[The once and future king]

Well in the 70s when basket of stuff inflation reached 27% in Britain the stock market lost 70% of its value over a two year period, and house prices didnt fare much better. Seems now that we have turned that situation on its head.

This would explain the phenomenon I have observed in the markets that taken to its pathologic extreme goes something like this:

"Scientists claimed to day that a galactic goat was 110% certain to eat 75% of the worlds population. In an effort to stave of financial instability and recession CBs cut interest rates by X%." "The markets reached record new highs today as they reacted positively to the news that CBs were to cut interest rates. Analysts claimed that the economies fundamentals were robust enough to see off any galactic goats"

In essence the markets have twigged that the system has be rigged to suppress basket inflation and then inflate assets. For Govs this creates/created a win win situation at least in the medium term. Consumers dont feel battered by inflation at the shops and all feel richer coz their house has quadrupled in value. Bankers can all collect gargantuan bonuses and the whole bull psychology feeds into the zietgiest of the whole country.

If things start to go wrong there is only one recourse, cut interest rates.