August 11, 2014

The McIlroy effect

Posted in Sunday Business Post · 73 comments ·

Yesterday a friend of mine was supposed to fly to New York using two cheap business class tickets which his brother, a pilot on one of the big international airlines, can get as a perk for family. Up until Thursday there were lots of seats left on the route and there wasn’t a problem.

However, on Friday the posh end of the plane filled up rapidly. He was told it was the “McIlroy” effect. Well off Irish people, hoping to see Rory McIlroy win a Masters live in Kentucky this weekend, decided on the spur of the moment to hop on a plane – business class – and head over to the US.


This is Ireland 2014.


In certain parts of the economy, money is no object, yet in other large swathes of the country, many people haven’t a bean.

Events in the past few months have exacerbated this divide because the single biggest divider of wealth in this country, the housing market in Dublin, is taking off. With house prices booming in south Dublin, the already rich are getting wealthier. In other parts of the country, house prices have hardly budged and the residents are stuck, in many cases, in negative equity.

When house prices move in Dublin, this generates a wealth effect. People feel richer not because they have actually got any richer, but because they “feel” richer. Their notional balance sheet – the difference between assets and liabilities – has improved.

But this only is the case for the lucky ones who are already wealthy and whose perceived income is affected by asset values.

Meanwhile, the vast majority – those people who depend on wages for their income – don’t feel any richer. In fact, the evidence over the past few years is that their income has been eroded. We can see this from the first chart, which shows that real wages in Ireland – that is wages minus inflation – have fallen substantially.

Real Wage Growth

If fact, real wages have fallen and not recovered, even as the GNP figure has risen rapidly. GNP is the figure that is used by economists to measure income in the domestic economy. It is often reported that if GNP is rising, a person’s income is rising. But this is not always the case. Look at the chart and you see something else happening, which is that wages are flat-lining while income rises.

Irish Employee Compensation as % of Gross Output

How could this be?

The implication is that profits in the economy, or the return to capital rather than labour must be rising rapidly and this is indeed true. Therefore, the people who own capital in the country are doing well, but those who only have their labour to sell are not.

Given that the greatest source of private capital and wealth in Ireland is a person’s house, any increase in this asset drives consumer sentiment and therefore, retail sales.

We can see this very clearly from chart 2. This shows the extraordinary correlation between house prices and consumer sentiment and also reveals how important the house price recovery is for domestic spending.

Consumer Confidence vs House Prices

So where do we go from here ?

My feeling is that Ireland is on the cusp of a massive surge in wages and a fall in profits and when this happens, the trauma of the past seven years will begin to ease.

To understand this thinking, I will ask you to take a bit of altitude from the day-to-day, blow-by-blow reportage on the economy and consider how economic cycles work.

The first thing to appreciate is that in recessions, profits don’t fall, they rise! This seems counter-intuitive, but it’s true. In fact, recessions are actually caused by a surge in profits. This might seem odd, but this is how the economy works. Marx made the point that capitalism was a constant struggle between workers and capitalists. He was – and still is – right.

When something is sold, either the returns go to workers in the form of wages, or capitalists in the form of profits. When more of the returns go to wages, people have more money in their back pockets and more work. They then spend this cash and this is how the economy grows, purchase by purchase. If more of the economic output goes to profits, these retained profits are saved normally and don’t recirculate in the economy because they are normally owned by a small percentage of the population. Therefore, when there is a surge in profits in the economy, there is too little spending and the economy shrinks. This is how recessions can get prolonged.

In contrast, when there is a boom, the rate of unemployment falls dramatically as it did in the years 2000-2007 in Ireland and this drove up the share of wages in GNP and drove consumer spending, pushing up the growth rate further. Ironically, the boom was the period when companies in Ireland made least profit, not most profit. This point is rarely appreciated.

The bust occurs because companies try to increase their margins by letting go workers and squeezing wages. This process drives down spending and up savings, thereby suppressing activity.

We are now at an inflexion point where wages are lowest and profits are highest and a small minority whose wealth is dependent on profits and capital are much richer than the rest of society. This will now change as the pendulum swings back towards wages and employment and away from profits and capital.

Does this mean that Ireland is about to experience a significant rise in wages over the course of the next few years?

Yes I believe that will happen, not because I have any insider knowledge, but because this is how economies behave and this is how humans behave. Expect the trade unions and workers very soon to demand their share of the pie. Does that mean industrial relations issues? Why of course.

There’s more chance of Rory McIlroy getting back with Caroline Wozniacki, than Ireland not having labour disputes in the period ahead.

  1. Mike Lucey

    Thanks for that clear explanation David. Obvious when one thinks about it but again who thinks these days.

  2. I agree . Life for many is Lost in Translation . Thanks David.

  3. michaelcoughlan


    “We are now at an inflexion point where wages are lowest and profits are highest and a small minority whose wealth is dependent on profits and capital are much richer than the rest of society. This will now change as the pendulum swings back towards wages and employment and away from profits and capital”

    Are you sure? My 5 year old daughter is starting school and a school we were looking at getting her into was going to have 12 girls in her class 9 of which were foreign.

    My wife’s friend works in a school 70% of the students are foreign. A local provincial town near me over half the kids are foreign. The standard tends to rise according to various teachers I have talked to about this development.

    My point is that with an open doors policy a legacy of Mr Ahern’s many failures leaves Irish based workers competing with 10′s of millions of desperate eastern Europeans so I don’t see wages rising any time soon excepting niche skills. There will have to be a restriction on total numbers coming here for wages to rise.


