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COVID-19 bulletin 28: Will the post virus economy collapse or emerge leaner and fitter?

Many people facing the corona virus pandemic are focussing on immediate needs and requirements but some correspondents – and hopefully heads of state – are looking further (shortened version of article on a sister site)

 

A Moseley resident writes: “Once again, the bill will have to be paid. Expect years of austerity to pay for this virus disaster. I’m guessing that, otherwise the currency will be valueless and inflation will run riot. At the moment we’re in 1918 to be followed by 1920 and then 1930 and 1940 ….

COLLAPSE?

A clear US-focussed account was written on March 7th by Australian-born economist, Dr Steve Keen (right). His article – A Modern Jubilee as a Cure to the Financial Ills of the Coronavirus – is summarised here.

He points out that this is the first disease to compare to the Spanish Flu in terms of both transmissibility and virulence. Europe was embroiled in World War I at the outbreak of the Spanish Flu. Its health and population impacts were huge: estimates of the death toll vary between 40 and 100 million in a global population of 1.8 to 1.9 billion.

But its financial effects were mild, disruptions to the war economy for much of the world were relatively small, with guaranteed employment and wages for military personnel, rationing for the general public and other wartime measures. Crucially, private debt was a mere 55% of US GDP when the flu outbreak began. The private sector was relatively robust.

The situation is vastly different today. Our great financial crisis, the “Great Recession” or “Global Financial Crisis”, lies in the recent past, and its primary cause is still with us: private sector debt. 

In addition, we now have “the gig economy” and precarious jobs in industries which are likely are likely to be hard hit by the Coronavirus: health itself, entertainment, restaurants, tourism, education. They could lose their jobs, and be unable to service their debts or pay their rents, or even buy food. Many employers could also be unable to service their debts. Corporations in the USA have levered up during the period of Quantitative Easing, pushing the US corporate debt to GDP ratio to an all-time record. It is also twice the level that applied during the Spanish Flu. Many corporations will find their cash flows dry up and many will find these debt levels crushing.

The production system is also more vulnerable than at the time of the Spanish Flu.

The global economy today relies on long and complicated supply chains, with many goods being produced from components manufactured in dozens of countries and shipped between them on container vessels.

  • If manufacturing in even one place (such as China) comes to a near standstill, production elsewhere will do the same.
  • “Just in Time” manufacturing methods will run out of inputs, even if their factories are still capable of operating.
  • Shipping could be affected if crews refuse to undertake trips that can take weeks with potentially asymptomatic carriers on board, or if crews are quarantined for two weeks prior to departure.
  • Shares are likely to plunge in value. We have already seen a 14% fall in the S&P500 (though followed by a 5% rebound on Monday March 2nd) . . . We are clearly in the exponential phase of the pandemic. It will ultimately taper, but at present the number of cases outside China is doubling every 2-6 days, depending on the country.
  • Banks will also suffer badly. The asset side of their ledgers includes corporate shares: if these fall in value, banks will find their assets plunging, while their liabilities remain constant. A bank cannot: it must have assets that exceed its liabilities, or it is bankrupt.

A credit-driven, private sector monetary system is not capable of handling a systemic crisis like this. If the rules of such a system are enforced, it will make the crisis worse:

  • renters and mortgagors will be evicted, put on the streets, where they are more likely to catch and transmit the virus,
  • personal hygiene and public health will suffer, when one is needed to slow the pandemic, and the other must be functional to support its current victims,
  • stock markets will crash,
  • banks themselves will fail as their shareholdings plunge in value, bringing the payments system to an end
  • and even those unaffected by the crisis will be unable to shop.

OR EMERGE LEANER AND FITTER?

It is, on the other hand, possible for Central Banks and financial regulators, once authorised by their governments, to take actions that prevent the medical crisis from becoming a financial one. Other mechanisms may exist, but these are the obvious ones to prevent a financial pandemic on top of a medical one.

First: make a direct payment now, on a per-capita basis, to all residents via their primary bank accounts (most effectively, their accounts through which they pay taxes).

As Quantitative Easing has shown, this does not have to be financed by asset purchases. It is quite possible for Central Banks to put a notional asset on their balance sheets to finance. This is already done by the Bank of England to back the value of the notes issued by Scottish Banks: a bill known as a Titan with a face value of £100 million balances the value of bank notes issued by Scottish banks. The same could be done by any Central Bank to balance a direct cash transfer to the bank accounts of all residents of its country – see People’s Quantitative Easing (Coppola 2019).

