Why Glenn Stevens shouldn’t get too cheerful: Kohler

Suddenly we have an outbreak of central banker cheerfulness, although it must be said that Mervyn King and Glenn Stevens are at different ends of the scale.

In his charmingly old-fashioned “letter to the Chancellor” last night, Mervyn King, the governor of the Bank of England, wrote about “signs of recovery”; meanwhile the governor of the RBA, in his speech in Melbourne at about the same time, was talking about “the road to prosperity”.

Between recovery and prosperity there is a bumpy road. The US, UK and Japan remain saddled with high levels of debt, so that balance sheet adjustments – both private and public sector – will hold back growth for years, perhaps decades.

And the greatest irony on the planet is that the nation with the highest level of household debt – Australia – is doing best of all.

It is an irony that caught out poor Steve Keen, who lost his bet with Macquarie’s Rory Robertson that house prices would fall 40%, and must now walk to Mt Koscuisko wearing a T-shirt saying: “I was hopelessly wrong on house prices. Ask me how.”

Perhaps Glenn Stevens had Professor Keen in mind last night when he said: “even most of the optimists are a little surprised, I suspect, at the economy’s performance”.

In between King and Stevens are the European Central Bank’s Jean-Claude Trichet, announcing last night that the ECB would keep rates on hold (“…improvement in economic activity in the second half of this year”), and the Fed’s Ben Bernanke announcing the same thing (“economic activity has continued to pick up”).

New Zealand’s Allan Bollard is just glad to live near Australia (“Australia is a lucky country, but we could be a lucky neighbour”) and India’s Duvvuri Subbarao is letting his actions speak for him – he’s buying gold, just in case.

Mervyn King wrote to the Chancellor that the UK’s output has fallen by nearly 6% since the beginning of 2008 and that the prospect is for a slow recovery with “substantial” unused capacity.

Accordingly he asked Alastair Darling if he could print some more money, please – just another