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politicalbetting.com » Blog Archive » The coronavirus crisis: A Misdiagnosis?
politicalbetting.com » Blog Archive » The coronavirus crisis: A Misdiagnosis?
So it begins. The emails announcing that this or that restaurant is to close its doors, temporarily they hope, and regretfully, as they let go treasured and valuable staff. A few offer takeaways, in the hope that a diminished service and reduced costs will keep the place alive until better times come. Other venues – museums, for instance – emphasise their digital offering. Yet others hope to keep alive online.
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What is worse, some businesses going bust because they won't put some skin in the game (20%) or the government being on the hook for huge loans to every business in the country which will in all likelihood never get paid back?
They can't just hand out free money on such an enormous scale, it's crazy.
And think about it afterwards.
Quite understandable, but not necessarily wise.
Loans are a stupid idea. HMG wont even be able to administer them in time.
HMG has learned little from the GFC
Any environmentalists who oppose mass immigration and globalism must be feeling a strange mixture of pretty smug and extreme concern
One other thing - as I understand it a business that believes it may be facing insolvency is acting illegally if it takes on a loan. Is that right?
Loans really dont help.
I’d say globalisation has created an artificial, downside free, bubble of wealth that people have mistakenly come to think of as the norm, and now the true price is being revealed
Each change will hopefully reduce the problems. Then fix the next, smaller set. Lather, rinse, repeat.
The quest for perfect set of rules is the most futile activity that governments engage in.
Fine, let them close, and let them furlough workers.
In the meantime, pay the workers something fair so they can keep paying rent, can keep buying food, can keep ordering online to keep some economic activity going.
Call it emergency corona support or whatever. Some people will be unhappy about other people getting money for nothing.
Either ignore them, or institute some kind of policy whereby those who receive emergency corona support have to do some voluntary work at some point in the future (or now if we need volunteers for something and they're able).
I do not have excessive amounts of bog roll!
©the glassy-eyed BJers.
It will require a huge tax bill for every household and business in the country once this crisis is over, not just repayment of loans by borrowers, with a huge consequent further negative impact on growth
https://www.bbc.co.uk/news/uk-scotland-scotland-politics-51944044
No Indyref this year. I wonder if the price of oil has anything to do with it.
It's better to pay £40-50bn in support today than £200bn in unemployment support next year. Additionally the markets are happy to lend at zero rates right now and the Bank can and will extend QE to absorb the impact of the additional measures.
Loans are not the answer here, at least if they require undeliverable security.
Paper out yesterday,
No therapeutics have yet been proven effective for the treatment of severe illness caused by SARS-CoV-2.
https://www.nejm.org/doi/full/10.1056/NEJMoa2001282?query=featured_home#.XnKSQNr29_h.twitter
Britain's gin distilleries rally to fight coronavirus by switching production from alcohol to make hand sanitiser
https://www.dailymail.co.uk/news/article-8129737/Britains-gin-distilleries-switch-production-alcohol-make-hand-sanitiser.html
Now isnt really the time to worry about the long term.
1) If the government doesn't leak to journalists, they just make up stories. See Pesto the other day.
2) People need to feel important - "I know". Several Albanian taxi drivers have told me this.
3) This has been going on since before the printing press - some medieval monarchs arranged for rumour spreading of the favourable kind...
Who are you going to vote for ?
And yet the media will still ask but Sir Patrick, can you give me a timeline to the hour when restrictions will be in place and lifted.
We saw in Italy and Spain and other nations that did advisory shutdowns before us that the response of telling people they don't need to go to work, shouldn't go to the pub, but the pub is open that they think "I don't need to go to work, shall we go to the pub instead?"
Put down the bloody twitter machine and wait for the official announcements.
Supermarkets are supplied by a carefully managed supply chain which relies on careful prediction of and planning for future demand. This means that even a relatively small change in shopping habits is likely to cause chaos if it is both unforeseen and widespread.
But the people who will be hit hardest by this will be the homeless, as usual. They have little opportunity to follow guidance on social distancing and hygiene, and if they catch the disease, their outlook is very poor. Even if they don't, the reduced footfall and the prioritisation of other matters will mean the difference between life and death for many. Do spare a thought for them and show them kindness if you can.
I wonder whether the govt would be better off announcing a made up number. Schools will be shut for 4 months. And then when 4 months comes, they say another 2 months.
Government grants to cover this period have to be the way forward. They should have strings attached though to prevent companies laying off / dismissing staff, and to prevent profits being syphoned off during this period.
Cyclefree's argument that the government itself has brought about the collapse of frontline businesses via the lockdown (which she and others accept is necessary for health reasons), and therefore needs to counterbalance that intervention to avoid artificially imbalancing the market, means that capitalists and socialists can unite on this one.
