In the early 1960s, the British establishment was rocked by a sex scandal involving the patrician, married, Minister for Defence John Profumo, and a young call girl, Mandy Rice Davis.

When the story broke, a sceptical member of the Tory press accused Rice Davis of being a money-raking fantasist and backed up his attack on her by saying that John Profumo denied even knowing her, let alone sleeping with her. The call-girl quipped, “he would say that, wouldn’t he?”

With one caustic, but self-evident remark, she condemned Profumo and made the journalist look like a bit of a naive eejit.

When I hear one of the biggest money lenders in the country telling us that we are the second wealthiest country in the world, the call girl’s wisdom comes to mind.

They would say that, wouldn’t they? Let’s look at motives for a second. If you are in the business of lending money, you might tell people that they are unfeasibly rich beyond their wildest dreams, mightn’t you? Could this be part of a sales pitch to make people feel better about borrowing yet more money to buy yet more assets and give the bank yet more fees?

Could this be another example of the shameless cheerleading process which goes on in Ireland every day to keep the inflated property market buoyant?

Let us consider that accusation for a moment.

You don’t have to be a killjoy to suspect that across the board, from banks to estate agents, money brokers, advertising sales people and the biggest gainers of all – the Government – there might be a motive problem here. When we examine the incessant barrage of self-congratulatory financial muck bandied about, could it possibly be aimed at lining the pockets of the thousands of vested interests who make money from the property market?

No one doubts the economic success of the past decade. Those of us forced to emigrate in the 1980s and early 1990s in particular have reason to celebrate; we returned to a much better country. However, a bit of perspective might help. We have seen this type of stuff before, in countries that have been much more successful for much longer than ourselves. For example, in the late 1980s, Japan – an economic powerhouse – experienced the most inflated property bubble of the 20th century. As a result of the lending boom, four Japanese banks dominated the top five banks in the world. (Today, no Japanese bank is in the top five and one of these original 1980s financial colossuses is bankrupt.) However, the most startling statistics of all were those about property values and implied wealth.

A good example was the fact that in 1988 the land on which the Imperial Palace in central Tokyo sits was valued at more than the entire real estate of the State of California or Canada – the world’s second largest country. By that benchmark, Japan was indeed the wealthiest country in the world. Needless to say, it was all nonsense – not because the Japanese were not wealthy, they were; but the property bubble (which burst in 1990 with dire consequences) had overstated that wealth enormously. The Japanese had income which had been built up over generations from making stuff, but they were not as wealthy as they thought they were.

Horse sense attests to Japanese income. Look around your kitchen, living room or front drive today and you will see where Japan’s undeniable income comes from. Even during the post-property crash domestic slump, Japan remained the world’s largest exporter and the globe’s most innovative economy. It still had the fastest growing consumer goods businesses with the best brand names like Sony, Toshiba, Honda, Canon and NEC. Japan’s car industry remained world beaters. The country continued to export more capital to the rest of the world than any other country and, as a result, its accumulated income was substantial.

In short, Japan had a lot more things going for it than simply property and even still, property played havoc with Japanese balance sheets by making them feel richer than they were. Also – surprise, surprise – Japanese banks – that were making most out of lending to fuel the property speculation – continued to publish reports on the marvels of Japanese wealth right up until the eve of the crash.

Now let’s look at this week’s Bank of Ireland Private Banking Report which says that we are the second richest people in the world after you know who. Wealth is a bizarre but fairly straightforward concept. Typically rich people, like countries have had substantial income for many years which has been invested over generations wisely so that their wealth overtakes their income.

But there has to be evidence of income to substantiate opulence unless of course, it is inherited. All of us are suspicious of the Flash Harry who rocks up throwing cash around with no evidence of where it came from. Did he win the Lotto, rob the loot or maybe borrow it from someone in an effort to either impress or hoodwink us? Should we not be sceptical about countries that do likewise?

If there is no evidence of income, wealth and the substance of public displays of money or claims about it, have to be questioned. With this in mind, one of the strangest aspects of the Bank of Ireland’s wealth assertions is the fact they claim that “Irish net wealth has increased by 350pc in the past ten years” and then says that our income has only gone up by 100pc in the same period. Both these figures are true, but did the fact that our wealth increased three and a half times quicker than income not make the Bank think for a minute?

How could wealth increase three and a half times quicker than income in ten years, if not through incredibly astute investments? Ok, so from having never speculated before, is it conceivable that the entire nation – from my mother to the local postman – could have turned into financial gurus overnight? Do you believe that all of us have suddenly learned the financial acumen of Warren Buffet? Anyone who has ever worked in a market knows that not everyone can be a winner all the time. For every buyer there has to be a seller and for every buyer who thinks he has got a bargain, there has to be a seller who believes that he has just sold something which is about to lose value.

That is how the system works, how it regulates itself and how it benchmarks value – unless, of course, we are in a frenzy. In a frenzy, everyone wants to be a buyer.

Everyone rushes to get in and prices go through the roof.

For a limited period, as the prices overshoot, the value of your wealth, as measured against the overvalued asset, can indeed exceed income – but this can’t go on forever.

However, the frenzy confuses people and many think that this is a permanent state of affairs so they forecast wildly panglossian futures. This is why for example, during the tech bubble of the late 1990s, when the Dow Jones was rising past 10,000, the book called Dow 36,000 was on the US best sellers’ list for weeks.

The Dow subsequently fell back below 7000 and is only now recovering to its previous levels. Incidentally, Japanese property has not recovered to its 1988 value, almost 20 years later.

Typically at the head of this cheerleading are the people who are feeding off the effervescence and making cash – such as banks, estate agents, property advertisers and money lenders of all hues.

They, in unison, project a bright future based on wildly optimistic values and nonsensical estimations of wealth. Nobody exercises their critical faculties.

Everyone speaks the same positive language. Things have never been better, we have never been richer.

The miracle continues.

They would say that, wouldn’t they?

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