Gary Shilling's Guide to the Post-Pandemic Economy, Part 1
Expect more government involvement in the economy, monetary policy that is closely linked to fiscal policy, a retreat from globalization and a strengthening U.S. dollar.
The pandemic will have a lasting effect on the economy.
Photographer: Frederic J. Brown/AFP via Getty Images
The global Covid-19 pandemic will have lasting effects on the U.S. economy and financial markets that investors should separate from ephemeral noise. Four of them are increased government involvement in the economy, monetary policy that is ever more closely linked to fiscal policy, a retreat from globalization and shorter supply lines with more “in house” production of components and higher inventory levels, and a strengthening U.S. dollar. I’ll explore eight more in two future columns.
History shows that major national traumas result in increased government involvement in the economy and financial markets that never disappear -- at least in modern times. The 1930s spawned the New Deal and dozens of regulatory agencies including the Securities and Exchange Commission, Federal Deposit Insurance Corp., the Works Progress Administration and the National Labor Relations Board. World War II sired the GI Bill and federal government involvement in higher education, which led to $1.6 trillion in student debt and rising delinquency rates.