Can Britain Afford This Lockdown and Others Which May Follow?


Many people who think seriously about stuff will already be aware of the phenomenal cost to the UK economy of 4 months lockdown and another three partial lockdown earlier this year and wondering how the nation can possibly endure, both economically and socially, another month of lockdown with possibly more to follow. Well worry not my friends, according to economist and Wall Street Journal contributor Matthew Lynn the Bank of England has the answer, we just print some more money.

As we all lock ourselves in the cupboard under the stairs and England goes back into lockdown today, Chancellor Rishi Sunak announced another injection of £££s tens of billions to support the economy through the Covid-19 crisis (Chapter 99,900?) Surely the money will run out soon, will it not? Well, according to Mr. Lynn, no. So long as the Bank of England can print money fast enough the economy will stay afloat. We will hit a crisis eventually, but not for a long time – and we shouldn’t expect the Bank to rescue us from lockdown by imposing economic sanity on the government and its scientific advisers. 

Alongside keeping interest rates at almost zero while fuelling inflation the government is destroying the value of your saving and pensions, driving down the purchasing power of earnings, and undermining the currency. Yet they casually pumped another £150 billion into the economy through another round of ‘quantitative easing’ for the sake of prologing the misery of a few chronically ill people.

Even at the rate Sunak spends, that is a huge sum. In effect, the Bank will be funding the Government’s entire deficit for the year, and it will be doing it with little more than a few keystrokes on Andrew Bailey’s computer. In total, it now plans to print an extra £895 billion to counter the Covid-19 crisis, and no doubt more will be done if necessary. What started out as a one-off £200 billion to deal with the crash of 2008 has now multiplied five-fold, and it probably won’t stop there. 

A magic money tree? Perhaps. But as the linked article shows we have been picking the low hanging fruit from that for a long time, since the financial crisis of 2008 in fact. According to Modern Monetary Theory (MMT) we can carry on creating fiat money in this way for a long time. The Federal Reserve, the Bank of Japan, and the European Central Bank are printing even more than The Bank Of England. Keynesean theorists will tell you we are only borrowing from ourselves.

“Bugger me with the blunt end of a ragman’s trumpet,” you might well exclaim, why do we all bother going to work and paying our taxes when it’s possible to finance our lives by borrowing money from ourselves? I had no idea that we could spend our lives goofing around and the Bank of England would pay us for it.

I wonder if the author, who writes for one of the world’s leading economic journals remember, is aware that “printing money” does not actually mean topping up the ink reservoirs and staring the printing presses. Central banks create money by issuing bonds which bear a fixed interest rate or coupon value and are sold at auction to the highest bidder. The ‘yield’ is the true interest rate. If the bonds sell for more than the face value the yield is less that the fixed interest rate, if they sell for less then the yield is higher.
When a central bank floods the market with bonds (as is happening with most central banks now,) the yield on those bonds crashes,

No Mr Lynn, Britain cannot afford another lockdown, this government is mortgaging the nation’s future to pay for the incompetence and idiocy of its scientific advisers.Long term the result can only be catastrophic,


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