Could Ireland economy collapse permanently?

Wanderer78 · 23-10-2020 9:03am

experiMental wrote: »

Irish economy will do fine if the banks will loosen the grip on it. There is a large enough population of people both in government and other semi-state institutions who are able to avert an economic shock.

Also - since at least one person in nearly every major company and large institution's Board of Directors is an accountant of some sort, they can figure out how to make money from thin air.

one of the main reasons why i advocate for public banking

23-10-2020 9:08am

If Biden wins the election, the US will drop all coverage of Corona and stop locking down businesses in blue states. We will likely have a vaccine by then too. Then they will emphasise the growing mountain of scientific papers that show corona isn't that bad. Then the economy will take off next year. We'll probably still be in lockdown reporting cases on RTE.

Wanderer78 · 23-10-2020 9:09am

Deleted User wrote: »

If Biden wins the election, the US will drop all coverage of Corona and stop locking down businesses in blue states. We will likely have a vaccine by then too. Then they will emphasise the growing mountain of scientific papers that show corona isn't that bad. Then the economy will take off next year. We'll probably still be in lockdown reporting cases on RTE.

what?

kippy · 23-10-2020 9:14am

Wanderer78 wrote: »

we really need to move on from these fears of growing debt, particularly public debt, 08 truly showed us what happens when theres an over reliance on private debt to fulfil our needs of a growing money supply, in order for our economies to function and grow, its simply far too volatile. our private debt issues are more than likely gonna resurface in the new year, if we truly want to entertain debt jubilees, we truly should be considering it in the private domain. public debt can be rolled almost indefinitely, as long as its regularly serviced, this works fine, and is far less volatile compared to private debt

The problem is this ever increaseing demand for "growth". What's wrong with a fair society with a standard of healthcare/education and housing that work for society? Rather than looking for more and more "growth".
We've a growing economy for the past X years - yet we still lack a lot.

I don't really get why you are making the points you are making as stating that private debt is worse that public debt, doesn't make unsustainable public debt the right course of action.
You are only every one pandemic/global recession away from needing to borrow more and more, what happens when you cannot borrow any more or have to pay it back.

turbbo · 23-10-2020 9:29am

Was just thinking about all the social welfare payments in Ireland this year because of lockdowns etc. and effect on local economy.
It really made me think what would we do if China didn't make everything we consume these days - clothes, computers, phones - practically everything is either made in China or consists of parts made in China. We have lost a serious amount of knowledge expertise and skill in loosing those jobs to other countries(and replacing them with social welfare here) - we still consume and we have become very dependent just like the rest of the western world. The shock will come when china is in a position to charge what we can't afford anymore. How soon that will be who knows.

growleaves · 23-10-2020 9:43am

lightspeed wrote: »

I'm concluded this based on potential impact from

1.Coronavirus global depression
2. No deal Brexit
3. Significant movement on the cards for measures to be taken by EU Commission to harmonise corporation tax.

4. Fungxit

Wanderer78 · 23-10-2020 11:14am

kippy wrote: »

The problem is this ever increaseing demand for "growth". What's wrong with a fair society with a standard of healthcare/education and housing that work for society? Rather than looking for more and more "growth".
We've a growing economy for the past X years - yet we still lack a lot.

I don't really get why you are making the points you are making as stating that private debt is worse that public debt, doesn't make unsustainable public debt the right course of action.
You are only every one pandemic/global recession away from needing to borrow more and more, what happens when you cannot borrow any more or have to pay it back.

some fair points, but unfortunately its the way we have designed our economies, largely debt based, with the majority of that in the private domain, this is ultimately causing our growing inequality issues, particularly with what this debt is being used for, mainly continual asset price inflation, this is truly unsustainable, and voters are letting their anger known, hence trump, brexit, rise of the right, and even our own radical election outcome.

we keep defaulting in regards our need for continuing the money supply, towards the private sector, and 08 showed us, this is dangerous, but we keep doing it, so thankfully, the government seen some sort of sense, during the budget, and is continuing to take on public debt, this is far safer, but does introduce its own problems.

its extremely important to remember, the act of paying down debt, in both the public or private domains, is in fact, the destruction of money, so in order for our economies to function, credit/debt must be continually created, in both sectors, but with controls, in order to do so.

central banks can never run out of money, but if an economy runs out of its ability to service its debts, both public and/or private, you significantly run out of options for your economy to function. this is what happened in 08, the bubble burst, and we ran out of our ability to service our debts, particularly in the private domain

turbbo wrote: »

