Maybe it’s the voyeur in me? I know it’s not for everyone, but the Comptroller and Auditor General’s report last week makes essential reading for anyone trying to get a handle on what is going on in this country.
While many in the media seem convulsed with the split in the cabinet, two much more important pieces of news emerged last week which tell us about where our economy is going. Neither portrait is a pretty one.
The first is the data on emigration, which continues relentlessly. Official figures show that the number of people who emigrated from Ireland soared to 87,000 over the last year. More than half of those who left the country in the 12 months up to April were Irish, and almost 36,000 were under the age of 25.
Talk to anyone in business in the country, and they will tell you that demand is seizing up. People are just not spending, not because they don’t want to, but because they don’t have it.
I spoke last week to someone in the advertising business and she told me that, coming back from the summer, she was hoping against hope for some uptick . . . but no, there was no sign. In fact, she said, it was getting worse.
The rise in emigration tells us that the pool of potential taxpayers and workers is shrinking while, at the same time, the amount of debt this country is carrying is increasing all the time.
The debt figures detailed in the Comptroller and Auditor General’s release are quite, quite startling. We all knew that there was a massive problem, but to see it written down so starkly shocks even those of us who had a fair idea how bad it was in the first place.
Look at the chart. It reveals that the general government debt stood at approximately €169 billion at the end of 2011. The significant upward trend in debt since 2007 is evident.
The ratio of debt to gross domestic product (GDP) is a standard sustainability measure applied for the purposes of comparison across the EU. The debt as a proportion of GDP rose from 25 per cent in 2007 to 106.4 per cent in 2011.
The deterioration in our government debt is continuing apace.
But with the economy stuttering at best and shrinking on the most meaningful measures, we have to find more money from less to keep the debt ratio stable.
A simple rule of thumb is that, to keep the debt ratio stable once the debt has gone above 100 per cent of your income, the rate of interest has to be lower than the growth rate of the economy. But our rate of interest is at least four times the growth rate of the economy.
In other words, the debt ratio is exploding.
We know that when a country has too much debt it can do one of three things. First, it can try to pay it if possible. But the numbers in Ireland mean it is impossible to pay all this debt. We simply can’t grow our way out of this.
The second thing you do, if you can’t pay, you inflate it away. But we can’t do that either because – even if there were an all-knowing Central Bank that could keep the rate of inflation just right, to deflate the debt without anyone noticing it – we don’t have it. We don’t have our own Central Bank, so the unique inflation route is out of the question.
What’s left is the third solution: we don’t pay it, not because we don’t want to, but because we can’t. This final option, absent any alternative, is looking increasingly likely.
Armed with this observation, let’s drill down into this mess to see some of the more horrific “hiddens” in the numbers and how this could affect you. One thing that jumps off the page at you is the fact that public sector pensions won’t be paid, because they can’t be.
According to the report: “Accrued pension entitlements of public servants are a significant liability of the state. At end December 2009, a total of €116 billion had accrued in respect of occupational pensions payable to public servants.
Those liabilities represent the estimated present value of the cash payments that fall to be met over the next 60 years in respect of pensions earned at December 31, 2009.”
This is the product of the pay-as-you-go system which is government public sector pensions. The problem is not just that the state doesn’t have the money, but that the public sector pension bill is rising at a ridiculous rate.
This time last year, the same report estimated the public pension liability at €108 billion at the end of 2008. In only 12 months, the estimated liability has increased by a whopping €8 billion.
Just to put this increase in the estimated public sector’s pension bill in context, the total income tax take last year was €13.7 billion. So the increase in the public sector pension bill alone amounted to 61 per cent of the total income tax take. Consider that for a moment.
It is pretty clear that, with numbers like this, the decision by the Germans and their friends on bank debt are driven not just by the bank debt problems, but also by their fear that all debts in Europe will be mutualised and they will have to pay. It is not hard to understand their position.
But they now have a choice. Countries like Ireland will have to default, renegotiate, repudiate, whatever you like to call it. We can grow out of this hole; we can’t inflate, so we won’t be able to pay.
