Lessons from Ireland?

The recent data releases have prompted various comments about what might be learned from the Irish recovery: see FT comment here;   and the letter from Hugh McDermott here.

Comments

comments

56 thoughts on “Lessons from Ireland?”

  1. The Irish Recovery:

    The government is PPS-ing all over usJust to complicate things, the politicians funded a gift of – at a conservative estimate – €64bn to gamblers. Some of them in Ireland, more in the UK, France, Germany and the USA, to compensate the poor dears for their bad investment choices.

    … Ministers have to come up with plausible excuses for transferring huge wealth from the citizens – so, they think up new taxes and call them the Universal Social Charge, the Household Charge, the Local Property Tax, the Carbon Tax, the New Funding Model for Water – whatever the mugs will put up with it.

    … Let me remind you, as a proud Dub but a realist, that the motto of our capital is “Obedientia Civium, Urbis Felicitas”: The obedient citizen makes for a happy city.Well, it makes for happy politicians, happy gamblers, happy consultants, happy lawyers, happy purchasers of valuable “assets”.

    http://www.independent.ie/opinion/columnists/gene-kerrigan/the-government-is-ppsing-all-over-us-30602998.html

    … and … ?

  2. from the FT Editorial@

    ‘Above all, the government recognised the serious risk played by its shattered banking system and took steps to rebuild it. Through its “bad bank”, the National Asset Management Agency, it made banks come clean about their losses. By forcibly swapping toxic assets for safer government debt, it cleared the way for lending to start again. ‘

    !Steps! above!

  3. Now that Scotland has been humiliated and subjugated again, the fanatically British Nationalist Financial Times is free to change its tune. During the summer, when the Scots appeared to be revolting, the Financial Times was singing a different tune. This article back in June under the heading “A nationalist sate has carved itself out of the UK once before. It was a disaster.”

    http://www.ft.com/cms/s/2/cd89f3f0-d08b-11e3-9a81-00144feabdc0.html#axzz3E1R4pvgB

    But, hey-ho, 4 days after the referendum, and with Alex Salmond imprisoned like Braveheart in the Tower of London (metaphorically at least), the Financial Times is now free to reveal that Ireland is a miracle economy again. There is no way they would have printed this article last Monday, even if Ireland’s GDP figures had been available then (although anyone could have predicted them last Monday, as I did).

    The principal lesson to be the learned from the Irish recovery, and indeed from Ireland’s super-high growth rate over the past half-century is “Leave the United Kingdom asap.” Obviously, this is only applicable to those countries (Scotland, Wales and N. Ireland) that have the misfortune to be in the United Kingdom. More generally, the lesson to be learned is that countries should focus on improving competitiveness by reducing costs, rather than relying on volatile fluctuations in the exchange rate.

    Back in late 2007, as the global recession struck, it was clear that both Ireland and the UK needed to improve competitiveness. They chose different routes to achieving this. Ireland opted for exchange rate stability (within the Eurozone) and a vigorous attack on costs within the economy.. Economists call this ‘internal devaluation’, and the predominant view on this site was to ridicule it. The UK opted for a massive devaluation combined with what economists call ‘Quantitative Easing’, or, as it should be more accurately called, ‘debauching the currency by printing oodles and oodles of banknotes’. The results have been predictable.

    Ireland has achieved a genuine and stable improvement in competitiveness against ALL other European countries. Ireland had the lowest inflation rate in the EU between late 2007 and August 2014. with the competitiveness improvement ranging from around 10 per cent up to around 40 per cent depending on which other EU country you are talking about. Hence the resurgence in growth, the export boom and the balance-of-payments surplus.

    The UK achieved an improvement in competitiveness for a time, up to early 2009, thanks to the devaluation. But, the inevitable high inflation then kicked in. And worse, with no control over it, but being dependent on the whims of the market, the devaluation has been partially reversed in the past year or so. The combination of high inflation and recovering exchange rate has put the UK back to square one as far as competitiveness is concerned. I calculate that, between January 2009 (the low-point for the £sterling) and August 2014, relative prices in the UK rose by 35 per cent relative to those in Ireland, with about 20 per cent due to higher inflation, and about 13-15 per cent due to the partial recovery in the exchange rate for £sterling. No wonder you never hear of shopping trips to Newry now. Predictably, the UK’s growth is now well below Ireland’s, it has no export boom, and it has a massive balance-of-payments deficit. Its growth outlook for the next few years is much less rosy than Ireland’s. The effects of the UK’s severe loss of competitiveness since January 2009 haven’t yet been too serious in South-East England, relying as it does on the financial services industries in the City of London, but have been felt most in areas like N. Ireland, which relies on manufacturing, tourism, agriculture etc, and which is experiencing little recovery in growth, certainly in comparison to the super-growth now apparent in the Republic.

