Coronavirus

[Witton Park]

So we have now had our version of full lockdown for 30 days and of course we had some partial measures in place earlier.

We are still getting 4-6K confirmed cases a day.

I consider that my contacts with other members of the public have dropped to zero. Of course there are transfer contact issues (I touch an infected surface) and the question of whether 2m is enough.

But I have not been in breach of the guidance at all. Neither has my wife, and my 28 year old daughter has more or less camped in the house.

So where are all these new cases coming from?

Look at the timeline for Boris. It's about a 3-4 week cycle from catching, developing symptoms, those symptoms escalating to put you in hospital and then either your decline or recovery leading to being discharged.

So the level of infection being detected (how many are not detected) even with lockdown and the vast majority following rules suggests there are serious errors in the timeline of the development in us, and/or this is more easily transmitted than we had thought.

With such a spread during lockdown, it makes it more likely that it having arrived here in January, many, many people got this in the 10 weeks (quite likely longer) between it arriving and us moving to lockdown.

When you consider that in Italy they are approaching 50 days now, Spain are not far behind them, yet they are also still reporting new cases in the 1'000s per day.

Lockdown seems to have got us to a level of infection higher than pre lockdown. It doesn't add up.

[Muddy Retriever]

From Ann Pettifor's "The production of Money" - pages 16 -22: ...a loan to AIG of $85 billion ...it was transferred in just an instant after all 11 numbers had been tapped into the computer ... It is what banks do every day ... the spending is created out of thin air ... savings do not fund ... if well managed, there need never be a shortage of money for society's most urgent projects.

Peston, in WTF, calls QE creating money, just to show that some economists think that way - the sum? £535 billion in 2009 - yes, billion.

I would strongly recommend Pettifor's book.

With regard to banks producing money out of thin air, this is a good article, which explains that they don't. Banks have to hold healthy assets as well as Sterling reserves.

https://voxeu.org/article/banks-do-n...y-out-thin-air

As it concludes, if banks were indeed able to create money out of nothing, why would we need to bail them out?

We all know about QE, the Bank of England, The Fed and ECB have all done it and will continue to do so, especially now. But central banks buying bonds from institutions is not the same as printing money to finance expenditure. The debt is not eliminated and remains on their Balance Sheets. But even this is likely to cause inflation if it gets out of control.

What country has printed money specifically to fund expenditure without causing inflation?

[Muddy Retriever]

Lockdown seems to have got us to a level of infection higher than pre lockdown. It doesn't add up.

We still have to go to the Supermarket. I have to admit I sometimes feel uneasy about going. Some people do come within two metres of you no matter how hard you try and avoid that. There are still lots of people who have the potential to come into contact with others in their work. Not just medical staff, carers, supermarket workers and delivery drivers. But also people involved in the food production process and related packaging.

But I agree, it is perplexing that there hasn't been a greater fall in new cases.

[Mike T]

With regard to banks producing money out of thin air, this is a good article, which explains that they don't. Banks have to hold healthy assets as well as Sterling reserves.

https://voxeu.org/article/banks-do-n...y-out-thin-air

As it concludes, if banks were indeed able to create money out of nothing, why would we need to bail them out?

We all know about QE, the Bank of England, The Fed and ECB have all done it and will continue to do so, especially now. But central banks buying bonds from institutions is not the same as printing money to finance expenditure. The debt is not eliminated remains on their Balance Sheet. But even this is likely to cause inflation if it gets out of control.

What country has printed money specifically to fund expenditure without causing inflation?

All countries print money all the time. When you spend £10 on your credit card, that money is created out of thin air, it does not come from savings. But at the same time an obligation to pay it back is created - borrowing from the future.
Money is not a commodity, it is a social construct - credit/debt is how all money is created in the first place - but obligations are created with it. Again from Pettifor: " ... a well developed monetary system can finance very big projects, far exceeding an economy's savings." " .. the Bank of England published 2 articles in 2014 ... to make clear that most money in the modern economy is 'printed' by private commercial banks making loans ..." and so on.

