Future Directions for the Irish Economy

There is a joint European Commission / TCD conference today “Future Directions for the Irish Economy”.

The webpage is here , which has some of the papers. (Others will be added after the event and in the coming days.)

My Irish Times op-ed is here.

190 replies on “Future Directions for the Irish Economy”

This excellent point here is missed by the many superficial analysts:

“Growth policies typically play out over a 15-30 year horizon, such that 2014-2020 is not a sufficiently long horizon in evaluating the net benefits to various economic policy reforms. For instance, reforms to the education system might have a substantial long-term impact, even if there is little direct impact on economic performance over the next 5-10 years.”

For example, in exporting, most companies do not have unique products to sell and it usually takes many years to develop new markets. Besides, an economy needs a reasonable number of medium-size firms to build an indigenous export base – – Germany’s strength in this area explains much of the performance gulf with France.

Armchair experts see a 1bn+ market in China but while there is no reliable data, it appears that a lot of western companies lose money there.

Kevin Daly of Goldman Sachs says:

“Ireland could converge to the US average – and this seems reasonable as a central case. But it is also plausible that it converges towards the Silicon Valley or towards Detroit.”

Of course here, the FDI and indigenous sectors should be separated – – total direct jobs in FDI internationally tradeable firms in 2013 remained below the level in 2000.

So there was an exports surge but it was a jobless one and the related Department of Finance’s claim that a “continued competitiveness boost through reduction in unit labour costs with a 21% relative improvement forecast against the Eurozone average” is a fantasy. The average whole economy hourly labour cost rose 1% from Jan. 2008 to end-June 2013.

This week Bord Bia reported record food/drinks exports of almost €10bn — 5.5% of total exports value or 10% when discounted for excess transfer pricing and fake services exports.

Pro-growth policies are easy:
1) Orient taxes away from labour, towards property and consumption
2) Invest in infrastructure (transport, utilities, telecommunications)
3) Reform public service – give managers incentives to manage, introduce accountability
4) Reform education – incentivise teaching and results in maths, science, languages
5) Encourage entrepreneurship – make starting a business easy, and provide support for scaleable businesses
6) Introduce compulsory private health insurance, and compulsory private/public pension scheme
7) Reduce authoritarian controls on various leisure activities and encourage different forms of tourism
8) Take advantage of Ireland’s many natural and geographic advantages (food, climate, water, land)

“Finally, it is desirable that the political system has access to high-quality economic analysis and robust empirical evidence in formulating its strategic policy choices”

This should be understood by everyone of voting age. Why isn’t it? What is it about Ireland that means that “sure it’ll be grand” passes for policy analysis ?

Could someone in the economics profession attempt to quantify the cost each year of this insanity ?

@ Ninap

How would you recommend the pension money be invested ?

@ Prof Lane

What does prosperity mean ?

Could we have a meaning intellectual exchange, discussion or even a Music Hall style “Yes! – it is, No! – it isn’t” piece of banter about the following:- (some exchange being preferable to none).

The FIRE Economy and the implications for developed and developing economies of ‘financializations’. Or, “Where are the consumers yachts?”

The physical nature of any economy and the utter impossibility of sustaining ‘growth’ on an ever upward trend. Creationists are excepted and excused.

The economic, social and political problems associated with increasing populations: food and energy. It REALLY needs 50 mill to ‘start up’ an already functioning drinking water supply? WTF!!!

@ Ninap: I assume you can’t be serious!


I think the NPRF or the NTMA could manage the ensuing sov wealth fund quite well. Ideally employers, employees and the State would contribute similar proportions, and the same pension entitlements would accrue to public and private sector workers.

@Brian Woods

I’m serious with the suggestions. Slightly facetious in saying they are easy (to implement).

@ Ninap: Fine.

1) Orient taxes away from labour, towards property and consumption

Yes – but watch the consumption one. Folk on minimal income and proportion of income paid in tax will be whacked – again!

2) Invest in infrastructure (transport, utilities, telecommunications)

Maybe. If trans is main-line and light rail I’d agree. We need more roads like we need a hole-in-our-head. The other two have been raped and looted. The unfortunate taxpayer will be left to pick up the debris when these go belly-up.

3) Reform public service – give managers incentives to manage, introduce accountability

Skip this. Undooable. But I’d support restructuring of national and local government.

4) Reform education – incentivise teaching and results in maths, science, languages.

I’d put my effort into getting children (5-6 years) to read fluently – in English. Dump the fetish with compulsory Irish. We already know where the best practice is in Math + Science teaching. Importing it is the problem. Know how teachers are trained?

5) Encourage entrepreneurship – make starting a business easy, and provide support for scaleable businesses

Fine. But … …

6) Introduce compulsory private health insurance, and compulsory private/public pension scheme

Now, you ARE being very un-serious here! How about a Health Service which comes up to the standard of care provided in Cuba or Thailand. I’d even settle for France and the UK. Ours is Two-tier. Private and Unspeakable.

7) Reduce authoritarian controls on various leisure activities and encourage different forms of tourism.


Close to where I live there are two major arterial routes – both with serious lengths of Lána Bus. Outcome: increased congestion; increased transit times; increased fuel consumptions; increased air pollution. And they call that progress! Could I have some ‘failure’ – please!

Maybe the key question is not Which policies are likely to result in best outcomes?, or even, Which countries should we seek to emulate, but rather, What conditions give rise to wise policy choices? and then we should set about creating these conditions.

Ninap, I rejoice at your enthusiasm. Regrettably, those of us with both the competence and the testicular tissue to undertake such restructurings as WE think appropriate! – have neither authority nor power. Which is probably just as well. But you are quite correct: things are a tad shambolic in some sectors.

One thing I always noticed when someone proposed a reform: it was blasted out of the water – but there was no parallel equivalent criticism of the status quo. Funny that – and the same persons who whinged the most (sotte voce – you understand) about the status quo – seemed to come dumb all over about the restructuring proposal. They gazed fondly and beseechingly into the eyes of the Leader (who invariably was against proposals) to seek inspiration and approval. That was not funny!

“Endeavour to persevere.” Some sh*t always sticks! 🙂

@ Ninap

I think there used to be a sovereign wealth fund.
How could the NTMA ensure a new SWF was ring fenced ?
And where would the money be invested ?

@ Ninap

It seems to me that you have put your finger on the conclusion that should be drawn from the analysis set out by Philip Lane viz. the Irish economy, as a small open economy, needs to be made generally efficient in terms of its productive capacity which should enable it to take advantage of external opportunities and cope with adverse external developments.

Why is this conclusion not drawn?

Perhaps the answer lies in the very limited number of countries, mainly Scandinavian, that have succeeded in achieving this outcome. The reason is the unwillingness to face up to the consequences for various interests of the steps you propose.

On reform of the public service, I would start rather with the issue of its definition i.e. a debate on what should be the responsibility of government and what should not.

The problem lies not in the existence of the general problem, but the lack of a general appreciation of its existence.


The idea of an “independent panel” made up entirely of persons whose salaries or pensions, as far as I can judge, are paid from the public purse is simply ridiculous. This is not, of course, a comment on the integrity of the persons involved but an indication of this lack of appreciation of the need for a wider field of assessment.

“This is not, of course, a comment on the integrity of the persons involved but an indication of this lack of appreciation of the need for a wider field of assessment.”

DOCM. You surely know and appreciate how these ‘consultation’ processes work. You pick your packed panel. No contrarians need apply (there are no applications sought anyway). Everyone goes home happy – after some agreeable lunches, of course!

The result will be as expected, and required. QED.


“Central Bank Governor Patrick Honohan has said that the EU-IMF programme for Ireland “delivered what it said on the tin”. ”


“Ireland would be going into a second bailout were it not for Labour, says leader”

But the numbers lack conviction. I don’t think this is what the tin said back in 2010 .



Maybe not on this occasion!


It is slowly but surely dawning on the electorate that the government has no money other than that which they give it. (The illusion was nurtured by successive – mainly FF – governments “taking people out of the tax net”).

I have had only had time to take a glance through the consultation paper and it is a truly remarkable document. For the authors, the world evidently ends at the Channel with some extensions to former UK dominions. I may revise my opinion when I have read the paper in more detail. But I do not think so.

‘However, special features of the Irish economy mean that its future path is especially unclear. At a structural level, the very high international mobility of workers, capital and technology is a defining characteristic that means the range of possible growth outcomes is much wider than for most other advanced economies’

‘A small open economy, abbreviated to SOE, is an economy that participates in international trade, but is small enough compared to its trading partners that its policies do not alter world prices, interest rates, or incomes. Thus, the countries with small open economies are price takers’

Ireland is hugely vulnerable to imported price inflation. The problems of substitution are likely to be much more challenging than they were in the Emergency, because so much of our economy is imported in a box. The price of credit is already strangling Irish SMEs, and normalisation of already excessive ‘peripheral’ interest rates could be a Perfect Storm.

‘In common with many other countries, a fundamental challenge facing Ireland is to find the balance between maximizing growth and attaining a socially-sustainable income distribution, in view of the global trends (new technologies, globalisation) that are fostering greater inequality in market-driven earnings’

Financialisation is the really demonic process, but we are (currently) a beneficiary from profit shifting and other scams. What goes around comes around.

‘Perhaps the answer lies in the very limited number of countries, mainly Scandinavian, that have succeeded in achieving this outcome. The reason is the unwillingness to face up to the consequences for various interests of the steps you propose.’

Joe Lee said it all in Ireland 1912-85. Those countries had governance, built up over centuries. We had rotten boroughs, corrupt local authorities and Dublin Castle placemen. I do not idealise the preceding Gaelic clan systems with their various grades of slave.

@ PQ

‘In common with many other countries, a fundamental challenge facing Ireland is to find the balance between maximizing growth and attaining a socially-sustainable income distribution, in view of the global trends (new technologies, globalisation) that are fostering greater inequality in market-driven earnings’

I would throw climate change into that sentence. There is no point in maximising growth if growth drowns the goose that lays the eggs .

Ireland has to be run differently to face the challenges of the future. There is far too much waste and sloppiness.

Globally we also need to measure progress differently. GDP is a waste of time when the temperature in Chicago is minus 8F and there is F all snow in the Alps.

Please bear with me folks….


Perhaps the answer lies in the very limited number of countries, mainly Scandinavian, that have succeeded in achieving this outcome. The reason is the unwillingness to face up to the consequences for various interests of the steps you propose.

Perhaps there are a few pointers we could take from the Scandinavian countries to replicate their success?

* Higher levels of public sector employment (Sweden’s level of public sector employment per capita is twice ours, ditto Norway)
* More unionization. (The Scandinavian countries have no minimum wage because of the clout of collective bargaining)
* Free or nearly free health care in all three countries. (funded by taxation)
* Private sector employees enjoy the same protection as public sector employees (see Unionization)
* Less income inequality (all three countries have a better gini coefficient than Ireland)
* Not being in the Euro (duh!)

I could go on but you get the picture. The Scandinavian countries are essentially all social democracies with their own currencies, we are not. Please do not give the Scandinavian countries as an example of the need for neoliberal or supply side reforms. It insults our intelligence or your integrity, a bit like every reference ever to the Baltic Republic “success” stories (for very small values of success).

Which brings me to the digressive bit….

Reading the Irish Economy it seems to me that the right (and this means many of the contributors) are engaging perpetually in a combination of three things.

* Trying to fool the public (trickle down economics, rising tide lifts all boats, privatization improves the efficiency of service provision and so on) to advance political ends.
* Sounding like fools (the unfortunate Eugene Fama comes to mind).
* Fooling themselves about cause and effect (Marco Buti would be a prime example as Aidan Regan notes above).

Why is this?

There was an interesting study about US Republican’s level of educational attainment versus their attitude to anthropogenic climate change, the better educated they were the less they could be persuaded by the evidence and I think this is a general trend on the right, particular in public policy circles and academia where people are generally well educated and intelligent. They have strong beliefs, which though unsupported (or contradicted, as above) by the evidence they can rationalise (confidence is just around the corner, failing policies have not been pursued strongly enough (Alberto Alesina on expansionary austerity), John Cochrane on the US stimulus being doomed). Of course there is also Olli Rehn, who has a different excuse.

That is one of the reasons the Irish Economy has less left wing contributors than of old. The right is a political cult cum feudal social network and we do not have the time to deprogram them. But please carry on, it is only the world you are helping to ruin.

