Could Obama be remembered as the man who presided over the greatest hyperinflation the world has ever see? At the moment, with unemployment rising, companies going to the wall and prices falling everywhere, the mention of hyperinflation seems ridiculous, that is until you examine what the new president wants to do.
Obama plans to spend a phenomenal amount of money to re-boot the US economy. How does he plan to finance this spending? Where does he think he’ll get the money? What will the US’s latest splurge do to the trust the world has placed, up to now, in the dollar and American assets in general?
Rarely has one man assumed such a burden. It seems that an indebted, beleaguered America is looking to him to come up with the greatest escape act since Harry Houdini. The brilliance of Obama is that he seems unfazed. Watching him yesterday, he has obviously steeled himself for this moment and, as the ‘Financial Times’ stated, “the world needs Obama to succeed”.
However, the hope and expectation shouldn’t blind us to the difficulties. We hope for the best, but must prepare for the worse in order to temper some of today’s effervescence.
Everything in Obama’s programme for government will be predicated on his ability to get the economy going again. At the root of America’s problem, like Ireland’s, is bad housekeeping. The US lost the ability to balance their books and, in an effort to prolong the good times, it borrowed from wherever it could get cash and spent most of the subsequent overdraft on instant gratification. Its banks and its people overextended themselves, fuelled by the hi-octane combination of other people’s money and rapidly rising house prices. In the end, some of its banks went bust, overburdened by an array of financial waste. Now the US must clear up this mess.
Up to now, the Americans have tried throwing as much money as they can at the banks. However, a pattern has emerged over the past few quarters. Every time the government feels it has done enough for a bank by injecting new capital, the bad debts tarnish this new capital and the banks are back at square one. The Nobel prize winner Paul Krugman referred to this approach recently as Voodoo banking, where the state, in an effort to avoid nationalisation, keeps throwing taxpayers’ money at banks, which is essentially a gift to shareholders and, according to Mr Krugman, probably the only thing keeping bank share prices from collapsing totally.
Ben Bernanke is continuing with this policy. Having failed to stop the unravelling of the economy with a monumental interest rate cutting process from 6pc to 1pc, the panicking Bernanke is pushing US rates down to zero. The big problem is that for the US, zero is not low enough. By this I mean that the US needs negative real interest rates (the interest rate minus the inflation rate); in essence, it needs to pay people to borrow. The only way it can do this is to allow inflation to creep up, while keeping interest rates close to zero. This financial conundrum is made all the more tricky by the added fact that Obama is going to preside over a budget deficit of $1 trillion in his first year, using borrowed money.
Who is going to lend the US the money? And at what price, knowing the US will need negative interest rates? Additionally, if so much of the cash is geared at saving insolvent banks, is the US not throwing good money after bad?
Politically, these questions are predicated on the central assumption that the US intends to pay the cash back. What if the US has forgotten that borrowed cash has to be repaid? What does it do next and, more significantly, what becomes of the lenders in such a world? These might seem like outlandish contentions. Surely the US is not considering giving its lenders the two fingers?
Think about it. What country can lend this type of cash to the US? China is the only country in the world with its $1.9tn in foreign reserves. But the Chinese already own $700bn of US treasury bills. It may just be reaching US debt fatigue. Indeed, in November, ‘China Business News’ reported on this dilemma, saying, “the US must pay back its debts, and to do that, it needs to live a more frugal life, instead of others lending it money to maintain its over-consumption”.
If China begins to question the wisdom of putting all its foreign-exchange eggs in one basket, what will Obama do? If the Chinese say no, the market for US debt will collapse. The dollar will also fall like a stone and the US will begin to experience hyperinflation. With no-one to buy its debt, no appetite to reduce public spending and, most crucially, no memory of a time when the world’s financial markets ever rejected the seduction of the dollar, the US will simply start printing paper dollars and covering them with paper IOUs, flooding the market with worthless financial confetti.
All this implies that Obama could quite conceivably preside over a period of hyperinflation. Today this seems impossible but he has inherited such a mess from George Bush and his political need to get the economy going, if he is to deliver on some of his immense promise, might just prove too much. Don’t take my word for it, just look at what is happening to the price of gold — the only real hedge against hyperinflation.
Economic theory would suggest that after a period of hyperinflation, where all old US debts are wiped out and lenders to the America robbed, the dollar revalues as America reindustrialises under the green job agenda talked about by Obama.
History could well look on the end of the first decade as not just a momentous era which produced the first black president, but as a period of dramatic economic change. The debt-fuelled boom of the Noughties, leading to a rapid deflation and failed banking bailouts at the end of the decade, giving way to hyperinflation, which ultimately cleaned up the US’s balance sheet. Sounds fanciful? But then again, so, too, did a black president not so long ago.
sorry please delete this
In defense of sam, i don’t think property is such a bad idea provided its affordable. Just as Irish people got hysterical as the property market went up so they are doing so on the way down. I agree that renting is a good idea at this time but renting is always a good idea if you don’t want to buy. The trick is however if you do intend on buying when should you buy and this is timing and luck come into play. If for arguments sake you see a property you like, thats affordable (and your mortgage is properly stress-tested) your job is secure (if any job is?) then its not a bad idea to buy. Prices will come down alright more but nobody will know when it bottoms out. The market will upturn (at some stage) without people realising it. Any decision such as this should be weighed up long and hard but ultimately obtaining shelter is a primary need, the problem we had in Ireland was that people paid prices they actually couldn’t afford from day one. Prices in Ireland may not be far off coming into some realistic sphere. I also see that local authorities are lauching a rent for three years with option to buy scheme as well which ain’t a bad idea.
I think Sam must have been taking the p*ss.
Rob, when did renting and obtaining shelter start to be incompatable? Do the elements size up your abode and figure out whether you own it or not, then decide to wreak havoc or pass on to the next rented property?
I think what we are forgetting here is that it is not the first time we have been in this position. 1880/90′s, 1920′s, late 40′s and all of the 50′s, late 70′s and all of the 80′s. There is only one little difference, there is no bleed valve, yet. Where the economy elsewhere can absorb. But in all of the cases above the collapse followed a massive economic burst. With property being driven to extreme levels. And at no time in the past did prices re-jig themselves to a realistic mark. Except once, in the 1990′s, when we copped on and realised that attempting to peg ourselves to economies hundreds of times bigger was just plain foolish. And while prices then remained pegged to those in central London, they started to get a bit better. Now we are back in the situation where everything is pitched at twice or three times the price in the most expensive areas. Who the hell decided that Ballsbridge deserved a pricing structure of the Avenue Foch. And that Dalkey, Howth and scrappy little spot centered on Kilmacanogue only slightly less expensive. For the love of duck, rents per sq ft on Grafton St were higher than those in central NY. But now because all are leveraged up to the wazzou it seems they have to stay there.
A very few years ago, winning the Lotto, just the normal weekly one, not the rollover, would have bought you ten 4-bed semi’s. And while to-day you might you would get one more than last year, you would not get within an Asses roar of ten.
This is a very good though lengthy read especially for the non-economists.
http://www.foreignaffairs.org/20090101faessay88101-p0/roger-c-altman/the-great-crash-2008.html
I said some time ago that if all the bail-out money was coming from the Middle and Far East it followed that there would be a seismic shift in the balance of power insofar as Islamic or Sino Re-Funding of the World Order would prevent colonial wars being underwritten.
