The coronavirus will redefine what currency-issuing governments can do – finally

Life as we knew it is changing fast, almost by the hour. Most of my speaking engagements, which were heavily booked for the foreseeable future, have been cancelled or deferred. All the gigs that my band was booked for have been cancelled until people start returning to the now, empty venues. And, more significantly, the ideologues are giving way to the pragmatists in the policy space. Almost (see below). The sudden realisation that even Germany will now spend large amounts to protect their economy exposes all the lies that have been used in the past (up until about yesterday) to stop governments doing what they should always do – maintain spending levels in the economy to sustain full employment and ensure no-one falls through the cracks and misses out on the material benefits of growth. In the early days of the GFC, I thought that the neoliberal era, supported by the mainstream macroeconomists, might be coming to an end. Maybe I was a decade out in my prediction. Perhaps this crisis, induced by a human sickness, will end the madness that has redistributed massive volumes of income to the top-end-of-town, sustained elevated levels of labour underutilisation and seen the traditional progressive political voices become mouthpieces and even agents for the neoliberal economic lies. I was wrong in 2008 on this score. I hope something good like this comes out of the current disaster. The coronavirus comes on top of already growing dissent over the failure of mainstream economic policy. It will redefine what governments can do with their obvious fiscal capacity and will demonstrate once-and-for-all the lies that the mainstream economists tell about deficits, inflation, interest rates, etc. It will categorically demonstrate the capacity of the currency-issuer. All that will lay the foundation for a better future, if we get beyond this current malaise.

Last week, there was a coordinated policy response in Australia as the RBA cut rates and the Australian government stopped raving about its surplus ambitions and introduced a stimulus (aimed at business) of about 1 per cent of GDP.

I did some interviews on the national broadcaster (ABC) in the aftermath and indicated that 1 per cent of GDP would hardly be enough – I think more like 4-6 per cent will be required (at least) – and that targetting business was the wrong way to ensure those affected by the virus crisis are best protected in income terms.

What is now being realised is that the global economy is sinking into depression (or a very severe recession) which will be unlike the typical V-shaped recession where output falls quickly (and sometimes significantly) but growth resumes relatively quickly and robustly once confidence returns after some sort of fiscal stimulus.

That is what happens in a standard demand-side event where firms get skittish and reduce investment spending, lay off workers who then stop spending much and sales plummet. The government steps in, sales rise again and away it all goes again.

The GFC was not such an event – it was a balance-sheet recession – where the initial problem came from financial markets (over-indebted borrowers and over-valued assets) and fed into the real economy as bankruptcies multiplied.

The solution then, which wasn’t properly implemented by deficit-shy governments, was to support growth with large and sustained fiscal deficits which allowed sales and national income to rise and saving and balance-sheet restructuring to occur in the non-government sector.

That process is a sort of dragged out U-shaped event – a rapid descent followed by a very drawn out recovery that required fiscal support for years while the balance sheet repair was going on.

The coronavirus event is different again. It has supply and demand elements which are impacting on growth.

The supply dimensions (factory closures, etc) mean that the stimulus injections designed to help the demand collapse need to be carefully targetted. It is also why monetary policy is less likely to be effective.

And the fiscal support will be required for an extended period and should not be withdrawn until business investment is growing back on trend and household debt is significantly reduced.

The point is that the vestiges of neoliberalism have to be expunged in this crisis. We cannot return to where we started both in terms of aggregates (like household debt) and policy mentality (surpluses are the only desirable goal).

I talked about where I would spend government currency in the two-part blog series:

1. The coronavirus crisis – a particular type of shock – Part 1 (March 10, 2020).

2. The coronavirus crisis – a particular type of shock – Part 2 (March 11, 2020).

So I won’t repeat what I said.

Other than to say that this would be an ideal time to announce some directional changes in government policy – for example:

1. Introduce a Job Guarantee – to give an income security option to all those (particularly low-income, precarious workers) who will face massive income losses as a result of being made redundant. There are no end of productive activities that can be done which will not be constrained by supply-chain disruption arising from the factory closures brought about by the coronavirus.

And specifically, this would be a salvation to the arts/music scene which is now being devastated by the cancellations as a result of the virus.

