Kohler: ScoMo engineering a depression

Alan Kohler springs to life:

It’s now clear to us all that the problem for authorities is to try to prevent the health system from being overwhelmed without causing an economic depression. That’s with D, as in 10 per cent GDP contraction, not an R for a two-quarters recession, which is already a given.

Prime Minister Scott Morrison is trying to finesse it – announcing incoming travel “self-isolation” and banning events of 500 or more, while acknowledging that domestic spread of the virus is likely to grow.

Why not try to head it off with more drastic measures now, since he knows there are only 2000 intensive care beds and respirators in the country and he knows that these would fill up if only one per cent of the population got the disease, so that those with other life-threatening conditions would miss out?

…Even if an official total quarantine is not declared for a week or two, it’s happening unofficially already. People who are fighting in supermarket aisles over toilet paper and pasta are not then going out to a restaurant for a nice relaxed meal.

…business cash flow is already collapsing – except for supermarkets it seems. And their time will come once the hoarders have hoarded.

The national cabinet will need to simultaneously announce drastic containment measures and unlimited support for businesses and those on variable incomes, like musicians and contractors.

There urgently needs to be a “bazooka” like the one announced by the German finance minister, Olaf Scholz, on Friday: he said there would be “no upper limit on loans” that the government-owned development bank, KfW, can provide to businesses, and they would also be allowed to defer billions in tax.

…Scott Morrison stands on the precipice of presiding over a depression. The conservative fiscal rule book needs to be thrown out.

Bravo, Alan.

Sack Phil Lowe if he won’t print. Then drop an atom bomb of cash on small business and the unemployed while shutting us in for six months.

That’s all you need and can do.

David Llewellyn-Smith

Comments

  1. “Even if an official total quarantine is not declared for a week or two, it’s happening unofficially already.”

    The only human behaviour our idiotic government is capable of modelling is Wealth Effect. Had they treated this virus more seriously and shutdown international flights, and shutdown any suburbs that had untraceable virus origins, we would all still be attending restaurants and the footy.

  2. I’m looking forward to working from home. Working with my clients to ensure they are as close to “business as usual” as they can get even if people can’t fly in and out of site easily. Stop wasting time traveling when I could be working. Lunch with the family, not just dinner. Being able to enjoy the garden.

    Sure, everyone can’t work from home, but hell, if you can you should do so thus be one less vector loose in the community.

  3. ScoMo’s complete lack of leadership, foresight, planning or coordination, let alone hopeless lack of clear communication – on top of his idiotic drive for surplus and latest cash hand out for corporates masked as “stimulus” is the reason people are now panicking. Kohler and everyone else in the muppet media just now catching up to reality will have completely spooked the horses in 24 hours. Fun times coming

    • Scomo is meant to be getting advice from the Chief Medical Officer. Surely this means future projections.

      How on earth could he be so flippant to say ‘go to the footy’ on Friday, only to come out and ban mass events on Saturday. It seems he has his eye on a horizon which is 24 hours out. He should be looking months in advance and making decisions based on that.

      Scare the horses … the horses’ main fear at this moment is the leadership vacuum. People are taking matters into their own hands – pulling kids from school, isolating grand parents, buying enough food to last a while, connecting with neighbours about Plan B in the community.

      The last three months are going to define Scomo and the LNP. Flat footed, deniers of everything, compromised.

  4. Don’t expect the coronavirus pandemic to be over by Christmas.
    Instead, New Zealand is set for a long, drawn-out battle with the virus as different waves of the pandemic hit separate countries at different times. Tough travel restrictions are buying New Zealand invaluable time in the fight, but the complicated spread of the virus elsewhere means it will keep knocking at our door.

  5. Unlimited loans to businesses and the unemployed sounds like a recipe for hyperinflation, no?

    And these won’t be loans to businesses they will be donations. Most businesses will never be able to repay them. Just money wasted.

    A lot of businesses are going to go under and there’s not much we can do about it.

    Businesses with low overheads, not bogged down by debt will survive. People that overextended themselves won’t.

    Giving free money to poorly run businesses doesn’t help anyone. Delaying the inevitable.

