How much money does Ireland actually owe?

ASVM

Does anyone know how much Ireland actually owes and how long will it take to pay it all back? There's so much stuff floating around that it seems a bit baffling.

TheChizler

ASVM wrote: »

Does anyone know how much Ireland actually owes and how long will it take to pay it all back? There's so much stuff floating around that it seems a bit baffling.

Gross or domestically? If you include the private dept it's a couple of trillion.

ASVM

TheChizler wrote: »

Gross or domestically? If you include the private dept it's a couple of trillion.

All our debt.

ASVM

Okay I just found some information on an old post relating to our national debt and then the other stuff - NAMA, recapitalising Anglo etc.

I suppose I am just wondering when people think we will be out of our current financial mess. Is there any real future or light at the end of the tunnel in the next few years? Will we be out of the bail out programme by 2015 and will this 25 billion( is that the figure) be paid back.

Any reading suggestions?

AlmightyCushion

ASVM wrote: »

Okay I just found some information on an old post relating to our national debt and then the other stuff - NAMA, recapitalising Anglo etc.

I suppose I am just wondering when people think we will be out of our current financial mess. Is there any real future or light at the end of the tunnel in the next few years? Will we be out of the bail out programme by 2015 and will this 25 billion( is that the figure) be paid back.

Any reading suggestions?

We probably won't pay any of the debt back and just keep rolling it over, maybe paying relatively small amounts down as we do.

shedweller

AlmightyCushion wrote: »

We probably won't pay any of the debt back and just keep rolling it over, maybe paying relatively small amounts down as we do.

I heard something to that effect but thought it might not be true. I heard that after inflation growth, the national debt shrank, despite it being still the same amount of money. If thats true then WTF???
Are we going to do it all over again?

hmmm

shedweller wrote: »

I heard something to that effect but thought it might not be true.

Back in the 70s/80s we ran up huge debts that also looked unpayable. Right on the brink we pulled back and got our deficit under control, and over time that debt became a smaller and smaller proportion of our total economy. I remember at the time how quick the turnaround was, within a decade of going from total despair we had the (real) celtic tiger.

So yes, it is true. The first thing we have to do is stop spending money we don't have which is the gap the next 3 budgets are going to close, and we have to grow the economy.

The economy has started growing again (slowly), and for most people things are not getting worse. Everyone is poorer, but we seemed to have reached bottom in about mid 2010.

Scofflaw

shedweller wrote: »

I heard something to that effect but thought it might not be true. I heard that after inflation growth, the national debt shrank, despite it being still the same amount of money. If thats true then WTF???
Are we going to do it all over again?

It's the standard plan. This is our debt going back to 1990:

Year|GGD €bn|GGD % GDP|Nat Debt €bn
2011 |169.3 |108.2% |119.1
2010 |144.2 |92.5% |93.4
2009 |104.6 |65.1% |75.2
2008 |79.6 |44.2% |50.4
2007 |47.4 |24.9% |37.6
2006 |44.0 |24.7% |35.9
2005 |44.7 |27.5% |38.2
2004 |44.3 |29.7% |37.8
2003 |43.3 |31.0% |37.6
2002 |41.9 |32.2% |36.4
2001 |41.6 |35.6% |36.2
2000 |39.7 |37.8% |36.5
1999 |43.9 |48.5% |39.9
1998 |42.1 |53.6% |37.5
1997 |43.7 |64.3% |39.0
1996 |43.2 |73.5% |38.0
1995 |43.6 |82.1% |38.4
1994 |41.7 |89.8% |37.1
1993 |41.1 |95.2% |36.0
1992 |37.0 |92.4% |33.5
1991 |36.0 |95.5% |32.2
1990 |34.2 |94.5% |31.8

GGD = General Government Debt (everything the government owes)
Nat Debt = National Debt (what the government owes bar the promissory notes and a few other things)

As you can see, the debt in 1991 stood at 95.5% of GDP, and it was not paid down. It stabilised, or largely stabilised, and GDP grew. GDP growth alone meant that in 2000 GGD was 38% of GDP, even though the actual sum involved was larger than in 1990.