HYUFD's arguments are utterly ridiculous.
Coronavirus panic has sparked violence in France with shoppers filmed brawling over keeping a safe distance in supermarket queues, while others panic-buy baguettes.
https://www.dailymail.co.uk/news/article-8130245/Coronavirus-panic-sparks-violence-France-shoppers-brawl.html
Yes John Maynard's views on the long-run are eerily applicable here.
Seems sensible
I think this is the danger with the French approach where they have said 2 weeks (or as we know it 15 days). There is no way they are lifting that restriction in such a short period of time, not if they are serious about suppressing this.
I wish at this time of crisis the journalist stuck to educating the public and sticking to very specific questions which they know the government can / should answer and the public need to know.
Not a) make crap up, just so they can claim to be the first with the scoop and b) ask questions they know there is no way even the experts can give a definite answer to.
Boris and Rishi are still in "peacetime" mode and haven't grasped the situation. Just like Asquith in 1914 and Chamberlain in 1939.
When I read that "there won't be any interest on the loans for six months", I realised just how completely out of sight they actually are. Not only are they not providing money (they're offering access to the companies own future funds only), they're actually charging them interest for the privilege!
They need to get a grip. We needed Churchill. We got Chamberlain.
Not only will the hospitality industry die (not be suspended - die), with the loss of 9% of our economy and 3.2 million jobs, the tourism industry will die. Airlines will die. The finance industry - which will not see the return of huge amounts of loaned money as a huge swathe of their customers simultaneously lose the ability to repay and become bankrupt (a stress test far beyond any that the system has ever devised) - may die.
But they're not in that mindspace right now. From the announcements they made yesterday, they haven't grasped it at all.
What to do is fairly obvious, and it doesn't include "allow firms to plunge deeper into debt that they can never pay off", or "allow millions of individuals to go bankrupt and into mortgage and financial debt (and rent arrears) they'll never pay off".
The policy strategy will be lucky to survive for more than 2 weeks.
The Daily Mail front page the day after the Budget last week was the worst I have ever seen. It easily surpasses the one about Theresa May during the early Brexit shambles.
We need innovative ideas. We don't want the tried and tested bullshit that won't work.
It's fairly obvious but some sort of basic income for everyone is going to be required.
Rather than having to develop a million and one rules to avoid companies trying to con the taxpayer, just give businesses the option to close trading for a period and then make sure workers can get corona money for free to meet their needs and keep spending.
Otherwise we end up paying every airliner/cruise ship company at vast expense, millions of which goes to their CEOs, only for them to go bankrupt once the crisis passes because people won't want to go on cruise ships any more anyway.
The role of the state has already fundamentally changed....and will do so more. Having a bunch of Neo-liberals in charge, one in particular who has previously viewed the state with nothing more than contempt, doesn't matter now.
Think Corbyn, the pacifist, facing a huge military attack that threatened UK lives- he would do what needs to be done, ordering troops into the firing line if need be.
Politics and ideology go out the window during these one in a lifetime crisis.
The Govt now needs to take charge or indirectly ensure that the economy comes through this relatively intact which will require an expansion of state activities the likes we have never seen. The Govt needs to do what needs to be done....nothing is off ideological limits...think the unthinkable...a massive mobilisation of the health system, and the state taking control of banks, transport and utilities are not out of the equation.....
But small businesses need to be financed....bills and mortgages paid...salaries paid....
I wasn't previously aware that you were such a keen green/environmentalist but your points on this element of the crisis have been challenging and interesting. The Venice canals story is a straw in the wind (or a fish in the water?)
Thanks
If the government is shutting down companies then the same principle should apply. The government made this choice, it should not be a 'lender of last resort' but a 'customer of last resort', the equivalent of a compulsory purchase order should be given as recompense for the lost business.
alterego said:
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Regardless of cost?
Well if added at end it would come out of my estate hopefully as I plan to never pay my house off, otherwise it would be a tiny monthly increase. For the amount it would hardly matter either way and I am unlikely to bother with hassle of the paperwork.
And it is necessary.
When you're trying to outrace a tsunami, it is dangerous to exceed the speed limit. But you don't stick to the speed limit when trying to outrace it.
Think of it like a human body. When fighting a virus, the temperature is raised, you start to sweat buckets, and all sorts of painful and achey things happen. And this is needed to kill off the virus and save your life - even though afterwards you're weak as a kitten for a while and more vulnerable.
We ain't in normal mode now. We need to elevate the temperature and sweat. And yes, there will be repercussions - but losing a huge chunk of the economy and having many millions of people unemployed and the finance sector also collapsing will have a far worse consequent "negative impact on growth."
