Driving up the east coast on a beautiful sunny day, looking out, you can almost see Wales. I wondered was the weather so beautiful on this day in 1169,whenthe first Normans set sail from Wales to invade Ireland.
Did they get a fair wind, a bright sunshine for the short hop over to Wexford bearing their secret weapon, which was to subdue Ireland so quickly?
The five-foot longbow – Strongbow’s longbow – was the world’s most formidable weapon in the 12th century when they arrived here, and it put the fear of God into the Danish towns of Wexford, Waterford and Dublin.
A few years later, happily ensconced in Dublin in 1182,using a longbow of yew, one of these archers shot an arrow straight through a four-inch oak slab, proving to the Irish that no armour could withstand the longbow.
The Norman kings urged the adoption of this lethal weapon to terrify the Irish. They made longbow shooting competitions mandatory every Sunday and on public holidays.
This became the chief sporting event in Norman Ireland. Much of the marksman’s success lay in the use of a good bowstring. Archers typically had a favourite, and the Anglo Normans called this the fyrst-streng. This expression for the finest bowstrings soon became synonymous with the top contestants and emerged into the English language as the expression ‘‘first string’’ and ‘‘second string’’.
There is a distinct second-string feel about the position of Ireland in Europe these days. We are not playing at the highest level; we are condemned to be second best. But it’s not all that bad, as playing as a second-string outfit gives us the chance to improve. After all, the only way for the second string is more or less up, once you hit the bottom. But hitting the bottom is exactly what we are not allowed do at the moment. Without this sense of being at the bottom, no new capital will flow in.
The thing about recessions is that they all end. There never has been one that doesn’t. Life goes on and, interestingly, those things we thought so important during the crisis are quickly forgotten about.
In the second-string team, you can Allow assets to fall dramatically in value. If we forget about property, there are a number of reasons to believe that the process of recovery will begin soon. It will be slow and it will be faltering, but capitalism normally rights itself if it is allowed to run its course.
Companies that are put into liquidation will tend to find buyers for their assets and, in the same way as the boom involved a huge transfer of wealth from the buyers to the sellers because the assets were overvalued, the opposite will prevail now.
In this crisis, there is a massive transfer of wealth from sellers to buyers because the assets are terribly undervalued.
But why are they undervalued? Is it because of the fall in demand?
Although at first blush this seems to be the case, the real reason the value of assets will fall dramatically is because of lack of money. If no one can get their hands on money, the assets will fall and that fall will undershoot ‘‘fair value’’ substantially. In the same way, when there was loads of money about, assets overshot their ‘‘fair value’’ price dramatically.
Believe it or not, there is some evidence that assets are beginning to change hands at huge discounts. Look at the distressed property auction at the Shelbourne last week, where 80 of the 82 properties were sold.
There is evidence elsewhere too . Speaking to a liquidator friend of mine last week, I was told that serious negotiations are going on now, but people have to realise that we are seriously second-string and the price of everything has to fall. In businesses where the only problem is rent and where the landlords are forced to realise this, there are deals to be done.
Going concerns that can renegotiate their rents have a chance of survival.
We all know that there are thousands of businesses in Ireland that could survive if rents fell to a level where the business could make money.
But landlords are still in denial. They still think they are in the first string, but they are not.
The problem for society is that most of the state’s efforts since the property market crashed have been designed to ease the burden for landowners or those with property interests. Obviously the biggest property vested interests in the country are the banks.
At the top of the boom, over 80 per cent of all lending by Irish banks was property-related. So the banks’ ‘‘assets’’ are essentially land.
The more you prop up the banks, either with cash injections or with scams like Nama, the higher you keep the price of property artificially.
This artificially high price means that the real value is blurred. If a business has to pay a huge rent, it can’t extract the value in its other assets – its capital, its people or its ideas.
Therefore businesses are being put into liquidation, not because they can’t trade, but because they can’t trade in 2011 shackled with 2008 rents.
What will happen if the landlords are not confronted is that these businesses will be liquidated and their other assets will be vaporised.
Assets will be flogged cheaply in fire-sales and there will be a destruction of value throughout the country.
This will enrich buyers enormously as they pick up real (non-property) assets for a fraction of their real fair value. These players will be financed from abroad because the Irish banks are simply safety deposit boxes for the IMF.
They will take in our tax money and keep it there on deposit to meet the IMF’s stringent capital requirements.
