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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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Voting intentions are changing – as more is seen and heard about Boris Johnson

Two days is a long time in pre-election politics

On 28th November Francis Elliott’s triumphalist article in the Times heralded a seat-by-seat analysis based on polling by YouGov for The Times.

But two days later, a BMG poll which questioned 1,663 voters between 27 and 29 November showed that the Conservative lead had ‘narrowed sharply’ (Reuters) – halved when compared with last week’s poll.

Robert Struthers, BMG’s head of polling, said “If this trend continues, this election could be much closer than it looked just a matter of weeks ago.”

Rob Merrick (Independent) points out that the results come at the end of a week when Mr Johnson has faced further criticism on several counts, compounding earlier allegations, including:

Photograph from article about Trump’s visit in PoliticsHome, which set up by former deputy chairman of the Conservative Party Lord Ashcroft 

Robert Struthers said there was growing evidence Labour is “starting to build momentum” ahead of the election on 12 December. 73% of those who backed the party at the 2017 election now planning to do the same on 12 December – up from 67% a week ago.

The change in direction is shown above and BMG’s headline voting intention figures take the Conservative lead from a likely majority into possible hung parliament territory. Will this continue and take the Labour Party into the lead?

 

 

 

 

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August Goff: Birmingham students unite against climate change: 15th March 2019

August, who lives in Moseley, sends a first-hand account of Birmingham students’ march against climate change. 

He writes:

More than five hundred Birmingham students bunked off school today to march against climate change.

All Birmingham-based photographs reproduced with permission: copyright August Goff

Youth Strike 4 Climate coordinated young people from various educational establishments across the city who met up in the city centre.

They marched from Victoria Square, down New Street, through Pigeon Park and back to Victoria Square to protest against the inaction of governments to tackle climate change.

The march was organised by Katie Riley, a Birmingham student. She spoke at the rally, saying:

“Educate the youth of tomorrow and the parliament of today because people who don’t know what climate change is about don’t know how dangerous it is. Some people think the topic is dull and boring because the curriculum makes it like that. So, we need to change how people view climate change in order to get the change we deserve.”

Councillors from local political parties attended, as did Jess Phillips, Labour MP for Yardley.

Similar events have taken place in 100 British towns and other cities including London, Edinburgh, Canterbury, Oxford and Cambridge, calling for urgent action to tackle climate change, cut emissions and switch to renewable energy.

A few hours later a message was received from Irish colleagues, sending a podcast with messages from two 11-year-olds, Eve O’Connor and Beth Malone, who are involved in the schools climate strikes movementThousands turned out in Dublin and demonstrations were held in many towns.

 

 

 

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Time for change: junk the Anglo-Saxon model* in 2018

The FT reports that senior executives at several of the largest US banks have privately told the Trump administration they feared the prospect of a Labour victory if Britain were forced into new elections.

It then referred to a report by analysts at Morgan Stanley arguing that a Corbyn government would mark the “most significant political shift in the UK” since Margaret Thatcher’s election and may represent a “bigger risk than Brexit” to the British economy. It predicted snap elections next year, arguing that the prospect of a return to the polls “is much more scary from an equity perspective than Brexit”.

Jeremy Corbyn gave ‘a clear response’ to Morgan Stanley in a video (left) published on social media reflecting anti-Wall Street rhetoric from some mainstream politicians in the US and Europe, saying: “These are the same speculators and gamblers who crashed our economy in 2008 . . . could anyone refute the headline claim that bankers are indeed glorified gamblers playing with the fate of our nation?”

He warned global banks that operate out of the City of London that he would indeed be a “threat” to their business if he became prime minister.

He singled out Morgan Stanley, the US investment bank, for particular criticism, arguing that James Gorman, its chief executive, was paying himself a salary of millions of pounds as ordinary British workers are “finding it harder to get by”.

Corbyn blamed the “greed” of the big banks and said the financial crisis they caused had led to a “crisis” in the public services: “because the Tories used the aftermath of the financial crisis to push through unnecessary and deeply damaging austerity”.

