That’s the first time I’ve ever heard a serious commentator talk about Ireland falling into a depression.
Oh sweet fook…
I really love the last bit
“And the lesson of Ireland is that you really, really don’t want to put yourself in a position where you have to punish your economy in order to save your banks.”
“Ireland became in effect a cool, snake-free version of coastal Florida.”
Oh, if only Paul. If only.
Surely the worst outlook for the world economy is that the well armed nations will go broke, indulge in protectionism and default on their debts. This in turn will lead to a break down in international commerce, political turmoil in many countries and increased poverty and starvation. Simultaneously it wil cause a huge drop in the living standards of western economies as they struggle to be self sufficient. They may also find it very difficult to buy resources/raw materials as the Chinese now hold all the cash and their credit is bad. Huge international tensions arise as Eastern Europe freezes and european and USA factories go silent. China is painted as the bad guy for not loaning us more money and all sorts of other selective human rights abuses and we all go off to war. Loads of people die with the possibility of a global nuclear winter (i.e., everybody dies). Democracy may also be threatened by mass poverty and social unrest in western countries. Going “Irish” is the least of the USA’s or the World’s worries.
That’s one of the unmentionables!
Plus, it’s the New York Times, having a lash at Ireland on a slow news day is their go to story at the minute and Krugman ain’t exactly short of a word…
In addition, war is an economic benefit, particularly to a keynsian…
If fairness though - they could try and frighten their readers with the Icelandic bogeyman - but that’s DefCon*1 - shotguns, beans and krugerrands time. Irish stories are DefCon4 at the moment - be good, eat up your greens or else you could turn out like the ugly kid down the road.
I’m guessing Russian stories will be DefCon3 (once great superpower gone to seed) and Chinese tales of woe will be DefCon2 (Shit! If the Chinese are fucked then who’s gonna lend us more money?)
*DefCon = The Defecation/Convulsion scale.
Iceland no one cares in the States.
Ireland, land of furry green Shamrocks and Leprachauns and begorrah… Stop the presses! The attitude the editorial staff on the NYT seem to have at the moment is depression / recession / Ireland flogs bog roll…
This is an ill-informed and ill-thought-out piece written by a guy who may be a household name (nevertheless quite wrong on occasions) but aparently no better informed than an average punter. The only thing he has going for him is the ‘argument from authority’ - a quite common fallacy in logical reasoning.
The economy is not being punished by the guarantee and the recapitalisation. There was a marginal rise in spread on guarantee (there is no guarantee it would not have happened anyway due to the extremely weak public finances so this may as well be post-hoc-ergo-propter-hoc) and other than that there is no immediate or medium term financial damage to the economy. The recapitalisation money is not being taken out of current tax intake and the increases - which are punishing the economy on the short-to-medium term and may run the country into the ground like it did in 80’s. The damage that is being inflicted by tax rises is a direct consequence of having strong militant unions and a government without balls to tackle them - and this is not a state of affairs that Krugman and his NYT bosses would criticize. Hence the populist anti-banks rhetorics.
there is some validity to what he states…
roll the clock back to 2001
after September 11th growth stumbled globally, there was an exception - Ireland
idiots at Anglo were tapping easy cash on global markets and dispensing it in wheel barrows to any gombeen with a plot of land and political connections.
Call it what you will but it equated to what we can now call ‘a stimulus package’
We have had our ‘stimulus package’ and it has bankrupted us.
thus reinforcing the Ireland being ‘read as a prediction for the world economy’
things are about to get alot more interesting…
for St Patrick banishing the snake
Krugman’s analysis is a bit OTT and full of the old hyperbole in some instances. The article isn’t balanced to boot, but then again its very hard to come across balanced reporting or opinion these days.
At least one poster has balanced out Krugman’s opinions somewhat. If only them ‘militant’ unions representing wage earners would go away then all the affects of the economic downturn wouldn’t be occuring. The gaurantees, the bail-out money, the 10’s billions of developer loans (and other shite loans) wouldn’t be transferred to NAMA, and I suppose the housing bubble wouldn’t have occured. All the monies for these programs come from thin air. There is a free lunch, afterall.
Bad, bad wage earners. tsk, tsk, tsk. Maybe a slave economy is what we need.
IrishEconomy.ie has some good comments on Krugman’s piece.
As Brian Lucey says " if [Krugman] weighs in with his views, and they are shallow but accurate, whats not to like? ".
No, absolutely not. We need more posturing of the unions and waffle of Jack O’Connors because it is very well known that the real wages are a functions of their chest-thumping. We need the public sector pay bill to triple again in the next 4-5 years! No point leaving the ‘wage earners’ without spending power, right?
What evidence do you have that the public sector pay bill ‘tripled’ and over what period of time?
Do you think someone who reads irisheconomy.ie (if only as quick prep) tends to be better or more poorly informed than the average punter?
That fallacy would only be evident if he based his argument on his position or experience. But where in the article does he invite us to give greater credence to his argument because of his position or experience?
You’re right to say that failure to reduce public sector pay, together with a fall in tax revenues, produces tax increases.
But I don’t think you can pin all the blame for our present and future tax increases (and associated deflationary effects) on that alone, and ignore the extraordinary measures taken to save the banks.
For a start, bank recapitalisation requires an up-front cash call. Even funded immediately by new debt rather than by tax revenues, Ricardian equivalence raises its head (en.wikipedia.org/wiki/Ricardian_equivalence)
We all know we’ll be paying for the banks’ mess well into the future, and this knowledge depresses investment and general economic activity. If Ireland defaults, we’ll never know just how much of the failure was due to unaffordable public spending, and how much was down to the massive expenditure (and tax rises + deflationary effect) brought about by the methods chosen to save the guaranteed banks. Default or not, the bank rescue is costing a staggering amount of resources, and is already severely affecting the rest of the economy and society. Krugman, writing for a popular audience, is correct to draw attention to this: the rest of the world might as well learn from our mistakes or, as an Irishman once sang, “tonight, thank God it’s them instead of you”.
I got a miraculous insight into the crystal ball called ‘the government budget’ which is in the public domain and which clearly shows the public sector wage tripling since 2002.
He is not but the people quoting him in this particular instance are quoting him just because he’s Paul Krugman. Otherwise there is nothing in his article that is of any added value and plus it has at least one wrong conclusion.
But it is not funded by new debt. The 7.5b did not come out of debt and so far other than the 7.5b into AIB and BOI the guarantee cost zilch. And that 7.5b may or may not be repaid ever. And about depressing the markets - if my memory serves me well, the shares went up significantly after the recapitalisation.