The cry of a middle-aged economist

Posted by: Paul Donovan

07 Oct 2020

Daily update

  • Being middle-aged has its costs— I do not have a TikTok account, and am only on Twitter by accident. However, being middle-aged, I have experience that brings a sense of déjà vu. The IMF announced it would be revising up its economic growth estimates. The WTO announced it would be revising up its trade estimates. Middle-aged experience tells us there is always a tendency to underestimate people's willingness to adapt in a crisis—which is why we always get positive revisions after a crisis.
  • Economies still have to deal with structural challenges. As the Fed minutes will remind us, while central banks have almost unlimited firepower over the cost of credit or liquidity, this is a crisis of income. Income requires a fiscal policy response.
  • US President Trump tweeted an end to fiscal negotiations in the US, though he also tweeted a willingness to consider narrow measures. This offer is probably more politics than a credible idea. The lack of fiscal assistance is bad for those who are unemployed, and may raise the fear of unemployment for those with jobs.
  • The calendar is quiet—the US vice presidential debate is less important than the presidential debate for markets. The presidential debate was not important for markets.

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