Sunday Night Open Thread

http://www.occupiedlondon.org/blog/2011/07/15/preliminary-notes-towards-an-account-of-the-%E2%80%9Cmovement-of-popular-assemblies%E2%80%9D/

Very interesting news from the Greek Street.

Ambrose Evans-Pritchard in the Telegraph pitches the “Latin Euro”, with Ireland eventually going back to our own currency. Probably unrealistic but interesting at the least:

http://www.telegraph.co.uk/finance/comment/ambroseevans_pritchard/8643512/A-modest-proposal-for-eurozone-break-up.html

Btw, good idea Stephen – maybe editing the original post with the most interesting/discussed links after a day or two might be useful?

Possibly in line with Namawinelake’s excellent post linked to in the post, this article by Nobel laureate Michael Spence http://www.project-syndicate.org/commentary/spence25/English is well worth a read.

Following up on Spence, Leonharte in todays NYT is worth a look http://www.nytimes.com/2011/07/17/sunday-review/17economic.html?_r=1&pagewanted=all?src=tptw

So, is everyone getting too bearish? I know the politics spun the rapid recovery for the US, but did people really believe it would be possible.

I suppose, at least we here in Ireland have never believed the recovery would be rapid…

Ireland Greecified

“In the meantime, Moody’s also moved to further downgrade the debt of Ireland’s banks, which is guaranteed by the Irish government. It was a reminder that in spite of the decision to bail out these banks and their bondholders, said bondholders have no reason to feel secure in their position. As we have frequently noted, bailing out the banks has been a costly mistake for Ireland. Many people in Ireland are well aware of this and opposition to the decision continues to fester. The connection between the government’s finances and the financial situation of the banks, which initially was only presumed to exist by the Fianna Fail government, has in the meantime been cemented by the conditions attached to the government’s bailout by the EFSF. The ECB insisted that the ‘no bank bondholder left behind’ program be made permanent, as it feared for the solvency of banks across the euro area should bondholders be forced to take a large haircut on their exposure to Ireland’s banks (recoveries would likely have been minimal). European banks have indirectly financed the Irish property bubble by extending finance to Ireland’s banks and all across Europe, the exposure to debt of Irish provenance remains vast.”

http://www.acting-man.com/?p=8950

It would be really interesting to see a post on debt stock versus flow…in many conversations with bond people ove the years, their first utterance is “separate the stock from the flow” because while the flow normally sets the turning point in bond prices, the stock is important for fundamentals.

Ireland has both. Stock and a flow problem and while the EU is helping us with the flow part, the price for us is that we recognize and honour our longer term obligation to the stock of debt that has built up. The conclusion seems to be tht if Ireland wants to control it’s longer term destiny it needs to find alternative sources to deal with the necessary flow (public sector deficit, repayments) and then it can negotiate the stock from a position of strength.

What do posters here believe is the best way forward? Go with the current trend? And if not, what are the options to deal with the flow first and then how aggressive can we be in reducing the stock of debt?

It’s all Basil’s fault apparently. he should have listen to Sybil and stayed away from dodgy Irish builders.
http://londonbanker.blogspot.com/2011/07/tissue-paper-over-mountain-range.html

The most interesting article in this week’s Sindo is Siptu’s Jack O’Connor’s rational rebuttal of Shane Ross’ call for unilateral default.

Shane Ross likely agrees with all the arguments made.

What the country doesn’t need is a renewal of the Eircom Ross-Dunphy double act where the protagonists lambast an inept government for acting on their advice.

Though there’s nothing quite like reading a catty article for a good laugh:

http://www.independent.ie/opinion/columnists/shane-ross/shane-ross-false-confidence-will-be-fatal-2823645.html

A Krugman paper on currency crises with examples
http://web.mit.edu/krugman/www/crises.html

Standard and Poors on the Bank stress tests.
“We consider that the European Banking Authority has pitched its stress scenarios at a level that attempts to be sufficiently tough to reassure markets, but not so stringent as to suggest material capital shortfalls. We consider that a moderately harsher scenario would add greater value in terms of assessing the resilience of the European banking sector.”
and Professor Hans-Peter Burghof, chair of the Banking and Finance Department at the University of Hohenheim.
“The stress test is a pretty blunt instrument. And what’s more, the test was designed with certain political motives. Of course a Greek default is not part of the scenarios, because that would expose certain banks holding lots of Greek debt.”

