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Hedge Fund CIO: Can A Modern Nation Pull Off A Debt Jubilee Without Full Monetary Collapse?

Hedge Fund CIO: Can A Modern Nation Pull Off A Debt Jubilee Without Full Monetary Collapse?

By Eric Peters, CIO of One River Asset Management

“While…

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Hedge Fund CIO: Can A Modern Nation Pull Off A Debt Jubilee Without Full Monetary Collapse?

By Eric Peters, CIO of One River Asset Management

“While central banks in the U.S. and Europe are moving toward monetary tightening or rate increases, the Japanese economy is still on the road to recovery,” said the Bank of Japan Governor. “It is most important to support economic recovery by patiently continuing monetary easing,” added Kuroda-san.

The Bank of Japan first cut interest rates to zero 23yrs ago, and ignoring a couple aborted attempts to briefly normalize policy they have remained at zero or lower ever since.

Government debt exploded in that time, with annual deficits and stimulus packages becoming so commonplace they lost their effectiveness.  The central bank bought nearly half the 1.4 quadrillion Yen of government debt that mounted, a stunning 260% of GDP. And yet, through it all, core prices in Japan’s economy remain almost identical today as they were when its zero-interest-rate experiment began.

For decades, it seemed everyone lost money trading Japanese bonds, which moved in counter-intuitive ways. They called the inexorable government bond rally the “Widow-Maker.” Traders with the highest IQs tend to have the least-disciplined risk management, so they suffered most profoundly.

In the years preceding the pandemic, economists claimed they definitively understood how and why Japan’s disinflation developed, persisted, and then manifested in other nations. Secular Stagnation.

Perhaps they did actually figure it out. But no sooner had the economists named their magnificent mental model then the world started to change -- which of course is the only durable model in all of economics. There are others that tend to work too. Like when major central banks are tightening, while others are easing, volatility rises until something breaks badly, at which point policy makers panic (for more on this topic, see "The Biggest Story No-One Is Talking About": Why Albert Edwards Expects "Something In The Market Is About To Snap").

Another model that seems to hold is that highly intelligent economists and central bankers generally believe they understand inflation, as if it is a mathematical equation. And even though inflation appears when they least expect it, and fails to manifest when they most anticipate it, they remain remarkably confident in their ability to predict it.

Anecdote:

The more you think about money, the less it makes sense. That is why the topic is so alluring for the masochists amongst us, attempting to solve the unsolvable, climb the unclimbable, conquer the unconquerable.

We engineer thought experiments and mental models in the hope of gaining a glimpse of some truth, the scent of something real, a money-making opportunity. Japan provides an enigma to explore. It once had a bubble so big the Emperor’s Palace was worth more than the state of California. Unreal. Impossible. But so it was.

When that bubble burst, real estate and equity prices utterly collapsed. The Yen strengthened for decades. It remains stronger today than back then. Japan’s exporters carried on, managing costs lower, maintaining competitiveness. The government supported the system, running persistent deficits and in each recession announced a special stimulus.

The central bank stimulated too. In 1999 the Bank of Japan reduced rates to zero, unsuccessfully lifted them a couple times, and in 2015 cut them to -0.10% where they remain. The level of government debt expanded in ways that almost everyone agreed would lead to an inflationary collapse. It did not. The Bank of Japan bought bonds, and now owns roughly 130% of GDP worth of government debt, which is half of the 260% outstanding.

It also pledged yield curve control, bidding for an unlimited quantity of 10yr government bonds at a 0.25% yield. Could the central bank create money, buy all the outstanding bonds, and simply burn them? Execute a modern version of an Old Testament debt jubilee? The currency of a nation that chooses this path should weaken, as it is now doing in Japan.

But might it be possible for a country to pull off such a feat without full monetary collapse? We don’t know, yet. What seems certain though, is that if you were to attempt such a bold maneuver, you would absolutely want to be the first nation to try. 

Tyler Durden Sun, 05/01/2022 - 21:00

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Science

Long COVID: female sex, older age and existing health problems increase risk – new research

A new study has analysed UK data from long-term health surveys and electronic health records to understand how common long COVID is, and who might be at…

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shurkin_son/Shutterstock

About 2 million people in the UK currently have long COVID, according to the latest data from the Office for National Statistics.

In the UK, long COVID is defined as “signs and symptoms that continue or develop after acute COVID-19”. This definition is further split into people who have symptoms between four to 12 weeks after infection (ongoing symptomatic COVID-19) and for 12 weeks or more (post-COVID syndrome).

Symptoms can include fatigue, breathlessness, difficulty concentrating and many more – but the precise nature of the symptoms is not well understood. There are also gaps in our knowledge when it comes to the frequency of long COVID, and whether there are particular factors that put people at higher risk of developing the condition.

