Lenihan Says NAMA Will Stop Houses Prices Falling

In an interesting prediction, the Minister for Finance, Brian Lenihan, has said that Irish house prices will now hit bottom thanks to the NAMA transfers. The Sunday Independent reports:

Yesterday, Mr Lenihan told the Sunday Independent: “One of the good things about the steep discount, averaging 47 per cent, is that the residential property market will now be stabilised at a realistic level.”

He added: “You can now buy in confidence that the price is realistic.”

Perhaps I’m being stupid here, but I’m having troubles linking (a) The setting of prices that the government is willing to pay to banks for non-performing property loans (largely backed by commercial or development property) with (b) Prices that people are willing to pay for residential properties.

The Minister reckons the NAMA transfers will act to boost the residential property market. Just playing devil’s advocate, one could point a large surplus of properties for sale, high unemployment, pay cuts, future tax increases, higher mortgage interest margins, and future increases in ECB interest rates as factors that could act against whatever positive effect the NAMA transfers are supposed to have.

76 replies on “Lenihan Says NAMA Will Stop Houses Prices Falling”

I can’t shake the somewhat depressing feeling that he still hasn’t entirely learnt to drop this obsession that propping up the property market is a cornerstone to restoring the economy.

Where does the Minister say prices are at the bottom? Isn’t this just an assumed conclusion by an Indie journalist? Do we know what prices are in April 2010? The ESRI last produced an index for December 2009 with very thin sales (for interest it said prices dropped by 3.6% in Dec 2009 alone).

Thinking about this and based on existing interest rates and existing wage levels (and indeed existing taxes and commodity prices) and savings, it is probably the case that property has not been this affordable for many years. But the Minister must be aware of his Governor’s calls for wages to come down 20%, for the likelihood of interest rates to rise and unemployment (to go from 13.4% now to a peak of 14%) and commodity prices and taxes (either income or property or spending or all of them) to rise in the short term.

I have great admiration for Brian Lenihan but if he had just spent €54bn on turnips, I would expect as a politician that he would be advising us all to go and buy as many turnips as we can. Time, not the Minister of Finance, will tell whether prices in April 2010 were realistic – I think they have some way to fall but I have seen the BEST valuers in property being wrong on this in the past.

He’s just pandering to the Sindo collective (as dumb as a bag of hammers), telling them what they want to hear.

Not much different from Moore McDowell on the Late Debate during the week, essentially telling the audience (and I cannot believe that no-one brought him up on this) that we (the general public) share responsibility for the economic collapse because we have an expectation that ordinary deposits be protected.

Of course, that’s all of a piece with the O’Malley contribution during the week – it couldn’t possibly have anything to do with the PDs’ philosophy of “light touch” (non-existent) regulation, of course.

House prices not only can fall, but I believe that they will fall. This is yet one more reason that bank lending volumes will not recover any time soon, NAMA or no NAMA.

For lenders to provide finance to house buyers at current price levels is pure folly; for advisers to recommend house purchase is jaw-droppingly incompetent.

(Of course, some exceptions can be found).

I don’t this piece of nonsense merits a thread.

Lenihan suffers from congenital silver lining disease – in his case it is an inherited condition along with the hairstyle.

Probably the most honest assessment of CURRENT houseprices was that from the liquidator who sold the apartments in Mullingar. Speaking on Marian Finnucane this morning I think he said the price set at approx 1/3 the original list price was required to convince buyers of the value of the apartments.

The ideé fixe that deposits must be protected in all circumstances is indeed a factor that makes the collapse more intractable, like it or not.

Consumer deposits – by which we mean personal savings here – are sacrosanct as a fundamental building-block. Everything else, however, is a gamble in one way or another, so you’ve got to take the rough with the smooth with these – wouldn’t you agree?

@ FO’G: ‘For lenders to provide finance to house buyers at current price levels is pure folly; for advisers to recommend house purchase is jaw-droppingly incompetent.’ Right on!!!

In fact it might even be deceptive, or downright fraudulent, to advocate or encourage purchasing any res property at the present time. It took 10 yr for bubble to form: takes x 2 times as long for prices to revert to their adjusted mean.

A +7% annual, incremental increase will give doubling in 10 yr; or +50% at 3.5% for same time. So a useful rule-of-thumb might be to take this latter set of values and estimate the probable price today, if the starting value (10 yr ago) was 100,000 (just as an example). You could then extrapolate to other values as needed. Locally, (south Dublin) res property increased by +400% -> +500% from 1996 thru 2006!!! So there is a substantial decrease still to come! Ouch!

Demand will resume when median res property price is x 2.5 times median income. If national ind wage is, say 45,000, then property price will be 1125,00 or thereabouts.

B Peter


No I would not, if the legal position is that consumer deposits rank parri passu with bond holders in a liquidation then that is the law. You went in on the understanding that you were a liquidity provider not part of the capital structure. Why should anybody buying say 10k of a bank 3 month FRN be treated in a differant fashion to soembody putting money on deposit for 3 months.

