and most liquid assets, of which, these researchers argue, there is a relative shortage in emerging markets. 3 my paper confirms empirically that the global saving glut countries – principally, some emerging asian economies and middle eastern oil exporters – did indeed evince a strong preference for very safe and liquid u. s. assets in the middle of the past decade, especially treasury and agency securities. although a large share of the net capital inflows to the united states came from emerging markets, substantial gross capital inflows were received from the advanced economies as well. an additional contribution of the paper is to examine the portfolio preferences of these advanced economy, especially european, investors. the paper finds that, like the global saving glut countries, european investors placed a high value on safety and liquidity in their u. s. investments ; however, relative to purchases by emerging markets, those of european investors encompassed a broader range of u. s. securities, including sizable amounts of private - label mortgage - backed securities ( mbs ) as well as other highly rated asset - backed securities. unlike the global saving glut countries, which funded their acquisitions of u. s. assets through their current account surpluses, europe on net had a roughly balanced current account and thus issued liabilities to fund acquisitions of u. s. assets. however, as these liabilities were tilted toward more traditional securities, including sovereign debt, as well as bank deposits, the result here too was a net increase in the global demand for highly rated u. s. assets. the preferences of foreign investors for highly rated u. s. assets, together with similar preferences by many domestic investors, had a number of implications, including for the relative yields on such assets. importantly, though, the preference by so many investors for perceived safety created strong incentives for u. s. financial engineers to develop investment products that “ transformed ” risky loans into highly rated securities. remarkably, even though a large share of new u. s. mortgages during the housing boom were of weak credit quality, financial engineering resulted in the overwhelming share of private - label mortgage - related see ben s. bernanke ( 2005 ), “ the global saving glut and the u. s. current account deficit, ” speech delivered at the sandridge lecture, virginia association of economists, richmond, va., march 10 ; and ben s. bernanke ( 2007 ), “ global imbalances : recent developments and

expand the ranks of the middle class in asean. • in 2010, asean had a population of 600 million, with around a quarter making up the middle class. bis central bankers ’ speeches • in 2030, asean will have a population of 700 million, with about two - thirds attaining middle class status. • in other words, the size of the middle class will swell by as much as three times over two decades. this rapid expansion of the middle class in asean will spur demand for a wide range of goods and services. • services such as telecommunications, education, healthcare, and banking and finance, have a high income elasticity of demand. • this means that as incomes rise and wealth accumulates, the demand for financial services – be it consumer credit, wealth management, or insurance – will rise more than proportionately. this phenomenon is being demonstrated right now, as it has been over the last few years, and will continue to play out in the next few decades as asean continues to grow. economic and financial integration to sustain growth besides domestic structural reforms, a key factor to sustain asean ’ s rate of growth closer to 6 % than 4 % is economic integration. • a key vehicle to achieve this is the asean economic community ( aec ). • the aec, as you know, was adopted in 2007 by asean leaders as a blueprint to achieve a free flow of goods, services, investments, and skilled people within the region by 2015. we have achieved substantial progress in implementing the aec blueprint. • more than 90 % of the key deliverables targeted for completion by 2015 have been implemented. • virtually all goods traded within asean are at zero tariff. • there are agreements in place to enhance protection for investors, liberalise sectors for investment, and provide greater transparency on investment rules. financial integration is a strong complement to trade integration and a critical component of the overall aec project. deeper financial integration will yield substantial benefits for asean economies. • it will support economic growth by helping to mobilise surplus savings more efficiently and channelling them to productive investment opportunities in the region. • it will strengthen resilience to external shocks by helping to deepen and broaden capital markets. • it will promote financial inclusion by helping to expand the reach of financial services to a wider community that is currently under - banked and under - insured. the asean financial integration framework ( afif ), adopted by asean central bank governors and endorsed by asean finance ministers in 2011,