Recession predictions

KyussB

I view all of that as a solvency/capital-requirements issue. I don't see the point in breaking that down into more and more granular issues - that only serves to obscure things. There are two general classes of issues - capital requirements and reserve requirements - and it doesn't add anything to the discussion, to break the former down into more and more detail.

If there is enough demand for loans and the only thing stopping the overall banking system from providing them is liquidity, the central bank will accommodate that - including by (one way or the other, obfuscated through several different programs if need be) expanding 'eligible assets' that can be swapped for shoring up reserves.

All of that leading to restating the point, that bank lending is constrained by capital requirements - it is not constrained by reserve requirements - deposits do not 'fund' loans, loans create deposits - and that ultimately the quantity of loans/money is determined from within the economy (endogenously) by demand for loans, not from outside the economy by the central bank (exogenously) - with the interest rate and regulations placed on loan issuance, tempering the demand for loans.

Timing belt

KyussB wrote: »

I view all of that as a solvency/capital-requirements issue. I don't see the point in breaking that down into more and more granular issues - that only serves to obscure things. There are two general classes of issues - capital requirements and reserve requirements - and it doesn't add anything to the discussion, to break the former down into more and more detail.

This does not obscure things as all the points I mentioned need to be taken into account for a individual bank to lend. It is not just about a bank being adequately capitalised. If it was it would make banking a lot more simple and riskier.

If there is enough demand for loans and the only thing stopping the overall banking system from providing them is liquidity, the central bank will accommodate that - including by (one way or the other, obfuscated through several different programs if need be) expanding 'eligible assets' that can be swapped for shoring up reserves.

At the overall banking level yes but not at a individual bank level and banks fail at a individual level and all it takes is one bank to get into difficulty to put pressure on all other banks.

All of that leading to restating the point, that bank lending is constrained by capital requirements - it is not constrained by reserve requirements - deposits do not 'fund' loans, loans create deposits - and that ultimately the quantity of loans/money is determined from within the economy (endogenously) by demand for loans, not from outside the economy by the central bank (exogenously) - with the interest rate and regulations placed on loan issuance, tempering the demand for loans.

Yes I agree that demand for loans comes from the economy but a bank has it's risk appetite which limits who and the value of who they lend to.

At the moment consumers are not drawing down loans in fact they are paying them off which is destroying money. The banks are desperate to lend due to the amount of liquidity in the financial system but unless they take on more risk they are unable to do so as the market is saturated. The central bank can cut rates to try and drive demand but that hasn't worked for the past 4/5 years in fact you could argue that it has lead to banks being less profitable which has reduced competition as smaller banks are not able to cover the fixed costs of running a bank and have exited the market. (e.g. ulster, Kbc)

KyussB

Except I'm talking about banking on an aggregate level, not individual banks, because I was talking about how money creation works and what the real limits on it are - which requires looking at the whole banking sector, not individual banks. So that's a page or two spent on details which (while illuminating and worth going over again, even if just for education use and refreshing my memory), don't help clarify the original point made.

I agree that the demand for loans now is constrained - that QE has been "pushing on a string" for years.

Wanderer78

Fascinating debate folks, thank you

Geuze

Confirmation today that the EU and the EA were in (technical) recession during 2020 Q4 and 2021 Q1.

https://ec.europa.eu/eurostat/documents/2995521/11563087/2-18052021-AP-EN.pdf/c892ab6d-ecc0-8152-00aa-929e2e838db4?t=1621325416766


Small falls in GDP during these two quarters.

Geuze

Geuze wrote: »

Confirmation today that the EU and the EA were in (technical) recession during 2020 Q4 and 2021 Q1.

https://ec.europa.eu/eurostat/documents/2995521/11563087/2-18052021-AP-EN.pdf/c892ab6d-ecc0-8152-00aa-929e2e838db4?t=1621325416766


Small falls in GDP during these two quarters.

Germany was in techical recession before Covid.

https://www.cnbc.com/2019/11/14/germany-q3-gdp-2019.html

The most common problem in 2019 in Ireland was shortage of loans to SME and first signs of recessions

https://www.centralbank.ie/docs/default-source/publications/sme-market-reports/sme-market-report-2019.pdf?sfvrsn=9

I can not understand were "growth" coming from

Zombi which had die in 2019 got some support ?

The most common problem that people has serious problems with memory

Deub

The G7 agreement on minimum corporate tax and change on digital tax could be bad news for Ireland.
Let’s see what are the details and most of all the timeframe for the implementation.