There are two assumptions in the soak the senior bondholder argument
*they are all rich and deserve to lose their money
*they are all foreigners and deserve to be shafted

Thanks very much Calan and I know this is slightly off topic but to address the NTMA’s statement in their letter to the IT hyperlinked by Calan

“Regarding interest rate risk management, the loans which Nama has acquired from the financial institutions typically pay a six-monthly interest rate plus a margin from the borrower. Nama, however, will pay a six-monthly interest rate only and no margin to the financial institutions on the Nama guaranteed securities.” If this is true then why does the draft NAMA business plan show interest receivable of €12bn and interest payable of €16bn

If the NAMA plan assumption of an 80% non-default rate is correct AND NAMA took on 77bn of loan then 80% of 77bn should be paying interest to NAMA (80% of 77bn equals 62bn). So NAMA should be receiving interest on 62bn of debt from borrowers without default.

On the other hand NAMA would be paying interest on its bonds (estimated at €54bn in the draft business plan).

If the interest rate % payable and receivable were the same then interest paid by borrowers should be MORE than interest payable by NAMA (because €62bn > €54bn). Instead the plan has NAMA paying out €16bn and receiving €12bn. (page 10 of the draft business plan – below is link)


BUT what Brian O’Neill for NTMA is claiming in the hyperlinked letter is that the interest rate payable by NAMA should not contain any margin and should be LESS than the interest rate payable by borrowers so if NAMA’s is paying out €16bn of interest it should be getting AT LEAST €18bn in interest from borrowers (€16bn * €62bn/€54bn).

Isn’t Brian O’Neill, NTMA Communication official talking rubbish?

@tull mcadoo
In terms of wind down, I don’t think anyone is in disagreement that senior bondholders rank parri passu with depositors but has been discussed on here countless times it is completely irrelevant.

After or during a wind up the government can protect who ever they choose. So depositors and senior bondholders could still rank parri passu but depositors could be protected at the same time.

“There are two assumptions in the soak the senior bondholder argument
*they are all rich and deserve to lose their money
*they are all foreigners and deserve to be shafted”

Or 3, to save the taxpayer very scarce resources.

Ah Mr Lenihan – every silver lining has a cloud eh?

Was he trying to attract the Daily Mail reader with this little snippet?

Who was that English minister (Hogg?) who fed his children beefburgers on TV during the BSE problems over there? Perhaps Mr Lenihan could do something similar – e.g. go out this week and buy an expensive property in Ballsbridge or somewhere, at full asking price, with his own money and tell us in a year or so whether he lost anything.

“I can’t shake the somewhat depressing feeling that he still hasn’t entirely learnt to drop this obsession that propping up the property market is a cornerstone to restoring the economy.”
Shurely “restoring the FF vote”…

… the economy is a secondary consideration. There are people who live in tents to house first.

@ tull mcadoo

I don’t really *care*. The State can do as it likes, as it is still sovereign (not say that there aren’t consequences, but often consequences are worth it). FF – as the present governing party – made the decision to extend the guarantee on ‘ordinary’ deposits, which was good – if they’re going to licence a bank to operate and perform a regulatory role, then they ought to stand over as guarantor on ordinary deposit – surely the most fundamental definition of what a bank actually is?

And the sleight-of-hand, gambling and numbers games which an elite at these banks otherwise get into should come a very distant second on the priorities of a democratic government, elected by the citizenry.

@ D-E

I think you are playing with words here. The law ranks depos and senior bonds equally. I am a citizen of the state who bought into a bank at the senior bond level on the assumption that I was on the same footing as a depositor. The statues seem to imply that. It seems to me that if there is an issue of scarce resources then the courts would have to rank claims equally. Otherwise the rights of the bond holder are being oppressed. a simple solution would be to pay out everything under 100k equally but haircut everything above 100k.

If you you as you propose D_E you are acting in contravention of your own laws.


by the discussing over and over again is not the same as stating the same proposition over and over again. I would saying “refusing to discuss over anfd over again” is more accurate.

Brian Lucey is mistaken on the point of interest rate risk, just as he is mistaken on the possibility of selling Anglo’s deposit base for 21bn eruos. That’s not to say he is mistaken on everything.

@tull mcadoo
In no way is anything I am proposing in contravention of the law.

Say we were to wind down Anglo instantly, not advocating this policy at all just using it as an example. And say there are only senior bondholders and depositors with 50% of the liabilities each.

Say Anglo has liabilities of €100bn and the asset raise €60bn.
To comply with the parri passu senior bondholders and depositors get 60c in the €.

Now after this the government can decide to make the depositors whole by paying the them 40c in the €.


The most Depressing read of the Easter Sunday papers in living memory.

