Understanding Our Pandemic – Economy Predicament

The world’s number one problem today is that the world’s population is too large for its resource base. Some people have called this situation overshoot. The world economy is ripe for a major change, such as the current pandemic, to bring the situation into balance. The change doesn’t necessarily come from the coronavirus itself. Instead, it is likely to come from the whole chain reaction that has been started by the coronavirus and the response of governments around the world to the coronavirus.

Let me explain more about what is happening.

[1] The world economy is reaching Limits to Growth, as described in the book with a similar title.

One way of seeing the predicament we are in is the modeling of resource consumption and population growth described in the 1972 book, The Limits to Growth, by Donella Meadows et al. Its base scenario seems to suggest that the world will reach limits about now. Chart 1 shows the base forecast from that book, together with a line I added giving my impression of where the economy really was in 2019, relative to resource availability.

Figure 1. Base scenario from 1972 Limits to Growth, printed using today’s graphics by Charles Hall and John Day in “Revisiting Limits to Growth After Peak Oil,” with dotted line added corresponding to where the world economy seems to be in 2019.

In 2019, the world economy seemed to be very close to starting a downhill trajectory. Now, it appears to me that we have reached the turning point and are on our way down. The pandemic is the catalyst for this change to a downward trend. It certainly is not the whole cause of the change. If the underlying dynamics had not been in place, the impact of the virus would likely have been much less.

The 1972 model leaves out two important parts of the economy that probably make the downhill trajectory steeper than shown in Figure 1. First, the model leaves out debt and, in fact, the whole financial system. After the 2008 crisis, many people strongly suspected that the financial system would play an important role as we reach the limits of a finite world because debt defaults are likely to disturb the worldwide financial system.

The model also leaves out humans’ continual battle with pathogens. The problem with pathogens becomes greater as world population becomes denser, facilitating transmission. The problem also becomes greater as a larger share of the population becomes more susceptible, either because they are elderly or because they have underlying health conditions that have been hidden by an increasingly complex and expensive medical system.

As a result, we cannot really believe the part of Figure 1 that is after 2020. The future downslopes of population, industrial production per capita, and food per capita all seem likely to be steeper than shown on the chart because both the debt and pathogen problems are likely to increase the speed at which the economy declines.

[2] It is far more than the population that has overshot limits.

The issue isn’t simply that there are too many people relative to resources. The world seems to have

  • Too many shopping malls and stores
  • Too many businesses of all kinds, with many not very profitable for their owners
  • Governments with too extensive programs, which taxpayers cannot really afford
  • Too much debt
  • An unaffordable amount of pension promises
  • Too low interest rates
  • Too many people with low wages or no wages at all
  • Too expensive a healthcare system
  • Too expensive an educational system

The world economy needs to shrink back in many ways at once, simultaneously, to manage within its resource limits. It is not clear how much of an economy (or multiple smaller economies) will be left after this shrinkage occurs.

[3] The economy is in many ways like the human body. In physics terms, both are dissipative structures. They are both self-organizing systems powered by energy (food for humans; a mixture of energy products including oil, coal, natural gas, burned biomass and electricity for the economy).

The human body will try to fix minor problems. For example, if someone’s hand is cut, blood will tend to clot to prevent too much blood loss, and skin will tend to grow to substitute for the missing skin. Similarly, if businesses in an area disappear because of a tornado, the prior owners will either tend to rebuild them or new businesses will tend to come in to replace them, as long as adequate resources are available.

In both systems, there is a point beyond which problems cannot be fixed, however. We know that many people die in car accidents if injuries are too serious, for example. Similarly, the world economy may “collapse” if conditions deviate too far from what is necessary for economic growth to continue. In fact, at this point, the world economy may be so close to the edge with respect to resources, particularly energy resources, that even a minor pandemic could push the world economy into a permanent cycle of contraction.

[4] World governments are in a poor position to fix the current resource and pandemic crisis.

