LONDON (Reuters Breakingviews) - Olaf Scholz might want to study some history. The German finance minister was wrong when he described the fraud at Wirecard as “a scandal which is almost unprecedented in the world of finance”. The German payments processor’s 1.9 billion euros of imaginary bank balances are actually pretty familiar. They resemble, for example, the fictitious orders in the 1938 McKesson & Robbins scandal and the fraudulent loans that brought down the Bank of Credit and Commerce International in 1991.
LONDON (Reuters Breakingviews) - Covid-19 is hitting United Airlines very hard. The Chicago-based carrier says it is burning through $40 million a day. Fortunately, it can borrow enough money to keep on flying some of its planes. On Monday, United announced that it had raised $5 billion, backed by the value of its frequent-flier programme.
LONDON (Reuters Breakingviews) - Modern Monetary Theory is right for right now. It is revolutionary. It shows common sense. And it has a tendency to oversimplify and overpromise. Stephanie Kelton’s “The Deficit Myth: Modern Monetary Theory and the Birth of the People’s Economy” is a good place to see the great virtues and significant weaknesses of this suddenly popular approach to government finance.
LONDON (Reuters Breakingviews) - After Covid-19 is tamed, inflation rates are going to rise fast and far. Or maybe lockdowns will be followed by years of global deflation. The pandemic has unleashed a furious debate between extremists on either side of the monetary divide. Policy and habit suggest they’re both wrong.
LONDON (Reuters Breakingviews) - Disasters often teach people what is really important. The fight against Covid-19 is showing how helpful strong welfare states are to modern economies. The lesson is unlikely to be forgotten.
LONDON (Reuters Breakingviews) - Each suicide has its own sad story, as does every death from alcohol and drug abuse. When the number of these tragic endings increases dramatically, something bigger is going on: a social failure. “Deaths of Despair and the Future of Capitalism” recounts the multifaceted communal neglect which has poisoned the lives of far too many vulnerable Americans – in many cases, literally. The spread of Covid-19 only reinforces the thesis.
LONDON (Reuters Breakingviews) - Worry about the coronavirus pandemic, definitely. Worry especially about poor countries where social distancing is difficult and medical resources are scarce. Worry about the exit strategy for lockdowns and the damage to mental health from isolation. But do not worry too much about the economy.
LONDON (Reuters Breakingviews) - When something is broken, try to fix it. If that doesn’t work, seek a replacement. This wisdom is applicable to the world’s financial system.
LONDON (Reuters Breakingviews) - Platinum, like other precious metals, is sometimes considered a reliable store of value. U.S. lawmaker Rashida Tlaib wants to use the material in a new way, one which would help the coronavirus-damaged economy now – but potentially destroy some value later. The Democratic congresswoman from Michigan wants the American government to mint two platinum coins, each with a face value of $1 trillion.
LONDON (Reuters Breakingviews) - Covid-19 is causing a global recession. Ever stricter restrictions on activity are pushing down gross domestic product throughout Europe and the United States, while economic activity will only slowly return to normal in China and South Korea. However, these macroeconomic numbers fail to capture the unusual nature of the current situation.