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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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Conservative co-chair revelation: Jetset to spend even more time abroad under a Labour government

The Telegraph reports that MP James Cleverly, who is in charge of the Tory election campaign, says that he is aware of individuals, including entrepreneurs and other business figures, some Jewish, who plan to leave the country if Labour were to win the election.

Would that be noticed? Many – like the Telegraph’s owners – already spend much of their time away from Britain.

Surely they could survive relatively unscathed, despite paying taxes in full and ‘coming to an arrangement’ with the currently short-staffed inland revenue service, paying their workers a living wage and bearing the costs of any pollution emitted by their businesses?

Mr Cleveley shows compassion for those whom he says are planning to leave, but appears to lack sympathy for the less fortunate. The Independent reported that, according to Parliament’s register of interests, Cleverly was one of 72 Conservative MPs voting against the amendment who personally derived an income from renting out property. He opposed – and therefore delayed – legislation which would have required private landlords to make their homes “fit for human habitation”.

https://libraenergy.co.uk/homes-fit-human-habitation/

When working with mayor Boris Johnson as Chair of the London Fire and Emergency Planning Authority, he was responsible for the closure of ten fire stations in London, after which an elderly man jumped from a burning building in Camden, following delays in the arrival of fire crews. The Fire Brigades Union had repeatedly warned that a tragic death of this kind would occur after severe cuts to funding of the fire service in London. 

Outnumbered

Under a government led by Jeremy Corbyn, as corporate tax evasion and avoidance on a large scale is addressed releasing funds for education, health and other important services, the 99% on lower incomes will welcome a living wage, a well-staffed fire and health service, homes fit for human habitation, appropriate care for the elderly and disabled and better employment opportunities as manufacturing and services are increasingly in-sourced. 

And these millions have one asset: their vote.

 

 

 

 

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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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Birmingham Council adopts the government’s austerity agenda: asking the low paid to accept even lower wages

In July, Birmingham City Council reneged on an ACAS-mediated, cabinet-approved agreement between the Unite union and Birmingham’s talented Council Leader, John Clancy, which was to end the seven-week refuse collection dispute.

The well-paid BCC chief executive (right) was seeking to downgrade 106 Grade 3 jobs to a Grade 2, which meant that workers would lose £3,500-5,000 from their already low salaries of around £20,000.

And when BCC reneged on the Unite/Clancy deal, they also issued redundancy notices to the Grade 3 workers. These were later banned in the High Court when Mr Justice Fraser spoke at length about the “extraordinary” and “astonishing” state of affairs at Birmingham City Council with “chaos” between senior personnel. Read more about his reflections here.

Council leader Ian Ward (left) told a BBC reporter: “The cost of the (three month) dispute, yes that’s cost in excess of £6m”.

This ‘new’ version of the original deal (details here), described by union insiders as a ‘total climbdown’, was agreed at a special meeting of the BCC cabinet on Friday.

 ITV reports that yesterday Birmingham bin workers voted to accept the council deal.

So a seven week dispute was allowed to go on for three months, regardless of health and safety implications, losing £6m of ratepayers’ money – and the wrong head rolled.

From ‘Our Birmingham‘,  under another title.

 

 

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Broken Britain 6: deprivation, job losses, depression and suicides follow cruel ‘welfare’ legislation

Cuts protest during the last Prime Minister’s Questions session before parliamentary recess. Support given by Labour’s shadow chancellor John McDonnell and Green leaders, Jonathan Bartley and MP Caroline Lucas.

British Medical Association calls for an end to a system harming the most vulnerable in our society

In their evidence to the Fifth Independent Review of the Work Capability Assessment (WCA), the BMA repeated its 2012 call for government to end it “with immediate effect and replace it with a rigorous and safe system that does not cause avoidable harm to the weakest and most vulnerable in our society”.

Research by disabilities campaign group found more than 80 cases of suicide directly linked to billions of pounds in benefit cuts. Many other deaths have been indirectly linked to this regime:

  • In 2014, it was reported that David Clapson, a diabetic, had been found dead in his home. His benefits had been cut, he had no food in his stomach and the fridge that stored his insulin was not working because there was no credit on the electricity card.
  • A senior North London coroner spoke out, highlighting his inquest verdict that ‘Mr A’s’ suicide was triggered by a ‘fit for work’ assessment.
  • In 2010 Coroner Tom Osbourne blamed the death of Stephen Carré on a decision by the Department for Work and Pensions that the Employment and Support Allowance claimant, who was clinically depressed, was fit for work following a work capability assessment.
  • The suicides of Michael O’Sullivan and Julia Kelly, were also blamed on the result of work capability assessments by their respective coroners.

