Financial Times Europe - 20.03.2020

8 ★ FINANCIAL TIMES Friday 20 March 2020

Monetary policy primed

markets for turmoil

At a time that global equity markets

are melting down and the clearest signs

of a global credit crunch are emerging,

one has to be taken aback by Janet

Yellen and Ben Bernanke’s blithe

comment that our economic problems

are not originating from the financial

markets (“The Federal Reserve must

reduce long-term damage from

coronavirus”, Opinion, March 19).

Less surprising perhaps is their

omission to remind us that the Federal

Reserve’s monetary policy under their

watch might have set us up for the

financial market turmoil that we are

experiencing today. Along with the

world’s other major central banks, it

did so by creating a global equity

bubble and by causing the gross

mispricing of credit risk as investors

were encouraged to stretch for yield.

On the basis of their experience, it

would have been both helpful and

timely had the former Fed chairs

cautioned that we should not repeat

the mistake of responding to the

current economic and financial market

crisis as we did to the last one by

putting an undue burden on monetary

policy for promoting the next

economic recovery.

Desmond Lachman

American Enterprise Institute,

Washington DC, US

Central banks could just

give people money

I very much agree with the proposals

put forward by Martin Wolf in his

March 18 column. However, it is

perhaps incoherent to say that

“governments can just send everybody

a cheque”, while at the same time

claiming that “central banks

cannot... underpin household

incomes or insure business against this

collapse in demand”.

Putting in place direct fiscal transfers

to people might be feasible for the US

government, whose central bank issues

the world’s currency, but it is not so

easy for certain euro area countries

that are seeing their risk premiums on

their debt go up. But central banks can

indeed help households and stimulate

aggregate demand at this critical

junction by sending a monetary

transfer to citizens, as proposed by Eric

Lonergan in his op-ed, “Central banks

should consider giving people money”

(August 3, 2019).

This is perfectly legal in the case of

the European Central Bank, since this

is not tantamount to the financing of

government deficits.

Domènec Ruiz Devesa

Economist, Member of the European

Parliament (Socialists & Democrats),

Brussels, Belgium

Concierge doctors cannot

make kit magically appear

As a longtime patient of Dr Bernard

Kruger in New York, I write to dispel

the impression that he is somehow

profiteering from this health crisis as

suggested by your recent article, “The

rich confront the virus: ‘Do I

quarantine in the Hamptons?’”

(March 18).

While there is no question that

concierge medical services such as

those provided by Dr Kruger pamper

the well-to-do by offering shorter

waiting room times and even house

calls on occasion, they cannot make

life-saving machines like ventilators

magically appear or offer experimental

vaccines not available generally.

Moreover, I know first-hand that Dr

Kruger has not taken advantage of the

insane demand for his services at this

nervous time to raise his prices or

otherwise profit from medical need. At

an age when many doctors would have

already given up their stethoscopes for

golf clubs, Dr Kruger is working around

the clock to serve his patients and

reduce the strain on public healthcare

facilities.

Tom Glocer

Former CEO, Reuters,

New York, NY, US

Recommended reading

for worrying times

I think this coronavirus is the darkest

and scariest time in US history since

the civil war and the Spanish flu of

1918. This is devastating for the whole
      economy and will have scary mental
      health effects. The stress of this crisis
      will cause more deaths of despair and
      cause social bonds to fray. I want to
      thank the FT for the great coverage and
      for providing facts and great leadership
      on how to keep the economy afloat.
      Michael Glennan
      Lynbrook, NY, US

It is time UK government

enforced compliance

The UK stands out among comparable

countries for its relatively relaxed

response to coronavirus. In recent

days, the government has been forced

into issuing more drastic “advice”.

Boris Johnson announced on Monday

night that the government was advising

people to avoid all non-essential

contact. One can only assume that this

advice — which was quite drastic — was

meant seriously, and that the

government really now believes that

avoiding non-essential contact is

critical to containing the virus. One

assumes that the government’s goal is

to see as high a level of compliance

with the advice as possible.

