Includes economics essay by Michael O’Sullivan here.
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@philip lane thank you for this,did not even know the publication existed,very small point the second link does not work stateside.
but anyone who links the first one can easily find the referenced article,clash of titans looks good too.
@ Philip apologies and also to the author above,who piece is worthy of review and comment.
Just a heads up,on another thread regarding the B of i coco’s i have repeatedly attempted to link the actual notes.yesterday i was at a different office but today back at normal IP address.
i am no longer allowed post on that tread,my sincere apologies to anyone i insulted or upset,all best great site.
enjoyed the exchange was trying bring a bit of a ‘new yawker’ attitude to the debate,appears i crossed a line or two.
NWL has kindly allowed me post the actual notes at his site, regards all i no longer will post here.
On Michael O’Sullivan’s paper, I would think that alcohol is a bigger addiction in Ireland than gambling. In China, it is the reverse, partly because a significant portion of Chinese have a natural aversion to alcohol.
As for the property bubble, I would attribute the phenomenon that gripped a lot of people to a form of mass hysteria or madness than risk. It could be also compared with the irrationality of religion which gains credence because leaders, ‘experts,’ family and so on believe in it.
Possibly most thought there was no risk, including bankers and McCreevy had fanned the fire with tax incentives. Sean Quinn who had the background of dealing in risk and being aware that some business investments have better chances of succeeding than others, appears to have also fallen for the fairytale that the free lunch had been invented.
The windfalls from the bubble went back into property — again risk wasn’t an issue as commercial property in the UK and across Europe was a slam dunk with accountants singing the mantra about the safety of buying buildings with blue chip clients.
Underpinning it all, were all those brainy experts on the wireless talking of population growth, the whole world admiring us, Riverdance and lots more malarkey.
The bubble was preceded by rising income, confidence and job opportunities. That was unprecedented even compared with the 1960s. However, the hysteria and the link to culture raises the question, why the lost decade of the 1980s, which was preceded by another period of madness, but mainly at government level, had been so easily forgotten?
With the exception of the Northeast with its closer proximity to the booming industrial centres in England and Scotland, there is no evidence of a strong historical entrepreneurial culture in the rest of the country.
In the 1911 Census, the percentage of the workforce employed in that sector was down to 20% from 33% in 1841.
The O’Sullivan piece is nicley crafted and easy reading – for those who actually do some reading (about this subject matter*) that is. Having also read the authors he cites, and having had countless verbal exchanges about our current economic mess, I have this nagging feeling that most folk have read little about its causes and outcomes (apart from newspapers and airport bookshop offerings) – and hence, have inadequate, unstructered and mal-informed understandings. This does not prevent them from pontificating on all manner of political economic issues. Their un-suspected ignorance actually encourages them in their dopey beliefs and stupid financial behaviours.
One salient issue. The matter of the long-term stability of my ‘community’. I, and each individual in this community are mortal: we survive for 3 score and 10 – or so. But my community has existed for far longer than I and will contnue (I hope – my grandkids are now part of it) for a long time to come. Hence, the guardians of our community (our elected representatives) have a moral, ethical and legal obligation to protect the community from all harmful influences – including financial malfeascence. In this task, they have completely failed us.
So the place to start restructuring is at the highest political levels (a fish rots from its head!). Once those restructurings are in place – and maintained, the financial restructurings should follow. The temptation, and its very great so close to the bad events, is to rush into a poorly considered re-decoration of the financial sector (political lobbying will snuff out any meaningful structural renovations). Waste of time and effort. Sentiment always trumps rationality!
Probability of meaningful political and financial restructurings: low. Prognosis for community wellbeing: bad.
* Thank God for the Internet. Some great sources are available – but you have to know about them – access them, read them.
Michael Hennigan said “With the exception of the Northeast with its closer proximity to the booming industrial centres in England and Scotland, there is no evidence of a strong historical entrepreneurial culture in the rest of the country.”
I suggest that is a bit sweeping. While much Irish entrepreneurship has been in trading rather than manufacturing, the Parliamentary Gazetteer of 1845-46 shows very extensive manufacturing industry throughout the country. Most of it was to meet local needs but I would still regard that as entrepreneurial. The weakness was a relative failure to expand to broader markets and achieve economics of scale and/or preference in wider markets.
