for the rest of their lives. The resulting asset
boom, however, saw stock and property
owners becoming much richer. Most vot-
ers have had to watch the financiers, hav-
ing wrecked the economy, get rich all over
again — courtesy of the world’s leading cen-
tral banks. This has been the trademark of
western economies now for a decade.
In Britain, the market distortions have
been eye-watering. The average house now
costs eight times average earnings. Home
ownership, especially among the crucial fam-
ily-forming 25- to 39-year-old age group, has
consequently plunged. The Conservatives
are now beginning to find out that there is
a political price for all of this — a high cor-
relation between those with no property and
those who in the election backed Jeremy
Corbyn in droves. When Labour took the
seat of Kensington and Chelsea, it seemed
a mystery. But a look at its home ownership
rates offered a clue.
An economy that seems rigged against
workers helped fuel unrest everywhere
from the right-wing Tea Party in the US to
populism in Europe. Former finance minis-
ter Wolfgang Schäuble blames ‘ECB mon-
ey-printing’ for the electoral success of the
right-wing nationalist party Alternative für
Deutschland. Germany’s historic experience
has given particular reason for sensitivity
about the wider consequences of govern-
ment rigging money markets. The German
stock market roared in the 1930s.
What seemed like a quick fix, rewarded
by high share prices, can have other impli-
cations. Ultra-low rates have also kept thou-
sands of ‘zombie’ companies alive, so we have
firms able only to pay debt-interest rather
than clear actual debts. Around a quarter of
a million struggling UK firms are in this situ-
ation, kept on life support by unnaturally low
rates. Unable to invest and expand, they tie
up resources that should be channelled into
healthier firms. This helps to explain the low
productivity and wages that have cursed the
UK economy in the past ten years.
If bond yields are kept artificially low,
pension funds will be forced to divert their
cash into far riskier financial assets. This
risks stoking another boom/bust cycle, driv-
ing financial markets too high and making
a Lehman-style collapse more likely. And
should it happen, what would governments
do? The easy money era has seen them all
borrow staggering amounts: global debt as
a share of economic output is now 40 per
cent higher than it was on the eve of the
last crash, according to the Bank for Inter-
national Settlements. The world has tried
to borrow its way out of a debt crisis. The
result is, as the BIS described, a ‘risky trinity
of unusually low productivity growth, unu-
Most voters have had to watch the
financiers, having wrecked the
economy, get rich all over againsually high debt levels and unusually limited
room for policy manoeuvre.’
The Fed and the Bank of England are
beginning to take heed and are no long-
er using QE. Having raised rates once, the
Bank is also gingerly following the Fed’s
lead, with markets beginning to price in
another increase in May or June. The ECB
and Bank of Japan, though, are still boost-
ing their balance sheets, creating the equiv-
alent of tens of billions of dollars of virtual
money each month. So QE hasn’t ended, not
by a long chalk. And no one knows what will
happen when it finally does.
The Dow Jones closed at an all-time high
more than 70 times last year — more record
closes than during any years in history. It
may be that the timing of his recent tax cuts,
coming at a time when the US economy was
already buoyant, pushed valuations too far.
But if overvalued stock and bond markets
are to return to earth without a deeply dam-
aging collapse, then a series of smaller cor-
rections will be needed.
A fully blown stock-market crash wouldhave major political implications, of course.
The emerging narrative about failing global
capitalism in crisis would go into overdrive.
With the big emerging giants like China
boasting massive financial reserves, and like-
ly to ride out any storm, more power would
shift from west to east. And with continental
Europe still harbouring a slew of bad bank
debt, certainly compared with the US and
UK, the eurozone is likely to suffer dispro-
portionately — as it did after 2008. And, like
last time, the UK economy would certainly
be hit.
The likelihood, though, is that this is not
the start of a big crash but instead a soft
landing, a necessary downturn in stock pric-
es, part of a process that will mean savers
might finally start to be given a return on
their bank deposits. Serious market slumps
also generally follow a US recession and, for
now, Trump’s America looks strong — per-
haps a little too strong for the market’s lik-
ing. And across the world, there’s a lot of
cash waiting on the sidelines, ready to enter
the market.
The market upswing of recent years
reflects, in part, optimism about the world
economy: partly based on technological
advances and post-Lehman ‘bounce back’.
But much of the rise was due to crony-
ism, the emergence of cartels, unjustified
share buybacks, dividend payments from
borrowed money and, above all, QE and
absurdly low interest rates. That’s why a fall-
ing market — for all the pain of adjustment
— shows financial logic, and genuine capi-
‘It’s not a crash – it’s a correction!’ talism is fighting back. And about time too.The Last Walker
‘Atheism is, of course, defined by lack...’I inched and slid by darkened bulbous outcrops
On Grasmere Common, chilly, late and slow,
Towards a window’s far unswelling glow.
My halogen head-torch blinded every trace
Of Easedale Tarn and blue-backed mountaintops
But lit the plumes I huffed from awn-sharp air,
Old packhorse slabs and one unravelling lace,
So I switched off the blunt myopic glareAnd a thousand stars came out at once, thick, rife,
Some low as lightbulbs, some a few photons strong,
A staggered, glamorous, unrequiring throng.
They burn and blaze till bursting they disburse
Carbon and oxygen, the quick of life.
Meteors leapt as if synaptic wit.
The pure cool forces of the universe!
I gazed and felt no trace of deficit.
— Kieron Winn