Today we had a parting shot from Andy Haldane on leaving the Bank of England, in. which he claimed inflation will be 4% by Christmas, unleashed as the economy gets over Covid.
I seriously wonder about the ability of people like Haldane to analyse data. He has long had a theory that all the spending deferred by Covid will be unleashed when the pandemic is over and that inflation will result, and the only credit you can give him is that he has stuck to the theory, even though there is no evidence to support it.
Post 2008 it took eight years for consumers to start spending at pre-crash levels in proportion to income. This crisis was worse, threatened more jobs, created more unemployment (albeit still disguised, but furlough is ending now) and there was no Brexit impact to add the air of general economic unease. There are literally no reasons why anyone barring the quite wealthy should go on spending bonanzas now that will wipe out their Covid savings.
As I noted this morning, there are already signs that the spending boom is fading.
And then there is Covid itself. I know the charlatans in government like to pretend this is all over, but it is not. There were 26,000 new cases today. And that is not all. Click on the links in this live tweet to see more data. Hospitalisations and ICU bed cases are rising too.
Cases & hospital charts for 30 June for England.
*The hospitalization growth rate is starting to increase.*
Cases +67%
Hospitalizations +11%
Patients in ICU beds increasing pic.twitter.com/1q2jb0stFD— Dr Duncan Robertson (@Dr_D_Robertson) June 30, 2021
The claim that the link with death is over may also not be true: there may simply be (as was always obviously going to be true) a lag. I am not saying that things will be as in January because no one knows. What is glaringly obviously true is that things are going to get much worse as yet.
I just have to look at the data and as an economist I think three things.
First, and glaringly obviously, this pandemic is not over yet. The risks of further waves because our vaccination programme is so poor is high. I say that because too few are vaccinated, children are not, and as yet none of the first batches of elderly people are scheduled for top-ups, and their immune systems may now be very vulnerable again, most especially if they had Pfizer. If anything, risks are now rising from the failure of the vaccination programme rather than falling, as is widely claimed.
Second, in that case, and because a majority of people are not stupid (albeit, some are) self-isolation amongst the population is growing to be increasing rapidly soon as people react to the very obvious risks that Covid creates.
Thirds that means that the chance of a boom is very low this year.
I accept that does not mean there will be no inflation: chaos from Brexit, worldwide increases in food prices and supply chain disruption may create some inflation. But none of those things can be corrected through any of the policy instruments available to the Bank of England, which also marks out how poor the analysis fro Haldane is, when after 30 years at the Bank he does not know that. These things are solved by either political responses, or by accepting that they just have to work their way through the system, with appropriate protection for the most vulnerable in society as to the consequences being provided.
But what we have not got is a scenario remotely close to a boom. The risk we face is of a major collapse in the private sector, and especially amongst smaller companies. That's the result of spending not growing, effective lockdowns continuing, and government support being withdrawn as debt burdens have to be repaid. That's a massive triple whammy. But that's not anywhere on the horizon of the Treasury or the likes of Haldane, who are all deeply comfortable in their own little economic bubbles where they are not exposed to the real world of business, in which none of them has ever been engaged.
I am worried. And the more I see the more worried I am.
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They are beginning to tack towards telling the public the truth which they have inflicted upon us.
“ Marr on catching Covid after being double vaccinated”
https://www.bbc.co.uk/news/health-57640550
Not on their MSM channels yet though.
And he says he caught it in Cornwall at G7. Which the government he shills for denied.
Nobody has said that vaccines offer 100% protection against Covid, so there is still a risk after vaccination.
It is however less and if infected, less likely to result in death or hospitalisation
In yesterday’s Guardian, Philip Inman, economics editor for the Observer, wrote a histrionic warning of the impending inflation disaster, citing on particular our 2.2 trillion debt and the cost of surging interest rates on servicing it. In a short tweet, I asked him whether his failure to mention 800 million QE, which is not a debt and does not have to be repaid was ignorance or deception. There was insufficient space to include your arguments, Richard, about long term fixed interest on that part of debt which is interest bearing, the inclusion of NSI deposits etc.. My rhetorical point is significant, of course.
This orchestrated ‘expert’ panic about inflation is indeed ORCHESTRATED. I think this is profoundly ideological in character. There is a perceived imperative to reassert established monetarist theory and shrink the role of the state back to its proper place, leaving market mayhem to do its job. The so-called debt crisis needs ratcheting up to hysteria levels as the prelude to enhanced austerity that, in reality, has never slackened for local authorities, the justice system, education and the NHS. Inman, economics editor for an allegedly liberal newspaper, is probably a good measure of the extent of the campaign, better perhaps than a leading figure like Haldane.
I still don’t really know whether they write this drivel from ignorance or with the intention to deceive. In Haldane’s case, it’s probably the latter, but one should not underestimate the level of utter ignorance of economists educated for decades on a diet of sterile formulae unrelated to reality. However, the arguments are just as dangerous, regardless of motivation.
I get this at work from some of my senior management people – they don’t realise that they are better equipped financially to weather Covid (which pisses them off because of the precautions) and BREXIT (which many of them advocated) than their workers many of whom have lost thousands of pounds since 2010.
They live in their own world and it becomes increasingly hard to take them seriously. And yet, they are in charge!
And why – well because of Neo-liberalism – it doesn’t matter how thick or inadequate you are – as long as you are a ‘believer’ and you do not question the status quo.
[…] By Richard Murphy, a chartered accountant and a political economist. He has been described by the Guardian newspaper as an “anti-poverty campaigner and tax expert”. He is Professor of Practice in International Political Economy at City University, London and Director of Tax Research UK. He is a non-executive director of Cambridge Econometrics. He is a member of the Progressive Economy Forum. Originally published at Tax Research UK […]
No wonder you are getting things so wrong, if you are using what happened post 2008 (which was an entirely different type of crisis to the current one) to extrapolate what will happen post COVID!
I make it quite clear that this is not true: I provide reasons as to why it is different and the trends from 2008 are even more valid for that reason now
How might one respond to Nouriel Roubini’s article today, ‘Conditions are ripe for repeat of 1970s stagflation and 2008 debt crisis’?
I think my reason fir disagreeing is already clear
The situations are very different
And there is no union power to drive stagflation, so incredibly unlikely