Strolling through Hyde Park in the sun this morning, it is difficult not to get the sense that Ireland is the land that time forgot. The rest of the globe is moving on gradually from the great crash of 2007/08.
Our major trading partner is growing again, its industrial output is expanding and there is a feeling that the worst has passed. The UK is doing just fine, the unemployment rate is 7.8pc, and the economy added an extra 184,000 jobs between March and June of 2010 (the highest rate since 1989).
Even house prices have staged a bit of a recovery with the Halifax house price index showing growth of 4.6pc to the year ending in August. Business confidence in the UK, though still under pressure, is rising.
We, on the other hand, are mired by the worst economic decision-making in any developed country since the fall of the Berlin Wall.
In fact, it is not unreasonable to go further and claim that if you could wreck an economy it would be difficult to go about it in a more effective fashion than this Government and the previous Ahern government have done.
Ireland 2000-2010 will become a textbook case of how not to do it. In economics courses of the future, the Irish disaster will symbolise pathetic and corrupt economic management.
Those who run our country recklessly fuelled the boom with disastrous consequences and now, in the bust, they are making things considerably worse. The problem for us is that the very people who didn’t see the bust coming and cheer-led the country over a cliff are the same people in power now.
Those who warned of the dangerous bubble had to listen to these charlatans sneering in the boom and now that they have destroyed the place, I turn on the radio and they are still there, droning on incomprehensively about things they just can’t understand, because they just don’t have the knowledge.
Thank God the rest of the world is now realising this. I am not just talking about prominent politicians but about the “insiders” — the top civil servants, the top bankers and their professional supporters who tried to rubbish anyone who said their boom was a charade and continue to try to undermine anyone who now is “telling it like it is” to the public.
Monday’s ‘Financial Times’ editorial strongly criticised our Government for its strategy on Anglo and went on to recommend — as this column has been doing for over a year now — that making the bondholders pay is the way out of this mess. The respected economic commentator Wolfgang Munchau declared (also in the ‘Financial Times’) that Ireland is bust and faces a potential Greek-style crisis.
While these comments are not new or in any way unique, they do confirm the growing realisation everywhere that this Government’s banking policy is inept. The reason the ‘Financial Times’ is important is because when it says things or when a Nobel Laureate says things, it gives the Irish economic establishment the “permission” to think the unthinkable. It allows them to peek out of their intellectual straightjacket and begin to do some serious analysis.
We in Ireland seem unable to entertain what some of our own economists have been saying for years, and only when an outside expert suggests something do we feel that we are “allowed” to think for ourselves.
It was the same in the boom. When a local commentator warned that the whole boom was a scam, he was vilified. Then eventually when a foreigner makes the point belatedly, he is listened to intently. There are many reasons for this deeply insecure intellectual position, but let us leave them for another day.
At this stage, we should just note that by the time the ‘Financial Times’ makes its judgment it is already too late. It was the same in the boom: by the time it and other “reputable” publications were writing about the Irish miracle, we were already in bubble territory!
Hopefully the bust will change our obsequious attitude to our neighbours and what they might think of us. We have got to learn to trust ourselves and make economic judgments for ourselves, rather than wait for someone else to twig what is going on here.
Apart from the gradual realisation that we will default, the most interesting, and in terms of contrast, the most stark piece of news to come out of the City of London this week, is that banks have never been borrowing more in the market in order to lend out. This implies that a substantial part of the banking world is back in something like rude health. It also means that for all intents and purposes the credit crunch is over almost everywhere except here.
But not the Irish banks, oh no, the banks here are bankrupt, having to raise capital — now multiples of their total market value — just to stay afloat until Christmas. The Government’s dithering is strangling us.
Now let’s move from the banks and London to the continent where the EU Commission has just upgraded its growth forecast again for Europe. This is good news for the EU but bad news for Ireland.
