January 4, 2009

Change? Yes we can and must

Posted in Debt · 365 comments ·
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Now that even last year’s cheerleaders have accepted that the Irish boom was more or less ‘hot air’, inflated by easy credit, there is little point in going over the rights and wrongs of what happened. The case is clear: an economically challenged government, perniciously influenced by the interests of the housing lobby, blew it. The entire Irish episode will be studied internationally in years to come as an example of how not to do things.

Was it a well-orchestrated conspiracy by a few very wealthy people? Was it simply mass plutocratic hysteria or was it appalling governance at every level of the Irish state from the Financial Regulator, the planners and the Department of Finance? Maybe, it was a combination of all three, with a bit of half-assed ideology stitching the fabric together. One other thing is clear: the media -much of them now baying for blood -w ere as culpable as any other influential sector of our society. The media, which should have been critical and alert to the threats to our prosperity, caved in and believed the hype.

We are now seeing the pathetic revisionism of many who are mouthing platitudes such as: ‘‘No one could have foreseen this’’ or ‘‘Everyone knew it couldn’t last’’. Well, hold on, people did foresee it, some people did forecast the crash and warned that it would be so calamitous as to knock the country back a generation, but we were ridiculed at the time -by the political elite, the financial cabal and, more egregiously, by our sycophantic colleagues in the media who are allegedly paid to analyse.

As we head into the new year, is there anything we can do in Ireland to make sure that we are never again beguiled by a portfolio of over-valued council houses, apartments in the Algarve, blacked out Jeeps and self-congratulation?

A good place to start is with the Financial Regulator. Doubtless, the incumbent regulator is on his way out, so what should the new one do to make sure we are not entrapped by property again?

If we examine the real accelerator of the property mania, we can see that the crucial problem was the lending policies of the banks, which stood to gain enormously from property price increases.

The banks allowed their balance sheets to play tricks on them. As property prices rose, the underlying collateral, which underpinned their property lending, became progressively debased. It is this very fragility of collateral that is now hammering them. The fragile collateral, which up until the top of the cycle was driving profits, is now the hazardous waste that is driving up losses.

The crucial mistake made by the banking system was to think that the market price was an accurate reflection of value. During a bubble, this is never the case. Equally in the bust, now that prices are falling over a cliff, the plummeting market forces prices to overshoot on the downside. This price overshoot means that credit will contract further as banks rein in lending. This will cause prices to fall further and ensure that bad loans will be worse than they need to be.

Therefore, we have a systemic problem that is so obviously deleterious to any economic recovery. Are we going to do nothing and become hostage to a flaw in the system or should we make the most obvious change to lending practices that could hasten the recovery and ensure that this boom-bust carry on is consigned to history?

The problem is that picking moments in an economic cycle to gauge the value of collateral either inflates the boom or accelerates the bust. So why pick moments at all? Why not use a moving average of the value of land over a 20-year period to assess the real long-term value of collateral? By using a simple moving average against which to lend, we eliminate the lending madness that leads to a boom/ bust cycle in the first place.

If we had done something like this in Ireland over the past decade, we would never have had our housing boom. Prices would have increased gradually because lending would have increased gradually and ultimately the pace of house price inflation would have been determined by the rate of inflation and developments in the rental market.

If we were to take the long-run average price of houses as collateral as the basis for lending, the property boom would not have happened.

More interestingly, if we instigated such a lending policy now, it would mean that the extent of price falls would be significantly curtailed. As things stand, Irish property prices are likely to fall by another 50 per cent from here, with development land liable to fall by even more.

More worryingly, with the current lending system, these falls will go on for many years, contributing to higher unemployment, emigration and leading to an unprecedented explosion in government debt, with attendant higher taxation. The main reason for this, quite apart from the post-boom adjustment that has to take place in the economy, is that the collateral model that underpins lending and thus monetary policy is not right. The monetary trap has been sprung and Ireland is caught in it.

No matter how low interest rates go, we will still be trapped because deflation is making people postpone their buying decisions as they believe (rightly) that the price of everything, including houses, is falling. Why buy now when you will get the stuff cheaper next month?

Ultimately, deflation corrodes an economy and a society more than inflation ever could, and we in Ireland must avoid this at all costs. At some stage, we need to change things. We might need prices to fall another bit from here to become more competitive, but it’s time to put a stop to this. We need to call a halt.

If the new Financial Regulator has any wit, this idea would be introduced overnight. In fact, it should become part of the global solution to the financial crisis. Unfortunately, in Ireland, the new regulator is likely to be dredged from the same Central Bank/Department of Finance/ IFSR Agene pool, which does not inspire any confidence.

A little bit of hard thinking -rather than the same policies and people who got us into this mess -is what Ireland needs. A 20-year moving average of land prices as the basis for collateral is the way forward. We have no time to waste.


  1. b

    See. This won’t happen because FF and their bum chums in Anglo won’t get to gouge the people this way.

    Lose 95% of your companys value collect a bonus no matter what drivel you come up with and force the Irish people to pay for your madness aided by a compliant Fianna Fail administration. If I were Anglo this would be my ideal scenario.

    The Financial “regulator” job is a paper tiger. It is plain to see the office has no teeth nor will it have any teeth. The market will be allowed to fail and the banks, even the failed ones that are being artificially propped up by the State will kick and punch every last cent out of it.

    We do not have the stomach nor the political will to make the hard and right decisions. Cowan, Coughlan and Lenihan will make furrowed browed professions of seriousness but they have little or no interest in saving anything other than their own arses. This is apparant by the fact that brass necked may politician holds onto her 41 grand as an independent even though she is back in FF.

    We have no leadership. We have nobody to take charge and make the decisions. The 20 year rolling average may be a brilliant idea and the answer to our problems but it hasn’t a hope in hell because it doesn’t benefit the few pigs that eat 90% of the swill in the trough. Pigs. How appropriate.

  2. Furrylugs

    I’m of the opinion now that macroeconomics and the solutions thereof are all well and good. Very good and necessary. Altogether. But while the theory boys and girls are rewriting the model, wherefore do we mere mortals dine??

    • Lorcan

      Perhaps Keynes said it best when he said ” In the long term we are all dead”.

      So I guess in the short to medium term Furrylugs, it is up to us,,,

    • L

      Its partly the mainstream macroeconomics that got us into this mess in the first place. The central bankers and politicians internationally are not smart enough or willing to protect the value of our currencies and preventing the big inflations. Microeconomics has better reputation now. Austrian economics website mises.org is probably worth dining out at. Marginal revolution is more mainstream but not short of ideas. Hope this helps, fellow mortal.

  3. Lorcan

    David > Ultimately, deflation corrodes an economy and a society more than inflation ever could

    At the risk of being a bit of a bore about the risks of deflation, I think it is the most pertinent risk to us in the coming years. The ESRI in their latest report talk about ‘negative inflation’, which is a short term euphemism for deflation. To be clear, in the short term deflation is little more than a price correction, as in the house price index, but in the medium to long term it is the death knell of economic activity.

    So how is deflation possibly the greatest threat to an economic recovery for Ireland?

    Yes, we need a price correction in many areas, but we really, really do not need to see prices to over-correct on the downside just because consumers (i.e. us) become afraid to spend our money because of perceived future downward price pressures.