In our networked economy, too low a resource base relative to population manifests itself in a strange way: It appears as an affordability crisis that leads to very low prices for oil. It also appears as terribly low prices for many other commodities, including copper, lithium, coal and even wholesale electricity. These low prices occur because too large a share of the population cannot afford finished goods, such as cars and homes, made with these commodities. Recent shutdowns have suddenly increased the number of people with low income or no income, pushing commodity prices even lower.

If resources were more plentiful and very inexpensive to produce, as they were 50 or 70 years ago, wages of workers could be much higher, relative to the cost of resources. Factory workers would be able to afford to buy vehicles, for example, and thus help keep the demand for automobiles up. If we look more deeply into this, we find that energy resources of many kinds (fossil fuel energy, nuclear energy, burned biomass and other renewable energy) must be extraordinarily cheap and abundant to keep the system growing. Without “surplus energy” from many sources, which grows with population, the whole system tends to collapse.

World governments cannot print resources. What they can print is debt. Debt can be viewed as a promise of future goods and services, whether or not it is reasonable to believe that these future goods and services will actually materialize, given resource constraints.

We are finding that using shutdowns to solve COVID-19 problems causes a huge amount of economic damage. The cost of mitigating this damage seems to be unreasonably high. For example, in the United States, antibody studies suggest that roughly 5% of the population has been infected with COVID-19. The total number of deaths associated with this 5% infection level is perhaps 100,000, assuming that reported deaths to date (about 80,000) need to be increased somewhat, to match the approximately 5% of the population that has, knowingly or unknowingly, already experienced the infection.

If we estimate that the mean number of years of life lost is 13 years per person, then the total years of life lost would be about 1,300,000. If we estimate that the US treasury needed to borrow $3 trillion dollars to mitigate this damage, the cost per year of life lost is $3 trillion divided by 1.3 million, or $2.3 million per year of life lost. This amount is utterly absurd.

This approach is clearly not something the United States can scale up, as the share of the population affected by COVID-19 relentlessly rises from 5% to something like 70% or 80%, in the absence of a vaccine. We have no choice but to use a different approach.

[5] COVID-19 would have the least impact on the world economy if people could pay little attention to the pandemic and just “let it run.” Of course, even without mitigation attempts, COVID-19 might bring the world economy down, given the distressed level of today’s economy and the shutdowns experienced to date.

Shutting down an economy has a huge adverse impact on that economy because quite a few workers who are in good health are no longer able to make goods and services. As a result, they have no wages, so their “demand” goes way down. If the economy was already having an affordability crisis for goods made with commodities, shutting down the economy tends to greatly add to the affordability crisis. Prices of commodities tend to fall even lower than they were before the crisis.

Back in 1957-1958, the Asian pandemic, which also started in China, hit the world. The number of deaths was up in the range of the current pandemic, relative to population. The estimated worldwide death rate was 0.67%.  This is not too dissimilar from a death rate of 0.61% for COVID-19, which can be calculated using my estimate above (100,000 deaths relative to 5% of the US population of 33o million).

Virtually nothing was shut down in the US for the 1957-58 pandemic. When doctors or nurses became sick themselves, wards were simply closed. Would-be patients were told to stay at home and take aspirin, unless a severe case developed. With this approach, the US still faced a short recession, but the economy was soon growing again. Populations seemed to reach herd immunity quite quickly.

If the world could somehow have adopted a similar approach this time, there still would have been some adverse impact on the economy. A small percentage of the population would have died. Some businesses might have needed to be closed for a short time when too many workers were out sick. But the huge burden of job loss by a substantial share of the economy could have been avoided. The economy would have had at least a small chance of rebounding quickly.

[6] The virus that causes COVID-19 looks a great deal like a laboratory cross between SARS and HIV, making the likelihood of a quick vaccine low.

In fact, Professor Luc Montagnier, co-discoverer of the AIDS virus and winner of a Nobel Prize in Medicine, claims that the new coronavirus is the result of an attempt to manufacture a vaccine against the AIDS virus. He believes that the accidental release of this virus is what is causing today’s pandemic.

If COVID-19 were simply another influenza virus, similar to many we have seen, then getting a vaccine that would work passably well would be a relatively easy exercise. At least one of the vaccine trials that have been started could be reasonably expected to work, and a solution would not be far away.

