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Media's Most Consistent Bear Strikes Again

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She gets my vote for HPC bear media personality -consistently bearish and hard hitting with her views. Is that why she's consigned to the inside back page of the Money section of the Sunday Times? I think we should be told.


I am still hanging on to one opinion that puts me in something of a minority — the view that Alan Greenspan’s legacy to America, as he prepares to retire on Tuesday, is a truly horrible one. Greenspan’s many fans say that in his 18 years at the helm of the Federal Reserve he has presided over a low-inflation era of astonishing prosperity and stability. But is this true? The answer is that it depends how you look at it. Greenspan has prevented any huge crises actually taking place on his watch, so for that you could applaud him. However, what his preventative actions have also done is pretty much guarantee that a serious crisis will take place on his successor’s watch, something I’d say isn’t quite so praiseworthy.

The fact is that Greenspan’s policies over the past few decades have created vast and unsustainable imbalances in the US economy.

In response to every single problem — the 1987 crash, the collapse of LTCM, the technology crash of 2000 and the corporate scandals of the early part of this century — he has cut interest rates and kept cutting them. But keeping rates this low — while it has averted obvious disaster — has had a nasty effect on the way the US economy sustains itself. Low interest rates mean more people borrow more money, and Americans have been borrowing in some style.

Last year four out of ten new homebuyers in America put down no deposit at all; in the past 18 years mortgage debt has jumped from $1,800 billion (£1,000 billion) to $8,200 billion; consumer-debt levels have quadrupled in the same time frame; the average American credit-card debt per family now stands at well over $8,000; and last year the savings rate in the US actually turned negative.

Government debt has soared at the same time. As Bill Bonner, author of Empire of Debt, points out, more government debt will have been issued during the eight years of the Bush administration than in the 200 years before that put together.

All this debt has — as Greenspan presumably intended — spurred asset prices and consumer spending upwards, something that has kept the economy moving ahead nicely in gross- domestic-product-growth terms — consumer spending has been the main driver behind the US economy for years now — and that has boosted asset prices to their current levels.



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  • 301 Brexit, House prices and Summer 2020

    1. 1. Including the effects Brexit, where do you think average UK house prices will be relative to now in June 2020?

      • down 5% +
      • down 2.5%
      • Even
      • up 2.5%
      • up 5%

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