    I should apologise for bringing monetarist policy to the table, but please indulge me.

    Irving Fischer (in 1912) used this simple equation, derived for John Stuart Mill’s analysis of quantity theory: – MV=PQ. Where M=the money supply and V= the velocity of money. PQ represents the nominal GDP (P is the price level and Q is the amount of goods and services produced).

    The most important factor here is V. As a member (thankfully) of the EMU Ireland has little control over M, so for us V becomes the most important factor in deciding PQ, i.e. our GDP.
    V is the velocity of money. To over-simplify things let’s pretend that the supply of money is €1. V=6 so that €1 is turned over six times in the year making GDP = €6. Fairly simple.

    But in a deflationary environment, consumers do not spend money, knowing that prices will fall in the future so V may fall from six the (for example) three. Thus MV=3. Or a 50% decrease in GDP just because consumers decide to stop spending.

    Now, couple this decrease in GDP with the imminent increase in government borrowing and we start to see how much of a bind we will soon be in if we allow ‘negative inflation’ to become ‘deflation’.

    David’s idea about asset price fixing may well prove useful to the bankers of this isle as an accounting exercise, but I do wonder how much help it would be in a SHTF scenario where mortgage foreclosures become a matter of survival for the institutions concerned.

    There is little point in having assets marked to a 20 year rolling average if it completely fails to reflect the liquidation value of the assets concerned. And any such average would only fall in value the further we move from the statistical peak that was 2007, i.e. we would be locking in long term deflation expectations from the outset of the equation.

    Maybe we should be reading a little bit more of James M. Buchanan and give a little less credence to any love-child of Keynes and Friedman. As Mark Twain once said “ I saw an unusual sight today, a politician with his hands in his own pockets”

    • L

      I wonder about the effect that the house price deflation is having right now and how the official inflation rate doesnt really capture it. Also in the long run, inflation will have to return given the amount of money that is being thrown at the financial problems worldwide.

  4. Damien

    On the upside houses will be cheap as chips. It’ll be like My Left Foot but with plasma screens and indoor toilets.

  5. Hasn’t Ireland legally adopted the IASB standards that mandate accounting of assets (including of the property and land that banks count as collateral to their loans, and of the loans themselves) according to the mark-to-market rule, which means ‘mark to the value on the market AS IT IS NOW, when you’re reporting’ ? (i.e. as Lorcan pointed out, the liquidation price in a fire sale-prone, illiquid market)

    If Ireland breaks away from most other developed countries and, on its own, legislates for its banks and its own government to account for land and property collateral at some long-term moving average of market prices, what value will “the market” (the worldwide money, bond and share investors) put on the accounting reports coming out of Ireland? What faith will investors have anymore with Ireland sovereign (never mind the Irish banks…) if our accounts are unlike anyone else’s?

    David, I’m afraid it’ll be a hard task to get the whole world to change the accounting standards in order to bail out Ireland…
    Maybe the old diplomat Bertie can be called up to try another Good Friday agreement.

  6. The first sign that Ireland has changed will be when people really stop thinking about property. They don’t think about it in most countries the way we do. Some people just cant wait for prices to come down, they’re literally salivating over the thought. Why? It’s certainly not a great investment vehicle and the standard of what is built in Ireland leaves much to be desired. It’s only useful as a place to stay and at that I ain’t going to throw 500,000 at a one bed apartment just off Pearse street.

    We’re still hooked on property and if it can get a massive kick in the nuts now then it might wake enough people up so they can come off the concrete IV. People might start to think of different things instead. Useful things. New hospitals? schools? better politicians? That sort of thing.

  7. Low pass filter eh? Nice. Mind you the filter you propose has quite a few side-lobes in the frequency domain and not outstanding attenuation in the stop-band. Perhaps something a bit more sin(x)/x like?

    Do the ‘dealers’ not thrive on volatility though? Is it not their very lifeblood? I imagine it would be resisted quite strongly, while it is about the best proposal I have seen to damp the oscillations.

  8. the dude

    most people in Ireland can change but the largest party in the state will not change and they are in power 80% of the time
    FF are just a one trick pony
    Don’t listen to what they say, just watch what they do

    i can see no change

  9. Lorcan

    Not a good day for the elitists.

    Waterford-Wedgewood has gone into administration, and poor Sean Dunne is probably insolvent.

    http://www.nytimes.com/2009/01/04/business/worldbusiness/04ireland.html?_r=2&ref=business

    Unfortunately, they’ll probably take us all down with them.

    • Colin

      Pride always comes before a fall, Mr Dunne.

      Excellent article, although it does not mention that 2 miles down the shelbourne road from Moyross is the North Circular Road (where we got our edumacation Lorcan), where houses were valued in the millions. An old house between Ardscoil Ris Secondary School and John F Kennedy Primary School was knocked recently and €5 million was paid for a site of about 2 acres. The development is 80% complete but has stopped and the developer has gone to the wall.

  10. davep

    Irish people saw what happened to the UK economy in the late eighties and stupidly didn’t learn from the British housing boom and bust.The real culprits are the bank staff who threw money @ people encouraging reckless spending and the research staff such as Dan Mc Loughlin who got their forecasts wrong , wrong and wrong again and again.Why do these clownns keep their cushy jobs while the economy shrinks by 7% this year?.How Patrick Neary still remains employed is the eighth wonder of the world!.Nice to see the Politicans still have 3 weeks holiday remaining.Lenihan, Cowen and Coughlan are truly hopeless, following in the footsteps of their undistinguished parents.Cute hoorism is as true today as any time in the past.You can’t beat Asda for value, I strongly recommend it.Why is Ireland still in the Euro.It has been a disaster .

  11. Furrylugs

    “Unfortunately, they’ll probably take us all down with them.”

    There’s a cunning opportunity here for anyone with borrowings and spare cash to renegotiate the T’s & C’s of the loan/mortgage/credit card balance.
    Plead poverty and offer say 20c in the Euro to clear the balance. Since this crunch is going to take 5 years to upturn, any blemish on credit ratings will be gone by then. Notwithstanding the fact that credit rating is a bit of an oxymoron under the present circumstances.

    http://www.nytimes.com/2009/01/03/business/03collect.html?em

  12. John ALLEN

    furrylugs – rte tonight 9.35pm ‘ blood of the irish’ – my book might be ahead of this pack …watch it

    • Colin

      Its not a very imaginitive title.

      Mr Sykes who wrote “Blood of the Isles” a couple of years ago may take them to court.

      As usual, RTE follow – never lead. Plagerism from England is all RTE can come up with.

    • Furrylugs

      John,
      Way ahead. This was dire twaddle we learned in secondary school. Question? How did Rift Valley Negroid evolve into Caucasion / Asiatic?

  13. Deco

    David – you have the courage to call it as it is. I am reminded of the quotation of Albert Einstein { “We can’t solve problems by using the same kind of thinking we used when we created them.” } This should be our starting point.

    And I presume with that in mind, the minds that created the problems should be asked to step down, until they are prepared to provide honest input into fixing it.

