an bord snip [Archive] - Peoples Republic Of Cork Discussion Forums

markinmanc

16-07-2009, 06:24 PM

All this the day after a statement that no bank will be allowed to fail no matter what the cost, I guessing the unions will fight redeployment?

http://www.irishtimes.com/newspaper/breaking/2009/0716/breaking53.htm

The 'An Bord Snip Nua' report has called for swingeing measures to eliminate as many as 17,358 public sector jobs as part of its plan to cut public expenditure by an annual total of €5.3 billion.
The group, chaired by UCD economist Dr Colm McCarthy, calls for a general reduction of up to 5 per cent in social welfare rates to achieve savings of €850 million.
Given the continuing fall in prices, the report says the general cut in social welfare allowances would bring the value of payments back to the level seen in the summer 2008.
It says €513 million could be saved by reducing and standardising the child benefit rate, cutting the €2.5 billion cost of the programme by 20 per cent.
The group calls for a new benchmarking examination of public sector pay and says the process should include the possibility of pay cuts and allow from an comparison of pay rates in the Irish public sector with equivalent posts internationally.
In addition the group said the Government should consider "how best to secure an appropriate contribution" from public service pensioners.
"The group observes that the burden of budgetary adjustment both in terms of measures introduced over the past year and of the measures proposed in this report will be borne broadly across most areas of society with the exception of those people currently in receipt of public service pensions."
The health and education sectors will bear the overwhelming burden of the cuts, with 6,930 jobs to go in the education system and another 6,168 jobs will go from the health service. There would be 1,140 staff reductions from the agricultural sector, 594 in environment and 540 in the justice area.
Dr McCarthy said the reduction in jobs could be achieved without compulsory redundancies, stating that a recruitment embargo, retirements and an existing voluntary redundancy scheme could be used to achieve savings.
However, he said the trade union movement would have to agree to changes which would facilitate the redeployment of staff between Government Departments and other parts of the public service.
In his report, Dr McCarthy says a range of outdated and restrictive working practices and allowances add greatly to the cost of providing public services.
The report says the closure of the Department of Community, Rural and Gaeltacht Affairs and the redistribution of its functions reflects the need to prioritise scarce Exchequer resources. It also calls for a critical examination of the need for a Department of Arts, Sports and Tourism.
Minister for Finance Brian Lenihan called for “considered and honest” debate of the options set out in the report.
“I recognise, and the Government recognises, that the choices facing us are not simple or pain-free,” Mr Lenihan said.
“Following them through requires a collective social effort and not one motivate by protecting one’s patch or pursuing one’s special interest to the exclusion of all else.
“That is why I would ask people to read the report carefully and critically, and avoid knee-jerk and defensive reactions to each and every suggestion raised by the special group.
“All of us, including those of us in public administration, will have to accept that the old ways of doing things need to be looked at afresh, so that we can deliver excellent public service with the dramatically lower level of resources now available.”

corkoniense

16-07-2009, 07:41 PM

hungry

16-07-2009, 07:49 PM

corkoniense

16-07-2009, 09:49 PM

Just stop the scams going on with Romanian Gypsies, they are claiming for more children that they actually have. They all have the same names, they claim benefits here and in other Counties. They earn thousands for children allowance, their rent is paid for. they
have no intention of working here. They are barred from nearly every shop in Cork for stealing. Another hundred or so have come into Cork again in the last three weeks.
I have a friend working in a shop in town, she caught two of them stealing what did they do run out of the shop and left two children behind them. I doubt if they will be charged with cruelty to children. Check on all the POLISH people who fly in once a month to claim their dole even though they have gone home. Whey should they get childrens allowance if their children are not in this Country. The Social Welfare checked over 600 Poles claiming the dole here and over 11 per cent were gone back to POLAND. I doubt if any one of them will be charged with fraud. Can anyone tell me how come we have thousands of non EU citizens working here in Cork. If you say look after IRISH people first you are called a racist.

The Govt has just given 10 billion to three banks in 5 months, and is prepared to write infinity worth of taxpayer cheques to keep them afloat. last time i checked the banks in ireland were run by irish people, and this bail out that will beggar you and children for 50 years is only because of Fianna Fail cronyism. But wait now, over the next weeks, months and years watch the FF politicians rant about foreigners scrounging and morons like you will fall for it hook, line and sinker.

The Government looks after IRISH people first, to the detriment of you and me. They will get away precisely because they are racist.

hungry

16-07-2009, 10:48 PM

[QUOTE=corkoniense;27 82855]The Govt has just given 10 billion to three banks in 5 months, and is prepared to write infinity worth of taxpayer cheques to keep them afloat. last time i checked the banks in ireland were run by irish people, and this bail out that will beggar you and children for 50 years is only because of Fianna Fail cronyism. But wait now, over the next weeks, months and years watch the FF politicians rant about foreigners scrounging and morons like you will fall for it hook, line and sinker.

The Government looks after IRISH people first, to the detriment of you and me. They will get away precisely because they are racist.

hungry

16-07-2009, 10:52 PM

The Govt has just given 10 billion to three banks in 5 months, and is prepared to write infinity worth of taxpayer cheques to keep them afloat. last time i checked the banks in ireland were run by irish people, and this bail out that will beggar you and children for 50 years is only because of Fianna Fail cronyism. But wait now, over the next weeks, months and years watch the FF politicians rant about foreigners scrounging and morons like you will fall for it hook, line and sinker.

The Government looks after IRISH people first, to the detriment of you and me. They will get away precisely because they are racist.

I agree with what you say about the Banks and the Fianna Fail government but I am not a moron.

corkoniense

17-07-2009, 01:20 AM

I agree with what you say about the Banks and the Fianna Fail government but I am not a moron.