The media are spinning this statement as no real lockdown. But we know most people commute in and out of London, because too expensive to live very close to work. If you cut off all underground and overground transportation, few nurses, doctors and other essential workers could get there. I doubt many check out staff at the supermarkets in expensive areas live close by.
How are essential workers getting into places like Paris? Even in Wuhan, essential workers could move around, ranging from nurses / doctors / community workers to food delivery services.
Now not saying Boris won't bottle it and just continue to tell his dad not to go to the pub, but I really hate the way they have spun a line from a spokesman.
Had it not been for government action restaurants up and down the country would have been sold out this weekend for Mothers Day. That foregone money can't be made up via a loan.
https://www.theguardian.com/politics/live/2020/mar/19/uk-coronavirus-live-boris-johnson-london-lockdown-williamson-refuses-to-rule-out-government-putting-london-in-lockdown-by-weekend?page=with:block-5e7353298f085c6327bc2e5d#block-5e7353298f085c6327bc2e5d
From Greg Clark, the former business secretary who tabled the urgent question
All employers have an account with HRMC to pay tax for employees through Pay As You Earn (PAYE). The monthly wage bill is known to HMRC.
Instead of firms paying PAYE to the government, that flow should now be reversed with the nation paying the wages of people for the next weeks if, and only if, they continue to employ their staff.
Separate arrangements would need to be made for the self-employed, but at a stroke this would save people’s jobs, save businesses and put an immediate end to the risk of contagion and help save the economy.
This is similar to the ideas being proposed by the CBI and by the Resolution Foundation.
From Sir Iain Duncan Smith, the former work and pensions secretary
There is something else the government can do, literally today. Universal credit has three basic levers which could all be pulled now enormously to help people who are in work. One, the taper could be lowered dramatically at this stage, which would push the floor right up underneath people in work at the moment, allowing them to fall back on that if government’s cannot deal with them.
Second, you could change the benefit rates allowing the greater expanse of money to flow to them. This could be done today.
The third areas is to look at the waiting time [for benefits] and reduce that almost immediately.
Those three things were always built into the flexibility. They can be done today, they can be delivered within days by the department that already has the ability to do that whilst he gets on with this other facility.
And key workers getting wages + citizens income will be deserved (where key workers is a pretty wide group not just NHS, but supermarkets, train drivers, etc as well).
If Johnson and Sunak will not listen, I suggest that they are replaced as a matter of urgency by @Cyclefree and OJ. As to which one becomes PM and which one Chancellor, I don't mind. The key thing is that the two of them are singing from the same hymn sheet on this and therefore should work well together. Differences on Trans ID matters to be set aside in the National Interest.
Fair to say, we all know they would have done it with weeks to spare.
1 - Suspend all longer term loan repayments. The mortgage payment for April is paused and will take effect after the crisis. Finance payment for April likewise. Loan repayment for April the same way. No interest incurred. The next accounting period for that loan is after the crisis. People and business can, if they have the capacity, continue to pay off their principal - this will help the liquidity and reduce the debt burden that we were lumbered with already.
[credit card debt - short credit - will continue as is; we need contactless payments, anyway]
This will need Government to underwrite all loans. But this is liquidity - not capitalisation. The funds going in will come out automatically as payments resume after the "pause". Without this, we'll have a capitalisation crisis that will make the GFC look like a teeny tiny blip. As it's liquidity, the number involved in the support here is irrelevant - the Government can underwrite it and it will go in and out without affecting the long-term money levels.
2 - Rent is suspended as well in private and public sectors (which is why BTL mortgages are included in the above). Support to be given to Housing Associations where necessary.
3 - A basic income of £600 per month to all adults (taxable - so if you're lucky enough to retain your job, you wonn't end up getting it all). Without accommodation or loan servicing costs, this should be enough to keep people going. Cost about £30bn per month, and yes, we'll have to borrow for this. We don't have the time or bandwidth to spare working out means testing, producing a sixty page form to fill in and administer and argue about, so it's to all. We'll get some of it back in taxes under existing systems; those most in need won't pay tax on it. (The Housing Benefit bill will be less, which will slightly offset this)
4 - All business rates suspended. Of course. Businesses encouraged to furlough workers rather than lay them off; workers will at least get the basic income and not have to worry about housing costs and loan costs.
5 - Businesses that don't have to pay rent, rates, wages, and loan servicing costs have a far far better chance of "pausing" rather than dying. Given that the Government has (correctly) closed down their incomes, it has to also close down their outgoings for the duration.
Is it me, or is all that obvious? Or is it for some reason impossible?
For millions of people who work in hospitality, travel, tourism, retail or a plethora of other jobs we are there NOW.
Been speaking to her, she says there's no way the system is geared to take on hundreds of thousands, if not millions of new claimants.
It will keel over, even if the government lifts the restrictions on things like you have spend 35 hours a week looking for a job.