What will the economy look like in 6 months time?

PommieBast

Snow Garden wrote: »

Would you advise people to move their pensions to lower risk funds? Away from equity/property etc?

Trouble is what is actually lower risk? Gilts are the sort of things that are considered "safer" in pensionspeak but they are expected to sink even further into negative yields.

Pa ElGrande

Perpetual bonds are not the best way to finance the European Recovery Fund

Prominent voices propose financing the European Recovery Fund using joint perpetual debt. This column argues that there are gains from using European borrowing and lending as two separate policy levers. In a world of ultra-accommodative monetary policy, financing the Fund issuing debt at shorter maturities and passing those low interest rates onto member states through loans with low margin and with very long maturities is financially cheaper. Supporting the recovery through this maturity transformation would reinforce debt sustainability across the EU.


A number of prominent voices have put forward the idea of funding a large investment package (€1.5-2 trillion) to support the EU recovery from Covid-19 by issuing EU perpetual bonds (consols). Such a joint recovery plan is seen as vital for the stability of the EU. One argument in favour of using consols is that committing to joint perpetual debt delivers a high degree of mutualisation.

The idea has recently been floated by Garicano (2020), Giavazzi and Tabellini (2020), Verhofstadt and Garicano (2020) and the Spanish Government (EU Council 23 April 2020) to name a few recent ones (see the discussion in Baldwin and Weder di Mauro 2020). Soros (2020) also backed the idea, stressing that consols were used in the past by both the UK and US. Prior to COVID-19, in a somewhat different context, Paris and Wyplosz (2014) proposed a “plan PADRE” to deal with high public debts in the euro area, essentially by swapping existing debt instruments into zero-coupon consols held by the ECB.

source

It may happen that existing bonds will be converted to perpetual bonds rather than call it a "default".


Poor Countries Face a Debt Crisis ‘Unlike Anything We Have Seen’

Nermal

An Ri rua wrote: »

If anyone believes that they can keep creating extra dollar units and entering credit markets and buying up all form of instruments, they are deluded.

They literally can, they have as many dollars as they need. You can claim it will result in hyperinflation, but claiming they cannot intervene on any scale or duration of their choosing is just wrong.

An Ri rua

Nermal wrote: »

They literally can, they have as many dollars as they need. You can claim it will result in hyperinflation, but claiming they cannot intervene on any scale or duration of their choosing is just wrong.

That's a childish response. They can of course. Ceteris parabus. But there are other actors in the action you know?

Snow Garden

Why aren't the media focusing on the massive economic recession that is coming down the line?
In terms of coronavirus they seem to talk about everything except the economic devastation we are facing in 2021 and 2022.
Is this deliberate?

Wanderer78

Snow Garden wrote: »

Why aren't the media focusing on the massive economic recession that is coming down the line?
In terms of coronavirus they seem to talk about everything except the economic devastation we are facing in 2021 and 2022.
Is this deliberate?

the virus is higher priority at the moment, no need to be bringing out the tin foil hats just yet, i actually think theres a looming banking crisis on the way, hence the higher rates

Snow Garden

Wanderer78 wrote: »

the virus is higher priority at the moment, no need to be bringing out the tin foil hats just yet, i actually think theres a looming banking crisis on the way, hence the higher rates

It's naive to call it tin foil hat material. Paschal was as worried in April.

https://www.thejournal.ie/paschal-donohoe-covid-19-recession-5071625-Apr2020/

FINANCE MINISTER PASCHAL Donohoe said he has “little reason to doubt” the recession caused by the Covid-19 pandemic will be the worst global economic crisis since the Great Depression of the 1930s.

IMF chief Kristalina Georgieva yesterday predicted that 2021 would only see a partial recovery as countries all over the world deal with the impact of the pandemic.

Speaking on RTɒs Morning Ireland, Donohoe said: “I’ve little reason to doubt what the IMF have said, and the reason for that is because this virus is global in nature. The economic impact, tragically, will also be global in nature.”

Hubertj

Snow Garden wrote: »

Why aren't the media focusing on the massive economic recession that is coming down the line?
In terms of coronavirus they seem to talk about everything except the economic devastation we are facing in 2021 and 2022.
Is this deliberate?

i wouldn't agree with that. Unless you are referring to RTE? I don't watch RTE so can't comment but i think the Irish Times and Examiner have included plenty of analysis as to what is coming down the line.

Snow Garden

Hubertj wrote: »

i wouldn't agree with that. Unless you are referring to RTE? I don't watch RTE so can't comment but i think the Irish Times and Examiner have included plenty of analysis as to what is coming down the line.

During the 2007/2008 crash we were hearing daily news updates about the PIIGS states and the future of the Eurozone and the national debt and borrowing rates etc etc. It lasted for years.

This crash will be much much worse and it's hardly covered on the news in any meaningful way. All we hear is that Paschal will be borrowing 30bn.
Nothing about the number of businesses that will close or the jobs that will be lost permanently when the Covid payments end.