Fair enough. I just go insane when i see/hear people whinging about johhny foreigner. there may be too many foreigners in this country, but its FF/IBEC who let/wanted them in back in 2004. It was not some EU conspiracy, but a deliberate decision by our own govt to drive down wages. Now that everything's gone tits up, I expect to hear the likes of Noel o Flynn and other FF knackers tap up public anger by blaming foreigners for our woes, just like Dermot Ahern and his "toughguy" approach to criminals which will no doubt see more lawlessness and police corruption on our streets. Beware right wing populism and demagoguery. Always.

jd26

17-07-2009, 11:19 AM

How much of this are they going to try to get through when the Dail is closed for the summer?

Some of the recommendations (e.g. the closing of railway lines) would cause massive problems for some FF TDs. We might see a real push on it.

Stall De Ball Biy

17-07-2009, 12:55 PM

17,500 jobs to be axed in the Public Service sounds very little compareed to the 50,000 the IMF would slash! Its time for the unelected PS unions to get real and think differently but of course they cant cause they're still stuck back and longing for Bertie's Celtic Tiger days when he would just throw money around like confetti to any problem that came his way .

Damn you Bertie Ahern for leaving us all in the shit!!

BangorFeen

17-07-2009, 01:06 PM

Yeah, 1.6 million private sector workers cannot continue to pay for 320,000 public sector workers who on average are earning 20% higher wages than those in the private sector, and have permanent pensionable jobs.

We should take to the barricades and tell those cunts and their propagandists in RTE that we just can't afford them anymore.

The bastards.

On average. That's important here. I'm a public servant but my take home is in the €35-€45K bracket (like most PSs). In fact, I'm probably earning a fair wedge less than I would in the private sector and I have similar job security to a private sector worker - I'm on a contract. At least a third of my colleagues here are in a similar boat. Private sector pensions are in a mess because business leaders managed to rip their employees off, not because of public servants. But of course IBEC have skipped merrily away from that one

Actin The Sham

17-07-2009, 01:14 PM

On average. That's important here. I'm a public servant but my take home is in the €35-€45K bracket (like most PSs). In fact, I'm probably earning a fair wedge less than I would in the private sector and I have similar job security to a private sector worker - I'm on a contract. At least a third of my colleagues here are in a similar boat. Private sector pensions are in a mess because business leaders managed to rip their employees off, not because of public servants. But of course IBEC have skipped merrily away from that one

Based on the above figures, a public sector worker taking home between €673 and €865 per week is doing extremely well in the current climate.

Especially when Ireland Inc. is having to borrow €30 Million per day to make ends meet.

Suggestion: if you think you can get more wedge in the private sector, why not take a job in the private sector?

Public servants used their political muscle in order to ensure that the costs of running this state got way out of kilter which reduced our competitiveness and damaged our ability to win export business.

All of this "we didn't cause the problem" shite is starting to wear a bit thin now. Many public sector workers contributed to the problem by accepting corrupt payments and by rezoning land. Others contributed by stoking the property market when they bought second houses (guards, teachers, prison officers) and rented them out to co-workers, and just like every citizen in the country by paying inflated prices when they were playing the property market. We are all equally to blame, and we now will all equally have to share the pain.

BangorFeen

17-07-2009, 01:27 PM

Based on the above figures, a public sector worker taking home between €673 and €865 per week is doing extremely well in the current climate.

Especially when Ireland Inc. is having to borrow €30 Million per day to make ends meet.

Suggestion: if you think you can get more wedge in the private sector, why not take a job in the private sector?

Public servants used their political muscle in order to ensure that the costs of running this state got way out of kilter which reduced our competitiveness and damaged our ability to win export business.

All of this "we didn't cause the problem" shite is starting to wear a bit thin now. Many public sector workers contributed to the problem by accepting corrupt payments and by rezoning land. Others contributed by stoking the property market when they bought second houses (guards, teachers, prison officers) and rented them out to co-workers, and just like every citizen in the country by paying inflated prices when they were playing the property market. We are all equally to blame, and we now will all equally have to share the pain.
They are? It's feckin' news to me then.

And as for the snide remark, I work in research so the degree of independence to publish my findings would not be available to me in the private sector. I don't like the idea of being anyone's trained poodle.

Your last two paragraphs describe pretty every sectional interest in Ireland over the past five years so singling out the PS for special mention here is at best, unfair. Sharing the pain is just dandy but if you think it's being shared out equally now or it would be by slashing PS wages then I believe you are quite wrong. We'll get out pay cut, don't you worry. I don't agree by the way that everyone is equally to blame; that's hopelessly simplistic. Joe Average had to take the prices as they were. What's someone going to do when the pint of milk in the shop is x% more than it "should" be? Buy it from France??? FFS.

Barney

17-07-2009, 01:40 PM

Stop the madness and stop allowing any more foreigners into the country to take advantage of the social welfare schemes...some might call that racist, but if I was racist i'd suggest kicking out the existing foreigners in ireland...leave them as that was the deal when they came here...now ireland has to stop the bleeding fast, so stop allowing any more romanian gypsies, africans, polish into the country....

jd26

17-07-2009, 01:52 PM

Do you have any idea the number of Irish that are emigrating to the UK with 2.4 million unemployed, or Australia with 700K or Canada where 1.5 million are out of work or Germany where the number is 3.4 million.

I'd guarantee we're losing more welfare recipients than we're gaining.

Besides, you have to be habitually resident in Ireland to get jobseeker's allowance, so anyone moving to the country to take advantage of social welfare is in for a rude awakening.