Mongfinder General

[Deleted User] wrote: »

Germany was in techical recession before Covid.

https://www.cnbc.com/2019/11/14/germany-q3-gdp-2019.html

The most common problem in 2019 in Ireland was shortage of loans to SME and first signs of recessions

https://www.centralbank.ie/docs/default-source/publications/sme-market-reports/sme-market-report-2019.pdf?sfvrsn=9

I can not understand were "growth" coming from

Zombi which had die in 2019 got some support ?

The most common problem that people has serious problems with memory

Perhaps the regulation of Crowdfunding can help with SME loans. I understand that Crowdfunding platforms will be able operate cross border from November under the new Crowdfunding Regulation.

Mongfinder General

Mongfinder General wrote: »

Perhaps the regulation of Crowdfunding can help with SME loans. I understand that Crowdfunding platforms will be able operate cross border from November under the new Crowdfunding Regulation.

Let's start from understanding that loan are not growth.

Wanderer78

Revolution 1917 wrote:

Let's start from understanding that loan are not growth.

If loans aren't created, we got no money supply, which means we get no growth, which means, we d be in deep sh1t

theguzman

Wanderer78 wrote: »

If loans aren't created, we got no money supply, which means we get no growth, which means, we d be in deep sh1t

We should move away from FIAT Currency back to the Gold standard or to a Dogecoin like system of finite supply. Printing money ad-infinitum forever is debt slavery and is responsible for the current boom in asset prices like property and land, people want something which is fixed and permanent, not something which is being constantly printed off and duplicated ad-infinitum, a true measure of wealth is something rare and in short supply, almost 50% of all cash and money in banks has been created out of thin air "printed" since March of 2020 at the start of the Pandemic. Inflation is starting to bite badly now and has started already in Construction and will soon filter down to groceries and other essentials.

Wanderer78

theguzman wrote: »

We should move away from FIAT Currency back to the Gold standard or to a Dogecoin like system of finite supply. Printing money ad-infinitum forever is debt slavery and is responsible for the current boom in asset prices like property and land, people want something which is fixed and permanent, not something which is being constantly printed off and duplicated ad-infinitum, a true measure of wealth is something rare and in short supply, almost 50% of all cash and money in banks has been created out of thin air "printed" since March of 2020 at the start of the Pandemic. Inflation is starting to bite badly now and has started already in Construction and will soon filter down to groceries and other essentials.

all money is created from thin air, it always has been, long before 2020 polices where implemented, we ve in recent times, just become overly reliant on private sector created money, i.e. credit, which in turn has just created credit fueled asset booms, and subsequent busts, i.e. 08. the majority of the money supply has in fact been, and for a long time, coming from private sector financial institutions, or banks, hence the term 'credit crisis'. but since we ve been lubing the pathways to asset markets, over the last few decades, anytime money is created in either the public or private domains, its flooding straight towards these markets, driving up asset prices. private debt has in fact been causing far more significant crashes, again, 08 was primarily due to private debt accumulations globally, including here in ireland, which of course was flooding into asset markets, primarily property and land. its also important to remember, the paying off of debt, is in fact the destruction of money itself, due to the nature of its creation, commonly called 'double-entry bookkeeping'

one of the main reasons why we moved from the gold standard was to expand our economies, without which, we would have been screwed, i.e. we had to move off the gold standard, it had run its course. going back isnt possible now, you cant make debts just disappear without causing problems, and there just isnt enough gold, it would cause catastrophic economic crashes globally. its also one of the main reasons why it would be virtually impossible for a country to leave the euro group, having debts based in what would be a foreign currency upon leaving, leaving would probably lead to that countries economy crashing, potentially crashing the eu along with it, i.e. we re all stuck in this dance.

some inflation is actually required, and urgently, as we ve been also living in a low wage inflation environment for too long now, along side high asset price inflation, hence our current housing train wreck. if we dont create this inflation, all our debts become highly problematic, as we may not be able to service them, and we all know what happens when debts become unserviceable, i.e. 08! so careful what you wish for!

