Ranvir Singh and Ben Shepherd just interviewed the Shadow Chancellor on GMB. So much better than the pompous, gotcha seeking technique of Piers Morgan
Chancellor had something of a car crash on his BBC interview this morning.
Did OK on R4 - what tripped him up on the TV?
He was a Tory.
That'd be enough for some people.
I didn't watch it
Never let it be said that PB Tories are overly dependent on evidence for their persecution complexes.
It was a joke. Hence the wink and the "j/k" (literally stands for "just kidding") that you editted out of my post.
Hey, mine was also a joke about PB Tories (Mark 1920) constantly portraying themselves as a traduced, silenced, persecuted minority. It's so obviously hilarious that I don't even need an emoji!
I like to leave out emojis from gags occasionally just to see if someone will get mad at what is obviously a joke. Sadly, few fly into the trap.
The thing that some people clearly understand about economics and others clearly don't is that it is circulation that matters.
Giving money to struggling businesses/individuals does absolutely nothing for the macro economy whatsoever as they cling on to that cash (and then continue to struggle if they're not getting anything circulated back to them).
What is needed is to get money circulating again. That is why I have been calling for a VAT cut here for months. And I've been laughed at here saying we need tax cuts with replies like "yeah and I'd like a supermodel".
Cutting VAT and similar issues on the struggling hospitality sectors will allow money to circulate more in those sectors - and allow businesses to cope with thicker margins on smaller volumes - thus saving the sector from a catastrophe and in the long-term the government will make more tax revenue despite temporarily lower taxes.
Essentially adjusting for the time value of money the peak of the Laffer Curve has temporarily moved far to the left of the graph and the government needs to respond accordingly.
Wasn't there an old song about the circulation of money? The lines "see the money flow, round the Barley Mow" float into my head but Google finds nothing.
It's usually best to wait for a few days before deciding whether a budget has been successful in political terms.
However, reality appears to be dawning more quickly than usual this morning. This time you don't need to pour in detail over the appendices to the Red Book to find that all is not as it seems. We already have a chorus of businesses in different sectors who have woken up to the fact that they've missed out from any meaningful further help and are shouting loudly about it. Labour needs to do no more than echo those complaints and wait for reality to bite in the form of sectoral unemployment leading to a more general loss of demand. The charge of insufficient targeting will be the Achilles heel of these measures.
Any Chancellor can spend £30bn. The question is whether they can do so effectively.
It comes across as special pleading
Most are happy. Gyms and aviation are complaining.
Whilst not wanting to underplay the risk, it seems to me that a lot of people seem to be operating under the belief that you can catch COVID simply by being in the same room and/or in close proximity to other people. As opposed to other infected people. In some parts of the country right now the actual odds of finding yourself within “dangerous” proximity of an infected person, let alone catching COVID off them, let alone developing symptoms are pretty small. Let alone if you operate sensible personal precautions.
It’s not like going into a pub is comparable with spending all night mingling on a crowded nightclub dance floor.
That's unfortunately probably not true if you make a habit of it. The last estimate I saw is that 1 in 1000 people are currently infectious, and the level is not declining rapidly. If you go to a pub and mingle with a few people you'll probably be fine. If you do it twice a week for a couple of months, and a few other things like shopping and the odd restaurant meal, you'll probably catch it sooner or later.
This isn't dependent on the 1/1000 rate being quite accurate. If it's actually 1/500 or 1/3000 the argument is the same.
I have a mildly increased risk (>70) but had a haircut and went into two shops yesterday. I feel the risk has declined to the point that an exceptional outing is a reasonable roll of the dice. But I don't plan to do it again for a month or so.
Ditto, I have a degree of occupational exposure that I can do little more about. The PPE etc seems to be working. Otherwise I gave not been in a shop, other than local small supermarket, garden centre or DIY store for 4 months. Not been in a vehicle with anyone other than Mrs Foxy and Fox jr.
Off to the IoW for a long weekend, so may go to a pub with beer garden, as the forecast looks good, but otherwise just socially distanced filial visiting and walks. The way to keep the r number down is treat everyone and everything as an infection risk. I am used to it now.
On topic, an intriguing facet of all this. Since becoming Chancellor, Sunak has quickly established himself as one of the most popular politicians in the country.
But Javid told us he resigned as Chancellor because "no self-respecting minister would accept" the interference from No 10's aides. Chiefly Dominic Cummings.
Something somewhere is clearly quite wrong with the media narrative on Cummings.
Either Cummings is not in fact an unelected dictator running every element of government business, because Sunak has taken a firm grip of the Treasury and is running it brilliantly (or at least in a very popular way), despite the "unacceptable" interference from Cummings.
Or... Cummings is in fact in complete control and Sunak is a puppet. But that's ok because Cummings himself is coming up with very popular policies and is not the inept monster made out by the chattering classes but someone the public should cherish.
Javid resigned over his SPADS having to answer to Cummings. To lose a second CofE would look very bad, so Sunaks SPADS may get nominal control by Cummings, but in practice very little.
The other thing is that Cummings agenda is unusual for a UK right winger. It is Cultural and organisational, not economic. He hates the Civil Service in all its forms, and wants to smash what he sees as the Blob. Brexit too is driven by culture war, not economics. Cummings is not bothered by economics, or whether the countries debts are sustainable.
Both Cummings and Sunak have one thing in common. Both were wealthy from the start, but then married into very wealthy families. Neither has ever had to go short personally and never will, as such culturally they are very happy spending money, as there has always been an inexhaustible supply. We will see if that is true of the Treasury...
I think that the real finance implications take a year to hit. The July 31 tax payments have been deferred, and the income tax due on Jan 31 is 11 months of normal income. Corporation tax is also paid 9 months after fin year finishes. Tax reciepts will appear to be OK for some time yet, but will fall off a cliff in 2021, while spending remains very high. We are at the running in the air stage of a Wile E Coyote cartoon.
I guess the question is, does it matter? Everyone everywhere is running huge deficits now. Everyone who can is debasing their fiat currency through money printing to monetise these deficits. And gilt prices evyerwhere are still sky high. At some point orthodoxy says this all feeds through to high inflation. But of what, goods or assets? If I were writing the full budget, I'd equalise capital gains tax with income tax ahead of asset price inflation, just in case gilt yields start spiking beyond the control of our highly interventionist central bank.
The factor largely overlooked through this crisis has been the extent of balance sheet restructuring. From large caps, to SMEs to households. Massive amounts of corporate debt have been refinanced at negative real interest rates and with longer durations. Bye bye debt cliff edge. SMEs have been given a lifeline with often unsuitable very high interest short term debt, refinanced with longer term state guaranteed facilities. As for households, they've been given mortgage holidays and low rates to refinance at, a furlough scheme an order of magnitude more generous than redundancy and in many cases, no reduction in disposable income (or even an increase given commuting costs) but highly reduced avenues to blow that disposable income.
Glass half full says there's no meaningful second wave and we're at the start of a roaring decade. Albeit with as many losers as winners (poor old Pret).
But doesn't a rise in M3, which as you say tends to be inflationary also tend to lead to a hike in interest rates. As we are financing the pandemic by personal borrowing be that from HMRC deferments, which we might have to refinance by a bank loan in January, or from an extension to the mortgage, isn't that sub-optimal?
Ceteris paribus the country is facing massive deflation.
A boost in inflation right now is a good thing, not a bad thing.
Not if you are mortgaged up to the hilt and interest rates rise to 15%. During the Major Government my mortgage IIRC was for a while at around 18%.
Add general inflation to that and we have a heady cocktail of serious debt to deal with.
Part of me thinks Johnson is a lucky politician and the normal economic rules don't apply to him and we can all carry on as normal without consequence. Is that wishful thinking?
You can get a 5 year fix at 1.59%. Grab it. This is not financial advice, your home is at risk, etc etc
The thing about Sunak is he handles billions with aplomb. But popularity for dishing it out does not make him a likely leader.
"And Boris made it clear how much he enjoyed his junior’s slick performance. The PM tucked himself comfortably into a corner of the Treasury bench and harrumphed loudly as the nattily-suited brainbox took centre-stage. Far from being threatened, Boris looked as happy as a football manager watching a classy new purchase bossing the midfield in a cup-tie." https://www.spectator.co.uk/article/rishi-sunak-is-no-threat-to-boris
Not if you are mortgaged up to the hilt and interest rates rise to 15%. During the Major Government my mortgage IIRC was for a while at around 18%.
Add general inflation to that and we have a heady cocktail of serious debt to deal with.
Part of me thinks Johnson is a lucky politician and the normal economic rules don't apply to him and we can all carry on as normal without consequence. Is that wishful thinking?
One off spending isn't a real problem, the real issue would be if the spending became permanent because, say, people became unemployed.
Hence doing everything they can to make this a blip rather than an long term issue.
My concern is inflation as a result of supply issues and raw material increases which will impact us in our favourite retail store, much like it did in the late 1980s.
I was pleasantly surprised to hear both Sunak and his interviewer use the term deadweight loss.
The furlough scheme was/is great and has saved us from mass unemployment. But the job retention thing is dreadfully inefficient. The youth job placement looks similar to other failed apprenticeship ideas to me. The cheap meals out might be a good idea, but subsidising eating out is a pretty strange incentive to put in place.
Dogs that didn't bark: universities and adult education? Now is a great time for govt to be getting people back into study, either university or adult education. Aviation? No idea what can help them tbh.
On topic, an intriguing facet of all this. Since becoming Chancellor, Sunak has quickly established himself as one of the most popular politicians in the country.
But Javid told us he resigned as Chancellor because "no self-respecting minister would accept" the interference from No 10's aides. Chiefly Dominic Cummings.
Something somewhere is clearly quite wrong with the media narrative on Cummings.
Either Cummings is not in fact an unelected dictator running every element of government business, because Sunak has taken a firm grip of the Treasury and is running it brilliantly (or at least in a very popular way), despite the "unacceptable" interference from Cummings.
Or... Cummings is in fact in complete control and Sunak is a puppet. But that's ok because Cummings himself is coming up with very popular policies and is not the inept monster made out by the chattering classes but someone the public should cherish.
Javid resigned over his SPADS having to answer to Cummings. To lose a second CofE would look very bad, so Sunaks SPADS may get nominal control by Cummings, but in practice very little.
The other thing is that Cummings agenda is unusual for a UK right winger. It is Cultural and organisational, not economic. He hates the Civil Service in all its forms, and wants to smash what he sees as the Blob. Brexit too is driven by culture war, not economics. Cummings is not bothered by economics, or whether the countries debts are sustainable.
Both Cummings and Sunak have one thing in common. Both were wealthy from the start, but then married into very wealthy families. Neither has ever had to go short personally and never will, as such culturally they are very happy spending money, as there has always been an inexhaustible supply. We will see if that is true of the Treasury...
I think that the real finance implications take a year to hit. The July 31 tax payments have been deferred, and the income tax due on Jan 31 is 11 months of normal income. Corporation tax is also paid 9 months after fin year finishes. Tax reciepts will appear to be OK for some time yet, but will fall off a cliff in 2021, while spending remains very high. We are at the running in the air stage of a Wile E Coyote cartoon.
I guess the question is, does it matter? Everyone everywhere is running huge deficits now. Everyone who can is debasing their fiat currency through money printing to monetise these deficits. And gilt prices evyerwhere are still sky high. At some point orthodoxy says this all feeds through to high inflation. But of what, goods or assets? If I were writing the full budget, I'd equalise capital gains tax with income tax ahead of asset price inflation, just in case gilt yields start spiking beyond the control of our highly interventionist central bank.
The factor largely overlooked through this crisis has been the extent of balance sheet restructuring. From large caps, to SMEs to households. Massive amounts of corporate debt have been refinanced at negative real interest rates and with longer durations. Bye bye debt cliff edge. SMEs have been given a lifeline with often unsuitable very high interest short term debt, refinanced with longer term state guaranteed facilities. As for households, they've been given mortgage holidays and low rates to refinance at, a furlough scheme an order of magnitude more generous than redundancy and in many cases, no reduction in disposable income (or even an increase given commuting costs) but highly reduced avenues to blow that disposable income.
Glass half full says there's no meaningful second wave and we're at the start of a roaring decade. Albeit with as many losers as winners (poor old Pret).
But doesn't a rise in M3, which as you say tends to be inflationary also tend to lead to a hike in interest rates. As we are financing the pandemic by personal borrowing be that from HMRC deferments, which we might have to refinance by a bank loan in January, or from an extension to the mortgage, isn't that sub-optimal?
Ceteris paribus the country is facing massive deflation.
A boost in inflation right now is a good thing, not a bad thing.
Not if you are mortgaged up to the hilt and interest rates rise to 15%. During the Major Government my mortgage IIRC was for a while at around 18%.
Add general inflation to that and we have a heady cocktail of serious debt to deal with.
Part of me thinks Johnson is a lucky politician and the normal economic rules don't apply to him and we can all carry on as normal without consequence. Is that wishful thinking?
You can get a 5 year fix at 1.59%. Grab it. This is not financial advice, your home is at risk, etc etc
As to making a point, you get all frothy at the mere mention of Alex Salmond and how much damage he might do to the local govt in Scotland.
Can you provide an example of this? I'm concerned that I might have inadvertently expressed an opinion (frothy or otherwise) on a subject on which I don't really have an opinion.
On topic, an intriguing facet of all this. Since becoming Chancellor, Sunak has quickly established himself as one of the most popular politicians in the country.
But Javid told us he resigned as Chancellor because "no self-respecting minister would accept" the interference from No 10's aides. Chiefly Dominic Cummings.
Something somewhere is clearly quite wrong with the media narrative on Cummings.
Either Cummings is not in fact an unelected dictator running every element of government business, because Sunak has taken a firm grip of the Treasury and is running it brilliantly (or at least in a very popular way), despite the "unacceptable" interference from Cummings.
Or... Cummings is in fact in complete control and Sunak is a puppet. But that's ok because Cummings himself is coming up with very popular policies and is not the inept monster made out by the chattering classes but someone the public should cherish.
Javid resigned over his SPADS having to answer to Cummings. To lose a second CofE would look very bad, so Sunaks SPADS may get nominal control by Cummings, but in practice very little.
The other thing is that Cummings agenda is unusual for a UK right winger. It is Cultural and organisational, not economic. He hates the Civil Service in all its forms, and wants to smash what he sees as the Blob. Brexit too is driven by culture war, not economics. Cummings is not bothered by economics, or whether the countries debts are sustainable.
Both Cummings and Sunak have one thing in common. Both were wealthy from the start, but then married into very wealthy families. Neither has ever had to go short personally and never will, as such culturally they are very happy spending money, as there has always been an inexhaustible supply. We will see if that is true of the Treasury...
I think that the real finance implications take a year to hit. The July 31 tax payments have been deferred, and the income tax due on Jan 31 is 11 months of normal income. Corporation tax is also paid 9 months after fin year finishes. Tax reciepts will appear to be OK for some time yet, but will fall off a cliff in 2021, while spending remains very high. We are at the running in the air stage of a Wile E Coyote cartoon.
