Is Lisbon Relevant? Threats to National Independence.

Construction was 14% of the economy in 2007.

There are big strains on the euro (and on member states) resulting from the lack of opportunity for individual states to devalue, and there were big pressures put on our economy resulting from the protracted low interest rate. In India, they did all the right things to try to restrict property overheating but "hot money" from the UK in particular, flowed in to replace local money and people borrowed it when they were refused loans from local banks.

Yes, the Government was reprehensible. But there is no point in ignoring the global factors.

cactus flower wrote:

Construction was 14% of the economy in 2007.

There are big strains on the euro (and on member states) resulting from the lack of opportunity for individual states to devalue, and there were big pressures put on our economy resulting from the protracted low interest rate. In India, they did all the right things to try to restrict property overheating but "hot money" from the UK in particular, flowed in to replace local money and people borrowed it when they were refused loans from local banks.

Yes, the Government was reprehensible. But there is no point in ignoring the global factors.

No point in getting the facts wrong, either:

ibis wrote:

cactus flower wrote:

Construction was 14% of the economy in 2007.

There are big strains on the euro (and on member states) resulting from the lack of opportunity for individual states to devalue, and there were big pressures put on our economy resulting from the protracted low interest rate. In India, they did all the right things to try to restrict property overheating but "hot money" from the UK in particular, flowed in to replace local money and people borrowed it when they were refused loans from local banks.

Yes, the Government was reprehensible. But there is no point in ignoring the global factors.

No point in getting the facts wrong, either:

cactus flower : 14% = 2007

graph : 25% = 2005

Auditor #9 wrote:

ibis wrote:

cactus flower wrote:

Construction was 14% of the economy in 2007.

There are big strains on the euro (and on member states) resulting from the lack of opportunity for individual states to devalue, and there were big pressures put on our economy resulting from the protracted low interest rate. In India, they did all the right things to try to restrict property overheating but "hot money" from the UK in particular, flowed in to replace local money and people borrowed it when they were refused loans from local banks.

Yes, the Government was reprehensible. But there is no point in ignoring the global factors.

No point in getting the facts wrong, either:

cactus flower : 14% = 2007

graph : 25% = 2005

True - I'm probably being unnecessarily antagonistic! However, through most of the boom the construction sector was more like a quarter of the economy than 17%.

The published figures I have looked at go from 15% of GDP in 2005 to 23% in 2007 - so we are both wrong, or right.

http://www.amaresearch.co.uk/Irish_Construction_Market_07s.html

I was thinking of construction employment which was at 14% in 2007. In any event, the 25% of GDP was a peak, in one year ( a year of shocking brinkmanship ).

Personal indebtedness and other spending, not mortgage-related, also soared in the same period.
Ireland was the second biggest purchaser of European commercial property in 2007. Limits on Irish mortgages would not have stopped that. Irish mortgages were actually declining.

cactus flower wrote:

The published figures I have looked at go from 15% of GDP in 2005 to 23% in 2007 - so we are both wrong, or right.

http://www.amaresearch.co.uk/Irish_Construction_Market_07s.html

I was thinking of construction employment which was at 14% in 2007. In any event, the 25% of GDP was a peak, in one year ( a year of shocking brinkmanship ).

Fair enough - weird, though - I have the 23% and the 17% the other way round (23% in 2005 as per the graph)!

cactus flower wrote:

Personal indebtedness and other spending, not mortgage-related, also soared in the same period.
Ireland was the second biggest purchaser of European commercial property in 2007. Limits on Irish mortgages would not have stopped that. Irish mortgages were actually declining.

Prudential limits on lending would have stopped it. A good comparison is the property boom in the 80's in the UK. Bank of England interest rates were between 9% and 14% - yet still they had a property boom, and for the same reason. It had nothing to do with interest rates, and neither did ours - it all has to do with the prudence of lending.

Bank of England Historical Rates

Trichet gave us the honour of his presence today. He came all the way to Dublin to tell us/the rest of the world, that we/the banks weren't going to default.

It was difficult to get mortgage finance in the UK in the 1980s. The housing boom is more to do with displacement of investment from the productive sector. You described it well in an earlier post today.

cactus flower wrote:

Trichet gave us the honour of his presence today. He came all the way to Dublin to tell us/the rest of the world, that we/the banks weren't going to default.

