Recession predictions

riddles

ECB set to continue buying bonds into 2022 the addition to cheap money is now permanent.

ExMachina1000

Wanderer78 wrote: »

So if we had a 'smaller' public sector, this would have prevented the previous crash by......

....and if we had a 'smaller' public sector, this would have helped resolve our current situation by......

Think of it as more of a drag on the economy.
In the private sector if a business isnt productive and profitable it is replaced. Public sector departments cost money

You are trying to over simplify as if economics could be taught in a half day after lunch.

If you prefer to keep it simple think of it like a Netflix account. The private sector pay for it while the rest enjoy the benefits

Wanderer78

ExMachina1000 wrote:

Think of it as more of a drag on the economy. In the private sector if a business isnt productive and profitable it is replaced. Public sector departments cost money

So private companies are never bailed out, they are simply allowed to fail, yea?

ExMachina1000 wrote:

You are trying to over simplify as if economics could be taught in a half day after lunch.

Am I the one over simplyfy or is it you? There's nothing simplify in regards economics, but the mainstream profession would try to have you believe it can be simplified, with its supplies and demands, equilibriums, efficiencies, and blah blah blah.

Be some craic if we didn't have a functioning public sector, wouldn't it, particularly right now!

Wanderer78

Wanderer78 wrote: »

I just did explain! But these are very good questions! The previous crash was primarily a private sector issue, a private debt problem, primarily linked to a property boom, primarily backed by private sector created credit, but you d be surprised by the amount of people that think it was primarily a public sector problem, a public debt problem, it wasnt, even though our state bodies and institutions also played their part in it to....

Again, your posing extremely important and serious questions regarding the whole situation, why the imf, why didn't we increase our deficits, why did we impose austerity, when the financial elements of the crash were primarily a private sector problem!

You still haven't answered the question. You repeated the cause when I explicitly told you I wasn't asking about the cause.

I'll ask you again and I am not letting you away with this nonsense you and others spout across boards and social media ..

.. if we should just keep adding to the debt, why did we have to resort to the IMF? If piling on to the debt mountain is not a bad thing, why were investors not rushing to buy Government Bonds?

Arthur Daley

It is complete garbage to continue to pump it out there that the massive increase in Irish Government Debt is solely due to the Bank bailouts.

The net cost of the Banking bailout is circa €42 billion.

https://www.irishtimes.com/business/financial-services/was-it-worth-paying-41-7bn-to-bail-out-irish-banks-1.4036792

Irish Government debt sat at €50bn in 2008. It is €219 billion today, an increase of almost €170bn.

https://tradingeconomics.com/ireland/government-debt

https://commodity.com/data/ireland/debt-clock/


€170bn - €42bn = €128bn of deficit spending in 13 years, not related to the bank bailout, but laughably called 'austerity'.

Timing belt

Wanderer78 wrote: »

So private companies are never bailed out, they are simply allowed to fail, yea?



Am I the one over simplyfy or is it you? There's nothing simplify in regards economics, but the mainstream profession would try to have you believe it can be simplified, with its supplies and demands, equilibriums, efficiencies, and blah blah blah.

Be some craic if we didn't have a functioning public sector, wouldn't it, particularly right now!

We may have a public sector that is just about functioning but it is far from efficient and one could argue that the resources could be used more effectively to deliver better results. That is not to say that there are not sections of the public sector that are not efficient but there is a lot of wasted resources that could be used elsewhere. Just look at the stats on the no of admin per soldiers in the Irish army or the government paying private landlord HAP when there are better alternatives that would resolve the issues in the long term. Instead tax payers money is wasted by putting a patch on the problem rather than fixing it.

KyussB

We borrowed from the IMF because the breakup of the Euro and thus the likelihood of the debt not being repaid, was real, leaving the IMF as the only willing choice.

Now, a decade later and endless QE programs later, there is zero question on whether or not government bonds get repaid - short of an asteroid smashing into the country.

All countries, throughout all of history, have a long-term persistently increasing Public Debt - despite the ups and downs in debt levels during economic cycles.

