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Other than all of that, I’m feeling optimistic.
I'm not sure the general population have really understood the enormity of the economic effects of this. I reckon most people seriously think it's all going be back to normal in a few months time. They'll come off furlough and go back to work and it'll all be over. Total fantasy if you ask me. We need to start planning for a post-covid economy with millions of fewer jobs, less work and less consumerism. If we stick to the old rules then full on economic collapse and mass poverty beckons.
One of the few amusing things about this situation is that you can almost see the panic in the eyes of people like Ian Duncan Smith as they realise that people are getting quite used to this slower pace of life, the erosion of the work ethic, and the fact that they don't need to spend as much money on shite as they did before. It's like the victorian factory owners have suddenly realised that if the serfs down tools, they don't make any money.
I heard a (month ago) that the thinking then at the Nudge Unit was a Keynesia/TVA-type spend out of a crisis. The thinking may well have changed and I don't believe for one moment that any policy won't be designed to help what Thatcher called 'the wealth creators'. When this started the first word in Boris's mouth was 'business'. The BoE has been printing money since 2009 and has avoided inflation through pay freezes at eg the NHS but not for the top 1%. An ex-flatmate who's now a director of a merchant bank has spent years getting cheap money and lending it out dear, the banking crisis helped him make 10s of £ms whilst most got austerity. Nothing at the moment suggests that the future will be any different let alone better, the vultures are circling and the lions are being led by posh donkeys.
people are getting quite used to this slower pace of life, the erosion of the work ethic, and the fact that they don’t need to spend as much money on shite as they did before
Very much so, the question though is are they simply enjoying a holiday from that life or are they changed permanently. We aren't going to know that for a long time. It's a nice idea and appeals to me but we do have to find a way to move towards that without huge problems.
Amazing how the UK is leading the world in all the wrong metrics. The OECD is based in Paris though so no doubt the idiots will dismiss this as anti-UK propaganda.
See also how Sweden not going into “Lockdown” is effecting their economy, as neighbours open up trade and borders with each other, but have to leave Sweden out of that economic liberation because they haven’t controlled the virus.
Cancelling credit card debt is a silly idea.
People have spent the money out of their own choice.
Where there is merit is reducing the amount max credit card rate to, let's say, 7%, and rebating the interest paid in excess of that for them last 5 years.
This would mean that banks would be far less willing to pay lend on "plastic" than previously before and would be take more stock of credit ratings and security. This would be a good thing.
Canceling the whole debt? No, and it's not the "fairness" argument, I'm all for cancelling student debt, it's about personal responsibility for your purchases. Where there is an issue is that people don't understand the interest rates and gave been gouged by banks.
I had quite a lot on my CC ~15 years ago, all through my own fault of buying stuff I couldn't afford. Very little would of been essential (eg. car repairs etc).
I slowly but surely paid it all off. Now it gets cleared each month if it's been used. I don't see why people life the old me should be rewarded for having no sense with money.
So, the furlough scheme is slowly being withdrawn and yesterday was the last day companies had to give notice of redundancy if they're not keeping jobs after the end of July.
Some big numbers in the news today, and it's not even 9am yet:
Heathrow cutting 25,000 jobs
Centrica cutting 5,000 jobs
guitar - only the start.
Add in debenhams, bentley, bp, monsoon/accessorize, ovo energy, the restaurant group (frankie & benny's) in the past few days.
Next Monday will be interesting - how many/few high street shops will remain closed; some will open at a later date, some will never re-open.
Yes, some elements of the media railing against the OECD because they're based in Europe and it's some sort of conspiracy. Our exceptionalism knows no bounds as when we're hopefully just about to turn the corner on this fiasco, we'll self-inflict a no deal Brexit on the economy.
The reality is that our economy is too-exposed to sectors like retail and hospitality and an over-dependence on cheap, low-skilled labour (immigrants or not). There are a few things we do well as a nation like Pharma, high-tech engineering, financial services but these simply aren't enough to keep us out the do-do.
It's also worth noting that we've had decades of Governments who have failed to invest in our infrastructure in preference of tax cuts funded by privatisation of public assets. The pandemic has highlighted a lack of resilience in a lot of our critical infrastructure, particularly the health service and social care.
dove biker - agree with all of that; would add that we will not have a strong and sustainable economy without volume manufacturing.