    The one ‘undisputed’ (according to Krugman et al) benefit of the UK approach was supposed to be that the budget deficit would come down much faster as the high inflation melted away debt (at the expense of screwing savers, of course). But, it looks as though Ireland’s budget deficit in 2014 will be under 3.5 per cent, while the United Kingdom’s will be in the range 5.5 to 5.8 per cent. Austerity may be ending in Ireland, but it has quite a few more years to run in the DisUnited Kingdom.

  4. ‘By forcibly swapping toxic assets for safer government debt, it cleared the way for lending to start again. ‘

    Fág an bealach !

    But did the banks actually start lending again ?

    http://www.rns-pdf.londonstockexchange.com/rns/9901N_-2014-8-1.pdf

    ” The pace of reduction in our loan book has slowed in the first half. In Ireland, we are seeing encouraging signs of increased credit demand in our residential mortgage, SME and corporate businesses and, excluding tracker mortgages, total new lending of c.€2.5 billion exceeded
    repayments and redemptions in the first half.”

    I have difficulties with “forcibly swapping toxic assets for safer government debt”

    As I understood it at the time the banks were sinking and their “gréim an fhir bháite” almost sank the sov.

    The Irish “rescue” was botched, way too expensive and nobody else followed it. I think the FT and the Eurowallahs are desperate to show that something is working but I’m not sure they are going about it the right way.

    Another point about the last round of bailouts- if TSHTF again there is going to be very little capacity to mop up the mess.

  5. Undisputed.. Oof. Pretty hard hitting (I if typo ridden)
    Seafood
    Seafood. Yeo Lots of whistles past graveyards

  6. Why does the Irish Fiscal Advisory Council issue statements on Budgetary matters that do not take account of the recent GDP data?. The latest publication was written before the Q2 GDP release and therefore does not reflect the much stronger than expected outturn and the consequential upward revision to the consensus GDP forecasts for 2014. The Minister for Finance has spoken of 4.5% growth, although the average for the year would be over 5% if GDP was flat in the final two quarters. The surge in H1 also means that GDP growth in 2015 will now probably be lower than this year, contrary to the prevailing consensus pre the q2 release.

  7. @ Sam

    No need to apol. It happens all the time.
    Back in 2012 the FT was less poised and actually ran a series called “capitalism in crisis”. It will be a must read whenever this rally ends.

    http://www.ft.com/intl/cms/s/0/c80b0d2c-4377-11e1-8489-00144feab49a.html

    Lessons from/for Ireland ?

    1 Always understand the risk you are buying. If AIB do it, don’t.
    2 Don’t listen to plámás from foreign bankers
    3 Sinn féin (original meaning) for tail risk situations. Don’t assume anyone else will help
    4 Crashes are about who ponies up for losses and the rules are fairly brutal.
    5 It’s better to negotiate from a standing position
    6 Nobody did anything particularly well last time and next time will probably be no different.
    7 The essence of dramatic tragedy is not unhappiness. It resides in the solemnity of the remorseless working of things.
    8. “Two things are infinite,” Albert Einstein said. “The universe and human stupidity, and I’m not sure about the universe.”

  8. The main elements of the manner in which Ireland has emerged from the crisis have to be distinguished and dealt with together IMHO.

    There is little doubt that the country, and the other peripherals, “took one for the team” when holding the shaky edifice of the euro together. The question is to what extent this has been recognised and recompensed by the various soft loans advanced by other European countries (not, however, by the IMF which takes no prisoners in terms of loan conditions, a policy dictated by the US since that organisation’s creation) i.e fully, not at all -as some seem to believe – or with a remaining balance; still the government’s position.

    There is equally little doubt that the steps taken have turned the situation around and a large majority of the population now agree. To this extent, Lagarde is clearly justified in her remarks.

    http://www.redcresearch.ie/news/early-signals-that-recovering-economy-could-benefit-government-parties

    However, where the main problem arises is how the burden of the adjustment has been shared. Not very fairly and with a refusal of those involved to face up to their responsibility in the matter. The problem for the electorate now is how to hit the correct target of their anger without doing collateral damage to their own entitlements in the process. Those that have been forced to emigrate cannot even participate in the exercise.

