David McWilliams proposes a 2 year debt hiatus

Asparagus

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David Mc Williams: Simple rules of economics say we must spend, not cut - David McWilliams, Columnists - Independent.ie

Currently there are €107bn of outstanding mortgages in Ireland. Allowing for an average outstanding term of 25 years and an interest rate of 4.5pc, that means that mortgage payments per month in the economy are approximately €600m per month. Or €7.2bn per year. There is a stimulus sitting right there.

Why not freeze all mortgage payments for two years? Nobody makes any payment on their mortgage until November 2012. If we assume a conservative multiplier of only 1.4, Ireland would get €20bn worth of stimulus without upsetting our EU leaders' rules at all.

Probably a function of how we are all thinking at the moment, but I bet your first question is 'What about the banks?' Well first, we own the banks, so they will do what they are told. The financial regulator has been very generous with bending the rules to allow defunct institutions like Anglo to continue in whatever half-life it currently inhabits, so I'm sure he would be willing to allow Irish banks to carry mortgage debt for two years without forcing them to take write-downs on it. After all, a policy like that would be in the interest of the country, rather than just the interest of banks.

Of course, the bondholders would still want to be paid. And they would be, they just might have to join in the two-year waiting game. Which would be better for them? Get a haircut now, or wait a few years and get paid.
By George i think he has it....;

So basically we take a holiday payment to allow recovery - this will see a 20 Billion euro stimulus and relief from repayment of the national debt.

So in two years you work with the ps unions to impose an austerity package while at the same time you get the economy moving forward...

This is a radical idea that should be debated - By only dealing with austerity we will only cut our throats - we need to lose the fat and start running again... the momentum that we build in two years will propel us through the debt mountain - everyone gets paid, everyone shares the pain...

Consider this, if we cut the public service pay by 50% for three years we would have to ask them to pay the same exact amount of tax and spend the same amount of money on goods and services to hit the 2014 target.

We are in a position to dictate terms and David McWilliams has a fantastic solution where nobody gets badly burnt.
 


locke

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What of people who want to continue paying their mortgage?

And he can't just say that the regulator can bend the rules for the banks.

If the banks don't get that money, there are a few choices
- Look for more money from the government. Like we can afford that
- Suspend what meagre lending is going on. How does that benefit anyone?
- Go bust. I can't see how that one benefits the economy.

I actually agree with him that we should encourage those who have money to start spending, but I really don't see that as the way to go.

The best would have been if we hadn't tried to prop up the property market and had found the bottom quickly. Then we would be in a position where prices had already stabilised and spending was starting to expand.
 

grafter1

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While i applaud McWilliams for throwing an idea out there i think its just too Irish i.e. its just a case of kicking the can down the road. It would undoubtedly improve the economy in the short term but at the end of the day the mortgage debt isn't going away.

People who have fallen behind on their mortgage need to be dealt in a proper manner by the banks. The banks should perhaps cancel the loan, take ownership of the houses and let the families rent for a few hundred euros a month or something to that effect. Our ridiculous bankruptcy laws mean that the banks don't shoulder any of the burden when they make a crap loan. We need to have a situation where the banks can only have recourse to an individuals house, i.e. if the bank give a mortgage of 300k and the house becomes worth 200k an individual can hand the keys back to the bank and move on.

This will ensure that future property price increases should be more sustainable and more importantly the banks will have an incentive not to over speculate in housing/land.

Anyway again i applaud DM for his idea. I don't agree with it but i can see how it would stimulate the economy
 
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What about the people that rent? They have to continue to struggle whilst people that own their own homes spend the next two years swanning off on Holidays.

Reform of our bankruptcy laws is the only thing that needs to be done, allow people to get rid of the debt which in turn allows them to take cuts and when the time is right they can go on and start again with a clean record.
 

locke

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One thing that's important to remember is that there will be no quick easy fix to the troubles of the Irish economy. It's nice to believe that there's something we can do that will suddenly make everything right again. But all those debts, national, commercial and personal aren't going to just disappear.
 

Holy Cow

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Ar least McWilliams comes up with solutions. Cowen and Lenihan just flap around.
 