Was just thinking about all the social welfare payments in Ireland this year because of lockdowns etc. and effect on local economy.
It really made me think what would we do if China didn't make everything we consume these days - clothes, computers, phones - practically everything is either made in China or consists of parts made in China. We have lost a serious amount of knowledge expertise and skill in loosing those jobs to other countries(and replacing them with social welfare here) - we still consume and we have become very dependent just like the rest of the western world. The shock will come when china is in a position to charge what we can't afford anymore. How soon that will be who knows.

we ve actually replaced most of these jobs with lower paid, more precarious employment, primarily in the retail and service sectors, this to is causing serious issues, most notably in regards property issues

CoronaBlocker · 23-10-2020 11:53am

lightspeed wrote: »

Hi

All just wondering what are people's thoughts on the risks of a permanent crash?

By permanent I mean more specifically will our economy deteriorate inthat we may be more like an eastern European country. The likes of Poland, Hungary etc dont appear to be poor like Bangladesh or the like but there is a reason so many immigrants from eastern Europe need to come to ireland and uk etc for employment.

I'm struck that Ireland is probably the most at risk country right now in western world for a economic shock.

I'm concluded this based on potential impact from

1.Coronavirus global depression
2. No deal Brexit
3. Significant movement on the cards for measures to be taken by EU Commission to harmonise corporation tax. This may mean sales are taxed in the country where they occur and not where company is headquartered. Hence we would see huge dip in Corp tax receipts and huge loss of low Corp tax advantage that attracts the multinationals.

At some point the impact of depression or recession will pass at some point but issues resulting from Brexit and any corp tax harmonisation could be permanent.

I've a child on the way and looking to buy a house soon presuming my job remains intact. It's a worry to think though that so much could change in the long term.

Is my outlook too pessimistic or realistic?

Was Poland not the only country in the EU to not have any consecutive negative quarters right through the financial crisis? Have they not shown massive growth and consistency therein for years? Are many Poles not now returning to Poland and taking up higher paid roles than here (anecdotally, my ex-wife is Polish and doing exactly this)?

Ireland will be getting tested for more than the usual places as it tries to pull itself out of our new, self-imposed recession here. We need to be very careful - and observant to trends.

Wanderer78 · 23-10-2020 12:16pm

CoronaBlocker wrote:

Ireland will be getting tested for more than the usual places as it tries to pull itself out of our new, self-imposed recession here. We need to be very careful - and observant to trends.

Self-imposed, how?

truth and logic · 23-10-2020 12:26pm

Good jobs are on the way out. Automation is the future and we should welcome that. Of course, we'll need new ways to provide essential services to people, and people will need to find new ways to spend their time.

I have no problem with this but many people don't want to recognise that AI and automation will lead to mass unemployment. The only solution is a Universal Basic Income, or a Freedom Dividend, and a reorganisation of society. We should be happy at the prospect of it no longer being necessary for us all to work.

One poster said the central bank can just print money, and that's true, and another poster sarcastically said 'well, then we can all stop working', and of course there's a good point there, .. we can't all just stop working surely and just sit around doing nothing? Where would the food come from?

Automation and AI will provide the food. So, problem solved.

Of course, the real world is slightly more complex so what really happens is that corporations continue to make luxury goods, which some people want. Therefore, some people work in order that they will be rich enough to purchase luxury goods. Corporations make a profit selling luxury goods. They pay sufficient tax so that everyone, rich and poor, can be paid a basic universal income. Many people are happy with the basic income as it provides for a good type of life, with no work and no harassment from state employees.

Drugs like cannabis would be legal to grow at home, to alleviate the boredom for some people only. If you don't like drugs then you can go to the opera and be high brow and avant garde if you wish but other people can sit around with the spliffs and they shouldn't be judged for that.

As I said, we need a reorganisation of society.

Geuze · 23-10-2020 12:53pm

truth and logic wrote: »

Good jobs are on the way out. Automation is the future and we should welcome that. Of course, we'll need new ways to provide essential services to people, and people will need to find new ways to spend their time.

I have no problem with this but many people don't want to recognise that AI and automation will lead to mass unemployment.

There was never more automation than in 2019.

There was high employment in 2019.

I welcome more automation, and the reduction in mundane tasks that it will bring, and the boost in productivity and real wages.

There will be different jobs in the future, yes, but not less.

There were many labour shortages in 2019, even with the highest level of automation ever.

JimmyVik · 23-10-2020 12:53pm

lightspeed wrote: »

Hi

All just wondering what are people's thoughts on the risks of a permanent crash?

