##berger, which were published in the 1970s, or, even further back, to the business cycle theories dominant in england in the 1920s, and hayek ’ s work from the 1930s. the third element relates to the high levels of debt that can result from a prolonged period of strong credit growth, and which make the economy vulnerable to negative shocks. in my view, the importance of the stock of debt is a manifestation of a more general phenomenon, whereby in a context of disequilibrium – such as the accumulation of financial imbalances – stocks dominate flows as determinants of macroeconomic dynamics. when critical stock - flow ratios become very large, financial market players may at first become suspicious and then very rapidly flee into holdings of liquid assets, thus triggering a financial turbulence. the fourth ingredient is sharply rising asset prices – typically in equity or real estate markets. while an asset price bubble is notoriously difficult to identify, here again deviations from some form of historical trend can give some guidance. in an international dimension, sizeable current account deficits and high levels of international debt can point to imbalances that can have disruptive effects. while we all know how this can play out in emerging market economies, such episodes also occurred in industrial economies – just think for example about the nordic banking crises in the late 1980s – early 1990s. in the current context of global imbalances, it has been argued that the large current account deficit and rising international debt in the united states reflects the large decline in savings by us households during the housing credit bubble. but how can we quantitatively verify the existence and magnitude of financial imbalances along these five dimensions? this is a challenge for policy makers, academics and market participants alike. there is an empirical literature that suggests that financial imbalances might be detected but its findings are far from undisputed. in my view, there is definitely a need for more in - depth research that helps us understand the dynamics of the accumulation of imbalances, even if this research comes up with interval estimates rather than point estimates. these margins ( or bands ) might be large but exceeding them would definitely be a sign that something is going wrong. but even if imbalances might not be accurately assessed by empirical research, based on my personal experience as a policy maker there is clearly a sense in which they can be detected. “ if it looks like a duck and quacks like a duck, chances are it is a duck ”. to illustrate

##w played a key role in post - war reconstruction efforts. it must have been a daunting challenge – getting the german economy back on its feet after the devastation of war. but that is exactly what it achieved. and more. through a spirit of cooperation, through a willingness to take on massive responsibility and through ensuring funds were channeled to where they needed to go, ultimately, paving the way for the country to recover and emerge as one of the world ’ s leading industrial states. today another wind of change is blowing. and though the challenges we face today are equally daunting, i am certain that once more we can overcome them. and that once again we will show to the world that the financial sector can be a force for good. we ’ ve come a long way. in 1992, the leaders of the world took a first step by signing the un convention on climate change. that is over a quarter of a century ago. 25 years in which many more steps have been taken, leading up to the paris agreement of 2015. the good news is that momentum is building. and not a moment too soon. in 1992, there was little consensus on the catastrophic effects of rising temperatures. we did not yet know that in 2017, air pollution would cause the deaths of almost 5 million people. we did not yet know that in 2018, 62 million people would be affected by extreme weather events and over 2 million would be displaced because of it. and we did not know that by now, we would be risking our homes, our jobs and eventually even our lives if we don ’ t drastically change how we live. world leaders took the first step in acknowledging climate - related risks. and it seems that investors and financial institutions are now on the same page. in 1992, the words “ climate change ” popped up in only 69 bloomberg articles. by comparison : last year, it appeared in over 22, 000 bloomberg articles. also, in 1992, seminars like this didn ’ t cover climate - related issues. this is of course not only true for climate change : “ low interest rates ” weren ’ t really a hot topic then either : with the german bund yield at 8 %. but the difference between these two subjects is that interest rates go up and down over time, while the temperature keeps rising. the world has already warmed by about 1 degree celsius since pre - industrial times, due to human activity. drastic efforts are needed to reduce carbon emissions now. otherwise, it