Quite so

The economy could “easily” contract in the coming weeks by as much as it did in more than a year during the financial crisis, a senior forecaster has warned.

As ministers were being urged to do more to help businesses survive the coronavirus, Julian Jessop, an independent economist, said a 6pc drop in GDP or “even worse” in just one quarter can be expected.

Yep, sure, entirely possible.

And what matters is not that at all. What matters is what happens in the 3 months afterwards.

Recessions where we know what happened are less of a problem than those where we don’t. For, obviously enough, when the thing stops happening we can go back to doing stuff.

This is not just the wailing of some free marketeer either. Behold Simon Wren Lewis on the point.

This ‘direct’ impact of the pandemic will reduce GDP in that quarter by a few percentage points. The precise number will depend on what proportion of the population that get sick, on what the fatality rate in the UK turns out to be, and how many people miss work in an attempt not to get the disease. The impact on GDP for the whole year following the pandemic is much less at around 1% or 2%, partly because output after the pandemic quarter is higher as firms replenish diminished stocks and meet postponed demand.

BTW, there is no way to stop the slump happening. No combination of monetary and fiscal policy will do so. We’re at Canute and the tide here. It’s the recovery that matters.

29 thoughts on “Quite so”

  1. One would hope that this virus will prove a learning experience for many who deify the State and its powers. Perhaps when they see that there are physical limits to what humans can do against the forces of nature they might realise the State is not the answer to every problem. Its a long shot, but you never know, it may be a light bulb moment for a few at least.

  2. The way they’re going, the government and its advisors are going to do more damage to the economy of the country than the fucking Luftwaffe ever dreamed of!

    I’m utterly disgusted at the blind panic and hysteria that’s being whipped-up by politicians and the media – especially the BBC – and the effect that it’s having on the moronic sector of the “Great” British Public.

    Covid-19 appears to be a relatively minor illness, unless combined with a pre-existing respiratory or coronary problem in the over-70s (of which I’m one). IMHO, all the panic measures should be cancelled and everyone be left to get on with their lives. 99+% of the population under 70 will get nothing much worse than a mild cold, probably <5% of the remaining <1% might become more seriously ill, but it's a manageable number. The over-70s can make their own decisions – many of us with pre-exisiting problems might die, but we're going to die anyway.

    For the country it's a win-win. The economy can get back on an even keel and avoid the many bankruptcies that are looking inevitable under the present panic measures, and a few old fogies (like me) will stop drawing their pensions and blocking hospital beds long-term a bit sooner.

    FFS, imagine "The Blitz" or "Dunkirk" with today's generation in charge… Wir würden alle deutsch sprechen!

  3. Bloke in North Dorset

    Baron Jackson,

    What’s making a lot of the panic worse is the number of people who base their advice on their hatred of Boris. BDS is likely to cause more damage than Covid-19.

  4. “The way they’re going, the government and its advisors are going to do more damage to the economy of the country than the fucking Luftwaffe ever dreamed of!”

    This is the issue. There are a lot of things that won’t simply carry on as before after a recession this deep caused by insane panic. The idea that there are investors ready and able to pounce on the rubble of airlines and hotel chains seems far-fetched. Supermarkets will be allowed to open, mom’n’pop greengrocers won’t. So there’s likely to be catastrophic numbers of failures of small business for cashflow reasons, entirely unnecessary, and it isn’t possible to just kick-start those back into life afterwards.

    On top of that, the governments whose original raison d’etre includes being able to effectively do some shit when things like this happen, have used the boom times (and the low interest rates, causing overinflated asset prices, which will bugger up many reboot attempts) to utterly blow their entire credit lines on street football outreach co-ordinators and such. So there is nothing left in the kitty for the unforeseeable events like this. God help us if there is ever a big war.

    All caused by a panicked overreaction to something that’s probably a bit worse than the Baron assumes.

  5. M’Lud,

    Don’t you live in one of those places where it’s quite possible that Tesco has actually been looted?

  6. A couple of days ago the Babylon Bee went with the spoof story “Drug Cartels Switch To Producing Hand Sanitizer”. Today, in all seriousness, Sky News is telling us “Dark Web Drug Dealers Turn To Selling Face Masks”.

  7. ‘The precise number will depend on what proportion of the population that get sick, on what the fatality rate in the UK turns out to be, and how many people miss work in an attempt not to get the disease.’

    The Telegraph is fvcking blind. Politicians are now involved, Baron Jackfield clearly states.

    Note that there is no need for a recession. Companies were making money before the Panic. There is no reason for them not to resume after the Panic.

    ‘when the thing stops happening we can go back to doing stuff.’

    Exactly.

  8. “One would hope that this virus will prove a learning experience for many who deify the State and its powers.”

    And one would hope that the people would get from this that the press is not smart people, and their content is calculated to incite, not inform.

    Runs on grocery stores is bizarre; there is no threat to their having products. We have an Ebola response to a flu like disease. Fueled by the press. Some of it is fueled by Trump hatred, but most of it is because the press is STUPID.

    “Journalism: a profession whose business it is to explain to others what it personally does not understand.” – Alfred Harmsworth

  9. “The precise number will depend on what proportion of the population that get sick, on what the fatality rate in the UK turns out to be, and how many people miss work in an attempt not to get the disease.”

    The most influential item is not in the list: the amount by which the government fucks everything up. Therefore Simon Wren Lewis’ assessment of the impact is entirely academic.

  10. Fueled by the press.

    Partly, but also by the governments. Because the governments need to delay the rate of infection to reduce peak demand on health services by that small proportion of the population that becomes seriously ill, they’ve bigged this thing up in peoples minds such that it is perceived as Ebola like. Add government talk of closing everything down and forcing long periods of isolation, people’s “panicked” behaviour seems quite rational.

