Where to begin?

Posted by: Paul Donovan

09 Mar 2020
  • There are one or two things happening in the world today. The podcast gives more detail. Saudi Arabia has started a price war in the oil market. Oil matters less to the global economy than it did. Oil price moves shift money between oil producers and oil consumers. This price drop should be a net economic benefit to oil consumers.
  • Oil consuming companies may not pass on all of the oil price fall – using the lower costs to support cash flow instead. If consumers do benefit this is likely to add to the post-virus economic rebound, rather than change consumption patterns now.
  • Social media, a super-spreader of coronavirus fear, may have encouraged panic buying. Stockpiling toilet rolls brings forward consumption from the future (stockpile today, do not buy tomorrow). Italy has put Lombardy in lockdown. The news leaked first, causing people to leave. Consumer behavior is a blend of fear and annoyance. If people think policy is overreacting, they are less likely to overreact themselves.
  • Lebanon is freezing bond payments and seeking a debt restructuring. Cryptocurrencies have been collapsing (but interest in these things collapsed a couple of years ago). German industrial production in January was better than expected – a quaint historical fact.

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