Currencies dominated this year’s annual meetings of the International Monetary Fund. More precisely, two currencies did: the dollar and the renminbi, the former because it was deemed too weak and the latter because it was deemed too inflexible. But, behind the squabbles, lies a huge challenge: how best to manage the global economic adjustment.
In his foreword to the new World Economic Outlook, Olivier Blanchard, the IMF’s economic counsellor, states: “Achieving a ‘strong, balanced and sustained world recovery’ – to quote from the goal set in Pittsburgh by the G20 – was never going to be easy . . . It requires two fundamental and difficult economic rebalancing acts.”
The first is internal rebalancing – a return to reliance on private demand in advanced countries and retrenchment of the fiscal deficits that opened in the cri