Government poorly served by the civil service

Apologies for the lack of posts from me this month, should improve a bit now. Real world work has been very busy which I guess is a good thing overall.

Watching the unfolding PR disaster of the Government this week has been quite something. I really am lost as to how nearly 18 months into the pandemic, the Government still can never seem to get ahead of its own agenda. 

Today they released the list of occupations where the self-isolation rules won't apply. How is it possible they had not planned for this a week or two ago? A lot of blame is going on Boris and the Tories for this, rightly so as the buck stops with them.

However, what the hell is the civil service up to? Why are the Ministers constantly in a flux of changing medical and governmental advice. It is one thing to accuse the Tories of lacking consistent messaging, which they surely do, but the lack of preparation and foresight sits firmly on the civil service. 

They are the ones enacting the policies of the Government and supposedly considering all the pitfalls and opportunities. Very little of this seems to be going on. As a taxpayer the value for money here is really poor. 

Dealing with a pandemic is a challenge, but the strategy has been right for a long time now after the initial few months of screw ups. It is the delivery which is so poor and the Government should ask questions of the competence of its senior advisors....maybe Dom was right....

Is Boris really the worst Prime Minister for Covid?

Yesterday's excellent post on the dire May/Hammond combo made me think about how alternative realities may have come to pass. The events since 2016 have been very unpredictable and at many moments the history of the UK could have easily been different. A simple one would have been for the arch-remainers to sign up to May's BRINO for example. Oh, how they wish they did now to my constant joy. If they had, there would be no Boris government now, but continuity May until 2022, with the benefit of total reliance on the DUP. 

However, along comes covid, she dithers in March 2020. She would have dithered, as May was never decisive plus always had to seek the counsel of the DUP.  It would be as bad if not worse than Boris in the first wave and then with BRINO we would have signed up to the EU vaccine scheme with a much worse position now. Hammond would have been more cautious than Sunak and so the economy maybe inw worse shape than it is now, but that is harder to say as Sunak's profligacy we may come to regret.

or

Perhaps May loses to Corbyn in 2017 or somehow he become PM.

Along comes Covid, again dithering with the crazy team in Labour (Abbott, Burgon - remember these idiots?) then followed by a huge lockdown for months enabling a full on discussion about a socialist revolution in the UK to stop people ever working having to do Capitalist work again. Constant musing about nationalising broadband and the trains in the name of the pandemic. Nothing to do to really fix the pandemic as the Tankies think for them this is the 2nd coming for communism. Of course, Labour would also have signed up to EU vaccine scheme plus decided to declare that the poor people of the world and especially Palestinians need vaccines more than we do in the UK with our magnificent NHS. 

There are no other alternatives, Keir Starmer was not leader in any way to take over. This was the world as it could have been with only 3 choices - May, Corbyn or Boris. 

So in conclusion you can think Boris is a useless dud surrounded by incompetent fools - but look at the alternative, his 4/10 is still better either of the other options that we had. 

Friday Fun - "We're alrigght!"

 So with the vaccine first phase roll out going very well and the lockdown working from a cases perspective, we have seen two weeks now in the UK of rapidly falling cases and hospitalisations. 

Inevitably we are back to splits in the cabinet about when and how to ease back to real life. It seems to me this might happen a lot more quickly than we think, having all been battered with bad news for so long, hope is hard to create.

What do you think will happen?

A) end of lockdown in early March, into national tier 2, end of that by June. then next winter occasional tiering in areas with low vaccine uptake or new variants. International travel dependent on other countries getting their vaccine act together. 

B) Tier 4 by end of march, slow reduction in tier levels over the summer, with most restaurants and shops open by May or June. Maybe even sports events over the summer. 

C) Lockdown until end of April to really lower cases and allow vaccine her immunity effect to kick-in. Tier 3 over the summer and then staying there until year end and the whole population vaccinated. 

Which will it be, the sun is our I am plumping for A...

Extra points if you can name the accent in my head of the phrase, together with the date and place. 

Seeing the future in the markets?

At the time of writing the FTSE100 is off around 2% on the day, a small blip but still well up in the beginning of the year.

Most years, after a Santa rally to get their bonus' in, fund managers re-allocate their funds in January to safer plays adn let the market drift whilst thier benchamrks for the year are set. 

All very old school. 

