Jackson Hole Economics Newsletter

Theme of the Month: Coronavirus

The coronavirus has arrived. As tragic as its health consequences will be, the pandemic is not merely a global health emergency. It has already deeply shaken financial markets and global economic activity is at risk. Before the virus runs its course, it may also undermine the political legitimacy of governments and institutions worldwide.

Various contributors to Jackson Hole Economics have explored the myriad of ways the Covid-19 pandemic will impact public health, healthcare policy, global economic activity, economic policy, financial markets and geopolitics.

In Pandemic Politics, Julie Sunderland of Biomatics Capital Partners exposes the lack of preparedness in the US to anticipate outbreaks such as the spread of the coronavirus. Without institutional reforms as well as international coordination, Julie argues that the US and other countries will be condemned to fight rearguard campaigns ill-prepared to ensure the health of their citizens.

In a pair of articles, What the Coronavirus Tells Us about Stocks and Bonds and A Covid-19 Emergency Response Plan, Jackson Hole Economics co-founders Larry Hatheway and Alex Friedman explain how fear and uncertainty, as well as restrictions on travel, may bring the world economy to the brink of recession. They also explain why monetary policy is ineffectual in the face of uncertainty-induced economic weakness, which is why targeted tax cuts, increases in unemployment benefits and government transfers will be required to stabilize economies weakened by the pandemic.

In the weekly Market Compass pieces, our team highlights how fears surrounding the coronavirus have impacted financial markets and how investors, in turn, handicap the probabilities and magnitudes of the central bank policy responses to the risks that the pandemic pose to global growth.

Lastly, the virus’ reach may extend beyond public health, economics or finance. As contributor George Magnus notes in Coronavirus Highlights Xi’s Vulnerability, Chinese President Xi Jinping may bear a heavy political price for China’s struggles to combat the Covid-19 outbreak. More broadly, political legitimacy based on ensuring the health and welfare of a country’s citizens could prove brittle to many leaders as doubts grow about various governments’ abilities to protect their citizens.