Our national debt is unsustainable - we should default on it.

BilliamD75

Registered User
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Government is incapable of running proper budgets, the way forward is running a balanced budget every year, no interest payments on the debt, just pay down the debt with a nominal sum every year from the budget, infrastructure projects should be built from private sector monies, that is just my opinion
 

NoRegretsCoyote

Frequent Poster
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792
Genius. Why has nobody ever thought of this?
But you're not being ambitious enough - why only stop the interest payments? Why not just completely default on the debt? Can you imagine the savings?
What @BilliamD75 probably means is that the state should run a fiscal policy with the medium-term aim of clearing all national debt.

This would mean very large budget surpluses.

As I have posted on another thread, that would mean immediate tax increases and/or spending reductions of at least €10bn a year.
 

BilliamD75

Registered User
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64
When you borrow two hundred thousand million euros for a working population of two million private sector workers in one economic cycle.,we'll really tough decisions are going to be made, pay down the debt but with no interest, no more borrowing.
 

Brendan Burgess

Founder
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38,130
Hi Billiam
Just to be absolutely clear, is this what you are proposing?

You are proposing that we simply refuse to pay the interest on our debt?

We don't borrow any more because, of course, no one would lend to a country in default.

But we do run a surplus and pay down our debt.

Brendan
 

BilliamD75

Registered User
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Yes the debt is to large for our working population, its either a euro bond or massive increases in the interest rate held by the private sector going forward on the roll over of debt, very tough decisions are going to be made, this may be the easiest option in time,
 

Purple

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9,075
Yes the debt is to large for our working population, its either a euro bond or massive increases in the interest rate held by the private sector going forward on the roll over of debt, very tough decisions are going to be made, this may be the easiest option in time,
If we are going to default at least we should do it properly and just give the two fingers to everyone.
I think it would be a disaster but what do I know.
 

Brendan Burgess

Founder
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38,130
very tough decisions are going to be made, this may be the easiest option in time,
I think that, in time, some form of debt restructuring may be the only option. But I don't think we need to do it yet.

It would have huge negative consequences. Clearly we would be kicked out of the eurozone - that is not necessarily a bad thing.

Not sure if we would be kicked out of the EU?

Foreign companies would certainly be less likely to invest.

In the meantime, we should cut our spending and raise taxation and gradually reduce the debt. If we do that, we might not need to restructure our debt.

And if we do need to do it, it would be part of another Troika type rescue and not a unilateral default on our debt.

Brendan
 

Peanuts20

Registered User
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104
41% of the national debt is owned to domestic credit institutions and the Central Bank. In effect almost half of what we owe, we owe to ourselves since if we default and take credit instiutions down, its our money that either bails them out or goes down the swanny with them.

Our ND Per Capita its high but that's because Ireland has one of the lowest population densities in the EU, about a third of Italy for example. Encourage more immigrants and increase the tax base is perhaps what is needed.

No arguement that we should be trying to reduce it but a straight default is a bonkers idea. It would knock us straight back to the 80's .
 

NoRegretsCoyote

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792
I think that, in time, some form of debt restructuring may be the only option. But I don't think we need to do it yet.

It would have huge negative consequences. Clearly we would be kicked out of the eurozone - that is not necessarily a bad thing.

Not sure if we would be kicked out of the EU?
You can't leave the euro without leaving the EU. Just look across the water to see how hard that is even for a country which is not a euro-area member.

The idea of defaulting on a stock of debt when interest costs are literally the lowest they have been in financial history is pretty daft.
 

BilliamD75

Registered User
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64
40 % of the national debt is owed to the e.c.b at 100 basis points, thats less than inflation across the EU, it's costing the e.c.b billions of euro on the nominal value of the bonds. That will change when Draghi leaves at the end of the year.
40%is owed domestically and yes they are still getting paid just losing the inflation value of the bonds. Its better than a haircut (form of default). There are two ways of looking at this, we either pay the bonds with no interest over time or we end up paying anything up to 7% on the debt when the e.c.b offloads the bonds back to the private sector (loan sharks) leading us to economic slavery, the economy is at almost full capacity so growing rates will decline over the short term and with negative ability to inflate the currency, I just fail to see a better solution going forward, I hope I am wrong,
 

Peanuts20

Registered User
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104
Are the bonds not fixed rate in most cases?. hence offloading them does not necessarily mean "loan sharks" will increase the rates. As opposed to defaulting and seeing the next rate we need to borrow at going up considerably?
 

BilliamD75

Registered User
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64
Bonds are fixed in most cases for ten years, some are longer and shorter, if the e.c.b buys (political) all the bonds and creates a euro bond, happy days interest payments are 100 basis points, 2 billion, (soverenty gone). At the present time the e.c.b is mandated to buy 40% 80 billion so leaving about 120 billion in the private sector with an average yield of 425 basis points (4.25%).
Without the e.c.b the interest would be 9 billion average not including for risk purposes.
Now if your in the private sector and your bonds are maturing, would you repurchase at yields of 100 basis points, no way, you would want at least the same yield your getting as the e.c.b cannot purchase any more bonds.
Now if your the e.c.b with 80 billion of Irish bonds trying to offload to the private sector at 100 basis points, I would say good luck trying to get bids, (they will have to raise rates to get bids) they can repurchase but at some point they will offload the bonds at higher yields creating greater risks increasing higher premiums and so on.
Can the country afford these payments, if it can then my point has no credibility, if it cannot then pay the debt over time less the interest portion and stop borrowing and start saving nominal sums for the decline in the economic cycle
 

cremeegg

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3,027
40 % of the national debt is owed to the e.c.b at 100 basis points, thats less than inflation across the EU, it's costing the e.c.b billions of euro on the nominal value of the bonds. That will change when Draghi leaves at the end of the year.
Very interesting point.

At the present time the e.c.b is mandated to buy 40% 80 billion so leaving about 120 billion in the private sector with an average yield of 425 basis points (4.25%).
Without the e.c.b the interest would be 9 billion average not including for risk purposes.
Is this correct, where are you getting it from.

Now if your in the private sector and your bonds are maturing, would you repurchase at yields of 100 basis points, no way, you would want at least the same yield your getting as the e.c.b cannot purchase any more bonds.
Why can the ECB not purchase anymore binds. Because they are limited to 40% ? Are they?

Now if your the e.c.b with 80 billion of Irish bonds trying to offload to the private sector at 100 basis points, I would say good luck trying to get bids, (they will have to raise rates to get bids) they can repurchase but at some point they will offload the bonds at higher yields creating greater risks increasing higher premiums and so on.
Are you saying that ultimately the ECB will sell Irish bonds into the private sector at a discount ? Would this be a problem for Ireland.

I assume that it would be all Eurozone countries not just Ireland.

That is a major argument against your proposal to default, our situation is similar to many other countries. A eurozone wide solution will have to be found. The whole point of the EU, finding solutions together.
 
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