Covid 19 - the end of Capitalism?

Is this situation a test of modern monetary theory?

It is, but given the highly unusual circumstances I suspect it's going to be difficult to draw any real conclusions from the outcome.

If modern monetary policy is print print print, I reckon we’ll pass this test

It seems to me we have perfect conditions for rapid inflation: a magic money forest combined with shortages of goods.

If there is hyper inflation anything is possible politically, but most outcomes would be bad.

I note that devaluation is usually a death knell for the goverment in office, although the Tories seem to have got away with the 2016 post referendum devaluation - for the time being, at least

the 2016 post referendum devaluation

the what now?

I suspect it's a reference to the value of the pound falling after the 2016 referendum rather than a formal devaluation - given that you can't devalue a freely tradeable currency.

It seems to me we have perfect conditions for rapid inflation: a magic money forest combined with shortages of goods.

Though if this is replicated in every country all around the world will this not nullify its effect?

Dieter Helm's take on it:
More nationalisation and bigger state
Deglobalisation
Greater intergenerational conflict
Reduced interest and action on climate change

http://www.dieterhelm.co.uk/publications/september-2020-and-march-2021-the-temporary-and-the-permanent-impacts-of-coronavirus/

There isn't a shortage of goods, yet.

The danger is that everyone will decide to sack work off because the govt. will bank roll them and then you will get a shortage of goods and associated financial agony.

The danger is that everyone will decide to sack work off

My effective wage compared to Hypothetical Furloughed Me is barely over £2/hr. Would I rather have a few hundred quid or 40 hours of free time a week? Tough choice

In other words I agree, people are going to sack off work

US weekly jobless figures.

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Didn't Finland experiment with universal income and find this to not be the case?

Depends if they ran it in the middle of a pandemic when we are told it's safer for everyone to stay inside.

I mean, with UBI I struggle to see who is going to clean the toilet at the best of times, god knows what it's like when people are afraid to leave their houses.

There would still be an incentive to work with UBI: you get paid for it. With this furloughing approach, as I mentioned above, effective wage for a lot of people is pathetic so I can't imagine many are going to be inclined to stay on (barring live-to-work nutters) if they have a free choice.

But UBI is the antidote to that because anything you earn on top of UBI you get to keep (subject to taxation at least). So @frankenbike won't be better off by £2/hr if he goes back to work, if they kept the 80% salary cover as UBI, he'd be better off by 80% (slightly less in effect if it some of that income were in a higher tax bracket)

Unofficially, the 'message' from the government is "don't work". Even if you want to. Especially in types of work where you come in to close contact with people - manufacturing, shops, logistics, cleaning, the stuff that keeps the wheels on the bus.

UBI assumes people want to, and can work.

You can UBI all you want, but if nobody can work, or they think working is too dangerous, nothing will get done, and prices will rise to reflect scarcity because nothing is being created / supplied / put on shelves.

This is extreme, but this is why I said The Danger Is , not This Will Happen.

Sorry, I assumed that we were talking post-Covid when things are back to normal.

In the current situation, the financial support (UBI if you like) is the result of people not working. Not the cause of it. The cause of people not working is the government directive not to and the closure of shops, bars, restaurants etc. However, in the absence of those conduits for spending, demand will effectively drop as well. There's obviously still a demand for food from shops, but that is being supported by people still working food production and supply chains, so there's no supply/demand disparity there once the daft panic-buying has passed.

Also relevant is the question of whether furloughed employees are allowed to take on a new job whilst furloughed. Because that'd be a real kick in the teeth for anyone on UC/SSP, or those who are still required to work remotely, nurses on £25k, or whatever. Some people will come out of this actually better off than normal if that is allowed (e.g. min. wage café worker takes up min. wage FT job in supermarket - earnings are basically 180% of normal for duration of COVID measures).

It's quite a tricky problem

As someone who put cash aside for a rainy day, I feel like a fucking mug.

Nice problem to have I guess.

Furloughed workers can't take on additional employment.

I feel like a fucking mug

Boo hoo

Good to know, a wise decision. I hadn't seen that anywhere in the government guidance

Yeah, definitely—as you say it would be manifestly unjust otherwise

Even the unfairness isn't the biggest problem - it's that those jobs need to be left for people who can only get SSP/UC

Hah, fair enough!