    • Add to that, the possibility that if the current administration has their way, what jobs that do become available will be filled by so-called ‘internships’ which are actually a pernicious attempt to re-introduce conditions of medieval servitude. With JobsBridge they have devised a scam whereby 80% of an already meagre wage bill is subsidised out of the public purse, including to the benefit of some of the most vastly wealthy corporations on the planet, most of whom are only over here to take advantage of one of the lowest corporation tax rates in the world. If David really understands Marxism, he would would know that a reserve army of labour has always been a key weapon in the arsenal when it comes to sandbagging profits.

      Of course, those people in Ireland who today ‘feel richer’ because property prices are rising (their “perceived income is affected by asset values”) know full well that that ‘feeling’ can only be sustained if there is a rising generation willing to offer them terms for that property. So the long-term sustainability depends upon the rise in the purchasing power of wages. But they are only bit players in the overall game. There are other, bigger players whose real, not perceived, income is conditioned by a need to keep wages permanently low. In normal circumstances, tail does not wag the dog where these matters are concerned.

      • michaelcoughlan

        “There are other, bigger players whose real, not perceived, income is conditioned by a need to keep wages permanently low”

        You can be sure of it. It’s called feudalism or plutocracy. Milton Friedman misses this point when he argues against a min wage saying such min levels are a barrier to hiring the unskilled. It’s the good nature of friedman which was warped by corporate sociopaths in the US that gives Milton such a bad name.

        • DB4545

          What I don’t understand in this endless race to the bottom is how the plutocracy can make money from impoverished serfs? How are they going to sell goods or services to people reduced to serfdom? Even Henry Ford realised that there was no point in creating assembly line production if there was no market that could buy his Model T.

          • michaelcoughlan

            let me explain it this way. if X equals the total value of goods and services produced in a year and the King owns everything then his share of X is BIGGER if the first line producers receive LESS of X through reduced income.

          • DB4545

            I see that Michael. But even the plutocrats must realise that you end up with Zimbabwe instead of Switzerland. Sure you get to control it for a while but it then it implodes and then someone else takes the loot off you.

          • DB4545 and Michael

            Just arrived in my inbox courtesy of Awaken Longford.

            Not to be ignored on this topic of money.

            New post on Awaken Longford

            Words of Wisdom in an ever degenerating World……
            by nacainte
            For those of you who have never been introduced to E.C Riegel, I would like to share some of his self taught insights into the world of finance and government.

            E.C Riegel described himself as a “non-academic student of money and credit”, I am imparting some of his views from his book ” Private Enterprise Money” dating from 1944 which is as pertinent today as it was then, maybe even more so.

            He states clearly that Man has two major problems:

            1. How to prosper

            2. How to govern Government

            “Because man has not mastered the problem of achieving prosperity, he has turned to government for its solution”

            Just look where government, both here in Ireland and in Europe, has managed to do the the economy and people of Ireland!

            “While government intervention in the primary problem, (that being Man’s failure to master prosperity), has brought the additional problem of how to govern government. When government undertakes to solve man’s problem for him, it undertakes the mastery of society and it cannot be both master and servant. Thus it fails in both spheres.”

            Just what role do you believe government should fulfil? Master or Servant.

            “When man has mastered money he shall have mastered not only his economic problem of prosperity but also his political problem, for he will see that money has no place in state functions. Not money, but a false money system, is the root of all evil.

            We shall eventually find that money power is inherent in all if us; and that this power can not be exerted by government for us. We must either exert it or become supplicants to some authority (government or banks) that issues money. Since we have looked to government to exert the money power, either directly or indirectly by the legalisation of the banking function, we have innocently fashioned our own subjection from which nothing but the correcting of this error can extricate us.


            Unfortunately Politicians in Ireland have discovered the benefit of self-interest and compliance with the financial, unelected money men in Europe.

            ” Obviously, the economy must have a money supply; since we the people are too ignorant to understand that not only the power, but the duty, to issue money resides in ourselves, pressure falls to government to manage the matter.

            We the people, must assume responsibility for the solution to the primary problem of prospering ourselves, but to do this we must master money.

            Having mastered money we shall find that vicarious money issuing power is pure illusion and that we can and must exert the money power by and for ourselves.

            With this step accomplished, we shall find out very quickly that we are no longer petitioners of government but rather, government is completely dependent upon us.

            Ipso Facto; we solve all political problems and end war.

            Empowered, as governments are, to control the money system by their acquiescence to the central bank system, they are a constant menace to the peace and prosperity of mankind.

            Mad man, selfish men, ambitious men, fanatics and crackpots may at any time seize the reins of government and drive the state like a juggernaut over the people.

            When government is invested with the power of money it rises above the citizen and under the profession of protecting him may actually constitute the greatest threat to his well being and safety.

            The power which control of the money system gives to interfere in and direct and even take the life of the individual should not exist on theis earth.


            Democratic government to date has been a pure illusion.

            All that is accomplished by voting or revolting is a change in the personnel of government.

            The perversive money power remains to serve the evil designs of the dishonest politician and to frustrate the plans of the virtuous.

            Money power means budget power and it is folly to imagine that the citizen can control government unless he can control its budget.”

            When was the last time a budget in Ireland was put to the people for ratification?

            “Political democracy (in Ireland; Representative Democracy) is a system of tolerance, not one of active support.

            The citizen is engaged with the duties and problems of his private affairs and if government does not especially annoy him, he takes government for granted.

            It is only when government burdens or bothers him that he is stirred to action.

            As a citizen he function negatively, i.e., he doesn’t trouble to give approval; he only registers disapproval.

            Since this is the citizens natural attitude toward government, he must be put in a position not only to protest a completed act but also to veto a proposed one.

