“Rise and Fall of Ireland’s Celtic Tiger”

Readers of the blog may be interested in my new book “The Rise and Fall of Ireland’s Celtic Tiger: Liberalism, Boom and Bust”. With ideal timing, John Bradley’s review is in the latest edition of the Dublin Review of Books.

Table of Contents:

1 Liberalism in crisis
2 Ireland: between development and crisis
3 Capital: the triumph of finance
4 Europe: between market and diversity
5 National politics: governing fragmentation, fragmented governance
6 Crisis: the difficult politics of development and liberalism

69 replies on ““Rise and Fall of Ireland’s Celtic Tiger””

If the bolsheviks had not despatched Alisa Rosenbaum and her cult,to America in 1925, a year after Lenin died, this wipe out of the Irish economy may never have happened.

Reading the review just adds to the inducement of getting mitts on this book a.s.a.p. Is it for sale in NUIM bookshop?

Looks like a good read.
Meanwhile deflation stalks the EZ and the US is a long way from exit velocity.
Plutocracy seems to be the stumbling block. Development vs liberalism perhaps.

This was in the print version of the FT back in January

“Emmanuel Saez of University of California, Berkeley, calculates that the top 1% of the American workforce captured 95% of the income gains in the first three years of the recovery. ”


“With seemingly effortless and unthinking ease, policymakers segued from one policy framework to another with little or no understanding of the longer-term consequences.”

To be repeated time and time again. Great pity really.

The review is very interesting. I will definitely try to read the book.
However, I read the following excerpt of the review with some bewilderment.

“The German emphasis on the need for greater efficiency in labour and product markets and greater external competitiveness in a context of a social market economy (what Ó Riain terms a Schumpeterian view) sits well with Irish long-term policy aims and objectives. Ireland’s role in the continuing discussions on the future governance of the euro zone could be enhanced if it built on these kinds of commonalities between its own self-interest and the self-interest of other advanced member states.”

I have no idea what Ireland’s long term policy aims and objectives are. Not a notion. Based on their actions it seems to be confined to one objective-fix the banks, fix the banks-fix the banks. Fixing them for what I am not clear, because from experience and as is mentioned in the review, Ireland’s banks have not invested in Irish industry. This seems to be true not only in Ireland, as I have read that 90% of UK fixed investment went into commercial property.

@ J.R.

“Based on their actions it seems to be confined to one objective-fix the banks, fix the banks-fix the banks.”

I’m not so sure….. for example on one hand there is a incentive to invest in property as there is a CGT exemption (ending 2014).

On the other hand… there are penal taxation measures against landlords, and Sinn Fein have publicly stated that they are “in effect” going to wipe landlords out with the interest deduction being reduced from 75 to 40%.

I believe the more hostile the “establishment” is to property… the more pain is prolonged on the Banks.

It might explain why Danske and a number of other banks have left Ireland. They have decided to cut their losses, and remove themselves from the bad news that is this country (WRT to property / economics / taxation etc).

Based on the Irish Times summary piece last week and John Bradley’s review, Fred Block appears to have got it right: “a rich diagnosis of the Irish case.”


However, it appears to be a bit short on cure.

It doesn’t of course matter in the short to medium term until possibly after a few general elections coupled with the old donkeys that reached positions of influence over the past decade, grazing happily in retirement.

The Irish Times piece has the headline and strapline: ‘How to avoid the mistakes of the Celtic tiger: There’s a need to strengthen public service and beef up job supports and investment in local firms’

That can help a bit but it’s not going to change much.

Stable continuing SME credit is very important but as for development, there’s a multiplicity of different schemes together with the lowest corporate and employer social security taxes in Western Europe.

In 2001-2007, the years of the property bubble, indigenous exporting firms which had a domestic market ratio of about 45% added only 10,000 jobs while foreign firms shed the same number.

The Enterprise Strategy Group in 2004 put forward an alluring solution at a time of plenty to create what Micheál Martin in 2006 dubbed a ‘world class’ knowledge economy – less than a third of FDI firms today spend from a very low €100,000 on R&D.

Israel had been involved in survival research (water + defence) for 40 years when it absorbed 1m emigrants in the early 1990s from the
collapsed Soviet Union – a unique movement of intellectual capital in a short time period to a small country.

Even an economy such as the UK may not gain much from commercialisation of graphene, a possible ‘miracle’ material that was discovered at the University of Manchester a decade ago.

The European Commission’s report yesterday shows that despite a brutal recession, things still change if at all at glacial speed; the fiscal advisory council was designed to be a nuisance rather than have any power and the Ireland Strategic Investment Fund that will have control of the €6.8 billion residue of the pension fund according to a Bill will have a governance system that FF would have put in place in its heyday.

@ Veronica – I believe it is. Long queues out the door as you can imagine…


that’s because your devoted followers in Germany buy the kindle version for 18 USD : – )

Michael Hennigan wrote,

“Israel had been involved in survival research (water + defence) for 40 years when it absorbed 1m emigrants in the early 1990s from the
collapsed Soviet Union – a unique movement of intellectual capital in a short time period to a small country.”

Yeah, what happened too, was the whole technology that fits around ‘water and defence’, and the management of those assets over the longer term, was also developed to a high degree in Israel.

All that one has to do, is look at companies that were created in Israel and by the early 2000’s, many of them were acquired by the global tech giants, who had not had a chance to develop that sort of technology themselves.

What the global tech giants are selling to a global market nowadays, a lot of it has roots and origins in that effort in Israel during the 1990s that you speak of.

I.e. The market for those kinds of things, was ultimately much larger than just Israel.

What I also notice, is that Israel remains a centre for development of that technology to this day, and a lot of the key teams owned by global tech giants are still based in Israel. So all of that, didn’t just ‘disappear’, after it had been set up.

Maybe, the book that O’ Riain should look to next, is a book like his one about Ireland, . . . but looking at other small countries around the world, who have experienced their ups and downs.

I appreciate the remark that Michael Hennigan did make too, of the longevity of the investment and effort on the part of Israel as a nation, . . and how that compares with Ireland. Again, this is another field of study that would be important for O’ Riain to take a look at, in upcoming research. BOH.


