Irish Economy and Budget Watch / / /Emergency Budget Announced for April 7th

rockyracoon wrote:

Anything's possible. If Ireland were thrown out, so to speak, it would have to make other countries very wary of joining the Euro, no?

I have to believe it would make the Euro more volatile as the rest of the world watches such a scene unfold. Essentially, the EU would be giving the signal that the German , and to a lesser extent the French, economies were the sole underpinning of the Euros stability and that all other nation's economic activity is essentially a drag on the currency's value. Given that the French seem to be pushing for global sector currency domination of the Euro, this type of event would throw a spanner in the works.

I'm inclined to think that this budget overrun will be used as a stick to beat Lisbon through - but I'm a cynical batard.

Interesting times.

PS. If they throw us out, do we get our gold back?

And our fish?

This is clearly what Ciaran O'Hagan was warning us of last week.

http://www.irishtimes.com/newspaper/finance/2008/1031/1225321583919.html

http://news.sky.com/skynews/Home/Business/Euro-Zone-Recession-Economy-Slumps-Into-Negative-Growth-Says-European-Commission/Article/200811115140663?lpos=Business_Carousel_Region_2&lid=ARTICLE_15140663_Euro-Zone_Recession%3A_Economy_Slumps_Into_Negative_Growth%2C_Says_European_Commission

They wont throw Ireland out of the euro. Currencies depend on there being a confidence in their stability. If you look at the Asian financial crisis of some years ago the whole thing accelerated when countries, who had stated that their currency would be pegged to the dollar, started unpegging it based on short term goals. This radical move in the midst of a financial crisis made matters worse for them because it said to investors that they couldn't rely on any assurance from the Governments in question anymore. The same thing would happen to the euro in that context. It would give the impression of instability, how would an investor know that France and Germany weren't about to pull out and have the whole thing collapse?

Eu Commission warns over deficit

http://www.rte.ie/news/2008/1103/eucommission.html

I still can't see Ireland leaving the Euro. Currency sentiment and politics just doesn't make it a probable proposition at the moment.

If we do leave the Euro, I want some of that lovely gold the ECB is holding for our central bank. I'm not greedy mind you - just a couple of bars will do nicely.

Quote :

Ciaran O'Hagan, Head of Strategy in Paris for Societe Generale, says the Government intends to borrow €19.4 billion on the international capital markets. He says that stands at almost €5,000 for every man, woman and child in Ireland - a massive sum. He says the sum is over two times the limits allowed under the Maastricht Treaty. The new borrowing is going to represent over 40% of the total Irish debt already outstanding. He says he has never seen a euro zone state borrow so much on a per capita basis or intentionally exceed several times the level the Irish state agreed when it signed up to the Maastricht Treaty.

Can't find my original full transcript here. The interview can also be heard on RTE. The Government in my view is being very poorly advised, and is out of its depth. Charlie McCreevy is still apparently campaigning against regulation of Hedge Funds. We have some very bright economists and bright politicians. How come we are getting this all so horribly wrong? Is it simply that FF is prepared to run us into the ground in the hopes that someone else - the EU, the Yankee dollar, the next government - will get the blame?

Zhou_Enlai wrote:

LINK: Will the eurozone survive Ireland’s budget? Sunday, November 02, 2008 By Ciaran O’Hagan

Thanks Zhou.

There is a lot here that is right, but I wouldn't take all my advice from Ciaran O'Hagan. He was giving out stink not so long ago that the ECB should raise its interest rates through the roof. It is now generally thought they were kept too high, too long.

Whether or not he has the solutions, he is certainly spelling out the problem, and for that he should be appreciated.

"Excessive Deficit Procedure" - The Commission kicks this off today or tomorrow and we have six months from that time to ... (?) show that our deficit will not be as bad as forecast now and is reducing. Lenihan now thinks the deficit will be over 8%, a good whack more than the forecast 6.5% by the Irish Government or the 6.8% by the EU Commission and a lot more than the 3% needed to avoid "heavy fines". Examiner

You'd imagine that there will be significant cuts in public spending now over the next two or three months and an emergency budget before the next quarter in 2009.

In October 2007 the Exchequer deficit for the previous year was 3 billion.
This year it is 11 billion.
Yesterday was a good day to bury bad news:

Quote :

Irish Exchequer deficit for year to October was €11 billion
By Finfacts Team
Nov 4, 2008 - 5:09:46 PM

Irish Exchequer Returns for year to October show a deficit of €11 billion - €7 billion higher than October 2007.

