The ECB and the Fed

By: Charles Wyplosz, Graduate Institute of International Studies

Facing different situations, the Fed and the ECB muddle through, each in its own way.

Ben's depression

By: Wolfgang Münchau

A return to a monetary policy to stabilise prices ended the Great Depression in the 1930s. This time it will work the other way round. Once the Fed is forced back onto a path of price stability, our depression will begin.

Germany’s wise man call for stimulus

Council of economic advisers calls for 0.5-1% package of investment spending; forecast of zero growth for 2009; chairman of Merrill Lynch predicts 1930s style depression; $2.1 trillion of European corporate debt wil mature until 2011; Harvard University apparently so brilliant investment managers are warning of a sizeable loss; the number of unsold Spanish property has skyrocketed; Joschka Fischer, meanwhile, accused Barroso of incompetence in his handling of the financial crisis.

China’s half trillion dollar stimulus

In time for the G20 summit, China announces a broad investment package to sustain economy in 2009 and 2010; European leaders agree on a five-point plan for the G20, and find a way to take Zapatero with them to the summit; credit conditions are expected to worsen in France, President Lula of Brazil, meanwhile, demands co-decision rights on financial architecture discussions.

When the facts change...

… some central banks change their mind more quickly than others; BoE cuts by 150bp to 3%, ECB by 0.5%; stock markets slump again amid indications that the global slowdown is even worse than expected; IMF revises forecasts downwards yet again; German industrial orders were collapsing in September; France targets a 3.1% deficit for 2009; Segolene Royal, meanwhile, has emerged as the frontrunner for the leadership of the Socialist Party.

Summers, Geithner and Volcker seen as frontrunners for the job of Treasury secretary

President-elect Obama is expected to make up his mind shortly; EU Commission raises serious concerns about Commerzbank recapitalisation, and launches inquiry; IMF imposes a money target on the Ukraine; US services sector suffers a severe contraction in October; there is a growing gap in the risk assessment of corporate bond and CDS markets; the French Socialists, meanwhile, ponder their leadership choice as Royal’s position strengthens.

Germany vetoes Sarkozy's proposals for euro area and global policy co-ordination

Merkel says no more euro area summits, provoking a hostile French reaction; Steinbrück says French plans for global macro co-ordination unrealistic and undesirable; French EU presidency is ready to drop group supervision from Solvency II; Italy plans €30bn bank recapitalisation programme; more reports are surfacing, meanwhile, that the credit crunch has a severe effect on the real economy.