FT: No Irish Lazarus

Yer DoF types are all eyeing up the handy number with a bank or even running a central bank after their stint in Finance.

They simply will not countenance that the good gigs are gone and that even if there were any the last person anybody would hire is an ex DoF type.

Once the DoF realises that reality they may start to make policy like they should.

The FT gets it partly right in my view. No argument on the urgent need for SRR. The failure to produce it is a major failure of government policy. But withdrawing the guarantee on new issues would be hugely risky — indeed quite mad. The thinking — also described in its earlier editorial — is that the resulting funding crisis would force debt-equity swaps to recapitalise the banks and presumably regain access to market funding. But if a bank is severely undercapitalised, then an effective SRR should be enough to bring about the debt-equity swap. This could happen reasonably smoothly without bringing the economy to its knees. Its is amazing how some commentators are willing to be so radical with someone else’s economy.

@ Karl Whelan,

I think what has emerged last week most forcefully to both the international and domestic media, in relation to Ireland, is the following. Two years after the hit water mark of the financial collapse in late 2008, it is becoming obvious that the Irish finance minister and An Taoiseach’s public statements carry less and less weight. It is like a chilled food product on a shelf, which gradually approaches its sell by date. My own suspicion is that the current Irish government, have not paid nearly enough attention and respect to this dimension of the problem.

It is not simply a matter of keeping a bunch of bloggers on the Irish Economy in check. There is a very serious matter of their own credibility going through its natural phase-out process. That has progressed a great deal by now, and whatever good or otherwise the current government in Ireland can do, they will have to implement with a lot less influence than they did two years ago. It is understandable that the Fianna Fail coalition government would have missed this critical aspect. As Eamon Dunphy reiterated several times on his radio program yesterday, Bertie Ahern managed to win three successive elections in Ireland. I think there is an in-built belief in the current FF government, that they will go on winning elections for as long as they like. The fact simply has not dawned on them yet, that they are at the end of a road.

The political in Ireland mirrors almost perfectly the economic. For year after year in Ireland, many of us were lucky enough to expect a better job opportunity and improved standard of living was awaiting us, around the corner. It was only a matter of when our own boss was promoted to a better position, and we could fill the space vacated by our boss. That was a mindset I had definitely gotten into. It has been a challenging process of re-adjustment for me, in the past couple of years. For politicians in Ireland, I assume a similar upheaval awaits them. The challenge today, is to give a proper mandate to some group of people – who will know, that when they utter something in public about economic policy – it will at least carry some weight, both here and abroad. The international observers have made up their own minds at this stage, that the sitting parlimentary executive in Ireland has all but lost its mandate to rule. BOH.

While I agree with the sentiment of the FT editorial and Munchau’s argument, both raise more questions than they answer:

The FT ed says on the one hand:
“Explicit state guarantees must be honoured.” and also “The guarantee scheme should be cancelled for new issues”. This presumably means that all Anglo debt including subordinated would be paid throughout Sept. At the end of Sept, Anglo would be immediately insolvent (as it could not raise more debt) and the costs to the tax payer enormous (ca. 70bn). I thought that that’s why Brian Lucey was arguing for a renegotiation of the guarantee so that subbies would not be paid this month.

Is this right? If so, the cost honouring the guarantee AND winding up Anglo would be enormous. Is the FT seriously suggesting that the amount would be manageable as it would bring some certainty to the bond markets.

As regards AIB. I presume it would be insolvent with the extension of the guarantee. Does anyone have any idea how much nationalisation would cost, assuming existing shareholders are wiped out?

I meant:

As regards AIB. I presume it would be insolvent withOUT the extension of the guarantee.

@ Andrew

From Dizard’s article

“A European veto of further bond guarantees could be a blessing for the Irish state and the citizens. It would draw a line under the country’s most serious liability. Please, Mr Almunia. Do the right thing.”

Doesn’t this make it a third article in the paper on the same day, all disagreeing with government policy?

Brian,

perhaps you could answer some questions
*which senior bondholders would you burn?
*how much would this reduce the sovereign burden by?

@ KW

Dizard’s article refers only to subbies and pre 2008 seniors. If i was Lenny, I would be circulating this to my collegues. It knocks 7billion max off the tab but leaves north of 40billion on it.

Nationalising the system a la the editorial might knock another 20 billion max off the bill, but you would have to burn the 7bn put into BOI/AIB.

The net might be that the burden still stands at 30bn on 45billion. Slight problem with the legality and the political acceptability of it. Next up would be the Greeks & the Spanish. The political will of the German govt to write a check to bail out their feckless and irresponsible partners is low.

German workers who retire at 65+ are being asked to bail out the Greeks to retire at 53. Tha same workers will baulk at bailing out irish public servants who earn more than them in some cases.

@Eoin

Did we ever track down the reference legislation which says deposit holders and bondholders rate pari passu? I suspect that it is may be expressly provided for, but rather follows from the general legislation on winding up and the fact that both are unsecured (?) creditors in a winding up. If this is the relevant legislative basis, then this would preclude amending legislation which alters the way in which the “pot” in an insolvent company/bank is distributed between the various classes of creditors. It would not, however, stop the Government from intervening, outside the winding up process, to provide statutory compensation to deposit holders. In fact, even before September, 2008 and the guaranteed, deposit holders had an entitlement, outside the usual rules on a winding up, to recover 30k (and then 100k) from the Government via a statutory compensation scheme.

Again, if the basis for the “pari passu” argument is found in the general rules governing a winding up, there would not appear to be any legal (as opposed to economic) constraint on Parliament introducing a new bank resolution scheme which would allow un-guaranteed bondholders to have their interests in a hopelessly insolvent bank extinguished at nominal or nil compensation.

To summarise, whereas genuine legal difficulty would arise if an attempt were made to renege on guaranteed debt, the legal (as opposed to economic) challenges in wiping out un-guaranteed are not insurmountable.

As ever, I express no view on whether from an economic viewpoint it would make any sense to incur the wrath of the bond market in circumstances where the proportion of un-guaranteed debt is relatively small.

Important to remember that the Irish state & ECB hold a significant portion of Anglo debt, further complicating any restructuring process.

Eoin says,

there’s also some big legal questions which have never been fully answered by people with, you know, actual legal expertise. Specifically, if you tried to enforce a debt for equity swap with senior bondholders (mandatorily via resolution), would you not have to force depositors to get involved too, given they are the same ranking in the capital structure?

We don’t know any longer, if the markets are becoming turbulent because Ireland/EU will not allow the debt holders access to St. Stephen’s Green to recover as much as they can, and secure whatever physical assets are attached to loan aggreements etc. In conversation, the opposite has always been assumed. I.e. That the bondholders do not want a debt for equity swap agreement. We cannot ask any bondholders unfortunately, to find out which is the case. At this stage, it is my suspicion that many bondholders are facing the problem of lack of clarity in statements about their own finances. Which would lead me to believe, at some stage, those same bondholders of Anglo etc, will want to convert their pieces of paper into something meaningful. Are NAMA IOU’s good enough in that case? Or could it be the case, that NAMA assets will be sold back to Anglo Irish bank again, in a cleaned-up state, in order to form part of some debt-for-equity swap with its bondholders? That would remove the same assets from the NAMA balance sheet, and bring some form of clarity, to the financial statements of Irish bank bondholders.