Rather than just rounding on the easy targets, how about pointing the blame at those who got us into this mess (and if you voted for Bertie because your income was going up, but you didn't question why it was going up, that includes you).

Actin The Sham

17-07-2009, 01:58 PM

They are? It's feckin' news to me then.

And as for the snide remark, I work in research so the degree of independence to publish my findings would not be available to me in the private sector. I don't like the idea of being anyone's trained poodle.

Your last two paragraphs describe pretty every sectional interest in Ireland over the past five years so singling out the PS for special mention here is at best, unfair. Sharing the pain is just dandy but if you think it's being shared out equally now or it would be by slashing PS wages then I believe you are quite wrong. We'll get out pay cut, don't you worry. I don't agree by the way that everyone is equally to blame; that's hopelessly simplistic. Joe Average had to take the prices as they were. What's someone going to do when the pint of milk in the shop is x% more than it "should" be? Buy it from France??? FFS.

No snide remarks.

Just an assertion that we can't afford to borrow €30 million per day so that we can afford the luxury of "Independent Research."

No idelogical differences. I'd love to be able to afford to have a bottle of Cristal every night with my truffles and caviar, but unfortunately I can't afford it.

If we could afford it, I'd say fine; off you go research away. But unfortunately you are a luxury that we can't afford right now.

As for independent research, the OECD would be seen as reasonably independent:

This is from last year:

The OECD today published its Ireland - Towards an Integrated Public Service report outlining reform of the Irish public service. It highlights a development of the public service over the last decade that has evolved in an uncoordinated manner without a strategic vision and reflecting poor competence at senior level, limited performance review and accountability. With the possible exception of the Public Accounts Committee, the interest of Parliamentary committees to discuss the reviews sent to them has been limited.

I have no axe to grind with you, I am merely saying we as a country can no longer afford you, or your colleagues.

We have too many public sector workers, we can no longer afford them, and we must cut back. That is not "ibec propaganda," that is a fact.

poulgorm

17-07-2009, 02:28 PM

Householders in Glenageary and Tallaght have a lot more in common then householders in Turner's Cross and Adrigole.

Still, having a single local authority would make declaring independence easier.

Hi jd26. Leave Adrigole out of this. We had noting to do with the SNIP report.

PS Are we going to win on Sunday?

frankeechops

17-07-2009, 03:05 PM

Hi jd26. Leave Adrigole out of this. We had noting to do with the SNIP report.

PS Are we going to win on Sunday?
Not a chance lad, Kildorrery all the way.

On the Snip report, there is nothing fairly drastic on it, people may complain about the cuts to social welfare, but the fact is that it is only returning to 2008 levels.

The only thing I would find objectionable is the cuts to Education staff. Already there is 30 in my daughter class, and there is two special needs assistants in the class. If even one of these was cut I hate to be that teacher. As For amalgamtion if a school has less than 100 pupils, It is probably not sustainable.

jd26

17-07-2009, 03:47 PM

I don't have a real problem with amalgamation of rural schools. The pattern of schools is based on a time where everyone had to be able to walk to school, but that era has long passed.

I'd question the short-term savings though. Amalgamating schools means a big building programme. Certainly, it would produce a return over 10+ years, but it may cost money in the early years.

My main problem with the report was the focus on cutting services, rather than on providing services more efficiently. For example, with the rail lines they want to close, the first questions should have been "How can we increase revenues?" and "How can we reduce costs?". Instead, they're just going down the close them route. And as we've seen with Midleton, if you change your mind on that one, it's very expensive to reverse it.

BangorFeen

17-07-2009, 04:12 PM

No snide remarks.

Just an assertion that we can't afford to borrow €30 million per day so that we can afford the luxury of "Independent Research."

No idelogical differences. I'd love to be able to afford to have a bottle of Cristal every night with my truffles and caviar, but unfortunately I can't afford it.

If we could afford it, I'd say fine; off you go research away. But unfortunately you are a luxury that we can't afford right now.

As for independent research, the OECD would be seen as reasonably independent:

This is from last year:

The OECD today published its Ireland - Towards an Integrated Public Service report outlining reform of the Irish public service. It highlights a development of the public service over the last decade that has evolved in an uncoordinated manner without a strategic vision and reflecting poor competence at senior level, limited performance review and accountability. With the possible exception of the Public Accounts Committee, the interest of Parliamentary committees to discuss the reviews sent to them has been limited.

I have no axe to grind with you, I am merely saying we as a country can no longer afford you, or your colleagues.

We have too many public sector workers, we can no longer afford them, and we must cut back. That is not "ibec propaganda," that is a fact.
What praetorian guff. I'm thrilled you've no axe to grind...

First of all, I'm actually not paid out of government funds buy from a research grant and secondly by "independent research" I mean that I'm not having someone go through my findings for a specified programme of work and taking out the sections that are "unpalatable", not that I'm some free-thinking wastrel who wanders into the office wondering what am I going to research today? And considering I've just been an author on a piece of work that has meant a minister actually making a decision based on evidence you can frankly get stuffed. Thanks for making that call on behalf of Ireland Inc.

How many public sector workers should we have then? Jesus.

Haro

17-07-2009, 05:06 PM

well fuck me. good stuff

they should also cut rent allowance. this would force landlords to reduce rent to realistic prices.
moving out of home isn't really a human right.

God you're a fucking moron.

They already cut rent allowance and as a result many people in Dublin are out of home. If I couldn't afford rent allowance, I'd have to move back to Clare with my parents or be forced to live in poor living conditions. I'm down here actually trying to find things to do to help me getting a job. I'd have to come off my current training course and would not be able to attend one where my parents live.