By permanent I mean more specifically will our economy deteriorate inthat we may be more like an eastern European country. The likes of Poland, Hungary etc dont appear to be poor like Bangladesh or the like but there is a reason so many immigrants from eastern Europe need to come to ireland and uk etc for employment.

I'm struck that Ireland is probably the most at risk country right now in western world for a economic shock.

I'm concluded this based on potential impact from

1.Coronavirus global depression
2. No deal Brexit
3. Significant movement on the cards for measures to be taken by EU Commission to harmonise corporation tax. This may mean sales are taxed in the country where they occur and not where company is headquartered. Hence we would see huge dip in Corp tax receipts and huge loss of low Corp tax advantage that attracts the multinationals.

At some point the impact of depression or recession will pass at some point but issues resulting from Brexit and any corp tax harmonisation could be permanent.

I've a child on the way and looking to buy a house soon presuming my job remains intact. It's a worry to think though that so much could change in the long term.

Is my outlook too pessimistic or realistic?

People always think this in bad times.
Never happens though

Geuze · 23-10-2020 12:57pm

truth and logic wrote: »

Good jobs are on the way out. Automation is the future and we should welcome that. Of course, we'll need new ways to provide essential services to people, and people will need to find new ways to spend their time.

I have no problem with this but many people don't want to recognise that AI and automation will lead to mass unemployment. The only solution is a Universal Basic Income, or a Freedom Dividend, and a reorganisation of society. We should be happy at the prospect of it no longer being necessary for us all to work.

There are labour shortages at the moment.

Try to get a builder!!!

No longer necessary for us all to work!!!

We need to build tens of thousands of houses, we need loads more tradespeople.

KyussB · 23-10-2020 1:19pm

Drifter50 wrote: »

Yes he did and driven I understand by the fact that we have 6/7 months liquidity left in our system and thats on a good day which these days we are certainly not having good days.
Sure we can keep borrowing and Yes money was never cheaper and we can lean on the ECB but this seems likely to last for 2021/2022 and maybe into 2023. How long do you think we will be able to borrow if we are a basket case.

We have to avoid consigning the future generation into austerity, debt, emigration. Soon the pontificating academics will have to have a reality check and the sooner the better

The ECB is not ending negative rates until there is EU-wide recovery, which is not going to come until several years after the pandemic and Brexit - and the pandemic isn't even going to be over by 2022 - so we're talking mid-2020's at best.

The ECB's 'whatever it takes' policies, pretty much mean that no country will have issues borrowing. The only way to turn countries into a basket case in those circumstances, is with austerity.

KyussB · 23-10-2020 1:22pm

kippy wrote: »

One would have to guess that at some point globally there's either a massive amount of conflict coming and/or a massive amount of debt restructuring/forgiveness.
As you say the current situation is not sustainable in the long term - someone will have to pay it all back.
It would be good however, that this crisis is used to improve some of services (which it has already) and focus the mind on what is important.

Government finances, do not work like household finances. Public Debt is not typically paid back, it is usually rolled over forever - and is eroded away by growing the GDP portion of Public Debt vs GDP.

With the ECB's policies, debt sustainability is pretty much guaranteed.

Cluedo Monopoly · 23-10-2020 1:40pm

KyussB wrote: »

Government finances, do not work like household finances. Public Debt is not typically paid back, it is usually rolled over forever - and is eroded away by growing the GDP portion of Public Debt vs GDP.

With the ECB's policies, debt sustainability is pretty much guaranteed.

We don't know how much future borrowing rates will impact our debt servicing and annual budget.

I mean the govt is borrowing 22bn this year and probably the same next year. By your rationale why don't they make it 50bn this year and 50bn next year?

Wanderer78 · 23-10-2020 1:41pm

Cluedo Monopoly wrote: »

We don't know how much future borrowing rates will impact our debt servicing and annual budget.

I mean the govt is borrowing 22bn this year and probably the same next year. By your rationale why don't they make it 50bn this year and 50bn next year?

why not? crack on with ploughing through this recession

KyussB · 23-10-2020 1:49pm

kippy wrote: »

The problem is this ever increaseing demand for "growth". What's wrong with a fair society with a standard of healthcare/education and housing that work for society? Rather than looking for more and more "growth".
We've a growing economy for the past X years - yet we still lack a lot.

I don't really get why you are making the points you are making as stating that private debt is worse that public debt, doesn't make unsustainable public debt the right course of action.
You are only every one pandemic/global recession away from needing to borrow more and more, what happens when you cannot borrow any more or have to pay it back.

The money spent from Public Debt doesn't just disappear, it goes into GDP growth, into capital/assets that doesn't just disappear.

