What could be more damaging to the Irish economy — Brexit or the European Central Bank (ECB)?
This may seem an odd question, not least because we have been fretting about Brexit for a year now and have hardly heard a dickey bird from the ECB in ages.
But think about it, we don’t know how Brexit will affect us, particularly now as the Brits themselves don’t seem to know what type of Brexit they want, let alone what type of Brexit they are likely to get. But when it comes to interest rates, we can be under no doubt.
Any increases in interest rates could have a significant impact on Irish balance sheets because we are still a highly leveraged society.
It is with this in mind that the statement from Mario Draghi this week might be a cause for some concern. On Tuesday, the ECB president declared that “deflationary forces have been replaced by reflationary ones”.
The medium-term implication of this is that European rates might have to rise.
Personally, I don’t think they will rise by much, particularly as the Italian banking system is in a state of perilous fragility. But that said, the continental economy is beginning to emerge from a nearly decade-long slump during which the central bank slashed interest rates to avoid ubiquitous insolvency.
Now that the patient is convalescing, there may be higher inflation on the way — at least that’s what the ECB boss is warning us about.
Now, to assess what a rate rise or a series of them would do to the Irish balance sheet, we need to dig a bit. Forgive me if today’s article is a bit heavy on the numbers, but we need to crunch those numbers a bit to see what might happen.
The first thing we see when we look at the balance sheet is just how much debt Irish people have paid back over the past few years. The numbers are enormous and the comparison with the continental position is staggering.
In fact, they are so big that I suspect we may not be so much paying down debt as not paying it at all.
My hunch is that some of these figures reflect mass default that has gone on under the counter with banks doing deals with those canny enough to strike them or the banks simply being left with properties and loans that aren’t serviced at all. But nonetheless the figures are startling.
According to the latest national quarterly accounts, Irish households have reduced debt as a proportion of income more than any country in the European Union over the past four years, but we still remain the fourth most indebted in the EU.
Irish household debt has fallen from 194% of disposable income to 141% from Q4 2012 to Q4 2016.
This is an extraordinary achievement. It’s a decline of 52.9%.
Consider that the equivalent figure among other European countries is a tiny decline, just 3.3%. So Irish households have been paying back debt 18 times faster than our EU neighbours.
This is mass deleveraging on a monumental scale.
Clearly when you are paying back debt, you are not spending. Therefore, if many of us are not spending, who is? Someone is! If this were not the case, the economy would be contracting at great depression rates, but it’s not. In fact, the economy is growing rapidly.
This paradox means that the people who didn’t have debts are spending like crazy or those with debts are paying back and spending like mad. (Leave this conundrum with me, as I’ll come back to this oddity next week).
For now, let’s keep our eyes on the interest rate dilemma. Despite the massive recent effort to pay down debts, lots of Irish people are also borrowing again. And we are borrowing for housing, yet again.
Check out these figures for the first three months of this year. We are at it again but maybe we are being a bit more careful. Principal dwelling house (PDH) fixed-rate loans recorded a net increase of €615m over the quarter.
This means punters are getting worried about higher rates because floating-rate mortgages declined in net terms by €522m during Q1 2017.
There were declines across all categories including tracker mortgages (€384m) and standard variable-rate mortgages (€124m) which account for 39% and 43% of PDH mortgages respectively.
This means that punters are switching and trying to lock in today’s low rates for fear that rates will rise.
But still the overall picture is one of a society heavily in debt.
Household debt stood at €143.8bn in Q4 2016. Per capita, household debt stood at €30,199. But the big picture is one of a country still suffering the hangover of the boom. Household debt has declined every quarter since its peak of €203.7bn in Q3 2008 and has fallen by 29% since then.
Now let’s talk about interest rates and imagine what might happen if they were to go up.
As of Q1 2017, the average standard variable rate being serviced on was 3.75%.
This is down from 3.94% a year ago. This is a scandal given that banks are borrowing for free from the ECB and charging you the guts of 4%. The average rate on outstanding trackers is 1.03%.
Now imagine a 1% increase in the ECB rate.
Because rates are historically low, a relatively small 1% rise would have a big absolute effect.
A 1% increase on a variable rate of 4% would imply a 20% real increase from 4% to 5%.