Instead of performing live (while the restrictions continue), these workers could write and record new material, paint or sculp things etc.

But they would be able to maintain (mostly) their rents, mortgages, and other nominal commitments that are not ‘cancelled’ as a result of the virus spread.

2. Restructure the gig economy – introduce far-reaching reforms to force employers to pay sick and holiday pay and to treat all workers as employees rather than independent contractors.

Initially, a publicly-funded phase-in period could be offered (the stimulus part) so that workers sick or in quarantine would continue to stay solvent and which would not penalise the employers who are already likely to be enduring a massive collapse in revenue.

But once the crisis passes then the phase-in support vanishes and the employers have a choice – restructure their operations or exit.

3. Create a public bank – the private banks are going to need substantial public support. As in the GFC, many will become insolvent unless they are guaranteed by the government.

The government should guarantee all deposits for a time and offer to integrate them into a new public bank. Depositors would then have a choice. After some period, the guarantee would lapse and only apply to the public bank and consumers would understand the risks of their choices.

4. Restore national ownership of the airlines. The tourist industry is facing ruin. The airlines are going to need massive public injections to stay solvent anyway. Many were privatised in the early days of the neoliberal hey-day. The government should offer full support but take over ownership.

And more.

It is no surprise that Europe is dragging its feet on fiscal support.

We had the ridiculous situation last week, where Madame Lagarde, no central banker that is for sure, addressed the press conference after the ECB Governing Council had met on March 12, 2020, and immediately created financial chaos.

The – Transcript – records that she was asked about the implications of the obvious increase in “debt issuance” that will be required to deal with the crisis and the fact that “certain countries are hit especially hard, like Italy”.

She was asked: “What can the ECB do if the spread for government bonds increase?”

Her reply was extraordinary:

My point number two has to do with more debt issuance coming down the road depending on the fiscal expansion that will be determined by policymakers. Well, we will be there, as I said earlier on, using full flexibility, but we are not here to close spreads[1]. This is not the function or the mission of the ECB. There are other tools for that, and there are other actors to actually deal with those issues.

Now if you read these statement regularly you will note there are really never footnotes appended after the fact.

That [1] note linked to a subsequent press comment Lagarde made to CNBC after all hell broke loose in the secondary bond markets (Italian yields rising sharply) and Lagarde had obviously been hauled over the coals by other members of the Governing Council.

After that, she claimed that she was “fully committed to avoid any fragmentation in a difficult moment for the euro area.”

Some have speculated that her initial statement was not a gaffe but a well-designed ploy to put pressure on Germany to announce a major spending injection.

Others have interpreted it as the statement of a lawyer (given Lagarde’s training) about the Treaty obligations of the ECB. That may be true but ignores the reality that the only reason the Eurozone survived intact in 2010 and 2012 and subsequently was because the ECB became a quasi-fiscal agent in the absence of a federal capacity and defied the strict rules of the Treaty by funding government deficits to the tune of billions of euros.

The Eurozone only survived because the currency-issuer acted outside the ‘law’ which should tell you everything about the flawed architecture of the EMU.

This morning (March 16, 2020) we read – Christine Lagarde apologises for botched communication of ECB strategy – and learn that the Madame spoke to the Governing Council members on Friday and said she was:

… sorry for comments that led to the biggest single-day fall in Italian government bonds in a decade.

But despite being known as “Madame la Gaffe” (from her days as French Finance Minister), she keeps her job.

Interestingly, the German press gave Lagarde support for her ridiculous comments.

The Frankfurter Allgemeine ran an Op Ed from several economists (mostly retired) including Edmund Stoiber, Peer Steinbrück, Wolfgang Clement, Günther Oettinger, Hans-Werner Sinn, Franz-Christoph Zeitler, Kurt Faltlhauser und Marcus Vitt (March 15, 2020) – Für eine neue Geldpolitik der EZB – which accorded with Madame Lagarde’s claim about the ECB role.

They claimed that as the coronavirus crisis was “primär um eine Angebotskrise” (“primarily a supply crisis”), there was no demand-side role required by the ECB.

They also said that the crisis “ist ein Signal für eine Zinswende nötig” – that is, that interest rates should be pushed up as the infection rate subsides.