            He must have both voting and vetoing power.

            Therefore government must be so placed that it can have no existence independent of the citizen, and must ask for every penny it proposes to spend.

            This monetary control by the citizen over the state is the only form of democracy that is effective.

            Until we attain it, we are merely beguiling ourselves with our elective processes.

            We must have a broader voting process than the merely marking a ballot paper annually or quadrennially.”


            ” As long as we cling to the superstition that we must look to government for the money supply, instead of requiring it to look to us, just so long must we remain the subjects of government and it is vain to follow this or that policy or party or ism in the hope of salvation.

            We can control government and our own destiny only through our money power and until we exert that power it is useless for us to debate the pros and cons of political programs.”

            In Summary:

            The present money system has three basic evils, (notice I did not call them flaws, mistakes or errors, I called them EVILS):

            1. The system permits all money to be issued privately and only by a limited number of persons and corporations.

            2. The system permits government to issue unbacked money while the citizen has no power to veto such decisions.

            3. The system allows ambitious, designing or fanatical men who are in control of government light the fires of war, threaten the lives and fortunes of untold millions. This terrible power lies solely in the political money system since armaments spring from money and money springs from government fiat, whereas it should spring from the fiat of the people who would thus hold the veto power.

            It is worth reminding everyone that we in Ireland held the power of veto until it was removed by a Fine Gael government from the 1937 Constitution.

            Imagine for a moment, the power of that veto if we had it now, apply it to all the disgraceful decisions made by successive governments since 2007 and in turn imagine the status quo if we the people had been able to veto such decisions.

            All power comes from the people but every person has to stand up and claim that power, only then will we see the improvements to our standard of living, do nothing and government and powerful corporations who influence government will continue to erode basic human rights and hard-won freedoms until we are all simply completely subjugated to one entity or other.

            Property Taxes have nothing to do with improving your life!

            Water Charges have nothing to do with improving your life!

            Any increase in any form of taxation has nothing to do with improving your life!

            When is the last time you have seen a government provided service improve?

            I used to pay tax to have my bins collected, now I still pay that tax and also have to pay again to have a private company collect my bins.

            I used to pay tax to have roads built and maintained, now I still pay that tax and also have to pay again to use the roads in the form of tolls.

            I used to pay tax to have a drinkable water supply, now I still pay that tax and also have to pay again to a private company for undrinkable water.

            I paid penal stamp duty when I bought my home, now I must pay an annual property tax in addition.

            I could go on and on but I know I am preaching to the converted, (or at least i hope I am), I am ashamed of what my Ireland is turning into, a corportocracy, whose function is to bleed the people dry for the benefit of the few.

            Being an Irishman is not something to be proud of right now.


            E.C Reigel book “Private Enterprise Money” is available to read here:


          • michaelcoughlan

            “I see that Michael. But even the plutocrats must realise that you end up with Zimbabwe instead of Switzerland”

            Hi DB4545.

            I am delighted that you responded with this comment because it gives me the opportunity to finally I hope make my point which I have been harping on and on again bonbon like.

            The plutocrats DON’T see this point. They only see MORE FOR THEM..

            Remember Aesop’s fable the frog and scorpion? The scorpion asks the frog for a ride across a river on his back and the frog agrees thinking that he will be safe from the sting since why would the scorpion kill the frog ensuring he will drown as the frog is paralysed and can’t swim? Well the scorpion stings the frog and they both drown but before they do the frog asks why the scorpion did it and the scorpion says “it’s what I do”

            My own anecdote is if you have ever had chickens and a pine martin gets into the coop he will kill every chicken because he is a killer. He doesn’t kill one and take it away for food. He will kill everything in sight because that’s what he does.

            Another story was when Denis O’Brien gave evidence at the tribunal he stayed in a hotel in the North to ensure he didn’t spend more days in Ireland than necessary so he wouldn’t fall foul of his tax exile status. Do you think you could convince Dennis that for all his money that not being free to walk the land of his birth was a sign that he had no freedom at all? I dare say so no is the answer.

            Knowing human nature I suppose was why Aesop invented the parable to instruct children of the self destructive behaviour of some people especially those in power. Imagine being a German general in WW2 trying to convince Hitler that committing Genocide would lead to the destruction of Germany and Hitler’s own death? Do you think any of them could make Hitler see the madness of it? Hence the term;

            The blinding clarity of a madman.

            Sounds like an oxymoron but terrifyingly it isn’t.

            Ben Bernanke suffers from the same blind ignorance. He can’t be told either. Neither can Bonbon or any one like them.


          • michaelcoughlan

            “When man has mastered money he shall have mastered not only his economic problem of prosperity but also his political problem, for he will see that money has no place in state functions. Not money, but a false money system, is the root of all evil”

            Man must first master HIMSELF and his OWN greedy tendencies before he can achieve ANY of the above.

            The Longford scribe is a real sage Tony.

            Well done.

        • DB4545

          There is a deliberate attempt(Largely succeeding)to pauperize the world and control it, by an elite few who consider themselves the masters of humanity.

          They first commanded the money system through political intrigue, then the government, then the policies of governments.

          These policies destroy economies causing discomfort to those previously well off who then cry for help and protection to be provided from those same governments.

          In the meantime the money system pushed onto the people is designed to indebt the people, government and states.To whom?

          Why the very people controlling the banking system who are accumulating all the assets. What assets? At present about a third of the world output through stock markets and share ownership of the corporations enmeshing the economies through corporatism or in its better known name Fascism. Plus the accumulation of significant solid assets.

          We are well on the way to a form of feudalism where all are indentured to the holders of the debts.

