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Could Ireland economy collapse permanently?

135

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  • Registered Users Posts: 12,992 ✭✭✭✭Geuze


    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.


  • Registered Users Posts: 5,368 ✭✭✭JimmyVik


    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


  • Registered Users Posts: 12,992 ✭✭✭✭Geuze


    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.


  • Registered Users Posts: 2,314 ✭✭✭KyussB


    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.


  • Registered Users Posts: 2,314 ✭✭✭KyussB


    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.


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  • Registered Users Posts: 8,355 ✭✭✭Cluedo Monopoly


    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?

    What are they doing in the Hyacinth House?



  • Registered Users Posts: 28,703 ✭✭✭✭Wanderer78


    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


  • Registered Users Posts: 2,314 ✭✭✭KyussB


    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.


  • Registered Users Posts: 2,314 ✭✭✭KyussB


    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.


  • Registered Users Posts: 710 ✭✭✭tjhook


    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.


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  • Registered Users Posts: 24,016 ✭✭✭✭breezy1985


    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


  • Registered Users Posts: 12,992 ✭✭✭✭Geuze


    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.


  • Registered Users Posts: 18,357 ✭✭✭✭kippy


    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)


  • Registered Users Posts: 28,703 ✭✭✭✭Wanderer78


    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!


  • Registered Users Posts: 2,314 ✭✭✭KyussB


    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.


  • Registered Users Posts: 2,525 ✭✭✭Ardillaun


    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.


  • Registered Users Posts: 2,314 ✭✭✭KyussB


    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.


  • Registered Users Posts: 544 ✭✭✭agoodpunt


    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


  • Registered Users Posts: 28,703 ✭✭✭✭Wanderer78


    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!


  • Registered Users Posts: 798 ✭✭✭Yyhhuuu


    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.


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  • Registered Users Posts: 2,314 ✭✭✭KyussB


    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.


  • Registered Users Posts: 18,357 ✭✭✭✭kippy


    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?


  • Registered Users Posts: 2,314 ✭✭✭KyussB


    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.


  • Registered Users Posts: 28,703 ✭✭✭✭Wanderer78


    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?


  • Registered Users Posts: 2,314 ✭✭✭KyussB


    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.


  • Registered Users Posts: 28,703 ✭✭✭✭Wanderer78


    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


  • Registered Users Posts: 2,314 ✭✭✭KyussB


    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.


  • Registered Users Posts: 18,357 ✭✭✭✭kippy


    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.


  • Registered Users Posts: 18,357 ✭✭✭✭kippy


    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.


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  • Registered Users Posts: 28,703 ✭✭✭✭Wanderer78


    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


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