Recession predictions

Timing belt

Wanderer78 wrote: »

more conservative rubbish, central banks can never run out of money, so your answer is, lets not try prevent job losses, and encourage the likelihood of longer dole queues for 21!

There is a cost associated with printing money so it’s not free money and when used needs to be done in a targeted way. The point that I am making is covid is going to be around for a long time and I don’t think it’s the best use of money. It’s not conservative rubbish as you call it.

Let’s say that the country continue borrowing from the ECB who have created an extra 1.2tn in cash how will that be repaid in the future if covid is still around. At some point it will lead to a sovereign crisis which will lead to tax rises, job cuts and the government not having a say on how to implement it.

The other point that is worth noting is that Ireland is more dependent on the global economy than other countries so if they don’t pick up Ireland is in trouble regardless of gov spending.

The difficult part is how you target the cash. For example if you said tourist industry needs to be targeted where do you draw the line Hotels, Restraunt’s, pubs. What about the small business supplying these. This is the same problem being experienced by every country.

Richard571

Wanderer78 wrote: »

more conservative rubbish, central banks can never run out of money, so your answer is, lets not try prevent job losses, and encourage the likelihood of longer dole queues for 21!

This is just rubbish. Sure central banks can print money, but you will then see hyper inflation where currency would become devalued like Zimbabwe. Also being part of the EU would prohibit this as it would undermine the EURO.

Someone always pays - either we face up to it now or let our children Pay our bills.

Timing belt

Richard571 wrote: »

This is just rubbish. Sure central banks can print money, but you will then see hyper inflation where currency would become devalued like Zimbabwe. Also being part of the EU would prohibit this as it would undermine the EURO.

Someone always pays - either we face up to it now or let our children Pay our bills.

100% correct

Geuze

Timing belt wrote: »

T
Let’s say that the country continue borrowing from the ECB who have created an extra 1.2tn in cash how will that be repaid in the future if covid is still around. At some point it will lead to a sovereign crisis which will lead to tax rises, job cuts and the government not having a say on how to implement it.

The ECB does not lend to Govts.

That is illegal, and does not happen.

Geuze

Richard571 wrote: »

This is just rubbish. Sure central banks can print money, but you will then see hyper inflation where currency would become devalued like Zimbabwe. Also being part of the EU would prohibit this as it would undermine the EURO.

The ECB started QE in 2014, and it has not led to consumer price inflation.

You can argue it has contributed to asset price inflation.

Timing belt

Geuze wrote: »

The ECB does not lend to Govts.

That is illegal, and does not happen.

Not directly but by there bond buying programs they are keeping rates low enabling countries to borrow on the open market that they would otherwise be locked out of due to the cost

Wanderer78

Timing belt wrote: »

There is a cost associated with printing money so it’s not free money and when used needs to be done in a targeted way. The point that I am making is covid is going to be around for a long time and I don’t think it’s the best use of money. It’s not conservative rubbish as you call it.

Let’s say that the country continue borrowing from the ECB who have created an extra 1.2tn in cash how will that be repaid in the future if covid is still around. At some point it will lead to a sovereign crisis which will lead to tax rises, job cuts and the government not having a say on how to implement it.

The other point that is worth noting is that Ireland is more dependent on the global economy than other countries so if they don’t pick up Ireland is in trouble regardless of gov spending.

The difficult part is how you target the cash. For example if you said tourist industry needs to be targeted where do you draw the line Hotels, Restraunt’s, pubs. What about the small business supplying these. This is the same problem being experienced by every country.

..and you can be damn sure they ll be a real 'cost', if we dont start saving jobs and businesses! so the usual conservative thinking and default position is, lets pull back, start working on the deficit, and encourage the growth of the private sector, via private sector credit creation, does this sound familiar??? didnt we just experience a 'credit crisis'!!!! all money, whether it is created in the public sector or private sector, eventually becomes our debts, so no, its not free money, money only becomes free when its loans are defaulted upon or theres debt forgiveness, which doesnt happen all that often, in both sectors.

public debts can be rolled over for many decades, possible even centuries, this is common practice globally, and doesnt cause too many problems, provided the debts are regularly serviced, i.e. nothing to be worried about, but growing private debt, particularly while heading into deep uncertainty, now that is a big problem!

important to remember, public debt didnt actually cause the previous crash, as the financial issues of the financial crisis, were largely in private sector financial institutions, again, 'private debt issues'!

by any chance, if you gave the citizens a few extra quid, via, oh i dont know, 'covid payments', would some of this cash make it into these small businesses? I know im talking crazy talk here, but......

