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What's the point in saving anymore?

124

Comments

  • #92
    KyussBishop
    Closed Accounts Posts: 5,797 ✭✭✭KyussBishop


    johnnyskeleton wrote: »
    A government that supplies everyone with a job even if there is no work for them to do was a significant feature of the Soviet Union. That's what im referring to. If you want to use the us and uk as real world examples of what you propose, they are not. They carried out a lot of qe but it hasnt solved their employment problems and has devalued their currency, causing a higher level of inflation than the eurozone.
    Communists did not provide a job guarantee, i.e. temporary public jobs, in order to manage inflation; that is an analogy designed to distract from arguing against the actual job guarantee policy itself.
    johnnyskeleton wrote: »
    I'm not ignoring them but there's simply too much speculative stuff in them to go through point by point. But all of these points are based on a crazy scheme to employ everyone from free eu money without causing inflation or any other negative effects. You'd think that if this could be done it would be done somewhere in the world, right? I mean, my solution where they buy some magic beans and it solves all their problems would also work and i can't understand why they are not doing that.
    Right, so paraphrasing, you're not bothered replying to my actual arguments, so you're going to straw-man them and pour ridicule on them instead.


  • #93
    the groutch
    Closed Accounts Posts: 16,096 ✭✭✭✭the groutch


    still can't get my head around why people would oppose what is essentially a wealth tax.


  • #94
    RichardAnd
    Registered Users, Registered Users 2 Posts: 4,121 ✭✭✭RichardAnd


    the groutch wrote: »
    still can't get my head around why people would oppose what is essentially a wealth tax.


    Because they have wealth that might be taxed?


  • #95
    DarkDusk
    Registered Users, Registered Users 2 Posts: 914 ✭✭✭DarkDusk


    Hi guys,
    I briefly had a look through this thread to get an idea of what has been discussed so far.

    In regards to the alternative economy the user Bluewolf first brought up, this is called "Austrian" economics and has a different viewpoint on the way our financial, economical and social world works. Austrian economists, because of the way they analyse the economy, foresaw the stock bubble in 2000 and the property bubble in 07/08. The majority of Keynesian economists did not see these bubbles coming. I just wanted to get that out there first.

    About "saving vs spending": if you go back to the beginning of a company, you know that that company will need capital in order to operate. There are many ways the company could get capital. 2 common ways are: the owner using his own money or taking a loan out from a bank. In both instances, savings are required. The owner needs to save his money before investing it in his own business. In the other case, savers need to save with a bank, so the bank can use their savings to loan money (or invest in) to businesses. It appears that savings are the backbone of all businesses, and therefore our economy. If there wasn't savings, there would be currently no businesses in existence.

    I agree that Austrian economics does not work in every respect, but it sure would work better than the Keynesian economics we have now.


  • #96
    Duggys Housemate
    Closed Accounts Posts: 3,298 ✭✭✭Duggys Housemate


    DarkDusk wrote: »
    Hi guys,
    I briefly had a look through this thread to get an idea of what has been discussed so far.

    In regards to the alternative economy the user Bluewolf first brought up, this is called "Austrian" economics and has a different viewpoint on the way our financial, economical and social world works. Austrian economists, because of the way they analyse the economy, foresaw the stock bubble in 2000 and the property bubble in 07/08. The majority of Keynesian economists did not see these bubbles coming. I just wanted to get that out there first.

    About "saving vs spending": if you go back to the beginning of a company, you know that that company will need capital in order to operate. There are many ways the company could get capital. 2 common ways are: the owner using his own money or taking a loan out from a bank. In both instances, savings are required. The owner needs to save his money before investing it in his own business. In the other case, savers need to save with a bank, so the bank can use their savings to loan money (or invest in) to businesses. It appears that savings are the backbone of all businesses, and therefore our economy. If there wasn't savings, there would be currently no businesses in existence.

    I agree that Austrian economics does not work in every respect, but it sure would work better than the Keynesian economics we have now.


