New fronts in the US-China trade war

from C. P. Chandrasekhar and Jayati Ghosh

While everyone was busy looking at the Covid-19 numbers across the world, other “stuff was happening” in international trade: the US-China trade war, which started as far back July 2018, just got significantly worse. This on-again-off-again war has been a feature of the Trump Presidency, with the man who became president of the US in January 2017 vowing to prevent the US from being “exploited” by other countries, notably China, that had benefited from the US market by running bilateral trade surpluses.

Trump focussed on the US aggregate surplus as well as certain bilateral surpluses, missing the basic point that aggregate trade and current account surpluses in an economy are the result of internal macroeconomic imbalances (between aggregate domestic savings and investment) that are unlikely to be affected by trade measures alone. Protectionist measures against Chinese imports only lead to imports from alternative sources being substituted. Indeed, as Figure 1 shows, the period of Trump’s Presidency has seen very little “improvement” in the trade balance. The very recent reductions in the US’ overall trade deficit reflect changes in global trade, specifically affected by the Covid-19 outbreak.

Global economic growth in the Post World War II Era and Post COVID-19 Recovery

source: konema

The Pandemic and the Global Economy

Unequal Effects        The Aftermath         Averting Catastrophe

 

from Jayati Ghosh

There are still many uncertainties about the COVID-19 pandemic: about the extent of its spread, its severity in different countries, the length of the outbreak, and whether an initial decline could be followed by a recurrence. But some things are already certain: we know that the economic impact of this pandemic is already immense, dwarfing anything that we have experienced in living memory. The current shock to the global economy is certainly much bigger than that of the 2008 global financial crisis, and is likely to be more severe than the Great Depression. Even the two world wars of the twentieth century, while they disrupted supply chains and devastated physical infrastructure and populations, did not involve the restrictions on mobility and economic activity that are in place in the majority of countries today. This is therefore an unprecedented global challenge and requires unprecedented responses.

This very severe economic impact largely stems not from the pandemic itself, but from measures that have been adopted across the world to contain it, which have ranged from relatively mild restrictions on mobility and public gatherings to complete lockdowns (and clampdowns) that have brought to a halt most economic activity. This has meant a simultaneous attack on demand and supply. During lockdowns, people (especially those without formal work contracts) are deprived of incomes and joblessness increases drastically, causing huge declines in consumption demand that will continue into the period after the lockdown is lifted. At the same time, production and distribution are halted for all but essential commodities and services—and even for these sectors, supply is badly affected because of implementation issues and inadequate attention to the input-output linkages that enable production and distribution. Previous regional and global crises have not entailed this near-cessation of all economic activity. The deadly combination of collapses in both demand and supply is why this time is truly different and has to be dealt with differently. 

A debt jubilee is the only way to avoid a depression

from Michael Hudson

Even before the novel coronavirus appeared, many American families were falling behind on student loans, auto loans, credit cards and other payments. America’s debt overhead was pricing its labor and industry out of world markets. A debt crisis was inevitable eventually, but covid-19 has made it immediate.

Massive social distancing, with its accompanying job losses, stock dives and huge bailouts to corporations, raises the threat of a depression. But it doesn’t have to be this way. History offers us another alternative in such situations: a debt jubilee. This slate-cleaning, balance-restoring step recognizes the fundamental truth that when debts grow too large to be paid without reducing debtors to poverty, the way to hold society together and restore balance is simply to cancel the bad debts.

The word “Jubilee” comes from the Hebrew word for “trumpet” — yobel. In Mosaic Law, it was blown every 50 years to signal the Year of the Lord, in which personal debts were to be canceled. The alternative, the prophet Isaiah warned, was for smallholders to forfeit their lands to creditors: “Woe to you who add house to house and join field to field till no space is left and you live alone in the land.” When Jesus delivered his first sermon, the Gospel of Luke describes him as unrolling the scroll of Isaiah and announcing that he had come to proclaim the Year of the Lord, the Jubilee Year.

The fall and rise of inequality

source

Why millennials will lose out to Covid-19

from WEA Young Economists

Forget about economics and the pandemic: here’s The Beatles’ last concert to cheer you up

from Thomas Palley

On a cold day in January 1969, The Beatles, who hadn’t played live since 1966, took to the rooftop of the headquarters of Apple Records, located at 3 Savile Row, in central London. And there they played an impromptu last gig, much to the delight of Londoners on nearby rooftops … and to the chagrin of the police.