“I can’t go on. I’ll go on.” [Beckett via Carol Hunt in Indo sums it all up …]

As Morgan Kelly illustrated recently, house prices are a function of lending (mostly), interest rates (less so) and supply. So with only those in the public sector getting mortgages, interest rates on the way up (to record levels), supply at crazy levels and an anticipation of stamp duty ending in favour of a property tax, I can’t see house prices going anywhere but down.

I’m with Morgan Kelly, 80% fall from peak. Even at that I thought banks were being encouraged to ‘diversify’ their loan books. Surely that means less civil servants getting buy-to-let mortgages.


Nice try, but if I was a bondholder, I would look at your solution and conclude that I was being shafted.

If I was Allianz or DWS, I would ring you up and say the following
*you have a budget deficit of 12% of GDP to fund
*you have 40billion of bank liabilities to term out
Now pay up or else

We do not have much to offer in return
*not a resource play
*not cheap
*not particularly well educated
*not particularly flexible.

Has anyone tried to quantify in money terms the benefit of cheaper houses and apartments to the economy going forward? Surely the transfer of the huge debt burden (which young people would have had to bear if house and apartment values had held to developers’ projections ) to the general taxpayer will mean that the total debt burden on society as a whole remains much as it would have been.

I don’t know which is more enteraining — reading the ramblings of Lenihan & co. — Or reading the ever patient and analytical academics as they struggle to parse them fo signs of consistency…

@ Karl Whelan,

Morgan Kelly’s research into house prices in Ireland, and the relationship to abundance of mortgages to greater and greater multiples of income paints a very clear picture of the Irish residential market. However, that is not the only way in which to manipulate the market. You can also work to distort the price of raw material for the production of residential units. I remember back in the 1980s, when urban planners and architects all over the world attended conferences, where they described ‘the American model’, the city that spreads for miles across the landscape connected by huge highways to carry people about. One could say that many Irish towns and cities expanded according to ‘the American model’ in the 1960s and 70s. By the time the 1980s came around, we were getting some idea of the kind of environment we were creating with the ‘American model’. The expense of providing services, utilities, crime surveillance, social care and so forth. The American model had one economic factor going for it, the land as a raw material of production was relatively cheap. There wasn’t a huge amount of finance involved in large land deals. In the 1990s and 2000s, we reversed the process, as set out by the American model, because local authorities simply could not maintain the expenses that went along with that. That is when urban renewal opportunities in urban centres, which had been all but ignored in the 1960s and 70s, became the subject of huge leveraged speculation. One noted urban planner in Dublin proclaimed, Dublin city was turning the corner again in the 1990s, following a slow decline since 1800 and the Act of Union, which removed Dublin’s political significance as a city. I read somewhere this week, that the 3 or 4 seat constituency system we have in place in Ireland still, goes back to the days when people travelled a lot less, and had virtually no communications. Remember, as late as the 1980s in Ireland, you needed political pull just to get a phone connected. It is not like today with Dan Boyle and the iPhone etc. The point of my huge ramble is as follows. By the time Liam Carroll, Ray Grehan, Sean Dunne etc were doing business, the means of production were tightly controlled by a couple of feudal lords and barrons who controlled what land there was suitable, and marketable for residential building. For those feudal barrons, as much building as they carried out in the Dublin region, they were only supplying a drip, drip to the market. Recall for instance, the time when the government did a deal to provide more land for residential building purposes onto the Dublin market. It was called the public private partnership scheme, where the developer was meant to renovate existing public housing built on state owned land, and was also allowed to sell off units s/he would build privately. The Irish government had been under political pressure to do something, because young people could not obtain residential units to buy. There is no oversupply of housing in the Dublin region. With NAMA in control of the tap nowadays, rather than a small cabal of build-er(s), I should anticipate a big difference in how things are done. You must remember, it was in the banks’ interest to finance a small group to assemble such large amounts of building land. Because the banks made back the money in terms of hundreds of thousands of over priced mortgages to individual couples. The banks bets were well hedged, if you know what I mean, even if many of the same mortgages have to be negotiated downwards, the banks will still do more than okay. BOH.

@tull mcadoo
“If I was Allianz or DWS, I would ring you up and say the following
*you have a budget deficit of 12% of GDP to fund
*you have 40billion of bank liabilities to term out
Now pay up or else”

I think this is a weak argument.

Firstly the bondholders aren’t been shafted they just aren’t being guaranteed. They have no entitlement to a guarantee, the fact that the government has chosen to give depositors more is not shafting them.
We could even sweeten their deal by giving them a little additional to the liquidation proceeds of the sale of Anglo assets’.

The credit markets have improved significantly since the peak of the crisis. So while Allianz or DWS might get the hump they are many other investors who would be willing to take their place. Especially as the sovereign could now be better off by €10bn plus.
I have worked on bond prop desks before and where I worked, it was all about the numbers emotions and grudges simply didn’t come in to it and if they did you would be out of a job very quickly. I’m not saying emotion doesn’t come into it but I think it is much less prevalent than many on here seem to believe.

