If you aren't emigrating, you need to buy solidarity bonds

feargach

Well-known member
Joined
Dec 11, 2006
Messages
4,968
Looking at the following analysis, which I paraphrase for copyright reasons, I have to reiterate the fact that the only course that equates to survival is to take up, en masse, the much-despised but entirely necessary NSB.

David McWilliams (paraphrased) said:
And now that the State is paying nearly 6pc interest on our debt, this means that the debt-to-GDP ratio will spiral out of control. A simple rule of thumb on debt dynamics is that if a country's debt gets to 100pc of its income, the growth rate must be higher than the interest rate on the debt in order for the debt to become stable.

Our growth rate isn't likely to reach more than 6pc again in a generation. So without much increased taxation and deep cuts, the deficit will grow beyond our ability to contain. But the more you cut and tax, the lower growth becomes and the more the efforts to cut the debt fail. This is called a 'failed fiscal adjustment'.

This is the reason the bond buyers are penalising Ireland. As said by Paul Krugman, the Nobel prize winning economist, rather than being rewarded for our orthodox, programme of deficit cuts, the markets are charging us more for debt.
The key phrase is "the State is paying nearly 6pc interest on our debt". If we reduce that interest rate progressively, then the crisis can be averted.

Rationally speaking, it's crazy to both stay in Ireland and shun the National Solidarity Bond. You can do one or the other, but it makes no sense to do both.

We cannot fiscally adjust if the interest rate is too high, so therefore Ireland will have to become bankrupt if the interest rate doesn't fall over the next few years.

If you're leaving Ireland, and not leaving behind anybody you care much about, then that needn't be a problem. Just watch your own back. But if it's your intention to stay, then you will have to sacrifice a lot of your income into lending to the state. Specifically, you will have to sacrifice the money that you were intending to spend on imported goods and foreign holidays.

It's an ugly situation, and I am glad my earnings have their roots outside the state and aren't tied to here. I am glad my decisions are my own. I am glad I have no creditors who have any say in my decisions.

I don't have to choose between living in a broke nation and having a new plasma screen, but people who are locked into Ireland do. I don't have to choose between living in a cold, rainy version of Greece and switching to a moped instead of a car to cut my fuel bill so that I can spend the savings on National Solidarity Bonds, but people who are locked into Ireland do.

But most Irish people with any income are tied to Ireland by both creditors and employment, and have to stay here no matter what. They have to wise up. They need to loan money to themselves, at a really low interest rate, otherwise they will be sampling the joys of living in a bankrupt state.

This is very hard to do. We need the media to be pumping the simple sums at us 24/7. Lending dosh to the Solidarity bonds WILL give you a lower return than investing it in other assets, that's certainly a fact. But if you intend to stay in Ireland, you need to do it anyway, because you will be much worse off living in a bankrupt nation.

It's no longer a set of decisions about how to get the most money: it's down to minimising losses.

So, once again, if you're staying put, buy the NSB's today.
 


grainne whale

Well-known member
Joined
May 2, 2007
Messages
554
I won't give 'that shower' the steam off my pi** at the moment.
 

Cassandra Syndrome

Well-known member
Joined
Aug 23, 2009
Messages
16,885
I'd sooner pay to attend a Feargach seminar on Economics.
 

LDF

Well-known member
Joined
May 28, 2007
Messages
4,157
You could buy 10 yr bonds in AIB and BOI at much better rates than those offered by FF through this solidarity lark. Bonds in AIB and BOI are guaranteed by Lenihan and Co so there is really no reason to opt for the solidarity bond at all.
 

Sync

Well-known member
Joined
Aug 27, 2009
Messages
28,584
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.
 

Cael

Well-known member
Joined
Jun 19, 2006
Messages
13,304
I would advise every patriotic Irish person to boycott this save-a-developer-and-banker bond.
 

oceanclub

Well-known member
Joined
May 17, 2006
Messages
1,300
Website
oceanclub.blogspot.com
Sure, cut out the middleman; just give me the PayPal details of Liam Carroll and co, and I'll send them some cash.