Unfortunately, SARS and HIV are fairly different from influenza viruses. We have never found a vaccine for either one. If a person has had SARS once, and is later exposed to a slightly mutated version of SARS, the symptoms of the second infection seem to be worse than the first. This characteristic interferes with finding a suitable vaccine. We don’t know whether the virus causing COVID-19 will have a similar characteristic.

We know that scientists from a number of countries have been working on so-called “gain of function” experiments with viruses. These very risky experiments are aimed at making viruses either more virulent, or more transmissible, or both. In fact, experiments were going on in Wuhan, in two different laboratories, with viruses that seem to be not too different from the virus causing COVID-19.

We don’t know for certain whether there was an accident that caused the release of one of these gain of function viruses in Wuhan. We do know, however, that China has been doing a lot of cover-up activity to deter others from finding out what actually happened in Wuhan.

We also know that Dr. Fauci, a well-known COVID-19 advisor, had his hand in this Chinese research activity. Fauci’s organization, the National Institute for Allergy and Infectious Diseases, provided partial funding for the gain of function experiments on bat coronaviruses in Wuhan. While the intent of the experiments seems to have been for the good of mankind, it would seem that Dr. Fauci’s judgment erred in the direction of allowing too much risk for the world’s population.

[7] We are probably kidding ourselves about ever being able to contain the virus that causes COVID-19. 

We are gradually learning that the virus causing COVID-19 is easily spread, even by people who do not show any symptoms of the disease. The virus can spread long distances through the air. Tests to see if people are ill tend to produce a lot of false negatives; because of this, it is close to impossible to know whether a particular person has the illness or not.

China is finding that it cannot really contain the virus that causes COVID-19. A recent South China Morning Post article indicates that roughly 14 million people are to be tested in the Wuhan area in the next ten days to try to control a new outbreak of the virus.

It is becoming clear, as well, that even within China, the lockdowns have had a very negative impact on the economy. The Wall Street Journal reports, China Economic Data Indicate V-Shaped Recovery Is Unlikely. Supply chains were broken; wholesale commodity prices (excluding food) have tended to fall. Joblessness is increasingly a problem.

[8] If we look at deaths per million by country, it is difficult to see that lockdowns are very helpful in reducing the spread of disease. Masks seem to be more beneficial.

If we compare death rates for mask-wearing East Asian countries to death rates elsewhere, we see that death rates in mask-wearing East Asian countries are dramatically lower.

Figure 2. Death rates per million population of selected countries with long-term exposure to the virus causing COVID-19, based on Johns Hopkins death data as of May 11, 2020.

Looking at the chart, a person almost wonders whether lockdowns are a response to requests from citizens to “do something” in response to an already evident surge in cases. The countries known for their severe lockdowns are at the top of the chart, not the bottom.

In fact, a preprint academic paper by Thomas Meunier is titled, “Full lockdown policies in Western Europe countries have no evident impacts on the COVID-19 epidemic.” The abstract says, “Comparing the trajectory of the epidemic before and after the lockdown, we find no evidence of any discontinuity in the growth rate, doubling time, or reproduction number trends.  .  . We also show that neighboring countries applying less restrictive social distancing measures (as opposed to police-enforced home containment) experience a very similar time evolution of the epidemic.”

It appears to me that lockdowns have been popular with governments around the world for a whole host of reasons that have little to do with the spread of COVID-19:

  • Lockdowns give an excuse for closing borders to visitors and goods from outside. This was a direction in which many countries were already headed, in an attempt to raise the wages of local workers.
  • Lockdowns can be used to hide the fact that factories need to be closed because of breaks in supply lines elsewhere in the world.
  • Many countries have been faced with governmental protests because of low wages compared to the prices of basic services. Lockdowns tend to keep protesters inside.
  • Lockdowns give the appearance of protecting the elderly. Since there are many elderly voters, politicians need to court these voters.

[9] A person wonders whether Dr. Fauci and members of the World Health Organization are influenced by the wishes of vaccine and big pharmaceutical companies.

