Timothy F Geithner: Policy implications of global imbalances Remarks by Mr Timothy F Geithner, President and Chief Executive Officer of the Federal Reserve Bank of New York, at the Financial Imbalances Conference at Chatham House, London, 23 January 2006. *  *  *  Good morning. Let me first thank the organizers of this conference for inviting me to speak to you today. Over the next two days you will focus on the substantial financial imbalances that characterize the world economy today. The size and duration of these imbalances, perhaps the most visible of which is the U.S. current account deficit, present challenges—and risks—for the world economy. Understanding the forces behind the international capital flows and the associated gaps between saving and investment within countries that led to these imbalances is of crucial importance to economic policymakers as they struggle to consider the implications of the imbalances on future economic growth. You have brought together an excellent group of people to explore these issues. You meet in the context of some remarkable developments in the world economy. I thought I would begin by touching on some that bear most directly on the subject of your conference. Naturally, as a central banker, I’ll begin by observing that over the past two decades, most of the world has experienced a substantial fall in inflation.
In particular, the takeover of innovative start-ups should give rise to a revamping of the concepts used by the Commission. Money: To bridge the innovation gap and help our start-ups grow, we need to better mobilise our financial resources thanks to a genuine “Financing Union  Page 13 sur 14 for Investment and Innovation”. Europe is facing an unacceptable paradox : we have the world's largest pool of domestic savings – with the household saving rate hitting an all-time high in 2020 – but since the 2008 financial crisis, investment has been declining, especially in southern and eastern Europe xiv:  And the equity financing of non-financial firm’s is underdeveloped compared to the United States: it only represents 76% of euro area GDP, versus 176% in the United States:  Page 14 sur 14 In the current context of the Covid crisis, consolidating the Capital Markets Union is even more essential to complement public measures and support the economy. There is still too much fragmentation. Tangible solutions are in the pipeline such as new regulatory measures to help companies raise funds rapidly on markets in the context of Covid-19. Further efforts should also be made in the areas of pan-European venture capital, market supervision or companies’ data transparencyxv. ***  In conclusion, I would like to mention a more “cultural” cause of our European lag: let us call it a confidence gap.