The Irish Exchequer Returns for the year to October show a deficit of €11 billion, almost €7 billion higher than it was in October of last year.

Government's tax revenues were €4.3 billion less than had been forecast for the first ten months of the year.

Tax receipts for that period were almost €33.5 billion, over €3 billion less than in the same period in 2007.

Expenditure was €44.5 billion compared with €40.7 billion in the same period last year.

The exchequer deficit was €9.4 billion at the end of September.

VAT was more than €1.6 billion behind target while stamp duty, capital gains tax and corporation tax were all below forecasts.

The November Exchequer Returns will include payments by the self-employed in particular.

I heard Jim Power on the radio this morning. Five of the things he mentioned were:

1. ECB rate likely to fall today.

2. Figures (released today or yesterday?) show the Services Index (?) is at 36. Jim Power said anything below 50 indicates recession so this is significant.

3. AIB profits forecast fell to 120c per share. (This was a good deal lower than analysts predicted. AIB put it down to exposure to Irish property development.)

4. The big increase in the public finances deficit.

5. The substantial increase in the jobless figures. Jim Power said this was far and away the most serious indicator of economic well being. He said that we can expect this figure to increase and labour market conditions to deteriorate.

Zhou_Enlai wrote:

I heard Jim Power on the radio this morning. Five of the things he mentioned were:

1. ECB rate likely to fall today.

2. Figures (released today or yesterday?) show the Services Index (?) is at 36. Jim Power said anything below 50 indicates recession so this is significant.

3. AIB profits forecast fell to 120c per share. (This was a good deal lower than analysts predicted. AIB put it down to exposure to Irish property development.)

4. The big increase in the public finances deficit.

5. The substantial increase in the jobless figures. Jim Power said this was far and away the most serious indicator of economic well being. He said that we can expect this figure to increase and labour market conditions to deteriorate.

Apart from item 1, none of this is good news, but all of it was predictable at least a year ago - and was predicted on P.ie, the Pin, by Irish economists and (gently) by the IMF.
The ISEQ began its steep slide a year ago. There was a 3 billion deficit a year ago. I feel quite bitter, tbh, about the passage of 12 months in which so much could have been done, and wasn't done, to make this so much less bad. There wasn't even the excuse of an election coming. Zhou - can you explain it ? What was the thinking ?

Maybe this isn't the thread for it, but McWilliams has a good article about why voters will choose "Change" in the next election.
http://www.davidmcwilliams.ie/2008/11/06/we-need-our-own-obama-to-be-an-agent-for-change
His story about "Mike" is close to the truth too.
There will be a lot of people in small companies, not related to construction, who did not get caught up in the property madness, but will find themselves out of a job because the shareholders/owners of those small companies gambled on property.

eoinmn wrote:

Maybe this isn't the thread for it, but McWilliams has a good article about why voters will choose "Change" in the next election.
http://www.davidmcwilliams.ie/2008/11/06/we-need-our-own-obama-to-be-an-agent-for-change
His story about "Mike" is close to the truth too.
There will be a lot of people in small companies, not related to construction, who did not get caught up in the property madness, but will find themselves out of a job because the shareholders/owners of those small companies gambled on property.

Personally, although there are some truths in the story about Mike (that sounds to me to be possibly fictitious), I have no time for David McWilliams. The Mike story completely ignores the fact that the Irish problem at this stage is almost entirely home made and not to do with the credit crunch. If the "boss" bought property it was probably tax incentivised and didn't cost him a bean. The problem with this is that we urgently need to get our heads around what we have done wrong in Ireland and to start to I looked at the "related articles" and found this by McWIlliams from a few weeks ago:

Quote :

Many people in Japan expected the government to shoulder the risk of the banks and thus bad banks were offered a lifeline. It took at least half a decade from the peak for the banks to admit the extent of the problems. This was because the Central Bank in Japan sought to protect, at all costs, the banks and the developers who had become close to the political system in the boom. So instead of marking down loans and starting again with a new sense of purpose, Japan experienced a tortuous period of obfuscation and bluffs, which eventually shattered public confidence.

We need to learn the lessons of this. We can’t afford to do what the US is proposing and set up a similar toxic fund to bail out the Irish banks’ property debts. We don’t have the cash.