Back in Clare I'd do absolutely nothing and go mad. Maybe in countries where they have less of a "we're providing for you, you're our slave now" mentality it works better. But yes, people should have a right to their own place.

Also, most landlords/agencies still haven't brought their prices down in line with Rent Allowance. I'm having difficulty finding a new place in a suitable area at the moment.

Given the continuing fall in prices,

This is a load of shit. Prices are not falling. What's happening is the price of the average basket is going down since people are buying cheaper food.

the report says the general cut in social welfare allowances would bring the value of payments back to the level seen in the summer 2008.

They already HAVE done by cutting the Christmas bonus.

Anyone who supports this is a little bollocks. Some people are actually starting to get fooled into the idea that "tough decisions" have to be made.

You can't just tax and cut your way out of a recession. That's not dealing with the root of the problem which is global and will pass on it's own within time. If we continue to cut welfare, education, healthcare, we'll be a nation of sick, uneducated couch potatoes coming out of this recession.

jd26

17-07-2009, 05:15 PM

You can't just tax and cut your way out of a recession. That's not dealing with the root of the problem which is global and will pass on it's own within time. If we continue to cut welfare, education, healthcare, we'll be a nation of sick, uneducated couch potatoes coming out of this recession.

Yes, there's a global recession, but we've had policies which have made it an awful lot worse here. I think only Iceland and Latvia really compare for the depth of it.

One thing that's unfortunate is that we're only considering cutting expenditure. What we should really do is sit down and work out what services we want the government to provide, how they can be most efficiently provided and then how we can modify the tax system so they are sustainably fundable.

The only real excuse would be if we were to say that the problem is so immediate that we don't have the time to do that. However, seeing that some of the cuts will take 5-10 years to show a return, I'm not sure is that really the case.

Haro

17-07-2009, 05:34 PM

Yes, there's a global recession, but we've had policies which have made it an awful lot worse here. I think only Iceland and Latvia really compare for the depth of it.

This is true. But there's no reason why I, as a disabled person, should have to suffer from it. There's only so much they're going to get by reducing welfare and also, there are some countries with relatively better welfare than Ireland even if ours is moderately high.

I couldn't imagine going out smoking or drinking on welfare. It only seems like a lot until you start doing that.

The only real excuse would be if we were to say that the problem is so immediate that we don't have the time to do that. However, seeing that some of the cuts will take 5-10 years to show a return, I'm not sure is that really the case.

I don't think recessions generally last 5-10 years. I see most countries coming out of this in another 1-2 years(As in starting to upturn) but Ireland's will last longer unless we get a bail out.

No matter how much of a mess the UK may be, there's at least some people there somewhere with good ideas. In Ireland we have nothing but messers.

i_didnt_do_nawtin

17-07-2009, 05:38 PM

God you're a fucking moron.

They already cut rent allowance and as a result many people in Dublin are out of home. If I couldn't afford rent allowance, I'd have to move back to Clare with my parents or be forced to live in poor living conditions. I'm down here actually trying to find things to do to help me getting a job. I'd have to come off my current training course and would not be able to attend one where my parents live.

Back in Clare I'd do absolutely nothing and go mad. Maybe in countries where they have less of a "we're providing for you, you're our slave now" mentality it works better. But yes, people should have a right to their own place.

Also, most landlords/agencies still haven't brought their prices down in line with Rent Allowance. I'm having difficulty finding a new place in a suitable area at the moment.

Suitable area? Poor living conditions? You're entitled to what you can afford.

If I lost my job I'd head back home and live with the parents for a while. Maybe that's a moronic thing to do

daithi81

17-07-2009, 05:38 PM

This is a load of shit. Prices are not falling. What's happening is the price of the average basket is going down since people are buying cheaper food.

Nonsense. I was on here a few months ago giving out about Dunnes, for being so expensive. I went back the other day out of sheer boredom with the selection at Aldi, and my basket was about 40% less. And no, I didnt buy much different stuff.

daithi81

17-07-2009, 05:41 PM

Haro

17-07-2009, 07:51 PM

Nonsense. I was on here a few months ago giving out about Dunnes, for being so expensive. I went back the other day out of sheer boredom with the selection at Aldi, and my basket was about 40% less. And no, I didnt buy much different stuff.

You must have buyed particular things that were on sale then. Because my experience, and the experience of most people, does not line up with this. The average prices in Tescos and Dunnes are the same. Dunnes just have some decent deals from time to time.

No, you are the moron. These measures are about ensuring that the government doesn't default on foreign obligations and have to allow the IMF in to take control. And believe me, if they come in you will be back in Clare faster than you can spell your name.

They shouldn't "allow" the IMF in anyway, just keep finding other foreign investors to borrow from. The IMF don't seem to understand the severe cost of living here. There is no way the entire first world is going to give up on Ireland completely. There are plenty of other things they can do not to loose money, TDs should take a massive cut before anyone should die due to cuts in healthcare, it's ludicrous, and planning for the future is important. Regardless of foreign obligations, you can't just put us in a position that is harder to recover from in the long term, and it's someone in the government's job to explain this to the people we're borrowing money from. I don't see much in the way of this happening and it's not beyond our government to use the threat of the IMF to make these cuts. I don't understand why everyone here is taking the government on their word. There should be people who can reach some kind of compromise with foreign bodies, or the IMF.

I fully support obviously the idea of snipping off unnecessary and irrelevant parts of our government. This is where the money sink lies. But further cuts to welfare, education and health is the worst thing they could do. Also, what are you going to do with those people once they get the snip? You'll have more people on welfare. I imagine this is why they're trying to cut that. Obviously, we need a lot more restructuring then just getting rid of a bunch of people and cutting money we give to disabled people.

