Global equity markets have almost exactly doubled since the darkest days of early 2009. Even subprime bonds, the culprit for the greatest economic crash in living memory, have enjoyed spectacular gains. All this has come against a gloomy backdrop of high unemployment, record levels of government debt, and emergency action by many central banks. Why has this happened, and can it continue?
In retrospect, the reason for this dramatic recovery in asset prices is straightforward. The emergency action taken by policy makers has “worked,” if only in the narrow sense that it has stopped the economic situation from getting worse.…
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