O/T — In London today I was surprised to find myself giving directions to Japanese tourists. I had thought that all tourism from other countries was off the cards atm.
It would appear that the Government is, in essence, operating an open door policy for visitors from the whole world, except those travelling from red list countries (and presumably visitors from e.g. Brazil could just get around the feeble rules by travelling via a third country and lying on whatever declarations they have to make when they get here, if sufficiently determined to do so?)
Like I said the other day, it's so reckless and illogical a policy that it only really makes sense if one assumes that ministers want to import variants, in order to have surge testing, panic in the press, and thus to maintain the general atmosphere of emergency. The emergency is wildly popular with the Tories' frightened elderly supporters, it gives them cover to act with impunity, and it serves further to neuter an already ineffectual Opposition. Why would they ever want it to end?
Because there are more votes in ending lockdown than continuing it? And free economies are more successful than locked down ones?
1. Are there? Much of the population remains irrationally terrified and such opinion is disproportionately concentrated amongst elderly authoritarians, who are (a) numerous and (b) heavily inclined to turn out to vote. 2. Who cares about the economy when you can just borrow to plug the gaps in your finances?
We’re printing money not borrowing it
How is that actually done? Literally printing or metaphorically? Are other comparable countries doing the same and roughly to the same extent?
Metaphorically
The Bank of England fires up its spreadsheet and buys assets from banks who turn around and lend it to the government. They call it Quantative Easing so it sounds boring and technical and people’s eyes glaze over.
We’ve been doing it for years but generally less than the EU and the US.
That’s the reason why we have horrendous asset price inflation - there’s too much money around and not enough quality assets
If banks are lending assets it to the government then surely this IS government borrowing in a real sense - i.e. with interest being charged and repayment at some point to be made?
The Bank buys an old government bond from banks.
The banks use that money to buy a new bond from the Government.
The Government owns the Bank so doesn't pay interest to the Bank on the bond it bought.
Net effect the Government has sold a new bond, the banks have the same, the Bank owns some it didn't and claims no interest.
But theoretically no money has been printed. Theoretically the Bank isn't buying from the Government.
O/T — In London today I was surprised to find myself giving directions to Japanese tourists. I had thought that all tourism from other countries was off the cards atm.
It would appear that the Government is, in essence, operating an open door policy for visitors from the whole world, except those travelling from red list countries (and presumably visitors from e.g. Brazil could just get around the feeble rules by travelling via a third country and lying on whatever declarations they have to make when they get here, if sufficiently determined to do so?)
Like I said the other day, it's so reckless and illogical a policy that it only really makes sense if one assumes that ministers want to import variants, in order to have surge testing, panic in the press, and thus to maintain the general atmosphere of emergency. The emergency is wildly popular with the Tories' frightened elderly supporters, it gives them cover to act with impunity, and it serves further to neuter an already ineffectual Opposition. Why would they ever want it to end?
Because there are more votes in ending lockdown than continuing it? And free economies are more successful than locked down ones?
1. Are there? Much of the population remains irrationally terrified and such opinion is disproportionately concentrated amongst elderly authoritarians, who are (a) numerous and (b) heavily inclined to turn out to vote. 2. Who cares about the economy when you can just borrow to plug the gaps in your finances?
We’re printing money not borrowing it
How is that actually done? Literally printing or metaphorically? Are other comparable countries doing the same and roughly to the same extent?
Metaphorically
The Bank of England fires up its spreadsheet and buys assets from banks who turn around and lend it to the government. They call it Quantative Easing so it sounds boring and technical and people’s eyes glaze over.
We’ve been doing it for years but generally less than the EU and the US.
That’s the reason why we have horrendous asset price inflation - there’s too much money around and not enough quality assets
Corbynistas are sometimes keen on QE as a way to finance spending, but as the effect of QE is to increase the value of real assets. It is a form of redistribution to the wealthy. Certainly I have done well out of it.
O/T — In London today I was surprised to find myself giving directions to Japanese tourists. I had thought that all tourism from other countries was off the cards atm.
It would appear that the Government is, in essence, operating an open door policy for visitors from the whole world, except those travelling from red list countries (and presumably visitors from e.g. Brazil could just get around the feeble rules by travelling via a third country and lying on whatever declarations they have to make when they get here, if sufficiently determined to do so?)
Like I said the other day, it's so reckless and illogical a policy that it only really makes sense if one assumes that ministers want to import variants, in order to have surge testing, panic in the press, and thus to maintain the general atmosphere of emergency. The emergency is wildly popular with the Tories' frightened elderly supporters, it gives them cover to act with impunity, and it serves further to neuter an already ineffectual Opposition. Why would they ever want it to end?
Because there are more votes in ending lockdown than continuing it? And free economies are more successful than locked down ones?
1. Are there? Much of the population remains irrationally terrified and such opinion is disproportionately concentrated amongst elderly authoritarians, who are (a) numerous and (b) heavily inclined to turn out to vote. 2. Who cares about the economy when you can just borrow to plug the gaps in your finances?
We’re printing money not borrowing it
How is that actually done? Literally printing or metaphorically? Are other comparable countries doing the same and roughly to the same extent?
Metaphorically
The Bank of England fires up its spreadsheet and buys assets from banks who turn around and lend it to the government. They call it Quantative Easing so it sounds boring and technical and people’s eyes glaze over.
We’ve been doing it for years but generally less than the EU and the US.
That’s the reason why we have horrendous asset price inflation - there’s too much money around and not enough quality assets
If banks are lending assets it to the government then surely this IS government borrowing in a real sense - i.e. with interest being charged and repayment at some point to be made?
Not really
Bank buys £300bn Uk government debt from the market.
Market buys £300bn of new debt from the government
Net result is that government debt has gone up £300bn and Bank of England assets have gone up £300bn.
Government pays same interest to market (assuming no change in rates). Government pays more interest to the Bank of England (in practice I don’t think they bother any more) which pays a dividend to the government with the proceeds.
When the Bank of England debts come due they enter into a contract with the government to roll over the loan into a new instrument
I am not sure that is quite accurate Charles. What I understand is happening (and I could be wrong) is that the government is issuing new debt and the Bank are in the market as a buyer of last resort. The result is that the price of that debt in terms of coupon is artificially reduced and those buying it know that they are guaranteed that they can shift it on, usually at a small profit.
The net result is that the banks make a turn on the debt and it ends up on the balance sheet of the Bank who no longer get paid the coupon so it is interest free. The government gets the proceeds of the bonds which allows it to fund its day to day activities. The total amount of money in the economy is increased by the amount of buying that the Bank does (since, as you say, it simply creates the money to buy the bonds). Government debt is increased by the amount of the bonds but at zero cost to them because they don't pay the bank.
The government borrowing all of this money would normally squeeze out private sector borrowing but this does not happen because it is the created money from the Bank that pays for it so there is still the same amount of capital looking for a home which, as you say, is creating asset inflation.
What I don't understand is why this has not created more general inflation. Monetarist theory indicates that the price level is set by the quantity of money in the economy available to buy things. As that quantity of money increases prices should increase too unless there is an increase in supply. But its not happening. Its really weird.
On the subject of asset price inflation, it looks like the FTSE100 will open above 7000 for the first time in over a year. Not as over inflated as some other markets but looking rather optomistic to me.
O/T — In London today I was surprised to find myself giving directions to Japanese tourists. I had thought that all tourism from other countries was off the cards atm.
It would appear that the Government is, in essence, operating an open door policy for visitors from the whole world, except those travelling from red list countries (and presumably visitors from e.g. Brazil could just get around the feeble rules by travelling via a third country and lying on whatever declarations they have to make when they get here, if sufficiently determined to do so?)
Like I said the other day, it's so reckless and illogical a policy that it only really makes sense if one assumes that ministers want to import variants, in order to have surge testing, panic in the press, and thus to maintain the general atmosphere of emergency. The emergency is wildly popular with the Tories' frightened elderly supporters, it gives them cover to act with impunity, and it serves further to neuter an already ineffectual Opposition. Why would they ever want it to end?
Because there are more votes in ending lockdown than continuing it? And free economies are more successful than locked down ones?
1. Are there? Much of the population remains irrationally terrified and such opinion is disproportionately concentrated amongst elderly authoritarians, who are (a) numerous and (b) heavily inclined to turn out to vote. 2. Who cares about the economy when you can just borrow to plug the gaps in your finances?
We’re printing money not borrowing it
How is that actually done? Literally printing or metaphorically? Are other comparable countries doing the same and roughly to the same extent?
Metaphorically
The Bank of England fires up its spreadsheet and buys assets from banks who turn around and lend it to the government. They call it Quantative Easing so it sounds boring and technical and people’s eyes glaze over.
We’ve been doing it for years but generally less than the EU and the US.
That’s the reason why we have horrendous asset price inflation - there’s too much money around and not enough quality assets
If banks are lending assets it to the government then surely this IS government borrowing in a real sense - i.e. with interest being charged and repayment at some point to be made?
Not really
Bank buys £300bn Uk government debt from the market.
Market buys £300bn of new debt from the government
Net result is that government debt has gone up £300bn and Bank of England assets have gone up £300bn.
Government pays same interest to market (assuming no change in rates). Government pays more interest to the Bank of England (in practice I don’t think they bother any more) which pays a dividend to the government with the proceeds.
When the Bank of England debts come due they enter into a contract with the government to roll over the loan into a new instrument
I am not sure that is quite accurate Charles. What I understand is happening (and I could be wrong) is that the government is issuing new debt and the Bank are in the market as a buyer of last resort. The result is that the price of that debt in terms of coupon is artificially reduced and those buying it know that they are guaranteed that they can shift it on, usually at a small profit.
The net result is that the banks make a turn on the debt and it ends up on the balance sheet of the Bank who no longer get paid the coupon so it is interest free. The government gets the proceeds of the bonds which allows it to fund its day to day activities. The total amount of money in the economy is increased by the amount of buying that the Bank does (since, as you say, it simply creates the money to buy the bonds). Government debt is increased by the amount of the bonds but at zero cost to them because they don't pay the bank.
The government borrowing all of this money would normally squeeze out private sector borrowing but this does not happen because it is the created money from the Bank that pays for it so there is still the same amount of capital looking for a home which, as you say, is creating asset inflation.
What I don't understand is why this has not created more general inflation. Monetarist theory indicates that the price level is set by the quantity of money in the economy available to buy things. As that quantity of money increases princes should increase too unless there is an increase in supply. But its not happening. Its really weird.
That inflation has not increased (yet) should give economists pause for thought. A bit like physics at the end of the 19th century, where they thought they knew almost everything, but really didn’t. Economic theory has a long way to go...
On the subject of asset price inflation, it looks like the FTSE100 will open above 7000 for the first time in over a year. Not as over inflated as some other markets but looking rather optomistic to me.
Still 400 ish points lower than it was pre-pandemic.
O/T — In London today I was surprised to find myself giving directions to Japanese tourists. I had thought that all tourism from other countries was off the cards atm.
It would appear that the Government is, in essence, operating an open door policy for visitors from the whole world, except those travelling from red list countries (and presumably visitors from e.g. Brazil could just get around the feeble rules by travelling via a third country and lying on whatever declarations they have to make when they get here, if sufficiently determined to do so?)
Like I said the other day, it's so reckless and illogical a policy that it only really makes sense if one assumes that ministers want to import variants, in order to have surge testing, panic in the press, and thus to maintain the general atmosphere of emergency. The emergency is wildly popular with the Tories' frightened elderly supporters, it gives them cover to act with impunity, and it serves further to neuter an already ineffectual Opposition. Why would they ever want it to end?
Because there are more votes in ending lockdown than continuing it? And free economies are more successful than locked down ones?
1. Are there? Much of the population remains irrationally terrified and such opinion is disproportionately concentrated amongst elderly authoritarians, who are (a) numerous and (b) heavily inclined to turn out to vote. 2. Who cares about the economy when you can just borrow to plug the gaps in your finances?
We’re printing money not borrowing it
How is that actually done? Literally printing or metaphorically? Are other comparable countries doing the same and roughly to the same extent?
Metaphorically
The Bank of England fires up its spreadsheet and buys assets from banks who turn around and lend it to the government. They call it Quantative Easing so it sounds boring and technical and people’s eyes glaze over.
We’ve been doing it for years but generally less than the EU and the US.
That’s the reason why we have horrendous asset price inflation - there’s too much money around and not enough quality assets
If banks are lending assets it to the government then surely this IS government borrowing in a real sense - i.e. with interest being charged and repayment at some point to be made?
Not really
Bank buys £300bn Uk government debt from the market.
Market buys £300bn of new debt from the government
Net result is that government debt has gone up £300bn and Bank of England assets have gone up £300bn.
Government pays same interest to market (assuming no change in rates). Government pays more interest to the Bank of England (in practice I don’t think they bother any more) which pays a dividend to the government with the proceeds.
When the Bank of England debts come due they enter into a contract with the government to roll over the loan into a new instrument
I am not sure that is quite accurate Charles. What I understand is happening (and I could be wrong) is that the government is issuing new debt and the Bank are in the market as a buyer of last resort. The result is that the price of that debt in terms of coupon is artificially reduced and those buying it know that they are guaranteed that they can shift it on, usually at a small profit.
The net result is that the banks make a turn on the debt and it ends up on the balance sheet of the Bank who no longer get paid the coupon so it is interest free. The government gets the proceeds of the bonds which allows it to fund its day to day activities. The total amount of money in the economy is increased by the amount of buying that the Bank does (since, as you say, it simply creates the money to buy the bonds). Government debt is increased by the amount of the bonds but at zero cost to them because they don't pay the bank.
The government borrowing all of this money would normally squeeze out private sector borrowing but this does not happen because it is the created money from the Bank that pays for it so there is still the same amount of capital looking for a home which, as you say, is creating asset inflation.
What I don't understand is why this has not created more general inflation. Monetarist theory indicates that the price level is set by the quantity of money in the economy available to buy things. As that quantity of money increases princes should increase too unless there is an increase in supply. But its not happening. Its really weird.
That inflation has not increased (yet) should give economists pause for thought. A bit like physics at the end of the 19th century, where they thought they knew almost everything, but really didn’t. Economic theory has a long way to go...
My personal theory is that it is creating more inflation - but if we didn't have it we'd be in Japanese-style deflation right now.
On the subject of asset price inflation, it looks like the FTSE100 will open above 7000 for the first time in over a year. Not as over inflated as some other markets but looking rather optomistic to me.
Still 400 ish points lower than it was pre-pandemic.
Selling 90% of my equities in February when I saw the wave hit Italy and buying them back in April has been my most effective bit of speculation ever. I doubt that I will ever have such an information advantage ever again. I have been reshuffling to a more defensive position over the last month. I am beginning to fear a major Asian second wave, particularly in China, Korea, SE Asia etc. Those are countries with very low vaccination rates, and sitting ducks for new variants.
On the subject of asset price inflation, it looks like the FTSE100 will open above 7000 for the first time in over a year. Not as over inflated as some other markets but looking rather optomistic to me.
Still 400 ish points lower than it was pre-pandemic.
Which as we're heading out of pandemic and the market looks to the future doesn't seem at all optimistic to me.
O/T — In London today I was surprised to find myself giving directions to Japanese tourists. I had thought that all tourism from other countries was off the cards atm.
It would appear that the Government is, in essence, operating an open door policy for visitors from the whole world, except those travelling from red list countries (and presumably visitors from e.g. Brazil could just get around the feeble rules by travelling via a third country and lying on whatever declarations they have to make when they get here, if sufficiently determined to do so?)
Like I said the other day, it's so reckless and illogical a policy that it only really makes sense if one assumes that ministers want to import variants, in order to have surge testing, panic in the press, and thus to maintain the general atmosphere of emergency. The emergency is wildly popular with the Tories' frightened elderly supporters, it gives them cover to act with impunity, and it serves further to neuter an already ineffectual Opposition. Why would they ever want it to end?
Because there are more votes in ending lockdown than continuing it? And free economies are more successful than locked down ones?
1. Are there? Much of the population remains irrationally terrified and such opinion is disproportionately concentrated amongst elderly authoritarians, who are (a) numerous and (b) heavily inclined to turn out to vote. 2. Who cares about the economy when you can just borrow to plug the gaps in your finances?
We’re printing money not borrowing it
How is that actually done? Literally printing or metaphorically? Are other comparable countries doing the same and roughly to the same extent?
Metaphorically
The Bank of England fires up its spreadsheet and buys assets from banks who turn around and lend it to the government. They call it Quantative Easing so it sounds boring and technical and people’s eyes glaze over.
We’ve been doing it for years but generally less than the EU and the US.
That’s the reason why we have horrendous asset price inflation - there’s too much money around and not enough quality assets
If banks are lending assets it to the government then surely this IS government borrowing in a real sense - i.e. with interest being charged and repayment at some point to be made?
Not really
Bank buys £300bn Uk government debt from the market.
Market buys £300bn of new debt from the government
Net result is that government debt has gone up £300bn and Bank of England assets have gone up £300bn.
Government pays same interest to market (assuming no change in rates). Government pays more interest to the Bank of England (in practice I don’t think they bother any more) which pays a dividend to the government with the proceeds.
