Editor's letter

Looking on the bright side

The great virus crisis is miserable in many ways. But there are glimmers of positivity, says Merryn Somerset Webb.

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).

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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