Lester Thurow once forecast that EMU would leave Ireland looking like his home state, Montana. Empty.
Krugman playing dummschlau — business as usual.
Fortunately, some of the commenters are of far higher quality than the commentator — because, unlike Krugman, they know what they are talking about:
[The Irish] will drag themselves and the EU to the bottom. They do have the most eloquent spokesmen and an intimidated press–almost all of whom have profited from the economic collapse. Check out the mild coverage of the crisis in the Irish newspapers and the state owned television–all available on the internet.
Exactly.
Croke Park? Shhhhh, don’t mention the C-word.
@Carolus
“Croke Park”
I bet there was a guy on the Titanic who, as the ship up-ended, was trying to make his way to the bridge to complain that the asparagus was overcooked.
Texas??
Ireland’s future is starting to look more like West Virginia – but without the profits from coal.
PK actually refers to one of the biggest scams before the sub-prime.
How come he did not spot the sub-prime?? Or is he one of the cronies?
He seriously underestimates the mess in Germany, implying that Europe’s problems mainly come from Ireland, as their banks bought lots of sub-prime and alt-A type securitised crap from American banks. Who will be sued.
Ironically enough, the tighter bank regulation in Texas from the aftermath of the S&L crisis has left them relatively untouched in the current depression (so far). A lesson there?
@ Pat Donnelly
PK actually refers to one of the biggest scams before the sub-prime.
“Sub-prime” was the trigger for the collapse of the wider US “prime” property market which was part of the same bubble. Same as here, though, this collapse among the flipping classes was inevitable at some point, so blaming it on poorer participants in the same bubble is just a cop-out for the middle-class.
How come he did not spot the sub-prime??
Mr. Krugman does not appear to have factored in the assistance given by the UK and others to subsidiaries of their banks in Ireland.
Furthermore, banks such as Bank of Scotland will not be able to get out of Ireland for a long time if there is no increse in the market for the assets used as security for the loans they gave out. There isn’t even a market for a firesale at the moment.
Maybe the difference between us and Texas is that our bank bust was far worse than theirs.
Thank you Mr. Krugman for that insightful aside. You may now return to telling us why Japan—the place where all our TVs, cars, and video games come from—has been an economic wreck for the last 20 years.
This, as well as these (forgive the polemical source, the quotations seem to be accurate enough), leave a less flattering image of Krugman’s attitude to housing bubbles and the Greenspan put.
@Merijn Knibbe
It is also worth noting that Japan’s unemployment rate is just 5.0 percent. It never rose above 6.0 percent over the last two decades.
Wasn’t Japan’s published unemployment rate the subject of polite skepticism even before the crash? Lots of make-work at government-connected construction firms…
@anonym
You can say an apple is an orange, but no sale here.
@Cramor
Are you defending Japan’s unemployment statistics, or Dr. Krugman’s track record on bubbles? And do you have any more specific objection to what I said?
Prof Krugman forgot to mention that during the S&L fiasco, Texas did not experience a housing bubble as such (where house prices exceeded 3 times household incomes) while of course Ireland did (refer Annual Demographia Surveys http://www.demographia.com ).
There is a long history of mortgage consumer laws in Texas, as a recent excellent article on Big Money “The Lone Star Secret” outlines. As Professor Krugman explained within his March 2010 NYT article “Georgia on my mind”, in contrast, the State of Georgia had very liberal lending standards. But as the Demographia Survey illustrates (refer Schedule 2) Atlanta, Georgia housing is currently 2.1 Median Multiple. Instead of inflating, the less damaging overproduction occurred in Atlanta.
For a housing bubble to occur, there must be a scarcity trigger, as I explained within a recent article “American’s slow learners about housing bubbles” (accessible via my website). Within this article, I quote from a speech to a US Real Estate Editors Conference early this year by Mike Insulmann, CEO of Metrostudy in the United States. Mike explains it clearly, in that supply scarcities are the “trigger” for housing bubbles to occur and finance (whether it be equity, bubble equity or mortgage debt) is simply the “fuel”.
The question that needs to be asked is – why hasn’t there been a public discussion in Ireland of the role land use planning has had in being the “trigger” for the Irish housing bubble?
I would be most interested in learning about the planning problems in Ireland.
Hugh Pavletich is absolutely right. Ireland’s highly “planned” new housing development policies are the MAJOR difference between Ireland and Texas. If Ireland learned from Texas on this score, Ireland would be in as good a shape economically as Texas is today. The crucial give-away is whether a section for a new house on the urban fringe is priced at around US$30,000 as it is in Texas. This is simply the price a fringe section SHOULD be, given what agricultural land is worth and what it costs to develop sections. If the price is HIGHER than that, you need to look at oligopoly behaviour and de facto racketeering happening between town planners and developers. (I say “de facto” because these things are often happening with the purest of intentions – however, it MIGHT AS WELL BE A RACKET as far as first home buyers are concerned).
What is more, if your urban planning sets off a property price bubble, this will burst one day and really hurt your economy. Hugh is quite right about the difference between an “overbuilding” boom and a PRICE bubble. Do the maths: what does the most damage to the economy: building 10,000 too many homes at $180,000 each, or having every home in the country inflated in value by the same amount (on average)? The “several trillion dollars” of bubble value lost in the USA is made up 50% or more, of a few million homes in California being inflated in value by several hundred thousand dollars each. If California was a separate country, the USA would barely be in any trouble at all; and if Texas was a separate country, Texas would be the most unscathed economy in the world today.
16 replies on “Ireland: The Texas of Europe?”
