What will happen to mortgages when unemployment rises to 15pc? How many first-time buyers, who bought at the top of the boom, will default? Will the banks throw them out on the streets and, if this happens, what benefit will the newly recapitalised banks get from an empty house with no tenant and a defaulted mortgage?
Widespread default on mortgages is likely to happen in the next year. This will accelerate the following year and will not stop until unemployment peaks.
As a result, house prices will fall dramatically in the next 24 months and this alone will influence many young people and couples to give the keys back. Negative equity causes people to give up hope and throw in the towel because, if there is no short- to-medium term reason for houses prices to rise, there is little point, bar your sense of obligation to the bank, in paying back the loan.
You might conclude that a charge against your name is a small price to pay. Furthermore, a charge against your name is of little immediate impact when you are on the dole. We can’t let this happen. We can’t allow people to lose hope.
The country finds itself in a conundrum. We are slashing public spending now on the advice of almost every economist in town. The logic is that this will get us back on some sort of track and that when we get out of this mess, we will be leaner, meaner and fitter. However, this view conveniently forgets that the banks are not lending, so there is nothing to raise local demand and the more you cut, the more you shrink the economy.
This will lead to a failed adjustment, and it will fail and fail again because there is no liquidity in the system and no prospect of liquidity coming back. There is now a real risk that the economy will contract by some 10pc this year and possibly more again next year.
If something like this comes to pass, Irish society will split in two. We will be left with what could be called an ‘insider’ and an ‘outsider’ society, as was the case in the 1980s. The insiders are, typically, a poor version of the European middle-classes whose jobs are reasonably secure and whose incomes have fallen by 5pc to 10pc from their peaks. Typically, these would be public-sector workers, semi-state employees, people who work deep inside the large financial institutions and small time businesses that sell into the protected sector of the economy.
Multinational workers whose jobs are not geared to the domestic economy exclusively might also escape the brunt of the depression.
These insiders are likely to be middle-aged who have bought their houses years ago and will not be hammered by the prospective fall in house prices.
Their wealth will be affected but as their mortgages were taken out in the 1970s, 1980s and early 1990s, their monthly repayments are manageable and negative equity doesn’t figure as a problem. Higher taxes will annoy them, but in general, their lives will not be enormously dislocated by the meltdown. They will fight therefore, to maintain the political status quo. The ‘outsiders’ on the other hand will get hammered and will find their tenuous grasp on a stake in society ripped away. Who are the ‘outsiders’?
They are people who have lost their jobs and will continue to do so, in sectors that are going to be trashed by the recession. They will be working in retail, construction, the more exposed sides of the banking and finance industry.
They are the many thousands who are in companies hammered by the overvalued exchange rate. They are likely to be younger, in many cases the sons and daughters of the ‘insiders’.
A significant proportion of them will be among the 200,000 first-time buyers who came into the housing market in the past five years. Negative equity will sap their energy, their resources and their will to stay here. As in the 1980s, many insiders will just assume that the outsiders have to emigrate, and that’s how we preserve social cohesion. But we can’t tolerate this.
Therefore everything must be done to prevent this happening.
How do we avoid this cleavage emerging in our society?
How do we give the outsiders a stake so that they don’t leave or they don’t sink under the weight of negative equity?
One thing we could do immediately is that the State, as part of the recapitalisation of the banks, acts to help those thousands of first-time buyers who are now drowning in debt.
The State could demand, as a condition of recapitalisation, that the banks re-negotiate thousands of mortgages. The principal could be halved now so that the debtor continues to service the debt, but on a much lower amount. This way they don’t default and the bank does not end up with a bad loan. But the debtor doesn’t get away with it. It is not a debt write-off, it is just deferred.
Initially, the State and the bank take the hit on the level of loan deferral. They pay 50/50. But this deferral, which is the difference between the old principal and the new principal, goes to the State so that when these houses finally rise in value again in, let’s say, a decade, the upside goes to the State and a proportion to the bank.
The bank’s proportion is much smaller than the State’s because the bank messed up in the first place. So although the State and the bank cough up 50/50 to pay now for the deferral, the State gets proportionally more of the upside so the taxpayer, not the future shareholder, is paid first and most.
The impact of such a move would be to release the noose of debt from around the necks of thousands of our younger generation. This will give them hope and maybe a reason to stick around. For the banks, it means the debt write-off will be smaller than they would otherwise be, and the loans will continue to be serviced.
This means the minister’s recapitalisation of the banks, with our money, might cost us less in the medium term because a smaller proportion of the mortgage loan book will go sour. Most significantly for liquidity, it will signal a floor to the house prices.
So how would it work? Consider a house bought in the boom for €200,000. The couple who bought it could just cover it with both working. One loses their job. The mortgage repayments now, more than likely, swamp them completely. They will not spend and the economy will contract more as a result.
What if we slashed their principal in half, so they now service a loan of €100,000? The State finances a proportion of this with a state-wide bond and the bank finances its bit out of its capital.
The State and, to a lesser extent, the bank, gets an option on all the price upside, up to and beyond, the old price over the next 10 years. As prices move back up, the State’s option becomes very valuable.
This means the State behaves responsibly and gives its citizens a break, while the citizens behave responsibly and ultimately pay the State back when they can. It is a win-win for everyone and is precisely the sort of lateral thinking we need to be coming up with.
The Obama administration is looking at measures to reduce foreclosures to to try and put a bottom in the housing market, which they view as essential for recovery. and the value of related toxic assets.
In Dec, 40% of second-hand houses sold in the US were in the West, mainly from foreclosures.
Debt deferral and a moratorium on payment, for people who lose their jobs should be considered in Ireland. In those circumnsatnces, all that would concern people is keeping their house rather than looking for a write-off.
I agree with other posters, that the asking prices are still crazy and keeps Ireland at the top of the heap with the most expensive houses in the world.
On as related topic, isn’t it crazy that the land rezoning sysrtem, which provides gigantic windfalls for owners of land on European welfrae/diole via the CAP, remains a taboo subject – - more than 11 years after the setting up of a tribunal to investigate planning corruption?
Given the plethora of problems in Ireland, Iceland’s “Saucepan Revolution” may in time seem like Noddy’s playtime compared with the reaction in Ireland.
Some of you have considered packing the old bags…….
Maybe some will apply for political asylum in Cuba, to try to escape the vagaries of neoliberalism and the Western Capitalist model
As for those other individuals, check out this ‘wonderful’ gallery and the money made, in today’s Guardian, butter wouldn’t melt in their mouths – a good exercise would be to do an Irish version – anyone up for it????
