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 Ireland, the World Economic Crisis and the Threat to the Euro

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PostSubject: Re: Ireland, the World Economic Crisis and the Threat to the Euro   Sun Oct 05, 2008 2:28 am

I like the term Paddy. The day when anyone would be ashamed to be Irish is long gone.

The figure being bandied around is 20 billion in the link in CF's post prior to mine. The fact of the matter is that nobody knows the size of the losses as it depends on how bad the downturn is. Judging from the size of the bubble and past history I feel it will be greater. Making 6.5 billion profit in a speculative bubble common but avoiding disastor in deflation is a more difficult job.

You have faith in Cowan not being selfish and out for himself. I rely on these pieces of evidence for my opinion. It was clear early this year something needed to be done. Cowan put off action as this would have interfered with him getting the big job. The other TDs would have used him as a scapecoat but now they are stuck with him. Then action was avoided so as not to rock the boat on Lisbon. After that they were paralysed with fear.

Had Lisbon passed do you think Cowan would have acted differently.
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PostSubject: Re: Ireland, the World Economic Crisis and the Threat to the Euro   Sun Oct 05, 2008 3:07 am

cactus flower wrote:
rockyracoon wrote:
In 1936 Andrew Jackson, 7th President of the US, closed down the Second Bank of the US by revoking its charter. His comments:

". . . Gentlemen, I have had men watching you for a long time and I am convinced that you have used the funds of the bank to speculate in the breadstuffs of the country. When you won, you divided the profits amongst you, and when you lost, you charged it to the bank. You tell me that if I take the deposits from the bank and annul its charter, I shall ruin 10,000 families. That may be true, gentlemen, but that is your sin! Should I let you go on, you will ruin 50,000 families, and that would be my sin!"

Kind of sums it up for me. Instead of charging their losses to the bank these days, we now have the "too big to fail" doctrine and the tax-payer, in on form or another, it left to pick up the bill.

I don't see one politician of the caliber of Jackon anywhere in the world. I don't expect to see things change unless the US financial system finally crumbles. Right now the powers-that-be are attending to the symptons of the malaise and not trying in any meaningful way to address the underlying causes of the malaise.

Personally I think the hedge fund guys were right in what they said - the property bubble was a last throw to protract the agony of the dotcom bubble, itself a scam to try and overcome the rise in oil prices and general deterioriation of profitability of US and european industry.

I wouldn't quite agree (are you surprised?). I think there was a genuine increase in prosperity in the Clinton years, but there ought to have been a recession starting in about 2000-2001. Greenspan instead pumped up a bubble, which is now bursting. Curious that it coincided almost exactly with Bush's tenure, but maybe no more than that.
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PostSubject: Re: Ireland, the World Economic Crisis and the Threat to the Euro   Sun Oct 05, 2008 11:28 am

ibis wrote:
cactus flower wrote:
rockyracoon wrote:
In 1936 Andrew Jackson, 7th President of the US, closed down the Second Bank of the US by revoking its charter. His comments:

". . . Gentlemen, I have had men watching you for a long time and I am convinced that you have used the funds of the bank to speculate in the breadstuffs of the country. When you won, you divided the profits amongst you, and when you lost, you charged it to the bank. You tell me that if I take the deposits from the bank and annul its charter, I shall ruin 10,000 families. That may be true, gentlemen, but that is your sin! Should I let you go on, you will ruin 50,000 families, and that would be my sin!"

Kind of sums it up for me. Instead of charging their losses to the bank these days, we now have the "too big to fail" doctrine and the tax-payer, in on form or another, it left to pick up the bill.

I don't see one politician of the caliber of Jackon anywhere in the world. I don't expect to see things change unless the US financial system finally crumbles. Right now the powers-that-be are attending to the symptons of the malaise and not trying in any meaningful way to address the underlying causes of the malaise.

Personally I think the hedge fund guys were right in what they said - the property bubble was a last throw to protract the agony of the dotcom bubble, itself a scam to try and overcome the rise in oil prices and general deterioriation of profitability of US and european industry.

