The headline in yesterday’s Irish Independent was eye-catching. It said that half of all Irish businesses are on the verge of collapse, according to stress tests carried out by business and credit risk company Vision-net.
Companies in the hospitality, construction, IT, motor, and wholesale and retail sectors are least likely to survive, Vision-net said. Added to this is the news that five companies went bust every day this month.
This news came on the day that the central bank pronounced that lending to the private sector continues to slide. On an annual basis, lending fell by 3.7 per cent, with mortgage lending down by 2.2 per cent and lending for consumption and other purposes down by 7.9 per cent in June.
Credit for companies also declined, down by 2.9 per cent on an annual basis. Loans to companies fell by €399 million during June, following a decrease of €338 million in May.
We also have new data showing a complete collapse in retail sales last month, more evidence that houses prices continue to fall, news that long-term unemployment has reached 200,000 and four out of every ten people on the dole have been out of a job for over a year.
The picture painted by the most recent data, is one of a domestic economy that is grinding to a standstill. Far from recovering, this evidence screams that the domestic economy is getting weaker. People and companies aren’t borrowing, we are not spending and there are debt and cash flow problems emerging everywhere in the local market while long-term unemployment, the most significant indicator for absent demand, continues to rise.
Doubtless exports are doing well, but this is coming from the multi-national sector, which is part of the global supply chain and hardly indicative of unique competitive gains in Ireland. The big change in Irish competitiveness has come from the fall in the Euro against our major trading partners. As Ireland does 62% of all its trade outside the Eurozone, we benefit more than most from Euro weakness.
But still the weakness in the local market predominates and the better perfomance in exports is not dragging the local economy upwards. In fact it is decoupling from the local economy. The hope would be that the greater production would be leading to increased demand from the multinationals for products that Irish companies can sell them. But it looks like they are sourcing their inputs abroad, implying that the positive effects their hyper-production might be limited to wages of those directly employed in the sector, which is not that high at just over 100,000.
If this trend continues, Ireland will become an economy where there is a highly profitable multinational sector, a large public sector and a smaller and smaller private domestic economy. The private sector will be turned into the debt servicing agency – a type of extractive industry where rent will be extracted to pay for the public sector but where profitability will be tampered by high local costs and an exchange rate, which although now weakened, is still far to strong for our domestic conditions.
If you think the weakened Euro reflects conditions here, just look at the data released by the EU on unemployment yesterday which shows the lowest unemployment rates were recorded in Austria (4.5%), the Netherlands (5.1%), Germany and Luxembourg (both 5.4%), while Ireland’s rate was almost three times that of the core; Ireland’s rate was 14.8%. The Euro is still far too strong for us.
But maybe that’s the point.
In the course of the next few years, it is likely that the mandarins and the political elite in Ireland and elsewhere will use the current crisis in the Euro to push for greater integration. Political integration means the end of the nation state – make no bones about it. That’s what it means. With the end of the nation state comes the end of the nations state’s ability to engineer its own policies. The first thing that would go in Ireland is our corporation tax. With this gone, the Americans would be out the door like a flash and what does Ireland do then?
For a few years, the local business sector will be squeezed by high costs, maintained by the costs of a large public sector, the legacy of high debts and an exchange rate that offers no support to local exporters. What happens then?
Maybe we settle into the role of an inoffensive group of 5 million odd people on the western fringes of Europe, kept in a sort of concubine existence by some wealthy neighbours, living on Euro handouts which is in turn are used to buy imports made in the productive core of Europe.
Maybe that’s the essence of the coming European deal. Countries like Spain, Ireland, Portugal, Greece, most of Italy, maybe even the new entrants like sunny Croatia and some other Balkan states, see their domestic economic marrow hollowed out in this crisis and credit crunch, but see their public sectors expand, so there are enough sated appetites to keep everything ticking over.
In such an environment, the fiscal compact is delivered without affecting public sector numbers but by wage freezes, higher taxes and off-shoring of the bits of manufacturing that the core doesn’t want to do.
The ECB — as is becoming clearer – will buy up all the debts, opening its balance sheet and operating more like the Federal Reserve. This goes against every monetary value that the Federal Republic of Germany was built on. Why will the more dogmatic Germans, Dutch and Finns accept the deal unless it is part of a grand bargain?
