Two years after the start of the worst global financial crisis since the Great Depression of the 1930s, policy-makers from around the world gather this week to think about how to prevent it from happening again.
The Kansas City Federal Reserve's yearly conference at a mountain retreat in Jackson Hole, Wyoming, will draw central bankers and top economists together at a time when the crisis appears to be easing, with the global economy on the mend.
The event will be a showcase for Fed Chairman Ben Bernanke to reflect on the lessons learned and assess whether signs of recovery are lasting.
Bernanke, who speaks at 8 a.m. Mountain time (10:00 a.m. EDT) on Friday, may build on the Fed's view that while the U.S. economy is regaining its balance after the deepest dive since the 1930s, any rebound will be slow and fraught with risks.
Bernanke's speech is the big deal, said John Silvia, chief economist for Wells Fargo Securities in Charlotte, North Carolina. Is this thing really over? Is it three-quarters over?
Questions about Bernanke's reappointment to a second four-year term as chairman of the Fed -- the U.S. central bank -- will also hang over the event.
His current term expires on January 31 and President Barack Obama has yet to indicate whether Bernanke will be renominated. Analysts expect a decision by the end of October.
A year ago in Jackson Hole, officials hunkered down for private behind-the-scenes crisis-management talks. At that time, financial stress was intensifying, although the most virulent phase of the crisis would not be triggered until a few weeks later when Lehman Brothers bank collapsed.
Now, with Germany, France and Japan having pulled out of recession and the United States appearing in better health as well, officials are breathing easier. Still, economies remain on life support, with full recovery not yet assured.
I am not convinced that the recovery is sustainable yet, European Central Bank governing council member Axel Weber told German weekly Die Zeit when asked about Germany's economy.
Speaking a little more than a week after the Fed declared the U.S. economy to be leveling from a deep recession, Bernanke will likely take a stand-back approach in keeping with the academic nature of the conference and his professorial roots.
Bernanke, European Central Bank President Jean-Claude Trichet and other central bankers could use the occasion to claim credit for emergency programs that have helped restore financial stability, and could point to much-settled-down indicators of risk in money markets as evidence of success.
They can say, 'We've taken a lot of actions; we have a lot of success,' said BNP Paribas economist Julia Coronado in New York.
Even so, with pockets of risk remaining, such as the shaky U.S. commercial real estate market, policy-makers who failed to recognize the dangers of subprime mortgage exposures are likely to be cautious in declaring victory.
CENTRAL BANK EFFECTIVENESS
Participants at the conference, which runs into Saturday, will likely also debate how effective central banks can be in spotting asset bubbles, such as the run-up in U.S. housing prices that triggered the financial meltdown, and what tools they can use to prevent turmoil.
Bernanke will need to convey confidence in the Fed's path toward economic recovery without raising expectations for an assured bounceback that could lead financial markets to anticipate a quick withdrawal of the central bank's monetary support for the economy.
With hopes for a U.S. recovery pinned on reinvigorated auto sales and a long-awaited upturn in housing markets, analysts worry a rebound could die out in six months.
Even as he tamps down expectations about recovery, Bernanke will want to be emphatic that the Fed can pull back from the low interest rates and flood of cash it has pumped into the economy quickly enough when the time comes to avoid inflation.
(Editing by James Dalgleish)