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Invesco’s John Greenwood is optimistic about 2021

I.In the second half of 2021, the signs point to an upswing. The chief economist of the American asset manager Invesco, John Greenwood, revealed this in an interview with F.A.Z. convinced. “I then expect a very strong recovery in the global economy. It will be more powerful than it was after the financial crisis twelve years ago. ”The Briton from the shadow cabinet of the Bank of England refers to the vaccine then available. Lockdowns are no longer necessary. In addition, the support measures are now much more extensive. The banks were weakened during the financial crisis: They had to make high write-downs on loans and securities. In addition, there were regulatory restrictions, so that their willingness to lend was very limited. “It’s different now,” emphasizes Greenwood. The banks are in a comparatively strong condition.

In his view, the fiscal support packages have a temporary effect. Above all, they served to enable companies and households to survive phases without income. It is therefore important that the central banks provide extensive monetary policy stimuli. “High growth rates in the money supply have always stimulated economic growth with a time lag,” says Greenwood, who worked for a long time in the former British crown colony of Hong Kong, where he proposed in 1983 that the Hong Kong dollar should still be pegged to the American dollar.

He expects the inflation rate in the euro area to rise above 2 percent in 2023. But it won’t be a big increase as the money supply hasn’t been growing rapidly for very long. In the United States, the most important monetary aggregates (such as M2) have recently increased by 23 to 24 percent compared to the same period last year. The extra money will be held by financial institutions outside of the banking sector – insurers and asset managers – as well as businesses and households. It has already flowed into the stock and real estate markets. Greenwood rejects the view that stock market gains are inconsistent with the fundamental health of the economy. Rather, the higher money supply is now boosting asset prices and will have an impact on the economy in 2021.

Greenwood remains happy with Britain’s exit from the EU. The slow and difficult negotiations between the British government and the EU on a regulated Brexit at the turn of the year have not changed that. Greenwood expects a Brexit deal with the EU. At the moment, public attention is focused too much on the points in dispute and not on the agreements that have already been reached. Great Britain will be in a better position in the future because it can buy goods on the world market at the best prices and not at the protectionist EU prices. That will raise the British standard of living, especially that of the poorer population. In his opinion, protectionism characterizes the EU, as demonstrated by the protection of agriculture and the automotive industry.

According to Greenwood, Joe Biden’s victory in the US presidential election did not weaken the British government’s negotiating position. It can be assumed that an agreement with the United States will now look a little different than under a President Donald Trump. But such a trade agreement relates to a very long period, which goes well beyond the term of office of a president.

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