tag:blogger.com,1999:blog-2826531655042170344.post8278708672594411452..comments2024-03-16T12:27:45.665+00:00Comments on Economic Incentives: What are we saving?Seamushttp://www.blogger.com/profile/15679299530222667673noreply@blogger.comBlogger15125tag:blogger.com,1999:blog-2826531655042170344.post-39733845878269020072011-07-13T10:49:40.456+01:002011-07-13T10:49:40.456+01:00Very good analysis of the what the increased savin...Very good analysis of the what the increased savings rate really means.<br />However, the level of private/household deposits is still over 100bn (c 40K per household in a very simplistic breakdown). And this seems to be driving a lot of the current government's thinking. They seem to think that if people would just spend 5% of their savings then it might just re-start the economy.<br />What do we know about these deposits? Is it all cash?<br />It just seems like a very high figure to me.<br /><br />FFrankhttps://www.blogger.com/profile/03278636907000556348noreply@blogger.comtag:blogger.com,1999:blog-2826531655042170344.post-87254496905641699052011-06-30T21:05:15.441+01:002011-06-30T21:05:15.441+01:00Seamus.
Great post. Another myth debunked.
Yet wit...Seamus.<br />Great post. Another myth debunked.<br />Yet with deposits moving 'offshore', I don't know how these figures reflect that phenomenon<br /><br />On the run down of loans:<br />"Since peaking in the middle of 2008, the amount owed on household loans has fallen from €203 billion to €185 billion. Short-term loans have fallen from €14 billion to €9 billion."<br /><br />Some of this would be car loans etc, easily got at the height of the boom usually with terms of 36/60 months. These are now coming to an end and not being replaced.<br />The same type of deleveraging ('saving') is going on in industry. Even the successful companies are funding from cashflow, while the less successful are only a machine breakdown/truck breakdown from disaster. With no prospect of funds to replace the equipment. Saving the presence of course of good fitters who will be increasingly important in the new Maintenance Ireland.Joseph Ryanhttps://www.blogger.com/profile/07581632829548894401noreply@blogger.comtag:blogger.com,1999:blog-2826531655042170344.post-71780253933865888382011-06-30T01:04:39.251+01:002011-06-30T01:04:39.251+01:00I wonder what are the perspectives on a fourth per...I wonder what are the perspectives on a fourth period, after the Thrifties have seen their savings taxed and spent in order to maintain a level of activity in the economy that was only possible because the Profligates were being - well - profligate. What is the impact in the medium/long term?Anonymousnoreply@blogger.comtag:blogger.com,1999:blog-2826531655042170344.post-8731360128799042242011-06-29T23:05:42.840+01:002011-06-29T23:05:42.840+01:00Seamus. Good work. In conversation with people ove...Seamus. Good work. In conversation with people over the past year or two, I have made some version of this point time and again but never felt like I had the data to hand to confirm it, so I've never written a post about it. Your point of linking it to deposits data is something I should have thought of to confirm this but didn't.<br /><br />Anyway, I'll put up a link to this on the IE blog.Karl Whelanhttp://www.karlwhelan.comnoreply@blogger.comtag:blogger.com,1999:blog-2826531655042170344.post-8827792056560346392011-06-29T22:47:18.912+01:002011-06-29T22:47:18.912+01:00Or maybe not. The CB documents out today don't...Or maybe not. The CB documents out today don't appear to say that.<br /><br />Where does the 185bn figure come from?yoganmahewnoreply@blogger.comtag:blogger.com,1999:blog-2826531655042170344.post-2301429868763096622011-06-29T09:13:29.351+01:002011-06-29T09:13:29.351+01:002Pack has come up with the missing billions - secu...2Pack has come up with the missing billions - securitised mortgages:<br />http://www.thepropertypin.com/viewtopic.php?p=517690#p517690<br /><br />So there is 134 bn in mortgage debt...yoganmahewnoreply@blogger.comtag:blogger.com,1999:blog-2826531655042170344.post-89986139320604945762011-06-29T08:35:24.551+01:002011-06-29T08:35:24.551+01:00That could be well be it. On thinking about this ...That could be well be it. On thinking about this it struck me that the gap could be explained by business loans to self-employed people which would be counted in the Household Sector in the Financial Accounts but could be counted as Business Loans in the Money, Credit and Banking Statistics.<br /><br />This would tie in with your suggestion that the €24 billion of buy-to-let mortgages would explain the gap.<br /><br />I would think that the full €35 billion gap would be accounted for by self-employed business loans and private investor buy-to-let mortgages.<br /><br />It does give the hope that there is some assets to offset the huge debts the household sector has assumed but that hope is in itself offset by the undoubtedly poor nature of those assets.Seamus Coffeyhttp://economic-incentives.blogspot.com/noreply@blogger.comtag:blogger.com,1999:blog-2826531655042170344.post-15246203345910408832011-06-29T08:24:17.289+01:002011-06-29T08:24:17.289+01:00Sorry this is what I was referring to
