The blind leading the bland!

Confusion about our different identities has gotten me into hot water, but what matter. I understand the exasperation conveyed in your last sentence, but that should not extend to recent appointments. The Government retains a popular democratic mandate - irrespective of how tenuous this might be. In his public statements Governor Honohan must be mindful of the thrust of Government policy and not be seen to undermine it. I am sure the Governor is astute enough to recognise that the Government will seek to leverage his integrity and international reputation to conceal the tarnishing of its own - and that he will be judged in the court of public opinion to be guilty by association, but that provides no grounds for calling for his resignation. He should be judged solely on how he discharges his statutory role.

I note there is a way back, but it is a very hard road. In the early 1990s when were last there, the public were able to put up with very high unemployment and public service destruction, it won’t be that easy this time!

He argues that the ECB has serious ammo and can create a vast amount of base money without inflationary repercussions.
Given that the ECB may have directly purchased Irish debt using base money do people have to work by candlelight to improve the economy ?

I would argue using the resources of the ECB to develop non oil based transport such as heavy trams and light rail and also state spending on nuclear power would greatly increase our economy and productivity / efficiency.
Do our goverment authorities realize that a central bank should be used to increase the producivity of a economy and not the profitability of banks?
There now has been enough cuts in wasteful consumption, now our goverment needs capital for development and needs to get a grip with the ECB along with the rest of the euro goverments

Airstrike pakages would arrive withen 24 hours I suspect.

Below, is an excerpt from Fitch back in November of last year. I wonder what they are thinking now, with Anglo due to swallow up at least 5bn more than the government’s worst estimate to-date? Rogoff and Reinhart said that weird unpredictable things start to happen once you go above 100%. There is a way back but it involves too much pain for government workers who have bluffed their way along in the past while billions of Euro was used as Poyfilla to plaster over their huge cracks in their lamentably weak analysis.

“Even assuming the government is able to consolidate the budget over the coming years, general government debt (official definition) will peak at 80% of GDP. Government liabilities rise to over 110% of GDP when fiscal funding for the carve out of bad bank assets is taken into account”.

This will be very painful but surely it will be the right course of action.

@Paul Hunt
I agree with you on just one point - one article in the Telegraph is never a reason to call for a resignation. However:
— When “governor” honohan says by end 2010 we’ll all realize that the banks are in good shape, and,
— When the governor honohan says “high” spreads at just 2.3% above zero for risk of default, are “ridiculous”
— and, when governor honohan supports stress tests of banks that don’t even mark their NAMA loans to NAMA prices, yet still pretend they are solvent under stress scenarios….[true stress is default of our sovereign]

You still think he is the right man for the job? Sorry, some people in the world actually believe the word of officials, and they act on it. There are pension funds and long term savers who own Irish sovereign and bank debt. They rely on integrity of the officials, and sadly, learn far too late that there is none. We all know the budget deficit is too high, with no resolution, and that no one on earth has any idea how big the hole is in our banks - but we do know it could be so big it topples us. You need to be realistic too. It is not just one article in the Telegraph where “governor honohan” pretends nothing is wrong….it is everywhere. He is sadly a soft, but highly intelligent individual, who wants too much to be liked and near power. He took a job with a great title. Now people are too afraid of his title, or too afraid of their own hopes being dashed, to dare being honest about him.

He, plus our government, need to resign.

So that’s alright then.

I’d agree with you that without the banking crisis in Ireland the outlook would be improving for Ireland. However, since the crisis is real it cannot be ignored and consequently I do believe the worst is yet to come for Ireland.

What justification are you using for discounting the effect of the banking crisis in your economic forecast? (That services which banks are providing aren’t needed?)

You may have missed my question to you in an earlier post:

So, given that jobs growth in the 10 years to the crash, was in health, education, construction, distribution and tourism, what is the sustainable level of full employment for the current population with about 100,000 on the Live Register?

Assume no net jobs added in the international tradable sector.

JTO again:

Sorry for not replying to your question straight away, Michael. I had a very busy weekend. Michael, I haven’t the slighest idea where jobs growth will come from in the future. Neither, I suspect does anyone, although some may claim to know. I’d have given the same answer in 1986, but a million jobs were added in Ireland in the following two decades, and tens of millions in other countries. Did any economist or media commentator in 1986 predict that the number in employment in Ireland would double in the following two decades?