          One must understand that there is no improvement or freedom until this is understood by a critical mass of people.

          The current central banking system must be destroyed and rid of or our children and descendants will be permanently enslaved.

          The plutocrats do not care about you or me as they will live the the good life at the expense of humanity.

          Henry Ford is also credited with saying something along the lines of, “Only one person in a million understands our money system and if they did there would be a revolution tomorrow morning.”

          • michaelcoughlan

            “The current central banking system must be destroyed and rid of or our children and descendants will be permanently enslaved”

            I agree wholeheartedly. Where I advocate a different approach is how you do it. My counsel Tony is to use the principles of E C Riegel and start implementing them at the local level with fellow citizens of like mind, a bottom up approach. You then build momentum and as you do your numbers grow and before you know it you and your fellow citizens are using LESS and LESS fiat currency and more and more citizen credit. The central banking system will then WITHER on the vine.

            If I could get you to realign your view of “how to destroy the central banking system” in this regard you will be less bonbon like in your repeated assertions saying the same thing over and over again to people who agree with you and will refocus your intense energy on something which will be far more productive and the full realisation of a life’s learning and experience and lived well.



          • “If I could get you to realign your view of “how to destroy the central banking system” in this regard you will be less bonbon like in your repeated assertions saying the same thing over and over again to people who agree with you …………”

            Michael, one can do all one likes at the local and corporate level but it does not change a couple of facts.
            Nobody outside your local circle will use the local currency.
            Any of your circle desiring to purchase goods online or travel has to convert to fiat central bank money.

            Much as the US having the reserve currency of the world gives the US great power,economically and military so does a national currency exert similar pressures on its citizens.

            We are coerced by government.

            Therefore the people must revoke that centralised currency and use a currency of the people.

          • Just use Bitcoin lads and you’ll be fine.

            Short and sweet answer.

          • DB4545

            Maybe a first step is a move back towards cash. I understand that cashless transactions are now deeply embedded in our economy and society. I noticed on a recent visit to Germany that many transactions require cash and a noticeable number of businesses just won’t accept debit or credit cards.

    • pablos

      Don’t blame the immigrants for any perceived or actual threats to your livelyhood, you will have to do what any businessman or woman has to do when faced with competition – become more competitive, you probably already have advantages over the immigrants, such as a support network (famiily, friends) and you speak the local language, a lot less likely to suffer bias and discrimination etc.. Now all you have to do is develop your skills.

      As an Irish immigrant in a European country I have no patience with such a whinging attitude. Reading between the lines, what you’re actually telling us is that you’re too lazy to get off your behind and do something about it.

      • michaelcoughlan


        I didn’t blame them. You did what many people do and made a mistake that a numbers game equals bashing the foreigners. Read my post again and you will see my post is complimentary.

        it’s a mistake to read between lines because it can lead you to form a biased and unrealistic view based on your own hypotethis which may have no basis in reality as is the case with your post and your impression of me.

        As for becoming more competitive many business men are now exploiting those same foreiginers offering min wage in a high cost country like ours copper fastening the divide between the haves and have nots which McWilliams addressed in the article by saying that a swing back to wages is something he feels is about to happen.


      • DB4545

        Pablos if Irish taxpayers paid for your training and education then that’s our loss and I’m sorry that the Irish State has again failed to match education with the needs of the economy. If you were an Australian Citizen having received a third level education it would have been funded via a student loan and you’d have a liability to pay back the Australian taxpayer. If you were educated in Ireland at third level the Irish taxpayer has effectively given you and your host Country a tax free grant. Does your host Country provide you with free or subsidised housing, healthcare, welfare benefits without having made contributions to their welfare system and for what time period?

    • I have to say I agree with this poster.

  4. patboland

    The two good things Fianna Fail did were:
    1)The smoking ban.
    2)Open door policy for immigrants.
    The influx of foreign nationals is a total net plus for the economy. As with all immigrants they have brought determination and innovation to Ireland. In addition to this an increase in population in an economy like ours will naturally increase the size of the economy from which we all benefit. Including the kids who are lucky enough to go to school with these children.
    The real need that we have in Ireland is to continue to reduce the cost of the Public Service.
    The taxpayer needs management within the Public Sector to have the option of compulsory redundancy so that real reorganisation can take place.

    • michaelcoughlan

      Almost all my mates Pat in their late 30′s and early forties with young have had to emigrate to countries where they get paid properly. in other words the door opens both ways.

      My post was not against foreign labour it was highlighting the need to control supply if we are to achieve a better balance between capital and labour which was the thrust of the article.

    • Good that we now have to compete with the rest of the world on our own turf?? Compete with desperate immigrants who’ll do anything to work and put food in their mouths, who’ll undercut the entire native population if needs be just to survive?

      I beg to differ but we already had “determination and innovation” in Ireland.

      With which special children will be be so privileged to school with, Einstein’s offspring?

      Sounds rather anti irish to me sir.

    • DB4545

      I accept that an open door policy for highly skilled immigrants is positive for the economy. Any Country which can access such a pool of talent without having to pay for the cost of their education etc. is on to a winner. That’s why Australia, The UK and Canada etc. have been hoovering up tradespeople and professionals for years. But an open door policy for low skilled workers shifts Irish people with low skills onto the dole at taxpayer expense. Low skilled immigrant workers take up these jobs and the taxpayers pay the “hidden” costs of unemployment benefits,medical cards and public housing etc. If an open door policy is the way forward why do Australia, Canada, Switzerland restrict entry through a points system based on skills? We don’t need to import people with low skills we have plenty claiming benefits. We need effective policies to bring them into the workforce to contribute.

