They need to say this to satisfy the markets and prevent a huge rise in the UK’s borrowing costs and speculation against sterling. But the BoE has made £750billion available from ‘the Ways and Means’ account (money printing). Given the deflationary headwinds are stronger than at any time since the 1870s, there is no reason not to use funny money to pay for the next few months.

Agreed. Given there’s neither demand push nor price increases on the horizon the mechanisms that drive inflation are absent. 

Maybe an analogy is large faults appearing after a major earthquake: pouring concrete into the cracks doesn’t produce a mountain, it produces level ground.

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The Times is talking about a house price correction of 20% to 30% or more - negative equity looms for many.

 

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Agreed. Given there’s neither demand push nor price increases on the horizon the mechanisms that drive inflation are absent. 

Maybe an analogy is large faults appearing after a major earthquake: pouring concrete into the cracks doesn’t produce a mountain, it produces level ground.

 

.... or just disappears into a magma chamber

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.... or just disappears into a magma chamber

You’ve watched too many Hollywood disaster movies.

😉

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Could be just me but after reading The Times at brekkie I came away thinking corona virus is sailing off into the distance and it is time to learn lessons and prepare for the future. Does the UK (and other European) government privately think the worst is now past us regardless of social distancing and lockdown policies? I wonder whether there is a suspicion in some quarters that this virus will be self-limiting in its spread for some unknown reason? My understanding was that second wave is likely and it may well be even more destructive than the first. Time will tell.

I don't think there will be a significant second wave, at least not during the summer. In other news, the Institute of Actuaries have also estimated the covid related excess deaths in the UK to be ~60,000 to date.

 

The Times is talking about a house price correction of 20% to 30% or more - negative equity looms for many.

 

That was a worst case scenario from Lloyd's Banking Group.

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Could be just me but after reading The Times at brekkie I came away thinking corona virus is sailing off into the distance and it is time to learn lessons and prepare for the future. Does the UK (and other European) government privately think the worst is now past us regardless of social distancing and lockdown policies? I wonder whether there is a suspicion in some quarters that this virus will be self-limiting in its spread for some unknown reason? My understanding was that second wave is likely and it may well be even more destructive than the first. Time will tell.

I think what is going on is that the Government are trying to find a navigable channel between full lockdown and some semblence of a pickup in the economy such that the NHS is able to cope and also that we don't eventually bankrupt the economy.

With 90-95% at least of the population still vulnerable till a vaccine is available, I don't think anyone is undr any illusions as to the risk of a second wave if we take our eye off the ball too much

 

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I don't think there will be a significant second wave, at least not during the summer. In other news, the Institute of Actuaries have also estimated the covid related excess deaths in the UK to be ~60,000 to date.

 

I don’t think anybody expects one during the summer. I expect cases to decline gradually before a second outbreak in November. But not on the scale of the first. Nonetheless, we should expect a death toll of more than 100k.

 

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Yes, I think that’s about right.  But perhaps the key point is that the last thing governments and central banks should be doing for the next several years is sucking demand out of their economies via higher taxes: that would just make the recovery slower, weaker and more challenging.

Someone needs to write the new manual for economics beyond a global pandemic. Where’s the modern day Keynes?

Higher taxes and austerity all round would be the obvious choice but I think after a year of lockdown and social distancing (as it will probably turn out) this will go down extremely badly IMO

much as it pains me, I think the printing presses need to swing into action and print a few hundred billion and dish it out to Joe Public and the lenders

Interest rates and exchange rates will no doubt be severely affected but needs must

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I don’t think anybody expects one during the summer. I expect cases to decline gradually before a second outbreak in November. But not on the scale of the first. Nonetheless, we should expect a death toll of more than 100k.

 

Borders controls, testing and contact tracing will be the key tools until there is a vaccine. Was talking to my Danish colleagues this morning and they are liberalising a lot locally (bars and restaurants open next week with a 1 metre distancing rule instead of 2 metres). The difficult one is the border controls - they have not decided what to do about them yet - currently borders between Denmark and Germany and Sweden (their only land borders) are closed to all but commercial and essential traffic.

P.S. Details below - measures are still in force with no understanding of when or whether they will be relaxed:

https://politi.dk/coronavirus-i-danmark/in-english/minstry-of-justice-12-03-2020

 

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LBC talking as though it is back to normal today. Be interesting not see what happens on public transport in London during the coming days.

According to Nick F on LBC this morning, if you’re not at work today you must be a scrounger and work shy....🙄 or so it seems....