Even the insane people like Larry Summers and Rogoff are now calling out the virtues of deficit spending - when they were some of the main austerians before.

It's not 2010 anymore. The Euro isn't about to implode anymore. The ECB isn't constrained in its ability to flood arseloads of money into the economy anymore. So lets stop pretending like we're back in the fucking Gold Standard from 100 years ago, where money was tied to a scarce physical resource.

Zenify

KyussB wrote: »

All countries, throughout all of history, have a long-term persistently increasing Public Debt - despite the ups and downs in debt levels during economic cycles.

I agree with ups and downs of debt with the economic cycles. However, our cycles now only include ups. There wasn't a "down" on our debt during our boom, just a little pause and now its going up again. up, pause, up, pause, up is not sustainable.

KyussB

Whether short-term debt levels have ups and downs, or ups and pauses - it's the same thing long-term: All countries, throughout all of history, have a long-term persistently increasing Public Debt.

KyussB

KyussB wrote: »

We borrowed from the IMF because the breakup of the Euro and thus the likelihood of the debt not being repaid, was real, leaving the IMF as the only willing choice.

Oh ok, so carrying too much debt does leave us more vulnerable to external shocks, other investors will not be rushing in, debt cannot grow if others are not willing to lend and the IMF is the last resort.

Thanks for proving my point !!

Wanderer78

salonfire wrote:

Thanks for proving my point !!

And what point is that?

Wanderer78

Wanderer78 wrote: »

And what point is that?

Oh there you are. Any chance of you gracing us with your answer to my question?

Wanderer78

salonfire wrote: »

Oh there you are. Any chance of you gracing us with your answer to my question?

yes, im extremely busy at the moment, would you like me to change my priorities just for you? i ll get back to you when i get the chance

KyussB

salonfire wrote: »

Oh ok, so carrying too much debt does leave us more vulnerable to external shocks, other investors will not be rushing in, debt cannot grow if others are not willing to lend and the IMF is the last resort.

Thanks for proving my point !!

What point exactly? You just agreed with what you quoted, that states this was due to the risk of a Euro breakup. A risk that has now passed.

You weren't expecting me to play along with quote-mining and selective interpretation of my own post, were you? :rolleyes:

Wanderer78

salonfire wrote:

You still haven't answered the question. You repeated the cause when I explicitly told you I wasn't asking about the cause.

What's the cause?

salonfire wrote:

.. if we should just keep adding to the debt, why did we have to resort to the IMF? If piling on to the debt mountain is not a bad thing, why were investors not rushing to buy Government Bonds?

Again, you're posing the correct question, why was the imf called in, and austerity imposed, when the roots of the problem were clearly based in private sector financial institutions, and how the hell was imposing these measures in the public sector gonna truly resolve these primarily private sector based issues? I'd imagine investors weren't rushing in due to the lack of confidence, we really have to get over this rising deficit myth, 08 once again showed us, private debt is the far more dangerous of the two, and what is our government currently trying to do, once again, but encouraging the borrowing of private debt, ffs!

Public and private debt are both critical components of the money supply, but we currently have an over reliance on private debt to do the heavy lifting, when it's clearly obvious, that it is extremely dangerous to do so, but we 're not accepting these dangers! This is one of the main reasons why I advocate for public banking systems, it gives us the ability to partially self finance our critical needs, and some sort of democratic control over our money supply.

Arthur Daley wrote:

€170bn - €42bn = €128bn of deficit spending in 13 years, not related to the bank bailout, but laughably called 'austerity'.

...as above! Even some folk in the imf realise now how wrong imposing austerity was, we should have done the complete opposite, and not only that, we signalled to the global financial system, carry on folks, you're doing a great job! What could possibly go wrong!

Timing belt wrote:

We may have a public sector that is just about functioning but it is far from efficient and one could argue that the resources could be used more effectively to deliver better results. That is not to say that there are not sections of the public sector that are not efficient but there is a lot of wasted resources that could be used elsewhere. Just look at the stats on the no of admin per soldiers in the Irish army or the government paying private landlord HAP when there are better alternatives that would resolve the issues in the long term. Instead tax payers money is wasted by putting a patch on the problem rather than fixing it.