      • Those Depression photos are astonishing. I think they are easily accessible through google, and the collection held in it’s entirety at the Library of Congress.
        Some of the photographers were Arthur Rothstein and Dorothy Lange.
        I pulled a whole lot down when our book club read Grapes of Wrath at the end of last year.
        Both the book and photos are timely, and ultimately horrifying.

        • I read Grapes of Wrath a long time ago in my teens and have never forgotten the extremely powerful ending to the book. Stunning. The movie wasn’t bad but stopped short, finishing on a slightly positive note, instead of the incredible climax of the book.

    • Jumping jack flash

      Handing out free money may hyperinflate, but I’m pretty sure there’s enough personal debt to soak it up. A smidge over 2 trillion, and that’s just the mortgage debt.

      Handing out debt is just economic suicide, so this is probably what they will do. Debt is not free money and never can be.

      There is a distinction between free money and debt. If the government borrows debt to dole out to everyone, that is an entirely different scenario than the government printing a ton of cash and dropping it from helicopters.

      Ideally, they would use their reserves. The next best solution is interest free, or CPI indexed loans.

  6. SupernovaMEMBER

    “Only 2000 intensive care beds and respirators in the country”……. (panic over this number not toilet paper) especially when our over 65’s are around 16% of the population (not including all-age immune & respiratory deficient people); we need a few million intensive care beds not a misely 2000. Have been confused they haven’t already stopped the planes 3 weeks ago despite the economic consequence. ScoMo’s advice more from bone-densitometrists (medical) and economists, rather than microbiologists (science) who also specialise in stats. To get the correct message out suggest the ABC’s Norman Swan be admitted onto the Govt advisory panel. Alternatively, Warwick McKibbin believes that tanking the country economically to save a few old people isn’t worth the risk…..well Professor that’s providing those few deaths don’t include members of your family.

  7. With an incompetent leadership, people are acting in their best interests now as opposed to listening and adhering to government “advice”

    Not going to announce school closures? No worries, parents are pulling their kids out of school anyway.

    What about advice not to panic buy? The ones who have followed that are likely to be more stressed out right now.

    There are already many demanding that there be a government led lockdown are growing – but the thing is if this is ignored, these people are going to follow this regardless of what the government does. Through social media and the like, their numbers are only increasing. It is more likely the states will take things into their own hands, with Morrison claiming credit or apportioning blame depending on the outcome.

    Morrison is incompetent as well as reactive. The Italy ban was only implemented once Italy had banned outbound flights. A US ban will probably only occur after similar, or if they ban flights from Australia. A cash splash may work, but we can already see that the already announced stimulus measures will only start from March 31 to save the next quarter and avoid a technical recession. They have ignored Labor’s calls to recall parliament to get it through sooner, so I doubt we will see anything additional until this goes through.

  8. Just printing and helicoptering money without first expanding the supply/production chain will only lead to hyperinflation … that will not solve anything.
    And instead of handing out money or bailing out business the Gov should give money in exchange of shares of these business; that way when things go up again, the Gov can cash out on their share of the surviving business.

    • The debt may soak up the helicopter money….there is far more debt than new money…

      My gut feel is that printing after a debt-deflation is far more likely to produce hyperinflation.

  9. Just imagine the negative impact on GDP if we all stop going to cafes and restaurants? HUUUUGE
    I was buying my usual take away coffee last week and the barista presses his hand on the plastic lid to get it onto the paper cup. Now if he had nCoV-19 he’d be an absolute rip snorter of a super spreader. Of course I drank from the lid covered cup but thought afterward how stupid this might have been.
    Or perhaps the virus doesn’t survive on a very hot cup of long black coffee for long?

    • Jumping jack flash

      Up 9 days on surfaces I heard from the ABC.
      Temperatures need to be pretty high to kill this one, don’t know if a coffee cup lid would be enough. Its a toughie.

      Pretty much a perfect virus. Spread by aerosol, long incubation with zero symptoms while being infectious, long life away from a host, questionable immunity after infection and recovery.

      The only way it would be more perfect is if it were a bit more deadly. This one is simply a “serious inconvenience”. I’m sure they have a more deadly one, though.

      • happy valleyMEMBER

        I am thinking your way. This is just the test version, which is doing rather well but there is the armageddon version to come.

