October 19, 2015

Here's some budgetary advice: time to let it rip

Posted in Sunday Business Post · 70 comments ·
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One of the strangest reactions to last week’s budget was that it was dangerously expansionary. This is quite bizarre, particularly when the economy has so much spare capacity. When you have a rate of unemployment twice that of your nearest and most important trading partners and when your rate of interest is lower than theirs, what is the world telling you?

It is telling you that there is excess capacity everywhere in the economy; there is plenty of room to grow and plenty of scope to invest. High levels of Irish unemployment and historically low interest rates, plus a current account surplus – it all means that the economy can’t possibly be overheating or anywhere near to it.

A current account surplus of nearly €3 billion was registered in the three months to June of this year. This means that in the three months to June of this year, Irish people and companies saved €3 billion more than we spent. That doesn’t strike me as an economy in danger of hurtling out of control. In fact, it appears to be an economy that is not spending enough. It is not an economy with too much demand.

This is also an economy with a dramatic housing shortage and a rate of inflation that is actually falling, not rising. According to the CSO, consumer prices in Ireland decreased by 0.3 per cent year-on-year last month. And what about wages, are they rising rapidly? No they are not.

In short, there is scant evidence of the economy overheating. With a rate of unemployment of 10 per cent, the idea that the economy is operating at full throttle is an insult to all those thousands of people who are available for work and can’t find any.

Yet during the week, it was impossible to turn on the radio without hearing an economist or seven, warn the government about expansionary budgets. Some strange outfit called the “fiscal council” – which has yet to explain why it exists – was warning about the dangers of too much expansion.

Apparently the “fiscal council” got their numbers wrong last week, which is okay because we all make mistakes. I am less worried about their numbers than their understanding of economics. The notion that the economy is expanding into dangerous territory is weird because the economy has loads of spare capacity to grow and there is no danger of overheating – anywhere.

Look at this checklist.

The housing market has too few houses, the labour market has too few jobs and hundreds of thousands of idle people looking for work, the current account is in dramatic surplus, the rate of interest has never been lower and there has never been so much money on deposit in the banking system. Large swathes of rural Ireland are economically crippled and in farming, Ireland’s biggest indigenous industry, deflation not inflation is the problem.

Rarely have arguments for public investment in housing in the right place, broadband in the right place and education in the right sectors been more compelling.

Today, the state in partnership with whomsoever it wants to do business with, can borrow at rates never entertained before to invest in projects that have been on hold for years.

However, it appears that most of the “respectable” economists are screaming caution. These are largely the same “soft landing brigade” who told you that the housing market wouldn’t crash.

In truth, the problem today with the budget is not that it was too expansionary, but that it wasn’t expansionary enough.

All the indicators suggests that, while consumer spending may be back and certain parts of the south Dublin housing market were/are a bit frothy, there is no evidence of too much demand. There is still significant evidence of spare capacity – and the most telling indicator is unemployment.

Just before you think I am overlooking the job creation that is occurring, I am not. What I am saying is the level of job creation needs to keep going at an even faster rate to reduce the rate of unemployment down to acceptable levels. In order to achieved this, we have to maintain demand or amplify it.

I am writing this article from Lexington Avenue in New York. Chatting to Americans here its clear that they would not countenance 10 per cent unemployment. They simply wouldn’t tolerate it.

The American establishment is only now beginning to think about raising interest rates off zero after unemployment has come down to 5 per cent from 11 per cent at its peak.

The US still runs a budget deficit and America believes that low unemployment is a target for the central bank. It seem to me to be a much more humane policy than our obsession with government deficits which the whole world wants to finance.

In Ireland, we tolerate double-digit levels of unemployment and yet are intolerant of government spending. Why not target unemployment, rather than the budget deficit or some other notional ratio?

Employment is related to the growth rate and higher employment will bring down the debt targets anyway. Think about it for a minute. The higher the national income, the higher the level of employment and the lower the level of unemployment. And because the targets such as the budget deficit are always expressed as a proportion of income, if income is rising quickly, the debt ratio will fall on its own.

Rather than thinking differently, it seems that the economic establishment is suffering another bout of “groupthink”. Last time it was the ‘soft landing”, this time it is the “hard expansion”. The truth is there is no real evidence of this dangerous expansion.

Our aim should be to bring unemployment down to the level of that of our neighbours and do it quickly. This means more, not less demand.

The problems associated with full employment are problems we can deal with. Bring them on.

There is little danger of the economy overheating, so why are economists making worried noises about a spendthrift budget?


  1. Zevar

    IMF warning of a global slowdown. Strengthening Euro. US shale industry (and debt) ready to go pop. I’d say there’s a few things to be worried about on the horizon.

  2. Deco

    When I read this yesterday my eyebrows moved upwards, and my jaw moved downward.

    The one thing that is never necessary in economic management is to encourage politicians to goose up the economy before an election. Politicians never need encouragement to let rip.

    I agree with Professor McHale. I do not remember him (or any others in the Galway economics department encouraging the manic borrowing that occurred in the first five years of Trichet at the helm of the ECB years). Maybe we have Ryanair to thank for that.

    The dominant feature of the Irish economic system at the moment is debt. It is the elephant in the room.

    Ireland’s unemployment problem is much influenced by the cost of doing business here. Empty shops on main streets abound. Again – just look at Dun Laoghaire. A state quango – the Harbour Commission has a business model based on parking. The local authority has lost the plot. Unemployment in Northern Ireland and in Wales is lower. So are wages. And so is social welfare. And indeed so is the cost of living. And I do not think that Wales has almost one thousand quangos, etc…

    We should be looking to the UK, and not the US.

    If the government wants to improve the economic performance of the country, it should invest in making either the private sector more efficient (via transport in the east region, and broadband elsewhere) or else make the public sector more efficient.

    What would Singapore do ? Have another splurge ?

    Incidentally, the US has the world’s reserve currency. And the US unemployment statistics are nonsense. John Williams of shadowstats was in charge of Federal Statistics, but has since retired, and produces the real statistics.

    3 Billion Euro happens to be the magic number of the estimated cost of the Dart interconnector. That would improve the economic performance of the several counties and Dublin. Broadband would improve the economic performance of the Atlantic counties, and the provinces.

    We should be investing in driving up productivity.

    Ireland is facing a possible debt trap, and must drive productivity through the roof to escape.

    Either that, or else we will be back in default territory when the Nasdaq gets found out again to be a money losing racket.

    None of the political parties in Kildare Street have a clue. The last thing they need is a pat on the back.

  3. Deco

    Sorry, David – but can we afford to implement US style economics ? we don’t have a reserve currency. We are up to our neck in debt. And we have serious internal inefficiencies (often the result of state or oligopolistic power).

    I reckon we should instead focus on business competitiveness, and state efficiency.

    We have a debt problem. Debt to GDP is illusionary because GDP is inflated with so many multinationals playing games with “transfer accounting”.

    Time to invest in structural reforms of the state system so that state services are more efficient. This will enable us to keep borrowing under control.

    I have no confidence in Noonan, and I regard Howlin as mini-Cowen in the DoF steering the ship towards eventual insolvency. Again. Howlin has ensured that there has been no reform in the Irish institutional state.

    Ireland – Financial crisis 2.0, is in the making. Howlin has ensured that Ireland will be part of the drama.

    No lessons learned. Not a single solitary lesson learned. Nothing.

