Spring 2014 Issue of ESR

Vol 45, No 1, Spring (2014): with Policy Papers from ‘Future Directions of the Irish Economy’ Conference, 10 January 2014

Table of Contents


The Influence of Family Structure on Child Outcomes: Evidence for Ireland PDF
Carmel Hannan, Brendan Halpin 1-24
Socio-economic Inequalities in Child Health in Ireland PDF
Anne Nolan, Richard Layte 25-64
Minority Status, Social Welfare Status and their Association with Child Participation in Sporting, Cultural and Community Activities PDF
Bryan Coughlan, Edel Doherty, Ciaran O’Neill, Brian E. McGuire 65-85

Policy Section Articles

Ireland’s Medium-Term Growth Prospects: a Phoenix Rising? PDF
Nicholas Crafts 87-112
Ireland’s Banking System – Looking Forward PDF
Thorsten Beck 113-134
Ireland’s Fiscal Framework: Options for the Future PDF
George Kopits 135-158

24 replies on “Spring 2014 Issue of ESR”

fyi on Future Directions:

Nearly two-thirds of a portfolio of mortgages being sold by the liquidators of IBRC has been purchased by two US hedge funds.

The Project Sand tranche of loans, which have a balance of about €1.8 billion, are mostly residential mortgages that originated with Irish Nationwide. Half of the mortgages are in arrears.

In a statement today, liquidators KPMG said 64 per cent of the loans had been sold to US funds Lone Star and Oaktree Capital.

It had been speculated that the loans would sold at a discount but the sales price was not disclosed.


The Auction of Ireland’s Fracking Rights will take place in the near future


Is it possible to challenge this business of the sale price of loan books being kept hidden? Surely it is in the public interest to know? What are they hiding? If these things are going for 10c in the Euro I would happily ‘buy’ my mortgage for that!!

@ PR Guy
In the post Q4 2013 by Seamus Coffey I commented on an article in Wired Magazine that puts Ireland at the centre of the world. Tech tax schemes, using Money, Intellectual Property and Product.

What do you make of it, will it have a positive or negative effect on our existing strategies.

Re: “Phoenix Rising ”

“The growth of employment will reflect labour force participation as well as
labour force growth.” (p89).

Indeed it might, but the mathematical model makes no allowance for either debt friction or energy use and cost increases, both of which must be negative variables wtr economic ‘growth’.

This site is alleged to be a reasonably good economics site, so perhaps it would be a ‘good’ idea if there was some fair and informative commentaries of the negative impact on aggregate economic activity due to liquid fossil fuel costs being where they are (persistently high by historic standards).

If we can maintain our current level of aggregate economic activity, using (on average) 6 litres, per person per day @ E 1.10 /l, then which sector of our economy will have to undergo a decrease in its economic activity, in order that another may increase its economic activity? Unless of course, you are assuming that there will be a parallel increase in the amount of imported fuels in order to support the simultaneous ‘growth’ of all sectors?

So, where will the additional funds come from to pay for that additional fuel? The non-exporting sectors will repatriate how much of a surplus? So the exporting sectors surpluses will have to be used? But surpluses are used – amongst other things, to fund investments and pay-down debts. Interesting.

Someones must be expecting a lot of economic surpluses to accrue here at home. But then the US, the UK and all the rest, North, South, East and in-between, will also be expecting their economic surpluses. That sort of reminds me of Musical Chairs, with 10 participants and only a single chair: 😎

There is a lurking global export supply problem in respect of liquid hydrocarbon fuels. The locals in the 30 major exporters just want more – like Olly Twist! But unlike the fable, this time its the urchins who will get what they need: Olly, (us), will be left go hungry. Think that some mathematical modellers might like to insert that negative variable into their positive growth models?


I have ‘thunk deep’……

I can’t see any of it being of benefit to the vast majority. It will benefit a lucky few though.

I’m back in Ireland for a while, helping a start-up. Those people in Enterprise Ireland are an interesting bunch……

Ah John! – not this silly old coal thing again? How many times is it now? Dozens? Same dopey math.

Look, folks stopped ‘using’ coal about 1914 or so. Oil had become the new ‘black’. So, 100 years later we are back to the olde black then? And that is NOT an economic growth problem? Like hell it isn’t!

Lesson 1: Its not our ultimate resource reserves that matter (we cannot extract 100% anyway) – its the annualized rate of use.

Lesson 2: Not all coal is equal.

Lesson 3: The rate of use is usually (on an annual basis) a compounding percentage of the previous year’s use. Its exponential.

Lesson 4: At the ‘present rate of use’ (ie. an annual % compounding value) the global recoverable coal will last another 70 – 90 years or so. That is, four doubling times – (depending on that annual % compounding value it could be more or less).

Lesson 5: You never (well, hardly ever) read or hear Lessons 1 thru 4. Tad inconvenient, they are. Actually 3 and 4 appear to be beyond most folks’ understanding!

