Satyajit Das, author of Traders, Guns and Money and A Banquet of Consequences, is worried about the financial system. Optimists argue that "economic prospects are sound, with globally synchronised growth, low inflation, strong labour markets and buoyant asset prices". But this ignores "low labour-force participation rates, low wage growth, limited productivity growth, weak capital investment and continued imbalances in global trade and savings". They are also too relaxed about "fiscal deficits, accommodative monetary policy and perpetually increasing debt".
Still, Das wouldn't short the market immediately as "a major fall in asset prices or a substantial slowdown in economic activity is unlikely to be tolerated". Instead, "policymakers will reduce interest rates (potentially into deep negative territory), resume asset purchases and increase government spending to preserve the status quo". Central bankers are still intervening heavily the Bank of Japan "now owns about 75% of all listed Japanese exchange-traded funds and is a top 10% shareholder in 90% of Japan's listed equities". Similarly, "the Swiss National Bank has become a major shareholder in many US companies".
Subscribe to MoneyWeek
Subscribe to MoneyWeek today and get your first six magazine issues absolutely FREE
Sign up to Money Morning
Don't miss the latest investment and personal finances news, market analysis, plus money-saving tips with our free twice-daily newsletter
Don't miss the latest investment and personal finances news, market analysis, plus money-saving tips with our free twice-daily newsletter
-
Why strong currency is the key to upward mobilityChange your social status and your life by saving money in strong currencies, says Dominic Frisby
-
1,000 children hold over £100,000 in a junior ISA – how to grow tax-free nest egg for your childJunior ISAs can be a tax-efficient way to grow a nest egg for your child. We explain how they work
