The Big Bailout of the Eurozone (Another crisis coming? - Seriously)

[seafoid]

There is just too much debt in the system, Muppet. Yields are at all time lows because of this.

Yields are low because the ECB are printing money because there is too much debt in the system. A surplus of debt would tend increase interest rates.

I think they are running out of road for that much kicked can........

I suppose they would justify themselves that if Greece goes down now, the knock on effect on Ireland or Spain would be very limited and indeed Greece itself would probably do OK as they now have a surplus.

It would normally armaghniac but we are in uncharted waters now debt wise.

Chart here on growth of global debt
http://www.ft.com/cms/s/0/4df99d28-4590-11e4-ab10-00144feabdc0.html

Oversupply and limited demand for investment- the result is ultra low interest rates

"The background level of real interest rates is set not by central banks but by supply and demand. Low real rates suggest lots of people are trying to save, and particularly in safe assets, while few people are trying to borrow and invest. Only with rates at a very low level can enough borrowers be found to mop up all the savings."
http://www.ft.com/cms/s/0/da0413f8-27cb-11e4-ae44-00144feabdc0.html


QE only makes it worse.
I think QE is deflationary . there is no evidence that it generates sustainable growth.

[muppet]

http://www.businesspost.ie/#!story/Home/News/Government+debt+falls+to+110%25+of+GDP+in+2014%2C+CSO+says/id/51491701-9455-34df-de78-550471956556 (paywall)

Government debt as a percentage of gross domestic product (GDP) fell to 110 per cent last year from 123 per cent on the back of better-than-expected economic growth and the early repayment of a portion of IMF loans, the CSO said.

The government finance statistics for 2014, released by the Central Statistics Office, showed that the general government deficit totalled €7.63 billion or 4.1 per cent of GDP, down from 5.8 per cent of GDP a year earlier.

Government revenue increased by more than six per cent to €64.7 billion while expenditure rose by 1.7 per cent to €72.3 billion, the CSO said.

Taxes and social contributions accounted for 88 per cent of government revenue last year while social benefits accounted for nearly 40 per cent of government spending.

Net government debt last year totalled 89.9 per cent of GDP, down from 92.1 per cent in 2013.

[Rossfan]

Probably all frittered away over the next 2 years on vote buying for the G E.

[muppet]

Interesting article:

http://www.marketwatch.com/story/how-this-debt-addicted-world-could-go-the-way-of-the-mayans-2015-04-27?dist=countdown

Nowadays many countries' social and political structure relies on debt-driven consumption and increasing levels of entitlements.

Blame the policy makers. To drive economic growth, boost living standards, and manage growing inequality, policy makers have used debt and monetary tools to create economic activity. This has resulted in excessive borrowing and imbalances in global trade and capital.

Governments played a part, too, allowing the buildup of social entitlements to win or maintain office. Private companies also encouraged the growth of employee benefits to avoid immediate pressure on wages as well as boost current earnings and share prices.

But such expensive commitments were rarely fully funded.

Rather than deal with the fundamental issues, policy makers substituted public spending, financed by government debt or central banks, to boost demand. Strong growth and higher inflation, they hoped or believed, would correct the problems.

Barron's Buzz: Who's optimistic now?(2:57)
This week's Barron's features the result of a survey of money managers and a look at Amazon's cloud services. Barron's Jack Hough discusses. Photo: Getty Images

The current state of affairs echoes Archaeologist Arthur Demarest's observation about the Mayan civilization: "Society had evolved too many elites, all demanding exotic baubles...all needed quetzal feathers, jade, obsidian, fine chert, and animal furs. Nobility is expensive, non-productive and parasitic, siphoning away too much of society's energy to satisfy its frivolous cravings."

Seven years into this crisis, the level of debt in major economies has increased. Global imbalances have decreased, but primarily as a result of slower economic growth. Countries such as China and Germany are reluctant to inflate their domestic economies, moving away from their export-driven model. Major borrowers, such as the U.S., refuse to reduce spending and bring their public finances into order. Enthusiasm for fundamental financial reform has dissipated, driven by concern that lower credit growth will decrease economic growth.