Achieving this public goal requires

the co-ordination of the actions of tens

of millions of private individuals.

Private individuals, however, are wont

to come up with their own calculations

of the risks and odds associated with

each situation in which they might find

themselves.

For example, many people are still

having minor works done to their

homes. They might take the view that

they can stand away from the

workmen; or get them to wash their

hands; they may reckon that they and

the workmen are all healthy, and that

therefore nothing too bad can happen.

At an individual level, these

calculations might be quite rational.

But if these actions were replicated

tens of millions of times, they might

end up having socially ruinous

consequences. There is too great a risk

that people will leave compliance to

other people or to future situations in

which they are involved (eg, “I’ll do it

just this once, but I’ll comply

tomorrow”). This is the well-known

free-rider problem in economics.

Moreover, small miscalculations of

risks associated with a particular

situation may, in most cases, leave the

individuals involved unscathed but

could prove to have socially

catastrophic consequences.

It seems obvious that the lack of a co-

ordination mechanism or an incentive

mechanism for compliance will result

in widespread non-compliance. The

government is dispensing “advice” of a

drastic nature, but declining to put in

place a mechanism that will ensure

compliance with that advice. If the

government’s goal was to achieve as

high a compliance rate with the advice

as possible, then surely it is time to

consider enforcing compliance as other

countries do? If the government’s goal

is something else, then what is that

something else and on what basis was it

formulated?

Kalyan Dasgupta

Principal, Berkeley Research Group,

London EC4, UK

By wearing a mask,

I am doing my bit

To wear a mask or not to wear a mask?

That was the big question on my mind

this morning. After I read your article

(“Asian lessons in virus control”, The

Big Read, March 17) I decided to wear a

mask.

In Japan if you do not wear a mask on

the subway, you attract immediate

disapproval. Contrast that with New

York City subways where hardly

anyone wears a mask. When I told my

friend that I wore a mask to work

today, that person’s response was:

“That’s a Chinese thing.”

That is the wrong attitude. Yes, from

what I understand, wearing a mask will

not protect me from catching the

coronavirus.

But if I have been infected with the

coronavirus, my chances of passing on

the disease to someone else is lessened

because I have the mask on. I feel now

that by wearing a mask, I am doing my

part to contain the virus. And as your

article points out, the countries where

people wear a mask — Taiwan, South

Korea and Japan, seem to have a

handle on the problem.

Fortunately for me, my wife

purchased a number of masks early

last month before anyone even knew

what an N95 mask was. Now they are

hard to get. Even if people want to wear

a mask and show their solidarity with

their fellow human beings, they

cannot. It is becoming readily apparent

that the Trump administration is not

up to the task.

What should we do? I liked Mayor

Bill de Blasio’s idea that we nationalise

our supply chains, much as we would

do in a time of war, so that our people

and medical providers have the

provisions they need.

Get the factories working 24/7,

manufacturing the ventilators, masks,

diagnostic tests and sanitiser that we

need to put an end to this mess.

It would also help if we had a

nationalised healthcare programme

like Taiwan or South Korea. We can

make that happen, but for now, I think

more Americans need to start wearing

a mask.

Walter Weis

Forest Hills, NY, US

Trump term for pandemic

is a familiar distortion

The arguments about the name and

origin of the coronavirus are being used

by both the US and China to hide the

weakness and deficiencies in their

respective systems which have been

highlighted by this virus. For Beijing,

that weakness is the instinctive

reaction at all levels of government to

bury the truth and shoot the

messenger if, for any reason, the truth

is or might be an inconvenient one. For

President Donald Trump and his

administration, that weakness is the

reflex practice of ignoring, distorting or

simply failing to comprehend any truth

if it challenges in any way Mr Trump’s

narrative about himself.

Richard Bartlett

Beijing, China

Brexit is not just an economic wrench

for the UK but an emotional one too.

And nowhere more so than Liverpool,

the port city dubbed the “second

capital of Ireland” because of its large

Irish émigré population. Officials

estimate that three-quarters of

Liverpudlians have Irish roots.

