Economic recovery: are we fooling ourselves?

Dinarius · 14-07-2019 1:07pm #1

The solution to the economic meltdown in 2007/08 has been to render the world’s economy awash with cheap money - “quantitative easing” on an industrial scale.

I read in yesterday’s Irish Times that we now owe €44,365 for every man, woman and child in the state. At the height of the mess in 2007, we owed €10,667 per person. The debt has increased more than four-fold.

While our debt to GDP ratio isn’t the worst by any means - Japan’s is off the scale - we are now truly awash with debt.

In 2008, the financial system had about 7% of interest rate downside to defuse the situation. With interest rates at virtually zero, it has used up all that downside, while allowing debt to increase fourfold.

So, in the event of another crash, there is no % rate room to manoeuvre. As I see it, the only solution would be to make debt inter-generational. You can’t make it any cheaper to finance. So, you have to allow people far longer to pay it back. Or is there another way?

Do we have our collective head in the sand?

D.

[Deleted User] · 14-07-2019 1:11pm

Dinarius wrote: »

Do we have our collective head in the sand?

Not the average Joe, we're largely at the whim of the powerbrokers.

Fann Linn · 14-07-2019 1:15pm

[Deleted User] wrote: »

Not the average Joe, we're largely at the whim of the powerbrokers.

Exactly. The economic think tank which was set up exactly for this scenario so as to advise Govt are being constantly ignored. And then you have some on here saying FG are responsible with the nation's finances.

Harry Palmr · 14-07-2019 1:21pm

Interestingly the Irish are champion savers despite there being no real logic to it if you're looking for a return. The national debt is about 210 billion the amount estimated to be in standard deposit accounts is about 100bn.

Dinarius · 14-07-2019 1:27pm

It was only last November that Pascal found €3bn down the back of a sofa (it was a corporation tax windfall) and gave it to the HSE. The HSE are already over budget this year. Will they be looking for what they got last year and some? Of course they will.

I’ve been a self-employed, sole-trader for 35 years. So, never knowing where next month’s cheque is coming from has made me extremely debt-averse. As a result, the financial behaviour of our political and economic masters leaves me bemused.

When the history (political and financial) of the last twenty five years is written, I think that the sudden and very costly expansion of the EU to the east (at the behest of the Franco/German alliance, and one of the main reasons for Brexit) will be criticised.

D.

branie2 · 14-07-2019 1:55pm

I don't think so

ToddyDoody · 14-07-2019 2:01pm

If there's any consolation in this, it's that you can vote FF in again but don't think they'll be able to buy elections like they did previously with that level of debt now present.

Not that I'm anti FF or anything.

XsApollo · 14-07-2019 2:04pm

This country is loaded for the population we have.
We could be one of the best in the world.
But the government chooses to throw the money away on social welfare.
Can’t reform the HSE or any other public service in this country because everybody goes on strike and all they want is more more more.
So they are all money pits.
It’s a bloody joke of a place.
No accountability for the countries accounts and spending, or on the job performance by people working for the state.

I dunno how Any public service can be reformed or streamlined for the better of the people paying for it , when the people working in it won’t let it happen.

The country costs more to run than its taking in,
Nothing to be done about it except make it less expensive to run, except nobody will let it happen.
Bloody madness.

rossie1977 · 14-07-2019 2:14pm

Well unemployment has gone from 16% in 2012 to 4% in July 2019, first budget surplus last year in a decade and economic growth is predicted to be over 8% this year. Using traditional economic methods Ireland is close to a boom right now. If this was the US and a Republican government the media and pundits online and on radio would be calling the president the greatest ever..

But yes the underlying factors tell a different story. The bank debt accrued during economic crash of late 00s will hang over this country for generations to come. We basically sold out the financial solvency of this country to save the EU because if the Irish banks had been allowed fail banks in Italy, Spain, Greece, Portugal would have fallen and the whole thing would have collapsed like a stacks of cards.

We physically burn €100 of borrowed money from the ECB every second.

friendlyfun · 14-07-2019 2:26pm

Ye

XsApollo wrote: »

This country is loaded for the population we have.
We could be one of the best in the world.
But the government chooses to throw the money away on social welfare.
Can’t reform the HSE or any other public service in this country because everybody goes on strike and all they want is more more more.
So they are all money pits.
It’s a bloody joke of a place.
No accountability for the countries accounts and spending, or on the job performance by people working for the state.

