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Helicopter Money

In the 1970’s the sound of army helicopters over Belfast was part of the soundtrack of the troubles. A constant reminder of the tense state of alert across the city. There disappearance a silent herald of peace.

Another helicopter is about to take off and is set to be a much more welcome visitor. The Norther Ireland Executive’s Economy Minister, Elaine Dodds, has announced a £95m High Street Stimulus Scheme, part of a wider £213m Covid-19 support package for the province.

The £95m would be used to provide spending vouchers for the citizens of Northern Ireland to spend in local shops. The aim being to provide a stimulus to the economy at the start of the new year.

Seemingly, there have been previous experiments of this sort in Jersey and Malta and the idea is known as helicopter money. In essence the notion being in order to stimulate demand you simply fly over the country throwing out money which people then collect and spend. A less strenuous version of the suggestion by Keynes that you pay people to bury money and then pay them to dig it up again.

£95m is a lot of money. However, it pales into insignificance when compared to the £895bn spent on quantitative easing. Another version of helicopter money but one which is a) funded differently and b) distributed in a rather more discerning way.

If we first look at how it is funded. The £95m, which, for information is 0.01% of £895bn, is part of a package provided through the government, funded either via taxes or borrowing. The £895bn is funded by the Bank of England who fortunately do not have to borrow as they control the printing presses for pound notes.

In terms of distribution the £95m is set to be distributed in a very egalitarian manner to all citizens . There may be age restrictions but broadly people who live in Northern Ireland will benefit directly with cash in their hands to spend as they wish.

Of the £895bn, £875bn has been used to buy government bonds. In other words the debt of the Government. If the National Debt is £2trn, which is roughly right, then something like 45% of the debt is owed to the Bank of England.

The purpose of buying these bonds is via the demand it puts into the market it increases the value of the bonds and thus reduces the yield, or interest, on those bonds which has the effect of reducing the rate of interest in the economy as a whole. This in turn, according to the theory, increases confidence and promotes investment and thus growth. A good thing.

The remaining £20bn spent went on high grade non-financial, investment grade corporate bonds, e.g. BP debt or similar. Together these purchases of financial assets pumps money into the economy which the previous owners of the bonds use to buy other assets thus pushing up the value of financial assets generally. This makes people feel better off, thus increases confidence making people willing to buy more.Again this stimulates economic activity and growth. Another good thing.

There is one significant difference. The immediate beneficiaries of the cash into people’s pockets version of helicopter money is everyone. The beneficiaries of the quantitative easing version are predominantly the c10% of the population that have significant holdings of financial assets.

What would be really interesting to know is which mechanism generates the most benefit to society. The thing about the people that own significant amounts of financial assets is that they tend to be rich. and are likely therefore to save more than they spend. On the other hand the vast majority of the population are likely to save very little of the wind fall they receive thus pushing it into the economy increasing aggregate demand and thus growth.

Lets hope there are lots of researchers looking into how effective the 0.01% of helicopter money works as compared to the 99.99%!

This is an article I would really welcome feed back on what I have got wrong. It clearly has fascinating implications for the scale of debt the country now owes and to… whom?

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Republican Risk

President Trump did remarkably well in the election. He got the most votes of any Republican presidential candidate. He inspired the largest turnout since the Civil War. He increased his vote with black and latino voters. He ran an amazingly energetic campaign in the last weeks which was particularly impressive for a man of his age recovering from Corona Virus. Whatever you think of the man these are genuine achievements and the Republican Party should recognise if not celebrate.

However, he lost. He lost the popular vote by some 6m votes, around 4% of the electorate. This loss was magnified via the “quaint”electoral college system to a 14% loss with Joe Biden getting 306 out of the 538 votes available. Interestingly the result in 2016 gave candidate Trump the White House with exactly the same majority of electoral college votes despite candidate Clinton having a 2.8m (2%) majority of the popular vote.

In October 2016 Candidate Trump claimed the up coming election was “absolutely rigged” by the “dishonest media” and “at many polling places”. His attempt to undermine the democratic process did not start when he lost, it started before he won. What is rather different is that in 2016 Mike Pence his running mate made clear he would accept the outcome of the election. Four years on Mike Pence and pretty much the whole of the National Republican Party, its representatives in the legislature and senior members of the executive either passionately or spinelessly supporting baseless and evidenceless claims of electoral fraud. There are a few honourable exceptions.

