It’s hard to escape COVID-19 whether in reality or in the mind. We’ve just revamped our COVID tracker that gives an extremely comprehensive update on each country’s case growth rate, projected cases and fatality rates. Some surprising surges happening.
In terms of curated blogs, global monetary and fiscal stimulus looms large. Everyone has an opinion on what’s best to do. We’ve tried to feature some of the more interesting pieces. The Peterson Institute discusses how Trump’s tariffs on medical imports from China are complicating the response to COVID-19. And VoxEU discuss Europe’s need for a catastrophe plan. We also feature ECB Chief Economist, Phillip Lane’s, blog following Christine Lagarde’s error prone ECB press conference last week.
Away from the virus we feature former Citi Group chief economist Willem Buiter on why Piketty’s ideas are of participatory socialism is lacking in any basic economic analysis. And why Joe Biden is the least bad choice for the Democratic presidential nomination.
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It’s hard to escape COVID-19 whether in reality or in the mind. We’ve just revamped our COVID tracker that gives an extremely comprehensive update on each country’s case growth rate, projected cases and fatality rates. Some surprising surges happening.
In terms of curated blogs, global monetary and fiscal stimulus looms large. Everyone has an opinion on what’s best to do. We’ve tried to feature some of the more interesting pieces. The Peterson Institute discusses how Trump’s tariffs on medical imports from China are complicating the response to COVID-19. And VoxEU discuss Europe’s need for a catastrophe plan. We also feature ECB Chief Economist, Phillip Lane’s, blog following Christine Lagarde’s error prone ECB press conference last week.
Away from the virus we feature former Citigroup chief economist Willem Buiter on why Piketty’s idea of participatory socialism is lacking in any basic economic analysis. And why Joe Biden is the least bad choice for the Democratic presidential nomination.
Enjoy!
Bilal
• We’ve revamped our COVID tracker to cover all major developed and developing countries.
• We include the latest case counts, the growth in cases and our projections for each country based on the paths of Singapore (best case) and Italy (worse case).
• We also include data on fatality rates. These are crude at best, but we include three different versions of estimating these rates.
(Bilal Hafeez | 17th March, 2020)
A history of the term bear market and how the stock market is a coincident indicator
Looking at the Bulls and the Bears (EconLife, 2 min read) The idea of bull and bear markets can be tracked back to the 18th century with the warning not to “sell the bearskin before the bear is caught”. During the past century bull markets have lasted significantly longer than bear markets and the latest bear market comes after a bull market that saw equities gain 400%.
How Much Recession Warning Did You Expect? (Money Maven, 2 min read) Rather than a leading indicator the stock market is instead a coincident indicator of sentiment towards stocks. The coronavirus was a trigger but cannot be blamed for the recent sharp declines with earlier tax cuts and Fed stimulus the culprits.
Lane repairs Lagarde’s blunder and the case against OMT for Italy
The Monetary Policy Package: An Analytical Framework (ECB, 6 min read) In an effort to reverse the damage from Christine Lagarde’s blunder during last week’s press conference Phillip Lane’s blog noted that, the ECB “stand(s) ready to do more and adjust all of our instruments, if needed to ensure that the elevated spreads that we see in response to the acceleration of the spreading of the coronavirus do not undermine transmission” of monetary policy.
Why OMT is Not the Solution for Italy Right Now (Bruegel, 2 min read) OMT light, with minimal conditionality and a commitment to roll back stimulus once the crisis is over, could be a way to contain spread widening and financial contagion. But since it would require Italy to give up some of its economic sovereign at a time of national crisis and does little to protect the wider Euroarea, this is not the instrument to use.
The Fed’s Actions Sunday: All in on Monetary Policy; Partly in on Liquidity Support (Brookings, 6 min read) The Fed’s actions on Sunday will not end the worsening disruption from COVID-19 but they will nevertheless ease pressure in the financial system and leave the economy more able to rebound quickly when the health crisis subsides. Further actions could include more specific forward guidance and a resumption of both the Term Auction Facility and lending to non-banks.
Monetary and Financial Stability During the Coronavirus Outbreak (IMF, 3 min read) A co-ordinated effort to offset tightening financial conditions via rate cuts and liquidity injections is the optimal use of monetary policy in the current environment. Other crisis instruments such as targeted SME lending can also help. Banks can look to restructure loans temporarily, but financial stability risks must be monitored closely.