I wouldn't quite agree (are you surprised?). I think there was a genuine increase in prosperity in the Clinton years, but there ought to have been a recession starting in about 2000-2001. Greenspan instead pumped up a bubble, which is now bursting. Curious that it coincided almost exactly with Bush's tenure, but maybe no more than that.

This is something we have looked at here before. The "genuine increase in prosperity" was associated with creation of a lot of low wage service jobs. It was called the Walmart economy. Overall, taking out the second income from women coming into the workforce, and second jobs, Americans are no better off than they were in the 1970s. The difference between Clinton and Bush in terms of well being and social equality was to do with tax cuts for the rich. And of course 2 and a quarter million less jobs under Bush.
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PostSubject: Re: Ireland, the World Economic Crisis and the Threat to the Euro   Sun Oct 05, 2008 12:07 pm

Clinton's adminstration looks ok on paper and is being viewed against the backdrop of the recent Bush era. My god, Mugabe mightn't look so bad when viewed against the Bush era. When the dust settles in a few years, the disaster that has been the Bush doctrine and what is now being referred to as the neo-liberal economic agenda will be seen in stark highlights.

Clinton took many easy options such as encouraging the expansion of the service sector industry which entails a distribution network, cheaper imported goods and most workers earning the minimum (max) wage with very little other tangible benefits. It is a merchantilist economy where scales-of-economy (ie the bigger you are, the cheaper your merchandise) play a major role, and the importation of cheap goods often undercuts local manufacturing.

On the plus side, Clinton had gotten the budget under control for the first time in 25 years. One could claim he was carrying out a delicate balancing act whereby it seemed the middle classes and wage earners were holding their ground and the federal budget was being controlled in order to set the foundation for better fiscal policy. It seemed Clinton was stemming the slide in the standard of living for the average American. In reality, the average American was making up the detrioration in their living standards by taking on more debt and saving less.

Then came Bush with his two wars and tax cuts for the wealthy. They decided to ignore every bit of regulatory legislation ever enacted and have done their damnest to repeal or negate existing legislation at every turn. This began under Reagan and has now come to almost total fruition under Bush.

I worked in investment banking in NY in the 1980's. Clawed my way up the ladder quite successfully, if I say so myself. One of the major themes that occupied our attention was where the next big economic breakthrough would occur. We knew, given financing patterns etc., that the technology industry was well up its maturity curve even in the 1980s. Info technology, á la the dot.com industry, was often touted but many pointed out that this wasn't really a new industry but only displaced existing industries like the news media.

Well, we're on the verge of 2009 and I don't see any new and ground-breaking industry on the horizon. I suppose bio-technology comes the closest to a new industry and hence why some are so enthusiastic about privatising health care. The simple fact is that for a society to increase its overall wealth there has to be a vast surplus in economic growth in a capitalistic society. The growth we've been experiencing in the West is anemic at best and questionable in its statistical methodology - ie we haven't been experiencing growth at all.
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PostSubject: Re: Ireland, the World Economic Crisis and the Threat to the Euro   Sun Oct 05, 2008 12:47 pm

Quote :
The growth we've been experiencing in the West is anemic at best and questionable in its statistical methodology - ie we haven't been experiencing growth at all.

Just growth in credit.

Your post is a very convincing summary of what I was only able to take a stab at.

I would be of the view that human labour is the primary way that value and profit is generated and that technology tends to take a slice out of that profit. That is certainly the case in the field I work in.

Reagan and Bush also took on the Unions and cut services, didn't they? It looks like the credit expansion masked over how peoples' living standards were affected.

We are in for one hell of an uproar in the next few months when reality hits the fan.
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PostSubject: Re: Ireland, the World Economic Crisis and the Threat to the Euro   Sun Oct 05, 2008 1:40 pm

cactus flower wrote:
Quote :
The growth we've been experiencing in the West is anemic at best and questionable in its statistical methodology - ie we haven't been experiencing growth at all.

Just growth in credit.

Your post is a very convincing summary of what I was only able to take a stab at.