I dunno how Any public service can be reformed or streamlined for the better of the people paying for it , when the people working in it won’t let it happen.

The country costs more to run than its taking in,
Nothing to be done about it except make it less expensive to run, except nobody will let it happen.
Bloody madness.[/QUOTE

How we protect our must vulnerable by cutting back on social welfare?

pearcider · 14-07-2019 2:28pm

The next recession we will be screwed again. We haven’t paid down a penny of the 200 billion we owe and bond spreads would only have to moderately spike again and it would be call in the imf time. Most of the taxes the government collect are extremely vulnerable to a downturn too much like 2009 with stamp duty. Unfortunately the capability to bail the whole world out again might not be there this time. The problem with 2008 crisis was the debt. As any household knows the solution to too much debt is not more debt. My opinion is most of the growth since 2009 has been fake and will vanish in a downturn.

There are really only two ways out of this. Global default, liquidate the debt and enter a Great Depression for a generation. Which would probably lead to war considering the pathetic nature of global politics and how the major powers are still all essentially at Cold War with each other like China v US or Russia v EU. Or keep printing until the currencies are all destroyed. Which will leave to societal breakdown in most countries. That’s pretty much it. A rock and hard place. Only have ourselves to blame. Elect monkeys and get a pile of monkey **** in return.

dxhound2005 · 14-07-2019 2:33pm

Capitalism depends on debt, and inflation. If there was no debt and no inflation, everything would collapse. Every country in the world owes vast sums of money to each other, and worrying about it is just stupid.

Every man woman and child in the country can afford to spend €1,500 of earned income (or social welfare) on drink every year, so things can't be that bad. And there are six times as many private sector workers as public sector, so they must be responsible for more of the bad stuff.

Edgware · 14-07-2019 2:36pm

dxhound2005 wrote: »

Capitalism depends on debt, and inflation. If there was no debt and no inflation, everything would collapse. Every country in the world owes vast sums of money to each other, and worrying about it is just stupid.

Every man woman and child in the country can afford to spend €1,500 of earned income (or social welfare) on drink every year, so things can't be that bad. And there are six times as many private sector workers as public sector, so they must be responsible for more of the bad stuff.

It would be a lot worse if we couldnt afford the drink

Hobosan · 14-07-2019 2:49pm

Massive strides are being made in science and engineering, most of it to little fanfair. We should theoretically be cautiously optimistic.

I personally find it difficult to shake the feeling that many people in positions of power are complete megalomaniacs, and will turn this scientific and engineering capability against people in sadistic ways. That's just how things generally unfold.

Hopefully the prospect of wiping out distant lifeforms in other solar systems will give those in positions of power a new perspective which will diminish the need to play war against other humans.

Ashleigh1986 · 14-07-2019 2:50pm

In today's Ireland there is .... A Dublin economy and than cork/galway/ Limerick after that hardly an improvement anywhere .
This sums it up
Dublin has over 120 tower cranes building away .
Galway has 2 .
What hotels in Dublin are getting for a room over a year is nearly double what hotels in galway are getting .

Tammy! · 14-07-2019 2:58pm

We were always fooling ourselves.

Someone once told me the Celtic Tiger was like a few pigs sitting at a table and the table was heaped with food.

The poor people at the side got loads of crumbs because there was so much food on the table it was falling off. During the crash there was still plenty of food for the pigs but the crumbs were much smaller.

Tokyo · 14-07-2019 3:10pm

Moved from AH > CA

suicide_circus · 14-07-2019 5:07pm

JeanL wrote: »

We were always fooling ourselves.

Someone once told me the Celtic Tiger was like a few pigs sitting at a table and the table was heaped with food.

The poor people at the side got loads of crumbs because there was so much food on the table it was falling off. During the crash there was still plenty of food for the pigs but the crumbs were much smaller.

thats some top level economic analysis right there

Tammy! · 14-07-2019 5:26pm

suicide_circus wrote: »

thats some top level economic analysis right there

I like it though

ToddyDoody · 14-07-2019 5:58pm

JeanL wrote: »

I like it though

Very suitable for kids.

Sonny noggs · 14-07-2019 8:11pm

ToddyDoody wrote: »

Very suitable for kids.

Especially if the kids like fairy tales.