But most importantly you need to weight up the costs of forcing losses on senior bondholders against any potential increase in the costs of borrowing.
Personally, if the state could save €10bn from bondholders, across all the banks, I think it would vastly out weight any potential increase in borrowing costs.

We are dragging this post way off topic tull!

@Brian Woods

“Demand will resume when median res property price is x 2.5 times median income. If national ind wage is, say 45,000, then property price will be 1125,00 or thereabouts.”

I foresee more renting than buying. The government at least acknowledged that the country needs to be more competitive but that the market has to be protected. I presume the haircut is just the optimal economic mean of market needs (they need decent albeit more competitive equity) vs. reduced purchasing power. The government is projecting a return to growth in 2011 so I don’t see people buying in hordes yet. The government could put civil servants to work as landlords and enter the rent market, but again it would probably want to keep rental prices consistent with the new haircut value. The government (Dublin, Berlin) control the market. They are the market!


I will not burden this discussion with too much more text, but I could do a lot more to fill out the picture above. I didn’t mention residential unit production in Carlow, Laois, Offaly and Kildare (or further afield in Longford etc) which experienced different market forces to that of the Dublin market. But there is one thing I could tack on to complete the picture. In the United Kingdom residential market, which is vast in scale compared to the paltry little Irish one, what happens is distinctly different. Despite the increased wealth and scale of the UK market, what you find is a lot more competition. You have less ‘large’ players in the residential market. No one can control everything, like happened in Ireland during the boom years. The Irish could afford to pay the ‘Paddy prices’ for investment property in London, or Eastern Europe during the boom. Because the market in Ireland, tended to produce players which had more in common with Tyrannosaurus rex than Homo habilis. Night all. BOH.

If there are any creative academic economists reading this, a couple of professors from Glasgow university produced ‘energetics’ models to study the behaviour and feeding habits of T-rex. This published a paper in 2003, which was mentioned in university news at the link below. BOH.

Ruxton GD, Houston DC (April 2003). “Could Tyrannosaurus rex have been a scavenger rather than a predator? An energetics approach”. Proceedings. Biological sciences / the Royal Society 270 (1516): 731–3.


Every site in the country going into or already in NAMA are having more dodgy or just plain absurd planning permissions prepared for them. One in Cabra Heights which has a permission for 325 apartment, granted by Board Pleanala for some strange reason, is being scrapped and PP for 475 apartments is being submitted. Now, how on earth, could property prices not fall? Where are the human beings going to come from to occupy the 350,000 empty units?

If you are going to tell a lie tell a big one that is beyond the comprehension of your people.


we agree to disagree up to a point. I think you can only contemplate touching the seniors in the case of Anglo. B the time you win the argument on that, most of them will be gone.

As regards the other banks, we have now deemed them solvent, are recapping them and need to term out their debt so I guess that ship has sailed too.

For your strategy to be guaranteed to work requires a massive oil find.

But the fundamentals are good……oh wait wait sorry they’re not! 😉

I am in Oz at the mo and they are having the exact same discussions we were having a few short years ago….prices going up yoy of 13%, increase supply, fundamentals are strong etc.

But having said that they seem to have solid regulation of the banking sector…no 100% mortgages …and they are increasing their interest rates…..bubble territory perhaps but not as reckless as our own!

Back to Brian, I think he is just trying to insert a bit of confidence in the market, who can really blame him, for NAMA to work property prices have to be propped up and that is his big baby!

I have just heard of a case in Malahide where a developer has turned down a very substantial cash offer for a new house saying NAMA will pay him a higher price for the house based on average prices for all the unsold houses in his portfolio?
This shows me that NAMA is a scam on Irish taxpayers which will distort the Irish property market for years to come. I believe it was set up with strong urging from the EU/ECB to protect other EU bondholders and interbank lenders to the Irish banks.

If we are to become a low or a lower cost economy , do we not need cheaper housing ? Is housing not one of the biggest causes of wage inflation ?

Tom Paine said: “I have just heard of a case in Malahide where a developer has turned down a very substantial cash offer for a new house saying NAMA will pay him a higher price for the house based on average prices for all the unsold houses in his portfolio?”

I don’t understand this Tom. How will NAMA be paying any money to developers for properties? My understanding is that the developers still owe whatever they always owed, only it is to NAMA and not the bank.

The only additional payments developers like the chap in your story will be getting is the profit from the sale of their portfolios MINUS the amount they owe NAMA (which is simply their original loan amount). And since nobody expects the assets’ sale prices to cover the loans, I don’t get what this developer talking about.

I’m open to correction on that though.

@FO’R: Opps! Sorry about my ‘go(o)f’!!

@maestronom0: Renting is good – maybe even better! Thanks for reminder.

