The R Word

[jimbob1234]

Surely the banks attempt to sell these houses on the market? Or is there a repossesedhousesales.ie website?

they will try and off load them quietly as if they start putting them on the web etc then confidence will plunge altogether and they would be a lot worse off

 

[Treehouse]

I stand by my earlier comments:

• This is more of a "technical" recession than anything else, and is very unevenly distributed among sectors
• Growth will resume at a much more realistic rate in a year or two
• This slowdown will punish those who were foolish, greedy or tempted by speculation and short termism
• Hard workers and those who have invested in their education will continue to succeed
• Unemployment will rise, but it will not be anything like the 80's.
• Slowdown will hit some little and some very hard depending on whether they have been prudent or lived beyond their means
• A slowdown is actually excellent news for hard working educated young people as it will make housing more affordable and focus firms on performance. In this climate firms will reward those who work hard and improve productivity, whilst lazy or inefficent workers will be overlooked.
• Entrepreneurs will continue to thrive. A recession will push lots of big firms into the red and they will lose focus; leaving ample room for cunning entrepreneurs. Also a decline in rents for commercial property is good news for new businesses trying to get established

I am not an economist, and I DON'T want to get into an unpleasant argument with anyone, so please don't take the comments below as personal at all.

I just want to express an opinion that almost all of the above is based on wishful thinking, platitudes, unsubstantiated assumptions, and blind faith. Quite where sweeping positive statements like "Growth will resume at a much more realistic rate in a year or two" come from I don't know. Perhaps you have some economic insights that I don't and which you haven't mentioned.

As I say, this is NOT a personal comment, so please let's not get into a dumb internet shouting match. I just think each of your assertions is platitudinous and shallow.

 

[CGorman]

I am not an economist, and I DON'T want to get into an unpleasant argument with anyone, so please don't take the comments below as personal at all.

I just want to express an opinion that almost all of the above is based on wishful thinking, platitudes, unsubstantiated assumptions, and blind faith. Quite where sweeping positive statements like "Growth will resume at a much more realistic rate in a year or two" come from I don't know. Perhaps you have some economic insights that I don't and which you haven't mentioned.

As I say, this is NOT a personal comment, so please let's not get into a dumb internet shouting match. I just think each of your assertions is platitudinous and shallow.

No problem Treehouse, I don't take it personally - I can see your viewpoint clearly (it is the viewpoint of many people).

However, let me add a little substance to the above. I said I would expect growth to resume at a realistic pace in a year or so. To me that would be something along the lines of 08': -0.75%, 09': 0.75%, 10': 2.1% and gradually rising to about 3-4%pa for the medium term. I do not expect us to witness tiger like growth again - that would be absurd. I do however expect the current recession to be sharp, but relatively short (from an technical economic point of view). The shockwaves and losses will continue for some time, but as a whole the economy should still expand.

I too am not a professional economist, but have studied finance at third level and have had an avid interest in economics and business for a long time.

By all means we can have different opinions and yet take nothing personally, I am merely interested in constructive debate.

 

[z109]

CGorman, I think before trying to project the recovery, we need to look at how the present came about - what is it that has pushed the economy into recession? To my mind:
- housing bubble (nuff said)
- commercial property bubble (Irish commercial rents are the second highest in Europe)
- consumer credit bubble
- pro-cyclical spending policies from the government
- wage inflation due to high living costs (fueled by bubbles!)

So, we have become uncompetitive and indebted, in my view.

The questions then become:
- what will be the impact if oil prices remain high?
- what will be the impact if interest rates rise?
- what effects will reductions in public spending and probably in public service headcount have?
- how far will house prices fall? (not looking to debate them, but you pointed out that they are at 2005 levels already in some areas. If they fall further, this will leave more people in negative equity)
- will the global economy go into recession?
- will any of the multi-nationals (who account for 90% of our exports) downsize or leave altogether?

Given these ponderables, do you really see a turnaround to positive growth in six months?

 

[television]

No problem Treehouse, I don't take it personally - I can see your viewpoint clearly (it is the viewpoint of many people).

However, let me add a little substance to the above. I said I would expect growth to resume at a realistic pace in a year or so. To me that would be something along the lines of 08': -0.75%, 09': 0.75%, 10': 2.1% and gradually rising to about 3-4%pa for the medium term. I do not expect us to witness tiger like growth again - that would be absurd. I do however expect the current recession to be sharp, but relatively short (from an technical economic point of view). The shockwaves and losses will continue for some time, but as a whole the economy should still expand.

I too am not a professional economist, but have studied finance at third level and have had an avid interest in economics and business for a long time.

By all means we can have different opinions and yet take nothing personally, I am merely interested in constructive debate.

Where do you base these groth figures from? Just off the top of your head??

