ECB and Ireland deal finally REACHED

NAP123

kippy wrote: »

Stimulus from where?
Where does a country with a fiscal deficit of close to 20 billion a year (at the time), a banking "situation" that requires approximately 60 Billion to stabilise get the money to "stimulate" and to stimulate WHAT, more importantly.
Surely you see the need for some level of austerity in those figures?

You can start with the 64 billion.

Absolutely no reason to have bailed out Private Banks. That was the job of the ECB. Prommissory note deal was a handy copout for those fraudsters.

As for the deficit, we had 21 billion in the Pension Reserve Fund, that we gave to Banks and we had the goodwill of the sovereign bondmarkets until we extended the bank guarantee in Sept 2010.

Austerity, forced upon a country, not allowed to stimulate is a punishment.

The EU are not our friends or partners. They are our jailers.

They loved us when their banks could dump their low interest money on us and stoke our property bubble.

A property bubble they would never have been allowed stoke in their own countries.

When are people going to understand that Ireland is a mere pawn in the EU project?

We will be used and abused. Again.

Farmer Pudsey

Godge wrote: »

GDP is the measure that the EU, IMF and ECB judge us on, at the moment all else is irrelevant.

They are not irrelevant GDP is a poor measure of the Irish economy in spendingas it is skewered by multinational exports and profits. GNP is a better yes the trioka is useingGDP as measurements but they are also looking closly at GNP and will change there figures if things change.

space_man

Godge wrote: »

GDP is the measure that the EU, IMF and ECB judge us on, at the moment all else is irrelevant.

nonsense

K-9

space_man wrote: »

i think everyone is in agreement with the point that our budget deficit is unsustainable and needs correction.
what i dont agree with is that agressive slashing & burning will help. i believe it will make things worse. the IMF actually happen to agree with me on this btw.

like i said before and i see it's amusing to see certain people are now frantically pressing the u turn button, austerity did NOT cause all €430k people to be unemployed (nor did it cause every small business to fold, or every immigrant to have to leave), but it did exacerabate an already bad situation ie an economic implosion.

why people fail to see/recognise this is beyond me.

The problem is we've borrowed €50 Million or so over the last 3/4 years to bridge that gap. To close the deficit we need to borrow huge amounts of money, we'll see the effects of that in budgets to come when we are paying 25% of tax revenues on interest.

That's the stats, there is no avoiding them, why you don't recognise them is beyond me.

K-9

space_man wrote: »

nonsense

Posts like that aren't acceptable on this forum. Most posters put a bit of thought into their responses, give them a little respect for doing so and debate meaningfully..

Cookie_Monster

Godge wrote: »

To answer that post I have shown that in actual fact the government has managed to impose the maximum amount of austerity it could without causing growth to dip into the negative and maintain an arrangement whereby growth plus inflation equal 3%.

that's a bit arbitrary though isn't it? Who knows, if they made massive cuts all at once back in 2010 maybe we would have had one terrible year but be better off now...

I don't think they're anywhere near the maximum amount of austerity that could be applied, particularly if very rigidly targeted rather than generalised.

KyussBishop

Farmer Pudsey wrote: »

The reality is that the EU is not going to print money in any huge amounts for quantive easing and definately not for money creation Idea's. So lets get away from that futile argument of wheather it would work or not in the government being an employer of last resort. It is a waste of time.

The reality is where do we make any ajustments over the next 2-3 years to get the Budget deficit down to below 2% and heading for a surplas in second half of the decade. This is what the trioka require and how do we get the private sector to have enough conifidance that if they invest money that they will not end up in an situtation where government costs drive them out of buisness and where they compete with a very generous welfare system when they employ staff.

The EU has already printed over €1 trillion for quantitative easing, and again the impediments you speak of are political only, not economic (and options available to us don't all rely upon the EU, which is a part in particular that people like to repeatedly ignore); so, being a politics forum, you don't get to rule austerity alternatives out of the picture by saying "the EU will never do it" (even when alternatives don't all rely on the EU), anymore than a pro-life advocate gets to rule out discussion of legalized abortion by saying "government will never do it".

The reality is, austerity is not an economically necessary policy, and people accepting it as an unchangeable reality, are accepting the partial destruction of our country; it most definitely is possible to change it, and that possibility alone means it should be lobbied for at the EU by our government, and if that proved fruitless, we would have to consider harder options like reducing our role within the EU.


When there are perfectly good alternatives available, which totally invalidate the core founding austerity arguments of the public sector bashing/destruction advocates, and which can halt the slow destruction of the public services (as well as bring social/economic recovery); when all that is possible, it's pretty damn important it gets discussed, so people are aware of the alternatives.

