The arguments now being used to justify continued restrictions on activity have become so irrational that its hard not to imagine that there is some other motivation behind the continued restrictions, and threat of even greater ones. I have become increasingly convinced that the real reason for the continued scaremongering and promotion of COVID paranoia, to justify such restrictions, is a concern to slow economies, as every time economic growth increases rapidly, it brings with it the same pressure on interest rates, which threaten to crash asset prices, the form in which the top 0.01% now owns their wealth, and through which they exercise power and influence.
The arguments in favour of restrictions have become even more irrational than they have always been. It was always the case that the proportion of the population at serious risk from COVID was only about 20%. Even of those, the proportion likely to die was small. The rational approach to that situation was to isolate that 20% of the population until such time as vaccines became available to protect them, or other herd immunity was established. In the meantime, the other 80% of the population, who were not at risk from the virus – and, generally, these were people under 60, i.e. those that comprise the working age population and students – could have continued life as normal, in the process acquiring natural herd immunity to the virus from asymptomatic infection, which would also have quickly prevented further spread of the virus, also, thereby, acting to prevent it having time to mutate.
Implementing lock downs, and other such measures was always an irrational, and counterproductive strategy. Analysis of mortality rates across the globe, shows no correlation with countries that imposed lock downs, as against those that did not. The mortality rate in Britain, which has had lock downs of one sort or another for nearly a year and a half, for example, is nearly twice as high as that in Sweden, which has not had any lock down. But, it becomes even more irrational and surreal when, in addition to the natural immunity built up from infection, we also now have herd immunity generated by a large scale vaccination programme that has focused on the most at risk sections of the population.
The latest fiasco surrounding Boris Johnson illustrates the point. Johnson must be one of the most COVID immune people on the planet. Not only did he obtain immunity, as a result of contracting the virus last year, and so producing his own antibodies against it, but he has also been double vaccinated against it! So, why then was there such a hullabaloo, demanding that he self isolate for a fortnight, having come into contact with Sajed Javid, who was recently positively tested? There is no rational reason for him to do so whatsoever. The only reason he had to do so was because a) the Tories had made it law that anyone pinged by the ridiculous NHS app had to do so, and b) having made it law that everyone else has to self isolate for a fortnight, in those conditions, the media were threatening to have a field day in attacking Tory hypocrisy.
But, everyone knows the NHS app is a joke. It is pinging people, who, like Johnson, are now immune from the virus, and forcing them to stay away from work. It is even pinging people who have not even been in contact with anyone who has recently tested positive, but whose phone has simply been close enough to someone else's, for example, through adjoining walls! In the last few months, there has been 350,000 school students who have been yet further deprived of education – in a country where education provision is already pretty poor – having lost about 16% of their entitlement due to lock downs, not because they were ill, or likely to become ill, because those under 18 have statistically almost zero chance of being ill from COVID, but simply because a single student in the school had received a positive test. This is total lunacy.
Billions of Pounds has been spent developing vaccines and rolling them out in the population. Government data shows around 70% of the population has now had both jabs, providing them with immunity to at least the level that flu jabs provide against flu. The section of the population actually at risk from the virus have been jabbed first, and the rates of vaccination amongst that group are even higher, at around 90%. So any rational basis for continued lock downs, and other such restrictions has gone. The factor of new variants does not change this, because all the evidence is that the vaccines provide protection against these new variants too, at least to the extent of preventing them causing serious illness, hospitalisation and death. The facts also support that, because, although the media now continually push the number of new infections as their metric of choice – though they always emphasised infections, mindlessly, as against serious illness and death – the correlation between infections and hospitalisations and death has been seriously weakened. Currently, the number of people being hospitalised or dying, having been infected, is only a tenth of that it was prior to the development of herd immunity from vaccination and natural infection.
In fact, as I illustrated a while ago, using data from the ONS obtained under a Freedom of Information Request, the actual link of deaths to infections from COVID was itself not what it was being purported as being – . Of those being described as dying WITH Covid, less than 10% died FROM COVID, the main cause of death of those dying WITH COVID was Alzheimer's/Dementia, which accounted for about 25% of the total, Heart Disease accounted for about 10% of the deaths, and flu/pneumonia accounted for more than did COVID.
If we look at the number of deaths currently being reported as people WITH Covid, it is a fraction of what it was, and there are two reasons for this. Firstly, as with last year, the number of deaths, in general, declines substantially during the Summer months, and for the reasons described, in the post referred to, what the COVID statistics really are is just an index of the total number of deaths from all causes. If the number of people who die from any cause, be it Alzheimer's or being hit by a bus, declines then the number who had also had a positive COVID test in the previous month declines. Secondly, as a result of the development of herd immunity, from both natural infection and vaccination, the total number of people becoming infected with COVID, and having a positive test will be reduced.
So, despite all the stories about the number of deaths rising to 1,000, at some point, that is very unlikely to happen, both because, over the next few Summer months, total deaths from all causes will decline, so the number of people dying from those causes, who also had received a positive COVID test in the previous 28 days, will decline, and secondly, the consequence of the development of a large amount of herd immunity will mean that a smaller proportion of the population will now get positive COVID tests. As a moving average, the number of deaths is unlikely to move much above 100 per day, until the Summer ends, and larger numbers of people start dying from the effects, be it from colds and flu, or falling on ice, and so on. Of course, if there were some large natural disaster that killed thousands of people, the number of deaths of people WITH Covid, would also shoot up, because a proportion of them would have had a positive COVID test in the previous month! Yet, the fact is that, on the basis of the COVID data referred to above, of the current 50 or so people dying WITH Covid, only about 5 of them are dying FROM Covid. The numbers dying from flu and other causes are now much more significant.
