DE | Weekly | Global Markets | Two-Sided External “Shocks”—Demand-Side, Supply-Side—And Some Questions – 11/12/21

Posted November 13, 2021 by rvillareal

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What has happened Post-Pandemic is that major “Aggregate Demand” and “Supply-side” Shocks have occurred at the same time.

The extent of both is one of the unexpected consequences of the COVID-19 Pandemic; particularly from the Supply-side.

Unintended consequences from policy responses to the Pandemic—Public Health, Ultra-Easy Monetary Policy, Massive Fiscal Policy Stimulus—responses that never would have happened had there been no Pandemic, have been many.

Such is always the case, however, post– a significant “External Shock,” e.g., W.W.II, the Vietnam War, Crude Oil in the 1970s, the Iraq War, Stock Market Crash of ’87, Asian Crisis in the late 1990s, Internet Bubble bursting in 1999-2000 and the Housing Bust, Great Recession and Great Financial Crises in 2006-09.

Instructive is the answer to the Counterfactual “what would have happened if there had been no External Shock, or Event?”

The answer to the Counterfactual of the Pandemic is not for this DE Global Markets Weekly (GMW).  It is for another time.

But of relevance is looking at the two Shocks, “Demand” and “Supply,” some unexpected consequences, their effects, several questions as a result and the economic prospect and financial markets’ outlook.

Two Shocks—Demand-Side and Supply-Side

Essentially two shocks, one from the “Demand-side” and one from the “Supply-side,” related and tied to COVID-19, the Pandemic, and policy responses of the U.S. and non-U.S., can be defined as the “Event.”

Now 21 months into COVID-19, the Pandemic and the Event, much of the backdrop and conditions for the future has changed.