As for a breakdown - this is from the NTMA:

Source|National Debt €m|General Government Debt €m
Government Bonds |85,310 |
EU/IMF Programme Funding |34,629 |
Other Medium and Long-Term Debt |673 |
State Savings Schemes (excludes POSB Deposits)1 |11,546 |
Short-Term Debt |4,616 |
Cash and other Financial Assets |-17,692 |
National Debt at 31/12/11 |119,082 |
||
National Debt ||119,082
Adjustment for Cash and other Financial Assets2 ||17,692
Promissory Notes to Financial Institutions ||28,333
Other General Government Debt Adjustments ||4,125
General Government Debt at 31 Dec. 2011 ||169,232

And this is the current breakdown:

|National Debt €m
Government Bonds |88,259
EU/IMF Programme Funding |54,762
Other Medium and Long-Term Debt |773
State Savings Schemes (excludes POSB Deposits)1 |12,885
Short-Term Debt |6,336
Cash and other Financial Assets2 |-26,253
National Debt at 31 Oct. 2012 |136,762

From the above, the GGD at end October would presumably be around €195.473bn.

cordially,
Scofflaw

I think ordinary people find it hard to conceptualise it and that is a big problem, I am listening to the radio at the moment ( Pat Kenny ) and he had Richard Bruton on who basically said its not as bad as we think then he has Eddie Hobbs who as it worse much worse that we think, they can't both be right its very hard for ordinary people to get under the spin and make sense of it.

Sponge Bob

The big problem is that the banks will lose another ( my personal guess) €30bn from writing off property loans to households and individuals. This over the next 10 years or so. This would not be a problem if the banks made €3bn a year in operating profits over the same period of course. Other estimates of losses may not be as high as €30bn.

Our banks expect the taxpayer to make good on their mistakes, after all we have the best bankers in the world and they are entitled to be kept in the style they are accustomed to.

hmmm

Sponge Bob wrote: »

The big problem is that the banks will lose another ( my personal guess) €30bn from writing off property loans to households and individuals.

I don't expect it to be that much, but remember anyway that we have over-capitalised the banks already to meet a lot (and hopefully all) of those losses. So, hopefully, the banks have got as much funding as they are going to need.

That's assuming an Irish government doesn't do something stupid like bail out people in negative equity.

The really big problem at the moment is our over-spending.

Scofflaw

mariaalice wrote: »

I think ordinary people find it hard to conceptualise it and that is a big problem, I am listening to the radio at the moment ( Pat Kenny ) and he had Richard Bruton on who basically said its not as bad as we think then he has Eddie Hobbs who as it worse much worse that we think, they can't both be right its very hard for ordinary people to get under the spin and make sense of it.

Those who would like to claim that things are disastrous (and that they told you so) have to add other numbers to the debt pile to make things clearly and unambiguously catastrophic, while the government, obviously, resists such claims, because they could potentially damage Ireland's market prospects. And to be fair to the government, such additions are usually pretty spurious. Household debt and corporate debt, which are often added to the national debt to produce truly bowel-loosening figures, are meaningful in themselves, but cannot simply be added to the public debt in any meaningful way.

The real figures are, I suppose, about as bad as it's possible for them to be without quite being disastrous. It's a bit like being on the edge of a cliff. We're not over the cliff, so that's a positive, but we are, nevertheless, on the edge of a cliff. And, considering the household/corporate debt, yes, we're also wearing lead weights, so it will take us longer to crawl away from the cliff edge than otherwise - but it has nothing to do with whether we're over the cliff or not. And there is a European safety net, but it's over the cliff edge, not on it.

cordially,
Scofflaw

antoobrien

Sponge Bob wrote: »

The big problem is that the banks will lose another ( my personal guess) €30bn from writing off property loans to households and individuals. This over the next 10 years or so. This would not be a problem if the banks made €3bn a year in operating profits over the same period of course. Other estimates of losses may not be as high as €30bn.

But then we've already recapitalised the banks for €64bn losses, which in the case of AIB, BOI and IL&P have not been crystallised as losses yet (and won't be until they write the amounts off the value of the loans).

KyussBishop

Just like the US, there is no economic reason the debt has to matter at all, it is all a political problem (where the EU use of money creation has been locked out); there is no reason debt can't be simply monetized when it falls due (or some just written off where justifiable), and high-interest debt replaced with that at a more reasonable interest rate (by working to solve the real problems in our economy, lack of demand, so there is some market confidence; even still, debt isn't even needed to fund a deficit anyway).

The national debt, i.e. private investors putting money into the country and getting a percentage interest in return, is just a series of very large savings accounts, where you're actually doing the investors a favour by giving them a risk-free way to get earnings out of their money, through interest (the percentage of which, if the EU exercised its monetary powers properly, would be fully controllable and impossible to default on, due to ability to create money).

It is fiscal/monetary irresponsibility at the EU level, based on outdated economic theory, that has us locked in this situation, over issues which economically are not a problem, and are perfectly resolvable.

Sponge Bob

Well the Recaps ( some idea here) > http://obsessivemathsfreak.org/stuff/banks/irish_bank_recapitalisation.html have not in MY opinion provided for the eventual scale of losses resulting from residential property lending and household speculation ( Buy To Lets)

The real writedowns will come when a new personal insolvency regime is eventually created.

http://www.irishtimes.com/newspaper/finance/2012/0516/1224316193530.html

First of all €64bn is accepted.

