Two rate rises in 2007. Retail sales rise strongly. House prices soar to boom levels. Home building falls in a heap in December. Employment is strong. Unemployment is low. Oil prices rise and rise. Rents go through the roof. The drought inflates the price of food. Governments run surpluses. Inflation is on the rise. The economy grows strongly. China booms. The US crumbles in a tangle of bizarre derivatives and bad debt. The stock market veers between panics and bullish confidence. The world’s biggest takeover is just hours from completion. The response to all this apparent contradiction and complexity? Cut spending and raise rates.

Ah, economics: not only a dismal science, but an unfathomable one as well.

Peter Fray

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