Central Bankers Aren't Superheroes

Janet Yellen, Mario Draghi, and others have limited powers to stimulate growth.

- Michael Shuman

No heart is immune from the uplifting tale of the Little Engine That Could—that plucky optimist who, against the odds, saved the day by chugging a stranded train over a mountain. In the world of economics, our central bankers have become this storybook overachiever. Ever since the 2008 Wall Street meltdown, they have tried, tried, and tried again to pull the broken global economy into happier times, undaunted by setbacks, criticism, or the sheer weight of their burden. At times that unstinting effort has made them heroes, too. The now-legendary 2012 pledge by Mario Draghi, president of the European Central Bank, to do “whatever it takes” to save the euro quelled the market turbulence that threatened to tear apart Europe’s monetary union.

Today, though, central banks look more and more like the Engines That Couldn’t. Despite all their tireless persistence, the world economy remains stuck on the tracks, short of its ultimate destination — a real recovery. The value of the often highly unorthodox methods central banks have employed along the route will be hotly contested by economists for years, even decades. What’s beyond question is that the institutions just don’t possess the horsepower to rescue the global economy.