In June this year, a company called intu (no capitalisation) collapsed. Most people had never heard of it. But they knew what it did. It was the owner of many of the UK’s biggest shopping centres. Lakeside in Thurrock, Metro Centre in Newcastle, and the Trafford Centre in Manchester – all of these were owned by intu. Indeed, they still are. At the time of writing, no disposals have been made. So intu is the landlord of a significant part of the UK’s retail sector. And it is dead, killed by the pandemic. But like many of those killed by the pandemic, intu had underlying health issues that made it especially vulnerable. Long before the pandemic struck, the retail sector was in trouble. Over the last few years, a stream of household names have gone to the wall: Woolworths, Toys R Us,Read More »
Articles by Frances Coppola
"Britain nearly went bust in March, says Bank of England", reads a headline in the Guardian. In similar vein, the Telegraph’s Business section reports "UK finances were close to collapse, says Governor":Eh, what? The Governor of the Bank of England says the UK nearly turned into Venezuela? Well, that’s what the Telegraph seems to think: The Bank of England was forced to save the Government from potential financial collapse as markets seized up at the height of the coronavirus crisis, Governor Andrew Bailey has said. In his most explicit comments yet on the country’s precarious position in mid-March, Mr Bailey said ‘serious disorder’ broke out after panicking investors sold UK government bonds in a desperate hunt for cash. It left Britain at risk of failing to auction off the gilts neededRead More »
There’s yet another bizarre claim doing the rounds in Waspiland. Or, more correctly, among the hardline Back to 60 fringe of the broader women’s state pension movement. I try to ignore most of the ridiculous claims made by Back to 60 campaigners, because they aren’t going to listen to me and I will simply end up with a sore head and a very frayed temper. But this one is more complex – and confusing – than most, and it doesn’t only affect women. So it is worth explaining. As always, the story starts with the unequal state pension ages of men and women. When the present state pension system was introduced in 1946, women’s state pension age was set at 60, and men’s was 65. To qualify for a full state pension, women had to make 39 years of NI contributions: because their state pension age wasRead More »
Below are the slides from my presentation at Beyond Covid on 12th June. The whole webinar can ve viewed here.The pandemic seems to me to resemble the "nuclear disaster" scenarios of my youth: hide in the bunker, then creep out when the immediate danger is over, only to find a world that is still dangerous and has fundamentally changed in unforeseeable ways. Rabbits hiding from a hawk is perhaps a kinder image, though hawks don’t usually leave devastation in their wake. And I like rabbits. So this presentation is illustrated with rabbits, not nuclear bombs. This is where we were in March/April/May. Hiding in our homes, waiting for the danger to pass:And this is what central banks should have been doing then:To their credit, this is exactly what they did. By supporting sovereign financesRead More »
Is the U.S. in recession? If so, when did the recession start, and what caused it? The usual economic definition of "recession" is two successive quarters of negative GDP growth. But in Q1 2020, growth was positive, though it was apparently slowing sharply (more on this shortly):So using the standard economic definition, the U.S. is not yet in recession.But according to the Business Cycle Dating Committee of the National Bureau for Economic Research (NBER), the U.S. entered recession in February: The committee has determined that a peak in monthly economic activity occurred in the U.S. economy in February 2020. The peak marks the end of the expansion that began in June 2009 and the beginning of a recession. February? The New York Fed’s nowcasting report for February showed no sign ofRead More »
Monday afternoon, 25th May 2020. A beautiful, warm day on which to watch our new overlord make his first speech to the nation. I refer, of course, to Dominic Cummings’s press conference.The Daily Mirror and the Guardian had revealed that Cummings had gone to stay in a family cottage near Durham at the end of March, and that he had also been seen in Barnard Castle, about 30 miles from Durham. The country was under full lockdown at the time, with non-essential travel completely banned, so both trips appeared to break the law. Furthermore, his wife, Mary Wakefield, had published an article in the Spectator magazine towards the end of April which said that she had developed CV-19 symptoms on 27th March and he became ill with suspected CV-19 the following day. Wakefield described him as "lyingRead More »
