Political interference with central banks can only delay recovery.

For example, anyone who bet their life savings on this blog’s prediction that the Dow Jones will rise on Wednesday may be a victim of such government manipulation.

What actually happened is that the markets rose to an artificially high level the day before, so that they were doomed to fall on the Wednesday.

A comment by reader Georges T B Hua – yes, we always read your comments, so keep them coming – may provide an explanation.

George’s suggests that the Dow was supported by the Fed on the Tuesday so that a particular candidate would not be penalised on Election Day.

We have no conclusive evidence for or against this suggestion. That does not matter. What matters is that people are thinking in those terms, and it is what people think, not whether they are right or wrong, that determines the market.

There is a similar suspicion that British Prime Minister Gordon Brown – who gained great political credit for giving the Bank of England independence – is pressuring the Bank to cut interest rates.

So the markets were not impressed by yesterday’s sudden 1½ % rate cut – conveniently coming while the people of Glenrothes were voting in a by-election.

Lower interest rates are helpful, but such a large cut undermines confidence. It evokes memories of John Major’s dramatic rate increases on “Black Wednesday”, 1992. The markets saw at once that such high rates were unsustainable and so the pressure on the pound was increased by them, rather than easing as was the intention.

Yesterday’s sharp reduction has the same smell of panic about it. Shrewd players will wait and see where the rates bottom out before they start borrowing and lending again.