 

[gradgrind]

Originally Posted by MrKeane http://www.askaboutmoney.com/showthread.php?p=655703#post655703
A lot of entrepreneurs have been able to ramp up their businesses because they could get access to lots of cheap money over the last 10 or so years. The rising tide was lifting all boats, I suspect it will be a lot more difficult to ramp up a new business idea in the new environment.

True and another problem is that the lowest income you need to pay the bills in Ireland is one of the highest in the world. But anything that a new business produces will likely have a price set by the rest of the world rather than by Irish partnership agreements.

In America you might get by for a year or two selling one widget a week, in Ireland you might need two widgets. Your business will need to expand quicker than it would in a lower cost economy.

If you're starting your business from your savings or a redundancy payoff you'll run through your savings here quicker than elsewhere.

 

[leesider29]

The problems at the moment are twofold, external and internal. We are witnessing high fuel prices, high food prices, possible raises in interest rates and the global credit crunch. Internally there has been mismanagement of the boom especially in the public sector through current spending and bad management of resources.

Firstly I think fuel prices will drop back to near the $100 a barrel due to a stronger dollar in the future and therefore less speculation. Food prices will probably remain high, eventhough some people suggest they might ease off a bit due to larger harvests this year. Interest rates we really don't have any control over but raising them will not reduce inflation from oil and food so why do it?? The credit crunch is ongoing but the worst seems to be over.......no banks have gone under in the last few months and there has been no more cash injections by the ECB or the FED.

Internally we really need to get our house in order and sad as it is this is the only time the government was going to take this on. The problem now is that they don't cut capital investment and they have to really work hard at weening us off fossil fuels.....we are one of the most dependent countries on oil and really leave ourselves open.

Yes I think we are entering a recession but I think it will be shortlived as with an open economy such as ours we are affected dramatically by external factors and these will change over the next year. It also gives the government the "opportunity" to make tough decisions and finally get our house in order. There are knockon effects with all these job losses of course but I think at this stage people need to stay calm realise we are not going back to 1980s and knuckle down to getting ourselves out of it.

Believe me my industry is one of the ones most affected by this so I am feeling the pain and have been for a while but where there is a will there is a way!!!!

All based on my humble opinion!

 

[Treehouse]

By all means we can have different opinions and yet take nothing personally, I am merely interested in constructive debate.

That's cool CG, me too.

Yeah, my problem with all this optimism is that I believe we have had no economy for several years, or at least a fake economy - Billy Connolly might call it a Wee Pretendy Economy. Our economy has consisted of:

1. A housing bubble fuelled by cheap credit and easy access to that credit.
2. A consumer boom fuelled by the same cheap credit, and further fuelled by mortgage equity withdrawal
3. A boom in non-tradeable services that rely on other people having money (creating wealth I suppose) to pay for them. Again a result of the consumer boom and increasing demand for these services.
4. A massively bloated and inefficient public sector, funded by government revenue as a result of the housing boom, stamp duty, increased VAT income from consumer boom etc.
5. Multinationals, who help the economy through tax and employment, but with the massive downside that the tax take is limited, the employment insecure, and the "wealth creation" minimal. FinFacts reported in 2006 that 92% of Ireland's exports are from foreign multiationals. That's a damn scary statistic.
http://www.finfacts.ie/irelandbusinessnews/publish/article_10008570.shtml


What else do we have? Agriculture and tourism for sure. After that, we are down to small companies and a small amount of manufacturing. The vast bulk of our economy - it seems to me - was non wealth-creating as we see in the 5 elements listed above. So when those parts of the economy falter, we have little to fall back on.

And as I see it, each of those 5 major elements of our economy I listed above are now looking very bleak. This is reflected in rising unemplyment, falling government revenues, a tanking housing market, multinationals scaling back, the consumer boom faltering as credit tightens and rising interest rates make shopping more expensive as they make the mortgage more expensive.

And I don't know how any of this gets fixed in a few years.

And none of this even allows for external/global effects on our economy. A world recession would obviously make all of this worse, although I agree with Leesider that oil prices are just another speculative bubble and will fall back in time.

Anyway. We're fuc**d I reckon!

 

[television]

That's cool CG, me too.

