Covid 19 - the end of Capitalism?

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  • I was thinking of quitting my job before this kicked off. Now wondering if it'll still be there in a few months. Pretty weird.

    My general hopes for the post-Covid economy are that we take this as an opportunity to transition towards climate neutral technologies and industry-any and all future economic stimulus should be addressed there. Not road building, not fracking, not propping up the aviation or cruise industries.

    Renewable energy, clean tech and sustainable farming/aquaculture practices over the horrendously intense methods we have now depending on pesticides and toxic chemicals that fuck the wider ecosystem, and really putting a massive brake on the tourism industry in general.

    We can dream, eh?

  • 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.

    Yes, Danstuff is exactly correct. The sterling/euro rate was 15.81% worse (for us) at the end of 2016 compared with the beginning of the year (I've just looked it up)

    TW nicely proves my point - they got away with it! The public didn't realise they'd lost a lost of their money.

    Danstuff's post raises an interesting linguistic point : "you can't devalue a freely tradeable currency". This rather assumes devaluation is something active which is done by a government, which may be how a goverment presents it to the public. In reality it is something which is forced on a government by powers outside its control - in other words it is passive,not active.

  • But you can actively try to support a currency as a government, if you want to.

    You can also actively or passively enact policies which aid devaluation.

  • This rather assumes devaluation is something active which is done by a government, which may be how a goverment presents it to the public. In reality it is something which is forced on a government by powers outside its control - in other words it is passive,not active.

    I would argue it's the other way round. Devaluation is when a government decides that it is going to make its currency weaker and can do that by dictat (in theory) because it enforces a fixed exchange rate with foreign currency, a strategy which is invariably very effective at producing a flourishing black market in currency dealing because the official rate is almost inevitably different to the real rate.

    In circumstances where a government doesn't set the exchange rate (i.e. most countries these days, but not all - China for example) the government can do things which have the effect of strengthening or weakening their currency but that's a secondary effect rather than a devaluation per se.

    Like you say, primarily a linguistic distinction. Probably only really relevant to economists, and I'm not one.

  • TW nicely proves my point

    Really not, I hope. Perhaps I was being obtuse in my intial response - I should have explicitly called you on there being no devaluation, just a drop in sterling against the other majors.

    I'm afraid your point is somewhat lost on me just now.

  • I think he be dissing yo ass, suggesting that a 16% drop in sterling passed you by unnoticed.

  • Obviously you would have noticed. Who can forget The Great Toblerone Missing Chunks scandal?

  • I know, right - How embarrassing for me.

  • Next up in this thread: Someone mentions the gold standard...

  • 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?

    The problem is that inflation will not be replicated evenly throughout the world. The British economy is famously weak - low productivity and investment, chronic balance of payments deficit etc., so we are likely to do badly. I see high inflation as being like taking a lot of fragile things and throwing them up in the air. Let's see how they come down!

    It could well be very bad for the baby boomers (I'm just pre boom myself) who have done so well in the past. We (I'll include myself here) are mostly reliant on savings, which are likely to be wiped out, and we have very little earning capacity left.

    Luckily for me I probably have enough bikes to see me through .

  • Next up in this thread: Someone mentions the gold standard...

    Then National Service and the death penalty...

  • I'm not an economist either, but for what it's worth this is how I understand what happens in a normal devaluation (if there is such a thing).

    Speculators (may be indivduals or goverments) spot a weak currency - they sell that currency and the central bank for that currency has to buy what they are offered with foreign currency.
    Eventually they run out and then the goverment has no option but to devalue. Naturally they will try to cover their backs by claiming that the devaluation will be brilliant for industry, but the fact is they've been stuffed. This usually means electoral defeat - soon.

    The Attlee government devalued in 1949, just survived the 1950 election but were mortally wounded and lost in 1951. Wilson was probably wrong in failing to devalue immediately after being elected in 1964 (when he could have blamed it on the Tories), devalued in 1966 and hobbled on until 1970 when he hoped in vain that a World Cup victory would save his bacon.
    More recently the 1992 Lamont fiasco was a prelude to T. Blair's landslide.

