Quarterly Institutional Sector Accounts

The new release is here.  Among the headline numbers –  household savings rate remaining high, at 18.5 percent of gross disposable income in Q2 2011 (it was 19.6 percent in Q2 2010).

29 replies on “Quarterly Institutional Sector Accounts”

@Damienr this seems rational behaviour on the part of households. As the government is borrowing then future taxes will be higher and benefits lower, so saving presently seems wise.

In general the EURO turmoil is not helping, if this was settled then people would regain confidence and reduce savings somewhat.

The link appears to be broken
@Damienr
Given that there is negative credit creation – if the goverment did not borrow from banks who create new money , soon there would be no paper / electronic units to save – other them income imported via export revenue & tourism from other positive credit creating jurisdictions.
Although I guess I could save some Horse Chestnuts this time of year.

@Damienr

Yep, these housholds are also saving all their cash in German and Swiss banks. The goverment is running a deficit to fund transfers to savings accounts in German banks and it is taking large amounts of cash off the IMF, ECB to underwrite those very savings.

Ireland is being sacraficed for the few.

@Dearg doom,
Yes, it is completely rational for households who save now when they anticipate future tax increases/pay cuts and/or reduced public services. This line of thought is what underlines the argument for front loading adjustments in order to stimuate consumer spending. Views on the labour market and confidence in retaining their jobs also comes into play here.

But my point is that, households are able to save mainly because the government is borrowing to fund a tax system with a tax burden at the lower end of the OECD average and to pay public sector wages at rates out of line with our finanical position (I’m not a PS basher) which acts to artifically inflate household’s disposable income. Those on welfare or on low wages have no real ability to save. We are clocking this national debt that will have to be repaid in the future, unless we default so that people can save.

In other cases, rather than saving, people are using their disposable income to pay down debts at a faster rate that is necessary as they take advantage of tracker rates. This might be rational at the individual level but hurts consumer demand at the macro level.

I think if the government took some of this ‘saving’ from people through increased taxes and reduce the deficit, it would be a more optimal use of resources.

It is amazing that we have come to the stage where monitoring savings as if it were some kind of disease when in fact the squandering has got us in a biggest crisis of our generation.

http://economylessons.blogspot.com/2010/05/economy-lesson-assault-on-saving-by.html

““Saving,” in short, in the modem world, is only another form of spending. The usual difference is that the money is turned over to someone else to spend on means to increase production.”

People are also saving the dole money – its just not the people who get the dole in the main.
They spend it in the pub and then the publican / brewery sticks it in a bank account.
Goverment / official banking sector money creation is not to be compared to a indivdual saver.
Credit or Goverment money always come first in this process as deposits are created when a loan is made or when new government money is added to accounts.

I just don’t know by how much Irish people are exporting their money abroad which is really a kind of import or if there is simply less money to save due to the european especially peripherial european wide capital strike.
A combination of both I suspect although I would like to know the ratio.

@ Damienr

You have put your finger on it!

That is exactly what the government and the people in a position to save – mainly retired public servants – are doing. The latter are not, as far as I can judge, expert in Swiss bank accounts. They are, however, pretty expert in assessing stupid policies – instigated by the authoritie in charge of the Euro Area rather than domestically – which include putting Irish banks in a position where they have to offer exceptionally attractive rates in order to retain deposits.

What the generation in question is saving for is their old age or, rather, the implosion of the level of public services, notably health, likely to be available to them.

Sooner or later the government will have to address the core issue which is the excessive level (defined as going beyond the capacity of the state to pay) of spending on social welfare and the public service, including pensions.

@DOCM
Speaking for myself – I took most of my money out of the Post Office (although given my flawed nationalist programming I still hold Irish paper) when it became clear the contract was broken.
And no my deposit is not in Switzerland – although euros probally were credited externally.
But looking back at it now – its what the ECB desired to accomplish their strategic objectives.

PS – it would not matter what deposit rates are on credit deposit accounts – the collective money supply would still fall if deposits are in the commercial banking system.
Also a independent state can pay for anything it wishes if it is in trade surplus and has internal money power.
As Daffy Duck might say – your laboured targeting of the innocent is despicable.

I posted this on another thread, perhaps it’s more appropriate here..

Our esteemed leader has raised the white flag and surrendered what little sovereignty we have left. No bondholder left behind.

