As early indicators point to a strong recovery that will create a “supercharged” economy once the coronavirus crisis slows down, Moody’s Analytics chief economist Mark Zandi says that the biggest risk to that recovery isn’t the runaway inflation that has many experts sounding alarm bells but a dangerous surge in asset values.
Rising vaccination rates and falling hospitalizations, plus the fact that herd immunity looks likely by the summer months, are just a few of the “increasingly compelling reasons” to be optimistic about recovery in the months ahead, Zandi wrote in a Monday research note.
In addition, federal stimulus spending is beginning to make its way to households that need assistance, households with excess personal savings and lots of pent-up demand from the pandemic are ready to spend, and business-to-business spending is on the rise too.
Some economists, lawmakers, and market experts are worried that the unprecedented federal stimulus and the surge in consumer spending that follows it will push prices to historic levels, devalue the dollar and destabilize the broader U.S. economy.
Zandi says these concerns about rampant, uncontrollable inflation are “much too premature,” especially since it will be years before the U.S. reaches pre-pandemic employment levels.
Rather, the bigger and more pressing threat to the recovery is ballooning asset prices, he says, pointing to recent surges in the equities market, housing market, bond market, commodities market, and even the cryptocurrency market.
With valuations sky high, these markets could be vulnerable to major corrections and crashes that have the potential to reverberate through the entire economy.
The S&P 500 index has soared almost 300% over the past ten years—much in the way it did in the ten years preceding the dot-com crash two decades ago.
$2.4 trillion. That’s how much “forced” savings—money that households would have otherwise spent but couldn’t because of pandemic restrictions—analysts from Goldman Sachs estimate will be accumulated by the time the economy returns to normal in the middle of the year. “Whether households spend a modest or large share of these pent-up savings as the economy fully reopens could be the difference between a healthy recovery and overheating,” the analysts wrote in a Monday research note.
Zandi isn’t the only expert taking this view. In a January speech at Princeton University, Federal Reserve chair Jerome Powell said he expects to see “a strong wave of exuberant spending” once the pandemic subsides that could push prices higher in the short term, but that he is not concerned about overheating and runaway inflation in the long term. Powell noted that there are still too many Americans seeking employment for wages to rise to unhealthy levels any time soon, and emphasized that with interest rates still at rock-bottom, the Fed has an arsenal of tools at its disposal to address rising inflation if it becomes problematic.
Is The Stock Market About To Crash? (Forbes)
Biden on brink of passing historic $1.9tn boost to US economy – Financial Times
Joe Biden is on the brink of securing final approval from Congress for his $1.9tn stimulus bill — a bet that massive fiscal intervention aimed at lower and middle class families will speed up America’s recovery without overheating the economy.
After the US Senate voted to approve the package on Saturday, the Democrat-controlled House of Representatives is poised to give its final green light to the bill on Tuesday, allowing it to be signed into law by Biden.
Barring any last-minute trouble in the House, where Democrats hold a slim majority, the stimulus legislation will mark a big political victory for Biden, who made it his top priority since entering the White House on January 20.
The stimulus bill — known as the American Rescue Plan — represents one of the largest US government interventions in the economy of the post-world war two era — just short of the size of the $2.2tn March 2020 pandemic stimulus, but larger than the $787bn recovery plan during the 2009 financial crisis.
The prospects for its passage have already led many private-sector economists to upgrade their forecasts for US growth this year. Federal Reserve officials are likely to do the same when they publish their latest economic projections next week.
But the plan has attracted criticism from Republican lawmakers — who have so far unanimously opposed the plan — as well as some economists, including Lawrence Summers, the treasury secretary under Bill Clinton — who say it risks a harmful spike in inflation.
A recent sell-off in long-term government debt — with yields on 10-year Treasury bonds rising above 1.5 per cent for the first time in more than a year — has fuelled those concerns, though senior US policymakers including Janet Yellen, the treasury secretary, and Jay Powell, the Federal Reserve chair, have dismissed the worries.
Around the world, the US stimulus package could give a fresh jolt to the global recovery amid hopes that widespread vaccinations throughout the year will help reopen many economies. But any unintended jump in US inflation or debt yields could unsettle markets and prove particularly harmful for emerging markets.
