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Lars Christensen

L. C.

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Articles by L. C.

The shortest recession ever – unemployment will be below 6% in November

June 5, 2020

After US unemployment rose to nearly 15% (in April) I wrote a blog post forecasting unemployment would be back below 6% in November.

That got me a lot of attention and a lot of suggestions for bets on the numbers (I have accepted a lot of these wagers).

Today, we got the US labor market report for May. It is a massive confirmation on my bullish call on the US labor market.

US (non-farm) employment rose by 3 million in May and unemployment dropped to 13.3% in May from 14.7% in April. This is much better than the consensus expectation of an increase in unemployment to 19%.

The US recovery is well underway. The markets have been right and the-world-is-coming-to-an-end-pundits have been wrong.

Meanwhile market inflation expectations continue to rise as well and even

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Why have epidemiological forecasts been so wrong and what to do about it

May 19, 2020

Why have epidemiological forecasts been so wrong and what to do about it
If we look at the forecasts, we got from epidemiologists initially in the Covid-19 pandemic it has turned out that they have massively wrong. While tragic the number of people who has died in this pandemic has been much lower than forecasted.
The reason given by epidemiologists then is that that is because of interventions – lockdowns. But then you made the wrong kind of forecast – you forgot to forecast what would happen IF lockdowns were implemented.
Furthermore, how do you explain the numbers in South Korea, Taiwan and Japan? There were no lockdowns (until recently) and we haven’t seen a massive death told, which was forecasted by the kind of epidemiological models used for example by the epidemiologists at the

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Presentation on the US economy and markets (in Danish)

May 12, 2020

Warning – this is in Danish.
Her til eftermiddag har jeg haft fornøjelsen for første gang at optræde på SpeakerBee. Temaet var markederne og økonomien – primært i USA.
Jeg taler blandt andet om udsigterne for væksten og arbejdsmarkedet i USA – jeg er meget optimistisk – og for det amerikanske aktiemarkeder, hvor jeg er knap så optimistisk. Hør og se, hvordan det hænger sammen her.
Hvis du vil have mig ud til en præsentation eller arrangere et webinar eller lignene, så kontakt mit speaker agency YouandX her.

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When Americans vote in November unemployment will be below 6%

May 10, 2020

Friday’s US labour market report rightly got a lot of media attention globally. The spike in US unemployment to 15% surely is historical and tells us quite a bit about just how big a shock has hit the US and the global economy.
However, where most commentators are wrong is assuming that this has to be seen as a normal recession. I on the other hand would argue that this has little to do with a normal recession. In fact I am increasingly thinking that the use of the term ‘recession’ is a misnomer in relation to this crisis.
Back in April I argued in my blog post ‘All set for a fast recovery after the ‘Great Lockdown’ argued that this crisis primarily should be seen as an unplanned and very unpleasant ‘vacation’. 
The IMF has called it the ‘Great Lockdown’ and I find this term very

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The Corona Crisis – a Scandinavian perspective.

April 28, 2020

Today Swedish journalist Nathalie Besèr and I have had a talk about the economic and political perspectives on the corona crisis from a Scandinavian perspective.
We among other things talk about the different policies in the Scandinavian countries and look at the economic consequences of the crisis.

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ONE factor explains most of the differences in Covid19 deaths across countries

April 20, 2020

As an economist I am not happy about going into having strong views on the causes of why people die from Covid19, but at least I can have a look at correlations.
It has been very clear for some time that very few people younger than 50 years old die from Covid19.
In fact the average of people dying with Covid19 have been around 80 years in most countries and men are more likely to die than women.
These simple facts made me think – how much of this can explain the different mortality rates we observe across countries?
Why has so many people died in Italy and Spain, while mortality rates have been much lower in for example Scandinavia? Similarly why are mortality rates so low in most developing countries?
Can the age composition explain this? The graph below give us the answer.

In the

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All set for a fast recovery after the ‘Great Lockdown’

April 18, 2020

In 2005, Hurricane Katrina hit New Orleans in the US state of Louisiana. The hurricane caused enormous material destruction and about 2,000 people perished.
While Katrina obviously cannot be compared to Covid19 in terms material devastation and death it nonetheless is comparable in terms of the sudden the “shutdown” of the economy.
Katrina was a very clear case of a supply shock. Production facilities were simply shut down. And in the same way as today, it happened from one day to the next.
But nothing really had happened to the fundamentals of the economy – this to a large extent is also the case in terms of the Covid19 around the world.
Katrina was a huge, but very short-lived economic shock
If we look at how things were going for Louisiana’s economy in 2005-6, then you will see that

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A talk with the Icelandic Minister of Finance on the corona crisis

April 6, 2020

Everyday at 1000 CET I do a Facebook Live Update on the economic and financial consequences of the corona shock.
It is normally in Danish but today I did it in English because I had invited the Icelandic Minister of Finance Bjarni Benediktsson to join me for a talk about Iceland’s response to the corona shock.
You can watch the talk here and you can follow me on Facebook here.

