342 thoughts on “Donal O’Mahony Disagrees with Morgan Kelly”

  1. “Donal O’Mahony is global strategist with Davy, a Dublin-based stockbroking, wealth management and financial advisory service. The company is also a primary dealer in Irish government bonds”

    Eh. OK.

  2. “YES, WE are all bond market vigilantes now. The gyrations of Irish government bond yields are fast becoming a national obsession, with talking heads dominating all media outlets in a manner that leaves the dogs in the street straining to get a decent bark in.”

    Beats all the nonsense that stockbrokers and bankers were spouting as they cheered on the destruction of a nation.

  3. “Now, currency fears have been replaced by credit fears, epitomised by the spike in Irish sovereign credit default swap spreads to 6.2 per cent, this market thus ascribing a 51 per cent default probability over the next five years.”

    What currency fears? We’re in the Euro.

    Safe as houses. No?

  4. “Courtesy of Nama and the stepped-up prudential requirements of a new and vigorous financial regulator, Ireland will soon find itself with two of the most strongly capitalised banks in Europe (AIB and Bank of Ireland). This realisation is already playing out in Irish bank funding markets, where credit spreads are now tightening appreciably against European peers. For example, subordinated debt spreads for Bank of Ireland have tightened by as much as 120 basis points over the past five weeks.

    http://www.irishtimes.com/newspaper/opinion/2010/0413/1224268226001.html

    And where are the subordinated debt spreads for Bank of Ireland now?

  5. Domestically, malcontents continue to vent their spleen against the Government’s stabilisation policies, in stark contrast to the increasingly receptive audiences overseas, including an endorsement from the International Monetary Fund last week.”

    Eh. OK.

    “increasingly receptive audiences overseas”

    I’d buy that for a dollar.

  6. Again more nonsense

    The banks liabilties exceed their assets – they cannot now create debt credit as their customers have reached and exceeded debt capacity.

    The goverment cannot get debt from the financial markets so when the banks customers become unemployed they cannot hope to even pay modest debts.
    Workers who took out unrealistic debts are now stretched to pay these private debts as the goverment raised tax / reduced expenditure to pay debts incurred to bail out the banks
    The solution is easy – create debt free or nearly debt free money to create a new equilibrium.
    If not you soon reach catastrophic implosion as the debt gets compounded to infinity against a static money supply.
    Its that simple – why all this pointless conversation for 2 years or more.

    what a joke – and indeed how much does it cost to write bullshit such as this – I repeat what a joke – do the banks think all the Irish people are retarded……… actually on second thoughts
    Message to the banks – you made the mistake of awakening the sheep by trying to butcher it in the presence of others – you should know that dispensing debt is a subtle art and best done in small groups, as if the whole herd gets wind of the farmers true nature it may be a bit difficult to sheer, let alone butcher the livestock.

  7. The corollary is that Ireland is moving increasingly towards “self-help” status, whereby the ongoing borrowing requirements of the public sector can, in principle, be absorbed by the accumulated surpluses of the private sector.

    Compress private demand enough so that the only thing left to do is lend to a chronically indebted government. Heckuva job.

  8. I am going have a go at the section of Mr. O’Mahony’s article dealing with bank defaults: the paragraphs from Unfortunately, current circumstances are far from normal. to Those who advocate bond defaults, but then seek alternative explanations for rising bond yields, betray breathtaking ignorance of bond market dynamics. (I won’t annoy the IT or readers here by quoting it all.) I’m sorry to say that it is risible.

    First I’ll deal with this bit.

    LIABILITY MANAGEMENT exercises on subordinated debt have been a feature of the bank recapitalisation story (at home and abroad) over the past 18 months, but all being conducted without the compulsion of investor participation, such that issuers (the Irish included) might still be seen to be honouring their liabilities in full

    To an idle, unfinanced yahoo like myself, the Dunfermline immediately springs to mind here. As best I understand it, the Dunfermline Building Society was put into resolution under the UK’s Banking Act 2009, and the subordinated debt was given a swingeing haircut. As far as I can tell, the whole process was compulsory as far as the subs were concerned, and they certainly don’t seem to have been offered any alternative to taking their losses. And in fact EU approval for the resolution required this kind of “burden-sharing”. Ah, but wait. The Dunfermline went into on 30 March 2009: twenty months ago. Sorted! Similarly, the Danish banking resolution system, approved by the Commission in these terms

    The Commission found the scheme to be in line with its Guidance Communications on state aid to overcome the financial crisis (see IP/08/1495). In particular, the aid is limited to the minimum necessary to ensure an orderly winding-up. Moreover, burden-sharing is ensured by excluding shareholders and subordinated debt holders of the failed bank from any benefit from the aid. Finally, strong limitations on the activities and the lifespan of the bridge bank will minimise distortions of competition that may arise from the state measure.

    at the end of last September, doesn’t matter because (as far as I can tell) no institutions have been resolved under it yet. (Credit: Jagdip Singh.) Truly, this is the sort of careful attention to detail we expect from professional financiers.

  9. (By the way, a penny has just dropped for me while reading the press release for Neelie Kroes’ bank-rescue guidelines. The sub haircut at Anglo has to have been forced on Lenihan by the need to get Commission approval, right?

    An appropriate contribution of the private sector by way of an adequate remuneration for the introduction of general support schemes (such as a guarantee scheme) and the coverage by the private sector of at least a significant part of the cost of assistance granted

    Having no shareholders left to burn, he had to turn on the subs. Sorry if I’m just slow on the uptake on this.)

  10. At last, Morgan Kelly exposed for the fraud that he is.

    Time the Government stepped in with the nuclear option, simply sack him.

  11. I love the last bit, the kicker…
    “a need for more enlightened self-interest in the ways in which we disburse the investments of the pension fund and insurance industries, the National Pensions Reserve Fund, and indeed the domestic banks themselves.”
    Or
    “global bond stategegist suggests we abandon global diversification, put all eggs into irish basket”
    Hmm……

  12. “To be sure, delinquency rates are rising in the Irish mortgage book, but levels remain relatively low (4.6 per cent of the total at last count) and the banks now have Matthew Elderfield’s blessing for “taking a responsible, reasonable approach of forbearance by allowing customers to reschedule”.

    Donal sees but refuses to recognise the problem. The default rates are low now but the mortgage holders are in negative equity holding loans based on inflated income and facing income cuts and therefore inability to repay even if it is rescheduled.

    The only direction mortgage defaults can go is up.

  13. @Brian Lucey

    On the grounds that taxpayers are paying lots of money towards this wrecker’s salary and are deriving, not zero, but massively negative benefit in return. Taxpayers pay him 100k a year, or whatever, and the service he offers them in return is trying to convince the rest of the world that the economy is heading for such a crash that they have no hope of getting their money back and should charge sky-high interest rates. Any cost/benefit analysis would quickly come to the conclusion that taxpayers are not getting value for their money from Kelly’s continued employment at their expense. However, the government are probably too weak to take my advice, although there will be a window of opportunity for doing it when the GDP figures are published next month and confirm that Kelly’s predictions are totally wrong. The main difference between you and him is that you have the honesty to admit that you want to see the economy crash, which is why I don’t advocate the same treatment for you.

  14. When will the penny drop? Ireland is the weakest link in the chain and putting pressure on all other Irish entities who require access to the international capital market and on the adjacent weak – but less weak than Ireland – links. It’s not good enough for the Government to say “we don’t care how high these yields go; we’re fully funded until the middle of next year”. Serious damage is being done.

    Or the penny may have dropped already, but the window-dressing is being done in advance of public confirmation. Mr. Bond’s usually reliable antenna were twitching yesterday afternoon.

  15. Please, JtO, you need to retreat a tad. Do you seriously think that bond investors make their decisions based solely on the views of an Irish don who has adopted a contrarian stance – and, while not being bang on the money on all occasions, has been remarkably prescient on some key issues?

    And as for those of us whom you perceive as being intent on “doing Ireland down”, I think you will find that, recognising the patient need surgery urgently, many of us advocated that course – rather than the prolongation of suffering that the application of the alternative homeopathic remedies have caused.

  16. JtO
    “wrecker” eh? Wow…. good job I have read a lot of Soviet history. A very loaded term…or did it seep up from your subconscious all of itself?
    What next JtO? Urgings towards Stakhanovite exertions? suggestions that dissent is a mental illness?

  17. We have a lot of reassurance, admonition and exhortation from our domestic elite since the bubble burst. Outside the semi-detached MNC sector, however, the economic fabric has continued to unravel. Hard to believe that is all down to Morgan and the blogs.

    I suppose if there had been more willingness to divulge the facts a little earlier, we’d be more inclined now to believe our official sources. Hopefully the discourse will become a little more reality oriented in the New Year.

  18. @Brian Lucey

    Never heard of Stakhanovite. Who does he play for? Neither have I read a lot of Soviet history, although I did watch Dr Zhivago once. I expect that reading a lot of Soviet history was de rigeur when you were a student, at a time when so many cherished the hope that Ireland would soon become part of it. Perhaps they still do.

    @Brian Lucey, Paul Hunt

    Why don’t you address what Donal O’Mahoney is saying about Kelly? Why bother about a mere spectator like me? O’Mahoney is the one who is slugging it out with Kelly and just landed him flat on the canvas. I’m merely cheering him on.

  19. @JtO
    Sad then for you that you have reinvented, de novo, a soviet derogatory term. keep at it and you can think more.
    As for addressing Donie, last time i did that he started to get very very agitated (twas in Mullingar..the country air didnt agree with him) and said, this now was June 2009, within 3m of NAMA we would see normal credit restored. And i have commented above re the benefits of diversification, and on the IT. I have several papers on bond market diversification ; theyre listed on my website. Read them Donie…

  20. @Karl W,

    Admonition noted, but I believe that JtO articulates a mindset and world view that is more prevalent – and influential – in Ireland than you might care to acknowledge. I’m old-fashioned enough to believe that engagement and discourse, if pursued assiduously, may lead to enlightenment.

  21. Wow, seriously fun reading on a bright and sunny Friday morning. At least i can go into the weekend a bit more assured that the lights will still be on on Monday! Bund spread in by 30bps btw, so obviously Donal has managed to undo some of the damage caused by Morgan…(c’mon folks, lighten up….)

  22. It can often be illustrative to have the other side of an discussion aired as it allows you to highlight its errors and bring home your own point of view. Play the man, not the ball.

    This article would have more credibility as a retort to Mr Kellys piece if it was not an attempt to sell more bonds by a bond seller.

  23. @ Eoin Bond

    The bond spread is indeed narrowing. At first I suspected ECB buying but the FT has pointed out that a G20 statement this morning seems to suggest that France and Germany are back-tracking on forcing bondholder losses. Looks like they blinked.

  24. @Brian Lucey
    Perhaps the best treatment JtO deserves is the silent treatment. His denunciation of Morgan Kelly as a ‘wrecker’ borders on trolling.

    @all
    Donal O’Mahony speaks of “the hubris [Morgan Kelly] displayed in second-guessing the “stress-test” findings of the independent financial regulator regarding Irish bank balance sheets”. [italics mine]

    The financial regulator may be an honourable man but who can claim that he is truly ‘independent’? Donal O’Mahony’s use of that adjective, without sneer quotes’, seriously detracts from his credibility.

    Ditto for the ‘kill the messenger’ tactics and the accusation of stab-in-the-back defeatism. In 2006 Morgan Kelly famously predicted the collapse of the housing boom. Was it therefore his doing that the collapse actually occurred?

  25. @Mr. Bond,

    Immediate panic over? ECB buying Irish sovs? A market pause while a deal is being worked out in the background? Any thoughts?

  26. @ John Mul

    yeah, was just joshing on the Donal-wot-did-it thing (though i do suggest its at least helping somewhat). EU statement is clearly trying to stop the collapse. Very interesting that the UK weighed in on it too, they usually leave Euro problems to the EZ guys.

  27. @ Paul Hunt

    no ECB in sight yet (oddly, they usually wait til around 11am CET before they do anything, assume they like long morning espresso and croissants). No much buying, but sellers have disappeared and a few bits of real money trying to pick some up.

  28. Thanks Donal, you made some excellent points.
    You’re right, we have got a glimpse of what the consequences of ‘burden sharing’ look like, and it is scary.
    For the next couple of years the EFSF will surely have to fund us, and as per Merkel’s proposal, after that, any borrowings will be done without any guarantee from European taxpayers. By God, I hope we elect a decent government soon, one that will take serious measures to ensure we will be a credible borrower by then.
    As for Merkel – her comments certainly contributed to the recent blow out. I suspect that apart from having to placate her own taxpayers, she is getting reports from her Ambassador about how we continue to avoid reality and pay exceptional wage levels to a public sector which still hasn’t adopted reasonable modern work practices.
    As for Brian Lucey – selling the deposit book anyone? Do you not have to understand finance to lecture on economics?

  29. Donal O’Mahoney’s article was a far more entertaining, and uplifting, read than Professor Kelly’s but you’d want to be pretty dumb to believe that either of them are entirely correct in their analysis. Weighing up one set of arguments against the other, I’m more inclined towards O’Mahoney’s perspective than Kelly’s, but that’s why the IT juxtaposes strong opinions in this way, to appeal to a readership who like to make their own minds up rather than just being passive receivers. As an ordinary lay person, I’ve been more impressed by John McHale’s contribution to this debate, both on this blog and in his radio interview, than either of the IT columns.

  30. The IT article refers dismissively to the absence of a basis for Morgan K’s loss estimates. “His expectation for AIB losses appears particularly heroic, covering the vast bulk of AIB’s €27 billion mortgage book.”

    Clearly the author has not bothered to look at Kelly’s spreadsheet, referred to in his IT article on Monday and posted here again by Karl W a few days ago. MK’s assumptions about the scale of AIB losses on Irish mortgages range from 5% of the book (“optimistic”) to 10% of the book (“realistic”).

    Suggesting that Kelly’s “€42 billion loan loss forecasts are without substantiation”, without addressing the explicit and detailed published assumptions tht underpin them, is unacceptable in this kind of discourse.

  31. @ KC: “The solution is easy – create debt free or nearly debt free money to create a new equilibrium.”

    Spot on. Thanks.

    @JtO: John we encorage and tolerate free speech – up to a point. You are now at that boundary. Moderate your comments about individuals or I shall make a formal request to the administrators to moderate all your future comments (if they can do that). You are being termed a Troll: No John you are an ignorant bully -pure and simple. Take you ignorant and unhelpful comments elsewhere.

    Brian P

  32. “In 2006 Morgan Kelly famously predicted the collapse of the housing boom. ” Yes he did, at the same time that Prof Lucey was confidently predicting the house price boom would continue until 2010.

    Interesting how the debate hinges around people’s credibility or their agendas. DOM has made some objective criticisms of MK’s predictions of a mortgage book melt down. With one exception nobody here is attempting to answer that with all effort devoted to playing the man.

    DOM’s article was a breath of fresh air although I find it a bit of a stretch to argue that the spike in bond yields is down to the recent approach to Anglo subbies.

  33. @Brian Woods

    WE encorage and tolerate free speech.

    I shall make a formal request to the administrators to moderate all your future comment

    JTO again:

    I think by ‘moderate’, you mean ‘censor’.

    And what is all this: “WE encorage and tolerate free speech”?

    especially ‘WE’.

    You are not listed as one of the site administrators. You are just a mere poster like me. Don’t give yourself a status you do not possess. So far, the site administrators, to their credit, have given no reason to believe they will start censoring posts as you request. Looks like Morgan Kelly’s fans are in trauma at seeing their man being carried out of the ring.

  34. What facts does he adduce to refute MK arguments. Very few. I still believe MK is closer to the mark in his analysis.

    As for the subordinated bondholders. He is clearly suggesting that they should be paid. What part of the word subordinate does he not get.
    Of course there is a clear connection between the threat from Abramovich to take “legal” action and the Russian sovereign funds pulling out of Irish bonds.
    That is Abramovich’s and indeed Russia’s understanding of the word “Legal”.
    They are now attempting to bring Ireland to heel. So be it.
    ‘A la guerre, comme la guerre’
    We should simply announce that subbies will not get paid.
    My bet is that bond yields would fall. And as we are not borrowing at these rates anyway, why not do it.

    MK used a figure of €70 billion bank losses in his article. DOM rubbishes the figure but does not put a number down. How convenient.
    Money and finance is a hard numbers game.
    Give us your estimate for bank losses please and do include the hidden mortgage losses that have still to emerge.

    I have also seen comments that BOI is paying 10% for money. I doubt it. If BOI announced that it was paying even half of that on one month deposits, it would be inundated with money.

  35. *IRISH 10-YEAR BONDS EXTEND GAINS; YIELD FALLS 40 BPS TO 8.72%

    @ Brian Lucey

    shouldn’t you be updating us with this on your Twitter page? Don’t want people thinking you only have bad news on your mind when updating bond yields…

  36. Connecting, bond spreads widening with ‘Germna talk of default’ and then going on to say we shouldn’t default as we’ll never get ever get money again, seems disingenuous. Of course CURRENT bonds would blow out and we wouldn’t be able to go back to the markets for a year or so but we would get money leant to us again, as investors only care about the future.

    It seems to me that’s there’s plenty of room for growth in domestic investment in Irish bonds, like the Japanese set up.

    Good to see the bond spreads down.

    @Eoin,
    Any word on why the markets seem a bit more rational this morning?

  37. Thank you, Mr. Bond. Haven’t seen the text of the EU statement, but it seems a statement of the bleeding obvious – no private sector money used in any EFSF intervention. The spread coming in could be due to the Veterans’ Day ‘weekend’ in the US, or the supply of stock for borrowing to short could be dwindling, or, now that the spread has been pushed out so far, shorting profits are shrinking – or the ability to secure them becoming much more risky.

    Don’t think this is over yet by a long chalk. Damage is being done all around to other players (here and in the other peripherals) who need access to the international capital market – and a slight tightening of the spread is going to have little impact if credit lines are closed. For example, the CER is proposing to increase its fictional cost of capital for the ESB Networks (extracting another €200 million from consumers) by 20% to cover expected higher borrowing costs by the ESB.

  38. @Veronica
    You are not the only one to be more inclined towards someone ” far more entertaining, and uplifting, read than Professor Kelly’s”
    What MK is suggesting is very scary so alternatives that give us more hope will always be grasped. I am a little disappointed when academic/respected economists resort to it however.

    Hope may be great for the human spirit but it is not a policy.

    I think the speed at which MK’s article is coming to fruition would even surprise the author.

  39. Rather than criticise DO’M, why not focus on the actual points he is making. Firstly, that bond yields have gone parabolic, the classic herd rushing for the door despite a virtual certainty that these bonds will be repaid. Investors are either being forced to sell because of yields further adding to the problem or are running scared due to a lack of understanding of the real story on the ground.
    Secondly, that Ireland has self-help options that are either not available or have already been used by other affected countries. Private pension and insurance funds across Europe typically invest c.35% minimum in their own sovereign debt ( Germany it’s over 50%, Spain 70% source BIS). in Ireland these funds hold less than 5% of NTMA bonds ( source CBI ). Even getting to the European norm over the next 5 yrs would create over 25 bio of new demand and crucially a permanent buyer and proper liquidity for the market the lack of which is the primary reason for the crazy moves in recent weeks. The NPRF is a unique Irish saving pool and it makes zero sense to pay for funding at a rate higher than the pool is earning. So another 15 bio of demand. And finally the Irish banks uniquely in Europe hold very little Irish debt ( source recent CEBS stress tests ), moving their liquid asset pool composition to the European norm would create another pot of demand of c.20 bio. All in all, it’s untapped demand of 60 bio which is roughly the total funding requirement for the state including redemptions for the next 5 yrs, or to put it another way, in theory Ireland moving to EU norms re asset allocation of domestic savings would allow the state stay out of debt markets until 2015!!!!
    Thirdly, there is no direct evidence yet of mortgage defaults getting anywhere near the levels suggested by MK. Note that BOI this morning have reconfirmed their loan loss guidance, unchanged in 18 mths now !!. And Irish banks uniquely in Europe record mortgages in arrears even if the loan has been rescheduled until the original unpaid monthly debit has been settled. I would urge you to read that point again, it flys in the face of the MK argument. If you don’t believe it, ring the banks Comsat dept and ask them, Irish banks are probably OVERSTATING arrears relative to EU peers.

    The real economy has started to pick up, search ‘YouTube ‘ for ireland by numbers’, the data is getting materially better, Ireland has had a horrific period of adjustment and the process of going from A to B has been a nightmare but we’re nearly there and all the doomsayers fail to appreciate how dynamic an economy it is. There will be further pain as we reassign capital from unproductive public and private sectors, years of pain for the reckless who borrowed at the peak but the cataclysmic collapse forecasts are ludicrous and Donal and others will be proved right.

