Media coverage of the economic implications of Covid

[Duke of Marmalade]

David McWilliams in today's IT.
He has promoted the situation to the Great Pandession. Not much economic content. Riffing on about the Black Plague/the Renaissance; the Spanish Flu'/the Roaring Twenties; the 1958 Flu/the Swinging Sixties. Somewhat tenuous connections but a reasonably entertaining bit of spoof nonetheless.
The economic content? We should ignore the "austerity jihadis" (add that to breakfast roll man) and let the ECB print the money. It's almost inside the box these days, is he losing his grip?

There was a time of course when McWilliams castigated Quantitative Easing. I remember an episode of his Punk Economics cartoons which was notable for producing an enormous amount of zeros, representing the quantity of money the ECB were printing. Heck, we are all allowed to change our minds.

 

[Duke of Marmalade]

Our hero was fairly letting fly with the silver bullets today. What we need is a sovereign wealth fund just like Norway.
Where's the oil?, I hear you ask. The multinationals stupid. We should increase our annual tax take from €8bn to €15bn. But we would take it in share options. That way it costs the multinationals nuffin' and we seed our wealth fund with a stake in the most profitable companies on the planet. But that's only to get us kick started. We now gear up to the hilt at 0.28% p.a. and buy more of the stock of these companies. That is what the rich people do, he says. Is that what the rich people do?
But here's the coup de grâce:

The Irish sovereign wealth fund could be used not as a pension fund but as a start-up fund. The equity in these companies would be pledged to every citizen proportionally and could be used as collateral for start-up business.

Does anybody understand this? What does proportionally mean? What does pledged mean? What would the gal on the Ballymun omnibus do with her proportional equity pledge?
He was so carried away with these ideas that he forgot to mention the Great Pandession.

 

[Duke of Marmalade]

McWilliams is at it again in last Saturday's IT.
The government can borrow at near 0%. It should use these cheap funds to "refinance" the entire 75% State owned AIB mortgage book to bring the average mortgage rate down from 4% to 0.5%. The other lenders would then be forced to follow suite.
The linkage between the State's borrowing rate and the fact that AIB is in the business of lending is an illusion and He knows it. This would simply be a major transfer of wealth to AIB mortgage holders on the back of cheap State lending. How unfair is that?

Yes we will need to avail of these low borrowing rates to address the fall out from COVID. But it must be much more surgically and fairly targeted. Such a selective bonanza to a narrow constituency, for many of whom this would be a totally unnecessary windfall, would be an outrage, presumably unconstitutional.

Firing silver bullets at mortgages is a well worn tune in McWilliams' repertoire best exemplified by his recommending that ALL mortgages in the State should be forgiven so as to provide a stimulus to get us out of the financial crisis.

 

[WolfeTone]

Yes we will need to avail of these low borrowing rates to address the fall out from COVID. But it must be much more surgically and fairly targeted. Such a selective bonanza to a narrow constituency, for many of whom this would be a totally unnecessary windfall, would be an outrage, presumably unconstitutional.

My goodness Duke, we are in agreement, twice in one day! (Is there an eclipse due or something ?)

Well, maybe not.

The McWilliams is clearly an intelligent chap, full of beans and has done very well for himself to forge a celebrity broadcasting career from what was traditionally viewed as a topic for duffle coats.
I don't read his column but tune in occasionally to the podcast. Some interesting musings such as the off-spring of Irish descendants in the Caribbean being referred locally as 'Reds' due to the lighter shade of skin that could get sunburn.
If you recall Morgan Freeman's character in the Shawshank Redemption was called 'Red', when asked why, he replied 'I dunno, maybe it's because I'm Irish'.

Anyway, the podcast is a tinge cringe worthy at times with overindulging in his vast knowledge and prompted by his sidekick John "but Mac!... what does all this mean?" Davis.

Two economic proposals have emerged in recent years that have caught my attention. The Deficit Myth by Stephanie Stapleton dealing with Modern Monetary Theory, and, the sloppily titled 'Doughnut Economics' by Kate Raworth, re-examining and developing the circular flow of income to include the limitations of earths environment.

Both are pertinent and timely texts to the situation we, and rest of world, find ourselves in.
In a nutshell, Deficit Myth exposes a number of conventional falsehoods about the national debt (we can't afford to borrow additional €600m to resolve housing crisis, but suddenly we can find €30bn to save the country) and Doughnut exposes the inefficiency of economic measurements like GDP.
All good, thought-provoking stuff. Yes, we need to borrow, and yes it needs to be targeted more strategically, environmentally sustainable way.
McWilliams is talking fluff.

 

[Purple]

My goodness Duke, we are in agreement, twice in one day! (Is there an eclipse due or something ?)

Well, maybe not.

The McWilliams is clearly an intelligent chap, full of beans and has done very well for himself to forge a celebrity broadcasting career from what was traditionally viewed as a topic for duffle coats.
I don't read his column but tune in occasionally to the podcast. Some interesting musings such as the off-spring of Irish descendants in the Caribbean being referred locally as 'Reds' due to the lighter shade of spam that could get sunburn.
If you recall Morgan Freeman's character in the Shawshank Redemption was called 'Red', when asked why, he replied 'I dunno, maybe it's because I'm Irish'.

Anyway, the podcast is a tinge cringe worthy at times with overindulging in his vast knowledge and prompted by his sidekick John "but Mac!... what does all this mean?" Davis.

Two economic proposals have emerged in recent years that have caught my attention. The Deficit Myth by Stephanie Stapleton dealing with Modern Monetary Theory, and, the sloppily titled 'Doughnut Economics' by Kate Raworth, re-examining and developing the circular flow of income to include the limitations of earths environment.

Both are pertinent and timely texts to the situation we, and rest of world, find ourselves in.
In a nutshell, Deficit Myth exposes a number of conventional falsehoods about the national debt (we can't afford to borrow additional €600m to resolve housing crisis, but suddenly we can find €30bn to save the country) and Doughnut exposes the inefficiency of economic measurements like GDP.
All good, thought-provoking stuff. Yes, we need to borrow, and yes it needs to be targeted more strategically, environmentally sustainable way.
McWilliams is talking fluff.

The "If only we just..." school of populism has been around since forever. McWilliams is just one of its many members.
The problem with housing is we don't have the people to build them using traditional methods and no matter what we do it takes 5-10 years to get a good flow of housing in the economy. Borrowing to build will solve nothing. I agree with much of your post though.

 

[WolfeTone]

The problem with housing is we don't have the people to build them using traditional methods

It was probably a bad example.
But the critical point being is that the printing presses are being turned on. Boris has committed to going on a public sector spending bender which can only be positive from an Irish export point of view (notwithstanding any calamitous outcome from Brexit negotiations).
The Germans too are throwing this fiscal prudence ideology to wind with record levels of stimulus.
And with ECB buying up 20%(?) of new government debt, money, theoretically is going to be plentiful and cheap.
It remains to be seen how effective it will be against combating the decline attributable to Covid19.

 

[Protocol]

It was probably a bad example.
But the critical point being is that the printing presses are being turned on.

Note that QE started several years ago.

The Fed started first, back in 2009.

The ECB started in 2014/2015.

Asset purchase programmes

outright monetary transactions

www.ecb.europa.eu

The ECB paused during 2018-2019, then QE re-started at the end of 2019.