Insidious Ireland

IMF Economists Bas B. Bakker and Leslie Lipschitz propose a taxonomy of balance-sheet crises in a new IMF working paper (.pdf). The basic distinction is between ‘Conventional’ and ‘Insidious’ balance sheet crises.

A conventional balance sheet crisis happens because of external imbalances, typically large gross flows into or out of the country, causing balance sheet vulnerabilities, typically in non financial corporate sectors, which then blow up the economy. The insidious balance sheet crises have the conventional crisis features plus way off-balance expectations and really off portfolio effects.

The authors find Ireland and Japan insidious. Fair play to them.

From the paper:

Conventional and Insidious Macroeconomic Balance-Sheet Crises; by Bas B. Bakker and Leslie Lipschitz; IMF Working Paper No. 14/160; August 1, 2014

This sort of crisis would usually be preceded by a long period of excellent economic results—rapid growth led by exports, sound policies, and strong external accounts—that gives rise to an enduring positive perception of the economic prospects. The difficulties arise when a normal, equilibrating shift in relative prices—an increase in the prices of nontraded goods and assets relative to those of traded goods—gets built into investor expectations and elicits a rapid, and eventually excessive, reallocation of credit and domestic real resources.

The paper is excellent and worth reading as a narrative of a series of crises, but it’s not clear what Bertie et al would have done in 2004 in Ireland, had we had this paper to guide them, because the conventional vs. insidious distinction isn’t clean-cut. The discussion on pages 29-31 of the paper on China are fascinating. A deeper dig into financial history might help get more salient case studies to iron out the distinctions.

By Stephen Kinsella

Senior Lecturer in Economics at the University of Limerick.

55 replies on “Insidious Ireland”

“The authors find Japan and Ireland insidious”. Past or future?

For Bertie it might have worked to tell him you don’t want to be first over the waterfall. And show him that clip from the silence of the lambs where Buffalo Bill tells the woman in the dungeon “you put the lotion in the basket or you get the hose again”.
Or even just a time traveller to tell him what the financiers would to to his beloved Man Utd . That 6 years after winning the Champions League they would be so damaged the new manager would talk about making the club big again. That might have resonated. Jaysus.

“This sort of crisis would usually be preceded by a long period of excellent economic results—rapid growth led by exports, sound policies, and strong external accounts—that gives rise to an enduring positive perception of the economic prospects. The difficulties arise when a normal, equilibrating shift in relative prices—an increase in the prices of nontraded goods and assets relative to those of traded goods—gets built into investor expectations and elicits a rapid, and eventually excessive, reallocation of credit and domestic real resources.”

That’s a common or garden crisis definition. Emerging Markets last year :

“The truth is more banal: 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.
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.”

What ####ed Ireland was being in the Euro with no safety net

National bank regulators controlled their own patches and cross border effects were ignored.

None of these were or are in place

• Banking union with a single supervisor
• a single resolution authority
• a common safety net involving
o Deposit insurance
o fiscal backstops
o burden sharing and
o a credible Lender of Last Resort

So you ended up with a very messy and extremely expensive “bailout” . The model was not repeated elsewhere because it was crap.

And unless those missing elements are introduced the next blowup in Europe will be more of the same.

Maybe Bertie should have looked at what sort of procedures were available in case the car broke down.

A fascinating paper!

It does not, however, tell us much that we did not already know with regard to what happened in Ireland and the “plain vanilla” nature of the crash (page 25).

“Without contagion from the global financial crisis Ireland’s economy probably could have continued on its growth path for a while longer; but given the underlying vulnerabilities, some event would have sparked a crisis not much later. It is clear in retrospect that the relative price correction in favor of real estate and other nontraded sectors had overshot any plausible equilibrium, that this overshooting had been driven by speculation, leverage, and the easy availability of credit. Not only was the crisis insidious, but all the pressures on policy were to keep growth going and not to disturb an extraordinary history of income gains.”

Moving on from how we got into the mess to the way we seem to be getting out of it, Draghi had some interesting things to say in his speech in Jackson Hole.