Infrastructure is likely to be the only construction sector with growth prospects; housing - no, commercial development - no.
My gloomy forecasts and glass half empty attitude to the economy appear to be well-founded.
Share prices are divorced from reality with an ever-increasing risk of a major correction.
guitar – only the start.
Add in debenhams, bentley, bp, monsoon/accessorize, ovo energy, the restaurant group (frankie & benny’s) in the past few days.
Next Monday will be interesting – how many/few high street shops will remain closed; some will open at a later date, some will never re-open.
At the start of all this it was a pretty fair bet our only real chance of a quick rebound was a 3 month lock down and back to business as normal.
We're 2 week away from that now, and there seems very little chance we'll be back to normal by then. The retail and tourism industry is going to take a battering - clothing retailers are going to dump a whole seasons worth of clothes into the bargain bin for pennies, Restaurants that were barely viable with X number of customers per Y floor space are not going to be worth opening with half that. The rest seem to be taking the opportunity to clean house.
It would seem an ideal time to announce to the public that the world has changed and the price of sovereignty is now too high and we need to try to cancel Brexit, but it won't happen. We're likely to stumble dazed and confused out of the hell of Covid and take Brexit square in the face, or maybe we'll do both at the same time, that'll be fun.
I can't imagine for a moment how Boris plans to win the 2024 election, he must at least think it's possible. The early Covid goodwill is long gone, and the facts stark. They were told to lock down 2 weeks earlier, they were begged to do so, but they didn't. It cost the lives of 25k people and extended lock-down by at least 6 weeks which is going to cost hundreds of thousands of jobs.
Cancelling credit card debt is a silly idea.
If you read the thread you'd see the debate isn't really about credit cards, it's about avoiding deflation via a massive debt write-off. It seems though that's not going to happen. The govt have all but given up an any plans to support the economy beyond what they have already done, and the result will be inevitable I think. If we continue thinking within the narrow parameters of neoliberal economics then a depression or even full collapse is on the cards. We're beginning to see the early stages of that in the job losses which are now accelerating. The hospitality industry alone employs something like 3.5M people, and most of those jobs only exist due to the furlough scheme which is being scaled down. Mass unemployment is going to cause a tsunami of bad debt, property and asset prices will collapse, and then the banks will need bailing out again. We can either think of a new way to run the economy, or go down with the ship.
Going back to one of my first economics lectures one of the issues I see is that "injections" into the economy are being rapidly transformed into "withdrawals" because money isn't cycling as fast as it normally would in these Corona times.
Some countries are reporting record levels of savings (a withdrawal from the circular flow of income) which the banks are making little attempt to reinject into the economy. Indeed they're doing exactly the opposite by putting more stringent conditions on borrowing and raising interest rates. The ecomomy is being stangled because however much money central banks print it spends very little time working in the economy before sitting as a stagnant number on a bank statement somewhere.
Whole sections of the economy are Corona immune or even benefitting, but they're sections that are low paid with almost zero withdrawals in normal times, and even if the people in those sectors wished to benefit from their security and low prices (cars, some types of housing) they can't because the banks won't lend. So even in those sectors people just save.
So whatever solutions you propose, they need to attack the withdrawals, the big ones, the fat cats.
I wonder what's going to happen in the US. They are lifting restrictions despite still rising cases in some areas. So either they ignore it to carry on with the economy or they have a severe lockdown when it gets out of hand in a few months, which could last ages.
In the first case, that could a) be horrific and b) even the deaths alone could significantly dampen the economy. In the second, that could really damage the US economy if other countries start trading with each other and they are still trying to suppress the disease. But the potential for serious civil unrest in that case is significant. US could be in big trouble.
And if the US slides, it could seriously affect the rest of the world too.
