Some moderately good news Post author By Brendan Walsh Post date December 2, 2010 The November Live Register SA total shows a drop of 3.5% from the August peak. The November Exchequer Returns are broadly on target. Categories In Economic Performance, Uncategorized 19 Comments on Some moderately good news ← Blog is Two → Monetary Dialogue Briefing Papers: November 2010 19 replies on “Some moderately good news” Good news is good news. Very gracious of the globally competitive corporate sector to post decent returns at this time. Long may it continue … Blind Biddy says Hi! She is in Brisbane doing a bit of baby sitting with her grandchildren – since she got the Travel Pass (and the tenner) back from Colm McCarthy there is no stopping her – she will be back to campaign, march, and possibly run in North Tipperary. Yeah, and my youngest sibling was part of that “drop” of 3.5%. He’s now working in the UK. @Brenad Walsh. I am not an economist nor do I look at these figures regularly. However I cannot agree that there is good news in either set of data. Specifically on the live register numbers — “In November there were 40,787 new registrants on the Live Register, which compares with 49,827 in the previous month. New registrants consisted of 19,139 JB claims (46.9%), 19,787 JA applications (48.5%) and 1,861 other registrants (4.6%).” The number new JB claims at 19139–these are the genuine additions to the unemployed– is very high. The JA figues are probably people moving from JB to JA??. Where are the jobs to re-employ these people going to come from? A few months of these kind of JB increases would be alarming. The trend of JB to JA to “the boat” will have kick in bigtime if the out of work problem is not to cascade in serious social discontent. The increase in unemployment is verified in the income tax returns which is well below 2009 and over 3% below profile YTD Nov 2010. How is this good news? People are leaving the country. That’s why these numbers dropped. And it’s only just begun. House prices will drop further. Negative equity will increase. More mortgages will default. And that means the banks will be in even worse shape. The electoral system had better sort this out. Because if it doesn’t there comes a point where people stop being peaceful. Brendan, For many years you were the only academic economist known to the public and you often challenged conventional wisdom. However, you were essentially a lone voice and the commercial economists had command of the airwaves facilitated by public broadcaster RTÉ where interviews were either conducted by multimillionaires or economic illiterates, overpaid with the inflow of boomtime advertising revenues. With the herd currently in full stampede against the ruling elite, I wonder what would have changed from 2007 if the US credit boom had continued until now? Weeks before, HSBC stunned the markets in Feb 2007 with news of huge subprime losses in the US, Lawrence Summers had a message for investors heading to Davos to toast a year of booming returns and record bonuses. “It’s worth remembering that markets were very upbeat in the early summer of 1914,” the former US Treasury secretary observed. “It’s too good to be true,’‘ said Vittorio Corbo, then head of Chile’s central bank, who was to speak at a seminar in Davos about the dangers of derivatives. “Tomorrow the mood could change. We have to be prepared.” Trichet told a Jan. 2007 news conference that “we continue to see, overall, a low level of risk appreciation, and a disorderly unwinding of this situation would be a risk that we have to be fully conscious of.” Willem Buiter, professor of European political economy at the London School of Economics, was more blunt. “Current risks are ludicrously underpriced,” said Buiter, a former member of the Bank of England’s Monetary Policy Committee. “At some point, someone is going to get an extremely nasty surprise.” In May during the Irish election campaign, there was no debate on the risks to the economy even though many barometers of stress were flashing red. The focus was more on Ahern’s finances than the public finances. I went to an FF press conference where its 250,000 five-year new jobs plan was unveiled by Cowen and Martin. I asked Martin what proportion were expected in the exporting goods and services sector seeing that only 6,000 of 83,000 new jobs created in 2006 came from there. He claimed my figures weren’t correct; Cowen blustered that I was ignoring services, which I wasn’t and what excited the journalists was Cowen’s claim that Pat Rabbitte as minister for finance would be a threat to the 12.5% corp. tax. In Aug, the credit crunch hardly created a ripple as the mantra ‘soft landing’ continued to be sung. Minister for Transport Noel Dempsey said in Oct 2007 after the report on senior public pay was published, that ministers would be entitled to a lot more if they were paid on the performance of the economy. And so we arrived in 2008. So if now we were just ahead of the bursting of the bubble, Morgan Kelly would be dismissed as a crank who doesn’t understand population dynamics; Philip Lane’s appeals for fiscal rules would have been ignored; the head of the central bank would have come from the DOF and while FF’s popularity would have dropped after so many years in office, the consensus among political pundits would be a coalition with Labour was in prospect in 2012. Oct 2007: Where is the Outrage? Gombeenism thrives at home while in Paris, OECD staff work on proposals for Irish public service reform The additional Super VIP Benchmarking had been provided by a mechanism