SSIA as way to combat virus’ economic impact

Dots1982

I’ve heard quantative easing and helicopter money as ways to combat the current financial crisis.

An SSIA would have the high level of return available that it would bring huge money into the government from those that still have it in piles (and there are many) and allow the government to transfer the cash to a recovery plan for the self employed and the newly unemployed.

Geuze

I don't get you?

The original SSIA was designed to encourage saving, and cost the Govt as they added to people savings.

Dots1982

Geuze wrote: »

I don't get you?

The original SSIA was designed to encourage saving, and cost the Govt as they added to people savings.

Where does the money go that people save in an SSIA?

kingstevii

Nobody has a penny. Nevermind trying to save in an ssia..

Dots1982

kingstevii wrote: »

Nobody has a penny. Nevermind trying to save in an ssia..

Well that’s bollocks.

Allinall

Dots1982 wrote: »

Where does the money go that people save in an SSIA?

It sat in bank accounts all over the country.

I think what you are proposing is a government issued bond that would be bought by the general public, with a generous interest rate to attract investors.

Whilst laudable, the government can borrow virtually as much as they want at historically low interest rates, so I'm not sure why they would pay more to you or me.

Geuze

Dots1982 wrote: »

Where does the money go that people save in an SSIA?

Into a bank account, and the bank then lend it to borrowers.

Geuze

kingstevii wrote: »

Nobody has a penny. Nevermind trying to save in an ssia..

Irish households have over 100 bn on deposit.

Geuze

Dots1982 wrote: »

I’ve heard quantative easing and helicopter money as ways to combat the current financial crisis.

Follow this blog for possible economics responses:

https://marginalrevolution.com/

Dots1982

Allinall wrote: »

It sat in bank accounts all over the country.

I think what you are proposing is a government issued bond that would be bought by the general public, with a generous interest rate to attract investors.

Whilst laudable, the government can borrow virtually as much as they want at historically low interest rates, so I'm not sure why they would pay more to you or me.

Fair point. It would put our own dormant money to work rather than Depend on foreign capital.

Pete_Cavan

SSIAs take money out of the economy and release it later. That is fine when the economy is ticking along nicely. When this is sorted, we won't want to be taking money out of the economy, we will need ways to generate economic activity. SSIAs are literally the exact opposite of what we will need to do.

Geuze

Dots1982 wrote: »

Fair point. It would put our own dormant money to work rather than Depend on foreign capital.

What do you mean by "dormant money"?

All money deposited into banks is lent out.

Dots1982

Pete_Cavan wrote: »

SSIAs take money out of the economy and release it later. That is fine when the economy is ticking along nicely. When this is sorted, we won't want to be taking money out of the economy, we will need ways to generate economic activity. SSIAs are literally the exact opposite of what we will need to do.

Asking again, where does the money go that is being taken out of the economy?

Pete_Cavan

Dots1982 wrote: »

Asking again, where does the money go that is being taken out of the economy?

Banks, again.

Dots1982

Geuze wrote: »

What do you mean by "dormant money"?

All money deposited into banks is lent out.

True and banks will make decisions on who to loan that money to on the basis of what is good for the bank.

Governments can decisions On what is good for the economy.

Dots1982

Pete_Cavan wrote: »

Banks, again.

The money would have to go to the government. Basically these with a higher level of return- https://www.statesavings.ie/our-products/4-year-national-solidarity-bond

L1011

Dots1982 wrote: »

Asking again, where does the money go that is being taken out of the economy?

In to the bank account you've inventivised people to put it in to

L1011

Dots1982 wrote: »

The money would have to go to the government. Basically these with a higher level of return- https://www.statesavings.ie/our-products/4-year-national-solidarity-bond

So the state would icentivise people to give it money to do what with precisely?

This is an awful badly thought out idea

Pete_Cavan

SSIAs are a deflationary measure in times of strong economic growth, they are no use to assist economic recovery after a shock.

loyatemu

the ECB will have to print money, every other central bank will be doing the same thing. The govt will be keen to get money back into the economy, not have people squirreling it away in savings accounts.

Dots1982

L1011 wrote: »

So the state would icentivise people to give it money to do what with precisely?

This is an awful badly thought out idea

The government doesn’t need money? It will have a load of money that it will have nothing to do with? That’s what you see happening?

The self employed, businesses and recently unemployed are all grand right now?