I would be of the view that human labour is the primary way that value and profit is generated and that technology tends to take a slice out of that profit. That is certainly the case in the field I work in.

Reagan and Bush also took on the Unions and cut services, didn't they? It looks like the credit expansion masked over how peoples' living standards were affected.

We are in for one hell of an uproar in the next few months when reality hits the fan.


Of course it did, cactus flower, Living standards in the US have plummetted under Bush/Cheney. You cannot be an obedient servant to the wishes of private capital and serve the public. The Republicans have established something like the Berlin Wall inside corporations. Board members have their tax cuts, share option schemes, retirement account parachutes and so on. Republican legislation was passed for their benefit. But the minute you go below board level to senior managers, these guys are simply employees and have been subjected to sll the vicious anti-employee legislation the Republicans have implemented since 1980. Clinton could have done more to overturn the more noxious employment laws but was hampered by a Republican-controlled congress.

But I have no doubt that this massive barrier exists in US corporations now. The "American Dream" is not what it used to be. It now means getting on to the board of a major corporation. Anything less and the Republican anti-employee legislation works against you. They have got away with this for so long but, having ruined the economy, they should be massacred at this election. The fact that the polls do not point to a richly-deserved electoral slaughter for the Republicans is worrying.

(PS . Palin is now calling Obama a "terrorist". It didn't take her long to drag this into the gutter, or Republican home turf, as I call it.)
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PostSubject: Re: Ireland, the World Economic Crisis and the Threat to the Euro   Sun Oct 05, 2008 2:59 pm

Slim Buddha wrote:
. . .(PS . Palin is now calling Obama a "terrorist". It didn't take her long to drag this into the gutter, or Republican home turf, as I call it.)

Very Happy . What can ya say. The Republicans are behind in the polls. McCain's election team have all but given up on Michigan and "redelpoyed" assets elsewhere.

I watched the film Count on Friday night about the Florida voting debacle in 2000. While the film is definitely biased against the Republican party, stripped down to its bare essentials, it shows that the Republicans will stop at nothing to get their way and cement their version of the "free market" on the US. The US Supreme Courts ruling was particularly noxious. Never before in the history of the US Supreme Court had a ruling been passed which was never to be referred to again. It was a one time special judgement, stopping the recount, which can not be referenced. The whole raison d'etre of the Supreme Court is to be the last court of appeal and arbitration and to have its judgements recorded for future reference.

The entire US system is rotting at the foundation.
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PostSubject: Mathematics not Money   Sun Oct 05, 2008 4:22 pm

The actual problem is not with money, it is with mathematics. The mathematics used to manage the world financial systems is wrong. Those who manage the systems need to be incarcerated in a nice quite spot and schooled in Dynamic Computational Real Geometry, then they will understand how to develop and manage a multidimensional cosmic approach to resource management in such a way that chaotic behaviour is naturally dissolved through the principles of invincible computation.
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PostSubject: Re: Ireland, the World Economic Crisis and the Threat to the Euro   Sun Oct 05, 2008 4:29 pm

cactus flower wrote:
ibis wrote:
cactus flower wrote:
rockyracoon wrote:
In 1936 Andrew Jackson, 7th President of the US, closed down the Second Bank of the US by revoking its charter. His comments:

". . . Gentlemen, I have had men watching you for a long time and I am convinced that you have used the funds of the bank to speculate in the breadstuffs of the country. When you won, you divided the profits amongst you, and when you lost, you charged it to the bank. You tell me that if I take the deposits from the bank and annul its charter, I shall ruin 10,000 families. That may be true, gentlemen, but that is your sin! Should I let you go on, you will ruin 50,000 families, and that would be my sin!"

Kind of sums it up for me. Instead of charging their losses to the bank these days, we now have the "too big to fail" doctrine and the tax-payer, in on form or another, it left to pick up the bill.

I don't see one politician of the caliber of Jackon anywhere in the world. I don't expect to see things change unless the US financial system finally crumbles. Right now the powers-that-be are attending to the symptons of the malaise and not trying in any meaningful way to address the underlying causes of the malaise.

