Issues 2021 

Doug Nolan

Fragility. Last year exposed myriad fragilities. 

The U.S. stock market went from all-time highs to an emergency FOMC meeting in ten sessions. The S&P500 lost more than a third of its value in just 21 trading days. 

Q2 GDP collapsed at a 31% annualized rate. Financial conditions tightened dramatically, with illiquidity and dislocation erupting throughout the markets – equities and fixed income. 

The year demonstrated the fragility of social stability. Frail confidence in our institutions was similarly revealed. 

A historic rally saw stock prices end 2020 at record highs. Financial conditions loosened spectacularly, with the year seeing record investment-grade and high-yield bond issuance. 

Record IPOs and SPACs. It was a year of surging trading volumes for both equities and options. The Fed’s balance sheet expanded almost $3.2 TN in 43 weeks.

Financial fragilities were exposed – and then seemingly resolved at the generous hands of the Federal Reserve (and the global central bank community). 

For years now, my beginning of the year “Issues” pieces have featured a key Credit Bubble maxim: “The Bubble either further inflates or bursts.” 

While easier to dismiss than ever, this dynamic has never been as germane. The Fed-induced Bubble is raging out of control. Monetary Disorder is acute and highly destabilizing. Sustainability must be questioned. 

The system to begin 2021 in the throes of historic late-cycle “Terminal Phase Excess.” 

One cannot overstate the potential damage this ongoing epic Monetary Disorder can inflict upon financial, economic, social and political stability. 

The brazen assault on our U.S. Capitol this week was both terribly distressing and ominous. Covid infections continue to run out of control, with single-day deaths this week surpassing 4,000 for the first time. 

Meanwhile, Tesla surged 25% this week (794% y-o-y) - increasing market capitalization to $834 billion. Bitcoin surpassed $40,000 this week, with one-week and one-month gains of 38% and 100%. 

The small cap Russell 2000 jumped 5.9% this week, with the S&P400 Midcaps up 4.8%. The “average stock” Value Line Arithmetic Index rose 4.6%. 

The KWB Bank Index surged 8.5% during the first five trading sessions of the year. 

The Philadelphia Oil Services Index jumped 13.6%. 

Beginning where it left off in 2020, the Goldman Sachs Most Short Index surged 10.1% in a week.

There is at least some discussion of “Bubbles,” a sign of how flagrant excess has become. 

To be sure, years of Bubble excess have inflated into a full-fledged stock market and financial mania. This is an extremely dangerous situation: speculative blow-off dynamics with acute latent fragilities. 

Nonetheless, confidence in the Federal Reserve’s capacity to sustain the boom is more deeply ingrained than ever. Last year’s unprecedented crisis measures emboldened financial speculation. Underlying fragilities are disregarded. 

The general view is that risk can be readily ignored – it must be to capture easy trading profits. The Fed has everything in better control than ever. Our central bank will ensure that financial conditions remain exceptionally loose.

Key Issue 2021: Can the Fed sustain ultra-loose financial conditions?

There’s a fallacy that became only more toxic during 2020: That the Fed readily manages and controls financial conditions. Markets, financial systems and finance, more generally, evolve over time, with this evolution significantly influenced by policy measures. The appearance of Fed control persists only so long as the Bubble inflates. 

For about three decades, the Fed has accommodated, nurtured and backstopped leveraged speculation – arguably to the point where speculative leveraging is the prevailing force dictating underlying financial conditions. In a “risk on” backdrop, expanding speculative Credit (leverage), loose financial conditions, and speculation all feed a self-reinforcing Bubble Dynamic. But the wildness awaits… 

We witnessed this past March how quickly de-risking and deleveraging can erupt into illiquidity, dislocation and panic. Unprecedented speculative leverage had accumulated across global markets. Associated latent fragilities were exposed – and unprecedented policy measures were required to hold collapse at bay. In the end, in excess of $3 TN of Fed liquidity ($8.5TN from “G4” central banks) reversed the powerful forces of de-risking/deleveraging. A potent new speculative cycle was unleashed.

Key Issue 2021: Will the latest speculative cycle, arguably the most egregious and destabilizing yet, be sustained through the year? 

Ebullient markets celebrate the Fed’s unprecedented 2020 measures, with more faith in “whatever it takes” than ever. More sober analysis would recognize the relationship between systemic speculative leverage, underlying fragility, and the scope of the Fed’s response necessary to thwart Bubble collapse. 

Importantly, the need for such monumental Fed measures confirmed the unprecedented scope of leveraged speculation and speculative excess more generally. 

The Fed and global central bank 2020 crisis response pushed unparalleled leveraged speculation and financial excess to even more precarious extremes. While presumed otherwise in the markets, last year’s market bailout and resulting mania have significantly exacerbated what was already acute Bubble fragility. 

Typically, a speculative cycle’s manic phase has a limited duration. As in life, it becomes difficult to sustain the intensity of extreme euphoria. But this is the most extraordinary of cycles. 

Myriad signs of rank excess that in the past would have aroused concerns from the more sophisticated market operators are today paid no heed at all. Not with markets over-liquefied and the Fed determined to inject $120 billion monthly for the foreseeable future. 

This promotes an extended cycle – an elongated “Terminal Phase” – with only more egregious speculation and speculative leverage.

The 2008 crisis was labeled “a hundred-year flood.” Crises inflict enormous pain. 

Normally, lessons are learned, and behaviors are altered. Speculators are chastened, while policymakers assume a more assertive role in safeguarding against lending, debt accumulation and speculative excesses. 

But contemporary central bank doctrine has transformed age-old dynamics. QE, zero rates and using asset inflation as the key mechanism for system reflation ensure anomalous dynamics. 

The Bubble was reflated and then some, ensuring only greater future Bubble collapses. 

The global Bubble was again at the precipice in 2020, with reflationary policy measures employed more quickly and in incredible dimensions. Bubbles were rapidly resuscitated. Pain was ameliorated before it altered risk tolerance or speculative impulses. 

It would be highly unusual to have back-to-back years of financial crisis. But the speed by which intense speculative excess reemerged post-crisis has been extraordinary. 

There are some similarities to the post-LTCM rally that briskly ripened into the 1999 technology stock mania – with less than 18-months from bailout to a major market top in March 2000. 

Yet the scope of the current global Bubble across asset classes so dwarfs 1999. Between September 1998 and the end of March 1999, Federal Reserve Assets expanded $55 billion to $580 billion. For this cycle, the expansion of Fed Credit is now up to $3.580 TN in 69 weeks. 

Central bank largess spurred history’s greatest Credit expansion – in the U.S., China and globally. Many governments over the past year ran deficits surpassing 10% of GDP. 

The U.S. fiscal deficit exceeded $3.0 TN, or approaching 15% of GDP. 

In the face of an unprecedented supply of new bonds and debt, market yields nonetheless collapsed. Central bankers completely disabled the market pricing mechanism. 

January 8 – Bloomberg (Jordan Fabian): 

“President-elect Joe Biden on Friday called for trillions of dollars in immediate further fiscal support, including increased direct payments, after a surge in coronavirus cases caused U.S. payrolls to drop for the first time since April. 

‘The price tag will be high,’ Biden said of his planned package… He promised to lay out his proposals next Thursday… ‘It will be in the trillions of dollars.’ Biden invoked images of the unemployed waiting in long food lines and added a dire warning: ‘If we don’t act now, things are going to get much worse and harder to get out of a hole later.’ 

Biden made the call for new assistance – including boosting stimulus checks to $2,000 -- after an unexpectedly poor December jobs report…” 

Ten-year Treasury yields surged 20 bps to start the new year to 1.12% - the high since March 19th. Long-bond yields jumped 23 bps to 1.88%. 

After winning both Georgia Senate runoff elections, at 50 seats the Democrats have effectively accomplished “clean sweep” control of Washington. 

Presumably, next week we’ll have a better idea of the size of the new administration’s stimulus plan. 

For sure, the Treasury market now faces massive supply – with a fiscal deficit likely to rival last year’s $3.1 TN. After buying the majority of 2020’s net Treasury issuance, the Fed is poised to purchase a Trillion or so in 2021. 

That leaves a significant hole. In addition, inflationary pressures are germinating. 

The 10-year Treasury inflation “breakeven” rate jumped nine bps this week to 2.07%, the high since October 2018. 

Crude (WTI) prices surged $3.72 this week, with gasoline up 9.4% and natural gas gaining 6.3%. 

