I am writing this article from a ‘‘ghost hotel’’ in Leinster.
Rumour has it that the business was recently sold for â‚¬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