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How much money are you needlessly losing to foreigners?


feargach

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There hasn't been a thread about this topic for months, and with the new numbers supplied by Karl Whelan, it's now justified. Several years ago, we had one almost lone voice in the media, yelling to a tiny audience about how we were making an outrageous financial error.

David McWilliams enjoyed a rich diet of ridicule and scorn for his efforts to point out the facts behind the bubble nature of the housing market. His logic was flawless, but people weren't in the mood to accept any logic. So the bust happened and surprised almost everybody.

History: first as tragedy; second time round, farce. It's happening again, only this time there's even less excuse for it.

For all the foolishness of getting a mortgage, at least the victims of the housing madness got something out of it. They got a house. More significantly, they got the illusion that they were rich. Those are two genuine benefits that make your day seem better, which is no small thing.

What excuse have the Solidarity Bond refuseniks?

Here's one of the better-reasoned examples:

Sync said:
So because the state have made horrible financial decisions, I should make a horrible financial decision as well and lose on money? No thanks. I pay my taxes. If the state can't make do with those then that's not my issue.
That's the point, you do pay your taxes. And where do those taxes go? They go to pay high interest rates to foreigners. You and your fellow taxpayers will pay €1.5bn in interest in the first year alone to foreign bondholders (source: The Irish Economy » 2010 » October). That money is gone forever, you will never see it again, because it will be spent in Tokyo, Macau, Sydney and Rio de Janeiro. It will never circulate in Ireland.

So if you pay, say, €5000 in tax, that means that you are personally giving something like €250 to a foreigner.

You could have avoided that pointless waste of money by simply becoming one of the lenders to Ireland. Instead of losing €250 forever, you'd have temporarily given up control of it, and got it back with interest.

There's no way to sugar coat it. The "horrible financial decision" was patently the one you espoused. The two decisions have been market-tested, and yours is €250 worse. My proposal would have seen you invest €250 and, in time, get back about €300 to €400. Your counter-proposal leaves you being forced (by the Revenue) to give €250 to a foreigner for a personal return of €0.00.

Nice going, Mr Gekko.
 


cozzy121

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Yes, buy bonds issued by a country that's about to call in the IMF, they're as safe as houses.......
 

kerdasi amaq

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David McWilliams enjoyed a rich diet of ridicule and scorn for his efforts to point out the facts behind the bubble nature of the housing market. His logic was flawless, but people weren't in the mood to accept any logic. So the bust happened and surprised almost everybody.
The people who mattered didn't want to hear, as they were coining it at the time.

Now, they are, with any luck, all bankrupt and going to get it in the neck at the next General Election.petunia
 

Master Debater

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The people who mattered didn't want to hear, as they were coining it at the time.

Now, they are, with any luck, all bankrupt and going to get it in the neck at the next General Election.petunia
I doubt Seanie will suffer greatly. He'll still be teeing off on the 1st tee at Greystones golf club on the day following the budget I'd wager....
 

former wesleyan

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It was " foreigners " who handed Albert Reynolds 8 or 9 billion to play with in the "90's. That Ireland is incapable of balancing its books, regulating its banks , putting sustainable taxes in place isn't the fault of "foreigners". I detest that term... it smacks of Shinnerism with their ourselves alone crap.
 

Cassandra Syndrome

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So in his absence from here, Feargach has transformed from being an a PC left wing pinko into a Third Position Xenophobe?.

This forum never ceases to amaze me. What next, Goosebump drives about in a 1961 Lincoln Continental? Tonic is now an anarchist?
 

kerdasi amaq

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I doubt Seanie will suffer greatly. He'll still be teeing off on the 1st tee at Greystones golf club on the day following the budget I'd wager....
I'd prefer it if he were teeing off at a Swiss golf course. For the same reasons that Idi Amin spent his last days in Saudi Arabia.petunia
 

feargach

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Yes, buy bonds issued by a country that's about to call in the IMF, they're as safe as houses.......
Ouch, yet another epic fail on the logic ABC. It's amazing how people's basic arithmetic fail them when this issue comes up.