Altman also identifies that the cosy G8 is finished and the club will have to expand to G20 by default. This would give a way forward by reviving the Doha round but would afford emerging economies, as opposed to emerging Nations, much more influence at the table.
Bitter pill for the Neo-Cons to swallow but the times they are a-changin.
Sam,
1. Jumping on the bandwagon:
I rent. I pay 800 euro a month. The house I live in dropped about 50,000 euro in value last year. That’s nearly 1000 euro A WEEK. I’m glad I don’t own it. I’ll buy when prices stop falling.
2. Anyway, much more interesting is the idea of the eurozone splitting:
Obviously, if we were told about this plan well in advance, everyone holding euros in the PIGIS countries would stick them under the mattress, or rush to deposit them in Germany, rather than have them devalued.
Equally obviously, the bankers and politicians would know that, and would try to prevent it.
What do you think they would do to try and prevent it, and how could we defeat their efforts?
(I suppose the obvious answer is to move our savings to a well-run non-euro non-eu country. Suggestions? Switzerland?)
Would a split in the euro actually require a different physical banknote (s)?
higher authority reading :
Moon Wobble is a period of time that gives you the impetus to spend more time with your friends .The emotions that arise will actually be very positive during this Moon Wobble especially if they are directed in a conscious way that takes into consideration the needs and wants of the other person in addition to their own.
So why is this relevant ? Well it is because the date of commencement of the gravity to give rise to this was 20 th Jan 2009 and that was the date of inaugeration of Obama and the date of the actual moon wobble is 29th Jan 2009 so we are now in interesting moments .
It would seem to indicate a new positive phase beginning in line with the Cosmic energies .Ok so what can we do now before the 29th ? We can hope for now at least . On a lighter note we could reflect on Brendan Boyers ( showband fame ) and his Huckle Buck ……wriggle like a snake and wobble like a duck …..
AndrewG, Furrylugs, thanks for those posts above that made me laugh – laughing with you by the way. I suppose Andrew the Ka Poom Du Wu code will be the next big thing. I think a dophin just flew over my head! ;-)
Some very good posts/responses above, articles in their own right. Deco, Lorcan, Philip and others.
Yes, its productivity (real output, not monetary GDP “output”) which is the key to any economy and indeed the human race. That underpins everything and thank C we are smart and good at it.
Although it should be noted that we just aint smart enough in the collective as a species to manage it in a planned and fair way based on effort put in. There are lazy and privileged people which have far more material wealth than others who are poorer, indeed very poor, and working much much harder to make a crust, a real crust.
Think of the 1000′s of children that each day scavenge in the rubbish dumps in Sao Paulo, Mexico or in China. Or the teenagers that work for 1 USD a day in Pakistan putting on buttons on clothes which are sold in dept stores in Europe and the US with markups of 98%. Fairtade? Not likely. We may not see such things on the 9 o clock news or on PrimeTime, out of sight is out of mind, but they are PART of our global system. And there is insufficient ‘guilt’ or compassion collectively to change the system. The egyptians had slaves, not much has changed in the millenia apart from the removal of shackles and chains.
> the banking system is “effectively insolvent”
Not only are many of the banks “insolvent”, so are many other things. Debt is paid off in the future by money (=work), or indeed printed. But inflation doesnt actually produce anything, it just changes the numbers, not the effort. So, not only are banks in debt, but so is the consumer, so are governments, so are businesses, so are local governments, etc. You get the picture. The EARTH is in debt. Yes, us 6.8 billion people have placed “work”/debt on the next billions of people that are being produced. At some stage, some generation XYZ is gonna say – no more inequal debt ‘slavery’. It cant go on forever and it wont. But that’s for a future date.
But debt is all about trust, even though the global debt house of cards system may be broken by design, it does not mean it will crumble IF trust remains in it and IF people continue to participate in it as before. So, globally the system got ahead of itself in terms of credit. These credit lines resulted in asset price increases (as more money was chasing the same amount of goods/assets) so everything from Oil, property, commodities, shares, government tax takes, public sector salaries, etc, etc, etc, went up and up and up, in real terms. But the globe cannot live on credit. So now, the credit wave has crashed (and we in little old Ireland have a bad case of it as we exacerbated it) and one solution is to give it more credit.
But I think most can see how this is merely a ‘hair of the dog’ type of solution. Too much credit is what created the many problems (which I remnd people arer only STARTING) around the world in the first place.
I had to laugh (at) when I heard at the Dail Committee yesterday the Regulator stating that in hindsight they would have done things differently with tighter credit controls and tougher lending criteria in the housing market. This is ludicrous. Its not hindsight, its capability and foresight. That was their responsibility and they failed so they let the banks, like kids in a sweet shop (or more metaphorically correct, like alcholics in an unmanned bar) had a free-for-all and binged binged binged.
People cant seriously be now surprised that bankers actually wanted to make money?
MK1
le franc fait son retour pour doper le commerce jusqu’a la fin du mois Jan 2009 – il sera possible du payer ses achats en francs den parfumerie de galerie Auchan
The Franc is not coming back and saying Auchan will take it is like saying SuperValu takes Yen.
Comment by Sam, January 22nd, 2009 at 1:05 am
Also, it is just dumb to pay someone else’s mortgage (by renting for €1,200 to 1,500 per month) when you can buy an an apartment or house at these levels and pay down the mortgage on it at low long term interest rates for much less. If the short planks ever get to figure it out, you can expect to see the Agents start advertising on that basis soon.
Sam,
Now is the time not to be anchored down by property, now is the time to be able to move around, and negotiate your rent, now is a great time to be a tenant. You need to get away from this mentality that a person “must own property”, it is this mentality that has the country in the state that it is in. And if you think things are bad now, they are set to get a whole lot worse. If you are anchored down by massive mortgages, you have no wriggle room during the downturn.
You do realise that there are thousands of people, who were talked into taking on massive debt on properties that they will never, ever get their money back on. And many were talked into it, because two banks tried to talk me into getting huge mortgages, I turned them down, and bought a place I could afford. Then, in 2006, I decided it was time to sell it again, and get out of property, as the numbers just did not add up, you could see something was going to give.
I mean, even in 2003/04 I used to read the property sections, and laugh at the amount of money people were shelling out for houses, yet I am no expert economist, it was just a gut instinct that something was not right. I said to a guy at work, that these houses will be worth half that price some day, he smirked and said “no no, you are wrong, they will be triple that price in a few years”, then again this guy also bought shares in Banks and in Elan.
I have friends who are in serious, serious trouble, they own nine or ten properties, and the banks let them have loans to buy these places. All i can say is, I think I will go with my gut instinct in future. The thing that struck me most about the last ten years, was, that if you questioned what was going on, if you stood up and acted differently to the pack, you were singled out for ridicule. People do not like to be singled out, so they run with the pack, and then get burned. Our mentality needs to change, if someone is asking questions, take time to listen to what they are saying, or maybe ask some questions of your own, it could save you a fortune, and your health.
Paul – your quotation { The thing that struck me most about the last ten years, was, that if you questioned what was going on, if you stood up and acted differently to the pack, you were singled out for ridicule. People do not like to be singled out, so they run with the pack,… } is 100% correct.
Thanks, for expressing that succintly !! There is a lot to be said for thinking outside the box. The three most viable companies on the Irish stock exchange today are Kerry Foods, RyanAir, and Tullow Oil. And the think outside the box, and represent an Ireland that is clearly not mainstream. That is the way we will rebuild our economy. By throwing the “Lemming Mentality” (obedient to the vested interests) into the past – and by becomming a society that allows original thought. And by being more direct about our business.
