I am writing this article from a ‘‘ghost hotel’’ in Leinster.
Rumour has it that the business was recently sold for €1, but the hotel itself is probably in Nama.
It will never be worth what it was built for.
Today, as well as owning a small part of this hotel, I am the only guest in it.
The reason I know this is that, when I asked about the lack of hot water, the very charming hotel manager said that I’d have to run the water for a bit as there was no other hot water being used in the whole hotel.
There were no other guests.
The hotel has more than 90 rooms. This is reality in Ireland, and this reality needs to be defined and accepted.
The reality is that bank lending is falling, prices in most sectors are falling, lending to residential housing is falling and the economy is in the grips of a credit crunch.
People have too much debt and don’t want to borrow, and the banks have too much bad debt and don’t want to lend.
Against this background, the people who run the country make announcements about ‘‘front loading’’ budget cuts as if budget cuts are some sort of clean arithmetic, which has no impact on the economics.
This is not arithmetic, it is economics and, in economics, everything is related.
On paper, arithmetic can look clean and incisive, but in reality it affects jobs and people’s decisions to spend.
It means nights in a ghost hotel and wages for hotel managers, it means Christmas parties and Christmas presents, it means investments in machinery and the difference between some hope and no hope.
Those who best understand the difference between simple arithmetic and complex economics are the financial markets.
Investors want to invest in an economy which has the prospect of growth. If they see that a country is being turned into a large debt-servicing machine, they will pass. If they see that the people who run the state on behalf of the citizens are little more than despised debt collectors for owners of capital, the financial markets will take flight.
The reason for this is that there are always other opportunities and there are always losers in the great game of capitalism. So if new investors see that their fresh money is being used to pay off old investors, they will say thanks, but no thanks.
There are more markets than bond markets.
There are equity or real investors who want to see new companies, new workers and new ideas. They have no interest in a country that will waste money on a bust banking system and squeeze its own citizens.
They realise that countries, like companies, need time to turn themselves around. If you put a gun to a country or a company’s head, it will just fold. We need time.
But the incompetent lads who run this country don’t understand this. They got all macho on us last week and made the big announcement on the budget that was supposed to prove that Ireland could take the ‘‘hard’’ decisions.
And what happened? The market laughed in their faces. Everyone can see through the corny schoolboy language of our regime.
We all know that there is nothing hard about writing a cheque for rich investors in Anglo while at the same time, cutting the health budget for the poorest.
That is not hard. Picking on the poor, while siding with the rich is a sign of weakness, not strength.
Last week, it was not just the average citizen who saw through the haze of incompetence that clouds economic policy in Ireland.
The financial markets saw through it too. In fact, the financial markets and the average citizens are on the same page – both know that if you cut everything now, there might be nothing left to generate the revenue necessary to pay the debts.
Both groups realise that bankrupting the country is not a clever debt strategy. So, rather than buy Irish debt on the back of the announcement, the markets did the opposite and sold.
The spin – written by people who have never worked a day in the financial markets – was that the markets would be impressed by our government’s toughness.
But, of course, the opposite happened. The financial markets took one look at the budget plan and concluded that it would push the Irish economy over the edge.
No investor wants to invest in a country with a death wish. So Irish bond yields moved up again as investors sold Irish bonds and, of course, the sugar daddy that is the European Central Bank had to step in to buy up Irish bonds as the buyer of last resort.
So when the rest of the world is getting on with the process of recovery, we are still at square one and the rest of the world is less and less inclined to prop up this government.
Investors realise that there has been no reform in Ireland; the same cronies are still in power everywhere. Why would you believe that the mentality which built ghost estates and ghost hotels with other people’s money has changed, if the same people are in power?
Why would you believe that your money won’t also be wasted?
So when the governing insiders tell a prospective investor not to worry because the plan is ‘‘screw the people and look after the bank investors, rather than the bank customers’’, who can blame the investor for running a mile.
They don’t have to listen to this garbage.
Unfortunately, we have to – at least for the time being.
David McWilliams hosts www.kilkenomics.com, on November 11 to 14
“The reason for this is that there are always other opportunities and there are always losers in the great game of capitalism. So if new investors see that their fresh money is being used to pay off old investors, they will say thanks, but no thanks.”
Got it in one!
10 year bonds at over 7% and virtually no comment on our national broadcaster.
