The National Debt


#541

Oh, by way, Ireland is backing the 1.5 Trillion Euro Coronabond proposal supported by France, Italy, Spain etc. and opposed by the Dutch/Finns (and Germans?).

We didn’t back Eurobonds even at the height of our financial crisis because of “moral hazard”. Now a government which has resigned signs us up to this because “we’re all in this together”.

At least that’s what Helen McEntee told Cormac Ó hEadhra yesterday (45 minutes in)
http://rte.ie/r.html?rii=9_21742126_26960_28-03-2020

Did the Dail discuss this? Are the Irish people ready to guarantee Italy’s borrowings?


#542

My attempt at humour failed Lefournier!


#543

Nice one, bury it in the middle of a Saturday lunchtime news show or the week in politics and assume it is of only of interest to the political nerds.

Given the capture of the mainstream press and TV the citizenry need to be extra vigilante of what strokes may be pulled these days.


#544

Like I said earlier.

The Italians would have to control their deficits if they tapped the ESM, they don’t like that idea at all but there is no choice now.

Portugal are used to the regime, they would be fine with an ESM tap.


#545

Sorry for my pedantry. My Spellchecker gives me Uranus bonds!


#546

So how much of the national debt and general European business and other national and ECB debts are owed china a d what happens if or when it is refused to be paid back


#547

NTMA is going back to the markets but no indication how much ( “billions of Euro”).

Its previous objective of only raising between €10 billion and €14 billion has been abandoned.

I assume this means the NTMA now plans to borrow much more than €14 Bn. this year and it is starting ASAP.

Is COVID-19 a Black Swan?

[https://www.irishtimes.com/business/economy/ntma-to-raise-billions-of-euro-for-state-in-bond-sale-amid-covid-19-1.4217691]


#548

I thought it was more of a cross between a bat and a pangolin. Not sure what colour.


#549

They are not saying how much they plan to borrow which is a statement in itself however they have said that borrowing would be on going in the coming years (North Korea Application of unknown fact) based on Americas TARP in % of 700 billion dollars and the new 2 trillion quantitative easing programme this will make the Bank bail out look like a penny.
As of now the NTMA is not answering any questions of importance.


#551

Like I said, the government will eventually order the NTMA to find up to €40bn more, in 2020, than the NTMA originally planned to raise this year as well as disburse the rainy day fund and the NAMA surplus to the exchequer.

The syndicated tap in April will probably be in the order of €5bn or so. Auctions in May and June around €2bn each. It is a start.


#552

I assume that some of you guys who post knowledgeably in this thread may be economists or perhaps even working in government circles.

It seems to me that the current crisis is leading to massive deflation of activity in the economy, lessening government tax income and increasing current and projected government spending. This of course is happening for governments all over Europe and further afield. Within a number of weeks if current lockdowns continue I am expecting to see rioting starting first in the major cities in Europe as people run out of money for food and rent.

We have seen quantitative easing in previous downturns with money generally been helicoptered into the banking system.

As an amateur in this area why not have the ECB act to helicopter money directly to workers in every Euro zone country to provide spending power to feed the needy, and as a very useful side effect to keep some companies going via consumer spending? And to relieve some pressure on government budgets. What is wrong with this suggestion in this unprecedented time and are any radical measures like these under consideration? A problem of course is having the solid but unimaginative Germans in effective control of the EU’s financial strategies.


#553

Borrowing is the only show in what was the Eu town, Banks and governments need liquidity and as posted elsewhere under existing treaty’s quantitative easing breaches all the rules that was invented by the bureaucrats however if it does happen we are entering a Keynesian meltdown. I doubt our present leaders care to much and for good reason. One only has to view our Central bank boss in lock-down in Greece.


Take a view of this guys history.: https://www.irishtimes.com/business/financial-services/makhlouf-embroiled-in-budget-leaks-controversy-in-new-zealand-1.3911297?mode=sample&auth-failed=1&pw-origin=https%3A%2F%2Fwww.irishtimes.com%2Fbusiness%2Ffinancial-services%2Fmakhlouf-embroiled-in-budget-leaks-controversy-in-new-zealand-1.3911297


#554

So let the government write cheques to everyone and put the government bonds on the market and have the ECB buy them. If we put a 1% coupon on the bonds, we probably don’t even need the ECB to do it, the banks and pension funds would buy them.

Only problem for a services economy is that cash in people’s hands when in lockdown just leaves the country via PLC supermarket profits or online shopping. It doesn’t multiply in the local economy which is what is needed. We need to increase unemployment benefit to avoid destroying lives and then plan for the boost for consumer spending that is needed when lockdown ends. We need to get people back into the restaurants and bars etc. as soon as possible and in a big way. A few bank holiday weekends and national parties would help more than the ECB.


#555

I know what you are saying but I think that we are in a brand new paradigm now that will need brand new thinking. Unfortunately it now seems that the world won’t be able to let people out of lockdown for months, unless the radical decision is made to only quarantine the fragile. So this episode is going to be a company killer as well as affecting personal finances if something radical and new is not done, on a once-off Marshall Plan style-basis. I don’t think that a few bank holidays whenever we all get out of COVID house arrest is going to cut it frankly.

If countries elect to keep lockdown strategies going for months then we are likely to see unrest and potentially riots starting first in cities such as Paris and London as there are many people who will not be earning enough from unemployment assistance alone to cover living costs such as rents. People who have lost jobs in great numbers and where there will be no alternative employment in the short to medium term. Most if not all western countries will need new solutions. One of these solutions could be a QE scheme that arrives to everyone, for instance in the form of a basic living wage, funded by QE money that does not have to be paid back. Since few nations would ever be able to pay back this emergency measure. I hope that there are some economists in government/EU circles thinking now about this type of scenario.

