I am getting the willies wrt this economy,
I think the wind has changed these last few weeks and that we are looking at a very steep slide downwards. factors include:
Wipeout of domestic(and commercial) building activity, and its impact on GDP
The fact our positive GDP relied so much on the now evaporating construction sector
The credit crunch and its impact on future investment
rising unemployment, the figures out today are alarming
Reliance on low Corp tax and hence Multi-nationals for employment.(re-dell)
a inept political landscape incapable of tackling problems.
rising inflation (5%!)
Drastically reduced tax take.
Negative equity in bucket loads (nobody spending money)
Its all bad news, and bad in a FUNDAMENTAL way, i.e. our fundamentals
For the last ten years, it looks like our economy has been based on spending and debt, it is going to take a very long time to pay the piper.
Honestly, really worried about the next 5-10 years.
You know all the “Celtic Tiger” crap? That is what it was/is.
It takes a quite considerable period of time and persistant mismanagement to put a national economy into a position where it is exposed to the sort of recession now beginning to unfold in Ireland. All those things that have been held up over the recent past (at least 5 years), including massive immmigration inflows, extremely low unemployment, massive growth in consumption etc. (oh, and rapidaly inflation house prices) were all warning lights that were spun into symbols of economic superiority. What is beginning to unfold now has been building over the last 10 years not the last 10 months - although I will bet a penny to a pound that every newpaper, media outlet and “leading economist” will say it is the latter.
About two years ago in the wee hours over a bottle of scotch I had one of those drunken debates you tend to have with a brother in law. He claimed how the rest of the world couldn’t handle how successful Ireland was and how Ireland was showing the world how to manage economic affairs etc. etc.
Of course, I took the opposite view and said all the things he said were evidence of success were symptoms of increasing malady and Ireland was one sick economy (despite appearances).
waffling on about this being screwed or that falling in price on a forum is all well and good, but stand up and look outside the window.
Looking at the size and ferocity of the storm i see coming is scary.
We at our firm (Design consulatants) are seeing a global slowdown in work and our office is looking lazier every day. i am hearing of people who have been contracting for the last 20 years, failing to get work in the last six months.
my friends are not able to sell thier houses (negative equity is anchoring them, so much for the up side)
Inflation is killing my shopping bills, as is the cost of living here.
The new reality of a country in ressesion is here, i remember the late 80’s and it was not fun.
whilst i can see and appreciate the forces at work here,
most of my native irish workmates are blinkerd to the coming storm.
Don’t forget the bloated public service and the costs of their pensions to Joe Public. Granted that’s further out than the 5-10 years you’re worried about but still…
Have had many a similar conversation with friends from home aver the last 3 - 4 years. The responses were a) you are jealous because you have missed out on the “boom” b) When did I suddenly become an economist and c) I was all doom and gloom.
Interestingly, having a conversation with a friend last week, it was c) that came up. Apparently, I caused the Tiger to stall (there is little realisation of the impending implosion) - well, me an my ilk with our gloomy talking.
:We probably did have a short, mild recession in 2001 though. Then along came Mr Greenspan and his Great Liquidity Splurge, which in turn re-ignited our own property bubble (which had stalled in mid-2001) and sent it into crazy territory. We’ve been riding that bubble ever since…
Which means that this time we have to take the pain of the bursting bubble and the pain we dodged in 2001 and the pain of recession in our two biggest trading partners (US/UK) and adverse currency movements and global inflationary pressures and a credit crunch.
In truth, it was the ECB response in 2001/2002 that pushed the Irish bubble beyond the point of no return. And that was an entirely appropriate policy response to the issues facing Germany and France at the time. Take note, it is not the Eurozone as a whole that is in trouble, just Ireland (plus Spain in particular). It was Ireland’s mistake to be in the Euro.
It was IFSRA’s, the Central Bank’s and the Dept of Finance’s failure to regulate the banks sufficiently and clamp down on over aggressive lending. And of course FF/PD’s failure to ensure IFSRA, etc, did their job properly.
Like many here I have been gloomy for some time but what has surprised me was the length of time that it took for the country to reach this point, given that the economy was essentially a borrow-and-spend model. Moreover, it is extremely unfortunate that the the homegrown problems are being compounded by multiple external ones, not least of all the credit crunch, a relatively strong currency and slowdowns in our major trading partners.
However, just to play devil’s advocate, now that the economy is really beginning to show signs of stress, what can we pin our hopes on? Is there any cause for optimism?
Had a very similar conversation last December. Former work colleague was completely convinced that house prices were not falling. Pointed out that price drops for new developments were front page news that day. He proceeded that say that these were ramblings of “bitter” people, and that if there really were any economic problems, then us pessimists were responsible. I decided it was pointless to continue that conversation any further…
Regulating a financial system that consists of so many moving parts is a formidable task; and one not made easier by the fact that the regulators are never the smartest guys in the room.
We’re not aiming for brilliance here - Is it a good idea to allow ireland to have net borrowing growing 1/3 of its GDP per year? Or does that have a ring of unsustainable about it.
Under our current political class, on both sides of the house? Slim to none, unfortunately. There’s little evidence that anyone in the Dáil actually understands the situation we are in, how we got here, the mistakes we made. So how can we expect them to fix a problem they created (through sheer bumbling incompetence, lack of knowledge and lack of vision) and don’t have the wit to diagnose correctly?
There’s a load of Pinsters who could do an excellent job to turn this around. But none of us are TDs
To be honest I was not expecting the economy to be rescued by the people who helped f**k it up in the first place.
On another thread Pill suggested that our low corporate tax rate would probably continue to attract companies and hence jobs, but I cannot imagine that this could offset the economic headwinds facing the country.
The market is a wonderful micro-optimizer, but a crap macro-optimizer.
It’s quite easy to limit the amounts which can be borrowed by certain parts of the economy. Likewise it’s quite easy to limit the rewards for borrowing for speculation.