Michael O’Leary is totally correct when he says he does not want anything to do with the establishment method of management as practiced in large Irish companies, and the Irish state sector. It is all about inefficiency, coverups, cronyism, fat cat salaries, mega-perks, waste and nepotism.
Two pieces of good news on the Industrial Jobs front. The two largest industrial plants in the East of Ireland will stay in production.
1) Intel announced closure of two plants in Asia. But Leixlip is still in production.
2) Unions and Management in Tara Mines in Navan have agreed a cost cutting plan. Workers are taking deflation, for the sake of security.
Let’s take heart from this, and keep holding our industrial sector together. This means that we have to do apply serious tightening down to the protected private sector of the economy (the Economic Rent Infrastructure), the oligopies, price fixers and self regulating industries.
We need to get the cost of living down, for the sake of the newly unemployed, and the workers who are now taking pay cuts !!! Time to implement competition policy on all the little cosy arrangements that are causing Ireland to be an overly expensive place to survive !!!!
wow our cds is 250 thats expensive greek speaking of course ….on the uncanny date 29-01-2009 the date the moon wobbles i will sit in dun aengus to feel the tetronic energy trow away the umbilical chord of the euro into the ocean
Mr Obama. Air strike on Dun Aengus please. Save us from the wittering of Dee Noblesse.
A bit of economic humour :
Brian Cowan was visiting a primary school and he visited one of the classes. They were in the middle of a discussion related to words and their meanings. The teacher asked Mr. Cowan if he would like to lead the discussion on the word ‘tragedy’.
So the illustrious leader asked the class for an example of a ‘tragedy’.
A little boy stood up and offered: ‘If my best friend, who lives on a farm, is playing in the field & a tractor runs over him and kills him, that would be a ‘tragedy.’
No, said Brian – that would be an accident.’
A little girl raised her hand: ‘If a school bus carrying fifty children drove over a cliff, killing everyone inside, that would be a tragedy’.
I’m afraid not, explained Brian – that’s what we would call great loss.
The room went silent. No other children volunteered. Brian searched the room. ‘Isn’t there someone here who can give me an example of a tragedy?’
Finally, at the back of the room, little Johnny raised his hand… In a quiet voice he said: ‘If A plane carrying you and Mr.Lenihan was struck by a ‘friendly fire’ missile & blown to smithereens, that would be a tragedy.’
‘Fantastic!’ exclaimed Brian. ‘That’s right. And can you tell me why that would be tragedy?’
‘Well,’ says little Johnny ‘it has to be a tragedy, because it certainly wouldn’t be a great loss and it probably wouldn’t be a f*cking accident either!’
When that gets converted to text it’ll go worldwide. Excellent
Furrylugs, it arrived to me as text in November – it’s out there.
A1 :)))
Very concerned re forthcoming Moon Wobble — Have ordered heavy metal soled shoes to adhere more easily to Earth surface courtesy of magnetic field- Thanks for the warning John.
Nb Take extra care on toilet during Moon Wobble to avoid high surge tidal washback!.
This discussion is ,to say the least, off track, even if there is an attempt at hyperquantitive
easing there is no mechanism whereby it can be translated and exported into the general economic population. Without such a mechanism (and the window is narrowing every day) artificially generated inflation cannot succeed.
Expound please Prince??
I think he means that, while “printing” loadsa money is easy, actually getting it circulating in the economy is surprising hard in a deflationary environment. Whoever gets their hands on it hoards it instead of spending it.
Thanks McGoo. just like the banks soaking up all the intervention and stifling credit supply?
Deco, I totally agree – we need to reduce costs
But, how do you put the pressure on toll roads and other stealth taxes? These are the guys that make more money as you produce more. These are the guys who account for a higher portion of your margin as volume builds.
Maybe, reducing costs is not merely a matter of taking pay cuts. We need to look at the silly expensive ways in which we live our daily lives. It is in the structure of our society -Ireland, England in particular that we have so many dwellings being financed by jobs located further and further from people’s homes as people’s careers develop or as jobs move. Rental gives flexibility. And combined with broadband and allotment planning, we could give people a greener, healthier and less costly but very high grade lifestyle.
Remember, these are non economist questions… I am sorry if they sound stupid, but I dont know the answers..
1. What does it mean to have reserve currency and what qualities does it take to have reverse currency status. Why also do people say the euro is not a reserve currency?
2. Can someone explain why Greece might have to leave the euro. What would be the trigger point? What exactly would make them leave and why? What would be the actual reason they would ‘have to’ leave..
3. If a country like Greece left the euro, what would happen to the Greece what would it do. Would it create a new currency for itself? Why suddenly would this improve the situation for Greece..?
4. Why do people say the US interest rates are so low because of the willing foreigners to finance the debt? How does willing foreigners who finance government debt in the US make interest rates which banks lend to the pubic cheaper?
5. How much international trade between non US countries is conducted in dollars? Why is this especially when the US is not involved in the transaction?
6. Why are commodities always priced in dollars especially when the US is not involved in the trade?
The answer to question 1,5,6, is something called the Bretton-Woods agreement.
There used to be something called the ‘gold standard’ where most world currencies were exchangable for a fixed amount of gold. Money was a bearer instrument, you could bring your currency to the central bank and exchange it for a fixed amount of gold.
After WWII the world economy was in a mess, the only country that had any money to kick-start the recovery was the US. (the UK was practically bankrupt) So at Bretton-Woods most countries agreed to ‘peg’ (fix an exchange rate with) their currencies to the $. The $ remained backed by gold.
So in international trade all prices became listed in $.
Bretton-Woods collapsed in the early 1970s. The final nail in the coffin was Charles deGaulle exchanging French held $ for gold in the US, causing Nixon to close the ‘gold window’, although the agreement had been under severe pressure before that.
Bretton-Woods also set up the world bank and the international monetary fund (IMF), initially to oversee the Marshall Plan in Europe, but more recently to be an international lender to basket-case economies.
Basically world trade was conducted in $ between 1945 and 1973 because of Bretton-woods. Since then it has been due to habit, but also because people still have confidence in the $. It is still seen as the most assured money store of wealth in the world.
The Euro isn’t a reserve currency because it is the currency of a committee of states, and is still a very new currency. Reserve currency status has more to do with geo-politics than economics. Sterling was the world reserve currency before WWI, but the geo-political landscape changed. There is nothing to say it won’t change again..
Greece may have to leave the Euro (unlikely) because the monetary control that it has ceeded to Europe means it does not have the weapons that a normal sovereign country would have over its currency. ie it can’t devalue or set its own interest rates.
If it did leave it would have to issue a new currency, and try to raise debt independantly. But, any currency it creates would quickly devalue. Greece would very quickly become bankrupt because much of its current debt is in €. It would be forced to default within six months.
As a defaulter nation, it would take longer for it to stage an economic recovery, at least while it is still inside the Euro it can still afford its debt.
If you’re looking for a country that is likely to leave the Euro, look to Italy.
Are we looking at the possibility of another Greco-Roman-Moorish axis to the south and a Franco-Teutonic Empire to the North? It’s all starting to look vaguely familiar.