This year is interesting, there is a huge race on in the UK to vaccinate as many people as possible before Covid takes too higher toll - on people mainly but also on the economy, a lot of which remains closed.

To me, the FTSE at 6700 odd seems like a very positive readout given the economic damage wrought by Covid. The market investors must seem to think the vaccine race will be won in short order and some normality begin to return. Then again, they can soon turn down, but it is an interesting indicator to watch - more insightful than Twitter...

How do we live with the virus over the winter?

This Covid-2019 is so hard to manage. After a six months it does not seem that much the Government do makes a lot of difference to managing the outbreak. Despite our breathless media, the same is true in some other countries like France and Spain. 

Heavy handed lockdowns have worked in March and April to reduce in the UK and other Countries, but only at a huge economic cost and also a big cost to wider health outcomes. Excess deaths is the real measure of how badly the epidemic is affecting a country and the UK in Europe (likely in part due to being honest about deaths) is the worst affected. This covers not just covid deaths, but also the more 'normal' killers like cancer and heart disease - both exacerbated by the refusal to treat people in hospital by the Heath Service and Government. 

But we are where we are and there are no silver bullets here to stop the pandemic short of a vaccine which at best must still be 6 months from any kind of roll-out that would have a real world impact. 

However, the Government to me has not got things badly wrong. In March they were unfairly criticised for taking the time to consider how long a lockdown could work. Here we are in October, willfully ignoring the evidence. Matt Hancock I saw yesterday basically threatening the population that increases in local covid cases will see the closure again of cancer treatments. To me, this is totally unacceptable - a punishment on the weak created by the (immune) strong and backed by the Government. It reflects the desperation of the Government to control a bored and frustrated population. 

If I had lost my job, the idea I am going to sit at home and starve is for the birds. Who cares about a virus that you are 99% likely to recover from as compared to losing your lifestyle, home and possibly family?  No chance. 

With the lack of compliance and new evidence showing lockdowns are no longer effective we need a change in how we deal with the virus and one guided by economics and wider health concerns than only covid. 

I would go for:

- End lockdowns of all types. 

- Rigorously enforce social distancing, wearing masks and basic hygiene

- Open all businesses and schools as long as they can create a socially distanced environment. Properly monitor and inspect establishments, with big fines for non-compliance. 

Only in an extreme case of say over 100,000 cases per day would be have a national lockdown and even then only for a couple of weeks to take the edge off the cases. 

The biggest challenge is around shielding, over 70's should be offered voluntary shielding by the Government for a long period, up to a year from now. This is the vulnerable group but they are also adults, if they want to take risks they should be allowed to do so, but if they want to shield they should be supported in that. 

I am no doctor, but I can see psychologically the impact of the pandemic and economically we are having a nightmare - something needs to change and the Government's science only led approach is not working in the wider interest. 

Covid, review of the season to date

Another week of Covid-19 starts and frankly now we are on episode eighteen the real action is now starting to take place.

On the political front, the poorly scripted revolutionary rabble of BLM continue to make bizarre ground. With a huge following of what seem to be death-cultists, their franky bizarre demands are only now getting minimal attention. Such is the zeitgeist prevalent though, they are able to act with impuntiy against the weak police and inaction of the Government who are intent on letting the thing blow out.

The Government itself has largely been ignored by the writers since the "Prime Minister gets Covid" story of a couple of months ago. Not really capable of doing anything much about the virus, the Government characters come out to make little speeches about not mch, building towards what should be big economic announcement, but it is a toss up as to whether they give Rishi Sunak a big script or just ignore him. For the opposition, it is easy to give some time to the dashing and hand-wringing lawyer Sir Keir Starmer, without him having any actual impact on events.

The references to the global impact of the virus are the weakest bit of the writing and presentation. The US is portrayed as if some sort of dictatorial revultion is going on when in fact it is an election year. Lots of places around the world are mentioned as doing better or doing worse seemingly only on the basis of if they have a right of centre Government. It is a silly approach becuase the same statistics they have used show the virus being virulent basically everywhere there is high population density and has to spread into the population.

The effect on day to day lives is a better view, the little people they throw into the show every now and again add some good colour to what is a very complex story. No one really comes close to the Colonel Tom Moore character though.

Overall though the whole show feels like it is building to a point, but equally could just fizzle out into a not very compelling conclusion - the whole thing is a morass of intertwined stories and the effort to make it a morality tale ring very hollow.

