Transcripts of the monetary policymaking body of the Federal Reserve from 2002–2008.

Yes. So very few are trying to peg to an overvalued exchange rate. Even a country like Malaysia gave up on its pegged exchange rate. So the floating rates have certainly improved the situation. But, you know, the peso and the real are strengthening vis-à-vis the dollar. So it’s not mercantilist. It’s not that these countries have somehow allowed their exchange rates to become and remain undervalued and that they are benefiting from that. But again, I think the flow changes the risk character of these countries and their ability to interact with international investors.

I think a second fundamental is that Asia, largely because of China but also because of India to some degree—because of the Asian Tigers, as we used to call them—has become a second independent source of vibrant global economic activity. It was derailed a bit in the late ’90s, but actually only a pretty short period elapsed before they were back on their feet. And their capacity to

December 13, 2005 17 of 100 succeed economically is very great. They are a high-saving, highly productive, strong work ethic part of the world. And unless something happens to forestall that, they’re going to be an economic region that’s growing.

And, third, they’re becoming more market-based. The orthodoxy, so to speak—the increased reliance on markets, the additional flexibility, and the more stable macro prices—is paying dividends in these regions as well. You still get a country like Venezuela that, but for its oil reserves, would be totally in some tank somewhere. And its politics are leading it in crazy directions, but it’s the exception at this point; the others are more as I’ve just described.

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