Policy makers refused to acknowledge that available fiscal and monetary policy tools cannot address the underlying problems. They repeatedly use complex jargon, obscure mathematics and tired ideologies to disguise their failures and limitations. Perhaps, as the writer G. K. Chesterton suggested: "It isn't that they can't see the solution. It is that they can't see the problem."

The policies, now centered around debt monetization entailing zero interest-rates and quantitative easing (QE), have potentially destructive side effects.

Punishing frugality and thrift, and rewarding borrowing, profligacy, excess, and waste.
The resultant loss of purchasing power effectively represents a tax on holders of money and sovereign debt. It redistributes real resources from savers to borrowers and the issuer of the currency, resulting in diminution of wealth over time.

Debt monetization also creates moral hazards. Low rates and easy availability of credit reduces market discipline. Borrowers face less pressure to cut back on their debts. Low borrowing costs allow unproductive investment to be maintained. It reduces incentives for governments to bring public finances under control.

Ultimately, the policies being used to manage the debt crisis punish frugality and thrift, and reward borrowing, profligacy, excess, and waste.

The policies might have been defensible if successful. But evidence to date suggests that policy makers are unlikely to succeed. The Bank for International Settlements and other central bankers now stress the limits to monetary policy in boosting economic growth without addressing the underlying issues.

Ordinary people fear the consequences on their lives from the Great Unraveling. The political and social response is likely to be volatile. It was the fear and disaffection of middle-class citizens who had lost their savings in the Great Depression that gave rise to fascism.

Governments have shown little willingness to inform the electorate about the magnitude of the economic problems, the lack of solutions, and cost of possible corrective actions. Politicians have taken regard of historian Simon Schama's comment that no one ever won an election by telling voters it had come to the end of its "providential allotment of inexhaustible plenty." In a moment of unusual candor, Prime Minister of Luxembourg and Head of the Euro-Group Jean-Claude Junker stated: "We all know what to do, we just don't know how to get re-elected after we have done it."

Precious political and economic capital has been wasted with inadequate policies that have side effects and decrease chances of a recovery. For policy makers everywhere, to paraphrase Alexander Solzhenitsyn, the "permanent lie [has become] the only safe form of existence."

Satyajit Das is a former banker and author of "Extreme Money" and "Traders, Guns & Money."

[muppet]

http://www.rte.ie/news/2015/0428/697213-spring-economic-statement/

The Minister for Finance has said the Government would be in a position to introduce expansionary budgets from now until 2020, if it is deemed prudent to do so.

In the Government's Spring Economic Statement, Michael Noonan said the department was forecasting that employment would pass the two million people at work by next year.

He said the economy would replace all of the jobs lost during the downturn by 2018 and, in total, between 2015 and 2020, 200,000 jobs would be created.

Net outward migration was expected to cease next year with a return to inward migration from 2017 onwards.

Following GDP growth of nearly 5% last year, the Department of Finance is projecting GDP growth of 4% this year, with positive contributions from both exports and domestic demand. 

Mr Noonan said that the public finances are under control with the deficit falling below 3% this year, while debt levels are set to move down towards the European average in the next few years.

The minister added that net migration is expected to stop next year with a return to inward migration from 2017 onwards.

Speaking about budgeting, Mr Noonan said there would be no return to the boom and bust model of the past.

He also said the Government was considering a range of options to strengthen the mortgage arrears framework in order to ensure that families in long-term arrears can find a solution.

He added that there would be a further announcement on this in the coming weeks.

Mr Noonan said that the number of arrears cases was falling but that there were still 37,000 accounts in long-term arrears of over two years.

The minister said there would be a particular focus on enhancing the role of the Insolvency Service and the range of solutions that become available through an insolvency arrangement.

Minister Noonan said the national debt peaked in 2013 and is on a firm downward path, and is expected to drop below 100% of GDP and move towards the EU average in the years ahead.

