Daniel Munoz / Courtesy Reuters

The Myth of the Omnipotent Central Banker

Monetary Policy and Its Limits

Purchase Review

The Alchemists: Three Central Bankers and a World on Fire. BY NEIL IRWIN. Penguin Press, 2013, 400 pp. $29.95.

Central bankers have always carried a mystique far beyond justification. Even as their policies and procedures have become markedly more transparent, the air of secrecy and power about them persists. And the ongoing financial crisis has brought their activities to the center stage of both economic policymaking and political attention, even as the crisis has revealed many inherent limitations of monetary policy and economic forecasting more broadly.

Indeed, central bankers should be far humbler today than they were in recent decades, when some claimed credit for the so-called great moderation, the period of reduced economic volatility that lasted from the late 1980s to the early years of this century. It is now clear that the prosperity and stability much of the world enjoyed during those years were largely the result of good luck. Nevertheless, monetary policy is a powerful tool, even if it is less powerful than many think.

The journalist Neil Irwin’s book The Alchemists: Three Central Bankers and a World on Fire thus has an unfortunate title. Central bankers are hardly inconsequential, but their policies cannot transform economic fortunes as an alchemist turns dross into gold. This limitation notwithstanding, Irwin’s book is an excellent account of how central bankers have responded to the financial crisis, scrupulously reported and full of clear explanations of events and economic concepts. On the whole, it is an incredibly valuable book for all economically concerned

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In This Review

The Alchemists: Three Central Bankers and a World on Fire
Neil Irwin
The Penguin Press HC, 2013
400 pp. $29.95

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