All hat and no cattle

Long gone are Jackson Hole's days as a wild frontier town. Cowboys, gunfights and saloons have given way to celebrities, luxury resorts and haute cuisine. Only a mock shoot-out is staged each summer evening to entertain tourists on the town square.

Suspension of disbelief is a wonderful tool for actors, but it is proving considerably less effective for the central bankers who just left town. Global markets obliged them with a brief jump in equities and bond yields on Friday before concluding that, like the dress-up cowboys on the town square, they are all hat and no cattle. Ben Bernanke's tepid pledge to consider riding to the rescue if things get too ugly was undermined after much of his posse at the Federal Reserve seemed more concerned about harming innocent bystanders if they were to ride into town with guns blazing. The remaining weapons in the Fed's arsenal - even more aggressive buying of Treasuries, lowering what banks earn on excess reserves or raising inflation targets - certainly have plenty of potential for collateral damage. Mr Bernanke explicitly ruled out the third, most radical step.

If the Fed struggled to channel Gary Cooper, its European and Japanese counterparts did an even worse job of playing the strong, silent type. Vocal and impotent were more like it as the yen strengthened and the euro weakened to near pre-Jackson Hole levels on Monday. Equity markets are the main indicator of whether a double dip can be avoided and the signs are ominous as they approach bear market territory. The S&P 500 is 13 per cent below its April peak and up less than 4 per cent over the past year year, while Japan's Nikkei 225 has passed the bear threshold, down 21 per cent.

Lost confidence in central bankers could be self-fulfilling. They now find themselves in a Mexican stand-off with what ECB president Jean-Claude Trichet warned could be a Japanese-style "lost decade".

Markets fear that, like Jackson Hole's fake sheriff, they are shooting blanks.

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