To those of us who studied business and some economics a few years ago the current role of the central banks is hard to understand
I attach below an excellent article by George Gilder courtesy of John Mauldin.
The central theme of the article is pretty straight forward and should not surprise anyone. A planned economy is a planned economy, free markets are something else.
Since the collapse of the financial system in 2008 central banks have taken over. That made sense in a situation of emergency, but the current role is clearly taking things too far. Last week the stock markets went on a binge simply because the Fed announced that it was delaying the famous tapering. That was bad enough, but the really interest thing was this graph
The Fed led the markets, it is called now forward guidance, showing them what the interest rates are going to be in the near future. Free markets are not about this. The bond markets should be influenced by the central bank, but the concept of the stock markets looking at the Fed like some kind of drug addict expecting their dose is ludicrous.
Central banks are not accountable to voters. The idea that they are independent of political influence is naive, to say the least. What is effectively happening is that governments are indirectly taking control of interest rates, a fairly important part of any economic system. I do not think that any US president would object to a Fed chairman who says that he would do anything to lower unemployment, or that he will keep printing money for as long as it is necessary. Printing money is addictive, once you start you just cannot get enough of it.