@All: Cash Flow: this IS reality. CF is decreasing. Boom time (as in detonation!) not far off; timing uncertain. Sheeple are (still) being dreadfully misled – but I do get a sense that many are getting angrier. RMS Ireland is damaged below waterline. Watertight bulkheads were not sealed properly. NAMA lifeboat has pulled away – rest will go down.

But do those of us who bother to vote have the political testicles to switch from supporting Business-as-Usual parties to local independents? If this should occur (doubtful, but you never can tell!), would a large enough rump of indos in the Dail result in a re-fusion of FF, FG and SF – a la 1918! Now that would be interesting!

I expect a -30% (or thereabouts) decline in Std-of-Living: 10 yr?. Hope I’m wrong. Econ fundamentals look terrible: like watching one of those slomo videos of disasters.

B Peter

@ Tom Paine
I have long suspected that the EU policies are not about protecting our citizens. How can they possibly believe that NAMA does not distort competition, that Anglo will be restored to viability and should be kept open, that creating SPV’s to mask the debt on our national balance sheet is different from Greece’s attempts? The only difference is that Greece went to a lot of trouble to hide their SPV’s while we broadcast it from the roof-tops approach with the blessings of eurostat. The result, OBS debt, is the same.

Ireland voted for Lisbon. Eventually. However, the EU are complicit in Irish people being conned out of billions. Our enabler and moneylender is the ECB. During the bubble, bertie years we were grist to the economic ‘miracle’ now we are grist to the EU duplicity with our developers, bankers and politicians who are NAMA. Sure, it is nice to slide into the deep rather than plunge in one fell swoop.

NAMA is competing directly and indirectly with all private buyers of property, hotels, renters of commercial and residential properties. Contrary to popular opinion, It will not allow the dirt clogging the system to be removed under the guise of LTEV etc. it will keep it there and will even add more sludge at our expense. Take a small example, look at those cranes standing on-sites, I am looking at one out my window right now (some even completed) . Who do you think is paying for these? In most cases it is NAMA. The NAMA payments clock is running on all fronts and running a lot quicker than the national debt clock at the moment. There are a lot of bank accounts as well as banks that need replenishing.

Has he abandoned the idea of cost cutting?

Competitiveness requires lower house prices, as well as lower wages.

De Roiste
We have the third lowest rate in the history of the state and a rental shortage in the big cities in Australia. But rates are to rise at least 0.5% over the next 4 months and have already risen that amount. Mortgage rates are still over 6% here now! That does not imply a bubble.

Colonies are always short of labour and capital. Opportunities are the one thing not in short supply! We are thinking of allowing in another 300,000 migrants this year, same as last. Our workforce is starting to diminish due to the older age structure. The media, say prices will rise. But they may not be wrong in Melbourne and Brisbane.

B Peter
Spot on. How is Japan, a far wealthier country, where people worked harder, going to get out of its 200% debt to GDP ratio? Raising taxes has been taboo there for twenty years. It is always harder to do so when incomes and assets are declining.

The only good thing in the NWO, is that the rest of the world will get wealthier. The EU will have to do away with subsidies on food. Farming incomes will drop. Any knock-on effect on Irish land values? National income?

Governments get into power and can bribe voters while there is inflation, as taxes rise annually. They have more in the kitty each year. Spot the problem when there is a depression! Governments only damage economies. They cannot create them at all. NAMA will fail in all respects, except to make profit for those lending the money to Ireland!

Economic warfare and we have gombeens in charge!

April 3rd 2010, Stephen Collins writes in the Irish Times, Crisis may help parties develop a new level of maturity.

The value system of Fianna Fáil involves a deep sense of loyalty to the party and the nation but a much weaker sense of loyalty to the State, whose existence it initially denied. By contrast Fine Gael has always stressed loyalty to the State which it founded, with party and nation very much in second place.

There is an element of caricature in these definitions but a substantial amount of truth as well. The buccaneering attitude of Charlie McCreevy and Bertie Ahern to the public finances, the concession of clearly unsustainable impositions on the exchequer, like benchmarking, and the willingness to let the bankers and developers become “too big to fail” showed an unconscious disregard for the long-term security of the State.

Further evidence to support my dinosaur theory of the Irish economy. BOH.

By the time Liam Carroll, Ray Grehan, Sean Dunne etc were doing business, the means of production were tightly controlled by a couple of feudal lords and barrons who controlled what land there was suitable, and marketable for residential building.

Not just residential building – all of these motorways, too (and, both actual ‘raw materials’ – remember CRH, FF’s favourite cement provider? – and engineering/construction firms).

@ EWI,

That if a fact. You look at companies like CRH in Ireland. It is another example of what I would call a dinosaur scale of beast which could have only been produced in the Irish context. One can look at other industries also, such as the native food industry here. It was characterised by a lot of smaller cooperatives for a long time. Then it was deemed necessary or clever by someone to merge them together. Lately, we have seen the story documented in Sunday Business Post, which I read quite often, of the last four big food companies in Ireland cutting loose from Ireland altogether. The farmers at Glanbia for instance wanting to break away to secure better prices for milk produce.

