Coronavirus: Hysteria ‘is Salem witch trials all over again’

A top investment strategist has likened the response to COVID-19 to the Salem witch trials.

A student waves from the window of her locked-down accommodation building in Manchester, England, on Monday. Picture: Getty Images

A top investment strategist who advises the Future Fund has likened the response to COVID-19 to the Salem witch trials, warning that governments will cause a depression if they continually “lock down” communities to stamp out the coronavirus.

Marko Papic, chief strategist at California-based Clocktower Group, has claimed in a new book, Geopolitical Alpha, that the response to COVID-19 “would be studied by academics for centuries as an example of ‘mass hysteria’ on an order of magnitude similar to the one that culminated in the Salem witch trials”.

“If G20 economies embrace indiscriminate flatten-the-curve policies, particularly if they do so indefinitely, they will cause a ­depression — not a 2008-style Great Recession, but a 1930s-style Great Depression,” he writes in his book published in the US this month.

Mr Papic says the public has “lost its mind” over the “octogenarian-targeting COVID-19” in a similar way as when “confronted by the rampaging, decapitating Islamic State”.

According to the Future Fund website, Clocktower is an asset management partner.

Separately, in a presentation being given on Wednesday to the Portfolio Construction Forum Strategies Conference in Sydney, Mr Papic will say the pandemic would accelerate a shift away from free-markets, free trade, independent central banks and deregulation to a new “Buenos Aries Consensus” of left-wing populism underpinned by “generational conflict”.

In the US, the under-35s had only about 7 per cent of the net wealth of the 65-74 age group in 2016, compared to more than 15 per cent in 1989 and 25 per cent in 1962, he notes.

“Investors should stop poring over Federal Reserve minutes as if they were Holy Scripture,” he says, suggesting that the Trump administration is leading the change with massive fiscal stimulus.

In August, the US Congressional Budget Office forecast US deficits equivalent to 18 per cent of GDP, or $US3.7 trillion ($5.2 trillion) in 2020 and 9.8 per cent in 2021. The Morrison government is expected to announce a deficit this financial year of about $200bn next Tuesday, about 10 per cent of GDP.

“Somewhat surprisingly, China appears to be the most orthodox economy in the world, with relatively paltry fiscal and monetary stimulus,” Mr Papic explains.

“Democracy is inflationary,” he says, anticipating an “epic” bull market in asset prices, especially real estate and gold, in 2021 underpinned by unprecedented fiscal and monetary stimulus.

“The next decade will see the return of fiscal policy, which means the dominance of politics over economics,” he adds.

Published by Wiley and Son, Mr Papic’s book argues Europe will become more integrated in the wake of the pandemic, while the US and China will “remain at each other’s throats”.