The FT points out that donors linked to Morgan Stanley had given £350,000 to the Tory party since 2006 and Philip Hammond, the chancellor, had met the bank four times, most recently in April 2017. The bank also had strong ties to New Labour: “Alistair Darling, a Labour chancellor until 2010, has served on the bank’s board since 2015. Jeremy Heywood, head of Britain’s civil service, was a managing director at Morgan Stanley, including as co-head of UK investment banking, before returning to public service in 2007”.

A step forward?

In a December article the FT pointed out that the UK lacks the kind of community banks or Sparkassen that are the bedrock of small business lending in many other countries adding: “When Labour’s John McDonnell, the shadow chancellor, calls for a network of regional banks, he is calling attention to a real issue”. And an FT reader commented, “The single most important ethos change required is this: publish everyone’s tax returns”:

  • In Norway, you can walk into your local library or central council office and see how much tax your boss paid, how much tax your councillor paid, how much tax your politician paid.
  • This means major tax avoidance, complex schemes, major offshoring, etc, is almost impossible, because it combines morality and social morals with ethics and taxation.
  • We need to minimise this offshoring and tax avoidance; but the people in control of the information media flow, plus the politicians, rely on exactly these methods to increase their cash reserves.

But first give hope to many by electing a truly social democratic party.

Is the rainbow suggesting a new party logo?

*the Anglo-Saxon model

 

 

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Seeking food supplies from Turkey and Morocco?  Time for change!

On BBC Radio 4 today it was reported that some supermarkets are limiting sales of fruit and vegetables.

veg-2shortage

A newspaper elaborates: “Morrisons and Tesco have limited the amount of lettuce and broccoli after flooding and snow hit farms in Spain. Shortages of other household favourites – including cauliflower, cucumbers, courgettes, oranges, peppers and tomatoes – are also expected. Prices of some veg has rocketed 40% due to the freak weather. Sainsburys admitted weather has also affected its stocks”.

HortiDaily reports on frost in Europe in detail (one of many pictures below) and the search for supplies from Turkey, Morocco, Tunisia.

A former Greenpeace Economist foresees these and more persistent problems in his latest book, Progressive Protectionism.

Read on: https://foodvitalpublicservice.wordpress.com/2017/02/03/seeking-food-supplies-from-turkey-time-for-change/

 

 

 

It’s good to be able to say “Hats off to DEFRA”!

. . . if they continue to ‘reboot’ farm policy in favour of small family farms

“Not only do small family farms (defined as covering less than 250 acres and requiring the labour of one or two people) employ more people per acre and provide a wider variety of locally produced food than larger farms, but there is increasing evidence that they are less damaging to the environment.”

private-eye-logoThis passage in the latest Private Eye (1429) mentioned research findings published in a new state funded study carried out in the Netherlands and an online search added detail from the FT.

lidwien_smitDr Lidwien Smit, an environmental epidemiologist at Utrecht University, found that the biggest contribution to deaths linked with air pollution in Europe comes from agriculture, as risky to breathe as that in a traffic congested city.

She recommends that intensive farms in particular should be subjected to the same strict pollution rules as other industries. 

In September, the study was presented to the European Respiratory Society’s international congress in London. Professor Stephen Holgate, the society’s science council chair said that the findings underline the need for governments to take tougher action on farm pollution: “It raises a very important issue; there needs to be much better monitoring of intensive farming’s pollution plumes that spread out across the neighbourhood”.

farms-not-factories-tracy-logo

Private Eye reports that DEFRA is to use part of a £16m EU emergency dairy aid fund to help farmers ‘hit’ by very low milk prices to encourage grass-based farming systems.

The NFU, whose ‘lobby’ is often said to be dominated by large farmers that pay the biggest subscriptions) has, however, made ‘counter proposals’.

defra-logoThe farmer who writes for Private Eye, hopes – as we do – that DEFRA will ‘stick to its guns’ and also that all the UK’s regional governments and national assemblies will go on to make discrimination in favour of small-scale family farms central to farm policy in post-Brexit Britain.

First published on another site: https://foodvitalpublicservice.wordpress.com/2016/10/13/hats-off-to-defra-if-they-continue-to-reboot-farm-policy-in-favour-of-small-family-farms/

 

 

 

Austerity 2: Corbyn “spending cuts would not be needed if big companies paid their tax”

hmrc header

Parliament’s own website heads the summary of the Committee of Public Accounts report on Revenue and Customs: “HMRC still failing UK taxpayers”.