What you’re writing about is very relevant to my own research period – the second half of it anyway. So next time I’m out in NUIM, I’ll happily join the ever-lengthening queue. Look forward to reading it.

fyi Sean

for the 2nd Ed.

Breaking Newz

Wonderful newz! Mirabile dictu! Phoneix like …

… the PeeDee Nua has been launched …. having taking over FF and wrecked the state the strategy is to take over FG in gov and wreck it again ….

Dosh is flowing in … hedge funds, vulture funds, purrfect mawrket hypothesis (sic) useful idiots, neoliberals, ordoliberals, the coke pros, the fracking fraternity etc

A bid has been put in to take over All Hallows as the neu head office …. with a special throne for Cardinal “Error” MickDowell … and a professorship for the brudder in the back room ……

Winston is thrilled, thrilled he is …. and studying accountancy …. O Brave Neu World ….

Michael Hennigan, Brian O’ Hanlon,

could you be a little bit more specific on what exciting research and development RESULTS have happened in Israel, especially in the non-defense sector?

Seems like a very good read!

There seems little enthusiasm, however, for discussion of the possible slow resurrection of the Celtic Tiger and of the means to bring it about. Indeed, the silence is almost deafening other than in relation to the tug-of-war to be resolved by the Coalition parties on the next budget.


According to the Taoiseach, there is nothing new in the Commissions’s recommendations to the Council – that it adopts – on Ireland! This would include, no doubt, the problem of “low work intensity” households.

There is something about the CT period and the way power works within the system that hasn’t gotten enough airing, IMO.

Ireland didn’t and still doesn’t have the appropriate institutional arrangements.
and it won’t have for a long time either. Because that doesn’t get in the way of the way things work.

Even allowing for the shoddiness of governance there seems to have been a terrible naivete when the money turned up. Like this would be different.
But it’s never different, is it ?


“the real cause of the expansion that precedes the typical financial crisis is usually a flood of cheap (or relatively cheap) credit, often from abroad.
Thai companies in the 1990s borrowed dollars short-term at low rates of interest and made long-term investments in property, industry and infrastructure at home, where they expected high returns in Thai baht, a currency that had long been held steady against the dollar.
The same happened in Spain and Portugal in the 2000s, although the low-interest loans that fuelled the unsustainable property boom were mostly north-to-south transfers within the eurozone and therefore in the same currency as the expected returns. Indeed, the euro was labelled “a deadly painkiller” because the use of a common currency hid the dangerous financial imbalances emerging in southern Europe and Ireland.

Phase Two of a financial crisis is the downfall itself. It is the moment when everyone realises the emperor is naked; to put it another way, the tide of easy money recedes for some reason, and suddenly the current account deficits, the poverty of investment returns and the fragility of indebted corporations and the banks that lent to them are exposed to view.

It is not that all of India’s economic fundamentals are bad. As Palaniappan Chidambaram, finance minister, said on Thursday, the public debt burden has actually fallen in the past six years to less than 70 per cent of GDP – but then the same was true of Spain as it entered its own grave economic crisis in 2009.

Like Spain, India has tolerated slack lending practices by quasi-official banks to finance the huge property and infrastructure projects of tycoons who may struggle to repay their loans.

Phase Three is when ministers and central bank governors survey the wreckage of a once-vibrant economy and try to work out how to rebuild it. ”

And when the Tiger fell apart what was most striking was the shafting. BLTD looking out at the snow. To prevent contagion, tu sais. Nothing but the same old story.


I was just trying to answer to something you said, along the lines that those “activist bench” folks have disadvantages, and that there is something to Antonin Scalias “stupid, but constitutional” approach, worth to be considered.

That Supreme Court and other judges also have to show restraint to not trying to micromanage what is better left to the parliament as the final instance on financial obligations.

@ francis

My post seems to have gone astray. I agree that courts should exercise judicial restraint. By and large, this has been the case in Ireland. However, as I pointed out, it took a referendum to effect a reduction in the salaries of judges.


And the high cost of legal services continues to be a drag on the Irish economy as both the Troika – before its departure – and now the Commission in its recommendation has pointed out.

@ seafóid

Yves Mersch of the ECB – see link above – has quite few interesting things to say on the issue of the institutional framework required. Also on the impact of the school of ordo-liberalism on the conduct – and success – of post-war German economic policy.

“Thus, as the ordoliberals saw it, the role of government was to frame markets in such a way that actual outcomes would approximate the theoretical outcome in a perfectly competitive market. Achieving such outcomes could imply de-regulation, if government was interfering too much in market processes, or re-regulation, if market failures were apparent – a feature that distinguished it from a laissez-faire approach. In other words, the role of government was both to untie the “invisible hand”, and to keep it firmly cuffed to the rule of law.

At the same time, ordoliberalism recognised the crucial importance of monetary and economic stability to a well-functioning market. This implied an economic framework built around price stability, competition regulation and budgetary discipline – in Eucken’s words, the perfect “economic constitution”. This thinking had a strong influence on the design of the post-war social market economy in Germany, and is seen by some as the foundation for German economic success in that period.

Interestingly, as many developing countries transitioned from planned to market economies in the 1980s and 1990s, there was something of a large-scale social experiment of the ordoliberals’ views outside of Germany. Several transition economies followed the macroeconomic policy recommendations of the so-called Washington Consensus, which emphasised the laissez-faire side of liberalism – decentralization, deregulation and privatization – while downplaying the legal and institutional underpinnings of a well-functioning market economy..”

That is where things went wrong, it seems. It could also be argued that this was the case with regard to the euro (indeed, there is a ‘mea culpa’ on the part of Mersch) or, rather, that ordo-liberalism works, but only in a domestic German context.

@ Sean,

while reading your book, and the Bradley review,

I want to comment on his “Angela Merkel … has never accepted the establishment of a fiscal capacity to absorb imbalances” and the text before

It is not just Merkel, but the whole of Germany who have not in the past and will not accept in the future liability for folks who want to decide on expenses and then shift the cost on us.

We have signed the “no bail out” into the treaties, and that is the law of the land.


maybe it is worth to notice, that I am pretty happy with the changes in the last 10 years in Germany.

Streamlined and thoroughly cost control of tax offices and lawyer fees.