  4. Deco

    Maybe we have a variation of French economic syndrome. An oversized public sector. A private sector that is highly competitive in some sections, and suffering badly in others. Rising debts, and rising savings. And it all being propped up by low interest rates, and a range of regulations. And loads of resource misallocation as a result. Money is not being invested, but is instead being saved, and held. For good reason too. Individuals know what to do with money that is in their own individual interests. Wage deflation, and increasing public debts have people on tenderhooks. The state ensures that there is no investment, and is preoccupied with fighting saving.

    And the state is indulging in showcases, and PR stunts.

    Ireland has locked in state inefficiency, and private sector market rigging. We are back again in the Bertie era. FG plus LP are the new FF plus GP.

    • sravrannies

      + very well put Deco. I love reading the articles and comments here but, I am disappointed that David seems to be on a slippery slope of actually believing in his own hype. Hey – it’s his blog and he can write what he likes!

      Peter

  5. Antaine

    Subscribe :-)

  6. Does anyone believe the US unemployment figures?

    What about discouraged workers?

    • ross81

      exactly, they don’t include the millions who’ve simply given up looking for work. Surprised David believes the US Dept of Labor/govt’s line.

  7. Grzegorz Kolodziej

    I wonder – is David still reading our blog entries or, perhaps, he does not think that labour participation rate is more important than unemployment figures (which are without U-3 anyway?).

    So this time I have decided, after months of verbal attacks on FED officials, change my strategy and quote… FED official, without any comments, so that no one can say that I am getting influenced by Fox News or the Tea Party – as if inbe could not interpret economic data without watching TV stations):

    “If one considers the people who would like a job but have stopped looking — so-called discouraged workers — and those who are working fewer hours than they want, the unemployment rate would move from the official 9.4 percent to 16 percent, said Atlanta Fed chief Dennis Lockhart.

    Lockhart pointed out in a speech to a chamber of commerce in Chattanooga, Tennessee that those two categories of people are not taken into account in the Labor Department’s monthly report on the unemployment rate. The official July jobless rate was 9.4 percent.

    Lockhart, who heads the Atlanta, Georgia, division of the Fed, is the first central bank official to acknowledge the depth of unemployment amid the worst US recession since the Great Depression.”

    Not that we have any reason to be complacent about our “recovery” (recovery for property speculators that is).

    Here is an article from Indo about inflation (I have been pointing out for a long time that we have preferential treatment for multinationals, but weak, if any, domestic competition and, accordingly, overly high cost of libing, which translates into high cost of doing business – hence we are so vulnerable to any pan-European corporation tax policy changes driven by oh-so-ethical Germany and France):

    http://www.independent.ie/business/personal-finance/devil-is-in-the-detail-of-irish-inflation-data-31030392.html

    What this article does not quite tell you is that both in Ireland and in the US the way they distort the inflation statistics is that if the price of some article goes up rapidly in a given year (usually the one poor people spend more on percentage wise), they would simply take that product out of the customer basket and replace it with a product which price did not go up that much(and I am not trumping it up – it just happens that I have a friend working for as astatistician government and another one doing the same in Poland, and they include slightly different products into inflation statistics in both countries; I wonder if they do it everywhere? – i.e. the Chinese growth statistics – btw, one Polish weekly did a summary of Poland’s 10 years of the EU membership – in 2014 – and they concluded that if we do not change the customer basket, then the conclusion is that from 2004-2014 wages in Poland went up twice and so did the prices, with moe or less zero change in purchasing power over the last decade).

    • cooldude

      Hi Gregorz I tend to agree with you on the falsification of statistics. I also think that this is a symptom of a reluctance to admit that our present system of economics is deeply flawed especially the idea that an expansion of the money supply and zero interest rates can somehow lead to any sort of meaningful economic growth. Another interesting stat in the US is that more businesses are closing than are starting up. This is a very bad sign but maybe our whole system of economics is simply wrong and we simply need to start afresh.

      Here is a very interesting article which looks at the origins of economics and why it is working so poorly.

      http://www.plata.com.mx/Mplata/articulos/articlesFilt.asp?fiidarticulo=270

  8. Hi G. I read all the responses and then I just have to choose which ones to take up. Thank you all for your comments they make me think again and hopefully I won’t fall into the trap of the conventional man (as Galbraith pointed out) who when faced with a choice between changing his mind and finding the proof not to do so, he gets busy on the proof!

    D

  9. Bamboo

    How should I read: “The higher the national income, the higher the level of employment and the lower the level of unemployment.”

    Thanks

  10. McCawber

    Something that I’ve been wondering about regarding the FED.
    The US is not an homogenous 50 states. Anything but.
    Based on an admittedly small, personal sample and comments from the natives, Tennessee is a thriving State. Building industry is not booming but it is ticking along nicely, exactly what you want.
    The shopping malls are nearly always advertising for part time staff.
    A lot of the part time staff are 60+ and are retired from full time work so the part time employment suits them.
    So TN is doing fine. They are very, very friendly people I’d have to say. Normal as you and me (I’m am normal and I am speaking for myself).
    Other states are doing better and then there is the other side of the coin.
    So! How can the Fed possibly regulate the currency and/or interest rates for such a disparate economy.
    I don’t think it can and the same goes for the ECB.
    Therefore………… I really don’t know.
    But Tony, not that I agree necessarily with your gold theories it does become obvious that if the FED aren’t regulating for everyone, then who are they regulating for.
    Answer would appear to be Mr Rich, it always comes backs to this.
    I’m not a begrudger, good luck to the rich and their wealth.
    But what I do begrudge them is their stacked deck.
    And being on a gold standard will not change that.
    So Tony, I think me, you and the rest need to tilt at a different windmill.

    • It’s a stacked deck. The central banks work for the bankers. Nobody else.

      Once it permeates the mind that the bankers control the money supply, thus controlling the political agenda , thus controlling the peoples of the world , then there is a different slant to ones view point.

      It becomes imperative to regain control from the bankers. A difficult job when one considers all the propaganda advertising and the lies and deceit propagated in the media. (In the current Canadian election, a recent poll suggests that 90% of the people regurgitate what they see of the political advertising on the TV, and have no idea of the political platform of any party).

      It is imperative to gain control of the money system to regain control of national sovereignty and individual sovereignty. The fastest way to do that is to replace current fiat money with state issued money, from Treasury. This replaces debt based money CHARGED AT INTEREST WITH FREE MONEY AT NO INTEREST. This is a point overlooked by everyone that is constantly stated in my postings. Completely ignored. It has nothing to do with a gold standard and everything to do with wiping out national debt and restoring the economy. NOBODY EVER HAS COMMENTED ON THIS POINT. YOU ARE ALL DEAF AND BLIND TO THE ISSUE OF THE MENACE OF THE CURRENT BANKING SYSTEM.

      It is entirely possible that changing the money as noted will remove the national debt completely and enable the cancellation of income tax. ANOTHER POINT MADE SEVERAL TIMES AND IGNORED. This would result in an effective income boost for all people and a reduction of the size of government.

      The only problem left to resolve would be the fact that the money supply is or would be in the hands of the politicians and subject to random increasing of the money supply because of political reasons.

      Coupled with this is the misapprehension that people think that an expanding money supply is a requirement for having an expanding economy.

      • “NOBODY EVER HAS COMMENTED ON THIS POINT. YOU ARE ALL DEAF AND BLIND TO THE ISSUE OF THE MENACE OF THE CURRENT BANKING SYSTEM.”