No such thing as a Greco-Roman-Moorish axis now or ever. Greco-Roman is a bit of a stretch but the Moors will always be the enemy of everyone in Europe. Read Huntingdon’s “clash of civilisations” to find out why. Read Mark Steyn to find out how islamic empires collapsed once their populations flipped to become muslim majority and christian minority.
If you are calling Spain & Portugal Moorish, then you are caught in an 8th century timewarp. If you are calling the people in Spain and Portugal Moorish now, not only are you wrong on ethnicity grounds, you are delivering an insult to them in their eyes. The very last of the moorish population left Spain in 16th century. Very few stayed because they would have had to become christians.
Thanks for the history lesson. What I meant was if Southern Europe is cut off to suit Lisbon 2 and the Euro, it may look South to allegiances with Algerian and Libyan Oil. I didn’t mention Spain or Portugal though they too have trading relations with North Africa.
The point being Euroland was announced with a big fanfare and had no plan b when the economic might of America dumped it’s dodgy risk over here via greedy banks. So America shagged Europe and Europe won’t stand together unless an individual country marries up to the Franco-Teutonic vision.
Some Union.
Italy could probably survive outside the Euro. The problem is that the Italian state would simply have to go on cold turkey in order for Italy to survive outside the Euro. And the beneficiaries of the patronage system that is the Italian state will not allow that to happen.
But Spain is in serious serious trouble. Spain has made it’s entire macroeconomy dependent on adventurous banking establishments, tourism for North European ‘chavs’ and property. All three sectors are in far more trouble than anybody in the Spanish establishment would even remotely admit. The only part of Spain that is free of this is Catalonia, the Basque Country and Galicia….which have various degrees of separatist sentiment and resent subsidising the central government in Madrid. Since 1998, Spain has cooked up a toxic economic mess for itself….
Back to Obamanomics…1 trillion will get 1 to 2 Million people back into high quality production. Making wealth. Transport, Utilities, Health . “Made in America” is back.
Face it, the US could float off into space by itself and still survive and keep their way of life. It is fully self contained. They can make anything and pretty well do anything they like and they have the bulk of the weapons. So even if the dollar fell off the edge, is China or India or Germany going to blockade it? err…I think not. And do not for 1 second believe that the oil is its Achilles heel. It is not. Americans are fast to change and very flexible and ruthless to themselves. Little cars are moving in. They know how to suck in and get used to it and tough it out as needed. In 2-3 years they will lead in Green just as they did in electronics, computers etc etc. Their intellectual capital is humungous and will get bigger and is not hampered by ivory tower mentality so prevalent elsewhere.
Re: Hyper Inflation – They can inject as much credit via IOUs as they like and ignore everyone else. This is one tent you better get inside of with an “open hand”. It is not like Germany after the 1st world war where they were forced militarily to give away their productive capacity. The fact that the Dollar covers such a large area of land under 50 states should be held in awe. America whether we like it or not, mostly works for its 300Mil citizens and it will continue to do so.
Americans know full well the value of productivity in making wealth. Inflation etc is just a tool to loosen up the flow of cash (another tool) to accelerate the inevitable.
The Dollar is a reserve currency becasue Americans have the knowhow to take a turd and turn it into Hershey bar and get hard currency from you and make you feel happy about it. :)
The emigration safety valve is constricting. Real bummer to spend a load of precious cash to get out of here only to land somewhere we’ve already been six months ago.
http://www.theaustralian.news.com.au/story/0,25197,24950554-5013871,00.html
Not quite Phillip, it is not now an option for any nation to try and get by with having its prime industry the processing of ones neighbours washing. It can be done, but only at the expense of a savage and unacceptable deterioration in living conditions, this will not happen in the US.
I don’t know if its still the case but a high proportion of the dollars that went into South America to pay for commoditiies, military aid etc. wasn’t invested in local industry or infrastructure but was immediately turned round by their banks and oligarchs and invested in Florida real estate etc. Same for Arab oil revenue invested in New York real estate, US stocks and shares.
How much of America has already been bought up by the Chinese I don’t know, but I’d be very surprised if they are sitting on X trillion dollars savings all stashed in a Shanghai bank. Those assets will still belong to their foreign owners regardless of dollar inflation.
Princeton is spot on. This exactly what happened in Ireland, but instead of “washerwoman” read “developer”.
the greco roman moorish axis is very very real and is matched to day by the similarities of our positioning in the euro charts namely piigs – we as a island have a different mindset to the uk and northern europe and our atlantic language eulogised as gaelic shows us apart from those lands at similar lattitude -we as a nation and culture arrived by boat via mediteranean from middle east – somethings dont change and always repeat themselves ~ this the mark of our evidence today ( da wu yu code )
Spain was never completely moorish, Granada was the only part of moorish spain to escape the reconquest by the 13th century, and was retaken in 1492 by the SPANISH.
A moorish axis involves Morocco, Algeria and Tunisia.
Again, less of the LSD please.
Bernanke didn’t push rates down to zero – he pushed real rates negative! Will it lead to a crash in US treasuries?
Very good article from Martin Hutchinson here:
http://www.prudentbear.com/index.php/commentary/bearslair
(the link resets every Monday, so scroll through if you don’t find Where is the safe haven? by Martin Hutchinson January 19, 2009.)
He’s an inflationista, and so part of the great ongoing debate on the money supply.
His safe haven? Not Canadia. Not Japan. Not Brazil. Not China. Perhaps France. But no, it’s … Germany.
I’m a deflationista, but open to suggestions. Have $ at the moment, to benefit from the great crash coming in the £, but will be considering Bundesobligationen over the next few months when – hopefully – the picture becomes more clear.
Ireland can still play it smart. Come on the boys!
Phillip
I think that you’re underestimating the coupled nature of the global economies. The standard of living of the average Joe would fall considerably were the USA to pull up the drawbridge. The whole driver of the US economy over the past 30 years has the been the growth of the consumer economy: It’s reliant on cheap, good, imports. Sure, they could make them for themselves, but the costs would increase several fold.
As for the jobs that Obama will create, there’s no knowing what they’ll be like, but it’s unlikely that a central administration will be able to avoid massive waste, while at the same time enabling the correct capital allocation processes. Just consider the spectacular cost of the US health system, and it’s relatively awful outcomes. He’s up against some extremely powerful vested interests. The attitude of the so-called Western ‘elites’ can be judged by the actions of the bank executives, and what reason could there possibly be to doubt that these reflect the attitudes of other big corporate executives?
I fear we are hoping to much from Obama, but we shall see.
The whole culture of socialism for the rich and capitalism for the poor is morally reprehensible and wrong. The vast majority of people are completely against it. We do not need elites telling us that saving their incompetent a55e5, is in our interest. That is complete nonsense. We need to make sure the system is meritocratic to the point that the reckless lose out and the expense of the indutrious. So far state policy in Ireland, Britain and the US has been biased in reverse – favouring the reckless, the corrupt, and the deluded. Obama might change this in the US. And Merkel in Germany has shown that of all the Western leaders, she is more prepared than most to deal coldly with failed multimillionaire bankers.
In addition, throwing PAYE money at cowboy outfits like ANIB and INBS will create all sorts of societal problems that make the CJH legacy look like an afternoon picnic. There are layers of idiots in our banking sector, who are not fit to hold their responsibilities. We have the likes of Dan McLaughlin, proposing that outsourcing the cabin work on Irish Ferries is a great idea, whilst encourging state fiscal policy to be used as a means of driving up aggregate demand in a boom, thereby creating a perfect environment for price fixing, indebtedness, and inflation.
