What if there had been no property bubble??

It strikes me that we would be a lot better off but I think people are over-estimating how much better off we would have been.

We would still have had wage inflation. It is hard to know how much property pushed wage inflation in non-property related trades.
We would still have a cost of energy problem.
We would still have a commercial rates problem (more with no levies?).
We would still have a public service wage bill problem, but less so as the Government could not have bought them off.
We would proabably not have a pension reserve fund.
We probably still have a banking crisis as the bankers would surely have looked at exotic products for profit if they weren’t dealing with property?
We would have less roads and infrastructure.
We would have paid a lot more income tax over the last number of years.
We would probably have more industry if lending was concentrated on businesses but they would all be crunched now if they were exporting.

Overall, we would be a deal better off but not as much as some might think. This kevlar is itchy but I think I’m going to need it :smiley: .

An interesting what if, but the property bubble did happen, horribly.

Gawd this reminds me of that awful programme on Radio 1 some time back, where they asked this question each week about some random event in history.

The one question they should have asked of course was, what if this idiotically dumb programme was never commissioned?

Your post would have gone something like this

What if there was no AAM? Jaysus we’d have had no Brendan to complain about for months. Jaysus the waste. :angry:

Indeed it did happen horribly with serious consequences for everybody. I think it would have been hard to avoid a bubble at all but that proper lending practices and tax incentives could have eased it a lot.

I don’t know if the property boom really did fuel wages except for those who worked in related industries. Software, cars, clothes and other products did not increase in cost as much. Inflation in Ireland was not wildly ahead of other countries. Consumption was up massively and this increased wages sure but I think it is limited. Peopele lost the run of themselves though. I wonder what the personal credit bubble would have looked like with no property bubble. I am sure it was worse because people thoght they had cash in bricks and mortar but it strikes me it was always going to be bad. People went mad on low interest rates and banks were glad to lend to them. This was the case whether you had a house or not.

Energy costs have dropped but they are still relatively higher in Ireland.

I don’t know how much cheaper infrastructure and local authority projects would have been. How much have they come down since the crash? Materials and labour still make up a huge part of the costs. People are tendering at practically zero profit margins now so we should be able to see the difference. Less money would have been wasted on CPOs for sure though. I don’t think we could have sustained the level of capital expenditure we did if we had not had the bubble. Perhaps the expenditure wasn’t worth what we paid for it though.

A linked question is what proportion of jobs would have been lost. It is clear that the bubble has led to more dramatic job losses than would otherwise have been experienced. Exporters are holding up better than building because building has hit a brick wall. However, they are suffering in a big way as are the multinationals. It would be interesting to know though what percentage of unemployment could have been expected otherwise.

Our bank woes are primarily linked to the bubble but we would have had some woes one way or the other. Also the silver lining with toxic property debts is that we should be able to assess them and implement a bad bank solution which would not be the case if we had toxic exotic financial product throughout the system. (The bubble may have saved our banks from the bankers!!)

In the end, I think that the bubble has been a disaster and that the people responsible must own up and take their share of the blame. However, I also think its effects are somewhat exaggerated. Our eroded tax base is as a result of tax policy and spending policy, not the bubble. Our pension deficit is because of population age profile not the bubble. Our energy crisis is because of fossil fuel exhaustion, not the bubble. Our competitiveness problem is largely due to globalisation and others following our tax policies, not the bubble.

I don’t agree.

Stamp duty and VAT from housing sales provided massive exchequer funds permitting income tax cuts, which allowed people to spend more on housing. The extra tax also paid huge public servant wage increases leading many of them to buy houses, and creating bigger demand for wage growth.

Competitiveness was hugely affected by people ditching manufacturing jobs and working on building sites OR the public sector instead. We would still be suffering the effects of a global downturn of course, but not to the same extent.

I lol’d. :mrgreen:

Significantly, i’d think - when you have unskilled people able to earn 1K a week on the sites, every industry is affected.

Because they are imported.

For the last 10 years, it was considerably ahead - at least 2% per year.