Wanderer78

Wanderer78 wrote: »

If loans aren't created, we got no money supply, which means we get no growth, which means, we d be in deep sh1t

When loan taken we also dont have money supply.
Person who bought car taking loan spend less
When hi spending less the less people around getting money
When they getting less money the government getting less taxes
When government getting less taxes has take loan
We are in deep ,.. because we have pay more taxes when we already getting less income because person which took the loan spend less
We all alive just because government still can take loan

Wanderer78

Wanderer78 wrote: »

all money is created from thin air, it always has been, long before 2020 polices where implemented, we ve in recent times, just become overly reliant on private sector created money, i.e. credit, which in turn has just created credit fueled asset booms, and subsequent busts, i.e. 08. the majority of the money supply has in fact been, and for a long time, coming from private sector financial institutions, or banks, hence the term 'credit crisis'. but since we ve been lubing the pathways to asset markets, over the last few decades, anytime money is created in either the public or private domains, its flooding straight towards these markets, driving up asset prices. private debt has in fact been causing far more significant crashes, again, 08 was primarily due to private debt accumulations globally, including here in ireland, which of course was flooding into asset markets, primarily property and land. its also important to remember, the paying off of debt, is in fact the destruction of money itself, due to the nature of its creation, commonly called 'double-entry bookkeeping'

one of the main reasons why we moved from the gold standard was to expand our economies, without which, we would have been screwed, i.e. we had to move off the gold standard, it had run its course. going back isnt possible now, you cant make debts just disappear without causing problems, and there just isnt enough gold, it would cause catastrophic economic crashes globally. its also one of the main reasons why it would be virtually impossible for a country to leave the euro group, having debts based in what would be a foreign currency upon leaving, leaving would probably lead to that countries economy crashing, potentially crashing the eu along with it, i.e. we re all stuck in this dance.

some inflation is actually required, and urgently, as we ve been also living in a low wage inflation environment for too long now, along side high asset price inflation, hence our current housing train wreck. if we dont create this inflation, all our debts become highly problematic, as we may not be able to service them, and we all know what happens when debts become unserviceable, i.e. 08! so careful what you wish for!

Simply the economy model are dead
If we take country as company we will see that country does not create enough profit and has to take loan to survive and pay wages!
When company has same situation she simply meet bankruptcy procedure because any bank will not give loan to the company which not creating any profit !
By real name and situation Ireland bankrupt in 2009 and all her finance system collapsed because stopped creating any profit and still not creating any

Wanderer78

Revolution 1917 wrote:

When loan taken we also dont have money supply. Person who bought car taking loan spend less When hi spending less the less people around getting money When they getting less money the government getting less taxes When government getting less taxes has take loan We are in deep ,.. because we have pay more taxes when we already getting less income because person which took the loan spend less We all alive just because government still can take loan

Revolution 1917 wrote:

Simply the economy model are dead If we take country as company we will see that country does not create enough profit and has to take loan to survive and pay wages! When company has same situation she simply meet bankruptcy procedure because any bank will not give loan to the company which not creating any profit ! By real name and situation Ireland bankrupt in 2009 and all her finance system collapsed because stopped creating any profit and still not creating any

Debt is the money supply, this process is called 'monetisation of debt', and the two main methods of doing so is when governments run deficits, the public entity, or when banks create loans, the private sector entity. This is why governments are nothing like households, I.e. Households cannot create money, but governments can, but since we ve been living in an era of balanced budgets, governments have been significantly curtailed in doing so, forcing the money supply out into the private sector, creating credit fuelled booms and busts.

Yes, we ve become over reliant on the credit supply, resulting in heavily indebted nations, but this is the private sector supply, we must move into a more public sector supply, I.e. Perpetual deficits, in order to try break away from this.

Noting, the Irish state wasn't bankrupt in 08, it was the private sector banks that over supplied credit that lead to the crash, I.e. It was primarily a private sector problem, but you d be surprised af the amount that believe otherwise!

coolshannagh28

Wanderer78 wrote: »

Debt is the money supply, this process is called 'monetisation of debt', and the two main methods of doing so is when governments run deficits, the public entity, or when banks create loans, the private sector entity. This is why governments are nothing like households, I.e. Households cannot create money, but governments can, but since we ve been living in an era of balanced budgets, governments have been significantly curtailed in doing so, forcing the money supply out into the private sector, creating credit fuelled booms and busts.

Yes, we ve become over reliant on the credit supply, resulting in heavily indebted nations, but this is the private sector supply, we must move into a more public sector supply, I.e. Perpetual deficits, in order to try break away from this.

Noting, the Irish state wasn't bankrupt in 08, it was the private sector banks that over supplied credit that lead to the crash, I.e. It was primarily a private sector problem, but you d be surprised af the amount that believe otherwise!

There is an argument that the private sector may have triggered the crash but the real pain thereafter was caused by the govts need to borrow approximately 50 billion to maintain the standard of living of the public service.

Wanderer78

coolshannagh28 wrote: »

There is an argument that the private sector may have triggered the crash but the real pain thereafter was caused by the govts need to borrow approximately 50 billion to maintain the standard of living of the public service.

no argument at all, it can be clearly seen in the data what occurred, graphs provided, private debt triggered and caused the crash, period, and it required central banks to bail the whole system out, and states were in turn, 'encouraged' to take a few billion on their books, just for the team! blaming the so called 'inefficient and 'bloated' public services was a very convenient scapegoat, and as you can see, it has worked!

