The combination of American trade protectionism and the end of a failing credit expansion is leading into a global economic downturn, and potentially a systemic crisis. Meanwhile, investors still believe more extreme monetary policies will stabilise economies and that the ultra-low interest rate environment will persist without renewed price inflation. As Samuel Johnson reputedly said of a second marriage, it represents the triumph of hope over experience.
Introduction
There is a moment just after the top of every credit cycle where positive momentum stalls before a new reality emerges. When the stall begins, as appears