This post includes Canadian GDP charts, Stephen Poloz's farewell remarks and Paul Schmelzing's introduction to his 110 page thesis that "By the late 2020s, global short term real rates will have reached permanently negative territory and by the second half of this century, global long-term real rates will have followed."
CR: So pandemics are not new. But the policy response to pandemics that we’re seeing is definitely new. If you look at the year 1918, when deaths in the US during the Spanish influenza pandemic peaked at 675,000, real GDP that year grew 9%. So the dominant economic model at the time was war production. You really can’t use that experience as any template for this. That’s one difference.
Canada GDP % Growth Annualized
The Canadian economy advanced an annualized 0.3 percent on quarter in the three months to December 2019, below a downwardly revised 1.1 percent expansion in the previous period and matching market forecasts. It was the weakest growth rate since the second quarter of 2016, when the economy shrank 2 percent. (BEFORE THE FIRST COVID 19 CASE HIT)
In his final official speech May 25, 2020, the Governor of the Bank of Canada Stephen Poloz said:
Market rates rose in Canada to follow suit with U.S. Fed Chairman Volker's policy of raising rates to shut down price and wage inflation of the mid 1970's, the fuse of which was sparked by the 1973 OPEC embargo oil price increase shock. In 1981 Canada, a 5 year fixed rate mortgage was being offered at 18+%.
"Eight centuries of global real interest rates, R-G [real wealth returns (R) and broader real growth (G)], and the ‘suprasecular’ decline, 1311–2018" Source Material
The Suprasecular Rate Decline
"By the late 2020s, global short term real rates will have reached permanently negative territory. By the second half of this century, global long-term real rates will have followed."
said Paul Schmelzing, JAN 2020, Bank of England Staff Working Paper No. 845
The Conclusion, in full:
Schmelzing on Bonds, Why Investors Face Years of Losses
History, Charts & Curated Readings
"Progress, far from consisting in change, depends on retentiveness. When change is absolute there remains no being to improve and no direction is set for possible improvement; and when experience is not retained, as among savages, infancy is perpetual. Those who cannot remember the past are condemned to repeat it." George Santayana Vol. I, Reason in Common Sense
"History, real solemn history, I cannot be interested in.... I read it a little as a duty; but it tells me nothing that does not either vex or weary me. The quarrels of popes and kings, with wars and pestilences in every page; the men all so good for nothing, and hardly any women at all - it is very tiresome." Jane Austen spoken by Catherine Morland in 'Northanger Abbey'