Its lamentable performance in simple tasks such as answering the telephone is on record and its failure to collect a reasonable amount of offshore tax evaded was published in November. It spoke of 11,000 job cuts since 2010 & 40,000 since 2004. Read the summary by the chair, MP Meg Hillier, here: http://www.parliament.uk/business/committees/committees-a-z/commons-select/public-accounts-committee/news-parliament-2015/hmrc-performance-report-published-15-16/

“HMRC must do more to ensure all due tax is paid. The public purse is missing out and taxpayers expect and deserve better.

“We are deeply disappointed at the low number of prosecutions by HMRC for tax evasion. We believe it is important for HMRC to send a clear message to those who seek to evade tax that the penalties will be severe and public. It’s also important that the majority who play by the rules, paying their tax on time and in full, see that those who don’t will face the consequences.

“Tax avoidance also remains a serious concern. Too many avoidance schemes run rings around the taxman, operating legally but gaining advantages never intended by Parliament. If tax law is to be improved then HMRC must as a priority provide Parliament with comprehensive details of avoidance. HMRC must also rapidly improve its customer service, previously described by the PAC as abysmal and now even worse – to the extent it could be considered a genuine threat to tax collection.

“It beggars belief that, having made disappointing progress on tax evasion and avoidance, the taxman also seems incapable of running a satisfactory service for people trying to pay their fair share.”

crickhowell 3

The FT reports that people of Crickhowell agree: the town’s traders have submitted tax plans to HMRC, using offshore arrangements favoured by multinationals. They hope that their ‘tax rebellion’ will spread to other towns forcing the Government to tackle how Amazon, for example, paid £11.9million tax last year on £5.3billion of UK sales. Their rationale: High street coffee shop owner Steve said: ‘I have always paid every penny of tax I owe, and I don’t object to that. What I object to is paying my full tax when my big name competitors are doing the damnedest to dodge theirs.’

DEFRA and other government departments, please note this article in The Grocer and resist corporate blandishments

The Grocer, not usually seen as a hotbed of radical protest, reports Monsanto GM  products implicated in ‘shocking’ new cancer study

The Grocer, a market-leading weekly magazine celebrating its 150th anniversary this year, is read by directors of the large multiples to independent retailers, wholesalers and suppliers, as well as growers, food processors, manufacturers, key opinion formers and the national media.

Yesterday its senior reporter, Elinor Zuke, wrote about a peer-reviewed study conducted by a team of researchers at the University of Caen, which has just been published in the scientific journal Food and Chemical Toxicology, though a link to the study is not yet online there.

The research found that rats fed on a diet containing NK603 Roundup resistant GM maize, or given water containing Monsanto’s Roundup at levels permitted in drinking water, over a two-year period, died significantly earlier than rats fed on a standard diet. Even rats exposed to the smallest amounts developed mammary tumours and severe liver and kidney damage as early as four months in males, and seven months for females, compared with 23 and 14 months respectively for a control group.

In 2008, in response to a Greenpeace press release, Monsanto made a statement on safety allegations related to transgenic maize NK603, published on its website.

Dr Michael Antoniou, molecular biologist at King’s College London, and a member of CRIIGEN, the independent scientific council which supported the Caen research, said: “This research shows an extraordinary number of tumours developing earlier and more aggressively – particularly in female animals. I am shocked by the extreme negative health impacts. The rat has long been used as a surrogate for human toxicity. All new pharmaceutical, agricultural and household substances are, prior to their approval, tested on rats. This is as good an indicator as we can expect that the consumption of GM maize and the herbicide Roundup, impacts seriously on human health”.

Roundup is widely available in the UK, and recommended on Gardeners Question Time, but the team found that even the lowest doses of Roundup, which fall well within authorised limits in drinking tap water, were associated with severe health problems.

A consultation led by DEFRA’s  Green Food Project  recommended as recently as 10 July 2012 that GM must be reassessed as a possible solution:

 

As yet, GM maize is not consumed directly by humans in the UK and Europe but is widely used in animal feed without the requirement for GM labelling.

A video link was given to a film – under three minutes long – in which an overview of the situation and research is given in plain language and the affected rats seen live.