    Most debate about budgetary discipline does not, unfortunately, get to grips with this fundamental political problem.

    http://www.irishtimes.com/business/economy/politicians-need-to-keep-cause-of-collapse-in-mind-as-economy-recovers-1.1936729?page=1

  9. DOCM,
    perhaps you could produce some evidence to back up your “ex rectum” contention that the burden of adjusment was not shared equally.

    Dan,
    I am sure the IFAC are well meaning and erudite individuals and have busy lives which renders it diffcuclt to do stuff like hard sums and a bit of writing.

  10. @David O’Donnell

    Perhaps you or some other contributor please for once and for all give a clear outline of the exact size of the bank bailout.

    You indicate a number of €64bn above whereas last week I believe I saw a number of €67bn quoted from the NTMA and Namewinelake, if memory serves me right, suggested a number in its heyday closer to €70bn when one includes the capital included to start up NAMA.

    I would like to know which number (if any) is correct as it surely has a big bearing on Debt GDP stats. Nice to know that the inputs are right.

  11. NAMA was the first bailout of the banks I think. Anglo dragged on until the 5th.
    Not the way to do it. NAMA didn’t stop the losses or draw a line under everything. It scared the horses and AIB , ILPM and Anglo went to the wall regardless . There must have been a better way to do things. Policy ineptitude at EZ level as well , highly influential.

    The whole thing was very like the symphysiotomy story in Drogheda. Yes, Mrs Murphy is back walking. She’s fine now.

    http://ftalphaville.ft.com/2011/03/31/532931/what-lurks-in-anglo-irish/

    http://ftalphaville.ft.com/blog/2011/02/09/482451/anglo-irish-2006-2011-in-memoriam/

    Martin Wolf from Feb 2011, with great charts

    http://www.ft.com/cms/s/0/436234b8-3ebb-11e0-834e-00144feabdc0.html

  12. @ JTO

    The National Competitiveness Council, a public quango, would be much more muted with claims on competitiveness claims.

    If you believe this: [Unit labour costs: “a 21% relative improvement forecast against the Eurozone average”] Prof Patrick Honohan would include among “superficial analysts.”

    The average hourly labour cost covering all sectors of the economy other than ‘Agriculture, forestry and fishing’ was €25.03 in the first quarter (Q1) of 2008 and €24.89 in Q2 2014 and there was no relative productivity miracle.

    “Ireland was the only country in the EU to experience a decrease in inflation between 2008 and 2012 but prices remain high by EU standards” – – CSO, Jan 2014

    In 2013 Irish prices for consumer goods and services were 18% above the European Union (EU) average and fifth highest in the EU28 – – Eurostat, June 2014

  13. “But did the banks actually start lending again ? ”

    BOI Loans to customers:
    Dec 2011 99 billion
    Dec 2012 93 billion
    Dec 2013 84 billion
    June 2014 83 billion

    AIB Loans to customers:
    Dec 2011 83 billion
    Dec 2012 73 billion
    Dec 2013 66 billion
    June 2014 65 billion.

    The Irish banks took huge amount of LTRO, but LTRO in case of Ireland was just an ECB wheeze, to swop some weekly unsecured funding for collateralised longer term funding, thereby queue jumping other creditors.

    http://www.finance.gov.ie/sites/default/files/Eurosystem_Note_Feb_dataset%20%28Mar%202014%29%20%283%29.pdf

    The ECB has been the most aggressive debt collector on the block.

  14. I do not believe that our economy has ‘grown’, ‘expanded’ or whatever, at an annualized +4.x%. It may not have ‘shrunk’ any further in 2104 in respect of 2013, but it has ‘expanded’ ???

    Anyone with real – that is, a reliable set of statistical estimates, care to update and enlighten me. I regard any G*P estimates as useless.

    And with crude oil at -$20/bbl shy of where it should be for producers to be profitable – why such a low price? And before anyone gets ‘seasonal’, its off -9% since 2013. Someone is not sitting comfortably.

  15. @ TMD

    I have already seen it and was not surprised by its contents given the failure to target social transfer payments where they are most needed. Indeed, I quoted the view some time ago of one commentator that the top three deciles of income are the only ones that actually make a net contribution (i.e. after the various state benefits that taxpayers are in receipt of are offset against tax paid). I do not know how accurate this is. A study by those expert enough to carry it out of the relevant CSO figures would be useful. Or may be there is one to which bloggers might be directed.