Buiter on Piketty and the coming debt crisis
COVID-19 is an Opportunity for Europe (Project Syndicate, 4 min read) With no appropriate EU-wide fiscal tools currently available to response to the current crisis the EU should use this opportunity to pool resources and create an “insurance fund”. Europe has a history of coming together in difficult times, it should do so again.
Piketty’s Latest Charge (Project Syndicate, 12 min read) Piketty’s idea of “participatory socialism” is, according to Willem Buiter, wishful thinking lacking in any basic economic analysis. It also ignores incentives and assumes global cooperation on fiscal and regulatory issues.
The COVID-19 Debt Deluge (Project Syndicate, 4 min read) The huge run-up in debt since the financial crisis could now expose significant financial vulnerabilities as growth and profits collapse. High stocks of FX-denominated corporate debt in EM and upcoming repayments on sovereign Eurobonds alongside declining reserves stocks point to an imminent debt crisis.
Severe recession now the consensus plus Europe’s need for a catastrophe relief fund
A Coronavirus Recession? A New Survey of Top US & European Economists (IGM Forum, 6 min read) Leading US and European economists now expect a severe recession due to COVID-19 although uncertainty remains over the expected length of the downturn. More than two-thirds of European experts think the Eurozone lacks the necessary tools to response, particularly given the absence of co-ordinated fiscal policy.
COVID-19: Europe Needs a Catastrophe Relief Plan (VoxEU, 12 min read) Europe should immediately develop a catastrophe relief fund to cover both needed healthcare spending and indirect costs from school closures and other containment measures. All temporary spending related to the crisis should also be deducted from SGP budget measures.
Trump’s Trade Policy is Hampering the US Fight Against COVID-19 (Peterson Institute for International Economics, 8 min read) US tariffs on medical imports from China could mean delays and higher costs for needed equipment. Trump has in the past week temporarily reduced some of the tariffs but this does not go far enough with many medical products still affected.
Biden consolidates his lead in the race for the Democratic presidential nomination
Biden’s Surge and the Power of Fear (Official Monetary and Financial Institutions Forum, 3 min read) Joe Biden is the “least bad choice” for the Democratic presidential nominee with vast foreign policy experience and fairly mainstream economic views. But his sometimes-confused manner and his son’s perceived links to corrupt practices in Ukraine are just a few of his meaningful weaknesses.
Who Won The Biden-Sanders Debate? (FiveThirtyEight, 2 min read) Joe Biden came out ahead after Sunday night’s TV debate, gaining 3 points in support versus a decline of 2 points for Bernie Sanders. Biden remains the candidate viewed as most likely to beat Trump with around two-thirds of respondents projecting him to win the November election.
A black swan with a permanent impact and an analysis of travel bans and virus transmission
The Impact of COVID-19 on the Housing Market: A Wake Up Call to Markets (Dr Housing Bubble, 3 min read) Ongoing uncertainty due to the virus will significantly impact the housing market. Real estate is a lagging indicator to stocks and as job losses mount a correction will start to become clear.
Is the COVID-19 Outbreak a Black Swan or the New Normal? (MIT Sloan Management Review, 9 min read) Putting people before profits, introducing resilience and risk reduction as integral parts of a business model and embracing reduced travel as a component in the fight against climate change are ways that the current black swan event will have a permanent impact on business.
Tracking Coronavirus in Countries With and Without Travel Bans (ThinkGlobalHealth, 3 min read) Despite 88 countries imposing travel bans with China COVID-19 continued to spread. Nevertheless, it did delay the spread of the virus, particularly in countries which took measures to reduce community transmission.
New technology to get the country back to full capacity
China to Fast-track Work Resumption Across Industrial Chain (State Council Office, 1 min read) Industries including utilities, farming and exporters are being asked to support all parts of the supply chain to help return the country to full capacity. Use of 5G and AI are also being expanded to help the economy recover and to improve future resilience.
A new carbon emissions index and how big data and ESG can fit together
ESG, Big Data and the Future of Work (Worcester Business Journal, 2 min read) Mid’ sized companies facing challenges to attract workers are using big data to guide resourcing decisions as well as ESG strategies. Efficiency gains and improved long-term sustainability should prove beneficial for profitability.
S&P Dow Jones Indices Launches ESG Commodity Index (ETF Stream, 1 min read) A new S&P GSCI Carbon Emission Allowances index will, for the first time, give investors a benchmark index for European carbon emissions allowances based on the ‘cap and trade’ system.
(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.)