JeanL, here is a clue to where tax take goes:

https://whereyourmoneygoes.gov.ie/en/

More than 25% to social protection, almost 15% on education, more than 20% on health, so yeah, the poor get crumbs...

Tammy! · 14-07-2019 8:38pm

ToddyDoody wrote: »

Very suitable for kids.

Adults are just obsolete children.

Sonny noggs wrote: »

Especially if the kids like fairy tales.

JeanL, here is a clue to where tax take goes:

https://whereyourmoneygoes.gov.ie/en/

More than 25% to social protection, almost 15% on education, more than 20% on health, so yeah, the poor get crumbs...

Yeah and don't forget schemes like the SSIA. One euro for every four invested. Doubt those on social protection availed of it mind.

ToddyDoody · 14-07-2019 8:38pm

Sonny noggs wrote: »

Especially if the kids like fairy tales.

JeanL, here is a clue to where tax take goes:

https://whereyourmoneygoes.gov.ie/en/

More than 25% to social protection, almost 15% on education, more than 20% on health, so yeah, the poor get crumbs...

Excellent webpage.

1) Social protection
2) Health
3) Debt Servicing
4) Education

Would a minister for debt servicing be a good idea? We have ministers for the rest. Maybe call it finance and debt servicing. I'd propose that tomorrow if I was allowed.

Sonny noggs · 14-07-2019 8:53pm

JeanL wrote: »

Adults are just obsolete children.

Yeah and don't forget schemes like the SSIA. One euro for every four invested. Doubt those on social protection availed of it mind.

A scheme from more than a decade ago, is that the best you can come up with? 1.13 million adults took part. The total Irish population in 2001 was 3.8 million, so approx 3 million adults. So more than 1 in 3 adults had an SSIA. Hardly aimed at the 1%

Sonny noggs · 14-07-2019 9:00pm

ToddyDoody wrote: »

Excellent webpage.

1) Social protection
2) Health
3) Debt Servicing
4) Education

Would a minister for debt servicing be a good idea? We have ministers for the rest. Maybe call it finance and debt servicing. I'd propose that tomorrow if I was allowed.

I see where you are going but the NTMA are responsible for issuing bonds and managing / redeeming / buying back / replacing them to try to get the best interest rates and seem to be well regarded. It is an agency of the Dept of Finance.

Still waters · 14-07-2019 9:06pm

dxhound2005 wrote: »

Capitalism depends on debt, and inflation. If there was no debt and no inflation, everything would collapse. Every country in the world owes vast sums of money to each other, and worrying about it is just stupid.

Every man woman and child in the country can afford to spend €1,500 of earned income (or social welfare) on drink every year, so things can't be that bad. And there are six times as many private sector workers as public sector, so they must be responsible for more of the bad stuff.

If the €3.30 on average that i spend on alcohol every day is what leads to recession i should probably give up morning coffee as well

NIMAN · 14-07-2019 9:10pm

When the initial figures say personal debt has increased 4-fold since 2007, I am assuming that is because they are lumbering all of the citizens with the countries debt?

Because I constantly hear about how the population have been saving hard and paying down their debt since the crash, so if thats true then we can't be getting into more debt unless its something out of our control.

[Deleted User] · 15-07-2019 9:00am

rossie1977 wrote: »

We physically burn €100 of borrowed money from the ECB every second.

Where's this happening? Can anyone go and watch?

Geuze · 15-07-2019 2:41pm

NIMAN wrote: »

When the initial figures say personal debt has increased 4-fold since 2007, I am assuming that is because they are lumbering all of the citizens with the countries debt?

Because I constantly hear about how the population have been saving hard and paying down their debt since the crash, so if thats true then we can't be getting into more debt unless its something out of our control.

The public debt = Govt debt has risen rapidly.

Private debt = household debt has not.

Geuze · 15-07-2019 2:42pm

Deleted User wrote: »

Where's this happening? Can anyone go and watch?

The Govt does not borrow from the ECB.

That is illegal, and does not happen.

Yes, the ECB has been until recently engaged in large scale QE, like the Fed and BoE before it.

howamidifferent · 15-07-2019 4:27pm

Geuze wrote: »

The Govt does not borrow from the ECB.

That is illegal, and does not happen.

Yes, the ECB has been until recently engaged in large scale QE, like the Fed and BoE before it.

But we did with the promissary notes which we are now paying back by destroying real money.

Economic recovery: are we fooling ourselves?

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