and submit their findings by december 20, 2002. these results will allow us to ascertain the need for adjustments prior to the release of an updated proposal for public comment in the second quarter of 2003, followed by finalization of the new accord in the fourth quarter of 2003, and implementation at year - end 2006. • while much work clearly remains to be done over the next three years - including evaluating banks'readiness, training supervisory staff, and working towards consistent implementation across supervisors - in my view, both the journey and the ultimate destination of a new accord will contribute substantially to a more resilient international financial system. • unfortunately, while there is a deepening consensus on key elements about how to promote resilience ex ante, there is no comparable degree of consensus on how best to handle international financial crises once they do erupt, or the proper roles of public institutions and the private sector in containing and resolving such crises. notwithstanding considerable efforts at the public and private level to search for a better way, no magic bullet or formula has been found, although at times some have been asserted. • nor is one likely to be available. experience and a reading of the historical record suggest that the seductive allure of grand solutions must be resisted. cases differ greatly with respect to what is possible and desirable in terms of their implications for the interests of the public and private sectors. moreover, history tells us that new developments in markets and practices quickly will render obsolete those measures that might seem well attuned to today ’ s circumstances. • allow me to explain how i think progress can be made by first focusing a bit on the problem that confronts us. i would like to highlight some of the important changes that have taken place over the past two decades in the patterns and instrumentation of capital flows to the emerging world, and in the nature of crises that can arise associated with these flows. g first, it is important to keep in mind that the constellation of investors and the range of instrumentation have broadened considerably over the past two decades. equity investors ( both direct and portfolio ) are now the principal source of net inflows for emerging market countries, and most medium - term debt is held in tradable form by a broad array of diversified, well - capitalized, fixed - income investors. g second, there have been equally important changes in the destination of flows. reflecting the predominance of private - to - private flows since 1990, today sovereign foreign debt often represents only a

the second half of 1999. the question that remains unanswered - and troublesome - is whether this significant improvement in productivity growth, which has made the us economy one of the most competitive in the world today, is temporary or permanent. what is less often taken into account is that the us productivity boom of the 1990s has taken place against a background of very low inflation in the united states and rapidly decelerating inflation in almost every region of the world. through much of the 1990s, weak economic performance elsewhere in the world has held down commodity price inflation and strengthened the dollar. as a result of both productivity growth and the favorable world inflation environment, core consumer price inflation ( cpi ) - excluding the more volatile food and energy sectors - has been running about 2 % recently, down from 3 % in 1995. as measured by the personal consumption expenditures deflator ( pce ), core inflation is even more subdued, rising by only 1½ % a year over the past few years. as a central banker, however, i cannot help but register concerns about some recent developments. as the expansion has progressed, signs of imbalance or strain have begun to appear in the us economy, especially in relation to the world economy. commodity prices, for example - and not just oil prices - have increased rapidly in recent months, as world growth has bounced back sharply in 1999. for example, on a year - over - year basis, prices for crude materials, excluding food and energy, were up 15 % as of february. in addition, strong consumption growth in the united states has been fueled in part by an inexorable decline in the personal saving rate. as i have noted, however, these declines in personal saving rates may to some extent be due to technical measurement issues. moreover, the us current account deficit has also widened markedly over the past several years, with corresponding large surpluses in asia and europe. the outlook is for continued worsening in the deficit that had already reached a record last year, at about 4 % of gdp. history tells us that such imbalances can persist for some time, but increase in risk as they widen. history also tells us that current account imbalances eventually require macroeconomic adjustment - adjustment that is smoother and more orderly the earlier and more coordinated the policy response. while i am not one to second - guess the markets, i also believe that we in the united states must ask ourselves whether the surge in the stock market over the past several