The men who made £1 billion as the banks were bailed out
http://www.guardian.co.uk/business/gallery/2009/jan/28/recession-executivesalaries?picture=342424897
&
http://www.guardian.co.uk/business/2009/jan/28/executive-salaries-banking
Some of you have considered packing the old bags.
Maybe some will apply for political asylum in Cuba, to try to escape the vagaries of neoliberalism and the Western Capitalist model
As for those other individuals, check out this ‘wonderful’ gallery and the money made, in today’s Guardian, butter wouldn’t melt in their mouths – a good exercise would be to do an Irish version – anyone up for it????
The men who made £1 billion as the banks were bailed out
http://www.guardian.co.uk/business/gallery/2009/jan/28/recession-executivesalaries?picture=342424897
As a realist I applaud your ideas and fresh thinking but as an Irishman I am forced to begrudge the hand outs on principle.
What about people with no house and high debt levels? Is there anything that can be done for these people to get a morgage in the furture?
Hi
I see that a lot of people are heading to AUS, so I just did some checking up on house prices in AUS. Seems like property in AUS is way way way overvalued aswell.
$400,000 seems to be the price of an average house 3 bed house which is fine, but then again isn’t AUS a massive country with only a handful of people in it. Should’nt it be cheaper to buy land and property in a massive country, I smell a rat in AUS.
Also hear that people in Sydney are struggling to fined homes to rent, something to do with planning difficulties and laws so demand exceeds supply.
Can someone tells us more ?
Australia maintains very tight planning regulations, which does tend to restrict supply.
Geograpically, Sydney is a bit like Dublin, ocean to the east, weathly people spread up and down the coast, less wealthly spread west (Sydneys western suburbs can be pretty awful), but their spread is limited by the Blue Mountains (or Great Dividing Range depending who you talk to).
Australia had exactly the same credit-driven housing price boom that Ireland had, except that in about 2005 their government started increasing interest rates. I was there at the time, and expected a crash, but actually they got it just right – they stopped the boom without causing a crash. House prices pretty much just stopped! (except for a few exceptions. The mining boom kept prices soaring in Perth, but they are now crashing. Tiny city-centre apartments built for “flipping” did crash, as did some high-end holiday locations).
I can’t predict the future, but the latest info I have is that Oz house prices are falling, but very slowly.
Check out this article on the housing market in Australia:
http://www.dailyreckoning.com.au/australian-house-prices-are-severely-and-seriously-unaffordable/2009/01/27/
bottom line the bubble hasn’t yet burst in Oz so they have some of the most unaffordable housing markets in the world – incudling 4 cities in the top 10. by the way you’ll all be glad to know that Ireland manages to still get 3 entries in the top 60 with Dublin ranked no. 32, Galway at joint 42 and Cork coming in at 51.
The good news is that rents in Oz are Cheap!
It’s thanks to a controversial tax oddity called Negative Gearing, whereby if a landlord loses money (ie. the rent doesn’t cover the mortgage), they can subtract the loss from their other income pre-tax.
D McW – “The country finds itself in a conundrum.”
Quite a statement – how about ‘the country finds itself in the greatest financial bind in its history, coupled with the greatest financial swindle from the public to private sector”
It’s interesting that as a single, PAYE worker on the average industrial wage without a single property, no debt, and who lives modestly, I am being asked to contribute to this bank (societal) bailout.
In addition, there is talk of the pensions of public sectors workers being altered (most likely unfavourably), plus I am threatened with the strong possibility of increased taxes both directly and stealth ones (which always materialise).
I suffered during the boom time at the hands of greedy politicians, estate agents, solicitors, ‘property developers’, the media bandwagon and their newspaper property supplements, business guru’s, pushy ‘teamleaders’, ‘property developers’ and builders who were responsible for vastly inflating house prices (the average house is 10 times my income) and then with the early budget I am taxed all over the place to pay for this mess.
I am attacked by IBEC who say I should be glad I have a permanent and pensionable position (what is Turlough making by the way or the corporate elite he represents?) and on the other side of the ring I am told to do my patriotic duty by an idiot who loves inappropriate clichés (only thing to fear is fear itself – the thing to fear my little friend is an inept, overly pro business government). Never mind that this is the same person who is up to his neck in it as a senior member of Fianna FAIL, who facilitated this entire economic shambles along with a bulldog of a taoiseach who makes more per annum than any other leader in the Western world, including Obama, Brown and Sarkozy.
This is more than a conundrum David, this is farce layered on absurdity, with some comic tragedy thrown in!
This may be the only game in town, if we can’t devalue and it still may not be enough to stop us sliding further into oblivion. I heard recently, that some councils are paying mortgages for people with families that have been made redundant – it makes a lot of sense, as it would cost them the same amount to re-house families in social housing, which in some cases could be on the same estate. I don’t know if it would be a runner Dublin, as mortgages are way higher there than in the provinces.
No matter how you look at it, though, it’s a let-off for a profligate government, their builder and bank buddies – it’s a bitter pill, but we may have to swallow it.
It won’t address the competitive problem, in fact it may reinforce it, by keeping the housing market floor artificially high.
Gentlemen,
We’re in the mire brought on by hubris, accept it , forget it and move on.
What is the most we can now hope for? Perhaps a survival level standard of living, or is this too ambitious? Think horses and carts on the backroads of Eastern Europe… We currently do not have the potential to hope for a hell of alot better, our manufacturing base is in rags, and dont anyone tell me they think this process has stopped yet. Without a substantial drop in our costs base we cannot hope to aspire to even a very modest standard of living.
The British copped on to this situation very early on, they have devalued and become very competitive, unfortunately its no good being competitive if no one can afford your products, or indeed the market for them has vanished. However at least they are trying, what are we doing except ringing our hands and playing the blame game?
Bad Pale – Dun Aengus and The Pale are on the same lattitude .The last time we had a serious Depression Dun Aengus was split in two , the other half fell back into the sea .The financial richter scale measures the greater pale to be the center of gravity of the present depression where the maximum implosion has occured and where the sentient bankers all live that caused the blunder.This Virus must be contained and not allowed to contaminate the rest of The Isle .
So , I am proposing that we should have a Bad Pale and Dump the Bad Loans there where they are and leave them rot where they belong .Allow the Bad Pale leave the EU and carry the MAN-Ure it has created and allow the rest of The Province to live without burden and free of constraint of the Bad Pale and that would allow the existance of a two tier Canton within a New Republic .
To-morrow is Moon Wobble Day .
JohnA
How do we best prepare for the wobble?
Is a wobble a good thing or bad?
Where can I get more info?
