The Government borrowing, a partial solution‏

enfield · 09-11-2010 01:31PM #1

I was walking the dog yesterday when a thought struck me (walks are great for thinking) and I could not find any reasons why this idea would not work. here it is. The Government are borrowing at 8% and the Irish Banks are offering deposit holders about 3.5%, so why don't the Irish people who have a few bob in the Bank, lend it to the Government instead, at, say, 6%. Everyones a winner, I think?. What am missing?

beeno67 · 09-11-2010 01:35PM

enfield wrote: »

I was walking the dog yesterday when a thought struck me (walks are great for thinking) and I could not find any reasons why this idea would not work. here it is. The Government are borrowing at 8% and the Irish Banks are offering deposit holders about 3.5%, so why don't the Irish people who have a few bob in the Bank, lend it to the Government instead, at, say, 6%. Everyones a winner, I think?. What am missing?

First of all the government is not borrowing at 8%. If they wanted to borrow, that is the price they would have to pay but as this is too high they are not borrowing. Hence the risk of the country going bankrupt.

Secondly the government is borrowing from the people as you suggest. It is called the "National Solidarity Bond"
http://www.statesavings.ie/products/Pages/NationalSolidarityBond.aspx

gmale · 09-11-2010 01:38PM

Are they not trying that with the solidarity fund which is offering more but people dont seem to be too willing to do it. Why would I lend money to the Irish govt when a bank wont? I know the track record of this govt, I dont trust them!

I like the idea, it would be akin the SSIA (25% back after 5 years) but maybe give 10% back after 20 years?

The Government borrowing, a partial solution‏

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