November 28, 2016

Mortgage rule change is a Pyrrhic victory for first-time buyers

Posted in Sunday Business Post · 89 comments ·
Share 

Let’s be clear, when housing supply is stuck, any increase to housing demand will produce higher prices. The Central Bank understands this logic and this is why it relaxed deposit rules last week. The deposit rules were relaxed in order for prices to rise, in order to coax builders who are sitting around waiting for prices to rise, to begin to dig foundations. This is state-sanctioned house price inflation. Nothing less. It’s like a hostage situation.

The builders/developers in cahoots with each other declare that they can’t build and make profit at current prices, so building stalls. They then put out a ransom, which is that if the state can engineer prices higher, they will build.

The state is, therefore, a hostage and as first-time buyers are voters, the politicians have an interest in getting things moving. So the state leans on the Central Bank to loosen things up. The Central Bank obliges. Under the cover that it has nothing to do with house prices, it claims to simply oversee bank lending. Prices rise.

Ultimately, the ransom is paid over by the first-time buyer to the builders, and the state, acting as the broker, gets a bit more tax revenue, the banks make a few more quid profit and we solve a supply problem not with efficiency, which would be good, but with house price inflation which is unambiguously bad.

Quite apart from the politics of this, the economics are quite straightforward. This notion that increased demand (when supply is rigid) will push up prices is pretty uncontroversial in microeconomics. The process works through two basic channels.

If it is easier to get a mortgage, first-time buyers will obviously “bring forward” their purchase because they have to save less. This is very clear. As more people bring forward their purchases, total demand goes up and prices rise because there are more bids, yet no more offers. The estate agents will (naturally) play off one first-time buyer against another and the upward momentum in prices will ensue.

However, there is another mechanism at work, which is less well understood, but can be actually more significant. This mechanism involves people’s expectations of where prices are going next. Once you change a policy – particularly a policy that was so successful and quite rigid – you trigger a whole host of other consequences.

The main one of these is the expectation that prices will go up because it is easier to borrow and will be easier in the future. Once prices rise, there is the natural momentum in expectations. So 5 per cent this year leads people to expect 7 per cent next year and so on.

Wage demands are also reframed accordingly. Additionally, there is a human tendency to conclude that if the Central Bank is prepared to reverse policy once, it will do so again.

Therefore, there is a further psychological mechanism on the part of buyers and sellers that now expects more “help” for first-time buyers. “Help” means that there is now a floor on house prices and “help” means higher prices by lowering the savings bar necessary to trigger a mortgage. As for the first-time buyer — the so-called beneficiary in all this — will they benefit? Is this prudent for buyers?

Okay, here is the new situation faced by an individual first-time buyer. She will now be able to borrow any amount with a deposit of 10 per cent. Up to last Thursday, she could have been approved for a mortgage with a deposit of 10 per cent for borrowings up to €220,000. She needed a 20 per cent deposit for all amounts over that. Now if she’s buying a home for €300,000, she will qualify for mortgage approval with a deposit of €30,000. Whereas previously, she needed a deposit of €38,000.

So will this individual be better off? At first blush, it looks like she will be, but a little knowledge of macroeconomics should cause us to rethink this rosy conclusion. The first fundamental rule of macroeconomics is known as the paradox of aggregation. This rule in plain English means that what is good for the individual is not always good for the collective. Where all first-time buyers act individually, competing with each other in the market for houses, they also influence each other profoundly.

This means that lowering the deposit ratio is great for the individual and gives her a leg up in the market, so long as no other first-time buyer avails of the new deposit flexibility. When all the rest of the first-time buyers avail of the same break, it simply cancels out the individual advantage and forces everyone to compete with each other at higher prices if the market is tight.

The same thing happens when the market is slack and faced with too many houses and broken balance sheets like it was in 2008. Banks would tell the individual who had too much debt to sell his extra apartment to fix his balance sheet. This was good advice so long as the bank didn’t tell every bankrupt the same thing because if they did (which they did) everyone would sell at the same time and prices would just fall and the seller would be faced with the same problem of trying to sell but at lower prices.

The best way to visualise this is to imagine you are at a football match and you are all siting down watching the game. Then suddenly the guy in front of you stands up to get a better view. Then you have to stand up to get a better view and in no time the whole stand is standing when we had all paid to sit.

This is how it goes with housing. What looks to the individual as being a unique advantage for her, is not because everyone can avail of it.

Rather than giving one person an advantage, because everyone avails of it and responds identically, every individual’s benefit is cancelled out by everyone else’s. We end up having the same problem, at higher prices.

This will happen here too and the Central Bank, which for the past two years has been the guardian of prudence, has turned itself into the agent of profligacy.


  1. Swanie

    Could the Government puts out an EU-wide tender to get x houses built. It provides the land and sets the criteria, standards and requirements and then companies bid for the tender. I know this happens for other large infrastructure projects, so why not with this too?

  2. michaelcoughlan

    Hi,

    Your macro analysis is incomplete I feel.

    Firstly though I couldn’t agree with you more in regard to this part of the analysis which I feel is excellent;

    “Ultimately, the ransom is paid over by the first-time buyer to the builders, and the state, acting as the broker, gets a bit more tax revenue, the banks make a few more quid profit and we solve a supply problem not with efficiency, which would be good, but with house price inflation which is unambiguously bad.”

    especially the last bit of it.

    The omission in your macro analysis is that higher prices will stimulate supply. The developers are also watching the price not just the punter.

    The gubernement should in fact be looking at lowering cost for the citizen. They can’t because they decided to keep zombie banks open and pay debts which should have been written down. Taxes to pay these debts have to be recovered from the citizen. Carry on like this is the solution to the ailment and not the cause.

    However If I can off load my house next year Dathi at a higher price I will be freed up with a few quid in my pocket to fulfil my true potential.

    Michael.

  3. Antaine

    Subscribe :-)

  4. Pat Flannery

    Academic commentators like David ignore what every successful property salesman in the world knows: “show me the money”. You must first qualify your buyer. Can this eager non-cash “buyer” afford the monthly payments?

    David would not last long in real estate sales as he would wallow in hypotheticals with every talkative eager buyer that came in the door. And the world is full of such eager unqualified “buyers”. I have fired dozens like David for wasting my electricity and desk space. In real estate “qualifying” your buyer is job number one.

    So, as usual this latest piece is full of hypotheticals about what does and does not constitutes “demand”. In all my years in real estate I never once had to worry about “the paradox of aggregation” or any other fundamental rule of macroeconomics. I simply filled out a Buyer’s Estimate showing the purchase costs and monthly payments and asked for proof of income. A yes or no answer quickly emerged.

    In the real world the deposit required is only one factor in the qualifying process. How will reducing the deposit help young guards, teachers or nurses, whose fixed incomes are already overstressed, qualify for prices even higher than those they cannot afford right now? The fact is that reduced deposits will not increase demand. The only thing that will increase demand is more INCOME-QUALIFIED buyers.

    David and other media intelligencia need to dig into the real causes of the housing shortage like the scandal of private land banking. Right now housing land is the principal speculative marketplace in Ireland. Housing supply is too important socially and economically to be left to speculators.

    • EugeneN

      Your individual experience of selling property is meaningless, like asking a petrol pump attendant about the MacroEconomics of oil production.

    • Grzegorz Kolodziej

      Pat,

      I worked in sales too, and I know the importance of the qualifying process. The man who was teaching me what he called “pitching” and what really boiled down to manipulation techniques was trying to imbue me with a concept of, when you deal with 100 potential customers, on eliminating 90 of those who do not qualify and will waste your time and bring you in a negative mood, and working on 10, out which 2-3 will sign the contract regardless and 7-8 you have to work on to get them to sign.

      But I have to say that in hindsight the entire experience led me to upskill on the dating/making friends area rather than understanding the economy.

      I am sorry if this judgement might sound to arrogant and generalised to you, but I put dollars against peanuts that one can be a brilliant sales person and not understand a iota about what is going on in the economy, or even how the economy works (i.e., very few sales people know what is money and how it is created).

      I do not have to look far to substantiate my claim – he himself is a good example. From being a multimillionaire, he went bust within the first year of the recession, had to close his company and was never heard of again.