    Lord God Ireland doesn't have Keynesianism, it has the opposite. Keynes would increase deficits during a bust and have surpluses during a boom.


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  • #97
    Duggys Housemate
    Closed Accounts Posts: 3,298 ✭✭✭Duggys Housemate


    Once again - Ireland is doing the exact opposite of Kenysian economics.


  • #98
    johnnyskeleton
    Moderators, Entertainment Moderators, Politics Moderators Posts: 14,568 Mod ✭✭✭✭johnnyskeleton


    Duggys Housemate wrote: »
    Once again - Ireland is doing the exact opposite of Kenysian economics.

    Well, we are doing the bit of Keynesian economics that suits our governments political ends ie run a deficit during a recession and ignoring the bits that don't suit, such as running a surplus during a boom, borrowing only to provide short term stimulus etc.


  • #99
    johnnyskeleton
    Moderators, Entertainment Moderators, Politics Moderators Posts: 14,568 Mod ✭✭✭✭johnnyskeleton


    KyussBishop wrote: »
    Communists did not provide a job guarantee, i.e. temporary public jobs, in order to manage inflation; that is an analogy designed to distract from arguing against the actual job guarantee policy itself.

    A rose by any other name...I see nothing wrong with a stimulus investment which creates some temporary jobs but such is heavily caveated. It should not be universal. It should not be a guarantee. It should be we'll timed. It should be accountable and good value for money. It should be project based rather than simply make work, and it should only come from funds actually available.
    Right, so paraphrasing, you're not bothered replying to my actual arguments, so you're going to straw-man them and pour ridicule on them instead.

    I have already gone through your arguments point by point and I believe my summary of your view is accurate - a large scale jobs stimulus funded by the eu is the only thing that will stop economic destruction and babies dying.

    Well, economic contraction is the inevitable result of a bubble gone bad mixed with government mismanagement, and the only way to fix the economy is through recession, which is the economy's way of healing itself. When the recession has done its work ie weeded out mismanagement, at that point a stimulus can be put in place. But wanting the eu to solve all our problems is not an economic view, it's wishful thinking.

    Maybe the Irish government can play euromillions and use the jackpot to do the jobs stimulus?


  • #100
    DarkDusk
    Registered Users, Registered Users 2 Posts: 914 ✭✭✭DarkDusk


    I never said Ireland had a Keynesian economy. Ireland cannot have a Keynesian economy because we do not have total control over our currency.

    Obviously, our economy is more Keynesian than Austrian.


  • #101
    KyussBishop
    Closed Accounts Posts: 5,797 ✭✭✭KyussBishop


    DarkDusk wrote: »
    Hi guys,
    I briefly had a look through this thread to get an idea of what has been discussed so far.

    In regards to the alternative economy the user Bluewolf first brought up, this is called "Austrian" economics and has a different viewpoint on the way our financial, economical and social world works. Austrian economists, because of the way they analyse the economy, foresaw the stock bubble in 2000 and the property bubble in 07/08. The majority of Keynesian economists did not see these bubbles coming. I just wanted to get that out there first.
    True regarding neoclassical economists etc., however Post-Keynesian economists did predict it, and the only person to not only predict with some accuracy but also to model this current crisis before it happened, was Steve Keen (a post-Keynesian economist). A lot of Austrian economists have since harmed their reputations with false predictions of hyperinflation.
    DarkDusk wrote: »
    About "saving vs spending": if you go back to the beginning of a company, you know that that company will need capital in order to operate. There are many ways the company could get capital. 2 common ways are: the owner using his own money or taking a loan out from a bank. In both instances, savings are required. The owner needs to save his money before investing it in his own business. In the other case, savers need to save with a bank, so the bank can use their savings to loan money (or invest in) to businesses. It appears that savings are the backbone of all businesses, and therefore our economy. If there wasn't savings, there would be currently no businesses in existence.

