May 13, 2009

Collapse in house prices will be good for economy

Posted in Irish Economy · 149 comments ·

Many people in recent weeks have tried to explain what is happening to the economy.

How can we visualise why credit has dried up? How do we rationalise the fact that we went from a situation of so much money we didn’t know what to do with it, to a situation of no cash at all? Where did it all go?

One interesting way to look at this, and this column has used it before, is to think of events in the natural world.

Think of the aerial photos of the Serengeti at the beginning of the annual rainy season. What was a parched arid climate where nothing grows suddenly become florid, verdant and full of life. Animals, flowers insects flourish and the place is abuzz. We see migrating wildebeest, crocs and birds and then, at the height of the season, the whole plain is crackling with energy, fuelled by that most precious of commodities, water.

Then as the seasons change, the water begins to evaporate. Life disappears from the edges of the plain, animals flee, plants die and as the waters recede life recedes with it. In the end, there is only a pathetic lush patch at the source of the river, everything else is barren, lifeless and arid.

Credit in the Irish economy acts the same way as water does in the real world. When it gushes into the various different nooks and crannies of the globe, economic life and vitality springs. So, all over the country, the water of the economy ushers economic vitality in — credit. Anything is possible, anywhere. Money gushes out of the traditional core countries such as the US and Europe and finances projects in the most remote places, giving people hope.

Then the financial season changes, due to the psych- ological interaction between investors’ hopes and fears, and the money retreats back to the centre again, leaving the exposed areas like the high plain of the Serengeti, exposed and lifeless. This process is happening all over the country now as businesses are left to fend for themselves without their lifeblood, credit.

This is why Irish house prices will continue to fall and fall. We are the victims of the retrenchment of credit. No-one will lend to our banks and they won’t lend to everyone else.

Yesterday, I drove to Galway from Dublin and then up to Letterkenny. It was quite a trip, but it gives you a good idea about what is happening in our towns around the country and why the thousands of vacant properties will continue to fall like a stone.

Every single town I passed has a huge ghost estate on the outskirts: Athlone, Craughwell, Oranmore, Tuam, Castlerea, Sligo, Ballybofey, Bundoran, all the way up to Letterkenny. The place is full of them. These houses will never sell for the prices that are demanded. The reason is simple: they are still madly overvalued.

In most cases the houses will never produce any rental income. With unemployment rising so quickly and emigration replacing immigration, there simply are not the people to fill the houses. Even if credit were available, there is no demand.

Also, if we look out a few years, the banks will have to wean themselves off all the money they were borrowing abroad to sustain the boom. For the two main banks this was 160pc of their deposit base. Put simply, the banks were lending €16 for every €10 of deposits. In order to get their capital ratios back to a reasonable level, this figure needs to go back to parity. This financial pendulum swing means billions of euro will be sucked out of the economy in the next few years and not replaced.

So, how low will Irish house prices go? To establish this, we need to figure out what a house is worth.

A house is just a simple investment and should be valued according to some financial benchmark. In America, where they have had booms and busts in every generation, the long-term price of a house is equal to 14 times the annual rent the place can generate. Using this valuation, where could Irish prices go?

So, let’s pick a typical ghost estate area such as Oranmore in Galway. If you go on you will find all the answers. If you want to buy a three-bed semi in Oranmore, it will set you back €335,000. However, you can rent the same place for €800 a month. What’s more, there are 75 vacant three-bed semis in Oranmore advertised on alone.

Using the American valuation method, it implies that the house generates rent for the owner of €9,600. The house is worth 14 times that which gives us a value of €134,400. Yet the seller expects to get €335,000 for it!

In other words, to make it worth your while buying the house, the price would need to more than half from where it is now. We have to assume that the days of large capital gains on houses are over. Therefore, the average Irish house in these estates is likely to fall by anywhere between 50pc and 60pc in the next few years. And even that is assuming that prices don’t undershoot on the downside the way they overshot on the upside.

This is a tragedy for the people who own the properties, and for us, because, ultimately, many of these shells will find their way into the NAMA. However, looking out a few years, the fall in the price of houses will be very positive for the economy.

Cheap accommodation, like cheap energy, is a competitive plus for any economy. In fact, if we look at successful European economies, cheap accommodation relative to wages is the basis of a dynamic economy.

After all, we are amongst the least densely populated countries in Europe. By the time this recession is over we will have house prices that will reflect this sparse population. And the economy will be stronger for it.

  1. gadfly55

    Over the long-term, for those who did not buy, competitiveness improves as less of their income is required for a roof over their head. But for those with negative equity? Of which you have spoken many time, what of their fate? And no government can rescue them, none, ever, so what are the long-term consequences for their families, for their children? Very dim indeed.

    • wills

      They take the bank to court and they push the value of the ‘debt’ down to the new price level the bank is selling the debt at on the inside track markets.

      THey find a good lawyer and understand the banks do not have an equity interest thereby relinquishing the jurisdiction given banks the legal right to re – possess the house.

    • HeavyEnlightenedOne

      The difference between personal economy, and national.

      Negative equity of a home should not be an issue if ;
      1) You’re content to live there, and if you can afford to live there – pending oil price crisis and all that.
      2) If you never had the view that your home can or should be used as leverage. Up until “free-flowing credit”, Irish people only leveraged their homes when met with large fines / judgments, or illness.
      3) If you’re young enough to be in a position to wait.

      The frivolous period may be over, for ever. One might have to leverage their skills if possible, and save for the objects which they think that they need.

      If you’re still thinking in terms of using a home to release equity (for what), then you may still be caught up in the psychology of the boom.

  2. G

    It will be a buyers market in 12-16 months, so for those who can, sit back, save and wait.

    For those with houses and financial issues, I am deeply sorry that you, for whatever reason, got taken in by people who smiled and told you what a great decision you made. I can only hope that it ends being such a royal mess that some sort of transformative social and political revolution takes place that will free people from debt slavery.

  3. finbarr

    Like I said the setting up of NAMA will slow down this neccessary process as without it we would be having developers holding fire sales on some of these estates to recoup what they can. This drastically and quickly move on the revaluation of a most property as other sellers would have to suit.
    Last year the indo ran a story as did RTE about 5 bed houses in Carlow that were dropped down to 300K from 550k. Those houses are STILL on daft. Sellers overall are a long way off getting some reality. Estate agents are not been helpfull either.
    As much as you say it would be good for the country the carnage will be very costly and hard to guage this early.

  4. finbarr

    ‘meant to say above, sorry’
    This would drastically and quickly move on the revaluation of most property as other sellers would have to follow suit.

  5. wills

    .’….banks lending 16euro on 10euro deposit’

    Not the case. Banks lending officially 8:1, lending out 8euro on every one euro deposit. Also, banks borrowing on interbank lending markets to boost artificially deposit capacity to lend further.

    • Philip

      You know, I always thought banks always loaned a multiple (6-8 times) of their deposits according to a limit set by the central bank. They created liquidity. But borrowing internationally to increase the “deposit” base by another 60% and thus garner some cream off extra interest potential means that the definition of who really owns the deeds as a mortgage supplier must call a few things into question. I suspect a few interesting circuit court hearings will emerge soon.

    • pera

      Hi guys,

      I am not sure if that is correct wills. I think the Basel 2 refers to ratios of 8 or 12% (not sure of the exact figures, might be less) core capital vs loans. In which case I suppose you would get ratios of 8 or 12 times in loan against their core capital (which as far as I have understood is the money that belongs to the bank) The deposits are in many ways a loan that the bank has received from its customers which they can then lend out to their customer. So the basel rules were probably there to protect depositors, by making sure that banks can absorb losses on the loan book. Wihtout any core capital any loss on loans for a bank would eat into the deposits for a bank with a deposit to loan ratio of 1.

      But as David pointed out 16 euros of loan, 10 is financed by deposits and 6 is financed by borrowing from other countries and banks. If the banks are not able to renew those loan. There is suddenly 6 Euros of the 16 unaccounted for, and ofcourse you have to addin a couple of euros for loan impairments. There is suddenly a lot of euros gone missing to make the equation go up,

    • That’s not quite the case. You have to differentiate between high-powered money, on deposit with central bankers, and money in deposit accounts (which is just paper reflecting debt elsewhere).

      The fractional reserve ratio as far as I’m aware applies to the high-powered money. The loans to deposits ratio is different.

      • Pretty sure it’s the other way around. The fractional reserve ratio refers to reserves of demand/transactional bank accounts which must be maintained. Central banks are supposed to oversee the adherence to reserve requirements and act as a lender of last resort if/when trouble occurs. Loans to deposits takes into account total deposits.Tier 1 capital is a combination of common stock and capital reserves (which could be retained profits).
        One of the main jobs of a financial regulator is to stop banks from lending outside the levels deemed safe by the basel accords with a common metric being the percentage of the loanbook covered by tier 1 capital. Our regulator seemed to forget about arguably his most important activity and our banks loaned almost everything they had. They seemed to view hard limits as targets that (like our road speed limits) should be exceeded a bit when it suits. We have a culture of casual lawlessness in this country.

