Since the subject was put on the international policy agenda by Brazil’s finance minister almost three years ago, much of the talk about currency wars has been phoney. That is to say, contrary to reporting from the putative battlefield, the use of quantitative easing by key advanced country central banks, which some claimed was the opening salvo in the currency wars, was not designed to bring about a depreciation of their currencies.

While most people are oblivious to it, there is a war raging in the blogosphere over the role of macroeconomic stabilization policy in the current global conjuncture. The battle pits the illuminati of the economics profession (and sadly—pathetically—a well-known Harvard history professor) against each other in internecine debates over basic economic models and “what Keynes really meant” when he reflected on the human condition.

A previous post, here, argued that agency problems, or the potential for borrower and creditor interests to diverge, have increased over the past thirty years as the role of private capital flows have increased in importance. As a result, it may be more difficult for the IMF to fulfill its role in assisting its members strike a judicious balance between financing and adjustment. And this, in turn, has, arguably, undermined the credibility, legitimacy and effectiveness of the Fund. The question is what role can or should the IMF and other international financial institutions play in a world of global financial integration.

Over the past month, a number of commentators have opined on the implications of the Cyprus situation on the euro. The decision to impose capital controls, they contend, however necessary to prevent the flight of deposits from troubled banks, represents a de facto exit from the euro zone. After all, a euro in Cyprus does not have the same command over resources as a euro in any other member of the eurozone.

The story thus far: The global economy faces large adjustment challenges that in some respects resemble the situation in the early years of the Bretton Woods era, albeit with different structural constraints. The IMF and other International Financial Institutions (IFIs) can help their members deal with the adjustment challenges ahead, but only if members agree on a set of obligations and responsibilities they owe to each other and the system writ large.

At this time of year, after several months of snow and freezing rain, Canadians typically begin to worry about the effects of all of that road salt on their vehicles. Similarly, there was evidence, this week, that the corrosive effects of economic weakness that have been eating away at the periphery of the euro zone for the past several years is causing structural problems with the drive train. It is difficult to put a good spin on the single currency area’s growth in the fourth quarter, which contracted by 0.6 percent.

The previous post argued that to make progress on IMF governance reform requires a clear-headed perspective of the role of the IMF in the early decades of the 21st century and the relationship between it and the G20. It concluded that the challenge is to identify what the Fund must do to advance the mutual interests of its members in the first half of the 21st century and draw a mapping between these roles and responsibilities and quotas and other elements of governance reform.

CIGI, together with the Intergovernmental Group of Twenty-Four (G24) and the Brookings Institution, organized a seminar on "pressing and future issues in IMF Reform and Options for their Resolution" at Brookings in Washington, D.C. Friday afternoon. It was, as the great American social philosopher Yogi Berra said, "deja vu all over again." A year ago (almost to the day) a similar seminar was organized at Brookings featuring many of the same participants, who said much the same thing. And, while I hope to be proven wrong, I am reasonably confident that, in a year's time, we could have yet another conference with pretty much the same script.

As previously argued, a case can be made that the international financial institutions (IFIs) have not yet fully adjusted to the post-Bretton Woods world of massive private capital flows that dwarf the limited resources of the official sector. Lacking the instruments and frameworks to fully assist their members strike the right balance between financing and adjustment, the institutions have been less than fully credible and effective in dealing with the capital account crises of today. The result has been disenchantment with the IFIs, whose legitimacy is questioned. Viewed in this perspective, improving the framework for the resolution of financial crises and promoting the timely, orderly restructuring of sovereign debt are critical objectives in international architecture reform.