Wanderer78

Snow Garden wrote: »

During the 2007/2008 crash we were hearing daily news updates about the PIIGS states and the future of the Eurozone and the national debt and borrowing rates etc etc. It lasted for years.

This crash will be much much worse and it's hardly covered on the news in any meaningful way. All we hear is that Paschal will be borrowing 30bn.
Nothing about the number of businesses that will close or the jobs that will be lost permanently when the Covid payments end.

important to remember, it was the rapid rise in private debt that actually caused the crash, public debt and expenditure had little to do with it

Geuze

Snow Garden wrote: »

Why aren't the media focusing on the massive economic recession that is coming down the line?

It has started already.

In the USA, it looks like the recession will last three or six months.

From the charts below, it look to me like Q2 and Q3 of 2020 are the recession?

Very sharp drop in output.

http://econbrowser.com/archives/2020/07/an-improved-gdp-outlook-from-wall-street

Geuze

Snow Garden wrote: »

Why aren't the media focusing on the massive economic recession that is coming down the line?
In terms of coronavirus they seem to talk about everything except the economic devastation we are facing in 2021 and 2022.

There will be growth during 2021 and 2022, according to these surveys:

http://econbrowser.com/archives/2020/07/an-improved-gdp-outlook-from-wall-street


It’s still the case that recovery to 2019Q4 levels – the prior peak — is not attained by 2022Q1 according to the mean response.

This prediction is broadly consistent with the IGM/538 survey, which has a modal response for catchup taking place in 2021H2 (see here.)

Geuze

Snow Garden wrote: »

Why aren't the media focusing on the massive economic recession that is coming down the line?
In terms of coronavirus they seem to talk about everything except the economic devastation we are facing in 2021 and 2022.
Is this deliberate?

2020 is the year of the savage recession:

https://www.esri.ie/system/files/publications/QECSUM2020%20%281%29.pdf

Geuze

Snow Garden wrote: »

Why aren't the media focusing on the massive economic recession that is coming down the line?
In terms of coronavirus they seem to talk about everything except the economic devastation we are facing in 2021 and 2022.

The Central Bank bulletin is helpful reading:

https://www.centralbank.ie/docs/default-source/publications/quarterly-bulletins/qb-archive/2020/quarterly-bulletin---q3-2020.pdf?sfvrsn=4





2021 and 20022 will hopefully see a rebound from the very sharp 2020 recession.

AlmightyCushion

Snow Garden wrote: »

During the 2007/2008 crash we were hearing daily news updates about the PIIGS states and the future of the Eurozone and the national debt and borrowing rates etc etc. It lasted for years.

This crash will be much much worse and it's hardly covered on the news in any meaningful way. All we hear is that Paschal will be borrowing 30bn.
Nothing about the number of businesses that will close or the jobs that will be lost permanently when the Covid payments end.

They have been covering it. Wherever some institution releases a report stating they expect GDP to drop by x% it has been in the news. Any company that has closed or had job losses it is in the news. There was a news story about FDI expected to drop by 40% only the other day. There has been plenty of news stories quoting Pascal saying that a lot of the jobs lost due to covid will be permanent.

enricoh

Geuze wrote: »

The Central Bank bulletin is helpful reading:

https://www.centralbank.ie/docs/default-source/publications/quarterly-bulletins/qb-archive/2020/quarterly-bulletin---q3-2020.pdf?sfvrsn=4





2021 and 20022 will hopefully see a rebound from the very sharp 2020 recession.

I'd settle for that!
We're 200 billion in debt, what'll covid add, another 50? Should be ok if we can hang onto the 12.5% corporation tax rate.
We should be a lot healthier but our politicians do like doling out the sweets!

Wanderer78

enricoh wrote:

I'd settle for that! We're 200 billion in debt, what'll covid add, another 50? Should be ok if we can hang onto the 12.5% corporation tax rate. We should be a lot healthier but our politicians do like doling out the sweets!

Public debt has rarely caused issues, rising private debt has caused far more crashes and downturns, our government should be creating long term bonds to stimulate the economy, as the private sector will have limited capacity to expand for some time, very few house holds and private sector businesses will have the capacity to take on new debt.

Geuze

Wanderer78 wrote: »

Public debt has rarely caused issues, rising private debt has caused far more crashes and downturns, our government should be creating long term bonds to stimulate the economy, as the private sector will have limited capacity to expand for some time, very few house holds and private sector businesses will have the capacity to take on new debt.

The Govt is doing that, billions of bonds being issued.

Huge fiscal stimulus happening.

More of the 2050 bond was issued last week.


Households have rebuilt their balance sheets since 2008-2012, household debt has fallen steadily, thankfully.

HH wealth has been growing.

HH savings have been rising fast during the last six months. Turning some or all of this extra savings into HH expenditure during the rest of 2020 and 2021 will help the recovery.

ILoveYourVibes

Cases are climbing up again. They stupidly brought forward phase two and three. They should have remained on track. And they are not responding to the rise in cases.