I think when the assets of the Irish banks moved from Anglo Irish bank to NAMA, it has created some degree of turbulence in the markets, because it is not very clear any more, what the bondholders have claim to. If there is a question mark over the value of NAMA bonds, which replace the Anglo loans, then you could understand the problem. Is that what is really happening? Is there really a question mark over the NAMA bonds, and the entire EU guarantee in place on those same bonds? You see, I don’t understand the current turbulence in the markets – as the NAMA process works its way through the Anglo loans. If the NAMA process was working properly, then we would not witness the current rise in interest rates for borrowing. If anything, we should see the opposite. Something doesn’t feel right to me. BOH.

http://designcomment.blogspot.com/2010/09/lunar-landing-module.html

@Paul Hunt:
“The reality is that the institutional and political EU is even more determined to prevent this than the Government.”

I have no reason to disbelieve you, but on what do you base that assertion? I’m not challenging it, but I am curious about the source of your certainty.

bjg

@paul hunt
“The only thing the Govt. can do is to tackle the excessive costs, inefficiencies and anti-competitive practices that are suppressing the resilience of the domestic economy”

Hear hear.
I saw this article earlier http://www.rte.ie/news/2010/0913/fiannafail.html
We live in hope.

@Eoin,

I know the Brierley paper on the UK SRR has been linked to many times already, so it won’t be news. But doesn’t it go a long way to answering how additional legal resolution tools could be put in place?

http://www.bankofengland.co.uk/publications/fsr/fs_paper05.pdf

@ Paul Hunt,

Brian Luceys last paragraph in the IT article was not a hint. It was a recommendation that democratic principles on which this country is based be abolished.

When pressed in the 387 thread BL was not forthcoming about who this unelected foreign power would be.

The fact that none of the 39 or 40 commenators on the IT article website picked up on the significance of the last paragraph can politely be described as dissappointing. Or perhaps those commentators who did question the last paragraph were censored by the moderators on the IT website. We may never know.

There can be no doubt that if Ireland did renege on some or all of our foreign borrowings / bondholders AND handed over the keys of the country to some unelected foreign entity that they would seek revenge, they would be free to rape Ireland as they wished.

While Ireland has many problems, it is still a more favourable alternative to the politics / corruption of some other juristictions. If one want to complain about inefficiency / and civil service mismanagement then you need to look outside Ireland, have a look at Brazil for example.

Brian Lucey has my admiration for sticking his neck out, not easily done in such a small country. But his last paragraph in the IT article was a recommendation too far.

@BJ Goggin,

“By their deeds shall ye know them.”

I think there is enough evidence out there to indicate that the institutional and politcial EU is as keen to kick this can down the road as ou own government is. And on this board I find the arguments of Tull and Ciaran O’Hagan convincing.

Yes, it is still only a contention, but I have seen no evidence to refute it. And I think it would be unwise to proceed as if it weren’t true.

@Paul Hunt:
Thanks. That’s fair enough: I’m not challenging, just curious.
bjg

Conor,
agreed re: “constant fallacy and spin”.

Agree with AMcGrath’s key point as well re: surprising absence of a clause that the uarantees would be rendered invalid by lies or lack of disclosure, considering the amount of money involved, and the legal expertise presumably available.

It seems reckless the government made these guarantees without requiring bank directors and top executives to provide full disclosure regarding any potential negative circumstances.

In a small equity investment (e.g. less than €100k from a State or independent professional investor) such guarantees are normally required and form part of the boiler-plate text. They must be accompanied by a disclosure letter advising upfront of known liabilities and risks.

Why weren’t all the banks’ directors and executives asked to provide full disclosure, with the risk of severe penalties for incomplete or false disclosure (including civil or criminal prosecution or personal liability)?

Is there any way under FOI to discover

* whether such guarantees/warranties of full disclosure were discussed before the guarantees were given?

* who was responsible for the legal language on that fateful night, and did they have experience with basic contract law?

* why weren’t these guarantees structured differently to require accountability in the event of lies, obstruction, obfuscation or otherwise less than full disclosure?

@JohntheO
One of the problems is that government growth predictions are being based on the most optimistic scenarios. I agree with you that we shouldn’t base on the most pessimistic either, but we should at least keep them in mind. Better to be wrong on the downside and have spare cash than the opposite.

It is going to be difficult to come up with a benchmark growth figure based on past performance. The bubble started, in my view, earlier than most give it credit (I reckon 2002 at the latest) and was significant from early on – so there is a range of past growth figures that must be considered suspect in establishing a benchmark.

Under current policies, the likelihood of a lift-off like in the ‘nineties is also unlikely, though the unemployment and underemployment rates suggest large capacity available for it to happen. It is possible, but it would take a concerted effort from government to make it happen. There is little evidence of that.

@zhou
“So far we have done everything right”

Have you also taken leave of your senses – or did you forget to include the “smiley”?

@ AMcG
I mean we need to grow the economy and create jobs.

Pretty uncontroversial point I would have thought.

@All

‘While the suicide numbers hit record levels, parents weep at airports, waving goodbye to another generation off to far-flung places to start a new life. Around 460,000 people are looking for work, doctors’ surgeries are inundated with over-stressed customers, and we have not had one credible policy idea or plan to get us out of this mess. There is a vacuum and paralysis at the heart of the leadership of this country, in the place it is needed most. The hidden misery behind every statistic is a shameful indictment of how recklessly the economy has been managed.’

Paul Sommerville in realist mode ………..
http://www.independent.ie/opinion/analysis/we-must-discard-futile-delay-and-pray-strategy-2334554.html

@Ger
Who is questioning that we need to grow the economy and create jobs? What I question is that this is “the only thing the government can do”. Paul seemed to me to be suggesting that the bank bailouts debate is essentially over and all we can do is look after other housekeeping costs, and just grin and bear the bailout costs.

@OAC
It is good to see that someone agrees. I raised this issue on this board over a year ago, and apart from Karl assuring me that the guarantee included no such clause, there was absolute silence on the subject. This also astonishes me. For me the absence can’t be considered an oversight, since it would be instinctive to protect oneself from possible fraud. Did our government and civil service conspire to put in place a charter for fraudsters?

@jto
have to agree that speculating on growth for five years out is a risky and dubious method of sorting out the current problems. Surely a more cautious forecast would command more respect.
On AIB, now that we know that Santander want all of the good assets of the Bank would’nt it have been preferable if the Government negotiated with them to take over the entirety. It must be possible to make them take some dubious (Irish) assets in return for the prized ones and end up with a credible lender able to kick start the economy

There is a third article about the Irish banking crisis in today’s (Monday’s) FT. It is by John Dizard and is on page 15 in the FTFM supplement.
Subject matter, Anglo bonds.
Worth reading

Fair enough, Sporthog. My apologies.

Meanwhile, back in bank land, my political views having been discussed, any further advances on how we save ourselves/the banks/either/none of the above?

Every single economic financial prediction, reason and logic given by the current administration has been overthrown by circumstance. I am actually amazed that they are still there.

If they were in any private sector job the company they were in would have been bankrupted or NAMAed.