Copper rose 4.4%. Corn jumped 2.5% this week, with soybeans up 4.6%. Strong price gains were posted by cotton, palm oil, rubber and live cattle. 

Fed vice chair Richard Clarida spoke Friday afternoon before the Council on Foreign Relations. Bloomberg headlines captured the gist of his message: “Time to slow pace of bond buying ‘Well down the road.’” 

“Can be quite some time before we think about tapering.” Chicago Fed president Charles Evans this week commented, “Frankly, if we got 3% inflation that would not be so bad.”

Issue 2021: The Fed is Playing with Fire.

I understand the deep complacency. The Fed has not felt pressured by the markets to raise rates since 1994. In a more normal environment, the bond market would look at the confluence of mounting inflationary pressures and Fed indifference with trepidation. 

Throw in unprecedented supply and booming risk markets and you’ve got all necessary ingredients for a brutal Treasury bear market. Yet fear remains difficult to come by. There is already talk of how much higher market yields would need to move before the Fed steps in with larger purchases of long-dated Treasuries. 

“Whatever it takes.”

I see these breakdowns in monetary management, market function and fiscal discipline likely coming to a head in 2021. Would the Fed significantly boost QE in the face of manic risk markets and a recovering economy? 

I see the Republican party emerging from disarray to return to its fiscal conservative roots. The Federal Reserve faces major political risk when it is viewed as financing the Democrats liberal agenda. Issue 2021: Fed credibility.

Another massive stimulus program risks turning both Republicans and an increasingly inflation-focused bond market against massive Fed monetization. There is, as well, the not inconsequential risk of a disorderly decline in the dollar. 

The confluence of huge trade deficits, previously unimaginable fiscal deficits, massive Fed monetization, over-indebtedness, and a vulnerable financial Bubble places dollar stability in jeopardy. 

It’s not unusual for a nation’s bond market and currency to turn disorderly concurrently. Such a scenario for Treasuries and the dollar would place the Fed under the most pressure to tighten policy in decades. 

The iShares long-dated Treasury ETF (TLT) sank 4.1% this week, a painful reminder of how quickly losses can mount for a perceived low-risk Treasury bond. Treasuries, corporate bonds and fixed-income securities more generally are extraordinarily vulnerable to a painful bear market.

Meanwhile, high-yield bond risk premiums (spreads and CDS) remain near multi-year lows. 

This is in spite of looming Credit distress throughout the economy. Risk markets remain white-hot and financial conditions extraordinarily loose. Companies enjoy the easiest access to cheap finance, ensuring Credit stress, defaults and risk premiums remain well contained. 

Still, corporate Credit remains acutely vulnerable to a bout of risk aversion and a resulting tightening of financial conditions. We witnessed in March how quickly ETF outflows can manifest into marketplace illiquidity, dislocation and fear of systemic corporate defaults.

The iShares Emerging Market equities ETF (EEM) surged 5.8% this week to an all-time high, with a 22% gain since November 1st. Brazil’s Bovespa Index jumped 5.1% this week, with Mexico’s Bolsa up 6.0%. 

Major equities indices jumped 9.7% in South Korea, 9.2% in Chile, 6.0% in South African, 5.0% in Russia and 4.3% in Turkey. 

The global liquidity tsunami impacted virtually all markets, though some of the greatest effects were seen in many of the marginal markets most vulnerable to shifts in financial conditions. 

The global Bubble is today raging, but there is acute vulnerability to any unexpected risk aversion and tightening of financial conditions. 

No country faces a greater challenge than China in balancing the need to reduce stimulus against underlying acute fragility. 

After expanding Credit $500 billion monthly for most of 2020, Chinese officials will attempt to restore some degree of financial restraint. The risk of a financial accident in China in 2021 is reasonably high. 

Beijing postponed plans to get its Credit system in order as it confronted aggressive trade war tactics from the Trump administration. Officials then resorted to massive fiscal and monetary stimulus to counteract contractionary pandemic dynamics. 

Today, there’s excessive optimism regarding China’s economic recovery – and the soundness of its system more generally. Beijing is not oblivious to the perilous scope of China’s Bubble. 

Authorities will now cautiously attempt to impose restraint, a risky proposition for one of history’s great financial and economic Bubbles. I expect cracks in the corporate debt market and “small” bank sector to widen into more systemic issues in the event of heightened risk aversion and deleveraging. 

China’s apartment markets remain an accident in the making. The stability of China’s bloated banking system is an Issue 2021. 

It is now a dangerously synchronized global Bubble. Global developments – market, financial, economic and geopolitical – pose significant risk to the vulnerable U.S. Bubble. 

The general impression is that geopolitical tensions will ease with the new Biden administration taking control – especially with China. I’m skeptical that much will slow the evolving cold war between rival superpowers. Taiwan and the South China Sea much remain potential flashpoints for 2021.

But for now – and especially after this week’s developments - I remain more worried about domestic conflict than international. What an absolutely abhorrent start to the new year for our country. 

Wednesday’s spectacle was an appalling national nightmare. Was it a freak anomaly? 

The end of something – or more the beginning? 

As disturbing as Wednesday’s U.S. Capitol insurrection was, by evening I found myself trying to find reasons for hope. Would the debacle force some serious rethink? Would there be recognition that things had been pushed much too far? 

As a nation, through this disgusting episode of mayhem might we begin the challenge of national reconciliation. Could we come to a consensus that as a nation we need to tone down partisan rhetoric? 

Would Wednesday force the reassessment of efforts hell-bent on inciting anger – anger that burst into violence, desecration and even murder in our beloved Capitol Building. 

Our nation is today dangerously divided – and how this social crisis is handled is a key Issue 2021. 

Here, on Friday evening, I find myself less hopeful. 

The end of something or the beginning? 

Will the chaotic conclusion of the Trump presidency set in motion the healing process, or has something menacing been unleashed that will prove difficult to contain? 

Is the far-right fringe energized and emboldened? 

Can we keep the extremists from the right and left from clashing? Do we now face elevated risk of domestic terrorism?

How citizen Donald Trump handles quite difficult circumstances is, unfortunately, a major Issue 2021. Does he resolve to play a constructive role in national reconciliation, or does the famed “counterpuncher” coming out swinging madly at his adversaries? 

How gory does the unfolding civil war within the Republican party become?

I am left to hope for a much-needed easing of socials tensions – a pulling back from the precipice. There were over 300,000 new Covid cases today, with another 4,000 American deaths. 

We can be hopeful that with vaccinations we’ll be through the worst of this terrible pandemic within a few months. But how much worse will things become in the meantime? 

There are these more contagious virus variants, along with the possibility that virus mutations may at some point weaken vaccine efficacy. 

I worry about deepening scars – from the pandemic, from divisiveness, from all the hostility, and from waning faith in our institutions. I’m not happy to write another dark piece – in back-to-back weeks – 2020 and 2021 prospects. 

But I worry. We’re witnessing an increasingly combustible social tinderbox. I rather clearly see a fire starter. 

We’re a bursting Bubble away from severe societal crisis. And this could be the major Issue 2021. 

It’s tempting to focus on booming markets and the constructive role they will play in economic recovery and social healing. 

But it’s no coincidence that securities prices are going nuts as social stability increasingly fractures. Society today suffers the myriad deleterious effects from decades of dysfunctional finance and resulting Monetary Disorder. 

Meanwhile, the Fed responds feverishly to late-cycle market, economic and social fragility with Trillions. 

The inflationism I’ve been chronicling weekly for over two decades has turned desperate. 

This is a deeply troubling dynamic – a disaster in the making. 

The culmination of a crazy financial mania right in the face of deepening late-cycle economic and social distress. 

The worst-case Bubble scenario is, most regrettably, a momentous Issue 2021. 

I saw nothing but ominous confirmation of this troubling thesis during a chaotic first week of 2021: The Year of Acute Monetary Disorder and Fragility.

The nightmarish end to Donald Trump’s presidency

There are deep concerns about what the US leader may do in his remaining two weeks

Edward Luce

        Donald Trump arrives to speak at a rally in Washington on Wednesday © AP

Ninety minutes before rioters stormed Capitol Hill, US president Donald Trump addressed many of the same people using unequivocally inciteful language. 

“You’ll never take back our country with weakness,” Mr Trump said. 

“You have to show strength.”