How is everyone else enjoying it?

V shape recovery on the cards?

With the Corona Virus in the UK seemingly evaporating at the moment, we may see a V shaped recovery for the economy. This would be amazing news as I have been thinking for a long-time that the recession we see will be awful. However, the virus is seemingly petering out much faster than the Government thought, just as it spread much more quickly than the Government could adjust for.

They key will be whether the Government, under intense media pressure, will have the confidence to say that things are more or less back to normal by July and as long as we wash hands and stay alert then everything can go back to normal. It seems a brave call, but there are 40 odd districts now corona free and that list gets longer everyday - July is a long way off from here at this rate.

Too optmisitic a take?

no work = no pay

It has been a long time coming, but finally the penny is dropping that lockdown is over and the Covid party can start to end. Unfortunately, the Government was so harsh in its biding in March and April that we now have a very scared population indeed.

Led by the Public Sector Unions and media cheerleaders like Pies Morgan, the scaring must go on. The fact that outside of care homes and hospitals there is only a tiny amount of Covid-19 now present must be ignored. The fact hat Covid is only bad for a small fraction of those that catch it must be ignored. The fact that Australia has completed a month long study to show kids don't really infect people (they carry too little virus in all likelihood ot pass on) must be ignored.

Nope, instead it is too dangerous to go back to work or have any sort of normal life. No pubs or restuarants, no airplane travel. No going back to to work.

The Government is in a fix here, after all, they started the panic and it becamse obvious when Boris himself was so ill with Covid.

But here we are with lockdown ending and the trains have gone from 97% below normal to 93% below normal. This is not good, far too many people want to stay at home.

The only solution will be a bit of stick at this time and a removal of carrot. Furlough must be run down quickly, with this the last month at 80% pay. Next month 40% would do, also teachers mus tbe told if they refuse to work that is their right, but the Government can also refuse to pay them (illness and shielding for the elderly teachers will have to be factored in).

The sooner we get things going the better for the social and economic health of the County, plus the quicker we find out if the second wave theories are true or another scare story.

How has the UK Government done re Covid-19?

Here are we, about 10 weeks into the depths of the crisis. It came very suddenly and took the whole of the West by surprise. East Asian countries, more used to China's lies and the SARS pandemic, were much better prepared overall.

With Lockdown weeks long now and the media going from one panic about not long enough to another about it being to long depending on what day it is, it is hard to judge what is going on.

The media are obsessed by narrative and story. They can whip up a storm about the danger of covid just as easily as downplaying it to a mild flu. I give the Labour party some credit here, they are manipulating this well with constant placemen and women able to go on about lack of PPE - following and feeding any negative narrative on the Government. Fine practice at the dark arts.

So how do we think they have done overall. We wont really know for a year or so when this horrid thing has swept around the world, but two months in is enough to make some statements -

A) Preparedness - the NHS has not been tested like Spain or Italy, the Nightingales were built but not needed. Overall, very creditable on this front. The lack of testing and PPE is a global issue for the most part but does show up some failure as does the miss of how important it was to protect care homes and care home staff. 6/10

B) Reaction Speed - Way too slow to close airports from key countries like Italy and Spain where we knew the infection was. This alone has led to a much bigger outbreak. On the other hand, they were much better with holding off on lockdown, knowing it would only last effectively for a few weeks - despite media madness at either end of it. 4/10

C) Medical Policy - By following SAGE the Government has both been senisble and given itself a get out of jail free card. The arguments about whether SAGE is right or not dont matter - literally know one knows better in the Country, it is just that answers are not easy. 8/10

D) Leadership - As the polls show, Boris is flying and Hancock and Sunak have been overall very assured. Raab did a good job standing in at a tough time. In comparison to the endless campaiging and whining from Labour, plus with a very hostile media to cope with, they have been excellent. 9/10

E) Economics - A generous furlough scheme has kept the Country in stasis for now. The scheme was delivered well too in short order. Other elements of the package are expensive but no one seems to care for now, the bill comes later. Hard to fault what has been done, but I fear extending furlough too long will be costly move and affect people too much. 8/10

Can Gatwick survive?

Virgin are closing their hub airport at Gatwick. This is very bad news for those who work in and near the airport. Virgin has been a mainstay there for decades and their HQ is down the road in Crawley. In short this could be the end of Virgin Atlantic, although the owners must be hoping it can limp on in reduced form until the airline industry recovers.