    The issue was news in the UK some months ago cf. an earlier link by me.

    http://www.telegraph.co.uk/finance/personalfinance/tax/10638283/How-much-we-give-the-state-in-tax-and-how-much-we-get-back.html

  16. @Not the intelligent Brian Woods from N. Ireland

    “I do not believe that our economy has ‘grown’, ‘expanded’ or whatever, at an annualized +4.x%. It may not have ‘shrunk’ any further in 2104 in respect of 2013, but it has ‘expanded’”

    You are in total denial.

    Industrial output UP 17.5% in Jan-Jul 2014 over Jan-Jul 2013.

    Number of overseas tourist arrivals UP 10.0% in Jan-Jul 2014 over Jan-Jul 2013.

    Construction output UP 10% in Q2 2014 over Q2 2013.

    37,000 FEWER on Live Register in Aug 2014 than Aug 2013.

    Number of redundancies DOWN 55% in Jan-Jun 2014 over Jan-Jun 2013.

    Number of professional jobs advertised UP 18% in Aug 2014 over Aug 2013.

    Tax receipts UP 8.7% in Jan-Aug 2014 over Jan-Aug 2013.

    New vehicle sales UP 30.0% in Jan-Aug 2014 over Jan-Aug 2013.

    Tax receipts 4.1% AHEAD of target in Jan-Aug 2014 – target having been set on assumption of 2.4% growth

    Retail sales UP 7.0% in Jan-Jul 2014 over Jan-Jul 2013

    PMI surveys for manufacturing, services and construction all confirm very rapid growth in output in 2014.

    Ditto for numerous ISNE and IBEC surveys,

    Anyone denying economy has grown in 2014 is bonkers.

  17. @ JtO: “You are in total denial.” “Anyone denying economy has grown in 2014 is bonkers.”

    Thank you. I appreciate your candor. I’m a Dub – since 1875! Though my Huguenot ancestors arrived in Sth Armagh sometime in the early/mid 1600s. Used Anglicized version of their original family name, which has been morphed at least twice.

    I’m not actually ‘in denial’ John – I’m looking at some economic estimates which are a tad hard to ‘massage’ and seem to be telling a somewhat different story. Lets just say I take a dim view of folk who issue ‘naked’ estimates and meaningless means.

    We’re within the Advent of a parliamentary election – in case you may have missed it, what with all the excitement, and all.

  18. There are some weird aspects to the data:

    A) agriculture (a relatively small sectore but which absorbed loads of labour during the last 2 years in Ireland) grew with about: 14%. Which is a LOT.
    B) It’s not an austerity driven recovery: the VOLUME of government expenditure increased with 7,9%. But in current prices it only increased with 1,6% – which implies about *6%* deflation of the government expenditure price level.
    C) Tourism did well – but net exports (goods, services including tourism) did not. Exports increased about as much as imports (in current prices imports increased even slightly more than exports)
    D) Industry growth rates are weird: ex-tre-me-ly large monthly differences, very large *price declines* which means that more production (physical) does not yield more money.
    E) I have not yet been able to find labour estimates for the second quarter but looking at the first quarter and unemployment labour productivity must have increased with somewhere between 5 to 8%
    F) And another anomalie: a 18,5% growth rate of investments. Again: ex-tre-me. A building spree in Dublin? The purchasing of 10 Airbusses?

    Anyway – the whole thing seems to be broadly based. Which is good. But Ireland needs ten years of such growth to get its debts back on track (well – part of these might be written down, which is imo a better solution – but that’s another discussion)

    http://rwer.wordpress.com/2014/09/22/government-and-investment-led-growth-in-ireland/

    So, growth seems to be genuine – but it might feel different as (looking at the data) the government seems to have spent more on education and the like but payed teachers a lot less.

  19. Docm,
    The problem in Ireland is that the facts about the distribution of the adjustment do not tally with the narrative peddled by the advocates of the magic money tree.
    BW,
    Be great to see your economic data base.

  20. @ Merijn Knibbe

    excellent points

    yes – very strange figures all around

    ag baffling – no one in farming or anywhere else believes that kind of growth in output, especially since most of the increase in employment appears to be people heading back into family farming

    exports all over the place – lots of royalties imports supporting IT and business services exports; lots of machinery imports support medium tech employment expansion, fuel related exports increasing, etc

    retail employment flat, accommodation and eating out employment growing

    tourism interesting – biggest increases in numbers from US and Germany (and UK to some extent) over last few years – speaks to effect of recovery elsewhere

    and plenty more besides – haven’t got a handle on it myself but it requires a bit more than the FT puff piece

  21. @Yields or Bust

    Hard to get a precise figure on the ‘bankers bail-IN’ but the overall cost is much much higher …..

