Those huge pools of savings currently available can be intermediated locally instead of going through financial systems located in advanced economies. Regional financial markets would have to complemented and underpinned by monetary arrangements. Asian countries are working on and implementing progressively such schemes through the Chiang Mai initiative. We, in Europe, monitor closely those evolutions as well as the progressive emergence of the RMB as an international currency. As you know, we have a long and successful history of economic, financial and monetary integration. We have learned a lot and, still recently, gone through many crises and difficulties. Nevertheless the Euro, which did not exist fifteen years ago, stands today as one of two major world currencies. We certainly don’t pretend our own experience should constitute a model or an example to be followed. I have, however, one certainty: a strong and permanently renewed spirit of cooperation has allowed us to overcome many obstacles and to reap many benefits in terms of prosperity and stability. In a world full of opportunities, but also increasingly complex, this may be an inspiration for all of us. I thank you for your attention. References Caballero, Ricardo J., 2006. “The Macroeconomics of Asset Shortages.” 4th ECB Central Banking Conference, Frankfurt, November. Caballero, Ricardo J., Emmanuel Farhi and Pierre-Olivier Gourinchas, 2008a. “Financial Crash, Commodity Prices, and Global Imbalances.” Brookings Papers on Economic Activity, Fall, pp 1–55. Caballero, Ricardo J., Emmanuel Farhi and Pierre-Olivier Gourinchas, 2008b. “An Equilibrium Model of “Global Imbalances and Low Interest Rates.” American Economic Review, 98:1, p358–393.

History has taught us that Malthus and its intellectual descendants have always been proven wrong. The whole process of economic growth was borne out of the ability of mankind to overcome scarcity through human inventiveness and technical progress. It won’t be different this time. I am also very optimistic in the long run on the fundamental rebalancing of the world economy. Income per capita levels in the emerging world will progressively converge to those of the advanced economies and this will present gigantic market opportunities for producers in those countries. At the same time, tensions and insecurity created by differences in income and productivity levels will abate and disappear. The transition process, however, may be bumpy. Unavoidably, advanced economies, especially in Europe, will have to adjust to the permanent shift in world comparative advantages. They will have to increase flexibility and, above all, develop and preserve their most precious resource – human capital – through education and excellence in research. Emerging economies will have to face the dual challenge of aging and reducing inequalities. During that transition period, which may last several decades, it is important that the whole process is not derailed by shocks and crisis borne out of imbalances in the world economy. This is where the twin questions – (1) of the level and distribution of global demand and (2) the level and allocation of world savings – may matter most. Inside the G20, there is broad agreement on the need to rebalance aggregate demand.