@ DOCM: Thanks for that. Hope you’re correct. Its time. I listened to Min Gilmore this am. It was stomach churning. Labour need to dump him fast. And if they have any regard for their political survival, exit gov and let the cards fall where they will. Should we ‘buckle up’ or will these rascals do a Houdini?

@ PQ: Facts – when acknowledged can be very uncomfortable.

@P. Lane

“In common with many other countries, a fundamental challenge facing Ireland is to find the balance between maximizing growth and attaining a socially-sustainable income distribution, in view of the global trends (new technologies, globalisation) that are fostering greater inequality in market-driven earnings.”

I see no evidence of this key issue being on the agenda, nor do I see a focus on indigenous export, or on the form of taxation needed to take us in a Scandinavian direction.

That was a thoughtful and thorough article Prof. Lane and it laid out a number of the challenges (read “threats”) facing Ireland. Two counterpoints though.

While there needs to be much more (any?) long term planning in Ireland (education, Seafoid’s climate change and energy security all stick out) and patient investment we can not keep ignoring the short term negative effects of policy in the hope that there will be long term benefits. It is little use to save money for the education of the next generation if cuts now mean there is a matching loss of educational achievement for this one (and generational hysteresis has to be a concern in education, employment and health). It is the Hippocratic oath of economic planning – first do no harm; you can cut growth to try and achieve a sustainable economic equilibrium but EU style liquidationism in the hope of creating a leaner, fitter economy is at best a huge gamble unsupported by historical evidence or current experience and at worst a immensely damaging delusional grand projet of the European right.

I also have to ask whether the government should be paying more attention to the IFAC (no insult to its members), as far as I can see the requirement for “independent” fiscal councils was a sop to German ordoliberal thinking and their prejudice for paternalism (which has a mixed record in Germany itself) and also represents more or less the interests of the core economies (and we mean Germany and hangers on). Given the appalling record of the European economic consensus for the peripheral countries any body that hews as as closely to it as the IFAC seems a poor source of inspiration.

The overall point of the article is hugely important though, Ireland is a small country – smaller than many European capitals and we have to guard our resources closely and be more efficient and more thoughtful than our European peers per capita if we want to remain sovereign and moderately prosperous – our reliance on foreign multinationals in a time when tax arbitrage being seen for the monster it is is particularly risky, our tendency for patronage in public appointments is corrupt and severely damaging for the intellectual life of the country. The Republic needs to be reborn.

After all no one will look after us but ourselves – not the EU institutions, not our European partners and certainly not the market.

@John Gallagher

@shay you are fully entitled to your opinion but to describe Eugene as a ‘fool’ is rather ad hominem and a poor reflection on yourself,at least have the good manners to link the full article which was part of a 2 part series…

I did read the entire New Yorker article (quite a while ago) but it hardly does Eugene Fama any favours and I stand by my charge, Fama is a clever man but utterly wrong and too prideful to admit it. Strong form EMH is dangerous rubbish and weak form EMH is useless.

The Riksbank fake Nobel committee did themselves no favours here even if they did throw in Robert Schiller. (What sort of incentives are the Riksbank giving here to economists to produce useful work in order to win a large prize? This is moral hazard if ever I saw it).

Excessive self indulgent posting splurge ends here, I promise ye.

When I said:

* Fooling themselves about cause and effect (Marco Buti would be a prime example as Aidan Regan notes above).

I was thinking about another thread Buti and Mody on Europe. My mistake – it is a good thread though. I can highly recommend reading Buti’s piece if your blood pressure is too low – utter piffle as pointed out by Grumpy. I dare anyone to read it and not be annoyed (not sure about the symmetry of his trillemmas either).

With men of the calibre and forthrightness of Buti and Rehn is it any wonder EMU has been such a success?

@shay ya do know you linked Brad,who cites Friedman and Summers as big influences,just saying:)

And this ah now,I wouldn’t let you guys mind my dog for the weekend,ya cant govern yourselves.The article is actually a whitewash,completely ignores personal debt and mtgs,Honrohan`s speech is available over at the CB site.Whats point of a fiscal council,they ignored but good plug.

“After all no one will look after us but ourselves – not the EU institutions, not our European partners and certainly not the market.”

It seems that the DoF has mean reverted following the departure of the adults.


“Documents relating to the banking crisis have gone missing at the Department of Finance. The department has conceded that some correspondence forwarded from Bank of Ireland to former minister for finance Brian Lenihan can no longer be located.It says it has started a process to ensure the integrity of its records ahead of the banking inquiry.”

How much would you need to add to the bond yield to cover the cost of this kind of additional risk if you were invested in anything involving the DoF ?

“How much would you need to add to the bond yield to cover the cost of this kind of additional risk if you were invested in anything involving the DoF ?

nothing. No sovereign (or I predict, most probably senior bank ) bond holder will be singed. Irish sov debt is as risk free as Germany – zero risk in any short hold to maturity timeframe.

Absent ideological blinkers myself 😉 , when I first read the Pew’s report of its polling on US Republican Party supporters on climate change science, the pro-science climate change environmentalists who are also anti-science on GM food, came to mind.

The camel seldom sees his own hump.

Sir John Beddington, the chief scientific adviser to the UK Government and professor of Applied Population Biology at Imperial College London, said in 2010 that more than one trillion meals have been made using GM crops in North America and there has not been a single case in the law courts of anyone suing after eating GM products. “America is probably the most litigious society since Seneca’s Rome, but I think there is interesting indirect evidence that this is not a problem,” he said.

Your view of Scandinavia, seems to be some decades out-of-date.
A tradition of transparency and accountability and in recent decades openness to change where required, whether when ruled by governments of the right or left, have paid dividends: In the 1980s, both Sweden and Denmark had serious economic problems. Today after some privatisations and reforms in several sectors, the economies are much stronger. The government groups that manage Swedish health care are nonprofit entities even though about 27% of health care is delivered by profit-making firms.

You say: “Private sector employees enjoy the same protection as public sector employees,” true as the public employees have not jobs for life and much better pensions.

People in Ireland would likely willingly pay more taxes if they were confident of getting the Nordic standard of public services.

Anders Borg, Sweden’s finance minister, said in 2012 on inequality;

“You need to deal with the social cohesion issue. You cannot have a society where the conflicts that are built in become so strong that you undermine the political ability to deal with problems. If I compared Sweden with Spain or Italy or Greece, one of the reasons we have been able to these reforms is that our income differences are substantially lower which also means that the political tension is on a completely different level.”


Michael Ignatieff, academic-turned-politician-turned-academic, said in the FT on Friday:

“Progressives have become closet conservatives, defending the welfare state and the public-sector middle class at the very moment when rising inequality is eroding the tax and voter base for welfarism…Progressives will have to make their peace with the creative destruction brought about by competition, while conservatives will have to accept that the state has to take care of the market’s victims. As governments’ powers of surveillance grow, progressives will learn new respect for the conservative instinct that state power must be kept in check. As the globalisation of finance multiplies the risk of systemic meltdown, conservatives will begin to appreciate the progressive insight that only the state can keep markets from dropping us into the abyss.

Beyond caricatures and labels, this is in line with my own views.

“Sir John Beddington, the chief scientific adviser to the UK Government and professor of Applied Population Biology at Imperial College London, said in 2010 that more than one trillion meals have been made using GM crops in North America and there has not been a single case in the law courts of anyone suing after eating GM products. “America is probably the most litigious society since Seneca’s Rome, but I think there is interesting indirect evidence that this is not a problem,” he said.

absence of evidence is now evidence of absence ?

Trouble down’t US employment office


“New year hopes for an accelerating recovery in the US in 2014 were punctured on Friday after December saw the slowest pace of growth in new jobs for three years. Jobs growth, at just 74,000, came in far below expectations of a 197,000 increase. ”

And deflation seems to have reared its head again.


‘In common with many other countries, a fundamental challenge facing Ireland is to find the balance between maximizing growth and attaining a socially-sustainable income distribution, in view of the global trends (new technologies, globalisation) that are fostering greater inequality in market-driven earnings’
It is not a proven fact that a high income inequality is favorable to growth ,many( e.g Krugman) disagree ,in fact quite the opposite might be true .


Having read the consultation paper in more detail, my view expressed earlier remains unchanged. The leitmotiv is that of accountability which can be expressed in the terms set out in the paper or more bluntly “how can we as politicians ensure that senior public servants carry the flak when things go wrong within their area of responsibility and we still get all the credit when they go right?” Or, as I seem to recall one former minister putting it, changing the situation where she faced the music at the weekend while the civil servants in question were at home “drinking gin and tonics”.

It is a vain endeavour. Political responsibility goes with the territory of being a political representative and, as the Irish Water controversy reveals, it cannot be off-loaded. The confusion arises, as I have pointed out, from a general failure to recognise that public representatives are not public servants and their functions are not comparable.

Public servants, whether senior, middle-ranking or junior, can, and must be, made accountable for their actions but this requires an entirely different approach to that set out in the consultation paper. It involves distinguishing between officials involved in the function of policy advice – much fewer in number than the present “all chiefs and no indians” approach would suggest – and those charged with overseeing the administrative implementation of agreed policies, whether by the department itself or an existing agency (there is currently total confusion between the two) and developing appropriate control mechanisms and output measures. For the monitoring of policy execution, the involvement of parliament is essential. Being a “Westminster-style” system does not prevent this.

Serial public uproar by taxpayers is not an effective means of doing so.

@ BL

Thanks for that link. So the banks are protected by Super Mario but they aren’t functioning as they would in a normal economy. It reminds me of the Dead Kennedys


“And where would the money be invested ?”

Why….. in credible Irish start-ups that create jobs and exports of course.

PR Guy is returning to Ireland to set up a ‘disruptive’ (I’ve gone all interwebby nerd since I’ve been away) business in the digital content provider space.

The trouble is, I need a chunk of dosh…. and you have to jump through an awful lot of hoops to get that. By the time I eventually do, I could have set it up and be off and running instead of having to give a gazillion presentations to beg for the money and continually fretting that the longer it goes on, the greater the risk there is of someone else doing it first.


Google is always there to deliver whatever evidence that suits your needs.

The scientist could have cited reputable reviews of 20 years of safety studies; the American Association for the Advancement of Science, WHO etc. but he made an effective point for a general audience – try it sometime yourself.


Will you be back when the US December job figures are revised up? Trouble at t’doom-mongers mill then.

Frank Galton: “Did we know Prof. Krugman is coming to town next week?”

I didn’t. It seems he’s to receive yet another award:

On Monday 13th January at 5pm he will be in UCD to receive the James Joyce Award of the Literary and Historical Society in recognition of his outstanding contribution to Economic Science. On Tuesday 14th January he will visit the TCD Philosophical Society.

I’d guess he has other engagements too, but they don’t appear to have been publicised.


@Michael Hennigan

Absent ideological blinkers myself 😉 , when I first read the Pew’s report of its polling on US Republican Party supporters on climate change science, the pro-science climate change environmentalists who are also anti-science on GM food, came to mind.

It is International False Equivalence Day and nobody told me. Just typical.

It would take a while to pick apart your refutation of points I did not make and it is now substantially off topic. However if anyone really wants me to do it I will. If not I might write something up tomorrow and post it elsewhere. Suffice to say for the moment that your post managed to roll in a lot of the characteristics that make arguing with the right an exercise in futility.

@Michael Hennigan

Google is always there to deliver whatever evidence that suits your needs.

Michael, do you think that perhaps you might not be the man to be accusing others of cherry picking facts (often bizarrely unrelated ones) from the Internet to support their own political posiiton?

@ All

I posted this link on another thread some time ago (dealing with assistance being provided by Sweden to Portugal in terms of learning from the former’s emergence from an economic and banking crisis).


It may be contrasted with the “Strengthening Civil Service
Accountability and Performance” document (which has the sub-title “Consultation Paper on Programme for Government Commitments”).

A striking line in the “accountability” document is the following;

“One of the primary aims of this consultation process is to assess how greater clarity, certainty and common understanding may be achieved regarding who is accountable to whom for what.” (Page 2).

One would have hoped for some inkling of a recognition that the country is still in a deep economic criisis and navel-gazing by those collectively responsible for getting it into it, and now out of it, is not what is most urgently required.

Thanks Kevin.