Imagine that your prediction of an imminent IMF arrival is correct (very extreme assumption indeed, highly unlikely). What happens then? What happens is that Irish debt is restructured. We make an agreement to pay back existing bonds over a longer timescale. That's how defaults work. Investors don't get zero, they get a reduction in what they originally agreed to.

So even if we assume that, does that mean your point makes sense?

Nope.

Fact is, you are going to pay no matter what. You will either pay the money freely by buying bonds and getting a positive return or you will pay the money via the taxman and get a personal return of zero.

Yes, even if we default (far from certain), the bondholder will still receive a return of more than zero, because of the restructuring settlement that comes after a default.

So your argument still fails. Your way is 100% guaranteed to provide a zero personal return, the better way is guaranteed to provide a positive personal return, even if you make the wildly pessimistic assumption that some form of default is certain.
 

jams odonnell

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if you don't want to pay money to foreigners

then

maybe you should have thought of that before you borrowed the money from the foreigners?
 

feargach

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It was " foreigners " who handed Albert Reynolds 8 or 9 billion to play with in the "90's. That Ireland is incapable of balancing its books, regulating its banks , putting sustainable taxes in place isn't the fault of "foreigners". I detest that term... it smacks of Shinnerism with their ourselves alone crap.
Meh, I'm the most anti-racist poster in the whole economy folder, the only one to take a stand against that disgusting habit of referring to nations as pigs, so your argument that I'm a xenophobe is pretty ridiculous.

The point is that every year for the next decade or so (unless we cop ourselves on and start buying Irish bonds) circa 5c out of every €1 in tax will be going out of the Irish economy and circulating elsewhere. That makes no sense. Whether you're a hyper-xenophobe like Hitler or a hyper-xenophile like Gandhi makes no odds, it still makes no sense.
 

feargach

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if you don't want to pay money to foreigners

then

maybe you should have thought of that before you borrowed the money from the foreigners?
So your point is we should borrow from nobody at all, neither domestic or foreign? Interesting idea.

There's a general election on the way. Let's see how well the "borrow nothing from anybody" party does. Are you expecting them to get an overall majority?
 

jams odonnell

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So your point is we should borrow from nobody at all, neither domestic or foreign? Interesting idea.

There's a general election on the way. Let's see how well the "borrow nothing from anybody" party does. Are you expecting them to get an overall majority?
Not at all. I'm just saying that if you borrow money from someone you should expect to pay it back some day.

You gotta pay what you owe.

I don't see what difference it makes if it's to Gael or Gall.
 

feargach

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Not at all. I'm just saying that if you borrow money from someone you should expect to pay it back some day. You gotta pay what you owe.
Well, nothing I could disagree with there, of course.

I don't see what difference it makes if it's to Gael or Gall.
Ah, now you're missing the point. If you fail to see the difference between a nation owing money to domestic creditors as opposed to foreign creditors, then you're missing out on some really important economic principles.

Imagine two identical shopkeepers, both of whom have borrowed identical sums of money. The first borrowed from a stranger at the bank, the second borrowed from his wife (or parent, or sibling).

Now imagine that the recession arrives and both shopkeepers are having identical problems meeting their payments. So they go to their creditors to explain the situation.

You probably are starting to see my point now. Obviously, the debtor in the worse situation is the one with the loan from the stranger.
 

former wesleyan

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Meh, I'm the most anti-racist poster in the whole economy folder, the only one to take a stand against that disgusting habit of referring to nations as pigs, so your argument that I'm a xenophobe is pretty ridiculous.