If they were in the public sector in any other country other than Ireland or North Korea they would have fired for gross incompetance. In China they would could facing a much more unpredictable future than a gold plated pension and a career in teaching or the law.

I don’t think we are ever going to change in this country and will spiral down to Portuguese or below living standards unless we can change the major psychological problem we have with accountability.

Only a short few months ago Minister Lenihan and numerous other worthies assured the public categorically that the excess borrowing to keep NAMA and the banks in business would be understood by international observes as separable from the deficit and government debt. An ocean of waffle later and it is clear that that particular fiction has been well and truly holed. What new shibboleth will emerge from the FF think-in one wonders?

Brian Lenihans apparent response has been to promise more cuts in the budget. I know elements in the market will welcome this but what’s the overall view?

i’m sure the bogwater economists in de party will be preparing a nixon style pr push against lionel barber

@Eureka
Well it’s not very productive, but I guess we really don’t have a choice about cutting another €3bn off the deficit. Apart from our commitments in the Common Economic Policy, we simply have to keep pushing to close the gap between income and expenditure. Increased taxation should be part of it too, but it won’t cover the necessary gap.

It’s not about economics really, we’re into the realm of finance -and whatever is good for the nation’s economy is a bit moot when we have such dramatic short-term funding requirements.

Although I have no idea where the €3bn will come from. I think the pensioners shouldn’t get the free TV licence -but I suspect that won’t do it 🙂

Frankly, cutting alone won’t solve anything, and it’s clear that we must do something to try and cheaply give an impetus to growth. Even a small amount of growth would do much to reduce our liquidity problem. The calls in recent days by industry leaders for a stimulus to non-wage competitiveness is welcome and should not go unheard.
http://www.irishtimes.com/newspaper/finance/2010/0913/1224278755964.html?sms_ss=facebook

Regulatory reforms to boost our competitiveness should be kicked to the top of the political agenda to maximise the output from our already overburdened resources. If we’re going to pay for ourselves we have to put all those unemployed back to work, and we have to do it in a way that won’t cost an arm and a leg.

Fixing the budget through cuts alone is not feasible. We have to get the hole created by unemployment down too.

“Prof Lucey misses the point that the political party with the most nationalist outlook has cost us our independance.”
errr, no not really, I kinda did notice that. Thanks tho, for reminding me to stop being so namby-pamby and say what I really mean.

Apart from the various FT articles today, Morgan Stanley also published a note “Ireland; Mastering the Challanges Ahead”;

“Key conclusion: Ireland is facing major challenges.
But, if there is one economy in the euro area that should
be able to meet such challenges, it is the Irish economy.
This is because Ireland is fundamentally different from
other peripherals because it is a fully deregulated, fully
liberalised, flexible market economy. Hence, it should be
able to adjust to the new post-crisis world more swiftly.”

and

“Looking for a circuit-breaker. The government continues to
be supporting other banks as well. It announced on September
7, as widely expected, an extension of its guarantee scheme
for short-term bank liabilities from September 29 to December
31, 2010. Not much has changed since we described the
vicious circle (not just in Ireland) of sovereign and banking
crises mutually reinforcing each other because governments
need to backstop banks, while banks hold large amounts of
exposure to the government (starting with the NAMA bonds).
As we have argued before, only restructuring and
recapitalisation of the banking system can act as a
circuit-breaker for this potential spiral. We
see the announcement of a resolution proposal for Anglo Irish
as one first small but significant step towards this goal.”

and

“At the sovereign level, Ireland’s funding and liquidity position
remains robust. However, guarantees extended to the
banking sector have led to a non-trivial increase in sovereign
default risk, especially given that bank risk is likely to be
highly correlated with the business cycle.
Nonetheless, we think that the current implied level of
sovereign default – a one in three chance over the next five
years – is too high; we recommend positioning for an
improvement in sentiment through the bank debt, based on
the view of our bank credit analysts.
We also think that there is an asymmetry in the pricing of
senior bank versus sovereign CDS; here, we think the
sovereign is the better exposure, given the recent tightening
of bank versus sovereign spreads.”

@ Zhou, the no creditor left behind policy

@simpleton

IMHO the key (but not the only) driver of Irish CDS and sovereign spreads is not the Anglo pit but the global growth outlook. Sovereign credit risk rises as markets fret about double dips and eases when we get some good economic news out of the US and/or China.

JTO again:

Yes, you are quite correct, the global growth outlook is critical, principally through its effect on Ireland’s growth outlook. In connection with the latter, one of the factors influencing bond markets in recent weeks has been much media comment to the effect that recent economic statistics have showed growth in Ireland petering out.

Wolfgang Munchau (in the quote posted by Brian Lucey) was probably referring to this when he said: “In the summer, it looked as though the strategy might work, as the economic data came in better than expected. That was then.”

I take “That was then” to mean that (in his opinion) the economic statistics have got worse just recently. However, it is very debatable as to whether or not they do show that. As is usually the case, the economic data paints a mixed picture.

Some recent statistics point to a slowing down in growth. These are:

number on live register (rose in May, June, July, August)
retail sales (fell in July after rising in Q1 and Q2)

However, others point to an acceleration in growth. These are:

manufacturing output (surged to all-time high in July)
new car sales (up 125pc y-o- in August)
number of redundancies (fell in August to lowest since 2007)
number of ppsn numbers issued (first y-o-y increase in August since 2007)
merchandise exports (similar trend to manufacturing output)
construction PMI (published today – highest value since 2007)
tourism numbers since the ash cloud problem went away
agricultural incomes (recovering strongly on back of good weather and favourable price movements)

As of now, it is not possible to tell which set of statistics is providing the more accurate indicator. There is a particular question mark over the seasonality of the live register figures, which will only be resolved at the end of the year. This was discussed on previous threads. If it turns out that growth in Ireland didn’t slow down at all in Q3, then questions will need to be asked as to why so many media commentators and economists wrote that it did (with predictable effect on bond markets). Of course, if it turns out that they were correct, they will be totally exonerated.

What is really needed is for some competent body to calculate a composite index from all the individual statistics that are published each month, similar to what is done in the US.

Sporthog

I would say Lenny’s statement that 3bn in cuts is a minimum sent a few backbenchers to the bar early. A few more of these statesmen will probably take the course of principled opposition to savage cuts.

Lions in their constituencies, mice in the Dail

@Eoin

All we get from from present lot is ‘wealth destruction’ – where and when in past two yrs have we seen policies on “real” wealth creation? In previous thread John The (eternal) Optimist provided breakdown on ‘manufacturing’ – you know – making stuff and selling it on/exporting etc

http://www.irisheconomy.ie/index.php/2010/09/09/goldman-sachs-on-ireland/#comment-72559

@John the Optimist

I no longer believe that you are slouching with da laptop on a couch down in Mount Street ……… (-;

All this on and Conor lenihan launching a book denying evolution.

No

@ Bond Eoin Bond

‘……the outlook for growth is more of an issue here than the bank bailouts, they have just added an admittedly huge negative thread to the story’

Yes, but isn’t is all part of the same thread ? Our banks’ love affair with property has always been the biggest drag on economic development. Why has our domestic economy remained so weak over the decades since independence ?

Fiscal correction can probably be shoved through without riots, but the negative impact on final demand, asset values, and Irish bank balance sheets may well undo any good that is produced.

