March 2010: Air thick with upheaval

The monetary air has been thick with alarum and upheaval, whether from fiscal disturbances centred on Greece or fears of economic overheating in China. And
this heady brew has been stirred up further by the International Monetary Fund. Its chief economist, the estimable Prof. Blanchard, has chosen a moment of deep sobriety on world bond markets to raise the spectre of higher inflation – something that may happen anyway, with or without IMF encouragement. As Stewart Fleming indicates in his front page story: A brave man indeed. This month’s Bulletin has an unmistakable Bundesbank flavour, in keeping with the
Inaugural Meeting of OMFIF at the headquarters of that august institution in Frankfurt. Helmut Schlesinger, the former Bundesbank president, finds some features to applaud in Paul Volcker’s proposals to separate commercial and investment banking activities. This is despite the universal appeal (in Germany and other continental countries) of the universal banking model, which the present Berlin government seems highly unlikely to want to dismantle, whatever happens in America. Schlesinger takes a sideswipe at the ‘Great Moderation’ of the Federal Reserve and the European Central Bank – and, in passing, at the latest suggestions of the IMF’s Blanchard, which he says are ‘the last thing we need.’

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