Pete_Cavan

Dots1982 wrote: »

The money would have to go to the government. Basically these with a higher level of return- https://www.statesavings.ie/our-products/4-year-national-solidarity-bond

State bonds are completely different to the SSIA scheme. There is no point in the government trying to encourage economic activity while at the same time encouraging people to keep their money in a bank account for a set period of time. It is trying to do two opposite things at the same time.

nelly17

The issue with QE or Helicopter money is the crntral bank issues it to other banks and people need to borrow it - That wont happen and cause a bottle-neck I think the best option would be a kind of Temporary universal basic income model - Paird via both Drot of social protection and via employer salary suppliment

Dots1982

I’d love the helicopter money For all policy. Put it towards a nice holiday when this is all over. Not much good to ireland.

nelly17

Dots1982 wrote: »

I’d love the helicopter money For all policy. Put it towards a nice holiday when this is all over. Not much good to ireland.

This is part of the problem - others would just suppliment savings too

Dots1982

Pete_Cavan wrote: »

State bonds are completely different to the SSIA scheme.

Ok, would you Use incentives to convert cash piles to state capital to support the struggling sectors or what would you seem as best practice?

Pete_Cavan

Dots1982 wrote: »

Ok, would you Use incentives to convert cash piles to state capital to support the struggling sectors or what would you seem as best practice?

The state can support struggling sectors with money from issuing bonds or new money issued from ECB. They need to encourage people to get spending and have money circulating in the economy again. Saving money is the opposite of what we want.

Geuze

loyatemu wrote: »

the ECB will have to print money, every other central bank will be doing the same thing. The govt will be keen to get money back into the economy, not have people squirreling it away in savings accounts.

The ECB has already been creating new money to buy financial assets.

This happened during the last financial crisis, and was restarted last year.

From 1st Nov 2019 the ECB re-started QE at 20bn per month.

https://www.ecb.europa.eu/press/pr/date/2019/html/ecb.mp191212~06d84240ae.en.html

On the 12-March the ECB decided to increase money creation:

https://www.ecb.europa.eu/press/pr/date/2020/html/ecb.mp200312~8d3aec3ff2.en.html

An extra 120bn.

https://www.ecb.europa.eu/mopo/implement/omt/html/index.en.html

They have by now created an extra 2.6 trillion euro.

Dots1982

Pete_Cavan wrote: »

The state can support struggling sectors with money from issuing bonds or new money issued from ECB. They need to encourage people to get spending and have money circulating in the economy again. Saving money is the opposite of what we want.

You cant spend money in a closed business. The Money has to be more direct via state support. The state has to get that money from somewhere.

That is hypothesis.

What do you think the government should do?

Geuze

Pete_Cavan wrote: »

They need to encourage people to get spending and have money circulating in the economy again. Saving money is the opposite of what we want.

Surely we want people to stay at home?

Pete_Cavan

Geuze wrote: »

Surely we want people to stay at home?

For now yes, but not indefinitely. Obviously I am talking about getting the economy going again after the virus has passed.

L1011

Dots1982 wrote: »

The government doesn’t need money? It will have a load of money that it will have nothing to do with? That’s what you see happening?

The self employed, businesses and recently unemployed are all grand right now?

You are suggesting the government use money they don't have to get money. Do you realise the problem here?

Dots1982

L1011 wrote: »

You are suggesting the government use money they don't have to get money. Do you realise the problem here?

Money they don’t have? Sorry, I’m lost. Do you want to summarize what you think my hypothesis is?

L1011

Dots1982 wrote: »

Money they don’t have? Sorry, I’m lost. Do you want to summarize what you think my hypothesis is?

You were lost from the off. Your idea is awful in every way

You want to help the economy by encouraging people not to spend; but instead lend it to the Government at higher rates than the Government can actually borrow at

End result is nobody spends and the state wastes money, damaging the economy on the double.

You could even get a triple hit if you accidentally decapitalise the banks by incentivising people to take their money out!

The J Stands for Jay

Dots1982 wrote: »

Where does the money go that people save in an SSIA?

Into investment funds that are invested mainly in other countries' stock markets.

Dots1982

Dots1982 wrote: »

I’ve heard quantative easing and helicopter money as ways to combat the current financial crisis.

An SSIA would have the high level of return available that it would bring huge money into the government from those that still have it in piles (and there are many) and allow the government to transfer the cash to a recovery plan for the self employed and the newly unemployed.

You want anyone who has money spending it as soon as the country reopens for business. Maybe an investment scheme on the other end to allow people a tax break to invest is struggling sectors to revive businesses

The J Stands for Jay

What the government should actually do is reduce the interest rates on state savings to zero or less, and get the banks in on the act, to encourage spending

Allinall

McGaggs wrote: »

Into investment funds that are invested mainly in other countries' stick markets.

On a side note, I believe the value of sticks has risen sharply, since governments worldwide have switched from the carrot approach to dealing with the coronavirus pandemic.

