You might consider posting such ad libs under a pseudonym. I see that “Mao Zedong” is still available ;-).

I agree entirely.

Nothing mad about a judge school. I gather it is normal in some other non-english speaking, non-common law jurisdictions. If I have understood it correctly - just as some people interested in law choose to become solicitors or barristers, it is posible to choose to become a judge.

“From the clash of ideas, minds ignite” Patrick Lynch.

Happy New Year to all!

Actually, according to this Guardian report from March 2009, he didn’t use the term ‘national income’ - he used the phrase ‘economy to contract by 20 per cent’. It doesn’t specify whether he meant in 2009 or over a period of a few years starting in 2009. But, that is academic now, since virtually all forecasters now agree that any further contraction after 2009 will be negligible. In fact, most are now predicting resumed growth within the next six months. Of course, I don’t blame anyone for not referring to this one. Kelly spews out so many apocalyptic fore casts, its impossible to keep track of them.

If you read the article, you’ll see that it isn’t just me who considers Kelly to have gone way over the top. Other prominent economists quoted in the article say so too. In particular, Patrick Honahan dismisses his predictions. And, that was before he joined the Central bank.

http://www.guardian.co.uk/world/2009/mar/01/ireland-economic-crisis

Morgan Kelly didn’t forecast 20% gdp decline for 2009, but a 20% decline in national income over the next few years. He wrote this in January 2009. Looking at gnp, he may be right.

BTW, your posts are an interesting anitidote to the doom & gloom.

Has he been proved wrong? Quite the opposite, so there is hardly a need for him to come on this site and defend his truths.

I prefer the term “Gringo Gallop” meself!!

Happy New Year to you all.

I have no objection at all to academic economists having strong political views. Good luck to them. I’m merely saying that these should be taken into acount when they publish forecasts.

Economists’ forecasts are treated by the media as if they were almost scientific forecasts, in the way that, say, weather forecasts are. They are presented in the media as if these are the people who have done all the statistical calculations scientifically and objectively and come up with certain results. My point is that they are not like that at all. They are heavily influenced by their political bias, whether consciously or subconsciously I know not. Its blindingly obvious that Morgan Kelly hates Fianna Fail. Of course, he’s entitled to. I have no objection to that. All I’m saying is that his forecasts for economic depression over the next decade, and indeed his early-2009 forecast that GDP would fall by 20 per cent in 2009, are the result of this hatred of Fianna Fail, rather the result of any properly-conducted scientific analysis of the available economic data. You may say that I am equally biased in the opposite direction, of course. And, fair enough, if you think that, don’t take any of my forecasts seriously.

@Brian Lucey

Ditto as for Greg.

I don’t know if you are of the left or right. I have no objection whatever to your holding any political views you wish, regardless of whether or not your salary is paid for by the taxpayer. I believe totally in democracy and academic freedom. However, what I challenged you on was your statement that, in the hope of seeing various political changes, you actually wish for the economy to crash and for everyone to experience severe economic pain. While I admire your honesty in admitting that, and wish certain other economists were as honest, to my mind, actually wishing economic misfortune to fall on the country and its population is Beyond The Pale.

@Daithi

I’m not sure of your point. I said it now looks as if GDP will fall by between 6% and 7% in 2009, while you give a figure of 7% negative. Almost the same, surely? We obviously won’t know the exact figure until Q4 is published. But, for the record, a few quick calculations shows: if no change in GDP in Q4 over Q3, then GDP falls by 6.8% in 2009 over 2008; if GDP grows by 1% (optimistic) in Q4 over Q3, then GDP falls by 6.5% in 2009 over 2008; if GDP falls by 1% (pessimistic) in Q4 over Q3, then GDP falls by 7.0% in 2009 over 2008. So, a fall of between 6% and 7% looks likely.

@Maurice O’Leary

“Welcome back to the ’50s where 400,000 people emigrated in a decade.”

This is an example of where people, who actually look at the published statistics, have an advantage over those who get their ‘information’ from reading articles by Morgan Kelly and David McWilliams.