Last year’s stress tests, led by the Central Bank and verified by asset manager Blackrock and other expensive outside consultants, determined that the banks required a further €24 billion. This pushed the banking cost to the State to €64 billio

The scale of the losses depends on how the banks tackle the problem and the operation of the personal insolvency regime. That is not to say that there isn’t a figure on total mortgage losses. Out of Irish mortgages of €98 billion at the domestic banks, the Central Bank said in the stress test results that it expected losses to be €5.7 billion over three years (2011-2013) and, in a worst-case scenario, €9 billion.

An ominous sign is that the banks are close or have already reached the expected losses after year one. Analysts believe the banks will reach the €9 billion figure, so once again in Irish banking base case becomes worst case.

Blackrock estimated that total losses over the life of the loans, which could mean more than 20 years on these loans, was €16 billion.

The €24 billion recapitalisation bill set by the tests covers the worst-case losses of €9 billion but only 56 per cent of the €16 billion. Bankers expect final losses to fall between the expected and worst-case levels.

I expect the worst case to be a lot worse than the worst case so far. I also expect these parasites will try to tap the taxpayer for their osses as usual.

The stress test metrics are described here

http://www.thejournal.ie/central-bank-stress-tests-consider-13-4-per-cent-drop-in-house-prices-105436-Mar2011/

However, the worst case scenario would see (house) prices fall by 17.4 per cent in 2010 and a further 18.8 per cent in 2012 – a 60 per cent fall from peak prices.

They fell 16.7% in 2011

http://www.cso.ie/en/media/csoie/releasespublications/documents/prices/2011/rppi_dec2011.pdf

But only 8.1% oct 2011 to oct 2012

Idbatterim

The real figures are, I suppose, about as bad as it's possible for them to be without quite being disastrous. It's a bit like being on the edge of a cliff. We're not over the cliff, so that's a positive, but we are, nevertheless, on the edge of a cliff. And, considering the household/corporate debt, yes, we're also wearing lead weights, so it will take us longer to crawl away from the cliff edge than otherwise - but it has nothing to do with whether we're over the cliff or not. And there is a European safety net, but it's over the cliff edge, not on it.

Ah scofflaw, I love you analogies, you have such a great way of explaining thing to us mere economic mortals

Icepick

KyussBishop wrote: »

Just like the US, there is no economic reason the debt has to matter at all, it is all a political problem (where the EU use of money creation has been locked out); there is no reason debt can't be simply monetized when it falls due (or some just written off where justifiable), and high-interest debt replaced with that at a more reasonable interest rate (by working to solve the real problems in our economy, lack of demand, so there is some market confidence; even still, debt isn't even needed to fund a deficit anyway).

The national debt, i.e. private investors putting money into the country and getting a percentage interest in return, is just a series of very large savings accounts, where you're actually doing the investors a favour by giving them a risk-free way to get earnings out of their money, through interest (the percentage of which, if the EU exercised its monetary powers properly, would be fully controllable and impossible to default on, due to ability to create money).

It is fiscal/monetary irresponsibility at the EU level, based on outdated economic theory, that has us locked in this situation, over issues which economically are not a problem, and are perfectly resolvable.

Even if we wanted to be this irresponsible and cocky, we don't have the leverage the US have - the dollar and their military spending.

KyussBishop

Icepick wrote: »

Even if we wanted to be this irresponsible and cocky, we don't have the leverage the US have - the dollar and their military spending.

What is irresponsible or cocky about it, exactly? And what kind of 'leverage' are you talking about? (what has military leverage, for instance, got to do with it?)

liammur

KyussBishop wrote: »

Just like the US, there is no economic reason the debt has to matter at all, it is all a political problem (where the EU use of money creation has been locked out); there is no reason debt can't be simply monetized when it falls due (or some just written off where justifiable), and high-interest debt replaced with that at a more reasonable interest rate (by working to solve the real problems in our economy, lack of demand, so there is some market confidence; even still, debt isn't even needed to fund a deficit anyway).

The national debt, i.e. private investors putting money into the country and getting a percentage interest in return, is just a series of very large savings accounts, where you're actually doing the investors a favour by giving them a risk-free way to get earnings out of their money, through interest (the percentage of which, if the EU exercised its monetary powers properly, would be fully controllable and impossible to default on, due to ability to create money).

It is fiscal/monetary irresponsibility at the EU level, based on outdated economic theory, that has us locked in this situation, over issues which economically are not a problem, and are perfectly resolvable.

