The Long Covid Economy: Will the pandemic permanently change our society and investments?
Many Happy Returns
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The Effects of Pandemics on Interest Rates
The natural rate of interest over the next 20 years is shifted down by 1.5 percentage points after a pandemic on average, according to an IMF study. This is because we've got less workers, but capital has survived, right? We've not destroyed our machinery, our crops, our infrastructure in a pandemic. However, with the war, what tends to happen is that in the 30 to 40 years after a major war, real interest rates are significantly elevated. So yeah, the idea is maybe COVID is more like a war than it is a pandemic, at least in its economic effects. And therefore, we might see higher interest rates long term.
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