Central Bankers are just people too...and like many they are confused.

We always treated the reverence with which markets and politicians afforded Chairman Alan Greenspan as something that was misplaced at a minimum and sycophantic if we were realistic. That may sound harsh but the cynic in us suggests that Greenspan was revered on the basis of a correlation in his reign with economic moderation as opposed to a causality in his reign with the great moderation. Nassim Taleb always wonders if a traders or fund manager are just lucky no matter how hot or long their streak is and even though we think that we are pretty good at market timing, in a macro sense, we share this view of the true nature of success. That is in extremestan luck plays a big role in results.

So we find it instructive that Central Bankers around the North Atlantic who were waxing lyrical about the improvements in their economies and wondering about policy and stimulus withdrawal are now figuring out what to do when monetary policy is at its nominal lower bound. We think the unintended consequences of easy policy is a prolonged economic malaise so this latest redux toward quantitative easing seems to likely to reignite fears in consumers minds and usher in a renewed period of restraint. If that is truly possible.

This is all a round about way of saying we think that politicians and market participants often forget that Central Bankers are people too. We are not aware of any special behavioral research on the nature of central bankers but we'd always guessed they always try to tell the truth and be honest and upfront. Except that Chairman Greenspan told us that's not true in his Biography a few years ago and Chairman Bernanke confirmed this recently before Congress. We understand why but what they seem to be doing alternatively is persuading us to either spend more than we should  or can really afford (remember Greenspan lauding mortgage equity redraw in a 2002 speech) or restrain our spending from where it could be in order to restrain growth overall. Nobel pursuits no doubt but less than honest nonetheless. The individual is a mere pawn in the macro-economic game of Chess.

So it is interesting to watch the current problems central bankers are having with where economies and markets are now. Their sales job of early 2010 have been found to be just that. their credibility on economic soothsaying is now in question (anyone remember Tim Geithner's cheerleading article a month or so ago) and so markets as well as consumers are losing faith.

Markets over the past 20 or more years have really relied on the notion of the prescience of central bankers. Now that everyone knows they are human the question has to be where to now?

Here is an article from Bloomberg discussing this very point.
http://www.bloomberg.com/news/2010-09-22/central-banks-have-trouble-finding-exit-from-stimulus-as-recovery-weakens.html