The main coronavirus thread has become amateur epidemiology and data privacy argument. Here’s a new one for the non-medical impacts.

x-posted from the other thread. What are the chances of having our credit cards wiped out?

So those of us who are careful with money and run no debt loose out? Great.

National debt maybe, personal debt, no way is that fair.

Woohoo. Smash that credit card quick.

Zero but you could get a cheap loan to pay it off sooner as the rate is so low. Like Mat says it’s personal debt so suck it up.

National debt maybe, personal debt, no way is that fair.

So we allow the economy to collapse to preseve fairness? it’s actually a tried and tested policy to punish savers and reward spenders in times of economic distress.

Like Mat says it’s personal debt so suck it up.

Obviously it wouldn’t be as direct as simply writing off credit cards, but the point of that article is that debt deflation caused the great depression. If we’re to avoid another one in the wake of covid-19 it’s going to require private debts to be written off in some form. As it says in the article, the more people pay off their debt, the more they end up owing due to the deflationary downward spiral.

What are the chances of having our credit cards wiped out?

Almost none I’d guess.

As the first response shows people who don’t use them would be unfairly penalised, the UK has a history of unfairly penalising certain groups, but we generally put ‘Homeowners’ on a pedestal and berate people who use Credit Cards, I don’t see it being politically compatible.

They’ve extended the ho penalty 3 month holiday to pretty much every form of debt possible now. I guess that’ll be the solution.

but we generally put ‘Homeowners’ on a pedestal and berate people who use Credit Cards

I think homeowners are the last group of people who should be complaining about fairness, given that the vast majority of them have benefitted from a substantial free windfall.  Even then though, most ‘homeowners’ are nothing of the sort, they’re debtors, and in a deflationary economy they will suffer the most from their debt increasing in value and asset-price deflation.

Another good read.

Ouch…

“The explosion of the coronavirus economic collapse into that already weak monetary environment almost certainly means that deflation is already under way, even if the overall consumer price index has not yet turned negative. Commodity prices are falling. At the time of this writing, it is still physically possible to fly from Washington, D.C., to San Francisco, and you can get a round-trip ticket for a little over $200.

The fall in oil prices has been even more spectacular: On April 20, oil futures for May deliveries crashed to negative $37.63 per barrel. Most importantly, at least 26 million people have lost their jobs, while millions more have had their pay or hours cut. Economists say that wages are “sticky,” meaning they are usually set in contracts for long periods, so the way deflation happens to workers mostly isn’t through a falling price of labor but through a falling quantity of jobs. And the quantity of jobs has never fallen as far, as fast, as it has since mid-March.”

But on the flip side, goodbye credit card debts and hello UBI 🙂

“Demand stimulus through normal fiscal and monetary policy tools—even on an unprecedented scale—are incommensurate to this crisis. People need direct, universal, unconditional income support. Far from generating a sudden hyperinflation, it may be the only way to avoid a deflationary spiral that rivals the Great Depression.”

no way is that fair.

The pandemic isn’t exactly fair. It is hitting poorer households harder. Probably a link between debt and poverty too. Not that it’ll happen. We’ll be paying for this for a while yet.

It seems insane that the bank of england are ruling out printing more money to underwrite the crisis tbh. You can kind of tell their thinking from the fact that it was “quantitative easing” when it was to give money to banks and now it’s “printing money” when it’s to benefit everyone.

It seems insane that the bank of england are ruling out printing more money

It does until you consider the politicians who are in charge of all this. They’d rather go down in flames than admit that money does in fact grow on trees (or on electronic spreadsheets, more accurately) and everything everyone in the western world has been told for the past 40 years is a lie. And if they let a depression happen I’m quite sure they will go down in flames.

Have to read up on debt cancellation a bit before diving in, thanks for the link.

Did make me think of a recent Anthony Scaramucci quote though.

‘Sending out cheques to the public is capitalistic, bailing out corporations is socialistic.’

So if we’re going to talk about cancelling private debt we should also talk about the cancelling of corporate debt, because that is happening right under our noses.

It is hitting poorer households harder.

Hold up, how is this virus / lockdown hitting poorer households harder?

Why not refund people the tax they have p[aid, or a proportion of it at least?