  40. JohnTheOptimist

    “Time the Government stepped in with the nuclear option, simply sack him.”

    The Government don’t employ him.

    Personally I think he should get a bonus.

  41. @ Paul Hunt/Celtic

    c’mon guys, you only gotta ask nicely… 😀 The important bit is the last paragraph. Interesting that the UK signed off on it.

    SEOUL, Nov 12 (Reuters) – Following is a statement issued by the finance ministers of France, Germany, Italy, Spain and Britain at the Group of 20 meeting in South Korea on Friday.
    The statement was issued after a financial crisis in Ireland was discussed at the G20 meeting.

    “At its meeting on the 29 Oct 2010 the European Council discussed the future arrangements for ensuring economic and financial stability in the European Union.
    “Whatever the debate within the euro area about the future permanent crisis resolution mechanism and the potential private sector involvement in that mechanism we are clear that this does not apply to any outstanding debt and any programme under current instruments.
    “Any new mechanism would only come into effect after mid-2013 with no impact whatsoever on the current arrangements.
    “The EFSF is already established and it’s activation does not require private sector involvement. We note that the role of the private sector in the future mechanism could include a range of different possibilities such as a voluntary commitment of institutional investors to maintain exposures, a commitment of private lenders to roll over existing debts or the inclusion of collective action clauses on future bond emissions of euro area member states.”

  42. You should remember that Davys is in effect the “house broker” for the government. Anyone with market experience knows what house broker research really is. Its not “pllaying the man” its recognising the system and incentives.

  43. Lucey’s obviously on a tea-break, so i’ll step in. I know he places big importance on getting the information out there, bad or, eh, good, right?

    *IRISH BONDS EXTEND GAINS; SPREAD NARROWS 44 BPS TO 602 BPS

  44. @ Brian Woods

    Never heard such sanctimonious rubbish. JtO answered for himself. Why don’t you change your name!!

    DOM’s article provides a must needed antedote to the overwhelming kilkenomics zeitgeist on this blog. I see that the antedote is not going down at all well which I suppose is a measure of its effectiveness.

  45. @Eoin,

    Thank you. As ever, we’re in your debt. You’re right about the last para. And it’s nice to see that bond investors are re-discovering the knack of pricing risk properly in the periphery of the EZ. I still think that the damage that’s being done which extends far beyond the solvency of the peripheral sovereigns will force the pace.

  46. The Irish Bankers Fed wallah on the Six one news last night said that there is some committee working on the issue of people in mortgage difficulties and that there is a huge difference between negative equity and actually being unable to pay anything on one’s mortgage. So how bad is the mortgage situation likely to get ?

    I imagine that Ireland is not going to go down the road of senseless mortgage foreclosure as per the US because it would be culturally unacceptable and a hark back to the worst days of the Raj. It seems to me as though the banks are actually doing some thoughtful work in this area.

    BTW the Yank approach is ripping the hearts out of poorer neighbourhoods and also has the effect of savaging the accumulated wealth of the lower middle classes, a consequence that will have significant resonance in the future.

    I know that there are people on this site who are expecting an apocalypse (do any of you regularly follow Mayo football?) but is it really likely in the mortgage market ? Most of the people who bought during the boom are solid middle class FF voting come-from-a- respectable-family types . If traders in Lahndan are betting on them handing in their keys I think it says more about what traders in Lahndan know about Suvin Island than it does about what is actually likely to happen.

    I agree with Brian Lucey that the problem needs to be assessed and analysed but might it not be the case that the actions of the banks and the cultural context will mean that this is one self inflicted disaster that doesn’t materialise ?

  47. @Eoin
    So what happens in 2013?

    Will the fiscal adjustment be complete by then?

    Will we have paid off all existing debt so have nothing to rollover?

    Or have the Germans been prevailed upon to kick the can further down the road?

    On the article… pile of steaming… written by the least credible (after Southwest Capital, I suppose, but maybe not) finance house in the world… The idiots who brought about the crash of the fine Irish economy now rail at those who expose them for the the idiots that they are. You could make it up, but it would be more believable in a book.

  48. @Eamonn,

    You missread me. Of the two, I find Donal O’Mahoney’s arguments more persuasive than Professor Kelly’s and there may indeed be an emotional factor in that – I’m the optimistic type and I loathe negativity for the sake of it of which there’s all too much around and most of which is self-indulgent opportunistic garbage. Excessive negativity is as misleading in its conclusions as overoptimism, and just as damaging in the long run. However, in his intervention in this debate John McHale spoke only to the facts, which is why I take his argument seriously. As for hope, well, we all know what hope did: he stuck a feather in the ground and hoped it would grow a hen.

  49. Is calling someone a fraud and demanding their sacking malicious in the extreme?

    Moderation of sites is used to protect moderators and site managers/owners from risk of libel by others of others. It is not censureship.

    Frequently extensive posters on online communities become obsessed with their anonymous persona. Their alter ego’s contributions become more shrill, belligerent and malicious as it defends its space.

  50. Brian Woods II

    Why did it take that Kelly article to get Donal O’Mahony out? It is good to see more visibility from people like him. I do get the feeling that people who are in a position to do something are copping on to the seriousness of the situation.

    I thought the interview between Paxman and Lenihan on Newsnight earlier in the week was excruciating. I have no time for FF but there was something about the English Paxman telling the Paddy that he was incompetent that really stuck in my craw.

    BTW, Zeitgeist is a German noun so it takes a capital letter.

  51. @ Brian Woods

    I think that JTO makes an interesting point regarding the ability of academic economists to impact negatively on public perceptions when given a high profile voice in a main news outlet – hard for the paymaster to take it but given the concept of academic freedom held suspect hard to do much about it.

    Indeed the more negative the commentary, given the sensitivity of the markets currently to bad news, the more likely the news moves things in the wrong way thus fullfilling the doomsday scenario originally painted. On the downward cycle does this inherently create an incentive to write articles such as that written by M Kelly. Davy employees are quite clear in indicating what their day job involves.

    Maybe someone could answer a question i have wondered about for a while – do you get paid for writing the oppinion pieces in the IT?

  52. JohnTheOptimist

    “At last, Morgan Kelly exposed for the fraud that he is.”

    Fraud is quite the accusation.

    Now if you’re going to sling words like that around you might aim at the banking sector (no names no pack-drill) where hitting the target is more likely.

    By the way both pieces in the IT are “Opinion Pieces”.

    You might also be interested in William Blacks “Control Fraud” interview on PBS (Bill Moyers).

    http://www.youtube.com/watch?v=Rz1b__MdtHY

    Or perhaps not.

    You might be interested in a critique of optimism.

    Did Positive Thinking Wreck the Economy? – Barbara Ehrenreich

    http://www.youtube.com/watch?v=tWfDm_bqwUU

    Or perhaps not.

  53. Bailout this weekend (80bn, 3-4yrs), involving EU AND UK, rumour but strong one (and i know but wont say who’s putting it out – ‘good’ bank you generally wont hear trying to spook the markets). Yields coming a lot lower, CDS in by 70bps….

  54. Bond. Eoin Bond

    “Bailout this weekend (80bn, 3-4yrs), involving EU AND UK”

    UK banks getting a bit nervous?

    RBS?

  55. It’s amazing that if one advances a position that is critical of the ‘received wisdom’ or ‘green jersey’ mentality and one makes one slip (e.g., Brian Lucey’s alleged ‘deposit selling’ moment), any further assertion – no matter how well founded – is subject to pillory.

    I happen to agree with Brian’s most salient criticism of D O’M’s piece. That is his criticism of advocating the use of the NPRF, Irish pension funds, etc to shore up the sovereign’s fiscal position to avoid recourse to the international bond market. As an SOE Ireland needs the fullest access to the broad and deep international capital markets on affordable terms. It is only of historical interest that Irish savers and the managers of Irish savings chose not to invest in Irish securities to the same extent as savers in other much larger economies. Advocating the ‘green jersey’ approach now would signal a return to the autarky that brought the Irish economy to its knees in the 1950s.

    It might be excusable if it were only the sovereign that needed shoring up, but many private sector and semi-state entities require access to the international capital market. Should we use every cent of Irish savings to allow them to avoid accessing this market as well?

    I’ve mentioned the CER proposing to extract more money from electricity consumers to cover expected higher cost borrowing by the ESB, but it is ironic that D O’M didn’t consider privatising many of these semi-states which would put a dent in the stock of public debt and might encourage bond investors to look more kindly on us – as well as lowering the cost and improving the efficiency of some key infrastructure and utility services.

  56. Actually MK is wrong here – we don’t need no stinking badges.

    We can create credit with the states resources – we still have Euros ,lets multiply it.

  57. Now, with the enforced “burden sharing” for Anglo subordinated bond holders, unintended consequences have engulfed the Irish debt markets. The ratings agencies quickly assumed the loss of “systemic support” for similar categories of subordinated debt issued by both Bank of Ireland and AIB and, in awarding them “junk bond” status, triggered a self-feeding spiral of higher debt yields.

    Am I the only one who thinks that DO’M is greatly exaggerating the contribution (if any) which the proposed 20 c in the euro deal for the holders of subordinated debt at Anglo has had on Ireland’s bond spreads? Is the market incapable of distinguishing between the treatment of (i) subordinated bank debt, on the one hand, and (ii) senior bank debt and (iii) sovereign debt, on the other. My recollection is that Eoin, who knows much more about these things than most, reported anecdotal evidence of the holders of subordinated debt at Anglo being impressed (in a pissed off sort of a way) at the Government/Anglo’s move to inflict losses on them without having to put in place (and defend in court) a retrospective special resolution scheme. If DO’M’s article is correct, the move had the effect of spooking the holders of various different types of debt, including sovereign.

    The Government has been at pains to emphasise not only that it does not intend to impose losses on the holders of senior debt, but that it will not impose losses on the holders of subordinated debt at the other banks, e.g. AIB and BoI. I cannot understand therefore how the Anglo move could be interpreted by the markets as indicating a harsher line on the part of the Government. Of course, it is a separate question as to whether the Government has the financial credibility to make good these promises, but I do not see how the Anglo move against subordinated debt can be read as signalling a change in Government policy.

    All of this revise the more general question, the subject of a recent thread, of what do the markets want? Are the Government and most commentators correct in thinking that the market wants a credible austerity package, or are more radical commentators such as David McWilliams correct in thinking that the market does not believe the State can shoulder the burden of bailing out the banks?

  58. Medley Report:

    Intensive EU discussions are underway that will lead to a financial-rescue plan worth more than €80 billion for Ireland and as soon as next week. There will be no “private-sector participation.”

    The final decision is likely to be taken Tuesday (November 16) at the meeting of the Eurogroup, the committee of the Eurozone’s 16 finance ministers and representatives from the European Commission and the European Central Bank, but a political agreement to act has already been struck at the G20 summit in Seoul.

    Officials will be negotiating over the weekend over the exact shape of the package but it is clear it will be similar to the Greek deal in that it will be sufficient to remove Ireland from the market for up to three years, and it will be combined with an IMF and EU adjustment program. Where it will differ is in the efficiency of raising the funding. Both IMF and European Financial Stability Facility cash will be available without a repeat of the political maneuverings over Greek aid, although the Irish won’t need financing until they restart their funding program in the new year. Once the EFSF has the political go-ahead, it can start funding.

    Eurozone governments are also seeking a substantial British contribution to the program, probably via the €60-billion European Financial Stabilization Mechanism, which is guaranteed by the EU’s 27 members and not just those that use the euro.

    In a bid to stall contagion, the ECB is likely to step up its bond-purchase program — as it did in the first days after the May 8-9 crisis meeting. Officials differ over whether or how soon the Portuguese government will have to seek external assistance.

  59. @Bond.
    If bailout of €80 billion over 4 years, it won’t work. €80 billion about right. It needs to be over 20 years. All of bank losses+ into a 20 year mortgage.

    I don’t know what you mean by good bank trying to spook the markets. If it is Goldman playing both sides of equation. Well whats new in that?

  60. Joseph Ryan

    Needs to be €80bn at zero over 100 years.

    Oh to hell with it.

    Just lets the ECB print €80bn.

    Simples.

  61. @Eoin,

    EU AND UK? Wow! This is going to be a hard sell in ‘middle England’. Since we seem to have discounted most other factors, this rumour seems to be moving the market.

  62. @Bond Eoin Bond

    Patricia the Sovereign_in_exile has a good communications, and personal, relationship with HRH.

  63. @ BWII “sanctimonious rubbish.” ???? (I would use one of those smiley things if I knew how)

    Grateful if you might elaborate on this. Is my distaste for ignorant or ill-informed or ad hominem comments no longer PC? I fancy not. I have no problem with critical commentary provided it does stray into above mentioned territory.

    @ BT: Thanks for comment. Yep, comments can and do affect sentiment in both directions!. Which ‘proves’ that markets (or whatever) are driven by ‘Animal Spirits’.

    Brian P

  64. The big question is, how much will this money cost? Let’s hope it’s cheaper tha the Greeks are getting.

  65. Joseph

    “Conclusion. So finally its in the open. Fianna Fail has bust the country.”

    If the rumour is true. Yes.

    Of course we should not accept any package that does not include throwing Anglo and INBS to the wolves.

    Consolidating this fraudulent debt on the sovereign would be treason.

    The logic of saying that seniors would suffer post 2013 but not before escapes me.

  66. 11:08 12Nov10 -IRISH FINANCE MINISTRY SPOKESMAN SAYS MARKET TALK THAT BAILOUT BEING HAMMERED OUT WITH EU IS UNTRUE

  67. @ Greg

    Fair point!

    Just in case then:

    EU COMMISSION: WE HAVE NOT RECEIVED ANY REQUEST FROM IRISH GOVERNMENT FOR ANY FINANCIAL SUPPORT !!

  68. @all

    From the alleged Medley Report: “… a political agreement to act …”

    What a lovely phrase – KoMopSumNida Seoul …. The Solidarity Bond it is.

    Euro senior_citizen bonds universally win out over particular cost of Irish bank bail_out: ergo, negotiation with the ECB (and EC) on amelioration of particularly obscene cost to Irish serfs as EZ learns new lessons and moves to some form of EU citizen protection from financial infections.

  69. ED Says:

    “EU COMMISSION: WE HAVE NOT RECEIVED ANY OFFICIAL REQUEST FROM IRISH GOVERNMENT FOR ANY FINANCIAL SUPPORT !!”

    Fixed that for them.

    🙂

  70. There is exaggeration at times on both sides.

    On the official side, Brian Lenihan appears to be the only senior public
    official who speaks on issues without resorting to spin.

    Yesterday, Minister Batt O’Keeffe issued a statement claiming that the implementation of the EU services directive could result in a rise in exports by €16bn pa. Apart from the fact that most of the foreign-owned firms responsible for 97.5% of service exports have already companies in individual EU markets, Ireland only implemented the directive after a public warning of legal action by the EC.

    Official job creation targets now include an estimate for indirect jobs and no estimate of job losses and so on.

    We encouraged gullible overseas observers during the bubble and lapped up the reports on the ‘miracle’ but this week when an idiot on Bloomberg TV said Ireland would run out of cash in 60 days, the NTMA said it was ‘mischievous nonsense.’

    Two days later, the Taoiseach said if the Budget wasn’t passed, we would run out of money by next June – – but don’t we all hear half a story at times?

    Claims are made about exports but despite a 50% rise in current price terms since 2000, jobs are back to the 1998 level.

    As regards the rise in bond yields, it wasn’t articles in the Irish Times that were the catalyst but the 2-year slow motion response to the banking crisis, in particular the failure to address the cost of the Anglo bailout with urgency and the slow-motion in 2009 in getting detail from the banks on security and documentation on key loans.

    The official line of the Government in the summer of 2009 and from Davy’s was that the LTV would be 75%.

    According to the WSJ this week, Brendan McDonagh was shocked in early 2010 on the state of the loans’ securities.

    This then resulted in a big announcement in March on Bank recapitalisations and a move up in yields.

    In early Sept 2009, I had written on this blog that an LTV of 75% was not credible:

    Wall Street Journal says Ireland’s fate tied to doomed banks:

    http://www.finfacts.ie/irishfinancenews/article_1020984.shtml

  71. On a separate note of nerd-rage, who edited this piece?

    “Opinionate”? “Scarify”? Also, I know that contributors don’t often get to write their own headlines, but you can not PAUSE a button. You can pause the action that was perhaps caused by pushing the button in question, but you can not pause an object. The article reads like O’Mahony was trying to out-Kelly Morgan Kelly, but it comes across like a Sarah Palin Twitter feed! Perhaps O’Mahony and the IT editors were trying to be funny, but I doubt it.

  72. It wasn’t articles in the Irish Times that were the catalyst for the rise in bond yields, but the 2-year slow motion response to the banking crisis, in particular the failure to address the cost of the Anglo bailout with urgency and the slow-motion in 2009 in getting detail from the banks on security and documentation on key property loans.

    The official line of the Government in the summer of 2009 and from Davys was that the LTV (loan-to-value) would be 75%.

    According to the Wall Street Journal this week, NAMA chief Brendan McDonagh was shocked in early 2010 on the state of the loan securities and documentation.

    This then resulted in a big announcement in March on bank recapitalisations and a move up in bond yields.

    Again, it was only when investors started selling Irish bonds in August, that there was urgency given to the final cost of the Anglo bailout.

    In early Sept 2009, I had written that an LTV of 75% was not credible:

    http://www.finfacts.ie/irishfinancenews/article_1020984.shtml

  73. “There is plenty to opinionate ”

    Try “opine”! Archaic, possibly not so in America, backward yokels, but at least English. Perhaps an attempt at humour, but as he already finds economics too difficult, maybe he should stick to one discipline at a time?

    “unintended consequences have engulfed the Irish debt markets”

    Unfounded optimism. Clearly unaware we are victims of economic war! Mind yopu, given that he is a “ex “cheerleader of excessive credit, perhaps he is being disingenuous?

    “Contagion spread”

    Failure to use English again. Medical metaphor for what, exactly?

  74. @greg
    “Of course we should not accept any package that does not include throwing Anglo and INBS to the wolves.”

    Beggars can’t be choosers unfortunately.

    @All
    Forgive me if I’m being too indulgent, but I’d like to guage people’s opinions on what would be the implications of our having to accept SDRM/EFSF funding? What would it mean for taxes (personal and business), public sector pay and employment levels, welfare rates etc?
    And getting back to Greg’s comment, what would happen if we refused to accept the terms associated with the funding?

  75. “Good bank” by the way is HSBC (apparently) but could just have been them referencing the Medley report

  76. I am delighted that JtO has illustrated his “optimism” with a certain amount of bile. He is clearly a partisan.

    I have said it before, but it is just fascinating that tripe begets tripe and enticed JtO in this way.

    This is what passes for “thinking” in some circles and explains many things about the mess Ireland currently is in.

    Veronica.

    Sorry, the two articles are clearly of far different levels of accuracy and erudition! I am sure John McHale winced being in such company!

  77. Marian

    “Beggars can’t be choosers unfortunately.”

    Then don’t beg.

    They need us as musch as we need them.

    Our political class need to grow a pair.

  78. A couple of things:

    First, this site seems as good as any to request that someone attempts to adequately analyse the affect of media commentary here on perceptions abroad. It seems to me that certain people are trying to have it every way – scoffing at the notion that media commentary here could influence perceptions abroad, yet seemingly determined to influence the debate here nonetheless.

    Second, it is now apparent that any opinion expressed here (or in the wider media), which does not conform to the general conclusions the most frequent contributors to this site have drawn, is subjected to a lot of ridicule and very little analysis. The irony that those contributors (and their supporting commenters) instantly accuse others of playing man-not-ball seems to be entirely lost on them.

    Third, this thread has proved beyond doubt, if proof were needed, that a number of dismal scientists here need to recalibrate themselves to focus more on the science and less on being dismal.

  79. Marian
    Ireland would accept. All moral sinews would be strained etc!

    More taxes! PS salaries cut another 10%. Many quangoes and tax reliefs abandoned. They would leave education, armed forces and Agriculture alone, sadly.

  80. Im an avid reader of this site but Im increasingly alarmed by the inability of certain posters to even entertain a single doubt about the veracity of predictions emanating from their hero Morgan Kelly.

    There seems to be some sort of cult forming that seeks to jump down the throat of any dissenters.