British Airways last week said they were also considering closing Gatwick as a hub. BA management have hated Gatwick for years and never made any money there, the Unions pressured them into keeping it open and now they have the chance to focus on Terminal 5 at Heathrow where they are profitable.

Norwegian had overtaken Virgin at Gatwick in terms of transatlantic flights but they are in bankruptcy and negotiating with their creditors. Perhaps they will not come back tof life post Covid-19 anyway?

Thomas Cook and Flybe have already gone bust pre-Covid. This leaves Gatwick very reliant on Easyjet and Ryanair for sustainability. A rought estimate though is that it is about to lose 30% of long-term slot holdings and up to 50%. There won't be many takers for these after Covid for a while.

I can see Gatwick having to suspend activity altogether at one of it terminals for cost saving purposes after the crisis and potentially for the longer-term.

On the basis of so much excess capacity we can stop worrying about Heathrow expansion for a few more years yet (the court case was lost anyway so that was on a backburner in any event).

Airports are money making machines but they have huge safety and logisitcal demands placed on them. They have not had to adpat as now within living memory. Smaller regional aiports that have suffered like this have quickly closed. Perhaps the national infrastructure vision of the Government will force them to do some kind of bail-out to keep services running.

But there are going to be a lot of demands on Government funds and the greenies will be keen to claim an airport scalp for their mis-guided climate change agenda. One to watch.

Can't see how airlines survive in 2020...

So (congrats Boris!) I saw snuck out this week by the Prime Minister was finally a review of how people enter the UK. Now the virus is under control, there ismore of a need to stop people from abroad coming to re-infect us all.

As such, the guidance will be 2 weeks quarantine for all visitors to the UK. We can assume other countries will do the same.

Also I travel for business a lot, this year until March I was on a plane every week without fail to somewhere or other. Since then not so much. At the office we are planning to not do any travel in 2020. And even in 2021 maybe no non-essetnial travel like conferences etc. so a steep drop in spend.

Few of us will be willing to take foreign holidays with 28 days of quarantine in total around the edges of it - unless your planning a few months in Australia who would even think about this.

Finally, with the UK being hard hit many countries will not want UK covid-ridden tourists anyway for a long time and visa restrictions may are likely. We may find we are not very popular with the locals if we were to go anyway.

All this is a perfect storm for our airlines, no business travel and no tourist travel for six to twelve months. No way the industry can survive in the shape it is now, maybe with drastic cost-cutting, no new planes, giving up all leases, giving up airport slots and reducing staff to only enough to run a skeleton service. The only good news is fuel will be at record lows and in normal times this is huge part of their costs.

Meanwhile some Countries less affected will be able to suport their airlines who will 'fly' into the market and pick up the slots and share when the time comes for a real renewal.

It is a right mess and along with a few other sectors I can't see how share prices are sustained where they are today when you see what is coming in the next few quarters.

Am I too pessimistic...what have I missed?

So how bad is it?

This is the biggest unknown question at the moment  - jut how bad is Covid-19 and how bad is the economy?

Boris is back at work today, but after the scare he had you can imaginehe will be very conservative on following the health guidance.

But the Government is rapidly getting into crazy amounts of debt and the economy is ruined for a generation already. People are talking about a recession worse than 2008 (supposedly a once in two generation event) but to me it seems not really dealing with what that means.

The comparison is now crucial because it will determine the next phase. At some point lockdown will be releaxed, but I fully expect a crash in the stock markets and property prices at that time, as the damage becomes more visible.

In parrallel we will know if the end of lockdown increases the virus spread once more and by how much. It could be we get back to the early March situation very quickly, or it could be that we stabilist with it in our society but at a lower level.

Closing our economy will kill tens of thousands of people, this will only exaccerbate the curretn situation. Already hospitals are empty as people stay away, many of the 'excess' deaths reported are likely to be not Covid but people dying of strokes and heart attacks at home. Missing cancer scanning and treatment is also lethal.

Such a hard balance to get right, but to my mind the Government should press on with ending lockdown at the beginning of May to begin an assessment of the situation, following the Red/Amber/Green type strategy recommended here and elsewhere a couple of weeks ago.

The unbearable lockdown

As night follows day, so the media hyperventilating about the need for a hard lockdown have switched to demanding an end to it.