Personally I think the hedge fund guys were right in what they said - the property bubble was a last throw to protract the agony of the dotcom bubble, itself a scam to try and overcome the rise in oil prices and general deterioriation of profitability of US and european industry.

I wouldn't quite agree (are you surprised?). I think there was a genuine increase in prosperity in the Clinton years, but there ought to have been a recession starting in about 2000-2001. Greenspan instead pumped up a bubble, which is now bursting. Curious that it coincided almost exactly with Bush's tenure, but maybe no more than that.

This is something we have looked at here before. The "genuine increase in prosperity" was associated with creation of a lot of low wage service jobs. It was called the Walmart economy. Overall, taking out the second income from women coming into the workforce, and second jobs, Americans are no better off than they were in the 1970s. The difference between Clinton and Bush in terms of well being and social equality was to do with tax cuts for the rich. And of course 2 and a quarter million less jobs under Bush.

Who was talking about America!? I was talking about Ireland.
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PostSubject: Re: Ireland, the World Economic Crisis and the Threat to the Euro   Sun Oct 05, 2008 4:46 pm

TheGeniusFromCork wrote:
The actual problem is not with money, it is with mathematics. The mathematics used to manage the world financial systems is wrong. Those who manage the systems need to be incarcerated in a nice quite spot and schooled in Dynamic Computational Real Geometry, then they will understand how to develop and manage a multidimensional cosmic approach to resource management in such a way that chaotic behaviour is naturally dissolved through the principles of invincible computation.

The problem seems to have been that they only knew how to add and forgot how to subtract.
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PostSubject: Re: Ireland, the World Economic Crisis and the Threat to the Euro   Sun Oct 05, 2008 4:49 pm

Ibis said
Quote :
Who was talking about America!? I was talking about Ireland

Productivity and competitiveness fell after 2002. It was credit that expanded. The "increased prosperity" in Ireland as well as in the US was a fiction based on a huge increase in personal debt.
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PostSubject: Re: Ireland, the World Economic Crisis and the Threat to the Euro   Sun Oct 05, 2008 5:18 pm

TheGeniusFromCork wrote:
The actual problem is not with money, it is with mathematics. The mathematics used to manage the world financial systems is wrong. Those who manage the systems need to be incarcerated in a nice quite spot and schooled in Dynamic Computational Real Geometry, then they will understand how to develop and manage a multidimensional cosmic approach to resource management in such a way that chaotic behaviour is naturally dissolved through the principles of invincible computation.

If only it were that simple Wink
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PostSubject: Re: Ireland, the World Economic Crisis and the Threat to the Euro   Sun Oct 05, 2008 5:43 pm

cactus flower wrote:
Ibis said
Quote :
Who was talking about America!? I was talking about Ireland

Productivity and competitiveness fell after 2002. It was credit that expanded. The "increased prosperity" in Ireland as well as in the US was a fiction based on a huge increase in personal debt.

Yes, that's what I said, dammit.
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PostSubject: Re: Ireland, the World Economic Crisis and the Threat to the Euro   Sun Oct 05, 2008 6:03 pm

ibis wrote:
cactus flower wrote:
Ibis said
Quote :
Who was talking about America!? I was talking about Ireland

Productivity and competitiveness fell after 2002. It was credit that expanded. The "increased prosperity" in Ireland as well as in the US was a fiction based on a huge increase in personal debt.

Yes, that's what I said, dammit.


*agrees with Ibis again Shocked Idea Shocked *
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PostSubject: Re: Ireland, the World Economic Crisis and the Threat to the Euro   Wed Oct 08, 2008 10:52 am

The Indonesian and Russian Stock Markets have both suspended trading. The British have announced that they are going the Swedish route with recapitalisation of the banks in exchange for a holding of preferred shares. This is what Ireland needs to do - but do we have access to the cash to do it with? And, with the Irish Guarantee in place and our borrowing rates pushed up by it, at what cost?