The way that these events normally play out is that there comes a tax rate where capital simply leaves the country, because the middle classes panic as they see more and more of their income and wealth expropriated, either to pay for other people’s pensions or for debt.
This was why, in the 1990s, Brazilians and Argentinians were the largest buyers of real estate in Florida. They did this to protect their wealth. We saw this in the Ireland of the 1980s. It is always the same. Capital flees until the event happens – the default, in this case – and then it comes back.
The major news last week was this: Ireland is just unusual. In most countries, first the capital flees the sinking ship, followed by the people. In Ireland, the people flee first, as is already happening, followed by the capital. This is about to happen.
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Hi David,
In your last sentence you state: “This is about to happen”.
May I be very cheeky and ask of you what timescales we are looking at? Next year perhaps?
Thank you, Mit
Hi David Thanks for the insightful article. Your last few articles have drawn together alot of points about the socio-demographic problems that are both a result of, and a cause of Ireland’s position. With all these people leaving its keeping the unemployment figures from rising. Its also killing the economy because a 25 year old that leaves today is a source of productivity and revenue that the state looses out on for 40 years. – bar some type of remittance system developing like in somalia. I think the fact that the young are relatively mobile has also acted as a… Read more »
The Brazilians have been buying in Orlando in large numbers for a while now, they have been buying off Irish ‘investors’ who are bailing, amongst others. I’m not sure if it is about protecting wealth though.
David – I think the capital is long gone – at least that owned by mobile and savvy Citizens – our Banks are totally proppped up by ECB money – another reason why they want to extract as much as possible from us. There is , in my opinion , a curious but simple phenomenon at play here regarding emigration. Whilst Young potentially productive Irish people are leaving , thier places are being taken by equally young productive Eastern Europeans who are quite happy to work for less because the Euros they send home have several times the purchasing power… Read more »
I found this in todays independent. It makes you wonder really what planet our Govt are on.
“two German magazines reported at the weekend that Greece would receive the next payment despite missing its targets because euro zone governments were too afraid of the “domino effect” if Athens were forced out of the currency area.”
Is Stiglitz on the Kilkenomics speaker list?
NOBEL prize-winning economist Professor Joseph Stiglitz called for Ireland to be given a break on its crippling bank debts and said it was “very wrong” that they had been “forced” on the country in the first place.
His comments to the Irish Independent came after a Dublin speech where he railed against the EU‘s austerity drive and insisted Europe must radically change if the financial crisis was to be ease.
http://www.independent.ie/business/irish/nobel-prize-economist-joseph-stiglitz-urges-deal-on-our-bank-debt-3244673.html
Tony (Continuing our discussion from previoue article) The debt tsunami was not created by politicians; it was created by irresponsible private financial institutions. You should know this. The role played by politicians was to deregulate private debt creation and give carte blanche to banks etc. The destruction of the global economy was only indirectly caused by governments — in believing the bankers would behave responsibly in a deregulated market. They didn’t; they still don’t; and they never will. The expansion of the money supply and sovereign debt today is not being managed by governments or politicians; it is being managed… Read more »
So what we are face with is the debris from a predatory capitalism run amok. What is particularly concerning in my opinion is that it appears that the controllers of this predatory capitalism have landed themselves in a maze and are to quote Hobsbawm ‘they are all like a blind man trying to get out of a maze by tapping the walls with different kinds of sticks in the hope of finding the way out.’ The thing is the controllers running thier system what the article describes above appear to be losing their marbles in the maze of their absurd… Read more »
Catalan Separatist Vote Scheduled for November 25 Oct. 1 (LPAC)–Artur Mas, the president of Spain’s Catalonia region, today signed a decree calling for regional elections on Nov. 25, including a referendum on Catalan “sovereignty.” He told the press that recent attempts to intimidate people against proceeding with the referendum would fail. The state “cannot use weapons” to stop a sovereignty process if it is backed by a broad majority, he said, adding: “The world is watching Spain.” Mas made it clear that this initiative conforms precisely to Britain’s fascist {Europe of the Regions} policy: an independent Catalonia would not quit… Read more »
If we threatehn to leave the EU, then this will force the cat amongst the pigeons with respect to this entire scheme of debt sharing, socialism for bankers, etc…
At the root of the problem – the failure to allow debt default, and a ridiculous interst regime that is subsidising financial asset speculation.