    I agree that Austrian economics does not work in every respect, but it sure would work better than the Keynesian economics we have now.
    The problem with this, is that government does not work like a company or household; when considering the entire monetary system (going right up to the EU and the ability to create money), investments come first, not savings, through government spending fueled by money creation.

    With the ability to use created money for spending, investment must come first (such as investing it in labour in the public services), before it goes into savings (workers bank accounts), and the rest beyond that is just pre-existing money recirculating in the economy.


    As I explained in a previous post as well, loans from banks are extended before bank reserves are shored up, so loans lead both reserves and the money supply.

    This is easiest to understand if you consider private banks being replaced with a public bank: A public bank could loan money out through money creation, without needing any reserves; it would be constrained only by concerns of excess credit/debt in the economy, and by inflation.


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  • #102
    KyussBishop
    Closed Accounts Posts: 5,797 ✭✭✭KyussBishop


    Duggys Housemate wrote: »
    Lord God Ireland doesn't have Keynesianism, it has the opposite. Keynes would increase deficits during a bust and have surpluses during a boom.
    Agree, except Keynes applied that saying to a gold standard system (limited money supply), not a fiat money system; don't need to run a surplus in a fiat system, due to the ability to fund things with created money.


    The only thing that makes sense in an economy, is maximizing productivity (having full employment), while managing inflation; if government runs a surplus, it reduces employment/productivity by removing money from the wider economy, which is just a waste of labour/resource potential (removing money from the economy like that, is mainly useful for managing inflation).

    When that saved up money is spent in the future, you can't unleash extra productivity beyond full employment; full employment sets the ceiling for productivity.

    So, when you think of it in terms of productivity, government surplus/savings don't make sense anymore, in a fiat currency system.


  • #103
    KyussBishop
    Closed Accounts Posts: 5,797 ✭✭✭KyussBishop


    johnnyskeleton wrote: »
    A rose by any other name...I see nothing wrong with a stimulus investment which creates some temporary jobs but such is heavily caveated. It should not be universal. It should not be a guarantee. It should be we'll timed. It should be accountable and good value for money.
    And where, beyond the guarantee part, did I say otherwise?
    johnnyskeleton wrote: »
    It should be project based rather than simply make work, and it should only come from funds actually available.
    A government with control over its own currency (which we do not but the EU as a whole does), has an unlimited availability of funds; what it is limited by, is the potential for inflation.

    These projects should be funded, with the primary limit being the potential for inflation.
    johnnyskeleton wrote: »
    I have already gone through your arguments point by point and I believe my summary of your view is accurate - a large scale jobs stimulus funded by the eu is the only thing that will stop economic destruction and babies dying.

    Well, economic contraction is the inevitable result of a bubble gone bad mixed with government mismanagement, and the only way to fix the economy is through recession, which is the economy's way of healing itself. When the recession has done its work ie weeded out mismanagement, at that point a stimulus can be put in place. But wanting the eu to solve all our problems is not an economic view, it's wishful thinking.

    Maybe the Irish government can play euromillions and use the jackpot to do the jobs stimulus?
    I've already told you your previous summaries are inaccurate; anything other than addressing my actual arguments, is an attempt to straw-man.

    I've explained precisely in my previous posts, how the program and funding would work, and you've made it clear through selective replies, ignoring my arguments, and straw-manning, that you have no interest in replying to my actual arguments, just in making up false ones for you to knock down; you're engaging in knowingly dishonest arguments, with I would judge, no interest in actual discussion.


  • #104
    SupaNova2
    Registered Users, Registered Users 2 Posts: 515 ✭✭✭SupaNova2


    KyussBishop wrote: »
    True regarding neoclassical economists etc., however Post-Keynesian economists did predict it, and the only person to not only predict with some accuracy but also to model this current crisis before it happened, was Steve Keen (a post-Keynesian economist). A lot of Austrian economists have since harmed their reputations with false predictions of hyperinflation.