It is one of the features of capitalism and enterprise economies that growth industries spring up in most unexpected areas, areas which economists do not foresee in advance. The area I now work in, GIS, barely existed in 1986, but employs millions across the world now. What a country needs is a well-educated, flexible, enterprising, low-taxed workforce to take advantage of whatever growth industries arise. This, plus political and social stability (which Ambrose Evans-Pritchard says in his Daily Torygraph today Ireland has). A low vote for left-wing parties also helps. And good demographics (ie high natural population growth) also helps. If a country has all these attributes, jobs growth will follow, without the need for hundreds of economists employed in preparing 10-year-plans with precise estimates of the numbers likely to be employed in a decade’s time in every nook and cranny of the economy.

This is going to sound rude but it’s not meant to. By JTO’s own admission ..”I know absolutely nothing about banking, CD spreads, bonds, leveraging, NAMA, six-months borrowing, sovereign yields, absolutely nothing”.Now, I know nothing about pretty much everything but my ignorance is evenly spread which might not distort my view so much as selectively attending to a particular area of expertise.

JTO again:

Not rude at all, Eureka, and I certainly don’t interpret it as such. But, I would seriously doubt the truth or your statement that ‘I (Eureka) know nothing about pretty much everything’. Your posts indicate otherwise.

Banking is just one small sector of the economy, like agriculture, tourism, whatever. One can know enough about macro-economic statistics and demographics statistics to have a good understanding of how the economy is faring, without knowing anything about how the banking system works. One might know nothing about how to milk cows or sex chickens, but that doesn’t prevent one being able to analyse agricultural statistics. Sorry for so many ‘ones’, which make one sound like the Queen. But, as (I think) it was you that said last week, sometimes they are hard to avoid.

You may have missed my question to you in an earlier post:

So, given that jobs growth in the 10 years to the crash, was in health, education, construction, distribution and tourism, what is the sustainable level of full employment for the current population with about 100,000 on the Live Register?

Assume no net jobs added in the international tradable sector.

http://www.telegraph.co.uk/finance/comment/ambroseevans_pritchard/7946796/Ireland-can-withstand-the-euros-ordeal-by-fire-but-can-Southern-Europe.html

Ambrose has completely changed tack, compared with what he has been writing for the past two years. Having been an arch-pessimist on the Irish economy since the global recession began, making David McWilliams and Morgan Kelly seem like runaeay optimists, he now writes:

‘Ireland can withstand the euro’s ordeal by fire’

‘Ireland’s exports defied the Greatv Recession’

‘Unlike Club Med, Ireland is highly geared to global trade’

‘Ireland has the flexibility to survive the EU’s internal devaluation’

‘The Irish people have shown Spartan discipline’

‘Dublin has seen no riots, like in Greece’

‘Ireland has become a much cheaper place to do business’

‘It costs 25pcless now than in 2007 to set up a new enterprise’

Not my words, but those of arch-pessimist Ambrose Evans-Pritchard. Imagine the shock some posters on this site would have if they bought their Irish Times some morning, and found Morgan Kelly writing these things. The shock would kill them. Regular readers of Ambrose Evans-Pritchard will be feeling the same shock right now.

I’m curious as to why Ambrose has changed tack so suddenly. Vanity leads me in the direction of thinking he read my posts above, the ones Brian Lucey complained were beyond his attention span. Ambrose may have a longer attention span. Certainly, the points he makes in today’s article bear a marked ressemblance to the points I made in my posts above. However, that’s all it is, vanity. Its far more likely that Governor Honahan was very persuasive when he met him last week, and said thing off-the-record that he couldn’t say on-the-record.

Oliver Wyman in 2007 named Anglo Irish Bank as the best bank in the world in a piece of research published to coincide with the World Economic Forum in Davos, Switzerland.

Irish bankers continue to hold Oliver Wyman in high esteem, despite the fact that the Anglo business model failed.