This already has been done in Hong Kong. The payment there is HK$10,000, or roughly US$2,000. It does not need to be financed by the Treasury or by taxation: neither were used by the USA to support its $1 trillion dollars per year Quantitative Easing program. There will be no “debt burden for future generations”.

Secondly: boost share prices by buying shares directly.

Quantitative Easing was intended to boost share prices. Clearly it worked—but there is no guarantee that it would work in this situation Instead, Central Banks should directly buy shares, as they are also quite capable of doing: Japan’s Central Bank has been doing this for several years already. This puts money in the bank accounts of shareholders, while the shares are then owned by the Central Bank. This could prevent a collapse in share prices, which in turn could prevent a collapse in the banking sector—since if shares fall substantially, many banks will find that their assets are worth less than their liabilities, and they would be forced to declare bankruptcy.

Central Banks can also cope with a share market collapse in a way that private banks and financial institutions cannot. Unlike a private bank, a Central Bank can operate with negative equity. If there was still a stock market crash, a Central Bank holding shares would still be able to operate.

Thirdly: suspend standard bankruptcy rules while the crisis exists

Banks and financial institutions in particular are vulnerable to bankruptcy in this crisis. Non-financial companies which are heavily exposed to the pandemic—health companies, airlines and other transport firms, education providers (including many public universities reliant on student fees), restaurants, sporting grounds—could see their revenues plummet, making them unable to service their debts, and therefore liable to bankruptcy.

Corporations exposed to Coronavirus-driven losses of revenues should also be able to receive direct aid from Central Banks as well. This could take the form of the sale of newly issued shares in return for cash—it should not be in the form of debt, which would simply replace one problem with another.

As Professor Keen ends his constructive and reassuring article, the words of John and Andy, from Moseley and Bournville, have been blended to give their views on a post pandemic future: “If we look coolly, perhaps rather brutally, at our situation, a complete generation may be wiped out, but in the worst scenario most humans on the planet are unlikely to die and the younger members least of all. The NHS will be saved millions by not having to treat the elderly and generally infirm. Pensions will be reduced and a younger, leaner, more focused workforce that realises how soft we had become will take up the cudgels to drive the economy onwards. Human life will go on and maybe the lessons learnt from tackling this infection will help in facing the next”.

 

 

 

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The Great Unravelling: Part 2, Coronavirus: A Very British Cull

Read the article here.

Summary

Alan Simpson opens: “The nation is at war. Peacetime production has slumped, foreign travel collapsed, casualties rise. In every part of the country, people anxiously worry about how to avoid the enemy. This time, however, it is germs, not Germans, that we fear!”

What Britain needed was wartime mobilisation for peacetime survival. Instead handwashing and a mêlée of ‘unofficial’ messages have been offered that simply add to public confusion and anxiety.

He sees Boris Johnson’s preference for encouraging individual behaviour change (rather than more interventionist ‘test-and-trace’ and ‘social distancing’ policies) as likely to deliver a slower drift into a much deeper problem.

Most offensive of all is his claim that ‘herd immunity’ is what will save us is offensive, because “throughout history, herd immunity comes only after widespread infection and substantial death rates. Even the benefits are often short lived; with immunity not comprehensively passed on to succeeding generations of the herd”.

Johnson’s policy of turning his back on more interventionist measures, may result in ‘A Very British Cull’; ironically, one getting shut of large numbers of the voters who put him into power.

Simpson’s article predicts – according to the pattern revealed in Italy – that in less than three weeks – assuming the rate of increase remains constant – the total number of cases in Britain will have exceeded 16,000.

The World Health Organisation now says that China’s most effective strategy was the extensive testing, pro-active detection and immediate isolation of patients. This is what rapidly reduced infection rates. By choosing not to adopt vigorous ‘test-and-trace’ policies, Britain has opted not to know precise numbers. Simpson anticipates that by the end of three weeks, the capacity of the NHS to deal with the Coronavirus epidemic will be close to breaking point.

