Cazenove's Jeffrey: Why central banks have failed

Too much faith placed on them

Whether you are buying a new television for £200, or taking a decision to invest £200m in a new capital project, there is one ingredient that will determine if you go ahead: confidence.

It is confidence that your future income will justify undertaking significant expenditure today. As much as anything else, it is changes in confidence that lead to inflection points in economic activity, and turning points in the economic cycle. In the financial markets, you will often see the consequences of quite small changes in investor confidence become magnified in quite large swings in prices of financial assets. Sometimes, it is a change in information about current developments which triggers the shift. At other times, it can be difficult to determine just what has caused con...