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

expat girl wrote:

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.

In Germany, far fewer people own their own home. The property market is very different.

True that about home ownership, I think about 60% of Germans still rent. That figure must be down around 20% here.

Auditor #9 wrote:

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

We cannot compete with the production costs of India or China. The value of the currencies of both these countries is too low for us to compete. The west has to decline in relative wealth and cost before there can be a meaningful economic recovery. That is the hard reality of it. Our purchasing power will either decrease in a planned way or it will collapse as our economic base implodes. Wages in India vary considerably with region and employment but the average is probably around the equivalent of 2500 dollars a year and many are paid a lot less. A factory worker would get half that. China would be similar but 20%-30% higher. Professionals in India earn around £12000 - £15000.

There are also so many inefficiencies build into our economy. All those faceless, quangos etc and pointless regulations have to be paid for and Health care and care for the elderly whilst desirable mean that we in turn have to accept a reduction in living standards. I think we are entering a phase where globalisation is no longer in the interests of the West. The West needs to rebuild its industrial base and become more self reliant.

Squire wrote:

Auditor #9 wrote:

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

We cannot compete with the production costs of India or China. The value of the currencies of both these countries is too low for us to compete. The west has to decline in relative wealth and cost before there can be a meaningful economic recovery. That is the hard reality of it. Our purchasing power will either decrease in a planned way or it will collapse as our economic base implodes. Wages in India vary considerably with region and employment but the average is probably around the equivalent of 2500 dollars a year and many are paid a lot less. A factory worker would get half that. China would be similar but 20%-30% higher. Professionals in India earn around £12000 - £15000.

There are also so many inefficiencies build into our economy. All those faceless, quangos etc and pointless regulations have to be paid for and Health care and care for the elderly whilst desirable mean that we in turn have to accept a reduction in living standards. I think we are entering a phase where globalisation is no longer in the interests of the West. The West needs to rebuild its industrial base and become more self reliant.

Squire, tba I think you are the only poster who is addressing the realities here. The west in general has been living for some time on the tick. To exacerbate it, the last five years there has been an enormous credit bubble, a lot of it in personal spending.

Globalisation has meant an enormous increase in productive capacity in the east and a drop in prices and profit margins for manufactured goods - as Auditor says, this has gone from clothes and toys to computers and now cars. Costs are going up in India and China but they have a massive agricultural population that is migrating to towns and it will be a very long time before that process stops. Last week China became the world's third biggest economy and surely it won't be too long, other events permitting, before China and India are at the top.

At the same time there has been a trend in the west to concentration of more and more wealth into a smaller number of hands, adding a blockage to the circulation of wealth in the economy.

On top of that, we have too much stuff, and are using up our irreplaceable environment. Globalisation and mechanisation has enlarged the scope of production so much that we are able to produce the necessities of life for everyone easily and its only the disfunctionality of an economic system that requires an ever increasing quantum of profit, along with poor distribution mechanisms, that keeps half the planet poor.

Protectionism won't work as it becomes a tit for tat game and would mean a huge contraction in the market and for Ireland, massive long term unemployment. The alternative that I would fear would be war, as the western states with their stockpiles of weapons and armed forces may be tempted to make a grab for resources and territory while they still have the means.

We simply have to change the way we run our world economy, and the way we live.

Self-sufficiency is surely the key to this - global markets simply can't work in the interests of any but a relative few. The thing is, for the size of our population we could probably have a humane standard of living for everyone if we managed our own resources properly. We could certainly be self-sufficient in food. Right now there are more than enough houses for everyone who lives here so homelessness should not be a problem in the short to medium term. The principle of economic growth has to be abandoned in favour of true sustainability. We will be forced to re-examine the work people will have to do - a lot of it will be environmental work - proper recycling and sustainable manufacture and farming - it will be about staying alive. The throw-away society will have to end. We'll certainly need to learn new skills - ordinary things like dressmaking, farming, carpentry. Supermarkets are not viable because of the oil problem - basically we are eating oil.
Perhaps the greatest obstacle we face is that so many people do not yet appreciate the severity of what is ahead and so will not or cannot make the necessary adjustments to their thinking. Wealthy people in particular do not want to give up what they have, dont tend to want to acknowledge the truth and can be very angry about it.
It could actually be a nice way of life - it doesn't mean we can't have fun, be educated or creative or innovative - it just means we can't go on being excessive any more.