That's probably more useful than one might think.

cactus flower wrote:

It was difficult to get mortgage finance in the UK in the 1980s. The housing boom is more to do with displacement of investment from the productive sector. You described it well in an earlier post today.

In fact, it wasn't particularly difficult to get mortgage finance in the UK in the 80's boom - it was much the same as here, with people being lent huge multiples of their salaries, encouraged and assisted to talk up their salaries, etc etc. Very similar - the banks lent imprudently, and then when things turned sour, reversed their earlier liberality.

Quote :

According to our model, many factors conspired to produce the house price boom of the late 1980s. Initial debt levels were low as were real house prices, giving scope for rises in both. Income growth after the early 1980s recession was strong, as were income growth expectations and these became more important as a result of financial liberalization, though partly offset by bigger real interest rate effects. Wealth to income ratios grew and the spendability of illiquid assets was enhanced by financial liberalization. Financial liberalization also permitted higher gearing levels. Demographic trends were favourable with stronger population growth in the key house buying age group. The supply of houses grew more slowly, with construction of social housing falling to a small fraction of its level in the 1970s. Finally, in 1987-8 interest rates fell and the proposed abolition of property taxes in favour of the Poll Tax gave a further impetus to valuations.

Sound familiar? And all that at interest rates above 9%.

ibis wrote:

cactus flower wrote:

The published figures I have looked at go from 15% of GDP in 2005 to 23% in 2007 - so we are both wrong, or right.

http://www.amaresearch.co.uk/Irish_Construction_Market_07s.html

I was thinking of construction employment which was at 14% in 2007. In any event, the 25% of GDP was a peak, in one year ( a year of shocking brinkmanship ).

Fair enough - weird, though - I have the 23% and the 17% the other way round (23% in 2005 as per the graph)!

cactus flower wrote:

Personal indebtedness and other spending, not mortgage-related, also soared in the same period.
Ireland was the second biggest purchaser of European commercial property in 2007. Limits on Irish mortgages would not have stopped that. Irish mortgages were actually declining.

Prudential limits on lending would have stopped it. A good comparison is the property boom in the 80's in the UK. Bank of England interest rates were between 9% and 14% - yet still they had a property boom, and for the same reason. It had nothing to do with interest rates, and neither did ours - it all has to do with the prudence of lending.

Bank of England Historical Rates

Can't remember at this stage if I have already pointed out that India did all the things, and more, that you suggest, including a ban on lending for "raw land" and that foreign money (much of it UK) came in and took up the demand, so that indebtedness continued to rise just the same. There is potential for a thread here on the globalised land. housing and construction market that would be worth exploring.

The fact that irrespective of the figures, construction at no stage was more than 25% of GDP, leaves the rest of the economy to account for.

Does that 25% include everything that is associate with construction though ?

What about breakfast roll man, breakfast-roll rashers supplier man, breakfast roll pigfeed, pig, truck driver, coffee supplier to b-roll man's coffee needs, what breakfast roll man does with his moolah on a friday night ...

The whole multiplier effect - is that really accounted for in that figure of 25% ????

Or do they take the value of houses every year, add them all up (there were 90,000 houses built one year wasn't there? and that's outside of commercial property 90k houses by €300k value is 27bn. Add the bank interest to double that = 50bn and that's more than quarter our GDP at the height of the BOOM not taking into account the multiplier efect at that. There was little else an economy could be doing when a quarter of it was focused on such an industry.

Anyone feel rampantly free to add correct change reconfigure those side of the envelope figures above thank.)

Ibis - what did you make of Trichet's visit and his speech? There are widely differing interpretations of what he said.

ibis wrote:

cactus flower wrote:

Construction was 14% of the economy in 2007.

There are big strains on the euro (and on member states) resulting from the lack of opportunity for individual states to devalue, and there were big pressures put on our economy resulting from the protracted low interest rate. In India, they did all the right things to try to restrict property overheating but "hot money" from the UK in particular, flowed in to replace local money and people borrowed it when they were refused loans from local banks.

Yes, the Government was reprehensible. But there is no point in ignoring the global factors.

No point in getting the facts wrong, either:

That graph is wrong as the CSO's National Accounts state:

GDP was, at constant market prices, €167.7 billion in 2005.

Construction accounted €14.979 billion.