The recommendation to try to “flatten the curve” is, in part, an attempt to give vaccine and pharmaceutical makers more time to work on their products. Is this really the best recommendation? Perhaps I am being overly suspicious, but we recently have been dealing with an opioid epidemic which was encouraged by manufacturers of Oxycontin and other opioids. We don’t need another similar experience, this time sponsored by vaccine and other pharmaceutical makers.

The temptation of researchers is to choose solutions that would be best from the point of their own business interests. If a researcher gets much of his funding from vaccine and big pharmaceutical interests, the temptation will be to “push” solutions that are beneficial to these interests. In some cases, researchers are able to patent approaches, even when the research is paid for by governmental grants. In this case they can directly benefit from a new vaccine or drug.

When potential solutions are discussed by Dr. Fauci and the World Health Organization, no one brings up improving people’s immunity so that they can better fight off the novel coronavirus. Few bring up masks. Instead, we keep being warned about “opening up too soon.” In a way, this sounds like, “Please leave us lots of customers who might be willing to pay a high price for our vaccine.”

[10] One way the combination of (a) the activity of the virus and (b) our responses to the virus may play out is as a slow-motion, controlled demolition of the world economy. 

I think of what we are experiencing as being somewhat similar to a toggle bolt going around and around, moving down a screw. As the toggle bolt moves around, I picture it as being similar to the virus and our responses to the viruses hitting different parts of the world economy.

Figure 3. Image of how the author sees COVID-19 as being able to hit the economy multiple times, in multiple ways, as its impact keeps impacting different parts of the world.

If we look back, the virus and reactions to the virus first hit China. China’s recovery is moving slowly, in part because of reduced demand from outside of China now that the virus is hitting other parts of the world. In fact, additional layoffs occurred after Chinese shutdowns ended, because it then became clear that some employers needed to permanently scale back operations to meet the new lower demand for their product.

Commodity prices, including oil prices, are now depressed because of low demand around the world. These low prices can be expected to gradually lead to closures of wells and mines extracting these commodities. Processing centers will also close, making these commodities less available even if demand temporarily rises.

As one country is hit by illnesses and/or shutdowns, we can expect supply lines for manufacturing around the world to be disrupted. This will lead to yet more business closures, some of them permanent. Debt defaults tend to happen as businesses close and layoffs occur.

With all of the layoffs, governments will find that their tax collections are lower. The resulting governmental funding issues can be expected to lead to new rounds of layoffs.

Natural disasters such as hurricanes, tornadoes, floods, earthquakes and forest fires can be expected to continue to happen. Social distancing requirements, inadequate tax revenue and broken supply lines will make mitigation of all of these disasters more difficult. Electrical lines that fall down may stay down permanently; bridges that are damaged may never be repaired.

Initially, rich countries can be expected to try to help as many laid-off workers as possible with loans and temporary stipends. But, after a few months, even with this approach, many individual citizens and businesses will likely not be able to pay their rent. Default rates on home mortgages and auto loans can be expected to rise for a similar reason.

We can expect to see round after round of business failures and layoffs of employees. Financial systems will become more and more stressed. Pensions are likely to default. Death rates will rise, in part from epidemics of various kinds and in part from growing problems with starvation. In fact, in some poor countries, lower-income citizens are already having difficulty being able to afford adequate food. Eventually we can expect collapsing governments (similar to the collapse of the central government of the Soviet Union) and overthrown governments.

Longer-term, after this demolition ends, there may be some surviving pieces of economies. These new economies will be much smaller and less dependent upon each other, however. Currencies are likely to be less interchangeable. The remaining people will need to learn to make do with many fewer goods than are available today. It will be a very different world.