The toddler tantrum of President Trump is currently doing untold damage to the United States. He is attempting to overturn the result in increasingly desperate and dangerous ways as he flits between bunkers on the golf course and in the White House.

As in 2016 he started early claiming before a vote was cast that the system was rigged and riddled with potential fraud because of postal ballots. A system he uses himself and which has worked in the past without issue.

Once the voting stopped he waited until the votes counted gave him a majority and then attempted to claim the election. When people continued counting the vote he became increasingly agitated and aggressive. Claiming that the election was being stolen.

Once the election results were clear and gave Biden the election the President refused to concede and started legal action to demonstrate that votes for him had been hidden, destroyed, suppressed and that votes for Biden had been counterfeited and multiplied. His followers wound up by all this claimed that in state elections the same ballot papers had secured tremendous wins for seats in the Senate and the House which should stand but cheated the president out of his second term so should not be counted!

Rudy Giulliani explained, on Fox news, in stark terms why the election was stolen and what evidence he was going to take to courts in the swing states to get votes for Biden rejected. His passion was such as to melt his clown paint. In court under oath his mountains of evidence turned into molehills of hearsay which were rebuffed at every turn.

Given that he it looks increasingly clear he cannot change the results of the popular vote the president has turned his attention to the electoral college. He “invited” the Republican members of the Michigan legislature as part of a strategy to secure the votes for the electoral college despite the outcome of the election. In anything like normal circumstances this would not even be considered an option and most feel it is doomed to failure.

However, what president Trump has demonstrated time and again is that when he is supported by the GOP in the legislature and senior cabinet members in the executive he can challenge even the most basic precedents of democratic government and indeed the founding principles of the constitution.

The adults in the room that were so frequently talked about when president Trump entered office, have gone AWOL. Either they are consciously engaged in what has all the hall marks of an attempt at a soft coup or they are so spineless that they cannot face standing up to someone who is actively engaged in undermining the democracy they profess to love.

They fear that because of his popularity a tweet from the president could destroy their career. To be fair they have good reason to do so based on what has happened in the past. However there are things the members of the GOP should now think about.

Firstly, do they have any higher moral purpose than reelection? The good news is there are republican legislators and officers across the country who do and take their oath to protect the constitution seriously.

Secondly, just how powerful will Donald Trump be when he leaves the White House. No one should underestimate the shift in power that will happen when Joe Biden walks into that building.

Finally, how much political credibility is Donald Trump using up as he continues to wage an increasingly desperate war against the US electorate?

The Pew Research Centre has been monitoring elector’s views post election. The bad news is opinions about the election are sharply divided along partisan lines. This is corrosive of trust and is something that Mr Biden needs to address.

However, there are some positives which could be built upon. Firstly there is a clear majority, 59%, of voters who believed either “very” or “somewhat” that the elections were “run and administered well”. Clearly some of these must be republican voters.

When you look at whether voters were confident that “their votes were accurately counted”, again a majority, 59%, were “very” confident and 26% were “somewhat” confident.

Perhaps most interesting is the view voters have of the conduct of the president and president elect since the election. This shows 54% of electors think president Trump’s conduct has been poor since the election and only 13 % think it excellent. This compares with 20% who think Biden’s conduct poor and 38% who think it is excellent.

It looks as though more than those that voted for him think Biden is doing either an excellent or good job whereas far less than those that voted for him think the same of the president.

These results followed a survey conducted between 12 and 17 November. Just as President Trump lost the election through his own efforts he may now lose the transition through his ongoing denigration of American democracy. He may be alienating even those that voted for him by his increasingly outrageous behaviour.

The election process involves hundreds of thousands of Americans in the direct process of polling and counting. Their work is observed by thousands of members of the political parties. The process is overseen by thousands of elected officials. At every level there are probably as many Republicans as Democrats engaged in this mammoth exercise in democracy. These people, many volunteers, will have worked their socks off over the past month. Their reward for administering the most secure election in American history? Claims by their president that they have overseen the most corrupt election ever.