    There are a few on here that remind me of ‘Squealer’ to Morgan Kellys ‘Napoleon’

  81. Ok, 10yr is about 65bps lower on the day now, mid is around 8.26% (Lucey is still trying to find a parking spot in the car park outside Kilkenomics, so i’ll slog on with the yield updates til he finds one…)

    Market calming down after original knee jerk reaction, especially after a few ‘official’ denials. But market still thinks its in the works. UK involvement would be a big sign that this is in fact not being led by the Germans, but maybe by UK and France, in a bid to stop contagion affecting Portugal and Spain, as clearly the Germans aren’t willing to p1ss off their domestic political base by bailing us out early doors. I would suggest that if we do go early, it’ll be on the basis of the conditions being less onerous than previous (either fiscal conditionality – read corp tax – or simply the cost being less than the 5-6% being suggested for EFSF) program would have been.

  82. Marian

    “And getting back to Greg’s comment, what would happen if we refused to accept the terms associated with the funding?”

    The Euro would unravel within a week.

    Ireland would be locked out of IMF funding.

    A guarantee of €400bn was stupidity itself.

    The ECB needs to grow up.

    The debts of Anglo & INBS cannot be repaid.

    To attempt to do so is National suicide.

    Better off going it alone if that is what is required.

  83. Assuming rumors are true…

    4 year bailout = no need for market money for 4 years.
    After that…
    Explicit possibility of future haircut = overall higher interest rates.
    With Gov bond rates filtering to bank rates…
    Higher interest rates = greater number of mortgage defaults.

    Housing market context would be 8% mortgage rate the norm putting house prices back to early 90’s levels.

    If the 80bn number is true, there may be just enough to cover extra losses at AIB & BoI as well as cover budgets for 4 years.

    In this context bankruptcy reform imperative.

  84. @seafoid

    Overnight liquidity thing probably dissipated because now less chance of haircut problem accessing efsf. So state backup less potentially impaired.

    Ash? Anyone?

  85. Ronan Furlong

    “The logic of saying that seniors would suffer post 2013 but not before escapes me.”

    Does it escape you?

    Particularly with regard to €50bn of insolvent bank debt.

  86. I’m chilled to the bone at the thought that the 2 Brians and the DoF would be the ones to negotiate a deal with the IMF/EU.

  87. Ahura,

    Why would the prospects of a man mocked around the world as a drunk and another who thinks being an island helps prevent outflow of capital scare you.

  88. To Michael Hennigan’s chronology, it is worth adding the disastrous handling of the increase in the headline amount of aid for Anglo announced in August, which only came out when the European Commission approved a bigger amount than people had been expecting. But this came in early August, when Brian Cowen was less than half way through his holliers, and Brian Lenihan was, I believe, in Schull. No one was around to explain what was going on, that set the bond market off, and it’s never recovered.

  89. Lucey-twitter-absentee-bondwatch update….

    *IRISH 2-YR NOTES EXTEND ADVANCE; YIELD FALLS 104 BPS TO 6.65%

  90. Paul Hunt

    “The clarity provided by the EU Finance Ministers of the G20 is most welcome. The Statement makes it clear that any potential private sector involvement in that mechanism does not apply to any outstanding debt and any programme under current instruments. Any new mechanism would only come into effect after mid-2013. So this would have no impact whatsoever on the current arrangements.

    The “current arrangement” being that Ireland gets stuffed for €50bn of insolvent bank debt.

    “Any new mechanism would only come into effect after mid-2013.”

    Just before Greece exits the Stabilisation Fund with debt to GDP of 150%.

    How convenient.

  91. Greg,

    A lot escapes me in this debate….. Im just a layman.

    What comes across loud and clear to me is that there are two competing economic arguments….. but only one group seems to be behaving like a cult, complete with delusions of infallibility and effusive in its cries of ‘heresy’ when an alternative viewpoint is proffered.

    Since when did economics become an exact irrefutable science? More to the point when did it become an orthodox religion replete with a non elected Pope such as Morgan Kelly? Maybe Morgan is putting the Pontiff back in Pontificating?

    The use of the word ‘Acolytes’ by O’Mahony seems appropriate from where Im sitting.

  92. @Greg,

    Deals will be done, as the ECB is also on the hook for the massive liquidity support it is providing for the Irish banking system – but not in the current frenzy. Ireland must be taken into protective custody to prevent it harming itself any further – and others in the immediate vicinity. I think that has now been accepted and, in Claud Cockburn’s memorable words, “confirmed by official denial”.

    We need to see the additional fiscal outgoings for bank losses over the next 10 years as a tax on the greed and incompetence of the bubble era – unfortunate, but bearable. It is regrettable, but is of less import than the need to reduce the fiscal deficit and to begin repairing the economy. For this we also need external assistance as the current political factions are displaying their usual – and understandable – prediliction for placing their lust for political power above the public interest.

  93. @MPLT

    Congratulations on one of the best posts I have ever read on this site.

    But, I doubt that it will get through to the masses on here. Believe me, I’ve tried. If you persevere, you may have better luck than me because you are clearly more articulate. But, ever notice how they have a stock ‘explanation’ trotted out for every piece of good news, that enables them to dismiss it out of hand, without ever needing to supply any evidence? These are some examples. Not fictitious examples, but actual responses to my posts in recent weeks.

    (a) Manufacturing output rises 20% since Q4 2009.

    Good news? NO! Its all due to viagra.

    (b) Live register falls by 12k over September and October.

    Good news? NO! It must be emigration.

    (c) Tax revenue above target in September and October.

    Good news? NO! It was mostly Corporation Tax, so that shouldn’t count.

    (d) Job vacancies up by 50% in recent months over same period in 2009.

    Good news? NO! Wrong type of vacancies.

    (e) Redundancies down by 40% in recent months over same period in 2009.

    Good news? NO! Simply caused by delay between redundancies occurring and notifying Department.

    (f) Rents stabilise in 2010 (down just 0.5%) since December.

    Good news? NO! CSO must have got it wrong. We’ll make up our own index.

    (g) New car sales up 100% in recent months over same period in 2009.

    Good news? NO! All due to scrappage scheme.

    (h) Department of Environment report shows far fewer ’empties’ than Morgan Kelly or NIRS claimed.

    Good news? NO! They faked the report.

    (i) Emigration turns out less than half what ESRI forecast just a couple of weeks before.

    Good news? NO! CSO must have got it wrong again.

    (j) IBEC head says business improving, exports growing, and problems being ‘greatly exaggerated (his words).

    Good news? NO! He’s out of touch with reality.

    (k) Governor Honahan says markets ‘greatly exaggerating (his words again) economic problems.

    Good news? NO! He doesn’t mean it and is only saying it to keep his job.

    Ronan furlong is correct – it IS a cult.

  94. @Greg

    The Minister, in his response to G20, is basically stating that he intends to continue with his reversal of the logic of republicanism – and continue to screw the lifeworld of the Irish Citizenry in socializing the debts of the banks and elements of the upper-echelons of Irish society.

    Angela’s timing might be off, but her logic remains sound. Frankfurt to act.

  95. Ronan Furlong

    “but only one group seems to be behaving like a cult”

    The phenomenon is known as groupthink.

    It is the condition that bankers, stockbrokers, estate agents, MoF and Fianna Fail are hopelessly afflicted with.

    If you are looking for evidence of a “cult” begin there.

  96. Three intersecting bubbles:property, banking and public sector. Banks lent to property, they spent it, pushing property prices up, yielding taxes that the public sctor spent on wages and headcount. Property prices went down. 120,000 construction related workers laid off out of total rise in unemployment of 200, 000 (speaks to the rest of the economy being better than commonly supposed). Banks went bust when property stopped repaying loand. Public sector went bust when taxes stopped flowing.

    Public sector is being fixed and will be even more fixed by the IMF.

    Here is a proposal to fix the banks (NAMA an abject failure in that regard): take the one ‘good’ bank, for example, that is supposed not to need any more capital but is dogged by fears that this is just wrong and, therefore, can’t fund. Note that it makes circa 900 million pre-provision profits. Normalise this at a conservative 1bn. Aplly a conservative multiple of 7. Extreme stress test reveals, say, potential further losses of 3bn. Give said bank to BNP (or whoever) for 4bn ( 7 minus 3). Insure (Irish government with a backstop to IMF?) any further write-offs above 3bn. Aplly same logic to the other, ‘less good’ bank. Do either or or both. Banking system fixed overnight.

    Still leaves the 120000 construction workers as long-term unemployed but, to the extent that it can be, this is job done. Sorted.

  97. Paul Hunt

    “It is regrettable, but is of less import than the need to reduce the fiscal deficit and to begin repairing the economy.”

    Wihtout doubt the fiscal deficit must be reduced.

    I disagree that a “greed tax” is required to pay for Anglo & INBS.

    Two years on and we still have no resolution legistlation.

  98. This talk of cult is misdirected.

    Anyone remember the cult of consensus approach to budget, the cult of 4 billion cuts recently surpassed, the cult of 3%, the cult of there is no alternative and the cult of go and commit suicide as suggersted by Bertie-on the horses- Aherne, the cult of the soft landing and so on and so on.

    Come on guys if you are going to talk about cults then at least list all the cults rather than targetting one man whose opinion you dont like.

  99. @Greg,

    I can understand the basis for your disagreement. I don’t like or approve of it either, but I’m simply trying to place it in the context of what as i see as a much more pressing task.

  100. Interesting article from Mohamed El Erian
    Austerity alone won’t cut it

    http://www.ft.com/cms/s/0/11ad1ab8-ee49-11df-8b90-00144feab49a.html#axzz154eBDszd

    “So far, Europe’s response has consisted of two elements: peripheral countries (and particularly Greece and Ireland) embarking on ambitious austerity programmes; and, simultaneously, these countries receiving external funding through access to the ECB’s balance sheet and, in the case of Greece, loans from the European Union and the International Monetary Fund. But the lesson of numerous crises in emerging economies show that this approach simply kicks the can down the road. It does not deal with the basic problems: the overhang of debt (an acute problem for Greece and Ireland in particular) and poor competitiveness. “

  101. @MPLT.
    @JTO

    re:
    Ireland has had a horrific period of adjustment and the process of going from A to B has been a nightmare but we’re nearly there and all the doomsayers fail to appreciate how dynamic an economy it is. There will be further pain as we reassign capital from unproductive public and private sectors, years of pain for the reckless who borrowed at the peak but the cataclysmic collapse forecasts are ludicrous and Donal and others will be proved right.

    Some of us may be nearly there. Others definitely not there.
    There are some positive indicators as indicated by JTO but they are a drop in the ocean when set against the scale of unmeployment, business distress and the State and bank finances.
    The position will be resolved eventually but not without long term solutions.
    1. Long term ringfenced mortgage to cope with bank losses. Make sure it is high enought.
    2. Burden sharing on a realistic scale. This means severe cuts in higher levels (above €40,000) pay with pari passu reductions in pensions.
    3. Increase tax levels to Scandinavian levels.

    To ALL.
    The continued and personalised sniping on the site does not reflect well on the persons involved.
    I would be more interested in hearing proposed solutions. Specific solution to cut backs for instance and proposed tax changes or tax rises.

  102. Paul Hunt

    The “pressing task” might have a better chance of success if it were accompanied by the recognition that the debts of the insolvent banks Anglo & INBS are not those of the state.

    And that at a minimum a contribution is forthcoming from the senior bondholders.

  103. @JtO & MPLT

    Following JtO’s plug I read MPLT’s posting. Absolutely agree with JtO’s assessment.

    Just after listening to Pat Kenny’s Kilkenomics program. Stomach churning mob rule. Disappointed that people like Olivia O’Leary entered the mob spirit getting cheap applause for spouting populist banalities.

    I will give a flavour of proceedings. Towards the end someone asked why can’t people like David McWilliams and Brian Lucey form a political party and use their brains to sort us all out. DMcW came up to the plate. He was prepared to give whatever was needed for the benefit of our country (loud mob applause). He admitted though “I wouldn’t be very good at such things like fixing the local drains but when it comes to the big picture I know what needs to be done”. I nearly got sick.

  104. thx JtO. find the comments on here from our main economic academics to be fairly depressing, hard not to think that many of them, and they are getting international coverage with real impacts, want things to turn out horrifically, and the race to be the most extreme pessimist and get those headlines is the principle motive.

    suspect in the end it may be necessary for ‘outside’ help, not cos we need it as per my post, but cos it will be the only way to get thru the cuts required in public spending without serious social unrest. time will tell, but providing ‘our’ central bank, the ECB, is prepared to fund the banking system to buy time and allow the system delever and offshore loans mature/refinance, then the underlying economy is actually quite healthy and we should see a decent recovery and one positive outcome of the credit disaster will be significant reform of both public sector and political system even

  105. @Greg,

    I agree. It makes the task of securing any measure of popular acceptance for the severe fiscal adjustment required almost impossible. Postponing interest payments on the infamous promissory notes for 2 years won’t fool anyone as they’re just being rolled on. Sadly, some EU/IMF enforcement will be required.

  106. It appears to me that the key issue between the sides is losses on the mortgage books of the big two.

    Would it be helpful to have a thread precisely on that issue?

    I would add, to those people who have been saying for months that the fiscal position is overblown and that bond markets are over reacting that it must now be clear that, without the backstop of the IMF/EU, the country, and its entire domestic financial system, would be unable to attract international funding. Left to our own devices, we would be considered insolvent.

  107. BWII

    Shame to see such a picturesque place as the Marble City clogged up with all these thought leaders. The home of hurling deserves better.

    I read Lucey et al yesterday and the thought sruck me-why not sell both the Anglo and AIB deposit books for their collective worth, say 100bn on Lucey’s Anglo valuation. Then we could pay off everybody’s mortgage debt or the sovereign debt or whatever.

    Am I missing something?

  108. @Seafoid

    I also wondered what happened on the banks liquidity front. It seems BOI are paying 10% for guaranteed money and 13% unguaranteed. In the IT I think.

  109. @ceteris.
    BOI are certainly paying 13% to me on the small few euros on deposit with the. One per cent.

  110. ‘hence the need for more enlightened self-interest in the ways in which we disburse the investments of the pension fund and insurance industries, the National Pensions Reserve Fund, and indeed the domestic banks themselves.’

    I smell a rat

  111. MPLT

    “Private pension and insurance funds across Europe typically invest c.35% minimum in their own sovereign debt ( Germany it’s over 50%, Spain 70% source BIS). in Ireland these funds hold less than 5% of NTMA bonds ( source CBI ). Even getting to the European norm over the next 5 yrs would create over 25 bio of new demand and crucially a permanent buyer and proper liquidity for the market the lack of which is the primary reason for the crazy moves in recent weeks.”

    Are you suggesting a compulsory allocation of pension fund assets to Irish Sovereign debt?

    “The NPRF is a unique Irish saving pool and it makes zero sense to pay for funding at a rate higher than the pool is earning. So another 15 bio of demand.”

    I could be wrong but I thought the NPRF was restricted in the amount of Irish government debt it could acquire.

    Has this changed or are you suggesting a fundamental rewrite of the NPRF Investment Strategy?

    That the NPRF should be “directed” to buy government debt?

    http://www.irishstatutebook.ie/2000/en/act/pub/0033/sec0018.html#partiii-sec18

  112. @MPLT: “The real economy has started to pick up, search ‘YouTube ‘ for ireland by numbers’, the data is getting materially better”.

    My weekly itinerant wanderings amongst shopping centres, business parks and ind estates would not confirm ‘pick up’. Accurate intelligence comes from having your asset poke around on the ground. Remote digital sources, whilst attractive, are no substitute. Are credit and debt money?

    @ My Namesake II: “I nearly got sick.” Glad to hear you kept you stomach contents down. You might not be so fortunate if you saw the debt devastation (aka. ‘pain’) being visited on so many of your fellow citizens.

    Reading some of the comments: Good news is cheered (and properly so), whilst not-so-good news – “geld the messenger”. Things never change!

    Brian P

  113. Paul

    “I agree. It makes the task of securing any measure of popular acceptance for the severe fiscal adjustment required almost impossible. Postponing interest payments on the infamous promissory notes for 2 years won’t fool anyone as they’re just being rolled on. Sadly, some EU/IMF enforcement will be required.”

    “Postponing interest payments on the infamous promissory notes for 2 years won’t fool anyone as they’re just being rolled on.” Enronesque in its brass neck.

    “Sadly, some EU/IMF enforcement will be required”

    I’m not against intervention. I think the budget deficit is ours and ours alone.

    And I don’t have to be an optimist to know that we can make the adjustment.

    I merely suggest that we should take a hard line on Anglo and INBS as part of negotiations.

  114. @Brian Woods II

    Hi Brian,
    What’s your beef with David McWilliams? Is it his style or his substance? I’ve just been re-reading ‘The Pope’s Children’ (2005) and his denunciation of the credit junkies looks pretty spot on to me:

    [O]ur most productive generation — those between 20 and 40 — are moving rapidly into levels of debt that would concern outsiders looking in. But us, we don’t care, because we believe our own propaganda that this time it’s different. So borrowing continues apace. We borrowed 25 percent more in 2005 than we did in 2004. And we are spending this cash on flashy items. In the past four years, the market share of BMWs and Mercs has doubled, from 3.6 percent to 6.2 percent. We are Europe’s bling nation. Per head, there now are more Mercs sold here than in Germany. The two big banks — our principal moneylenders — are, as a result of our splurge, the most profitable in Europe, making around € 350 ($442) profit per customer. […] The full-on nation is burning the candle at both ends.

    That was five years ago. It all looks pretty obvious in retrospect but DMC was one of the few who saw the writing on the wall before the house went on fire. Give him his due.

  115. @ Ceterus

    they’re are not paying those rates, thats simply where the secondary market currently has them priced (hence why they can’t/wont issue). I think the max they have issued at is around 5.9% for a 2.5yr recently.

  116. ceteris paribus

    “I smell a rat”.

    Too right. They’re coming for your private pension fund.

    “more enlightened self-interest”

    Whose self-interest?

  117. @Joseph Ryan

    “The continued and personalised sniping on the site does not reflect well on the persons involved.”

    I had a look at comments on this article on the Irish Times site and the breakdown in order was noted. It seems to be a very specific Irish response to conditions of severe stress. The Tiger was supposed to have washed all that away but of course the Tiger only went skin deep.

    I remember being in Wexford a few years ago at an exhibition on 1798. The rising was put down by a consignment of soldiers from the Highlands of Scotland. A few months later I was in Inverness and bought a book about an uprising there in the early 1820s. Who put it down? Why, a consignment of British army soldiers from Wexford. The English were great for playing on this tendency to disunity under stress and which seems to be found at very deep levels in the national psyche.

  118. I accept it is easy to snipe from the sidelines and take the populist view and David McWilliams can be hard to listen to but why is the idea of so called intellectuals forming a new party sniped at?

    Is the current system with the likes of Willie O’Dea, JHR and Donnie Cassidy working?

    The current system of getting elected revolves around gombeenism or patronage. What % of TDS are elected on the family name ( Andrews etc).

    A new party with some household names at the helm could gain traction. Who these would be is another story.

    I agree with those that are grounds for optimism. We are near rock bottom if not already there. We would rise quicker with the right political decision makers.

  119. @ceteris
    @joseph ryan

    “Contagion spread rapidly to the senior bank and sovereign debt markets, while German chancellor Angela Merkel’s subsequent “bail-in” proposal for a post-2013 sovereign debt restructuring mechanism only added fuel to the fire of an Irish debt-spiral. The appalling vista this morning is of a recapitalised Bank of Ireland, trying to make its way in the world to support Irish economic recovery, but now with the millstone of 10 per cent (guaranteed), or 13 per cent (unguaranteed) funding costs weighing heavily around its neck.”

    No info there about what this refers to – guess secondary bond RYs. Clarity would be helpful, given the overnight rumours.

  120. @Greg
    you are right, it would require a legislative change for the NPRF to buy Irish debt. similarly, it would require legislation to require both private pension insurance or bank funds to do the same and it is more than a bit ‘south american’ if enacted
    my point though is that we are seriously out of line with other eu countries in terms of asset allocation of domestic savings and that has massively compounded our problem as there has been no natural buyer of Irish debt when bad news came out. free fall every time
    we are in wartime now and that demands extreme solutions
    domestic savings in theory should be used to finance long term infrastructure and investment, yet our savings are funding offshore companies and govts. they have stopped reciprocating and we need to bring our savings home
    there are plenty of precedents, the Dutch forced private pension funds to buy domestic debt about 3 yrs ago to ‘plug the deficit’ and now 90% of funds are in Dutch or German bonds ( Irish equiv would be 63 bio)
    last year the fsa in the the uk forced domestic banks to hold only uk govt gilts as liquidity buffers, overnight creating demand of over 200 bio for uk govt debt, all in the name of prudent liquidity
    spains pension funds are obliged to buy Spanish bank or govt debt to ensure prudent liquidity since the start of 2009
    we need to wise up and start being clever and as every country retreats to base, use what resources we have to stop getting beaten up by overseas bullies. and that’s what they are, all western banking systems gorged on credit, anyone who doesn’t realise that germanys banks, French banks, Spanish banks are in the same boat as our own is naive. it was a global cock up and we are paying the price for taking the hits to the banking system up front and crazily not ensuring a liquid domestic bid for our own funding requirements as the world works thru this crisis.
    the uk us and japan all ‘printed cash’ to fund the system, the ecb will ultimately have to do the same but in a different way by funding ALL the banking systems at artificially low rates to recapitalize them.
    we’re just the first link in the chain in my opinion

  121. @MPLT

    Indeed. Actually read somewhere that Spain’s pension fund will consist of over 90% Spanish debt by the end of the year. I agree with you about building up a domestic demand.