      Probably up till this day he still does not understand that all his 2000-2007 success was based merely on:

      - excessive credit available in Ireland at that time
      - Bertie Ahern’s policies aimed at inflating the economy
      - people being gullible and coming from a culture that does not value saving and restraint (this is particularly valid for Dublin, rural people are different, or rather were different at the time, for Coldblow has rightly pointed out that D4 is a mental thing.

      He was not the only brilliant company owner who went bust without knowing why. In a hillarious bout of bad judgement, he once argued with me that recession I told him would come will be great for his business for he will be able to recruit more staff more cheaply.

      Now, how is this relevant to housing? Not wanting to strain your eyes to read long post (this would be required to elaborate more on the topic, but I have done it in the past), housing in Ireland is A SYSTEM OF COMMUNICATING VESSELS. It is, as David pointed out in the past, the generation game.

      In 2010, 25% of all house purchases was done in cash. For years later, it was 60%. Part of the explanation is the “generation game”, another part are the speculative capital that has brought many countries to ruin.

      I said it in the past and I’ll say it again – essentially, property bubble is just an extra tax on economy and it always diminishes country’s competitiveness. It nearly always results in jobs moving to more cost competitive destinations, and often indigenous population voting for politicians who promise the same, but more – eventually blaming the scape goats within the population.

      “the real causes of the housing shortage like the scandal of private land banking. Right now housing land is the principal speculative marketplace in Ireland. Housing supply is too important socially and economically to be left to speculators.”

      Yes, I would agree

      but

      this does not mean that it should be left to the very same politicians, central banks and trade unions who brought the bubble and zoning gimmicks (Which resulted in limited supply and further price increases).

      If someone (not you) does not understand that near-zero interest rates lead to housing speculations and attract vulture funds, I find it hard to discuss with him for it would require the mountain of economic reeducation.

      And, for the last 15 years, which one of the commentators in Ireland has been saying that the interest rates should return to a normal 5% level, or we will have a housing crisis? I cannot thing of any…

      Why have all of those tax incentives for empty houses, hoarded lands, all that CAP that spirals out the prices of land, all that zoning?

      Why not deregulate completely?

      • Pat Flannery

        Grzegorz Kolodziej: you seem to be genuinely trying to find the right policy lever to pull, not just trying to score debating points. You ended with “Why have all of those tax incentives for empty houses, hoarded lands, all that CAP that spirals out the prices of land, all that zoning? Why not deregulate completely?”

        Yes, we have this myriad of legacy tax incentives tying up a large portion of our housing supply, because our politicians and economists cannot see a way of unwinding them. I get frustrated when David continues to wallow in ever more macroeconomic codswallop when he should be trying to find practical ways of unwinding the policy mistakes of the past, not rationalizing them.

        How will reducing the down payment (which will increase the amount that needs to be borrowed), with interest rates already at zero and property taxes at almost zero, enable buyers whose incomes are already insufficient to qualify, create new buyers? Many already have the deposit but are maxed out on income qualification. We have to find ways of reducing prices.

        We have run out of macroeconomic road. We need some common sense from our economic experts. It is the best macroeconomic theory of all.

        • michaelcoughlan

          Patrick,

          “We have to find ways of reducing prices.”

          We don’t need to reduce prices we need to reduce COSTS.

          • Pat Flannery

            michaelcoughlan: we need to reduce PRICES. Simply reducing costs would only put more profit in the developers’ pockets (unless of course that is what you want).

            Or do you think that developers would actually pass on reduced costs to the buyers? I don’t think so. We need the Government to intervene legislatively, otherwise the developers rule the land – literally.

          • Sideshow Bob

            I agree with Michael on this on.

            Taxation on building, Part V contributions and basic labour costs need to come down. They are all too high, in general.

            The only one them that can be controlled is by the developer/builder is

            Density needs to go up, that would deal with site price per unit.

            I think actually that high density smaller units made for owner occupiers at a reasonable price could sell in large numbers.

            People should talk about Ireland’s housing market in term three general bands, instead of quoting local situations as national truths. One band would be Metropolitan Dublin ( roughly the four County Burroughs ). This could be called the `bananas´ band. Because the situation is bananas there. Band two would be commuter towns within easy reach of Dublin ( 1 hour train or motorway journeys ) and all other city areas Cork, Galway, Limerick, etc. These have similar valuations rents and demand. Band Three is everywhere else.
            Different conditions reign in each of these and they are completely different on all economic levels.

          • Sideshow Bob

            {Sorry very tired here}

            *The only one them that can be controlled is by the developer/builder is labour costs through increased off site pre-fabrication ( now refered to as `rapid-build´) of buildings.

            The rest is up to the politicos, and they are clueless about all of this.

          • Sideshow Bob

            Some Stats on Developer activity Part 1:

            CSO National Housing completion data 2010-2016(Q2).i.e. post-crash production ONLY when virtually all units started during the crash would have been finished.

            Columns divided as follows:

            Year and Quarter / “Social Housing –
            Local Authority Housing”/”Social Housing – Voluntary & Co-operative Housing” / Private Houses / Total

            2012Q1 50 232 1,649 1,931
            2012Q2 111 34 1,853 1,998
            2012Q3 22 136 1,949 2,107
            2012Q4 180 251 2,021 2,452
            2013Q1 120 24 1,547 1,691
            2013Q2 73 15 1,921 2,009
            2013Q3 60 61 1,861 1,982
            2013Q4 40 111 2,468 2,619
            2014Q1 28 77 1,985 2,090
            2014Q2 4 79 2,659 2,742
            2014Q3 24 22 2,911 2,957
            2014Q4 102 179 2,946 3,227
            2015Q1 20 117 2,492 2,629
            2015Q2 0 40 2,956 2,996
            2015Q3 19 61 3,209 3,289
            2015Q4 36 183 3,533 3,752
            2016Q1 14 63 3,067 3,144
            2016Q2 103 57 3,338 3,498

            IN SUMMARY THAT IS:
            2,820 Local Authority housing units
            3,240 Co-Op provided housing units
            66,181 Misc private housing including an estimated 30K + one off houses, mainly in the countryside.

            and a total 72,195 units in 6.5 years of production. Or about 11.1K units per annum. Ireland needs 30K per year + or – 5K units to equal natural demand for housing.

            Direct social housing provision by the state in the biggest recession to hit the country in its near 100 year history was a mere 3.5% of total output. In the eighties it ran at near 30% per year, every year.

            Four of the boom years, 2004-2007 inclusive, had housing completion figures exceeding this 6.5 year total figure.( CSO figures for 2004-2007 are 76,954: 80,957: 93,419: 78,027 completions respectively).

            Pat, there are no developers left. there is no supply incoming. Planning numbers are as dismal as completions. Normally planning figures ( units granted permission in a given year to be built within 5 ) run at 20% above completions. Planning numbers look very similar to completion numbers. If there was to be an increase in supply it should be visible FIRST in planning permissions granted. There is planning permission for as little as 10K unit sin the country.

            All discussions about demand size stimulus or measures is moot as far as I can see.

            There will be no building because principally, there are no builders.

          • michaelcoughlan

            Hi sideshow bob,

            Thanks for your excellent analysis.

            I studied construction mgt and will not be returning to this part of the industry even though my original dream was to be a small scale operator developing well price eco friendly homes.

            There are some straight forward reasons.

            The biggest one is that almost everywhere outside of the M50 you will buy a house or apt for LESS than the cost of building them and will for years to come.

            Next the Irish punter in most cases wants the cheapest price irrespective of quality.

            Next when the banks were bailed out the small plots which should have come on the market at knock down prices were held onto and put into huge one offs bought by hedge funds who are sitting on them.

            The biggest problem I feel is the 20% rule for the second purchase. It simply can’t be met at the time in life of the buyer so it has killed stone dead the trade up market.

            Labour rates are not the problem they have stagnated for 10 years. Materials prices have risen but not excessively.

            The whole thing is one dysfunctional totally fucked industry paying the price and which has resulted from keeping zombie banks open.

            Michael.