The world was a mess before anyone ever uttered the word coronavirus

from Ken Zimmerman

According to the UN (and many others) the world was a mess before anyone ever uttered the word coronavirus. These problems remain waiting for us after the current crisis fades.

1. We have a decade to significantly curb carbon emissions and avoid catastrophe. Because of years of delayed action, we face an even more pressing mandate. We need to halve global emissions by 2030 but the emissions gap between what is needed and our current commitments is significant. Starting this year [2020], we need to cut emissions by 7.6% every year for the next 10 years to limit warming to 1.5 degrees.

2. The start of 2020 ushers in the ten-year countdown to deliver the Sustainable Development Goals (SDGs) [particularly elimination of poverty and extreme poverty] and is a crucial year for ensuring our policies, financing, and ambition align to reach the Goals by 2030. The first four years since the Goals’ launch witnessed new commitments, coalitions, and approaches among national governments from the developed and developing world, local actors and leaders, the investment community and private sector, and other non-state actors. For its part, the United Nations embarked on a major reform effort to better deliver on the SDGs. The relationship between climate, the SDGs, and peace has also come into greater focus.

3. Inequality is

C deaths as of 8 April 5 pm BST

As GDPs crumble…

As GDPs crumble… 

With the pause button pressed on nearly half of economic activity in the US and the EU for what is likely to be at least a period of three months, consumption, investment and trade have all collapsed. A contraction of as much as 10-20% of GDP or worse is possible. Pervasive uncertainty about the timing of the development of a viable treatment and/or vaccine means there is no light at the end of the tunnel yet. Even when we get there, the trauma of the COVID-19 meltdown will keep investors and consumers on the sidelines.

…tax revenues will collapse…

This will blow a massive hole through tax revenues. Corporate taxes that derive from profits will collapse first. Sales and value-added taxes will register a dramatic fall in line with the collapse in economic activity. The gigantic scale of job losses and/or job subsidies to stem such losses will depress income taxes. Tax revenues may fall by 30%-40%, maybe more.

…and deficits balloon… 

Highest U.S. unemployment rates in history and tomorrow

Health care MUST be in public provision and accessible to all in order to . . .

from Grazia Ietto Gillies

The expenditure given [in the chart] include both private and public expenditure as far as I know. That the US have a VERY inefficient health care system is well known but it can only be made clear by looking also at outcomes such as Infant mortality rate or life expectancy alla available from OECD health statistics.

Why such inefficiency. Well then you have to look at the organization of health systems not just the stats. In countries with high private provision a lot of the expenditure goes to insurance companies, lawyers for litigation, profits of health care companies and of insurance companies and pharmaceuticals etc.

Apart from these GROSS inefficiencies, systems that rely heavily on private provision and insurance cannot be expected to cope with PUBLIC health issues like Covid19. If the poor people get it – and they are more likely for many reasons including overcrowding habitations – the rich may also get Covid.

I hope that once we emerge from this nightmare the message becomes clearer: anything to do with health care MUST be in public provision and accessible to all in order to protect us all and achieve efficiencies.

Deaths and new cases

Unemployment in US and UK ‘may be worse than in Great Depression’

from today’s Guardian

Unemployment in Britain and the US could surpass the levels reached during the 1930s Great Depression within months as the coronavirus crisis crushes the global economy, a former Bank of England official has warned.

In a stark forecast as job losses mount around the world, David Blanchflower, professor of economics at Dartmouth College in the US and a member of the Bank’s interest rate-setting monetary policy committee during the 2008 financial crisis, said unemployment was rising at the fastest rate in living memory.

Writing in the Guardian, the economist said UK unemployment could rapidly rise to more than 6 million people, around 21% of the entire workforce, based on analysis of US job market figures that suggest unemployment across the Atlantic could reach 52.8 million, around 32% of the workforce.

“There has never been such a concentrated business collapse. The government has tried to respond but it has no idea of the scale of the problem it is going to have to deal with. We make some back-of-the-envelope calculations and they are scary,” he said.

Health expenditure as a percentage of GDP

Active cases, recovered cases and deaths

Daily death tolls

Coronavirus: upward trajectory or flattened curve?

Historic surge in US unemployment claims – 3.28m

Country by country coronavirus case trajectories graph – 29/03, 19:00 GMT