Dermot Desmond jeered in Dublin airport?

[Purple]

Why?

Maybe because we are/were/should be again an exporting economy and we have made ourselves very uncompetitive over the last 10 years by giving ourselves pay increases that we didn't earn (by earn I mean increase our productivity). The net result is that goods can be manufactured and services provided in other EU countries t a fraction of the cost here. I currently outsource to the UK at 35% of the unit cost I would pay here.
Jack O'Connor was on the radio last night claiming that pay cuts are not the answer and would in fact damage the economy. He said that no economy was helped by reducing their costs. The guy from ISME was utterly useless and let him away with that rubbish. Anyone who knows anything about the German economy for the last 20 years could blow his argument out of the water.

Listening to socialists talk about economics is like listening to fundamentalist creationists talk about evolution.

 

[room305]

Why?

The arguments against creating a "deflationary spiral" pertain to larger economies where many of the goods consumed are manufactured internally rather than imported. In Ireland we manufacture goods for export and import most of our consumption.

So stimulus packages to boost consumption or government moves to prevent falling prices and wages only benefit France, Germany and the UK. Meanwhile, the reduced competitiveness damages our source of income - our exports.

The UK's competitiveness has been boosted by the devaluing of their currency. This option is not available to us, ergo we must cut wages, which in turn will reduce the cost of living. It amounts to one and the same thing once everybody suffers the same cut in wages. Of course, what unions want is for everybody but their members to reduce their wages (a wage rise in real terms).

Remember, when (I'm alright) Jack O'Connor is bleating about the harm of a "deflationary spiral" that he saw no harm in the inflationary wage/price spiral of the social partnership talks.

As Purple said, Germany has undergone a prolonged period of mild deflation and it didn't stop it becoming the world's largest exporter.

 

[liaconn]

Fair enough, and thanks for that. Just a genuine question , while I understand that the price of goods and services will come down in line with cheaper labour costs, most people's main outlay is their mortgage and those of us who bought in the last few years have a huge amount ot repay every month. How would this be handled? Like I said, its a genuine question, I don't have an economics background.

 

[Purple]

The cost of borrowing is one of the major factors that we cannot control. In many ways it’s all we have left from the boom. For the short term the problem is not a problem since international interest rates are so low but if, as is predicted, the rest of the EU comes out of recession before us the ECB will increase rates to stop inflation (with the big increases in money supply this will be a real problem). As rates increase we will be knocked back even more unless we get our act together fast and keep up with the rest of the euro zone.

Back on topic; low interest rates in the short term will compensate for lower incomes. In the long term we’re probably all screwed.

 

[room305]

Fair enough, and thanks for that. Just a genuine question , while I understand that the price of goods and services will come down in line with cheaper labour costs, most people's main outlay is their mortgage and those of us who bought in the last few years have a huge amount ot repay every month. How would this be handled? Like I said, its a genuine question, I don't have an economics background.

Very little can be done in respect of mortgages (i.e. if interest rates start to increase) but unsustainably high wages won't help if it results in greater unemployment.

In the longer term, I think we need some sort of structure to aid people in negative equity who need to move for work or trade-up for family reasons, to carry their negative equity with them.

 

[Shawady]

Very little can be done in respect of mortgages (i.e. if interest rates start to increase) but unsustainably high wages won't help if it results in greater unemployment.

In the longer term, I think we need some sort of structure to aid people in negative equity who need to move for work or trade-up for family reasons, to carry their negative equity with them.

Could the govenrment do something radical in this area like get the banks to write off a percentage (maybe 20%) of everyone's mortgage covered by the guarantee? It would free up more money for people to spend and may act as a stimulus to the economy.

 

[lightswitch]

"Maybe because we are/were/should be again an exporting economy and we have made ourselves very uncompetitive over the last 10 years by giving ourselves pay increases that we didn't earn (by earn I mean increase our productivity). "

Purple, you need to look at why there was a need for higher and higher wages. It's not complicated at all, it came down to one simple thing, the cost of property.

As a self employed person you may well have given yourself pay increases you didn't deserve. Most of us who are in the PAYE sector did not have that luxury.

You are correct with regard to us needing to be an exporting economy. I posted a long time ago with regard to a concern I had about the amount of Chinese goods on sale here ( close to impossible to avoid buying Chinese items). Where are the Irish manufacturers. Why don't we have campaigns encouraging us to buy Irish or at the very least European.

 

[Purple]

You’ve got it the wrong way around; high property prices are a result of high wages and cheap credit. Increasing wages to follow costs is stupid since prices are set by market demand and increasing wages just pushed up prices again. Ask yourself this; if everyone in the country got a 100% pay increase would it mean that they were 100% better off in real terms or would prices just go up in line with the increased labour cost within the economy?
Money is a nebulous thing, even when it was minted precious metal increasing supply didn’t mean a country got richer. Real up on what happened to the Spanish after the conquistadors discovered thousands of tonnes of silver in South America. It caused the death of the most powerful empire in the Western world.

 

[Purple]

Where are the Irish manufacturers. Why don't we have campaigns encouraging us to buy Irish or at the very least European.

We are more expensive than Germany and Switserland. Forget about China.

 

[lightswitch]

Numerous times over the past ten years I have seen employees move jobs or negotiate highter wages on the back of "I need to get on the property ladder", "I'm not earning enough here". If the cost of property was not allowed to spiral out of control partly due to cheap credit but also due to the encouragement of a massive buying binge then we would be in a far better place today.

With regard to Germany and Switzerland, we are part of the EU, China is not. I am not litterally faling over German and Swiss products in every shop in the country.

I will read up on what happened to the Spanish after the conquistadors discovered thousands of tonnes of silver in South America, sounds interesting.

 

[Purple]

With regard to Germany and Switzerland, we are part of the EU, China is not. I am not litterally faling over German and Swiss products in every shop in the country.

What is sold in shops only represents a small proportion of total economic activity. China is a low cost centre of choice at the moment but we are not trying to compete with them. We are trying to be a high-tech knowledge based manufacturing base. In that space it is our neighbours that we should be benchmarking ourselves against. Considering the inherent geographical and cultural disadvantages we have, (Germany is on the mainland, Ireland is not. Germany has a name for quality and excellence, Ireland does not.) as well as the economies of scale in production, materials and skills on mainland Europe we should be 10-15% cheaper.

 

[room305]

Could the govenrment do something radical in this area like get the banks to write off a percentage (maybe 20%) of everyone's mortgage covered by the guarantee? It would free up more money for people to spend and may act as a stimulus to the economy.

Free up what money? Anything forgiven by the banks must be repaid by the taxpayer thanks to the guarantee. This would also unfairly punish those who were prudent and reward those who were most reckless.