Central banks: Don't give up FOR almost half a decade the world's big central banks have been energetic paramedics to their sickly economies. Both in 2007-08 and, more recently, in the euro crisis, they warded off a financial collapse by pumping banks full of emergency liquidity. And they have acted repeatedly to prop up demand, first by slashing short-term interest rates and, when those rates in effect hit zero, with more experimental medicine, such as "quantitative easing" (printing money to buy bonds in order to push down long-term borrowing costs). For a while the medicine seemed to work. Deflation was staved off and tentative recoveries took hold. But as economies sink back into recession and long-term bond yields hit record lows (see article), a debate is raging about whether central banks are doing the right thing. One camp, led by some prominent economists, argues that central banks are not doing enough. These academic activists want them to embrace even bolder measures to boost demand, such as targeting temporarily higher inflation (which would reduce real borrowing costs and induce more spending) or using newly minted money to buy a broader range of assets, such as corporate bonds. They often cite the work of Ben Bernanke, the Fed's chairman (pictured left): as an academic a decade ago, Mr Bernanke implored Japan's central bank to be bolder. The other camp, which includes many central bankers themselves, urges caution. Mr Bernanke now frets publicly about the economic distortions created by large-scale Fed bond-buying. In the run-up to yet another make-or-break European summit on June 28th-29th, Mario Draghi, the president of the European Central Bank (pictured right), has made it clear that the ECB should not, and will not, fill the vacuum left by the failures of European politicians. In a report published on June 24th the Bank for International Settlements (BIS), the central bankers" club, argued that central banks were becoming "overburdened" and that the "extraordinary persistence" of loose monetary policy was becoming increasingly dangerous (see article). Who is right? Critics of central-bank activism, particularly the BIS, worry that loose monetary policy has become a crutch that lets governments put off difficult decisions, such as restructuring their banks or sorting out their own medium-term finances. To some degree this is true. Cheap central-bank money has doubtless kept some dud banks and their customers afloat. It has allowed politicians to dither (particularly in the euro zone) and to put off tough fiscal choices. The world economy would be in better shape if politicians had focused more on writing down unpayable mortgages and overhauling their pension and health-care promises. But this does not mean that central banks have erred. The line between illiquidity and insolvency is a blurry one: less central-bank largesse would push many illiquid institutions into insolvency. And although politicians" pusillanimity is regrettable, it is not up to unelected central bankers to punish them. Central bankers should do their job - stabilise prices, secure financial stability and, in America's case, maximise employment - whatever the politicians get up to. By those yardsticks central banks have hardly done too much. America's jobless rate remains far too high, at 8.2%, while both the actual rate of inflation and Americans" expectation of what inflation will be in future are falling. Although the euro zone's headline inflation rate is still, at 2.4%, above the ECB's target of 2%, it is coming down as growth slumps and looks likely to undershoot the target soon. Err on the side of action The central banks" mandates thus point clearly towards doing more. But the incremental impact of more quantitative easing is shrinking as long-term bond yields hit record lows. Huge central-bank holdings of sovereign bonds distort financial markets. The potential difficulties of controlling future inflation will rise as the balance-sheets of central banks swell. Leaving interest rates at zero for too long could produce bubbles. And more radical measures, such as changing inflation targets, could frighten financial markets. These risks are real, but they are manageable. Nascent bubbles and financial-market distortions can be addressed by, for instance, raising the amount of capital banks must put aside. Large central-bank balance-sheets do not automatically imply high inflation, either now or in the future; much depends on how resolutely policy is tightened when a durable recovery arrives. The costs of doing nothing, meanwhile, range from prolonged stagnation in America to a worsening recession in Britain and a far nastier one in the euro zone. So the central bankers should be listening to the academics. On July 5th, at its next meeting, the European Central Bank should cut rates and begin quantitative easing. The Bank of England and the Fed should both start employing more unconventional tools to loosen monetary conditions. Central bankers have helped avert disaster so far. Now is not the time for them to give up.