DEW Economic Policy Conference 2012

The programme for the conference is at http://dublineconomics.com/FinalProgramme2012.pdf
and general information is at
http://www.dublineconomics.com/event/annual-economic-policy-conference/

Offtopic but with respect to Colm’s column in today’s Sindo where he concludes

“When precisely does the European leadership propose to declare a clear and unambiguous success? If the answer is vague, there is no European leadership.”

Might Colm expand on what he means by this, he seems to suggest that Europe should know when it will exit the crisis.

@DOD
I’m getting worried that you have joined the other side. It will be some considerable time before growth rates come near your projection. As for 4.5% 9 year, watch for the Fiscal cliff that is Templeton.
What’s the debt/gdp projection if growth is 1% or less. 120%+?
And do you really think that Scheauble is going to agree any write offs for the best boy in the class. The best that can be hoped for is more time and maybe a lower interest rate on Anglo debt.
When your borrowing every day to keep the show on the road you are on an unsustainable path unless you win the Lotto.

@Fiatluxjnr

Me GN/gP figs are ‘tongue in cheek’ … we are on close to ‘zero growth’ (which is as tautological a term as negative growth); based on GNP debt is 140% and clearly unsustainable.

@ All

Link to the column in question.

http://www.independent.ie/opinion/analysis/colm-mccarthy-were-top-of-the-class-in-europe-but-may-still-fail-3230025.html

And my comment from the Krugman Baltic thread.

@ All

I was struck by this comment in particular.

“Instead of focusing on legalistic arguments about promissory notes and the mandate of the European Central Bank, or on the prospective growth rate of the Irish economy, it is time to address the following question: what is a sustainable debt target for Ireland given poor growth prospects, and what needs to be done to achieve it?”

Amen to that! But is there not a slight element of revisionism creeping in here?

As to the deal that is supposedly obvious, it may be so as far as the author is concerned but certainly not to the other side that is supposed to agree it. Unwise election promises are just that. The consequences rest with those making them. Full stop!

On the subject matter of the thread, I came across this priceless exchange in today’s Sunday Times (Stephen O’Brien).

“Brendan (Howlin) has respect for public servants, unlike a lot of people, but he seems to recognise that we can’t continue to protect people on generous salaries in the public service,” said one Labour TD.

“I think that there is recognition in the party now that it would be difficult to object to pay cuts for the highest paid, even though this will mean pay cuts for politicians, too, because our salary is linked. That’s the way it has to go”.

The moral hazard flaw in this situation appears to have escaped the notice of both the questioner and the questioned.

This is not “the way it has to go”. The Public Services Management Act underpinning this grotesque situation, and all the management gobbledygook going with it, is what has to go. Some “evidence based” policy-making might then be possible.

@ Fiatluxjr: ” Debt relief must come …”

Maybe. This is a very ‘tricky’ problem. Any suggestion of a ‘write-down’ is anathema to the financials – it would set a very bad precedent. Everyone would want one. This would trash the financials. Hence a ‘formula’ will be arrived at, accompanied with suitable solemn faces and funereal background music: it will be an ‘adjustment’. Pure political s***e; but that’s what will happen.

The real problem with any debt write-down is that it lets our politicians ‘off-the-hook’. They have to curtail spending but are wedged firmly between a rock and a hard-place. Their efforts to raise taxes is starting to engender stiff political opposition. Some hapless junior will make a simple, silly PR mistake and things will turn nasty. Mind you our political opposition are hopeless also. The welfare of the Irish citizen is the last thing on their minds.

@Brian Woods Snr.
Just read an interesting article by John Ihle in the SBP. Apparently Standard Life Investments have analysised our debt position and came to the conclusion we would need long term debt at 1.3% to stabilize public debt and would need nominal growth of 9.8% pa over the next three years in order to shrink the debt pile. He also says SLI sees our annual nominal growth at 2.8 out to 2015.

That growth seems surprisingly high given the new IMF projections and I can only assume that the sustainability issue would be a lot worse if the IMF are right.

None of our own economists seem to have done an exercise like SLI….interesting…it must be Verboten.

@ DOCM,

Once again, Re: “If Irish taxpayers do not pay their country’s debts, which taxpayers and from which countries are going to do so?”

A lot of the debt is not the debt of Irish taxpayers.
It is the the debt of private banks, which (against the wishes of the Irish people) was, for a limited time only, guaranteed by the then Irish Government. When the time was up the German-dominated ECB forced Ireland to continue the guarantee, and thereby overstepped the powers that the ECB had.