    Sadly, this process has not yet worked through with the 2016 version.

  • Sterling wasn't a floating currency until the 70s. The UK abandoned the gold standard (yeah @TW you were right) after WWI and after WWII the UK was part of the Bretton Woods agreement so sterling was pegged to the dollar. The devaluations after WWII and the 1960s were devaluations in the sense I'm using the word - the government changing a fixed exchange rate in response to a weakening in the currency.

    The 1992 Black Wednesday situation was slightly different, as by that time sterling was a floating currency. However, the government was committed by virtue of the ERM to try and keep sterling within a particular band of exchange rates against other European currencies. Since by that stage sterling was a freely-traded floating currency, the only way they could do so when sterling started falling was to try and prop up the price by getting the BoE to buy sterling. As we all know that failed, because the markets simply had more cash than the BoE had foreign reserves with which it could buy sterling. I wouldn't characterise that as a devaluation though - simply a recognition that once a currency is floating there's only so much a central bank can do to prop it up using market intervention.

    I think it's generally recognised now that central banks can only play a small part in propping up a currency when the market considers that the real market value should be lower. They simply don't have the reserves necessary. The only occasion I can think of when a central bank intervention was successful was after the 2008 financial crisis, when people started selling Euros and buying Swiss Francs, causing the Swiss Franc to go over the 1 CHF= 1 Euro mark (temporarily by quite a margin).

    In that case the Swiss National Bank was in the opposite position to the BoE on Black Wednesday - it was trying to get the CHF to go down in value, not up. It could do so, because it could just print money and use it to buy foreign currency. Since the CHF is, like pretty much all other currencies, a fiat currency there was no limit on the amount of CHFs the Swiss National Bank could create in order to buy Euros and drive down the CHF/Euro exchange rate. In fact, I remember they had a press conference a few years later in which they basically said that if traders carried on buying CHFs in Euros, they'd just create enough new money to do whatever it took to get the CHF below 1.2 Euros. Eventually the markets realised they were serious. That's one reason why the SNB is still sitting on a huge pile of Euros it accumulated after 2008. Roughly 300 billion Euros.

  • Not sure if this has been discussed, but with so many offices in my industry proudly speaking of their workforce operating smoothly at home - will it stay that way? Central London offices with their high rents dropped in favour of permanent functioning WFH.

    Most people's commute is hell and I guess home offices are pretty sweet.

    Business districts dry up like in Sim City when the tumble weed music plays.

  • I was about to exchange on a house in a couple of weeks. What would be better, a house or money in the bank? Shit timing I think.

  • Same situation. I've put a chunk of my deposit into stocks in the last week and I'm already a bit up.

  • If you need a house, buy a house.

  • Just heard radio news saying gov advice is to delay all house buying/moving.

  • I'm going to be honest, this can be nice for people who have an extra room with a good desk etc. However, looking at how many people in London have to live, spacewise, that is definitely not the case for quite a few. It gets a lot less sweet when you're crammed into a corner somewhere. Oh, and having a good Internet connection is often relatively important too... which you have to pay for.

    And call me weird, but personally I actually prefer going to the office. Maybe that's partially because I commute by bike and therefore almost enjoy the commute.

  • Edited: wrongThread

  • Can't see one thing, in this whole situation that we are in, that has benefited from Capitalism. From out-sourcing, just-in-time deliveries, centralisation of resources, selling off native industries, closing primary production, nothing has helped.
    When is someone going to start laying the blame for this shit storm we are in?
    Socialism is saving the day when everyone is in danger, how long before it slips to me me me again.

    Edited to add:-

  • When is someone going to start laying the blame for this shit storm we are in?

    At whom would you like to lay the blame?

  • “Socialist” China and their fetish for wet markets.

  • Socialism is saving the day when everyone is in danger

    Where's it doing that then? Increased public spending in a state which retains a capitalist economy is not socialism.

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Covid 19 - the end of Capitalism?

Posted by Avatar for skydancer @skydancer