    Some Austrian's predicted the housing bubble as early as '01, and Schiff was considered a loon for his warnings as early as '02. He's hyperinflation call is based on existing dollar holders not buying US debt(and fed stepping in) and the dollar's loss of reserve status. Yeah his been wrong in timing, as he thought it would have happened by now, but his reasoning is sound. Though I have seen some Austrian's make the same predictions with less than solid reasoning.


  • #105
    KyussBishop
    Closed Accounts Posts: 5,797 ✭✭✭KyussBishop


    They're certainly to be credited with the predictions alright; the Austrian business cycle theory in general, is regarded as a good representation of the build-up to a crisis, but not so much what happens after.

    The US shouldn't need to actually extend the debt either unless they wanted to, as funding deficits through money creation into the future is actually less inflationary than the debt, because the interest paid on the debt holdings makes it more inflationary; the US is actually doing dollar-holders a favour by offering government bonds (i.e. debt), due to the interest paid.

    So, there's no indication that hyperinflation is going to occur anytime within the future; many of the more prominent historical instances of hyperinflation, were usually due to having to pay back debts in foreign currency, which is not a problem when debts are denominated in your own currency.


  • #106
    Duggys Housemate
    Closed Accounts Posts: 3,298 ✭✭✭Duggys Housemate


    johnnyskeleton wrote: »

    Well, we are doing the bit of Keynesian economics that suits our governments political ends ie run a deficit during a recession and ignoring the bits that don't suit, such as running a surplus during a boom, borrowing only to provide short term stimulus etc.

    Unless you think we should have taken about 18bn from the economy in one year then we are paying down the deficit.


  • #107
    johnnyskeleton
    Moderators, Entertainment Moderators, Politics Moderators Posts: 14,568 Mod ✭✭✭✭johnnyskeleton


    Duggys Housemate wrote: »

    Unless you think we should have taken about 18bn from the economy in one year then we are paying down the deficit.

    But we are still running a deficit, something which people often forget. Reducing the deficit by cuts is not the opposite of a deficit spending stimulus, it is simply decreasing the amount of the deficit spending stimulus.

    As to whether we should have had a greater cut at the start, yes, I believe we should have had greater cuts and a greater proportion of them (if not all of them) falling on the current account. That's not to say we should have sought to balance our budget from day 1, but in 2007 when the first signs of a downturn in the overall economy were arising we should have avoided additional current spending, and in 2008 we should have been decreasing spending. Instead we increased the rates of welfare etc. By 2009, when the emergency budgets were coming in, we were very slow to make cuts and they were severely resisted.


  • #108
    thebman
    Closed Accounts Posts: 10,007 ✭✭✭✭thebman


    The problem as I see it is a government stimulus is better spent on building infrastructure projects that will give a return on investment in the long run not by just giving people money to spend in shops which the state will likely not get a return on investment on as much of it leaves our economy altogether.

    We did the exact opposite, attacking capital expenditure immediately at the start of the crisis to keep paying people money we don't have which they then spend on imported goods sold by companies not in the state so less of the money even remains in our economy.


  • #109
    b4nd1t
    Registered Users, Registered Users 2 Posts: 42 ✭b4nd1t


    Going back on topic.

    Savings are what grows an economy - so to tax savings is utter lunacy!!!

    These politician's in charge, European of the Year Enda and his pals hate Ireland and hate Irish people if you judge them purely by their actions.


  • #110
    Duggys Housemate
    Closed Accounts Posts: 3,298 ✭✭✭Duggys Housemate


    johnnyskeleton wrote: »
    But we are still running a deficit, something which people often forget. Reducing the deficit by cuts is not the opposite of a deficit spending stimulus, it is simply decreasing the amount of the deficit spending stimulus.

    As to whether we should have had a greater cut at the start, yes, I believe we should have had greater cuts and a greater proportion of them (if not all of them) falling on the current account. That's not to say we should have sought to balance our budget from day 1, but in 2007 when the first signs of a downturn in the overall economy were arising we should have avoided additional current spending, and in 2008 we should have been decreasing spending. Instead we increased the rates of welfare etc. By 2009, when the emergency budgets were coming in, we were very slow to make cuts and they were severely resisted.