I recently went to the tax office, to submit a form, I forgot for 2011, the lady at the entrance still had some similar, and to my huge surprise redeclared it with the stroke of a pen, urged me to fill it out right there, a rupper stamp of hers, and bang, 2 weeks later I had a four-digit refund on my bank account.

Lawyers are somewhat kept on a short leash, to the extent, that I have repeatedly paid some addon, with my completely voluntary initiative, to show my appreciation. Can you imagine that, voluntarily paying more, out of a sense of a just reembursement?

@ francis

Germany is already locked into a bailout, whether one likes it or not; as this paper by my favourite professor, Adalbert Winkler, of the Frankfurt School of Finance and Management, reveals.


Without wishing to be facetious, the situation of the euro is a bit like the new Berlin airport, plagued by delays and design faults of every description (to the point that no one dare turn off the lights!).

How this will end, it is impossible to be certain but my bet is that the airport will be successfully completed.


Thanks for the links to the Mersch talk

‘ Fiscal policy therefore had to effectively give up its stabilisation function – which is vital with a single monetary policy – and switch to convincing investors of debt sustainability’

And that’s where we are well and truly sunk. Private sector can’t de-lever while government de-levers.

‘In many nations, the pursuit of government surpluses squeezed the private domestic sector of liquidity. This proved to be an non-viable growth strategy because the private sector (which always faces a financing constraint) cannot run on-going deficits. Ultimately, the fiscal drag coming from the budget surpluses (structural or otherwise) forces the economy into recession (as private sector agents restructure their balance sheets by saving again).’


@ PQ

Martin Wolf had it thus, together with some good charts :

“A reduction in the fiscal deficit must be offset by shifts in the private and foreign balances. If fiscal contraction is to be expansionary, net exports must increase and private spending must rise, or private savings fall. ”

the UK seems to be ratcheting up the credit machine but it’s not clear that’s viable in the medium term.

@ PQ

It’s a bit of a conundrum alright! As the best minds in Europe, it must be assumed, are struggling with it, it would be a brave man who volunteered a solution. The hen and egg nature of the problem is the most perplexing. Draghi seems to have very few arrows left in his quiver and there is every sign that the leaders of the major governments – with the exception of Merkel – have few, if any at all.

@ PQ

Referencing this extract from your link!

“What happens if a whole country – a potential ‘region’ in a fully integrated community – suffers a structural setback? So long as it is a sovereign state, it can devalue its currency. It can then trade successfully at full employment provided its people accept the necessary cut in their real incomes. With an economic and monetary union, this recourse is obviously barred, and its prospect is grave indeed unless federal budgeting arrangements are made which fulfill a re-distributive role.”

Events have shown that the recourse in question is obviously not barred. It is the fact that the economic consequences cannot be politically camouflaged that creates the major European political problem.


re: Irelands ‘long-term policy aims and objectives’ not being landlord/property friendly. We will have to disagree on that one and with due respect to any personal feelings you have on the topic, the harder Sinn Fein that sector, the more I would favour it.
Somebody like me, looking in form the outside might deduce Ireland’s long-terms aims and objectives as follows;

AAA. When Europe says roll over, put your four legs up and your tongue out.
AA. Get debts write downs for those who really matter.
A. Keep the top boys in the PS happy.

1.Keep the low rate of Corporate tax, our one-trick pony-Kenny &Co.
2.Fix the banks- Noonan
3.But don’t frighten the BTL investors that are in arrears.- The real insiders.
4.Get house prices up a bit- Noonan
5.Get wages down a bit- Bruton the younger.
6.Everybody else tighten your belts- Bruton the elder
7.Pay back NAMA bonds before they are due- Frank Daly
8.Sell Bord Gais. Rabbitte
9.Sell Irish water- Hogan and more insiders
10.Sell Irish seaweed- Coveney
11.Make work for our legal friends-Friends in the barristers party
12.Make work for consultants- All insiders.
13.Make our pensions safe for us, posterity be damned-the entire administration.
14.Keep it in the family, 5 cabinet members and an AG on a 7% national vote, is great for democracy- The Labour Party
15. Keep the Indo and Dinny B on side- Clever consultants

A bit incoherent, I admit. That could be my fault or it could be long-term aims and objectives viewed from outside the governing circle.

@ J.R.

You left out the raiding of private pensions bit…….!!!! 🙂

However I disagree with you about S.F. and squeezing landlords.

If it was not for the private sector… there would be nothing to rent at all.

But on one thing we can agree at least….. the “establishment” does not want private sector involvement in property. They would prefer to have a larger organization like a REIT. Big changes are coming, and I suspect private landlords are going to be wiped out.

@ JR


I’m all for sinn-feining the sector.

Don’t forget
‘keep overpaying for generic medicine in order to placate Big Pharma’
‘Do nothing about near highest in europe costs of childcare, electricity, legal’.

I find the Noonan comment the most absurd/depressing, how can you have a government talk about ‘competitiveness’ and have the minister for Finance take a position for property price increases, even work on a scheme for the state to get involved with an objective of increasing demand further.

@ francis

‘It is not just Merkel, but the whole of Germany who have not in the past and will not accept in the future liability for folks who want to decide on expenses and then shift the cost on us’

If only the Irish elite had taken the same position, Ireland had enough fiscal work to do without bailing out German and French banks.

@ Francis

“We have signed the “no bail out” into the treaties, and that is the law of the land.”

The Volk swapped Koenigsberg and Breslau for a Wirtschaftswunder, unlimited Schweinefleisch and a hard currency.

But life is contingent, oder.
And “no bail out” may be in the treaties but the D-mark married the Lira.

There’s a graph on the FT site that shows how American attitudes to gay marriage changed over the last 10 years.
I bet the bail outs are going to come around just like that. And it will be absolutely fabulous.

@ J.R.

It would appear the Ms Jan O’Sullivan is making some moves..


I’ll say it again… if you want rents to reduce.. then stop crucifying Landlords with penal taxation methods.

There appears to be no understanding of what taxation on a loss means. Let me spell it out for you…

When all is done and dusted… as a Landlord you realise you have made a 1000 euro loss. But when the figures are calculated for taxation purposes.. the Revenue determine you have made a 1000 euro profit… and tax is due on this… and preliminary tax is also due for next year.

