It has become an article of faith in Official Ireland post Brexit that the dramatic fall in sterling has caused a serious problem for Irish competitiveness. The narrative spun is that the British vote has been disproportionately negative for Ireland because our currency has suddenly risen against the falling sterling, punishing Irish exporters and retailers. This sounds plausible but it is not true.
The truth is that the appreciation of the Irish currency — first the Punt and then the Euro — has been relentless, and has been explicitly the policy of successive Irish governments over the past twenty years. So the appreciation of the Irish currency against sterling isn’t because of some shock associated with Brexit or anything emanating from British politics, rather it is the explicit choice of successive Irish administrations.
In order to show you what has been happening, I’ve done up a chart of the Irish Punt and later the Euro against sterling. Going back to the early 1990s, when we orchestrated a devaluation to cancel out the British devaluation against the Deutschemark, the appreciation of the Irish currency against that of our main import partner has been relentless. Check out the chart.
FIGURE 1 IRISH PUNT VS. POUND STERLING
I remember when business people used to worry about the old Irish Punt going above 80 pence sterling. Today, if we still had the Punt, it would be trading at 1.14 sterling. (As you can see this has been particularly marked since 2000 and the adoption of the Euro) This is a massive silent appreciation. So let’s be clear, far from being the unintended consequences of British policy, the appreciation of the Irish currency against sterling has been the explicit aim of Irish policy! We can’t blame the Brits for this.
Now here is the interesting bit.
In textbook economics if the currency of a small open economy appreciates against that of its major trading partner, particularly a partner that we import 31% of our total imports from, the prices of goods here relative to the UK should be falling, not rising! And as this appreciation has been going on for years! Irish prices should be permanently lower, not higher, than British prices.
But this is not the case.
Even before the 17% fall in sterling post-Brexit, Irish shoppers have always found great value in Newry, Derry and Belfast. The cost of living in Northern Ireland is a fraction of that in the Republic. We are not just talking about the price of slabs of Harp at Sainsbury’s in Newry. We are talking about tradesmen from the North, we are talking about the ridiculous notion that German-made, white goods and cars sourced from within the Eurozone are cheaper in the North – despite sterling’s fall which should make them more expensive! Housing is much cheaper, not only rents, but also the actual cost of buying a house is about half Southern prices. Building materials, private medicine, car insurance as well as groceries are all much cheaper. Even mortgage rates are lower in the North than in the South despite the fact that British base rates are actually higher than Eurozone rates!
How can this be?
Let’s stand back and examine this conundrum because for me if Brexit exposed anything, it’s the lamentable value that we Irish people get in comparison to our British cousins – for almost everything.
Because our currency has been rising against sterling for years, we should be getting a lower cost of living not a higher cost of living.
It is clear that if you are exporting from Ireland (which I do with my small economic consultancy company), the higher Euro against Sterling means that we have to watch our costs to remain competitive. So wages are tighter because if we let wages in Euros rise too much we will price ourselves out of the market to our UK clients.
Therefore, for people who trade with the UK, which is one in six of all exports, the exchange rate has driven down prices and wages over years. Also because exports to the UK are in labour intensive industries, far more people in Ireland work in companies that export to the UK than any other country. So we – those working in the traded sector – can’t be driving up costs in Ireland because if we did we’d go bust.
So why is everything more expensive if the exporting side of the economy is disciplined by the strong exchange rate?
Cost pressures must be coming from that part of the economy that isn’t traded.
The main culprit has to be the government sector, which is the biggest buyer of services in this country. In addition, the second source of inflation must be the banking sector that finances the most expensive of all Irish assets: property. The upward costs can’t come from any other place.
It seems logical to argue that the non-traded sector in Ireland, the public service and the State apparatus in general, is responsible for allowing costs to go out of control and these internally generated cost overruns are seeping into the general price level.
A good example of this is the health service. Ireland spent a massive 12.3% of gross national income on health in 2013. In the rest of the rich world, the average is 9% despite the fact that we have a younger population and should spend less.
The problem is that costs in the public sector are out of control and that every time there is a cost increase, taxes are raised to plug the gap. The rising taxes — particularly indirect taxes — directly push up costs and ultimately this is driving the cost of living upwards.
On top of this, the banks have for the past twenty years expanded lending dramatically — even taking into account the crash. This lending has pumped billions of euro into the economy, causing too much money to chase too few goods, driving up prices again. This is particularly the case for housing.
