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The need for domestic stimulus...


the_rebubblican

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Mar 24, 2010
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It's clear that Ireland is caught in the double bind of the global financial collapse depending on external sources for continued day to day funding be it from the ECB or the markets which was also ultimately the source of our problems through cheap money. We'll obviously need their help being on fiscal life support for a number of years.

As we hack away at government spending and raise taxes new pressures are being placed on citizens and businesses. There's not enough money available through this method to fast track recovery and all the while reducing government spend will reduce economic activity and depress consumer expectations.

There's been many a tale spun about the knowledge economy with 150,000 future jobs recently been found behind a couch in a government department. Any growth in this area will take years and will hardly dent the 450,000 dole queue.

There has not as yet been a form of domestic stimulus announced. Recovery is not possible without this. This Guardian article suggests an interesting method of time limited money. As part of the Euro we do not have the luxury to pursue this without blessing from Frankfurt.

Does anyone have a novel idea to turn savings into spending that would benefit indigenous industry and domestic demand? The government needs our help!
 


hammer

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These positive threads always amaze me. They get very view hits or ideas / posts.

Start a thread about cuts, tax, public sector, doom & gloom - thousands of hits.

We need some sort of stimilus that gets people working. I`ve mentioned about 6, that would cost relatively little.

We are dealing with closeted DOF officials / Civil Servants that believe that if passengers numbers are down in Dublin Airport we should increase landing charges & taxes
 
D

Dylan2010

very targeted , VAT to 10% and other measures to get retail prices down for a start. Traditional stimulus just means throwing money at the vested inteests who are the only ones that benefit. There are 60 million people less then an hour away if we abolished duties. There are a couple of hundred thousand wealthy Brits that might move here if we had a ceiling on income tax, how about 5% tax above 250K , you could relocate Harley street to the IFSC. just thinking out loud but thats how you grow out of a recession
 

roc_

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Under the surface, the root causes are certain social and political problems - these must be rectified to build a sustainable structural basis for economic activity.

But on the surface, the problem is simply the lack of money - put money in peoples' pockets, and they will spend it in local businesses creating employment and perpetuating even more economic activity.

But if you put money into peoples' pockets, they will obviously hoard it and use it to pay down debt - this is a process that has to be completed too.

So, the only solution I can think of is to print up a local currency that operates in parallel to the euro, that people can only use to buy local goods and services, and to top up wages with bonuses etc. (ie. not use it to pay down debt or put away for a rainy day).

It's very simple, but it would have to be done carefully. - Issue a certain amount of this domestic currency to every person every week; allow local businesses to cut euro salaries slightly but top up with the domestic currency they receive in. There's a few more logistical issues and other issues, but they are handleable with good design.
 
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Dylan2010

Under the surface, the root causes are certain social and political problems - these must be rectified to build a sustainable structural basis for economic activity.

But on the surface, the problem is simply the lack of money - put money in peoples' pockets, and they will spend it in local businesses creating employment and perpetuating even more economic activity.

But if you put money into peoples' pockets, they will obviously hoard it and use it to pay down debt - this is a process that has to be completed too.

So, the only solution I can think of is to print up a local currency that operates in parallel to the euro, that people can only use to buy local goods and services, and to top up wages with bonuses etc. (ie. not use it to pay down debt or put away for a rainy day).

It's very simple, but it would have to be done carefully. - Issue a certain amount of this domestic currency to every person every week; allow local businesses to cut euro salaries slightly but top up with the domestic currency they receive in. There's a few more logistical issues and other issues, but they are handleable with good design.
There isnt a lack of money , there is too much debt. That being said, there is some role for a "time based" currency of some sort. the painter and the haridresser dont need euros to conduct business with each other, but the leakage comes when tradeable goods are required as your international oil company will not be interested in your little venture and will have to be paid in real green.
 

charley

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There are ways to stimulate the economy but the Government won't attempt any of them. Halving utility bills for 2 years would free up €6billion into the economy. Making business rates dependant on the number of people employed not the size of the premises. Lowering taxes on fuel and a rebated diesel for trucks would also help.
Abolition of VRT just a €500 registration fee no matter what the cost of the vehicle.The Irish motor sector has been protected for too long.
VAT down to 10% as someone else suggested.
Air freight charge on all imported foodstuffs.The further it comes the higher it is.
Suspension of all foreign aid for 4 years.
A higher tax rate for businesses who employ non-EU nationals.
 

an modh coinniolach

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Oct 28, 2010
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Modest proposals

(i) How much of the National Pension Reserve Fund is invested in Ireland?
Could a minimum per centage be set and could a mechanism be found to direct that into the domestic economy with, at the very least, a view to opening up the flow of credit to businesses again?

(ii) I suppose there's no chance of an automatic VAT rebate on anything grown or manufactured in Ireland.
 

the_rebubblican

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Mar 24, 2010
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I wonder would it be possible to do a kind of reverse SSIA whereby tax income is refunded to people at a future date who spend or invest on specific projects or sectors now. We cannot reduce current tax rates but we could bargain with future tax receipts once the economy has recovered. Maybe some kind of rescue bond which is going to be used on productive spending such as FG's upgrading of water and broadband services.
 

roc_

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There isnt a lack of money , there is too much debt.
Yes, and this debt is being paid down or otherwise liquidated (eg. by 'recapitalisations') which leads to a lack of money. It is the core dynamic of a bust. There is certainly a lack of money, and that is the core issue for this thread.