Things will go one of two ways. Either we will end up being like Italy the second time round. Or we will be in lockdown again.

scilover

For sure the economy will continue to take loses in the upcoming months. Even with lockdown easing, it will be still the same. Around my area, a lot of business have already close down, it's such a shame.

Pete_Cavan

ILoveYourVibes wrote: »

Cases are climbing up again. They stupidly brought forward phase two and three. They should have remained on track. And they are not responding to the rise in cases.

Things will go one of two ways. Either we will end up being like Italy the second time round. Or we will be in lockdown again.

The number of daily cases hasn't exceeded 25 since the 6th of June, that was a couple of weeks after Phase 1 reopening (construction and outdoor activities) when people were predicting big growth again. Several Phases later and numbers have remained steady, which is the best we coulf have hope for. They don't just dwindle to 0 and that's it, gone.

The two ways you have presented for it to go are very unlikely. Far more likely is we continue with a similar number of cases for a while with possibly some localised outbreaks which have to be tackled.

average_runner

ILoveYourVibes wrote: »

Cases are climbing up again. They stupidly brought forward phase two and three. They should have remained on track. And they are not responding to the rise in cases.

Things will go one of two ways. Either we will end up being like Italy the second time round. Or we will be in lockdown again.

Cases are always going to go up, the virus is here to stay. Cant stay in a shell forever.

average_runner

Pete_Cavan wrote: »

The number of daily cases hasn't exceeded 25 since the 6th of June, that was a couple of weeks after Phase 1 reopening (construction and outdoor activities) when people were predicting big growth again. Several Phases later and numbers have remained steady, which is the best we coulf have hope for. They don't just dwindle to 0 and that's it, gone.

The two ways you have presented for it to go are very unlikely. Far more likely is we continue with a similar number of cases for a while with possibly some localised outbreaks which have to be tackled.

Number of cases will.get higher. We wont do an Italy but another lockdown could be possible. Victoria in lockdown, Croatia cases higher than before, all of that region seeing a surge

Irish_peppa

If theoretically our infection rate in the next week or three went up to United States levels would there be another lock down here or would that be just not an option? Was that massive lock down a once off never to be repeated because of the damage done does anyone think?

average_runner

Irish_peppa wrote: »

If theoretically our infection rate in the next week or three went up to United States levels would there be another lock down here or would that be just not an option? Was that massive lock down a once off never to be repeated because of the damage done does anyone think?

We didnt know the amount of cases or any contact tracing in March. We have more info now to watch things

Wanderer78

Geuze wrote:

Households have rebuilt their balance sheets since 2008-2012, household debt has fallen steadily, thankfully.

This is very true, but you ll find very few would be willing to take on new debt, as we head into a potentially serious downturn, and since theres already a reduction in new debtor's amongst younger generations, things don't look too healthy for the financial sector, significantly reducing the capacity of the private sector to expand. Our politicians will be out in force soon trying to convince us to spend our savings, but many will be still out of work, and the rest of us wondering will we have a job by Christmas, I.e. this will also have a limited effect in the long term

SEPT 23 1989

Wanderer78 wrote: »

This is very true, but you ll find very few would be willing to take on new debt, as we head into a potentially serious downturn, and since theres already a reduction in new debtor's amongst younger generations, things don't look too healthy for the financial sector, significantly reducing the capacity of the private sector to expand. Our politicians will be out in force soon trying to convince us to spend our savings, but many will be still out of work, and the rest of us wondering will we have a job by Christmas, I.e. this will also have a limited effect in the long term

But government are expecting small business to take on debt in the next few weeks having to go cap in hand to banks for money in the guise of a "bailout"

Many businesses would prefer to close than do this after going through 2008

Wanderer78

SEPT 23 1989 wrote: »

But government are expecting small business to take on debt in the next few weeks having to go cap in hand to banks for money in the guise of a "bailout"

Many businesses would prefer to close than do this after going through 2008

exactly, the private sector will have a limited capacity to expand for some time, unfortunately it looks like its gonna shrink for a while, this is where the public sector should kick in, and it is to a degree, but my fear is, they ll try pull back too early, when the private sector doesnt have the confidence to take things on, you ll find very few will take up the option of growing their debt obligations until confidence returns to the sector

ELM327

Irish_peppa wrote: »

If theoretically our infection rate in the next week or three went up to United States levels would there be another lock down here or would that be just not an option? Was that massive lock down a once off never to be repeated because of the damage done does anyone think?

If we were getting US levels I'm sure another lockdown would be more supported than the deaths and cases they are getting.


US is handling this shockingly.
https://www.cdc.gov/coronavirus/2019-ncov/cases-updates/cases-in-us.html

Atlantic Dawn

Irish_peppa wrote: »

If theoretically our infection rate in the next week or three went up to United States levels would there be another lock down here or would that be just not an option? Was that massive lock down a once off never to be repeated because of the damage done does anyone think?

I'd say a regionalised lockdown instead, no need to lock the entire country down again.