That will please the rich, or at least those not dodging tax, so has a chance of going forward.
Everyone will love the idea of punishing the tax dodgers so the Sun can print big headlines.
It will also reward the middle classes as they get some money too so they won’t rebel too loudly.
It will do nothing for the poorest and most desperate so is entirely in line with Tory policy.

I can’t help but think that the Corona virus discussion has become a battle of information between those who want to keep us in fear of the virus, and those who want to keep us in fear of the economic cost.

BA and Virgin have both announced massive job cuts. Virgin is going to get rid of 10 of their 45 aircraft (are they a relatively small, but noisy airline? that doesn’t sound a lot to me?) and pull out of Gatwick. I can’t help but think that’s a bluff to the Government, bail us out or we’ll lump 15k more unemployed in your lap.

The usual suspects like the Economist are doing their doom-monger bit – 35% drop in GDP!! Add that to 5m people either being Furloughed or unemployed (20% of our workforce) that’s great recession figures. Of course it’s an artificial drop in GDP, we closed the shops, the offices, the factories and building sites for a good reason, they didn’t go out of business. Not everyone will simply go back to work when this is over like nothing happened, but a lot will. That’s why the furlough scheme was such a good idea.

So far it’s cost the UK £20bn, if it runs until the end of the year it’ll cost £80bn. That’s a lot of money, but it’s nothing like the cost of the Credit Crunch bailout.

Timing will be everything, right now the greatest fear is the Virus, some people will hate any idea of loosing regulations, they’re the same kind of people who decided the Governments rules weren’t strict enough, decided on their own interpretation of them, or at least read others on Social Media and then judged others for breaking these new rules.

I wouldn’t want to be in the Governments position, what a hellish job – every day you lift lock down early will kill more people, every day you keep them longer than you need to you’ll push more people it poverty and ultimately kill them another way.

Hold up, how is this virus / lockdown hitting poorer households harder?

https://www.theguardian.com/world/2020/may/01/covid-19-deaths-twice-as-high-in-poorest-areas-in-england-and-wales

They also have less savings, so suffer far worse from any economic shock and tend to be in insecure employment etc.

every day you keep them longer than you need to you’ll push more people it poverty and ultimately kill them another way.

Not if they go for a huge Marshall plan style investment program afterwards and stimulate enough demand to re-start the economy.

However, if they switch back to Austerity and winding down the NHS then yes, loads will die.

Well, looks like Furlough will begin it’s wind down July onwards

There’s a good chance that’ll sink my workplace depending on the details.

https://www.theguardian.com/world/2020/may/05/rishi-sunak-preparing-to-wind-down-furlough-scheme-from-july

Sturgeon has said UBI is the Scotch Government’s top priority post lockdown

There’s a good chance that’ll sink my workplace depending on the details.

Yup, I think we can expect a tsunami of redundancies in the summer. It also feeds the deflationary vortex, as those who don’t get made redundant will be on lower salaries, probably permanently. The tories have completely lost their bottle. It seems ‘whatever it takes’ is just a meaningless slogan.

Interesting read here. Seems we’re on the tipping point between a new Bretton Woods post-war type global recovery effort, or a descent into beggar thy neighbour isolationism where the rich cream off even more than they already have. Joy!

Well, looks like Furlough will begin it’s wind down July onwards

There’s a good chance that’ll sink my workplace depending on the details.

Sorry to hear that, what industry are you in?

I guess that was always on the cards, the problem as ever is that there has to be 1 rule for everyone. I know a lot of places who’ve furloughed staff just because it was the most business-like thing to do, a few of our suppliers who’ve been crazy busy furloughed half their staff and just told us to expect problems because of Covid, I thought it was a pretty shitty thing to do, anyway most of them seem to be returning to work today, tomorrow and Monday.

If they do go ahead with the plans to end Furlough, the leisure and tourist industry will be in real trouble. The Gov might end up paying out more in Redundancy payments for employees of collapsed businesses than they will in furlough payments.

If we’re to avoid another one in the wake of covid-19 it’s going to require private debts to be written off in some form. As it says in the article, the more people pay off their debt, the more they end up owing due to the deflationary downward spiral.

can someone smarter than me explain how all this works?

it’s actually a tried and tested policy to punish savers and reward spenders in times of economic distress.

this is about my limit of understanding.

I’d love to see a truly universal UBI work; I’m worried about the practicalities of it though.

can someone smarter than me explain how all this works?