        That’s not correct Tony, I have agreed with you on this numerous times although you know more about it than I do. I prefer to operate outside the corrupt banking system as much as possible. Just this week I am tearing my hair out at the imcomptence of two banks – AIB in Ireland and ACB in Antigua, who can’t complete a simple wire transfer without cocking something up. Utter imbeciles the lot of them. If the guy I am paying was able to take Bitcoin the transaction would have been completed immediately weeks ago. One day soon he will be able to accept it. Everyone can be their own bank.

    • It’s a stacked deck. The central banks work for the bankers. Nobody else.

      Once it permeates the mind that the bankers control the money supply, thus controlling the political agenda , thus controlling the peoples of the world , there is a different slant to ones view point.

      It becomes imperative to regain control from the bankers. A difficult job when one considers all the propaganda advertising and the lies and deceit propagated in the media. (In the current Canadian election, a recent poll suggests that 90% of the people regurgitate what they see of the political advertising on the TV, and have no idea of the political platform of any party).

      It is imperative to gain control of the money system to regain control of national sovereignty and individual sovereignty. The fastest way to do that is to replace current fiat money with state issued money, from Treasury. This replaces debt based money CHARGED AT INTEREST, WITH FREE MONEY AT NO INTEREST. This is a point overlooked by everyone, but that is constantly stated in my postings. Completely ignored. It has nothing to do with a gold standard and everything to do with wiping out national debt and restoring the economy. NOBODY EVER HAS COMMENTED ON THIS POINT. YOU ARE ALL DEAF AND BLIND TO THE ISSUE OF THE MENACE OF THE CURRENT BANKING SYSTEM.

      It is entirely possible that changing the money as noted will remove the national debt completely and enable the cancellation of income tax. ANOTHER POINT MADE SEVERAL TIMES AND IGNORED. This would result in an effective income boost for all people and a reduction of the size of government. Prosperity would result.

      Fractional reserve banking must be banned as it is another, the main, way that the money supply is increased at debt and interest.

      The only problem left to resolve would be the fact that the money supply is or would be in the hands of the politicians and subject to random increase of the money supply because of political reasons.

      Coupled with this is the misapprehension that people think that an expanding money supply is a requirement for having an expanding economy. IT IS NOT REQUIRED TO EXPAND THE MONEY SUPPLY IN ORDER TO EXPAND THE ECONOMY. Again stated here and ignored many times.

      It is a requirement, however, to use a money system that can not be easily expanded or is basically static in order to eliminate, or nearly so the ebbs and flos of the so called business cycle with are mostly caused by the expansion and contraction of the money supply by the bankers.
      This being the case there must be a money system that the politician cannot manipulate at will. You tell me how to do this. However the world in the past has discovered what you deny. The use of gold and silver as the only money that cannot be inflated at will. ALL COMMENTARY ON THIS BLOG, SO FAR, THAT DISAGREES WITH THIS, ISSUES AN OPINION, WITHOUT REASON TO DISPUTE WHAT THEY CALL A GOLD STANDARD. JUST VACUOUS STATEMENTS. What is the reasoning behind your statement. I have yet to hear one cogent argument that is reasonable or persuasive.

      Like the 90% of the Canadian electorate, 99.99% of the people have a knee jerk reaction to the idea of honest money, OR NOT HAVING ANY UNDERSTANDING SHAKE THEIR HEADS. The real reason that honest money will not be implemented is because brains have become clouded and befuddled. They can no longer think and evaluate. Lemmings all.

      The debate has yet to begin.

      Coupled with the above is the concerted efforts by the central bankers to discredit gold and silver. A healthy gold and silver market put the lie to the health of fiat currency and expose it as the fraud it really is. Huge efforts are made to suppresses the prices. This is by both legal and illegal means. The bare naked shorting of the gold and silver markets in the COMEX futures is rampant. It is criminal as it is against the law. But governments are beyond the law, immune, as are all the supporters of the backers of this black art of suppression. Fines are issued but no one goes to jail. Rather the favoured sons are employed in the banking/corporate system and given fat incomes and pensions.

      Do not tell me honest money will not work for the betterment of mankind without stating your reasoning. If the reason is because it can not be implemented because of the system then that is your problem not mine. Until the people are educated and understand then nothing will change or can be changed.

      Any leader attempting to change the system without the backing and understanding and demand of the people will be assassinated. So the real reason that we cannot get real money, honest money, is that we are controlled by the crooks and pirates we magnanimously call bankers.

      We are all economic serfs and will continue be unless we change our thinking and adjust.

      • Sorry about the almost double posting, I did not realize the computer decided to move the cursor to the submit button while I was looking at the keyboard!!

        • Adelaide

          Tony +++.
          People in all walks of life have as much understanding of the system of money they operate in than fish do of the body of water they swim in. Both are all encompassing and control the wellbeing of its inhabitants but at least the wee fishes have an excuse for ignorance.
          I came to the same conclusion as yourself after years reading the monetarist thinker E.C.Riegel. But the depth of what he said took years to sink in, but when it finally did dawn on me, it was like the Matrix revealed, but that is the problem, it takes TIME to fully grasp the myriad consequences of ‘inhabiting’ a private banking system.
          That is why it’s so frustrating to listen to otherwise intelligent people espouse solutions to this and that, it’s futile, without understanding the consequences(see problems) of operating under a private banking system.
          The future will start when a handful of isolated communes abide by their own initiated honest money systems, then, when the sheeple see with their own eyes the tangible benefit of this alternative monetary model, they will adopt it, and turn their backs on what E.C.Riegel terms The Political Money System.
          In the meantime it’s best to ignore the wall to wall waffle that passes for so-called serious commentary by so-called serious people with so-called intelligence because they are all wee fishes swimming in a sea of ignorance.
          A band of outliers will change the world, quietly and by example, and utopia will beckon.

      • McCawber

        “everything to do with wiping out national debt and restoring the economy” That’s the windmill.
        Tony that’s what you should be bolding or putting in capitals.
        The gold standard is a red herring. Sure I think I understand why you want to return to it but it really is a long shot.
        That windmill tho is not going to fall easily.
        You just cannot simply wipe out debt and it’s probably illegal anyway so just imagine the type of legislation needed and difficulty etc.
        The cure might even kill the patient.
        I know I keep saying this but this is a war of attrition. The financial system is diseased and it’s contagious.
        We have to start eliminating some of the sources of infection.
        Spread betting, CFDs etc and it has to be done in a controlled manner.
        Answer this question. How would you start to heal the financial system. How would you eliminate spread betting, for example, from the financial system or if you think we need spread betting, what would be it’s function.

        • The simple fact is McCawber that all the proposals are the equivalent of putting a bandaid on a cancer sore and expecting some improvement.

          The reality is that only small economic entities that sponsor their own currencies based on honest money principles will prosper as the majority have not got a clue what the cause of the ailing economy is.

          Read what I said. I did not say wipe out debt, I said , pay it off. However as has been repeated many times here but ignored is the fact of odious debt. Debt accumulated by a regime that does not benefit the population but only a select few. Odious debt can be revoked, as I understand it, According to international law. Half of Ireland’s debt may be termed as such, or may be not.

          Curiously enough Ireland is the 9th largest holder of US debt. It holds this as an asset. Why not pay off your own debt before investing in others debt with the counter party risk involved? Maybe David can explain??

          http://www.gold-eagle.com/authors/mark-j-lundeen

          Read the whole and look at the charts!!

          • You are the red herring :)

            This was what I said

            ” The fastest way to do that is to replace current fiat money with state issued money, from Treasury. This replaces debt based money CHARGED AT INTEREST, WITH FREE MONEY AT NO INTEREST. ”

            All debt based money = All fiat money in existence bar the coins in your pocket.

