Markets, we are told, are rebelling against the government’s irresponsible fiscal policy, not least the now-abandoned plan to abolish the 45p tax rate. If that is what they are doing, it marks a sharp change in their behaviour. For most of the past decade they have whooped with delight whenever a fantastically expensive stimulus package has been announced and gone into a sulk whenever there have been rumours that the punch bowl is about to be withdrawn.
In this Alice in Wonderland world, good news became bad and bad news became good. Why? Because bad news means greater likelihood of a stimulus package; good news means stimulus is likely to be withdrawn. And of course, the extra billions pumped into the economy through stimulus – whether it be quantitative-easing or Joe Biden’s blatant helicopter money – had a tendency to be sucked into inflated asset prices.
Maybe like a reformed gambler, global markets have finally come to the realisation that this really can’t go on.
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