known as the Buckley reports. The Secretary-General of the Taoiseach’s Department gets one of the biggest hikes – 25% – he will no doubt be in charge of drafting the pleas for pay restraint that will inevitably emanate from his Department in the coming year. The Taoiseach’s chief flunkey/political adviser Gerry Hickey gets paid €210,141- a doubling in ten years compared with a 30% rise in the Consumer Price Index. The best news these last two weeks is the weakness in the Euro, at $1.32 and £0.845 after Trichet’s reassurances yesterday. Bond purchases esp. Irish and Portugese seem to have been heavy, but no ‘real money’ follow-through, and ECB liquidity support continuing but perhaps only to March. Good chance that the Euro will resume its slide in the absence of either unsterilised QE or Europe-wide bank resolution. If there is neither, the consolation prize for Ireland remains possible – a really big Euro slide. @Colm Could we get back to 60 cent V Sterling as it was before the Bubble from 2004 ? Maybe then we would really get our economy going particularly Tourism from the old enemy England and increased Food and Drink exports there. @Colm, I agree, but how overvalued is the Euro? And might not this be an ambiguous blessing given the impact it might have on existing and prospective $-denom FDI in Ireland? And a $ and € race to the bottom might pee off the BRICs – whose global economic and strategic interests are carrying more weight. The good news on the euro has been with us for a while…it peaked at $1.60 way back in mid-2008 and at 98p in late 2008… @Colm McCarthy. re: and ECB liquidity support continuing but perhaps only to March. I don’t fully understand you comment. I was under the impression that the quid pro quo of signing of the EU/IMF deal was that ECB would (definitelu would) provide liquiduty for the banks. Are you saying thta we have signed up to a deal which simply gives us loans but that the ECB can let the Irish banks fall for lack of liquidity at any point???? If so this is a more disastrous deal than I thought it was. I can’t see the Americans, Brits, etc. accepting a Euro sliding downwards dramatically. They will probably prop it up! @Joseph – How do you propose the Americans do that? QEIII? Not beyond the realms of possibility Cormac! Nothing surprised me at the moment. At very least, they will take steps to ‘devalue’ their own currency if the Euro slides. surprises @ Paul Hunt I think a lot of the BRIC stuff is ignorance wrapped up in hope. India is hopelessly corrupt, China seems incapable of creating a world beating corporate and so on. For me what is important is what share of global financial assets the BRICs have. Not future growth. Anyone can spoof about future growth. I have a book about the Nazi economy- the Wages of Destruction- and there’s a fine picture of Albert Speer from 1944 with a permagrowth chart of the type that we all recognise from today – showing German ammunition production. There was a steep drop in the trend in May 1945. As Primal Scream used to say, the name of the game is power and if you ain’t playing power you are in the wrong place. The power is in financial assets. The rest is decoration. @seafóid: Although I agree with your sentiment, I don’t think being hopelessly corrupt is a barrier to being economically, politically or militarily powerful. bjg @Seafoid. re “The power is in financial assets. The rest is decoration.” Pretty dismal view. But what generates the financial assets? It seems that the original creators of wealth entrusted that wealth (financial assets) to very well paid casino players who proceeded to lose it while enriching themselves. Perhaps out of all this will come the realization that wealth when created will have to be protected by a more controlled system managed by more controlled people. @ALL Could I prevail upon commentators for an answer to the requested clarification of Colm McCarthy’s remarks above —and ECB liquidity support continuing but perhaps only to March.—- Does this mean that after pumping a futher €35 billion into the banks on our account we have no guarantee that the ECB will not pull the liquidity plug at a time of its choosing? @ Joseph Ryan Dismal indeed. What other conclusion could one draw from the EU/IMF deal? Was anybody expecting the actual deal Ireland got ? So blatantly short termist and pointless ? Donal O’Mahony got a lot of abuse for his response to Morgan Kelly back in November but I think both he and many others were at least expecting some kind of fairness from the EU. http://www.irishtimes.com/newspaper/opinion/2010/1112/1224283148351.html “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. In delivering his supportive Rehn-check on the Irish situation this week, the EU economic and monetary affairs commissioner proffered the old Finnish proverb that “better not paint the devil to the wall unless you can wash it off from there”, meaning that exaggerating one’s problems can exacerbate those problems. In this respect, it is the kindness of one particular EU stranger that is now exhorting us to eschew the “self-destruct” path for a “self-help” alternative.” Even Kelly thought there might be some scope for some kindness from strangers. There was nothing of the sort. Instead it was a shotgun to the head. Total corporate power. Based on pure short term economic interests. @ Joseph Ryan again If there is a conclusion from this it is that out of control income inequality and rampant unchecked corporate power are incredibly dangerous. There is nothing to stop power from shafting the people. Comments are closed.