The Iustitia Impossibility

Panic. The word is derived from the Greek God by the name of ‘Pan’. A deity who is depicted with the horns of a goat, living in the wild, protecting wild animals and pursuing women for pleasure. While all that is certainly intriguing, he is also known to have caused humans to flee in unreasoning fear- thus deriving the meaning of the infamous word. Panic is something few are unfamiliar with, especially in the world of finance.

Oftentimes we try and limit the panic by predicting these downfalls, countless books have been printed and lectures given on the next bear market. The yield curve seemed to be an infallible prediction, an inversion predated almost every recession in the US. However, the UK proudly flouted this trend. Many Economists themselves sigh in frustration when people mistake them for prophets and fortune tellers, demanding accurate predictions.

Covid-19 is simply another piece in this wild game. A virus that spread from Wuhan and has wiped out millions of dollars from the market. Certainly not anything anyone could have found about in even the newest edition of ‘reading the market for dummies’. In the case of a pandemic, the panic isn’t limited to the toilet paper hoarders. So just as the public panic buys, the investors sell in the hopes of cutting their losses. Paper hoarding is synonymous across the board, so it’s only natural that both parties look towards the government for reassurance. Satisfying the people and the economy, a tall order for the government at any time, let alone during a global health crisis.

Governments across the world have taken unique approaches, attempting to cosplay the role of iustitia- in the sense of impartiality, yet wielding a steady sword. Now, the rate of success has varied but the UK proves to be a good case study. The government’s initial response has consisted of aid for the small to medium enterprises that are facing the brunt of the pain from a slowing economy. With the country practically on lockdown, these businesses have seen an almost immediate block on their cash inflow, affecting their overall income tremendously.

Rishi Sunak announced initial action in terms of ‘CBIL’ or Coronavirus business interruption loans. As the name clearly indicates, this promised the around 1 million firms that were at risk of closure loans to help them balance their cash flow. Initially this was only open to those that have been denied commercial loans from banks, however that left many individuals having to pay up to 30 percent in interest and potentially put up personal assets in security. In other words a death warrant. After widespread uproar from business across the UK, the government once again stepped in.

It ruled that banks wouldn’t ask for personal guarantee on loans of less than 250,000 pounds and opened the scheme to all businesses in need. To add to this the government promised to pay up to 80 percent of wages of staff that are kept on by their employers. While all this was viewed upon favourably by businesses, the people still had unmet demands. Why weren’t their caps on interests banks could charge, when they borrowed at practically close to 0 percent themselves? And although the government promised help for the freelancers, the required tax proof meant that the newly self-employed simply slipped through the gaps.

This level of government interference in the labour market is unprecedented, however, many view it as badly needed. The coronavirus has lead to the biggest sell-off across global markets since the 2008 financial crisis. However, investors look upon government action to fuel the economy as a small reassurance that an economic bounce back is inevitable, and perhaps up and coming. China serves as an ideal state, having reduced its cases dramatically and shifting into a motion to return to normalcy.

Alternatively, where many investors see panic and rush for cover, others see opportunity. An obvious example is Berkshire Hathaway owner, Warren Buffett who famously quoted- “We simply attempt to be fearful when others are greedy and to be greedy only when others are fearful.” He isn’t the first to swear to this tactic, and certainly isn’t alone.

The UK governments works overtime to meet all aspect of the crisis, the NHS workers need equipment, the people a sense of security and the investors a hope of achieving routine again. Total deaths have neared around 5000, with a sunnier week approaching and despite it having devastating impacts on the economy, the government continues to urge people to stay at home. While the pandemic continues and the people under the influence of the deity Pan, the government could never truly personify iustitia. There will always be a choice to make and thus an inconsistency.