Ireland’s Economics 2009
Unemployment increases to over 15%
Unstoppable Chain of Bankruptcies
The Gov will have to Give Up most too Big -to Save Cos
Central Bank to borrow up to €80bn to run the country
Irish Stock Exchange to cease to exist
Real Estate Collapse will enter a new more advanced stage >>>>>>>>>>>>>>>80% devalue of MV 2007
Great Financial Bog Bowl striking All forms of INCOME
Moon Wobble started on 20th Jan to 29 th ( D DAY ) you can google it and you can learn
Take this for brass neck!
Cowen in the Dáil today: “There is little point in looking back at how some of this might have been anticipated or avoided.”
http://www.finfacts.ie/irishfinancenews/article_1015801.shtml
The IMF forecasts global growth will fall to 0.5% in 2009:
http://www.finfacts.ie/irishfinancenews/article_1015799.shtml
If the Greens achieve anything from supping with the Devil, then let it be electoral reform. After all, Gormley himself is in charge of the Dept of Environment and Local Government, and his brief extends beyond the narrow remit of light bulbs. If we were to extend the franchise to allow the vote to Irish emigrants who still have their passports (happens in many countries, including the US), and if he allowed the postal vote for those out of the country at the time of elections (almost all civilised countries allow for this), then at least the people forced to take the boat can register their disgust at the outright theft of their future by FF over the last ten years. If the Greens have any sense of dignity at all left, then they know that hobbling FF for the future would be a much greater act of patriotism than dull bulbs of low wattage.
Fergus,
That all harks back to Article 45 of the Constitution whereby the good of the Irish people as a whole should be looked after. Not just those fortunate enough to be the right side of the “Insiders”
And who wrote the constitution again, remind me?
As our nation’s glourious anthem has it: Sinne Fianna Fáil……
Furrylugs – you are right. The concept of solidarity. Amongst all people – that people shall be allowed to progress according to one’s merit, hard work and honest endeavour.
Price fixing is the real treachery. Price fixing is unconstitutional. Price fixing is wrong.
Implement Competition Policy. Against the supermarket groups who refuse to publish public accounts to the citizens. Yet overcharge to a ridiculous level.
Article 45 should be implemented on the retail sector. And the “builders bailout” is clearly in breach of the constitution.
Reviewed the Sunday Indo – seen interesting details of loads of class actions be instigated against bank directors, IFSRA, various accountants, etc… Some transparency to follow, hopefully !!!
The United States War of Independence was fought on the basis of “No Taxation without Representation”. On behalf of all us stupid, stay at home Irish people who remained in this country through thick and thin, I say to all those clever, adventurous, educated people who fled to look after themselves, over my dead body will you be allowed to have ANY say in the affairs of this country unless you pay your taxes here and are equally affected by the decisions made by native government!
we need a legal opinion on sect 45 of the constitution to understand what it really is ….can an outsider give on? eg from kings inn? so many sc from d fail party around its stifling to contemplate
My understanding is that it is not enforceable by law, full stop.
David McW – you mean well in trying to chart a way through all of this mess. But we have to accept the fact that there have been serious misallocations of resources within the Irish economy. And this has to be corrected. This is what the recession really is – a disease brought about by misallocation of resources. Compare us to a similar country like Denmark (though Denmark has civic responsibility where we just have gombeenism and pride). In Ireland the current crisis has revealed that we have serious impediments to recovery.
1) A serially mismanaged public sector.
2) An overbearing and highly bureacratic state.
3) Oligopolies in a massive area of the economy.
4) A tradition that regulations and laws prohibiting fraud and corruption are either excessively lenient, or quite simply never implemented.
5) An overbearing cost base as a result of excessive margins – commonly referred to as “RipOff Republic” by Eddie Hobbs.
6) Political parties that are not even remotely clued in to economic matters.
7) Bad planning policies, which are another cost problem in themselves.
8) A persistent lack of meritocracy which destroys the soul of the working people, and places idiots in positions of responsibility.
9) IBEC and ICTU union bosses deciding economic policy to an undue level – to the detriment of the exporting sector.
10) Insolvent banks (which should be dropped and allowed to disintegrate).
I put the case to you, that Reform of the Institutional Framework needs to be reformed. David, your proposal cannot be implemented in light of the current culture in the institutions of the state, much less the culture of Irish banks.
When I read that the State must carry the cost for anything – I always read the PAYE taxpayer.
You are correct concerning insiders and outsiders. The basis of the Roy Keane-Saipan debacle, with regard to the faultline in Irish society with regard to the deficiencies of authorith in Ireland.
The first thing we need to accept – The Irish Concept of Management HAS FAILED UTTERLY. Shane Ross has been predicting this for years – and saying as much. And the Great Senator has been proven correct. In thirty years time there will be streets named after Shane Ross, and sewers named after those he lambasted. And Ross is correct about IBEC being a quango for the private sector – a club of cronies who are feathering their own nests to the detriment of the rest of society….
The Second thing we need to do – Implement Article 45 with respect to all the price fixing that is in existence in Irish society.
Last thing – 79 Council workers laid off in Kildare yesterday – clearly they were not insiders. For insiders, I read those that have already scelped the general public with price setting behaviour.
We need Eddie Hobbs to take on the vested interests again.
Arise, you little twerp of Cork craftiness – your country needs your strong opinion to rip assunder the oligopolies of Ireland. We need Hobbs to rip apart our high cost base – and allow us to deflate the margin fixing that is killing the Irish economy.
Sorry Deco,
His county needs him even more to sort out the goddamn cork county board!
Forget it. Thats up to Fatima.
There are numerous reasons for not letting people off debt – the most obvious being that it sends a strong signal that debt does not, in fact, have to be paid back.
But David is basically right, there’s no point in declaing half the people in the country bankrupt, or in repossessing half the houses in the country. So something will have to be done.
My suggestion is that the terms of mortgages be dramatically increased, perhaps to 200 years.
That will reduce monthly payments to a manageable level.
When the mortgagees die, any outstanding debt is forgiven, and the house becomes part of their estate (perhaps life insurance can help with this?)
If the mortgagees become rich (perhaps by winning the lotto?), the bank can still claim it’s money back.
Before you go “but they’ll be in debt forever”, plenty of them will be in debt forever anyway, they stand no chance of ever paying off their 40-year mortgages.
But most importantly, it buys time for inflation to work. At some time in the future, inflation will take off in a big way, and all that debt will shrink to almost nothing anyway.
I’m talking, of course, about existing mortgages. Issuing new 200year mortgages would be just stupid.
not if work work on modifying human genetics and the efforts to prolong life work out, we could all be around for a lot longer and the banks and employers would be delighted, wage slaves for 200 years, now that’s the kind of business, outside the box thinking we need!!!!!