The reason is simple. We are in a currency union that we have no economic right to be in. By this I mean that we trade less with the euro countries than we do with the UK and the US. This is because growth means a rise in interest rates and the negative impact of higher interest rates far outweighs the positive impact of higher trade opportunities.
Furthermore, you could make the broader point which is that as we have become politically more European, we have become economically more Anglo-Saxon. So we are left with an Anglo-Saxon reality of huge personal debts but the European aspiration of the euro.
The main reason the UK might be getting out of the recession faster is that it dropped its currency to offset the impact of the domestic recession and the budget cuts the government is about to make. We on the other hand are trapped in the euro — a strong currency in a weak country. In the history of economics there are few certainties but one is that a strong currency makes a weak economy weaker.
The most damning statistic of our entire euro venture is that from 1990-2000 when we had our own currency and we devalued in 1993 to get competitive, Irish exports grew by 360pc. Between 2000 and 2009 with our overvalued new euro currency, Irish exports grew by 0.3pc. That says it all really and yes, that figure is 0.3pc, not 30pc!
So when European interest rates rise to reflect the new growth in Europe, Ireland will still be in the doldrums and any rise in rates will prompt a series of mortgage defaults which will clobber the banks.
Turning the corner? Snap out of it.
Great article! You have to wonder if we can’t manage ourselves, if we realise the euro is no longer for us, but instead is the way to economic suicide, who do we turn to? Which currency should we track? A Canadian dollar/US dollar relationship; or, Sterling/Punt. Either way, we’ve primed ourselves well with Anglo and NAMA for default, for which we wait! Perhaps they will get the message from the markets present policy is not working, one gets the feeling the pilot has already bailed out and the crew along with him! ( any chance of having most recent comments… Read more »
Let’s put it another way. As long as the current bunch of looneys (who cannot tell slurring from hoarseness) are in power, there will be no investment. Ireland is not a place to do business while FF & GP are holding the reins. The Euro, the debts etc etc are a side issue which should not be allowed to cloud the fact that we need an environment where someone comes here, has a few bob, feel safe in the knowledge that they can conduct business with ease and certainty. No messing with nonsense rent takers. European bank needs to see… Read more »
I agree stronlgy with the commentary { We in Ireland seem unable to entertain what some of our own economists have been saying for years, and only when an outside expert suggests something do we feel that we are “allowed” to think for ourselves. It was the same in the boom. When a local commentator warned that the whole boom was a scam, he was vilified. Then eventually when a foreigner makes the point belatedly, he is listened to intently. There are many reasons for this deeply insecure intellectual position, but let us leave them for another day. At this… Read more »
Hi David, 20 years of cronyism, brown envelopes and rip-offs has a majority of the nation very worried about what is going down, why, by whom and for whom. Why are the government doing things that make no economic sense. Are the favours in the “no favours asked or given” being called in. Colum Kenny has been writing in the Sunday Independant for the past two weeks asking where did the unrecoverable money that Anglo loaned actually go. Has it been offshored? Maybe David, you could use your good standing to alert the people in a future article to the… Read more »
Im sitting here wondering what the hell happened to our country ? Drunk leaders in the morning ? Really, you know we all deserve to go down the tube because we have all stood back and watched it all happening, im not a violent person but the people of Ireland won’t realise the magnitude of the situation until there is blood on the streets and believe me this is not too far away if we keep going the way we are. Sad times…
David. At least the Euro is working as a containment mechanism on Ireland. Irish society is now at a critical juncture. What happens next is truly sociologically going to be fascinating. Will the insiders manage to pull this off, or, will it be one stroke too far pulling the crony network edifice down in on itself once and for all. I think what we are faced with here is a generational showdown. Babyboomers V Generation X. In times gone by the elder generation shuttled off this mortal coil quietly and bowed out to the next generation acceding into power. Not… Read more »