Hewson

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Interesting suggestion all right. Fear among consumers is becoming as critical a problem for the economy as the lack of credit. Think of Ireland as a hospital patient on the critical list. The patient needs a series of blood transfusions. Instead, in the upcoming budget, the doctors are about to drain more blood from the system, sending the patient into shock and possible death.

We desperately need to start money circulating again and McWilliams' idea is radical and worthy of consideration. It's time for the banks to carry some of the can for their stupidity and duplicity over the years. It's time to give consumers and mortgage holders a breath of clean air and encourage some movement out of savings and into spending.

The Croke Park deal is dead. The fat we all know exists in the public sector has to be rooted out and dumped. We can no longer afford the luxury of doing things the old way. It hasn't worked because the world has changed.
 

HanleyS

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What about those without a mortgage? Or should I run out and buy a million dollar gaff and freeload 100 grand in mortgage interest?
 

Sync

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We don't own the banks. We own the majority shares in some of the banks. Why should Ulster Bank be crippled by this?

Who on earth is going to spend any of the money they're saving on their mortgages? The smart people are going to save it for 2 years time. They probably don't need help anyway. The idiots are going to buy plasma screens, and still won't be able to pay in 2 years.

What if everyone doesn't want to extend the length of their mortgage repayments by 2 years? Because that's what this actually involves.

We need to come up with suggestions, which limit the downturn and ease the burden on ordinary people.
Taxi drivers, P.IE users and Joe Duffy come up with suggestions. Economists are meant to come up with detailed, costed theories.


The financial markets would be the first to support us, because they want Ireland to grow.
Sure. People will be falling over themselves to give us more money after we announce we're unilaterally going to stop payment on our debts for 2 years.
 

1888bhoys

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David Mc Williams: Simple rules of economics say we must spend, not cut - David McWilliams, Columnists - Independent.ie



By George i think he has it....;

So basically we take a holiday payment to allow recovery - this will see a 20 Billion euro stimulus and relief from repayment of the national debt.

So in two years you work with the ps unions to impose an austerity package while at the same time you get the economy moving forward...

This is a radical idea that should be debated - By only dealing with austerity we will only cut our throats - we need to lose the fat and start running again... the momentum that we build in two years will propel us through the debt mountain - everyone gets paid, everyone shares the pain...

Consider this, if we cut the public service pay by 50% for three years we would have to ask them to pay the same exact amount of tax and spend the same amount of money on goods and services to hit the 2014 target.

We are in a position to dictate terms and David McWilliams has a fantastic solution where nobody gets badly burnt.
well done to David again he shows there is another way .I heard him on the PK show taught he was very good.
 

Aindriu

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What about the people that rent? They have to continue to struggle whilst people that own their own homes spend the next two years swanning off on Holidays.

Reform of our bankruptcy laws is the only thing that needs to be done, allow people to get rid of the debt which in turn allows them to take cuts and when the time is right they can go on and start again with a clean record.
+1

What is proposed would be a case of 'stuff the renters, they don't matter' :mad:
 

Holy Cow

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What about those without a mortgage? Or should I run out and buy a million dollar gaff and freeload 100 grand in mortgage interest?
If you can get a mortgage.

McWilliams is talking about putting money into the economy at the ground level.

This is what should have been done at the start. Every taxpayer should have been given a cheque for €30k and told to go and spend it. That cash would have arrived into the systemic banks.
 

Libero

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I'm normally a fan of McWilliams but I don't see the point of suggestions that can't be implemented.

Under the basic terms of our membership of the European Union, Irish banks are subject to EU rules, and these don't (and won't) allow for banks to grant mortgage holidays, keeping their doors open in spite of the resulting gross insolvency.

Like McWilliams warned years ago, we have been slowly turned into a little impoverished island dedicated to debt servicing. Having predicted this, McWilliams must know that a smart-arse (impossible) stunt like national mortgage holidays don't change any of that underlying equation.
 

Clanrickard

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Under the basic terms of our membership of the European Union, Irish banks are subject to EU rules, and these don't (and won't) allow for banks to grant mortgage holidays, keeping their doors open in spite of the resulting gross insolvency.
.
I have seen no EU rules on banking that says this. Banks are covered by the Basel Convention.
 

Holy Cow

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+1

What is proposed would be a case of 'stuff the renters, they don't matter' :mad:
The renters are the smart people in the country.
 


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