Daniel Lacalle legt uit hoe de ongelimiteerde stimuleringsmaatregelen op de beurzen de emerging markets leegzuigen en sterk benadelen.

Duur: 5:57 min.

Publicatie: 24 juni

The macro data published in May and June so far shows a lackluster recovery, with significant challenges both in the pace of unemployment reduction and the improvement in consumption and investment.

According to the United Nations, global foreign direct investment is expected to fall 40 percent from pre-COVID levels in 2021, while U.S. and eurozone unemployment figures are likely to remain elevated even in a recovery.

So far, the global response to the COVID-19 crisis has been demand-side driven. Governments have launched massive loan programs and subsidies while central banks have injected liquidity in unprecedented ways. The balance sheet of the European Central Bank stands at 47 percent of GDP, with the Federal Reserve at 33 percent on the week ending June 19.

However, these extraordinary measures are generating only a small impact, as most of them are simply additions to the already aggressive fiscal and monetary policies of the past years. The diminishing returns of demand-side policies have been evident in 2019, with the eurozone in stagnation, and Japan.

The main reason for the poor results is the fact that this is not a demand problem but the effect of a government forced  lockdown. The industrial fabric, talent, capital, and productive capacity of the major economies is intact. Therefore, adding credit facilities and liquidity injections helps economic growth in an exceedingly small way.

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