Morgan Kellys latest pronouncement 06/08/11

From the RTE Site, since this was part of a lecture given in Kilkenny maybe a case of putting the Cats amongst the pigeons
He has form this man

The link to the audio of the lecture is here: … t-lecture/

I guess he’s not saying anything new here on the debt, that hasn’t been tossed around on the pin for the last 1 year+

I’d say he is a pinister :wink:

Government growth projections are also wrong and continually being revised downwards.

It’s something I find a little disturbing about some of our current crop of economists (some of whom I respect greatly for their other work) - they work from the current position in little more than an accountancy exercise. There is no contingency. There is no range of outcomes. Government projections (which are always about best outcomes) are used as a base. It is not forecasting, it is accurate sums.

I agree YM. Prediction is not an exact science and will never be so. However, it may be possible to give a range of economic predictions, ranging from a worst case scenario to a best case scenario with a probability of these occurring. This would be a far more useful tool than the usual drival that is fed to us at present.

**Morgan Kelly: We are very far from the bottom of the property market ** … um=twitter

the ‘stopped clock’ brigade have been saying this for 4 years now, makes ya wonder who the stopped clocks actually are!

5 Reasons Why Ireland Should Follow Greece and Default → … d-default/

Actually I think the problem is more basic than that. The reason why the DoF and the Irish economists are usually so wrong (and reduced to glorified bookkeeping) is that they refuse to recognize that Ireland does not have a normal western economy. That its basically Argentina plus Singapore plus the Cayman Islands and the three economies only partially intersect. So the guys in the DoF use their Treasury and ECB and OECD/IMF/BIS econometric models which were developed and fine tuned for normal western small mixed economies, put in the CSO inputs, and then there is surprise that the actually real world numbers not only widely diverge from the models but often move counter to what the models predict.

My guess is that using South American econometric models for the core Irish economy would produce far more accurate results but that would raise a whole bunch of home truths about both the Irish economy and Irish state that would be deeply unpalatable to both the DoF and the Irish academic economists. Yes guys, its not a shiny northern European small economy. Its little more than a banana republic. And using more suitable econometric models from South America I think would prove it.

Could someone here do that?

Well, as you say previously, a good chunk of it is a banana republic. Using solely South American models would likely give similarly wrong answers, but, as you say, segmenting and modelling the three parts of the economy (Hibernia omnes est divisia in partes tres?) might give a ‘better’ range of results?

Actually it would give pretty accurate results for the numbers the DoF really need for accurate projections. The Singapore part of the economy, the MNC entrepot economy, has inputs in only a few very well defined spots, employment, tax revenue, the small supplier sector. The model could be adjusted accordingly. The IFSC sector is completely decoupled and its only impact was to completely gut the financial regulatory system. Which does not impact the models we are interested in except when it bankrupts one whole part of the finance sector in the macro system.

The model would have to take into account that the domestic economy mostly consists of essentially static sector monopolies / semi monopolies and with direct and indirect government expenditure being by far the largest input into the economy. Very different from the traditional open / mixed economy econometric models that have dominated the scene since the 1970’s.

Just listening to the recording now. Morgan even cracks a few jokes. He’s talking about the first report on the banking crises (from Honahan I think - i.e. the one before Nyberg) which he sums up as simply stating “mistakes were made”. He goes on to say that “this is a gramatical construct known as the past exhonerative tense”. That got a laugh from the crowd, as did some references to Life of Brian at the beginning.

He lays the blame for our economic demise squarely at the senior management of BOI and AIB. They should have told the government that Anglo was out of control, rather than trying to follow them. He admits that the regulatory environment was incompetent, but doesn’t really think the blame lies mainly there.

He also says that the 90’s boom was bad news for politicians here as they no longer had the leverage they used to by being able to offer jobs for the boys. Now that we had full employment, being able to say “don’t worry, I’ll get your son into the post office” no longer had the same currency. But once the property boom kicked off in ernest in 2000, it meant the politicians were back in the game as planning permission was a matter of paying the right amount of money to the right local counciller.

What a silly phrase. So Morgan Kelly (the stopped clock) was right (once) about the housing bubble bursting, and he is right (twice) about the government debt being bigger than expected due to bank losses. They agree with MK then? Presumably, they said nothing of substance against his points?

Id like to see zoning disappear in this country and planning done a either a case by case basis or given by default bar an objection by neighbours or some similiar. Ive seen so many people get refused build houses or get extensions while developers are allowed plonk whatever they want wherever they want.

I saw a developer in rural wexford get planning permission for a housing estate in a rural area (not even a village it had a pub with a shop attached thats all it had) with nothing but farms around… other people couldnt get planning to build more modern houses in place of famine cottages. Something seriously wrong there.

Wicklow is a fine example of how backward things can get in Ireland. Shockingly parochial and very unhealthy.

Morgan Kelly is right, a huge amount of this stems from the politicians…

Interesting view. I would actually see it as being the exact opposite of an accountancy exercise, although I agree with the substance of your point. Accountants look at facts as they are, and make estimates based on a conservative projection based on facts. So for an accountant’s projection they would look at the factors which will make the economy better, worse or stay the same. They will then quantify each of these factors (e.g. government austerity will reduce GDP by X% because they are mainly in the capital budget cuts and household income tax increases, offset partially by the MNC sector increasing exports by Y% because of an increase in the numbers of MNCs and the levels of their investment over the course of 2010, there will be no change in agriculture because that has stayed the same for most of the last few years, etc etc).

To be honest, I may be overly pessimistic, but the only possible positive factor is MNC exports. I suspect that 2010 might have been a bumper year for these exports and they will either go down in 2011 or else stay at the same level. So at best this is a neutral factor. The cuts are real (the budget 2011 cuts are only starting to hit home as people change behaviour and the fear of budget 2012 has a depressant effect) and they are negative, and the jobs/domestic economy is on a slightly downward trajectory. There is little chance of monetary stimulus and private sector credit continues to shrink.

Thus, a proper accountant’s (or rather auditor’s) assessment of growth projections would include details of where the growth is to come from. In government projections the growth is to come from one of four possible places:

  1. multinational export sector growing indefinately;
  2. a new housing bubble lead by NAMA;
  3. something is bound to turn up (e.g. EU to the rescue or uranium found in the wicklow mountains); or
  4. magicked out of thin air.

If we at least had some explanatory memorandum which said I [insert economist] believe that the economy will grow by X% in 2012 because the following things will be different (1, 2, 3, etc) and the net outcome of this is an increase in GDP by €Xbn.

Because all other things being equal, €4bn worth of tax increases or decreased spending will result in approximately 2.5% downward pressure on the economy (I know I haven’t adjusted for the multiplier and I know that as a lot of government spending is wasteful, the multiplier effect could be less than 1:1. However, given the preference for capital budge cuts and private individual tax increases, a multiplier effect above 1:1 is possible).

Ireland is full of uranium, you know why we have such high levels of radon gas? Because its what uranium releases as it rots.

Here is what we do when we find resources (also bear in mind the oil off Mayo): … reland.htm … onegal.pdf … _1_1983713

Fine. Pirate treasure found off the cost of Kerry.