All this would tend to cause a massive trade and balance of payments crisis in a normal economy as we spent beyond our means. However, on the trade side, the multinationals give a distorted picture of our exports. Multinational exports are not price sensitive. They are part of a global supply chain and any cost increase in Ireland is more than outweighed by the tax holidays they get here in comparison to other countries. Finally, in a monetary union, you can’t run out of hard currency no matter how much you spend because no matter how much we spend, there will still be Euros in the ATMs. So there is no actual balance of payments crisis, despite having balance of payments crisis conditions.
Thus we become progressively less competitive, with a bloated State sector, a squeezed domestic exporting sector and an outsized multinational sector, which massages the figure.
It all looks good on paper but the tailbacks of Hyundais at Newry tells a different story — and it’s a story written by Official Ireland policy.
Back to your brilliant best.
David, THANK YOU !!!! Than you for bringing up the massive green jersey wearing elephant in the room !!! The entire cost base is out of whack. The only country coming close in the Eurozone is The NL. And they have higher productivity, solvent banks (ours are still on theraphy ) and a more efficient state sector. When the state is led by the beneficiaries of nepotism, the political party machine, and sport club crony decision making – inefficient management abounds. The body politic that is Official Ireland has declared efficiency to be the disease. This is a complete opposite… Read more »
Will somebody fnd a link on the mismanagement that occurred in the British car industrty in the 1970s.
The people running the Irish state currently, learned management during that era.
They still ave the same hardwired nonsense in their thick skulls.
The IMI produced the 2007 mess. The mainstream approach to management that exists in Ireland is inadequate. In particular there is a problem in UCD. One only has to look at the mess that is AIB to see this.
The Irish approach to management is failing.
[ The main culprit has to be the government sector, which is the biggest buyer of services in this country. In addition, the second source of inflation must be the banking sector that finances the most expensive of all Irish assets: property. The upward costs can’t come from any other place. ] I would include “regulation and tax” as a culprit. Irish freight costs include a punitive element from the state system. This increases the costs of living the further one goes from Rosslare, or Dublin Port. Which contributes to shoving business to the eastern seaboard. Another government service is… Read more »
The state has done a lot to introduce competition into monopoly industries like the electricity industry.
And every time they have made matters worse.
There doesn’t seem to be the right philosophy being applied and the consultants have made a fortune every time and still are.
I have my own ideas on what the philosophy should be but I’d welcome the thoughts of others on this.
BTW David I really hate to disagree with your latest and excellently written and presented article.
BUT the I want it and I want it now attitude, of nearly everyone living on this island; is what is killing our economy.
That feeds into the type of politicians we end up with.
There is a total lack of realism in this country.
Maybe I am agreeing with you BUT.
http://www.xe.com/currencycharts/?from=GBP&to=USD&view=10Y The above chart shows the UK pound dropping over the last 10 years against the USD. It was close to $2 a pound and is now close to $1.20. or a 40% drop http://www.xe.com/currencycharts/?from=EUR&to=USD&view=10Y This shows the euro over 10 years droping from 1.60 to about 1.10 USD to the EURO or a 31% drop. http://www.xe.com/currencycharts/?from=GBP&to=EUR&view=10Y The EURO against the pound over 10 years has gone from about 1.50 to 1.15 (but to be noted there is not a lot of difference today than the average over the last 7 years) or a drop of 23%. ” the appreciation… Read more »
I remember thinking what a masterstroke the Irish Gov. had pulled when it introduced the Bank Guaranteed in 2008(but kept for too long) for a brief moment I honestly thought they had finally got their act together! It certainly was the time and opportunity to make brave and bold decisions. One I thought and hoped they would take was to redress the issue of run away wage inflation to return Ireland immediately to a more competitive base – my idea was to slash TDs and all government wages by half – perhaps fanciful but, we wouldn’t be where we are… Read more »
Must listen speech by Trump with an appeal to all people to overthrow the power elites. Less than 6 minutes.
Pass it on forward to all family friend and associates.
This is the most important election in over 100 years.
It overrides all other issues and concerns.
“”The simple solution would be to firstly get rid of all central banks because central banks is the main reason why money never remains money but always returns to just the value of the paper it is printed on.””
Quotes of that certain charming lady from country who most likely advised Irish State to rig :
Dail Elections ;
And, by implication, the choice of actual executive / cabinet.
Libertine espousing presidents
Good Friday Agreement ;
Irish Nation — & foreigners in Irish State too — according to the ballot boxes relegated the North East of Ireland & our people there to the Brits.
