The January Market Madness

For most of the month, the asset prices on my Bloomberg screens have been red with the exception of gilts, which have been rising. I am sceptical of the usual and well-rehearsed explanations for the current gloom, which fall into three categories: sub-prime problems; the US housing slump; and over-indebted consumers. Firstly, the sub-prime problems have been with us for a year (does anyone remember HSBC’s announcement in February 2007?); secondly, the US housing slump starting in 2006; and, thirdly, consumers do have more debt but they have a lot more assets too. To understand what is...