What will the economy look like in 6 months time?

vladmydad

Xertz wrote: »

There’s a high risk of dogmatic austerity financial accounting type approaches in Europe. I don’t know if we have really moved past that mode of thinking in the EU.

Politicians aren’t economists and I think that’s something we forget. You end up having political debates about fiscal rectitude and moral hazard and all of that stuff which belongs in a philosophical discussion not an economic one. The markets generally don’t care. They are short to medium term focused and speculate.

I found during the 2008 crash you had all sorts of political commentators both imagining the markets were some kind of political entity with a long memory that would punish transgressors and also people who imagine the markets are somehow an all knowing prophet and that slides in value actually mean something.

If they see opportunity they invest. If they don’t they avoid investment. There’s nothing more to it than that. European bonds would be extremely safe investments and good places to stash cash. It’s very unlikely they’ll do anything other than be hugely beneficial to the Eurozone, including the NL and Germany and we sure as hell are not going to be paying signifiant interest on them. If the markets are still in turmoil they’ll be a safe haven and may even be offering negative yields.

The reality is politicians need to both play the game and realise they also control many aspects of the game. It’s not a household budget or the accounts of a small business, nor is the Eurozone a small economy that has to be a rule taker and get bounced around. I don’t think we really have begun to even think about the Eurozone as a big, powerful, single integrated economy. We’re mostly still locked in the mentality of small and medium nation state economies that were used to very agressive speculation on their currencies.

You can either use the very powerful tools of a gigantic Eurozone economy, or you can punish Italy and Spain because you perceive transgression of rules. The two aren’t the same thing and the NL and Germany are not going to be paying a cent. You’ll have huge investment in very safe haven bonds that will be costing us next to nothing and be incredibly low risk.

The upside is a potentially thriving Eurozone and EU that could well end up serious global economic nexus in the years ahead.

I also think throwing Eurozone problems into the IMF is an absolute disgrace. Europe is well able to solve these issues internally and easily and it’s just undermining itself by being petty and also undermining a global fund that is supposed to be for bailing out countries that have no other alternatives. It’s not meant for abuse by one or the world’s wealthiest places.

You’re very very very optimistic on the future of the euro zone and the EU......Some might call it delusional.

ILoveYourVibes

When restrictions are lifted there will be a surge ...some businesses won't recover. Its not a normal recession though.

addaword

ILoveYourVibes wrote: »

When restrictions are lifted there will be a surge ...some businesses won't recover.

Will there be a lifting of restrictions or further restrictions?

The latest figures today, sobering reading:
We now have 3248 covid-19 cases per million population.
USA has 2458
UK has 1901
France has 2421
Italy has 3043

ChikiChiki

Idbatterim wrote: »

Ff fcuked up the economy last time, now fg are doing it....

Serious question, Do you ever get sick of listening to yourself?

Snow Garden

https://www.irishtimes.com/business/economy/covid-19-s-impact-on-the-economy-makes-for-grim-reading-1.4234433

In these scenarios GDP could fall by an eye-watering 14 -16 per cent this year and instead of borrowings of €23 billion, we could see the total rise to €27-€29 billion.

Against this backdrop, it is impossible to even guess what the 2021 budget might look like, though a national recovery programme to scope out the options is to be prepared.

The longer this goes on, the deeper the lasting damage to the productive base of the economy – there will more companies which will never reopen or be hugely constrained if they do.

The recession will “cast a long shadow”, the department warns, with not only damage to company balance sheets, but also a possible impact on foreign direct investment as companies re-examine global supply chains.

Yes we will have to borrow massively (again) to balance the budgets. Every country will need to borrow massively. The borrowing rates will rise for certain.
The debt-to-GDP ratio will shoot up again. Servicing that debt will obviously increase too. We will have austerity for years after 2020.

BillyBiggs

Mocha Joe wrote: »

So people that go to pubs and restaurants have a lot less money, the people who work in and own them have a lot less money, the government has a lot less money. Who has more money? There's still the same amount of money in the world.

Well you tell me bud.

landofthetree

Snow Garden wrote: »

https://www.irishtimes.com/business/economy/covid-19-s-impact-on-the-economy-makes-for-grim-reading-1.4234433







Yes we will have to borrow massively (again) to balance the budgets. Every country will need to borrow massively. The borrowing rates will rise for certain.
The debt-to-GDP ratio will shoot up again. Servicing that debt will obviously increase too. We will have austerity for years after 2020.

Massive emigration is on the way when the crisis passes.

The likes of the UK,Canada,Auz,NZ will recover a lot quicker. They have their own currency and less debt per capita.


Irish people will once again look to the commonwealth and not the high tax EU countries for a new life.