At the same time as the President expends every ounce of energy he does not use on the golf course in running down the work of American patriots the Covid-19 pandemic seems to be very low on his radar. Now 250k people have died. Conservatively assuming that each one of those was known reasonably well by 50 people that means 12.5m Americans now have some direct contact with the disease. Word of mouth will obviously expand this enormously.

The Republican leadership should start to wonder how these experiences are shaping opinion in the States. Yes there are millions who would follow Trump to hell in a hand cart whatever he did. But it is risky to assume that all of the 74m that voted for him will do the same. It may well be that some of them are already experiencing buyers remorse over the expenditure of their vote.

As he tweets and screams about fraud ever more aggressively he may be losing credibility with traditional Republicans that voted for him in an exceptionally partisan election which ironically has lowered the bar for Mr Biden with those Republican and Democrats in the centre ground. If president Biden fails to declare all power to the Soviets on 21 January tens of thousands of Republican voters will heave sigh of relief but start to wonder what other misleading information they were given. If the Republican leadership are not careful their credibility may go the same way as Mr Trump’s. They might just consider the arc of popularity of the ex leader of the United Kingdom Independence Party, Nigel Farage.

By supporting Trump the GOP leadership are: fomenting division within the States, making the country increasingly difficult to govern, whoever is in power; reducing the credibility of the US in the eyes of its allies; delighting its opponents and all those who oppose liberal democracy; overseeing the decline of a global superpower. That is before one thinks about the basic failure in governance to protect the nation against harm in the shape of the Covid-19 pandemic.

The GOP leadership face a real choice. Are they for democracy or against? It is as simple as it is profound. Time is against them.

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Trump Fires Christopher Krebs, Election Cybersecurity Official – The New York Times

President Trump on Tuesday night fired his administration’s most senior cybersecurity official responsible for securing the presidential election, Christopher Krebs, who had systematically disputed Mr. Trump’s false declarations in recent days that the presidency was stolen from him through fraudulent ballots and software glitches that changed millions of votes.The announcement came via Twitter, the same way Mr. Trump fired his defense secretary a week ago and has dismissed other officials throughout his presidency.

Mr. Trump seemed set off by a statement released by the Department of Homeland Security late last week, the product of a broad committee overseeing the elections, that declared the 2020 election “the most secure in American history.”“The recent statement by Chris Krebs on the security of the 2020 Election was highly inaccurate,” Mr. Trump wrote a little after 7 p.m., “in that there were massive improprieties and fraud — including dead people voting, Poll Watchers not allowed into polling locations, ‘glitches’ in the voting machines which changed votes from Trump to Biden, late voting, and many more.” He said Mr. Krebs “has been terminated” as director of the Cybersecurity and Infrastructure Security Agency, a post to which Mr. Trump himself had appointed him.

 

Northern Comment – That President Elect Joe Biden is a statesman and focused on the interests of his country is a genuine tonic after four years of the present incumbent of the office. His aim to unite the country is fantastic. But what would you give to see the face of President Trump if President Elect Biden sent him a Tweet simply saying “Your terminated!” The cheer of delight, even just from those he has appointed then terminated, would be earsplitting.

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Investors urge European companies to include climate risks in accounts | Financial Times

Investors urge European companies to include climate risks in accountsCoalition overseeing $9tn in assets have written to groups including Anglo American, BMW, EDF and LufthansaMore than 30 companies, including EDF, have been asked to ensure their financial statements reflect the implications of the Paris Agreement

More than 30 of Europe’s largest companies, including Anglo American, BMW, EDF and Lufthansa, have been urged to include climate change risks in their financial statements as concerns grow that corporate accounts no longer reflect the longer-term outlook.A group of 38 investors overseeing more than $9tn in assets have written to the chair of the audit committee at each of the companies, calling on them to ensure their financial statements reflect the implications of the Paris Agreement, which aims to limit temperature increases to well below 2 degrees Celsius.

Source: Investors urge European companies to include climate risks in accounts | Financial Times

 

Northern Comment – Really interesting that large scale investors are waking up to the implications of the Paris Climate Accord. They want to see numbers moving not just words. The statements of the CEO if not reflected in the Financial Statements are clearly seen for what they are, – hot air, and we are trying to avoid that.

It is good news as it will start to drive investment to clean technologies and away from the fossil fuel industry. A way to go but you can feel the momentum beginning. Lets hope it is not too late.