|
Post by Chesapeake on Nov 26, 2010 10:00:14 GMT -5
|
|
|
Post by millring on Nov 26, 2010 10:40:13 GMT -5
cry.
|
|
|
Post by millring on Nov 26, 2010 10:40:45 GMT -5
definitely cry.
|
|
|
Post by omaha on Nov 26, 2010 10:42:06 GMT -5
This is such complicated stuff. Here's an interesting analysis from Allister HeathThere is a crucial aspect of the Irish crisis that everybody appears to have forgotten, which goes a long way towards explaining Ireland’s problems: its membership of the dysfunctional single currency, an institution it should never have joined. Ireland, like Britain, had its economy deformed by debt — the result of year after year of dangerously cheap credit, aided and abetted by central banks. Ireland’s cheap money came from the European Central Bank, which kept interest rates even lower than the Bank of England, thus guaranteeing an even greater boom and subsequent bust. Even in January 2006, when many of the stupider lending decisions taken by Irish banks were being planned, eurozone interest rates were only 2.25 per cent. This arguably made sense for Germany, but was absurdly low for Ireland; it could have done with 9 per cent.
Politicians always like to take credit for prosperity, real or illusory. For some time in Ireland, inflation was running higher than interest rates. That meant ‘real’ interest rates were negative: companies and consumers were being paid to borrow. Projects that would never have been worthwhile had the authorities priced money properly were signed off with abandon.
Of course, Ireland’s microeconomic reforms — including cutting corporation tax to 12.5 per cent — played a key role in transforming its economy from backwater to global hub. But much of the reported ‘growth’ was froth caused by excessively low interest rates. When the bubble popped, thanks to the US subprime debacle, the consequences were devastating. As property prices slumped and firms went bust, so, predictably, did most of Ireland’s banks.
Ireland’s membership of the euro was thus the single most important reason for last week’s cripplingly large bailout of its financial institutions. It is hard to argue that Ireland should be spending (or rather borrowing) more. The authorities in Dublin understand this; last week’s bailout was an attempt to draw a line under bad debts. Its commitment to real austerity — including public sector pay cuts of up to 20 per cent in some cases — means that the markets are much happier with Ireland than they are with the likes of Greece and Portugal. It is in times of economic peril that the advantages of a country controlling its own currency become most obvious. Sterling has plunged far further against international currencies than the euro, giving our exporters the advantage over their French, German and (yes) Irish rivals. Stoking the boom, compounding the bust: the single currency has been a curse for Ireland’s economy. The idea that one interest rate would fit so many countries was always a nonsense. The tragedy is that so many in Ireland have had to suffer so much to prove it. The incurable optimist in me sees a silver lining in all of this...that being that the international technocrat class has learned a lesson about the limits of their knowledge, the limits of centralized and concentrated decision making, and the law of unintended consequences. Nah.
|
|
|
Post by RickW on Nov 26, 2010 10:43:17 GMT -5
Going to be some tough times for a while. Hopefully only for a while.
|
|
|
Post by millring on Nov 26, 2010 10:48:39 GMT -5
The incurable optimist in me sees a silver lining in all of this...that being that the international technocrat class has learned a lesson about the limits of their knowledge, the limits of centralized and concentrated decision making, and the law of unintended consequences. Nah. Yeah, "Nah". It is the nature of the beast that's killing us all. Centralizing causes the problem....so the solution is finding a bigger group with which to centralize.
|
|
|
Post by paulschlimm on Nov 26, 2010 11:23:58 GMT -5
The country was going to have to go through years of hardship, he said, to get to a position where it could begin again. There were no choices. Argentina was not just broke, it owed a fortune and the costs of public services were outlandish. Protesting would not make the slightest difference.
Um, duh?
|
|
|
Post by patrick on Nov 26, 2010 11:45:23 GMT -5
Fintan O''Toole has an excellent book out that analyzes the causes of the Irish economic problem. From a review:It was a land of massive tax breaks and of financial regulation so light as to be invisible to the naked eye. As Ireland grew more dependent on foreign investment for its manufacturing than almost anywhere else in the world, the New York Times dubbed the country "the Wild West of European finance".