When the Bank of England debts come due they enter into a contract with the government to roll over the loan into a new instrument
I am not sure that is quite accurate Charles. What I understand is happening (and I could be wrong) is that the government is issuing new debt and the Bank are in the market as a buyer of last resort. The result is that the price of that debt in terms of coupon is artificially reduced and those buying it know that they are guaranteed that they can shift it on, usually at a small profit.
The net result is that the banks make a turn on the debt and it ends up on the balance sheet of the Bank who no longer get paid the coupon so it is interest free. The government gets the proceeds of the bonds which allows it to fund its day to day activities. The total amount of money in the economy is increased by the amount of buying that the Bank does (since, as you say, it simply creates the money to buy the bonds). Government debt is increased by the amount of the bonds but at zero cost to them because they don't pay the bank.
The government borrowing all of this money would normally squeeze out private sector borrowing but this does not happen because it is the created money from the Bank that pays for it so there is still the same amount of capital looking for a home which, as you say, is creating asset inflation.
What I don't understand is why this has not created more general inflation. Monetarist theory indicates that the price level is set by the quantity of money in the economy available to buy things. As that quantity of money increases princes should increase too unless there is an increase in supply. But its not happening. Its really weird.
That inflation has not increased (yet) should give economists pause for thought. A bit like physics at the end of the 19th century, where they thought they knew almost everything, but really didn’t. Economic theory has a long way to go...
Indeed. There is some research which shows that there was an impact on Sterling from the last lot of QE. In dollar terms the value of Sterling (total) remained broadly the same despite the fact that the quantity of Sterling available increased, in other words the value of the pound fell by a roughly proportionate amount.
But that fall in the value of the pound should have been inflationary in that imports would cost more and it largely wasn't. The only thing that makes sense to me, and I am not a trained economist, is that there were offsetting deflationary pressures which largely cancelled the effect either from falling demand or reduced cost of supply. We see some evidence of this in very low wage growth ever since 2008.
O/T — In London today I was surprised to find myself giving directions to Japanese tourists. I had thought that all tourism from other countries was off the cards atm.
It would appear that the Government is, in essence, operating an open door policy for visitors from the whole world, except those travelling from red list countries (and presumably visitors from e.g. Brazil could just get around the feeble rules by travelling via a third country and lying on whatever declarations they have to make when they get here, if sufficiently determined to do so?)
Like I said the other day, it's so reckless and illogical a policy that it only really makes sense if one assumes that ministers want to import variants, in order to have surge testing, panic in the press, and thus to maintain the general atmosphere of emergency. The emergency is wildly popular with the Tories' frightened elderly supporters, it gives them cover to act with impunity, and it serves further to neuter an already ineffectual Opposition. Why would they ever want it to end?
Because there are more votes in ending lockdown than continuing it? And free economies are more successful than locked down ones?
1. Are there? Much of the population remains irrationally terrified and such opinion is disproportionately concentrated amongst elderly authoritarians, who are (a) numerous and (b) heavily inclined to turn out to vote. 2. Who cares about the economy when you can just borrow to plug the gaps in your finances?
We’re printing money not borrowing it
How is that actually done? Literally printing or metaphorically? Are other comparable countries doing the same and roughly to the same extent?
Metaphorically
The Bank of England fires up its spreadsheet and buys assets from banks who turn around and lend it to the government. They call it Quantative Easing so it sounds boring and technical and people’s eyes glaze over.
We’ve been doing it for years but generally less than the EU and the US.
That’s the reason why we have horrendous asset price inflation - there’s too much money around and not enough quality assets
If banks are lending assets it to the government then surely this IS government borrowing in a real sense - i.e. with interest being charged and repayment at some point to be made?
Not really
Bank buys £300bn Uk government debt from the market.
Market buys £300bn of new debt from the government
Net result is that government debt has gone up £300bn and Bank of England assets have gone up £300bn.
Government pays same interest to market (assuming no change in rates). Government pays more interest to the Bank of England (in practice I don’t think they bother any more) which pays a dividend to the government with the proceeds.
When the Bank of England debts come due they enter into a contract with the government to roll over the loan into a new instrument
I am not sure that is quite accurate Charles. What I understand is happening (and I could be wrong) is that the government is issuing new debt and the Bank are in the market as a buyer of last resort. The result is that the price of that debt in terms of coupon is artificially reduced and those buying it know that they are guaranteed that they can shift it on, usually at a small profit.
The net result is that the banks make a turn on the debt and it ends up on the balance sheet of the Bank who no longer get paid the coupon so it is interest free. The government gets the proceeds of the bonds which allows it to fund its day to day activities. The total amount of money in the economy is increased by the amount of buying that the Bank does (since, as you say, it simply creates the money to buy the bonds). Government debt is increased by the amount of the bonds but at zero cost to them because they don't pay the bank.
The government borrowing all of this money would normally squeeze out private sector borrowing but this does not happen because it is the created money from the Bank that pays for it so there is still the same amount of capital looking for a home which, as you say, is creating asset inflation.
What I don't understand is why this has not created more general inflation. Monetarist theory indicates that the price level is set by the quantity of money in the economy available to buy things. As that quantity of money increases princes should increase too unless there is an increase in supply. But its not happening. Its really weird.
That inflation has not increased (yet) should give economists pause for thought. A bit like physics at the end of the 19th century, where they thought they knew almost everything, but really didn’t. Economic theory has a long way to go...
Indeed. There is some research which shows that there was an impact on Sterling from the last lot of QE. In dollar terms the value of Sterling (total) remained broadly the same despite the fact that the quantity of Sterling available increased, in other words the value of the pound fell by a roughly proportionate amount.
But that fall in the value of the pound should have been inflationary in that imports would cost more and it largely wasn't. The only thing that makes sense to me, and I am not a trained economist, is that there were offsetting deflationary pressures which largely cancelled the effect either from falling demand or reduced cost of supply. We see some evidence of this in very low wage growth ever since 2008.
Precisely that was my point. Look to Japan as the alternative.
Much of the issues that caused the Lost Decades in Japan - bubble, bad debts, over leverage, excess borrowing etc - struck the UK and the West in general in 2007/08.
We should have seen a deflationary spiral like Japan. QE has meant instead we've had negligible inflation instead of deflation.
On the subject of asset price inflation, it looks like the FTSE100 will open above 7000 for the first time in over a year. Not as over inflated as some other markets but looking rather optomistic to me.
Still 400 ish points lower than it was pre-pandemic.
Which as we're heading out of pandemic and the market looks to the future doesn't seem at all optimistic to me.
Some shares do seem rather optomistic. Easyjet is trading at the same price as June 2019 for example despite flying only 10% of flights, and those dirt cheap. I cannot see that share price is justified.
On the subject of asset price inflation, it looks like the FTSE100 will open above 7000 for the first time in over a year. Not as over inflated as some other markets but looking rather optomistic to me.
Still 400 ish points lower than it was pre-pandemic.
Which as we're heading out of pandemic and the market looks to the future doesn't seem at all optimistic to me.
Well, except quite a lot of these companies are now bombed out with debts accumulated over the last year and far more vulnerable. Some of these, particularly in retail, will go bust unable to sustain that debt level, even at current very low interest rates.
I personally think that the market is very high at the moment and a correction at some point, possibly brought on by some variant set back as @Foxy alludes to, is almost inevitable in the next quarter. It seems unlikely to me that Greensill is going to be the only finance house that is somewhat overstretched for example.
O/T — In London today I was surprised to find myself giving directions to Japanese tourists. I had thought that all tourism from other countries was off the cards atm.
It would appear that the Government is, in essence, operating an open door policy for visitors from the whole world, except those travelling from red list countries (and presumably visitors from e.g. Brazil could just get around the feeble rules by travelling via a third country and lying on whatever declarations they have to make when they get here, if sufficiently determined to do so?)
Like I said the other day, it's so reckless and illogical a policy that it only really makes sense if one assumes that ministers want to import variants, in order to have surge testing, panic in the press, and thus to maintain the general atmosphere of emergency. The emergency is wildly popular with the Tories' frightened elderly supporters, it gives them cover to act with impunity, and it serves further to neuter an already ineffectual Opposition. Why would they ever want it to end?
Because there are more votes in ending lockdown than continuing it? And free economies are more successful than locked down ones?
1. Are there? Much of the population remains irrationally terrified and such opinion is disproportionately concentrated amongst elderly authoritarians, who are (a) numerous and (b) heavily inclined to turn out to vote. 2. Who cares about the economy when you can just borrow to plug the gaps in your finances?
We’re printing money not borrowing it
How is that actually done? Literally printing or metaphorically? Are other comparable countries doing the same and roughly to the same extent?
Metaphorically
The Bank of England fires up its spreadsheet and buys assets from banks who turn around and lend it to the government. They call it Quantative Easing so it sounds boring and technical and people’s eyes glaze over.
We’ve been doing it for years but generally less than the EU and the US.
That’s the reason why we have horrendous asset price inflation - there’s too much money around and not enough quality assets
If banks are lending assets it to the government then surely this IS government borrowing in a real sense - i.e. with interest being charged and repayment at some point to be made?
The Bank buys an old government bond from a bank.
The bank uses that money to buy a new bond from the Government.
The Government owns the Bank so doesn't pay interest to the Bank on the bond it bought.
Net effect the Government has sold a new bond, the banks have the same, the Bank owns some it didn't and claims no interest.
But theoretically no money has been printed. Theoretically the Bank isn't buying from the Government.
The Bank of England is creating the money to pay for the bonds out of thin air - it is they who have responsibility for the money supply not the government
So this is not the hapless Brown and Darling "maxing out the credit cards" as pointed out by Cameron and Osborne. It is genuinely free money with no downsides. Wow that is genius...although doesn't this increase M3 which is inflationary, although in itself is that also a positive, because inflation erodes the debt?
On the subject of asset price inflation, it looks like the FTSE100 will open above 7000 for the first time in over a year. Not as over inflated as some other markets but looking rather optomistic to me.
Still 400 ish points lower than it was pre-pandemic.
Which as we're heading out of pandemic and the market looks to the future doesn't seem at all optimistic to me.
Some shares do seem rather optomistic. Easyjet is trading at the same price as June 2019 for example despite flying only 10% of flights, and those dirt cheap. I cannot see that share price is justified.
I guess the market reckons they’ll make a fortune at some point.
Haven’t they snuck in some price rises on luggage?
On the subject of asset price inflation, it looks like the FTSE100 will open above 7000 for the first time in over a year. Not as over inflated as some other markets but looking rather optomistic to me.
Still 400 ish points lower than it was pre-pandemic.
Which as we're heading out of pandemic and the market looks to the future doesn't seem at all optimistic to me.
Well, except quite a lot of these companies are now bombed out with debts accumulated over the last year and far more vulnerable. Some of these, particularly in retail, will go bust unable to sustain that debt level, even at current very low interest rates.
I personally think that the market is very high at the moment and a correction at some point, possibly brought on by some variant set back as @Foxy alludes to, is almost inevitable in the next quarter. It seems unlikely to me that Greensill is going to be the only finance house that is somewhat overstretched for example.
Yes, it is worth noting that while UK and USA have reasonable vaccine coverage against a fresh wave, and even France now has 12 million immunised, much of the world, particularly Asia, Latin America, Middle East, Africa are effectively unvaccinated. The world economy remains very vulnerable.
O/T — In London today I was surprised to find myself giving directions to Japanese tourists. I had thought that all tourism from other countries was off the cards atm.
It would appear that the Government is, in essence, operating an open door policy for visitors from the whole world, except those travelling from red list countries (and presumably visitors from e.g. Brazil could just get around the feeble rules by travelling via a third country and lying on whatever declarations they have to make when they get here, if sufficiently determined to do so?)
Like I said the other day, it's so reckless and illogical a policy that it only really makes sense if one assumes that ministers want to import variants, in order to have surge testing, panic in the press, and thus to maintain the general atmosphere of emergency. The emergency is wildly popular with the Tories' frightened elderly supporters, it gives them cover to act with impunity, and it serves further to neuter an already ineffectual Opposition. Why would they ever want it to end?
Because there are more votes in ending lockdown than continuing it? And free economies are more successful than locked down ones?
1. Are there? Much of the population remains irrationally terrified and such opinion is disproportionately concentrated amongst elderly authoritarians, who are (a) numerous and (b) heavily inclined to turn out to vote. 2. Who cares about the economy when you can just borrow to plug the gaps in your finances?
We’re printing money not borrowing it
How is that actually done? Literally printing or metaphorically? Are other comparable countries doing the same and roughly to the same extent?
Metaphorically
The Bank of England fires up its spreadsheet and buys assets from banks who turn around and lend it to the government. They call it Quantative Easing so it sounds boring and technical and people’s eyes glaze over.
We’ve been doing it for years but generally less than the EU and the US.
That’s the reason why we have horrendous asset price inflation - there’s too much money around and not enough quality assets
If banks are lending assets it to the government then surely this IS government borrowing in a real sense - i.e. with interest being charged and repayment at some point to be made?
The Bank buys an old government bond from a bank.
The bank uses that money to buy a new bond from the Government.
The Government owns the Bank so doesn't pay interest to the Bank on the bond it bought.
Net effect the Government has sold a new bond, the banks have the same, the Bank owns some it didn't and claims no interest.
But theoretically no money has been printed. Theoretically the Bank isn't buying from the Government.
The Bank of England is creating the money to pay for the bonds out of thin air - it is they who have responsibility for the money supply not the government
So this is not the hapless Brown and Darling "maxing out the credit cards" as pointed out by Cameron and Osborne. It is genuinely free money with no downsides. Wow that is genius...although doesn't this increase M3 which is inflationary, although in itself is that also a positive, because inflation erodes the debt?
It's "genius" for as long as it works. After that it may become more Weimar republic. Or it may not. We are not in Kansas anymore.
On the subject of asset price inflation, it looks like the FTSE100 will open above 7000 for the first time in over a year. Not as over inflated as some other markets but looking rather optomistic to me.
Still 400 ish points lower than it was pre-pandemic.
Which as we're heading out of pandemic and the market looks to the future doesn't seem at all optimistic to me.
Some shares do seem rather optomistic. Easyjet is trading at the same price as June 2019 for example despite flying only 10% of flights, and those dirt cheap. I cannot see that share price is justified.
I guess the market reckons they’ll make a fortune at some point.
Haven’t they snuck in some price rises on luggage?
If they don't go bankrupt first! I think there is vast overcapacity in every travel industry for the next few years. Some other sectors too.
On the subject of asset price inflation, it looks like the FTSE100 will open above 7000 for the first time in over a year. Not as over inflated as some other markets but looking rather optomistic to me.
Still 400 ish points lower than it was pre-pandemic.
Selling 90% of my equities in February when I saw the wave hit Italy and buying them back in April has been my most effective bit of speculation ever. I doubt that I will ever have such an information advantage ever again. I have been reshuffling to a more defensive position over the last month. I am beginning to fear a major Asian second wave, particularly in China, Korea, SE Asia etc. Those are countries with very low vaccination rates, and sitting ducks for new variants.
A report on 5 live this morning from India said they are experiencing 150.000 daily infections and covid is out of control
And how on earth did they allow crowds at the cricket
On the subject of asset price inflation, it looks like the FTSE100 will open above 7000 for the first time in over a year. Not as over inflated as some other markets but looking rather optomistic to me.
Still 400 ish points lower than it was pre-pandemic.
Which as we're heading out of pandemic and the market looks to the future doesn't seem at all optimistic to me.
Some shares do seem rather optomistic. Easyjet is trading at the same price as June 2019 for example despite flying only 10% of flights, and those dirt cheap. I cannot see that share price is justified.
Coincidentally this is very similar to what I did my Master's dissertation on. Share prices are essentially not based on what is happening in the present but the long term expectation of future dividends, adjusted.
EasyJet may be doing 10% of its flights today, but they won't in the future. Investors are (wisely) taking future expectations into account.
On the subject of asset price inflation, it looks like the FTSE100 will open above 7000 for the first time in over a year. Not as over inflated as some other markets but looking rather optomistic to me.
Still 400 ish points lower than it was pre-pandemic.
Selling 90% of my equities in February when I saw the wave hit Italy and buying them back in April has been my most effective bit of speculation ever. I doubt that I will ever have such an information advantage ever again. I have been reshuffling to a more defensive position over the last month. I am beginning to fear a major Asian second wave, particularly in China, Korea, SE Asia etc. Those are countries with very low vaccination rates, and sitting ducks for new variants.
I agree with you (and did quite well myself, although my buying was more gradual and from June). Either Ukraine or Taiwan could provide a sudden shock to the markets, or we wait to see what happens with US inflation.
Corrections are usually preceded by one last hurrah - so moving gradually into less risky assets is probably the sensible approach for now.
FT have an article criticising slow action of MHRA on AZN https://www.ft.com/content/5251e1b9-b88d-4bfc-95fa-29dc34d37652 (title "‘Slow’ UK response to AstraZeneca side-effects alarms experts", which will normally get you past the paywall if you search it in Google and access from Google link rather than direct).
Now, I don't know the rights and wrongs of this, but the FT journalists should perhaps reflect that if the best you can do in 'expert' criticism is a psychologist, a spokesperson for a charity (professional body?) and someone from a science media centre then maybe you need to try a bit harder or there is not in fact a story. No pharmacovigilance researchers, for example?