Therefore, no matter how much the money supply is expanded, it won’t translate into credit. So the credit will have to come from elsewhere – or maybe even from a new bank or two, which no doubt will emerge in the next year or so.
The thing about being a second-string outfit is that our asset prices have to fall. If they do, we will recover. There is no doubt about that. But if we continue to prop up the interests of property, we will surely sink further.
We need to abandon policies that prevent private capital from being enticed here. One of these policies is the use of the courts by landlords to crush business people by anchoring them to rents that no one can afford. These business people will just go bust and there will be no businesses to sell, which means new capital will stay away.
Once new capital comes in at the level of individual businesses, the weapon of official credit constraints becomes as irrelevant as a hulking zombie bank.
The way to move from second string to first string is to make changes to the position of landlords.
Rents need to fall dramatically. That will allow capital to do its thing.
Even the Normans -who became prodigious exporters of agriculture, using our rivers as trading routes and our ports in the south east as trading hubs with France and England – understood that business can thrive. But it has to be given the right conditions.
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David. And the biggest land / price rigging of them all, NAMA. NAMA engineered to prevent the price of land and house dropping and favoring the buyer. How blatant. NAMA funded by the very same taxpayers who cannot afford to buy a house or who pay most of their income on rent and we are funding an agency which is rigging the property market which is keeping the prices too high which is killing buoyancy in the market and we are back to the article above. Or as Constantin speaks it, ‘Nama is a debt vehicle that will use more… Read more »
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The problem is even if you can get a lease at 40% of 2008 rents your trade is likely to be 60% off that date. And going down.
I thought btw that the ECB was handing the banks money at 1%. If so whats all the fuss with the trackers. They mightn’t be making anything but they aren’t losing either.
Whether urban myth or not, Bismark is reported to have said: “give Ireland to the Dutch and they will turn it into an economic miracle, give the Netherlands to the Irish and they will all sink beneath the waves because they won’t maintain the dykes”, harsh but we do live with a nepotistic socio-politicial system and a crony capitalist economic system, both of which have produced utter disaster. Dan O’Brien has an interesting article in today’s Irish Times on amateur part time politicians, Ministers who are still TDs etc, while I would add, TDs who have property empires, share portfolios,… Read more »
Hi everyone!! In my little shop in a shopping centre in Dublin, everyday another shop closes down in fact went to collect clothes from the cleaners and the shop had indeed closed down also. having serious difficulty paying the 2006 level rent, however have being paying it to date, have written to landlords many times they will not help me they are in NAMA. I am not entitled to the dole and I expect the business to fold by the end of May. I feel like Michael Douglas in the movie “Falling Down” Are the provisional F F party going… Read more »
It is not just rent. Many businesses are now paying more to local authorities in the form of commercial rates, than they are paying in rents. When you pay rent for a building, you get the use of the building. But when you pay rates to the local authority, all you get is more hassle, as the money is used to pay for a wide array of inspections that are trying to justify their existence in the first place. In other words you play for politicking with a small p, for petty bureacrats. You get nothing of value. It is… Read more »
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At the top of the boom, over 80 per cent of all lending by Irish banks was property-related. So the banks’ ‘‘assets’’ are essentially land.
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I am convinced that the land market in Ireland is being manipulated to scale back the most extreme losses in the Irish banking system, and to make the country look healthy. All with the objective of keeping the credit flowing inwards in the medium term.
What is that they say ? “You cannot buck the market”….
We don’t need reality – because we have constructed an existence called the Irish concept of lifestyle, which is firmly based in delusional concepts like pride, arrogance, “Guinness is good for you”, authority is doing a good job, everything is fine here, havin the craic, bring back Bertie, I am sophisticated, and so is the crap that comes out my ass, etc… Reality, is not something to be indulged in.
We just want to keep borrowing and keep sustaining the delusions.
Another article from yesterday’s business post. http://www.sbpost.ie/post/pages/p/wholestory.aspx-qqqt=TOM-MCGURK-qqqs=commentandanalysis-qqqsectionid=3-qqqc=5.3.0.0-qqqn=1-qqqx=1.asp Things are getting very serious. McGurk also makes some reference to the ‘industry’ built around the crisis, by the media as they seek to ensure that the population remains plugged into the media, and prepared to take in more advertising and hard sell. To be honest there is something absurd about Maid Marion and Joe the yapper getting half a million a year to talk about your financial difficulties. I do not know where he gets his stats from, but anecdotal evidence is indicating that he is correct. There is something absurd about… Read more »
I agree with your views about where asset valuations are headed in the sector. In fact, the reluctance to adjust rents seems to indicate to me that landlords are effectively trying to pay themselves now, for future reality.