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Higher taxes and austerity all round would be the obvious choice but I think after a year of lockdown and social distancing (as it will probably turn out) this will go down extremely badly IMO

much as it pains me, I think the printing presses need to swing into action and print a few hundred billion and dish it out to Joe Public and the lenders

Interest rates and exchange rates will no doubt be severely affected but needs must

With pretty much every major economy facing similar issues I think the exchange rate won’t be a major issue. For there to be downward pressure we need to be doing relatively worse than others.

Having said that, if we insist on leaving the EU in 7-8 months from now with the pandemic still taking its toll and no agreements with EU or US we will be asking for trouble.

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My wife back from her morning run tells me the roads are much busier this morning with many off to work

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My wife back from her morning run tells me the roads are much busier this morning with many off to work

A flexible return to work makes perfect sense - those with small children at home to look after won't be able to go to work of course.

Plus, all hospitality is closed down for the foreseeable.

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Coronavirus: How England's golf courses, tennis clubs and fisheries are preparing for return of sport

Traffic volumes will be up I guess as a number of sports venues re-open.....

https://www.bbc.co.uk/sport/england/52632639

For the lucky ones who managed to secure early tee times, the weather at Perranporth golf course looks pretty good

https://www.metoffice.gov.uk/weather/forecast/gbuq6tz2f#?nearestTo=Perranporth%20(Cornwall)&date=2020-05-13

Yes, my brother in law’s a green keeper at Worksop golf club and is preparing for the deluge. Their club has been inundated with calls from members booking tee times!  My son has gone fishing this morning too!  

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Higher taxes and austerity all round would be the obvious choice but I think after a year of lockdown and social distancing (as it will probably turn out) this will go down extremely badly IMO

much as it pains me, I think the printing presses need to swing into action and print a few hundred billion and dish it out to Joe Public and the lenders

Interest rates and exchange rates will no doubt be severely affected but needs must

 

Higher taxes and more austerity in a deflationary economy,which is where we are heading for a while, will just kill the economy even more.The proplem with printing money and giving it to joe public will lead to massive inflation,even worse! I think postponing or even cancelling H2S and scrapping foreign aid would be a good starting point.Income tax may go up across the board by say 1p or 2p in the pound as well as an increase in corporation tax.Means testing of the state pension would be a good one to look at as well as closing a lot of the tax loopholes the rich and large companies use to avoid tax.The lowest paid and the poorest should be protected from further erosion of their incomes and although more cuts to public services will be necessary some vital services eg NHS should be ringfenced.

The Times is talking about a house price correction of 20% to 30% or more - negative equity looms for many.

 

A house price correction of that range would be a good thing!

 

 

Higher taxes and more austerity in a deflationary economy,which is where we are heading for a while, will just kill the economy even more.The proplem with printing money and giving it to joe public will lead to massive inflation,even worse! I think postponing or even cancelling H2S and scrapping foreign aid would be a good starting point.Income tax may go up across the board by say 1p or 2p in the pound as well as an increase in corporation tax.Means testing of the state pension would be a good one to look at as well as closing a lot of the tax loopholes the rich and large companies use to avoid tax.The lowest paid and the poorest should be protected from further erosion of their incomes and although more cuts to public services will be necessary some vital services eg NHS should be ringfenced.

But, as I said earlier (and Justin and I have said several times now) printing money may not be inflationary precisely because of the deflationary pressures. 

Printing money to replace missing buying power shouldn’t have the same effect as just creating a burst of demand when supply is largely unable to respond.

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I don't think there will be a significant second wave, at least not during the summer. In other news, the Institute of Actuaries have also estimated the covid related excess deaths in the UK to be ~60,000 to date.

 

Do you think that because a) the social distancing measure b) the virus has run its course?

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Could be just me but after reading The Times at brekkie I came away thinking corona virus is sailing off into the distance and it is time to learn lessons and prepare for the future. Does the UK (and other European) government privately think the worst is now past us regardless of social distancing and lockdown policies? I wonder whether there is a suspicion in some quarters that this virus will be self-limiting in its spread for some unknown reason? My understanding was that second wave is likely and it may well be even more destructive than the first. Time will tell.

 Whether by incompetence or design i think countries which have had a bad first wave of Covid -19 are probably on their way to Herd Immunity and a second wave will be far less devestating. Countries which have basically shut the virus out , till a vaccine arrives remain naive and very at risk.I was listening about Cyprus this morning and they have sone very well in terms of cases but i do not see how they progress as their main business is Tourism.