That is fundamentally unjust.

Sinn Fein and those who vote for them wish to make this taxation situation worse for landlords.

We will return to the days of 2 or 3 families to a room by 2040.

@ sean o’riain

Looks like an excellent job of work and nicely reviewed by John Bradley. More power to yer elbow.

@ Sean O’Riain,

Indeed many thanks… in addition I ordered a copy today.

It looks pretty interesting and Ill def buy a copy as soon as I get the chance to read it. A few things Im wondering though, which might be covered in the book but not Bradleys review (which was pretty good aswell imo), is to what extent did integration into the EU, more specifically the EMU, and larger processes in the global economy affect institutional development and regualtory policy in Ireland ? Irish institutions and policy might be the problem, but is the reason for that dysfunction primarily domestic ?And what would (hypothetically) have happened over the 00s under a counterfactual where Ireland had institutions and policy making processes comparable to northern europe ? Would there not still have been a boom of some sort ?

@ Sean,

reading further into your book (25 % at present, and some cursory beyond), I like it. Definitely worth the money!

Unlike with Legraine where my discontent over unsubstantiated claims started practically from page one.

It will not become a blockbuster (Max Weber wasn’t either), like Piketty, given the academic style and the absence of grand sweeping, but wrong statements. Plenty of interesting links. Nice!

You put things quite nicely into a long term view, I already learned significantly about Ireland.

For some graphs, it would have been nice to see some data beyond 2010, maybe in a second edition.

Using Fig. 2.1 GNI with the well known GDP issue for Ireland, employment rates Fig 2.2, when “unemployment rates” become increasingly misleading with different levels of unemployment services in various countries, most notably the US. Quality, style, and timely.

Of course I would have been curious to see a comparison to the US, France and Germany, but, of course, graphs can be easily become overloaded. I like your style and detail just right!
Your “delayed convergence” triggered me to ask, how does this look for more unfortunate countries like Bulgaria and Romania, Balkans, coming even much later to the party. I would be interested to see their assessment from YOU.

@ seafoid, DOCM

With respect to “bailout”, so far I can stand before my people and say, we helped our neighbors, lending our credibility, but we did not pay for this, as in the treaties.

And I think this will stay that way. Cyprus was rebuffed last year with their lunacy. Portugal, see my link above, got the answer to their Supreme Court decision on the same day from the Troika. This world works as I see it.

Not just reading Sean’s book, I say Ireland got some pretty generous development help in the last 40 years.
In the future, European help has to go to the new problem children, Bulgaria, Romania, the Balkans.
And in about 10 years, Ireland will have to contribute, not take, a little as well.

Any kind of debt restructuring, abusing the ECB for wealth transfer would be pure poison for Europe.

We did not give in on that during the crisis and panic mongering. Proper institutions like the ESM and banking supervision are now in place. Challenging the law in the future would harm the violators way more than the rest, and the market knows it, and the rate spreads are accordingly.


The new BBC global popularity survey 2014 is out. Germany is again Nr. 1, extremely fascinating, given the rants of many other countries media and politicians.

The link to the scanning agency with the full pdf of the report:

Germany is the stability anchor in Europe, and increasingly in the world. When you look at the French demands on the one side, and the UK on the other side, on where to go in Europe, full federalization or reduction to a simple free trade zone, we feel quite comfortable in the center.

Or the Americans constantly trying to pick fights with Russia, and Angela Merkel pretty much the last one of the West talking with Putin (or ?), in fluent Russian on our side and Putin giving speeches in German language in the German parliament(Bundestag, search youtube with the relevant key words). For those folks who think speaking just English is good enough : – )
We prefer to learn from people, we find interesting, like Seán Ó Riain, Finland, Switzerland,

And not being told by some arrogant, ugly Americans, like Timmie Geithner and John Kerry
Given the Kyoto protocol history, what an incredible hyperbolic brick.

@ Joseph Ryan

Your recent remark about the dropping of Depfa bond prices might be explained by the german decision to liquidate the bank, and not selling it. The HRE boss handed in her immediate resignation today.


@ Sean

I am really looking forward to read the rest of your book and hearing more from you!


“We will return to the days of 2 or 3 families to a room by 2040.”

We may do. A two-bed rat-hole in Cabra went up for €134,000 asking, €150,000 on the weekend. And I mean a rat-hole. The latest bid is €165,000. It may well be a puffed price, but of course that would never happen in Ireland. [Bidders are probably not obliged to identify themselves. This is Ireland after all].

I am in no doubt that another house price boom has been engineered to ‘save’ the banks, with more than a little self interest thrown in. Reduce supply, sit on the building land, and tell the banks ‘we need house prices to go up another bit’, i.e give out competing mortgage credit for the limited properties that come up i.e -go back to 2006, 95% mortgages etc. Save existing property owners and landlords on the backs of the next generation, again! It is depressing, very depressing, as has been observed above.

I do understand what you are saying about taxation of a loss, but until the landlord community is bound by rules on rent and other conditions such as fixity of tenure (remember our history and the three Fs), I refuse to see the ‘landlord side’ of the equation, while remaining personally sympathetic to anybody in distress.
And I do understand that BTL properties bought at ‘boom’ prices, could not and were never priced to make a rental profit. They were priced at boom prices with the purchasers looking for capital gain. There are embedded losses in the investments similar to the embedded losses in the banks.

[One other issue on rental and house price increases is probably the bed-sit ban, that affects Dublin city demand almost exclusively and is no doubt contributing to the present manipulated house price spike. To call it a ‘boom’ is a misuse of language. It is market manipulation on a grand scale.]

@ J.R.

A two bed rat hole in Cabra…. dear oh dear..

I’m glad you see the unfairness of taxation on a loss. Not all Landlords are greedy b______s etc.

Some people are “accidental Landlords” due to the fact that they have upped sticks and emigrated. If they were to cash in now… they would still be left with a loss.

Outside Dublin it is a different story.. it is possible to rent a 3 bed semi in most local towns for 650e / month. Is that being greedy? Coz in 2008 it was around 850e / month.

On another point… in an era of V. High personal taxation (most progressive in the entire OECD) it is very difficult for a bank to justify giving out a mortgage to a young couple.

