Could Ireland economy collapse permanently?

kippy

Wanderer78 wrote: »

austerity is a failure, and covid is proving this

I amn't disagreeing but I don't think you can use Covid to justify that standpoint - however not balancing the books or at least coming within a few Billion of it, isn't a good policy either.
This suggestion that we are grand debt servicing so long as we don't introduce "austerity" as austerity causes GDP and revenue to fall off a cliff, is just pure nonsense if you ask me.
We are so reliant on external forces, we cannot assume that cheap money will be available forever and we'll have no issue servicing debt as our GDP/revenue will continue to rise.

KyussB

kippy wrote: »

Do you not think that GDP, in the context of a small open economy, heavily reliant on FDI and as such the policies of other nations, is a bit more exposed than most to GDP falling off a cliff?
There isn't an endless supply of free money for infinity out there and to operate on the belief that there is, subject to not bringing austerity on the populace is as daft a policy as I've every heard to be frank about it.

It's not 'free' as it has a servicing cost (which is sometimes negative, making it as good as free in those times), but there is an endless supply of money, until GDP is maximized and inflation kicks in. That's just how it works.

It is complicated somewhat by the ECB being removed from individual nations - but under their current policies, that they are forced by economic conditions to operate under, there is not going to be any shortage of money available.

Austerity makes as much sense as quitting your job to save on travel costs, to help pay your mortgage. It undercuts the countries GDP and Revenue.

KyussB

kippy wrote: »

I amn't disagreeing but I don't think you can use Covid to justify that standpoint - however not balancing the books or at least coming within a few Billion of it, isn't a good policy either.
This suggestion that we are grand debt servicing so long as we don't introduce "austerity" as austerity causes GDP and revenue to fall off a cliff, is just pure nonsense if you ask me.
We are so reliant on external forces, we cannot assume that cheap money will be available forever and we'll have no issue servicing debt as our GDP/revenue will continue to rise.

Countries almost never balance their books. In a lot of cases, balancing the books or even going into surplus, is followed not too long after, by a fresh economic crisis - because it puts upward pressure on Private Debt, to make up for the shortfall of money in the economy.

When the government is not taking on debt to keep the economy ticking over, the Private Sector is under more pressure to take on debt to keep the economy ticking over.

Government finances don't work like personal finances, yet you are talking as if they do. If you're going to treat government finances like personal finances, then I'll point out that debt ratio's of 350% - even up to 450% - are fairly normal in personal finances, and at higher interest rates than government finances...(and I'm not advocating looking at government finances things that way - I'm pointing out the inconsistency)

kippy

KyussB wrote: »

Countries almost never balance their books. In a lot of cases, balancing the books or even going into surplus, is followed not too long after, by a fresh economic crisis - because it puts upward pressure on Private Debt, to make up for the shortfall of money in the economy.

When the government is not taking on debt to keep the economy ticking over, the Private Sector is under more pressure to take on debt to keep the economy ticking over.

Government finances don't work like personal finances, yet you are talking as if they do. If you're going to treat government finances like personal finances, then I'll point out that debt ratio's of 350% - even up to 450% - are fairly normal in personal finances, and at higher interest rates than government finances...(and I'm not advocating looking at government finances things that way - I'm pointing out the inconsistency)

Ah lookit. I'm wasting my time here.
We are completely overexposed to FDI and the whims and policies of a lot of external factors in relation to this. Our GDP is completely distorted as a result.
Taking on excessive debt is not something we can sustain should any external factors impact on our GDP.
I don't think people appreciate this at all.

I get the household finances aren't like national finances etc and I amnt advocating balancing the books all the time but there does become a point where you seriously overstretch yourself as a nation or a household.

KyussB

FDI doesn't come into it. A government funding a Job Guarantee can replace any Private Sector loss in GDP - and this helps boost the Private Sector back up again until it recovers, so the JG can wind down.

You don't seem to know or attempt to define what debt is 'excessive', nor what would be unsustainable - you don't know where the 'point' lies at which a nation is supposed to be overstretched.

You also ignore explanations of how debt sustainability does work.

salonfire

Utter drivel from the same suspects on this thread.

If public debt was so easy to come by and sustainable, why was Ireland unable to borrow in 2010 and had to resort to the help and goodwill of the IMF?

The borrowing today will have to be paid back, partly with new borrowing in the future. Who's to know what interest rates the new borrowing will be?

kippy

KyussB wrote: »

FDI doesn't come into it. A government funding a Job Guarantee can replace any Private Sector loss in GDP - and this helps boost the Private Sector back up again until it recovers, so the JG can wind down.

You don't seem to know or attempt to define what debt is 'excessive', nor what would be unsustainable - you don't know where the 'point' lies at which a nation is supposed to be overstretched.