Wanderer78

Wanderer78 wrote: »

Debt is the money supply, this process is called 'monetisation of debt', and the two main methods of doing so is when governments run deficits, the public entity, or when banks create loans, the private sector entity. This is why governments are nothing like households, I.e. Households cannot create money, but governments can, but since we ve been living in an era of balanced budgets, governments have been significantly curtailed in doing so, forcing the money supply out into the private sector, creating credit fuelled booms and busts.

Yes, we ve become over reliant on the credit supply, resulting in heavily indebted nations, but this is the private sector supply, we must move into a more public sector supply, I.e. Perpetual deficits, in order to try break away from this.

Noting, the Irish state wasn't bankrupt in 08, it was the private sector banks that over supplied credit that lead to the crash, I.e. It was primarily a private sector problem, but you d be surprised af the amount that believe otherwise!

The last money spreading from helicopter show that any economy rules does not work anymore ! Money does not make money !
The PUP and WSS perfectly show that capitalism does not work !
I would not like tell how media try create positive thinking trying increase government incomes from taxes !
I will not tell who own media and who pay lobby ! Who paying bills for elections !
Whole system are collapsed !
I own media in Ireland were builders buy advertisment trying sell houses were is part of my business group investment .You think I will come on street and tell people truth Dont buy houses !? Dont spend !? The recession will start in month time ? Do you know what will happen with my company in next couple hours ? Do you know what politicians supported by another business groups will do ?
Recession here ! Right here and right now ! The biggest world ever seen !

Pussyhands

Nearly 3 years since the thread started and no one could have predicted the covid recession non recession.

Still a lot of tax payer supports out there at the moment though.

Wanderer78

https://www.boards.ie/discussion/comment/117894434#Comment_117894434

such predictions are impossible, humans dont have these capabilities, we may never have

tax payer supports have been critical in maintaining functionality of our economies, since there was a dramatic drop in the demand for private sector money, i.e. credit. we need to maintain running deficits for the foreseeable, to try reduce, ideally prevent, excess credit creation, i.e. pre 08 period

Gloomtastic!

How have countries fared where there were no tax payer supports? Have their economies been devestated? Or were they pretty bad to start with.

Wanderer78

https://www.boards.ie/discussion/comment/117894512#Comment_117894512

great question, not sure, but i suspect, not too good. i know people have been dying outside the entrances of Indian hospitals throughout this, unsure if theyve been receiving state aid, welfare etc, oxygen has also been in serious short supply in such countries, industrial oxygen been used in many cases, and a major black market of oxygen supplies is under way, so god knows whats been bought and sold there. parts of Africa have been experiencing major civil unrest, riots, looting etc etc, they probably dont receive government aid

Timing belt

https://www.boards.ie/discussion/comment/117894547#Comment_117894547

if you are referring to the civil unrest in South Africa a few months back this was orchestrated and allowed to put pressure on the government for prosecuting Zuma for corruption.

A lot lot of emerging markets have been insulted by the increase in demand for commodities from fiscal spending in more developed countries.

Wanderer78

it ll be interesting to see if the collapse of chinas evergrande have much effect in this neck of the woods!

celtic_oz

any issues can be overcome by central banks printing more money

any inflation as a result is entirely transitory apparently

there is no downside, welcome to the new crash free world!

Wanderer78

https://www.boards.ie/discussion/comment/117900223#Comment_117900223

im not so sure about that, we still have the global financial system very complexly intertwined, it ll be an interesting one to watch

Timing belt

https://www.boards.ie/discussion/comment/117898211#Comment_117898211

The world will be watching how china handles the crisis.

Will they protect the domestic market at the expense of offshore bond holders?

Will the step in and guarantee household deposits because if they don't the crisis will spread to all other property developers in china as the pre-sales funding model would no longer be deemed viable model.

They will need to take action and how they handle this will determine whether investors run away or stick with china.

PieOhMy

https://www.reuters.com/article/china-stocks-hongkong-close-idUSAZN182A00

Been a while since I saw this much talk of contagion. The first ripples?

I've enjoyed catching up on the posts over the last few days here, interesting times ahead!

An Ri rua

https://www.boards.ie/discussion/comment/117901607#Comment_117901607

A bull in a China shop has always ended in tears...

Pussyhands

These budgets are unsustainable. We added over 5bn in permanent spending last budget and more this budget. There's no money tree but government are acting like it!