      • McCawber

        I’ll put it another way.
        Your mission, should you choose to accept it, is as follows.
        You have Enda Kenny’s ear. Persuade him.
        Suggestion, I would advise broad brush strokes with a small, simple to understand example thrown in, near the end. Tell him the electorate will love it.
        And remember he will be fearful of radical thought.
        Then you get an audience with Noonan and the Dept of Finance. Persuade them.
        And remember they will even more fearful of radical thought.
        Suggestion, broad brush strokes initially.
        Then take them to the start of what is required. Show them a timetable of actions required.
        Tell them they’ll have more money to spend.

        • Be my guest. Show us how it is done.

          My position is to reduce the impact of government as much as possible. If the politician thought he/she could get elected by lowering taxes that is what would happen. That involves the reduction of government spending not increasing spending.

          “Tell them they’ll have more money to spend.” This suggestion is totally counter productive.

  11. McCawber

    Mr McCawber wouldn’t agree with David.
    Main reason – increased Government spending means less efficiency, more waste. Bench-marking was a ruse to give civil servants enough of a pay rise so that they could afford to buy over priced houses.
    We all know how that ended up.
    And David you predicted it.
    Shame on you for not calling the government out on their plans to raise public service pay.
    The only people who actually needed the BM rise, and still do, are those people who are in negative equity(30s to 40s).
    The rest of them don’t and I should know because I’m one of them, sort of.
    Encouraging the government to spend more money is like encouraging a heroin addict to take more heroin.
    David, you don’t know what the format of the next government is going to be like but imagine how a socialist government would react to your musings.
    Tut, Tut.
    Maybe after the election would have been a better time for this spendthrift approach to be encouraged especially now that the budget has been published.
    You just pushed the price being offered for our vote up a notch.
    The bids will be coming in thick and fast.
    Tut, Tut again.

  12. DB4545

    David if you’re one of the 10% (thankfully I’m not) letting rip seems like a very good idea. The question is what do you let rip on considering that it’s taxpayers money that must be borrowed? The usual housing antics will just inflate prices again and that borrowed money will be filtered into whatever is today’s equivalent of the Galway tent. It’s easy enough to moan so how about some positives.

    1. Make the welfare system fully contributions based to discourage welfare tourism.
    2. Provide decent bottom up tax incentives for the one man(and woman) bands running small businesses and access to the social welfare system based on contributions if they need it. They take the risks and create jobs why not let them have equal access to the welfare umbrella if they need it? EU nationals can parachute in and access our welfare system without having contributed to it.
    3. Provide decent tax credits for people working and accessing third level or vocational education.
    4. Get an integrated Dublin transport network sorted with a dedicated airport link. If that means a dedicated bus corridor as an interim measure just do it. Locals and tourists or business persons alike should be able to walk out of the airport buy a ticket that covers them for the entire network for a fixed daily amount and have a direct public transport link to the city centre. Don’t make life complicated for visitors.
    5. Allow sensible tax exemptions and relief from CGT clawback(for a single dwelling) for people providing accommodation using networks such as AIRBNB. This provides flexible access for visitors who have short term requirements for accommodation. It frees up the hotel rooms for the higher spenders. We’ll soon find out if Paddy Cosgrave is on an ego trip or if he had a genuine grievance. Either way it helps the next generation of Paddy Cosgrave’s without the taxpayer underwriting hotel construction.

    They’re bottom up measures, they don’t cost a fortune and the money circulates at all levels of society.

    • Grzegorz Kolodziej

      DB4545,

      1. “Make the welfare system fully contributions based to discourage welfare tourism.”
      I would go further and I would abolish the rent allowance system completely. If my friend has returned to the country of his birth – Germany – after 10 years of building organs in Ireland – and he says that he is paying for 80m flat in Berlin less than what we would have to pay to rent a room in Dublin (that Germany will have other fish to fry is another thing, but I decided to close the economic migrants and terrorists passing off as war refugees – escaping from refugee camps in Turkey, no less – because enough is as good as a feast), than we – the voters – need to start asking our candidates what plans they have to reduce the cost of living in a country where childcare is more expensive a hobby than being a Mondello Park regular).

      2. “Provide decent bottom up tax incentives for the one man(and woman) bands running small businesses and access to the social welfare system based on contributions if they need it” – if there is one injustice in Ireland I would like to put my finger on, it is the fact that you are getting penalised by employing people or being self-employed. Somehow being on disability allowance for being “anxious” and “depressed” (what was the number in Ireland? 10pc of the population?) entitles you to social welfare but having a small firm and paying taxes and employing people who pay taxes does not.

      3. “Provide decent tax credits for people working and accessing third level or vocational education.” – as to the latter, based on many experiences of my friends you are actually losing money doing this.

      “EU nationals can parachute in and access our welfare system without having contributed to it.” – unless I am very much mistaken, this is not true. You have to have 2 years contributions and paying taxes to get welfare as an EU national in Ireland (unless you are an asylum seeker, of course), which is actually highest threshold in the EU (1 year in all other EU countries) – which is good.
      The only exception are British nationals living in Ireland and, accordingly, the Brits constitute the highest percentage of the EU non-nationals living in Ireland and claiming social welfare (from the non-EU nationals it is the Nigerians).

      Of course, we can change the law and force the Brits to contribute to the Irish system before claiming social welfare, but that would probably require abolishing CTA. Now, I do not know whether that would be good for Ireland considering the amount of Irish people living in Britain (particularly if Britain leaves the EU).

      4. “Don’t make life complicated for visitors.”
      Dublin Bus is a company which is so inefficient (even though they have improved so much since I have arrived) that not only they have been constantly occupying the top 3 most expensive transport systems in the world (and that includes Venice), but Ireland is losing business because of their monopoly. The Web Summit organisers have moved the event from Dublin to Lisbon because they were not confident whether they delegates could efficiently travel to a and from the venue.

      5. “Allow sensible tax exemptions and relief from CGT clawback(for a single dwelling) for people providing accommodation using networks such as AIRBNB.”

      Some people are afraid of deflation in Ireland, I cannot wait for the deflation in property market, having paid for the last decade so much percentage of my income on renting that it would make look like people James Larkin was talking about having obscene amounts of disposable income left after rent and taxation in comparison.

      “If that means a dedicated bus corridor as an interim measure just do it.”
      Competition. Competition. Break the unholy monopoly. Ticket inspectors on buses freezing with us on remote bus stops, not standing in splendid uniforms and laughing on the queue like f…g muppets, blissfully unaware of where and how the lines are going and what does it feel to be packed to a bus tighter than WWII trains travelling to Eastern front having seen 3 out of service buses.

      “they don’t cost a fortune and the money circulates at all levels of society.”

      You hit the nail! That’s the thing – none of that would cost a fortune, on the contrary, it would save taxpayers money. But what about the relatives of TDs in all those quangos?

      By the way, David writes: “In Ireland, we tolerate double-digit levels of unemployment and yet are intolerant of government spending” – I took today’s Indo, which features an article about the levels of taxation in Ireland and we do not look like a bunch of people intolerant of government spending – 48pc of our taxes (I am not sure that includes all hidden taxes) – strike me pink.

