Lets face facts. We are in a deflationary depression. Latest CPI figures show that deflation is now at 2.6%.
The most optimistic forecasts for GDP growth is -8% this year. Exchequer returns for VAT year on year are already 20% down. Anything over 10% contraction in an economy is considered a depression. Furthermore our economy grew by 6% in 2007 and that sort of growth rate had been factored into our economy as in China, whose 4-6% growth rate forecasted for this year is considered a recession there.
We have had at least 14% swing in 2 years. Too much to handle. We are flatlining and the defibilators aren\’t working.
1 of the defibilators, called monetary policy, is dictated by Europe and the ECB. They are more concerned in the health of the German and French patients. Being a part of the Euro has been the destruction of this nation. Interest rates were too low for too long and caused the country to build up a massive credit bubble. Banks were pouring the money out to meet their targets. Total debt in this country is now 1.6 trillion Euro, thats 350,000 Euro for every man woman and child. We are insolvent.
The Austrian school of economics is a renowned organisation where common sense economists subscribe to. In Ireland\’s case, when it comes to monetary policy, we need to leave the Euro, re establish the punt and devalue our currency. We need to boost our foreign reserves which are a pathetic 700 million euro. We only have 5.5 tonnes of gold worth 100 million Euro. We come 127th in the world in this league of reserves. Zimbabwe and Albania have more. We should have our currency backed by gold and have the reputation of being the first country to return to the gold standard.
The other defibillator, fiscal policy, is being run in reverse. What the Austrian school of economics suggest to do in a deflationary depression is for governments to try to decrease taxation to increase the money supply. However this highly incompentent government has gone and increased taxes, removing more money from the economy. To save 3 billion the government will remove that much from its receipts over the next 3 months from making the deflation, unemployment, less consumption, less production vicious self energising cycle worst!
Now our troubles are only beginning. As business sentiment here collapses or ability to increase our output of goods and services deteriorates. This is critical as when the ECB starts its program of Quantitative Easing (printing money), the money supply will be too much too soon. The breeding ground for hyperinflation.
We could be Europe\’s Zimbabwe very soon.
Thanks for reading and all the best.

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