My thoughts on Twitter this morning all relate to my concern that the government is getting yet another aspect of this crisis very wrong. It's talking about reopening, and the Governor of the Bank of England is even talking about returning to what he sees as normality.
But the truth is that there is a much greater chance of a second wave of coronavirus than there is of any return to normality. And with that second wave would come a significant escalation in the economic impact of this crisis, not least with regard to the scale of the unemployment that we'll face and the consequent knock-on effects.
And yet there is no plan. These were the tweets. They started from the bottom and work up, but the ordering doesn't matter much:
My point is a simple one and is that confidence comes from having a plan. In the absence of people knowing the government has one that they can believe is credible then there is no way that people are going to start spending again, and quite reasonably so.
I should add, that the Opposition is not doing much better.
I guess it's time to write one...
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I’m sure Baldrick Cummings has a cunning plan.
Apparently, your plan would frighten the investors and cause hyperinflation (yesterday’s Telegraph https://archive.is/OCMa3).
The article attempts to justify Andrew Bailey firing a warning shot at Chancellor Sunak with the standard list of falsehoods –
“But if it became the norm, the notion of Bank of England independence wouldn’t be worth the paper it was written on, and investor trust in the value of British assets would quickly collapse. Modern monetary theory deludes itself in thinking of the Bank as a sustainable magic money tree. The Bank cannot keep on financing the deficit forever without dire consequences.
So-called “monetary financing” of government deficits has always been a taboo among central bankers, and with good reason. From Weimar to Zimbabwe and more latterly Venezuela, hyperinflations nearly all have their genesis in an overactive central bank printing press at the beck and call of populist politicians.”
Apparently the bank’s “designated outrider” –
“Andy Haldane, the Bank’s chief economist, is already sounding the alarm” and “refused to vote for the Bank of England’s latest £100bn dollop of quantitative easing.”
So the reason to deny MMT in the UK is fear of investors under a right-wing government. In the US, it was fear of what that the well-known communist Bernie Sanders would do with MMT if elected. The Zimbabwe nonsense is of course common to both.
The article offers no alternative, so basically we are doomed.
Spot on George
But if a Govt prints money to satifice the “needs“ of the population and interest rates are at or around zero so encouraging borrowing, what is to stop inflation? Especially when the preferred tool of rising taxes proves electorally unpopular (which it will) forcing a high taxing govt out of office? What then? Cutbacks and just a return to boom /bust?
I am not saying incidentally inflation is upon us as it clearly isn’t but that can change post virus and we will overcome the virus .
Up to 6 million unemployed will stop inflation
You’d rather they suffer so your fantasy that inflation is looming when it is not seen anywhere is the world in economies like ours right now.can be sustained?
Why?
Richard the chasing of bills have started months ago. British gas is harassing me for so called unpaid bill ie electricity. They said i have not paid, untrue. I have proof via my bank. So what they want is for me to stop paying them by the bank because of the above. I have refused. So they are now demanding i pay up or else.
So where is the the government policy of no disconnection due to “unpaid” bills. I tell you there is none, if you do not pay you get evicted, if you do not pay you get disconnected. Companies like british gas are not supposed to chase people for bills till next month. Fat chance of that they started with me in april.
They keep throwing me off payment plans which i keep to. They do this to up the payment amount. I am on benefits, i cannot work, but they know this. They have removed any way to complain by email, there was a complaint form, on their site. It has now gone, all is there is a phone number and expensive one. Well it is to me i have no money. So no way will i phone them, i have no control of what they say on the phone, no proof and only get stressed out. I have to pay the bedroom tax and council tax out of my benefits.
Yes there will be a second wave, covid 19 has hit where i live, and people have been out mixing. Not me i have stayed away, i have kept to myself. You see this lock down is damn easy for me. I lived a locked down life before covid 19. It was my condition which has led me to a lock down life. This covid 19 era is like playing in the pool for a few weeks.
Still the vultures are coming. The tories have not change their spots and they will open up and ignore the the cries of covid 19. Their supporters think covid 19 is fake, it’s all taken out of proportion. They think nightingale hospitals lack of use is proof, it was all rubbish and just a big waste of “taxpayers money” . Most want to get to work, ignore the virus and if people die so what. What this really means is so long as it is not them or their family.
Yet the vultures are coming and they are big tory ones. I would complain to my mp but i will get no joy he is a new tory.
“From Weimar to Zimbabwe and more latterly Venezuela, hyperinflations nearly all have their genesis in an overactive central bank printing press at the beck and call of populist politicians.”
Empirical evidence would appear to suggest otherwise.
https://evonomics.com/moneysupply/
Indeed
“I am not saying incidentally inflation is upon us as it clearly isn’t but that can change post virus and we will overcome the virus “
Why use 6m as an answer when I said and I repeat .,,,Post virus and moving to an economic position similar to that before the virus( this might be 1,2,3yrs away who knows but we will get there”… But if a Govt prints money to satifice the “needs“ of the population and interest rates are at or around zero so encouraging borrowing, what is to stop inflation? Especially when the preferred tool of rising taxes proves electorally unpopular (which it will) forcing a high taxing govt out of office? What then? Cutbacks and just a return to boom /bust…
This is not meant to provoke btw, it is a genuine question!!!!
I’ve answered
We are going to face mass unemployment for a long time
And very limited lending because people will not be in a position to borrow
There is no chance of inflation
Deflation is the risk
Your assumptions are wrong
It is interesting that Andy Haldane is referred to as supporting Andrew Bailey.
Previously he has been a beacon of good sense.
https://www.theguardian.com/business/2020/may/17/britain-is-at-risk-of-returning-to-80s-levels-of-unemployment
I suspect there is more to this story than meets the eye.
Anyone know more?
That story is more than a month old
That means the time line does not flow
Jeremy Warner apparently thinks, according to his Telegraph article that: …….”…Going into the pandemic, we had both price stability and full employment, ….”
Full employment ? I don’t think so. An effective propaganda narrative, yes. (Apparently) But with millions on insecure often zero-hours contracts and millions in insecure self-employment, making an inadequate income, effective full employment? Absolutely not. So if the BofE goal is to return to that norm we are not going to be in a good place even if it is possible to get there from where we are which seems unlikely.
Precisely