Sweden is weird, here are their numbers to the 5th of April, they are from top to bottom Cases / ICU admission / Deaths
Look how weird that is! Cases rising since the 1st of Feb, ICU admissions rising since the first of Feb. Deaths are... down since 1st of Feb and now currently flat.
I mean don't get me wrong they are flat at the UK equivalent of 125 people dying of Covid a day but their current ICU Covid occupancy is now higher than their December/Jan peak where they had the UK equivalent of 600 a day dying. They are now hit those Dec/Jan numbers again for every indicator apart from deaths.
Overall ICU occupancy in Sweden is massively above average so this isn't a with/of Covid distinction, Their ICUs are rammed with full on Covid cases. And deaths are not being 'hidden', their whole country mortatlity numbers for March are _under_ the 2015-2019 average.
That's weird. Swedes are obviously made of sterner stuff than other countries.
O/T — In London today I was surprised to find myself giving directions to Japanese tourists. I had thought that all tourism from other countries was off the cards atm.
It would appear that the Government is, in essence, operating an open door policy for visitors from the whole world, except those travelling from red list countries (and presumably visitors from e.g. Brazil could just get around the feeble rules by travelling via a third country and lying on whatever declarations they have to make when they get here, if sufficiently determined to do so?)
Like I said the other day, it's so reckless and illogical a policy that it only really makes sense if one assumes that ministers want to import variants, in order to have surge testing, panic in the press, and thus to maintain the general atmosphere of emergency. The emergency is wildly popular with the Tories' frightened elderly supporters, it gives them cover to act with impunity, and it serves further to neuter an already ineffectual Opposition. Why would they ever want it to end?
Because there are more votes in ending lockdown than continuing it? And free economies are more successful than locked down ones?
1. Are there? Much of the population remains irrationally terrified and such opinion is disproportionately concentrated amongst elderly authoritarians, who are (a) numerous and (b) heavily inclined to turn out to vote. 2. Who cares about the economy when you can just borrow to plug the gaps in your finances?
We’re printing money not borrowing it
How is that actually done? Literally printing or metaphorically? Are other comparable countries doing the same and roughly to the same extent?
Metaphorically
The Bank of England fires up its spreadsheet and buys assets from banks who turn around and lend it to the government. They call it Quantative Easing so it sounds boring and technical and people’s eyes glaze over.
We’ve been doing it for years but generally less than the EU and the US.
That’s the reason why we have horrendous asset price inflation - there’s too much money around and not enough quality assets
If banks are lending assets it to the government then surely this IS government borrowing in a real sense - i.e. with interest being charged and repayment at some point to be made?
The Bank buys an old government bond from a bank.
The bank uses that money to buy a new bond from the Government.
The Government owns the Bank so doesn't pay interest to the Bank on the bond it bought.
Net effect the Government has sold a new bond, the banks have the same, the Bank owns some it didn't and claims no interest.
But theoretically no money has been printed. Theoretically the Bank isn't buying from the Government.
The Bank of England is creating the money to pay for the bonds out of thin air - it is they who have responsibility for the money supply not the government
So this is not the hapless Brown and Darling "maxing out the credit cards" as pointed out by Cameron and Osborne. It is genuinely free money with no downsides. Wow that is genius...although doesn't this increase M3 which is inflationary, although in itself is that also a positive, because inflation erodes the debt?
The collapse of gilt rates may well be good for the government, but is terrible for those relying on them for income. Pensions are no longer viable for many schemes.
On the subject of asset price inflation, it looks like the FTSE100 will open above 7000 for the first time in over a year. Not as over inflated as some other markets but looking rather optomistic to me.
Still 400 ish points lower than it was pre-pandemic.
Which as we're heading out of pandemic and the market looks to the future doesn't seem at all optimistic to me.
The key question is when the market starts to look beyond the coming short-term boost from people spending what (some) have been able to save and from general post-lockdown euphoria. A lot of the coming boost is already priced in.
On the subject of asset price inflation, it looks like the FTSE100 will open above 7000 for the first time in over a year. Not as over inflated as some other markets but looking rather optomistic to me.
Still 400 ish points lower than it was pre-pandemic.
Which as we're heading out of pandemic and the market looks to the future doesn't seem at all optimistic to me.
Some shares do seem rather optomistic. Easyjet is trading at the same price as June 2019 for example despite flying only 10% of flights, and those dirt cheap. I cannot see that share price is justified.
Coincidentally this is very similar to what I did my Master's dissertation on. Share prices are essentially not based on what is happening in the present but the long term expectation of future dividends, adjusted.
EasyJet may be doing 10% of its flights today, but they won't in the future. Investors are (wisely) taking future expectations into account.
I suppose the question is, how long can they survive on the current levels? When does the market expect a recovery? They shouldn’t bank on a recovery this summer.
O/T — In London today I was surprised to find myself giving directions to Japanese tourists. I had thought that all tourism from other countries was off the cards atm.
It would appear that the Government is, in essence, operating an open door policy for visitors from the whole world, except those travelling from red list countries (and presumably visitors from e.g. Brazil could just get around the feeble rules by travelling via a third country and lying on whatever declarations they have to make when they get here, if sufficiently determined to do so?)
Like I said the other day, it's so reckless and illogical a policy that it only really makes sense if one assumes that ministers want to import variants, in order to have surge testing, panic in the press, and thus to maintain the general atmosphere of emergency. The emergency is wildly popular with the Tories' frightened elderly supporters, it gives them cover to act with impunity, and it serves further to neuter an already ineffectual Opposition. Why would they ever want it to end?
Because there are more votes in ending lockdown than continuing it? And free economies are more successful than locked down ones?
1. Are there? Much of the population remains irrationally terrified and such opinion is disproportionately concentrated amongst elderly authoritarians, who are (a) numerous and (b) heavily inclined to turn out to vote. 2. Who cares about the economy when you can just borrow to plug the gaps in your finances?
We’re printing money not borrowing it
How is that actually done? Literally printing or metaphorically? Are other comparable countries doing the same and roughly to the same extent?
Metaphorically
The Bank of England fires up its spreadsheet and buys assets from banks who turn around and lend it to the government. They call it Quantative Easing so it sounds boring and technical and people’s eyes glaze over.
We’ve been doing it for years but generally less than the EU and the US.
That’s the reason why we have horrendous asset price inflation - there’s too much money around and not enough quality assets
If banks are lending assets it to the government then surely this IS government borrowing in a real sense - i.e. with interest being charged and repayment at some point to be made?
Not really
Bank buys £300bn Uk government debt from the market.
Market buys £300bn of new debt from the government
Net result is that government debt has gone up £300bn and Bank of England assets have gone up £300bn.
Government pays same interest to market (assuming no change in rates). Government pays more interest to the Bank of England (in practice I don’t think they bother any more) which pays a dividend to the government with the proceeds.
When the Bank of England debts come due they enter into a contract with the government to roll over the loan into a new instrument
I am not sure that is quite accurate Charles. What I understand is happening (and I could be wrong) is that the government is issuing new debt and the Bank are in the market as a buyer of last resort. The result is that the price of that debt in terms of coupon is artificially reduced and those buying it know that they are guaranteed that they can shift it on, usually at a small profit.
The net result is that the banks make a turn on the debt and it ends up on the balance sheet of the Bank who no longer get paid the coupon so it is interest free. The government gets the proceeds of the bonds which allows it to fund its day to day activities. The total amount of money in the economy is increased by the amount of buying that the Bank does (since, as you say, it simply creates the money to buy the bonds). Government debt is increased by the amount of the bonds but at zero cost to them because they don't pay the bank.
The government borrowing all of this money would normally squeeze out private sector borrowing but this does not happen because it is the created money from the Bank that pays for it so there is still the same amount of capital looking for a home which, as you say, is creating asset inflation.
What I don't understand is why this has not created more general inflation. Monetarist theory indicates that the price level is set by the quantity of money in the economy available to buy things. As that quantity of money increases princes should increase too unless there is an increase in supply. But its not happening. Its really weird.
That inflation has not increased (yet) should give economists pause for thought. A bit like physics at the end of the 19th century, where they thought they knew almost everything, but really didn’t. Economic theory has a long way to go...
My personal theory is that it is creating more inflation - but if we didn't have it we'd be in Japanese-style deflation right now.
Or worse.
The risk in the future will be that people regard it as, essentially, magic, and we print the money when it doesn't help us avoid deflation. But it may be that the IT revolution is having a long-term deflationary effect now, so we could be a fair way from that.
On the subject of asset price inflation, it looks like the FTSE100 will open above 7000 for the first time in over a year. Not as over inflated as some other markets but looking rather optomistic to me.
Still 400 ish points lower than it was pre-pandemic.
Which as we're heading out of pandemic and the market looks to the future doesn't seem at all optimistic to me.
Some shares do seem rather optomistic. Easyjet is trading at the same price as June 2019 for example despite flying only 10% of flights, and those dirt cheap. I cannot see that share price is justified.
I guess the market reckons they’ll make a fortune at some point.
Haven’t they snuck in some price rises on luggage?
If they don't go bankrupt first! I think there is vast overcapacity in every travel industry for the next few years. Some other sectors too.
Which is why investors need to take the health of firms balance sheets, liabilities etc etc into account.
It's entirely possible that the pandemic could cause ultimately some of the firm's valuations to go up not down, if the pandemic took out some of their rivals allowing future profits and dividends to be higher as a result.
On the subject of asset price inflation, it looks like the FTSE100 will open above 7000 for the first time in over a year. Not as over inflated as some other markets but looking rather optomistic to me.
Still 400 ish points lower than it was pre-pandemic.
Which as we're heading out of pandemic and the market looks to the future doesn't seem at all optimistic to me.
Some shares do seem rather optomistic. Easyjet is trading at the same price as June 2019 for example despite flying only 10% of flights, and those dirt cheap. I cannot see that share price is justified.
Coincidentally this is very similar to what I did my Master's dissertation on. Share prices are essentially not based on what is happening in the present but the long term expectation of future dividends, adjusted.
EasyJet may be doing 10% of its flights today, but they won't in the future. Investors are (wisely) taking future expectations into account.
On that basis Carnival is a steal at still half what it was worth pre-pandemic. But of course they have tons of new debt to service now, as well as the still uncertain short term outlook for cruising. It has nevertheless already doubled from when I bought back at around £8
On the subject of asset price inflation, it looks like the FTSE100 will open above 7000 for the first time in over a year. Not as over inflated as some other markets but looking rather optomistic to me.
Still 400 ish points lower than it was pre-pandemic.
Which as we're heading out of pandemic and the market looks to the future doesn't seem at all optimistic to me.
Some shares do seem rather optomistic. Easyjet is trading at the same price as June 2019 for example despite flying only 10% of flights, and those dirt cheap. I cannot see that share price is justified.
Coincidentally this is very similar to what I did my Master's dissertation on. Share prices are essentially not based on what is happening in the present but the long term expectation of future dividends, adjusted.
EasyJet may be doing 10% of its flights today, but they won't in the future. Investors are (wisely) taking future expectations into account.
I think that this is madness. Easyjet and most of the travel related industry are going to restructure at some point to write off the accumulated debt piles, almost certainly wiping out most of the existing shareholder interest. There just isn't a barge poll long enough for me.
Sweden is weird, here are their numbers to the 5th of April, they are from top to bottom Cases / ICU admission / Deaths
Look how weird that is! Cases rising since the 1st of Feb, ICU admissions rising since the first of Feb. Deaths are... down since 1st of Feb and now currently flat.
I mean don't get me wrong they are flat at the UK equivalent of 125 people dying of Covid a day but their current ICU Covid occupancy is now higher than their December/Jan peak where they had the UK equivalent of 600 a day dying. They are now hit those Dec/Jan numbers again for every indicator apart from deaths.
Overall ICU occupancy in Sweden is massively above average so this isn't a with/of Covid distinction, Their ICUs are rammed with full on Covid cases. And deaths are not being 'hidden', their whole country mortatlity numbers for March are _under_ the 2015-2019 average.
That's weird. Swedes are obviously made of sterner stuff than other countries.
Those charts can be ignored as they don't have dodgy trend lines which are mandatory for when discussing Sweden and Covid-19.
We came close to running out of some agents in both waves. Anaesthetic agents, kidney filtration kit, even oxygen bandwidth.
My medical student this morning is still doing bank shifts as HCA on ICU. Only a third of the ICU nurses remain at present, the rest are conscripts from the press gangs, though some proper staff may return. Staff attrition is horrific.
I’m sure Toby Young will be highlighting this on Lockdown Sceptics. After all, he must be interested on what happens when a large country is actually run by a lockdown sceptic; Bolsonaro has done almost everything he demands.
Worth noting that there have still been fewer Covid deaths per capita in Brazil than in the UK. People get very excited about the absolute numbers there, and tend to rather ignore the fact that its a huge country - nearly 300 million people.
It is also a 3rd world country which started off with a health system that was barely adequate before Covid.
I think for all the breathless reportage, it's probably too early to predict the outcome - deaths appear to have plateaued at about 3k/day recently (this is less than our daily peak in per capita terms), they may rocket up further, or it may start to burn out.
Currently it looks pretty nasty, but it may yet also be the country that shows the lockdown sceptics are right; personally I think that if at the final count they come through with less than double the UK deaths/capita, it probably means that our lockdown was the wrong thing to do. Alternatively it may yet turn very nasty indeed, and they really should have locked down; we simply don't know at this stage.
But just quoting numbers without a population size context is a particularly bad case of comparing apples and oranges.
O/T — In London today I was surprised to find myself giving directions to Japanese tourists. I had thought that all tourism from other countries was off the cards atm.
It would appear that the Government is, in essence, operating an open door policy for visitors from the whole world, except those travelling from red list countries (and presumably visitors from e.g. Brazil could just get around the feeble rules by travelling via a third country and lying on whatever declarations they have to make when they get here, if sufficiently determined to do so?)
Like I said the other day, it's so reckless and illogical a policy that it only really makes sense if one assumes that ministers want to import variants, in order to have surge testing, panic in the press, and thus to maintain the general atmosphere of emergency. The emergency is wildly popular with the Tories' frightened elderly supporters, it gives them cover to act with impunity, and it serves further to neuter an already ineffectual Opposition. Why would they ever want it to end?
Because there are more votes in ending lockdown than continuing it? And free economies are more successful than locked down ones?
1. Are there? Much of the population remains irrationally terrified and such opinion is disproportionately concentrated amongst elderly authoritarians, who are (a) numerous and (b) heavily inclined to turn out to vote. 2. Who cares about the economy when you can just borrow to plug the gaps in your finances?
We’re printing money not borrowing it
How is that actually done? Literally printing or metaphorically? Are other comparable countries doing the same and roughly to the same extent?
Metaphorically
The Bank of England fires up its spreadsheet and buys assets from banks who turn around and lend it to the government. They call it Quantative Easing so it sounds boring and technical and people’s eyes glaze over.
We’ve been doing it for years but generally less than the EU and the US.
That’s the reason why we have horrendous asset price inflation - there’s too much money around and not enough quality assets
Corbynistas are sometimes keen on QE as a way to finance spending, but as the effect of QE is to increase the value of real assets. It is a form of redistribution to the wealthy. Certainly I have done well out of it.
That's why the new money shouldn't be distributed in the form of very low interest loans from the banks to the wealthy who buy assets (trickle down) but distributed directly to the general population as the US has done which boosts consumption and jobs.
EDIT: ...or invested in infrastructure and education that produces a long term economic return.
On the subject of asset price inflation, it looks like the FTSE100 will open above 7000 for the first time in over a year. Not as over inflated as some other markets but looking rather optomistic to me.
Still 400 ish points lower than it was pre-pandemic.
Which as we're heading out of pandemic and the market looks to the future doesn't seem at all optimistic to me.
The key question is when the market starts to look beyond the coming short-term boost from people spending what (some) have been able to save and from general post-lockdown euphoria. A lot of the coming boost is already priced in.
Well precisely. Many people lose their shirts on the market by overreacting to what is happening in the present. The market always tries to swiftly correct to the future.
I recall getting into a debate last year when the FTSE was below 5000 I said it was time to buy, buy, buy as the market had overreacted. Others said to sell as the pandemic was going to get worse before it gets better.
The pandemic did get worse but anyone who bought below 5000 would have made an absolute fortune by now. As the market knew and realised the pandemic would end and figured out which firms were likely to recover.
On the subject of asset price inflation, it looks like the FTSE100 will open above 7000 for the first time in over a year. Not as over inflated as some other markets but looking rather optomistic to me.
Still 400 ish points lower than it was pre-pandemic.
Which as we're heading out of pandemic and the market looks to the future doesn't seem at all optimistic to me.
Some shares do seem rather optomistic. Easyjet is trading at the same price as June 2019 for example despite flying only 10% of flights, and those dirt cheap. I cannot see that share price is justified.
Coincidentally this is very similar to what I did my Master's dissertation on. Share prices are essentially not based on what is happening in the present but the long term expectation of future dividends, adjusted.
EasyJet may be doing 10% of its flights today, but they won't in the future. Investors are (wisely) taking future expectations into account.