Be careful with pensions. The total amount of ‘public sector pension burden’ (or any pension for that matter) is an actuarial figure based on the longevity of the population. It is a total capital sum. Unfortunately that is a stupid way of doing things, because pensions are always a current production distribution problem. So what you need to find out is what the annual spend on pensions will be, which of course has to be covered by taxation or excess savings so that there is real output for the pensions to buy. That’s the key number – what is the… Read more »
All of this matters not a hill of beans. Food, Water and Security are the 3 big issues of the next 12 months. Food prices are going to rise significantly in the next year driven by speculation and climate change. Water scarcity is only down the road driven by inefficient infrastructure and surging demand. Mortgage defaults and a rise in homelessness will impact that third aspect of the real crisis to face us. We’re concentrating too much on the politics and debt issues and not on the realities. Most people couldn’t survive a wet week without low cost, imported and… Read more »
Some real world figures
My Restaurant 3rd week sept 2008 turnover 23,000 staff 20 same week 2009 t/o 18,000 staff 18 2010 t/o 12,000 staff 14 2011 t/o 9000 staff 11 2012 t/o 6500 staff 9
Oct 2 2012 closed down
[ According to the report: “Accrued pension entitlements of public servants are a significant liability of the state. At end December 2009, a total of €116 billion had accrued in respect of occupational pensions payable to public servants. Those liabilities represent the estimated present value of the cash payments that fall to be met over the next 60 years in respect of pensions earned at December 31, 2009.” ] There is something complete ballistic about the trajectory of the institutional state in this country. It is just plain mad. The state simply has too much power over the economy. The… Read more »
David, Great article and analysis, IMHO. It might seem pessimistic, but history suggests that things only change when a substantial chunk of the middle class cannot afford to eat. Ireland is not there yet. “Ireland is just unusual. In most countries, first the capital flees the sinking ship, followed by the people. In Ireland, the people flee first” True that. Maybe today for different reasons. The figures for younger people should be frightening. Always thought that if one has brains and a bit of initiative and creative flair, Ireland is not really the place to be. Opinions vary, but the… Read more »
[
Countries like Ireland will have to default, renegotiate, repudiate, whatever you like to call it.
]
But if we explored any of these options we would no longer be at the heart of the gigantic scam that the EU is becomming.
The generation that are settled with no or very little mortgage or other outstanding loans and so are comfortable mentioned in an earlier article. I wonder what the statistics are on this group with adult children, are unemployed but still very employable in a different country. How long are they willing to play golf and do all sort of hobbies that they always wanted to do but never got around to doing when they were raising their children? However, there will be a time soon when boredom kicks in. They know that they are very experienced and skilled in their… Read more »
Here is a video of influential neocon Patrick Clawson openly discussing how America can be drawn into a war with Iran and the “necessity” of initiating a false flag event to ensure this happens. He openly discusses the previous use of false flag events by the American government. He is a member of The Washington Institute foe Near East Studies one of whose founding members is Paul Wolfovitz, who was very close to Bush. This is beyond scary and is crystal clear
http://www.youtube.com/watch?v=PfoaLbbAix0&feature=youtu.be
But surely capital flight not taken place in the preceding 4 years???
Numbers cited in article merely reflect the reality on the ground, I am amazed there still is a ‘high street’, plus often wonder why government ministers so often talk about tough budgets, I can’t think of a single worse thing for consumer confidence. They are literally killing off business with their idle words.