Hyde Park, one of the benefits of living in London, along with all the other parks. I would suggest that the Halifax’s growth figure is more applicable to the sought after suburbs of London, rather than e.g Sunderland, Goole, Dover, Belfast, etc. Whist your “bank/government bashing” articles are totally justified, have you ever suggested that perhaps the black economy of any country is in any way also partly responsible for the harsh economic measures currently in progress in the Republic? Whether in growth or recession it is always the case that your 9 to 5 taxed at source workers are… Read more »
Can we keep the Euro out of this? Or at least put its place in a proper perspective? The fact that Ireland trades so much with non-Eurozone countries is not an argument for not being part of the Eurozone. California must do a zillion times more trade with China or Japan than with North Dakota yet it shares a single currency with North Dakota and not with China or Japan (or having its own California currency). Germany’s trade with Slovenia is miniscule compared with its trade with Japan, the US, Russia or perhaps 50 other countries, yet Germany and Slovenia… Read more »
{ as we have become politically more European, we have become economically more Anglo-Saxon. } Very true. We seem to be having Californian consumption and debt levels, and the French ability to generate the sort of employment and business activity that is needed to pay for this. It is a competely mismatched equation. We have been chasing the superficial and absolving ourselves from any responsibility for understanding the rudimentary. Trying to get the best of both, and ending up with the worst of both. We end up bankrupt like Democratic Party run states like California, and with the persistent high… Read more »
We don’t bury our heads in the sand in this country.
We stick our heads up in the clouds.
It achieves the same effect, to construct your own reality, and thereby completely misinterpret reality. Construct your own reality to meet the requirements of the pride construct.
Sorry David, cannot accept your opening paragraphs. Innocence abroad perhaps,it requires some depth/analysis which may not be possible while walking around the park. The 7.8% figure for unemployment is nowhere near accurate, Labour, like all governments, have been massaging unemployment numbers for years. A lot of major British cities are extremely run down, major social problems, enormous inequality and appalling lack of social mobility, high incarceration rates, child poverty is off the scale (worst than most European countries according to an analysis in the NewStatesman), people have got to read Wilkinson’s book ‘The Spirit Level’, where the UK and US… Read more »
The numerous references to “intellect”, or lack of, struck a chord with me. My dear old dad who is now headin towards 75 and who left school and a class of 65 pupils at age 13 always maintained that our guys in politics were not “intelligent” enough. Yep they were cute as hell and applied themselves dilligently to studying the system to the benefit of themselves and their supporters but never thought of the big picture unless there was some gain somewhere for some of their ilk. Now Pops never proclaimed himself anything but an ordinary PAYE worker educated in… Read more »
A warning to any young people thinking that Canada will provide them with the lifstyle that they deserve. 3 out of 5 Canadians are struggling. Far away hills are green….
http://globaleconomicanalysis.blogspot.com/2010/09/59-of-canadians-live-paycheque-to.html
Looking around nowhere seems green, I know some Galway people who have left for the UK already and they seem a little shell shocked by the pace of working life there- do you think Ireland will really get much worse or are we looking at things wrong and is it just a matter of having too high expectations?
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Recovery Fades in UK; UK Trade Deficit Hits Record; US Trade Deficit Shrinks; Jobless Claims Drop or Not?
The recovery in the UK has faded, with manufacturing, housing, and services all weakening in August. In response the BOE Mulls ‘Second Wave’ of Stimulus.
http://globaleconomicanalysis.blogspot.com/2010/09/recovery-fades-in-uk-uk-trade-deficit.html
Hi David, The size of their economic illiteracy is trumped only by their massive inferiority complex; focusing on “what would the neighbours think”. They parrot over and over the mantra “There is no other way!” like brain-dead zombies. You can forget logical arguments or facts, company law or even best economic practice. The only “show in town” is to feed off the ignorance of the average voter. It’s going to continue for as long as people stay ignorant on the difference between government bonds (backed by tax revenues) and company bonds (backed by company revenues). They will continue to tell… Read more »
This mad inferiority complex is not just manifested in the area of economics. Economics is a bit complicated but rock music isn’t. Yet Rock was 30 years old before an Irish rock band seemed to able to make a proper living without being endorsed by our British cousins. We could not even even ourselves to judge our rock and roll bands!