      • DB4545

        Grzegorz

        I agree with virtually all you’ve said Grzegorz. The Berlin rental situation is striking in comparison although I understand rent controls are being relaxed there. The rent allowance nonsense is something I just don’t understand. It’s another straight handover of taxpayers cash to REITs. If you’re not working and taxpayers are generous enough to house you it should be on the understanding that if you are offered a house you take it wherever that might be. You don’t get the option of a valuable city centre location that working taxpayers need. You get to choose options and locations when you can afford to pay the rent or mortgage yourself.

        Without going into detail sadly you are mistaken on the welfare issue although some of it is the result of fraud. She won’t be thanked for it and I can’t bear to listen to the woman’s voice but Joan Burton has tightened up on welfare fraud. I believe that if we pressed the reboot button on welfare applications and housing benefits and made everyone re-apply annually Dublin Airport wouldn’t be able to handle the numbers flying in to re-submit applications. If welfare officials have any doubt they should have discretion to make people sign on daily/weekly if required. It’s beyond ridiculous.

        Competition is fine for transport if you have integrated ticketing so it’s not confusing for locals (who fund the infrastructure through taxation) and visitors. Germany cities seem to be able to do this with little difficulty. Quangos? Like taxpayer funded charities (an oxymoron perhaps?) and most NGOs they’re just a welfare benefit for the well connected middle classes.

        • Grzegorz Kolodziej

          DB4545,

          “I believe that if we pressed the reboot button on welfare applications and housing benefits and made everyone re-apply annually Dublin Airport wouldn’t be able to handle the numbers flying in to re-submit applications.”

          That’s true too – and to be honest, even though I am more in favour of a strong police system in case of a serious threat to Ireland’s safety (i.e., possibility of terror attacks or London-style no-go Muslim zones), I am not in favour of Polish style border controls, whereby all major airports are run by the military and your passport is being scanned and checked up to three times.

          But my point was more – though I am not an expert on that (I only dealt with criminal and family law cases) that obtaining welfare without contribution is in my understanding impossible due to habitual residency conditions except for the UK citizens where you would get that automatically (having said that, I suspect that having kids may obfuscate the matter, and asylum seekers are a different cup of tea altogether in terms of the thousand welcomes they get).

          Also, you can of course fly to and through Ireland every week, but that again would only make economic sense if you live in the UK, Germany (low cost of flights due to huge competition) and I do not know about Spain. Everywhere else, for most months in a calendar year, your return flight would cost more than social welfare you would get, so that kind of fraud would be only possible very short term (before April, after September and before December)…

          But this is not really a counter-point from me, as the essentials are as you say: God knows who gets benefits, how, on what terms (as so much is up to discretion) and why exactly; and the number of non-nationals living in Ireland does not make it easier to control (and who knows that really as I do not think that the deportation system in Ireland is very efficient; I tell you what – some time ago I had been working on a case of an extremely dangerous Polish criminal – so dangerous in fact that he knew some law details I did not know – whom Poland wanted to extradite on, I believe, 18 charges, and Ireland did not want to give him back!).

          And what about Irish citizens who will come back from Australia after their economic tsunami Australia is facing and they will not be able to meet the habitual residency conditions (unless they commit fraud, but would that be even possible as the Ozzi visa would be in your passport?). We (David and the readers) have never discussed that possibility.

          And I am not even talking from their welfare point of view, but simply from the point of view of rural or urban crime – imagine hundreds of thousands of ex-Ozzi miners used to a very high standard of living and cut of social welfare – what will our streets look like: 1970s Derry style minus PSNI?

          As to DB, I could not believe when I read SF statement (a party which most of my mates consider Ireland’s only hope):

          “Sinn Féin Transport spokesperson Dessie Ellis said, “These strikes as planned will, of course, cause major disruption to many people but it is the fault of this government that have rammed through their plans as part of a wider agenda to bring private profit companies in to undermine publicly owned groups.”

          The Irish state has an agenda to bring competition to public transport system? Since when? What are they on?

          Of course you are right when you say that competition is fine as long as you have integrated ticketing, but sometimes I wonder whether a lack thereof is a sign of governments laziness or is that their agenda (no integrated ticketing = more difficult to bring competition).

          Sometimes I do not understand why people here put up with so many things which make their lives unnecessary more tiresome (such as having your day structured so that you leave at 7am and are back just to say a bead ;-) which people around think are the necessities of nature the same as rain in autumn.
          How can the change (towards reality check) in Ireland be implement if most people would rather put up with 4 hours travelling than “be negative”?

          Did SF not read the ‘The Road Transport Act’ of 1932 which provides a cloak of protection Formula 1 drivers could only envy?

          So they say we are in danger of having a competition in Dublin and that will put the prices up. Well, if Mr. Varadkar would like to have a competition, he had what – 3, 4 years?
          I do not see any Irish government, whether FF or FG, willing to change the status que (the happy union of the state, trade unions, bankers, etc). I think that what they can do in the future is to change a public monopoly into a private monopoly (if they are borasic, as they say in East London) – they would certainly not open the transport market for hundreds of small private companies.

          If there was any time to do it, it was in the 90s when Ireland was really great and a model to emulate in Eastern Europe (I even remember a conservative Polish speaker of the parliament who said that he imagines the future social order in Poland modelled on the Irish model – Marek Jurek was his name). We people living on this Island were enhoying full employment, economy based on export and house prices expensive, but matched with wages and cost of living rather than plucked from the air)

          And in that prosperous 1999 over 200 applications were made to the Department for provision of private services and only two were granted.

          So who is going to do it now?

  13. StephenKenny

    My difficulty with such prognostications is that they tend to be based on the same three economic indicators that the western central banks and governments clearly, and repeatedly, stated were targets of direct policy intervention, with the intention of pushing them up (or down): Stock Markets, Unemployment, Property.

    None of these, in and of themselves, mean much. These are all merely used as indicators of the underlying economy. Not surprisingly, all governments have used a whole range of policies to directly intervene in all three.

    For example, in the UK, it’s almost impossible to be on the unemployment register if you’re young, and everyone else are put under enormous pressure to be take anything they’re offered, often for such low pay that they are effectively on welfare. As with all broad policies, there is no doubt unfairness in many cases, but I’ve no doubt that doing something rather than nothing is basically a good idea.
    But that’s not the issue, which is that as an indicator, the UK unemployment rate is not comparable with previous times. Saying that it has fallen from 10% to 5% us completely misleading, since it’s not organic economic growth that’s got it there, it’s almost a redefinition. It is no longer a useful indicator of the health of the economy, but of the effectiveness of the government’s goal of pushing down the headline figure.

    The same essentially goes for the stock and property markets. Direct government intervention in the stock markets have reached a point where traders *know” that any serious reversal will result in a massive intervention by someone. It was just a few months ago I was reading that a Bank of Japan official was in front of the Diet (a committee, I expect) talking about the markets, and was asked about a large item on the Bank’s account. He calmly explained that it was direct intervention on the S&P 500, one afternoon. The UK of course, has three concurrent schemes (loans and guarantees) who’s stated goals are pushing up property prices.

    When you combine these policies with the massive and ongoing global borrowing, and zero interest rates, it’s hard to find any useful indicators of broad economic health. There’s intervention wherever you look.

    Economic theory, whichever you choose, can only operate if information is generally accurate The problem I have, is that it isn’t.

    • You are right on Stephen.

      To quote Chris Powell from http://www.gata.org

      “There is no such thing as a free market” Manipulation is the name of the game. Painting the tape in the markets. Hedonic adjustments to “adjust” the CPI. Change the rules to improve the nominated unemployment rate. These are Orwellian times. Black is white, left is right, right is wrong. And my favourate on this blog: it is a sin to be a savor. Being a spendthrift is better and prudence and economy. Discrimination has gone from being thoughtful and careful to being racist.