Of course there is an economic reason for debt to matter. The US has to service it's debt which in itself is becoming an ever harder task. What happens when investors realise the US is technically bankrupt and won't be able to pay back? Yields will shoot up, and house of cards comes down.

KyussBishop

It's literally impossible for a country in control of their own currency to involuntarily default or to run out of money (i.e. go bankrupt); they can always create money to meet the debt demands.

AlmightyCushion

KyussBishop wrote: »

It's literally impossible for a country in control of their own currency to involuntarily default or to run out of money (i.e. go bankrupt); they can always create money to meet the debt demands.

So, what happened with Argentina?

liammur

KyussBishop wrote: »

It's literally impossible for a country in control of their own currency to involuntarily default or to run out of money (i.e. go bankrupt); they can always create money to meet the debt demands.

That money will always become worthless i.e. Germany in the 20's, the likes of Zimbabwe. Failure to control debt is a 1 way ticket to bankruptcy.

ezra_pound

KyussBishop wrote: »

It's literally impossible for a country in control of their own currency to involuntarily default or to run out of money (i.e. go bankrupt); they can always create money to meet the debt demands.

Simple solution for the dangerously stupid.

ezra_pound

liammur wrote: »

That money will always become worthless i.e. Germany in the 20's, the likes of Zimbabwe. Failure to control debt is a 1 way ticket to bankruptcy.

Kyusbishop refuses to accept this.I was arguing this point in a recent thread. Trust me, he's convinced that this is a valid option and seems to hold it as a religious doctrine. It's like trying to convince the pope that Christ wasn't conceived immaculately.

I guess for some economic policy is a question of faith rather than rationality.

liammur

ezra_pound wrote: »

Simple solution for the dangerously stupid.

Well there is going to be a very interesting situation unfolding in America soon. They are reaching their new debt limit and approaching the so-called fiscal cliff. If they raise the debt ceiling, the rating agencies have warned them of downgrades which will do untold damage to their ability to raise cheap money.
If they cut spending and increase taxes, the economy will lose 3-4% of GDP.

Scofflaw

ezra_pound wrote: »

Kyusbishop refuses to accept this.I was arguing this point in a recent thread. Trust me, he's convinced that this is a valid option and seems to hold it as a religious doctrine. It's like trying to convince the pope that Christ wasn't conceived immaculately.

I guess for some economic policy is a question of faith rather than rationality.

Given the state of economics as a "science", economic policy is a primarily matter of faith for anyone with a strong economic stance, as we see regularly here and elsewhere!

Still, yes, we shouldn't really have to have this argument again. Printing (or debasing) money has been tried as a debt solution enough times with sufficiently similar results to count as one of the few empirically tested economic hypotheses.

cordially,
Scofflaw

Tigerbaby

keep applying the plaster to this *****y little ponzi scheme boys.

Thats worked well so far, hasnt it?

ezra_pound

liammur wrote: »

Well there is going to be a very interesting situation unfolding in America soon. They are reaching their new debt limit and approaching the so-called fiscal cliff. If they raise the debt ceiling, the rating agencies have warned them of downgrades which will do untold damage to their ability to raise cheap money.
If they cut spending and increase taxes, the economy will lose 3-4% of GDP.

Yes. I agree with you.

ezra_pound

Scofflaw wrote: »

Given the state of economics as a "science", economic policy is a primarily matter of faith for anyone with a strong economic stance, as we see regularly here and elsewhere!

Still, yes, we shouldn't really have to have this argument again. Printing (or debasing) money has been tried as a debt solution enough times with sufficiently similar results to count as one of the few empirically tested economic hypotheses.

cordially,
Scofflaw

Exactly. No reasonable and rational individual could possibly argue for it, based on the history of 20th century monetary policy.

liammur

ezra_pound wrote: »

Yes. I agree with you.

As for our debt,
public debt to GDP is 180.816%, external debt to GDP is 1280.025%.

Scofflaw

liammur wrote: »

As for our debt,
public debt to GDP is 180.816%, external debt to GDP is 1280.025%.

Er, no. The first figure is grossly wrong by any agreed measure, and is therefore presumably one of these made-up numbers where one includes anything one thinks might make it bigger, while the second is frankly meaningless without the balancing assets.

GGD might be approximately €180 billion (slightly higher, in fact, I'd say), but it is definitely not 180 percent of GDP by any agreed measure.

I'm not sure where your external debt figure comes from. There are two possible figures - our "gross external debt" and our "foreign liabilities". The former was €1,686bn at end June (apx 990% GDP), the latter was €2,934bn (apx 1700% GDP) - but our net external debt is -€613bn (that is, assets exceed liabilities) and our stock of "foreign assets" is €2,782bn, which means our "net international investment position" (IIP) is €152.3bn in the red. None of these match your figure, and all of them in reality largely represent the position of the IFSC, which holds €2,279bn of the "foreign assets" and owes €2,273bn of the "foreign liabilities", and which similarly constitutes €1,188bn of the gross external debt and €1,954.5bn of the external assets.