        • StephenKenny

          Reducing prices, or value, is obviously what has to happen. But before that if forced by unstoppable market forces, the governments of the west will put up ever greater levees and sea walls, dig ever deeper dykes, and so on.
          Cutting the deposit is one thing, but the UK have something much cuter: A government guarantee for bank loans to enable first time buyers to afford the 20%. Now what sort of contorted fund thought up that one!

          We’re either going to get a 4 or 5 years of 20% inflation, with no corresponding rise in house prices, or the house price crash to end all house price crashes,

          I would suggest the former, that can only be achieved by (a) having a nice war, or (b) going to cashless society and -10% interest rates.

    • mcsean2163

      Bizaare, how then do you explain the property crash?

    • Sideshow Bob

      Pat,

      Can you point to where and exactly who is doing the land banking at the moment? Or either of these options even?

      If you can name addresses then general areas are fine (e.g. NW of Dublin just beyond the M50.)

      • Pat Flannery

        Sideshow Bob: Good question. The problem is with the Land Registry. It charges a fee for every search. It would cost a fortune to check the ownership of every plot of vacant land in the Dublin area.

        Consequently investigative journalism is effectively barred in Ireland. I for example cannot use my considerable investigative experience in this here land of the unfree.

        All land ownership information is available free online in every county in the United States. That is one of the reasons it is the land of the free while Ireland remains a banana republic.

        • Truthist

          Pat, Land of Ire is actually too cold for bananas.
          .
          Ireland is a “shamrock” republic.
          .
          Even no banana republic is as corrupt as Irish State & the North East of our country.
          At least with a banana republic u know exactly where u stand.
          But, in Ireland everything is so deceptive.

        • Sideshow Bob

          You are barking up the wrong tree I think, Pat.

          I don´t see any planning activity around that would support the idea of land-banking price gauging activity by an unnamed group of Irish developers.

          The SCSI have publicly available information on their site about planning permissions and zoning this, but I think some of it is a bit out of date.

          Back to your research suitably zoned land is the key thing. Or land immediately adjacent to recently developed land/zoned land. So every site need not be checked, just certain areas.

          Remember also that the loan threshold for entry into NAMA was 20 million so a lot of lands and properties didn´t go into it. Nothing held by Ulster Bank or ACC went into it. These have already been on the market, and many have been bought and put back to their original pre-boom use as agricultural lands, etc.

          NAMA held lands and properties were mapped on- line and there is info about who they were sold to and if any are being put to public use it should also be possible to find out.

  5. Truthist

    3 articles from the pen of Henry Makow himself of henrymakow.com that will be iconoclastic for some readers ;
    Well, sorry to burst yer illusions up until yee read the following.
    .
    .
    http://henrymakow.com/the_death_wish_of_western_civi.html
    .
    .
    http://henrymakow.com/2016/11/Turdeau-shallow-response.html
    .
    .
    http://henrymakow.com/2016/11/athens-cradle-of-pedophilia.html

  6. Truthist

    I have some hope in Trump after viewing this very human exchange from Trumps mother interviewed with Frank Patterson the famous Irish Tenor for Irish TV some years ago ;
    .
    https://www.youtube.com/watch?v=ORibB_SvL98

  7. Truthist

    Worth perusing ;
    .
    The Fourth Turning: An American Prophecy ;
    What the Cycles of History Tell Us About America’s Next Rendezvous with Destiny
    .
    Authors ;
    William Strauss
    Neil Howe
    .
    Ref.
    Wikipedia.org
    .
    EXCERPT ;
    .
    The Strauss–Howe generational theory, created by authors William Strauss and Neil Howe, describes a theorized recurring generation cycle in American history. Strauss and Howe laid the groundwork for their theory in their 1991 book Generations, which discusses the history of America as a series of generational biographies going back to 1584.[1] In their 1997 book The Fourth Turning, the authors expanded the theory to focus on a fourfold cycle of generational types and recurring mood eras in American history.[2] They have since expanded on the concept in a variety of publications.
    The theory was developed to describe the history of the United States, including the 13 colonies and their British antecedents, and this is where the most detailed research has been done[original research?]. However, the authors have also examined generational trends elsewhere in the world and described similar cycles in several developed countries.[3] The books are best-sellers and the theory has been widely influential and acclaimed[weasel words]. Eric Hoover (2009) has called the authors pioneers in a burgeoning industry of consultants, speakers and researchers focused on generations.[4]
    Academic response to the theory has been mixed—some applauding Strauss and Howe for their “bold and imaginative thesis,” and others criticizing the theory.[5][6] Criticism has focused on the lack of rigorous empirical evidence for their claims,[7] and a perception that aspects of the argument gloss over real differences within the population.[6]
    .
    .
    https://en.wikipedia.org/wiki/Strauss%E2%80%93Howe_generational_theory
    .
    .
    https://www.amazon.com/Fourth-Turning-American-Prophecy-Rendezvous/dp/0767900464

      • Truthist

        What is a poor & victimised by the Irish State Irish aborigine to do when TSHTF as Harry Dent foretells ?
        .
        Also, Grzegorz, I hope that u perceive A] my arguments against Landlordism, which includes landlording, & being a tenant, & sometimes big brother “some are more equal than others” regulations & regulations enforcement & embedded pseudo charities — such St. Vincent de Paul have become recently — as Ron Paul, in one of the few flawed parts of his manifesto, argues is sound alternative to State social welfare system, & aul gatekeepers like Threshold [ hah hah hah ] & does not include hotels & boarding schools & other red herrings, & B] my game-changing solution born from enduring in Land of Ire, as truly having merit.
        .
        Landlordism is crass !
        .
        Heck, the Irish establishment basically betrayed the country again for the sake of Landlordism.
        .
        If even the Rothschilds even provided all the citizens of Ireland with excellent large condominiums as their own personal property [ freehold ], the Irish establishment would scuttle it so as to ensure that Landlordism would continue to rule the roost.

  8. McGoo

    I would really like to see a price breakdown explaining why developers cannot build houses profitably at current prices. Is it the current cost of Labour? Materials? Land?
    I believe that it is none of the above. The problem is the price that the developers paid for their land banks, back in 2007/8, peak property boom time. They are refusing to build on that land until they can make a profit based on the price that they paid. Crazy, but very simple really.

  9. BurrenRocks

    If Price Paid is a function of Supply, Demand, Government Interference and Capability to Buy.

    Surely, once the first time buyer purchases the soon to become a second hand home, though the demand is high, there are now a fewer number of capable buyers for that home. The now, soon to become, second time buyer may find next themselves in immediate negative equity with fewer options to move than before should circumstances change – A weak government (capitulating rather than collapsing) should not interfere. The free-ish market will sort the current housing crisis quicker.

  10. Truthist

    Still unrequited ;
    Perhaps, too advanced a question.
    .
    Truthist
    November 24, 2016 at 11:58 am
    .
    So, what is a citizen to do when the State bans :
    1.
    importation of Gold
    2.
    [ exportation of Gold ? ; As part of an economy using actual Money -- i.e. Gold or Silver -- as the Currency for foreign trade ]
    3.
    ownership of Gold ?
    REPLY

  11. DannyG

    You forgot the 3.5 times salary rule. That rule is still in place. it makes housing affordable for people that can afford the mortgage repayments but not the 20% deposit. Lots of people stuck renting and competing with other receiving gift deposits.
    I do agree that this pushes prices up but then hopefully this indirect incentive to the builders will also increase supply.

  12. Pat Flannery

    DannyG: how many buyers do you think are within the 3.5 times salary limit but cannot buy because they are short on the deposit? That is how many extra buyers an easing of the deposit requirement will bring into the market. How many civil servants for example, whose incomes we know, will be able to buy as a result?

    Judging by the widespread threatened strikes I am under the impression that younger public employees, who are likely to be first-time buyers, are already way above the 3.5 times salary qualifying limit for anything developers would build. Am I wrong? Is it the lack of sufficient deposit or the lack of sufficient salary that has them “stuck renting”?

    • StephenKenny

      In some places that sort of simplicity is ancient history. I know financial advisors who can, using all sorts of alternative definitions (legal) get a $85k a year employee a $800k mortgage. I’m seeing him next week, so if you like, I’ll get the details and explain.
      Honestly Pat, it’s a fantasy land out there.