      There is no accuracy in official statistics. All is lies and deceit leading to total fraud and a total breakdown of moral standards.

    • StephenKenny

      It’s probably worth adding that the reasons given for these policies are very much the same as the reasons given in this article, viz to persuade people that the economy is doing well, so they’ll go out and spend like it was 2005. The days of bouncy castles on every corner, and when one in four new cars purchased, were German.

      What perplexes me is that we have 15-20 (or 40?) years of evidence that this policy doesn’t work – it merely creates another bubble, that will, in due time, fall on it’s arse. We had property bubble of 80s/90 which popped, then the stockmarket bubble and dotcom bubble which crashed spectacularly, then the property bubble ending in 2007.
      During all of these, everyone went out and borrowed like there was no tomorrow, spent everything they could lay their hands on, and then it all collapsed. Each time, the taxpayer picked up the bill, jacking up the overall debt levels.

      The current great and glorious bubble is on the back of $trillions and $trillions of extra outstanding debt that we’ve built up over the last 8 years (on top of all the previous piles of debt).

      And we are to believe that this time is different, and all this extra borrowing and spending will result in a surge of productive, wealth creating, industry & commerce – when all the previous ones didn’t?

      If you believe that, give me a call, I’ve got this great bridge that you’ll just going to fall in love with, and it’s an absolute bargain. Bridge prices too, never fall.

      • “What perplexes me is that we have 15-20 (or 40?) years of evidence that this policy doesn’t work – it merely creates another bubble, that will, in due time, fall on it’s arse.”

        I used to wonder why intelligent, informed, educated people could be so stupid.

        Hugo SP has an explanation posted above. The education system trains economists in the wrong methodology. Once established in their mind as the correct thing it is impossible to contemplate any other course of action.

        I then wonder who provides the idea to educate the brightest and best thus? I conclude it is those with the money to set up the foundations to espouse the policies that find their way to the education establishments.

        That money comes from the families with the great fortunes who benefit from those policies. They are supplied with funding and direction from the great banking houses who control the ebbs and flows of international or world finance.

        Those great banking houses created the national banks, starting in the modern age with the Bank of England in the 1690′s lending money for William of Orange (yes him again) to propagate and continue warring. Nothing much has changed in methodology of the banking houses.

        Since the formation of the Federal reserve in 1913 we have all countries with a national bank. National in name only. Each provided legitimacy by government but all operating individually without government input or control.

        The 20th century had the great wars and the cold war standoffs. This culminated with US dominance as the one super power. The 21st century is the century of wars and terrorism fostered by the same banking houses. In addition it is the age of massive exponential debt accumulation and the destruction of the world financial systems.

        Thus is it set up that policy is formed by the bankers and funded by the bankers for the benefit of the bankers and nobody else except those who receive a personal payoff for services rendered in the course of duty.

        War and chaos is the aim. It is the perfect consumable good to be funded. It uses vast resources and is totally destructive. Eisenhower warned us of the military industrial complex and how it would take over and destroy our lives. It is and will continue unless we change the system.

        Money is the lifeblood of the octopus entangling us. Money issued as debt enslaves us. Money is the source of the funding of the institutions misleading us.

        The current source of that money is the central banking system. The central banking system is destroying and enslaving the world.

        To those who say we must change incrementally or we will bring the financial houses crashing down I say it is too late to be gentle. The financial system is crashing now and deliberately so. Out of chaos will come a new order, but it will be formulated by the bankers themselves and result in further penury, control of peoples and destruction of societies all over the world. Perpetual war will be wages for perpetual peace.

        By taking this problem full grasp and destroying the central banking system ourselves we may bring down the financial system but we will retain freedom and liberty and thus happiness and prosperity. We will throttle the source of the funding of the wars, terrorism and destruction

        That is the real choice we can not see. It is a choice between slavery and freedom. What is your choice. There is little time left to decide.

        It is much like the story of Robin Hood. Oppressed and harangued by a foreign invader. The Normans seized all property in the name of the King. They then taxes the people beyond endurance. The King Richard named the Lion Heart fought foreign wars (The Norman Kings spent little time in England which was a vassel state governed by a French speaking court in a Saxon English land.) The currency was debased and inflation was rampant. The newly imposed Catholic Church imposed a 10% tithe and grew obscenely rich.

        Even the landed gentry became estranged from the Crown and asserted their rights at Runnymede. These rights were between the Crown and the Barons and did nothing for the ordinary people. https://en.wikipedia.org/wiki/Magna_Carta

        That brings us back to Robin Hood who had to take to the woods to obtain freedom. The legend is that he robbed the rich to give to the poor. He relieved the Catholic Abbots cavalcades of their silver and gold. He fought the Pirate at Ravenscar in the now named Robin hood’s Bay.

        It has been a long hard struggle from the time of the Normans to reach the Human Rights of today and freedom is never won but must be constantly defended. We do not need to be a Robin Hood but we must defend our freedoms before they are lost.

        Destroy the Central bankers money flood of debt based fiat.
        Return to honest money and cut off the bankers funding. Then the money to fight the wars and impoverish people will be dried up and eliminated. That is just one of the things a gold back limited money system will accomplish. It is the money of a free people.

        • coldblow

          Tony

          Certainly in the early years I was here (probably early 2008 or late 2007) there was a great deal of discussion of the banking system and fiat money. If Wills is looking in he might confirm this.

          An excellent book to read (I once saw it recommended on the Irish Economy website, but not (I think) by an economist) is the Great Transformation by Polanyi. His argument was that pure capitalism is fatally destructive to nations and their people and had to be tempered by all manner of things, from aristocratic ‘reactionaries’ to trade unions. He also argued that central banks are essential to manage the beast. I must read it again. He is brilliant on the Speenhamland relief system and the 1834 Poor Law, but the whole book is superb.

          David Cameron (‘Dave’) famously didn’t know what Magna Carta stood for.

          The Catholic Church was not imposed on England in the 12th century as you state. You are forgetting about St Augustine, the Venerable Bede and a host of others from Saxon times, not to mention earlier Christian figures from Roman Britain, such as Naomh Padraig.

          A tithe isn’t so bad when it is imposed on consenting people of the same faith. What was bad, however, was the Church of Ireland tithe on a Catholic people which was finally abolished in 1829 by the Duke of Wellington. (I once heard of a real Dub coach tour guide who referred to him as the man ‘who gave Ireland Catholic emanstipation’.)

          Crotty’s Ireland in Crisis (which is far more than merely the story of Ireland)covers the reasons for Henry VIII’s break with Rome. It was all tied up with the social effects of the Black Death nearly 200 years earlier which, by reducing population but leaving capital intact, encouraged for the first time the extraction of actual *profit* from the land, via the wool trade, which in turn led to the metamorphosis of the feudal lords into *owners* of land, land as private property, which was a new concept at the time. A strong state arose to secure this title to the land and it was essential that any interference by the foreign papacy should not endanger it. This is what it was all about, although the relatively large amount of monastic land available was a further motive.

          Ireland was conquered under the Tudors for the same reason, ie private ownership of land (a concept utterly unfamiliar to the pastoral Gaels)held solely for the purpose of generating profit (rather than feeding the local clan), and also for obvious strategic reasons. It was a very difficult enterprise as pastoral peoples are martial by nature and it seems that all the profits from the appropriation of the monasteries were swallowed up in the forests and bogs of Ireland.