I think that this is madness. Easyjet and most of the travel related industry are going to restructure at some point to write off the accumulated debt piles, almost certainly wiping out most of the existing shareholder interest. There just isn't a barge poll long enough for me.
Easyjet currently have a vast percentage of staff on furlough, so can afford to not fly, but that ends soon and they will either make massive redundancies or run massive losses. I cannot see a normal summer service returning, though summer 2022 may be realistic.
I don't particularly want to pick on Easyjet, which is a well run company and historically a good share to own. There are many others similar that I know less well, but I just cannot see how they will make any money, and avoiding bankruptcy will be a challenge.
Sweden is weird, here are their numbers to the 5th of April, they are from top to bottom Cases / ICU admission / Deaths
Look how weird that is! Cases rising since the 1st of Feb, ICU admissions rising since the first of Feb. Deaths are... down since 1st of Feb and now currently flat.
I mean don't get me wrong they are flat at the UK equivalent of 125 people dying of Covid a day but their current ICU Covid occupancy is now higher than their December/Jan peak where they had the UK equivalent of 600 a day dying. They are now hit those Dec/Jan numbers again for every indicator apart from deaths.
Overall ICU occupancy in Sweden is massively above average so this isn't a with/of Covid distinction, Their ICUs are rammed with full on Covid cases. And deaths are not being 'hidden', their whole country mortatlity numbers for March are _under_ the 2015-2019 average.
That's weird. Swedes are obviously made of sterner stuff than other countries.
If you are vaccinating the most vulnerable then you are effectively reducing the average fatality rate.
If that's the explanation then you'd expect the average age of the deaths that are still occurring to be trending downwards, as they come from the younger unvaccinated age groups.
Joy of joys, the double mutated strain from India is in the UK.
Border controls my arse.
Indeed.
"A coronavirus variant that was first detected in India has been found in the UK.
In total, 77 cases of the variant, known as B.1.617, have been recorded in the UK up to 14 April, according to the latest update from Public Health England (PHE), released on Thursday. Of these, 73 were recorded in England and four in Scotland."
On the subject of asset price inflation, it looks like the FTSE100 will open above 7000 for the first time in over a year. Not as over inflated as some other markets but looking rather optomistic to me.
Still 400 ish points lower than it was pre-pandemic.
Which as we're heading out of pandemic and the market looks to the future doesn't seem at all optimistic to me.
The key question is when the market starts to look beyond the coming short-term boost from people spending what (some) have been able to save and from general post-lockdown euphoria. A lot of the coming boost is already priced in.
Well precisely. Many people lose their shirts on the market by overreacting to what is happening in the present. The market always tries to swiftly correct to the future.
I recall getting into a debate last year when the FTSE was below 5000 I said it was time to buy, buy, buy as the market had overreacted. Others said to sell as the pandemic was going to get worse before it gets better.
The pandemic did get worse but anyone who bought below 5000 would have made an absolute fortune by now. As the market knew and realised the pandemic would end and figured out which firms were likely to recover.
TBF things would have been different had the vaccines not been emerging and found to be effective just as the second wave began to build. The second wave would have taken markets down had dust and cavalry pennants not been spotted on the horizon.
Sweden is weird, here are their numbers to the 5th of April, they are from top to bottom Cases / ICU admission / Deaths
Look how weird that is! Cases rising since the 1st of Feb, ICU admissions rising since the first of Feb. Deaths are... down since 1st of Feb and now currently flat.
I mean don't get me wrong they are flat at the UK equivalent of 125 people dying of Covid a day but their current ICU Covid occupancy is now higher than their December/Jan peak where they had the UK equivalent of 600 a day dying. They are now hit those Dec/Jan numbers again for every indicator apart from deaths.
Overall ICU occupancy in Sweden is massively above average so this isn't a with/of Covid distinction, Their ICUs are rammed with full on Covid cases. And deaths are not being 'hidden', their whole country mortatlity numbers for March are _under_ the 2015-2019 average.
That's weird. Swedes are obviously made of sterner stuff than other countries.
If you are vaccinating the most vulnerable then you are effectively reducing the average fatality rate.
If that's the explanation then you'd expect the average age of the deaths that are still occurring to be trending downwards, as they come from the younger unvaccinated age groups.
Hard to explain the ICU numbers though. Mortality in covid ICU runs about 40% even with the new treatments such as Tocizilumab. I think the Mortality figures will catch up.
O/T — In London today I was surprised to find myself giving directions to Japanese tourists. I had thought that all tourism from other countries was off the cards atm.
It would appear that the Government is, in essence, operating an open door policy for visitors from the whole world, except those travelling from red list countries (and presumably visitors from e.g. Brazil could just get around the feeble rules by travelling via a third country and lying on whatever declarations they have to make when they get here, if sufficiently determined to do so?)
Like I said the other day, it's so reckless and illogical a policy that it only really makes sense if one assumes that ministers want to import variants, in order to have surge testing, panic in the press, and thus to maintain the general atmosphere of emergency. The emergency is wildly popular with the Tories' frightened elderly supporters, it gives them cover to act with impunity, and it serves further to neuter an already ineffectual Opposition. Why would they ever want it to end?
Because there are more votes in ending lockdown than continuing it? And free economies are more successful than locked down ones?
1. Are there? Much of the population remains irrationally terrified and such opinion is disproportionately concentrated amongst elderly authoritarians, who are (a) numerous and (b) heavily inclined to turn out to vote. 2. Who cares about the economy when you can just borrow to plug the gaps in your finances?
We’re printing money not borrowing it
How is that actually done? Literally printing or metaphorically? Are other comparable countries doing the same and roughly to the same extent?
Metaphorically
The Bank of England fires up its spreadsheet and buys assets from banks who turn around and lend it to the government. They call it Quantative Easing so it sounds boring and technical and people’s eyes glaze over.
We’ve been doing it for years but generally less than the EU and the US.
That’s the reason why we have horrendous asset price inflation - there’s too much money around and not enough quality assets
If banks are lending assets it to the government then surely this IS government borrowing in a real sense - i.e. with interest being charged and repayment at some point to be made?
Not really
Bank buys £300bn Uk government debt from the market.
Market buys £300bn of new debt from the government
Net result is that government debt has gone up £300bn and Bank of England assets have gone up £300bn.
Government pays same interest to market (assuming no change in rates). Government pays more interest to the Bank of England (in practice I don’t think they bother any more) which pays a dividend to the government with the proceeds.
When the Bank of England debts come due they enter into a contract with the government to roll over the loan into a new instrument
This makes my head spin.
So to what extent is this actually a problem? If Covid ends up costing us, say, £800 billion - surely there must be a limit to this?
If ,say, ten years slip by and there is another pandemic caused by a new virus, could QE be used to generate a brand new £800 billion?
There is no limit only constraints
At some point QE will lead to debauchment of the currency resulting in inflation and a collapse of the exchange rate. The exchange rate is protected because our main comparables are printing money as well. But we have asset price inflation which is less visible but is storing up massive societal issues for the future (it benefits those with wealth and assets - like houses - over the you g and those with limited capital stock)
O/T — In London today I was surprised to find myself giving directions to Japanese tourists. I had thought that all tourism from other countries was off the cards atm.
It would appear that the Government is, in essence, operating an open door policy for visitors from the whole world, except those travelling from red list countries (and presumably visitors from e.g. Brazil could just get around the feeble rules by travelling via a third country and lying on whatever declarations they have to make when they get here, if sufficiently determined to do so?)
Like I said the other day, it's so reckless and illogical a policy that it only really makes sense if one assumes that ministers want to import variants, in order to have surge testing, panic in the press, and thus to maintain the general atmosphere of emergency. The emergency is wildly popular with the Tories' frightened elderly supporters, it gives them cover to act with impunity, and it serves further to neuter an already ineffectual Opposition. Why would they ever want it to end?
Because there are more votes in ending lockdown than continuing it? And free economies are more successful than locked down ones?
1. Are there? Much of the population remains irrationally terrified and such opinion is disproportionately concentrated amongst elderly authoritarians, who are (a) numerous and (b) heavily inclined to turn out to vote. 2. Who cares about the economy when you can just borrow to plug the gaps in your finances?
We’re printing money not borrowing it
How is that actually done? Literally printing or metaphorically? Are other comparable countries doing the same and roughly to the same extent?
Metaphorically
The Bank of England fires up its spreadsheet and buys assets from banks who turn around and lend it to the government. They call it Quantative Easing so it sounds boring and technical and people’s eyes glaze over.
We’ve been doing it for years but generally less than the EU and the US.
That’s the reason why we have horrendous asset price inflation - there’s too much money around and not enough quality assets
If banks are lending assets it to the government then surely this IS government borrowing in a real sense - i.e. with interest being charged and repayment at some point to be made?
Not really
Bank buys £300bn Uk government debt from the market.
Market buys £300bn of new debt from the government
Net result is that government debt has gone up £300bn and Bank of England assets have gone up £300bn.
Government pays same interest to market (assuming no change in rates). Government pays more interest to the Bank of England (in practice I don’t think they bother any more) which pays a dividend to the government with the proceeds.
When the Bank of England debts come due they enter into a contract with the government to roll over the loan into a new instrument
This makes my head spin.
So to what extent is this actually a problem? If Covid ends up costing us, say, £800 billion - surely there must be a limit to this?
If ,say, ten years slip by and there is another pandemic caused by a new virus, could QE be used to generate a brand new £800 billion?
QE represents the reallocation of wealth to capital holders, from those that rely on an earned income. After all, Debt = Savings. Massively increase debt and you de facto increase savings.
Followed through to its logical conclusion, QE leads to the total destruction of capitalism, as it penalises productive activity and encourages rent seeking. Given the disparity in capital holdings between old and young, it’s also a hugely ageist policy against the young. I am a natural conservative but we’re reaching the point where 100% inheritance taxes are the only moral course left. Increasing taxation of those of working age to pay social care costs of baby boomers would be an abomination.
There is of course one possible mitigation between the Sunak brand of QE compared with that employed by his predecessors. Which is that a good chunk of the proceeds have been deployed on what is essentially a colossal job retention and unemployment benefit scheme (with some bundles of outright graft thrown in). Unclear right now how it will impact long term productivity.
O/T — In London today I was surprised to find myself giving directions to Japanese tourists. I had thought that all tourism from other countries was off the cards atm.
It would appear that the Government is, in essence, operating an open door policy for visitors from the whole world, except those travelling from red list countries (and presumably visitors from e.g. Brazil could just get around the feeble rules by travelling via a third country and lying on whatever declarations they have to make when they get here, if sufficiently determined to do so?)
Like I said the other day, it's so reckless and illogical a policy that it only really makes sense if one assumes that ministers want to import variants, in order to have surge testing, panic in the press, and thus to maintain the general atmosphere of emergency. The emergency is wildly popular with the Tories' frightened elderly supporters, it gives them cover to act with impunity, and it serves further to neuter an already ineffectual Opposition. Why would they ever want it to end?
Because there are more votes in ending lockdown than continuing it? And free economies are more successful than locked down ones?
1. Are there? Much of the population remains irrationally terrified and such opinion is disproportionately concentrated amongst elderly authoritarians, who are (a) numerous and (b) heavily inclined to turn out to vote. 2. Who cares about the economy when you can just borrow to plug the gaps in your finances?
We’re printing money not borrowing it
How is that actually done? Literally printing or metaphorically? Are other comparable countries doing the same and roughly to the same extent?
Metaphorically
The Bank of England fires up its spreadsheet and buys assets from banks who turn around and lend it to the government. They call it Quantative Easing so it sounds boring and technical and people’s eyes glaze over.
We’ve been doing it for years but generally less than the EU and the US.
That’s the reason why we have horrendous asset price inflation - there’s too much money around and not enough quality assets
Corbynistas are sometimes keen on QE as a way to finance spending, but as the effect of QE is to increase the value of real assets. It is a form of redistribution to the wealthy. Certainly I have done well out of it.
It increases the PRICE not the VALUE of real assets
O/T — In London today I was surprised to find myself giving directions to Japanese tourists. I had thought that all tourism from other countries was off the cards atm.
It would appear that the Government is, in essence, operating an open door policy for visitors from the whole world, except those travelling from red list countries (and presumably visitors from e.g. Brazil could just get around the feeble rules by travelling via a third country and lying on whatever declarations they have to make when they get here, if sufficiently determined to do so?)
Like I said the other day, it's so reckless and illogical a policy that it only really makes sense if one assumes that ministers want to import variants, in order to have surge testing, panic in the press, and thus to maintain the general atmosphere of emergency. The emergency is wildly popular with the Tories' frightened elderly supporters, it gives them cover to act with impunity, and it serves further to neuter an already ineffectual Opposition. Why would they ever want it to end?
Because there are more votes in ending lockdown than continuing it? And free economies are more successful than locked down ones?
1. Are there? Much of the population remains irrationally terrified and such opinion is disproportionately concentrated amongst elderly authoritarians, who are (a) numerous and (b) heavily inclined to turn out to vote. 2. Who cares about the economy when you can just borrow to plug the gaps in your finances?
We’re printing money not borrowing it
How is that actually done? Literally printing or metaphorically? Are other comparable countries doing the same and roughly to the same extent?
Metaphorically
The Bank of England fires up its spreadsheet and buys assets from banks who turn around and lend it to the government. They call it Quantative Easing so it sounds boring and technical and people’s eyes glaze over.
We’ve been doing it for years but generally less than the EU and the US.
That’s the reason why we have horrendous asset price inflation - there’s too much money around and not enough quality assets
If banks are lending assets it to the government then surely this IS government borrowing in a real sense - i.e. with interest being charged and repayment at some point to be made?
The Bank buys an old government bond from a bank.
The bank uses that money to buy a new bond from the Government.
The Government owns the Bank so doesn't pay interest to the Bank on the bond it bought.
Net effect the Government has sold a new bond, the banks have the same, the Bank owns some it didn't and claims no interest.
But theoretically no money has been printed. Theoretically the Bank isn't buying from the Government.
The Bank of England is creating the money to pay for the bonds out of thin air - it is they who have responsibility for the money supply not the government
So this is not the hapless Brown and Darling "maxing out the credit cards" as pointed out by Cameron and Osborne. It is genuinely free money with no downsides. Wow that is genius...although doesn't this increase M3 which is inflationary, although in itself is that also a positive, because inflation erodes the debt?
The collapse of gilt rates may well be good for the government, but is terrible for those relying on them for income. Pensions are no longer viable for many schemes.
There is no free lunch.
I was being a little tongue in cheek. As I was reading Charles and Philip's analysis I kept seeing the image of Robert Mugabe.
On the subject of asset price inflation, it looks like the FTSE100 will open above 7000 for the first time in over a year. Not as over inflated as some other markets but looking rather optomistic to me.
Still 400 ish points lower than it was pre-pandemic.
Which as we're heading out of pandemic and the market looks to the future doesn't seem at all optimistic to me.
Some shares do seem rather optomistic. Easyjet is trading at the same price as June 2019 for example despite flying only 10% of flights, and those dirt cheap. I cannot see that share price is justified.
Coincidentally this is very similar to what I did my Master's dissertation on. Share prices are essentially not based on what is happening in the present but the long term expectation of future dividends, adjusted.
EasyJet may be doing 10% of its flights today, but they won't in the future. Investors are (wisely) taking future expectations into account.
I think that this is madness. Easyjet and most of the travel related industry are going to restructure at some point to write off the accumulated debt piles, almost certainly wiping out most of the existing shareholder interest. There just isn't a barge poll long enough for me.
Easyjet currently have a vast percentage of staff on furlough, so can afford to not fly, but that ends soon and they will either make massive redundancies or run massive losses. I cannot see a normal summer service returning, though summer 2022 may be realistic.
I don't particularly want to pick on Easyjet, which is a well run company and historically a good share to own. There are many others similar that I know less well, but I just cannot see how they will make any money, and avoiding bankruptcy will be a challenge.
I agree about the company. The business may well thrive, especially if some of their competitors are taken out, but I suspect it will be under new ownership.
O/T — In London today I was surprised to find myself giving directions to Japanese tourists. I had thought that all tourism from other countries was off the cards atm.
It would appear that the Government is, in essence, operating an open door policy for visitors from the whole world, except those travelling from red list countries (and presumably visitors from e.g. Brazil could just get around the feeble rules by travelling via a third country and lying on whatever declarations they have to make when they get here, if sufficiently determined to do so?)
Like I said the other day, it's so reckless and illogical a policy that it only really makes sense if one assumes that ministers want to import variants, in order to have surge testing, panic in the press, and thus to maintain the general atmosphere of emergency. The emergency is wildly popular with the Tories' frightened elderly supporters, it gives them cover to act with impunity, and it serves further to neuter an already ineffectual Opposition. Why would they ever want it to end?
The only way to ensure mutations from abroad never come here is to ban all travel to and from the UK indefinitely or until Covid is completely eliminated worldwide and allow staycation holidays only and no travel for business either but Zoom calls only.
It would destroy the airline and travel industry but would ensure no imported mutations.
Otherwise we just have to control it and live with it, as more of us get vaccinated the impact of mutations is less significant anyway
O/T — In London today I was surprised to find myself giving directions to Japanese tourists. I had thought that all tourism from other countries was off the cards atm.
