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Jeremy Warner's Outlook: Is The Bank Of England Right To Be So Bullish? Beware The Storm Clouds On The Horizon

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Extract from today'sIndependent...

The point is that when money is cheap and plentiful, investors grow oblivious to risk and in an increasingly desperate search for yield lose all sense of capital discipline. This in turn makes the world's financial system highly vulnerable to shocks. Any sudden widening of spreads brings with it the risk of severe losses, a credit crunch, and the possibility of violent economic and financial correction.

So despite the glowing report card evident in yesterday's MPC minutes, the Governor is right to warn against complacency. Britain is only the US in microcosm. Our high levels of debt and growing trade deficit make us extraordinarily similar. The strong likelihood is that nothing will happen to spoil the sunshine of economic stability forecast in last week's Inflation Report, yet the storm clouds are all too obviously building. It's only a fool who ignores them altogether.

Edited by Mags
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