In A Hole, But Emerging

2nd September 09 – In a hole, but emerging

Hollywood could not have script it better. They met in a hole. Jackson Hole, Wyoming as it happens. In this most aptly named of towns within a rocky cowboy state, Ben Bernanke, chairman of the US Federal Reserve, told leaders of the world’s central banks that “Prospects for a return to growth in the near term appear good.”

On this side of the pond, Kenneth Rogoff, Harvard professor and former chief economist of the IMF voiced his opinion that there was “no question the global economy is healing and emerging from recession.” Furthermore, according to a German purchasing managers’ survey, business confidence in August hit its highest level since January 2006 and led to Klaus Baader, chief European economist at Societe Generale to utter the immortal words “The recession is over.”

So there we have it then, the world has emerged for its (Jackson) hole.

But what about the UK specifically? Our man in the frame, namely Mervyn King, Governor of the Bank of England, is more head-scratchy and cautious. He is focusing on the threats that remain and emphasising that even if recovery has started, the major tests lie beyond 2009 when stimuli are unwound and consumers have lost their appetite to spend. He backed up his caution by wanting more QE than he got at the last meet of the Monetary Policy Committee.

In many ways the apparent conflict of view between those in the hole and those in central Europe with the UK, is not conflict at all. It is more an issue of emphasis. Things may not look as bad as they did, but we still have to pay for the rescue. We still have to emerge from the hole.