Steve Forbes explains in the latest issue of Forbes magazine why he believes central bankers have pursued the wrong path toward economic growth.

THE KEY TO CURING a sick patient is getting the diagnosis right. That’s also true in economics. The astonishing inability of economists and political leaders to gauge what ails most economies these days and then promulgate the right cures is sad testimony to their obstinate refusal to look at facts and to their deep emotional adherence to bogus ideas. It also reflects their intellectual laziness. …

… Here’s where we come to the widespread application of economic malpractice–and on a scale not seen since the 1970s and the 1930s.

– The big misdiagnosis. Central bankers moan about the threat of deflation. Their very policies, however, are contractionary–about as helpful as doctors bleeding their patients in days of old. What ails the global economy is not the failure of central banks to churn out enough money; it’s that their policies are constricting the flow of credit to small and new businesses. What these institutions are practicing is a form of statism. If you want to be harsh, label it the central bank version of Fascism: The big and the politically connected get loans; everyone else is on short rations. The Federal Reserve has been open about its trickle-down policies: If financial markets expand enough, rich consumers will spend more in response to this “wealth effect,” which in turn will spur a broader recovery.

Credit has flowed disproportionately to the federal government at suppressed rates of interest. Worse, the Fed gobbled up long-term Treasurys and government-guaranteed mortgages (its purchase of packages of these instruments is also a form of credit allocation). In addition to suppressing the price of money, this vacuuming of ultrasafe bonds distorted credit markets. …

– Another form of economic quackery: Money controls the economy. Classical economists understood that money represents the production of services and products, in the same way that musical notes represent music. The idea that manipulating money can magically generate a genuine and durable economic prosperity is as wacky as believing that manipulating the number of parking tickets at an event influences the number of cars that will be manufactured. After examining 150 devaluations since 1950, distinguished monetary expert and historian Nathan Lewis recently concluded in a treatise on Forbes.com (forbes.com/currency-devaluation) that devaluations always fail to achieve sustained growth. “Whenever a country gets itself into big trouble, a certain cadre of economists insists that all can be made right again if the government would just devalue the currency.

“We have been devaluing currencies for so long—hundreds of years—that, if this were true, you’d think we would have noticed by now. I recently looked at the history of all the 150+ currencies of the world since 1950. … I don’t think you’ll find a single country that managed to devalue itself to prosperity.”

Yet today the IMF , the Fed, the ECB, the Bank of Japan, the Bank of England and numerous smaller such institutions all believe in the positive power of monetary manipulation. Experience hasn’t taught a thing.