Good evening, ladies and gentlemen, and welcome to the Federal Reserve Bank of Atlanta's eighth annual Financial Markets Conference.
Welcoming Remarks of Jack Guynn
Federal Reserve Bank of Atlanta's
Eighth Annual
Financial Markets Conference
Sea Island, Georgia
Sunday, October 17, 1999The central challenge for any conference planner is the timeliness of the program's topic. It's got to resonate in the 12 to 18 months preceding the event, when you're competing for the time and resources of panelists, speakers and audience members. And, of course, it's still got to be relevant when the conference date arrives.
When we started planning the 1999 Financial Markets Conference last year, the world was awash in financial crises. Just a year ago Friday, as a matter of fact (on Oct. 15), the FOMC implemented a between-meeting quarter percentage point fed funds rate cut — the second in a series of three intended to mitigate the impact of the world's financial crises on the United States. Our actions were, in their urgency, an extraordinary response to what we regarded as an equally extraordinary threat. Nevertheless, bad news for the world was going to be good news for the Atlanta Fed's conference.
Today, of course, we seem to be witnessing the beginning of turnaround in most of the countries affected by the financial crises of the previous two years, which is not to say that these countries have fully recovered. They have not, and it may take several years for output and employment to return to pre-crisis levels. Still, I think it is fair to say that those countries that experienced financial crisis are on their way to recovery and that the crises that precipitated many of the economic downturns have finally abated.
But if the financial crises of the previous two years are mostly over, where does that leave us for this conference? Should I fire my conference planners for failing to anticipate a reversal of fortunes? Should we put the previous two years' unpleasantness behind us and get on with the serious business of preserving and enjoying prosperity?
Well, as tempting as that might be, to do so would be to fall into complacency — to confuse recovery with reform — because the fact remains that all the necessary reforms have not yet been made in those countries that experienced crises the last two years. In particular, issues of transparency, dollarization, supervision, capital adequacy and capital controls — among many others — remain to be resolved. Until they are, the possibility of future economy-crippling crises remains.
To that end, I am reminded of Chairman Alan Greenspan's comments at this very conference in February 1998. The chairman concluded his remarks with the following observation:
Eventually, the Asian economies now suffering from the current crisis will recover. If the proper policies are pursued and there is support from the international community, the process of recovery can begin soon and the structural reforms necessary for more durable growth will be under way. But the lessons from the Asian crisis will remain with us, as the lessons from previous crises have remained. It is important that national and international officials and private individuals learn these lessons now and take advantage of that knowledge so that we will not have to relearn those lessons in the future.It's worth recalling that the chairman's comments came more than six months before the FOMC's preventative measures. This suggests to me that in the interim, U.S. policymakers were busy trying to learn the right lessons about what the policy response should be to the Asian crisis in the short run.
But now that the world's financial crises have subsided — now that the economic and political environments are more conducive to reform — it is time to begin the long-term assessments. These include — as we heard during today's academic segment — the causes of the Asian crises, the particular role of hedge funds in the Asian currency crisis of 1997, whether and when international rescues of countries in financial distress succeed, and how rational expectations work during an episode of financial contagion.
Tomorrow we'll consider whether financial crises are predictable and the role speculators play in them. Tuesday morning we'll consider how an economy's infrastructure might make it susceptible to financial crises and the implications of a crisis for a financial regulatory system. Finally, Tuesday afternoon it will be our great honor to be joined by the world's most erudite student of economics and finance, Chairman Greenspan.
The question of whether efficient financial markets contribute to financial crises is likely to become an increasingly difficult one to answer. Not because the frequency of financial crises is likely to increase — it may or may not. No, the question is likely to become more urgent because markets are likely to become even more efficient and more transparent, driven by ever more prolific technological advances. Nevertheless, while the answers may be years in coming (if they ever develop fully at all), the important thing is to begin asking the right question. That's what we hope to do these next two days.
Thank you very much for your attendance and participation this year, and good evening.