Wage Slavey
http://en.wikipedia.org/wiki/Wage_slavery
Usury
http://en.wikipedia.org/wiki/Usury
not if work work on genetics and the efforts to prolong life works out, we could all be around for a lot longer and the banks and employers would be delighted, wage slaves for 200 years, now that is the kind of business, entrepreneurial, outside the box thinking we need!!!!!
Wage Slavey
http://en.wikipedia.org/wiki/Wage_slavery
JohnA
I have Googled M/Wobble and can only find reference to astrology, can you direct me to a more specific site re scientific basis of m/w?Thanks
George
George Chavvy :
Hope this helps
- http://www.astrologysoftware.com/resources/articles/getarticle.asp?ID=77
for the political ignoramuses and for the record there does exist ‘the killing fields of irish slavery’ in westmann islands
s.e. iceland and their evidences are abound and include stone engravings completed before their untimely death
only the cold wind and rain guard their souls
Wicked festival there in August though.
Globalization
The poor complain
They always do
But then that is idle chatter
Our system brings benefits to all
Well,
To all those that matter
Epitaph to the Tiger
I haven’t read all the replies but David McWilliams, in this article, seems to forget who his market it – the people who listened to him during the boom and didnt buy. These are the “insiders” he didnt mention. Stayed to rent. Wating for a fall in prices.
The others dont like him anyway so it makes no sense to support them now. They didnt listen, and they are not going to thank McWilliams now.
Also, David low balled the 200K deliberately. That would have bought a dog kennel in Crumlin during the boom. Since he believes there are 24 months of severe falls to go, and since Irish property has crashed already ( by 30% according to Estate Agents) the total fall from peak will be 50%, or more. So it needs a 100% increase to recover. In some cases that will not happen, in most the nominal increse wont happen for a generation. This means the bank loses money on the original debt write down, and the mortgage repayments but there is no capital appreciation for the Government for generation(s).
The last point is that it is unworkable. The government is not going to take it’s Stake back, if this happens eventually most people will vote for a party who decided to forgive the loan guarnatee.
Uro Storm
before the tetronic plates divide
a sound is heard far away
only the bird listens
and the waves dance
and the fish swim
and the boat swings
before it sinks
to the bottom
Irish Killing Fields :
http://www.fotosearch.com/bthumb/ICN/ICN273/F0025589.jpg
Here is the location of where Irish Slaves including Monks were slaughtered
I’ve read “The Builders” by Frank McDonald and Kathy Sheridan, a great insight into the whole fiasco. A real lack of perspective is at the core of the problem – to quote Ray Grehan of Glenkerrin Homes -
“But housing is a commodity like an Intel Chip. If it’s scarce the price goes up”. This guy is obviously one of Berties Space Cadets and the space is between the ears. Comparing housing to a microprocessor is infantile in the extreme, but the government obviously went along with this illusion and that’s why we’re in such serious shit – they don’t know their ass from their elbow.
True Story. Saw “The Builders” for sale at é20 and said nahh too much, but later they had cut the price in half so i bought one.
As commented above, David is doing what he always does which is bring original thinking to the problem. in the same way that he is not suggesting he leave the Euro, he is not suggesting debt forgiveness. Just that we get somewhere by looking at all possibilities.
In all the chaos that is Iceland, I read in The Guardian that house prices have only dropped by a a third.
Westmann Island – Heimaey –
On 23rd Jan 1973 at 2am two drunken islander men went home walking after a local celebration and while walking one looked sideways and thought he saw a falling star .He took no notice of it .He then saw a large spark .This caught his attention so he told his pal what he saw only to be laughed at and that he must have drunk more than he did .Again he saw another spark only that this one was bigger .So he told his pal again and his pal told him that he was drunk and not himself.
Five minutes later they both saw a very very big spark and flame and were both shocked to see each other’s faces that indicated neither were too drunk to recognise what they both saw.The spark shot up from a low undulating piece of barren ‘field’ .Then more sparks flew out and became more frequent .They were both shocked in silence and lost for words and wanting to believe that both were dreaming .Somehow their senses registered and they ran towards the main part of the town shouting at the top of their voices telling everyone to get up.Some of the townsfolk woke and when they saw who was shouting they shouted back to go home and to bed.The men were determined not to fobbed off so they persisted and went around the street making as much noise as they could.One of the villagers decided to get up and go out to give them a piece of his mind and in doing so the two men brought him over to within the view of the sparks and flames that by now had increased into a small inferno .This man was equally shocked and woke up the island fireman and others .There was only one main telephone line from the island to the Capital Reykjavik and the City Fire Station was awakened by the local island fire brigade team and told what was happening .The city firemen would not believe them and told them that they were all too drunk and to go to bed .
More telephone calls followed to various City officials until eventually they were taken seriously .The island population was then 5,300 and the next day boats arrived from the mainland to ferry people away .Over a few days most were lifted to the mainland including the few island animals .
As the weeks passed the Inferno increased and lava flowed and almost blocked the whole harbour entrance .Nobody was killed but many many homes were burned and destroyed .The inferno stopped in July of that year and the homes of 2,000 people were burned .
The purpose of this storey is that it took two drunk people to save the island because they were responsible and acted immediately and they had the will to do good and cared for their neighbours and gave great leadership and team work .
Do we have teamwork, leadership and elected responsible representatives or are ours just only drunk?
http://www.nat.is/images/gos_vm.gif
this idea does not make any sense , where do you draw the line ? Bailing everyone out with no consequences for bad financial decisions . What about topping up peoples pensions which gone down in value , what about people who lost investments in the stock exchange ? What about companies like Waterford Crystal ? I mean this proposal would have no positive effect other than transferring wealth from the very poor to the well off.If these people do not have any jobs they will not have any jobs after you give them the mortgage money , We are missing the point with amateurish proposals like this one. The real problem of this country :it is uncompetitive , inefficient and run by cronies of a small elite group who represents very small minority of the population. They are the people to be taxed , property tax definitely on all owned properties. We need to get competitive again , privatize large parts of public sector , open to competition . Cosy protected sectors of banking as well , so called professionals sector , solicitors , doctors etc , open these to competition as well. break all monopolies which created this excessive pricing of goods and services. By just doing these and decreasing tax rates on ordinary people we can achieve some level of competitiveness . if we are still heading south , maybe we might have to get out of euro and do an old fashioned devaluation of our new currency EL Punto, around 30%. We also need to nationalize assets of this country like natural gas and oil fields , instead of useless banks like Anglo Irish . We have natural resources unexploited as well. Norway is a good example how this could be used for the good of the country,
Quite a good idea, but with a bit tweaky it could be better.
