Dear Financial Voice Reader,

Wednesday 25th March 2020 05:22 EDT

Government should buy shares for cash in large employers needing a bailout eg British Airway BUT on an offer to existing shareholders who if they do not pay up, get diluted away. The State will get its money back and save jobs.

The problem with the financial markets is they are not the real economy with real people and real jobs. When I had my show on Bloomberg and we went through a couple of crashes we were mindful that real people will be losing real jobs. There are those who cannot and so have not saved. Others chose not to.

You may have read reports of how the worlds wealthiest have lost trillions. Actually, market crashes always result in transfer of wealth from the many poor to the few rich - just faster than usual.

At this time it should be British Airways shareholders - diffused - who should feel the pain not employees. Shareholders are capitalists. It is capital that should pain. But instead management will sack workers. Cash flow is a limit operating boundary condition of any business but just as banks were forced after 2008 to ensure they had ample reserves we know now to ensure all businesses of any scale should have too. They don’t because dividends from earnings are paid to capitalist shareholders not kept in reserves. This needs to change as it was for banks.

Once again banks will be loaded with money and management will make massive profits paid to their senior managers and dividends.

If you have an extended family of friends and relatives you are especially rich at this time. Those who have sought self isolation for years as their idil realise I hope even more so we are connected.

It is heartening we as a fragile species even in increased isolation brought on long before this new threat, we help those we can, when we can, in whatever way we can. That part of human nature is a constant.

The pound has weakened weakened further this past week against major currencies, and it’s no mystery one reason why:

Brits like buying products made elsewhere more than the rest of the world likes buying products made in the UK. Inevitably, that causes the UK to ship billions of IOUs and assets annually to the rest of the world. And over time, that puts pressure on the pound

When the pound falls, it both makes our products cheaper for foreigners to buy and their products more expensive for UK citizens.

That’s why a falling currency is supposed to cure a trade deficit.

Indeed, the UK deficit has undoubtedly been tempered by the large drop in the pound.

There’s been much talk recently of sovereign wealth funds and how they are buying large pieces of British businesses. This is our doing, not some nefarious plot by foreign governments.

Our trade equation guarantees massive foreign investment in the UK when we force-feed billions annually to the rest of the world, they must invest in something here. Why should we complain when they choose our companies? (thank you to Warren Buffett for his more eloquent explanation I have adapted here).

This crisis is an opportunity to change. And one thing needing change is not only more British exports, but more manufacturing in Britain. Not for nationalist reasons, but for economic survival.

What we do within the Department in Government with which I work is to bring those entrepreneurs to the UK. Homegrown talent is not large and is not growing fast enough. The one import I recommend is that of the overseas entrepreneur setting up HQ and home in the UK and manufacturing here and exporting from here.

By Alpesh B Patel

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