  6. wills

    The banks are portraying proclamations over and over credit is available from what i can see. Adds every place advertising loans etc. All know though the banks are telling porkies and are not providing credit accordingly. The credit freeze is the reality. Now, the put – out by the banks is capital ratio’s are fine, it’s the toxic assets are the problem, and if we remove ‘em all will flow again,. so from what i can see here alot of confusion and misinformation.

    Have you decided David the banks are re – fixing capital ratio’s on the sly sotospeak, or, what, cos the banks keep repeating over and over they are lending and credit difficulty is a figment of our collective imagination.

    • Philip

      ISME 4 months ago…48% of businesses finding it difficult to raise a loan. Now it’s risen to 58%. What is all this nonsense that something is being fixed when the banks are plainly in bits.

  7. severelyltd

    David, I agree with you on everything except the valuation formula. Every country will have it’s own factors, but in Ireland there is an menagerie of inherent costs associated with home ownership that are much higher than in other countries. Rates, taxation, energy costs and insurance to name a few have increased dramatically over the last few years. When you relate these to the cost of renting vs ownership it makes a big difference. I do not differentiate between a personal loan and a mortgage. A house is an asset that needs to have the ability to generate revenue if needs be. If it cannot and it costs you money and you gain no utility or manna through its use then it is a liability. Rental prices are dropping like a stone to the extend that it is hard to see how landlords cover their costs. The drop in property value is going to break a lot of people. The national party will turn into the national hangover, and so the cycle will begin again. The example ratio you use of 14 I would think is nearer to 11 in Ireland at the moment. That’s assuming anyone is willing to buy or can get a loan.

    • wills

      The increase in property price broke alot more people,,,,,

    • shtove

      You can look at it from the other end – fair price is 3.5 times the purchaser’s annual earnings with a 20% deposit.

      • wills

        nope, don’t agree. The price of property exploding upwards has destroyed ou communities and wrecked our reputation internationally as a civil society.

      • liam

        That in itself is fair, but unrestricted availability of cash leads to over pricing, which leads to people demanding higher salaries, which destroys competitiveness in the end, and creates the idea that a house (and the debt associated with it) is a marketable asset, and not the place that you live in.

        Renting or buying, you are first and foremost paying to not stand in the rain, and to do so in the community of your choice. This idea of people’s homes also being a personal asset (when in fact they are nearly always a liability) is, in my view anyway, horsesh*t.

  8. wills

    Absolutely concur, Irelands only hope of recovery is through sanity returning to house prices according to the P/e ratio,. will the vested interests permit this to happen. The property market is riddled in vested interests, cronyism and wholesale market rigging across the spectrum and geographical land space.

    At last DAvid, the battle line has been drawn and an exit out of this dark chapter in our economic life is visible, now, how are we going to get the prices down to market equilibrium price. Time to name names point fingers and put hand cuffs on to put the fear of jail time into the market riggers and get going towards the exit now, before it is too late.

  9. More Power to Ga Gee – the morgagee has an absolute right to prevent possession of their home through foreclosure by any bank .Look up furry’s bill of right in the constitution A45 and use it .NAMA should be entwined into a new financial system to write off bank loans held by the electorate and to set them free again to work free of the chatels of slavery and indentured slavery.We have a free country and that is what the constitution guarantees to all of Irish Men /Women.We want to earn an Income for ourselves alone and our families so stamp your feet now and be seen to have your Voice Heard.

    • Evening John,
      Report from Eyre Square on my factfinding trip up West.
      I’ll be on the Spaceship tomorrow.
      More then.
      The Committee are eviewing A45 soon. I’ll keep you posted unless Tim has easier access?

      • Tim

        Furrylugs, John, I can find out from a member of the committee that I have access to, if you want me too. Thay are at 42.5 right now, I think.

    • A45 isn’t binding, or justiciable, so I wouldn’t hold my breath.

      • That’s true kirghiz but it was laid down by principled people to give guidance in a time where honour and one’s word didn’t have to be set out in law. If an amended A45 was made binding, we would have some Constitutional comeback as a nation. Else these people will ride roughshod over common decency for their own ends as has happened. We need defined bottom lines for the good of the State.

  10. MK1

    Hi David,

    Its hard to get a perfect analogy that explains the credit bubble. Water in the Serengeti is not one though, there is analogy breakdown there. In your earlier posts back to Feb 2008 I used heroin as an analogy, not perfect either, and others and I have used alcohol, etc, to explain the human social interaction and how we “lost the run of ourselves”.

    The thing is, your article is about housing and its value. Yes, there are too many places built, there is not enough demand to purchase them even at falling prices people will wait and wait. But we as a nation need to be weaned off the property-speak. Economists like yourself too! We were in a frenzy with property. Pat Kenny is still obsessed with it. The media is obsessed with it, etc. We need to wean ourselves off it.

    Yes, we need to fix the problems in our marketplace which exacerbated the credit bubble and has made our pain worse. We have a lot still todo on that score. But, we need to wean ourselves off it. Thats why the ‘heroin’ analogy is more apt. Drug takers even when ‘clean’ will still be talking about scores, hits, ‘bag’s, suppliers, etc, etc. Former Estate Agents are still talking about land, builders, developers, conveyancing, stamp duty, etc.

    Cleanse yourself ….. let it go. Forget property, for now, and never go back to the “way it was”. Yes, we need to fix the problems our system has, the lack of flexibility in the market place, the control the developers had, planning laws, etc, etc.

    But lets look at what our economy really needs now instead. Lets concentate our efforts on working that out, the solutions. Do we need MNC’s ? Yes. What sectors, and how do we support that? What about fast track short-term education? Our cost base, what to do with it? Indigenous industies, exporting, etc? Our taxes? Credit systems yes, but can we wait for our broken banks to do that? Probably not, lets supply another route.

    These are the topics that need to be discussed. So, the topic of property and land and its ‘value;, forget it, its like talking about the left over half-spilled cans of larger at last nights party. Its soaked into the carpet. Its now foul and smelly.

    Forget about it, let it go …..


    • Philip

      I think this is a very pertinent point. This “property” thing is now on automatic and will finish as it should finish. The whole kit and caboodle has gone over the cliff and taken bankers, builders etc with it and NAMA will go that way as well. I am not too worried about those in massive -ve equity because it has become political. The social contract has to be honoured or we have societal collapse. which will not be allowed – full stop. Expect some laws and A45 being leveraged.

      As Smurfit said there recently, we need to start producing and being productive. Frankly, in a world as b0££1xed as it is now, I think people are out of ideas. The money engine is busted, supply chains are wrecked but Ireland may not be bad place to be in right now given its moderate climate and good food and water supplies. It means we have space to work things out and redraft a few things.

      One thing that needs fixing is the public service (including all it’s semi-states etc). This has been for me the root cause of a lot of the problems due to unchecked incompetence and allowing policies that led to the mess we are in today. Politicians need to realise that they work for the ordinary man on the street – not the PS or bankers or any other rich gladhander that seeks favours through grants and large mega contracts.

      • wills

        absolutely philip, but there are these lunatics running things who are doing anything and everything to keep the reigns of power. All one has to do now is turn on the RTE news and take a look at AIB bildeberger directors and see a neo fascist financial order in control. Even the O.A.P’s can see it and are throwing eggs at it.

        • Philip

          Let’s hope it’s just eggs that ever get thrown. I think we have witnessed the last AGM of AIB as it stands today. Its a gonner simply becasue no one can help it.

    • Garry


      Property Boom made some people very rich, has destroyed some more people but distracted and consumed the entire country.
      Property Crash, Bank Bailout, NAMA, crisis has the potential to make some people very rich, destroy more, but distract and waste energy and consume us all again on crisis management

      Some way needs to be found to stop NAMA, banks, CIF etc from drowning out everything else and tell them to “take a number and get in line”

      • wills

        Property ownership in Rep of Ireland is all about control.
        It’s all about the master slave relationships that run through the family unit.
        It’s all to do with the compromises parents and children make with each other in the conducting of the shifting sands of their relationships with each other.
        Ireland is a deeply stained culture in incestuous relationships particularly between mothers and sons and mothers and daughters and this cultural rot feeds into the ownership of property and the threat hanging over anyone who refuses to enter into the incest pit and play the comfy womfy mammy love game under the table,

        • Tim

          wills, I do not understand this bit; can you elucidate a little, please?

        • Philip

          Actually, I fully understand this one. 100%. This goes back to the formation of the state, the links with the Catholic Church, the landowners down the country sending their borading school educated sons to the priesthood or to the civil service. It has taken us until the mid 90s to partially break the Church stranglehold. All the nonsense this country had to put up with regarding illegitimacy, abortion etc. and it’s still hanging around. The “in” group and its decendants are still there unaltered and unmoved. That’s why I am positive about what is happening now. These guys are about to find out what happens when you decide to have an open society and it’s payback time.