It is difficult to interpolate the graph of increase in coal use for electricity generation – looks like approx 2.7% annual compounding, which gives a 25 year doubling-time (for 1990 – 2010). 80 years of extractable coal* looks good at that annual percentage compounding rate of increase of use. And remember, they extract the ‘good stuff’ first.

They are going to store carbon dioxide underground for a 1000 years! WTF! In 1000 years humankind will have reverted to hunter-gatherers!

* From Graph: (2010 – 2030 is estimate) * assume annual compounding increase in use is 3%. Not sure what M (on Y-axis represents)

Used + New -> Total Used

1990 – 2010: 4 M + 4 M -> 8 M
2010 – 2030: 8 M + 8 M -> 16 M
2030 – 2050: 16 M + 16 M -> 32 M
2050 – 2070: 32 M + 32 M -> 64 M
2070 – 2090: 64 M + 64 M -> 128 M

– that’s a lot of coal!

And the bad news. Well, you need lots and lots of liquid fuels to extract, process and transport that coal. So, where will all that extra liquid fuel come from? From the coal as well? Very good! And all that extra electricity? From the coal as well? Even better! And all that extra steel? From coal? Well, praise the Lord!

That’s about as good a definition of economic insanity as it is possible to conjure up.

@BWSnr hi Brian hope the garden is good,down in the sunshine state working on my tan catching up bit reading.Poland is rather partial to its coal.
I’m certainly no energy expert barely know how put gas in the SUV, main reason to go to New Jersey are the pump attendants,however I did assist the eldest one with her recent project on the good ole USA’s nuclear power strategy.have to say based on a somewhat superficial review I’m a believer.I know I know what do we do with the waste,Japan etc.
Oh there’s loads of coal at least another 100 years the black stuff,don’t underestimate man kinds ability to adapt and invent,I did watch a few experts on Charlie Rose other night chilling stuff:)

Ji John. Garden in good shape. Mild winter and spring. Bit wet to-day. Wher’bouts in FL? Spent two holidays just south of Clearwater.

Nuclear will pass – if you have enough deep mines to store the garbage. Won’t solve the energy supply deficit though. That’s the problem – there is just barely enough energy now. We really are at the margin.


I’m in Orlando today,spent quite a bit of time in Tampa/Clearwater.
Paddy Kelly or gentleman paddy assembled a terrific piece land for development next door to the Ritz over there,an old Anglo deal,with NAMA gathering dust these days.Lots excitement over “fracking” here David or DOD linked an interesting article on it.Storage doesn’t appear to be the issue it’s raising the capital Wall St has turned it’s back on nuclear,hence Uncle Sam had guarantee the above loans.
Link above regarding sale off mortgages I know you keep an eye on that,one interesting aside after the sale closes,like sub prime the CB/DofF will no longer count them in their already rosy numbers-one way make them look better!
But overseas investor interest remains very strong,the horseshoe bar will be busy again four seasons ice bar was like a ghost town last time…

“Dublin, 1st April 2014 – Commercial property consultants CBRE today released statistics for commercial property investment spend in the first three months of 2014, reporting that more than half of the volume of investment activity in the Irish market in 2013 has been signed in the first quarter of 2014 alone. According to CBRE, a total of 37 investment transactions of more than €1 million in value were signed in the Irish market during Q1 2014, totalling €938.5 million, compared to a total spend in the Irish market in 2013 of €1.78 billion in 96 individual transactions. These figures exclude loan sales activity. There were more transactions signed in the Irish market in the first three months of 2014 than during the entire 12 months of 2012.”


The lesson learned from Fukushima according to a relative of mine who is working on nuclear waste storage (hydrogeology is the key factor) safety. Is that the private sector cannot be left within an asses roar of nuclear plants or waste storage facilities. National government with an individual minister to be held responsible. Policies, rules, regulations to be formulated by expensive, international experts in the field. I am told that international nuclear safety meetings contain 40 to 60 of the brightest people on earth. Arms length agency responsible for inspection.
I am assured it can be done and will be done safely but only if a government and ministers suffer direct consequences.

I know in America that governments have been demonised but there are many countries where government is expected to be effective.

Germany has lots of brown coal which is in the middle between turf (peat) and metallurgical (black and hot) coal. Closed vessel, coal gasification plants have been around for over a century (street lighting before electricity). Being closed vessel it can be a pollution free process. Human beings will consume every molecule capable of producing energy if they survive long enough.

@ MH: Part of this comment thread relates to one of the papers in the Policy Section of the latest ESR publication. Its about some mythical bird arising magically from some equally mythical flames. Its a fearful, but quite ironic, symbolism of Irish (and global economies). They grow (arise) out of the combustion (flames) of a finite supply of chemical energy.

All I will say about the economic content of Craft’s piece is that it may be indicative of the nature of some economic theorizing – that you really can model, using abstract mathematical symbols and expressions, the unknowable interactions within and between the components of a closely-coupled and deeply complex physical process. There is a term to describe such behaviour.

