They will probably realise that debts borrowed by developed countries are still debts and must be repaid one way or the other in the future. Moreover, excessive debt or leverage would drag down the economy sooner or later, just in the same way it did to the developing economies. It is natural that most people would prefer to get out of the indebtedness trap without the pain that would be inflicted on them when the economy undertakes the necessary fiscal consolidation and structural reforms. So it is not surprising that people would like to think that if they can find someone who is very clever to lead the government or to be in charge of the central bank, then somehow good life can return and business is back to normal once again without the painful adjustments. No one can rule out the possibility of finding a very clever person who can save the world without pain, but I suspect that it would probably not be a bad idea, and hopefully not too late, to start studying and learning from the Hong Kong recovery story after the eruption of the Asian Financial Crisis. Conclusion: Don’t mortgage our children 19. Ladies and Gentlemen, while I have talked a lot about the predicament of the developed world, it is not my intention to suggest that the developing world is all home and dry.
Funds flow to emerging economies because they are able to generate better return for savers in the developed economies. On the one hand, the emerging markets have to do their homework and preparation. But on the other hand, when things get temporarily out of balance, shouldn’t there be tools and safeguards to help them deal with situations better? The good news is there could, if all the countries here want to! BIS Review 52/2002  3