. i don ’ t have to tell you this. this is the shared experience of everybody in modern day jamaica. no doubt you hear it from your clients every day. let me put it another way : a policy with a face value of $ 100, 000 purchased by a young graduate 40 years ago is worth considerably less than 1, 000 of those same dollars at his retirement. in actual fact, the value of 100, 000 of today ’ s dollars in terms of 1971 dollars is $ 177. 22. so, where is the other $ 99, 000 or so of purchasing power? where has it gone? on the face of it, nowhere. the underwriter will still faithfully pay over the face amount or cash surrender value which could still be nominally $ 100, 000. but the expectation that this lump sum could have bought a house or provided an adequate source of investment income well into retirement is worse than a broken promise. time and inflation changed the price of everything except his savings. as it turned out, from the day the policy or contract was signed, the value of the jamaica dollar has been steadily falling. a dollar buys less each day. sometimes the impetus has come from some unexpected shortage of goods which causes the supplier to hike prices. the ability to sustain demand at these higher prices has been helped by the bargaining bis central bankers ’ speeches power of workers who claim higher wages and salaries to compensate for the increased cost of living. property owners charge higher rent, owners of capital charge higher interest and demand higher profits and earners of foreign exchange hold out for higher exchange rates. the government too plays a role. it borrows more to pay higher wages and distribute more financial support and if, instead, the government were to resort to borrowing from the central bank, it would be simply printing more money to fund its activities thus adding fuel to the inflation fire. at the end of the day, those without the ability to adjust their incomes to match inflation – such as pensioners, workers on fixed income and those with little income or property – become progressively poorer and their savings worth less and less. thus a princely $ 100, 000 policy in 1971 eventually becomes little more than a funeral grant today. when will this erosion of value stop? it will not stop entirely. everywhere in the world prices change as the relative value of goods and services change and as basic exhaustible resources become scarcer. but, as happens in the developed world and increasingly in emerging market economies, it is possible to conduct

##cipate. should such developments occur, we would adjust the stance of policy in response. considerable uncertainties also surround the outlook for economic activity. for example, we cannot be certain about the pace at which the headwinds still restraining the domestic economy will continue to fade. moreover, net exports have served as a significant drag on growth over the past year and recent global economic and financial developments highlight the risk that a slowdown in foreign growth might restrain u. s. economic activity somewhat further. the decision not to raise the interest rate in september has generated a great deal of discussion at this meeting of the imf and world bank and elsewhere. the decision was based, in part, on a desire to have more time to appraise recent developments in the global economy, especially those originating in the chinese economy, before beginning the normalization of interest rates. there may well have been more comments on foreign economic developments in recent fomc statements than was common in the past. that is natural given the increasing influence of foreign economic developments on the united states economy, both through imports and exports, and through capital account developments. the september statement notes that we are monitoring developments abroad. nonetheless, we do not currently anticipate that the effects of these recent developments on the u. s. economy will prove to be large enough to have a significant effect on the path for policy. that said, recent employment reports have been somewhat disappointing and, as always, we are closely monitoring developments that could affect our sense of the economic outlook and the risks surrounding that outlook. among these risks is the possibility that shifting expectations concerning u. s. interest rates could lead to more volatility in financial markets and the value of the dollar, intensifying spillovers to other economies, including emerging market economies. we are mindful that this could be the case even though monetary policy normalization in the united states will only occur in the context of a strengthening u. s. economy, and even though it has been clear from conversations at this conference that many officials of emerging market and other countries feel sufficiently forewarned and prepared for them to want us “ to just do it. ” however, we have to remain cognizant of the risks ahead. we remain committed to communicating our intentions as clearly as possible – but not more clearly than the facts warrant – to assist market participants, be they in the private or the public sector, in understanding our intentions as they make their investment decisions. bis central bankers ’