However, there is something we can do. By giving a full deposit guarantee now, the State could re-energise creditors’ — both big and small — confidence in our banks. In fact, given what is happening all over the world, a comprehensive guarantee would prompt foreigners to lodge their money in Irish banks. As a member of EMU with the lowest State-debt-to-GDP ratio, Ireland would be ideally placed to offer itself as a financial port in this international storm.

I have a horrible suspicion that Government is taking advice from McWilliams. Most of McWilliam's history is in journalism rather than economics. I don't think you would find another economist in Ireland who would agree that the guarantee and the failure to recapitalise the banks is anything other than a reckless disaster.

Mike's story doesn't ring true as I know from first hand experience that credit is getting more expensive for firms, but not yet disappearing. The story also demonises a business person who borrowed to expand - if people expand it is because there is more work and their profits grow too: it is what every business is trying to do. Why is the employer in this case demonised? Is he not just as much a victim of changed circumstances as "Mike"? It sounds like it is the company owner who is going to lose his shirt and home, whereas Mike can walk away with redundancy pay and look around for a new job.

I am so cynical about McWilliams that I am wondering if he has seen the writing on the wall for Fianna Fail and is putting out his feelers to Fine Gael in this article. I hope to goodness that they don't bite.

The core point is not at all off topic though: other governments than the Republicans will fall over the economic crisis. In times of trouble the idea of a charismatic leader who will make everything all right can be appealing, but if the politics are wrong, terribly, terribly dangerous.

cactus flower wrote:

The Mike story completely ignores the fact that the Irish problem at this stage is almost entirely home made and not to do with the credit crunch. If the "boss" bought property it was probably tax incentivised and didn't cost him a bean. The problem with this is that we urgently need to get our heads around what we have done wrong in Ireland and to start to I looked at the "related articles" and found this by McWIlliams from a few weeks ago

CF, it is like we are reading different articles.
I read McWilliams saying that the boss figure overborrowed because he got caught up in the hype of the boom. Mike blames the credit cruch but fails to realise it was the boss's fault.

The Floppy haired economist wrote:

While Mike saw through the hype of excessive lending, his boss did not. The owner of the company borrowed up to the gills, swallowed up competitors and expanded in an ego-driven adventure which saw his company become the biggest player in their — admittedly small — sector. The “growth” of the company was entirely debt-driven, leaving it with a huge borrowing overhang. As long as the banks were happy to keep lending, these huge loans could be serviced. Revenue growth was strong, so all looked kosher. The boss reacted to the increased debt burden on the balance sheets by setting the salesmen ever more ambitious targets and incentivising them with cars, bonuses and holidays.
This time last year when the Irish banks’ share prices started to fall, no one in the company worried because the problems were in the property market, which was a totally different sector. As banks’ share prices fell, their ability to raise money was impaired. But there didn’t look to be a real problem. Mike at this stage was oblivious to the “credit crunch”, which he’d never heard of ; little did he know it would affect his ability to buy presents this Christmas.

cactus flower wrote:

Zhou - can you explain it ? What was the thinking ?

Of course I can Cactus, of course I can .

Well there were certainly errors made. And to be honest, I think the scape-goating and the blame game is necessary because people won't act to prevent these disasters unless they believe they will be hung out to dry when things go wrong.

However, the fact that this has happened in a number of countries, notwithstanding that Ireland the UK and Spain had particularly serious property bubbles, indicates to me that the problems are deeper than the individuals involved. I put it down to the following factors:

1. Irish workers rightly demanded and got increased wages and rights which naturally blunted our competitiveness.

2. Increased competition from large developing nations in an increasingly globalised economy drained jobs and made us less competitive.

3. Other countries copying our corporate tax rates made us less competitive.

4. ECB rates, bank lending practices and benign government policy allowed for a huge expansion in construction providing huge spin off employment and wealth generation. This was the bubble.

5. People felt rich during the bubble, people were employed by the bubble, people wanted the bubble. The population led by the media had no appetite for any attacks on the bubble.

6. The Government knew we were heading for a crash and tried to postpone it. The Government hoped the landing would not be so bad.

7. The crash came at the time of the worst global economic crisis for a century. This was not a happy coincidence for us. As both problems were fuelled by the imperfect behaviour of markets they are not quite a coincidence but they are notnecessarily the Irish government's fault either. In essence, we are screwed. Cuts will be made but it is not possible to get up one morning and fire half the civil servants and cut half the projects and expect the economy and the country to keep functioning. FG and R. Bruton may think that is possible but they are wrong.