The J Stands for Jay

Allinall wrote: »

On a side note, I believe the value of sticks has risen sharply, since governments worldwide have switched from the carrot approach to dealing with the coronavirus pandemic.

We will need as many sticks as we can get our hands on to make it through the post-apocalyptic landscape into which we will emerge when this is over.

SEPT 23 1989

A Covic19 Solidarity Charge will bring a few quid in the emergency budget next month

The J Stands for Jay

SEPT 23 1989 wrote: »

A Covic19 Solidarity Charge will bring a few quid in the emergency budget next month

It's a good thing we got rid of the credit crunch emergency USC charge

Harry Palmr

With about 103 billion in deposit what is needed is a massive hording tax on any property owner with more than twice their annual income squirrelled away.

https://www.irishtimes.com/business/personal-finance/what-s-a-saver-with-more-than-1-million-on-deposit-to-do-1.3688716?mode=amp

There are some 138,441 accounts with deposits in excess of €100,000 in them.

And there are 1,776 household accounts with more than €1 million on deposit.

Dots1982

L1011 wrote: »

You were lost from the off. Your idea is awful in every way

You want to help the economy by encouraging people not to spend; but instead lend it to the Government at higher rates than the Government can actually borrow at

End result is nobody spends and the state wastes money, damaging the economy on the double.

You could even get a triple hit if you accidentally decapitalise the banks by incentivising people to take their money out!

Yes, the flaws are pretty clear now. My idea was to move Sleeping money from deposit account to business by providing a rate of return. The government are going to be the most in need of money over the next couple of months. I am dubious about the helicopter money and huge money printing in a country with huge money in deposit also seems a receipe for huge inflation.

But my plan is not the answer, so what is?

FVP3

kingstevii wrote: »

Nobody has a penny. Nevermind trying to save in an ssia..

The rich are as rich as ever. Some will be richer after all this.

An SSIA will take money out of the economy. It wont help.

FVP3

Dots1982 wrote: »

Yes, the flaws are pretty clear now. My idea was to move Sleeping money from deposit account to business by providing a rate of return. The government are going to be the most in need of money over the next couple of months. I am dubious about the helicopter money and huge money printing in a country with huge money in deposit also seems a receipe for huge inflation.

But my plan is not the answer, so what is?

There won't be any inflation with helicopter money, given that recessions are deflationary.

There's no easy answer.

Geuze

Dots1982 wrote: »

Yes, the flaws are pretty clear now. My idea was to move Sleeping money from deposit account to business by providing a rate of return.

Again, money in deposit account is not "sleeping".

Say I have 20k on deposit.

That is loaned to people and firms all over Ireland.

It is not idle.

Banks lend out savings to borrowers, who spend and invest.

My savings are used to finance new tractors, milking machines, new Aldi warehouses, new Vodafone mobile masts, new printers, new machines up and down the country.

That is the whole point of banks.

They are matchmakers - they match savings and loans.

They do this every day.

Geuze

Harry Palmr wrote: »

With about 103 billion in deposit what is needed is a massive hording tax on any property owner with more than twice their annual income squirrelled away.

https://www.irishtimes.com/business/personal-finance/what-s-a-saver-with-more-than-1-million-on-deposit-to-do-1.3688716?mode=amp

You want a large wealth tax on anybody with large deposits in banks?

Dunnes Stores may have 50m on deposit - do they have to pay your proposed wealth tax?

Geuze

Dots1982 wrote: »

The government are going to be the most in need of money over the next couple of months

Yes.

The good news is that they started the year with 20bn in liquidity.

https://twitter.com/seamuscoffey/status/1242187541190717443/photo/1

Geuze

Dots1982 wrote: »

I am dubious about the helicopter money and huge money printing in a country with huge money in deposit also seems a receipe for huge inflation.

While direct "helicopter money", i.e the ECB creating new money and distributing it to households, has been discussed, I don't think it will happen.

The ECB have already announced 750bn more QE asset purchases.

That will ease any problems in bond markets.

LuasSimon

This will bring the pension fund to a head for once and for all . The state pension will have to be means tested looks to be the only way to cut back on the welfare bill . That would make significant savings and ensure those at the bottom will get their pension into the future .

Geuze

LuasSimon wrote: »

This will bring the pension fund to a head for once and for all . The state pension will have to be means tested looks to be the only way to cut back on the welfare bill . That would make significant savings and ensure those at the bottom will get their pension into the future .

If you are calling for all State pensions to be means-tested, then you are effectively called for an end to Social Insurance?

All modern countries have either a universal pension or a Social Insurance pension.

Correct me if I'm wrong, but I don't know of any country like you propose?