I hope Krugman’s acceptance speech rises to the level of Will Ferrell

“As I perused my leatherbound volumes of ‘Ulysses,’ ‘Finnegans Wake,’ ‘Dubliners,’ ‘Portrait of the Artist as a Young Man,’ standing in my mahogany library, a lot of feelings ran across my mind. Like: ‘Damn, I should have read these books’,”

@ Johnny F: You know full well that the BLS metrics are semi-fictional and you have to view the whole thing on a quarterly basis – at least.

The most important US labour-force metric is – as I have previously mentioned, the ratio of those in Full-time Employments versus the Adult Working-age Population. Other labour-force metrics are whilst useful, might be misleading.

The US labour situation sucks! FtE/AWaP is at 59% – bad! It should be closer to 65%. And the Median Wage? Where is this going? Like down!

In normal times (no FED QEs) these statistics would send (and keep) the stock indices down. Not normal times.

Nah they could care less,A Rod got suspended,the Knicks suck..NFL playoffs on,dead war criminal that bout it..
Oh the bridge and tunnel gov closed a few lanes on the GW bridge…phew..delaying the hordes from jersey getting to the city….
@BWSnr…whats the unemployment rate here again, still falling I think ya can only wish:)

@ DOCM: Thanks for that update. One wonders.

“Serial public uproar by taxpayers is not an effective means of doing so.” Agreed, but look what happened when the Grey Tigers savaged the pols over the Med Cards! But: “Exceptions dear boy, exceptions!”

My longish experience of ‘public service’ types leads me to immediately dismiss as utter hogwash any, and all, proposals at ‘reform’ or ‘accountability. If folk had been genuinely about these, they would have been accomplished at least three decades ago.

There will be genuine public sector reform when people vote for politicians who provide it rather than those who perform stunts and call it reform.
Judging by this forum, a relatively well informed group, this day is far away.

@ JG: Thanks for those. Listen, what’s this story about Cristie and the Bridge? Sounds like some Hollywood disaster movie!

@DD how exactly in this day and age does a dept entrusted with matters of national importance lose stuff,it’s a banana republic.

“We are sure there is a joke in here somewhere but it is no laughing matter. Following a request for copies of 8 documents of correspondence between Ireland’s (former) finance minister and the nations’ largest bank executives, the Irish minstry of finance has been forced to admit that it cannot find two out of the eight. The documents, previously 100% redacted, raises questions as to whether other documents have gone ‘missing’. As RTE reports, the Department of Finance said it had carried out a widespread search for the documents and it was not clear why the original versions could not be located. Those darn leprechauns… We are sure, however, it has nothing to do with the Irish banks “picking bailout numbers out of their arses.”


@BWSnr here’s the skinny,the mayor of Koreatown aka Fort Lee,little kip just over the George Washington Bridge did not endorse slim for his reelection bid as gov.In a fit of pique someone,its a who knew what when situation,decided to conduct a ahem,traffic study resulting in lane closures and massive extra large traffic jams.Its a non event,quite a few people are amused by his,got ya style:)


Or as the Jesus and Mary Chain sang in Dirty Water…f**k with me and I..


There is no downside, other than a couple of days embarassing stuff in the media, to the shredding, erm I mean, mislaying, of any documents that might endanger clubbable people’s careers or pensions.

The saying in Ireland, not so much in South County Dublin as elsewhere, is:

“Sure, they’re all one clique.”

Imagine how a document that had to be so heavily redacted managed to go through that process without any spare photocopies being made or without still existing as an attachment to an email somewhere.

@Grumpy,the NJ gov had let a few people go,some embarrassing emails turned up,perhaps the DofF what with the Minister,winning awards left and right could advise….
There truly is no political will to conduct any inquiry,I don’t think BofI even did one on what went wrong.
AIB I recall conducted a thorough inquiry and review after that rogue Baltimore based trader came apart.

Speaking of inquiries regular readers may be pleased to know that Fishamble’s production of ‘Guaranteed!’ by Colin Murphy has just been nominated for an Irish Times Theatre Award as best new play.


Also a new play nomination for some other lad but it would be vulgar to name names. That one is about how the crisis is playing out in the homes of the Drumcondra/Phibsboro heartlands.

In my says in the Watchtower documents never went astray. They always rested on several files usually in several depts. Things really got sloppy in the last three decades. This is really embarrassing for the current regime that documents generated by the past regime have fallen down the back of the filing cabinet.

“Irish sov debt is as risk free as Germany.”…now that takes the biscuit and demonstrates to me how “serious ” Irish economists have been cocooned for so long in academia, they have no knowledge of the real world. You haven’t a clue Brian. Your understanding of markets is purely as ” an amateur”. You should refrain from posting or writing stupid articles like this (as I have suggested before)….damaging yourself.

Surprised that no one had challenged your piece on here…being nice to you.

I agree that Ireland should maintain fiscal and financial discipline. Not much choice at this point. If Ireland doesn’t do so, the potential for disaster increases.

Your primary surplus thingy seems to be solely in defense of the public service. It’s kinda like ‘Our finances’ reconciliation shows that our income now pays for our food…….but we have no idea how to pay the mortgage interest, let alone control our continuing debt ‘habit’. Sorry if that is ‘harsh’…but in my world, rubbish is rubbish. That’s a crap article.

@The Sage of Kuala Lumpur

You wrote: “People in Ireland would likely willingly pay more taxes if they were confident of getting the Nordic standard of public services.”

And there’s that old right-wing practical syllogism again:

We would gladly pay for Nordic standards of public services.
On the pittance we do pay, we don’t get Nordic standards of public services.


Slash spending on public services.

re: Reform not happening, or where to start.

There is no point in people talking about ‘debates’ on reform, while a golden circle of insiders, their friends, acquaintances and business buddies squander public money on each other.
It is not, as some people think, incompetence or stupidity. It is deliberate.
The State is being ransacked, for the benefit of its ‘managers’ and their professional South Dublin buddies. The bank heist was so perfect for the professional classes, that Irish Water was seen as another golden fountain.

A good start would be to fire the entire board and management of Irish Water.
They have burned 100 million last year and not one pipe fixed and not one invoice issued and money being dispensed like toilet paper. No pipe fixed, but I bet that all salary contracts have been sorted and I also bet that a defined benefit pension scheme is firmly in place, with no watery leaks in it.

What did Irish water need to get started?
A metering state, an invoicing system and a maintenance crew.
Yet, they seem to have paid €50 million to consultants to ascertain that much.
That they could not figure out that much themselves is reason enough to sack them all and shut Irish Water down now, before we have another HSE disaster on our hands.
Irish Water should IBRC’d right now.

What the betting that the some consultants were even paid to advise on the location of the head office, and to come us with the required answer,
Talbot Street, Dublin. Why Dublin? Why city centre?

Shut the sucker down.

Taking the Irish Health Service as an example, how is it that the private HS in Ireland is so much better? Same /similar environment, mainly dependent on health insurance proceeds, etc.

@Paul W

Well, I imagine that it’s a complex problem but the fact that private health-insurance premiums have double-digit inflation while the budget for the public health system is being slashed, er, reformed might have something to do with it.

But if you’re unhappy with it, clearly the answer is to defund it until you can drown it in a bathtub. Look how well the almost-entirely-private system in the US works.

Lemme see, I’m “damaged goods” because I dared to suggest that you get what you pay for on a blog devoted to economics…

Methinks I struck a nerve with that practical syllogism. It’s tough having the inanity of your deeply-held beliefs exposed, isn’t it?

@Tull /Grumpy
re: Missing letters
from the Ir Times
““I have now been informed that these letters have gone missing from the Department of Finance.” ”

Sounds strange. Like Grumpy says, the likelihood of no copies, or no email copies is a bit. The very answer, ‘the letters’ have gone missing, is suspect. There was no letters, as I understand it. There was emails!
Clearly the content of those emails is more embarrassing than the ‘loss’ of them.

I would have thought that all files had an index, and that all documents were scanned, referencing that index file?
Perhaps such practice only occurs in a smart economy.

Looking at my last post, I need to improve my grammar, if I am to survive in the new smart economy.

The missing files are clearly significant. Richard Burrows was old school…..unlikely to have emailed anything….nice guy, but knew FA about banking (corp governance was his job, in reality).

The missing files….like the missing money in that north Co. Dublin Garda station, nothing will be proved. Does anyone not believe that there is a “rotting corpse” all the same?

In my day, every piece of paper that came in was put on a file along with all the other paper that it generated as it went up and down the line and around the building. So you would find copies in various places. This was done to protect the officials as we had a record of what we wrote and who we wrote it to.
. There would also be copies in other places. If I sent you a letter chances are you would retain a copy.
As to email disappearing. I did not think that was possible. I thought email was like a zombie. You could bury it but it would come back to haunt you.
This is v. Strange.
If as it is hinted the docs refer to an offer by a foreign investor to buy a stake in BOf I what would be controversial?

I think Irish Water deserve the opportunity to state what their money was spent on, €50m is an awful lot for consultants, I wonder if software was not also provided for this figure. The don’t just need a metering system and invoice system as suggested, they need a 21st century inventory management system so that they are clear where each pipe is located, so that they can locate and repair leaks. That no commentator I have seen has mentioned this aspect of things suggests that there is no serious concern about proper management or the service provided, people are happy to rant without knowing much about the issues or even thinking for more than 30 seconds about the problem.

@ Dearg Doom

people are happy to rant without knowing much about the issues or even thinking for more than 30 seconds about the problem.

You seem to have missed the main issue here yourself – the enduring Victorian legacy of secrecy.

Irish Water says: “Our current funding model is simply not sustainable…Ireland is currently the only country in the OECD that does not have domestic water charges. This transition will ensure that Ireland is well positioned to attract foreign and indigenous investment, creating real potential for new jobs within the country.”

Transparency is an essential part of good governance and the public monopoly provides zero budgetary information to the public. Besides, none of the 10 non-executive directors have relevant international operational experience in the sector.

As for software, this is usually a good earner for consultants who can customise a system that was developed elsewhere.

Colm McCarthy wrote last month:

“The Government has apparently committed itself, outside the actual legislation as proposed, to setting up a brand-new super-quango (Irish Water has already recruited 300 staff) while leaving the pre-existing, and inefficient, structures fully in place for a minimum of 12 years. The local authority staff in this €1.2bn per annum industry will remain in place and will transfer, with all pay and conditions intact, into the new quango 12 years hence. What is going on here?

It would appear that, below the radar, our long-lost friends the Social Partners are back in business.”

Paul W
My touchy today arent tou
Ok..define risk (apart from price movements) and show me how irish or say spanish government bonds are at risk of non payment? Take your time. ..

@BWSnr,just had chance listen to this,WTF do people call the guards on themselves,did he do that old comic routine “do you know who I am”.He does make an interesting point on clients not be allowed to buy.Should price not be the only criteria,any other groups excluded?
5mins in.

@Dearg Doom

Rant or not, I stand over what I said in relation to Irish Water.
It should be shut down now, even if it cost a further 50 million to do so.

Further, let me reiterate, all Irish Water fundamentally needs is a metering system and a billing system. All councils already meter and bill commercial properties, so a system is already in place for commercial customers. Irish water does not need a ‘world class’ inventory system or other incidental paraphernalia.

The biggest inventory item in a water company is, guess what, water. It also needs maintenance stores in the various locations, that are all currently in place.

So the learned experience of the past 50 years is to set at zero, and new ‘consultants’ are going to tell us how to make more water run through a leaky pipe.


From the point of view of the government, the biggest problem is PR.
“Fine Gael junior finance minister Brian Hayes warned: “This is a PR disaster for Irish Water, the company is 10 points down in the game.

What game? This was about 20 euros so far out of the pockets of every man, woman and child in this country. And for nothing. To pay consultants.
The money it appears is of little concern to the Minister for State at the dept of Finance.

“Only five of the successful bidders have been disclosed: they were IBM, Accenture, Pricewaterhouse Coopers, KPMG, Ernst & Young and Oracle.”

All publicly tendered contracts, and no doubt three tenders for each contract, and these were absolutely the lowest price in town!

“The tenders were issued by Bord Gais Eireann on behalf of the water company and included a wide-ranging search for “subject matter experts” in areas such as engineering, project management, governance, quality assurance and industrial relations.”

The only subject matter can should conceivably have required outside expertise is engineering. The remainder should be within the competence of those hired to do the job. If they had not that competence, then they should not have been hired.

