Global liquidity: where it stands, and why it matters. IMFS Distinguished Lecture by Mr Jaime Caruana, General Manager of the Bank for International Settlements, at the Goethe University, Frankfurt, Germany, 5 March 2014.

“These remarks apply the concepts of global liquidity and the financial cycle to analyse developments in the global financial system in the past decade or so and to understand the current configuration of risks and vulnerabilities. The focus is on how financial risk-taking, asset prices and credit expansion tend to move together across countries, even when these countries are at different stages of the macroeconomic business cycle. After the boom in the early 2000s and the bust in the crisis period 2007-09, the world is now in a new phase of global liquidity – with potential new risks. Although global liquidity conditions remain accommodative at the current juncture, more normal conditions will inevitably return at some point. Both policymakers and the private sector will need to be prepared for that adjustment. This means watching out for vulnerabilities that may have built up while conditions were accommodative. It also means taking action to build resilience in the financial system.”