Yeah, my problem with all this optimism is that I believe we have had no economy for several years, or at least a fake economy - Billy Connolly might call it a Wee Pretendy Economy. Our economy has consisted of:

1. A housing bubble fuelled by cheap credit and easy access to that credit.
2. A consumer boom fuelled by the same cheap credit, and further fuelled by mortgage equity withdrawal
3. A boom in non-tradeable services that rely on other people having money (creating wealth I suppose) to pay for them. Again a result of the consumer boom and increasing demand for these services.
4. A massively bloated and inefficient public sector, funded by government revenue as a result of the housing boom, stamp duty, increased VAT income from consumer boom etc.
5. Multinationals, who help the economy through tax and employment, but with the massive downside that the tax take is limited, the employment insecure, and the "wealth creation" minimal. FinFacts reported in 2006 that 92% of Ireland's exports are from foreign multiationals. That's a damn scary statistic.
http://www.finfacts.ie/irelandbusinessnews/publish/article_10008570.shtml


What else do we have? Agriculture and tourism for sure. After that, we are down to small companies and a small amount of manufacturing. The vast bulk of our economy - it seems to me - was non wealth-creating as we see in the 5 elements listed above. So when those parts of the economy falter, we have little to fall back on.

And as I see it, each of those 5 major elements of our economy I listed above are now looking very bleak. This is reflected in rising unemplyment, falling government revenues, a tanking housing market, multinationals scaling back, the consumer boom faltering as credit tightens and rising interest rates make shopping more expensive as they make the mortgage more expensive.

And I don't know how any of this gets fixed in a few years.

And none of this even allows for external/global effects on our economy. A world recession would obviously make all of this worse, although I agree with Leesider that oil prices are just another speculative bubble and will fall back in time.

Anyway. We're fuc**d I reckon!

Thats some pesimistic stuff there David (McWilliams). But I am tending to aggree with your logic. Makes a lot of sence. But I am one of those working in the bloated public sector with a full time non sackable job. Happy days

 

[ccbkd]

This thread is great especially loving the bit in the middle from Nicolaz and his brand of quasi-religious philosophy, nice try Nico but I am afraid you must have pressed the wrong button on Boards.ie in a bid to espouse on the philosophy forum this is the wrong forum don't you know AAM is full of Accountants, Estate Agents and Solicitors whom I believe are Lucifiers Off-spring!

 

[JohnBoy]

No problem Treehouse, I don't take it personally - I can see your viewpoint clearly (it is the viewpoint of many people).

However, let me add a little substance to the above. I said I would expect growth to resume at a realistic pace in a year or so. To me that would be something along the lines of 08': -0.75%, 09': 0.75%, 10': 2.1% and gradually rising to about 3-4%pa for the medium term. I do not expect us to witness tiger like growth again - that would be absurd. I do however expect the current recession to be sharp, but relatively short (from an technical economic point of view). The shockwaves and losses will continue for some time, but as a whole the economy should still expand.

I too am not a professional economist, but have studied finance at third level and have had an avid interest in economics and business for a long time.

By all means we can have different opinions and yet take nothing personally, I am merely interested in constructive debate.

Whilst I am firmly in the pessimists camp I am open to being convinced otherwise. On your growth projections above what economic sectors do you reckon will generate growth given that the construction sector could shrink for another year or two at least.

 

[Welfarite]

4. A massively bloated and inefficient public sector, funded by government revenue as a result of the housing boom, stamp duty, increased VAT income from consumer boom etc.

Is this your own opinion or is it based on facts?

A recent OECD report found that general government employment in Ireland is relatively low among OECD countries. while, numbers employed in the PS has increased, such increases were from a relatively low base. They are significantly less than the level of public employment in Norway, Sweden, France, Finland and Belguim. Expenditure has increased substantially over the last decade but this reflected the need to play catch-up from historically low levels. Ireland has the third smallest total public expenditure as a % of GDP (behind Korea and Mexico) adn this figure has decreased over the past decade.

 

[z109]

The credit crunch is ongoing but the worst seems to be over.......no banks have gone under in the last few months and there has been no more cash injections by the ECB or the FED.

Not sure where you get this idea from.

The Fed and the ECB are still conducting regular cash injection operations. LIBOR/EURIBOR/Dollar LIBOR are still hovering near the highs of last August. The TED spread is widening again. B&Bs cash call failed and had to be bailed out by a direct investment, HBOS's cash call is also looking very dodgy. If the banks cannot recapitalise themselves they will fail/be dismembered/be taken over in a shotgun marriage.

The credit default fiasco in the US is moving from subprime loans to Alt-A loans, Adjustable Reset Mortgages, Home Equity Loans, Credit Cards, Auto Loans and Commercial Real Estate Loans. Why does it matter what Americans are defaulting on? Because it's not just American banks that hold this debt. A much wider range of banks hold these loans compared with subprime related securities. While the default rates will not be as high as subprime loans (except maybe in the case of home equity and credit cards!), there will still be substantial pain.

The worst of the credit crunch hasn't yet started.