Lads, give the markets what they allegedly fear and default. Result- massive cuts in public expenditure and massive deleceraging of the banking system. We have to continue on the current road until Europe changes tack. We wiu not be allowed default on our debts until we restruture the public finances. The German govt is not going to stand over a transferring wealth from their taxpayers to ours short of serious pain. Tull

Dr. Constantin Gurdgiev speaks openly about his own Situation!

….The numbers are frightening. Frightening to the point of getting me worried about even my own family ability to endure this crisis.

American philosopher and writer, Ayn Rand once said that: “It only stands to reason that where there’s sacrifice, there’s someone collecting the sacrificial offerings. Where there’s service, there is someone being served. The man who speaks to you of sacrifice is speaking of slaves and masters, and intends to be the master.” Recall Minister Lenihan’s statements about the need for ‘patriotism’ in his two Budget 2009 speeches. With the events transpiring around us today, Rand’s words are now no longer a catchy turn of a phrase…..

He continues…

….the sacrifices and patriotism of our politicians’ speeches has turned the people of this country into serfs to the vested interests of Social Partnership and banks’ elites. They speak of a sacrifice, intending to be the masters. My family, and millions of other ordinary people around this country are now just meaningless pawns in their game for survival.

STANDING OVATION! …. BRAVO Constantin!

http://trueeconomics.blogspot.com/2010/09/economics-13910-our-crises-are-more.html

Best

Georg

@Eoin

It seems the market is rejecting a lack of a debt restructuring, and in particular is rejecting the cost of the banking rescue. If we were to cap the cost of the banking bailout, by whatever means, then would the market really hold it against us in terms of sovereign debt?

We have taken the medicine, we have lead by example and we can credibly claim we will continue down this path. However, it now appears that mathematics rather than individuals will be the primary arbiter of whether we survive.

A man with a terminal illness will eventually opt for last resrt high risk surgery which may save his life as the consequence of inaction are certain. The risk of death becomes no risk at all.

There is also a wider context insofar as the EU needs to face up to restructuring. Restructuring or withdrawing a guarantee given at gunpoint and which lacks ultimate credibility may be politically, morally and financially acceptable.

It may be enough to let the guarantee lapse and to lash out a special resolution scheme at the same time. Let’s hope so. However, if that won’t suffice then we will need to take more definite action. We will probably require the assistance and co-operation of our European colleagues to make this stick. However, it is clear there are political and economic positives for them too.

It is not in our interest, or in our EU neighbours’ interest, for us to take anyone by surprise. However, when Standard & Poors, the bond markets and the FT (twice) all signal the cost of the bank bailout is the problem then it will hardly take anybody by surprise if we address this.

@Eoin

I think many of our retired civil servants are more willing to contribute to the cause than the unions would have us believe. I have spoken to two retired teachers recently who think it is not only inevitable but also necessary that their pensions will be cut.

@BL

We’ll see!

@ Simpleton

of course the bank guarantee is part of the problem, but so are a load of failed banks. There’s no easy answers or silver bullets here. Basically we either default on a large amount of our financial systems obligations via a near implosion of the banking sector (absent the guarantee), obligations which given the systematic problems underlying them many foreign investors believe to be “our” collective problem, or we hope that by using the public balance sheet to support the financial system, we can hopefully come out the other side battered and bruised but still in one piece. At some stage if things get worse, we may have to discuss restructuring of our debt, but that will not happen for another 3 or 4 years probably. At the very least Europe expects us to work as hard as we can to pay back our debts, they simply will not accept us reneging on them at the first suggestion that we’re not even willing to try (80% debt/gdp, lots of big public sector pay and pensions left untackled). The situation may be tough and difficult to stomach, but it is by no means beyond repair. As people have alluded to on here, the political will may be what is lacking, rather than the resources or options.

@ Zhou

im skeptical that they are willing to give up their pay and pensions, especially having seen the scenes outside the Dail by the Grey Brigade (who granted are public and private) at the merest suggestion the medical card system be reformed. But hopefully you are right.

Imagine if the FT were not commenting on us. We could still think that the proponents of restructuring were all deluded. It’s nice to remember that just because we are lead by baboons we are not all monkeys.
Conor Lenihan’s denial of scientific truth is as the same as his brothers denial of economic truth.
Honestly people…….!
If Darwin saw Fianna Fail he would doubt evolution too.

@Eoin
I think your own logic trips you up. You rightly identify lots of deep seated problems. hence no easy solutions. We can all agree there. You identify lots of failed banks, about which we need to do something. All agreed. But you cannot go on to argue, as you seem to do, that ‘therefore’ we can do nothing about the guarantee. I think that’s called a non sequitur.

Eureka,

Not correct, Darwin would just conclude that sometimes evolution led up blind alleys. Ther have to be some examples of species that ended up in failure.

@P O’Grady Walsh
MS said: “Ireland is fundamentally different”
Oh here we go again… look what our fundamental differents did to us the last time…

@JohntheO
“What is really needed is for some competent body to calculate a composite index from all the individual statistics that are published each month, similar to what is done in the US.”
Absolutely. We need to know, as a random list,
– what every house/commercial property/piece of land sold for
– LTVs by granual sale (i.e. by type of property)
– a granular makeup of ‘industry’ and ‘services’ – it is ridiculous that we cannot tell hairdressers from IT exporters. We have no way of figuring out the size of the ‘knowledge economy’. We don’t know what’s in it, even if we did, we don’t know how each bit is doing. How can we be expected to see if policy is working? (Though I suspect this is the reason we don’t get the info).
– we need to see where departmental spend is really going. At the moment, if you want to find out how much the quangos cost, for example, you have to look at the individual accounts for 800 of them – some of it is NDP money, so is in the capital spend, some is ongoing so is in the current spend of some departments. The whole accounting system of the government is a shambles.
– every month we hear of some new jolly claim our elected representatives get (ones that are barred to lesser mortals as allowable expenses). This week it is all-in think-ins at 5* hotels. I’d like to go on a brain storming session myself and claim it against tax… I’m still wondering how I could go through a 750 euro mobile phone every 18 months
– we need to see a break-down of the sorts of products that are imported into the country and the value of that produce – the first step in building indigenous exporters must surely be to build local companies that can supply an alternative to some imports (whether they be goods or services).
– The last incomes breakdown from the revenue commissioners was 2007…
– and on and on… and, as you say, timely. In this day and age, what are we doing producing only quarterly figures?

@Tull
“Lads, give the markets what they allegedly fear and default. Result- massive cuts in public expenditure and massive deleceraging of the banking system. We have to continue on the current road until Europe changes tack.”
I’m afraid so. I am not sure we need banks (local banks that is). But the Pandora’s box of the guarantee means that now we are married to the banking system, we aren’t likely to get away with defaulting on it without funding for the deficit drying up. Closing the fiscal gap must be, as it always should have been, front and centre. The choice was the banks or the economy. That choice was made two years ago…

@Sporthog
“Perhaps if we were to make a commitment that the money borrowed will be paid back but not at 6%+, but 3.5%.”
Yup. That is why I reckon we should promissory note the bondholders out of it and stick the lot on repo red. It is no more of a gamble than anything else that has been tried. If the ECB want to play hardball on not letting the banks fail, let them subsidise the action. That’d be 1% funding all the way and we could close down the NTMA. Using the current interest payments (what, 4 bn a year?) to repay the more expensive debt in the market without the burden of interest would reduce the duration of the impact of the state’s excessive debt on the economy.

