The US economy was earlier projected to return to pre Covid-19 levels by the fourth quarter of 2021. New analysis indicates that the country’s economy may recover sooner than previously forecast. Macroeconomic influencers share their views on the Covid -19 impact.
Daniel Lacalle, chief economist at Tressis SV, tweeted about the projected recovery of the US economy. The US GDP is expected to recover to pre-Covid-19 levels two quarters earlier of Q2 2021 than the previously projected Q4 2021, according to Morgan Stanley.
Lacalle added that the recovery will mainly be supported by debt-fuelled government spending with the private sector requiring more time to recover.
United States GDP likely to recover pre-Covid 19 level two quarters earlier than expected, according to Morgan Stanley.
However, a large part of the GDP increase is debt-fueled government spending. Private sector output will need more time. pic.twitter.com/WJ22fcQ1GW
— Daniel Lacalle (@dlacalle_IA) September 14, 2020
Antonio Mele, economist at LSE Department of Economics, shared an article on the job crisis in the UK. The planned redundancies in the UK are twice that of the previous recession in 2008, according to statistics from the Institute for Employment Studies (IES).
More than 380,000 jobs were reported to be at risk between May and July 2020. Further, 445,000 jobs may be made redundant between July and September, according to the IES. Although the planned redundancies and actual redundancies may differ, the number of redundancies announced is still higher compared to the previous recession.
The UK government’s ‘Plan for Jobs’ programme may help in protecting and supporting job creation apart from the £2bn ($2.38bn) kickstart scheme that supports employers in creating training and apprenticeship positions.
Jobs 'crisis' twice as bad as previous recession https://t.co/E2FbHQWzNT
— Antonio Mele (@antoniomele101) September 14, 2020
Prof. Steve Hanke
Prof. Steve Hanke, economist at Johns Hopkins University, shared an article on how the stimulus package announced by the UK government is giving rise to a wave of fraudulent claims under the job retention scheme. The error and fraud rate in the scheme is estimated to be between 5% and 10% causing the government to lose £3.5bn ($4.49bn) to fraudulent claims.
Apart from the job retention scheme, the Bounce Back Loan programme has also witnessed fraudulent applications. The loans are self-certified and banks are not liable for them hence background checks are rarely conducted. According to the Policy Exchange think tank, the fraud and error rate in these schemes could cost the government between £1.3bn ($1.66bn) and £7.9bn ($10.14bn).
After rolling out its new stimulus program, the British gov't admits it could lose £3.5b of taxpayer dollars to waste and fraud. More evidence that waste, fraud and abuse fit hand-in-glove with large government programs.https://t.co/IAowCvoWRn
— Steve Hanke (@steve_hanke) September 14, 2020
Adam Tooze, director of European Institute, shared his article on the politics surrounding central banks and foreign exchange. The US Federal Reserve recently announced its new policies of targeting higher inflation in the US economy, which some experts feared would weaken the US dollar’s global dominance as a reserve currency.
During the European Central Bank (ECB) press conference, several market experts and commentators expected the bank to comment on the euro’s appreciation against the dollar. Tooze noted that commenting on exchange rates does not fall under the tasks of a central bank as the main focus is on ensuring price stability.
The ECB should focus on formulating fiscal and monetary policies that restore the balance in the euro area. Such actions will ensure that the exchange rate values will restore themselves, Tooze added.
Why were folks so nervous about the ECB talking about currencies last week? I did a piece for @socialeurope on the politics of central banking and foreign exchange. One for @sobel_mark @PositiveMoneyEUhttps://t.co/U4AZEe2fDa pic.twitter.com/EMT97m4KU9
— Adam Tooze (@adam_tooze) September 14, 2020