Also, while I believe that if issuance of money is done in a careful, scientific manner, such phenomena as inflation can be avoided, however there is a bigger danger.

This is that the social and political factors which become exposed and urgent owing to the disappearance of money, get obscured with another wash of money, and again ignored so that the underlying real problems fester and get worse.

If we were mature enough as a society to be able to face up to and deal with these social and political factors, while using the device of new money issuance to alleviate the pain and destructivesness of bust, all would be well.

However, unfortunately, we're not mature enough.
 
Last edited:

deiseguy

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How about simply making it illegal for banks to pay more than say 30% of the amount they take in in loan repayments off shore for a defined period? David McWilliams calculated the amount being paid off-shore on mortgages alone to be €600 million per month. The banks wouldn't spend too long looking at this cash before they found ways to put it to work. The period could be defined with a time limit or with a link to economic performance. For me the link to economic performance would be GDP/GNP and employment numbers returning to 2006 levels.
 

Hazlitt

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Feb 3, 2009
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Does anyone have a novel idea to turn savings into spending that would benefit indigenous industry and domestic demand? The government needs our help!
Savings and spending are two sides of the same coin. Savings get loaned out to businesses. If we really want to "get credit flowing" again, as seems to be the mantra, then savings should be encouraged. Of course, although savings have risen, if the interest rate was allowed to freely fluctuate there'd be a lot more. Also, given that we're saving in insolvent banks that will simply shore up their balance sheets / service debt rather than extend credit, we need urgently to encourage the creation of new banks in the country. We also need urgent reform to our banking laws similar to the Toby Baxendale proposals in the UK
 

the_rebubblican

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Savings and spending are two sides of the same coin. Savings get loaned out to businesses. If we really want to "get credit flowing" again," The banks will recover at their own pace no matter what is done. We need to bypass them as you said thru a new bank or credit vehicle. The state could offer large future discounts on targeted expenditure now via tay credits or pension benefits. We need to prise money from savers.
 

roc_

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Savings and spending are two sides of the same coin. Savings get loaned out to businesses. If we really want to "get credit flowing" again," The banks will recover at their own pace no matter what is done. We need to bypass them as you said thru a new bank or credit vehicle. The state could offer large future discounts on targeted expenditure now via tay credits or pension benefits. We need to prise money from savers.
http://www.politics.ie/political-reform/139377-new-co-operative-bank.html
 
D

Dylan2010

Savings and spending are two sides of the same coin. Savings get loaned out to businesses. If we really want to "get credit flowing" again," The banks will recover at their own pace no matter what is done. We need to bypass them as you said thru a new bank or credit vehicle. The state could offer large future discounts on targeted expenditure now via tay credits or pension benefits. We need to prise money from savers.
thats bollox! where is the other side of your equation , you need profitable investments and there are precious few around. Prising money from savers makes no sense except at a very superficial level, of couse I'd love people to spend their reserves in "my business" so that I could save it or pay down debt, but you are looking at the wrong end of the donkey I'm afraid.
 

roc_

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thats bollox! where is the other side of your equation , you need profitable investments and there are precious few around. Prising money from savers makes no sense except at a very superficial level, of couse I'd love people to spend their reserves in "my business" so that I could save it or pay down debt, but you are looking at the wrong end of the donkey I'm afraid.
True as well, although I know what Hazlitt means.

So, it comes back to my earlier point that for profitable businesses and investments to exist, you need to have customers with money in their pockets. So, any stimulus should be aimed straight at their pockets.

While recognising that we're not going to get out of this hole in real terms until debt is paid down - that is why I think the suggestion of reserving the euros for paying down debt and strengthening cash positions; and reserving a domestic currency to spend in local business and enterprise, is a good one.

It also has the added benefit that the customer decides which businesses survive, and which die, rather than Eamon Ryan and his cronies deciding the question, as is currently the case.
 

Tim Johnston

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So, it comes back to my earlier point that for profitable businesses and investments to exist, you need to have customers with money in their pockets. So, any stimulus should be aimed straight at their pockets.
Quite right but the people who talk about "stimulus" generally mean that the government should create jobs, rather than cut taxes to let people spend more of their own money, sadly.
 

roc_

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Quite right but the people who talk about "stimulus" generally mean that the government should create jobs, rather than cut taxes to let people spend more of their own money, sadly.
The problem is that if you cut taxes the way things are at present, more people die in hospitals, turn to drugs and crime, and pretty much any other social problem you care to imagine gets worse.

I'm more suggesting cranking up a domestic currency printing press, perhaps even localised down to community level - which currency can only be used in local business, specifically as an aid to help perpetuate economic activity and coinciding employment. This currency would deployed in parallel, and supplemental, to existing euros. Definitely, it would be put straight into peoples' pockets so they choose how to spend it rather than allowing government to decide how to spend it.
 

the_rebubblican

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Hazlitt

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thats bollox! where is the other side of your equation , you need profitable investments and there are precious few around. Prising money from savers makes no sense except at a very superficial level, of couse I'd love people to spend their reserves in "my business" so that I could save it or pay down debt, but you are looking at the wrong end of the donkey I'm afraid.
That quote you have there from me is actually a mix of me and the_rebubblican - I didn't say half that. Please read my post
 

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