Capital inflows helped fuel emerging market growth, contributing even more to the uneven global recovery. Looking a bit further ahead, as the recovery solidifies in the advanced economies and inflation risk rises in emerging markets, diminishing growth differentials will diminish, spurring volatility in capital flows. Choppy waters may be ahead. So I’ve given you my view of the current global environment of fluid, if not excess, liquidity. So if excess liquidity is not the main issue, what is? On top of the list we have oil prices, Japan crisis and geopolitical risk in the Middle East and how these risks interact with global fluid liquidity. Which naturally leads me to the next question – what are the global growth scenarios in such a context? BIS central bankers’ speeches  1  In our central scenario or most likely scenario, we see continued global growth. The US and Euro area shows signs of a firmer recovery, amid monetary and fiscal stimuli. Latest data show strong consumption and production. But structural obstacles do remain; for example, unemployment and real estate market issues in the US and sovereign debt problems in the Euro area. The growth prospects of Asian economies remain robust, underpinned by strong fundamentals. However, inflation risk is rising, and fast. On the tragic Japan crisis, our current view is that its impact on the global economy should prove temporary. History suggests that Japan will quickly rebuild and recover. And the main engines of global growth still remain.
In the 1930s, the British economist Lionel Robbins stated that:  1  In Agnar Sandmo (2006): “Samfunnsøkonomi – En idéhistorie (Economics – a history of ideas)”, Universitetsforlaget, p. 224. BIS Review 109/2010  1  “Economics is the study of the use of scarce resources that have alternative uses”. 2 This definition may seem rather abstract – and does not perhaps capture aspects of the subject that are important today. To illustrate the breadth and application of the subject, an alternative may be to list some of the questions that an economist can contribute to elucidating or provide a decision-making basis for. The issues of relevance today may for example include the following:   Is it economically profitable to build a power line through Hardanger? How should we weigh the value of untouched nature against the cost of using alternative power supply systems?   How can CO2 emissions be reduced while minimising the impact on living standards and employment? While engineers have valuable knowledge about the technological aspects, economists can analyse how pricing and taxation can be used to reduce emissions    What are the consequences of increasing oil revenue spending in Norway? Over the past 10–20 years, a theme at the forefront of economic policy debate in Norway has been how fast we should spend petroleum revenues. Both gas and oil are nonrenewable resources and this places the management of these resources in a particular position. How can we ensure that many generations benefit from this wealth?