Of course, there are some people who are still contracting and dying FROM Covid, but that is mainly amongst people who, although they are entitled to vaccination have, for whatever reason, chosen not to avail themselves of it.
There is no rational basis for continuing with a strategy of lock downs and restrictions that was irrational from the start, but which is even more irrational in conditions of widespread herd immunity, resulting from a combination of vaccination and natural infection. Yet, at every opportunity, we are confronted with scaremongering and COVID paranoia, so why? In part, its because its cheap sensationalist news for the media, who can also use the ridiculous nature of the restrictions to have cheap stories pointing out the hypocrisy of politicians who flout the very rules they have introduced. Of course, some of the scientists that took the lead in scaremongering at the start of the pandemic were also shown to be guilty of the same hypocrisy, but the media is less likely to focus on their hypocrisy than that of politicians and their political advisors.
But, its also hard not to see that, whenever economies have started to grow rapidly in recent years, causing interest rates to rise, which then threatens to crash asset prices, some means has been found to hold back that economic growth, and so reduce the threat to those assets. In 2010, conservative governments everywhere implemented fiscal austerity, for example, which cratered economic growth. In 2018, as economic growth again increased, interest rates rose, and financial markets fell by 20%, Trump stepped up his global trade war, which reduced global trade, and curtailed global growth, whilst the resulting slowdown was used as an excuse for the Federal Reserve to reverse its tapering programme, and again begin to inject liquidity that pushed up bond and share prices once more.
After the initial shock of COVID in Spring 2020, the even greater amounts of liquidity thrown into circulation by central banks led to global stock and bond markets rising to even greater astronomical heights, again showing that these forms of gambling have nothing whatsoever to do with the real economy, which at the time was seeing the greatest slowdown in 300 years, and company profits disappearing across the board, and turning into losses. But, as economies began to open up over the last few months, monetary demand has surged. In part that is fuelled by all of that same liquidity that central banks have injected. As businesses were forced by competition to respond to this increased demand, by accumulating additional capital, they have found labour shortages, and supply bottlenecks that have sent their input costs soaring in a manner described by Marx in Capital III, Chapter 6, and in Theories of Surplus Value, Part II. With many of them having no profits to use to finance that accumulation, and others also having run down their balance sheets to cover costs over the last year, they have had to go to the capital markets to borrow.
In previous years, we have seen companies using profits to buy back shares. Already, this year, there has been a record number of IPO's, and of additional share offerings as firms tried to get money-capital to invest in additional capacity. The result is inevitable. Additional supply of debt instruments – bonds, shares – means that there prices fall, which means that the yields on them rise, along with interest rates. Higher interest rates means a lower capitalised value of revenue producing assets such as shares and bonds, as well as land and property. Over the last few months, bond prices began to fall, and yields rise, a clear sign that interest rates were rising in the economy, as the demand for money-capital rose relative to supply. As frequently happens, the fall in bond prices saw a rotation into shares, as speculators bet that this increase in economic activity would result in higher profits, and, thereby, higher dividends. But, that would inevitably be short lived, as increased masses of profit is not the same as increased rates of profit. Falling rates of profit mean that, although rates of interest rise, they do so, not via any significant increase in the amount of interest/dividends paid, but via a fall in the price of the assets themselves.
Such a sharp fall, let alone a crash in asset prices strikes fear into the heart of the top 0.01% which owns its wealth now exclusively in this form. It needed by hook or by crook to slow down the rapid pace of economic expansion, and so relieve the pressure on interest rates and asset prices. COVID paranoia fulfils that function. Of course, there are others who have a vested interest in promoting COVID paranoia. There are sections of the Left, who have a crude and vulgar view that anything that is bad for capitalism is somehow good for Socialism, and so who relish any economic difficulty.
But, if COVID paranoia is being used to hold back economic growth, so as to slow the growth in wages and interest rates, it is a very short-term solution that will end in tears. One of the factors seen in recent months has been rapidly growing inflation. The main cause of that is all of the liquidity that central banks have put into circulation, which now is going to fund unproductive consumption, whereas previously it went to fund gambling in asset markets. The monetary demand has exceeded supply that was constrained as a result of the imposition of lock downs and lockouts that had stopped production of goods and services, a problem made worse in Britain by Brexit. COVID paranoia might act to reduce economic activity, but the genie is already out of the bottle. Spending both by households and by businesses is likely to continue to increase, as they try to get ahead of the now obvious inflation of prices, and, thereby, costs. All that further restrictions will do, is to further constrain supply, in the face of that rising demand, as well as further increasing costs, which will be passed on into higher prices, fuelling further inflation.
And, governments cannot continue to keep everything locked down forever. They might get support as Winter starts, and deaths rise, which they can attribute to COVID, but sooner or later that narrative will be seen through by populations. As was once said, you can fool some of the people all of the time, and all of the people some of the time, but you can't fool all the people all of the time. All that further restrictions will do, now, is to store up further demand as the dam bursts, as well as stoking up higher costs that will feed through into prices. Seeing yet further inflation ahead, speculators in bond markets will again begin to fear for the capital losses that such inflation will impose on their longer-term bond holdings, causing bond prices to fall sharply once more, and yields to rise, with a subsequent effect following on for other assets.
*****
The series on “When Will Asset Prices Crash” will resume later this week.
No comments:
Post a Comment