The line is “it rubs the lotion on its skin, or else it gets the hose again”
Bertie would note that the lass in the pit escaped. He would then inveigle Buffalo B to open a couturier shop in Temple Bar, while getting Dr Lecter a quango post – perhaps the Food Safety Advisory Board.


“Moving on from how we got into the mess to the way we seem to be getting out of ”

What sort of EZ unemployment rate would you consider as a mark of success ?

DOCM considers, i fear, the real unemployment rate to be inflation*unemployment. So long as inflation is at or near zero, not a problem. Sure the unemployed are probably lazy, arent there loads of jobs out there?


The ECB targets 2% inflation. So it’s missing that and unemployment is quite high . Money supply is running below target and real GDP has stagnated since 2011. The Euro is also overvalued. I’m struggling to see how the situation can be classed as a success.

Emerging economies such as China, Thailand and Malaysia, can be particularly vulnerable to shocks as moving down the economic pyramid, the spending of the new middle class tends to be fragile.

In China a young couple may have to support 4 parents, pay a home mortgage, one or two car loans, healthcare costs because of the poor standard of public provision – from salaries that are not high by western standards.

Nevertheless the items associated with a middle class life can come at international prices.

As for spotting future dangers in “insidious” Ireland, little seems to have changed as distorted data impacted by the FDI exporting sector coupled with tax avoidance, gives a wide latitude for spin.

There is a recovery underway but is it as strong as commonly claimed?

Jobs are a central focus for government propaganda and the Dept of a Jobs can claim CSO data show that 70,000 net jobs were added in Sept 2012-March 2014. CSO data show that 47,000 jobs were added – the Dept magicked up 23,000 jobs by adding seasonally adjusted figures for 6 quarters – why can this fantasy-making endure?

2) The situation may change but since March 2011 when the current coalition took power, almost all the additional 46,000 jobs were in self employment and public schemes.

3) There is a well established mantra that rising exports means more jobs but why were there no jobs added in 2000-2013 when headline exports surged?

Note how the possible end of the Double Irish Dutch Sandwich schemes and their knock-on impact on services exports remains a taboo issue for the Central Bank and ESRI.

4) PMI sentiment surveys get a lot of media attention while official data showing lower activity are often ignored.

5) The current governing coalition is as addicted to toxic spin as it’s predecessors and few government statements can be taken at face value.

@ MH

Brendan Keenan had an exceptional piece on the topic of the “recovery” last week.

The “statistical fog” to which he refers is a major feature IMHO in the explanation of the failure of those supposedly expert in the area to come to grips with the real state of health of Ireland Inc.

He had an equally perceptive piece this week on the “precariat” and raised the question of whether there will be a realisation on the part of those stuck in it of their situation and whether this will give rise to the necessary political reaction. In other words, will the recovery from a self-inflicted crisis be different on this occasion?

It is by far the most interesting political question in the post Troika era. The structure of the budget will be revealing.

@ MH

Chris Johns of the IT was also very interesting on the topic.

He comments;

“And this year we are underspending, again, on our infrastructure. The failure to distinguish between the current and capital sides of the budget is an infantile aspect of the way we do austerity.”

This infantile behaviour in question is the result of political calculation with those benefiting causing a general attack of blindness even, it would seem, hitherto at least, among those losing big time i.e. the precariat.

@ Sam Maguire

(i) I am talking about Hibernia (Republic thereof) not the globe

(ii) and about roads that lead somewhere e.g. connecting Galway to Limerick and Limerick to Waterford by motorway, not forgetting far-flung Donegal.

It is not so much a question in Ireland’s case of a lack of suitable investments – there isn’t any – but of the pockets in which taxpayer’s money ends up. If I have a choice between obviously useful investment – which benefits the precariat directly – rather than the pockets of those not in that category, I am for it.

Such a choice must also benefit economic growth rather than the spurious kind reflected in vacuous commentary on the sales of motorcars and the prospects for the Irish motor “industry”.


“And this year we are underspending, again, on our infrastructure. The failure to distinguish between the current and capital sides of the budget is an infantile aspect of the way we do austerity.”

