The damp kindling wood of global economic recovery is poised to catch fire.

For the first time in half a decade of stagnation, government policy has turned expansionary in the US, China and the eurozone at the same time. Fiscal austerity is largely over. The combined money supply is surging.

Such optimistic claims are perhaps hazardous, given record debt ratios in most areas of the world and given that we are six-and-a-half years into an aging economic cycle that might normally be rolling over at this stage. It certainly feels lonely.

Citigroup's Willem Buiter has issued a global recession alert. Professor Nouriel Roubini from New York University joined him this week, warning that the odds of a fresh slump have doubled to 30pc.

Mr Roubini's gloom is unsettling for me. We saw the world in almost exactly the same way in the lead-up to the Lehman crisis, when it seemed obvious to both of us that sharply rising interest rates would prick the US housing bubble and the EMU credit bubble.

This time I dissent. Years of fiscal retrenchment and balance sheet deleveraging have prevented the current global economic recovery from gathering speed, and have therefore stretched the potential lifespan of the cycle.

The torrid pace of worldwide money growth over recent months is simply not compatible with an imminent crisis.

A combined gauge of the global money supply put together by Gabriel Stein at Oxford Economics shows that the "broad" M3 measure grew by 8.1pc in August, and by almost as much in real terms. This is the fastest rate in 25 years, excluding the final blow-off phase of the Lehman boom.

The index has since fallen back slightly as the US settles down but the pattern is clear. It bears no relation to the monetary implosion in early to mid-2008 before the collapse of Fannie Mae and Freddie Mac, the twin mortgage giants that in turn brought down the banking system.

It is, of course, possible that money signals have lost their meaning in our brave new world of zero rates and secular stagnation, but the current pace of growth would typically imply a flurry of economic activity over the following year or so.

"It is a very benign picture for the world. We should see above trend growth over the next year," said Tim Congdon from International Monetary Research.

Mr Congdon said the expansion of broad money in China has accelerated to an annual pace of 18.9pc over the past three months, thanks in part to equity purchases by the central bank (PBOC), a shot of adrenaline straight to the heart - otherwise known as quantitative easing with Chinese characteristics.

David Fuller's view

Here is a PDF of AE-P's column.

Having a high regard for AE-P and his columns, I am pleased to see him return to the global economy.  This one is even better, in my opinion, than Global Recession Scare Fades as Stimulus Revives Manufacturing, which I posted on Tuesday.

 While subscribers can see part of AE-P’s latest article above, I recommend that you read the full online version (via the opening link above if you are registered with The Telegraph, or see the PDF below) not least for the informative graphs shown.

In terms of expansionary monetary policy in the second paragraph above, I would also add the world’s third largest economy – Japan – which is beginning to benefit from full-on QE.  Additionally, borrowing AE-P’s opening analogy of “damp kindling wood”, yes, the top three economies: USA, China & Japan, plus #4 Germany at the heart of the EU, and also #5 the UK, are all flickering to life in the early stages of economic recovery. 

We have certainly not seen this for a long time and it will be good for both stock markets and global economic recovery.  The next danger period for equities will be when synchronised GDP growth led by the top economies is a little too good, inviting the next round of monetary tightening.  However, that is certainly not an immediate prospect, at least not while commodity markets remain bombed out.  Meanwhile, the weakest links for the global economy are clearly the commodity exporting countries.  They still await the combined bullish affects of supply cutbacks and rising demand.