If healthcare gets cut any more I swear someone should lock up Mary Harney. She should be tried for manslaughter. People have died because of these decisions.

blackie

17-07-2009, 07:52 PM

The chief author of Bord Snip worked both for the Central bank and ESRI and we all should know of their capabilities.

One suggestion sums it all up , that of combining schools of less than 100 pupils ? , take 2 neighbouring village scools of 60 pupils each - WHERE in either school are the 120 pupils to be housed- NONSENSE

will2

17-07-2009, 11:35 PM

Yeah, 1.6 million private sector workers cannot continue to pay for 320,000 public sector workers who on average are earning 20% higher wages than those in the private sector, and have permanent pensionable jobs.

We should take to the barricades and tell those cunts and their propagandists in RTE that we just can't afford them anymore.

The bastards.

right on, place gone 2 fook , ill take lessons in polish + claim childrens allowance 4 loads of alleged kids i have:crazyeye:,+rob ur house ,dump my rubbish like d knackers in buttevant did+laugh when u get done 4 no tv liscence;-)i love wee ireland , collins well proud,not!!!!

quincytwo

18-07-2009, 01:22 AM

Yes, there's a global recession, but we've had policies which have made it an awful lot worse here. I think only Iceland and Latvia really compare for the depth of it.

One thing that's unfortunate is that we're only considering cutting expenditure. What we should really do is sit down and work out what services we want the government to provide, how they can be most efficiently provided and then how we can modify the tax system so they are sustainably fundable.

The only real excuse would be if we were to say that the problem is so immediate that we don't have the time to do that. However, seeing that some of the cuts will take 5-10 years to show a return, I'm not sure is that really the case.

Maybe you were asleep the days they were rising vat, levies etc etc.

daithi81

18-07-2009, 03:34 AM

They shouldn't "allow" the IMF in anyway, just keep finding other foreign investors to borrow from.

From where, Mars? Haro, that statement shows how little you know about what is going on.

markinmanc

21-07-2009, 10:05 AM

From where, Mars? Haro, that statement shows how little you know about what is going on.

Has Ireland's credit rating been downgraded yet? If not, people will still lend money.

Which probably shows how ridiculous the financial system is.

gozzy

21-07-2009, 10:09 AM

Has Ireland's credit rating been downgraded yet? If not, people will still lend money.

Which probably shows how ridiculous the financial system is.

I think it has. We were downgraded recently from AAA to AA by all three main global credit rating agencies.

We are borrowing at 8%.

markinmanc

21-07-2009, 10:31 AM

I think it has. We were downgraded recently from AAA to AA by all three main global credit rating agencies.

We are borrowing at 8%.

People are still prepared to lend but at a higher interest rate it would seem. Borrowing from banks to pay off the banks who made bad loans to er, other banks.

http://www.telegraph.co.uk/finance/newsbysector/banksandfinance/5477337/SandP-downgrades-Ireland-credit-rating.html

The downgrade from AA from AA+ follows a costly rescue package for the banking sector which has weakened the nation's finances.
S&P said in a statement that is outlook for Ireland is "negative".
"We have lowered the long-term rating on Ireland because we believe that the fiscal costs to the government of supporting the Irish banking system will be significantly higher than what we had expected when we last lowered the rating in March 2009, and, consequently, that the net general government debt burden will also be significantly higher over the medium term," the credit rating agency said.
The AA rating is two notches below the top AAA ranking but still means on the S&P scale that Ireland has a "very strong" capacity to repay its borrowings.

jd26

21-07-2009, 10:44 AM

Maybe you were asleep the days they were rising vat, levies etc etc.

Levies don't exactly count as long-term tax planning. Nor does a panicked VAT rise that even the Minister for Finance acknowledges was a mistake.

What I want to see is a system where we say

- This is what we want to achieve as a government
- This is how we intend to fund it
- This is how we're going to get there

In all the immediate panic, we don't have any long-term goals.

Just like the way we had no long-term plans for funding the state over the last few years.

The fact is, we're seeing what a lot of others have discovered before us - consumption taxes collapse during a recession. Property taxes, wealth taxes, income tax, inheritance tax, all hold up a lot better; they fall, but nothing like as much.

Of course, consumption taxes are easy because people don't see the money leaving their pocket or at least don't perceive it going to the Revenue.

So, in terms of taxation, we need a plan for a long-term sustainable tax base that isn't going to leave the country screwed every time there is a slowdown. And we also need to ensure we provide government services efficiently so that we don't take more tax than necessary.

At the moment, I'm seeing no impetus on the long-term thinking, just cuts and levies to fund the current hole.

Compare to the US, where Obama is still trying to build a health service, while tackling the economic crisis. The comparison doesn't reflect too well on this country.
Cue quincytwo calling me pro-American, even though everyone knows I've been critical of America plenty of times too

markinmanc

21-07-2009, 11:15 AM

In Ireland, people get elected because they can sort out the pothole in the street or get the GAA club a grant. Ability to govern is irrelevant.

The democratic system in Ireland mitigates against having a decently run country.

daithi81

21-07-2009, 11:19 AM

Has Ireland's credit rating been downgraded yet? If not, people will still lend money.

Which probably shows how ridiculous the financial system is.

It's AA-, which means there is a negative outlook. Self-explanatory, I assume.

My point is when/if we have reached a stage where we call on the IMF to lend us money i.e. the point where investors will no longer lend to us. Which is why Haro's comment was so silly.

jd26

21-07-2009, 11:21 AM

There was a good post on politics.ie (not made by me before someone suggests I'm quoting myself) about our standards of governance.

No, the location of central government isn't that big a deal to me. That said, I think the only cities on the island capable of hosting the capital of an Irish state would be Dublin, Belfast or Cork.