Where is the invisible hand? The whole financial system is seizing up, on the back of deregulation. The Chicago experiment has been a disastrous failure.
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PostSubject: Re: Ireland, the World Economic Crisis and the Threat to the Euro   Wed Oct 08, 2008 10:56 am

cactus flower wrote:
The Indonesian and Russian Stock Markets have both suspended trading. The British have announced that they are going the Swedish route with recapitalisation of the banks in exchange for a holding of preferred shares. This is what Ireland needs to do - but do we have access to the cash to do it with? And, with the Irish Guarantee in place and our borrowing rates pushed up by it, at what cost?

That Bill was a bit hasty last week so? More late nights this week for our representatives, more emergency legislation etc. etc.?

That's it, I'm going to plant the back garden with winter vegetables today - I might have to consult the food threads here later.
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PostSubject: Re: Ireland, the World Economic Crisis and the Threat to the Euro   Wed Oct 08, 2008 4:07 pm

anyone see the parallels with ireland?
(breakingnews.ie)
Financial pressure remains on Iceland
10/08/2008 - 10:59:37

The financial crisis engulfing Iceland showed no sign of easing today.
A day after Prime Minister Geir Haarde publicly criticised the lack of assistance Iceland has received from Europe, Sweden said it would lend the Swedish arm of Icelandic bank Kaupthing €435m.

The central bank said that it believed that Kaupthing was solvent, but was suffering temporary liquidity problems that could have wider repercussions.

In Britain Chancellor Alistair Darling said he would guarantee deposits of British savers with Icesave, the online arm of Landsbanki, the bank nationalised by the Icelandic government yesterday.

Britain and Sweden's intervention underscores the effect that a full-blown collapse of Iceland's financial system would have on the rest of Europe, given the heavy investment by Icelandic banks and companies across the continent.

In recent days, Iceland's government has taken over the country's second-biggest bank, fixed the exchange rate of its plummeting currency, and asked Russia for a massive loan as it tries to stop the collapse of its economy.

It has also introduced emergency laws that give the government sweeping new powers to take over companies, limit the authority of boards, and call shareholder meetings.

One of Iceland's biggest companies, investment group Baugur, owns or has stakes in dozens of major European retailers - including enough to make it the largest private company in Britain.

Kaupthing has also invested in European retail groups, and racked up debts of more than $5.25bn in five years to help fund British deals.

The Icelandic government is also due to send a delegation to Moscow this week to negotiate the terms of a loan that it hopes with bolster its depleted foreign exchange reserves.

After watching the currency free-fall for several days, the Central Bank of Iceland stepped yesterday to fix the exchange rate of the krona at 175 - a level equal to 131 krona against the euro.

The speed of Iceland's downfall in the week since it announced it was nationalising Glitnir bank, the country's third largest, caught many by surprise despite warnings that it was the "canary in the coal mine" of the global credit squeeze.

With the deregulation of its financial market in the mid-1990s and subsequent stock market boom, Iceland had transformed itself from the poor cousin in Europe to one of the region's wealthiest countries. Icelandic banks and companies made acquisitions across Europe.

The average family's wealth soared 45% in half a decade and gross domestic product rose at around 5% a year.

But the new wealth was built on a shaky foundation of foreign debt - the country's top four banks now hold foreign liabilities in excess of $100bn, dwarfing the country's gross domestic product of $14bn.

Against this tumultuous backdrop, Mr Haarde vowed that ordinary Icelanders would not pay the price for this spending spree and that his country will not default on its debt.

"Iceland has never defaulted on sovereign debt and won't," he said.
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PostSubject: Re: Ireland, the World Economic Crisis and the Threat to the Euro   Wed Oct 08, 2008 4:13 pm

Iceland is in an even worse state than Ireland and this is a fact that has been recognised long before the current crisis. I attended a seminar given by Austin Hughes of IIB bank not too many months ago in which he highlighted the woes of the Icelandic economy.

Its not being a member of the European Union coupled with the fact that it is has a small population (under half a million) and an independent currency makes it great prey for speculators. They have been speculating on the Iceland krona in particular for several years.

