China is in recession. Economists have begun to flag early warning signs that the US may already be in recession too. Germany has slowed to a crawl.
The optimistic view is that the world is going through a mid-cycle "air pocket". Households will unleash their pandemic savings, picking up the baton as governments pull back. That remains the most likely outcome.
The darker tail-risk is that we are entering a synchronised world downturn, spread wide enough to create self-reinforcing "reflexivity" that slips control – if there are any policy errors.
The commodity spike does not in itself mean that the global economy is overheating or that we are returning to the sticky inflation of the 1970s.
This may be a one-off shock, more akin to the shortages after the First World War, a parallel case of pent-up demand and disrupted global trade. That reopening price surge was followed by deflation in the British Empire and the US.
The Bloomberg commodity index has jumped by 30pc this year but is far below levels in 2008, and the moves have a different character: a sequence of wild surges that burn out quickly. Iron ore prices have fallen by 45pc since July. Timber prices have halved and this may happen to gas prices before long.
Covid monetary and fiscal stimulus is being withdrawn just as the global economy slows.
China’s smoothed official figures recorded a slide in growth to 0.2pc in the third quarter (quarter-on-quarter) as property curbs and Xi Jinping's assault on "disorderly capital" hit home.
The better proxy measure of Capital Economics showed an outright contraction of 3.9pc. "Industry and construction appear on the cusp of a deeper downturn," said the group.
Nomura calls it China's "Volcker Moment" , a deliberate purging of rampant excesses that can no longer be delayed.
In the West, monetarists won the first round of the pandemic: central banks underestimated the inflationary impulse, or pretended to do so. But those arguing that the greater danger ahead is "Japanification" and a relapse into secular stagnation may win the next round.
The latest data is sobering. A paper by the National Bureau of Economic Research – the body that designates US recessions – argues that America has either entered recession already, or is about to do so .
Co-written by Danny Blanchflower, a former member of the Bank of England’s Monetary Policy Committee, it says the sharp fall in the Conference Board's index of consumer sentiment matches patterns before each recession over the last half century.
The nationwide gauge has dropped 25 points since March, a greater fall than before the 2007 slump. The labour data does not yet confirm the recession call but the paper says Covid furloughs have distorted the readings.
The hypothesis is not implausible. The GDP figures have an upward bias at the end of the cycle, invariably missing turning points.
We know in hindsight that the US economy went into recession in November 2007 almost a year before the collapse of Lehman Brothers, but the Federal Reserve had no idea at the time.
The Fed’s chairman, Ben Bernanke, was more worried about inflation. He "talked up" borrowing costs (verbal monetary tightening) by 50 basis points in the spring of 2008, contributing to the coming collapse.
This was ironic because a younger Professor Bernanke wrote the definitive paper on why commodity shocks cause recessions: central banks panic and tighten into the storm.
The European Central Bank went further and raised rates after Germany and Italy had already gone into recession, the greatest blunder in central banking since the 1930s.
Are central banks about to repeat the mistake in this cycle? They have an unenviable task.
Headline inflation is soaring, but what if they were right all along and it is indeed a transient anomaly – one that arguably helps by devaluing the pandemic debt load, shifting the loss from society to creditors?
The Fed is poised to announce bond tapering. The ECB has begun to dial down purchases under German pressure.
Markets are relaxed but they may have misjudged the liquidity effects. "We think the idea that tapering is fully priced in is a fairytale," said Citigroup's investment guru, Matt King.
Governor Andrew Bailey says the Bank of England will "have to act" to curb inflation, the clearest sign yet that rate rises are coming in November , regardless of the extreme sensitivity of the UK property to base rates.
It will happen as Rishi Sunak's austerity budgets start to tighten fiscal policy. "We really do have a perfect storm," said George Buckley from Nomura.
The global slowdown is at odds with nosebleed equity measures, with the Shiller price/earnings ratio on Wall Street currently at a record 38 times. The pre-Lehman peak in late 2007 was 27.
If you think the Shiller metric is invalid in a world of zero rates, try the "Buffett indicator". The broad Wilshire 5,000 index of US equities has reached 197pc of GDP, compared to the dotcom extreme of 137pc.
So where do you hide if you think that the world is skating on thin ice?
Core sovereign bonds still trade inversely to equities in a serious sell-off, but not as well as they used to now that QE has pinned yields to the floor.
They offer thin pickings these days, and several sovereigns (Italy? France? UK?) could become credit risks.
Cash is no solution if you are based in sterling. The pound is a "high beta" currency that is leveraged to the economic cycle and invariably tumbles during a major flight from risk .
The classic safe haven used to be the "Swissie". Britons who switched from pounds to Swiss francs in mid-2007 almost doubled their money (tax-free) in 15 months.
But this no longer works. The franc today is a managed currency. The Swiss National Bank will intervene to hold it down.
The Japanese yen is the best proxy and still rises in times of stress (because Japan is a $3 trillion net global creditor). The US Treasury will not let Tokyo get away with currency manipulation.
Better yet, try 10-year Chinese government bonds. The yield is over 3pc but China's demographics and structural slowdown mean convergence to global levels of zero over time.
This implies a fat capital appreciation and probably an exchange gain too. It is the next big trade of the global Ice Age in bonds.
If this is too exotic, stick to the classic: three-month US Treasuries. This is where Warren Buffett has parked $113bn (£96bn), waiting to pounce after an equity correction. The dollar always spikes in a big global sell-off.
The sophisticated can short stock markets with put options, but these contracts suffer from horrible "time-decay". Short ETF funds have in-built value destruction. You have to pick your moment perfectly, and risk/reward is out of alignment.
Gold fell along with equities during the Lehman crash because investors had to sell what they could to cover margin calls. A safe haven it ain't.
My top pick is Chinese bonds. Have I pulled the trigger? Not yet. Good luck.
This article is an extract from The Telegraph's Economic Intelligence newsletter . Sign up here to get exclusive insight from two of the UK's leading economic commentators – Ambrose Evans-Pritchard and Jeremy Warner – delivered direct to your inbox every Tuesday.
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