    Dude – “the largest party in the state will not change”. Well actually they are facing an electoral meltdown in June. And in fact they have changed many times – everytime they get into government, we have a phenomenon called “the tail wags the dog”. In the mid 90s they were bureacratic left wing. Then they became pro-market right wing when they needed to PDs. Now, they are getting in some tree-hugging, whenever the opportunity presents itself :)))

    Waterford Wedgewood are in serious trouble. We have two cities in Munster who are now in serious trouble. And a dole queue in the centre of Cork City that is now reputed to be the longest in Ireland, on dole day. The real economy is struggling, and is heavily dependent on exports. These firms are facing intense cost competition from Eastern Europe, and Asia. We have to help our industrial sector, because they feed the entire economic system. And this means that we have to do something about our cost base. Nobody in the Dail seems to comprehend this.

    In particular, this is relevant to our Green Party Minister for Energy, who is doing nothing about us having the most expensive ESB in Europe. (apparently on ideological grounds). (though he did not create the problem-I think that was one of Noel Dempsey’s long list of ‘achievements’. Meanwhile the ESB want permission to buy a network of power plants in Spain, at a massive cost. Why don’t they do the country a favour, and return the money to the state, as a once off-dividend, now that the taxpayer is getting it on the chin ? This ESB expansion scheme is getting a bit like the CRH business plan – operate a monopoly at home, overcharging everybody, and then re-invest the money overseas in a corporate empire. We will have ESB executives be flying around the world, corporate class, while factories at home do the numbers and go to the wall, with their former workers waiting months on end, for their dole applications to be processed. Can we have some ‘joined up thinking’ at the cabinet table ??? Is there no Einstein in the government capable of addressing these types of issues, until it is too late-until a consulting report tells them why our factories are closing down ???

    • Colin

      The Government’s only understanding of Joined-Up-Thinking is drawing pictures on a page where there are dots and numbers printed over the dots.

      Wake Up, Smell the Coffee, and Emigrate

  14. Malcolm McClure

    David : Like thriftcriminal, on first reading, I Iiked your idea of an asset volatility damping function. After all, if economics has any claim to be a science at all, then economists should be able to come up with practical, quantitative solutions to economic problems. (Like Lorcan/Mills’ MV=PQ).

    Trouble is that all economic systems are prone to manipulation by the unscrupulous. For example if, as you suggest, average land values over 20 years is the criterion, then do we use land values with planning permission or without, land values before or after the motorway junction was built, land values before or after the nearby supermarket was built, land values before or after the traveller’s site was established?

    The sands of location desirability are always shifting, and no-one knows the actual value of anything to better than +/- 10% at any particular time. Thus any economic parameter than quotes more than ONE significant figure is highly suspect. This is particularly true of percentage rises and falls in value and in failure rates. The media often talk about monthly percentage falls in the market without explaining the calculation basis of the annual percentage fall that they really mean. And they glibly assume that there is a significant difference between a 6% fall and a 14% fall, when in reality they should quote 10% +/- 5%. –Sorry to intrude with a little lesson in Real Arithmetic but some of your acolytes (with whom I include myself) might find it useful.

  15. Barry

    @David – “Why not use a moving average of the value of land over a 20-year period to assess the real long-term value of collateral?”

    Have you lost the plot?? I don’t mean that in cliche sense; the plot has been for at least the last 20 years that land values in Ireland mean nothing, Clause 4 of the ’63 planning act and other clauses of the same act and others, make sure of that. We have just spent countless €m on tribunals to have that re-iterated. County Councillors and brown envelope ‘planning’ is alive and well.

    Yes, a moving average of land value would be fine IF we had commensurate planning of land use. As it is, despite all the noise, we still have the situation where gombeen men such as the Healey -Raes can ride roughshod over any attempt to rationalise planning and with it land values. Other pols use Jackie H-R and others as front men for themselves ‘fixing’ permissions. Of course there are significant and important exceptions, but overall that is the situation.

    No, long term we’ll never get anything as rational as land vaue as a basis for lending/bank activity.

    Next item on the agenda???

    Bye, Barry

  16. Deco

    David – I disagree concerning the inflation vs. deflation argument. Inflation for Ireland would make sense, because it would allow us to cheat on our massive debts. But the ECB will not let it happen. Germany and the Netherlands are both structured against inflation-and they are the paymasters of the EU, and the strength of the Euro.
    Then there is the fact that we are in the Euro, and the UK, our largest trading partner, uses a seperate currency, which has lost one third of it’s value in six months. This leaves us massively exposed on the cost side, in the traded goods and services sector. This is exerts a massive deflationary impact on the Irish economy. And this means jobs are undre threat in the export sector. Which is will have to be the basis of any recovery plan – including Cowen’s “Framework”. The Euro is compelling us to decrease our cost base, or radically improve our productivity. But we do not have the capital resources, to invest in productivity improvement. And the credit problems, makes it impossible to address this issue. Not one member of the cabinet seems to grasp this. And I have not heard anybody on the opposition benches, mention this either. We even had Minister Dempsey increasing public transport fares, because it was ‘necessary in current circumstances’. The government is afraid to do anything. Did anybody think that maybe it might have been possible to cancel the subscription fee of CIE to IBEC as a means to postpone the fares increase ?? Or would that be damaging to the partnership process ?? Or annoying our friends in corporate Ireland ??

    John Allen – I think you keep us all sane.

  17. Philip

    Change is upon us whether FF like it or not. This is a time when new leaders will become apparent.

    Dampening volatility cannot be done by changing rules of valuation. Like a physical system where you can plan for dissapating energy of high frequency components, you also need to have a buffer to cater for external up/ down shocks. We are too globally exposed to isolate our property market and indeed could wind up with nationals not being able to afford to buy using local banks while foreigners cause it to rocket. Equally, we need some means of raising cash and in a future booming world we would like to leverage what we can rather than be artificially bogged down by a local valuation rule. All of this leads us back to the original mess.

    Another means of dampening volatility is to avoid potholes and drive more carefully and eliminate the need for a sophisticated suspension. That means good leadership (driver mentality) and a sustainable approach to investment. By that, I mean moving from a notion of worth in terms of price to one in terms of value. By value, I mean utility. If it saves you energy, adds function, improves food yield etc.

    You also have to change the system from the ground up. A good example of the above is the British vs the French train systems. The French built the TGV from the ground up. Tracks, rolling stock the works. The Brits did not touch the tracks (large costs, politics etc etc) and spend a horrendous amount building veryt sophisticated rolling stock to run on 19th century infrastructure -and it sort of works. Meanwhile, TGV has moved to Belgium, NL etc. You get the drift. You either start tacking this mess we have from the ground up or we can languish for ages grafting on some 21st Century fixit onto an 18th Century status quo driven crock.

    I think the time for a ground up change is upon us and unlike B above, I believe it’s going to happen whether we like it our not. However, in sympathy with B’s view, the historical precedence has shown for such change has an associated unpleasantness about it.

  18. HughK

    Another beast of an article from Michael Lewis in the NYT (4,800 words!):

    http://www.nytimes.com/2009/01/04/opinion/04lewiseinhorn.html?pagewanted=1&ref=opinion

    Think his forthcoming book might be added to the shelf.

