Honohan's Oireachtas Committee appearance: 26 Nov 14

The Irish Property Bubble Sell, Buy or Rent?
#1

So, how long do we think Honohan will be into his Oireachtas Committee appearance tomorrow before the media spin is that “he’s rowing back”?

Just as interestingly, which Committee member will grandstand and disgrace themselves the most with nonsense questions about “representing First Time Buyers” along the lines of:
“Johnny & Mary need to get a huge mortgage to get on the ladder - why are you holding them back from taking out this huge unsustainable mortgage at double average european interest rates? Why, Patrick? Why?? Won’t someone please think of the children?”
etc etc etc…
:sick:

Am I alone in thinking that this is a big moment tomorrow?
Clearly he’s not going to definitively say anything - since it’s still before the end of the consultation stage - but I’d really appreciate a balls-out, tough stance with a lot of data to back up his points.
If we don’t get that, and if we get a tepid performance where he looks like he’s actually going to row back - then it’s time to abandon all hope as we watch property “recover” to the heights of 2007… before falling spectacularly again years later in a second fall that “nobody saw coming”.
XX

Even if he could just find a way to play the Committee the clip of (Ulster Bank) Jim Brown’s performance in front of said same Committee recently - and point out that this is exactly why Ireland needs the proposals. I’d be happy with that.
8)

#2

Maybe a bunch of Pinsters who are off work tomorrow could stand outside and cheer him as he arrives!
Along with supportive placards… I’d pay good money to see that.
:smiley:

#3

Honohan is the gobshite who said the Anglo debts was manageable.

He also conspired with Noonan to ensure the illegal promissory notes were converted into state debts before they could be challenged in the courts.

He also agreed with the banks that legal letters were counted as restructuring efforts.

He is the eejit who maintained a “rabbit caught in the headlights” approach to the mortgage arrears.

And to top it off, he refers to a bunch of zombie banks as pillar banks.

He deserves to be fucking stoned - not cheered.

#4

A lot of that is true. Absolutely. But right now - for whatever reason (ECB pressure etc) - he is our best hope to bring in the CBI proposals that might start to limit the banks ability to totally gorge on property again in the next 3 to 5 years.

#5

I would cheer Honohan so far. I don’t know if tomorrow will be a big reveal of anything but these LTV and LTI measures are a bold intervention that have as much of a chance of saving the market from itself as damning it to another fall. I wouldn’t try to compare him to perfection. I compare him to Patrick Neary. Now that’s a man I would consider throwing a stone at. I often imagine Neary playing golf, eating a fine meal or popping off on holiday, always surrounded by sympathetic people never mentioning that he was paid to lifeguard the swimming pool in which so many people drowned.

I wouldn’t even mind if the CB measures were watered down a bit - before being brought to full strength within 5 years. They are a bit of a kick in the face to FTBs who have been saving hard.

As long as Honohan delivers something meaningful with LTV and LTI to protect the banks from themselves he will have my support.

#6

It may be true, but what’s important as always, is the context. Typically ignored. Honohan is the “fucking eejit” who stepped into the breach and acted in the best interests of the country as best he could humanly judge. And he is damn capable. Of course, what was done 1997-2002, 2002-2007 and 2007-2011 by the real fucking eejits in this country i.e. the voters - needed to be dealt with. It had to be. Of course you had lines of armchair geniuses with great solutions. But actually, they were probably shite solutions. Well good for the person proposing them, usually. Whereas, a much better principle is to do least harm and run least risk. No doubt Honohan did that. So the man is a fucking hero. Not only that, but he has to deal with gobshites like Ming and that arsehole from cork who trumpets collective amnesia and stoic marches, and the rest of the populists… We see tomorrow he is going to do his best to stand up for lower property prices and sanity. As I said, the man is a hero, relatively speaking.

#7

+1
Context is the key.
That’s why I said a lot of it is true - yes, he did do a lot of those things. But I don’t think he’s an idiot. He did inherit an insane asylum from Neary, and I think he has done a reasonable job with the hand he was dealt.
As I said in the earlier post, for whatever reason he is doing this - either his own judgement, or a push from Europe - I want to see him get in there and defend the position. Ireland needs him to do this.

#8

You obviously have no idea who Honohan works for.