Liking the Zombie Marx

In the spirit of this being an open thread.

Philosophers crop up on the blog and show a suprising degree of influence in the financial world – Soros, student of Popper for example.

I haven’t yet noted the Pragmatists being referenced much though, so here is Richard Rorty’s “Trotsky and the Wild Orchids”.

http://www.philosophy.uncc.edu/mleldrid/cmt/rrtwo.html

@ JTO

It would appear that your take on migration, immigration and emigration was superior to that of the many “experts” from state organs, academia and Dublin 4. ( For the record I don’t qualify under any of these headings).

I seem to have noticed this being acknowledged a number of times on this site. So that’s OK too!

I support and share your disdain for “emigration hysteria” and those peddling it. And I don’t think you’re alone there either.

Now, to substantive, future issues on the basis that you couldn’t possibly be suggesting that that the “real”, “positive” census numbers are, or will be, the solution to our financial, indebtedness, enterprise strategy or unemployment challenges, here’s a question.

In a small, open economy heavily dependent for growth on exports ( from MNCs and the indigenous sectors), where even those employed in Ireland need to be up to speed on global trends, best practices and rapidly changing customer ( “industrial” or consumer) behaviour, are you in favour of Irish people of all ages and competencies spending some of their educational and working careers in the markets on which our future is so dependent?

Or should “we” all stay “at home” for all our formative and working lives?

@Stephen Kinsella
@JTO

Sorry, I meant to illustrate the fast-changing demands of the global employment market ( only some of which can be learned by “staying at home” by the following ( further reading) from: “The start-up of You” by Tom Friedman in his piece in the New York Times. http://www.nytimes.com/2011/07/13opinion/13friedman.html

In case the link doesn’t work, he talks about employees being evaluated every quarter, ( not yearly). Employment being the response to the question ” Can this person add value every hour, every day – more than a worker in india, a robot or a computer…so my company can adapt and export more to the fastest-growing global markets?”

MNCs, the life-blood of the bulk of our exports, (and therefore our growth) increasingly will recruit only adaptable, resilient people who have been educated and gained work experience other than “at home”.

@Richard Fedigan

I am in total agreement with you on this issue. I am not against emigration or immigration. I have never said that I was. People come and go all the time. That is a good thing. I myself have come and gone, and gone and come many times, and have lived in several different countries.

The real issue is NET emigration and population growth. Large NET emigration and population decline are bad. If the flow is 2-way, and the NET figure is positive, and the population is growing, then, if within that there is some outflow of people seeking to expand their horizons and learn new skills, possibly with a view to returning at a later date, then I see nothing at all wrong with that. But, if the flow is largely and permanently outward, and the NET migration flow is largely and permanently negative, and the population is continually falling, then that is unreservedly a bad thing. The complaint against the media and ESRI is that they led us to believe that that was happening again on a large scale, but the census figures showed that it wasn’t. Ireland did have that for over a century after the famine, until the 1960s. The population decline continued in the north and west until the 1990s, even after it had been reversed in the south and east. But, in the last couple of decades, even the north and west have seen it reversed and the population growing rapidly.

