the convertibility system. argentina was able to grow because it was undergoing an external debt restructuring process and the price of commodities provided enough margin to avoid external restriction. so, i believe we can learn from our own experience. during the last jackson hole economic symposium, jerome powell said that inflation was a problem of imbalance between supply and demand. he said something that is 1 / 3 bis - central bankers'speeches also true : central banks can restrict demand though they have few tools to expand supply ; and, when they have to act, they do so accordingly. what underlies my argument is that growth is the way to avoid inflationary processes. as i was saying, in argentina, the restriction is in the external and energy sectors. powell said something that we all know : the restriction is in the u. s. labor market and in the long term. if we think of democratic economies with situations of poverty and inequality, very long periods of tightening of demand may have very negative social effects and may also question the credibility of those who carry out the anti - inflationary policy. long periods of high interest rates seeking to reduce inflation have social consequences, and this may also affect the credibility of the institutions that have to curb inflation. i believe that we are also in a special moment of paradigm change. i mentioned it when i opened the conference. charles goodhart and manoj pradhan wrote the great demographic reversal. goodhart wrote this book in 2019 before the pandemic. he stated that the incorporation of china into the global market of industrialized goods caused the inflationary impulses from industrial goods to be reduced due to the low wages paid by china and the enormous labor force it had to expand its exports. in 2000, the ratio of chinese workers'wages to american workers'wages was 34. by 2018, that ratio had dropped to 5 and it posted a downward trend. goodhart's pointed out that the opportunity to take advantage of low wages in the chinese economy had ended. figures support this situation. in 2030, china will have 500 million middle - class people and only 100 million low - income people. in 2015, there were 500 million lowincome people. this means an extraordinary increase in china's domestic absorption and, as i mentioned before, it will not moderate the prices of industrial products. coincidence is not causation. the presence of china in the supply of industrial goods, favored by globalization, has coincided with a long period of price stability and

martin redrado : latin america and argentina – the effect of international financial turmoil keynote speech by mr martin redrado, governor of the central bank of argentina, at the bank of russia, moscow, 26 june 2008. * * * emerging markets face definitely a hostile international financial scenario. the global economy is going through its worst stage in more than a decade. as i said over a year ago in basel when shocks first hit financial markets, volatility is here to stay. and we will witness its consequences for some time to come. credit markets in developed countries are still deteriorating. money markets continue to show signs of tension despite innovative tools generated by monetary authorities. libor and euribor rates are recording wide spreads compared to yields on low counterpart risk such as u. s. treasuries. this is largely due to credit risk perceptions among banks, with some degree of overshooting in financial institution spreads. current prices of banks ’ cds show that it will take time to correct this situation. as uncertainty regarding each institution ’ s exposure to “ toxic waste ” persists, banks continue to avoid lending among themselves. then, demand for liquidity as a precautionary measure to confront potential materialization of contingent liabilities is what predominates in the financial markets. even though exceptional central bank steps helped mitigating pressures at the most critical times, they are still insufficient to recover investor – or, even worse, consumer – confidence. in the u. s., current conditions show at least a substantial difference from previous episodes : the trigger to current turmoil is the real estate market. therefore, the adjustment is different and, maybe, deeper than before. the social sensitivity that arises from this sector is reflected in u. s. congressional initiatives, which attempt to generate an orderly resolution, calling upon the government, banks and investors to share the burden of expected losses. in the euro area, divergence is probably a reflection of disparities among member countries. while germany grows at higher - than - expected rates, mediterranean economies, at the other edge, are virtually stagnant. the credit cycle begins to show the first signs of what, in other times, were periods of credit tightening, especially due to an incipient deceleration in household financing. for these reasons, a reversal in the capital flows of banks from subsidiaries in the emerging world to meet liquidity and solvency requirements in their headquarters is something to closely monitor. we are witnessing a growing use