He doesn’t have the power to make decisions for the good of the country.

As head of the CBI he’s a member of the governing council of the ECB - their responsibilities are:
ecb.europa.eu/ecb/orga/deci … ex.en.html

Some fucking hero!

#9

@Ftber, I don’t either. I put it in inverted commas to indicate him being called this by others.

@wgu, I disagree that the ecb is the bogeyman here, far from it, that’s the point. The market innovations that allowed us transfer wealth from the future 1997-2007 were made possible by the unmistakable ideology of FF/PD. If we were anyway uncomfortable about these innovations that allowed us transfer wealth from the future to such a huge extent, we had multiple opportunities at the poll booth to indicate we had a problem with the philosphies of these parties and their implications. Anyway this agenda of finger pointing and blaming outside entities like the ecb and greedy, money-mad, dishonest, hook-nosed bankers and complicit media and so on and so on is our present problem in my view and it’s a much bigger one than the foregoing. Same same but different.

#10

He’ll be walking in hours after new CSO figures. Interesting times

#11

Thanks ‘roc’. I agree with you, I knew from your inverted commas that it wasn’t your opinion.

It’s always going to cause conflicting opinions when the EU/ECB is brought up, as I don’t think that it’s a black & white situation.
For example it could be argued that european banking policy wasn’t exactly on the ball when it left the German banks loan out German savings to peripheral countries banks thus fuelling the asset bubble from early 00’s.
It could probably also be argued that the ECB enforcing LTV/LTI proposals through Honohan will help Ireland immensely - reducing bank exposure, protecting Ireland’s cost base, and preventing a new generation of over-exposed FTBs. So they can be both the bogeyman and the saviour - depending on actions and timing.
The interesting thing about the LTV/LTI proposals is that they are not really about protecting buyers from enormous mortgages at all - that’s simply a byproduct of trying to prevent the banks from over-exposing themselves to future risk.

Equally while I’m supportive of Honohan bringing in these proposals - I’d have much rathered he bring them in during 2011/2012 when nobody would have objected at all… and we wouldn’t have had the undeniable bubble we had through late 2013 up until now. :wink:

But also,… none of these actions would have been effective on their own in 2011/2012, if they had come in.
The amount of, in my opinion, state interference in the market (through NAMA, inaction on held landbanks, inaction through the government “pillar banks” on 125,000 mortgages in default) all contributes to constraining supply. To the point where a country with the oft-quoted population of Greater Manchester, and one of the lowest population densities in Europe, simply can’t have a proper honest supply/demand curve in our housing market. And in reality we really have a cluster of separate regional housing markets lumped together on the island, that perform quite differently on a lot of levels.

And finally… we have a population that just takes this - time & time again. Because we are the population that creates this - time & time again. Politicians get voted in here due to their funerals per week quotient, or worse because they put themselves forward as “the voice of the ordinary man/outsider/insert single issue here”, or simply because they are the incumbents son/daughter/cousin etc. Or teachers that run for election - we pay them to have 4 months holidays a year - they have to do something.

We have bankers who know they can’t lose - but we’re not the only country that has that. It’s widespread.
A part of me fears that this is the model for the US/UK/Ireland going forward. Cyclical economic/asset boom and busts, of ever increasing frequency and ever increasing amplitude - so that in the age of globalisation, funds can just be moved from each boom to the most recent bust; ride the wave to boom, then take the profit and find the next bust again to ride upwards.
It’s depressing when I think about it.
That’s all off-topic a bit - I probably shouldn’t have had that last beer… XD

#12

Right on cue…IT’s main headline tomorrow
‘Thousands will not be able to buy homes, says report’
broadsheet.ie/

edit- it’s not directly related to the proposed CB rules, but the boyos tomorrow will use it for that

#13

Unbelievable.
Why not: “Thousands will not be indebted beyond their means”
But of course not.

#14

If someone was to point a gun to my head & tell me to pick leaving the financial control of the country to a bunch of strangers in Frankfurt, or the good people within 1km of Leinster House; guess which group I’d choose ?

I’m not happy about my choice; but only a gobshite keeps repeating the same policy, year after year, losing every single time; especially when they can look across at their neighbor who has dug themselves out of losing a war that devastated their country beyond anything you or I can imagine, & then raised that country up to what Germany is today !