If we take our IIP, which seems to be the more complete measure of our debts and liabilities, and which is in the red to the tune of €152.3bn, that €152.3bn breaks down like this at the end of June:

Sector|31/03/12|31/03/12|31/03/12|30/06/12|30/06/12|30/06/12
|Assets|Liabilities|Net|Assets|Liabilities|Net
General Government|6.1|109.3|-103.2|5.8|114.3|-108.6
Monetary Authority|19.9|96|-76.1|22.8|100.1|-77.3
Monetary Financial Institutions|748.5|715.5|33|770.1|738.4|31.7
Other Financial Intermediaries|1686.2|1628.4|57.7|1733.4|1655.4|77.9
Non-Financial Companies|244.3|317.3|-72.9|250.2|326.2|-76
Total|2705.1|2866.5|-161.5|2782.2|2934.6|-152.3


As you can (hopefully!) see from that, the negative part of the international investment position is made up of €108.6bn from the government, €77.3bn from the monetary authority (the Central Bank), and €76bn from non-financial companies. The banks (MFIs) and other financial intermediaries actually have a net positive position - and stripping out what we know to be the IFSC's net positive position of €6bn, that's still the case. So the net debt figure there is largely composed of the same public debt you've already quoted separately.

This is why I'm immediately suspicious of anyone quoting only our gross external debt - no offence intended - because it's barely meaningful as a figure on its own. The majority of it is IFSC, just as was the case with our banks' famous "foreign liabilities" - for some reason we simply forget that we're a financial services hub, and that means a hell of a lot of money passes through our economy without ever touching the walls, but is nevertheless reflected in our raw statistics.

cordially,
Scofflaw

KyussBishop

AlmightyCushion wrote: »

So, what happened with Argentina?

They defaulted, voluntarily; they could have decided to let the debt roll-over through money creation, but they went with defaulting.

liammur wrote: »

That money will always become worthless i.e. Germany in the 20's, the likes of Zimbabwe. Failure to control debt is a 1 way ticket to bankruptcy.

Unsurprisingly, people are jumping from the initial proposition, monetizing debt as it falls due, to monetizing it en-masse (all in one go), to try and straw man the argument.

Notice also, all the objections avoid making any actual argument against the idea, just comparisons to something entirely different, or just through ad-hominem.

Scofflaw wrote: »

Still, yes, we shouldn't really have to have this argument again. Printing (or debasing) money has been tried as a debt solution enough times with sufficiently similar results to count as one of the few empirically tested economic hypotheses.

It's not intended as a means to monetize the entire debt, all in one go, it's intended as rollover for interest payments (and as a means to control the interest); the debt can be let grow as high as you like, and it makes no difference so long as the interest is payable, without causing too much inflation.

Remember, I'm not talking about dumping the entire debt with money creation.

liammur

Scofflaw wrote: »

Er, no. The first figure is grossly wrong by any agreed measure, and is therefore presumably one of these made-up numbers where one includes anything one thinks might make it bigger, while the second is frankly meaningless without the balancing assets.

GGD might be approximately €180 billion (slightly higher, in fact, I'd say), but it is definitely not 180 percent of GDP by any agreed measure.

I'm not sure where your external debt figure comes from. There are two possible figures - our "gross external debt" and our "foreign liabilities". The former was €1,686bn at end June (apx 990% GDP), the latter was €2,934bn (apx 1700% GDP) - but our net external debt is -€613bn (that is, assets exceed liabilities) and our stock of "foreign assets" is €2,782bn, which means our "net international investment position" (IIP) is €152.3bn in the red. None of these match your figure, and all of them in reality largely represent the position of the IFSC, which holds €2,279bn of the "foreign assets" and owes €2,273bn of the "foreign liabilities", and which similarly constitutes €1,188bn of the gross external debt and €1,954.5bn of the external assets.