Yes of course there are inefficiencies in the public sector , and unfortunately there probably will always be, due to its complexities, but we must also accept the shortcomings of the private sector to, and it's inefficiencies. It's not a competition between the two, both are in fact needed, in order to have some sort of functioning society, but it's also important to realise both sectors shortcomings. The relation between both is in fact symbiotic, both are in fact equally needed, but this is currently a highly dysfunctional relation, the public sector is currently used as a back stop, for when the private sector fails, or when the private sector is simply unable to provide what's needed. This dysfunction is leading us towards continual patch work fixes, which ultimately does indeed cost us more in the long run, and not just financially either.

ExMachina1000

Fun fact.

Our chief justice of the supreme court gets paid 20k a year more than the chief justice of the supreme court of the United states of America. The world's wealthiest country.

Leo gets 60k a year more than UK PM Boris Johnson
Our TDs get 7k a year (basic) more than UK ministers.

The white house chief of staff earns 168k euro a year where as MM and LV chiefs of staff earn 171k per year

Compare the size of the economies of the US and UK vs Ireland

The size of the us economy as gdp : 20.54 trillion
UK: 2.8 trillion
Ireland: 382 billion


Any recession is only for the poor

Wanderer78

ExMachina1000 wrote: »

Fun fact.

Our chief justice of the supreme court gets paid 20k a year more than the chief justice of the court of the United states of America. The world's wealthiest country.

Leo gets 60k a year more than UK PM Boris Johnson
Our TDs get 7k a year (basic) more than UK ministers.

Compare the size of the economies of the US and UK vs Ireland

Any recession is only for the poor

ah shur both the uk and the us have become train wrecks, largely due to rising inequalities, and the disturbing part is, we re following them down the same road in terms of economic and political ideologies

ExMachina1000

Wanderer78 wrote: »

ah shur both the uk and the us have become train wrecks, largely due to rising inequalities, and the disturbing part is, we re following them down the same road in terms of economic and political ideologies

Starts at the top. Those payments for top level officials is beyond ridiculous when compared to the like of the US and UK.

Wanderer78

ExMachina1000 wrote: »

Starts at the top. Those payments for top level officials is beyond ridiculous when compared to the like of the US and UK.

oh god, this crap, its a hell of a lot more complex than just pay rates at the top, theres astonishing levels of complexities involved in our economic and social issues

ExMachina1000

Wanderer78 wrote: »

oh god, this crap, its a hell of a lot more complex than just pay rates at the top, theres astonishing levels of complexities involved in our economic and social issues

What "crap"?

If you can justify the comparisons I made above I'd be interested to hear it.

Your posting style leaves a lot to be desired so if you cannot reply politely then dont bother

Wanderer78

ExMachina1000 wrote: »

What "crap"?

If you can justify the comparisons I made above I'd be interested to hear it.

Your posting style leaves a lot to be desired so if you cannot reply politely then dont bother

great!

you re overly simplifying something that is in fact highly complex, we ve all gone down the road of whats called neoliberal/free market ideologies, its failing, and we ve decided the best thing to do is ignore it, and carry on.....

ExMachina1000

Wanderer78 wrote: »

great!

you re overly simplifying something that is in fact highly complex, we ve all gone down the road of whats called neoliberal/free market ideologies, its failing, and we ve decided the best thing to do is ignore it, and carry on.....

I'm comparing pay levels between our neighbors and the United states with our lot.

That's all .

But to take up your point. What would be the alternative to neoliberal/free market ideologies?

Wanderer78

ExMachina1000 wrote: »

I'm raising comparing pay levels between our neighbors and the United states with our lot.

That's all .