Where there is merit is reducing the amount max credit card rate to, let’s say, 7%, and rebating the interest paid in excess of that for them last 5 years.
there is £70bn credit card debt in the uk. assuming the average interest rate on that is 20%, you're suggesting a £45bn refund to consumers. Where would that kind of money come from?
banks take a very good view of credit ratings when lending on credit cards - the impact to them is just the same as when someone defaults on a loan or CC. At the moment, most banks are taking cuts to profits to plug the gap that these defaulting consumers will have on their bottom line, this will probably continue for the next few years. Capping interest rates would simply limit credit accessibility to consumers, and essentially end the use of credit cards in this country (as they stop being cost effective to issue). That might be your aim, but I quite like having protection when I buy online
Where there is merit is reducing the amount max credit card rate to, let’s say, 7%, and rebating the interest paid in excess of that for them last 5 years.
I'd look at the example of where the FCA investigated Overdrafts and told the banks to implement a better model.
Broadly everyones charging 40% now.
Out of those £70bn credit card balances, what % was used for essentials?
I'd guess its single digit figures?
Why would Centrica be shedding jobs. Surely we're using the same amount of utilities?
Its because they need to restructure having lost market share.
Using Covid is a useful excuse to shed jobs and divert attention elsewhere.
The economy bouncing back is all to do with public confidence.
If someone has £100 in there pocket and is confident that their job is secure they'll go out and spend it. If theres insecurity they may keep it in their pocket and thats where a recession starts.
I wonder what’s going to happen in the US. They are lifting restrictions despite still rising cases in some areas. So either they ignore it to carry on with the economy or they have a severe lockdown when it gets out of hand in a few months, which could last ages.
It's a bit of a mess for sure.
The Trump in charge, who acts like a Dictator and has roughly the intelligence of a used tissue, tackling Covid with one hand and re-election with the other.
Conventional thinking at the start of the Covid crisis was you either locked down and took the economic hit until it passed, or you ploughed through and accepted the (much) higher death rate.
He was always going to Plough through, even Democrats have a fundamental dislike of paying people when they're not working and all their hyperbole about how they're the only 'free' country on Earth really comes down to Individual freedom, which is a hell of a double edged sword. The centre ground in the US seems to be against forced lock-downs, they would prefer to learn the facts about the virus, buy their own PPE and go back to work until it passes, or they achieve herd immunity.
Even in the hardest hit, most left-leaning, liberal NYC, many people simply ignored lock down (or Shelter in place as they call it) to go to work, or pick up casual work because the only stimulus they got was a one-off $1200 payout.
He's doesn't really care about health issues because he knows he could kill half a million Americans and blame the Chinese for it and Republicans would re-elect him, I guess he's planning on all the 21M people who claimed unemployment in April returning to work soon, remarkably even with their infection rate so high, 10% of them did in May.
It has more to do with business confidence than consumer confidence.
When businesses reduce spending the knock on is faster and goes further than the consumer. And as Molgrips hints, it's international not local.
Take Airbus. Airlines aren't flying and won't be flying as many routes post Covid (a condition of the rescue package for Air France/KLM). Airlines cancel options. Airbus needs less components. Subcontractors need less staff and some look like going bankrupt. All the subcontractors suppliers lose orders, the workers are laid off or on short-time working.
It's a vicious circle that has continent wide repercussions, and beyond. Airbus buys lots of bits in Asia.
Whilst I'm delighted to see less planes flying we can't expect the same level of wealth, employment and economic activity without them.
It has more to do with business confidence than consumer confidence.
Agreed, for example I know of Business' that have taken grants, and multiple covid loans interest free, but they're not planning to use that money to keep people employed that they don't need, it's either for redundancy payments or to go on their bottom line.
So whatever solutions you propose, they need to attack the withdrawals, the big ones, the fat cats.
Simple solution to that. Negative interest rates and wealth taxes. Encourage people and businesses to spend their money rather than saving it.
Business travel will be way low and stay way low for a long time. If you decide to go on holiday that's one thing, but your employer has a duty of care, so will be much more cautious making decisions on your behalf. And if they offer you the choice most people being reluctant business travellers will choose the stay at home option. And people will become used to staying at home, so companies will want to save money by not travelling and for things like services clients won't see the need to pay for consultants expenses as their belts will also be tight.
Good for the environment (and us) but I wouldn't want to be an airline right now.
Even in the hardest hit, most left-leaning, liberal NYC, many people simply ignored lock down (or Shelter in place as they call it) to go to work, or pick up casual work because the only stimulus they got was a one-off $1200 payout.