Rather than the periphery acting as a threat to the core via lower costs, it will be allowed to emasculate itself via higher costs and ongoing credit rationing, reinforcing the industrial dominance of the core.
Maybe this is just a bit of sun getting to your columnist, but sometimes events that appear random and unfathomable – like why a country such as Ireland would actively allow its private sector grind to a halt – happen for a reason. Maybe that reason is that these events fit into a larger plan, someone else’s larger plan.
Otherwise why do Germany and its creditor friends countenance what is happening right now in Europe? Why would they let their central bank be looted to pay for the debts of the peripheral countries and why would they let all that they hold dear about not printing money go out the window?
I don’t think there is any big plan, it is all just chaos caused by fat lazy EU citizens electing populist politicians who don’t know what, or care about, what they are doing just to get everything they want easy. Where are the Statesmen with morals and ideals? It cannot last much longer.
Nobody even mentions the word society any more, it just all about economies. It’s pure greed, sloth and ignorance.
There are two reasons you ask the questions which to me are so stupid at the end of this article is because you don’t have the capacity to view what’s going on in the world from a political perspective AND because it is obvious that you STILL haven’t read the two books by John Perkins titled Confessions of an Economic Hitman and Hoodwinked. The grand plan and ‘reason’ you refer to in your questions is EXPLAINED IN DETAIL in those two publications.
If you bother to read those books you might begin to understand how much nonsense this post is.
Unfortunate characterisation of the public service, lacking in nuance, many within the service do essential work for low pay, pay taxes, levies and have seen their salaries cut, makes life very stressful as it was already tough enough. They don’t get speaking fees on what it is like to be a guard at a road taffic accident, a nurse comforting the bereaved, cleaning staff wiping blood and tears from the hospital floor, they don’t appear on the Late, Late, their story is rarely told. Private sector as debt servicing is only partly there, private sector by which I mean banks,… Read more »
“so there are enough sated appetites to keep everything ticking over” That sums up the Public (Closed) Sector succinctly. We have more than enough gorging at the trough in who’s interests it is to maintain the status quo. Why change anything if it means starving the elites, the mandarins and their butlers? These self interest traitors will play this to the end rather than suffer any personal deprivation. Their mindset is NO PAY CUTS. Let the peasants work harder, tax them more, tax their daily bread and water. Tax the air they breath. This select scum are convinced there would… Read more »
I am waiting for my number and for the charismatic fella that’ll walk the earth freely -No. 666- and carry us forward to the next boom and then bang bang bang Judgement Day… :). Might get a ring-side seat! David, I wonder are we not making the mistake of relying on the tunnel vision of the many philosophies we always hold dear to ourselves and in the process see no more options. After all, did everyone think they could be a version of what Germany is today and we’d have 27 of them sitting side by side? That’s just plain… Read more »
David as someone close to my age you should be able to remember the 80s. As a child / young adult of parents who ran a small business during that period, the private sector was squeezed within an inch of its life back then, similar to today so I doubt it has anything to do with Europe. Also as pointed out by Lord Jimbo, the people who helped keep our business afloat was the public sector workers. In addition the one area that the government has been adamant is the low corporation tax. They know if that gets messed with… Read more »
The first glimmer of understanding – of enlightenment, as sherlock holmes put it – “How often have I said to you that when you have eliminated the impossible, whatever remains, however improbable, must be the truth?” Mainstream economists like David have denied the obvious for so long but now the sheer weight of evidence – of things happening that were forecast by the crazies ten, twenty and more years ago now coming to pass mean that at last they must confront the evidence. There is a big plan and everything else to just part of it. Witness Draghi – at… Read more »
Europe is run by unelected civil servants. I wonder are the copying the Irish model of government ?.
Look how well that turned out.
‘The first glimmer of understanding — of enlightenment, as sherlock holmes put it — “How often have I said to you that when you have eliminated the impossible, whatever remains, however improbable, must be the truth?”’
Please Please David observe the wisdom in the above passage by another poster and read Confessions of an Economic Hitman and Hoodwinked by John Perkins. Please Please David!