Despite the fact that much of the world's Viagra is manufactured in County Cork, this extraordinary upthrust could not be sustained. Irish GDP is now shrinking faster than in any other advanced economy, and the country's gross indebtedness is larger than Japan's. House prices have fallen more rapidly than any others in Europe, and the average Irish family has lost half its financial assets. Unemployment has risen faster than anywhere else in Europe. By 2007, the country was €10bn in the red and a banking system massively complicit in fraud and tax evasion was just about to enter meltdown. In September last year it finally imploded, awash with billions in bad loans to property sharks. In its rise and fall, as Fintan O'Toole remarks in this superb polemic, "Ireland made Icarus look boringly stable." It had moved from being the poster child of free-market globalisation to one of the great economic basket cases of modern history.
All this has been accompanied by a culture of corruption so shameless and spectacular that it makes Dublin look like Kabul. The former prime minister Charles Haughey stole €250,000 from a fund set up to pay for a liver transplant for one of his closest friends. Last year, the chairman of Anglo Irish Bank resigned when it emerged that he had €84m in loans from his own bank, a sum concealed by an annual (apparently legal) cooking of the books. As O'Toole points out, bribery, tax evasion and false evidence under oath have not simply gone unpunished; the very idea of penalising the culprits is viewed by the governing elite as unsporting or even unpatriotic. So, tax breaks for the wealthy to encourage outrageous speculation and a lack of financial regulation caused the collapse? I'm glad that can't happen here! As Krugman points out: The Irish story began with a genuine economic miracle. But eventually this gave way to a speculative frenzy driven by runaway banks and real estate developers, all in a cozy relationship with leading politicians. The frenzy was financed with huge borrowing on the part of Irish banks, largely from banks in other European nations.
Then the bubble burst, and those banks faced huge losses. You might have expected those who lent money to the banks to share in the losses. After all, they were consenting adults, and if they failed to understand the risks they were taking that was nobody’s fault but their own. But, no, the Irish government stepped in to guarantee the banks’ debt, turning private losses into public obligations. And so, having allowed massive fraud by the wealthy and banks, the Irish people will now have to live in austerity for years to pay off their debts. The US isn't the only mixed economy with capitalism for poor people and socialism for the rich. My nephew-in-law is Irish and used to work for Anglo-Irish Bank (he's since moved on to find an honest job). Last year he told me flat out that "My bank corrupted the entire European banking system."
|
|
|
Post by omaha on Nov 26, 2010 11:56:12 GMT -5
From Krugman: "The Irish story began with a genuine economic miracle. But eventually this gave way to a speculative frenzy driven by runaway banks and real estate developers"
What he leaves off is that the root cause was irrationally low interest rates from the European Central Bank that had the effect of vigorously pumping more and more cash into Irish banks. Interest rates that made sense for Germany didn't make sense for Ireland. Where was all that cash supposed to go?
In Ireland, as in the US and everywhere else where central banks maintain artificially low interest rates, the obvious result was an asset bubble. Bubbles always burst.
This crisis was manufactured and followed the precise path that Euro-skeptics argued would result from trying to fit a shared currency and a shared central bank across multiple countries with vastly different economies and governments. Everything that is happening today was predicted years ago. There are no surprises here.
|
|
|
Post by omaha on Nov 26, 2010 12:03:15 GMT -5
The other component that needs to be analyzed is that during the boom in Ireland, as tax revenues shot up, spending shot up too. There as here, the government class has an insatiable desire to spend money. No amount of revenue is enough to out-strip the desire of governments to spend. The idea of actually running a surplus, and saving up funds for times when revenues decline due to economic downturns, seems to be absolutely un-heard of among Western governments. Irish spending trend.
|
|
|
Post by ducktrapper on Nov 26, 2010 13:22:11 GMT -5
As one of the other most vilified woman in history, Margeret Thatcher, said, "The trouble with socialism is that you eventually run out of other people's money."