[…] (“The numbers that continue to damn us“) […]
Good morning This Country is Bankrupt,their is no money ,only debt. We cannot afford all this debt,therefore like any bankrupt company you either do a deal with creditors or default entirely. Government is clearly incompetent and in the pay of Bankers,venture capitalists, Pension Fund Managers, and the many Corporations ran by the few and profiting from the many. No matter how many posts are put up regarding solving this crisis,they are ,although excellent reading and posted by people who are passionate,..irrelevant and that includes me too. As I said,Government does not care about this State’s Population,therefore you must take matters… Read more »
Just heard on Newstalk news report that it is now officially easier to access a small business loan in Greece than it is in Ireland!!
Hi David Yes, the figures are impossible and everyone here has known that for at least three years, as you know yourself. As I’ve mentioned here before, I don’t anticipate collecting much from my ‘Rolls Royce’ pension and I’m not in any hurry to get there either. As you say, if we weren’t in the Euro inflation could cut PS wages down to size, and most other people’s along with them. In Hudson’s view the idea in order to squeeze private sector wages is to start on the PS first. I’m not too happy about the middle classes offshoring their… Read more »
2013 Budget is going to be vicious, make no mistake about it! the only thing worse than the actual budget is the next two and a half months of fishing excercises by our illustrious government, and the stress that this practice will cause to the general population. If you take regard of nothing else! just think of this as you try to convince yourself that our Public Trustee’s have the best interests of the citizens of Ireland at heart. These goombeen politicians will heap more and more worry on hundreds of thousands of Irish citizens who are already at the… Read more »
This government is just going through the motions and with there budget looming things are about to get a lot worse.
The time for talking must surely be over.
Think about this this government want to help new company’s start up but all the while they let existing company’s go under, you can set up company after company be they small or large but if people are not spending due to there lack of money surely you are flogging a dead horse
Excellent article. Sorry for not saying this earlier.
I liked this article in the SBP because it continues the recent trend of humanising economics in real terms. Thanks for that. Sorry gizzy to hear about the resteraunt I am sure from your post that it was the external factors were responsible for shutting it down. It really beggars belief that we have a crowd in the government who are still focused on the status quo and still taking orders from Europe rather than demand equality and parity of esteem and start to negotiate like equals. It’s clear they want to be able to say ‘look we did it… Read more »
A recent survey found that over 50% of Irish SME’s are on the edge and in danger of going bust.The Gombeen’s in Government have never run a business and managed profit and cash flow – they think there is always more money to be had – your money – from taxes and charges etc.Ray McSharry said as much in the Sindo this w/e by stating that He found increeasing income taxes had no effect on growth ( hah !).Politicians are a breed unto themselves.Until We , the Irish people who are not part of the Public Sector are prepared to… Read more »
Minister Cromwell I wonder if we all can be able to enjoy the current freedom as we do on this site in a years time or will events constrain our thoughts and ideas and banish us to a Dungeon of no entity .The pen of Ministerial Politics has no boundry and the power it plays is mortal to say the least . What will bind us and who of the us do we see our allegiances to and who leads .When logic fails so do all foundations .So what will be the colour of the new redemption from deep below… Read more »
Evening all Thanks for the comments A.I.B loses 1.4 Billion euro in first 6 months of this year and gets a Billion of our money yesterday to pay bondholders failed investment in a Failed Bank and a failing Government puts failed polices ahead of its suffering people. I suggest we start giving the people in power ulcers instead of getting them. Hope you and yours are okay today Gizzy,your doing great and a inspiration to many. When things were really tough for me,I remember asking somebody “why me,why is this happening to me”..?.. The guy thought for a second and… Read more »
We have been taken for fools our pensions have been destroyed and we have been played. Look at the shortfall in the pension pot,how long will it take for some of the pension fund company’s go bang how long will it be before this government runs out of money,the whole system used to run this country is built on sand and its sinking fast remember the governments telling you you should have your own pension you may as well play the slots. The serious over haul we where promised by this government is a joke do you trust them,they have… Read more »