It is and it’s also a problem in the States. A lot of infrastructure is falling apart, even without fracking damage. Also in the corporate world the lack of investment in business is slowing down productivity growth which means lower wage increases, lower consumer spending and ultimately lower growth.

Short termism is the curse of the Zeitgeist. Incentives are arseways.

I know Colm McCarthy is no fan of railways but oil isn’t going to be available at $100 a barrel forever.

@ seafóid

The problems of the States are their problems. I am only interested in our own.

As to oil, you may not have noted that Irish Rail runs on diesel!

@ Seafóid

The issue is the economic efficiency of inter-city road versus inter-city rail transport (with the two systems in Ireland’s case running usually side by side as the imagination of 19th century rail promoters was not greatly improved upon by their 20th and 21st century road equivalents).

They both run on the same fuel from the same external sources and which has to be paid for by foreign earnings.

Make your mind up between the two! The travelling public has already done so.


I don’t see private car use being economically efficient indefinitely. Do you ?
Most economic models assume the supply of oil is infinite. I don’t believe it is.

“The travelling public has already done so.”

The travelling public’s ancestors put their faith in spuds. And guess what happened.



Draghi is an Italian. Italy is banjaxed, and something in the European political ‘system’ has to give. Spain will hit the wall too, and the Germans will eventually come under pressure to dismantle their export machine. The UK will be less chirpy when their fiscal and current account deficits come home to roost (again).

The implication of the cited paper above is that Ireland will be in hole for a very long time. There are enough NPLs left in the banks to sink the ‘Pillar’ strategy, and there is no engine of growth.

Colm McCarthy righly highlights the synthetic ‘engineered’ nature of sovereign bond yields. The bigger picture is even more troubling.

‘I expect the next crisis to likely revolve around the harsh reality that central banks cannot guarantee robust and liquid markets. Actually, reflexivity ensures that perceptions of limitless cheap liquidity and market backstops ensure the type of excess that inevitably ends in liquidity crisis. When this historic Bubble bursts, corporate profits will be one of the more prominent casualties. And in the fascinating world of Bubble analysis, I can confidently posit that the Fed is oblivious to the unfolding financial stability problem. They clearly don’t appreciate the Bubble they have induced in corporate profits and the ramifications for the true overvaluation of corporate securities generally – both equities and bonds.  ‘

Is this paper supposed to be up-to-date or is it supposed to be dealing with history? I ask because all his charts for Ireland are way out-of-date. They show GDP still falling, house prices still falling and unemployment flat with no sign of a fall. In reality, unemployment has been falling for 2.5 years at a rate that matches the steep falls the first part of his chart shows for the 1990s. Is it supposed to be like this, or is it just that, because of the time-lags involved in publishing, papers like this tend to use very out-of-date data? I expect that, if the IMF publish a paper soon on Rory McIlroy, they’ll say he’s crap as they’ll be using data from 2012 and 2013.

Brendan Keenan is right on one point. Ireland’s economic resurgence (almost certain to be the fastest-growing economy in the EU in 2014) is being greatly downplayed by Irish politicians and media (clearly, he was not referring to my posts on this site). I wonder why? Politicians are usually found screaming from the rooftops when economic growth takes off. But, Kenny and Noonan are being extremely quiet about Ireland’s growth in 2014. They are still ludicrously predicting 2.5% growth this year. It will be miles above that. Industrial output is going through the roof. Exports are soaring. The number of foreign tourists is up 10 per cent. New car sales were up 60 per cent in July. All the PMIs are brilliant and by far the best in the EU. Consumer confidence is rocketing. Unemployment is plummeting. The tax take is way ahead of target (unlike the UK). So, why the uncharacteristic silence from Irish government ministers, who really ought to be the main beneficiaries of the growth surge,

I suggest they have been leaned on by the UK. It is reliably reported that UK Embassies worldwide have been pressing governments to do what they can to prevent a ‘yes’ vote in Scotland. Hence the statements by Barak Obama and Tony Abbott of Australia. Does anyone think that Ireland is not also being leaned on? The last thing the UK wants in the run-up to Sep 18 is world media coverage of Ireland’s economic resurgence. Alistair Quisling is currently touring Scotland telling them on a daily basis that Ireland is an economic disaster area and that the same will happen Scotland if it has the temerity to break from England. He’s telling them that Ireland is bust and still in recession. In fact, Ireland is growing faster than the UK, its borrowing rates are lower than the UK and its budget deficit in 2014 and beyond will be lower than the UK. Even though they can claim credit for these achievements, Kenny and Noonan have been keeping very quiet about them. But, wait until after Sep 18 and Kenny and Noonan will be proclaiming these facts from the rooftops. And I confidently predict that after Sep 18 the official Irish government forecasts for economic growth in 2014 will be revised upwards dramatically.