    • wills

      Mk1,.. as DEco has been psting for weeks, this property sickness is a reflection of a deeply sick society and it cannot be fixed unless all who entered onto the frenzy go and seek psychoanalysis.

  11. wills

    Ireland is not going anywhere economically until the price of property returns to it’s market equilibrium price, as clearly stated in Davids Article above.

  12. Tim

    Folks, I think it was G and wills above that expressed sympathy for the serfs who got sucked in by the property bubble. There is an easier way of helping them out of the problem than enriching solicitors and barristers.

    I see many of these young couples in my area; 20-30 somethings with small babies; at the height of the boom (2004-2005), they paid up to SEVEN times the price that I paid in 1995, for the exact SAME house! I was baffled by it then and I am still baffled by what jobs they must have in order to service the enormous mortgages they have.

    I do not blame them for “the mistake” of buying at that price – their ENTIRE socio-political “millieu” was constantly telling them that “the country is awash with money”, location,location,location is the only game in town; the Oireachtas (both houses, both “sides” of the house), the newspapers, radio, TV, bankers, builders, estate agents, etc., bar a few lonely exceptions.

    Now, these young families are falling by the way-side while we all bail out banks to the tune of billions, as they cut off the credit to businesses and force them close and put our young couples on the dole and default on their mortgages, thus causing the need for even more bank re-capitalisation……..

    This is utter maddness.

    This brings me back to a suggestion I made a few months ago (and have been making to many people I meet since), and no-one has yet been able to tell me why my idea is a bad one:

    Take a look at the banks mortgage loan books; identify those families who are defaulting on their mortgages; use the money that is destined for re-capitalising the banks and PAY the people’s mortgages with it.

    No default occurs, the families are saved and the banks end up getting the same re-capitalisation money anyway, but with less risk of more toxic debt defaults because the defaulters/potential defaulters have had their mortgages paid off by the money the taxpayer was going to give to the bank anyway.

    Why hand this re-capitalisation money straight to the banks, when so much suffering COULD be prevented by giving it to them via my circuitous route?

    I think that my plan would even fulfil the requirements of A45.

    • But where would the vintage Krug, Yachts, Private Islands, Syndicates, Dolly birds and Covert shareholdings appear on that revised balance sheet?

      The people must suffer so they understand the pain of leadership. N’Est-pas?

    • wills

      doing this tim would actually de – tox the debt.
      I suspect the reason why this common sense solution is out of the question comes back to the simple question which is this…….
      What is the actual mortgage value wise, it is a debt, nothing else, it is not monies, so, the banks are not losing money when customer de – faults,. and if they start using common sense solutions like yours offered they are afraid people will start asking the wrong questions as far as they are concerned. They want people thinking the banks gave them a bag of money and so they owe a bag of money back with interest. They are afraid that if the customer knew the mortgage arrived into their account via a computer accrued entry and nothing more the customer would then realise hey ! this is not such a bad situation….!!! as i’ve been lead to believe by guess who….. the bank…! The banks business is the business of fear and confidence.

      • Tim

        wills, so, since it appears you agree with the idea, will you tout it with me in all circles and get it moving? We saw today the waste at AIB and, if I understand “The spin” at 9 o’clock tonight correctly, we just actually lobbed the first €3.5 billion in there today………

        Wasted, when it could have gone through the hands of families or a struggling SME to keep people in work or in their homes.

        This solution is way better than throwing any amount of eggs, if we can get it going.

    • Garry

      @tim support the principle but theres more victims that mentioned in your comment.. The ‘young families’ are getting all the attention and sympathy but they are just one set

      Tradespeople&builders who subcontracted, are owed money and cant pay their own debts. As a result their tools have been reposessed, sold from under them and they have been sent the bill for cost of this and the shortfall.
      Bank shareholders, lost up to 95% of their investment…. real wealth not borrowed money. Could be pensioners, could be pension funds
      Other businesses and workers that depended on residential construction for a living. DIY stores etc
      Buy to Let investors.
      People who left school early to go on the sites
      People who held off buying and who are now bailing out those who didnt
      Many other examples… im sure

      Within each of these theres people who were too greedy, too stupid, too unlucky or too late… people with good motives and bad motives…

      First theres not enough money for everyone, second raking over all this and bailing out people according to some criteria is an impossible task.

      Who do you screw over? Who do you reward/bailout?

      Bailout the snobby young couple who bought a posh house and SUV while screwing over the carpenter in the transit who is owed thousands by some builder
      Bailout the tradesman who did shoddy work
      Bailout the developer who actually built the social housing part of their developments?
      Bailout the investors who were sold guaranteed rent scams?
      etc etc etc

      Its a very complex situation….

      Thats why my attitude is no bailouts, we should protect people from going hungry but thats about it…

    • Philip

      Bad idea because I’d want to be a defaulter under your arrangement. Legal eagles would have a field day.

      • Tim

        Garry, Philip, all very good points; however, the situation that abides right now is that only the banks are being bailed out and people and businesses are getting no benefit as the banks are not releasing credit liquidity despite the re-capitalisation monies.

        What if we apply the idea to viable, but struggling, employers alone? At least this would sustain jobs and prevent defaults by the business itself and its employees because they keep their jobs and continue to pay their morgages.

        Put simply, I think we should be able to arrive at a more creative process than the one we have; a process whereby the re-cap money brings some good to some people, at least. I accept that deciding upon who to help along the way is difficult and will inevitably leave some sections wailing, but to hand over the money to the banks while ignoring everyone else just seems like wrong and lazy thinking.

        I remember DMcW on TV3′s “Agenda” years ago calling for “Joined-up Thinking” at national level. That is what I am trying to come up with in this bank re-cap situation and looking for help on this from you all.

        • Garry

          I have no solutions Tim….There is a logic in what the government are trying to do….But the banks are hoarding and not lending because the recapitalisation money is not enough to make the banks healthy and issue new loans, they have already loaned too much… Case in point, AIB discovered this week they need more than their previous worst case scenario.

          We dont have enough money

    • Dilly

      Tim, one of my neighbours too his own life last week. He had been unable to find work, and owned a number of properties.

      • Tim

        Dilly, I am saddened to learn of this terribly shocking reality-dose that lies behind all the showmanship in the Oireachtas and bank AGMs. The lives of real people have been/are being ruined by the market gambling of the players.

        People need ideas, information and practical help to carry on, as Ruairi said here many months ago, a “new Paradigm”.

        (or, maybe even a partial return to a good, old one; see my link below to the Allotment Act of 1926).

  13. Furrylugs – I never said it before but I think the greater part of the ‘ring fort’ on Dun Aengus was consumed down the devils hole ‘poull an diabhal’. You can check that .When you see it you will see the incoming tide rise upwards through the hole .I just hope the Irish Euro does not go the same way .
    Maybe there might be an original A45 found embedded in a nearby stone.

  14. ~I am going to go to DMCW philosophical meeting in Tempel Bar next tuesday night

    • Tim

      John ALLEN, Hmmmmmm…….. thinking………

    • Tim

      Furrylugs, the Leviathan event John ALLEN refers to is right up your street:

      Leviathan: The Economy vs The Environment

      19 May 2009
      20:00 – 23:00
      Button Factory (formerly Temple Bar Music Centre), Curved Street, Temple Bar, Dublin, Ireland
      In association with Delta Index
      Join host David McWilliams for a fiery public conversation on how environmental issues and the green agenda are compromised by economic crisis or whether they can be mutually beneficial.
      Everyone knows the environment is a key [...]

    • wills

      john,.. will you buy me a ticket………??????? (joke)

  15. wills

    TIm: elucidation >>>> the property market is run on the basis of compromise and place on the totem pole. Most people secure mortgage by a certain smile. If person refuses to play into this secret little game they all know they will be refused the mortgage. The smile represents the commitment to an underlying agreement never spoken but understood, an agreement a person made in their heart in childhood to themselves which generally goes like this……

    “all work and no play makes me a dull boy or girl”…..

    so i’m going to do it my way, and a pact is signed to enter into sef serving behaviour for the rest of ones life on the back of a deceit.

    • Tim

      wills, when I got a mortgage, it was limited by a rule: I was allowed to borrow 2.5 times my income and nothing more. This came to a maximum of £45,900, or 90% of the purchase price of the house. I had to have saved the 10% myself or I was not allowed to buy the house. If the cost of the house was any more than that, I had to save up the difference or not buy the house. Simple.

      The problem of the bubble arose when they relaxed these rules to ensnare more people.

      The clue to the fact that there is no fiscal rectitude in the minds of the bankers, the regulators office, the central bank or the government is the fact that no-one has insisted on a return to these rules.

      Until they return to these rules, it is clear that they are still trying to re-inflate the bubble.

      I have read/heard, nowhere, the suggestion of re-imposing these limiting rules.