  19. Ire_in_Exile

    But will there be change?

    http://www.bloomberg.com/apps/news?pid=20601084&sid=aOsOolYoYQ3U

    While the ordinary citizen stands to lose everything, the authors of the misfortune have long since
    feathered their own nests and will merely retreat for awhile…knowing that financial disaster also means
    salivating potential for opportunities…why most (with money safely boxed offside) cannot wait for the prospects ahead…and they’ll all pounce again as greedy as ever…

    If they are allowed……

  20. Ray

    David I won’t claim this joke but just heard it today, What’s the difference between Iceland and Ireland?… 1 letter and 6 months. I’m afraid your seeking some light at the end of this tunnel is in vain. Unfortunately those in power have grown as fat and as lazy in dealing with issues as their appearances suggest. They are the perfect politicians in the era of budget surplices and allowing themselves to be wined and dined by their Builder banker mates. But those days are over and they haven’t a clue what to do. It’s looks like that this country will have to fail even further before the conditions are ripe for a general election to be called and the present regime to be removed. Maybe then might some new ideas and new blood come to the fore, hopefully before the IMF come-a-knocking .

    Regards,
    Ray

  21. Lorcan

    HughK, thanks for the link. While I understand that David’s idea would not amount to a full suspension of Mark-to-Market accounting, I agree with what Lewis has to say about any dilution of the policy.

    “In its latest push to compel confidence, for instance, the authorities are placing enormous pressure on the Financial Accounting Standards Board to suspend “mark-to-market” accounting. Basically, this means that the banks will not have to account for the actual value of the assets on their books but can claim instead that they are worth whatever they paid for them.

    This will have the double effect of reducing transparency and increasing self-delusion (gorge yourself for months, but refuse to step on a scale, and maybe no one will realize you gained weight). And it will fool no one. When you shout at people “be confident,” you shouldn’t expect them to be anything but terrified.”

    Maybe he’s right, maybe David is, but I always enjoy Mr. Lewis’ ‘poacher-turned-gamekeeper’ insights on the opaque world of Wall St.

  22. Busty

    Sorry lads but die to the economic conditions, potential deflation, corruption etc, the light at the end of the tunnel has been switched off

  23. John ALLEN

    Good News – Lets Declare a 2nd Republic and default on all our Bank Debts / No Bank Nationalisation

    Lets Celebrate and once again believe in ourselves / all the ( borrowed ) electorate wins

    We can re-issue a new Irish Euro @on a below euro parity and sterling and continue manufacturing again and producing

    We can claim chapter 11 under the sovereign clause in a UN Mandate and re-issue new passports to eligible citizens

  24. I think you’re close to a solution but the smoothing or filtering effect you advocate would isolate the ordinary taxpayer in Ireland from the potential good effects of another boom. These include wealth creation, entrepreneurship, improved infrastructure, increased attractiveness for FDI (until the cost of living tipping point is exceeded). Internationally, booms and busts seem inevitable.

    How about creating a more conservative banking system? Enforce (not recommend) a minimum bad-debt provision level for banks (as a percentage of the total loan book) . Empower the regulator to fine the bank and put the money in a “banking contingency fund” if they don’t comply. Make the provision level high, let’s say around 8-10%. This would have nothing to do with tier 1 capital, it’s just for bad debts and should take a low risk format; maintained in cash preferably but also gold, government bonds etc.. After this financial crisis, conservatism may be in vogue, for a while anyway.

    As such a provision level is impossible now, give Irish banks a few years to steadily ramp up to it. As far as I know NIB’s owners, Danske Bank, are already prudently increasing debt provision for their Irish business.

    Secondly, enable all property owners to hand back an unencumbered equitable interest of up to 50% to the bank at the value they paid for it (or the last valuation mutually agreed with bank for purposes such as collateral), with NO penalty. Think of it as an Irish version of chapter 11. Irish banks believed that as long as credit was available they could transfer a few high risk builder loans to a large number of lower risk mortgages. They spread risk in a cynical way onto ordinary families who statistically default less often. Outside of a recession anyway! Make the balance sheets of Irish banks reflect a worst case scenario. Promote this to the rest of the world as a sign of a new maturity in Irish banking.

    Banks will still lend under these tighter circumstances. It’s one of their primary sources of income.

  25. barry

    @Hugh K and Lewis – “The S.E.C. now promises modest new measures to contain the damage that the rating agencies can do – measures that fail to address the central problem: that the raters are paid by the issuers.”

    David says we need change, is this the sort of change we need? more of the poacher/gamekeeper rubbish?

    BTW unlike your colleague on the other thread, I don’t crave quoting, but I do like rational discussion. Unfortunately there are so many things going on and so many topics needing discussion it gets difficult. However, I am surprised at the silence regarding land values and future measurements. It seems to me pretty fundamental to our future that the financial markets be based on something real, even if they are divided up to allow the gamblers/shysters to work away on their own nonsenses….

    Way back there was the gold standard, of glorious memory, ok, it didn’t work all that well but, have we something else we can use??

    I notice Mr Brown, the saviour of the world, said ‘when the financial system is sorted’ yesterday, has he any idea how or when? I also note that Senator Dan Boyle says ‘we need the financial system, that’s why we bail it out and not Waterford’ – oh yea, we need the financial system? not the one we presently have surely!

    Finally, can we arrange for Michael Lewis to be the new commisar of the financial markets worldwide??

    Bye, Barry

  26. the Dude

    Deco the next government will be formed by FF and labour and there will be no change. I look at both parties and I don’t see anyone who understands how wealth is created

    FF think we can all get rich buying and selling houses to each other

    Labour think we can all work for the state

    It would be nice to think that FG are better but I’m not so sure

    Far too many people think that our problems will only last until the end of the year, what this ided is based on I don’t know
    the growth of the last few years was all based on the building industry and very little else, now the building game is finished (thank god) why do people think we can just turn on an export based recovery, our costs are now far too high
    Dell will soon leave, I wonder who will be next

  27. Paul

    I was in a bar at Christmas, I suggested that we maybe looking at eight years of stagnation, I was laughed out of it by some builders. They suggested, things will start to pickup at the end of 2009. There are those, who think that 12 months of sitting around doing nothing will sort out all our problems.

    • “There are those, who think that 12 months of sitting around doing nothing will sort out all our problems.”

      Isn’t that how builders earned so much money in the first place.

      I can definitely see a falling housing market for at least 4 years and then after that there will be no return to the “glory days”. A return to building about 45,000 houses/apartments a year will be the max.

      I always go by about how many people that do the leaving cert every year and divide that by 2 and that is a rough guide to the amount of houses that is needed in a single year. I consider it the amount of “new families” the state is producing. New families need new houses.

  28. Ed

    Interfering with price in areas other than food smacks of political failure – the soviets tried it and we all know what happened to them. The runaway property market could have been dampened at any time if the politicians had wanted to, but that would’ve clashed with the interests of their main supporters – hence, the shambles we’re now left with. The electrical analogy is pertinent – when you want to kill oscillations, you use an appropriate resistance value to achieve critical damping and it works every time.

  29. Furrylugs

    One thing that could be done with thousands of acres of otherwise relatively worthless land is the creation of serviced national parks to attract eco-tourism. Some employment would be created, the land would become viable and a benefit in many ways.
    But once the park was created, no further development could be allowed by statute to stave off Bacon Roll Man trying to capitalise on the developmental opportunity.