This is particularly important in changing the narrative: Austerity measures 'success' in slashing the budget deficit (unnecessary with alternative policies), when the real measures of 'success' are human measures, such as the unemployment rate, effects of public health (which are pretty wide ranging due to negative effects of unemployment/homelessness and health service cuts), effects on people due to private debt, among much more.

The entire austerity measurement of 'success', when viewed in the context of available alternatives, is insane, because 'success' there is basically a measure of economic and societal destruction.

KyussBishop

K-9 wrote: »

The problem is we've borrowed €50 Million or so over the last 3/4 years to bridge that gap. To close the deficit we need to borrow huge amounts of money, we'll see the effects of that in budgets to come when we are paying 25% of tax revenues on interest.

That's the stats, there is no avoiding them, why you don't recognise them is beyond me.

Well, we could do it with borrowing, but (and yes, this is 'controversial' ) we could equally do it with money creation up to the point of inflation targets (which is not added to our national debt); utilizing money creation for funding also gives us far greater control over the interest paid on our debt, because we would basically be doing bond bearers a favour by giving them an interest-bearing place to store their money, when we could just use money creation for funding instead.

I don't know if (legally) the interest rate of the current bonds can be changed, but at the very least, I'd say it would be possible to replace our current national debt with lower-interest bonds.

Utilizing money creation can actually allow us to very easily unwind our debt over many decades, without punishing interest rates; it can, effectively, solve the public debt problem.

kippy

NAP123 wrote: »

You can start with the 64 billion.

Absolutely no reason to have bailed out Private Banks. That was the job of the ECB. Prommissory note deal was a handy copout for those fraudsters.

As for the deficit, we had 21 billion in the Pension Reserve Fund, that we gave to Banks and we had the goodwill of the sovereign bondmarkets until we extended the bank guarantee in Sept 2010.

Austerity, forced upon a country, not allowed to stimulate is a punishment.

The EU are not our friends or partners. They are our jailers.

They loved us when their banks could dump their low interest money on us and stoke our property bubble.

A property bubble they would never have been allowed stoke in their own countries.

When are people going to understand that Ireland is a mere pawn in the EU project?

We will be used and abused. Again.

You reckon we could have put that 60 odd billion into a stimulus package instead?

If you really think that, and that not giving the banks the money they needed to survive would have had lesser negative impacts than what we have felt for the past few years you need to look at things a lot closer.

And the fact that you think that the EU are to blame for everything is just crazy in my opinion.

We had enough control over our state through our politicians and regulators to ensure we didnt go crazy. We chose not to do that.

antoobrien

KyussBishop wrote: »

I don't know if (legally) the interest rate of the current bonds can be changed, but at the very least, I'd say it would be possible to replace our current national debt with lower-interest bonds.

The only way to replace bonds is to buy them back and then one has to have the permission of the bond owners. Forced buy backs are considered to be defaults, so it often makes more sense to pay the extra 1/2bn over 10 years than risk investor sentiment.

I think you might be surprised to learn that more than half the government debt (in bonds) is at 5% or lower - which is historically the lowest rate the Irish government has been getting on its bonds - so there's not as much room for manoeuvre as some would like to make out.

KyussBishop

antoobrien wrote: »

The only way to replace bonds is to buy them back and then one has to have the permission of the bond owners. Forced buy backs are considered to be defaults, so it often makes more sense to pay the extra 1/2bn over 10 years than risk investor sentiment.

I think you might be surprised to learn that more than half the government debt (in bonds) is at 5% or lower - which is historically the lowest rate the Irish government has been getting on its bonds - so there's not as much room for manoeuvre as some would like to make out.

Investor sentiment doesn't matter when you have control over monetary policy (and when you are willing to use it for funding); we would not be at the mercy of the bond markets, because we wouldn't need them for funding (5% is also above our growth rate).

In any case, the interest on bonds themselves can be serviced easily, also through money creation (limited by the inflation target); we wouldn't need to increase the total debt burden either, we would be looking for people interested in purchasing bonds, at a rate less than the highest we currently pay on national debt, then we can easily switch out the high-interest bonds with the low-interest ones, without any repercussions (just some pissed off investors looking for easy money).


Think about it as well: There is no economic reason for a country with a fiat currency, to finance themselves through bonds; all the national debt does, is give investors free money (in interest payments) for doing nothing.

We will have to offload our debt burden over decades due to its size, but there's no way we should keep giving away so much free money when there is no reason to at all; so make bondholders compete with each other, and switch-out high-interest bonds for lower-interest ones, when the offer arises.