      But why should they? We have a concept that links theology, teaching and parenthood. The notion is that, say, if a student forgets to bring her lunch to school today, she will be hungry so she will not forget her lunch tomorrow. The soft parent thinks they are being a good parent by dropping the lunch into the school to feed “my little darling”. But the little darling did not suffer the consequence of her forgetfulness, so she will make the same mistake again because she did not learn the lesson. The responsible parent wants the child to learn the lesson from the mistake and grow into a more self-disciplined and independent person.

      It is called “moral hazzard” when the soft parent always takes up the slack for the child, because the child will never grow to become responsible.

      I was delighted to hear (in that link about “Inside the Meltdown” the other night) that Henry Paulson used this exact same phrase to the bankers in America.

      The moral hazzard in Ireland is HUGE and was on clear display today at the AIB egm.

      • wills

        agreed: parenting requires massive effort and energy and the easier option of parenting by might very attractive to some.

  16. maltt

    Why are you guys so hung up the idea of a property market anyway? Does there need to be a market in residential property? Hasn’t anyone in Ireland taken a long hard look at the rest of Europe where most people rent at very affordable rates. The surplus supports major pension funds and pays millions of pensions. Until madame T screwed it all up up in Britain to feather the nests of her banker friends, 52% of all housing was publicly built and owned and only a tiny proportion as crappy high rise estates. The crappy bits are almost all that is left now and the jagger generation cashed in and pissed off to Spain on the proceeds.

    • Tim

      maltt, you are correct, of course. I lived in America for many years and the concept of renting is an acceptable life-long choice. In Ireland, we seem to be obcessed with “owning our own little patch”.

    • Philip

      I would not get too hung up on rental versus owning. Each have their issues. It’s a lifestyle choice which I agree never was seriously analysed by people before they bought.

      Also for the last 10 years I know a few firms that started up and are still sunning very well due to the property equity release. A pity that mentality was never encouraged. Instead we turned good debt into bad debt (cars, holidays and bling) and destroyed the good debt. So now, no one has equity with which to look for a loan and business plans are looking more unbelieveable now that the market has evaporated.

      I think the need to control one’s own little patch is probably a primeval one. I think everyone needs a space to express themselves. Ownership tends to ascribe more rights to apply one’s stamp on it. In Ireland, you do not belong unless you own a house…says a lot about nationhood and our respect for one another…this goes back to our institutions and who runs them and their attitude to the man on the street (see comment above).

  17. This is going around:

    Dear Mr. Darling,

    Please find below my suggestion for fixing Britain’s economy.

    Instead of giving billions of pounds to banks that will squander the money on lavish parties and unearned bonuses, use the following plan.

    You can call it the Patriotic Retirement Plan:

    There are about 20 million people over 50 in the work force. Pay them £1 million apiece severance for early retirement with the following stipulations:

    1) They MUST retire. Twenty million job openings – Unemployment fixed

    2) They MUST buy a new British car. Twenty million cars ordered – Auto Industry fixed

    3) They MUST either buy a house or pay off their mortgage – Housing Crisis fixed

    4) They MUST send their kids to school/college/university – Crime rate fixed

    5) They MUST buy £50 of alcohol/tobacco a week ……and there’s your money back in duty/tax etc

    0AIt can’t get any easier than that!

    P.S. If more money is needed, have all members of parliament pay back their falsely claimed expenses and second home allowances

  18. matjaco

    I do fully agree with the analysis in general. But I am missing out some important factors that could even contribute to more severe decline of vacant houses and apartments.

    1. Modernization of unoccupied buildings after few years
    2. Deficit in energy efficiency
    3. Suitability of houses and apartments in the light of demographic developments

    Ad 1.
    Newly built but unoccupied buildings need as well maintenance. Although it might be basic but there is a need for heating to fight moisture and damp, especially in the Irish climate. Appliances need to be run as otherwise within short time rubber sealings may deteriorate. If not kept up, there will be cost for the renovation of unoccupied buildings once they might be sold. As a buyer I would request a discount of the price for such deferred maintenance. The loss is obvious, it either comes early with a further reduction of the investment yield or it will finally come as part of the price negotiations.

    Ad 2.
    A lot of the houses in Dublin and around the country are built 20 to 40 years ago and a lot of them look as if they are badly in need of a modernisation. But even when I watch renovations or the built of extensions I am quite amazed to what low standards houses a being built. That concerns walls, roof insulation, insulation of floors or basements, windows, doors, insulation of warm water pipes, etc. The energy efficiency of such houses is miserable. Compared to standards in other countries like Netherlands, Denmark, Sweden, Germany, Austria, Switzerland there is probably no notable energy efficiency at all.
    There is only little use made of renewable energy like solar power.
    Although during the current pre-boom phase the energy prices are rather low we should not live with the illusion that we are currently paying energy on a sustainable price level. And we should not forget that these prices move faster that we can adjust our energy efficiency.
    If I would be in a position to buy a house I would certainly look for its energy efficiency. That this is also government policy we see with the introduction of the Building Efficiency Rating (BER) in April 2009. And with a bad BER I would certainly demand a discount from the asked price.

    Ad 3.
    Walking around Dublin I see a lot of newly built 1 or 2 bedroom apartments. Clearly these were built with the intention to yield on the stream of young single immigrants. With the tide turning, emigration on the rise the need for such apartments is in sharp decline. In addition, people are maturing, building families. People need to move out of small apartments. Demographics are an important factor in real estate development.
    Associated with the change in demographics usually there is also a change in demand characteristics triggered by the wealth of a nation. During 1950 — 1980 in the heavily destroyed cities on Europe hundreds of thousands apartments were being built. There were desperately needed. So the focus was on mass and not on seize or individuality. With the maturing of the continental economies the trend in housing changed dramatically. Apartments from the 1970ies and older just do not meet anymore the style and demand patterns. The wealth in the post-war ear had risen, so the personal disposable income and with it the demand for more space and luxury.
    Did the real estate developers take such developments into account when planning their buildings. Are these building adaptable, i.e. will it be possible to merge smaller apartments to cope with an eventual demand for larger flats as we grow older?

  19. Haveaniceday

    I blame the banks. I blame the Government. I also blame the people who thought that buying a badly designed house in the back of beyond for 400K was a good idea. Today you can buy a peach of a house in the beautiful (and sunny) Languedoc region of France for 200K. In fact, five years ago it would have cost you 160K. Just a glance at our continental friends’ property market should have been enough to make one realise that our prices were nuts! And have the prices in Languedoc crashed? Have they heck.

  20. wills

    below is a link to BASLE and the legalities set for fractional reserve lending ratios.

  21. Banking an Egg : Tradition has it that piseogs deliver your message when all other avenues fail .That determined damaged injured matured pensioner showed his feelings at the recent AGM of AIB when he demonstrated how he gave the Bord a piece of his mind .His actions removed the sterility of the banality in the room and added a circus to a new beginning in Banking Governance and Regulations .Long may he live and long may his actions be seen to inflict the message like a Scorpion.

  22. AndrewGMooney

    As an aside:

    Just finished watching 3/3 Pope’s Children on BBC4. I’m sure DMcW was introduced as ‘the hero of the Celtic tiger’ in the programme lead-in! New sombre introduction from David, wearing scruffy jeans, putting the programme in it’s current context.

    Seems even more prescient analysis now, even though it turns out to be Deflation, not Inflation, in Germany -and Obama’s Tax Policies that threaten to destabilize Ireland Inc.

    I’m looking forward to reading/watching David’s ‘Plan B’ for Ireland after the Celtic Crisis as a C21st Venetian-style independent City State trading allegiances and alliances with all and sundry.

    Especially interested in how that evolves inside (or outside of?) the Euro. How to get German pensioners to accept that they’ve put up with a noisy neighbour’s decade long party without realising they have to pay the bill.

    I remember telling a friend that Capital is, of necessity, as Parasitic as the Host Nation will allow. And that it’s up to the Host Nation to make sure the relationship remains symbiotic so that something of worth endures should flighty Capital, er, take flight!

    I don’t think it’s any longer controversial to suggest that FF failed in many areas of stewardship such as infrastructure, education and health. What’s amazing is how baffled people were when all this was pointed out during the party. I guess the music was just too loud and funky for anyone to hear DMcW’s cribbing on the sidelines when this was first broadcast.

    Time to move on:

  23. noonep

    FF have squandered this country’s progress and future on a ‘whimsy & a misgotten prayer’, the fianna fail emperor and his minions have been naked all along. We taxpayers are now liable for their conceit. Can Irish people vote for these ‘lugubious slugs’ excusing them of the cock-ups and having pigged-out on the boom trough for so long, now having blown up on their watch?

    Peasent class politics for a peasent class people.

  24. Johnny Dunne

    “Many people in recent weeks have tried to explain what is happening to the economy.”

    Then we get this talking up a ‘transfer pricing’ induced balance of trade surplus and pretend we are reducing private sector borrowing requirement….you’d think from this recovery is on it’s way ????–did-you-know-that-we-1738351.html

    “The trade statistics tell us that while many other countries continue to run large current account deficits, Ireland has reduced its standard of living to realistic levels. ” – how can he conclude this ?

