My briefing note for today’s meeting of the Oireachtas Sub-Committee on the Intergovernmental Treaty is here.
Year: 2012
A new book edited by Brian Lucey, Charles Larkin and Constantin Gurdgiev has just been published by Orpen Press. Details of the book are available from Orpen Press, Amazon Kindle and others.
The book was formally launched last night in The Library Long Room in Trinity College by Senator Sean Barrett, whose speech is available here. Here is a short extract:
In the words of a great TCD man, Oscar Wilde, Miss Prism tells Cecily to read her political economy in the absence of her tutor. “The chapter on the fall of the rouble you may omit. These monetary problems have their melodramatic side.”
Ireland’s economic policy unfortunately followed Miss Prism’s advice. We sleepwalked into the euro currency and the regulatory body played lots of golf with bankers through an unsustainable property boom. Stephen Kinsella notes that we doubled the national debt in 2008 by bailing out the banks. Relative to GNP this was a gold medal in regulatory capture by world standards. Regulatory capture of governments by national airlines or sheltered sector professions pales into insignificance compared to the Irish bank capture of the exchequer.
The latest report of the Independent Fiscal Advisory Council can be read here.
The CSO released its Q4 2011 data on Ireland’ international balance sheet last week. Putting together the full-year data for 2011, Ireland’s net external position fell by 11.3 percent of GDP in spite of the small current account surplus.
In order to fully understand the sources of this measured decline, it would to good to know more about the relative contributions of valuation changes and data revisions to the 6.8 percent of GDP “stock-flow adjustment” component of the net decline and also possible explanations for the 4.5 percent of GDP “net errors and omissions” that drive a large wedge between the small current account surplus and large measured net capital inflows. (Unrecorded capital flight must be part of the explanation, which would suggest that the decline in the overall net position is overstated.)
Seamus has an introduction to this quarter’s DAFT report on asking prices for property across the country. This report is compiled by Ronan Lyons. The introduction is worth a read, with a key piece being:
A house in a particular estate may have sold for €350,000 because one bank was willing to lend one purchaser the money for such a transaction. The other banks provided similar mortgages to other buyers on the basis that the first transaction provided the “market value”.
The price reflects the amount of money that someone is willing to pay for a good. Value reflects the benefits that a good can offer. In most cases, these are the same but this does not have hold. Residential property provides accommodation service. As a result of the madness of the boom, we now have thousands of households paying a price for accommodation far in excess of the value they are receiving.
This reality must be addressed and the burden of the mortgage debt is largely a function of the actions
of the banks so they must offer what ever forbearance is necessary to assist households. The banks must also realise that there are thousands of homeowners who will never be able to repay the huge loans they issued to them. It is very difficult to gauge the number of unsustainable residential mortgages that need to be ended but it could be anywhere between 15,000 and 30,000. These are households who are in deep mortgage arrears and negative equity and have little prospects of recovery.The banks must face up to losses that exist on these loans. The homeowners must accept that they will never be in a position to repay the loan and that by surrendering the property they will be able to make a fresh start. Households with unsustainable mortgages must be allowed to do so.