But to take up your point. What would be the alternative to neoliberal/free market ideologies?

its fair enough comparing pay levels, but the reality is, its a hell of a lot more complex than just that, to the point, its probably irrelevant, i also think we may also never truly fully understand these complexities

we probably dont know what is better than our current form of capitalism, but the reality is, we still havent truly accepted, its a major failure. i personally like the use of the term 'progressive capitalism', but we dont even truly know what that means either, but first things first, actually accepting, we ve gone down the wrong road in regards capitalism

ExMachina1000

Wanderer78 wrote: »

its fair enough comparing pay levels, but the reality is, its a hell of a lot more complex than just that, to the point, its probably irrelevant, i also think we may also never truly fully understand these complexities

we probably dont know what is better than our current form of capitalism, but the reality is, we still havent truly accepted, its a major failure. i personally like the use of the term 'progressive capitalism', but we dont even truly know what that means either, but first things first, actually accepting, we ve gone down the wrong road in regards capitalism

I hope you don't mind me saying so but that is a politicians answer if I heard one!
Lots of words but no question answered or real alternative offered

Wanderer78

ExMachina1000 wrote: »

I hope you don't mind me saying so but that is a politicians answer if I heard one!
Lots of words but no question answered or real alternative offered

so what would you like me to say? what dont you understand with what i said?

ExMachina1000

Wanderer78 wrote: »

so what would you like me to say? what dont you understand with what i said?

I want to to offer a viable clear alternative.

I understand what you wrote but it didn't mean anything.

Wanderer78

ExMachina1000 wrote: »

I want to to offer a viable clear alternative.

I understand what you wrote but it didn't mean anything.

it probably doesnt exist, we have to simply create it, just like we created all the other forms of capitalism, including our current most predominate one, free market etc

does it make sense now?

Timing belt

Wanderer78 wrote: »

it probably doesnt exist, we have to simply create it, just like we created all the other forms of capitalism, including our current most predominate one, free market etc

does it make sense now?

So if it doesn't exist and we need to create it. What is that we need to create?

Your answer is coming across as the system is broken and needs to be fixed but we don't know what the solution is. Maybe you do know what the solution is and you are telling us but it is not clear from your post so could you please elaborate and spell out what changes are required.

KyussB

Generally the capitalist policies that came before NeoLiberalism (the Post-WWII 'golden age of capitalism' era in the US/UK/Europe), are much closer to the ideal that people are calling for today.

That's not the same as turning back time and the last 50 years of economic development with it, though.

That's what Corbyn/Sanders and similar progressives represent - a modernized version of the Post-WWII style 'golden age' Keynesianism - with modern Post-Keynesian advances in our understanding of how monetary/fiscal policy work, which aught to be coupled with a Job Guarantee and climate-change-fighting jobs program - among a lot more.

Timing belt

KyussB wrote: »

Generally the capitalist policies that came before NeoLiberalism (the Post-WWII 'golden age of capitalism' era in the US/UK/Europe), are much closer to the ideal that people are calling for today.

That's not the same as turning back time and the last 50 years of economic development with it, though.

That's what Corbyn/Sanders and similar progressives represent - a modernized version of the Post-WWII style 'golden age' Keynesianism - with modern Post-Keynesian advances in our understanding of how monetary/fiscal policy work, which aught to be coupled with a Job Guarantee and climate-change-fighting jobs program - among a lot more.

So its not quite communism (as that has been proven not to work) but a progressive version of communism with progressive tax changes and wealth redistribution and at the same time saving the environment.

Wanderer78

Wanderer78 wrote: »

What's the cause?


Again, you're posing the correct question, why was the imf called in, and austerity imposed, when the roots of the problem were clearly based in private sector financial institutions, and how the hell was imposing these measures in the public sector gonna truly resolve these primarily private sector based issues? I'd imagine investors weren't rushing in due to the lack of confidence, we really have to get over this rising deficit myth, 08 once again showed us, private debt is the far more dangerous of the two, and what is our government currently trying to do, once again, but encouraging the borrowing of private debt, ffs!

And STILL you haven't answered my question. You repeated my question. And again you repeated the CAUSE.

If economic shocks can be overcome by borrowing - and growing the public debt is harmless - why did we have to resort to the IMF and give away or sovereignty to be able to borrow? How do you suggest borrowing should continue if nobody would lend to us like in 2010?