  11. One would hope that this virus will prove a learning experience for many who deify the State and its powers.

    Sadly not, Jim. The fallout from this sort of thing is likely to produce more fans of the state than fewer.

  12. It is a sign of media-created panic that the health minister is talking of telling *all* over-70s to self-isolate. I took part in a “Trail” race yesterday – not involving anyone near Olympic standards, the main attraction was the scenery – which was won by the only over-70 competing: the person who came last will not be asked to self-isolate for his/her own protection …

  13. It doesn’t help that politicians and the MSM think that the twitterati are representative of the population.

  14. There are people demanding X, Y and Z must be done NOW!!!!! No, it has to be done at the correct milepost, if you do it NOW!!!!!! you destroy the orderly management of it.

  15. At least it’s a change from the climate change bullshit. Still, no doubt they’ll get back to that once this blows over.

  16. I believe in freedom of speech. However–if ever a group deserved a brutal mass beating the marks of which they would carry to their graves if they live to 125–that group is the UK press–national and local.

    One minute shrieking “It’s Here!!!!!!” like the kid in “Poltergeist” (pendants–I know the line was “They’re here”–dramatic licence) the next day seemingly bemused at the orgy of panic purchase that wouldn’t have happened without their input of hysteria.

    They need their hands nailed to their desks–not just –as you might expect or hope -through the palm. But one through each fingernail as well BANG,BANG,BANG,BANG. Doing the shriek call it.

  17. Bloke in North Dorset

    For my sins I found myself watching the BBC News papers review this morning. I don’t know who he was but some twat was saying the Govt should order Rolls Royce to start manufacturing medical ventilators.

    The other one was demanding that private hospitals should be commandeered.

    It’s not the Coronavirus that’s going to kill us all, it’s ramant insanity.

  18. Same here in Canada, just before Spring Break they announce if you leave the country you are advised to self isolate for 14 days on return. Companies enforce this by sending out notices that you will be barred from the workplace so it means work from home if your lucky or more likely unpaid leave and if you get ill they won’t pay sick leave as you ignored an advisory. Mass cancellations of their vacation last minute as people can’t afford an extra 2 weeks off work, then govt realises health workers not happy and refusing to cancel vacations so backtrack and put an exemption in for them.
    They have issued an advisory not even a mandatory order and effectively totally fucked the airlines, travel industry and no doubt a very large part of the Mexican economy. We have people in work refusing to attend in person meetings it’s crazy

  19. For my sins I found myself watching the BBC News papers review this morning. I don’t know who he was but some twat was saying the Govt should order Rolls Royce to start manufacturing medical ventilators.

    Robert Peston, whose rise to fame at the BBC seems entirely due to a slightly camp delivery due, I believe, to overcoming a minor speech impediment. He’s got a fucking brain impediment if he thinks a manufacturer of aerospace engines is going to start knocking out ventilators any time soon.

    “Oh, come on, it’s a factory! It makes things! How hard can it be to make other things?”

  20. Robert Peston, whose rise to fame at the BBC seems entirely due to a slightly camp delivery due, I believe, to overcoming a minor speech impediment.

    That would be Robert Peston, son of Labour peer Baron Peston.

    No, I can’t see why the BBC would give him a cushy job either.

    Incidentally, and with certain echoes of events happening now, that would be the same Robert Peston that caused the run on Northern Rock: https://www.open.edu/openlearn/society/politics-policy-people/economics/has-robert-peston-caused-recession-social-amplification-performativity-and-risks-financial-markets

  21. @Jim March 15, 2020 at 10:17 am

    One would hope so, sadly Labour and BBC (see Marr today: Nandy “Not enough info” – Brexit playbook) are saying “more state, more tax needed”

    @Baron Jackfield, Gamecock, DocBud +1

    @Boganboy

    You’ve not been paying attention: Covid-19 is due to climate change and meat eating, WHO agrees. :facepalm

    @Bloke in North Dorset March 15, 2020 at 4:24 pm

    Yep, and JCB should start manufacturing medical ventilators :facepalm

    An RR Trent 1,000 would ventilate a patient superbly, but patient’s lungs then body explode

    @Rob March 15, 2020 at 7:46 pm

    “Oh, come on, it’s a factory! It makes things! How hard can it be to make other things?”

    Yep, that was ignorant BBC position too. They obviously don’t watch their own programmes eg “BBC Inside The Factory”
    https://www.youtube.com/watch?v=Hb1WDxSoSec

    PS Peston is a damaging (terrorist?) cnut

    Undercover at “wet markets”, where the Coronavirus started
    https://youtu.be/Y7nZ4mw4mXw?t=761

  22. I now find that, as an “over 70” I’m likely to be placed under house arrest for the next four months. Great! I hate gardening and decorating, I still do contract work and I’m sure that HMG is most unlikely to pay my fees for the said enforced break or compensate my clients for my absence, and, worst of all, the bastards are even more unlikely to refund my golf club subscription for the time I’m unable to take advantage of it!

  23. A ventilator is basically a bag with an actuator, couple of valves, tube to oxygen supply. Ok, there are more bells and whistles, but fundamentally that is it. I could build a crude one from parts at a DIY store. Bags and valves, pumped by hand, are still used in trauma, before it is possible to incubate patients.

    Ventilators aren’t (need not be, and perhaps now is the time to relax regs a bit so that other manufacturers can tool up adequately) the bottleneck, it’s the space to put people who need them and the armies of anaesthesiologists and ICU techs that will be needed to maintain the patients on them.

  24. Dang it, Jackfield! I thought the target of CV was 70 year olds.

    I thought I’d be safe when I turn 71 next month.

  25. @BiG

    Thanks. Would a 12 volt air-bed inflator do the job? Some tyre inflators have an air-bed inflator setting – volume, not pressure

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