But on the subject of Cement Roadstone holdings, I attended Dublin innovation week last year, or one of those events in which an ex. member of Lemass’s Aer Lingus semi-state company commented – Look at Finland, and cases where their forestry companies etc, expanded and became major multinational companies. I mean, the comparison is valid, in that Finland has a small thinly populated country, where much is run by the state. For instance, companies which manufactured welly boots and so on. Yet it managed to produce some quite dynamic new age companies. The commentator who worked for Aer Lingus in the old days, asked why didn’t companies such as CRH go the same direction as Nokia, etc, etc. I.e. Name a whole lot of Scandanavian companies which are now international. I am unable to view it in context of the whole history of the 20th century, but I know someone could collect interviews etc, and assemble together a history, which much of the memory is still intact. BOH.


I suppose the bracket the discussion, by reference to Mr. Chris Horn and his comments about industry, enterprise and innovation in Ireland. Chris Horn said on his blog October 13th 2009, An Irish Smart Economy: Aspiration or Reality?

Our enterprise policy has primarily been focussed on job creation, not wealth creation. Our enterprise focus has primarily been focussed on building companies to scale, rather than building companies to have them sold.

@ Brian Woods

‘I expect a -30% (or thereabouts) decline in Std-of-Living: 10 yr?. Hope I’m wrong. Econ fundamentals look terrible: like watching one of those slomo videos of disasters’

This does not have to be a disaster, but it sure is a big problem. Too many people are whistling in the dark. Diagnostic clarity is gold dust.
What is the basis (briefly) for your economic unease ?

“…why didn’t companies such as CRH go the same direction as Nokia, etc, etc. I.e. Name a whole lot of Scandanavian companies which are now international.”

Could you explain your point a bit more? CRH has grown from being a small cement factory by the Boyne into one of the biggest players in primary and specialist building materials in the world, operating in 30+ countries, and has been a superb buy-and-hold investment for 30+ years.

@Pat Donnellly

I agree the fundamentals are good! 🙂 And they seem to be a lot sounder than Ireland’s ever were. Just one worry is that prices in Sydney have increased 13% yoy and what if there is a blip in the economy will those 300,000 be allowed or want to come then? Ireland was using population growth as a reason that we would not have any problems in the housing sector but now we have net emigration and we all know about our housing sector. Things can change fairly quickly.

I personally do not believe there is a bubble but there is a cautionary note and I think the way they have started raising interest rates shows they heed these things.

@ dealga

BOH’s comparison of CRH with Nokia is not a valid one.

CRH is now effectively an international company rather than an Irish one — a little of 25 of its payroll is based in Ireland and some 90% of the group is held overseas.

Nokia has its main R&D operation in Finland and employs about 30,000 people there – – about 25% of its total.

Obviously it’s not profitable for CRH to ship a lot more material in and out of Ireland.

It’s a well run operation.

Australia is normalizing interest rates. 4.25% announced today. The fifth 0.25% increase in seven months. 20% of creditors find it difficult to make repayments. Debt stress highest in 30 months.

How will Irish mortgage holders fare, when interest rates rise like this in Ireland? To be fair, as the Aus economy is doing so well, they need capital and so the interest rate rises should help to get the investment necessary. So the EZ rate increases will be slower.

Michael Hennigan

In fact, they are displaying a MacQuarrie type of skill level? As you know, MacQuarie has a big international infrastructure operation, partly or wholly funded by the investors they identify from their banking side. CRH have not actually taken the steps of converting into a bank, but they might well do so? I am talking 10 years or so into the future. They have the supervisory strength and financial skill, demonstrated so far, by their international side.

They do have many sub contractors in Ireland, having made many erstwhile employees redundant, but they are still dependent upon CRH.

Could you explain your point a bit more? CRH has grown from being a small cement factory by the Boyne into one of the biggest players in primary and specialist building materials in the world, operating in 30+ countries, and has been a superb buy-and-hold investment for 30+ years.