Wanderer78

Snow Garden wrote: »

Yes we will have to borrow massively (again) to balance the budgets. Every country will need to borrow massively. The borrowing rates will rise for certain.
The debt-to-GDP ratio will shoot up again. Servicing that debt will obviously increase too. We will have austerity for years after 2020.

again, austerity is a failed economic idea, it has little or no evidence of success, its a dreadful part of neoclassical theory, having the opposite effect of its proposed purpose

Geuze

landofthetree wrote: »

Massive emigration is on the way when the crisis passes.

The likes of the UK,Canada,Auz,NZ will recover a lot quicker. They have their own currency and less debt per capita.

Irish people will once again look to the commonwealth and not the high tax EU countries for a new life.

An opposite opinion:

https://marginalrevolution.com/marginalrevolution/2020/04/immigration-will-be-largely-shut-down-for-some-time-to-come.html

smelly sock

We need to stimulate the sectors badly impacted by Covid.

Snow Garden

Wanderer78 wrote: »

again, austerity is a failed economic idea, it has little or no evidence of success, its a dreadful part of neoclassical theory, having the opposite effect of its proposed purpose

Ok we got your point over and over and over.

Wanderer78

Snow Garden wrote: »

Ok we got your point over and over and over.

strangely enough, it doesnt seem like people are getting it at all, particularly our politicians, watch this space, it ll probably sneak its way back into our discourse soon enough

JohnnyFlash

landofthetree wrote: »

Massive emigration is on the way when the crisis passes.

The likes of the UK,Canada,Auz,NZ will recover a lot quicker. They have their own currency and less debt per capita.


Irish people will once again look to the commonwealth and not the high tax EU countries for a new life.

None of those countries you mentioned are particularly low tax countries.

Geuze

Wanderer78 wrote: »

again, austerity is a failed economic idea, it has little or no evidence of success, its a dreadful part of neoclassical theory, having the opposite effect of its proposed purpose

Can I ask what exactly is meant by austerity here?

Let's take the following three scenarios, which of them are "austerity"?

(1) no change to any tax rate/ tax credits / tax base, but tax revenues rise as the economy recovers, and Govt exp falls as more people return to work

Clearly, (1) is not austerity.


(2)
no change to any tax rates/credits/base
no changes to welfare rates, so real welfare rates fall very slightly
and let's say the PS pay restoration of 1.75% due this Sep under the PSSA is scrapped
and let's go further and say no PS increments

Is that austerity?

(3) does austerity mean specific increases to tax rates, specific cuts to PS nominal pay rates, specific cuts to nominal welfare rates?

Wanderer78

Geuze wrote: »

Can I ask what exactly is meant by austerity here?

Let's take the following three scenarios, which of them are "austerity"?

(1) no change to any tax rate/ tax credits / tax base, but tax revenues rise as the economy recovers, and Govt exp falls as more people return to work

Clearly, (1) is not austerity.


(2)
no change to any tax rates/credits/base
no changes to welfare rates, so real welfare rates fall very slightly
and let's say the PS pay restoration of 1.75% due this Sep under the PSSA is scrapped
and let's go further and say no PS increments

Is that austerity?

(3) does austerity mean specific increases to tax rates, specific cuts to PS nominal pay rates, specific cuts to nominal welfare rates?

some good questions there, i ll try address them properly when i get the chance. but i ll give the official definition:

the aim to reduce government budget deficits through spending cuts, tax increases, or a combination of both

Snow Garden

https://www.theguardian.com/business/live/2020/apr/23/uk-government-borrowing-covid-19-recession-pmi-us-jobless-claims-business-live

Bank of England warns of worst contraction in centuries, as economic activity slumps

UK to borrow £225bn to cover Covid-19 spending
The UK has announced plans for a massive surge in borrowing over the next few months, to cover the cost of the Covid-19 pandemic.

Britain’t Debt Management Office says it plans to issue £180bn of bonds between May and July.

That’s up from £32.6bn in the same period a year ago, and more than the DMO had expected to raise over the entire year.

Wanderer78

Snow Garden wrote: »

https://www.theguardian.com/business/live/2020/apr/23/uk-government-borrowing-covid-19-recession-pmi-us-jobless-claims-business-live

borrowing from their own central bank?

donaghs

Wanderer78 wrote: »

again, austerity is a failed economic idea, it has little or no evidence of success, its a dreadful part of neoclassical theory, having the opposite effect of its proposed purpose

That sounds like a vague political slogan. Austerity doesn’t sound nice, but what’s the alternative? Presumably borrowing lots of money from somwhere, and then hoping the economy recovers?

ILoveYourVibes

Dorakman wrote: »

It’s early days yet of covid-19, however the past couple of days the number of new cases have been in or around 200-250. If all goes well, and the curve is indeed starting to flatten, it begs the question of how our economy will cope? Will this be a short lived depression, which will bounce back relatively quickly, or will we be thrown into a 2008 type scenario?

I am not an economist. Just a lay person. But i will give my rather limited opinion.


Its not crisis due to dept or bad credit.

Its due to us trying to protect ourselves.


Its biggest impact is on our supply and demand.