One of the other big problems with the economy is that we have also priced ourselves out of being competitive. So heres the deal – everyone, EVERYONE across the board takes a 10% pay cut, national minimum wage is reduced accordingly.
In return, everyone who has a loan with a bank gets the principal reduced by say 30% through legislation.
In a stroke, Irelands economy becomes more competitive, the banks get whacked where it hurts and deservedly so and are effectively forced to write down their loan books to more realistic levels.
Not only that, even though everyone has had a pay cut they have effectively increased their purchasing power. Ditto for those who do not have any loans at all, they will have the maximum increase in purchasing power , cars and household goods are cut.
The economy will start to move again with this extra purchasing power.
Some wages – in some sectors of technology for example – are already internationally competitive as they have been influenced global disinflationary forces for some years now. In these sectors, the outcomes of the benchmarking circus were and are irrelevant ; rather their wage levels are determined by international competition (and the trend for the wages of first world participants in this arena is down).
The everyone you refer to should primarily be all people whose employer is the Irish government, and those who have been stakeholders in benchmarking, who benefited most from the temporary windfalls of the so-called boom.
Also, how do you think the market would react to across-the-board debt writedowns of 30% in the current market, and what effect do you think this would have on the taxpayers recapitalisation of these institutions?
Paddy
Yes I agree, ‘some’ wages are already internationally competitive, but no doubt a 10% cut would make them even more competitive – the crucial point is that we dont lose our most talented people to generous offers abroad. We can do this by penalising the banks by a 30% write down of their loans books.
You ask, how do I think the markets ( I assume you mean the stockmarkets) would re-act to across-the-board writedowns…well, the answer to that is that the markets have already re-acted to this. Prices have crashed to a micro fraction of what the banks were worth at the peak of the boom. The reason for this is the expected eventual writedown of loan books.
As soon as the banks face up to the realities, then the sooner we can move out of this mess. So in short, I think the markets would re-act positively.
As for singleling out public sector workers as the prime recipients of wage cuts is a misnomer. The reality is that one way or another private sector wages are already being cut and a downward pressure on wage rates is the order of the day – certainly if public sector wokers have their wages cut then this will al resolve itself sooner than later.
Ultimatley, by cutting wages across the board, it will restore Irelands competiveness (or make it more competitive). The banks will be forced to face up to their own contrived mess, and the purchasing power of workers will increase inducing economic activity.
PaddyThePig, I fear that you have misunderstood the “Benchmarking” exercise:
It was devised to “curtail the public service pay and pensions bill”; that is according to the “Fitzpatrick Report to An Taoiseach, 1998″.
The LIE is that benchmarking has improved the pay of public servants – it HAS NOT!
Do the maths on the pay “increases” that nurses, gardai and teachers received since benchmarking started: you will see that
1) Their pay has DROPPED, relative to inflation and GDP;
2) The “Golden pensions” that they have, they PAY for! ( The LIE says they get their pension for FREE! – LIE!)
4) The latest benchmarking exercise DISCOUNTED public service salary by 12% because, it said, that was the value of the PS pension.
So, the public servant, who pays for his pension, was “charged” an extra 12% wages for his pension by the benchmarking exercise.
STOP believing the “spin” that public sector workers are the cause of our economic difficulties, and that taking money from them is the solution!
BOTH of the hypotheses are LIES.
The wealthy top 7% (or so) of people in Ireland, their D4 buddies, “Golden-circle” lads, government INSIDERS – including Trade Union Bosses – have stitched us all-up.
We MUST stand TOGETHER against them!
we .have to get our competitiveness back to what it was 10 years ago. The country has become cookoo land over the past few years. We have the highest national minimum wage after tax in europe. Who do we think we are, we are almost 50% as high as the usa and thirty percent more than the uk. Wages from the top to the bottom of the scale need to be reduced by at least 5% if not 10% the cost of living is comming down so should wages. all labour intensive businesses have at least 3o% more on wages to pay compared to our rivals. Its also a joke that the esb have passed an increase of 3% on to thier staff this week when the average wage is nearly 80k per annum. Last september they increased tariffs by 20% from the previous year. Oil and gas has come down so should electricity. Semi state owned so they can do what they want the sooner the line from england comes the better .
We all have such marvellous plans to solve our financial problems; we promise our poor that we will look after them when we get into power. Power corrupts greed sets in and promises are broken. We as a nation have welcomed greed with open arms and have forgotten where we have been. Once greed has started a journey it completes its course, when we think we have hit rock bottom greed is only half way through. Currently greed is figuring how to maximise its profits from the people who have lost their jobs and can’t repay their mortgages. It will throw our citizens out on the streets without blinking an eye. When will we ever learn?
David, I think that this id the best article yet.
It is totally practical and self-explanatory;
It touches all bases, yet, excludes no-one;
It shows the way/ the solution, yet allows comment.
I have been screaming for stimulous, but unheard; people still have money (and lots of it!), but they are AFRAID to spend it due to the media spin. Car-sales this month is only ONE example.
The government plans to cut pay, services, and increase taxes (oops, already tried that, with the levy and the 0.5% VAT increase!).
That did not/does not/will not work.
Get people SPENDING money again!
Do NOT cut their “cash-flow”! (even the current situation with banks will allow a few thousand euro of a loan to most people, so they can carry-on. Loan to the businesses so that they do not have to let people go).
Well,I’ve been living in Ireland for nearly 12 years and I’ve experienced already two redundancies
here ,which helped me subtantially to purchase not only the actual house where I live in Ireland,but also
a summer house in Croatia .The actual price of my house in Ireland is decreasing everyday,to the point to where
my house in Croatia is actually more valuable now. But the point that David is making here (which is contantly roaming
in the back of my mind since these last few months )is that I might probably lose all my properties in case
I’m becoming redundant again.
Oh whatever happened to the “soft landing” Bertie, Brian and all those good guys so assuredly promised would come to pass not so long ago. I’d hate to see the hard landing.
I like the lateral thinking David, but I dont know if it really takes into account the complexities such a move would throw up – it sounds like it would massively reduce people’s mobility (if they do actually have any left), life assurance premia would increase massively as the risk of people not paying of their mortgages until later in life (a riskier time to be carrying such debt) increases etc. That said, it is time for the banks and govt to start thinking creatively and offering up new solutions to what is, lets face it, a new problem in terms of the massive impact it is going to have. I write this as the IMF reports the world’s economy is now at its lowest growth level since the end of WW2…the ‘D’ word will be long shortly I fear… :-(
At least someone is thinking Denis.