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Well done! Decisive actions from global central banks

March 15, 2020

Sunday night European time global central banks under the leadership of the Federal Reserve moved decisively to calm down market fears of eroding global dollar liquidity and to ease global monetary conditions.
See my comments on the this decisive and positive policy action here.

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A (Keynesian-Monetarist) proposal to shock the euro zone out of the crisis

March 4, 2020

Fundamentally I think central banks have full control of nominal spending and therefore also inflation. Therefore, to me there is no liquidity trap.
However, there can be a mental or an institutional liquidity trap if for example a central bank refuses to take the necessary steps to permanently increase the money base.
I believe we are now in such a situation in the euro zone and therefore I think it is now time to suggest something I never thought I would have suggested – significant keynesian style (with quite a bit of market monetarist influence) fiscal “stimulus”.
So have a look at what I wrote on Twitter earlier today:

I know this is radical and maybe not expected from me, but the seriousness of the global ‘corona shock’ and the ECB’s refusal to act appropriately necessitate

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Robert Hetzel on the monetary response to Covid19

March 3, 2020

There are few economists that have had a bigger influence on my thinking about monetary matters than former Richmond Fed economist Robert Hetzel.
Bob is not only one of my biggest intellectual heroes, but also a very a good friend and I am therefore extremely happy that he has allowed to publish some of this insights and thoughts on Fed’s 50bp ’emergency’ rate cut today.
Lars Christensen
Fed and Covid19
By Robert Hetzel
Cutting the funds rate just before an FOMC meeting sends a strong but not necessarily appropriate message.  The fact that the cut came without the discussion from the regional Bank presidents of their respective regions that would come routinely at an FOMC meeting suggests that the FOMC was responding to the decline in the stock market.
That turned out badly for the Fed

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The statement the Federal Reserve should publish ASAP

February 28, 2020

I have been asked about what the Federal Reserve should do in response to ‘corona shock’.
So here we go – I suggest the Federal Reserve immediately put out the following statement:
“The Federal Open Market Committee (FOMC) notes that the global shock from the spreading of the corona virus significantly has changed financial market expectations regarding the outlook for the US economy and particularly regarding financial and monetary conditions.
The FOMC also notes that financial market expectations regarding the outlook for nominal spending growth and inflation have deteriorated significantly and to such a degree that the US economy risks entering a potentially severe recession in the coming quarters and that there is a serious risk that inflation will further undershoot the Federal

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The scary risk that central banks will turn the ‘corona shock’ into a global recession

February 26, 2020

This week the corona virus has hit global financial markets hard and it is now clear to everyone that this is a significant and hard negative shock to the global economy and a shock that likely requires a response from central banks around the world. The question is how to react. I will try to answer this in this blog post.
Overall, one can start out by noting that central banks have the responsibility of broadly speaking ensuring nominal stability.
I would generally prefer this to be some kind of nominal GDP (level) target for most central banks, but for most central banks nominal stability is interpreted to be some kind of inflation target – in the case of the ECB and the Federal Reserve 2% inflation.
So here I will take the inflation target as given and I will also take it as given

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Revisiting the P-star model

December 20, 2019

I read Milton Friedman’s book “Free to Choose” at an age of 16 years old and ever since then I have been more or less obsessed with monetary theory and particularly the equation of exchange:
My view of the world obviously has developed over the 32 years since I read “Free to Choose”, but I am still fully convinced that monetary policy failure historically has been the main cause of macroeconomic problems – whether it is inflation or recessions and depressions. In fact I am more so than ever.
When I started studying economics at the University of Copenhagen in the early 1990s my obsession with monetary matters continued. That more or less coincided with the publication of a paper, which had quite an impact on my general thinking of how to empirically think about monetary

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The McCallum rule is back – and so am I

December 8, 2019

It has been some time since I posted anything on The Market Monetarist – primarily because I have been doing other thing – among other things been running my consultancy Markets & Money Advisory (which I still do) and for a year have been the editor-in-chief of the Danish financial website Euroinvestor (which I no longer do).
However, I missed blogging and I have particularly missed having an outlet for my (casual?) thinking on monetary matters.
Consequently, I have reluctantly decided that I want to start blogging a bit again on The Market Monetarist.
How much I will be blogging the in the future is unclear as I also have to make a living doing other things – continuing my consultancy working (on international economics, markets and money), academic work as well as doing a lot of

