John Kenneth Galbraith on the Central Federal Reserve Bank

In his view, America's Federal Reserve System (Fed), the central bank and agency to limit recession, unemployment and inflation, is 'our most prestigious form of fraud, our most elegant escape from reality'.

During a recession, the Fed cuts interest rates to stimulate borrowing and spur on production, consumption and, so, the economy.

In a boom scenario, on the other hand, the rate is raised to restrain business investment and consumer borrowing to level off excess optimism and prices.

Highly plausible and wholly agreeable, Galbraith says. But the difficulty, he says, is that this process 'exists only in well-established economic belief and not in real life'.

Business firms borrow when they can make money and not because interest rates are low.

And when times are good, higher interest rates do not matter. They do not have the effect of slowing down business investment because what is egging it on is the prospect of profit.

As he notes, the Fed could provide no remedies for economic ailments during and after World War I and during the Great Depression of the 30s.

Galbraith himself did have success controlling inflation, which was greatly feared during World War II, while he worked in the Office of Price Administration under president Franklin D. Roosevelt. He says this was because there was no reliance on the Fed.