Despite all the hype heading into the Greek elections, they seem to have accomplished little more than all the big events that came before it. Despite the secret meetings and conference calls, endless elections, protests and a slew of important-sounding acronyms like ECB, EFSF, and LTRO Europe still has no tangible plan to address its economic woes. Carol Pepper, CEO of Pepper International says to expect more of the same.
Europe will continue to do whatever it takes to squeak by, says Pepper. Member nations want both autonomy and collective benefits; a combination seldom occurring in nature let alone politics. As a result the countries just meet and grouse "like a bunch of squabbling hens."
Enter the cock of the walk in the form of Federal Reserve Chairman Ben Bernanke. Despite the myriad failings of the U.S. economy, this country remains the world's economic safe haven. It may come back to haunt us over the long haul, but Bernanke's policy from day one has been to inject money into the system by any means necessary.
Operation Twist is set to end at the end of this month. An extension of Twist would shock no one, but Pepper thinks more could be on the table. Bernanke has "absolutely left the door to open to more easing" and she expects to see it by September, despite this being an election year.
Bazooka Ben pulling the trigger on more stimulus so close to an election would be controversial, to say the least. Pepper says that's a secondary concern compared to the need for the Fed to emerge as a leader to Europe, if only symbolically. Would Europe follow? Almost certainly not, but at least the FOMC will have demonstrably done what it can in response to the threat of recession.
Waiting until September gives the Fed more data to support a cut and buys more time for Europe, in the remote chance the 17 nation (at the moment) Eurozone can get something accomplished on its own.
The FOMC trying to set the standard for global central banking is obviously less than ideal but, at least as Carol Pepper sees it, it's the best option we've got.