      • Pat Flannery

        StephenKenny: please do that. You would be doing a great public service. An $85k a year employee getting an $800k mortgage? Legally?

    • DannyG

      Pat Flannery: My comment was focusing on a particular line in David’s article, “She will now be able to borrow any amount with a deposit of 10 per cent.” I was pointing out the safe guard of 3.5 times is still in place stopping over borrowing.

      • Pat Flannery

        DannyG: I was wondering if you thought that there was unused borrowing space below the “3.5 times” income qualifying limit because you said: “I do agree that this [David's lower deposit hypothesis] pushes prices”.

        For there to be room to push up prices there would have to be room to push up qualified borrowing. Do you still think there is? It is an a priori assumption in David’s “lower deposit” hypothesis.

        • DannyG

          But that just confirms my point. If there is unused space for people, they now have the opportunity to use it. If there isn’t unused borrowing space, they can’t.
          This new central bank rule has just given first time buyers with enough earning power to get on to the property ladder earlier. May people are stuck paying massive rents which are equivalent or more than the mortgage would be on that same house, which makes it impossible to save for a 15-20% mortgage.

          I think that this new central bank rule will only help a small number of people but the point I am making is, that it won’t lead to over borrowing/stretching which David had alluded to in his article.

          • Pat Flannery

            DannyG: I was hoping you would explain why you agreed with David in your: “I do agree that this pushes prices up but then hopefully this indirect incentive to the builders will also increase supply.”

            David’s hypothesis rests on an a priori assumption that there IS unused borrowing space that would be freed up if deposits were reduced. I would like your opinion on that assumption, not “IF” there is unused space.

          • DannyG

            Pat Flannery: When the central bank change their rules it meant more people could avail of mortgages which meant there is higher demand for housing, which means prices will rise.
            I have recently been looking to buy a house. I have experienced first hand how estate agents play potential buyers off each other and seen people pay 20-30% over the asking price after getting into a bidding war.

            I think for young professional couples there is unused borrowing space but not in Dublin. I understand that might seem contradictory as a lot of professionals work in Dublin but there are commuter towns that will offer at least some solution.

          • Pat Flannery

            DannyG: I agree that when more people can avail of mortgages there will be more demand and consequently higher prices.

            The problem posed by David’s (influential) piece was his unfounded assertion that lowering the deposit requirement in and of itself would increase demand. I was concerned therefore that he was lending credibility to a forlorn belief that lowering the deposit requirement will actually make a difference in Dublin where it matters.

            David is an economist and tends to deal in academic theories, which tend to be like the perceptions of the proverbial three blind men who went to “see” the elephant – very subjective and very limited: https://en.wikipedia.org/wiki/Blind_men_and_an_elephant

  13. Pie Squared

    Agree David. You know Ireland is a fine country, that has come a long way, but we struggle to join the dots – (just look at the genius of Dublin’s public transport system and our National snail rail). O for the bigger picture. We had one, or at least a mechanism for creating one (thanks to the EU – the National Development Plans), but threw the baby out with the bathwater during the crash. Time for a new one. One that prevents self defeating decisions with dubious knock ons (like the one above) – by the sheer power of its message.

    Big Picture Questions –

    Should we attempt to create a vision for our future at all, as a country?
    Why? What might that lead to?
    Why not? What might that lead to?
    If so, how would we do that, in this digital age?
    What do we value?
    What distinguishes us from other countries? The good, the bad and the ugly?
    How should our past and present shape our future?
    How do our neighbours, the EU and the globe shape us?
    How do we shape them?
    Where do we draw the line?
    What kind of a country does Ireland want to be in 10y, 20y, 50y time?
    The tried and tested country of emigrants we are?
    A country of immigrants?
    A country of refugees?
    A microcosm of the globe?
    A country that actively reaches out to its citizens abroad and to its diaspora to return/invest?
    What goals do we have?
    What are we trying to achieve?
    What values inform our decisions?
    How should we manage the space on this island to achieve our goals?
    What does that mean for the 4 provinces?
    What does that mean for Dublin, Cork, Galway, Limerick and Belfast?
    How do our cities need to change to accommodate this vision?
    What infrastructure do we need?
    What would radical, incremental, innovative, experimental change look like?
    What are we capable of opting for?
    What short term sacrifices would this involve?
    What would be the long term gain?
    How would we deal with different realities relative to that vision – low. med, high?
    How would we implement such an ambitious thing?
    Big Bang
    In Phases
    How would we fund it?
    How would we manage the curved balls that would inevitably try to push us off course?
    How would we deal with the inevitable failures?
    How resilient and tenacious are we?

    Just taking a line for a walk.
    Without a guiding context, we will continue to make ill informed decisions with unintended knock on effects.

  14. Pat Flannery

    I’m not the only one who thinks macroeconomics belongs on the trash heap.

    https://www.bloomberg.com/view/articles/2016-11-28/debating-what-s-wrong-with-macroeconomics

    • Grzegorz Kolodziej

      There are some statement in the article “Debating What’s Wrong With Macroeconomics” (thanks for sharing) with which I disagree.

      1. “It treats an economy as if each household and each firm make optimal decisions, thereby excluding most of the richness and heterogeneity of a real economy.”

      Mr Buchanan does not explain what kind of the rational choice theory he means, so I assume that he means a subjective Bayesianism in the theory of rationality extended to circumstances involving risk, where the objects of choice are lotteries with known probabilities. Subjective Bayesians suppose that individuals in circumstances of uncertainty have well-defined subjective probabilities over all the payoffs and thus that the objects of choice can be modeled as lotteries. This assumes the so called independence condition, which is controversial. But not all macroeconomic theories assume the independence condition, and Mr Buchanan fails to mention it, which renders his criticism fuzzy (as he does not specify what kind of a rational choice theory he refers to).

      2. “I’ve studied research in physics, biology, chemistry, psychology, anthropology and always found, after looking closely enough, that the models people use in these fields are usually well-motivated, make basic logical sense and get rejected if they don’t fit the facts very well. Macroeconomics has been the one exception.”

      Well, had he really looked closely enough, he would have noticed that, i.e.,, as Lakatos wrote: “the anomalous behaviour of Mercury’s perihelion was known for decades as one of many yet unsolved difficulties of Newton’s programme; but only the fact that Einstein’s theory explained it better transformed a dull anomaly into a brillant ‘refutation’ of Newton’s research
      programme.”

      If the rationality of physics is so weak, what about psychology and anthropology? Take psychology as an example: we have four major schools of thought:

      2.1 Psychonalisis = Schopenhaurer treated in a superficial manner and misunderstood
      2.2 Behaviourism = its naive and primitive assumption that empiricism it pursued was incompatible with the concept of internal mental states was thoroughly debunked by late Wittgenstein, hence behaviourism’s transformation into the cognitive approach.
      2.3 Abraham Maslow = anyone who claims that this Marxism minus theory of exploitation is scientific has clearly not done any science. Some ideas of Maslow are interesting, but there is so much more in the writings of Plato and Aristotle, for example. In other words, reading Maslow is a waste of time – it is either too shallow or too unscientific or both.
      2.4 Cognitive approach is the only pyschological theory worth stydying, but everything that it came up with was explained better, shorter, more accurately and with much better predictive power in sociocybernetics. Proof? When the intelligence services such as BND recruit their agents and NASA recruit their astronauts, they use sociocybernetics (mainly tests designed for them by Józef Kossecki), not cognitive psychology.

      An interesting opinion on cognitive psychology in “Psychology: Pythagoras to Present” by John Malone:

      “Examinations of late twentieth-century textbooks dealing with “cognitive psychology”, “human cognition”, “cognitive science” and the like quickly reveal that there are many, many varieties of cognitive psychology and very little agreement about exactly what may be its domain.”

      I could go on with my criticism, but my post is getting too long already.

      I largely agree with a lot what Mr Mark Buchanan says about macroeconomics, but he is either unaware or he glosses over that his criticism applies only to macroeconomic theories based on demand, mainly Keynesim and monetarism.