With the ECB's current policies, unless you have repeated recessions brought about through physical destruction of your economy, you're not going to need to borrow/spend so much that debt servicing becomes unmanageable - that mainly happens for countries using a completely foreign currency (the Euro isn't a nationally controlled currency, but isn't foreign like e.g. USD either).

The whole point of it all is this: The way things are being run, there is supposed to be a harmonious cycle where the ECB makes it really easy for governments to sustainably finance public debt to recover from economic downturns, and then tightens this up again in economic recoveries to keep inflation on target.

That's how it works, macroeconomically - and it works perfectly sustainably, unless you do something stupid like enact austerity and trash GDP + your tax base for servicing the debts.

We are never moving away from "growth" under this system, as this system requires it. Ending growth sustainably, requires monetary reform first.

KyussB · 23-10-2020 2:02pm

Cluedo Monopoly wrote: »

We don't know how much future borrowing rates will impact our debt servicing and annual budget.

I mean the govt is borrowing 22bn this year and probably the same next year. By your rationale why don't they make it 50bn this year and 50bn next year?

We know that under the current ECB policies, interest rates are adjusted cyclically to cope with economic downturns, and to cope with inflation upon reaching full economic recovery (the latter being the perfect conditions for maximising debt sustainability), as described in my previous post - that's pretty much all we need to know.

tjhook · 23-10-2020 2:09pm

I'm not sure I buy this whole "money is free" argument. If it was true, and I wish it was, it would apply as much to taxation as to spending. There'd be no problem with reducing taxes for middle earners, right? Right now I pay 52% income taxes on quite a lot of my income. And we're often told that our government is "right-wing", so surely it's something they'd love to do if it were possible?

But money won't be free forever. At some point interest rates will rise again - when it suits the larger countries. Maybe 5 years. Maybe 10. Maybe longer. And until then, inflation rates will also be low, so debt won't shrink all by itself. If our debt grows so large that we're only able to pay off the interest, we'll be shafted once those rates do rise.

breezy1985 · 23-10-2020 2:13pm

By "like Eastern European countries" do you mean Ireland will be poor and shipping out 1000s of its young ?

So like Ireland for most of its independent life then

Geuze · 23-10-2020 3:34pm

KyussB wrote: »

Government finances, do not work like household finances. Public Debt is not typically paid back, it is usually rolled over forever - and is eroded away by growing the GDP portion of Public Debt vs GDP.

While this is true, there is always a need for fiscal space.

If you have a huge public debt, there is less room to manoeuvre.

How high is safe?

Currently, our public debt is 229% of GG revenue.

https://www.ntma.ie/news/ntma-institutional-investor-presentation-october-2020

Five countries have higher public debt, using that metric: Greece, IT, PT, ESP, Cyprus.

kippy · 23-10-2020 5:41pm

KyussB wrote: »

Government finances, do not work like household finances. Public Debt is not typically paid back, it is usually rolled over forever - and is eroded away by growing the GDP portion of Public Debt vs GDP.

With the ECB's policies, debt sustainability is pretty much guaranteed.

I've heard this plenty of times and know how public finances do not work like household finances however at some point servicing the debt becomes an issue as does rolling over the debt. You end up reliant on far too many outside influences.
We are "lucky" presently that this is a global crisis and that there are global solutions available. We are screwed if and when we have another bump in the road, this time that might be more national than global and have to go cap in and to get finance while debt repayments eat into whatever income the state make.

This ratio of Public Debt to GDP is a very flawed measurement in the Irish case, as you should be well aware and makes us out to be doing better than we actually are.

While this probably won't worry people of a certain age, we are going to leave a lot of work for our kids and their kids to do (as well as leaving them in the crapper environmentally)

Wanderer78 · 23-10-2020 8:22pm

kippy wrote:

While this probably won't worry people of a certain age, we are going to leave a lot of work for our kids and their kids to do (as well as leaving them in the crapper environmentally)

...or we could carry on as is, being unable to provide them with their most critical of needs, maybe it ll work out eventually, by doing the usual!

KyussB · 24-10-2020 3:26am

Geuze wrote: »

While this is true, there is always a need for fiscal space.

If you have a huge public debt, there is less room to manoeuvre.

How high is safe?

Currently, our public debt is 229% of GG revenue.

https://www.ntma.ie/news/ntma-institutional-investor-presentation-october-2020

Five countries have higher public debt, using that metric: Greece, IT, PT, ESP, Cyprus.

Japan is almost 250% of GDP. There is no known limit that is unsafe.

