Three subjects were the most talked-about in Davos. First, the global economic recovery that financial markets have already anticipated. Or rather, the question of the extent to which the future economic recovery the markets have begun to lead is real. Davos argued about the latter but wouldn’t dare to open the can of worms on the former. It was deemed to be too controversial a discussion to stage amid these times of uncertainty and sheer fear.
The second subject that proved relevant in Davos was the role of central banks. Can they keep up appearances for much longer? Many Davos participants considered that the contraction of the European Central Bank’s balance sheet is not a hint of what other will have to do, but a good example of how to do it when the environment allows it. And no, there was not any red carpet for governors and chairs of central banks.
And the last theme that turned to be important in Davos was a bit more complicated: do we have a currency war before our eyes, or not? In technical terms: can we implement a currency exchange policy together with other economic policies? Theoretically, currency exchange policies don’t exist, but in practice it is a debatable matter. In Davos, some governments complained about Japan and others, who refused to have any currency exchange policy in place. Yet, the swords were crossed and it isn’t difficult to forecast a more visible clash during the G20 summit next February.
By the way, a recent poll showed 68 percent of Japanese support their government, so it is likely that it will persist in its economic policies.