We might have a second rate reality, but I bet that a lot of people are still aspiring towards first rate delusions !!!
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‘2nd string’, I say more ‘3rd fiddle’,
“The people never give up their liberties, but under some delusion”. Burke, Edmund
“All are lunatics, but he who can analyze his delusions is called a philosopher”
Ambrose Bierce
Normality :
I have been in France for two weeks now and life is normal as I know it .I recently caught a serious virus and went to the local hospital and was admitted immediately and seen by a team of doctors there and every blood test and electronic gaget was put on me with drips etc and the day after I was discharged with a prescription a full page result and all free because I used the EU national health system . So something still funtions on our PRSI premium system .
DMcW says:
…’there are a number of reasons to believe that the process of recovery will begin again soon’.
Hmmm…. ‘believe’…..’soon’…. these are vague and uncertain terms.
By contrast these two words are very certain. Google ‘PEAK OIL’.
Folks, Sean Quinn issues statement after receivership which he might live to regret:
wp.me/pNlCf-1iu
(via Namawinelake)
‘it would be quite simple to painlessly rescue the relatively small economies of Greece, Ireland, Portugal, or Latvia’
http://bit.ly/gaR9cO
http://www.babylon.com/definition/Anjana/English Anjana (Sanskrit) [feminine of anjana] The mother of Hanumat or Hanuman, the celebrated monkey god of the Ramayana, who is therefore called Anjaneya (son of Anjana). In her previous birth she was a goddess, but due to a curse was born as a monkey in the Himalayas. The birth of her son, Hanuman, lifted the curse and after a period Anjana ascended to svarga (heaven). We await Hanuman to lift the curse of the two great elephant Gods, Anglo and Nama. However, the great spear that pierced Dub’s heart, must firstly be taken from O Connell St. Everyday servants… Read more »
http://www.zerohedge.com/article/1-billion-gold-bars-taken-delivery-pension-fund-due-risk-comex-default-and-shortages
http://namawinelake.wordpress.com/2011/04/16/northern-ireland-judge-dubs-anglo-%E2%80%9Cgolden-circle%E2%80%9D-scheme-%E2%80%9Cimproper-and-unlawful%E2%80%9D/
http://whistleblowerirl.blogspot.com/2011/01/financial-regulator-tells-sunday.html?spref=tw
http://www.darkpolitricks.com/2010/12/firefighters-for-911-truth-debunk-assange-irrefutable-proof-of-cover-up-video/
http://www.google.com/finance?q=jpm
http://www.irishtimes.com/newspaper/breaking/2011/0418/breaking29.html
http://gregcfuzion.wordpress.com/2011/04/16/debt-forgiveness-or-vulture-culture/
http://namawinelake.wordpress.com/2011/04/18/a-cheeky-offer-on-tracker-mortgages-from-permanent-tsb/
http://www.businessinsider.com/spanish-debt-auction-april-18-2011-4
http://www.shelltosea.com/content/norwegian-newspaper-statoil-brutal-conflict-ireland
http://www.zerohedge.com/article/jpmorgan-pours-cold-water-crude-demand-destruction-story-sees-crude-spiking-over-130-june
FYI
Some of you might find this site interesting: http://ie.mg40.mail.yahoo.com/dc/launch?.gx=1&.rand=1173191486 If this think-tank is correct – and they claim to have been thus far – much of what is discussed here will soon be academic. When the good ship ‘Global Economy’ finally goes down. I have made the point here a few times. We – Ireland – cannot presently solve this for ourselves given the reality of our current political elites and our embeddedness in the European system. We are not Iceland, nor anything like it. we just have to ride this one out and individually prepare for what may be… Read more »
The ECB, and how it works.
http://www.sbpost.ie/news/ministers-believed-the-ecb-was-issuing-threats-55809.html
This is disgraceful. The ECB appears to have an agenda of looking after the bondholders.
Is the ECB corrupt ?
We need Jens Peter Bonde on the case, poking his nose into what lobbyists are really working behind the scene in the ECB.
