IMF: “Nothing to see here, keep moving”

The European Commission, European Central Bank, and International Monetary Fund have passed Ireland with flying colours in their latest quarterly review. I’ll post audio of their press conference when it’s available (commenters please drop the link if you see it). The IMF press release is here.

The statement reads that bank reforms are on track, fiscal consolidation is on track, structural reforms are to come, and it’s all good. Lots of touchy-feely language. Those pesky bond markets, and the burning of senior bondholders, weren’t looked too kindly upon in questions, but overall the message seemed to be: Nothing to see here, nothing at all, no to burning senior bondholders, but guess what lads, the next review will be tougher. Stick with the programme.

On twitter, NamaWinelake reported a divergence between the EU and IMF, with Ajay Chopra of the IMF saying he expected to see a more robust approach to burden sharing, while the ECB representative said no, that wouldn’t be happening.  Although much can be made of comments like this, the review exercise seems to be, on balance, a qualified success. The government did meet its agreed targets. Whether the exercise enhances our credibility to the point that Ireland can wean itself off EU and IMF funds without a second loan package is another question entirely.

By Stephen Kinsella

Senior Lecturer in Economics at the University of Limerick.

110 replies on “IMF: “Nothing to see here, keep moving””

Hardly worth commenting, its Neville Chamberlain and his piece of paper declaring peace in our time…worthless

(Jesse – Just another day in the Pax Goldmana. “They create a desert, and call it recovery.”)

This depletion economic syndrome must be given a new chapter in that great book of economic knowledge……….
Destroy capital .. get a yield …. destroy more capital to sustain a yield…. Burn it , burn it all.

This is a major blow for those who gambled on Ireland defaulting/devaluing. Coming on top of the census results, it has been a bad few weeks for them. I am surprised that the statement didn’t contain a reference to the fact that Ireland’s population is growing rapidly, much more rapidly than they thought when they were here last, since this is one of the key drivers of economic growth. But, I expect it would have been embarassing for Noonan if it had done so, as he claimed repeatedly during the election campaign that Ireland was in the throes of massive emigration and depopulation.

My investments are looking more and more secure. My heart goes out to those unfortunate and now impoverished suckers who, as soon as the £sterling began its decline from 1.50euro to today’s 1.10euro, panicked and moved all their money from Ireland to London, and who since then have been on the receiving end of the UK’s 0.5% interest rates and 5% inflation. I hope that they are enjoying the sight of the real value of their money melting away. But, have no fear. The UK has Triple AAA rating because it retained the freedom to print money, lots and lots of it, and so, come what may, will pay them back, even if it is only in BankOfNoddyland notes.

John the Optimist – Perhaps it might be worthwhile (particularly given the week thats in it) if you tried to look at some of the evidence against your position.

Your cries of everyone else wrong and you right are a little tiresome and this week especially are reminiscent of Comical Ali.

Acknowledging the possibility that someone who doesn’t know the difference between a bond and a deposit might in fact be wrong would work in your favour.

John a 26% drop in GNP since Q1 2007 is bad enough with a static population…. but with a booming population it almost feels like the post 1800 act of union days.
Booming populations & deindustrialization are not generally considered good fun by most.
But I guess you have a acquired taste.

A Population rise does not raise economic growth , a rise in your BTU ration raises economic growth.

Personally, I see this announcement as being akin to the Kiss of Death; a twisted gesture of affection, in reality signifying doom for the receiver. If the EU has to cut Ireland loose to save the ship, it will do so, whether or not Paddy is afloat.

The IMF claims things are hunky dory. Meanwhile, the Taoiseach admitted yesterday that the state will run a deficit of €18 billion this year, which will be about the same deficit it ran last year, and the year before that, and the year before that. What deficit will we be running by 2013 when the EU/IMF funding runs out? By that time, the States own debt will dwarf that of the banks and we’ll simply be a greener version of Greece.

And we all know what’s going to happen to Greece.

@JTO

“This is a major blow for those who gambled on Ireland defaulting/devaluing”

“My investments are looking more and more secure”

These are strange comments

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

10 year still nudging 14%, and up significantly in the last week (from around 11.75% to 14%) which would imply that those holding a 10 year bond would have lost more money in the last few weeks……

@Obsessive
Enda Kenny “We have to grapple with an economic challenge that no Government in the history of the State has had to deal with. We have lost our economic sovereignty”

What exactly is he grappling with if he accepts the loss of sovereignty ?
At least after 1800 we did not have to pay for a useless domestic parliament ?
Not only have we lost sovernity but we still have to pay for dirty gaelic optics.
I can’t see through this s£$t

Other news from JTO :

Cork are destined to win the all-Ireland senior hurling final.
Cliff Richard is the sexiest man in the UK
The News of the World will be back next Sunday

One think that I am wondering about is the issue of the current acc. deficit which was a number of years ago 20 billion and is this year likely to be 20 billion.

I cant reconcile the claims that the austerity programme is working with the fact that the borrowing requirement is not changing. Unless it hangs off the premise that structurally things are bettered for happier times.

If anyone could briefly square that circle for me I’d appreciate your thoughts on it.

@wow

Why would any politician choose not to opt for – you get the % deficit down by waiting for significant gdp increases.

Until you can prove the gdp increases will not happen, how do you expect them to abandon this position?

Gilmore has assured his constituency there will be no more cuts to at least headline social welfare payments.

Kenny has done the same for his constituenmcy re tax rises.

Their joint constituency under Croke Park retains the assurance of no compulsory redundancies and no more pay cuts (despite paragraph 1.28 making the agreement null and void, but SHHH!).

How do you expect them to want to alter any of this?

Equally, I am not uniquely perceptive, so how do you expect the markets to fall for it?

@Din Taylor

I dont think my investments include a bond purchase. As I explained to Eoin Bond once, I thought at one time that they did, but I think I was wrong. I’ll be honest, I dont know much about the details. It is all beyond me. I leave it all to my bank. That’s what I pay them for. They do all the wheeling and dealing. I have far too much to do with my own work to be bothered with all that. I just issued general guidelines to my bank, namely: stick my lolly in euro investments south of the border to take advantage of the uniquely high real interest rates. So far, it has paid off. In contrast, my company pension fund, which I have no control over, and which is invested largely in the UK, has shown a below-UK-inflation return each year since 2008, and, of course, is denominated in sterling, which has sunk like a stone since 2007.

@seafoid

Other news from JTO :

Cork are destined to win the all-Ireland senior hurling final.
Cliff Richard is the sexiest man in the UK
The News of the World will be back next Sunday

JTO again:

We are not really into hurling in Tyrone, so I would be somewhat out of my depth forecasting that. However, I do forecast Tyrone to win the all-Ireland senior football final. But, then, I’ve forecast that every year since 1956, and only been correct 3 times so far.