The banks are still nursing wounds… even if they had buckets of money… it is hard to get people to qualify for a loan when there is very little after the Revenue have taken their tax, not to mention the cost of childcare, most young people do not have the disposable income after tax to support a mortgage.

So with banks nursing losses, people unable to qualify for a mortgage ( due to high taxation) it does not matter if there are thousands of developers or no developers, houses are not going to be built if people cannot get a mortgage, despite the demand… it is the money which talks.

The state has for too long relied upon the private sector to provide social + affordable housing. Under Part 5 rules… a developer had to provide 20% of units to the council. That was a high tax for the owners who bought the other 80% of units. The councils are broke too, and as regards property did not have much to offer.

Of course.. Ireland’s sub intellectual members of the media are unable to figure this basic puzzle out. It’s all about criticizing Landlords, blaming landlords, blaming landlords, restrict the income a landlord can make, whist cutting their legs off via the Revenue with taxation on a loss.


We both, I think, have somewhat of a personal interest in the matter of housing and we are on different sides of that equation.

Suffice to say that we might agree that the housing situation in Dublin, in terms of stability of prices, rents, supply and demand is about as chaotic as it was before the crash. The annual increases mirror those of 2006.
From you link
“Rents in Dublin were up 14 per cent in the first quarter of 2014, compared to the same time last year.”

IMHO, that is a devastating indictment of either government competence or government aims. What tenant can afford these increases and still manage to survive. Who does the government think pays these increased rents, the better off?

One has to conclude that the Irish are congenitally stupid and incapable of running the country, or else are not at all stupid and are quite adept at managing the country so that certain vested interest groups always come out on top. I tend towards the latter view, while not discounting the former completely.
Dublin property owners and Dublin landlords and Dublin real estate form one giant interest group that has manipulated policy in its direction from the start of the crisis. They are still doing so and succeeding.

@ All

To return to the action on the European pitch, FYI this first-class article by Ian Traynor of the Guardian on the fracas relating to the appointment of the next Commission president.


Both Merkel and Cameron have been too clever by half. Juncker seems certain at this stage to get the job. What will be the face-saving compensation for the UK?

@ francis

I suggest that a read of Professor Winkler might also be worthwhile. The main question posed is, as far as I can see; how are the Target 2 balances with the Bundesbank to be unwound?

Maybe Draghi will have some element of the answer tomorrow.

Herr Winkler – de Professor of OrdoLiberalism

A little tutorial …. Ja, I know, empirics are such a nuisance to Deutsche Ordoliberals ….

Ireland has paid 42% of the total cost of the European banking crisis, at a cost of close to €9,000 per person, according to Eurostat.

The figures show that while the banking crisis cost Berlin €40bn, Ireland is liable for €41bn. With fractions of the population and GDP of the EU’s biggest state, the crisis has cost Ireland 25% of GDP and Germany 1.5%.

“Without burden sharing on banking debt in Europe, any pretence of solidarity left in the EU will be extinguished. If we have no burden sharing on bank debt, if the failed policies of austerity are pushed and pushed, what in the end will be left of our communities, our economies and our democracies?” Nessa Chiulders asked.

Michael Taft, research officer with the Unite trade union, said the Eurostat figures show that Ireland is a special case and requires a special solution.
“The Government has a real challenge in the negotiations over bank debt. But there is a bottom line here. If any deal does not qualitatively alter these dismal statistics, then it won’t be a deal worth applauding.

“If people are still paying nearly €9,000 each while the remainder of the EU pays only a fraction of that, then it is no deal at all; just a rearranging of euro notes on the decks of a sunken ship,” Mr Taft said.

The average banking crisis debt across the EU is €192 per person, and the figure of €9,000 for each Irish person does not take into account the €18bn put in from the National Pension Reserve Fund.

After Ireland, the German people at €491 per person have shouldered the next biggest cost of bailing out their big regional banks, which invested heavily in hedge funds.



Still a ZERO on the BB BAU Sham€ Index … not a nano-flicker


a) I look at the discussion of sporthog / Joseph Ryan

whether a 14% raise per year of rent is kind of reasonable, given some past numbers or whatever

I compare that to my local Situation in Dresden, with an rent increase of 2.0% per year over the last 10 years, with a little dent up to 2006 and then getting back to “normal” (at least in my view : – ) and the local green party cry babies calling for government control

I say both extremes are crazy, but that makes me a tiny minority everywhere : – )

I have systematic data over the last 15 years in the main publication (http://www.sz-immo.de/service/preisuebersicht.asp
even went to the library for pre internet data), detailed by quality, location, size.

b) I think your Prof Winkler has just drunk the Bagehot LOLR poteen from 150 years ago, when the BoE was still a respectable, important, institution, completely unapplicable to the ECB situation. And Bagehots phrase was

“”to avert panic, central banks should lend early and freely (ie without limit), to solvent firms, against good collateral, and at ‘high rates’”.

The overspending crazies always want to forget “for firms” and not for governments, “good collateral” vs stupid governments not able to control their spending, and the “high rates”

c) the Target 2 salda have been reduced from a maximum of 751 b to 477b now, with a rate of -20% /a

and will continue so, IMHO

The ECB balance sheet, as I track via Bloomberg, was reduced by 450 b in 2013, and another 80 b this year so far.

Soo, where is the problem?

I am mildly interested too, what Draghi has to say tomorrow, after visits to my dentist and car dealer

d) Merkel and Juncker/Schulz

It is well known, that Merkel, and many reasonable people in Germany, like me, do not like either Schulz and Juncker. She never ever “pledged her full support for” Juncker, as the guardian agitator claims. All this Kremenologists now try their hand on grossly overinterpreting boringly obvious statements of Merkel.

All this hype about what these folks want to interpret into “Spitzenkandidaten” or what Cameron allegedly wants.

All the extremists get now plenty of time to bloody each other up.

All the authority fixated folks can blame everything and the respective opposite on Merkel and the Germans.

A neighbor is again copulating with an open window.

Tell me something new.

It is all boring business as usual.

@ J.R.

