What will the economy look like in 6 months time?

Geuze

FVP3 wrote: »

My bet is most of the borrowing will be monetised.

Direct monetary financing of fiscal expenditure is illegal.

Idbatterim

Eric Cartman wrote: »

Over 700k of the 2.2 million labour force now on the payment, that doesnt even take into account various government supports to businesses paying their staff that way, the government is effectively supporting over 1/3rd of the labour force and at a rate of almost double the dole during recession. If this goes on much longer we’ll be in a serious financial hole.

The ‘emergency’ tax they bring in to fix this is going to be an absolute kick in the face and balls to those who return to work.

Listen Eric. Once they keep the likes of Margaret cash and the legions like her comfortable, fcuk the workers. That’s been varadkars main concern up to now...

FVP3

Geuze wrote: »

Direct monetary financing of fiscal expenditure is illegal.

The bonds we issue can be bought up by the ECB, afterwards.

And if that is illegal ( which I doubt) then the EU better make it legal, or it will disappear.

FVP3

There will be no huge increase in tax after this.

Geuze

FVP3 wrote: »

The bonds we issue can be bought up by the ECB, afterwards.

And if that is illegal ( which I doubt) then the EU better make it legal, or it will disappear.

OK.

Secondary market purchases are not illegal.

They are happening now.

The ECB calls it Asset Purchases, and it started in Oct 2014.

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

FVP3

Geuze wrote: »

OK.

Secondary market purchases are not illegal.

They are happening now.

The ECB calls it Asset Purchases, and it started in Oct 2014.

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

Which, as far as I know from the point of view of the country whose debt is bought it is expunged. And my statement "most of the borrowing will be monetised" wasn't about direct financing.

( As to why we needed austerity in Greece etc, or Ireland had to roll bank debt into sovereign debt, beats me. Presumably the ideology of QE had not been accepted then. )

Over 8 billion spent already apparently someone said on The Tonight Show last night.

If the ECB doesn't write these debts off somehow, if the Germans and Dutch stick their heels in and say "it must be repaid" it's the end of the EU.

We are in comparatively good shape compared to the likes of Italy and Spain. They will have debt to GDP ratios north of 300% and most of their industry is gone after this.

Xertz

I think if we end up in a load of patronising “fiscal rectitude” arguments from the usual sources in the EU and this turns into a blame game and attempts to shirk any sense of solidarity towards other members, the EU risks becoming pointless.

The reality is the EU is a mirror. It reflects the 27 member states that make it up. If their reflection is ugly, they may need to look closer to home. Shouting at a mirror until it cracks is rather pointless.

The 27 EU members are also generally well resourced, sensible, social democracies with excellent social infrastructure compared to almost anywhere else in the world. It would be a terrible shame and frankly an indictment of many of them if the EU project falls apart due to fair weather friends.

Also I’m sick listening to Dutch rants on this online. The Netherlands is benefiting enormously as a gateway in and out of the EU single market. In many respects, much like ourselves, it’s a tax haven. We just know when to shut up and show some solidarity. Their finance minister lecturing Portugal was just cringe inducing stuff.

The EU countries have a huge opportunity to show what they stand for and pull together and use they powerful social infrastructure. This is a crisis where that kind is stuff is what matters - not being a military powerhouse.

Or, we can do the Trump thing and set everyone against everyone else and end up in a few years time with a hollowed out EU and a hollowed out US, with a load of bitter and poorer people.

Europe has a choice really: pull together and sail out of this mess or revert to the bad old days when this part of the world spent most of its time and effort fighting, having pointless and deadly wars and undermining itself with endless tribal squabbles.

Are we better than that? The jury is out.

The more I read the less optimistic I become. I’m not seeing any charismatic leadership and we seem to be reverting to the bad old days. Sorry if that’s a bit of a grim assessment but I’m seeing a lot of too little too late and drift to jingoism.

If there isn’t a massive EU intervention there won’t be an EU or a European economy. We could well be looking at a massive depression, never mind a recession and that has global implications.

Similarly if the USA goes into some kind of ideological fight over fiscal conservatism, they may become a lot less relevant too.

Geuze

FVP3 wrote: »

Which, as far as I know from the point of view of the country whose debt is bought it is expunged.

No, the public debt is not expunged.

When the ECB buy Govt debt, they recieve interest and redemption payments like any other holder of public debt.

The public debt is still serviced and repaid, as normal.