But that, of course, would assume there actually was an Irish community with a real aspiration to having its own state.Simply that it would actually be engaged in those issues and matters. The Irish state doesn't engage with the realities of Irish life.

Take the case in point - defence, as symbolically represented by EU soldiers saluting an EU flag. Its actually an excellent example, as a few quick sentences will get the concept across very quickly. I'm supposed to be worried about EU states making collective decisions on defence, and to prefer these same decisions being made in Dublin under the direction of Minister Willie O'Dea.

That would be fine except, as we all know, Willie O'Dea is just the Minister for Limerick without any interest whatsoever in defence questions. The only defence questions that matter, in fact, are parochial concerns like keeping open as many barracks as possible in small towns or moving the Department of Defence to Newbridge. The actual content of defence policy is largely irrelevant. So as far as defence is concerned, we're travelling on autopilot in the hope that nothing with crash into us. There's nothing there, no substantial issue, on which we are exercising any meaningful independent stance.

In fact, apart from abortion, is there any area of domestic policy where the Irish State is actually exercising any meaningful independence? I suppose we can point to things like our deep commitment to allowing the pollution of groundwater by unregulated and unpoliced one-off housing development and farming practices. But is there anything more meaningful than that?

markinmanc

21-07-2009, 11:26 AM

It's AA-, which means there is a negative outlook. Self-explanatory, I assume.

My point is when/if we have reached a stage where we call on the IMF to lend us money i.e. the point where investors will no longer lend to us. Which is why Haro's comment was so silly.

Read the article I posted above - finance speak which means we can both probably read the same thing and come up with contradictory understandings of it.

It doesn't seem to me like it's negative. Not time for the IMF et, but the more people talk it up, the more it becomes a possibility. None of this (the market's views) seems to be based on logic but on sentiment.

daithi81

21-07-2009, 11:39 AM

Read the article I posted above - finance speak which means we can both probably read the same thing and come up with contradictory understandings of it.

It doesn't seem to me like it's negative. Not time for the IMF et, but the more people talk it up, the more it becomes a possibility. None of this (the market's views) seems to be based on logic but on sentiment.

I don't listen to what journalists have to say, it is very clear that if we continue to spend the way we do, we are very likely to default in 2-3 years. It's simple arithmetic. Therefore it could not be more logical.

markinmanc

21-07-2009, 01:08 PM

I don't listen to what journalists have to say, it is very clear that if we continue to spend the way we do, we are very likely to default in 2-3 years. It's simple arithmetic. Therefore it could not be more logical.

Your patronising reply has totally pwned me, I bow to your superior knowledge of economics and maths.

Who has said Ireland will default in two or three years? IMF? Central Bank? Goldman Sachs?

jd26

21-07-2009, 01:13 PM

I'm not sure we will default considering the ECB are buying our bond issues. So long as they remain tolerant we won't default. However, we have to keep them tolerant, which means showing we're trying to reduce the deficit and also not doing anything stupid like voting down Lisbon again.

But letting the debt get out of hand is irresponsible anyway. It's burdening ourselves and those not even born yet for years to come.

I still think we need a more full consideration of the nature of the tax base and what public services we want to provide and to what level than the current ad hoc approach we have been adopting.

daithi81

21-07-2009, 01:25 PM

Your patronising reply has totally pwned me, I bow to your superior knowledge of economics and maths.

Who has said Ireland will default in two or three years? IMF? Central Bank? Goldman Sachs?

Again, I don't rely on other people's opinions to draw a conclusion. One of the best indicators of whether a country might default is their debt-to-gdp ratio.

This is simply debt, divided by GDP. Currently, it is deceptively low. But our debt is set to increase massively over the next 2-3 years due to public spending commitments and falling tax revenues, not to mention the vast sums that will be necessary to setup NAMA and re-capitalise the banks again, once the transfer of debt is complete.

On the other end of the scale, we have GDP. Which is due to fall by around 10% this year, and 8% the next. Of course, these estimates could turn out worse. Because of the fall in output, and the rise in unemployment, this will put further pressure on the governments coffers.

Both of these factors combined means that Ireland's once low debt-to-gdp ratio will rise over to at least 90% (lowest estimate). If we reach 127%, we are at the level of public debt that we were in the late 80's, when the IMF were last knocking on our door.

And we could potentially go beyond 127% (because of NAMA/banks).

Killyoursons

21-07-2009, 04:45 PM

Again, I don't rely on other people's opinions to draw a conclusion. One of the best indicators of whether a country might default is their debt-to-gdp ratio.

This is simply debt, divided by GDP. Currently, it is deceptively low. But our debt is set to increase massively over the next 2-3 years due to public spending commitments and falling tax revenues, not to mention the vast sums that will be necessary to setup NAMA and re-capitalise the banks again, once the transfer of debt is complete.

On the other end of the scale, we have GDP. Which is due to fall by around 10% this year, and 8% the next. Of course, these estimates could turn out worse. Because of the fall in output, and the rise in unemployment, this will put further pressure on the governments coffers.

Both of these factors combined means that Ireland's once low debt-to-gdp ratio will rise over to at least 90% (lowest estimate). If we reach 127%, we are at the level of public debt that we were in the late 80's, when the IMF were last knocking on our door.

And we could potentially go beyond 127% (because of NAMA/banks).

Am I right in thinking that defaulting is a political decision? Or is there a certain level of indebtedness beyond which you automatically default?