    Imports are underwritten by ‘massive borrowings’ as we have less than 2 million in gainful employment with an average industrial wage of less than €40k, the massive gap is not funded by exports as indigineous exports are about 1/6 of consumption – we don’t produce enough so let’s not pretend the solution is just less imports.

    We can’t develop solutions if ‘economic commentators’ don’t analyse clearly the problem – we just end up confused like Michael Somers of the NTMA sounded today on how NAMA might work ?

  25. jim

    I came across this post recently and thought it might be relevant.Thanks to the original poster John.I had to calculate the average new house price (avnhp) against the average industrial wage (avindw) from 1973 to 2006 for a project last year. These were the figures I obtained. As the data sources were not the best, I’ll be happy to correct my figures if anyone suggests they are wrong and supplies a different data source that I can use instead. I had to use the Dept of Environment figures for house prices as the ESRI/TSB figures only go back to 1996. In addition, the figures for 1986 to 1990 are a bit out, as I couldn’t get average industrial wage figures for those years and had to use 1985 and 1991 figures instead. So, ignore the 1986 to 1990 figures.

    1973 avnhp: €9,009.00 , avindw: €1,599.9 , ratio: 5.631
    1974 avnhp: €10,836.00 , avindw: €1,950.4 , ratio: 5.556
    1975 avnhp: €13,254.00 , avindw: €2,520.7 , ratio: 5.258
    1976 avnhp: €15,564.00 , avindw: €2,921.5 , ratio: 5.327
    1977 avnhp: €18,754.00 , avindw: €3,385.0 , ratio: 5.540
    1978 avnhp: €24,082.00 , avindw: €3,937.2 , ratio: 6.117
    1979 avnhp: €29,387.00 , avindw: €4,624.2 , ratio: 6.355
    1980 avnhp: €34,967.00 , avindw: €5,506.3 , ratio: 6.350
    1981 avnhp: €40,167.00 , avindw: €6,387.7 , ratio: 6.288
    1982 avnhp: €44,060.00 , avindw: €7,326.9 , ratio: 6.013
    1983 avnhp: €44,448.00 , avindw: €8,286.2 , ratio: 5.364
    1984 avnhp: €45,419.00 , avindw: €9,261.5 , ratio: 4.904
    1985 avnhp: €46,542.00 , avindw: €10,048.1 , ratio: 4.632
    1986 avnhp: €48,256.00 , avindw: €10,048.1 , ratio: 4.803 **
    1987 avnhp: €48,151.00 , avindw: €10,048.1 , ratio: 4.792 **
    1988 avnhp: €52,450.00 , avindw: €13,707.5 , ratio: 3.826 **
    1989 avnhp: €58,178.00 , avindw: €17,293.7 , ratio: 3.364 **
    1990 avnhp: €65,541.00 , avindw: €17,293.7 , ratio: 3.790 **
    1991 avnhp: €66,914.00 , avindw: €17,293.7 , ratio: 3.869
    1992 avnhp: €69,264.00 , avindw: €18,183.7 , ratio: 3.809
    1993 avnhp: €69,883.00 , avindw: €18,841.7 , ratio: 3.709
    1994 avnhp: €72,732.00 , avindw: €19,481.6 , ratio: 3.733
    1995 avnhp: €77,994.00 , avindw: €19,879.2 , ratio: 3.923
    1996 avnhp: €87,202.00 , avindw: €20,692.2 , ratio: 4.214
    1997 avnhp: €102,222.00 , avindw: €21,377.6 , ratio: 4.782
    1998 avnhp: €125,302.00 , avindw: €22,868.6 , ratio: 5.479
    1999 avnhp: €148,521.00 , avindw: €24,165.5 , ratio: 6.146
    2000 avnhp: €169,191.00 , avindw: €25,786.0 , ratio: 6.561
    2001 avnhp: €182,863.00 , avindw: €27,919.0 , ratio: 6.550
    2002 avnhp: €198,087.00 , avindw: €29,872.1 , ratio: 6.631
    2003 avnhp: €224,567.00 , avindw: €31,513.5 , ratio: 7.126
    2004 avnhp: €249,191.00 , avindw: €33,338.3 , ratio: 7.475
    2005 avnhp: €276,221.00 , avindw: €35,277.5 , ratio: 7.830
    2006 avnhp: €305,637.00 , avindw: €37,477.1 , ratio: 8.155

    As the ESRI/TSB house price figures are the most frequently used, and
    as these only go back to 1996, there is a tendency to use the 1996 house price/industrial wage ratio as the standard, However, if you go back to the 1970s with the Dept of the Environment figures, it can be seen that the mid 90s was the bottom of the cycle. The ratio was about 6.0 in the 1970s, which is probably what it is close to in 2009 after the recent house price falls. It is not difficult to work out why. In the 1970s there was strong population growth. Between 1981 and 1996 the population hardly grew at all. Since 1996 the population has soared. The future trend for house prices will depend largely on the future trend in population growth. If there is renewed mass emigration and negligible population growth, its similar to the 1981 to 1996 situation. If strong population growth continues, its similar to the 1970s and 1996 to 2006 situation. In this scenario (of strong population growth) a ratio of around 6.0 seems reasonable, i.e. what it was in the 1970s and late 1990s, before it went way above this after 2000.

    • True, the industrial wage is slipping though. I know very few people who (still employed) have not taken at least a 10% pay cut.

    • MK1

      Hi Jim,

      In any analysis such as this you also need to factor in mortgage interest rates, tax rates, mortgage tax relief (if any), inflation (on goods), mortgage terms, etc, and as you also indicate, population growth rate as this pushes up the demand. It is far from a simple exercise as the data is not that readily available.

      Also, to get a run rate long term average you would need about 100 data points (n=100) where several booms and busts would be covered, and it would be even better if you had 1000 data points.

      One problem, the economic environment we are in now is not the same as it was 25 years ago nor 25 years before that. We are in a changing game where the economic rules are changing, so producing any type of long-term “this is what it should be” average ir nigh on impossible and ends up neing an apples to oranges comparison.

      Here’s some food for thought …

      200,000 years ago adults worked 22 hrs per week
      and they spent approx 5% of that time on their accomodation

      In modern Ireland, this would equate to approx. 2,000 euro per year on accomodation/property.

      Mind you, the places these days are more functional, thats for sure!

      are we talking about property again ?!?!?

      Let it go people ……


      • wills

        David s article is about property last i checked

      • Philip

        MK1, again, I agree. Paradigm shifts and their associated disruptive effects are the nature of our history. Predictability can probably be established when the effects of the disruption are fully understood. I think people are running around in circles trying to figure out what is going on.

        Property is really not the problem here. We have a situation of inability to service debt – no matter what it is. Property was the last “gold standard”. It no longer retains that status, so all securitisation is kaput.

        I work in the IT and Telecoms industry – arguably the most disruptive and change oriented of its kind. I can tell you that the changes we can expect in the next 10 years will make the last 30 look like something that came from our stone age. What I cannot tell you is what the human effects will be. Twitter, Mashups, Blogsphere are still very poorly understood and are wrecking traditional telecoms revenue models. Virtualisation & hot-desking is disruptive of commercial property demand. It is causing labour to be exported at a whim to other lower cost areas and so on. People have been blissfully unaware of this in this country, so their “cheese” so to speak, has been swiped like a cloning of a credit card.

        I think the revenue model of the future is going to be very different and until we understand it, crisis will remain.

        • paddythepig

          The last 2 paragraphs of this comment has profound implications. This comment is worth more than all the idle predications of all our government and financial elite, as well as all our other ‘social partners’ and ‘professionals’.


    • Malcolm McClure

      According to Jim’s interesting table it appears that in the seven years after 1972, when the Punt was allowed to float, instead of being fixed to Sterling, house prices quadrupled in Ireland; whereas in the seven years after the Euro was launched in 1999, house prices in Ireland merely doubled. It would seem that leaving the sterling area had a worse effect on inflation in the Irish economy than did joining the Euro.

      Strange that nobody mentions the ’70s house price bubble any more.

      We might draw the lesson that it was a mistake to leave the sterling area. which is where of course other commentators have remarked our main interest lies.