Please stop referring to all of the debt as Ireland’s sovereign debt.

Peadar

@Peadar Coleman

FYI DOCM is the leading spinner on the blog of The Conflationist Fallacy – the idea that the Citizenry picks up the tab for all f*ck__ups in The Financial System – most ably pushed on the EU stage by Dear Lorenzo Bini Smaghi and Ittmar Issing. The fact that EU politicos and ECB have wised up to the lunacy of this fallacy and now argue for separating banking debt from sovereing debt appears to have passed him by.

The fact that ECB provides liquidity assistance to Irish (and other European) banks is not relevant in this case – this is what central banks do. DOCM at times also claims to be a Social Democrat which provides us with the best chuckle since Bertie Ahern declared himseld a socialist (-;

@DOCM

Thought you might have submitted a paper – as the most dismissive of economic thought on the blog – but then again the peer review process presents a bit of a prob – as you not believe that you have any peers!_and you might have to come out of the comfort of the anonymous closet. That said, keep up the good work for the Ferengi. Blind Biddy says Hi!

@ Fiatluxjnr

I think the outcome will be more substantial than that. Brian Carey, Irish Business Editor of the Sunday Times, accurately describes what seems to me, on the basis of information currently in the public domain, the current situation. The sums involved in getting Ireland out of the debt hole into which it stumbled, in circumstances in which the monetary union to which it belongs had no instruments at its disposal to prevent such an event happening (a point which now appears to have been won by Irish negotiators), are small in relative terms, at least compared to those required for Spain and/or Italy. But the decisive consideration is that it is also in the interest of the parties collectively. But timing appears to be all.

On the topics to be discussed at the DEW conference, that of “policy-making” the Irish way should certainly figure cf.

http://ipa.ie/pdf/Administration/FrancesRuane.pdf

Footnote 14 draws attention to the malaise which, in my view, afflicts Ireland viz. the confusion of roles between the politicians and what some choose to describe as the “permanent government”.

“To people from outside Ireland, this term may look like a misnomer. However, it has become common parlance in Ireland over the decades to refer to ‘policymakers and politicians’. This term is not seen as denying in any way the constitutional role of ministers (and the Dáil) in the policy process, but it recognises that ministers bring forward policies that derive strongly from options put forward by the ‘policymakers’.”

The real distinction is, of course, between policy formulation and implementation. The job of the first is for the politicians, given appropriate and technically expert advice by an identifiable top echelon of the civil service. How the second is organised is a function of what is to be implemented. The Scandinavian countries, as I never tire of pointing out, show the way. Sweden, a country of over 9 million people, has less than 5,000 civil servants carrying out the policy advisory role. Implementation is left to largely well-managed agencies with clearly defined functions.

The policy function cannot be dissipated across the entire gamut of available advice as it currently is in Ireland with predictable results. Until the underlying structural problem is resolved, there will be no improvement. Incidentally, there is not one mention, as far as I can see, in the paper linked to above to the Public Services Management Act 1997, the basic legislation which has been clearly shown not to work. It involves, for example, statutory requirements for the submission of “strategy statements” and other bumf by departments in circumstances in which no meaningful strategy is possible other than to implement the programme agreed with “official lenders” i.e. the countries putting up the funds and who want to get their money back.

@DOCM: “the countries putting up the funds and who want to get their money back.”

“… their money?” I have a deep problem with this. Did those countries (which I assume are proxies for real persons) give us real cash or virtual credit? If it was all cash then it was their money. However if it was virtual credit then what proportion of this credit was fiat; it was created ad hoc and had no prior existence. How is it possible for some human person to lay claim to something that had no prior existence? Except by some element of religious faith? Just asking?

In respect of the sdebt repayment spat that was opened above. The Irish taxpayers can, and will, be forced into repayments even with their diminishing incomes. It matters little if the majority of our population are slowly exsanguinated and have to adopt a 1940s lifestyle and standard of living. The rent seekers will have their income-stream, and they can pay the citizens a ‘risk premium’ to prevent riots and disorders (most of the risk premium goes back to the renters in the form of ‘taxation’). The greater the level of inequity in our society the less chance of a successful re-structuring (political and financial). The trick is to choose the appropriate level of the inequity. Hungry folk WILL riot!

Ruane’s paper is hollow. Read William Kingston (Interrogating Irish Policies) for the actual situation.

@Brian Woods Snr

On the matter of growth I believe its probably wise not to be overly clever about predicting the future.