More dispensing with our sovereignty
And WHO the HELL is HUMA ABEDIN –
Clinton LESBIAN SCANDAL
AL QAEDA Insider ?
But, B] does not really exist ; It is just a badge of convenience for operations done by The Dreadful Few with Muslims falsely accused / patsies.
The 2016 United States presidential race was never intended to be an election. http://www.silverdoctors.com/headlines/finance-news/2016-election-clinton-syndrome-donald-trump/#more-73605 The Clinton Syndrome At Inferential Analytics, we have zeroed in on what we believe is the most sweeping psychological syndrome ever discovered. It affects literally tens of millions of people, and has no parallel in scale, scope or consequence that we can find in medicine or psychology. We have named it the “Clinton Syndrome,” after career politician Hillary Clinton. http://investmentresearchdynamics.com/the-clinton-syndrome-part-2-can-hillary-escape-this-time/ To realize what is actually at stake in this election one needs to read both these links. The US will suffer terminal decline in a short… Read more »
Further to Tony Brogan’s link from silverdoctors.com, here is another analysis of the psyops being performed on us by this whole President Election experience. Disclaimer by Henry Makow to featured article of the day on henrymakow.com ; I believe it is necessary to elect Trump. But, don’t lose your soul to the spectacle. The Illuminati control both Left and Right. . Referenced throughout this article is Michael Hoffman ; Author of : . Usury in Christendom: The Mortal Sin that Was and Now is Not (2013) . They Were White and They Were Slaves: The Untold Story of Enslavement of… Read more »
Trumps team members ; No O’Leary, Murphy, Byrne, Mac Grath, McCarthy, or Shatter in sight ; Naw, nope, no Irish surnames at all at all. We have no influence with Trump clearly. . Michael Abboud– Communications Coordinator, Donald J. Trump for President [ Abboud is the nephew of Sheldon Adelson’s right hand man and fixer. ] Paul Achleitner .– Chairman, Supervisory Board, Deutsche Bank (Donald Trump’s largest lender) Sheldon Adelson .– Endorser, Donald J. Trump for President Elliott Broidy .– Vice Chairman, Trump Victory Committee Michael Cohen .– Executive Vice President and Special Counsel, The Trump Organization Gil Dezer .–… Read more »
I will not be going to Newry. Because there is a large shopping centre in Newry connected with Bertie Ahern. He is a director. And he may well own a share in it. I do not know the name. I have decided to boycott the entire town, so as to make sure I do not do anything to help that liar. Bertonomics was the high point in financial madness. The borrowing was at it’s most extreme. The feel good factor was pumped out relentlessly. The propagand at it’s most idiotic. Bertonomics is not dead. In fact it survived. Brendan Howlin… Read more »
RIGGING THE VOTE
This latest burst of familiar anglophile rhetoric from David reminds me of the young boy when asked by his father how he got into a fight at school explained: “It all started when he hit me back”. David blaming the Irish public sector workers for higher consumer prices and denying the true cause, Brexit devaluation, is even more outrageous than the above schoolboy’s “explanation”. David may have been taken to the family woodshed by his Belfast wife, who in turn may have had a call from Arlene Foster, daughter of a Fermanagh RUC man and now leader of Ian Paisley’s… Read more »
David McWilliams says ; X [ ‘All of’ or ‘The vast amount of’] Cost pressures must be coming from that part of the economy that is not traded.” . I qualify ; X [ Most of ] AND Inverse of X [ Lessor portion ] vis. X [ Most of ] MOST of the cost pressures must be coming from that part of the economy that is not traded AND Inverse of X [ Lessor portion ] Sizable lesser portion must be coming from that part of the economy that is traded [ in private lives of the main production… Read more »
Trump is better than Hillary Clinton, & Bernie Sanders, & Paul Ryan. . But, please remember that Trump is riding on the coat-tails of Ron Paul. . Ron Paul would be a superior President in every aspect. . Aanirfan is very against Trump, & would prefer Hillary Clinton to be Prezzie. Aanirfan even suggests that Mshd sabotaged Hillary Clinton so as to propel Trump into power. But, this theory could also be modified to contend that the aim is to propel Ryan into the job. Anyway, Trump is very adamant on these issues : Iran ; Trump wishes to be… Read more »
I do not understand David’s argument in this part ;
in a monetary union, you can’t run out of hard currency no matter how much you spend because no matter how much we spend, there will still be Euros in the ATMs. So there is no actual balance of payments crisis, despite having balance of payments crisis conditions.