NAMA, of course, was much more clever in relation to consultants. They don’t pay consultants, the pay ‘Primary Service Fees’ and other such mangled verbal concoctions, but it amounts to the same thing.

A massive gravy train for the South Dublin professional classes. To hell with the water and to hell with the country. These guys are rolling in it. And people wonder why house prices in South Dublin have increased by 30% last year.
The country is being ransacked, from within and without.

Most of these systems and packages can its need

Fine Gael junior finance minister Brian Hayes warned: “This is a PR disaster for Irish Water, the company is 10 points down in the game.

@Joseph Ryan I am not expert in Irish Water, but they should be assessed in a balanced way and I for one do not have the information to do this. Do you? Any assessment needs to evaluate whether what they are trying to do is appropriate and whether they have done this in a cost effective way. There have been numerous criticisms of the HSE, which never standardised its operations across the State. There have been numerous calls for common procurement and the like. In my opinion, there is no way that Irish Water should just take the 34 existing water operations and leave everything in place, just having the same logo on the bills. There are real savings from integrating these operations.

As for the ‘world class’ inventory system, I repeat that the savings will come from reducing the leakage and from being able to efficiently identify leaks and schedule their repair effectively. A once off inventory process is needed to do this, given the poor state of record keeping in many cases. It is absolutely appropriate to do this, provided that it is done in a cost effective way. The likes of IBM and Oracle have genuine international expertise to offer, they should not be compared with estate agents, and if they are asked the right question they can contribute to productivity.

@ Brian Lucey

This would be the same Willem Buiter who said that Greece would leave the Eurozone in 2012, before admitting he got that wrong, and that Ireland would default, before admitting he got that wrong? It’s interesting that Buiter now gets more coverage when he writes for think tanks than he does when he writes for his actual employer.

@ Brian Lucey

Also, glad to see that after many many years of denial and suggesting otherwise (blog comments, op-eds, a book etc) you have finally relented to the idea that banks and sovereigns will not simply go bust under current EU policy. This makes progress, even it is potentially incorrect on the banking front in my view.

@ DD: Irish Water is a commercial and social parasite – no ‘balanced assessment’ is required. If it is not shut down pronto, then 50 mill will be just the first of many, many more mills out of the taxpayers (and their dependents) incomes. Yes? For what? I think JR (above) has made a neat case.

Any company, private or public, which requires ‘secrecy’ of its operations or whose promoters or execs intone ‘commercial sensitivity’ – are simply a flock of lying-sacks-of-shit. And should be treated as such.

If you have the stomach: visit Jesse’s Cáfe Américain. You will need to read quite a bit of stuff. Buts its essentially about ethics, morality and callous disregard for others – up to and including criminal fraud.

Shut the sucker down! Amen!

On the economic outlook, folks could be divided into optimists with a subset of fantasists, realists and pessimists – people who need a lot of positive evidence, sometimes based on bitter actual experience and would be unlikely to choose entrepreneurship. This group would have a subset of those who are likely to buy airport economic crash books during a boom.

The realist is usually an optimist but filters official spin, data for distortions and subjects key policies to a reality check.

Colm McCarthy has highlighted the clamour for tax cuts when debt continues to rise and on Dec 16 a day after the official bailout exit, IBEC, the business lobby group, called for cuts in income and business taxes, that would be financed by reform of public pensions.
Whatever the merits of the latter, with the opportunity for reform past, it will now realistically have to wait the next economic calamity or for decades as new entrants with the modified scheme, rise. Besides, cuts in business taxes when corporate and employer social security taxes are the lowest in Europe, with little positive impact on the indigenous sector, would be bizarre.

The weak mandate given to the Fiscal Council suggested that little has changed in the Department of Finance and the economics unit with its increased staffing, continues to operate in a highly politicised system.

Prospects would be brighter if there was a system where strengths and weaknesses are honestly assessed and where sunset rules apply to many public programs, grants etc forcing evaluations.

However, the vacuous economics ‘strategy’ announced last month buried hope that such a route would be taken.

I just saw the latest spin in the Indo. “Bill Gates buys Irish bonds as default risk evaporates”

@ MH

The perfect political storm that results in fundamental change may actually have arrived. Water in Ireland is an incendiary political topic.

It is either that or another “sudden stop” in the ability to borrow even more.

Yesterday night I watched again “The Ghost and the darkness”, with some Irish engineers “sorting it out”

Some of the celtic tigers might be interesting in that the Tiger Mom Amy Chua is lashing out again in “the triple package”, this time joined by her man, and her tiger cup Sophia being in the Army ROTC, maybe a little underweight, like the

German tiger wiki/Otto_Carius, who still is available with medicine in his Tiger pharmacy : – )

Given that you are one of the moderators, why not push to change the rules. If you know who EOin is why are you bothered about his handle .
I care less about whether has courage or not. I am more interested in what he has to say. Perhaps Bond does not want to engage in self promotion like some others. The site would be poorer for his absence .

“By the time the financial crisis has abated, the pension crisis will be out of control.”

2nd last para. Eh? Is the ‘pension crisis not already out of control? Genie back in bottle – how? There is a pension crisis precisely because we are having a financial crisis – which has been four decades in the making. Its unwindable.

Does the author of this piece actually – like, really and truly, believe that investing 15% – 20% of ones salary, will, over 40 years actually accumulate a plausible pension? What % interest rate return would that involve – 8% p/a? Wake me up! But not just immediately.


I always find BEB’s opinions and facts relevant/informative–even though his opinion of mine is the reverse. Play the ball not the man,surely any distinguished academic like, a TCD Professor ,would agree?

Theres no need for anyone with a public persona elsewhere to adopt a pseud somewhere else
sure in a number of cases, but not if you already have a public profile

..which is to say im sure its just a pseud that beb got stuck with..no harm. I think the evidence post 2008 is 85% + of people who speak consistently on the irish economy have some classof ideological/financial investment..so bets to take it all with a pinch of salt, or so ive found


That is the exorbitant cost of exorcising the ghost; but only assuming that the current level of pension payment is maintained. Unless there is a remarkable improvement in economic performance, the problem can only be resolved by further dramatic pension reductions except, possibly, in respect of those funded by the holder from other than taxpayer-paid resources i.e unaided by tax concessions..

Incidentally, what is already overwhelmingly evident from the Irish Water debacle is the excessive concentration of power in the hands of ministers which is, in turn, an outcome of the “winner takes all” assumption underpinning the view of Irish politicians with regard to elections, leading to what best be described as “ministerial hubris”.

“people who speak consistently on the irish economy have some classof ideological/financial..”

The irish economy as a totality, not the the irisheconomy.ie..no offense meant to the locals


Another remarkable development, is that the force of public opinion, and the public’s understanding of the principles that are at issue, which most politicians either have not grasped or are refusing to do so, appears to have given Dáil committees de facto the powers which successive governments have refused to give them de jure.

I think it’s very dangerous for the Sindo.to tell Independent Woman and her common law spouse that the default risk.on Irish bonds is zero. The future may be deflation which would make the current debt load even heavier and as the prof says debt isn’t being paid down. This is no time for complacency even if the bonds are selling reasonably well.

@ DOCM: Yes. When power concentrates – morality evaporates. Though who gets ‘bashed’. Why its the young, the disabled, the sick, the unemployed (or low income folk), the elderly. The elites think themselves inviolable and invincible. Unaccountable.

Here’s hoping your correct. And yes (again) your comment about water being ‘incendiary’ – bit Freudian that, might be spot on. That proverbial political banana-skin!


Some of the recent capitulations are beginning to make me wonder whether the top might be fairly close 😉

You have been generally sceptical on the rally in Irish risk assets for a good part of the rally. Same with Seafoid, who is flogging the bear like well a dead horse. Eoin & JF have been generally right.

Most of of us here, self included have been pretty useless. Of course we have the odd correct call from time to time, pretty much like any punter on a Saturday. Or as one of my old bosses said strategists are like stopped clocks…right twice a day.

There are quite a few though that you would not send out to buy a newspaper.

@ tull

Ireland is a flea on the a*5e of the global economy. What is going on Above Stairs is something else.

‘By all accounts, William McChesney Martin was one of America’s greatest central bankers – disciplined, independent and prudent. He was definitely no inflationist. Martin actually well-understood the insidious nature of inflation and, in the words of the New York Times, he “detested” it. He headed the Fed from 1951 to January 1970. In the late-sixties he raised rates to fight rising inflation in the face of intense political pressure. It is worth noting that in the twenty-year period 1950 through 1969, the Fed’s balance sheet increased $32.5bn, or 67%, to $80.7bn. Over this same period, GDP jumped 274%. The Fed’s balance sheet was 15% of GDP at the beginning of Martin’s term (inflated from WWII monetization) and was down to 8% by its conclusion.

Over the most recent twenty-year period, Federal Reserve assets have increased $3.576 TN, or 844%. Over this period, GDP expanded 151%. Examining just the past 10 years, Fed assets inflated $3.03 Trillion, or 400%, compared to 52% growth in GDP. Fed assets remained in a range of between 6% and 7% of GDP from 1980 to 2007. They ended 2013 at about 24% of GDP and were climbing rapidly’


@ Tull

The fact that interest rates are still on the floor is what suggests this motherfr has a good bit to go. I know it’s the Grauniad not the Telegraph but the words are Merv’s. And that was just last June


“On unwinding the stimulus
It’s a contingent path. And it’s contingent on conditions returning themselves to normal in order to allow interest to return to normal. We are nowhere near that yet. And I think people have rather jumped the gun thinking this means an imminent return to normal levels of interest rates. It doesn’t.
Until markets see in place policies to bring about that return to normal economic conditions, there is no prospect for sustainable recovery and without that prospect for sustainable recovery, markets understand that it will not be sensible to return interest rates to normal levels.”

Meanwhile Mario announced this week that interest rates are not going anywhere for the foreseeable.

John Authers said a few years ago that it takes at least 7 years to get over a biggie and that the intervening years are marked by booms and slides and generally sideways movement in equities

No sign of the great rotation either AFAIK. Various punters are still moaning about “financial repression”..

Did Mickey Hickey say he trusts the Swiss commentators ? This was in the NZZ in December

“ist der keltische Tiger zurück? ”
-Is the celtic tiger back?

“Glaubt man den Beteuerungen der irischen Regierung, gibt es auf der grünen Insel nach sechsjähriger Qual wieder Grund zur Hoffnung. ”

-do you believe the Irish Government that hope is back ? Do you reject Satan and all his empty promises ?

“Mitte Dezember wolle man das Hilfsprogramm der EU, der Europäischen Zentralbank und des Währungsfonds verlassen, berichtet Martin Alioth aus Dublin.”

-Martin Alioth reports that Ireland wants to leave the bailout mid December

“In der Tat zeigt die irische Wirtschaft erste, zaghafte Symptome der Erholung.”

-Actually the Irish economy is showing signs of recovery

“Doch die Risiken bleiben beträchtlich, kommentiert unser Korrespondent: «Die EU, die dringend ein Erfolgsbeispiel für ihre Austeritätspolitik braucht, wäre gut beraten, wenn sie Bankschulden der Iren teilweise übernähme.”

-But the risks are sizeable . The EU urgently needs a success story for its austerity polices and would be well advised to take over at least some of the banking debt


‘It’s interesting that Buiter now gets more coverage when he writes for think tanks than he does when he writes for his actual employer.’

Buiter didn’t, and couldn’t anticipate the fact that central bankers were going to throw away their own rule book, and prop up financial assets willy nilly without regard for the macro consequences. Driving people into risk assets is fine until it goes wallop.


This is the third or fourth time you have had a go at this.

I try to convey scepticism about many things – sustainability of Croke Park, reform, posturing over ‘negotiating’ debt write-offs or defaulting, off-loading the blame on foreigners, willingness to have a proper banking inquiry, bank provisioning, retrospective ESM bank bailouts, benefits of Euro membership and many more, but I thought I had been fairly careful not to do so about Irish risk assets per se and there’s a reason for that.

Hmmm Thorsten Beck’s presentation:

Ireland’s Banking System – Looking Forward.

Hmmmm methinks a more precise title, from me usual citizen_serf perspective, would be:

Banking System’s Ireland – Looking Around.

Looking around – and a little de_construction of official waffle ….

