If confidence could be distilled and bottled, it would be worth as much to policymakers right now as the finest perfume or vintage Chateau Lafite.
Unfortunately for them, central bankers can create unlimited liquidity but not unlimited confidence – as European and U.S. surveys are likely to show this week.
Of late the Federal Reserve and the European Central Bank have done all that markets could reasonably have expected of them. The former has pledged to keep printing money until unemployment falls; the latter has promised to act as buyer of last resort for Spanish and Italian bonds.
Even the Bank of Japan joined in last week by modestly expanding its programme of asset purchases. Of the leading central banks, only the People's Bank of China is hanging back.
The question then for the global economy, now in its sixth year of acute financial strain, is when this unprecedented monetary activism will translate into increases in demand, output and jobs.
"What the central banks have done has been helpful, and the positive reaction in the financial markets is probably going to lift confidence somewhat in the near term," said Mark Cliffe, chief group economist at Dutch bank ING.
"But now it's over to the politicians, and we've been endlessly disappointed by them – not just in Europe but also in the United States – and that's a big challenge to any positive story for next year," he said.
France and Spain will this week announce austerity budgets for 2013 that will compound tightening already under way in much of the euro zone.
Spain, for instance, which has just raised value-added tax, might freeze pensions as part of a deal for financial support from its euro zone partners.
"Recessionary pressures are already well-entrenched as a result of financial stresses, even before planned public spending cuts in the region have been implemented. Austerity in the midst of slowing global demand might just prove to be the lethal two-part blow for Eurozone fiscal stabilisation measures," said Lena Komileva, managing director of G+ Economics, a London consultancy.
Take Italy, which said last week it now expects the economy to shrink by 2.4 percent this year, double its previous forecast, and abandoned hope that growth might return in 2013. As a consequence, Rome also sharply raised its budget deficit projections.
LIGHT AT THE END OF THE TUNNEL?
Not all is gloom. Economists polled by Reuters expect a better tone to Germany's IFO business survey, and, in the United States, a pick-up in September consumer confidence.
Building on last week's surprisingly strong U.S. existing home sales for August, markets also anticipate a rise in purchases of new homes.
Despite the encouraging housing trend, Robert DiClemente, Citi's chief U.S. economist, said he was cautious about the near-term growth outlook, partly because he is unsure whether the improvement in financial conditions triggered by the Fed can be sustained.
"Most important, over the very immediate horizon, global slowing appears to be trimming some domestic activity and some key economic decisions may be delayed until the direction of broader economic policies is clarified following the election and the resolution to the 'fiscal cliff' debate," he said in a note.
This global slowdown has been reflected in Asian exports, which JP Morgan calculates have fallen at a 15.7 percent annualised rate in the June-August period.
But the bank reckons that in Europe, the main source of Asia's woe, growth could resume in early 2013 thanks in part to the ECB's aggressive actions.
This is the sort of confidence-building bullishness that Alexander Stubb, Finland's minister for European affairs, wants to hear.
Speaking at a conference organised by Oxford Analytica, a research group, he dismissed talk of a breakup of the euro and said a trio of euro zone summits between now and the end of the year to build stronger foundations for the single currency could be decisive.
"If we get it right, I think we'll have turned the corner in the euro crisis," he said.