Somebody mentioned Peter Schiff. Peter Schiff has campaigned openly against this policy in the US. At the centre of the Theory of Austrian Economics is the idea of human motive, human action. This means that basically markets are just an expression of human motive and human action. Because human motive can be good and bad, morally, there will be a need for a moral framework, in order to ensure that the market operates in an orderly manner, and that good motives and actions are rewarded, and that bad motives are punished. In other words – appropriate regulation on information availability, and moral standards are required. When the moral standards disappear, and the information becomes degraded, we get events like Enron, Worldcom. Since the 1980s, there has been a steady decline in these areas, under both the political right, and the political left. It was called “innovation” in PR speak. It gave us sub-prime investment vehicles, excessive construction, credit card debts, and a consumption binge.
We need to regulate the markets – in terms of information flow, and also in terms of moral reprimands. And we also need Institutional Reform, because in Ireland, the institutional state has failed to monitor what was happening, and has been far to prepared to please the political state, and it’s leadership.
In Ireland,nepotism in the pirvate and the public sector, has ensured that Irealnd is in the midst over more than just a normal property bubble. Because the prices were excessively high in the first place, the drop will be considerable. And in the commercial property space, it will be a complete disaster. The government has now strapped the taxpayer to the fate of the Irish Commercial Property market. Great news for the private bankers in Frankfurt who gave money to ANIB. Bad news for the ordinary taxpayer.
The key considerations in the construction of a method of dealing with the crisis seems to be
i) the need to postpone the problem until after this years election/referendum,
ii) the need to accomodate the well connected, and
iii) the need to prevent any form of institutional reform in case it placed useless, overpaid, besuited, “safe pair of hands” type neophytes on the dole.
The real issue is institutional reform of the state. It is the one issue that IBEC, ICTU, the political parties, the banks, The Irish Times, and RTE seem to be avoiding with all sorts of red herrings being dangled in front of the Irish people. The current economic policy is morally flawed. To fix it requires institutional reform. I suspect that even if we get any institutional reform, it will upset none of the vested interests in any meaningful way – and the disasters will continue.
Deco, will YOU, please, run for office? I will help you to get elected. I do that.
Tim – I have a better idea. You run for office – and I will canvass for you. Because you have a definite angle on things. And you need to represent front line public sector workers. In contrast to the Prof Drumms and Roddy Molloy types who presie over the incompetence that leads Ireland nowhere.
Germany is the most powerful state in the EU today and it is suffering the tirade of the global crisis .We have a role to save its country because we did it before a long time ago from the ravage of the barbarians ,almost 1400 years ago approx .Our Monks learned the tongue of the Invaders in Ireland and made their language a written one and introduced new letters unique apart from normal english usage such as Þ and ð denoting the sound of ‘th’ at the beginning of a word and the end of a word and these became part of the new German written language and they wrote their first Germanic Bible using these christian symbols .Our monks have brought back to Germany more what they had previously lost .
Today we are at a similar juncture and we can ‘adapt’ and learn to give while ‘ in economic captivity ‘ and repeat the progress not only in EU but also in ~USA . ( da wu yu code )
How can you lecture us on the German language when your punctuation shows you have no idea of English.
Full stop at the end of a sentence. Two spaces and start the next one with a capital letter. After a comma and any other punctuation one space. The punctuation goes right up against the last letter of the sentence. Not in space or at the start of the next.
And capitalising words that don’t merit it makes you look stupid!
Finally. If we never had Romans, never mind Greeks how the hell did we have Barbarians? Which way did they invade and for Gods sake do not quote your own self-published book as a source.
You are a troll and I have no idea why the webmaster lets you continue with your drivel.
Although it is one of the stages in classical crash theory (if it can be described as such), I do wonder whether a rise in nationalism is such a good idea.
Every country knows that they are special, that they have the answers. Even if it all starts out benignly, it inevitably results in a lot of those tiresome torchlight parades, badges for the undesirables, and eventually burning people at the stake because they boil their eggs the wrong way round, or something. Let’s just not go there this time.
Civilisations are all about trade, we just have to remember that trade is a matter of exporting, as well as importing.
Obama’s Green Policies will rid the Ugly Trucks on our roads especially along the east coast and the sooner the better
b- the Invaders are the vikings and i am not lecturing i am giving an idea thats what the forum is about u read into too much .back away and relax
When JFK gave his Ask not what your country can do for you…..’ speech, he was speaking to the wartime generation. Essentially he was reminding them of something that they already, in their souls, knew. A similar speech from, Obama, although it may use the same words, would be interpreted by our generation as:
“Ask not what your country can do for you, but what you can do for yourself, with the help of some dodgy government contracts”.
@ Sam ,while no doubt your probably a lovely girl in real life you should though really stop wandering here and leaving such absolute waffle that some one think maybe your blonde bleach got to your brain. a one bed apartment can be rented for as little as 460 a month what does that get you even with your deposit from family and your taking home the below average 28 grand a year ?
It is unimaginable for the vast majority of the worlds general masses to visualise what has went on for two decades and peaked within the last twelve months. 92000000000000000, odd us dollars uncle sam now owes , so what’s your worry about selling your badly built un green houses ?
There has been houses only construction ed or sorry thrown up even in the last two years that if bought and to be put for sale again, they would not meet Government B.E.R. Standards of 2009 !
Life is a comical satanic journey at times , this cycle is like the rising every 2 millennium of Gods sons we have had Jesus and The Egyptians before had their man , maybe this Black Irish Man might be the God to save the PIGS time will tell.
@ John Allen I have to concur with b, please drop your posts here with reference to your du wan thi code ,as while speaking personally I can’t see any one other read it or ever buying it. We all here have our own books within us , some may never write any of them while others will publish many , I don’t come here to tell you to reference my book, My Guinness Mafia Years, Why I left My Hillary in Florence and walked from her family’s €30 million estate, as it is only a bit of the jig saw of this one world we all have to share.
@ Tim maybe if you weren’t running around trying to do two jobs and going on cancer walks and helping others get elected, You should stop and look at your self simply saving for the rainy day is a Joke like your sky dish television , as the Ireland I am back living in , Rains a Lot . If You want Change you have to start doing it yourself , I was speaking with a man today who is going to run for Labour in local elections but he’s not going to get there as his given back room team are not professional or adapted for a modern technology election . Your endless short one two line postings slow up my Outlook so I have to stop clicking for notification ,…too many points on just two articles each week, as I now have to start thinking of my future this summer coming
i think you’re a drunken misogynist masquerading as a doomsday economist. it’s a little bit amusing to read your stupidly offensive meanderings. but ultimately sickening. go away and grow sense.
Fascinating, fascinating, fascinating… as someone who now has an obsessive interest in all this turmoil, globally and nationally, I find this website absolutely fascinating and riveting… So there is a lot of wild talk, but MK1 and Furrylugs, you guys are SMART!!! And Deco… you are SMART, and a philosopher… I am learning and absorbing….
John Allen and B…stop fighting and calling eachother trolls..
Off now to learn more about the Bretton-Woods Agreement and Peter Schiff..
Some great writing and some great moralising and philosophising on this site…
Diletta, welcome.