Prudence isn’t something that Irish Parish pump politicians understand; & while we, the voters, continue to vote for the pump, they never will.

#15

There are two problems with that argument:

  1. The ECB is supposed to be a pan European central bank - not a German one.
  2. The ECB was in charge of our economy since we joined the Euro in 2002.

On the first, since the creation of the Euro, the ECB has been in charge of interest rates and the currency, so they should also have been bank regulators and Lender Of Last Resort (LOLR). Unfortunately, the Euro was a currency union without a political union - so Ireland inherited German interest rates (and credit rating - remember when Ireland was AAA!) for borrowing and had Irish politicians for spending - and even worse, Irish bank regulation. To top it all off, when the SHTF we were told the Irish Central Bank was the LOLR. The whole thing was fucked from the get go. Getting German regulation now, for their clusterfuck, is a bit rich. The whole point of the ECB being pan-European was to share the wealth and share the pain - but that required full political integration - but instead it’s become a German institution and political tool. That shit’s gonna bite them on the ass.

On the second, as above, the ECB/Germans have been in charge of our economy since 2002! They were the ones setting the interest rate - the fact is it suited them to have low interest rates for German reunification. Once our economy got the “Celtic Tiger” sobriquet alarm bells must have been ringing, as being named after the Asian Tiger, and how that turned out, was surely indicative of massive capital inflows seeking yield - which guarantees a housing bubble and the inevitable banking collapse!

I have no faith in Irish politicians to do the right thing - but I have no faith in European/German central bankers to do the right thing either - especially when their German political masters have shown themselves to be German first, European second.

As Noonan has adequately shown over the last two years, with his CGT exemption scam, Irish politicians are well able to screw things up even with the adults in charge. The Germans finally realised what he was up to and the 20% rule is the ECB slapping him down. Honohan is merely the messenger boy for his German masters. Noonan, and his lapdog Brian Hayes, running around spouting shite about mortgage insurance and fixed rate mortgages is them trying to stop the skittish FTB horses from bolting - and it just goes to show how little control Irish politicians have really, but it also shows how little the Germans care for economic management of the peripheries. Noonan overcooked the goose with his 20%+ annual price rises, otherwise the Germans would have not being interested in how gombeen man was screwing his economy again.

Economic, but not political, union is a fucking disaster - whether it’s less, or more of a disaster than Paddy running his own affairs is open to debate - but the €64Billion bill the ECB handed Ireland because they refused to be LOLR makes me pissed off - because it was their fucking credit card it was ran up on.

#16

We muat recognise that the german’s (and other central european mature economies) sending liquidity and capital into the irish housing market was due to a fundamental underlying problem. That was their pension timebomb.

For all the ‘change’, hand wringing and ‘reform’ of the last 8 years that underlying issue is still there.

#17

On top of their pension time bomb, a good proportion of the German insurance industry wil be bust if current low interest rate regime is maintained until 2020. Negative spreads like those experienced in Japan can be a real pain.

#18

There is more to ‘control’ of an economy than interest rates. It is merely one variable. One variable that no doubt is ‘constrained’ towards the greater good since 2002, and that must be worked around.

Taking a simple Keynesian analysis, the other variables that matter in terms of ‘control’ are level of savings, liquidity preference, level of consumption, and level of investment.

If you want to make something happen in the economy, or ‘control’ it, you promote policy that affects these other variables.

So we saw what was done in that regard to affect these other variables.

But perhaps the key thing that was done, and that democratic consent was overwhelmingly in favour of, was the creation and hyper-development of legal privilege, ownership rights, licenses, subsidies and tax-breaks, for the private sector, to exploit resources, create new markets, strengthen existing ones, create barriers to new market entrants, towards maximising the rents and profits that could be generated. (Never mind patently light-touch-crony regulation).

This was what FF/PD offered. We were in charge. We were in control. We chose…

What were they? Around 2.5% in 2003. 3.0-3.5% in 2006. They briefly dropped as low as 2.0 in mid 2003…

But let’s take an ECB interest rate of 2.25%. Add on .75% for Irish bank profit. So, 3.0%. Now, if someone was to buy a house for 250,000 euro - how much would they have to pay each month purely for the cost of the money i.e. the interest? I make it 625 euro a month…

Is that not a high enough rate to pay? What is it compared to water rates or property rates etc?

