The world is holding its breath, or at least that’s how it seems.
This coming Thursday is almost a mythical day – the day on which Janet Yellen, chair of the U.S. Federal Reserve System’s board of governors, decides whether she should raise interest rates. It would be the first time the Fed’s benchmark rate has been raised since 2006.
It would be the first step, if just a tiny one, towards normalizing monetary policy in the aftermath of the 2008 financial crisis.
The enormous importance of this event, which is actually supposed to be a non-event, highlights how ludicrous and bizarre our world has become. It’s a world in which central bankers are by far the most powerful decision-makers about economic policy. A world that can definitely be characterized as a central bank-planned economy.
In fact, central bankers are supposed to quietly and unobtrusively ensure that the sensitive mechanical gears of the modern market economy run smoothly – with instruments that are limited in terms of their manageability and efficiency.
But the eight-year battle against the global financial meltdown has made hands-on money managers of the one-time agency heads.
Take the head of the European Central Bank, Mario Draghi, who, with his brash measures, is being praised as a hero in many places. At the same time, he is well on his way to making the ECB the largest creditor of the European states.
Or take Mark Carney, the urbane head of the Bank of England, whose central bank has quintupled its balance sheet totals since 2007.
Or Ms. Yellen. These days she’s expected to set a monetary policy for the entire global economy, contrary to her legal mandate to focus on the domestic situation.