The UK and Ireland joined the EU

together in 1973 but on January 31 the

UK left alone. At the end of this year a

transition period ends. While London

and Dublin want to keep a common

travel area for people, there are likely

to be new checks on goods crossing

the Irish Sea.

So this week’s St Patrick’s day

parade in Liverpool would have been

more sombre than usual — even if

coronavirus had not forced its

cancellation. “There seems to be a

little bit of despondency among

everybody. There’s an invisible wall

going up,” says Richie Billing, manager

of the Irish Centre, which boasts more

than 3,000 members and acts as a hub

for the diaspora. His grandmother,

then just 18, and great-aunt travelled

from rural county Waterford to

Liverpool in the 1960s to work as

nurses.

The Irish have contributed to

Liverpool’s success in football, culture

and music (three out of four Beatles

had an Irish grandparent and John

Lennon bought a home there). And

this fervently pro-EU city, with a

growing population of about 500,000,

likes to swim against the tide of

English opinion. It voted against

Brexit in 2016, and for Labour in the

general election. Liverpool’s 58 per

cent was the highest Remain vote

outside Manchester in northern

England, a reflection partly of the

port’s internationalism. The

Conservatives have been unpopular

since presiding over the near-collapse

of the local economy in the 1980s.

A cabinet meeting in 1981 discussed

abandoning the city to “managed

decline” after severe rioting. But the

EU has invested hundred of millions

of euros over 25 years to regenerate

the city.

“Liverpool has always fancied itself

as looking outwards, turning its back

on London,” says John Belchem,

emeritus professor of History at

Liverpool University and author of a

book on the city’s Irish community.

“It is a Celtic city. It would rather be

the 33rd county of Ireland or join an

independent Scotland.”

When the Act of Union of 1801

created a single market of the whole of

Britain and Ireland, nascent industries

there were crushed — this is when the

large scale emigrations began. “Its

economy relied on two exports — food

and people,” Prof Belchem says.

Almost a fifth of Liverpool’s

population in 1841 was Irish born.

The great famine from 1847-

increased that number. In the year

1847 alone, 300,000 arrived from

Ireland, with many passing through

on their way to the US or elsewhere in

the UK. But many stayed in Liverpool

and rose to prominence in the city.

Irish trade underpinned the port’s

success. While imperial trade rose and

fell with geopolitical events, the

import of Irish livestock and food and

export of textiles and other goods was

constant.

In 1885 Liverpool sent an Irish

Nationalist MP to Westminster. T P

O’Connor remained a representative

for the city until his death in 1929, and

there were several Irish nationalist

councillors even after Ireland gained

independence in 1921.

As Ireland prospered, the

connections endured. New waterfront

apartments in Liverpool were

snapped up by Dubliners wanting a

weekend bolt-hole: their patronage

supports a thriving bar and restaurant

scene. Ferry companies are planning

for growth. Stena Line this month

introduced a bigger boat on its daily

service from Birkenhead to Belfast, in

Northern Ireland, increasing capacity

by 40 per cent, said Paul Grant, Stena

Line’s route director.

“Freight has increased fivefold in 25

years and passenger numbers have

doubled. Ireland’s most important

trading partner is the UK and that

won’t change,” he said.

Labour deputy mayor Wendy

Simon, of Irish descent, says the city

will work hard to retain its economic

and social relations with Ireland. “I

think the links will get even stronger

because of Brexit.” Mr Billing agrees

that Brexit has reinforced these

historic affinities. “We will always

hold on to our Irish identity. It is like

glue. It seeps into your soul.”

[email protected]

Holding on to

an Irish identity

through Brexit

and beyond

Liverpool

Notebook

by Andy Bounds

Letters

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OPINION ON FT.COM

Adair Turner

For countries with national currencies, central

bank monetary financing of temporarily

increased fiscal deficits is a feasible option.

