Vogonomics

  There is a great deal of talk about the Roaring Twenties. In the depth of winter lockdown, it's not surprising that economists have crowded around the zoom campfire telling tales of better times to come. Moreover, there has also been the retrospective justification of buoyant risk markets. The narrative is adjusted to fit the performance. The Roaring Twenties, the decade of strong growth that followed the last global pandemic, Spanish flu, was primarily an American affair. Most other counties were constrained by the inappropriate return to the pre-War Gold Standard exchange rates. However, the American-centric Roaring Twenties narrative is also supported by the President's decision, together with his Treasury Secretary and former Fed Reserve Chair, Janet Yellen, to go large and larger still on fiscal policy. Donald Trump continues to exert his malign influence on the Republican Party, further reducing the scope for bipartisan agreement over Biden's $1.9tr additional fis...

Now that specific certification is no longer necessary, we all want to be Australian, at least for 2021 and maybe 2022. Australia, and its better rugby playing neighbour New Zealand, have become models for this pandemic. Suppress the virus domestically, but prevent importation of new infections and more virulent strains by closing down borders;  domestic services can then thrive, and more importantly, life can return to "normal" without the disabling "mortality" fear. Foreign travel, tourism and education services remain depressed, but with plentiful liquidity from the Reserve Bank of Australia and RBNZ, and record expansion of fiscal policy, consumers have had the means to increase spending on other sectors.   The success of Australia's pandemic strategy has resulted in a smaller than expected decline in GDP during 2020, and the Reserve Bank of Australia expect that real activity will return to its end-2019 level by the middle of the year, 6-12 months earlier t...

"you cannot predict inflation or deflation until you understand the extent of the virus over the next six months" . John Mauldin's precise words show why the Fed's January meeting is a holding meeting. The central bank added progress on vaccines to its list of uncertainties but maintained confidence in the economy's outlook. However, as my friend and former colleague Meghan Greene wrote in the FT last week, Murphy's law suggests that the risks remain on the downside. Therefore it's not surprising that the Fed maintained, that they're not even thinking about thinking about raising rates or even tapering its bond purchase program. Treasury market bulls have come to view FOMC press conferences as a reliable source of profit and last week's meeting was no exception. Major western industrialised economies, don't have a good pandemic record and as a result, the Antipodes are increasingly being viewed as the role model for the initial post-pandemic p...