This is all related to an earlier story by Kathleen Barrington. It is also the reason why we have vacant structures on Dublin’s skylines today such as North Wall Quay, and vacant sites such as the Irish Glass Bottle site. And it appears that AIB are still holding onto Wyman for consultation. This smells really bad to me, I have to be honest. BOH.

In May 2007, the then finance minister Brian Cowen rushed through legislation which included provisions to allow banks to issue ‘covered bonds’, backed by commercial mortgages. Under the previous 2001 Act, the bonds could only be backed by residential mortgages or public sector debt. The 2007 move was music to the ears of commercial mortgage lenders, particularly Anglo Irish Bank, as it meant they could raise new money by issuing securities backed by commercial mortgages.

See blog entry, Kathleen Barrington, Cowen’s Act fuelled banks’ folly.

Oliver Wyman in 2007 named Anglo Irish Bank as the best bank in the world in a piece of research published to coincide with the World Economic Forum in Davos, Switzerland.

Irish bankers continue to hold Oliver Wyman in high esteem, despite the fact that the Anglo business model failed.

This is all related to an earlier story by Kathleen Barrington. It is also the reason why we have vacant structures on Dublin’s skylines today such as North Wall Quay, and vacant sites such as the Irish Glass Bottle site. And it appears that AIB are still holding onto Wyman for consultation. This smells really bad to me, I have to be honest. BOH.

In May 2007, the then finance minister Brian Cowen rushed through legislation which included provisions to allow banks to issue ‘covered bonds’, backed by commercial mortgages. Under the previous 2001 Act, the bonds could only be backed by residential mortgages or public sector debt. The 2007 move was music to the ears of commercial mortgage lenders, particularly Anglo Irish Bank, as it meant they could raise new money by issuing securities backed by commercial mortgages.

See blog entry, Kathleen Barrington, Cowen’s Act fuelled banks’ folly.

I haven’t had a chance to follow any of the debate above unfortunately - but I thought I would leave you with this link from the Sunday Business Post today. It is an important article I think, and shows another important slant to the financial crisis. BOH.

Dimon had what Tett terms ‘‘the supreme self-confidence to go up against analysts and consultants.” Dimon noted that one of the problems of being a chief executive was the constant pressure to grow and grow.

http://www.sbpost.ie/themarket/comment-50923.html

In Ireland’s case, for instance, pharma output from Lilly might increase because of improved yield from manufacturing processes. This might even lead to reduced employment in the plant. There is no necessary impact on employment in the rest of the Irish economy at all, and you have already mentioned that increased output might be accompanied by reduced employment. Similarly an improved process in Intel might increase output from the fab, no impact in the rest of the Irish economy. There might well be increased employment elsewhere, but not necessarily in Ireland. As I said, no necessary impact. Your statement may usually be true, but doesn’t always need to be. Ireland, with the high percentage of foreign owned pharma and software in its exports is one of the cases where it’s important to note the difference between usually and always.

http://www.telegraph.co.uk/finance/comment/ambroseevans_pritchard/7946796/Ireland-can-withstand-the-euros-ordeal-by-fire-but-can-Southern-Europe.html

The only thing that is stopping unemployment figures surging through the 14% level is emigration. However, every emigrant creates another empty houses, apartments etc and less demand for goods and services. That is unless they have been living in family homes. This will add to the 300,000 empty units and ghost estates we already have? AIB will be nationalised and that will frighten markets some more. BoI is becoming a shadow of its former self. Banks are still in survival mode and cannot lend. The next wave of delinquent loans from BTL’s will send another shudder through the banking system whether nationalised or not. Meanwhile, the country already needs the support of emergency purchasing of our bonds from EU to enable us to pay our salaries so that we can pretend that we are not bankrupt. Where is the government in all of this? On holidays! It beggars belief.

Granted, NTMA have stocked up on borrowings and have 80% of what we need to borrow for this year, whatever that is supposed to mean? Don’t all junkies keep a stash if they can? The game has been to borrow and to borrow as much, and as often as the fools are prepared to lend. However, we are running our of fools and already are dependent on emergency funding. This is the strategy of the bankrupt i.e. to borrow as much, from whoever, in the knowledge that pretty soon they will not be able to borrow from anyone. Notice that his strategy is totally illegal for businesses but not, it seems for government. Notice too, I have not even mentioned Anglo nor will I bother to discuss it. The Irish Hotels Federation believe that 90 of its members will be out of business by years end as they will be unable to compete with an SPV called NAMA.