You could equate our current scenario in some ways to the early days of the Famine or the end state of WWII. How should governments/the EU deal with a one off economic disaster affecting a huge swathe of the population?


#556

I know what you are saying but I think that we are in a brand new paradigm now that will need brand new thinking. Unfortunately it now seems that the world won’t be able to let people out of lockdown for months, unless the radical decision is made to only quarantine the fragile. So this episode is going to be a company killer as well as affecting personal finances if something radical and new is not done, on a once-off Marshall Plan style-basis. I don’t think that a few bank holidays whenever we all get out of COVID house arrest is going to cut it frankly.

If countries elect to keep lockdown strategies going for months then we are likely to see unrest and potentially riots starting first in cities such as Paris and London as there are many people who will not be earning enough from unemployment assistance alone to cover living costs such as rents. People who have lost jobs in great numbers and where there will be no alternative employment in the short to medium term. Most if not all western countries will need new solutions. One of these solutions could be a QE scheme that arrives to everyone, for instance in the form of a basic living wage, funded by QE money that does not have to be paid back. Since few nations would ever be able to pay back this emergency measure. I hope that there are some economists in government/EU circles thinking now about this type of scenario.

I liked the plan where government was going to pay 70% of a person’s pre-Covid19 weekly wages up to €410 per week if a company kept them on with the company being encouraged to top that up but it not being mandatory. If the company then sends everyone home because there’s no work, then that’s essentially a basic living wage scheme of €20k per year. Maybe someone with their own company can explain why so many people were laid off with that scheme in place…were they sole traders without a company structure?

Temporary COVID-19 Wage Support Scheme

RTE reports over 30,000 employers registered for scheme

Probably more that can be done there for people as incomes were on average twice that amount but its a good start and I also don’t know why people earning more than €960 a week net were excluded. A ban on evictions, mortgage payment deferrals are also in play, a ban on utility company disconnections, increased unemployment assistance…all of these should reduce the need for people to be unable to cover living costs in Ireland. If you’re getting €400 a week and can get deferral on your bills, you should be able to eat and drink on that budget.

Maybe the Marshall Plan needed at the end will be to make whole the landlords, banks, utility companies if they cancel the debts but it would be a brave Finance Minister who’d flag that now.


#557

In relation to the Temporary Support Scheme as well as the sole trader issue I don’t know for instance if 1 person or 2 person (director only) companies would be approved for this scheme and probably there are many in this category who have seen their business disappear. Also one of the conditions of the scheme is that the company is “unable to pay normal wages and outgoings” and secondly that a list of companies who avail of the scheme will be published. Most companies always have some cash in hand or overdraft facilities to deal with normal cashflow scenarios (pay before paid) or to deal with contingencies of various forms (project or sales delays or non payment) so what is the definition of being “unable to pay normal wages and outgoings”?

Then there is the problem of companies having many other costs (rent, rates, insurance, cost of stock etc) as well as employee costs so a great many more will go to the wall if the lockdown continues for many months. Even the mighty highly profitable Primark has signaled that it wants a rent holiday.


#558

German minister commits suicide after ‘virus crisis worries’

Thomas Schaefer, the finance minister of Germany’s Hesse state, has committed suicide apparently after becoming “deeply worried” over how to cope with the economic fallout from the coronavirus, state premier Volker Bouffier said Sunday (29 March).

Schaefer, 54, was found dead near a railway track on Saturday. The Wiesbaden prosecution’s office said they believe he died by suicide.

“We are in shock, we are in disbelief and above all we are immensely sad,” Bouffier said in a recorded statement.

Hesse is home to Germany’s financial capital Frankfurt, where major lenders like Deutsche Bank and Commerzbank have their headquarters. The European Central Bank is also located in Frankfurt.

A visibly shaken Bouffier recalled that Schaefer, who was Hesse’s finance chief for 10 years, had been working “day and night” to help companies and workers deal with the economic impact of the pandemic.

https://www.euractiv.com/section/economy-jobs/news/german-minister-commits-suicide-after-virus-crisis-worries/


#559

A Central Bank Quarterly Report like no other paints a stark picture

https://www.centralbank.ie/docs/default-source/publications/quarterly-bulletins/qb-archive/2020/quarterly-bulletin—q2-2020.pdf?sfvrsn=4

it is projected that the general government balance will move from an estimated surplus of 0.7 per cent of GNI* in 2019 to a deficit of over 10 per cent of GNI* this year (or from 0.4 per cent of GDP to -6 per cent of GDP). In terms of general government debt, the projection is for an increase in the ratio from an estimated 97 per cent of GNI* in 2019 to 112 per cent of GNI* (or from 58 to 66 per cent of GDP


#560

To somewhat answer my own question the EU announced this scheme yesterday.

Well it’s a decent start at least and they have used the term “Marshall Plan” so at least someone there is thinking along those lines.

However what we don’t need is merely a scheme of cheap loans to governments that will just pile up more government debt and lead to an extended period of austerity/depression. Money pumped out under these schemes will have to be free to avoid the largest depression ever seen.


#561

The Plandemic is beginning to fall asunder with Italy Spain Greece France and Ireland’s figures not toting up, appears to be more wants than needs from the ECB and with no correlation mathematically to an epidemic that is supposed to be ongoing. The first one to tell the truth will be the first one out of the basket of baskets as the R0 keeps dropping, this is heading (primarily)towards a bad winter flu with adjustments to unofficial records,
I doubt Leo and co will be in a hurry to correct the fact that the median age of death from Covid is 92 however they along with FF want to borrow Billions for the purpose of simply being in the Que and they will create massive inflation ( 20% 30%) for the purpose of satisfying the few. A crime is A crime is A Crime.