His personal lawyer, Rudy Giuliani, also called on the crowd to conduct “trial by combat”.

A mob made up of “Make America Great Again” protesters, Proud Boys and other far-right groups took them at their word. 

What followed was desecration. Four years after Mr Trump warned of “American carnage” in his inaugural address, he got what he wanted. 

The scenes of insurrectionists, some of them armed, ransacking Congress will go down in infamy in American democracy.

Nobody should feign surprise. 

Mr Trump has been vowing to “take back control” since before he took office. 

During the build-up to last year’s presidential election, Mr Trump repeatedly predicted that it would be the most corrupt in America’s history. 

Since losing, he has been broadcasting that falsehood ever more loudly.

He said it again on Wednesday afternoon — in the Twitter video he released urging his supporters to pack up and go home. (Twitter later locked the president out of his account and insisted he delete the post.) 

On Twitter and elsewhere, Mr Trump has fuelled the QAnon conspiracy theory that Washington is controlled by a deep state of paedophiles. 

Now a large minority of Americans believe the US election was fraudulent. 

No wonder some were ready to storm Congress just as it was meeting to certify Joe Biden’s victory. 

The only surprise is that there were not more.

The most pressing question now is what Mr Trump might try to do in his remaining two weeks in office. 

Senior military in the Pentagon have discussed at length how they would respond if Mr Trump tried to declare martial law, using the 1807 Insurrection Act. 

Some around Mr Trump, including Michael Flynn, his former national security adviser, have been urging him to invoke it. 

After supporters stormed the Capitol, Ivanka Trump, the president’s daughter, called them “American patriots” in a tweet she later deleted.

The concern about what Mr Trump can still attempt to do is not academic. In spite of what happened on Wednesday, Mr Trump still commands the personal loyalty of many people in uniform.

One reason why the mob so easily breached Congress is because many of the Capitol Hill police officers were clearly in sympathy. Some even took selfies with the insurrectionists inside the Capitol building. 

The contrast with how Black Lives Matter protesters were treated last June when law enforcement violently cleared Lafayette Square to make way for Mr Trump’s photo-op was glaring. 

Had African-American protesters tried to storm Capitol Hill, or the White House, there can be little doubt that bullets would have been used.

The next question is how many Republicans will continue to support Mr Trump’s “stolen election” narrative.

Shortly before Congress was invaded, Mitch McConnell, the outgoing Senate majority leader, had repudiated Mr Trump’s attempts to declare the election a fraud. 

Critics will say Mr McConnell’s surprisingly forceful address was a day late and a dollar short. But he was able to state reality forcefully when it mattered. 

The same cannot be said of Ted Cruz, the Texan senator, Josh Hawley, the Missouri senator, and more than 100 of their colleagues in both houses. 

Their theatrical protest against the election certification was interrupted by a real-life assault on the building in which they were speaking.

In his speech, Mr Cruz said the fact that so many Americans believed the election was a fraud posed “a profound threat to our country”. 

Here was a classic case of the arsonist posing as a firefighter. Fifteen minutes later, the session was abruptly halted.

As senators were being hurried to safety by Capitol Hill police, Mitt Romney, the Utah senator, who has been a rare Republican voice warning of Mr Trump’s authoritarianism, yelled to GOP colleagues: “This is what you’ve gotten.” 

He was right.

Agree with him or not, Mr Romney speaks for the party that used to care about the US constitution, law and order, America’s standing in the world, and civility in politics. 

Those who have thrown their lot in with Mr Trump are now tied to his mob. 

They may not have expected events to turn quite so dark. 

But that was the gamble they took. 

As John F Kennedy said in his own inaugural address: “Those who foolishly sought power by riding the back of the tiger ended up inside.”

The Planning Disaster

Germany and Europe Could Fall Short on Vaccine Supplies

The EU and Berlin have insisted there will be sufficient vaccine available, but delays in signing purchasing contracts mean that the elixir will arrive late and there might not be enough. The EU even declined an option that would have allowed for the purchase of hundreds of millions of extra doses.

By Markus Becker, Veronika Hackenbroch, Martin Knobbe, Christoph Schult und Thomas Schulz

German Health Minister Jens Spahn: Optimism hasn't been matched by reality. / Foto: GETTY IMAGES

Such are images of hope: Nurses getting vaccinated. Pallets of packaged vaccines distributed on special flights. Mayors exulting over "the beginning of the end of the pandemic.” A president who is preparing the country for better times.

These images are from the United States.

In Germany, on the other hand, you see desolate shopping streets, shuttered restaurants and a government that is preparing its population for long, dark days.

The contrast is unmistakable. On the one hand, there is the supposedly incompetent Trump administration, which will provide vaccines to 20 million Americans in the next two to three weeks alone. By the end of March, the plan is for around 100 million Americans to have received the two vaccine injections they need.

On the other hand, there is the supposedly well-prepared Europeans, who continue to have to wait for a vaccine that was developed in Germany. And who still don’t know exactly how much of the vaccine they will be getting in the coming months.

Initially, Germany’s health minister has announced, there will probably only be 400,000 vaccine doses for Germany, with another 11 to 13 million to follow by March -- a fraction of the amount the Americans are getting.

It’s a politically dangerous situation that has now been recognized by the German government. Since last week, it has been taking hectic countermeasures. The European Medicines Agency (EMA) now wants to approve the vaccine a week earlier than planned, and vaccinations are slated to begin in Europe on Dec. 27. 

Negotiations are also underway with manufacturers to obtain more doses. On Thursday, German Chancellor Angela Merkel even spoke with BioNTech founders Özlem Türeci and Uğur Șahin in a livestream, part of which was broadcast publicly. The message couldn’t be any clearer: Vaccination is now the chancellor’s business.

That realization has come too late, however. For months, it has been clear that other countries would have more doses of the vaccine, would start vaccinating sooner and, as a result, would be able to take more effective action against the pandemic.

But in Berlin and at European Union headquarters in Brussels, too little action was taken for too long, and it was often justified with complacent arguments: In Europe, medicines are tested better and more precisely than elsewhere in the world, and vaccines are available in abundance thanks to good planning. 

Health Minister Jens Spahn announced that the critical mass of around 60 percent of the German population could be vaccinated.

Too Little, Too Late

But, so far at least, his optimism hasn’t been matched by reality.

And the late approval of the active ingredient in the BioNTech and Pfizer vaccine by the European Medicines Agency (EMA) appears to be the least of the problems. 

The bigger issue is that if the situation remains as it is now, there will not be enough vaccine available to get the pandemic under control in Germany before next autumn. 

The EU appears to have bought too little, too late and at times from the wrong producers. And it appears that it turned down hundreds of millions of vaccine doses that are now lacking.

Dramatic consequences are brewing for the German government: Without being able to vaccinate on a broad scale, the country won’t be able to stop the virus. Which means that the fall and winter of 2021 could be similar to this year, with high infection rates, contact restrictions and lockdowns. 

The only remedy would be a massive increase in the number of vaccines that are approved for use.

But Berlin has made an uncompromising commitment to European solidarity on the vaccination issue. And that means it’s not only the influential and economically strong member states that will have access, but also smaller countries like Romania and Slovenia. If Germany were to go out on its own and buy up vaccine doses that are in short supply, it would massively threaten cohesion in a Europe that is already fragile.

At the same time, though, the German federal government has an obligation to do all it can to protect its people.

Scientists estimate that 60 to 70 percent of Germany’s population would need to be vaccinated in order to stop the virus. 

That would require 100 to 120 million doses because, with one exception, all the vaccines currently available have to be administered in two doses before they deliver immunity.

The EU has ordered a total of 1.3 billion doses from six different manufacturers. Germany is entitled to 18.6 percent of those doses in a distribution mechanism calculated according to its share of the EU population. That amounts to around 250 million doses. But the number is misleading.

Currently, the only deliveries that are certain are those from German-American consortium BioNTech/Pfizer and the American biotech company Moderna.

BioNTech, whose vaccine is to be approved by the EU on Dec. 21, will be able to supply around 45 million doses to Germany in the first half of the year, according to current estimates. 

Moderna, whose vaccine is due to be authorized for use in Europe on Jan. 6, could supply around 15 million doses. Together, that’s a total of 60 million doses, which is far too little.

But When?

Additional supplies are to come from four other producers with whom the EU has contracts. But it remains highly uncertain when they will be able to deliver. 

No matter what happens, no significant quantities are expected before the summer.

