I know Morgan kelly has written the articles that described our bust superbly and people tried to ignore him but i think he produced these documents when the damage was pretty much done as regards the inflated bubble.
(how we hadled this ad situation is another thing )
What we really needed was somebody outlining this debate on the front pages in 2003 and 2004 to stop the extent of the damage…basically to say we were at unsustainable levels …did anyone do it at that time …describe the problem so well ?
I actually was very dubious about prices and sold property in 2002 and a development site in 2004 that was inherited and people were laughing at me but my reckoning was that property could not be worth 3-5 times what it was worth in 97/98.
As i remember there were vague comments in central bank reports and maybe some comments from david mc williams.
Did you happen to read the Vanity Fair article?
Kelly was an academic busy releasing papers on medieval economics right up to 05-06 before he took any interest in Irelands bubble.
The central bank was warning of the unsustainable growth in credit also. The Economist warned of it in 2004 AFAIK.
There is a funny thread on boards where a poster who is basically a FF shill (he maintains that he will not vote FF) keeps asking why no one predicted this and that it wasn’t Bertie Ahearn’s fault because no one told him. Then when someone replies to him with something from back in the day, he changes the goal posts. Well worth a read if you want your blood to boil.
There is nothing new. Boom and bust come in cycles. You can say you knew but did you make money out of it. You could buy property in 2002 and sell in 2004/ 2005 with heavy profit.
Did you make money?? No- You are just like us. Keep posting on forums.
Did you make money?? Wise man who predicted rising tide.
To which may be added he has repeatedly said that it was on his return to Ireland in 2006 and when he took one look at the raw data -he could see what was coming and immediately said so as loudly as he could wherever he was given an opportunity to do so.
The only thing i wish kelly would do is go on the airwaves more often. However, i think he said in the vanity fair article that he would never go on tv again
I used Morgan Kelly as an echo to the OP’s dismissal of him as being late and their wish for a “Morgan Kelly” in 2003/4:
We had people whose job it was to manage, legislate and regulate the economy.
Unfortunately, the people whose job it was to manage, legislate and regulate the economic train, put rocket fuel in the engine, disabled the brakes and turned off all the warning signals.
No economist or guru was going to prevent the runaway train from crashing - all they could do was try and shout at a few passenger to save themselves and prepare people for the carnage to come.
The gobshites with the rocket fuel and matches are still in charge and they are busy throwing the people (who had listened to Morgan Kelly and saved themselves) under the train to try and slow it down whilst they build extra track for it (most of which will be underwater). The fact that the train won’t work underwater will be someone else’s problem.
No “Morgan Kelly” in 2003/4, 2004/5, 2005/6 or whenever was ever going to stop the runaway train. All he, and those of his tribe, sough to do was save a few souls.
I am not having a pop at morgan kelly at all…the responsibility is government FF primarily , weak regulators , banks , real estate industry and people who kept saying property prices never fall etc.
And obviously the figures were even more startling in 2006 …but they were still out of touch with fundamentals in 2003/2004.
I was just reflecting was there articles at an earlier stage that made the risks so clear …
I am also not saying i made money …maybe i lost money.
I knew there was a madness about when a penthouse over looking the motor way in sandyford were 1M+ and
tax break 2 bed pokey apartments in midlands town were 350,000.
This is an excellent article …the credit growth in the economy should have been kicking off serious warning
signals …and we have to assume independent action by the regulators/central bank at this stage could
have stopped the oafs in government digging holes but either they did not have the right to dictate
or the balls to do so.
There’s a basic problem in calling the end of a bubble. McWilliams above in 1999 is saying “maybe 18 months” to a crash, but apart from a minor correction there were 6 or 7 years of rising prices still to go. Sensible people see a bubble and warn about it, but they’re not able to say when exactly it will burst. As long as it keeps inflating, less sensible (or less risk averse) people can profit from the bubble, so they help to inflate it.
Greenspan began dropping the interest rates in January 2001 and kept dropping them. The reason was to bailout Wall street banks from their losses over the dotcom crash. 9/11 had nothing to do with the interest rate drops, it just coincided with the policy already in place by the Greenspan Federal reserve. Also off balance sheet Special Purpose Vehicles (SPVs) were developed by the likes of Citibank to hide the dotcom trash (these were still lying around off balance sheet in 2008, probably offloaded to the American federal reserve by now). The interest rates were kept low for so long to facilitate the American invasion of Iraq (wars are real expensive)
Another factor that was not foreseen at the time was the effect of the Japanese carry trade, Japan dropped it’s interest rates to almost 0% in March 2001, as part of it’s policy of mercantilism to allow Japanese industrials to export into the United States. Japan also bought up American dollars and built up a foreign reserve surplus as did many other south east Asian countries. China also got in on the Japanese act and was the single the largest holder of American treasury debt until the Federal reserve started intervening in a major way in the last two years.
TheECB adopted a me also policy and shadowed the policies of the bank of Japan and Federal reserve and started dropping interest rates in May 2001, the public motivation at the time was to “help” the German and French economies, but the reality is they needed to sell their exports into the largest consumer market in the world, at the time this was the USA and an over-valued Euro would not help Germanys (and Irelands) export industry.
McWilliams did not anticipate the ‘Greenspan put’ and most economists like the ESRI and the population as a whole expected the boom was over by 2000, the memories of the 80s and early 90s were still fresh in Irish peoples minds. If you were in the dotcom sector you definitely felt the recession and possibly your wages fell for a few years after despite the boom.
The effects of monetary inflation of the 90s were largely hidden by the global outsourcing boom of the 80s/90s (Ireland being a major beneficiary) and the collapse of the Soviet Union also meant that oil prices fell as industry collapsed there and created a glut of supply on the world market. (The collapse in oil prices led to the first gulf war in 1990). The inflation of the 90’s fed the FIRE (Finance, Insurance, Real Estate) economy.
Also ‘creative financing’ (I would say fraudulent) through securitisation and derivatives started to take off in Ireland. Interestingly securitisation started here in the 90s (Peter Sutherland moved from AIB to Goldman Sachs about this time, coincidence, or not…?)
Securitisation spawned various derivative products which further kept the demand for mortgages high and kept money (liquidity) flooding into the property market which drove property prices higher and drove a speculative frenzy, which was aided and abetted by governments worldwide.
In Ireland’s case this extra liquidity, was further fuelled by tax breaks as the administration of the day thought it had found the goose that laid the golden egg. Most the economists trained in econometrics bought into the new paradigm, derivatives would spread the risk, and the rating agencies with their models and fees kept the confidence game going.
So called economists like Dan McLaughlin, Austin Hughes, Marc Coleman and other property shills engaged in magical thinking and explained the boom through ‘the fundamentals’ (young educated population, immigration, rising wages, low interest rates because we’re in the EURO etc.), the country would boom forever and experience no more than a ‘soft landing’, they ignored the elephant in the room.
One person who seems to have called the beginning of the depression right is Fred Harrison who called it in 2005.
Here he is talking to Michael Hudson.
Interestingly one central banker who was paying attention was the governor of the Bank of Lebanon, Riad Salameh who previously worked for Merrill Lynch.
