# Will we see any incentives to spend again?



## amh (14 Apr 2011)

I was wondering will we see any new incentives proposed to increase spending and get money moving once again.

What I'm talking about are vouchers or tokens that can be used within the country for a given period of time. This type of incentive was talked about on Newstalk this morning as it has been used before in other countries as a means of increasing spending. Could something like this be used in conjunction with hotels etc and be give to the tourists or the general population, possibly focussing in on the NAMA hotels since we own them in effect? 

What about the empty business premises? Can they not be used as incentives for new businesses or indeed foreign businesses who might look to invest here if they were to have a premises at a reduced rate or indeed for free? Of course only if they are employing people and increasing revenue.


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## Chris (14 Apr 2011)

Spending is what caused this problem and is the last thing we need in one of the most indebted countries in the world. It is probably one of the most common misconceptions of modern times that spending drives economic growth. If spending voucher actually worked then why not give everybody a €100000 to really get things going. It just isn't that simple.

Spending is the result of economic activity which is driven by saving and production, which is hard work. If people are encouraged to spend the little savings they have, or worse yet spend on credit, then there will be less loanable funds which are in dire need for viable and expanding businesses.

What this country needs is more encouragement to save and invest, but recent tax increases on savings interest and CGT have made sure that that will not happen.


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## ringledman (14 Apr 2011)

As Chris said, an economy based mostly on consumption is a disaster. 

If companies are struggling, unfortunately then they can't be propped up by the state, they need to fail to allow the people, land and capital tied up in the companies to be used for better use in new profitable industries or sectors. 

Letting unprofitable businesses fail is a sign of a healthy economy. The economy should be organic and left to itself. Once governments start dishing out cheques people divert savings and investments from the good companies to the bad ones that the state is trying to keep going despite having any customers, earnings and profit. 

You end up with zombie companies as experienced in Japan after their 1990 crash that ended up bleeding the taxpayer dry for 2 decades and paid back 100 times less than the government's so called 'investment'.

All that incentives to spend does is bring forward future consumption. We saw that with the 'cash for clunkers' schemes in the UK and USA. 

Everyone bought a new car during the period when the state was subsidising purchase of new cars. Once the schemes ended new purchases plumetted.

A high savings rate, high capital investment, high exporting economy, low consumption economy is the only route to long term wealth creation. 

i.e. the complete opposite of everything the West is doing currently.


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## z107 (14 Apr 2011)

I would doubt we will see any incentives to spend.

The new thing is taxes and plenty of them. It's easier for the government to get our money that way.


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## ringledman (14 Apr 2011)

The thing with voucher incentives is that its your money and every other taxpayers that the government is spending. Government finance is non-existent. 

They may give €1000 each but the money is the taxpayer's credit to begin with. They will happily indebt our children for 30 years for the sake of a quick shot of binge spending that once spent has gone yet the debt cost remains.

Two other problems is that a €1000 voucher each would be funded by the government over a 25 year or so bond period so it would cost us each €3000 or so once debt interest is paid. 

Secondly government spending has a return of less than 1. Typically 0.3% or so to GDP growth. 

So all in a €1000 voucher each would end up costing us (as there is no such thing as government money) something like €6000 or so over the long term (debt interest + the negative return multiplier of government 'investment').

All in, government induced spending is a complete con to the taxpayer.


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## Chris (15 Apr 2011)

ringledman said:


> All in, government induced spending is a complete con to the taxpayer.



That is the best summary!


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## roker (25 Apr 2011)

Should we not spend all our savings before the the country defaults because we may not have anything to spend then


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## Lamorna (25 Apr 2011)

Chris couldn't have put it any better.
Just look at the student situation: young people are encouraged to take loans, for degrees which are probably often not worth that money. After 3 or 4 years of uni, all they can find is a call centre job, with an annual net salary which is often less than their student debt. From what I've seen around me since 2008, the only students which seem to be able to land a 'good' job are those with connections, the daddy's boys and daddy's girls. Often they don't even have a loan to refund, while those students who would most need a good paid job, can't find one.


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## darag (25 Apr 2011)

They tried precisely this idea in Japan not too long ago and it was a complete flop.  People, naturally, used the vouchers to make purchases they need to make anyway and saved the money they would have spent had they not been given the vouchers.


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