Whilst the element of betting on the economy by speculators is in common with Ireland, Iceland are far more susceptible to such attacks owing to their weakness and independence. Ireland has weakness but it is both protected and constrained.. to some extent.. by its membership both of the European Community and the European Monetary Union.

What is similar between the two situations is the cycle of boom and bust. Following every boom there is a major bust. We have been deluding ourselves for well over a decade regarding our boom. What we have failed to do is realise that if you boom you will bust. What is necessary to avoid such cycles is sustainable growth built on a sustainable and functioning economy. Whilst all Western economies are under strain at the moment, it is those economies which are built on a sustainable footing (eg Germany, manufacturing, engineering etc) which will (i) cope with the downturn (ii) best emerge from it.


Last edited by johnfás on Wed Oct 08, 2008 4:46 pm; edited 1 time in total
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PostSubject: Re: Ireland, the World Economic Crisis and the Threat to the Euro   Wed Oct 08, 2008 4:40 pm

zakalwe wrote:
anyone see the parallels with ireland?
(breakingnews.ie)
Financial pressure remains on Iceland
10/08/2008 - 10:59:37

The financial crisis engulfing Iceland showed no sign of easing today.
A day after Prime Minister Geir Haarde publicly criticised the lack of assistance Iceland has received from Europe, Sweden said it would lend the Swedish arm of Icelandic bank Kaupthing €435m.

The central bank said that it believed that Kaupthing was solvent, but was suffering temporary liquidity problems that could have wider repercussions.

In Britain Chancellor Alistair Darling said he would guarantee deposits of British savers with Icesave, the online arm of Landsbanki, the bank nationalised by the Icelandic government yesterday.

Britain and Sweden's intervention underscores the effect that a full-blown collapse of Iceland's financial system would have on the rest of Europe, given the heavy investment by Icelandic banks and companies across the continent.

In recent days, Iceland's government has taken over the country's second-biggest bank, fixed the exchange rate of its plummeting currency, and asked Russia for a massive loan as it tries to stop the collapse of its economy.

It has also introduced emergency laws that give the government sweeping new powers to take over companies, limit the authority of boards, and call shareholder meetings.

One of Iceland's biggest companies, investment group Baugur, owns or has stakes in dozens of major European retailers - including enough to make it the largest private company in Britain.

Kaupthing has also invested in European retail groups, and racked up debts of more than $5.25bn in five years to help fund British deals.

The Icelandic government is also due to send a delegation to Moscow this week to negotiate the terms of a loan that it hopes with bolster its depleted foreign exchange reserves.

After watching the currency free-fall for several days, the Central Bank of Iceland stepped yesterday to fix the exchange rate of the krona at 175 - a level equal to 131 krona against the euro.

The speed of Iceland's downfall in the week since it announced it was nationalising Glitnir bank, the country's third largest, caught many by surprise despite warnings that it was the "canary in the coal mine" of the global credit squeeze.

With the deregulation of its financial market in the mid-1990s and subsequent stock market boom, Iceland had transformed itself from the poor cousin in Europe to one of the region's wealthiest countries. Icelandic banks and companies made acquisitions across Europe.

The average family's wealth soared 45% in half a decade and gross domestic product rose at around 5% a year.

But the new wealth was built on a shaky foundation of foreign debt - the country's top four banks now hold foreign liabilities in excess of $100bn, dwarfing the country's gross domestic product of $14bn.

Against this tumultuous backdrop, Mr Haarde vowed that ordinary Icelanders would not pay the price for this spending spree and that his country will not default on its debt.

"Iceland has never defaulted on sovereign debt and won't," he said.

Thanks for posting that Zakalwe. I do see parallels, as I seem to remember reading recently that Ireland has the largest external debt in relation to GDP of any European country.

The IMF say that Irish property prices are still (even after falling since 2006) the most overvalued of any State.

