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Yet equity markets have thus far been remarkably indifferent and do not appear to be factoring in any of the potential dangers that could come from a recession. After the wobbles of May-July, markets are now climbing again. One reason for this is obvious - brokers, investment strategists, central bankers and politicians are all in the business of selling optimism. Moreover, many may genuinely believe that if disaster strikes, the US Federal Reserve can be counted on to slash interest rates as did former Fed chief Alan Greenspan, or fling cash from helicopters as current Fed chief Ben Bernanke once famously promised.

As a result, most markets seem to be in the grip of complacency. For instance, all throughout the May-July plunges, analysts and fund managers maintained that there was nothing to worry about and that the bull market would soon re-establish itself. In a mid-year Investment Roundtable of top US fund managers and analysts published by the Barron's newspaper on May 1, not one mentioned a possible bursting of the American housing bubble, a development which is now beginning to dominate headlines.

Even with clear signs that global earnings have peaked and turning downwards, the number of 'buy' calls being issued by brokers still overwhelmingly outnumber 'sells'. In addition, many experts are basing their 'overweight' on equities on the perverse possibility that when the economy slows drastically, the US will cut its interest rates.

As pointed out by the New York Times on Wednesday, past slowdowns have typically been preceded by higher inventories, rising interest rates and weak consumer confidence. The first two have already occurred and this week, the Conference Board's confidence index dropped to a nine-month low. It is, however, the property market which is of greatest concern. Consider the latest statistics quoted in Barron's Aug 21 issue - new-home inventories hit a record high in April, existing-home inventories are 39 per cent higher than a year ago, but sales are down more than 10 per cent.

Worse, lenders have apparently been encouraging people to use an anticipated rise in their property value as collateral for a loan to buy that property in the first place, a preposterous strategy once used to painful effect in the junk bond market in the late 1980s.

Of course, the chimerical 'soft landing' that central bankers aspire to may yet materialise in 2007 and markets everywhere may continue to boom. But this is now beginning to look less likely.