 

[jimbob1234]

the public sector is our biggest problem. they cant have the same wages as the private sector and have job security and huge pensions as well, thats just all wrong. in the US no one wants to work for the govt as the private sector is so much better, its the opposite here, eveyone wants to end up in the civil service due to all the benefits

 

[television]

the public sector is our biggest problem. they cant have the same wages as the private sector and have job security and huge pensions as well, thats just all wrong. in the US no one wants to work for the govt as the private sector is so much better, its the opposite here, eveyone wants to end up in the civil service due to all the benefits

Or the private sector pushing up prices to unjustifible levels over the boom period. Of course the public sector is responcible for the credit crunch, fall in house prices, the oil crises, competition from the far east, banks giving credit to people who could never afford it etc. Yes, that would be the public sectors fault.

 

[jimbob1234]

who said its responsible for the credit crunch, fall in house prices, etc. the public sector is our biggest internal problem that is directly managed by the govt. its woefully inefficent, overpaid,lazy, and totally full of wasters.

and by the way the central bank is part of the public sector and they could have stepped in and stopped the bank giving credit to people who cudnt afford it

they also could have stopped house prices rising so fast by opening up govt zoned land to resedential development.

 

[shnaek]

jimbob1234 - you make the right point there. In France, public sector pay is about 10% less, taking into account job permanency and pension. What we need in Ireland is accountability in the public sector. If you mess up, then you're demoted, or you're out. Fact is, the government took in too much tax when revenues were artificially high - thus all the vested interests raced in to raid the family silver. In an ideal world governments would save in the good times and spend in the bad. This will never happen in a democracy. The only solution is to keep tax revenues relatively stable, and not allow spending to get out of control with no tangeable benefits whatsoever.

I like CGormans optimism. There is always a place for this type of thinking, and it is better that we have some positive thinkers around as times get hard. but the credit crisis is not over. An Irish bank is definitely going to fall. And there are more hard times ahead. No doubt about it. And house prices will fall for a long time to come. We need all the optimism we can get!

Also, we need to look at global issues. Europe could well proceed with initiatives which ruin our low tax advantage. This may happen with or without Lisbon. It is common sense for them to protect their interests. And if Obama wins in the US, the US could enter a new era of protectionism. Without low tax and US multinationals, what is it exactly that we produce here? Tourism and agriculture. The two things we have always produced. Where are the Irish multinationals? We don't have too many.

There is also a strong possibility that we are going to see a lot of strikes in the next year. That will do us no good.

While people who work in Hibernian and others are loosing their jobs, the trade unions are 'angry' about a pay freeze pointing at 'fat cat' bosses. How many 'fat cat' bosses are there? Sweet F.A. But there are hundreds of thousands of public 'servants' (I prefer to call them 'masters' seeing as how they are pulling the strings and the rest of us are dancing) who need to know that redundancy and unemployment is a reality for a lot of us outside the walls of the public sector. And when the war is over, this is where all the bodies will be.

 

[jimbob1234]

indeed. a person in the public sector cant get fired even if they mess up! whats that about like. they will still receive their bench mark pay increases and will still have a job during even the most severe economic depression cos they are protected by all these unions. my sister has just 2 yrs experience as a primary school teacher and between yard duty (which is during their short working day) and getting extra money cos she got and honours degree (whats this rubbish about) she is on 41k per year. off to oz for the summer now on full pay, civil servants dont even know what the word recession means

if an irish bank falls and it looks like IL&P are the most successtible to the credit crisis then the irish economy will fall apart

 

[jimbob1234]

will dell pay you an extra 2500 per year if you have a first class honours degree and ur boss only has a second class honours degree

 

[television]

who said its responsible for the credit crunch, fall in house prices, etc. the public sector is our biggest internal problem that is directly managed by the govt. its woefully inefficent, overpaid,lazy, and totally full of wasters.

A previous poster made a good point about the public sector.

A recent OECD report found that general government employment in Ireland is relatively low among OECD countries. while, numbers employed in the PS has increased, such increases were from a relatively low base. They are significantly less than the level of public employment in Norway, Sweden, France, Finland and Belguim. Expenditure has increased substantially over the last decade but this reflected the need to play catch-up from historically low levels. Ireland has the third smallest total public expenditure as a % of GDP (behind Korea and Mexico) adn this figure has decreased over the past decade.

Groups like IBEC etc would want the public sector to have the same crappy exploititive conditions that are present in some of the private sector. I have worked in the private sector are from my experience there is a fair amount of wasters there too. It is a bit simplistic to suggest that the private sector good public sector bad. This simplcity has characterised your previous posts I suppose.

If those in the private sector except crappy pay, terrible conditions, instability etc than good luck to them. Why do you feel the need to inflict that on your fellow worker in the public sector?

Yes the public sector needs reform and become more customer focused. I would not even mind a pay freeze if i though it would help the whole economy. However the private sector needs to get more competitive also, i.e. smalland medium size businesses who have ripped people off over the last number of years.