Is a 6billion saving this year not a total 24billion?

drunkmonkey

I don't get it, they say we need a 6 billion saving, but if you save 6 billion this year you should continue to save 6 billion every year. So in 4 years time you've saved 24billion with that initial 6 billion cut.

Therefore when the Government say we need to save 15billion over 4 years what there actually talking about is saving 60 billion.

Where is my logic mixed up here, I don't get it.

digme

Basically ,we have maxed our credit card, all we're doing is making min payments, while still getting charged interest.

beeno67

drunkmonkey wrote: »

I don't get it, they say we need a 6 billion saving, but if you save 6 billion this year you should continue to save 6 billion every year. So in 4 years time you've saved 24billion with that initial 6 billion cut.

Therefore when the Government say we need to save 15billion over 4 years what there actually talking about is saving 60 billion.

Where is my logic mixed up here, I don't get it.

No we need to cut 15 billion over 4 years, so 7 billion this year and the remaining 8 over the next 3 years.

In the end we need to have our spending in 2014, 15 billion a year less than this year.

Permabear

This post has been deleted.

kmick

We are saving 6 billion which would otherwise have to borrow. Previously we were spending 6 billion we did not have. Now we are not spending 6 billion we do not have.

drunkmonkey

Still Confused.

beeno67

drunkmonkey wrote: »

Yes I get you but if you cut 7 this year, that 7 billion will be saved next year and the year after and so on and so forth.

So if you cut 7 billion this year, You'll save 28 billion over 4 years. As your saving 7 every year.

It is not a total saving of 15 billion after 4 years. The spending in 2014 has to be 15 billion a year lower than this year. So 7 billion cut this year. Then next year a further cut of 3 billion (so spending in 2012 will be 10 billion lower than this year) then 3 billion in 2013 (so spending in 2013 will be 13 billion lower than this year) and finally a further 2 billion in 2014 so expenditure that year will be 15 billion less than this year.

DailyBlaa

As beeno67 correctly stated, the saving of 6-7 Billion a year does not equate to the 15 Billion we require to have in 4 years time. The 15 Billion saving is not correctly stated in the media, as many people don't realize the extent of what that means.

As it stands in this budget we are looking at at least 6 Billion in saving. We will need further cuts over the remain few years which should gives a cumulative saving of 15 Billion a year compared to current levels.

This is where it becomes a lot more complex. Say we do cut 6 Billion this year, how will this affect consumer spending (which is one of the main driving forces in our economy) and if we do have to go to the bond markets what will be the repayments on those monies? The current interest on the bonds markets for Ireland would be virtually impossible to repay while making cuts to public spending. So in fact as bad as this budget seems the next one could be much worse. Imagine the current proposed cuts in spending with the added burden of repayments which looks likely and then we have to find another 8 Billion in cuts over the next few years.

I think we need a far more creative approach than what is currently proposed. There are several extreme options that we could take but I firmly believe that this government or the subsequent one wouldn't have the balls to do it. Instead we are doing what we are told from Europe. We are the equivalent of a dog with Europe as our master. We are playing fetch just to get a pat on the head.

Permabear

This post has been deleted.

DailyBlaa

We could go down the route Iceland took and default on our loans. This would be awful for the first 2-5 years but we would recover. If we go the route of what is proposed we are looking at a time time scale of 10-20 years and even at that the loss of young people emigrating would have a even more damaging effect. The markets have a short memory and we would get investment again. Spain has defaulted several times over the last 100 years.

We could leave the Euro zone completely and go it alone. Europe places several restrictions on us regarding exports for example the milk market. Also if Europe has to intervene on our economy our generous corporation tax will be the first thing to go. This would make us unattractive for foreign business. Of course Europe could place restrcitions on us stopping us trading within the Euro zone. In turn we could turn to the Asian markets and make ourselves an attractive hub for business as we are placed in the European time zone and only 5 hours off the eastern board US.

Nijmegen

We're earning €32bn a year and we're spending €55bn a year, a gap (deficit) of €23bn (actually, what is the final figure for this year? Not quite that high?).

We want to reduce that deficit by €15bn, so that (if there was 0% growth) in 4 years time we would be €8bn short.

The idea is that growth in the economy will naturally produce more output, thus more taxes, and help with the remaining €8bn.

At the end of 2014 we want our debt to be 3% of GDP, versus the 32% it is this year (including bank bailouts.)

In reality, we're actually looking to save €41bn over 4 years.