I want a firm and concise answer from you, not waffle. This is the Economics forum not some leftist Blogging site

KyussB

If you want to have a debate about the definition of the word Communism, then have it with someone else. I don't think anyone who isn't shit stirring would define Joseph McCarthy era US, and the war against Communism from the Post-WWII US/UK/European West - as itself being Communist.

Timing belt

KyussB wrote: »

If you want to have a debate about the definition of the word Communism, then have it with someone else. I don't think anyone who isn't shit stirring would define Joseph McCarthy era US, and the war against Communism from the Post-WWII US/UK/European West - as itself being Communist.

The use of Job Guarantee and Corbyn/Sanders automatically makes me think communism. Just to be clear I'm not looking for a debate on communism just looking for clear answers instead of waffle.

Wanderer78

salonfire wrote: »

And STILL you haven't answered my question. You repeated my question. And again you repeated the CAUSE.

If economic shocks can be overcome by borrowing - and growing the public debt is harmless - why did we have to resort to the IMF and give away or sovereignty to be able to borrow? How do you suggest borrowing should continue if nobody would lend to us like in 2010?

I want a firm and concise answer from you, not waffle. This is the Economics forum not some leftist Blogging site

again, whats the cause? what are you actually talking about?

thats fair enough i guess, once again, the financial issues of the previous crash were largely based in private sector financial institutions, i.e. private sector banks. once again, you are in fact posing the correct questions, why were the imf introduced into the whole mess, how come large proportions of the debts, which were ultimately private sector debts, end up in the public domain? and how was austerity, imposed in the public sector, gonna resolve these, primarily private sector issues? what the hell!

ive no idea how to be anymore concise than that

KyussB

Timing belt wrote: »

The use of Job Guarantee and Corbyn/Sanders automatically makes me think communism. Just to be clear I'm not looking for a debate on communism just looking for clear answers instead of waffle.

So you want 'clear answers' about whether certain policies or people meet the definition of Communism - and you're not looking for a debate on the definition of Communism...

That's a well known shit-stirring/flamebait tactic, accusing everything you disagree with as being Communism. I'm not having a debate about that - I don't associate anything I advocate, with that.

Timing belt

KyussB wrote: »

So you want 'clear answers' about whether certain policies or people meet the definition of Communism - and you're not looking for a debate on the definition of Communism...

That's a well known shit-stirring/flamebait tactic, accusing everything you disagree with as being Communism. I'm not having a debate about that - I don't associate anything I advocate, with that.

No I want clear answer in plain English as to what policies you are advocating.

KyussB

Which you got and dismissed as Communism.

If you're not happy with that answer which you dismissed, then tough - I'm not willing to give you benefit of the doubt as arguing in good faith, past that point.

Timing belt

KyussB wrote: »

Which you got and dismissed as Communism.

If you're not happy with that answer which you dismissed, then tough - I'm not willing to give you benefit of the doubt as arguing in good faith, past that point.

What's the point being on this forum when you are unable (or unwilling) to articulate your policies or even to debate the merits of them.

Arthur Daley

Even though it's clearly pointed out that the majority of the deficit spending was not for the banks he still repeats the same thing over and over again. And there's the misuse of the term austerity again.

KyussB

Timing belt wrote: »

What's the point being on this forum when you are unable (or unwilling) to articulate your policies or even to debate the merits of them.

The policies which you dismissed as Communism, now suddenly weren't articulated?

Nobody is stopping you from replying to those policies - it is your choice to reply with "Durr Communism!" and then the flail about pretending no policies were expressed - instead of debating their actual merits.

Geuze

KyussB wrote: »

which aught to be coupled with a Job Guarantee .

I have said this before, to me this proposal sounds interesting.

Ireland does not have high rates of employment, and our LFPR is not high.

We have loads of households with zero market incomes.

We have been the leading country across the EU for the number of people living in VLWI households.