@ PQ

spot on.

Serious financial imbalances. Tools that haven’t been used to this extent before. No idea how the post QE space will pan out. Big problems with productivity growth, even in “serious” (copyright McAdoo) countries such as the UK and US.

The EZ export model may not work any longer in the States and the Yanks may pull back on military spending.

Economics profession all over the place.

Worldwide, more money is piling into savings than businesses believe they can use to make productive investments.

Martin Wolf :

“But, in essence, today’s financial system is the same as before. Worse, it is yet more dominated by a small number of thinly capitalised, complex, global behemoths. The notion that such institutions could be “resolved” in a panic without triggering panic remains untested and, partly for this reason, government promises not to bail them out are not credible. This is a highly troubling legacy.”

Assets at record highs- where do they go from here ?

• Markit CDX inv grade index 57 vs 279bps nov 08
• MSCI world index up 190% since March 09
• Eurozone yields at record levels – eg Ireland 2%


I concur with your Celtic Phoenix argument for now. Under the leadership of Chairman Mayo the Irish economy is now on a firmer footing. I tried to book a hotel room at short notice on Friday in Kilkenny but non could be had except for a B&B which was touting one for 120 euros. Meanwhile, my contact in the conveniance store business reports sales of muffins with the morning coffee are back in bubble territory.

I know the govt reticence to blow the trumpet has got nothing to do with Scotland. But you raise an interesting question. Why have the leaders of the alternative govt, Jarry, Mary Loo and Michael Martin not decamped to Scotland to extol independence. Is it because the rebound in Ireland does not fit their narrative of a failed state.

@DOCM on car vs rail travel

They both run on the same fuel from the same external sources and which has to be paid for by foreign earnings.

Make your mind up between the two! The travelling public has already done so.

You are simply regurgitating “private good, public bad.” over and over again without having any idea about the area you are talking about.

Firstly the choice between a rail network with poor access to many parts of the country and a well funded ane extensive road network is a false one, people drive long distances by necessity and the people I know who live on well serviced rail routes and have the option to use them will do so rather than driving.

Secondly you completely missed the point of Seafoid’s point about trains and oil dependence which is that trains are more fuel efficient per passenger kilometre travelled than cars by a factor of between 1.6 and 20 (though this depends on train utilization and average passengers per car, the costs of rolling stock, etc). If we have to make choices about mode of travel in Ireland based on reducing oil imports it will be rail or three day bicycle trips.

Thirdly an electric train network can be run off renewable resources much more easily than long distance car travel (this may change but improvements in battery technology also help trains).

This is all to say that a well designed train network needs less fuel imports, makes life more pleasant for commuters, is less environmentally damaging and more sustainable than travel by private car.

If there a transport economist in the house they can fill in some more details and there is of course room for a badly designed and under utilized rail network to work out more expense per passenger kilometre travelled than a very efficiently designed road network with highly utilized vehicles.


“As to oil, you may not have noted that Irish Rail runs on diesel!”

Is your point that they are availing of that secret supply from over the border that nobody can prove comes from anywhere, never mind a refinery?

re Irish wage growth:

Average weekly earnings are down 1.1% year over year in q2 following zero annual change in q1, so even with virtually no price inflation nominal and real pay for those in work is still falling. The aggregate data hides some interesting changes across sectors however, with strong annual increases in construction (6%), industry (4.4%) and the hospitality sector (5.3%), implying some tightening of labour conditions in those areas.

