Central banks are, as Mohamed El-Erian has written, “the only game in town”. They are certainly the main players of the game of macroeconomic stabilisation. So do they know what they are doing?

One line of attack, popular among libertarians, is that it is arrogant for central banks to attempt macroeconomic stabilisation. They should be either abolished or forced to follow a mechanical rule: the gold standard, for example. The lesson of history seems absolutely clear: a democracy will not accept that money is outside purposeful control. For now and the foreseeable future, we will remain in a world of monetary policy. But, ever since the financial crisis, central banks have done unusual and unpopular things. In unusual circumstances, that was inevitable.

Unfortunately, the unusual circumstances now appear to be usual. The reasons for — and implications of — this come clearly out of a critique by Lawrence Summers of the speech by Janet Yellen, chair of the Federal Reserve, at this year’s Jackson Hole symposium. As he wrote, “countering the next recession is the major monetary policy challenge facing the Fed”. But, he fears, the Fed is in a disturbingly poor position to do so.