Timothy F. Geithner, CEO of the New York Reserve Bank (March 2006) focuses on two features of what is happening in the world economy and financial markets today, which are among the most interesting and consequential questions we ......... today.

These are, first, the ......... of forward interest rates in financial markets, and, second, the pattern of external imbalances.

These features are interesting, in part, because they seem somewhat ........., or inconsistent with what the past has led us to expect.

Understanding the forces behind these phenomena is important to thinking ......... what they mean for policy.

The source of the relatively low level of nominal rates is still a matter of ......... debate.

The other surprising feature of the current economic environment is the pattern of global imbalances, and the size and ......... of the U.S. current account deficit.

As Alan Greenspan has explained, the greater dispersion in external imbalances can be seen as the ......... result of fundamentally healthy changes in the world economy.

If one were confident that observed imbalances reflected an efficient allocation of the world's saving to its most productive uses, then we might also expect these imbalances to ......... themselves through smooth and gradual adjustments in relative prices and flows of goods and services.

We do not yet live in a world of perfect capital ........., one in which savings move across borders to their most productive use without constraint in the form of capital controls or without distortions affecting the behavior of private actors.

......... this is important to understanding both why the U.S. imbalance has grown as large as it has and, perhaps more importantly, why it has been financed with such apparent ease despite obvious concerns about its sustainability.