Should we conclude, therefore, that in the absence of a world government, the identification of “new rules of the game” is likely to be no more than a theoretical exercise? Certainly, the fate of Keynes’ proposal for an International Clearing Union is not encouraging. But the experience of the past twenty years shows that large imbalances mean that everyone suffers when there is a sharp adjustment. So there is scope, if not for formal international policy coordination, then for an international conversation about how to improve a system that is fragile. Central banks were able to ensure, for a while, that the paths of output were sustainable – consistent with low and stable inflation. But the patterns of demand were far from sustainable. And when the sharp adjustment to demand eventually came, it inevitably had implications for the level of output. Reform of the IMFS, and of our domestic financial systems, is a necessary complement to the domestic price stability oriented policy frameworks of central banks. The immediate issue of how to move to a more sustainable position requires a resolution of different countries’ economic strategies for rebalancing. There can be only one path for rebalancing – with rebalancing in the deficit economies, by definition, just a mirror of that in the surplus countries. But the path that would be chosen by high-saving economies differs from that which the more indebted industrialised economies would prefer.
Durmuş Yılmaz: Food prices and inflation Speech by Mr Durmuş Yılmaz, Governor of the Central Bank of the Republic of Turkey, at the Central Bank of Argentina 2008 Money and Banking Conference “Financial turbulence – impact on developed and emerging economies”, Buenos Aires, 1 September 2008. *  *  *  Dear Guests, It is a great pleasure and honor for me to address such a distinguished audience on the issue of “Food Prices and Inflation”. The current level of food prices constitutes a major risk to households, in particular those living in developing countries. I’d like to thank the Central Bank of Argentina to organize this conference and dedicate a special session on this issue at this juncture. Dear Guests, The second half of 2007 was not an easy period for central bankers – and so far 2008 has been even more challenging. We are currently facing significant inflationary pressures on a global scale due to record high increases in commodity prices. The surge in inflation rates has become a major challenge that threatens price stability in many countries. Average inflation throughout the world has been rising rapidly. Inflation in developed countries has reached its highest level of the last eighteen years. For the first time in many years, inflation figures of the developing countries are in two digit levels. Moreover, the financial turbulence that has started in the second half of 2007 and the subsequent credit crunch are adversely affecting economic activities. Growth rates have been slowed in many countries.