They also said that:

Wie Präsidentin Lagarde zu Recht ausgeführt hat, ist es auch nicht Aufgabe des Eurosystems, Zinsunterschiede zu verringern.

In other words, La Madame was right in saying the ECB is not about controlling bond yields.

And, we read that the German (Source):

Federal Ministry for Economic Affairs and Energy published an order on 4 March 2020 in the Federal Gazette prohibiting the export of protective medical equipment (medical face masks, gloves, protective suits, etc.)

European solidarity anyone?

How much of the shortage in Germany of “protective medical equipment and in capacity in intensive care units” the result of their obsession with primary fiscal surpluses?

Of course, division within Europe is the norm.

It is clear that the European elites in Brussels are not united in a way forward to deal with the crisis.

All their previous forecasts for this year and associated ‘budgeting’ are now null and void.

They are staring at a massive collapse in growth on top of an already slowing economy.

They are staring at thousands of shops, service outlets (cafes etc), tourist operators, airlines, and major sporting codes becoming insolvent.

They are staring at millions entering the ranks of the unemployed, many without any defined income support available and starting from an already precarious state.

And, as a consequence, they are staring at the need for fiscal deficits to go many multiples over the Stability and Growth Pact upper thresholds.

Today’s Eurogroup meeting will have to state categorically that the fiscal rules are no longer applicable and sustained increases in deficits will have to become the norm.

The ECB will have to confirm that they will fully support the governments by large-scale purchases of their bonds in the secondary markets to prevent the bond markets from demanding punishingly high yields.

The problem for the Eurozone, that Madame Lagarde seemed to forget, was that the ECB is the only European institution that can control ‘spreads’ of Member State bond yields against the bund.

That is the system they created. They have to live with the consequences of that.

And the more vulnerable nations, such as Spain and Italy at present, will have to be more or less permanently supported through ECB funding, if they are to remain solvent and overcome the huge costs incurred by their coronavirus strategies.

Madame Lagarde was right in saying that:

An ambitious and coordinated fiscal stance is now needed in view of the weakened outlook and to safeguard against the further materialisation of downside risks …

But, the EMU doesn’t have that capacity in its current configuration.

The individual Member States surrendered that capacity when they decided to use a foreign currency and collapse their own central banks into the Eurosystem.

If they try to expand their deficits they must satisfy the private bond markets who realise they are investing in states that carry credit risk (because they use a foreign currency).

This is especially the case when the Member States are bound by fiscal rules that turn on alarm bells for the bond markets as breaches are approached.

Which means that all the rules that constrain the fiscal capacity of the Member States have to be set aside.

And to contain the credit risk – which means to effectively deal the private bond markets out of the game – the ECB has to be decisive and eliminate the influence of the bond markets.

They, alone, can do that in this poorly designed currency union.

Whether the Eurogroup can agree to any of that is another matter.

The track record is certainly not good and the portents are not there at present.

They might agree to some billions of stimulus (at present only €7.5 billion) with rules and sunset clauses about no permanent transfers and all the rest of their gibberish.

But they will need multiples of that and the transfers will have to be permanent. Get over it!


Essential listening and reading, the full audio and transcripts available of the 2015 Eurogroup meetings at which Syriza participated in the lead up to the June surrender to the neoliberal austerity – Euroleaks


In my recent lecture tour of Europe I argued that we were already amidst a paradigm shift in economic policy thinking as the dissonance of the neoliberal era brings together disparate groups – an anti-establishment citizens’ revolt, central bankers calling for fiscal action, and financial market players realising their business model has been almost terminally compromised – realise that mainstream macroeconomics is a failed discipline.

The coronavirus comes on top of that already growing dissent.

It will redefine what governments can do with their obvious fiscal capacity and will demonstrate once-and-for-all the lies that the mainstream economists tell about deficits, inflation, interest rates, etc.

It will categorically demonstrate the capacity of the currency-issuer.

That is enough for today!

(c) Copyright 2020 William Mitchell. All Rights Reserved.

