Very true. Most politicians are pro-cyclical in a boom and counter-cyclical in a recession. Keynesian counter-cyclical economics is discredited for that very reason: because you fail to deflate your economy during booms, while reflating your economy during recessions, you end up with much higher inflation than would be the case if you actually followed Keynes’s prescription. It’s like Communism - makes sense on paper, but gets screwed up whenever humans get near it.
Ireland is different, we’re just extremely pro-cyclical, period. McCreevynomics: “If I don’t got it, I don’t spend it”. So you end up with politicians amplifying the economic cycle: booms get boomier and busts get bustier. We had high inflation throughout most of our boom - a lot higher than the rest of Europe. We will now have severe disinflation/deflation throughout our bust - a lot more severe than our European partners. It’s not by choice - it’s because we were so extremely pro-cyclical during our boom, that our public finances are so out of whack that international lenders will not allow us to adopt borrowing-led reflation now.
That has been perfectly obvious to many here for some time now.
And the funniest thing about the interview was when McDowell broken down what he was saying. “So you want us to go to the German taxpayers and ask them to bail us out. Come on David” (he may have not said bail us out but that’s a paraphrase until I hear the podcast and correct it)
Django, as you see from the above, I didn’t bring the matter up, I was responding to the above comment.
You don’t get to shut down discussion or censor me by slapping on a “troll” tag. Tens of thousands of economists worldwide take my stance, and when the matter arises in debates, I will not take orders to withhold my views.
rock3r, you have proposed that the Keynsian method of deficit spending is the correct solution in Ireland which is to assume that:
we don’t have a structural deficit, so we don’t need to do something about it. Income will rise with the pump priming recovery and the budget will balance over the medium term. But what will the pump priming invest in? What is there that is productive that will build tax revenue?
we will get funding of the order of 120 bn over the next few years to pay for this. From where?
it won’t beggar our children for generations to come. This money will have to be paid back. The interest from it will approach 30% of GDP in four years time even at today’s bond prices. We will be borrowing to pay interest by that stage.
the stimulus won’t just evaporate out of the country fueling the tat and bling bubble. What excess inventories of goods and services do we have, other than housing and international services, that a stimulus package will soak up (that is, after all, the intention of a Keynsian stimulus).
it will work.
You have been asked to explain how each of these things will work, but have failed to address even one of them. Please do so. I am all ears.
For my own part, I think we will go bust before we can stimulate the economy enough to bring about a recovery. Dependent as we are on international exports of knowledge, we need the world economy to show signs of recovery before we attempt to march out to meet it. Until then, we should be keeping our powder dry and trying not to go bust.
McWilliams suggested that if Europe is serious about the Euro then Europe should bail out the PIGS (Portugal, Ireland, Greece, Spain).
If I were a French or German Taxpayer who had already given the Irish billions in structural funds, only to see them hang themselves with it, the last thing I’d want is to give the Irish more money.
Particularly after a decade of the Irish laughing at us because the Irish were so proud of their economic miracle.
As an Irish person I don’t think I could handle the shame of being bailed out by the French and Germans. I couldn’t look them in the eye.
Why don’t we just hand over the keys of the country and ask the French to govern us. How many times do we have to ask someone to bail us out before we recognise that we’re not actually capable of looking after ourselves. We need someone to dress us, feed us and wipe our asses.
Yeah. It’s gone far enough. Right, I’ll stick my neck out and say what I think the only solution that will actually work is - though it kills me to say it. And it will probably kill everyone else here to contemplate it!
… the government must assume full control of the price that property sells at. And commit to maintaining that control, and commit to increasing selling prices at a rate greater than inflation, for at least five years…
This cutting costs is a useless myopic view. It will actually make the crisis worse through engendering an international race to the bottom and consequent deflation spiral. Why isn’t this being discussed properly?
I will say however, that it’s obvious the current government incumbents are not the people to implement this solution. Moral hazard doesn’t even come close to describing it.
We could not implement it either through the current system that allowed us to reach this fucking situation. Moral hazard also.
We would have to follow the money (or the securities (mortgages) promised and the pay-checks garnered on the strength of these promises) and remove all interested parties from public life and public entitlement for at least as long as until housing eventually goes back to a fair price level.
And a fair price level is a level that enriches nobody for doing sod all work (or work lacking real value-added), and causes nobody to become a slave, promising to work to pay back not just the cost of a group of other people to build their house for them, but also to line the pockets of a bunch of useless gombeens of whatever flavour. And they come in many flavours and types.
Sure, many people were waiting to pick up a house for a reasonable price. However, the baby is going to go out with the bathwater at the rate we’re going.
… If house prices are rising at a rate slightly above inflation, then we will need to ensure that wages are rising at a rate even higher than the rate that houses are rising at. This is necessary if houses are to come to a fair price as above. Which must happen. Also, people will not put off buying a house if they are considering it. To prevent profiteering, rent rates will also have to be fixed.
So, in the solution scenario described, once house prices and wage rates and rent rates are fixed (relative to each other) legislatively as above, the challenge becomes attaining a productivity and profitability that relies on any factor excepting wage rates. eg. process, ideas, insights, exceptional communication of business propositions, customer service, identifying and taking advantage of opportunities, robots etc.
This puts the onus on all of us to put our shoulders (or brains and talent) to the wheels and get out of this crap… Fire at will!
Indeed, jmc, I found it a very thoughtful article compared to some of the ranting. Despite being British originated (the author is Niels Jensen of Absolute Return Partners based in London) the conclusions are less than euro-sceptic:
Of course, he could just be talking his book
edit: I might add that this was the likely outcome posited on the 'pin some time last year
sometimes i have to wonder - does ireland actually deserve a sovereign government? can’t we still be irish and have a central government? if we were merely a locality of europe and ran the EU the same way the USA is run (local and federal govt’s) would it be any worse than what we have right now?
what we have at the moment is similar to the original union states in the usa to a degree. would it save money to remove lots of government in favour of smaller local government? i don’t feel we would lose that much in steering the ship, the current skipper is fairly clueless anyway.
No wonder the FFers run the country everyone else is a bleedin’ nihilist. The fuckin’ inferiority complex of some people here is disgusting. Let Germany rule us? Children!
“Ooohhh we’re a European joke” you say. “So what!” says I “and how are your banks and investment houses, how are your jobless figures? What was that I read about hypo real sociodudah or what have you?..how many billion?”
UBS, FORTIS, Sweden, Finland, Iceland, UK, US all have or are going down the shite pipe
IRELAND IS NOT DIFFERENT or to paraphrase Tyler Durden “Listen up, Ireland. You are not special. You are not a beautiful or unique snowflake. You’re the same decaying Economy as everyone else.”
So enough with the defeatist talk it’s a pain in the bollix