Ben Bernanke, chairman of the U.S. Federal Reserve, said on Thursday: "In the short term, I would believe that we should maintain a reasonable degree of fiscal support, stimulus for the economy."

That was yesterday. Today, Friday, Jean Claude Trichet, president of the European Central Bank, in an editorial for the Financial Times, called for public spending cuts and tax increases immediately across the industrialized world. Prolonging the stimulus would have "very limited" effect on growth, he wrote.

Trichet criticized the oversimplified message of fiscal stimulus -- "stimulate, activate, spend" -- given to all industrialized economies.

In Europe, both manufacturing and services output in the eurozone grew faster than expected. The European Commission also said that consumer confidence was at its highest level in July for more than two years.

When it comes to economic policy, it's difficult to plot the perfect path. Bernanke is an avid student of the 1930s depression and vows not to repeat the mistakes of that era. Trichet, on the other hand, is of the conservative European school of economics. He would prefer to err on the side of fiscal conservatism. Bernake would continue to use public money, if needed. He has already used $11.2 trillion of taxpayer money to prop up U.S. bank. The shift of this vast amount of money from taxpayers to the private banking sector is unprecedented in world history. Whether he should continue this policy is open to debate.

Do you believe that Trichet is right to cut spending and raise taxes?

European Central Bank President Jean-Claude Trichet, who earlier relaxed lending rules for one country, diluted the lending rules for a second time Tuesday by announcing that the ECB will continue to indefinitely accept Greek bonds as collateral despite their downgrade by ratings agencies, Bloomberg News reported.

The move came after rumors pervaded the stock, bond, and currency markets Tuesday that Spain may need a European Union and/or International Monetary Fund aid package to stabilize its financial situation. Spain Tuesday rejected the assertion. The euro tumbled Tuesday, nonetheless, weakening about 2 cents versus the dollar to $1.3014 in afternoon trading.

Thursday's events in Europe provided some encouragement, if not universal calm, regarding the Greek debt saga, including the promise that Europe and the International Monetary Fund will now move relatively swiftly to put together a suitable package that will assist the Mediterranean nation's transition to fiscal solvency.

But even if Europe again show signs of "snatching defeat from the jaws of victory," investors should not anticipate a sudden return to the barter system, globally.

The DJIA managed to finally get back over that ever-elusive DJIA 11,000 mark in the last ten minutes of the trading day today. Shares managed to stay firm most of the day after Greece was given a reprieve by the ECB's Trichet, who offered some reassuring comments. Earnings season is about to gear up with many key players reporting next week.

Here were today's unofficial closing bell levels:

Dow 10,997.35 +70.28 (0.64%)
Nasdaq 2,454.05 +17.24 (0.71%)
S&P 500 1,194.37 +7.94 (0.67%)

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The head of one of the world's most powerful central banks is on record with his view that Greece's fiscal crisis should be resolved via a Europe-centric solution.

A day after Greek Prime Minister George Papandreou said his government may go to the International Monetary Fund for aid, if needed, European Central Bank President Jean-Claude Trichet said he doesn't see that as a suitable option.

"I don't trust that it would be appropriate to have the introduction of the IMF as a supplier of help," Trichet said at press conference, Bloomberg News reported Thursday. However, Trichet also praised the IMF for providing Greece with technical assistance as it addresses its budget deficit, marketwatch.com reported Thursday.

It sometimes is a small, unpredicted event that moves markets. Today it was Jean-Claude Trichet, the president of the European Central Bank. He unexpectedly left a meeting in Australia to attend special meeting of European leaders to address the region's economy.

That was the trigger that shot off a turnaround in world markets. Stocks and commodities are trading higher in anticipation that the Greek sovereign debt problem will be dealt with. The U.S. market, just opened, did it with a bang as the Dow industrials more than recovered its triple digit loss from Monday to be back above the 10,000 mark.

Under the radar: Some trends are obvious enough and visible to all investors. Others are more subtle, but are just as potent, and these often slip 'under the radar.'

Case in point: As Senate leaders molded a late coalition to secure the reappointment of U.S. Federal Reserve Chairman Ben Bernanke to a second term as Fed Chair, the Princeton University economist and Great Depression scholar received public backing from an unexpected source: European Central Bank President Jean-Claude Trichet.