The Anglo-Swedish pharmaceutical company AstraZeneca had to interrupt its vaccine trial and delivered disappointing testing data. French company Sanofi has postponed possible approval for its vaccine candidate to the end of 2021. 

Meanwhile, the vaccine from CureVac, based in Tübingen, Germany, isn’t expected until this summer. The only company that is close to delivering another vaccine candidate is Johnson & Johnson in the U.S., and it isn’t expected until March.

Of course, not all of these developments could have been foreseen. The U.S., for example, believed that Sanofi would be quicker in delivering its vaccine. Still, the procurement of vaccines in Europe has been a bumpy road from the start.

Germany initiated a small vaccine alliance in the spring together with France, Italy and the Netherlands. In a first step, they reached an agreement with AstraZeneca for 400 million doses. 

The move was primarily intended as a means of exerting pressure because there wasn’t enough happening in Brussels. "Many countries around the world have already secured vaccines, but Europe hasn’t yet,” Health Minister Spahn warned at the time.

In mid-June, the European Commission subsequently presented an EU vaccine strategy to "ensure fair and equitable access for all across the EU.” 

Sufficient supplies for the member states were to be ensured by providing purchasing guarantees to manufacturers.

Health care is actually one of the competencies that is reserved for the member states in the EU. But the vaccine supply was meant to serve as a symbol of solidarity in contrast to the U.S., where Donald Trump was propagating his "America First” stance and fueling merciless global competition for the coveted vaccines.

Between August and October, the EU concluded the first of its contracts: with the pharmaceutical giants Sanofi, Johnson & Johnson and AstraZeneca. 

Even at the time, though, it was conspicuous that the companies with the most promising vaccine candidates were not given firm contracts. 

BioNTech and Moderna had already obtained promising results from their studies in July and were entering the home stretch.

No Comment

Behind the scenes, this was the source of anger and irritation within government circles in Berlin. The irritation grew significantly in November, when the companies published data that their vaccine candidates are each up to 95 percent effective.

The manufacturers have repeatedly made it clear that they intend to distribute the vaccine according to two criteria: population size and when the contract was signed.

Way back in July, the U.S. secured 600 million doses of the BioNTech vaccine and 500 million doses from Moderna. Japan, Canada, Hong Kong and others signed contracts in the summer and autumn. 

The EU only reserved doses. It didn’t place concrete orders until mid-November. And even then, it ordered far less than it could have.

A future vaccination center in Husum, the Netherlands: a fraction of what the Americans are getting Foto: Shutterstock

The EU only secured 200 million doses from BioNTech, with an option for 100 million more that would be manufactured later. According to sources with knowledge of the negotiations, BioNTech had additional capacity and apparently offered that capacity to the EU: up to 500 million doses in the first round.

But the European Commission reportedly rejected the offer. European Health Commissioner Stella Kyriakides would not comment on the exact reason. "We do not comment on the progress of negotiations," a commission spokesman said.

Why were only 300 million doses of a vaccine secured that had already demonstrated 95 percent efficacy in clinical trials at the time? One that had been hailed as a sensation and was already on its way to regulatory approval? 

German Health Minister Spahn pushed for more to be purchased, but he failed to prevail in the end due to opposition from several EU member countries -- in part, apparently, because the EU had ordered only 300 million doses from the French company Sanofi. 

"That’s why buying more from a German company wasn't in the cards,” says one insider familiar with the negotiations. The European Commission has denied that version of events, saying it isn’t true that Paris took massive steps to protect Sanofi.

However, similar reports have emerged from the negotiations with the U.S. producer Moderna. Studies also showed its product to have efficacy of 95 percent. But the EU only ordered 80 million doses. 

It has an option for another 80 million, but they wouldn’t be manufactured until a later date. "We could have provided more,” says Stéphane Bancel, CEO of Moderna, saying it could have been up to 300 million doses. But he said the EU didn’t want more.

And now, that decision is looking even worse.

Storm of Outrage

Last week, Sanofi in France was forced to announce that it had suffered a significant setback in the development of its vaccine. The company says it is no longer feasible for its vaccine to gain approval before the fourth quarter of 2021. The second phase of the clinical trial demonstrated surprisingly poor efficacy data in the elderly.

Bad luck, to be sure, but it’s precisely the reason why it makes sense to first buy in large quantities from the companies that have already successfully completed their clinical trials and not just hope that everyone else will ultimately deliver, too.

"That’s why, right now, whether Germany fares well or not hinges on the AstraZeneca vaccine,” says Karl Lauterbach, the health policy point man for the center-left Social Democratic Party and also an influential voice in Germany on the political response to the pandemic. "

If Spahn says that 60 percent of the population could be vaccinated by the end of summer, what that really means is that he’s hoping that the AstraZeneca vaccine will be approved.”

Right now, development of the British-Swedish vaccine isn't going particularly well either. Experts weren’t happy even with the design of the company’s study. AstraZeneca simply combined data from two studies into a single analysis.

One subgroup of around 2,700 subjects revealed an efficacy of around 90 percent, similar to that of the vaccines from BioNTech and Moderna. But among the rest of the test subjects, efficacy was just 62 percent. 

The fact that AstraZeneca combined these disparate results into an average efficacy of 70 percent triggered a storm of outrage. Particularly because the company didn’t provide a meaningful explanation for the discrepancy. Further studies are to follow.

In September, reports on possible side effects also alarmed the public. All trials had to be stopped because one subject developed weakness in her arms and legs, symptoms of transverse myelitis. When it was discovered that another subject had previously developed similar symptoms, alarm bells went off.

The trials resumed after it was determined that there had been no connection between the illnesses and the vaccine. But the Food and Drug Administration (FDA) has already announced that the AstraZeneca vaccine is unlikely to be approved in the U.S. before summer, if at all. 

In light of all the problems, it seems highly unlikely at this stage that the European authorities would rush it through and approve it by spring.

But even if the vaccine ends up being approved, it will probably only have an efficacy of 60 to 70 percent. "What are you going to do with the 70 percent when you’ve got two (vaccines) that are 95 percent? Who are you going to give a vaccine like that to?” Anthony Fauci, the leading American expert on vaccines, recently wondered.

The other candidates still in development could wind up with similar results. No one can say right now whether they will be able to achieve efficacy at a similar level as the BioNTech and Moderna vaccines.

So, what now?

The EU intends to exercise its option on the further 80 million doses from Moderna and 100 million from BioNTech. It is unclear when they can be delivered, although it is most likely they will come in the second half of the year. 

And those supplies still won’t be enough to cover what is needed Europe-wide.

More than Enough

The European Commission, for its part, doesn’t see this as a problem and is instead praising its own management. 

"The EU vaccine portfolio is proof of what we can achieve when we work together as a strong European Health Union,” says Health Commissioner Stella Kyriakides.

She says the Commission has selected the most promising and advanced vaccine candidates, which are also based on different technologies. "To ensure that we have as a diverse a portfolio as possible,” Kyriakides says. "In total, we have bought more than enough doses for everyone in Europe,” European Commission President Ursula von der Leyen told the European Parliament on Wednesday, without any hint of self-criticism.

Sources in Brussels say that it wouldn’t have been possible to achieve much more in terms of vaccine procurement under the circumstances. The smaller companies, particularly, would have difficulty conducting simultaneous negotiations with various governments around the world. Brussels sources also say that negotiations with BioNTech partner Pfizer, in particular, were difficult.

In Berlin, the self-satisfaction in Brussels is being viewed increasingly critically. "Germany could also buy additional vaccine bilaterally, directly from the companies, and I think we should do that,” says SPD health policy coordinator Lauterbach.

The German government itself also appears to have recognized that it is too risky to leave procurement of vaccines to the EU alone. If, in fact, there are too few doses available in the coming months to effectively contain the pandemic, politicians will have difficulty explaining why they didn’t take this matter of life and death into their own hands.

Behind the scenes, work is already underway to order additional doses from BioNTech and Moderna. The additional deliveries would likely first come in the second half of the year, but it would ensure supplies if none of the other vaccines are convincing.

Months ago, the federal government worked to organize a national effort for procurement from all the vaccine manufactures in addition to the EU program. 

In September, BioNTech, CureVac and the Dessau-based company IDT Biologika all received a total of 750 million euros in funding from a special Research Ministry budget. 

In return, it was agreed that millions of doses would be secured exclusively for use in Germany. 