All this is a bit off-topic and carefree, given that so many on here believe that the world is about to end any day now. But, I sense that this thread is going to struggle to match the 231 posts the Moody’s one has, so we need to stretch it out some how.

I am utterly non-plussed as to how our “on-track” status can possibly be making adequate allowance for our deficit.

The clear corollary of today is that the troika think we are indeed going to close the €19b* gap over the next 4/5 years.

With Roscommon causing a medium-sized national scandal, with promises of no income tax rises or SW cuts and with Croke Park in situ and, above all, with projections based on wildly optimistic growth forecasts, I quite simply do not understand where that money is going to come from.

* Or whatever the hell it is now.

To be fair, you can’t expect them to say that they’re unhappy in the public press conference…even if they are unhappy.

The Moody’s downgrade is one thing, but if the IMF came out and said “Ireland is not on track and is failing to make the necessary adjustments” it would cause an absolute firestorm, so they’re not going to say it unless the firestorm is imminent and inevitable anyway….so they’re not going to say it.

Basically, whatever problems Ireland might cause for the IMF/EU are distant and can still be managed. They have other more urgent problems. Ireland is fine for now. It’s fine. “Nothing to see, move along” is exactly the right message.

@Hugh Sheehy
“Ireland is fine for now. It’s fine. “Nothing to see, move along” is exactly the right message.”

Not sure about that. 2 year Irish yield up 5.76% to day at 21.2%. the people that matter are not buying it.

Seriously, will the deficit be E18b again?? What’s all the huffing and puffing about then? Before I escaped to the sunnier tax-free climate they were taking 1000 a month more off me compared to 2006. So how the hell did they fail to achieve any significant reduction in the absolute deficit figure?? Boy I am glad I am not paying for all this any more.

It is frustrating to hear Enda Kenny saying ‘we’ve lost our economic sovereignty’. That is utter bunkum. The Irish State has enormous freedom, the only constraint is to reduce spending money it does not have. Government is not about ‘giveaway’ budgets, or lavish spending increases – though evidently our leaders still think so.

The Government spends tens of billions per year, it is well past time for them to start governing this spend.

“The government did meet its agreed targets. ”

Lies and propaganda again:

In 2012 €3.6 bn to be taken out of the economy. To achieve the projected Troika growth rate of 2% firstly, the economy has to make up for the taking out of €3.6 bn just to remain standing at 0% growth, this means we would need growth of 3% just to make up for the austerity.

To achieve real growth of 2% we need to grow by 3% + 2% = 5%

Are Chopra’s austerity targets delivering economic recovery and growth rates of 5%

Whose foolin who, Lord Haw, Haw…’flying colours my ….’

“To achieve real growth of 2% we need to grow by 3% + 2% = 5%”

Naive question here. If exports make up most of Ireland’s production and they grow by 8% say, would this not mean that production had grown by 5%?

@Stephen

Keeping in mind a post you made in your previous thread (which I fear may have lost itś impact in the “storm” of 240 posts) re : inviting ideas from readers/posters about this site perhaps I could make a humble suggestion.

Perhaps the relevant “thread meister” could occasionally answer some questions , such as the one dearg doom has just asked about growth and the one Dom K appears to have asked about the deficit being 18 billion “again”, if the “thread meister” feels the question may benefit readers.

I am not an economist so I (and I am sure many other readers) would welcome answers to questions posed by readers/posters who are brave enough to ask them.:)

Best…L

With all the bad news in the EZ of course the Troika will pronounce that Ireland is on track – could you imagine the market reaction if we were found to be in breach of major or even minor elements of the MOU?

I know we are compliant so far this year [though I don’t see why everyone thinks the Exchequer’s revenue position is ok – looks worrying enough to me, especially re income and corporation tax].

But it seems to me inevitable that the Troika will underline the positive where they can given the present international circumstances – ie, the “positivity” is nice but we need to think about what lies behind it.

We need to remember that the Exchequer deficit is still at 10% – all the “consolidation” is doing is preventing things from getting worse-, 10 year bond yields are at 13-14%, and, most worrying of all, we have probably only have enough cash under the deal for the Exchequer for 2012, but not all of 2013.

Assuming that there’s no EU-wide bail out which really tackles the problem, seems to me that the real, crunch reviews by the Troika will be in spring and summer of next year.

My bet is that the deficit will still be around 8-10% despite what might happen in the budget and it’ll be very clear that something really drastic has to be done given the looming cash shortfall in 2013.

As we’ll have the EU presidency in 2013, maybe someone will give us a few bob.

Probably best not to get too relaxed…

Incoming European Central Bank chief Mario Draghi said the debt emergency had “entered a new phase” and called on political leaders to come up with a clear response to the contagion.

This is PR-speak for: “It has moved way beyond control and I don’t have a clue what I’m going to do about it so I will try and pass the buck.”

Meanwhile, Irish bond yields continue to climb. We won’t even be returning to the markets in 2013.

After this week, the bank stress tests tomorrow will probably be a bit of an anti-climax.

@Livonian

Good suggestion, I’m more than happy to answer questions like this when time allows.

The distinction dearg is making is between ‘real’, or inflation-adjusted, and nominal or in current prices. I’ll skip over a few points about indexes and logarithms, but hopefully you’ll get the gist.

Gross Domestic Product is a measure of the value of goods and services produced in a year. It’s the numerical sum of private consumption, investment, government expenditure, and net exports (exports-imports).

Say GDP in year 1 €100, and in year 2 GDP is €105. GDP growth is 5%. But, if there was inflation in the economy of 2%, then we’d like to know the ‘real’ value of the output change, and we’d ‘deflate’ the 5% nominal GDP growth by our 2% inflation to get a ‘real’ value of GDP growth of 3%.

The export growth wouldn’t normally be deflated in that way, but you could do it.

Does that help?

By Post Author

@JTO
re:
“My investments are looking more and more secure. My heart goes out to those unfortunate and now impoverished suckers who, as soon as the £sterling began its decline from 1.50euro to today’s 1.10euro, panicked and moved all their money from Ireland to London,…”

I find it particularly insensiitive (at the least) that in the middle of an economic crisis, with high unemployment, emigration (yes emigration), busines failures on a masive scale and most importantly youth unemployment, that any person can bloat like a goat about his or her investments, no matter how well they are doing.

Thank Christ that the Tyrone team never got carried away by their success.

@Stephan thanks for that. This is not quite my original question. My basic question is, that in an economy like Ireland with a large export sector, by how much do exports have to grow to provide a growth rate that allows some real growth in the internal economy, after the deflationary effects of the reduction in the government deficit. I presume that imports would grow more slowly, but this would depend on the proportion consumed in Ireland vs the proportion used to produce the exports.

