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In Britain alone the Government has borrowed half a trillion pounds (roughly 25% of GDP) in 2020-21. Most of that went into the hands of normal people via furlo

In Britain alone the Government has borrowed half a trillion pounds (roughly 25% of GDP) in 2020-21. Most of that went into the hands of normal people via furlough (paying people 75% of salary to stay at home during Covid), support for the self-employed and loans (up to £50k) for small businesses. It would be fascinating to see a study into where this money ended up. As you say, it should have found its way into the economy and in turn the pockets of large companies/the Government which could use it for capital investment, but in reality the country is crumbling.

soco 4y ago
The beneficiaries are poor enough to not afford saving that money, so it definitely ended up back in the economy. After all there are no studies saying that savings had increased, are there.
willyt 4y ago
The construction market went crazy. Last year, prices for materials were doubling every 3 months, and there were no trades available anywhere to carry out work. Maybe it was used to buy a lot of overpriced back extensions, kitchens, conservatories and decks. Coupled with the reduction in skilled trades available because of brexit, prices were really high.
jlokier 4y ago
The furlough money paid to salaried workers while they sheltered at home wasn't "extra" in the economy, in some sense. Those people who received furlough got it instead of their salary, and they weren't working while they received it (not counting fraud and edge cases). The economic value of their work temporarily disappeared, and that value probably exceeds the amount paid in furlough by some reasonable measures. Among the self-employed, transitioning-between-jobs-at-the-time and edge-case people, a lot didn't get anything. I didn't receive a penny via furlough or similar payments, nor did I qualify for any kind of loan. The one client I had who owed me also decided to stop paying everyone in April 2020, telling all suppliers "we have no money to pay anyone", and that was that. They owed me for a long period of services provided and not yet paid, so I was counting on it. In normal circumstances a supplier might petition for their client's bankruptcy, but special rules were in place to stop that at the time. I still haven't been paid by them though. So I couldn't afford my rent during most of 2020, or food. Luckily my landlord let me defer rent for 6 months (I still had to pay it later), and local volunteers provided food for a while. It was a rough time but unusually communitarian. The last part of the year ended with some surprisingly good contracts though, and 2021 was my best year financially ever. Which isn't as good as it sounds, because there was a big hole to fill, and now I'm back to where I was in 2019, roughly. Except with more skills :-) That's a lot of lost economic value from people not doing any work or not being paid, and a lot of people who were left with a big financial hole, which later acts as a drain on the rest of the economy even when they start earning again, because what they earn later goes to filling the hole more than on new goods and services. I'm glad all the people who received furlough and loans were helped; it could have been much worse. As for where the money went, in 2021 the reports were that a large share of the population gained savings or paid off their long-term credit, due to working at home in well paid jobs while having not much to spend it on. That suggests a lot of people likely still have a large amount of savings, and a lot of people likely have paid off more of their home mortgage than they would if the pandemic had not happened. Those two factors might turn into spending on the rest of the economy during more confident times, but even people with savings are worried about the future, so would rather hold onto it for now.

soco 4y ago

The beneficiaries are poor enough to not afford saving that money, so it definitely ended up back in the economy. After all there are no studies saying that savings had increased, are there.

willyt 4y ago

The construction market went crazy. Last year, prices for materials were doubling every 3 months, and there were no trades available anywhere to carry out work. Maybe it was used to buy a lot of overpriced back extensions, kitchens, conservatories and decks. Coupled with the reduction in skilled trades available because of brexit, prices were really high.

jlokier 4y ago

The furlough money paid to salaried workers while they sheltered at home wasn't "extra" in the economy, in some sense. Those people who received furlough got it instead of their salary, and they weren't working while they received it (not counting fraud and edge cases). The economic value of their work temporarily disappeared, and that value probably exceeds the amount paid in furlough by some reasonable measures. Among the self-employed, transitioning-between-jobs-at-the-time and edge-case people, a lot didn't get anything. I didn't receive a penny via furlough or similar payments, nor did I qualify for any kind of loan. The one client I had who owed me also decided to stop paying everyone in April 2020, telling all suppliers "we have no money to pay anyone", and that was that. They owed me for a long period of services provided and not yet paid, so I was counting on it. In normal circumstances a supplier might petition for their client's bankruptcy, but special rules were in place to stop that at the time. I still haven't been paid by them though. So I couldn't afford my rent during most of 2020, or food. Luckily my landlord let me defer rent for 6 months (I still had to pay it later), and local volunteers provided food for a while. It was a rough time but unusually communitarian. The last part of the year ended with some surprisingly good contracts though, and 2021 was my best year financially ever. Which isn't as good as it sounds, because there was a big hole to fill, and now I'm back to where I was in 2019, roughly. Except with more skills :-) That's a lot of lost economic value from people not doing any work or not being paid, and a lot of people who were left with a big financial hole, which later acts as a drain on the rest of the economy even when they start earning again, because what they earn later goes to filling the hole more than on new goods and services. I'm glad all the people who received furlough and loans were helped; it could have been much worse. As for where the money went, in 2021 the reports were that a large share of the population gained savings or paid off their long-term credit, due to working at home in well paid jobs while having not much to spend it on. That suggests a lot of people likely still have a large amount of savings, and a lot of people likely have paid off more of their home mortgage than they would if the pandemic had not happened. Those two factors might turn into spending on the rest of the economy during more confident times, but even people with savings are worried about the future, so would rather hold onto it for now.