An academic paper, published in the BMJ’s Journal of Epidemiology and Community Health in which examined 149 English council areas, found that nearly 600 suicides in England may be associated with the government’s “fit-for-work” tests. Oxford and Liverpool researchers looked at three years’ data and also found the Work Capability Assessments could be linked to a rise in mental health problems. The BBC reports that the study found the areas with most WCAs showed the sharpest increases.

The Department of Work and Pensions (DWP) refused to reveal their peer reviews of suicides linked to the sanctions

Disability rights campaigners, mental health charities and the families of claimants who killed themselves, or died after cuts to benefits, have argued that 49 DWP secret investigations or “peer reviews” into the deaths of claimants should be published.

In April (2016) a decision was made by the First-tier Information Rights Tribunal that, pending any appeal by the DWP or the Information Commissioner’s Office, the government would have to hand over details of the circumstances of 49 deaths concerning claimants on benefits. The DWP was given five weeks to resolve the matter.

In May, following the successful legal challenge – John Pring v IC & Department of Work & Pensions – the DWP released the peer reviews of these cases but with many key words blacked out (redacted) and a Labour spokesman accused the Government of “rewarding failure” – giving new contracts to Capita and Atos.

The UN Committee on the Rights of Persons with Disabilities finds that UK welfare reforms have led to “grave and systematic violations” of disabled people’s rights. Work and Pensions Secretary Damian Green rejected the UN report’s findings 

Changes to benefits “disproportionately affected” disabled people, the UN Committee on the Rights of Persons with Disabilities (CRPD) found. The investigation was launched after receiving evidence from disability organisations about an “alleged adverse impact” of government reforms on disabled people. UN committee members visited London, Manchester, Birmingham, Cardiff, Edinburgh and Belfast in October 2015 to identify any gaps in human rights protection for disabled people. As part of its inquiry, the CRPD also looked at a range of recent welfare reforms and legislation including the Welfare Reform Act 2012, Care Act 2014, and Welfare Reform and Work Act 2016.

The BBC reported the UN inquiry’s conclusion that changes made to housing benefits and criteria for parts of the Personal Independence Payment, combined with a narrowing of social care criteria and the closure of the Independent Living Fund, “hindered disabled people’s right to live independently and be included in the community”.

2017 update: continuing the cruel cuts to those on low incomes and generous treatment of those already wealthy 

More than 160,000 people initially denied PIP have had this decision overturned since the benefit launched in 2013, according to DWP figures,

ITV News: the Motability charity, which allows disabled people to pay for specially adapted cars, from their benefits, reports that 900 people a week are having cars, scooters and even motorised wheelchairs taken from them – some losing their jobs as a consequence.

Motability also reports that 51,000 people have been taken off the scheme after a reassessment for personal independence payments (PIP) since it was launched in 2013 – 45% of all cases. 

The benefits budget is being repeatedly cut to pay for the ‘bailouts’ following the banking crisis and people are stripped of disability benefits or having them reduced by half. This is causing pressures which can leave them too sick to work, too poor to support themselves and too tired and frightened to appeal against these damaging decisions.

Even in comfortable ‘middle England’ the number of people who find this victimisation shameful and seek radical political change is growing.

 

 

 

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Elite stranglehold on Britain – unbreakable?

As Steve Beauchampé writes in the Birmingham Press and Political Concern, generations of an elite have ruled this nation (with a few intermissions) for as long as anyone can remember, due to a rigged electoral system.

Their dual achievements:

  • comfortable tax arrangements for the few, a political/corporate nexus which ensures highly paid and nominal duties for all in the inner circle
  • vast military expenditure bestowed on the arms industry, as rising numbers of the population survive in relative poverty, wait in hospital corridors, receive a sub-standard education and depend on handouts to eke out their existence.

Direction of travel

Beauchampé:(The) economy is increasingly kept afloat by the economic support of China . . . The modern high-rise residential blocks that have sprung up throughout the capital may give the impression of a modern, flourishing economy, but look closely and you will see that many are all but empty, whilst homelessness and a reliance on subsistence level housing grows . . . “He notes that surveillance is at an historic high with spy cameras, and even microphones installed in many public places -describing the state’s ability to track the population and follow their activities and conversations as ‘frightening’. . .

