Twitteretter

Quite a few of you, especially if you are in the UK, will remember the famous poster of a finger pointing, handlebar moustachioed Lord Kitchener, issued by the British Department of War at the start of the WWI, with the message: ‘Your country needs you’. A hugely successful campaign, which has become one of the XX century’s iconic images and which got millions of British recruits to take up arms and leave their lives and physical and mental health in the trenches of Belgium and Northern France. The slogan is being recovered after the biggest economic contraction in 300 years, caused by the pandemic. It turns out that, unable to spend their money, Britons alone (I imagine the same applies elsewhere) have saved over £180Bn. The trouble is, saving can become a habit, just as consuming was, pre-pandemic. So, after years of being told we don’t save enough, now that we finally managed it thanks to an aggressive virus, we are being told to drop it and spend in 1920s fashion, another parallel ...

The biggest news this week, in global terms, was the announcement of the EU recovery fund which I covered in post 63. A huge effort in economic terms but, even more importantly, a rare exercise in cross border solidarity. However, despite its seminal importance, it is practically impossible to find in UK news. The EU is one of the subjects I read about the most. Tales of EU failure and woe often feature prominently at the top of my digital news, selected by algorithms which, day after day, try to build an understanding of my interests. But news of this fund was number 43 in the list presented to me, well below items of little importance which I have little interest in. This is peculiar. I am not given to believing in conspiracies, I have trained myself to reject them as oversimplistic explanations of haphazardly converging interests and motivations and, again, I am confident there is no conspiracy here. But it is worth studying. Big news should be big news, even if it is about the EU L...

I have seen several social media threads objecting to the proposed EU Recovery Plan on grounds that the funds are earmarked mainly for technology sectors related to the new economy, and it does therefore not help companies that suffered most directly from the pandemic. This reveals a misunderstanding of how the economy works. Rather than direct compensation and support (MEDE fund is for that purpose in any case, not the RF), funds given to new technology companies with the potential to dominate a growing sector multiply as these companies grow. Money is spent locally, through purchases and salaries, and reaches traditional business that way, in larger sums than the direct help. Can you imagine the amount Google employees spend at restaurants, shopping malls, car dealerships or cafes in Mountain View, or Microsoft employees in Seattle? More than direct help to restaurants, we need to grow our own next generation globally leading companies, and this is what the Recovery Fund aims to do...

The EU has announced a 750 billion (American) euro recovery fund. It will be used by countries as they need it, will be deployed to fund strategically important sectors and, unlike recovery cash in the aftermath of the last financial crisis, will be repaid from EU funds. This sets up the scene for poorer countries to benefit the most and for richer countries to pay most of the bill. The EU has, finally, after over 20 years in the wilderness, remembered that solidarity is one of the values at the heart of its project. It’s only one policy, one announcement, but it has the potential to be a paradigm change, to build a more equal, faster growing and more competitive Europe. I’m both relieved and heartened that, when we expect to be let down by our politicians, the leaders of the European economic powers and the top European bureaucrats have answered the call of history and stood up, refusing to withdraw from the fight against exacerbated, selfish nationalism. The EU has a chance. We all d...

The biggest economic risk of the coronavirus pandemic, which no trader has so far factored in, is a permanent change in consumption habits. After having been obliged to try it for a while, consumers may actually stop buying products and services they don’t need. This would be catastrophic for the economy, or at least for GDP, the useless, coarse measure of how our economy is doing. GDP would be permanently affected and there would be no recovery. Of course, the economy only makes sense as a construct to improve human lives and, therefore, in real terms this may not be a disaster at all, after a period of adjustment to pivot jobs, develop new industries, etc. The big fly in the ointment, and there is always one, is that our tax system generates its revenue from middle income work and consumption, and tax revenues may not suffice to sustain, let alone develop, the welfare state. We may come to a point where we finally have to tax corporations and wealth fairly, perish the thought Leng...