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This is the point in the movie where the coach grabs the overhead projector and says, "forget everything in the playbook. We're starting over." Unfortunately, in Washington, that seems unlikely. There is very little noise inside the beltway about confronting China on its currency policy, trimming healthcare costs or putting together a significant energy policy. This leaves it up to central banks to do some tweaking.
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The Organization for Economic Cooperation and Development in Paris said Thursday economic growth for 2011 would not meet prior expectations.
The news is likely to keep a tightly wound dynamic tightly wound, which is to say investors will back off from risks knowing economies around the globe are growing at a mere crawl. This in turn, will factor into the next OECD forecast.
The latest OECD predictions put growth in the U.S. economy at 1.1 percent in the third quarter, compared to a previous prediction of 2.9 percent. Fourth quarter growth, previously forecast at 3 percent, is now expected to hit just 0.4 percent.
Besides lower numbers, the trend now forecasts a decline from the third to the fourth quarter, as compared to the previous prediction which included the expectation the economy was on an upward track.
In Frankfurt, Germany, the European Central Bank, as expected, kept its bank-to-bank lending rate intact at 1.5 percent for the second consecutive month.
Across the Atlantic, investors are studying the Federal Reserve for any signs of a breeze coming across a nearly stalled U.S. economy.
So far, what has not worked has been dropping the overnight lending rate to zero to 0.25 percent and putting together two quantitative easing programs. The most recent one, a $600 billion securities purchasing program ended in June.
Data suggest these moves worked well, keeping the value of the dollar low and pushing down interest rates for the domestic mortgage market. Neither move proved to be a panacea, however.
What's next? With the Fed's lending rate nearly zero, squeezing more generosity out of the federal fund rate is impossible. Some policymakers, The Wall Street Journal reported, are considering an "operation twist," which describes shifting the Fed's portfolio from short-term treasuries to longer term notes. As it implies, this would help push down lending rates for long-term borrowing at U.S. banks, perhaps providing a small nudge for businesses to expand.
Secondly, the Fed could lower or cancel a 0.25 percent payment the Fed pays banks that keep cash on deposit at the Fed.
In theory, banks would then put this cash to other uses, including an increase in lending.
In its Beige Book report released Wednesday, the Fed said economic growth was proceeding at a modest pace, but revealed that statement only applied to five of the Fed's 12 districts. Elsewhere slow growth was getting slower and in two districts growth was "weakening."
After a strong rebound Wednesday, markets in Asia and Europe were mixed Thursday. The Nikkei 225 index in Japan rose 0.34 percent while the Shanghai composite index in China lost 0.68 percent. The Hang Seng index in Hong Kong lost 0.67 percent while the Sensex in India rose 0.59 percent.
In Australia, the S&P/ASX 200 index was flat, rising 0.11 percent.
In midday trading in Europe, the FTSE 100 index in Britain dropped 0.82 percent while the DAX 30 in Germany fell 0.6 percent. The CAC 40 in France fell 0.16 percent while the Stoxx Europe 600 was flat, up 0.01 percent.