All of this is partly because the symptoms used to define long COVID often vary between studies, and these studies tend to be based on relatively few people. So the results may not apply to the wider population.

In a new study published in the journal Nature Communications, my colleagues and I looked at data from ten UK-based long-term studies, alongside 1.1 million anonymised electronic health records from English general practices. Based on this data, we investigated whether the burden of long COVID (how common it is) differs by demographic and health characteristics, such as age, sex and existing medical conditions.

The studies were established before the pandemic, and have tracked participants over many years. From these surveys, we used data from 6,907 people who self-reported they’d had COVID-19. Comparing this with the data from the electronic health records of people diagnosed with COVID allowed us to examine the frequency of long COVID in those who have seen their GP about it and those who haven’t.


Read more: Long COVID: a public health expert’s campaign to understand the disease


We found that of the people who self-reported having COVID in the studies, the proportion who reported symptoms for longer than 12 weeks ranged between 7.8% and 17%, while 1.2% to 4.8% reported “debilitating” symptoms.

In the electronic health records, we found that only 0.4% of people with a COVID diagnosis were subsequently recorded as having long COVID. This low proportion of diagnoses by GPs may be partly because formal logging of long COVID was only introduced for doctors in November 2020.

COVID-19 National Core Study, Author provided

The proportion of people who reported symptoms for more than 12 weeks varied by age. There was also a lot of variation depending on which definition each study used to capture long COVID. But overall, we found evidence to suggest an increased risk of long COVID was associated with increasing age up to age 70.

The studies include participants across a range of ages, from an average age of 20 to 63. Using a strict definition of symptoms affecting day-to-day function, we found that the proportion of people with symptoms for 12 or more weeks generally rose with increasing age, ranging from 1.2% for 20-year-olds to 4.8% for those aged 63.

We also found that a range of other factors is associated with a heightened risk of developing long COVID. For instance, being female, poorer pre-pandemic mental health and overall health, obesity and having asthma were also identified as risk factors in both the long-term studies and electronic health records.

These findings are broadly consistent with other emerging evidence on long COVID. For example, a recent international review study concluded that women are 22% more likely than men to experience long COVID.


Read more: COVID: long-lasting symptoms rarer in children than in adults – new research


It will be important to understand why these links exist, which is beyond the scope of our research. But identifying who may be at higher risk of long COVID is important, and as we continue to learn more, this could inform public health prevention and treatment strategies.

Ellen Thompson does not work for, consult, own shares in or receive funding from any company or organisation that would benefit from this article, and has disclosed no relevant affiliations beyond their academic appointment.

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International

Redundancy: what to know about your rights when an employer lets you go

Redundancies are an unfortunate fact of life for businesses, but companies can try to make the process of job cuts less painful for workers.

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Companies making redundancies should treat both dismissed employees and those that remain with compassion. Syda Productions/Shutterstock

One of the biggest rail strikes in 30 years has been playing out in recent weeks as 40,000 workers protest the threat of job cuts. Their employer, Network Rail, wants to lay off up to 1,800 people as it prepares to introduce new technologies in an attempt to save more than £100 million annually following a post-pandemic drop in passenger numbers.

Transport secretary Grant Shapps has claimed this industrial action will cost around £150 million in lost revenue, in addition to a £450 million hit to the wider UK economy. With such significant costs expected, not to mention the ongoing impact on individual travellers, the government has called on the parties involved – the rail operators and the unions representing the workers – to agree a deal via negotiations.

We already saw the impact of a company taking such matters into its own hands earlier this year when P&O Ferries dismissed 800 employees without notice as it tried to make savings. In the current situation, Network Rail’s management is following a process of consultation with affected employees. It has offered voluntary redundancy in an attempt to limit the impact of its plans for modernisation that will lead to the redundancies, with more than 5,000 workers applying so far, according to news reports.

Unfortunately, redundancies are a fact of life for businesses, particularly in difficult times like the current economic environment. In such circumstances, businesses often choose to make redundancies to create a more sustainable future for the company as a whole. And while making employees redundant tends to be an unpleasant experience for all parties involved, the impact is, of course, most significant for the employees that are losing their jobs. Companies must therefore find a way to implement redundancies with compassion, providing clear communication for all employees during the process, as well as offering ongoing tools and support to the employees that lose their jobs and those that remain.

Setting expectations

So what should you expect? Employees at risk of redundancy are entitled to a fair redundancy process underpinned by the Employee Rights Act 1996, which includes the right to meaningful consultation. According to the UK Advisory, Conciliation and Arbitration Service (ACAS) this should provide the opportunity to discuss the changes and why certain employees are at risk of redundancy. If employees meet specific criteria, such as being employed for a certain amount of time (usually a minimum of two years), they are also entitled to statutory redundancy payments. It is important to check specific employment contracts and the company’s policy on redundancy pay as well, however.