Mr Noonan said that the value of the State's investment in AIB, Bank of Ireland and Permanent TSB continues to rise and he added that it is not the State's intention to remain a holder of its banking investments in the long term.

"The sale of 25% of PTSB that concluded yesterday, further improves the position and I am fully confident that all the taxpayers' money investment in AIB, Bank of Ireland and PTSB will be fully recovered," the minister told the Dáil.

The minister also stressed that the 12.5% Corporation Tax rate will stay. "This is a red line for the Government", he stated.

"We have no reluctance to continue, in parallel with our European colleagues, in reforming Corporation Tax, but we will not, as many in opposition advocate, increase the 12.5% rate," he said.

The Minister for Public Expenditure and Reform said the Government is looking to increase current spending by between €600 and €750 million for 2016.

Brendan Howlin said the expansion would allow the Government to deal with underlying demographic pressures in key areas such as social protection, education and health.

He said, including these additional allocations, Government spending - excluding debt interest - would come in at just under a third of gross domestic product.

Mr Howlin reiterated the Government's commitment to pension provision.

He told the Dáil the country currently spends over €6.5 billion annually on pension provision.

He said this was projected to increase by €200 million per year to 2026 as the population ages.

However, he said the Government was committed to pension provision and there was no threat to current schemes.

Mr Howlin also told the Dáil the way is clear to enter talks with unions on public service pay.

He warned, however, that it was prudent to plan for an orderly unwinding of the emergency provisions that had been introduced to deal with the hole in the public finances, which included pay cuts for public servants.

The public service had seen the beginnings of pay awards in the private sector over the past two years, he added.

Both ministers said the Government was aiming to have between €1.2 and €1.5 billion of fiscal space for Budget 2016.

They said the resources would be allocated on an equal basis between additional spending and reducing the tax burden on low and middle income earners. 

Additional investment may also be possible arising from reduced spending on unemployment payments as the numbers at work grow.



On the first bit in bold, no doubt they have no intention of return the money to the taxpayers.

And the 2nd point, they are increasing public spending on public pensions while paying for it by raiding only private pensions.

[seafoid]

An end to boom and bust is incoherent.
It's like saying no biscuits ever again.
In order to make it happen we would all need new brains.

[armaghniac]

On the first bit in bold, no doubt they have no intention of return the money to the taxpayers.

And the 2nd point, they are increasing public spending on public pensions while paying for it by raiding only private pensions.

Well the money will come back to the government, as the sale of part of  PTSB yesterday showed, whether you think that is a benefit to taxpayers is a moot point.

There is a time difference here, they raided the private pensions in the past and will pay the increases in the future. A bigger problem for private pensions now is low returns on bonds and the like, and of course almost everyone receiving a private pension also gets the OAP.

[muppet]

On the first bit in bold, no doubt they have no intention of return the money to the taxpayers.

And the 2nd point, they are increasing public spending on public pensions while paying for it by raiding only private pensions.

Well the money will come back to the government, as the sale of part of  PTSB yesterday showed, whether you think that is a benefit to taxpayers is a moot point.

There is a time difference here, they raided the private pensions in the past and will pay the increases in the future. A bigger problem for private pensions now is low returns on bonds and the like, and of course almost everyone receiving a private pension also gets the OAP.

The private pensions are taxed differently to public pensions, transferring money from the former to the latter.

I agree about the bonds. It is disastrous.

As for the final point, is that called a 'consolidated pension' or something like that? The OAP is for everyone, but I think that is changing too. In future it may only be for those who didn't pay anything into a retirement fund. Don't get me wrong, you obviously can't leave people without an income in their retirement. But those in the PS who can afford to pay their way should be treated equally.

[seafoid]

On the first bit in bold, no doubt they have no intention of return the money to the taxpayers.

And the 2nd point, they are increasing public spending on public pensions while paying for it by raiding only private pensions.

Well the money will come back to the government, as the sale of part of  PTSB yesterday showed, whether you think that is a benefit to taxpayers is a moot point.