The worst that can happen, is we stay burdened with the current interest rate on our existing bonds (because we don't need to increase our total bonds), while having a decade or more of opportunities to switch the high-interest bonds for lower-interest ones; so there is nothing to lose in that case.

kippy

KyussBishop wrote: »

Investor sentiment doesn't matter when you have control over monetary policy (and when you are willing to use it for funding); we would not be at the mercy of the bond markets, because we wouldn't need them for funding (5% is also above our growth rate).

In any case, the interest on bonds themselves can be serviced easily, also through money creation (limited by the inflation target); we wouldn't need to increase the total debt burden either, we would be looking for people interested in purchasing bonds, at a rate less than the highest we currently pay on national debt, then we can easily switch out the high-interest bonds with the low-interest ones, without any repercussions (just some pissed off investors looking for easy money).


Think about it as well: There is no economic reason for a country with a fiat currency, to finance themselves through bonds; all the national debt does, is give investors free money (in interest payments) for doing nothing.

We will have to offload our debt burden over decades due to its size, but there's no way we should keep giving away so much free money when there is no reason to at all; so make bondholders compete with each other, and switch-out high-interest bonds for lower-interest ones, when the offer arises.

The worst that can happen, is we stay burdened with the current interest rate on our existing bonds (because we don't need to increase our total bonds), while having a decade or more of opportunities to switch the high-interest bonds for lower-interest ones; so there is nothing to lose in that case.

I don't think you have a grasp of the problem at all to be honest.

The state had a gap of between 15 and 20 billion per annum to fill from 2008 onwards.
Even without accounting for the 60 billion in Bank issues, how exactly did you expect the state to fill that gap without getting it from either the bond markets (or in the past few years the Troika)

The whole austerity policy is designed to reduce that gap - at which point, as you rightly say, we wont be at the mercy of the markets as much.

KyussBishop

It's explained right in the post you are quoting, and I've explained it several times throughout the thread (three times on the current page), that it's financed through money creation limited by the inflation target, among other policies (though I'm half expecting my previous posts are going to be totally ignored, to repeat the same points I've already addressed several times).

antoobrien

KyussBishop wrote: »

(5% is also above our growth rate).

Totally irrelevant, especailly since - boom aside - interest paybale has been historically higher than the growth rate! We have never had long term government bond rates as consistently low as they are right now, even with the recent spikes in cost of borrowing.

KyussBishop wrote: »

Investor sentiment doesn't matter when you have control over monetary policy (and when you are willing to use it for funding); we would not be at the mercy of the bond markets, because we wouldn't need them for funding

Oh dear god what kind of deluded tripe have you been reading?

We had control over monetary policy between 2000 & 2007 and we still went to the bond markets - despite running a surplus for most years.

Why? Cash flow is not linear!

Your perfect theory of money ignores practical realities, such as the fact that a good chunk of our tax revenue arrives in the door in the last 3 months of the year.

So in suggesting that we don't borrow, you are suggesting we ignore the fact that we would not be in a position to pay for the services the government are providing until November. What will the doctors, nurses, teachers etc. work for? Will suppliers wait up to 11 months to be paid? What happens if we don't collect enough tax, as happened in 2008, will we cut welfare?

Taxi for KyussBishop!

KyussBishop

antoobrien wrote: »

Totally irrelevant, especailly since - boom aside - interest paybale has been historically higher than the growth rate! We have never had long term government bond rates as consistently low as they are right now, even with the recent spikes in cost of borrowing.



Oh dear god what kind of deluded tripe have you been reading?

We had control over monetary policy between 2000 & 2007 and we still went to the bond markets - despite running a surplus for most years.

Why? Cash flow is not linear!

Your perfect theory of money ignores practical realities, such as the fact that a good chunk of our tax revenue arrives in the door in the last 3 months of the year.

So in suggesting that we don't borrow, you are suggesting we ignore the fact that we would not be in a position to pay for the services the government are providing until November. What will the doctors, nurses, teachers etc. work for? Will suppliers wait up to 11 months to be paid? What happens if we don't collect enough tax, as happened in 2008, will we cut welfare?

Taxi for KyussBishop!

I'd appreciate if you engage with my actual arguments rather than spouting stuff that is close to ad-hominem; predictably, you ignore what I pointed out right in my last post, that funding comes from money creation limited by the inflation target, and through ignoring that throw out a bunch of straw-men.