      Last but not least – I would like to refer to this excerpt from the interview:

      “Some, like Paul Krugman, advocate the use of very simple, old models”

      No wonder – all sophisticated models that Mr Paul Krugman has designed failed miserably. After Mr Paul Stieglitz (Stieglitz claimed that the risk of the housing bubble in the US was so miniscule that it could be ignored completely), Mr Krugman is the most failed macroeconomists of our times (just look at Japan who listened to his advice).

    • HAHA Pat

      A good one. Trash the BS

      I too spent a lifetime in the RE business mostly with my own brokerage, licensed as broker, mortgage broker and property management.
      our education was through the RE department, Faculty of Commerce at University of BC.

      We were educated by practical people in law, property management, financing and sales.

      Never have I read such a bunch of poppycock as in this thread and article. Theory after theory based on yet another theory never worked and never will.

      It is simple. Any market left alone to itself will reach equilibrium. Just enough supply to meet the market demand at an agreed price. Any Change in an aspect of the market will affect the other aspects until equilibrium reigns again.

      In the housing market of purchasing and ownership, demand may way exceed supply but the more wealthy will be housed and the rest will be out of luck. The lower income/wealth people will have to find a place to rent. If prices are too high then people double up. Guess what, this is an increase in demand. Prices go higher.

      Normally in a free market the supply chain will increase efforts to meet demand and prices will reduce again.

      If if an increase in supply is not happening then there is an artificial constriction caused by something. Remove the constriction or expect higher prices. As there are so many housing related government projects one should look here first.

      However, one quick way to stop house prices rising and have them fall 20-40% is to raise the cost of financing, that the ability to fund a mortgage is reduced, substantially. How about government rules that 25% down payment is the norm and interest rates on mortgages will be raised to where ever achieves the desired result; say 10-20% interest per annum to reduce housing costs by 35%

      This of course will just make an increase in the number of tenants, increase rental demand, and increase the rental value of property.

      As far as I am concerned there was never a government decision that did not exacerbate the problem and so the only proper solution is to remove government interference of all kinds and let the market sort it all out.

      It sounds uncaring but in reality it is not. The alternative is everything owned and operated by government subsidy that is paid for by those others “paying their fair share” until so much is coerced from the productive and siphoned to the unproductive that the the former give up and there is still nothing for the latter. Everyone is skint and paupered to the bone. Welcome to a command economy

      “North Korea – After World War II, President KIM Il Sung created the world’s most centrally planned economy. It resulted in food shortages, malnutrition, and several bouts of mass starvation. Most state resources go into building up the military. ”

      https://www.thebalance.com/command-economy-characteristics-pros-cons-and-examples-3305585

      • http://uk.businessinsider.com/trump-meeting-john-allison-bank-ceo-abolish-the-fed-gold-standard-2016-11?r=US&IR=T

        “I would get rid of the Federal Reserve because the volatility in the economy is primarily caused by the Fed,” Allison wrote in 2014 for the Cato Journal, a publication of the institute.”

        tHERE’S STRAIGHT THINKING AT LAST.

        • As President-elect’s Donald Trump’s transition rolls on, more and more attention is being paid to possible selections for a variety of high-ranking positions and meetings that might help decide these appointments.

          On Monday, Trump will meet with John Allison, the former CEO of the bank BB&T and of the libertarian think tank the Cato Institute.

          There have been reports that Allison is being considered for Treasury secretary.

          Trump’s has on the campaign trail questioned the future of the Federal Reserve’s political independence, but Allison takes that rhetoric a step further. While running the the Cato Institute, Allison wrote a paper in support of abolishing the Fed.

          “I would get rid of the Federal Reserve because the volatility in the economy is primarily caused by the Fed,” Allison wrote in 2014 for the Cato Journal, a publication of the institute.

          Allison said that simply allowing the market to regulate itself would be preferable to the Fed harming the stability of the financial system.

          “When the Fed is radically changing the money supply, distorting interest rates, and over-regulating the financial sector, it makes rational economic calculation difficult,” Allison wrote. “Markets do form bubbles, but the Fed makes them worse.”

          Allison also suggested that the government’s practice of insuring bank deposits up to $250,000 should be abolished and the US should go back to a banking system backed by “a market standard such as gold.”

          Allison also argued for higher capital reserves of up to 20% of assets at banks. On the other hand, he also argued that the government should repeal three of the broadest banking regulations.

          “We should raise capital standards, but it is even more important to eliminate burdensome regulations — including Dodd-Frank, the Community Reinvestment Act, and Truth in Lending,” Allison wrote. “About 25 percent of a bank’s personnel cost relates to regulations. Banks cannot pay the regulatory costs and have high capital standards.”

          This is similar to Trump’s desire to roll back regulation — including Dodd-Frank — on financial institutions, though he has since backtracked somewhat.

          It is unclear if any of Allison’s policy views will ultimately become a part of Trump’s plan, but given the unconventional nature of his ideas, the meeting is notable.

      • Grzegorz Kolodziej

        “It is simple. Any market left alone to itself will reach equilibrium.”

        There is only one problem: two forces in the equlibrium situation pushing in opposite directions.
        F’ is the said equilibrium – demand curve meeting the supply curve.
        F” is the tendency to increase the market share.

        F’ pushes towards free market
        F” pushes towards monopolies to increase the market share

        This requires state intervention to legislate the anti-monopolies laws and enforce it.

        But

        The legislative power of the state leads into temptation of big market players to influence the legislators directly (this is how the Central Bank was created in the US – one often forgets that in the US monopolies were encouraged by private companies owners and shareholders, such as J.P.Morgan – not by the state).

        For more on that, listen to this debate:

        https://www.youtube.com/watch?v=NoS8M0snwqM

        Nowadays, we face even more difficult a conundrum – how to unwind from state monopolies and oligopolies towards free market. One would think these are problems mainly related to post-communist countries, but as the housing situation in Ireland shows (disastrous effects of zoning), we face that conundrum too (and bare in mind that culturally western European societies are of course more Marxists than once-bitten, twice shy eastern European – that is their teachers\lecturers\media/voters parts – of course not Centra managers or pub owners).

        In my opinion, to carry out such transition from socialism into free market in democracy is more difficult than in authoritarian systems, because – as Karl Marx noted – “Democracy is the road to socialism” *, as any unrestricted democracy drives towards socialism (it is enough to see our democratically elected President Higgins – Europe’s dumbest president by a mile as I estimate Mr Higgins’s understanding of political and economic matters as merely slightly above Khrushchev’s (he talks about Minsky models all right but he has no idea what they are, so he does it only in order to sound smart like people on this blog, much like a trained parrot would repeat “it would appear that I am here” phrase), and below Comrade Edward Gierek’s level (minus Gierek’s fluent French and good looks) – Edward Gierek was 70s first secretary of the Polish United Workers Party who had no education and was hated because of his immensly long and borring speaches and because he brought Poland into debt by buying licenses based on obsolete French technologies for money borrowed from the US; he had some good ideas to – he was developing Polish program for nuclear energy, but this has ended with KGB liquidating the top scientists involved).

        Our President’s constant and undignified yapping confirms Thomas Jefferson’s opinion that a man who does not read anything is more educated than a man who only reads newspapers (as “The Spectator” brilliantly summarised his democratic ascend into power: “He is 70, but he looks much older. And he talks. A lot”).

        President’s comments on Fidel Castro remind me of what they used to say about Sir Bertrand Russell after his pacifistic adventures: the best educated fool in England.

        Except, Russell wrote “On Denoting” – one of 10 most intellectually important texts ever written, while all President Higgins had written is some ok poetry and political articles ranging from glib generalisations to that kind of arrogant ignorance that only befits someone who has never worked hard and never studied hard in his life (I bet you he cannot cook either, being spoiled and catered for all his academic life).

        Yes, it is very difficult to unwind from socialism without someone like General Pinochet, who had much more consideration for the so called human rights than President’s beloved Castro and managed to lift his country to the status of the richest in Latin America, as Castro and Chavez managed to bankrupt it into the poorest.

