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Here is the downloadable PDF report which summarises the principles and application of Surplus Energy Economics.

It is based on the article #175. The Surplus Energy Economy – An Introduction, first published on 19th June 2020.

SEE INTRODUCTION 175

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Here is the PDF version of the report Coronavirus: The Economics of De-Growth

This based on #169: At the zenith of complexity, to which some additional information has been added.

CORONAVIRUS – THE ECONOMICS OF DE-GROWTH

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Here is the PDF version of the scoping report Coronavirus: The Scope of Financial Risk

This based on #168: Polly and the Sandwich-man, to which some additional information has been added.

CORONAVIRUS – THE SCOPE OF FINANCIAL RISK

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Welcome to the resources section of Surplus Energy Economics.

Here, further to a request, is SEEDS data for selected European economies:

SEEDS PROSPERITY EUROPE 19th December 2019

Here’s the SEEDS dataset on the EM-14 emerging market economies group, accompanying article #159.

EM 14 December 7th 2019

Here are the charts, from the new version of SEEDS, showing per capita prosperity by region. The critical one is the EM group – and what it does to the World picture.

P11 01

Energy and population:

Energy & populationjpg_Page1

 

OLYMPUS DIGITAL CAMERA

OLYMPUS DIGITAL CAMERA

 

SEEDS environment report July 2019

Supplement #151- The Great brick Wall of China

Surplus Energy Economics – Interpreting the post-growth economy

Guide to SEEDS output

tp0510_TPSI_report_005_LR(1)

TPSI_009_Perfect_Storm_009(3)

 

 

 

 

Recent Posts

#176. Protect and Survive

THE AUTHORITIES’ ‘RACE AGAINST TIME’

Before we can assess the outlook for the economy after the Wuhan coronavirus pandemic, we need to be familiar with the measures adopted by the authorities to tackle the crisis itself. Whilst these measures themselves are reasonably well-known, it seems that some of the associated risks are by no means so clearly understood.

Critically, governments and central banks face an imprecise (but undoubtedly critical) time-deadline which, if missed, could create an extraordinarily hazardous combination of circumstances.

The ‘standard model’ response

The coronavirus crisis, and the use of lockdowns in an effort to curb the spread of the virus, have posed two different challenges to the economy, and these have been met by two different types of response.

The more obvious and immediate impact has been the sharp fall in economic activity itself.

The second is the risk that households may lose their homes, and that otherwise-viable enterprises might be put out of business, by an inability to keep up with rent payments and debt servicing due to the temporary impairment of their incomes.

Official responses to these problems have involved, respectively, support and deferral.

Support has been provided by governments running extraordinary (and, in anything but the very short term, unsustainable) fiscal deficits in order to replace incomes, with these deficits essentially monetised by central banks’ use of newly-created QE money to acquire pre-existing government debt. The alternative, of course, would be for central banks to sit this out, and let government debts soar, but monetisation seems to have been judged, perhaps correctly, as the lesser of two evils.

Deferral, meanwhile, has taken the form of rent, debt and interest ‘holidays’, whose effect is to push such costs out into the future.

Fiscal support programmes are exemplified by the British situation, in which a deficit of £48bn limited, to ‘only’ 20.4%, a decline in April GDP which would otherwise have been a slump of close to 50%. A further deficit of £55bn during May pushed the two-months’ total to £103bn, a number remarkably (and surely by no means coincidentally) similar to the £100bn of QE thus far undertaken by the Bank of England.

A time-constrained expedient

Though there have been variations around this theme – most notably in the United States, where the Fed seems to have attached inordinate importance to the prevention of slumps in asset prices – there has been an identifiable ‘standard model’ of responses which combines deficit-funded support for the economy with central bank monetisation of equivalent amounts of existing public debt. Over the course of three months, the three main Western central banks – the Fed, the ECB and the Bank of Japan – have increased their assets by $4.5 trillion, or 31%, a sum equivalent to 10.5% of their aggregate annual GDPs.

Essentially, and despite some variations in the types of assets purchased, this amounts to the back-door monetisation of the new debts incurred to support economic activity. Although Japan has been getting away with wholesale debt monetisation for many years, this process nevertheless carries very real risks. If markets, and indeed the general public, ever came to think that the monetisation of deficits had become the ‘new abnormal’, the credibility and purchasing power of fiat currencies would be put at very serious risk.

This risk most certainly should not be underestimated – after all, the $2.9tn of asset purchasing undertaken by the Fed between February and May equates, on an annualised basis, to 55% of American GDP, with the equivalent ratios for other areas being 39% in Japan, 32% in the Euro Area and 23% in Britain.

If any of these central banks actually did monetise debt at these ratios to GDP over a whole year, currency credibility would suffer grievous impairment.

A race against time

This ‘standard model’ of support response, then, is a time-constrained process, viable for a single quarter, and perhaps for as much as six months, but not for longer.

Meanwhile, there are obvious time constraints, too, on a deferral process which imposes income delays on counterparties such as lenders and landlords.

If all goes well, a reasonably rapid economic recovery will enable governments and central banks to scale back deficits and monetisation before this process risks impairing credibility. An optimistic scenario would postulate that, by the time that this normalization has been concluded, the authorities will also have worked out how to wind up the deferrals process in ways that protect households and businesses without imperilling landlords and lenders.

There is, though, an all-too-plausible alternative in which deficit support is still being provided at a point when deferral is no longer feasible. This is a ‘nightmare scenario’ in which, as well as continuing to monetise high levels of fiscal deficits, central banks also have to step in to rescue lenders and landlords.

Thus understood, governments and central bankers are engaged in a race against time. They cannot carry on monetising deficit support for more than a few months, and neither can they prolong rent and interest deferrals to the point where landlords and lenders are put at risk. This makes it all the more surprising (and disturbing) that some countries are acting in ways that seem almost to invite a crisis-prolonging “second wave” of coronavirus infections.

 

 

  1. #175. The Surplus Energy Economy 143 Replies
  2. #174. American disequilibrium 76 Replies
  3. #173. The affordability crisis 124 Replies
  4. #172. Orchestra, lights, beginners! 125 Replies
  5. #171. Inflexion point 398 Replies
  6. #170. At the end of “new abnormality” 278 Replies
  7. #169. At the zenith of complexity 227 Replies
  8. #168. Polly and the sandwich-man 252 Replies
  9. #167. Tests and correctives 243 Replies