Sadly, the resource wars you mention CF are already here - in Iraq, Israel and Afghanistan - all about oil as most people know in their heart of hearts at the very least. The most powerful won't abandon their addiction to growth without a nasty fight though. It seems like there will be awful bloodshed in many places while the richest people seek to maintain their advantage.

Aragon wrote:

Self-sufficiency is surely the key to this - global markets simply can't work in the interests of any but a relative few. The thing is, for the size of our population we could probably have a humane standard of living for everyone if we managed our own resources properly.

Squire wrote:

There are also so many inefficiencies build into our economy. All those faceless, quangos etc and pointless regulations have to be paid for and Health care and care for the elderly whilst desirable mean that we in turn have to accept a reduction in living standards. I think we are entering a phase where globalisation is no longer in the interests of the West. The West needs to rebuild its industrial base and become more self reliant.

I've a feeling that that self-reliance we should be aiming for wouldn't impoverish us so much at all but it would seriously change the nature of work. We'd be working a lot more towards energy harvesting than we are now.

Given the cheap costs of goods too coming in from India and China, there's no reason either why we couldn't have enough of the life we have now except without the massive continent-size debts that some countries in Europe have now.

I'd say it's a matter of re-organising things now - priorities, processes, mechanisms. If it's cheaper to import more efficient cars from India why not? But what do we have to trade ?

How do ye think Europe as a bloc of countries together might operate in all of this ?

http://news.bbc.co.uk/2/hi/business/7839391.stm

Sterling plunging, trader quoted on C4 news "it's finished"

we might become a very united Europe, shortly

Thought more about the self-reliance. I don't think we could or should go back to tiny localised economies, but there are a lot of environmental reasons for more self sufficiency. If you are talking about not bein reliant on taking resources from other regions, that we keep poor while we get rich, then that makes sense too.

Michael Hennigan doesn't agree with David McWilliams on threatening to leave the Euro:

two interesting short articles here:
http://www.finfacts.ie/irishfinancenews/article_1015708.shtml

Even the economists are squabbling; the irish times had a big editorial about why letting Anglo go to the wall a la Morgan Kelly was a bad idea.

is there anyone on the planet with a solution or do we just have to accept that unregulated capitalism doesn't work any better than communism??

Sigh. Everyone seems to think doom is nigh, but no-one can agree on the mechanisms

cactus flower wrote:

Michael Hennigan doesn't agree with David McWilliams on threatening to leave the Euro:

two interesting short articles here:
http://www.finfacts.ie/irishfinancenews/article_1015708.shtml

Some stuff from that article towards the end of it



The Irish national debt trebled in the period 1977-1982 and is set to do so again in the period 2007-2012.

The Department of Finance forecasts that the national debt will increase from €37.6 billion in 2007 to €111 billion in 2012 despite taking drastic action to reduce borrowings.

A big fall in living standards is in prospect as tax revenues will have to rise and servicing the national debt will again take a significant slice of revenues.

A back-stop will be provided by the European Central Bank.

Ireland's debt situation will be better than that of Italy and Greece but household debt levels as a % of disposable incomes are at record highs. Borrowing up to 100% of GNP again, after the end of the Celtic Tiger boom, would be far from a badge of honour. It would be a mark of shame.

The big question for the Irish people is - - will the economic crash prompt reforms in the governance, housing and planning systems, that will set the country on a sustainable course?

The answer is likely to be a negative, but it should be asked.
___________________________________________________


Now, the more jobs we lose the smaller our GDP gets and thus the greater becomes the gap between the desired budget deficit of 3% prescribed by the Stability and Growth Pact and what the actuality is - closer to 10% and rising to between 11% and 13% up to the year 2013 according to Hennigan.

Does anyone have a clue what the EU intends to do about the likes of us? Even if they relaxed their borrowing requirement restrictions by not fining us or whatever they can do, would we still be even able to borrow ? Or should we ?

Hennigan I think reckoned we'd be able to borrow up to 100 billion before we'd run out of credit. Why bother trying to do anything - we're good for another ten years yet at that rate. Something will come up - don't worry, we'll be fine.