    We’ll have to micro manage small enterprises for ourselves while taking advantage of tax breaks and tax status. Co-operative, community and charitable movements can bring great local benefit. And they cut out the Silverback out for a quick buck.

    21 year plans don’t suit politicians or big business but suit communities anxious to generate legacy.

  30. b

    Lads, all the pontificating in the world won’t get us away from the simple fact that for FF, FG Labour and the various business owners and “social” partners self preservation is job #1. The rest of us can just pay up or go sing.

    From my experience of the chancers who are um… er. “in charge” they haven’t a bulls notion what to do.

    Sitting down and talking in hushed, serious tones on the News at One yesterday may give the appearance of being in charge but Biffo hasn’t a notion.

    What I think will happen is like at the last election people will YET AGAIN vote FF because they are afraid and “better the devil you know”. This is the same reason they voted them in the last time. Hoping they would keep the gravy train going for one more stop. And next time people will vote FF again so they can pull another rabbit out of a hat.

    All the clever plans in the world may be valid but they are utterly useless in Ireland when we are wedded to the politics of the parish pump and the cattle trader. Fianna Fail was founded by Dev who was profoundly anti-intellectual and you won’t find that modern (in the loosest possible terms) FF tolerates clever clogs. No matter how good or how pertinant clever clogs is.

    I am cynical and I am jaded but we keep being fooled by the same eejits over and over. Fool me once shame on you, fool me twice shame on me. We have been fooled hundreds of times. Shame on us!

  31. Deco

    Philip – what concerns me is that with our institutional framework, we don’t get the TGV, we get Luas. [ over schedule, over budget, several thousand defects, and still not an effective solution to the traffic problem ] The French take their public projects very seriously. The Brits acknowledge that they don’t take them seriously enough. And we rarely take these infrastructure projects seriously enough. Though it should be recognised that the road system is getting safer every year-so this much we are getting right.

    Did Dan Boyle really make those (stupid) comments concerning Waterford Crystal ? He should resign.

    We don’t need the current banking system strictly speaking. We need an efficient mechanism to ensure the optimum allocation of capital to where it will generate the best rate of return, both to our economy(mostly private) and our society(mostly public). What really matters is the human capital that makes the decisions. And with rampant nepotism, and amateurism rampant, our human capital base in this area is not adequate. Bailing out bad bankers/public administrators is like giving an alcoholic more whisky.

    The Irish banking system has successfully allocated capital in a ridiculous, horrenduous manner since 2000. The senior management deserve to be replaced, by people who understand capitalism, not ‘one of the chaps’ from Portmarnock Golf Club. There are rules for Capitalism, and taxpayer bailouts for the big cheeses should not be part of the rules. Dan Boyle believes that these rules apply to Waterford Crystal-but not to the banks. Well, maybe we need bank managers who are getting standard social welfare cheques instead of hefty bonuses ?? Maybe we should hire a bunch of Singaporeans or Israelis, over to run our banks for the next five years, and put Goggin and pals on a FAS scheme painting a bridge ?

    The state has been equally reckless. Money was thrown at everything. Before we start having Continental or East Asian style infrastructure spends, we should clean out the cronies who are letting the ordinary people down. We need to fix the human capital base.

    The Ancient Romans had a rule, concerning bridge construction – when the casing was being removed, the person in charge of the project, would stand underneath. It was a sure way of making sure that it was sturdy enough for the citizens who would use it. Patrick Neary take note !!! Ireland is stuck with financial headaches, and a human capital base which is structured in such a way that the problems are not going to get fixed.

    • I heard about Dan Boyle’s comments. They disgust me. In the interests of full disclosure I’m from Waterford. Generally, we feel that up until we got some new roads in the past few years we’ve received SFA investment from the government. We’ve a well developed (Waterford-sized) chip on our shoulders and feel that our tax money is sent by train and truck to Galway and Limerick. The history of the city is a gradual diminishing of relative wealth and power during the history of the Republic. I keep seeing closing down sale signs and hearing the specials’ “ghost town” in my ears. Believe it or not but we were better under English rule for various reasons. Indeed the idea of declaring independence has been suggested a few times :) Now that I got all that off my chest…

      Seriously though, we’ve lost a lot of jobs recently with no replacements and simply can’t afford to lose the Crystal jobs. We need them more than we need our developers propped up by a nationalised Anglo. It’s millions taken out of a local economy that is already in turmoil. Equally, Waterford has been a major Irish brand in its current guise for around 50 years. The company and its workers have contributed fortunes of tax revenue. Perhaps they hoped that one day if an Irish government was required to assist the company they would. It was brought up in the senate. A guarantee of a 39 million euro loan was what was required, nothing more.
      http://historical-debates.oireachtas.ie/S/0189/S.0189.200805210003.html

      Yet, our friends in leinster house had no problem in lighting a bonfire under 1.5 billion Euro they handed to Anglo Irish Piggy Bank.

      It seems to me that the country is run BY those from the leafier parts of Dublin FOR the benefit of the leafier parts of Dublin. The only way for anyone else to get a look in is to have a marginal constituency, a key independent or a senior minister.

      • Furrylugs

        And you’ve not mentioned the strategic importance of Waterford as a port.

        • We try to bitch about one topic at a time down here. It doesn’t always work as we’re so miserable. The importance as a port has been diminished by the Rosslare Europort. It’s still doing good business (2.6 million tonnes in 2007) and I accept that the construction of the new terminal at Bellview has taken away much of the activity from the harbour in the city which might influence the perception of us hyper sensitive waterford types. Read more here.
          http://www.portofwaterford.com/general.aspx

          I’ve always thought the place would make a great tax haven as it’s placed in the sunny south east, the riviera of Ireland. ;-)

        • Malcolm McClure

          Shane: I feel Waterford’s angst at the recent turn of events but put its depressed state down to lack of civic vision there. Your leaders have known for years that a motorway was coming. You have a little harbour, but you missed the boat. There was an opportunity to build a deep-water port on the estuary that could have served all Ireland, much better than Dublin port, which is a costly bottleneck, as ‘b’ pointed out several moons ago.
          With Sir Tony’s contacts, it would have been a simple matter to raise the cash a few years back. Not so easy any more.

        • As far as I know Bellview is a deep water port in the estuary. Actually it’s in Kilkenny but let’s not split hairs. As for knowing for years there’s a motorway coming. Yes, we asked for it for years and for years we didn’t receive it. We’ve asked for a university since 1969? Will we have lacked foresight if we get one in 2069 and find there are infrastructural issues that need addressing? While there’s no shortage of utter muppets running the place, I don’t think it’s fair to single Waterford out as a place that lacked vision. Without the money that was invested on UCG, UL and the shannon zone the “west” would be a complete mess. An economically barren wasteland that has been subsidised by money taken from Waterford during more prosperous times and given their as part of a regional development programme based more on a feelings of guilt in those leafy dublin suburbs than economic common sense.

          Also, Sir Tone has put money into Waterford Crystal but I can’t think of anything else in the region he’s invested in. So I don’t think it’s simply a case of poor leadership in the area.