Importantly, there is more to the european integration project than what the economic pundits on twitter and elsewhere bang on about continually. To summarise, european integration is primarily about a more civilised social order among the nations of the EU. And charging usurious rates, and expecting the very worst of a group of citizens, is not civilised.

Being civilised means being treated like adults, and we were. What we need to do now, is face up to ourselves and the outcomes of our actions, like adults.

When property prices dropped, what was the total “wealth destruction”? A lot more than 64 billion.

But the key thing is the mechanism. The reason so much wealth suddenly disappeared, is that the institutions and assumptions on which was founded the high probability in financial reasoning terms, that in the future our children would probably take on Japanese type 100 year mortgages, suddenly crumbled.

Thus, the mechanisms of *wealth transfer from the future to the present *were cocked up.

What was the Irish reaction, with near complete democratic consent? It was the [twin-pronged* NAMA/Guarantee *cover-up * (https://www.independent.ie/opinion/analysis/merger-of-aib-and-boi-is-the-only-way-to-save-sector-26484004.html) of “solvency” implications (in effect, high property prices are based on the assumption that others to come will pay an even higher price in the future)… We all nodded vigorously along to the institutional protestations that the issues related to “liquidity” only, when any fool could clearly see what was in front of their eyes, implications and all.

My point being, if our children are to have low property prices, which allow them freedom to live and grow, we must pay for it today. We must pay back all we tried (and succeeded) to take from them during the period 1997-2007.

That is what “austerity” is in my view. All of these bills and dues, such as the ECB one (which came on the foot of our guarantee, which support (ECB) was another insidious aspect of its intent). No doubt, we can go out and protest that we want out cake today, and we will eat it, too. That’s what the current protests are about at the end of the day if you dig down a bit. We get riled and ‘political’ when there is an immediate and perceptible hit to our own pocket and nobody else’s. We get riled and ‘political’ when someone says, “No, you cannot live at the expense of future generations anymore”.

So, low property prices means we have a lot of difficult bills and reckonings to face up to and deal with. While high property prices mean these reckonings disappear, or at least, to be paid for slowly, in the future, through high rents and huge mortgages, and all the repercussions that echo through the whole economic and social fabric, right down to individual freedom, and mode of soul.

*** twin-pronged as in the guarantee was undertaken fully in the consciousness of a Nama-like entity to come soon, as my link dated one week after the guarantee attests to.**

Final point I’d like to make is on this as the above is a catch phrase continually trotted out with the current populism and blamegaming etc.

What I want to know is how fucking important is it really, relatively? Because here’s what I think is important - social justice, freedom, human rights etc.

So when we ‘won’ our ‘sovereignty’ in 1922, how did we improve on these scores? Or did we badly regress? How were the rights of women, homosexuals, and other minorities affected? What did we undertake in the name of oppression and pure evil, for example, the industrial schools, laundries? How did we conduct ourselves in the face of the most unmistakeable evil let loose on the world during the time of fascism and Hitler, etc?

So… what do these fools shouting for ‘sovereignty’ really want to do with it this time around? Do they really want to see properly to the future? Or, are they really just concerned with what they have themselves, today? (Multinationals kept here with tax breaks, paying them high wages, low taxation, and living in high priced houses, as per 1997-2007. No matter the harm caused to others. I’m all right, Jack, etc.)

But actually, it is worse than that. For example, I cannot help but notice recently that countries like Greece, Spain, Ireland rank as highly antisemitic, relatively speaking. e.g. global100.adl.org/#country/ireland IMO there seems to be something a lot more base, dark and complex than mere stupidity, pervading the mass more and more. Having studied a lot of history, I am really fucking getting bowled over by the parallels these days.

Bring on Sinn Fein, great!

#19

WTF???

Where did I bang on about sovereignty and controlling our own destiny?

#20

You didn’t. I said I wanted to make a point about it, as it ‘is a catch phrase continually trotted out with the current populism and blamegaming’. i.e. the phrase so often goes along with what you were representing, that to complete the post I included it. I should have differentiated from the other quotes. I intended to put your name into the other snippets but forgot or neglected to. Sorry about that.