NYC didn't have shelter in place, they had a stay home order (there's a difference)
i was there mid march, just as the measures were coming in, the place was like a ghost town pre stay home order, i flew home on Monday 16th, where were the people going to pick up casual work, iirc everything closed Monday night as the "irish" pub we were in on the saturday were saying they couldn't even open for st patricks day on the tuesday
NYC didn’t have shelter in place, they had a stay home order (there’s a difference)
i was there mid march, just as the measures were coming in, the place was like a ghost town pre stay home order, i flew home on Monday 16th, where were the people going to pick up casual work, iirc everything closed Monday night as the “irish” pub we were in on the saturday were saying they couldn’t even open for st patricks day on the tuesday
My SIL lives there, by her account "Stay Home" effectively lasted a few weeks or so before people started to get let go and started to seek work elsewhere. In her case she's a Gymnastics coach, she took to doing 1-2-1 sessions in homes and a bit of PT work in parks, as well as the odd Zoom sessions with her usual kids. Others found work where they could. They're very hot on social distancing and PPE etc, you wouldn't dare work into a shop in the city without a mask on, but it's work or starve in the US for the most part.
But the potential for serious civil unrest in that case is significant. US could be in big trouble.
We've already seen how that could pan out. The BLM riots weren't just about one man and a racist cop, they were also about how the black population have effectively been left to the mercy of coronavirus. There are millions in the US with nothing left to lose, and when that anger becomes more of a class issue than race, it'll explode. The only hope is Trump being kicked out in November, and I reckon that's the only thing preventing more widespread civil unrest. If somehow he's re-elected then I shudder to think what will happen.
but it’s work or starve in the US for the most part.
very easy (ie cheap) over there for firing and hiring.
Over here, spaffing out months worth of salary per employee in exchange for no work just to get rid of them is going to look very stupid when they need to re-hire or replace those people - although cash poor companies will have no choice.
whats the likely longer outcome for us versus the rest of europe and the us when we get going again?
our furlough is one of, if not the, most generous in the world is it not?
(compared to our unemployment benefit which is probably a shambles compared with some of europe.)
slim hope here that this is what saves us...
Like 9/11 and the finance crash, Coronavirus will be this decades pivotal event and lots of businesses will be taking serious stock of the situation and re-assessing themselves as a consequence.
The fact we have a no-deal Brexit hard on it's heels means UK businesses are going to be seriously disadvantaged / cash-flow impacts as many are going to need to put 3 months of stocks in place for January - I expect many businesses owners are simply going to pull the plug as they're already bearing 3 months of lost business and can't afford to finance the same again.
I also expect many speculators will be holding huge short positions against many British companies in order to profit from their misery.
I suspect a lot of traders will have covered their Corona and even Brexit short positions by now. Part of the post Corona peak rally could be short covering. You take a short position when you anticipate a fall and cover it ASAP when the fall happens. Long terms shorting is just too risky.
I also expect many speculators will be holding huge short positions against many British companies in order to profit from their misery.
Really not sure why some on here talk about the US as if we're that much different. In many respects we're worse. We won't bounce back as fast due to the cost of hiring and firing and of course brexit. The only thing preventing chaos here is the furlough scheme, and they're getting rid of that. Boris could be gone by christmas if and when the second wave hits.
When you look towards the next 12 months economically, its bloody scary
Whats increasingly obvious is that its now full steam ahead with a no deal Brexit, and damn the consequences. They're insane! They actually subscribe to the Cummings philosophy of destroying everything in order to rebuild it to your own advantage. And given that a no-deal was always going to be financially catastrophic, to pursue it on the back of the huge-scale redundencies that are presently in the post is absolute madness.
This time next year the banking crisis will be looking like a bit of a hicup in comparison. And these lot don't actually give a toss! Everything must be sacrificed on the altar of their ideological zealotry
How many hedgies are shorting the UK market? I cannot imagine Soros or Odey passing up the chance to make mega-bucks.
As for companies getting rid of people and then having to re-hire or replace them; if only.
For those companies with a viable future this has been a perfect opportunity to review size of workforce and remove the surplus. A lot of companies have become bloated over the past few years; now they are reviewing operations and structure - and culling.
