15 Dec 2021

There seems to be a puzzling disconnect between the available facts from South Africa about Omicron (that it spreads quickly but has relatively benign health consequences) and the gloomy and even panicky reaction in the UK from the government, the self-appointed “science” and the political opposition, such as it is. 

It is almost as if the establishment, if that’s the right word, has an ulterior motive in keeping the fear going, even at the expense of the usual suspects such as children, people with undiagnosed conditions like cancer and, of course, the leisure and travel industries. 

As this website is about money, I will speculate about financial motives. Fighting Covid has been extraordinarily expensive. The UK government has borrowed more than £550 billion since April 2020. Clearly this money has gone to some obvious recipients like vaccine manufacturers and the rapacious “approved” PCR testers but also to the NHS, to local councils and in the form of furlough payments to employers of the temporarily unemployed.

I don’t suppose that many people associated with any of these groups, the pharma companies aside, actually want the pandemic to continue.

But be aware that this is potentially a very big week for the UK Treasury. In March 2020 it was agreed that the Bank of England’s Asset Purchase Facility could be increased from £445 billion (it was full at the time) by £200 billion and later in the year by another £100 billion and again (in November) by a further £150 billion for a total of £895 billion (popularly known as QE or quantitative easing). 

Since April 2020 the Bank has duly bought gilts steadily from institutional holders. We have only the detailed figures up to the end of September but at the consistent rate at which it was operating it should have reached its £895 billion target this very week (13th December). Over that period the Bank purchasing arm has bought £3 of gilts for every £4 that it has issued on behalf of the government. In other words, 75% of this extraordinary borrowing has been funded by what one might call an elaborate accounting trick.   

Unless the QE facility is ramped up again, the government will be trying to sell gilts into a sellers’ market next year which implies the possibility of materially higher borrowing costs. Given that more QE would be a rather desperate example of “kicking the can down the road” it could surely only be justified by a new state of emergency. 

But what’s that? The calls for more furlough schemes are already reaching my ears via the media channels that largely dedicate themselves to demands for state subsidy. It is unthinkable that fear mongering could be manufactured in order to justify more money printing. It is a quite ridiculous idea that the ultimate bill could be further loaded on to the generation that is being deprived of education and gifted vaccinations of dubious use. But once you have thought the unthinkable it is very hard to unthink it. 

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