Social Europe: The Covid-19 debt deluge

Another potential consequence of the pandemic is less recognised but potentially more important: increased financial fragility, implying the potential for a debt crisis and even a broader financial collapse. After Covid-19 is contained and policies are implemented to ease the situation, supply chains will be restored and people will return to work with the hopes of recovering at least some of their lost incomes. But that real economic recovery could be derailed by unresolved financial and debt crises. [...]

A recent analysis by the United Nations Conference on Trade and Development shows how sustained debts could pose a larger problem for the global economy and financial system. In 2018, total debt (private, public, domestic and external) across developing countries was equal to almost twice their combined gross domestic product—the highest it has ever been. Particularly concerning is the build-up of private debt by non-financial corporations, which now amounts to nearly three-quarters of total debt in developing countries (a much higher ratio than in advanced economies). According to UNCTAD, inherently volatile ‘foreign shadow financial institutions’ have played a major role in fuelling this accumulation, such that around one-third of private non-financial corporate debt in developing countries (with the exception of China) is denominated in foreign currency and held by external creditors. [...]

As the Turkish economist Sabri Öncü has suggested, we can start by taking our cue from the London debt agreement of 1953, which dramatically altered economic conditions for Germany, at that time a major debtor. The agreement between Germany and 20 external creditors wrote off 46 per cent of the country’s prewar debt and 52 per cent of its postwar debt, while the remaining debt was converted into long-term, low-interest loans with a five-year grace period before repayment. Most significantly, Germany had to repay its debt only if it ran a trade surplus and all repayments were limited to 3 per cent of annual export earnings. This encouraged Germany’s creditors to be vested in its export success, creating the conditions for the subsequent boom.

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Social Europe: Here we go again: Europe’s inability to face the coronavirus crisis

On March 16th, the president of the European Commission, Ursula von der Leyen, proposed a 30-day closing of the union’s external frontiers. Many governments have however locked national borders, with no European co-ordination. The same day, a meeting of eurozone finance ministers—with a co-ordinated economic response anticipated—failed to take significant action. The chair, Mário Centeno, merely expressed a general will for fiscal stimulus while emphasising the permanence of European rules: ‘[T]he Stability and Growth Pact has all the flexibility needed to cater for this situation … We welcomed the commission guidance on the scope for supporting firms that is available within state aid rules.’

In fact, such rules are openly—and wisely—being broken by all governments facing the pandemic. Europe’s attitude leaves open the possibility that damaged countries are again asked to follow a stricter path of adjustment of public expenditure, leading to a new round of austerity. [...]

Policy action in the face of the pandemic is indeed difficult. Monetary-policy tools are less effective than in previous crises. On the day of von der Leyen’s announcement, new liquidity announced by the US Federal Reserve and the ECB failed to prevent a stock-market collapse. The indirect stimulus of expansive fiscal policies and tax relief is crucial to rescue damaged economies. But the most effective tool for containing the crisis is probably a large direct increase in public spending—on public services, the purchase of domestically produced goods and investment in new production activities. [...]

In fact, a key lesson from the pandemic is that health is a global public good, vulnerable to deficits in its supply and to the emergence of epidemics from any point on the planet. Another lesson is that public-health systems—with universal and egalitarian coverage—are the best protection from the pandemic. A third is that the model of Europe’s welfare state, with public responsibility for providing fundamental services—health, education, universities, research, pensions, social assistance—to all citizens, regardless of their ability to pay, is an effective alternative to the operation of markets.

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The Atlantic: The Great Toilet-Paper Panic

It started with an unsubstantiated rumor. “You can laugh now,” said Johnny Carson on The Tonight Show in 1973, “but there is an acute shortage of toilet paper.” There wasn’t— but it didn’t matter. The broadcast sent America into a mass panic. Millions of shoppers swarmed into grocery stores to begin hoarding toilet paper. The Scott Paper Company insisted that the shortage was being artificially induced, and urged people to stop panic-buying the product. Nevertheless, for four months, toilet paper—absent from the selves—was bartered, traded, and even sold on the black market. Out of nowhere, a shortage was born.

"The Great Toilet Paper Scare" was directed by Brian Gersten (https://www.briangersten.org). It is part of The Atlantic Selects, an online showcase of short documentaries from independent filmmakers, curated by The Atlantic.

Grunge: Why People Are Hoarding Toilet Paper Amid Coronavirus Panic

Whether or not you buy into the whole "don't hoard toilet paper" thing, COVID-19 has ensured that, where once there was Angel Soft on supermarket shelves, there is now only silence. All of this raises the question, "What the heck is going on?" Well, we have an answer to that.

The reasoning behind the recent toilet paper boom is multifaceted and layered, much like toilet paper itself. In an interview with Time, Associate Professor of Psychiatry and Behavioral Sciences at the George Washington University School of Medicine Mary Alvord stated that the draw towards toilet paper in times of crisis is practically a primal instinct. She explained:

"We all eat and we all sleep and we all poop. It's a basic need to take care of ourselves. There is comfort in knowing that it's there."

The problem? It's not there. "It" being the availability of toilet paper, of course. While disasters like hurricanes and tornadoes are relatively predictable, appearing at around the same time every year, the novel coronavirus popped up fast and mean. Additionally, it wasn't until it had already spread that authorities at the federal level acknowledged that the virus posed any kind of threat, which led to a flashpoint of panic-buying when the gravity of the situation was felt all at once.

Financial Times: Germany’s coronavirus anomaly: high infection rates but few deaths

The apparent anomaly has sparked debate in Germany and beyond, though experts warn against drawing sweeping conclusions. They argue that the country’s low fatality rate most likely reflects the fact that the outbreak is still at a relatively early stage, and that the age profile of those affected has so far been younger than that in other countries. Younger patients without previous ailments have a much better chance of surviving Covid-19 than elderly patients.

Another factor that may help explain the variance is the unusually high number of tests being carried out in Germany. According to Lothar Wieler, the president of the Robert Koch Institute, German laboratories are now conducting about 160,000 coronavirus tests every week — more than some European countries have carried out in total since the crisis started. Even South Korea, which is conducting 15,000 tests a day and has been held up by virologists as an example to follow, appears to be testing less than Germany. [...]

In the short term at least, mass testing feeds through into a lower fatality rate because it allows authorities to detect cases of Covid-19 even in patients who suffer few or no symptoms, and who have a much better chance of survival. It also means that Germany is likely to have a lower number of undetected cases than countries where testing is less prevalent. Indeed, one notable feature of the coronavirus outbreak in Germany so far is the high number of relatively young patients: according to data from the Robert Koch Institute, more than 80 per cent of all people infected with the coronavirus are younger than 60. [...]

Last week, the federal government ordered an extra 10,000 life-saving ventilators from a German manufacturer, on top of the 25,000 that are already in place in hospitals across the country. The city state of Berlin, which has so far recorded 391 cases of Covid-19, is converting parts of the local trade fair ground into a 1,000-bed hospital for future coronavirus patients. Similar steps have been taken across the country.

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