From Prof Stephany Griffith-Jones.

Sir, Robert Skidelsky’s article “A golden opportunity for monetary reform” (November 10) is one of the few that link the need for reforming the global monetary system towards a world of more stable exchange rates, with the need for capital controls. Indeed, the possibility of less violent movements of exchange rates (so these are less disruptive for trade and long-term investment) is undermined by short-term speculative flows. While these remain so large and volatile, more stable exchange rates are impossible. Why are we allowing the financial tail to wag the real economy dog?

Lord Skidelsky also highlights, as the FT too has done more generally, the importance of growth; there is much discussion of the distribution and structure of growth worldwide. While this is important, even more crucial is that sufficient demand is generated to allow for sufficient growth, especially in the developed countries.

In a context where over-leveraged companies and households are reluctant to spend, cutting back fiscal spending simultaneously in many countries in Europe will undermine rather than promote growth in the continent and globally.

Stephany Griffith-Jones,

Executive Director,

Initiative for Policy Dialogue,

Columbia University,

New York, NY, US

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