Richard Spring MP
Member of Parliament for West Suffolk

President Kennedy’s father Joe was a hugely successful investor.He once observed that in getting in and out of the stock market the final 10% up or down should be left to somebody else.

Most press attention has been devoted to the soaring cost of property. The London stock market is now quite close, however, to its all time high, and New York is now well above its all time high. However these pale into insignificance compared with many other stock markets, notably China.

The world is awash with liquidity which has driven up property prices, stock markets, and the art market. A sale at Christies in New York last week of modern art yielded an astronomical $354.6 million, largely on the back of Russian buying. Significantly, auction prices were for the first time displayed in roubles, and no doubt will be in the Chinese yuan before long.

Anthony Bolton, London’s most successful investment fund manager, warned against all this excess in his retirement speech last week. The securitisation of borrowing means that the normal direct relationship between a lending institution and a borrower has been lost, and private equity deals can fuel the market without the normal restraints.

Growth in the British economy has been largely driven by the consumer, on the back of rising asset prices. Any reversal would create a significant problem for any Chancellor of the Exchequer in the future.

What a juxtaposition of contradictions that the colossal fall in the Shanghai share index proved to be. It happened on the very day that the Chinese Prime Minister promised socialism for 100 years. I wonder what Karl Marx would make of yesterday’s events. It also coincided with the beginning of the Year of the Golden Pig, very auspicious, and an event occurring only once a century.

Markets have done very well – not only shares linked to commerce and industry, but also mining and commodity shares. Almost all over the world house prices have soared, on the back of low interest rates and low inflation. The profits outlook for 2007 is good.

However this golden scenario of ever rising asset prices will not continue for ever, that is the only certainty. Perversely, the chances of this extraordinary bull run continuing for longer is greater today than two days ago. Much froth will have evaporated.

As President Kennedy’s hugely successful father Joe once observed about the performance of stock markets – “leave the last 10% to the other guy”.

What it also tells us is the huge global economic importance of China. It used to be that if General Motors sneezed the US economy caught a cold. Eventually one day, we shall undoubtedly suffer from Asian flu – the moment of greatest danger will be when such an eventuality is universally regarded as inconceivable.