About Gail Tverberg

My name is Gail Tverberg. I am an actuary interested in finite world issues - oil depletion, natural gas depletion, water shortages, and climate change. Oil limits look very different from what most expect, with high prices leading to recession, and low prices leading to financial problems for oil producers and for oil exporting countries. We are really dealing with a physics problem that affects many parts of the economy at once, including wages and the financial system. I try to look at the overall problem.
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3,868 Responses to Understanding Our Pandemic – Economy Predicament

  1. Harry McGibbs says:

    “Just as early bets on an emerging-market recovery start fuelling appetite for stocks and currencies, an old bugbear is reappearing to haunt investors: US-China tensions.”

    https://www.bangkokpost.com/business/1923488/emerging-markets-stumble-as-us-china-tensions-return

  2. Xabier says:

    Further proof of the habitual callousness of governments in times of crisis, and that it’s not necessary to be a wicked Imperialist to screw the poor of the world without a thought.

    Those in the West who have been thrown out of work by the short-sighted lock-down policies are in much the same position, just temporarily disguised with welfare and furlough-subsidies.

  3. Fast Eddy says:

    Coronavirus LIVE: Highest spike of 635 cases in Delhi in 24 hours, Kejriwal says due to relaxations
    https://www.indiatoday.in/india/story/coronavirus-in-india-live-news-updates-covid19-vaccine-status-world-usa-1681505-2020-05-25

    Mumbai heads for highest number of daily new Covid-19 cases for any city in the world
    https://www.indiatoday.in/diu/story/mumbai-heads-for-highest-number-of-daily-new-covid-19-cases-for-any-city-in-the-world-1681635-2020-05-25

    • Wow!

      the team tested a combination of the antiparasitic drug Ivermectin and the antibiotic Doxycycline on a group of 60 COVID-19 patients, all of whom were cured within four days of treatment with the combo. The patients had reported breathing problems and other symptoms of the coronavirus disease and were confirmed to be COVID-19 positive.

      None of the patients showed any side effects and all of them tested negative for the virus in the repeated or the second test.

      That is quite the finding. Ivermectin is the drug we were reading about earlier that seemed to kill the virus in the lab. It is a generic that has been around since the 1980s. Both of these drugs are widely used on animals as well as on humans.

      • horseofadifferentcolor says:

        Treatments other than vaccination will not be considered. Bangladesh didnt get the memo. NWO aside the AMA would rather sniff bed pans than acknowledge a treatment developed in Bangladesh.

        • I think you are correct. We have to look outside the current system (AMA) for the real solution.

          It is just like the economists not truly wanting to know how the economy works. Fitted curves applied to what happened in the past give results that are acceptable to politicians.

          Someone has to come from outside of the system and to point out the obvious. This has been the OFW approach.

  4. psile says:

    Neither a rigged market nor Vera Lynn will pick the crops

    “The crop picking crisis is revealing the fundamental failures of free-market capitalism and invoking national spirit won’t fix it, argues Kevin Ovenden.”

  5. Dennis L. says:

    FE,

    Your beloved PM spoke and the earth moved under her feet! Now that is a real speech.

    Dennis L.

  6. Yoshua says:

    Senator Harry Reid created AATIP a UFO program inside Pentagon. Pentagon recently declared that the UFO phenomena is real.

    Pentagons spokesperson Susan Gough just stated that AATIP is still running and analysing UFO encounter by the military personnel. They take these reports very seriously.

    That’s it. That’s all they got. They are still flying in tin cans with wings. The phenomena has at least been around since WWII.

    Humanity is a bore.

    • Robert Firth says:

      “Klaatu Barada Nikto!”

      • Matthew Krajcik says:

        The most recent famous incident appears to be of ducks caught on IR. The jet is traveling 650 MPH one way at a height of 35,000 feet, while the ducks are a few thousand feet above the ocean, so the parallaxing makes it appear like the ducks are defying the laws of physics, and the IR makes them look pill shaped: https://www.youtube.com/watch?v=mfhAC2YiYHs

  7. CTG says:

    The essence of what is happening now

    Rabobank: “Quite A Market Disconnect Has Formed: We May Be Just Weeks Away From The Levee Breaking”

    Quite the market–politics disconnect…for now at least. But we may be just days or weeks away from the levee breaking, with Hong Kong the most likely trigger. However India-China, where the PLA are reportedly 2-3km inside Indian territory and setting up camp, is also another flashpoint to watch.

