BNS insiders banking on the G-economy
    
    
      
    
  

  
    
        In dealing with the economic fallout
        from the coronavirus,
        policymakers essentially have two choices.
        They can choose the D-economy path which
        involves reaching for the 2008 playbook
        that focused on saving
        financial institutions and helping
        the asset-rich via QE
        and zero interest rates.
        That path probably would not accomplish much,
        and inflation expectations
        would likely keep falling.
        Disinflation or deflation is likely
        to be the reality for
        years under that scenario.
        The other alternative is
        the G-economy path where
        elected officials take the lead and adopt
        a whatever-it-takes approach and spend big.
        We'll call that the G-economy for
        government-led return
        to growth and inflation.
        The path chosen by policymakers will
        have big implications for asset markets.
        The D-economy will continue
        to favour government bonds while
        the G-economy may actually favour
        stocks as hopes for nominal inflation return,
        giving firms some pricing power.
        On Wednesday, we got a sense
        of Ottawa’s direction when it
        announced ambitious support measures
        that include payroll subsidies,
        bigger income transfers, and other measures.
        That has the makings of a G-economy,
        and insiders at the Bank of Nova Scotia
        appear to be betting on it.
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        a recommendation to buy or sell securities.