      • Deco

        Ireland, has a bias towards welfare in it’s immigration policy. Especially in respect of housing policy.

        The real objective of social housing policy in Ireland is to provide a floor for the housing market.

        If a person with high skills is taxed to the point, that they will go somewhere else. And the cost of living in Ireland (especially Dublin) is a further impediment.

        High skills people don’t wait in Ireland. They pass through here on the way to somewhere else.

        • DB4545

          We’ve been exporting highly skilled tradespeople and professionals for generations having trained them at taxpayers expense. We don’t need to import people with low skills we have them in abundance. We just need to restructure the welfare and work and training system to help pull them into employment. But to suggest an open door policy for all immigrants given our short and long term structural unemployment levels is just plain stupid. We have some families who are approaching four generations of welfare. That can’t be good for the individual or society.

  5. I can’t read the x-axis of figure 1, is it months?
    I’ also puzzled by figure 2. To show a correlation between house prices and consumer sentiment, one should expect two curves, one tracking the other, no?

  6. donnagh

    At the same time, we need to consider all the external problems which could wipe us out before we get too optimistic.
    We’re only a spec relative to the global economy.
    Any number of things could sink us:
    Changes to corporation tax
    Euro crisis is still ongoing
    International debt crisis
    Fuel crisis resulting from various current and potential conflicts (Ukraine, Iraq, Afganistan, Syria).

  7. Adelaide

    David’s article makes perfect sense as long you agree that we are indeed in a ‘recession’ and that ‘business cycles’ still work, what went before will repeat again, economic assumptions never change, inevitably capitalism will return back to business as usual while jobs with meaningful wages will return for the majority.

    I very much hope this is the case, because, not wanting to sound elitist, but all the intelligent people are emigrating. I’m sick of saying goodbye to smart innovative capable Irish 35-45 year olds.

  8. patboland

    Not at all anti Irish. Pro Irish in fact. The more people want to come here prouder we should be. It is a vote of confidence in Ireland as a nation that others want to come and live here. It shows we are doing a lot of things well and are creating a society in which people want to live.

    • michaelcoughlan

      “It shows we are doing a lot of things well and are creating a society in which people want to live”

      From adelaide’s post above it seems everyone except the most productive segment of the irish population. not very pro Irish Pat.

  9. patboland

    Not all capable 35-45 year olds are leaving some are though however many will return when things get better. We have achieved a good deal over the past 5 years or so.Over the past 15 years if you consider the resolution peace process in NI etc we have achieved even more. If we maintain this focus we will continue on this positive trajectory. There is no reason why we will not.
    We will emerge from this economic collapse stronger and wiser.
    Two years from now this will be forgotten…….that could be the biggest danger.

    • Mike Lucey

      ‘Two years from now this will be forgotten…….that could be the biggest danger.’

      I seriously doubt this will happen. Two years or less from now I think we will probably undergo a total re-set and could well be back to some type of Gold Standard. It looks that its the only way some form of global financial stability can be achieved. Far more knowledgable men than the likes of me are advocating such requirements / happenings.

      Check out what Steve Forbes has to say about the current mess,

      Steve Forbes: Link dollar to gold or face Great Depression II

      • Forbes does not acknowledge the on going price suppression of gold and silver as the central banks and the their proxy bullion banks illegally naked short the commodities.
        With the adoption of the Shanghai exchange dealing only in completed contracts that must be settled by delivery of the goods rather than cash as at COMEX we will see a shortage of metal for delivery that will cause a spike in prices. The COMEX only,reportedly,has one ounce of gold available for every ounce traded. $2 billion dollars can buy up all the available metal in a flash.

      • Forbes does not address the fact that there is a high likelihood that most of the Western central bank gold, including the the US, is already sold or otherwise and so is not available to back a currency except at a considerable increase in price as priced in US dollars.

        We are talking multiples here not percentage increases.

    • Colin


      I left the old sod in September 2007, the real start of the ‘crisis’, returned to Ireland (with my UK PRSI stamps) in December 2009 (due to getting laid off in the UK) and stayed until August 2011 when the UK Economy picked up again.

      I will never return to Ireland again to live and work. I would be a big fool, I would take a huge drop in take home pay and I would be forced to own a car and take out motor insurance, health insurance and all the other fees.

      • Pat Flannery

        Colin, we clashed in the past but I share your sentiments more than perhaps you realise. I experienced very similar emotions as I left Ireland – twice – each time sworn to be for good.

        But I returned, after almost a lifetime away. It never leaves you. I decided to come back and confront my demons. But I waited until well past retirement age. I could never have worked in Ireland again after my experiences.

        I had qualified as an accountant in London where I was treated well but always as a “Paddy”, which I deeply resented. I returned to Ireland as I was so often urged to do when considered to have spoken out of turn as a “Paddy”. Perhaps things have improved but that is how it was in the ‘60s.

        My main beef with Ireland was the all-pervasive dishonesty. The English may have called me “Paddy” but they were honest in their business dealings. All the Irish wanted from me as an accountant was to cook their books. Two sets of books was standing procedure in Ireland.

        When I joined a certain company I quickly discovered that the bank manager was actually splitting lodgements, sending a portion to an offshore account and crediting the remainder to the company’s account at his branch. I naively thought I had just discovered a bad apple.

        When I “reported” him to the bank’s HQ in Dublin they laughed at me. They told me such practices were part of his job. If that particular bank manger did not do it his competition would be glad to. The Irish banks were actually facilitating “skimming” by every major business in Ireland. I have no doubt it still goes on and woe betide the accountant who reports it.