Geuze

FVP3 wrote: »

( As to why we needed austerity in Greece etc, or Ireland had to roll bank debt into sovereign debt, beats me. Presumably the ideology of QE had not been accepted then. )

Even if somebody stands ready to buy much of the debt you issue, a Govt must still reduce its fiscal deficit.

Having a large scale buyer of your debt helps keep bond yields down, which is good.

But there is still the hard work to be done of reducing the deficit, and stopping the public debt from rising.

AlmightyCushion

https://www.rte.ie/news/business/2020/0407/1129023-ntma-bond-auction/

The NTMA had a bond auction today and borrowed €6 billion for 7 years at 0.24%. There was huge demand for it as well, with over €33 billion bid on it. A very encouraging sign.

Geuze

FVP3 wrote: »

( As to why we needed austerity in Greece etc, or Ireland had to roll bank debt into sovereign debt, beats me. Presumably the ideology of QE had not been accepted then. )

Some commentators say "we don't need austerity" after this pandemic.

I think a lot of the discussion hinges on what exactly people mean by austerity?

Does it simply mean: (1) "reducing the fiscal deficit"?

Or does it specifically mean: (2) increases in tax rates, decreases in Govt expenditures?

If we have a large fiscal deficit in 2020, which we will have, then it must fall into 2021 and 2022.

But if we have an economic rebound, we may be able to achieve (1), without doing (2).

Wanderer78

Geuze wrote: »

Some commentators say "we don't need austerity" after this pandemic.

I think a lot of the discussion hinges on what exactly people mean by austerity?

Does it simply mean: (1) "reducing the fiscal deficit"?

Or does it specifically mean: (2) increases in tax rates, decreases in Govt expenditures?

If we have a large fiscal deficit in 2020, which we will have, then it must fall into 2021 and 2022.

But if we have an economic rebound, we may be able to achieve (1), without doing (2).

will the eu be forced to change fiscal rules, or face ruin?

Geuze

Wanderer78 wrote: »

will the eu be forced to change fiscal rules, or face ruin?

http://econbrowser.com/archives/2020/04/guest-contribution-its-long-past-time-for-a-eurozone-brady-plan

https://voxeu.org/article/covid-19-economic-crisis-europe-needs-more-one-instrument

Eric Cartman

Deleted User wrote: »

Over 8 billion spent already apparently someone said on The Tonight Show last night.

If the ECB doesn't write these debts off somehow, if the Germans and Dutch stick their heels in and say "it must be repaid" it's the end of the EU.

We are in comparatively good shape compared to the likes of Italy and Spain. They will have debt to GDP ratios north of 300% and most of their industry is gone after this.

Id agree most current industry is gone and agree that if the germans keep the debt up theres going to be a few less flags flying in Brussels.

However I think one of the biggest things people will learn from this is that centralising manufacturing power in China was a terrible idea, I predict a lot more manufacturing returning to the western world after this and countries like Spain are cheap for labour , it could be their salvation.

Xertz

I’d generally be quite in favour of a strong and functional EU but this is really starting to turn into a complete mess.

If they don’t act in a very big way soon and if this fiscal conservative stuff keeps rolling on, a lot will just conclude the EU has a number of influential fair weather friends who really have no solidarity towards the rest of the EU, at least not when the money is flowing in a direction they don’t like.

They’re all very quick to laugh and point at Donald Trump pitting US state against US state and letting the whole thing slide into chaos, while doing exactly the same thing themselves.

Europe should be able to use its collection of strong, well structured social democracies to deal with this effectively but, it seems we’re just the same short sighted, market oriented morons that are running the US.

I think if this continues to slide, the EU will end up as a simple trade bloc. The trolls will have won and we will all be a lot weaker and poorer as a result, bouncing between actual world powers.

I guess maybe we were all over optimistic. This has always been a continent of waring idiots who spent centuries killing each other.

Depressing as it is. I don’t think the solidarity exists to fix this. The ladders are being pulled up and the punches are being directed downwards.

Also on a side issue, just looking at European Union institutions’ and key figures’ twitter accounts. I don’t know why they even bother. All they’re doing is attracting thousands of trolling bot accounts. If the European Commission said “Good morning!” there would be hundreds and hundreds of accounts with 5 posts all ranting and raving about how they’re worse than (insert totally ridiculous comparison regime here).