The point is that every year for the next decade or so (unless we cop ourselves on and start buying Irish bonds) circa 5c out of every €1 in tax will be going out of the Irish economy and circulating elsewhere. That makes no sense. Whether you're a hyper-xenophobe like Hitler or a hyper-xenophile like Gandhi makes no odds, it still makes no sense.
I wasn't implying racism or anything as well thought out as xenophobia... just good old fashioned shinner isolationism ( as exemplified by the term "foreigner )!
 

jams odonnell

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Well, nothing I could disagree with there, of course.



Ah, now you're missing the point. If you fail to see the difference between a nation owing money to domestic creditors as opposed to foreign creditors, then you're missing out on some really important economic principles.

Imagine two identical shopkeepers, both of whom have borrowed identical sums of money. The first borrowed from a stranger at the bank, the second borrowed from his wife (or parent, or sibling).

Now imagine that the recession arrives and both shopkeepers are having identical problems meeting their payments. So they go to their creditors to explain the situation.

You probably are starting to see my point now. Obviously, the debtor in the worse situation is the one with the loan from the stranger.
The shopkeeper borrowed money from everyone - his wife, his neighbour, strangers

and now the shopkeeper can't pay the rent on his shop anymore

- his wife doesn't any money left

- his neighbour doesn't have any money left

and the shopkeeper is trying to borrow more money from the stranger to pay the rent on his shop

Are you suggesting that the shopkeeper should tell the foreigner that he doesn't want to pay back the money before he tries to borrow the money for the rent??
 
Last edited:

feargach

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I wasn't implying racism or anything as well thought out as xenophobia... just good old fashioned shinner isolationism ( as exemplified by the term "foreigner )!
Well, when it comes to credit then I would say that "credit isolationism" is (when possible) the best way to go.

If country X is going to borrow money, then it is almost always better for them to borrow from citizens of country X.

Japan's debt-to-GDP ratio is much higher than Greece's or Ireland's, but nobody believes Japan will default. Why?

Japan borrows from her own citizens, not (for example) Irish investors. That's very good for both Japan the state and Japan's citizens.
 

Edo

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if you don't want to pay money to foreigners

then

maybe you should have thought of that before you borrowed the money from the foreigners?
indeed - thats the bit we seem to have problems with.........have had problems with for the bones of 40 years since George Colley ran the first budget deficit in 1969.
 

feargach

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The shopkeeper borrowed money from everyone - his wife, his neighbour, strangers

and now the shopkeeper can't pay the rent on his shop anymore

- his wife doesn't any money left

- his neighbour doesn't have any money left

and the shopkeeper is trying to borrow more money from the stranger to pay the rent on his shop
Sorry mate, that's not how it works. It's my hypothetical example, so you don't get to fool around with the parameters. Trying to argue your point by inventing parameters is dishonest.

This exchange is a good example of how it's impossible to construct an honest argument against the solid logic of my point. To fight the point, it's necessary to make stuff up, like Jams did.
 

former wesleyan

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Well, when it comes to credit then I would say that "credit isolationism" is (when possible) the best way to go.

If country X is going to borrow money, then it is almost always better for them to borrow from citizens of country X.

Japan's debt-to-GDP ratio is much higher than Greece's or Ireland's, but nobody believes Japan will default. Why?

Japan borrows from her own citizens, not (for example) Irish investors. That's very good for both Japan the state and Japan's citizens.
I can't see how that works. For example Ireland has arrived at its present position because it borrowed heavily on the global market to finance the development bubble. It would seem logical that its own resources are far too small to finance any rescue.
 

feargach

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indeed - thats the bit we seem to have problems with.........have had problems with for the bones of 40 years since George Colley ran the first budget deficit in 1969.
The point is, it's not too late to start borrowing from ourselves.

What's more, it is literally inevitable that we will begin to do so within the next few years. What you are seeing now is the conventional wisdom of the future.

In 2020, everyone in Ireland will agree that borrowing domestically is vastly superior to external credit. You can continue fighting the obvious, but if ou sit down and calmly think it through, you will see how none of the arguments against add up.
 

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