But we will probably have to wait for the ECB to realise that we aren’t going to be able to repay both capital and interest and to come up with the scheme all by themselves. Then we can say “magnifique, wunderbar, you guys, you’re just great”…

@Eoin
I think you are too optimistic. How long will Greece last with interest rates around 11% on sovereign debt, and the ensuing private sector credit contraction underway? As they sink we sink too, because we are all part of the same ship now. We might even sink faster as our problems are far more complicated and could lead to more bank runs that sink us quickly. I’d guess sometime in 2011 it becomes clear that restructuring is needed. They will then restructure more than one country quickly because we all know it can’t be done singly within europe.

Hmmmm, no posts since 9.37pm, everyone is quite clearly watching Freefall…

@ John

if you include all the foreign banks operating here it might be true (Depfa, Germany’s bigger and equally as ugly version of Anglo, probably had a balance sheet around 150% of our GDP by itself). But if you deduct them, which most people do when comparing, then our number is far lower (anyone remember the exact figure?).

@ Mr Bond,

I was just thinking the same thing……….. obviously something was on the telly.

@All and BL

Thought we had a Minister for Science & Technology? Maybe the Minister for Education has got a good deal on textbooks from Texas? Or has he joined the Tea Party?

@John
According to Davy in 2009:
http://www.davydirect.ie/content/pubarticles/econcr20090217.pdf
The six Irish owned banks had liabilities to the value of 575 bn or 309% of GDP. But that is the wrong side of the balance sheet. The quote was about indebtedness. We know from Mr. Neary (no sniggering at the back there) that bank assets exceeded liabilities by 100 bn at the time of the guarantee.

So about 600 bn in loans (allowing for other sorts of stuff?).
That’s just the six Irish based banks.

What about Haven? Smart? BoSI? KBC? ACC? Ulster bank? etc?

Then there is the amount that has been issued in covered bonds, about 47 bn?

Then there is the corporate debt binge – not all of which was bought/sold domestically.

Then there is government debt and government guaranteed debt – GGD of about 46 bn in 2007.

IIRC, GDP was about 187 bn in 2007, so 700% would be 1,309,000,000,000 which looks a little big. Even in GNP terms it was 1,047,000,000,000 which still looks too big.

@the loan arranger
I haven’t fogotten that, what I wonder about is the composition of it. My impression is that most of it, bar some residential lending (in particular BoI – a wave to BoI Reading who gave me my first mortgage in England) is to Irish, eh, awntrupinners… Quinlan, Treasury and the like or other ‘investments’ – Stuyvesant Town etc.

I agree with you about Depfa (and the various Landesbanken SIVs); how many ISTCs are there in the IFSC?

Is there any limit to the amount of statistical misinformation churned out by leading economists in this country? Before the site organisers get too worked up, I should point out that I’m not referring to economists on this site. This thread has links to articles by two leading economists in Ireland. David O’Donnell gave a link to an article by Paul Sommerville. George R. Baumann gave a link to a speech/article by Constantin Gurgdiev. Here they are again for those wishing to read them:

http://www.independent.ie/opinion/analysis/we-must-discard-futile-delay-and-pray-strategy-2334554.html

http://trueeconomics.blogspot.com/2010/09/economics-13910-our-crises-are-more.html

I’m sure that most people in Ireland, reading these articles, will swallow whole everything the two economists say and be horrified. Me, I follow a different line. Based on years of observation that regard for statistical accuracy among some Irish economists is far less than among those of a more genuinely scientific bent, such as rocket scientists, nuclear physicists, and racing and football tipsters, I always check the figures out at source. They invariably turn out to be false. The following are just a few snippets of the statistical misinformation contained in the two articles. They are not directly related to this thread, but it is others who have linked to them and I’m just correcting the misinformation contained in them. Of course, there is an indirect link to this thread in that it highlights how wildly inaccurate many leading economists in Ireland currently are in their analyses, and what total disregard they have for statistical accuracy.

emigration:

Sommerville writes: “parents weeping at airports, waving goodbye to another generation off to far-flung places”

Gurgdiev writes: ” By my evaluation 200,000 have left Ireland in the last 24 months”

FACT:

The CSO estimates net emigration of 7,800 in the year from April 2008 to April 2009. This is the definitive figure. The figure for the year from April 2009 to April 2010 is not out yet, but should be out soon. However, the QNHS figures are out up to February 2010. These have proved reliable indicators in the past. They indicate net emigration of around 40,000 in the year from February 2009 to February 2010.

So, net emigration in the last 24 months is of the order of 50,000, not the 200,000 claimed by Gurgdiev. Moreover, virtually all of this was foreign nationals, mainly Poles, returning home. The CSO figures show virtually no net emigration in the last 24 months among Irish nationals. Sommerville and Gurgdiev have simply elevated the return of about 50,000 (about 10pc of the total in Ireland in 2008) foreign nationals to their own countries into a new Flight of the Earls and 1950s-level emigration.

suicide:

Sommerville writes: “suicide numbers have hit record levels”

FACT:

This is indeed true, but only if we ignore the increase in population, which is totally unscientific. Even after the increase in 2009, the suicide rate is well down on the record level it hit in 1998. Thus, in 1998, at the height of the Celtic Tiger, there were 514 suicides in Ireland. And, in 2009, in the depths of the global recession, there were 527 suicides in Ireland. Thus, in number terms the previous record has been broken. But, after we take the increase in population into account, the suicide rate is well down on its 1998 peak.

1998:

number of suicides: 514
population: 3,703.1 thousand
suicide rate: 13.880 per 100,000 population

2009:

number of suicides: 527
population: 4,459.3 thousand
suicide rate: 11.818 per 100,000 population

Hey, why let facts get in the way of a good dose of hysteria-mongering?

For the record, the suicide rate in Ireland continues to be much lower than in other northern European counties like France, Belgium, Germany, Austria, Nordic countries, eastern Europe countries, although higher than in Mediterraenean countries (these have the lowest suicide rates in the EU, probably weather-related).

unemployment:

Sommerville write: “there are around 460,000 unemployed and looking for work”

Gurgdiev writes: “we have around 700,000 surplus workers”

FACT:

The most recent QNHS survey puts the number of unemployed at 275,000, not 460,000 or 700,000. This is the definitive figure. The 460,000 figure is from the live register, which includes lots of categories of persons not counted as unemployed in other countries, mainly those on short-time etc. Moreover, 275,000 exaggerates the figure for the shortfall in jobs. Unemployment is never zero in any country. At the peak of booms, when shop windows are plastered with notices begging for workers to fill vacancies, unemployment still hovers around 5pc. A 5pc unemployment rate in Ireland would be full employment (as it was up to 2007) and, if ever achieved, would trigger massive net immigration (as it did up to 2007). A 5pc unemployment rate in Ireland equates to 105,000 unemployed, roughly the 2007 figure. So, the shortfall of jobs in Ireland currently, as compared with 2007 levels (when there was massive net immigration), is 170,000, not 460,000 or 700,000. The current unemployment rate in Ireland, around 13pc, is 3pc higher than the EU and US averages. However, the US figure is an under-estimate. Finfacts estimates that, if calculated on the same basis as in Ireland, the US unemployment rate would be 16pc. The employment rate in Ireland is approximately the same as in other EU countries, while the number of hours worked is higher.