Take any sector/industry and map the supply chain as far back as you can to see how far the impacts of an economic downturn will spread.
Does anybody think that this time next year we won't be looking at late-80's levels of unemployment?
I think its a dead cert. It might actually be even worse. And, of course, its exactly the same places who got clobbered last time that are about to cop it again
Binners - I think what's coming will make late-80's look like the good old days.
Does anybody think that this time next year we won’t be looking at late-80’s levels of unemployment?
I reckon that's a best case scenario! If a second wave hits and needs a second lockdown, and I don't see how it won't, we'll be looking at depression level unemployment of 20-30%, mass bankruptcies and foreclosures, and potential collapse of the banking system and with it supply chains in every industry, including food production and distribution. And that's before thinking about brexit.
Binners – I think what’s coming will make late-80’s look like the good old days.
I think you're right and I think this lot knows, full well, what's coming and they simply don't care. Just like they didn't care back then. For these disaster capitalists, this is an 'opportunity' to remodel our society completely and tear everything up. Its why they're hell-bent on a No Deal Brexit even on top of Covid
I think the end results will be the same as last time as well too...
How many hedgies are shorting the UK market?
Lots I expect, weak £ against foreign currencies, UK uncertainty means suppressed share prices and many companies succeptible to leveraged buy outs as debt is cheap. Poor employee protection means it's easy for a foreign take-over, strip all the assets / IP, stick the debt on the balance sheet, declare insolvency, dump the employees, leave pension liabilities to the UK taxpayer and move most of it overseas.
Interesting that Steve Mnuchin has said the US cannot afford to shut the economy again.
Given the rising R number in some states that's quite some statement to make and we're still to see the effects of protestors in close proximity to each other.
So that's the US marker - wealth before health.
I wonder how much/little of the Fed's support has worked it's way through to businesses.
binners
SubscriberDoes anybody think that this time next year we won’t be looking at late-80’s levels of unemployment?
I think its a dead cert. It might actually be even worse. And, of course, its exactly the same places who got clobbered last time that are about to cop it again
The only glimmer of hope I can really see is that so many big economies are effected, and so many of the countries that have done well are relatively small. So it will depend who is making the decisions and on what basis- and of course, it's right to be cynical about that. But there's no specific reason why we have to tackle this on the usual self-defeating negative-sum game, using the economics that we already know don't work to try and fix everything. Just maybe, enough of the world and enough of the major players and enough of the voters and enough of the employees and enough of the employers won't be served by that.
I think it's more likely that There Is No Alternative gets rolled out again and people get convinced fixing things so that money can continue to go upwards and get pulled out of the economy in order to make everyone poorer is the right way forward. Maybe it'll come down to how much media and tribalism holds sway, vs how much of america and europe gets set on fire.
Very much back to the 80's and then some with regards unemployment and resulting civil unrest. Further up the thread I said how things felt like the 70's and whilst we're still under the spell of furlough that remains the case.
Once furlough stops well be crashing into an 80's type situation with bells on. The major growth will be in the black economy, those anticipating a cashless economy are in for a bit of a shock.
The major growth will be in the black economy, those anticipating a cashless economy are in for a bit of a shock.
what exactly is in this black economy?
-tax free items that are supposed to be taxed sold for low cost like cigarettes
-items in short supply resold at higher cost to those who can afford it - potentially luxury foodstuffs
-low quality fake copies of expensive items bulk imported from the far east - clothing, electronics
No, paying for services in cash, in part or in total. The infamous cash deal. It happens everywhere there is high unemployment - see Spain with it's x% unemployment and lots of people scraping by with black work of one kind or another.
Indeed. What we’ll see is the opposite of what we’ve seen recently. Services will be paid for in notes with nothing going through the books and no tax paid.
Back to the 80’s in every way
wealth before health
If only it was that simple.
Nice - I have the skills and equipment to make high quality "moonshine"*
2020 could be my year!
*untaxed single malt whisky
stumpy - in essence, that's exactly what it is; in the US wealth will always take precedence over health.
johnson is being pushed to do the same but, having tied himself to '...following the science', there is some control over what he and his clown circus do.