The stock of Public Debt tells us nothing about its sustainability, after all. It doesn't even consider interest rates.

People can take out 350% of their revenue in debt, and that is with much higher interest rates - and there are loads in government and the public, who think this is far too little as well, and are demanding those limits be relaxed - even though Private Debt is FAR more dangerous than Public Debt.

Ardillaun · 24-10-2020 3:31am

All things are possible but I wouldn’t worry too much. If it’s any consolation, my neck of the woods in Canada is far more likely to collapse than Ireland is.

KyussB · 24-10-2020 3:34am

kippy wrote: »

I've heard this plenty of times and know how public finances do not work like household finances however at some point servicing the debt becomes an issue as does rolling over the debt. You end up reliant on far too many outside influences.
We are "lucky" presently that this is a global crisis and that there are global solutions available. We are screwed if and when we have another bump in the road, this time that might be more national than global and have to go cap in and to get finance while debt repayments eat into whatever income the state make.

This ratio of Public Debt to GDP is a very flawed measurement in the Irish case, as you should be well aware and makes us out to be doing better than we actually are.

While this probably won't worry people of a certain age, we are going to leave a lot of work for our kids and their kids to do (as well as leaving them in the crapper environmentally)

We are reliant on one outside influence: The ECB.

All ratio measurements of Public Debt are very flawed - as none of them take interest rates into account.

The way we are screwing our kids i.e. upcoming generations is by leaving them jobless. They do not pay for Public Debt, it is rolled over forever. Public Debt pays for our kids and upcoming generations welfare and jobs.

Public Debt is a Private Sector surplus (ignoring the foreign sector). Always remember that.

agoodpunt · 24-10-2020 4:44am

KyussB wrote: »

People can take out 350% of their revenue in debt, and that is with much higher interest rates - and there are loads in government and the public, who think this is far too little as well, and are demanding those limits be relaxed - even though Private Debt is FAR more dangerous than Public Debt.

That is secured morgage debt normally for a home it requires insurance and the house is not completely yours till the loan is repayed.
State is spending more than it takes in with no inflation is the type that can bring the house of cards down when lenders see higher risk and borrowing becomes less attractive or difficult at worse

Wanderer78 · 24-10-2020 6:10am

agoodpunt wrote:

That is secured morgage debt normally for a home it requires insurance and the house is not completely yours till the loan is repayed. State is spending more than it takes in with no inflation is the type that can bring the house of cards down when lenders see higher risk and borrowing becomes less attractive or difficult at worse

That's funny, thought morgage backed loans caused a few issues, not too long ago!

Yyhhuuu · 24-10-2020 7:18am

kippy wrote: »

We are nowhere near being able to say that.
Covid is going to have a major effect on the global economy until a vaccine is found and/or some level of herd immunity is achieved.
Ireland's biggest issue in the short term is our reliance on tourism be it international, retirees, students. That industry is decimated for the next 6 to 12 months at a minimum.

I don't think things are as bad as the OP may be thinking but I believe they are bad and some of the effects will be worse than 2008 and effect far more people.

"Herd immunity" is not a valid option. Reinfection can occur.

KyussB · 24-10-2020 1:14pm

agoodpunt wrote: »

That is secured morgage debt normally for a home it requires insurance and the house is not completely yours till the loan is repayed.
State is spending more than it takes in with no inflation is the type that can bring the house of cards down when lenders see higher risk and borrowing becomes less attractive or difficult at worse

The two are not the same, yes - it is Private Debt that is far more dangerous and precarious than Public Debt, though - with far greater macroeconomic consequences.

There is almost nothing as safe as government bonds. Governments effective income/revenue keeps growing along with GDP, forever effectively. A persons 'revenue'/income is fixed, yet they can take out 350% of that in debt, sometimes 450% of income in debt in exempted cases - at a much higher interest rate - and it used to be a hell of a lot more than this.

When you're talking about a 'debtor' whose income/revenue is permanently growing at an exponential rate - at a time when fixed-income debtors can take on debt at 350-450% of their income/'revenue', at much higher interest rates, with far more precarious income sources - then the debtor with exponential growth in income/revenue is going to be able to sustain far, far more - particularly when it's a win-win situation, where taking on more helps maximize exponential growth in GDP and income/revenue...

The two generally shouldn't be compared, but since people insist on talking about Public Debt as if it works like Private Debt - almost exlusively! all of the time! - it pays to point out the massive and absurd irony and double standards, that the same people are completely fine with and have no comment on the debt ratios of Private Debt, despite them routinely being multiples higher than we've ever seen on Public Debt.