@Brian Lucey

All this on and Conor lenihan launching a book denying evolution.

JTO again:

Actually, he’s pulled out after a media campaign against it.

Shows how backward he was to agree to it in the first place. Imagine, in this day and age, a government minister actually believing that the Dublin 4 media would tolerate freedom of spech or diversity of opinion.

@Robert agree about integrity.

But even assuming integrity, if youre to take the “we are where we are” argument and look at the current approach… I think government strategy can only work if there is serious sustained global economic growth for the next decade. (my guess is enough to mean Irelands GDP doubles in that timeframe so growth of more than 7%)

Thats me trying to be objective. If that happened, our debts would look to be going in the right direction in a couple of years and then start to look more manageable.

The ‘burn the bondholders’ are trying to get the debt manageable by repudiating as much as possible of it up front. I agree with them also but would point out that those in charge have been very effective at reducing the scope for any such action by this or any future government.

I disagree with JTO on most things and Im sure JTO will have a different number (and in all fairness he will probably have spent more time and expertise in arriving at it)

But at least theres a recognition that glowbal growth is needed in order to make this work.

Its very hard to put a figure on it because Ireland’s economy will continue to shrink without global growth. Global growth is needed and then our share of this growth has to be captured. and some allowance has to be made for productive borrowing as well as the looting that is ongoing plus the borrowing to bail out the cronys. Which brings us back to integrity.

I’m not saying such growth is going to happen or is likely, I dont know….just that that is what is needed.

@JtO

Now hold on just a minute, Mr Optimist! Dr Gudgieriev talked about the number of people leaving the country, whereas you talk about net emigration.

As you well know, they are not the same thing. You’re figure takes into account those entering the country and leaving, while his does not.

You also persist in talking about GDP, when you know full well that for income per capita purposes, we should be using GNP and for tax (and budget purposes) we should use GNP + 0.125*(GDP-GDP), which we could call “Gross Revenue Income Taxable in Ireland” (GRITI).

This is not to be confused with Net Income Taxable in Ireland (NITI) which also takes into account depreciation, but that would really be getting into the NITI GRITI…

…buh-bum tschiiiing!

@Eoin,

“Honestly, if you’re asking me what we should do, it’d be much more along the lines of getting the deficit in order and then looking for a restructure. Its far easier to threaten people with a default if you dont have to borrow off them tomorrow again.”

Once again, you’ve produced some wheat among the chaff. Our Government probably has the shortest time horizon (up to 18 months) of all the players in this game. The institutional and political EU is probably looking at the 3 to 4 years you indicate. The focus in that period is on achieving longer-term fiscal sustainability throughout the EZ, but particulary in the southern and western periphery.

The sovereign bond market, in so far as it has a collective view, doesn’t want to force default – though there is money to made by some players when a gap opens between reality and the political fiction and one player’s loss is a profitable opportunity for another. It mainly wants to establish how strong is the resolve of the institutional and political EU to shore up the Euro system. In April and May of this year it went for Greece and forced the EU to respond – with the IMF on board. In the Irish case all they want to know is precisely how much bank debt is going to be imposed on the sovereign and how solid is the Government’s commitment to restore fiscal stability. If we don’t give them this we will remain as their battering ram of choice – as Greece was earlier in the year – to force the institutional and political EU to respond.

The NTMA, prudently, has provided a six-month shield (apart from some limited forays to roll-over short-term paper), but these questions must be answered latest by the end of the year. If these questions are answered convincingly (and, ideally, accompanied by a report from the State Asset Review Group indicating what state assets should be sold and providing a range around what might be realisable) the heat will be off.

However, in terms of fiscal adjustment, I would counsel against excessive reliance on expenditure cuts. Even though overpayment, underperformance and inefficiencies may exist, the State’s share of the economy was not excessive in Ireland; the bigger problem was how this expenditure was being financed. There is now a once in a life-time chance to shift taxation from productive labour (a good) to land and property (sources of rent) and to GHG emissions (a bad). And there is a chance to root out excessive costs, inefficiencies and anti-competitive practices.

The problem is that, while Sarkozy, Merkel and other EU leaders may be looking at the prospect of re-election in 2 – 3 year’s time, this Government is focused on minimising an inevitable electoral rout. Therefore we’re into soft option, ‘don’t rock the boat and don’t upset anyone we don’t have to’ territory.

It’s a dismal prospect.

@ Eoin,

“Honestly, if you’re asking me what we should do, it’d be much more along the lines of getting the deficit in order and then looking for a restructure. Its far easier to threaten people with a default if you dont have to borrow off them tomorrow again.”

But here again you betray your bondholder loyalties. For, it is equally true that it is much easier to ask Irish citizens to accept austerity if they see that those capitalists who took unsecure risks are asked to pay for their own losses.

@JTO whats important is we get more than our fair share of whatever growth happens. But there is a minimium growth that must happen in order to pay for the debts and looting that have been facilitated and instigated by those dictating policy. Right from Cowens ignorant boast that no cheques was too big for the bankers through Anglos many frauds through the consultants stealing a living from the taxpayer via NAMA, the culture has been set.

Care to put a figure on this? Mine is the country needs to double in size to keep feeding the tapeworm.

I’ve been spending some time is Asia the last 2 years because of my work and I identify with Dr Gudgieriev’s blog. It is clear to me a lot of countries have shrugged and moved on from the events of 2008, largely because it didnt affect them as much.

Same as we shrugged when a similar crash happened to some Asian economies in the nineties. Those that crashed then had the benefit of the dot com/consumer/real estate/credit bubbles in the US/west to help their recovery.

Im pointing out we need something similar, its working for my business but I dont think my business is typical.

Dr Gudgieriev is back from a country which believes itself to be on the up, misses the vibe there, and has taken a fresh look at the shennagians in Ireland. Where the focus is on rewarding well connected failures at general expense. Which is the road to poverty.

@ JohnTheOptimist

There is little doubt that global growth will continue and the dip in 2008/09 was the first since 1945.

However, economic stagnation in Japan with 35% of its workforce as temps earning less than the Irish minimum wage and middle income stagnation in the US, suggests that growth in developed economies maybe below trend for many years.

Besides ageing costs, public debt is a problem for many developed countries as is globalisation.

The US real GDP grew at a 3.4% annual rate in the period 1960-2007.

From 1980 real median income stagnated and the rise in the average home size was funded by equity release from rising property values and debt.

Some economists say the ‘new normal’ US trend rate will be about 2.5% in the next 10 years.

The interesting evolving pattern of development in emerging economies and developing economies led by China is the rise in both trade and investment, bypassing the rich countries.

There is still a lot of catch-up; China’s population is 55% rural; India’s is at 73%.

As for Ireland as happened with computers and electronics, the dependence on pharmaceuticals/ medical devices, accounting for more than half of merchandise exports is a vulnerability as is the dependence on US firms in general.

All the big US firms in the pharma sector are located in Ireland but overall, the FDI sector has stalled as a job creation engine with employment back to 1998 levels.