The IMF is jockeying for position with the ECB and they are both very anxious not to say anything that will spook the market. Behind closed doors their message will have more edge to it. Noonan is not conducting himself with aplomb and they are leading by example.

Some of you will say the market is as spooked as it can get. I bet there are still people out there who hope that Merkel and Sarkozy will defy German and French public opinion and at least rescue the PIGS. I do believe that a serious effort to keep the Euro Zone intact will continue but that there will be defaults both by private entities and governments. Nobody will be issued with a get out of jail card free now that Italy and Belgium are coming to the table for alms. Let us hope that the conditions imposed on us will not be too onerous.

We are now truly dependent on the kindness of the ECB and IMF. I am pleasantly surprised at how well we have been treated so far.

@PR Guy

Keep up those PR-speak translations. I enjoy them. You seem to have a second sense for them.
I trust it is not a first sense. ie, That you are helping to compose the various PR-speaks.

@Mickey Hickey

The IMF is jockeying for position with the ECB and they are both very anxious not to say anything that will spook the market.

Spook the markets.
When I think of the markets these days, I immediately think of Hitchcocks’s ‘The Birds’. Could the market be any more spokey? Shit spattering everywhere. Just like the film. And it looks like we are all about to be devoured, just like the film. I forget what happened in the end!

@dearg, that’s a much more complicated question because there are multipliers and elasticities involved. Abstracting from all that, remember the accounting identity for GDP.

GDP= Consumption + Investment + Government Expenditure + Exports-Imports.

So if you want GDP to be +3, and everything else is 0, then net exports would have to grow by +3.

+ 3 = 0 + 0 + 0 + 3

Now let’s say the government drops expenditure by some amount, say 4%. If exports are only thing keeping you afloat, then you’d have to grow them by 7%.

+ 3 = 0 + 0 +(-4) +7

Again, I’m abstracting from loads of things here, but that’s the gist.

By Post Author

@Stephen Kinsella

re above
What is % Change C,I,G,E and I for 2011 and forecast 2012?
I would have a lot of doubts about the C,I and G pieces.

The ECB/EMF have a number of options but their options are narrowing rapidly as they dither. If they leave it much longer they will kill, not only the euro, but also the political consensus that the EU is founded on. At the moment their options are;

1. Kick the can down the road again. Keep rolling over the debts of the PIGS by giving them more credit at unreal interest rates that will never be paid. Current leaders are hoping the problem will outlive their political life and allow them to retire in peace and give overpaid lectures on the Yale circuit about European integration and world peace. Every now again visit the PIGS, complain about the size of their cars, laugh at their politicians and try to make them sell some more family silver to the colonial overlords. This is the current policy. This is bound to fail because it all depends on the timing. If a Spain or an Italy hits the fan it becomes impossible as the can becomes a beer keg, try kicking that down the road. The French attempt to get private sector participation in pig bonds was just a version of this. Give money to Lord Bond in return for him giving most of it back again on thirty year bonds. If only for those pesky rating agencies we might have persuaded a few idiots to participate.

2. Burn the bondholders (or in Irelands case the ECB). This sounds great and would be great for Ireland but has risks for the entire western global financial system. The German, French and British banks would, depending on their risk profile, cash in their Credit Default swaps, recapitalise with the help of their governments, or go bust. Some of the Wall Street Investment banks who made their cash selling Credit Default Insurance would liquidate. Why do you think Geithner was so set against burning bondies when Ireland handed over their Sovereignty overnight. Go figure.

3. Print Euros. What if a nice man in the ECB decided to start buying up heavily discounted pig bonds with money that magically appeared in an account in Frankfurt. What would that do the spreads. O.K. EU inflation may nudge up 0.5% but all they need to do is up the interest rates by 0.5% to quell inflation.

4. Ditch the Euro and ultimately probably the EU. Fasten your seat belts.
The best option is 3, the only sensible option for the EU is 3. For Ireland, scenarios 2,3 and 4 are all in my view preferable to number 1, the route we are now taking. Look at Iceland, look at Russia. Lets be a free self respecting people again instead of Ollie Rehens pet poodles, getting good marks from the troika because we keep on doing the right thing by Germany and France. Every month we follow the current course we shut down another hospital, sell another key asset and give away another piece of our self sufficiency and respect. Be free people of Ireland.

@Joseph Ryan

Sadly, I have to admit to being a master of the dark arts – and most of my clients are financial services companies (though increasingly, outside of Ireland these days). I almost landed a gig with AIB the other day – now that would have been great fun.

@ Ceteris Paribus “Not sure about that. 2 year Irish yield up 5.76% to day at 21.2%. the people that matter are not buying it.”

You’re dead right. Whom exactly do you reckon are the people that matter? The likes of ILP, or any other life/pension company with Irish liabilities?

If I thought they were taking an intelligent view, as opposed to the stopped clock approach of the last 12 years, I might give them credit for their post-hoc perspicacious inaction. That they were short Irish bonds (relative to their obligations or liabilities) in the 1999/2007 period was demonstrably both silly and costly, though. That they remain short despite significant relative price movements doesn’t indicate value-for-money in terms of the active management fees charged.

Maybe they’re right, they saw all this coming back in 1999, and caps should be liberally doffed in their direction. I’d love to hear even one of their spokespeople justify their investment performances and asset allocation decisions, so I’d know (again post hoc) that they weren’t simply lucky. (The industry concentration on equities as an asset class through thick and thin might render the job difficult, mind).

I’m not suggesting that Irish bonds should necessarily be bought at current yields. I find it depressing, though, that if they should, it will not be done by the guardians of Irish long-term savings in life and pension products.

I hope my bitterness as an DC pensioner doesn’t come through in any of the above.

Interesting to see how Ajai Chopra’s remarks ‘we need a European solution to a European problem’ are being reported. In the FT no mention is made that these remarks were made in an Irish context…fact is the IMF is pushing Europe. I wonder if Ireland is tabling any overall solution, at this stage we need to get behind something – the Merkel/Sarko/ECB fudge is crumbling.

@stephen Kinsella

re
‘Nothing to see here folks’

The original MOU has the following aims in ‘Whereas 3’. We are not doing so hot on the aims are we? However the IMF statement adroitly sidesteps the aims of the pograms and concentrates on the action plans.
But the purpose of the actions plans was to achieve the aims, was it not.

http://register.consilium.europa.eu/pdf/en/10/st17/st17211.en10.pdf
The draft economic and financial adjustment programme (the “Programme”) submitted to the Council and the Commission aims at restoring financial market confidence in the Irish banking sector and the sovereign, enabling the economy to return to sustainable growth. To
achieve these goals, the Programme contains three main elements.

Sorry, I spelled programs, ‘pograms’ in error. Well perhaps I should have spelled it pogroms!

