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Year of the Multicurrency System’ January 2016 The BulletinVol. 7 Ed. 1 Official monetary and financial institutions▪ Asset management ▪ Global money and credit Going their own way Multicurrency journeys Nick Butler on stranded assets Otmar Issing on euro impasse Kingsley Moghalu on central banks John Mourmouras on Europe’s future Athanasios Orphanides on Greece's non-rescue You don’t thrive for 230 years by standing still. As one of the oldest, continuously operating fi nancial institutions in the world, BNY Mellon has endured and prospered through every economic turn and market move since our founding over 230 years ago. Today, BNY Mellon remains strong and innovative, providing investment management and investment services that help our clients to invest, conduct business and transact with assurance in markets all over the world. bnymellon.com © 2015 The Bank of New York Mellon Corporation. All rights reserved. BNY Mellon is the corporate brand for The Bank of New York Mellon Corporation. The Bank of New York Mellon is supervised and regulated by the New York State Department of Financial Services and the Federal Reserve and authorised by the Prudential Regulation Authority. The Bank of New York Mellon London branch is subject to regulation by the Financial Conduct Authority and limited regulation by the Prudential Regulation Authority. Details about the extent of our regulation by the Prudential Regulation Authority are available from us on request. Products and services referred to herein are provided by The Bank of New York Mellon Corporation and its subsidiaries. Content is provided for informational purposes only and is not intended to provide authoritative fi nancial, legal, regulatory or other professional advice. Contents Going their own way The year ahead The world is en route towards a Mixed views for 2016 Advisory Board 8 multicurrency system in which the dollar will share its central role Europe with other currencies, including the euro, yen, sterling and the up- Europe must resolve the euro trilemma David Owen 12 and-coming, volatile yet potentially Flawed rescue threatens integration Athanasios Orphanides 13 pivotal renminbi. As the monetary authorities behind these currencies Fate of the euro and the UK referendum Gus O’Donnell 18 prepare to go their own way in interest rate policies, historical Improving EMU’s incomplete architecture John Mourmouras 19 precedent, and the overshooting No closer to political union Otmar Issing 20 often associated with asset diversification, indicate that flux and uncertainty lie ahead. ▪ International monetary policy Fed panel turns more hawkish Darrell Delamaide 21 Biggest danger is bank bashing Steve Hanke 22 Emerging markets Independence: important, not absolute Kingsley Moghalu 23 Beware Russian weakness Ben Robinson 24 Insecurity in ‘a time out of joint’ Michael Stürmer 25 Sustainable investment Action plan needed following accord Ruud Lubbers and Paul van Seters 26 Climate change and stranded assets Nick Butler 27 Book review Book review You don’t thrive for 230 years A man who ‘didn't see it coming’ William Keegan 30 In the review section, William Keegan by standing still. enjoys Adair Turner’s ‘eminently readable’ assessment of the 2008 Spotting when the bubble will burst financial crisis, Between Debt and the Devil. Turner headed the UK’s nalysing how divergent monetary Financial Services Authority at the As one of the oldest, continuously operating fi nancial institutions in the world, Apolicies will affect global economic height of the crisis, working closely growth and asset prices in 2016 is a difficult BNY Mellon has endured and prospered through every economic turn and with Chancellor of the Exchequer task, writes Brian Reading. Alistair Darling and Bank of England Computer screens have replaced crystal market move since our founding over 230 years ago. Today, BNY Mellon Governor Mervyn King to address balls, silicon chips are the substitute for tea a systemic banking failure none of remains strong and innovative, providing investment management and leaves. Still nobody sees the future. them foresaw. investment services that help our clients to invest, conduct business and His concerns are Zero interest rate policies and quantitative easing have divorced markets We should remember the Triffin dilemma transact with assurance in markets all over the world. with historically high levels from fundamentals. Divergence entails – the conflict between the tendency for a of public and convergence, either economic fundamentals reserve currency to run a current account private sector up or asset prices down. Ultimately the deficit, and creditor countries’ increasing debt, and the latter. reluctance to hold that currency as the deficit need to restore The dollar’s the key. An increasing US widens. sense and utility trade deficit drives global growth while capital Upward convergence ends when America to the banking inflows push up the dollar. Normalising is can no longer afford to export growth. This system. dollar bubble-building then bubble-busting. bubble will burst, maybe in 2016, more likely Debt-trap arithmetic spawned early 2000s 2017. ▪ bnymellon.com dollar crisis fears. Instead domestic debt did the damage. Brian Reading is an independent economist. Vol. 7 Ed. 1 © 2015 The Bank of New York Mellon Corporation. All rights reserved. BNY Mellon is the corporate brand for The Bank of New York Mellon Corporation. The Bank of New York Mellon is supervised and regulated by the New York State Department of Financial Services and the Federal Reserve and authorised by the Prudential Regulation Authority. The Bank of New York Mellon London branch is subject to regulation by the Financial Conduct Authority and limited regulation by the Prudential Regulation Authority. Details about the extent of our regulation by the Prudential Regulation Authority are available from us on request. Products and services referred to herein are provided by The Bank of New York Mellon Corporation and its subsidiaries. Content is provided for informational purposes only and is not intended to provide authoritative fi nancial, legal, regulatory or other January 2016 3 professional advice. About OMFIF Official Monetary and Financial OMFIF Advertising & subscriptions Institutions Forum Promoting dialogue for world finance For advertising and subscription 30 Crown Place details, contact: [email protected] London The Official Monetary and Financial Institutions EC2A 4EB Forum is an independent platform for dialogue and United Kingdom Diary dates and meetings research. It serves as a non-lobbying network for T: +44 (0)20 3008 5262 worldwide public-private sector interaction in finance A full list of past and forthcoming F: +44 (0)20 7965 4489 and economics. Members are private and public meetings is available on sector institutions worldwide. 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