The global imbalances of the 2000s and the recent global financial crisis are intimately connected. Both originate in economic policies followed in a couple of countries in the 2000s and in distortions that influenced the transmission of these policies through the US and ultimately through global financial markets. In the US, the interaction among the Fed’s monetary stance, global real interest rates, distorted incentives in credit markets, and financial innovation created the toxic mix of conditions making the US the epicenter of the global financial crisis. Exchange rate and other economic policies followed by emerging markets such as China and the oil-exporting countries contributed to the United States’ ability to borrow cheaply abroad and thereby finance its unsustainable housing bubble. But at the same time, the lower real interest rates resulting from the rise in oil prices and the ever increasing Chinese savings surplus, in turn, have facilitated adjustment to the subprime crisis. Especially nowadays, a coordination of monetary policy is advisable as during the financial crisis, central banks flooded the markets with ample liquidity. Drying out this excess liquidity will be one major task for central banks worldwide as our analysis has shown that liquidity will first show up in asset price inflation and finally end in consumer goods inflation. If the exit from this very expansive monetary policy is not coordinated, this might cause additional problems for the world economy.