David, I’ve just spent the summer researching the amazing Mondragon Co-op of the Basque country..Without any of the leftie rhetoric, its totally outside the free market and trades with the world on its terms. It relies on the natural industrious nature of Basque people, everything down to the supermarkets is collectively owned and they manufacture. The profit pays pensions and dividends to the ‘members’ and all the money and profits is kept within the basque country and in their banks. instead us irish constantly look out for some knight in shining armour, in the shape of global capital to come… Read more »
David, you print a very gloomy picture indeed. I agree with what you say. I see fit to add some observations of my own. You describe a country with a destroyed private sector a huge hungry public sector and a “foreign” investment sector which is insulated/isolated. Yes, that is the picture. Of course the big question is, “What happens next?” The current national crisis has different dimensions to it, temporal, social, monetary, justice, governance, temporal and personal. To map a future from this very “bad place” we are now, we must divine a tau line (a multi-dimensional path) though the… Read more »
I just wonder how long more time will it take, and how many more disasters, and at what stage in subjugation and emasculation of the citizens, will the penny finally drop and people realise the simple fact that democracy, as a political experiment, had utterly failed. The political system described as being democratic is a flawed and dysfunctional system. Inherent in that system, a continuation of the feudal hierarchical power structures, is the slow but sure concentration of authoritarian rule from the few elites at the top. NO economic policy can work, long term, if the very political system itself… Read more »
Hi David, I don’t think it’s part of a larger plan. I don’t think politicians are that visionary. Certainly, the ones we elect here in Ireland are not. They just muddle through looking for advantage, mostly just being swept along by waves of economic, technological and cultural change. There was a time that the very powerful could steer society to some extent but I wonder if that’s true anymore. The change is just too pervasive and too relentless. Sometimes the politicians make impacts here and there and shout loudly if they think there are votes in it. Often they are… Read more »
The plan was laid out years ago at Jekyll Island (The Creature from Jekyll Island – Griffin) The Federal Reserve System is now rolled out worldwide bar a few countries. Funnily enough those countries are being “democratised” one by one. Recently Iraq, Libya…Syria and Iran next. We are down to a handful. The banks that control the Fed are the same banks that own the IMF. No degree in economics needed, just read Perkins, Griffin, visit http://www.positivemoney.org.uk/ etc.
I’m afraid you people in the Republic have it all wrong! You will keep concentrating on the unemployment, the appalling political leadership, the collapsing businesses and the Banks. Here in the UK we now view it all differently. We’ve taken a view of our situation like the Romans did all those years ago. The ‘solution to the problem(s) is Bread and Circuses. So we have the Olympics. The resounding successes of this can be judged by the emptyness of London Town, The regular breakdowns of the Underground, the boasting confidence of those issuing tickets (like the New Zealanders outside the… Read more »
Does this government know what’s it’s doing?
I believe that when the government comes out with figures saying theirs a 10 percent drop in retail sales last year it’s all lies they can’t be trusted to tell the real truth
Retail like the domistic have all seen savage drops in consumer spending and the drop is far more the ten per cent so why lie, because telling the truth would be to admit that this government is losing.