Our government should be looking very hard at what Iceland has just done and be prepared with a plan to maintain essential industries and services.

http://www.irishtimes.com/newspaper/breaking/2008/1008/breaking61.htm

Ireland's external debt in 2007 was $1.841 trillion (30 June 2007, CIA Factbook) i.e. approximately a half a million dollars per capita.
I've heard it said that there are external assets that balance out part of that debt: what they are worth at present is anybody's guess.

http://en.wikipedia.org/wiki/List_of_countries_by_external_debt

High external indebtedness is generally associated with a poor standard of living.

The more I look at this the more it looks like we need a fast and forensic audit of assets and liabilities.
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PostSubject: Re: Ireland, the World Economic Crisis and the Threat to the Euro   Wed Jan 14, 2009 8:32 pm

Yesterday the Euro was rocked by a few words (not) made by Brian Cowen in relation to the IMF- details are on the Cowen/IMF thread. Ireland's credit ratings are under pressure, and so is the euro.

Quote :
The blighted eurozone
Published: January 13 2009 09:13 | Last updated: January 13 2009 22:27

The Irish must be feeling green, and so too the Spanish, Greeks and Portuguese. Over the past week, all four countries have been warned that their debt ratings could be downgraded. Dublin, Madrid, Athens and Lisbon may bat this away with reassuring noises about how they will put their financial houses in order – even if they, meanwhile, suffer higher borrowing costs. What they cannot dismiss so easily, however, is the solution to their troubles: deflation.

The potential downgrades are only a manifestation of a deeper problem: a loss of competitiveness. That is largely why the Irish, Greek, Spanish and Portuguese trade deficits are so large and their economies slowing so fast. It has been a long decline. Euro membership lowered borrowing costs, but unleashed a credit boom and a rise in prices – most obviously in housing but also in wages.
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PostSubject: Il n'y a pas de free lunch.   Mon Jan 19, 2009 8:02 pm

There is talk everywhere about the strains of the crises on the Euro.

United States of Europe blog said today
Quote :

The Telegraph reports that David McWilliams, a former official at the Irish central bank and former Director of UBS, has called on Dublin to threaten withdrawal from the Euro unless Europe's big powers do more to rescue Ireland's economy. "It is essential that we go to Europe and say we have a serious problem. We say, either we default or we pull out of Europe," he told RTE radio.

"If we have a single currency there are obligations and responsibilities on both sides. The idea that Germany and France can just hang us out to dry, as has been the talk in the last couple of days should not be taken lying down," he said.

Mr McWilliams said the EMU was preventing Irish economic recovery. "We are paying twice for the euro: once on the exchange rate and once more on the interest rate," he said.

The article notes that there is no public support for withdrawal from the euro. A Quantum poll published by the Irish Independent yesterday found that 97percent reject such a radical move.
In the FT Wolfgang Münchau looks at what would happen if one of the member states of the eurozone were to default on its debt. He argues that default would not lead to the break-up of the eurozone: "if a default were to happen, it would almost certainly happen within a eurozone that remained intact."

He suggests instead that "Europeans would bail out one of their own, but it would not be fun for anyone, especially not for the defaulter."

He adds that "you could conceive of a scenario under which the bail-out had to be so large that it would bring down the entire system. This could then provide the non-defaulters with an economic incentive to leave. But dream on. If Germany, for example, had such an incentive to leave, it would almost certainly forgo that perceived economic benefit and stay for political reasons."

Telegraph WSJ FT: Munchau FT

Coulisse's blog said on 16 Jan:

Quatremer:"Markets mimic eurozone break up"On his blog, Brussels Libération correspondent Jean Quatremer reports on the yield spread of eurozone member state bonds, warning that markets are mimicking "that the financial and economic crisis will lead to the eurozone break up". He cites Christian de Boissieu, President of the French "Conseil d'analyse économique", saying that in order to reduce the spread, the countries concerned should "not leave any doubt about their desire to remain in the eurozone".Coulisses de Bruxelles

http://bruxelles.blogs.liberation.fr/coulisses/2009/01/les-marchs-pari.html

McWilliams interview has been widely reported across Europe.
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PostSubject: Re: Ireland, the World Economic Crisis and the Threat to the Euro   Mon Jan 19, 2009 8:47 pm

Spain loses triple A rating

Spain has embarked on a heavy government spending programme to counter a deepening recession, and expects a budget deficit this year of 5.8 per cent of gross domestic product. But the European Commission predicts the deficit will reach 6.2 per cent of GDP and S&P made a deficit forecast of 6.6 per cent.

