Of course, all bets are off if the tentative signs of co-operation evident from last month’s meeting of G20 finance ministers give way to acrimony and talk of trade barriers and capital restrictions. If, though, Indian prime minister Manmohan Singh’s recent appeal for a “meeting of minds” is heeded after the dust settles in Seoul, then a more calibrated QE programme in the west, coupled with a little more currency flexibility in the east, might unleash a surprisingly grateful response from western world stock markets. [GUY MONSON] is chief investment officer at Sarasin & Partners and Subitha Subramaniam is chief economist
In a quotation often attributed to Keynes, monetary policy becomes like “pushing on a piece of string”. Such a fate may still be the outcome of new QE programmes, with massive central bank bond purchases simply unable to produce any real change in bank lending or domestic demand. But, while central bank governors may find themselves pushing on a piece of string in their own economies, they could be pushing on something more like an open door in the emerging world, the transmission mechanism being the informal dollar peg, adopted by China, which funnels the US “super-low” interest rate policy to almost every economy in Asia and the emerging world.