Archive

April 14, 2021
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EU: Waiting in the wings for Hamilton

  • The current Covid19 crisis is an opportunity for the EU to force the door open a little further towards sharing debt - the Hamiltonian moment.
  • However, the attitude of any new German administration to further fiscal entanglement with southern Europe is unclear. We believe the doom loop has yet to be extinguished.

March 25, 2021
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Covid-consensus is over-optimistic

  • Enthused by vaccine success in some countries, the consensus appears to be centred on a modal "return to normal" outcome in H2.
  • We see a higher probability of a more restrictive outcome, with downside risks to a more cautious mode.
  • Continued curbs on international travel create a fractured global economy, while local flare-ups will lead to periodic domestic restrictions.

March 17, 2021
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De-globalisation’s macro impacts

  • Globalisation in recent decades both lowered and flattened the Phillips Curve, making domestic inflation more dependent on the global rather than the domestic output gap.
  • We believe that the drive for supply chain security is pushing this process into reverse and that the post-pandemic world will have a higher and steeper Phillips Curve.
  • Inflation will be higher for a given set of unemployment data, especially if there’s a global schism. Policymakers will respond more to output and risk overstimulating.