the activities of hedge funds you were regarded as paranoid and you received a sermon on the dangers of shooting the messenger, etc. now, no one has got a good word to say for them, and they are likely to soon be brought into either : • • the disclosure net, or some form of supervision via their connections with banks. second, i see a clear improvement in future crisis management in the way the imf is talking with brazil. unlike the asian crises, i don ’ t see any country in future putting itself in the hands of the imf without knowing pretty clearly beforehand what the imf conditions will be. if it doesn ’ t like the conditions, for example, because they are too wide - ranging, it will not go to the fund. if it is comfortable with the conditions, it will be able to sign up from day one. this way, we should be able to avoid the long periods of semi - public haggling over conditions that characterised the asian crises and did so much to frighten the markets into pushing exchange rates down excessively.

mr. macfarlane comments on the future international financial architecture talk by the governor of the reserve bank of australia, mr. i. j. macfarlane, to the east asia economic summit in singapore on 14 / 10 / 98. … in my ten minutes here i will try and cover what i see as the main changes in perspective about what we formerly termed the asian crisis, and then say a few words about future international financial architecture. • the main change is that since august this year we no longer think of an asian crisis but we now think of either an emerging markets crisis or a general world financial crisis. • a second important change is that the western policy establishment can no longer believe that the root cause of the problem is the inadequacy of the financial infrastructure and governance of some formerly rapidly growing asian countries. of course, not everyone used to believe this, but there were some very influential institutions that thought this way. • everyone is now aware that contagion is a much stronger force than formerly thought. contagion is an essentially irrational force which tars large groups of countries with the same brush, and causes fear to overrule reason. • given the bigger role for contagion, more and more people are asking whether the international financial system as it has operated for most of the 1990s is basically unstable. by now, i think the majority of observers have come to the conclusion that it is, and that some changes have to be made. with pretty well everyone now conceding that changes have to be made, you would think it would be a relatively simple matter to move on to the next step. but it will not be, because there are still big differences of opinion about how serious the problem is. • one school of thought held that the main thing required to restore stability was to improve transparency, particularly the government ’ s transparency to the private sector - e. g. by more frequent and accurate publication of figures for international reserves. this school of thought also gave a fair bit of weight to improving the quality of bank supervision in emerging market countries. this explains the motivation behind two of the three working groups set up by the g22 in april. • but an increasing majority think something more is required, and the most promising approach here goes under the general title of burden sharing with the private sector ( the g22 ’ s third working group ). i would like to say a little more about this because i think it will be necessary if we are to make real