Thursday , December 3 2020
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Lars Christensen

Lars Christensen

International economist, Money Doctor, Founder of Markets & Money Advisory, Research Associate Stellenbosch University [email protected] +45 52 50 25 06

Articles by Lars Christensen

Covid-policies should focus on ‘health fundamentals’

1 day ago

The number of Covid-deaths per capita is converging towards a level which essentially is determined by what I have called ‘health fundamentals’ – or simply X*.

Europe and the US have different health fundamentals – Europe is ‘older’ and the US is more obese. Over all I would actually expect more deaths in the US mostly because of obesity, but it is clear that Europe is caching up fast now – X (actually mortality) is moving fast towards X*. Despite new restrictions being put in place everywhere.

Source: https://91-divoc.com/pages/covid-visualization/

The effect of these restrictions (as well as voluntary behviourial changes) might be to ‘postpone’ the ‘convergence’ towards what health fundamentals ‘dictate’, but not for long.

It is comparable to what economists call the

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Swedish mortality in 2020 – It’s a lot better than you might think

7 days ago

Sweden has been the ‘outlier’ in terms of handling the global Covid-19 pandemic as the country’s health authorities have relied on a more laissez faire approach which have relied on the common sense of the Swedish population rather than on draconian government measures such as lockdowns and mask mandates.

In that sense Sweden has been different than basically every other country in Europe and Northern America.

Consequently, Sweden has also become the benchmark case to compare other countries to.

Unfortunately from day one of this pandemic it has all been about counting the number of people who have died from or with Covid-19. The countries with the least Covid-deaths are the “winners” – at least according to the media, commentators and politicians.

I must say I have

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The Czechs and the Swedes – the tale of two Covid-strategies

October 17, 2020

This is the number of new daily deaths from/with Covid-19 in Sweden and the Czech Republic.

Source: Here.

The two countries are similar in many ways – the population is just over 10 million in both countries; the average age is around 41 and the number of elderly people as share of the population is also pretty much the same (3-4% of the population is over 80 years old).

Life expectancy in Sweden, however, is 82 years while it is 79 years in the Czech Republic.

The immigrant population in Sweden is much larger as share of the population than is the case in the Czech Republic.

These two factors make it more likely that Sweden will see more Covid-19 deaths than the Czech Republic as we know that the mortality form Covid-19 increases sharply for those older than 70 years

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ONE factor explains most of the differences in Covid19 deaths across US states

September 22, 2020

Since the outbreak of the Covid-19 pandemic I have closely been monitoring the data for the number of deaths and infected across different countries and I have spend considerable time trying to estimate statistical models to explain variations in deaths and infects across different countries.

It quickly became clear to me that relative few factors could explain this variation and back in April I wrote a blog post in which I claimed that ONE factor could explain most of the variation in Covid-19 deaths across countries.

That factor was age or rather the number men older than 80 years as share of the male population.

There really wasn’t anything overly surprising about that as it fast became clear that very few young people or children died from Covid-19 and the average age

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The Fed just de facto increased its inflation target to 2.5%

August 27, 2020

The long awaited update of the Federal Reserve’s Monetary Policy Strategy has just been announced.
Here are the key points:
On maximum employment, the FOMC emphasized that maximum employment is a broad-based and inclusive goal and reports that its policy decision will be informed by its “assessments of the shortfalls of employment from its maximum level.” The original document referred to “deviations from its maximum level.”
On price stability, the FOMC adjusted its strategy for achieving its longer-run inflation goal of 2 percent by noting that it “seeks to achieve inflation that averages 2 percent over time.” To this end, the revised statement states that “following periods when inflation has been running persistently below 2 percent, appropriate monetary policy will likely aim to

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Presentation: Getting practical about data and analytics in basketball

August 13, 2020

If you are hear about monetary policy or international economics this post is not for you.
Instead this is about ‘sports analytics’ or rather about ‘basketball analytics’.
This morning I was invited to give a presentation on the use of data and analytics at the Filipino basketball network HOOP Coaches International.
You can watch my presentation here:

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Presentation: Will the Covid-19 crisis be inflationary?

August 11, 2020

On July 27 I gave a Webinar-Presentation at Buckingham University’s Institute of International Monetary Research on the Covid-19 crisis and whether this crisis and the particularly the policy response to the crisis will be deflationary or inflationary.
You can watch the presentation here.
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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:
M•V=P•V
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 mamoadvisory.com

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:
Advisory
Speaking
Research
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.
Sincerely,
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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