There are several reasons for this (design of the welfare state / childcare / social care preferences)

I would need to see the details, but a scheme that offers a Job Guarantee sounds good.

I have several questions:
is it only available to LT unemployed?
or is it available to any jobless person?
who will the employers be?
does this scheme replace JSA?

https://twitter.com/seamuscoffey/status/1094990982444134407/photo/1

KyussB

Ya I think it could benefit Ireland particularly well with regards to households with low work intensity and such - and particularly e.g. areas with discrimination and reduced job opportunities, like in the Traveller community, the disabled - among many other groups. Also helping people get off welfare dependency, and eliminating the 'dole scrounger' stereotype being applied to willing workers.

We should also look to it being EU-wide, because there are future economic crises and fresh Euro crises on the way - and it's exactly the kind of stimuluss and job-creation effort, that can help repair the malaise especially in the e.g Southern EU economies.

A JG position is supposed to be available to anyone who wants it, employed or unemployed - the employer would be the state (and the breadth of potential work can be quite large, and includes training if necessary) - and it would not replace unemployment payments (if people want to stay unemployed rather than go on the JG, that's fine).

There is, in my view, no lack of useful work to be done, and never will be either - and urgent projects like eliminating our carbon emissions etc. (a truly enormous amount of work that needs doing), would be the perfect present example.

Timing belt

KyussB wrote: »

Ya I think it could benefit Ireland particularly well with regards to households with low work intensity and such - and particularly e.g. areas with discrimination and reduced job opportunities, like in the Traveller community, the disabled - among many other groups. Also helping people get off welfare dependency, and eliminating the 'dole scrounger' stereotype being applied to willing workers.

We should also look to it being EU-wide, because there are future economic crises and fresh Euro crises on the way - and it's exactly the kind of stimuluss and job-creation effort, that can help repair the malaise especially in the e.g Southern EU economies.

A JG position is supposed to be available to anyone who wants it, employed or unemployed - the employer would be the state (and the breadth of potential work can be quite large, and includes training if necessary) - and it would not replace unemployment payments (if people want to stay unemployed rather than go on the JG, that's fine).

There is, in my view, no lack of useful work to be done, and never will be either - and urgent projects like eliminating our carbon emissions etc. (a truly enormous amount of work that needs doing), would be the perfect present example.

How do you finance such a proposition and in such a scenario would we not end up with full employment which in turn would lead to wage inflation or immigration to fill any new jobs in the economy. How would this be managed?

Also what is the logic in keeping unemployment payments in such a policy. I can understand if it is a short term unemployment payment whilst someone is looking for work but surely it would not included the long-term unemployed.

KyussB

The actual jobs portion of the JG is only half of the policy - the other half is that it's an entire macroeconomic automatic stabilizer and inflation management policy, which replaces the use of unemployment as an automatic stabilizer and inflation management (i.e. dumps NAIRU).

Instead of the private sector money supply being tightened and raising unemployment to bring down inflation, private sector money supply is tightened and jobs shift from higher wage private sector work to living wage JG work, to bring down inflation.

Instead of the central bank using monetary policy to tighten the entire private sectors money supply, government taxation would be used to target overheating sectors instead.

It would set a de-facto wage floor for the economy at the living wage (the wage the JG pays) - when Full Employment is reached, adjustments to spending/taxation would be used to limit inflation at target levels (primarily taxes aimed at overheating/inflating sectors of the private economy).

There's no Euro crisis or threat to our ability to repay bonds, so we can afford any level of funding up to Full Employment.

The reason to keep unemployment payments, is so that people are not being forced to work - as that raises ethical/moral questions about the JG - and as you mention for cases like short term job churn. It's better/safer to keep unemployment payments as well, with the intention that very-few (almost no) people are on unemployment (and it would be a lot easier to identify the 'genuine' dole scroungers, then - the ones that really are work shy, long-term unemployed - but there may also be people still who, for one reason or another, aren't suitable for the labour force or have trouble).

