The Daily Nugget: The Week Ahead And The ECB Policy Meeting

Like last week when we were waiting on Jackson Hole, this week we will be waiting for yet another meeting full of empty words – the ECB policy meeting.

Whilst some have suggested Draghi skived Jackson Hole to prepare for a big announcement, perhaps some kind of intervention in the sovereign debt markets, today analysts and commentators seem less convinced and have warned us to be disappointed. He may just announce details of how it "may" carry out measures rather than a super solution (in case you thought there was one).

Another meeting this week, from which no one is expecting significant announcements, is the MPC meeting, also on Thursday. Considering the BofE is in the middle of its latest round of asset purchases, no change is expected.

MP’s returned to Westminster today amongst news of upset over the planned cabinet reshuffle. David Cameron has also been forced to defend the Coalition’s deficit plan and austerity measures. Cameron appealed to Mail on Sunday reader’s yesterday, whilst Chancellor George Osborne appeared on television, both hoping to appease voters and critics.

As we have written about before on these pages, and discussed with Max Keiser, so far the government’s measures for saving the UK have proven to be a false economy, in more ways than one.

Having said that, already today the UK is looking like the golden child of the EU; Manufacturing PMI data released was better than expected, unlike the Eurozone countries. No doubt this will down to strong policies from the government, rather than the fact the GBP is the best of two evils when it comes to that and the Euro.

Other data this week includes further PMI measures – both services and manufacturing across the world. However the next piece of data which the markets will be carefully watching for will be data on US nonfarm payrolls, out on Friday.

We can’t go without briefly mentioning the elephant in the room:

Bernanke’s speech at Jackson Hole did turn out to be the damp squib we had all been waiting for. The markets soon realised he was about to disappoint them when he uttered that “…substantial further expansions of the balance sheet could reduce public confidence in the Fed’s ability to exit smoothly from its accommodative policies at the appropriate time.”

We lost confidence in the Fed’s ability to do anything many years ago, but it seems to only be of concern now.

Considering Jackson Hole is the place where the world’s "best economists" meet to solve this crisis by offering solutions, plans and packages which they are only required to come up with because of previously disastrous solutions, plan and packages, we weren’t exactly expecting great things from the weekend.

One interesting point to note from Bernanke’s speech was the acknowledgement of policy makers’ “limited historical experience [with non-traditional monetary easing]” and they “have been in the process of learning by doing.”

If anything those who are invested in gold bullion are aware of the dangers central banks bring to the monetary system and know things are really bad when even the most important central banker in the world admits things may be tricky as they don’t really know what they’re doing. Many were expecting gold to loose its footing were Bernanke to lose his nerve on further stimulus measures. It didn’t and remains near a 5-month high this morning. Whilst many believe "gold-bugs" have been hanging on for further rounds of QE, this isn’t why gold remains top of the blocks.

Whilst QE3 has been delayed, investors must not think it won’t happen. QE3 is inevitable, what form it will come in is as likely to be as inventive as Bernanke’s head is shiny. The Chairman is right to remind us not to lose sight of the dangers which lie up ahead, that’s why we expect more nouveau-dangerous solutions from the central banks, it’s also why we invest in gold bullion.