Confidence is a powerful force. A lack of confidence can be devastating. Have enough confidence and you can achieve absolutely anything.
All financial markets are underpinned by confidence. Currency relies on the fact that you have confidence in the issuing central bank. Banks rely on your belief that you can get your money back whenever you like. Investments work because you have faith that
the value of your investment will go up. The price of Sovereign debt is based on the level of confidence that the country concerned can furnish its obligations.
Confidence can be very fleeting. As we saw last week when the Spanish bank bail out (that wasn't a bail out) was hailed as a great thing in the morning, but by the afternoon, all faith that this mechanism would solve the underlying problem had pretty much
We tend to be herd animals when it comes to confidence. When surrounded by people with no confidence, it is very hard to maintain your own belief in something especially when that belief is shaky to begin with.
So here we are at yet another G20 meeting with global confidence bumping along the bottom of the chart. The great and the good of the world are assembled to speak to each other with the stated purpose of;
1. Policy coordination between its members in order to achieve global economic stability, sustainable growth;
2. To promote financial regulations that reduce risks and prevent future financial crises;
3. To create a new international financial architecture
They certainly have their work cut out and I doubt whether they will advance too much on this agenda in the few days they have together in Mexico. The best we can hope for is a new and imaginative way of kicking the can down the road. Will that be enough
to restore confidence to the financial markets? Briefly perhaps. Until the next skeleton falls inconveniently out of the crowded closet.
Running a country has to be a big job and so pressures on their time must be legion, but can you think of a bigger priority than sorting out the European economy right now? Why are they only dealing with it in the occasional conference call and when they
bump into each other at scheduled events?