@Aiman
The point I was trying to get across is that since we got the bailout program in November our sovereign bonds have steadily declined in value to the point where our two year bond yields are now north of 21%….from 4% last November. If this EU/IMF/ECB programme (which we are allegedly sticking to rigidly) is so wonderful, then why are the markets dumping our bonds at a time when the supposed experts consider we are on the correct course to fiscal rectitude?

@Steven Kinsella.

Thanks for that:
I see personal consumption to show no reduction, despite a €4 billion wedge to be taken out. So people are going to spend savings despite disposable falls in disposable income and no reduction in unemployment levels. Who are they kidding!

Investment to increase slightly? Well, possibly the base is so low at present that this is possible. Thee will have to be a certain amount of replacement investment.
Exports forecast to take a huge jump despite the weakness of sterling and the dollar and despite an austerity drive across Europe? Definitely too optimistic at this point.
As for Government! Who knows!

@Ceterisparibus
Because its a controlled default not a bailout – its got nothing to do with the markets.
Markets for govermental money anyhow is a strange post napoleonic concept.
The goverment is the ECB/ IMF.
They have decided to drain the domestic deposits to pay for the new sov debt in a controlled fashion.
The Lloyld giveth & the Lloyld taketh away…… ( thats not mine – heard that on Zero hedge land I think )
Monetory mechanisms without the deception of markets is a beautiful vista – its like finding out how the magic trick really works.

@ceterisparibus – good point, and we both I reckon would love to know the answer, if there is one.

The point I’m trying to raise is that the tiny percentage of Irish savings invested in Irish bonds is unique in the Eurozone. If this were the result of an investment decision on the part of long-term savings institutions, managing Irish savings, I could accept it. But it appears it isn’t, nor has it been, since entry into the euro.

I’m not suggesting, unless such a decision were justified by rational expectation of excess or even average returns, that Irish long-term savings be committed to Irish government debt. That such an expectation would not be acted on is plain wrong.

If Irish debt is worth investing in – and there must be some clearing price at which it represents value, barring 100% default – why is it off the investment radar of those institutions managing Irish long-term savings? That over 80% of extant bonds are held abroad, according to most recent data (and more importantly those of the last ten years or so), makes those overseas holders wonder why won’t Irish funds – effectively Irish residents – hold or buy it?

The deposits outflow from Irish banks since 2008 is rightly in the news. By comparison the outflow of long-term savings since 1999 remains unremarked. The deposits outflow was based on legitimate fears; the long-term savings outflow was based on a random, value-ignorant, benchmarking decision of 12 years ago.

@Aiman
Have you been pondering what I have been pondering ?
I have made the point before that since Irish Credit deposits are already guarrenteed by the Irish Goverment they could travel to the post office if the bond holders in the ECB & elsewhere were left with the mortgage paper

However putting all our financial assets such as pensions into this is dangerous when you are dealing with a CB without any state executive control – ( they may decide to monetize when all the debt is withen the serfs hands)

@A. J. & Co

A ‘Cuinas’ Statement – with the gust of wind directed, appropriately, at Europe.

“Lots of touchy-feely language.”

But that’s optimistic.

What’s your problem?

So.

Let me guess here.

The money supply runs out?

Have I got that right?

What happens then?

From the original MoU linked by Joseph Ryan above:

“The draft economic and financial adjustment programme(the “Programme”) submitted to the Council and the Commission aims at restoring financial market confidence in the Irish banking sector and the sovereign, enabling the economy to return to sustainable growth.”

As has frequently been rehearsed here, the ‘bailout’ package was never enough to last to a time when the state gets round to running a surplus, more it was supposed to get the state over the hump, or pointed in the right direction of stable banks, growth and closing deficit: then the markets would swing back in.

However, this was muddied by the punitive interest rate, when ‘economics is not a morality play’, would have been a more useful, pragmatic approach. And doubly muddied about the question of bondholders, which at least the ECB is being more explicit about now.

J McHale has argued that the interest rate includes a factoring in of risk, but I think that is a stretch,

Meanwhile the state is less creditowrthy than it was, why?

(1) Moody’s point to: “Statements from EU countries suggest that further public sector support for Greece is likely to be contingent on private sector creditors restructuring their holdings of Greek debt and shouldering losses. The statements and proposals point to increased risk for creditors of Greece and other _debt-burdened European sovereigns that have weak recovery prospects and that lack market access._”

This is in line with the IMF’s position here. Until the EU sort this out, the outlook for Irish bonds is uncertain. You don’t know what you’re buying.

(2) Growth is underperforming the initial estimates.

From the MoU section 4: “Under the Commission’s current projections for nominal GDP growth (1,4 % in 2011, 2,7 % in 2012 and 3,8 % in 2013)” While now the IMF merely says: ‘Real GDP stabilized in the year to the first quarter, and modest growth is expected in 2011.’

The Q1 accounts from the CSO 2011, showed GDP just hanging in there, but GNP falling.

http://www.cso.ie/releasespublications/documents/economy/current/qna.pdf

From the Dof document linked by Stephen Kinsella (using CSO data) says: “For the year 2010 as a whole Irish real GDP recorded a decline of 0.4%. This represented a sharp moderation in the pace of contraction when compared to the preceding years.”

Growth at the moment is, unfortunately, always a day away.

Of course, many here have pointed to the forecasts as being overly optimistic in the light of the effect of austerity.

One point about the shift in the loss of the state’s economic soveriegnity is that the IMF/EU/ECB are now responsible for Ireland’s economic policy.

If they enact an economic policy that does not have, within reason, the outcomes they claim, how can they be held accountable? Responsibility without accountability is a recipie for disaster.

I’m not sure where I’m headed with this, but it’s to do with Ireland having absolutely hit its targets under the MoU and yet the MoU not achieving its key goals. As we wend our way towards another bailout, somehow the accountability for what has happened and what will happen needs to be shifted. Crudely, if the state signed up for a package based on ‘troika’ assumptions, and the state fulfils its part of the deal, but the assumptions are proved innacurate, then it is the ‘troika’ that needs to deliver. A more contractual, rather than parent-child, relationship.

I do think that the bank stress tests today will be very important for Ireland and for the crisis, and is linked to the above, but we’ll see how that goes.

Finally, I am curious about JtO’s claim that the new census figures might result in Ireland’s GDP being revised up. That would put a diiferent light on things.