I guess the question is, does it matter? Everyone everywhere is running huge deficits now. Everyone who can is debasing their fiat currency through money printing to monetise these deficits. And gilt prices evyerwhere are still sky high. At some point orthodoxy says this all feeds through to high inflation. But of what, goods or assets? If I were writing the full budget, I'd equalise capital gains tax with income tax ahead of asset price inflation, just in case gilt yields start spiking beyond the control of our highly interventionist central bank.
The factor largely overlooked through this crisis has been the extent of balance sheet restructuring. From large caps, to SMEs to households. Massive amounts of corporate debt have been refinanced at negative real interest rates and with longer durations. Bye bye debt cliff edge. SMEs have been given a lifeline with often unsuitable very high interest short term debt, refinanced with longer term state guaranteed facilities. As for households, they've been given mortgage holidays and low rates to refinance at, a furlough scheme an order of magnitude more generous than redundancy and in many cases, no reduction in disposable income (or even an increase given commuting costs) but highly reduced avenues to blow that disposable income.
Glass half full says there's no meaningful second wave and we're at the start of a roaring decade. Albeit with as many losers as winners (poor old Pret).
But doesn't a rise in M3, which as you say tends to be inflationary also tend to lead to a hike in interest rates. As we are financing the pandemic by personal borrowing be that from HMRC deferments, which we might have to refinance by a bank loan in January, or from an extension to the mortgage, isn't that sub-optimal?
Ceteris paribus the country is facing massive deflation.
A boost in inflation right now is a good thing, not a bad thing.
Not if you are mortgaged up to the hilt and interest rates rise to 15%. During the Major Government my mortgage IIRC was for a while at around 18%.
Add general inflation to that and we have a heady cocktail of serious debt to deal with.
Part of me thinks Johnson is a lucky politician and the normal economic rules don't apply to him and we can all carry on as normal without consequence. Is that wishful thinking?
You can get a 5 year fix at 1.59%. Grab it. This is not financial advice, your home is at risk, etc etc
Whilst not wanting to underplay the risk, it seems to me that a lot of people seem to be operating under the belief that you can catch COVID simply by being in the same room and/or in close proximity to other people. As opposed to other infected people. In some parts of the country right now the actual odds of finding yourself within “dangerous” proximity of an infected person, let alone catching COVID off them, let alone developing symptoms are pretty small. Let alone if you operate sensible personal precautions.
It’s not like going into a pub is comparable with spending all night mingling on a crowded nightclub dance floor.
That's unfortunately probably not true if you make a habit of it. The last estimate I saw is that 1 in 1000 people are currently infectious, and the level is not declining rapidly. If you go to a pub and mingle with a few people you'll probably be fine. If you do it twice a week for a couple of months, and a few other things like shopping and the odd restaurant meal, you'll probably catch it sooner or later.
This isn't dependent on the 1/1000 rate being quite accurate. If it's actually 1/500 or 1/3000 the argument is the same.
I have a mildly increased risk (>70) but had a haircut and went into two shops yesterday. I feel the risk has declined to the point that an exceptional outing is a reasonable roll of the dice. But I don't plan to do it again for a month or so.
Ditto, I have a degree of occupational exposure that I can do little more about. The PPE etc seems to be working. Otherwise I gave not been in a shop, other than local small supermarket, garden centre or DIY store for 4 months. Not been in a vehicle with anyone other than Mrs Foxy and Fox jr.
Off to the IoW for a long weekend, so may go to a pub with beer garden, as the forecast looks good, but otherwise just socially distanced filial visiting and walks. The way to keep the r number down is treat everyone and everything as an infection risk. I am used to it now.
Yep, after today the weather looks fair, and we are already awash with visitors. Pubs and restaurants have progressively been opening this week, although many have limited capacity due to the impact of the safety measures.
The thing that some people clearly understand about economics and others clearly don't is that it is circulation that matters.
Giving money to struggling businesses/individuals does absolutely nothing for the macro economy whatsoever as they cling on to that cash (and then continue to struggle if they're not getting anything circulated back to them).
What is needed is to get money circulating again. That is why I have been calling for a VAT cut here for months. And I've been laughed at here saying we need tax cuts with replies like "yeah and I'd like a supermodel".
A VAT cut is not the right way to go, however crowd-pleasing it might be in the short term.
First, there is a huge deadweight effect. Most of the purchases would have been made anyway, so all you're doing is cutting prices to individuals. They will save the difference.
Second, depending on the sector, people will often just bring forward future spending, leading to reduced economic growth when you take it away.
Third, there are often surprisingly large administrative costs involved in cutting VAT then raising it again, which is why, when they did it during the financial crisis, a lot of businesses did not even bother cutting their prices.
Fourth, sector-specific cuts lead to reclassifications and other inefficiencies.
Cutting less sexy business taxes, like payroll levies, or increasing capital allowances, gets you much more bang for your buck.
Isn't the point that businesses won't cut their prices and will therefore pocket the difference themselves making the business more viable.
(You could say the same about the stamp duty cut, eventually it gets worked into house-prices and they just go up by the difference - its what happened last time)
In terms of "bringing purchases forward", this is a natural consequence of having inflation of any level in the economy, people buy things now because they will cost more in the future. The alternative, deferring purchases, is worse for the economy and is usually driven by deflation.
The VAT cut is a quick way to save businesses money. The job retention schemes and half price meal system, clunky and unlikely to be terribly effective as it is, are the ways of maintaing consumer spending so that businesses can actually get the revenue in they will be keeping more of.
The thing about Sunak is he handles billions with aplomb. But popularity for dishing it out does not make him a likely leader.
"And Boris made it clear how much he enjoyed his junior’s slick performance. The PM tucked himself comfortably into a corner of the Treasury bench and harrumphed loudly as the nattily-suited brainbox took centre-stage. Far from being threatened, Boris looked as happy as a football manager watching a classy new purchase bossing the midfield in a cup-tie." https://www.spectator.co.uk/article/rishi-sunak-is-no-threat-to-boris
Forget Sunak's billions; look at his calm, assured demeanour in the House, at the Covid-19 briefings and in interviews. Sunak looks like a leader in a way most of his Cabinet colleagues (and future leadership rivals) do not.
On topic, an intriguing facet of all this. Since becoming Chancellor, Sunak has quickly established himself as one of the most popular politicians in the country.
But Javid told us he resigned as Chancellor because "no self-respecting minister would accept" the interference from No 10's aides. Chiefly Dominic Cummings.
Something somewhere is clearly quite wrong with the media narrative on Cummings.
Either Cummings is not in fact an unelected dictator running every element of government business, because Sunak has taken a firm grip of the Treasury and is running it brilliantly (or at least in a very popular way), despite the "unacceptable" interference from Cummings.
Or... Cummings is in fact in complete control and Sunak is a puppet. But that's ok because Cummings himself is coming up with very popular policies and is not the inept monster made out by the chattering classes but someone the public should cherish.
Javid resigned over his SPADS having to answer to Cummings. To lose a second CofE would look very bad, so Sunaks SPADS may get nominal control by Cummings, but in practice very little.
The other thing is that Cummings agenda is unusual for a UK right winger. It is Cultural and organisational, not economic. He hates the Civil Service in all its forms, and wants to smash what he sees as the Blob. Brexit too is driven by culture war, not economics. Cummings is not bothered by economics, or whether the countries debts are sustainable.
Both Cummings and Sunak have one thing in common. Both were wealthy from the start, but then married into very wealthy families. Neither has ever had to go short personally and never will, as such culturally they are very happy spending money, as there has always been an inexhaustible supply. We will see if that is true of the Treasury...
I think that the real finance implications take a year to hit. The July 31 tax payments have been deferred, and the income tax due on Jan 31 is 11 months of normal income. Corporation tax is also paid 9 months after fin year finishes. Tax reciepts will appear to be OK for some time yet, but will fall off a cliff in 2021, while spending remains very high. We are at the running in the air stage of a Wile E Coyote cartoon.
I guess the question is, does it matter? Everyone everywhere is running huge deficits now. Everyone who can is debasing their fiat currency through money printing to monetise these deficits. And gilt prices evyerwhere are still sky high. At some point orthodoxy says this all feeds through to high inflation. But of what, goods or assets? If I were writing the full budget, I'd equalise capital gains tax with income tax ahead of asset price inflation, just in case gilt yields start spiking beyond the control of our highly interventionist central bank.
The factor largely overlooked through this crisis has been the extent of balance sheet restructuring. From large caps, to SMEs to households. Massive amounts of corporate debt have been refinanced at negative real interest rates and with longer durations. Bye bye debt cliff edge. SMEs have been given a lifeline with often unsuitable very high interest short term debt, refinanced with longer term state guaranteed facilities. As for households, they've been given mortgage holidays and low rates to refinance at, a furlough scheme an order of magnitude more generous than redundancy and in many cases, no reduction in disposable income (or even an increase given commuting costs) but highly reduced avenues to blow that disposable income.
Glass half full says there's no meaningful second wave and we're at the start of a roaring decade. Albeit with as many losers as winners (poor old Pret).
But doesn't a rise in M3, which as you say tends to be inflationary also tend to lead to a hike in interest rates. As we are financing the pandemic by personal borrowing be that from HMRC deferments, which we might have to refinance by a bank loan in January, or from an extension to the mortgage, isn't that sub-optimal?
Ceteris paribus the country is facing massive deflation.
A boost in inflation right now is a good thing, not a bad thing.
Not if you are mortgaged up to the hilt and interest rates rise to 15%. During the Major Government my mortgage IIRC was for a while at around 18%.
Add general inflation to that and we have a heady cocktail of serious debt to deal with.
Part of me thinks Johnson is a lucky politician and the normal economic rules don't apply to him and we can all carry on as normal without consequence. Is that wishful thinking?
You can get a 5 year fix at 1.59%. Grab it. This is not financial advice, your home is at risk, etc etc
Who can afford to fix their money for 5 yrs....
That 1.59% is the rate to borrow money not a savings rates.
On topic, an intriguing facet of all this. Since becoming Chancellor, Sunak has quickly established himself as one of the most popular politicians in the country.
But Javid told us he resigned as Chancellor because "no self-respecting minister would accept" the interference from No 10's aides. Chiefly Dominic Cummings.
Something somewhere is clearly quite wrong with the media narrative on Cummings.
Either Cummings is not in fact an unelected dictator running every element of government business, because Sunak has taken a firm grip of the Treasury and is running it brilliantly (or at least in a very popular way), despite the "unacceptable" interference from Cummings.
Or... Cummings is in fact in complete control and Sunak is a puppet. But that's ok because Cummings himself is coming up with very popular policies and is not the inept monster made out by the chattering classes but someone the public should cherish.
Javid resigned over his SPADS having to answer to Cummings. To lose a second CofE would look very bad, so Sunaks SPADS may get nominal control by Cummings, but in practice very little.
The other thing is that Cummings agenda is unusual for a UK right winger. It is Cultural and organisational, not economic. He hates the Civil Service in all its forms, and wants to smash what he sees as the Blob. Brexit too is driven by culture war, not economics. Cummings is not bothered by economics, or whether the countries debts are sustainable.
Both Cummings and Sunak have one thing in common. Both were wealthy from the start, but then married into very wealthy families. Neither has ever had to go short personally and never will, as such culturally they are very happy spending money, as there has always been an inexhaustible supply. We will see if that is true of the Treasury...
I think that the real finance implications take a year to hit. The July 31 tax payments have been deferred, and the income tax due on Jan 31 is 11 months of normal income. Corporation tax is also paid 9 months after fin year finishes. Tax reciepts will appear to be OK for some time yet, but will fall off a cliff in 2021, while spending remains very high. We are at the running in the air stage of a Wile E Coyote cartoon.
I guess the question is, does it matter? Everyone everywhere is running huge deficits now. Everyone who can is debasing their fiat currency through money printing to monetise these deficits. And gilt prices evyerwhere are still sky high. At some point orthodoxy says this all feeds through to high inflation. But of what, goods or assets? If I were writing the full budget, I'd equalise capital gains tax with income tax ahead of asset price inflation, just in case gilt yields start spiking beyond the control of our highly interventionist central bank.
The factor largely overlooked through this crisis has been the extent of balance sheet restructuring. From large caps, to SMEs to households. Massive amounts of corporate debt have been refinanced at negative real interest rates and with longer durations. Bye bye debt cliff edge. SMEs have been given a lifeline with often unsuitable very high interest short term debt, refinanced with longer term state guaranteed facilities. As for households, they've been given mortgage holidays and low rates to refinance at, a furlough scheme an order of magnitude more generous than redundancy and in many cases, no reduction in disposable income (or even an increase given commuting costs) but highly reduced avenues to blow that disposable income.
Glass half full says there's no meaningful second wave and we're at the start of a roaring decade. Albeit with as many losers as winners (poor old Pret).
But doesn't a rise in M3, which as you say tends to be inflationary also tend to lead to a hike in interest rates. As we are financing the pandemic by personal borrowing be that from HMRC deferments, which we might have to refinance by a bank loan in January, or from an extension to the mortgage, isn't that sub-optimal?
Ceteris paribus the country is facing massive deflation.
A boost in inflation right now is a good thing, not a bad thing.
Not if you are mortgaged up to the hilt and interest rates rise to 15%. During the Major Government my mortgage IIRC was for a while at around 18%.
Add general inflation to that and we have a heady cocktail of serious debt to deal with.
Part of me thinks Johnson is a lucky politician and the normal economic rules don't apply to him and we can all carry on as normal without consequence. Is that wishful thinking?
We aren't facing 15% interest or 4% inflation rates. We are facing 0.25% interest rates and deflation.
We need to get inflation away from deflation and back up to betweeen 2-3%.
You don't know that. The more money is pumped into the economy the higher the inflation. There are already some supply issues from imported and domestically produced material.
You might be right, but a consumer debt lead recovery can be problematic.
We do know that. What we are facing is deflation not high inflation, we know that from history and we know that from the evidence we have before us.
Yes the actions being taken now lead to "higher" inflation but "higher" than what?
When your inflation rate is 5% then higher inflation is bad. When your inflation rate is 10% then higher inflation is terrible. When your inflation is close to 0% and heading down then higher inflation is a good thing.
What is the inflation rate today?
What we are going through is a catastrophe not seen since the Spanish Flu. What was the inflation rate in the early 1920s in the UK after the Spanish Flu?
It is a long time since I was a student of economics but I could see inflation rising to five percent and interest rates likewise. That is catastrophic if one is already (as many will be) on the limit of their borrowing.
As usual there seems to be a lot of extreme views in relation to the package Sunak came up with yesterday. In my view it will either look dangerously insufficient in a few weeks or largely irrelevant depending on the shape of the recovery. An L shaped recovery and he will be accused of not doing enough. A V shaped recovery and we will move onto the next concern, namely how do we pay for all this, in which event it will look irrelevant and unhelpful.
In the scheme of a £2trn economy £30bn is a pretty modest package. We have suffered a fairly severe demand shock over about 4 months. I think the risk is more that its not enough but it is only a part of the overall package. If you take the support measures as a whole they exceed £300bn which is an enormous sum, way beyond what any government has ever pumped into our economy in peace time.
For me, the shape of the economic recovery is going to be dependent on behaviour. There is an urgency in getting people back in the shops, restaurants, cafes and bars. The measures seem reasonably well targeted that way and should help to mitigate the increase in unemployment. I am not sure that we will get back to anything like normal with bright yellow tape everywhere telling people to stay 2m apart. It stokes fear and apprehension. Will a 2 for 1 deal overcome that? I am not sure.