    And the next crisis is coming ….

    ‘I think one of the cleverset things the 1% have done over the last few years is the way they have created a relentlless public discourse, via their paid political front-men and women and their media empires, to insist on the need to ‘fix’ and protect the system, and the extreme danger to us all should the system not be ‘saved’. This has served as a perfect cover for making sure that not enough people have noticed that the system is, in fact, being gutted and replaced by something that better serves the interests of the 1%. We have not been fixing the banks, we have been feeding them.’

    […] If you look a little more closely into the figures for government debt levels in Europe between 2000 and 2010 the fact is that all European nations apart from Portugal were either reducing their debt-to-GDP level or at least not allowing it to grow. Most of Europe was reducing government debt to quite manageable and historically low levels. Ireland’s debt was very low (27%). Take a good long look at those two bars for Ireland. Even Spain was bringing in more in tax than it was spending. Don’t take my word for it look at the figures yourself. Almost every European country was keeping debt to GDP even or going down – before the banks were bailed out that is. The exceptions, of course, were Greece and Italy whose debt was already very high even before they bailed out their banks.’

    http://www.golemxiv.co.uk/2014/09/next-crisis-part-one/

    Welcome to the 99!

  22. contd.

    The Next Crisis – Part two – A manifesto for the supremacy of the 1%

    Some things about the present system must be maintained, others expanded and some new ones added. Taken together the changes, I think, amount to the beginnings of a Manifesto for the 1%. So here are some of the things, I think, our global Over Class would like to achieve and how they intend to achieve them.

    Outline.

    1) The Over Class must retain and consolidate their control over the global system of debt.

    2) The power to regulate must be taken from nations and effectively controlled by corporations.

    3) Professionalize governance. Democracy can be and must be neutered, and an effective way of doing this is to insist that amateur, elected officials MUST take the advice of professional (read corporate) advisors. Expand current law to enforce this.

    4) The financial system badly needs un-encumbered ‘assets’ to feed the debt issuing system. A new way must be found to prise sovereign assets from public ownership. Such a new way is suggested.

    5) In order to facilitate the political changes necessary, the public mind-set must be changed. National Treasures such as the NHS in Britain must be re-branded as evil State Monopolies.

    6) Effective ways must be found to convince people that democratic rule is no longer sufficient to protect them.

    7) An alternative to Democracy must be introduced and praised. That alternative must be the Rule of International Law as written and controlled by the lawyers of the 1%. People must be told that this is all that stands between them and an increasingly hostile and anarchic world. But that it can only keep them safe if it has absolute authority over democracy. People must voluntarily bow to it out of fear and its decisions must be as absolute and unquestionable.

    In conclusion, I suggest that this amounts to a dystopian version of the old environmentalist idea of Spaceship Earth. A corporate version where we are just passengers who must pay our passage in a ship someone else owns. No longer inhabitants or citizens with the same inalienable right to be there and be heard as anyone else.

    And yet, dark as all this may seem, victory for the 1% depends on no one understanding what is happening. If we are already beginning to see the outlines of what the Over Class wants, then their victory is not assured. If our ignorance is their bliss, then our understanding is like sunlight on a vampire’s skin.

    All is not lost, not by a bloody long way.

    http://www.golemxiv.co.uk/2014/09/next-crisis-part-two-manifesto-1/#comment-153820

  23. @Merijn Knibbe

    “F) And another anomalie: a 18,5% growth rate of investments. Again: ex-tre-me. A building spree in Dublin? The purchasing of 10 Airbusses?”

    But investment has been extremely low for the past number of years.
    My own humble non-economic estimate is that there is a further 2% growth just to bring house building back to to normal levels.

    This year we will build less than 10,000 houses. At a normal cycle level of 30,000, this means we are 20,000 short at say a building cost of €200k= 4 billion in investment or over 2% GDP.
    [I have ignored the land profiteering benefit that will accrue to NAMA, banks, bank receivers and private landowners as such profit is, imho, valueless to the economy, even though it lines the pockets of those holding the land.]

    @ DOD

    I think it much simpler.
    Save the banks=save investor /creditor money in banks=save the 1% at the expense of or with little benefit to most of the 99%.
    The banks stress tests, underwritten in the final analysis by the public purse, is a fantastic ruse to make the EZ safe for better off investors and to safeguard their wealth at public expense.