It would appear that the Government is, in essence, operating an open door policy for visitors from the whole world, except those travelling from red list countries (and presumably visitors from e.g. Brazil could just get around the feeble rules by travelling via a third country and lying on whatever declarations they have to make when they get here, if sufficiently determined to do so?)
Like I said the other day, it's so reckless and illogical a policy that it only really makes sense if one assumes that ministers want to import variants, in order to have surge testing, panic in the press, and thus to maintain the general atmosphere of emergency. The emergency is wildly popular with the Tories' frightened elderly supporters, it gives them cover to act with impunity, and it serves further to neuter an already ineffectual Opposition. Why would they ever want it to end?
Because there are more votes in ending lockdown than continuing it? And free economies are more successful than locked down ones?
1. Are there? Much of the population remains irrationally terrified and such opinion is disproportionately concentrated amongst elderly authoritarians, who are (a) numerous and (b) heavily inclined to turn out to vote. 2. Who cares about the economy when you can just borrow to plug the gaps in your finances?
We’re printing money not borrowing it
How is that actually done? Literally printing or metaphorically? Are other comparable countries doing the same and roughly to the same extent?
Metaphorically
The Bank of England fires up its spreadsheet and buys assets from banks who turn around and lend it to the government. They call it Quantative Easing so it sounds boring and technical and people’s eyes glaze over.
We’ve been doing it for years but generally less than the EU and the US.
That’s the reason why we have horrendous asset price inflation - there’s too much money around and not enough quality assets
If banks are lending assets it to the government then surely this IS government borrowing in a real sense - i.e. with interest being charged and repayment at some point to be made?
Not really
Bank buys £300bn Uk government debt from the market.
Market buys £300bn of new debt from the government
Net result is that government debt has gone up £300bn and Bank of England assets have gone up £300bn.
Government pays same interest to market (assuming no change in rates). Government pays more interest to the Bank of England (in practice I don’t think they bother any more) which pays a dividend to the government with the proceeds.
When the Bank of England debts come due they enter into a contract with the government to roll over the loan into a new instrument
This makes my head spin.
So to what extent is this actually a problem? If Covid ends up costing us, say, £800 billion - surely there must be a limit to this?
If ,say, ten years slip by and there is another pandemic caused by a new virus, could QE be used to generate a brand new £800 billion?
The trouble is that it's the drug of choice for politicians. It (apparently) magics away the short term severe pain of previous crashes, while its long term effects (which are slow and pernicious, but no-one understands them) carry little political price. It's people without assets but who need to buy them in future - i.e. the next generation looking for housing and pensions - who ultimately carry the can.
QE is slowly undoing the egalitarianism of the post-war 20th Century and returning us to the 'born rich or born poor' society of the pre-first world war era. But the frog doesn't sense the water warming and hence the political price for current politicians is minimal.
The only catch is if something triggers a collapse in credibility and the whole thing comes tumbling down. We're stuck with zero (almost negative) interest rates, and no-one knows whether the 'new economic model' is sustainable if inflation and interest rates rise.
O/T — In London today I was surprised to find myself giving directions to Japanese tourists. I had thought that all tourism from other countries was off the cards atm.
It would appear that the Government is, in essence, operating an open door policy for visitors from the whole world, except those travelling from red list countries (and presumably visitors from e.g. Brazil could just get around the feeble rules by travelling via a third country and lying on whatever declarations they have to make when they get here, if sufficiently determined to do so?)
Like I said the other day, it's so reckless and illogical a policy that it only really makes sense if one assumes that ministers want to import variants, in order to have surge testing, panic in the press, and thus to maintain the general atmosphere of emergency. The emergency is wildly popular with the Tories' frightened elderly supporters, it gives them cover to act with impunity, and it serves further to neuter an already ineffectual Opposition. Why would they ever want it to end?
Because there are more votes in ending lockdown than continuing it? And free economies are more successful than locked down ones?
1. Are there? Much of the population remains irrationally terrified and such opinion is disproportionately concentrated amongst elderly authoritarians, who are (a) numerous and (b) heavily inclined to turn out to vote. 2. Who cares about the economy when you can just borrow to plug the gaps in your finances?
We’re printing money not borrowing it
How is that actually done? Literally printing or metaphorically? Are other comparable countries doing the same and roughly to the same extent?
Metaphorically
The Bank of England fires up its spreadsheet and buys assets from banks who turn around and lend it to the government. They call it Quantative Easing so it sounds boring and technical and people’s eyes glaze over.
We’ve been doing it for years but generally less than the EU and the US.
That’s the reason why we have horrendous asset price inflation - there’s too much money around and not enough quality assets
If banks are lending assets it to the government then surely this IS government borrowing in a real sense - i.e. with interest being charged and repayment at some point to be made?
Not really
Bank buys £300bn Uk government debt from the market.
Market buys £300bn of new debt from the government
Net result is that government debt has gone up £300bn and Bank of England assets have gone up £300bn.
Government pays same interest to market (assuming no change in rates). Government pays more interest to the Bank of England (in practice I don’t think they bother any more) which pays a dividend to the government with the proceeds.
When the Bank of England debts come due they enter into a contract with the government to roll over the loan into a new instrument
I am not sure that is quite accurate Charles. What I understand is happening (and I could be wrong) is that the government is issuing new debt and the Bank are in the market as a buyer of last resort. The result is that the price of that debt in terms of coupon is artificially reduced and those buying it know that they are guaranteed that they can shift it on, usually at a small profit.
The net result is that the banks make a turn on the debt and it ends up on the balance sheet of the Bank who no longer get paid the coupon so it is interest free. The government gets the proceeds of the bonds which allows it to fund its day to day activities. The total amount of money in the economy is increased by the amount of buying that the Bank does (since, as you say, it simply creates the money to buy the bonds). Government debt is increased by the amount of the bonds but at zero cost to them because they don't pay the bank.
The government borrowing all of this money would normally squeeze out private sector borrowing but this does not happen because it is the created money from the Bank that pays for it so there is still the same amount of capital looking for a home which, as you say, is creating asset inflation.
What I don't understand is why this has not created more general inflation. Monetarist theory indicates that the price level is set by the quantity of money in the economy available to buy things. As that quantity of money increases prices should increase too unless there is an increase in supply. But its not happening. Its really weird.
I think you are just putting more detail to my simplification - we are saying the same thing (although If you look at last year the Bank bought most of the bonds directly from the government)
I’m intrigued about why there hasn’t been CPI. Either we are in a structurally deflationary situation - possibly, like Japan was in the 90s - or (more likely) CPI is broken as a measure of inflation
O/T — In London today I was surprised to find myself giving directions to Japanese tourists. I had thought that all tourism from other countries was off the cards atm.
It would appear that the Government is, in essence, operating an open door policy for visitors from the whole world, except those travelling from red list countries (and presumably visitors from e.g. Brazil could just get around the feeble rules by travelling via a third country and lying on whatever declarations they have to make when they get here, if sufficiently determined to do so?)
Like I said the other day, it's so reckless and illogical a policy that it only really makes sense if one assumes that ministers want to import variants, in order to have surge testing, panic in the press, and thus to maintain the general atmosphere of emergency. The emergency is wildly popular with the Tories' frightened elderly supporters, it gives them cover to act with impunity, and it serves further to neuter an already ineffectual Opposition. Why would they ever want it to end?
Because there are more votes in ending lockdown than continuing it? And free economies are more successful than locked down ones?
1. Are there? Much of the population remains irrationally terrified and such opinion is disproportionately concentrated amongst elderly authoritarians, who are (a) numerous and (b) heavily inclined to turn out to vote. 2. Who cares about the economy when you can just borrow to plug the gaps in your finances?
We’re printing money not borrowing it
How is that actually done? Literally printing or metaphorically? Are other comparable countries doing the same and roughly to the same extent?
Metaphorically
The Bank of England fires up its spreadsheet and buys assets from banks who turn around and lend it to the government. They call it Quantative Easing so it sounds boring and technical and people’s eyes glaze over.
We’ve been doing it for years but generally less than the EU and the US.
That’s the reason why we have horrendous asset price inflation - there’s too much money around and not enough quality assets
If banks are lending assets it to the government then surely this IS government borrowing in a real sense - i.e. with interest being charged and repayment at some point to be made?
Not really
Bank buys £300bn Uk government debt from the market.
Market buys £300bn of new debt from the government
Net result is that government debt has gone up £300bn and Bank of England assets have gone up £300bn.
Government pays same interest to market (assuming no change in rates). Government pays more interest to the Bank of England (in practice I don’t think they bother any more) which pays a dividend to the government with the proceeds.
When the Bank of England debts come due they enter into a contract with the government to roll over the loan into a new instrument
This makes my head spin.
So to what extent is this actually a problem? If Covid ends up costing us, say, £800 billion - surely there must be a limit to this?
If ,say, ten years slip by and there is another pandemic caused by a new virus, could QE be used to generate a brand new £800 billion?
QE represents the reallocation of wealth to capital holders, from those that rely on an earned income. After all, Debt = Savings. Massively increase debt and you de facto increase savings.
Followed through to its logical conclusion, QE leads to the total destruction of capitalism, as it penalises productive activity and encourages rent seeking. Given the disparity in capital holdings between old and young, it’s also a hugely ageist policy against the young. I am a natural conservative but we’re reaching the point where 100% inheritance taxes are the only moral course left. Increasing taxation of those of working age to pay social care costs of baby boomers would be an abomination.
There is of course one possible mitigation between the Sunak brand of QE compared with that employed by his predecessors. Which is that a good chunk of the proceeds have been deployed on what is essentially a colossal job retention and unemployment benefit scheme (with some bundles of outright graft thrown in). Unclear right now how it will impact long term productivity.
Yes, and the increasing age inequality enriches older asset owners at the expense of the young, which is why it is popular with right wing governments too.
Corbynistas like free money, their parents like asset inflation so QE ain't going away. It is like beating a hangover by keeping drinking.
Sweden is weird, here are their numbers to the 5th of April, they are from top to bottom Cases / ICU admission / Deaths
Look how weird that is! Cases rising since the 1st of Feb, ICU admissions rising since the first of Feb. Deaths are... down since 1st of Feb and now currently flat.
I mean don't get me wrong they are flat at the UK equivalent of 125 people dying of Covid a day but their current ICU Covid occupancy is now higher than their December/Jan peak where they had the UK equivalent of 600 a day dying. They are now hit those Dec/Jan numbers again for every indicator apart from deaths.
Overall ICU occupancy in Sweden is massively above average so this isn't a with/of Covid distinction, Their ICUs are rammed with full on Covid cases. And deaths are not being 'hidden', their whole country mortatlity numbers for March are _under_ the 2015-2019 average.
That's weird. Swedes are obviously made of sterner stuff than other countries.
If you are vaccinating the most vulnerable then you are effectively reducing the average fatality rate.
If that's the explanation then you'd expect the average age of the deaths that are still occurring to be trending downwards, as they come from the younger unvaccinated age groups.
Hard to explain the ICU numbers though. Mortality in covid ICU runs about 40% even with the new treatments such as Tocizilumab. I think the Mortality figures will catch up.
Andy showed some charts way back that compared Covid hospitalization rates and death rates - younger people benefit more from health treatment.
Therefore wouldn't you expect a Covid ICU filled with people in their 40s to have a lower death rate than people in their 70s?
On the subject of asset price inflation, it looks like the FTSE100 will open above 7000 for the first time in over a year. Not as over inflated as some other markets but looking rather optomistic to me.
Still 400 ish points lower than it was pre-pandemic.
Selling 90% of my equities in February when I saw the wave hit Italy and buying them back in April has been my most effective bit of speculation ever. I doubt that I will ever have such an information advantage ever again. I have been reshuffling to a more defensive position over the last month. I am beginning to fear a major Asian second wave, particularly in China, Korea, SE Asia etc. Those are countries with very low vaccination rates, and sitting ducks for new variants.
A report on 5 live this morning from India said they are experiencing 150.000 daily infections and covid is out of control
And how on earth did they allow crowds at the cricket
Hubris. See also much of Eastern Europe last summer, Boris prior to Christmas etc etc
Whats the view on the impact of Greensill on the Scottish elections..... London's stock cant have slid much lower - surely this sees the Independence cause creep that little bit closer.... (never though D Cameron would come back to haunt the Union)
Except, Scotland has a £500m bill for Greensill, in the shape of guarantees given by the SNP Government. Why would they do that, when Westminster wouldn't? What is the lobbying story there?
You want to see this thing go off at a weird angle, that might be it....
I don't think the odd half-a-billion pounds makes a difference to anything myself (you actually have to wonder if any degree of fiscal incompetence or skulduggery would anymore, in an era of such astronomical spending and borrowing numbers - but anyway...) The Scottish Government is essentially protected by a suit of kevlar-lined, teflon-coated plate armour. The entire Salmond debacle barely scratched it. If they chucked some money to try to prop up an aluminium smelter in a remote corner of the Highlands that most Scots won't even have visited then honestly, who is really going to care?
Actually the SNP and Yes has fallen from near 60% late last year to under 50% now as No Deal Brexit has been avoided and the vaccinations stepped up and after the Salmond and Sturgeon civil war
O/T — In London today I was surprised to find myself giving directions to Japanese tourists. I had thought that all tourism from other countries was off the cards atm.
It would appear that the Government is, in essence, operating an open door policy for visitors from the whole world, except those travelling from red list countries (and presumably visitors from e.g. Brazil could just get around the feeble rules by travelling via a third country and lying on whatever declarations they have to make when they get here, if sufficiently determined to do so?)
Like I said the other day, it's so reckless and illogical a policy that it only really makes sense if one assumes that ministers want to import variants, in order to have surge testing, panic in the press, and thus to maintain the general atmosphere of emergency. The emergency is wildly popular with the Tories' frightened elderly supporters, it gives them cover to act with impunity, and it serves further to neuter an already ineffectual Opposition. Why would they ever want it to end?
Because there are more votes in ending lockdown than continuing it? And free economies are more successful than locked down ones?
1. Are there? Much of the population remains irrationally terrified and such opinion is disproportionately concentrated amongst elderly authoritarians, who are (a) numerous and (b) heavily inclined to turn out to vote. 2. Who cares about the economy when you can just borrow to plug the gaps in your finances?
We’re printing money not borrowing it
How is that actually done? Literally printing or metaphorically? Are other comparable countries doing the same and roughly to the same extent?
Metaphorically
The Bank of England fires up its spreadsheet and buys assets from banks who turn around and lend it to the government. They call it Quantative Easing so it sounds boring and technical and people’s eyes glaze over.
We’ve been doing it for years but generally less than the EU and the US.
That’s the reason why we have horrendous asset price inflation - there’s too much money around and not enough quality assets
If banks are lending assets it to the government then surely this IS government borrowing in a real sense - i.e. with interest being charged and repayment at some point to be made?
The Bank buys an old government bond from a bank.
The bank uses that money to buy a new bond from the Government.
The Government owns the Bank so doesn't pay interest to the Bank on the bond it bought.
Net effect the Government has sold a new bond, the banks have the same, the Bank owns some it didn't and claims no interest.
But theoretically no money has been printed. Theoretically the Bank isn't buying from the Government.
The Bank of England is creating the money to pay for the bonds out of thin air - it is they who have responsibility for the money supply not the government
So this is not the hapless Brown and Darling "maxing out the credit cards" as pointed out by Cameron and Osborne. It is genuinely free money with no downsides. Wow that is genius...although doesn't this increase M3 which is inflationary, although in itself is that also a positive, because inflation erodes the debt?
It’s “free” until the shit hits the fan and we turn into Weimar.
Sweden is weird, here are their numbers to the 5th of April, they are from top to bottom Cases / ICU admission / Deaths
Look how weird that is! Cases rising since the 1st of Feb, ICU admissions rising since the first of Feb. Deaths are... down since 1st of Feb and now currently flat.
I mean don't get me wrong they are flat at the UK equivalent of 125 people dying of Covid a day but their current ICU Covid occupancy is now higher than their December/Jan peak where they had the UK equivalent of 600 a day dying. They are now hit those Dec/Jan numbers again for every indicator apart from deaths.
Overall ICU occupancy in Sweden is massively above average so this isn't a with/of Covid distinction, Their ICUs are rammed with full on Covid cases. And deaths are not being 'hidden', their whole country mortatlity numbers for March are _under_ the 2015-2019 average.
That's weird. Swedes are obviously made of sterner stuff than other countries.
If you are vaccinating the most vulnerable then you are effectively reducing the average fatality rate.
If that's the explanation then you'd expect the average age of the deaths that are still occurring to be trending downwards, as they come from the younger unvaccinated age groups.
By the 1st of Feb Sweden had got to 2% of the population with a first vaccination. They are now up to 10% so I don't think it is Vaccination that is having the effect
Sweden is weird, here are their numbers to the 5th of April, they are from top to bottom Cases / ICU admission / Deaths
Look how weird that is! Cases rising since the 1st of Feb, ICU admissions rising since the first of Feb. Deaths are... down since 1st of Feb and now currently flat.
I mean don't get me wrong they are flat at the UK equivalent of 125 people dying of Covid a day but their current ICU Covid occupancy is now higher than their December/Jan peak where they had the UK equivalent of 600 a day dying. They are now hit those Dec/Jan numbers again for every indicator apart from deaths.
