"Angel Gear"

Since my last post in July there has been a continuation in the struggle between the forces of beardom and bulldom.

Equity markets continue to trace sideways. Central banks seem unable to decide if inflation or deflation is the greatest threat to the status quo. The recent data from the US shows that the housing bubble has finally started to deflate and possibly burst. There is now active talk of a decline in demand mitigating inflationary pressures and of the US Federal Reserve suddenly reversing monetary policy. Which I suspect will be a bit like switching into neutral while coasting own a hill...generally regrettable.

Ultimately nothing, and I mean nothing, will demonetise the world economy like a fall in the value of the US dollar. This is precisely what a reduction in US interest rates would now precipitate.

So, although it seems paradoxical, the reversal of monetary policy at this point, if it occurs, may be the "Angel Gear" shift that leads us to the Great Recession.