The Financial Wonderland of Covid-19

According to economic experts, Ireland does not have to worry about paying back the massive borrowings that were needed to fund the endless lockdowns : 

“Government debt does not have to be paid back, particularly the kind that sits minding its own business in the vaults of the ECB” - Chris Johns, Irish Times

 The problem with that is Article 123(1) of the Treaty on the Functioning of the EU :

 

 This means that it is illegal for any Member State to use the ECB as a bank overdraft facility.  The only reason why we can afford the luxury of endless lockdowns is our access to lots of free money. The Irish government have already borrowed €20 billion interest free this year and they plan to borrow another € 20 billion next year.   This is in addition to around €35 billion borrowed at very low interest rates since 2015 from the ECB's PSPP programme, prior to the covid "pandemic". So the free money bonanza that has enveloped the EU is not a new thing as some commentators have argued. 

All this free money being created by the ECB has resulted in the ECB becoming the largest single creditor of the member states in recent years. The German Council of Economic Experts have warned that this could present a threat to monetary policy independence in the long term.

In 2008, after the banking crash, the debt laden on to the backs of the Irish was paid back through taxation. This makes the situation at present different as there is no pressure to increase taxes. 

The natural effect of all this free money is massive inflation but we have not seen any sign of that yet (it may help to reduce government debt by de-valuing the euro). What is the most likely outcome - my guess is that we will see some inflation next year but more importantly negative interest rates will skyrocket so that most of the extra cash lying around on deposit will be recouped.   

There is already a similar precedent for this in the EU banking system, when deposits were confiscated in Cyprus in 2013 in what became known as a bail in. 

So as Mr Johns maintains, the ECB may well continue to play ball by printing infinite quantities of free money but the price will be an eradication of savings, either through inflation or negative interest rates or a combination of both. It will also mean that the EU will once again bend and mold its own laws laid down in it's treaties. This further erosion of the rule of law will sow yet more discontent within the union. 

Some Christmas Reading

 

Electricity in the USA is already half the price it is in the EU. Therefore, by 2050 in the EU, it is highly probable we just won’t have any viable jobs and disposable income left to spend, as it will have all gone to the energy bill to eliminate the fossil fuels currently forming 72% of the energy mix. 

Charles MacKay in his 1841 book ‘Extraordinary Popular Delusions and the Madness of Crowds’ pointed out: “Men, it has been well said, think in herds; it will be seen that they go mad in herds, while they only recover their senses slowly, one by one”. How on earth did we get to this situation, in a so called intelligent modern society? Were laws broken? Is there something wrong with the weather or do we just have a political crisis with respect to incompetent management? If for example you are paying serious amount of hard earned money for pollution, which is not occurring, can you get your money back or is there going to be even more of the same? [Pat Swords - 2020]

Pat Swords has written a new book on energy and other related matters which can be downloaded for free here :

 The Polluter Pays, but to Whom, How Much and On What Basis – Science or the Cult of Witchcraft ? 

It takes a look at the EU's mad panic to reduce carbon emissions and the negative consequences of doing so without conducting a proper assessment. 

I have also written a book but not energy related, about motion and perception, which includes a collection of articles on Einstein, Descartes, Newton, Empiricism, Mathematics, Ancient Greeks and Galileo and attempts to solve some of the paradoxes of motion and perception that they presented. It will also be free and if you want a copy send me an email. 

The Future of the EU and Relations with Ireland

The figures above were shown during the Irexit conference today in Dublin. They show that Ireland paid €400 million net towards the EU budget in 2016. Since there is now a €15 billion black hole in the EU budget due to Brexit, it is expected that Ireland will have to contribute a lot more. As a result, it is fairly predictable that the EU will want to force Apple and other multinationals in Ireland to pay more tax. They can see a money pot there and they need to get their hands on it. 

Right now the media ridicule any suggestion of an Irexit.  How things might soon change in Ireland if the likes of Apple decide to relocate as a result of EU pressure to pay more tax.