“The Financial Jigsaw” has been serialised here and now is replaced by this weekly “Letter from Great Britain.”
NOTE – If anyone would like an electronic copy of the complete book, I should be pleased to email a free PDF on request to: [email protected].
One website about the UK is always worth reading because the author, Dr Richard North, is an experienced health professional and provides useful information on a daily basis. http://eureferendum.com/
Last Monday was a bank holiday in UK (a statutory holiday) and the weather on the weekend was not so bad that some city dwellers decided that taking their RVs to the seaside would be a good idea and so they all crammed on to the beaches. The locals were up in arms claiming that they will be infected with the dreaded disease and all die a horrible death.
The police were trying their best in a typical, polite British fashion to ward people off and return them from whence they came. This all came about because of the confusing signals from our ‘caring’ government issued as part of a slight change in the lockdown provisions.
And this is just the beginning, because as our ruling elite try to unlock the rules which were so quickly and thoughtlessly put in place in March, they are going to find it a very difficult activity. Already there are signs that the great British public are starting to lose faith in what they should be doing and will probably make up their own minds as time passes. All this was totally unnecessary in the view of a sober article this week:
“In the face of a novel virus threat, China clamped down on its citizens. Academics used faulty information to build faulty models. Leaders relied on these faulty models. Dissenting views were suppressed. The media flamed fears and the world panicked.
That is the story of what may eventually be known as one of the biggest medical and economic blunders of all time. The collective failure of every Western nation, except one, to question groupthink will surely be studied by economists, doctors, and psychologists for decades to come.
To put things in perspective, the virus is now known to have an infection fatality rate for most people under 65 that’s no more dangerous than driving 13 to 101 miles per day. Even by conservative estimates, the odds of COVID-19 death are roughly in line with existing baseline odds of dying in any given year.” https://www.realclearpolitics.com/articles/2020/05/21/how_fear_groupthink_drove_unnecessary_global_lockdowns_143253.html
And the consequences are extremely damaging to the UK economy. UK government borrowing hit its highest level on record last month amid the Covid-19 pandemic, as retail sales across the country plunged at a record pace. The Office for National Statistics has just reported that public borrowing in April is estimated to have surged to £62.1bn. That’s £51.1bn more than in April 2019, and the highest borrowing in any month since records began in January 1993.
This is an early sign of the massive cost of the government’s attempts to limit the damage of the Covid-19 crisis, including its jobs guarantee scheme. It’s also due to a sharp drop in tax takings. But the ONS (Office of National Statistics) also cautions that “the effects of COVID-19 are not fully captured in this release”. The ONS has also reported that retail sales across the UK slumped at an unprecedented rate in April. Sales fell by over 18% compared with March, due to the widespread shutdown of non-essential shops, taking turnover down to its lowest level since 2005.
The ONS explains: The volume of retail sales in April 2020 fell by a record 18.1%, following the strong monthly fall of 5.2% in March 2020. All sectors saw a monthly decline in volume sales except for a record increase in sales for non-store retailing at 18.0% and a continued increase in sales for alcohol stores at 2.3%. The volume of clothing sales in April 2020 plummeted by 50.2% when compared with March 2020, which had already fallen by 34.9% on the previous month.
This comes as fears over the UK hospitality industry grow, with many pubs, bars and restaurants warning they will close some outlets permanently.
And, the Telegraph newspaper, not given to extreme views and a supporter of the Tory government, has a sobering report about UK finances:
“The most important news from the Covid frontline this week was not the grimly still mounting death toll, the row between the UK’s four nations on how and when to lift the lockdown, the standoff with unions on reopening schools, or even the more encouraging revelation of a zero new infection rate in the capital. Political recriminations apart, all this will be quickly forgotten as just passing detail once the pandemic is over.
Rather, it was two pieces of Covid-related economic news – that Rolls Royce, Britain’s world leading aerospace manufacturer, is shedding 9,000 jobs, mostly in the UK, and that the interest rate on an auction of new UK Government debt had fallen below zero for the first time.” https://www.telegraph.co.uk/business/2020/05/22/britain-sliding-deflationary-death-spiral/?li_source=LI&li_medium=liftigniter-rhr
Now that UK has left EUROPE I will comment on relevant EU – UK events as they arise:
Here is the latest situation about Brexit. This article neatly summarises where UK stands at present and the outcome is not likely to be pleasant:
“Here is where Brexit and Covid-19 begin to converge. Last week it was announced that government borrowing for the month of April, all in response to the Coronavirus, came to £62.1 billion. By comparison, borrowing in April 2019 amounted to £10 billion. The untold pressure on public finances has reinforced the government’s position of not seeking any extension to the transition period.
The prevailing narrative now is that the country can no longer continue paying into the EU budget at a time when all economic resources need to be concentrated into responding to Covid-19. Leaving the EU with no new trading agreement has been made more likely because of the financial fallout of the pandemic.”
https://stevenguinness2.wordpress.com/2020/05/24/the-convergence-of-brexit-and-covid-19/
But the EU is in serious financial problems which won’t help the Brexit negotiations – Wolf Richter is on the case: “The EU haven’t gotten over Financial Crisis 1 and the Euro Debt Crisis. Now there’s a new crisis. Deutsche Bank’s CEO going on TV to soothe nerves didn’t help matters. The biggest European banks have started to report their earnings against a bleak backdrop of locked down economies, plunging economic activity, surging business closures and rising loan defaults. Each earnings call laid bare the scale, scope and complexity of the problems and challenges facing a European banking sector that never really recovered from their last two crises — the Global Financial Crisis followed by the Euro Debt Crisis.
Unlike the Fed, whose 12 regional Federal Reserve Banks are owned by the banks in their districts, and to whom bank stocks are therefore hugely important, the ECB couldn’t care less about bank stocks, as long as the banks themselves don’t collapse. The ECB’s primary focus is on keeping the Eurozone together, a task that is growing more difficult by the day.
Now that we are in the grip of yet another full-blown financial crisis, triggered not by the banks this time, but by a pandemic and the response to it, central banks are throwing just about everything they can at the crisis, which is moving far faster and wider than the last one. This was amply borne out by the quarterly earnings reports of four European banks:
To be continued next week.
I went to buy a quart of oil yesterday and the only auto parts place in my area wouldn’t let people in the store. Funny, considering that until recently it was wide open for business.
That is odd, Anon, what reason did they give?