https://www.marketwatch.com/story/p...-research-finds-11594824346?mod=mw_latestnews Published: July 15, 2020 at 10:45 a.m. ET By Steve Goldstein Perkins writes that ‘pandemics leave a traumatized population determined to save rather than spend, and a labor-capital ratio that has fallen to levels that undermine the incentive to invest’ Central bankers sit atop a perch in the economic world that few do, which is why participants in the financial industry pay so much attention to them. Not only can they draw upon their own expertise, they have an army of economists advising them, businesses are willing to confide in them, and they have access to the most current research, some of which is unpublished. Bank of England monetary-policy committee member Silvana Tenreyro demonstrated that latter point in a speech Wednesday in which she quoted unpublished research on the impact of pandemics on inflation. The Bank of England charted historical inflation data from the U.K. and seven other countries, including the U.S., to estimate the response of inflation to pandemics. These episodes typically led to persistent declines in inflation, she said. Dario Perkins, managing director of global macro at TS Lombard, said the new Bank of England study fits with other analyses showing that pandemics are unlike wars in terms of inflation. “Whereas military conflicts cause underlying bond yields to rise (consistent with the inflation narrative, since these are needed to restrain post-war booms), pandemics usually cause long-term rates to decline,” he recently wrote. “While both wars and pandemics have been responsible for huge numbers of deaths, eliminating large parts of the labor force (which caused wages to rise), wars also destroy the capital stock,” he noted. “But pandemics leave a traumatized population determined to save rather than spend, and a labor-capital ratio that has fallen to levels that undermine the incentive to invest.” Major asset markets seem to also have diverging views on the likelihood of inflation. Gold futures GOLD, +0.14% recently broke $1,800 an ounce for the first time in nine years, and bitcoin BTCUSD, -1.60%, whose enthusiasts rail against fiat currency, has surged 29% this year. By contrast, bond yields are low TMUBMUSD10Y, 0.624%, with the benchmark 10-year Treasury note yielding just 0.63%. Inflation remains muted in both the U.S. and the U.K., according to data released this week.
If you believe government data I will sell you the Sydney Harbour Bridge at a very cheap price. A double special would include the Brooklyn Bridge.
US inflation has been low due high productivity in the farming sector. and food prices are cheapest in the world in the US.and cheap imports from China,mexico. etc. 100% of farm workers in the US is from mexico. farmers are producing so much food they cannot even give it away. oversupply lots of wealth. prices go up when there is shortages. as a state inflation is not what you want. if inflation is from shortages. or low productivity. you have riots from inflation as prices rise. but incomes are same like housing inflation etc. or rising rents...etc. inflation been under control from outsourcing of jobs and lower wages and union busting. people no disposable income so demand decrease. retailers cannot raise their prices or less is sold. nobody will buy a new car if it cost $80,000 or fewer buyers. inflation is good when it becaues people are earning more money and buying things Inflation been low for the last 30 years.. price of food, large appliance etc and technology is same due to cheap imports and high productivity in the farms and use of foreing labor from mexico
When the pandemic is defeated, countries will have to continue to use fiscal stimulus as economic recovery may be slow, the International Monetary Fund commented. It urged them to figure out how to reduce their debt burden in the future. The experience of Greece, which had to use several financial aid programs after the last crisis and austerity policies, shows how important it is to maintain high growth rates. The US has implemented a $2 trillion fiscal stimulus package to support the economy. The country's budget deficit for this fiscal year ending September 30 will reach a record $3.6 trillion, although it will shrink to $2.4 trillion next year, according to Goldman Sachs estimates. Business and the U.S. population are also forced to use loans. But then they'll have to limit investment and consumer spending in order to repay debts. Many believe that the U.S. will be able to cope with the growing debt burden. Partly due to the fact that a significant part of the debt can be bought by the Federal Reserve System. Considering the wave of populism in recent years, years of fiscal austerity in many countries, and the dissatisfaction of the middle class with decades of stagnation in revenue, it is hard to expect governments to raise taxes to fill the budget. In the meantime, developing and poor countries are more vulnerable, with less financial capacity to fight the virus and stimulate the economy.