Domestically, Biden’s top aides and many Democrats on Sunday touted the plan as “historic and transformational” legislation for families that have struggled through the pandemic. The bill — which will be financed entirely by adding to the US deficit — will dispatch $1,400 means-tested payments to most Americans; extend emergency federal jobless benefits worth $300 per week until September; increase a tax credit for children; provide aid to states and local governments; and boost funding for schools and vaccinations.
“This is a bill that reflects President Biden’s belief that the best way to get the economy back on track and get it growing is to invest in working people and middle class people,” Kate Bedingfield, the White House communications director, told CNN. “It is urgent aid that is going to help people all across the country but it’s also making a long-term investment,” she added.
The US president had applauded passage of the Senate’s version in remarks on Saturday, following an all-night session in the upper chamber of Congress.
Biden was on Sunday expected to sign an executive order to boost voting rights, at an event commemorating the civil rights protesters who were tear-gassed and beaten by state troopers in Selma Alabama 56 years ago.
Senate passage of the stimulus legislation — by a party-line 50 to 49 vote — was held up for hours as Democratic leaders sought to get the decisive consent of Joe Manchin, the moderate West Virginia Democrat, who was insisting on tighter terms for the jobless benefits.
On Sunday, Manchin did the rounds of US television networks to trumpet his role in the talks, rejecting any fears that the Biden plan was excessive.
“I can assure you, we have helped every segment of society right now, more so than ever before with this piece of targeted legislation,” he told Fox News Sunday.
The global economy won't recover if we don't get vaccines to developing countries, too – CNN
First, step up efforts to end the health crisis
Second, step up the fight against the economic crisis
Third, step up support to vulnerable countries
With many vaccinated, Israel reopens economy before election – NEWS 1130 – News 1130
JERUSALEM — Israel reopened most of its economy Sunday as part of its final phase of lifting coronavirus lockdown restrictions, some of them in place since September.
The easing of restrictions comes after months of government-imposed shutdowns and less than three weeks before the country’s fourth parliamentary elections in two years. Israel, a world leader in vaccinations per capita, has surged forward with immunizing nearly 40% of its population in just over two months.
Bars and restaurants, event halls, sporting events, hotels and all primary and secondary schools that had been closed to the public for months could reopen with some restrictions in place on the number of people in attendance, and with certain places open to the vaccinated only.
Israeli Prime Minister Benjamin Netanyahu’s government approved the easing of limitations Saturday night, including the reopening of the main international airport to a limited number of incoming passengers each day.
Netanyahu is campaigning for reelection as Israel’s coronavirus vaccine champion at the same time that he is on trial for corruption.
Israel has sped ahead with its immunization campaign. Over 52% of its population of 9.3 million has received one dose and almost 40% two doses of the Pfizer vaccine, one of the highest rates per capita in the world. After striking a deal to obtain large quantities of Pfizer/BioNTech vaccines in exchange for medical data, Israel has distributed over 8.6 million doses since launching its vaccination campaign in late December.
While vaccination rates continue to steadily rise and the number of serious cases of COVID-19, the illness caused by the virus, drops, Israel’s unemployment rate remains high. As of January, 18.4% of the workforce was out of work because of the pandemic, according to Israel’s Central Bureau of Statistics.
At the same time that it has deployed vaccines to its own citizens, Israel has provided few vaccines for Palestinians in the West Bank and Gaza Strip, a move that has underscored global disparities. It has faced criticism for not sharing significant quantities of its vaccine stockpiles with the Palestinians. On Friday, Israel postponed plans to vaccinate Palestinians who work inside the country and its West Bank settlements until further notice.
Israeli officials have said that its priority is vaccinating its own population first, while the Palestinian Authority has said it would fend for itself in obtaining vaccines from the WHO-led partnership with humanitarian organizations known as COVAX.
Israel has confirmed at least 800,000 cases of COVID-19 since the start of the pandemic and 5,861 deaths, according to the Health Ministry.
Ilan Ben Zion, The Associated Press
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