  24. @MK
    Following recent changes to national accounts methodology R&D and intellectual property now account for over 50% of spending on machinery and equipment although in q2 the overall rise owed more to actual spending on equipment.
    Despite the surge in reported GDP real consumer spending remains soft, rising by just 0.3% in q2 following a 0.2% rise; households are still deleveraging and no one knows when that will end. Exports accounted for 117% of GDP in q2 with imports at 91%, so the reported GDP figures will be dominated by net exports, Unfortunately no one has a clue as to what drives net exports in Ireland, at least in terms of short term forecasts.

  25. The EZ is hollowing out from the centre. As funds flee to safety in Frankfurt from the PIIGSF they are flooding out to non EU countries in the form of loans to German companies that are invested overseas. The article has a US focus that does not include flows to non US countries. The reference is to cash rich companies but the cash is leveraged with 1% loans that are seen as the bargain of 500 yrs.

    dealbook.nytimes.com/2014/09/22/german-companies-continue-their-buying-spree/?action=click&contentCollection=International%20Business&region=Footer&module=MoreInSection&pgtype=article

  26. Dan,
    if you look at the capcity added in the pharma sector by companies such as AMGEN, Eli Lilly and Regeneron to name but 3 and then if you look at the pipelines of the 3 companies you will see up to 10 blockbuster drugs for cardio-vascular diseases, diabetes, oncology etc. Some of these will undoubtedly be manufactured in Ireland. You can then come to an educated guess that pharma exports are going to rocket skywards.
    If I recall correctly, Noonan said about 2 years ago that if US and UK turned, the Irish economy would take off like a rocket. He was slated by the nattering nabobs of negativity on here.

  27. @Merijn Knibbe

    Tracking employment and industrial production has been a problem for the Central Statistics Office in recent times.

    A jump in monthly production of almost 40% for example in June was a bit weird!

    The employment data for June appears to be back on even keel and it confirms that the recovery is milder than the headline data suggest.

    In the 12 months to Q2 2014, there is little change in jobs in the main production areas.

    Industry is -3k; construction is +3k; ICT stable.

    Agriculture is up +6; transport +4; tourism activities +8; professional, scientific, technical +6; administrative and support service +6, total of 30k added and 1.9m employed.

    One curious issue about construction employment is that hit fell from 28k in 2006 to about 100k in the period 2009-2012 but this was a higher level than in 194/95 when there was higher housing, commercial and civil engineering activity.

  28. If there was a ramp-up in food production rather than pharmaceuticals, then there would be a case for some rejoicing.

    Employment in the chemical sector has been stable at about 25,000 since 2004 whether there was a surge in exports, a patent cliff or recovery.

    So a rise in exports will not be significant for the economy.

    The impact on the OECD BEPS project remains to be seen both in relation to greater transparency on transfer pricing and country-by-country reporting which will disclose the activity, employment level, profits and tax paid in each country in which the company does business.

    Let’s say when export values are almost a quintuple of imported materials and given the nature of the products local purchases are limited, it would be reasonable to assume that their will be a rejigging in the allocation of profits and the value of exports from Ireland.

    What would make a difference is to get these companies to do significant research in Ireland – ten years of effort has not had an impact.

    Intel Israel for example has more than half of its 10,000 payroll in development.

    The knee-jerk reaction of drowning out dissent and the common pattern of official so-called ‘strategy’ documents being published without any serious attention given to the downsides or sometimes the evidence, inevitably results in sub-par policy.

  29. @ MH

    One for you!

    http://www.theguardian.com/business/2014/sep/23/astrazenca-shares-fall-obama-thwarts-tax-inversion-deals

    It may be noted that Obama, rather than Congress, acted. This suggests to me that the step itself is not ground-breaking. No doubt, there are still some members of Congress, prompted by their backers, who will make noises; muted by the likely public reaction.

    Brian Carey in the business pages of the Sunday Times has a great coverage on the prompting that Ireland stick its neck out as first mover. (He is against it). Wider change, when and if it comes, will be largely at the discretion of US lawmakers. World government is not a requirement.

  30. following somewhat MH,

    a) don’t over interpret the data of 1 or 2 good quarters

    It has become a bad habit of many, to exaggerate quarterly growth data by 4 to yearly data, of for government programs to use cumulatives for 4, 7, 10 years to make them look impressive to folks used to yearly data, as it should be

    b) Hugh McDermott

    not a single comment on the FT ??? doesn’t happen too often
    His lamenting about “no social cohesion in Irish society”. What does he expect? The people gathering in masses around parliament and chanting “Hail to the Taoiseach”?
    There have been no general strikes in Ireland, dead people in the street, burning police stations or tax offices (http://www.zerohedge.com/news/2014-09-23/decline-fall-europe-french-farmers-set-tax-office-fire)
    Given that Ireland has no land connection to the rest, and is not part of the Schengen treaty, it has a truly remarkable high immigration rate of 0.3% (look at CIA world factbook)

    Compare this to Portugal, where people were fretting in 2013 about then getting back from 35 to 40 hour weeks in public administrations (the last German “Länder” to get back from 42 to 40 hours was Bavaria, …. Just before the 2013 elections : – )

    And in Greece this Tsipras’s Syriza is head to head in the polls with Samara’s ND with promising people all past goodies back. Completely crazy. Credit rating Caa1, like 30% chance of folks going postal in the next 5 years
    Of course normal people are not happy with financial cuts. Here Schröder was not reelected after Agenda 2010, and people were marching in the streets, for many weeks.

    c) German acquisitions in the US

    Business as normal. Just take a look at longer term data
    http://news.investors.com/technology/092214-718437-german-buyouts-of-us-firms-at-record-high.htm?p=full
    correct the past numbers with 2% inflation and 1.5% growth do some average, and Germany is still short of long term averages of M&A deals

  31. @Michael

    “If there was a ramp-up in food production rather than pharmaceuticals, then there would be a case for some rejoicing”.

    Milk quotas are going to be phased out next year.
    http://www.ft.com/cms/s/0/7cfa9f72-0919-11e4-8d27-00144feab7de.html

    “Ireland targets a 50 per cent uplift in milk production by 2020, much of which will be processed into cheese and exported. This is likely to result in a material increase in Irish cheddar exports to the UK.”

    Bord Bainne had a big thing in Charleville last week- they opened a new cheese processing unit for Kerrygold – it was on the RTE news

    It would be good if they diversified out of cheddar and started making some more upmarket stuff. Irish milk is world class and they could do a lot more with it in terms of product placement.

  32. “Noonan said about 2 years ago that if US and UK turned, the Irish economy would take off like a rocket. ”

    In fairness Tull it’s only at firework speed at the moment

  33. loads of Tomahawk rockets, at a million bucks a go, all over parts of the Middle East at the mo …

    I’d advise Minister Noonan to invest in a few to spice up his upcoming distribution of indulgences to the deserving ….

    @seafóid

    One can do a lot with milk.

    Kerry Group, led by Denis Brosnan, started as a small co-op in North Kerry; it is now global leader in ingredients and other agri-food sectors. It’s simply about adding value …

  34. What is happening is that intellectual property is being farmed out to low tax regimes. Manufacturing/processing/services are being farmed out to low cost of labour countries of which there are many. Ireland can reap some benefit albeit small since we are competing in a watch how low we can go world. 2% is still above zero so we can ratchet it down 1/4% at a time to remain competitive. Ireland’s labour costs will have to be less than the EU average if we are to lower unemployment by creating jobs. At the moment emigration is lowering unemployment as it has done since 1932.

    If taxes are lowered in Ireland it should be on the lower tranche with a compensating rise in the upper tranches, neutral.
    As my mother used to say, the less well off spend within walking distance while the very well off spend Euro 20 on petrol to save Euro 10. The poor do not vacation in Marbella they do day trips to Ballybunion. And the best for last, they spend every cent, none of it goes to Geneva.

  35. This a very interesting discussion

    Mickey : “What is happening is that intellectual property is being farmed out to low tax regimes.”

    I think that’s a sign of stagnation. Companies are not investing and they have to boost earnings.Tax changes help but they are not growth drivers

    http://www.ft.com/cms/s/0/1c7f8828-0884-11e4-9380-00144feab7de.html

    “The expansion in share prices over the past two years has been driven almost entirely by rising earnings multiples. Since September 30, after a brief correction driven by the political imbroglio over the US government’s debt limit, the S&P has gained 46.6 per cent, against a rise of 18 per cent in earnings per share. The season of reporting earnings for the second quarter of 2014 is about to start, and the consensus expectation according to Thomson Reuters is for a 6.1 per cent rise in earnings – robust but still short of the levels implied by the market’s optimism.
    It would be hard to sustain the rally without a pick-up in earnings. But resumed M&A could just keep the gravy train running for a few more years. Greater dealmaking is unlikely to be healthy in the long run, but would keep the stock market humming a little longer.”

    Tull “if you look at the capcity added in the pharma sector by companies such as AMGEN, Eli Lilly and Regeneron to name but 3 and then if you look at the pipelines of the 3 companies you will see up to 10 blockbuster drugs for cardio-vascular diseases, diabetes, oncology etc.”

    http://www.ft.com/cms/s/0/9b81f952-cc71-11e3-9b5f-00144feabdc0.html

    “the impression of an industry in flux as it searches for a new growth model after a decade-long wilderness of patent expiries and misfiring development pipelines. “The plates are spinning,” says a top executive involved in negotiating one of the deals. “The industry feels a little unstable.”

    http://www.ft.com/intl/cms/s/0/193748c8-ca44-11e3-bb92-00144feabdc0.html

    Dan : “Following recent changes to national accounts methodology R&D and intellectual property now account for over 50% of spending on machinery and equipment although in q2 the overall rise owed more to actual spending on equipment. Despite the surge in reported GDP real consumer spending remains soft, rising by just 0.3% in q2 following a 0.2% rise; households are still deleveraging and no one knows when that will end.’

    Accounting rules are weird and you can’t spend accounting values. I wonder how a lot of this stuff is valued and how solid the valuation methodology is if things take a turn for the worse.

  36. Seafoid, Dan,

    following recent changes to national a/cs…yada yada.
    Should expenditure in machinery and equipment not be changed to investment in tangible and intamgible assets.

    i don’t know what “cant spend a/c values means”. Sounds like one of those clever things an actuary or an internet bogger would say when trying to argue black was white. Cash is an a/c value and you can spend that. Assets can be disposed to raise cash and you can spend that.

  37. Is it all cash, Tull ?

    I think valuation is a big challenge at the moment. A lot of financial products are complex and difficult to value at the best of times.

    http://www.ft.com/cms/s/0/a4453cd2-d1c8-11e3-8ff4-00144feabdc0.html

    “According to Springleaf’s amended financial report, the company “did not have adequate resources with an appropriate level of accounting knowledge, experience and training commensurate with the complexity of such transactions”.
    And then, on Monday, Bank of America was left red-faced in the wake of the Federal Reserve’s recent bank stress tests. BofA had to postpone a plan to return $4bn to shareholders after discovering an accounting error related to structured notes sold by Merrill Lynch, the result of which was a significant misstatement of its regulatory capital levels.
    Needless to say, these accounting blunders are embarrassing for firms whose bread-and-butter business is the handling of large numbers.
    And yet these errors also demonstrate a truism of modern financial markets. Finance, with its ever increasing degrees of complexity, is as much a collection of estimates and forecasts as a well-defined set of accounts and values. ”

    Another thing abut tech is that goodwill can lose value very quickly. What’s all that Nokia stuff worth now? Samsung have an awful lot of unsold smartphones in their warehouses too.
    Whoever in the IDA is bringing in the intellectual property needs to get the calls right.
    I vaguely remember GPA aswell.

    Just saying like .

  38. @seafoid
    You mention above the need for KerryGold to diversify. They are diversified to the point that while selecting from a display of Kerry Gold products in a REWE store in Berlin I selected a highly herbed and peppered cheese by mistake based on the large script and green packaging. Kerry is a company that has never slept on its laurels and is still experimenting actively. Remember a company called Mount Mellaray(Cistercian monks) that produced small triangular 2 oz or so herbed cheese packets in the Knockmealdown Mountains. Waterford. They were quite successful in their day. Kerry Gold now has critical mass and marketing clout and instead of focusing on SME (votes) the gov`t should be backing proven winners that can compete internationally. Graduates in Botany and Biology who worked at Kerry in product development told me that it is a demanding, no nonsense and disciplined company to work for.

  39. @ Mickey

    the FT is always banging on about how the diet in china is moving upmarket to more protein- would Irish cheese not have a decent chance there instead of focusing on the UK ?

  40. seafoid,

    they also would have to be cost effective, to compete for substantial market share in China.

    Butter is presently 0.85 Euro per 250 grams here, Kerry more like 1.65.

    How much is that in Ireland ?

  41. @seafoid
    I have had Chinese doctors for the past twenty years. Without exception they advised me that dairy products in general and cheese in particular are unhealthy. There is a, deep seated preference for soy based products including Tofu steaks and Soya “milk” in China. Eat fish frequently is a common piece of advice, avoid beef and pork, chicken, ducks, geese (particularly good) and lamb are better. Nutrition and food is a minefield everywhere and China is no exception.
    My German wife is a firm believer in the benefits of cheese so I do not have to follow the advice of doctors.

    I saw and ad today for Organic Irish Salmon Filets in the flyer from the largest supermarket chain (Loblaws). Guinness is in all the liquor stores and most beer stores. Jameson and Baileys are in all the liquor stores.

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