“Further silly information is accepted by many [historians]. They do not care to consider the factual proofs and circumstantial evidence that require us to recognize that the contrary is true ….” [Ibn Khaldún – 1332-1406]

Energy, in whatever physical form, is a mandatory factor of economic production. But, so also is credit. Any mathematical expression which purports to represent some aspect of economic activity (aka: growth and GDP) must include variables to represent the contributions of energy and credit. Furthermore, both these economic variables have some quite negative and nasty externals which also should be included – but are not. Hence any conclusions or forecasts based on such inadequate modelling are useless. But this seems to be neither understood nor valued. There is a term to describe such behaviour.

jg’s final para in his piece just above, describes the process of churning and kiting (of financial instruments). Its a virtual process which creates a credible impression of the creation of real wealth (aka: economic growth). Unfortunately, our world is full of suckers who are only too eager to latch onto such deceptive chicanery. There is a term for such behaviour: it has been observed much in times past.

If you are implying that our contemporary governments (and politicians) are prostitutes, supplying a economic service in exchange for campaign donations – then you would be correct.

Ms Lawson appears to have had her US visa cancelled for powdering her nose (in the UK). Poor dear! But financial thieves, who steal billions of customers money – on a global scale, are rewarded! Nice one!

Hitler lost WW2 because he didn’t have access to petrol.
Stalingrad was the key.
Coal just doesn’t hack it on the scale required to run all the cars around.
“Never bet against America” was great advice but a lot of that suburbia is going to have to be abandoned eventually.

Future directions,the banking paper is quite good above but..

“What seems to be happening now is that the ECB is pressurising the Central Bank of Ireland to reduce its assets by selling the government bonds it swapped for the Notes that it used to hold. Why? Because the ECB considers the ELA transactions to have been a form of government financing that it allowed during the crisis’ peak but which it now wants to roll back. But if the Irish Central Bank does sell these bonds to the private sector, this will strike another blow at the Irish taxpayer. Why? Because these bonds come with considerable coupons (i.e. interest) that will have to be repaid over a long period. Had the bonds been retained by the Irish Central Bank, the latter would be obliged to return these interest payments to the Irish Treasury (as profits from monetary operations). Now, it seems that hedge funds and assorted financial predators will take another chunk of Ireland’s diminished income. Moreover, a sale of bonds today will involve a haircut (as Irish government bonds are not trading at face value, despite having recovered significantly in recent months) that will, in due course, burden the Treasury further. And guess who will pay for this burden…”


@seafoid some “dork” for you in comments,the suburbs are awful bit like outer outer Dublin/Meath.
Some good news from “mother jones” but it’s everywhere.
“The Affordable Care Act CRUSHED its first major enrollment deadline!
As of Monday, 7.1 million Americans are now signed up for affordable, quality private health insurance through the law!!!
It wasn’t easy. President Obama’s faced unprecedented obstruction from Republicans. But he kept on fighting to make this historic day a possibility.”

text from Blind Biddy in Kharkov:

In Crimea, Russia Showcases a Rebooted Army

http://www.nytimes.com/2014/04/03/world/europe/crimea-offers-showcase-for-russias-rebooted-military.html?_r=0 [h/t nakedcapitalism.com

@Brian Woods Snr.

Your views on ‘fracking’?; see article I linked to above.


‘Stalingrad was the end of the beginning; Kursk was the beginning of the end’ W. Churchill – the geman tanks ran out of gas at Kursk and when Blind Biddy’s great aunt drove her tank into Kharkov the fascists were on the long walk home. [a good few of them are now in power in Kiev thanks [no put intended] to ‘fu*k the eu’ Nuland’s ill-thought out strategy for regime change]


Divisive history at heart of Ukraine’s latest identity crisis
Letter from Kharkiv

People are proud of their tanks in Kharkiv, Ukraine’s second city. A Soviet T-34 sits outside the local history museum, green armour gleaming, a few miles from the factory where it was designed and built.


Blind Biddy spotted in the photograph …. just to the left of Paddy Zhukov.

@ DO’D: Words fail me David. But that is how the ‘end’ of our oil dependent very uncivilized societies will appear – an environment polluted with toxins, corrosives, teratogens and carcinogens. I’d say progress in that direction appears to be quite good in that Texas county.

The only ‘good’ point, is that the wells deplete very rapidly. In a decade most will be ‘dry’. The hydrogen sulphide and sulphur dioxide are both very reactive and will ‘wash-out’. The residues are nasty. Ditto for the fomaldehyde, but slower: a chemical ‘baddie’. Benzene is another matter entirely.

Fracking? Its an obscenity. There appears to be almost almost no limit to human self-destructive propensity. We just do it better than previous civilizations.

Thanks for the link.

@Brian Woods Snr.

‘Fracking? Its an obscenity.’

Agree. Ta for response.

Comments are closed.