I am not sure why the Europeans wanted to hold this conference now. As a lame duck administration, the Bush Administration would not have the power to create a new Bretton Woods system. In addition, all of the previous actions by the Bush Administration indicate that it has no inclination to do so. If the Europeans, particularly the French and the British, really want to reform how global financial markets are regulated in any substantive way, they would have been better off waiting till January after the new administration takes office.

The problem of why monetary policy is having a limited effect on investors is a function of different factors in the US and EU.

In the US, the Fed has been ahead of the curve (relatively to other central banks), but is quickly running out of ammunition due to a worsening economic forecast.

Many analysts believe that the Fed is "pushing on a string." That is, the Fed can continue to flood the market with liquidity but it will only have a limited effect because banks aren’t willing to lend money directly to firms or consumers. The Fed has sidestepped this problem (somewhat) by lending indirectly to firms via providing liquidity to buy asset-backed commercial paper; the main day-to-day funding mechanism of firms. Ultimately, though banks are still hoarding cash (though less than a few weeks ago) because they still don’t know the amount of write downs on their own balance sheet, but perhaps more importantly, everyone is uncertain regarding the current economy including consumers’ ability to spend (minimal) and firms’ future prospects. Indeed, uncertainty over the extent and depth of the economic downturn, firms’ future earnings, and Obama’s future economic prospects are all weighing down the market. Until there is greater clarity regarding these questions, monetary policy is unlikely to have a substantial impact.

In England and Europe, the problem (at least until yesterday) was that the BOE and ECB were severely behind the curve. Granted, both the BOE and the ECB have different mandates; both are tasked with preserving price stability rather than full employment. However, both feared inflation for far long which essentially led them into this position. In addition, uncertainty is also starting to weigh down equity markets as the economic downturn is far worse than previously expected in England, and Germany (the EU’s best-performing economy).

Eric - great comment, Elizabeth, I couldn't agree more on the conference, it's almost like Europe wants it to fail.....