“Taoiseach Enda Kenny said today he was opposed to bondholder writedowns for for countries other than Greece.” …I Times.

And the carers be damned.

And while I’m at it..
How does he propose to repay 215 billion, the projected IMF figure for indebtedness .
It’s unsustainable.

Consume, Conform, Obey.

Get out and shop! But dont go to Newry!

I’m waiting for some genius to suggest putting best before dates on Euros.

@Garry

Something analogous to that has already been discussed in parts of both the analytical community the financial press.

@Ceterisparibus
Enda is the modern day Home Ruler – he will push for more mortgaged blood to be transfered to Belgium to achieve the Nirvana he thinks is on the other side of the war.
Nothing will change until there is a visceral reaction as these are a very sad bunch of old men.
The Irish Euro dynamic is very different from the Icelandic Krona episode – a entire class of Irish people think they have too much to loose while in Iceland almost everone lost in short order.
Little do they know that when whatever socio /economic/ poltical objectives have been acheived they will be spit out like the rest of us.

@Ceteris

“Taoiseach Enda Kenny said today he was opposed to bondholder writedowns for for countries other than Greece.” …I Times.

Its simple

He got his briefing note from the DOF.
The Hungarian dictated it.

@all
Cynicism is all very well
But we have just witnessed the biggest sellout of a negotiating position by an elected representative.
In dismissing bondholder haircuts on our unsustainable debt our glorious leader has added 80 billion to the burden to be paid by future generations at a time when the markets are anticipating debt write downs of at least this amount…..jpmorgan say 40%.
I thought the last lot were poor at negotiation but this latest episode of the great debt debate demonstrates that the current incumbents are equally dismal.

I can believe Kenny leapt onto the ECB bondholder protection crusade (pursued with evangelical drive anyway). The guy is an intellectual pygmy.

@PRGuy

Alan Ahernes recent interview describing how things were in the last year of the Lenihan/Cowen government. a gutless rabble in government buildings, completely overwhelmed by events, no morale, running around looking for someone to surrender to…..

They know full well what they are doing, they are looking after themselves. This is nothing to do with Europe dictating things…. its everything to do with a bankrupt country’s governing classes scared shitless that their pensions, wages and expenses cheques wont cash.

@Garry

“its everything to do with a bankrupt country’s governing classes scared shitless that their pensions, wages and expenses cheques wont cash.”

Granted – that too! But there are key elements in Europe dictating things across the board – though one senses there may be two opposing factions?

@PR Guy

It happened in Argentina and Russia. Some day their massive pensions will be worth a quarter of what they are.

Cash and cash deposits are put in front of all other economic parameters. It has become “acceptable” to deflate the economy and throw huge amounts of people on the dole, reduce expenditure on education etc. in order to protect the cash depositors and the cash value of pensions.

However this approach is ultimately self defeating as the productive capacity of the economy is reduced by a reduction in education, an increase in unemployment and import subsitution from “cheap” far east suppliers and the ability of the real economy to support the massive cash deposits and pensions of the ruling class is gradually depleted.

Even the deficit is largely caused by this euro cash mentality, large wages and pensions built up during the boom have convinced the ruling classes that “they are worth it”. They want whats left of the productive economy to subsidise their gilt edged pension by future taxes. In the meantime they refuse to pay a decent tax on their incomes or pension pots which could help to close the deficit. Their solution – expenditure cuts.

@ All

FYI

http://www.ft.com/intl/cms/s/0/3f54fbbe-f430-11e0-bdea-00144feab49a.html#axzz1ah3aBSTX

The remark by the Taoiseach and, indeed, all his remarks in recent days, have appeared entirely sensible to me. Why would he invite markets to believe that Ireland would go the same route as Greece?

If the comprehensive final package deal put together so expertly by the senior officials in the core institutions (Commission, Council and ECB), and set out in Barroso’s address to the EP, is accepted, the EU may finally be on its way out of the crisis.

Some intermediate window-dressing to cover the retreat from the mistaken analysis that the entire mess is attributable to irresponsible budgetary behaviour by debtor countries will have to be put in place, the most likely being the appointment of a “budgetary czar” from among the ranks of the Commissioners. Some action is a sine qua non for the Dutch, according to an interview in today’s FT Deutschland.