It's a sure sign of dishonest argument, when a poster reverts to condescension, and appears to deliberately ignore key repeated parts of another persons post.

antoobrien

KyussBishop wrote: »

I'd appreciate if you engage with my actual arguments rather than spouting stuff that is close to ad-hominem; predictably, you ignore what I pointed out right in my last post, that funding comes from money creation limited by the inflation target, and through ignoring that throw out a bunch of straw-men.

Oh cut the crap, invoking strawman & ad-hominem to defend an argument is a sure sign that it's unsupportable.

We can't inflate our way of out this because it means that the costs of good and services also go up, meaning that your inflated funding is just paying inflated costs and the benefit goes away. Or did you not notice your pay-packet wasn't going as far as you thought it should be, despite it actually going up for most of the boom?

KyussBishop

antoobrien wrote: »

Oh cut the crap, invoking strawman & ad-hominem to defend an argument is a sure sign that it's unsupportable.

We can't inflate our way of out this because it means that the costs of good and services also go up, meaning that your inflated funding is just paying inflated costs and the benefit goes away. Or did you not notice your pay-packet wasn't going as far as you thought it should be, despite it actually going up for most of the boom?

Yes it would be good if you address my actual argument then; particularly, you seem to be ignoring what I pointed out right in my last post, that it would be "money creation limited by the inflation target".

Don't let my actual arguments get in the way of a good straw-man though.

antoobrien

KyussBishop wrote: »

Yes it would be good if you address my actual argument then; particularly, you seem to be ignoring what I pointed out right in my last post, that it would be "money creation limited by the inflation target".

Why does this have to be explained to you every time you bring up this fallacy?

Targeted inflation is impossible (except in models), because the money created inflates everything. It doesn't do so equally but it does inflate!

djpbarry

KyussBishop wrote: »

Yes it would be good if you address my actual argument then...

But you don't have an argument. I remember you putting forward this very same proposal on another thread and no matter how many times I questioned you on the particulars, you insisted I wasn't addressing your "actual argument".

Your argument is basically "money creation limited by the inflation target"? How about some hard figures to demonstrate that this will actually work?

KyussBishop

antoobrien wrote: »

Why does this have to be explained to you every time you bring up this fallacy?

Targeted inflation is impossible (except in models), because the money created inflates everything. It doesn't do so equally but it does inflate!

That's a straight out non-sequitur; that spending through money creation is inflationary, does not make hitting an inflation target impossible, it means the spending through money creation is limited by the inflation target (requiring tightened fiscal policy when the target is approached or exceeded).

antoobrien

KyussBishop wrote: »

That's a straight out non-sequitur; that spending through money creation is inflationary, does not make hitting an inflation target impossible, it means the spending through money creation is limited by the inflation target (requiring tightened fiscal policy when the target is approached or exceeded).

Ah so we'll create the extra money but not spend it......Wait that's just the same as not creating it - has no effect on anything!

KyussBishop

antoobrien wrote: »

Ah so we'll create the extra money but not spend it......Wait that's just the same as not creating it - has no effect on anything!

You're not even bothering to feign a real response to my posts at this stage are you?

You know I didn't say anything about creating money and not spending it, you know I did not imply that either; you pulled that out of nowhere, as yet another straw man.

antoobrien

KyussBishop wrote: »

You're not even bothering to feign a real response to my posts at this stage are you?

You know I didn't say anything about creating money and not spending it, you know I did not imply that either; you pulled that out of nowhere, as yet another straw man.

No, I'm taking what you're saying at face value and telling you what it means in the real world, the palce where the rest of us have to live that isn't effected by the rather idiotic theory you're espousing.

You made the following point earlier:

KyussBishop wrote: »

The EU has already printed over €1 trillion for quantitative easing

The EU created money and caused inflation. Explain to us, with figures, how you create money to wash away the combined defects of the EU without causing inflation.

KyussBishop

antoobrien wrote: »

No, I'm taking what you're saying at face value and telling you what it means in the real world, the palce where the rest of us have to live that isn't effected by the rather idiotic theory you're espousing.

No, you're in the habit of completely making stuff up and pretending I said it, i.e. straw-man arguments; you're taking completely dishonest lines of argument, including what amounts to ad-hominem (such as labeling me an idiot in your post here), and are expecting me to follow-along with the pretense that you have any interest in hearing or responding to my arguments honestly.

You've made pretty clear over the last page, the level of dishonest argument you're willing to engage in, and that you are perfectly willing to selectively misrepresent my posts wherever it suits you (such as, in your previous post right here, implying that I've argued money creation is not inflationary, when I have explicitly said it is, and that it is for spending up to the inflation target).