    Meanwhile “arrogant and offensive” is also what the different sides in Europe appear to think of each other: the East vs the West on liberalism vs. illiberalism, and north vs. south on stimulus v. surplus; and with a whole lot of truth twisters on all sides of all those arguments. Will we see any further breakthrough on that front this week? Markets will move accordingly.

    https://www.zerohedge.com/markets/rabobank-quite-market-disconnect-has-emerged-we-may-be-just-weeks-away-levee-breaking

    • There seem to be a lot of choices of which parts of the system could break.

    • Fast Eddy says:

      When it breaks I would not want to be a Mainlander in HK… I’d also be concerned about my family if I was a cop…. the protesters will know who they are…. but so far have kept the knives sheathed…

  8. john Eardley says:

    The UK banks are offering small businesses ‘bounce back’ loans underwritten 100% by the government. So guess what the banks are giving them out to anyone who asks. My friend got £35k and another got £20k which was in his business account in two days. Neither needed the money, one in fact invested his loan in the stock market. What a shocking state of affairs, none of this will ever be repaid.

    • The UK is attempting to get investment in making goods and services. If instead, the loan recipient simply buys shares of the stock market, the price of an existing asset rises instead. This is obviously not wanted.

      If these loans are not to be repaid, the interest rates on the loans would seem to be a large negative percentage. But they still don’t work to fix the system.

      • Robert Firth says:

        Gail, classical economics (again) tells us that you cannot help an economy by giving money to producers, but only to consumers. That way, you know the producers will produce, rather than sequester or squander. But politicians do not understand game theory.

        • Stevie says:

          Did you just say that supply side theory is rubbish? Of course, any 6th grader could have told you that. An economist I read often asserts that what drives capital investment the most is not taxes, regulations, etc. or even profit, but capacity utilization. Provide demand, and producers will assuredly provide supply.

          • Robert Firth says:

            Thank you, Stevie, and I agree. But I accept no credit; all I know of economics comes from the works of those far wiser than I. Including, of course, Gail Tverberg.

    • Fast Eddy says:

      MFN (C4F) …. damn… might as well take the handouts.. I mean loans….

  9. Herbie R Ficklestein says:

    Desperation!😳 So, I go through tablets every year or so and saw one at Brandsmart, a chain discount department store here in South Florida, on sale. Drove up yesterday and highway traffic light around noon and shopping center was somewhat half full Anyway, not too many shoppers and was able to get waited on right away. Salesman wrote the ticket and told me I was a lucky winner and have been selected to win a Brandsmart Credit Card! Not kidding, raddled off some list of bennies and 4,000 limit. I declined and thank him. Nope, won’t take no for an answer, held hostage and had to find a Manager! After finding one, was approached with a look of desperation in the young man’s face. Basically, said the same, thanked him again. Did not end, “What will it take to get you to sign up!” …worried expression….Hey, I was there on the sales floor and had to meet a quota or out the door. Retailers are in survival mode and the restrictions are going to hurt.
    When I was in retail, when I achieved one goal, it automatically increased to a peg up!
    Poor chaps and gals now selling….

    Spot on!

    • Xabier says:

      Poor devils, they must hate it. But what a way to drive customers away…

    • Harry McGibbs says:

      Interesting, Herbie. A friend of mine here in the UK went to a branch of the NatWest bank to withdraw £5k in cash from his savings to pay his builders and the au pair. They were very obstructive and resistant to him making the withdrawal on the basis of “fraud prevention”, even though he had all the relevant ID and had made an identical withdrawal with no issues two months prior.

      He had to argue with the bank manager in order to get his hands on his cash. Looks like the psychology of contraction is firmly taking hold with both banks and retailers struggling to keep their heads above water.

      “The core metrics of the Big Five UK banks have deteriorated sharply since the
      New Year, and even more since the end of 2006, i.e., the eve of the Global Financial Crisis. Their market capitalisation is now £148.5 billion, down 40% since the New Year and down 57% since December 2006; their average priceto-book ratio is 42.7%, down from 71% at the New Year and 255% at end 2006; their average capital ratio, defined as market capitalisation divided by total assets, is 2.7%, down from 4.7% (end 2019) and 11.2% (end 2006); their corresponding leverage levels are 36.7, up from 21.5 (end 2019) and 8.9 (end
      2006).