  26. jim

    In conjunction with My previous post I would like the Members of the Forum to consider to what extent they consider all the rest of the bubbles in this “AERO” Republic, should be reduced by.Shall we row in with Davids 50-60% for the following 1.price of clothes bubble…2 price of food bubble…3 price of cars bubble…..4 price of pay in Public Service bubble…..5 price of drink bubble…6…price of every thing in Ireland bubble??????.Why stop with the Developers when were dishing out the Bankruptcy’s ?. What about all the people that Yeats described thus “But fumble in a greasy till
    And add the halfpence to the pence
    And pray to shivering prayer, until
    You have dried the marrow from the bone”

  27. I have learned from the site contributions on this topic the following:

    1 That if unemployment becomes worse ,which it will ,the value of property is 14 times the anual rent ; and

    2 That if employment is available near the said property the value will be 6 times min the reduced average annual wage which might become €36,000 x 6 = €216,000 ; and

    3 That location has some influence to increase the above values ; and

    4 That the ERSI forecast ( cowen’s propaganda ) of 12% min increase from 2011 will cause a massive increase in house values again ; and

    5 That continental properties have a truer value and are a safe bet.

    Miscellaneous :

    That Furrylugs was lucky and boarded the Spacecraft on Dun Aengus yesterday in dense fog and he and his entourage were lifted to a new planet where no money is relevant neither are banks .He tells us he is doing energy research but my bet is is that he is actually an Alien.He is living a new life in the moments that we can count now and maybe….just maybe …..he may return and offer us the salvation of Hope . It is known that Tim is telling his students that they should exercise their lungs by blowing harder and longer as it would be an economical method to regain lost energy between exams and save their money buying Mars bars . Tim is hoplessly wishfully thinking why he never made it to the spacecraft before take off.His new mantra is : spacecrafts take off and pensions collapse .Neighbours have noticed this week he has commenced a new allotment and includes raising hens and is painting some of the Eggs for new AGM’s he hopes to attend soon.Fianna Fail will be a scamble he says.

  28. Tim

    John ALLEN, indeed, all citizens are entitled to an allotment to grow their vegetables according to the local authority Allotment Act of 1926:

    Visitors to this site should familiarise themselves with this and lobby the canvassers on it when they come to the door of your houses asking for your vote.

  29. wills







  30. coldblow

    I was away for a few days but I caught up on the discussion and as usual it’s been absorbing.

    Now for something more prosaic, drawn from my own experience (evidence of a lack of imagination): even my father in law, a farmer entering his 90th year, is concerned that we haven’t yet bought again, having sold in December. His fear is that we’ll lose the sale proceeds in a bank collapse. Someone here was kind enough to provide a link to Kunstler’s website which was well worth a read and pretty much what I was expecting, not having read his books. Among his prophecies is high inflation due to QE. Now my position is obviously different from someone thinking of taking out a big loan, but isn’t there an attraction in buying now, or very soon, albeit at inflated prices rather than risk seeing your monetary assets going up in smoke? And mightn’t sellers also see it that way too – why be in a hurry to exchange a solid asset for risky paper? Even with a large loan weighing him down, why not sit tight for a while and see what happens?

  31. wills

    !!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!! NAMA is doomed !!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!

    ………….one stroke too far for the POnzi Rep financial oligarchs and cohorts.

    ………….everyone involved will end up jumping ship on it cos it’s an illegal act been carried out by a democratic gov.

  32. liam

    …the man charged with running it, Dr Michael Somers, expressed reservations about its operation….
    The Minister appeared today to echo those reservations, saying there would be huge practical difficulties in the areas of law, staffing and valuation

    jeez, they really are making this sh!te up as they go along…. You’ve still got the guarantee, and the recapitalisation happening. Bizzarely, NAMA in and of itself is as far as I can work out actually the least damaging of this trinity of insanity. Without the other two, NAMA makes some sense. I await further more intelligent comment with interest…

  33. liam

    “We’re bad news, we’re bad news everywhere. There is nothing but bad news coming out of Ireland,” said Mr Somers forlornly.

    Irish banks had borrowed up to €200bn to fund a credit spree and now the likes of “Fritz, Heinz and Gunther” wanted it back. “This is awful stuff, awful stuff,” he added.

    As ever, the only winners in this whole saga will probably be the lawyers sorting out the inevitable legal tussles, predicted Mr Somers.

    “This is completely new territory for us all. The people down at the courts are delighted because there is going to be a bonanza here.”


    • CREST

      “As ever, the only winners in this whole saga will probably be the lawyers sorting out the inevitable legal tussles, predicted Mr Somers.”

      “This is completely new territory for us all. The people down at the courts are delighted because there is going to be a bonanza here.”

      As ever , after the next General Election when they get kicked out, will be both Cowen, and Lenihan, additional to the above.

  34. Deco

    ..There is nothing but bad news coming out of Ireland..

    well of course…what should we expect….we have muppets in charge of many aspects of the country….and the media has spent the last ten years passing the message of the muppets to the great unwashed….celebrate, spend, be irrational, follow the herd of lemmings…..and the greater the compliansce….the worse the eventual disaster…

    The ESRI are back in action again…do those lads have a copy of great projections of economic bliss in the speeches of Nikolai Ceacescu in their standard training induction….The ESRI project that between 2011 and 2015 Ireland will have 5% growth again…..hilarious….can I vote for a political party that will get rid of the ESRI please ??? I am fed up paying taxes for useless propoganda that is designed to keep Ireland controlled by the gombeen insider element in society….Even the useless ratings agencies(those that rated all that subprime as AAA, and Enron as AAA) ignore the ESRI now…that is how bad the ESRI…They are the muppets that even the muppets ignore….except RTE, and the Irish print media who carry Pravda’s message to the PAYE peasants.

    • liam

      Few it seems are capable of comming forward with a plan or even a vision for the way forward. Its fine for us lot to witter on about how f***ked things are, but its exceedingly bad to have your leadership and their appointed officers do this. Personally, I think this is a serious problem. It also makes the contrast between George Lee and almost every other politician in the game now such a huge one. When he stands up and says “I am not afraid of the future” that is something worth noting.

      Yes, we all know that RTE and the ESRI are useless agents of the state. So, Irish people, what are you gonna do about it?

      • Deco

        Liam – good question. What are the Irish going to do ? Well, I would say that there is very little they can do ? Lenihan will be Minister for Finance for the next two years unless there is a FF back bench rebellion. And Lenihan believes what the (crooked) bankers tell him. And he even throws our money at them to help them continue.

        I read details of a poll yesterday concerning the MEP elections. Guess what ? Despite nonsense in Kildare Street, and serious questions about what exactly our MEPs do in Europe, the biggest clowns and wasters continue to be the biggest votegetters. It seems that in Dublin that Gay Mitchel has 27% of the vote – and I honestly cannot say what Mitchel does to get such a high poll – when so many people regard him as a eijet – the only possible reason I can arrive at to explain his current high standing is tht he has kept his mouth shut since the “Dr. Pauls” incident. Prionsias De Rossa is close behind him. Again I have to ask exactly what use is he either ? Maybe voters know that he will step down in teo years and that makes him less detestable – the thought that he will take his snout out of the trough and live off his pension. His replacement will will have no mandate. Next in line is Mary Lou. She is even more nnoying than the two in front of her. But hey it get’s worse. As usual FF always manage to find the ‘brandname’ candidates who stand for nothing. Brian Crowley, we are told, is set to top the poll in Munster. Crowley comes from the Haughey wing of FF. True to form, he has done nothing except tell lies, and shove his greedy snout in the swill at every opportunity. And somebody with the nickname the Cope has been pushed into the race by FF HQ because there are three Ulster counties, and their voters will vote for a candidate with a Northern accent. Before the Cope even announced his policy framework, he was at the top of the poll. Maybe he is a man of such integrity that we have never seen before in Irish politics – in which case he could step in and replace Dempsey, Harney or Cullen, and try and repair the damage done to an incompetent government department.

        The entire culture of authority Ireland has failed. It has become steadily more corrupt and rotten since Haughey first became Taoiseach. I would categorize the History of Ireland in three phases.
        1) Before Haughey influenced matters.
        2) Haughey influencing matters. (includes Ahern’s reign)
        3) Cleaning up Haughey’s influence on matters.
        We are now trying to get ourselves into stage 3.

        And this is not just a state problem. It affects much of the private sector. It affects the entire institutional ediface of Ireland. Even the critics of the system have bllod on their hands.

        Liam – you asked a very important question “What are we going to do about it ? ”

        First of all, I would propose to analyze it and know it for what it really is. Because that is a first step towards reforming it. Being driven like sheep from one show of crooks to another, from one crooked bank to another, etc. is not sufficient. The people need to see above all the nonsense eminating from the media and get a clear view of how to play off the various vested interests so that they are effectively nuetralised and at the same time spend their money in such a way as to undermine the various vested interests. Every time we allow a crook to stay cheating us we are shooting ourselves in the foot. I beleive that the majority of Irish people want proper a proper civil society, but are so spell bound by all the lies and media spin that they never know what to do.

        The key missing link that people do not see is that the media acts always “with consideration of our advertising sponsors”. The type of clean cut decision making to sort this mess out, will be actively proscribed by a range of vested interests. We need a higher level of intellectual debate to overcome this. Basically the people need to outsmart PR techniques, the failed institutions of the state, and the strength of media organizations, and their commercial sponsors.

        Therefore for the moment all we can do is think and discuss openly. As the poll result for the Euro elections suggest, a lot of people do not even do that. A lot of people simply follow. They simply do as they are programmed to do – to obey. The official motto of Dublin City is “obedience makes happy citizens”. Obedience is essential to making sure that nothing changes. Active circumvention on the basis of principle is far better. Expect a reaction. Like Keane in Saipan – you cannot call say things about authority in Ireland, and instanteously expect a clean honest debate. We need to raise the level of debate about the entire thing. I think that this is possible. The Irish people are capable on occasion of seeing beyond all the nonsense.