The lockdown though now is causing a real split between those who are being furloughed or in full work and those who have lost their income entirely. Clearly the latter group are rather keen on coming out of lockdown so that they can survive.

My own focus today is those who are in lockdown but basically on an enforced staycation. There are millions of people now  in this state. Whilst worried for the future, they are actually having quite a nice break now. My hunch is quite a few won’t fancy a return to work. These will be the group that claim they are too scared to travel etc in true new woke style. They will demand to work from home or have sick leave.

The longer we have a lockdown, the worse this mindset will become. For this alone, we need to quickly long term impact for this further 3 week lockdown. I have not criticised the Government ugh clearly are trying their best and the time for asking questions about preparedness is later when we are through the worst.

France has already seen this phenomenon, I was speaking to an employer there who said 30% of staff won’t come back because they don’t feel safe but expect someone to pay them (white collar workers).

Ending lockdown - brand strategy needed

I really hope the Government can do a better job of Lockdown undoing than they did of doing it in the first place.

If we remember those heady weeks of er... last month, we can recall the Government seemed taken aback by the speed of the epidemic spread, as was every Government in Europe and North America.

Now though we have more time to consider how we get out of this box, as there are a few things that need sorting first:

1) As per yesterday, antibody tests and copious full body PPE for the NHS key workers.
2) Low enough community tranmission that the whole pandemic won't just start up again immidiately.
3) Enough extra NHS capacity to cope for a year with a few thousand people on ventilators at any one time.

Only really point 3 has been achieved, so we will be here another couple of weeks. But the lockdown must be released to save the economy but also in a flexible way that allows it to be re-imposed if needs must. The way to do this it to have a simple colour coded system.

This system can be used on motoroway signs, train stations, TV/Radio ads etc to let the population know where we are at any time. I would propose something like the below:

Chilli - Full lockdown as now, no going out, to be saved for when deaths are over 400 a day

Lemon - Travel to work, with masks, if needed, schools open, restaurants and cafes for takeaways, football behind closed doors etc.

Apple - social distancing stil in place, wearing masks when travelling, leisure open but with social distancing measures ( e.g less covers in restaurants, limited people in pubs, 50% capacity in sports stadiums)

It will only be with a vaccine in place of herd immunity that we will release from Apple status - so maybe not until spring 2021. In the meantime we need something that gives the populace a guide as to how they can live under this Covid-19 threat, but to do so responsibly and effectively whilst balancing risk and work.

If you like this idea, feel free to promote it, I am keen the Government make a better fist of explaining this clearly than they did in March when we entered the lockdown.

Can the NHS take it?

Herd immunity, a phrase spat out by Beth Rigby and Adam Boulton, is in fact the only route out of our crisis. A six month lockdown is not going to find any obedient takers. There is a small chance people might go for a in and out type strategy where we get sent home again for a few weeks for a week or two out again. This will work better when we have an antibody test.

What I have not seen though, amongst the cheerleading for the NHS, is that when reality hits in a few weeks time, it could get nasty. For lockdown to end, we need to accept ongoing illness and deaths. The NHS workers have to deliver this and risk themselves at the same time. Over time, when they see everyone else going back to normal this will be resented by them - as I would myself.

Where is the danger money? Where is the 💯 effective PPE and process?

Without these it is only a matter of time until the unions strike or the NHS suffers mass illness and nurses and careers stop going to work. I think both of these remedies can be found but they need to be high on the Government’s  agenda. Also it needs to be clear to the public that we are expecting those in the NHS to suffer as footsoldiers in war and to treat them with the respect this deserves.

"The Only Free Lunch ..."

A couple of weeks ago I did a piece on Black Swans involving some technical stuff on risk management, and someone asked if there was more.  Well indeed there is ... and this morning I'll pick up on some of the issues raised by our discussion on attempting to envisage some rational basis for determining a logical quantum of self-sufficiency or, as Mark Wadsworth put it, the "efficiency vs reliability" debate.

We can readily agree that full self-sufficiency is an implausible national goal.  It lay at the heart of North Korea's Juche *philosophy*, and look where that got them, even as they remain dependent on China for all manner of important things.  As one of our esteemed Anon's said BTL, "... trade vs self sufficiency, surely it's not an either/or proposition? The sin would appear to have become so reliant on single sources, which has many sources of blame, including the 'lowest price' mentality".

