Malcom Knight

My final observation is that all of this acquires greater significance at the current juncture. The world economy has been experiencing, and may now be emerging from, an unusually long period of historically low inflation-adjusted policy interest rates, unusually strong expansion in global liquidity, exceptionally buoyant asset prices, and strong global growth. And this has occurred at a time when globalisation should, if anything, have raised the world's natural interest rate, by boosting global growth potential while helping to keep a lid on inflation. But just because inflation has remained remarkably quiescent so far, should we assume that all is fine?

I say this in that spirit of humility which should underpin all policies. We must always remain alert and avoid complacency. The major policy mistakes in history that I highlighted earlier were made precisely when policymakers felt they had finally come to master the secrets of the economy. Preserving macroeconomic and with it, financial stability, is essential. We should not forget that it was financial stress at the core of the global economy, and its international ramifications, that proved fatal to the first wave of globalisation. I certainly do not have the answers. But these questions are worth asking.

From a comment on a paper by Frederic Mishkin on the benefits of globalization and the need for emerging markets to embrace more open capital markets