THE markets are very jumpy, worried that the era of low global interest rates is at an end. Rising bond yields, of which more in a moment, are flashing an amber warning signal.

And if you want to get really gloomy, you could do worse than browse Amazon’s website. There you will find titles like The Great Reckoning: Protecting Yourself in the Coming Depression, by James Dale Davidson and William Rees-Mogg; The Return of Depression Economics, by Paul Krugman; and Boom Bust: House Prices, Banking and the Depression of 2010, by Fred Harrison.

If that’s not enough, how about The Second Great Depression: Starting 2007 Ending 2020, by Warren Brussee; or Crash-proof: How to Profit from the Coming Economic Collapse by Peter Schiff and John Downes?

I should mention, perhaps, that not all these are hot off the press. Davidson and Rees-Mogg’s book was published in 1994, Krugman and Harrison’s in 1999 and Brussee’s in 2005. Schiff and Downes’s book is new.

You might say that some of them have already been proved badly wrong, though this does not seem to dim the appetite for this kind of tome. The blogosphere (the trendy name for folk who sit in front of PCs in their dressing gowns) is full of predictions of economic and financial Armageddon. One day they’ll be right. Are we there yet?

The context for this question is the world’s extraordinarily strong economic performance. Last year global growth was 5.4%, the fourth consecutive year in which it has grown near or above 5%.

“The current economic situation is in many ways better than we have experienced in years,” said Jean-Philippe Cotis at the Paris-based Organisation for Economic Cooperation and Development.

Simon Johnson at the International Monetary Fund, reflecting on last year’s strong growth, said: “We have not seen a four-year span like this since the early 1970s.”

The IMF is brave enough to publish illustrative forecasts right through to 2012 and they suggest the good times will continue, with growth in the 4.5%-5% range. It won’t stop the publication of new, doom-laden books, though by then plenty of the old ones will have long been recycled.

One disturbing aspect of the present situation is that comparisons are being drawn with the early 1970s. Then, as now, commodity prices were booming (which helped persuade the Organisation of Petroleum Exporting Countries to exert some of their pricing power). Then, as now, the global and UK money supply was growing strongly.

In the early 1970s economists such as Alan Walters and David Laidler warned of the inflationary consequences of the soaring money supply. Now economists such as Tim Congdon and my namesake David B Smith do so.

Then, of course, it all ended in tears. The world economy endured nearly two decades of turbulence, including the stagflationary (a double dose of stagnation plus inflation) 1970s. No two periods are alike. In the early 1970s, not only was global money supply growth stronger but so was inflation, even before it headed into the stratosphere (nearly 30% in the case of Britain). Inflation in the industrialised countries averaged between 5% and 6% even over the period 1970-72.

But the echoes are there. Standard Chartered, in a new report on the global economy, sees little risk of a downturn in growth. If anything, it could be even stronger next year as the US economy picks up, the bank said. But its economists are worried about the inflationary consequences of the boom. Food-price inflation has replaced energy inflation as the big concern and global money-supply growth has strengthened significantly over the past year. There is a lot of liquidity sloshing about.

It is possible that the current period of global expansion could end as a result of a “black swan” event of the kind identified by Nassim Nicholas Taleb in his bestselling book. These are the kind of random or highly improbable events we convince ourselves afterwards we saw coming but which constitute a genuine shock to the financial system.

Or it could be that the seeds of the next downturn are already sown, and are reflected in the recent rise in bond yields in major economies to their highest level for several years. Bond yields are important because they reflect two related things – market expectations of inflation and market expectations of interest rates, over the longer term. So the recent rise tells us the markets have become gloomier about inflation, or about interest rates, or both.

It is possible to argue that the global economy’s four-year boom has been the result of the easy monetary policy adopted by central banks in the wake of the last global mini-recession in 2001, brought on by the bursting of the dotcom bubble and the 9/11 attacks.

Central bankers would blanch at the idea that they are a cartel but their message has been remarkably uniform recently. Whether it is Mervyn King at the Bank of England, Ben Bernanke at the Federal Reserve or Jean-Claude Trichet at the European Central Bank (or their counterparts elsewhere) the tone has been tough. Interest rates will stay high and could go higher.

One reason for the low bond yields of recent years, the so-called global glut of savings, may be peaking. Goldman Sachs reckons that, barring a renewed surge in crude-oil prices, the petrodollar surpluses of the Middle East oil producers may now start to decline.

The big factor unsettling bond markets, however, has been inflation. Economists and analysts at UBS, in a paper, Crisis, what crisis?, have taken a detailed look at whether market worries about inflation are justified. They did this from the bottom up, by looking at the pricing evidence from individual sectors, on a worldwide basis. They also looked at it from the top down, by studying survey evidence on pricing power, of the kind that has worried central banks.

UBS’s conclusion is that we have seen some evidence of increased pricing power in “old economy” sectors like manufacturing but that in other “newer” sectors, including technology, falling prices are still the norm. The survey evidence, it suggests, points to somewhat higher inflation than the exceptional low rates of a few years ago but it says that inflation is stable at these higher levels and not accelerating.

That is a reassuring message for financial markets and the global economy, but it is unlikely to settle the argument about whether current exuberance will spill over into higher inflation. Growth is good. But you can have too much of a good thing.

PS Gordon Brown’s decision to open up appointments to the Bank of England’s monetary policy committee is to be welcomed; the posts will be advertised. Eventually, perhaps, we’ll see an Apprentice-style televised appointments process, with Mervyn King in the Sir Alan Sugar role.

In the meantime, the MPC has some puzzles to deal with. Inflation dropped last month, as expected, with the consumer-prices index showing a drop from 2.8% to 2.5%. More remarkable was the benign behaviour of earnings, up by 4% in the latest 12 months, including bonuses, and 3.6% excluding bonuses.

Economists have focused on the fact that inflation expectations remain low, sharply increased migration and evidence of labour-market slack as reasons why pay has remained so low, even in the light of the earlier rise in inflation.

There could be another reason, advanced in a paper to be published in the Royal Economic Society’s Economic Journal this week. Job Insecurity and Wages looks at the role that fear of unemployment plays in moderating the growth of wages.

Among men, fear of unemployment is indeed a significant factor in keeping pay down, the research finds, though not so much among women. Some men are quite good at gauging the risk of losing their job but plenty of others worry unnecessarily; they overestimate the danger of redundancy. Whatever the cause, pay behaviour has certainly changed.

david.smith@sunday-times.co.uk

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