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Who do they think they’re kidding?

The US economy is in a fool's paradise – Europe and Japan are by no means doomed to lag behind it. But none of these rivals can afford to abandon free trade to cope with China's massive growth

The French and Dutch 'no' votes in their referendums on the EU constitution have led to further weakening of the euro, as talk of the 'death of Europe' spreads across the media. The dollar has also gained against the yen. Those who back the US model and its financial assets reckon the dollar will continue to strengthen because Europe is doomed politically and economically – a sclerotic hell of low-IQ lemmings. And Japan is seen as a dying economy with an irreversibly ageing population condemned to low growth and investor returns. So the dollar, being the least ugly whore in the bordello beauty parade, rather than because it possesses any inherent virtue, will triumph.

As for the economy, US corporations will continue to make profits because inflation will stick at 2% to 3%, so the Federal Reserve will stop tightening soon. This will allow the US consumer to keep on consuming and adding debt like rusty scrap to the slagheap of profligacy in the backyard of unaffordable luxury homes. Multiples of revenue (for everything from equities to bonds and real estate) will not have to plummet and there will be just enough profit growth to keep equity investors happy and too little inflation to make bond investors miserable.

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