The supposedly very wise heads in PIMCO aka Gross and El Erian suggested ‘a new normal’ in terms of returns investors should expect over the next decade or so. Returns were expected to be very poor relative to the long run historical average of risky asset returns of c7%-8% enjoyed by investors over the past 30-40 years. They suggested returns of the order of 2%-3% should b expected. Now in time they may prove to be on the money but thus far it ain’t looking good for them.

It just so happens that equity markets have actually exhibited remarkable returns (reasons why a different days discussion) since these guys made their prediction back in 2009/10 so much so that they have now introduced their own equity type funds to add to their hugely successful bond funds (largest in the world).

S&P returns for 2009/2010/2011 and ytd are as follows:
2009:+27.76%
2010:+12.78%
2011: 0%
YTD: +16.55%

On a cumulative basis since 1st Jan 2009 the s&p is up close to 68% – this is along way off 2% p.a. as predicted (about 60% off in fact). So making long term predictions in terms of economics and markets can make one look very silly, particularly when its your day job.

@seafoid

In a word – f$@#ed.

Kiel Institute for the World Economy reckons that Ireland requires a WRITEDOWN OF €50 Billion in order for its ‘conflationist debt’ to become sustainable.

@ DOCM: “On the paper by Francis Ruane, it has the considerable merit of raising probably the most important issue confronting the country viz. how can we ensure that the funds raised in the public interest are both properly raised and effectively disbursed.”

I think you and I may have to take a ‘rain-check’ on this one. My Red-line: no borrowing for day-to-day state expenditures. State taxation revenue shall equal state expenditures. This situation is sustainable over all time intervals. The money spending addicts in Leinster House must be reined-in by a Constitutional proscription. Nothing else will work. Any contributor who asserts otherwise is either a fool or a knave. Local Governance is a shambolic mess. Will it be re-structured? Ever?

@ YoB: Yep. Crystal Ball gazing is iffy at best. The upturn in those indices is very suspicious. They are too good to be based on any basic metric. My guess is they are being ‘goosed’. I’m watching Gold (coin) and liquid fossil fuels. The signal emanating from these is flashing amber! If I had the wherewithal I would buy farmland – preferably with some lake or river frontage.

I’m off!

@Brian Woods Snr
That article is in the Sunday Business Post . Cannot access it online.

It looks like Angela has fired her bazooka at Noonan’ s plan for a bank debt deal this year. Oh well.. Maybe they will give us 50b next year. From rte…
“Merkel also said it was unlikely that a planned new pan-European bank supervisory body could be created by January 2013, adding that direct ESM aid to euro zone banks could only come after the new body was functioning.”

Jyrki Katainen, Finnish prime minister, flew to Madrid last week, on tourist class in a scheduled flight, to meet his Spanish counterpart.

This wasn’t for show. It’s just that the Finns and Swedes do not tolerate beggars on horseback as the Irish do, with a sense of entitlement to scrounge from public treasuries.

As regards growth, anyone familiar with producing a business plan, is familiar with the 3-year forecast by month on an Excel spreadsheet and how some tweaking gets to the scenario that is the basis of the funding proposal, coupled with SWOT analysis etc.

In respect of forecasting Irish GNP in 2014 and 2015, all the key risks are on the downside.

The US, China and the rest of the Eurozone are not going to have what Noonan called ‘rocket’ growth in that period.

The rational forecast is Zero growth but that would be inconvenient. However, that scenario should be incorporated in forecasts by the DoF, the Central Bank and this week’s ESRI QEC.

Saying that GNP growth is going to be 2 or 3% is avoiding inconvenient truths.

Most of what is officially said about the impact of trends or changes in export data is in the realm of fairytales.

So people, when you encounter politicians, economists or journalists getting excited about export trends, wonder if they have ever ate a Dutch sandwich or met a leprechaun.

Even though I grew up near the countryside in Bandon, the first fox I encountered was in Blackrock in Dublin; the second was in Ballsbridge (yes it may have been the same fox).

However, I never recall meeting a tooth fairy, even though one did once leave a coin with a rabbit etched on it.

@ DoD

Maybe Netanyahu can take over Douglas Feith’s mantle .

http://thinkprogress.org/report/the-architects-where-are-they-now/

An attack would send oil over $200. Not ideal for the global economy at this juncture.

@seafóid

What a lovely bunch of motherhood and apple pie – I must now censor my real opinions – ***^^%%$£$%&*((*&^^%£”£$***((*&^%$%^^&&&&&&&&&& (Blind Biddy has now started)FF67754677FF77657778FFF8888***&^%$% Nuff said!