When is the recession coming?

macvin

https://www.boards.ie/discussion/comment/119101312#Comment_119101312

If you read the sinn fein manifesto, money grows on trees - at least that's the only explanation for the spending that they have proposed. But I'm sure they will trot out various excuses so that their flock will not blame them.

There will be a slowdown and there will be a slowdown in corporation tax. The pharma and tech super profits of 2021 will not be repeated and with many of them reporting here, that leads to less tax and therefore less spending, but the conditions simply are not there for a recession*.

*conditions can change

growleaves

https://www.boards.ie/discussion/comment/119101312#Comment_119101312

It's even more pernicious than that because the borrowed money was dumped into the economy helping to spur the inflation which has made interest rate rises necessary.

timmyntc

https://www.boards.ie/discussion/comment/119101312#Comment_119101312

Governments do not pay any money back. They endlessly refinance and only ever pay back interest. Its all built on premise that GDP (and ability to pay interests payments) will increase forever.

If you can borrow money at a cheap enough rate and invest in something capital that will give enough of a GDP boost (railways, ports, energy infrastructure) then you would be mad not to do it, as the increase in GDP will more than cover the interest payments. Up to now we had near 0% rates and should have taken advantage of it.

growleaves

https://www.boards.ie/discussion/comment/119101408#Comment_119101408

I'm not sure how SF can cop all the blame.

In February 2020 people were giving out about Sinn Fein and their magic money tree.

Then in March 2020 onwards FF/FG implemented MMT on a *massive* scale.

Now they've wound that down, are people pretending that MMT is a left-wing only phenomenon? Because it clearly isn't in practice.

FF/FG just do spend like drunken sailors, whatever the rationalisations ("it's an emergency")

In fact all over the world centrist/right parties showed that their alleged opposition to MMT was wholly feigned or at least dropped when expedient. MMT is a completely bi-partisan, universal policy.

Horn_of_Africa

https://www.boards.ie/discussion/comment/119101462#Comment_119101462

The government does pay the money back. They borrow money and pay back prior debt. That's paying the money back. Just because they have a new loan doesn't mean the previous loan wasn't paid back.

The government tends to waste money, and much of the borrowings are not invested. Also, I would be very cautious about assuming government borrowings adds to GDP greater than the rate of interest, even at low rates.

Horn_of_Africa

The MMT enthusiasts also told us that all of this money printing wouldn't cause inflation. It's baisc economics, vast money printing programmes cause inflation.

marieholmfan

https://www.boards.ie/discussion/comment/119101945#Comment_119101945

In what sense does the government tend to waste money?

What's your benchmark?

marieholmfan

https://www.boards.ie/discussion/comment/119101463#Comment_119101463

SF can't really cop any blame as they didn't do any borrowing.

Horn_of_Africa

https://www.boards.ie/discussion/comment/119102005#Comment_119102005

They're inefficent. As an example look at the situation with the Children's Hospital and the spiralling costs.

Amadan Dubh

The big "S" State definition of a recession is different to the man on the street's definition.

As pointed out in a good post earlier in the thread, the situation we are currently in, which was a culmination of particular policy interventions the last decade, could to many people be a sort of recession, in that they are steadily getting poorer and finding it harder to make ends meet (due to skyrocketing living costs).

timmyntc

https://www.boards.ie/discussion/comment/119101945#Comment_119101945

From a practical point of view no they do not pay it back. They "service" the debt - i.e. they get a new loan to pay off the old, and then pay any interest that was due on the old loan. The total debts on government balance sheets seldom reduce, only as a % of GDP.

Donald Trump

https://www.boards.ie/discussion/comment/119101312#Comment_119101312

Actually governments borrow by issuing debt. If the debt has a fixed (or zero) coupon then once issued, change in rates do not make any difference to the amount owed for that instrument. It would have an impact if they do need to roll it over but they are supposed to have a well managed maturity profile

marieholmfan

https://www.boards.ie/discussion/comment/119102037#Comment_119102037

How efficiently run are equivalent private sector contracts?

Pussyhands

One of the weirdest comments I see online (not boards) is the "there's no recession coming, sure there's full employment!"

There's often full employment before recessions.

I personally believe not only is a recession going to happen, but we need one. The economy is off balance imo. We have too many things not right with it. Costs are too high. Can't get staff in a lot of sectors. Housing is too expensive to allow lower wage workers to work the lower wage jobs.

CrookedJack

https://www.boards.ie/discussion/comment/119102046#Comment_119102046

You can't just invent a new definition for words, especially which you're inventing a mythical "Man on the street" and attributing the definition to him.

Words have meanings, whether you like the government or not.

Pussyhands

https://www.boards.ie/discussion/comment/119101226#Comment_119101226

Well really that would be a recession then.

If inflation is 8% and GDP is 5%. Probably not technically a recession but technicals don't matter anyways, only matters what happens in peoples pockets.