  122. “The corollary is that Ireland is moving increasingly towards “self-help” status, whereby the ongoing borrowing requirements of the public sector can, in principle, be absorbed by the accumulated surpluses of the private sector.”

    Am I reading that correctly?

    A not so thinly veiled threat to confiscate private surpluses for public use?

    Time to get your “private surplus” beyond the reach of the state then?

  123. A bit off topic but I had lunch in the Eurostat canteen in Luxembourg today and heard on the grapevine that a troubleshooting team is preparing to leave for Ireland or has already left. So watch out for more tall Hungarians. Dúirt bean liom etc.– let’s hope it’s just another urban legend.

    Don’t tell anybody I told you BTW.

  124. @Grumpy
    Thanks. I could not find the article again. Eoin Bond says it is the secondry market. But what has happened the liquidity issue – can they get overnight money at reasonable rates.

    @Greg
    I seem to remember a financial services unit being bought out at a huge price- so you got to keep churning the commissions to pay the interest.

  125. @mplt

    During ’99 – ’07 there was too much capital flowing into Ireland. Had fund managers not diversified out, using the absence of exchange rate risk, that impact would have been exaggerated.

    They have been paid to manage risk and – to some extent – done so. Had they not beeen allowed to do so all sorts of investment funds would have been bust by now.

    If you change the rules just bear in mind that you are doing part of the investment manager’s job and had better get it right in picking the bottom for these assets.

  126. @Greg,

    I agree. That day of reckoning will come, but it won’t be forced (exclusively) by an irish government. In the meantime I can’t wait for the spin that will accompany the announcement of the bail-out. “The IMF is only here to help. We’re still in charge. We’ve taken the best (international) advice in the past; we just need a lot more now.”

  127. @Carolus Galviensis

    Sounds like a sort of Eurostat paratroop mission to seek out troublesome statistics and shoot them. Tip off – its a bit windy.

    I think JTO has commandeered all the untroublesome ones, so they should be easy to find.

    Ask questions later.

  128. MPLT

    Sorry MPLT I need to take this slowly (not being an economist).

    “it would require legislation to require both private pension insurance or bank funds to do the same and it is more than a bit ’south american’ if enacted”

    Are we now taking advice from Argentina?

    http://online.wsj.com/article/SB122460155879054331.html

    So the asset allocation of private pension funds would be determined by an act of the Oireachtas?

    “it would require legislation”

    Might it not also require a change to the Article 43 of Constitution, Private Property?

    You are suggesting that the state should be allowed to take my private property (private surplus) and determine where it will be invested?

    So if my pension fund is currently 100% allocated to equities the state can instruct the fund manager to take 50% of that and “invest” in Irish government debt?

  129. @ grumpy
    They only diversified cos the rules changed in 01 when they went from having lots of Irish debt to other eu debt as there was not enough Irish debt available to meet their requirements
    agree it may well have pushed the price of credit to even more ludicrously low levels but we are where we are and we need natural buyers of debt to prevent this ‘run’ on the country. it’s the lack of liquidity in Irish debt that has made us an easy target despite the underlying fundamentals being so different to Greece Spain Portugal etc
    I’m not advocating buying debt as being a value play, more a natural supplier of long term capital to the state as per every other country

  130. @ Greg. the state already has very strict rules regarding your ‘private’ pension fund, how much you or your spouse own if you passed on, how it is managed, the deficit allowed etc
    I’m not saying it’s right, I’m saying it brings us into line with everyone else and like it or not, that’s who we are competing with and we need to be properly equipped going to battle in a global market

  131. @ All

    now reckon there is no chance of bailout this weekend, or even early next week. We can move back to Defcon 2 or 3 until end of next week at least, and maybe more like next month. Re Medley – very good track record in US, not so much on matters European, fyi.

    @ Ceterus/Grumpy

    they’re getting 1, 2 and 3 week cash at euribor + 0-25bps (its a wide market these days).

  132. @mplt

    You could diversify lots of funds as soon as you were convinced entry into the Euro was going ahead. Depended on what the the fund was and the trustees.

  133. If the Government strong-arms Irish pension funds into buying more Irish assets, that’s the end of putting money into Irish pension schemes for me, and I’ll be looking for ways to move what I have somewhere safe. Irish pensions are already only marginally attractive because market returns are poor, financial services firms skim a lot of the returns there are, and the value of the fund gets taxed on the way out even if it is not taxed on the way in. If the Government compounds that with likely expropriation of part of the value through a default, putting money into a pension will turn from marginally sensible to dumb, dumb, dumb.

    Incidentally, Donal’s suggestion that current spreads imply 51% probability of default in 5 years time seems to me to be as incendiary as anything Morgan Kelly wrote. It is equivalent to claiming that if Ireland defaults, it will be by wiping out bondholders, in contrast to the normal practice of imposing a limited haircut. Tempting though it is, I don’t think we will do this even in extremis. I interpret the same evidence as implying that the markets anticipate a probability of default far above 51%, but much sooner, and with a haircut far short of Donal’s La-La Land 100%.

  134. @Eoin,

    Don’t think there is a chance of a bailout before the budget. I think you will see strong statements of support come out of the G20 later today and from various EU leaders next week. They will try and remove the possibility of debt restructuring off the table and see where that takes us.

    Medium term, I still don’t see any other option than outside help.

  135. @Eoin,

    Many thanks for the up-date. What are the odds the market players won’t be back for more on Monday? Postponing the details of the 4-year plan until after the Donegal by-election doesn’t look very clever. Plenty of scope for “events” in the interim.

  136. MPLT

    It is entirely understasndble that there be “very strict rules regarding your ‘private’ pension fund”.

    “how it is managed”. Well I can’t quote chapter and verse here but would I be right in assuming that those rules relate to the qualifications of those managing such fund? The clear presentation of how the fund will be managed?

    Would such rules not be in the interest of those investing in pension funds (or any other collective scheme)?

    They were not designed to allow the state confiscate private wealth.

    So let’s be clear here.

    Donal O’Mahony’s big idea is to confiscate private wealth and give it to the state.

  137. Letter to shareholders from Dr Michael Walsh, Chairman, Irish Nationwide, 10 March 2008:

    “The financial results for 2007 were outstanding. The pre-tax profits of your Society were €391 million – an increase of 64% over 2006. The total reserves of your Society, which are the members’ funds, are now €1,510 million. The level of loans to customers increased by 18% during the year to €12.3 billion. This increase in the loan book is a true reflection of how competitive your Society is. The table below highlights the outstanding job done by the management and the staff of your Soceity over the past decade.…

    The Board wishes to acknowledge the enormous contribution of Mr Fingleton to the Society’s success over many years and his importance to the Society….”

    I quote this merely to recall that ‘facts’, divorced from context or dynamic, are fairly meaningless. In my view, the dynamics (or the ‘fundamentals’, to quote our much-maligned leaders) of the economy are much improved of late (cf, JTO), but are not sufficient to outweigh the continued justified (and disinterested) concern of the markets regarding i) the sovereign’s ability to repay existing and future debt, and ii) the extent of further unrecognised bank write-downs.

  138. DOM writes “The corollary is that Ireland is moving increasingly towards “self-help” status, whereby the ongoing borrowing requirements of the public sector can, in principle, be absorbed by the accumulated surpluses of the private sector. Of course, practice can differ from principle in this regard; hence the need for more enlightened self-interest in the ways in which we disburse the investments of the pension fund and insurance industries, the National Pensions Reserve Fund, and indeed the domestic banks themselves.”

    This is the Hugo Chavez school of economics. The notion that private pension fund managers should be ‘persuaded’ to buy Irish gov’t bonds in ever larger quantities is very questionable – especially from an investment professional firm such as Davy.

    There’s a lot of criticism of Morgan K. around the fact that the ‘didn’t offer a solution’. But let’s face it – even if he had – what difference would make. The trouble in Ireland is that the folks who run the country have no concept that anyone else should run it. So they they say ‘we’ they mean themselves and not you. Lenihan on Newsnight the other night was beast from an island where he has no natural predators. He wandered into Paxman’s gunsights and, purely for sport, Paxman fired off a shot or two – but BBC jouralism / current affairs has no interest in the truth about how Ireland is governed. This was just entertainment. The bullets bounced off Lenihan and by the end Paxman was plainly bored. You could see Paxo thinking ‘A rather charming Irish rogue’…..I wonder what’s playing at Covent Garden this week-end.

  139. DOM writes “The corollary is that Ireland is moving increasingly towards “self-help” status, whereby the ongoing borrowing requirements of the public sector can, in principle, be absorbed by the accumulated surpluses of the private sector. Of course, practice can differ from principle in this regard; hence the need for more enlightened self-interest in the ways in which we disburse the investments of the pension fund and insurance industries, the National Pensions Reserve Fund, and indeed the domestic banks themselves.”

    This is the Hugo Chavez school of economics. The notion that private pension fund managers should be ‘persuaded’ to buy Irish gov’t bonds in ever larger quantities is very questionable – especially from an investment professional firm such as Davy.

    There’s a lot of criticism of Morgan K. around the fact that the ‘didn’t offer a solution’. But let’s face it – even if he had – what difference would make. The trouble in Ireland is that the folks who run the country have no concept that anyone else should run it. So they they say ‘we’ they mean themselves and not you. Lenihan on Newsnight the other night was beast from an island where he has no natural predators. He wandered into Paxman’s gunsights and, purely for sport, Paxman fired off a shot or two – but BBC jouralism / current affairs has no interest in the truth about how Ireland is governed. This was just entertainment. The bullets bounced off Lenihan and by the end Paxman was plainly bored. You could see Paxo thinking ‘A rather charming Irish rogue’…..I wonder what’s playing at Covent Garden this week-end.’

  140. @ Enda

    i think a very heavily incentivised deal (ie low rate, no messing with the corporate tax rate) could be done pre budget, but am tending to agree with you, think everyone got a little ahead of themselves this morning. It does seem unlikely that we’ll be waiting til March/April though, much more of a Dec/Jan feel to it.

    @ Paul H

    i think the adjustment plan will be released before the by-election, think the DoF heard the market groans on it. Reckon we’ll see it end of next week to be honest. I think Cowen made a comment suggesting end next week, start of week after actually.

  141. Hmmm, as soon as i say that this hits…

    RTRS-EURO ZONE SOURCES SAY IRELAND IN TALKS TO RECEIVE
    EMERGENCY FUNDING FROM EUROPEAN UNION

  142. @Eoin
    This is a bit of a yo-yo day 😆

    I have heard through someone on “our side” that it was going to happen soon but I would be surprised if it was this weekend.

  143. “Of course, practice can differ from principle in this regard; hence the need for more enlightened self-interest in the ways in which we disburse the investments of the pension fund and insurance industries, the National Pensions Reserve Fund, and indeed the domestic banks themselves

    This is a manifesto to take control of the entire financial system and allocate domestic capital under fiat.

    Time to start asking who the “we” are.

  144. The statements made at G20 summits have to be taken for the complete undulterated PR balderdash that they are. The rubber hits the road with Frau Merkel and Madam La Garde who will have to face voters who are disgusted with the idea that governments, bankers and speculators who made enormous amounts of money by gaming the system will walk off with their booty while the taxpayers are left in the dust with the losses. All the economic science and carefully crafted economic models cannot overcome the cold hard fact that even the gullible Irish voters are waking up and are not smelling coffee but are smelling the putrid stench that corruption, fraud, cronyism, nepotism, parochialism and plain common stupidity and ignorance has brought to pass. The gov’t in power since 1997 is partly to blame for the problem and is now an impediment to the solution. So said Joseph Stiglitz the well respected Nobel Laureate a few days ago. An early election is badly needed. Clean out the stables now.

  145. Personally, I don’t think the statement from the G20 was enough to calm bond markets. We have very little debt maturing in 2011/2012. We are unlikely to be in a position to have a balanced budget in 2013, never mind to be able to repay debt. So it is likely that all debt will be rolled over. If the new buyer beware scheme is going to be in place, then all barring the shortest duration existing debt is at risk. At best the 2-year is helped and indeed, it has seen the biggest price improvement.

    So, what do I think is improving prices today? EFSF bailout talk…

    An EFSF bailout is at least going to start with rolling over Irish debt into unhaircutable EFSF debt. So short durations are protected. It is likely to extend for some time and ensure that the fiscal situation stabilises. If the fiscal situation doesn’t stabilise, the EFSF will remain onside, one presumes, as long as the government are following the rules. The IMF, by contrast, was likely to look for some element of renegotiation or rescheduling (that is what it does).

  146. @hogan,

    The IMF’s hand has been stayed in Greece – much to its chagrin. I agree with you. I doubt they will be kept on that leash in an Irish bailout. And they’ll have lots to keep them occupied in the dysfunctional non-traded sectors.

    In my patch, I very much rate the IMF folk who deal with energy sector policy and regulation. Can’t wait for them to give the Irish sector the once-over.

  147. @ Greg
    that is not what donal o’mahony is suggesting and it’s unfair to say so

    the reality is that other countries are prohibiting the free movement of capital under the guise of liquidity, solvency, security etc. take your pick

    we don’t set the rules, we have to play by them. Every other country is legislating to ensure capital is retained domestically, capital is what’s missing when leverage goes through the roof. Until deleveraging has been completed, we need to protect what capital we have and the more we can get to accelerate the process the quicker you get there. Deleveraging by definition is as much increasing the capital base as reducing debt which will take much longer.

    This is not about what’s right or what should be, more what is needed in a time of national crisis

    Having most of your capital abroad supporting foreign financial systems is madness when the reciprocal line of credit has been withdrawn. unpleasant but needs must and 8% odd is a pretty decent return for your private fund picking up that debt from offshore holders

  148. I’m hearing Lucey is still indisposed down in Kilenomics. There was an incident with McWilliams apparently, they got put in the same hotel room by mistake, Brian asked David to leave, David asked for Ireland to leave the Eurozone, and some unpleasentness ensued. Anyway, he asked me to give you a closing bondwatch update….

    IRISH TEN YEAR 72BPS LOWER ON THE DAY, MID-YIELD 8.19%
    IRELAND 515-535 -80
    JUNCKER SAYS IRELAND HAS NOT REQUESTED HELP FROM EFSF                                                  

  149. Of course there is no application for aid. The formal application is made only when the package is fully agreed and ready to go.

  150. @DE
    Any chance there is no application but we are being given an offer we can’t refuse?

    Can’t see it happening this weekend given what the minister has said but there is definitely something happening behind the scenes

  151. @MPLT
    You don’t appear to understand capital, or I don’t understand what you are saying.

    Supposing I move my PRSA funds out of bunds and into Irish debt. How diversified is capital in the country then? Er, less, I’d say, concentrated on the performance of the sovereign.

    What does it do to external investment balance?
    Well, it makes it worse as there is a lower investment in bunds.

    Currently external investment balance stands at -157 bn euro. Most of the external investments that are worth anything are pension fund, insurance assets and the like. Each time a coupon is paid on a bund, my pension and the country’s investment position improves (by a teeny-tiny amount). Aggregated, these investments abroad help balance out the interest payments that we pay to others.

    Bringing them back home is not going to help, indeed, it is going to increase capital flow out of the country (in the form of existing interest payments with no balancing income) as well as increasing the pressure on the sovereign to perform.

    I don’t know about you, but I wouldn’t rate the current administration to perform in a circus, so expecting that they will return my savings to me with interest is a bit rich.

  152. @D_E & @Paul
    It does rather sound like that, doesn’t it?

    The wording is all rather careful. And rather unrealistic.

  153. Contrary to what Donal has to say, it’s self-evident that Ireland’s bank problems are much worse than admitted.

    While NAMA haircuts have been greater than predicted, it is only necessary to look at the rules of the game as written, and at publicly available information on surrounding circumstances, to see that they must have paid the banks at a level well above any objectively reasonable estimate of the long term economic value of the assets.

    Three points are key in relation to NAMA:
    – NAMA is obliged to pay for assets at their ostensible market value as of a date in the past, when such few benchmark transactions as were occuring took place at prices significantly higher than they do today.
    – Prices in the Irish property market are still underpinned by an enormous degree of intervention by the state to limit supply. Vast volumes of new properties have been parked in NAMA cold storage, and the homes of at least tens of thousands of mortgage defaulters are being kept off the market by the moratorium on repossessions. If the market was allowed to operate, it is self-evident that it would be at price levels far below those which obtain today.
    – The main argument originally made in favour of the idea that 10% growth in property value is a reasonable and conservative assumption was based on evidence from past Irish recoveries from property slumps. Unfortunately, most of the key information quoted at the time seems to have failed to discount for very substantial inflation. Based on my calculations, the long term trend in the JLLS capital price property index was flat from around 1970 to the mid-1990s when discounted by the CPI. There were occasional blips above trend, but they did not last. We are now coming out of the mother of all blips. If the argument made by NAMA advocates that the past is a good guide to the future in Irish property stands up, then property prices still have a long way to fall.

    In relation to the wider banking sector, it is reasonable to take what will happen to NAMA as a rough guide for what will happen to banks left with broadly similar loans from outside NAMA’s remit.

    If you put the most honest of men in a position where he has a moral and professional obligation to manage opinion in the wider world, then it is only rational, and even a mark of respect, to discount what he has to say in the light of his responsibilities.

  154. @ DE

    sure it was…sure… 😀

    My personal opinion is somewhat as you suggest – that someone non-Irish and non-German is pushing a better deal into the open in the hope they can get everyone to sign on. It might take a while to agree (a month or so), but i would not be surpised if we saw a somewhat amended EFSF coming into existence shortly. In the meantime, Irish focuses on domestic issues, and ECB buying will ramp up for the next few weeks. Today’s events should at the very least solidify Irish risk out to 3 years, ie banks should now be able to issue ELG for that period.

  155. @hoganmahew
    I’m sorry, but I don’t understand your numbers.
    The liabilities on the national balance sheet if you could devise one essentially are capital (domestic bank deposits, savings ( insurance pension and various saving funds ), cash in circulation, and offshore borrowings.
    We ‘invest’ those liabilities in domestic loans to support mortgages and business needs, infrastructure, offshore assets , govt deficit and current account deficit.
    As offshore borrowings dry up, we either resort to outside help via IMF or EFSF to repay them or
    a) shrink the economy through reduced deficits
    b) improve current a/c
    c) reduce lending (increased saving)
    d) reduce capital spending
    e) sell offshore assets

    a) to d) are being done but it’s e) that every other country is also doing that we’re not. If we could sell some more offshore assets (such as AIB selling polish bank) well and good, but the big win will be offshore assets that are liquid and held by the NPRF , banks and private pension funds.

    Otherwise it’s bailout time or more to be squeezed from a) to d)

  156. I am in a pub not far from merrion sq and there is a german dude here. I don’t believe in co-incidences! Must tell Joan.

  157. @MPLT
    I refer to http://www.cso.ie/releasespublications/documents/economy/current/iip.pdf

    We already have a huge deficit of offshore assets. Selling more would leave us in the position of being solely dependent on growth in Ireland to improve this position – we would be left with a rump of external ‘debt’ that would operate in isolation, undiversified from the Irish economy.

    My point is that at least with some foreign investments, the economy in aggregate is in a position to benefit from diversity – we get some growth where there is growth.

    Should we leave it to the state to decide how best to invest? Their track record on picking bank shares is poor…

  158. MPLT

    “Having most of your capital abroad supporting foreign financial systems is madness when the reciprocal line of credit has been withdrawn. unpleasant but needs must and 8% odd is a pretty decent return for your private fund picking up that debt from offshore holders”

    I don’t think you get it.

    You are arguing for capital controls and the confiscation of private property to fund state debt.

    Solvency requirements differ very little throughout Europe.

    Liquidity (I presume you mean banking sector liquidity) is market driven until the market breaks down.