Maybe Morgan knows all he has to do is wait. Why should he worry, he will be given a nice plum job cleaning up the mess. Personally, I would like to see him chairing the “Peace and Reconciliation Tribunal” the one we are going to need.

Can’t you advance any evidence or statistics in support of your case. Simply saying: “I’m afraid this is not necessarily so.” isn’t much of an argument. Can’t you do better?

Look at the figures for growth in employment in nearly all developed countries in the past 40 years. Virtually all of it has been in the non-tradeable sectors.

Or maybe Morgan Kelly might don a suit of armour. Though his pen seems to be ‘mightier’ at the moment.

Actually, Morgan’s pen hasn’t been that ‘mightier’ in 2010. I count only one doom article by Morgan in the Irish Times in the first 8 months of 2010, compared with one every 2 months in 2008 and 2009, an annualised rate of decline of some 75pc. Looks like Morgan has gone into recession, just as the economy has come of it.

The “job gap,” which measures the number of jobs the economy needs to create to return to pre-recession employment levels while also absorbing the 125,000 people who typically enter the labour force each month, is 11.6m.

Brookings Institution economists say that if future job creation reaches about 208,000 jobs per month, the average monthly job creation for the best year for job creation in the 2000s, it will take almost 140 months (about 11.5 years) to reach pre-recession employment levels. In a more optimistic scenario with 321,000 jobs created per month, the average monthly job creation for the best year in the 1990s, it will take 59 months (almost 5 years).

http://www.brookings.edu/opinions/2010/0806_employment_looney_greenstone.aspx?p=1

The OECD said last month that Ireland needs 318000 jobs to return to pre-crisis levels.

I’m afraid this is not necessarily so.

Paul I think it comes down to what Ireland can honestly offer. As you observe the state never industrialised and an unfortunate legacy of that is a very limited ability to build world-class product-based innovation businesses. This is because the requirements for such business to take root go far beyond matters of technology, for example, into cultural heritage of engineering resourcefulness, shared experience and pride in making excellent products.

Ireland is culturally the antithesis of Germany which makes establishing an extensive carpet of small export-capable knowledge-intensive product businesses improbable. The system of innovation policies and supports in Ireland including SFI, SSTI and the enterprise agencies will continue to achieve very little in building business because they ignore such cultural factors.

The strength of these effects will be apparent to anyone familiar with the culture of entrepreneurship and risk-taking around the border counties in Ireland - a part of the state that lived off its wits for decades, seeking out arbitrage opportunities in trading goods back and forth across the border.

The problem with chasing a staple diet of FDI, which many suspect is the underlying enterprise and innovation strategy (if the S word can fairly be used in an Irish gov policymaking context) is lack of control. FDI operations are in most cases jumped-up assembly and distribution plants. Most of the intellectual ‘heavy lifting’ is done elsewhere (i.e. invention, financial engineering, IP management, sales and marketing). Those located in Ireland were attracted by the tax optimisation proposition, not by the swelling ranks of 24 year old white coated PhD branded heroes beloved of state propaganda. Those who chose to locate in the German states, or in the UK, or in parts of France, Denmark and other states unwilling to discount tax contributions perhaps were more concerned about access to manufacturing, design, engineering, innovation culture and the people and vendor networks embedded in it.

There are grounds for hoping this may change in the area of medical devices however, an industry centred around Galway, where a culture of embedded experience in more than just device assembly now exists. Unlike the ICT sector, medical device industry is not cyclical and unlike the biotech, renewables and nanotech sectors it is well advanced along its maturity curve. If there is genuine scope for Ireland to be of global significance in any area of high value product/service innovation it is perhaps only in this sector.

As I see it nothing the state does is likely to have any significant positive effect on the development of exporting businesses. The best thing it could do is tone down the greencollar jobs/innovation hub/smart economy noise (which is both content-free and embarrassing) and slim itself down as quickly as possible.