Those sums are likely off on detail, but you get the idea. If we spent €55bn and earned €32bn over 4 years, it'd be €220bn total spending and €128bn total earnings. So you see the scale of the cuts relative to our income/outgoing over the full period.

Plus, all the interest on that debt would be going up and up. So actually we'd need to borrow more to stay still. This year interest was 16% of all tax take.

DailyBlaa

One thing in all this is that we are currently tied into the Euro. If this happened while we still had the Punt we would see the value of our currency drop like a stone. This would cause far greater upheaval in the Irish market but we would recovered in time. This would have given us a much quicker recovery and a chance to had a virtual reset of the economy.

However been tied to the Euro makes this impossible as our economy is supported by that of Germany and Co. This makes recovery a slow and painful process. As it is we will have years of decline to face before we have any chance to recover.

jmayo

drunkmonkey wrote: »

I don't get it, they say we need a 6 billion saving, but if you save 6 billion this year you should continue to save 6 billion every year. So in 4 years time you've saved 24billion with that initial 6 billion cut.

Therefore when the Government say we need to save 15billion over 4 years what there actually talking about is saving 60 billion.

Where is my logic mixed up here, I don't get it.

drunkmonkey wrote: »

Still Confused.

Year 1 (i.e. 2011) 6 billion
Year 2 (i.e. 2012) 4 billion
Year 3 (i.e. 2013) 3 billion
Year 4 (i.e. 2014) 2 billion

Total cuts/savings over 4 years will be 15 billion.

But of course last year we only needed to save something like 7 billion and this year it is 15 billion, so any bets next year we will need to save 20 billion ?
Oh wait the game will be up in the spring, so it is all a mute point.
To the world we are as good as bankrupt.
IMHO the only question now is will we bring the Euro down with us.

Giblet

"Ok lads, you owe me a lot of cash, you should be paying me back 20 euro a year, currently, you aren't paying that. Now, I know that suddenly paying 20 euro a year back is a bit of a shock, so I am going start by accepting 6 euro a year, then next year I want an additional 4 euro, which will be giving me 10 euro a year back, still not enough, but getting there. Now, after that I want the full 20 euro a year until we have everything sorted ok? I don't mind a little bit less now and then, but jaysus you'll have to do much better than ye are now. So you better be finding a way to save more and more each year"

beeno67

Giblet wrote: »

"Ok lads, you owe me a lot of cash, you should be paying me back 20 euro a year, currently, you aren't paying that. Now, I know that suddenly paying 20 euro a year back is a bit of a shock, so I am going start by accepting 6 euro a year, then next year I want an additional 4 euro, which will be giving me 10 euro a year back, still not enough, but getting there. Now, after that I want the full 20 euro a year until we have everything sorted ok? I don't mind a little bit less now and then, but jaysus you'll have to do much better than ye are now. So you better be finding a way to save more and more each year"

Not quite. None of the cuts are to reduce the overall debt. In 4 years time, after all the cuts, we will owe substantially more than we do now.

randombar

Just one question, in boom times did we still have a deficit? How much did we reduce the national debt by??

Nijmegen

GaryCocs wrote: »

Just one question, in boom times did we still have a deficit? How much did we reduce the national debt by??

We had surplus but borrowed for capital projects. So, in theory yes, but deficits work differently in times of growth.

We had quite a low national debt come 2008, something like 25%. It will top 100% shortly, a massive jump in 2-3 years.

During times of plenty governments can run a deficit or borrow for capital and then inflation over time wipes out the money you borrowed without having to 'pay it back' through current spending. You just pay the interest.

During times like this, when you're adding debt much, much faster than is affordable it will eventually sink you, because the interest payments would become higher than your tax income, and as they go up you either cut spending or you borrow even more to service the debt and keep the hospitals open. (Paying off credit cards with credit cards. Or not even. Credit card interest with credit cards that will accrue interest.)

Inflation is also quite low, so that doesn't help us - it speeds up the time till we're borrowing more than we can by slowing down the pace at which inflation 'burns' the old debt.

Err, to simplify. Good times: We earn 100. We spend 105. Next year we pay 1 to service the interest on that debt (amazingly high interest rate in my world...), but inflation knocks 1 off the 5 we borrowed (amazingly high inflation, too.) So as time goes by, the debt and the interest winds down, and we can borrow more.