It’s actually at the stage, if I were doing their PR strategy, I would advise them to forget those social media channels. There’s no point in being a flame to angry moths and we didn’t need Twitter a few years ago. Just use your existing communication channels, as you’re extremely bad at Twitter.

At this stage I’m just fed up with it. Whole thing seems like we are walking into a complete disaster in the EU and in the US.

It just feels like at the very time we need quality leadership we are in some kind of weird political dystopian mess and trolls and conspiracy theorists at every turn online.

I’m at the stage I’m no longer watching the news as it’s just idiot after idiot after idiot.

Geuze

Eric Cartman wrote: »

However I think one of the biggest things people will learn from this is that centralising manufacturing power in China was a terrible idea, I predict a lot more manufacturing returning to the western world after this and countries like Spain are cheap for labour , it could be their salvation.

An interesting point.

Could we see PPE / important medical devices / drugs, being stockpiled within the EU?

A common EU procurement policy?

Could we see Trump say or do this: why are ventilators for Americans being made in Galway, why are we importing ingredients for drugs from India?

He is already protectionist.

Will there be more?

Yes, Spain / Portugal / eastern Europe could have opportunities if more low-end manufacturing moves back to the EU

Xertz

There’s nothing “low end” about a lot of that manufacturing, rather that companies found ways of exploiting workers willing to work for far, far less money and side stepped environmental standards in Europe and elsewhere by going to developing economies.

The reality is we have let corporate interested run riot and undermined a lot of progress and security.

Globalisation is all well and good but we did it by just exploiting loopholes rather than really improving things across the globe.

Whether our supply chains would have been any more secure pre globalisation is also debatable. The big issue was nobody took pandemic risks seriously due to the fact that we are very bad at calculating risk.

If you look around most countries the risks they wee prepared for tended to be things like wars. The US has massive preparedness in the military but has been completely disrupted by virus that needs strong healthcare and social infrastructure to combat it, not weapons.

Meanwhile in Europe we’ve also focused on short term views and market economic ideologies that would see stockpiling PPE ans ventilators as a gross waste of resources.

We didn’t see this coming. That’s for sure.

Eric Cartman

Geuze wrote: »

An interesting point.

Could we see PPE / important medical devices / drugs, being stockpiled within the EU?

A common EU procurement policy?

Could we say Trump say or do this: why are ventilators for Americans being made in Galway, why are we importing ingredients for drugs from India?

He is already protectionist.

Will there be more?

Yes, Spain / Portugal / eastern Europe could have opportunities if more low-end manufacturing moves back to the EU

I wouldn't be shocked if both the US and Europe forbid the import of PPE and some medical equipment from china / India / Africa etc... We see time and time again where manufacturing and safety standards are just ignored or the rules bent to save money and no recourse is possible. Europe should be manufacturing this potentially life saving equipment in Europe where companies can be held accountable for manufacturing flaws.

Billhook

Geuze wrote: »

An interesting point.

Could we see PPE / important medical devices / drugs, being stockpiled within the EU?

A common EU procurement policy?

Could we say Trump say or do this: why are ventilators for Americans being made in Galway, why are we importing ingredients for drugs from India?

He is already protectionist.

Will there be more?

Yes, Spain / Portugal / eastern Europe could have opportunities if more low-end manufacturing moves back to the EU

The reasons they import ingredients from India is because the ingredients could be plant based and will only grow in India, they could be a generic hybridised plant and we don't have the climate and conditions to grow the specific plants species.

lomb

AlmightyCushion wrote: »

https://www.rte.ie/news/business/2020/0407/1129023-ntma-bond-auction/

The NTMA had a bond auction today and borrowed €6 billion for 7 years at 0.24%. There was huge demand for it as well, with over €33 billion bid on it. A very encouraging sign.

ECB likely bidding like a crazy thing with phantom cash.Who would lend at .24 when the ECB targets inflation at 2 percent. That's a loss of over 10 over the 7 years

Eric Cartman

lomb wrote: »

ECB likely bidding like a crazy thing with phantom cash.Who would lend at .24 when the ECB targets inflation at 2 percent. That's a loss of over 10 over the 7 years

the ECB hasn't been able to get inflation to over 2% in the last decade which was their challenge, they're going to have to just print money in this kind of backdoor QE scheme and possibly trigger a period of hyperinflation to get anywhere.

