Central banking is being turned upside down by innovations such as securitization, complex options dealings and Euro-asset transactions that are denationalizing money and making it impossible for central banks to regulate costs of capital. Nor can central banks modulate business cycles in open economies; study of banking policy and business fluctuations suggests that the ''real'' importance of bank-credit changes has long been exaggerated. The new art of central banking may culminate in masterly inactivity.

Central banking is being turned upside down by innovations such as securitization, complex options dealings and Euro-asset transactions that are denationalizing money and making it impossible for central banks to regulate costs of capital. Nor can central banks modulate business cycles in open economies; study of banking policy and business fluctuations suggests that the ''real'' importance of bank-credit changes has long been exaggerated. The new art of central banking may culminate in masterly inactivity.