In the case of BioNTech, that figure is around 30 million.

Running Out of Time

But there is one hitch: Deliveries to the EU have priority. 

And a contract is also needed for that special contingent, but it hasn’t yet been signed, according to company sources. 

So far, there have only been declarations of intent. The contracts can only be concluded once the doses earmarked for the EU have been delivered.

Regardless whether the EU or the German government is negotiating: Time is running out. BioNTech's and Moderna’s capacities are largely booked up until well into the summer. 

BioNTech is working a full speed to complete a new factory in Marburg, Germany, as early as this spring, considerably faster than originally planned. This was also the subject of the non-public part of Chancellor Merkel’s discussion with the BioNTech founders. 

This would allow additional doses to be produced, primarily for the EU and Germany. 

Until then, though, new orders will be placed at the end of the list.

Other countries are also pushing for more vaccine doses from BioNTech and Pfizer, most notably the U.S. As early as the beginning of December, the U.S. government sought to secure 100 million additional doses for the first half of the year..

Pfizer initially declined, saying its capacities are exhausted until summer. But now they are negotiating, after all. 

"The company could provide many of those doses in the third quarter of 2021, but the U.S. government is pushing for it in the second quarter,” Pfizer CEO Albert Bourla recently stated. 

Pfizer has very clearly told the U.S. government under which conditions this would be possible: If the U.S. government instructs the external American suppliers by decree to preferentially supply Pfizer with the raw materials needed for the vaccine – and not others.

This shows what is in store for the coming months: an ugly global race for enough vaccine that will by no means be fair. 

Those who lose will, at least initially, be denied a path out of the pandemic.

Is Bitcoin Strangling The Other Cryptocurrencies?


Bitcoin has had a helluva week. 

And many of its fans see its recent spike as just the beginning of a run that converts it from cult favorite to global reserve currency.

That’s an exciting prospect for a lot of reasons. But it’s not yet a done deal.

One of the many concerns that non-HODLers have about bitcoin is that its algorithmically-constrained supply might be a kind of mirage, because other cryptocurrencies with similar characteristics and utility can be created in infinite numbers.

From a trader’s perspective, here’s what that means: If bitcoin keeps rising relative to, say, ethereum and litecoin, it creates an arbitrage in which investors sell bitcoin and reinvest their profits in much-cheaper but otherwise similar – and therefore equally attractive as a store of value – coins. So bitcoin’s price falls (or at least rises more slowly) while ethereum and litecoin gain ground. 

The crypto universe diversifies and expands, partially at bitcoin’s expense. And bitcoin, while still successful, misses its chance to conquer the global monetary system.

The other day I mentioned this concern to a very smart, highly committed bitcoin fan, and his response (I’m paraphrasing a bit) was: “Those other coins are trash. Bitcoin is draining all the air out of the crypto space. 

The others will die and bitcoin will absorb their market cap, along with most of the capital now in gold and the dollar, on its way to a price of $1 million per coin.”

That’s … compelling, considering that you hardly ever hear about those other coins anymore.

One way to check this, of course, is to see what the other coins are doing. If they’re falling as bitcoin rises, then yes, this might indeed be a one-horse race and those comparisons of bitcoin’s tiny-by-design supply to the number of US dollars, ounces of gold, etc., that yield insanely high bitcoin prices look more valid. 

If, on the other hand, smaller-cap cryptos are taking wing along with bitcoin, then the jury is still out on whether bitcoin’s “supply” is limited to its own ledger or has to include the rest of the crypto space. Which makes its supply theoretically unlimited just like any crappy fiat currency. So let’s go to the charts:

Bitcoin’s dominance of the crypto space has fluctuated in the past year, falling from a massive 70% to the mid-50s and then rising back to pretty much where it started. 

The verdict: It’s definitely the big player in this space. 

But is bitcoin’s recent gain in market share due to the inevitable death of all those no-name/no-future coins that came to market during the recent ICO frenzy? 

Or is it due to defections from the other viable cryptos that might someday challenge bitcoin’s dominance?  

If the former, you’d expect some of the other cryptos to be rising in price along with bitcoin. 

And some of them are. In the past week: 

During a week in which bitcoin had an epic run, the other well-known cryptos did okay. 

The oxygen may have been sucked out of the no-names with market caps approximating zero, but ethereum, litecoin and bitcoin cash all caught a bid.

These charts actually paint a picture that resembles precious metals mining. 

Bitcoin is a Barrick or Newmont that just had a really good year, while the lesser cryptos look like mid-tier or junior miners being swept along in the sector whale’s wake.

Which means the crypto ecosystem might be evolving into a normal market, with big and small players and a common-sense dynamic in which a big player’s success sends money flowing down the food chain in search of juicier percentage gains.

With one difference: The supply of viable gold miners is constrained by geology. 

There’s just so much gold out there, and most of it has already been found. 

But the number of cryptos with algorithmically-constrained supplies is potentially infinite. 

And as money flows into that space, the incentive to create more bitcoin clones – and to sell bitcoin itself to buy those potential hundred-baggers – rises.

Put yet another way, bitcoin’s first-mover advantage is real, but the constraints on its dominance imposed by the other viable cryptos seem real too. 

Very few sectors are swallowed up by a single entity, and it’s not yet clear that cryptos are an exception to that rule.

It’s Europe’s Turn to Reject Trump

Although Donald Trump will soon depart from the White House, his toxic legacy of America-first nationalism and isolationism will continue to dominate the Republican Party. The worst thing European leaders could do now is to sit back and resume their previous subordinate role within the transatlantic relationship.

Joschka Fischer

BERLIN – Despite all his whining and wailing, Donald Trump’presidency will end on January 20, 2021. He will be history; but, sadly, his political legacy will endure. 

With almost 75 million Americans voting for him (and 82 million for Joe Biden), Trump mobilized an extraordinary and unexpected level of support among a base that will continue to steer the Republican Party toward his brand of nationalist isolationism.

Like a revenant, Trumpism will haunt US politics for a long time to come, and some version of it will be on the ballot again in 2024 – that much is already clear. 

To vanquish Trumpism, Democrats needed to muster a “blue wave” of electoral victories all the way down the ballot. 

They didn’t.

The idea that Trump himself will run again is unlikely, given his age. But younger populist heirs are already jostling to claim the mantle. From both a European and transatlantic perspective – each of which has an existential interest in America remaining committed to multilateral cooperation – Biden’s election represents victory in a decisive battle, but not in the war.

We here in Europe must not forget that, after four years of Trump’s incompetence and mendacity – with more than 300,000 Americans dead from COVID-19 – almost half of US voters decided they wanted four more years of the man. 

That disturbing fact has far-reaching implications for the future of European policymaking.

Europeans could make no greater mistake than to lean back comfortably and cede responsibility for the transatlantic relationship to the Biden administration. Biden and his advisers may be infinitely more competent than Trump, but the future of transatlanticism will depend in no small measure on what Europe – and particularly Germany – does in the coming years.

While the Trump years forced European leaders into a defensive crouch, Biden’s election requires the opposite: a proactive push for transatlantic renewal. Restoring the relationship requires that Europe act like an “adult” and co-equal vis-à-vis the United States, moving beyond the Cold War-era subservience that still endures 30 years later.

For example, European countries’ disproportionally small share of the burden of military spending within NATO is simply inexplicable to most Americans (and not just Trump supporters). This point of contention should be resolved as quickly as possible, not least because it would be in Europe’s own interest to bolster its defense.

But Europeans must make clear to the Biden administration from the start what Europe can and cannot do. America is a global power with global interests and unrivaled military capabilities. 

Europe, by contrast, consists of many small- and medium-size countries, each of which has only limited ability to project power and influence (perhaps with the exception of the two nuclear powers, France and the United Kingdom, and the UK will first need to find its feet outside the European Union).

Past experience with military missions outside of Europe has shown that the perspective of a global power differs fundamentally from that of a small- or medium-sized power. European voters recognize this, and it will have a strong bearing on whether they accept such missions in the future.

In the context of the transatlantic relationship, Europe’s role is to defend NATO territory and its precarious periphery. In Eastern Europe, this concerns primarily the Baltic states (all NATO members), the war in eastern Ukraine, and other “frozen conflicts” in Europe’s neighborhood. 

Resolving these – or at least achieving some sort of stabilization – will require a much more forceful European diplomatic response than we have seen so far.