I’m afraid you people in the Republic have it all wrong! You will keep concentrating on the unemployment, the appalling political leadership, the collapsing businesses and the Banks. Here in the UK we now view it all differently. We’ve taken a view of our situation like the Romans did all those years ago. The ‘solution’ to the problem(s) is Bread and Circuses. So we have the Olympics. The resounding successes of this can be judged by the emptiness of London Town, The regular breakdowns of the Underground, the boasting confidence of those issuing tickets (like the New Zealanders outside the… Read more »
Interesting comments about public/private sectors I think that the manner in which both the private and public sector do business in Ireland needs to be looked at more… For example on a personal note I dread having to order a new piece of equipment at work. The reason for this is that it is practically impossible to source items in the Irish market. when it is possible to actually find what I’m looking for the costs are prohibitive for buying in Ireland. I have recently attempted to source a pretty common piece of equipment. I could not find one supplier… Read more »
Well Done David Excellent article….and No,the sun is not getting to you….their is a larger grand plan and appears to have been for some time now. Their is no solution and it seems clear now the picture you paint,debt is the 21st version of slavery. A continual crisis is handy as it keeps wages down and keeps people “waiting” in a state of limbo,hence lack of spending etc etc….. This is a Banking Crisis and the dawn of a new beginning,for the worst for most.Like the fabled “War on terror”it will/is reducing standards of living, make people even more like… Read more »
Look, the art of engineering, planning, you name it, that goes on in corporations – combined with the ability to mine and analyze terra and yollabytes of data about all around us will drive optimizing solutions that look very similar and lead one to the suspicion that one or two guys are running the whole shop. These companies use the best minds in these kinds of activities and they will tend to arrive at the same solutions…outsourcing/ transfer pricing/ centralizing capital/ optimal skill sourcing/ you name it. Now, this means that your average dumb dumb public body made up of… Read more »
David I’ve read this article and many of your comments over the years and you and a few others forecasted the manufactured property bubble well ahead of the pack. A lot of the debate is shoulda, coulda woulda done this that or something else. We have a national culture of “ah jasus but”. We’re a small Island on the edge of Europe. We have developed a business and political culture of cronyism and nepotism which has led the State to the eve of financial destruction. This cronyism and nepotism is clear to most Citizens who have a brain between their… Read more »
The periphery does not need to be or stay emasculated, on the national as well as as on the European level. Every country has a periphery, every city has a periphery. Sure, many of them are emasculated, but not all. Some have the energy and vision and gumption to find their path to success.
I don’t know about anyone else but I am really sick of this public/private argument. It nonsense. Let’s say you force every single public sector worker to accept the same pay and conditions as the private sector workers you would wind up for example the headbof The esb on about 2m PA and tow or thre others in financsl control etc with similar pay and everyone els on min wage. Will that stop our republic sliming into financial tyranny? No. Will it solve the unemployment problem? No. Will it prevent thd internal GDP economy from imploding?. No. Stop the nonsense.… Read more »
As per Chris Hedges “The greatest crimes of human history are made possible by the most colorless human beings. They are the careerists. The bureaucrats. The cynics. They do the little chores that make vast, complicated systems of exploitation and death a reality. They collect and read the personal data gathered on tens of millions of us by the security and surveillance state. They keep the accounts of ExxonMobil, BP and Goldman Sachs. They build or pilot aerial drones. They work in corporate advertising and public relations. They issue the forms. They process the papers. They deny food stamps to… Read more »
Great stuff The stats contained in this article would bring a tear to a glass eye. It is truly eye watering stuff and does not mince words. It is a far cry from some of the idiotic ramblings of dishonest journos who try to convince the nation that we are the good boys in the class and that we deserve the Germans and the Finns to pass us the sweetie bag for our good behaviour. This article proves that what some of our esteemed hacks write is plain bullshit We are in deep denial We have a minister for health… Read more »
The Article by DC is simply outstanding. It’s the best I have read from four years reading this blog. To put the article in financial context let me enlighten all of you. After Anglo failed you would imagine that the people involved would never be given a job again. Such naivety! David drumm former CEO is gainfully employed in the US on another monster salary and can anyone explain why after he fucked up so royally in Anglo? Brian Goggin former CEO of BOI who was there when all the dodgy loans were given out and subsequently pensioner off has… Read more »
The Irish brothers are angry today. Before it gets out of hand I think it time to consult the bard
Ye see yon birkie, ca’d a lord,
Wha struts, an’ stares, an’ a’ that;
Tho’ hundreds worship at his word,
He’s but a coof for a’ that:
For a’ that, an’ a’ that,
His ribband, star, an’ a’ that:
The man o’ independent mind
He looks an’ laughs at a’ that.
DMcW is doing a forecast based on trends, statistics. In the real world we know better. The future is decided otherwise.
I posted here breakthrough action for major banking changes, decisively placed on the table by London.
Here is a clip from German leading press, in English, to get the message across
http://www.spiegel.de/international/business/it-s-time-to-break-up-massive-banks-a-847658.html
This is a very clear message from the Editor, Georg Mascolo in 2 languages. Maybe a broadside on Geithner?
This is what is coming, not seen in tea-leaves, trends, or statistics. After all statistically speaking there should be no economists, only ecologists.