You also ignore explanations of how debt sustainability does work.

FDI is one of the key drivers of this economy over the past 30 years so saying it doesn't come into it is strange.
Excessive is where we are at now - essentially relying on debt forgiveness and/or major increases /stability in GDP/revenue to keep repayments sustainable.


Debt sustainability works assuming GDP and revenue continue to increase. A major issue for us I fear.
I'll review where we are at debt wise in 5 or 6 years and see how sutstainable we are.

KyussB

salonfire wrote: »

Utter drivel from the same suspects on this thread.

If public debt was so easy to come by and sustainable, why was Ireland unable to borrow in 2010 and had to resort to the help and goodwill of the IMF?

The borrowing today will have to be paid back, partly with new borrowing in the future. Who's to know what interest rates the new borrowing will be?

Was the ECB trapped in zero-to-negative interest rate QE in 2010? Is the Euro on the brink of collapse, putting ability to pay debts in question, today?

Public Debt is typically not paid back - it is usually rolled over, forever - and eroded by GDP growth and inflation...

Wanderer78

salonfire wrote: »

Utter drivel from the same suspects on this thread.

If public debt was so easy to come by and sustainable, why was Ireland unable to borrow in 2010 and had to resort to the help and goodwill of the IMF?

The borrowing today will have to be paid back, partly with new borrowing in the future. Who's to know what interest rates the new borrowing will be?

funnily enough, its the same folks talking about increasing public debt and not balancing the budget, will lead to the end of the world, when the data shows otherwise

kippy

Wanderer78 wrote: »

funnily enough, its the same folks talking about increasing public debt and not balancing the budget, will lead to the end of the world, when the data shows otherwise

Im all for sustainable public debt, but increasing debt levels to the point we are heading towards now (and have been) will cause us major issues as a nation down the line when the things we cannot control come back to bite us.

KyussB

kippy wrote: »

FDI is one of the key drivers of this economy over the past 30 years so saying it doesn't come into it is strange.
Excessive is where we are at now - essentially relying on debt forgiveness and/or major increases /stability in GDP/revenue to keep repayments sustainable.


Debt sustainability works assuming GDP and revenue continue to increase. A major issue for us I fear.
I'll review where we are at debt wise in 5 or 6 years and see how sutstainable we are.

You don't seem to know what you're trying to say about FDI then, because you are trying to use it as an example of something that can cause GDP to drop, and are now ignoring the counterexample that GDP can be kept maximized regardless of what FDI does.

GDP has to increase exponentially long term, forever, in the current monetary system. That's simply inescapable. That's not going to change until the monetary system itself changes and is reformed.

What debt forgiveness?

salonfire

KyussB wrote: »

Was the ECB trapped in zero-to-negative interest rate QE in 2010? Is the Euro on the brink of collapse, putting ability to pay debts in question, today?

Public Debt is typically not paid back - it is usually rolled over, forever - and eroded by GDP growth and inflation...

Thanks for proving my point.

Borrowing is easy today. But as you point out, circumstances can change and you or your wanderer friend do not have a crystal ball as to what the future holds.

We could be just as easily be prevented from borrowing again by some future circumstance

kippy

KyussB wrote: »

You don't seem to know what you're trying to say about FDI then, because you are trying to use it as an example of something that can cause GDP to drop, and are now ignoring the counterexample that GDP can be kept maximized regardless of what FDI does.

GDP has to increase exponentially long term, forever, in the current monetary system. That's simply inescapable. That's not going to change until the monetary system itself changes and is reformed.

What debt forgiveness?

I am saying that our attractiveness to tech, finance and medical firms, is not something set in stone and changes in tax and/or regulatory affairs would have a major impact on our GDP, an impact that the state would not be able to handle should our debt levels at the time be deemed excessive.

As a nation we will be reliant on debt forgiveness at some point.

KyussB

salonfire wrote: »

Thanks for proving my point.

Borrowing is easy today. But as you point out, circumstances can change and you or your wanderer friend do not have a crystal ball as to what the future holds.

We could be just as easily be prevented from borrowing again by some future circumstance

If your argument is based on the idea that the ECB is going to go back to its policies of 2010 and reignite the Eurozone crisis - then we can safely discard your point of view.

kippy

KyussB wrote: »

If your argument is based on the idea that the ECB is going to go back to its policies of 2010 and reignite the Eurozone crisis - then we can safely discard your point of view.

I don't think that's the argument........

KyussB

kippy wrote: »

I am saying that our attractiveness to tech, finance and medical firms, is not something set in stone and changes in tax and/or regulatory affairs would have a major impact on our GDP, an impact that the state would not be able to handle should our debt levels at the time be deemed excessive.

