I believe that we would all be better off if the system evolved toward more flexible exchange rates and greater monetary independence in the EME world. Notwithstanding this, we can and do pursue our monetary policy objectives in the United States ever mindful of how our policy choices affect other parts of the global economic system, recognizing that these impacts will, in turn, influence U.S. economic outcomes. For the Federal Reserve, pursuing the dual mandate of full employment and price stability allows us to make an important contribution to global stability and growth. Ensuring low and stable inflation preserves the purchasing power of the dollar and sustains its attractiveness as a medium of exchange. Supporting maximum sustainable employment means that we have an important growth mandate. This remains the case even when we are at the so-called zero bound with respect to shortterm rates. In this context, I believe that our large-scale asset purchase programs were fully consistent with our global responsibilities. For example, our recent program to purchase $ billion of Treasury securities sought to prevent a relapse into recession and to lessen the risk of deflation – outcomes that would have been very damaging to global economy. I do not mean to dismiss lightly the concerns raised by some EMEs about the program. By removing long-duration Treasury assets from private investors’ hands, we encouraged those investors to purchase other assets, including foreign assets. This eased U.S. financial conditions and, thus, boosted U.S. demand for both domestically and foreign-produced goods.

But many EMEs also recovered quickly because they had the capacity and credibility to pursue countercyclical policies in response to large external shocks to aggregate demand for the first time. On many fiscal metrics, some economies in the emerging world now look in better shape than many of those in the advanced world. This challenges the traditional distinction between developed country and emerging market sovereign creditworthiness. Where the developed world still stands apart is in the quality of its institutions, legal and policy frameworks, and the sophistication of its technologies and markets. But even here the gap is narrowing. The story of the EMEs has generally been an extraordinarily positive one for the world as hundreds of millions of people have lifted themselves out of poverty. Nevertheless, even before the crisis, it was evident that the relationship between developed and emerging economies was becoming strained and needed to be adjusted; the status quo would clearly be unsustainable. Consider, for example, the economic relationships between the United States and China that prevailed over the past decade or so. Some experts have summarized the arrangements as follows. The United States bought Chinese exports at low prices, which bolstered U.S. living standards and held down U.S. inflation. The United States did not take extreme steps to try to force China to revalue the renminbi upward against the dollar, and China, in turn, invested its trade surplus and capital  2  2  Figures are real GDP-weighted indexes for each group. BRICs include Brazil, Russia, India and China.