Meaningless words mask rotten system

Language has become a tool for politicians to hide the fact they’ve ceded power to bankers, writes Gene Kerrigan

“The predominance of vacuous language (or Vaccuspeak) among our rulers isn’t just a matter of poor vocabulary, a poverty of expression — what the hell, we can’t all have Chris Hadfield’s communication skills. But this language is very effective in that it allows an apparent discussion of events, thereby calming a crisis, appearing to provide media accountability, while leaving the real politicking to the back rooms where the forces involved play out their conflicts in private.”


An award winning crime novelist is probably better placed to comment than most economists …

“The clearest analysis I’ve seen of the relationship between economic elites and their political classes, and the global moneyed classes is The Quiet Coup, a lengthy piece by Simon Johnson, former chief economist with the IMF. He writes of “a political balance of power that gives the financial sector a veto over public policy”. The financial sector includes the banks, hedge funds, bondholders and their camp followers.

Simon Johnson: “Under duress, generosity toward old friends takes many innovative forms.” (See the bank guarantee, the bondholder bailout). “Meanwhile, needing to squeeze someone,” says Johnson, “governments look first to ordinary working folk — at least until the riots grow too large.”

Kerrigan again: Hmmme … riots? What riots?

@ David O’Donnell

The manipulation of language in politics is not new.

In ‘Nineteen Eighty-Four,’ George Orwell’s celebrated novel, the character Syme is working on the definitive eleventh edition of a dictionary of Newspeak, a language of words that would not become obsolete before 2050. “‘Don’t you see that the whole aim of Newspeak is to narrow the range of thought? In the end we shall make thought crime literally impossible, because there will be no words in which to express it,” Syme says to Winston Smith.

What George Orwell described in 1946, three years before publication of his novel, as “euphemism, question-begging and sheer cloudy vagueness” can be found in the common use of the term ‘world-class’ in Ireland, which was vividly illustrated by an Irish Times report on 10 Oct, 2010 titled: “Fás board to agree plan for new ‘world-class’ skills body”.

The aspiration of just competence and prudence in public spending may have required the need for some practical specifics rather than the realm of fairytales – an art we excel at.

A year before, the heads of Trinity College and University College Dublin announced an innovation alliance with bromides such as: ‘world-class ecosystem,’ ‘world-class graduates,’ and ‘visionary job creation plan.’

As for ‘excellence’ and Mary Harney’s ubiquitous but mythical ‘centres of excellence,’ this vague terminology is a classic case of putting the cart before the horse.

The Irish Times had a headline last week: ”Kenny faces trade-off promoting Ireland Inc abroad.” Was the taoiseach promoting Ireland Inc, the business lobby group, or what?

George Orwell, "Politics and the English Language," 1946

Political language – and with variations this is true of all political parties, from Conservatives to Anarchists – is designed to make lies sound truthful and murder respectable, and to give an appearance of solidity to pure wind.

Now you are being really precious. As if your I markets would tremble if your identity was revealed.
Words do have meaning though and the phrase capitulation …. and top convey a simple message to most market participants.However, if you were referring to a top in wheat or cattle futures I do apologise.

I’m assuming this is M King speak.

“Until markets see in place policies to bring about that return to normal economic conditions, there is no prospect for sustainable recovery and without that prospect for sustainable recovery, markets understand that it will not be sensible to return interest rates to normal levels.”

There are no longer ‘markets’ – but there are cartels of high-frequency traders (that’s a very polite term, by the way) and collusionists who rig the posted prices of every thing that can be controlled from a keyboard (which is cheating?) – but the regulators are so very, very busy – doing what?? No matter.

Its not the economic conditions that is the problem, its that the Rule-of-Law has been ditched. But hey, who cares? Whose are those yachts moored in the marina? They sure as hell do not belong to the customers.

Its my (naive?) understanding that commercial money rates are some percentage below the rate of return on whatever the productive enterprise may be. The borrower has to be able to ensure a higher rate of return, else they cannot repay both the interest on the borrowed capital, and lay off the principle in some reasonable time frame. So current rates are? What? I can borrow at 0.25% (or maybe less) and lend out at 3%. Jeeze, that’s a no brainer!

If the business interest rate is 3%, then productive enterprises must be getting a return of what? 5%? Hmmmmm. That math seems a tad iffy. But hey, lash on the confidence – never mind the reality!

If its a no brainer to lend out ‘free’ electronic money – they why the hell would anyone (except they lack a brain), involve themselves in borrowing to create or sustain a productive enterprise when the probable return will not cover their repayments – which have to be made in real money? Hump that for a lark! Lets ‘play’ with electronic (virtual) money – its more fun!

Normal service will resume in ……. [fill in blank yourself].

@ PQ

“Buiter didn’t, and couldn’t anticipate the fact that central bankers were going to throw away their own rule book, and prop up financial assets willy nilly without regard for the macro consequences.”

Is this a joke? It was entirely predictable. Some would say it was incredibly obvious. Every CB in the world has done it in the past and will do it in the future, if push comes to shove. Further, Buiter couldn’t, and still can’t, get his head around the idea of solidarity being shown within the context of the Eurozone crisis, and that both politicians and citizens will actually go to extraordinary lengths to keep the Euro project alive.


Thanks. The recovery is already priced into US equities. I am doing the rosary. Should I get the child of prague onto the case? Will promise publication. When the model is broken we have to understand what is driving what happens. There is a lot of legacy stuff that hasn’t been dealt with. Maybe we need more time. Grumpy’s list has much to commend it. The BOHICA factor is also there in the background.


The way this works, or is supposed to, is that when you get to the point that it becomes almost impossible to come up with a plausible mechanism by which a market will fall, when the last bear has thrown in the towel, and it is actually embarrassing to try to contradict the optimism, then you are supposed to force yourself to believe the market is at a top. Think Irish property in 2006, Tony Dye being forced to resign etc.

Albert Edwards, Hugh Hendry etc etc, they have all capitulated, the bulls are so cocky its amazing…ergo?

To put it simply, a quirky, but previously reliable tool makes me suspect risk markets generally could be at or close to a top (ie don’t go higher) right now.

That’s just one guy’s suspicion, and markets are a lot harder to analyse than economies.

@ Grumpy

“Albert Edwards, Hugh Hendry…”

Albert Edwards is an insane perma bear who (still) thinks gold is going to $10k, 10Y Treasuries to 1%, and the S&P500 to 450 (ie -75%).

Hugh Hendry is simply a bit more nuanced in where he feels valuations etc should.

Albert Edwads has neither capitulated nor should be considered a serious forecaster. He is to be used for comic relief only. Even if any of his forecast were to come true, this would not justify them given that he has been short risk for so long and so wrong now.


Used to go through Albert’s stuff years ago but found the best way to do it was to look at the pictures and not bother with the writing.

This is the relevant bit from HH

“”I may be providing a public utility here, as the last bear to capitulate. You are well within your rights to say ‘sell’. The S&P 500 is up 30% over the past year: I wish I had thought this last year.”

I don’t mind that people are perma-bears, its how sheepish or cocky they get that can be useful.

Its intriguing that I can currently make a very strong argument that almost anything with yield can be bought even now and is bound to be a sound investment. Most assume economics is going to dictate that interest will remain low for a long time, QE will be applied, probably even by the ECB, as necessary, and we even have Summers, Kruggy and, less impressively Greenspan etc all suggesting bubbles are acceptable and even desirable.

How can you rationally sustain a bearish outlook? Who are the noisy bears left? As far as I remember Nouriel ‘its a suckers’ rally’ Roubini turned bullish a while ago.

Maybe the key will be when Buiter goes back to the FT or acedemia.

The S&P was at 669 fairly recently. The markets know what the price is at all times.

Perma low interest rates are emblematic of Japan post 89. Most equities now have optimism priced in. If you build it they will come. Maybe. But the corporates aren’t investing their cash piles. Something is missing. Deutsche Bank did a calculation recently. Euro high yield corp bond yields would have to go to -47% to see returns of 150% over the next 5 years.

@Michael Hennigan

Ta for that. The quote that I use recently from George Orwell ….

“At a time of universal deceit, telling the truth is a revolutionary act.”

@grumpy; seafoid

I see that Tull is throwing tantrums out of his pram again with his usual balls of candy_floss … take little notice.

@ Grumpy

the S&P was indeed at 669 in Q1 2009, but a lot has changed in the last five years, and Albert refuses to recognise this. In May 2009 he was expecting 400 on the S&P 500 (ie a further 40% drop from the low), and if you’d followed his advice you’d have missed out on a 170% bounce off the bottom in the headline index, and a 200% return if you include dividends etc. The simple fact is that his outlook is no longer based on actual economic data and facts, its based simply on his opinion that the world is still in the midst of a credit fuelled asset bubble that will not only pop, but will see the complete collapse of the global economy, and an economic ice age (his term, not mine) occur.

In Ireland we haven’t had quite the same level of perma bears, only McWilliams was really vocal in the boom years, and his forecasting was so early (ie 1999) that it is not really accurate to say he called the bubble correctly when you consider that if you followed his advice you would have missed out on 8 years of capital appreciation and rental income and still only found yourself back at square one even if you stayed fully invested. He spotted the birth of the bubble, not the maturity of it, and ultimately investment is all about timing. The Economist got probably as close as anyone when they frequently suggested the housing bubble as becoming a problem in 2003-2004.


“How can you rationally sustain a bearish outlook? Who are the noisy bears left?”

The absence of noisy bears should be a warning sign that investors are all standing one one side of the boat. Ditto for all-time highs in margin debt. Makes me pretty bearish.

To answer your question, John Hussman is still bearish (and credible) http://www.hussmanfunds.com/wmc/wmc140113.htm.

[Disclosure: I own OTM June S&P and am not immune to wishful thinking]

Say Authers is right and the latest boom of 57 months is just an intermediate step since we aren’t at escape velocity and are due a slide that will be followed by another sequence. Would now bw the time to uncover the shorting machinery and are the people at Squid HQ likely to be thinking along these lines?


I think you have me confused with seafoid.

I’m familiar with Albert’s record, to the extent that I have on several occasions whinged to the FTA crowd about their featuring it. He’s genuinely crap.

But indulge me. Who can you think of that is bearish (of financial markets, not GDP figures) that is still out there selling that line as opposed to slinking away with their tail between their legs?

Marshall Auerback: When is a Bubble a Bubble?
Posted on January 13, 2014

“… the most astounding fact about the great bubble decade of the 1990s was that there were 84 months in a row in which the market did not fall by more than ten percent. The previous high in this figure was 28 months. So naturally people began to think that not only were returns so high that you could become rich quick by participating in the stock market; but there was seemingly no risk in chasing such quick riches.

I only mention this because while I think the economics literature from Keynes onward is very good on the propensity of markets to greatly overshoot and undershoot the fundamentals, economics per se does not adequately explain what makes the dynamics of bubbles more than an overshoot. In other words, what makes them recursive, explosive, parabolic? That is the difference between real bubbles and mere waves of pessimism and optimism that move markets all the time even when there is no rational basis.

To get a full measure of this one has to enter into the realm of psychology and neuroscience. That’s where the definition lies. Bubbles, like so much else, are too important to be left to the realm of economics alone.”


” …if you followed his advice you would have missed out on 8 years of capital appreciation …”

Happened to the best of folk. You had to do Jimmy Goldsmith cash-out at the right moment, though.

” … spotted the birth of the bubble, not the maturity of it…”

Ah, yes. So did the Rev Malthus. Bit previous he was. But. Maturity is …? It IS there, but where?

Several commentators were warning of a serious negative financial event as early as 2002. That’s not prediction. That’s an assertion based on the evidence they had available to them. I can assert, with confidence, that we will experience a sequence of increasingly serious energy shocks. But I have no notion as to when these will arrive. But arrive they will.

@ DO’D:

Maybe we should include Charles Mackay* on the reading list for econ undergrads.

*’Extraordinary Popular Delusions and the Madness of Crowds’. But would they read it? Have me doubts!

“So what’s new Pussycat?” 🙂


what are your talking? S&P at 669, pffffht.

The most simple picture is, with rounded numbers:

Take a total return index, like the DAX, but not the S&P500,

8% raw yield, minus 25% tax, makes 6% net, minus 2.0 % inflation makes 4% real, makes a wonderful long term description

Add historically in different treatment of dividend (typically 2.0% now) with regard to tax, some inflation bubbles, squabble about state tax in NY, CA in the US, 0.3% into one direction, 0.2% the other direction, endless galore possible, of course.