The point raised by JTO is interesting and I suspect the government may not want to raise expectations too much regarding the upcoming Budget. The pattern of quarterly GDP ( up 2.7% in q1), absent revisions ( a big caveat) implies that annual growth may well be lower in 2015 than this year, which is contrary to current official projections.


I agree with what you say about Jarry and Mary Loo. I consider them to be primarily marxists and not traditional nationalists, so of course they will say Ireland is a ‘failed state’. It is wrong to think that, because I am a northern nationalist , I support SF. Far from it. Never have voted for them and never will.

However, I’d be surprised if Michael Martin has ever described Ireland in similar terms. FF have been the government for about 60 of the past 92 years, so I doubt any FF leader would ever say such a thing. However, if you provide a link to where he is supposed to have said it, I’ll look at it.

It all seems so noble how the FG leaders are downplaying the resurgence in economic growth so as not to jeopardise it. When did any government anywhere in the world, especially one 18 months from an election, behave like that? We’ll see if their reticence continues after Sep 18.

A far more likely explanation is the one I advanced above. Portraying Ireland and its economy as a disaster area is central to the ‘no’ campaign in Scotland. Here is a link to a quote from Alistair Quisling in the first debate (may I say I have no connection with this blog):


If a German or French politician described Ireland as ‘bust”, Enda Kenny would have no hesitation in refuting it, and the relevant ambassador would be called to explain. However, with official UK government approval, the ‘no’ side in Scotland are apparently able to make any number of false claims and insults about Ireland, and nothing is said from Ireland to refute them. If Alistair Quisling insults Ireland again in tonight’s debate, Enda Kenny must stand up and refute him. He should go on national tv and act as Dev did after Churchill insulted Ireland. He should point out as loudly as he can that Ireland is growing faster than the UK (for the 36th time in the past 50 years), that its borrowing costs are now lower than the UK, and that Ireland has performed far better out of the United Kingdom than it ever did in it. Enda Kenny should also declare that, if Scotland votes ‘yes’, then Ireland will do everything it can within the EU to advance Scotland’s membership of it and will demand that the EU help facilitate whatever transitional currency arrangements the government of free Scotland decides on.

With regard to Irish politicians decamping to Scotland, may I say I am doing just that next Sunday for 3 weeks. It would be good if some Irish government ministers did similar and explained to the Scottish electorate the great advantages of being outside the United Kingdom.


The country may not be bust (no country, as such, can actually achieve this status), but the government coffers certainly are. Why else would it be borrowing to fund everyday spending?

CMcC hit the nail on the head with his use of the adjective “unnerving” about the current level of debate.

As to Scotland, if independence was the solution to economic problems, there would be no shortage of successful economies in the world.

As to the ez if union was the solution to economic problems then everyone would want to join in.

@ seafóid

Whether it is or it isn’t, that is what “everyone” (i.e. all countries of the EU) have signed up to (with the exception of the UK and Denmark, which have formal treaty-based opt-outs, and Sweden, which has an ersatz self-created version tolerated, with bad grace, by the other countries).


Ireland’s budget deficit in 2014 is significantly less than that of the UK. One of the reasons Ireland’s borrowing rate is lower than that of the UK. So, if Ireland is ‘bust’, the UK is even more ‘bust’. All the more reason for Scotland to leave.

Has CMcC ever said anything positive about the Irish economy? Did he predict the current growth rate before it happened?

“As to Scotland, if independence was the solution to economic problems, there would be no shortage of successful economies in the world.”

Well, Denmark, Norway, Belgium, Netherlands are all as close to London as Scotland (give or take) and they seem to be doing quite well without being governed from London. Neither have I ever heard of any desire on their part to be so governed. Why shouldn’t Scotland do as well as those? t could add Ireland to that list, but you would probably dispute it. No dispute about the others.

Just watching Alex Salmond destroying Alistair Quisling. Sock it to him, Alex.


It doesn’t seem to be working very well.
Missing the inflation target by 150 bps. Jaysus

today’s Der Spiegel says Germany’s prosperity is precarious.

How do you define success ?


You are advancing independence as an ingredient, if not a requirement, for economic success. There is zero evidence to support this claim. If someone had the time and inclination to show the relative economic progress of newly-independent countries – and that is what we are talking about – I am pretty certain that the opposite would be shown to be the case.