AlmightyCushion

lomb wrote: »

ECB likely bidding like a crazy thing with phantom cash.Who would lend at .24 when the ECB targets inflation at 2 percent. That's a loss of over 10 over the 7 years

We've been borrowing at rates lower than 2% for a while now.

https://www.google.com/amp/s/www.irishtimes.com/business/economy/ntma-sells-1bn-in-bonds-at-a-third-of-the-interest-rate-set-in-january-1.3924455%3fmode=amp

That's a 10 year bond at 0.29%. We've even had bonds sold at a negative rate

Geuze

lomb wrote: »

ECB likely bidding like a crazy thing with phantom cash.Who would lend at .24 when the ECB targets inflation at 2 percent. That's a loss of over 10 over the 7 years

Does the ECB buy Govt bonds at the primary auction?

I thought it only buys in the secondary market?

Geuze

lomb wrote: »

ECB likely bidding like a crazy thing with phantom cash.Who would lend at .24 when the ECB targets inflation at 2 percent. That's a loss of over 10 over the 7 years

The NTMA report some info on the buyers of the bonds:

https://www.ntma.ie/news/ntma-raises-6-billion-from-sale-of-new-7-year-benchmark-bond

New 7yr bond, to be redeemed May 2027, coupon rate = 0.20%


"The main investor categories were asset managers (36%) and banks & intermediaries (36%), followed by pension & insurance (10%), central banks and official institutions (10%) and hedge funds (8%)."

Xertz

Bear in mind too that bonds are attractive right now as holding money in cash may return negative rates due to inflation and stocks are quite unpredictable.

snotboogie

Xertz wrote: »

There’s nothing “low end” about a lot of that manufacturing, rather that companies found ways of exploiting workers willing to work for far, far less money and side stepped environmental standards in Europe and elsewhere by going to developing economies.

The huge majority of it is exploiting the difference of cost of living rather than exploiting employees directly. Even within China, where there are huge differences in standard and cost of living between provinces, a lot of the factory workers are migrants who want to earn as much as possible in as short a time as possible while spending as little as possible. A lot of the money being paid to workers isn't being spent in Guangdong or Shandong or Zhejiang, it's being spent in poorer provinces via remittances or via property being bought when the factory worker is finished their stint. Exploitation is not rife, there is competition for workers and a lot of what we would consider horrible, like on site accommodation or huge working hours (while being paid by the hour), are considered perks in China because migrant workers are generally more interested in raising fast capital to improve their life and safety net at home rather than building a life in the province where they go to work.

Pa ElGrande

Farmers across Europe bank on improvised armies of pickers to save harvest

At this time of year John Greene is usually preparing to welcome dozens of Slovakian strawberry pickers for another harvest at his farm in County Wexford in south-east Ireland.

The work is arduous and repetitive and he relies on their experience and stamina to get the fruit picked, packed and sold.

Greene surveyed his fields this week with foreboding. “I look out my window and there’s no one to pick it. None of them are on site at the moment.”

source

I did post this on the supermarket thread, but it needs to be considered that fresh food will become more expensive and scarce due to the restrictions on movement of seasonal workers and airlines financial problems. I did make the suggestion that since lots of teenagers are stuck for something to do at the moment and they are at very low risk of infection and there won't really be much in the way of Summer jobs this year with many adults having to take holidays now and businesses try to get cash flows going again. Why not send them harvesting food?

arctictree

Over 700K getting unemployment assistance now. Would of been cheaper and more efficient to just introduce a universal income..

Pa ElGrande

arctictree wrote: »

Over 700K getting unemployment assistance now. Would of been cheaper and more efficient to just introduce a universal income..

That's €250 million per week, pretty soon you're talking real money. :eek: The UBI experiment in Finland did not work well either.

Coronavirus Ireland: More than 700,000 people now claiming unemployment benefits

A total of 714,000 people are now claiming unemployment benefits following a surge in claims for emergency support due to the coronavirus pandemic.

There are now 507,000 people receiving the new Covid-19 pandemic unemployment payment worth €350 a week following a government-ordered business shutdown.

This is on top of 207,000 people who are on standard jobseekers benefits.

In addition, 39,000 employers who have registered for a wage subsidy scheme to avoid laying off staff are receiving state support.

Under the terms of the scheme, the government is paying 70pc of wages for employers whose income has fallen by 25pc.

A further 23,800 applications for an enhanced lllness Benefit payment for those in self-isolation or diagnosed with the virus have been made.

source