Last week’s meeting of leaders was supposed to help. Instead it turned out to be a complete car crashEurope is being ravaged by the coronavirus pandemic. There have been more than 10,000 deaths in Italy. In the grimmest of league tables, Spain comes second. Normal life has been suspended across the continent and the hit to the economy is immense. France’s output is running at two-thirds of what it was last year. Germany has abandoned fiscal rectitude and – along with the rest – adopted a “whatever it takes†approach.Border controls have been erected to stop the flow of people even though this contravenes one of the founding principles of the single market. Rules on state aid to struggling companies have been relaxed. The European Central Bank has embarked on a gigantic asset purchase scheme in an attempt to flood the eurozone economy with cheap money. Continue reading...
Getting the Bank of England to print money to cover the government’s debts is in principle a good ideaThis is an economic crisis and it’s right that government takes unprecedented steps to compensate employees and the self-employed from huge income hits. But how are we going to pay for these decisions? Eventually taxes will go up, but governments need to raise cash right now as tax revenues fall and spending surges. Luckily, borrowing costs are low, but what happens if financial markets are unable to absorb the huge amounts of extra borrowing?This is a crucial question with which treasuries around the world, and the IMF, are starting to grapple. The gung-ho among you may like the answer of the economist Jordi GalÃ, who last week called for central banks to print money for government without it ever being paid back. Our view at the Resolution Foundation is that he is right to examine the case for monetary financing (the Bank of England creating money to directly buy government debt). But we don’t agree that the objective is for it to never be repayable – in fact, we argued last week that it’s crucial to stress that any unavoidable monetary financing would be temporary and that the central bank could sell off government bonds when things calm down. We’ve seen unprecedented steps by government to tackle this crisis, with big price tags attached. Unprecedented measures may be needed to pay for them, but we should plan for that with utmost care. Continue reading...
Proponents of modern monetary theory believe that countries can and should keep printing as much money as they needTreasury officials have spent the last couple of weeks asking themselves how much the exchequer should spend fighting coronavirus. Curled up with laptops in the spare room or on the kitchen table, banished from their neoclassical headquarters, they have debated how many borrowed billions ought to be devoted to rescuing companies from bankruptcy and households from destitution.Thinking about what a nation should spend when its income falls off a cliff, and how much it will owe as a consequence, is especially mind-boggling for conservative policymakers emerging from 10 years of austerity. Many have spent their entire careers telling voters that paying back what the country has borrowed is of paramount importance.Is this real money that will eventually need to be paid back? Or can it somehow be left behind by one generation to be written off by the next? Continue reading...
As the coronavirus pandemic destroys jobs across Australia, New Zealanders who have lived and worked here for years are finding they have no access to welfare
Jobless claims are smashing all known records during this unprecedented crisisCoronavirus – latest updatesAll our coronavirus coverageThe surge in unemployment in the United States caused by the Covid-19 pandemic shatters all previous records. In its time, the world’s biggest economy has seen some savage shake-outs of its labour market but nothing that remotely compares to what has just happened.Jobless claims in the week ending 21 March surged to almost 3.3m, which was double what Wall Street analysts had collectively been expecting. The previous worst total in October 1982 was just one fifth of last week’s level. Continue reading...
Thinktank says move could prevent workers from being laid off in coronavirus crisisNext month’s planned increase in the national living wage should be delayed to prevent struggling businesses from laying off workers during the Covid-19 crisis, the Institute for Fiscal Studies (IFS) has said.The thinktank said the above-inflation increase from £8.21 to £8.72 an hour threatened jobs and ran counter to the policies announced by the chancellor, Rishi Sunak, to keep people in work. It said the rate may even need to be cut for the duration of the emergency.Related: Coronavirus benefits, sick pay and lost hours: your rights in the UK Continue reading...
