More on Savings Rates in Ireland.

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Seamus’ excellent post today reminded me to post something I looked at some weeks ago. The September Budgetary and Economic Statistics from the Department of Finance carried some really useful information in Table 25 on investment, Gross National income, and gross and net savings. The figure below shows the evolution of gross and net national saving and the gross total available for investment from 1995 to 2010.

We can see clearly from the figure that the spike in net national savings in 2007 is rapidly diminished, with only 21 million euros put aside, so to speak, in 2009, and 1951 million euros in 2010. Occasionally the notion gets floated that there is a load of money somewhere in a bank account to be taxed. This should be dispelled rather quickly, as households don’t seem to be saving their way through the crisis much at all. In addition, the total available for investment seems to have dropped off, with no rebound in sight, which is a worry.

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21 Responses to “More on Savings Rates in Ireland.”

  1. The Dork of Cork Says:

    Thanks for going back to 1995 – that was the real beginning of the malinvestment madness in my opinion.
    I remain convinced that fiscal policey should be redirected towards the concentration of population & commerce in both Dublin & Cork and to a lesser extent Limerick , Galway & the south east towns.
    If people can lead more efficient lives then they can produce a surplus of sorts – Housing & Utilities with the exception of hospitals are still dramatically underutilised in our larger cities creating huge undiscovered losses.
    Half empty urban buses is a classic example of this strange hollowed out nature of Irish development.

  2. Paul Hunt Says:

    @Stephen Kinsella,

    Many thanks for this. It is a useful accompaniment to Seamus Coffey’s informative post. But I wonder have I got this right? It appears there is only a slight up-tick in the stock of savings because the current savings of some are just exceeding the paying down of debt by others. Is this a valid interpretation?

  3. Stephen Kinsella Says:

    Hi Paul, pretty close to right. The screenshot and the excel table at this link shows the raw data plus some further complications. http://dl.dropbox.com/u/1484382/savingspost.xlsx

  4. Stephen Kinsella Says:

    Hit post too quickly Paul, apologies. The important change imho is the change in net saving behaviour(s) by households and firms, which should be different, but the latest data is from 2009 from the ESRI on that.

  5. Martin Says:

    Interesting…. but does this reflect only savings in local Institutions? What if significant money has been moved abroad to non-Irish banks?

  6. Seamus Coffey Says:

    The CSO’s data from the Non-Financial Institutional Sector Accounts only begins in 2002 so it puts a natural limit on how far back the graphs in the previous post could go.

  7. The Dork of Cork Says:

    You can clearly see the banking sector getting its way (table 1 & 2 Gross Goverment expenditure) in both the post 1987 tallaght strategy figures and the post 95 figures finally reaching its peak during the truely mad McCreevy & Cowen years when central funds as a % of GNP was at near 2.5%ish for over half a decade.
    This forced the private sector into a massive malinvestment debt binge as they had no choice in the matter – the state via the banks refused to buy goverment paper – preferring to make huge profits in a natural utility which is always funny in my book as what goes around comes around in a closed system.
    Things could get very interesting when / if we get up to the 12%+ figures of the mid 80s.
    Its hard to escape the notion that the last 25 years has been a waste of time and monumental waste of resourses as the “investments” during that time were made in a false economic ecosystem.
    The only thing that could save us is the technological improvements since that time period although despite the propoganda the internal combustion engine has at most just doubled its MPG for a given weight of vehicle – not dramatic by any means.

  8. The Dork of Cork Says:

    At 2.5% GNP goverment funds – thats a 40 to 1 leverage lads…………..any investment losses are catostrophic at those levels.

  9. Stephen Kinsella Says:

    @Paul, there *was* a typo in the Excel sheet–I’ve just corrected it.