Hello. Greetings from Birmingham which is gaining some of the ‘brain drain’ from Ireland’s current crisis: “A number of young graduates are coming to Birmingham to work as nurses, occupational therapists and lawyers, and Manchester is also popular,” Jennie McShannon, chief executive of the Federation of Irish Societies. ‘Lure Britannia’ Irish Times http://bit.ly/PLcCUI It’s all very sad as the generation of 50s Irish are buried, new arrivals in Digbeth repeat the cycle followed by my parents. Alarmingly, some suggest this may be a structural change in the Irish economy which will not be unwound: ‘Feeder Nation’ risk for Ireland –… Read more »
Ireland as we know it is being dismantled in front of your very eyes. All over Ireland towns are being destroyed by county councles,forcing shoppers to shop in retail parks instead of towns ,the plan is like a death wish first they drive people out by parking fines and as we’ll they hammer shop keepers with high rates they can’t pay. Than they reduce the Garda so crime pays. Than they cut the HSE so don’t get sick. What about school to many in the class? What’s coming next? Any young person living at home who can’t get a job… Read more »
David…..I note. “The first is the data on emigration, which continues relentlessly. Official figures show that the number of people who emigrated from Ireland soared to 87,000 over the last year. More than half of those who left the country in the 12 months up to April were Irish, and almost 36,000 were under the age of 25.” This is pretty funny. In 2006 I earned EUR220,000 in foreign income off my own bat. In 06/07 I paid EUR110,000 in income taxes in Ireland. However, because I was attacked by the criminals in the family courts and my company was… Read more »
Taxes 2012?
PICKPOCKETS, it is larceny, period!
Pickpocketing is one of the oldest and most widespread crimes in the world. The appeal is its relative safety: A skilled pickpocket can make off with just as much money as an armed robber, without much danger of confrontation or risk of being identified in a line-up. By the time the victim realizes what’s happened, the pickpocket is long gone.
RETIRED!
Hi peter Andrew Nolan. My heart is breaking for you. Where are you from? Don’t waste your time with your proof about Irish politicians knowledge etc of wrongdoing. Take it from this Irishman if you were ever to expose such information which no doubt is in Ireland national interest it is impossible to describe in words how intensely despised you would be for ‘helping’ the locals. Know wfy? Every asshole Irishman would have to admit three things. 1) what s scrounging bastard he is in the way he makes his living 2) what a coward he really is for not… Read more »
Hi Tomy brogan, I am s goldbugs ad you know. I am anticipating a retracement in gold shortly though. Here is as good an account I have read for the reason JFK lost his head and life in the deely plaza; 12. JOHN F. KENNEDY The Federal Reserve completed their plan for the economic subjugation of the American people in 1964, one year after the assassination of President John F. Kennedy. Silver coin and certificates were still in general use; money that came from the government and was used free of interest. Since the money was something of value and… Read more »
The Fed will write $1 trillion or more in checks over the next twelve months, the ECB will write the same,” Bill Gross, the founder and co-chief investment officer of Pimco, the world’s biggest bond funds, wrote via Twitter late on Sunday. “(There is) reflation ahead. (It) will create asset bubbles but little growth.”
Bond bubble is made and baked. It will be over cooked with the QE to infinity. 2 trillion to start as above.
Hyperinflation is on its way as soon as people say no to the euro and the US dollar.
I know at times like this people talk of end times but my father who’s over 80 said to me the other day i feel like im back at the beginning of world war 2.He has the same vibes and remembers his mother saying these tough times cant last and then dad said the war started. I feel myself people should be stocking up as if this happens it will be quick.
Your opening question suggests that you are a self absorbed little boy. No-one cares if you are a voyeur or a lady boy or a transvestite and nor should they but it is interesting that you mention voyeurism as that is what I have always had you down as … a right wing limp wristed idealist getting his own back on boys who once made him feel small. It’s like looking through a sheet of glass. You know it, I know it and so do others “I know it’s not for everyone … but it makes for essential reading” A… Read more »
Hi JACKW.