Quote from Brian Cowen in the Dail today: “The critical mass we are building means that R&D investments accounted for over four-in-ten of all new projects announced last year by the IDA,”
See R&D is the future isn’t it? The smart economy, the knowledge economy, that will get us out of this mess, won’t it? So why don’t you just go ahead Brian and hand over more good taxpayers money to those multinationals who already enjoy minimum corporation tax or to a few college professors for their pet projects so they can justify their high salaries and get on RTE and tell us what great innovators we Irish are. No problem there Brian, but aren’t you forgetting one thing? What about the rest of us? Could you tell us exactly how does research at Intel/HP/IBM/Dell trickle down to the rest of us? Where do we fit in? Is there any place for us outsiders?
signed,
An Outsider
Thank you Outsider.
Common sense.
And the anger is palpable. All the new posts are a sign of the anger.
It is supposed to be an economics forum but DMcW is becoming more and more political by the day.
To those who have no choice but to go, please remember why. To those of us who must stay, take no prisoners.
Ferrylegs??
Are you claiming the shanks of Roxy Music’s lead singer now?
Heh Heh.
I was waiting for the comment.
Sussed.
Busy here today…
Good article and good idea David. Was talking to an ‘insider’ over the weekend and this very idea came up, so it might be a runner.
In other news Davos kicked off today, Mr. Putin’s speech is well worth a look.
http://www.weforum.org/pdf/AM_2009/OpeningAddress_VladimirPutin.pdf
“Was talking to an ‘insider’ over the weekend and this very idea came up, so it might be a runner.”
The understatement of the decade???
Hmm.
What we need to do is create real ‘demand’ for residential and commercial properties but it seems to be more ‘waffle’ from our ‘leader’ about the IDA and new R&D projects, which we all know won’t create many sustainable jobs now.
The problem is none of these politicians or social partner ‘leaders’ ever worked in business and don’t understand !
A solution is for the IDA to get there ‘finger out’ and promote Ireland as THE tax effective country in Europe for business.
Here is a $250 million revenue company with 700 employees planning to create 50 jobs in Ireland.
http://www.entemp.ie/press/2009/20090122.htm
There a 1,000s of companies like this around the world looking for a tax effective location to manage their international business. Why are the IDA getting 100’s of these companies instead of about 30 last year ?
One question I would like answered if there is no/low inflation, private sector wages dropping and prices are dropping why then are the government planning to spend €49 billion in current expenditure in 2009 up from €44 billion in 2008. So these proposed cuts / savings are just taking back €2 billion to a revised forcasted spend of €47 billion.
The government plan to get back to €43 billion in tax revenue in 2013 from a low of €37 billion projected for this year ?
This is a ‘side show’, why not ‘freeze’ all incremental expenditure and go back to evaluating all projects on a value for money basis. In every business where revenue is below spend by a magnitude of 20%, there is no spend increases!
well considering we comprise less than .09% of the global population landing 30 of these international companies is probably above average.
Then you have to take into account the great welcome that we’re giving all these foreign business people:
http://www.independent.ie/national-news/us-economic-bigwig-warns-were-sick-of-your-americabashing-472739.html
It’s not all about the bottom line….
We do in our Swiss need to “create” a demand for property. Faecal matter like your statement frightening people to buy at crazy high prices got us into this mess in the first place.
To clarify the only way ‘create real demand’ for property is to have an economy which is growing with more employment and opportunities to export, I’m not advocating artifically holding up property prices. But now the government have guaranteed all the banks liabilities when they right off loans taxpayers will ultimately pay.
The days of borrowing €2 billion a month on residential mortgages to prop up the economy are over, we have surplus requirements. If we don’t focus on stimulating the economy with more jobs and just become a below ‘average’ European we will spiral into a postion of employment back at a level we were in the 1980′s.
We employ just over 200k in industry/manufacturing today in ireland. Back in 1981 we employed 220k ! In 1993 there was 200k working in industry, 230k unemplyed while 1.2 million in total were employed in Ireland. Last year, it was as high as 2.2 million and we now have 300k unemployed with conservative estimates this will rise to 450k. The extra 1 million employees are now at risk as there jobs have been financed by borrowings.
1984 was the year with the highest redundancies ‘reported’ in ireland of 35k – over 20k joined the dole in December and later this month we will find out that even more joined the live register in January.
I believe the only way to reverse this trend is ‘aggressively’ market worldwide as the destination to do business. Rising unemplyment will not stop until we find a mechanism to play to our strengths and make Ireland the destination of choice to do business using TAX incentives focused on productive companies and providing all types of opportunitie for people to work.
If the Government now increase income or corporation tax this will not happen for a very long time – social partners need to consider this before forcing the governemnt’s hand into make our economy more uncompetitive !!
Malcom McL> Mr Fanning is opposing a court bid by the bank to gain possession of his home on 24 acres in Co Kildare. An article in yesterday’s IT implies that even millionaire’s mansions are so protected.
Malcolm, yes, the law does protect a person in their family home, as in one cant be forcefully evicted IF they have no other means of abode. However, in Oisin Fannings case the 24 acres of land around his home and ALL other assets can be possessed, and its questionable whether a court would deem that he must live in the said ‘expensive’ property or whether it could be sold, and a proportion kept for the presumably zero income and zero asset Oising Fanning who could acquire a property close buy.
However, its all down to judgement at the end of the day and the judgement can vary depending on the judge and the court, and how persuasive the barrister and other briefs may be ……
Laws in this country are maleable ……. we have stayed far from the Brehon system and oter natural justice systems culturally and are closer to London than Tara.
MK1
Seems you were right (again) MK1.
Court allowed the reposession today.
MK1: I am curious when fellow bloggers mention the Brehon code as I’ve dipped into Senchus Mor occasionally and have a reasonable understanding of the pre-medieval ‘Celtic’ way of life. There were no written contracts and they had no sense of widely recognised personal property. The law was based on Enechlann, an individual’s Honour Price, and was defended at quarterly Oireachtas or Assemblies where individuals disputed their Torts before the Brehons. Judgement would result in a fine, settled between the individuals and resulting in an increase in the Honour of the successful litigant and a decrease in the Honour of the unsuccessful.
One wonders just what the Enechlann of our politicians would be if brought before a Brehon court tomorrow?
Ok, first of all, Lorcan Roche Kelly is so far ahead of the posse that we should all be slightly deferent.
Now. All Vladimir Putin said today is what I have been saying for months. America has got it wrong and get over it. Move on. If you don’t move on and try to shag my country, I’ll nuke you. Your western business model has failed so don’t try to stick it down my throat.
Russia will do what it always has done. Our own thing and bugger the rest of ye. Global crisis my bum, We’re Russia and we’ll survive because we do what we want. Democracy my A**e.