  10. Ceterisparibus Says:

    Very interesting read on Italian situation including the wealth they have. Would be interesting to contrast with our situation..ie. Debt/GDP to reach 115%.
    http://www.spiegel.de/international/europe/0,1518,792385,00.html

    And the hole in the bucket dear lisa

  11. Ceterisparibus Says:

    Sorry…too soon
    Dear Lisa here
    http://www.nytimes.com/2011/10/24/opinion/the-hole-in-europes-bucket.html?hp

  12. Paul Hunt Says:

    @Stephen,

    Thank you. Following Seamus Coffey’s useful post I’m more interested in the possibility of devising incentives to re-allocate some of the existing stock of savings available for investment towards some, possibly more, productive investment and on how the international capital markets might be tapped to secure financing beyond the Exchequer balance sheet at a low cost of capital.

    With the huge deleveraging going on we can’t count any any significant increases in the domestic stock of savings available for investment.

    Although it might strike some as heresy, I believe we should use the fiscal ‘umbrella’ being provided by the Troika for as long as we can to secure lost cost financing for non-government sectors. And that means some serious restructuring, re-financing and reform of regulation. And, needless to say, rigorous evaluation of investment options.

    Very little of any substance has been achieved in these areas in the last three years. There’s a lot to be done and we shouldn’t be any hurry to escape.

  13. Stephen Kinsella Says:

    @CP, that reminds me of John McHale’s graph on the IE blog at some point showing all the feedbacks into the system we have at the moment: http://bit.ly/mUiIhA

  14. Ceterisparibus Says:

    @Paul Hunt
    “Although it might strike some as heresy, I believe we should use the fiscal ‘umbrella’ being provided by the Troika for as long as we can to secure lost cost financing for non-government sectors. ”

    I take it that was a Freudian slip???

  15. Paul Hunt Says:

    Sorry, Cet Par., does ‘low’ for ‘lost’ help?

  16. The Dork of Cork Says:

    @Ceterisparibus
    “It’s a Maginot Line built to prevent a replay of the 1970s”
    This is what I thought until recently – but they are not now following the logic of their own creation.
    There is another way to reduce leverage and consume their quota of the worlds resourses before its all gone.
    But It seems there is too many US treasuary men withen the halls of the ECB.
    Maybe thats why Sarko is doing his fake Gaullist routine today – is he their not so quiet American ?

  17. DOCM Says:

    @ Martin

    You have put your finger on it! Without wishing to be offensive, I find the faith of economists in Irish statistics quite astonishing, especially since Ireland adopted the euro. The borrowed money is still sloshing around and the trick must be to restore sufficient confidence – not just in Ireland but across the euro area – to have some of it slosh back to Ireland’s emerald shore. Some of it might even pay the salaries of those paid from the public purse, money which is currently being borrowed and adding to the mountain of government, not private, debt.

    cf. the very interesting interactive graphic from the weeken edition of the New York Times. The print version can be accessed at the bottom of the web page.

    http://www.nytimes.com/interactive/2011/10/23/sunday-review/an-overview-of-the-euro-crisis.html?ref=global

  18. Ceterisparibus Says:

    @Paul Hunt
    I preferred “lost”

  19. The Alchemist Says:

    I have raised doubts before on this forum about the validity of reported increases in the savings rate over the last few years. Relieved to see them confirmed as I thought I was touching with reality. The reports struck me as at variance with every other indicator of where the economy has been heading.

  20. Kevin Lyda Says:

    Do people really believe that folks in Ireland have savings? How? Between unemployment and cutting people’s wages, how do you think people were saving? They were using their savings to pay bills and pay off debt.

    What reality do policy makers live in?

  21. Juled Says:

    I suppose we are now going to say that the god plated pension pots and other external investments refered to by the great Ollie Rehn don’t exist either. The ruling classes are doing a great of putting their pots well and truly at the end of the rainbow well away from any tax man at the same time telling us we all have to pay full shilling on the Anglo bonds PLUS PUNATIVE INTEREST. As Anglo became in the market to be seen as risky they GOT EXTRA INTEREST before they took their “savings” out and invested it in bunds as the curve shows. No attempt is made to connect a reported 12% savings rate with a simultaneous drain on banks deposits.

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