        The real difference between George Lee and what exists in the Dail is that George Lee understands Macroeconomics much much better. Behind all all the gimicks of a government trying to sound ‘authoritive’ and an opposition trying to make the government not sound ‘authoritve’ the important questions of national importance get ignored unless they can produce “button pressing moments” on the electorate. We do not get problem solving in the Dail. We definitely don’t get representation when they do every thing contrary to the wishes of the people. The promises are always forgotten. We don’t even get respect for our intelligence, when the creation of stupid policies is termed ‘leadership’. We don’t even get entertainment now that Joe Higgins is no longer there.

        Instead we get theatre. We get a lot of condescension. We get plenty of coverups. We get excuses. We never get answers. And we get an awful lot of acting. So let’s be honest about what is going on. Let’s not get dragged into the theatre. The entire thing is theatre. Let’s rename it the National Theatre. Calling it a circus would be an insult to genuine circus operations which provide value for money. And the same applies to the media. The media is one big circus act.

        Let’s fix it, by seeing one aspect for what it really is, after another, one step at a time. That is what we are forbidden from doing. And then we shall communicate it to each other. Shane Ross has been calling these crooked banks for what they are for two decades. He has been threatened repeated with Ithe censorous Irish libel Law (made even more censorous by Brian Lenihan). But the conversations that are never heard will never be categorised as libel. And besides the establishment cannot sue the entire population for analyzing their misdeeds :))) They would have to turn Ireland into East Germany in order to implement that successfully.

        We know have the tool to raise the national debate above the level approved “by our advertising sponsors”. The internet :))))

        • Malcolm McClure

          Deco: Open-ness and transparency, helped by whistle-blowers where it is prevented, are key to making the wider public aware of the mis-management and corruption of the entire system. As seen in Westminster in recent days, this is not a peculiarity of Irish politics but occurs everywhere that people in authority get to set their own rules without detailed oversight.

          We elect people expecting them to protect and enhance our interests, taking into account the welfare of the whole population. We do not expect them to feather their own nests or those of the banksters and developers who financed the boards on every lamp-post adorned with their smiling faces at election time.

          We elect people to Europe but never a word is heard about their expense claims as we fondly assume that the Germans are paying them, so it doesn’t matter. By failing to exercise oversight, we condone the excesses by which the system has been corrupted. Politicians at every level depend on keeping in touch with their electorate, but few electors raise questions of endemic corruption with their representatives.

          Shame on all of us.

          • wills

            no shame on me malcolm (in respect of course),.
            Never a moment where i stayed in silence to this sickening greed, never.

          • Malcolm McClure

            Wills: Thanks for the very perceptive Dominic Lawson link.

            I assume you are absolved from shame not just by your frequent contributions here but by actually buttonholing politicians, face to face and giving them a piece of your mind? I know Tim has done this to his comrades in the Republican Party, but to what effect? Where I am, FF election posters carry the party name in tiny letters in the bottom left corner of posters that have the candidates name writ LARGE. These posters are hung low so that even the Fianna Fail gets covered by the long grass.

            A clever marketing strategy.

  35. Space News – I have shown here before that at the time ( in recent years ) of the change from age of pisces( water ) to age of aquarius( air ) that many of the world leaders that were Pisces saw great downward changes unfold in their countries ie Kohl , Gorbechov , de Clerk , and more recently Gordon Brown .What was common in all of them was the fall of what was to them a ‘world order of things’ to an immediate disjointed society without a national plan.Luckly we here in Ireland had none such leaders in recent years .From Haughy ( Virgo ) to ( poison chalis ) Ahearne ( Virgo ) to Cowen ( Capricorn ) they were all earth elements that were logical , good planners , exact with details and builders of material gains in society they lived in .They have left that legacy behind them no matter how you argue the reasons etc .
    Had we been able to continue our confidence in Cowen we might continue to have hope, and for some political reason or otherwise he is ebbing away and his cosmic energy will be a financial loss nationally.I am baffled why his energy is not performing to norm and there must be a secret reason none of us seem to know but time will in good time reveal that .Presently he only demonstates to the public his negative energy namely constant worrying body language and that is a pity.
    At this juncture I am noticing the arrival of ‘an airpac’ Lenihan ( Gemini ) and our new late late show host Ryan Turbridy ( Gemini ) .Both of them are Air signs.We must also acknowledge that the departing host Pat Kenny ( aquarius – air ) is the same element air too .Previous to Pat our Gay Byrne ( a leo ) was a Fire sign a true actor performer unequalled .I am selecting the Late Late Show and the Ministry for Finance as a national fulcrum we are all standing in now from which whatever change that in the future takes place will develope from these centers .I also previously mentioned that Peter Bacon is also an air element – acquarius .We have in a boiling cauldron a triangle between Lenihan – Bacon – and Tubridy ( a fianna fail family ) .Irish society will watch their national identity evolve from this mystical myrr and intangible thought process that will seem like battling a fly and teasing the eyes to submission.There skills lie in their quick thinking and punch lines that is hard to challenge .But that does not mean they are right or clever but it does mean that they make themslves look right and clever and this is what influences society most.
    The above idea is just a beginning and someday maybe I can tell you more .

    • Malcolm McClure

      John Allen: “The fault, dear Brutus, is not in our stars, But in ourselves, that we are underlings.”

  36. Alien Location – if you place your rotund aeriel in your garden across from your neighbours facing each other and stand in the middle and look up and deeply and think and stare and then talk , you will begin to hear furrylugs answer back to tell us all how he is and the news from extra terrestial land.

  37. “”Think of the aerial photos of the Serengeti at the beginning of the annual rainy season. What was a parched arid climate where nothing grows suddenly become florid, verdant and full of life. Animals, flowers insects flourish and the place is abuzz. We see migrating wildebeest, crocs and birds and then, at the height of the season, the whole plain is crackling with energy, fuelled by that most precious of commodities, water.

    Then as the seasons change, the water begins to evaporate. Life disappears from the edges of the plain, animals flee, plants die and as the waters recede life recedes with it. In the end, there is only a pathetic lush patch at the source of the river, everything else is barren, lifeless and arid.

    Credit in the Irish economy acts the same way as water does in the real world. When it gushes into the various different nooks and crannies of the globe, economic life and vitality springs. So, all over “”the country, the water of the economy ushers economic vitality in – credit. Anything is possible, anywhere. Money gushes out of the traditional core countries such as the US and Europe and finances projects in the most remote places, giving people hope.

    Then the financial season changes, due to the psych- ological interaction between investors’ hopes and fears, and the money retreats back to the centre again, leaving the exposed areas like the high plain of the Serengeti, exposed and lifeless. This process is happening all over the country now as businesses are left to fend for themselves without their lifeblood, credit.”"

    Good article in general but I have to question the comparision.
    In the Serengeti the flow of water is outside the control of the animals & plants (largely). However a few carnivorous animals profit from the plight of the herbivores effected by the water flow, that is when the water advances the herbivores breed & expand in numbers, then later when the water recedes and the pond gets smaller the herbivores are preyed upon and eaten by the fat-cat lions and lazy crocs waiting for them. In both the world & Irish economy the bankers & oligarks control the flow of money and do so in a method similar to described by David in the Serengeti model, the Bankers & oligarks then profit from the sweat of the workers during a boom and later savage the workers during a recession. I can not see any reason why economies can not be managed in such a way so as to avoid the panic, stress & chaos of booms as well as the hardship of recessions. Surely a common sense approach to managing economies would to maintain a moderate level of economic activity continuously. If mankind can send astronauts to the moon and back then mankind is surely capable of managing a level economy if allowed.
    Any attempt by anybody to try and convince people that these economic cycles are natural or unavoidable is simply a lie, told to appease these fat cats, as being done by much of the Irish newspapers and media.

  38. wills

    bloggers: interesting link below, ‘handcuffs on’ hedge fund owners city of london, listed in Dublin.

    • wills

      bloggers: A MUST READ LINK ABOVE.

      Irish stock exchange is been used by hedge funds in City of London to carry out covert shadow banking derivatives speculation through off shore tax havens.

  39. wills


    !!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!! NAMA REpublic !!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!

    • wills


      I find hilarious the property speculator barons are screaming blue murder on their constitutional rights regarding private property but yet joe and jane blogs must roll over and take the banks foreclosing threats up the ar$e.

  40. Back in a wet and dreary recession hit Cork, Galway seems a million miles away.
    I don’t think property there will fall as much as David suggests because Galway has always generated it’s own demand due in no small part to it being a cracking place to live.
    Whilst engaging in an activity muchly adverse to Deco’s beliefs, namely The Black Stuff liberally dosed with diddly music, I had a Marxist orientated discussion with a Professor of political science. He was struggling to articulate the nascent catalyst required to get Ireland Teo moving.
    I simply summarised all we say on here into “Reclaim Ireland, Reclaim our intellectual base”. I expounded by telling him I had enough of black suits, cronyism and the implicit intimidation meted out if one didn’t comply with the diktat of our elite.
    He went into orbit with ecstatic glee having found a fellow traveller. We’ll be keeping in touch.
    I heard many other conversations of similar nature. Any material change in society always comes from the intelligentsia and the seed for change in Ireland is well sown in Galway. The acorn is well and truly growing there.

