Time for some home truths as residential wealth plummets - Dermot O’Leary -> independent.ie/business/iris … 33630.html
Hard to see anything in this that couldnt have been written a year ago; and for the most part its backward looking…
there’s a wealth recession in Ireland…really…as house prices plummet by 60% …oh wow…first time buyers are taking the brunt…you don’t say!!..and then the inevitable “comparison with Japan in the 1980s” is wheeled out…
he finally finally gets around to making a point, in the very last sentence; “Further European assistance in relation to the restructuring of the banking sector is required.”…but it could do with a bit of fleshing out.
If you ignore property “values” did wealth change that much over the last 20 years or so?
Anyone know where the LDR for the sector as a whole is roughly?
PTSB is 250%.
AIB is 165%.
EBS is 175%.
INBS and Anglo no longer have deposits, so I guess their ratio is infinity%.
well…it would be a pretty big ‘ignore’…
Somewhere in cyberspace (or Dublin or London) Geckko is pulling his hair out, roaring “What fugging wealth…aaahhhhhh”
People still in jobs have less cash than before because of tax hikes.
However a lot of spending during the boom years was aspirational spending fuelled by credit/anticipated salary increases/bonuses. People were living way beyond their means because at the time your sense of self was in large derived from how much cash you could throw around so lots of people in low paid jobs tried to live a life that they really had no business trying to live - 2 holidays a year, designer shoes, bags, new cars etc. Even without the crash people were going to be faced with credit card bills they could never pay off. That is before you even get into house prices etc.
What has happened may teach people a lesson that if you can’t afford something with cash then maybe wait until you can or don’t buy it. Will people reassess what they spent and what they thought they were entitled to?
Irish people during the boom had a sense of entitlement.
Unfortunately that same sense of entitlement continues.
yes nail on the head there
He’s been quiet for a while -> geckkosworld.blogspot.com/
Yeah, I don’t think so
This sort of stuff has been repeated as nauseum since 2007. Yes for sure all that happened, but we all know it.
The thing that annoys me is the attitude to ‘irish people’, as if their is some inherent flaw in the Irish psyche that makes is go out and blow all our cash on champagne and horses at the first opportunity, and that we are goldfish who will do the same thing next year as well…
For sure we had a massive boom. But I wouldnt say Irish history, since the inception of the state, is characterised by excess and credit bubbles. Far from it. Irish people would have been known for putting their money under the mattress.
And its not like the Irish boom happened in complete isolation. There was a credit boom all over the developed world. What happened here also happened to a greater or lesser degree with our nearest trading partner the UK and in the US, and in several European countries. You think British people don’t do on foreign holidays? buy luxury goods? buy nice cars? Take a look at autotrader.co.uk.
My point: the credit boom here was much more the result of international economic conditions (especially low interests and the global trend towards financial de-regulation) than it had to do with the hedonistic attitudes of Irish people.
But that notion doesn’t sit well with people who would much rather put their boot into their neighbour.
I agree to a certain extent, but I’d also suggest that the property boom had the effect of making people believe they were wealthy. If your biggest asset is increasing in (notional) value by 15%+ per year, you’re more likely to be flathulach with the credit card(s) and treat yourself to luxuries. To my mind, there was a lot of pent-up demand in Ireland for consumer goods - in the 1970s and 80s we had an influx of US television showing how wondrous America was with its big cars and shiny electronics, but the supply of these goods was limited to the lucky few who could afford them. The relative decline in prices for formerly luxury items and the widespread loosening of credit combined to make a previously aspirational lifestyle attainable to many many more people, but with the caveat that a good proportion of them were buying on credit.
But sure my 250K house rose in value by 25K last year? Why wouldn’t I spend 30K on a new car? It’s only costing me 5K, really.
Well…that right there is the wealth effect. Its an economic principle. If people feel wealthier they will spend more.
Irish house prices quadrupled in value. irish people would have been economic freaknics if there had not been a serious wealth effect from that.
Agree on the above. The idea that it’s an issue with the Irish psyche is also a bit defeatist. In every country in the world a significant proportion of politicians are corrupt (or at least only interested in re election), a significant proportion of the people are greedy, a significant proportion of people are reckless with personal finances etc etc. By saying its an ‘Irish issue’ you handily skip over the actual underlying reasons this country is in this mess.
So why did Ireland end up bankrupt? The underlying reason that I can see is that there is lack of personal responsibility and accountability in our society from the top down. As a society we don’t demand high enough standards from our elected politicians and public servants. This means that the Regulator that was asleep at the wheel walks off into the sunset with a golden parachute. Not one banker has appeared in front of a judge. The impression is that the developers are having their lavish lifestyles supported by NAMa. You could point out that the politicians (FF & PDs mostly) that recklessly bribed the electorate to further their own ambitions were wiped out at last election. However there was some indication in presedential election that all is not lost for FF.
Until we make our elected representatives and public servants accountable then we will continue to have theses problems. In the UK we see politicans are forced (by weight of public opinion) to resign whenever a scandal occurs. This doesn’t happen (yet) in Ireland - in fact we re-elect Lowry et al time after time.
So doesn’t this then describe an ‘Irish’ problem? No - for me this lack of accountability is a common feature is ‘developing’ societies. Whatever many may think we are not yet, after 100 years, a mature enough society with the self confidence (not ‘kiss me I’m Irish’ bravado) and sophistication to govern ourselves effectively. This is a common theme I believe in post-colonial countries. My belief is that we are getting there but our decisions at the next one or two elections will determine if we get there sooner rather than later.
Warren Buffett has a good phrase: its only when the tide goes out that you see whose swimming naked.
it refers to companies, that a recession will expose who the crap companies really are, and who the good ones are.
Same applies in this case I think…the inept, crony-ist, local issues based political system was fine and tolerable while times were good. But when the tide went out our system couldnt cope.
So in a sense bertie ahern is right. He’s always banging on about Lehman brothers…if only it hadnt been for Lehman Brothers…yep…if it hadn’t been for the Lehman shock, we mightnt have discovered how truly incompetent his government had been.
The failure to jail any bankers or politicians is a major stumbling block to the recovery of our reputation in financial international circles.
AIB was 143% at end of June and has since sold €5bn in debt with deposits increasing slightly. Not sure what it’s at now.
aib.ie/servlet/ContentServer … &year=2011
BOI was 172% at end June
bankofireland.com/fs/doc/pub … -20111.pdf
It’s the wealth effect, yes, but take it in context - it’s the wealth effect in a society with a lot of pent-up demand that had gone through very lean years from the early 1980s to mid 1990s. I’m not saying that there’s something intrinsic in the national psyche to lose the run of oneself, rather that it’s general human nature to splurge when things start going well after many years of belt-tightening.