These are the figures from the latest 2011 census:

Donegal: population up 9.3 per cent in 5 years
Cavan: population up 13.9 per cent in 5 years
Leitrim: population up 9.8 per cent in 5 years
Sligo: population up 7.2 per cent in 5 years
Longford: population up 9.3 per cent in 5 years

Dublin: population up 7.0 per cent in 5 years

Who would have believed a few years ago that the populations of Donegal, Cavan, Leitrim, Sligo and Longford, would all grow faster than Dublin, which itself was growing much faster than virtually every other EU city? These figures are a vindication of FF’s core values. They haven’t occurred across the border in Derry, Tyrone and Fermanagh (hence my slightly joking reference to the Ulster GAA results above). Over the years, the core FF value has been primarily about reversing the century-old decline in rural Ireland, while the Dublin 4 establishment mocked it for this, and jeered at every measure FF brought in to bring that reversal about; measures such as Shannon airport, Knock airport, good roads to the north and west, decentralisation, and so on. That is why, election after election, until the most recent one, people in these areas, to the consternation of the Dublin 4 establishment, continued to vote FF. But, the most recent census figures are a vindication of FF in that regard.

Irish media treatment of the subject is infantile. They can’t be bothered to study the wealth of population and migration indicators that are published regularly. Their modus operandi is to send a reporter to a pub in London, interview some nice-looking girls from Galway, and, on the basis of that, write rubbish about Ireland experiencing a mass exodus. According to the last (2006) census, there are almost 2,000 Swedes living in Ireland, mostly in Dublin. I’m sure that, if I was an Irish Times reporter, I could while away a very pleasant few hours chatting to some nice-looking Swedish blondes in a Dublin pub, and then writing a load of rubbish about a Swedish exodus to Ireland. Plodding through the population and migration indicators is a lot more boring, but it leads to more accurate predictions.

Joan Burton is reported to have said that social welfare abuse stood at between 1% and 3%. With a social welfare spend of €20bn that means that between €200m and €600m is being wasted.

If I am not mistaken, Labour and FG both said before the last election that they were going to save circa €1bn to €2bn from cleaning up welfare fraud. Has this figure decreased and how does this affect their policies?

@Stephen

As the guardian of this blog, I presume you erased my comment?.

@ JTO

OK. Great to be in agreement. And, once again ( all together now), you were RIGHT. We believe you. More stats will only make you more RIGHT. ( RIGHTER?). Bravo!

So, if, as somebody, maybe even Stephen Kinsella ( and others), also seem to agree, net employment increase is a consequence/function of aggregate demand, we won’t get a solution to “our” serious unemployment problems in the West (Spain, France, the US included) until aggregate demand takes off in the West OR the West exports significantly more to where the aggregate demand is growing (in the BRICs) OR we get more people (as Tom Friedman says) with completely new mind and skill sets using experience learned away from “home” and through global information and intelligence networks identifying new opportunities wherever they are and starting businesses wherever it makes most sense employing the people it makes most sense to employ for as long as it makes sense to employ them ( but not longer!).

In an Irish context, and in line with what you and others say about Irish government and media spin, could it be “valid” to generate, as a tentative working conclusion of “economics” debate on this site, the recommendation that we need ( as I believe Tony Owens has suggested on another thread) a working strategy that incorporates incentives for Irish educational institutions to get bright students to LEAVE Ireland, incentives for grant-receiving SMEs to recruit people with “export” market experience or send them abroad to get it and a framework for “tracking” and networking these people wherever they are?

This “conclusion” is really very simple ( execution more complex) but it addresses directly the “spin” industry by simply and categorically “concluding” that we don’t have enough people who know enough about the world we depend on for our survival and potentially ends all further debate about “emigration”.

Whaddya tink?

@Richard Fedigan

The most important thing is not that I was right, but that others were wrong. What does it matter if I was right? I am nobody, and I am not taxpayer-funded, and my forecasts are not reported on Bloomberg. Even if I had been wrong, it would have been of no more consequence than some pub bore being wrong. What matters is that others, who occupy high positions, are paid for by the taxpayer, and have their forecasts reported in the world’s financial media, got it wrong. That indicates incompetence. Do we really want more taxpayer funding to those who have shown that they are incompetent? The least that we can expect from them is some acknowledgement and explanation as to why they got it wrong, and some effort from them to undo the damage to confidence in Ireland’s economic prospects, among domestic consumers and global investors, that their erroneous forecasts have contributed to.

