Central bankers stress not rushing for exits

Reuters ^ | August 23, 2009 | Kristina Cooke and Mark Felsenthal

[Cheap_Hessian]

JACKSON HOLE, Wyoming (Reuters) - If there was one message from central bankers gathered at this mountain retreat this weekend it was this: Don't expect us to raise interest rates any time soon.

A series of speakers at the Kansas City Federal Reserve Bank's annual conference, which drew the monetary policy elite from around the world, heralded the global economy's apparent push out of its deep recession.

But they noted that economies were recovering only with extraordinary stimulus from governments and central banks, and said it was too soon to talk of a self-sustaining recovery.

"I am a little a bit uneasy when I see that, because we have some green shoots here and there, we are already saying, 'Well, after all, we are close to back to normal,'" European Central Bank President Jean-Claude Trichet said on Friday.

"We have an enormous amount of work to do."

As ECB Governing Council member Ewald Nowotny told Reuters, there seems to be a consensus among central banks to make sure they do not withdraw their stimulus too soon. "What we see now is that to a large part this is still a recovery sponsored by public measures," he said.

In the words of Harvard University professor Kenneth Rogoff: "They don't want to go back into what we just got out of."

[Libloather]

we have some green shoots here and there

That's the sound of my loot leaving...

[NotSoModerate]

This is a dangerous game they’re playing.

[CapnJack]

Maybe I'm naive, but to me the reason they wish to keep the interest rates low is to force what money is left from he sidelines into equities.

Since no one is making any interest on any savings and savings type instruments, the only game in town to make money is the markets.

With the increased market activity these people and their friends will reap huge revenues while potentially real productivity gains from small/mid/non-financial size businesses go unfunded.

Yes, maybe the new jobs that will be created will not only be gov’t jobs, but the rehiring of stock brokers and traders.

Its seems to be its all about Wall Street and to hell with Main Street.

Or maybe I'm all wet.

[taxtruth]

Don’t you people understand?These sleazebags own the country but if we go back to a currency backed via an asset their fiat money will be worth ZERO and we will have NO DEBT.We have no choice but to do this.NO CHOICE PEOPLE!THIS HAS TO BE DONE.

[RayChuang88]

In my humble opinion, this recession should have been very chance to finally do something about the income tax system itself, a system that has mightily contributed to our economic problems.

Kibosh the 16th Amendment and replace the Internal Revenue Code with FairTax (which favors cash-based personal savings and capital investment over debt financing); our economy will take off almost instantly, especially when we'll get at mininum around US$20 TRILLION in repatriated liquid assets and new foreign investments as the world rushes in to take advantage of what amounts to the world's largest legal tax haven.

[Swing_Thought]

Green shoot this up your rear portal, Bernanke.

[paul51]

Maybe I'm naive, but to me the reason they wish to keep the interest rates low is to force what money is left from he sidelines into equities.

They realize that with the enormous debt, they can't let interest rates rise. They had to choose between saving the fed or saving the treasury. It is really no choice. They have to monetize the debt because rising interest rates will be the final nail in the coffin. Truth is, damned if they do and damned if they don't. We are screwed.

[CapnJack]

A fair tax would be nice. Somthing where there is no need for an IRS.

But you need to remember that politicians gain their power over you and I via the power to tax. That is why it most likely will never happen. But I am all for something (even a national sales tax with the 16th repealed), that will put the power of how much I pay in taxes in my hands not others.

[ncfool]

Right in the home city of the Kansas City Fed is Bank Midwest they did a lot of deals in CA and AZ. The will soon make the Friday list of banks if the can’t clean up their mess soon. How many banks will make the death watch and list this year.

You can bet this was a topic at Jackson Hole.

[blam]

Why "Normal" WILL NOT Return

Here's the underlying problem: Bernanke and the Government are throwing literally $250 billion a quarter down the toilet simply trying to prevent an all-on deflationary collapse.

Unfortunately that "prevention" only works so long as the $250 billion a quarter can continue to be spent - more than $1 trillion a year in annual deficit that must be continually added by borrowing from the Chinese and Japanese EACH AND EVERY QUARTER or THE SYSTEM WILL GO RIGHT BACK INTO COLLAPSE.

How long can this continue?

[snip]