The freesias that my daughter sent me are long dead, but the clematis in my garden is in full flower, and the flowers smell of vanilla. It has taken over six weeks for my sense of smell to return. But I was only mildly ill. For many people, the road to recovery is much longer.Initially, coronavirus was thought to be a respiratory illness causing cough, fever and breathing difficulties. But the range of symptoms that the virus produces is now known to be much wider. Headache, muscle pains, fatigue, nausea, diarrhoea are all now recognised as symptoms of coronavirus infection. There is growing evidence that it disturbs the blood clotting mechanism and can trigger heart attacks or strokes. It also seems to have caused renal or liver failure in some patients. And there are worrying reportsRead More »
The economy slumbers in its induced coma. Businesses are closed, workers furloughed or laid off. But the astonishing headline falls in economic indicaters such as GDP and PMI conceal a grim reality. Businesses are closing not just because they have been ordered to do so, but because they are running out of money. And people who have lost their jobs or become ill are also running out of money. If businesses fail instead of being mothballed, the eventual economic recovery will be slow. And if people die of starvation or untreated disease, what is the point of the lockdown?Everyone agrees that there is an urgent need to get money to people and businesses so they can stay alive. But the waters are being muddied by terms such as "helicopter money" and "people’s QE" being bandied about withRead More »
A few days ago, the vicar of my church helpfully sent me a booklet of daily meditations for Holy Week and a palm cross. Inevitably, coronavirus is a theme, and it seems appropriate: after all, the virus is so named because it resembles a "crown of thorns". The meditation for Palm Sunday highlights Pilate’s symbolic washing of his hands, absolving himself of any responsibility for the death of another, and asks how we feel about our own virus-induced hand washing ritual:
How do you feel when you wash your hands, in the present time?
Do you pray, sing or count as you wash?
How does this influence the way you feel, as a Christian?
How can this simple act, often done in our homes in isolation, be seen as an act of service?
As I read these questions, I thought of the men I saw onRead More »
Remember Friday Night Is Downgrade Night, from the Eurozone crisis? It’s back. Last night, Fitch Ratings downgraded the UK to AA-, negative outlook. Here’s their rationale:
The downgrade reflects a significant weakening of the UK’s public finances caused by the impact of the COVID-19 outbreak and a fiscal loosening stance that was instigated before the scale of the crisis became apparent. The downgrade also reflects the deep near-term damage to the UK economy caused by the coronavirus outbreak and the lingering uncertainty regarding the post-Brexit UK-EU trade relationship. The commensurate and necessary policy response to contain the COVID-19 outbreak will result in a sharp rise in general government deficit and debt ratios, leading to an acceleration in the deterioration of publicRead More »
“Give me chastity and continence, but not yet,” sighed St. Augustine in his Confessions. Today, as the world reels under the impact of coronavirus, policymakers are at last reaching for tools I have long advocated: helicopter money and Universal Basic Income. And yet, like St. Augustine, I find myself sighing, “Lord, grant us helicopter money and Universal Basic Income, but not yet.”I have spent much of the last decade advocating giving people money. Helicopter money in recessions, to boost spending and kickstart recovery: and Universal Basic Income (UBI), to set a floor under incomes and ensure that no-one is ever left without the means to live. Now, because of the coronavirus, both are for the first time being widely, and seriously, considered. The US Government is about to giveRead More »
"USD-backed stablecoin is 10x better than your savings account," runs the headline on an unsolicited press release in my inbox yesterday. And it goes on to explain:
The average interest rate for savings accounts in the US currently stands at 0.09%, with some German banks even charging negative interest rates.
Universal Protocol, a coalition of leading blockchain organizations, including Uphold, Cred, Blockchain at Berkeley, and Bittrex Global, has recently introduced interest rates of 10% p.a. for its USD-backed stablecoin UPUSD.
Ok, so they are issuing an altcoin at high interest rates. Why are they comparing this with FDIC-insured savings accounts?