Moreover, mass migrations and the fight against terrorism will force Europe to deepen its engagement on the southern shore of the Mediterranean, in the Middle East, and in West Africa. 

The eastern Mediterranean is increasingly becoming a new hotspot, owing to tensions between EU and NATO members (Cyprus, Greece, and Turkey) and the unresolved conflicts in the Western Balkans. 

Europeans should focus primarily on these challenges, and on developing capabilities needed to manage them; that in itself would strengthen European security, and thus Europe’s contribution to NATO.

As for world politics, Europe must leave this domain to the global superpowers – a title it cannot claim for itself. This is particularly true when it comes to China. 

The EU needs to establish a close mutual understanding with the US on this issue, particularly where common values are concerned. 

The US and the EU should pursue policy coordination as equals; but, again, there will need to be clarity about what European voters will accept – and thus what European governments can do. For example, NATO should not be made into a security organization for East Asia, as that would simply overstretch it.

In the area of trade policy, a new set of shared strategic interests will emerge, both vis-à-vis China and in the transatlantic region. The reduction or even elimination of trade imbalances will remain a high priority.

Meanwhile, storm clouds are gathering on the digital-policy front. Europe, an important market for US tech giants, is insisting on its digital sovereignty and introducing comprehensive regulations to protect European data and privacy, and to rein in the power of the biggest digital platforms. 

Here, differing interests within the transatlantic sphere are threatening to collide. If Europe and America can agree on common rules, they can set the global standard more or less by default. 

But with China making its own bid for leadership over digital governance standards, time is running out.

Even with Biden in the White House, there will be no going back to the comfortable old dependencies that long defined the transatlantic relationship. After four years of Trump, Europeans know what is at stake. 

Likewise, continuing to harbor any illusions about China would be both naive and dangerous. There is no better alternative to a renewed transatlanticism. By spurning Trump and electing Biden, America has delivered. 

As Americans say, the ball is now in Europe’s court.

Joschka Fischer, Germany’s foreign minister and vice chancellor from 1998 to 2005, was a leader of the German Green Party for almost 20 years.

9 Ways the Pandemic Will Change Travel in 2021

As 2020 ends, and with vaccination against the coronavirus ramping up, would-be travelers wonder what they can expect in the coming year, and beyond. Here’s what we know.

By Tariro Mzezewa, Ceylan Yeginsu, Elaine Glusac and Sarah Firshein

Travelers and the travel industry are looking forward to a brighter 2021. Here, an airplane lands at sunrise at Charles-de-Gaulle Airport near Paris.Credit...Christian Hartmann/Reuters

The travel world has been on a roller coaster in 2020. Even as vaccination campaigns started in the United States and Europe, countries slammed shut their borders to visitors from the United Kingdom, because of a new strain of the coronavirus. 

And while the number of people flying in the United States is again on the rise — topping 1 million a day on the weekend before Christmas — a patchwork of quarantine and testing regulations remains in place in many parts of the country.

Worldwide, Covid-19 has killed more than 1.5 million people, sickened millions more and short-circuited economies. Of all the industries reeling from its destructive impact, the travel industry was upended like no other.

Travel has been changed by past calamities. Safety measures instituted after the 9/11 attacks are now just part of the travel experience. It’s unclear just which changes to the travel landscape will be in place a year from now — or 10 years on — but some answers are starting to come into focus.

On the brink of the new year, we looked at nine of the most pressing queries facing the travel industry and individual travelers — here are the answers.

An Israeli medical worker fills out an international certificate of vaccination for coronavirus at the Sheba Medical Center, near Tel Aviv.Credit...Jack Guez/Agence France-Presse — Getty Images

Will I need to prove I’ve been vaccinated to travel?

In November, Qantas Airlines announced that once a coronavirus vaccine was available, passengers hoping to fly on the airline would need to prove that they had taken it. Alan Joyce, the airline’s chief executive, described the need for proof of vaccination as “a necessity.”

“I think that’s going to be a common thing talking to my colleagues in other airlines around the globe,” he said.

Indeed, many airlines are currently testing technology to streamline the health documentation process, including mobile health apps like CommonPass, ICC AOKpass and VeriFLY to ensure travelers can present their health data in a secure, verifiable way.

It’s not known yet whether some kind of universal health form or certificate will be required to travel because that would require participation from various countries and organizations, but that’s happened before. 

The International Certificate of Vaccination or Prophylaxis, known to many as the carte jaune or yellow card, was originally created in the mid 1930s by the World Health Organization. 

Versions were used as proof for vaccination against diseases including yellow fever, typhus and smallpox, and many countries still require proof of certain vaccinations when traveling. 

For those travelers who have relocated to foreign countries over the years, the possibility of sharing personal health information isn’t unusual, as many visa and residency applications call for medical exams.

Today’s apps have to address a host of issues around carrying health data, including privacy and standardization. For one, nobody wants to carry around a printed health record that could contain sensitive information in addition to proof of testing or vaccination. 

For another, such records could be forged with image-editing tools. And in this increasingly global world, a traveler’s health documents could be written in a language that is unfamiliar to an airport official.

The Commons Project, the nonprofit that is developing the CommonPass, said its app connects with websites for medical facilities, and those sites then load verification of completed test or vaccine record inside the app, limiting the amount of private information that is shared. 

Others are taking a similar approach.

A common request from people across the industry is for governments to work together to standardize testing and vaccination requirements. For example, travelers who are vaccinated in the United States should know that their vaccination and documentation is valid in Thailand and vice versa. — Brian Chen and Tariro Mzezewa

How long must I wait until travel picks up?

With approved vaccines being administered in Britain, Canada, the United States and elsewhere, industry insiders are hopeful that people will transition from searching for trips online to booking them.

“A safe, effective and well-distributed coronavirus vaccine is the linchpin for a return to travel normalcy,” Scott Keyes, founder of Scott’s Cheap Flights, an online booking platform, wrote in a recent email. “Great news on the vaccine front is great news on the travel front.”

But the initial distribution of the vaccine may not equal a swift return to mass travel. While some experts believe that pent-up demand will have people rushing in large numbers to book “vaxications,” others, including Anthony S. Fauci, the nation’s top infectious disease expert, think the return to travel will be gradual, with people easing their way back.

“I think it’s going to be gradual,” Dr. Fauci told The Times this month. “There is no black and white, light switch on, light switch off.”

Until the vaccine is widely distributed, rigorous testing will remain a key part of the travel experience — before and after traveling. (Expect testing to be offered as an amenity at a growing number of hotels.) Still, for many in the industry, the vaccines provide a reason to be hopeful.

“After months of a ‘cautiously optimistic’ tone, we now look to this vaccine as a means to bring back some travel demand,” said Mike Deitemeyer, chief executive-elect and president of Aimbridge Hospitality, whose portfolio includes more than 1,500 branded and independent properties in 49 states and 20 countries.

Road trips, which won 2020, are expected to remain popular as they guarantee comfort and control for travelers. Cruise lines are reporting strong bookings for summer 2021 and airline travel is expected to pick up in the second quarter of the year, with international travel outpacing domestic travel, according to the travel marketing firm MMGY Global, a significant change from bookings for 2020.

Canada’s prime minister, Justin Trudeau, has said that he hopes that every Canadian who wishes to be vaccinated will have done so by the end of the year. In Canada and the United States, vaccinations will be difficult to distribute in remote and rural areas. 

For low-income countries with less robust infrastructure, it could take until 2024 to obtain enough vaccines to fully immunize populations. That means it could take a while for Africa’s $12.4 billion safari industry to bounce back.— T. M.

Passengers aboard the World Dream on a “cruise to nowhere” watch a movie at an open air screening. A similar sailing was cut short when a passenger tested positive for the coronavirus, though he was later cleared. Credit...Ore Huiying for The New York Times

When can I get back on a cruise ship?

Since the Centers for Disease Control and Prevention lifted its “no sail” order on United States cruises October, cruise companies have been scrambling to set up an infrastructure that meets the requirements the health agency laid out for the safe resumption of sailings.

Most major cruise lines had planned to restart operations in early 2021, but the resurgence of the coronavirus has forced many of them to push back their start dates.

Carnival, Royal Caribbean and Norwegian have paused all sailings through the end of February, but it’s unlikely any large-scale operations will begin soon after that date. Already certain voyages have been postponed to late 2021 and 2022.

