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Mainstream Media's Bearish Stance Gathers Apace.

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I'm detecting creeping bearism in the mainstream press. There's been an increasing number of bearish articles in the mainstream press recently.


It is, of course, entirely plausible that the optimists are right. The sheer resilience of the US economy should never be underestimated, and it may be that the imbalances in the world economy are part of the natural process of global integration. Normally, economists would expect interest rates to be pushed up by America's appetite for global savings to fund its enormous trade deficit. But that has not happened. Long-term interest rates are unusually low, in large part because markets assume that inflation will stay low. They are not especially concerned about excess demand in the US when there is excess supply from China and other countries reliant on exports for their growth.

This, though, is getting perilously close to saying "it's different this time" - traditionally the four most dangerous words in financial markets. It's what people said in 1999, 1929 and almost certainly in 1720 when the South Sea Bubble was about to pop. When anybody starts to mention the words "new paradigm" (as they were in Davos this week) it's a good idea to get the tin helmet out of the cupboard - just in case.



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  • 301 Brexit, House prices and Summer 2020

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