[Oracle]

I see a lot of myths and misunderstandings on this thread, as well as the socialist propensity for thinking you can spend what you dont have. You cannot.

Setting a few of the myths at rest. The word "money" is the problem
Banks dont create wealth or even money out of thin air. Ever. Conservation of mass applies.

When they make a loan , there is an equal and opposite liability held at the bank.
When punters are given 1bn, the banks become worth -£1billion until the loans are repaid. Which is why banks must care what money is spent on.
Nothing was created or lost. Unless a borrower defaults.

Banks are obliged to hold a proportion of their capital in rock solid liquid things so they can allow a proportion of savers to withdraw money they have saved. But it is all a confidence trick. Banks are all in essence insolvent.

Governments can never spend what they do not have except by issuing loan instruments, "bonds"

Governments can only borrow or raise in taxation for current account. In quantitative easing a central bank buys assets off the market at market rate, so value is not distorted. Government first must sell its debt to the market, before it is bought by central banks.

In this way the central bank is creating "money" but that too is just a loan, the central bank becomes insolvent if the governments default on bonds. QE is simply a mechanism by which governments and people can borrow more than they would , when there is nobody else with assets to lend!

It is still money on tick. Nothing is created or lost.

Wealth is only created by growing it, designing it, making it (adding value ), digging it out of the ground, transporting it and distributing it (and of course the planet and the sun are ultimately finite resources but not on our timescale. It is why I have manufacturing underpants. It is one of the least valued but only valuable activities, as indeed is the occupation of Wittons wife! These are the true KEY workers. Not NHS diversity officers.

The contribution of many parts of the economy are at best indirect. Bankers accountants and lawyers just push it around a table. They create nothing. Some have value, those that educate the productive parts of society to improve productivity. If germany is successful it is partly because it still values apprentices and vocational training. Not waste of time degrees in bird subjects for all. they are just a drain. One policy I would like to see, is selective funding of courses that add to wealth creation. eg engineer.

The health industry helps increase the productivity of working age people, but that needs offsetting against horrendous cost ( but even that is arguable if there is a large section of unemployed, so others could fill the productivity space) As for keeping post working age alive, that is simply a consumption of resources , a drain on wealth. The argument for health is a moral one not an economic , it is a massive drain on resources and must be kept under control within the means of wealth creation. The idea that "health workers" are the "key workers", is a misunderstanding of what keeps our society fed.

It is also consumed (eating it, burning it, burying it in landfill and so on), or anything consumed by those who do not create the wealth. It can also be burnt. Like NHS diversity officers.

The ONLY spending on tick, that is valuable to the economy is that which creates more wealth.
So there are examples of spending on infrastucture. America late 19th early 20th century borrowed heavily to create the biggest manufacturing engine in the world. Ditto japan in seventies. Both were worthwhile but, it does not help if you spend more than you make. Both have gone tits up.

Economies are naturally deflationary. This years farming is more efficient than 100 years ago. This years production line more efficient or TV. Programming inflation is simply wrong. It is a way for governments to devalue their debts killing saving and investment returns. The rot started here under new labour in 1993 (central bank) and later 2002.

The explosion of money on tick and cheap interest, for consumerism not productive investment is a short term boost with long term pain. The heroin of cheap money is how Gordon Brown destroyed our economy. The QE that followed, more of the drug that made the patient sick.

No you cannot print value. The only way to spend more is to create more REAL wealth. Not spending on ever more good causes. Callaghan tried it. Look what happened to him.

I trust the economists who predicted 2008 in 2005. None of them believe monetary explosion is good. It creates artificial bubbles like Gordon Browns bubble that burst. In 2008 he said "we will never return to boom and bust". Who remembers what happened next? Idiot.

If governments borrow for current account (non productive asset purchase)then when they spend more, their children will have less to spend less. The rest is just sophistry. The excessive pensions taken by many in public sector are stealing from children.