    Security. Don’t understand that.

  159. At least the British sympathetic. Jeremy Warner writes..

    “The Irish government has been betrayed by its European “friends” as surely as was Britain during the fiasco of the ERM in the early 1990s. Unfortunately for Ireland, there is no similarly obvious escape route. It cannot devalue its way back to growth. It is as permanently imprisoned in its eurozone sarcophagus as an Egyptian mummy in the Valley of the Kings.

    What makes this fate so galling is that Ireland has done everything that could reasonably be expected to set its fiscal house in order, and, unlike others, it has done so ahead of time and voluntarily. Wages, pensions and public services have been slashed, and taxes raised in a manner that makes the UK’s yet-to-bite fiscal consolidation look like a stroll in the park.

    Yet it’s all been in vain.”

  160. @ Carolus

    David McWilliams got it right in 2005. Morgan Kelly got it spot on in 2006 through 2008. I think MK in particular actually believes that we have fallen off a cliff but just because he was right before…Having said that, and having seen a rerun of his Sept 08 performance on Primetime, I have a lot of respect for him, I just hope he is wrong this time.

    DMcW on the other hand is a totally different kettle of fish and has gone completely into ego orbit on the back of his “I told you so”. His outrageous suggestions are too many to list from leaving the euro to a two year freeze on mortgage repayments to insuring our way out of this mess.

    He was all prepared for this morning’s show – his big theme that Merkel was giving Lenny the hint to stop chewing garlic and listen to David. The problem was that his idee fixe had been derailed by the overnight confirmation that Angela was having a deposit selling moment. David decided to ignore that development.

    When it was suggested he should form a political party and save the country I could almost see his head swell, thank god this was not TV.

  161. @ All

    The Professor is back on-line! Hurrah, he has greeted our bond yield improvement with…..eh, a frowny emoticon, ie 🙁

    Now, i wonder has JtO being suggesting such a thing happening…

  162. Ireland in talks to get EU financial aid
    http://www.msnbc.msn.com/id/40151899/ns/business-world_business/

    BRUSSELS — Ireland is in talks about tapping emergency funds from the European Financial Stability Facility and it is very likely that it will get a funding program, euro zone sources told Reuters on Friday.

    “Talks are ongoing and European Financial Stability Facility money will be used, there will be no haircuts or (debt) restructuring or anything of the kind,” one euro zone source said. “It is very likely that Ireland will get a program.”

    A second source confirmed that talks were taking place.

    “The talks are ongoing between the EU and Ireland on a lending package from the EFSF, of unspecified size,” the second euro zone source said.

    “It is clear there will be no haircuts, which should help restore calm to markets,” the source said.

  163. @Bond.Eoin Bond
    Looks like the G20 statement is working. 8.13% in .76
    Whats you prediction for Monday. Will they (bondtraders) reflect and resume selling or are the ECB and UK lending buying support. I see David Cameron supporting us.

  164. @ Ceteris

    i reckon short end keeps coming in (lower yields) on Monday. It’d be covered by any bailout timeframe, so it should be seen as very safe now. Longer end will take more convincing, but dont think we’ll see the yields go back higher yet. Btw, no sign of ECB today, all real money buying. Saw some decent activity both domestic and foreign.

  165. @Dreaded Estates
    Interesting bit from MSNBC article ‘If needed, the 60 billion guaranteed by the EU budget is to be tapped first.’ Just enough to keep us going for three years.

  166. You have to be aware that the Tory government does REALLY not want a failed austerity based approach that the opposition and Keynesians will latch onto. Try austerity – end up defaulting, is not acceptable to Osbourne.

  167. How much of bonds both senior and subordinated are still outstanding at the 6 institutions ? Could we not sting the european banking system early next year before we go down ?
    We’ve indirectly bailed out German banks from their bad investments in private casinos (Anglo, AIB) and then have to get lectured about the need to burden share by Angela as we get bent over because we didn’t ?
    WTF is going on here.
    Give her what she wants.
    Let the remaining bondholders go.
    Time for a little hardball from the Brians, something more than statements pleading for the Germans to please say something nice about us.

  168. @Bond. Eoin Bond
    Thanks.
    Interesting that real money buying. Looks like bailout activation gathering momentum. That article in link posted by dreaded estates is intriguing ie.the 60b.

  169. @eoin

    Now, i wonder has JtO being suggesting such a thing happening

    JTO again:

    No, I have been too busy giving interviews to the Irish Examiner.

    That very nice-looking lady lecturer from UCD posted yesterday that she had identified me as Danny McCoy, the head of IBEC. I am not, of course.

    But, this is what he said in an interview with the Irish Examiner today. I suppose that there is a certain ressemblance between what he is saying and what I have posted. Except that, when I post it, I get called a troll. And, with all due respect to him, I said it a few months before he did. It all comes down to which group of economists you believe. Those that work at the coalface, engaged daily in making/selling things, or those that sit behind desks in universities.

    IBEC: Strong industrial production figures show recovery on track
    Friday, November 12, 2010 – 02:18 PM

    Industrial production in Ireland has risen by 7.9% in the month and 10.9% in the year, according to Eurostat figures. IBEC said the data demonstrated that recovery is “firmly taking hold”.

    The EU statistics agency figures show that Ireland posted the strongest monthly improvement in industrial production in the EU in September 2010. IBEC Director General Danny McCoy said: “Part of the reason why bond yields have risen so sharply is that markets have been doubting Ireland’s growth prospects. Latest industrial production data clearly show that the recovery is on track.

    “Ireland continues to have a resilient, diverse and dynamic enterprise base on which to build future growth. In response to the recession, Irish companies and their employees moved quickly and with a flexibility unmatched in any other country.

    “We now have evidence that this is working and business is gaining the necessary momentum to drive growth. We have a lot more to do to restore our economic fortunes, but we are on the right path.”

    http://www.irishexaminer.com/breakingnews/business/ibec-strong-industrial-production-figures-show-recovery-on-track-481559.html#ixzz155Y0FBld

  170. @ Grumpy
    “Try austerity – end up defaulting, is not acceptable to Osbourne.”

    Boy George is taking a gamble with his austerity programme. He has no control over how it pans out.

    The UK has similar debt overhang problems as other countries closer to the centre of the vortex. What is Osborne doing about the UK’s private debt situation ?

    He comes across to me as a spoofer. Maybe not in the same league as our own dear FM but still a chancer. Do you remember that August 2008 kerfuffle when Darling said the UK faced the greatest financial shakeup since the 1930s and Osborne rubbished it? Or September 2008 when sterling fell and Osborne blamed Darling for “talking down the pound”?

  171. Brian Woods II

    Ta, you’ve obviously done your homework. Frankly, I don’t know enough about the country (having lived abroad for several decades) to be able to agree or disagree with your judgment. But your reply has been most informative.

  172. JtO writes:

    It all comes down to which group of economists you believe. Those that work at the coalface, engaged daily in making/selling things, or those that sit behind desks in universities.

    You are one of those trolls even I can’t resist.

    The problem is that economists ‘who work at the coalface’ often have vested interests — more so than academics, who may lose their reputation if they overdo it on the propaganda front. A private-sector economist who, say, disses his own company or industry can lose his job. University economists can diss what they like, more or less, but if they have tenure they are unassailable.

    As you yourself say, private-sector economists are engaged daily in [..] selling things. But a seller’s job is not to seek the truth — it is to persuade the buyer.

    Imagine if Morgan Kelly were employed by the AIB. He would now be on the dole — the reward for speaking his mind.
    Not that that would make
    you shed any tears.

  173. @Carolus Galviensis

    University economists can diss what they like, more or less, but if they have tenure they are unassailable.

    JTO again:

    That is the problem. They can come up with rubbish 24 hours a day, 7 days a week, 52 weeks a year, and taxpayers still have to pay for them. I am not saying that they are all like that, but some are. As for tenure, I’d love to have tenure. If tenure is such a good thing, why not extend it to everybody? A private-sector economist lives by results. If he gets all his forecasts wrong, he is out the door.

    @Carolus Galviensis

    Imagine if Morgan Kelly were employed by the AIB. He would now be on the dole. Not that that would make you shed any tears.

    JTO again:

    Correct. But then, if I was on the dole, he wouldn’t shed any tears.

    The difference is that, if I don’t produce results in my job (which is not as an economist, BTW), I could end up on the dole. Whereas, even if all the predictions that Morgan Kelly made this week, to damaging effect, turn out to be totally and hopelessly wrong, he carries on collecting his taxpayer-funded salary regardless.

  174. @seafoid

    Not sure I was clear. Suggesting motivation for backing/encouraging deal.

    btw …”Or September 2008 when sterling fell and Osborne blamed Darling for “talking down the pound”?”

    Actually Osbourne looked very silly at the time since he went around shouting from the rooftops that ther was going to be an imminent gilts strike – even encouraging one, but yields just kept falling monotonically. Looked shrill and naive. Enter Ken Clarke.

    He seems to be a subscriber to Morgan Stanley research and can’t bring himself to read the other side.

  175. JohnTheOptimist

    “That is the problem. They can come up with rubbish 24 hours a day, 7 days a week, 52 weeks a year, and taxpayers still have to pay for them.”

    How many economists who work for banks or stockbrokers have been sacked for “comming up with rubbish 24/7/52” over the last decade?

  176. @JtO
    MK predictions have been ok so far. His unemployment prediction was well off but he called things earlier and more accurately than most on the banks.

    Only time will tell whether he is correct on us needing outside assistance. Most of the problems he forecasts is on the banking which is an area you don’t comment on much

  177. @jto

    “A private-sector economist lives by results. If he gets all his forecasts wrong, he is out the door.”

    No he isn’t, as long as his output helps the salesforce generate commission – even if that is through shared sales/client disagreement with most of his research.

    Wholesale: analysts and economists (mainly on the sell side but also sometimes on the buy side) are frequently used to check the other view. What they say is often rejected but they are a useful tool to make sure the fund manager is still comfortable with his, contrasting, view. They are often derided.

    Retail: they are often there to provide intellectual cover for a sales push. There is a lot of pressure to come to conclusions executive managers want to hear.

    Even outside financial services an economist who says invconvenient things, even if eventually correct may be out the door, whereas the guy who knows where his manager’s interests lie and accomodates them can do very nicely. Economies turn slowly and people move onwards and upwards.

  178. Never understood the fascination with economists. Not saying they don’t do good work but at the end of the day it is a social science. You find me a economist that inteprets data one way, I will find you another that interprets it another way. Bizarre! Right up there with banks fascination with ‘models’. You have all these genius guys designing brilliant mathematical models and yet it all comes down to whether Joe soap is able and willing to pay his mortgage! Everyone needs to climb off their high bloody horse and realise none of us have a damn clue what that future brings.

  179. dreaded_estate

    banking which is an area you don’t comment on much

    JTO again:

    Correct. I don’t comment on things that I know little about. I only post in about 10 per cent of threads. I notice some people (not you) post in nearly every thread. It would be better if people only posted in threads that they know something about. That seems to be a rule you follow as well.

    Forget the fact that I disagree with Kelly. I am nobody. But, the list of somebodies who are lining up to give totally opposite opinions to Kelly is getting quite long. In the past 24 hours alone: Patrick Honahan, Danny McCoy, Donal O’Mahony. You are correct in saying that only time will tell whether or not Kelly’s apocalyptic forecasts prove accurate. Not just the one about needing outside help, but his forecasts that the economy will completely crash with no recovery at all in the near future. My point is that clearly he has done great damage in making the forecast, and while, if he is proved right, that won’t matter as he will be vindicated, but, if he is proved totally wrong in this, and notwithstanding the damage that would have been needlessly caused in that case, he just carries on in his taxpayer-funded job as if nothing had happened.

  180. @JTO

    The tenure system in Universities is designed precisely to allow academics to be free to say distinctly unpopular things and set their own research agendas. Imagine what ‘Fianna Fail administration approved research’ would be like! Scary as fxxk I’d imagine. You are arguing for a downright fascistic limitation of freedom of speech and academic freedom on here.

  181. @JtO

    Carolus Galviensis herewith withdraws all allegations of trollhood leveled against JtO.

    If tenure is such a good thing, why not extend it to everybody?

    Not being a university professor, I don’t think I’m indulging in special pleading when I claim that an exemption should be made for the world of academe, at least in the case of state-funded universities. Enough of the public sector is politicised as it is — what other state servants can express contrarian views without risking disciplinary action? If universities were privatised tenure would be a matter of freedom of contract, of course. But you have a good point — there are pros and cons.

    Whereas, even if all the predictions that Morgan Kelly made this week, to damaging effect, turn out to be totally and hopelessly wrong, he carries on collecting his taxpayer-funded salary regardless.

    By virtue of warning the Irish public about the upcoming housing crisis four years ago, Morgan Kelly has deserved his lifetime taxpayer-funded salary several times over. If he dissuaded even a hundred would-be house purchasers from their folly, he has probably saved them at least 100K euro per head. That’s not a bad achievement.

    And, yes, Mk could conceivably be wrong about the mega-crash he believes we are heading for. But MK is hardly likely to CAUSE such a crash, unless we attribute supernatural powers to him as a kind of Prince of Darkness.

    If he’s wrong, the taxpayer will have lost a relatively small sum (per capita, that is). But if he is right again, every investor who — thanks to his advice — steers clear of Irish govt. bonds will have gained. So will every Irish citizen who buys a one-way ticket to anywhere outside the Republic thanks to their taking MK seriously.

    Incidentally, almost EVERY Cassandra who years ago predicted the current debt-deflation crisis (such as Peter Shiff, Mike Shedlock, Steve Keen, Charles Hugh Smith, the Automatic Earth duo, Chris Martenson etc) is convinced that bankruptcy is just ’round the corner’ for all credit-boom infected countries. They got it right the last time when everybody else got it wrong. They have no credibility problem.

  182. @dreaded_estate

    While on the subject of things that people know about, and knowing your expertise on rents, what is your explanation for the CSO figures on rents yesterday? As I am sure you are aware, they showed rents almost stable in the 10 months between December 2009 and October 2010. I think down just 0.6pc in those 10 months. This is far below your own forecast of a 10pc fall in rents in 2010 and far below Morgan Kelly’s forecast, which was for an even larger fall than you forecast. Do you have an explanation?

    Notice that I am not saying that your forecast is wrong and that the CSO figures are correct. I am merely pointing out that the CSO figures don’t support your forecast. When the CSO figures for net emigration came out a lot lower than ESRI forecast, the ESRI defence was that the CSO must have got it wrong. So, obviously, that line of defence is open to you and Morgan Kelly as well, should you wish to use it. Just curious.

    For the record, the CSO figures for rents are:

    Dec 2009: 91.1
    Jan 2010: 91.1
    Feb 2010: 90.5
    Mar 2010: 90.5
    Apr 2010: 90.5
    May 2010: 90.5
    Jun 2010: 90.5
    Jul 2010: 90.5
    Aug 2010: 90.5
    Sep 2010: 90.5
    Oct 2010: 90.5

    So, according to CSO anyway, down just 0.6% between Dec 2009 and Oct 2010, and completely flat between Feb 2010 and Oct 2010.

  183. @JtO,

    Another point: your attitude to Morgan Kelly seems to be of the ‘tails I win, heads you lose’ variety. Whether the predicted apocalypse occurs or not, MK will be found guilty in your book. If the sky falls in, he will have helped damage the universe’s foundations; if it doesn’t, he will have misspent taxpayers’ money with his irresponsible scaremongering.

    My own view is that the worst Dr Doom could do is bring judgment day forward by a couple of hours. And would that actually be a bad thing?

  184. @John:
    “Come on guys, we all need to wear the green jersey and get through this together.”

    If you attach a piece of hairy fat bacon to one end of a string, swallow the bacon and then use the other end of the string to jiggle the bacon up and down, you can make yourself sick.

    bjg

  185. @Carolus Galviensis

    Carolus Galviensis herewith withdraws all allegations of trollhood leveled against JtO.

    JTO again:

    I am 61 and not up-to-date with current jargon. I don’t even know what a troll is, or whether being called a troll is a compliment or an insult. Explain it to me. The first person to call me a troll on this site was Richard Tol. Or was it Richard Troll calling me a tol? Anyway, it is confusing at my age when a Tol calls you a troll.

    @Carolus Galviensis

    But if he is right again, every investor who — thanks to his advice — steers clear of Irish govt. bonds will have gained.

    JTO again:

    But, if he is wrong again, every investor who passed up the opportunity to buy Irish bonds at 7/8%, and opted instead to buy UK bonds at 1/2% (or whatever they are now), and possibly suffers further exchange rate loss into the bargain (entirely possible given that UK inflation is nearing 4%, v 2% in Eurozone and -1% in Ireland) will have lost. He can’t have it both ways.

    While on the subject of academic economists influencing people on their investment decisions, I reiterate my suggestion of a few weeks ago that all academic economists in Ireland declare publicly where they have invested their money. Then, we’d see how their investments are faring and whether or not they are putting their money where their mouth is. Like lots of northern nationalists, virtually all of my money (not that there is a lot of it) is in Irish Government bonds. I’m now getting a whopping interest rate, and a 20% appreciation on top of that over what some of my unionist friends are getting who kept their money in UK Government bonds, convinced by the likes of Kelly that the UK was safer. I doubt if Morgan Kelly has his money invested in Irish Government bonds, so it is great to know that almost certainly my investments are doing better than his.

  186. JohnTheOptimist

    “My point is that clearly he has done great damage in making the forecast”

    What “great damage” has he done?

  187. @ Enda f

    Absolutely brilliant. Economics is that very funny “science” where almost everybody can have an opinion, as the ad goes, just like backing on horses. Self confessed ignorami like Gene Kerrigan have no problem waxing about the Keynsian multiplier effect of economic stimuli. But just like the horses, when the tips don’t win, there is no accountability, just the brass neck to go for another tip. People like MK and DMcW pulled off some marvellous tips in the past, doesn’t mean they will always be right. On the other hand Prof Lucey keeps getting his tips wrong and yet people still listen for more.

  188. @JtO

    I think the difference could be down to differences in methodologies.

    The CSO the use a rental survey of estate agents and others to determine how rents have changed over the period. Not sure if this is performed monthly or quarterly.

    The CSO review group from March 10 doesn’t seem to be completely happy with this method and they are investigating alternative data sources for private rents.

    http://www.cso.ie/surveysandmethodologies/surveys/prices/documents/reviewgroupreportmarch10.pdf

    Recommendation 23 page 25

    The IPW index is simply based on the average rent of all 18k properties currently for rent on Daft and is updated weekly.

    I think the IPW index may be more forward looking than the CSO survey. We kinda look at rental expectations for properties yet to be rented while the CSO does a survey of a sample of estate agents rentals completed over a given period.

    Not for 1 minute suggesting the IPW method is better than the CSO, it is what is and no more.

    You can see the IPW indices updated weekly to the right of the site

  189. @ JtheO

    “While on the subject of academic economists influencing people on their investment decisions, I reiterate my suggestion of a few weeks ago that all academic economists in Ireland declare publicly where they have invested their money. Then, we’d see how their investments are faring and whether or not they are putting their money where their mouth is.”

    And Donal O’Mahony doesn’t have a vested interest? He works for one of the only parts of Davy that makes any money. They rely on the Irish government issuing bonds. Once we go, and by God we will go, to the IMF/EU our government will stop issuing bonds and Davy’s business dries up.

    So JtheO calls for the sacking of a economics professor who has in no way been proved to benefit from extraordinary impact of his opinion pieces in the IT whereas we hear not a peep about conflict of interest concerning Donal O’Mahony.

    Oh and by the way just engaging in wishful thinking by cherrypicking a bunch of economic data and then extrapolating to a ridiculous degree, while ignoring the overwhelming evidence of paralysis in our financial institution is not optimism, it’s delusion. I’m optimistic about the future because we great people great resources and good education but persisting in this wishful will actually not allow to unlock any of future potential.

  190. JohnTheOptimist

    Morgan Kelly’s Opinion Piece was published in the Irish Times on Monday 8th November 2010.

    The Bloomberg record (mid I think) has the 10yr Irish opening at 7.847 and closing at 7.939.

    http://www.bloomberg.com/apps/quote?ticker=GIGB10YR:IND

    Click on the “1W”.

    A rise in yield of 0.092 on the day. Quick man the lifeboats. 😯

    Is that the “Morgan Kelly” effect?

    Your Unionist friends may be nursing losses but Morgan Kelly is not responsible.

    Mind you your Unionist friends might know something about diversification.

    Maybe they’re just not telling you.

    “But, if he is wrong again, every investor who passed up the opportunity to buy Irish bonds at 7/8%”

    They can buy on Monday at a yield of 8.141%.