        So I share your distaste for much of what happens here. Going away and never coming back is exactly what they want people like you and I to do. It allows them to get on with their age-old ways, which probably were a major factor in the Great Famine.

        If truth be told the “Great Famine” was probably the “Great Enrichment” of the profiteering “gombeen” class whose descendants occupy the majority of positions of wealth and authority to this day. That dishonourable class populated the clergy and the civil service because their families could afford the required education.

        Having said all that I still love this country, enough to come back, finally, and do what little I can to improve it before I kick off. So Colin, never say “never”. You speak more truth than you may realize.

        • Colin

          Cheers mate.

          Thatcher called the Irish liars. Irish establishment got offended. She was right.

          Law and order does not exist in Ireland. Gardai are lazy. Judges are bleeding heart liberals who often refuse to jail. Barristers play the ‘my client had a drink problem m’lord’ card everytime because it works.

          I’ve never been called Paddy in London, and I take the Declan Lynch line of the Sunday Independent when it comes to using the name Paddy. I have an inner eejit too, and sometimes I wrestle with him, and usually I win. Getting drunk lets the eejit out, so I don’t really get drunk much anymore. We all need to wrestle with our inner eegit – it makes you a better person. never give up …and all that old chap.

    • Adelaide

      I commend your positive outlook. It reminded me of yesterday’s Sunday Times piece by economist Cormac Lucey: “20 Reasons To Be Less Dismal”. His outlook, it is a good sign things are economically worsening because this ‘worsening’ is a correction, which will be followed by a recovery. It’s painful because we are correcting the jobs crisis, housing crisis, debt crisis and whatnot, meanwhile professional couples with children have and are weighing up their prospects and voting with their feet. “Bye, give us a call when you’ve sorted it all out, in the meantime we aim to have a life.” At their age and their children’s age they will not be returning.

    • michaelcoughlan

      They wont come back pat because they are the first generation in Irish history tom emigrate twice.

      In 2 years time the world will be going through a hyper inflationary depression that will make the great depression look like a walk in the park.

  10. cooldude

    The “blow by blow” overview of the economic cycle makes no mention of how the bubbles which cause recessions are created. The boom bust cycle is a direct result of our system of central banking, which is constantly manipulating both the supply of money and the interest that is charged on this money, and our system of fractional reserve commercial banks, who are actively encouraged and cajoled by the central banks to constantly increase the supply of money at a percentage way beyond the growth in the economy. This easy liquidity always moves into asset bubbles, such as housing or stocks, and the boom inevitably leads to the bust which is also solved by even more money printing. This cycle is just increasing in speed and will end in total debt saturation which is not that far away.

    To ignore the real causes of the “economic cycle” is not unusual in this column or in most of the Keynesian media but is nonetheless wrong. A lot of the stuff in this article was also in a recent Reuters article on economic recovery and income disparity even down to the quote from Marx. Here is an article from the excellent Daily Bell which analyses the Reuters article and points out the fallacies in it’s conclusions

    • You are completely correct Cooldude.
      The fundemental cause, causes, of the economic depression upon us all, world wide, is to be found is to be found in the current fiat debt based money system.

      98% or more of all money is issued into existence as a debt. This debt is charge interest. Thus more money is demanded in return payment than was issued.

      EG A 100 loan at 3% demands a return of 103.
      As this extra 3 is not yet issued nto existance it can only be repaid from someone elses loan issued to them. This leaves the second person with a 100 loan short 6 to repay. The third person loaned will be short 9 etc. Eventually the system requires another and then another to be loaned to in order to have enough money in the system to repay or the system collapses.

      Thus more and more at ever increasing frequency will have to be loaned just to prevent the money system collapsing. We have reached the stage where even exponential growth of new money loaned into existence has no effect on the economy but simply adds to the debt load. This is evident in all countries with a central bank and associated money system.

      As Cooldude indicates , this issue is not, has not and is unlikely to be addressed by our host.

      I respectfully request that this issue be addressed and debated and made part of the public forum.

      • I second that Tony.

        Come on David, bite the bullet and tackle the fiat elephant in the room!!!!

        • We all need more help from the government I am told. Central banks control governments and so one receives the help allowed by the central bank controllers. this results in the following as received in my inbox this morning.

          Subject: FW: Fw: ACRONYMS

          Due to the current financial situation caused by the slow down in the economy, the Government has decided to implement a scheme to put workers of 50 years of age and above on early, mandatory retirement, thus creating jobs and reducing unemployment.

          This scheme will be known as RAPE (Retire Aged People Early).

          Persons selected to be RAPED can apply to the Government to be considered for the SHAFT program (Special Help After Forced Termination).

          Persons who have been RAPED and SHAFTED will be reviewed under the SCREW program (System Covering Retired-Early Workers).

          A person may be RAPED once, SHAFTED twice and SCREWED as many times as the Government deems appropriate.

          Persons who have been RAPED could get AIDS (Additional Income for Dependents & Spouse) or HERPES (Half Earnings for Retired Personnel Early Severance).

          Obviously persons who have AIDS or HERPES will not be SHAFTED or SCREWED any further by the Government.

          Persons who are not RAPED and are staying on will receive as much SHIT (Special High Intensity Training) as possible. The Government has always prided themselves on the amount of SHIT they give our citizens.

          Should you feel that you do not receive enough SHIT, please bring this to the attention of your Local MP who has been trained to give you all the SHIT you can handle.


          The Committee for Economic Value of Individual Lives (E.V.I.L.)

          PS – Due to recent budget cuts and the rising cost of electricity, gas and oil, as well as current market conditions, The Light at the End of the Tunnel has been turned off


  11. StephenKenny

    Where’re the well paid jobs going to come from? or, in what sector will they be?