Now what we're doing is we're earning 100, we're borrowing 150, we're paying 5 in interest and we've picked up a lot of other debt from our banks that we're paying another 5, 10, 15 in interest... And pretty soon we're paying more and more interest, and to stand still on spending we need to borrow more... Hastening our demise.

randombar

Good to know.

What are peoples opinions on going bust or not?

I also disagree with the whole "Europe Bashing" that's going on.

Next year when we do need to borrow and the bond interest rates are too high we will be needing Europe.

Not really sure if running away from Europe and defaulting is the right way to go.

How would we pay teachers/doctors/courts social welfare etc. while no one touches us with a ten foot pole??

Nijmegen

GaryCocs wrote: »

Good to know.

What are peoples opinions on going bust or not?

I also disagree with the whole "Europe Bashing" that's going on.

Next year when we do need to borrow and the bond interest rates are too high we will be needing Europe.

Not really sure if running away from Europe and defaulting is the right way to go.

How would we pay teachers/doctors/courts social welfare etc. while no one touches us with a ten foot pole??

We couldn't. We borrowed that money to pay for them in 2007, 8, 9, 10, 11, etc. And to bail out banks and all the rest of it.

If we default on those loans it's the same as an individual reneging on personal loans - you don't trust them, you think they're a shady bugger, and shouldn't have borrowed more than they could afford, or should shoulder the burden of repaying the debt they chose to take out.

If we default and nobody loans to us, we can't spend a penny more than the €32bn we earn in tax.

That will kill the economy in a massive shock, too, and our banking system etc would also go.

So tax levels would go down.

So we get a bailout from the IMF, who backstops the loans in return for slightly less terminal action to correct things. But it'll still be mean.

Our immature politicians screwed us and now want daddy to come in and sort the mess, and sure they can blame them for it.

Red Actor

Nijmegen wrote: »

We had surplus but borrowed for capital projects. So, in theory yes, but deficits work differently in times of growth.

We had quite a low national debt come 2008, something like 25%. It will top 100% shortly, a massive jump in 2-3 years.

In some of the good years we paid for the capital projects, repaid the maturing debt and also paid into the pension reserve fund. In the other years we didn't pay for all of the capital projects from income but paid 1% of GNP or GDP into the pension fund (and gave about €500m back in SSIAs)

Zynks

drunkmonkey wrote: »

Still Confused.

I agree that this "we need to save €15 bn over four years" is a typically misleading line. It should be "we want to reduce our yearly deficit (losses) from €20bn today to €5bn by 2014".

beeno67 wrote: »

Not quite. None of the cuts are to reduce the overall debt. In 4 years time, after all the cuts, we will owe substantially more than we do now.

Yes, it is the curse of a growing debt and compounded interests. The hole keeps getting bigger, and there is no mention anywhere of reduction of debt. I take it as an implied admission that it just won't happen.

Nijmegen wrote: »

Plus, all the interest on that debt would be going up and up. So actually we'd need to borrow more to stay still. This year interest was 16% of all tax take.

Is it 16% of tax take or 16% of expenditure?

In any case, that is what scares the s**t out of me. Many of the loans will be replaced by new ones, at higher interest rates. If today the interest, at lower rates, and on a much lower overall debt is 16% of either the tax take or expenditure (not sure, really), then this percentage could be heading towards a much higher level as a percentage of the national budget.

Unless we can start to reduce the principal of the debt itself, there is no way we can stop the downward spiral, is there?

OK, that is what the IMF is about, but in our case they will be trying to milk a comatose bull...

Nijmegen

Zynks wrote: »

Is it 16% of tax take or 16% of expenditure?

In any case, that is what scares the s**t out of me. Many of the loans will be replaced by new ones, at higher interest rates. If today the interest, at lower rates, and on a much lower overall debt is 16% of either the tax take or expenditure (not sure, really), then this percentage could be heading towards a much higher level as a percentage of the national budget.

Unless we can start to reduce the principal of the debt itself, there is no way we can stop the downward spiral, is there?

OK, that is what the IMF is about, but in our case they will be trying to milk a comatose bull...

16% of our tax take in 2010, the €30 odd billion, went on servicing the interest on our debt.

I think if we meet the current targets then in 2014 I heard a figure (this is off the top of my head, you can look it up) that we will be spending 25%, 1 in 4 euros of tax on servicing the debt.

We used to laugh at African countries doing the same.

dav3

There is a difference between 6bn in cuts and 6bn in savings. The way the idiots in government have been doing their figures lately, I have absolutely no confidence in them making 6bn in savings.