Richard571 wrote: »

This is just rubbish. Sure central banks can print money, but you will then see hyper inflation where currency would become devalued like Zimbabwe. Also being part of the EU would prohibit this as it would undermine the EURO.

Someone always pays - either we face up to it now or let our children Pay our bills.

inflation, addressed above! Zimbabwe is an interesting story used in these debates, but the conservatives generally leave out the very important part of the story, not only was their mess created by excessive money creation, there was also serious supply side issues to, go figure!!!!

Timing belt wrote: »

100% correct

100% incorrect, see above!

Timing belt

Geuze wrote: »

The ECB started QE in 2014, and it has not led to consumer price inflation.

You can argue it has contributed to asset price inflation.

It definitely has lead to asset price inflation and increased the divide between rich and poor.

The QE has not lead to customer inflation yet as it has been targeted and inline with other G8 economies. If Europe was to massively increase this and no other economy did then it would impact the euro and there would be imported customers inflation.

I am not saying QE is bad just that it is limited and needs to be used in a targeted way otherwise you could have serious consequences.

Wanderer78

Timing belt wrote: »

It definitely has lead to asset price inflation and increased the divide between rich and poor.

The QE has not lead to customer inflation yet as it has been targeted and inline with other G8 economies. If Europe was to massively increase this and no other economy did then it would impact the euro and there would be imported customers inflation.

I am not saying QE is bad just that it is limited and needs to be used in a targeted way otherwise you could have serious consequences.

i think we re at that point already, maybe even surpassed it!

Timing belt

Wanderer78 wrote: »

i think we re at that point already, maybe even surpassed it!

So why are you arguing for more. [Hand slaps my forehead]

Wanderer78

Timing belt wrote: »

So why are you arguing for more. [Hand slaps my forehead]

..because it is our current system, and its not exactly all that easy to change highly complex systems, our current problems are exactly that, right now, we need solutions right now, ignore the deficit, get money directly into peoples hands, stop trying to push the money supply out to private sector financial institutions, in order for them to sell it to us in the form of private debt. as again, increasing private debt, particularly in deeply uncertain times, such as now, is in fact, highly dangerous, and may tip our private sector financial institutions over, just like we experienced not too long ago! its also important to note, we could create a few quid of our own via public banking systems, like other euro zone countries, but that would introduce its own set of problems and limitations.

Timing belt

Wanderer78 wrote: »

..because it is our current system, and its not exactly all that easy to change highly complex systems, our current problems are exactly that, right now, we need solutions right now, ignore the deficit, get money directly into peoples hands, stop trying to push the money supply out to private sector financial institutions, in order for them to sell it to us in the form of private debt. as again, increasing private debt, particularly in deeply uncertain times, such as now, is in fact, highly dangerous, and may tip our private sector financial institutions over, just like we experienced not too long ago! its also important to note, we could create a few quid of our own via public banking systems, like other euro zone countries, but that would introduce its own set of problems and limitations.

How could we create a few quid via a public banking system?

Wanderer78

Timing belt wrote: »

How could we create a few quid via a public banking system?

by normal banking operations, i.e credit creation!

Timing belt

Wanderer78 wrote: »

by normal banking operations, i.e credit creation!

I don’t understand what could a publicly owned bank do that a normal bank doesn’t. It can’t just create credit out of thin air as it would need to comply with CRDIV plus it would probably be run inefficiently so would probably generate a loss.

Wanderer78

Timing belt wrote: »

I don’t understand what could a publicly owned bank do that a normal bank doesn’t. It can’t just create credit out of thin air as it would need to comply with CRDIV plus it would probably be run inefficiently so would probably generate a loss.

so you want, all our funding to effectively come from the international markets, but we could self produce some ourselves, wheres the logic in that? baring in mind, some euro counties do exactly this, with relatively little problems! why would it be inefficient? public banks seem to run just fine in countries such as america and germany! maybe we should ask them how to do it, 'efficiently'? conservatives are nuts!