“We apologize to our guests, but we must continue to take a thoughtful, deliberate and measured approach as we map out our return to operations in 2021,” said Christine Duffy, the president of Carnival Cruise Line. “Our commitment to the health and safety of our guests, crew and the communities we visit is at the forefront of our decisions and operations.”

The C.D.C.’s health and safety protocols include extensive testing, quarantine measures and social distancing. Cruise operators are required to carry out simulation cruises to test the new framework before applying for a permit from the agency that will allow them to restart excursions with passengers.

Most cruises will resume sailing at a reduced capacity with limited itineraries. In the United States, initial excursions will be limited to seven days, according to C.D.C. guidelines. 

Masks will be mandatory in all public areas onboard vessels, including outdoor decks, according to the Cruise Lines International Association, the industry’s trade group.

Even with heightened safety measures in place, several cruise lines in Europe and the Caribbean that sailed in recent months were forced to cut their trips short after reporting virus outbreaks onboard.

In October, eight people aboard the Costa Diadema tested positive for the virus following an excursion to the Greek Islands. 

In November, seven passengers and two crew members tested positive on a SeaDream Yacht Club voyage around the Caribbean. Most recently, Royal Caribbean’s Quantum of the Seas cut short its “cruise to nowhere” and returned to Singapore after an 83-year-old passenger initially tested positive for the virus. 

Further testing found the passenger to be negative.

While major cruise lines with the capacity to carry more than 250 passengers have said they will require testing before passengers board a vessel, the details of testing protocols during cruises are still unclear.

“The testing framework remains fluid because the test time frames have been changing over the last seven months in terms of how quickly and effectively they can turn around,” said John Downey, president of the Americas at Hurtigruten, a Norwegian cruise company, which is aiming to restart its European voyages in April. 

“We are working with experts to explore the most recent testing protocols and once we have the best option available, we will figure out how to execute that plan operationally.”

Despite the risks and challenges, cruise fans are eager to sail and have been booking excursions for 2021. 

Since April, 80 percent of cruise shoppers surveyed by the Cruise Critic, a major cruise planning website, said they had booked for next year.

A recent report by the website also found that travelers are spending more on cruises with the average cost of a booked cruise up by 120 percent, compared to the same period last year, mainly because more people are booking luxury and river cruises that have a smaller capacity and higher fares.

Regardless of the new protocols and increase in fares, the recent rollout of coronavirus vaccines has created optimism within the sector, which has lost billions of dollars and thousands of jobs since the pandemic halted cruise ships in March.

“The cruise companies are doing everything they can to ensure that we can get back in a safe way, and I think they are nearly there,” said Shannon Wright, a 45-year-old beautician from Newcastle, England, who has booked two cruises for 2021. “It’s worth the wait.” — Ceylan Yeginsu

City or country? United States or international? Where can I expect crowds?

Since April, the majority of Americans have chosen to travel domestically, taking road trips, exploring small towns, scenic drives and nearby lakes and beaches. 

That trend is likely to continue into 2021, but interest in international travel has increased since November following the news of vaccines.

Cancun and Tulum in Mexico are among the top searched destinations for American travelers in 2021, alongside Oahu and Maui in Hawaii, according to a 2021 trends report by the online travel agency Expedia. 

Further-flung destinations such as French Polynesia, the Maldives and Bali are also popular.

“We expect pent-up demand for travel will continue to grow with the availability of Covid-19 vaccines,” said Monya Mandich, the vice president of Expedia Group Media Solutions. 

She added that of more than 11,000 people surveyed for a recent study, 57 percent said they would be comfortable traveling if a vaccine was widely available.

Recent search traffic also indicated an eagerness among travelers to return to major cities for cultural holidays, with most interest starting in June to late 2021. 

In the United States, Las Vegas, New York and Los Angeles were among the most searched urban destinations, according to Expedia. Data from the travel search engine, Skyscanner, showed that London is the most searched destination for Americans looking to travel internationally next summer.

“As we’ve seen with public health crises in the past, when people feel their chances of contracting the virus are minimal they start traveling again and come back very quickly,” said Allen Simpson, managing director of strategy at London & Partners, the international trade, investment and promotion agency for London. 

“We expect to see the same trend when people have been vaccinated for Covid-19.”

Mr. Simpson expects a phased return to London, starting with locals followed by visitors from across the country, the continent and then finally international tourists from further afield. 

Many of the city’s cultural attractions like museums and theaters in the West End will reopen gradually.

If vaccinations become widespread in the first quarter of next year, New York City also expects to see a surge in visitors from regional and short-haul domestic destinations, according to NYC & Company, the city’s tourism marketing agency.

The international market is expected to take longer to pick up, and is unlikely to reach 2019 levels before 2025, the agency said.

“Given significant pent-up demand, we target regaining half our 2019 volume by end of 2021 and to be fully back three years from then,” said Fred Dixon, the president and chief executive of NYC & Company. — C.Y.

When will I be traveling for business again? And what about my frequent-flier miles?

This was the year business travel flatlined, taking with it airline, hotel and convention hall profitability. 

For a time, it also jeopardized those loyalty-point balances coveted as freebie currency by frequent business travelers and many others, as miles and credit-card points seemed less valuable when no one was traveling.

But points programs are far from dead, experts say, citing better booking terms, the growing value of loyal customers to travel companies and the advent of creative programs that may allow you to spend points like cash more easily on things other than airline tickets or magazine subscriptions. In these largely stationary times, programs are keen to retain existing members.

“Most airlines have increased the value of their points by getting rid of fees,” said Brian Kelly, the founder of The Points Guy, a travel site devoted to rewards. 

He noted also that fees to change itineraries or refund miles on canceled trips have been dropped. 

“It makes it more valuable to redeem using miles because they’re fully refundable, whereas cash tickets are changeable.”

The bank of points — still somewhat growing thanks to travel-rewards credit cards that expanded to offer bonuses on things like groceries during the pandemic — and increasing opportunities to travel with the widespread distribution of vaccines suggest competition to redeem for seats is coming, leading to an eventual devaluation of points.

But not soon, say experts, in part because many airlines used their loyalty programs as collateral when they borrowed money during the pandemic.

“Airlines will be careful not to jeopardize value and the loyalty of customers once this crisis abates,” said Vik Krishnan, a partner in the travel practice at McKinsey & Company, the business consultants.

Most analysts expect any near-term travel recovery to be driven by leisure travelers desperate for a vacation or to see family, not by business fliers.

Apart from health concerns and corporate travel freezes, “business travelers need a place to go to and currently office occupancies are very, very low so there is no real reason to travel to a city,” said Jan D. Freitag, the national director of hospitality market analytics at Costar Group, a commercial real estate firm, pointing to data that shows office occupancy averaging around 24 percent nationally.

He expects business travel to pick up in the third quarter of 2021. McKinsey & Company pins the full recovery to 2023 or beyond.

Before business travelers can resume accumulating points in earnest, expect more ways to use them. “From a redemption perspective, we can see the need for a lot more emphasis on ‘micro rewards,’” Mr. Krishnan said, referring to everyday items like a Starbucks latte rather than saving the entire bank for a family trip to Hawaii.

Still, the next year might be that time to book a big trip with points, when it’s safe to do so, as devaluation is inevitable.

“I think what’s likely to happen is an increase in value in how points can be used in the first few quarters of 2021,” said Alex Miller, the chief executive and founder of, a website devoted to maximizing points. 

Thereafter, he expects “a slow devaluation of those points toward the back end of 2021 and into 2022.”— Elaine Glusac

If I need to cancel, will flexible policies still be around?

As the coronavirus crisis crushed travel, flexibility swept the industry, from airlines to cruises to R.V. rentals and hotels, as operators aimed to assure potential travelers they had little to lose — financially, anyway — in booking.

Airlines came a long way in bending to consumer sentiment, offering fee-free changes even on nonrefundable tickets as passenger volumes plummeted; they remain down nearly 70 percent compared to a year ago.

“The flexible booking policies for basic economy persist because right now the people who are traveling are lowest-fare leisure travelers,” said Gary Leff, who writes the air travel blog View From the Wing. 

“Those tickets need to have flexibility to get customers to buy.”

Airlines have talked about making flexibility permanent for other fares, a promise that may hold out until the industry recovers to 2019 levels, which the industry group Airlines for America doesn’t expect before 2023 or 2024.