It's a real "have your cake and eat it" argument - talk about government finances as if they work like personal finances (they don't) - but then apply double standards on gauging the sustainability of debt to disfavour Public Debt, despite Public Debt inherently being way way more sustainable than Private Debt, the former being backed by the entire economy and exponential GDP/revenue growth.

kippy · 24-10-2020 1:36pm

KyussB wrote: »

The two are not the same, yes - it is Private Debt that is far more dangerous and precarious than Public Debt, though - with far greater macroeconomic consequences.

There is almost nothing as safe as government bonds. Governments effective income/revenue keeps growing along with GDP, forever effectively. A persons 'revenue'/income is fixed, yet they can take out 350% of that in debt, sometimes 450% of income in debt in exempted cases - at a much higher interest rate - and it used to be a hell of a lot more than this.

When you're talking about a 'debtor' whose income/revenue is permanently growing at an exponential rate - at a time when fixed-income debtors can take on debt at 350-450% of their income/'revenue', at much higher interest rates, with far more precarious income sources - then the debtor with exponential growth in income/revenue is going to be able to sustain far, far more - particularly when it's a win-win situation, where taking on more helps maximize exponential growth in GDP and income/revenue...

The two generally shouldn't be compared, but since people insist on talking about Public Debt as if it works like Private Debt - almost exlusively! all of the time! - it pays to point out the massive and absurd irony and double standards, that the same people are completely fine with and have no comment on the debt ratios of Private Debt, despite them routinely being multiples higher than we've ever seen on Public Debt.

It's a real "have your cake and eat it" argument - talk about government finances as if they work like personal finances (they don't) - but then apply double standards on gauging the sustainability of debt to disfavour Public Debt, despite Public Debt inherently being way way more sustainable than Private Debt, the former being backed by the entire economy and exponential GDP/revenue growth.

What happens when GDP/Revenue growth falls off the cliff?
What happens with the debt repayments annually uses up more and more of your revenue income?
What happens when you have no control of money supply and/or interest rates?

KyussB · 24-10-2020 11:30pm

GDP and thus Revenue only falls off a cliff if the government lets it, by not spending enough during economic downturns.
The government is capable of operating the economy at Full Output (maximum GDP) and Full Employment, 100% of the time - though policies like the Job Guarantee - where there's an endless list of stuff we urgently need to be working on, that such a program could get done.

GDP and thus Revenue tend to grow faster than debt servicing costs, in the long run - unless you do something stupid, like austerity - which collapses GDP/Revenue.

The ECB controls the money supply and interest rates, and it's not possible for them to budge from their "whatever it takes" zero-to-negative interest rate policies during prolonged economic downturns - because the entire Eurozone would collapse, forcing all but a few EZ countries out of the Euro.

Wanderer78 · 25-10-2020 5:59am

KyussB wrote:

The ECB controls the money supply and interest rates, and it's not possible for them to budge from their "whatever it takes" zero-to-negative interest rate policies during prolonged economic downturns - because the entire Eurozone would collapse, forcing all but a few EZ countries out of the Euro.

But wouldn't private sector banks also play a role in controlling the money supply?

KyussB · 25-10-2020 7:12am

Ya pretty much, private banks control access to credit, which is granted as long as certain conditions are met - which means the money supply is ultimately controlled from within the economy, i.e. is determined 'endogenously' (as opposed to determined outside of the economy i.e. 'exogenously', by the central bank).

So ya it's inaccurate for my previous post to say the ECB controls the money supply - the ECB just influences the money supply, mainly through interest rates - the money supply is controlled endogenously by demand for credit.

Wanderer78 · 25-10-2020 7:48am

KyussB wrote:

So ya it's inaccurate for my previous post to say the ECB controls the money supply - the ECB just influences the money supply, mainly through interest rates - the money supply is controlled endogenously by demand for credit.

Thank you for clarifying, your knowledge is astonishing in regards these matters, it took a hell of a lot of digging to get to that level of understanding

KyussB · 25-10-2020 3:09pm

It takes a while to grok a lot of it, but having good sources is the main thing - Naked Capitalism has been invaluable both directly and indirectly, in regularly exposing you to a wide range of people/academics, their ideas, and giving excellent critical analysis on economic topics/events.

From there, I have dozens of other economic authors (and yet more political authors/journalists) in my RSS reader, originally found from that site. That's the long/indirect (but imo better) way of learning this stuff.

The other side of it, is testing what you learn in debate, seeing what works and what doesn't - and it usually (quickly) highlights things you misunderstood, or haven't found the right narrative for expressing yet, so is useful for learning (but is not very productive, to say the least, as the quality of discussion is piss poor).