On topic, an intriguing facet of all this. Since becoming Chancellor, Sunak has quickly established himself as one of the most popular politicians in the country.
But Javid told us he resigned as Chancellor because "no self-respecting minister would accept" the interference from No 10's aides. Chiefly Dominic Cummings.
Something somewhere is clearly quite wrong with the media narrative on Cummings.
Either Cummings is not in fact an unelected dictator running every element of government business, because Sunak has taken a firm grip of the Treasury and is running it brilliantly (or at least in a very popular way), despite the "unacceptable" interference from Cummings.
Or... Cummings is in fact in complete control and Sunak is a puppet. But that's ok because Cummings himself is coming up with very popular policies and is not the inept monster made out by the chattering classes but someone the public should cherish.
Javid resigned over his SPADS having to answer to Cummings. To lose a second CofE would look very bad, so Sunaks SPADS may get nominal control by Cummings, but in practice very little.
The other thing is that Cummings agenda is unusual for a UK right winger. It is Cultural and organisational, not economic. He hates the Civil Service in all its forms, and wants to smash what he sees as the Blob. Brexit too is driven by culture war, not economics. Cummings is not bothered by economics, or whether the countries debts are sustainable.
Both Cummings and Sunak have one thing in common. Both were wealthy from the start, but then married into very wealthy families. Neither has ever had to go short personally and never will, as such culturally they are very happy spending money, as there has always been an inexhaustible supply. We will see if that is true of the Treasury...
I think that the real finance implications take a year to hit. The July 31 tax payments have been deferred, and the income tax due on Jan 31 is 11 months of normal income. Corporation tax is also paid 9 months after fin year finishes. Tax reciepts will appear to be OK for some time yet, but will fall off a cliff in 2021, while spending remains very high. We are at the running in the air stage of a Wile E Coyote cartoon.
I guess the question is, does it matter? Everyone everywhere is running huge deficits now. Everyone who can is debasing their fiat currency through money printing to monetise these deficits. And gilt prices evyerwhere are still sky high. At some point orthodoxy says this all feeds through to high inflation. But of what, goods or assets? If I were writing the full budget, I'd equalise capital gains tax with income tax ahead of asset price inflation, just in case gilt yields start spiking beyond the control of our highly interventionist central bank.
The factor largely overlooked through this crisis has been the extent of balance sheet restructuring. From large caps, to SMEs to households. Massive amounts of corporate debt have been refinanced at negative real interest rates and with longer durations. Bye bye debt cliff edge. SMEs have been given a lifeline with often unsuitable very high interest short term debt, refinanced with longer term state guaranteed facilities. As for households, they've been given mortgage holidays and low rates to refinance at, a furlough scheme an order of magnitude more generous than redundancy and in many cases, no reduction in disposable income (or even an increase given commuting costs) but highly reduced avenues to blow that disposable income.
Glass half full says there's no meaningful second wave and we're at the start of a roaring decade. Albeit with as many losers as winners (poor old Pret).
But doesn't a rise in M3, which as you say tends to be inflationary also tend to lead to a hike in interest rates. As we are financing the pandemic by personal borrowing be that from HMRC deferments, which we might have to refinance by a bank loan in January, or from an extension to the mortgage, isn't that sub-optimal?
Ceteris paribus the country is facing massive deflation.
A boost in inflation right now is a good thing, not a bad thing.
Not if you are mortgaged up to the hilt and interest rates rise to 15%. During the Major Government my mortgage IIRC was for a while at around 18%.
Add general inflation to that and we have a heady cocktail of serious debt to deal with.
Part of me thinks Johnson is a lucky politician and the normal economic rules don't apply to him and we can all carry on as normal without consequence. Is that wishful thinking?
We aren't facing 15% interest or 4% inflation rates. We are facing 0.25% interest rates and deflation.
We need to get inflation away from deflation and back up to betweeen 2-3%.
You don't know that. The more money is pumped into the economy the higher the inflation. There are already some supply issues from imported and domestically produced material.
You might be right, but a consumer debt lead recovery can be problematic.
We do know that. What we are facing is deflation not high inflation, we know that from history and we know that from the evidence we have before us.
Yes the actions being taken now lead to "higher" inflation but "higher" than what?
When your inflation rate is 5% then higher inflation is bad. When your inflation rate is 10% then higher inflation is terrible. When your inflation is close to 0% and heading down then higher inflation is a good thing.
What is the inflation rate today?
What we are going through is a catastrophe not seen since the Spanish Flu. What was the inflation rate in the early 1920s in the UK after the Spanish Flu?
It is a long time since I was a student of economics but I could see inflation rising to five percent and interest rates likewise. That is catastrophic if one is already (as many will be) on the limit of their borrowing.
|People said the same on the back of QE after the GFC but in fact interest rates struggled to get over 1% and are now at 0.1%. It may be different this time because it is a different kind of shock but gilt markets indicate that we are going to have very low interest rates for some considerable time to come.
I was pleasantly surprised to hear both Sunak and his interviewer use the term deadweight loss.
The furlough scheme was/is great and has saved us from mass unemployment. But the job retention thing is dreadfully inefficient. The youth job placement looks similar to other failed apprenticeship ideas to me. The cheap meals out might be a good idea, but subsidising eating out is a pretty strange incentive to put in place.
Dogs that didn't bark: universities and adult education? Now is a great time for govt to be getting people back into study, either university or adult education. Aviation? No idea what can help them tbh.
Ranvir Singh and Ben Shepherd just interviewed the Shadow Chancellor on GMB. So much better than the pompous, gotcha seeking technique of Piers Morgan
Chancellor had something of a car crash on his BBC interview this morning.
Did OK on R4 - what tripped him up on the TV?
He was a Tory.
That'd be enough for some people.
(j/k I didn't watch it and OKC isn't that partisan)
Thanks. didn't see all of it but Naga asked a specific question about a caller and Sunak went on and on about what a great job they were doing. Every so often Naga mentioned the caller again but Sunak simply said they couldn't help everyone, without being any more specific.
On topic, an intriguing facet of all this. Since becoming Chancellor, Sunak has quickly established himself as one of the most popular politicians in the country.
But Javid told us he resigned as Chancellor because "no self-respecting minister would accept" the interference from No 10's aides. Chiefly Dominic Cummings.
Something somewhere is clearly quite wrong with the media narrative on Cummings.
Either Cummings is not in fact an unelected dictator running every element of government business, because Sunak has taken a firm grip of the Treasury and is running it brilliantly (or at least in a very popular way), despite the "unacceptable" interference from Cummings.
Or... Cummings is in fact in complete control and Sunak is a puppet. But that's ok because Cummings himself is coming up with very popular policies and is not the inept monster made out by the chattering classes but someone the public should cherish.
Javid resigned over his SPADS having to answer to Cummings. To lose a second CofE would look very bad, so Sunaks SPADS may get nominal control by Cummings, but in practice very little.
The other thing is that Cummings agenda is unusual for a UK right winger. It is Cultural and organisational, not economic. He hates the Civil Service in all its forms, and wants to smash what he sees as the Blob. Brexit too is driven by culture war, not economics. Cummings is not bothered by economics, or whether the countries debts are sustainable.
Both Cummings and Sunak have one thing in common. Both were wealthy from the start, but then married into very wealthy families. Neither has ever had to go short personally and never will, as such culturally they are very happy spending money, as there has always been an inexhaustible supply. We will see if that is true of the Treasury...
I think that the real finance implications take a year to hit. The July 31 tax payments have been deferred, and the income tax due on Jan 31 is 11 months of normal income. Corporation tax is also paid 9 months after fin year finishes. Tax reciepts will appear to be OK for some time yet, but will fall off a cliff in 2021, while spending remains very high. We are at the running in the air stage of a Wile E Coyote cartoon.
I guess the question is, does it matter? Everyone everywhere is running huge deficits now. Everyone who can is debasing their fiat currency through money printing to monetise these deficits. And gilt prices evyerwhere are still sky high. At some point orthodoxy says this all feeds through to high inflation. But of what, goods or assets? If I were writing the full budget, I'd equalise capital gains tax with income tax ahead of asset price inflation, just in case gilt yields start spiking beyond the control of our highly interventionist central bank.
The factor largely overlooked through this crisis has been the extent of balance sheet restructuring. From large caps, to SMEs to households. Massive amounts of corporate debt have been refinanced at negative real interest rates and with longer durations. Bye bye debt cliff edge. SMEs have been given a lifeline with often unsuitable very high interest short term debt, refinanced with longer term state guaranteed facilities. As for households, they've been given mortgage holidays and low rates to refinance at, a furlough scheme an order of magnitude more generous than redundancy and in many cases, no reduction in disposable income (or even an increase given commuting costs) but highly reduced avenues to blow that disposable income.
Glass half full says there's no meaningful second wave and we're at the start of a roaring decade. Albeit with as many losers as winners (poor old Pret).
But doesn't a rise in M3, which as you say tends to be inflationary also tend to lead to a hike in interest rates. As we are financing the pandemic by personal borrowing be that from HMRC deferments, which we might have to refinance by a bank loan in January, or from an extension to the mortgage, isn't that sub-optimal?
Ceteris paribus the country is facing massive deflation.
A boost in inflation right now is a good thing, not a bad thing.
Not if you are mortgaged up to the hilt and interest rates rise to 15%. During the Major Government my mortgage IIRC was for a while at around 18%.
Add general inflation to that and we have a heady cocktail of serious debt to deal with.
Part of me thinks Johnson is a lucky politician and the normal economic rules don't apply to him and we can all carry on as normal without consequence. Is that wishful thinking?
You can get a 5 year fix at 1.59%. Grab it. This is not financial advice, your home is at risk, etc etc
Who can afford to fix their money for 5 yrs....
That 1.59% is the rate to borrow money not a savings rates.
tks I have just moved my pittance to N S &I at 1.16% AER its the best non risk afaik.
"But what happens if this acts as the catalyst for more people to be affected by the virus? One thing is for sure Covid19 has not gone away and incentivising people to get into situations where they could be affected might not with hindsight prove to be smart."
Absolutely spot on.
If we take a global rather than myopic view of this, which a responsible Government is required to do, it is evident that serious spikes are occurring where people drop their guard. Look at Melbourne today which has just gone back into a 6-week total lockdown.
Coronavirus surges in the UK are a question of when not if.
The Government probably do know this and have decided to pull the wool over everyone's eyes. Beer, chips and ice-creams on the beach are more beneficial to the economy and so what if several thousands more people die?
Imagine a hundred Zeebrugge disasters and that's what this Government are dishing you up.
The people most at risk from Covid are the over 70s who don't work anyway, now we are passed the initial peak people should be returning to work with social distancing otherwise we risk the highest level of unemployment since the Depression once furlough ends
The thing that some people clearly understand about economics and others clearly don't is that it is circulation that matters.
Giving money to struggling businesses/individuals does absolutely nothing for the macro economy whatsoever as they cling on to that cash (and then continue to struggle if they're not getting anything circulated back to them).
What is needed is to get money circulating again. That is why I have been calling for a VAT cut here for months. And I've been laughed at here saying we need tax cuts with replies like "yeah and I'd like a supermodel".
A VAT cut is not the right way to go, however crowd-pleasing it might be in the short term.
First, there is a huge deadweight effect. Most of the purchases would have been made anyway, so all you're doing is cutting prices to individuals. They will save the difference.
Second, depending on the sector, people will often just bring forward future spending, leading to reduced economic growth when you take it away.
Third, there are often surprisingly large administrative costs involved in cutting VAT then raising it again, which is why, when they did it during the financial crisis, a lot of businesses did not even bother cutting their prices.
Fourth, sector-specific cuts lead to reclassifications and other inefficiencies.
Cutting less sexy business taxes, like payroll levies, or increasing capital allowances, gets you much more bang for your buck.
A 15% cut in VAT is a different proposition. There are 2 possibilities. Either prices will indeed fall significantly or the cafes etc will have substantially better margins helping them to stay in business.
Whilst not wanting to underplay the risk, it seems to me that a lot of people seem to be operating under the belief that you can catch COVID simply by being in the same room and/or in close proximity to other people. As opposed to other infected people. In some parts of the country right now the actual odds of finding yourself within “dangerous” proximity of an infected person, let alone catching COVID off them, let alone developing symptoms are pretty small. Let alone if you operate sensible personal precautions.
It’s not like going into a pub is comparable with spending all night mingling on a crowded nightclub dance floor.
That's unfortunately probably not true if you make a habit of it. The last estimate I saw is that 1 in 1000 people are currently infectious, and the level is not declining rapidly. If you go to a pub and mingle with a few people you'll probably be fine. If you do it twice a week for a couple of months, and a few other things like shopping and the odd restaurant meal, you'll probably catch it sooner or later.
This isn't dependent on the 1/1000 rate being quite accurate. If it's actually 1/500 or 1/3000 the argument is the same.
I have a mildly increased risk (>70) but had a haircut and went into two shops yesterday. I feel the risk has declined to the point that an exceptional outing is a reasonable roll of the dice. But I don't plan to do it again for a month or so.
At age 70 it is impressive if you need a haircut as often as that.
I'm older than Mr P and I need one every two or three weeks. The avatar is NOT accurate!!
As usual there seems to be a lot of extreme views in relation to the package Sunak came up with yesterday. In my view it will either look dangerously insufficient in a few weeks or largely irrelevant depending on the shape of the recovery. An L shaped recovery and he will be accused of not doing enough. A V shaped recovery and we will move onto the next concern, namely how do we pay for all this, in which event it will look irrelevant and unhelpful.
In the scheme of a £2trn economy £30bn is a pretty modest package. We have suffered a fairly severe demand shock over about 4 months. I think the risk is more that its not enough but it is only a part of the overall package. If you take the support measures as a whole they exceed £300bn which is an enormous sum, way beyond what any government has ever pumped into our economy in peace time.
For me, the shape of the economic recovery is going to be dependent on behaviour. There is an urgency in getting people back in the shops, restaurants, cafes and bars. The measures seem reasonably well targeted that way and should help to mitigate the increase in unemployment. I am not sure that we will get back to anything like normal with bright yellow tape everywhere telling people to stay 2m apart. It stokes fear and apprehension. Will a 2 for 1 deal overcome that? I am not sure.
Chatting to an old friend on the phone last night, a family member of his has a restaurant in SE. One single small table of diners last weekend.
The thing that some people clearly understand about economics and others clearly don't is that it is circulation that matters.
Giving money to struggling businesses/individuals does absolutely nothing for the macro economy whatsoever as they cling on to that cash (and then continue to struggle if they're not getting anything circulated back to them).
What is needed is to get money circulating again. That is why I have been calling for a VAT cut here for months. And I've been laughed at here saying we need tax cuts with replies like "yeah and I'd like a supermodel".
Cutting VAT and similar issues on the struggling hospitality sectors will allow money to circulate more in those sectors - and allow businesses to cope with thicker margins on smaller volumes - thus saving the sector from a catastrophe and in the long-term the government will make more tax revenue despite temporarily lower taxes.
Essentially adjusting for the time value of money the peak of the Laffer Curve has temporarily moved far to the left of the graph and the government needs to respond accordingly.
