Kes

I’m director of another company which employs 200 people.Its been hit hard by the downturn so we as directors stopped paying ourselves anything to save jobs.We took a large Covid loan from the government with director guarantees to keep alive

Furlough is now coming to an end and our sales just haven’t come back as hoped.Our equity is now underwater because of the loan and we will need to make a lot of people redundant in the next few weeks.

What would you do in this dilemma-one facing many of us?Put more of your money in to keep employing people knowing it will not come bank or walk away?

I personally wouldn't. If I've already got a successful company and am making a profit, I wouldn't want to make 20 people unemployed just so I could make even more profit. Me having to go without a yacht or a Ferrari is better than 20 of my staff going without being able to pay the rent or put food on the table. I think people should sometimes be content with what they have instead of constantly going after more and more profit at the expense of others. Constant growth is an unsustainable economic model, we've only got finite resources in the world. But this is a very interesting point you brought up. With the increasing automation of jobs, what happens to the people who find themselves out of work? They still need to eat, they need some form of income. If you don't provide an income for them to put a roof over their head and food on the table, then they'll probably turn to illegal means of getting income. Personally I feel that some kind of UBI, as advocated by Friedman, will ultimately end up being necessary.

I know several who have taken a similar attutude to you on 'them new fangled machines', and they have mostly ended up out of business, with everyone being made redundant as thier competitors did invest in new more productive ideas and equipment, and were able to manufacture at a much reduced cost.

Funny old World............

Kes

I’m director of another company which employs 200 people.Its been hit hard by the downturn so we as directors stopped paying ourselves anything to save jobs.We took a large Covid loan from the government with director guarantees to keep alive

Furlough is now coming to an end and our sales just haven’t come back as hoped.Our equity is now underwater because of the loan and we will need to make a lot of people redundant in the next few weeks.

What would you do in this dilemma-one facing many of us?Put more of your money in to keep employing people knowing it will not come bank or walk away?

I applaud you for that. Like I say, I don't think you are a bad employer. To answer your question, putting capital into a business knowing that it won't generate any income is just not sustainable. That can only last until your reserves of money run out. A lot of the time there's just going to be no other option but for the business owner to walk away and I do understand that. I don't expect them to exhaust every last penny of their capital keeping a business open in the way you describe.

On the subject of economics Laffy what are your thoughts on the BoE recent talk about removing obstacles for the introduction of negative interest rates next year? It's something already in place in some European countries but not tried before in this country.

My view is interest rates are irrelevant just now-it’s liquidity that needs to be at the front.

I may have said this before but my view is world debt is so colossal now that it can never be repaid-an unfair burden on the next generation.So I would be printing money then writing off big chunks of central bank debt in a couple of years time

Oh. Are you an advocate of MMT?

Negative interest rates would encourage banks to lend more, which could be one of way of getting more liquidity in the system. Though personally it's not a step I'm in favour of.

I’m not a fan of negative rates, simply because there is little evidence they produce anything and may in fact have a detrimental effect called deflation-in anticipation of things falling in value.

The world needs inflation but that is unlikely in the short to medium term-that means alternative thinking, hence my views on global debt write offs by central government.

Could you have a look at something called Modern Monetary Theory today and let me know what you think about it later? You're not the first person who has suggested printing money to pay off debt, there is an entire school of thought on that idea. The problem is that printing more money makes the existing money worth less. In extreme cases you can end up with hyperinflation like Zimbabwe or Germany after World War One. If the government paid off debts by just printing more money and continually devaluing the pound, would people be so willing to keep lending them money? Also I know you're not a fan of Corbyn but one of his policies was so called Peoples Quantitative Easing where the government would in effect print money to invest in social housing and welfare. Is that a policy you would agree with or not?

Will have a look-I’m not a fan of the printing press to be honest but this is an unusual time and I would follow up with a debt write off down the line

Have a read of ‘when money dies’Its the classic book on printing money and hyperinflation.