        • Jumping jack flash

          Careless handling of a rather important biological agent, purposely hobbled for R&D purposes, is my opinion, but there are quite a few theories… * adjusts tinfoil hat *

    • billygoatMEMBER

      Mind boggling mixed messages from msm govt etc. Based on Simpson’s episode devoted entirely to Simpson family vacation a cruise ship where they are all taken out by Virus that impacts whole world & they’re all gonna die. Of course Lisa uses ‘science’ to discover a cure. Can’t recsll ending but bleak and pretty much blow for blow as C virarse playing out on world stage. I’m tipping your safe to suck on the spill proof (baby lid) on your latte. FEAR false evidence appearing real. Stay cal stay safe from the mind f$&kers

  10. “There urgently needs to be a “bazooka” like the one announced by the German finance minister, Olaf Scholz, on Friday: he said there would be “no upper limit on loans” that the government-owned development bank, KfW, can provide to businesses..”

    Governments in Australia made a mistake privatising all the state-owned banks. A publicly-owned development bank offering concessional loans would be really useful in times like these.

  11. Jumping jack flash

    I am skeptical that economic stimulus can even work in an economy with as much debt as ours unless it is unfathomably huge. I am certain that at this point in time, almost all stimulus will be spent at the bank and not on consumption. It doesn’t matter if it is “targeted” or otherwise.

    The basic purpose of stimulus is extra money. We have a dire shortage of money leading to the problems with consumption and demand due to the enormous amounts of debt that already exist. Debt absorbs money through interest, it doesn’t create money. Any extra money provided by stimulus will fill the debt hole first before it spills out to boost demand and consumption.

    But if they target the “stimulus” to provide additional, cheaper debt, then that exacerbates the debt problem we already have.

    The hungover, angry, drunk economy is placated with more drink, but at some point they will become hungover and angry again once that wears off.

    My 2c, anyway.

    • What is Scomo’s objective with the stimulus

      1. Save Gerry & mates
      2. Save the banks

      So either people go out and buy fridges etc or they pay their home loan with the money which is a win win for #scottyfrommarketing

      The problem is that this is going to last 3-6 months so and the economic shock will be for 12 months or longer so it is not really going to work

    • Jumping jack flash

      I should qualify my above comment by saying “nonproductive debt”.

      Productive debt that can increase productive revenue to be greater than the interest bill of the debt required to increase it is awesome and the only way which debt should be used.

      Nonproductive debt simply used for “buying stuff” like houses and other trinkets is economic poison.

      • Not if the cost/return is calculated in A$ that are 50% over-valued.
        e.g. Let’s provide Sydney with a whole lot of new trains that are imported. Let’s say cost is approx. USD 500M et’s assume lots of people in Sydney use them and, if we need some more people well that’s easy right. So the trains might earn more than they cost. However we have spent USD$500M how many USD are earned????? Approximately zero! So we just add to our massive foreign debt/asset sale problem by USD500M
        Build a road out in the middle of nowhere to open up a new farming area. The return in A$ looks absolutely lousy but would result in extra export income thereby reducing our need to sell our country off to the first foreigner with a dollar that we can find.

        It really is time to drop the simplistic way we allocate funds. There be at least three coniderations
        1. Return in A$
        2. Return in temrs of the external account
        3. Social value
        Which one ought get the most weighting would e determined by the state of the nation and our accounts at the time. All should be considered.

  12. IMHO an Aussie Depression has been on the cards for a while it was always a case of what would be the trigger, just happens that it is Covid-19

    • billygoatMEMBER

      Yep black swan frocked up as common flu – zero symptoms- requiring gun style thermometer put to head to measure temp – days for testing results – testing ionly for those doctors deem worthy – vaccine imminent – old folk not worth saving – celebrities, politicians & F grade media personalities highly susceptible- snot nose children immune – toilet paper equals ca$h ( get out now) … that can kill you if you don’t wash your hand, door handle, steering wheel etc – self isolation for magical 14 days will save you from this flu like panDEMONic. Stay safe & stay solo
      On the upside if heaps of people die there will be more empty house about the place & less to share resources. Greta must be loving this… How dare you???