For our Deep Dive this week, we review some of the academic literature and World Wars. The idea being that are similarities between wars and the current COVID outbreak. An important lesson appears to be the economic winners tend to be those that have the best economic and institutional infrastructure to withstand shocks.
We also include our weekly podcast picks. Our five featured podcasts cover different aspects of the virus; why the World Bank’s pandemic bonds may never pay out, US stimulus and the disruption in the US Treasury market, the impact on EM and the similarities and differences between cholera and coronavirus.
Finally, we have our daily COVID tracker. Today, we focus on the US states that have recently seen a surge in cases from Michigan to Connecticut.
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(total reading time: 5 mins)
For our Deep Dive this week, we review some of the academic literature on World Wars. The idea being that are similarities between wars and the current COVID outbreak. An important lesson appears to be the economic winners tend to be those that have the best economic and institutional infrastructure to withstand shocks.
We also include our weekly podcast picks. Our five featured podcasts cover different aspects of the virus; why the World Bank’s pandemic bonds may never pay out, US stimulus and the disruption in the US Treasury market, the impact on EM and the similarities and differences between cholera and coronavirus.
Finally, we have our daily COVID tracker. Today, we focus on the US states that have recently seen a surge in cases from Michigan to Connecticut.
Enjoy!
Bilal
The WWI Economics Of COVID-19 (5 min read) COVID-19 is wreaking havoc on our lives, health, and the economy. Given the global scale of action to combat the virus, it’s no far stretch to equate the current economic conditions to those brought about by a global war. Here, we discuss The Economics of World War I (2009), edited by Profs. Broadberry and Harrison from the University of Warwick, to find the ways the Great War is similar to the current pandemic and the economic lessons we can learn from it.
(Mehdi Farooq │ 1st April, 2020)
Pandemic Bonds (Planet Money from NPR, 10 min listen) Pay out on the World Bank’s pandemic bonds may still be a few weeks away, or may never come at all, as various criteria on the number of poor countries witnessing an outbreak and the pace of the pandemic must be met. But as poor countries may not be testing this red tape risks doing real harm. Meanwhile, investors in the 2017-issued bonds have enjoyed 6-11% annual returns.
Simon White: Aftermath Of The Biggest Monetary Policy Intervention In World History (MacroVoices, 1 hr 26 min listen) Virus is a trigger for Japanification of the US. Unlimited and immediate Fed QE (including corporate bonds) plus the biggest fiscal package in US history are unprecedented. Intention is for more than the $500bn of QE2 every week. Dollar index probably can break higher as the pandemic is dollar positive, despite unlimited QE which should be dilutive. Gold should outperform all fiat currencies.
How The Crisis Nearly Blew Up One Of The World’s Safest Trades (Odd Lots from Bloomberg, 54 min listen) Recent disruptions and illiquidity in the UST market reflects an initial rapid shift in fundamentals as long-term growth expectations fell. Discrepancies between on and off-the-run treasuries also increased sharply as did volatility. RV funds / dealers trading futures basis was levered and large. Mark-to-market losses usually not realised started to mount causing a vicious circle. Also, operationally complex and became difficult when WFH.
Robin Brooks On COVID-19’s Impact On Emerging Markets And The Domestic Policy Response To The Crisis (Macro Musings, 53 min listen) The pace of the selloff in EM is unprecedented, even compared to the GFC and 2013 taper tantrum. MXN stands out with a 30% depreciation over the past several weeks but it is far from alone. USD swap lines announced for four EMs (Brazil Mexico, South Korea and Singapore) were the same as in 2009 but others may have to turn to the IMF particularly given unprecedented outflows from non-China EM.
From Cholera To Coronavirus (Talking Politics, 39 min listen) Parallels between the 19th century Cholera outbreak and the coronavirus include the disproportionate hit on the poor where people live closer together (coronavirus disproportionately attacks the old). Transmission was different (through water) but the same trade-off between free movement of people and goods and containing the disease. Throughout history disease was blamed on foreigners.
COVID-19 Country Tracker: It’s Spreading Across US States
• New York and New Jersey have been the epicentre of the recent surge in US COVID cases, but other states are seeing surges too. We’re seeing large numbers of COVID cases and big weekly increases in Connecticut (+400%), Illinois (+290%), Louisiana (+280%), Massachusetts (+460%), Michigan (+325%), Pennsylvania (+425%), Rhode Island (+290%), Tennessee (+210%) and Vermont (+210%)
(Bilal Hafeez │ 1st April, 2020)
(The commentary contained in the above article does not constitute an offer or a solicitation, or a recommendation to implement or liquidate an investment or to carry out any other transaction. It should not be used as a basis for any investment decision or other decision. Any investment decision should be based on appropriate professional advice specific to your needs.)