Magazine article The Spectator

Time to Fasten Seat-Belts as the Giant Panda Takes over the Flight Deck

Magazine article The Spectator

Time to Fasten Seat-Belts as the Giant Panda Takes over the Flight Deck

Article excerpt

This summer season is the most glittering I can recall. London is the place in all the world where zestful people, especially the young, want to be at present and it is certainly the most enjoyable, provided you have the money. And many people do have the money as the world economy booms, the Dow Jones and the FT index soar and many huge financial institutions are, literally, giving cash away to their members. To add to the euphoria, we have here the most popular government I can recall -- popular with all classes, too. BA have had to put up the price of Concorde because so many people are using it, and the exodus to the Continent for a splurge has already begun. For the first time in many years you can get ten francs to the pound, which is rising against the mark, the Swiss franc, the lira, the peseta - the lot.

It is the same story across the Atlantic. In Washington last week I was told: `Alan Greenspan's effort to curb the bull market and give it a soft landing has failed. There is more money about than ever.' The sums being earned in Wall Street have never before been approached, in real terms or any other terms. One of my most perceptive American correspondents points out that as much money is being spent as in the headiest days of the 1980s, though more discreetly. He draws my attention to a Wall Street Journal headline, `Global Growth Attains a New, Higher Level that Could Be Lasting' and to a recent survey of 200 chief executives of the Massachusetts High Tech Council: 88 per cent called the business climate good or outstanding while no less than 99 per cent said it would `hold steady or improve'. One United States economist is quoted: `We've entered a golden age that could last for decades.' As my correspondent says, such blithe dismissal of uncomfortable historical facts like business cycles is ominous. He recalls a similar remark by the all-seeing Bernard Baruch in the American Magazine: `The economic condition of the world seems on the verge of a great forward movement.' The date of this prediction was June 1929.

So in the last few days I have found myself humming that 1938 hit, `Let's Face The Music And Dance', whose brilliant lyric begins, `There may be trouble ahead'. I have not consulted my colleague Christopher Fildes, wisest and wittiest of commentators, because I wanted to make my own judgment, but I have talked to some of those actually engaged in manufacturing wealth as opposed to spinning it out of thin air. They all agree that a violent 'adjustment' (as they have been conditioned to call it) is overdue and will probably take place this autumn. United States stocks are at absurdly high levels because, as my US Treasury friend said to me on Saturday, `there is no place else for the money to go - the guys cannot spend it as fast as they are making it'. One of my American gurus defended the rises until recently on the grounds that they were concentrated largely on good stocks but even he now agrees that much of the Wall Street madness is fuelled by the hope of continuing capital gains rather than any prospect of commensurate earnings. Once the market reaches this stage a crash is inevitable and the only question is: when?

As a historian, there are two aspects of the business cycle which particularly interest me. One is the nature of the detonator required to turn a bull into a bear market. …

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