reason for shifting their preferences suddenly and disruptively, even in the context of allowing greater exchange rate flexibility. financial markets are flexible and increasingly integrated around the world, facilitating continuous and gradual adaption of capital flows to changing circumstances. markets for goods and services are also becoming more integrated and flexible, though this trend has been, perhaps, more subject to government actions to slow the process. in fact, the dollar has risen in 2005, reflecting the interplay of portfolio preferences and shifting patterns of saving and investment in markets. in all likelihood, adjustments toward reduced imbalances in the united states and globally will be handled well by markets without, by themselves, disrupting the good, overall performance of the u. s. economy provided, of course, that the federal reserve reacts appropriately to foster price and economic stability. still, complacency would be ill - advised. although the odds seem favorable for an orderly adjustment, the current imbalances are large and - importantly for gauging risks - unusual from a historical perspective. thus, we have little experience to call on in judging when and how they will be corrected. in such circumstances, we cannot rule out sudden shifts in expectations, whether or not they are unreasonable to begin with, and asset prices may change suddenly. investors may recognize the unsustainability of some flows and prices, but believe they can adjust in advance of the market - as apparently many thought they could in the tech - stock bubble - and their reactions when prices move could add to volatility. moreover, we cannot rule out governments engaging in unwise policies policies that might undermine confidence or might hinder market adjustments and associated changes in asset prices. the role of policy sound public policies are essential to enhance the chances that any transition will be smooth. a permanent correction to the spending imbalances must involve the restoration of fiscal discipline and long - run solutions to the financing problems of social security, medicare, and medicaid. achieving these objectives are important in any event, but they take on added weight to the extent that we cannot count on an ever - increasing flow of global savings coming to the united states. without a resolution of these fiscal problems, the balancing of aggregate production and spending would be much more difficult and would result in intensified pressures on interest rates. those pressures would tend to hold down the growth of investment and productivity and they would exacerbate asset - price movements and adjustment difficulties in other markets. adjustment of global current - account imbalances could

t t mboweni : the commodity price boom and the south african economy address by mr t t mboweni, governor of the south african reserve bank, at the regional business achievers awards dinner of the businesswomen ’ s association, pretoria, 27 june 2007. * * * honoured guests ladies and gentlemen 1. introduction thank you for your invitation to speak at this business achievers awards ceremony. for too long the world of business has been a domain for men only, but in recent years more and more women have been making their mark in this arena. the businesswomen ’ s association has been instrumental in promoting and encouraging women who have entered the business world. the important role that women played in the liberation of our country is without question. women have also played an important role in various fields which have contributed to the overall development of the country. it is now time for women to be at forefront of the business sector. women in business are a scarce resource and your efforts deserve support. the economic environment in south africa has been extremely positive in recent times, with growth averaging around five per cent for the past three years. an important contributing factor to this favourable environment has been the behaviour of commodity prices. as a commodity producer, we should be pleased when commodity prices are performing well. however, as we know from past experience, commodity price booms can be a mixed blessing. too often in our history we have ignored the fact that commodity prices move in cycles. there had been a tendency to regard price booms as being permanent, only for things to end in tears when the cycle ended. the current boom has persisted for longer than many had predicted, leading to suggestions that we are now in a commodity super - cycle. at the same time, commodities have become a new asset class on their own. in my comments this evening i will highlight some of the recent developments in commodity prices and some of the challenges posed for the economy in general and monetary policy in particular. 2. commodities and the south african economy as you are aware, commodities have played a central role in south africa ’ s economic development. the mining industry, largely supported by gold, diamonds, coal and the platinum group of metals, has for more than a century contributed significantly to the national economy. it has provided the impetus for the development of physical infrastructure, as well as the establishment of the country ’ s secondary industries. south africa is a leading supplier of a range of minerals and mineral products. according to the chamber of