Regarding your points on employment, I don’t disagree with any of them. But, employment comes in many forms. You can be employed writing state-of-the-art GIS software, that is sold in a hundred countries, as I am (although only partly south of the border), or you can be employed selling ice-cream, fixing car engines, or in brick-laying. All are needed. Those at the ‘higher-end’, like myself, that have M.Scs and Ph.Ds. should not disparage those who make their living at more humble occupations. I certainly never have. While I don’t dispute for a moment the need for ‘high-end’ jobs of the type you describe, another obvious source of employment is in the construction industry. This has now been allowed to run down to a level (about 2.5% of GDP) never before seen in a developed country, and the level of new house completions has been allowed to fall to about 6,000 annually, while the census showed that the underlying growth in the number of households is over 40,000 annually. The surplus of houses is falling, and it takes 2 years before any decision to start building more new houses actaully results in more new houses being completed. Revving up the construction industry again would make a very significant dent in unemployment, although I totally agree that export-generated high-end jobs are also needed.

I have emailed the Taoiseach and enquired as to when he will be commenting on the census results.

On the Bondwatch initiative pioneered by the villagers in Ballyhea in Cork linked to here

http://www.facebook.com/pages/Bondwatch/136610376421120?sk=wall

There will be regular messages sent to the IMF hammering home the fact that massive sums relative to our economy continue to be paid because the IMF sits on its hands and confines any criticism of the EU position to press conferences,

Regular messages will also be sent to our Finnish friend, Olli Rehn so that he understands with each payment to bank bondholders we drift further and further away from the 60% debt:GDP cap that Olli is supposed to police.

And no doubt politicians of all shades will be reminded of the bond payments every time a cut or tax is mooted.

@JtO

My apologies if you have addressed this elsewhere but with respect to the recent preliminary Census 2011 results, on what basis can you conclude anything about the annual net migration in each of the five years 2006, 2007, 2008, 2009, 2010 and 2011. All the preliminary census shows is a total net inward migration of 120,000 (Table E – 5 yrs x 24,000) in those five years which might (to exaggerate the point) have been 600k net inward in 2006 – 2009 and 480,000 net outward in 2009 – 2011.

Don’t get me wrong, the implications for the ESRI are not good either way, because even if the ESRI was right in 2009-2011, they would have been wrong in the earlier years. And ever since the ESRI declined to respond to my questions about the representativeness of their PTSB house price index which seemed to be based on a mortgage company with less than 4% of the market, I myself have not been too enamoured with that organisation.

But all that said, how can you say that the ESRI overestimated emigration in 2009-2011?

Reliance on the Census 2011 figures is troubling to me because it implies that if we took a snapshot of 2008 property prices and saw they were above 2003 ones then Ireland was doing well, when in fact it had passed the inflection point. I’m more interested in what the CSO could reasonably do to improve their intercensal estimates.

@ Grumpy

…if the ECB was actually able to get a 10-day settlement line with the banks! 😉

Oh, and ZOMBIE MARX! Because, well, just because.

I think there’s more reason to it than that.

If the Soviet Union was still extant, their propagandists would have eaten the western world alive over the fall out from this entire financial farce. But more importantly, their economists and theorists would have released countless papers, books, and other volumes explaining in detail why and how the crisis happened and probably how to fix it. The western economic establishment has yet to do this.

It seems to me that western society, at an economic level, is just as ideologically warped and restricted as the old Soviet Union was. Witness multiple developed nations (even the US) running up massive debts in the middle of a credit crunch, at yet none will raise their taxes. Witness an destabilised international banking and currency system cracking at the seams, yet no-one speaks seriously of regulations or reform. Witness a balance of trade imbalance unprecedented in history, yet none see value in adding value to goods domestically. Nothing short of a pervasive dogma or ideology can explain this continued and debilitating management of western economies.

Meanwhile, the Chinese for one actually manage their economy, at the state level no less. You may disagree with their methodology of course, but you cannot argue with the results; the manifest hand of the state delivering demonstrably better results than the invisible hand of the market.

