The world has been flooded by liquidity unleashed by the central banks of overdeveloped economies. Now it is spurting up elsewhere. There are signs of asset booms in countries as far afield as Peru (equity market up 139 per cent this year), Indonesia (112 per cent) and Turkey (99 per cent). Eventually, these will turn to busts.

It need not be so. One way for countries to absorb international liquidity is to sterilise it. But the interest payments on domestic bonds issued to mop up capital inflows can have a heavy fiscal cost. Another possibility is to allow the money in and let exchange rates appreciate. This keeps domestic inflation low and rebalances the economy away from exports – as repeatedly recommended for China.