    • Tull McAdoo

      I suppose you would have to be foolishly optimistic to believe that these jobs are going to be created in Ireland and given out to people based on merit and qualifications….haha what a laugh.

      Of course you could take a leaf out of Pat Bolands spin above and believe that we are going to have a “soft takeoff” now that we have dispensed with our “soft landing” ha ha …good man Pat, Bertie the Drumcondra Ditherer would be proud of ya.

      Meanwhile back in the real world I will continue to meet these emigrants in O’Reillys pub in Perth and listen to how they tell it. Who knows maybe they will become bulletproof like me over time….. On that note Goodnight Ireland . Sleep well and take it away Daithi Mac Guetta, as gaeilge, an thuigean too, Titanium…

      • StephenKenny

        I’ve just read a piece about James Stockdale, the first US pilot to be shot down in Vietnam. He was captured, tortured, and survived something like 8 years as a prisoner of war.

        He was asked what kind of people survived, and he answered “those who had faith they would”. When asked what type didn’t, he replied “the optimists”.

        I think we’re in a period when it’s important not to confuse belief with optimism.

  12. mishco

    David, to entitle your article “The McIlroy Effect” is a bit unfair on a guy who’s just recently conquered the world in his sport (Majors,though not yet a Masters). When has an Irishman last done this? Think back to the Hurricane or George Best (also strangely from the very same corner of the country). Perhaps more recently Padraig from Dublin, but he never reached No 1, and there have been some great boxers, and the odd rugby player, and maybe a few I don’t know about. But Rory is now a superstar.

    Rich Irish people fill the best seats of planes for every Man U. home game, and for Davos, U2 concerts and a whole lot more.

    And even though I agree that it’s a sad world where the rich grow richer and the poor grow poorer and the unions will try to be doing something about it again, I’d love to have seen you concentrate on what I think is a more valid “McIroy Effect”, where a guy born and bred in our country has, through his and his family’s own hard work, managed to show what we are capable of. This effect is one of inspiration to the young people growing up in Ireland, as well as of pride among everyone that one of our own has made it to the very top. And this is also Ireland 2014.

    • “conquered the world” haha.

      Hitting a miniscule ball around a windy field with a stick.

      Utterly meaningless in the grand scheme of things.

      The proles love it though, just like the rugger and the footy.

      They lap it up.

      • jaysus

        heh heh, well said Adam.

        • “pride among everyone that one of our own has made it to the very top”.

          Speak for yourself mate, I couldn’t give a toss what McIlroy the smarmy little twat does.


          • mishco

            Begrudgery of the first order.

            Ireland produces someone who is best in the world at what he does.

            Ah, but he’s a “smarmy little twat”.


          • He hits a ball around a field with a stick. That’s his ‘profession’. An utterly useless activity.

            I admit his personality is irrelevant, a red herring but I don’t really care about it – neither should you.

            Are you intensely ‘proud’ of Ireland’s synchronised swimmers as well? That’ll put food on the table for your kids alright.

            Bread and circuses keep simple minds distracted while they are being milked for everything they have.

            Still it’s your life, good luck with it. What’s the next sporting ‘occasion’ that you can’t wait to wrap the flag around yourself for?

  13. Deco

    The McIlroy effect. Really it is about a niche.

    In fairness, the people following McIlroy would have gone three years ago too. If they were confident that he was going to win.

    There is a certain economic category that will always take part in these events.

    I see that Garth Brooks is selling a concert in the American Midwest, with tickets almost 20 Euro cheaper than the expected prices in Croke Park. Even cowboys like Brooks were in on the “rip-off Ireland” racket. And that is before we get to talk of other “performer”.

    McIlroy is perhaps a better personification of achievement in Ireland than the national soccer team (who continue to flatter to deceive) or maybe the rugby team (who are actually very good, and full of competence, even if they are not at the level of NZ or OZ).

    Apart from anything else, he getting to be number 1.

    Maybe Irish people are picking winners, instead of blindly following lemming runs chasing defeats and draws and measuring ourselves as “also-rans” (in other words “losers”).

    The odd thing about it is that we are not as good at team work, as we pretend, and far better at individual achievement than we ever seem to acknowledge.

  14. Jim Sinclair’s Commentary

    Some recovery…

    Wages in U.S. down 23 percent since 2008, report shows
    By Cliff Pinckard, Northeast Ohio Media Group
    on August 12, 2014 at 2:29 AM

    While 8.7 million jobs have been regained since the 2008 recession, they are paying much less, by an average of 23 percent, according to a report released Monday by the United States Conference of Mayors.

    The report comes as debate continues about income inequality in the United States.

    “While the economy is picking up steam, income inequality and wage gaps are an alarming trend that must be addressed,” said Conference of Mayors President Kevin Johnson, the mayor of Sacramento, Calif., in a news release. “We cannot put our heads in the sand on these issues.”

    The annual wage in sectors where jobs were lost, particularly in manufacturing and construction, during the recession was $61,637, but the average wage of new jobs through the second quarter of 2014 is $47,131, the report shows.

    It represents a loss of $93 billion in wages, according to the report. (Go below to see the full report. Mobile users can see it here.)

    The losses in construction and manufacturing were replaced by jobs in hospitality, health-care and administrative support.

    The report shows the gap between low- and higher-income households is growing and likely will continue in the future. In 2012, the latest year for which figures are available, 73 percent of metro areas had a larger share of poorer households (those making less than $35,000 per year) than upper-income households of above $75,000.

