Graphs of the day (2). Cashflow and debt in Ireland
In Ireland the cashflow from households to banks is dwindling (graph 1) as less money is available. This led the Irish to restructure their
debts cashflows in the sense that less is used to pay down debts and more to prop up interest incomes of banks (graph 2). The cruel paradox: if they pay down more debt and pay less interest the money would disappear ‘into thin air’ (as the banks were allowed to create it by accepting the debts emitted by the households paying down the debts leads to the disappearance of this money). They clearly have to establish a state bank (oops, they have one: the Irish central bank) which buys the bad mortgages at a discount and which has to right to change debt repayments into debt free money which can only be used to pay down government debt or to finance the purchase of the mortgages (sources of the graphs: Irish central bank).
Graph 1. Cash flow problems of Irish households are increasing
Graph 2. Which are ‘solved’ by paying down less debt or even increasing debt as is shown by how bad mortgages are restructured