# Is it possible for private individuals to lend to the state



## LouisCribben (7 May 2010)

I was reading that Ireland is paying over 5% interest on the national debt

Is it possible for private individuals to lend to the state ?

A lot of people would be happy to lend to the state for way less than 5%, saving the state a lot of money


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## Towger (7 May 2010)

Yes. The NTMA's .!!


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## Padraigb (7 May 2010)

Lots of options: http://www.anpost.ie/AnPost/MainCon...invest.htm?P&gclid=COrQibWTwKECFQE8lAod3UXmAA


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## LouisCribben (7 May 2010)

Thanks
I'm impressed with the National Solidarity bond.....3.96% annual interest effectively after tax.
One drawback is that you have to tie up your funds for 10 years...


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## mathepac (7 May 2010)

Would offering Lenihan or Biffo a "dig-out" not be frowned upon?


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## ringledman (7 May 2010)

You've got to be pretty brave to lend to the government for a decade or so for only 5%.

Inflation? Currency debasement? Monetisation? Default?

It is interesting to note that Mcdonalds debt is yielding less than Western governments. 

Who is the most viable long term? I'm not so sure. I think I currently trust corporations to remain more solvent than Western governments...


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## Protocol (10 May 2010)

People have been saving with An Post, and so lending to the State, for 50 years +.

It is very common.

Same happens in the UK, and many other countries.

Example: Savings Bonds  = 3yrs, 10% net.


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## ringledman (28 Jun 2010)

Protocol said:


> People have been saving with An Post, and so lending to the State, for 50 years +.
> 
> It is very common.
> 
> ...


 
The problem is most people can't work out the difference between nominal and real returns. 

They see a nice 3% annual return and think; wow I'm getting paid by the government, excellent. 

They miss the fact that the government is stealing 2% off them per year by running a 5% inflation rate.

Government theft is what savings accounts are over the long term.


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## jpd (28 Jun 2010)

inflation isn't 5%


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## ringledman (29 Jun 2010)

jpd said:


> inflation isn't 5%


 
Who is saying it is?

I am making an example to consider the real return not the nominal.

Yes Ireland has deflation at present so the real return on cash has been excellent the past couple of years.

This won't last over the 'long term' as I stated in my post. Inflation is the long term situation for fiat currencles 95% of the time.

As the ECB has to print and print and the Euro loses value against basic staples then the return on a fixed bond or cash will fall.

As an example; the UK banks are curently offering 2.5%-3% with inflation at 4-5%. The state is stealing from indviduals at present. This may well happen in a year or two in Ireland and the Euro zone, particularly as the euro falls in value.

Government bonds and cash are there to serve the government not the individual. 

Consider the inflation/deflation scenarios before investing is all I say.

Cash and bonds are not low risk. They come with a huge inflation risk that needs to be factored in.


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## Protocol (29 Jun 2010)

Yes, savers and borrowers should adjust for inflation and consider the real returns/costs.

The ECB has been fairly good at keeping eurozone inflation close to its target of 2%.

Irish inf did get out of hand, up to 7%, but now has turned negative.

Over the long run, the nominal int rate should exceed the inf rate, leaving a positive real int rate of maybe 2% on average.


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## Sunny (29 Jun 2010)

You can invest directly in Government Bonds if you so wish. The yields are more attractive than the solidarity bond or An Post Bonds. You do need a minimum amount though (I would guess 50k but could be higher). One of the big stockbroking firms will be able to help you.


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## DerKaiser (1 Jul 2010)

Sunny said:


> You can invest directly in Government Bonds if you so wish. The yields are more attractive than the solidarity bond or An Post Bonds. You do need a minimum amount though (I would guess 50k but could be higher). One of the big stockbroking firms will be able to help you.


 
I compared the 3 year an post savings bond to the 3 year government bond yield and the savings bond gives a better return! 

You can invest up to €240k per couple in it.

Also, you can cash in at any time you wish.  It's not locked in.  I think the return on the 3 year bond is approx 2.5% p.a. if you cash in early.  Hardly a serious penalty!!


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## sunrock (1 Jul 2010)

Eddie Hobbs advises against the solidarity bond. Fear of inflation and the risk of national bankruptcy are his reasons. He has a point but then he was promoting the Cape Verde islands not that long ago.


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## DerKaiser (2 Jul 2010)

sunrock said:


> Eddie Hobbs advises against the solidarity bond. Fear of inflation and the risk of national bankruptcy are his reasons. He has a point but then he was promoting the Cape Verde islands not that long ago.


 
I'd be inclined to agree with eddie on the 10 years bonds (but for different reasons).

First off, the yield is less than a 10 year government bond at the moment.

Second, it's inferior to a government bond in that you will get much less than this yield if you cash in early.

The shorter term bonds on offer by An post appear a better proposition to me


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## ringledman (2 Jul 2010)

Protocol said:


> The ECB has been fairly good at keeping eurozone inflation close to its target of 2%.
> 
> Irish inf did get out of hand, up to 7%, but now has turned negative.
> 
> Over the long run, the nominal int rate should exceed the inf rate, leaving a positive real int rate of maybe 2% on average.


 
Maybe during the good times but not the bad.

I subscribe to the Marc Faber school of thought - 

Western governments will run negative interest rates for at least a decade to destroy their debt.

When this happens bond/cash holders in the Euro/US/UK will see their wealth destroyed.

It's already happening in the UK. A matter of time before the Euro & USA savers face the same problem.

10 year fix and tied in. Highly risky investment IMO.


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## DerKaiser (2 Jul 2010)

ringledman said:


> 10 year fix and tied in. Highly risky investment IMO.



It's got a 1% return per annum (which you can cash in on at any point) and a 40% bonus at the end.  

Taking prevailing interest and inflation rates into account I wouldn't agree it's highly risky. You can always bail out with your 1% return if inflation starts to creep up


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## sunrock (3 Jul 2010)

What about Eddie Hobbs suggestion of inflation linked bonds?


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