@Garry
“Alan Ahernes recent interview describing how things were in the last year of the Lenihan/Cowen government. a gutless rabble in government buildings, completely overwhelmed by events, no morale, running around looking for someone to surrender to…..”

I just don’t understand the mentality of surrendering before a shot is fired. It is now obvious that Greece is going to get debt relief of at least 50%. it could well be that they will be in full recovery mode by next year with adequate supplies of cash and a sustainable debt load.

@DOCM

I think Barrosso is trying to reclaim lost ground from Germany and France.

“It is essential that we do not create a division between the 17 members of the euro area and the 27 members of the European Union – most of whom wish to join the euro. Such a division could deeply harm the European Union as a whole, put in question the Single Market, be an invitation for renationalisation of Community policies. That is why we need to have stronger governance for the countries that are in the euro area, but have it in full compatibility with the rules and the acquis for the European Union as a whole. This is why it is essential to keep the Community institutions – this European Parliament, the European Commission – at the core of the process of coordination and integration.

The role of these institutions is also to guarantee this link, to guarantee that no Member State is jeopardised, to guarantee that Europe remains strong and united.”

Germany will decide in the end.
Btw, French bonds now 92bp ahead of bunds

@ Ceterisparibus

It is a mistaken analysis to speak of Barroso in these terms. He is not a leader in a domestic political sense with an electoral mandate reclaiming lost ground, unless by this reference you mean that of restoring the institutional balance of the EU.

He is the head of a collegiate body which forms a vital part of the democratic institutional structure of the EU. That he has emerged from his foxhole is attributable to a sea change in the attitude of the German establishment. Events have rudely shaken them out of the illusion that major decisions could be taken in respect of the EU, outside the treaties, and on the basis of a “framework agreement”, which does not even have the status of an international treaty, and is subject to the whim of every participant, down to the most euro sceptic elements not alone in the parliaments of Finland and Slovakia but within their own governing coalition ranks.

If the argument for so doing was that to act otherwise would have been in breach of the infamous no bailout clause, one is prompted to ask the obvious question as to how acting anyway outside the treaties can make any material difference.

The markets are now getting extremely restless. Governments have to deliver in the coming weeks. And it seems that the “assistance” of the US, through the IMF, will be required to overcome the continued brawl between the teams of the two main protagonists, their captains being close to retiring injured.

The importance of the intervention by Barroso is not that he has suddenly gained a stature that he had previously lacked but that the institutions of the EU, and the governments and politicians that make them up, are reasserting themselves prompted by the situation of a clear and present danger for their countries which their previous pusillanimity has allowed to develop.

@ All

For readers of German, the attached commentary by a senior editor of the revered Handelsblatt will of interest. Google translate, unfortunately, copes very badly with the word order of German but the sense of the article can still be figured out. The author believes that a forced recapitalisation of the banks is unavoidable and refers to the unholy alliance between politicians and bankers, from which both benefited, and which gave rise to the present crisis. A notable feauture is the criticism of the banks for failing to make capital provision for their holdings of sovereign debt, a change in respect of which is, as I understand it, a fundamental plank of the ESBies proposal.

http://www.handelsblatt.com/politik/international/ohne-zwangskapitalisierung-der-banken-geht-es-nicht/4754612.html

Soros will be choking on his porridge.

@DOCM
“The importance of the intervention by Barroso is not that he has suddenly gained a stature that he had previously lacked but that the institutions of the EU, and the governments and politicians that make them up, are reasserting themselves prompted by the situation of a clear and present danger for their countries which their previous pusillanimity has allowed to develop.”

Essentially the above agrees with my comment!!! The asylum and lunatics and all that (smiley).

I’m puzzled by the reference to George.

@ Ceterisparibus

I must admit that I was on my favourite soapbox there. (The behaviour of the big beasts has never caused me any distress. It is the foolishness of the smaller ones that thought they could mix it in that company, without the protection of the house rules, that has always annoyed me).

On George, cf. his latest opinion piece which comes down firmly on the side of the banks. Ackermann is in open public conflict with Schaeuble in the German press even questioning the ability of the politicians to resolve the mess. A somewhat unusual stance but par for the course in these strange times.

http://blogs.ft.com/the-a-list/2011/10/13/a-routemap-through-the-eurozone-minefield/#axzz1aklvAKFo

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