Pussyhands

https://www.boards.ie/discussion/comment/119099958#Comment_119099958

I think in normal times you could say that but these are not normal times. Your comment would be fine when people were talking about recessions in 2018 but when the economies are like they are now, makes it easier to predict.

Jerome Powell has said they're going to get inflation back at 2% and they won't stop until they do. He said there are far too many job vacancies now meaning people can job hop to get bigger wages thus driving inflation. He basically implied they are going to destroy a lot of the vacancies and how are they going to target only the vacancies? They can't. Amazon/Walmart in the US have said they hired too many people already.

Within the past year Powell has gone from Inflation is Transitory -> Inflation is more longer term -> we're going to have a soft landing -> we're going to have a softish landing and many factors are out of our control

DellyBelly

I don't know how people who engage in moaning about the economy do not commit suicide....it's booming guys..no need for the negativity

Furze99

https://www.boards.ie/discussion/comment/119101462#Comment_119101462

Ponzi like scheme in other words. If households ran their family finances the way our governments run the state finances, we'd all be in dire, dire trouble. That's why the 'we all went out and partyed' line after the celtic tiger crash was so insulting. Some people borrowed excessively whilst ordinary sane citizens underwrote their losses. If we followed the government strategy, we should all borrow way beyond our means and let the whole place collapse in due course. Someone else will always pick up the tab, won't they?

rossie1977

Most economists as of late April have Irelands GDP to grow by ~8% in 2022 and ~6% in 2023 so a recession is unlikely anytime soon.

bad2thebone

My grandparents always had a pantry and stored powdered and tinned food for the tough times.

Nothing wrong with having a few spare tins if you don't want to be lining up on a damp November's evening especially if you're an urban dweller.

Nothing worse than city supermarkets

Cdemess

https://www.boards.ie/discussion/comment/119102906#Comment_119102906

I hear Powder sells well in the boom

Pussyhands

https://www.boards.ie/discussion/comment/119101408#Comment_119101408

FFG told us the money tree doesn't exist.

They found it in the last couple of years.

Geuze

https://www.boards.ie/discussion/comment/119101462#Comment_119101462

The State did borrow massively, as bond yields were very low.

Pussyhands

https://www.boards.ie/discussion/comment/119101462#Comment_119101462

You just said it yourself, the government never pay money back. You are right, they don't. They take out new loans to pay it back.

The problem being of course the next loans they take out will be a higher rate and they DO pay interest. Up to now there are negative interest rates. In the future there won't be meaning we're going to have to cut budgets to pay that interest.

Ireland basically has struck oil with all the MNCs and their tax takes. Our country should be incredible, yet it's not because our government have squandered the money. And the good times will come to an end with our corp tax boom. We're going to have fcuk all the show for it.

We're going to look back in 10/20 years and think what the fcuk did we get out of all the billions and billions of tax we were getting that we're not getting anymore.

Geuze

https://www.ecb.europa.eu/press/blog/date/2022/html/ecb.blog220523~1f44a9e916.en.html

ECB blog post by Christine Lagarde on monetary policy normalisation.

bad2thebone

https://www.boards.ie/discussion/comment/119102930#Comment_119102930

The aul charly lol my grandmother used to grow a heritage lettuce in her vegetable patch, lets just say she grew a heirloom variety and it was dynamite.... not sure if it's still available....she said it was like being in a heavenly place. Bless her she was a legend...

timmyntc

https://www.boards.ie/discussion/comment/119102956#Comment_119102956

They did, unfortunately for the wrong reasons. Billions borrowed at 0% but used to pay current expenditure rather than capital expenditure.

https://www.boards.ie/discussion/comment/119102960#Comment_119102960

The way it should be done is to borrow during recession (to stimulate growth & prices are generally cheaper) and then raise taxes and cut back spending during boom times (to save for next bust). We have done the opposite and tried to inflate the bubble and then act surprised when it bursts and we have so far to fall.

Currently Irish economy is not sustainable, at record low unemployment businesses struggling for staff, cannot recruit from abroad due to accommodation shortages, cannot build enough due to materials inflation/shortages and labour shortages, and we are sleepwalking into an energy crisis. Fun times ahead!

Dante

https://www.boards.ie/discussion/comment/119101312#Comment_119101312

Yeah I really didn't understand this logic either tbh. David McWilliams was a big champion of this approach but he never properly addressed the obvious reprecussions of it. His solution to the resulting inflation was to simply turn off the money machines. If only things were that simple...

Pussyhands

https://www.boards.ie/discussion/comment/119103103#Comment_119103103

David Mc the hack!

He's made a career out of being right once.

Look what he was saying 3 years ago. He was saying that commercial property market was in a bubble, it would pop and all the Irish pension funds would be left bagholding thus with massive losses. We've had covid and a massive work from home push and there's been no pop!

He was also telling people last year to stay out of the property market and not to buy yet.

https://twitter.com/davidmcw/status/1117753424626503682