Newton's Clay: In US dollar terms, the world economy is already in a recession

The structural forces of ageing populations, increasing debt levels, the abundance of capital and competition, and a move to protectionism by many countries creates a backdrop of low growth.

We feel central bank actions have simply made this backdrop more fragile by elevating asset prices and trying to control the economic and capital cycle. As these distortions now come home to roost (for example, with the bursting of the emerging market debt bubble), global economic growth will remain low and there is a significant probability of the US economy slipping back into recession. In US dollar terms, the world economy is already in a recession. We believe risk is more elevated than the markets suggest (volatility indices being low). Because of our view of the structural forces...