    Conversely, travelling through West Clare on the way up, they are suffering. Highly dependent on the dollar and tourism, takings and bookings are well down. They’re hoping for an East Coast surge of people who won’t go abroad this year. If the rain keeps up, West Clare is in deep doo doo and will resemble the Serengeti insofar as the people will resemble the great Gnu emigration across the Shannon.

    But it was great to come back home and tell Mrs Furry her shopping bill was down by 1.7%. A whole 2 yo yo’s per week. She was hugely impressed at this news from our governments Dept of Good News aka RTE.

    I’d go to the Leviathan thing but I’m getting mixed messages. Naoise Nunn of Libertas seems to run it and I can’t see Duncan Stewart falling out with Ryan. It looks a tad cosy though a hand reared free range egg hopped off Ryan might liven things up a bit. Apparently Gormless wouldn’t go.

    Must go now. Off to a quasi political local meeting. I’m getting used to people asking my opinion (based on this Phd forum). And we’ve a local think tank Tuesday on how the extended local community can generate local commerce. No point waiting for Dublin to go bankrupt.

  41. wills

    interesting link here from, ‘the guardian’ newspaper,, further opening up the murky world of shadow banking.

  42. wills

    interesting link this, Irelands membership of Bilderberg club.

  43. NAMA is a legal minefield. Expect many developers to sue the state and/or their banks (joing tortfeasors) should they try to transfer assets to NAMA without their consent. NAMA only works if the developers are established as being in default or have agreed to transfer the assets to bank ownership. I strongly doubt NAMA can be done that quickly and I think that’s why the government have slowed down despite their initial (speculative IMHO) announcement. It’s a huge mess and who’d expect anything less…

  44. jim

    I included the above table on average house price/av.industrial wage because it is often dragged out by various people with different agenda’s.It looks ok with its ratios included but what information does it include that has any relevance to anything tangible?.Nobody that I know could bring Me to an Average house,its bullshit,and what of this infamous average Industrial wage and what great Victorian yardstick is it meant to represent?.According to the C.S.O. av.ind.wage in 2006 was 641 euro per week,while some basic catering jobs etc. came in lower.However all other jobs came in much higher on average,examples being prison officers at 1150 euro per week,and so onn…I say “so onn” because when you mention any other job it brings a plethora of debate from all and sundry who will all claim that they dont earn up to the average and it must be someone else,more bullshit.One thing I know to be true right accross the World is this,people who earn top wages like to use averages to dilute down the figures and not draw attention to the disparity in incomes within an Industry.I will tie back in my observations after I dispell some of the bullshit being talked about prices.Well given that a lot of commentators like to call the 3bed semi the average house,a cursory glance through tells Me that these bastions of civility range in size from 900 sq. ft. to 1360 sq.ft,they are located everywhere from town centers to the arsehole of nowhwhere or the sticks if you care to be polite,they carry a price range from Clara,Cowens hometown of 150k to the leafy D4 where you can pay a couple of million Euro’s, or back West along the road to Galway where you can spend anything from 300k to 700k with great emphasis on what the EA’s like to call “the MASTER bedroom”….Masters of the foolish phrase is how I would describe most of the representations I read.SO to tie it all back in as promised,Cowen can buy 2 av.houses in His home town on a years wages,He will not be able to buy a house in D4 based on proper lending criteria and I wont mention His eligibility for the Galway House because He had to take down His tent there recently and “got shifted onn” so to speak…….As for the 40% of the population who earn less than 30k p.a. well there just fuc.ed anyway,sorry its waiting lists and affordable housing for them under achievers.No great mention of them in all the great Economic dispatches apart from their usefullness at dragging back down averages in terms of the average industrial wage and their fondness for living in the average house no matter what their Family size happens to be.Bulshit Bulshit and did I mention Bulshit.

  45. Malcolm Mc Clure –
    says : “The fault, dear Brutus, is not in our stars, But in ourselves, that we are underlings.”

    I fully concur .
    My messages are to be perceived on a different level and will not defy logic or reason no matter.It is in the connecting of the two levels that causes the misunderstandings .
    If I may draw an analogy : should the weather forecast say it will be cold with heavy rain tomorrow and should you go out in short sleeves ….would it be fair to say ‘only an eegit would do that ‘, and if you did not then ‘you are wise’.When I say it will be cold and raining the choice is up to the reader what they do and depending their choice will show up the probability what will actually happen.That is a fair assumption .This is economics too.
    Allow me take you further along .Should I show you a field of ‘horses’, you can associate what they are .Likewise , if I show you sheep, bulls, fish, scorpions, Rams etc .It would also be fair to say that each of those categories have a special relationship within their own species and a different one between each of the other species.This is a science to learn and a language to explore and all of that created Atlantean ( Gaelic ) in the past something we have lost sight of along the way especially when that tongue became santicised by the The State .It only takes someone like Paidi O ‘ Shea who can express that at best .That is still a strong Kerry characteristic still in play even astrologically speaking.
    As I said before it is a different mindset ( Suil Eile ) but once aquired it hard to live without it because it gives so much.

  46. Deco – you will be written in history if not already .Congratulations.

  47. DarraghD

    Just listening to a discussion on the NAMA here on RTE1:

    (1) The proposed head of NAMA is apparently saying he doesn’t have the expertise, the HR resources or it would appear, any ingredient necessary to get this NAMA project off the ground. If this is what the proposed head of NAMA thinks, I can’t understand what he expects to achieve in his role as head of the organisation.

    (2) A new organisation naming itself the IPDF (Irish Property Developers Federation), seems likely to oppose on a legal front, the NAMA and it’s objectives.

    This could all be avoided if the messing with NAMA was stopped and our government went back to first principles here with regard to the problem.

    (1) Nationalise AIB and BOI.

    (2) Post nationalisation, immediately identify developers loans that are in default and cannot be normalised by the borrower in the short term. Call in the loans and take the securities. End of problem, no messing with a NAMA or having to deal with obstructive and lenghty legal arguments and proxy organisations set up by developers.

    All that is happening here is that the banks above, are refusing to deal with bad debt. If you have a car loan and default on the loan, then the bank tells the repo man comes to your house and puts your car on the back of a recovery truck and auction it off to cover your loan, end of problem for the bank.

    It’s that simple, so what’s the problem when it comes banks dealing in a similar way with developers loans??? The longer this goes on, the worse things will get for all of us. We should be asking, “hang on a minute, how much is this NAMA exercise going to cost us taxpayers???” From what I’m hearing, it will employ a couple of hundred staff comprising of solicitors, accountants, administrators, managers, valuations experts, etc, etc, etc., all paid for by the taxpayer.

    We can’t afford cancer vaccines for schoolchildren, but somehow we can afford this, all because our banks cannot deal with bad debts in relation to developers, but you can see recovery trucks every day of the week going up and down the M50 on an hourly basis with repossessed cars on the back of the truck???

    What we are seeing is the “old boys network” operating at the peak of it’s prime. We are seeing the same old Irish way of dealing with the problem, pad it up with loads of bullsh*t and pack it up with three letter acryonoms, bamboozle people with pure bullsh*t, drag the problem a good bit away from the actual cause, and then people will become a bit disorientated and you can do what you want without public unheaval.

    I propose nationalise the banks meediately and any development debt that is in default, call in the loans and associated securities. Take the land and sit on it for a few years like the developers have been doing, end of problem.

    You’re in breach of contract, no need for NAMA’s, IPDF’s, or any other bullsh*t, we take the assets, just like if you default on your car loan, the repo man goes in and that’s the end of that.

    • wills

      Darragh: it’s all about political and economic supremacy and a two tier society. HE WHO CONTROLS THE DEBT CONTROLS THE AGENDA.

    • Original-Ed

      DarraghD, it’s not as simple as repossessing cars – you can sell a car abroad if needs be – houses and land are non-tradable, they have to be sold where they stand and that’s not going to be an easy for the foreseeable future. Mr Somers’ shot across Lenihan’s bow says it all, nobody wants the job and whether the banks are nationalised or not, still leaves us with this problem. Neither the state nor the Banks are capable of managing this debacle – it’s a serious, serious situation and even George Lee wont be able to solve it without causing massive pain.

      • Garry

        With all due respect, it is as simple as reposessing and selling cars, or tradesmens vans, plant etc

        The way its going tradesmen will have homes along with everything else sold from under them because developers have not paid them…
        While the developers who owe money will have their debts forgiven and be treated with kid gloves.. Then all hell will break loose

        One law for everyone or else it’ll be the law of the jungle.

  48. wills


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