Set aside is nuts there is no doubt about it. It isn’t a conspiracy though to drive up commodity prices. It is a policy to protect farming incomes in Europe. The other part to set aside is that Europe wants to replace dear European food with cheaper African and south American imports. That docent get mentioned much.
When I read your column David,I have to point out that you are continually stating and leading us all to the obvious conclusion of negativity which then spawns many of the Armageddonesque narratives from the comments above (myself as well stands accused). If it is not Obama working for the drug pusher Queen Elizabeth, it’ll be FG/Lab as the Civil Servants of Brussels that’ll be the end of us all – let’s hope for a ring side seat to watch the action! The heart felt comments of personal experience are for me the real compass of what is happening. Now,… Read more »
Yet again London, the center of the financial Empire, with every single scandal originating there. Lehmann, MF Global, LIBOR, JPMC … ———– Deutsche Bank Trader and Others Charged with Insider Trading Oct. 2, 2012 (EIRNS)–Four men have been charged by Britain’s Financial Services Authority (FSA) with “conspiracy to insider deal” between Nov. 1st, 2006, and March 23rd, 2010. Martyn Dodgson, a senior corporate broker and former Deutsche Bank employee, and Andrew Hind, Benjamin Anderson, and Iraj Parvizi have been released on bail, pending hearings at the Westminster Magistrates Court on October 19, 2012. The charges arise out of Operation Tabernula,… Read more »
Hi PeterAndrewNolan,
Your points are very interesting and insightful. The trouble is that you present your arguments here in a manner which would lead one to believe you are a raving lunatic. Calm down and be polite and concise. I am very interested to read more posts from you. What books have you written and have you a website for your business association?
Regards,
Michael.
London’s {Economist} Sees Steinbrück Backing Ring Fencing Bank Separation Oct. 2, 2012 (EIRNS)–The London-based financial weekly has the following assessment on the “bank separation” plan of Peer Steinbrück, the German Social Democrats’ most likely candidate for Chancellor in the next national elections in 2013. “Mr. Steinbrück favors a holding-company structure along the lines suggested by Britain’s Independent Commission on Banking (known as the Vickers Commission) and by a paper written in 2009 for the OECD, a think-tank of mostly rich countries. A non operating holding company would invest capital in separate subsidiaries, one specializing in investment banking, the other in… Read more »
I’m a firm believer that the financial outcomes lag activity in a business or economy by about two years. What are we looking at in two years if you project forward. This years figures really do not tell the real story Peter Andrew Nolan I have regularly commented here that the professionals in this country are up to their necks in the destructionof this country. They advised everybody. I am sorry for your situation but the law here operates in its own world and is so wound tightly around how everything here is done. The country is collapsing and PWC… Read more »
On my way to Northern Territories While some of you know I am in Donegal, which already is way up NW Ireland the title might be reason for confusion. I am off to Darwin, which is the capital city of Australia’s Northern Territory. :) It was a pleasure exchanging ideas and thoughts with you Ladies and Gentlemen. I hope that those who stay behind in Ireland will find a better future, but personally, I doubted this very much so, hence my move, like so many others. Last but not least, as much as I loved Donegal, I am kinda tired… Read more »
Hi Bonbon,
Re: The failure of Enron; did you not hear that Jamie Oliver is now offering courses in accountancy?
“Only Jamie Oliver cooks the books better”
Enjoy,
Michael.
The rewards meted out to the Public Trustee’s who destroyed the Irish economy and more importantly as a result, continue to destroy the moral and social fabric of our little country… Annual Pensions Bertie Ahern €152,331.66 Brian Cowan €151,061.77 Mary Harney €129,805.67 Dermot Ahern €119,177.67 John O’Donoghue €119,177.67 Noel Dempsey €119,177.67 Sean Treacy €119,177.67 Joe Walsh €119,177.67 Mary O’Rourke €117,981.01 Frank Fahey €113,341.35 It is important to be reminded of these specimen examples regularly, it is also important to remember that the incumbent (bent)government are feathering their individual nests to the same level hence the reason why they have no… Read more »