For trackers, moving from 1% to 2% means that the borrower would experience a doubling in rates paid.
With the country still heavily indebted, it’s not difficult to see how the ECB is a more immediate threat to prosperity than Brexit, but you’d never think that listening to all the chatter that’s clogging the airwaves.
The ECB always was the greatest threat to the Irish economy. Like a drug pusher is the greatest threat to the health of people in an area. And ECB’s purpose is to regulate Ponzi-economics. It’s tool is loose monetary policy. The problem is not that the ECB will raise interest rates. The problem is that the ECB encourages malinvestment via lower interest rates, which destabilize the asset markets and cause asset prices to be overpriced. One only has to look at the asking prices of real estate in SECD (South East County Dublin), to see the confluence of institutional Ireland… Read more »
Ireland’s private sector debt level has decreased. But Ireland’s public sector debt level is out of control. And the institutional state’s approach to this topic is to ensure that the largesse is never threatened with any form of introspection.
APROPOS OF : Our heh-heh-heh-heh-heh Public Service delivered by what in the main are Civil SERPENTS [ That is what they are if u are “poor + decent” ; Of course, if u are of the right connections, this is not so ] . Distribution of alms to the jobless [ NOTE ; They are not unemployed. But, rather employed to be in queues & other destructive experiences that justify cozy shops for Civil Serpents, & Quangos, & Professional Class in-the-loop, & other Spivs & Spiveens . Payments to the international Banksters . inter alia 1. WHAT, & HOW MUCH… Read more »
Brexit ain’t going to happen. Subscribe from lovely Holyhead in Wales.
There are still some decent and intelligent people left in Ireland:
https://www.youtube.com/watch?v=xjaOx4bej6Y&t=11s
Good channel anyway. For example, watch this:
https://www.youtube.com/watch?v=EqxSBrk2cEE
Come to think of it the current system does not favour the ordinary man or woman either.
Though, I do see what you are saying.
Any new system is likely to be even less favourable, and more controlling. And more skewed in favour of large asset holders.
Dathi, dathi, dathi,
Talk of interest rates and NO TALK of the out of control derivatives market?
Tut tut.
Irish household debt has fallen from 194% of disposable income to 141% from Q4 2012 to Q4 2016. This is mainly because once again it is government policy, to inflate away debt by infalting the housing market! 500,000 people in Ireland have tracker mortgages, when rates are supressed from the average of near 3% to 0 this stimulates our Economy more than any other in Europe! The price recovery in the housing market as opposed to the housing market recovery( big diffrence) is an illusion of debt relief and wealth increase! Another major, global recession and a normalization of rates… Read more »
http://www.dw.com/en/bundestag-passes-law-to-fine-social-media-companies-for-not-deleting-hate-speech/a-39486694
London is dead, the signs of corruption and decay were evident ever since the Norman Toraigh bandits tried to stop HS2 having had the cheek to gorge on HS1 linking them to Europa with their fake European Cultural appropriations. And then there’s Cross-rail whilst the rest of the UK is starved of infrastructure investment. Northern Powerhouse? Midlands Engine? Marketing buzzwords with no back-up. I keep telling people that Europe cannot be built on the broken backs of the ex-working classes of Greece and the UK…but nobody’s listening. Brexit is about 4 decades of betrayals of the rest of the UK… Read more »
Pew statistic for freedom of speech in the world: Poland: second place; way ahead of the UK. Germany: behind countries like – Venezuela, Peru, Tanzania – and just a little bit higher than Kenya and Israel (these two were estimated the same – though I read Haaretz and they always hammer their own government; Haaretz has a greater freedom of speech than The Anti-Irish Times). My country, Ireland (plenty of raised brows now) was not included in the survey: maybe her media were not significant enough. That’s not true – David McWilliams’ blog is significant, and it is the only… Read more »
The loathsome creatures at The Guardian wake up & smell the Corbyn Brexit blend coffee. Too late! Throw them into an icy sea! Just look at this bullshit: ‘Some commentators assume Labour’s pro-EU voters have not realised its leadership in reality loathes the EU…..’ Well, if Jeremy Corbyn had been as open, honest & transparent about his loathing for the EU in public as he is in private or as trenchant and unyielding in opposing the Brussels Banksters as I have been, then ‘the Left’ wouldn’t now be in a state of abject ridicule as it desperately tries to renege… Read more »