    • michaelcoughlan

      “It represents a loss of $93 billion in wages”

      This loss is a gain in operating income which is a return in favour of capital versus labour. This increase in corporate income and the transfer of that money to investments on the stock market is A contributory factor in the record levels on valuations for the indices another inflationary indicator.

      • Not necessarily.
        That supposes the economy is stable and wages dropped.
        My suggestion is that the the return on capital also diminished and that the reason the wages are lower is that is all that can be afforded.
        Monetary inflation does not always result in rising prices as the economy fails and collapses in the end phase.
        First inflation, then deflation as the excesses are wrung out of the system.
        Remember Mises, roughly transcribed as ” All credit induced booms are followed by the inevitable bust”
        The bust was temporarily stopped by QE but now it continues to the bottom. Because of QE it will be worse and without QE would have already been over.

    • michaelcoughlan

      Begs the question; What’s driving house prices? I venture a guess that the same thing is happening as here. A market thinner than a knickers on Jordan’s arse with prices for some properties paid for in cash profits taken from speculating in the stock market.

      Rising prices in such circumstances in my view is the beginning of hyperinflation.


  15. Mike Lucey

    I’ve been, like many others, trying to think of realistic ways Ireland can revitalize and generate a sustainable economy rather than placing too much confidence in multi-nationals that could be gone like a puff of wind overnight. Dell?

    The state needs to concentrate on public wealth creation not particularly job creation, jobs will materialize as a result of national wealth creation.

    Like many things I feel its a case of looking under one’s nose. While attending the local CBS back in the 60s we were taught that Ireland really didn’t have any natural resources apart from a good portion of productive land.

    I feel that this must have sunk into the kids attending primary school at this time and remained with them. Many of these now grown up 60′s kids have been and still are in high powered political positions.

    While agriculture has always been nurtured by vote seeking politicians and to be fair its doing quite well as it has produced some decent world class companies that are expanding creating wealth and decent well paid jobs, it looks that it may not our major natural resource.

    After reading an article by Harry Browne, ‘Where will they get the fish?’ in The Dublin Review, I am even more convinced that Irish Waters are a huge natural resource that the State never had time to develop for the betterment of Irish citizens. Maybe the thinking was that, what you never had, you never miss!

    Harry Brown’s historical analysis of how we have got where we now are with our national waters / fisheries is well worth the read.

    A couple of quotes from the article,

    ‘An Irish fisheries official, who spoke to me on condition of anonymity, said the crime being committed over and over again in the seas off the coast of Ireland, as elsewhere, could be summarized simply: concentrated rape.’

    ‘The Spanish fishing fleet contains thousands of ships. In Galicia alone the fish industry employs a quarter of a million people.’

    ‘With 20 per cent of the EEC’s waters, Ireland got about 4 per cent of the overall catch’

    ‘In every fishing port in Ireland the theory thrives that a coterie of civil servants in Dublin is keen to get rid of Irish commercial fishing, leaving the waters to the big EU players and the Irish ports to pleasure-boaters and tourists.’

    The bottom line for me is that it looks that Ireland could over time create vast wealth and possibly hundreds of thousands of direct and indirect jobs in an eco-friendly and sustainable Fisheries Industry in OUR WATERS that are currently being raped and abused. Surely the State has the right to retrieve a raped and abused national asset that was placed in EU hands for good keeping.

    After reading Brown I now feel that I understand the reason why this is not currently a leading Irish industry and the article also puts the mind thinking how it could be a future leading industry for Ireland.

    Of course the State would need to grow a pair and reclaim what should never have been given away for peanuts in the first place. I doubt the current leading political parties will do this but it would not surprise me if upcoming parties take this option more seriously and actually continue what was started in the years pre Common Market membership.

    • Good commentary Mike.

      ” I doubt the current leading political parties will do this but it would not surprise me if upcoming parties take this option more seriously and actually continue what was started in the years pre Common Market membership.”

      Adding to the above. I suggest that abandoning the Euro is the start to reclaiming sovereignty. Adopt a national currency and repeal all odious debt.
      Reclaim the Irish continental shelf and the fishing and other resources that go with it according to international law. If the EU does not agree then leave the EU too.

      There is nothing more admired than the rugged individualist standing up to the bully. As pointed out elsewhere, the Irish do well in other jurisdictions around the world and it is time to do so at home.
      Exemplify as well as amplify the likes of Rory McIlroy.

    • DB4545

      If you want to see how marine resources are properly managed take a look at Iceland. We handed over our Agricultural, Marine,Mineral, Oil & Gas resources for a few brown envelopes. Norway did a deal with Statoil on a 50:50 basis to develop it’s Oil & Gas Reserves. Norway now has 500 billion Euros in a wealth fund to pass on to the next generation. The major Oil players must be laughing their heads off at our reckless incompetence/third world level of corruption or both.

  16. so we are in recovery are we?

    Soon enough the money ponzi scheme will collapse. Meanwhile it’s
    “16 tons
    and what do I get
    Another day older
    and deeper in debt”

  17. Mike Lucey

    From what I see, the ‘super elites’ have always resorted to world war in order to maintain their ‘top dog’ position and this looks to be their strategy again in these times.

    It looks that the Washington DC is foolishly pushing very hard for war with Russia in the belief that the ‘homeland’ would escape devastation. The thinking seems to be that as per usual its Europe that would suffer the brunt. Their reliance on current ‘super’ technology to achieve this would be a very foolish gamble according to logic.

    ‘Washington Has Placed The World On The Road To War — Paul Craig Roberts’

    I hope that the lunatic Washington gamblers are not allowed to go this route. If they do we may as well bend over, put our heads between our legs and kiss our arses goodbye.

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