Incidentally, and without thinking this will help us get out of the current situation, the way you've described the situaiton puts a large part (perhaps most) of the blame on the banks. At the very least, if they hadn't been run so badly, we would have a lot more flexibility in being able to respond to the fall in revenue. It's reasons like this that make me very suspicious of the 'public versus private sector' narrative that's being spun at us.

jd26

21-07-2009, 04:47 PM

Am I right in thinking that defaulting is a political decision? Or is there a certain level of indebtedness beyond which you automatically default?

It's not really a political decision.

What happens is you eventually hit a point where your current cash can't cover your loan repayments and nobody is willing to lend you any more. In those circumstances, you have no choice but to default.

I don't know has any country ever defaulted when it could have made its commitments - possibly Korea in the mid-90s, anyone know?

daithi81

21-07-2009, 05:03 PM

Am I right in thinking that defaulting is a political decision? Or is there a certain level of indebtedness beyond which you automatically default?

I will put it this way. Imagine that you earned €100 p/w and you spent €100 p/w. The books are balanced. Suddenly, there is a drop in income to €80 p/w, yet you continue to spend €100 p/w. So you are borrowing €20 p/w to maintain your lifestyle and over time your TOTAL debt is piling up, with interest. As this piles up, the bank becomes less willing to lend, or starts charging higher interest rates. This of course increases your TOTAL debt and a vicious cycle begins which leads to the individual being unable to service the interest payments, let alone the principal debt.

Now, factor into this model a slowly decreasing income and an ever increasing debt, cause some of his mates asked him to go guarantor on a loan (NAMA, AIB, BOI, etc). This is where Ireland stands, at the moment. If we keep spending money that we don't have, at least in the volumes we are doing it, we will not be able to meet our obligations to foreign lenders. They will stop lending to us. Capital will fly out of the country. This is your typical default story minus the exchange rate issues, which we wont have cause of the Euro.

Killyoursons

21-07-2009, 05:05 PM

It's not really a political decision.

What happens is you eventually hit a point where your current cash can't cover your loan repayments and nobody is willing to lend you any more. In those circumstances, you have no choice but to default.

I don't know has any country ever defaulted when it could have made its commitments - possibly Korea in the mid-90s, anyone know?

This is the interesting bit for my question. Prionsias mentioned the ECB on another thread. What determines their lending - do they have a rigid set of indicators, or is it more flexible (like the EU's policy on current budget deficits turned out to be)?

Killyoursons

21-07-2009, 05:06 PM

I will put it this way. Imagine that you earned €100 p/w and you spent €100 p/w. The books are balanced. Suddenly, there is a drop in income to €80 p/w, yet you continue to spend €100 p/w. So you are borrowing €20 p/w to maintain your lifestyle and over time your TOTAL debt is piling up, with interest. As this piles up, the bank becomes less willing to lend, or starts charging higher interest rates. This of course increases your TOTAL debt and a vicious cycle begins which leads to the individual being unable to service the interest payments, let alone the principal debt.

Now, factor into this model a slowly decreasing income and an ever increasing debt, cause some of his mates asked him to go guarantor on a loan (NAMA, AIB, BOI, etc). This is where Ireland stands, at the moment. If we keep spending money that we don't have, at least in the volumes we are doing it, we will not be able to meet our obligations to foreign lenders. They will stop lending to us. Capital will fly out of the country. This is your typical default story minus the exchange rate issues, which we wont have cause of the Euro.

I'm with you so far. But see my reply to jd26.

daithi81

21-07-2009, 05:14 PM

jd26

21-07-2009, 05:14 PM

This is the interesting bit for my question. Prionsias mentioned the ECB on another thread. What determines their lending - do they have a rigid set of indicators, or is it more flexible (like the EU's policy on current budget deficits turned out to be)?

In theory, the ECB shouldn't be lending us money at all.

But at the moment, all central banks are at it as part of their quantative easing strategy. They essentially lend us (or other governments) money that they have created out of thin air.

We seem to have been particularly targeted with the new money (along with a few other countries like Austria, Greece & Portugal) because the last thing the ECB want to deal with is a Eurozone member going bust.

This will last as long as there is political will and as long as the bank is pursuing a general policy of quantative easing.

So, we're unlikely to default in the near future. But then that's not an excuse for racking up cripplingly large debts. By any measure, borrowing over 3% of GDP is regarded as bad practice, yet we are currently up at the 10% mark. If we keep this up, we will fatally compromise our ability to invest in services, infrastructure and the welfare of the vulnerable for a period that lasts beyond a generation.

Killyoursons

21-07-2009, 06:15 PM

In theory, the ECB shouldn't be lending us money at all.

But at the moment, all central banks are at it as part of their quantative easing strategy. They essentially lend us (or other governments) money that they have created out of thin air.

We seem to have been particularly targeted with the new money (along with a few other countries like Austria, Greece & Portugal) because the last thing the ECB want to deal with is a Eurozone member going bust.

This will last as long as there is political will and as long as the bank is pursuing a general policy of quantative easing.

So, we're unlikely to default in the near future. But then that's not an excuse for racking up cripplingly large debts. By any measure, borrowing over 3% of GDP is regarded as bad practice, yet we are currently up at the 10% mark. If we keep this up, we will fatally compromise our ability to invest in services, infrastructure and the welfare of the vulnerable for a period that lasts beyond a generation.

Thanks for that, and daithi, good posts.
I'm not suggesting that we use the ECB as a golden teat, and do nothing to get our house in order. I don't think anyone is. I would certainly freeze wages for public servants above, say, 50 or 60k, and wage cuts for those higehr up again doesn't seem out of the question. For me, the more important distinction isn't between public and private, but between those who are financially capable of carrying a lot of weight, and those who are not.

