Today the European Central Bank President Mario Draghi is slated to speak in Lindau, a particularly quiet and gentle resort on lake Constance, at the Meeting on Economic Sciences. The conference prides itself for attracting 17 Nobel laureates and 350 young economists from 66 countries who are expected to hang on the former groups every word. Those who still remember the spectacular failure of Long Term Capital Management in 1998 with its bevy of Nobel Prize winners might be wondering how it can be that economics can still call itself a science rather than a dark art but this is all happening in Germany, close to the Austrian border, where there is still a belief that the bigger an individual’s academic title, the higher the probability that said person’s pronouncements must be correct.
Nobody seems to know what Senor Mario is going to say although consensus is that he will try to avoid another “Sintra moment” in which he scared the living daylights out of financial markets by suggesting that the time had come to start tightening up a bit on the ludicrously loose monetary policy which the ECB has been pursuing despite the visible recovery of the eurozone economy. With him speaking both today in Lindau and on Friday at a central bankers meeting at Jackson Hole, dedicated ECB watchers see all their Christmases coming at once. That said, if one drew a graph which tracked what Sr Draghi has said and another one which followed what he, and in consequence the ECB, has actually done liquidity programmes aside, I suspect they would not display too many cross-over points.
On Friday representatives from the central banks of over 40 nations will gather at the US resort of Jackson Hole in Wyoming for an annual talk-fest. While many inches will be written in the world wide media and expectations boosted for any tangible positive outcome I doubt it will end, as they all have in past years, with no outcome bar a very large expenses bill. We all know what the issues facing central banks are and how they are all standing backs to the wall unable to move for fear of blowing up a debt bubble and an asset balloon.