According to my calculations, that puts construction at 8.9% of the economy that year. Euroconstruct are committing a schoolboy's error in economics, namely that they have failed to distinguish between intermediate goods and final goods.

ibis wrote:

Well, not really. The problem is that unregulated, a credit-based demand-led economy tends to swing mightily, because without regulation, effectively an infinite amount of credit can be created. That's why the libertarians constantly call for a return to the gold standard - although it would actually be meaningless without credit regulation.

I love this post of yours, ibis, it articulates much better than I could of the virtues of a sensible lending regime to be established at the heart of any open market economy as it leads to a regularisation of the growth of the economy and a stabiliser of economic trends. It also acts as a strong repellent to the evil which is inflation.

Quote :

His diagnosis wasn't all that hot either. The swings are an inherent feature of capitalism, but that doesn't mean they there never has been a soft landing.

Yup, capitalism is all about taking two steps forward and then one step back. Marxism and socialism are all about scuttling from side to side like crabs.

Quote :

Yup, capitalism is all about taking two steps forward and then one step back. Marxism and socialism are all about scuttling from side to side like crabs.

The neat side step sounds a lot more sustainable to me than the relentless and destructive back and fore lurches of capiltalism.

Depending on how the next while pans out we could be seeing a massive revision of Capitalism and the greed is good theory. Greed might be good if everyone has full information of the consequences of their greed; if they don't have full information - (hiding of or disguising information has been a contributory factor in the Great Leverage Bubble that we see now de-leveraging and bringing what down the plughole with it?) - if we don't have full information of the consequences or potential consequences of our greed then we could knacker the planet on our way up and ourselves in the process.

Capitalism mightn't be the answer and neither might be socialism - an amalgam of both could be the way.

cactus flower wrote:

Quote :

Yup, capitalism is all about taking two steps forward and then one step back. Marxism and socialism are all about scuttling from side to side like crabs.

The neat side step sounds a lot more sustainable to me than the relentless and destructive back and fore lurches of capiltalism.

Oh, so you're happy with the eternal stagnation which results from socialism? In fact stagnation is being charitable to socialism. As soon as people realise that there actually is no point in getting out of bed every morning then the whole of society and economy steadily rusts up and falls back.

Capitalism provides liberty, novelty, vitality and opportunity.

Ard-Taoiseach wrote:

cactus flower wrote:

Quote :

Yup, capitalism is all about taking two steps forward and then one step back. Marxism and socialism are all about scuttling from side to side like crabs.

The neat side step sounds a lot more sustainable to me than the relentless and destructive back and fore lurches of capiltalism.

Oh, so you're happy with the eternal stagnation which results from socialism? In fact stagnation is being charitable to socialism. As soon as people realise that there actually is no point in getting out of bed every morning then the whole of society and economy steadily rusts up and falls back.

Capitalism provides liberty, novelty, vitality and opportunity.

How much do you have to pay a capitalist to get out of bed then, Ard Taoiseach ?

cactus flower wrote:

Ard-Taoiseach wrote:

cactus flower wrote:

Quote :

Yup, capitalism is all about taking two steps forward and then one step back. Marxism and socialism are all about scuttling from side to side like crabs.

The neat side step sounds a lot more sustainable to me than the relentless and destructive back and fore lurches of capiltalism.

Oh, so you're happy with the eternal stagnation which results from socialism? In fact stagnation is being charitable to socialism. As soon as people realise that there actually is no point in getting out of bed every morning then the whole of society and economy steadily rusts up and falls back.

Capitalism provides liberty, novelty, vitality and opportunity.

How much do you have to pay a capitalist to get out of bed then, Ard Taoiseach ?

What is their market-determined due, with the opportunity to increase this provided they become more efficient and effective at what they do.

It also has to do with more than money. There's also self-esteem and self-achievement issues. People derive a lot of satisfaction and esteem out of working hard and achieving results and winning. Many of the most successful businesspeople are motivated by a lot more than money, they are motivated by success.

The opportunity to do this also drives people to go out and carpe diem.

Ard-Taoiseach wrote:

cactus flower wrote:

Ard-Taoiseach wrote:

cactus flower wrote:

Quote :

Yup, capitalism is all about taking two steps forward and then one step back. Marxism and socialism are all about scuttling from side to side like crabs.

