There is a simple explanation of what is going wrong in the world economy.

Between 1992 and 2008 a prolonged fall in interest rates led individuals and companies into an ever more aggressive search for higher returns either by buying higher yielding assets or by betting on rising asset values. The result was a virtuous circle of growth.

The more companies borrowed to invest in assets the higher asset prices rose enabling them to borrow even more and drive asset prices even higher. Eventually the whole world economy began to resemble a highly leveraged bet on endlessly rising asset. This in turn made it vulnerable if asset prices should ever start to fall.

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