|
|
|
Post by Russell Letson on Nov 26, 2010 13:53:30 GMT -5
There as here, the government class has an insatiable desire to spend money. How much (and what kind of) overlap might there be between the "government class" and the "money class"? I agree that governments, like some individuals, often appear unable to see the usefulness of a rainy-day fund. In Minnesota, it was the libertarian Jesse Ventura who zeroed out the surplus by sending us all refund checks because it was "our money." And when the rains came and the crick rose, we all got soaked. But that's a diversion. This non-economist wonders whether there might be reason to finger large-scale international policies (a money system that is supposed to work equally well across a range of perhaps-incompatible jurisdictions/economies) as well as under-regulated local financial systems run by greedy cowboys and outright crooks who share interests with those who wield political power. I'm searching for a metaphor that won't falsify too much of the situation--how much do we blame the bar owner who runs drink promotions when a customer gets hammered and drives into a family of four on the way home? Dram shop laws are supposed to cover this, but they're generally enforced after the fact. Do we regulate two-for-one nights or ladies-drink-free nights or drinking-game nights? Or do we just mop up the blood on the highway, sue the bartender, and let the bar owner keep encouraging drunkenness and enabling alchoholism? There's a parable of the distribution of responsibility in there somewhere.
|
|
|
Post by ducktrapper on Nov 26, 2010 14:03:24 GMT -5
You can blame the food but one owns one's own crap and is responsible for the smell.
|
|
|
Post by Russell Letson on Nov 26, 2010 14:09:49 GMT -5
OK, atomistic libertarianism. I understand it, I just don't think it's a workable social philosophy.
BTW, Duck, in your metaphor the problem is that the food lacks agency.
|
|
|
Post by ducktrapper on Nov 26, 2010 14:15:12 GMT -5
OK, atomistic libertarianism. I understand it, I just don't think it's a workable social philosophy. BTW, Duck, in your metaphor the problem is that the food lacks agency. Workable social philosophies are like the wayward wind and soup of the day, imho. Owning your own stuff is a great start to any of them, however. Might the Canadian Food Inspection Agency be of service?
|
|
|
Post by billhammond on Nov 26, 2010 14:21:03 GMT -5
OK, atomistic libertarianism. I understand it, I just don't think it's a workable social philosophy. BTW, Duck, in your metaphor the problem is that the food lacks agency. Workable social philosophies are like the wayward wind and soup of the day, imho. Owning your own stuff is a great start to any of them, however. Might the Canadian Food Inspection Agency be of service? Oh, Duck, I have been meaning to tell you. Those Trader Joe's Water Crackers with the Flaxseed and Whole Wheat, the ones that only cost $1 a box and are produced in Canada, those ones? They are really good, and I have not found any insect parts in them. So, way to go, lad.
|
|
|
Post by epaul on Nov 26, 2010 14:27:19 GMT -5
Russell,
You presented a fairly reasonable protrait of Dram shop laws. The Hobo Haus got successfully sued three years ago because it was the first bar (in a series of three) a guy visited before smashing into someone on his way home. The fellow's lawyer claimed that the beer he had at the Hobo after work compromised his good sense enough that he decided to go to the Rainbow Club, and from there, The MeadowBrook. The kid at the Brook served him one drink and then they shut him down.
Didn't matter, He plowed into a tree on the way home and messed himself up and he sued every bar he had gone to. And all three had to pony up, or rather their insurance companies did. And now the Brook is gone. The Rainbow was sold and is hurting. And Hobo has survived it's culpability in serving the guy a Bud after his shift, but Ron is ponying up an extra eight grand a year in insurance. He is about ready to get out of it.
A parable of responsibility, indeed. A fucking perversion of it.
|
|
|
Post by timfarney on Nov 26, 2010 15:56:48 GMT -5
If it is a sufficiently large and centralized bar, yes, we blame the bar. If it is a small local bar, we blame the liquor board. No, wait a minute, that's local. We'll blame ATF. Yep, that's it. Blame ATF. Regulating the drunkenness never seems to make it to the consideration set.
Tim
|
|
|
Post by Chesapeake on Nov 26, 2010 17:13:25 GMT -5
The last time I was over there was on a reporting trip about 15 years ago, when "the troubles" referred to stuff that could literally blow up. I could tell when I was crossing out of the Republic of Ireland into Northern Ireland by (a) the sudden proliferation of armored Land Rovers and (b) no more cracks in the pavement with weeds growing out of them. Wonder if they got around to fixing up the roads before they went broke.
Btw, I'm very taken with the idea of a novelist writing about the problems in his native land. Enlightening, with some wistful touches that are probably appropriate.
|
|
|
Post by TKennedy on Nov 27, 2010 11:17:16 GMT -5
It's been said that "If you're Irish the world will eventually break your heart"
|
|