Argue, that Gold might be the “true” long term inflation indicator, adding some 0.35% to that, dependent on what start/stop point, and ignoring storage costs (0.25% ?)

Both the US and Germany are pretty much where I predicted that in 2005, probably 5 -10% overvalued, as so often, I am presently updating somewhat more complex files

Some links I find useful:


http://pages.stern.nyu.edu/~adamodar/ in general

present day average maturity of government debt is more like 5 years
interesting ticker PTRAX

(very) long term risk free rate, after tax and inflation, close to zero

many things approaching “normal”

Given the latest data, I might be willing to contemplate lowering US NAIRU by a quarter from 6.0%


Certainly think that psychology should be included – neuroscience prob a bit much but now influencing behavioural economics. Best would be a year on the fact that so called ‘instrumental rationality’ is one-sided and does not incorporate all of human rationality. Then another year on the structures and processes of power. One more year on a hermeneutic de-construction of Grimm’s Fairy Tales ….. and then dumb down to the mathematics of the ‘perfect’ market in final year.

Then again, I’m only an interdisciplinary generalist citizen-serf – what would I know?

@Prudent Hans


@ Eoin/Grumpy

Normally the time to go contrarian is when everyone else is piled in. Or does the Fed factor overrule what you should do when your shoe shiner is getting into the market ?

I think the FT had a lot of raised eyebrows up until last summer . There is still some rearguard bear action from the likes of Henny Sender.


“One problem is that the risks of the Fed’s easy money policy are largely invisible. Today, those Fed policies appear costless – just as they did after the last round of easing. The shortfalls in pension funds assuming 8 per cent returns in a zero rate world are barely being acknowledged, let alone dealt with. Millions of Americans who are postponing their retirements because they aren’t earning enough to finance them don’t seem to have factored into the Fed’s calculations. Sadly, retail investors will be the last to get out of the risk assets they are being driven into now.
Executives at firms such as Apollo Management are not alarmed, though. They know the foundations for the next distressed cycle are being laid today, thanks to the Fed’s generosity.”

I just wonder what’ll happen when fund managers realise prices aren’t going to go any higher.

@ JF

48% of SME bosses say business is “good or very good”.
50% of SMEs have loans that are impaired. Do we know anything about the other 2%?

David, I would hold out little hope for any ‘positive’ educational developments in economics. Not impossible, just improbable.

The curriculae and syllabi in third-level are usually decided by the research academics who do some teaching as a side-line. Hence, the course programmes tend (mostly) to reflect the major interests of those academics. I may get a ‘rocket’ for this semi-biased comment, but its not unreasonable. The basic or foundation courses have to be taken in first and second year. After that its mostly specialisms. And nary a one trained and qualified as an actual third-level teacher of economics! Common across all disciplines.

There was an old saying, that if you asked two economists for their opinions, you got three! It might be even more confusing if you asked for ideas about economics education! Too many chiefs: too few injuns!


I think you might have this wrong. There are some big loan write-offs doing the rounds of the sun 20m impaired SME sector, foreign banks leading the way – usually no need to sell the business to more prudent businesspeople, no interruption to private schooling etc.

Coupled to that there is a mini-boom going on in some areas and has been for a few months.


The problem with the permabear mindset is the assumption that ‘if things carry on this way…’ a disaster will happen. But things never do ‘carry on this way’ – things always change. Sometimes because policy makers force things to change, and sometimes because of simple natural variation and regression to the mean.

Things always change. What matters is the demand underpinning the recovery, not the identity of the businesses poised to reap the benefits. Plenty of businesses will go bust, but lots more new businesses will take their place if the demand is there.

“40% of Irish businesses expect to add to their workforces this year, with 58% expecting their employment levels to remain the same. This gives Ireland the second most positive employment outlook in Europe after the UK.”

It’s the same with the so called mortgage delinquency disaster. While the bears were poring excitedly over each new report from the central bank, guess what? House prices started going up. Employment started going up. Most people carried on paying off their mortgages (they don’t last forever!) and new people with much sounder credit profiles entered the market. And now the delinquency numbers are starting to go down.

And yes, there will be a downturn at some point in the next few years. Because things always change.

@ JF

Yes, things do change and you should never bet against America and Kerry win an all Ireland every 4 years . But this crisis is serious- it’s 5 years in and interest rates are still on the floor. And things are still very fragile. So if there are a few animal spirits around, great, but there’s a lot more to do. There are so many structural and debt hangovers in the background.

I have shares too and I don’t see them growing much over the next few years. How about your portfolio?


Hold the bubbly.

‘There was an increase of 1.2% in the seasonally adjusted industrial turnover index for Manufacturing Industries in November 2013 when compared with October 2013 (see above and table 7). On an annual basis turnover increased by 0.7% when compared with November 2012’

@ grumpy

How can Ireland be immune from global trends ? This is a balance sheet recession. Given the private debt burden, it’s not realistic to posit a consumer led recovery here. Private schools in leafy suburbs depend on a whole lot of less privileged folks getting out of debt and back to work. Someone has to produce the surplus.

There may be a buzz here and there, especially in the ‘markets’, but the bread and butter issue is that credit is expensive in the periphery. 8% APR for a car loan if I recall a recent billboard (small print) correctly. Is that going to get better when interest rates ‘normalise’ ? As for the number of business startups, that could simply be an artefact of training programmes.

The Swiss are not sinking in the bog up to their chins. The Irish government is in over its head and is having difficulty seeing the trees due to the forest.

The degree of uncertainty expressed by the Swiss is about right when one considers what could go wrong with the EZ. To say nothing about our populist (on the surface) government desperate to be re-elected. Add the two together and nervous money would not be looking for comfort in Ireland.

As they say, the trend is your friend and it is flat lining.


Re Investment

I know little about it, but it seems to me that a sectoral approach makes sense. I have the broader agri sector in mind. People will always to to eat and to grow food. A company such as Yara would fit the bill. [If only my pension fund had invested in it rather than Anglo and AIB.]

On a different topic.
When the FED buys assets, I assume that it buys bonds, both bank and corporate bonds, paying market price at presumably yields of ~3%- 5%. I don’t understand why there is an explicit or implicit need for the FED to eventually unwind its level of asset holdings. My understanding is that private banks created a huge level of credit and the FED is simply countering the deleveraging of the private banks. [Creating money that the private banks are destroying through deleveraging or other balance sheet adjustments].
Eventually private institutions will have so much surplus cash, that buying back the FED assets will make sense, as they will yield more than the cash holdings, but there is need for the FED or any other CB to cause instability by dumping assets, is there?

Last sentence above should have read:
‘but there is no need for the FED or any other CB to cause instability by dumping assets, is there?

After brief discussion of possibility of economic recovery, board mean reverts to normal doom porn setting.

fyi – looking around …

The Irish Media And Austerity

“… The study {UCD full report linked – pity about The Examiner} examined over 400 editorials and opinion pieces in Ireland’s three leading newspapers (Irish Times, Irish Independent and Sunday Independent). It found that only 12% of articles oppose fiscal consolidation, 55% support it, and 34% don’t voice any clear opinion. Worse, those numbers arguably overestimate the extent of the small opposition to austerity, because many of the articles opposing fiscal consolidation simply reject specific cuts without proposing any alternative policy. It is astonishing that only 3% of all articles support an increase in government spending, which could form the basis of a Keynesian stimulus programme. The media debate thus revolves around how best to implement austerity, without questioning it. Totalitarian regimes would surely be impressed by the effectiveness of this information control.

[…] The media have helped the government extensively in that task. One reason that explains why only about 12% of articles oppose austerity is that a large majority of writers come from elite institutions that favour austerity. Excluding regular journalists, 29% of the authors of opinion articles in the press on austerity are mainstream economists, 28% are working in the financial or corporate sector, and 20% are political officials in the three main political parties, which have all supported austerity. In short, the overwhelming majority of writers (77%) come from elite political or economic elite institutions. The remainder is composed of 9% of academics (excluding mainstream economists), 7% of members of progressive organisations, and only 3% are trade union officials. It is thus a very conservative cast of writers who are allowed to take part in the debate in the national media. Elite sectors dominate, but institutions like academia and trade unions are also relatively conservative, further reducing the number of progressive ideas.”


… and on the blog???

@ Tull: “After brief discussion of possibility of economic recovery, board mean reverts to normal doom porn setting.”

That’s a big mouthful. Care to spell it out in simpl(istic) terms? If I inspect your car and inform you the brakes are defective … … That’s ‘doom porn’? Depends I suppose.

@ Brian Woods Snr

no, highlighting defective breaks would not count as ‘doom porn’.

However, highlighting that previous models of my car were reknowned for breaking down and turning into firey balls of death, and that therefore my newer better model might also, does count as such.

The recovery is underway and the market sentiment has swung dramatically from a year ago.

Last week Bankia, formed from a merger of seven banjaxed Spanish home loan lenders (cajas), which had to get a bailout of over €22bn in 2013, tapped investors for a 5-year senior unsecured bond, raising €1bn at a rate of 3.5%, after the issue was 3.5-times subscribed.

Business capital spending will sustain the recovery but pre-2008 will not be back after the classic recovery spurt in activity.

Aldi and Lidl, the German discount retailers, had their best UK Christmas seasons since they set up operations there in the early 1990s. Absent credit on tap and pay rises, Christmas shopping was also restrained in the US. It was estimated in 2010 that the top 5% of Americans by income accounted for almost 40% of all consumer outlays. Outlays included consumer spending, interest payments on installment debt and transfer payments.

On investments, the ISEQ at end-2013 was back to Feb 1998 levels; it’s likely that not many individual investors cashed out when the market peaked on Feb 21, 2007 – it was almost 2 weeks after HSBC announced multi-billion dollar losses on US prime mortgages. For several years there were reports of a massive rise in interest-only mortgages. Nobody heard the news!

On the long-term, forecasts of growth are not reliable but multi-decade trends do generally matter.

The European Commission is not optimistic about the long term:

Eurozone living standards could fall to 60% of US levels by 2023 – a mid-1960s ratio

@ DoD

is that the “study” by the Mercille guy? Dan O’Brien gutted his arguments on RTE radio. Dan pointed out that Mercille has described ALL academic economists as part of the “elites”, even if they were left wing or centre in their political and economic persuasion -> ie Brian Lucey is not a fan of austerity, but would have been used by Mercille as an example of how the media is controlled by the “elites”. Essentially Mercille was complaining that non economists didnt get a chance to comment on economics, and we should find this a shocking revelation. Dan O’Brien also suggested that Mercille’s argument was akin to complaining that most articles on global warming are against global warming.

@ Seafoid

“50% of SMEs have loans that are impaired”

what is the source of this statistic? If you are refencing the Fiona Muldoon comments, please note that they have long since been clarified by the CBoI as being inaccurately described as “impaired”. Apparently the correct description should be that the banks have 50% of their loan book that they are worried about, ie could still fully current, and may never get into trouble, but are under some sort of watch or increased focus.


re the 50% stat. Damn you for trying to confound a “myth” with some facts. Presumably, if the economy recovers, cash flows and asset values go north and a loan that is on watch can move off watch.

But then the economy is not capable of recovering is it?


According to the Bloomberg article that I referenced above the definition of a bad debt is actually up for discussion within the EBA so who the hell knows if Fiona Muldoon or the CBoI are actually correct – it seems nobody really knows.

The right answer will be the one that allows the Eurozone banking ship to continue sailing and that will likely mean rule changes because without a rule change the capital deficit will likely be extreme.

Anyone for fudge??


I think there is an inherent bias in your opposition to the Mercille argument in drawing paralells with the global warming debate (and for DO’B an inherent arrogance)…implicit in this analogy is that there are of course some ‘outliers’ that think that global warming is a myth. Those with real insight and deference to scientific evidence would never concur with such a conclusion.

If anything the opposite is the case when it comes to fiscal consolidation argument….economic history and science is scoffed at in favour of the alternative “save the euro at ALL costs” acolyte thought process….


“We might be growing as fast as 4% GDP yoy at the moment, what does that tell you about the value of Government spending in Ireland?”

It tells me that that if we can pump that up another 1.5%, we will manage to get to a net nuetral position for the economy as a whole in terms of meeting our interest payments on debt for the year. Any growth below 5.5% will be taxed in full to service debt….what does that tell you about debt sustainability?