This Post Has 34 Comments

  1. Bill

    Paradigm shifts happen quickly and for the strangest reasons. this time, one of the most vulnerable groups in this crisis are the Baby Boomers who have been shaken out of their “how do we pay for it because I don’t want to be taxed for it” mindset by a virus that will kill them in larger numbers than any other age group on the planet.

    I joked on the weekend that this should be called the “neoliberal virus” It emerged from an unregulated “wet” market in the neoliberals’ greatest success story (China), demanded that a casualised/part-time workforce self isolate to contain its spread even though they are not entitled to sick leave, will put under-resourced public health systems suffering from a decade of neglect and austerity under stress and finally it took the only employee group who have the market power needed to say “stuff this I’m not coming to work today, its dangerous” (i.e. millionaire F1 drivers, NBA basketball players, European football players, etc.) to drive home the scale of the problem.

  2. Well hopefully, I mean really hoping here, the corona virus does not demonstrate that too much. Because everyone knows virus doesn’t use or care about money at all no matter who issues it.

    Much as I have come to despise ‘neoliberals’- they didn’t cause this virus, even if they might stand in the way of proper reaction to it.

  3. Australian government set to announce a second stimulus package (one hopes that the penny has dropped with them that shovelling cash to business and largely ignoring the great mass of households isn’t likely to save many jobs) – details still sketchy.

  4. Supermarket chain Coles announces intentions to employ 5000 more staff (casual of course) to cope with the extra demand.

    While demand for many things is beginning to slump, demand for essentials like food is actually booming because of hoarding behaviour.

  5. “No one should have to worry about paying rent, buying groceries, or additional child care because of COVID-19. We will help Canadians financially,” Justin Trudeau said from the steps of his home in Ottawa, Friday.

    “You’re worried about your health, about your family’s health, about your job, your savings, about paying rent, about the kids not being in school. I know that you’re concerned about uncertainty in the global economy. The steps being taken to keep you safe have an economic impact, but what is also true is we are in the enviable position of having significant fiscal firepower available to support you.”

    Justin Trudeau has cemented his reelection in the next Canadian Federal Election.

  6. What a wonderful opportunity for the British Government to buy back all the railways companies going broke for 1 Pound each, put all the employees on the civil service payroll and carry on with the necessary maintenance and upgrade work in preparation for the resumption of the services later on.

  7. “That process is a sort of dragged out U-shaped event”

    Perhaps L-shaped conveys the point more clearly?

  8. Here in San Francisco all the workers from Facebook, Google, Salesforce, etc. are working from home. Yet all the catering vendors, cleaning people, security, building engineers, construction workers are required to come in to the city via trains, buses, carpool. Which none of us can afford not to. The state government is trying to take action but they are limited by budget, and they are probably too late. I hope I am wrong but it seems San Francisco is doomed.

  9. “primarily a supply crisis”

    I can’t buy anything (in Italy) other than food, medicine, or electrical goods. Or I could try to purchase on-line. But who will deliver? If suddenly a nation of 60 million people requires an on-line delivery service for almost everything, that is going to create a slight *demand side* bottleneck.

    Even supermarket delivery services for daily essentials are completely overwhelmed. You have to queue outside even the smallest grocer, and the policy is “one in, one out”.

    Maybe Lagarde was trying to calm the population, but her remarks just make her look deluded.

    I hope you are right that a paradigm changes is coming, but I’m not holding my breath.

  10. I’ve never believed that the death-penalty was merited by sheer, innate, bone-headed, stupidity (nor for homicide, come to that – but that’s for another discussion), so i do sincerely hope that none among those “several economists” who were authors of the Frankfurter Allgemeine op ed who are within the most at-risk cohort actually die from covid-19 – even though it would be almost irresistibly tempting should such a dire fate regrettably befall any of them to read-into that the workings of poetic justice.

    These ornaments of their profession have – with the predictability of automata – duly disgraced themselves once again. They are clearly totally incorrigible – but then, we knew that already. Their prescription coming on the very day when the WHO declared Europe (its number of cases and deaths having outpaced China’s) now to be the epicentre of the pandemic gives to it an enhanced level – if such were possible – of blind idiocy.