We can't supply certain things right now even though demand is high.

The demand isn't there for certain things ....events pubs ...but this is a FORCED situation. We can't allow it. The demand is there ..but it must be suppressed.

The biggest issue i think for long term trouble ..is unemployment. If people have money ...when movement is more free they will spend.

Look after unemployment ...businesses the rest will look after itself.

If you don't do that ....the rest will slowly come down.

ILoveYourVibes

The govt has to come up with ways to make sure people's jobs are still there. Or there are new jobs ...or they can work from home etc.

Wanderer78

donaghs wrote:

That sounds like a vague political slogan. Austerity doesn’t sound nice, but what’s the alternative? Presumably borrowing lots of money from somwhere, and then hoping the economy recovers?

Borrowing makes sense now, with rates at record lows, this can be rolled over for a very long time, and stimulate the economy back into recovery. Debt isn't necessarily a bad thing, its a critical component of our money supply, without if, there simply wouldn't be a supply. Austerity has the opposite effect than intended, it slows a recovery, having both the public and private sector contracting at the same time is potentially dangerous

ILoveYourVibes

Wanderer78 wrote: »

Borrowing makes sense now,

It really depends on what you intend to do with it and if you can repay it without austerity.

Wanderer78

ILoveYourVibes wrote:

It really depends on what you intend to do with it and if you can repay it without austerity.

Absolutely, what we do with this money now, is critical, it should be used to stimulate the economy, to building confidence, particularly in the private sector, to increase spending, as people have a tendency to save during a downturn

Pa ElGrande

Macron warns of EU unravelling unless it embraces financial solidarity

Speaking to the FT from the Elysée Palace, the French president said there was “no choice” but to set up a fund that “could issue common debt with a common guarantee” to finance member states according to their needs rather than the size of their economies. This is an idea that Germany and the Netherlands have opposed.

The EU faced a “moment of truth” in deciding whether it was more than just a single economic market, with the lack of solidarity during the pandemic likely to fuel populist anger in southern Europe, Mr Macron said.

“If we can’t do this today, I tell you the populists will win — today, tomorrow, the day after, in Italy, in Spain, perhaps in France and elsewhere,” he said

source

A common debt is something the French government in particular and the Europhiles in have been seeking for some time. The particular unstated goal behind this is to save the Euro currency by having a federal debt priced in Euros similar to the United States and the dollar.

“The Marshall Plan, people still talk about it today . . . we call it ‘helicopter money’ and we say, ‘we must forget the past, make a new start and look to the future’.”

source

Ultimately the euro currency project may come to an end depending on the outcome of these politics.

Geuze

Wanderer78 wrote: »

our money supply is shrinking due to less demand for credit, credit being the largest part of the money supply. cb money is needed to stimulate our economies, the best way to invest this money would be via infrastructure spending, as demand in the private sector will more than likely remain low. austerity does not grow economies, its furthers the reduction of it, its implementation is ideologically based, not factually

Here is data on the money supply:

Feb 2020 data published 26 March

M1 narrow MS + 8.1%
M3 broad MS + 5.5%

Mar 2020 data published today:

https://www.ecb.europa.eu/press/pr/stats/md/html/ecb.md2003.en.html

M1 narrow MS + 10.3%
M3 broad MS + 7.5%

The money supply is growing faster in March.

Wanderer78

Geuze wrote:

The money supply is growing faster in March.

Would that be due to central bank bond creation, I'd imagine bank created credit is down?

Geuze

Wanderer78 wrote: »

Would that be due to central bank bond creation, I'd imagine bank created credit is down?

https://www.ecb.europa.eu/press/pdf/md/ecb.md2003_annex~3e411bdbb2.en.pdf?e6c968fde6853b699eb76f5ede4271c9

M1 = the narrow MS = cash in circulation + overnight deposits

Cash grew faster in March, up 7% y-on-y, which I find odd
Overnight deposits grew faster, at 10.9%


M1 = 9.335 trn

M3 = 13.473 trn


The data report discusses the "counterparts" of M3:

credit to the private sector - rising faster in March

Loads more details in report.

wassie

JohnnyFlash wrote: »

None of those countries you mentioned are particularly low tax countries.

Point being is that they all have lower rates of personal income tax and VAT than here. Plus we have a few special favorites ones like VRT & DIRT for good measure....

Geuze

Wanderer78 wrote: »

Would that be due to central bank bond creation, I'd imagine bank created credit is down?

When the central bank create extra money to buy financial assets, I don't think M1 will directly rise, will it?

I think it's M0, the monetary base, that rises as more money is created?

https://www.ecb.europa.eu/pub/pdf/other/ebbox201706_07.en.pdf

M0 = currency + required bank reserves at the ECB + excess bank reserves at the ECB

M0 did rise fast as the ECB introduced QE in 2015.

I note that base money M0 and broad money M3 seem to have decoupled.

LeYouth

What will tye economy look like in six months time?

Banjaxed!