Markets
Chart: The Downward Spiral in Interest Rates
During the onset of an economic crisis, national governments are thought to have two chief policy tools at their disposal:
- Fiscal Policy
How the central government collects money through taxation, and how it spends that money - Monetary Policy
How central banks choose to manage the supply of money and interest rates
Major fiscal policy changes can take time to be implemented — but since central banks can make moves unilaterally, monetary policy is often the first line of defense in settling markets.
As the ripple effect of the COVID-19 pandemic rages on, central banks have been quick to act in slashing interest rates. However, with rates already sitting at historic lows before the crisis, it is possible that banks may be forced to employ more unconventional and controversial techniques to try and calm the economy as time goes on.
The Fed: Firing at Will
The most meaningful rate cuts happened on March 3rd and March 15th after emergency meetings in the United States.
First, the Federal Open Market Committee (FOMC) cut the target rate from 1.5% to 1.0% — and then on Sunday (March 15th) the rate got chopped by an entire percentage point to rub up against the lower bound of zero.
As you can see on the chart, this puts us back into familiar territory: a policy environment analogous to that seen during the recovery from the financial crisis.
ZIRP or NIRP?
It’s been awhile, but with interest rates again bumping up against the lower bound, you’ll begin to see discussions pop up again about the effectiveness of zero interest rate policy (ZIRP) and even negative interest rate policy (NIRP).
Although the latter has been used by some European banks in recent years, NIRP has never been experimented with in the United States or Canada.
Here’s a quick primer on both:
With rates sitting at zero, it’s not impossible for the Fed and other central banks to begin toying more seriously with the idea of negative rates. Such a move would be bold, but also seen as highly experimental and risky with unforeseen consequences.
Global Rate Slashing
Since only the beginning of March, the world’s central banks have cut interest rates on 37 separate occasions.
The only exception to this rule was the National Bank of Kazakhstan, which raised its key rate by 2.75% to support its currency in light of current oil prices. Even so, the Kazakhstani tenge has lost roughly 15% of its value against the U.S. dollar since February.
Here’s a look at cumulative interest rate cuts by some of the world’s most important central banks, from January 1, 2020 until today:
Going into the year, rates in developed economies were already between 0% and 2%.
Despite not having much room to work with, banks have slashed rates where they can — and now out of major developed economies, Canada has the “highest” interest rate at just 0.75%.
Helicopters on the Horizon
With central banks running out of ammo for the use of traditional measures, the conversation is quickly shifting to unconventional measures such as “helicopter money” and NIRP.
Life is already surreal as societal measures to defend against the spread of COVID-19 unfold; pretty soon, monetary measures taken around the globe may seem just as bizarre.
Put another way, unless something changes fast and miraculously, we could be moving into an unprecedented monetary environment where up is down, and down is up. At that point, it’s anybody’s guess as to how things will shake out going forward.
Markets
When Will Air Travel Return to Pre-Pandemic Levels?
COVID-19 hit the air travel industry hard. But passenger traffic is slowly recovering, and by 2025, things are expected to return to ‘normal.’
Creator Program
When Will Air Travel Return to Pre-Pandemic Levels?
Many industries were hit hard by the global pandemic, but it can be argued that air travel suffered one of the most severe blows.
The aviation industry as a whole suffered an estimated $370 billion loss in global revenue because of COVID-19. And while air travel has been slowly recovering from the trough, flight passenger traffic has yet to fully bounce back.
Where is the industry at in 2022 compared to pre-COVID times, and when is air passenger travel expected to return to regular levels? This graphic by Julie R. Peasley uses data from IATA to show current and projected air passenger ridership.
Air Travel Traffic: 2021 and 2022
After an incredibly difficult 2020, the airline industry started to see significant improvements in travel frequency. But compared to pre-pandemic levels, there’s a lot of ground to cover.
In 2021, overall passenger numbers only reached 47% of 2019 levels. This influx was largely driven by domestic travel, with international passenger numbers only reaching 27% of pre-COVID levels.
| Passenger numbers (% of 2019) | 2021 | 2022 |
|---|---|---|
| International | 27% | 69% |
| Domestic | 61% | 93% |
| Africa | 46% | 76% |
| Asia Pacific | 40% | 68% |
| Caribbean | 44% | 72% |
| Central America | 72% | 96% |
| Europe | 40% | 86% |
| Middle East | 42% | 81% |
| North America | 56% | 94% |
| South America | 51% | 88% |
| Industry-wide | 47% | 83% |
From a regional perspective, Central America experienced one of the fastest recoveries. In 2021, overall passenger numbers in the region had reached 72% of 2019 levels, and they are projected to reach 96% by the end of 2022.
In fact, the Americas as a whole has seen a quick recovery. Both North America and South America also reached above 50% of 2019 ridership in 2021, and are projected to reach 94% and 88% ridership in 2022, respectively.
On the opposite end of the spectrum, Asia Pacific has experienced the slowest recovery. This is likely due to stricter lockdowns and travel restrictions put into effect in this region (which was harder hit by SARS in 2003), especially in places like Shanghai.
