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How will we pay for all the fiscal stimulus?


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Of course, governments have to provide support to the economy, businesses and individuals. But I just wonder how all these massive packages will be paid for. A lot of people are demanding that governments print even more money than already announced via QE. I see this just leading to massive inflationary pressures that will stoke interest rate rises in the medium term. That might result in an even bigger problem than the Coronavirus problem with so much personal, corporate and national debts.

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The bank bailout primarily only really led to inflation in the stock market as evidenced by the subdued inflation. This will be different if money is just handed out as it will then also fuel increase in demand without any increase in productivity. That will just fuel inflation in the real economy.

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2 minutes ago, Eurobonus said:

The bank bailout primarily only really led to inflation in the stock market as evidenced by the subdued inflation. This will be different if money is just handed out as it will then also fuel increase in demand without any increase in productivity. That will just fuel inflation in the real economy.

 

Like I told you, if you've just finished getting a degree in economics you haven't even started your education yet.  The word you were looking for was austerity.  Neither does handing out money automatically lead to inflation.

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2 minutes ago, dmedin said:

 

Like I told you, if you've just finished getting a degree in economics you haven't even started your education yet.  The word you were looking for was austerity.  Neither does handing out money automatically lead to inflation.

You are really an arrogant know it all. You make a lot of assumptions based on your prejudice and arrogance. I have a BSC in Economics from the LSE and a MSc in Finance from the London Business School. I started my career with Deutsche Bank, been CFO for an international company, Associate Director of Finance for a company managing well into the teens of billions of pounds in real estate assets. So yeah your assumption that I have just graduated is probably correct dmedin.

Furthermore, you don't remember 1987 and the inflationary pressures afterwards?

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18 minutes ago, Eurobonus said:

You are really an arrogant know it all. You make a lot of assumptions based on your prejudice and arrogance. I have a BSC in Economics from the LSE and a MSc in Finance from the London Business School. I started my career with Deutsche Bank, been CFO for an international company, Associate Director of Finance for a company managing well into the teens of billions of pounds in real estate assets. So yeah your assumption that I have just graduated is probably correct dmedin.

 

 

Then why are you slumming it on here and using spread betting?  🤔

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Bringing it back on topic...

The last round of QE didn't cause a large bout of inflation? Not in the "real" economy anyway. The stock market went crazy yes, and houses. British people LOVE houses.

As for paying for it, add it onto the national debt, and keep rolling it till the principle is inflated away.

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1 hour ago, dmedin said:

 

Then why are you slumming it on here and using spread betting?  🤔

Cause I am in self quarantine and nothing better to do. But my big positions I execute via Credit Suisse. They provide me with all the tools - shorting, options, futures, mini futures etc. IG I do for fun. 

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Apparently the UK treasury will announce some kind of wage support for PAYE staff. Any predictions?

I think the finer details may take a few more days to work out. But if the govt postponed taking tax/NI through PAYE, it would leave a significant portion of cash in the business. Tax can make up 25-50% of a persons pay, so this would reduce the cost of keeping the employee in a job. The employee would still receive the same takehome pay.

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11 minutes ago, Bopperz said:

I do have a bit of a chip on my shoulder at the moment, but......

The daily death rate of the world is 100,000 people. The current deaths attributed to this virus are 10,000 (in two months). This is ridiculous.

 

Facts don't matter ...

At times like these we all realize how powerless and hopeless we are.  :)

 

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53 minutes ago, Bopperz said:

Apparently the UK treasury will announce some kind of wage support for PAYE staff. Any predictions?

I think the finer details may take a few more days to work out. But if the govt postponed taking tax/NI through PAYE, it would leave a significant portion of cash in the business. Tax can make up 25-50% of a persons pay, so this would reduce the cost of keeping the employee in a job. The employee would still receive the same takehome pay.

I strongly believe that there will be tax relief as well as delayed tax payments to alleviate cash flows. But it seems people believe that the government has an endless amount of money available or can print unlimited amounts of money. However, there is always a cost and someone always has to pay. The measures have to be made but I am just worried about the medium to long term consequences.

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2 minutes ago, dmedin said:

 

Do you think the very rich will pay?

I am sure a lot of rich people have lost a lot. I know a US hedge fund guy who has lost $115 million and essentially broke. Two ex-Goldman Sachs traders who set up their own fund have had to close it.

Think most will pay in one way or another. 

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