Do we need an International Monetary System? - speech by Mervyn King

The Governor of the Bank of England, Mervyn King, today calls for a "grand bargain" to bring about a global rebalancing and avert a move towards protectionism.
Published on 11 March 2011

In a speech to the Stanford Institute for Economic Policy Research in California, the Governor notes the importance of international trade and hence an effective International Monetary System. But he goes on to highlight externalities in that system which caused high savings in some countries and high borrowing in others. This resulted in global imbalances characterised by large current account surpluses and deficits, and ".unsustainable paths for domestic demand, net debt and long-term real interest rates". While the ensuing crisis elicited an unprecedented policy response, he says this "simply postponed much of the required adjustment in spending patterns around the world".

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