    But they might want to quick about it. If I’m right the banks, who borrow at (what) 1.5% from the ECB will front-run retail and drive prices up and yields down as it appears the EU will provide €60bn to Ireland under the bailout.

  191. @Dreaded_estate

    Thank you for that information.

    Do Daft use similar methodology to the CSO? Their figures since December 2009 seem to be very similar to those of the CSO, ie a very small fall, although they only go up to July, whereas the CSO go up to October.

  192. @JtO
    “You are correct in saying that only time will tell whether or not Kelly’s apocalyptic forecasts prove accurate. Not just the one about needing outside help, but his forecasts that the economy will completely crash with no recovery at all in the near future. ”

    The vast majority of MK’s piece in the Irish Times was potential banking losses sinking the economy. He seemed to mention the economy very little if I recall correctly.

  193. @JtO,

    I was drinking my last espresso of the day and now you’ve made me snort it through my nose.
    Check Wiki for definition of troll.
    You’re 61, so I suppose you’d better ask not for whom the bell trolls. Actually it trolls for me, since I am 62.
    Thanks for your enlightening comments, much appreciated.
    Still, I’d advise you occasionally to check out Austrian-school Mike Shedlock’s blog. Though he makes Morgan Kelly sound like Pollyanna on speed. It’s here:

    http://globaleconomicanalysis.blogspot.com/

    I’ll bill you for the espresso.

  194. @JTO
    “he just carries on in his taxpayer-funded job as if nothing had happened”.

    There are lot of well paid people in that category-Both working and retired.
    That very fact that is the principal reason for lack of optimism.

  195. @jto
    “Like lots of northern nationalists, virtually all of my money (not that there is a lot of it) is in Irish Government bonds. I’m now getting a whopping interest rate, and a 20% appreciation on top of that over what some of my unionist friends are getting who kept their money in UK Government bonds, convinced by the likes of Kelly that the UK was safer. I doubt if Morgan Kelly has his money invested in Irish Government bonds, so it is great to know that almost certainly my investments are doing better than his.”

    Surely you’re only getting a whopping interest rate as a reflection of the fall in the € capital value. The coupons haven’t gone up. If you have an offsetting fx gain, that would tend to compensate fully or not for the capital loss – depending on when you bought them.

    If your friends were convinced by the likes of Kelly thaty the UK was safer, they seem to have been right. Seems the bit you got right was that the Euro was going to strengthen against sterling – something which has nothing to do with Ireland. Now a patriotic cash deposit in Anglo and a switch yesterday into those bonds…….

  196. @ JTO

    ever considered to write a book? You could even publish it yourself via BLURB for example.

    @All

    Of course, it is all Morgan’s fault, talking down the economy since years now.

    LOL…. Have a nice weeked!

  197. @Carolus and JTo

    Boys, boys, boys.

    C’mon now – all this playing the men not the ball is not constructive. (though the troll jokes are funny). Personal attacks do not advance the debate and they are increasingly a feature of public discourse.

    Are we the only ones not in Kilkenny?

  198. @JTO

    I don not agree with you that Dr Kelly should be sacked. He called the bubble early on and most of his predictions are still in the realms of the possible. I fail to see the purpose of Prof Lucey though.

  199. @Sarah Carey

    I have always thought that economics chiefly belongs to the entertainment industry, at least as practiced in the Republic of I. Kilkenomics vindicates my argument by its very name. Certainly it looks as though there’s quite a lot of preening going on there today and if they’re not playing the men there what else are they playing? If they play the men, why can’t I and JtO do so in our humble, low-key way?
    BTW where are the ‘personal attacks’ between myself and non-troll JtO?

    P.S. Reliable sources in the Grand Duchy tell me that the Eurostat eagles have landed. Watch out for a Greek not bearing gifts, a dark Italian wearing granny glasses, and a green-eyed femme fatale from one of the Baltic states.
    This information is TOTALLY confidential.

  200. I heard that a representative of a local mobile phone company was singing the praises of the iphone, amazing isnt it.
    The only strange thing in this story is whether the irish times was charging for advertising

  201. @Tull

    “I fail to see the purpose of Prof Lucey though.”

    Prof Lucey serves a very useful purpose. If it was not for his alleged deposit selling moment you would be conned into thinking these profs speak ex cathedra.

  202. @Carolus

    Entertainment for sure. Why I do little else in the evenings only giggle over my laptop.

    I particularly enjoy researching and pondering people’s choice of pseudonym wondering what they are desperate to reveal and yet conceal at the same time.

    So..a Latin scholar, and from Galway. Jesuit educated perhaps?

  203. Sarah Carey Says:

    “Boys, boys, boys.

    C’mon now – all this playing the men not the ball is not constructive. (though the troll jokes are funny). Personal attacks do not advance the debate and they are increasingly a feature of public discourse.”

    I have dealt with MPLT

    You can read the discourse for yourself. MPLT had the decency of discourse.

    I have dealt with JohnTheOptimist

    He chooses not discourse.

    do not advance the debate

    How would you advance the debate?

    The proposition offered by Donal O’Mahony is this.

    “we disburse the investments of the pension fund and insurance industries, the National Pensions Reserve Fund, and indeed the domestic banks themselves”

    My response is this.

    “This is a manifesto to take control of the entire financial system and allocate domestic capital under fiat.”

    Donal O’Mahony suggests that your private property should be seized by the state for the purposes of the state.

    If you don’t enjoy the idea private property all you have to do is say so.

    Maybe it’s a boy thing.

    What’s your opinion?

    Are you an optimist?

    http://www.youtube.com/watch?v=tWfDm_bqwUU

    “Boys, boys, boys”

    I’d be obliged if you left your sexist predisposition out of the discourse.

  204. @Greg

    Don’t take it so personal. A man would take it on the chin 😉

    My opinion is that we probably will need a bailout – either ESF/IMf or that latest rumour I loved – the Chinese!!! I will shed a tear for Irish sovereignty and then get on with things, since I am not sure who rules will make any difference to my life, other than having less money, and as far as that is concerned, I approach that problem with a blitz like spirit of mixed resignation, stoicism and yes, optimism that the wheel will turn, as it always does, presumably by the time my own boys will be ejected from the nest.
    I was fortunate to be reared in the 80’s when there was no such thing as disposable income and graduated into a world with little employment and therefore have no sense of entitlement. This above all qualities appears to me to be one of the most useful in days such as this.

    That ridiculous Prime Time special showed a mother tearful that her 6 year old son couldn’t have FOUR presents for Christmas!!! Her voice broke as she told us – he’d-have-to-choose!!!!!!!!!!

    I am optimistic that purging ourselves of this sort of self-pity will have benefits as we rebuild after the mess.

    But pessimistic that Fianna Fail will stay out of office for more than one term.

  205. @ Greg

    That link is excellent. Totally agree with every word of it. The cult of positive thinking has become a new tyranny in our lives. And it does nothing to help anyone face real problems head on.

    If our economy is going down the toilet then the best thing we can do is face up to it – face the brutal facts – and work out the best way to deal with it. Not delude ourselves with some fantasy silver lining.

  206. OK, 22000 words later, I’ve read through this thread.

    @JTO
    I hope you realise that your optimism and the reaction to it is what makes the site so interesting to read.

    Now then… you present great figures about the present (e.g. 1:03pm). What I’d love to see though is that you translate this into predictions for the future. At least in this thread, I’ve not seen that though.

    The fear I have does not come from today’s good news. The fear I have comes from the future impact of the reconcilation of the budget to meet the future nightmares.

    Notably budget deficits, paying off the national debt, huge unemployed unskilled workforce who left school to build houses, out of kilter public sector wages / social welfare payments… how can all of this be ‘rebalanced’ in a way that doesn’t cause mass defaults on people’s property obligations (mortgage, 2nd house mortgage, house rent, property rent, developer’s repayments to banks…) Imposing all of this pain without the ability to devalue isn’t going to fly with the public.

    If we were at the end of the bad budgets , I’d be delighted at the statistics you gave. Sadly Brian was wrong in the last budget speech and more pain (and challenge) lies ahead.

    Add to this (as the FT pointed out) that the two opposition parties are at polar opposites yet neither have enough of a majority to push their pro-cuts [FG] or pro-taxes [Labour] budgets through, then I’m not surprised that the bond holders are losing confidence that budget balancing can happen without bail outs and losses to them.

    PS Please ignore and don’t retaliate to the snide comments – your opinions are worth more than that! As Joseph Ryan/Sarah Carey said – all the sniping on the site seems misplaced and doesn’t reflect well on anyone. I’m sure I posted the same thing another day too.

    @ All – taking a left-field approach to the suggestions made above… I don’t know why we don’t force international companies [e.g. Tescos] to publish Irish profits. Anything we can do to push food, petrol, clothing costs down will help in our drive to be competitive. They’ve been hiding profits for years. Anything we can do to reduce those costs by a few % should be part of the budgetary plan. Am I completely off the mark in this thought?

  207. Re the bailout. I think we have a couple of weeks tops. Look for news that gardai leave has been cancelled. Bailout will be announced a day or two after that. Some interesting comments in the Sunday papers. Get up early, buy a couple with a bucket of coffee and go have a good read lads and lasses. Hard to distinguish fact from fiction in the world of journalism at the moment. Too many dogs on the street sniffing around this one.

    @Carolus Galviensis – how reliable is your source in Luxembourg? Your trio sounds like the scouts ahead of the cavalry. Seen it before but in takeover situations rather than bailouts. Got any names for these horsemen (and lady) of the apocalypse?

  208. That’s of course assuming there hasn’t been a run on the banks before the gardai leave is cancelled!

    I must remember to start going to the cashpoint a bit more often and sticking it under the mattress. Might need it if those cashpoints stop working….

  209. Joseph!!!

    I told BBC Radio Ulster today that the ATMs would still work and there’d be bread on the shelves.

    Stoppit!

  210. @Joseph

    That the Eurostat eagles have landed is as good as certain. If I’m mistaken I’ll post a correction on Monday.

    I sorta made up the rest, i.e. like the Bible: true, but not literally true.

    PSST .. IT’S ALL HUSH HUSH — don’t tell anybody.

  211. @Joseph:
    “I must remember to start going to the cashpoint a bit more often and sticking it under the mattress.”

    I think there are laws about putting ATMs under your mattress.

    And the bed might be uncomfortable, even for a princess.

  212. @Frank

    Aha!!! Germans pushing us around to save themselves. I KNEW it.

    Hold the line lads, steady……….

  213. @David in Dublin

    In Scotland prices in Tesco between 50 and 70% of irish prices.

    Lidl and Aldi very quite because they have real competition from morrisons etc.

    Tesco laughing all the way to their non-irish bank.

  214. @Sarah:
    Maybe we could ask the British to send us some rifles? Germany’s difficulty is Ireland’s opportunity ….

    bjg

  215. @David
    Reduce Costs.

    Set parking charges to charge by 1/4 hour.
    Remember all the agitation to get mobile phone operators to charge by the second.
    Yet car parks can still charge a full hour for one second over the hour. I wonder how much per hour that works out at?

  216. Sarah Carey

    “Don’t take it so personal. A man would take it on the chin “

    I did not. Your response is vacuous other than your repeated sexism.

    “My opinion is that we probably will need a bailout – either ESF/IMf or that latest rumour I loved – the Chinese!!! I will shed a tear for Irish sovereignty and then get on with things, since I am not sure who rules will make any difference to my life, other than having less money, and as far as that is concerned, I approach that problem with a blitz like spirit of mixed resignation, stoicism and yes, optimism that the wheel will turn, as it always does, presumably by the time my own boys will be ejected from the nest.”

    “My opinion is that we probably will need a bailout”

    And the reason your opinion matters in that is what exactly?

    Did you work that out all by yourself? Your opinon?

    “I am not sure who rules will make any difference to my life”

    Have you any idea just how stupid that statement is?

    “stoicism and yes, optimism that the wheel will turn”

    Stoicism?

    Logic? Ethics?

    There are none in Ireland.

    I see now why you need optimism.

    But you misunderstand optimism. As JohnTheOptimist does.

    You need it because you live in a world empty of logic and ethic.

    The optimism you speak of is nothing other than “Wish Upon A Star”.

    Optimism without logic and ethic is mere tyranny.

    With me so far Sarah?

    “that the wheel will turn”

    What nonsense is this? Wheels turning? Pure psychobabble.

    “presumably by the time”

    Did somebody give you the right to presume?

    No they didn’t.

    “my own boys will be ejected from the nest”

    I hope that when you eject your boys they will have a better grasp of logic, ethic and optimism than you do.

  217. @Sarah

    Sorry, missed out on your question as to my education. Yes, enfant des jesuits I am. Galwegian to the core. Needless to say I normally play hard to get with my pseudonyms but that one wasn’t all that difficult to decipher.

  218. @Frank Galton
    MSNBC carried a version earlier.
    We are an amazing little country in the Atlantic. We hijack the G20 and oblige the leaders to issue a formal message of support. And we don’t even have an exocet.

    Now our Brian is saving the euro -‘Prime Minister Brian Cowen said for the first time that he is working with fellow EU leaders as “there are issues affecting the wider euro area” and that they are trying to “ensure that the bond markets respond positively to the euro.”

    For our size we sure can cause havoc.

  219. @Greg

    What’s so sexist about using the term “boys, boys, boys”?
    You’re beginning to sound like a girl. 🙂

  220. John

    “The cult of positive thinking has become a new tyranny in our lives.”

    Have you consider why the tyranny of optimism exists?

    Optimistic humans do what they are told.

    It really is that simple.

    They don’t think. They act. They become actors in some optimistic play.

    It is as close to Maoism as you can get without calling it such.

    Everybody appears to be free but end up making “free” decisions that make them slaves.

  221. So the Fat Bloke in the Ill Fitting Suit had not asked for a bailout from the EFSF. Neither had the Newly Skinny Bloke with Cancer (Bless Him). Instead we have the leaders of some of the most powerful nations on earth thrusting the EFSF unwanted, unneeded, not FF’s fault, on the nation.

    And this is supposed to do what? Guarantee gombeen man that come the election in 2016, that on the anniversary of the event that sparked the foundation of the modern state we will, what, rise up from the chains of our foreign overlords and re-elect the natural party of corruption… eh, I mean government? And their glorious reich will last for another ten years before they stuff the country again?

    You have got to be kidding me that these spoofers and blusterers have any voters at all. 18%? Are there really that many mad people in the country?

    (Sorry for going all Godwin).

  222. The biggest problem with Ireland is not so much the 90 bn or so of sovereign bonds. As the central bank governor said that is probably “manageable” by an increase in taxation or expanding the sources of taxation into property taxes.

    Increasing corporate taxes will only decrease the take because brass plates will move east.

    What scares everyone is the 110 bn banking gilts which Mr. Lenihan has made parri passu with the sovereign. There are also the derivatives NAMA type bonds.

    He has already admitted that the anglo and INBS gilts are junk. Thats what they mean by “orderly wind down”. In other words we will leave it to the nice Mr. Noonan to tax the F*** out of everybody to pay these bonds as and when they become due.

    As for the rest of the gilts, they do have a value. A lot depends on the capacity of the Irish to pay inflated mortgage rates. Currently these are all been underwritten by the ECB. If they were all written at current market rates everybody would pay 10% on their mortgage or the banks go bust whatever plan Dr. Lucey may have. Neither will work

    It is all very simple. All they are looking for is the floor on the value of these gilts that Frankfurt puts on them. Merkel says we are going to make the bondholders pay something and the bondholders say shit we are only going to 50 cent on the pound and the overnight rate on irish paper goes up to 20% and the shutters come them. The ECB says we are with the Irish (and we have our man on the ground but we dont want to say in case the natives complain about democracy – what a crappy word) and that means that Hans in Dusseldorf is going to see an extra 200 euro in his tax bill next year to pay the bondholders.

    Merkel is trying to gauge how far she can push the german tax payers after the the greek crisis. The stake is the Euro not us

  223. Anyway, back on topic.

    If you think that the state is going to go bust and have to be bailed out and so have a more severe austerity program, then yes, you would think that both the unemployment rate will rise and that the mortgage default rate will be higher than average for a property bust (normally a property bust, even with recourse mortgages, would have a default rate of about 5%). Or that the German and/or (probably and) world economies might recover and interest rates might rise. Or they might not and commodity price inflation might feed into eurozone inflation expectations also causing interest rates to rise (remember 2007 anyone?).

    If, on the other hand, you don’t think the state will go bust and have to be bailed out and the plan that the current government has put in place is going to work and that Germany is not going to sustain its recovery and that interest rates in the eurozone are not going to rise and that the risk element of peripheral eurozone debt is going to reduce because American QE is going to revive the world economy (except the Germans as noted above), then, of course, you would find it palpably ridiculous that there will be a mortgage crisis with the Irish banks provisioned to the tune of 0.3% while KBC has provisioned 9% of its mortgage book.

  224. @Hogan
    Do you have a software programme that we could stick all those variables into? The .3% provision does look ridiculous.

  225. Sarah Carey

    “I was fortunate to be reared in the 80’s when there was no such thing as disposable income and graduated into a world with little employment and therefore have no sense of entitlement. This above all qualities appears to me to be one of the most useful in days such as this.”

    “This above all qualities appears to me to be one of the most useful in days such as this”

    What nonsense is this?

    “above all qualities”

    You have mentioned no quality. You simply state that you exist. Existence is not a “quality”.

    “I was fortunate to be reared in the 80’s”

    Just how stupid are you?

    “I was fortunate to be reared”

    Stop talking nonsense. You are a human being.

    Wheels, Fortune, Optimism?

    What next Fortune Cookies?

    “This above all qualities appears to me to be one of the most useful in days such as this”

    Mother of Divine Jesus.

  226. @hoganmahew

    what is the point you are trying to make was in germany a few weeks ago and it felt, looked and was the case that they were already on recovery. How else do you explain the surge in Irish exports.

    The only worry there is that some pimple will burst and mess up the euro.

    The irish state is, was and will remain bust until an “orderly” write off of the bank senior bondholders, not just anglo ghost bondholders but also AIB and B of I occurs.

  227. The point I am trying to make is that Mr O’Mahony is talking nonsense. Even the best case scenario is going to be bad for us.

  228. @Hogan
    Lots of nonsense around.
    Brian Cowen blames the markets-‘Mr Cowen said bond markets were “behaving irrationally”.
    Brian Lenihan-“When markets remain that turbulent that’s not the fault of Ireland, it’s part of a wider international problem. That’s why it’s being discussed at the G20, and that’s why our European partners are anxious to bring it to a resolution,” he said.
    It has nothinh to do with our debt.

  229. @Hogan
    Just realised that BL may have given the game away=’that’s why our European partners are anxious to bring it to a resolution,”

  230. Sarah Carey

    “That ridiculous Prime Time special showed a mother tearful that her 6 year old son couldn’t have FOUR presents for Christmas!!! Her voice broke as she told us – he’d-have-to-choose!!!!!!!!!!

    I am optimistic that purging ourselves of this sort of self-pity will have benefits as we rebuild after the mess.

    But pessimistic that Fianna Fail will stay out of office for more than one term.”

    “That ridiculous Prime Time special” “FOUR presents for Christmas!!!”

    Do you know just how ridiculous you sound?

    You really are ignorant and love it.

    Jesus wept and felt abandoned.

    http://www.youtube.com/watch?v=Xe1a1wHxTyo

    You are so ignorant you don’t care whether the state steals your “personal surplus”.

    You are so ignorant you don t even know what “personal surplus” is.

    “I am optimistic that purging ourselves”

    Are you completely insane?

  231. @Greg

    You lambaste Sarah for saying:

    “I was fortunate to be reared in the 80’s when there was no such thing as disposable income and graduated into a world with little employment and therefore have no sense of entitlement. This above all qualities appears to me to be one of the most useful in days such as this.”

    Sorry, but Sarah has made a very good point. Not to overdo the Four Yorkshiremen skit but I myself was fortunate to be reared in the 50’s when there was no such thing as disposable income and we lived in a tree trunk and my only toy was a piece of driftwood I picked up on the beach in 1953 and it took a lot more investment to persuade a girl to drop her knickers than it does today and I graduated into a world with little employment and therefore have no sense of entitlement.

    Most of us are hardy enough to adjust their expectations to circumstances. Once the Croke Park agreement has been torn asunder on the grounds of force majeure most Irish people will be in much the same boat anyhow and should be able to cut their cloak to fit their cloth. The Irish people aren’t going to starve, after all.

    Relax, and ‘chill out’ — as my sons say to me when I get tired and emotional.

  232. Sarah Carey

    “But pessimistic that Fianna Fail will stay out of office for more than one term”

    OK.

