WHEN a canary stops singing, it is worth a sidelong glance. When whole flocks of birds keel over, it is time to be alarmed. The warning signs in the financial markets and the global economy are mounting. The early omens could perhaps be dismissed; falling commodity prices were a response to increased supply in oil or the equivalent of a tax cut for western consumers. Subdued inflation was just a consequence of lower commodity prices. Sluggish trade growth could be explained by a change in China's manufacturing strategy; building more goods from scratch rather than assembling components made from abroad.  Falling Chinese share prices in August were simply the bursting of an earlier bubble.

But it is nearly the end of September and more bad news seems to be announced every day. Chinese industrial profits dropped 8.8% year-on-year in August. Cheap Chinese steel was blamed for the closure of a steel...Continue reading