Matthew Lynn

A lot has happened over the past 34 years: the Cold War ended, several wars have taken place in the Middle East, a banking collapse occurred, and a global pandemic left millions stuck inside their homes. But one thing remained constant throughout: the bear market – a price drop of 20 per cent or more from the most recent high – in Japanese equities ground on and on relentlessly. After hitting an all time high of 39,915 points on 29 December 1989, the Nikkei 225 which covers the country’s major companies slumped and slumped again. Today, it finally recovered all those losses, setting a fresh all time high. There is a lesson in that for investors everywhere. All bear markets end eventually, even Japan’s.

The City of London would be hollowed out. Bankers would have to retrain as burger chefs. And Paris and Frankfurt would emerge as the twin centres of the European financial markets, leaving London as little more than a backwater. Of all the predictions made by some Remainers during Brexit, there was one that kept re-emerging: that financial trading would inevitably move to the other side of the Channel.  It's clear that this doom mongering was overblown. A deal has finally been struck between EU chiefs and the bloc’s member states that will keep the City of London in business for several years to come.

Government borrowing is lower than had been forecast. The economy needs some form of a boost. And perhaps most of all there is an election within a few months. There are plenty of reasons why Chancellor Jeremy Hunt might want to cut taxes slightly in his spring Budget, and perhaps even once more by the autumn. But hold on. The International Monetary Fund (IMF) has just said it would be ‘fiscally irresponsible’. Well, perhaps. And yet, the IMF’s record on forecasting is very poor, and it is also very committed to a high-tax, big-state economic model. On that basis, Hunt should just ignore it, and cut taxes anyway.

Christine Lagarde, the president of the European Central Bank, has one of the most glittering CVs in European politics. The ex finance minister of France, and former managing director of the International Monetary Fund, earns £365,000 a year for running the show at the ECB. But is she any good? An internal poll of staff at the Bank, leaked to the press, suggests not. It found that more than half of employees rated her leadership of the organisation as either ‘poor’ or ‘very poor’. Her own people reckoned she put self-promotion ahead of the institution (‘Quelle surprise’ as they would say in her native country), pushed an irrelevant political agenda, and had little knowledge of the markets or the economy. 'Lagarde is generally reported as being an autocratic leader.

Why is Oxfam so concerned about the coming possibility of the world’s first trillionaire? The charity has this week released a report with an apocalyptic warning that one is likely within the next decade. Yet surely people only get that rich by making something that people want. That should be celebrated instead of condemned.  In a report published for the start of Davos, the annual event where very rich people gather at an expensive resort in Switzerland to worry about being rich, Oxfam said the world’s first trillionaire could come soon. Apparently, that showed we are entering a ‘decade of division’. ‘We have the top five billionaires, they have doubled their wealth’, said Oxfam’s executive director Amitabh Behar.

The charlatans had been exposed. Its flimsiness had been confirmed. And the bubble had finally burst. Rewind to just over a year ago, and with the collapse of the crypto exchange FTX and the arrest of its billionaire founder Sam Bankman-Fried it seemed as if the legions of skeptics of the digital currency Bitcoin had been proved completely right. But hold on. Over the last few months, its price has soared again. In reality, Bitcoin has made fools of its critics once again.  In the wake of the FTX scandal, Bitcoin, along with its digital imitators, seem headed for history’s dustbin. After all, the collapse seemed to confirm all the accusations levelled against it. It was over-hyped, fraudulent, and unreliable.

Well that was a surprise. At just 3.9 per cent, down from 4.7 per cent, the latest inflation figure published today came as a shock for many. The figures are far lower than the consensus forecasts, and even low enough to allow the Prime Minister Rishi Sunak to meet his forecast to halve the rate by the end of the year. But should we really be surprised that inflation has fallen so rapidly? Monetarists – who noticed that the money supply has been contracting since the start of the year – won't be taken aback by the inflation figures. They said all along that the flow of money is the key to inflation – and they've been proven right.

Critics of Argentina's president Javier Milei have already made up their minds: he is a lunatic and his plans will collapse on first contact with the real world. Argentina's money will run out and the economy will grind to a halt. To some commentators, he is a ‘hard-right’ ideologue who will crash the economy within weeks. They say he's like Liz Truss and Kwasi Kwarteng on roller-skates. If you listen to those attacking Milei, you'd be forgiven for thinking the man in charge in Buenos Aires will precipitate yet another economic calamity in a country which has been stumbling from one disaster to another for almost a hundred years. But hold on. It turns out that the markets don’t quite see it like that.

When Jeremy Hunt takes to his feet in the Commons this afternoon to deliver his Autumn Statement, he'll be trying to woo voters with some tax 'giveaways': VAT thresholds might be raised to help small businesses and the basic rate of National Insurance could be reduced for the rest of us. But hold on. Before the Chancellor gives anything back, both he and the Prime Minister Rishi Sunak need to do something far more important: they should apologise for all the tax rises the Tories have imposed. We don’t know the final figure yet, but it turns out that the Chancellor has around £13 billion to £15 billion of ‘headroom’, as the fiscal jargon has it, to cut taxes.

At least there will be some pandas. At his summit with President Biden this week, China’s President Xi pledged to send more cuddly bears to the US, the traditional Chinese way of cementing good relations with other countries. More importantly, there was a significant easing of tensions between the two largest economies in the world. Military communications will resume, reducing the chances of a catastrophic miscalculation between the two nations, controls on narcotics will be tightened up, and there will be a resumption of high-level diplomatic contacts. It remains to be seen if that sticks. But if it does, one point is surely clear. That could yield a huge ‘peace dividend’ for the global economy.