Cheap money from central bank asset purchases and ultra-low interest rates is helping to reinflate bubbles in parts of the global economy. UK house prices are soaring irrationally again, for instance. But my favourite anecdote comes from ComicConnect.com, a US auction site which yesterday sold an admittedly rare, top-condition copy of the world’s most coveted comic book for a breath-taking $1m. That figure – more than three times higher than the prior record-holder – was for a copy of Action Comics #1, which marked the 1938 debut of Superman, thus changing the course of pop culture. Its cover price at the time was ten cents; it is now seen as the Holy Grail of comic books. But $1m? It certainly smacks of bubblenomics.
On the one hand, the economy is showing signs of renewed weakness – there was a flurry of warnings yesterday from around the world, including a downbeat statement from Mervyn King, a collapse in US consumer confidence and all sorts of warnings of a double-dip recession. On the other, there are renewed signs of fresh bubbles. One sign is the number of emails I am getting from so-called experts telling me the housing market is once again a great investment. Spotting bubbles is no science – but these sorts of trends worry me deeply.
CITY A.M. NEEDS YOU
IT is pretty hardcore stuff. No bonuses at all for anybody in a top management job at any bank that is enjoying implicit or explicit government support, a top rate of capital gains tax of 50 per cent, a one per cent annual tax on homes worth £2m or more, a unilateral break-up of all universal banks in London – UK or foreign-owned – a Tobin tax on financial transactions – these are some of the policies advocated by Liberal Democrat leader Nick Clegg in his interview in today’s City A.M. (see page 1 and page 17). With the polls narrowing, there is a good chance the LibDems could end up as the kingmakers in a hung parliament come May. Clearly, Clegg’s anti-bank, anti-private equity, anti-hedge fund, tax-the-wealthy policies will resonate with a large chunk of the electorate – but they would also have a devastating effect on London’s competitiveness, chase away inward investment, destroy jobs and deal a crippling blow to the UK’s already shrivelled private sector tax base. Those who Clegg genuinely seeks to help – the poor – would suffer from reduced opportunities, weaker growth and – over time – reduced living standards.
But that is merely my opinion – the real question is: what do those who work in the City, Canary Wharf, Mayfair and all of London’s other business districts really believe? What do enterprising, hard-working members of London’s business and investment community really think? To find out, we have teamed up with PoliticsHome.com, Westminster’s most influential news site, to create a unique daily poll (see below). PoliticsHome already produces a daily five-question, 1-minute BlackBerry and iPhone compatible survey for Westminster policymakers; we will be doing the same for those who work in business and finance. Readers should fill in the form in strict confidence at www.cityam.com/panel. When the poll launches, we will be reporting on its findings daily, revealing what the City really thinks – and letting the politicians know, loud and clear.
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