@ Kerchav

Mercille is not an economist. He’s a geographer i believe. He thinks there should not have been the push for austerity that there ultimately was. He does not suggest where exactly the magic funding tree is currently planted, but presumably he thinks we should have harvested it instead of implementing austerity? Austerity is a fact of life within the confines of Eurozone monetary policy (ie no QE). The only issue of debate is how exactly it was implented, and perhaps the pace of its implementation. I’ll maybe even give you the scale of the austerity as an issue of debate. But austerity simply had to happen given the restrictions on the ECB’s mandate and the real-politik of Eurozone policy.

Further, what Mercille neglected to mention was that with 75% of the vote in the last election (and more in the previous one) for the three “pro austerity parties (and more again for the right wing Ind), would it not make sense that the majority of opinion writing on this issue would also be in favour of austerity, particularly given that almost all the media has some sort of commercial mandate to offer products/services which the people want? Mercille’s biggest complaint seemed to be that there was no left wing mainstream newspaper in Ireland. Is that possibly because there is no demand for such a product/service?

@ BEB: I am vanquished! The following is for Tull.

“Early afternoon Tull!”. Here’s one for you to ponder on. Human economies are physical processes embedded within a finite (fixed volume) container with finite (fixed) amounts of raw resources (air, water, commodities, etc., etc.) with which to conduct that economic activity. Money is not a limiting (finite) resource. Of course, there are us pesky humans. We just keep increasing in number. Bit inconvenient that.

Climb a stairs often? How about Coagh Patrick? Think about the effort (energy) needed to climb. If its a normal domestic-style flight of stairs, then each successive step up requires the same effort (energy) as the previous one. An interesting thing (in terms of the effort needed) is that although your total effort increases the more steps you climb, your marginal effort (climbing each succesive step up), is smaller and smaller relative to your total effort already expended. Now back to that mountain. And for ‘climbing’, mentally substitute ‘economic growth’.

Skip Croagh P: lets think Everest. The lower approaches require little effort, but slowly, inexorably, the slopes become steeper, the terrain rougher. More and more effort is needed to climb. Eventually you have use both your hands and feet to keep climbing. Above a particular altitude you will need protective clothing and climbing gear. Go much higher and you need to have a cylinder of compressed air as well. Climbing at those altitudes – even over a gentle slope is completely exhausting. Your marginal effort increases the higher you go. That’s the analogy for our modern, mechanized economies and our use of finite fossil fuels to grow them. The farther (or faster) you go the greater and greater your marginal expenditure – not of capital (that does indeed increase, but more like the marginal increase in effort in climbing a flight of stairs), but of our expenditure of our finite fossil energy resources.

Fossil energy makes our world go round! Our expenditure of fossil energy resources (even allowing for some very sophisticated prosthetic technologies) is exponential, that is, our marginal economic effort in ‘growing’ from where we are currently, to where we need to be – requires the expenditure of an amount of fossil energy equal to everything that we have already expended – and then some! There be limits to this sort ‘economic growth’ thingy. But that’s Nature. And its Nature that calls the economic growth shots, not us. Mind you, we are such arrogant sons-of-bitches that we DO know better. Indeed!

Now, this is not your normal subject matter for undergrad study in economics. So you are quite unlikely to encounter it – except on this blog courtesy of Brian the Merchant of Doom Porn. “Your welcome!”.

QE – the emission of electronic, virtual money, is like climbing that flight of stairs. The marginal cost of emitting extra billions (or is it trillions now) gets less and less the more you emit. No sweat here. So to ‘grow’ consumer demand – which is what is desperately needed – just let the ECB send everyone a free-of-charge, electronic ‘selfie cheque’ onto their iPhone – or similar. Economic problemo solved! Eh, no. But you will have to think hard and slow about that one. And do ye know what? I do believe its kinda doomy and porny. Interesting times, as they say. Oh, I almost forgot. Us pesky humans. Now we would not be part of the overall economic growth problemo, now would we? Naw!

“QE is alive and well. Long live QE!” Its costless!” Depends, I suppose.

@BEB,that’s a lot of nonsense,given the heavily subsidized media,anyone else in line for some debt relief ?

@Bond. Eoin Bond

Julien Mercille (2013) ‘The role of the media in fiscal consolidation programmes: the case of Ireland’. Cambridge Journal of Economics 2013, 1 of 20

Manuscript received 24 January 2013; final version received 7 July 2013.
Address for correspondence: School of Geography, Planning and Environmental Policy, University College, Dublin, Belfield, Dublin 4, Ireland; email: jmercille@gmail.com


Economics (or Political Economy) is NOT the sole preserve of ‘trained economists’, to use a phrase from a regular on here. Neoliberalism and ‘austerity’ are also of interest to other disciplines and to interdisciplinarians such as meself. I don’t take too much notice of being ‘guttedby Dan O’B – a bit like being walloped by Tull with his candy floss balls.

Any empirical glance at the meejia around here would agree with Mercille.

You note: ‘But austerity simply had to happen given the restrictions on the ECB’s mandate and the real-politik of Eurozone policy.

… the restrictions on the ECB’s mandate and the real-politik of Eurozone policy.

These were, are, policy choices – there were, are, alternatives.

That said, keep up the work – but beware of DanO and his little tantrums.

@Bond. Eoin Bond

But austerity simply had to happen given the restrictions on the ECB’s mandate and the real-politik of Eurozone policy.

“Giving the fact that policy making is corrupt and broken we have to adjust ourselves to broken policy that benefits only the powerful.”. How sage. I can see how things are bound to improve with that approach.

Might I suggest that the people who sensibly and stoically accept this statement might not be in the same group hit hardest by it? That they in fact might benefit from not opposing it, both professionally and financially? Fiscal compact types.

Also, not to denigrate Dan O’Brien’s integrity or impartiality, but if he is trying to suggest that the elite consensus exclusively in the European Union for a political solution is the same as the scientific consensus on a subject is any way similar he is being a teensy tiny bit disingenuous. Globally opponents of the EU approach to the global financial crisis is basically everyone left with any credibility after the GFC not involved with European policy making and the (whisper it) wealthy (who, incidentally, control the media and decide, rather than the public, exactly what it is they will get to hear).

This is basically just the sibilant chorus of European neoliberals whispering “TINA!” “TINA!” over and over again. Of course there is a better alternative but the class interests of the current European political , financial and technocratic elite are just not compatible with it.

Wonder how many rejections DanO might have received from The Cambridge Journal of Economics?

The Mercille paper might be the subject of a thread on its own.

Consider the definitions, do read them carefully:

(1) ‘In favour of fiscal consolidation’: articles asserting that the government’s fiscal deficit must be reduced to address the crisis. There is a range of views possible in this category. For example, articles may call for achieving fiscal consolidation goals within a shorter or longer time span; they may present a mix of taxation and spending measures; or they may call for a steep or moderate fiscal adjustment. Articles of a ‘progressive’ nature calling, for example, for sharp tax increases on the wealthy and no spending cuts on welfare programmes but accepting the need to reduce the government’s deficit, were classified in this category.

(2) ‘Opposed to fiscal consolidation’: articles opposed to reducing the government’s fiscal deficit to address the crisis. There is a range of views in this category, from articles calling for significant deficit spending to those explicitly opposed to the strategy of fiscal consolidation without presenting an alternative. Also included were pieces that oppose government spending cuts in general or a specific cut, even if they often did not state explicitly their position relative to consolidation itself. This ensured that the paper would not underestimate the extent of opposition to consolidation presented by the media.

So, to be categorised as opposed to austerity you would have had to have written, basically between late 2008 and late 2012, an article which actually called for increasing borrowing (during most of that time lenders were to be persuaded by the NTMA waving around an out of context Krugman editorial, presumably) to finance higher deficit spending, or totally ignored the question of financing.

If he hadn’t included just opposition to specific cuts, he might have managed to claim close to zero opposition to austerity.

This is being classified in coverage as pro-austerity:
“Articles of a ‘progressive’ nature calling, for example, for sharp tax increases on the wealthy and no spending cuts on welfare programmes but accepting the need to reduce the government’s deficit, were classified in this category”

Useful stuff?

I think Dan’s interst might have been motivated in part by this bit:

“But the case for fiscal consolidation and the prioritisation of spending cuts is
sometimes made on questionable grounds. For example, the Irish Times economics editor Dan O’Brien, in an article entitled ‘Government Will Have to Cut Old-age Pension’ (Irish Times, 15 July 2010), argues that cuts should be prioritised over tax hikes, because ‘History says cut when the economy is weak’ is ‘the best way out of recession’. However, as seen above, the historical and contemporary evidence suggests the opposite. Moreover, IMF research has shown that expenditure cuts are no more expansionary than tax increases. Indeed, when growth follows cuts, it is in fact largely because central banks are more likely to provide monetary stimulus following cuts than following tax hikes, a separate factor (Guajardo et al., 2011).”

@ Grumpy/Shay/DoD et al

here is the transcript of the debate between the two of them


Please show me how DOB doesn’t get by far the better of this argument. Mercille eventually has to admit that the newspapers did provide coverage, just not on the front page etc. Mercille ends up using vague, subjective argunment and Dan gives him actual facts. As one of the commenters suggests, Mercille’s main argument is that there is a conspiracy in the media to not allow balanced opinion. Its not a very strong argument to be fair, given that Fintan O’Toole is such a strong influence within the Irish Times.

@Bond. Eoin Bond

Please show me how DOB doesn’t get by far the better of this argument.

Are you saying that Dan’s superior debating skills means that he has the better argument? I do not doubt that Dan could hold his own at a college debating society but does he really have a good record on economic forecasting (or policy)? The words “Baltic republics” come to mind for some reason.

Its not a very strong argument to be fair, given that Fintan O’Toole is such a strong influence within the Irish Times.

Surely you jest? Fintan O’Toole is supposed to be a counterbalance to the political, economic and editorial teams of both major Irish national daily newspapers, the ruling political coalitions spinning team and RTE? Why not name one or two other figures on the left with prominent bully pulpits? Colm McCarthy is to left of Stephen Collins and Mr McCarthy is firmly on centre right.

The Sunday Business Post is less economically reactionary than either of current national newspapers for Reason’s sake, and it is supposed to represent business interests?

Nah, you have got be trolling me. Just stop. I have my blood pressure to think of.

Some academics have no common sense. No barrier to the label “elite” though. Bearing in ming his definition at (1) above for ‘proponents of fiscal consolidation’ consider this summary of what they believe:

“Proponents of fiscal consolidation maintain that public borrowing to make up
for budget deficits ‘crowds out’ borrowing by the private sector that would lead to investment and pushes interest rates upwards, reducing private investment further. Moreover, politicians are subject to electoral pressures, which entail wasteful spending, in contrast to the private sector, which is subject to the efficiency of the market. Furthermore, governments may be tempted to finance their accumulating deficits by printing money, leading to inflation.

Advocates of fiscal consolidation assert that it can be expansionary and pull countries out of a recession. The rationale is that balanced budgets lead people to expect taxes and interest rates to remain low. This should increase the confidence of investors and the public, which will be inclined to spend more, thus stimulating the economy. The confidence of bondholders and international financial interests will also increase, as the likelihood of default on sovereign debt is reduced. If investors in government bonds do not have this confidence, interest rates will move upwards, making it more difficult, and eventually impossible, for governments to borrow.”

No mention there of the fact that you might be opposed to increased deficit spending for the simple reason that Ireland was shut out of the bond market and the only financing available was conditional on…..drumroll…. yes, you guessed it, fiscal consolidation!

Word counts:
“austerity” 42
“borrowing” 3
“conditionality” 0

Just goes to show the value of “peer reviewed” publications.

@ Shay

what i’m saying is that Mercille’s argument couldn’t even get the best of Dan. Read into that what you will.

In my view, the flaw in the position of those who opposed what became known as austerity, is that there was not an alternative offered to appeasing private lenders and later official ones.

Iceland was a different kettle of fish and it was often the fallback but downsides were really not detailed: debt default – the ECB would have to capitulate was the easiest option, and the practicalities of suddenly exiting the euro in an economy that hadn’t a sustainable indigenous tradeable sector, were too much of a hassle to deal with. It wouldn’t arise as the rest would raise the white flag.

The mainstream media organisations were boom cheerleaders whether it was INM as a private sector group, The Irish Times as a charity, and RTE as a public sector organisation – it was either good for the share price or your bonus.