[…] David McWilliams came to speak in our parish three weeks ago. A special moment for a small country parish, we don’t often have nationally known speakers. But it was not his presence that has endured, it was his message. The message about who was responsible for our problems; the message that we should not bear the cost of the banks’ debts; the message that we should focus on the things that we are at good at doing and be allowed to work our way back to prosperity; they struck a chord in a community of working farmers and small… Read more »
Too many hotels built in the boom, too many incentives, and schemes and look where it has landed the entire industry. Also agree with the comment by uncle fester, and to echo the lyrics from one of the Verve’s songs…”austerity don’t work, it just makes you worse and I’ll know I’ll see her face again…….” You are watching the wholesale destruction of what is left of a shattered economy, a mismanagement which is in keeping with a long tradition, IMF here by Q1. It certainly is more a regime than a government. Don’t ‘spend’ too much time in an empty… Read more »
We have no choice but to accept what the Government dicides because nobody is prepared to stand against them that is those who represent the status quo. So we need to accept the consequences of our lack of action. When I speak of Govt I mean the politic body of Ireland all sides of the Dail. Gilmore says the Croke Park agreement must be worked properly. So denial is in the DNA of all in the Dail. It would be absolutely futile for anyone of no credibility to stand up against the asinine politics of Ireland as it is imperative… Read more »
All we own is the debt. The country is on life support and our leaders figure that cutting off life support will fix things.
For weeks now I have read peoples comments on here. I hear “What can we do?” Well yesterday you could have joined the peaceful pumpkin protest at Merrion gate. 60 people turned up to express their horror at the financial crisis! Where were all of you?
Speaking of hotels, if this country was a hotel it would be Fawlty Towers.
I think that our deteriorating situation stems from the fact that FF/Green alliance chose in December 2009 to put the greater part of the financial burden on the low and middle income groups – the coping and spending classes – and to minimise the impact on those in the higher and super-rich income levels – the wealth-accumulating classes. The wealth-accumulating classes have so much discretionary income that last year’s Budget will have had little or no impact on their life styles. In fact, I am sure that the super rich among them are still gambling away fortunes on stock-market derivatives… Read more »
The Irish are the most spineless people on earth, you will continue to sit back and accept being kicked to the ground repeatedly by these clowns. You are a joke of a nation, and deservedly mocked throughout the world..you sheep!
The Irish Economy The Irish economy is too small to survive in its present state. With a population of just over 3.6 million (excluding non-nationals), the viability of the Irish Nation itself is in doubt. The primary function of this work is to promote debate, generate ideas, which hopefully will lead to an understanding of a shared vision, a vision of the type of society which the Irish people desire to achieve and which they can begin to believe in. The views expressed in this work are the views of the Author, and may change as a result of debate.… Read more »
Has anyone read this article?
http://www.telegraph.co.uk/finance/comment/ambroseevans_pritchard/8100412/Angela-Merkel-consigns-Ireland-Portugal-and-Spain-to-their-fate.html
“We must keep in mind the feelings of our people, who have a justified desire to see that private investors are also on the hook, and not just taxpayers,” said German Chancellor Angela Merkel.
Its what David has been saying – default and start anew – but is it too late for us as our politicians have already agreed to the bailout?
Why can we not convert the billions of taxpayers’ savings (sitting on deposit in nationalised banks) into government loans and end our dependency on the financial markets? Is it possible to increase savings and spending in the economy at the same time? During a time of financial crisis, people tend to save whatever disposable income they have. This affects consumer spending, negatively impacting on tax receipts, businesses and employment. Yet it makes sense for people to behave prudently and save at a time of crisis. Right now, this is happening in the Irish economy with over €85 billion in household… Read more »
David. Another layer of the insiders financial ‘POnzi scheming onion’ is now quite thoroughly peeled away. Quite extraordinary all of this. And how remarkable are the revelations one after the next after the next after the next. Those who believed Irish society and the economy and its organizing is carried out in accordance with free market principles ought to be reevaluating. Those who reckoned on Irish parliamentary democracy holding the line on constitutional values regarding banking as a utility to provide prosperity for all of IRelands citizens into future and a fair allocation of the riches in accordance with free… Read more »
McWilliams: Monkey could have done ex-treasury boss’s job By Paul O’Brien, Political Correspondent Monday, November 01, 2010 ECONOMIST David McWilliams has launched a stinging attack on the pay and pension received by former National Treasury Management Agency (NTMA) boss Michael Somers, saying “a monkey” could have done his job. The highly-regarded Dr Somers retired last December after serving since 1990 as chief executive of the NTMA, which manages the national debt. Earlier this year, it was reported that Dr Somers’s pay package in the year prior to his retirement had come to circa €1m — consisting of salary of €565,000… Read more »
The budjet cuts will certainly be interesting. As David rightly points out the cuts are being made to pay for the losses of mainly property speculators i.e banks and their investors otherwise known as ‘the bailout’. Certainly higher taxes for the higher income earners and a healthy increase to the 200euro taxes for people with 2nd properties would be fairer than making backward steps in health or education. On another interesting point, with many of our foreign affairs interests being now served by the EU, perhaps we can close down some of our embassies as the swedish and norwegians have… Read more »
Hopefully the country will just default sooner rather than later. Then at least we can just get this over with. It’s dragged on for almost three years now with no end in sight to the incompetence, corruption and cronyism. The country has to go back to the bond markets in March. The Dail returns from Christmas recess at the end of January. So expect the announcement of default in February, once the Christmas hangovers have passed and the deputies and civil servants have warmed up enough to realize their situation. I personally think a default would be the best thing… Read more »
David, it now looks like we don’t need the markets as the EU is already in control. We’re only getting make believe optics from Lenihan at this point.
