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Goldman Previews Dystopian ‘Adjustment Mechanisms,’ Isn’t Worried About Inflation In Post-COVID Reality

The good news is...

Virus containment protocols have cut global growth by 16%, Goldman says, in a new note. The figure is derived from the statistical relationship between GDP and the bank's "lockdown index", which is itself a combination of official restrictions and data on social distancing. Europe has suffered the most, while declines in Asia are smaller. As you can see from the visual in the right pane (which is actually pretty helpful, as far as these things go), the effect on China is waning. (Goldman) The good news is that even as the level of global GDP has collapsed by more than 15% since January, there's a light at the end of the tunnel. Or at least according to the bank's Jan Hatzius. In addition to the fact that major western economies are starting to ease lockdown protocols, Goldman sounds a cautiously optimistic tone on a post-COVID reality, which, while surreal, could find humans adapting enough to make economic activity possible on a reasonably robust level. "We expect GDP to grow more quickly than implied by the effective lockdown index alone, as firms and households learn to combine higher economic activity with continued virus control via a range of adjustment mechanisms inc
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