What is the inflation rate during and after lockdowns?
Inflation is already hard to measure in normal times, as I discussed in Bankers are people, too (page 126-129).
But the corona crisis adds further complications. Some services are unavailable due to the corona lockdown, for example restaurant visits and air travel. To discourage hoarding, supermarkets stopped offering discounts.
The abrupt shock causes headaches for statisticians.
I don’t believe that the corona pandemic will fundamentally change the course of geopolitics or the global economy. As I predicted on March 25, 2020:
All the doomers, America-haters, EU-haters, permabears, moralizing nutters, communists, and libertarians are crawling out of the woodwork due to the coronavirus. However, I expect they will be proven wrong again. #timestamp#prediction
The coronavirus will not cause the collapse of society
The coronavirus will not end the dollar hegemony
The coronavirus will not be the end of the American empire
The coronavirus will not cause the end of the euro
The coronavirus will not cause the end of the EU
The coronavirus will not start a 20+ year bear market
The coronavirus will not reverse global supply chains
The coronavirus will not stop the desire for money, travel or luxury
The coronavirus will not stop climate change
The coronavirus will not cause the end of capitalism
The coronavirus will not lead to central planning
The coronavirus will not stop the government from intervening in the economy
The coronavirus will not stop central banks from “printing money”
I should have written "political economists are crawling out of the woodwork" ??https://t.co/TukKZy5jAE
The German Federal Constitutional Court (Bundesverfassungsgericht) made a decisionconcerning the ECB’s QE program1.
This article explains how the ECB can defend itself.
But I want to play devil’s advocate, and defend the German judges.
Despite buying thousands of billions of euros worth of bonds, the ECB has undershot its inflation target for years. The Court has a point that buying vast amounts of sovereign debt doesn’t seem proportional to this disappointing outcome.
In fact, the ECB could achieve its primary objective of price stability with a much smaller balance sheet. For example by dual interest rates. Or by helicopter money.
Second, the Court could prohibit the Bundesbank from participating in QE. But buying German bonds was not needed for monetary policy anyway! It was a political decision to buy bonds proportional to the national capital key in the ECB.
Finally, the decision of the Court should force European politicians to fix this mess. Maybe the ECB should have a dual mandate like the Fed has, so inflation and employment carry the same weight in monetary policy decisions. Or they could change the structure of the Eurosystem. Do we still need 19 national central banks when we have the ECB? Sounds like a make-work scheme to me…
The corona crisis is a once-in-a-lifetime emergency. You cannot expect firms to anticipate zero revenu for months on end.
Therefore, it’s reasonable to help firms with loans and grants. But not all firms. Let’s reward corporate citizens who follow the law and pay taxes.
“Companies that evade their tax liability in Germany are not entitled to be saved by the German taxpayer” German Finance Minister @OlafScholz. https://t.co/Lx9aipCVeQ
3. Building up resilience must be a priority. Solid government institutions and #fiscal space are essential to mitigate economic breakdowns. Conditionalities should preclude companies using tax havens from public assistancehttps://t.co/jRf4mZwhof 7/n
A GENTLEMAN’S PRIMER ON SHORTING INSOLVENT SHITCOS
So you’ve found a ShitCo. It’s such an ugly zombie it couldn’t be an extra in season 19 of The Walking Dead But it’s still got a $185m cap And you want to be the one to mung the last rancid, putrefying drops out of that corpse
So if you want to convince me of your financial panacea, show me what it means in practice. Who are the winners and losers? What are the consequences of your plan for households, companies, banks, government finances, inflation, employment?
