Saturday, October 11, 10pm.
The world’s finance ministers sat for several tests this weekend, and it’s not yet clear how they did. If we set the bar low enough (i.e., no public criticism of each other), they did OK. The Italian finance minister did threaten not to sign the communique on Friday afternoon, but this was not particularly meaningful (think about it: if Italy walked out of the G7, how would the markets view Italian risks on Monday morning?) Everyone else was reasonably polite.
But if we were hoping for specific steps to be announced, then Friday’s list of principles from the G7, and the ensuing vague statements of support from other sets of finance ministers on Saturday have really not taken us very far.
Still, there is time for a make-up test (or two) on Sunday. The US Treasury is undoubtedly working on some detailed measures to shore up parts or, hopefully, all of the banking system. Eurozone member countries will be meeting in France on Sunday afternoon, presumably to see how far along they can bring the Germans – particularly with regard to systematic bank recapitalization. It remains unclear whether anyone in the eurozone will suport the British ideas of blanket bank guarantees at this point. And it is far from clear if the British will introduce the kind of overall package that in our view could turn the corner, even in a local sense.
The goal, as you know, is to get a clear strategy in place and well communicated by the time the stock market in Tokyo opens at 8pm (US East Coast time) on Sunday. Let’s see how they do.