8. Small countries no longer have the civil service or regulatory expertise necessary to properly regulate highly complex industries and markets. This is a function of increased complexity, increased globalisation and increased privatisation and outsourcing of expertise to cure historical gross inefficiencies in the public service. Furthermore, in small countries, a regulator cannot go heavy on a bank or top banker without incurring a personal cost in animosity and personal reputation. Unlike in a big country, in Ireland this will always come back to bite you as personal relationships still underpin an historically recently community based society.

9. In democracies, Governments cannot effectively manage civil servants as they are too powerful a political grouping. Hence outsourcing is necessary, hence loss of expertise occurs, hence more power must be given to experts or supra national bodies to save us from ourselves, hence we lose freedom. That process is ongoing and Brown and Sarkozy will soon present their proposals.

cactus flower wrote:

I have a horrible suspicion that Government is taking advice from McWilliams.

I wish they were!
I suspect he was called in late at night when the Guarantee was made. He had an article the next day praising the move, as the *first step*.
He has bashed Brian Lenihan over the last few weeks though for not taking the next steps.
See Bank Guarantee Means Survival of the Weakest and Banks Must Tell The Truth If They Are To Regain Our Tust and Time for Phase 2, Minister and Banking Crisis is a Case for the Untouchables

cactus flower wrote:

Mike's story doesn't ring true as I know from first hand experience that credit is getting more expensive for firms, but not yet disappearing. The story also demonises a business person who borrowed to expand - if people expand it is because there is more work and their profits grow too: it is what every business is trying to do. Why is the employer in this case demonised? Is he not just as much a victim of changed circumstances as "Mike"? It sounds like it is the company owner who is going to lose his shirt and home, whereas Mike can walk away with redundancy pay and look around for a new job.

Fair enough, but if he overborrowed? Over-reached?
Borrowed on the back of property?

cactus flower wrote:

I am so cynical about McWilliams that I am wondering if he has seen the writing on the wall for Fianna Fail and is putting out his feelers to Fine Gael in this article. I hope to goodness that they don't bite.

He'd be a damn sight better than Richard Bruton. Bruton was far too soft on Cowen all these years. At the time McWilliams was shouting from the rooftops about a property crash and being ridiculed for it.
And even now Bruton can't explain how in government he would cope with our growing debt. He makes out that his fuzzy notions of public sector effiency will magically save the day. I don't buy it.
(Richard Bruton rant over)

cactus flower wrote:

The core point is not at all off topic though: other governments than the Republicans will fall over the economic crisis. In times of trouble the idea of a charismatic leader who will make everything all right can be appealing, but if the politics are wrong, terribly, terribly dangerous.

True.
Could Ganley be that leader?

Zhou_Enlai wrote:

Cuts will be made but it is not possible to get up one morning and fire half the civil servants and cut half the projects and expect the economy and the country to keep functioning. FG and R. Bruton may think that is possible but they are wrong.

Resuming Richard Bruton rant...
Exactly.
Bruton is correct to push for public sector reform. And it would reap returns in the long term. But in the short term it achieve nothing.
Because it can't be done in the short term. It can't be done quickly enough.

Zhou_Enlai wrote:

The crash came at the time of the worst global economic crisis for a
century. This was not a happy coincidence for us. As both problems were
fuelled by the imperfect behaviour of markets they are not quite a
coincidence but they are notnecessarily the Irish government's fault
either. In essence, we are screwed.

Sadly, I agree with you again.

eoinmn wrote:

cactus flower wrote:

I have a horrible suspicion that Government is taking advice from McWilliams.

I wish they were!
I suspect he was called in late at night when the Guarantee was made. He had an article the next day praising the move, as the *first step*.
He has bashed Brian Lenihan over the last few weeks though for not taking the next steps.
See Bank Guarantee Means Survival of the Weakest and Banks Must Tell The Truth If They Are To Regain Our Tust and Time for Phase 2, Minister and Banking Crisis is a Case for the Untouchables

cactus flower wrote:

Mike's story doesn't ring true as I know from first hand experience that credit is getting more expensive for firms, but not yet disappearing. The story also demonises a business person who borrowed to expand - if people expand it is because there is more work and their profits grow too: it is what every business is trying to do. Why is the employer in this case demonised? Is he not just as much a victim of changed circumstances as "Mike"? It sounds like it is the company owner who is going to lose his shirt and home, whereas Mike can walk away with redundancy pay and look around for a new job.