      “By these metrics, UK banks have much lower capital ratios and are more than four times more leveraged than they were going into the previous crisis. These metrics indicate a sickly banking system. If the banks were in good financial shape, their PtB ratios would be well above 100% and their capital ratios well above current levels. Traditional rules of thumb also suggest that leverage levels should be no greater than 10 or 15 to be considered safe.

      “In addition, UK banks have hidden problems relating to their off-balance-sheet positions, their gameable ‘Fair Value’ Level 3 (or ‘mark to model’) and loan book valuations, and their problematic implementation of IFRS 9, all of which have further adverse consequences for their capital adequacy.

      “The BoE’s ‘Great Capital Rebuild’ narrative about a strongly recapitalised UK banking system is little more than an elaborate, and occasionally shambolic, window dressing exercise. The BoE focused most of its efforts on making the banking system *appear* strong by boosting banks’ regulatory capital ratios instead of ensuring that the banking system *became* strong through a sufficiently large increase in actual capital meaningfully measured. The result is that the UK banking system enters the downturn in a worryingly fragile state and avoidably so.

      “Another massive bank bailout now appears inevitable.”

      [Durham University Professor Kevin Dowd and former Bank of England regulator Dean Buckner]

      Click to access Can%20UK%20banks%20pass%20the%20COVID-19%20stress%20test%206%20May%202020.pdf

      • The Basel requirements never made sense to me. Perhaps put off small problems a bit, but create a huge bigger problem.

      • Rodster says:

        “He had to argue with the bank manager in order to get his hands on his cash. Looks like the psychology of contraction is firmly taking hold with both banks and retailers struggling to keep their heads above water.”

        I see this as more evidence that we are headed towards a cashless society.

        • Herbie R Ficklestein says:

          Yes. Yes, digital wallet of the Federal Reserve and Capital Controls coming very soon to us all! It will be implemented very quickly, perhaps in the second wave of the China flu!
          Social Distancing will be enforced for your own welfare!
          Coming soon to YOU….some Ten years ago 2009
          https://www.theguardian.com/world/2009/dec/03/north-korea-won-currency-revaluation

          North Korea’s surprise decision to redenominate its currency has prompted panic and despair among merchants left with piles of worthless notes, even driving one couple to suicide, activists said today.
          North Korea informed citizens and foreign embassies on Monday that it would redenominate its national currency, the won, diplomats said. Residents in the reclusive communist state were told they have until Sunday to exchange a limited amount of old bills, they said.
          The news sent Pyongyang residents rushing to the black market to convert hoarded bills into US dollars and Chinese yuan, South Korea’s Yonhap news agency reported, citing unidentified North Korean traders operating in neighbouring China.
          Shops, bathhouses, barber shops and restaurants have closed, activists said.
          “We heard business and market activities were all suspended,” said Lee Seung-yong, an official at Good Friends, a Seoul-based civic group that sends food and other aid to North Korea. “People have no money to engage in business.”
          Authorities have threatened “merciless punishment” for anyone violating currency exchange rules, Good Friends said.
          The overhaul of the North Korean won – the most drastic in 50 years – aims to curb runaway inflation and clamp down on the street markets that have sprung up in the tightly controlled nation, analysts said.
          Unable to feed its 24 million people, the regime began allowing some markets in 2002, including farmers’ markets.
          The markets may have encouraged trade but they also brought in banned goods such as films and soap operas from South Korea, threatening leader Kim Jong-il’s totalitarian rule, analysts said. The country’s largest wholesale market, in Pyongyang, reportedly closed in June.
          With the currency overhaul, the government is retaking control of the economy from merchants, analysts said.

          It’s all about POWER and CONTROL…OBEY

        • GBV says:

          Cashless society? Solution = EMP attack by domestic terrorists.

          It’s almost as if the Powers That Be want to make the world more fragile for those who wish to see it burn…

          Cheers,
          -GBV

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