The clowns running the Republic of Ireland are almost totally delusional. However, the EU clowns heading up the Brexit negotiations for the EU27 are absolutely 100% delusional. As a Vegan I think the fish should be left in the sea. No sane person eats sea-food now we know the extent of plastic contamination of the Oceans…fish are predators, there’s a moral case for exempting them from the debate as they prey on other beings so are just genetic killing machines who cannot claim the same rights to protection as herbivores. However, in the ‘real world’…. Mr Doyle raged: “Today’s announcement… Read more »
With Draghi teeing up a small interest rate rise for later in the year, probably December, it will be only a matter of time before the numpties in the dept. of Finance start mouthing off about “stress tests”. A small rise will be enough to let the wind out of any sails in Ireland. Unless of course the DOF decide to bamboozle us again with their 26% growth nonsense like before. Dublin 4 trying to talk it up yet again now that they have been bailed out yet again, while Pravda RTE beat the bushes for any good news story… Read more »
Every man is his own nation too . Thus, each must remind himself ; . Level 1. World Economy > Level 2. EU Economy > Level 3. Irish State Economy > Level 4. Local Economy > Level 5. One’s own Economy . . David says that Level 2. is the bigger threat now to Level 3. Irish State Economy. And, then using logic, it by domino-effect it is the bigger threat to Level 5. One’s own Economy if one is “not-connected” ; i.e. EU / ECB simply x]”inflating the currency supply” & / or y] “raising the interest rates”, is… Read more »
Canada’s Selfie PM is in town.
If any of you want to get int Selfie photo’s make your way to Justin Trudeau.
If any of you want answers to Canada’s housing bubble, go just about anywhere else.
Trudeau is part of a new trend – heads of government who are image savvy, producing the right mantras, and gaining approval of the media – but who have not capacity to fix anything.
And who do not even try, but would rather be going around getting perfect photos for the newspapers that revere them.
Here – some entertainment.
https://www.youtube.com/watch?v=E6qeo77Y9mw
How come we let this type of clown get so powerful in our corrupt country ?
Dominant media oligarch. Pal of the mainstream political parties.
Meanwhile, Karl Rove launched an attack on Denis O’Brien.
https://www.youtube.com/watch?v=ydOXJdGb8sg
And as a result the Irish media hit back at the Republicans, Breitbart and Bannon.
MESSAGE FROM THE CORRUPT IRISH ESTABLISHMENT – THOU SHALT NOT LEARN FROM THOSE THAT ATTACK THE CORRUPT IRISH ESTABLISHMENT.
Discussion about introducing Sharia law (as part of the EU legal framework) in the Council of Europe!
And Poland’s rulling party votum separatum:
https://www.youtube.com/watch?v=lUi453ILMCQ
@ Grzegorz,
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I heard that there is some new private museum in Poland.
It cost an apparently staggering amount of bucks when one considers the cost of living in Poland.
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A part of the brief report that I cannot understand is after Poland’s government donating Euro 80 million & private donors based in USA giving Euro, 50 million to its cost, how is it that the total cost is Euro 80 ?
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I also notice some other declared reduction in official numbers from 4 million to 1 million, but still a particular 6 million obtains.
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NEWSFLASH ON RECENT HIPROCRITE VISITOR TO OUR SHORES CAMPAIGNING FOR MURDER OF OUR “PRE-BORN” CHILDREN & OUR “INFANTS” ;
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Ref.
Henry Makow? tweeted ;
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Socialists – doing very well by pretending to be doing good
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https://twitter.com/HenryMakow/status/881919206580793345
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Henry Makow retweeted Thomas Paine
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REPORT:
Bernie Sanders’s Wife Tried To Kick A Bunch Of DISABLED PEOPLE Out Of Their Group Home
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https://twitter.com/Thomas1774Paine/status/881900359035355136
“TELL IT LIKE IT IS” is the exonoration
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Every article has a different theme replacing the previous article’s theme.
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But, for the rather unfortunate Syrians of ancient Syria — OR RATHER FORTHCOMING “GREATER ISRAEL” — the theme is appropriately unfortunately the same ;
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Is..l Secret Intelligence Service [ ISIS ] ;
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Irish Army personnel based in Southern Lebanon will confirm all this too.
