But it is perhaps in the nature of financial flows that they do more often than not lead to overshooting in financial markets. The strong growth track record of Asia and indeed of other emerging markets has, with the benefit of hindsight, brought about excess optimism in these markets, producing a compression of yield spreads which underpriced the underlying credit, market and other risks that are typical of emerging markets going through financial liberalization. Indeed, Alan Greenspan said recently that “in retrospect, it is clear that more investment monies flowed into these economies than could be profitably employed at modest risk”. With the sharp correction seen in financial markets in Asia, against the background that the economic fundamentals have largely remained sound, whether in isolation or relative to other emerging markets beyond the region, it is possible that there might now have been overshooting in the other direction. 22. I am sure, however, that the markets will eventually find their right levels, reflecting new circumstances, for better or for worse. I am not convinced, in any case, that the devaluation brought about by floating the exchange rate is necessarily the panacea for the ills of our Asian neighbours. First year economics tells us that the four elasticities of demand and supply of imports and exports may not interact to produce a clearly positive contribution to the balance of payments position from devaluation.
A reference to the letter appeared in Skidelsky, R. John Maynard Keynes Volume 1: Hopes Betrayed, 1883-1920, Macmillan, London, 1983, page 280. The official attendance on 13 September was 38,575; the Villa scorer was the incomparable Clem Stephenson, who may have lacked pace but whose passes were, according to contemporary observers, “as sweet as stolen kisses”; and the ‘most expensive’ right winger for Blackburn Rovers was John “Jocky” Simpson who cost Blackburn a record fee of £ when he was transferred from Falkirk in 1911. BIS Review 5/2004  1  do those prices come from? Each month - on “Index Day” (either the second or third Tuesday of the month) - around 300 “price collectors” visit a wide range of retail outlets and record the prices charged for 130,000 different items, ranging from small loaves of brown bread to large lawnmowers. Each of these different items will have changed in price by a different amount. A key difference between the CPI and RPIX is how these 130,000 price changes are averaged to give a measure of overall inflation. RPIX inflation is, for most goods, an arithmetic average of the inflation rates for each item. In contrast, CPI inflation is measured as the increase in the geometric average (the average of the logarithms) of the different prices.