Aquila Flash US infrastructure package

The Senate’s passing of a $1 trillion infrastructure package with the support of 19 Republican senators, including Senate Minority Leader Mitch McConnell, shows the Biden Administration still has momentum behind its government spending objectives. Discussion is now focused on the much bigger ($3.5 trillion) Budget package which includes new social programs and climate measures. We worry that the financial markets have become accustomed to more or less permanent monetary and fiscal policy stimuli. If investor expectations are not met, we see a danger of market dislocations.

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Aquila Flash wave of regulation of tech companies

Not only in China, but also in the US and even the EU, governments are concerned about the ubiquitous power of Big Tech. The influence of their platforms on elections, the security of vast amounts of consumer data and the exploitation of workers are increasingly putting these companies under the spotlight of authorities. In the US, congressional hearings have been held and antitrust lawsuits filed, so far without far-reaching consequences. In China, on the other hand, the government is tightening the reins and the political system allows for quicker action.

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Aquila Flash part 1 – Central bank cryptocurrencies

The state and its politicians have a strong interest in not losing the lucrative monopoly on money creation. Spontaneously created cryptocurrencies threaten the central banks’ monopoly on money creation. Thus, Bitcoin & co. can be seen as "enemies of the state, and of the central banks".

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Aquila Flash weaker labor market data

New virus variants will continue to prevent a complete opening of the global economy. Europe's vaccination gap to the US has narrowed considerably. Inflation risks are high. A scaling back of highly stimulative monetary policies is not yet in sight. The recovery of the US labor market is slower than “the consensus” expected. Although more than 7 million jobs have been lost since the start of the pandemic, US wage inflation looks set to rise. The coming rise in consumer price inflation will be less transitory than central banks would have us believe.

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Aquila Flash higher US inflation

Vaccination campaigns are being implemented at speed in most Western nations and lockdown measures are being scaled back. There is a risk that the jump in US inflation will not be just temporary. But the US labor market is still too weak for an inflation explosion. The latest US economic figures were disappointing. Central banks, like most other investors, are investing pro-cyclically and have increased their quotas for “investments” in risky instruments. Many central banks intend to hold less US dollars and more "other currencies" in their reserves.

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Aquila Flash US infrastructure package

The rise in interest rates at the long end of the yield curve has come to a halt for the time being. This probably reflects the view that the Biden Administration's infrastructure package will be financed primarily through tax increases. If implemented, the Administration’s plans would significantly worsen the international position of the US from a tax competition perspective. The good sentiment indicators in the US are due to booming stock markets. Never before have the real economy and stock markets been as linked as they are today.

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