I think most peoples gripe with the MOU is its insistance on using state money to re-capitalise the banks, and full and total reimbursment of senior bondholders of all banks which would be bankrupt without state intervention. The IMF argued against this as it is both unfair and unsustainable, however Mr. Geither and the ECB want this to be a precondition to save their own banks/investors from paying up. This is the crux of the MOU as that is a massive cost to the Irish taxpayer. The MoU is unsustainable (according to what the IMF really think, credit rating agencies, Joesph Ryan, Morgan Kelly, David McWilliams and markets ) So success in implementing an overall unsustainable MoU is not really success at all.
Most parts of the MOU are positive like increasing competition in certain secotrs like legal and medical, and replacing boards of management etc.
IMF Statement on mission to Greece last year, everything is on track http://www.imf.org/external/np/sec/pr/2010/pr10308.htm

@Joseph Ryan

I find it particularly insensiitive (at the least) that in the middle of an economic crisis, with high unemployment, emigration (yes emigration), busines failures on a masive scale and most importantly youth unemployment, that any person can bloat like a goat about his or her investments, no matter how well they are doing.

JTO again:

Au contraire. If everyone had made the same investment decisions as myself, there would be a lot less unemployment, a lot more immigration (yes immigration), and a lot less business failures, while it is those who shipped their money out of the country in a blind panic, after injecting themselves with an overdose of Morgan Kelly and David McWilliams, who are largely to blame for that. It is not my fault if they made the wrong decisions. They had access to the same data as me. I can analyse data intelligently, as I showed with the migration data. They can’t. The people who shipped their money out of the country are the same ones who swallowed in full the absurd ESRI and TASC emigration estimates. Anyone with an IQ over 50 could have deduced that they were absurd. In addition, I am out and about, spending a lot of the money earned (and quite a lot of it north of the border in Donegal) thereby generating employment, while they, thinking the world is about to end, are hiding under the bed.

The reaction of 95 per cent of the posters here to the IMF news is typically pathetic. I really don’t know whether to laugh or cry when reading them. I think I’ll opt for laughing on this occasion. They are like some attention-seeking hypocondriac who convinces himself he’s dying. He bores everyone in the pub with his tales of how he’s dying. He revels in all the attention and sympathy he’s getting because they all think he’s dying. He goes to the doctor, and the doctor tells him he’s not dying, but well on the way to recovery. So, he storms back to the pub, in a fit of rage and depression, proclaiming to his now diminished band of listenerers that the doctor is a quack, and that he really really is dying.

@Gavin Kostick

Finally, I am curious about JtO’s claim that the new census figures might result in Ireland’s GDP being revised up. That would put a diiferent light on things.

JTO again:

If you recall, we went into all this just after the census figures came out. I think I said then (but I wont repeat all the arguments again) that:

(a) the figures for the number in employment will definitely have to be revised up, and by quite a large amount, but the exact amount depending on which age-groups the extra 100k persons belong to,

(b) it is likely that (because of (a)), GDP will also have to be revised up, but it is more complicated and less certain, and the upward revisions may not be as great as for the number in employment, but they should still be significant.

@ John the Optimist

Yes, we did thanks. Perhaps I would have been better speculating as to when this revision might come through, and what impact it would have on the ongoing situation.

For example, if tax take is a proportion of GDP, then would the tax intake be revised up, or would the government simply have to look at its tax returns and revise the proportion of GDP that is being taken in tax, down?

Just thinking out loud – no needed to answer if you’re busy mapping.

If we want personal financial advice we can go to motley fool or some money blog…can we avoid the tedious ya ya prescience of John here and elsewhere? And tedious it is…

This 22 November 2010 piece from the FT is worth reading in full.
Because it is 8 months on and the crisis is far more toxic now. And Europe took the wrong road around .

http://www.ft.com/intl/cms/s/0/97fe4484-f66e-11df-846a-00144feab49a.html

“The €750bn worth of financial ordnance in the European Financial Stability Facility and its European Union and International Monetary Fund matching funds was meant to bring enough shock and awe to scare markets off from thinking a eurozone sovereign might default. The EFSF’s inaugural mobilisation reveals that between bond investors and Europe’s leaders, the politicians blink first.

• It is too soon to say whether the rescue into which Dublin has been manhandled by panicking EU partners can help fix Ireland’s troubled banking sector. Decisions taken in the next week or two will make the difference between the rescue’s failure and a chance of success.

• If the troika now imposing its writ in Dublin can get the Irish to restructure their banks in a way that recapitalises the banking sector (if not extant institutions) by forcing bondholders to convert to equity or otherwise share in losses, the EFSF can provide useful backstop funding for public spending or calls on banks’ guaranteed liabilities in the transition period, which must be kept as short as possible.

• A good outcome requires both a special insolvency regime and the will to strong-arm senior creditors into taking haircuts – as Dublin, to its credit, is finally doing to Anglo Irish subordinate bondholders. • So far, however, Ireland’s uninvited helpers seem set on perpetuating Dublin’s dysfunctional policy of throwing good money after bad and filling holes into which creditors refuse to step. This is understandable insofar as many of those creditors come from the core eurozone countries that guarantee the bulk of EFSF money. But it does not justify sticking to a failed strategy: keeping banks standing has already impoverished the Irish public by some €50bn, a third of a year’s output. If borrowed EFSF money is used to inject equity into the banks now, it will only dig the Irish sovereign debt trap deeper.

• The best that can realistically be hoped for is a combination of new equity and creditor haircuts. Whatever plan is laid, it is crucial that it does not aim to keep individual banks alive in their current form. That goal – which implies that the state continues to back all senior bank liabilities – is neither fair to taxpayers nor credible to markets. The mooted €80bn-€90bn rescue covers just half the Irish private sector’s bank deposits, let alone other deposits and wholesale debt.

• Not for the first time, Europe is facing bank creditors and feeling tempted not to face them down. If public money is again used just to buy time, the problem will soon return, more contagious than ever.”

And it reminds me of the old joke . How long did it take Olli Rehn to fix the banking crisis? It took the contagious.

@Gavin Kostick

I am not sure, but it could be a moderately long time. I can only go by what happened in 1979 (you can probably read about it in IT archive). Then, too, the census revealed the population to be 100k greater than expected. The sequence then was: (a) the census took place in April 1979 (b) Charlie Haughey became Taoiseach in December 1979 (c) many months later, and well into 1980, the CSO revised up the number in employment by 80k for all years up to 1979 (d) Charlie Haughey then claimed the credit and said that the extra 80k jobs were the fruits of his Taoiseach-ship, although it had nothing to with it, and were simply revisions for the years before he became Taoiseach. Wonder if the same will happen this time. Revisions to GDP figures could take even longer. Although, the whole process might be speedier now, with modern technology and all that.

@JTO, what about those who shipped their money into swiss francs – the traditional safe haven currency for people ‘fleeing’? March 2010 1 euro would get you 1.47francs now it will only get you 1.17 a new low in the history of the Euro. Or those who went into Gold or Silver which have made healthy gains against the euro? Did they make the right decisions?
I am not aware of any evidence of D.McWilliams or Morgan Kelly giving people advice to buy Sterling or anything to that effect. Just of their record of great analysis and predicitons.

Perhaps Ireland should counter with a quarterly review of the ECB, the IMF, and the EC.