If we take our IIP, which seems to be the more complete measure of our debts and liabilities, and which is in the red to the tune of €152.3bn, that €152.3bn breaks down like this at the end of June:

Sector|31/03/12|31/03/12|31/03/12|30/06/12|30/06/12|30/06/12
|Assets|Liabilities|Net|Assets|Liabilities|Net
General Government|6.1|109.3|-103.2|5.8|114.3|-108.6
Monetary Authority|19.9|96|-76.1|22.8|100.1|-77.3
Monetary Financial Institutions|748.5|715.5|33|770.1|738.4|31.7
Other Financial Intermediaries|1686.2|1628.4|57.7|1733.4|1655.4|77.9
Non-Financial Companies|244.3|317.3|-72.9|250.2|326.2|-76
Total|2705.1|2866.5|-161.5|2782.2|2934.6|-152.3


As you can (hopefully!) see from that, the negative part of the international investment position is made up of €108.6bn from the government, €77.3bn from the monetary authority (the Central Bank), and €76bn from non-financial companies. The banks (MFIs) and other financial intermediaries actually have a net positive position - and stripping out what we know to be the IFSC's net positive position of €6bn, that's still the case. So the net debt figure there is largely composed of the same public debt you've already quoted separately.

This is why I'm immediately suspicious of anyone quoting only our gross external debt - no offence intended - because it's barely meaningful as a figure on its own. The majority of it is IFSC, just as was the case with our banks' famous "foreign liabilities" - for some reason we simply forget that we're a financial services hub, and that means a hell of a lot of money passes through our economy without ever touching the walls, but is nevertheless reflected in our raw statistics.

cordially,
Scofflaw

Sources for the figures I provided came from Eurostat/World bank/US treasury. The accuracy of them or otherwise I don't know.

Scofflaw

liammur wrote: »

Sources for the figures I provided came from Eurostat/World bank/US treasury. The accuracy of them or otherwise I don't know.

Those are OK sources, but they're either not very accurately reported, out of date, or refer to something slightly different, as far as I can see. They don't match any of the currently available figures, at least.

cordially,
Scofflaw

View

KyussBishop wrote: »

It's not intended as a means to monetize the entire debt, all in one go, it's intended as rollover for interest payments (and as a means to control the interest); the debt can be let grow as high as you like, and it makes no difference so long as the interest is payable, without causing too much inflation.

Remember, I'm not talking about dumping the entire debt with money creation.

Once you start printing money, your interest rate on new debt will go up as a lender will need to charge higher interest so they get back the equivalent amount of money.

Hence countries that regularly engage in printing money usually pay higher interest rates than does that don't.

Scofflaw

KyussBishop wrote: »

They defaulted, voluntarily; they could have decided to let the debt roll-over through money creation, but they went with defaulting.

Which is, if you're correct, an extraordinary decision - requiring an extraordinary explanation.

KyussBishop wrote: »

Unsurprisingly, people are jumping from the initial proposition, monetizing debt as it falls due, to monetizing it en-masse (all in one go), to try and straw man the argument.

Notice also, all the objections avoid making any actual argument against the idea, just comparisons to something entirely different, or just through ad-hominem.


It's not intended as a means to monetize the entire debt, all in one go, it's intended as rollover for interest payments (and as a means to control the interest); the debt can be let grow as high as you like, and it makes no difference so long as the interest is payable, without causing too much inflation.

Remember, I'm not talking about dumping the entire debt with money creation.

Which gives you a somewhat longer timescale over which the created equivalent of the debt produces inflation, but doesn't change the basic dynamic. We, for example, would be printing €108bn between here and 2020 - an average of €13.5bn annually. Our M2 money supply is €168bn, so if we had our own currency, then, all other things being equal, your "printing only to meet due debt" would produce additional inflation of 8%.

cordially,
Scofflaw

liammur

Scofflaw wrote: »

Those are OK sources, but they're either not very accurately reported, out of date, or refer to something slightly different, as far as I can see. They don't match any of the currently available figures, at least.

cordially,
Scofflaw

I agree to a large extent to what you say as regards the external figure. But ours is the highest in the world and by some distance. (Next is the UK at 508%). Certainly assets have to be taken into consideration, but, as we all know from the 08 guarantee, asset valuations can be grossly over valued etc.

View

liammur wrote: »

I agree to a large extent to what you say as regards the external figure. But ours is the highest in the world and by some distance. (Next is the UK at 508%). Certainly assets have to be taken into consideration, but, as we all know from the 08 guarantee, asset valuations can be grossly over valued etc.

The issue that the government has to worry about though is what the State owes.

The fact that VW Bank Ireland owes VW AG billions or Amazon Ireland owes Amazon Inc may make the figure look large but so what?

Scofflaw

liammur wrote: »

I agree to a large extent to what you say as regards the external figure. But ours is the highest in the world and by some distance. (Next is the UK at 508%). Certainly assets have to be taken into consideration, but, as we all know from the 08 guarantee, asset valuations can be grossly over valued etc.

Well, no, the parallel is too weak to be of use. The assets of the Irish banks were Irish property loans that were caught in one of the world's most sharply collapsing property bubbles - the foreign assets recorded against our foreign liabilities aren't, and their real value is as likely to be greater than their booked value as it is to be lower.

