What to Expect at the Upcoming Meeting of World Central Bankers

By George Leong

It’s that time again; the world’s most important bankers are meeting this week at the annual Jackson Hole symposium of global central bankers. This is the same meeting where the Federal Reserve’s Ben Bernanke launched the bank’s third round of quantitative easing (QE3) in 2011. However, this time, Bernanke is not expected to attend, which is somewhat odd, given he will be exiting his position with the Fed in January.

Whatever the case, you know the meeting will see central bankers continue to push the need for quantitative easing globally in an effort to keep the global economy from taking a step back. The reason is that the world growth, while improving, continues to be sluggish.

Everyone knows the Federal Reserve will be paring down its stimulus beginning as early as September, but I do expect some arm twisting from Bernanke’s friends around the world. Maybe that’s why he is not attending this year. He has also made up his mind.

Also Read: NYSE Holidays 2013

The focus at this meeting and over the next few weeks will be on what the Federal Reserve plans to do in September. The reality is that, despite the Federal Reserve saying it wants to first see the unemployment rate fall to seven percent before cutting its bond buying, there is speculation the central bank may actually decide to taper a bit to monitor the market reaction and its impact on bond yields first.

We know the Bank of Japan will be pushing its easy money, and the government, its massive projected stimulus plans. However, Japan will likely need to raise taxes to pay for the stimulus—the country has already agreed to reduce welfare to support its stimulus program. As I’ve said, this is absolutely ridiculous, and Prime Minister Abe should be ashamed of this move. But of course, hurting the less fortunate to help the wealthy happens everywhere. Just take a look at America and what the lower-income earners have to deal with here.

The European Union has emerged from its recession, but it cost the region a trillion dollars to do so, leaving massive debt levels for many of the countries to deal with. There are still hurdles as China could still sink and impact the economic recovery in Europe and the global economy.

Yet as I have said in my previous columns, in spite of the massive amount of money printed by the Federal Reserve and the mounting debt, the U.S. economy has improved—just not to the degree the Federal Reserve expected. This is the dilemma facing not only the Federal Reserve, but central bankers around the world as well. I’m sure it will be an interesting gathering this week once the introductory wine and cheese formalities by the world power brokers are over.

This article What to Expect at the Upcoming Meeting of World Central Bankers was originally published at Investment Contrarians