Fair enough, but if he overborrowed? Over-reached?
Borrowed on the back of property?

cactus flower wrote:

I am so cynical about McWilliams that I am wondering if he has seen the writing on the wall for Fianna Fail and is putting out his feelers to Fine Gael in this article. I hope to goodness that they don't bite.

He'd be a damn sight better than Richard Bruton. Bruton was far too soft on Cowen all these years. At the time McWilliams was shouting from the rooftops about a property crash and being ridiculed for it.
And even now Bruton can't explain how in government he would cope with our growing debt. He makes out that his fuzzy notions of public sector effiency will magically save the day. I don't buy it.
(Richard Bruton rant over)

cactus flower wrote:

The core point is not at all off topic though: other governments than the Republicans will fall over the economic crisis. In times of trouble the idea of a charismatic leader who will make everything all right can be appealing, but if the politics are wrong, terribly, terribly dangerous.

True.
Could Ganley be that leader?

Quote :

The owner of the company borrowed up to the gills, swallowed up competitors and expanded in an ego-driven adventure which saw his company become the biggest player in their — admittedly small — sector.

This is all heightened terminology but what does it mean? You could phrase it otherwise and make it out to be a success story. If "borrowed up to the gills" i.e. borrowed more than the profits could pay back, then he is a bad businessman and is going to go bust even in a boom.

Quote :

The “growth” of the company was entirely debt-driven, leaving it with a huge borrowing overhang.

This suggests that he did indeed borrow more than the profits of the firm could repay. Nothing to do with booms or slumps.

Quote :

As long as the banks were happy to keep lending, these huge loans could be serviced. Revenue growth was strong, so all looked kosher. The boss reacted to the increased debt burden on the balance sheets by setting the salesmen ever more ambitious targets and incentivising them with cars, bonuses and holidays.

Ah! revenue growth was strong. That means that the business could repay the investment in the business. The investment of couse is also subtantially a right off against tax, rather than a "burden on the balance sheets". He had expanded, we were told in the first paragraph, and become a big player, but also needed to set higher sales targets for each salesman? Perhaps he was in a very competitive area of the market, but for most service providers, prices were going up, not down in the boom. Interest rates were low, so that wasn't the problem.
The incentives were probably needed because of the difficulty of holding on to staff in the boom. Mike, the good guy in this, presumably got his share of them.

Quote :

This time last year when the Irish banks’ share prices started to fall, no one in the company worried because the problems were in the property market, which was a totally different sector. As banks’ share prices fell, their ability to raise money was impaired. But there didn’t look to be a real problem. Mike at this stage was oblivious to the “credit crunch”, which he’d never heard of ; little did he know it would affect his ability to buy presents this Christmas.

Quote :

A few days later, the bank’s HQ sent the message out that all loans were to be reviewed, all debts — where possible — had to be collected and no new lending could be sanctioned without senior management consent. What seemed remote was coming home to roost.

This is pantomime stuff. This simply has not happened in Ireland yet. If loans have been called in, it will have been in cases in which the firm is clearly not able to repay the loan.

Quote :

The debt of Mike’s company, which had been secured against the notional value of all the assets, began to look enormous and dangerous. As income faltered, because the banks were reining in credit everywhere, the company missed a monthly repayment. The bank, afraid to admit to yet another bad loan, told the boss that they would roll over his interest for a few months. The price of this reprieve was that the boss had to raise money.

The banks told the boss that he’d have to find the cash from cost savings otherwise they’d have to act against him, calling in the personal guarantees he’d signed in 2005. This meant the house and the holiday apartment in the Algarve, as well as the numerous houses and apartments he had bought in the boom — all of which had fallen dramatically in value.

The loan was secured against property. Small business people often start up by remortgaging their homes. Is David McWilliams saying people shouldn't start businesses by raising loans on their assets? That would cut out half the jobs in the country.

Quote :

So to save his hide, he started to cut. Hard-working, frugal Mike was in line for the chop. When we spoke yesterday, he was angry with everyone, the banks, the boss, the Government and even the immigrants, who still had jobs. He spoke to me about someone having to “look after Irish people first” and how we couldn’t just continue to support every “Tom, Dick and Harry” who showed up here. Mike was seething about the public servants and teachers who don’t realise that they are protected, and he insisted that next time he’d vote for someone who would “sort it out”.