Have a read of the article I posted in the OP. All to do with something called ‘Fishers Paradox’ apparently:

“Fisher argued that the Great Depression was caused by the twin coincidence of too high a level of private debt, and too low a level of inflation. In this situation, debtors resorted to distress selling, cutting their prices in order to attract a cash flow to themselves rather than their competitors. But because everyone was doing it, prices fell across the board, taking GDP down with it. Debts therefore fell less than GDP, and the private debt ratio actually rose. In his words:”

this is about my limit of understanding.

Inflation. In a normal economy inflation reduces the value of debt and savings. It’s been pretty much standard post-war practice for governments to inflate themselves out of debt crises, the end result being those who hold cash (savers) end up poorer.

Sturgeon has said UBI is the Scotch Government’s top priority post lockdown

Sweet, as soon as they do that I can quit work, relocate to Scotland (somewhere pretty in the Hebrides) and live on UBI. Bliss.

Sweet, as soon as they do that I can quit work

Does the scottish govt have the power to unilaterally bring in a UBI? There’s not a chance in hell they’ll be allowed to have one without the rest of the UK for the very reason you state. If they do then you can be sure anyone not resident in Scotland for a certain period of time won’t qualify, which brings up a whole series of issues in itself.

The UBI issue is a weird one. The entrenched view against people ‘getting something for nothing’ is very difficult to overcome. People (especially those on the right of the spectrum) would rather the economy collapse and we all go down together than break with their blinkered and self-interested view of what’s fair and what’s not.

In this situation, debtors resorted to distress selling, cutting their prices in order to attract a cash flow to themselves rather than their competitors. But because everyone was doing it, prices fell across the board, taking GDP down with it. Debts therefore fell less than GDP, and the private debt ratio actually rose. In his words

i get this from a business point of view, or even a personal view if people have to do an emergency remortgage or flog their car to free up funds.

how does it screw over the person with a big credit card, or financed car?

how does it screw over the person with a big credit card, or financed car?

I quoted the wrong bit before, the one below explains it better. Basically the value of money increases faster than people can clear their debts. So if you owe ten grand on a car, by the time you’ve paid off two, the remaining eight is worth more in real terms than the original ten.

“if the over-indebtedness with which we started was great enough, the liquidation of debts cannot keep up with the fall of prices which it causes. In that case, the liquidation defeats itself. While it diminishes the number of dollars owed, it may not do so as fast as it increases the value of each dollar owed. Then, the very effort of individuals to lessen their burden of debts increases it, because of the mass effect of the stampede to liquidate in swelling each dollar owed. Then we have the great paradox which, I submit, is the chief secret of most, if not all, great depressions: The more the debtors pay, the more they owe. The more the economic boat tips, the more it tends to tip. It is not tending to right itself, but is capsizing.”

dazh,

Read that Guardian piece and got my head around it a bit easier than the 1st link! [though I got the gist of that one] Hope this thread goes well, I tried something similar a month ago but it died a death / got diverted.

I was concerned that governments were about to repeat the mistakes of 2008 with regards bail outs. I chucked in that Anthony Scaramucci quote because I thought it echoed some of the ideas around debt cancellation and UBI, essentially, that bailing out the poor would keep the economy afloat more successfully than bailing out corporations / airlines / banks etc.

Though this time, the banks aren’t being bailed out, they’ve just been given trillions to distribute without proper oversight, thus incentivising them to maximise their own profits and quite naturally distribute it amongst their favourite clients rather than direct the cash to those who really need it.

A predicted outcome of this is that wealth will become further concentrated amongst the few, mirroring what has happened over the last decade, leaving us even more vulnerable to existential threats in the future.

There’s been more coverage of this in the US, we’ve been too busy chasing Matt Hancock down on sets of spurious figures, failing to ask deeper questions. Good a article on Bloomberg where they frame the argument well, not presenting the situation as some grand conspiracy theory, rather they attribute events to negligence, systemic failures and lack of oversight that will lead to inevitable but familiar outcomes.

https://www.bloomberg.com/opinion/articles/2020-04-30/why-small-business-bailout-went-to-shake-shack-and-ruth-s-chris

The more the debtors pay, the more they owe.

I think it was my misunderstanding of this line that gave me confusion. As in choosing to overpay a mortgage, pay the CC in full and so on was actually increasing your debt.