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The blog has MOVED to

April 10, 2017

Markets & Money Advisory’s website is now up and running. You find it here.
If you normally receive mails from The Market Monetarist you in the future instead will receive mails from Markets & Money Advisory instead.
As a general rule we will try to avoid spamming our followers, readers and clients so we will try to only send out the newsletter once a week – unless there is “breaking news” such as key monetary policy announcement or major market moves.
I – Lars Christensen – will continue to blog, but in the future the blogs will be published on Markets & Money Advisory’s website rather than here.
You can sign up for the Markets & Money Advisory newsletter here to receive blog posts, webcasts etc. If you are already signed up for the Market Monetarist mailing list then you can update the information here.
For now, however, we will will keep this website “alive” to give the loyal followers an opportunity to get used to following the blog on Markets & Money Advisory instead.
On the Markets & Money Advisory website you also find information about:
And don’t forget to subscribe to our new monthly flagship publication Global Monetary Conditions Monitor – here.

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New Markets & Money Advisory website

March 29, 2017

Today we launch a major expansion of Markets & Money Advisory.
On our new website (see here), you will find a lot more information about what we do – including our speaking, advisory, and research services.

If you’re a loyal reader of The Markets Monetarist blog, don’t despair! It stays as an integral part of our operation – which will continue to focus on monetary policy and global financial markets. The Market Monetarist blog will in the future redirect to the Markets & Money Advisory website.
Make sure to subscribe to our newsletter with the latest blog posts and information about M&M Advisory.
We are today also launching our new monthly flagship publication Global Monetary Conditions Monitor for investors and policy makers alike.
Lars Christensen

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MTB Cast #3: Inflation worries hitting the markets?

March 22, 2017

Spring has come to Denmark, but a bit of jitters overnight in the global stock markets. Is it inflation fears? See my comments here.
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Reflections on the Fed hike

March 16, 2017

Have a look at my comments on yesterday’s Fed hike.
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And see our “country page” on the Fed, which will also feature in our soon-to-be-published Global Monetary Conditions Monitor. (In PDF here)

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FOMC preview – please hike, but be careful going forward

March 15, 2017

The Federal Reserve is widely expected to hike the Fed funds target rate by 25bp today. The real question is how much more the Fed will deliver going forward.
To get an idea about we are happy to give you a sneak preview on the “country page” for the US monetary policy from our soon to be launched Global Monetary Conditions Monitor (GMCM).
See here (in PDF here):

Just to explain what we are doing in GMCM we do not try to forecast what central bankers will do, but rather we assess or measure monetary conditions. This is a lot less straight forward than people often think. For example the actually level of the key policy rate – in the case of the Fed the Fed funds target rate – on its own says very little about the monetary stance.
Overall, the price level and nominal demand in the economy is determined by the interaction between the money supply and money demand.
It is the task of the central bank to use whatever instrument(s) it uses to to ensure that this interaction between money supply and money demand causes the target – for example inflation – to be hit.
Therefore our starting point in GMCM is to assess monetary conditions relative to the given central bank’s target. In the case of the Fed a 2% inflation target.

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MTB cast #2: Icelandic currency controls, the Fed and European central bankers

March 14, 2017

So here we go again – another Mountain bike ride and another MTB cast. This time we got three in one.
First on Icelandic currency controls.
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Second, this week’s FOMC meeting.
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Third, are European central bankers overly worried about political risks?
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MTB cast #1: Czech inflation to rise above 3%

March 9, 2017

I have been out on a mountain biking this morning, but I could not help noticing the Czech inflation numbers for February.
So have a look at my first MTB cast where I comment on the Czech inflation numbers.
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If you like this I will continue doing this in the future and please remember to sign up for the Markets & Money Advisory Youtube channel.
See our updated inflation forecast in the graph below. It is based on the latest inflation data and trends as well as our composite indicator for Czech monetary conditions.
If you want to know more on our monetary conditions indicator please contact us by mail: [email protected] or [email protected]

Update: The day started with Mountain biking and Czech inflation and ended with an interview with Icelandic TV (RUV TV) about the booming Icelandic economy. See here (in Danish and Icelandic).
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Another look at our Global Monetary Conditions Monitor – the case of Hungary

February 28, 2017

Yesterday, we wrote a short post on Israeli monetary policy and linked to one page on Israeli monetary conditions to give an example of how the “country pages” in our – Markets & Money Advisory – new monthly flagship publication Global Monetary Conditions Monitor (GMCM) will look like. We expect to publish the first edition in March – coinciding with the launch of our new website.
So what is the GMCM? Overall one can say it is our attempt to create a measure of monetary conditions for investors and policy makers alike so they can track global monetary developments.
It will not be a forecasting publication as such, but obviously investors can use the publication to make informed decisions on investments as there certainly is no doubt that changes in monetary conditions have a significant impact on changes asset prices.
The overall structure in GMCM will be the following.
First of all, the firsts page (5-6 pages) will discuss global monetary developments with a particular focus on what we call the Global Monetary Superpowers – the Federal Reserve, PBoC, ECB, BoJ, BoE and SNB. The discussion will be based both on our new composite indicator of monetary conditions (see more below) in each of the “Superpowers” and on what the financial markets are telling us about monetary conditions and expectations for monetary policy.