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http://www.globalresearch.ca/tel-aviv-pays-al-qaeda-fighters-salaries-the-syrian-wars-worst-kept-secret-that-could-become-israels-nightmare/5597339
France – the battle. http://www.telegraph.co.uk/news/2017/07/05/emmanuel-macron-accused-drunk-power-amid-french-far-left-calls/ Macron’s reforms are small in scale compared to the scale of the problem. New labour laws will not fix France. Because all they will do is reduce the competitiveness deficit between France and all of it’s neighbours except Switzerland (currency limitations) and Italy (bureacracy bunched). Something far more drastic is required – to reinvigourate the French regions. Paris is too expensive to be able to compete. Distant regions are too rundown and demoralised to be competitive – and are too expensive as well. Macron’s policy will leave much of the problems intact, whilst annoying the… Read more »
Another clearly “hidden” agenda — not an oxymoron if u are perceptive in the pattern thus far — article from aul Scallywag himself Mr. Derek Scally of The Anti-Irish Times ?
Scallyway because of scurillous & untrue accusations against Poland as reminded by our fellow poster Grzegorz.
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https://www.irishtimes.com/opinion/gay-marriage-vote-shows-merkel-wedded-to-short-termism-1.3140866
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Here is the Google.com “Images” results for search terms ;
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Derek Scally AND Irish Times
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https://www.google.com/search?q=Derek+Scally+AND+Irish+Times&source=lnms&tbm=isch&sa=X&ved=0ahUKEwj8tMm7pvLUAhVLPY8KHYavBd4Q_AUICCgD&biw=1301&bih=673
Silver and the Great Future of Mexico Hugo Salinas Price Lecture of the author at the solemn ceremony of his appointment as Honorary Professor of Northwest Institute of Management of the Russian Presidential Academy. Embassy of the Russian Federation “The end of the world’s present monetary system is already taking place. The clearest symptom is the frantic bellicosity of the US, propelled by the perception on the part of those who run the US, that the US is losing influence in the world, and that their deep-seated objective for control of the whole world is slipping out of their hands.… Read more »
https://dollarvigilante.com/blog/2017/07/05/the-federal-reserves-moronic-statements-on-the-whole-foods-buyout.html
To see how the Federal Reserve itself is a scam set-up to impoverish nearly everyone at the expense of a few, watch this video.
https://youtu.be/IaDt9T7BF38
Whilst Europe is being deliberately flooded with Muslims from Sub-Sahara, Sahel, Middle East, & Asia, AS “DIVIDE & CONQUER” STRATEGY BY THE DREADFUL FEW,- it may come as surprise to the Occidentals that Arabic Muslims for sure are renowned for being very clean ; It is not just self-respect & health they abide by. It is part of Islam that they honor too. . . Here is a marvelous photo of indigenous Judaic people who converted to Christianity willfully, & later converted however-so in the main to Islam, from once formerly ancient Judea, & laterally Palestine, & later again occupied… Read more »
An Alasdair Macleod Special publication that needs reading three times!!!!!!! https://www.goldmoney.com/research/goldmoney-insights/time-for-a-new-gold-standard-for-asia?gmrefcode=gata “”Over half the world’s population, living in the Eurasian land mass, understands that gold is money. The leaders of the Asian nations also know that this is true as well. The leaders of the security and economic alliance of the Shanghai Cooperation Organisation, which now incorporates most of these peoples, also know that to become independent of Western hegemony and to forge their own way, they must abandon Western financial systems and markets, replacing them with a new monetary order, serving their own needs. This is demonstrated in the… Read more »
Hi all – Only just read the article now and none of your comments so apologies if I’m repeating other comments. Firstly ECB will raise rates slowly so a total 1% increase could take 2 years to happen. Secondly this is not a property bubble, it’s a rent bubble – supply is lagging demand hugely. So what is the punter going to do. More emigration as people snap and realise that once again they are about to be screwed by official Ireland. Tax returns are struggling to match forecasts and it’s starting to become a trend. That David is the… Read more »
Just-in for to reveal what is happening because of Justin Trudeau’s policies ;
The conclusions are not gay / happy at all.