Your point

“Rents in Dublin were up 14 per cent in the first quarter of 2014, compared to the same time last year”

One requires to be careful with percentages. If rents are rising from a low base then a 14% rise looks big… but it could still be lower then what the monthly rent was in 2008. For example…

Monthly rent for a 3 bed semi in Portlaoise was probably 850e / month in 2008.

The same property today is going for 650e / month.

Lets say there is a 14% rise in monthly rent next month.

The new rent is now 741e / month. That is still 109 euro / month cheaper than in 2008.

So you see when the media writes up these articles… one has to be careful about what figures are cherry picked to suit the populist article.

Now of course in Dublin… things could be different (& they are in places)… however I know of one apartment in south Dublin which was renting for 1000 euro / month in 2005.

The same apartment now is renting for 1200 / month. That is a 20% increase in 9 years. That is an annual compound rental rise of 2% / annum. Is that greedy?

According to S.F. it most probably is.

Considering the costs which have been put on property, from PRTB, LPT and so on.. the tenant is getting a place to live without the hassle of all the bureaucratic crap that goes with a property. The Landlord has to carry the risk… and believe me there are tenants out there who you DO NOT want in your property.

Irish society cannot have it both ways… squeezing landlords at the top and cutting them at the bottom, expecting them to stay solvent and provide a good quality place for rental. It just does not add up.

Your point…

“What tenant can afford these increases and still manage to survive.”

Excellent point Joesph… most relevant… but I would add..it is worse than that….

Ireland is undergoing ‘Internal devaluation’ (as you well know)… Only some tenants are going to survive… as are some landlords, the rest of them will be pushed out of Dublin or go back with their parents.

The divorce rate is going to go like Cuba… with multiple families under the same roof… martial breakdown is going to soar.

Joesph… don’t get me wrong… I understand your point about “affordable rents”….

But if we want cheaper rents… we require more housing units… and we require costs on landlords to be reduced.

If Landlords have lower costs…. then they can afford to rent out properties at a lower rate.

Unfortunately nobody in ‘the establishment’ understands this.

In relation to your point about ‘The Irish’. I am very cynical myself… (bet you have’nt noticed!!).. however the Irish are just easily led… they are being taken for a very very expensive ride and they don’t understand why.

@ francis

I have been trying to get my head around the issue of the Target 2 balances for quite some time, without much success (but then, I am probably not alone in this as they seem to be quite a disputed issue in Germany). The one conclusion that I have come to is that they must reflect a less than perfectly functioning euro system. If they do not, I must have been reading the wrong papers.

As to Bagehot, sound banking is still based, as far as I know, on the principles enunciated by him.

cf. http://www.irishtimes.com/business/economy/why-banking-crises-happen-in-the-united-states-but-not-in-canada-1.1819205


I do not think that the euro was deliberately “fragile by design” but that has proved to be the case for the reasons advanced in the book under review, the underlying thesis of which I would agree with wholeheartedly.

The process of retrofitting the euro is continuing!

@ Sporthog

‘Ireland is undergoing ‘Internal devaluation’ (as you well know)… Only some tenants are going to survive… as are some landlords, the rest of them will be pushed out of Dublin or go back with their parents.

The divorce rate is going to go like Cuba… with multiple families under the same roof… martial breakdown is going to soar.

That seems an accurate (if dire) prognosis. But there is no work down the country. It’s hard to get around without a car which is a big cost. And there is only so much room inside a home.
So people buy less and buy cheaper stuff.
So retail and distribution jobs go.
So more marriages go wallop and more surplus people b***er off.

Luckily Dublin property is ‘recovering’ otherwise we would be in trouble.


The thoughts of Holger Stelzner most interesting. If Europe goes down, the Schwab housewife goes down along with it. We live in an extraordinary, unprecedented era of financial tyranny, masquerading as ‘economic wisdom’.

‘The “Granddaddy of All Bubbles” thesis rests on the premise of a deeply systemic Bubble throughout debt and equities markets and asset prices more generally, on a globalized basis. In contrast to GSE market distortions that impacted pricing most significantly in mortgage Credit, today’s global central bank distortions impact virtually all asset prices. Market risk distortions now basically permeate all markets – stocks, bonds, Credit and any asset that provides income/yield virtually anywhere in the world. Assets include collectible art, Manhattan apartments, farm property and NBA franchises.

Importantly, it is the character of policy-induced market distortions and speculative excess that dictate the risk of future crises. It’s nothing more than wishful thinking to claim the protracted cycle of booms and busts miraculously ended in 2008/09. Typically, one would not expect another Bubble to begin inflating immediately after a major bursting. But 2008-2014 policy measures have been the most extreme and atypical.’


@ pq: “Luckily Dublin property is ‘recovering’ otherwise we would be in trouble.”

Yes indeed! Another 20 pages of property porn in to-day’s IT Property Supplement. I’m buying the popcorn on this one. The decline will happen, since the rising sector is un-representative of the whole. Fallacy of composition and all that.

The US economy has stalled. So has the UK and the EU. Chindia have dire economic (and social and political) problems. And with all these great recoveries: the global rate of production of liquid hydrocarbon fuels is still stuck between 87 – 92 mill bbl per day. There are four factors of production: land, labour capital, and energy. The latter two have encountered some problems (diminishing returns). Significant proportion of labour may be robotized (as long as there is a surplus of electricity). Interesting times ahead.

@ Joseph Ryan

“A two-bed rat-hole in Cabra went up for €134,000 asking, €150,000 on the weekend. And I mean a rat-hole.”

A ruminative post.

Both my father’s family and my wife’s mother’s family grew up in Cabra and me and my family was there for around 8 years, 2001-2008 before moving to Phibsboro.

One thing that has given me heart during this recession is the relative solidity of the 17-shops at Cabra. Clarke’s the bakery still has queues out of the door on a Saturday morning, the butchers are well stocked there are rival greengrocers including a new Get Fresh one. This is in contrast to Phibsboro which looks very battered and which is very reduced to empty spaces and multiple euro-stores. I think the threat to Cabra may be more the mega new Tesco’s and so on rather than absolute poverty.

My father’s family had the top half of a house with two rooms for all, no toilet or running water, cooking was done on the fire, no shoes until he was seven and so on but there was a public library from which he read every book and he eventually went to TCD. My wife’s mother’s family, all girls, similarly thrived. Certainly when we started to say our two-bedroom house wasn’t enough older residents chortled and told stories of twelve to a room and sleeping in turns and so on.