KyussB

I've only skimmed it, but Bill Mitchell and Warren Mosler are probably the primary and most authoritative Job Guarantee advocates - Bill's writing isn't always accessible though:
http://www.billmitchell.org/publications/journals/J40_2002.pdf

Should give a good overview of it, as a general macroeconomic policy. Most of the writing on it is not tailored to the Euro.

Timing belt

KyussB wrote: »

There's no Euro crisis or threat to our ability to repay bonds, so we can afford any level of funding up to Full Employment.

Thank you for Reply and yes I can see the logic behind this but still question the ability to pay for it and the wider impacts that it would have.

Technically we would have full employment but this would be split between the private sector and public sector and Tax base would need to be widened to pay for this because if we were only reliant on government debt then that would not be sustainable and we would end up being locked out of the market or forced to pay debt servicing costs that would be unmanageable. Yes we could print money or undertake a form of QE to reduce this but that also has impacts.

For example if we assumed that Ireland still had its own currency (So as to eliminate the complexities of the Euro) the government would be able to borrow from the markets to fund this and if the cost of borrowing rose they could do there own form of QE to bring the rate down. The impact of this would be to devalue the currency which would help with exports but would increase the cost of imported inputs and any imported goods that we consume. The main one being oil as this is priced in USD.

Likewise if it was a regular occurrence to devalue the currency or undertake QE we would end up little or no investors as the value of the bonds they hold would devalue each time by the time the converted it to their home currency. Likewise there is a risk that the people of Ireland would loose confidence in the currency and would start to hold foreign reserves so they could pay for holidays or a expensive import (German Cars etc.) so not to be at risk of the price rising in Irish currency terms.

KyussB

There is no Euro crisis anymore, and no question of our ability to repay government bonds. There is no debt sustainability issue.

The assumptions/models you use for predicting future interest rate levels is wrong. Officially predicted future interest rates have been persistently wrong for a long time, because of the use of bad assumptions/models.

The simplified reality is that central banks determine the interest rate and the rate on bonds will shadow that pretty closely - and the central bank interest rate is (simplified...) determined based on whether or not Full Employment has been reached (lower/zero/negative bound when it has not been reached - rising when it is reached).

Unless Ireland is at risk of crashing out of the Euro, our bonds shadowing the ECB interest rate will hold. The Eurozone is also not reaching Full Employment anytime this half of the decade most likely, so interest rates are not going to be a worry.

The sooner Ireland acts on this, the longer Ireland gets to take advantage of low interest rates and soak up spare EU-wide labour, massively expanding our economy and wealth - before the rest of the Eurozone catches up and brings the Eurozone to Full Employment, causing the spending boom to level out, and the Job Guarantee to wind down until the next economic crisis.

If Ireland had its own currency it would never need to borrow, the primary purpose of bonds would be to encourage saving if that was deemed to be macroeconomically desireable. The only time there is permanent devaluation, is if a government keeps on net-spending after reaching Full Employment - if a government does not do this (and the JG explicitly is against doing that), then the long-term value of the currency pre/post crisis is the same (simplified - since we're an open economy and who knows how a global crisis would hit trade). All of that is another topic though, and it's probably less complex/dissonance-inducing to stick to the Euro.

Still, it's worth emphasizing that QE/currency-printing does not devalue a currency, so long as there is an 'Output Gap' (GDP being below potential) which the newly created money is used to fill/close. That's exactly what the JG is for - and there is a very tight/close relationship between interest rates, Full Employment the Output Gap, currency value etc. - which are in perfect harmony with the JG policy, and are critical to focus on and understand.

Timing belt

KyussB wrote: »

There is no Euro crisis anymore, and no question of our ability to repay government bonds. There is no debt sustainability issue.

The assumptions/models you use for predicting future interest rate levels is wrong. Officially predicted future interest rates have been persistently wrong for a long time, because of the use of bad assumptions/models.

The simplified reality is that central banks determine the interest rate and the rate on bonds will shadow that pretty closely - and the central bank interest rate is (simplified...) determined based on whether or not Full Employment has been reached (lower/zero/negative bound when it has not been reached - rising when it is reached).