        • Malcolm McClure

          Shane: I was thinking of somewhere like off Creadan Head where your local council could apply for a European grant to get Arup or Brown & Root to make a feasibility study for a proper deep water Europort. Presumably you jest about Bellview. Calling Rosslare a Europort is over the top aggrandisement. It is merely a little ferry port that has some ferrys going to the continent.
          Southern Ireland needs modern port facilities linked to a motorway with plenty of adjacent space for efficient container distribution and industry.
          The Cork/ Cobh area is choked up and hazardous for big container vessels, tankers etc.
          If Sir Tone can’t be bothered, I am sure a proper plan will attract the required investment from elsewhere.
          Waterford shouldn’t b***h about what others are getting but develop some big ideas of its own.
          Wedgwood-Waterford has been staving off the receivers since 2003, so the final chop should come as no surprise.
          The movie ‘Kinky Boots’ shows what can be done to revitalize a moribund industry when somebody applies a bit of imagination

        • Furrylugs

          The Cork harbour Authority expansion plan was blocked by D4 late last year. Strike a line from Arklow to Foynes and don’t expect much support below it.

        • b

          As far as FF are concerned Waterford Port should close and they do everything in their power to try and close it. The port can take the ships but what are we going to do send the paperwork by semaphore or pigeon to somewhere that has broadband? The bullshit that has gone on about that port is unbelievable.

          We spent FIVE years trying to get broadband and were told there was no demand and it was too far and the water was too wet. All kinds of bullshit excuses to prevent anything happening. Then we witnessed then the building of the giant palace for the Port of Waterford. To do what exactly? Look at the empty docks?

          There is a train line there but only ONE train per week goes. There are 10 ships a week. One train is shag all use. Coca Cola wanted to run a train to Ballina but Iarnrod Eireann told them to get lost. Coke even offered to buy the train for them. Useless shower of wasters refused.

          Waterford could take traffic from Dublin saving the ships time and fuel. Nobody really gives a flying monkeys about it and no amount of shouting will help. We did that and got nowhere. Dublin Port is mired in FF politics and is vastly underused and inefficent. We can get two ships in and out of Waterford in the time it takes them to get one in and out of Dublin.

          Waterfords cranes are designed to move boxes from the ship straight onto trains or trucks in one movement. This is the only port in Ireland that can do this. Pity there are no trains to put the boxes on. The motorway is coming but its too bloody late now!

          Hit the tide at the wrong time in Dublin and you are goosed. Sitting there like a pot plant waiting for the tide to lift you up. And if you miss your berth you are screwed too. There are acres of land in Dublin Port under utilised and in this day and age who the hell has a 9-5 port like most of Dublin is?

          HELLO anyone at home?

          Give me strength. These losers have been told time and time and time again for YEARS and they only start bleeting when Dell pulls out. My dog could have told them that. But no.

          All that matters in Ireland politically is FF staying in power. And this is faciltiated by Beverley Flynn who knows damn well if she walks the Government might fall. So they have to keep her sweet. All politics in Ireland is held to ransom by some munter from Mayo. A munter on the take.

        • Malcolm McClure

          b: Waterford has two FF TDs. Cullen and Kenneally. if they are truly there to represent the good people of Waterford, they must have twice the leverage of Bev in present circumstances. Whilst they are still on holiday it is an opportunity for Waterford people to bend their ears in their constituency offices.

          Belview is a joke as far as big ships are concerned despite the liner image linked by Shane above. Its like a Pool of London quayside compared with Tilbury. Navigating in and out round those bends in a large ship must be a nightmare.
          Taken with the other white elephant palace you mentioned, Waterford obviously lacks intelligent planners and should hire international consultant engineers to get it right next time.
          My suggestion of a deepwater port at Creadan Point could accommodate all but the very biggest vessels.

        • b

          To further deflate Shane remember that Waterford Port has been and is now in Co. Kilkenny. Once you cross the bridge you are in Kilkenny never mind what the blow ins protest. The train station is in Kilkenny too!

          @ Malcom McLure. Belview can take vessels up to 190m with a draft of 9m. It is the only port that can move cargo directly to rail and the only port with a reliable cold chain. How the hell can you come up with the river being too bendy as an excuse to call it a joke! Cop on man. Foynes is even smaller and has one swing crane and shag all infrastructure for boxes.

          Rosslare is too small to have a container port.

          Oh and Hong Kong has a load of bends too and the sea is as rough as a bears arse too. The ships have no problem there. Even the little ones with 8-12 boxes on them.

          Its not the size of the ship that matters it is what you do with the freight when it comes off and how fast you can turn the vessel around. Hours and days are wasted in Dublin arsing around waiting for the tide, berths, cranes etc. You name it it takes forever. Dublin is the biggest market in Ireland but millions of gallons of bunker are wasted going up and down the Irish sea when the ships could dock in Waterford stick the boxes on the train and send them to Dublin overnight. Like in a real country.

          Ryanair showed us with planes and for an island nation surrounded by sea right beside the two biggest trading partners the US and Europe we could have been a contender. Irish Shipping was allowed to go under and we gave away our fishing. We want the sea to go away. We look inwards not outwards. This is obvious. This is not new. This is decades old and this is structural and this shows the basic incompetence that Ireland repeatedly shows to the outside world.

          As for the local FF. Give me strength.

        • Deco

          B – I am disgusted at CIE not facilitating Coca Cola. Coca Cola bring employment to a region where there was never enough. Typical CIE stupidity. This is a company that has two main train stations in Dublin City – and to get from one train station to the next – you need to take a bus, a taxi or a luas. There is a train track from Connolly to Heuston station. But CIE reckon that it should not be used. It can be used. But basically, they will not use it.

          The top three layers of management in CIE should be sacked for incompetence. And we should ensure Coca Cola get their train from Ballina to Waterford, before they are forced to do the same as others.

          Best solution-set up an action committee in Waterford – contact Coca Cola – and the IDA – and then activize until CIE get their act together.

          CIE – Irish Rail freight is a complete disaster. It needs urgent institutional reform !!!

  32. McGoo

    Instead of the “20-year average” for propety valuations, which as several commects have pointed out is open to interpretation and abuse, why not just keep it simple.
    Just make it illegal to give a residental mortgage for more than 3 times a single persons income (as declared to the tax office)?
    That would:
    1. Get house prices down fast, instead of dragging the inevitable pain out over many years.
    2. Keep them down, so helping restore Irelands competitiveness, and prevent future housing bubbles.

    Of course, this will never happen, because the establishement doesn’t want to stop boom/bust economics. Why would they? After all, they get rich during the booms, and use taxpayers money to smooth their way during the busts. By privitising profits and socialising losses, boom/bust is a one-way bet, and much easier than earning real wealth.

  33. Furrylugs

    Whilst we search for the “Way”, I always thought this is where it all went wrong. We forsoke Hammurabis Code for a liquorice allsorts of geo-political foll-de-dolls.

    http://www.wsu.edu/~dee/MESO/CODE.HTM

    No messin’ with that lad.

    • Lorcan

      fantastic Furry. Although the amount of death penalties that would have to be handed out would get a whole new meaning to the term ‘Moral Harard’. Mortal Hazard perhaps?

      • Furrylugs

        But look at the jump in construction for eco friendly power generation crematoria??

        Under the present circumstances, I particularly like this one;

        “109
        If conspirators meet in the house of a tavern-keeper, and these conspirators are not captured and delivered to the court, the tavern-keeper shall be put to death.”