McWilliams has been banging on for 2 years about how there is now 1980s-level emigration of young Irish people. He wrote an article last year about GAA clubs being decimated by players leaving for London and New York. He was writing in similar vein yesterday. However, if we actually look at the published CSO statistics, this is what we find:

(a) There is currently a definite net outflow of foreign nationals from Ireland, mostly Poles going home. In the 12 months to 2009 Q2, this net outflow amounted to 7,800. The QNHS report published last week showed that this increased somewhat in 2009 Q3. This is happening right across western Europe. As Poland has avoided recession, the number of Poles living in virtually all western European countries is falling. Of course, we mustn’t exaggerate this trend. The number of foreign nationals in Ireland is only down by about 8 per cent since the recession began.

More importantly, however:

(b) There is not a scrap of evidence of any net outflow of Irish nationals, at least up to September 2009 (the most recent period for which the CSO has published statistics). None at all. Nothing. Zero. Zilch. That doesn’t mean that none are emigrating. Some are. But, their numbers are balanced almost exactly by Irish nationals returning. According to the CSO figures published in September, in the 12 months to 2009 Q2, 17,800 Irish nationals left Ireland and 17,800 Irish nationals returned to Ireland from abroad. The net outflow of Irish nationals was ZERO. It is the net outflow which is the important figure as, in this globalised world, people are always coming and going. The QNHS report published last week showed this trend continuing. It showed that, while the number of foreign nationals living in Ireland is falling (as I said in (a) above), the number of Irish nationals living in Ireland is continuing to increase rapidly. The QNHS report published last week showed that were 41,200 more Irish nationals living in Ireland in 2009 Q3 than in 2008 Q3, which is more than the natural increase, implying that, contrary to scores of scaremongering media reports, there is as yet no resumption of net emigration of Irish nationals.

@Morgan Kelly

Your silence speaks volumes.

“A significant minority of academic economists in Ireland are actually political activists first and foremost, some of the far-right, some of the far-left”

Did they start out as “political activists”?

What are the non-academic economists? Political atheists?

Do they not work for Banks, Media, Political Parties, Religious Interests?

Is it a requirement that economists be politically neutral (other than agreeing with your politics)?

Is economics not in essence a political science?

Are not all meaningful economic debates those of politics?

John,

I have followed your comments for some time. You seem to me to be the most politically partisan commentator on this blog.

And yes, I do mean Fianna Fail.

Maybe I’m wrong. I look forward to your political neutrality.

What is your current best guess at the real level of mortgage default right now.

What do you think it will be in 12 months from now.

The relatively modest sums we as taxpayers pay to academic economists protected by tenure are so insignificant that the term “drop in the ocean” might have been coined for them compared to the horrendus sums we will pay for the rest of my lifetime for the mistakes made by a group of politicians who thought they were Masters of the Universe rather than a bunch of small town go-fers for Big Money.

Im confused here. Im surprised that you think “first and foremost”, as in 20 years of professional finance academia (subtly but importantly different from econ) I have spent one year in the public view. Ditto with Karl frinstance…Where do you place me btw? Left or right, bearing in mind you know me only from what you hear/see me say here and other places? And do you think that my outpourings on say volatility transmission in precious metal markets are “tainted” by my (pretty nonexistent) political views you think I possess? I mean, you said all…

“But, then I had to go out into the real world, earn a living in the market place, and grow up. The great thing about being an academic economist is that you don’t have to go down that path. You can still be an adolescent revolutionary all your life when you are an academic economist and the taxpayers are paying for it”.

Ah, the old taxpayers. Well…. Again, the issue of who pays for what. I suspect that its uncomfortable for many to realise that what you pay for in academics is a bunch of mouthy opinionated smart people, who when they reach close to the top of their profession start to spread their views (while doing the day job still) to the world. If you don’t like that, too bad my friend. As someone who works in a b-school, I have a passing acquaintance with the real world, professionally, and also as someone who competes. If you want to have a chat about competing world wide in the provision of educational services at masters level, ring me. Meanwhile on any accounting metric you care to mention JtO I cover my salary by a multiple, so your subliminal fears on the fate of the taxpayer as regards my possible abuse of their monies can be laid to wast

Surely you know that basing your arguments on GDP figures for the Irish economy is completely misleading and that GNP is the best description of what is really going on.