Michael Hennigan who lives in Malaysia echoed Michael O’Sullivan who lives in London:
“As for the property bubble, I would attribute the phenomenon that gripped a lot of people to a form of mass hysteria or madness than risk.”
The Irish times carried an article in 1997 that said Irish property was going the way of property in Copenhagen and Munich – id est -out of the reach of everyday folk. Apart from the 162 Irish who clocked up 62 billion euros of nama debt, and the 10,000 others who were smaller players, most Irish men and Irish women were buying small expensive homes to keep the weather off their children. The large mortgages are in place as the funds to service those mortgages are being attacked – steadily. A small self regarding few may be tempted to ‘stifle’ the conversation (Eddie Hobbs’ phrase) Posting anonymously allows the argument be set free from personality debating society claptrap.
Maybe sweeping but taking the sweep of history back from the present, the number of SME firms that export is lower than other comparable European countries. A Central Bank paper last year said: “the vast majority of indigenous employment (which makes up 78 percent of private sector employment) is still accounted for by traditional sectors such as Hotels & Restaurants, Wholesale & Retail, Business & Administrative services and Transport & Storage.”
If 40% was knocked off the total export value to discount for MNC tax strategies, indigenous exports would only account for 20%.
The location of the former English garrison town of Bandon, West Cork, was selected because of the fertile land in the area but over 40 years from the closure of Allman’s Distillery during US Prohibition in the 1920s to the mid-1960s, there was not one significant industrial plant opened.
There are explanations as there are for the failure to re-establish the Irish whiskey market in the US after 1933 to match Scottish rivals, but for long, law and medicine were the prized professions not fumbling in greasy tills.
In Finland, teachers are paid as well as lawyers and doctors.
@ IP with the editor
Not everyone partied and the politicians had much bigger rises than that of the average industrial wage.
The eco-system let’s say lured in many. The capital gains tax rate was less than half the high rate of income tax.
Besides, electors would have never supported anyone preaching prudence and parsimony. The public treasury was there to be plundered and behold the beggars on horseback with a firm grip on a government credit card with a €50,000 spending limit, oozing with a sense of entitlement to scrounge their way across the world, with family in tow.
The corrupt land-rezoning system managed to make land scarce in a country that was 4% urbanised compared with 28% in France.
People genuinely thought prices would stay high forever.
Irish Times, July 2005
Mortgage applications are set to leap just days after the Central Bank flagged its concerns about growing levels of consumer debt. The first mortgage that covers the full price of a property was launched yesterday by First Active, part of the Royal Bank of Scotland group. The lender said it had held discussions with the financial regulator about the product.
A spokeswoman for the financial regulator said it had continuing dialogue with lenders about prudent lending, but that it did not approve specific products.
Other lenders are expected to copy First Active’s move, which means that people desperate to get on the property ladder will no longer have to save massive deposits. Lenders normally advance a maximum of 92 per cent of the property price, forcing first-time buyers to save an 8 per cent deposit. First Active’s 100 per cent mortgage is the first of its kind to be offered to first-time buyers on a widespread basis and could unleash a flood of new property hunters on the market.
Mortgage brokers REA yesterday described the product as the biggest development in the mortgage market in years. However, First Active’s product could fuel house price inflation, the lender admitted. “In the short term, it will release more first-time buyers on the market and there will be a little bit of a spike, but that will equalise over time,” said Brendan O’Hora, head of marketing.
The launch of the 100 per cent mortgage comes in a week in which the Central Bank welcomed the slowdown in house price inflation and signalled concern about high and growing levels of household debt. “Any significant increase in rates or downturn in economic activity in the future would cause problems for recent and more highly indebted borrowers,” Central Bank governor John Hurley said on Tuesday.
Borrowing the full purchase price means that in the event of even a small dip in prices, borrowers would be landed in negative equity, owing more than the value of their homes. First Active, which normally lends over terms of up to 40 years, said it would restrict the 100 per cent loans to a maximum of 30 years, which would allow customers to build up more equity in their homes in the early years of the loan. First-time buyers will still need money upfront for booking deposits.
However, this amount will be recoverable under the loan. Stamp duty, legal fees and furnishing costs will not. Sarah Wellband, of REA, said there was a big demand for 100 per cent loans. “It’s certainly great for parents, who have been funding their children’s deposits by releasing equity from their own homes,” she added.
First Active said it had seen the frustration of many first-time buyers who could afford to repay a mortgage on the full value of properties, but were finding it impossible to save huge deposits.