As this recession is still very tough I do try to comfort myself with the thought of what a long way things have come. Which is not to say I don’t doubt that many people who are still in work are surviving on cornflakes at the end of the month.

The height of the bubble saw two bedroom, 1930s on houses built for social purposes going for about 440k. I remember on dutch auction, where the surveyor finally said, no, this house is not worth it, much to the annoyance of the bidder. I also remember looking along the street and adding up the total value at the time and realsing that one would have to win the euro-millions good and proper to buy along. In Paris I saw a larger apartment overlooking Notre Dame for less than a two-bedroom in Cabra.

Residents who had been there a while had equity of over 300k in their homes (often the homes going up by more than their wages per year). I don’t think they went mad. I don’t think we all partied. Certainly there were some dubious extensions, a shomra in the back garden, a second car (Cabra – home of the Nissan Micra) and maybe help with a deposit for the kids. It’s all relative. The kids still played tip-the-can on the streets, the back doors were still open but it was difficult to get a game of footy in with the cars in the way. Also the main fear was that the children could no longer buy in the area and moving up was out of the question. I was in some new estates in Trim and the prospective buyers all had familiar accents. Buyers, whom I suspect in earlier days would have bought in Glasnevin, Phibs., fairview or even the southside began to come in to Cabra as they were also being priced out of ‘their’ areas.

Leaflets certainly came regularly through the door encouraging you to make the most of your windfall: you were foolish if you didn’t.

There are certainly rats down by the canal, but the houses were never rat-infested as far as I know. We had a hedgehog come in from a disused railway line which bloomed with lilies in the summer.

So Cabra is a good spot as far as I’m concerned (I know you weren’t saying otherwise), but what ‘should’ those houses be worth? Hard to say, two and a half times the median wage? That would make them about 95k, I think. A bit more if their seen as for a couple to buy jointly. I quite like Yields or Bust’s approach, but I’m not sure how that would work out.

I think I’ll end the rambling there but I suppose it is not just about prices and rents but how the people of Dublin can thrive in a city that works for their needs and gives everyone a chance to flourish in the future.

Worth seeing Pat McGrath’s ‘Small Plastic Wars’ for a sense of how Cabra is now.

@ Francis

“A neighbor is again copulating with an open window.”

You have my sympathies. Those Commerzbank investment bankers have no manners.
And the poor window.

Thanks for the interest and kind words

@ Francis
You might not be as happy with me when you get to chapters 4 and 6!

There are a number of interlinked arguments there:

1. When we compare capitalisms across Europe (and the Anglo-Am world) that it is the social democratic and Christian democratic countries that do best on both fiscal balance and social spending. I see these as linked – in part because of the better tax base, in part because higher spending probably ‘demands’ greater fiscal conservatism but also because the social spending provides a ‘social compensation’ for citizens and therefore makes fiscal conservatism an easier political sell as citizens have a serious stake in the sustainability of public finances. Chapter 6 also has a discussion of how different models of capitalism have different ‘models of risk’, which also links to this question.

2. Ireland significantly benefited from the EU in the 1990s, as shown in EU funds as a % of public investment during that era. Public capacity to manage these funds in infrastructure and industrial policy was also important. That is a key lesson for the ‘accession countries’ – both the need for EU policy to support serious investments and the need for robust public institutional capacity to manage them. The fiscal tightening at national and EU level of course makes that more difficult.

3. The European model – and indeed the German model – has shifted since the 1990s. The key element here has been financialisation (associated with the EZ among other factors) but also, as Wolfgang Streeck has documented, weakening ‘social investment’ in some key economies (Germany, Uk, Sweden). Although the ‘social model’ has held up much better in some of the smaller economies, their influence is much weaker within the EU. Going back to point 1 above, this makes me skeptical about the possibility to deliver on fiscal conservatism while at the same time weakening the social model – so, unlike Draghi, I see the social model as core to achieving the fiscal goals, not as a threat. Not an easy policy or political task but an essential one.

@Gavin Kostick

re: A ruminative post.
Your politeness does you credit. The ‘rat-hole’ of course referred to the condition of the building rather than its location in Cabra. I would be very happy for my near relative to reside in Cabra. So, no offence intended to Cabra.The house itself would have required complete refurbishment. I am sure that there are even bigger rat-holes in parts of the Dublin at king-rat prices.
[Allow me to assure you that accommodation facilities in rural Limerick in the 1960s were not AAA rated]

Government policy that allowed prices to spiral and that drove people form Cabra to Trim and further afield bordered on criminality. It is clearly happening again, with the government and NAMA hoarding land so the ‘house prices go up a bit’. Its now official policy you could say.

@Sporthog has pointed out that a house will rent in Portlaoise for €650 per month, the same house in Dublin would rent for a least twice if not three times that amount.
This in a country that has spent the last six years supposedly trying to deal with a housing and banking crisis.
Now if government policy was to bring all standard accommodation down to say 5 times the average industrial wage, that is what I would call a policy aim or objective. It could easily be done. It would require the government using it existing land banks in Dublin and acquiring new ones, if necessary, at waste land prices, no more.
We will not see that happen. There would be no money in it for private speculators.

@ Sean,

I am looking for new stuff, things which do NOT fit my present picture, but also have good quality, not like the endless regurgitation of ISLM humbug, carefully researched and referenced, and your book and references look very much like it : – )

You provide food for thought for many days, a rare thing in these days.
Your mentioning of the interlinkage of the 3 pointed arguments , I love it! I felt lonely with writing in a similar style.


What who thought when about the Target 2 system will most likely stay a secret.

