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11-04-2020, 10:34   #61
Akrasia
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Originally Posted by Wanderer78 View Post
The last crash had little or nothing to do with balanced budgets, surpluses and deficits, it was a fundamental global banking problem, of which we haven't fixed
Yep, the global banking system has been getting more and more messed up with debt piling up and financial instruments being created and implemented with wildly inconsistent regulatory oversight such that there might as well not be any oversight at all

The global pandemic is going to cost the world tens of trillions of dollars in lost economic output and further trillions in income supports and bailouts to individuals and corporations

Issuing government bonds won’t work because nobody has enough money to buy those bonds without simply creating it out of thin air through yet another financial instrument

The only solution is for central banks to print money ( quantitative easing) to cover the costs of the bailouts and income supports, and when this is over, a global debt jubilee should be announced. This should clear the national debt of every country in the world back to zero. If done carefully the QE should not have a big impact on inflation because the crisis is inherently deflationary, the money supply is shrinking due to the shock to both producers and consumers at the same time

It would totally screw over a few billionaires and trillionaires,and financial institutions and hedge funds who trade n government debt and the banking system would need to be reconstructed but ultimately there is and has been an awful lot of corruption in the financial system for a very long time now and it’s crippling for a lot of the world’s poorest nations, who will also be devastated by the current medical crisis as well as other natural disasters related to environmental degradation and climate change

Our global priorities will need to change.

I’m talking about erasing most sovereign debt, not private debt, but there would need to be a very serious conversation had about wiping out unsecured debt for private individuals also.

This could become a massive transfer of wealth into the laps of land and property owners as their assets would increase in value while their liabilities would dissolve away, so there would need to be a way to balance so that secured debt is not just all inflated away

Things like student loans, credit cards, personal loans etc. should also all just go away. You say you’re prudent and have no personal debt so why should spendthrift Magee down the road get rewarded?? Sh1t happens,

I personally have zero unsecured debt, So I’m not suggesting this because I want to be bailed out personally

There would of course be loads and loads of fine print and exceptions and hard cases to work out, and the elites would try to manipulate everything into their own best interests but If we don’t do something like this, there is the very real potential for a very bleak decade to come with mass starvation and mass migration triggering social unrest, wars, the further rise of right wing populism, or left wing totalitarian regimes, at home and abroad.....
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12-04-2020, 17:37   #62
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The only solution is for central banks to print money ( quantitative easing) to cover the costs of the bailouts and income supports, and when this is over, a global debt jubilee should be announced. This should clear the national debt of every country in the world back to zero. If done carefully the QE should not have a big impact on inflation because the crisis is inherently deflationary, the money supply is shrinking due to the shock to both producers and consumers at the same time
Quantative Easing is an ongoing experiment from the last financial crisis onwards. Sure, they managed to keep inflation down up until now but now they're going to reach a new level. We've never been here before - nobody knows how this will go. It's quite possible that they won't be able to keep inflation under control.

This is a time for hard money - Gold, Silver and Bitcoin.
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12-04-2020, 18:25   #63
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As described above, we are in a deflationary scenario. How do you think unmanageable inflation is going to arise?
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12-04-2020, 18:48   #64
makeorbrake
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As described above, we are in a deflationary scenario. How do you think unmanageable inflation is going to arise?
At this very moment, we are in a deflationary scenario. Oncemoney printer goes brrr, one of the potential outcomes is a wave of inflation. Of course, it will depend on how this money is dispersed. However, its naive to assume that this can be managed without damage along the way.

This experiment started in 2008 - and whilst inflation was kept down post financial crisis, we're talking about a shed tonne more magic money now. If it was this easy and there are no consequences, how come we've been paying taxes all these years? Why can't that money be printed off for us? I think we all know the answer.

IF (and its a big IF) they manage to keep inflation under control, the can is just being kicked down the road - and this nettle is going to have to be grasped and dealt with ultimately.
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12-04-2020, 23:52   #65
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The only solution is for central banks to print money ( quantitative easing) to cover the costs of the bailouts and income supports, and when this is over, a global debt jubilee should be announced. This should clear the national debt of every country in the world back to zero.
What about the savers in Ireland who own Govt debt?

Are their savings to be wiped out?
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12-04-2020, 23:54   #66
Geuze
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Originally Posted by Akrasia View Post
The only solution is for central banks to print money ( quantitative easing) to cover the costs of the bailouts and income supports, and when this is over, a global debt jubilee should be announced. This should clear the national debt of every country in the world back to zero. If done carefully the QE should not have a big impact on inflation because the crisis is inherently deflationary, the money supply is shrinking due to the shock to both producers and consumers at the same time
..
You seem to suggest that the ECB should start QE, yet it already started QE in 2014?

It announced a major new program of QE last month.

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


Pandemic emergency purchase programme (PEPP)

The ECB’s pandemic emergency purchase programme (PEPP) is a non-standard monetary policy measure initiated in March 2020 to counter the serious risks to the monetary policy transmission mechanism and the outlook for the euro area posed by the coronavirus (COVID-19) outbreak.