But a word of warning. Please do not add too much to Furrylug’s ego. He is barely under control as it is…
Thank you for the enormous compliment diletta and though I would be up on a par with Dame Edna, to be realistic, nowhere near MK1(who is not Morgan Kelly), the esteemed Lorcan or the other economists in the group. If I named all the expert contributors, it would sound like a GAA acceptance speech. I was a newcomer here trying to make sense out of this WWW mess last October and all these people were patient and helpful. I learned bundles. Enjoy the run
@ David and Mr Obama problems , how did U2 get up on that stage what an example of, an paddy pig he is with or without the shades. While he may have sang some good songs now he hides his wealth in the home of Europes drugs warehouse capital and preaches to us all on Africa ,….but as David Ike has said we will have one Global God of center power . While Africa will be a rewarding continent for our Irish developers to begin building high rises and swimming pools at least in Nigeria they have suit cases of US Dollars .
It will all be all right Dalkey will not be over run by Mad Maxes coming to raid your ATM by the tram yard and our Old lawyer of Political schools will , in time meet their fall it happens each and everyone of us , as cycles go perhaps it is time to now give our Capital powers back to Kilkenny our medieval pre Norman invader days. Even geographically it is more Central than Dublin is and no panic all airports same distance away too.
Yes I have been hanging around for a few days now, and manage to understand most of what Furrylugs says… but do not have the intellectual capabilities to add anything of note to the discussion, still at the asking questions stage…
Don’t be shy with the questions, there’s usually someone hanging around who will answer.
A lot of rubbish has been written here about the demise of the housing market. All that has happened is that there was an overproduction of housing. We built 90,000 houses / apartments for a number of years while the Uk with a population of 60 million (15 times ours) built 150,000 and the US with a population of 300 million plus built 1.2 million houses. In other words we built 10 times the UK rate per head of population and almost 60 times the US rate of build per head of population.
It comes back to the first law of economics – that of supply and demand. We overproduced and that has to be absorbed.
Having said that, 40 years ago a 3 bed house in Blackrock sold for IR£2,750 or €3,600. If you check in Daft.ie, even in today’s market you will see that this same haouse sells for c.€500,000. I challenge anyone to find a better investment than that. – and that includes Berkshire Hathaway shares, which is reckoned to be the best investment that could have been held as far as shares are concerned over the same period.
Also, as anyone who held Anglo shares knows, they can fall to a nil value. The same has never happened to property. It always has an intrinsic value.
Hi Sam, I think that most ordinary people buy homes to live a life in and not houses for selling when a market is peaking.
Bullshit – I never thought or realised that the builders would invade DMcW’s site.
“The same has never happened to property. It always has an intrinsic value.”
Yes but there’s not much use in this intrinsic value if the investment is impossible to cash in on. Look at what happened property prices in detroit:
http://money.cnn.com/2009/01/08/real_estate/thousand_dollar_homes/index.htm?postversion=2009010806
As the article says, these are run down and all that, but the point remains. Market forces (in the shape of surge in unemployment in the city combined with property bubble bursting) resulted in the financial value of this house being driven to the floor.
Parallel in Ireland?
I recall a news story of about a year ago (but can’t find it on the intergoogle) of ex-council houses in Limerick city going for as little as e30,000, and this was at the height of the market. Not be pessimistic, but with Dell leaving there’s a risk that Limerick could become Ireland’s Detroit. The knock-on effect of Dell’s departure is going to heighten the ‘social problems’ within the city- problems that were never effectively dealt with during the boom times.
Having said all that, apparently the housing market in general in the city isn’t doing too bad (compared to Deckland, anyway):
http://www.limerickpost.ie/index.php?option=com_content&view=article&id=273:limerick-most-stable-in-falling-property-market&catid=28:property&Itemid=56
Not quite the Guatemala Times, but still.
Anyway. The long-winded point being, the intrinsic financial value of a house can become, if not quite nil, then very,very low indeed. The bricks and mortar of those homes in Detroit would set you back more than a grand they weren’t being sold in house form. Those who bought that Blackrock house 40 years ago aren’t in negative equity, that house wasn’t bought as an investment.
My 2c anyway, must get more practice at this commenting lark
@Brendan, Residential apartments are so cheap at present that they sell for less than the social and affordable apartments provided by the various councils. In other words, they are selling for less than the cost of production. To counter this the councils have had to reduce the prices that they are selling the S&A units at. They too are now selling at a loss – to be covered by the taxpayer, of course. You can get a home in Meath for €100,000. See:
http://www.irishtimes.com/newspaper/ireland/2009/0123/1232474676128.html
Also, I’ve had it with all this “O’Bama the Irishman” sycophancy. He wouldn’t be able to find the place on a map. It reminds me of a cult at the moment. By the time he finishes sorting out the US companies who have located here for tax purposes, there won’t be many remaining. We’ll see what the Irish cult followers have to say then!
Me … I’m looking forward to Sara Palin in 2012. Now, there was a girl!
Yes, Sarah certainly was a good ol’ Wassilla Hillbilly shop till you drop on other people cash kind of a girl. Entirely presidential in her demeanour and behaviour. And her turn of phrase. Pitbull with lipstick! Well, she’s one sulking sow now.
I sincerely hope she returns in 2012 as she has given me so many hours of entertainment. I hope she continues with the exorcism treatments and the geography classes. And the interview preparation classes. She’s certainly ‘a class act’. Ireland is not alone in that department. Is your name really ‘Sam’?
If you’re interested in cults, Sam, here’s one Sarah joined but then tried to deny she was part of until Christopher Hitchens reduced her to rubble in the American press. Have a nice day!
http://uk.youtube.com/watch?v=Jmp_S9YSKJ8
Governments all over the World through their financial regulators and central banks have been trying for decades to put some sort of control in place.Its a game of cat and mouse with the markets,brokers,banks[both public and private],insurance’s of all descriptions and governments right,middle and left.Governments representing their interests,sometimes noble,sometimes vested.The other side representing their investors,shareholdes etc.These two great circles of the old fashioned pie chart.One green the other blue with the yellow overlap in the middle.The yellow area being the most heavely contested,some governments and economists preferring a larger overlap while others preferring less.Theories abound as to the optimum size of the yellow area but the problem economists are faced with is ,they dont have perfect green&blue circles to start with.Whats needed now is the type of people who can deliver the perfect circles.Electorates,shareholders etc.need to cast their votes well in these present circumstances if the optimum solution is to be found.While historians will have the luxury of been able to judge the impact of Obama,Cowen,Merkle,Fitzpatrick,et al.on the present dilemas facing the world,the greatest burden will fall on the people to choose well when asked to do so.No mater how small the media,boffins and bluffers try to make people feel,just remember the vote is still the biggest leveller on the globe.
Off-topic?
I think concerns regarding the relevance or ‘merit’ of any particular comment, the supposedly ‘correct length’ of a comment, or the frequency of certain posters should be addressed, in private, to the Webmaster who can then discuss the alleged infringements with David.
Complaining about people being ’off-topic’ by posting irrelevant ‘off-topic’ complaints in a thread disrupts the flow. Attempting to assert authority by nit-picking punctuation is patronising, to put it mildly.
I instinctively recoil from bossy prefect-types telling me, or anyone else, how they should behave. It’s very difficult to express frustration with what you may perceive as ‘trolling’ behaviour without inviting the description of ‘flame bait’.
As this crisis unfolds increasing volumes of traffic will come to David’s site. Some to try and get the skinny on latest cutting edge economic views, but some just to try to get a hold of their personal anxieties. As well as the real and pseudo-cerebral boffins on this site, I come here for the often surreal humour which develops during a thread.
