“Can you please explain the economy?”

Yes – thanks to ThePeoplesEconomy.com:

Challenge the Candidate

  • Are you going to tell the EU we’re not prepared to bail out their banks indefinitely?
  • What are your plans in relation to the huge underlying non-bank deficit?
  • How are you going to reduce the amount we spend on welfare, health and education without affecting services?
  • What plans do you have for raising taxes?
  • What is your strategy on negative equity, mortgage arrears and bankruptcy?
  • Are you committed to Ireland’s 12.5% corporation tax rate?
  • Do you have an economic plan for Ireland’s natural resources, such as gas, forests, and wind energy?
  • How will you encourage small business to create jobs?

Economic Mythbusting – e.g. “If we burn the bondholders there will be a run on the banks”:

No, in fact the opposite is the case. There is already a run on the banks precisely because we won’t burn the bondholders, not because we might!

People realise that we can’t afford to pay all this debt because there is simply too much of it and that we will eventually have to default one way or another. As a result, many people have already started taking money out of Irish banks because they see them as too risky – in the last while, over 45 billion euros has been taken out and deposited in banks outside the country.

Frequently Asked Questions – e.g. “Why was Anglo bailed out?”:

At the time, nobody except Anglo thought that it was “systemically important” (i.e. that it was like AIB and BoI, in that its collapse would cause a massive calamity in the Irish economy).

There was, and is, an argument to defend depositors, but the bailing out of Anglo was indefensible. Anglo only became “systemically important” when we bailed it out and its debts became ours.

Anglo was, in essence, a property hedge fund (i.e. a specialist financial house providing investment capital for property development and speculation). It had ceased to be a mainstream bank and was therefore not in the same position as AIB or BoI. The only rationale given was that it was linked to the other banks via its cross-holdings of deposits and this has never been proven.

The suspicions are that Anglo was actually bailed out because the alternative was to let it fold, and that would cost well-connected people lots of money.

Information for Candidates

Are you running for election in 2011? Stumped by Econo-babble?

The People’s Economy offers free economic advice to all candidates running for election.

We particularly want to help Independent Candidates who lack access to the resources and economic advice offered by the political parties.

But the free economic clinics and all the information on this site is open for use by all candidates. The People’s Economy is not political – we simply aim to help the electorate and our representatives be better informed about what exactly is, and has been going on in this country.

This site has been created by a group of volunteers including a group of well-respected economists to provide easy to read information and access to expert advice.

Online Discussions (Webinars): Will take place every morning at 10.30am between Monday 14th February and Thursday 24th February

Jargon Explained

Roadmap to Recovery

The domestic economy is broken because over the past 10 years, people mistook a large overdraft for an economic miracle. The banks fuelled this fantasy by stuffing the economy with foreign money that they borrowed recklessly. We bought land with this money. As long as land rose in value, this masked the deep debt mire we were in. Then the foreigners asked for their money back but the banks didn’t have it because they had lent it all for houses and land.

As the price of houses and land has plummeted, the balance sheet of the nation has imploded with huge debt on one side — the cost of which continues to rise — and collapsing “assets” on the other side, the value of which continues to fall.

We are in a balance-sheet recession. That is reality defined. Many people seem to think that we can re-run the 1980s, reduce the Government’s deficit through austerity and this will solve the problem. It won’t. This is not the 1980s; this is a completely new challenge.

In a balance-sheet recession, the people who have money save and the people in debt try to pay off as much as possible. The saving ratio in Ireland is now 16pc of GDP. The more people save, the less they spend and the more the economy shrinks. Because the banks are broken, the saved money isn’t re-lent to the economy because the banks are afraid to lend and want to build up reserves of cash to fix their broken balance sheet, and so credit in the economy dries up.

The next phase of the balance sheet recession will be mass mortgage default, unless we change policy quickly.

The solution to our problem — a problem of too much debt — is obviously less debt, not more debt. We need to face up to that and do something about it.

Please, read more!

This entry was posted in Accountability, Action Stations, Bankers' Bailout, Budget, Civil Rights & Liberties, Debt Default/Restructuring, ECB/IMF, Economy, Elections, EU, Euro / Sovereign Money, Housing Bubble, Ideology, ireland, Leo Varadkar versus the World, Solutions and tagged , , , . Bookmark the permalink.

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