[Mike T]

With regard to banks producing money out of thin air, this is a good article, which explains that they don't. Banks have to hold healthy assets as well as Sterling reserves.

https://voxeu.org/article/banks-do-n...y-out-thin-air

As it concludes, if banks were indeed able to create money out of nothing, why would we need to bail them out?

We all know about QE, the Bank of England, The Fed and ECB have all done it and will continue to do so, especially now. But central banks buying bonds from institutions is not the same as printing money to finance expenditure. The debt is not eliminated and remains on their Balance Sheets. But even this is likely to cause inflation if it gets out of control.

What country has printed money specifically to fund expenditure without causing inflation?

From the linked article: "From an economic viewpoint, commercial banks create private money by transforming an illiquid asset (the borrower’s future ability to repay) into a liquid one (bank deposits)...." - so creating money, and borrowing from the future.

[Oracle]

From the linked article: "From an economic viewpoint, commercial banks create private money by transforming an illiquid asset (the borrower’s future ability to repay) into a liquid one (bank deposits)...." - so creating money, and borrowing from the future.

I suggest you read from the avove. Nothing is created or lost.

From the point of one single individual, they must pay all consumption back in their lifetime in addition to saving for the entireity of retirement.. For that reason all personal borrowing for consumption is AT THE EXPENSE of later consumption. It is transitory.

Even the successful government borrowing eg US around turn of 20th century, only helped for a period. A shelf life. All borrowing has to be justified on a short time frame.

So cheap borrowing and banks lending beyond their assets, only stimulates economy for a period, it has the opposite effect later: early consumption reduces later consumption.

Eventually no amount of additional loan money stimulates, (it is like pushing on the end of a string, the current negative rates) but it kills saving return.

It helps reduce government debt by inflating it away at the expense of creating later life hardship for everyone else except those MP type pensions, because it kills savings return which then as now, fall below inflation rates.

There is no free lunch.

The economy is a zeros sum game: every additional penny taken in inflation proofed (eg MP pensions) is one penny less for someone elses non inflation proofed savings pension. Or funded by more borrowing from their children: we cannot afford the state pension even. Same result. If you are wondering why I hark on about MPs (20 year to half salary) pensions, or Euro MP (10 year to half pension) these are so excessive, it will cost the tax payer and other pensioners more than those people ever pay in tax.

MPs are the worst tax dodgers their are. They created a bear trap for everyone else outside inflation proofed schemes, by forcing them into equity based pension savings. The screwing of my pension is how they afford theirs.

[Muddy Retriever]

All countries print money all the time.

All countries print money, but that is to ensure that the money supply is sufficient to meet the needs of the economy. That's not what I'm asking.

A couple of days ago I mentioned that the OBR was forecasting a £270 billion deficit in the coming financial year. I suggested that paying it back would mean much greater austerity than what we've had in the last ten years. You said that there was no need to borrow it, just print it. So, my question is again, which countries have financed expenditure without borrowing money but by simply printing it and not incurred inflation as a result?

I can't think of one. If it was such a good idea, why isn't everybody doing it? The reality is to use Oracle's phrase, there is no such thing as a free lunch. You'll increase the money supply but with the same amount of goods we will get inflation. Wealth has to be created not just magicked up.

[Mark G]

This week's More or Less on BBC R4 this morning had some interesting stats on the virus. It's worth a listen I kthink, regardless of your views on the BBC or on stats being capable of proving anything. If I understood some of it correctly your chance of dieing of this so far if you are a healthy adult between 15 and 65 is 1 in 19000. Also the number of deaths amongst health workers may not be statistically very much higher than the rate in the general population (accepting that if they ran out of PPE things would change). There's also some interesting stuff about death rate comparisons by country. Make if it what you will but I usually find this programme full of common sense and helps put things in context. They have some interesting things to say about the peak too - one argument is that it occurred a couple of weeks ago.

[anthonykay]

. . . rock solid liquid things . . .

Can you explain the physics of this, Oracle?