Intel’s Paul Ottellini said last July that it would costs $4.5bn to open a new semiconductor plant in the US – – more than $1bn more than overseas; the Sunday Business Post reported last Sunday that 500 jobs are at risk because of the possible decommissioning of one of the older plants in Leixlip.

So a decision to expand in Ireland is not a simple decision because of the huge investment required.

Besides debt, Irish unemployment is likely to be a drag on growth for many years.

@Garry

Dr Gudgieriev is back from a country which believes itself to be on the up.

JTO again:

I totally agree that Russia is on the up.

It is the largest country in the world, and lots of natural resources. About time it was on the up. Marxism up to 1990 and corruption since 1990 have held it back. What’s amazing, given its natural advanatges, is how far behind it currently is. According to last week’s World Economic Forum report, GDP per capita in Ireland in 2009 was $51,356, in Russia $8,694. Lop off 15 to 20pc for GNP in Ireland, and Ireland is still about 5 times as rich as Russia. So, there is plenty of scope for Russia to come up. And. of course, it is good for Ireland (and other Western countries, if it does so, since a rich Russia would be an excellent new market to export goods and services to). However, my post wasn’t about Russia. It was about Gurgdiev wildly exaggerating the level of emigration from Ireland. That is indisputable.

@ JohnTheOptimist

In general, Constantin’s comemnts are not alarmist.

Harry Truman’s comment: “It’s a recession when your neighbour loses his job; it’s a depression when you lose yours. “ comes to mind.

As I said elsewhere, the comfortable cannot understand the misery in their midst.

Constantin’s estimate of emigration seems on the high side; where are the developed countries which will absorb large-scale Irish immigration?

As far as I can see the FT have proposed an alternative approach that allows losses to be imposed on bondholders. This approach would not require a revocation of the guarantee.

It appears to me that they are suggesting

1 Pass a resolution scheme – basically copy the UK one I presume

(Does our membership of the eurozone complicate this?)

2 Stop guaranteeing new bond issues while simultaneously continuing to guarantee all deposits

3 Any bank that can’t fund itself is put into the scheme wherein the bank is quickly, and in an orderly manner, recapitalised.

The resolution mechanism would, I presume, wipe out equity holders and subbies and then seek to impose losses on senior debt and depositors.

Surely all senior debt and depositors (whether guaranteed or not) would be forced to accept their share of losses on a parri passu basis.

The guarantee implies that the state would need to make whole any losses thereby suffered by depositors or guaranteed bondholders.

My, admittedly long winded point, is that it appears to me that we would only be able to wipe out all of the unguaranteed debt in circumstances where we also wiped out all depositors and all guaranteed debt (clearly reimbursing the later two out of state funds). If we proceeded otherwise, we would be prejudicing the interests of unguaranteed senior debt holders. They are entitled to their seniority in the capital structure. We cant make deposits or guaranteed debt senior to existing debt just by guaranteeing it.

My point is the FT plan appears to be premised on an overestimation of the proportion of senior debt that is not guaranteed.

@ Eoin,

Agreed. CSO figures tell us that 2009 emigration was 50% EU-12, and that is likely to be continuing in 2010.

I can’t imagine anyone with childhood memories of swimming in the Vistula in 30 degree summer splendour will much miss the rainy 14 degree “summers” they spent in Roscommon on the building sites…

This level of net emigration is probably also not a bad thing, if it helps deflate prices a bit. At present, we are in a wage / price deflation situation of around 1.2% annualised and that is a good thing.

I also don’t think sending young lads over to Hamburg to pack boxes into the back of a truck will do them any harm. It will teach our Celtic Tom Kittens some badly needed modesty (and some not-so-badly-needed German curse words).

My only point was that Constantin didn’t just make up the numbers, as JtO seems to be suggesting.

@Ribbit
It’s the racially profiled degree of tragedy that bothers me, not the emigration. I’m an immigrant myself so I do have some knowledge. I dunno about donning green shirts: you lads need to think about the black ones you are wearing.

@ simpleton

my comment is a disgrace? Way to keep things in perspective. Unemployment is an unfortunate fact of life, and hence the reason why we are trying to increase social mobility. That they could go home to their home countries, to their friends and familes, to economies that for the most part dodged the crisis and are very much “looking up” at the moment, should not be seen as a tragedy. I highly doubt they either want or need your pity.

@Eoin
I wouldn’t condescend to extend my feelings one way or the other. It’s the racial relatavism that is a disgrace: Polish emigration OK, Irish emigration something to worry about. Think about it. Please.

@ simpleton

i dont necessarily think that Irish people being forced out of the US are victims of a “tragedy” either (even though they are actually being forcibly removed, so ill admit to some circumstances being potentially so), but no doubt i have some deeply held raciall hatred for my fellow Irish too. The point is where you’re coming from and where you’re going to – leaving your home vs returning there.

simpleton,

I agree with you. It is a sign of failure that many people who entered this country during the boom are no longer able to find work here. This is irrespective of whether or not they are from the CEE, Irish returning from Boston, from the UK of GB&NI or wherever. Irish society will be poorer for their passing.

I suppose if every one with a brain leaves, we can continue to be lead by someone who was not hungover.

@Tull,

As Eliza Doolittle might have put it,

The brains that drain are mainly Cowen to blame.

@ Cearbhall

…but EUR/USD goes through the roof as well, and equities are higher again – lot of people reckon the Fed is starting to warm up the printing press again…

@ Cearbhall O’Dalaigh

Don’t forget that the inflation adjusted peak gold price was in 1980, at $2,300.

@ Cearbhall/Michael

goldmans just had a big economic teleconference with their clients, from the wjs…

“The U.S. Federal Reserve could announce a new program of asset purchases to support a weak economy as early as November, according to Goldman Sachs Group Inc.

“We don’t expect this at the Sept. 21 meeting, but in November or December there’s certainly a possibility that it will be announced,” Jan Hatzius, chief economist at the bank, said Tuesday. He added the Fed is likely to buy U.S. Treasurys worth around $1.0 trillion to kick-start the economy.

To fight the financial crisis in 2008 and 2009, the Fed bought $1.7 trillion in mainly mortgage-backed securities, a move that helped to keep mortgage and other long-term borrowing rates low. That program ended in March. But with the recovery slowing, the Fed said Aug. 10 that it would reinvest the proceeds of mortgage bonds into U.S. Treasurys to prevent its portfolio of securities from shrinking. The question now is whether the central bank will start a new program of asset purchases that would increase the size of its $2.0 trillion balance sheet further.

Goldman Sachs expects this to happen soon given the weakness in the U.S. economy as a result of lower business inventory accumulation and a fading fiscal stimulus. The bank expects the U.S. unemployment rate to creep back up to 10% by early 2011 from 9.6% in August and to stay around that level for most of the year.

U.S. inflation is predicted to continue slowing to 0.5% by the end of next year from around 1.0% currently. That would be well below the Fed’s informal target of between 1.5% and 2.0%.

The upcoming meetings of the Fed’s policy-setting committee this year are Sept. 21, Nov. 2-3 and Dec. 14.”

Thanks, Eoin. This is interesting. The mid-term elections are on Tues. 2nd Nov. There’s no doubt that more QE is needed, but how quickly will Helicopter Ben ride to the rescue?