The UPUSD is a fully-transparent digital asset that is collateralized 1-to-1 with US dollars and held at US-domiciled, FDIC-insured
Coronavirus is scaring the world. Last weeks’ stock market crash was the worst since 2008. And yields on safe assets, especially U.S. Treasuries, are crashing as investors dump anything they see as remotely risky. I suppose if you fear sudden death, you want your assets to be safe – though I sometimes wonder if investors understand that you can’t take them with you.Anyway, central banks are of course responding to the market panic. The Fed has just announced a 50 basis points cut in interest rates. Here’s the FOMC’s mercifully brief statement in full (my emphasis):
The fundamentals of the U.S. economy remain strong. However, the coronavirus poses evolving risks to economic activity. In light of these risks and in support of achieving its maximum employment and price stability goals, the
When the banks fell over, they knocked the stuffing out of the British economy. The UK’s productivity has been dismal ever since. Unemployment has fallen to historic lows and wages are rising, but productivity growth remains near zero. This “productivity puzzle,” as it is known, has had economists scratching their heads for best part of a decade.But UK productivity is a tale of two halves. Experimental statistics recently released by the Office for National Statistics (ONS) reveal widely varying productivity levels across the UK. “Productivity grew in half of the 12 regions and countries of the UK in 2018,” says the ONS, “with output per hour increasing in both Scotland and the East Midlands by more than 2%; in contrast, output per hour fell in Yorkshire and The Humber and in NorthernRead More »
The Fed’s interventions in the repo market are attracting considerable comment. A lot of people seem to think the Fed has embarked on another QE program without Congressional approval. And the usual suspects are complaining that the Fed is pumping up stock prices and debasing the dollar. Stocks are indeed heading for the moon – though so is the dollar, which rather undermines those who think it is being debauched. But the Fed’s interventions in the repo markets have nothing to do with stock prices. They are all about banks.Last September, sudden spikes in the Fed Funds Rate (FFR) and its repo market equivalent, the Secured Overnight Funding Rate (SOFR), caught the Fed off guard. It acted quickly, injecting copious quantities of reserves to bring the rates down. But this was by anyRead More »
The NI Fund discussed in this post covers England, Wales and Scotland only. Northern Ireland has a separate NI Fund, which is excluded from the figures given in this post. However, it works in exactly the same way as the Fund discussed here. Sometimes the government is its own worst enemy. HM Treasury’s hamfisted response to this Freedom of Information request from Trudy Baddams of the pension rights campaign group "We Paid In, You Paid Out", has caused a very silly storm.Ms Baddams asked this question:
Can you confirm that the National Insurance Fund (NIF) is presently in surplus and by
how much? Can you also please confirm how much has been paid from the fund
into the National Insurance Investment Fund in the last 10 years?
In response, HM Treasury pointed her to the NIF accounts,
Ever since the secured overnight repo rate (SOFR) spiked to 10% in September, there have been dire warnings that these exceptional movements show the financial system is fundamentally broken. The story goes that the post-crisis financial system is so dysfunctional that it is unable to operate without continual injections of money from central banks. The Fed’s attempt to reduce the $4.2tn of reserves it added to the financial system in three rounds of QE has dangerously destabilised the financial system, so it has now had to re-start asset purchases to restore the lost reserves and refloat tottering banks.It’s fair to say that much has changed since the financial crisis. Prior to 2008, banks maintained far lower levels of reserves than they do now, typically at or just above theirRead More »
