Markets Versus Central Banks- Who Would You Bet On?

It is a difficult job to be a central banker. You work hard to restore the equity market and the bonds markets. Once you achieve that you find the analysts fretting about something else.  Most of the recession is over now. US economy seems to be growing now. European economy is also growing. British economy is also not far behind. US FED, ECB and BOE had worked hard in the last few years with the QE programs and the interest rate slashing.

But most companies are still hoarding cash and not investing or spending it to create more jobs. EURO is still strong against USD and causing concerns for the policy makers. Draghi’s pledge to do “whatever it takes” to save the euro helped calm markets, but may ultimately have been self-defeating. Many now expect quantitative easing (effectively money printing) from the central bank, to the extent that he may be forced to carry it out whether he wants to or not.

Central banks are the most powerful players in the market. Central banks have the power to print unlimited amounts of money and flood the market with cheap money. You should understand how the central banks work. Watch the video below that explains how central banks rule the world.

After watching the above video, you will understand how financial crisis develop. You will also understand the role of central banks in not dealing with that financial crisis. Central banks are now even more powerful than the governments. But there are limits to the power of central banks. Sometimes the markets simply reject central banks manipulation. Read this post on the limits of ECB. European Central Bank is an important central bank of the world. Federal Reserve Bank is one of the most important central bank in the world. Do you know this strange fact that Federal Reserve Bank is privately owned? But as said above markets sometime simply ignore the dictates of the central banks and do the exact opposite of what the central banks want it do.