A very useful inspiration is former Singapore PM, Lee Kwon. Singapore has no resources to squander to gain membership of a political kick back club/gravy distribution racket for corrupt political machines, called the EU.
Does Singapore have Rody Molloys, Ivor Callelys or Drunken Clowens on mega pensions ?
There is a reason for Trump’s wall
Are you prepared?
2 interesting posts that most likely have escaped notice because they entered late into early sub-discussion of previous article’s discussion ;. . . fearmcduda October 30, 2016 at 1:12 am . I maybe mistaken but a year or so ago the Bank of England released a report in which it stated that fractional reserve banking was a myth. In fact commercial banks need no reserve and just create money when a loan is made. . . zapit November 1, 2016 at 1:36 pm Here is a video relevant to what you are talking about. It kind of backs up what… Read more »
EXCLUSIVE … EXCLUSIVE … EXCLUSIVE . . And, do please investigate the following friends of the USA administration : . Irish State Politicians Irish State “SENIOR” Civil SERPENTS ; incl. Garda-Landlords / Landlord-Gardai Irish Business-Persons of note Irish Media persons of international location . . Excerpt ; . MONDAY, OCTOBER 31, 2016 . Insiders Threaten to Expose Hillary’s Pedophile Sex Ring !!! BREAKING BOMBSHELL ! FBI NYPD INSIDERS LEAK – Email Scandal About to Take a SICK and TWISTED Turn . Source: Victurus Libertas . All of the following information was given to us by our insiders who have specific… Read more »
More here ; . FBI Insider: Clinton Emails Linked To Political Pedophile Sex Ring . Posted on October 31, 2016 by Sean Adl-Tabatabai . FBI Discover Political Pedophile Sex Ring During Clinton Email Investigation . An FBI source has confirmed that evidence has emerged from the Clinton email investigation that a massive child trafficking and pedophile sex ring operates in Washington. . According to reports, at least 6 members of Congress and several leaders from federal agencies are implicated in the pedophile ring, which they say was run directly with the Clinton Foundation as a front. . According to an… Read more »
Yee all on this blog should have paid attention when I posted stuff about Hillary Clinton’s abuse of Kathy O’Brien.
Nere is a short update on Bill Clinton & Hillary Clinton’s latest scandal ;
Good speaker here ;
Published on Nov 1, 2016
Learn about the Clinton’s connection to Anthony Weiner, Larry Silverstein’s “Lolita Express,” and more.
SEE MORE AT: http://www.StevePieczenik.com
Yes, Grzegorz, u are correct in pointing out that Orban of Hungary is a great leader. . And, Bernie Sanders is rotten ; He would be all for abortion. . NEWS_ABORTION_Tue Nov 1, 2016 Hungarian gvmt’s pro-life initiatives reduce abortions by nearly 25 percent Abortion , European Union , Hungary , Viktor Orban BUDAPEST, Hungary, November 1, 2016 (LifeSiteNews) — Under communist Hungary, abortion became the primary means of birth control. Today, pro-life efforts by the conservative Prime Minister Viktor Orbán government are bringing abortion numbers down. The Orbán administration publicly encourages women to give birth. His government helps arrange… Read more »
Truthist, one candidate in the US presidential election has THREE FBI investigations ongoing. Not one. Not two. But three. That candidate has been revealed to be at the centre of an enormous amount of vote-rigging, underhand tactics, and outright manipulation, via the Democratic Party authority hierarchy. That candidate has been the subject of a long list of scandals. What is most telling, is Irish media coverage. It is informative of the ability of the Irish media to completely refuse to cover scandals, corruption, etc… The entire mountain of scandals have been swept under the carpet. The Irish media have presented… Read more »
Weiner’s Computer Has Details on Alcoholic Hillary’s Trips to Pedophile Island to Have Sex with Underage Girls
In June 2011, EU Fundamental Rights Commissioner Viviane Reding stated,
“This campaign goes against European values. We want European funds to be returned as quickly as possible.”
The Obama administration and the United Nations have both criticized Orban’s conservative government, with the U.N. accusing it of
“obstructing” abortion access with “unnecessary waiting periods, hostile counseling, or conscientious objection.”