Oh. BTW. Our best mates, the Chinese, tell me that the Yanks want to borrow Zillions to prop up Western Capitalism.
Ho Ho Ho.
Deference might lead to complacency on my part, so not to be encouraged.
On the Putin speech, I particularly noted this line “This means that a system based on cooperation between several major centres must replace the obsolete unipolar world concept.”
Which to my mind roughly translates as “US, you’ve had your chance and you’ve blown it”
On another note (and apologies about getting so far from the topic under discussion here) but I did enjoy this article from the FT.
http://www.ft.com/cms/s/0/efe1a910-ed98-11dd-bd60-0000779fd2ac.html
Talk about divided loyalties for the poor gold-bugs. They hate the hedgies, but love the gold. What to do, what to do…
What I took from that article Lorcan, is a no-vote in fiat currency. Worrying.
I wasn’t aware this was a competition for who’s top of the class!
‘S not Colin. Bit of mental jousting. Thats all.
Davids proposal does have a moral dimension but to his credit he has proposed an idea which goes back to the very core of economic theory.He knows Im sure that all proposals must first engage the politicians and by that I mean “the political will must be there to make it happen”.He knows the Banks are badly wounded at present and are causing a serious problem with regard to Monetary policy.He also knows that the level of economic activity accross the country is reduced because of the reduced spending of over extended first time buyers{ they do represent a sizeable chunk of Irish society} Brian Linehan has set aside a certain amount of his Fiscal budget to re capitalise the Banks so how does he get most bang for his buck,and not breach competition law,or antagonise his fellow Eurocrats etc.David proposes Linehan gives the money to the Banks but instead of them propping up their own balance sheets with it,he forces them to pass it onn to first time buyers and through them(disposable income) back out and into circulation in the general economy,there by stimulating economic activity and stopping some of the unemployment that would happen otherwise.The upside for the Government (taxpayers) is the money would be reimbursed over time as house prices rise,plus the interest being charged to the Banks would also find its way back to state coffers.Government Bonds to pay for this would be raised from a less hostile market.The upside for the Banks is the setting of the floor on property prices against which their loan book would be measured.Their risk of Default would be lessened.Their tradeable position would improve.The market gets a resounding message that they wont be nationalised and they can expect a good rebound on their share price.I know some of you will cry foul regarding the first time buyers but remember they CANT cash in any house price rise until the Taxpayer and the Banks get back their investment.As a side note these measures should reduce pay demands from stressed first time buyers and there by help reduce our cost base.This Fiscal stimulus will help the Government both economically and socially and as such gets a huge thumbs up from me.For those of you who need an economists opinion you just got one.
This is a crazily stupid idea unless I can borrow a few million go on the dole and cry and get debt forgiveness. I will now buy a magnificent house valued at 20 times my income using the last penny of someone’s elses savings.
The fuckwits who boasted about their savvyness are now (justly) getting roasted, Privatise profits and socialise losses.
Buddy spare me a dime. Indeed.
Today if You SHAKE ……You WOBBLE
Welcome to MOON WOBBLE DAY
Everything going well so far John.
Sorry to be totally off the subject, but I read this article and I thought it might be of interest to some of you:
“THE ULTIMATE ALTERNATIVE ENERGY
by Patrick Cox
Contrary to the common misconception, we have no energy shortage. In fact, we have more energy available than we could ever use. If not for the anti-nuclear movement, the funders of terrorism would not be awash with petrodollars and our economy would be significantly stronger. Unfortunately, rock musicians and actors had more influence on energy policies than scientists like Petr Beckmann, whom I was lucky to have as a friend.
Dr. Beckmann was a Czech refugee from Nazism who spent much of his career in America promoting nuclear power. Until he died, Beckmann was treated as some sort of demon by the environmental movement. No longer.
Today, even green leaders are admitting the folly of rejecting this cheap, clean and safe (when compared rationally with other energy sources) technology. If there were justice, Beckmann would have statues erected in his honor.
The green turnaround on nuclear power is particularly relevant now. President-elect Obama has picked several global warming activists to serve as top officials. The most important is Harvard physicist John Holdren. As presidential science adviser, he could have a significant impact on energy policy. His career, in fact, has focused on climate change, next-generation nuclear energy and nuclear disarmament.
From the perspective of an investor, what does this mean? Among other things, it could rapidly accelerate the transition from the current generation of nuclear power plants to the next. I would, incidentally, never invest in a technology simply because it has political support. Ethanol, for example, had lots of it. It was never a good idea, though, and is finally being recognized as such.
Nuclear power as we know it today is obsolete. Current light water reactors use uranium-235. This fuel is not only expensive, but its byproducts create problems. They are difficult politically to handle and can be used to create nuclear weapons.
Those byproducts are, ironically, the reason we initially adopted uranium-235. America needed the materials for nuclear weapons. Power plants using uranium-235 provided them. Regulators, naturally, favored the technology despite the fact that there were superior fuels – especially thorium.
Thorium is not only far more abundant than uranium-235, but thorium reactors do not produce waste materials useful in nuclear weapons. In fact, the wastes are far less hazardous and much cheaper to deal with. Thorium reactors are safer in general to operate, producing little radioactive threat outside their shielding. They cannot, in fact, experience a catastrophic meltdown.
This is a much bigger deal than it appears on the surface. Fuel costs, though much lower for thorium, don’t play much of a role in total nuclear power costs. In his book The Nuclear Energy Option , Bernard Cohen estimates that safety measures to counter meltdowns account for about 75% of current plant costs. As thorium plants can’t melt down, energy costs would be significantly lower.
Additionally, thorium reactors can be almost any size. Prototypes have been made small enough for military aircraft. This makes them economically viable in developing countries without the additional cost of large-scale electrical infrastructure. Thorium reactors would also be easier to sell internationally because they cannot be used to manufacture nuclear weapons.
The shift to thorium would facilitate economic, environmental and nonproliferation causes. So why are we still building plants that burn uranium-235? This is one of the hazards of government involvement in the sciences. Once grants and regulatory attitudes that favor a technology are in place, they are huge barriers to competitors.
A free market would favor thorium over uranium anyway. Coincidentally, Obama’s administration could significantly reduce barriers to thorium energy production. I’m looking hard now at several ways to take advantage of this development.
There is one potential wrench in these works, though. It’s nuclear fusion, and it could change everything. The fuel for fusion is essentially free, so the cost of power generation is a matter of capital costs and maintenance. I’ve been a skeptic about the economics of fusion, but that has begun to change. It appears that early research grants may have derailed and forced out more promising and cheaper fusion technologies than those favored by various governments research efforts.
For transformational profits,
Patrick Cox
for The Daily Reckoning “
Thanks Nono.
