The Cambridge Weekly – 22nd February 2021

One year on – who would have thought

One year ago, on 19th February 2020, stock markets hit their pre-pandemic high. Over the five weeks that
followed, markets plunged in the most extreme global market crash ever known, as the world accepted
that COVID-19 was a threat of unprecedented dimensions. Looking back, it seems impossible anyone could
have even broadly predicted what would happen over the following 12 months. The best – and the worst
– that defines the human race emerged, and we can all agree 2020 is now one of those ‘before and after’
markers, like World War I and World War II, that we use to map the progression of collective society.

Fear facing complacency over rising debt

Desperate times call for desperate measures. The global economy has been ravaged by the pandemic,
struggling under the cycle of lockdowns and rising virus fatalities for a year now. The forced shutdown of
entire business sectors has led to the deepest global recession on record – with increasing numbers of
affected businesses closing their shutters for good. Thankfully, the economic policy response to this crisis
has been decisive. Central banks across the developed world have embarked on extraordinary asset
purchase programmes that have kept borrowing costs suppressed, while governments are plugging the
income gap with spending measures not seen before in peacetime.

Italy’s Super Mario off to a strong start

In the midst of political and economic crises, the Italian president has asked an economist named Mario to
form a technocratic government – a headline that works today as well as it did back in 2011. But despite
the numerous parallels between Mario Draghi’s recent appointment to Italy’s top job and the appointment
of Mario Monti ten years ago (both inherited a spiralling national debt pile from a controversial prime
minister), the current premier has something none of his modern predecessors have enjoyed: an
outstanding reputation in international capital markets. Mario Draghi, the former European Central Bank
president that Paul Krugman once described as “the greatest central banker of modern times”, takes
leadership of a country and economy in turmoil, but markets are certainly confident that he can do
“whatever it takes” yet again.

Read the full commentary here