        So if I was the guv’nor above in Drumcondra, I’d be mighty concerned.

  34. Ire_in_Exile

    Begad Furrylugs that link will veritably explode the mystic John ALLEN like a chameleon on plaid…

    But @b had certainly better be aware of the following in point 2.

    ” If any one bring an accusation against a man, and the accused go to the river and leap into the river, if he sink in the river his accuser shall take possession of his house. But if the river prove that the accused is not guilty, and he escape unhurt, then he who had brought the accusation shall be put to death, while he who leaped into the river shall take possession of the house that had belonged to his accuser. ”

    Thanks again for adding a touch of colour to the forum which is currently in danger of getting grave..and thus keeping us all in our senses… ;-)

    • Furrylugs

      And grave it should be Ire. I was just comparing the 2009 estimates published last year from the Dept of Phallance against the Fat Controllers splutterings today about public finances.

      I didn’t know we had a secret service? And they have a multi million budget. I suppose they must be the best since none has ever been caught??

  35. L

    This moving average idea seems to be worth a look at. Some people are a bit too dispondent about the political situation. If more people come to support this idea then it will become an election issue and the politicians will be forced to follow. That said I am not sure what form such a reform would take. The same is true of Davids other idea in using Anglo as a dumping ground for bad debts (saturdays independent). The latter seems a better idea at first glance.

    The ‘moving average’ should ideally allow for fluctuations in volume because volumes can change radically from year to year. Therefore a weight should apply to each of the twenty years. Applying such a method however could be prone to manipulation by special interests because the big question is how the weight should be determined.

    Another thing is that all amounts must be indexed to inflation. However the inflation rate is really misleading at the moment because it only includes the interest part of mortgage repayments and excludes new goods. The most recent household budget survey (2004/05) is a bit of an improvement in that it includes many of the new goods. Obviously we dont want to include mortgage repayments on old houses, just those recently purchased.

    Some people are really concerned about Deflation. This will probably be a bigger issue in asset markets than for consumer goods. However many prices for durables will go down and retailers will go bust.

    We could do worse than read a bit of economics before Fisher and even Adam Smith. Our own Richard Cantillon in the early 1700s explained in length the complexity of the relationship between the money supply and inflation. The increase in the money supply does not instantly increase the inflation because some people choose to hold on to the money. I think thats where Lorcan was going with V in his equation. There is loads of money being injected into the system at the moment which should lead to higher inflation further down the road.

    Price fixing seems to be a really bad idea. This has been a failed policy used by Hoover, Nixon and other administraions. It will lead to shortages of demand if set too high or shortages of supply if set too low.

    Furrlylugs is concerned that “the theory boys and girls” will not move quickly enough. The truth is that there are great clashes within economics about what solutions are best. Much of the theory is out there but is not part of the mainstream. One could do worse than read a little bit of public choice economics as Lorcan suggested (Buchanan) or austrian economics (von mises, rothbard) etc. However poverty is a bigger problem now and that requires a different train of thought.

    We are probably too dependent on the superstar economists such as Keynes, Friedman etc. Time for a change indeed!

  36. the Dude

    McGoo
    i think that would be the best solution but i would also add that the buyer must also have to pay a 10% deposit and 2.5 times salary would be better
    at least then wages would have to rise before house prices, but this would then put an end to super profits for banks and builders, remember for these vampires, profits are never enough, it has to be super profits and F everyone else and who cares about the long term damage

    If we were to move to that type of system how many people would then be in negative equity. so for that reason i don’t see it happening

  37. b

    All I am saying is that they have control of the bus but none of them know how to drive it nor where it is going.

    We are in deep shit.

  38. Furrylugs

    Since physical property is being mooted as the new “Standard” in lieu of Gold or some other tripe from America, then , given that a domestic House/Home is the basic unit of measurement, it follows that building control standards take on a new meaning. The purity of precious metals is assayed and so should houses.
    We have built tens of thousands “houses” here which,ad infinitum, fail energy efficiency, impaired mobility and durability requirements.
    Given The Dudes or McGoos lending criteria, it also follows that the houses should be built with a defined life expectancy from materials of known durability to reduce the financial risk and by people who are suitably licenced to build.

    If the construction/property industry is to set the standard, we need far more appropriate regulation than is present today.
    No point getting back to conservative sensible lending practices if the recipients are a shower of unlicenced chancers.

  39. Tim

    Malcolm, Wow! “For example if, as you suggest, average land values over 20 years is the criterion, then do we use land values with planning permission or without, land values before or after the motorway junction was built, land values before or after the nearby supermarket was built, land values before or after the traveller’s site was established?”

    That is one of the best questions I have seen.

    Jeez, I HOPE that someone with the power to get things done is reading this forum!

    Thank you all for taking me to school.

    • Malcolm McClure

      Tim: I agree it would be nice, but many sensible people may be put off by the flavour of some contributions here. I just hope that ‘powers that be’ don’t infiltrate a fifth columnist onto the site…..if they haven’t already?

      • Furrylugs

        It’s an open forum Malcolm and we all speak as we find. I’ve had to revisit some postings I’ve made and cringe. I would suggest that the vast majority take their time to furnish comment as sensible people. It is a critical forum and open to disagreement but I can’t recall Party Political elements voicing opposition.
        It is the essence of democracy that we are still allowed to speak with open mind. The economic situation is dire but I’m not being hauled off to Spike yet.

        • Malcolm McClure

          Furrylugs: generally I appreciate you contributions and have gained an excellent insight to the reality of the situation from all contributors here. The advantage of having an Irish mind is being able to deal deftly with reality on several levels at once, unlike the Dutch, always on the lookout for a dyke to stick their finger in.

          However. the disadvantage of our mindset is that we are not always explicit about whether we are treating reality with sarcasm, irony, humour or mysticism. This is widely depreciated by sensible people as our ‘lovable Blarney’. After all, it is only very recently when a widely accepted way to augment the HSE was to pin a rag above a holy well or make a pilgrimage to Lourdes. –I gather Medugorje is becoming increasingly popular because it is much cheaper than a full body scan.

          I am concerned that sensible but casual visitors could be confused by the ambiguities in some contributions and decide this blog is a waste of time. Yet some bloggers here seem to have real inside knowledge so it would be of general interest if more anonymous whistle-blowers arrived to blow fresh air through a moribund system.

        • Furrylugs

          Agreed. Self deprecation can be confusing. It would be interesting to know who browses but cannot comment.

        • Malcolm McClure

          Furrylugs: deprecate means deplore; depreciate means disparage or belittle. Sensible people wouldn’t waste breath deploring Blarney, they would just disparage that mode of address as inappropriate in a business context.
          The blogosphere is alive with sensible but curious Lurkers who avoid commitment to a blog until they are sure that its participants have constructive intent and are not just ad hominem moaners.

        • Furrylugs

          I had a cursory look back over the last dozen or so blogs Malcolm. There has ,on occasion, been a tendency to drift once the initial flurry of relevant comments have been made.
          Ergo, point taken and business relevance to be the new watchword.

  40. Tim

    Paul, they may be correct. A friend of mine who is a builder sat on two sites for the last eight months because, he told me, there was no point in developing it. (That was six months ago).

