As long as the credit of this bank subsisted, if appeared to the French to be perfectly solid. The bubble no sooner burst, than the whole nation was thrown into astonishment and consternation. Nobody could conceive from whence the credit had sprung; what had created such mountains of wealth in so short a time; and by what witchcraft and fascination it had been made to disappear in an instant, in the short period of one day.
Sir James Steuart, An Inquiry into the Principles of Political Oeconomy (1770)

In reply to pessimistic argument ad nauseum about debt levels, housing bubbles, static asian export models, current account deficits, artificial dollar strength and so forth, comes the reasonable "look, there is always something to worry about - but that does not mean impending catastrophe" school of thought. That's true.

Turning points and catastrophe do not always strike in one day, though. They may do, as has happened in both John Law's and our own time. But sometimes the inflexion point takes the stealth bomber route with realisation dawning on the bombarded after the fact. The absence of fear exhibited by Alan Greenspan and the regional Fed banks regarding, in particular, the sustainability of the current account deficit is contributing to that syndrome this time around.

With no credible authority, be it leading central banks or politicians, ringing the economic alarm a large moral hazard has built up. Little alarm increases the likelihood that a Houston-we-have-a-problem moment is creaping up. In the meantime onlookers continue to take on financial risks that they surely would not have had policy makers been more assertive regarding the state of the global economy before senate committees, the press and voters. Instead, there are a lot of happy unbroken eggshells.

Nonetheless, many equity holders have been distributing shares since April/May. Consequently longer term moving averages now clearly show major equity market indicies to be in two minds over this debate, but with a perceptible southerly bias. Markets may have predicted 8 of the last 5 recessions, as the saying goes, but caution carries its own rewards.

That's the backdrop to this week's keenly anticipated non-farms payrolls data. Just don't draw the Big Picture with one data point.

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