Possible chapter headings:

Economic Justice – Why are the ECB so keen to let German high-stakes gamblers walk away with billions of Irish taxpayers money?

Economic Justice – Why is Greece given a lower interest rate than Ireland?

Political Economy – If a bloodlusted mob of Irish people set fire to Europe House and burned several commission officials alive, would that convince the EC that Irish people are as reckless and angry as the Greeks, and hence encourage them to drop the interest rate by a percentage point?

Democratic accountability – Since when did an unelected body have the right to step outside its legal framework and issue crude threats to the democratically elected government of a sovereign nation state which is doing nothing more than implementing the mandate on which it was elected?

I have another chapter heading for the EC:

Reformed Keynsian Idiocy – When we listened to Paul Krugman back in 2009 and tried to get all the MS to overspend, why did we fail to consider the effect this would have on sovereign debt?

Chris

So success in implementing an overall unsustainable MoU is not really success at all.

There is the rub, really sincerely believing a fantasy will not make it come true. It is not even a good fantasy.

The critical factor remains that most of the EU and all of the ECB is more invested, politically and financially, in the current configuration of the European financial system than in any idea of the common good.

We need, Europe needs, for this disaster to break the ECB and the political influence of the finance industry and our main hope remains that the disaster becomes too big to paint as the result of the national failings of the debtor nations.

Our best hope therefore remains escalating the financial crisis so that the national political consequences for the creditor nations are so severe that confronting the core source of the problem, and not its peripheral symptoms, becomes the least painful choice.

@Joseph Ryan

“I find it particularly insensiitive (at the least) that in the middle of an economic crisis, with high unemployment, emigration (yes emigration), busines failures on a masive scale and most importantly youth unemployment, that any person can bloat like a goat about his or her investments, no matter how well they are doing.”

I find it refreshing that JTO is so candid about his wealth. Its people like this that the govt needs to target in its attempts to raise revenue. Another poster referred to the “silver heads driving around in 2011 cars” and anyone in Ireland will agree that this too common a sight.

Posters here will be aware of graduates and others who cannot get work or who are being hired on salaries that are a % less than their peers who managed to get into the system over the last couple of years.

The younger generations are easy targets and are taking a bit of a hit as some are incentivised to move away to get work (myself included).

Maybe, once the bottom of the jobs market is corrected, the attention can turn to the overflowing cash piles sitting in Dublin bank accounts waiting to be raided.??

@Chris

Investment in gold, silver and Swiss francs would be a very good investment indeed in recent years. Congratulations if that is what you have done, although the returns would still fall a bit short of those resulting from my modest bet on Tyrone to win the 2008 All-Ireland. However, my point wasn’t really about all the different possible bets that one could have made in recent years, but rather was limited to making a comparison between the alternatives of keeping your money in Ireland, as opposed to moving it to London, which many people have done, and who may well now be regretting it.

@JTO –

“as opposed to moving it to London, which many people have done, and who may well now be regretting it”

Ive not come across anyone on this site who has said they have moved their money to London. Sterling is just are corrupted by this whole credit panic as the euro is. Any kind of glance at a “celeb economist” blog will tell you this.

Is this some kind of private joke between you and another poster?

If so…can you name names ?? (just kidding).

@ Shay Begorrah

‘Our best hope therefore remains escalating the financial crisis so that the national political consequences for the creditor nations are so severe that confronting the core source of the problem, and not its peripheral symptoms, becomes the least painful choice’

That’s dangerous thinking. The core will protect the core, as one might naturally expect. If that means isolating the periphery, that’s what will be done or at least be attempted. Austerity is going to be politically and socially toxic in the periphery long before it become toxic in the core.

Think of it this way. Our law and order is a public service, like HSE hospitals or ordinary primary schools. When garda funding sufers, people have to wait longer for law and order to arrive, if it arrives at all. Those ‘bloodlusted mobs’ that LHE mentions above probably don’t know what or where the EU is, but they sure know where the off licences are.

@ dearg doom re “Naive question here. If exports make up most of Ireland’s production and they grow by 8% say, would this not mean that production had grown by 5%?”

Nope, production itself doesn’t give a total figure even if inflation is taken away. Real growth less inflation is what counts, say the total value of goods and services produced over a year. I agree the measurement indices could be very complicated and beyond a simple definition such as above, I’ll let you scope other parameters.

Perhaps the Troika in referring to the growth magic 3% underpinning its outlook on Ireland’s ability to repay its debts, should have scoped more the measurement indices so we could all examine them more closely.

But I notice a deafening silence from the Troika in this area perhaps because we’re economically nose diving to the bottom and not passing growth measurements ‘with flying colours’ 🙂

http://en.wikipedia.org/wiki/Economic_growth

@Paul Quigley

‘Our best hope therefore remains escalating the financial crisis so that the national political consequences for the creditor nations are so severe that confronting the core source of the problem, and not its peripheral symptoms, becomes the least painful choice’

That’s dangerous thinking. The core will protect the core, as one might naturally expect. If that means isolating the periphery, that’s what will be done or at least be attempted. Austerity is going to be politically and socially toxic in the periphery long before it become toxic in the core.

Oh, I concur that the currently dominant political parties in the “Core” economies only want to save themselves (and particularly their financial sectors) . Once we acknowledge this lack of vision (well, that is Christian Democracy) it is apparent that what we need is not a different solution to the current problem but a different problem requiring a solution that better suits our needs.

If the crisis escalates so that some of Eurobonds, QE, debt forgiveness and a more compliant ECB are required to save the political fortunes of Germany’s (and to a less extent France, Netherlands and the Nordics) ruling parties then those are the solutions we will get.

With that in mind the temperature needs to be raised, we are praying that the animal spirits will do it for us but we should be offering some worrying and unfamiliar policy noises to help them into outright panic.

In this way we can make our problems the core’s problems. A couple of unhelpful public statements by Enda, worries from the central bank about meeting our debt repayments, a show of solidarity with the Greeks and Italians. Lets bring the same level of hysteria that forced us into the bailout to a wider audience.

@ JTO

I call BS. “If everyone had made the same investment decisions as myself,”
According to your earlier post, you only made general recommendations to your “investment bank” and they made the decisions to the point that you do not know with certainty whether you have Irish bonds or not. As I, and others, have clearly pointed out the mere move to Euros would not assure anything. It depends on what you did with the Euros. And, a cash deposit sitting in a bank is not an investment by any common definition. And, lastly, and mean lastly, anyone who can claim investment acumen without knowing what their money is invested in and merely looks at the returns is a fine candidate for Mr. Madoff.

@ Philip (Doh!)

-1

JtO illustrates his points by these examples, and often sparks a debate with his opinions usually based on (not infallible) data. He does apologise if data is shown to be incorrect. I don’t always agree with him but he is in general an addition to the blog

On the other hand, you ordinarily may be an authority on tediousness, but if anyone needs advice to go to another site you might look closer to home.