The UK has its own currency. Commentators, especially on this blog, usually view this facility as an advantage; the markets seem to assess it differently in terms of assessing risk in relation to government bonds.

Colm McCarthy advances a cogent and entirely credible explanation of the reasons for the low bond rates generally. In Ireland’s case, they have nothing to do with an imagined sudden economic revival. Of course, I will be delighted if this proves to be the case. No doubt, the government will then emerge from the self-imposed purdah you seem to think has something to do with the broader EU context and Scotland in particular. The explanation may be more prosaic i.e. that advanced by Dan McLaughlin above. My own view is that the two Coalition leaders are attempting to keep a lid on opposed views with regard to what to to do about the budget; with limited success.

As to Scotland, what the people there decide is not my business, a sentiment strengthened in my me by my instinctive reaction to the attempted involvement of UKIP in Irish referendum campaigns.

@DOCM on the failed EMU part of the EU

Whether it is or it isn’t, that is what “everyone” (i.e. all countries of the EU) have signed up to

Sadly preditctable schilling for failure.

The only line now left for Euro supporters is that we signed up to this “this” and therefore are forever committed to “it”. Yet the “this” we have with German self interest and dominance over EMU, appalling macroeconomic policy at DG Austerity, an activist ECB (but only with regard to budget cuts) is not what anyone signed up to.

This is not buyers remorse, we signed up to a service that does not work and the provider will not fix it. Sweden and Denmark will never join EMU as is and its difficult to see Poland rushing over the cliff either. EMU is a disaster and its supporters the worst kind of fools and dissemblers.


good luck to you in Scotland. Hope you win a few votes for the cause. No irish minister or pol should go near this on either side of the debate. It is for the Scottish people to decide. RQ is doing a useful service by pointing out that a vote for succession COULD delay EU accession and a Commitment to join the EUR. That is actually a good point. Alex Salmon is talking about a currency union with HMG but nobody has asked him about a union with the EUR.

The data on the employment increase is welcome. The regional breakdown is not all that comforting.
Over two years Q2,2012 and Q2, 2014, the regional changes are as follows:

Dublin +5.3%
Middle East +2.6%
Mid-West -1.4%
South West +1.0%

Border +6.0%
Midlands + 7.9%
West 0.6%

One has to suspect that the Border/Midlands ‘increases’ have more to do with people signing off rather than new employment.

Dublin, however, is the clear winner with 30,000 additional jobs over the past two years.

@ seafóid

I agree that it is not working very well. But the Eurosystem is a cooperative. Only the participants can fix it.

You will be aware that Denmark is effectively in the euro-zone as the country remains at the ERM II stage i.e. the Danish crown is maintained within a narrow band of fluctuation vis-a-vis the euro. This could not, of course happen without the support of the Eurosystem.

Joining the euro, when the necessary conditions/criteria are met, is both a right and an obligation of EU membership. While both the UK and Denmark have carefully retained the right, both have an opt-out, with Denmark, from the obligation. The Swedish government lost a referendum in attempting to join i.e. fulfill the obligation (which, one must assume, it considered a good thing at the time). It is considered to be – technically – now not meeting the necessary conditions.

How an independent Scotland would approach the issue is one of those known unknowns.


Thank you for your good wishes.

I am not surprised at RQ. Let’s face it, if the referendum was in Ireland, he’d be the Alistair Quisling of Ireland’s referendum.


You ignore the reality of the United Kingdom state. As far as Ireland, Scotland and Wales are concerned (and in that order), the United Kingdom is a ‘failed state’. Not saying its ‘failed’ in the sense that Afghanistan is a ‘failed state’. It has benefitted England who make up 85 per cent of its population. England has prospered in the United Kingdom and been able to punch above its weight in the world. But, Ireland, Scotland and Wales have suffered only depopulation, economic underdevelopment, cultural genocide and social regression as part of the United Kingdom.