(I refer of course to the mighty Aslan and Christy Dignam, who are still going strong since the 1980’s without that elusive hit single or CD in Britain)
Great article David, you’re in top form lately.
I just think the government simply doesn’t care what state we’re in. FF know they’ll get at least 45 seats in the next general election so the odds of getting re-elected are good.
The biggest problem Ireland faces is the section of its people who will vote FF no matter what catastrophe FF inflict on the Irish people. Once we de-program this subsection of society, we can then, and only then progress.
Keep up the good work. We know the history books will treat you kindly.
Very goood David, but remember: our crash started in 2006, when house prices topped off TWO YEARS in advance of the Lehman Brothers crash. We’ve been stagnating for 4 years not 2.
All (you know who you are)
Constantin Gurgdiev’s manifesto summarises what needs to be done.
It probably needs additions & tweaks.
Got any ideas?
True Economics: Economics 27/8/10: Manifesto I (?) http://goo.gl/b/Gnn3
No-one else, particularly in Leinster House, will catalyse change.
Regards,
@BriMcS
Strange as it seems even Iceland is making somewhat of a recovery.It used to be “change the C for an R and six months” and now its six months the other way.Iceland are six months ahead of any recovery here.We converged and Iceland are heading north and we are heading south. Unfortunately we can’t keep joining clubs getting the freebies and when they enforce the rules we want to jump ship.The EU and the regional and structural funds are one classic example.I know the euro ain’t a great idea but unfortunately its here to stay and we better get our… Read more »
Dante’s Inferno : I am sensing the frustration David is experiencing when he observes the ‘new growth’ elsewhere while Ireland lingers in the doldroms. The new hymn sheets in the EU and USA are singing praise to glory while Ireland prepares to topple over and loose its sovereignty.Had David walked closeby along Brompton Road he could have spared himself waiting in a long queue in Dublin and renewed his express passport thus prolonging the renewal date and be ready sooner when everyone will have to jump ship.What replaces the vacuum left immediately after bankocracy? This is a worrying question and… Read more »
RE “.I know the euro ain’t a great idea but unfortunately its here to stay and we better get our heads around it.” We need to free ourselves from this lemming like attachment to the euro completing eroding any bargaining position we may have with our political latchicos here in Ireland and in Europe. It’s simply not true to say we cannot leave the Euro. Leaving the euro has many advantages for us none the least of which benefiting from an improved cost structure that is currently returning Iceland to growth. We have a large infrastructure ready to boost our… Read more »
I smell a rat.
http://www.independent.ie/national-news/state-rejected-halfprice-offer-on-convention-centre-in-2007-2339330.html
Apparently Micheal Martin, a kind of a drier, more suave and more sophisticated version of the ditherer if you like, is the favourite to be the next FF leader. The political establishment seems to only be capable of going from awfully bad to absolutely diabolical.
Neoliberalism is destroying Europe
by Christian Marazzi
Austerity and repression won’t bring Europe out of crisis, we need a social struggle against free market politics.
http://www.guardian.co.uk/commentisfree/2010/sep/14/neoliberal-europe-union-austerity-crisis
“Ireland is different” is something we have heard, from people, who more often than not were ‘plugging’ their own pet project and were in a sense asking people to suspend their disbelief in the impossibility of what was being proposed. Well now I am sure some of ye will be glad to hear that Ireland is indeed different. Ireland has a small open market economy and it is important to understand that when you seek to resolve the present difficulties. People who cite some of the measures that are employed in Germany or Japan or Great Britain and suggest we… Read more »
As I said above, root cause of why Ireland is faltering (and always has been for the last 100 years or so), has little to do with the Euro or our debt or anything else which relates to external factors. Ireland is simply a terrible place to transact business. Brown envelopes & rent taking and any other non productive “compliance” nonsense which is questionable on an ethical basis eats margin. In this internet driven world, the margin will always be tight. It will get tighter as people start to understand its capabilities more and more. We have to have an… Read more »
Any chance of Ireland rejoining the UK?Lol LOl.