I am sure there are many casual visitors to this site who my have interesting comments to make. But if they think there’s some ‘hierarchy of authority’ their comments may be withheld.
Other than flagrantly abusive behaviour it seems to me a little tolerance and sense of humour repay dividends. And I address that comment to myself also, having risen to the bait once or twice. Just for the fun of it.
The Webmaster will monitor the site in between shopping trips and on-line poker sessions. I’m sure whoever this mysterious being is will send any really out of order posters a quick email with a yellow or red card.
Regards.
A Sage Edict. Hear Hear.
I don’t think your censorship will work Garda Mooney. I will however ease up on John Allen (da wu yu code) because it is tilting at windmills. Astrology should be left to Government who seem to rely on it heavily.
I don’t think there is a hierarchy of commentary but there are some haughty posters here. I don’t think Mr McWilliams is cutting edge. He is a slightly posher and more cultured version of what Peter Schiff has been bellowing for years.
After all his main point has always been “careful now, go too high and you will fall”. He has got a kicking from two Taoiseach and is unbowed.
Andrew. If you have a problem with comments email the webmaster. Making up rules like you just did is imposing your values on others and ends up in self-censorship. If thats what you realy want lets change the name of our country to Singapore.
Blimey ‘b’: You’ve got a bee in your bonnet. Garda Mooney? Good call, as the current boyfriend is a fine figure of a man from the ranks of the Kilkenny Garda . I love dressing up in his uniform and having kinky fun, but he gets nervous about nosy neighbours. Especially if I’m out in the garden in my British Bobby gear. But enough of my exotic sex life. What were you saying about Obama? Oh, nothing. Hmmn.
John ALLEN (NOT Allen)? Windmills. Astrology. Government. Well, you’ve walked straight into a brick wall with that one: “The only function of economic forecasting is to make astrology look respectable.” John Kenneth Galbraith.
180!
What appears haughty to you may appear hilarious to me, or others. Or vice-versa. So another irrelevant riposte. Schiff can certainly get his bellicose knickers in a twist, but it’s amusing to watch. Who cares if David isn’t ‘cutting edge’? He’s fun, like a curly-wurly. Pop economists fulfil an important role in modern life and it’s hard work translating things from the Jargon Factory into relatively plain English. Aren’t you being ever so slightly patronising? I admire David for politely and urbanely putting up 2 fingers to 2 Taoiseach: That’s why I follow events on his exciting website.
If I want cutting edge I invite Willem Buiter round for dinner. He’s coming tonight actually, with that dreadful George Osborne, who’ll doubtless bring some dreadful Aldi cheapo wine. But that’s one of the perils of networking the London M4 Oxfordshire Country Club weekend aga saga set. Am I annoying you yet? I hope so. Am I irreverently and irrelevantly off-topic? Good. Do you want me to switch on my Celtic Ray mystical Eminem rapping in Newgrange linguistic fireworks? John ALLEN is the least of your worries if you pick a fight with Mad Paddy From Brum, aka: Southsider Southpaw From Hell.
Despite your unsolicited reply, you appear not to have understood my general comment, which was a mild plea for tolerance. Read it again now, but this time with your thinking cap on. I’m not imposing my rules or values on anyone and I’m certainly not proposing censorship of myself or others. Unless the WebMaster has a legal responsibility to do so. You know, the occasional racist flame baiting troll. Save your ire for appropriate targets.
Singapore is a complex society with a vast web of social and moral protocols. From banning Led Zeppelin in the 70s to re-allowing trannies in bars and clubs, they do it their way. I’ve not studied their culture in enough detail to comment authoritatively. Unlike you, no doubt. *rollseyes*
Andrew, all I can say is, “wow!”.
I agree with your tolerance plea; not just because tolerance is soft, squishey and polite, rather, also because it allows free expression of ideas and imagination and ideas are what we need. Their expression can lead to synergies that may actually lift us out of our difficulties. This is where co-operation begins and I think that is exactly what Deco, Furrylugs, Lorcan and others here seem to suggest will go some way towards re-modelling our society in general and our local communities in particular.
Well done with this retort to those who would silence us (b and BrendanW?) and thank you for all of your comments (which I enjoy reading and find quite enlightening).
Quick question.
If every other country nationalises their main banks ,so they’re run by civil servants, and we don’t, will that provide the last free market opportunity for investors?
If so, would that influx of dosh accelerate our way out of recession ?
Interesting yesterday that Intel shut down the far east and Silicon Valley but left us intact. Obama might not be able to find us on a map but his Joint Chief of Staff can. Facinating to see how we’ll adapt to being the 53rd State if Euroland want to hang us out to dry.
http://www.businessworld.ie/bworld/livenews.htm?a=2347208
DMcW 1 – 0 Rest of World
Sam,
A very small minded response there with regards to property, and prices, just like the Green party with their bicycles, they think everyone lives in Dublin 4. Get your head out of the sand. The Greens (Fianna Fail Light) are finished, as are the property speculators. Some people made profits, that is true, but they did that on the backs of the younger generation, who will spend most of their lives in debt.
@Paul: Other than the “ad hominem” attack on me,,,, what’s your point?
All I’ve said is that over the last 40 years, property is the best investment you could make. Prove me wrong. I don’t give a fiddlers about the Greens, who are irrelevant; and the property speculators, who by the way, represented 60% of the purchasers in the housing market. They are now out of it and can look after themselves. As can the builders. The speculators (aka “investors”) were all buying to let – does that not tell you something?
It’s not only the younger generation who will spend most of their life in debt – so does everyone else, with the exception of a lucky few. For example just look back a few days ago to all the wrinklies who lost their savings and pensions leaving the Anglo meeting. At least their homes are still worth something and the law protects the family home, where it doesn’t protect investment in shares.
I hope to die bankrupt – sweet revenge!
Sam> In other words, they are selling for less than the cost of production.
Thats not exactly true. The cost of production of a reasonable 3 or 4-bed semi is about 120k to 150k and coming down in terms of materials and labour costs I would suspect, whether in Dublin, Mayo, Cork, etc. What people are actually buying is not the bricks and mortar but the land/location that it sits on, etc. Different areas will have different underlying commercial value due to density, access, transport links, etc, and different areas/buildings will have good names, etc. Dublin City are left with stock that cost them more in terms of production costs and land costs.
It is well-known and recognised that homes are useful and are always in ‘demand’ in that sense as we all need to live in one. But have you ever been to a ghost town? Ceide fields? Derelict houses in Ireland after the famine? A gold mining town in the wild west? In these cases, property values did go to zero. People just turned the key (or not) and walked leaving perfectly good houses to rot by nature.
Now, I am not saying ours will depreciate to zero, indeed they wont, as demand should still be there whilst we have enough humans in Ireland, but what we are seeing is that a 500k house in Blackrock if sold in 12 months time may only sell for 450k. We know of places like a 2.5 million pad in Foxrock or Castleknock that sold 12 months ago will now only sell for 1.5 million. Thats asset value ‘destruction’ on a grand scale. As many of these were leveraged buys, people can be left with large so-called ‘negative equity’ and worse than shares being valued at zero they in some cases will actually owe large amounts of debt. So property can be less than zero!
Property is needed of course …… but like shares, there can be a right time to buy and a wrong time to buy depending on personal circumstances, market variations, etc. A lot of people are sitting on the sidelines now in this slide, both sellers and buyers, and there remains a huge overhand in the supply and available side. This will take a while to work out.