Question for the central bank operatives.

What is this big relative increase in the credit advanced to electricity , gas , steam supply& air conditioning all about ? (tends in business credit & deposits march 2011 ICB)

(a) the figures for the number in employment will definitely have to be revised up, and by quite a large amount, but the exact amount depending on which age-groups the extra 100k persons belong to,

You’ve completely lost all perspective on the census figures. First you refuse to acknowledge that they reveal substantial emigration of people out of the country in the last three years, and now you are claiming that somehow, someway, they mean that there is going to be an increase in employment/GDP. There’s no logic to this. Unless you’re going to regard a decrease in live register numbers from emigration as an increase in jobs. In that event, GDP is unlikely to increase as the country haemorrhages money and spending power through emigration.

I am not sure, but it could be a moderately long time. I can only go by what happened in 1979 (you can probably read about it in IT archive). Then, too, the census revealed the population to be 100k greater than expected. The sequence then was: (a) the census took place in April 1979 (b) Charlie Haughey became Taoiseach in December 1979 (c) many months later, and well into 1980, the CSO revised up the number in employment by 80k for all years up to 1979 (d) Charlie Haughey then claimed the credit

And (e): Ireland went into a ten year recession shortly thereafter, with only emigration keeping the unemployment figures down. Of course, there were probably plenty of well enough heeled optimists who hung around back then and had good roots wrapped tight around the country in time to profit from the boom.

I find it refreshing that JTO is so candid about his wealth. Its people like this that the govt needs to target in its attempts to raise revenue. Another poster referred to the “silver heads driving around in 2011 cars” and anyone in Ireland will agree that this too common a sight.

I’ve said it once and I’ll say it again: The pensions levy was far too low. The IMF/EU precriptions on tax increases be damned. Most of these pensions are little more than unearned profiteering, made on the backs of nothing other than the seniority of those who were not forced to emigration during the 1980s recession, and who are now forcing out another generation of people in order that their overflowing nest eggs remain triple padded.

The behaviour of the non-emigrating classes in this country is disgraceful, all the more so as they get older.

@OMF
The ‘Great North Road’ beckons to old and young alike. The old unfortunately are footsore and feeble and unlikely to last the journey. That is why they stay at home.
When there is little food left for the young, they too may fledge!

@ Stephen

Thank you.

I am just catching up with the blog/thread since yesterday.

As a mildly cynical political scientist I find Irish Economy.ie provides invaluable insight into understanding the facts behind headlines as, I am sure, do many other readers who may not always post comments.

For example I will read something on RTE/IrishTimes/Independent or via some other news outlet but if I need clarification (or occasionally feel the urge to clarify something) I will then head to Irsh Economy.ie where invariably “thread meisters” and posters will provide valuable insight and analysis.

I hope Paul Hunt comes back to post on the various threads. While I do not always agree with him I always find his postings helpful. respectful well thought through. and informative reflecting the level of mannerly and intelligent debate which, IMHO ,Irish Economy.ie should be proud of.

@OMF,

The Live Register will not be changed because of the Census. The number on the Live Register is of people who “sign on” so we know the total. The numbers employed come from the QNHS which is a survey, so the total must be estimated.

Consider a population of 1000. If a survey of 100 shows that 55 are employed than the estimate of the total number employed is 550. If it is subsequently found that the total population is actually 1100, then with the same survey, the estimate of the total number employed rises to 605.

The QNHS is a survey of about 20,000 people. The total estimates it provides for the economy are based on the assumed size of the population. The survey cannot provide that detail. This is why the Census is undertaken. The population is 100,000 greater than previously thought so the assumptions on which the QNHS is based can now be updated.

@Stephen K

Could I suggest a repeat thread title with “IMF” removed wrt this from Bloomberg:

“Eight banks failed the European Union stress tests after regulators said they had a combined capital shortfall of 2.5 billion euros ($3.5 billion).”

I just can’t tell you how convincing this is.

This is why the Census is undertaken. The population is 100,000 greater than previously thought so the assumptions on which the QNHS is based can now be updated.

Why are the QNHS numbers even used? Didn’t the census record the numbers in employment directly? And if so, how did those census figures compare to those predicted by QNHS?

I grow more suspicious of these census figures by the day.

@ Grumpy
“I just can’t tell you how convincing this is.”

Interesting that no German Banks failed…the reports during the week that the bankers federation in Germany were throwing hizzy fits must have been accurate.

@Seamus@OMF@JTO

So (Seamus) if the extra 100,000 in the population translates as, lets say, an extra 60,000 in the 16-66 working age group this would then suggest that the actual PERCENTAGE of unemployment for June would have to revised downwards even if the numbers in employment and numbers on the live register remain static.

As there appear to be currently job announcements/creation (possibly resulting in slight net or neutral job creation) taking place this month the unemployment percentage for July should be interesting.

@Shay begorrah,

To break the influence of large financial institutions we can think of
1. politicans and 2. the ECB and 3. regulation.

1. We should make any corporate donations to political parties very transparent and cap or ban them entirely from the financial industry given the current climate of important decisions relevant to financial institutions being made by policians. Financial institutions are very large donors to political parties and also supply them with massive loans.
2. The ECB executive board is all made up of guys who worked closely with financial institutions or in them. Lets stick in a Phd in economics who worked for a workers union or even a development based non-profit , e.g. UNDP.
3. The G-20 needs to do a better job of regulating the financial industry on a global basis. Timothy Geither pointed the finger at the U.K. for the crisis in a recent speech. He said de-regulation of finance in London to lure business from Frankfurt and New York caused a global race to the bottom. Ireland was also involved in lax regulation to lure business so I suppose that explains in one way his stern attitude towards Ireland.
The E.U. should take the lead here, even if some businesses will go out in the short term. City of London need to be taken on-board though.

@Grumpy

“The EBA said 67% of all the exposure to the Greek sovereign was held domestically, with just over EUR30 billion held by banks outside Greece. Foreign banks also had another EUR17 billion in exposures to Greek banks.

The picture was similar for Portugal and Ireland. Domestic banks held 63% of a total of EUR43.2 billion in exposures to the Portuguese sovereign, while domestic Irish banks held 61% of a total of EUR52.7 billion in exposures to their government.”

So the French and German banks have an exposure of less than 30b to the Greek sovereign. So a large haircut should not bring the house down..or would it?

@ grumpy
‘The aggregate EAD exposure for Ireland is E52.7 billion, with 61%
held domestically’

Interesting. At the current sovereign debt pricing, looks like another 10bn plus of additional losses needs to be taken onto the books of our banks. So we have property bust compounded by a weakening sovereign.

