TTF Blog: 23 November 2020

by Alex Varley-Winter, TTF’s Head of Media Relations & Investigative Reporting

In the countries worst hit by the global pandemic, governments will have to grapple with the impact of Covid 19 pandemic on people’s jobs and security.

The U.S. today hit a one-day record of more than 192,000 Covid cases and the Sun recently reported that ‘TENS of millions of Americans will lose their unemployment benefits next month when Cares Act provisions expire, – unless lawmakers can agree on another coronavirus relief package.’

Meanwhile, where I am in the U.K., City A.M. reports that one in twenty young people are currently unemployed and the Mail covered how ‘Covid-19 has hammered jobs DESPITE Rishi’s massive bailouts’.

The case for tackling private debt

Professor Steve Keen, the author of Debunking Economics will be speaking at a Symposia we are running on Wednesday, on Covid 19 and the case for a ‘Private Debt Jubilee’.

I’ve spoken to Keen before; his ideas are based on detailed mathamatical models of the economy, based on official statistics. He argued this summer that economists’ ignoring private debt was why, in 2008, “we walked blindfolded into the financial crisis.” He did not, however, then talk to us directly about the impact of the global pandemic, now, on public and private finances.

As signs are emerging that jobs and livelihoods are again suffering, on both sides of the Atlantic we might start to see a heyday for the ideas of Keen and – possibly, under Biden, the modern monetary theorists who are centred around Stephanie Kelton’s Deficit Myth – who reportedly gained a following in the left wing of the Democratic party in the U.S. Their views are frequently critiqued as ‘Magic Money Tree’ economics but they are also gaining currency. Philip Aldrick commented in The Times over the weekend that modern monetary theory ‘offers a way through the post-pandemic recovery that could help to fix both the economy and the public finances. But it means turning policy upside down.‘

Professor Keen’s independent view, so far, has been this: “If you look at the correlation between the annual change in private debt and unemployment, it’s staggering.
“When credit goes up, unemployment goes down, and visa versa. This to me looks like a Rorschach Blot.”

With a correlation of ‘-0.84’, Keen insists ‘this is no black swan, there is something going on’. Yet the impact of private debt on jobs and livelihoods has for too long been ‘ignored’ by mainstream economists, in his view.

I’m looking forward to hearing what Keen has to share on the impact of a global pandemic on private debt – and what that might mean within society. If you would like to get involved in that discussion, please look here for details.