The Shape of Things to Come; The Saw Tooth Post Pandemic Economic Recovery- Why it is like no other.
Manage episode 297792314 series 2927946
This economic recovery is like no other. It is characterised by periods of excess demand growth followed by a decline in demand to trend growth. The second stage implies negative growth - shinkage. The first period of excess demand growth is financed by government funding of strong household and corporate balance sheets during the pandemic. This is the first time that recession creates wealth in private hands and debts in government hands. It means that private sector demand does not have to earn back recession losses before it expands. This is unique. The pandemic constrained opportunity to satisfy demand. And there were supply side constraints like the shortage of chips to make autos. Once, the blockages are removed, as sun follows rain, excess demand will be followed by a decline to trend. This happens at different times in different sectors (services versus manufacturing) and place (EU V UK and US). The location of any asset on the Saw Tooth recovery map is a vital input to forecasting currencies, bonds and equites. It is a not driven by history but a Quantum Economic discontinuum.