The PEPP is a temporary asset purchase programme of private and public sector securities, which has an overall envelope of €750 billion. All asset categories eligible under the existing asset purchase programme (APP) are also eligible under the new programme. Under the PEPP, a waiver of the eligibility requirements will be granted for securities issued by the Greek Government. In addition, non-financial commercial paper is now eligible for purchases both under the PEPP and the corporate sector purchase programme (CSPP). The residual maturity of public sector securities eligible for purchase under the PEPP ranges from 70 days up to 30 years and 364 days.

For the purchases of public sector securities under the PEPP, the benchmark allocation across jurisdictions will be the capital key of the national central banks. At the same time, purchases will be conducted in a flexible manner. This allows for fluctuations in the distribution of purchase flows over time, across asset classes and among jurisdictions.

The Governing Council will terminate net asset purchases under the PEPP once it judges that the COVID-19 crisis phase is over, but in any case not before the end of 2020.
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13-04-2020, 00:01   #67
Amirani
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All debt should be wiped after this at the end of the day it is only figures on a computer screen
Any money you have lodged in a bank is debt. Happy for that to just be wiped?
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13-04-2020, 00:36   #68
Akrasia
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What about the savers in Ireland who own Govt debt?

Are their savings to be wiped out?
How many citizens of Ireland own government bonds?

We could put in an exception to refund those few non institutional investors
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13-04-2020, 00:54   #69
Geuze
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How many citizens of Ireland own government bonds?

We could put in an exception to refund those few non institutional investors
All credit union savers?

I suspect nearly all CU own Govt bonds?

Then there are all the workers with pension funds?

Then there are all the people with managed funds that own bonds in the funds.

I'd make an estimate that 2m people have some indirect ownership of Govt bonds???


Then you have all the savers in An Post savings instruments.

These are part of the Govt debt.

They would have to wiped also.

Prize Bonds, Savings Bonds, Savings Certs
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13-04-2020, 11:42   #70
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How many citizens of Ireland own government bonds?

We could put in an exception to refund those few non institutional investors
Do you or does anyone you know have a pension?
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14-04-2020, 01:05   #71
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Just to be clear on this, is it right to say that the interest charged on a Government bond can never be changed or altered no matter how many times that bond is bought and sold?

I assume the answer is the interest remains fixed.
If that is the case why are government bonds bought and sold??
Is the interest paid on an annual or monthly basis or is it only payable on maturity date of the bond?
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14-04-2020, 10:36   #72
Geuze
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Just to be clear on this, is it right to say that the interest charged on a Government bond can never be changed or altered no matter how many times that bond is bought and sold?

I assume the answer is the interest remains fixed.
If that is the case why are government bonds bought and sold??
Is the interest paid on an annual or monthly basis or is it only payable on maturity date of the bond?
Most Govt bonds are fixed-rate bonds.

By that it is meant that the coupon is fixed.

So the Govt issues a 100 euro bond at 0.20%, and it will pay 0.20 interest each year, that is fixed.

See this bond:

https://www.ntma.ie/news/ntma-raises...benchmark-bond

https://www.ntma.ie/uploads/general/...-TS_070420.pdf

Note that the coupon is a fixed 0.20% - it is in the title of the bond.

Now, the bond actual sold at 99.706, so the initial yield is 0.242%.

So the Govt effectively borrowed at a cost of 0.242%.

It borrowed 99.706, will repay 100, and will pay 0.20 interest each year.
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14-04-2020, 10:38   #73
Geuze
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Then, after that, the bond trades in the secondary market.

Imagine general interest rates fall.

The bond pays a fixed 0.20%, so becomes more attractive.

Its price rises, say to 103 / 104 / 105.

Its yield falls, as now the owner will face a capital loss.

So the yield-to-maturity changes every day as the bond price changes every day.

Do not confuse the initial fixed coupon rate with the YTM.
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14-04-2020, 10:38   #74
 
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Originally Posted by Geuze View Post
Most Govt bonds are fixed-rate bonds.

By that it is meant that the coupon is fixed.

So the Govt issues a 100 euro bond at 0.20%, and it will pay 0.20 interest each year, that is fixed.

See this bond:

https://www.ntma.ie/news/ntma-raises...benchmark-bond

https://www.ntma.ie/uploads/general/...-TS_070420.pdf

Note that the coupon is a fixed 0.20% - it is in the title of the bond.

Now, the bond actual sold at 99.706, so the initial yield is 0.242%.

So the Govt effectively borrowed at a cost of 0.242%.

It borrowed 99.706, will repay 100, and will pay 0.20 interest each year.
Who (or how?) decides what price the bond sells at?
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14-04-2020, 10:41   #75
Geuze
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Originally Posted by efanton View Post
Just to be clear on this, is it right to say that the interest charged on a Government bond can never be changed or altered no matter how many times that bond is bought and sold?

I assume the answer is the interest remains fixed.
If that is the case why are government bonds bought and sold??
Is the interest paid on an annual or monthly basis or is it only payable on maturity date of the bond?
https://www.ntma.ie/business-areas/f...ent-securities

There is a list of all existing bonds here, in a PDF.

https://www.ntma.ie/uploads/general/...2020-04-09.pdf

You can see the coupon rates.
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