JACKSON, Wyo. – As the world’s central bankers descend on the Grand Tetons for a closely watched annual conference, the mood in Jackson Hole is again one of profound unease.
The symposium, sponsored by the Federal Reserve Bank of Kansas City, occupies a unique place in the world of economic policy. It brings together most of the globe’s top central bankers and many of the planet’s smartest economists to talk through the issues of the day. It was here one year ago that Federal Reserve chief Ben S. Bernanke signaled openness to massive bond purchases, here in 2007 that the Fed leaders plotted a response to the budding financial crisis and here in 1990 where the central bankers of the West first met their counterparts from the former Soviet bloc.
When Kansas City Fed leaders decided months ago on the topic of this year’s conference — “Achieving Maximum Long-Run Growth” — they did so advisedly. The implicit message was that the focus of the world’s economic policymakers was no longer about financial crisis firefighting, but about laying the groundwork for a stronger global economy over the longer run. It’s not about growth in the next quarter but in the next decade, or three.
In hindsight, the topic seems almost aspirational. If only the world were in position to worry about the long term, rather than the short term!
During the past two months, the risk that the United States will slip back into recession has increased precipitously. Analysts are now facing the possibility that the nation actually lost jobs in August for the first time in more than 18 months (the Labor Department will release U.S. unemployment figures for August next week). Many on Wall Street are starting to think the Fed may need to look deep into its depleted quiver for new arrows to try to arrest the faltering outlook.
Europe’s debt crisis has entered a more ominous phase, with the European Central Banking buying billions’ worth of Spanish and Italian bonds to try to avert a further panic and Germany and France showing weaknesses, as well. The stock market has returned to jaw-rattling levels of volatility. Even the booming Chinese economy may be slowing as it continues its anti-inflation campaign.
These topics will surely be the stuff of countless deceptively casual conversations among the economists and policymakers gathered at the Jackson Lake Lodge — at meals in the lodge, during hikes in the Grand Tetons and over drinks in the Blue Heron Lounge.
But even as the crisis management task facing the Fed’s Bernanke, the European Central Bank President Jean-Claude Trichet and their counterparts around the globe grows more worrisome, there is something to be said for thinking about the official topic of the event. Bernanke has emphasized before that monetary policy, and by extension central banks, cannot be expected to solve all the world’s problems. He is likely to echo that belief in a closely watched speech to be delivered Friday morning.
What central bankers can do is shape monetary policy to offer a steady, reliable backdrop that might allow growth, and over time use both their official policy tools and their influence to try to guide world toward greater prosperity.
We should hope that the men and women gathered in Jackson Hole are able — even when working day and night to put out fires — to think about what that world would look like and how we get there.