Due to the scale of NHS cuts since 2010 the UK has only 6.6 ‘critical care’ beds/100,000, whereas Italy has 12.5 ‘critical care’ beds/100,000 people. 14,000 EU nationals left the NHS during Britain’s Brexit debacle and there has been an 87% fall in NHS job applications that followed this.

His generation (the older generation) mustn’t miss the chance to face painful home truths. Coronavirus is to the elderly what climate is to the young. If population growth is a problem, it isn’t the kids. It’s those of us living longer. Coronavirus has grasped this in a way that prejudice doesn’t.

Far too often climate campaigners come across indifferent (older) voices saying “It’s population, not climate, you should worry about. So let’s look at the actual numbers. According to the UN, out of today’s global population of 7.6 billion there are about 2 billion children (under 15). By 2100, when the population may rise to 12 billion, the number of children is projected to be … 2 billion.

An economic implosion in 2020 is unavoidable 

No amount of Central Bank interest-rate reductions will avert this. Societies that are afraid to go outside, or share the air they breathe, and have lost faith in the safety nets they once took for granted, are only ever semi-functional. But it is around the silver linings of such a collapse that tomorrow’s New Jerusalem will have to be built.

The silver lining to a dire situation

In the absence of government leadership, whole communities have been quietly stepping up to the plate; providing the leadership the nation lacks. In Wuhan, an impromptu army of young volunteers, transporting food around on empty buses, has delivered the food and medicines that has kept others alive. It is what happens in a war. Dad’s Army, Mum’s Army and (increasingly) Kid’s Armies have stepped in, providing the emergency safety nets their society needs. One way or another, we are all following China’s lead. In the UK, the most visible sign of this came from those volunteering as emergency responders; providing non-medical support services to the NHS.

As self-isolation increases, it appears too in local support networks. We’re part of a neighbourhood ‘internet Group’ that offers shopping and support to anyone self-isolating. Go onto Twitter, WhatsApp or Facebook and you will find these in their thousands, all across the country.

Some reports suggest that up to 3 million UK volunteers are stepping in this space. Increasingly, as older/more vulnerable members self-isolate, it is younger people who underpin these safety nets. Slowly, we are rediscovering what previous generations did in wartime. They called it ‘social solidarity’.

Simpson forecasts that today’s crisis will see carbon emissions tumble, pollution levels plummet, and a generation of younger people emerge as social saviours. Around them a very different Green New Deal must then be written. Tomorrow’s security will require a more circular, cleaner, inclusive economics. It will have to put back to the planet more than it takes out, and turn its back on beliefs that we can just shop our way from one crisis to another. This won’t be before time.

 

 

 

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FFA(NI): climate-destructive food swaps only benefit profiteering corporates

Farmers For Action (Northern Ireland) earlier this month issued a statement about the recent “leaked” emails in the press from Treasury Advisor Dr Tim Leunig, arguing that the UK food sector is not critically important to the economy and that agriculture and fishery production certainly isn’t. This implies that UK farmers aren’t so important and UK agriculture can be the sacrificial lamb in US crunch post Brexit talks.

In their press release (click to read) they point out that the food that UK farmers produce translates into by far the biggest industry in the UK by tonnage and on top of this accounts for 60%+ of all transported goods throughout the UK

Leunig pointed to the example of Singapore, an island city-state that imports almost all of its food, as a model for Britain; he makes no reference to what happened in the Second World War when the UK almost starved as food importing ships were being sunk – and here we are again with unforeseen circumstances of the coronavirus COVID-19.

The UK produces safe quality food to EU high standards with the Minister for the Environment indicating these will continue and backing up the UK farmers as best his brief will allow him, bar the influence of people like Dominic Cummings and Dr Leunig.

The UK has declared a climate change emergency, therefore there is no justification for importing beef or importing dairy products or chicken or any produce in which we are self-sufficient or buy from our nearest neighbours.

William Taylor (FFA) added that this government must be held to account about the carbon footprint caused by importing food products we don’t need from the US and other countries around the world. Instead all the food produced by UK farmers should be used before importing any shortfall from the nearest neighbour. 

The key in all these climate change destructive food swaps is that they benefit profiteering corporate food retailers, corporate food wholesalers, corporate shipping companies and to a lesser extend corporate food processors and not the thousands of farming families or the environment in either food swap country.

