A bubble, or 'stubble', of our own design
Have we reduced the pain caused by the pricking of the mother of all financial bubbles by creating a new financial bubble?
That is increasingly a fear that stalks markets and haunts policymakers.
The unease stems from the following too-good-to-be-true (perhaps) combination:
• a 50% surge in share prices since they hit bottom at the start of the year;
• yields on US and UK sovereign debt that are close to all-time record lows (the lower the yield, the higher the price);
• a consistent rise in house prices (according to the Nationwide, UK house prices are now not much more than 10% below their bubblicious all time highs);
• and a return by bankers to some of the ostensibly reckless lending practices of two years ago.
OK, I know that if you run a small business, and are having difficulty obtaining credit from the bank, you'll think it laughable or insulting that the economy is awash with too-cheap money.
What's happened is that much of the cheap credit and new money created in the US and the UK has leaked - as it was always going to do - into financial speculation (a big hello to all our friends in the investment banks, whose bonus pools are rising faster than the globally warmed seas).
So we may be suffering from a combination of still sluggish growth (or recession if you happen to be British) and bubble, a mixture of stagnation and bubble. Shall we call it a "stubble"?
It's got to have a name, since it represents a bit of a problem for central bankers and finance ministers - who have somehow got to keep the growth going without pumping up the bubble to really dangerous proportions (or may, at some point, have to try to deflate the incipient bubble without tipping us back into recession).
The stubble is non-trivial for businesses and households too. Should they scrimp and save, and batten down the hatches, or borrow to invest as though there's no tomorrow?
The putative stubble is already causing the chief economist of the Bank of England, Spencer Dale, to scratch. This is what he has said this morning, in explaining why he recently voted against creating another £25bn of new money:
"I was also concerned that further substantial injections of liquidity might result in unwarranted increases in some asset prices. I should stress that I do not think there is any strong evidence to suggest than any of the increases in asset prices seen to date are out of line with the improving economic outlook and the desired impact of our asset purchase programme. Rather I was conscious that the current stance of monetary policy - in which Bank Rate is very low and substantial amounts of liquidity are being injected into the economy - increases the likelihood that asset prices may move out of line with their fundamental values and that this could be costly to rectify were it to occur. It is a risk that we need to be alert to."
That nagging fear that markets may again be overheating lay, I think, behind the somewhat hysterical global reaction to Dubai World's decision to suspend payments on $26bn of its debts - in that the direct economic cost of rescheduling the debt is trivial, in a global context, and certainly did not warrant many tens of billions of dollars being wiped off the value of shares.
The FT pointed to another ill augury overnight ("Fears grow about overheated US debt market"): bankers - especially US bankers - appear once again to have had their common sense removed by the prospect of deal fees.
Some bigger indebted companies are again able to borrow with few strings attached: the cov light loan is back.
There has been a revival of Pik toggle notes, which allow borrowers who suffer from cash-flow hiatuses to pay interest as a promise rather than in cash, by increasing the value of the debt they owe (thank you Father Christmas).
And some businesses are even paying fat dividend out of increased debt rather than profits.
Hooray. The holidays are back.
Or perhaps we should take a deep breath and question whether such deals constructed on dubious risk assessments are healthy.
When bankers start behaving like Santa or the fairy godmother, it's normally a sign that the party has been going on too long.
But perhaps more serious is the heated argument taking place between professional investors on whether two of the great economic and financial shifts of this year are bubbles or represent a rock-solid, newly formed, eternal mountain range.
First there's the row over China.
On one side are Goldman Sachs and Anthony Bolton (the guru of Fidelity), arguing that the astonishing revival of Chinese growth is unstoppable - and that you are ninny if you don't buy into it.
But there's also a lot of smart money, especially from hedge funds, betting against China. They fear that the growth is too dependent on an unsustainable Chinese stimulus programme equivalent to 13% of GDP together with an injection into the economy of bank loans equivalent to almost a third of GDP (see George Magnus of UBS in Monday's Times).
And then of course there's that mountain of new public-sector debt which has been created in the US and the UK.
At the moment, that sovereign debt is priced in the market on the basis that it'll be paid back without any difficulty at all (which is what those record low yields mean).
But I have been struck in the past few days by the number of big City banks agonising in public about whether British government debt, in the form of gilt-edged stock, is too expensive.
There have been notes to that hand-wring effect by Morgan Stanley, by Citigroup's Richard Saunders and by UBS's George Magnus (him again).
Their cue has been the recent opinion polls indicating an increased likelihood of a hung parliament as the result of next year's election: they fear that a minority or coalition government would find it almost impossible to take the tough decisions on public spending or taxation that are widely perceived as necessary to restore the health of Britain's public finances.
To put it mildly, it will be fascinating to see whether the price of gilts starts to rise and fall in the coming weeks with changes in the Tory party's lead over Labour.
See also Stephanie Flanders' post Three-way on the MPC.