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Our Global Monetary Conditions Monitor – what we write about Bank of Israel

February 27, 2017

It is hard to be very critical about the conduct of monetary policy in Israel. I have earlier praised the Bank of Israel (BoI) for essentially being an NGDP targetter and when Stanley Fischer was BoI governor nominal GDP basically was kept on a straight line (see here).
And even though Fischer’s successor Karnit Flug initially back in 2014 kept monetary conditions slightly too tight (see here) it now seems like the BoI under Flug’s leadership is back on track.
At least that is what our – Markets & Money Advisory’s – composite indicator for Israeli monetary conditions is showing.
Introducing Global Monetary Conditions Monitor
The indicator will be part of the first edition of our new flagship publication Global Monetary Conditions Monitor (GMCM), which will be published in March and given the Bank of Israel today (3pm CET) has its monetary policy announce we thought it would be a good idea to share a page from the upcoming GMCM on israel.
You will see the country page on Israeli monetary conditions here.
When we put out GMCM there will be 25 such pages on different countries plus of course addition commentary on global monetary matters. A 12 month subscription will be priced at EUR 2,000.
If you are interested in more information on the Global Monetary Conditions Monitor please let us know. Mail to [email protected] or [email protected]

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Did you book your speaker? Book me

February 22, 2017

Did you book your speaker for this year’s seminar or conference? You might as well book me!
See a sample of my speeches here.
To book me internationally see here.

In Denmark see here.
Or contact me directly: [email protected]
Recent speaking topics include:
Populism and the global economy and markets
1930s style politics: Monetary policy failure and the emergence of Trump, Le Pen and Brexit
Will the euro survive the German, Dutch and French elections in 2017?
The African growth miracle
China will never be the largest economy in the world
Russia: Between oil prices, lack of reforms and geopolitical uncertainty
The Maghreb economies: A coming miracle or permanent stagnation?
Oil prices, monetary policy and the crisis in the Gulf States economies
Prediction markets – why governments and central banks should leave forecasts to the market
Global economic and financial outlook 2017/2018
Currency wars – good or bad?
The end of the ‘dollar bloc’
Global Monetary developments: The end of deflation?


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Greece’s continued suffering

February 10, 2017

Greece is once again back on the agenda in the European financial markets and we are once again talking about Greek default and even about Grexit. There seems to be no end to the suffering of the Greek economy and the Greek population.
I must say that I have a lot of sympathy with the Greeks – they have terrible policy makers and no matter how many austerity measures are implemented there is no signs of any visible improvement either in public finances or in the overall economic performance.
Hence, the Greek economy has essentially been in decline for nearly nine years and there seems to be no signs of it changing.
To me there is no doubt what the main reason it – it is the monetary strangulation of the Greek economy due to the countries membership of the euro area.
I don’t like to see the euro area fall apart and I believe it can be avoided, but on the other hand I have a very hard time seeing Greece getting out of this crisis without either receiving a more or less complete debt write-off or leaving the euro area (or both).
ECB can’t do much more
Since 2008 there has been two dimensions to the monetary strangulation of the Greek economy.

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Decision time for the Russian central bank: To cut or not to

February 3, 2017

We will soon be launching our new monthly publication Global Monetary Conditions Monitor (GMCM), which will be available from our new ‘research shop’ when we soon launch Markets & Money Advisory’s new website.
GMCM will be covering 25-30 countries and overall we will differentiate between what we term the Global Monetary Superpowers (Fed, PBoC, ECB, Bank of Japan, Bank of England and SNB) and other central banks.
At the core of the publication will be a composite indicator for monetary conditions in each of the countries in the Monitor.
The indicator is constructed as an weighted average of four sub-indicators – broad money supply growth, nominal GDP growth, exchange rate developments and the key policy rate. Each of these four indicators are compared to what we call a policy-consistent growth rate or level for each indicator.
Russian money supply growth nearly on track
If we for example look at broad money supply (M2) growth for Russia (which has a monetary policy decision today) we find the policy consistent growth rate for M2 based on the equation of exchange.
We can write the equation of exchange in growth terms like this:
(1) m + v = p + y
Where m is broad money supply growth, v is the growth rate of money-velocity, p is inflation (GDP deflator) and y is real GDP growth.

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