In the case of lamb where the UK is self-sufficient, the nonsense of exporting 38% of lamb to France and North Africa only to meet ships coming from Australia and New Zealand loaded with lamb must end!

It is time for Boris Johnson and his government to wake up and realise that climate change is no respecter of majority governments and will only respect change of human activity on a global scale of which we are part = and so far this is not happening.

As climate change tightens its grip, we must not forget all those farming families and others flooded out of their homes and farms across the UK due to the increasing climate change extremes of weather.

FFA conclude by saying that they and all other like-minded farm organisations across these islands pledge from here onward to put an end to the UK government’s propaganda. Let battle commence!

Farmers For Action

56 Cashel Road, Macosquin, Coleraine, N Ireland, BT51 4NU

Tel. 07909744624 Email : taylor.w@btconnect.com

 

PRESS RELEASE 4th March 2020

 

 

 

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Dr Li Wenliang has counterparts in Britain – and millions all over the world

Most readers will have heard of Dr Li Wenliang who worked at a hospital in Wuhan and alerted the authorities to this infectious new form of the coronavirus and was reprimanded by Chinese police last month for spreading “illegal and false” information about a new form of coronavirus. He later died after contracting the coronavirus from a patient.

But whereas exposure to this zoonotic disease was unforeseen, worldwide people are being affected, before birth and during their lives, by legally permitted substances used in many sectors, including agriculture, industry and transport. In Britain, whistle-blowers – medical practitioners and patients – are also silenced by medical, legal and political authorities. Is this done in order to protect a range of wealthy and powerful companies?

Richard Bruce, Len Lawrence and George Wescott are among millions worldwide who have attempted to raise the alarm after suffering serious damage to health from exposure to chemicals in these sectors.

Message received yesterday; “WE ARE THE DR LI WENLIANG[s] of UK”

Len Lawrence was a fit, experienced pilot who had been working for British Aerospace since 1989 when he experienced and recorded his first ‘fume event’  Read and hear more about the drastic steps taken to silence him here. The BBC reports that five of the UK’s largest airlines are now facing legal action by four pilots, and 47 cabin crew members. It is claimed that pilots and cabin crew are still regularly exposed to toxic fumes during flights. The Unite union has Independent expert evidence that the fumes from the oil used to lubricate the jet engines, contain organophosphates and TCP, and that long-term exposure can damage the nervous system and may lead to chronic irreversible health problems in susceptible individuals.

Such people, often sidelined and mislabelled as having psychological problems, will take heart from the Telegraph’s report that, in December, an official report confirmed that British Airways pilots were forced to wear oxygen masks as a plane suffered five “fume events” in seven weeks.

George Wescott suffered severe health problems after dipping 1,500 sheep in July 1988 with an organophosphate dip, a compulsory process ordered by government. By August 1991 he realised he would never recover sufficiently to continue farming, relinquished tenancy of the farm and set up a National Action Group to make sure fellow farmers were aware of the dangers. His interview during a protest outside the Royal Courts of Justice may be heard on video here. In a 2015 parliamentary debate, his MP said that George (right) had suffered for more than 30 years and recommended the Minister to set up a commission to get to the bottom of the issue.

In June 1992 MAFF abandoned its policy of compulsory dipping

Richard Bruce, a farm manager whose health broke down after exposure to Actellic used in grain stores, says very few realise that farmers and grain store operators have for decades been pouring OPs and other poisons (in pesticides and fungicides) into harvested grains and oilseeds. He now has an extensive knowledge on the effects of organophosphates which are used far more widely in agriculture than just sheep dip – see his comprehensive collection of information at The Organophosphate File. Like Len & George, he has met a range of obstacles and unfair dealing whilst attempting to get official recognition of the dangers of using chemicals such as malathion, pirimiphos methyl, chlorpyrifos methyl, some of which were approved long after the dangers were known. 

His verdict: there are none so blind as those who are paid not to see:

“Professionally Induced Nelson’s Eye Syndrome…. They see no evidence – no matter how much there is or even if they published it themselves. All I seek is for the truth to be recognised by those who are trying to hide it in order for the public to understand what has been done to everyone”. He asks:

“Why is it that individuals are prosecuted for deliberately poisoning people but companies who make products that injure and kill thousands worldwide every year, escape blame? Makes no sense at all”.