Diletta, I will try to maintain the ‘smart’ perception although I learn new things everyday ……
Does anyone have the accurate GPS co-ordinates of Dun Aengus when we call in ‘air support’, although it is very picturesque there and our heritage so I am in two minds. ;-)
MK1
“Does anyone have the accurate GPS co-ordinates of Dun Aengus when we call in ‘air support’”
Don’t want to be a party pooper but Dun Aengus is surrounded by a Neutral Plasma Magnetic Cusp (NPMC)
http://radphys4.c.u-tokyo.ac.jp/asacusa/wiki/index.php?Cusp%20trap
rendering any form of attack futile, Moon Wobble or No Moon Wobble.
Ye can’t fool us john ALLEN.
P.S. What is it on this site about Dublin 4? It’s a kip! Get off the island and get a life!
I think this article is an excellent overview of the crisis situation in the U.S and U.K, and by osmosis, in Ireland, which has large trading relationships with both ‘troubled states’.
David’s article focusses on Obama, but the UK is equally critical to Ireland.
‘U.S. & UK on brink of debt disaster: John Kemp’
http://www.guardian.co.uk/business/feedarticle/8288576
I am not an number I am a free man – are you?
Does it really matter if all our comforts go – back to the true state of mankind – chaos and barbarians – one big wobble on the way – maybe a Maldivan solution – maybe not -
what about the geoids -
Hi MK1,
The PURE BUILDING cost of a minimum finish standard 3 bed semi is approximately €120,000. That does not include the infrastructure cost (roads, sewers, electricity and water services), nor does it include the cost of interest on money borrowed, cost of sales, legals and design. Neither does it include VAT at 13.5% of the sales price. And as you correctly state, it does not include the cost of land.
The latter (land cost and speculation in “white” land) has been the main reason for the high price of houses. Traditionally the mean cost of land in relation to a finished property has been 15% to 20%. During the “boom” this escalated to 40% – an unsustainable figure. It all has to be viewed in the context of property being a cyclical market which overshoots in both directions.
As a yardstick and in broad terms, the mean cost of new houses after removing the VAT element from the sales price is:
Land: 20%
Building: 45%
Infrastructure and local authority charges: 10%
Sales, Legals and Design: 5%
Interest costs: 5%
Overheads and Profit: 15%
After periods bull or bear markets prices normally revert to the mean. We are currently in a bear market from a property perspective and the market WILL revert to the mean. It’s just a question of time.
You give the example of famine villages as somewhere houses reverted to zero value, but these were mud huts with straw roofs. And ironically ….. they were tenanted!
MK1, Sam,
Out of interest in the discussion, I saw a French documentary last night which visited a village not too far north of Bejing. 10 years ago this village was a thriving rural community but , due to dessiccation of the watercourses, it is now on the outskirts of a desert with most of the occupants departed for the capital. Global warming etc to blame but nevertheless a whole rural micro-economy rendered worthless in one decade.
My own opinion, for what it’s worth, is that young couple were wise to buy a house early in life on the basis that “jobs for life” meant most societys mirrored “Eastenders”. No one moved very far from the nest. And the ones that moved settled quickly near the workplace. That era is past and to my mind the flexiblity of renting suits my lifestyle. I think for ordinary folk a house is a home primarily and a means of legacy for the kids. One has to be as smart as a stock market broker to trade in houses else the old fingers can get scalded.
sorry i am late today – somehow i managed to complete my regular 2000meters swim meticulously and the sky is blue today with a dosh of sunlight rising .
Anyway , to more serious issues – i read on IT the letter submitted by Chief Ex of ICA where he appears to be genuflecting while carrying too much at the same time .He wrote about the ‘duties of auditors ‘ .while panting in between sentences he mentions that auditors ( not only his own variety and there are thousands of them ) submitted ( only ) 4,000 reports to ODCE .that seems a small number if you were to calculate the number of irish cos and nos of auditors …..dirisory droplets .He fails to show transparency to the ineffectiveness of transparency of their code of ethics and conducts in upholding state public policy- so if the during the course of an audit a sexy director is snorting drugs and the smell abounds from the cellar -insofar as the auditor is concerned it’s none of your business .he also mentions that the american cpa counterparts check on usa cos in ireland as a matter of good policy ,what can they find in irish law when racketering is not unlawful in ireland .the whole thing is the cause of this country going burst .
Actually mr lenihan has said in IT that the dir loan dilema was material in his decision to nationalising anglo .there are blazing saddles and blame games all over D4 now .
What IS it with D4? Charlie wasn’t from Dublin 4, neither was Bertie, nor Biffo? Maybe David’s from Dublin 4……. is that it?
D4 – actually it is a slang term referring to a particular type of individual in authority. It happens that historically there was “address discrimination” – in Dublin. There is a problem in Irish society with regard to meritocracy. We simply do not have enough meritocracy to function as a modern society. The greatest lie of the last forty years has been that a model of authority that is inherently anti-meritocratic would make Ireland modern. The lie has now been exposed.
Do we have a better term for people in positions of authority, who are not performing the responsibilities properly, who do not know how the other half lives, who have contempt on tap, are class obsessed, and think that the system is there to be exploited ?? Not all have Dublin South East accents. Ahern and Haughey were Northside versions of the same thing.
I suspect that what we are taking about is the contemporary equivalent of the “gombeen man”. Kunstler critiques the mentality that enveloped the US for the past thirty years as the active and persistent pursuit of “something for nothing”. This seems to be less prevalent in Asian societies. Do the people in authority in Singapore or Japan have the same mentality ? It certainly does not look to be the case. Really, we are dealing with a culture within Irish society that is ruthlessly selfish, quite secretive, contemptuous, and economically useless. We used to all the gombeens. But the pschology of the gombeen is exactly the same as the psychology of high flying bankers, HSE master planners, useless politicians, property speculators, etc..
Maybe somebody could think of a more accurate term for the layer of ‘management’.
I have also realised something really important. We have to educate ourselves individually, and our neighbours in the ways of making our society of no use to ‘gombeens’. This way ‘gombeen’ behaviour will become unprofitable, and eventually legally prohibitive. We need a reform process that brings about the reconstruction of authority and power in Ireland so that we follow the model evidenced in the best examples to be found in Scandinavia, Canada, and the most decentralized of the East Asian societies. It would seem in this context, that the push towards increasing centralization in the EU is a massive error-creating the wrong model of government for the age that we are living in.
We need more effective regulation of the financial sector. But in Ireland we have learned that having 1000 people working in the combined Central Bank of Ireland, and IFSRA, is a complete waste of resources, if the management structure in both bodies is heavily biased towards not doing it’s job properly. And with a political system that is already a system of patronage rather than a system of governance, is it any wonder we get this sort of scenario. There is something rotten in the state of Ireland. As the saying goes, the fish rots from the head.
@Deco
“Do we have a better term for people in positions of authority, who are not performing the responsibilities properly, who do not know how the other half lives, who have contempt on tap, are class obsessed, and think that the system is there to be exploited”
Ballybrit Bourgeoisie ??
Or Bee-Bee’s for short.
Gobshites, that works quite well for me. I do not know exactly who or when the term was coined, but it seems to work. And with all it meanings.
http://www.irishtimes.com/newspaper/opinion/2009/0123/1232474674966.html
interesting ‘wobble ‘ ahead
bankers land = south dublin