I was reading this article last night and the first thing that came into my head was the episode of Fr. Ted when they had the raffle to repair the roof of the Craggy Island Parochial House! Fr. Billy O’ Dwyer, also known as the “SpinMaster”, him borrowing left right and centre to buy up all the tickets for the raffle, the raffle being fixed and the people of Craggy Island all being scammed, sound familar?!?!?!? Similar to what we have going on here also, we only have one record that we can play! Craggy Island is where we’re at… Read more »
David, As an ordinary citizen I have not heard debated the case for and against hanging bondholders out to dry. Govt spokesmen allude to terrible potential consequences to any policy except their’s but I have not heard a full explanation of the most likely response to defaulting on bondholders. One could question whether the Govt are acting as they are to cover accepting full responsiblilty for the crisis and resigning in shame. You should publish exactly why it is ok to default and give reasons for following your recommedations. In the likely event of an imminent election it is vital… Read more »
I have clients these weeks complaining to me how foreign traders have set up shop openly in defiance of compliance of tax regulations and under-cutting them and displacing them from trading activity .Lack of National Enforcement of new foreign owned businesses commencing trading is terminating livelyhood of compliant irish citizens.We are now discriminating ourselves into serfdom.
What is perceived to be the case is foreign traders obtain ‘ family/connected loans’ and usually in cash so there is no money trail.Some employ their own and not register them and many arrive from outside the EU.Revenue need to assure their effective enforcement and duties to the national taxpayers and not to be seen as discriminating .There is no transparent procedures in place to convince the registered and compliant trader.
Folks check out this clip, David McW get’s a mention!
http://vimeo.com/1867131
“We are grateful to The Washington Post, The New York Times, Time Magazine and other great publications whose directors have attended our meetings and respected their promises of discretion for almost forty years. It would have been impossible for us to develop our plan for the world if we had been subject to the bright lights of publicity during those years. But, the work is now much more sophisticated and prepared to march towards a world government. The supranational sovereignty of an intellectual elite and world bankers is surely preferable to the national autodetermination practiced in past centuries.” — David… Read more »
It seems like the irish people in general is being dripfed misery.
When do you guys forsee the tippingpoint?
When is the house of cards going to tumble?
I think people cannot comprehend that this sort of thing is going on. Five Corporations now own all Major News outlets. Federal Reserve Act 1913. This act was voted in couple of days before Christmas when there was no one in congress. What is the Federal Reserve ( a group of private banks printing money and coin for the american people at a percentage for every dollar printed ) ECB ( EUROPEAN CENTRAL BANK ) Has the exclusive right to authorise the issuance of euro banknotes. Member states can issue euro coins but the amount must be authorised by the… Read more »
Hmmm , Give it up lads . Cowen thinks so little of the Irish population that he will address the nation drunk / hungover . Thousands in negitive equity , 14 % unemployed and personal debt all over the place and they were having a sing song . Garglegate .
The Disporia must love it . I walked into work here in Oz and a guy came up to me laughing saying ” did you hear about the Irish Prime Minister ? “
I am coming around to the viewpoint that the authorities are going to make a bubble in order to end the aftermath of this bubble. Ponzi 2.0. Except it will not work in real estate, because of the oversupply crated by Ponzi 1.0….