P.
 

feargach

Well-known member
Joined
Dec 11, 2006
Messages
4,968
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.
Either decision you make on NSB's will be a horrible financial decision.

Don't buy: Ireland goes bankrupt and you suffer the Greek fate if you live here. Maybe this is your preferred solution, for emotional reasons, but the cold hard accounting is that you will lose more money that way. But maybe you don't want to keep your money if you have to have an NSB to do it.

Do buy: you'll make an anaemic return, much less than if you had put it into the DAX or CAC 40. You'll also avoid the personal cost to you of Greek-style national bankruptcy. Your guess is as good as mine as far as that goes.

Sure, cut out the middleman; just give me the PayPal details of Liam Carroll and co, and I'll send them some cash.
Technically, you (and anybody else) could put the money into escrow with the stipulation that it only gets disbursed if you get full legally-binding and actionable assurances that no developers get any of the money. If Irish people put €5bn into escrow with a Swiss bank, with such stipulations, I imagine that Taoiseach Kenny/Gilmore would comply with the stipulation. So that doesn't have to be a deal-breaker, unless you just refuse to lend under any circumstances, in which case you've got to emigrate or take your beating.

grainne whale said:
I won't give 'that shower' the steam off my pi** at the moment.
Let's examine who constitutes 'that shower' in the above sentence. On p.ie, we know who 'that shower' is: it's the government and not you, not oceanclub, not Sync, not showbandmanager, not Cassandra Syndrome.

In all our minds, there is a sharp clear distinction between the above posters and the Cabinet. On P.ie, the majority of the citizens of Ireland and the Cabinet are totally distinct, indeed totally opposed entities. And that reflects reality, that really is the truth.

But the bond market is the decider of whether Ireland becomes Greece or not. And they will never see reality as described above. As far as the bond market cares, you are a member of 'that shower'. And there are no exceptions, from the vantage point of the bond market. You're not an exception, not oceanclub, not Sync, not showbandmanager, not Cassandra Syndrome.

I notice nobody has stated if they'll emigrate or not, or even if they're on the fence between emigration and staying, like me. Anybody want to volunteer that info?
 

grafter1

Well-known member
Joined
Apr 1, 2010
Messages
829
So Feargach what you're basically saying is the Irish government should run deficits funded by its own people so that its own people can get a crap return in comparison to institutional investors?

In other words - we should do as the Japanese do.

Feargach - i know you're a fan of Japan with its debt/GDP ration in excess of 200%. The Japanese people are running out of "savings" to fund their government and thus the days of cheap borrowing and low interest rates for the Japs are coming to an end.

It's a bubble waiting to go pop.
 

grainne whale

Well-known member
Joined
May 2, 2007
Messages
554
Feargach, keep taking the tablets, looks like you need them!!
 

feargach

Well-known member
Joined
Dec 11, 2006
Messages
4,968
So Feargach what you're basically saying is the Irish government should run deficits funded by its own people so that its own people can get a crap return in comparison to institutional investors?

In other words - we should do as the Japanese do.

Feargach - i know you're a fan of Japan with its debt/GDP ration in excess of 200%. The Japanese people are running out of "savings" to fund their government and thus the days of cheap borrowing and low interest rates for the Japs are coming to an end.

It's a bubble waiting to go pop.
I'm a fan of having unemployment significantly below 8%.

Were you even aware that unemployment is that low in Japan?

I don't think you know anything about Japan. Bubbles pop when investors suddenly withdraw funds. Do you really think regular Japanese people are going to suddenly pull the plug on themselves for no reason? Explain why.

Also, it is a figment of your imagination that I propose a debt/GDP ratio of more than 110%.

Even more so, have you the faintest idea of the interest rate Japan has to pay on that 200% debt/GDP ratio? It's less than 1%.