If you're going to throw out condescension, ad-hominem, straw-men etc. etc., at least have the honesty to state that for what it is, instead of trying to dress it up (barely concealed) as an honest response.

djpbarry

KyussBishop wrote: »

No, you're in the habit of completely making stuff up and pretending I said it, i.e. straw-man arguments; you're taking completely dishonest lines of argument, including what amounts to ad-hominem (such as labeling me an idiot in your post here...

I think you'll find that you were not labelled idiotic, but your theory was.

KyussBishop wrote: »

...), and are expecting me to follow-along with the pretense that you have any interest in hearing or responding to my arguments honestly.

You've made pretty clear over the last page, the level of dishonest argument you're willing to engage in, and that you are perfectly willing to selectively misrepresent my posts wherever it suits you (such as, in your previous post right here, implying that I've argued money creation is not inflationary, when I have explicitly said it is, and that it is for spending up to the inflation target).

If you're going to throw out condescension, ad-hominem, straw-men etc. etc., at least have the honesty to state that for what it is, instead of trying to dress it up (barely concealed) as an honest response.

That's an incredibly long-winded way of avoiding a pretty straightforward request (I note that, once again, you've also ignored my request for solid figures).

Considering this is at least the second thread in which you have reverted to this kind of seige mentality in defending your theory, would it not occur to you that maybe the problem is not other posters, but maybe the problem is that your theory is not on terribly firm ground?

K-9

Mod:

Less sniping please and attack the post, not the poster.

Godge

Farmer Pudsey wrote: »

They are not irrelevant GDP is a poor measure of the Irish economy in spendingas it is skewered by multinational exports and profits. GNP is a better yes the trioka is useingGDP as measurements but they are also looking closly at GNP and will change there figures if things change.

space_man wrote: »

nonsense

Objective Number 1 above all other objectives: Get rid of the IMF/EU/ECB. They use GDP to set the targets. GDP is all that matters until that objective is achieved.

It is nonsense to suggest otherwise unless you wish us to remain under the yoke?

sarumite

Godge wrote: »

Objective Number 1 above all other objectives: Get rid of the IMF/EU/ECB. They use GDP to set the targets. GDP is all that matters until that objective is achieved.

It is nonsense to suggest otherwise unless you wish us to remain under the yoke?

Surely the objective should be to get our finances in order. The Troika are symptom of that.

(as for Ireland, both GNP and GDP are inaccurate. I will see if I can find the source, but I remember reading that a general measure used is GNP + 40% of the difference between GNP and GDP)

antoobrien

sarumite wrote: »

Surely the objective should be to get our finances in order. The Troika are symptom of that.

The objective is to get our finances in order, getting the troika out means that we are (or should be) at that point.

sarumite wrote: »

(as for Ireland, both GNP and GDP are inaccurate. I will see if I can find the source, but I remember reading that a general measure used is GNP + 40% of the difference between GNP and GDP)

We can sort that argument after we have gotten to a budget surplus. The difference between GNP & GDP is about 20% GNP, so to do anything with it now would add up to an extra 1bn to the correction required - assuming GNP stayed flat at approx 130bn.

djpbarry

sarumite wrote: »

as for Ireland, both GNP and GDP are inaccurate.

They're inaccurate for all countries (especially small open economies like Ireland), but they're the best estimates we have. The size of an economy is extremely difficult to accurately quantify.

sarumite

djpbarry wrote: »

They're inaccurate for all countries (especially small open economies like Ireland), but they're the best estimates we have. The size of an economy is extremely difficult to accurately quantify.

This is the article I read

http://www.economist.com/news/finance-and-economics/21569049-irelands-success-attracting-foreign-investment-has-its-drawbacks-fitter-yet

where it states

" The Irish Fiscal Advisory Council, a watchdog, has suggested a hybrid measure in which 40% of the excess of GDP over GNP is added to GNP. This offers a better gauge of fiscal sustainability for the Irish economy, says John McHale, who chairs the council."

If we know both figures, choosing the figure that a government established advisory council uses wouldn't be too difficult.

antoobrien

sarumite wrote: »

If we know both figures, choosing the figure that a government established advisory council uses wouldn't be too difficult.

From the CSO Gross Domestic Product and Gross National Product at 2010

GNP| €bn | GDP
Q1-3 2011 | 94.721 | 119.261
Q 1-3 2012 | 97.557 | 120.246
FY 2011 | 126.983 | 158.726

Based on those figures the target 3% of GDP deficit for European stability rules is 4.761bn in 2015.

Using GNP + 40% (GDP-GNP 12.697bn) we get a target of 4.19bn. I suggest we leave well enough alone and start worrying about that when we have to balance the "structural" budget.