An analysis of the current state of the US property market. Strong similarities with here. http://www.calculatedriskblog.com/2010/09/two-key-housing-problems.html Though the clown politicians seem to think that it is all because the banks are banjaxed….no….when you have 465000 people without jobs that includes a lot of young people who are not buying houses. The way out of this crisis is to fix the labour market. Nobody grasps that this is the fist step to solving the problem. Because as David pointed out, they are obsessed with the appearance of the banking system. It seems to me that the poltical establishment simply do not… Read more »
Good article but it is time to move to the detail of solutions. Ireland is being bled to death by banks and government. The residential mortgage paydown is approaching €1 billion per month (Central Bank data).Every cent of this money is being sucked out of the economy. ‘The country has been turned into a giant debt servicing agency’ to quote the author. The detail might read like this. 1. Not another cent to any of the banks. Let them manage their own balance sheets. This means banks bringing in the bondholders and telling them the game is up. EU support… Read more »
Well what was put to Biffo at the end of his now infamous drunk interview is only a crumb of the anger of this country, but he none the less srugged it off with words such as ‘defeatism’ for a girl who has gone through the education system done all that she can and has come out to what.. SFA!!! as have thousands, myself included..honest t’god why do all these types in their dam high places become rediculously myopic!!!..’Oh no, we need to go ahead with this blah, blah blah!! will someone open a window for this gobshite and have… Read more »
David says: ‘ … as we have become politically more European, we have become economically more Anglo-Saxon.’ We keep reverting to this Anglo Saxon dimension here. Perhaps the simplest solution to our economic woes would be to shake ourselves free from the burdensome Euro, become the 51st State of USA and use the Dollar or, alternatively, restore the union with the United Kingdom, and use Sterling. The Irish Republic, born just 61 years ago in 1948, must now be acknowledged to be a failure. Its conception was the result of an unholy alliance between Fine Gael and Clann na Poblachta,… Read more »
http://www.guardianonline.co.uk carried a piece about UK bankers being targeted by the real IRA.Does this apply to Fingers and Seanie?.loL lOL
http://www.independent.ie/national-news/government-perilously-close-to-calling-in-imf-report-warns-2341197.html : Potential for IMF involvement creeping into mainstream media.
I see Barclay’s are suggesting we need help from the IMF.
I wonder if FG and Lab have been waiting in the wings for this moment when they can take over. They know FF & GP are gone and the best way to remain uncontaminated is to have them to be seen to have brought the IMF upon us.
Interesting here between Max Steiner and Mum Sheikh Woohoo(got spelling wrong:))
http://bit.ly/2pN6r
Call for Breton Woods 111
Re from above, ‘Left and right side investment banking’,
‘On the left side nothing is right. On the right side, nothing is left.’
Could be applied to Anglo’s Asset Recovery and Anglo’s Funding bank escapade… Lol
Maybe now we have found a significance big enough for our collective arrogance ? http://www.marketwatch.com/story/ireland-sovereign-cds-spread-hits-all-time-high-2010-09-17 Let’s face almost everything that came from authority and from the media in 1998 – 2008 was a load of horsemanure. The mainstream viewpoint hammered home every day in the media was bull. The real cost of arrogance, when it influences our decision making. The real cost of the failure of authority in Ireland. Now, it should be clear in the battle between authority and truth which is the source of all the things that go wrong…. So much for the obsession with our perception… Read more »
“… the very people who didn’t see the bust coming…”, so of course some of them are more inclined than others to try to justify their earlier mistakes rather than the common good. “… only when an outside expert suggests doing something do we feel that we are ‘allowed’ to think for ourselves” Desmond Fennell was one critic obsessed by this Irish trait. This didn’t endear him. I last saw him on the Bibi Show (remember that) being insulted by Michael McDowell: “You call yourself an ‘intellectual’, well let me tell you, you are no intellectual…” The Irish don’t like… Read more »
Today is the day!
Bond spread are exploding as we speak here:
http://www.oceanviewstudioarts.com/Donegal_Initiative/Blog/Entries/2010/9/17_Irish_bond_spreads_hit_new_high.html