The deed is done, the government is dead and now, its up to Ollie to break the bad news. He’s already on his way.
There’s no way the markets would invest in an economy that’s being forced from the outside to comit hari kari.
The only difference between a tax man and a taxidermist is that the taxidermist leaves the skin – Mark Twain
David, I commented before on the phenomenon of rolling bankruptcies which will be a contributory factor towards the cost of the banking bailout exceeding, by far, the following official estimates: 1. the Government worst-case scenario of 50 billion, 2. the S&P figure of 80 billion This week’s paper: GHOST HOTEL in County Louth!! http://www.dundalkdemocrat.ie/dundalknews/Park-Hotel-shuts-its-doors.6600056.jp This is unbelievable. NOT MENTIONED IN ABOVE ARTICLE: Planning permission has been granted for building 2 more hotels in Dundalk – one adjacent to the Race Course and one in the town centre. This happened while the future of the Park Inn was very much in… Read more »
“Ghost Hotels” eh?. I am living in Australia so far, far removed from the disaster that has befallen the country. David’s writings help keep me informed of what’s happening. His writings from the coal-face are ‘real’. I no longer look to the indo & rte for their commentary. Instead, I read David’s blog & the blog most popular with my hometown. David was the first one to mention the words ‘ghost estates’. I was thoroughly surprised that these existed as I hadn’t heard about them before. That was about two years ago. Now we have ‘ghost hotels’. I read tonight… Read more »
subscribe.
Bad and all as things may seem at the moment, eventually this crisis will resolve and we, as a people, will have to then decide where our future lies. Long term, whenever that stability arrives, (and eventually it will), we will, as I see it, have four broad options, (none of which seem especially palatable at the moment.) 1. Try to return to managing our own financial affairs ourselves. Obviously not the most appealing idea in view of the home grown gangsters and imbeciles who have created the current debacle and the population’s regrettable past form of electing such morons.… Read more »
So here is my simple theory of recovery…,
The country will not turn a corner until someone very senior, that perhaps might have held a very senior position in the public eye, say in public office(!?!), is arrested and charged by CAB for corruption.
I know, I konw, you think it’s simplistic…but I believe there is a deep/deep level of hatred (lets not beat around the bush) amougst ‘run-of-the-mill’ Irish who just want to get on with life and do an honest days work without the constant threat of external forces constantly undermining their financial future.
Comments?
Irish Gvt 10-year note rate at 7.2% today and rising; was only 6.5% a week ago.
I have names of funds which are shrting but, when I try to post, they just disappear from my screen.