As for measuring our competitiveness based on the tax-sheltered employee-less production of patent phemaceuticals, you really can’t be serious. Just look at what has happened to indigenous exporting businesses who are daily suffering a squeeze that has never been previously experienced in Ireland.

Welcome back to the ’50s where 400,000 people emigrated in one decade.

Ronnie,

I’m looking at comparitive data for a comparable economy, Singapore.

Will revert when I have some time.

his full quote:

“As the private sector haemorrhages jobs it is hard to see how Irish national income will fall by less than 20 to 25 per cent in the next few years. Unemployment will easily reach 15 per cent by the end of the summer, and 20 per cent by next year”

The unemployment rate was 12.6% at the end of the summer, and has since stablilised (actually dropped very slightly to 12.5%).

The “national income” quote could be tagged under a similar debate as the “general vs exchequer budget deficit” argument, in that people need to quite clearly state which measure they are referencing so as to avoid confusion. Saying GDP will fall by 12-13% and GNP by 20-25% may be both correct, but they are quite clearly different in their headline grabbing abilities.

His “house prices will fall by 80%” quote is less unclear however. Some people say he meant “land prices”, but in the slide linked to on this site, he clearly says “house prices”. If he wants to clarify, all good, but thats how the record stands right now.

By the way, someone suggested that Kelly’s “earning potential” has been diminished by his comments, as they have upset the government. Eh, are you actually for real??? He’ll be coining it in for the next decade on the back of this (and fair play to him).

Where did you get your 2009 GDP figures from? I thought the cumulative for 2009 was ~7% negative?

Good point about foreign savings being released into the market. There are billions of people in Asia, all of them are working hard to provide for living expenses but also saving for retirement. Social welfare in these countries is not at the same level as the W.World. So these people save and save, the banks have to grow the money, so the money goes West in search of growth and it has all gone pear shaped.

These Asian countries should be increasing their taxes, introducing high levels of social welfare so that this money is not released onto the global markets to cause such carnage.

I fear we are bound to repeat the same mistakes again.

@ Brian Lucey,

Maybe you should start thinking about setting up your own Political Party. In the current climate it might be easier than you think, even though it is a huge commitment. No I am not goading you, or asking you to walk the walk. But it might be worth thinking about!!!

Imagine yourself in charge!!! You could have E65 as the Minister for Virtue and Vice!!! (Just Kidding!!!)

Ireland’s Current Account deficit at peak was less than 6% of GDP. How much of this do you put down to excess domestic demand sucking in imports, and how much do you put down to the supposed massive external imbalance which you believe we had (and still have)?

“On reflection this doesn’t make sense because Irish bankers are purely evil”

Glad to see you haven’t lost the run of yourself over the Xmas break…

So the fall in competitiveness wasn’t an issue?

Microsoft Ireland Managing Director Joe Macri, said in January 2007, that the Republic of Ireland’s corporation tax rate of 12.5% was the prime reason why multinational companies choose to remain in Ireland. While access to the EU and the availability of cheap labour were key factors in attracting foreign investment to Ireland 20 years before, these had largely been eroded by rising costs, falling productivity and the enlargement of the EU to central and eastern European countries, he said, adding: “That leaves us with tax.” ”

Intel’s ex-CEO Craig Barrett said in September 2009, that there were about 14 reasons why Intel came to Ireland in 1989 but that only one remained: the tax rate.

Ireland’s share in world export trade has fallen since 2002 and the performance of the indigenous sector has been poor.

It did seem crazy that over €10 billion was being invested annually by the Irish in overseas commercial property but less than €200 million was only available for venture capital investment in Irish exporting firms - - one overseas property deal was done last year by farmers on CAP benefit, who purchased a shopping centre in Saarbrucken, Germany!

http://archives.tcm.ie/businesspost/2008/03/16/story31181.asp

Job numbers in the export sector have been almost static over the past decade and while medical/pharma output has jumped to now account for more than 50% of merchandise exports, from 32% in 2000, employment has been almost unchanged at 40,000 since at least 2003.