Timing belt

Wanderer78 wrote: »

so you want, all our funding to effectively come from the international markets, but we could self produce some ourselves,

Do you know how banks fund themselves? How they maintain liquidity and capital? What role the central banks play? Sorry but you don’t make any sense nor sound like you know what you are talking about.

wassie

Richard571 wrote: »

This is just rubbish. Sure central banks can print money, but you will then see hyper inflation where currency would become devalued like Zimbabwe. Also being part of the EU would prohibit this as it would undermine the EURO.

Someone always pays - either we face up to it now or let our children Pay our bills.

So if printing money leads to hyper inflation, like Zimbabwe (and Nazi Germany, the other often quoted example) why has inflation in the US never risen above 4% yet they have performed QE four times since 2008?


Hyper-inflation will only occur where there is not enough capacity in the economy to absorb the demand that is generated from the 'sugar hit'. the developed world is a long way off from this for the fore-seeable future.

brisan

Wanderer78 wrote: »

or did introducing policies such as increasing covid payments, help in this rebound, and will the decrease in these payments, lead to a decrease in that rebound?

Well rambling around the Grafton street area yesterday it was less busy than normal
Brown Thomas was deserted

Wanderer78

Wanderer78 wrote: »

so you want, all our funding to effectively come from the international markets, but we could self produce some ourselves, wheres the logic in that? baring in mind, some euro counties do exactly this, with relatively little problems! why would it be inefficient? public banks seem to run just fine in countries such as america and germany! maybe we should ask them how to do it, 'efficiently'? conservatives are nuts!

Timing belt wrote: »

Do you know how banks fund themselves? How they maintain liquidity and capital? What role the central banks play? Sorry but you don’t make any sense nor sound like you know what you are talking about.

zee germans have already been here explaining how their public banks having been in operation, successfully, for many decades now! im amazed a conservative such as yourself hasnt come across public banks, if run well, they tend to be very conservative, compared to their private sector counterparts, generally not involving themselves in high risk activities such as derivatives trading etc, not paying their high level employees high salaries and bonuses etc, and just being plain ould conservative vanilla banking. Americas only public bank is in north dakota, traditionally a red state, sounds like it could be all up your alley banks need reserves, maybe state assets could be used, maybe citizens savings could also be used?

Wanderer78

brisan wrote: »

Well rambling around the Grafton street area yesterday it was less busy than normal
Brown Thomas was deserted

yea, retail is in serious trouble, along side most other sectors, we need money, and fast!

Timing belt

Wanderer78 wrote: »

zee germans have already been here explaining how their public banks having been in operation, successfully, for many decades now! im amazed a conservative such as yourself hasnt come across public banks, if run well, they tend to be very conservative, compared to their private sector counterparts, generally not involving themselves in high risk activities such as derivatives trading etc, not paying their high level employees high salaries and bonuses etc, and just being plain ould conservative vanilla banking. Americas only public bank is in north dakota, traditionally a red state, sounds like it could be all up your alley banks need reserves, maybe state assets could be used, maybe citizens savings could also be used?

Who said I am a conservative or didn’t know about public banks get back to point and talk economics and leave politics alone. What I am pointing out is it makes no difference public or private. As public bank can’t just create credit as you indicate is the case. Maybe I have it wrong and that’s why I am asking you to explain how it would work and you are unable to do so.

Wanderer78

Timing belt wrote: »

Who said I am a conservative or didn’t know about public banks get back to point and talk economics and leave politics alone. What I am pointing out is it makes no difference public or private. As public bank can’t just create credit as you indicate is the case. Maybe I have it wrong and that’s why I am asking you to explain how it would work and you are unable to do so.

banks in both the public and private sectors, create credit from virtually nothing, it is an accountancy activity, it is commonly called 'double entry book keeping'. when a loan is required, two accounts are created, the debtor is given access to one of these accounts, and the creditor the other. its all backed by the promise to repay.

i can give you directions towards how banking works if you like, as i cant explain fully the info you re looking for, i have academic, non academic and central bank research, let me know what suits you?