It is 2.30 am, and I can’t sleep. Today I must file my final piece for American Express’s FXIP blog, which is being mothballed. Writing for that blog has been my main source of income for the last four years. Once it is gone, my income will once again become precarious and inadequate, as it has been all too often in the past. Hence my sleeplessness.To be perfectly honest, I’m not sorry that the blog is closing. I’ve done some interesting work for it, and learned a lot. And it has been a reliable source of income during the difficult times of the last three years. For that, I am grateful. But I don’t enjoy writing for it. The house style is dry to the point of desiccation, devoid of all opinion, emotion and metaphor. It is also SEO-driven, so I am constantly trying to find ways ofRead More »
When even anti-EU tabloids say the Government’s official position on Brexit is insincere, it is time to take it seriously. On Tuesday last week, The Sun reported that the European heads of government had concluded that Johnson’s latest genius plan to create a "double border" on the island of Ireland wasn’t a serious attempt to negotiate a Brexit deal. "They believe his insistence the dossier be kept secret is an effort to disguise the fact it is designed to set up a “blame game” with Brussels," it said.An hour after The Sun published its article, Sky News released a briefing from an unnamed "No. 10 source" on a phone call between Boris Johnson and the German Chancellor, Angela Merkel:
"The call with Merkel shows the EU has adopted a new position. She made clear a deal is overwhelmingly
The world is saving like crazy. Corporations are building up cash mountains that they can’t or won’t invest in expanding their businesses. Individuals are building up pensions and precautionary savings. Governments, especially in developing countries, are building up FX reserves. The “savings glut,” as former Fed chairman Ben Bernanke dubbed it, shows no signs of dissipating. It is sloshing around the world looking for a productive home. But there isn’t one – or at least, not one that offers the safety that fearful investors desperately crave. That, fundamentally, is what is driving down the returns on assets.
It is also the primary cause of the wide US trade deficit. The President likes to think that the reason for the US’s persistent trade deficits is unfair trade practices and
This post was first published on Pieria in July 2013. I have re-posted it here on Coppola Comment because it now seems terribly, terribly timely. I have been reading James Rickards’ book Currency Wars. In this, Rickards reviews the use of fiat currency over the course of the last century, and concludes that the present global fiat currency system is inherently unstable and on the point of collapse. He calls for return of the gold standard to stabilise firstly the US dollar and, following on from that, international trade currency.I am no historian, but the first thing that struck me about this book was its partial view of history. Rickards does not discuss the reasons for the classical gold standard being abandoned in 1914. Indeed since he writes almost entirely from an AmericanRead More »
So the Lord God said to the serpent, “Because you have done this, cursed are you above all livestock
and all wild animals!
You will crawl on your belly
and you will eat dust
all the days of your life.
And I will put enmity
between you and the woman,
and between your offspring and hers;
he will crush your head,
and you will strike his heel.”
To the woman he said,
“I will make your pains in childbearing very severe;
with painful labor you will give birth to children.
Your desire will be for your husband,
and he will rule over you.”
To Adam he said, “Because you listened to your wife and ate fruit from the tree about which I commanded you, ‘You must not eat from it,’ cursed is the ground because of you;
through painful toil you will eat food from it
Yield curves have gone mad. Negative yields are everywhere, from AAA-rated government bonds to corporate junk. Most developed countries have inverted yield curves, and a fair few developing countries do too:(chart from worldgovernmentbonds.com)Negative yields and widespread yield curve inversion, particularly though not exclusively on safe assets. To (mis)quote a famous pink blog, this is nuts, but everyone is pretending there will be no crash.Here, for your enjoyment, is an à la carte selection of the most lunatic government yield curves. You can find lots more here.Exhibit 1: Switzerland.