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Irish State prisons, I am reliably told, have a major problem with this activity now too ;
Male prisons for sure.
And, I suspect also the same with the women prisons.
Consider this fact before ewe refuse to pay the TV License pampering of Big Brother-RTE’s luvvies [ Gender-fluid & all ].
Ewe most likely would be a coerced lamb to the f..k-fest ;
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https://www.henrymakow.com/2017/07/heterosexuals-pressured-to-follow.html
@ Grzegorz
The “Australian rising” called the high-rising terminal (HRT) has been observed in South Africa, US, NZ, Oz and Canada; as well as the UK and is a feature of mid-Ulster and Belfast accents. Its origins remain uncertain.
Interesting that it has turned up in Poland.
@ Grzegorz
PS: I bake my own bread including the dreaded Sourdough Rye Chleb: if you have a mixer then it only takes 5 minutes, let it rise and bang it in the oven.
Consequtive U.S.A. Administrations – Democrats & Republican & The Kushner Mafia / Trump – of course are just following orders, from The Dreadful Few who dominate the U.S.A. both “internally” & “externally”, in harassing North Korea into war for the sake of : . 1. inserting a private Central Bank [ And, it linked with The International Bank of Settlements of The Rothschilds ] . 2. remove yet another country from being in any way sovereign [ even if a country does have a private Central Bank ] . 3. imposing The Frankfurt School socio-pathology [ occasionally manifest on this… Read more »
Speaking of the relentless pernicious Frankfurt School
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And, The Frankfurt School has a very determining Economic Agenda & Economic Impact too.
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Here is one of the most important, & intellectually honest, thinkers, Camille Paglia [ Female self-declared as bi-sexual ] of modern times ;
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HEADING ;
Truth Bombs about Feminism, Male Creativity & Generation Snowflake – Camille Paglia
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https://www.youtube.com/watch?v=vvrxQ4M3EOo
Rare earth production is now being explored in Southern Africa: they seem to have everthing else.
And what do yous think of that:
https://www.irishtimes.com/news/social-affairs/housing-co-op-sells-dublin-houses-for-140-000-1.3147094
HEADING ; ENTER “THE NATURAL GAS CARTEL” . Jul 05, 2017 – 03:05 PM GMT . By: Jim_Willie_CB . Commodities . . EXCERPT ; The King Dollar is mortally wounded. Many notice but the masses seem largely unaware. Since 1971, the Gold Standard has been removed from its anchor position. But since 1973, the Petro-Dollar has taken its place. It has called for crude oil sales led by the Saudis and OPEC to be transacted in USDollar terms, for oil surpluses to be stored in USTreasury Bonds, and for some kickbacks from the Saudis to the USMilitary complex for weapons… Read more »
Re ; TRUMP IN POLAND NOW . Presently on Henry Makow’s website ; . Incidentally, Henry Makow — of Jew ethnicity — lost 2 of his Polish-Jew grandparents in German concentration camps or death camps placed at sufferance of the Poles in Poland by the National Socialist government of Germany. . July 6, 2017 . HEADING ; Trump-In-Poland-To-Attend-20-Summit. . Observations from a Polish Canadian . . by MG . THE ARTICLE ; As you’ve probably heard Trump was in Poland Wednesday and my did he get a welcome party … the propaganda machine was in overdrive last night and all… Read more »
@ Grzegorz,
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Interesting angles & info. in this blog that I found as recommended link in 1 of my regular ports of call ;
I suggest that u bookmark it for later access were u to compose again on matters of “Irish Isles” versus “British Isles” Conflict.
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I am prepared to re-evaluate my heretofore high opinion of John Stalker ;
Well, I was always suspicious as to why the Stalker affair transpired as it did.
Perhaps our resident self-confessed GCHQ Cheltenham Warehouse Hasbar-a-homosexualisation implausible poster knows why.
Horrible comment I’m getting some tattoos soon people go to a lot of effort and time organising and choosing a design that has meaning or simply the design they have fell in love with. The artists then take the time and passion to create that dream come true if you don’t like tattoos or don’t like these designs simply don’t read the article or bother to leave a negative comment !Tattoos are beautiful??Usually I never comment on blogs but your article is so convincing that I never stop myself to say something about it. Really helpful.