Low interest rates could lift Irish economic depression-closer to Berlin or Athens?

patslatt

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Mary Harney raised the issue of Irish economic philosophy by saying we were closer to Boston than Berlin. With the government's ability to get funding threatened by sharply rising,punitive interest rates at close to 7% on its 10 year bonds,dithering government deficit budgeting could bring us closer to Athens than Berlin.

If-a very big if-Irish government interest rates were restored to levels prevailing before bond desks began worrying about the PIIGS countries, Ireland could borrow at a small premium above Germany's rates and then the interest burden would be tolerable at around 3.5% (3.5% of debt at 130% of GNP = interest payments of about 4.5% of GNP).

So what urgent measures should the government undertake to restore bond market confidence in its bonds? Has it left it too late,to the point that a double dip depression is underway?
 


Oblivion.

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So what urgent measures should the government undertake to restore bond market confidence in its bonds?


The government needs to get in touch with Christopher "Doc" Lloyd immediately, and use his Flux Capacitor to go back to 1985 - a time before Ireland's toxic property boom bankrupted the country - and introduce prudent fiscal policy.


Has it left it too late
Yes.

to the point that a double dip depression is underway?
Yes
 

patslatt

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Doomed without the time machine to take us back!

The government needs to get in touch with Christopher "Doc" Lloyd immediately, and use his Flux Capacitor to go back to 1985 - a time before Ireland's toxic property boom bankrupted the country - and introduce prudent fiscal policy.




Yes.



Yes
 

forest

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While i dont support the current bail outs I understand why the government is doing it.
I feel thuogh we need to move away perminatley fro the anglo saxon economic system to that of Berlin Paris or Stockholm

house prices need to stay at the level they are at or drop lower(I believe one should be able to buy a 1 bedroom 40msq appartment with ease for 100,000€)

The anglo saxon mentality of buying property needs to be removed from irish culture never again do I want to hear people on about the price of their home or read articles on investment opertunities, prperty in bulgaria

A house should be smething you live in not an investment
 

Cassandra Syndrome

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Its too late. Too much debt. I could sooner successful formulate an answer to the meaning of life than correctly estimate Ireland's total debt. Its the region of €700 Billion to €1 Trillion at this stage. I know the External Debt figures shows €1.8 trillion. But you have to deduct IFSC double counting (which isn't stated). You then need to triagulate it to central bank reports and CSO reports. The central bank reports are just Irish institute debt, so you have to go to CSO household reports and Non Financial Corporation reports and company reports and then you have to estimate how much of the financial reports is not double counted in the household reports and NFC and household reports. You then have to go to the Department of Finance website and add up National Debt figures, with the short term debt figures and then go back to the central bank report to find out how much debt the government owes the Irish Banks and then subtract that from the Financial Institutes debt assuming that all their debt is from National Institutes.
You then need a drink.

Off the top of me head this is a rough estimate

Household Debt €150 Billion to €250 Billion.
Non Financial Corporations and Companies between €300 Billion and €400 Billion
Financial Corporations €100 Billion and €200 Billion (external debt that is not double counted int the above)
General Government Debt €120 Billion to a potential €220 Billion if you include NAMA and the future recaps that are guaranteed.

The Total Debt works out at between €670 Billion at a very unlikely minimum and €1.07 Trillion which is also unlikely.

But our Gross National Income for 2010 will be only €120 Billion. And our saving deposits are €185 Billion.

Savings and Investings or Savings and Borrowings should be at parity. Our total debt is at least 600% of GNP, probably 700% and in an extreme case nearly 1,000%.

Now think of that in terms of a single household economy. How could the people in that household payoff 700% debt of their annual income with interest rates rising and incomes shrinking?

It wipes out their income and no consumption and savings can occur.

Solutions?

1. Reduce the debt to €200 Billion, either by forgiveness, default, debt to equity schemes, selling off assets, or a dangerous consolidation of debt program of paying off all this debt over a long period of time in ghigh amounts while trying to avoid the need to borrow more.

2. Increase our National Income and national savings by not taking on any more debt, but not having to reduce it either. That would involve multiplying GNP four times its current amount to €460 Billion Euro per annum. We managed to increase our GNP 5 fold in the 1970s but that was from low levels and double digit inflation and a lot of real wealth creation.

The figures required here are a GNP per capita of €100,000 per year or on average €250,000 per worker. Can you see that happening? If it does, inflation will be rampant. That will be great for our debts but will crucify savers further and make our lives even more miserable. And I just can't see how those income numbers can reach those levels.

So I think the solution lies in default, debt forgiveness and restructuring without damaging our GNP or requiring a hostile outside force who would run the country for us. We have to reinstate or punt and have a new temporary state run bank. That's a tough call. I know. But this is a major crisis.
 

patslatt

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Why haven't any of the media come up with numbers similar to yours?
 


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