It’s not all bad. It really isn’t. The great virus crisis is utterly miserable in far too many obvious ways for far too many people. But there is perhaps a glimmer of positivity to be found in the way it is also helping us cut through a lot of the world’s waffle and look at some of our core problems a little more clearly. We cover a good few of these things in this issue (our fifth done entirely from home!).
First and probably most importantly it looks like increasing numbers of us will begin to understand that inflation is the only even vaguely kind answer to our long-term economic problems – and that as soon as we get on with creating it the better. We may even start to think that a fairly comprehensive debt jubilee would be the most painless way of achieving just that. Listen to my podcast with the expert on jubilees, Steve Keen, this week and see John’s thoughts on the matter. (Key point: it is possible for jubilees to be fair even to those who do not have debt.)
A few other things. We might now learn to protect ourselves from China a little better, or at least think about how we are not protecting ourselves. We might all be forced to be a little more honest on the monumental failings of the European Union – and its viability. Worrying about this is not illiberal or immoral – it’s entirely rational. We may begin to appreciate the bureaucracy-free philanthropy of the world’s super rich and even the idea that work (or at least purpose) is intrinsic to our happiness. Perhaps we will even start to think a bit more about the value of our universities (some are invaluable, some are of no value).
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I can offer one other glimmer of hope for you. In our cover story, John explains just how awful the shutdown-driven recession might be. But there is a chance that our forecasters are being a bit too downbeat. Not all the numbers coming out are as horrific as expected. Chinese exports fell only 6.6% in March and retail sales in the US were down only 8.7%, despite lockdowns being put in place in the middle of the month. April could well be much worse of course. But it’s worth wondering (as ever) if the models being used to suggest total economic carnage are getting their inputs right.
As Intertemporal Economics’ Brian Pellegrini points out, most of the modelling for the impact of pandemics was done after the SARS outbreak in 2003. The culmination of all that work came in a 2006 study by the US Congressional Budget Office – which is now much relied upon. The thing is, it’s a tad out of date. Technology has moved on massively – as has the ability of millions to be fully economically active even from home. Sure, a huge part of the economy is frozen. But exactly how much? On my street, everyone who was working is still working – at home, but more or less as productively as before. Are we underestimating the number of people who can do that in a modern economy?
Time will tell. But the point is that while the risks to the downside for economies and markets are more than obvious, there might be risks to the upside too (if things aren’t as apocalyptic as some think, is it possible that fiscal and monetary authorities have done too much?). With that in mind, this week Cris Sholto Heaton wonders if it’s time to buy into Asia and, of course, John’s cover story – where we also update on the performance of our portfolio of investment trusts.
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Three funds to consider as UK small caps trade at 30% discountUK small caps have been unloved for some time, but a shifting economic environment could give them a boost
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How much more you would need to save if UK state pension age hit 70Denmark is raising its retirement age to the highest in Europe – could the UK follow suit?
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UK wages grow at a record paceThe latest UK wages data will add pressure on the BoE to push interest rates even higher.
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Trapped in a time of zombie governmentIt’s not just companies that are eking out an existence, says Max King. The state is in the twilight zone too.
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America is in deep denial over debtThe downgrade in America’s credit rating was much criticised by the US government, says Alex Rankine. But was it a long time coming?
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UK economy avoids stagnation with surprise growthGross domestic product increased by 0.2% in the second quarter and by 0.5% in June
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Bank of England raises interest rates to 5.25%The Bank has hiked rates from 5% to 5.25%, marking the 14th increase in a row. We explain what it means for savers and homeowners - and whether more rate rises are on the horizon
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UK inflation remains at 8.7% ‒ what it means for your moneyInflation was unmoved at 8.7% in the 12 months to May. What does this ‘sticky’ rate of inflation mean for your money?
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VICE bankruptcy: how did it happen?Was the VICE bankruptcy inevitable? We look into how the once multibillion-dollar came crashing down.
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Would a food price cap actually work?Analysis The government is discussing plans to cap the prices of essentials. But could this intervention do more harm than good?