As a nation we will be reliant on debt forgiveness at some point.

Again: It has no impact on our GDP when the government is engaging in policies of maintaining Full Output and Full Employment in economic downturns - such as with the Job Guarantee policy.

Deemed excessive by who? And at what levels deemed excessive?

You don't seem to know how debt sustainability works - we are in a period of zero-to-negative interest rates, that's going to last at least untl the mid-2020's - which means being paid to take on debt, in many cases...there's zero chance of any nation seeking debt forgiveness, it's not 2010 anymore.

kippy

KyussB wrote: »

Again: It has no impact on our GDP when the government is engaging in policies of maintaining Full Output and Full Employment in economic downturns - such as with the Job Guarantee policy.

Deemed excessive by who? And at what levels deemed excessive?

You don't seem to know how debt sustainability works - we are in a period of zero-to-negative interest rates, that's going to last at least untl the mid-2020's - which means being paid to take on debt, in many cases...there's zero chance of any nation seeking debt forgiveness, it's not 2010 anymore.

Ah look,
I'm done.

KyussB

That's the second time you've said that - but you're not done, you're going to repeat the same arguments I just debunked again later - effectively ignoring replies to your posts, and engaging in rhetorical potshots instead...

kippy

KyussB wrote: »

That's the second time you've said that - but you're not done, you're going to repeat the same arguments I just debunked again later - effectively ignoring replies to your posts, and engaging in rhetorical potshots instead...

Lad,
you're not debunking anything - you are putting across your points of view I am putting across mine, which is usually what happens when trying to predict the future.
I hope you are right, in that continuing to increase national debt will not have an adverse effect on us as a nation in later years and that GDP/Revenue continues to rise to match it.

I am of a different opinion, that we are totally exposed to GDP falling off a cliff and this alone is reason to be cautious when increasing debt because we know the next crisis is just around the courner (next decade or less) - what happens then IF we continue to increase our debt over that time frame.

Oh, I am done - there's no point sometimes, people (including myself) don't tend to change their viewpoints on platforms like this.

boardise

Hairy Japanese BASTARDS! wrote: »

You can be guaranteed teachers' income won't be curtailed though.

- nor should it.

KyussB

kippy wrote: »

Lad,
you're not debunking anything - you are putting across your points of view I am putting across mine, which is usually what happens when trying to predict the future.
I hope you are right, in that continuing to increase national debt will not have an adverse effect on us as a nation in later years and that GDP/Revenue continues to rise to match it.

I am of a different opinion, that we are totally exposed to GDP falling off a cliff and this alone is reason to be cautious when increasing debt because we know the next crisis is just around the courner (next decade or less) - what happens then IF we continue to increase our debt over that time frame.

Oh, I am done - there's no point sometimes, people (including myself) don't tend to change their viewpoints on platforms like this.

Oh look, you replied again after saying you were done, for the second time. Now saying it again for the third time.

Again as well, you are ignoring that GDP doesn't fall, when governments prop it up with policies of Full Output and Full Employment, like with a Job Guarantee program. You are arguing against public funding of Full-Output/Full-Employment conditions, using arguments based on letting Output and Employment drop enormously.

Wanderer78

kippy wrote: »

Lad,
you're not debunking anything - you are putting across your points of view I am putting across mine, which is usually what happens when trying to predict the future.
I hope you are right, in that continuing to increase national debt will not have an adverse effect on us as a nation in later years and that GDP/Revenue continues to rise to match it.

I am of a different opinion, that we are totally exposed to GDP falling off a cliff and this alone is reason to be cautious when increasing debt because we know the next crisis is just around the courner (next decade or less) - what happens then IF we continue to increase our debt over that time frame.

Oh, I am done - there's no point sometimes, people (including myself) don't tend to change their viewpoints on platforms like this.

...but theres very little evidence to show that rising pubic debt has caused serious economic crashes, but plenty to show rising private debt has, yes, that doesnt mean things can indeed change in the future, but....

boardise

KyussB wrote: »

We have austerity parties in governmnt, of course they will say that.

Much of our government bonds are in negative interest rates, which makes them inherently sustainable - with no end in sight for negative rates, for at least half a decade, if not a decade or more - eliminating rollover risk.

Lashing billions around the economy hardly seems like austerity to my possibly naive way of thinking.