Overall ICU occupancy in Sweden is massively above average so this isn't a with/of Covid distinction, Their ICUs are rammed with full on Covid cases. And deaths are not being 'hidden', their whole country mortatlity numbers for March are _under_ the 2015-2019 average.
That's weird. Swedes are obviously made of sterner stuff than other countries.
If you are vaccinating the most vulnerable then you are effectively reducing the average fatality rate.
If that's the explanation then you'd expect the average age of the deaths that are still occurring to be trending downwards, as they come from the younger unvaccinated age groups.
Hard to explain the ICU numbers though. Mortality in covid ICU runs about 40% even with the new treatments such as Tocizilumab. I think the Mortality figures will catch up.
Andy showed some charts way back that compared Covid hospitalization rates and death rates - younger people benefit more from health treatment.
Therefore wouldn't you expect a Covid ICU filled with people in their 40s to have a lower death rate than people in their 70s?
You would, but ICUs are not filled with 70 somethings, but rather with 40 and 50 somethings, and so the mortality figures are based on that population already.
They might have different ICU criteria in Sweden, but the cannot be far different.
O/T — In London today I was surprised to find myself giving directions to Japanese tourists. I had thought that all tourism from other countries was off the cards atm.
It would appear that the Government is, in essence, operating an open door policy for visitors from the whole world, except those travelling from red list countries (and presumably visitors from e.g. Brazil could just get around the feeble rules by travelling via a third country and lying on whatever declarations they have to make when they get here, if sufficiently determined to do so?)
Like I said the other day, it's so reckless and illogical a policy that it only really makes sense if one assumes that ministers want to import variants, in order to have surge testing, panic in the press, and thus to maintain the general atmosphere of emergency. The emergency is wildly popular with the Tories' frightened elderly supporters, it gives them cover to act with impunity, and it serves further to neuter an already ineffectual Opposition. Why would they ever want it to end?
... but would ensure no mutations.
This is nonsense - but an assumption you come across time and again.
A mutation is just as likely to occur in your next door neighbour as in some random visiting German.
We could wall off the country and still be subject to potential future mutations - at least until the point at which the country is covid-free; which is a theoretical but probably unachievable position.
Travel restrictions make sense while there are places with significantly higher incidence than here and largely unvaccinated populations. But they come at an economic and social cost.
Reactions to the plagues of the middle ages were to shun or persecute foreigners, strangers, and various minorities - a response based on emotion not logic.
That "whiter than white" paint story yesterday is interesting.
Potential to keep some heat out, but not enough information to work out the overall effect - what is the heat emissivity balance etc. Turning down the US aircon bill alone would have some impact.
Sweden is weird, here are their numbers to the 5th of April, they are from top to bottom Cases / ICU admission / Deaths
Look how weird that is! Cases rising since the 1st of Feb, ICU admissions rising since the first of Feb. Deaths are... down since 1st of Feb and now currently flat.
I mean don't get me wrong they are flat at the UK equivalent of 125 people dying of Covid a day but their current ICU Covid occupancy is now higher than their December/Jan peak where they had the UK equivalent of 600 a day dying. They are now hit those Dec/Jan numbers again for every indicator apart from deaths.
Overall ICU occupancy in Sweden is massively above average so this isn't a with/of Covid distinction, Their ICUs are rammed with full on Covid cases. And deaths are not being 'hidden', their whole country mortatlity numbers for March are _under_ the 2015-2019 average.
That's weird. Swedes are obviously made of sterner stuff than other countries.
If you are vaccinating the most vulnerable then you are effectively reducing the average fatality rate.
If that's the explanation then you'd expect the average age of the deaths that are still occurring to be trending downwards, as they come from the younger unvaccinated age groups.
By the 1st of Feb Sweden had got to 2% of the population with a first vaccination. They are now up to 10% so I don't think it is Vaccination that is having the effect
Sweden probably has a much higher proportion of its population with antibodies than just about anyone else though.
On the subject of asset price inflation, it looks like the FTSE100 will open above 7000 for the first time in over a year. Not as over inflated as some other markets but looking rather optomistic to me.
Still 400 ish points lower than it was pre-pandemic.
Selling 90% of my equities in February when I saw the wave hit Italy and buying them back in April has been my most effective bit of speculation ever. I doubt that I will ever have such an information advantage ever again. I have been reshuffling to a more defensive position over the last month. I am beginning to fear a major Asian second wave, particularly in China, Korea, SE Asia etc. Those are countries with very low vaccination rates, and sitting ducks for new variants.
A report on 5 live this morning from India said they are experiencing 150.000 daily infections and covid is out of control
And how on earth did they allow crowds at the cricket
We are beginning to fear for our planned Grandparental trip to Thailand around Christmas. Haven't been able to hug those grandchildren since July 2019!
Hi guys. Thanks for the nice comments. Just about to start the long drive north on a road that used to be called "The Great North Road"
Just scraped ice off the frozen windscreen at the latitude you are on the way to, but on the north west side (good views of Scotland from here today). Nice day in prospect.
Sweden is weird, here are their numbers to the 5th of April, they are from top to bottom Cases / ICU admission / Deaths
Look how weird that is! Cases rising since the 1st of Feb, ICU admissions rising since the first of Feb. Deaths are... down since 1st of Feb and now currently flat.
I mean don't get me wrong they are flat at the UK equivalent of 125 people dying of Covid a day but their current ICU Covid occupancy is now higher than their December/Jan peak where they had the UK equivalent of 600 a day dying. They are now hit those Dec/Jan numbers again for every indicator apart from deaths.
Overall ICU occupancy in Sweden is massively above average so this isn't a with/of Covid distinction, Their ICUs are rammed with full on Covid cases. And deaths are not being 'hidden', their whole country mortatlity numbers for March are _under_ the 2015-2019 average.
That's weird. Swedes are obviously made of sterner stuff than other countries.
If you are vaccinating the most vulnerable then you are effectively reducing the average fatality rate.
If that's the explanation then you'd expect the average age of the deaths that are still occurring to be trending downwards, as they come from the younger unvaccinated age groups.
Hard to explain the ICU numbers though. Mortality in covid ICU runs about 40% even with the new treatments such as Tocizilumab. I think the Mortality figures will catch up.
For clarity the middle graph is ICU admissions, here is their Covid ICU occupancy chart
@MikeSmithson You're absolutely right to be proud of PB for keeping going, Mike - and that goes for all of you who help to keep the site running.
Ever since I came across the site it's been a great source of information and interest, to me and for a lot of other people. But it's been a real boon throughout the pandemic. I'm sure I would have struggled a lot, lot more with isolation during lockdown. Similarly with fear of the unknown - there's always someone knowledgeable to speak against misinformation.
O/T — In London today I was surprised to find myself giving directions to Japanese tourists. I had thought that all tourism from other countries was off the cards atm.
It would appear that the Government is, in essence, operating an open door policy for visitors from the whole world, except those travelling from red list countries (and presumably visitors from e.g. Brazil could just get around the feeble rules by travelling via a third country and lying on whatever declarations they have to make when they get here, if sufficiently determined to do so?)
Like I said the other day, it's so reckless and illogical a policy that it only really makes sense if one assumes that ministers want to import variants, in order to have surge testing, panic in the press, and thus to maintain the general atmosphere of emergency. The emergency is wildly popular with the Tories' frightened elderly supporters, it gives them cover to act with impunity, and it serves further to neuter an already ineffectual Opposition. Why would they ever want it to end?
Because there are more votes in ending lockdown than continuing it? And free economies are more successful than locked down ones?
1. Are there? Much of the population remains irrationally terrified and such opinion is disproportionately concentrated amongst elderly authoritarians, who are (a) numerous and (b) heavily inclined to turn out to vote. 2. Who cares about the economy when you can just borrow to plug the gaps in your finances?
We’re printing money not borrowing it
How is that actually done? Literally printing or metaphorically? Are other comparable countries doing the same and roughly to the same extent?
Metaphorically
The Bank of England fires up its spreadsheet and buys assets from banks who turn around and lend it to the government. They call it Quantative Easing so it sounds boring and technical and people’s eyes glaze over.
We’ve been doing it for years but generally less than the EU and the US.
That’s the reason why we have horrendous asset price inflation - there’s too much money around and not enough quality assets
If banks are lending assets it to the government then surely this IS government borrowing in a real sense - i.e. with interest being charged and repayment at some point to be made?
Not really
Bank buys £300bn Uk government debt from the market.
Market buys £300bn of new debt from the government
Net result is that government debt has gone up £300bn and Bank of England assets have gone up £300bn.
Government pays same interest to market (assuming no change in rates). Government pays more interest to the Bank of England (in practice I don’t think they bother any more) which pays a dividend to the government with the proceeds.
When the Bank of England debts come due they enter into a contract with the government to roll over the loan into a new instrument
I am not sure that is quite accurate Charles. What I understand is happening (and I could be wrong) is that the government is issuing new debt and the Bank are in the market as a buyer of last resort. The result is that the price of that debt in terms of coupon is artificially reduced and those buying it know that they are guaranteed that they can shift it on, usually at a small profit.
The net result is that the banks make a turn on the debt and it ends up on the balance sheet of the Bank who no longer get paid the coupon so it is interest free. The government gets the proceeds of the bonds which allows it to fund its day to day activities. The total amount of money in the economy is increased by the amount of buying that the Bank does (since, as you say, it simply creates the money to buy the bonds). Government debt is increased by the amount of the bonds but at zero cost to them because they don't pay the bank.
The government borrowing all of this money would normally squeeze out private sector borrowing but this does not happen because it is the created money from the Bank that pays for it so there is still the same amount of capital looking for a home which, as you say, is creating asset inflation.
What I don't understand is why this has not created more general inflation. Monetarist theory indicates that the price level is set by the quantity of money in the economy available to buy things. As that quantity of money increases prices should increase too unless there is an increase in supply. But its not happening. Its really weird.
I think you are just putting more detail to my simplification - we are saying the same thing (although If you look at last year the Bank bought most of the bonds directly from the government)
I’m intrigued about why there hasn’t been CPI. Either we are in a structurally deflationary situation - possibly, like Japan was in the 90s - or (more likely) CPI is broken as a measure of inflation
I am glad you share my mystification Charles!
One thought is that monetarist theory really has no useful application in a world without financial borders. The money supply is no longer controlled by the Bank or anyone else because virtually infinite amounts of capital can come and go at the press of a button. This makes it difficult for old fashioned things like cost push inflation to get a grip.
In the UK we did something similar to labour whilst in the EU. Freedom of movement meant that the supply of labour was open ended with the result that wages stagnated as did investment focused on labour substitution resulting in poor productivity growth. All other things being equal we should see better wage growth going forward.
That "whiter than white" paint story yesterday is interesting.
Potential to keep some heat out, but not enough information to work out the overall effect - what is the heat emissivity balance etc. Turning down the US aircon bill alone would have some impact.
It was all going well until Big_G realised he'd have to paint his roof white, and not just his walls. Sadly yesterday evening any plans north Wales might have had to combat global warming went down the pan.
Sweden is weird, here are their numbers to the 5th of April, they are from top to bottom Cases / ICU admission / Deaths
Look how weird that is! Cases rising since the 1st of Feb, ICU admissions rising since the first of Feb. Deaths are... down since 1st of Feb and now currently flat.
I mean don't get me wrong they are flat at the UK equivalent of 125 people dying of Covid a day but their current ICU Covid occupancy is now higher than their December/Jan peak where they had the UK equivalent of 600 a day dying. They are now hit those Dec/Jan numbers again for every indicator apart from deaths.
Overall ICU occupancy in Sweden is massively above average so this isn't a with/of Covid distinction, Their ICUs are rammed with full on Covid cases. And deaths are not being 'hidden', their whole country mortatlity numbers for March are _under_ the 2015-2019 average.
That's weird. Swedes are obviously made of sterner stuff than other countries.
If you are vaccinating the most vulnerable then you are effectively reducing the average fatality rate.
If that's the explanation then you'd expect the average age of the deaths that are still occurring to be trending downwards, as they come from the younger unvaccinated age groups.
By the 1st of Feb Sweden had got to 2% of the population with a first vaccination. They are now up to 10% so I don't think it is Vaccination that is having the effect
I think about 5% of the UK population are aged over 80, and about half of Covid deaths were of those over-80, so you might not need to vaccinate many people to have a large impact on the death numbers.
Sweden is weird, here are their numbers to the 5th of April, they are from top to bottom Cases / ICU admission / Deaths
Look how weird that is! Cases rising since the 1st of Feb, ICU admissions rising since the first of Feb. Deaths are... down since 1st of Feb and now currently flat.
I mean don't get me wrong they are flat at the UK equivalent of 125 people dying of Covid a day but their current ICU Covid occupancy is now higher than their December/Jan peak where they had the UK equivalent of 600 a day dying. They are now hit those Dec/Jan numbers again for every indicator apart from deaths.
Overall ICU occupancy in Sweden is massively above average so this isn't a with/of Covid distinction, Their ICUs are rammed with full on Covid cases. And deaths are not being 'hidden', their whole country mortatlity numbers for March are _under_ the 2015-2019 average.
That's weird. Swedes are obviously made of sterner stuff than other countries.
If we think our death-by-date figures are lagged, Sweden makes us look like nothing. At the best of times, it takes two weeks for the lag to catch up (I tracked it for a while when people were going on about it during their second wave in December/January).
Always ignore the last two weeks of death data from Sweden and compare the death figures from two weeks ago with the cases from five weeks ago to give a better view.
(You could also argue that if the proportion of deaths that have occurred that are recorded against a given date is decreasing as you move from two weeks back to the present - that is, you go from 100% or so of deaths being recorded by 2 weeks ago to under 10% by a couple of days ago, and the line of deaths is flat, it's quite an alarming line...)
O/T — In London today I was surprised to find myself giving directions to Japanese tourists. I had thought that all tourism from other countries was off the cards atm.
It would appear that the Government is, in essence, operating an open door policy for visitors from the whole world, except those travelling from red list countries (and presumably visitors from e.g. Brazil could just get around the feeble rules by travelling via a third country and lying on whatever declarations they have to make when they get here, if sufficiently determined to do so?)
Like I said the other day, it's so reckless and illogical a policy that it only really makes sense if one assumes that ministers want to import variants, in order to have surge testing, panic in the press, and thus to maintain the general atmosphere of emergency. The emergency is wildly popular with the Tories' frightened elderly supporters, it gives them cover to act with impunity, and it serves further to neuter an already ineffectual Opposition. Why would they ever want it to end?
Because there are more votes in ending lockdown than continuing it? And free economies are more successful than locked down ones?
1. Are there? Much of the population remains irrationally terrified and such opinion is disproportionately concentrated amongst elderly authoritarians, who are (a) numerous and (b) heavily inclined to turn out to vote. 2. Who cares about the economy when you can just borrow to plug the gaps in your finances?
We’re printing money not borrowing it
How is that actually done? Literally printing or metaphorically? Are other comparable countries doing the same and roughly to the same extent?
Metaphorically
The Bank of England fires up its spreadsheet and buys assets from banks who turn around and lend it to the government. They call it Quantative Easing so it sounds boring and technical and people’s eyes glaze over.
We’ve been doing it for years but generally less than the EU and the US.
That’s the reason why we have horrendous asset price inflation - there’s too much money around and not enough quality assets
If banks are lending assets it to the government then surely this IS government borrowing in a real sense - i.e. with interest being charged and repayment at some point to be made?
Not really
Bank buys £300bn Uk government debt from the market.
Market buys £300bn of new debt from the government
Net result is that government debt has gone up £300bn and Bank of England assets have gone up £300bn.
Government pays same interest to market (assuming no change in rates). Government pays more interest to the Bank of England (in practice I don’t think they bother any more) which pays a dividend to the government with the proceeds.
When the Bank of England debts come due they enter into a contract with the government to roll over the loan into a new instrument
I am not sure that is quite accurate Charles. What I understand is happening (and I could be wrong) is that the government is issuing new debt and the Bank are in the market as a buyer of last resort. The result is that the price of that debt in terms of coupon is artificially reduced and those buying it know that they are guaranteed that they can shift it on, usually at a small profit.
The net result is that the banks make a turn on the debt and it ends up on the balance sheet of the Bank who no longer get paid the coupon so it is interest free. The government gets the proceeds of the bonds which allows it to fund its day to day activities. The total amount of money in the economy is increased by the amount of buying that the Bank does (since, as you say, it simply creates the money to buy the bonds). Government debt is increased by the amount of the bonds but at zero cost to them because they don't pay the bank.
The government borrowing all of this money would normally squeeze out private sector borrowing but this does not happen because it is the created money from the Bank that pays for it so there is still the same amount of capital looking for a home which, as you say, is creating asset inflation.
What I don't understand is why this has not created more general inflation. Monetarist theory indicates that the price level is set by the quantity of money in the economy available to buy things. As that quantity of money increases prices should increase too unless there is an increase in supply. But its not happening. Its really weird.
I think you are just putting more detail to my simplification - we are saying the same thing (although If you look at last year the Bank bought most of the bonds directly from the government)
I’m intrigued about why there hasn’t been CPI. Either we are in a structurally deflationary situation - possibly, like Japan was in the 90s - or (more likely) CPI is broken as a measure of inflation
Probably a bit of both. Japan has been actively trying to create inflation for decades, and failing.