In normal times, it's positively beneficial to procure almost anything from multiple sources.  When one lets you down, the likelihood is another will come good.  Plus, you tend to get better prices because (a) you shop around and obtain good price discovery; and (b) suppliers quickly find you're not a mug.  (Obviously, if we thought to add Australia to our list of toilet-roll suppliers, the transportation costs would overwhelm the benefits of competition in that particular case.)

The price benefit can be real enough, but just as important is the risk-management principle involved - diversification, sometimes known as the only free lunch.  Describing it technically, we are relying on the variables of failure of each source of supply as being less than 100% positively correlated.   The maths involved here is Portfolio Theory, and it's an exceptionally important principle - at its simplest, well known thoughout the ages.  You can find it in the Bible (Ecclesiastes 11:2, v6), Shakespeare (Merchant of Venice); and Churchill famously stated "Safety and certainty in oil lie in variety and variety alone". (He was referring to his policy of sourcing oil for the Admiralty from more sources than just Persia, which had been the case in the early years of RN steamships.)  Not my job to advise anyone on personal investment, but everyone needs to bear it in mind: it has a role to play in every portfolio, large and small.

The second part of Anon's comment was also on the money.  "Perhaps it's time to start have rules on what %age of a good can be sourced from a single, foreign, nation or economic bloc? Security, after all, comes from plurality. Self sufficiency just changes *who* can take you hostage, rather than remove the threat. Add to that a minimum amount sourced internally, even it means having a nationalised source, with the capability of scaling up where possible, allows for flexibility and security of materials?"  This is exactly what happens in a good commercial risk-management regime - rules such as "no more than 20% of our business with a single counterparty" are instituted.  Quite a lot of valid maths can be put into this, to come up with something "optimal" - under a given set of assumptions.  The key, of course, is to price in the risk, to counter Anon's issue of going for the lowest (nameplate) price. We may return to risk-pricing on another occasion, if we've the appetite for even more technicalities (when we've nothing better to do in lockdown ...)

A free lunch ... but when the custard really hits the fan, variables that were heretofore less than perfectly correlated suddenly become highly correlated, all in the same direction - downwards.  If Tesco has run out of toilet paper, so too has Sainsbury - and it ain't a coincidence.  At this point the maths no longer helps us, and we're down to inventory, improvisation, *requisitioning*, sauve qui peut ... and ultimately, privation.

Thus far, Covid-19 has mostly exposed lack of diversification in medical supplies of various sorts.  There's every reason to believe that, as the months wear on and the tide recedes still further, we'll find who's been swimming without trunks on a lot more beaches.  Starting with food ..?

ND

What purpose does keeping financial markets open serve today?

In normal times, markets are a keep lifeblood of a capitalist economy. They send the singal to participants and the Government about the state of the economy and are a general barometer of health for a market economy.

But in times of crisis they are scary places. The markets are run these days by both human traders and their pet algo's. This means they experience both euphoria in the good times and fear in the bad times. Sometimes the algo's are designed to exploit the fear even further.

At this unprecedented time of crisis, I don't see the point of the markets remaining open for stocks and shares. We know the crisis is only going to get worseover the next few weeks. Then hopefully better. As such the markets are just going to keep dropping on every bit of bad news.

Meanwhile, Government's like the UK have stepped in to effectively nationalise the workforce. A completely unprecedetned move. Plus loans and tax holidays for businesses. These may work or may not work.

So to me the unknowns are so large that the markets will have no real option but to fall much further. This only unbalances the economy further for any recovery - hurting savers and allowing well-heeled Private Equity a chance to buy up lots of companies on the cheap at a future date. The answer surely must be to halt trading for 6 weeks.

Forex can continue for trade as can commodities as these are life essentials for a function global economy. But stock markets are a one way bet and the lack of price information is not going to change how our Governments make decisions in the next few weeks.

I am amazed at the lack of discussion of this in the media - this can only be because the responsible types at the Financial Times worry that this discussion will cause a stampede to cash by retail and other investors and thus another steep fall.

However, we need to be rational, a collapsed market will not be the basis for a quick bounce back and reset in a few months time if we are lucky enough to get to that point.

Debate needed..

UBI debate - a good idea or a sily one?

As we know the virus is currently laying waste to the UK economy. The Leisure and Tourism industries combined are over £400 billion of revenues per year according to Government statistics.