    Two weeks ago, he opened the sites and started building houses that will take until May 2010 to bring to market.

    He is confident.

    We may not have to live on rice and ketchup for too long, after all.

  41. ”…………. the entire Irish episode will be studied internationally in years to come”
    NO! the worlds/west’s episode, the promise of a better life through capitalism know as market capitalism will be studied: simply profit over people.
    It could never work and never will unless you want to remove the human/social element, and you just can’t. It is like trying to remove Hamas (the Palestinians) out of the Israeli equation.

    ”Was it a well-orchestrated conspiracy?”
    Again, just the promotion of profit first which is like spreading blood on shark infested waters, it creates a concentration without foundation leading to frenzy.

    Yes people did foresee it and knew it could happen but who can hold back the sharks when they’re in the feeding ground?
    You can stop the blood but then they might turn on the you/boats.
    You have got to keep the blood coming now and it makes no difference whose blood it is, the government will take it where it can be taken: from ”the people who got us into this mess.”

    The game is up: when I was just a little boy I asked my mother what would I be?
    She said: ”you’ll be Sean Dunne and not Brother O’Connor living in Limerick among depravity.

    • Ire_in_Exile

      Correct Paddy-

      Now webmaster…where is that little green button I can press to highlight the more useful or informative comments?
      It will certainly help us all navigate along ?

    • Colin

      Paddy,

      Capitalism triumphed over Socialism already. Do you remember a wall coming down in a certain city in Germany in 1989? I don’t recall anyone risking their life to get over to the East from the West prior to its destruction. Move to Cuba if you feel you can’t live in a Capitalist World.

    • Deco

      A bit like the way they have case studies in urban planning in continental univestities entitled “Dublin – How NOT to plan a city”. Interestingly, they used to use Birmingham UK (Which had the M1 bottlenecks alongside it, caused by the location of shopping centres – like our M50 issue). But in the last ten years, thanks to the Corpo, Pee Flynn, Ray Burke, Liam Lawlor, CJH etc.. Dublin advanced to the top of the list of badly planned cities. And all the criticism resulted in Birmingham making an effort to fix their problems.

      I wonder, now that we are stuck for a few bob, maybe Dublin City Council might be able to claim royalties for all the lectures titled “Dublin – how NOT to plan a city” ??? (alright, that is not possible :(

  42. Alan

    In terms of banks freeing up loans I have heard, anecdotally, of two instances where colleagues / friends have been approved (AIB as it happens) for non secured personal loans in the past few days. Neither of them work in anything related to construction in fairness, but this does show banks are at some level back in the business of personal lending. Not sure if the noose has been loosened on business customers but that’s another story.

    On an unrelated point, waterford wedgewood have effectively signalled they will be gone come Q2 this year and word is bausch and lombe are due to make a similar announcement about their waterford site imminently. If this is the case and if Dell do indeed decide to shut Limerick that will leave two of the top 5 population centres on this island truly in the sh1tter. The likes of Ballybeg local authority estate will be akin to O’Malley Park within a year. Indeed, look at Greece today where police are now being shot at with machine guns… that protest started as an expression of frustration at 25% unemployment amongst 20-30 year olds.

    Based on the RTE news tonight where only Martin Cullen appeared on behalf of the government and where the best he could come up with was a vague statement that the government will meet later this week, we really do seem to be utterly rudderless and waiting for some white knight to ride in and save us. Perhaps a vote of no confidence in Messr Cowen and co might have the desired effect in bringing this inept shower down and precipitate an election.

    If nothing else, it might show Cooper-Flynn what she is entitled to.

  43. McGoo

    Dude,

    >If we were to move to that type of system how many people would then be in negative equity

    The same number who will be there in a few years time anyway. The economic fundamentals always win in the end. I just want to speed things up.

    Tim,

    >Two weeks ago, he opened the sites and started building houses that will take until May 2010 to bring to market. He is confident.

    He’s probably read a bit of standard economics research that says “on average, housing busts last 4 years, and house prices fall 40% in real terms”. Which is true, but what we have now not an average housing bust, because:

    1. In an average housing boom, house prices reach 5-6 times average wages. Ireland went to about 12, I think.

    2. Most housing booms do not result in very much oversupply of housing. Ireland is estimated to have 200,000 houses sitting empty.

    3. Most housing busts cause rents to rise (noone wants to buy when prices are falling). But in Ireland rents are falling as people leave the country, making the housing oversupply situation even worse.

    4. Most housing busts happen at times of high (or at least average) inflation, so a 40% fall in real terms ends up being a 30% nomial price fall. But with deflation looming, a 40% fall in real terms could become a 50% nominal price fall, or more.

    5. During most housing busts, the banks are still ready, willing and able to lend (perhaps a bit more carefully than during the bust), so there is still some turnover in the housing market. But with the current banking crisis, people couldn’t buy houses now even if they wanted to.

    6. During most housing busts, the government takes at least token measures to boost the rest of the economy. But we have sharp tax rises and public spending cuts.

    7. No housing bust has ever before had a global economic slowdown dragging it down. And down.

  44. Tim

    Paddy, that is interesting. I agree with you that “profit over people” is what caused this.

    What will get us out?

  45. Tim

    McGoo, thanks. I will discuss your ideas with him and revert.

  46. John Allen 1

    My namesake is uncaracteristically silent on this topic – does this mean universal tolerance?

  47. The Dude

    McGoo
    I agree we are still a long long way to the bottom but the point I am making is that the goverment, the banks, the builders, and home owners all want house prices to remain artificially high, because they all bought into the hype

    just look at the government trying to prop up prices with their first time buyers scam, and this is the problem none of the people who created the problems we face realise the part they played in the problem, they all believe because the credit crunch started in the US that it i just an external black swan and if it never happened house prices would have gone one up and only up for ever and a day.

    We could all get rich selling houses to each other and then renting them out to the poles

    just read the sean dunne interview in the NY times he still thinks he will make a profit out of his stupid tower
    he has learned nothing, and he is not the only one
    until all the one trick ponys give up on the house price scams there will be no change
    It will take a long time

  48. waxylugs

    I wonder if we if we are taking full cognizance of the medio-economic structures (as defined in the paleo-autocratic sense) in all this? These are matters which we ignore at our peril, and while I must confess that I sometimes am cuplable in this regard myself, it is in a rather taken-aback mode that one is compelled to take two parsangs backwards before moving slightly to one side.

    • Lorcan

      “Medio-economic structures” ? Perhaps you refer to education.

      “Paleo-autocratic” ? Ancient Ruler? Cross reference with Furrylugs above perhaps?

      “two parsangs backwards before moving slightly to one side” A parasang is approx. 9,000 paces, so having retreated by such a distance might not the slight move to one side be viewed as redundant?

      I am sorry though, I seem to have missed your point.

      To paraphrase Spock in Star Trek ‘It’s English, Jim, but not as we know it…’

  49. JKG

    Parsangs forsooth!!- This cannot be right, but would make perfect sence if “parasangs”

  50. Stilton Friedman

    I agree with every word that the original ( and best) John Allen has written – however I am unable to go along with his comments on astrology in previous posts as I was born under the sign of Taurus and we Taurans never believe in astrology.

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