First, it was The BoJ’s utter collapse from omnipotence to impotence. Then came the collapse of The Fed’s credibility in the short-term…. and the longer-term. And now it is the turn of Mario Draghi’s ECB to face total failure, as the European banking system – the prime beneficiary of “whatever it takes” – has crashed back to pre-Draghi levels.

As former Morgan Stanley guru Gerard Minack explains, the most corrosive factor for markets currently is the downgrading of perceived central bank potency.

There are several recent hints of this decline.

Mario Draghi’s ‘whatever it takes’ comment in 2012 was, in my view, the single most important central bank action of the past 5 years.  However, European bank stocks – a principal beneficiary of ‘whatever it takes’ – have now almost given up all their ‘whatever it takes’ gains, despite recent ‘whatever it takes with steroids’ comments from Mr. Draghi.

Likewise, the Bank of Japan’s bazooka now seems to be firing blanks.  The yen strengthened and equities fell after the cash rate was cut below zero – the opposite of what was presumably expected.

Second, the central bank bubble seems to be deflating.   Central banks have long been over-rated in my view; markets seem to be starting to agree.

The equity sell-down is changing: it had been led by economically-sensitive sectors but is now shifting to financial risk ….financial stress is not good for growth.

Some further clarifications from Bloomberg:

Financial markets are signaling that investors have lost faith in central banks’ ability to support the global economy.

And some more:

“The markets are wondering, well, we’ve had these non-conventional monetary policy experiments for the last six or seven years and they haven’t caused a sustainable boost to global growth, so what will the latest moves do,” said Shane Oliver, head of investment strategy at Sydney-based AMP Capital Investors Ltd. “It’s a reasonable question to ask given the events of the last few weeks.”

“The notion that central banks and regulators could not act if the financial panic were to turn into a serious threat to the real economy and hence to jobs looks wrong,” said Holger Schmieding, chief economist at Berenberg Bank in London. “Central banks can bolster confidence if they really have to in order to support the real economy.”

“The period of central bank ‘shock and awe’ operations is likely to be behind us,” Stephen Jen, co-founder of SLJ Macro Partners LLP in London and a former International Monetary Fund economist, wrote in a note on Friday. “This will be the year that ‘gravity’ will overwhelm the central bank policies,” he said, recommending selling equities during rallies.