Going beyond basic rights, redundancy programmes can be implemented more smoothly when employees understand the business rationale for the situation, according to my research. Business leaders must provide a clear understanding of why redundancies are being made. Network rail, for example, has discussed its plan to make savings by implementing technology such as drones for site inspections and to drive automation of ticket sales.

To ensure consultations are useful and beneficial, employers should also be able to clearly demonstrate to unions and their members how they have attempted to save costs through means other than redundancies. This could involve reducing or selling unused assets or saving on procurement costs, for example. All reasonable alternatives to redundancies should be considered, such as potential redeployment of employees at risk of redundancy.

Once it has been decided that redundancies are to be made, however, a company should be ready and able to explain how employees were selected and why certain parts of the business were impacted. Overall, employees and unions should be given a clear plan for individual and collective consultation with anticipated timelines and effective communication channels. This will show all impacted employees that careful consideration was given to all decisions around the redundancy programme.

For those employees at risk of redundancy, additional services should be provided to help with the adjustment to life after redundancy. This can include support from the company itself, as well as services from external providers for up to three months after redundancy. Examples include:

  • Retraining: redundancies can be avoided where possible through redeployment by retraining employees to fulfil alternative, available and suitable roles. This depends on the role requirements and reasonable ability to transfer skills.

  • Counselling: loss of income is extremely stressful, causing anxiety and financial worries. Organisations should have the necessary help in place to support employee’s mental health by providing access to free counselling and one-to-one support.

  • Transition: employers can also offer alternative support such as workshops on financial planning and guidance, or on how to start a business.

Two women talking, counselling.
Companies should provide additional support following redundancies. wavebreakmedia/Shutterstock

Supporting other employees

A more compassionate redundancy process should also consider the employees that remain with the organisation. During my research, I found that the way organisations treat the employees who lose their jobs can have a significant impact on the employees who remain in the organisation. They may feel guilty or angry about colleagues losing their jobs, as well as experiencing continued fear of job insecurity if more job losses are expected.

Treating all employees with compassion, fairness and respect during redundancies also benefits the management staff that must implement the process of redundancies. Again, widespread communication – not just with the union, but with employees themselves – helps companies conduct the process with compassion. Remaining employees should understand the future vision and mission of the organisation. Other ways to lift employee morale include investing in training and development, as well as recognising job-related progress or achievements.

Redundancies cannot always be avoided, but the negative impact can certainly be limited for those who lose their jobs, as well as for those who remain. And when unions work with management to ease the pain of redundancies, employees can at least leave the organisation more equipped for the future.

Madeleine Stevens does not work for, consult, own shares in or receive funding from any company or organisation that would benefit from this article, and has disclosed no relevant affiliations beyond their academic appointment.

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Spread & Containment

U.S. FDA will decide on redesigned COVID vaccines by early July

U.S. regulators plan to decide by early July on whether to change the design of COVID-19 vaccines this fall in order to combat more recent variants of…

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U.S. FDA will decide on redesigned COVID vaccines by early July

By Michael Erman

“The better the match of the vaccines to the circulating strain we believe may correspond to improve vaccine effectiveness, and potentially to a better durability of protection,” Dr. Peter Marks, director of the FDA’s Center for Biologics Evaluation and Research, said at a meeting of outside advisers to the regulator.

Vials with Pfizer-BioNTech and Moderna coronavirus disease (COVID-19) vaccine labels are seen in this illustration picture taken March 19, 2021. REUTERS/Dado Ruvic/Illustration

The committee is scheduled to vote on a recommendation on whether to make the change later on Tuesday.

The updated shots are likely to be redesigned to fight the Omicron variant of the coronavirus, experts say. read more The exact composition of the retooled shots and whether they also will include some of the original vaccine alongside new components will be considered at the meeting.

Pfizer Inc (PFE.N), Moderna Inc (MRNA.O) and Novavax Inc. (NVAX.O) are scheduled to present data at the meeting. All three companies have been testing versions of their vaccines updated to combat the BA.1 Omicron variant that was circulating and led to a massive surge in infections last winter.

Both Moderna and Pfizer with partner BioNTech (22UAy.DE) have said that their respective redesigned vaccines generate a better immune response against BA.1 than their current shots that were designed for the original virus that emerged from China.

They have said that their new vaccines also appear to work against the more recently circulating BA.4 and BA.5 Omicron subvariants, even though that protection is not as strong as against BA.1.

Experts also want to know if the new shots will boost protection against severe disease and death for younger, healthier people or merely offer a few months’ additional safeguard against mild infection.

Scientists who have questioned the value of booster shots for young and healthy people have said a broad campaign is not needed with an updated shot either.

Other experts have championed any additional protection new vaccines may offer.

Reporting by Michael Erman Editing by Bill Berkrot and Bernadette Baum

Our Standards: The Thomson Reuters Trust Principles.

Source: Reuters

 

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