A certain view from Canada

BANK OF CANADA: EXPECT INFLATION IN EMERGING MARKETS, DISINFLATION IN DEVELOPED

“With currency tensions rising, some fear a repeat of the competitive devaluations of the Great Depression. However, the current situation is actually more perverse. In the 1930s, countries left the gold standard in order to ease monetary policy, and the system became more flexible.”

Today, the process is working in reverse.

 The international monetary system is sliding towards a massive dollar block. Over a dozen countries are now accumulating reserves at double digit annual rates, and countries representing over 40 per cent of the U.S.-dollar trade weight are now managing their currencies.

This death grip on the U.S. dollar is reducing the prospects for rebalancing global demand. As the Bank of Canada has argued elsewhere, the potential costs are huge–up to $7 trillion in lost global output by 2015.2

Excellent commentary  by the Governor of the Bank of Canada, Mark Carney. He succinctly describes why the crisis is far from over and why the disinflation in the USA is likely to persist while inflation rages in emerging economies:

“Current turbulence in Europe is a reminder that the crisis is not over, but has merely entered a new phase. In a world awash with debt, repairing the balance sheets of banks, households and countries will take years.

The full speech is certainly worth a read.

Source  THE PRAGMATIC CAPITALIST