As an accountant I totally disagree with the DMcW theory. He is a socialist populist, I heard Pat Rabbit make the same argument as DMcW on RTE sunday night, Rabbit said that bondholders want to see growth in the Irish economy rather than austerity. To me it is simple accountancy if you spend more than you take in you had better cut your costs. If you borrow to sustain this way of life you will definately end up worst off in the long run. The Irish economy is functioning more like a big company which is making losses and borrowing… Read more »
The strange thing about being in a hotel that is owned by NAMA is that if could be in any county in Ireland. There are that many. I have heard about these hotels that have nominal price of 1 Euro. The catch is that you have to take the debt. NAMA is actually going through the banks to find people who still have money to get them to buy these “leisure complexes”. Yes, that’s right NAMA are actually cold calling any remaining big depositholders in the Irish banks to see if they will take these hotels. It is an invasion… Read more »
Excellent article David. The corrupt-decision takers we call our government seem to be determined to ruin this country. No point standing up to them. Just leave and don’t look back in anger. I’m leaving next week, hoping to secure work abroad. I got a TEFL qualification in my back pocket now which I can use as my Plan B. I’M taking THE hard decision, my health and finances will suffer further if I stay here any longer so I must leave for my own benefit. I’m not going to stand shoulder to shoulder with the gombeens and gombeen supporters who… Read more »
i think if we want to change politics in this country then we have to look at the start of a new party that is there to serve the middle class/lower paid and unemployed in the country you may think that these groups are far removed from each other but these are the people paying most over this crisis. the problem is gaining support for this as i have said before people are so caught up in there own personal problems that they cant look above the line and begin the fight. people can forget about help from the unions… Read more »
Great Article David. Right on the money and good to see you back on track Anyone out in the Diaspora with money to invest would not touch Ireland right now never mind buy their debts It is very hard to take the Irish seriously and you only need to read the Pope’s Children and some of the other post celtic tiger disaster books on the market to realise this. It is a crazy crazy country and I would like to get the hell out Investors want to see a country that is grown up and ready for growth. They do… Read more »
More populist rubbish from David. PaddyJones is right. A government that is spending like a teenybopper on the town with Dadddy’s credit card can’t or shouldn’t cut back it’s spending? Give me a break. You cut your cloth to fit. The so-called solution of leaving the Euro, devaluation, and printing money is really a euphemism for stealing. It is immoral, and ultimately counter-productive. The only way out of this is hard graft. Firstly, massive cuts in numbers and salaries in the public service, get the same output from less input. Secondly, get proven business leaders to lead the way in… Read more »
I never voted for a Sinn Féin candidate in the past but I voted for candidates of all the other main parties. I didn’t vote in the last election because I realized we’re being sold. I’m so fed up of listening to the empty rhetoric, and for the lack of concrete proposals from the members of Fianna Fáil, the Greens, Fine Gael, and Labour that I’m very glad to see in black and white the economic proposals of Sinn Fein with a clear road map of their “better way”. And it makes a lot of sense to me, especially the… Read more »
I read the headline. The term “obvious death wish”. And this makes me think about the concept called a “self-fulfilling prophecy”. About five years ago, I learned that a woman who I thought a lot of at the time was not leaving my life. Then later I found out that that would be permannent. I did feel this as a blow. But I also knew that I was better off that it never came to anything. Of course, I was responsible, because I refused to agree to here terms. And she was uncompromising with respect to getting everything on her… Read more »
Actually, correction in second paragraph…should read “leaving” and not read “not leaving”…I hope I did not make any other mistakes.
REMINDER on lies relating to subordinated bonds Irish SUBORDINATED bonds are essentially worthless and it is impossible to buy them back “AT A DISCOUNT”. In reality the bonds are to be bought back above zero, that is, AT A PREMIUM and our government is planning to spend 300 million euros in the near future on such an operation for ANGLO. Any value above zero attached to subordinated bonds is based on the assumption that the Irish Government would act against taxpayers’ interests and continue to pay coupons, something the UK Government refused to do, as in the case of Bradford… Read more »
Comments slowly drawing to a close
Articles losing meaning
As we await the axe to fall
And all to change.
Year zero is almost upon us
But then,
It had to be like this
Now didn’t it.
It’s clear to me (at least) that the guys in Kildare St. running the most expensive circus in the world, and others in the Public Sector, are getting privileges that the rest of the population are not getting. This is making Ireland in economic terms very uncompetitive. And all those extra millions that we are overpaying to them should be put in providing social services and basic infrastructure for the well being of Society. If that is not done first we have not a hope in the world. And the delusional estate of mind that brought us from the boom… Read more »
Good post George. Sounds like you are sick to your guts at what’s going on. Listen mate. Managers in the HSE earning 120.000 euro certainly are a component of what is wrong in Ireland. Unfortunately, the situation in the country’s state owned enterprises will not change dramatically any time soon. What’s going on there is that the lunatics are running the asylum. You’ve got a bunch of kids let loose in a sweet shop & they are stuffing their faces for all they are worth. They are only taking the lead of our esteemed government ministers. http://www.flickr.com/photos/40295467@N02/with/4446258715/ Maybe we do… Read more »
I’ll bet you didn’t pay 1 euro for the room. For me that is the crux. Not the ghost rooms, hotels, estates or businesses. Its the fact that in the midst of a recession, I cannot find a decent hotel room cheaper than 70 euro a night in Cork and that lowly B&Bs charge almost as much. Its the fact that I live in a box room in my parents because frankly, I’ve thrown 30k in 10 years at greedy landlords and I’m damned if I’m going to hand 750 euro plus a month over to Mrs Scrooge for a… Read more »
LKSteve thanks! I don’t want the IMF either, nor Property Tax for homes, or water charges!!! Nestor Kirchner the deceased ex president of Argentina kicked them out of the country and told them they were not going to be dinning in the best hotels in Buenos Aires while telling him to increase the taxes and cut the services to the Argentenean people. And he also save the country more than 50 billion dollars that bond holders were demanding. And “put” in the Central Bank of Argentina a record of more than 50 billion dollars in reserves. He had more backbone… Read more »
Blueenigma has a point,where is all the anger?..steaming off in blogs that cowen etc don’t read or care about is all well and fine, but this time next year will anything have changed?