What is pretty clear, that most people in Germany thought, that the treaty is clear enough with “no bail out”. I remember being irritated about SPD finance minister Steinbrück in 2007 squeaking around about wanting more information about banks and other financial inb other countries, thinking, what do we have to care? Today I see this considerably different : – )
What is well known, that at the time of the Euro invention, the French finance minister, and probably many others thought, those rules will just fall in the next crisis, for political expedience. And nearly they did. In Germany we had over the decades also constant change to stability rules, when folks got creative on declaring higher teacher pay an infrastructure investment, and similar things: – )

Zerohedge has actually a couple of interesting threads on the development of today, and somewhat related to the book topic here.
In general we are entering more and more uncharted territory, with what I see as the main 2 strains:
a) an aging population, requiring much higher social redistribution towards that, and that the service sector becomes the dominant economic sector, agri and manufacturing shrinking to small parts, with all the problems associated with that, how do you measure productivity, inflation, e.g. what is a lawyers hour worth?

b) the dominance of Europe/ US of just the last 200 years is diminishing, and we have to adjust more and more to other more important players. And that will most likely mean, that living standards in many of our countries could shrink by a little over many years, something the overwhelming majorities certainly don’t like.

@ seafoid

I am aware of my broken English. It will not change anymore. What the Commerzbank has to do with it?

@ francis

Seafoid is joking.
Your English is a lot better than our German.
Keep posting.
Die Schau muss weiter gehen 🙂

@Joseph Ryan
The Irish have demonstrated that outside of Irish government jurisdiction in countries that are well governed we are commonly in the top 3 ethnic groups. This is still the case today. Your second proposition that Ireland is controlled by special interest groups rings true to me. Irish politicians make decisions that are in close alignment with “Campaign Contributions” commonly know as “giving a little bit to the cause”.

The cure is for more people to join political parties and effect change from within. The cheapest cure in the short run is to vote (sweet Jesus save us and forgive us our sins) Sinn Fein.
For a people with a reputation of being hard bitten bastards accustomed to hardship we are amazingly gullible when it comes to politics.

@ J.R.

Take a look at London…..the rental market there.

Many people in London…. they have enough to pay the rent… and commute.

And that’s it.

It is possible Dublin will go the same way, if it is not there already.

francis – why above do you think Piketty was ‘wrong’ ? Was that just the FT thing, or is there another counter argument ?

The two major issues in the Irish housing market are property taxes and taxpayer funded social housing. Unoccupied properties can sit for years because there is no cost to the owner. There is a cost to society at large in that roads, water, sewage, gas, electricity and communication service are provided to the property. If the average house in Dublin had to pay Euro 2,000 per year in property taxes, houses would be used more efficiently and property values would be lower. Thus lowering the cost of entry and reducing the need for social housing. The poor will always be with us so the need for social housing will not be entirely eliminated.

Property taxes collected by local government if not paid become the subject of a lien on the property and are finally due with accumulated interest and penalties when the owner dies or abandons the property. At that time the property goes to auction and the municipality gets paid first with the heirs getting the leftovers if any. You can see the value of this when it comes to accumulating a municipal land bank for social housing.
Our gov’t as always in the Head Waiter mode does not want to offend voters with a highly visible but sensible action when it can bury it in everybody’s income tax. We voted for things as they are now. The TDs’ were not dropped in from Mars or voted for by Leprechauns.


The FT Chris Giles on the cherrypicking of various datasets with limited long term comparibilty was just the last drop. What you can derive from datasets in economics is a notorious problem.

Way more important is, what I voiced here already in March,


For tonight I just put the link to Solow



in more elegant words than mine, but basically the same thing, piketty playing with the deprecation


over several other steps to


My view of this is even more conservative, that if you look for example at the OECD Annex 58 table, you split “capital” into the productive part of about 3x GDP, in all countries and pretty stable over long times and the “unproductive” namely your house, on which you can put a higher or lower price sticker. And that limits the “capital accumulation” further.

It also means, that it is impossible to build pension systems on capital in large countries, like the Modigliani Life-Cycle-Hypothesis,

that maybe in the future the appropriate target for government debt is more like 80% GDP, instead of the current 60%


while enjoying to read how Hamilton is basically mopping up the floor with spoiled Brad DeLong, feeding him his own papers

I read, that 4 SciencePo profs


made the same argument as me just above, that it is even worse, than the american commentators say,

that you have to separate the unproductive “housing wealth”

And, guess what, even Buiter is cited in the respective paper with:

“3 For instance, Buiter (2010), in a paper entitled Housing wealth
isn’t wealth,”

@ francis

When the Fed, BOE or BOJ massively expands its balance sheet with digital zeros, and thereby enriches the holders of financial assets, does it create, or transfer wealth ?


I assume you mean with “financial assets” in the US case, US government bonds like ticker symbol PTRAX, to discuss this specifically,

but not ownership of a US house or of Stock like Google, Amazon, Apple.


@ francis

The traditional factors of productivity were described as land capital and labour. Investment of capital was seen to provide profit which was shared between capital and labour. And so on.

My reading of the Solow link you provided does not support the notion that Piketty is fundamentally wrong. I doubt that many readers of this board have the training or inclination to follow the ‘greek letter’ arguments or the massive datasets assembled by Piketty and his critics. What most people see is that inequality is increasing contrary to what was promised or expected in western developed societies.

What I find extraordinary in Piketty is that he could write at such length while basically disregarding finance. In other words, he ignores Keynes and especiallly the post-Keynesians who are providing the kind of theory which actually deals with the reality of today’s financialised world. For a theroretician, he seems remarkably short on theory.

The notion of productive capital needs to be very seriously re-examined in a world where 99 out of every 100 dollar transactions is speculation. It is interesting that Piketty is feted at the White House, which has been captured by Wall St. As long as the leveraged speculating community is allowed to capture global finance, and the global economy, there can be no meaningful debate about ‘productivity’.

The point, I am getting at above is ‘what is wealth ?’. I would think it is the same question as ‘what is power ?’ . A command economy is still an economy. It easy to see why people who lived under a falling command economy ( and an oppressive political system) would want to leave all of that behind them, but there is a bigger picture. Oppression has always come in many forms, and even the most oppressive systems have aspects which serve the public.

You say there is no upward transfer of wealth in Germany, yet there is no return on savings. So many people have insecure mini-jobs, with constant pressure from new arrivals at the bottom. That is good for employers but not so good for existing low level employees, which is one of the reasons nationalist politics is again on the rise in Europe. I don’t think Ropke would have been very happy with that scenario.


short question:

did you read the Solow 1956 article in the original?

Could you take the table out of it, and try to replicate his calculations?

That would be very relevant on how to continue the discussion best

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