If you knew how to do simple sums, you would be aware that a 200% debt/GDP ratio at less than 1% interest rates is a lower debt burden than Ireland currently has.

Unfortunately your arithmetic abilities are too low for you to make any economic comments, but you do it anyway!
 

grafter1

Well-known member
Joined
Apr 1, 2010
Messages
829
I'm a fan of having unemployment significantly below 8%.

Were you even aware that unemployment was that low?

Also, it is a figment of your imagination that I propose a debt/GDP ratio of more than 110%.

Even more so, have you the faintest idea of the interest rate Japan has to pay on that 200% debt/GDP ratio? It's less than 1%.

If you knew how to do simple sums, you would be aware that a 200% debt/GDP ratio at less than 1% interest rates is a lower debt burden than Ireland currently has.

Unfortunately your arithmetic abilities are too low for you to make any economic comments, but you do it anyway!
Feargach the interest rate of 1% is due to the fact that all the debt is owned by its citizens.

The savings ratio in Japan has turned negative from a height of 15% in the mid 1990s. The population is decreasing and ageing rapidly. The Japanese will have to start raising funds on the interantional markets soon - do you think investors would prefer a 3% return on German/US debt or a 1% return on Japanese debt.


Thanks for the insults - but i'm pretty confident to say that my understanding of Japan is a tad superior to your own
 

feargach

Well-known member
Joined
Dec 11, 2006
Messages
4,968
Feargach the interest rate of 1% is due to the fact that all the debt is owned by its citizens.
*Very slow clap*

Finally sinking in, after all these posts.

When citizens own the debt, the interest rate can go lower.

You're of course wrong about big-time buying by foreigners. If you'd paid attention you'd have noticed the Japanese PM's announcement to move into a balanced budget over time, long before the generational crunch hits.

This would, of course, be the ideal situation for Ireland: heavy buying of NSBs for 5-6 years, whilst moving into first a balanced-budget position, around 2016, and a surplus position from 2017-2030.

That would be the sensible plan. Unfortunately the plan that will actually happen is that the Irish populace will refuse to save itself, and when the national bankruptcy hits in 2015, it will no longer have that option.
 

grafter1

Well-known member
Joined
Apr 1, 2010
Messages
829
*Very slow clap*

Finally sinking in, after all these posts.

When citizens own the debt, the interest rate can go lower.

You're of course wrong about big-time buying by foreigners. If you'd paid attention you'd have noticed the Japanese PM's announcement to move into a balanced budget over time, long before the generational crunch hits.

This would, of course, be the ideal situation for Ireland: heavy buying of NSBs for 5-6 years, whilst moving into first a balanced-budget position, around 2016, and a surplus position from 2017-2030.

That would be the sensible plan. Unfortunately the plan that will actually happen is that the Irish populace will refuse to save itself, and when the national bankruptcy hits in 2015, it will no longer have that option.
If you're going to engage in a discussion/argument you really have no need to throw insults at people.

Anyway again here it goes.

The Japanese people have run out of savings. Their new PM acknowledged that the country will have to tap the bond markets and raise its own interest rates.

Therefore you see citizens buying its state debt is unsustainable because eventually the citizens run out of cash.

And Feargach - we need €100 Billion over the next 5/6 years.
 

GDPR

1
Joined
Jul 5, 2008
Messages
217,846
You could buy 10 yr bonds in AIB and BOI at much better rates than those offered by FF through this solidarity lark. Bonds in AIB and BOI are guaranteed by Lenihan and Co so there is really no reason to opt for the solidarity bond at all.
There is no 10 year bank bond that gives a better return than the NSB.
 

grafter1

Well-known member
Joined
Apr 1, 2010
Messages
829
There is no 10 year bank bond that gives a better return than the NSB.
Well the institutional investors as of yesterday are getting 5.54% per annum. Again the government is short changing its own citizens.
 


New Threads

Popular Threads

Most Replies

Top