Terrible indictment of crony capitalism. Terrible indictment of banana republicanism. S&P downgrades Irish banks to junk status and this is after all the stress tests, bailouts, capital ratios and blah de blah. (story with the Times) couldn’t be arsed to link to it, same old, same old… Frank Daly of NAMA fame wants to kick start the property industry. Frank wants to become a banker and give out loans. S&P don’t have a rating below junk which could act as a yardstick for Frank’s ideas. Maybe we should build Norman theme parks in Waterford and such like. I can see… Read more »
The real estate market in Ireland is tightly controlled and prices are fixed. This goes for rents as well as purchasing. Even in New York, the bastion of capitalism, they have controls on how much you can increase annual rents. In Ireland we have the opposite, rules to stop rents being decreased. However despite the clearness of the collusion (200,000 empty properties, nothing selling and still massive prices for years) no laws have been changed or investigations started. I can only conclude that in fact that a large number of people in Ireland encourage this collusion and price fixing. One… Read more »
1st Effect of collusion on society – Suppliers gain by make higher than expected money by overcharging buyers. Buyers lose by being overcharged for a product. However Suppliers have to spend money to set-up the cartel by lobbying/funding politicans, setting things up etc, so their gain is not as big as buyers loss. 1st nett loss for society. 2nd effect of collusion on society – buyers can buy less of a product because of the higher price, so are deprived of the use of that product. As buyers buy less than at fair market value, suppliers also supply less, meaning… Read more »
Last night’s RTE News did not feature the downgrade of Irish banks to junk status. I was flabbergasted. Please correct me if I’m wrong but I’m sure it was not featured. If so, why not? It was on their website and teletext yesterday as their top 3 story, and the TV news merely repeats what is on their website, but not this story.
Do we live in a democracy?
Somebody decided to pull the story. I would like to know as a taxpayer and a tv licence holder, why?
Folks, Nyberg Report in full:
http://bit.ly/hEaixY
Timeline is worth looking at first, if you don’t have time to plough-through it all yet. Starts p165.
Unfortunately, there is no picture of “what’s up DOC?” beside the headline. This is unfortunate. It would nice if people could remember the shennangins alongside the face of the former AIB head, Doherty. http://www.breakingnews.ie/ireland/doherty-pay-off-a-hammer-blow-to-ordinary-banking-staff-501938.html In my view, Doherty should have got nothing. Remember this is a bank that might cost us more than Anglo. (something you will not hear on RTE or the Irish Times until it becomes blatently obvious). There is a theme in all of this. It is a case, of preferential treatment of the well connected. The well connected, the members of the cliques, seem to be… Read more »
News just in, http://www.rte.ie/news/2011/0419/banks1.html “Warnings over property bubble ‘insufficient'” Apparently they’d never heard of David McWilliams, author, broadcaster and columnist. They must have been living on planet Bertie – a place Gormless went native on. Here’s the fascinating bit, yet somehow it was David McWilliams’ advice the government took for the blanket guarantee. When woken in the middle on the night on the 29th of September ’08, Gormless answered the phone, and asked is it the McWilliams solution we’re going for? Yeah ok, look guys, I couldn’t be arsed getting out of bed for this carry on, just ring the… Read more »
BIG NEWS !!!!! NEWSFLASH.
I THOUGHT IT WOULD NEVER HAPPEN IN OUR LITTLE CRONY RUN COUNTRY. BUT IT HAS. FULL MARKS TO BALDY NOONAN.
http://www.breakingnews.ie/ireland/noonan-orders-clearout-of-bank-directors-501967.html
YES. I AM PUNCHING THE AIR WITH DELIGHT.
THIS IS A VERY IMPORTANT STEP FORWARD.
Gombeens, time to leave the stage. Enough is enough.
Frank Daly has been manoeuvred into place to launch the “echo bubble”. This latest speculative bubble in property will echo the type of dealings that has gone before. You will get the same Banks, Real Estate Companies, Law Firms, Syndicates and so on. Noonan needs to clear out the Dept. of Finance and what’s left of the Dept. of the Taoiseach inside cronies. I warned before about the centre not being able to hold, now the big danger is in the second coming…….A second property bubble will wipe Ireland for ever….lets finish the poem, Mr.Yeats….. Surely some revelation is at… Read more »
DID LENIHAN SANCTION CONTRACTS WITH A WINK AND A NOD? On 24 November 2009, I sent an email to members of the Oireachtas pleading for FAIR PLAY, but without any real hope that the Minister responsible would listen. Extract below: “I predict that Boucher will be allowed to keep the extra €120,000; and Colm Doherty, the new AIB Managing Director, will recognise government weakness and ensure that, in the fullness of time, he will receive the €630,000 which the Minister rejected last week.” Given the corruption within Irish politics my forecast did not simply come through within months but was… Read more »
Folks, Secret banking in offshore world :
.. speakers at last year’s conference Patrick Doherty, a former Anglo Irish Bank employee..