    Your solution is lunacy, it is the kind of economic illiteracy which caused the depression.


  • #111
    b4nd1t
    Registered Users, Registered Users 2 Posts: 42 ✭b4nd1t


    Duggys Housemate wrote: »
    Your solution is lunacy, it is the kind of economic illiteracy which caused the depression.

    I think you will find it is you who is a lunatic - perhaps you should go over to Krugman's blog and start planning the Mars invasion or the next world war to help "rebuild" the economy!


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  • #112
    Duggys Housemate
    Closed Accounts Posts: 3,298 ✭✭✭Duggys Housemate


    b4nd1t wrote: »
    I think you will find it is you who is a lunatic - perhaps you should go over to Krugman's blog and start planning the Mars invasion or the next world war to help "rebuild" the economy!

    Reported for abuse.

    And who in Gods name is Krugman? Is there a right wing blogosphere which keeps reporting this sub-literate ****e to people who don't understand basic economics, and have their bugbears like this mythical Krugman.


    Not Keynesian economics.
    Basic economics:

    If the savings rate increases consumption will decline.
    If a deficit is reduced in a recession it will accelerate the collapse in the economy, in a positive feedback loop.
    You cant get monetary hyperinflation, or even monetary inflation, if there isn't full employment.

    Basic stuff. 101.


  • #113
    Glenbhoy
    Registered Users, Registered Users 2 Posts: 1,852 ✭✭✭Glenbhoy


    thebman wrote: »
    The problem as I see it is a government stimulus is better spent on building infrastructure projects that will give a return on investment in the long run not by just giving people money to spend in shops which the state will likely not get a return on investment on as much of it leaves our economy altogether.

    We did the exact opposite, attacking capital expenditure immediately at the start of the crisis to keep paying people money we don't have which they then spend on imported goods sold by companies not in the state so less of the money even remains in our economy.

    Agree 100%, unfortunately not that many others seem too, see the scrappage scheme for example (or the lack of decent incentivisations encouraging investment in such schemes - if the govt can't fund them, let the private sector do so).


  • #114
    b4nd1t
    Registered Users, Registered Users 2 Posts: 42 ✭b4nd1t


    You clearly have no idea of even basic economics.

    The only thing you have right is that if savings increases, consumption declines. - this is GROWING an economy you tool - it is called CAPITAL FORMATION - you know - how people INVEST and start businesses!!!

    If consumption grows an economy - we should be booming with the huge deficit - but what you fail to grasp is that fiscal deficits are TAXES!

    For christ's sake kid, buy a clue!


  • #115
    SupaNova2
    Registered Users, Registered Users 2 Posts: 515 ✭✭✭SupaNova2


    Duggys Housemate wrote: »
    You cant get monetary hyperinflation, or even monetary inflation, if there isn't full employment.

    Basic stuff. 101.

    *cough* Stagflation.

    And do you have a source for the claim that hyperinflation only occurs under conditions of full employment.


  • #116
    johnnyskeleton
    Moderators, Entertainment Moderators, Politics Moderators Posts: 14,568 Mod ✭✭✭✭johnnyskeleton


    SupaNova2 wrote: »

    *cough* Stagflation.

    And do you have a source for the claim that hyperinflation only occurs under conditions of full employment.

    I think he may be confusing it with the problem that it is very hard to achieve full employment without causing inflation and the concept of the non inflationary unemployment rate.

    Of course it's possible that he takes the view that wage-inflation is the only kind of inflation, but that's a matter for another day.


  • #117
    johnnyskeleton
    Moderators, Entertainment Moderators, Politics Moderators Posts: 14,568 Mod ✭✭✭✭johnnyskeleton


    Duggys Housemate wrote: »

    Your solution is lunacy, it is the kind of economic illiteracy which caused the depression.