Wasn't there an old song about the circulation of money? The lines "see the money flow, round the Barley Mow" float into my head but Google finds nothing.
"But what happens if this acts as the catalyst for more people to be affected by the virus? One thing is for sure Covid19 has not gone away and incentivising people to get into situations where they could be affected might not with hindsight prove to be smart."
Absolutely spot on.
If we take a global rather than myopic view of this, which a responsible Government is required to do, it is evident that serious spikes are occurring where people drop their guard. Look at Melbourne today which has just gone back into a 6-week total lockdown.
Coronavirus surges in the UK are a question of when not if.
The Government probably do know this and have decided to pull the wool over everyone's eyes. Beer, chips and ice-creams on the beach are more beneficial to the economy and so what if several thousands more people die?
Imagine a hundred Zeebrugge disasters and that's what this Government are dishing you up.
The people most at risk from Covid are the over 70s who don't work anyway, now we are passed the initial peak people should be returning to work with social distancing otherwise we risk the highest level of unemployment since the Depression once furlough ends
Getting to work and maintaining social distancing isn't always easy. (IIRC) Doing so at work's OK for a desk worker or, usually in construction or agriculture, but not in many factories or shops.
As usual there seems to be a lot of extreme views in relation to the package Sunak came up with yesterday. In my view it will either look dangerously insufficient in a few weeks or largely irrelevant depending on the shape of the recovery. An L shaped recovery and he will be accused of not doing enough. A V shaped recovery and we will move onto the next concern, namely how do we pay for all this, in which event it will look irrelevant and unhelpful.
In the scheme of a £2trn economy £30bn is a pretty modest package. We have suffered a fairly severe demand shock over about 4 months. I think the risk is more that its not enough but it is only a part of the overall package. If you take the support measures as a whole they exceed £300bn which is an enormous sum, way beyond what any government has ever pumped into our economy in peace time.
For me, the shape of the economic recovery is going to be dependent on behaviour. There is an urgency in getting people back in the shops, restaurants, cafes and bars. The measures seem reasonably well targeted that way and should help to mitigate the increase in unemployment. I am not sure that we will get back to anything like normal with bright yellow tape everywhere telling people to stay 2m apart. It stokes fear and apprehension. Will a 2 for 1 deal overcome that? I am not sure.
Chatting to an old friend on the phone last night, a family member of his has a restaurant in SE. One single small table of diners last weekend.
Yes, that is a good example of the fear factor as was the pretty modest response to the pubs opening. It is just too in your face at the moment and people are rightly apprehensive.
I was pleasantly surprised to hear both Sunak and his interviewer use the term deadweight loss.
The furlough scheme was/is great and has saved us from mass unemployment. But the job retention thing is dreadfully inefficient. The youth job placement looks similar to other failed apprenticeship ideas to me. The cheap meals out might be a good idea, but subsidising eating out is a pretty strange incentive to put in place.
Dogs that didn't bark: universities and adult education? Now is a great time for govt to be getting people back into study, either university or adult education. Aviation? No idea what can help them tbh.
By all means fund the study he mentions. But I don't know that it will make much difference in terms of persuading people to fly.
For one thing, people may not believe the results. For another, people travelling to other countries is going to be discouraged through quarantine, self-isolation and the like.
The reasons people want to fly are also reduced. Weddings and events have been cancelled etc.
Javid resigned over his SPADS having to answer to Cummings. To lose a second CofE would look very bad, so Sunaks SPADS may get nominal control by Cummings, but in practice very little.
The other thing is that Cummings agenda is unusual for a UK right winger. It is Cultural and organisational, not economic. He hates the Civil Service in all its forms, and wants to smash what he sees as the Blob. Brexit too is driven by culture war, not economics. Cummings is not bothered by economics, or whether the countries debts are sustainable.
Both Cummings and Sunak have one thing in common. Both were wealthy from the start, but then married into very wealthy families. Neither has ever had to go short personally and never will, as such culturally they are very happy spending money, as there has always been an inexhaustible supply. We will see if that is true of the Treasury...
I think that the real finance implications take a year to hit. The July 31 tax payments have been deferred, and the income tax due on Jan 31 is 11 months of normal income. Corporation tax is also paid 9 months after fin year finishes. Tax reciepts will appear to be OK for some time yet, but will fall off a cliff in 2021, while spending remains very high. We are at the running in the air stage of a Wile E Coyote cartoon.
I guess the question is, does it matter? Everyone everywhere is running huge deficits now. Everyone who can is debasing their fiat currency through money printing to monetise these deficits. And gilt prices evyerwhere are still sky high. At some point orthodoxy says this all feeds through to high inflation. But of what, goods or assets? If I were writing the full budget, I'd equalise capital gains tax with income tax ahead of asset price inflation, just in case gilt yields start spiking beyond the control of our highly interventionist central bank.
The factor largely overlooked through this crisis has been the extent of balance sheet restructuring. From large caps, to SMEs to households. Massive amounts of corporate debt have been refinanced at negative real interest rates and with longer durations. Bye bye debt cliff edge. SMEs have been given a lifeline with often unsuitable very high interest short term debt, refinanced with longer term state guaranteed facilities. As for households, they've been given mortgage holidays and low rates to refinance at, a furlough scheme an order of magnitude more generous than redundancy and in many cases, no reduction in disposable income (or even an increase given commuting costs) but highly reduced avenues to blow that disposable income.
Glass half full says there's no meaningful second wave and we're at the start of a roaring decade. Albeit with as many losers as winners (poor old Pret).
But doesn't a rise in M3, which as you say tends to be inflationary also tend to lead to a hike in interest rates. As we are financing the pandemic by personal borrowing be that from HMRC deferments, which we might have to refinance by a bank loan in January, or from an extension to the mortgage, isn't that sub-optimal?
Ceteris paribus the country is facing massive deflation.
A boost in inflation right now is a good thing, not a bad thing.
Not if you are mortgaged up to the hilt and interest rates rise to 15%. During the Major Government my mortgage IIRC was for a while at around 18%.
Add general inflation to that and we have a heady cocktail of serious debt to deal with.
Part of me thinks Johnson is a lucky politician and the normal economic rules don't apply to him and we can all carry on as normal without consequence. Is that wishful thinking?
You can get a 5 year fix at 1.59%. Grab it. This is not financial advice, your home is at risk, etc etc
Who can afford to fix their money for 5 yrs....
That 1.59% is the rate to borrow money not a savings rates.
The best savings plan might be to overpay your mortgage. Mine, for example, can then be used to fund later underpayments, which makes it pretty flexible. I am not saying every penny but some.
The thing about Sunak is he handles billions with aplomb. But popularity for dishing it out does not make him a likely leader.
"And Boris made it clear how much he enjoyed his junior’s slick performance. The PM tucked himself comfortably into a corner of the Treasury bench and harrumphed loudly as the nattily-suited brainbox took centre-stage. Far from being threatened, Boris looked as happy as a football manager watching a classy new purchase bossing the midfield in a cup-tie." https://www.spectator.co.uk/article/rishi-sunak-is-no-threat-to-boris
Forget Sunak's billions; look at his calm, assured demeanour in the House, at the Covid-19 briefings and in interviews. Sunak looks like a leader in a way most of his Cabinet colleagues (and future leadership rivals) do not.
On topic, an intriguing facet of all this. Since becoming Chancellor, Sunak has quickly established himself as one of the most popular politicians in the country.
But Javid told us he resigned as Chancellor because "no self-respecting minister would accept" the interference from No 10's aides. Chiefly Dominic Cummings.
Something somewhere is clearly quite wrong with the media narrative on Cummings.
Either Cummings is not in fact an unelected dictator running every element of government business, because Sunak has taken a firm grip of the Treasury and is running it brilliantly (or at least in a very popular way), despite the "unacceptable" interference from Cummings.
Or... Cummings is in fact in complete control and Sunak is a puppet. But that's ok because Cummings himself is coming up with very popular policies and is not the inept monster made out by the chattering classes but someone the public should cherish.
Javid resigned over his SPADS having to answer to Cummings. To lose a second CofE would look very bad, so Sunaks SPADS may get nominal control by Cummings, but in practice very little.
The other thing is that Cummings agenda is unusual for a UK right winger. It is Cultural and organisational, not economic. He hates the Civil Service in all its forms, and wants to smash what he sees as the Blob. Brexit too is driven by culture war, not economics. Cummings is not bothered by economics, or whether the countries debts are sustainable.
Both Cummings and Sunak have one thing in common. Both were wealthy from the start, but then married into very wealthy families. Neither has ever had to go short personally and never will, as such culturally they are very happy spending money, as there has always been an inexhaustible supply. We will see if that is true of the Treasury...
I think that the real finance implications take a year to hit. The July 31 tax payments have been deferred, and the income tax due on Jan 31 is 11 months of normal income. Corporation tax is also paid 9 months after fin year finishes. Tax reciepts will appear to be OK for some time yet, but will fall off a cliff in 2021, while spending remains very high. We are at the running in the air stage of a Wile E Coyote cartoon.
I guess the question is, does it matter? Everyone everywhere is running huge deficits now. Everyone who can is debasing their fiat currency through money printing to monetise these deficits. And gilt prices evyerwhere are still sky high. At some point orthodoxy says this all feeds through to high inflation. But of what, goods or assets? If I were writing the full budget, I'd equalise capital gains tax with income tax ahead of asset price inflation, just in case gilt yields start spiking beyond the control of our highly interventionist central bank.
The factor largely overlooked through this crisis has been the extent of balance sheet restructuring. From large caps, to SMEs to households. Massive amounts of corporate debt have been refinanced at negative real interest rates and with longer durations. Bye bye debt cliff edge. SMEs have been given a lifeline with often unsuitable very high interest short term debt, refinanced with longer term state guaranteed facilities. As for households, they've been given mortgage holidays and low rates to refinance at, a furlough scheme an order of magnitude more generous than redundancy and in many cases, no reduction in disposable income (or even an increase given commuting costs) but highly reduced avenues to blow that disposable income.
Glass half full says there's no meaningful second wave and we're at the start of a roaring decade. Albeit with as many losers as winners (poor old Pret).
But doesn't a rise in M3, which as you say tends to be inflationary also tend to lead to a hike in interest rates. As we are financing the pandemic by personal borrowing be that from HMRC deferments, which we might have to refinance by a bank loan in January, or from an extension to the mortgage, isn't that sub-optimal?
Ceteris paribus the country is facing massive deflation.
A boost in inflation right now is a good thing, not a bad thing.
Not if you are mortgaged up to the hilt and interest rates rise to 15%. During the Major Government my mortgage IIRC was for a while at around 18%.
Add general inflation to that and we have a heady cocktail of serious debt to deal with.
Part of me thinks Johnson is a lucky politician and the normal economic rules don't apply to him and we can all carry on as normal without consequence. Is that wishful thinking?
You can get a 5 year fix at 1.59%. Grab it. This is not financial advice, your home is at risk, etc etc
Who can afford to fix their money for 5 yrs....
HSBC
To be clear I was talking about fixed rate mortgages (based on the context of the prior post)
Prediction: Soon Sunak is going to be retenlessly undermined by Downing Street gnomes via anonymous briefing, whispering etc etc.
Even the idiots who surround Johnson must see that the contrast between Sunak's performances and his oration compared to the blathering, empty bluster of an old, tired, worn out looking Johnson are now stark to say the least.
If everyone wore masks, a second wave would be far less likely.
I don't get it, it seems the simplest way to try to limit the spread of the virus and there is no real downside to wearing a mask yet 90% of Brits just can't be arsed. Even where it is supposedly mandatory on public transport a significant minority don't bother. Given the damage a second wave will do economically I really do not understand it.
But hey, I'm retired and it won't be me moaning when the pubs shut again and businesses collapse. It will be no use blaming everything on the government if the public are too stupid to try to help themselves
The thing that some people clearly understand about economics and others clearly don't is that it is circulation that matters.
Giving money to struggling businesses/individuals does absolutely nothing for the macro economy whatsoever as they cling on to that cash (and then continue to struggle if they're not getting anything circulated back to them).
What is needed is to get money circulating again. That is why I have been calling for a VAT cut here for months. And I've been laughed at here saying we need tax cuts with replies like "yeah and I'd like a supermodel".
A VAT cut is not the right way to go, however crowd-pleasing it might be in the short term.
First, there is a huge deadweight effect. Most of the purchases would have been made anyway, so all you're doing is cutting prices to individuals. They will save the difference.
Second, depending on the sector, people will often just bring forward future spending, leading to reduced economic growth when you take it away.
Third, there are often surprisingly large administrative costs involved in cutting VAT then raising it again, which is why, when they did it during the financial crisis, a lot of businesses did not even bother cutting their prices.
Fourth, sector-specific cuts lead to reclassifications and other inefficiencies.
Cutting less sexy business taxes, like payroll levies, or increasing capital allowances, gets you much more bang for your buck.
Isn't the point that businesses won't cut their prices and will therefore pocket the difference themselves making the business more viable.
(You could say the same about the stamp duty cut, eventually it gets worked into house-prices and they just go up by the difference - its what happened last time)
In terms of "bringing purchases forward", this is a natural consequence of having inflation of any level in the economy, people buy things now because they will cost more in the future. The alternative, deferring purchases, is worse for the economy and is usually driven by deflation.
The VAT cut is a quick way to save businesses money. The job retention schemes and half price meal system, clunky and unlikely to be terribly effective as it is, are the ways of maintaing consumer spending so that businesses can actually get the revenue in they will be keeping more of.
Targeting it to immediate consumables limits the bringing forward issue
How many people don’t go out for a meal because they went out a month ago? (Budget aside, in which case bringing forward isn’t an issue). The problem is with one time purchases like white goods*
* (it’s a little depressing that I hesitated before using that term for a domestic appliance)
"But what happens if this acts as the catalyst for more people to be affected by the virus? One thing is for sure Covid19 has not gone away and incentivising people to get into situations where they could be affected might not with hindsight prove to be smart."
Absolutely spot on.
If we take a global rather than myopic view of this, which a responsible Government is required to do, it is evident that serious spikes are occurring where people drop their guard. Look at Melbourne today which has just gone back into a 6-week total lockdown.
Coronavirus surges in the UK are a question of when not if.
The Government probably do know this and have decided to pull the wool over everyone's eyes. Beer, chips and ice-creams on the beach are more beneficial to the economy and so what if several thousands more people die?
Imagine a hundred Zeebrugge disasters and that's what this Government are dishing you up.
The people most at risk from Covid are the over 70s who don't work anyway, now we are passed the initial peak people should be returning to work with social distancing otherwise we risk the highest level of unemployment since the Depression once furlough ends
Getting to work and maintaining social distancing isn't always easy. (IIRC) Doing so at work's OK for a desk worker or, usually in construction or agriculture, but not in many factories or shops.
Still better than losing their job which is inevitable if they do not return to work at all
"On Tuesday morning, Harper's Magazine published a joint letter from 153 prominent writers, academics, and entertainers, ranging from Noam Chomsky to David Brooks, J.K. Rowling to Wynton Marsalis, Salman Rushdie to Gloria Steinem, expressing concern that "the free exchange of information and ideas, the lifeblood of a liberal society, is daily becoming more constricted."