The financial crisis and Great Depression took three years to play out, this crisis has taken three weeks. The Greater Depression beckonsThe shock to the global economy from Covid-19 has been faster and more severe than the 2008 global financial crisisand even the Great Depression. In those two previous episodes, stock markets collapsed by 50% or more, credit markets froze up, massive bankruptcies followed, unemployment rates soared above 10% and GDP contracted at an annualised rate of 10% or more. But all of this took around three years to play out. In the current crisis, similarly dire macroeconomic and financial outcomes have materialised in three weeks.Earlier this month, it took only 15 days for the US stock market to plummet into bear territory (a 20% decline from its peak) – the fastest such decline ever. Now, markets are down 35%, credit markets have seized up and credit spreads (like those for junk bonds) have spiked to 2008 levels. Even mainstream financial firms such as Goldman Sachs, JP Morgan and Morgan Stanley expect US GDP to fall by an annualised rate of 6% in the first quarter and by 24% to 30% in the second. The US Treasury secretary, Steve Mnuchin, has warned that the unemployment rate could skyrocket to above 20% (twice the peak level during the financial crisis).Related: How best to fight the economic impact of the coronavirus pandemic Continue reading...
Facilities thought to be 75% full with Saudi Arabia due to ramp up output as demand falters amid coronavirus shutdownsThe world may soon run out of space to store its extra oil as Saudi Arabia prepares to increase its fossil fuel production even as global demand for energy continues to fall due to the Covid-19 pandemic.Oil storage levels across the world’s storage facilities have climbed to about three-quarters full on average since the January shutdown of major refineries in China’s industrial heartlands to stem the outbreak of the coronavirus. Continue reading...
Measures to ease the impact of coronavirus hold lessons for how we can fight the battle against climate change, argue Colin Hines and Rosamund Aubrey, while Carl Gardner looks at the future of our financial centres
Signatories including Caroline Lucas and Bambos Charalambous say it is essential to deal with coronavirus as a global emergency, but that we must also work harder to predict and prepare for existential risks. They are backing the wellbeing of future generations billAs we work to tackle the Covid-19 pandemic, all of us – individuals, families, communities, and the worlds of business, finance and government – are reminded of the importance of thinking, planning and budgeting for the long term.It is essential to deal with coronavirus as it is – a global emergency – but it is clear we must work harder to predict and prepare for the existential risks we face. Not only the threat of pandemics, but the climate crisis and unchecked technological advancements. Continue reading...
Covid-19 crisis is raising borrowing costs for poorer nations just as commodity exports, tourism and remittances sent home fallRapid action is needed to head off the risk of a new debt crisis in the world’s poorest countries amid evidence that the Covid-19 pandemic is raising borrowing costs and hitting commodity exports, according to a leading campaign group.A Jubilee Debt Campaign report said some of the world’s most vulnerable nations were being hit by a double whammy of increasing debt interest bills and the tumbling price of oil and other raw materials.Related: Why debt relief should be the answer to this coronavirus crash | Katharina Pistor Continue reading...
The 1929 crash triggered a sea change. Ideas such as universal basic income suggest Covid-19 could do likewiseRishi Sunak says the measures he has announced to support the economy are without precedent in peacetime, and he’s right. Never before has the British state agreed to pay the wages of those at risk of losing their jobs. Never before has the government ordered the pubs to shut.The chancellor is not the only one to see the struggle against the coronavirus pandemic as akin to a military operation. Boris Johnson sees this as the summer of 1940, with himself as Churchill.Related: A hundred years on, will there be another Great Depression?Related: UK state support for business and workers reaches new heights Continue reading...
Last week we all had moments where the reality of what we were about to go through as a species hit homeIn a Southend Oxfam shop last week, I found a decadent 70s paperback of Clark Ashton Smith’s Lost Worlds collection. In the 1932 story The Empire of the Necromancers, the Silver Death plague ravages the land of Zothique, and necromancers make the zombie survivors “labour in the vaults and serve their necrophiliac lustâ€. Within days, Ashton Smith’s lurid dreams would seem prophetic.Is our prime minister, Boris Piccaninny Watermelon Letterbox Cake Bumboys Vampires Haircut Wall-Spaffer Spunk-Burster Fuck-Business Fuck-the-Families Get-Off-My-Fucking-Laptop Girly-Swot Big-Girl’s-Blouse Chicken-frit Hulk-Smash Noseringed-Crusties Death-Humbug Technology-Lessons Surrender-Bullshit French-Turds Dog-Whistle Get-Stuffed FactcheckUK@CCHQ 88%-lies Get-Brexit-Done Bung-a-Bob-for-Big-Ben’s-Bongs Cocaine-Event Spiritual-Worth Three-Men-and-a-Dog Whatever-It-Takes Johnson, up to the coronavirus crisis? Or will he be to Covid-19 what the swiftly substituted Neville Chamberlain was to the second world war, remembered only for the futile statement: “I have in my hand a piece of toilet paper!â€It looked as if liability confusion meant I might have to tour the virus-ravaged country performing to empty theatres Continue reading...
