William C Dudley: Financial market turmoil – the Federal Reserve and the challenges ahead Remarks by Mr William C Dudley, President and Chief Executive Officer of the Federal Reserve Bank of New York, at the Council on Foreign Relations Corporate Conference 2009, New York, 6 March 2009. *  *  *  Thank you for having me here today. It is a pleasure being back to speak at the Council. In the past, my Federal Reserve colleague, Governor Daniel Tarullo, gathered panels of Wall Street economists here at the Council to talk about economic issues. When he invited me to participate, it was challenging work because Dan always asked us about our economic forecasts! And he remembered and recounted our past mistakes (and our much rarer, more prescient forecasts)! Before I begin, let me emphasize that my comments represent my own views and opinions and do not necessarily reflect the views of the Federal Open Market Committee or of the Federal Reserve System. What has happened to the global financial system is momentous. We have seen – despite extraordinary actions by central banks and governments around the world – a severe impairment of the intermediation process between borrowers and savers. We have seen a massive deleveraging of the non-bank financial sector. We have seen a tightening in financial market conditions even as the Federal Reserve has pushed the federal funds rate down close to zero. The result has been a severe loss of confidence among consumers and business and a global recession.
Philipp M Hildebrand: Developing countries and international capital markets Summary of a speech by Mr Philipp M Hildebrand, Member of the Governing Board of the Swiss National Bank, to economiesuisse, Zurich, 14 June 2005. The complete speech can be found in German on the Swiss National Bank’s website (www.snb.ch). *  *  *  After having plummeted on the back of the Asian crisis, capital flows to developing countries have risen considerably again in the last three years. In 2005, they are likely to reach the approximate level at which they stood shortly before the Asian crisis. Capital flows are channelled mostly to a few emerging markets, notably China. China’s monetary order is currently undergoing profound changes, with the country gradually liberalising capital movements. The concept of the “impossible trinity”, which was developed by the Nobel Prize winner Robert Mundell, asserts that this will inevitably lead either to a loss in monetary autonomy or to a flexibilisation of the exchange rate regime. Both trends can be clearly observed: the pressure on the fixed exchange rate on the one hand, and the rapid expansion of the monetary and credit aggregates on the other. In the longer term, China’s monetary order will probably move towards floating exchange rates. This transition will hopefully be successful. As China’s monetary policy of gradual change has so far proved its worth, it is likely to serve as an example to other developing countries.