In 2004, The Irish Times had 2 accountancy partners, a managing director of an advertising agency, the former head of Waterford Wedgwood and a prominent banker, on its trust board.

It would have been difficult to sail against the prevailing wind with that amount of orthodoxy on its board.

So at that time, dissenters were as welcome as they were to Bertie Ahern.

After the bust, dissenters were given some space in the IT by the same people who had previously thought that the free lunch had been invented.

However, as David Begg, central banker and trade union leader suggested, in reference to myself, arguments made by “people of status” – at the ESRI – should be taken more seriously (RTE Radio One’s News at One, Dec 15, 2010).


Are you suggesting that the Irish media has not been overwhelmingly pro-austerity/anti-Keynesian?

I mean whatever the weaknesses of Mercille’s methodology if you are arguing with the thesis you are picking a fight with the facts. I understand that you think the deficit is good justification for pursuing austerity, but EU wide it has not been a success in terms of growth, employment or debt/gdp ratios, even in countries with economies that were previously thought to be strong (like the Netherlands).

Also, the argument that Mercille’s survey of economic opinion as presented by media coverage is worth less because he is not an economist is not too well well thought out, at best. No one would honestly suggest that a survey about attitudes to global warming should be done by climate scientists.


According to David Begg – the former credit-fueled-boom-time central bank guy, – pundits at the ESRI were “people of standing”, wheras you were not.

@ BEB: “Mercille is not an economist. He’s a geographer i believe.”

Correct. But as a geographer (a semi-scientist) I would hoped he might have developed a somewhat less naive grasp (he is well informed) of why the Great Financial Crisis has descended upon us at this juncture. Just a personal opinion.

Eg: The largest welfare recipients in the state are our private(?) domestic financial institutions. So, how does one classify that in standard L/R political terms? Actually, the standard Northwestern European L/R (socialist/conservative) political paradigm was never a real issue here in Ireland, despite all the published guff to the contrary. I’d frame the situation as a little bit of lefty (lower case intended) and a lot of RIGHTY.

Did I hear that some of our independent Independents have decided that the fragrant Lucinda – and her mates, are a tad malodourous? Hmmmm.
@ YoB: Ship? The MV EeeZee is overloaded with a cargo of Debt? “Yes!”. “Oh well, very good! Carry on!”.

Now being overloaded means that the Plimsoll Line – you know that one! – is actually below water. So, the clever clogs on the bridge will simply order the crew to paint a new Plimsoll Line above the water line! Problem solved. WTF!

Just make sure you DO NOT embark on that vessel. It will founder! Now, the captain would not be called Ahab, by the way?

Now MH is at it! ” … difficult to sail against the prevailing wind …”

Its known a Tacking! Zig-zagging at 45 deg. Just make sure you do not get caught on the Port Tack! And if the tide under you is running to Leeward … …

@Michael Henigan

However, as David Begg, central banker and trade union leader suggested, in reference to myself, arguments made by “people of status” – at the ESRI – should be taken more seriously (RTE Radio One’s News at One, Dec 15, 2010).

Being denigrated for your seriousness by David Begg is the auld “being savaged by a sheep” experience. I was at an anti-austerity rally where I remember him being roundly booed by the crowd of nurses around me as he spoke. An unloved insider.


You have me down as pro-austerity do you.

Tell you what, your google toolar will let you do a site search instantly. Try to find a single comment from me advocating either’austerity’ or ‘fiscal consolidation’ for a country other than Ireland.

If you can find any I will arrange to have sufficient Bitcoins sent to you to finance the purchase of a Mars bar.

As it happens I do think the media has an anti-Keynesian bias, but that research is just rubbish and self-undermining.

Oh and Shay, it has nothing to do with him not being an “economist”.

Can you even define “economist”?

@Bond, Eoin Bond

what i’m saying is that Mercille’s argument couldn’t even get the best of Dan. Read into that what you will.

Hmmm. Dan O’Brien is probably a perfectly nice man personally but I can not remember reading or hearing anything he said and not being being amazed he had the chutzpah to say it. His article (in the Irish Times
business section) on how President Higgins should avoid political comment is still a classic of unintended irony.


Tell you what, your google toolar will let you do a site search instantly. Try to find a single comment from me advocating either ’austerity’ or ‘fiscal consolidation’ for a country other than Ireland.

OK grumpy, my mistake and I apologise for it. I’ll comment no more on this thread.

The function of the Irish Times is to deliver an audience to it’s advertisers,who are mainly estate agents and auctioneers. Hence the property bubble. Follow the money–it’s not complicated.


As both an economist and one of the 75% that voted for the ‘alleged’ pro austerity parties I fear you have deliberately or otherwise muddled a number of topics to generate a narrative you are seeking to support. I am far from left wing mainstream, yet I am wholly opposed to the so called ‘fiscal consolidation’. This is purely because fiscal consolidation is a function of our governments abject failure to make any progress on getting a fair deal on debt. I was one of the 75% of people that voted for them – not because they were pro-austerity (“labours way or frankfurts way”….”not another red cent” (vardkar)) – They did not sell themselves to the electorate as pro-austerity. That they turned out to be just that in no way supports your case to denegrate Mercilles.

Btw, I can think of nothing more right wing that supporting a position that says you should not subsidise/reward failed investors.

Finally, DO’Bs ridiculous drawing of paralells with the global warming debate is still ridiculous with what happened in this country being much more analogous to taking the route promoted by global warming deniers than concerned and scientific majority.


Sorry about that. Apparently SME bad debt levels are not 50% . That was last year. Maybe Eamonn Moran has more up to date data. But the problem hasn’t gone away. It’ll take many quarters of progress to get the suffering down to decent levels. Using the SMEs to spin for the success of the post bailout regime is a bit rich considering what the banks have done to them.

There was an interesting article by John Plender in the FT on Saturday. Ireland is what passes for a EZ success story with unemployment well above 10%


“It also suggests that current confidence in Brussels about the eurozone’s employment prospects borders on hubris, especially given persistently dreadful labour market data. If Portugal and Ireland are success stories with unemployment respectively at 15.5 per cent and 12.3 per cent, the official lens is seriously distorted.

And the real disaster lies in youth unemployment. In no-growth Italy, where the jobless rate of 12.7 per cent is at the highest level since the 1970s, youth unemployment is 41.6 per cent. The comparable figures for Spain and Greece are 57.7 per cent and 54.8 per cent. That is an appalling consequence of creditor countries in northern Europe putting all the burden of adjustment on the debtors after the sovereign debt crisis. It remains a big worry that the eurozone recovery looks so fragile.

“Marc Faber, an influential Asia-based strategist, sees QE as an aberration that funnels money to the “Mayfair economy” of the well-to-do and “boosts the prices of Warhols”. The middle class holds a much greater share of its wealth in housing. So in the US central the QE programme may have mitigated the fall in house prices, but it created no wealth effect to encourage consumer spending.

As for the working class, its savings tend to be in the form of bank deposits, which have yielded negative real returns as central banks have resorted to financial repression, whereby interest rates are kept below the rate of inflation. This is intended to stimulate economic activity by giving consumers an incentive to spend instead of save. But this offers scant consolation to those whose nesteggs are being eroded.

Companies have done pretty well out of ultra-loose monetary policy too. Economists at the McKinsey Global Institute reckon that US companies enjoyed a cumulative interest rate windfall of $310bn since 2007. This increased corporate profits by five per cent and accounted for just over 20 per cent of profits growth over the period. There were similar effects in the UK and continental Europe where annual earnings were estimated to have increased by five per cent and three per cent respectively. Yet this, too, came at the cost of more inequality since large companies derived much of the benefit by issuing low-cost paper in capital markets whereas smaller companies lack access to bond markets and were more reliant on expensive bank finance, if they could borrow at all.”

It’s all rotten


Marc Faber is called Dr. Doom

and QE suppressed US mortgage rates, very substantially, and therefore building the next price bubble, that is the purpose of QE.

They pushed it about 20% above what I consider “fair value”, and the resulting wealth effect is a 13% higher wealth / income ratio, resulting in a one-time GDP push of about 2% (my estimate)

http://www.federalreserve.gov/releases/z1/Current/z1r-5.pdf table R.100 line 22 / line 23

And when you follow this table periodically, you will find, that they are constantly changing the numbers, at least 3 years back, to the tune of 5% in the last half year.

The same gimmickry as in the UK, spend now, suffer later.

@Dearg Doom

re: Irish Water:

Now that I have read the Irish Water submission (on RTE site), I am fully confirmed in conviction that this quango should be shut down right away.

They have spent €80 on consultants to the end of 2013, and of that just €1.5M was spent on engineering companies. This is the Taj Mahal of quangos.
The rest of the spend is basically for an unpopulated CRM system, and unpopulated asset management system, and a financial system (unpopulated) with bells, whistles and hoots of laughter at the idiots who are paying for it all.
All the systems are designed to provide “Capability” only.
Further, all the expenditure is not ‘expenditure’, it is ‘investment’ as per some idiotic accounting standard.
(For once) I do hope Eurostat call them on that nonsense.
It is one of the worst example of profligate public spending that I have ever witnessed.

The management and board should be sacked and Irish Water shut down
In any self respecting democracy, Minister Hogan would also resign or be fired.

To have this kind of reckless, idiotic spending going on in this country, while money needed for essential services are being cut, is an obscenity.

@Joseph Ryan
Irish Water

In the video link below,produced in March 2011 by James Coyle a candidate for the Senate election; the then Dublin City Manager John Tierney,now the CEO of Irish Water,is asked hard questions;

@ seafóid,

“50% of SMEs have loans that are impaired”

The Central Bank’s Macro-Financial Review usually includes a good chart on impairments in SME lending. In Q1 2011 the impairment rate on SME/Corporate lending was around 15%; the latest figures are for Q3 2013 when it was put at around 27%. Note the the rate doesn’t give the amount. At the start of 2011, there was €60 billion of SME/Corporate lending outstanding of which 15% is €9 billion. The latest figures show that the banks have around €40 billion of SME/Corporate lending so the total impaired is around €11 billion.

The 50% figure comes from combining ‘vulnerable’ loans to those which are actually ‘impaired’. See chart 32.


Cheers Seamus

Are there any updates on the data ? What sort of % would have been forgiven by the departing foreign banks ?

John Waters discovers Mercille ….

The study treats in passing the ideological role of media in stoking the conditions which gave rise to the boom, particularly in the housing market. Mercille cites a 2010 study of Irish journalism practices – “Irish Financial Journalism and the End of the Celtic Tiger”, published in the Irish Communications Review, which found that journalists “were leaned on by their organisations not to talk down the banks [and the] property market because those organisations have a heavy reliance on property advertising”.


Apologies for my absence…other things…

Define risk…

I’m a credit banker at heart (although no longer in banking). However my definition of creditworthiness is different to that used by the likes of John McH. who appears to rely on some measure of the ability of a debtor to borrow further funds, rather than the debtor’s ability to repay debt or even increasing interest on debt. My definition of credit risk is based on Debt Service capability….has one the ability to pay one’s debts as they fall due is the fundamental concept.

Included in debt service capability is the concept of the stress test….if the shit hits the fan, if there is a disruption (rise in interest rates, adverse economic shock, etc), how much latitude does the debtor have to adjust to the increased economic adversity.

I could go on. However, Ireland’s absolute debt is now very high, and growth of it continues to accelerate, absolutely but also on an inflation basis. In your article, you point out that there is a need to address the debt principal level and not just to pay the interest…..

My prediction is that Ireland’s debt /GDP ratio will breach 130pc in 2015, in the absence of sufficient growth. That in itself doesn’t cause of a fundamental problem unless growth is too low while interest rates also begin or threaten to rise.

So, my definition of credit risk inherently involves the fundamental banking concept of probability of default…..based on debt service capability, stressed, over time. By definition, if income (say GDP) falls relative to debt (service) commitments, the probability of default rises.

On that basis, there is a very clear difference between Ireland and say a Germany.

You appear to view risk in political terms only (in the current environment). I agree that political support mitigates the risk. However, mitigation is mitigation (only)……fundamentally, the economic reality has deteriorated……..Political support only represents the use of “savings” /resources to defer the underlying fundamental economic realities….so, your definition equates more to short term “market risk” which encompasses both credit risk and political risk in the short term forward scenario. In the longer term, true credit risk continues to increase unless there is a material improvement in debt service capability.

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