The 532-word document is a direct response to the remarkable past six weeks or so at American media and cultural institutions, which have experienced a wave of firings, resignations, and castigations over purportedly harmful words, deeds, and sometimes costumes."
On topic, an intriguing facet of all this. Since becoming Chancellor, Sunak has quickly established himself as one of the most popular politicians in the country.
But Javid told us he resigned as Chancellor because "no self-respecting minister would accept" the interference from No 10's aides. Chiefly Dominic Cummings.
Something somewhere is clearly quite wrong with the media narrative on Cummings.
Either Cummings is not in fact an unelected dictator running every element of government business, because Sunak has taken a firm grip of the Treasury and is running it brilliantly (or at least in a very popular way), despite the "unacceptable" interference from Cummings.
Or... Cummings is in fact in complete control and Sunak is a puppet. But that's ok because Cummings himself is coming up with very popular policies and is not the inept monster made out by the chattering classes but someone the public should cherish.
Javid resigned over his SPADS having to answer to Cummings. To lose a second CofE would look very bad, so Sunaks SPADS may get nominal control by Cummings, but in practice very little.
The other thing is that Cummings agenda is unusual for a UK right winger. It is Cultural and organisational, not economic. He hates the Civil Service in all its forms, and wants to smash what he sees as the Blob. Brexit too is driven by culture war, not economics. Cummings is not bothered by economics, or whether the countries debts are sustainable.
Both Cummings and Sunak have one thing in common. Both were wealthy from the start, but then married into very wealthy families. Neither has ever had to go short personally and never will, as such culturally they are very happy spending money, as there has always been an inexhaustible supply. We will see if that is true of the Treasury...
I think that the real finance implications take a year to hit. The July 31 tax payments have been deferred, and the income tax due on Jan 31 is 11 months of normal income. Corporation tax is also paid 9 months after fin year finishes. Tax reciepts will appear to be OK for some time yet, but will fall off a cliff in 2021, while spending remains very high. We are at the running in the air stage of a Wile E Coyote cartoon.
I guess the question is, does it matter? Everyone everywhere is running huge deficits now. Everyone who can is debasing their fiat currency through money printing to monetise these deficits. And gilt prices evyerwhere are still sky high. At some point orthodoxy says this all feeds through to high inflation. But of what, goods or assets? If I were writing the full budget, I'd equalise capital gains tax with income tax ahead of asset price inflation, just in case gilt yields start spiking beyond the control of our highly interventionist central bank.
The factor largely overlooked through this crisis has been the extent of balance sheet restructuring. From large caps, to SMEs to households. Massive amounts of corporate debt have been refinanced at negative real interest rates and with longer durations. Bye bye debt cliff edge. SMEs have been given a lifeline with often unsuitable very high interest short term debt, refinanced with longer term state guaranteed facilities. As for households, they've been given mortgage holidays and low rates to refinance at, a furlough scheme an order of magnitude more generous than redundancy and in many cases, no reduction in disposable income (or even an increase given commuting costs) but highly reduced avenues to blow that disposable income.
Glass half full says there's no meaningful second wave and we're at the start of a roaring decade. Albeit with as many losers as winners (poor old Pret).
But doesn't a rise in M3, which as you say tends to be inflationary also tend to lead to a hike in interest rates. As we are financing the pandemic by personal borrowing be that from HMRC deferments, which we might have to refinance by a bank loan in January, or from an extension to the mortgage, isn't that sub-optimal?
Ceteris paribus the country is facing massive deflation.
A boost in inflation right now is a good thing, not a bad thing.
Not if you are mortgaged up to the hilt and interest rates rise to 15%. During the Major Government my mortgage IIRC was for a while at around 18%.
Add general inflation to that and we have a heady cocktail of serious debt to deal with.
Part of me thinks Johnson is a lucky politician and the normal economic rules don't apply to him and we can all carry on as normal without consequence. Is that wishful thinking?
We aren't facing 15% interest or 4% inflation rates. We are facing 0.25% interest rates and deflation.
We need to get inflation away from deflation and back up to betweeen 2-3%.
You don't know that. The more money is pumped into the economy the higher the inflation. There are already some supply issues from imported and domestically produced material.
You might be right, but a consumer debt lead recovery can be problematic.
We do know that. What we are facing is deflation not high inflation, we know that from history and we know that from the evidence we have before us.
Yes the actions being taken now lead to "higher" inflation but "higher" than what?
When your inflation rate is 5% then higher inflation is bad. When your inflation rate is 10% then higher inflation is terrible. When your inflation is close to 0% and heading down then higher inflation is a good thing.
What is the inflation rate today?
What we are going through is a catastrophe not seen since the Spanish Flu. What was the inflation rate in the early 1920s in the UK after the Spanish Flu?
It is a long time since I was a student of economics but I could see inflation rising to five percent and interest rates likewise. That is catastrophic if one is already (as many will be) on the limit of their borrowing.
|People said the same on the back of QE after the GFC but in fact interest rates struggled to get over 1% and are now at 0.1%. It may be different this time because it is a different kind of shock but gilt markets indicate that we are going to have very low interest rates for some considerable time to come.
We’ve had massive asset price inflation.
That’s created real issues for the economy but most people haven’t noticed it because they don’t buy houses very often
The thing that some people clearly understand about economics and others clearly don't is that it is circulation that matters.
Giving money to struggling businesses/individuals does absolutely nothing for the macro economy whatsoever as they cling on to that cash (and then continue to struggle if they're not getting anything circulated back to them).
What is needed is to get money circulating again. That is why I have been calling for a VAT cut here for months. And I've been laughed at here saying we need tax cuts with replies like "yeah and I'd like a supermodel".
Cutting VAT and similar issues on the struggling hospitality sectors will allow money to circulate more in those sectors - and allow businesses to cope with thicker margins on smaller volumes - thus saving the sector from a catastrophe and in the long-term the government will make more tax revenue despite temporarily lower taxes.
Essentially adjusting for the time value of money the peak of the Laffer Curve has temporarily moved far to the left of the graph and the government needs to respond accordingly.
Wasn't there an old song about the circulation of money? The lines "see the money flow, round the Barley Mow" float into my head but Google finds nothing.
Full disclosure and publicity of the current state of the epidemic in local areas will influence individual behaviour wrt the virus. People will take appropriate precautions out of self interest. Atm there is too much policy (lockdown, distancing, quarantine, masks etc) and not enough encouragement to accept the responsibility to take personal decisions. Let people decide what to do when they have full and easy access to all the facts about the local epidemic.
On topic, an intriguing facet of all this. Since becoming Chancellor, Sunak has quickly established himself as one of the most popular politicians in the country.
But Javid told us he resigned as Chancellor because "no self-respecting minister would accept" the interference from No 10's aides. Chiefly Dominic Cummings.
Something somewhere is clearly quite wrong with the media narrative on Cummings.
Either Cummings is not in fact an unelected dictator running every element of government business, because Sunak has taken a firm grip of the Treasury and is running it brilliantly (or at least in a very popular way), despite the "unacceptable" interference from Cummings.
Or... Cummings is in fact in complete control and Sunak is a puppet. But that's ok because Cummings himself is coming up with very popular policies and is not the inept monster made out by the chattering classes but someone the public should cherish.
Javid resigned over his SPADS having to answer to Cummings. To lose a second CofE would look very bad, so Sunaks SPADS may get nominal control by Cummings, but in practice very little.
The other thing is that Cummings agenda is unusual for a UK right winger. It is Cultural and organisational, not economic. He hates the Civil Service in all its forms, and wants to smash what he sees as the Blob. Brexit too is driven by culture war, not economics. Cummings is not bothered by economics, or whether the countries debts are sustainable.
Both Cummings and Sunak have one thing in common. Both were wealthy from the start, but then married into very wealthy families. Neither has ever had to go short personally and never will, as such culturally they are very happy spending money, as there has always been an inexhaustible supply. We will see if that is true of the Treasury...
I think that the real finance implications take a year to hit. The July 31 tax payments have been deferred, and the income tax due on Jan 31 is 11 months of normal income. Corporation tax is also paid 9 months after fin year finishes. Tax reciepts will appear to be OK for some time yet, but will fall off a cliff in 2021, while spending remains very high. We are at the running in the air stage of a Wile E Coyote cartoon.
I guess the question is, does it matter? Everyone everywhere is running huge deficits now. Everyone who can is debasing their fiat currency through money printing to monetise these deficits. And gilt prices evyerwhere are still sky high. At some point orthodoxy says this all feeds through to high inflation. But of what, goods or assets? If I were writing the full budget, I'd equalise capital gains tax with income tax ahead of asset price inflation, just in case gilt yields start spiking beyond the control of our highly interventionist central bank.
The factor largely overlooked through this crisis has been the extent of balance sheet restructuring. From large caps, to SMEs to households. Massive amounts of corporate debt have been refinanced at negative real interest rates and with longer durations. Bye bye debt cliff edge. SMEs have been given a lifeline with often unsuitable very high interest short term debt, refinanced with longer term state guaranteed facilities. As for households, they've been given mortgage holidays and low rates to refinance at, a furlough scheme an order of magnitude more generous than redundancy and in many cases, no reduction in disposable income (or even an increase given commuting costs) but highly reduced avenues to blow that disposable income.
Glass half full says there's no meaningful second wave and we're at the start of a roaring decade. Albeit with as many losers as winners (poor old Pret).
But doesn't a rise in M3, which as you say tends to be inflationary also tend to lead to a hike in interest rates. As we are financing the pandemic by personal borrowing be that from HMRC deferments, which we might have to refinance by a bank loan in January, or from an extension to the mortgage, isn't that sub-optimal?
Ceteris paribus the country is facing massive deflation.
A boost in inflation right now is a good thing, not a bad thing.
Not if you are mortgaged up to the hilt and interest rates rise to 15%. During the Major Government my mortgage IIRC was for a while at around 18%.
Add general inflation to that and we have a heady cocktail of serious debt to deal with.
Part of me thinks Johnson is a lucky politician and the normal economic rules don't apply to him and we can all carry on as normal without consequence. Is that wishful thinking?
We aren't facing 15% interest or 4% inflation rates. We are facing 0.25% interest rates and deflation.
We need to get inflation away from deflation and back up to betweeen 2-3%.
You don't know that. The more money is pumped into the economy the higher the inflation. There are already some supply issues from imported and domestically produced material.
You might be right, but a consumer debt lead recovery can be problematic.
We do know that. What we are facing is deflation not high inflation, we know that from history and we know that from the evidence we have before us.
Yes the actions being taken now lead to "higher" inflation but "higher" than what?
When your inflation rate is 5% then higher inflation is bad. When your inflation rate is 10% then higher inflation is terrible. When your inflation is close to 0% and heading down then higher inflation is a good thing.
What is the inflation rate today?
What we are going through is a catastrophe not seen since the Spanish Flu. What was the inflation rate in the early 1920s in the UK after the Spanish Flu?
It is a long time since I was a student of economics but I could see inflation rising to five percent and interest rates likewise. That is catastrophic if one is already (as many will be) on the limit of their borrowing.
|People said the same on the back of QE after the GFC but in fact interest rates struggled to get over 1% and are now at 0.1%. It may be different this time because it is a different kind of shock but gilt markets indicate that we are going to have very low interest rates for some considerable time to come.
You may be right. However this flies in the face of what I was taught 40 years ago
The thing that some people clearly understand about economics and others clearly don't is that it is circulation that matters.
Giving money to struggling businesses/individuals does absolutely nothing for the macro economy whatsoever as they cling on to that cash (and then continue to struggle if they're not getting anything circulated back to them).
What is needed is to get money circulating again. That is why I have been calling for a VAT cut here for months. And I've been laughed at here saying we need tax cuts with replies like "yeah and I'd like a supermodel".
A VAT cut is not the right way to go, however crowd-pleasing it might be in the short term.
First, there is a huge deadweight effect. Most of the purchases would have been made anyway, so all you're doing is cutting prices to individuals. They will save the difference.
Second, depending on the sector, people will often just bring forward future spending, leading to reduced economic growth when you take it away.
Third, there are often surprisingly large administrative costs involved in cutting VAT then raising it again, which is why, when they did it during the financial crisis, a lot of businesses did not even bother cutting their prices.
Fourth, sector-specific cuts lead to reclassifications and other inefficiencies.
Cutting less sexy business taxes, like payroll levies, or increasing capital allowances, gets you much more bang for your buck.
A 15% cut in VAT is a different proposition. There are 2 possibilities. Either prices will indeed fall significantly or the cafes etc will have substantially better margins helping them to stay in business.
IMO it will be the latter - prices won`t fall to the purchaser but I still think businesses will struggle on the demand side.
The thing that some people clearly understand about economics and others clearly don't is that it is circulation that matters.
Giving money to struggling businesses/individuals does absolutely nothing for the macro economy whatsoever as they cling on to that cash (and then continue to struggle if they're not getting anything circulated back to them).
What is needed is to get money circulating again. That is why I have been calling for a VAT cut here for months. And I've been laughed at here saying we need tax cuts with replies like "yeah and I'd like a supermodel".
Cutting VAT and similar issues on the struggling hospitality sectors will allow money to circulate more in those sectors - and allow businesses to cope with thicker margins on smaller volumes - thus saving the sector from a catastrophe and in the long-term the government will make more tax revenue despite temporarily lower taxes.
Essentially adjusting for the time value of money the peak of the Laffer Curve has temporarily moved far to the left of the graph and the government needs to respond accordingly.
Wasn't there an old song about the circulation of money? The lines "see the money flow, round the Barley Mow" float into my head but Google finds nothing.
"But what happens if this acts as the catalyst for more people to be affected by the virus? One thing is for sure Covid19 has not gone away and incentivising people to get into situations where they could be affected might not with hindsight prove to be smart."
Absolutely spot on.
If we take a global rather than myopic view of this, which a responsible Government is required to do, it is evident that serious spikes are occurring where people drop their guard. Look at Melbourne today which has just gone back into a 6-week total lockdown.
Coronavirus surges in the UK are a question of when not if.
The Government probably do know this and have decided to pull the wool over everyone's eyes. Beer, chips and ice-creams on the beach are more beneficial to the economy and so what if several thousands more people die?
Imagine a hundred Zeebrugge disasters and that's what this Government are dishing you up.
The people most at risk from Covid are the over 70s who don't work anyway, now we are passed the initial peak people should be returning to work with social distancing otherwise we risk the highest level of unemployment since the Depression once furlough ends
Getting to work and maintaining social distancing isn't always easy. (IIRC) Doing so at work's OK for a desk worker or, usually in construction or agriculture, but not in many factories or shops.
Still better than losing their job which is inevitable if they do not return to work at all
Indeed, just pointing out that it's easier for some people than others. But hey, that's life, eh!
On topic, it was a bunch of gimmicks from a lightweight. Sunak will eventually face the problem all socialism does, when he runs out of other people's cash to piss away.
Like Churchill did. In his first ministry, he more than doubled our national debt as a percentage of GDP.
Yet, strangely, no-one ever seems to criticise him for it.
The thing that some people clearly understand about economics and others clearly don't is that it is circulation that matters.
Giving money to struggling businesses/individuals does absolutely nothing for the macro economy whatsoever as they cling on to that cash (and then continue to struggle if they're not getting anything circulated back to them).