Ireland was at near-zero unemployment for 4 or 5 years - that puts massive pressure on inflation. Couple that with windfall tax revenues to buy elections, and you have a recipe for the disaster now unfolding

True, but it takes a lot of anything else to have the same economic impact as borrowing for even one house. And we were borrowing for 50,000 per year at least.

And said eroded tax base was hidden by the bubble.

Good points ragingbear.

Is your net point that unsustainable employment and tax revenues lead to more detriment than benefit, i.e., one must always look to long term sustainability?

Is this a consequence of democratically elected governments being politically unable to take prudent measures to guarantee long term stability when elections take place every four years? The boom/bubble lasted the guts of 8 years, being two terms in Government. It is not so long since FG wanted us to cash in the pension fund.

We obviously need more transparency so the folks can see the warnings of experts. How can we create such transparency when the media behave like crack addicts and the expert are whoring themselves to every VI going? Perhaps we could create an academic aristocracy and give them their own statesponsored website, TV channel and Radio Channel? We would also have to ban Desperate Housewives, Eastenders, Corrie Norrie and all televised sport.

Absolutely, though this is difficult for politicians do actually do.

There’s a clear parallel with the ‘independent central bank’ idea - when politicians controlled interest rates, they would always drop them artificially low coming up to an election, temporarily letting inflation get out of hand. Everyone expected this, so investors always required a premium to cover this little eventuality. Now the central banks are supposed to ignore such political considerations, and use merely economic indicators, such as the ECB targetting inflation and the Fed using a combination of economic indicators, and as a result, the inflation premium demanded by investors is lower - this lowers the average long term interest rate, and is (normally anyway) a good thing.

I’d be firmly of the opinion that fiscal policy should be managed in the same way - an independent body should be established that requires (or at least recommends) a budget balance of a specific amount - demanding a surplus during good times, and allowing a deficit during the bad times. They would be able to make the ‘sustainability’ call on various tax revenue streams, and hopefully would thus be able to avoid the ‘empty the piggybank for the election’ mentality.

Political motivations will always ruin it, unless there is a strong independent voice (even if the government can technically ignore them, they will be less likely to).

True - but external circumstances largely defined the two ends. FF bloated the public sector based on one-off tax revenues almost every year, not merely in election years - an even more extreme kind of stupidity, if you will.

FG missed a massive opportunity on this one - they could have been the ‘reliable’ party, who told it was it was, even when things looked good. Instead they went into an election promising to be a cleaner FF at best, so they look even worse than FF now.

At this stage, something like the ECB (even if not binding) on the fiscal side would be best - looking at each country in depth, taxes and spending, and figuring out where things were going. Such an organisation would have a real voice - even if it could just demand that a government be dragged up on front of the EU commission and shamed.

But ragingbear if you “outsource” (for want of a better word) fiscal policy as well, then politicians will have little to do - and as the natural instinct of the politician is to insist that “Something Must Be Done!” they’ll only end up interfering in social engineering and outrageous nannying. Unintended consequences, etc.

Personally I no longer really believe in democracy - like marketing it just ends up as a debased race to the lowest common denominator, manipulation of ridiculous fears, and foisting “solutions” to problems which don’t actually exist…all being populated and pushed forward by the most useless elements in society who aren’t any bloody use to anyone.

I agree that our present would not be that much different with or without the boom. It’s our future that will suffer and the most significant consequences of the housing boom/bust are yet to be felt.

Were there plenty of ECB warnings during the bubble that we should have listened to ? You’d think that keeping an eye on how out of line our property prices were getting was part of their remit. In the end isn’t it something that could affect the currency so it was something the ECB should have been telling us about.

After all, when we joined the Euro weren’t we joining up with national systems much bigger and older than ours who went through their own property and other bubbles and busts in the past. Or was our bubble and bust equivalent to teenage years of a nation’s development where we get the first job and go mental driving our first car - something unavoidable for teenagers but you want to caution against them driving their number into a wall.

You’d think so, but until recently, central banks were stupid enough to ignore asset bubbles (even though they inevitably bust) - and we can see where that got us.