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 Post subject: Re: Government Tax Receipt Figures
PostPosted: Fri Jan 12, 2018 7:33 am 
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Joined: May 12, 2012
Posts: 2074
Eschatologist wrote:
Skippy 3 wrote:
France has not run a balanced budget since 1974 and it's not on the verge of default or hyperinflation.

It is fine to run modest deficits as economies generally grow over the long run.

Fine according to whom? Ireland is not able to make independent decisions in these matters, we are governed by EU rules.

Government still needs to meet a structural deficit target of 0.5% of GDP in 2018 (which strips out cyclical swings and one-offs such as bank bailouts).


Show me one economic prediction of Ireland in 2018 made five years ago that turned out accurate.




It is fine according to arithmetic. If your interest rate is equal to the nominal growth of your economy AND your non interest expenditure equals revenues THEN your debt to GDP ratio will not change.

The famous Maastricht Criteria have this logic. Assume nominal growth and interest rates are 5%. If your debt-to-GDP ratio is 60% then you will pay 3% of GDP interest. If you balance non interest expenditure and revenues (running an actual deficit of 3% of GDP) your debt ratio will remain stable at 60%.


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 Post subject: Re: Government Tax Receipt Figures
PostPosted: Fri Jan 12, 2018 11:02 am 
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Posts: 280
How sustainable are Ireland's gdp figures? Facing into higher interest rates. We know the gdp figures are highly questionable, how secure is the maybe 4-5 bn in corp tax coming from large MNCs. We should be doing more to eradicate this 200bn in debt now while the 'sun shines'. It is up 4 fold in a decade. We should fear the thinking that this dependancy on megadebt is the 'new normal'


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 Post subject: Re: Government Tax Receipt Figures
PostPosted: Fri Jan 12, 2018 12:01 pm 
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Joined: Sep 13, 2012
Posts: 5246
Skippy 3 wrote:
It is fine according to arithmetic. If your interest rate is equal to the nominal growth of your economy AND your non interest expenditure equals revenues THEN your debt to GDP ratio will not change.

The famous Maastricht Criteria have this logic. Assume nominal growth and interest rates are 5%. If your debt-to-GDP ratio is 60% then you will pay 3% of GDP interest. If you balance non interest expenditure and revenues (running an actual deficit of 3% of GDP) your debt ratio will remain stable at 60%.

OK, but for Ireland GGD to GNI* ratio is around 100%, not 60%.

Which means the sustainability of Ireland's debt requires that GNI* growth does not drop below the interest rate on the GGD over the "economic cycle" with no major shocks unless they're buffered by central bank action.

We are currently in the fortunate position of having ultra-low interest rates compared to growth (although I can't find any GNI* historical data, has it been back-calculated?).

But our medium-term stability within the Eurozone is based on some combination of Ireland outperforming the Eurozone average, and the ECB maintaining an accommodative stance.

What will Weidmann do if he succeeds Draghi in 2019?

_________________
"It's easy to confuse what is with what ought to be, especially when what is has worked out in your favour"
Tyrion Lannister


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 Post subject: Re: Government Tax Receipt Figures
PostPosted: Sat Jan 13, 2018 8:23 am 
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At the moment Ireland's debt-to-GNI* ratio is falling by about 3 to 4pp a year despite a small fiscal deficit through the functioning of the mechanism set out above.

I am not saying that this policy stance is right or wrong. I am saying that people should recognise that it means a falling debt ratio.

Interest rates will no doubt rise. The issue is that the term structure of Ireland's debt is unusually long. This means it takes a long time for any marginal increase in funding costs to feed through to the average stock of debt.

Ireland indeed has a large stock of debt in 2018. But by comparison with the rest of the euro area I would think that it is a bigger challenge for Cyprus, Portugal, Italy and Greece. And probably on a par with France and Belgium.

PS: GNI* to 1995 back series can be found here: http://www.cso.ie/px/pxeirestat/Statire ... Language=0


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