What is needed is to get money circulating again. That is why I have been calling for a VAT cut here for months. And I've been laughed at here saying we need tax cuts with replies like "yeah and I'd like a supermodel".
Cutting VAT and similar issues on the struggling hospitality sectors will allow money to circulate more in those sectors - and allow businesses to cope with thicker margins on smaller volumes - thus saving the sector from a catastrophe and in the long-term the government will make more tax revenue despite temporarily lower taxes.
Essentially adjusting for the time value of money the peak of the Laffer Curve has temporarily moved far to the left of the graph and the government needs to respond accordingly.
Wasn't there an old song about the circulation of money? The lines "see the money flow, round the Barley Mow" float into my head but Google finds nothing.
Prediction: Soon Sunak is going to be retenlessly undermined by Downing Street gnomes via anonymous briefing, whispering etc etc.
Even the idiots who surround Johnson must see that the contrast between Sunak's performances and his oration compared to the blathering, empty bluster of an old, tired, worn out looking Johnson are now stark to say the least.
Have a look at Johnson's face and body language during the wide shots during Sunak's Commons speech yesterday.....
'Imagine the state we’d be in if Corbyn had been in charge': the view from the 'red wall' Working-class voters in Leigh do not regret voting for Tories after listening to chancellor’s summer statement
"On Wednesday, the Chancellor gave permission for Britain to leave its Covid-19 nest. After four months of taking fright, the fightback had finally begun. "
and MPs.
"One veteran Tory said afterwards: "MPs were just grateful for a sense of direction out of lockdown rather than going round and round in circles as we have been."
"On Tuesday morning, Harper's Magazine published a joint letter from 153 prominent writers, academics, and entertainers, ranging from Noam Chomsky to David Brooks, J.K. Rowling to Wynton Marsalis, Salman Rushdie to Gloria Steinem, expressing concern that "the free exchange of information and ideas, the lifeblood of a liberal society, is daily becoming more constricted."
The 532-word document is a direct response to the remarkable past six weeks or so at American media and cultural institutions, which have experienced a wave of firings, resignations, and castigations over purportedly harmful words, deeds, and sometimes costumes."
On topic, an intriguing facet of all this. Since becoming Chancellor, Sunak has quickly established himself as one of the most popular politicians in the country.
But Javid told us he resigned as Chancellor because "no self-respecting minister would accept" the interference from No 10's aides. Chiefly Dominic Cummings.
Something somewhere is clearly quite wrong with the media narrative on Cummings.
Either Cummings is not in fact an unelected dictator running every element of government business, because Sunak has taken a firm grip of the Treasury and is running it brilliantly (or at least in a very popular way), despite the "unacceptable" interference from Cummings.
Or... Cummings is in fact in complete control and Sunak is a puppet. But that's ok because Cummings himself is coming up with very popular policies and is not the inept monster made out by the chattering classes but someone the public should cherish.
Javid resigned over his SPADS having to answer to Cummings. To lose a second CofE would look very bad, so Sunaks SPADS may get nominal control by Cummings, but in practice very little.
The other thing is that Cummings agenda is unusual for a UK right winger. It is Cultural and organisational, not economic. He hates the Civil Service in all its forms, and wants to smash what he sees as the Blob. Brexit too is driven by culture war, not economics. Cummings is not bothered by economics, or whether the countries debts are sustainable.
Both Cummings and Sunak have one thing in common. Both were wealthy from the start, but then married into very wealthy families. Neither has ever had to go short personally and never will, as such culturally they are very happy spending money, as there has always been an inexhaustible supply. We will see if that is true of the Treasury...
I think that the real finance implications take a year to hit. The July 31 tax payments have been deferred, and the income tax due on Jan 31 is 11 months of normal income. Corporation tax is also paid 9 months after fin year finishes. Tax reciepts will appear to be OK for some time yet, but will fall off a cliff in 2021, while spending remains very high. We are at the running in the air stage of a Wile E Coyote cartoon.
I guess the question is, does it matter? Everyone everywhere is running huge deficits now. Everyone who can is debasing their fiat currency through money printing to monetise these deficits. And gilt prices evyerwhere are still sky high. At some point orthodoxy says this all feeds through to high inflation. But of what, goods or assets? If I were writing the full budget, I'd equalise capital gains tax with income tax ahead of asset price inflation, just in case gilt yields start spiking beyond the control of our highly interventionist central bank.
The factor largely overlooked through this crisis has been the extent of balance sheet restructuring. From large caps, to SMEs to households. Massive amounts of corporate debt have been refinanced at negative real interest rates and with longer durations. Bye bye debt cliff edge. SMEs have been given a lifeline with often unsuitable very high interest short term debt, refinanced with longer term state guaranteed facilities. As for households, they've been given mortgage holidays and low rates to refinance at, a furlough scheme an order of magnitude more generous than redundancy and in many cases, no reduction in disposable income (or even an increase given commuting costs) but highly reduced avenues to blow that disposable income.
Glass half full says there's no meaningful second wave and we're at the start of a roaring decade. Albeit with as many losers as winners (poor old Pret).
But doesn't a rise in M3, which as you say tends to be inflationary also tend to lead to a hike in interest rates. As we are financing the pandemic by personal borrowing be that from HMRC deferments, which we might have to refinance by a bank loan in January, or from an extension to the mortgage, isn't that sub-optimal?
Ceteris paribus the country is facing massive deflation.
A boost in inflation right now is a good thing, not a bad thing.
Not if you are mortgaged up to the hilt and interest rates rise to 15%. During the Major Government my mortgage IIRC was for a while at around 18%.
Add general inflation to that and we have a heady cocktail of serious debt to deal with.
Part of me thinks Johnson is a lucky politician and the normal economic rules don't apply to him and we can all carry on as normal without consequence. Is that wishful thinking?
We aren't facing 15% interest or 4% inflation rates. We are facing 0.25% interest rates and deflation.
We need to get inflation away from deflation and back up to betweeen 2-3%.
You don't know that. The more money is pumped into the economy the higher the inflation. There are already some supply issues from imported and domestically produced material.
You might be right, but a consumer debt lead recovery can be problematic.
We do know that. What we are facing is deflation not high inflation, we know that from history and we know that from the evidence we have before us.
Yes the actions being taken now lead to "higher" inflation but "higher" than what?
When your inflation rate is 5% then higher inflation is bad. When your inflation rate is 10% then higher inflation is terrible. When your inflation is close to 0% and heading down then higher inflation is a good thing.
What is the inflation rate today?
What we are going through is a catastrophe not seen since the Spanish Flu. What was the inflation rate in the early 1920s in the UK after the Spanish Flu?
It is a long time since I was a student of economics but I could see inflation rising to five percent and interest rates likewise. That is catastrophic if one is already (as many will be) on the limit of their borrowing.
|People said the same on the back of QE after the GFC but in fact interest rates struggled to get over 1% and are now at 0.1%. It may be different this time because it is a different kind of shock but gilt markets indicate that we are going to have very low interest rates for some considerable time to come.
We’ve had massive asset price inflation.
That’s created real issues for the economy but most people haven’t noticed it because they don’t buy houses very often
Everyone under 40 has noticed it! Hence their flirtation with Corbynism. I accept most have not made the direct link with QE or socialism for the rich as I like to think of it.
The thing that some people clearly understand about economics and others clearly don't is that it is circulation that matters.
Giving money to struggling businesses/individuals does absolutely nothing for the macro economy whatsoever as they cling on to that cash (and then continue to struggle if they're not getting anything circulated back to them).
What is needed is to get money circulating again. That is why I have been calling for a VAT cut here for months. And I've been laughed at here saying we need tax cuts with replies like "yeah and I'd like a supermodel".
Cutting VAT and similar issues on the struggling hospitality sectors will allow money to circulate more in those sectors - and allow businesses to cope with thicker margins on smaller volumes - thus saving the sector from a catastrophe and in the long-term the government will make more tax revenue despite temporarily lower taxes.
Essentially adjusting for the time value of money the peak of the Laffer Curve has temporarily moved far to the left of the graph and the government needs to respond accordingly.
Wasn't there an old song about the circulation of money? The lines "see the money flow, round the Barley Mow" float into my head but Google finds nothing.
I was pleasantly surprised to hear both Sunak and his interviewer use the term deadweight loss.
The furlough scheme was/is great and has saved us from mass unemployment. But the job retention thing is dreadfully inefficient. The youth job placement looks similar to other failed apprenticeship ideas to me. The cheap meals out might be a good idea, but subsidising eating out is a pretty strange incentive to put in place.
Dogs that didn't bark: universities and adult education? Now is a great time for govt to be getting people back into study, either university or adult education. Aviation? No idea what can help them tbh.
By all means fund the study he mentions. But I don't know that it will make much difference in terms of persuading people to fly.
For one thing, people may not believe the results. For another, people travelling to other countries is going to be discouraged through quarantine, self-isolation and the like.
The reasons people want to fly are also reduced. Weddings and events have been cancelled etc.
Anecdata from group of friends who used to spend their lives on planes:
No-one is going on a plane now unless they really need to travel for personal reasons. Business is mostly been done remotely and couriers are keeping busy shipping documents around for signatures.
Those that really have to fly are trying to find the smallest possible plane, even if it means chartering one themselves.
Airlines are shooting themselves in the foot by not blocking middle seats in Economy - that's the biggest single change people want to see, and they're prepared to pay quite a lot extra not to be sitting right next to a stranger.
People are very much aware that the situation is changing daily, and that there is a considerable risk of being stuck at their destination for weeks on end, as was the case in March.
So, in summary, all the papers and politicians are saying just what they might be expected to say :-) .
It's a good job Rishi-Dishy is taking it in short stages, and has another bite of the cherry in the autumn when things will have changed again.
Hint on Energy: Anyone contemplating upgrading their house, note that these measures are the best they have been for about a decade, and subsidy (RHI) for ASHPs is already in place with the scheme running to approx April 2022. Probably a good time to renovate if you can get the plasterboard, but there will be a planning backlog.
Prediction: Soon Sunak is going to be retenlessly undermined by Downing Street gnomes via anonymous briefing, whispering etc etc.
Even the idiots who surround Johnson must see that the contrast between Sunak's performances and his oration compared to the blathering, empty bluster of an old, tired, worn out looking Johnson are now stark to say the least.
Have a look at Johnson's face and body language during the wide shots during Sunak's Commons speech yesterday.....
I wonder if Sunak would survive if it were found he had taken excursions to Durham, Hereford or Shrewsbury during lockdown?
The thing that some people clearly understand about economics and others clearly don't is that it is circulation that matters.
Giving money to struggling businesses/individuals does absolutely nothing for the macro economy whatsoever as they cling on to that cash (and then continue to struggle if they're not getting anything circulated back to them).
What is needed is to get money circulating again. That is why I have been calling for a VAT cut here for months. And I've been laughed at here saying we need tax cuts with replies like "yeah and I'd like a supermodel".
Cutting VAT and similar issues on the struggling hospitality sectors will allow money to circulate more in those sectors - and allow businesses to cope with thicker margins on smaller volumes - thus saving the sector from a catastrophe and in the long-term the government will make more tax revenue despite temporarily lower taxes.
Essentially adjusting for the time value of money the peak of the Laffer Curve has temporarily moved far to the left of the graph and the government needs to respond accordingly.
Wasn't there an old song about the circulation of money? The lines "see the money flow, round the Barley Mow" float into my head but Google finds nothing.
Prediction: Soon Sunak is going to be retenlessly undermined by Downing Street gnomes via anonymous briefing, whispering etc etc.
Even the idiots who surround Johnson must see that the contrast between Sunak's performances and his oration compared to the blathering, empty bluster of an old, tired, worn out looking Johnson are now stark to say the least.
Have a look at Johnson's face and body language during the wide shots during Sunak's Commons speech yesterday.....
Rule 1 of Tory Leadership challenges - the assassin never gets the crown.
So if Sunak wants to be leader, he needs to stay loyal(ish)
The thing that some people clearly understand about economics and others clearly don't is that it is circulation that matters.
Giving money to struggling businesses/individuals does absolutely nothing for the macro economy whatsoever as they cling on to that cash (and then continue to struggle if they're not getting anything circulated back to them).
What is needed is to get money circulating again. That is why I have been calling for a VAT cut here for months. And I've been laughed at here saying we need tax cuts with replies like "yeah and I'd like a supermodel".
Cutting VAT and similar issues on the struggling hospitality sectors will allow money to circulate more in those sectors - and allow businesses to cope with thicker margins on smaller volumes - thus saving the sector from a catastrophe and in the long-term the government will make more tax revenue despite temporarily lower taxes.
Essentially adjusting for the time value of money the peak of the Laffer Curve has temporarily moved far to the left of the graph and the government needs to respond accordingly.
I was taught years ago by an accountant when starting up a business for the first time: Cashflow is the lifeblood of a business. It's great to be profitable, and you need that in the long term, but it doesn't matter how profitable you are if your cashflow dries up. Your business can die overnight if that happens.
I was pleasantly surprised to hear both Sunak and his interviewer use the term deadweight loss.
The furlough scheme was/is great and has saved us from mass unemployment. But the job retention thing is dreadfully inefficient. The youth job placement looks similar to other failed apprenticeship ideas to me. The cheap meals out might be a good idea, but subsidising eating out is a pretty strange incentive to put in place.
Dogs that didn't bark: universities and adult education? Now is a great time for govt to be getting people back into study, either university or adult education. Aviation? No idea what can help them tbh.
By all means fund the study he mentions. But I don't know that it will make much difference in terms of persuading people to fly.
For one thing, people may not believe the results. For another, people travelling to other countries is going to be discouraged through quarantine, self-isolation and the like.
The reasons people want to fly are also reduced. Weddings and events have been cancelled etc.
Anecdata from group of friends who used to spend their lives on planes:
No-one is going on a plane now unless they really need to travel for personal reasons. Business is mostly been done remotely and couriers are keeping busy shipping documents around for signatures.
Those that really have to fly are trying to find the smallest possible plane, even if it means chartering one themselves.
Airlines are shooting themselves in the foot by not blocking middle seats in Economy - that's the biggest single change people want to see, and they're prepared to pay quite a lot extra not to be sitting right next to a stranger.
Last year I think I did 90 flights - this year it's likely to be a maximum of 2 (and that's only because I have a €400 flight voucher to spend and 2 free nights booked in the Inter Continental Amstel).
Sunak's package will be popular with many, but for the poorest in our society it will go down like a bucket of sick, particularly the measures that are getting the headlines. Indirect benefits to the poor are well hidden, though I'm not denying there may be some. Save£10 a head when you go out to eat? We haven't been able to go to a restaurant for years. Cut in stamp duty? Do me a favour.
I know it's not a popular view on here, but many people are really struggling, and if you rely on food banks or even universal credit there's not a lot for you, unless you are young and a traineeship or apprenticeship comes through.
'Eat out to help out' may also simply postpone a lot of restaurant visits from July to August, for those whom a £10 saving makes a significant difference, so I'm not sure it will be a huge success.
But for most habitual restaurant-goers it's the fear of eating out that needs reducing, not the cost.
Prediction: Soon Sunak is going to be retenlessly undermined by Downing Street gnomes via anonymous briefing, whispering etc etc.