        * Although I question that this quote should be attributed to Karl Marx: MEP Janusz Korwin-Mikke claims that this is the case based on the information contained in the book Communism (2007) by Tom Lansford, p. 48, but I asked experts from Karl Marx (btw, none of the Marxists I met in Ireland – that is most journalists, trade unionists and the entire UCD Sociology Deparment unless something has radically changed for the last 10 years – read and understood Marx excerpt for some manifestos at best) and they said that he earliest occurrence of this yet located is in The Communist Review (1952) by the Communist Party of Great Britain, p. 15, where it is used to characterize the Communist agenda.

        As this is only important for President Higgins and his ilk, frankly speaking I do not give a flying f…k whether Marx has really said it or not (that democracy leads to socialism) – but as I suspect it is likely that some readers might be Marxists because they are surrounded by a Marxist culture (ever listened to Ingrid Miley when she reports on trade unions or Vincent Browne when he talks about equality?), I thought I’ll share that information with them to prove how tolerant I am towards their Marxist religion.

        Oh no. Did not know it was so late: they say Edison slept only 4 hours, but first of all that was him, and secondly I do not believe that for a second.

        • ‘There is only one problem: two forces in the equlibrium situation pushing in opposite directions’

          There are multiple forces pushing, pushing , shoving and tugging. Soon like the tides and the wind equilibrium reigns. Change the wind, the sun, the aspect of the moon and the tide level changes. Similar for the economy. Build a dam on the coast and it works for a while to keep the water out. Along comes a severe dislocation to the status quo and there is a catastrophe.

          Artificial lower interest rates are like a wall. Oops the water came close raise the wall. Oops the economy is failing again lower interest rates some more. finally when the wall is so high it holds out huge volumes of water. Along comes an earthquake and down goes the wall. Welcome to flood land extremis.

          Interest rates get so low the economy acts more poorly. One day up go the rates and poof goes the economy.

          Housing is controlled by many zoning and building codes. Lack of land is not A PROBLEM. Simply build up or down , intensify the density, whatever.

          The price of land in Canada is an artificial construct as it is in Ireland. There is a tonne of poor non agricultural land prohibited from building upon. Why does ten acres here on Saltspring cost 350-600,000 dollars. Because it is restricted in its use by some government edict or even a dozen or two.

          Save the environment and put the poor out of a house.
          I maintain that simply put pricing is the result of artificial construct or impediment to development.

          “F” pushes towards monopolies to increase the market share”
          you can’t have a monopoly in a free market. Competition will find a niche to erode the monopoly market share. There are only monopolies in a fascist state where business and government collude to the benefit of the monopoly. We live in a part fascist part communist state. Each, both, are authoritarian.

          PS I am not saying there should not be safety standards. We currently live in a fully controlled environment. THERE IS NO SUCH THING ANYMORE AS A FREE MARKET. Thereby lies the problem of costs, regulations and oppressive government.

      • Pat Flannery

        Tony Brogan: you say “any market left alone to itself will reach equilibrium”. That can never be true for the housing market because the supply of buildable land is limited. Without elasticity of supply there can be no equilibrium.

        You go on to say “if an increase in supply is not happening then there is an artificial constriction caused by something. Remove the constriction or expect higher prices. As there are so many housing related government projects one should look here first.”

        What if the supply of land is not just artificially constricted but physically impossible, because of geography e.g. Vancouver or San Diego? How will the free market achieve equilibrium in such a situation? It won’t, without government interference by zoning or tax legislation, as has been successfully applied in both Vancouver and San Diego.

        A free housing market without government interference results in chaos, as for example in Tijuana. Which city would you prefer to live in, Vancouver, San Diego or Tijuana?

        • Grzegorz Kolodziej

          “That can never be true for the housing market because the supply of buildable land is limited. Without elasticity of supply there can be no equilibrium.”

          What kind of equilibrium you are talking about though?

          It would appear that you are talking about ther competitive static equilibrium, in which case we deal with homogenous products and almost perfect elasticity of supply.

          But equilibrium can also be dynamic (and besides, not all equilibria have to be competitive), that is it can change when if there is a change in demand or supply conditions, and this is the case with the housing market.

          “What if the supply of land is not just artificially constricted but physically impossible, because of geography e.g. Vancouver or San Diego? ”

          Why, what about it? Most not homogenous products have restricted supply. What about Modigliani paintings, or Bristol cars?

          And even on the homogenous products market, equilibria do not have to be competitive. Take the Cournot duopoly, which is a subset of the set of Nash equilibria. Now, take the case of your equilibrium being the outcome of some dynamic process. Is there an equilibrium, and what of what kind?

          Cournot argued that the equilibrium is stable using the stability concept implied by best response dynamics. Best response dynamics involves a developer starting from some arbitrary position and then adjusting output to their best-response to the previous output of the other developer.

          So long as the reaction functions have a slope of less than -1, this will converge to the Nash equilibrium.

          “How will the free market achieve equilibrium in such a situation?”

          It would appear that you are still confusing a static equlibrium with a dynamic one…

          A decrease in housing supply will disrupt the equilibrium, leading to higher prices. Eventually, a new equilibrium will be attained on the housing market – simple? Simple!

          “A free housing market without government interference results in chaos, as for example in Tijuana.”

          It is exactly the opposite. Government interference results in chaos due to:

          -planning regulations (see Ireland)
          - limited availability of skilled labour (see Ahern’s Ireland 2002-2007).
          - time delays in construction projects (see whatever government or the EU builds in Ireland, i.e. the Port Tunnel debacle)

          “Which city would you prefer to live in, Vancouver, San Diego or Tijuana?”

          Which city would you prefer to look for a flat – a totally government-regulated housing market socialist Moscow, where you would have to wait a few decades for a flat and where 50 square meters would be considered excessive, so that they would put a stranger into your flat because the state is unable to meet the demand with a supply – or Hongkong (or Eisenhower’s US)?

          And last but not least:
          In 50s US, with little government regulation, house cost twice the average earnings.
          In overregulated Obama’s US house cost 10 times the average earnings.

          Less regulation (including the zero-interest rates experiment) = bigger supply = better affordability

          Ain’t no brainer.

          • “Why, what about it? Most not homogeneous products have restricted supply. What about Modigliani paintings, or Bristol cars”

            That explains their hideously high prices and ownership restricted to the mega rich. You can do that to the housing market too. Limited supply of waterfront properties drives up the price. There are tons of places regular housing can be built.

            Near Victoria an obsolete limestone quarry was proposed to to be used as a 10,000 person new town. It was shut down by those who would rather see the land returned to its original hillside forest land. STUPID, STUPID, STUPID.

            On the other hand Stu Young the Mayor of suburb Langford past an edict that said a developer /builder deserves an answer within 30 days, to any proposal.

            Over the Last 25 years Langford is transformed from Dogpatch to Terra Nova. Huge housing construction, large commercial plazas, and box stores all reside in Langford. It thrives. But it is still the cheapest new housing area in Greater Victoria. But we still have the countries 3rd highest real estate prices.
            Put that down to too much positive advertising and the Victoria secret was displayed to the world. Now everyone wants to live here and the locals get pushed out.

            Still everyone would be better off with a Stu Young politician. Put the Market before Mantra. Free money before Fiat. Singapore or Hongkong before a stifled Europe or North America or indeed most of Africa and India.

  15. McCawber

    The last few articles but this one in particular brings to mind the phrase “burden sharing”.
    The questions to be asked are-
    1. Who’s carrying the burden.
    2. Who’s being targeted to share that burden.

    The poor banks, god bless, are certainly carrying some of the burden.
    Absentee owners who are in arrear and just pass on the rental income.
    Keys handed back are teo example.
    They want to start dolling out dividends asap so that we all think what a great job they’ve done saving our dumb ass ungrateful necks.
    The taxpayer is certainly carrying the burden.
    The solution is twofold.
    Get more burden shares eh I mean demand into the system.
    Create a shortage of supply for that demand.
    This as we all know pushes up the price of housing and in doing so adds further to demand. That’s counterintuitive isn’t.
    Well yes it is but let’s be honest normal or presumed normal economic theory isn’t working.
    Why for example would rising prices in housing market stimulate supply.
    The additional demand I mentioned is the pent up drmand in -ve equity homeowners who want to move but are stuck.
    As prices rise more and more homeowners are moving out of -ve equity and want to move before the cycle hits the top.