The neat side step sounds a lot more sustainable to me than the relentless and destructive back and fore lurches of capiltalism.

Oh, so you're happy with the eternal stagnation which results from socialism? In fact stagnation is being charitable to socialism. As soon as people realise that there actually is no point in getting out of bed every morning then the whole of society and economy steadily rusts up and falls back.

Capitalism provides liberty, novelty, vitality and opportunity.

How much do you have to pay a capitalist to get out of bed then, Ard Taoiseach ?

What is their market-determined due, with the opportunity to increase this provided they become more efficient and effective at what they do.

It also has to do with more than money. There's also self-esteem and self-achievement issues. People derive a lot of satisfaction and esteem out of working hard and achieving results and winning. Many of the most successful businesspeople are motivated by a lot more than money, they are motivated by success.

The opportunity to do this also drives people to go out and carpe diem.

At least half the world gets up and works without having to have that motivation, if you count women in the home, subsistence farmers and students.
It is a myth that people won't work unless for money.

cactus flower wrote:

At least half the world gets up and works without having to have that motivation, if you count women in the home, subsistence farmers and students.
It is a myth that people won't work unless for money.

Well you obviously didn't read my post since I said in it, "It also has to do with more than money". And anyway, subsistence farmers work to ensure they and their families can survive. Many subsistence farmers work harder when they can actually reap the rewards of their effort in the form of income for them and their family. They will not work beyond subsistence levels if their additional product is snatched away by some collectivisation. Furthermore, the students are getting up to work on getting a degree which leads to more money in the future than they otherwise would receive without one. Many students apply themselves in college are working hard to get firsts and two-ones that'll get them high-paying positions in the future.

This drive to better yourself which is rewarded in the capitalist system allows people to move forward, progress and improve themselves.

cactus flower wrote:

At least half the world gets up and works without having to have that motivation, if you count women in the home, subsistence farmers and students.
It is a myth that people won't work unless for money.

I think you have a rose tinted view of students and women and their motivations .
I also think subsistence farmers, by definition, work for purely selfish motives!

Ard-Taoiseach wrote:

cactus flower wrote:

At least half the world gets up and works without having to have that motivation, if you count women in the home, subsistence farmers and students.
It is a myth that people won't work unless for money.

Well you obviously didn't read my post since I said in it, "It also has to do with more than money". And anyway, subsistence farmers work to ensure they and their families can survive. Many subsistence farmers work harder when they can actually reap the rewards of their effort in the form of income for them and their family. They will not work beyond subsistence levels if their additional product is snatched away by some collectivisation. Furthermore, the students are getting up to work on getting a degree which leads to more money in the future than they otherwise would receive without one. Many students apply themselves in college are working hard to get firsts and two-ones that'll get them high-paying positions in the future.

This drive to better yourself which is rewarded in the capitalist system allows people to move forward, progress and improve themselves.

All very well, but where's the touchy feely in that!

tonys wrote:

Ard-Taoiseach wrote:

cactus flower wrote:

At least half the world gets up and works without having to have that motivation, if you count women in the home, subsistence farmers and students.
It is a myth that people won't work unless for money.

Well you obviously didn't read my post since I said in it, "It also has to do with more than money". And anyway, subsistence farmers work to ensure they and their families can survive. Many subsistence farmers work harder when they can actually reap the rewards of their effort in the form of income for them and their family. They will not work beyond subsistence levels if their additional product is snatched away by some collectivisation. Furthermore, the students are getting up to work on getting a degree which leads to more money in the future than they otherwise would receive without one. Many students apply themselves in college are working hard to get firsts and two-ones that'll get them high-paying positions in the future.

This drive to better yourself which is rewarded in the capitalist system allows people to move forward, progress and improve themselves.

All very well, but where's the touchy feely in that!

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Ard-Taoiseach wrote:

Furthermore, the students are getting up to work on getting a degree which leads to more money in the future than they otherwise would receive without one. Many students apply themselves in college are working hard to get firsts and two-ones that'll get them high-paying positions in the future.

So the motivation for students working is to get high-paying jobs in future...

So presumably, then, all students go into courses which will get you high-paying jobs like law and medicine, and all the courses which are least likely to get you high-paying jobs (like Arts, Philosophy, Social sciences etc.) are empty.

Most studies show that graduates with good marks from the Humanities tend to have particularly high future incomes actually.