As long ago as 2006, experts were predicting what is happening todayJust a few months ago, no one had heard of coronavirus. Today, it’s profoundly changing how millions of people live. Policymakers have been playing catchup, not least on how to respond to the economic crisis. But experts (the ones Michael Gove said we’d had enough of) had pointed the way to what is now taking place. A World Bank paper on avian flus forecast that a severe outbreak would lead to a near 5% fall in global GDP, and double that in Europe. That work, done in 2006, seems much closer to where we are headed than almost all the forecasts done in 2020.A US congressional budget office paper from that period examines the economic impact of various sizes of pandemic, from a repeat of the 1918-19 Spanish flu to the less lethal Hong Kong flu in the 1960s. It is particularly prescient. Continue reading...
This emergency demands good judgment, not the usual obsession with debt and deficit levelsSeldom has a British government’s budget been rendered so out of date and so irrelevant as Rishi Sunak’s first.One of the best indicators of this was provided in his post-budget evidence to the Treasury select committee last week by Robert Chote, the much-respected chairman of the Office for Budget Responsibility (OBR). The OBR is the independent watchdog on government spending and taxation plans – the setting-up of which was one of the few acts of Chancellor George Osborne of which I approved.Despite the crisis, the Brexiters are hellbent on not seeking an extension to the negotiations with the EU Continue reading...
Government indecision amid the coronavirus crisis has fuelled fears of a long recession – unless there is a huge fiscal responseSuch was the scale of the global market crash last week in the wake of the coronavirus outbreak, the spectre of the 1929 Wall Street rout and the ensuing Great Depression of the 1930s has been raised. Comparisons no longer seem fanciful.The failure of the US and the UK to swing into action with a wide range of mitigation measures – despite the lessons of Italy’s slow response to the spread of Covid-19 – has heightened concerns that a sustained, epochal downturn lies in wait. Continue reading...
Unprecedented measures for coronavirus crisis include paying 80% of wages, new loans, benefits boost, rent help and VAT deferralRishi Sunak said an unprecedented level of state protection will be offered to support businesses and workers through the coming months to prevent the coronavirus outbreak bringing the economy to its knees.The chancellor’s second package of measures since he announced a £30bn rescue operation at the budget earlier this month, has been developed in recent days in response to criticism that previous efforts would fail to prevent thousands of companies going bust.VAT deferral. No businesses will pay VAT until the end of June, a deferral of tax payments for another quarter. At a cost of £30bn, companies will not need to pay what VAT is owed until the end of the year.The coronavirus business interruption loan scheme will be interest-free for 12 months, instead of the initially proposed six. The move will let companies apply for the fund even when the worst of the virus outbreak has died down. It reflects warnings from economists that the ripple effects of the virus could take much of the year to dissipateUniversal credit standard allowance will be increased by £1,000. Tax credit allowance will also be increased. This will benefit 4 million low-income families, Sunak said, and with other measures to boost benefit payments cost £7bn.Measures for the self-employed, previously denied payments if they are off work sick, will be able to access sickness benefit of £94.25 a week.Rent support of £1bn support for renters following an increase in the housing benefit element of universal credit to cover 30% of market rents in local areas. The chancellor said that renters will receive this top-up to match mortgage subsidies announced in his last package.Other measures. Previously, Sunak said cash grants worth £25,000 would be made to retail, leisure and hospitality firms to help them survive the period of turbulence. Businesses with fewer than 100 employees in the country across all sectors of the economy will be able to seek grants worth £10,000. Continue reading...