For this and other pieces from commentators

and policymakers on how to alleviate the

global slowdown, go to:

ft.com/opinion

Even as coronavirus raged and econo-
mies reeled, China chose Tuesday to
expel at least 13 US journalists from the
country. The ejection of almost all US
nationals working in China for the New
York Times, Wall Street Journal and
Washington Post is deeply regrettable,
even if it was in part a response to tit-
for-tat moves by the Trump adminis-
tration. It will hamper the rest of the
world’s understanding of China. It was
also worryingly reminiscent of the
US-Soviet cold war.
The anger and mistrust between
today’s superpowers contrasts strongly
with the aftermath of the 2008 finan-
cial crisis, when China and the US
agreed to launch measures to
strengthen the global economy. Beijing
unleashed a huge infrastructure pro-
gramme that helped lead the world’s
recovery from a drastic contraction.
Today, in spite of a “phase one” trade
deal last December, economic co-oper-
ation between Beijing and Washington
has been replaced by a persistent
rivalry punctuated by spasms of out-
right hostility. Broad-based commer-
cial decoupling is picking up pace, with
nationalism rising on both sides.
US officials have done much to stoke
what has become a racially-tinged war
of words over coronavirus. US national
security adviser Robert O’Brien
accused China of covering up its health
crisis and costing the world valuable
time. Michael Pompeo, the US secre-
tary of state, has repeatedly called the
illness “Wuhan coronavirus”. President
Donald Trump has tweeted about the
“Chinese virus” — prompting Beijing to
express “strong indignation”.
Washington has been responding,
however, to a disinformation campaign
from Beijing. Chinese officials and
media have sought to cover up early
failures to control the virus in Wuhan,
and even to suggest the illness did not
start there. Zhao Lijian, a Chinese

foreign ministry spokesman, has sug-

gested on Twitter that the virus may

have originated in the US. Xinhua, the

official news agency, accused Mr

O’Brien of spreading a “political virus”

and using smears to put China down.

Tensions over news media have esca-

lated along with the official rhetoric.

The US last month designated five Chi-

nese media outlets as foreign diplo-

matic missions. Beijing then expelled

three Wall Street Journal reporters.

Washington retaliated by ejecting 60 of

about 160 Chinese nationals working

for Beijing-controlled media groups.

Bilateral ties have now reached a per-

ilous impasse. A few more barbs, tit-

for-tat recriminations and commercial

sanctions and both sides could find

that the common interests that used to

anchor their relationship have been

overwhelmed by hatred and suspicion.

The unravelling of relations is

accompanied by a downward eco-

nomic spiral. China looks set to post its

sharpest contraction in output since

the Cultural Revolution in the first

quarter of this year. The US and Europe

are set to follow suit as they adopt their

own virus lockdowns. Sino-American

tensions risk not only worsening the

global economic slowdown but under-

mining efforts to combat Covid-19.

It is in the interests of both Washing-

ton and Beijing to step back from bellig-

erence and follow the precedent of

2008. The first step then was for both
      countries to come to a common under-
      standing of the causes of the crisis — a
      point yet to be reached today.
      Beyond economic firepower, both
      countries should also improve their
      research co-ordination: developing a
      cure and a vaccine for coronavirus
      should be a priority. Covid-19 is a major
      threat to the economic system. But it is
      not insurmountable if the world’s two
      largest economies can rediscover the
      spirit of co-operation.