    I’d be curious to know.
    Are prices too high and if so by how much in % terms.

    David is striving manfully to come up with solutions however nonody, at the moment, seems to be listening.

    Which means that project “burden sharing” hasn’t reached it’s peak.
    Again anyone any idea how far it needs to go.
    Using phrases like already in a (start, small large no) bubble would be fine unless you have real info on the situation.

  16. McCawber

    teo = two
    Stimulate supply = stimulate more demand

  17. Mike Lucey

    Just wondering if longer, much longer mortgage periods might be a solution. The link below points out the good, bad and ugly for long mortgage periods.

    One point sticks out, that being that the mortgage repayments would most likely be lower that current rents. Its not an ideal solution but with further modification it might be worth considering.

    If long mortgages were operated via Credit Union ‘People banks’, I feel the fleecing (interest) elements might be more bearable / acceptable for the mortgagee as he / she would have a stake in the ‘bank’ so to speak.

    What Is the Longest Mortgage?
    http://homeguides.sfgate.com/longest-mortgage-7677.html

    • Pat Flannery

      Mike Lucey: allowing longer debt repayment periods increases borrowing capacity and feeds the price spiral. Some acceptable mechanism (or mechanisms) has to be found to curb the price spiral. The only entity that has the power to do so is government. Meanwhile house prices are at the mercy of anti-government ideologues, as is the cost of health care.

    • EugeneN

      Insane idea. Last touted during the boom.

  18. mike flannelly

    1995 was the last time that the housing market seemed to work. A 65,000e house in galway city was affoardable at about 3.5 times the average industrial wage and the mortgage interest rates were 7%. The land owner made money when he sold the land at about 78,000 per acre. The bank and builder also made money.
    There was a complete circle and everyone was happy.

    The aggressive profit growth strategy of Irish ” bankers ” started shortly after and exploded from 2003 to 2009.

    ” The same thing happens when the market is slack and faced with too many houses and broken balance sheets like it was in 2008. Banks would tell the individual who had too much debt to sell his extra apartment to fix his balance sheet. This was good advice so long as the bank didn’t tell every bankrupt the same thing because if they did (which they did) everyone would sell at the same time and prices would just fall and the seller would be faced with the same problem of trying to sell but at lower prices.” – DMCW.

    The irish failed “banker” sold the investment mortgage debt in 2007 for 40 times the annual rent (while paying himself an unfair gain bonus payment) and then in 2008 asked the customer to voluntary sell under the threat of court action( repossession) his bogus investment property.
    The forced bogus voluntary sale broke the customers balance sheet. All the mis sold investment mortgages(not fit for purpose) from 2005 to 2009 should have been restructured to meet the needs of both the customer and the bank.

    Todays rents are based on a 350,000e 3 bed property. In galway city a three bed is fetching an average of 1200 e / mth. 21% of the net industrial wage.

  19. Truthist

    Some “home truths” & propositions :
    .
    .
    Landlordism — incl. landlording & being a tenant & queuing for a living — is crass !
    .
    “U can never beat the Landlord.”
    .
    “Court is where rich men go to sort out their affairs.”
    .
    “U cannot beat ‘City Hall’.”
    .
    “There is no justice for the poor man.”
    .
    “It is all about control.”
    .
    Any attempt at making one’s own shelter from improvised material by homeless & roofless persons are dealt with by destruction & physical assault from the Garda-Landlords / Landlord-Gardai.

    G.A.A. = Garda Athletic Association
    .
    “‘Threshold’ wants to know all about the Tenant’s case against the Landlord so that then they can then pass on the Tenant’s strengths & weaknesses to the Landlord for the purpose of the Landlord beating the Tenant.;
    Thus, avoid Threshold like the plague.”
    .
    “The establishment, & most notably the E.U. & I.M.F., want to change the demographics of Irish State from majority having home ownership to they being only Tenants.”
    .
    “The most important purpose for the architect is to get the inside correct ;
    Because it is the inside that is the most important.”
    .
    “Ultimately, Houses & Condominiums & Apartments & arguably Flats consist of rooms [ emphasis on 'plurality' ]
    And, each room essentially [ supposably 8-) ] consists of a sound floor, sound ceiling, & 4 sound walls.
    Already, most utilities can be ‘self-standing’,
    e.g.’s
    Solar Power generation of Electricity ; Although, moreso for the tropics currently. And, the solar panels are getting considerably better & cheaper.
    Solar Power generation of direct heat
    Solar Power direct cooking ; Although, moreso for latitudes of 40^ & less.
    Passive cooling of building by clever design with control
    Complete bio-degradable sewage system per household
    Rain Water collection system
    inter alia
    Water supply from the Irish State should be ‘free’ ; But, with bonuses of meaningful value for consumption being less than certain range of limits per occupier.
    Anyway, free supply of water at drinking water quality is a Civil Right for every citizen.
    Of course, wholesale negligent waste & wanton waste of such supply is a civil wrong or criminal wrong as determined by leglislation.”
    .

  20. mike flannelly

    Unlike 1995 when a three bed house was 3.5 times the average annual industrial income the 350,000 three bed apt of 2007 was 10 times the average industrial income.

    Its true for Dan O Brien when he said
    we must have had no economists of any note to provide guideline measurements.
    A room in galway city is now 400e/ mth.
    This is 93e/wk and 21% of the net wage of 450e.

    Whos rental crisis is it?

    The workers or the room provider with a 350000 mortgage?

    The mortgage arrears process proved to be completely bogus with regard to restructuring the high ratio mortgages.

    The 31st dail, we are told put 2bn into failed bankers pensions. The pensions of failed bankers took priority over the domestic economy and bank customers with anxiety trying to restructure high ratio debt.

  21. Mike Lucey

    I’ve just read an article / analysis that I think might be agreed on by both DMcW and Tony Brogan!

    The Deep State’s Attempt To Suppress India’s Gold Demand

    http://investmentresearchdynamics.com/the-deep-states-attempt-to-suppress-indias-gold-demand/

    The author, ‘Stewart Dougherty is the creator of Inferential Analytics (IA), a forecasting method that applies to events proprietary, time-tested principles of human instinct, desire and action. In his view, forecasting methods not fundamentally based upon principles of human action are unlikely to be reliable over time. He is a graduate of Tufts University (BA) and Harvard Business School (MBA), is a 35+ year veteran of the business trenches and has developed IA over a period of 15+ years’.

    • Thanks Mike
      Indian campaign to garner tax revenue resulting the reduction of bank notes now only available in small denominations. It is another in the campaign to ban cash. In India they want to ban the only real money , gold, too, but they will never be able to as the black market already flourishes in gold trade and will blossom if the government tries duties fees or confiscation. Banning cash cannot work as a quarter of the Indian population do not have a bank account.

      This is part of a world wide campaign to ban the use of cash and have all transactions in wages and trade be digital. Then the government has you by the short and curlys. We have already digitized the health care and driers licences etc. Already in BC here is the option for the health care and the drivers license to be combined on one card. Next will be a single card with all your information and financial affairs.
      It will be really easy then to send you back to the stone age with a digital switch. One misdemeanor and you are cut off from everything.
      You will then live in a subsistence world of manual work for barter in the black market. Then will spring up a new set of currencies out of government control and a total black market unless it is the government locking you up in a work camp.
      Perilous times, be aware.

      • Mike Lucey

        A few weeks ago I and also an old mate, that also banks at Ulster, got a nice flyer in the post advising that our savings were save and under the State guarantee scheme.

        We both were scratching our heads as we never received such a notice in over 40 years of dealings with banks.

        Today I read that RBS, Ulster’s parent, has failed some stress tests and could be in trouble. The dots joined for us. However I think Ulster’s ‘nice’ notice might be more inclined to cause a ‘rush’ rather than a ‘calming’ effect!

        • That may be fine, Mike , but I do not trust the bastards. The fund held by the state will cover 2% of the deposits if the system crashes. I’d be interested in the responses if you asked “what if the government is broke too?”.