Ireland’s population fell by 60 per cent between 1841 and 1922 (but has rebounded since). My own county, Tyrone, today has half the population it had in 1841 and its been in the United Kingdom (unwillingly) all that time. Scotland’s population has been flat for a century, the worst performance in Europe. Excluding the Republic of Ireland since 1922, there has been net emigration of nearly 10 million from Ireland (both parts), Scotland and Wales combined since 1841. Wales and N. Ireland’s GDP per capita are today the lowest in western Europe, apart from Portugal and Greece. Scotland has the worst health stats, the highest mortality and lowest life expectancy in western Europe. N. Ireland is next worst. Wales has the worst PISA results in western Europe. N. Ireland, Scotland and Wales have all been deindustrialised in the past 50 years and, as result, made dependent on public spending from London (which helps keep them in tow). The Gaelic and Welsh languages have been virtually wiped out while part of the United Kingdom. All this amounts to a ‘failed state’. Lets hope it has only a few more weeks to live.

The only part of these islands to break clear of all this is R. Ireland. While far from perfect, since 1922 or, more accurately, since around 1960 it has managed to reverse some of these trends. Its GDP increased from 50 per cent that of UK to over 100 per cent. Its share of population of these islands increased. Its health stats and education stats are now much better than those of N. Ireland, Scotland and Wales.

@Joseph Ryan

I agree with your analysis.

In addition, of the 16,500 population increase in 2014, no less than 12,200 of it was in Dublin. The population of the Border region fell by 5,700. Between 1996 and 2011, population growth was spread evenly throughout the country and most of the Border and Western counties more than matched Dublin for population growth. Looks like the present Dublin-centric government is reversing that.

Very disappointing Irish employment data for q2, rather spoiling the recovery narrative. The annual increase has slowed sharply and on a seasonally adjusted basis employment rose by just 4.3k in q2 (0.2%) following a meagre 1.2k in q1 i.e. total employment has risen by 5.5k in the first half of 2014.


How do you square the employment data with the tax receipt data? Are we looking at a overstatement of previous periods to the disadvantage of current periods.


The 2014 Budget increase DIRT and reduced the tax break on health insurance which was projected to add €215mn to income tax (about 1.6%) but even allowing for that the average annual rise in employment in H1 was 2% and wages fell so it does appear a bit inconsistent with the income tax receipts to date. The Survey is just a survey after all.
It is noticeable that the headline coverage of the data is emphasizing the annual employment gain and the fall in the unemployment rate, although this year the latter has been driven by people leaving the labour force (mainly staying on in education or in third-level) rather than employment growth.

In the space of 12 months we appear to have swung from growthless jobs to jobless growth. Something does not add up.

@Dan McLaughlin / Others

The budget tax increases that you refer to do account for some of the apparent inconsistency between the fall in average weekly wages and the increased income tax take.
However, I do think it is possible mathematically to have a fall in average weekly wages, while recording an increased income tax take. If the new jobs/ lower paid jobs experience no wage increases (or are hired on below average wages) and better paid (who paid higher taxes anyway) are experiencing wage rises, then I think it is possible.

1. The QNHS has a margin of error of 9,000 but the CSO’s incorporation of the Census 2011 results which found that the migrant population was 103,000 bigger than estimated and other changes, was a mess.

2. The numbers working in Agriculture, fisheries and forestry was also underestimated in the bad job loss years. The number of mainly famers/ farm workers did not rise by 27,000 in 2013.

3. Ministers and others jumped on the opportunity to crow that 5,000 jobs were being added each month from a base of no growth in 2012.

4. I wrote last Feb:

“Employment did rise in 2013 but not likely by 61,000 and we can say with confidence that there was not an increase in full-time employment of 54,300 (+3.9%). The adjustment to ‘Agriculture etc’ in effect is to correct undercounting since the start of the financial crisis…There is a simple way of looking at the jobs situation in 2013 by focusing on the big sectors of the economy: IDA Ireland and Enterprise Ireland have said that their client companies added 12,000 net jobs in the year. Coupled with tourist activity related jobs, that amounts to 29,000. Public sector employment fell while 27,000 additional farmers/farm workers in 2013 is fairytale economics.

5. Since March 2011 when the current governing coalition assumed office, the 60,000 rise in employment comprises 21,000 employees, an additional 15,000 in public schemes and a rise of 24,000 in self-employment without employees – – effectively one-person operations.

