Top 5: Financial incentives for vaccination, chasing Tether’s billions, high DTIs & more

This Top 5 comes from interest.co.nz’s Gareth Vaughan.

As always, we welcome your additions in the comments below or via email to david.chaston@interest.co.nz. And if you’re interested in contributing the occasional Top 5 yourself, contact gareth.vaughan@interest.co.nz.

See all previous Top 5s here.

1) Financial incentives can increase COVID-19 vaccinations.

Earlier this month I wrote an article suggesting the Government pay people to get vaccinated against Covid-19 as a carrot to try and help increase vaccination rates. A study done in Sweden suggests this works.


An article about the study ran in the Science journal which is published by the American Association for the Advancement of Science. The trial, between May and July this year, included 8,286 participants aged between 18 and 49 years. Here’s a flavour.

Governments and organizations across the globe have started using incentives to encourage vaccination, ranging from payments of $5 in Vancouver and lotteries in Ohio to payments of €150 in Greece. Many others are now considering introducing payments for vaccinations. Notably, USA President Biden recently urged “[…] state, territorial, and local governments to provide $100 payments for every newly vaccinated American, as an extra incentive to boost vaccination rates, protect communities, and save lives”. Yet, governments and organizations are limited in their ability to properly assess the impact of monetary incentives because they lack control groups that are not exposed to incentives. Causal evidence examining the effectiveness of introducing payments for COVID-19 vaccinations is lacking.

Here we report findings from a randomized controlled trial (RCT) studying the impact of guaranteed monetary incentives on COVID-19 vaccination. We paid participants, drawn from a general sample of the Swedish population, SEK 200 (about $24) conditional on becoming vaccinated. The Swedish setting provides a unique opportunity to link individual-level survey data from the RCT to exhaustive population-wide Swedish administrative records for actual vaccinations collected by the public health authorities. We find that the monetary incentives increased vaccination rates by 4.2 percentage points. This is an increase from a 71.6% baseline rate, which is a similar rate to other countries in the EU, indicating that incentives can increase vaccine uptake even in countries with high vaccination rates.

2) The mystery of Tether.

In an enlightening and worrying article, Bloomberg’s Zeke Faux went in search of Tether’s billions. As he notes if the trolls are right, and Tether is a Ponzi scheme, it would be bigger than Bernie Madoff’s one. Firstly, here’s Faux’s explanation of what Tether is, for those who don’t know.

Tether is what’s come to be known in financial circles as a stablecoin—stable because one Tether is supposed to be backed by one dollar. But it’s actually more like a bank. The company that issues the currency, Tether Holdings Ltd., takes in dollars from people who want to trade crypto [currency] and credits their digital wallets with an equal amount of Tethers in return. Once they have Tethers, people can send them to cryptocurrency exchanges and use them to bet on the price of Bitcoin, Ether, or any of the thousands of other coins. And at least in theory, Tether Holdings holds on to the dollars so it can return them to anyone who wants to send in their tokens and get their money back. The convoluted mechanism became popular because real banks didn’t want to do business with crypto companies, especially foreign ones.

Faux followed the money trail from Taiwan to Puerto Rico, the French Riviera, China, and the Bahamas.  He notes that Tether hasn’t disclosed where it’s keeping its money, and the only financial institution he found willing to say it works with Tether Holdings was Deltec Bank & Trust of the Bahamas.

After I returned to the U.S., I obtained a document showing a detailed account of Tether Holdings’ reserves. It said they include billions of dollars of short-term loans to large Chinese companies—something money-market funds avoid. And that was before one of the country’s largest property developers, China Evergrande Group, started to collapse. I also learned that Tether had made loans worth billions of dollars to other crypto companies, with Bitcoin as collateral. One of them is Celsius Network Ltd., a giant quasi-bank for cryptocurrency investors, its founder Alex Mashinsky told me. He said he pays an interest rate of 5% to 6% on loans of about 1 billion Tethers. Tether has denied holding any Evergrande debt, but [Stuart ] Hoegner, Tether’s lawyer, declined to say whether Tether had other Chinese commercial paper. He said the vast majority of its commercial paper has high grades from credit ratings firms, and that its secured loans are low-risk, because borrowers have to put up Bitcoin that’s worth more than what they borrow. “All Tether tokens are fully backed, as we have consistently demonstrated,” the company said in a statement posted on its website after the story was published.

3) “The definition of high DTI lending should start at above five times.” 