          • Mike Lucey

            I doubt I’d get a response Tony. If I were, it would would probably be along the lines of, “Well you’re screwed then, sorry about that”.

  22. Truthist

    @ Grzegorz,
    .
    Re ; Paul Krugman [ "renowned" Economist ]
    .
    Krugman is one sick puppy !
    Has hidden agenda to have European-Americans to wrongly blamed as solely responsible for the wrongs done by USA directly & done as proxy.
    No admission by Krugman as to who to the Americas were the main slave trade originators, financiers, shippers, traders, & owners.
    And, it is the Irish who have been the vast majority of actual slaves in North America when all the tenure of slavery is considered.
    Many of the Irish as children were forced to adopt new religion of Protestantism & also to think of themselves as Scotch-Irish instead of as Irish ;
    Although, there is no such term as Scotch-Irish acceptable by Scottish people.
    Scots-Irish, yes ;
    Scotch-Irish, no.
    “Scotch” as a term is reserved by the Scottish solely for to describe whiskey originating from Scotland.
    Anyway, Scots are Irish settlers from Scotia [ one of the old names for Ireland ] to Scotland.
    Previous inhabitants of Scotland would be the Picts.
    .
    Irish were the main slaves in the Caribbean until the Slave-Trade brought slaves from certain parts of Africa.
    .
    Of course, the vast majority of slaves to the Americas as a totality came from Africa.
    .
    Why does Krugman not expose the above as a true economist ?
    .
    Google.com using search terms ;
    .
    krugman AND white man
    .
    https://www.google.com/?gws_rd=cr&ei=R-I-WIr4FczqvgSbxbv4AQ&fg=1#q=krugman+AND+white+man
    .
    .
    Re ; Stiglitz
    .
    Another deceptor ;
    But, one with some charm.
    “I just want to stop the hurt.” ;
    Like half he does !
    .
    He reminds me very much of the following character from Godfather Trilogy of movies played by that great actor Eli Wallach ;
    .
    Don Altobello
    .
    https://en.wikipedia.org/wiki/Don_Altobello

  23. Shane F

    Tony

    There’s an awful lot of Putin worship on that site. Found myself laughing out loud during US election as to who must be funding it.

    • Shane F

      Merkel has told Russia to stay out of German elections.

      During WW2, The hook for people in Britian to listen to Lord Haw Haw was that he read out letters from loved ones in POW camps. The plan then would be to subtly influence listeners to National Socialist point of view. Guess that part did’nt work.

    • Hi Shane
      I am not sure who to believe these days. So I try to stick to common sense. It seems to me Putin has nothing to gain by seizing territory. There is no doubt in my mind that the middle east was set aflame by the US. Allies were dragged in. Syria was the latest. A step too far for Russia as the Allies pile weapons on the Russian border. Ukraine was overturned too. Donetsk region and the Crimea has been Russian for centuries. Stolen briefly at the fall of the USSR.

      Me? I trust the US less than I trust Putin!!

  24. Truthist

    From the personal pen of Henry Makow ;
    .
    Trump’s Real Mission: Make Israel Great Again
    .
    November 30, 2016
    .
    EXCERPT ;
    .
    “We shall purify the idea [of God] by identifying it with the nation of Israel.” Banker Otto Kahn

    While we’re being distracted by domestic issues,
    Trump’s appointments all suggest we’re being led
    down the garden path to war with Iran leading to world war.

    Trump’s election heralds a return to sanity on domestic policy but an alarming cognitive dissonance still exists in terms of Iran and the so-called war on terror. All of Trump’s appointees are advocates of war on “militant Islam” and blame Iran for “sponsoring
    terror.”
    They ignore evidence that Saudi Arabia and Quatar and not Iran fund ISIS.
    They ignore evidence that ISIS was trained, armed and supported by Mossad, CIA and the West.

    All of Trump’s appointments point to a gratuitous confrontation with Iran orchestrated by Benjamin Netanyahu.
    This could easily lead to World War Three. In the current issue of The Atlantic, Uri Friedman writes:

    Several of the president-elect’s national-security appointees have argued that the United States is at war with “radical Islamic terrorism,” or “radical Islam,” or something broader still, such as “Islamism.”
    They have described this war as a primarily ideological struggle to preserve Western civilization, like the wars against Nazism and communism.
    The war is not confined to extremist Sunni Muslims or extremist Shia Muslims; the Islamic State and the Islamic Republic of Iran are seen as two sides of the same coin.
    (The Coming War on ‘Radical islam’)

    While Trump is saving jobs in Indiana, the US House of Representatives is calling for ‘no fly zones’ in Syria and the Senate is planning to reinstate sanctions on Iran.
    .
    .
    http://henrymakow.com/2016/11/trump-making-israel-greater-again.html

  25. Truthist

    List of Banks Owned or Controlled by the Rothschild Family
    .
    Authored or posted by Pao Chang
    Updated on December 21st, 2015
    .
    http://omnithought.org/list-of-banks-owned-controlled-rothschild-family/2327

  26. Truthist

    David Icke
    .
    ?@davidicke
    .
    12h12 hours ago
    .
    Rothschild man Wilbur Ross – leader of a notorious Wall Street secret society – is Trump pick for Commerce Secretary
    .
    ….
    Irish State welcomed Wilbur Ross to fleece Irish nation recently too.
    ….
    .
    https://www.davidicke.com/article/395291/rothschild-man-wilbur-ross-leader-notorious-wall-street-secret-society-trump-pick-commerce-secretary

  27. Truthist

    Do not expect Trump to be even-handed to the Palestinians.
    Rather,- expect Trump to be merciless to the Palestinians in Israel’s push for greater Israel.
    .
    WW3 coming with Trump the Bad.
    But, at least not WW3 coming with Hillary Clintion the Evil.
    .
    .
    Blaming Palestinians for fires part of Netanyahu’s “strategy of incitement”
    .
    EXCERPT ;
    .
    Palestinian citizens of Israel were as much victims of the wildfires as anyone else – particularly in and around the mixed city of Haifa.
    And rescue workers who are Palestinian citizens of Israel have been risking their lives to protect others.

    Several countries, including Greece, Italy, Turkey, Russia and the United States sent firefighting aircraft or other resources.

    And just like in 2010, the Palestinian Authority in the occupied West Bank sent dozens of firefighters and their equipment to assist Israel.

    Netanyahu even took a break from accusing PA leader Mahmoud Abbas of “incitement” to thank him for the Palestinian contribution.

    Israel acknowledged the assistance of those countries in a post on its official Arabic-language Facebook page.

    A graphic posted on Israel’s official Facebook page displays the flags of nations that sent firefighting assistance, but excludes the flag of Palestine. (via Facebook)
    The post includes this graphic that show the flags of countries that contributed to the firefighting effort.
    But there is no Palestinian flag.
    Instead, a note at the bottom acknowledges that the “Palestinian civil defense is taking part in extinguishing the fires.”

    The post is a symbolic example of Israel’s refusal to grant Palestinians equal status to others, even as they risk their lives to help it.

    In 2010, Israel canceled a ceremony meant to honor Palestinian firefighters, after occupation authories refused to grant them permits to attend.
    .
    .
    https://electronicintifada.net/blogs/ali-abunimah/blaming-palestinians-fires-part-netanyahus-strategy-incitement
    .
    .
    And, Gilad Atzmon [ ex-Israeli ] — philosopher & famous musician & activist — fairly informing us here ;
    .
    http://www.gilad.co.uk/writings/2016/11/28/israeli-pine-forests-were-planted-to-hide-the-plunder-of-palestine

  28. michaelcoughlan

    Hi David,

    I know I am off topic but my VHI bill for my family is 25% higher this year than last year. My car insurance is the same about 25% higher.

    Now guess what? The WAR on cash continues. The ECB are going to stop printing the 500 euro note from 2018 on;

    https://www.ecb.europa.eu/press/pr/date/2016/html/pr160504.en.html

    The 500 euro note represents one third of the total value of EU currency in circulation David.

    Any chance you or someone like you would sound the klaxon;

    https://www.youtube.com/watch?v=W_9KR3mYkUo

You must log in to post a comment.
× Hide comments