EIR to Draghi: “Pentiti”! Draghi: “No!” ECB President Mario Draghi lied today answering a EIR question, whether he “should not join Sandy Weill and say ‘we made a mistake, we should go back to a full separation between commercial and investment banks,'” since Draghi “personally abolished banking separation in Italy with legislation that carries” his name. Draghi answered that there had been no banking separation in Italy, but separation between banks which could make short-term versus long-term lending. “So, that is the only thing we abolished and the advantage today is that we have banks that can do both.” Answering… Read more »
How many financial contracts are actually fraudulend, hence null and void? Munich Law Firm Sees Sound Basis for Legal Charges Against LIBOR Manipulators Munich-based law firm Roessner contradicts the mainstream media “assessment” that legal challenges to the banks of the LIBOR cartel allegedly have poor chances, because plaintiffs would have to prove that they were defrauded concretely, and by exactly how much — which most media (and bank lawyers) claim is virtually impossible. The Roessner team argues that plaintiffs, obviously, would never have signed contracts with any of the banks, had they had the slightest suspicion that interest rates could… Read more »
Mr. Draghi, author of the Italian universal banks, where is your nuclear bazooka? Draghi Promises, But Fails To Deliver on Ultimate Bailout Now The U.S. Federal Markets Open Committee (FOMC) on Wednesday, and the European Central Bank (ECB) meeting on Thursday came and went, without the committment to the immediate, unlimited, opening wide of the hyperinflationary spigot demanded by insane financiers to keep their ficticious paper afloat. Draghi could not announce anything but that he has ordered plans to be drawn up for a nuclear bazooka, because of continuing, growing German opposition to a re-run of Weimar 1923 hyperinflation. One… Read more »
Nonsense – the Irish economy is not grinding to a halt – the Purchasing Managers Index for Manufacturing is surging since April, as tweeted by Constantine Gurdiev during the week.
Keep it real David, don’t always be such a drama queen.
Data is here: http://trueeconomics.blogspot.ie/2012/08/282012-one-hell-of-chart.html
Debt and Unemployment: Today, almost every country in the world has such huge debts that governments are now forced to either borrow more, spend less, or print more to meet their budgets. Realistically, none of these options are sustainable. Printing money devalues the currency, meaning you can buy less with it. Also, since it enters the economy as a debt, it is subject to interest. Since the money to pay this interest doesn’t even exist, it ultimately requires another debt – and more interest! Public spending cuts ultimately means job cuts, creating further unemployment, while private companies continually replace staff… Read more »
Morning
Thanks for all the comments. Just getting to read them now. Interesting take on things. BTW this was not a public v private article, that’s not my agenda. I am simply increasingly worried about the passivity of the country in the face of big trends which we can all see emerging.
Best
David
It’s worth bearing in mind that the Rothchilds spend half their day deleting money. Once a loan is repaid to a bank the money no longer exists. This is a very important point and it explains why there is less money during a recession. As David points out in the article people are not borrowing from banks. Consequently all other measures of the economy will be negative since money, the lifeblood of the economy, comes from bank loans. The only way to run an economy smoothly under this system of money creation/destruction is for us to collectively take on more… Read more »
How does Pat Hickie from the OCI get away with consistently garbage performances in the Olympics ? A small fortune has been spent on a small no of so called athletes. No excuses.Just as bad as the soccer tea. Most nations don’t even bother sending a boxing team.
