Central banks and leading politicians this week
By Daniel at 22 April, 2009, 5:23 pm
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They must be gently patting themselves on the backs this week after a co-ordinated campaign to talk-up limited signs of economic recovery successfully drove confidence back into capital markets.
Obama, Bernanke, Brown and Darling – from both sides of the Atlantic came the whisper that the end to the global recession was in sight or, stronger, that the recovery had already begun.
Whether there is any depth to their observations is less clear, and the IMF stood out like a sore thumb for morbidly pronouncing a deep and long recession is still to come.
The reality is that there is not much by way of the economic data to back up an optimistic view; the National Institute of Economic and Social Research said, for instance, that economic growth may not resume until 2012. Simply looking at the numbers is not going to put a spring in anyone’s step – hence the IMF’s pessimistic outlook.
But the central bankers and politicians know only too well that financial analysts on both sides of the pond are so desperate for any signs of optimism that might drive investors back into the capital markets, they will take any morsel they get. And to back it all up Goldman Sachs only went and announced a Q1 profit – we’re back in business!
As we know, stock markets look ahead by around six months, and the political gamble to predict tangible economic recovery before Christmas could still pay off for Darling, Bernanke and co, despite the lack of evidence.
Although the numbers do not back up their optimism, they have read a slow-down in the spiral of recessionary decline as enough evidence of a bottoming out to come to satisfy hungry analysts. And as long as there are no more shocks to the system by way of major corporate bankruptcies, the dose of optimism they have injected into capital markets may well spread into the real economy and carry us all through the rest of the recession. A philosophy nicely self-fulfilled! Well, that’s the theory anyway…
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