A lot of the deflation has arisen from China becoming manufacturer to the world with its low wage rates and currency held below market levels delivering a wave of cost savings for the rest of the world. As this process comes to an end, things may become less deflationary. And then potentially get 'interesting', in the Chinese proverbial sense.
O/T — In London today I was surprised to find myself giving directions to Japanese tourists. I had thought that all tourism from other countries was off the cards atm.
It would appear that the Government is, in essence, operating an open door policy for visitors from the whole world, except those travelling from red list countries (and presumably visitors from e.g. Brazil could just get around the feeble rules by travelling via a third country and lying on whatever declarations they have to make when they get here, if sufficiently determined to do so?)
Like I said the other day, it's so reckless and illogical a policy that it only really makes sense if one assumes that ministers want to import variants, in order to have surge testing, panic in the press, and thus to maintain the general atmosphere of emergency. The emergency is wildly popular with the Tories' frightened elderly supporters, it gives them cover to act with impunity, and it serves further to neuter an already ineffectual Opposition. Why would they ever want it to end?
Because there are more votes in ending lockdown than continuing it? And free economies are more successful than locked down ones?
1. Are there? Much of the population remains irrationally terrified and such opinion is disproportionately concentrated amongst elderly authoritarians, who are (a) numerous and (b) heavily inclined to turn out to vote. 2. Who cares about the economy when you can just borrow to plug the gaps in your finances?
We’re printing money not borrowing it
How is that actually done? Literally printing or metaphorically? Are other comparable countries doing the same and roughly to the same extent?
Metaphorically
The Bank of England fires up its spreadsheet and buys assets from banks who turn around and lend it to the government. They call it Quantative Easing so it sounds boring and technical and people’s eyes glaze over.
We’ve been doing it for years but generally less than the EU and the US.
That’s the reason why we have horrendous asset price inflation - there’s too much money around and not enough quality assets
Corbynistas are sometimes keen on QE as a way to finance spending, but as the effect of QE is to increase the value of real assets. It is a form of redistribution to the wealthy. Certainly I have done well out of it.
It increases the PRICE not the VALUE of real assets
The difference being whether you want to buy or to sell!
But yes, a house retains the same use value even if its price doubles.
Has any country ever improved its economy in the long run by debasing its currency? Short term benefits happen, but long term?
Sweden is weird, here are their numbers to the 5th of April, they are from top to bottom Cases / ICU admission / Deaths
Look how weird that is! Cases rising since the 1st of Feb, ICU admissions rising since the first of Feb. Deaths are... down since 1st of Feb and now currently flat.
I mean don't get me wrong they are flat at the UK equivalent of 125 people dying of Covid a day but their current ICU Covid occupancy is now higher than their December/Jan peak where they had the UK equivalent of 600 a day dying. They are now hit those Dec/Jan numbers again for every indicator apart from deaths.
Overall ICU occupancy in Sweden is massively above average so this isn't a with/of Covid distinction, Their ICUs are rammed with full on Covid cases. And deaths are not being 'hidden', their whole country mortatlity numbers for March are _under_ the 2015-2019 average.
That's weird. Swedes are obviously made of sterner stuff than other countries.
If we think our death-by-date figures are lagged, Sweden makes us look like nothing. At the best of times, it takes two weeks for the lag to catch up (I tracked it for a while when people were going on about it during their second wave in December/January).
Always ignore the last two weeks of death data from Sweden and compare the death figures from two weeks ago with the cases from five weeks ago to give a better view.
(You could also argue that if the proportion of deaths that have occurred that are recorded against a given date is decreasing as you move from two weeks back to the present - that is, you go from 100% or so of deaths being recorded by 2 weeks ago to under 10% by a couple of days ago, and the line of deaths is flat, it's quite an alarming line...)
That's why I've take it to the 5th of April to cut of some of their enormous lag. That said Sweden have got a bit better than they have at promptly recording deaths. They are no longer updating 20-30% of a days deaths over a month later as far as I can see.
Gordon Brown now the most popular former Labour leader with Labour members on 81% favourable view, then Ed Miliband on 78%, Attlee on 74%, Kinnock on 69%, Corbyn on 55% and Blair on 54%
On the subject of asset price inflation, it looks like the FTSE100 will open above 7000 for the first time in over a year. Not as over inflated as some other markets but looking rather optomistic to me.
Still 400 ish points lower than it was pre-pandemic.
Selling 90% of my equities in February when I saw the wave hit Italy and buying them back in April has been my most effective bit of speculation ever. I doubt that I will ever have such an information advantage ever again. I have been reshuffling to a more defensive position over the last month. I am beginning to fear a major Asian second wave, particularly in China, Korea, SE Asia etc. Those are countries with very low vaccination rates, and sitting ducks for new variants.
A report on 5 live this morning from India said they are experiencing 150.000 daily infections and covid is out of control
And how on earth did they allow crowds at the cricket
Hubris. See also much of Eastern Europe last summer, Boris prior to Christmas etc etc
O/T — In London today I was surprised to find myself giving directions to Japanese tourists. I had thought that all tourism from other countries was off the cards atm.
It would appear that the Government is, in essence, operating an open door policy for visitors from the whole world, except those travelling from red list countries (and presumably visitors from e.g. Brazil could just get around the feeble rules by travelling via a third country and lying on whatever declarations they have to make when they get here, if sufficiently determined to do so?)
Like I said the other day, it's so reckless and illogical a policy that it only really makes sense if one assumes that ministers want to import variants, in order to have surge testing, panic in the press, and thus to maintain the general atmosphere of emergency. The emergency is wildly popular with the Tories' frightened elderly supporters, it gives them cover to act with impunity, and it serves further to neuter an already ineffectual Opposition. Why would they ever want it to end?
Because there are more votes in ending lockdown than continuing it? And free economies are more successful than locked down ones?
1. Are there? Much of the population remains irrationally terrified and such opinion is disproportionately concentrated amongst elderly authoritarians, who are (a) numerous and (b) heavily inclined to turn out to vote. 2. Who cares about the economy when you can just borrow to plug the gaps in your finances?
We’re printing money not borrowing it
How is that actually done? Literally printing or metaphorically? Are other comparable countries doing the same and roughly to the same extent?
Metaphorically
The Bank of England fires up its spreadsheet and buys assets from banks who turn around and lend it to the government. They call it Quantative Easing so it sounds boring and technical and people’s eyes glaze over.
We’ve been doing it for years but generally less than the EU and the US.
That’s the reason why we have horrendous asset price inflation - there’s too much money around and not enough quality assets
If banks are lending assets it to the government then surely this IS government borrowing in a real sense - i.e. with interest being charged and repayment at some point to be made?
The Bank buys an old government bond from a bank.
The bank uses that money to buy a new bond from the Government.
The Government owns the Bank so doesn't pay interest to the Bank on the bond it bought.
Net effect the Government has sold a new bond, the banks have the same, the Bank owns some it didn't and claims no interest.
But theoretically no money has been printed. Theoretically the Bank isn't buying from the Government.
The Bank of England is creating the money to pay for the bonds out of thin air - it is they who have responsibility for the money supply not the government
So this is not the hapless Brown and Darling "maxing out the credit cards" as pointed out by Cameron and Osborne. It is genuinely free money with no downsides. Wow that is genius...although doesn't this increase M3 which is inflationary, although in itself is that also a positive, because inflation erodes the debt?
It’s “free” until the shit hits the fan and we turn into Weimar.
Plenty has been written about why there was no inflation post 2008 in goods and services, despite the huge increase in the money supply.
The most compelling explanation I’ve seen is that the highly globalised state of the major economies meant imported deflation kept headline inflation down. All the while, asset price inflation was pretty rampant. Mark Blythe has shown that in the last 20 years most of the real wealth gains have accrued to a tiny fraction of percent of the global population, with a smidgen to the masses in the emerging world. Joe Public in the West have largely had flatlined real incomes.
Monetarists will look at today’s less globalised world, a potential Cold War with China, more tightly restricted immigration etc... and conclude we’re headed finally for the headline inflation dragon to roar once again, as their models predict. If and when it doesn’t, they’ll no doubt have smart explanations after the event as to why it didn’t. Spoiler alert: it was the unfolding energy revolution that will be seen to have kept prices low.
O/T — In London today I was surprised to find myself giving directions to Japanese tourists. I had thought that all tourism from other countries was off the cards atm.
It would appear that the Government is, in essence, operating an open door policy for visitors from the whole world, except those travelling from red list countries (and presumably visitors from e.g. Brazil could just get around the feeble rules by travelling via a third country and lying on whatever declarations they have to make when they get here, if sufficiently determined to do so?)
Like I said the other day, it's so reckless and illogical a policy that it only really makes sense if one assumes that ministers want to import variants, in order to have surge testing, panic in the press, and thus to maintain the general atmosphere of emergency. The emergency is wildly popular with the Tories' frightened elderly supporters, it gives them cover to act with impunity, and it serves further to neuter an already ineffectual Opposition. Why would they ever want it to end?
... but would ensure no mutations.
This is nonsense - but an assumption you come across time and again.
A mutation is just as likely to occur in your next door neighbour as in some random visiting German.
We could wall off the country and still be subject to potential future mutations - at least until the point at which the country is covid-free; which is a theoretical but probably unachievable position.
Travel restrictions make sense while there are places with significantly higher incidence than here and largely unvaccinated populations. But they come at an economic and social cost.
Reactions to the plagues of the middle ages were to shun or persecute foreigners, strangers, and various minorities - a response based on emotion not logic.
That's absolutely untrue!
The case rate is miniscule in this country so the odds of your next-door neighbour and the odds of a random German being infected are completely different.
The odds of your next door neighbour and the odds of a random German coming into contact with someone else being infected and capable of infecting them is completely different.
Travel restrictions absolutely make sense until other nations have eliminated the virus like we have.
There is absolutely no justification for not having travel restrictions unless we have zero other restrictions too.
O/T — In London today I was surprised to find myself giving directions to Japanese tourists. I had thought that all tourism from other countries was off the cards atm.
It would appear that the Government is, in essence, operating an open door policy for visitors from the whole world, except those travelling from red list countries (and presumably visitors from e.g. Brazil could just get around the feeble rules by travelling via a third country and lying on whatever declarations they have to make when they get here, if sufficiently determined to do so?)
Like I said the other day, it's so reckless and illogical a policy that it only really makes sense if one assumes that ministers want to import variants, in order to have surge testing, panic in the press, and thus to maintain the general atmosphere of emergency. The emergency is wildly popular with the Tories' frightened elderly supporters, it gives them cover to act with impunity, and it serves further to neuter an already ineffectual Opposition. Why would they ever want it to end?
Because there are more votes in ending lockdown than continuing it? And free economies are more successful than locked down ones?
1. Are there? Much of the population remains irrationally terrified and such opinion is disproportionately concentrated amongst elderly authoritarians, who are (a) numerous and (b) heavily inclined to turn out to vote. 2. Who cares about the economy when you can just borrow to plug the gaps in your finances?
We’re printing money not borrowing it
How is that actually done? Literally printing or metaphorically? Are other comparable countries doing the same and roughly to the same extent?
Metaphorically
The Bank of England fires up its spreadsheet and buys assets from banks who turn around and lend it to the government. They call it Quantative Easing so it sounds boring and technical and people’s eyes glaze over.
We’ve been doing it for years but generally less than the EU and the US.
That’s the reason why we have horrendous asset price inflation - there’s too much money around and not enough quality assets
If banks are lending assets it to the government then surely this IS government borrowing in a real sense - i.e. with interest being charged and repayment at some point to be made?
Not really
Bank buys £300bn Uk government debt from the market.
Market buys £300bn of new debt from the government
Net result is that government debt has gone up £300bn and Bank of England assets have gone up £300bn.
Government pays same interest to market (assuming no change in rates). Government pays more interest to the Bank of England (in practice I don’t think they bother any more) which pays a dividend to the government with the proceeds.
When the Bank of England debts come due they enter into a contract with the government to roll over the loan into a new instrument
I am not sure that is quite accurate Charles. What I understand is happening (and I could be wrong) is that the government is issuing new debt and the Bank are in the market as a buyer of last resort. The result is that the price of that debt in terms of coupon is artificially reduced and those buying it know that they are guaranteed that they can shift it on, usually at a small profit.
The net result is that the banks make a turn on the debt and it ends up on the balance sheet of the Bank who no longer get paid the coupon so it is interest free. The government gets the proceeds of the bonds which allows it to fund its day to day activities. The total amount of money in the economy is increased by the amount of buying that the Bank does (since, as you say, it simply creates the money to buy the bonds). Government debt is increased by the amount of the bonds but at zero cost to them because they don't pay the bank.
The government borrowing all of this money would normally squeeze out private sector borrowing but this does not happen because it is the created money from the Bank that pays for it so there is still the same amount of capital looking for a home which, as you say, is creating asset inflation.
What I don't understand is why this has not created more general inflation. Monetarist theory indicates that the price level is set by the quantity of money in the economy available to buy things. As that quantity of money increases prices should increase too unless there is an increase in supply. But its not happening. Its really weird.
I think you are just putting more detail to my simplification - we are saying the same thing (although If you look at last year the Bank bought most of the bonds directly from the government)
I’m intrigued about why there hasn’t been CPI. Either we are in a structurally deflationary situation - possibly, like Japan was in the 90s - or (more likely) CPI is broken as a measure of inflation
There has been huge asset price inflation, but relatively little product market inflation. The latter is because of the favourable supply side shock caused by the inclusion of a number of developing countries - in particular China - into the world's trading system.
On the subject of asset price inflation, it looks like the FTSE100 will open above 7000 for the first time in over a year. Not as over inflated as some other markets but looking rather optomistic to me.
Still 400 ish points lower than it was pre-pandemic.
Selling 90% of my equities in February when I saw the wave hit Italy and buying them back in April has been my most effective bit of speculation ever. I doubt that I will ever have such an information advantage ever again. I have been reshuffling to a more defensive position over the last month. I am beginning to fear a major Asian second wave, particularly in China, Korea, SE Asia etc. Those are countries with very low vaccination rates, and sitting ducks for new variants.
A report on 5 live this morning from India said they are experiencing 150.000 daily infections and covid is out of control
And how on earth did they allow crowds at the cricket
We are beginning to fear for our planned Grandparental trip to Thailand around Christmas. Haven't been able to hug those grandchildren since July 2019!
Gordon Brown now the most popular former Labour leader with Labour members on 81% favourable view, then Ed Miliband on 78%, Attlee on 74%, Kinnock on 69%, Corbyn on 55% and Blair on 54%
That "whiter than white" paint story yesterday is interesting.
Potential to keep some heat out, but not enough information to work out the overall effect - what is the heat emissivity balance etc. Turning down the US aircon bill alone would have some impact.
It was all going well until Big_G realised he'd have to paint his roof white, and not just his walls. Sadly yesterday evening any plans north Wales might have had to combat global warming went down the pan.
O/T — In London today I was surprised to find myself giving directions to Japanese tourists. I had thought that all tourism from other countries was off the cards atm.
It would appear that the Government is, in essence, operating an open door policy for visitors from the whole world, except those travelling from red list countries (and presumably visitors from e.g. Brazil could just get around the feeble rules by travelling via a third country and lying on whatever declarations they have to make when they get here, if sufficiently determined to do so?)
Like I said the other day, it's so reckless and illogical a policy that it only really makes sense if one assumes that ministers want to import variants, in order to have surge testing, panic in the press, and thus to maintain the general atmosphere of emergency. The emergency is wildly popular with the Tories' frightened elderly supporters, it gives them cover to act with impunity, and it serves further to neuter an already ineffectual Opposition. Why would they ever want it to end?
... but would ensure no mutations.
This is nonsense - but an assumption you come across time and again.
A mutation is just as likely to occur in your next door neighbour as in some random visiting German.
We could wall off the country and still be subject to potential future mutations - at least until the point at which the country is covid-free; which is a theoretical but probably unachievable position.
Travel restrictions make sense while there are places with significantly higher incidence than here and largely unvaccinated populations. But they come at an economic and social cost.
Reactions to the plagues of the middle ages were to shun or persecute foreigners, strangers, and various minorities - a response based on emotion not logic.
That's absolutely untrue!
The case rate is miniscule in this country so the odds of your next-door neighbour and the odds of a random German being infected are completely different.
The odds of your next door neighbour and the odds of a random German coming into contact with someone else being infected and capable of infecting them is completely different.
Travel restrictions absolutely make sense until other nations have eliminated the virus like we have.
There is absolutely no justification for not having travel restrictions unless we have zero other restrictions too.
I quite clearly said that there should be travel restrictions.
If both your neighbour and the random German get the virus, the chances are the same. Obviously if one has more chance than the other, the equation changes - but then for any single person, the risk has more to do with behaviour and lifestyle and circumstances than nationality.
The key point is that what HY said about "ensuring no mutations" is complete tosh.
Gordon Brown now the most popular former Labour leader with Labour members on 81% favourable view, then Ed Miliband on 78%, Attlee on 74%, Kinnock on 69%, Corbyn on 55% and Blair on 54%
Regrets, I've had a few. Just surfing the web and found this. My very first car was a 1936 Singer Le Mans which I bought for £25. It would now cost me approx $150,000 to buy one now.