          Crotty further argues that the imposition of capitalist colonialism (unlike earlier colonialisms or invasions by other powers elsewhere in the world) left a lasting legacy of ‘undevelopment’ wherever it went, as the result of the imposition of inappropriate (using that word properly here rather than its present use as a euphemism for grave wrong) instituions on collective, non-capitalist peoples, in particular property in land. This, more than war or Western ‘inappropriate’ behaviour, is the reason why all former capitalist colonies are a mess. We are one of them.

          • coldblow

            ‘Should not endanger it’ is meant in the sense of ‘should not undermine in any way the owners’ newly acquired titles to their land’.

          • You side track the issue of central bankers money being the root of all the evil around us.

            There is evidence that the Roman Catholic Church was not a great force in England until the Norman invasion, being introduce to Britain in the 600′s AD.( Maybe the invasion was sponsored by the church.)

            The British were introduced to Christianity in the First Century by Joseph of Arimathea.
            As such it spread through the Isles and was not introduce to the Roman orthodoxy until at least the 5th Century but then by Patrick in Ireland.

            The British Church, so named, was transported to Rome by Constantine a British Celt who became Emperor of the Romans, about 300 AD, but who established his HQ in Istanbul (Constantinople) and who declared Christianity the Roman state religion. The Eastern orthodox church Or the so called Holy Catholic Church was a derivative of the British Church.

            There was no such thing as a Roman Catholic Church at that time.

            Henry the VIII I suspect knew the history as he was an Owen from Wales and would be familiar with the British roots of the Religion. Overthrowing the control of the Catholic church was simply a reversion to the ancient British Church later called the Church of England. (Simply my opinion))

            https://www.google.ca/url?sa=t&rct=j&q=&esrc=s&source=web&cd=1&cad=rja&uact=8&ved=0CBwQFjAAahUKEwj7tfTj9NHIAhUKwWMKHa8CBJ0&url=http%3A%2F%2Fwww.glastonburyabbey.com%2Fjoseph_of_arimathea.php&usg=AFQjCNFpJJO-xMuqjyC4t6QdZp_u8rmcaQ&sig2=iflmJOAXP6SziZtrsR2OaQ&bvm=bv.105454873,d.cGc

            Meanwhile, let us be rid of the pestilence of central bank fiat money. It is the primary source of all our problems.

            Blaming capitalism for the ills of the world is often done but an error, or a deliberate misrepresentation by the socialists of the world. True capitalism allows for the correct pricing of markets and the equitable placing of capital and goods for the greatest benefit of the largest number of people.

            We have distorted and manipulated everything to a complete mess that nothing functions correctly including capitalism.

          • Pedro Nunez

            so what’s the alternative for the ‘pastoral martial Gaels’ to capitalism?
            Is/was this a ‘falt earth philosophy’ that they were too intellectually lazy (perhaps as now to judiciously disabuse their abuse of’?).

            trop loin notre propre cul (collectively as ‘Gombeen nation’)

          • coldblow

            Tony

            Thanks for the history lesson. Did you get it off Wiki? Mine was from memory and to correct various errors in your earlier post. In particular the claim that nobody here talks about the banks. Your posts are still full of what i call extravert cliche: evil banks, Catholic Church and the rest.

            Pedro

            What is the alternative to capitalism? First one needs to find out what capitalism is, essentially. Crotty argued persuasively that it developed from the new form of agriculture which the early pastoralists in Western Europe were forced to adopt to survive there, which required the ‘investment’ of resources in stock, fodder, seed and equipment and involved delayed gratification. The problem as he saw it (and witnessed around the world from Malaysia to Africa to S. America) was the imposition of a capitalism which had grown organically and healthily in the conditions of western and central Europe (but not in Ireland whose climate was too wet and mild) on developed agricultural societies elsewhere.

            He called for a huge reduction in the scale of the Irish state, a big tax on land so that it would be most inattractive to hold except by energetic young farmers, repudiation of foreign debt, tax on bank interest (I think) and a national dividend for all citizens which they could supplement by working.

            I don’t really understand your comment. Are you implying that the Irish are intellectually lazy? If so, that is not the case but it might appear to be so in that they are (if such a thing is possible) a crazily one-sided extraverted people. Some of the best thinkers have come out of Ireland.

        • I just picked up a magazine and here is an article identifying the profiteers of war. In the attachment are several essays , all worth reading.

          The point of the funding by central bank fiat money systems is not made but the picture is painted for who benefits and who doesn’t.

          http://www.ratical.org/ratville/CAH/warisaracket.html#c4

          “If any one had the cream of the profits, it was the bankers. How the bankers made their millions and their billions I do not know because those little secrets never become public- even before a senate investigatory body. Major General Smedley D. Butler.

        • Pedro Nunez

          That’s it, some of ‘the best thinkers come out of Ireland’, they need to leave to think!

  14. “Modern economics is getting everything wrong and merely performing experiments on humanity, Hugo Salinas Price of the Mexican Civic Association for Silver writes today, because it is using the wrong scientific method. Or as Plato said — or was it Yogi Berra? — garbage in, garbage out. Salinas Price’s commentary is headlined “The Fundamental Flaw of ‘Mainstream Economics’” and it’s posted at the association’s Internet site” –Chris Powell, gata.org

    http://www.plata.com.mx/Mplata/articulos/articlesFilt.asp?fiidarticulo=270

  15. redriversix

    Ya what David ???

    Debt debt debt debt……hello !!!! DEBT DEBT…

    A debt based service economy with no manufacturing…..

    The country & people have too much debt..

    America as a example ?????

    Are you winding us up David ???

    A leper wearing a nice suit is still a leper…just harder to see the scars…

    Debt is the 21st century version of slavery…too much debt ? Say bye bye to your freedom.

    China visiting England this week to see if it will invest and build nuclear power plants.
    Why ?

    Because UK does not have the money to do this. Or cannot or will not put these projects on Government balance sheets.

    So they overlook China’s “issues” in the hope they will fund these projects.

    RR6

  16. michaelcoughlan

    Hi David,

    When I read this article it terrified the life out of me. If somebody as clued in as you can’t see what’s actually happening then it really is God help us all. The best way I can explain it is a little anecdote based on farming to illustrate the point. We need to define wealth first however which is;

    “an accumulation of valuable possessions or resources”

    With that in mind let us proceed.

    Last year a suckler farmer produced 100 new heifers. His output in wealth terms is 100 heifers. At 1000 apiece in monetary terms his out put is 100k. So far so good.

    This year however the extra taxes the government forced him to pay so the Govt. can pay the coupons on all the new Govt. bonds issued has reduced his capital available for deploying in his farming enterprise. The new bonds and with the corresponding increased money supply also affects his dilemma but I will highlight this in a while.

    So now the farmer only produces 80 heifers this year. He lets go his farm hand at the start of the year due to the reduced work load and since the farmhands dole ran out at 6 months the authorities don’t count him so he doesn’t appear on the live register.

    All the extra cash made available to commodity speculators and confined to them has allowed the price in monetary terms of live cattle on the stock market to RISE to say 1300 apiece. So now his monetary output is 104k.

    So now the moral of the story.

    An accountant will congratulate him for increasing his profits as he turned over 104k for the sale of 80 heifers showing increased profits and reducing his labour force! HOWEVER the VALUE of the WEALTH produced is a staggering 20% LESS DAVID, LESS DAVID, than last year. Unemployment has risen simultaneously.