The number of new greenfield and expansion projects, approved by IDA Ireland, rose from 70 in 2004 to 74 in 2008 while related capital investment fell from €5 billion to €1.5 billion.

In its 2009 statement, the IDA announced “125 foreign direct investments won” ” but this includes R&D grant approvals and compares with 130 in 2008.

Grants paid have halved since 1999.

So while the export data may seem impressive, it’s clearly not good enough.

One thing I find irritating about his commentary is that it is presented without any international context (except perhaps Iceland) which leads readers to perceive that Ireland is far and away the biggest basket case in the known universe - given the state of the UK public finances for example, I doubt this is the case.

Kelly mentioned two booms … what we now call the telecom bubble, the boom in internet products that crashed in 2001, & the other boom artificially created by corrupt politicians to enrich their clients and themselves.

Having done well in the 2001 bubble after a lifetime in electronics, we have now left in Ireland only a pale shadow of what was once the pride of the IDA. North Dubln had Motorola, Solectron, Celestica, Lucent and a host of others now all gone to the Far East. Maybe not a bad thing, let the Chinese do the grunt manufacturing, & keep the smart stuff.

Except, instead of immediately seeking a new field to replace electronics assembly & test, Ahern and his mafiosi buddies set about continuing on an artificial boom in housing, which was basically life support to a zombie economy. Not just life support … it was steroids as well. The last eight years are “the years the locusts have eaten” & Brian Cowen is as much to blame as anyone.

What I get from the public is a sullen acceptance, but another year of the hair shirt may see Fianna Fail fray some more at the edges & possibly a new political alignment.

If you want a historical perspective on economies and money, you could do worse than picking up http://en.wikipedia.org/wiki/The_Age_of_Uncertainty written and presented by JKG. It has stood the test of time - still relevant after 3 decades - something which cannot yet (and might never) be said of Niall Ferguson’s documentary.

Will it cost more to allow Irish home owners to default.

Or would it be more ‘economical’ to throw them a life raft?

Personally speaking, I think the impulse to buy and absorb more personal debt than was sane during the Celtic Tiger - was one of the most unsavory aspects of the Irish society I will ever come to witness. And there are quite a number of aspects one could choose from.

I suppose on the one hand, many people are learning harsh lessons at the moment.

But it is very similar to the Lehman Brothers bankruptcy argument. On the one hand, perhaps the Federal reserve bank had to make one example as a lesson to the world. However, on the other hand there is a feasible argument that says, a rescue by the US government for Lehman brothers would have cost a lot less money than the devastation which follows its collapse. *

In the BBC documentary series running on RTE television these past couple of evenings, The Love of Money the point comes across strongly, that a damage inflicted on the financial system by Lehmans collapse, in turn has inflicted massive damage on the real economy.

This metaphor, that a disease which creates a problem in one organ of the system spreads around to affect a collapse in other organs. This patient on the table metaphor for financial problems is often quite useful.

At other stages in the BBC documentary The Love of Money, the point is offered - it was very difficult for the British authorities to suggest any correction to the property bubble was needed, for fear or ’scaring the horses’. While on the other hand, if one did nothing, one was seen to be complacent.

Geithner also featured towards the end of one of the programs. He mentions the fact that the US financial authorities require better tools for dealing with the problems. Greenspan hints at that also. He hinted that as a surplus of savings suddenly became available on the world markets - a fairly significant proportion of the financial system was no longer under direct control of the financial regulations, as they existed. I assume that is meant to tie up with Geithner’s idea that new tools and better tools are required.

This would seem to back up to some degree the ‘party line’ as we hear it from Brian Cowen, or from Gordon Brown. The problems of the banking institutions of Ireland or Britain may be a result of a global meltdown.

That will not provide a convincing argument to people such as Senator Shane Ross, would certainly do not buy the argument that Ireland’s problems are a result of global financial turmoil.

*
I think Kevin O’Rourke linked a paper on ‘moral hazard’ sometime lately, by Andy Haldane, Bank of England executive director. It is worth a look if you can find the paper in one of the older blog entries.