Plenty for Bollard to ponder in cowboy country

This weekend the world's central bankers - from the US Federal Reserve's Ben Bernanke to our own Alan Bollard - will be kicking back at their annual shindig in Jackson Hole, Wyoming.

That's cowboy country - the kind of place where men can be men and tourists can indulge in mock gun fights, rodeos and local whisky.

But the event, hosted by the Kansas City Federal Reserve at a remote mountain retreat, is likely to be a pretty sober affair.

Despite the recent exuberance of stock markets and political enthusiasm for calling time on the crisis, central bankers worldwide remain stubbornly cautious about the state of the global economy.

Last year Bollard returned home from Jackson Hole positively ashen faced and told Clark's cabinet the world was facing the biggest financial meltdown since 1929.

A few days later Lehman Brothers imploded and the rest of us started to understand what he was talking about.

But Bollard was careful then to point out that this was not necessarily the biggest economic crisis since 1929. There is a difference between what happens on markets and how it flows through to the real world of jobs and ordinary lives.

And that is pretty much the way it has played out, thanks largely to the actions of central bankers who slashed cash rates in unison and - in the case of the biggest economies - starting printing money to head the credit crunch off at the pass.

Now the big question is how and when to unwind the exceptional actions of the past year.

If the bankers move too fast there is a risk of dropping the world straight back in to the recessionary slump it is just starting Plenty for Bollard to ponder in cowboy country to emerge from. But the recovery can not be sustainable if it continues to ride on the back of virtual money.

As the architects of all this stimulus, the bankers understand that better than most. They know that if they keep emergency measures in place too long they risk ushering in high inflation.

Coming in over the top of already high unemployment and low productivity, inflation would be a very bad thing indeed.

It would be helpful for the world if the bankers were again able to reach some sort of consensus about what to do next and when.

But without the immediate pressure of impending apocalypse to hone their thoughts it is unlikely that a unified approach will emerge.

With time to breathe the bankers are giving more weight to the particular issues of the economies they represent. We are already seeing that in this part of the world. Australia has started to talk about raising interest rates. Meanwhile, Bollard remains adamant he won't be raising rates until late 2010. In fact he's hinted he may even cut again (although very few economists believe he will).

What New Zealand and Australia do with rates has no real impact on the rest of the world. But the actions of Europe's Jean-Claude Trichet, Britain's Mervyn King, Japan's Masaaki Shirakawa and the Fed's Bernanke certainly do. Those guys will have a lot to talk about at Jackson Hole.

Activities at the retreat - now into its 31st year - are actually pretty sedate, with hiking and fishing high on the agenda for those who want to get out into the mountain air.

Hopefully that relaxed setting will be conducive to constructive dialogue and some compromise on how best to tackle the still sizeable problems facing the world.

Meanwhile, the chance to get face to face time with his peers will give Bollard some important insight into the kind of strategy he'll need to run in the year ahead.