is very complex, and teaches valuable lessons. on one hand, as to how imbalances that are not addressed on time end up creating enormous costs for the population. for those of us in charge of economic policy in our countries, it is absolutely essential that we strive to address these imbalances if they exist, and at the same time that we do not create them through our decisions. over - stimulating the economy when output gaps are narrow and inflationary pressures have risen could lead to imbalances. i trust that they are not as sizeable as those of the developed world, but in any case solving them is always costly. on the other hand, it has taught us the relevance of maintaining and improving a good macroeconomic framework. in chile, this framework rests on four pillars. first, monetary policy management is based on a flexible inflation - targeting regime, conducted by an autonomous central bank and supported by a floating exchange rate system. second, a fiscal policy that is accountable and predictable thanks to a structural balance rule. the significant amount of savings accumulated during the run - up of copper prices has been a crucial factor in bolstering the resilience of the chilean economy and in providing a countercyclical fiscal boost. third, a high degree of commercial and financial integration with the rest of the world. finally, a sound financial system, with globally integrated, well capitalized, and adequately - regulated banks. our countries have suffered decades as a result of mistaken economic policies. the great recession showed that our current state of preparation to confront and mitigate the impact of an adverse scenario is much better than in the past, and that it is the path that we must continue. undoubtedly, there are still many things to improve. attaining a level of development such that prosperity reaches the whole population is still far away, but at least we are on the right track. thank you. bis central bankers ’ speeches

##turn as inventories adjusted in the opposite direction ; • an investment boom which uses up all the best investment opportunities and whose euphoria drives investment into marginally profitable projects ; • related to this, funding ( particularly equity finance ) which had been liberally given in the early phase of the cycle dries up as the financial sector comes to recognise the degree of overcommitment and attempts to compensate ( or over - compensate ) for this ; • asset prices, driven up by over - optimism about profit potential, spill over into investment decisions ; • households, buoyed by rising asset prices and the general euphoria, run down their savings, leaving them vulnerable to a sudden change in confidence. all this jerky dynamic seems very relevant to america, and inapplicable to australia. let's contrast the cyclical position in the two countries. first and foremost is the contrast between the share markets. with no nasdaq bubble, the australian equity market has continued to increase steadily throughout the period, and is currently still close to its peak, contrasting to, say, the wilshire which is nearly 30 per cent below. australia has no stories of 14 - year - old boy - millionaires who ramped their chosen shares via a chat - room canard : nor, more substantively, of entrepreneurs with backwards - facing baseball caps attracting serious funding on the promise of a rapid " cash - burn ". so we didn't get the same degree of distorted investment decisions and ephemeral wealth - driven consumption. business fixed investment expanded rapidly in america during the 1990s, to well above its historical average. investment in information technology and communications equipment surged, with capacity to produce this equipment expanding by 50 per cent in the past year alone. in contrast, in australia business investment has trended upwards during much of the 1990s, but in recent years has fallen back a little, to remain around its long - term average. there is in no sense a problem of over - investment. slow but steady wins the race. similarly, australian household saving has not followed the american example into negative territory. the us financial sector is showing all the signs of concern about rising risks and lowering profit expectations in the business sector. spreads between yields on us treasury securities and corporate bonds have widened noticeably. the data on ipos shows that it became increasingly difficult during the year to get these away. commercial banks became more cautious in their lending, particularly after the large amounts they had directed to telecom companies. by