So much for the effort to oust Greece from the euro-zone. European Central Bank President Jean-Claude Trichet said the idea of forcing budget deficit-heavy Greece from the euro-zone was "absurd."

Asked by Reuters how realistic he thought the effort to force Greece out was, Trichet said, "I do not comment myself on absurd hypotheses, so that would be my response."

Hawks in the 16-nation euro-zone want mixed capitalist/socialist Greece out of the euro-zone, even though Greece's Prime Minister George Papandreou has committed to a 3-year spending reduction and tax increase plan to cut its budget deficit from the current 12.7% of GDP to 8.7% this year, and 5.6% and 2.8% in subsequent years. The 2.8% total in 2012 would bring Greece in compliance with the euro-zone's 3% of GDP maximum for budget deficits.

Well, you can't blame him for trying. Him being European Central Bank President Jean-Claude Trichet and his effort to convince China to remove its essentially fixed-rate currency system for the yuan, and let the yuan's value be determined by market forces.

China wasn't buying. Trichet was unable to convince China's Premiere Wen Jiabao to let the yuan float, Bloomberg News reported Monday, something that many economists agree would result in the yuan strengthening from its present 6.83 yuan to the U.S. dollar to about 5 yuan to the dollar, or to an even stronger level.

The resources of the central bank of the world's second strongest economy have now been marshaled to address the global financial crisis.

The European Central Bank, led by President Jean-Claude Trichet has shifted policy - - a remarkable, historic change - - and is now working in coordination with its companion major central banks - - the U.S. Federal Reserve, Bank of England, Bank of Japan, and the Bank of China - - and others, to end a credit crisis that threatens to cripple international business and seriously damage economies, worldwide.

A legendary inflation hawk,Trichet, whose ECB lowered its key, short-term interest rate by 50 basis points in conjunction with the other major central banks on Wednesday, declined to rule out further steps to solve the crisis, including additional interest rate cuts, Bloomberg News reported Thursday.

ECB: banks offered unlimited cash at 3.75%

Further, and equally significant, Trichet offered banks unlimited cash at 3.75% to help them cope with tight credit markets, Reuters reported Thursday. Previously, the ECB had offered funds to the highest bidders, a tactic that pushed average rates as high as 4.99% - - almost 75 basis points above the official rate.

In addition, the ECB cut in half the premium it charges for overnight emergency loans and increased the interest rate it pays on deposits, Reuters reported Thursday.

The U.S. Federal Reserve and the major central banks around the world took action again Tuesday to keep the financial markets liquid, amid a credit crunch that threatens to slow global growth to a crawl.

The Fed added $50 billion in liquidity to the financial markets through overnight repurchase agreements. In addition, the European Central Bank, the Bank of England, and the Bank of Japan each announced previously unscheduled actions to add liquidity to the financial markets, Marketwatch.com reported Tuesday.

The Fed's action came after overnight rates soared 333 basis points to 6.44%, as private banks pulled back credit and became reluctant lend to one another.

Economist Peter Dawson told BloggingStocks Tuesday the aim of the world's major central banks is clear: maintain market liquidity to enable transactions between solvent parties.

"The Fed and other central banks may have drawn a line in the sand regarding not saving insolvent institutions, but their stance regarding functioning banks is clear: they're going to prevent solvent institutions from freezing up for lack of liquidity," Dawson said. "The private banks may not choose to use that liquidity, due to a reluctance to conduct business, but the funds will be there."

There are lines of reasoning, and then there are lines of reasoning.

European Central Bank board member Axel Weber said Wednesday there's no plan for interest rate cuts and policy makers may, in fact, have to raise rates as the economy accelerates out its slump, Bloomberg News reported. He added that "monetary policy is where it should be" and that "discussion about declining rates in Europe is premature."

Weber's comments occur after Eurostat reported that Europe's economy contracted 0.2% in the second quarter (pdf), amid signs of slowing in business investment and consumer spending, and sagging business confidence.