As "income had faltered" we have to assume that the volume of work had reduced and the profits were down. We are not told why, as it was not a property-related business, that business went down. Exactly how were Mike's wages going to be paid?

Tbh - I don't think the story is real. There is too much that doesn't add up. I think it is a "cautionary tale" hyped up for readability. But what is the point of the story?
Essentially, the guy should not have borrowed to develop the business.

Zhou_Enlai wrote:

cactus flower wrote:

Zhou - can you explain it ? What was the thinking ?

Of course I can Cactus, of course I can .

Well there were certainly errors made. And to be honest, I think the scape-goating and the blame game is necessary because people won't act to prevent these disasters unless they believe they will be hung out to dry when things go wrong.

However, the fact that this has happened in a number of countries, notwithstanding that Ireland the UK and Spain had particularly serious property bubbles, indicates to me that the problems are deeper than the individuals involved. I put it down to the following factors:

1. Irish workers rightly demanded and got increased wages and rights which naturally blunted our competitiveness.

2. Increased competition from large developing nations in an increasingly globalised economy drained jobs and made us less competitive.

3. Other countries copying our corporate tax rates made us less competitive.

4. ECB rates, bank lending practices and benign government policy allowed for a huge expansion in construction providing huge spin off employment and wealth generation. This was the bubble.

5. People felt rich during the bubble, people were employed by the bubble, people wanted the bubble. The population led by the media had no appetite for any attacks on the bubble.

6. The Government knew we were heading for a crash and tried to postpone it. The Government hoped the landing would not be so bad.

7. The crash came at the time of the worst global economic crisis for a century. This was not a happy coincidence for us. As both problems were fuelled by the imperfect behaviour of markets they are not quite a coincidence but they are notnecessarily the Irish government's fault either. In essence, we are screwed. Cuts will be made but it is not possible to get up one morning and fire half the civil servants and cut half the projects and expect the economy and the country to keep functioning. FG and R. Bruton may think that is possible but they are wrong.

8. Small countries no longer have the civil service or regulatory expertise necessary to properly regulate highly complex industries and markets. This is a function of increased complexity, increased globalisation and increased privatisation and outsourcing of expertise to cure historical gross inefficiencies in the public service. Furthermore, in small countries, a regulator cannot go heavy on a bank or top banker without incurring a personal cost in animosity and personal reputation. Unlike in a big country, in Ireland this will always come back to bite you as personal relationships still underpin an historically recently community based society.

9. In democracies, Governments cannot effectively manage civil servants as they are too powerful a political grouping. Hence outsourcing is necessary, hence loss of expertise occurs, hence more power must be given to experts or supra national bodies to save us from ourselves, hence we lose freedom. That process is ongoing and Brown and Sarkozy will soon present their proposals.

Thanks for that answer, Zhou. I'm out of time at the moment to reply, but there is quite a bit in there that I can agree with, and all of it I can understand.

Cheers CF. I had the below typed already.

You don't have to be on the same side in McWilliams story to see that the outcome is accurate.

Mike's boss ("Jimmy") may have been swept along by his bankers who wanted to lend, or his financial advisers who didn't advise him to build up resilience against a substantial downturn. Jimmy also fed into the national culture of mismanagement which focuses on bald and arbitrary targets. Jimmy, unlike his employees and his bankers and their bosses, put his house and all of his personal wealth on the line. If Jimmy made a mistake, I think we can be sure it was a genuine mistake and not as a result of the "moral hazard" that better paid executives succumbed to.

And it is starting to hit all sectors: retail, professional, computing, waste, professional services, restaurants, pubs. Jimmy's business didn't have to be linked to property development to feel the pinch. Once the economy slows it is a vicious circle. Everybody's income drops.

The point of McWilliams article was that something will come to fill the political vaccuum which nature abhors. It could be a pan European affair with many countries moving the same way or individual countries might head in diverse directions. Either way, there is a risk of huge social upheaval. I hope most of the p.ie-type mentalities/neuroses don't rise to the fore when it happens.

Zhou_Enlai wrote:

Cheers CF. I had the below typed already.

You don't have to be on the same side in McWilliams story to see that the outcome is accurate.

Mike's boss ("Jimmy") may have been swept along by his bankers who wanted to lend, or his financial advisers who didn't advise him to build up resilience against a substantial downturn. Jimmy also fed into the national culture of mismanagement which focuses on bald and arbitrary targets. Jimmy, unlike his employees and his bankers and their bosses, put his house and all of his personal wealth on the line. If Jimmy made a mistake, I think we can be sure it was a genuine mistake and not as a result of the "moral hazard" that better paid executives succumbed to.