The main purpose in learning it all in the end, is to dispel the gigantic amounts of persistent propaganda and misinformation on economic topics - it's insane how much entirely wrong information is peddled in public discussion, particularly in the news (and in economics teaching...), all the time - wouldn't have any interest or reason to learn it, otherwise.

kippy · 25-10-2020 3:16pm

Yyhhuuu wrote: »

"Herd immunity" is not a valid option. Reinfection can occur.

We don't know much about herd immunity and/or reinefection yet but agreed - herd immunity is probably not a good "solution" while we know so little about it.

kippy · 25-10-2020 3:22pm

KyussB wrote: »

GDP and thus Revenue only falls off a cliff if the government lets it, by not spending enough during economic downturns.
The government is capable of operating the economy at Full Output (maximum GDP) and Full Employment, 100% of the time - though policies like the Job Guarantee - where there's an endless list of stuff we urgently need to be working on, that such a program could get done.

GDP and thus Revenue tend to grow faster than debt servicing costs, in the long run - unless you do something stupid, like austerity - which collapses GDP/Revenue.

The ECB controls the money supply and interest rates, and it's not possible for them to budge from their "whatever it takes" zero-to-negative interest rate policies during prolonged economic downturns - because the entire Eurozone would collapse, forcing all but a few EZ countries out of the Euro.

Do you not think that GDP, in the context of a small open economy, heavily reliant on FDI and as such the policies of other nations, is a bit more exposed than most to GDP falling off a cliff?
There isn't an endless supply of free money for infinity out there and to operate on the belief that there is, subject to not bringing austerity on the populace is as daft a policy as I've every heard to be frank about it.

Wanderer78 · 25-10-2020 3:25pm

kippy wrote: »

Do you not think that GDP, in the context of a small open economy, heavily reliant on FDI and as such the policies of other nations, is a bit more exposed than most to GDP falling off a cliff?
There isn't an endless supply of free money for infinity out there and to operate on the belief that there is, subject to not bringing austerity on the populace is as daft a policy as I've every heard to be frank about it.

austerity is a failure, and covid is proving this

kippy · 25-10-2020 3:28pm

Wanderer78 wrote: »

austerity is a failure, and covid is proving this

I amn't disagreeing but I don't think you can use Covid to justify that standpoint - however not balancing the books or at least coming within a few Billion of it, isn't a good policy either.
This suggestion that we are grand debt servicing so long as we don't introduce "austerity" as austerity causes GDP and revenue to fall off a cliff, is just pure nonsense if you ask me.
We are so reliant on external forces, we cannot assume that cheap money will be available forever and we'll have no issue servicing debt as our GDP/revenue will continue to rise.

KyussB · 25-10-2020 3:37pm

kippy wrote: »

Do you not think that GDP, in the context of a small open economy, heavily reliant on FDI and as such the policies of other nations, is a bit more exposed than most to GDP falling off a cliff?
There isn't an endless supply of free money for infinity out there and to operate on the belief that there is, subject to not bringing austerity on the populace is as daft a policy as I've every heard to be frank about it.

It's not 'free' as it has a servicing cost (which is sometimes negative, making it as good as free in those times), but there is an endless supply of money, until GDP is maximized and inflation kicks in. That's just how it works.

It is complicated somewhat by the ECB being removed from individual nations - but under their current policies, that they are forced by economic conditions to operate under, there is not going to be any shortage of money available.

Austerity makes as much sense as quitting your job to save on travel costs, to help pay your mortgage. It undercuts the countries GDP and Revenue.

KyussB · 25-10-2020 3:48pm

kippy wrote: »

I amn't disagreeing but I don't think you can use Covid to justify that standpoint - however not balancing the books or at least coming within a few Billion of it, isn't a good policy either.
This suggestion that we are grand debt servicing so long as we don't introduce "austerity" as austerity causes GDP and revenue to fall off a cliff, is just pure nonsense if you ask me.
We are so reliant on external forces, we cannot assume that cheap money will be available forever and we'll have no issue servicing debt as our GDP/revenue will continue to rise.

Countries almost never balance their books. In a lot of cases, balancing the books or even going into surplus, is followed not too long after, by a fresh economic crisis - because it puts upward pressure on Private Debt, to make up for the shortfall of money in the economy.

When the government is not taking on debt to keep the economy ticking over, the Private Sector is under more pressure to take on debt to keep the economy ticking over.