Welcome to the Thorium World.
Hi Nono
I work in the Pharma industry. One of out biggest costs is labour, however an even bigger cost is energy. Energy costs are a significant factor in Ireland’s competitiveness. This fact does not seem to get much coverage. The government needs to address energy costs now, or we will be in for another crisis in the near future, when oil and gas prices rise, or if Putin gets the hump.
Nuclear fusion and thorium for long-term energy
sources will be nowhere near a commercial fuel cycle until
late this century.
Too many vested interests in maintaining the status quo, I fear.
If the energy is efficiently and cheaply produced, how do the vested interests/insiders get rich and continue to fleece us? We are told, at the moment, that the reason we have to pay so much for electricity is that it is expensive to generate/based on finite fossil fuels, bla, bla, bla……..
Lip service is paid by government to green energy: the “Grant” for solar hot water being only fractionally more money than the VAT we pay on the aparatus; the fleecing cost of a wind turbine to supply a house (about €30,000).
They don’t want us to avail of green energies, because then the insiders lose out on the fleece.
There’s a way forward with Vortex tubes if anyones interested?
Unfortunately Vortex tubes are not terribly energy efficient compared to a stock AC unit. or so I’m told. Anyway, although this is a technical sub-thread (and I’m loving it, this is my thing, not economics) there is an economic point: I have always been amazed that Ireland does not have an energy/sustainability plan of any consequence or credibility, beyond relying on pumping gas and electricity from the UK.
There is a lot of aspiration but very little in the way hard numbers and facts. (though I admit to not having read this: http://www.energyireland.ie/yearbook/Energy_Policy_And_Administration.asp)
Yes some fair points but as already mentioned by many bloggers- This speculation housing debacle is about Irish borrowing on more than one house and many outside of Ireland !
Montenegro Portugal, Spain, Hungary Poland , France , Slovakia, Malta, South Africa etc etc etc etc
So why should state taxpayers money help these delinquint borrowers!
Maybe set up modern day workhouses to compete against the Chinese and get people working rather than drinking abd being morose and sorrow ! and so making the drug dealers , even more rich!
Also the greed , stupidity , and at times evil behaviour by so many, has contributed to a destructive madness-
as for new politicians with cleaner sheets , and maybe Shane can be one ! this must help in the long run- as the present bunch are to interlinked with banks / government commissiosn , regulators ,EU positions etc etc which has assisted this roadmap of blindess and incorrect morals!
I see here that the top people across the globe are putting their thinking caps on in Davos.
http://www.irishtimes.com/newspaper/finance/2009/0129/1232923372970.html
Apparently, our man is popping over for the feed.
Priorities Brian. Priorities.
“How do we avoid this cleavage emerging in our society?”
Wonderbra embargo?
Go to 42 mins or so in this webcast from Davos, not sure if David was at this session:
http://gaia.world-television.com/wef/worldeconomicforum_annualmeeting2009/default.aspx?sn=7065&lang=en
People are talking about the problems that caused the current financial crisis. A lot are blaming Basle (I and II), and its math models (VaR, etc), and I would agree with that and I have re-iterated it here several times. Securitisation, risk mis-priced and risk mis-rated, poor regulation, exotic instruments, CDO’s, etc …. greed and human stupidity …. oh, and no ethics … and no-one is to blame OR goes to jail.
No surprises …..
It would have been good to see a show of hands at the end of the people that screamed blue murder that this was gonna happen …… WHILST it was happening. There were just not enough people and the human race lemming-like went plop plop plop over that cliff, whilst making ‘virtual’ money …… and investing in future ‘pain’.
20-20 Hindsight does make ‘stupid people’ ‘smart’ …….
MK1
‘developers replaced landlords of old’ – spot on – and now with these same people waiting for demand to catch up with supply so house prices can be maintained. In the meantime, there will be lots of holidays to warm places to check their balances.
Let us not forget history, during the Irish Famine, there were food riots in Cork as foodstuffs were hoarded by the so called Merchant Princes for export around the British Empire. Contrary to myth, a lot of these ‘businessmen were Catholic, at least in terms of the label, but they were doing the devil’s work.
The Irish should do this -
http://news.bbc.co.uk/2/hi/europe/7857435.stm
The social partners seem paid off, the top Union guys are on huge salaries, as one Union guy said in the Sunday Business Post, Begg is more suited for the monastery and is not motivated by socialist principles.
They couldn’t prevent the financial meltdow in this country, the banking corruption, inflated house prices, greedy developers, overpaid politicians – what’s the point of them? To negotiate redunancies? They failed to protect the workers from massive job losses. But they all have these solemn faces – the whole thing is a performance.
We need change otherwise all this hot air on this webpage will be resurfacing in 2 years after the market has ‘readjusted’ and all these greedy b**tards who move paper around will be taking their substantial cuts once again from housing deals.
Interesting to note that Obama delegated the trip to Davos to a senior adviser, Cowen heads off again to listen to the keynote speech by Blair on the benefits of capitalism – what a farce.
What a wonderful idea. Banks should forget half the cost of every mortgage given out over the past ten years because the houses aren’t worth as much.
Actually, my car isn’t worth as much as it was two years ago, I should probably only pay back half of the monthly amount I agreed at the time.
The government could try to force this through as part of a condition for recapitalisation, but McWilliams only talks about the benefits for a very select group- people that bought overpriced houses that they couldn’t afford.
He’s talking about more artificial adjustment to keep house prices high, which is extremely unfair on anyone that waited to buy a house at a reasonable price.
I also note that he doesn’t suggest chasing the builders and developers that have made and put away millions over the past decade for selling a shoddy and overpriced product. They might put on the poor mouth now, but there are millionaires in every town in this country that aren’t worried about the recession
Essentially, this is just a populist article bashing the banks, and suggesting that people aren’t to blame for taking out crazy loans for overpriced property- and this being accepted, it’s not fair to expect them to pay the interest due on the agreed loan.
It’s absolutely infantile.
Please correct me if I am wrong – David McW is a former investment banker who travelled around Russia and Isreael and places during the ‘golden times’ for western capitalism and has reinvented himself as a media/economics commentator.
I doubt David McW in his interview with Kissinger asked him about the war crimes in Vietnam or Cambodia, or asked Jeffrey Sachs about his questionable involvement in Russia in the 1990s (see Naomi Klein’s book Shock Doctrine for more) or enquired of the ‘odious Bono’ (see recent John Pilger article http://www.johnpilger.com/page.asp?partid=520) about his patriotic duty when he shifted his money to Holland – forgive me if I seem black and white but you’re either on one side of the barrier or the other.