Hi, The Idea tha money is created by taking on debt from banks is only partly true. In America paper dollars come into being when the us government borrow them into existence from the fed by selling bonds to the fed on which interest is paid ! However the us coin in circulation is government issued interest free currency which is the way paper money was created in the US up until 1913 when this function was given to the fed by the president who later realised his mistake and admitted he had inadvertently destroyed his country for giving over… Read more »
Here is a passage from a sole opponent to the south sea co and bubble delivered in the house of commons as long ago as the early 1700’s. Seems to me his latter day incarnation is the floppy haired one who must be obeyed. ‘Mr. Walpole was almost the only statesman in the house who spoke out boldly against it. He warned them, in eloquent and solemn language, of the evils that would ensue. It countenanced, he said, “the dangerous practice of stock-jobbing, and would divert the genius of the nation from trade and industry. It would hold out a… Read more »
DMcW is worried about rampant passivity in Eire, and rightly so. Here is the Icelandic spirit in contrast : Iceland Parliamentarians Introduce Bill To Break Up Speculative Banks; Cite Glass-Steagall Ãlfeiður Ingadóttir, a member of the Parliament of Iceland, has submitted a motion to Parliament to to stop banks from “using state-backed deposits to finance risky investments,” reported Bloomberg/Business today in a lengthy article that recaps the collapse of the speculative bubble in Iceland in 2007. Citing the Glass-Steagall precedent, Ingadóttir says, “Lawmakers in all parties agree on the necessity of separation. So I’m confident that this will pass later… Read more »
Looking at the passivity and the sweeping changes DMcW cited above, there is a grave danger of “solutions” such as these to be enforced. I think this is why we should all be worried. Here is a Canadian think tank and its 70+ offshoots, including the Open Republic Institute in Ireland : Bare-knuckle capitalism http://www.anphoblacht.com/contents/15523 The cited list of this tank, supported both by neo-liberal Milton Friedman and Austrian School Friedrich von Hayek : – Lower and flatter taxes – Maximum privatisation of government functions and services – Privatisation of public pensions – Commercialisation of the public health care system… Read more »
Mr PAUL it is, you are as deserving of that title as is anyone else, this is a very polite blog even the anonymous are generally polite here, they are mostly are here to learn and contribute their mussing and mostly stay on topic. Sometimes too polite to himself he has a little bit of a feudal Blog here the master must be listened to……‘Seriously’…..Maybe he will throw you 20euro and tell ya to get a good meal too, like the master Quinn apologists were pointing to a “lovely man” I won’t be here much from now on but I… Read more »
Third of graduates plan to emigrate for work
http://tinyurl.com/c93qlax
How things change huh
Fascinating article. In fact it perfectly describes how misleading the entire statistics produced by the ESRI etc.. have become. Albert Eintein’s quotation on measurement describes exactly how state policy (and indeed EU) policy is producing a dysfunctional economic environment. “not everything that can be counted counts….and not everything that counts can be counted”. Our idiot official planners are looking at “grote”. This means GDP growth. During the last General election there was a big excitement in the broadcast media about “growth projections” from the various parties, and how they calculated growth to occur in the future. Of course none of… Read more »
A PLAN ? —YES -it’s Called the EURO / EU The problem with Angela Markel’s earlier insistences of no help until fiscal/banking/further integration was in place, was; -it did not build- it came across as insincere, insane , mad and dangerous “trust” – to steal a little of your writing style (which I have noticed is changing) ‘akin to not supplying the medicine to the dying until they cure themselves’ -it easy to see why this would not be believed or could not be relied upon by nations “trust”. Ireland been the exception -the eternal optimists — believing that because… Read more »
Thsi is getting a tad confusing to say the laest . People who are blogging that the world is run by an elite and that people are victims of corporate greed will condemn a small business and go shop in Tesco for a saving of 50 cents. Ah my head is done in.
Brian Cowen is not ruling out a return to law or politics and Da Bert is doling out advice on leadership
How absurd can it get. For Cod Sake. Get me out of here!
Its the silly season David all politicos are away at the races and such, you need change you holiday plan to fit with the time
But maybe it’s the clam before the storm of the great awakening on the streets
but i doubt it
“best”
Ciarán
u owe some black stuff I will pounce on u for it if you land in my bar
unlikely i would do that i am to reserved i choose my company very cearfully
truth is if you sat beside i might buy u
Hi David, What I think may be happening has got nothing to do with Ireland- we are irrelevant at this stage – what is really important to the core countries are Spain and Italy – these are still very important export markets for the core countries so it’s in the interest of the core to keep them ticking over with monetary transfers. (Remember the poor in the Spain and Italy don’t buy expensive German goods, so they don’t matter to the political and industrial elite of the core countries). So, to me, that is the grand plan. As for Irish… Read more »
“The headline in yesterday’s Irish Independent was eye-catching”
YES DAVID
the media is Jingoistic
if only they just tell us the facts then we might be able to call it NEWS
RT Max Keiser tonight – Pecora commission and a new FDR’s Glass-Steagall needed! HSBC in the crossfire!