Michael Hennigan has explained the point for me. What I was attempting to do above, and obviously did poorly, was to highlight a contrast between how CRH developed as a company, and how Nokia did. As MH has pointed out, Nokia has remained a functioning part of the Finnish economy, where CRH has little involvement today with its country of origin. CRH never became the advanced technological and research driver at the centre of the Irish economy, as it developed over a similar long time span to what Nokia did. The fellows who aught to explain this, are men such as MH, who lived through the times and understand it. I tried to emphasize this very point to Stephen Kinsella yesterday. We need in Ireland to capture some of the knowledge that exists still today, of various projects and enterprises which were tried out in Ireland over the decades. I argue strongly here, that guys like Fintan O’Toole, David McWilliams, George Lee and so on would be better served if Ireland had some good historical research to back up their theories on why Ireland never got off the ground. Fintan O’Toole’s talk about Ireland available at Vimeo dot com, is not bad though. To find the webcast, paste this tage into the search box – towardsaprogressiveeconomics. I was listening to Stephen Kinsella speak in a podcast linked at his site. Kinsella responded to the fact Ireland gains 20% of all FDI in the European Union, by saying, we should not in Ireland try to a tax haven. I think half of that 20% of EU FDI, is profits simply declared in Ireland, which were made elsewhere. All that exists of the actual company in Ireland is a brass plate, stuck on a door somewhere. I guess this is the problem, when we have teachers, lawyers and accountants leading the country. If we were trying to produce companies in Ireland, which accountants could understand – companies that are Irish and operate abroad, or companies that aren’t Irish and use this island as a tax shelter – then I guess Ireland has been really innovative and really successful. On the other hand, if a historical economists were to interview guys like Michael Hennigan, and grill them about the long history of company formation and innovation in Ireland, we would find out exactly what is going on. Why this reseach doesn’t happen is beyond me. Apart from obvious attempts such as Tom Garvin’s writing of a book about Sean Lemass recently. BOH.


P.S. And I suggest that all the wheel barrow loads of innovation reports published in Ireland recently, not even one of them contains a footnote, based on interviews with people, with real experience in Ireland and real views of the events over decades and decades. BOH.

Don’t agree we never got off the ground. It’s tough being a peripheral economy.
It would be interesting to compare this blog to an equivalent blog in another country. I think you might find they don’t look as much to outsiders for affirmation and they don’t engage as much in self-flagellation.
We’ve messed up – big deal. When the Germans messed up millions of Jews died. When the Brits messed up hundreds of thousands of their own young men died.
We made mistakes – we just accept, learn and move on – like every country in the world has had to do at one time or another.
It’ll be tough but we’ll be ok.

@ Eureka,

Fair point, I wrote it in haste. You know how it is in a restricted medium such as this one. What I would really be interested in, is involving myself in the broader physical (meat) space discussions going on in other countries. I do the best I can through reading of books about industry and innovation around the globe, which helps. I think, a blog similar to the Irish Economy would suffer from the same restrictions of the medium in other countries as it does here.

I promised the community here at Irish Economy and myself that I wouldn’t burden down the discussion with pages of text. I know to fully respond to many questions here, would require that. All the same, the Irish Economy or the equivalent abroad does serve as a useful mechanism for exchange. But my approach to using this blog, is going to be very different over the next 12 months, than it was over the last 12 months. I am sure the regulars here will breath a deep sigh of relief! BOH.

All but especially GOH!

Ireland is not a tax haven. We have an effective collection of standard OECD approved Double Taxation Agreements. We will and already have gained from the BHusseinO thrust against tax havens.

The profits are earned here. Any country that is concerned that they are a victim of that sort of behaviour can insist on an investigation with rights of appeal and full access to all papers! To my knowledge, these are rare.

There is no skulduggery, still less shenanigans, going on here!


Los Angeles is in trouble. It is not alone.

When the depression occurred in the 1930’s, no one called it that at first. They were unaware of how bad it was and became. They were stunned. They could not comprehend. Once in a life time. As if we had no books or academics. Depressions are a regular feature. Weren’t you told that over banking brings 20 years of boom and twenty years of bust?

@ Michael Hennigan,

I was listening to the podcast of the Pat Kenny/Myles Dungan RTE radio program with yourself and Chris Horn last night. A paper I stumbled across in a search for prof. Iansiti and Levien’s book, The Keystone Advantage is worth reading. It is from the ‘antitrust institute’ dot org site, by Albert A. Foer and demands the issues of monopoly power, and N-sided markets comparing them to communist regimes of old. Constantin Gurdgiev today on Newstalk lunchtime spoke about the Nordic model in the public service where a lot of outsourcing goes on. Foer’s paper from the antitrust institute touches on that aspect at the end, comparing ‘access’ to ‘ownership’ and references Jeremy Rifkin’s The Age of Access. Just some other food for thought I wanted to share with you. Link to Foer’s paper here:


The current head of the NTMA gave an interview about what NAMA would do for the banks on the Eamon Keane Newstalk show some months ago. I found the interview important because he regurgitated NAMA lobby arguments that subsequent developments, or analysis here, had shown to be clearly incorrect. Minister Lenihan is now doing the same. The NTMA man’s interview never became an issue though and I have heard no references to the content of the minister’s interview since.


“We made mistakes – we just accept, learn and move on – like every country in the world has had to do at one time or another.
It’ll be tough but we’ll be ok.”

