Given Their Failures, Central Bankers Need To Show Some Humility

Monetary Policy: The Federal Reserve's annual Jackson Hole confab has turned into a grumbling session about the failure of the world economy to respond to central bank stimulus. But no one should be surprised.

Fed Chairwoman Janet Yellen's speech Friday at the bankers' yearly Wyoming get-together focused mainly on the labor market - her main preoccupation as an economist.

She worries that a decline in unemployment from 10% in 2009 to just above 6% now doesn't reflect how bad the economy is. And she's probably right.

While she suggested that the economy is getting "closer to Fed objectives," she also frankly admits that we still have "significant" underutilization of labor in our country, despite a gradual drop in unemployment.

Which raises a question: Four years into a recovery, what does it say about the Federal Reserve that the best we can do is 2% average annual GDP growth?

What about median U.S. income declining 4.6% over the past five years? How does that reflect on the Fed?

Or the fact that 90.5 million Americans aren't in the labor force, up from 74.2 million a decade ago?

Or that more than 100 million people now get some kind of government support, including a shocking 47 million people on food stamps?

For central bankers, it's not very flattering.

No, we're not saying that the Fed caused all this, though its inept policy moves in the mid-2000s - setting off the housing market crash by excessively raising interest rates and tightening credit - did play a big role.

But since then, an unprecedented monetary policy hasn't brought anything like a normal recovery. Worse, central banks outside of the U.S. have all been making the same mistakes. So it's now a global problem.

Central bank money-printing, in the form of quantitative easing, zero-percent interest rates and other gimmicks, simply hasn't worked.

A few examples suffice:

• Despite central bank pump-priming, the European Union is now slipping back into recession.

• After five years of Fed-stimulated "recovery," the U.S. economy is growing at a sluggish 2% rate, continuing its worst recovery from a recession ever.

• Japan continues on Keynesian life support, entering a third decade of stagnation despite its own repeated bouts of spending and monetary "stimulus" and zero-percent rates.

• Even China, which everyone told us would own the 21st century, is starting to look shaky. Chinese growth is slowing fast, and the country has yet to deal with trillions of dollars in bad government loans.

Lots of central bankers have been left scratching their heads. Why is the world economy in such bad shape despite the central banks' hyperactive policy actions?

Whatever claims might be made by economists to the contrary, monetary policy doesn't create economic growth. It doesn't create jobs. It doesn't create wealth.

Those who, like many of the world's economic elites now gathered in tony Jackson Hole, Wyo., believe that monetary policy is a precise instrument that can make economies grow and thrive are wrong. They need a new paradigm - one that doesn't require a Rube Goldberg monetary policy.

It's clear that central banks, through massive monetary interventions, have distorted our markets, making it harder for businesses and consumers to make long-term decisions.

That's bad enough. But it's not the sole reason for our current problems. Fiscal policy - taxes, spending, regulation - is also to blame. Citizens and businesses are overtaxed and over-regulated, their bloated federal government just gets in the way, and central bankers can't do anything about it.

Nevertheless, the Fed under Yellen is pretty much continuing the damaging interventionist policies that former Fed chief Ben Bernanke mistakenly adopted.

Maybe it's time both here and abroad for a bit of central bank humility.

Stop trying to do so much, and just get out of the way.