http://bit.ly/hHV4Fl
Good interview there on Newstalk with David. I despair at this [Nyberg]report. It seems for the large part unnecessary; INFORMATION WAS FREELY AVAILABLE; particularly by David and by others also. The point [or pointlessness]regarding the sale of State assets and the mandatory purchase of toxic liabilities through NAMA and the bailout needs to be SPELLED OUT further to the general public. It is a scam and commentators have exposed it for what it is. Importantly, the Government must, EXPLAIN WHAT WILL HAPPEN IN 2012/2013 IF THESE POLICIES ARE CONTINUED. Will a further report have to be furnished at taxpayers expense… Read more »
Maybe the Nyberg report should be christened: ‘All to blame, no one to blame’. Seems like another carte blanche to me, while lumping in the average citizen is just simply breathtaking given the majority of people seeking a home were forced by a cynically manipulated market to engage with ludicrous property prices. In light of the pay-offs at AIB, the impotency of Irish democracy is once again laid bare, I find it rather astonishing that when the Irish government put in place a bailout of the Irish banks that they did so seemingly without strings attached, like clearly specifying that… Read more »
@Dorothy, Re Nyberg, there are racial overtone ‘groupthink’ slurs. It satisfies a political agenda, I heard Lenny in full throttle blaming the central bank, whereas we all know Bertie, Fingers, cronies went joy riding in their ferraris telling all naysayers to commit suicide. This anti Irish political agenda is hell bent on making the Irish population, citizens and taxpayers, stump up for the bill. I’d draw another useful analogy, which if I recall correctly DmcW has used as well, this is that of the soldiers who fought the trench warfare campaigns of World War 1, who lost their lives in… Read more »
The way forward:
Adequate Loan to Value caps and comprehensive mortgage insurance:
http://www.telegraph.co.uk/finance/economics/houseprices/8433264/IMF-backs-LTV-cap-to-prevent-housing-bubbles.html
Am almost nervous about posting this, given the eloquence and depth of knowledge displayed by all of ye above on what has happened to us, what’s happening to us, what will happen to us in the future. My question though – why are we not all on the streets? Mention of Maid Marion and Jolly Joe, the jowliest socialist in the world, I’ve heard it said many times on this issue that the reason we’re not marching is that between blogs and talkshows and phone-ins and so on, we have too many outlets nowadays for venting anger. The Greeks are… Read more »
Praetorian: Though I could say the exact opposite to points a), b) and f) (things ARE bad enough for a lot of people of my acquaintance, replicated I’m certain across the nation; around here anyway, people also operate on a collective basis, very strong community organisations; DON’T react and then what?), all your answers are pertinent, do add up to a plausible explanation. Most pertinent, however, the final question I asked – why aren’t YOU on the streets? This is the one that has me really baffled – €25k of debt imposed on every single one of us overnight, why… Read more »
@Malcolm Mc Clure re: “‘Behold the fowls of the air: for they sow not, neither do they reap, nor gather into barns; yet your heavenly Father feedeth them. Are ye not much better than they?’ Maybe Mr Micawber was right. Something will ‘turn up’. Depends who is putting the above into action and their particular circumstances. One interpretation alas could be an excuse for an alcoholic to go on drinking, or a gambler to continue losing in the casino. I rather like the poignancy of the last episode of Blackadder when all the theorizing, all the jokes, all the play… Read more »
PMC: Can’t agree with your semi-final point – we are NOT all to blame. I live on the side of a hill here, one house, five-year-old car, wife and two kids – we lived within our means, as always; down the boreen from me, the O’Regans, Duanes, McCarthys, O’Briens, Powers; up the boreen, the O’Keeffes (three families), the Brownes, the Nunans, etc. etc. NONE of those families bought second homes, bought Hummers, bought the big BMW 4x4s, all have been lumped with this €25k/person debt, because the likes of this guy have decided we should all be lumped in together… Read more »
Colin, we have our own blog, http://thechatteringmagpie14.blogspot.com
You can contact me through that if you wish and we can have coffee after the march up here in the hut on the hill. The same invitation extended to anyone else out there who wishes to join our protest.