    My solution is to reduce the deficit, something which most western countries are striving to achieve and which I believe is a necessary thing. The rate at which the deficit is closed and the areas which are targeted form a significant area for debate, but the deficit must be closed one way or another. Yes, this can result in minimal, no, or negative growth, but that is an inevitable result of years of mismanagement of the economy and coming down from an asset bubble.

    As for this causing the depression I don't agree. It wasn't prudence which caused the depression but imprudence.


  • #118
    southsiderosie
    Closed Accounts Posts: 6,565 ✭✭✭southsiderosie


    b4nd1t wrote: »
    I think you will find it is you who is a lunatic -
    b4nd1t wrote: »
    You clearly have no idea of even basic economics.

    The only thing you have right is that if savings increases, consumption declines. - this is GROWING an economy you tool - it is called CAPITAL FORMATION - you know - how people INVEST and start businesses!!!

    If consumption grows an economy - we should be booming with the huge deficit - but what you fail to grasp is that fiscal deficits are TAXES!

    For christ's sake kid, buy a clue!

    MOD NOTE:

    Don't post in this thread again. And in the meantime, if you want to continue having access to this forum, you need to post in a civil, non-abusive manner.


  • #119
    maninasia
    Registered Users, Registered Users 2 Posts: 4,635 ✭✭✭maninasia


    Well Ireland has signed up to the Eurozone fiscal pact which requires the deficit to be under 3% per year (ironically this was supposed to be the situation before but the rules were not adhered to). Therefore the government has no choice but to reduce the deficit to this % if it is to remain a member of the Eurozone. A deficit of 3% a year is broadly in line with inflation. That doesn't solve the problem of paying interest on the deficit every year, but at least it starts to get the situation under control.

    Of course we would hope our government would reduce the deficit by their own accord instead of being told to by the big boys in Europe.


  • #120
    KyussBishop
    Closed Accounts Posts: 5,797 ✭✭✭KyussBishop


    ^^ We don't want to close the deficit, because that (in our current economic environment, no matter what you do) leads to more economic destruction; we need changes at an EU level, such as centralizing EU members debt within the EU (to get better interest rates), relaxing the fiscal pact restrictions which are choking economies, and using monetary policy to provide funding (while keeping inflation in check).


    The term 'deficit' itself (as well as surplus) is inaccurate now in a fiat system, because governments in control of their own currency (which we aren't but the EU are), do not need to pay for public spending with taxes, they can use money creation so long as inflation is kept manageable; the purpose of taxes is different, with inflation management being one of the roles.

    Government spending more than they tax is more accurately termed a 'net addition' of money into the economy (which is sorely needed right now), and taxing more than spending is a 'net removal' of money from the economy (killing demand and worsening the crisis); more neutral terms without the inaccurate negative/positive connotations of deficit/surplus.

    Net addition/removal of money from the economy isn't inherently good/bad, you have to look at the employment rate and inflation rate to determine what is needed.


    The term 'deficit' made sense in the gold standard, because government literally did have to pay for spending with taxes (due to limited money supply), so the negative connotation of deficit (that it is a bad thing), made sense then; in a fiat system the term is just inaccurate.


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  • #121
    Farmer Pudsey
    Registered Users, Registered Users 2 Posts: 6,326 ✭✭✭Farmer Pudsey


    What is the point in saving anymore

    This is the OP orginal point. In reality the government wants savers to start spending to boost the economy. They want people to either invest or to spend in services. At present they have a problem the banks need deposits and are paying more than the ECB rate and inflation for 2-3 year money. To counter this and to raise tax they have increased Dirt and will add PRSI to it so that 38% of intrest will be taken in tax.

    Also I think they are looking at the personnel Insolvency/bank repossions that will happen over the next two years. Is this why there is a rumour that the banks intent to increase lending 3-5 fold next year. As the reposses they will need buyers either cash buyers or low leveraged purchassers that can put up 20-30++ equity. The last thing they want is buyers that they are lending 90-100% value of an investment


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