Reply #55: Volatility and low rates make the world a riskier place

[Demeter]

Following the downgrade of the US sovereign credit rating, investors continued to do what they had been doing: selling riskier assets, like equities, and buying safer ones, like Treasuries. The downgrade provided no new facts but underscored fears that the world is a risky place.

The US is now adapting to a growth rate that is much lower and more volatile than it is accustomed to. Working off the accumulated debt of the last two decades weighs on wealth, as assets are written down, and diverts a larger share of lower incomes to debt repayment, slowing economic growth for years to come.

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http://link.ft.com/r/LVA6WW/8ZMG8Q/1O51V/YH1L49/GDY6BC/GX/t?a1=2011&a2=8&a3=17