There is a time difference here, they raided the private pensions in the past and will pay the increases in the future. A bigger problem for private pensions now is low returns on bonds and the like, and of course almost everyone receiving a private pension also gets the OAP.

The private pensions are taxed differently to public pensions, transferring money from the former to the latter.

I agree about the bonds. It is disastrous.

As for the final point, is that called a 'consolidated pension' or something like that? The OAP is for everyone, but I think that is changing too. In future it may only be for those who didn't pay anything into a retirement fund. Don't get me wrong, you obviously can't leave people without an income in their retirement. But those in the PS who can afford to pay their way should be treated equally.

The bonds are overpriced because there is so much money looking for a return putting safety over anything else. There probably won't be any growth globally for a long time.

[muppet]

http://www.telegraph.co.uk/finance/economics/11588763/Greece-could-use-parallel-currency-as-desperation-grows.html

Greece could start using a "parallel currency" to pay its civil servants if it runs out of cash, one of the European Central Bank's board members has suggested. His comments come as the country scrambles to reach a deal with international creditors and avoid a default.
Highlighting the desperate situation faced by the country, Yves Merch, a member of the ECB's executive board and governor of Luxembourg's central bank, told Spanish newspaper La Vanguardia that Greece could resort to using "exceptional tools" to pay its obligations.

"There are intermediate solutions circulating, such as the issuance of a parallel currency or IOUs," he told the newspaper. "All these measures are among the exceptional tools that any government can consider if it has no other options. But all of them have a high cost."

The ECB has already analysed how such a scenario could play out. Officials told Reuters in April that creating a virtual second currency within the eurozone might not be enough to keep Greece in the 19-nation bloc.

Analysis showed around 30pc of Greeks would end up receiving such "IOUs" rather than cash, which would put further pressure on Greek banks as workers dipped into their their savings.

Billions of euros have been pulled out of Greek banks since the end of last year, which has left banks reliant on a drip-feed of liquidity from the ECB. The central bank raised its emergency liquidity assistance (ELA) to Greece's banks by €2bn to €79bn on Wednesday, in a sign of further progress between Greece and its creditors.

However, a spokesman for the Greek government said "red lines" on raising the minimum wage and restoring pension payments remained. Gabriel Sakellaridis told reporters that the situation remained criticial, adding that the country was committed to servicing its obligations.

The country repaid €200m to the International Monetary Fund on Wednesday as part of its bail-out agreement, but faces a more daunting €750m repayment later this month.

In a sign of defiance, Alexis Tsipras, Greece's prime minister, tweeted last night that he would meet the 600 cleaning ladies who have been re-hired by the Syriza-led government after being made redundant by the previous administration.

[muppet]

http://www.rte.ie/news/business/2015/0512/700509-greece/

[seafoid]

the Offaly mafia

http://www.independent.ie/opinion/comment/why-banking-inquiry-is-no-more-than-the-show-trial-of-brian-cowen-31209738.html

I saw a thing in he FT a while ago about voters from the home town of the Turkish Prime Minister who refused to believe he could be corrupt since no great man from the town could be corrupt. 

[macdanger2]

http://www.broadsheet.ie/2015/05/28/redacteds-1-25-interest-rate/

For anyone who's interested in reading what can't be reported. It certainly seems like something which needs an investigation

Mods: I presume posting the link is okay,.please delete if it's not

[muppet]

No comment from me. But this comment at the bottom of the link above is interesting:

Scary update:

Solicitors acting for Denis O'Brien have asked us to remove this post asserting that it is a breach of a High Court Order [O'Brien Vs RTÉ]. They gave a 7pm [Thursday] deadline or they would begin injunction proceedings. We have replied that article 15.12 of the constitution allows all Dáil statements "wherever published" to be privileged and we currently await their response.

O'Brien appears to have found a way around Dáil privilege. But I think it will blow up in his face. In the internet era that sh*te doesn't seem to work like it used to.

[Rossfan]

That O'Brien cnut needs putting in his place.