And it is starting to hit all sectors: retail, professional, computing, waste, professional services, restaurants, pubs. Jimmy's business didn't have to be linked to property development to feel the pinch. Once the economy slows it is a vicious circle. Everybody's income drops.

The point of McWilliams article was that something will come to fill the political vaccuum which nature abhors. It could be a pan European affair with many countries moving the same way or individual countries might head in diverse directions. Either way, there is a risk of huge social upheaval. I hope most of the p.ie-type mentalities/neuroses don't rise to the fore when it happens.

Back on topic, thanks Zhou.

Only bad news I'm afraid - intel's chips

http://www.irishtimes.com/newspaper/finance/2008/0927/1222419966535.html?via=mr

http://www.thepropertypin.com/viewtopic.php?f=19&t=14117

Cactus & Co...
The widely held view is that with BOI and AIB now trading below the price of a Big Mac that Lenihan should now recapitalise the banks.
Actually, listening to Richard Bruton and David McWilliams, the widely held view is that Lenihan should have done it before now.

But should he?

How about recapitalising the economy? Instead of giving wads of cash to Banks that have clearly made a lot of mistakes, why not give the money to profitable indigenous SMEs?

Using the "trickle-up" theory, this money will eventually find its way into the banks.

I suppose Tonys will argue that the HomeChoice scheme attempted to do just that. Except I propose not putting it anywhere near construction. I'm thinking software firms, energy firms, tourism, etc.

Indeed... home builders are obviously our most profitable, and indeed innovative, idigenuous SMEs going forward .

eoinmn wrote:

Cactus & Co...
The widely held view is that with BOI and AIB now trading below the price of a Big Mac that Lenihan should now recapitalise the banks.
Actually, listening to Richard Bruton and David McWilliams, the widely held view is that Lenihan should have done it before now.

But should he?

How about recapitalising the economy? Instead of giving wads of cash to Banks that have clearly made a lot of mistakes, why not give the money to profitable indigenous SMEs?

Using the "trickle-up" theory, this money will eventually find its way into the banks.

I suppose Tonys will argue that the HomeChoice scheme attempted to do just that. Except I propose not putting it anywhere near construction. I'm thinking software firms, energy firms, tourism, etc.

They were saying 20 billion on Pat Kenny - i just heard the start - that is what might be needed to bulk out the bank funds because of the level of bad loans. Twenty friggin billan... Imagine what coul;d be done with that (or imagine where more cuts will be made/have been made because they WILL be recapitalised ) if you didn't recapitalise the banks as you say ... ? What a wild thought ! Recapitalising them is another name for paying the salaries of the local town council, TDs and other public servants because they gambled their salaries on the Lotto ... and lost.

I'd feel we'd be well off to look first at food production and energy so you'd even make money out of your 20 billen if you played it right. Low-interest loans for the renovations of homes - pay on the never never - this would get people spending a bit, create employment and get some Kingspan stock moving. It would be part financed by the likely fall in the import of oil as result but the value of it to the less well off, the elderly and the congenitally cold and mean would be beyond price. The creation of work and the reskilling of young lads recently let off would also be invaluable - there's going to be suicides as a result of poverty and unemployment but let's hope for riots instead - that way someone might get the message.

Get people to buy the Smart meter so people can potentially get free of the ESB grid or partly. A plug-in solar panel bank or small turbine should be the kind of thing we're after - again it'll give wealth to individuals in terms of gadgetry or equipment with a useful function - this is something that holds value when the money goes bad. Constant Capital brendanmcooney calls it.

I'd inititate something similar with water rates and get plumbers employed so people can avoid paying the imminent rates. You could get a grant for some home plumbing system which will use the rain - we don't use nature enough here.

I'd break An Coillte into bits and reshape it and cultivate the culture of using local wood for fuel and building. This would need to be done sustainably of course.



There are already 450 millen euros of Leader grants let out by Eamon O'Cuiv to rural areas, fair play to him - do you think this will be put to good use at all ?

There are a millan and one things that could be done with the money instead of giving it to fat, rich, lexus-driving mcmansion-owning gamblers-going-under-a-different-name. Banks should be made to compete for every penny they get. They've had it easy up to now, let them go under some of them - the money in the economy will get in there eventually.