Which isn’t to say that we should follow the Chinese model entirely. But equally I see no reason why we should so blindly follow the Market model either.

People seem to believe that Marx’s works became entirely discredited after the Soviet Union collapsed; that his was a failed ideology. But Marx was an economist who wrote long before the USSR even existed, and he was writing about capitalism and its own “internal contradictions” which bring about its crises and collapses. It seems to me that these ideas are as relevant today–perhaps more so–than when they were originally written.

I think economists across the world need to swallow their pride, buy a copy of Das Kapital, and read it. Otherwise we’re all going to be fumbling around blindly for another three years.

@ OMF

Marx’s mate Friedrich Engels was familiar with work in the cotton trade in Germany and the UK.

The conditions of migrant workers in China today would have a lot in common with what Engels saw.

Globalisation has been goodbfor it and the EU is its biggest customer.

The system of state capitalism has a finite shelf life.

@ All

Before this thread closes, it would be a pity not to provide a link to the leading article in toady’s Indo.

http://www.independent.ie/business/irish/merkel-i-want-a-deal-to-end-the-euro-crisis-2824053.html

Considering that the only leverage she appears to have left is to threaten to refuse to turn up, one wonders what exactly the Indo thinks is going on.

We talk about defaulting on bank bonds as if it is all or nothing. Usually the default is partial and is related to the indebtedness of the entity involved. It was and is now ever more obvious that Ireland should not have back stopped the banks. We turned a bank debt problem into a sovereign debt problem thereby violating the first principle of governing which to remain solvent.

I do not see Ireland defaulting on its obligations to the ECB and IMF. Are we now inextricably on the hook to continue supporting the banks. If we are, then sovereign default is inevitable. The payout will be related to the current value of the paper outstanding. That means it will be closer to 1/3 than 100% of face value. How this will be managed depends on the know how and courage of our Gov’t. The short term price of staying in the EuroZone will be higher than exiting the EuroZone. The inability to balance the budget is proving to carry a very high price which gets higher each month.

How the ECB, IMF and European Commission treat Ireland has changed in that Italy will expect and get equeal treatment and precedents have to be observed.

@JtO

Thanks for explaining. I see what you mean. Looking at the CSO estimates here,

http://namawinelake.files.wordpress.com/2010/09/popcsorep.jpg?w=500&h=386

which include estimates of annual net migration pre 2006, it seems obvious that 300,000 in three years would look very unlikely (the CSO’s previous annual estimated high was 71,800 for 2006) but a series like 50,000 per annum for 2006,7,8 might look okay (especially with the financial shock in the UK in 2007 which might have prompted a spike movement from the UK to Ireland) and then 18,000 net emigration in both 2009, 2010. That would give you 124,000.

The reason to challenge that is the similarity between the CSO and ESRI in 2006-8. So time perhaps to study the method used to estimate migration.

I am one of the people that is surprised by net inward migration of 124,000 between 2006-2011. The reason for my surprise is anecdotal and no more, just observation of people moving to the UK, Canada and Australia mainly, and the return of Poles in particular to Poland. And I noticed this especially from mid -2009. But that’s anecdotal.

Ooops, I meant net 13,000 in 2009 and 2010 above. Long day…

@JtO

Re discrepency between forecasts and census figures. Why are you choosing to believe that estimates using the census method are correct, whereas the estimates derived from forecasts (or whatever the pre-census methodology is) were not ? In another thread you alluded to a similar situation happening many years back. So the CSO has form. Presumably whatever deficiencies existed in the pre-census methodology were corrected at the time. Yet this methodology still produces diverging results wrt the census. So maybe the census methodology is wrong.

@all

Good overview on Italy

http://www.spiegel.de/international/europe/0,1518,775092,00.html#ref=nlint

Beware anybody who believes that the answers to the problems of the world can be found in a single book. Marxists poring over Das Kapital, Maoists waving the Little Red Book, mullahs demanding fidelity to the Koran – it is never good news – – Gideon Rachman in FT today.