Forecasting Traffic in 2023 and Beyond
While recovery has looked different from region to region, airlines are largely expected to see a full recovery to their ridership levels by 2025.
| Forecasted Passengers (% of 2019) | 2023 | 2024 | 2025 |
|---|---|---|---|
| International | 82% | 92% | 101% |
| Domestic | 103% | 111% | 118% |
| Africa | 85% | 93% | 101% |
| Asia Pacific | 84% | 97% | 109% |
| Caribbean | 82% | 92% | 101% |
| Central America | 102% | 109% | 115% |
| Europe | 96% | 105% | 111% |
| Middle East | 90% | 98% | 105% |
| North America | 102% | 107% | 112% |
| South America | 97% | 103% | 108% |
| Industry-wide | 94% | 103% | 111% |
This recovery is a signifier of a much broader mindset shift, as governments continue to reassess their COVID-19 management strategies.
But while the future seems promising, IATA stressed that the forecast does not take into account the potential impact of the Russia-Ukraine conflict and other geopolitical concerns, which could have far-reaching consequences on the global economy (and travel) in the coming years.
Markets
All of the World’s Money and Markets in One Visualization (2022)
From the wealth held to billionaires to all debt in the global financial system, we look at the vast universe of money and markets in 2022.
All of the World’s Money and Markets in One Visualization
The era of easy money is now officially over.
For 15 years, policymakers have tried to stimulate the global economy through money creation, zero interest-rate policies, and more recently, aggressive COVID fiscal stimulus.
With capital at near-zero costs over this stretch, investors started to place more value on cash flows in the distant future. Assets inflated and balance sheets expanded, and money inevitably chased more speculative assets like NFTs, crypto, or unproven venture-backed startups.
But the free money party has since ended, after persistent inflation prompted the sudden reversal of many of these policies. And as Warren Buffett says, it’s only when the tide goes out do you get to see “who’s been swimming naked.”
Measuring Money and Markets in 2022
Every time we publish this visualization, our common unit of measurement is a two-dimensional box with a value of $100 billion.
Even though you need many of these to convey the assets on the balance sheet of the U.S. Federal Reserve, or the private wealth held by the world’s billionaires, it’s quite amazing to think what actually fits within this tiny building block of measurement:
Our little unit of measurement is enough to pay for the construction of the Nord Stream 2 pipeline, while also buying every team in the NHL and digging FTX out of its financial hole several times over.
Here’s an overview of all the items we have listed in this year’s visualization:
| Asset category | Value | Source | Notes |
|---|---|---|---|
| SBF (Peak Net Worth) | $26 billion | Bloomberg | Now sits at <$1B |
| Pro Sports Teams | $340 billion | Forbes | Major pro teams in North America |
| Cryptocurrency | $760 billion | CoinMarketCap | Peaked at $2.8T in 2021 |
| Ukraine GDP | $130 billion | World Bank | Comparable to GDP of Mississippi |
| Russia GDP | $1.8 trillion | World Bank | The world's 11th largest economy |
| Annual Military Spending | $2.1 trillion | SIPRI | 2021 data |
| Physical currency | $8.0 trillion | BIS | 2020 data |
| Gold | $11.5 trillion | World Gold Council | There are 205,238 tonnes of gold in existence |
| Billionaires | $12.7 trillion | Forbes | Sum of fortunes of all 2,668 billionaires |
| Central Bank Assets | $28.0 trillion | Trading Economics | Fed, BoJ, Bank of China, and Eurozone only |
| S&P 500 | $36.0 trillion | Slickcharts | Nov 20, 2022 |
| China GDP | $17.7 trillion | World Bank | |
| U.S. GDP | $23.0 trillion | World Bank | |
| Narrow Money Supply | $49.0 trillion | Trading Economics | Includes US, China, Euro Area, Japan only |
| Broad Money Supply | $82.7 trillion | Trading Economics | Includes US, China, Euro Area, Japan only |
| Global Equities | $95.9 trillion | WFE | Latest available 2022 data |
| Global Debt | $300.1 trillion | IIF | Q2 2022 |
| Global Real Estate | $326.5 trillion | Savills | 2020 data |
| Global Private Wealth | $463.6 trillion | Credit Suisse | 2022 report |
| Derivatives (Market) | $12.4 trillion | BIS | |
| Derivatives (Notional) | $600 trillion | BIS |
Has the Dust Settled Yet?
Through previous editions of our All the World’s Money and Markets visualization, we’ve created snapshots of the world’s assets and markets at different points in time.
For example, in our 2017 edition of this visualization, Apple’s market capitalization was only $807 billion, and all crypto assets combined for $173 billion. The global debt total was at $215 trillion.
| Asset | 2017 edition | 2022 edition | Change (%) |
|---|---|---|---|
| Apple market cap | $807 billion | $2.3 trillion | +185% |
| Crypto | $173 billion | $760 billion | +339% |
| Fed Balance Sheet | $4.5 trillion | $8.7 trillion | +93% |
| Stock Markets | $73 trillion | $95.9 trillion | +31% |
| Global Debt | $215 trillion | $300 trillion | +40% |
And in just five years, Apple nearly quadrupled in size (it peaked at $3 trillion in January 2022), and crypto also expanded into a multi-trillion dollar market until it was brought back to Earth through the 2022 crash and subsequent FTX implosion.
Meanwhile, global debt continues to accumulate—growing by $85 trillion in the five-year period.
With interest rates expected to continue to rise, companies making cost cuts, and policymakers reining in spending and borrowing, today is another unique snapshot in time.
Now that the easy money era is over, where do things go from here?
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