16  Some recent papers have proposed that the existence of a Global Financial Cycle has transformed the well-known international finance trilemma into a ‘dilemma’, according to which independent monetary policies are possible if and only if the capital account is managed, directly or indirectly (see Rey, H (2013), Dilemma not trilemma: the global financial cycle and monetary policy independence, in Global dimensions of unconventional monetary policy, proceedings of the Federal Reserve Bank of Kansas City Jackson Hole symposium, 2013, pp 285–333). Other papers suggest the trilemma is still alive, but the process of trade and financial globalisation has worsened the trade-offs that domestic central banks face, raising the marginal value of macroprudential tools (see Obstfeld, M (2015), Trilemmas and Tradeoffs: Living with Financial Globalization," Central Banking, Analysis, and Economic Policies Book Series, in: Claudio Raddatz & Diego Saravia & Jaume Ventura (ed. ), Global Liquidity, Spillovers to Emerging Markets and Policy Responses, edition 1, volume 20, chapter 2, pages 013-078 Central Bank of Chile). 12  All speeches are available online at www.bankofengland.co.uk/speeches  12  Pipes This underscores the importance of the third driver of Capital Flows-at-Risk, the Pipes, or the structure of the global financial system itself. Since the crisis, “the pipes” have changed Capital Flows-at-Risk in at least three ways. First, over the past decade G20 reforms have made the core safer, simpler and fairer, which has reduced Capital Flows-at-Risk. Large global banks’ common equity requirements and buffers are ten times higher than the pre-crisis standard.

The importance of “push factors” has increased over time as monetary policy and financial stability shocks in advanced economies have become both more prevalent and more potent. And push factors are arguably becoming more important as the fundamental asymmetry at the heart of the global economy deepens. When the IIF was founded, EMEs made up a little more than 1/3 of global GDP. Since the last Fed tightening cycle, their share of global activity has risen from around 45% to 60%. By 2030, it is projected to rise to around three quarters. But while the real global economy is being reordered, the international monetary financial system has barely begun its transition. The dollar represents the currency of choice for at least half of international trade invoices, two-thirds of global securities issuance, it denominates two-thirds of EME foreign currency external debt and acts as the monetary anchor in countries accounting for 70% of global GDP.14  14  Gopinath, Gita, and Jeremy C. Stein. (2018) Banking, Trade, and the Making of a Dominant Currency, Working paper, Harvard University, Cambridge, MA. Gourinchas, P, Rey, H Sauzet, M (2019), The International Monetary and Financial System, NBER Working Paper No. 25782. 10  All speeches are available online at www.bankofengland.co.uk/speeches  10  In fact, the dollar is as dominant today as it was during the Bretton Woods era, and is likely to remain so for some time, as its roles in international payments, as a reserve asset and a funding currency are mutually reinforcing.