The elite stranglehold could be broken

OB’s editor agrees with many that electoral reform is a priority for beneficial change – but even under the rigged ‘first past the post’ system, if the weary mass of people (Brenda of Bristol)  saw the true situation they would vote for the candidate with a credible track record who would be most likely to work for the common good.

 

 

 

 

Government cuts for disabled people escalate

The recent by-elections gave cover for the latest government announcement of emergency legislation inflicting further cuts on disabled people – ‘a good day to bury bad news’.

Two tribunals had ruled that the Department for Work and Pensions (DWP) should expand the reach of Personal Independence Payment (PIP) – which helps disabled people fund their living costs.

  • One ruling found that someone who needed support at home to take medication or monitor a health condition like diabetes would score the same on the benefits criteria as people who needed help with a demanding procedure such as kidney dialysis.
  • A second ruling said people who struggled to travel independently because of conditions such as anxiety scored the same as someone who was, for example, blind.

Ministers then swiftly revised the law to deny the increased benefit payments to more than 150,000 people.

super-rich-bailout

A Lib Dem work and pensions spokeswoman said it was outrageous that the government was using the ruling to make matters worse for disabled people: “What makes things even worse is that they have sneaked this announcement out under the cover of [Thursday’s] by-elections.”

From April, it is reported that new claimants will see a reduction of £29.05 in their entitlement, which will fall to £73.10 a week. This follows on from the cuts that the DWP tried to implement last year, which resulted in Iain Duncan Smith’s resignation.

Liz Sayce from Disability Rights UK said: “We’re not aware of one single disability employment or benefits expert who thinks this particular cut will be an incentive for disabled people to get a job.”

Unfortunately this logic, and a host of scathing comments seen in the Metro won’t pierce the thick skins of affluent legislators and further deprivation will hit the least fortunate in many sectors.

 

 

 

This week’s PMQs: “quite possibly the day when Tories started taking Jeremy Corbyn seriously”

pmq cameron osborne

As Glasgow’s Daily Record put it: “Cameron had no good answers and looked like a PM finally being held to account for the all damage his policies are doing. It really was an absolutely terrible day at the office for David Cameron. And quite possibly the day when Tories started taking Jeremy Corbyn seriously”.

As even the right-wing press salutes Jeremy Corbyn’s questions in Wednesday’s PMQs, two of the Telegraph’s journalists – hopefully their worst – pounce.

  • One is Dan Hodges, who describes himself as a ‘tribal neo-Blairite’.

dan hodgesDan has been a parliamentary researcher, a Labour Party official, GMB official, and as director of communications for Transport for London under Ken Livingstone. He left the party in 2013 after the government lost a crucial vote in the House of Commons which was designed to pave the way for a military intervention in Syria. Nice guy.

He writes: “The Lords are in open revolt. Caesar has been brought low. Or George Osborne, who has a haircut remarkably similar to Caesar’s, has been brought low. The barbarians are at the gates. Jeremy Corbyn has finally had a decent PMQs, using the tax credits issue to back David Cameron into a corner”.

He later refers to “Jeremy Corbyn’s besting of David Cameron at PMQs”

Reading around one gathers his attempted ‘downing’ of Osborne and Cameron is due to his support for Boris Johnson, first shown when he voted for him in the London Mayoral elections.

  • The other is Angela Epstein, a columnist for the Jewish Chronicle and some right-wing British publications

angela epsteinUnder the title, ‘Jeremy Corbyn is too thick to be Prime Minister’, she focusses on his exam results and lack of what she calls ‘natural talent’. It appears that she is a person whose disapproval amounts to an accolade. Read this devastating analysis of her mindset by Kate Smurthwaite, comedian.

Attacks by such people only highlight Corbyn’s decency and the popular welcome for the Labour Party’s policies for building a fairer society and redeeming Britain’s besmirched international reputation.

Compare Jeremy Corbyn’s record with that of the many ‘highly educated’ psychopaths in and out of power. They have successfully connived at the deaths and destruction in so many countries of late – whilst increasing their fortunes by their alliance with subsidised arms traders, multinationals who have taken over most of Britain’s energy, health, water, financial, communications and transport services and those who periodically attempt to make the struggling taxpayer accept mass medication (fluoride, statins, the polypill) GM technology, nuclear power stations, polluting incinerators and fracking – totally disregarding the welfare of the 99%.