    I get it now.

    You are not ignorant you are just another Gombeen interested in the power to trick people with a “positive outlook”.

    Disgusting.

    Just what we need.

    More “Positive Thinking Traitors”.

    Absolutely disgusting.

  233. @hogan

    O.k i get it. For the Irish Times to ask Mr. O’Mahony advice on bond sales is liking going into McDonalds and asking whether buying burgers is essentially a good thing.

    On another matter there will be a lot of emphasis in the budget on control and reduction of social welfare. In the bigger picture this is completely irrelevant and will have no effect on the national accounts. Just looking at it from a financial perspective with no moral viewpoint is interesting.

    Imagine a world with no debt.

    Social welfare in that case is just a transfer payment from the taxpayer to the non-taxpayer and will have no effect, like a form of insurance.

    Obviously there are extremes, if the tax rate is too high to pay the social welfare then there is a major disincentive to work reducing GDP. i don’t thing this is the case in Ireland at the moment.

    On the other side of the equation you could argue that social welfare payments are more likely to be spent locally on local produce and will have a inherently larger GDP multiplier than the increased taxation would deflate hence boosting GDP.

    This may explain why many northern European countries have a stubbornly high GDP per capita in face of a continual assault by right wing economists.

    Obviously there are all sorts of other complications were you need to look at the efficiency of the tax collection, debt etc.

    In the case of say Japan were debt is largely domestic interest payments of themselves are just another form of transfer from the people who have a good few numbers in a computer in a bank to people who dont and of its nature do not effect the GDP

  234. Wall Street Journal editorial:

    Still, Ireland’s underlying fiscal position is not that bad. The government has some €20 billion in the bank (so to speak) and doesn’t need to return to the debt markets until next year. It has already laid out a fiscal retrenchment of about €15 billion, or roughly 8% of GDP, over the next four years. And unlike Greece, it retains an attractive tax environment for business and the prospect of a return to growth that would help whittle down those deficits and debts. The worst thing that could happen to Ireland would be an IMF or EU-imposed austerity program that included a hike in the country’s 12.5% corporate tax rate and other growth-killing measures.

    The question remains whether the government in Dublin can overcome the sizeable obstacle of those open-ended commitments to make bank creditors whole. Mr. Lenihan has argued in the past that under Irish law depositors are not senior to senior bondholders, and so he’s had no choice but to protect both. That seems a weak basis on which to mortgage the country for the benefit of bondholders.

    Mr. Lenihan tore up the rules once to extend the guarantees. He could do so again to make clear who is, and isn’t, made whole.

  235. Carolus Galviensis

    “Relax, and ‘chill out’ — as my sons say to me when I get tired and emotional.”

    What do your sons say to you when you don’t tell them that their home is being taken away next week?

    It’s no joke.

    “The Irish people aren’t going to starve, after all.”

    Nobody saw it coming the last time.

  236. @Frank

    That is the crux of the matter. The whole world is saying it. Merkel is saying it, hans the german taxpayer is saying it now the Wall Street journal. For the love of God could he get the message.

    Mr. Lenihan needs to put aside his ego or his job or both and have a “difficult” phone call with some bondholders.

    Why cant he let Micheal O’Leary make the call

  237. Frank Galton

    “Mr. Lenihan tore up the rules once to extend the guarantees. He could do so again to make clear who is, and isn’t, made whole.”

    The difficulty with this is that the Wall Street Journal was absolutely silent while Anglo Irish and INBS were being made whole.

    Now that the EU/ECB is hooked. The WSJ goes fishing.

    “The question remains whether the government in Dublin can overcome the sizeable obstacle of those open-ended commitments to make bank creditors whole.”

    The WSJ doesn’t give a shit.

    If it did it would have put a stop to this a long time ago.

    The WSJ is not interested in anything other than what it is told to print.

  238. @ Galton

    “The WSJ is not interested in anything other than what it is told to print.”

    Are you insane. Do you think there is some editorial board sitting up all night with explicit instructions for what they should publish the next day.

    Do you think in the unlikely event that you interviewed for a job on the WSJ to comment on Irish affairs that you would told your job is to take an envelope from a nameless individual to punch into your computer everyday.

    No the WSJ concentrates on making money from the readers as it is financial journal. Sometimes it gets it wrong.

    The reason it never mentioned INBS and Anglo when they were made whole by our idiot savant was because they had never heard of them.

  239. We can easily go from Irrational Exuberance (IE) to Irrational Pessimism (IP) and while the outlook is grim, there has been some good news as JTO is always eager to highlight.

    New car sales were up 134% in Oct but sales in the reference month of Oct 2009 were the lowest since at least 1965!

    In the grim year of 1932, John Maynard Keynes, when on a visit to Washington, was asked how long did he expect the Depression to last. “The last one was called the Dark Ages,” he jokingly replied. “And it lasted 400 years!”

    During the boom, I assume Donal O’Mahony was in the IE pack while Morgan Kelly was among the realists, including myself if I can modestly add, and while nobody is infallible including the pope, MK cannot be accused of being a media whore playing to the public gallery.

    In Aug 2000, the IMF said: “Taken together, the international experience with property booms suggest that if property prices in Ireland were to level off without a significant fall, it would be an event unprecedented in the last 20 years. Of the nearly 40 episodes of high
    property price inflation examined here, there has not been a single experience of price inflation on the scale of Ireland’s which did not end in prices falling.”

    This was water off a duck’s arse for the IE crowd but Davy economists noted in July 2006, the crazy peak year of the bubble, that: “It is likely that the pace of growth of the Irish economy will slow in the later years of this decade. After 2007, the growth rate of consumer spending will be impacted by the withdrawal of the SSIA stimulus and the long-awaited peak in the housing market may finally have occurred. It is difficult to see what sectors could replace this loss of momentum.

    And so it was and so it is.

    Emigration, the international recovery and a return to sanity, will allow the country to eventually get through this crisis as a higher tax economy with high long-term unemployment but the biggest challenges are beyond.

    There is no obvious engine of growth; only the direct beneficiaries and fools believe university research is the answer; a former head of our top FDI investor, Intel , has said that we’re over reliant on FDI; besides, there is a limit to the potential of new FDI from US while we are unlikely to get significant FDI from emerging economies.

    The key pharma/medical devices sectors account for over 50% of merchandise exports and about 40,000 are employed out of a total workforce of 2.15m and an employed workforce of 1.86m.

  240. @Carolus Galviensis – “I sorta made up the rest”

    Yes, I figured you might have (had you said Spaniard and Portugese as well I definitely wouldn’t have asked!) but I believe you about the fact that some eagles have landed (and as MK pointed out earlier in the week, some probably here already). But this is why I always try to investigate = so I don’t fall for a ‘Hitler diaries’

    From the PR world (well, the ones paid for by FF anyway) we can expect stories over the next few days of robust work by the two Brians to prevent us from going under. They tried their best, fought valiantly, etc. Spin.

    I hope we can muster up a good negotiating team with some cojones. Sitting on the other side of the table are some Europeans who fear this could bring one or two of their banks down. We do have some cards.

    @Sarah Carey – don’t worry about the bread. My mammy still makes the old soda bread every day and I will get her to run off some extras. Believe me, one slice of that and you will think you’ve been fed for a week. It’s the gastronomic equivalent of a brick!

    @Greg – what is your problem with Sarah? As a neutral observer, your rants look like…….er, rants. Take a chill pill. No ranting is likely to change what is about to happen. Surely the focus must be then on how do we best manage a changing situation? Adjustment from one state to another (e.g. wealth to poverty) is always difficult when one is a negatively impacted stakeholder but some have obviously managed it successfully in the past so let’s go find those models and emulate them. Ranting is going to achieve sweet FA. Thought I daresay there will be a few thousand out ranting on the streets if FF have bust the country.

  241. http://noir.bloomberg.com/apps/news?pid=newsarchive&sid=aWpz1UDmPWxI

    When this happens across the board, then we have the “crash” of the last bubble. It will affect stock markets too. This GFC has a long way to go yet. All the smart money has flooded into whatever seemed profitable. Derivatives will fail, with “winners” finding themselves losers also! The losers will be wiped out of course. No-one will pay off the winning bets, those with the assets will simply disappear, faster than an Irish solicitor whp pledged properties multiple times to banks!

    Way too popular thread!

    Some of the banks in Europe will fail, but money can be and will be created by EZ when it is necessary. I do not expect anything like the QE of the USA.

  242. Perhaps Greg stayed up too late last night.

    I am off to the YFG Conference to break it to the 20-somethings that they are lucky not to be 30-something.

  243. jules Says:
    November 13th, 2010 at 12:08 am

    Agree!

    Greg

    Sarah really is cute, eh? As she is unable to deal with matters she makes a rational choice to try to remain on an even keel and to prepare to address those things she can understand? Ignorance can be bliss and for some/many people it is their best response. That is why these matters will still be debated in ten years time. They simply do not understand. They are being sensible though, for someone in their position. You are however, merely showing that things are bad and driving you to distraction. I was at that stage a decade ago, and still have “flashbacks” so believe me, I sympathise with you. If you wish to win others over however, it is good to stick to the facts and what is baked into the system so far? Sarah and the rest will learn more than they want to, but she and others are still good human beings? Even the Brians are trying their incompetent best. The problem we all face is that the system has to radically change back to the days of the Minister for Hardship and it is taking too long to do so. The WSJ say that IMF etc control would be bad. They know otherwise and are lying therefore.

  244. Good thread, by and large.

    Was it an Irishman who said “patriotism was the last refuge…..”?

    Green Jersy. We are in the EU. Love it or leave it, as we Australians say!

  245. @pat

    I understand perfectly well. We’re buggered and have been since 2007 after which the chance of having a sane government in place to save us from the worst disappeared.

    Patronising git.

  246. @ Sarah

    remember that Tango ad from ten years ago? Well, ‘You know, when you’ve been Gregggged!!’. Don’t take it personally, its a right of passage on here. Pat’s insanity too, they’re a double act.

  247. Most interesting thread.

    @ MPLT said a long way further up:

    ‘The real economy has started to pick up, search ‘YouTube ‘ for ireland by numbers’, the data is getting materially better, Ireland has had a horrific period of adjustment and the process of going from A to B has been a nightmare but we’re nearly there and all the doomsayers fail to appreciate how dynamic an economy it is’.

    That remains to be seen.

    MPLT also set out some figures showing that there was very significant potential demand for Irish sovereign bonds from NPRF, Irish banks and Irish-based pension and insurance funds, if only those funds were managed in a way which is typical of the Eurozone.

    The point was, I think, that much of the weakness of our sovereign bonds was attributable to our own funds unwillingness to invest in them. NPRF rules, aside, it seems remarkable that such a state of affairs has not attracted more critical comment.

    In response, @ Paul Hunt says:

    ‘It is only of historical interest that Irish savers and the managers of Irish savings chose not to invest in Irish securities to the same extent as savers in other much larger economies. Advocating the ‘green jersey’ approach now would signal a return to the autarky that brought the Irish economy to its knees in the 1950s’

    Autarchy is probably preferable to anarchy, which is what we will have if we do not resolve this crisis on intelligent lines. The most obvious outcome from austerity is a deep regression to a cross-border/black economy and an explosion in crime. For what it is worth, we are already topping the Euro league in heroin addiction and binge drinking. Our jails already full.

    Maybe our banks, pension and insurance funds have managed their investments without regard for the long term health of their own state.
    Did we swallow ‘ investment globalism’ in the same way we had previously swallowed ‘ economic nationalism’. My uneducated guess is that our fund managers have made errors which are parallel to those made by our bankers. They were so preoccupied with accounting that forgot their economic responsibilities to the state in which they are domiciled. Externalities matter.

    Of course like must be compared with like. Our history is not that of France or Germany. In the old days, we were low tech food producers for the British Empire. We never had a strong business or industrial sector, and we never had a proper welfare state. We had a poorly designed mix of London, Boston and Berlin.

    The American dream is not over, but it’s turning a bit scary now even for Americans. Dr Merkel has this crazy idea that capitalism entails risk and that taxpayers shouldn’t always get screwed when things go sour. Perhaps it’s better to wake up. Americans eventually will.

  248. @David in Dublin

    I hope you realise that your optimism and the reaction to it is what makes the site so interesting to read.

    Now then… you present great figures about the present (e.g. 1:03pm). What I’d love to see though is that you translate this into predictions for the future. At least in this thread, I’ve not seen that though.

    JTO again:

    Thanks for the kind compliment.

    It would be silly for me to give precise predictions the way that organisations like the Dept of Finance, the Central Bank, and the ESRI do, and are ALWAYS wrong. I mean, they give predictions to two decimal points, yet are often wrong by one thousand times that amount. For example, last year one of them forecast that the volume of exports would fall by 1.75 per cent in 2010. Not fall by 1% or 2%, or even by 1.5%. No, by God, it was fall by 1.75%, their forecast was that precise (we should be grateful it wasn’t for fall by 1.74698726%). It now looks like they will rise by close to 10% in 2010, maybe even 12%. I always laugh when some of the organisers of this site open threads with the latest Dept of Finance, Central Bank, or ESRI forecasts. It is like opening the 9 0’clock news with Eamonn Dunphy’s Premiership forecasts.

    So, none of these forecasts to two decimal points from me. My whole point is that it is not possible to predict precisely like this, and that therefore it is a complete waste of taxpayers’ money to pay people to do it. It is a racket. Moreover, it is a racket that, in the hands of a biased Dublin 4 media determined to push its particular slant on things, is actually dangerous. Look how the Dublin 4 media invariably prints what are mere predictions as if they were facts. For example, ESRI forecast in December 2008 that there would be 50,000 net emigration in the year to April 2009. The Dublin 4 media then prints this as a fact of 50,000 net emigration. It wants people to believe that it is a fact. It is repeated endlessly. Soon, everyone believes it as if it were a fact. Then, the CSO eventually publish the actual figure, and it turns out to be, not 50,000, but 7,800, all of them foreign nationals going home, which gets a small paragraph and 15 minutes coverage, before being superceded by the next ESRI prediction of 70,000 net emigration in the following year, which again turns out to be wrong. It would be far better to pay proper statistical experts to monitor precisely what is occurring now than to have economists pretending that they know what will happen in the future. They haven’t a clue. I don’t wish to pontificate on matters that this site isn’t intended for, but I am a Christian (Protestant actually, despite my nationalism) and believe that the future is in the hands of God and not in the hands of useless economists churning out predictions on a computer, which are ALWAYS wrong. Christianity is where my optimism comes from. I was optimistic in Belfast in 1972 because of it. I’d hazard a guess that most of the wildly pessimistic people in the Irish media are atheists. That’s where their pessimism comes from. But, this is an economics blog, so it would be wrong of me to go further into that here.

    However, as you kindly say that you’d love to see my predictions for the future and, as it is Saturday, usually a quiet day here, I’ll give my broad predictions for the next decade. I emphasise ‘broad’. Come back to me at Christmas 2020 and we’ll see how well I fared.

    (1) GDP growth in Ireland in 2010, 2011 and beyond will turn out higher than any economist is currently forecasting. By late 2010 (although figures for this period won’t be published until March/April 2011), Ireland will be recording y-o-y increases in manufacturing and exports, the like of which have not been seen since the 1990s. This will cause in mid-2011 a major reappraisal of the long-term outlook for economic growth in the next decade, and borrowing costs will fall, although not by too much until after the election (if it hasn’t allready occurred by then) for reasons I give below. The budget deficit in 2010 will turn out to be significantly lower than any economist is currenly forecasting, and lower than in 2009, so the adjustment in the coming budget will not need to be as large to meet a 10% target in 2011 as is currently predicted.

    (2) GDP growth in Ireland over the decade 2010 to 2020 will be higher than over the decade 2000 to 2010 (when it was around 30%), but lower than over the decade 1990 to 2000 (when it was over 100pc). In this decade, Ireland will have the highest growth in GDP of any EU15 country (just as it did in the 1970s, 1990s and 2000s). By 2020, not just GDP per capita (which allready is), but GNI per capita also in Ireland will be the highest in the EU (apart from Luxembourg which doesn’t count as so many Germans, French and Belgians commute to work there, but reside outside it). Apart from factors like high-class education, relatively low taxation, enterprise culture, availability of land and water, rapidly-improving wage and price competitiveness, and currently a ready supply of high-quality housing at affordable prices, the main factor that will cause the Irish economy to grow faster than any other EU15 country in this decade will be Ireland’s demographics, which are far superior to those of any other EU country, both in terms of natural growth and ageing. During this decade there will be one more global recession (there usually is), although a small and short-lived one compared with the recent one. Ireland may escape it (as in 1991/92, 2001/02) or it may not, but it won’t matter that much as it it will be small and short-lived compared with the recent one. I won’t try to predict the year in which it occurs, as I simply don’t know.

    (3) Although there will be net emigration (mostly among the foreign national population) for a few years, this will follow the pattern evident since 1922. Namely, as Ireland grows richer, both absolutely and relative to other EU countries and the US, the level of net emigration during each recession is much less than during the previous recession (a quarter century earlier). Thus, net emigration during the 1950s recession was much less than pre-Independence, net emigration during the 1980s recession was much less than during the 1950s recession, and net emigration, certainly among Irish nationals, will be much less this time round than during the 1980s recession. Once the recession is over (which it likely now is), then, after a decent interval, net immigration will resume (as in late 1960/1970s, 1990 etc) and, combined with Ireland’s exceptionally high birth rate and exceptionally low death rate, will produce a population boom greater than that of the 1990s and 2000s. By the 2021 census, the population of the Republic will be 7.2m, 5.2m in the former 26-county state and 2m in the former 6-county state.

    (4) Resulting from this population boom, there will be a temporary housing shortage in the second half of the decade. People will ask why can’t we use the 300,000 empties built in the 1990s and 2000s, and will be shocked to discover that they never existed and that Morgan Kelly simply invented them. The rapid growth in population will trigger a new construction boom in the second half of the decade, much greater than the one that ended in 2007.

    (5) Regardless of how soon or how late the election is called, FG will emerge as the lead party in government. If the election is soon, FF will do very badly, but not as badly as polls suggest now. If the election is in June 2012, FF will do much better than the polls suggest now and might even be the largest party, but still won’t win. FG will be the lead party in government and Enda Kenny will be Taoiseach. There will be euphoria in the Dublin 4 media for a period, as they have their Obama moment. But, when it dawns on them that a moderately socially conservative practicing Catholic from Mayo of all places is now Taoiseach, their despair will be palpable, and they’ll begin the same campaign of demonisation of him as currently they do on FF leaders, although it will take many years to build up to the level of ferocity that FF leaders are currently experiencing.

    (6) Once a new FG-led government is in power (whether in 2011 or 2012), there will gradually be a major improvement in confidence levels in the Irish economy, both among domestic consumers and among international investors. The main reason will be that the Dublin 4 media, having got rid of FF, but before their disillusion with FG sets in, will suddenly discover that things aren’t after all as bad as they were claiming. Economic commentators will suddenly notice that there is a manufacturing and export boom well under way. Never mind that it started in early 2010 under the old hated FF/Green government. That won’t matter then. Economists who, almost to a man, currently ignore the manufacturing and export figures, will suddenly notice them and start writing Irish Times articles about the fact that they are growing faster than in any other EU15 country and faster than at any time since the 1990s. FG will claim the credit for it, although they will simply have inherited it. Confidence will rise, consumer spending will rise and, allied to the ongoing manufacturing and exports boom, there will be several years of above-trend growth around 2013/2014/2015. And, in Ireland, above-trend growth is very high indeed. In tandem, ESRI will with regret admit that their emigration forecasts during the last years of the FF/Green government were greatly exaggerated, and not claim that the CSO got it wrong, but will announce steps to ensure that they don’t similarily exaggerate them in future, or at least not until FF come back into power, which at this time will still be many years away. And, around 2015, Morgan Kelly will write an article in the Irish Times saying how delighted he is that the economic armageddon he predicted in 2010 hasn’t occurred, but that it would have occurred had not FF been thrown out of power in 2011 or 2012, and will claim credit for it not occuring, on the grounds that his forecasts back in 2010, that it would occur, had helped drive FF from office, and that this was his sole intention all along, so clever is he.

