christian noyer : some thoughts on current financial turbulences speech by mr christian noyer, governor of the bank of france, at the euro fixed income forum, paris, 4 december 2007. * * * these are difficult times for policy makers. financial turmoil has created macro economic uncertainties. events are still unfolding. in those circumstances, i thought best to have a look at the dynamics driving recent turbulences ; then describe potential consequences for the economy ; finally make remarks on challenges for central banks and best ways to preserve and restore international financial stability. the dynamics of the crisis • i will start with a paradox. by any measure, we are facing a huge shock in financial markets. spreads in some segments of credit markets have widened with unprecedented speed and volatility. even more significantly, interbank markets in large industrial countries have been severely disrupted, for the first time in fifty years, more disrupted in fact, and for a longer period, than after september 11, 2001. • and yet, the losses themselves, while significant and spectacular for some institutions, would not seem to pose a major risk to the health of the financial system. current median estimates put the direct cost of subprime defaults around 250 billions usd. this is a little less than one year of profits for the 40 major financial institutions in the world. most notably, the turbulences occurred in a very favorable macro economic environment. why is there such a disproportion between the cause and the effect? at the aggregate level, most observers – including the banque de france – would point to a prolonged period of excessive risk taking in credit markets fueled by liquidity expansion at the world level. this was most apparent in the strong developments of lbos, mostly financed through leveraged ( i. e. with weak covenants ) loans. according to this interpretation, we may be witnessing the burst of a credit bubble. but there is also a deeper, more structural, element to the current turmoil. this crisis is the first in a disintermediated credit world. while, previously, loans were originated by banks, kept on their balance - sheet and monitored for the entire life of the loan, the process is to a large extent dissociated today : the loan is originated by a first entity, then bundled together with other loans as a structured product by another entity, then sold to final investors. these developments were expected to bring important benefits to the financial system and the broader economy : o as part

bok internatinoal conference 2022 opening address june 2, 2022 chang yong rhee governor, bank of korea ladies and gentlemen, i am truly delighted to welcome everyone participating in this year ’ s bank of korea international conference. it means a great deal to us to host this conference once again after being suspended because of covid - 19. i would like to start with a few words of gratitude. first, i would like to express my sincere appreciation to our two keynote speakers, professor robert townsend and dr hyun song shin, as well as to all of the moderators, speakers and discussants. as in past years, the organizers have brought together a very impressive list of participants who have made important contributions over the years helping the profession improve the art of monetary policymaking. i would particularly like to express my deepest gratitude to professor thomas sargent for all of his guidance and support in organizing this year ’ s conference. most importantly, i want to assure him that we have all gone back and reread his jmcb paper published in 1971 on the “ accelerationist ” controversy. 1 ) some might correctly argue that his work along with milton freedman ’ s 1968 presidential address to the aea should have provided ample analytical firepower and warning to prevent the great inflation of the 1970s. 2 ) they can certainly help us avoid making a similar mistake today. the theme of this year ’ s conference, “ the changing role of central 1 ) see sargent ( 1971 ). 2 ) see friedman ( 1968 ). - 1 - banks, ” is very timely and important for several reasons. after two decades of low inflation and anemic growth and working hard to fully recover from the global financial crisis ( gfc ), policymakers were faced with an unprecedented health crisis. initially, in many countries this resulted in aggregate demand falling roughly in tandem with aggregate supply. the large reduction in the demand for oil resulted in a collapse in oil prices that initially pushed inflation lower. but the reopening phase has been much more problematic as a bounce back in aggregate demand has stretched capacity in several sectors. over the last few months, there is now clear evidence that underlying inflation and long - term inflation expectations have ratcheted upwards to levels in some countries that are well above their stated objectives. many commentators are predicting a recession, while others suggest we might still have a smooth landing without a series of large interest rate hikes. today, i look forward to learning from your insights and wisdom regarding