Timing belt

Wanderer78 wrote: »

banks in both the public and private sectors, create credit from virtually nothing, it is an accountancy activity, it is commonly called 'double entry book keeping'. when a loan is required, two accounts are created, the debtor is given access to one of these accounts, and the creditor the other. its all backed by the promise to repay.

i can give you directions towards how banking works if you like, as i cant explain fully the info you re looking for, i have academic, non academic and central bank research, let me know what suits you?

Cut and paste ha ha. You truly don’t know what you are talking about!!!!!!!

Wanderer78

Timing belt wrote: »

Cut and paste ha ha. You truly don’t know what you are talking about!!!!!!!

please explain? again, would you like to see the academic, non academic, or central bank research on this, let me know what suits you? thank you

Timing belt

Wanderer78 wrote: »

please explain? again, would you like to see the academic, non academic, or central bank research on this, let me know what suits you? thank you

I know how a bank works I don’t need your research on this.

And again I ask why would a publicLy owned bank be different to any of the Irish clearing banks? What benefits would it bring for such a large investment by the government. I am asking you to back up your claim!!!!

Wanderer78

Timing belt wrote: »

I know how a bank works I don’t need your research on this.

And again I ask why would a publicLy owned bank be different to any of the Irish clearing banks? What benefits would it bring for such a large investment by the government. I am asking you to back up your claim!!!!

can you explain how the whole process works, please, i understand the whole idea of double entry, but i dont understand the workings of reserves etc? i also understand that deposits are never used as loans, but are held as reserves, so no need to explain that either. thank you

busy now, i ll get back to you in a bit, thank you

Timing belt

Wanderer78 wrote: »

can you explain how the whole process works, please, i understand the whole idea of double entry, but i dont understand the workings of reserves etc? thank you

busy now, i ll get back to you in a bit, thank you

It’s not as simple as a one customer deposits money and that same cash is then given as a loan to another customer (I.e. double entry) as

1) the bank needs to keep cash on hand (normally in gov bonds or central bank placements) in case the customer comes to withdraw the cash. This is why banks need to comply with the Liquidity Coverage Rules (LCR).

2)Likewise they can’t loan money out without having sufficient capital in reserves in case of a default. These rules are set out in CRDIV which come from a set of global rules from the bank of international settlement.

3) So assuming enough cash was there for liquidity and enough capital to be able to make the loan.
Then you have the interest rate risk(IRR) between the loan and customers deposits. If one is a floating rate (deposit) and the other a fixed rate (loan) then you will need to hedge the IRR. Which is where you more than likely need a derivative to hedge the risk.

4) you also need to look at the behaviour analysis of the deposit book as there will be a core element of this that is always there and if acceptable to the regulator you can use for lending. This is where the German public banks fund a lot of there loans.

This is vanilla banking at its simplest and it makes no difference whether it is a publicly owned bank or a private bank.

Under current market conditions (low interest rate) it is not easy to make a profit from this which is why Irish banks share prices are so low.

Add on top of this the extra capital that is required for non performing loans and you either have a bank that can’t lend as it doesn’t have enough capital or a bank that has to hold to much capital (which costs) in order to lend.

As of Thursday the banks non-performing loans will increase when the dispensation on covid breaks end which means that banks will have less capital for lending. To counteract this the regulators have relaxed some rules in relation to certain buffers.

The main Irish banks are all vanilla banks so having a publicly owned bank wouldn’t make a difference.

Wanderer78

Wanderer78 wrote: »

zee germans have already been here explaining how their public banks having been in operation, successfully, for many decades now! im amazed a conservative such as yourself hasnt come across public banks, if run well, they tend to be very conservative, compared to their private sector counterparts, generally not involving themselves in high risk activities such as derivatives trading etc, not paying their high level employees high salaries and bonuses etc, and just being plain ould conservative vanilla banking. Americas only public bank is in north dakota, traditionally a red state, sounds like it could be all up your alley banks need reserves, maybe state assets could be used, maybe citizens savings could also be used?