World’s top economies should rekindle co-operation shown in 2008

US tensions with China

hamper antivirus efforts

The European Central Bank has taken
a step towards restoring its credibility.
The package announced by president
Christine Lagarde on Wednesday was
bold and impressive. Combined with
quantitative easing already under way,
the central bank will buy over a trillion
euros of assets over the rest of this year.
Whatever else happens, its move
sharply reduces fears of a repeat euro-
zone crisis. Government bond spreads
should remain under control and rede-
nomination risk should be absent.
There is no reason to expect a disor-
derly break-up of the eurozone.
The ECB was not alone in deploying a
“big bazooka”. The Bank of England
followed on Thursday with a £200bn
asset-purchase programme and a cut in
interest rates to 0.1 per cent, the lowest
in the Bank’s 325-year history.
While their measures ought to stabi-
lise liquidity concerns in the eurozone
and in the UK, that will not be enough.
Ms Lagarde and Andrew Bailey, the
new Bank of England governor, have
put the onus on Europe’s politicians to
follow up with spending programmes
that provide support to workers and
businesses worried about the future.
Hosing the financial sector with liquid-
ity cannot help families pay bills with-
out money coming in.
The ECB launched a €750bn pro-
gramme of asset purchases that will
come to an end only once the coronavi-
rus crisis is over, including both com-
mercial paper and Greek government
bonds. The bank has also broadened
the collateral it will accept to include
corporate financial claims.
This programme rectifies mistakes
by the central bank. The ECB was
forced to clarify Ms Lagarde’s com-
ments last week that it was not the
bank’s job to close the spread between
yields on member states’ costs of bor-
rowing. This prompted anger, not least,
in Italy wherelo spreadis closely

watched and many have been wonder-

ing at a seeming lack of European soli-

darity. Ms Lagarde’s remarks sparked

an unnecessary sell-off in Italian

bonds. Actions, however, speak louder

than words. The phrase “whatever it

takes” has become ubiquitous among

European politicians but now Ms

Lagarde and Mr Bailey have provided

the monetary firepower to back up

finance ministers’ rhetoric.

Yet both are also at the mercy of glo-

bal flows. The dollar funding squeeze

now being witnessed shows the failure

to establish the euro as an alternative

global reserve currency. Neither has

the project to deepen Europe’s capital

markets as an alternative to the US suc-

ceeded: companies are desperate for

dollars, not euros or pounds. Sterling

fell to its lowest level against the dollar

since 1985 on Wednesday and actually

rose after the BoE cut interest rates.

There have, moreover, been public

displays of disunity over the ECB’s

approach. On Wednesday the bank

went as far as publicly contradicting

Austria’s central bank head, who said

monetary policy had reached its limits.

But ECB officials disagreed over how

far to take its new “no limits” policy.

Similar signs of discord or failures of

co-operation among EU leaders will

fuel nationalist populism. It was telling

that German chancellor Angela Merkel

did not mention Europe in a rare tele-

vised speech on Wednesday. The ECB,

for its part, was probably damned

either way. Eurosceptic populists in the

north will seize on the stimulus as a

sign of the euro’s dysfunction. Populists

in the south would have portrayed a

failure to act as a betrayal of solidarity.

The EU and UK central banks are,

nonetheless, on the right track. Mone-

tary policy cannot solve all the prob-

lems facing the economy, but the politi-

cians have no excuse or distractions.

They must follow and act decisively.

ECB and BoE action puts the onus on politicians to protect jobs

Europe’s central banks

try to ward off a crisis

Ihave a nephew, now 38 years old, who

was born with significant genetic

problems. He’s not technically autistic

but exhibits similar behaviour.

He grew up in a loving home with

two younger high-achieving siblings.

His brother won the prize for the best

thesis at Yale and is now a star

journalist at Bloomberg, his sister is an

equal star in the field of community

health.

My sister and brother-in-law found a

wonderful community, The Center for

Discovery, in New York state, where

my nephew has thrived for the past

two decades.

It has been fascinating to see how his

self-esteem has grown as he has

become one of the highest performers

in his community and a confident

leader.

I would suspect that this is equally

true for the individuals Patti Waldmeir

writes about in “Overlooked workers

gain appeal in challenging times”

(Opinion, March 17).

We often overlook the psychological

aspects of disabilities because most

people only see what is on the surface.

I’m certain that the success these

people have in their professional lives

is matched by the success they enjoy in

their personal lives as well.

Just one more reason why I hope Ms

Waldmeir’s column resonates with

people who can act on her valuable

observations.

Michael Garin

Abu Dhabi, United Arab Emirates

My nephew has thrived in the right setting

MARCH 20 2020 Section:Features Time: 19/3/2020 - 18: 26 User: alistair.hayes Page Name: LEADER USA, Part,Page,Edition: USA, 8, 1