Reason for High Interest Rates, 9 July, 1996
Interest rates are high because of Central Bank policy: keeping the currency high and inflation low. But is this the right policy in view of our pending membership of the single currency and the need to reduce our high levels of unemployment.
Why an appreciating Irish Pound may lessen our ability to repay foreign debt, 5 August, 1996
Effectively our ability to repay foreign debt depends on our being able to sell goods on foreign markets, which may not be helped by a high Irish currency.
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31 May, 1996.
Published in Irish Independent
Dear Sir,
I am glad to see the availability of cheap Telecommunications recognised as an important condition for economic development in the new Forfas strategy for enterprise document.
It is a bit ironic, in this context, that parts of rural Ireland still do not have local call access to their county towns and local administrative centres. I would appeal to Telecom Eireann, in the interest of the country generally and in their own economic interest, to make the whole country one large local charge area. This might involve a slight increase in local call charges but it would be worth it.
Of course it is not only Telecom Eireann that is guilty of discrimination against rural Ireland. Our own government made a great splash of going on the Internet recently and they have their own internal WAN country wide network. Yet despite this, rural people are required to make expensive trunk calls to government offices, which are centred in major urban centres. Why can’t government offices have 1850 numbers, like RTE. If government has useful information to communicate, and I am sure they have, why, in this information age, are they not more accessible. And it need not all be a one way street either.
If the civil service is to be reorganised, as was stated recently, it should made more user friendly and throw off that erstwhile colonial mentality, which still pervades Merrion Street.
Yours sincerely,
Andrew J. Moran.
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15 June, 1996.
Dear Sir,
Why, in times of great national prosperity – though not for some – does our national debt continue to grow in real terms, from 28 billion during the currency crisis in 1992, to over 32 billion today. This is around £10,000 for every man, woman and child in the country.
The interest rate on this debt, even at current low interest rates, is still around £1,700,000,000 per annum. Perhaps this is the reason that unemployment is remaining so stubbornly high. Think what could be done with £1.7 billion, if we had it to spend every year.
If this debt is not reduced during times of boom in the economy, will it ever be reduced. What if interest rates went back up to 20% again? The interest on £32 billion at 20% would be a whopping £6.4 billion, over £2,000 for every man, woman and child in the country and probably close to £10,000 per head of the working population, and this would have to be found every year.
Instead of being used to reduce the debt, the proceeds of the present upturn in the economy is going, in the main, to those already amply provided for.
Yours sincerely,
Andrew J. Moran.
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9 July, 1996.
Sent to Irish Independent: not sure if it was published.
Dear Sir,
Looking at the Europe Debate, hosted by Olivia O’Leary on RTE 1 last night, I was amazed by Garret Figzgerald’s contention, that the reason our interest rates were two points ahead of German rates was because we do not have a Euro Currency. The real reason, why our interest rate are so far ahead of German rates, is that they are maintained at that level by our Central Bank for fiscal reasons. Their purpose is two fold. They wish our currency to regain and retain – maybe even surpass – the level it was at after the devaluation in 1992, and they wish to keep our inflation rate as low as possible.
Why they wish to keep our currency at an artificially high level against all other EMS currencies I do not know. It is now at the top of the EMS band, having been at the bottom a few short months ago. Garret Fitzgerald, on last nights programme, commented, that the reason why the British currency got into trouble at the end of 1991, was because they went into the EMS at too high a level. Surely if our aim, in adopting a single Euro currency, is to attain fiscal stability and low interest rates, then the best preparation is to allow our currency to find its correct level against the German currency and all other EMS currencies, with our interest rates at or about the same level as other countries, like Germany, Britain and the United States.
With our economy supposedly doing so well at the moment, there is no reason why our interest rates should be so high. If our currency was at a more realistic level, investment in the country would be made more attractive to outsiders, even with the lower interest rates, and our own financial institutions would be less likely to invest abroad. Such a scenario could only be good for jobs and improving the employment situation. The other aim of the Central Bank, at keeping the inflation rate as low as possible, is laudable, but the rate is low at the moment, compared to other EMS countries and Britain. A balance must be struck between economic rectitude and the creation of jobs, identified recently by the Minister of Finance, Rurai Quinn, as the most important goal of the economy at the moment.
Yours sincerely,
Andrew J. Moran.
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5 August, 1996.
Published in the Irish Independent.
Dear Sir,
I would like to refer to a comment by Mr. Michael Somers, head of the National Treasury Management Agency, which was reported in the papers recently (30/7/96). He stated that the recent strength of the pound had wiped £400 million of the national debt. Mr. Somers is no doubt correct in this figure. If the Irish pound appreciates against certain foreign currencies, then that portion of the national debt denominated in those currencies is reduced, when expressed in Irish pounds.
However, it is not in Irish pounds that we pay off long term debt, it is effectively by the sale of goods on foreign markets. Unless these goods, can command a higher price on the foreign markets, after an appreciation of the Irish currency – which I very much doubt, due to the Globalisation of the international economy – then the appreciation will have no direct effect on our ability to pay off our foreign debt. There may be an indirect effect, however, in the opposite direction. If an appreciating Irish pound prices us out of foreign markets, then we may sell a lower volume of goods to those markets, thus reducing our ability to pay off the foreign debt.
Yours sincerely,
Andrew J. Moran.
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