Timing belt wrote: »

It’s not as simple as a one customer deposits money and that same cash is then given as a loan to another customer (I.e. double entry) as

1) the bank needs to keep cash on hand (normally in gov bonds or central bank placements) in case the customer comes to withdraw the cash. This is why banks need to comply with the Liquidity Coverage Rules (LCR).

2)Likewise they can’t loan money out without having sufficient capital in reserves in case of a default. These rules are set out in CRDIV which come from a set of global rules from the bank of international settlement.

3) So assuming enough cash was there for liquidity and enough capital to be able to make the loan.
Then you have the interest rate risk(IRR) between the loan and customers deposits. If one is a floating rate (deposit) and the other a fixed rate (loan) then you will need to hedge the IRR. Which is where you more than likely need a derivative to hedge the risk.

4) you also need to look at the behaviour analysis of the deposit book as there will be a core element of this that is always there and if acceptable to the regulator you can use for lending. This is where the German public banks fund a lot of there loans.

This is vanilla banking at its simplest and it makes no difference whether it is a publicly owned bank or a private bank.

Under current market conditions (low interest rate) it is not easy to make a profit from this which is why Irish banks share prices are so low.

Add on top of this the extra capital that is required for non performing loans and you either have a bank that can’t lend as it doesn’t have enough capital or a bank that has to hold to much capital (which costs) in order to lend.

As of Thursday the banks non-performing loans will increase when the dispensation on covid breaks end which means that banks will have less capital for lending. To counteract this the regulators have relaxed some rules in relation to certain buffers.

The main Irish banks are all vanilla banks so having a publicly owned bank wouldn’t make a difference.

fantastic stuff, thank you, but you d have to ask, why are our banks starting to panic!

Wanderer78

Wanderer78 wrote: »

zee germans have already been here explaining how their public banks having been in operation, successfully, for many decades now! im amazed a conservative such as yourself hasnt come across public banks, if run well, they tend to be very conservative, compared to their private sector counterparts, generally not involving themselves in high risk activities such as derivatives trading etc, not paying their high level employees high salaries and bonuses etc, and just being plain ould conservative vanilla banking. Americas only public bank is in north dakota, traditionally a red state, sounds like it could be all up your alley banks need reserves, maybe state assets could be used, maybe citizens savings could also be used?

Timing belt wrote: »

I know how a bank works I don’t need your research on this.

And again I ask why would a publicLy owned bank be different to any of the Irish clearing banks? What benefits would it bring for such a large investment by the government. I am asking you to back up your claim!!!!

the bank of north dakota was believed to be the only us bank largely unaffected by the 08 crash, and seems to be holding up well, considering the current situation with oil, it effectively acts as a central bank for the state. i suspect the german infrastructure bank, kfw, operates in a similar way, funding public infrastructure needs. the german sparkasse bank, is heavily protected under constitutional law, so much so, even the conversation of potentially selling a branch is illegal, i.e. branches cannot be sold, it sounds like theyre also very well used and respected in germany. id imagine they could be far more transparent, compared to their private sector counterparts also, as its probably easier to create such mechanisms to do so. its generally in their mandates to serve the public, and not prioritise the needs of their share holders, apparently theyre very good at supplying credit to critical sectors such as sme's, and of course citizens. again, public banks generally dont get involved in high risk activities such as derivatives, believed to have played a vital role in 08, i disagree with your belief, our banks are plain old vanilla for all of the above reasons. does a public bank, truly need to make a profit, compared to its private sector counterparts? all it truly needs to do is, make sure its operational, covering all the rules and regulations you mentioned, baring in mind the general lower salaries and bonuses, in comparison.

i also like the idea of dual interests rates, it might just unstick our current low rates situation, but that will probably need to occur at ecb level.

thanks for that, thats great stuff

Timing belt

Wanderer78 wrote: »

fantastic stuff, thank you, but you d have to ask, why are our banks starting to panic!

Because they will be an increase in defaults(non performing loans) which will tie up there capital and they won’t be able to make a profit which will lead to cost cutting which means redundancy. They may also be restricted by capital with regards to new lending they can do.

They have already cut to the bone so not much room to cut. This is why Ulster we’re talking about pulling out of irish market. If you look at ulsters capital it’s at about 22% which is way higher than they would like it to be and means they will struggle to make a profit even in normal times without a increase in defaults