Government finances don't work like personal finances, yet you are talking as if they do. If you're going to treat government finances like personal finances, then I'll point out that debt ratio's of 350% - even up to 450% - are fairly normal in personal finances, and at higher interest rates than government finances...(and I'm not advocating looking at government finances things that way - I'm pointing out the inconsistency)

kippy · 25-10-2020 4:30pm

KyussB wrote: »

Countries almost never balance their books. In a lot of cases, balancing the books or even going into surplus, is followed not too long after, by a fresh economic crisis - because it puts upward pressure on Private Debt, to make up for the shortfall of money in the economy.

When the government is not taking on debt to keep the economy ticking over, the Private Sector is under more pressure to take on debt to keep the economy ticking over.

Government finances don't work like personal finances, yet you are talking as if they do. If you're going to treat government finances like personal finances, then I'll point out that debt ratio's of 350% - even up to 450% - are fairly normal in personal finances, and at higher interest rates than government finances...(and I'm not advocating looking at government finances things that way - I'm pointing out the inconsistency)

Ah lookit. I'm wasting my time here.
We are completely overexposed to FDI and the whims and policies of a lot of external factors in relation to this. Our GDP is completely distorted as a result.
Taking on excessive debt is not something we can sustain should any external factors impact on our GDP.
I don't think people appreciate this at all.

I get the household finances aren't like national finances etc and I amnt advocating balancing the books all the time but there does become a point where you seriously overstretch yourself as a nation or a household.

KyussB · 25-10-2020 4:50pm

FDI doesn't come into it. A government funding a Job Guarantee can replace any Private Sector loss in GDP - and this helps boost the Private Sector back up again until it recovers, so the JG can wind down.

You don't seem to know or attempt to define what debt is 'excessive', nor what would be unsustainable - you don't know where the 'point' lies at which a nation is supposed to be overstretched.

You also ignore explanations of how debt sustainability does work.

25-10-2020 5:18pm

Utter drivel from the same suspects on this thread.

If public debt was so easy to come by and sustainable, why was Ireland unable to borrow in 2010 and had to resort to the help and goodwill of the IMF?

The borrowing today will have to be paid back, partly with new borrowing in the future. Who's to know what interest rates the new borrowing will be?

kippy · 25-10-2020 5:19pm

KyussB wrote: »

FDI doesn't come into it. A government funding a Job Guarantee can replace any Private Sector loss in GDP - and this helps boost the Private Sector back up again until it recovers, so the JG can wind down.

You don't seem to know or attempt to define what debt is 'excessive', nor what would be unsustainable - you don't know where the 'point' lies at which a nation is supposed to be overstretched.

You also ignore explanations of how debt sustainability does work.

FDI is one of the key drivers of this economy over the past 30 years so saying it doesn't come into it is strange.
Excessive is where we are at now - essentially relying on debt forgiveness and/or major increases /stability in GDP/revenue to keep repayments sustainable.

Debt sustainability works assuming GDP and revenue continue to increase. A major issue for us I fear.
I'll review where we are at debt wise in 5 or 6 years and see how sutstainable we are.

KyussB · 25-10-2020 5:25pm

salonfire wrote: »

Utter drivel from the same suspects on this thread.

If public debt was so easy to come by and sustainable, why was Ireland unable to borrow in 2010 and had to resort to the help and goodwill of the IMF?

The borrowing today will have to be paid back, partly with new borrowing in the future. Who's to know what interest rates the new borrowing will be?

Was the ECB trapped in zero-to-negative interest rate QE in 2010? Is the Euro on the brink of collapse, putting ability to pay debts in question, today?

Public Debt is typically not paid back - it is usually rolled over, forever - and eroded by GDP growth and inflation...

Wanderer78 · 25-10-2020 5:29pm

salonfire wrote: »

Utter drivel from the same suspects on this thread.

If public debt was so easy to come by and sustainable, why was Ireland unable to borrow in 2010 and had to resort to the help and goodwill of the IMF?

The borrowing today will have to be paid back, partly with new borrowing in the future. Who's to know what interest rates the new borrowing will be?

funnily enough, its the same folks talking about increasing public debt and not balancing the budget, will lead to the end of the world, when the data shows otherwise

kippy · 25-10-2020 5:29pm

Wanderer78 wrote: »

funnily enough, its the same folks talking about increasing public debt and not balancing the budget, will lead to the end of the world, when the data shows otherwise

Im all for sustainable public debt, but increasing debt levels to the point we are heading towards now (and have been) will cause us major issues as a nation down the line when the things we cannot control come back to bite us.

Could Ireland economy collapse permanently?

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