This week, as this same group of central bankers gathers in Jackson Hole, Wyoming, there appears very little of the coordinated stance they took fighting the worst financial crisis since the Great Depression.  Now that the bulk of the crisis is behind us, it appears that human nature is taking its normal course as each head begins to chart a monetary policy suited to their countries best interests.  What has changed to cause the central banks to now move in divergent directions?

First, we must understand what brought about the cohesive effort.  As is the case with all human beings, working together towards one goal is usually a product of absolute necessity.  Not by design, not by altruistic motivation, and certainly not by goodwill or humanitarianism.  This financial crisis, which created an emergency unlike any we have ever seen, short of a natural disaster, effectively brought out the kind of adaptive behavior humans exemplify when working towards a common cause.  It is how we are hard wired.

Now that the crisis has moderated, people generally revert back to their natural behavior which is usually centered in self and the mantra of what is in it for me.  Here, there is potential financial danger if the heads of the central banks now diverge in setting policy.  Such a disjointed approach could presage increased volatility in financial markets.  For some onlookers the question now, in terms of monetary policy, is not so much if the dollar will weaken, but when and how.  It is one thing for currencies to fluctuate in an orderly fashion, where investor and nations can adequately anticipate future values.  It is quite another when any one major currency, and especially if it is the dollar in this case, begins a period of volatile fluctuations dictated by a disorderly and non integrated monetary policy of the world's central banks.  Chaos is not an option if we are to effectively distance ourselves from this financial crisis.

Certain economic facts are all but certain and will surely occur over the next few years.  One of these is that the dollar will surely decline and will most likely be replaced as the primary world currency by which all things are pegged.  Another is that there will be inflation in the United States.  When Mr. Bernanke floods the economy with printed money, a strategy that has worked to stem the crisis short term, and in the process effectively "inflates" our way out of the recession, he cannot go around saying that inflation is not necessarily a forgone conclusion.  Either he knows something no one else does, in which case he should just come out with it, or he is intentionally not telling us everything.

In the U.S., the Fed has traditionally given little weight to the value of the dollar is setting monetary policy.  Yet, Mr. Lawrence Summers, National Economic Council Director, recently voiced the administration view that stronger exports are the "foundation for sustainable expansion."  Summers, who is believed to be in the running to replace Bernanke, and who previously was the president of Harvard University believes in the world's central banks working together to create financial stability.  The only way the US will increase exports is for those products to represent a good value to foreign buyers.  That would mean a devaluation of the dollar.  U.S. exports most assuredly must increase to achieve a sustained recovery because American consumers are retrenching. To help achieve that, there has to be coordination across countries, because the U.S. is still a big fish in this vast financial ocean.

Without that coordination, there's a danger of a disorderly fall in the dollar, which in turn may seriously destabilize financial markets and thereby affect recovery in all countries.  The fact of the matter is that the world has greatly benefited with a strong dollar over the decades, as foreign countries have been able to sell their goods to the U.S.  For that to change abruptly would be devastating to countries like Canada who rely on exports of natural minerals, and to China which has grown used to an economy based almost entirely on the American consumer.

If the world's central bankers act without coordination, what each country may find is that its currency is either hammered or valued increasingly higher as financial markets react to the differences in interest rates that would result from a non-coordinated approach.  The Market is the Market and it will always seek to find where the financial hedge lies, and with that central banks will find themselves whipsawed into a monetary policy based on reacting to the market, rather than setting a policy that helps financial markets bring order back into vogue.

Even in China, one of its most heralded economists, Yu Yongding, has been calling for the Chinese government to liberalize its currency, the Yuan, and allow it to float freely to its proper exchange rate.  China, America's largest creditor, has been buying Treasuries and selling its own currency in order to keep the Yuan valued at or near 6.83 per dollar, a policy that helps Chinese exporters by making their products cheaper overseas, but it then exposes China to losses if the dollar's value falls.

China owns over $776 billion in U.S. Treasuries.  Economists like Mr. Yongding are worried that these funds are not safe, due to problems with the U.S. economy, yet he also recognizes that there are no alternative investment safe havens.  "Why should we continue to pile up those reserves?" Yu said. "Once the U.S. recovers...the dollar will weaken and Treasury prices will fall."  Yet, China's reserves are so large that it is hard to sell this stockpile of reserves without also triggering a steep sell-off of the dollar.

As that great philosopher Rodney King once said, "Why can't we just get along?"