    It will be more interesting to discover to what extent their bunker-mentality still continues to be shared by the vast majority of their compatriots after this pandemic has run its course and the full costs of – and most importantly the means chosen for – repairing all the damage done by it come to be assessed, both within Germany itself and more widely throughout the German fiefdom known as “the eurozone” (ie the “disciplined” core members of same – the peripheral ones having long ago been written-off as irresponsible and degenerate layabouts, spendthrifts and lotus-eaters).

  11. @ Jerry Brown
    “Much as I have come to despise ‘neoliberals’- they didn’t cause this virus, even if they might stand in the way of proper reaction to it”.

    Not “might”. Jerry:- “do”.

    As exemplified by the Frankfurter Allgemeine op ed fossils (sorry, “economists”).

  12. @Andy. Not ‘L’ shaped! My FT letter: “Two years ago in this newspaper Gillian Tett (“Recovery not as easy as U, V, W”, May 29 2009) conjectured that the recovery would look like the shorthand sign for “bank” (right). And look what has happened: a sharp downturn caused by the global financial crisis, followed by a gentle upturn when the Labour government introduced some useful stimulus and now a period of flatlining, which presumably will last until the coalition’s Plan A is abandoned.

  13. Was trying to do the ‘understatement’ thing so the Brits could understand me… 🙂

  14. For me the solution is a truly epic spendathon, probably off budget, that replaces all the wages etc the Coronavirus causes. It really is imperative we do not descend into recession or depression. Avoiding that will simplify the effort to ride out this pandemic. The quantity of currency required could possibly be described as a war effort. Here it would be several trillion dollars, but I doubt as much as the US Fed spent on bailing out the GFC banks, which was $US29Trillion, between 2008 and 2019. It caused not a whisper of opposition.
    It seems now Morrison etc is finally seeing that the deficit must be extended. But he is unlikely to really step up to the enormous sum needed. It can be for bushfire relief as well.

  15. re;
    Jerry Brown
    Monday, March 16, 2020 at 23:06

    “Was trying to do the ‘understatement’ thing so the Brits could understand me… :)”


  16. Dear Bill,

    The situation in Greece right now, is also a clear example of the craziness of the whole EZ. Not only the ongoing austerity of the last decade has left our health system totally unprepared for a crisis like this, but we still have to obey all the rules resulting from the memoranda like the 3.5% of GDP budget surpluses.
    Last Friday our “government” has announced a series of 8 economic measures, the last of them was the most depressing showing once again that we are still under the strong rule of Troika:
    “8th. We claim fiscal space. In particular we claim:
    The full utilisation of the flexibility margins predicted within the EU stability and growth pact for emergency situations.
    To apply this flexibility for our country regarding this year’s goal for the primary surplus, and
    to expand appropriately the spending that is exempted from the calculation of the primary surplus.
    Spending for supporting businesses, employees, citizens and health system.”

    So even in the midst of a global pandemic, our “government” cannot simply act to take the appropriate measures but has to beg the true rulers of our nation to allow us some space to breathe.

    Since you also mentioned Euroleaks, I would also like to note that Varoufakis has presented a plan of 7+1 measures which in my view is typical of his ambiguous stance on EZ. He says that his measures cost around 3.6bn euros. He then insists that we should vote for these measures as a unilateral act without negotiating with the Troika. However, explaining that the money will come from the reduction of the primary surplus goal from 3.5% to 1.5%, he claims that this should have been our goal in any case. Presenting it as some kind of a natural percentage without giving any further justification and of course not mentioning that this is still austerity. On the contrary he supports that this would be more than enough to help Greece avoid the depression and deal with the systemic problems arising from the fight against coronavirus.

    This is our disappointing political personnel in Greece. On one had our “government” begging for some freedom and on the other hand the (self declared) responsible opposition, presenting arbitrarily imposed austerity constraints, as a progressive and revolutionary alternative.

    P. S. The greek version of Varoufakis’s plan:

  17. I am saddened by the terrible circumstances that so many around the world are facing, both in terms of their health and economic wellbeing. I am hopeful that the necessary fiscal remedies will be applied, despite the prevailing orthodoxies which are the equivalent of medieval medical practises (think bloodletting).

    But I will not rest until those responsible for hoodwinking their fellow citizens with their mummery are hounded out of their sinecures and exposed to all of the ridicule and hostility they so richly deserve.