London-based economist Mark Chandler told BloggingStocks Wednesday that data he's reviewed indicate Europe's economy will continue to slow in Q3, which is why he's somewhat taken aback by Weber's comments.

"Weber's comments are a bit troubling. I mean, what data is he looking at? The comments will create a bit of a row [dispute] in the U.K. because our economy is not going to contribute to the recovery he sees, not at this stage," Chandler said.

It's been said that old habits die hard.

And one habit likely to change is European Central Bank President Jean-Claude Trichet's penchant for delaying interest rate cuts until the last possible moment, so says economist Richard Felson.

"In this case, Trichet will be joining the Fed's rate cut party this fall," Felson told BloggingStocks. "In fact, if economic conditions continue to worsen in Europe, they may even precede the Fed with a rate cut." The ECB next meets to discuss rates on September 4; the Fed, on September 15.

The Fed, as investors / readers are aware, has paused in its rate cut cycle, after decreasing interest rates by 325 basis points, to 2% from 5.25%, in an effort to jump-start a U.S. economy dragged down by its worst housing slump in a generation. Meanwhile, the ECB has remained in restrictive monetary policy mode - - first increasing its refinance rate by a quarter-point to 4.25%, in mid-2008, then taking a stand-pat stance, citing inflation pressures.

With the world's top central bankers gathering in Jackson Hole, Wyoming for their annual retreat, amid the global economy's worst credit crunch in a generation and slowing GDP growth in every region, BloggingStocks asked a few economists what, in their opinion, should be on the central bankers' minds.

Economist David H. Wang – "I bet they sneak away for a few minutes to watch the United States versus Argentina [2008 Olympics] semi-final basketball game today. I would. Seriously, on the one hand central bankers face the prospect of another round of housing-related write-offs and the need to intervene to keep markets liquid. On the other hand, we still have oil-fed inflation in the system, so my sense is they will issue a statement indicating that the major central banks 'stand at the ready to provide additional liquidity and take other measures' to keep markets functioning."

Economist Peter Dawson – "I would really like to see some European Central Bank comments from [President Jean-Claude] Trichet that he's ready to cut rates and that the greater risk in Europe, like the U.S., is toward recession. Demand in Europe is slowing, and if E.U.-U.S. trade flows continue to decline, that will prolong the recession. Hence, ECB monetary policy is intrinsic to the recovery story."

Economist Glen Langan – "Probably the most important item on their agenda, after maintaining liquid, functioning markets, concerns long-term interest rates. They haven't fallen, due to banks' reluctance to lend, in order to repair their balance sheets. Housing faces a 2-3 year recovery period but we'll need long-term mortgage rates for 30-year fixed loans to drift back toward 6.00% or 5.75% to speed housing's transition back to health. If monetary officials don't find a way to get long-term rates to trend lower, that delays the recovery."

BNP Paribas, which helped signal the global credit crisis that started one year ago this week, has emerged from the credit crunch as France's healthiest bank, Bloomberg News reported Monday.

BNP Paribas will announce Q2 financial results this week. While earnings are expected to be lower year-over-year, they will probably be better than those of its rivals, Societe Generale SA and Credit Agricole SA, according to Bloomberg. BNP Paribas fell 1.76 euros to 59.77 euros in Monday afternoon trading in Paris.

About a year ago, on August 9, 2007, BNP Paribas halted withdrawals from three funds that invested in subprime mortgage debt. The bank's announcement proved to be the first of dozens credit-loss and write-down announcements by banks, mortgage lenders and other institutional investors, as subprime assets went bad, due to defaults by subprime mortgage payers.

The losses and resulting credit crunch compelled the intervention by the world's major central banks. The U.S. Federal Reserve, European Central Bank, Bank of England, Swiss National Bank and Bank of Canada made hundreds of billions of dollars available in specialized loans through conventional monetary policy tools and via new, special 'facilities,' in an effort to maintain credit market liquidity and prevent bad bank/mortgage lender business models from undermining healthy sectors and the broader economies in the United States and the European Union.

Economic growth is the major concern today

London-based economist Mark Chandler told BloggingStocks Monday that concern about credit markets freezing up again has diminished, but concern about the impact of the housing sector's slowdown on broader economies has not.