I very much enjoyed reviewing a book edited by Diane Coyle called “What’s the Use of Economics? Teaching the dismal science after the Crisis”. The book is a collection of papers from a conference last year co-sponsored by the UK’s Government Economic Service and the Bank of England.
You can read the review on the LSE Review of Books blog here.
In Ireland we have a very strange perspective on the morals of passing debt to future generations.
The headline on today's Irish Examiner suggests that the deal brokered on Anglo Irish and Irish Nationwide debt passes the it onto future generations. The paper is generally more circumspect than the front page headline would lead one to believe.
The headline though is indicative of the type of reaction some have had to the deal announced yesterday. This includes the Irish Daily Mail though we can hardly be surprised that paper goes for a populist spin (I can't find an online link to the Irish version and I'm not going to buy the paper to take a picture of the cover page).
The deal involves the restructuring of the debt of Anglo Irish Bank and Irish Nationwide (which had been financed by an a promissory note payment of €3.1bn each year for 10 years). This is replaced by a basket of bonds with the principal repayable on maturity of each bond - the average maturity is 34 years. More details in the Irish Times coverage here.
This has been compared to extending the term of a mortgage and so reducing the regular payments at the cost of higher overall payments over a longer term. The analogy isn't strictly accurate - since most mortgages include repayment of principal during the life of the mortgage. These bonds involve payment of interest only and a balloon payment of principal at the end. And the principal will be worth a lot less in real terms in 34 years than it is now (thanks to inflation).
But what is particularly interesting about the argument that we are passing on debts to future generations is that there seems to be less concern at the significant current budget deficits we are also passing onto future generations.
The Economic and Fiscal Outlook for 2013 shows in Table 12 that between 2011 and 2015 it is projected that the cumulative general government deficit (after stripping out financial sector measures) is €54.5bn.
This is also added to the stock of debt that we will be passing on to future generations. Where is the similar outrage at this?
I'm an economist so many of these posts will be about economic issues. But since everyone is allowed a view on economics I am inclined to go beyond my profession to throw my tuppence ha'penny into other issues.