Its true that our mistakes have been trifling when compared to the miscalculations made by the Germans during the K Wilhelm era and during Wiemar post WW1. The traumas of this period led to the forcible dismantling of the Royal houses of Europe except the British and a few smaller principalities. This era led to the rise of the Socialists in Russia and throughout Europe (eventually the World). During this era Fascism rose and fell and rose again. The convulsions during this period cost 57 million dead and wiped out most of Europe’s wealth built up over centuries, including colonies and major power status for the Germans, French, Russians and the British.

So compared to all this our little problems are indeed trifling.

Does this imply that we must continue to be stupid, however? It seems we are doomed to a future dominated by stupid people and stupid ideas. Here are three stupid ideas:

that continue to dominate our lives; 1: Socialism, 2: Parliamentary Party Politics and 3: Fractional reserve banking.

The first is the Destroyer of Worlds and will finish us all off in a massive conflagration.

The second is a charter for theft and a licence to regulate.

The third is theft plain and simple.

What the world needs is three smart ideas to counter the stupid ones;

1: Strictly limited government. 2: Sound money 3: Personal liberty.

The first protects the citizen instead of victimizing him.

The second manifests true democracy

The third is really the result that accrues from the other two.

Sorry mokabaybob I don’t mean we need to stay stupid. The learning and moving on involves exactly the kind of thinking you describelfelf blame is actually stopping us from doing that a bit.
This mess didn’t happen to us because we’re Irish – it happened because we were governed badly and that happens everywhere.
So the learning and moving on means dealing with that.

@ mokabaybob

‘ Here are three stupid ideas that continue to dominate our lives; 1: Socialism, 2: Parliamentary Party Politics and 3: Fractional reserve banking’
What the world needs is three smart ideas to counter the stupid ones;
1: Strictly limited government. 2: Sound money 3: Personal liberty’

If we keep talking to each other in simplistic ideological terms, we will all be stuck in the mud. As Eureka knows well, reality is complicated, and we need to work together somehow.

@Paul Quigley

My words were intemperate admittedly, Sometimes my own fulminations get the better of me. Especially late at night.

I must respond however to your observation.

The truth may not be as complicated as is suggested. A simple truth ofter bears the mark of authenticity. Nor is a simple truth always easy to grasp, especially when radical change is called for. The simple truth is that we must soon restore sound money and sound government. Otherwise we will surely sink without trace as a nation. It is important to state ideological differences where silence or unthinking unanimity prevails. How can people ever understand that there is a better way to organize society?

Possibly this forum is not the best place to attempt this as it seems the Economics profession is not open to a radical viewpoint; that the tenure and respectability acquired by the intelligentsia has created an obstinate tribe of Lilliputians set in their ways and unsympathetic to ideas that might simplify the rules by which we all live our lives. And which of course obviate the need for their technical services.

The principle of sound money; money backed by precious metal and not debased by credit expansion through fractional reserve banking or money printing by Government, will restore our personal liberties, which have been decimated by moralizing regulators and crony governments, and will also strengthen our economy which has been the victim of chronic mal-investment unchecked by any semblance of free market discipline.

Sound money and Socialism are mutually exclusive. There is no hope for sound money and personal liberty when regulators appointed by Ministers make decisions on behalf of free men without their consent. (Elections every four years does not constitute consent). These arbitrary edicts screamed for by ginger groups and moralizing zealots are what has undermined the freedoms of the citizen and diminished his economic potential.

The diminution of government; its scale and reach in society is a priority for the Right. This economic crisis has opened up the possibility of a real debate on how society is constituted. The Right however is weak, misrepresented and misunderstood and badly needs clear and reasoned voices raised on its behalf.

No one can say that we do not urgently require a new direction and new leadership. The structural and logical fallacies that permeate the Socialist mindset have rotted the foundations of our economies and corrupted our polity. The ambiguity with which property rights and sound money are viewed by the Left affords the Right a clear divergence of belief which can be developed through debate in the months ahead. At least we can provide a perspective which addresses the Economic issues correctly.

It is therefore incumbent on the Right to put up the arguments that describe a new society and which counter the Left not on solely ideological grounds but on moral and practical grounds as well. I for one will attempt in a my own minor way to add something to the debate.

Appreciate your comments.

We need not re-invent the wheel here. There have been numerous periods in human history when free market discipline brought the people to new heights in creativity, freedoms and justice. Justice is best achieved when oppression is absent from the polity.

@ mokabaybob

Thanks for all that mate.

Ireland is a funny little country, and we have never really taken sides in the whole right/left argument. We have shipping a lot of water over the centuries, but we never sank yet.

Socialism may be discredited, but capitalism isn’t looking too pretty these days either. No one is ever 100% wrong. On the other hand, no one is ever 100% right either.

May I respectfully invite you, in the interests of peace and prosperity, to read The Great Transformation by Karl Polanyi (1944).

House prices will continue to fall for another few years. The whole manipulation by the Government is not going to work, people have learned a lesson, I hope.

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