Even the idiots who surround Johnson must see that the contrast between Sunak's performances and his oration compared to the blathering, empty bluster of an old, tired, worn out looking Johnson are now stark to say the least.
Remember when the moaning was that Boris and Dom has forced poor Sajid out of his job and installed green, inexperienced Rishi to be their puppet?
If he had turned out to be crap, they'd have gotten it in the neck from the moaners. Now that Rishi is - at least so far - a roaring success in his post, they're getting it in the neck for creating a rival to themselves.
"On Tuesday morning, Harper's Magazine published a joint letter from 153 prominent writers, academics, and entertainers, ranging from Noam Chomsky to David Brooks, J.K. Rowling to Wynton Marsalis, Salman Rushdie to Gloria Steinem, expressing concern that "the free exchange of information and ideas, the lifeblood of a liberal society, is daily becoming more constricted."
The 532-word document is a direct response to the remarkable past six weeks or so at American media and cultural institutions, which have experienced a wave of firings, resignations, and castigations over purportedly harmful words, deeds, and sometimes costumes."
Yet already people are apologising for having signed it, when they saw that other people they 'hate' had also signed it.
Specifically lots of them hate JK Rowling, who has been found guilty by the Court of Woke of the heinous crime of saying that men aren't women.
When the issue of supporting free speech gets mixed up with the personal opinions of those who support it we are in trouble.
I am in favour of cancelling those who cancel other people for cancelling people. Clearly.
On a serious note.
Am I alone in thinking of the woman who made some really nasty comments about Boris when in hospital and lost her job over it?
She may be full of TwitterSpite (TM)* but being jobless in the current situation is not a nice fate. What about her family (if any) - is she a breadwinner?
*My invented term for the curious phenomenon of the apparently normal people who transmogrify into hideous, savage, sociopaths when online.
Sunak's package will be popular with many, but for the poorest in our society it will go down like a bucket of sick, particularly the measures that are getting the headlines. Indirect benefits to the poor are well hidden, though I'm not denying there may be some. Save£10 a head when you go out to eat? We haven't been able to go to a restaurant for years. Cut in stamp duty? Do me a favour.
I know it's not a popular view on here, but many people are really struggling, and if you rely on food banks or even universal credit there's not a lot for you, unless you are young and a traineeship or apprenticeship comes through.
'Eat out to help out' may also simply postpone a lot of restaurant visits from July to August, for those whom a £10 saving makes a significant difference, so I'm not sure it will be a huge success.
But for most habitual restaurant-goers it's the fear of eating out that needs reducing, not the cost.
A really thoughtful post, that unfortunately will butter few parsnips here.
As usual there seems to be a lot of extreme views in relation to the package Sunak came up with yesterday. In my view it will either look dangerously insufficient in a few weeks or largely irrelevant depending on the shape of the recovery. An L shaped recovery and he will be accused of not doing enough. A V shaped recovery and we will move onto the next concern, namely how do we pay for all this, in which event it will look irrelevant and unhelpful.
In the scheme of a £2trn economy £30bn is a pretty modest package. We have suffered a fairly severe demand shock over about 4 months. I think the risk is more that its not enough but it is only a part of the overall package. If you take the support measures as a whole they exceed £300bn which is an enormous sum, way beyond what any government has ever pumped into our economy in peace time.
For me, the shape of the economic recovery is going to be dependent on behaviour. There is an urgency in getting people back in the shops, restaurants, cafes and bars. The measures seem reasonably well targeted that way and should help to mitigate the increase in unemployment. I am not sure that we will get back to anything like normal with bright yellow tape everywhere telling people to stay 2m apart. It stokes fear and apprehension. Will a 2 for 1 deal overcome that? I am not sure.
Chatting to an old friend on the phone last night, a family member of his has a restaurant in SE. One single small table of diners last weekend.
London is quiet. I was expecting a lot more activity when things reopened on Saturday. I think the downturn in the weather has come at a very unfortunate time for the reopening ; if the infection figures stay low and the weather heats up again, things may start to improve for these sectors in August, which is essential for them, because in October a lot of people will come off furlough.
The thing that some people clearly understand about economics and others clearly don't is that it is circulation that matters.
Giving money to struggling businesses/individuals does absolutely nothing for the macro economy whatsoever as they cling on to that cash (and then continue to struggle if they're not getting anything circulated back to them).
What is needed is to get money circulating again. That is why I have been calling for a VAT cut here for months. And I've been laughed at here saying we need tax cuts with replies like "yeah and I'd like a supermodel".
A VAT cut is not the right way to go, however crowd-pleasing it might be in the short term.
First, there is a huge deadweight effect. Most of the purchases would have been made anyway, so all you're doing is cutting prices to individuals. They will save the difference.
Second, depending on the sector, people will often just bring forward future spending, leading to reduced economic growth when you take it away.
Third, there are often surprisingly large administrative costs involved in cutting VAT then raising it again, which is why, when they did it during the financial crisis, a lot of businesses did not even bother cutting their prices.
Fourth, sector-specific cuts lead to reclassifications and other inefficiencies.
Cutting less sexy business taxes, like payroll levies, or increasing capital allowances, gets you much more bang for your buck.
Isn't the point that businesses won't cut their prices and will therefore pocket the difference themselves making the business more viable.
(You could say the same about the stamp duty cut, eventually it gets worked into house-prices and they just go up by the difference - its what happened last time)
In terms of "bringing purchases forward", this is a natural consequence of having inflation of any level in the economy, people buy things now because they will cost more in the future. The alternative, deferring purchases, is worse for the economy and is usually driven by deflation.
The VAT cut is a quick way to save businesses money. The job retention schemes and half price meal system, clunky and unlikely to be terribly effective as it is, are the ways of maintaing consumer spending so that businesses can actually get the revenue in they will be keeping more of.
Targeting it to immediate consumables limits the bringing forward issue
How many people don’t go out for a meal because they went out a month ago? (Budget aside, in which case bringing forward isn’t an issue). The problem is with one time purchases like white goods*
* (it’s a little depressing that I hesitated before using that term for a domestic appliance)
Agreed, the VAT drop has been sector-specific, purely for the reason that the industries concerned need people spending now, and that consumption of entertainment and hospitality isn't something large that people bring forward as a result of the tax cut.
(In IT, we are currently arguing over use of whitelists and blacklists in firewalls, and master and slave disks in servers.)
Prediction: Soon Sunak is going to be retenlessly undermined by Downing Street gnomes via anonymous briefing, whispering etc etc.
Even the idiots who surround Johnson must see that the contrast between Sunak's performances and his oration compared to the blathering, empty bluster of an old, tired, worn out looking Johnson are now stark to say the least.
Have a look at Johnson's face and body language during the wide shots during Sunak's Commons speech yesterday.....
I wonder if Sunak would survive if it were found he had taken excursions to Durham, Hereford or Shrewsbury during lockdown?
Most are happy. Gyms and aviation are complaining.
Nobody knows less about the aviation business (or any other type of business) than me but my old squadron FB group had a lot of commercial pilots in it. It now has a lot of unemployed commercial pilots in it with apparently zero prospects of employment. A couple of A380 captains with Emirates got their cards and coppers this week. Aviation looks to be fucked beyond salvation. Even when it definitely does return it won't be a return to normal and it won't be anything like its pre-Covid form.
Sunak's package will be popular with many, but for the poorest in our society it will go down like a bucket of sick, particularly the measures that are getting the headlines. Indirect benefits to the poor are well hidden, though I'm not denying there may be some. Save£10 a head when you go out to eat? We haven't been able to go to a restaurant for years. Cut in stamp duty? Do me a favour.
I know it's not a popular view on here, but many people are really struggling, and if you rely on food banks or even universal credit there's not a lot for you, unless you are young and a traineeship or apprenticeship comes through.
'Eat out to help out' may also simply postpone a lot of restaurant visits from July to August, for those whom a £10 saving makes a significant difference, so I'm not sure it will be a huge success.
But for most habitual restaurant-goers it's the fear of eating out that needs reducing, not the cost.
The object of these benefits is not to save the better off customer a few quid, it is to ensure that there is work for the poorly paid waiter or bar tender. It is designed to be a continuation of the furlough scheme by other and better means and focused specifically on areas of marginal employment on minimum wage.
The thing that some people clearly understand about economics and others clearly don't is that it is circulation that matters.
Giving money to struggling businesses/individuals does absolutely nothing for the macro economy whatsoever as they cling on to that cash (and then continue to struggle if they're not getting anything circulated back to them).
What is needed is to get money circulating again. That is why I have been calling for a VAT cut here for months. And I've been laughed at here saying we need tax cuts with replies like "yeah and I'd like a supermodel".
A VAT cut is not the right way to go, however crowd-pleasing it might be in the short term.
First, there is a huge deadweight effect. Most of the purchases would have been made anyway, so all you're doing is cutting prices to individuals. They will save the difference.
Second, depending on the sector, people will often just bring forward future spending, leading to reduced economic growth when you take it away.
Third, there are often surprisingly large administrative costs involved in cutting VAT then raising it again, which is why, when they did it during the financial crisis, a lot of businesses did not even bother cutting their prices.
Fourth, sector-specific cuts lead to reclassifications and other inefficiencies.
Cutting less sexy business taxes, like payroll levies, or increasing capital allowances, gets you much more bang for your buck.
Isn't the point that businesses won't cut their prices and will therefore pocket the difference themselves making the business more viable.
(You could say the same about the stamp duty cut, eventually it gets worked into house-prices and they just go up by the difference - its what happened last time)
In terms of "bringing purchases forward", this is a natural consequence of having inflation of any level in the economy, people buy things now because they will cost more in the future. The alternative, deferring purchases, is worse for the economy and is usually driven by deflation.
The VAT cut is a quick way to save businesses money. The job retention schemes and half price meal system, clunky and unlikely to be terribly effective as it is, are the ways of maintaing consumer spending so that businesses can actually get the revenue in they will be keeping more of.
Targeting it to immediate consumables limits the bringing forward issue
How many people don’t go out for a meal because they went out a month ago? (Budget aside, in which case bringing forward isn’t an issue). The problem is with one time purchases like white goods*
* (it’s a little depressing that I hesitated before using that term for a domestic appliance)
Do suppose we are going to get complaints about "Brown Furniture", as it is the deprecated, devalued, unwanted antiques?
The thing that some people clearly understand about economics and others clearly don't is that it is circulation that matters.
Giving money to struggling businesses/individuals does absolutely nothing for the macro economy whatsoever as they cling on to that cash (and then continue to struggle if they're not getting anything circulated back to them).
What is needed is to get money circulating again. That is why I have been calling for a VAT cut here for months. And I've been laughed at here saying we need tax cuts with replies like "yeah and I'd like a supermodel".
Cutting VAT and similar issues on the struggling hospitality sectors will allow money to circulate more in those sectors - and allow businesses to cope with thicker margins on smaller volumes - thus saving the sector from a catastrophe and in the long-term the government will make more tax revenue despite temporarily lower taxes.
Essentially adjusting for the time value of money the peak of the Laffer Curve has temporarily moved far to the left of the graph and the government needs to respond accordingly.
Wasn't there an old song about the circulation of money? The lines "see the money flow, round the Barley Mow" float into my head but Google finds nothing.
Sunak's package will be popular with many, but for the poorest in our society it will go down like a bucket of sick, particularly the measures that are getting the headlines. Indirect benefits to the poor are well hidden, though I'm not denying there may be some. Save£10 a head when you go out to eat? We haven't been able to go to a restaurant for years. Cut in stamp duty? Do me a favour.
I know it's not a popular view on here, but many people are really struggling, and if you rely on food banks or even universal credit there's not a lot for you, unless you are young and a traineeship or apprenticeship comes through.
'Eat out to help out' may also simply postpone a lot of restaurant visits from July to August, for those whom a £10 saving makes a significant difference, so I'm not sure it will be a huge success.
But for most habitual restaurant-goers it's the fear of eating out that needs reducing, not the cost.
I am not sure the U3a Lunch Group to which my wife and I belong will be meeting in a room any time soon.
The thing that some people clearly understand about economics and others clearly don't is that it is circulation that matters.
Giving money to struggling businesses/individuals does absolutely nothing for the macro economy whatsoever as they cling on to that cash (and then continue to struggle if they're not getting anything circulated back to them).
What is needed is to get money circulating again. That is why I have been calling for a VAT cut here for months. And I've been laughed at here saying we need tax cuts with replies like "yeah and I'd like a supermodel".
Cutting VAT and similar issues on the struggling hospitality sectors will allow money to circulate more in those sectors - and allow businesses to cope with thicker margins on smaller volumes - thus saving the sector from a catastrophe and in the long-term the government will make more tax revenue despite temporarily lower taxes.
Essentially adjusting for the time value of money the peak of the Laffer Curve has temporarily moved far to the left of the graph and the government needs to respond accordingly.
Wasn't there an old song about the circulation of money? The lines "see the money flow, round the Barley Mow" float into my head but Google finds nothing.
Doing my bit for BA, booked tickets to Sicily for next month. Was advised to book the cheapest economy seat, wait for two days and get the club class upgrade. It worked, overall ticket cost for club class for two people came in at £370, 100% tier points as well.
I'd recommend everyone to do it this way around and book cheaper and wait for the upgrade promo. A friend got return tickets to Tokyo for £1300 club class this way instead of the £3400 ticket price.
Prediction: Soon Sunak is going to be retenlessly undermined by Downing Street gnomes via anonymous briefing, whispering etc etc.
Even the idiots who surround Johnson must see that the contrast between Sunak's performances and his oration compared to the blathering, empty bluster of an old, tired, worn out looking Johnson are now stark to say the least.
Have a look at Johnson's face and body language during the wide shots during Sunak's Commons speech yesterday.....
I wonder if Sunak would survive if it were found he had taken excursions to Durham, Hereford or Shrewsbury during lockdown?
Prediction: Soon Sunak is going to be retenlessly undermined by Downing Street gnomes via anonymous briefing, whispering etc etc.
Even the idiots who surround Johnson must see that the contrast between Sunak's performances and his oration compared to the blathering, empty bluster of an old, tired, worn out looking Johnson are now stark to say the least.
Have a look at Johnson's face and body language during the wide shots during Sunak's Commons speech yesterday.....
Rule 1 of Tory Leadership challenges - the assassin never gets the crown.
So if Sunak wants to be leader, he needs to stay loyal(ish)
Sunak's package will be popular with many, but for the poorest in our society it will go down like a bucket of sick, particularly the measures that are getting the headlines. Indirect benefits to the poor are well hidden, though I'm not denying there may be some. Save£10 a head when you go out to eat? We haven't been able to go to a restaurant for years. Cut in stamp duty? Do me a favour.
I know it's not a popular view on here, but many people are really struggling, and if you rely on food banks or even universal credit there's not a lot for you, unless you are young and a traineeship or apprenticeship comes through.
'Eat out to help out' may also simply postpone a lot of restaurant visits from July to August, for those whom a £10 saving makes a significant difference, so I'm not sure it will be a huge success.
But for most habitual restaurant-goers it's the fear of eating out that needs reducing, not the cost.
Sunak mentioned that the job retention scheme had been targeted to those on low wages - also surely (low paid) restaurant workers will benefit from more people going to restaurants - even if they can't afford to themselves - the issue we face is getting the economy moving again - how else do you suggest we go about it?
