The first global recession caused by a pandemic left its mark in the economic lexicon, elevating obscure terms to need-to-know status. Some reflect the interest of what worked and what didn’t because much of the world has been quarantined. Others try to anticipate the pitfalls and opportunities that lie ahead.

Reflation trade

Reflation is a period of accelerating economic growth that follows a large contraction, such as the plunge in the global economy during the coronavirus pandemic. Reflation trades are bets on the winners of this rebound (stocks and commodities) and against the likely losers (bonds not protected against inflation). When the first scientific reports showing that the vaccines would be effective against Covid-19 appeared in November, the reflation trade was on. Investments that had everything to gain from the end of lockdowns – or the so-called reopening of trades – have had their moment, with cruise lines, airlines and leisure businesses rallying after a bleak year.

Of course

US Treasury debt has long been the safe asset in the world. Very liquid and available in a wide range of maturities, it serves as a benchmark for all bonds denominated in US dollars. Investors look to safe assets in times of crisis and demand a premium for holding other riskier debt. Efforts to create a European rival to US Treasuries failed in part because almost all of the debt was sold by individual countries of different sizes and economic strengths. But now the European Union’s Pandemic Rescue Fund is triggering the biggest joint borrowing madness on record backed by the 27 member states, creating around 900 billion euros ($ 1.1 trillion). ) new instruments that could usurp the German bunds as the backbone of the region’s credit market.

Automatic stabilizers

Could government relief programs kick in and out on their own? So-called automatic stabilizers, such as employment and social protection programs that expand and contract without any action required by lawmakers, are embedded in most of the world’s developed economies, but are the strongest in the world. Northern and Western Europe. In contrast, the United States is more dependent on spending proposed, debated and (sometimes) adopted by elected leaders. Some US lawmakers want to put more programs on autopilot. One example is the supplementary unemployment benefit created by Congress in March 2020; it could be turned into a feature that turns on and off as needed.

Containerization

Since its introduction in 1956, the standardized shipping container has played a vital role in the global trading system. The pandemic underscored this when the supply of containers fell far short of demand there and when they were needed most, disrupting supply chains, slowing auto factories and causing costs to rise. According to Container xChange, an online platform based in Hamburg, 25 million containers worldwide make 170 million trips per year, to which is added an additional 55 million trips when they are empty. Containerization can fail trying to adjust to sudden shocks, such as when a giant container ship blocked the Suez Canal at the end of March, harassing shipping traffic.

Supercycle

Copper, soybeans and wood were among the most demanded commodities as parts of the world rolled out of quarantine. The surge in prices, fueled by massive government stimulus spending, raised the possibility of a supercycle – a widespread one-year rally in commodities. There have been four supercycles since the turn of the 20th century, each spurred by a transformational socio-economic event: the industrialization of the United States in the early 1900s, global rearmament in the 1930s, the reconstruction of Europe. and Japan after WWII, and the economy of China. increase since the early 2000s. Some analysts believe that the fight against climate change could turn the current commodity boom into a supercycle.

Global minimum tax

Businesses have a long history of using creative but legal ways to reduce their tax bill. One is to record the profits of customers in places like Boston and Berlin as if they came from, say, Bermuda, which has no corporate tax. Two ideas for cracking down on such activity – setting a minimum corporate tax rate around the world and rewriting the rules for distributing that income among countries – have recently received a push. The 15% minimum rate proposed by President Joe Biden for businesses has given new impetus to a year-long effort by the Organization for Economic Co-operation and Development to fight corporate tax evasion. The OECD had discussed a rate of 12.5%.

With John Ainger, Priscila Azevedo Rocha, Thomas Biesheuvel, Mark Burton, Christopher Condon, Laura Davison, Isabel Gottlieb, Katherine Greifeld, William Horobin, Justina Lee, Alex Longley, Brendan Murray, Reade Pickert and Olivia Rockeman

Arnold is a QuickTake editor in Washington.