The acting finance minister, Pascal Donohoe, said yesterday that the Covid 19 crisis has so far cost Ireland €13 billion and that Ireland will have a national deficit of €30 billion by the end of the year. The Taoiseach, Leo Varadkar, also said that Ireland cannot borrow cheap money forever. As the ECB prints more money, inflation will become even higher in Ireland and prices of goods will rise. Since natural levels of deflation have been prevented in Ireland since 2015 by the actions of the ECB, this means Ireland and the EU are starting at a higher inflationary point than would have been otherwise without the ECB bond buying, and is therefore on the road to very high rates of inflation. Negative interest rates may well be here to stay. High inflation may well suit the Government because it will make it easier to pay their previous debts, but it means savers and workers will continue to be robbed.
At the beginning of the crisis, the government generously paid out covid unemployment payments of €350 per week, almost double that of conventional jobseekers payments. It has since materialized that 40% of those on the covid payment were earning less than €300 in employment. Meanwhile, on the covid subsidy scheme, where employers are subsidized to keep employees on the payroll, employers cannot pay employees more than their average pay and still qualify for the subsidy. So the schemes were very badly thought out. There is also some fraud occurring where payments were made to non resident people.
425,000 people are on the employers subsidy scheme and 600,000 are in receipt of the covid unemployment benefit. Before the crisis, there was about 2.3 million people in the workforce. So about 44% of the workforce are now in receipt of government supports. In the UK, there was 28 million people in the workforce before the crisis. Now, 6.4 million people have been furloughed - the equivalent government subsidy scheme for those affected by the covid crisis and another 2 million self employed people are receiving supports from another scheme. That is a total of 30% of the workforce.
So Ireland has one and a half times the equivalent numbers on covid unemployment schemes as the UK has. This means that the Irish government should be phasing out the support payments. However, it is only the British government which is talking about winding down their schemes to reduce the cost to the exchequer.
This was partly a reaction to the Bank of England warnings about the UK facing the worst recession in 300 years. Meanwhile, in Ireland, there is strong opposition to any talk of protecting the taxpayer in all this. Leprechaun economics dictates that we must go blindly into the night and not prepare for a recession. Faith in the ECB money printing machines has never been better. And anyway, sure equality measures will ensure that we will all be equally poor. Except, of course, the few at the top who benefit from high inflation.
The concept of money relies on it being scarce. It is the job of official banks to keep it slightly scarce or otherwise no one would work to get it. Inflation is caused by too much money chasing too few goods and deflation is caused by too little money chasing too many goods. Possession of money has to be unequal or otherwise there would be no employers and no employees.
ReplyDeleteIn the Euro zone the amount of money is about right for the comfort of citizens and the functioning of trade but over recent years the value of products shrunk so there is adequate in the Euro. No enterprising people want capital to invest in wealth creating projects so that interest rates are negative. The general view of the Irish people is that the EU will wade in with tons of printed money and all will be well. The fact is the EU is broke and if anything they will demand money from Ireland and insist Ireland imposed more taxes. The government represents the people and that cannot count.