There were 130,000 part-timers seeking full-time work compared with 126,000 in Q1 2011 and total employment is down 245,000 compared with Q2 2008.

6. On tax receipts, the fiscal consolidation in last Oct’s budget included a rise of €900m in taxes including from prior measures.

In the 7 months to July, income tax was up 0.6% compared with target (made on the basis of June 2013 data when annual jobs growth was 34,000).

The overall tax take was up €548m or 2.5% mainly comprising VAT & Excise.

7. The rise in house prices and the FDI economy doing fine, has boosted spending but with no growth in wages, many of the 24,000 additional self-employed having a precarious earnings base and half the rise in tourism jobs going to migrant workers on the minimum wage, there is still a need for a jobs engine.

8. Despite lots of public funds and incentives, the ICT sector and Professional, scientific and technical activities have not produced significant jobs numbers.

9. There still is no long-term credible strategy for job creation apart from hoping for the best.

The paper is interesting but the definition of insidiousness is not something that can be easily calculated in real time. A bit like a bubble, only visible after it crashes. Is the current US model insidious ? Perhaps.

Still working on the paper and especially some additional questions it triggered for me.

One thing I want to link here, because I was unhappy that JtO’s way of assessing housing prices (per family, the average dwelling) was not compatible with the per square meter assessment we are familiar with in mainland Europe,

here a link I came across, which bring both views closer together, and also better reflects my assessment of future problems:

please go for the pdf there, and especially the affordability plot on page 14

Comments on wp14160

1. Japan

The Japanese exchange rate JPY was undervalued for the longest time, still at 0.65 real value at the time of the Plaza agreement 1985, rising to 1.0 at the Louvre agreement 1987, and then staying above 1.0 until a short peak of 1.5 in 1995.

That lead to a cumulative explosion of asset values (stocks: Nikkei 225 at 40000 in 1990, in 2014 at 15000, and real estate as well. This leads to the massive increase of household debt, which only seemed to be covered by much higher real estate values, reaching 125% of income in 1990, when the Minsky moment came. This was actually used by Warren Brussee to make his brutally simple prediction “The second great Depression, 2007 – 2020” applying the same to US household debt, with data until 2003, BEFORE the house price bubble really took off.

The American speciality was, that they took out de facto consumer credit as HELOC, masquerading it as housing invest. That was in the end a 5% per year overconsumption, which did not show up on the Fed Radar, because they were only looking at the amount of interest paid, which did not show anything alarming because of the Fed rates too low for too long (just 1 -2 years, to be clear) and the new instrument. And the subprime was then only the icing on the cake, which served in the end as a escalator in the financial markets, but was, in absolute size only a smaller part of the problem.

It is regrettable, that the paper shows many graphs only until 1995, because a lot of long term important information is lost that way.

2. Ireland

Exports peaked in 2002, long before the burst

The FX debt turned up only in 2008, almost parallel to the US house price crash, we had that here earlier this year and comments up and down, also worth to take a look at the Ukraine discussion there, half a year ago)

That was not visible like for Thailand or Latvia. This does not show up to the most degree in the CA plot, Fig. 10 lower right page 27

3. China

“Social Financing” is something new and unique, and with 200% GDP looks very dangerous

Because of the extremely low level as a starting point the extreme change of the ULC exchange rate to be noted (compare Fig.12 on page 33 to Fig. 9 on page 26

That shows the exchange rate model of Goldman-Sachs paper 99 (Dreaming with Brics) to be pretty useless with respect to China

4. my Bottomline

Making up my mind, how this 2008 screw up happened , and what I think is a long term rate of return (Wicksellian natural rate ???) were the 2 reasons I started to get into macro economics after 2009. And just blaming idiots like Greenspan is too simple.

The differentiation between normal and insidious in the paper seems to be analog to foreign debt driven or internally, and the author does not seem to be aware of the 2008 twist for Ireland.

With that in mind, I find the differentiation not really useful. Every case is different, even for the GIPSI countries in the Euro.

And that makes me really scared of what will happen in China in a few years.

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