Unless Ireland is at risk of crashing out of the Euro, our bonds shadowing the ECB interest rate will hold. The Eurozone is also not reaching Full Employment anytime this half of the decade most likely, so interest rates are not going to be a worry.

The sooner Ireland acts on this, the longer Ireland gets to take advantage of low interest rates and soak up spare EU-wide labour, massively expanding our economy and wealth - before the rest of the Eurozone catches up and brings the Eurozone to Full Employment, causing the spending boom to level out, and the Job Guarantee to wind down until the next economic crisis.

If Ireland had its own currency it would never need to borrow, the primary purpose of bonds would be to encourage saving if that was deemed to be macroeconomically desireable. The only time there is permanent devaluation, is if a government keeps on net-spending after reaching Full Employment - if a government does not do this (and the JG explicitly is against doing that), then the long-term value of the currency pre/post crisis is the same (simplified - since we're an open economy and who knows how a global crisis would hit trade). All of that is another topic though, and it's probably less complex/dissonance-inducing to stick to the Euro.

Still, it's worth emphasizing that QE/currency-printing does not devalue a currency, so long as there is an 'Output Gap' (GDP being below potential) which the newly created money is used to fill/close. That's exactly what the JG is for - and there is a very tight/close relationship between interest rates, Full Employment the Output Gap, currency value etc. - which are in perfect harmony with the JG policy, and are critical to focus on and understand.

It is not the interest rate that concerns me but more the impact on the currency exchange rate. And there would be currency fluctuation which is even stated in the link you sent earlier:
"A once-off, modest increase in ‘low end’ import spending is likely to occur because JG workers would have higher disposable incomes. Any depreciation in the exchange rate is likely to shift the distribution of imports away from the low end."

I can't see it working in a country with an open economy that relies heavily of FDI as the currency fluctuation alone would deter companies from setting up in Ireland.

KyussB

Timing belt wrote: »

It is not the interest rate that concerns me but more the impact on the currency exchange rate. And there would be currency fluctuation which is even stated in the link you sent earlier:
"A once-off, modest increase in ‘low end’ import spending is likely to occur because JG workers would have higher disposable incomes. Any depreciation in the exchange rate is likely to shift the distribution of imports away from the low end."

I can't see it working in a country with an open economy that relies heavily of FDI as the currency fluctuation alone would deter companies from setting up in Ireland.

Under the Euro, that wouldn't be a concern due to the size of the EU and trade within the Eurozone.

Under a national currency the exchange rate would float more, but Ireland would also be a fairly different economy due to not being in the Euro, so we can't really compare present-day Ireland's economic conditions with regards to e.g. Euro-based FDI, to that.

Yes, with a national currency there will be more pressure on imports because of 1: More money domestically buying foreign goods, and 2: A (presumably) global slowdown reducing the demand for Irish exports - but the latter half of that is going to happen anyway, and the government has tools to reduce this effect by 1: Substituting imports for local goods (eliminating climate changing emissions with renewables is a great way to do this, reducing energy imports), 2: Suppress imports with increased taxes, 3: Boost exports (but this is a 'beggar-thy-neighbour' zero-sum game in a global slowdown so isn't the desired option), 4: Increase local economic efficiency (e.g. through infrastructural investments), decreasing the cost of producing exports and reducing use of imports, 5: Encourage domestic saving instead of spending on imports (government bonds given to citizens instead of finance markets are good for this).

There are a lot of things I could continue listing there, and you're correct that being an open economy is an important consideration - but none of that changes the goal of permanent Full Employment being achievable, sustainable and the primary concern - it only changes the configuration of policy options we need to get there, which may indeed be a bit stricter versus what a stronger economy like the US (or EU/Euro) can manage.

Again though, I advocate a JG under the Euro - even if I'm very critical of the faults in the Euro.

Wanderer78

Job garantee programs are great, but creating these jobs is only an element of what would need to be done, the root causes of long term unemployment are deeply complex, the individuals would more than likely require professional psychological supports, some probably long term, in order to enter the work force, creating the jobs alone, probably wouldn't work.