  18. You see though that the WHO is trumpeting on its website the: ‘Covid-19 Response Fund’ as a ‘philanthropy and business-led’ initiative (Facebook and Google well in there)? Further giving the impression that the world must go running to well-meaning billionaires to fund the global response.

  19. Here in Good Old Blighty we’re trying to get used to the bloated Johnson forcing his facial muscles into a shape that moves close to looking grave and serious which must be costing him a colossal effort of will.

    Again, we’re getting very slow reactions to help temporary/zero hours workers and those about to claim Universal Cock-Up (aka Universal Benefit) and the use of welfare claimants as effective social pariahs has not yet ceased with more cases of hounding appearing almost daily. This has to stop-and quick,

    Let’s hope that this virus can create some sort of social cohesion in Britain which I have seen become a vile and calloused society over the last ten years.

    The panic buying and hoarding has been utterly beyond shame and indicative of how much we have become an I’m-alright-Jackist society.

    Thankfully there are just about enough decent folk around to counter this.

    Will this signal the end of the charlatan leader phenomenon? We shall see.

  20. I think Bill is undervaluing the gig economy. The gig economy gives people the freedom to explore & carve out their own income opportunities (& to encourage businesses to offer such opportunities) rather than expecting people to enslave themselves to the whims of a hierarchical employer for their working lives. (My observation of gig workers in New Mexico, which has abundant gig workers, is that they’re enjoying that freedom – although they’d like a bit more income).

    Of course this should be accompanied by a work guarantee program providing some wage competition for the businesses offering gig work, coupled with sustenance payments for those who can’t work. I don’t favor mucking up the program up with the benefits employers historically provided (like healthcare, sick pay, etc.) – rather I’d prefer that those be provided by government (via direct payments). And I’d favor administering the payments thru a public bank for max efficiency, with all participants having their own fee-free accounts (with debit card).

  21. I am far more pessimistic about the outcome in the long run and I am afraid that paradigm shifts do not operate in the way described in the main article. Mainstream economics (neoclassical and New Keynesian) is the ideology of neoliberalism. This ideology is effectively dead since 2008. The same process happened in Eastern Europe in the late 1960s with Marxism-Leninism.

    The death of Soviet Marxism as ideology in Poland was related to the persecution and expulsion of the reformists (also called “Zionists”) in 1968. These were the last group of people who wanted to modify the system within its own bounds. As a result Polish intelligentsia embraced liberalism (in the mid-1970s) or catholic conservatism (after the election of Wojtyła, 1978). The majority of socialists-reformist scholars (such as Włodzimierz Brus and Kazimierz Łaski) had to leave. They later helped designing Chinese market reforms in the early 1980s. It worked there. It could have worked in Eastern Europe, too. But we ended up with the neoliberalism because the ruling oligarchy in Moscow and Warsaw wanted the preservation of the status quo at any price. (Similar processes occurred in other Eastern Bloc countries).

    Despite the fact that only morons or people who sold their souls believed in Marxism-Leninism after 1968, the system survived the economic collapse and social revolt of 1980/1 because people had good ideas but the authorities had tanks. The system was dismantled in the late 1980s when it was obvious that command economy with a rigid pricing system was totally inefficient and the civilisational gap between the capitalist West and communist East was only getting wider. The cold was ver. 1.0 was not won with the roar of supersonic bombers carrying nukes but with the whimper of people queuing to get toilet paper which was always in short supply in Poland (that’s why I am laughing at the people queuing to get it now here in Australia).

    The current neoliberal system is ideologically dead because, like communism, it fails to deliver. While the motto of communism was “from each according to his ability, to each according to his needs”, the needs of the working class were not satisfied so people did not put any effort. The motto of the liberal system could be presented is “a fair go for those who have a go” (and this is from the website of the Liberal party). There is nothing far more detached from the reality in Australia. The true motto is “housing bubble uber alles”. (In the US it could be rephrased “profits or death”). All what is left to the working class is the possibility of “chałtura” (moonlighting), a Polish word borrowed from yiddish, describing the gig economy from a century ago. “Nihil novi sub sole”. I won’t buy this one.