    (7) Coming up to 2016, there will be a major revival in nationalism and patriotism. The Dublin 4 media commentators and Dublin 4 academic sneerers who continually denigrate everything Irish will suddenly find themselves passe. There will be massive celebrations in 2016 and confidence will be sky-high again. Even though not the main inheritors of 1916, FG will trumpet their 1916 credentials to the maximum, call an election for June 2016 and be returned to power. Around this time also, although still out of office, there will be a major revision of the record of the FF governments of the century since 1916, particularily the one from 1997 to 2011/12, which will pave the way for an FF comeback around 2020. There usually are such revisions in nearly all countries a few years after a government leaves office, and they normally involve completely reversing the opinions that were prevalent at the time it was in office. Having been portrayed by a biased Dublin 4 media and academia as incompetent, socially unjust, corrupt, useless, GAA-supporting culchies etc etc, some one (maybe even me) will write a book highlighting the massive economic growth and social progress that occurred under successive FF governments, particularily the one from 1997 to 2011/12, when, even including the 2007 to 2009 recession in the figures, GDP growth was twice that of any other EU15 country, and there was unprecedented improvement in education and health levels.

    (8) Following on from the revival in nationalism and patriotism engendered by the centenary celebrations in 2016, and combined with the fact that the Irish economy will by then be once again far outstripping the UK economy (as it has done in 4 out of every 5 years since 1958, and probably has allready been doing again in Q3 2010), there will be a major push for a United Ireland. By the second half of the decade, nationalists will be in a majority north of the artificial border, but many former unionists will also be by this time in favour of a United Ireland because of the economic benefits. This will lead to the effective dismantling of the artificial partition and the first 32-county elections around the centenary of the artificial partition in June 1921. The first political event in the new 32-county Republic will be a referendum on where the capital should be, Belfast or Dublin. It will be touch and go, but, if I am still around, I will vote in favour of Belfast, on the grounds that its self-confident, can-do, proud-of-its-traditions, scientific, optimistic outlook, in contrast to Dublin 4’s permanent state of cultural cringeing, pessimism, anti-Irishness, and all-round uselessness, will be just what the 32-county Republic needs.

    Hope this satisfies you, David. Don’t say I’m not afraid to stick my neck out.

  249. @ JTO

    Interesting…
    Your focus on manufacturing, exports, etc is important: it doesnt matter who our banks are as long as we are exporting strongly…

    One point though, if you vision is to be, what of our state of governance in delivering, facilitating and perpetuating the national interest.
    We need to cut out a large slice of intellectual lard that occupies our government and instate a degree of wisdom and fearlessness: parrhesiastes.

    Are we looking at another round of benchmarking in 2015 for example?

    Another thing concerns me. There will be social stratification based on the year of, or amount of a mortgage owed. There will be families who a large % of income will be spent servicing debt with incomes at a new competitive level, or at % of incomes that are much greater than others around them.
    While this isnt a threat to the nation, it will be something that needs looking at.

  250. @ JtO

    Let us hope your “optimistic” prognosis is misplaced, the vista of a United Ireland is absolutely appalling.

    BTW any tips on who will win next year’s Derby?

  251. This is why we still have a fighting chance. Opposing ideas smelted in the furnace of debate to give us something solid with which to fight on. I suggest a plan:
    1: Start negotiating for the bailout fund now (it will take 6 months to negotiate it properly and always best to start when were not completely despatate for it)
    2: Hold them to about 4% of an interest rate over 8 years
    3: Use our the threat of default, and destabilization of the Euro as leverage in those negotiations
    4: They can tie the bailout into deficit reduction
    5: Reverse benchmarking of everything to Euro averages (but this must include mortgage repayments by extending mortgage terms by 30% and taking insurance to cover the potential risk.

    BTW – sort of understand JTOs frustration. Hate people vying for the biggest and whitest flags. Good to fight – though no point in attacking people whose abilities need to be nudged to focus on the recovery. Alot of good people feel imrimidated now though in the face of Marquis De Lenihans massive hubris(!!) Would you let him negotiate to buy a car on your behalf?

    And that’s how we do it.

  252. Deposit selling moment, deposit selling moment, deposit selling moment…

    twitter.com/brianmlucey

    Shiny silver coin for whoever spots it first. It should also confirm that the Prof is explicitly against any recovery in our bond yields and ability to avoid a bailout. He should not be allowed public soap boxes like the Irish Times to deliberately talk down the economy.

  253. @Dreaded_Estate

    What the short term JtO? Will the IMF/EU arrive?

    JTO again:

    I have no idea. It is a political decision. There is no need for them to. If I was Taoiseach, they wouldn’t. But, the Government might decide that, with hundreds of Morgan Kelly clones running around the country predicting the end of the world, and a politically-biased media whipping up panic, they might decide that they can borrow cheaper that way. I don’t attach the same importance to it as some do, provided no concessions are made on Corporation Tax. It has little bearing on the long-term growth forecasts I gave above whether borrowing is done on markets or direct from organisations like EU/IMF, provided, as I said, no concessions are made on Corporation Tax. If my memory is correct, the UK Labour Government borrowed from the IMF in 1976, and their economy then recorded its best 20 years growth ever, and it overtook Germany, France and Italy, which it lagged behind prior to borrowing from the IMF. As I repeatedly point out, the long-term wealth of an economy is determined by the amount of goods and services its wealth-producing sectors produce. That is something that most of those going on and on and on about banks simply don’t get. It is one of the reasons I constantly complain about the lack of posters from industry and other wealth-producing sectors. Currently, Ireland’s manufacturing and exports are soaring. Danny McCoy of IBEC was saying the same thing this week. As shown in the nearby Kevin O’Rourke thread, they are growing faster than in any other EU15 country. Agriculture is having a great year. And, growth in tourism resumed in Q3. Although still well below its 2007 peak, the number of tourists arriving increased by 8% in Q3 over Q2, after seasonal adjustment. And it appears to be continuing in Q4. Going back to the source of borrowing, the main difference is political. It would be politically embarassing for the Government to borrow from EU/IMF than on markets, and the Opposition parties would gain from it, which is the main reason the media are tring to bring it about. But, in purely economic terms, it makes little difference and might even be cheaper (Eoin is the expert on that one, not me).

    Naturally, at EU/IMF insistence, the Government would be obliged to cut public expenditure, which would be a big argument against EU/IMF borrowing if they were a left-wing government, like in Greece, and had previously said that they weren’t going to make cuts, and had a left-wing support base that wouldn’t tolerate cuts. But, they aren’t. They plan to do make cuts anyway, which I am in favour of. There won’t be any larger cuts at EU/IMF insistence than what the Government have allready said they are going to do (as Governor Honahan himself pointed out during the week). And most countries are having to make cuts. Look at the riots in London this week. France has had countless national strikes this autumn. The budget deficit has to come down over a period of a few years. That is not in dispute. Most of this reduction will be the result of economic growth, as I outlined above, and just as happened in the late 80s and early 90s. But, the rest will have to be done by cuts. Ireland has shown before that it can do this without the population taking to the streets. It just has to put up with Vincent Browne and Fintan O’Toole ranting in the Irish Times, but then they are always ranting in the Irish Times, cuts or no cuts, so nothing changed.

    Until the deficit comes down, the government has to borrow. The deficit in the UK and US is virtually the same as a percentage of GDP as in Ireland. Until their deficits come down, their governments have to borrow too. But, Ireland as an economy isn’t borrowing, or at least not much and a diminishing amount. As has been explained in other threads, Ireland is currently saving like mad. The savings ratio rose from 4.3% in 2008 to 12.9% in 2009, and a balance-of-payments surplus is forecast for 2011 and onwards. The mainly amateur economists who write in the media don’t understand this difference, but professional economists ought to be able to expalin it. That is what they are paid for, after all. The only one I ever read explaining it properly was John Fitzgerald of ESRI.

  254. @JTO
    “In the past 24 hours alone: Patrick Honahan, Danny McCoy, Donal O’Mahony.” It would be worth your while looking at the comments section in the IT to see the drubbing that DOM gets. I suspect that he won’t be doing many more articles unless of course the IT likes to stir matters.

    Your predictions are very interesting indeed. I guess you assume that a large number of external variables will stay positive like world trade, oil prices, financial stability, currency movements etc. You seem to be using the same logic as people who thought that the property bubble would never end and to focus on internal issues as if Ireland was insulated from the real world events. I’m surprises that you didn’t explicitly mention booming car sales as that appears be one of your key statistics for justifying growth.

    That aside, you paint a clear picture. However, I would rather rate your assessment as being close to the “best case” scenario which means that there are other less optimistic alternatives. If some good soul were to describe these, we could then assess (guess) liklihoods of them materialising.

  255. @ Eoin

    It could be this:

    “Rise in value of Irish bonds welcomed by Lenihan: http://bit.ly/alXyaa So debt rises, minister for finance cheers”

    – as the minister was in fact welcoming the decline in bond yields.

    Or it could be this:

    “Government campaigns to avoid EU financial bailout: http://bit.ly/cJDOHu from @the_irish_times Why? Why?why?”

  256. @ Eoin

    The Toronto Globe and Mail;

    Prof. Lucey is no longer feeling as optimistic. “We need a complete economic restructuring,” he said. His career has tracked Ireland’s economic saga. When he graduated from university in 1985, he, along with all 25 members of his class, emigrated. He returned to Ireland during the boom years.

    Thanks to the austerity measures, he has taken a 17 per cent pay cut. His wife, who is a teacher, had her wages slashed by 14 per cent.

    Now, he says, Ireland has run out of road “and the can has gotten much heavier.”

  257. Uploaded prematurely:

    It’s of course convenient to ignore the fraudulent benchmarking payment of an average of 9% plus the gold plated pension benefits and then the claimed victim’s cross looks a tad lighter.

    Besides both Lucey and his wife have security of employment.

  258. @ MH

    ”no longer feeling as optimistic”?

    i can only assume you are referring to his 2006 musings about subprime lending and house prices.

    So the prof and his missus, both state employed, probably earn close to $225-250k per annum, with guaranteed state pensions and guaranteed jobs. What a strange little country we live in.

    @ jto

    seeing as we are in a predictive mood – i predict that if we do have to enter the EFSF it will be on significantly less onerous terfms than currently exist. I also predict that, in line with your view, we will be able to exit it well ahead of the 3 yr deadline. Maybe even after 12 months.

  259. Leaving aside the petty squabbles once again, really I haven’t seen such vindictive childishness since I was at college.

    Ms. Merkel says that future bondholders will pay for a bust borrower.
    Mr. O’Mahony says let’s invest our pension and insurance reserves in Irish sovereign debt.

    Supposing there is a bust sovereign some time after that. Who pays? Well, insurance policy holders and pension savers…

  260. @Brian Flanagan

    “In the past 24 hours alone: Patrick Honahan, Danny McCoy, Donal O’Mahony.” It would be worth your while looking at the comments section in the IT to see the drubbing that DOM gets.

    JTO again:

    The comments section in the Irish Times?

    Are you serious?.

    The Pope is more likely to be greeted enthusiastically at the next Ballymena Orange Parade than anyone who exudes the slightest disapproval of Morgan Kelly is likely to get in the comments section of the Irish Times. He is their God. They worship him. They kiss the ground he walks on. They strew his path with petals when he walks near. Like when Ayatollah Khomenei died, when Morgan dies, hopefully not for another 50 years, posters to the Irish Times comments section will jump into his grave in the hope of being buried alive alongside him.

  261. I hope Donal is more correct in his prognosis for the Irish economy than he was with the Irish banks:

    https://www.davydirect.ie/content/articles/supplydemandcurve20090914.pdf

    “NAMA will go successfully further than any of the other global bank support schemes (guarantees/recaps/insurance),in physically removing the source of the problem (toxic loans) and thus allowing banks and their host economy to breathe easily again. A profit is not recognised in its own land betimes, but it is never too late to make amends.”

  262. @Eoin, Hogan
    I don’t get it.
    If we have to borrow after 2013 (as we will) to pay or rollover existing debt then those borrowings will be subject to the new regime of haircuts. Who in their right mind is going to replenish unhaircuttable funds with the new version.

  263. @Eoin
    “new rules not in place ti 2013, you could argue it free-bet territory until then.l”
    You could. But with pension funds chasing 6% returns to fund future obligations, where do you think they will put their money? If it is a free bet from the EFSF for short-term debt, yields will come in to below EFSF rate (whatever that might be).

    It would probably make more sense for the EFSF to issue guaranteed debt and for it to pass on funding to governments at a small margin. Pension funds and insurance companies could happily buy that debt with low risk and in return there would be lower yields on it. It could keep the cost of the bailout manageable and would reduce the political pressures.

  264. @What goes up
    This bit is good-
    “However, it is the
    restorative actions of Irish authorities to stabilise both public finances
    and the banking system,lauded by Moody’s Annual Report last week,
    that is now turning the tide towards Irish economic redemption. The
    international community not only understands and endorses Ireland’s
    rehabilitative efforts but, more crucially, it is now prepared to fund it,”

  265. @ceteris
    “Who in their right mind is going to replenish unhaircuttable funds with the new version.”
    That’s the bit I don’t get either. If this is to be the case, we will have a wall of redemptions come end-2012. It is the CIFS bank guarantee writ large.

    We will only be able to borrow short and then not at all…

  266. Any chance we could have another thread specifically to cover bailout talk?

    What are the facts at the moment?

    All I can see is everyone is denying everything – but using some interesting language to do it. Surely a bad sign 😉

    I see the BBC are reporting it enthusiastically.

  267. @Joseph
    Good idea.
    I posted a quote by MoF last night where he said something to the effect that our Euro partners ‘required resolution of the problem’

    Could this mean that the big 5 have determined that we are beyond the tipping point and the uncertainty must be removed. We are affecting the Euro stability though this is good for Dr. Merkel

  268. @ Hoggie

    2013 is a long time away. If a JtO-style global recovery takes place then it shouldn’t be that much of a problem. If it doesn’t, then we’re not really any more screwed then than we are now. We are close to the bottom of the cycke and we have a margin call. Should we close out now or try to keep going? If you have cash, buying irish bonds at 77 cents seems like a very simple positive risk reward scenario.

  269. The Republic of Ireland is in preliminary talks with EU officials for financial support, the BBC has learned.

    It is now no longer a matter of whether but when the Irish government formally approaches the European Financial Stability Fund (EFSF) for a bailout.

    Someone is talking or attempting to force the issue.

  270. @Eoin
    ‘If you have cash, buying irish bonds at 77 cents seems like a very simple positive risk reward scenario.’

    Depends on the haircut. 50% would still be sore.

  271. It’s beginning to look better. It’s not so much losing our sovereignty as much as handing it over to people who know how to add and stuff

  272. @Eoin
    “If you have cash, buying irish bonds at 77 cents seems like a very simple positive risk reward scenario.”
    Fill yer boots there Eoin…

    The lack of enthusiasm for what seems like an obvious money maker is disheartening. While I don’t believe that the bond market as a whole is as smart as its components, if there was a genuine mispricing, I don’t see that it would persist. This leads me to believe that there is no mispricing and that the risk premium is accurate.

  273. Text of an email to dr phil
    “Philip
    Somewhat Tongue in cheek, but why not have a thread devoted to attacking, snarky ad hom sneers and so forth on Morgan Kelly and myself. A troll-pen where they could play away and let the rest of people read analysis which is generally excellent?”
    Off now to talk on the bailout etc to BBC news 24. Later kiddies. …

  274. @Eoin

    You are the expert on all this. While I like to think that I know something about macro-economic statistics, all this is Greek to me.

    Ex-FG Taoiseach, John Bruton, says in today’s IT:

    “The speculators who are betting that Ireland will not pay its sovereign government debts on time, and who are thereby driving up the spread on Irish bonds, will be proven wrong and will lose money.”

    I didn’t realise that they could lose money. Is what John Bruton says true? Or does he know as little about it as I do? Not whether the prediction that they will be proven wrong is true, which is obviously still to be decided either way, but his statement that will they lose money IF (and I know its an important IF) they are proven wrong.

    Under what circumstances would they lose money? How soon could they lose it if things didn’t go their way? How much could they lose? Who are the people who could lose? If they do lose it, how would we know? Would it just be one red line in the accounts of some of these companies that never makes the news? Or would it actually be on the news that Mr X or Mr Y has just lost a $billion because his gamble that Ireland wouldn’t pay its debts had lost out? And, finally, if what John Bruton says proves correct, where would be the best place to go to gloat at the losers, make 2-fingered gestures at them, and throw them coins attached to a piece of string when they begged for money to buy their next meal.

    Assuming its true, all this is very motivational for me to go out and spend, spend, spend and increase government coffers. Like being Sir Alec Ferguson and being told just before kick-off in the Manchester derby that the owners of Man City have gambled all their money on the result and will go bankrupt if City lose.

  275. @Brian Lucey

    Off now to talk on the bailout etc to BBC news 24. Later kiddies. …

    JTO again:

    Will you be pointing out to the BBC chappie that UK public debt as a percentage of GDP and the forecast UK deficit in 2011 are both almost exactly the same as Ireland’s? As are those in the U. States. I hope that he doesn’t ask you about your post at Christmas last that you wanted to see the Irish economy crash. It would be embarassing watching you wriggle your way out of it.

  276. @ the Prof

    so we can confirm now – you want the irish economy to collapse in the short term to meet your political viewpoint?

  277. @Brian Lucey

    If you want a governance change, I suggest that you stand for election. This is a democracy. Any one is free to stand for election. That’s how you get change. Not by expressing a wish on a prestigious site like this that the economy will crash. Given that you clearly feel so strongly that we will benefit from a crash that will be the catalyst for the change of governance you seek, perhaps you’ll tell us whether you are actively trying to bring about that crash and, if so, what your strategy for achieving it is, or whether you are simply passively wishing for the crash to occur, which frankly would be a bit lazy of you if you genuinely believe a crash will benefit us.

  278. irelands deficit in 2011 may be the same as U.S and U.K, but they don’t have the equivalent 50-60 billion euro bank bailout to worry about that we have. plus they have their own currency. you’re not comparing like with like

  279. @ Brian

    i dont mean party-political, i mean that you want an entire political change (for longer term good, in fairness) and you want and view an economic collapse as necessary to enact this

  280. @ Brian

    You could choose your by election!
    But We cant let these lit n deb/ philosophical society, hereditary types continue to run the country…
    There needs to be an influx of human capital into the process and not through the political party system that lobotomises talent.

  281. @Brian Lucey – “We need massive governance change and that requires a catalyst.”

    It usually requires a revolution/bullets/deaths/etc. if history is anything to go by. However, I’m kind of with you on the need for the massive governance change.

    I don’t have access to BBC News 24 – would you please post a link to your interview later on? Either on this thread or the new one on Ireland’s number being up (or is that a thread on our dismal performance against Samoa this afternoon?).

  282. Oh, and before someone asks why I am not standing,
    There was this thing years ago, and I dont want to talk about it…

  283. @Al
    “There was this thing years ago, and I dont want to talk about it…”
    Was that you? I was in the other chair. Sorry about it too. I won’t be standing either…

  284. ok lads, I really think this thread is long enough.

    It takes AGES to scroll on an iphone.

    I propose we either move on up to John McHale’s post OR change subject.

    Cher did not have to insert that rap into Sorry Seems To Be. She was singing just fine without it.

    Oh Dannii Agrees!

    Anyone?

  285. @ Hogan

    I had taken alot of painkillers for pain and had consumed alot of drink before hand…….
    I say this because I want others to learn from mistake.
    Dont mix prescription drugs and alcohol!!

    Could you imagine journalists asking where i ….. in the election…?

  286. @Al
    My mistake was the goat, I think. Apart from that, there’s nothing you wouldn’t see as high spirits in any regional town…

  287. @Hogan
    ‘This leads me to believe that there is no mispricing and that the risk premium is accurate.’
    Dr.Gurdiev posted 9% (based on an IMF study he unearthed for countries in our situation) as being appropriate. This was before the blowout.

  288. @Brian Lucey

    It’s clear that the “other side” is now trying to construct a Dolchstoß legend to explain our present and future misadventures. It would be unwise to play into their hands on this.

    @Sarah Carey

    Before we change threads I have a couple of things to say on topic. One is to ask you if you know whether the IT will be publishing a clarification of Mr. O’Mahony’s misleading remark pointed out above.

  289. I’m happy to exempt Donal O’Mahony from the Irrational Exuberance camp (see post above) having seen some of his material from the boom years.

    It’s too easy to tar everyone with the same brush or assume in Gordon Gekko’s words that “everyone is drinking the same Kool Aid.”

  290. @anonym

    I’m afraid I know nothing about what goes on in the IT. I know there have been remarks here before about an agenda etc that the paper has. Perhaps a newsroom culture exists there, but in the case of most of the columnists such as myself, we work from home. I call into the office extremely rarely ( perhaps 3 or 4 times since I started there?) and I’ve never had any conversations with anyone about editorial direction. Conversations are for correcting/clarifying issues in the column or the odd whine (mine) about comments on the website.

Comments are closed.