Sunak's package will be popular with many, but for the poorest in our society it will go down like a bucket of sick, particularly the measures that are getting the headlines. Indirect benefits to the poor are well hidden, though I'm not denying there may be some. Save£10 a head when you go out to eat? We haven't been able to go to a restaurant for years. Cut in stamp duty? Do me a favour.
I know it's not a popular view on here, but many people are really struggling, and if you rely on food banks or even universal credit there's not a lot for you, unless you are young and a traineeship or apprenticeship comes through.
'Eat out to help out' may also simply postpone a lot of restaurant visits from July to August, for those whom a £10 saving makes a significant difference, so I'm not sure it will be a huge success.
But for most habitual restaurant-goers it's the fear of eating out that needs reducing, not the cost.
A really thoughtful post, that unfortunately will butter few parsnips here.
Whilst not wanting to underplay the risk, it seems to me that a lot of people seem to be operating under the belief that you can catch COVID simply by being in the same room and/or in close proximity to other people. As opposed to other infected people. In some parts of the country right now the actual odds of finding yourself within “dangerous” proximity of an infected person, let alone catching COVID off them, let alone developing symptoms are pretty small. Let alone if you operate sensible personal precautions.
It’s not like going into a pub is comparable with spending all night mingling on a crowded nightclub dance floor.
That's unfortunately probably not true if you make a habit of it. The last estimate I saw is that 1 in 1000 people are currently infectious, and the level is not declining rapidly. If you go to a pub and mingle with a few people you'll probably be fine. If you do it twice a week for a couple of months, and a few other things like shopping and the odd restaurant meal, you'll probably catch it sooner or later.
This isn't dependent on the 1/1000 rate being quite accurate. If it's actually 1/500 or 1/3000 the argument is the same.
I have a mildly increased risk (>70) but had a haircut and went into two shops yesterday. I feel the risk has declined to the point that an exceptional outing is a reasonable roll of the dice. But I don't plan to do it again for a month or so.
Agreed.
I went for a haircut the day it became permissible, following an arguably heartless chain of reasoning.
1- Right now, the odds of coming into contact with anyone infected are very low for a one-off event 2 - The most likely people to get infected in a hairdressers are the ones who are there all day, every day, in contact with the customers (ie the hairdressers). Even with PPE, they have a non-negligible chance of slipping up. 3 - Sooner or later, that one in a thousand customer is coming in. If the hairdresser doesn't follow perfect guidelines with PPE, he or she will become an infection source.
Ergo, try to be one of the first customers and get in there before many, or any, of the one in a thousand get in there.
Prediction: Soon Sunak is going to be retenlessly undermined by Downing Street gnomes via anonymous briefing, whispering etc etc.
Even the idiots who surround Johnson must see that the contrast between Sunak's performances and his oration compared to the blathering, empty bluster of an old, tired, worn out looking Johnson are now stark to say the least.
Have a look at Johnson's face and body language during the wide shots during Sunak's Commons speech yesterday.....
Rule 1 of Tory Leadership challenges - the assassin never gets the crown.
So if Sunak wants to be leader, he needs to stay loyal(ish)
Did that apply to Boris?
Boris voted for May's agreement in the end didn't he?
I`m concerned about the Job Retention Bonus thing. I can see Sunak`s reasoning, but open to manipulation I think.
Will end up being a handout to business - inc large businesses.
I know one very large business very well, which has furloughed many employees and temporarily shut offices, but has carried on trading with minimal impact on turnover whilst getting government to reduce its costs via the furlough scheme. Making the furloughed workers redundant was never on the cards, and now the company is to receive £1000 for each furloughed employee on top.
Prediction: Soon Sunak is going to be retenlessly undermined by Downing Street gnomes via anonymous briefing, whispering etc etc.
Even the idiots who surround Johnson must see that the contrast between Sunak's performances and his oration compared to the blathering, empty bluster of an old, tired, worn out looking Johnson are now stark to say the least.
Have a look at Johnson's face and body language during the wide shots during Sunak's Commons speech yesterday.....
Rule 1 of Tory Leadership challenges - the assassin never gets the crown.
So if Sunak wants to be leader, he needs to stay loyal(ish)
Did that apply to Boris?
Yes - supporting the other side in the referendum, when Cameron had given leave for people to do so, didn't count as back stabbing as far as the party was concerned.
The worst thing the British bureaucratic apparatus ever did was to attach the word 'Permanent' to these people's titles. 'Contingent (on Performance)' would produce an infinitely more productive attitude, and perhaps even dispel their universal assumption that the elected Government exists to serve them, rather than the other way round.
Sunak's package will be popular with many, but for the poorest in our society it will go down like a bucket of sick, particularly the measures that are getting the headlines. Indirect benefits to the poor are well hidden, though I'm not denying there may be some. Save£10 a head when you go out to eat? We haven't been able to go to a restaurant for years. Cut in stamp duty? Do me a favour.
I know it's not a popular view on here, but many people are really struggling, and if you rely on food banks or even universal credit there's not a lot for you, unless you are young and a traineeship or apprenticeship comes through.
'Eat out to help out' may also simply postpone a lot of restaurant visits from July to August, for those whom a £10 saving makes a significant difference, so I'm not sure it will be a huge success.
But for most habitual restaurant-goers it's the fear of eating out that needs reducing, not the cost.
The object of these benefits is not to save the better off customer a few quid, it is to ensure that there is work for the poorly paid waiter or bar tender. It is designed to be a continuation of the furlough scheme by other and better means and focused specifically on areas of marginal employment on minimum wage.
Yes, I get that. I'm just not sure that it will have sufficient impact, given my last sentence. And the fact that it is only for a month.
Most are happy. Gyms and aviation are complaining.
Nobody knows less about the aviation business (or any other type of business) than me but my old squadron FB group had a lot of commercial pilots in it. It now has a lot of unemployed commercial pilots in it with apparently zero prospects of employment. A couple of A380 captains with Emirates got their cards and coppers this week. Aviation looks to be fucked beyond salvation. Even when it definitely does return it won't be a return to normal and it won't be anything like its pre-Covid form.
Emirates have 120 parked A380s, they reckon they might get half of them flying again by the end of the year.
Some of them have been seen flying circuits past my window, as they try and stop planes and pilots from getting rusty,
About a dozen pilots per airframe, that's sadly going to be a lot of redundancies.
Err, yes. One more senior CS for the bin. Their job is to implement government policy, not to brief the BBC about how evil it is.
I dont know the details but presumably it is part of his job description to give approval or not on such schemes rather than just a random comment. If so, his duty is indeed to carry out an assessment and give his view, which the minister can then choose to agree with or overrule as he did. Sounds like the process worked as intended. Just blindly saying yes to whatever would be a failed process.
Prediction: Soon Sunak is going to be retenlessly undermined by Downing Street gnomes via anonymous briefing, whispering etc etc.
Even the idiots who surround Johnson must see that the contrast between Sunak's performances and his oration compared to the blathering, empty bluster of an old, tired, worn out looking Johnson are now stark to say the least.
Have a look at Johnson's face and body language during the wide shots during Sunak's Commons speech yesterday.....
Rule 1 of Tory Leadership challenges - the assassin never gets the crown.
So if Sunak wants to be leader, he needs to stay loyal(ish)
Comments
Not all government spending is productive or useful
As to making a point, you get all frothy at the mere mention of Alex Salmond and how much damage he might do to the local govt in Scotland.
Most are happy. Gyms and aviation are complaining.
Off to the IoW for a long weekend, so may go to a pub with beer garden, as the forecast looks good, but otherwise just socially distanced filial visiting and walks. The way to keep the r number down is treat everyone and everything as an infection risk. I am used to it now.
"And Boris made it clear how much he enjoyed his junior’s slick performance. The PM tucked himself comfortably into a corner of the Treasury bench and harrumphed loudly as the nattily-suited brainbox took centre-stage. Far from being threatened, Boris looked as happy as a football manager watching a classy new purchase bossing the midfield in a cup-tie."
https://www.spectator.co.uk/article/rishi-sunak-is-no-threat-to-boris
The furlough scheme was/is great and has saved us from mass unemployment. But the job retention thing is dreadfully inefficient. The youth job placement looks similar to other failed apprenticeship ideas to me. The cheap meals out might be a good idea, but subsidising eating out is a pretty strange incentive to put in place.
Dogs that didn't bark: universities and adult education? Now is a great time for govt to be getting people back into study, either university or adult education.
Aviation? No idea what can help them tbh.
(You could say the same about the stamp duty cut, eventually it gets worked into house-prices and they just go up by the difference - its what happened last time)
In terms of "bringing purchases forward", this is a natural consequence of having inflation of any level in the economy, people buy things now because they will cost more in the future. The alternative, deferring purchases, is worse for the economy and is usually driven by deflation.
The VAT cut is a quick way to save businesses money. The job retention schemes and half price meal system, clunky and unlikely to be terribly effective as it is, are the ways of maintaing consumer spending so that businesses can actually get the revenue in they will be keeping more of.
In the scheme of a £2trn economy £30bn is a pretty modest package. We have suffered a fairly severe demand shock over about 4 months. I think the risk is more that its not enough but it is only a part of the overall package. If you take the support measures as a whole they exceed £300bn which is an enormous sum, way beyond what any government has ever pumped into our economy in peace time.
For me, the shape of the economic recovery is going to be dependent on behaviour. There is an urgency in getting people back in the shops, restaurants, cafes and bars. The measures seem reasonably well targeted that way and should help to mitigate the increase in unemployment. I am not sure that we will get back to anything like normal with bright yellow tape everywhere telling people to stay 2m apart. It stokes fear and apprehension. Will a 2 for 1 deal overcome that? I am not sure.
https://johnhcochrane.blogspot.com/2020/05/airlines-and-information.html
https://www.theguardian.com/world/2020/jul/08/china-great-firewall-descends-hong-kong-internet-users
That didn't take them long, did it?
For one thing, people may not believe the results. For another, people travelling to other countries is going to be discouraged through quarantine, self-isolation and the like.
The reasons people want to fly are also reduced. Weddings and events have been cancelled etc.
https://twitter.com/davieclegg/status/1281130828437827584?s=20
To be clear I was talking about fixed rate mortgages (based on the context of the prior post)
Even the idiots who surround Johnson must see that the contrast between Sunak's performances and his oration compared to the blathering, empty bluster of an old, tired, worn out looking Johnson are now stark to say the least.
But hey, I'm retired and it won't be me moaning when the pubs shut again and businesses collapse. It will be no use blaming everything on the government if the public are too stupid to try to help themselves
How many people don’t go out for a meal because they went out a month ago? (Budget aside, in which case bringing forward isn’t an issue). The problem is with one time purchases like white goods*
* (it’s a little depressing that I hesitated before using that term for a domestic appliance)
Specifically lots of them hate JK Rowling, who has been found guilty by the Court of Woke of the heinous crime of saying that men aren't women.
That’s created real issues for the economy but most people haven’t noticed it because they don’t buy houses very often
In his first ministry, he more than doubled our national debt as a percentage of GDP.
Yet, strangely, no-one ever seems to criticise him for it.
'Imagine the state we’d be in if Corbyn had been in charge': the view from the 'red wall'
Working-class voters in Leigh do not regret voting for Tories after listening to chancellor’s summer statement
https://www.theguardian.com/uk-news/2020/jul/08/imagine-the-state-wed-be-in-if-corbyn-had-been-in-charge-the-view-from-the-red-wall
"On Wednesday, the Chancellor gave permission for Britain to leave its Covid-19 nest. After four months of taking fright, the fightback had finally begun. "
and MPs.
"One veteran Tory said afterwards: "MPs were just grateful for a sense of direction out of lockdown rather than going round and round in circles as we have been."
Or only when its not about the Westminster government?
No-one is going on a plane now unless they really need to travel for personal reasons. Business is mostly been done remotely and couriers are keeping busy shipping documents around for signatures.
Those that really have to fly are trying to find the smallest possible plane, even if it means chartering one themselves.
Airlines are shooting themselves in the foot by not blocking middle seats in Economy - that's the biggest single change people want to see, and they're prepared to pay quite a lot extra not to be sitting right next to a stranger.
People are very much aware that the situation is changing daily, and that there is a considerable risk of being stuck at their destination for weeks on end, as was the case in March.
It's a good job Rishi-Dishy is taking it in short stages, and has another bite of the cherry in the autumn when things will have changed again.
Hint on Energy: Anyone contemplating upgrading their house, note that these measures are the best they have been for about a decade, and subsidy (RHI) for ASHPs is already in place with the scheme running to approx April 2022. Probably a good time to renovate if you can get the plasterboard, but there will be a planning backlog.
Even a whip round at The Flask would be pushed to raise that.
So if Sunak wants to be leader, he needs to stay loyal(ish)
I know it's not a popular view on here, but many people are really struggling, and if you rely on food banks or even universal credit there's not a lot for you, unless you are young and a traineeship or apprenticeship comes through.
'Eat out to help out' may also simply postpone a lot of restaurant visits from July to August, for those whom a £10 saving makes a significant difference, so I'm not sure it will be a huge success.
But for most habitual restaurant-goers it's the fear of eating out that needs reducing, not the cost.
If he had turned out to be crap, they'd have gotten it in the neck from the moaners. Now that Rishi is - at least so far - a roaring success in his post, they're getting it in the neck for creating a rival to themselves.
Can't win with some people, can they?
https://twitter.com/IrvineWelsh/status/1281111949007360000?s=20
On a serious note.
Am I alone in thinking of the woman who made some really nasty comments about Boris when in hospital and lost her job over it?
She may be full of TwitterSpite (TM)* but being jobless in the current situation is not a nice fate. What about her family (if any) - is she a breadwinner?
*My invented term for the curious phenomenon of the apparently normal people who transmogrify into hideous, savage, sociopaths when online.
Thanks.
(In IT, we are currently arguing over use of whitelists and blacklists in firewalls, and master and slave disks in servers.)
https://twitter.com/bbclaurak/status/1281150639402295296
I'd recommend everyone to do it this way around and book cheaper and wait for the upgrade promo. A friend got return tickets to Tokyo for £1300 club class this way instead of the £3400 ticket price.
I went for a haircut the day it became permissible, following an arguably heartless chain of reasoning.
1- Right now, the odds of coming into contact with anyone infected are very low for a one-off event
2 - The most likely people to get infected in a hairdressers are the ones who are there all day, every day, in contact with the customers (ie the hairdressers). Even with PPE, they have a non-negligible chance of slipping up.
3 - Sooner or later, that one in a thousand customer is coming in. If the hairdresser doesn't follow perfect guidelines with PPE, he or she will become an infection source.
Ergo, try to be one of the first customers and get in there before many, or any, of the one in a thousand get in there.
Will end up being a handout to business - inc large businesses.
I know one very large business very well, which has furloughed many employees and temporarily shut offices, but has carried on trading with minimal impact on turnover whilst getting government to reduce its costs via the furlough scheme. Making the furloughed workers redundant was never on the cards, and now the company is to receive £1000 for each furloughed employee on top.
Some of them have been seen flying circuits past my window, as they try and stop planes and pilots from getting rusty,
About a dozen pilots per airframe, that's sadly going to be a lot of redundancies.