    The system is stable despite being brain dead because the “stable geniusus” are still in power and the possible election of Joe Biden (the American incarnation of Konstantin Chernienko) won’t change the paradigm or alter the trajectory. The fact that they are going to put the corporations on fiscal life support does not fundamentally alter the property structure and I doubt they will nationalise anything here or there. It will be another bail-out like in 2008, more of socialism for the rich and more of feudalism for the poor.

    The cold was ver.2.0 will only end when an average person travelling from the US or Australia to China experience the same level of civilisational shock as someone allowed to travel from Poland to West Germany in the late 1970s – early 1980s. We need to wait a few more years but this process seems to be inevitable. Then it will be obvious that the Americans can flex they nuclear muscles (just like the Soviets in the late 1980s) or create as many USD as they want to purchase the creativity of everyone else, but nobody actually cares any more. Because in 2030 or 2035 the drones of People’s Liberation Army can get rid of the drones of the US Air Force and the Chinese economy can make 100 times more of these than the Americans, who have to buy the components from China and materials from Russia anyway. In the end all what counts is the real productivity of labour and this is really low if all the jobs are “chałtura”.

  22. Now we have the full economic package. Zero or almost-zero interest rates and the “suspension of rent, taxes and household bills” as declared in France by Macron, who repeated Bernie’s declaration that “we are in a war”. No accrual of interests or payments of rents when people have no revenue.

    The real economy of a country can survive being shut down for a few months if people get food, water, health care, electricity and few other essentials. Then the economy will have to be gradually re-stared as in China and a few industries need to be bailed out. We will be essentially in the same place we started in a few months time – hopefully minus the stock market and real estate bubbles.

  23. We are fast running out of time and governments have made the mistake is assuming normal rules apply when structuring their financial relief. It must be from the bottom up in these circumstances – individual liquidity particularly for those who already have nothing is the immediate problem. How do the unemployed, homeless, poor pensioners & etc make adequate preparations when they have no cash to purchase food, cleaning products, medications? These are great suggestions, Bill – but even a Job Guarantee scheme will take weeks to set up and distribute money to those most in need – and that’s too late.

    A greater threat than the pathogen is the very real prospect of social unrest, breakdown and collapse. Looting, rioting and anarchy are days away – the Americans can’t buy enough guns and ammunition – and given their already precarious society, it don’t bode well. When the neglected become infected, this ceases to be a health and economic emergency and turn into a Stephen King story.

    Hope you’ve a few extra sets of strings in..

  24. “Ed Zimmer
    I think Bill is undervaluing the gig economy. The gig economy gives people the freedom to explore & carve out their own income opportunities (& to encourage businesses to offer such opportunities) rather than expecting people to enslave themselves to the whims of a hierarchical employer for their working lives. ”

    Yeah, it sounds good, but in the real world the majority of “gig” workers have very few employment rights, if any – and that is precisely why the jobs exist, not to offer people marvellous opportunities and work around their schedules. They also have zero real career development. I’m sure when people talk about ‘flexible work’ they usually have in mind some middle-class idea of people being globe-trotting freelance photographers or similar, but the majority of actual “gig” employees are doing boring, semi-useful, low-paid work.
    It’s probably great when you’re 16-25 with fewer responsibilities, but not so great in your 30s and later. And in truth employers of real jobs that pay enough to support a family are looking for people with a structured work record, that’s part of the value of a JG for those who need it.

    I see no reason (apart from sheer reluctance based upon private profit concerns) why employment can’t be structured to be both secure and also somewhat open-ended for those looking for creative career development. Trading-in employment rights/benefits for ‘dynamic employment opportunities’ strikes me as the usual spiel one hears from the capitalist private sector looking to offset any responsibilities.

    The government subbing gig workers, who might not always be working or offsetting government spending with direct productivity, sounds a lot like UBI to me and possibly inflationary.

  25. [q]Andy
    Monday, March 16, 2020 at 17:34
    “That process is a sort of dragged out U-shaped event”
    Perhaps L-shaped conveys the point more clearly?[/q]

    Andy, that is better than “dragged out ‘U’ shaped”,
    BUT, ‘check-mark shaped’ does it even better.