The hit to our ‘pillars’ from bond losses could easily double, if markets continue to sell Ireland and second order effects kick in. That means a slow but sure ‘informalising’ of the creditless domestic economy. The new normal. A nod and a wink and cash in hand.

Or am I missing something ?

@Paul Quigley

The markets are continuing to sell Ireland all right with the 2 year closing at 23.11%. The trend is worrying, we are heading for Greek territory.

The exposures for the irish banks do not tally with the disclosures from the banks. Someone out there is holding up to 20bn of Irish paper. I do not think it is the banks or the life offices.

A second bail-out will be needed in 2013.There is not much point to start worrying about it since the economic situation at that time is practically impossible to forecast .In the next few weeks we will learn what happens to Greece and its creditors and maybe that precedent might help to understand what options are open to Ireland, until then there is no point to keep speculating .In the meantime everybody should concentrate on reducing the budget deficit without creating a new recession worse than the previous one (if this is at all possible).

According to the stress test about 60% of 60bn is held domestically. That seems at variance with other stats which imply 80% of the debt is held overseas. A quick tot of the covered banks this eve came to abt 12bn plus/minus. I suppose you cd make this up to 20bn if you included others including lifecos. After that, I am stumped. Maybe others better informed than I cd. Elucidate.

European Banking Authority
Europe Wide Stress Tests
2011
Ireland according to this is beyond redemption.

stress-test.eba.europa.eu/pdf/EBA_ST_2011_Summary_Report_v6.pdf

I was sad enough to watch the video of the stress test thingy.
The biggest pile of autistic rubbish I have ever heard.
Leverage must be eliminated whether through a Goverment money or Gold based system or else we will continue to slowly decompose in this web of debt.

Its clear to me now that the entire Euro project is so antiseptic , so Byzantine , so divorced from humanity that it is doomed to failure.

Indeed not only is it not human – it is anti primate.
It is time to simplify the monetory system into something we can all understand so this financial gaming strategy can end and therefore we can free vast resourses to build something that is wealth creating rather then feeding yield hungry capital destroying financial parasites.

Show me the monkeys.
http://www.youtube.com/watch?v=M7eEQQVnhc4

@ Actuary Says:
July 14th, 2011 at 4:24 pm

Unanswered.

+1

Also can see that there is heavier margin in exporting to RoI from UK to retail etc. over any loss in currency – empirical.

Maybe your ‘Nomme de Guerre’ put him off?

Well done 😉

“On the bond markets, the yield on Irish 10-year debt increased by 13 basis points to 14.04 per cent, while the yield on two-year Irish bonds rose to 23.11 per cent, up 1.8 per cent.”

As if everything is normal.

Well, at this stage the IT journalists are probably just copy and pasting previous rate increase articles and changing the figure around.

euHvR: gr33ce OMG!!! bff merkel won’t come to my meeting – wtf call it anyway ha ha LOL!

This is great news on the bank front, Irish banks passed the stress test with flying colors. However, on the sovereign front, bonds in the toilet. This reminds me of the old joke of the Doctor breaking the bad news to the family: “The operation was a great success but the patient died.”

@Gavin
Ha ha ha – now that was funny
The construction site was especially confusing though.
The Hyperinflation parallel universe was very much like Ireland of today……..but we live in a deflation….. yes ..no……?
This deliberate piss take says a lot of the culture withen the ECB.
They either produce figures that only Lorcan RK can understand or give child like explanations.
They obviously treat most of us with a inflated sense of contempt.

Not sure how much longer the banks can borrow dollars from the inflated FED base & search for yield in Europe without a growing base.
Me thinks Euros will reach parity withen 1 year or less.
Then we can experience inflation in the flesh.
It amazes me how a organisation that hyper inflated credit so that its buddies could get a yield could lecture people in such a contemptuous manner.
Their unjustified arrogance is off the scale.

Stress tests give a shallow snap shot of the situation as it exists in its simplest form. The true tests occur as the collapse gets under way and the assumptions and interrelationships start to unravel. Governments and banks are notorious for conducting gambits that make things look rosier than they are. The fact that things are worse than they appear is a given. It is reasonably safe to assume that the banks in top twenty percentile will prove to be sounder than the banks in the lowest twenty percentile and the same goes for countries where the banks are domiciled.

I would not be surprised if the flight to safety causes the currencies of resource rich countries to appreciate i.e OPEC, Australia, Canada, South Africa, Brasil, Argentina, Russia and a few of the ex USSR Stans. The Euro has depth and breadth as well as political stability, I wish I could say the same about the US where the checks and balances are lacking. In anticipation of the objections, in my opinion a few small countries will not derail the Euro Zone or the EU.

@JTO 33/1 with Boylesports for Tyrone to win 2008 All-Ireland was indeed one of the great investment opportunities and one year in which I ended up well ahead in such matters.

Perhaps Irish bonds are this year’s opportunity?

Amid all the criticism, the fundamental things the ECB is saying may still be true.

Inflation is generally a bad thing. So is excessive debt. So is insolvency of either countries or banks. However..and it’s a big however…we should not immediately run towards one bad thing (inflation) as the ONLY solution to the other bad things.

So far the ECB is keeping inflation off the table in the discussion and that’s strategically the right thing to do. You can’t even mention the possibility of allowing it without causing it and you can’t necessarily stop it when you’d like to. Genie. Bottle. Out.

If it becomes the ONLY solution, which isn’t the case yet, then the genie (or ogre) can be released.

Nadie puede esperar una digestión suave del denominado subprime español. Entre 1998 y 2008 se iniciaron 5,5 millones de viviendas en España, muchas más de las necesarias. El parque especulativo es enorme y hoy se dice que existen entre 700.000 viviendas nuevas sin vender (según Fomento) y 800.000, según el servicio de estudios de CatalunyaCaixa. Hubo años en los que España construía más casas que en Reino Unido, Francia, Italia y Alemania juntas. Ahora toca pagar la factura. El Economista today 7/15.

Translation
No one can expect an easy digestion of the self named Spanish subprime loans. Between 1998 and 2008, 5.5 million homes were built en Spain, way more than needed. The speculative numbers are large, between 700,000 and 800,000 unsold according to studies by the CatalunyaCaixa (Barcelona). There were years when Spain built more houses than the UK, France, Italy and Germany combined. Now we have to pay the bill.

If you can read this and still think Spain has the most remote chance of pulling out of this spiral then you are more than a dreamer. Worse than Ireland/Greece, yes, and throw in an Italy and Portugal…

@Jake
The other thing in Spain is that prices have not really fallen that sharply yet, although they may now be showing signs of rolling over an edge.

Idealista’s regular price reports ( http://goo.gl/19Wj4 ) are a resource that would be great to have for Ireland. I mean, imagine being able to track prices for Dublin in the way you can for BCN. see http://goo.gl/gwYDG

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