Those are rookie numbers. In about 2009 I parted out my 993 GT2 because I thought it wasn't worth fixing and nobody was interested in 993s then. The last 5 or 6 I've seen sell have all made around $1m. I've still got the GT2 wing on my 993 Carrera S though so that's sick.
That "whiter than white" paint story yesterday is interesting.
Potential to keep some heat out, but not enough information to work out the overall effect - what is the heat emissivity balance etc. Turning down the US aircon bill alone would have some impact.
It was all going well until Big_G realised he'd have to paint his roof white, and not just his walls. Sadly yesterday evening any plans north Wales might have had to combat global warming went down the pan.
You are a drama queen
All in good humour, but you did neatly illustrate the challenge of getting people to take action on climate change. When you first heard about the white paint plan and simply thought of your white walls, you were jumping up and down eager to be a leader in the global fight against a warmer climate. Yet as soon as the penny dropped that you'd actually have to change your roof, your enthusiasm disappeared!
We came close to running out of some agents in both waves. Anaesthetic agents, kidney filtration kit, even oxygen bandwidth.
My medical student this morning is still doing bank shifts as HCA on ICU. Only a third of the ICU nurses remain at present, the rest are conscripts from the press gangs, though some proper staff may return. Staff attrition is horrific.
That is horrific
At least give them some fucking pethidine. I don't want to drown in my own lung fluid. in total agony
My wife has just quit. She feels exhausted and unappreciated. She's going back to a care home. The impression I get is that while patients appreciate the NHS, staff don't.
Yes, no way is Mrs Foxy going back to ICU. She knows her limits. She is having a well earned week off on the IoW seeing her mum, but eager to get back to her regular work.
One thing I hope will come out of this experience is some sort of strategy for coping in the event that this ever happens again.
Obviously you can't just conscript people off the street to carry out specialised work, but equally obviously there's a limit to what trained people can manage. Also you can't just whistle up masses of specialised equipment at a moment's notice, although they seem to have done that quite well this time around.
I wonder whether the primary lesson is that we need to be much more ruthless about a lot of things if another disease ever crops up anywhere.
I also wonder whether opinions of people in the front line have changed over the issue of comparing a pandemic to a war. Now that PTSD is a real thing for so many, the war analogy may seem more apt.
O/T — In London today I was surprised to find myself giving directions to Japanese tourists. I had thought that all tourism from other countries was off the cards atm.
It would appear that the Government is, in essence, operating an open door policy for visitors from the whole world, except those travelling from red list countries (and presumably visitors from e.g. Brazil could just get around the feeble rules by travelling via a third country and lying on whatever declarations they have to make when they get here, if sufficiently determined to do so?)
Like I said the other day, it's so reckless and illogical a policy that it only really makes sense if one assumes that ministers want to import variants, in order to have surge testing, panic in the press, and thus to maintain the general atmosphere of emergency. The emergency is wildly popular with the Tories' frightened elderly supporters, it gives them cover to act with impunity, and it serves further to neuter an already ineffectual Opposition. Why would they ever want it to end?
... but would ensure no mutations.
This is nonsense - but an assumption you come across time and again.
A mutation is just as likely to occur in your next door neighbour as in some random visiting German.
We could wall off the country and still be subject to potential future mutations - at least until the point at which the country is covid-free; which is a theoretical but probably unachievable position.
Travel restrictions make sense while there are places with significantly higher incidence than here and largely unvaccinated populations. But they come at an economic and social cost.
Reactions to the plagues of the middle ages were to shun or persecute foreigners, strangers, and various minorities - a response based on emotion not logic.
That's absolutely untrue!
The case rate is miniscule in this country so the odds of your next-door neighbour and the odds of a random German being infected are completely different.
The odds of your next door neighbour and the odds of a random German coming into contact with someone else being infected and capable of infecting them is completely different.
Travel restrictions absolutely make sense until other nations have eliminated the virus like we have.
There is absolutely no justification for not having travel restrictions unless we have zero other restrictions too.
p.s. and we haven't "eliminated the virus", nor likely will we ever (most likely it eventually mutates into a progressively milder form and ends joining the portfolio of minor infections we call the common cold).
We could have a 99% vaccinated population with the virus popping up only occasionally here and there in isolated outbreaks, yet it could mutate inside a homeless tramp from Glasgow into a form to which the current vaccine is not (or is less) resistant, and the whole cycle starts again. We got where we are from an infection within a single Chinese person.
Comments
https://www.bbc.co.uk/news/business-15198789
The net result is that the banks make a turn on the debt and it ends up on the balance sheet of the Bank who no longer get paid the coupon so it is interest free. The government gets the proceeds of the bonds which allows it to fund its day to day activities. The total amount of money in the economy is increased by the amount of buying that the Bank does (since, as you say, it simply creates the money to buy the bonds). Government debt is increased by the amount of the bonds but at zero cost to them because they don't pay the bank.
The government borrowing all of this money would normally squeeze out private sector borrowing but this does not happen because it is the created money from the Bank that pays for it so there is still the same amount of capital looking for a home which, as you say, is creating asset inflation.
What I don't understand is why this has not created more general inflation. Monetarist theory indicates that the price level is set by the quantity of money in the economy available to buy things. As that quantity of money increases prices should increase too unless there is an increase in supply. But its not happening. Its really weird.
Eldest Granddaughter is driving from Stoke this weekend to deliver her Christmas presents to us, and her brother and collect hers!
At last!!
Fortunately nothing is perishable!!
But that fall in the value of the pound should have been inflationary in that imports would cost more and it largely wasn't. The only thing that makes sense to me, and I am not a trained economist, is that there were offsetting deflationary pressures which largely cancelled the effect either from falling demand or reduced cost of supply. We see some evidence of this in very low wage growth ever since 2008.
Much of the issues that caused the Lost Decades in Japan - bubble, bad debts, over leverage, excess borrowing etc - struck the UK and the West in general in 2007/08.
We should have seen a deflationary spiral like Japan. QE has meant instead we've had negligible inflation instead of deflation.
I personally think that the market is very high at the moment and a correction at some point, possibly brought on by some variant set back as @Foxy alludes to, is almost inevitable in the next quarter. It seems unlikely to me that Greensill is going to be the only finance house that is somewhat overstretched for example.
Haven’t they snuck in some price rises on luggage?
It's September. Hoping Christmas presents can finally be given then.
And how on earth did they allow crowds at the cricket
EasyJet may be doing 10% of its flights today, but they won't in the future. Investors are (wisely) taking future expectations into account.
Corrections are usually preceded by one last hurrah - so moving gradually into less risky assets is probably the sensible approach for now.
https://www.ft.com/content/5251e1b9-b88d-4bfc-95fa-29dc34d37652
(title "‘Slow’ UK response to AstraZeneca side-effects alarms experts", which will normally get you past the paywall if you search it in Google and access from Google link rather than direct).
Now, I don't know the rights and wrongs of this, but the FT journalists should perhaps reflect that if the best you can do in 'expert' criticism is a psychologist, a spokesperson for a charity (professional body?) and someone from a science media centre then maybe you need to try a bit harder or there is not in fact a story. No pharmacovigilance researchers, for example?
Sweden is weird, here are their numbers to the 5th of April, they are from top to bottom Cases / ICU admission / Deaths
Look how weird that is! Cases rising since the 1st of Feb, ICU admissions rising since the first of Feb. Deaths are... down since 1st of Feb and now currently flat.
I mean don't get me wrong they are flat at the UK equivalent of 125 people dying of Covid a day but their current ICU Covid occupancy is now higher than their December/Jan peak where they had the UK equivalent of 600 a day dying. They are now hit those Dec/Jan numbers again for every indicator apart from deaths.
Overall ICU occupancy in Sweden is massively above average so this isn't a with/of Covid distinction, Their ICUs are rammed with full on Covid cases. And deaths are not being 'hidden', their whole country mortatlity numbers for March are _under_ the 2015-2019 average.
That's weird. Swedes are obviously made of sterner stuff than other countries.
There is no free lunch.
The risk in the future will be that people regard it as, essentially, magic, and we print the money when it doesn't help us avoid deflation. But it may be that the IT revolution is having a long-term deflationary effect now, so we could be a fair way from that.
It's entirely possible that the pandemic could cause ultimately some of the firm's valuations to go up not down, if the pandemic took out some of their rivals allowing future profits and dividends to be higher as a result.
Border controls my arse.
It is also a 3rd world country which started off with a health system that was barely adequate before Covid.
I think for all the breathless reportage, it's probably too early to predict the outcome - deaths appear to have plateaued at about 3k/day recently (this is less than our daily peak in per capita terms), they may rocket up further, or it may start to burn out.
Currently it looks pretty nasty, but it may yet also be the country that shows the lockdown sceptics are right; personally I think that if at the final count they come through with less than double the UK deaths/capita, it probably means that our lockdown was the wrong thing to do. Alternatively it may yet turn very nasty indeed, and they really should have locked down; we simply don't know at this stage.
But just quoting numbers without a population size context is a particularly bad case of comparing apples and oranges.
EDIT: ...or invested in infrastructure and education that produces a long term economic return.
I recall getting into a debate last year when the FTSE was below 5000 I said it was time to buy, buy, buy as the market had overreacted. Others said to sell as the pandemic was going to get worse before it gets better.
The pandemic did get worse but anyone who bought below 5000 would have made an absolute fortune by now. As the market knew and realised the pandemic would end and figured out which firms were likely to recover.
I don't particularly want to pick on Easyjet, which is a well run company and historically a good share to own. There are many others similar that I know less well, but I just cannot see how they will make any money, and avoiding bankruptcy will be a challenge.
Is it open again for trips within England?
If that's the explanation then you'd expect the average age of the deaths that are still occurring to be trending downwards, as they come from the younger unvaccinated age groups.
"A coronavirus variant that was first detected in India has been found in the UK.
In total, 77 cases of the variant, known as B.1.617, have been recorded in the UK up to 14 April, according to the latest update from Public Health England (PHE), released on Thursday. Of these, 73 were recorded in England and four in Scotland."
Telegraph live blog
At some point QE will lead to debauchment of the currency resulting in inflation and a collapse of the exchange rate. The exchange rate is protected because our main comparables are printing money as well. But we have asset price inflation which is less visible but is storing up massive societal issues for the future (it benefits those with wealth and assets - like houses - over the you g and those with limited capital stock)
Followed through to its logical conclusion, QE leads to the total destruction of capitalism, as it penalises productive activity and encourages rent seeking. Given the disparity in capital holdings between old and young, it’s also a hugely ageist policy against the young. I am a natural conservative but we’re reaching the point where 100% inheritance taxes are the only moral course left. Increasing taxation of those of working age to pay social care costs of baby boomers would be an abomination.
There is of course one possible mitigation between the Sunak brand of QE compared with that employed by his predecessors. Which is that a good chunk of the proceeds have been deployed on what is essentially a colossal job retention and unemployment benefit scheme (with some bundles of outright graft thrown in). Unclear right now how it will impact long term productivity.
https://www.visitscotland.com/travel/getting-to-scotland/england-wales/
https://www.gov.scot/publications/coronavirus-covid-19-guidance-on-travel-and-transport/#travelbetween
It would destroy the airline and travel industry but would ensure no imported mutations.
Otherwise we just have to control it and live with it, as more of us get vaccinated the impact of mutations is less significant anyway
QE is slowly undoing the egalitarianism of the post-war 20th Century and returning us to the 'born rich or born poor' society of the pre-first world war era. But the frog doesn't sense the water warming and hence the political price for current politicians is minimal.
The only catch is if something triggers a collapse in credibility and the whole thing comes tumbling down. We're stuck with zero (almost negative) interest rates, and no-one knows whether the 'new economic model' is sustainable if inflation and interest rates rise.
I’m intrigued about why there hasn’t been CPI. Either we are in a structurally deflationary situation - possibly, like Japan was in the 90s - or (more likely) CPI is broken as a measure of inflation
Corbynistas like free money, their parents like asset inflation so QE ain't going away. It is like beating a hangover by keeping drinking.
Therefore wouldn't you expect a Covid ICU filled with people in their 40s to have a lower death rate than people in their 70s?
Will wave as you go past.
They might have different ICU criteria in Sweden, but the cannot be far different.
A mutation is just as likely to occur in your next door neighbour as in some random visiting German.
We could wall off the country and still be subject to potential future mutations - at least until the point at which the country is covid-free; which is a theoretical but probably unachievable position.
Travel restrictions make sense while there are places with significantly higher incidence than here and largely unvaccinated populations. But they come at an economic and social cost.
Reactions to the plagues of the middle ages were to shun or persecute foreigners, strangers, and various minorities - a response based on emotion not logic.
Potential to keep some heat out, but not enough information to work out the overall effect - what is the heat emissivity balance etc. Turning down the US aircon bill alone would have some impact.
https://www.theguardian.com/environment/2021/apr/15/whitest-ever-paint-could-help-cool-heating-earth-study-shows
Ever since I came across the site it's been a great source of information and interest, to me and for a lot of other people. But it's been a real boon throughout the pandemic. I'm sure I would have struggled a lot, lot more with isolation during lockdown. Similarly with fear of the unknown - there's always someone knowledgeable to speak against misinformation.
Thank you all.
And good morning, everyone.
ETA ..... and have a really lovely holiday!
One thought is that monetarist theory really has no useful application in a world without financial borders. The money supply is no longer controlled by the Bank or anyone else because virtually infinite amounts of capital can come and go at the press of a button. This makes it difficult for old fashioned things like cost push inflation to get a grip.
In the UK we did something similar to labour whilst in the EU. Freedom of movement meant that the supply of labour was open ended with the result that wages stagnated as did investment focused on labour substitution resulting in poor productivity growth. All other things being equal we should see better wage growth going forward.
Here’s how to think about the federal investigation into rare but severe blood clots associated with the vaccine.
https://www.nytimes.com/2021/04/15/opinion/johnson-and-johnson-vaccine-covid.html?referringSource=articleShare
Always ignore the last two weeks of death data from Sweden and compare the death figures from two weeks ago with the cases from five weeks ago to give a better view.
(You could also argue that if the proportion of deaths that have occurred that are recorded against a given date is decreasing as you move from two weeks back to the present - that is, you go from 100% or so of deaths being recorded by 2 weeks ago to under 10% by a couple of days ago, and the line of deaths is flat, it's quite an alarming line...)
A lot of the deflation has arisen from China becoming manufacturer to the world with its low wage rates and currency held below market levels delivering a wave of cost savings for the rest of the world. As this process comes to an end, things may become less deflationary. And then potentially get 'interesting', in the Chinese proverbial sense.
NEW THREAD
But yes, a house retains the same use value even if its price doubles.
Has any country ever improved its economy in the long run by debasing its currency? Short term benefits happen, but long term?
https://twitter.com/YouGov/status/1382638898447278082?s=20
The most compelling explanation I’ve seen is that the highly globalised state of the major economies meant imported deflation kept headline inflation down. All the while, asset price inflation was pretty rampant. Mark Blythe has shown that in the last 20 years most of the real wealth gains have accrued to a tiny fraction of percent of the global population, with a smidgen to the masses in the emerging world. Joe Public in the West have largely had flatlined real incomes.
Monetarists will look at today’s less globalised world, a potential Cold War with China, more tightly restricted immigration etc... and conclude we’re headed finally for the headline inflation dragon to roar once again, as their models predict. If and when it doesn’t, they’ll no doubt have smart explanations after the event as to why it didn’t. Spoiler alert: it was the unfolding energy revolution that will be seen to have kept prices low.
The case rate is miniscule in this country so the odds of your next-door neighbour and the odds of a random German being infected are completely different.
The odds of your next door neighbour and the odds of a random German coming into contact with someone else being infected and capable of infecting them is completely different.
Travel restrictions absolutely make sense until other nations have eliminated the virus like we have.
There is absolutely no justification for not having travel restrictions unless we have zero other restrictions too.
So upsetting
If both your neighbour and the random German get the virus, the chances are the same. Obviously if one has more chance than the other, the equation changes - but then for any single person, the risk has more to do with behaviour and lifestyle and circumstances than nationality.
The key point is that what HY said about "ensuring no mutations" is complete tosh.
Tories 43%
Lab 29%
LDs 8%
Greens 8%
https://twitter.com/BritainElects/status/1382970427769810946?s=20
Obviously you can't just conscript people off the street to carry out specialised work, but equally obviously there's a limit to what trained people can manage. Also you can't just whistle up masses of specialised equipment at a moment's notice, although they seem to have done that quite well this time around.
I wonder whether the primary lesson is that we need to be much more ruthless about a lot of things if another disease ever crops up anywhere.
I also wonder whether opinions of people in the front line have changed over the issue of comparing a pandemic to a war. Now that PTSD is a real thing for so many, the war analogy may seem more apt.
We could have a 99% vaccinated population with the virus popping up only occasionally here and there in isolated outbreaks, yet it could mutate inside a homeless tramp from Glasgow into a form to which the current vaccine is not (or is less) resistant, and the whole cycle starts again. We got where we are from an infection within a single Chinese person.