http://www....Sorry this is what I was referring to<br /><br />http://www.reuters.com/article/2011/06/28/idUSL6E7HS28C20110628Dreaded_Estatehttp://www.irishpropertywatch.comnoreply@blogger.comtag:blogger.com,1999:blog-2826531655042170344.post-79458858098778697442011-06-29T08:11:24.626+01:002011-06-29T08:11:24.626+01:00http://www.financialregulator.ie/publications/Docu...http://www.financialregulator.ie/publications/Documents/Quarterly%20Bulletin%20Q2.pdf<br /><br /><br />Could this explain some of the gapDreaded_Estatehttp://www.irishpropertywatch.comnoreply@blogger.comtag:blogger.com,1999:blog-2826531655042170344.post-47835416843358941792011-06-28T21:58:51.788+01:002011-06-28T21:58:51.788+01:00Excellent analysis Seamus!Excellent analysis Seamus!Dreaded_Estatehttp://www.irishpropertywatch.comnoreply@blogger.comtag:blogger.com,1999:blog-2826531655042170344.post-39539704297125507862011-06-28T13:40:35.569+01:002011-06-28T13:40:35.569+01:00"As you say, there is still a €30 billion gap..."As you say, there is still a €30 billion gap. How many apartments did we buy in Bulgaria?? "<br />Ouch.<br /><br />Do we know if Home Equity Withdrawal/Remortgage with equity release/Second Mortgages are included in the 117 bn figure?<br /><br />The more numbers that are revealed, the more weird and obscure the picture gets.yoganmahewnoreply@blogger.comtag:blogger.com,1999:blog-2826531655042170344.post-71026367360040581622011-06-28T12:08:53.985+01:002011-06-28T12:08:53.985+01:00You make an interesting point about the breaksown ...You make an interesting point about the breaksown of the total household loans of €185 billion at the end of last year. <br /><br />Looking at the Money, Credit and Banking Statistics for financial institutions operating in Ireland shows that these banks had €130 billion of loans extended to Irish households at the end of 2010.<br /><br />This was €138 billion in November 2010 but Bank of Scotland ceased operations here then. The households still have the loans but not to a bank operating in Ireland.<br /><br />The €130 billion is broken down as<br /> - mortgages €99 billion<br /> - consumer loans €19 billion<br /> - other loans €12 billion<br /><br />The mortgage arrears data from the Financial Regulator show that mortgage balances for Irish households were actually €117 billion. This is only mortgages in Ireland.<br /><br />Credit cards had a balance of €3 billion and credit unions have loans of about €7 billion but these are included.<br /><br />As you say, there is still a €30 billion gap. How many apartments did we buy in Bulgaria??Seamus Coffeyhttp://economic-incentives.blogspot.comnoreply@blogger.comtag:blogger.com,1999:blog-2826531655042170344.post-82551425940326444852011-06-28T09:43:50.579+01:002011-06-28T09:43:50.579+01:00Well, 'reputable' in this context probably...Well, 'reputable' in this context probably means using your own name... (you really are Seamus Coffey, aren't you?).<br /><br />Yeah, the credit card stats are revealing in some ways - there was a big run-up immediately before the bust which hasn't been paid off. <br /><br />As you say, the amounts are small. So what's the rest of it? Mortgage number estimates have varied between 90 bn and 147 bn at peak and I think settled at about 110 bn? Even taking the peak number and the peak CC number, there's another 35 bn of household debt. That's a huge amount. 15 bn of that is, I think, Credit Union related with partial matching deposits. The rest can't all be car loans and unsecured loans, can it?yoganmahewnoreply@blogger.comtag:blogger.com,1999:blog-2826531655042170344.post-89248923521676996922011-06-27T23:37:51.640+01:002011-06-27T23:37:51.640+01:00Hi yoganmahew,
Interest does not form part of the...Hi yoganmahew,<br /><br />Interest does not form part of the above analysis. Interest expenditure is subtracted from gross income as part of the calculation to determine disposable income. There is no choice when interest costs are incurred. I covered some issues relating to household interest <a href="http://economic-incentives.blogspot.com/2010/11/cost-of-debt.html" rel="nofollow">here</a>.<br /><br />Pension contributions are also subtracted from gross income when calculating disposable income. I can't tell if these have risen or fallen in recent times. Overall household social contributions (which includes payments to pensions) fell from €17.5 bilion in 2008 to €15.8 billion in 2009.<br /><br />I have some information on the credit card statistics <a href="http://economic-incentives.blogspot.com/2011/02/credit-cards-in-2010.html" rel="nofollow">here</a>. These are only €3 billion of our €185 billion of household debt so any changes here will not be significant.<br /><br />Some insight into the number of mortgages that have gone from interest only to repayment would be useful. We know that about 25,000 have gone from repayment to interest only. I don't know of any source on car loans.<br /><br />I'm not sure I belong in the 'reputable' set!Seamus Coffeyhttp://economic-incentives.blogspot.com/noreply@blogger.comtag:blogger.com,1999:blog-2826531655042170344.post-11394352576641446132011-06-27T15:03:51.744+01:002011-06-27T15:03:51.744+01:00Phew. Someone reputable says it at last! Thanks.
...Phew. Someone reputable says it at last! Thanks.<br /><br />Some other bits that contribute:<br />- where does interest fit in this? Is it part of consumption?<br />- pension contributions are another thing to look at - many have had to up their contributions (and not just in the public service) as the value of their funds has tanked.<br /><br />The repayments don't seem to have gone to credit cards, anyway, as the balance outstanding has not significantly declined.<br /><br />A fair amount of mortgages have reset during the period from I/O to repayment - rolling from one I/O to another I/O seems to have ended. Shame we don't have any statistics on this.<br /><br />Looking at car loans might be useful, but we don't appear to have any stats on these either.yoganmahewnoreply@blogger.com