Archive for September, 2008

Our political leaders must make the right decisions in the budget or face economic chaos.

At today’s cabinet meeting on the budget, the government must start to face up to the crunch decisions it must make.

ONCE upon a time, in a village, a man showed up and told the villagers that he would buy monkeys at €10 each. The villagers, aware that the area had plenty of monkeys, went to the forest and started hunting them. The man bought hundreds of monkeys at €10 each, and the villagers began to slow their efforts.

Making people’s savings secure is the best way to return confidence to the market.

When ordinary people are flocking to the post office to deposit their savings, we know that we are running out of time. Some Irish banks are in clear and present danger and, as events in the US have shown, when things are moving so quickly, old assumptions no longer hold.

We are now in a bad-debt cycle, where a credit crunch is exposing reckless loans that will never be paid back. Make no mistake, millions of euros in loans will never be honoured.

In spite of an impressive ability to paper over the cracks of an empty economy, Britain’s hot-air boom is sinking – and ours with it.

Years ago, the state of a country’s railways gave you a good idea of the health of a country’s economy. Today, the leading barometer is a country’s airports. You can tell a lot about the business culture of a country by spending time in its main airport.

If the two biggest American mortgage banks can go bust and be bailed out by the US government, could the same happen here? When the US government intervened to save Freddie Mac and Fanny Mae on Monday, it put the world on notice. We are now in a new era where our banks are the single biggest weakness in the economy and the State (meaning the taxpayer) will be expected to save them.

Things are going downhill so rapidly that we need to look at changes day to day, not year to year.

In economic analysis, it is normal to compare year-on-year figures in order to draw some inference about what is happening to the economy. Every day we hear experts saying that new car sales are down 42 per cent since last year, or unemployment is up 47 per cent since last September, or whatever.

David discusses the Irish economy with Brian Lenihan, Minister for Finance, Richard Bruton, Fine Gael spokesman on Finance and Brendan Keenan, group business editor at Independent Newspapers on the RTE Radio 1 program, Saturday View on September 6th 2008.
The program is available listen to from the RTE website here
(opens in a new window and…

Recently, I overheard a conversation about donkeys at a bar in Connemara. Being a committed suburbanite, the price of donkeys is not something I’d know much about, but this conversation was different. It was as enlightening a discussion as I’ve heard in years and it contained a profound economic message. Let me introduce the “donkey indicator of consumption” or “DIC” for short.