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Multicurrency journeys


20 January 2016, London

Jan 2016 Multicurrency logo

Jan 2016 cover

OMFIF has declared 2016 the ‘Year of the Multicurrency System’, with diverse currencies competing for status and clout in a crowded and chaotic monetary world. As different monetary authorities set out on diverse policy courses, the January Bulletin describes the tensions besetting the currencies that from 1 October will make up the International Monetary Fund’s special drawing right – the dollar, euro, sterling, yen and renminbi. We focus on the trials facing the European single currency.

Over the next 12 months, OMFIF will be attempting to shed light on whether the multicurrency system will be more or less stable than the de facto duopoly that has occupied centre stage for the past 80 years.

This month’s Bulletin contains 2016 predictions from OMFIF’s advisory board. According to these forecasts, a triumvirate of Hillary Clinton, Angela Merkel and Christine Lagarde will hold their ground  – a female foursome counting Janet Yellen, titular head of the multicurrency system. The euro area faces a fresh crisis, the Federal Reserve will face pressure not to increase interest rates above 1%, and the renminbi will decline further against the dollar.

The Bulletin analyses the implications of the Federal Reserve’s December decision to raise interest rates. Darrell Delamaide argues that the Federal Open Market Committee will be somewhat more hawkish in 2016, testing Yellen’s consensus-building skills. Steve Hanke contends that the greatest risk to the US economy stems not from interest rate tightening but from another round of ‘bank bashing’ through misplaced regulation.

Other highlights of the January 2016 edition:

  • Athanasios Orphanides, former Central Bank of Cyprus governor, outlines why the 2010 Greek rescue failed and says monetary union has mainly benefited Germany.

  • Otmar Issing, President, Center for Financial Studies,says Europe is no closer to political union and that national governments should retain fiscal responsibility.

  • Gus O’Donnell, former UK cabinet secretary, maintains that the euro is doomed to intermittent crises, saying he regularly ‘thanks God’ Britain did not join.

  • David Owen, former UK foreign secretary, asserts that Europe needs to resolve its euro ‘trilemma’ to avert a British vote to leave the EU.

  • John Mourmouras, senior deputy governor, Bank of Greece, says ECB asset purchases on their own will not be sufficient to boost euro area demand.

  • Marcello Minenna and Edoardo Reviglio, Italy-based economists, highlight the negative effects of dollar strength on private debtors in countries such as China and Brazil.

  • Kingsley Moghalu, former deputy governor, Central Bank of Nigeria, makes the case for central bank independence but maintains this should never be absolute.

  • Michael Stürmer, former adviser to Chancellor Helmut Kohl, says confrontation between Russia and the West requires an ‘agonising reappraisal’ and a return to Realpolitik.

  • Ruud Lubbers and Paul van Seters of the Netherlands say the Paris climate change accord represented the ‘best possible agreement’, but was only a first step.

  • Nick Butler of King’s College London argues that Bank of England Governor Mark Carney may have done investors a disservice by exaggerating the risk of stranded energy assets.

The Bulletin is available to OMFIF members, and to non-members on a subscription basis. To subscribe please contact: membership@omfif.org.

For latest OMFIF developments, visit www.omfif.org and follow us on Twitter @OMFIF.