Federal Reserve Board Chairman Alan Greenspan has lately been speaking of conundrums and an economy that those around him do not fully comprehend. These confessions of confusion are arising because some leaders and experts keep working toward results typical of normal business cycles in the middle of a very atypical economy, something we have called the Post-Growth Economy.
Those clinging to concepts arising from the past era of substantial growth have been manufacturing returns through extraordinary accounting maneuvers and through instruments carrying elevated, and little understood, risks. Corporations, the bond market, hedge funds and private-equity firms have all succumbed to the lure of higher risks to realize old-style returns in the Post-Growth Economy. These tactics are increasingly "leaning on air," dependent on support that could shift quickly and substantially or completely vanish. One segment of the bond market, however, may have a better grasp on what the Post-Growth Economy portends.