While hotels have long had flexible cancellation conditions, usually allowing penalty-free cancellations a day before arrival, consumers in 2020 discovered — often the hard way — the variable terms of vacation rental homes, which can range from refundable 24 hours out to refundable only within 48 hours of booking.

“Cancellation policies in the vacation rental market have not changed,” said Clark Twiddy, the president of Twiddy & Company, which manages more than 1,000 vacation home rentals on the Outer Banks in North Carolina. 

“But we’ve seen a significant uptake in travel insurance,” he added, noting increases up to 40 percent. (Airbnb has announced it is working on securing a travel insurance partner to make it easy to insure bookings).

According to the United States Tour Operators Association, the most frequently asked question by travelers who made new bookings this fall was on the cancellation or refund policy, ahead of health protocol questions.

“The future of travel is more flexible. Period,” said Jon Gray, the chief executive of RVshare, a marketplace for recreational vehicle rentals, noting that travelers remain cautious and tend to book close to their travel dates.

But whether these consumer-friendly terms last will likely vary by sector, with airlines and cruise lines — two of the hardest-hit operations — likely to keep them in place longest. 

Many cruise lines, including MSC Cruises and Royal Caribbean, are offering changes up to 48 hours before departure and rebooking through at least April 2022, terms that were unheard-of before the pandemic.

“I expect flexible cruise cancellation policies to last at least through 2022, and maybe longer if cruise start dates push deeper into the summer ’21 sailing season,” said Robert Kwortnik Jr., an associate professor in the hotel school at Cornell University who has studied the cruise industry.— E.G.

Meghan Froloff and her children Evy and Nate take a walk in the Arcata Community Forest in Arcata, Calif.  The timeline for vaccinating children is unclear. Credit...Alexandra Hootnick for The New York Times

I’d like to travel with my family, what’s the outlook?

According to an October survey from Vrbo, the home-rental company, 82 percent of United States families already have travel plans for 2021. 

Sixty-five percent plan on traveling more than they did before Covid; 61 percent will likely choose outdoorsy destinations over urban ones.

Most notable this year for families, though, was the loss — or pause — of multigenerational trips.

“Intergenerational travel — going someplace with grandparents — is kind of off the books for a while,” said Marianne Perez de Fransius, the co-founder and chief executive of Bébé Voyage, a family-travel website and online community of globe-trotting parents. 

“What people are talking about is going to visit grandparents because they haven’t been able to do that.”

Other patterns that cropped up this year will likely continue to define family travel in 2021, including “schoolcations” that have transported middle-school Zoom classes to the beach and multifamily “pod” trips that have allowed for inter-household socializing somewhere — anywhere — besides home.

“We’re witnessing this over and over again: families seeing this time as a rare opportunity to uproot for a short stint as they home-school, and live in a place that they had always wanted to try out,” said Caitlin Ramsdale, the managing director at Kid & Coe, a vacation-rentals site geared toward families.

If Kid & Coe’s recent browsing patterns are any indication, families are starting to think about what vacations in the “After Times” might look like.

“We are seeing a lot of people starting to imagine what a trip to the South of France would look like this summer,” Ms. Ramsdale said. “The conviction is still not there, but the sentiment is.”

But there is one big, unanswered question: Vaccinations for children. None of the vaccines have been tested on kids, and while inoculations are being rolled out for older people first, it’s unclear when they will reach children.

“If kids can’t get the vaccine, one concern I’ve heard is about what happens with tourists,” said Ms. Perez de Fransius. “Are countries going to say, ‘You can’t come in unless everyone is vaccinated?’”

As for the quintessential family rite of passage — Disney — the parks’ expansive Covid-19 health and safety measures, which range from strict capacity limits to virtual queues, have so far been successful in creating a carefully controlled “bubble,” of sorts.

“Before the pandemic, safety was not usually top of people’s minds,” said Lou Mongello, the host of WDW Radio, a podcast about all things Disney. “Now the first thing we think about is, ‘Where’s the safest place that I can go to get my kids out of the house?’”

Walt Disney World Resort, in Orlando, was booked close to its capacity limit over Thanksgiving and is already 77 percent booked for the first quarter of 2021. Although kids can’t hug Cinderella, the health measures may play another role next year: “Anyone who visits next year will see that the park experience has become so much more efficient,” Mr. Mongello said. — Sarah Firshein

What new travel trends can I expect to continue in 2021?

Call them “workcations,” “flexcations,” bleisure, whatever: By any name, the longer trips that remote working facilitated in 2020 show no signs of slowing.

“Global nomadism is going to be a huge theme in 2021,” Jack Ezon, the founder of Embark Beyond, a luxury travel agency. “People are going to a destination for a month because they can work and play at the same time.”

Stays of seven or more nights currently account for 17.5 percent of the January bookings at The Betsy Hotel in Miami Beach, which reopened in mid-December for the first time since March. Last January, stays of that length totaled 8.3 percent.

Jonathan Plutzik, The Betsy’s owner, said interest in new extended-stay packages cut across the generational spectrum.

“Families with young children are looking for space: outdoor spaces to be with their kids and space to work remotely,” Mr. Plutzik said. “Fifty- and 60-somethings are looking for those things, plus a full-service staff and places to dine and relax outside.”

Until vaccinations are widespread, other patterns will also persist. Ever-changing state and county travel restrictions and international travel will continue to make staycations and local travel among the few options for those looking to get away.

That tracks with what most consumers say they feel ready to do next year. In an October survey from Airbnb, 61 percent of respondents said they’re interested in trips within driving distance of home. Top 2021 destinations on Airbnb include Tennessee’s Smoky Mountains and Palm Springs, Calif.

“Twenty-twenty was definitely the year the world went local,” said Mr. Ezon. “People were forced to explore their own backyards, which was incredibly rewarding. But by May or June, with more vaccines, borders will probably start to open.”— S.F.

A hotel worker cleans the windows in a restaurant area at the Acropolian Spirit Hotel in Athens. Hygiene has become a major focus in travel. Credit...Petros Giannakouris/Associated Press

Will I ever feel safe traveling?

Among the many things the pandemic revealed about the travel industry is that almost every sector — from airlines and cruises to travel agencies and hotels — was ill-prepared to handle a crisis of this magnitude, as were governments. 

The crush to keep customers happy (or at least loyal), provide refunds where possible and even bring citizens home at the start of the pandemic, showed that no matter how many contingency plans were in place, there are some things no one can prepare for.

In the months since the pandemic took hold, people across the industry have been working to create policies and procedures that can apply in times of future crisis — even if that future crisis isn’t a health crisis. Many companies will use these changes, particularly in health and safety measures, to woo travelers back in 2021.

For hotels and home-sharing, perhaps the most visible change is the emphasis on cleanliness. People have learned to deeply care about the hygiene of heavily trafficked spaces, like hotels, planes and trains, and will demand a stepped-up focus on health measures.

This approach is largely meant to put travelers at ease. Designations and ranking systems that take cleanliness and safety into account could become the norm in the hospitality industry.

Partnerships with trusted cleaning-supply brands or hospitals will continue to evolve and be marketed to would-be travelers. Amtrak touts its relationship with RB, the makers of Lysol, while a partnership between Pendry Hotels and the health service One Medical gives hotel guests access to One Medical’s app even after they’ve checked out. 

In the Dominican Republic, guests of the Casa de Campo Resort & Villas now receive government-sponsored medical coverage and have V.I.P. access to the resort’s on site hospital, Central Romana Medical Center, which sits within the walls of the property.

Beyond cleanliness and health measures, travelers’ fears could be assuaged by clearer communication, flexible cancellation and rescheduling policies, and better use of technology during every aspect of the travel experience.

Hussein Fazal and Henry Shi, the founders of SnapTravel, an app that uses artificial intelligence to help customers book hotels with messaging apps like Facebook Messenger and iMessage, have said that to adapt to the “new world,” they made tweaks to focus more on spontaneous bookings and encourage hesitant customers to chat with a live agent.

They added Covid-19 messaging and notifications throughout the process. This allowed SnapTravel to see growth throughout the year, while also easing traveler fears, and these changes would work in the event of other unprecedented crises. — T. M.

Brian Chen contributed reporting.

Tariro Mzezewa is a travel reporter at The New York Times.  @tariro

Ceylan Yeginsu is a London-based reporter. She joined The Times in 2013, and was previously a correspondent in Turkey covering politics, the migrant crisis, the Kurdish conflict, and the rise of Islamic State extremism in Syria and the region.