I see from the RTE website (link below) that Goodbody have increased their forecast for GDP growth in Ireland in 2010 to 1.6pc, the highest to date of any forecaster. Bear in mind that, this time last year, they were forecasting a fall in GDP of 3.4pc in Ireland in 2010.

http://www.rte.ie/business/2010/morningrep/download/0914goodbody.pdf

I know one statistic does not mean anything but US is beginning to look fairly strong http://www.rte.ie/business/2010/0914/usa.html
While we have been here debating default/not and austerity or not the rest of the world is beginning to see a recovery.
Unfortunately with the 12.5% rate now coming into doubt our strategy of capitalizing on that recovery through multinational exports is not going to cut it for long. (The doubt is enough to influence long-term investment decisions)
There is a new global sino-centric (not even sure it’s a word) dynamic which FF are not capable of grasping. (It’s not all China – it’s just that it provides an impetus to kickstart growth elsewhere)
After the fianna fail think in I really cannot see a way out of this for us at all. Even JTO’s optimism must have taken a dent.
Our one-trick minister for finance, Marguis de Lenihan dangles his sword over the weary populace and sadistically asks them to guess how deep he’s going to cut. Our Minister for foreign affairs cries like a spoilt brat when a mere interviewer deigns to ask him questions and our Taoiseach….well Carlsberg don’t do Taoisigh but if they did…..
For all the really intelligent debate from really well informed people on this blog you can’t but think that we really are adrift on the ship of fools.
What can you do but jump?
Thank you FF – I will tell my children about you.

@Eureka,

I think we’re seeing the first hints of the new fiscal governance regime that will be imposed by the institutional EU. The days of Ireland doing solo runs on the wing are long gone. We need to behave as a well-governed, efficient small regional economy – fully integrated into the EU political and economic entity – and get behind the German thrust into the Far East.

An allegedly ‘hung-over’ government won’t get us far along this path – and the alternatives don’t seem that inspiring either.

@ Paul Hunt

i dont do politics, but i did have Palin to be the Republican VP nominee at 60/1 back in 2008. 🙂

I think you’re probably right, she’s too crazy even for the US electorate to put into power, even one in the throes of a prolonged recession, but she could easily be a king-maker for someone only marginally less potty.

@JtO,

We’re deviating a long way from the ‘Irish Lazarus’ post that kicked off this thread, but the resilience of the US economy has global import and probably impacts proportionately more on the future fortunes of the Irish economy than on those of other EU member-states.

The US is exceptional, for all sorts of reasons, and people everywhere project on to it the image and vision that they desire. But, since becoming a global superpower, the extent and nature of its international engagement has gone through periods of isolationism, of significant and effective engagement in multinational institutions, of misguided confrontations with the perceived agents of communism and of the neo-con projection of US economic and military might.

The Obama presidency is struggling to deal with the immense damage caused by the failure of the neo-con project. The fear is that the US will turn inward. The Tea Party faction is comprised of heavy funding from some of the super-wealthy elite, rabid sections of the media that reject the legitimacy of a Democratic Party president, some useful idiots from academia and know-nothing anti-government and isolationist fanatics. Obama will have to craft a narrative that brings the ideals of the Founding Fathers alive to US citizens in today’s scary world.

It will be damn close run thing. His success or failure will impact on the well-being of millions around the globe.

@JtO:
“The US is still very spiritual and religious.”

Sounds great: like Ballymena with nukes.

bjg

One would hope that is not directly quoting Mr. Ross… not knowing the name of the company you are buying might be considered a Cardinal sin..

Hey, maybe he thinks he’s buying the ESB?

@hogan,

If he hangs around, he might get his chance!

Sounds like a whiff of badly needed pragmatic US capitalism. Of course he (and the other consortium members) will probably look for a discount on the buy price to finance this customer-friendly largesse – and still be quids in – but it could put them out of the running. This sort of customer-focused, market-moving rationality is frowned on in Ireland – particularly when the financial health of the much-beloved ‘Big 2’ remains a cause for concern.

@ Ceabhail

wow, he’s pretty bullish on Ireland!

@Cearbhall
I reckon he’ll be more interested in the NAMA bad stuff. Sell the loans to him and let’s see how many of the borrowers really have no money…

Hmmm, not quite the done deal Ross initially suggested…

*WILBUR ROSS SAYS IRELAND ‘YET TO MAKE A DECISION’ ON EBS
*ROSS SAYS ‘OPTIMISTIC’ HIS GROUP’S BID WILL SUCCEED

So Wilbur was kite flying – must be a paid up member

.
@ hoganmahew

NAMA is immune from the Freedom of Information Act.

.
Highly unlikely and certainly not under the current government.

Brady Bonds For the Eurozone
Simon Johnson and Peter Boone
http://www.project-syndicate.org/commentary/johnson12/English

“Ireland’s banks financed their rapid growth by borrowing from other European banks, so the health of Europe’s financial system has become entwined with the survival of these insolvent banks. It is no surprise that the ECB is now Ireland’s largest creditor – through buying up its government bonds. In the latest data (through the end of August), despite being two-thirds the size, Ireland received more ECB financing than Greece – totaling 75% of Irish GNP and growing rapidly.”

… nite …

@JtO,

Many thanks. I noticed the numbers were a bit skew-whiff, but confidently expected you would be on the case – and you didn’t disappoint.

But please don’t damn all economists. This ‘analysis’ is supportive of the polemic being advanced by the ‘progressive-left’ and, because of this, it may not have registered on the radar of those with no axe to grind.

We don’t even know precisely where we are now, not to mind what’ll happen in 6 to 12 months time. There are huge uncertainties because the economy has taken such a huge jolt. The normal interactions that support economic activity either are not, or may not be, functioning properly and some are clogged up such as bank credit.

I agree that the private sector economy has huge resilience, but it is being suppressed and retarded in all sorts of ways. The Government has no option but to progress with the fiscal adjustment (which is what the progressive-left is really attacking), but it is politically hamstrung in terms of the composition of this adjustment. It could combine some expenditure cuts with a shift of taxes from enterprise and labour to land, property and ‘bads’ – and increase the take, but it nurtures the hope that it won’t be annihilated at the next election and doesn’t want to upset too many people. And it doesn’t want to go near land and property as that could overturn the entire NAMA and bank resolution applecart.

The ‘progressive-left’ is probably right in asserting that how the Government is going about fiscal adjustment is damaging the economy, but they would be the first to oppose any rational composition of fiscal adjustment (and other reforms in the state and semi-state sectors) that would minimise the damage and enhance the performance of the economy.

@Paul Hunt

But please don’t damn all economists.

JTO again:

Point taken.

Naturally, I exclude you from my criticism. I notice that, even where I don’t always agree with your conclusions, you are always very strong on statistical precision. I am too, I hope.

Alas, this is not true of lots of economists in Ireland, particularily the media ones, where statistical precision is always sacrificed in favour of sensationalist headines.

Forgot to mention that the comments above exclude all the big ticket one/some time current expenditures such as anglo etc. that we had last year and expect more of this year.

We’re saved!

Ireland ‘second richest in EU’

http://www.irishtimes.com/newspaper/breaking/2010/0916/breaking25.html

bjg