SSIA as way to combat virus’ economic impact

Dots1982

I’ve heard quantative easing and helicopter money as ways to combat the current financial crisis.

An SSIA would have the high level of return available that it would bring huge money into the government from those that still have it in piles (and there are many) and allow the government to transfer the cash to a recovery plan for the self employed and the newly unemployed.

Geuze

I don't get you?

The original SSIA was designed to encourage saving, and cost the Govt as they added to people savings.

Dots1982

Geuze wrote: »

I don't get you?

The original SSIA was designed to encourage saving, and cost the Govt as they added to people savings.

Where does the money go that people save in an SSIA?

kingstevii

Nobody has a penny. Nevermind trying to save in an ssia..

Dots1982

kingstevii wrote: »

Nobody has a penny. Nevermind trying to save in an ssia..

Well that’s bollocks.

Allinall

Dots1982 wrote: »

Where does the money go that people save in an SSIA?

It sat in bank accounts all over the country.

I think what you are proposing is a government issued bond that would be bought by the general public, with a generous interest rate to attract investors.

Whilst laudable, the government can borrow virtually as much as they want at historically low interest rates, so I'm not sure why they would pay more to you or me.

Geuze

Dots1982 wrote: »

Where does the money go that people save in an SSIA?

Into a bank account, and the bank then lend it to borrowers.

Geuze

kingstevii wrote: »

Nobody has a penny. Nevermind trying to save in an ssia..

Irish households have over 100 bn on deposit.

Geuze

Dots1982 wrote: »

I’ve heard quantative easing and helicopter money as ways to combat the current financial crisis.

Follow this blog for possible economics responses:

https://marginalrevolution.com/

Dots1982

Allinall wrote: »

It sat in bank accounts all over the country.

I think what you are proposing is a government issued bond that would be bought by the general public, with a generous interest rate to attract investors.

Whilst laudable, the government can borrow virtually as much as they want at historically low interest rates, so I'm not sure why they would pay more to you or me.

Fair point. It would put our own dormant money to work rather than Depend on foreign capital.

Pete_Cavan

SSIAs take money out of the economy and release it later. That is fine when the economy is ticking along nicely. When this is sorted, we won't want to be taking money out of the economy, we will need ways to generate economic activity. SSIAs are literally the exact opposite of what we will need to do.

Geuze

Dots1982 wrote: »

Fair point. It would put our own dormant money to work rather than Depend on foreign capital.

What do you mean by "dormant money"?

All money deposited into banks is lent out.

Dots1982

Pete_Cavan wrote: »

SSIAs take money out of the economy and release it later. That is fine when the economy is ticking along nicely. When this is sorted, we won't want to be taking money out of the economy, we will need ways to generate economic activity. SSIAs are literally the exact opposite of what we will need to do.

Asking again, where does the money go that is being taken out of the economy?

Pete_Cavan

Dots1982 wrote: »

Asking again, where does the money go that is being taken out of the economy?

Banks, again.

Dots1982

Geuze wrote: »

What do you mean by "dormant money"?

All money deposited into banks is lent out.

True and banks will make decisions on who to loan that money to on the basis of what is good for the bank.

Governments can decisions On what is good for the economy.

Dots1982

Pete_Cavan wrote: »

Banks, again.

The money would have to go to the government. Basically these with a higher level of return- https://www.statesavings.ie/our-products/4-year-national-solidarity-bond

L1011

Dots1982 wrote: »

Asking again, where does the money go that is being taken out of the economy?

In to the bank account you've inventivised people to put it in to

L1011

Dots1982 wrote: »

The money would have to go to the government. Basically these with a higher level of return- https://www.statesavings.ie/our-products/4-year-national-solidarity-bond

So the state would icentivise people to give it money to do what with precisely?

This is an awful badly thought out idea

Pete_Cavan

SSIAs are a deflationary measure in times of strong economic growth, they are no use to assist economic recovery after a shock.

loyatemu

the ECB will have to print money, every other central bank will be doing the same thing. The govt will be keen to get money back into the economy, not have people squirreling it away in savings accounts.

Dots1982

L1011 wrote: »

So the state would icentivise people to give it money to do what with precisely?

This is an awful badly thought out idea

The government doesn’t need money? It will have a load of money that it will have nothing to do with? That’s what you see happening?

The self employed, businesses and recently unemployed are all grand right now?

Pete_Cavan

Dots1982 wrote: »

The money would have to go to the government. Basically these with a higher level of return- https://www.statesavings.ie/our-products/4-year-national-solidarity-bond

State bonds are completely different to the SSIA scheme. There is no point in the government trying to encourage economic activity while at the same time encouraging people to keep their money in a bank account for a set period of time. It is trying to do two opposite things at the same time.

nelly17

The issue with QE or Helicopter money is the crntral bank issues it to other banks and people need to borrow it - That wont happen and cause a bottle-neck I think the best option would be a kind of Temporary universal basic income model - Paird via both Drot of social protection and via employer salary suppliment

Dots1982

I’d love the helicopter money For all policy. Put it towards a nice holiday when this is all over. Not much good to ireland.

nelly17

Dots1982 wrote: »

I’d love the helicopter money For all policy. Put it towards a nice holiday when this is all over. Not much good to ireland.

This is part of the problem - others would just suppliment savings too

Dots1982

Pete_Cavan wrote: »

State bonds are completely different to the SSIA scheme.

Ok, would you Use incentives to convert cash piles to state capital to support the struggling sectors or what would you seem as best practice?

Pete_Cavan

Dots1982 wrote: »

Ok, would you Use incentives to convert cash piles to state capital to support the struggling sectors or what would you seem as best practice?

The state can support struggling sectors with money from issuing bonds or new money issued from ECB. They need to encourage people to get spending and have money circulating in the economy again. Saving money is the opposite of what we want.

Geuze

loyatemu wrote: »

the ECB will have to print money, every other central bank will be doing the same thing. The govt will be keen to get money back into the economy, not have people squirreling it away in savings accounts.

The ECB has already been creating new money to buy financial assets.

This happened during the last financial crisis, and was restarted last year.

From 1st Nov 2019 the ECB re-started QE at 20bn per month.

https://www.ecb.europa.eu/press/pr/date/2019/html/ecb.mp191212~06d84240ae.en.html

On the 12-March the ECB decided to increase money creation:

https://www.ecb.europa.eu/press/pr/date/2020/html/ecb.mp200312~8d3aec3ff2.en.html

An extra 120bn.

https://www.ecb.europa.eu/mopo/implement/omt/html/index.en.html

They have by now created an extra 2.6 trillion euro.

Dots1982

Pete_Cavan wrote: »

The state can support struggling sectors with money from issuing bonds or new money issued from ECB. They need to encourage people to get spending and have money circulating in the economy again. Saving money is the opposite of what we want.

You cant spend money in a closed business. The Money has to be more direct via state support. The state has to get that money from somewhere.

That is hypothesis.

What do you think the government should do?

Geuze

Pete_Cavan wrote: »

They need to encourage people to get spending and have money circulating in the economy again. Saving money is the opposite of what we want.

Surely we want people to stay at home?

Pete_Cavan

Geuze wrote: »

Surely we want people to stay at home?

For now yes, but not indefinitely. Obviously I am talking about getting the economy going again after the virus has passed.