The £350 billion that the Government announced in bailout loans yesterday is only going to be a band ai for a few months, unless the virus challenge is overcome, then so too will our modern economy and our Government finances.

What a challenge that will be!

However, we cna hope that the worst of it is over in the next couple of months. Until then the US Government is considering giving everyone $1000 into their accounts to help them with bills and see through these dark times. On paper I like this idea, as it is simple and easy to do (IRS/HMRC have everyone's bank account details already) - it gets the cash where it is needed.

I am less sure about Universal Basic Income as a long term play though - becuase although it should allow for a more felxible and less stressed workforce it is also ruiniously expensive. It ends up being a middle class subsidy for wannabe actors and muscisians or those who endlessly study degrees - or even those who want to apprentice as MP's for a while. Meanwhile the workes pay huge taxes to support this and the truly needy see their benefits cut.

To give an example, the NHS costs around £2200 per person, with UBI we would have to give say £500 a month for it to be realistic - so £6,000 a year. That plus the NHS is £8,2000 per person per annum. At over £750 billion, that is more than the UK Government's entire spending and 250% more than we currently spend on all social benefits and the NHS added together.

Where would the tax come from when so many people could eeek out a meagre living by doing nothing?

So for me the principle of UBI is quite sound, the practical implementation of it makes it financial suicide - what do you think?

2008 is going to feel like a picnic in comparison

The worst economic crisis of my life was the 2008 financial crash. As readers will know, we had long forseen a crunch coming in the credit markets due to lax Government regulations and arrogance of those in power both at the banks and the Governments.

However, 2020 feels like it will be worse. For one, those immidiately affected are the old, the poor (retiaers, coffee shop owners, airline workers etc) and the needy; not wealthy bankers losing their jobs in Canary Wharf at Lehman Brothers as the first stage.

Moreover, because this crisis is so visceral and real, the Fed last night dumping $500 billion into T-Bills and dropping interest rates by 100 basis points has made no difference. Markets are down about 6% at time of writing. Pumping more fiat money only helps the Banks and traders, it will not make people fly again nor can a coffee shop owner survive when the Government has ordered them to close.

The 3 to 4 month hiatus in the economy we are about to experience will be very hard to manage. I can see UK Government debt ballooning by £100 billion for this year and maybe next year too - there is just so much to subsidise and try to keep going. In the round, this in and of itself won't kill the Country financially (unlike Italy) but it does mean higher taxes will be coming in the 2020's to pay for all this - and who is to say this is a one off, quite the opposite, Covid-19 is a successor to H1N1, so is already not a one-time emergency.

We will have to see where things go but airlines and all forms of travels, sports and events and retail food (incidentally all amongst the big winners economically of recent trends) are all going to be smashed to pieces. Whatever world emerges by the mid-summer will look very different to the world as it was on Valentines day in the West.

Recession incoming?

 I Know I am like a broken record now, but this is a very tough morning economically for the the world and for the UK. Don't fancy being the Chancellor trying to draw up a budget.

The Ftse is now down near 6000, having been at nearly 7500 a few short weeks ago. We started the year quite optimistically thinking getting Brexit Done and Trump pump priming the US economy ahead of an election would make for a strong year.

Now we have 3 simultaenous, but related,  crises:

1 - Supply shortages for finished goods and materials as a lag from a 3 month closure of the Chinese indsutrial heartlands.

2 - A new shock to the West as Covid-19 impacts every day life and travel with a potential for a China style shut down for a couple of months. 

3 - Saudi Arabia getting tired of the Russian approach to OPEC and decidig now is the time to start an oil war (Oil price fell 33% in one minute overnight) - just as oil demand is dropping due to lack of travel and shipping. 

Of the three above, only point one is under control with China starting to get back to work last week. The second point is on a knife edge, as the virus gets into Europe at the end of winter - so much will depend on the weather in the coming weeks.

The oil war should be a shot in the arm to the economy at a desperate time, but as we know it is good for some sectors and terrible for others.

UK Gilts are all negative now, the sign of a real crisis if there ever was one.

We still might see this as an over-reaction and there could be a fast recovery if Governments get a grip on the Virus, but there are few signs of that. UK still, after 2 weeks, had planes landing constantly from Milan for example. EU countries with their endless virtue signalling abou tinclusity and openness do seem to struggle with scenario's like this, as does the USA.

Fun week ahead