Central banks do not control the markets. Since the FED was created in 1913 we had violent fluctuations in the markets. FED made it worse!
Social mood directs the markets, economy, politics and culture. Change in social mood is visible first in stocks, and later in the economy. This is why stocks are a leading indicator. In the middle of bad news back in March 2009 we rallied and the recession was declared over later. Now stocks can decline first and a news recession will be declared well into the decline.
The economic cycles or business cycles such as Kondratieff Wave are created by the herding behaviour of the people. When Kondratiev Winter ends and spring starts, people look at each other and start expanding their businesses and investments just because others are doing so. Credit supply increases dramatically. China is now in the spring phase. People look at each other and they all want to borrow at the same time. This creates inflation.
Then expansion levels out and that is Kondratiev summer.This brings prosperity. Then the bill comes due and the debt must be paid off. Since everyone started at the same time, they all start paying off debt at the same time. This alignment of the entire population causes a major problem. In order to pay back debt, they reduce expenses, scale back new investments. This is where we are in the U.S.
Expansion stops, Contraction starts. When the debt is paid off, the money dissapears just the same way it was created by the banking system. This shrinks the money supply and Kondratiev Winter holds a strong grip on the economy. Once the debt level reaches reasonable levels, Winter ends and recovery, aka Spring starts again.
On the long run, we are in Kondratieff Winter! This is a cyclic downturn that happens once or twice in a century. This is the end of the credit bubble era. Here is Kondratieff Wave explanation:
http://www.kondratieffwavecycle.com/kondratieff-wave/
This is a deflationary crash. After decades of credit inflation (courtesy of the FED), deflation's devastating effects cannot be avoided. Total debt in the economy is too high. It cannot be fixed with more debt! Here is the web of debt we are tangled in: