Video, Audio and Slides from the Irish Economy Conference Post author By Stephen Kinsella Post date March 4, 2015 Are here. Many thanks to everyone who attended, and particularly our guest speakers. Categories In Crisis Conference 22 Comments on Video, Audio and Slides from the Irish Economy Conference By Stephen Kinsella Senior Lecturer in Economics at the University of Limerick. View Archive → ← ECB Analysis of Virtual Currency Schemes → What is the problem that selling Aer Lingus is supposed to solve? 22 replies on “Video, Audio and Slides from the Irish Economy Conference” Interesting slides on the lessons of the crash although I would not underestimate the noise effect caused by the sheer scale of research issuing at any given time. Also, compare the disclosure on banks’ balance sheets today with that pre-crash. Finally, the crash has resulted in a massive increase in financial data collated and published by the central bank as well as the degree and frequency of information published by the Irish exchequer. Re: Karl Whelan talk about macro-economics and economics profession This is an observation, which I have made for a while now, and I think it is worth sharing with the Irish economics community here, in particular. I would response to the points raised by Karl Whelan in his talk, where he talks about ‘greener fields’ elsewhere, where economics is taught differently to students. I don’t think there is economics taught differently. I think, that the best way probably to dissect and analyze the Celtic Tiger period in Ireland, is not through a lens of economics, but rather, through a lens of financial management and it’s ‘case study’ kind of approach. That is where, I think it is useful to insert a point about how we attempt to ‘classify’ what kind of an economic boom, the ‘Celtic Tiger’ was (phases one and two, 1990’s and 2000’s), was. What it about creation of new stuff, such as the railway boom, the internet boom etc, . . . or was the ‘Celtic Tiger’ boom in Ireland, really about re-organization of older stuff? I think it was much more the later, and less of the former, . . . and that is why I think that economics students, need to be able to analyze the world through a lens of financial management, as well as through economics. Otherwise, when they look at phenomena such as the ‘Celtic Tiger’, they will not be able to explain, or understand very much of it. I will try to elaborate. No one of certain age, in Ireland anymore talks or gives lectures about the mid 20th century period of buoyancy in the Irish economy. What we observed in the ‘Celtic Tiger’ period, often times, was a continuation of previous business projects, which began in Ireland during the 1960’s. We saw the re-organization of some private industries, which owe their origins to entrepreneurs in Ireland, in the 1960’s or 1970’s decades. We also saw in Ireland, the re-organization of some industries, which were started by the Irish state in the 1930’s. Indeed, we are still looking at part of this process today. Many of these people, who remember the 1960’s and 1970’s economic expansionary era in Ireland, have died in very recent years. There was no ‘project’ for example, to interview, or gather input from these individuals in Ireland. This is unfortunate I think. One work I can point to, by Kenneth Galbraith, which sort of points to a model, is that of ‘The New Industrial State’. Published in 1967, the book explains from an American perspective, how the early entrepreneurs are later replaced by what he called I think, a bureaucracy. We see this in the difference in Ireland, between the mid-20th century expansionary economic era, and that of the ‘Celtic Tiger’. The first era was very much entrepreneur-led, and some of the more successful ventures in the ‘Celtic Tiger’ era, were bureaucracy-led (led by a private workforce of legal, financial and enterprise consultants). There is a thriving business, which now exists in Ireland, of large multi-national financial and legal services firms, where graduates from the business and economics schools, will go to work in. When it really came down to it, in the 2000’s in Ireland, and this great re-organisation, re-valuation and re-financing of ‘stuff’, which had been in existence in Ireland for several decades, . . . to do it well, and move around quite large ‘blocks’ of finance, needed to do the same re-organisation, . . it required this ‘bureaucracy’, which Galbraith mentions in his book, to do it. That is, looking it from an economic point of view, you witness some economic expansion, which is about creating new stuff – in Ireland in the 1930’s, with public companies and works, . . . 1960’s in Ireland, with the major private sector entrepreneurs, . . . and the 1990’s and 2000’s, which was not making a lot of new stuff, but many times, about re-organisation of the 1930’s and 1960’s stuff, . . . and making it fit together, differently, than it did before. I am sure, that this is what future research about the ‘Celtic’ Tiger, will show. The only ‘new thing’, that really arrived starting in the 1970s, but really taking off in the 1980’s onward was a new concept in retail, . . . the idea of shopping centers. There were a lot of those created in the ‘Celtic Tiger’, but often times, they also were just upgrades to exiting facilities that really started in the 1980’s decade. So, we see very little ‘new stuff’, that was really created in our so-called ‘Celtic Tiger’. Very little. BOH. Re: One minor extension to the above One observation, which I will add to the above, because this comes up time and again, in the context of the present banking inquiry. It is the following. We notice in the analysis of the ‘Celtic Tiger’ period of say 1996 to 2006, a lot of focus on the presence of private sector borrowers, in a market for development land and real estate opportunities, and construction industry available capacity (which did become very stretched, in the 1990’s and the 2000’s), . . . but what is often missed, . . . and it is a point which ought to be emphasized more in the banking inquiry, is that other ‘bidders’ beside private leveraged ones, were competing in the same market during the recent boom period. For example, at one stage in 2007 or 2008, I remember a news item on television, which described how the Irish state had been successful in acquiring a particular plot, that existed in one of the midland towns, which it believed it required for a new medical campus facility, that the Irish state wanted to develop. Now, you stand back, and look at this. Little did the Irish state believe, or know in those later 2000’s years, that in a very short while, what would land on it’s lap, was the ‘ma and da’, or all development land asset portfolios, and that it would become the responsibility of the Irish state, to ‘dispose’ or develop the same. From the Irish state’s point of view, in the later years of the Celtic Tiger credit bubble, and real estate speculation bubble, . . all it saw, was this need to somehow compete with the other bidders, and acquire for itself, the basic raw materials and inputs to production, which it required to carry out it’s own mission. It is sort of like, when China as an economy, found itself running out of base materials, which act as the input into it’s production industries. The ‘Celtic Tiger’, had begun to interfere in a big way in the later 2000’s, with the ability of the Irish State to carry out it’s program of activities and enterprise on the island. What we observe in Ireland in the 1930’s to the 1970’s, really, is a relative ‘balance’. The Irish state was able to acquire its land, which it needed and could afford to develop some modest facilities on the same land, and in turn implement many ‘new’ social development programs. In the 2000’s, what we see, is the Irish state can afford new facilities, and an expanding public workforce, but cannot afford the land. And then, in the post-Celtic Tiger period, of the 2010’s, what we see is the Irish state has a whole lot of ‘land’, all of a sudden, and has constraints in terms of what it can spend to develop new facilities and operate those. I think that this point is worth making. The reason that I think it is worth making, is because of this distinction, which I made above, about ‘new stuff’, versus re-organisation of ‘old stuff’. The Celtic Tiger was mainly about re-organisation of ‘old stuff’, and that is why a researcher must know all about how very large blocks of finance are managed. That is, a financial management perspective and skill is needed. But it is limited what the private borrowers in the real estate industry in Ireland, could do with the ‘land’ resource, which they were able to bid for. Residential, workplace facilities, some retail, . . . and maybe the odd private hospital campus. But overwhelmingly, when it comes to producing ‘new stuff’, it comes from public sector facilities and public sector’s need to consume land resources. Think of things such as airports etc, and airlines, which were developed by the Irish state from the early 20th century period onward. What we saw in the early 20th century, from an economic perspective, is an Irish state which can bid successfully in the market for land resources, and also has sufficient finance available, to be able to develop things like airports, hospitals, universities or whatever. We find in the 1960’s boom in Ireland, this balance is still retained. But in the 2000’s, or the 2010’s era in Ireland, what we notice is very little ‘new stuff’, being done, because the Irish state is either being constrained by price of land, or by its own precarious financial health. This is an aspect, or an observation about the ‘Celtic Tiger’ boom in Ireland, which cannot be emphasized enough. Saying we should not have bubbles, is not just a motherhood and apple pie, ‘brush your teeth’, kind of public awareness campaign. It has lots and lots of real ramifications, for how Ireland advances and remains competitive with the wider globe. BOH. Another audio of interest from the head (Irish) of the Bank of Cyprus. http://www.bloomberg.com/news/videos/2015-03-05/cyprus-has-recovered-faster-than-ireland-hourican Re: Suggested research template One suggestion, that I would like to add to the above, because I think that it is an avenue of research, which may prove to be interesting for some young and eager scholar at one of the business schools in Ireland, to pursue (reaching four decades in age, my ability like the Roman centurions who reached that age, being in a ‘Legion’, being able to pursue active research, running the distance needed to do so, is coming to an end). This is really a job for a younger, able-bodied guy or ms. When we look at the development of Ireland, from an economic perspective, we can do a sort of ‘post match analysis’. We do a sort of Monday morning quarterback attempt, so to speak. Now, in 2015, we do hear a strong voice, which would suggest that the future of Ireland lies in greater public intervention, participation and a increased use of public companies to do X, Y or Z. The other extreme, that one listens to, . . . is that everything, including the kitchen sink, and the plumbing works leading to the kitchen sink, ought to be ‘ripped out’, and sold off the back of a wagon. We, I think what researchers, at our centres of learning ought to do, is to allow the politically motivated to take care of giving voice to those point of view. What young, energetic and inquisitive researchers at the centers of learning ought to do, is try to fill in some grey areas, that exist along a ‘spectrum’, between the two extremes that one listens to a lot, in our public debate and national air waves. I will explain. In the five or so decades between the 1930’s and 1970’s in Ireland, what we see is the Irish state employing a tactic, very like that which one observes in the game of America football. That is, the one where a large, strong mighty player creates a ‘pathway’ for itself through the opposition, and by that method manages to reach the opposing touchline and register the so-called ‘touch down’. From the 1930’s, until about the 1970’s, the Irish state was the biggest kid on the block so to speak. It had no identifiable opposite number. This changes we observe, as we move into the 1980’s decade. Indeed, what we do observe between the 1980’s decade and the 2010’s, is this other ‘half of the match’, so to speak. What we observe, is this second half a century period, during which the Irish state as an organisation, which works on behalf of a larger ‘citizenry’, in Ireland, is not able to create its own pathway, and carry the ball to the opposing touchline, with anything like the same ease as it once did. But what one does observe, to the present day here in Ireland, are sideline coaches (similar to the guys with the earphones, that one sees in American football), who still have a mindset which was relevant between 1930’s and the 1970’s. Indeed, we still observe in the Irish parliament even in 2015, some few leading political figures who set policy direction, who ‘grew up’ so to speak, in a 1970’s Ireland. Just by way of information, what we observe on a larger global scale, is that this 1970’s decade marked an important point, in the post-WWII history of other much larger countries (such as the United States, to which Ireland as a state has always cultivated a kind of close relationship). A couple of good references are professor Judith Stein’s recent book, about industrial policy in the United States during the 1970’s, and also a work published by Alvin Toffler in 1980, The Third Wave. What we observe in Ireland from the 1980’s onward, is an Irish state, whose pathway to the touch line, is interfered with by all kinds of immovable obstacles. In the 1980’s it was lack of resources. In the 1990’s, it was either lack of resources, or things like asset price inflation (as observed for example, when the Irish state tried to undertake significant public infrastructure projects, such as a ‘light rail’ project in Dublin city, . . like the one, the so-called ‘tram system’, which had already existed back at the turn of 19th and 20th centuries). In the 2000’s, what we observe, are various branches or departments of the Irish state, almost popping champagne corks, because they managed to create enough of a ‘pathway’, through the opposing bidders, to acquire a small plot upon which to construct a new healthcare campus, in a middle sized town in the center of the island (not even in Dublin city, mind you, but the ‘midlands’). And then, in the 2010’s decade, we witness the Irish state in it’s ‘bailout program, and the aftermath of that, where it has to dispose of thousands of acres worth of land, and in providing cash flow and funding to do the same, it’s opportunity to invest in it’s own social and economic regeneration programs, and do new things, is also seriously curtailed. And as I suggest, what we still observe in 2015 are sideline coaches, who still want to return to the ‘glory days’, when the Irish state was still a first division team, in the big leagues and could bully it’s own pathway through any opposition that it faced. What I would suggest, in terms of doing useful policy alternative exploration research, via our business schools in Ireland, is that we give some illustration to the ‘grey area’. It is unlikely, in a time of ‘free market’, and absolute open competition ethos, as an EU member state in the early 21st century, that Ireland will ever be able to ‘call the plays’, that it had done in the 1930’s to 1970’s period, again. But that is not to say, that the Irish state does need to opt for a complete public-owned, social extreme type of model either, . . . where the Irish state tries to regain control of an awful lot of things. There are a lot of grey areas. Economists talk about counter cyclical policy making. Left wing trade unionists in Ireland, when they come on ‘prime time’, talk about counter cyclical economic policy. None of them seem to see the actual point, the actual route to a ‘touch down’. Which is the creation of a reasonably level playing surface, upon which the Irish state as an entity could compete in the open market, . . . something, which it has been prevented from doing effectively, since the 1970’s decade (when our leaders in an Irish parliament, first assembled their book of plays). The Irish state, because it was like a ‘refrigerator’, it never had to learn, how to deal with a formidable opposition, which it has to deal with today. It never developed that play book, and that is evidenced by the public representatives and policies that we see today. What Ireland needed in the 1980’s was counter cyclical investment, and in the 1990’s or 2000’s, it needed to curtail asset price inflation (and it should have been entitled to do so), instead of let the ‘free market’ reign completely, . . and eventually to saddle it with a responsibility to clean up the mess of a full scale, financial sector and sovereign economic crisis. But nothing in public life in 2015, suggests that any of these exploration and scholarly research, into these grey areas, in order to assist the Irish state, to develop a better play book, has been done. And that is despite, countless millions and billions of Irish state investment, being pumped directly into support for our main centers of economic learning. All of the benefit of that, flows straight back, into multi-national legal, financial and economic private firms. The Irish state, in summary, has not even been ‘on the field’, it would appear to this observer of the Irish economy, . . . at least, since the prime minister began his participation in public life, four or five decades hence. The Irish state, has not done itself any favours, I would analyse in the last half a century. That’s really, really dumb. And no wonder, in that context, there is an extreme view, the full public and state ownership narrative, which has gain more and more traction in Ireland, in the 2010’s. It is no wonder. Our economic research departments in Ireland, have largely been fast asleep, as far as assistance to the Irish state, and it’s mandate goes. Fast asleep. Snoooozeee-. .-ing. BOH. @Dan “compare the disclosure on banks’ balance sheets today with that pre-crash.” So the accounts are a “true and fair reflection” of the underlying? So IFRS mark-to-market is working well to reflect the true value of Irish mortgage portfolios? And provisioning /impairment reporting is firmly anchored in reality (those write-backs at BOI are real and suitably conservative?)? Sorry, Dan, it will take a long time for anyone to believe in any of that again. @DOCM Thanks for that Bloomberg video. John Hourican is superb. Great guy. Type of person that Ireland needs at the helm of AIB for instance. Beats the Irish banks’ incumbents lying down…different league. The 500k pay cap is a problem though in attracting this level of talent. There are others out there also. Penny-wise and pound-foolish and all that. @ Paul W He is an impressive performer. I thought what he had to say relevant to the conference which had many worthy contributions but did not seem to have any real focus. My own view is that a radical situation required radical change which the current establishment has been unable to provide. Not getting ahead of the situation could have very negative consequences, as the Greek experience illustrates. http://www.wsj.com/articles/yannis-palaiologos-its-time-for-greeces-left-to-get-on-board-1425585013 How it pans out in Greece will have a major impact on the political debate in Ireland, especially with the emergence of Sinn Féin as a credible political alternative. The damage has already been done in Greece. http://www.economist.com/news/finance-and-economics/21645810-political-brinkmanship-has-exacted-heavy-economic-toll-running-empty What is also striking is the parallels across the countries in difficulty in relation to NPLs. @PW I am not suggesting its perfect, just that there is a lot more info than there was 10 years ago. @Dan My only observation is that more information is not necessarily more quality information……it seems that bank reporting data are more akin to official employment data and the like these days….all in the eye of the beholder (or teller of “history”). Which brings me to another point – the inherent bias (even propaganda) spewed out in official govt and other related data. Makes seeing the tree from the woods difficult. Not just an Irish affliction of course. The ECB’s latest growth forecasts gave me a good laugh this week! The US stats are highly suspect much of the time also. Politicians, technocrats, etc speaking up the economy seems the overriding fad. Good to see the presentations at the end by Messrs Whelan, McHale and Barry. The acknowledgement of political /policy influence, the “right wing’ general inherent bias (the Irish version of which would pass as far left in a US context), etc. Worthwhile and thought provoking, and clear to a reader like me from afar. So some improvement in communication all the same. The sooner “political” rejoins “economy” in the academic lexicon, and in the lecture hall, and there is overt recognition that one cannot be analysed or dealt with without the other, the better! Meanwhile, the Greek saga continues as an example of how not to run a country. http://uk.reuters.com/article/2015/03/06/uk-eurozone-greece-loan-idUKKBN0M20SE20150306 “In an apparent recognition that outspoken public statements that the country is broke and will not repay its debts and attacks on other euro zone governments have damaged Greece’s position, Tsipras said he had asked his cabinet – including Varoufakis – for “fewer words and more deeds”.” Talk about the pot calling the kettle black! It is almost self-evident at this stage that Tsirpas cannot deliver without parting company with “Left Platform”. http://www.ekathimerini.com/4dcgi/_w_articles_wsite1_1_06/03/2015_547943 The Varoufakis letter to the chair of the Eurogroup. http://greece.greekreporter.com/files/Greece-letter-to-eurogroup-PDF.pdf One wonders how long this extraordinary performance by the current Greek government can continue. The Syriza representative on Claire Byrne show (35 minutes in). http://www.rte.ie/radio/radioplayer/rteradiowebpage.html#!rii=9%3A10381771%3A11988%3A07%2D03%2D2015%3A What the OECD has to do with the matter is not clear. The view from the ECB. http://www.faz.net/aktuell/wirtschaft/eurokrise/griechenland/griechenland-krise-ezb-will-tsipras-nicht-noch-mehr-geld-verschaffen-13469664.html This is not an academic debate. It is about the rules. A better link to RTE. http://www.rte.ie/radio1/saturday-with-claire-byrne/ Varoufakis continues to put his game theory skills to the test! http://www.corriere.it/economia/15_marzo_08/varoufakis-atene-non-chiedera-altri-prestiti-all-europa-e09010f6-c55e-11e4-a88d-7584e1199318.shtml It is not clear what the referendum would be on. (The record has, apparently, been corrected to the effect that it is not membership of the euro he has in mind). No decision from the Eurogroup is likely in the basis of detailed examination of the proposals at a technical level by representatives of the “Institutions”. In Athens? After “Grexident”, the latest term in use – notably in the German media – is “Graccident”. The possibility of such is rising by the day. Bloomberg does its best to resume the cacophony. http://www.bloomberg.com/news/articles/2015-03-08/greece-mulls-referendum-as-no-agreement-with-creditors-in-sight Correction: For resume read summarise. For those seeking the academic underpinnings, such as they are, of the Greek approach cf. http://www.amazon.com/Crucible-Resistance-Greece-Eurozone-Economic/dp/074533380X/ref=la_B00E9CDPS4_1_1?s=books&ie=UTF8&qid=1425766458&sr=1-1 @ Paul W Disclosure is oversold when pricing signals are distorted. The stuff that is in the models is mispriced and disclosure can’t help that. The biggest risk now is “full employment” in the US and the expectation that rates can go up in June while the labor participation rate is at its lowest level since the 70s. More silly games here. At this rate does anyone really see Syriza in power or Greece in the euro by the summer? Something’s got to give. http://blogs.ft.com/brusselsblog/2015/03/09/will-the-troika-return-to-athens/ Repossessions are in the news again. This is going to be very tricky especially with the recovering banks in the thriving economy narrative. http://www.irishtimes.com/news/ireland/irish-news/cliff-taylor-seven-reasons-why-repossessions-are-in-the-news-now-1.2131962 @ Sarah Carey The silliness has been almost exclusively on the side of the Greeks! http://www.reuters.com/article/2015/03/09/us-eurozone-greece-idUSKBN0M50SX20150309 The penny appears to have finally dropped; notably in the case of Varoufakis. As to who will stay in power, this is in the lap of the gods. The dafter left wing elements in his government, and the marriage of convenience with the Independent Greeks, will have to be jettisoned by Tsirpas if is to survive. http://www.dw.de/greek-government-confronted-by-internal-divisions/a-18304497 Retaining the euro as a national currency, and accepting that the country’s creditors call the shots if this is to remain the case, is the fundamental issue that Tsirpas, and the Greek electorate, have to address. @ SC The details of the outcome of the Greek elections. http://www.wsj.com/articles/syriza-gets-right-wing-partys-backing-for-greek-coalition-government-1422266713 Almost as much fun as in Ireland! The Greeks invented democracy, the worst of all systems as Churchill reputedly remarked; apart from all the rest. @ SC And the other options! Or, rather, the lack of them. http://www.nytimes.com/2015/03/09/business/international/economic-reform-is-best-path-for-greece.html?_r=0 Comments are closed.