‘The big education for me is that civilisation is fragile and can be destroyed in a heartbeat' - Jeremy Brade, former peacekeeper in Sarajevo.

Tuesday, April 28, 2020

Covid econo-apocalypso

The Office for National Statistics (ONS) weekly figures https://www.ons.gov.uk/peoplepopulationandcommunity/birthsdeathsandmarriages/deaths/datasets/weeklyprovisionalfiguresondeathsregisteredinenglandandwales have just been updated to Week 16 (ending 17 April) and they are not comforting.

While the numbers of Covid-related deaths in hospital (see Worldometer https://www.worldometers.info/coronavirus/country/uk/ ) slowed in that week (and declined in the following one) the ONS’ numbers for Week 16 jumped another 40 per cent: from 6,213 to 8,758.
The ONS is recording cases where Covid is mentioned on the death certificate, and these are not limited to deaths in hospital. Fatalities involving non-Covid respiratory diseases continue to follow the trend of the previous ten years, so it seems implausible that many of them have simply been misrecorded as coronavirus victims.

 Overall deaths also continue to soar. In the seven weeks graphed above, we have lost 100,954 people in all. The average for the equivalent period in the preceding decade was 71,916 (the seven worst weeks totalled 83,843).

The meme that Professor Ferguson has been too pessimistic in his modelling may be exploded: last weekend we passed the landmark of 20,000 Covid deaths https://www.bbc.co.uk/news/uk-52424413 , which was what Professor Ferguson had hoped might be the maximum if we implemented control measures.

Those measures rely on public cooperation, and my experience is that people have gone along with the official advice and instructions, and are doing so with goodwill. As we walked an elderly friend’s dog yesterday, passers-by stepped aside to maintain distance, or thanked us if we did so. What will save this country is the ‘social capital’ that lets us pull together and look after each other in a crisis.

We are facing brutal alterations to the economy – ones that were overdue, and for which the coronavirus was a trigger event, like 9/11. How, for example, did our business class allow us to become dependent on a powerful Communist country? What let them give away our productive capacity yet expect society to maintain its cohesion, when Sir James Goldsmith was warning of the consequences a quarter-century ago? Do they not know that we really are in this together, that when civilisation falls all fall with it, that there are no rich Mayans hunkered down in air-conditioned Mesoamerican bunkers, still living off their investments?

The price we have just started to pay, is not because of the virus or the so-called ‘lockdown’; it is the result of the failure to plan and act. Here and elsewhere there have been studies and simulations going back years, and yet when the foreseeable needs arose the resources were still not there - witness the PPE debacle https://www.bbc.co.uk/news/newsbeat-52440641 .

The disaster is set to roll over the economy also, because we have become – thank you, bankers – hopelessly dependent on debt; not just government deficit, but personal and corporate liabilities. It’s bad in many countries, but the UK stands alongside Japan as the worst. As far back as January 2012 McKinsey reported https://www.mckinsey.com/~/media/McKinsey/Featured%20Insights/Global%20Capital%20Markets/Uneven%20progress%20on%20the%20path%20to%20growth/MGI_Debt_and_deleveraging_Uneven_progress_to_growth_Report.ashx  (page 5) that Japan’s total debt-to-GDP was 512% and the UK’s rivalled it at 507% - five times the value of our economic activity. When debts mount further – as they must, to stop the system collapsing – and thousands of small businesses founder, and millions are added to the dole queue, and the tax base shrivels, that ratio is going to be cruelly higher, a tremendous burden even when interest rates are near-zero.

What is the way out? Massive defaults?

Or reckless money-printing? Perhaps we should visit the ATMs more regularly and build up a stock of banknotes, just in case there is another shortage of toilet paper.


Jim in San Marcos said...

Hi Sack

I haven't seen a good recipe for pound notes or dollar bills, neither one would have much body or taste. Toilet paper works for me, just print on one side and leave the other blank.

A financial collapse can lead to an economic collapse, which can lead to massive starvation. The food is there, but the ability to distribute it isn't.

A hundred thousand dead from corona virus verses a billion dead from starvation--go figure.

Paddington said...

As I have said since the 1980's, the bankers broke the financial system, where most of the money goes to people who do not produce wealth.

The regular punters were convinced that they could participate and get rich by 'investing'.

The reality is that our lifestyles are due to science and technology, done by a relative few, and taken advantage of by the wealthy and powerful.