Negative yield already extends beyond 30 years, and markets are pricing in further interest rate cuts and/or QE, or indeed anything to stop the Swiss franc appreciating as scared investors pile into
Last night, the Resolution Foundation hosted a debate to launch my book, "The Case for People’s Quantitative Easing". A great panel consisting of Jagjit Chadha, Director of NIESR; Fran Boait, Executive Director of Positive Money; and James Smith, Research Director of the Resolution Foundation, debated my ideas with immense verve, ably moderated by Torsten Bell, Chief Executive of the Resolution Foundation. You can watch the debate here.In 2008, QE did a great job of supporting asset prices and preventing the disastrous deflationary spiral of the 1930s. But since then, enormous quantities of asset purchases by central banks around the world have proved unable to raise aggregate demand and kickstart growth.Although central banks didn’t do a bad job in the last recession, many of the toolsRead More »
Yesterday, the outsourcer Kier Group announced a major restructuring. The announcement makes grim reading. The company will divest or close down three of its business lines, with the loss of 1,200 full-time equivalent (FTE) jobs, half of them by the end of this month. The dividend will be suspended for two years. Kier’s share price fell on the news, closing down 17.43%.Remarkably, some analysts took the restructuring announcement as a "buy" indication, which might explain why its share price has recovered slightly today. I wouldn’t, personally. Kier is in big trouble, and has been for some time. Admittedly, Andrew Davies, its new CEO, has wasted no time in getting to grips with the company’s problems: the proposed restructuring is certainly drastic. But given how difficult theRead More »
In a lecture presented at the 2011 IMF Annual Research Conference, Hyun Song Shin of Princeton University argued that the driver of the 2007-8 financial crisis was not a global saving glut so much as a global banking glut. He highlighted the role of the European banks in inflating the credit bubble that abruptly burst at the height of the crisis, causing a string of failures of banks and other financial institutions, and economic distress around the globe. European banks borrowed large amounts of US dollars through the money markets and invested them in US asset-backed securities via the US’s shadow banking system. In effect, they acted as if they were US banks, but in Europe and therefore beyond the reach of US bank regulation. This diagram shows how it worked (the “border” is theRead More »
Eurozone inflation is in the doldrums again. After perking up to 1.7% in April, it slumped back to 1.2% in May. According to Bloomberg, this was "lower than expected". But I wonder who, apart from the ECB, really expected anything else. Core inflation has been well below target for the last five years:
(chart from Bloomberg)And although the headine HICP measure increased in 2016-18, this was mostly due to the oil price bouncing back from its 2014-15 slump:
(chart from Macrotrends)The wild swings in the energy inflation rate can be clearly seen on this chart from Eurostat:
It’s perhaps not obvious at this resolution, but the movement in headline HICP is almost entirely due to the energy price.In fact comparing the inflation and oil price charts, it is hard to see much justificationRead More »
It’s been pretty quiet in Lafferland since the Brexit referendum. All the talk has been of trade and sovereignty, not deregulation and tax cuts. But there’s nothing quite like a Tory leadership election to bring supply-siders out of hibernation. So here is Sajid Javid singing an old sweet song to attract the votes of Tory party members:
Cutting tax rates could bring in billions of extra revenue, which would mean:
More nurses ?⚕️?⚕️
More teachers ????
More police ?♂️?♀️"I would cut [top rate] if it brings in more revenue and gives us better public services" – @sajidjavid #TeamSaj pic.twitter.com/MxVUVcI5q2
— TeamSaj (@TeamSaj) June 2, 2019
Cutting taxes for the rich in order to generate more public revenue. The Laffer curve is back.Not that it has been absent for long, really.Read More »
I can’t stop looking at this table. Mortality rates in England rose between 2011-16 for teenagers and most working-age adults under 50:
That’s bad enough. But what should give all of us pause is the reason that Public Health England (PHE) gives for rising mortality among young and middle-aged adults:
Among people aged 20-44, an increase in mortality rates from accidental poisoning had a negative effect on life expectancy between 2011 and 2016 of -0.06 years in males and -0.11 years in females….
Data from ONS indicate that in this age group, over the whole
period from 2011 to 2016, 70% of accidental poisonings were due to drug misuse and 10% were to alcohol.
PHE also notes a slight increase in male mortality rates due to cirrhosis, which is in the top 10 causes of death for men.
Last week I attended a workshop entitled "Enhancing the Bank of England Toolkit," hosted by the Progressive Economy Forum. Presented at the workshop, and underpinning most of the debate, was this report from GFC Economics and Clearpoint Advisers, which was written for the Labour Party and first issued last June. The report was widely criticised at the time, as one of its authors ruefully observed in the introduction to the presentation. Nonetheless, the authors presented it unamended.The report recommends setting a productivity target for the Bank of England in addition to its existing inflation target:
An additional target will be introduced: productivity growth of 3% per annum. The Bank of England
will be required to explain how its policies are impacting upon productivity and,