The credit downgrade was expected, although the Spanish government tried to forestall the decision in its submissions to S&P.

Pedro Solbes, finance minister, was evidently anticipating a downgrade when he noted in an interview with El País on Sunday that Spain had attained triple A status only at the end of 2004 and that S&P’s proposed move would merely reduce Spain’s status from “outstanding to very high”.
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PostSubject: Re: Ireland, the World Economic Crisis and the Threat to the Euro   Tue Jan 20, 2009 5:30 am

Came across this earlier this evening

Not everybody in Europe is running around waiting (or in some cases around here-gleefully willing on) for the end of the world financially speaking:

http://www.guardian.co.uk/world/2008/dec/31/germany-europe

http://www.guardian.co.uk/business/2009/jan/07/automotive-europe


just a bit of balance to go against the constant dirges around here that Europe is about to explode into a billion pieces and that we should all be panicked into more short-term gimmicks and "lets all shit ourselves" nonsense such as unilateral devaluation and the implosion of the euro - none of this gets around the long term structural problems that our economy is in and that we stubbornly fail to address , always thinking that there is some sure fire easy way out of this mess - and Im afraid goes right across the entire political spectrum.










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PostSubject: Re: Ireland, the World Economic Crisis and the Threat to the Euro   Tue Jan 20, 2009 10:58 am

Edo

Germany is one of the more liquid economies in Europe but there are big adjustments going on around it. I'd say the Germans take a long-term look at policy as well which might be helpful to everyone in the long term.

Quote :
Germany's affluent and technologically powerful economy - the fifth largest in the world in PPP terms - showed considerable improvement in 2007 with 2.6% growth.
https://www.cia.gov/library/publications/the-world-factbook/geos/gm.html

However, there are significant changes to the shape of the world economy going on that will affect the Eurozone massively. China just overtook Germany as the world's third biggest economy as you probably know and is likely to surpass Japan very soon too.. It mightn't be long before India is there somewhere too, if not other BRIC countries so Germany is fast becoming a big fish in a shrinking pond.

http://www.guardian.co.uk/business/2009/jan/14/china-world-economic-growth

India and China are both producing their own cars now too and they're greener and cheaper than anything else produced anywhere else. The TATA Nano from India for example has a 600cc engine and will cost around €1700 and there are rumours it will go on sale in Europe in the very near future (2012) LINK. No doubt the same model won't be for sale here as will be released in India - maybe there'll be some electrical components in the European ones but isn't this a kind of real metaphor for what is happening or going to happen in the world - parts of our Euro economy simply ARE going to implode with yokes like this coming.

Don't you think the likes of this - or the likes of the electric Chinese car - the F3DM that Warren Buffet has plugged, could seriously threaten important European industries like the Auto one?

Luckily Germany didn't have a housing bubble and seem to have the willingness to adapt to change but will they and the French be flexible enough ? Is it any use the French producing Green luxury brands when the Indians could flood the world with <2k cars within three years?

I trust the Germans will adapt however and it'll be interesting to see what happens between this and 2012 when the Tata Nano - the real people's car - will crash into our Eurozone economy. Maybe the effects of it are being felt even now though ?
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PostSubject: Re: Ireland, the World Economic Crisis and the Threat to the Euro   Tue Jan 20, 2009 12:59 pm

Unfortunately, if jobs are lost in Germany, the housing price will be found to be too high. There is no absolute price for second hand housing at least, the price is what the people that buy housing can pay. If mercedes/volkswagen/porsche etc lay off half their work forces, fewer people will be able to buy German housing at the current price. Hence the asset price spiral will hit them too. Later than us, it has to be said, and probably not to the same extent. But it will happen.
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