Expect a global crisis or two next year, and alignment of monetary policy

REFORM of the international monetary and financial system tends to proceed not so much step by planned step as by reaction to repeated crises. This has been the pattern in recent decades and it is highly possible that 2016 could bring yet another crisis to act as a stimulus for reform.

This time, it will not be a US (sub-prime) mortgage loan-triggered crisis that ricochets through the global financial system but rather one that stems indirectly from the actions of the US Federal Reserve. Again, however, the impact will be felt globally.

There is a view that financial markets have "priced in" the effects of an increase in short-term US policy interest rates, which are imminent. But this may be no more than a comfortable fiction. It is not so much the first or second Fed rate rise that matters as the beginning of the end of a cheap-money era.