Where is our Irish tea party???
Huffing and puffing won’t blow the house down!
There should be thousands on the streets protesting anglo alone,never mind everything else!
Death Wish is Alive with Wishes :
Confucius says : ‘act a little stupid accomplish everything by doing nothing’.
‘maybe no contribution is the true contribution’.
‘ the weak survive , the mild persist’, ‘nothing is softer than water , then be like water it is beyond time and space’.
http://www.nytimes.com/2010/11/02/business/global/02euro.html?_r=1&ref=global-home
“Be with AIB”. The bank you would recommend to a freind. I assume TCD Finance head, Prof. Brian Lucey is fuming as he reads this. Prof Lucey has been lambasting Ireland’s biggest bank for months. Perhaps John Allen might also have an opinion. http://www.independent.ie/business/irish/states-share-in-aib-heads-for-95pc-after-uk-sale-put-on-hold-2403193.html Apart from that AIB have been strangely silent in recent months. They have this ability to go silent when there is bad news in circulation. Hoping that the bad news can go away. This is a company that still controlls significant chunks of other ISEQ listed companies. The Irish concept of management has been found inadequate.… Read more »
Well, this will come as a blow to the Irish concept of pride….green jersey, boozed up loser culture, I expect a bailout for my incompetence, and jobs for my pals…
http://www.independent.ie/opinion/letters/dont-mock-germans-learn-from-them-2403201.html
The writers have a point. Any chance of a more professional and more integrity based approach to economic practices in both private and public sector. I suppose there is so much subprime intellectual shite that has to be thrown out, that this is not yet possible….
It’s either the Republic of Ireland where the economy serves the people or it is Ireland Inc where the people serve the economy.
The former is worth fighting for, the latter worth fighting against.
Another by-election.
I wonder will Cowen and Gormless be shoving this out for 18 months as well….
http://www.breakingnews.ie/ireland/mcdaid-resigns-to-spark-another-donegal-by-election-480079.html
Hi folks, I’d great fun on trip to Lviv, arrived back last night, one of the students has a write up on his experiences in IT today. So, David’s article, no dissenters to it on this site, the Groucho Marx spin of getting the donkey to run the Grand NAtional by piling more stones weight onto its back, we see it for waht it is, just another of the incompetent fail work of the GOM gang, they’re rafting it upriver at the moment. Trouble is the current is getting stronger now and the raft is getting pulled closer and closer… Read more »
lff12,
This is a good starting point. All single people should stop paying rent and move back in with mum and dad if there’s room and a welcome. Squeeze the landlords! Don’t listen to the “I’m an adult, get me out of here” propaganda. Save your rent for emigrating in a few months time.
1 Euro?
Did the new owners take on the old debt or is the risk that there are no customers for the hotel at present (or ever)?
What we need is a website where buyers can advertise their offers and see if any desperate owners come to them.
Oh wait, there is one. I’ll shamelessly plug the site that I finished yesterday which allows just that: houseflog.ie
the spread on irish bonds is rising again today so it really goes to show that we are not going to be better off with this savage budget coming up. before anyone says that we need to cut spending i do understand this as it is simple that we are over spending but what gets me so mad is that its purely focused on the lower paid/sick/unemployed the very people who are felling the most of this recession im mean depression that we are in. lets not fool ourselves none of the major parties are going to tackle the higher… Read more »
Please go to this website page, read it and send it on.
http://golemxiv-credo.blogspot.com/2010/10/who-are-bond-holders-we-are-bailing-out.html