At the recent G20 meeting, policy makers turned a blind eye to Japanese monetary easing and its impact on the yen exchange rate. In the meantime, Japan’s Finance Minister, Taro Aso, writing in the Financial Times, heralded his government’s attempt to reverse ‘stagnation’ and end the deflation that current Japanese policy makers believe is the source of all their ills.

Guido Mantega, Brazil’s Finance minister, in 2010 revived the charge that some countries are relying on currency depreciation to improve their balance of trade, using it to revive their economic fortunes. Economists also refer to this as a ‘beggar thy neighbour’ policy. There are a number of interesting features associated with the currency war argument.

One casualty of any major economic crisis is that observers, if not policy makers, begin to fault the monetary regime in place. So it is with inflation targeting (IT). One of the latest examples of this phenomenon is the recent article by Martin Wolf whose title claims that the regime that aims to maintain price stability has “failed”. He then goes on to argue that his change of mind is because it has failed to be equated with economic stability.

With Britain considering a referendum on EU membership the focus shifts away, temporarily, from worries over the euro zone’s own myriad challenges (not to worry these will return in the Spring when growth in the euro zone fails to return and we edge closer to a German federal election).

The end of the year is nearly upon us and while the world wonders how much US fiscal policy will tighten sharply next year – fiscal cliff or not – prospect in the world’s second largest economy, the eurozone, do not look promising. The November Consensus forecast for eurozone real GDP growth (the latest available data at the time of writing), based on a mean of 26 forecasts, is zero percent growth for 2013.

The surprise announcement on Monday that Bank of Canada Governor Mark Carney would become the next Governor of the Bank of England has quite rightly emphasized that the appointment will be a challenging one. However, much of the media seems to have focused on Governor’s performance in the area of monetary policy and his reputation among central bankers. Yet, one of the reasons Governor Carney was sought after is because of his organizational skills. In response to the global financial crisis of 2007–9 the Bank of Canada has redistributed a considerable amount of resources towards financial stability issues. As the Bank of England resumes oversight not only over monetary policy, but also over matters dealing with financial stability, the resulting reorganization of the Bank of England will surely be one of Governor Carney’s most important challenges.

In a few days time CIGI ’12 will be held in Waterloo. While the topics cover a wide range of governance issues, it is clear that international governance questions (notably in the financial sphere) will play an important part. At the risk of neglecting some of the governance challenges facing the international community, it is worth devoting a little space to how developments in Europe are coloring the global community’s ability to deal with the many other economic governance problems it faces.

James Coyne was Governor of the Bank of Canada from 1955 until 1961 and passed away a few days ago at the age of 102. In spite of the fact that the "Affair" that carries his name is over 50 years old, his passing still merits an extensive piece in Canada’s major newspapers (see the Globe and Mail’s article as well as the National Post’s article about his passing). Although the title of this blog is Money Mischief, after the title of Milton Friedman’s book about the missteps and occasionally disastrous monetary policies of the past, there was always a special place in my monetary historian heart for the period when James Coyne was Governor of the Bank of Canada.

Of course, there is more to assessing the stance of monetary policy than simply looking at interest rates. In a small open economy the exchange rate also matters. Yet, media reporting of the Bank’s actions tend to focus on certain elements of the press release that keep being repeated and one occasionally gets the impression that exchange rate behaviour a separate role in assessing the state of Canada’s monetary policy. The next plot shows the record of the Canada-US dollar exchange rate since late 2008 until the middle of 2012 (left hand scale). As of this writing the Canadian dollar remains above par with the U.S. dollar.