It's not meaningful to link the two because both are called "assets" - it's exactly like considering chalk and cheese the same thing because they're both "materials".

And, perhaps more importantly, you've ignored the fact that the vast majority of our debt (and assets) has nothing to do with the Irish domestic economy - 77% of "our" foreign liabilities are in fact the foreign liabilities of the IFSC, while another large chunk will probably be the amounts "owed" by MNCs to their parent companies. I'm afraid it's quite absurd to wave such a hugely inflated figure around as if it had some meaning for us.

cordially,
Scofflaw

liammur

View wrote: »

The issue that the government has to worry about though is what the State owes.

The fact that VW Bank Ireland owes VW AG billions or Amazon Ireland owes Amazon Inc may make the figure look large but so what?

No, the state also has to worry about what individual citizens owe, because this will inevitably affect the state's ability itself to repay. Unfortunately, Irish people have taken on more debt than most with the foreign property mania that gripped the country.

KyussBishop

View wrote: »

Once you start printing money, your interest rate on new debt will go up as a lender will need to charge higher interest so they get back the equivalent amount of money.

Hence countries that regularly engage in printing money usually pay higher interest rates than does that don't.

You're assuming the initial point here, that the inflation caused will exceed the interest; you need to show that (by quantifying the actual inflationary effect of the interest monetization), not assert it.

Scofflaw wrote: »

Which is, if you're correct, an extraordinary decision - requiring an extraordinary explanation.

I don't know the ins and outs of the crisis in Argentina, or the reason they went the course of a default, but it's my impression they were constrained by both pressure from the IMF (political restraint) and also of their fixed-exchange rate with the US dollar (self-imposed political/economic restraint).

In any case, they engaged in a massive default on a large portion of their debt, and the policy I am talking about does not cause such a massive change of that amount of debt.

Scofflaw wrote: »

Which gives you a somewhat longer timescale over which the created equivalent of the debt produces inflation, but doesn't change the basic dynamic. We, for example, would be printing €108bn between here and 2020 - an average of €13.5bn annually. Our M2 money supply is €168bn, so if we had our own currency, then, all other things being equal, your "printing only to meet due debt" would produce additional inflation of 8%.

If we had our own currency, which we don't; in the context of money creation, you have to treat the EU as one big country (where any inflationary effects are absorbed by the whole EU).

Is that figure between now and 2020 including the same extremely high interest rates? If it is, then part of the policy is in reducing the interest rates, not in paying them as they are, so those figures are not accurate for the policy I am talking about.

Scofflaw

KyussBishop wrote: »

You're assuming the initial point here, that the inflation caused will exceed the interest; you need to show that (by quantifying the actual inflationary effect of the interest monetization), not assert it.


I don't know the ins and outs of the crisis in Argentina, or the reason they went the course of a default, but it's my impression they were constrained by both pressure from the IMF (political restraint) and also of their fixed-exchange rate with the US dollar (self-imposed political/economic restraint).

In any case, they engaged in a massive default on a large portion of their debt, and the policy I am talking about does not cause such a massive change of that amount of debt.

Unfortunately, it is for you to explain why Argentina didn't go your proposed route, so the ins and outs are important.

KyussBishop wrote: »

If we had our own currency, which we don't; in the context of money creation, you have to treat the EU as one big country (where any inflationary effects are absorbed by the whole EU).

Not really, because the ECB would not print that money on our behalf unless they also printed it on behalf of the other indebted countries. So it's meaningless to say that Ireland's needs are a drop in the bucket when the addition of the drop ineluctably implies the addition of the bucket.

KyussBishop wrote: »

Is that figure between now and 2020 including the same extremely high interest rates? If it is, then part of the policy is in reducing the interest rates, not in paying them as they are, so those figures are not accurate for the policy I am talking about.

It's capital only, so it's a conservative estimate for the policy you're talking about. I'm not sure exactly what "extremely high interest rates" you're referring to, though?

cordially,
Scofflaw

liammur

Scofflaw wrote: »

Well, no, the parallel is too weak to be of use. The assets of the Irish banks were Irish property loans that were caught in one of the world's most sharply collapsing property bubbles - the foreign assets recorded against our foreign liabilities aren't, and their real value is as likely to be greater than their booked value as it is to be lower.

It's not meaningful to link the two because both are called "assets" - it's exactly like considering chalk and cheese the same thing because they're both "materials".