This year, the UN termed it
Part 2 of http://www.bankofengland.co.uk/publications/Documents/quarterlybulletin/2014/qb14q102.pdf . Introduction ‘Money in the modern economy: an introduction’, a companion piece to this article, provides an overview of what is meant by money and the different types of money that exist in a modern economy, briefly touching upon how each type of money is created. This article explores money creation in the modern economy in more detail. The article begins by outlining two common misconceptions about money creation, and explaining how, in the modern economy, money is largely created by commercial banks making loans.(1) The article then discusses the limits to the banking system’s ability… Read more »
Re ; T.V. Braadcast from the British Bedophile Corporation [ B.B.C }
The Vigilant Citizen
BBC’s Children Show ‘Just a Girl’ is About a Transgender Child Taking Hormone Blocking Drugs
Bet, the E.U., Washington Admin., & U.N. are all for this stuff also ;
Just as they are for murdering the unborn child.
Posted at lemetropolecafe.com today Deutschebank, and “the rest of the story” Hi Bill: Today (11/01/2016) the Midas contained the commentary from Der Spiegel: The Deutsche Bank Downfall: How a Pillar of German Banking Lost Its Way “It is a story about how Hilmar Kopper, Rolf E. Breuer and Josef Ackermann, the leaders of Deutsche Bank during those fateful years, essentially turned over the bank to a hastily assembled group of Anglo-American investment bankers before Anshu Jain, the prince of these traders, rose to the top and spent three more years sailing the bank full-speed-ahead into the shoals.” The commentary didn’t… Read more »
http://investmentresearchdynamics.com/hillary-clinton-is-now-radioactive-sot-122/ “”Pride goeth before destruction, and an haughty spirit before a fall (King James Bible). Throughout recorded history, hubris has been the Achilles’ Heel of political despots. Hillary Clinton and her political crime machine has been operating above the law for decades, stretching back at least to when Bill Clinton was Governor of Arkansas. “Hillary Clinton is a toilet scrubber for Goldman Sachs” – John Titus on the Shadow of Truth During her 2016 Presidential Campaign, it became routine for her get in front the public and lie with convincing ease. In Greek tragedy, “hubris” was an anti-hero’s excessive pride… Read more »
Three new aces in the New Year for your investment portfolio.
Part 3 of ; . http://www.bankofengland.co.uk/publications/Documents/quarterlybulletin/2014/qb14q102.pdf . . Commercial banks create money, in the form of bank deposits, by making new loans. When a bank makes a loan, for example to someone taking out a mortgage to buy a house, it does not typically do so by giving them thousands of pounds worth of banknotes. Instead, it credits their bank account with a bank deposit of the size of the mortgage. At that moment, new money is created. For this reason, some economists have referred to bank deposits as ‘fountain pen money’, created at the stroke of bankers’ pens when… Read more »
Michael Moore is a Shill who works really for the “Frankfurt School” agenda.
So, more very timely roguery from Moore here here about :
the “dumb angry white men” as Moore is at pains so often to categorise.
For Tony Brogan ;
But, I would have misgivings about this website as a whole.
Ref ; The 2nd* most major source of high costs squeezing small to medium manufacturing-producing exporters from Irish State jurisdiction . *1st most major source of high costs are those imposed by the Bankster Scam [ B.S. / Bull S..t ] Bundle ; Private Central Banking, & [ Fractional ? ] Reserve Banking & Soverignizing the Private Debt of Private & Quango Borrowers . . Facts about how much gardaí are really paid must be central in talks Dan O’Brien 03 November 2016 Extract [ Re; these Crooks (State ment by Truthist) ] . . On an weekly basis, gardaí… Read more »
“Governments aren’t even important these days. The world from what we can tell is run by a small banking elite that controls the awesome power of central banks and the money they print.
The trillions available to this small group has allowed it to change the nature of society around the world.
The goal is global government and every kind of violence and corruption is employed to achieve it.”
Part 4 of ; . http://www.bankofengland.co.uk/publications/Documents/quarterlybulletin/2014/qb14q102.pdf . . bill in full at the end of the month, its bank would reduce the amount of deposits in the consumer’s account by the value of the credit card bill, thus destroying all of the newly created money. Banks making loans and consumers repaying them are the most significant ways in which bank deposits are created and destroyed in the modern economy. But they are far from the only ways. Deposit creation or destruction will also occur any time the banking sector (including the central bank) buys or sells existing assets from or… Read more »
Whether you’re after a short and sweet pixie cut or luscious long locks, our website has the perfect hairstyle to suit your personality and style.
Embrace your natural curls with these gorgeous and stylish hairstyles.
Experience the famed hospitality of the Turkish locals. Our website has more details about the cultural nuances of Turkey.