A ski resort in a mountainous setting. Sumptuous natural setting where the powerful of this world meet every year… Davos? No, Jackson Hole. We are in the middle of the US state of Wyoming. The Four Seasons hotel complex offers a friendly chalet atmosphere conducive to intellectual exchange with its leather club chairs, exposed beams, stone fireplaces and vast terraces. The brave can climb the famous Mounts Tétons which dominate the village. No need for skis or snowshoes, all you need is a good pair of sneakers, since the Jackson Hole International Symposium is traditionally held here in August. By a coincidence of calendar it opens this year this Friday, August 23, on the eve of the G7, which is held in Biarritz.
Another difference with the World Economic Forum which has taken place every winter since 1971 in the Swiss canton of Graubünden: we are here between serious people. Jackson Hole brings together around a hundred top-flight, handpicked experts. We are far from the barnum that Davos has become. While Klaus Schwab, the organizer of the Swiss-style globalization festivities loves to advertise himself by inviting stars, we will never meet at l’Economic policy symposium from Jackson Hole singer Bono or actress Sharon Stone. Politicians – too often intellectually mediocre – are not welcome either. Journalists are barely tolerated, but far removed.
We communicate to them the texts written in advance of the various speakers. The Reuters or Bloomberg “agents” dissect them and immediately send the most significant sentences to their desk which instantly relay them to subscribers in Wall Street or the City trading rooms.
First edition in 1978
Because, for a few days each summer, the center of the world is here. This year, the stars are naturally Jerome Powell, President of the Federal Reserve of the United States and Christine Lagarde, Managing Director of the International Monetary Fund who in a few weeks will replace Mario Draghi at the head of the central bank European. It was a certain Roger Guffey, chairman of the Reserve Bank of Kansas City, one of the establishments affiliated with the Federal Reserve of the United States, who had the idea of bringing together central bankers and economists in the same place to discuss the future of the world.
In 1978, for the first edition devoted to world agricultural trade, a few experts and the local senator were brought together. But as early as 1982, the symposium abandoned topics on the future of smallholdings or water resources for good. The demonstration then took up its quarters at the foot of the Tetons Mountains to talk that year about “the monetary policy of the 1980s”.
Among the guests, James Tobin, just awarded his Nobel Prize in economics, who delivered a constructive criticism of the Tinbergen-Theil model before discussing the mix between fiscal and monetary policy. We understand, we are here between pro, and the “elements of discussions, are riddled like real academic articles with footnotes. A good opportunity for Harvard or Chicago professors to gauge themselves and especially to get in direct contact with those who really drive the global economy: central bankers.
The famous quantitative easing was born here
Jackson Hole gradually became a kind of international congress on monetary policy. It was here, in 1990, that Western money-makers took stock with their fellow central bankers of the former USSR on how to deal with the disintegration of communism. Chairman of the Federal Reserve from 2006 to 2014, Ben Bernanke, was of course a regular. With a solid academic background, former Harvard and MIT, this fifties with the well groomed beard felt here at home. And it was at the foot of the Monts Tétons, in August 2010, that he perpetuated his policy of quantitative easing which consists of intervening in a massive and accommodating manner in the markets “if the situation requires “ – this is the end of the sentence retained by the trading rooms – in order to support and promote economic recovery.
It is true that that summer, the economic situation was not good. The growth rate had been revised down to 1.6% and the rate of unemployment was at 9.5%. The markets will take a few sessions to fully understand the meaning of the speech. But the message will eventually get through: the Central Bank is ready to put the printing press to full force to get the US economy out of the deadlock. Specialists talk about quantitative easing, “QE2” (pronounced “kiouitou”), unorthodox monetary policy, or more simply spreading dollars. At the controls of his helicopter, the pilot of the Federal Reserve, that summer in Jackson Hole, came to explain that he was ready to empty his bunkers to put out the fire.
At lunch, Jean-Claude Trichet Take the speech. The president of the European Central Bank (ECB) at the time made a different point. It is true that despite the doubts that have arisen about the ability of certain Member States to repay their debts, the European Union is not doing so badly. The growth rate is then twice as high as in the United States, at nearly… 4%.
Reverse reports
Today the relationship is reversed, Europe is down and the United States still has sustained growth. But not enough to the taste of President Donald Trump and many economists who fear a recession as early as next year. Suddenly, last year, Jerome Powell, in Jackson Hole, had given signals aiming to abandon the “forward guidance”, ie the moderate rise in interest rates. A few weeks ago, the Federal Reserve took action by lowering its key rate by 0.25%. Not enough to the liking of Donald Trump, who has just sent out a round of tweets for the American Central Bank to go further, a way in passing to blame him for a possible recession.
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