Uddrag fra John Authers nyhedsbrev:
One way of putting what is coming is from Michael Howell of Crossborder Capital Ltd. in London:
We have argued persistently since the COVID Crisis broke last February that the World economy would enjoy a ‘V’-shaped recovery. This prediction recognised the whopping liquidity injections made by policy-makers and made use of the simple adage that “… all money that is anywhere, must be somewhere.” In short, money flows. With Global Liquidity jumping by some US$20 trillion in 2020, or some 25% of World GDP, there is a lot to spend… Consider that following the 1930s Depression, it took roughly a decade to retain previous economic heights. After the 2008/9 GFC, the World economy clambered back after around two years. But it seems from latest data that it has taken barely six months to recover from the COVID Crisis!
The problem is that money is being used to buy things in the real economy, it isn’t being used to pump up the price of stocks:
the stark warning from history is that “… strong economies do not have strong financial markets.” In other words, if money is being spent in the (virtual) high street, it is not being invested in stocks. Our bullishness about economies forces us to become bearish about stocks. Think of the economy as having two monetary circuits: (1) financial assets and (2) real goods and services. There are feedbacks between both, but essentially money moves sequentially from credit suppliers (e.g. Central Banks) first into the financial circuit and from there into the real economy circuit. The transmission time between these two circuits typically varies from between around six to as long as 20 months. Money tends to move faster into real business activity once it has built up in retail bank accounts, like now, whereas if it is largely wholesale money (as post-2008/9 GFC), it will stick closer to financial assets for longer.
