Financial markets eye new peaks, yet output is everywhere decelerating or shrinking. Contradictory as these phenomena seem, both may be traced back to the actions – and inaction – of central banks.

Credit where credit is due: monetary policy makers have done more than most to halt the collapse of the world’s economies in 2008–09 and to help their recovery since. Very low interest rates and huge expansions of their balance sheets averted a worse credit crunch. But they have also caused a rising tide in asset prices reaching as far as emerging economies a world away from the sources of liquidity.

The Dow Jones Industrial Average hit an all-time high this week; more than catching up with losses racked up during the financial crisis. The DJIA is a flawed index but its recovery is shared with other, more representative measures of equity performance, both in the US and elsewhere. A Martian observer of stock markets might be forgiven for thinking all must be well with the earth’s economies. But little of investors’ exuberance is reflected in core economic data.