Thursday was a banner day for global policymakers, with Jean Claude Trichet, Ben Bernanke and President Obama vying for traders' attention with a trio of speeches. Meanwhile, an op-ed in The FT by the Dutch prime minister and his finance minister roiled markets by calling for a "radical break" from prior policies, including "the ultimate sanction" for profligate countries that refuse to comply with strict guidelines: Expulsion from the euro.
Meanwhile, the OECD slashed its growth forecasts and the Bank of England and ECB held policy meetings; both central banks left rates unchanged but opened the door for future accommodation.
Friday morning brought yet another round of headlines from a top international policymaker, IMF Monetary Fund Managing Director Christine Lagarde, who said: "Countries must act now and act boldly to steer their economies through this dangerous new phase of the recovery."
Lagarde's comments came as G7 finance ministers convened in Marseille, France for a meeting from which some observers are expecting big things. Morgan Stanley's global economics team predicts "a coordinated monetary policy easing move" is in the offing and could be announced at the G-7 confab. "The Fed, the ECB, the BoJ and the BoE could all participate in a coordinated move with a mix of rate cuts and quantitative easing."
Presumably, Bernanke didn't say much new on Thursday and the ECB and Bank England left rates unchanged so as to avoid stealing the thunder from any coordinated action. Anticipation of such a move, coming on the heels of the Swiss National Bank's pledge to weaken the franc vs. the euro with "the utmost determination," might explain the action in financial markets Friday morning: The euro hit a 6-month low vs. the dollar while gold tumbled to as low as $1825 per ounce, roughly $100 below Tuesday's record high of $1923.70.
For some insight on these and related matters, I spoke with international financier Marc Faber, publisher of the Gloom, Boom and Doom Report.
His advice: Don't even bother trying to stay on top of all the different policymakers, central bankers and other officials (elected and appointed) making waves in the financial markets these days
"I'm not interested in the garbage these government officials broadcast," Faber says. "Either they are lies or they are distrustful. You can't trust them anymore because they produce statistics that are completely unrealistic."
For example, Faber points to the U.S. government official statistics, which show inflation tame, or falling; or the Fed's focus on so-called core inflation, which excludes food and energy. "It doesn't account for the true cost of living increases you, your family and all your viewers have," he says.
Fundamentally, Faber rejects the notion that we should be looking to policymakers for solutions to what ails the global economy.
"Basically if you believe in a market economy and capitalistic system you don't believe in government intervention," he says. "If you want to have a properly functioning economy it has to be a market economy with all its drawbacks and disadvantages and the pain for individuals. That is the only way [the economy] will function."
Sounds a bit like Winston Churchill's famous line: "Democracy is the worst form of government, except for all those other forms."
- Jean Claude Trichet
- Ben Bernanke