I can’t help but think that the Corona virus discussion has become a battle of information between those who want to keep us in fear of the virus, and those who want to keep us in fear of the economic cost.

I’d like to see the lockdown lifted in a clear and staged approach. I’m in the fortunate position of not being economically impacted (beyond an expectation of increased taxation). But clarity is needed. How do schools return? How do we maintain protection of the vulnerable? How do we control transmission on public transport? (have you ever commuted into Waterloo?). How do we stage office working? What do we do for international travel – THE vector of international spread. Reintroduction is a significant maintainer of endemic transmission, be it in a house, in a hospital or in a nation.

I genuinely think people will be sufficiently well-motivated, now they’ve seen what naked transmission looks like. Things will not return to what they were for some time. But 12mo time? Maybe.

Everyone who has suffered economically in this is a hero, and those are the people we should be clapping for, supporting with clear messages, and providing a plan for return to work.

As in choosing to overpay a mortgage, pay the CC in full and so on was actually increasing your debt.

If you can clear your debts straight away then this doesn’t apply because even though you may owe someone money, you’re not actually in debt.

If you can clear your debts straight away then this doesn’t apply because even though you may owe someone money, you’re not actually in debt.

how does it apply if the thing you borrowed money for has value – mortgage, car payment*

*car is obviously depreciating asset, but does give earning potential

Whatever the outcome this is the government the people voted for when given the chance (not just once either but multiple rounds of the conservatives winning elections Cameron, May, Johnson).

They are self serving the rich get richer view politicians, they will continue to hold these viewpoints.

People will lose jobs, the economy will contract, the rich will get richer and the poor poorer, this isn’t going to change.

Personal debt written off? Only if it benefits the Conservative party, major investment and job schemes, only if it benefits the Conservative party.

Don’t forget, we are still to exit Europe the end of the year, if you feel things are bad now, let’s just see how it all is this time next year.

Bring back Cressers! We are all indeed doomed and he was saying it for years before we even got close to this stage!

Reintroduction is a significant maintainer of endemic transmission, be it in a house, in a hospital or in a nation.

Many people are going to be put in a position of deciding between earning money and risk catching the virus. I’m trying not to be consipiratorial but all this talk of releasing the lockdown and getting the economy going again is a clear signal that money is being prioritised over public health. There’s a lot more the govt could do to protect the economy whilst protecting public health, but it seems to me they won’t consider these things because it’s against their ideology.

So far it’s cost the UK £20bn, if it runs until the end of the year it’ll cost £80bn. That’s a lot of money, but it’s nothing like the cost of the Credit Crunch bailout.

Still less than the vanity project that is HS2. Although that is over a few years

I’m trying not to be consipiratorial but all this talk of releasing the lockdown and getting the economy going again is a clear signal that money is being prioritised over public health.

now this bit i do understand -its creating public buy-in for removal of lockdown (not necessarily yet but) at some point, a significant portion of the population is going to WANT to go back to work, to go to the pub, and to get on a plane to Malaga. That’s a lot more palatable than starving people out of their homes.

how does it apply if the thing you borrowed money for has value

That’s the whole point, asset prices go through the floor, making money more valuable. If you’ve borrowed to buy a house then it’s a double whammy. Your net debt (the part you can’t clear) increases in value while the value of the house decreases because everyone in the market is selling up in order to clear their debts. The end result is that everyone, asset owners and debtors, are worse off. And then you get creditors (banks) collapsing because the debts they hold aren’t being serviced, which causes businesses to go bust because they can’t access credit to maintain cashflow and before you know it the whole system collapses, all because we were too proud to go against our instincts and write off debts and support incomes at the beginning.

not presenting the situation as some grand conspiracy theory, rather they attribute events to negligence, systemic failures and lack of oversight

Robert Hanlon proved right again.

What are the chances of having our credit cards wiped out?

I sincerely hope sweet FA….

So those who buy everything on tick to live a life beyond their means get given a clean slate, whereas the guy who lives within his means, doesn’t buy stuff he can’t afford gets FA yet will essentially pay for those that do through higher interest rates and bank charges.

F off!

Similar thing here in Germany.
You can get help if you’re in financial difficulty and can’t meet the repayments on your leased motor or such, whilst the wise man who put a bit of money away each month, bought his motor outright gets **** all until he has burnt through his savings.

You bought it, you pay for it.