The Reserve Bank of Australia (RBA) issued its latest Financial Stability Review on Friday. Morgan Stanley banking analyst Richard Wiles and his colleagues picked up on some interesting points about housing borrowers’ debt-to-income (DTI) ratios in the Review. In particular they note that the proportion of borrowers reporting mortgage stress doubles from 3.5% to 7% when the DTI moves above five times.

The RBA’s Financial Stability Review has now revealed that: (1) around one-third of investors borrowed at a DTI >6x and ~5% of all borrowers had a DTI >8x; (2) the proportion of borrowers reporting mortgage stress doubles from ~3.5% to ~7% when the DTI moves >5x and is similar for those with a DTI >6x (~7%), which suggests that the definition of “high” DTI lending should start at >5x; and (3) >50% of borrowers with a DTI >6x also have a liquidity buffer of <3 months.

On Friday I reported that the Reserve Bank of New Zealand (RBNZ) has delayed consultation on how it could enforce long coveted DTI ratio restrictions on bank lenders until at least November due to Auckland’s community Covid-19 outbreak.

The latest quarterly RBNZ figures showed more than 70% of recent Auckland first home buyers borrowed at a DTI ratio of more than five. The RBNZ has previously described a DTI above five as pretty high.

The charts below come from the RBA.

 

4) Singapore’s travel lane partners, – where are they at?

As Singapore moves to resurrect quarantine free travel, The Straits Times provides a useful run down of where partner countries are at. It’s a handy wrap for us in New Zealand too, to see where a range of countries are at with Covid-19.

There’s still plenty of Covid out there, but most places appear to be more confident in their ability to deal with it now. Below are some details on Italy, for example, which was one of the hardest hit countries early on in the pandemic.

One of the first countries in Europe to be hit by Covid-19 last year, Italy has the second-worst death toll in the continent behind Britain.

Italy had aimed to vaccinate 80 per cent of its population by last month, and although it missed that target, enough progress was made to suppress infections.

Averaging below 3,000 new daily cases this week, infections are less than half the reported tallies during its recent surge in August. Deaths have also stayed low in the double figures since June.

Population: 60.4 million

Cases (7-day average): 2,845

Deaths so far: 131,274

Vaccination rate: 69 per cent fully vaccinated

Current border controls: All travellers going to Italy have to fill in a Passenger Locator Form online to facilitate contact tracing in the country.

Those who are vaccinated from certain non-European Union countries, including Singapore, will need to present a negative virus test result from a pre-departure PCR test or ART taken 72 hours before arriving in Italy, on top of proof of vaccination, to avoid a five-day quarantine.

Current Covid-19 safety measures: Most restrictions on entertainment venues in Italy will be lifted on Oct 11 for holders of a “Green Pass” that shows proof of vaccination or a negative Covid-19 test result. The pass is needed to attend cultural events, as well as to dine at indoor restaurants.

Sporting stadiums will operate at higher capacities, as will nightclubs and dance discos, which have been closed for more than 18 months.

Mask mandates are limited to indoor settings or when a safe distance of 1m cannot be maintained.

5) Eric and the anti-vaxxers.

Writing for Rolling Stone, David Browne details legendary guitarist Eric Clapton’s financial support for an anti-vaccination and anti-lockdown group of British musicians called Jam for Freedom. Allegedly this follows a bad experience Clapton had with the AstraZeneca Covid-19 vaccine. The article also delves into racist rants from Clapton’s past and his support for controversial anti-immigration British politician Enoch Powell.

According to Michael Knowles, who Browne describes as “a Conservative young-gun pundit,” Clapton’s stance is somehow very rock n’ roll. 

At 31, Knowles is younger than most Clapton fans and thinks the guitarist’s stance against the medical establishment is staying true to his rock roots. “It’s terrific,” Knowles says. “There’s something really authentic about a rock star speaking up against authority. That is what rock & roll used to represent. And as it aged, it simply came into conformity with the prevailing established opinions of society. . . . Eric Clapton trusts his audience to make their own medical decisions. And we used to do that more generally in this country. We don’t seem to do that very much anymore.”

Jam for Freedom’s McLaughlin sees the situation in much the same way, and his chat with Clapton confirmed it. “He said we’re essentially doing what he and his contemporaries in the Sixties did, which was embracing freedom, getting out of government control and societal control,” McLaughlin says. “He’s told us repeatedly, ‘This is like what we did.’ ”