Lester Thurow once forecast that EMU would leave Ireland looking like his home state, Montana. Empty.
Krugman playing dummschlau — business as usual.
Fortunately, some of the commenters are of far higher quality than the commentator — because, unlike Krugman, they know what they are talking about:
Exactly.
Croke Park? Shhhhh, don’t mention the C-word.
@Carolus
“Croke Park”
I bet there was a guy on the Titanic who, as the ship up-ended, was trying to make his way to the bridge to complain that the asparagus was overcooked.
Texas??
Ireland’s future is starting to look more like West Virginia – but without the profits from coal.
PK actually refers to one of the biggest scams before the sub-prime.
How come he did not spot the sub-prime?? Or is he one of the cronies?
He seriously underestimates the mess in Germany, implying that Europe’s problems mainly come from Ireland, as their banks bought lots of sub-prime and alt-A type securitised crap from American banks. Who will be sued.
Ironically enough, the tighter bank regulation in Texas from the aftermath of the S&L crisis has left them relatively untouched in the current depression (so far). A lesson there?
@ Pat Donnelly
PK actually refers to one of the biggest scams before the sub-prime.
“Sub-prime” was the trigger for the collapse of the wider US “prime” property market which was part of the same bubble. Same as here, though, this collapse among the flipping classes was inevitable at some point, so blaming it on poorer participants in the same bubble is just a cop-out for the middle-class.
How come he did not spot the sub-prime??
Mr. Krugman does not appear to have factored in the assistance given by the UK and others to subsidiaries of their banks in Ireland.
Furthermore, banks such as Bank of Scotland will not be able to get out of Ireland for a long time if there is no increse in the market for the assets used as security for the loans they gave out. There isn’t even a market for a firesale at the moment.
Maybe the difference between us and Texas is that our bank bust was far worse than theirs.
Thank you Mr. Krugman for that insightful aside. You may now return to telling us why Japan—the place where all our TVs, cars, and video games come from—has been an economic wreck for the last 20 years.
Japan has not been an economic wreck for the last twenty years. Read this http://www.cepr.net/index.php/blogs/beat-the-press/robert-samuelsons-confusion-on-real-interest-rates
@EWI
This, as well as these (forgive the polemical source, the quotations seem to be accurate enough), leave a less flattering image of Krugman’s attitude to housing bubbles and the Greenspan put.
@Merijn Knibbe
Wasn’t Japan’s published unemployment rate the subject of polite skepticism even before the crash? Lots of make-work at government-connected construction firms…
@anonym
You can say an apple is an orange, but no sale here.
@Cramor
Are you defending Japan’s unemployment statistics, or Dr. Krugman’s track record on bubbles? And do you have any more specific objection to what I said?
Prof Krugman forgot to mention that during the S&L fiasco, Texas did not experience a housing bubble as such (where house prices exceeded 3 times household incomes) while of course Ireland did (refer Annual Demographia Surveys http://www.demographia.com ).
There is a long history of mortgage consumer laws in Texas, as a recent excellent article on Big Money “The Lone Star Secret” outlines. As Professor Krugman explained within his March 2010 NYT article “Georgia on my mind”, in contrast, the State of Georgia had very liberal lending standards. But as the Demographia Survey illustrates (refer Schedule 2) Atlanta, Georgia housing is currently 2.1 Median Multiple. Instead of inflating, the less damaging overproduction occurred in Atlanta.
For a housing bubble to occur, there must be a scarcity trigger, as I explained within a recent article “American’s slow learners about housing bubbles” (accessible via my website). Within this article, I quote from a speech to a US Real Estate Editors Conference early this year by Mike Insulmann, CEO of Metrostudy in the United States. Mike explains it clearly, in that supply scarcities are the “trigger” for housing bubbles to occur and finance (whether it be equity, bubble equity or mortgage debt) is simply the “fuel”.
The question that needs to be asked is – why hasn’t there been a public discussion in Ireland of the role land use planning has had in being the “trigger” for the Irish housing bubble?
I would be most interested in learning about the planning problems in Ireland.
Hugh Pavletich
Co author – Annual Demographia International Housing Affordability Survey
Performance Urban Planning
http://www.PerformanceUrbanPlanning.org
Christchurch
New Zealand
Email: hugh.pavletich@xtra.co.nz
Hugh Pavletich is absolutely right. Ireland’s highly “planned” new housing development policies are the MAJOR difference between Ireland and Texas. If Ireland learned from Texas on this score, Ireland would be in as good a shape economically as Texas is today. The crucial give-away is whether a section for a new house on the urban fringe is priced at around US$30,000 as it is in Texas. This is simply the price a fringe section SHOULD be, given what agricultural land is worth and what it costs to develop sections. If the price is HIGHER than that, you need to look at oligopoly behaviour and de facto racketeering happening between town planners and developers. (I say “de facto” because these things are often happening with the purest of intentions – however, it MIGHT AS WELL BE A RACKET as far as first home buyers are concerned).
What is more, if your urban planning sets off a property price bubble, this will burst one day and really hurt your economy. Hugh is quite right about the difference between an “overbuilding” boom and a PRICE bubble. Do the maths: what does the most damage to the economy: building 10,000 too many homes at $180,000 each, or having every home in the country inflated in value by the same amount (on average)? The “several trillion dollars” of bubble value lost in the USA is made up 50% or more, of a few million homes in California being inflated in value by several hundred thousand dollars each. If California was a separate country, the USA would barely be in any trouble at all; and if Texas was a separate country, Texas would be the most unscathed economy in the world today.