  26. Bill, love your stuff. I am an economist trained in the 1960s and never liked the neo liberal approach. Your approach is a breath of fresh air.
    I hope you don’t mind but I nominated you to sit on the Qanda panel next week where they will be talking corona virus and economics. Maybe we should get the readers of your blog too nominate you as well.

  27. @ eg
    “But I will not rest until those responsible for hoodwinking their fellow citizens with their mummery are hounded out of their sinecures and exposed to all of the ridicule and hostility they so richly deserve”.

    A worthy aim indeed!

    But I fear you have a very long campaign ahead of you before it’s likely to be realised. Especially in regard to the majority of those most culpable – namely, among the Germans. Can there be even the slightest doubt that at present and for the immediately-foreseeable future the vast majority of opinion-formers among the German people would completely and slavishly endorse the views expressed by those “several economists” who were authors of the Frankfurter Allgemeine op ed quoted by Bill?

    I don’t expect to see any change of heart among those diehards (or their equally-deluded fellow-thinkers in Brussels and elsewhere) in my lifetime, but I wish you good luck all the same.

  28. @ Ed Zimmer

    Personally, I’ve been harbouring for some time the suspicion that what you’ve just come out and said may be right – given always the sensible caveats you make.

    I shall continue to do so unless and until I see a convincing rebuttal of your arguments. I suspect that there’s a whole school of thought which reflexively demonises the so-called gig economy and – by so doing – exalts by implication the tyranny and conformism of hierarchical and arbitrary “command-structures”, with some purportedly god-like figure at their helm, which characterises all too many corporate entities (each with its own “company culture” and often poisonous politics).

    Now that you have “come out” (forgive the analogy, but it does feel rather like that – in this forum anyway!) I’m wondering why I didn’t express my own reservations earlier. Moral cowardice in the face of groupthink perhaps? Not very estimable on my own part, if so.

  29. “Andy, that is better than “dragged out ‘U’ shaped”,
    BUT, ‘check-mark shaped’ does it even better”.

    Perhaps. But only for American speakers of English.

  30. @ Robert H
    ” shall continue to do so unless and until I see a convincing rebuttal of your arguments. I suspect that there’s a whole school of thought which reflexively demonises the so-called gig economy and – by so doing – exalts by implication the tyranny and conformism of hierarchical and arbitrary “command-structures”, with some purportedly god-like figure at their helm, which characterises all too many corporate entities (each with its own “company culture” and often poisonous politics).”

    Which ‘arguments’? There are none to rebut. There was an opinion about some Mexican gig workers apparently gaining amazing benefits.
    I don’t see, by either implication or logic, an exaltation of tyrannical command structures. If anything the so-called ‘gig’ economy as it actually is, personifies those very command structures masquerading as employment freedom. A lot of idealists have bought into it as the future of worker freedom. It’s rather naive. Unless it can be shown that it isn’t largely a sham of people being hired in pretty much the same way casual labour was in the 1930s (and that hasn’t been shown) is will attract negative commentary and deservedly so.

  31. Well, Bill. You sure weren’t kidding. But how long can “massive” be sustained? We can print money, but it don’t taste too good after a while. Not as nutritious as kangaroo, cow or sheep either, but I guess the animals ain’t too bothered. Five minutes into a cup final and we’re already six behind and this opposition is still in infancy. Wait until this baby grows up.

    From the case progression and recent clinical presentations this will prove a formidable adversary – and if the genome potentials develop characteristics that provide durability – v.load rate, target sites, transmit ability, we may be unable to develop an effective vaccine in sufficient time to see much of humanity. That’s if we can navigate through all the other catastrophic threats this crisis has created. Not surprising the Americans are buying guns and ammo at a time like this. A fitting metaphor for this civilisation.

    Let’s hope the next can make a better job of it. Preferably on four legs.

    Take care all.

  32. Mark, we will get through this. I hope. Anyway- I am an American and have never bought a gun. Haven’t been shot at ever either. Most of us aren’t nuts.

  33. @ Ferdinand

    Yes, it will continue to “attract negative commentary” from those whose thinking is stuck in the 1950s. I lived thru the ’30s & venture to say your understanding of that period is limited to the propaganda you’ve been fed.

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