    Monetarism David is CONSUMING the WEALTH creating economy for the benefit of the PROFIT making one AND is what is driving deflation!

    I fail to understand why you still believe official Govt. statistics

    Michael.

    (increasingly exasperated)

    • michaelcoughlan

      I also meant to say that since economic output is measured in currency terms it will be deemed to have increased!

      madder than a bonbon!

    • None are so blind as those who refuse to see, Michael. :)

    • Adelaide

      It annoys me immensely that David lazily regurgitates these outrageously fictitious official statistics to the general readership of national newspapers. He does his readers a great disservice. David was insightful and brave enough to publicly expose the property bubble for what it was back in the day, my advice would be for David to now expose official statistics for the fiction they are because he has the public exposure to make that positive impact where others lack the exposure.

      • Adelaide.
        Perhaps he has a Faustian bargain. Keep spouting the trash and it will make sure he is well paid.
        It cannot be lack of knowledge. He just told us he reads all the entries. That means he does not believe what we present or he chooses to ignore for other reasons. He has not commented yet on why he presents what he does.

  17. “I am writing this article from Lexington Avenue in New York. Chatting to Americans here its clear that they would not countenance 10 per cent unemployment. They simply wouldn’t tolerate it.”

    That may be true if they knew it is in reality more than 23%. http://www.shadowstats.com
    With 15% of the population on food stamps valued at 260 a month or 20% of all households how do you suppose they do not show up as unemployed on the official listings..

    “The American establishment is only now beginning to think about raising interest rates off zero after unemployment has come down to 5 per cent from 11 per cent at its peak.”
    Two wrong statements in one sentence. The FED will never raise interest rates as they can only do so if they wish to crash the economy. The unemployment figures are lies, distortions and outright deceit.

    “The US still runs a budget deficit and America believes that low unemployment is a target for the central bank. It seem to me to be a much more humane policy than our obsession with government deficits which the whole world wants to finance”.

    (Since 1970, the federal government has run deficits during every fiscal year for all but four years, 1998 to 2001. The effect of these cumulative budget shortfalls is debated by political analysts and economists, but their origins are much less controversial. Ever since the time of Alexander Hamilton, the U.S. government has turned to deficit spending as a means ofSince 1970, the federal government has run deficits during every fiscal year for all but four years, 1998 to 2001. The effect of these cumulative budget shortfalls is debated by political analysts and economists, but their origins are much less controversial. Ever since the time of Alexander Hamilton, the U.S. government has turned to deficit spending as a means of financing wars, growing federal influence and providing public services without having to raise taxes or cut existing programs.)
    http://www.investopedia.com/ask/answers/021115/how-long-has-us-run-fiscal-deficits.asp

    It is a habit. The US is drunk on deficit financing and the ability to create new money, add it to the national debt, and buy whatever they want, and go to war any time they feel like. Meanwhile government gets more and more intrusive.

    The national debt is 19 trillion or with unfunded liabilities 200 trillion. Add the derivative betting and you’r talking a quadrillion. Nobody can afford higher interest rates without collapsing the economy.

    Your favourate expression for debt resolution is “burn the bond holders”. At this rate the debts never get repaid and hundreds of millions of pensioners relying on those funds have no pension. Besides I was raised to honour ones obligations so I consider that an immoral position to take deliberately.

    This is what your expansionary budget is really all about. Over 52% of US citizens now receive benefits from the government. No wonder there is deficit financing in the budget, what with all the wars as well.

    (Thus, perhaps 52 percent of U.S. households—more than half—now receive benefits from the government, thanks to President Obama. And Mr. Entitlement is just getting started. If Obamacare is not repealed millions more will join the swelling rolls of those dependent on government handouts.

    Conservatives have long dreaded the day when the U.S. crossed the halfway mark because of all the implications for individual and fiscal responsibility. As Benjamin Franklin reportedly said, “When the people find that they can vote themselves money, that will herald the end of the republic.” They learned that from the 2008 election and turned out in big numbers again in 2012.)

    http://www.forbes.com/sites/merrillmatthews/2014/07/02/weve-crossed-the-tipping-point-most-americans-now-receive-government-benefits/

  18. StephenKenny

    My main source of up-to-date economic thought comes from a podcast called ‘Econ Talk’, hosted by someone called ‘Russ Roberts’ a researcher at Stanford University’s Hoover Institution. He’s been doing this weekly podcast on Economics for years – I’ve been listening for about 6 years. He’s had famous economists, less famous economists, researchers, finance guys, media people, businessmen, authors, etc etc.

    In all that time, I’ve never heard anyone give any really convincing arguments to back up the thesis that if everyone, including governments, goes out and borrows, and spends their savings, that the economy will do anything other than do what it’s done over the past few decades i.e. bubble and bust.

    So, I say again, why is this time different?

  19. This is what a big government does. Becomes insensitive to its citizens needs. Most of us know who is Peter Schiff. This is an account of the last weeks of his father’s life.

    http://www.schiffradio.com/death-of-a-patriot/

  20. michaelcoughlan

    Here is a thought for today David since you keep trotting out the official US Govt. stats;

    The US gubernment ordered the US armed farces to shoot their way into eyeraaaaaaaaaaackkkkkk massacring 100k of the locals on the way in and starving to death hundreds of thousands more since on the pretext that Hussein had weapons of mass destruction with launch capability and subsequently went onto find that even the joke shops in Baghdad didn’t have so much as farting gas and you think anyone reading your post trotting out official US gubernment stats will take them seriously?

    Say I am not right. Go on go on go on……………………………!

    https://www.youtube.com/watch?v=yDVCWKx0hIM

  21. redriversix

    As a result of US Sanctions against Iraq.
    UN and independent observers reported the deaths of 500,000 children.

    In 1996 Madeline Alright was questioned about this fiqure.

    She said they were collateral damage and laid the blame with the former US employee Saddamm Hussein !!

    You are wrong Micheal. Their is almost a million dead in Iraq.

    Talk about Economics ??

    Their are none

    It’s printing presses & pawn shops

    I am impressed and amazed at how many paragraphs can be written about markets , banking , currencies & economies.

    The entire is now clearly based on fraud .

    What does History tell us when economic upheaval continues unabated ??

    War

    Reset

    Do over

    Yearly memorial service

    “Fuckin humans”

  22. Posted today at @ http://www.lemetropolecafe.com

    The conscious and intelligent manipulation of the organized habits and opinions of the masses is an important element in democratic society. Those who manipulate this unseen mechanism of society constitute an invisible government which is the true ruling power of our country. We are governed, our minds molded, our tastes formed, our ideas suggested, largely by men we have never heard of. The invisible government tends to be concentrated in the hands of the few because of the expense of manipulating the social machinery which controls the opinions and habits of the masses. It is not generally realized to what extent the words and actions of our most influential public men are dictated by shrewd persons operating behind the scenes. … Edward Bernays, (assistant to William Paley CBS and nephew of Sigmund Freud) author Propaganda 1928

  23. The real unemployment rate in the UK

    “The real level of unemployment across Britain is nearly 3.5 million – almost a million more than the highest official estimate and two million more than the number claiming Jobseeker’s Allowance”

    https://www.shu.ac.uk/research/cresr/news/real-level-unemployment-almost-35million-new-report

    “The differences in unemployment between the best and worst parts of the country are far bigger than official figures have led us to believe, the report finds.

    In Knowsley in Merseyside, for example, the real rate of unemployment is estimated to be nearly 17 per cent, compared to just over three per cent in Stratford on Avon.”

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