And, perhaps more importantly, you've ignored the fact that the vast majority of our debt (and assets) has nothing to do with the Irish domestic economy - 77% of "our" foreign liabilities are in fact the foreign liabilities of the IFSC, while another large chunk will probably be the amounts "owed" by MNCs to their parent companies. I'm afraid it's quite absurd to wave such a hugely inflated figure around as if it had some meaning for us.

cordially,
Scofflaw

This is true, but you can't exclude debt that the citizens of the state owe. I have the figure in a book somewhere and will post it sometime I find it - but it is huge.

View

liammur wrote: »

No, the state also has to worry about what individual citizens owe, because this will inevitably affect the state's ability itself to repay. Unfortunately, Irish people have taken on more debt than most with the foreign property mania that gripped the country.

No, the State largely doesn't I'm afraid.

Some Irish people may be bankrupt or tottering on the brink of it, that does not mean ALL Irish people are.

View

KyussBishop wrote: »

You're assuming the initial point here, that the inflation caused will exceed the interest; you need to show that (by quantifying the actual inflationary effect of the interest monetization), not assert it.

I specified the interest rate that would be charged on new debt would be higher as markets will price in the inflationary effect of your action and charge accordingly.

liammur

View wrote: »

No, the State largely doesn't I'm afraid.

Some Irish people may be bankrupt or tottering on the brink of it, that does not mean ALL Irish people are.

On the contrary, I'm afraid it does. Taking €3.5bln out of an economy would be a piece of cake if citizens didn't have debt.

KyussBishop

Scofflaw wrote: »

Unfortunately, it is for you to explain why Argentina didn't go your proposed route, so the ins and outs are important.

I haven't studied it really, so I can't pin down the constraints that made them go the default route.

Scofflaw wrote: »

Not really, because the ECB would not print that money on our behalf unless they also printed it on behalf of the other indebted countries. So it's meaningless to say that Ireland's needs are a drop in the bucket when the addition of the drop ineluctably implies the addition of the bucket.

I didn't say it was a drop in the bucket, I said it needs to be considered in terms of the entire EU, and yes, in terms of all countries in the EU.

Scofflaw wrote: »

It's capital only, so it's a conservative estimate for the policy you're talking about. I'm not sure exactly what "extremely high interest rates" you're referring to, though?

I see, you're talking about the due date of the repayment of whole portions of the debt (I was thinking in terms of only the interest); for that you can issue new debt to keep it rolling over.

You have to consider that issuing of new debt in the context of the entire EU as well; what may be difficult for Ireland alone, is not for the entire EU (same way as an individual state in the US may have trouble if it had to act alone, but the US overall can keep rolling over their debt as long as they like).

KyussBishop

View wrote: »

I specified the interest rate that would be charged on new debt would be higher as markets will price in the inflationary effect of your action and charge accordingly.

Yes, this is assuming the initial point, that the inflationary effect (which depends largely on the interest paid) will be high, and that that will increase the interest rate excessively (which depends on the old interest rate etc.).
You need to quantify that to show the actual interest rate change you're talking about.

There is no reason the interest has to be fixed either, it can be adjustable, and if the government will be spending into the economy more that it takes out, that creates a net-saving desire within the economy which can be used to push the rate down.

Scofflaw

liammur wrote: »

This is true, but you can't exclude debt that the citizens of the state owe. I have the figure in a book somewhere and will post it sometime I find it - but it is huge.

To some extent that's true - but the point being made is that the vast majority of debt figures that get cited, including the one you cited (1280%), are made up largely of debt that the citizens of Ireland do not owe.

And that's not "do not owe" in the protestors' "it's not our debt" sense, but in the literal sense that no Irish citizen is liable for it.

We do have high levels of household debt - about €178.5bn, or about GDP. Compared to disposable income, household debt stands at 209.3%, which is regarded as somewhat excessive, although there's debate about whether it's a major issue, a minor issue, or a non-issue.

Company debt - non-bank - is also high, but it's hard to see what's happening there, because the MNCs distort the figures.

Net financial assets of Irish households is positive - liabilities are €190bn, financial assets are €310bn. There's a Seamus Coffey breakdown here.

Overall, the position is, again, bad but not unsustainable (on average, that is). There's a lot of household debt, but it's being paid down fairly firmly, and we at least don't have the traditional small-economy problem of debts denominated in foreign currencies growing against our own declining currency. The repayment of debt obviously makes the domestic economy sluggish, too, which slows recovery.

cordially,
Scofflaw

Geuze

You beat me to it.

Households owe 179bn.

This figure is falling (slowly), as more debt is being repaid, than new borrowings.

People are saving/lending, and using their saving out of income to pay down debt.

ASVM

I started this thread and I know I'm not contributing to it now but that's because I don't really understand the whole debt question. But thanks to everyone who is contributing.


I just have another question what do people think about fiscal union? Would it be a good idea or would Ireland get swallowed up? Maybe there are pros and cons.