Wanderer78

boardise wrote: »

Lashing billions around the economy hardly seems like austerity to my possibly naive way of thinking.

traditionally, both ffg have engaged in austerity measures, id say theyre both panicking about their current borrowing situation, when theres no need to at all, theyre really worrying about the wrong debt

boardise

I don't have the economic knowledge that many sharp well-informed posters here possess but I try to keep up with socio-political trends and issues.
I was puzzled that someone should snipe at teachers because good teaching is crucial in a knowledge based economy and in an ever changing world. Face to face teaching and learning will always be an important element in forming the workers and citizens of the future.
I believe we're still too insular in Ireland -being excessively ( though understandably) immersed in the anglophone world. Our knowledge of European languages is paltry and of other world languages like Chinese , Hindu , Arabic etc. close to non-existent.
Yesterday,in The Times, the head of the Russell university group pleaded for a less narrow specialised curriculum....a blend of Arts/Humanities and Science/Technology. I would agree -in fact decades ago I taught in an Irish university which tried to do this but inexplicably drifted away from it.
I endorse the point made above about the growth mania. There has to be more to life than striving to put another percentage point on to the GDP or GNP or whatever the fashionable metric is.. People need a nobler , more expansive purpose in their lives and job satisfaction is vital to a sense of wellbeing and self worth.
One possible benefit of the shock we 've experienced might be that people would question and re-assess their attitude to incessant materialism.

KyussB

boardise wrote: »

Lashing billions around the economy hardly seems like austerity to my possibly naive way of thinking.

Yes, the coronavirus has effectively shown that the entire austerity and budget balancing narrative is a lie - through forcing the government to start spending gigantic sums of cheaply sourced money to prop up the economy, that the same parties pretended were not available/affordable beforehand.

Don't forget: The current governments election pledge is to engage in budget-balancing mid-term, which - given we will still be in a major downturn them - means that such a move will amount to austerity.

They are planning to engage in austerity again.

Geuze

Wanderer78 wrote: »

traditionally, both ffg have engaged in austerity measures,

Presuming that "austerity" means cuts to Govt exps, you seem to be suggesting that austerity has been common during the last 50 years?

That is incorrect.

There have been just two periods of "austerity" that I recall.

1986/87

cuts in public capital expenditure
no cuts to PS pay

2009-2012 approx: Response to the Great Recession, cuts to PS pay, PS numbers fall


For the last five years, say 2014-2019, there have been continued large increases in public spending

Geuze

KyussB wrote: »

ike with a Job Guarantee program. y.

Your repeated suggestion of a Job Guarantee program deserves its own thread.

I would like to know more about it.

Given that thousands and thousands of central Europeans arrived here and found work, while there were many LT unemployed, it is clear to me that LT unemployment is not due to a shortage of vacancies.

The people who are LT unemployed in Ireland are not unemployed due to a lack of Aggregate Demand in the economy.

They were/are LT unemployed during 2014-2019, while the economy was growing.

Adding extra Govt expenditure will not make any difference, as they are not unemployed due to a lack of demand.

They are LT unemployed for other reasons.

Would the Job Guarantee program deal with this issue?

My own relations are LT unemployed as follows:
get JSA = 10k
get DA = 10k
nixer = 40k
get student fees/grants = 100k

Geuze

KyussB wrote: »

Yes, the coronavirus has effectively shown that the entire austerity and budget balancing narrative is a lie .

If we had been balancing our budget, we wouldn't have a 200bn public debt, pre-COVID.

The 200bn public debt shows that we have run deficits year after year.

All Govts have a bias towards deficits, due to politics.

Bertie Ahern could not say no to requests from unions.

We have rarely run surpluses.

You seem to be suggesting that we have has austerity very often - this is false.

I would love if we had what you suggest - a sensible fiscal policy, with politicians wanting to balance Budgets. Alas, we do not, as TDs want to be re-elected, and so are happy to run deficits.

We are not Germany.

We have had fiscal deficits most years since 1975, I must check how many years we ran a surplus since 1975.

Larbre34

Our growth, or decline, prospects are so inextricably to the other major economies of the World, that any fall in GDP won't happen to us in isolation. And so, if and when we need stimulus, it'll be when the others of the Eurogroup are positively disposed to it for themselves, like now.

Even Mr Optimistic Dan O'Brien was on the wireless on Friday saying that although these things concern him, the fundamentals of our GDP generators, IT, Pharma and Fintech/Services are resilient and even likely to grow in bad times, being the opposite of energy and consumer goods.

The repair work to our economic diversity since 2008 has been massive. All you need look at is the resilience of the tax streams this year, surprising even the mandarins in DoF.

Also, on Brexit, the quiet work going on in diversification of export markets since 2016 has been astonishing. Yes, no deal would still be damaging, but not catastrophic, and it's clear now UK are very desperate to not crash out, as on top of Covid it would it could put them in a prolonged depression with risks to fundamental social services.

So, we just need to borrow our asses off till Brexit crystallises, stimulate with major programmes of public investment and infrastructure and take advantage of our lean and strong fundamentals and winter it out. There are absolute no factors on the horizon to drive up interest rates on that front, so we'd be stupid not to take full advantage.