I'm also a little suspicious of the 'implement all the MacCarthy report now, or else we will (probably) default' logic. As you acknowledge, political will does come into it - presenting it as a cut-and-dried technical problem is a little one-sided. (I'm not suggesting daithi did this deliberately, its more a matter of emphasis.)
Also, a lot depends on what size debt is 'crippling'. Afair, it took us about a decade to get the mid-80s debt under control. Running up a huge debt isn't particularly desiralbe, but it may be the least worst option available. To my mind, Prionsias makes a good case for saying that running up a large debt is preferable to relatively large increases in unemployment.

jd26

21-07-2009, 06:38 PM

You'll see from some of my earlier posts that I'm certainly not of the implement the McCarthy report immediately mindset.

There are a few things that are a good idea, but would not yield savings for several years e.g. amalgamation of rural schools.

There are other things that I regard as totally unacceptable e.g. closing all rail lines that don't go to Dublin

However, there are some cuts necessary.

Over the Ahern era, Bertie effectively bought votes with our own money. We saw unrealistic rises in public sector salaries (Why does a German surgeon earn 4 times as much as an irish one?), large increases in social welfare (Why is the dole double what it is in the UK?), no attempt to enforce efficiency in semi-states (Why does Dublin Bus need twice as much money per passenger kilometre as a bus company in the UK, Sweden or The Netherlands?).

There was one thing that struck me in the thread where Haro was complaining that he couldn't afford guitar equipment because of the changes in rent allowance.
- An unemployed person in Ireland takes home 200 quid a week.
- On rent supplement, they pay 24 quid a week in rent

That means that they're left with 750 quid a month spending money after the accommodation has been paid for.

Now, it's not that long ago that I had an after tax income of around 1K a month, was paying 400 quid a month on rent and 100 a month to pay my commuting costs. What the hell was I working for?

While I appreciate that there can be children to be raised etc., those situations should be dealt with through child allowance. 750 quid net a month is a more than ample amount for any single person to live on.

I have no problem with extra shouldering of the burden. In times past, I've often criticised income tax reductions as I felt the money could be better spent on paying down debt (prophetic, it seems), public infrastructure or moving towards the sort of universal free health service I'd like to see. Now, I'd be happy to pay more tax, just to keep the deficit down (and I am in fact paying almost 3 grand a year more tax this year). But we can't just say we're going to protect certain groups, regardless of whether they need protection or not.

juanpablo

22-07-2009, 12:18 AM

There are other things that I regard as totally unacceptable e.g. closing all rail lines that don't go to Dublin

The report doesn't recommend that, instead it proposes closing lines with low patronage and require large subvention.

The good news for Cork Airport is that with the report recommending all PSOs & other Airport grants being withdrawn then it should limit Farranfore and Waterford airports future expansion.

jd26

22-07-2009, 09:20 AM

The report doesn't recommend that, instead it proposes closing lines with low patronage and require large subvention.

It's a pretty fair assessment.

It recommended closure for
Limerick-Ballybrophy
Limerick Junction-Waterford
Waterford-Rosslare
Ballina-Manulla

That is no lines going to Dublin and all lines not going to Dublin other than Cork-Cobh.

Now, those are the lines that have been starved of investment because Irish Rail has wanted to close them for 30 years.

Of course, in an act of genius, the report ignored rail freight. And the Ballina branch and the Limerick-Birdhill section of the Limerick-Ballybrophy line are two of the most heavily freight-used lines in the country (both connected with particular industries).

Anyway, to show just how much those lines have suffered because nobody working in IE headquarters in Dublin has an interest in making them work (sound like Cork's bus service?), let's look at what's regarded as the weakest of the lot: Waterford-Rosslare.

This line makes do with 1 train a day. That train is actually around 60% full, which isn't too bad, but still one train a day...

Now, it does at least allow for a day's work in Waterford, which is a step above what some of the other lines manage, but consider some of the other factors in the timetabling.

You want to go from somewhere in South Wexford to Dublin. Well, there's no bus, so the train might be an option? Think again. You have a 2 1/2 hour wait in Waterford for the first train to Dublin.

How about if you're in college in Waterford and want to head home for the weekend? Oh dear, there's no Sunday service. So we exclude the time of week that's busiest on the non-commuter network.

You want to travel from Waterford to Rosslare/Wexford. I hope you were planning on an overnight stay. Certainly the days of day-trippers to the beach are long-gone on the line.

Now, the whole thing has turned into a vicious circle with so many people anticipating the closure of the line that they will just not contemplate relying on it as a commuter service. So ideas of building up housing densities on the line cannot work.

And then you'll hear of the cost of keeping the line open. But with 3 decades of under-investment, that's not surprising. Money spent on manual gatekeeping for a line that has one train a day. It doesn't reallt make any sense, does it?

Of course the largest joke was that An Bord Snip recommended replacing it with a bus service - there's no road bridge!

What An Bord Snip should have done is said that the passenger numbers can't justify the money spent, that Irish Rail is not working and recommended handing the lines over to a franchise operator. That would really put the wind up Irish Rail and might make them realise that they can get the cost savings without cutting a single service if they really want to.

The good news for Cork Airport is that with the report recommending all PSOs & other Airport grants being withdrawn then it should limit Farranfore and Waterford airports future expansion.

Waterford is not a PSO airport; it operates on a commercial basis. It was awarded a grant for a runway extension, but I wouldn't be surprised if that had already been paid over at this point.

Actin The Sham

22-07-2009, 12:03 PM

Waterford is not a PSO airport; it operates on a commercial basis. It was awarded a grant for a runway extension, but I wouldn't be surprised if that had already been paid over at this point.

I was just about to make that point as well. It is the pet airport of Martin Cullen which is why it has been getting state aid.

It doesn't even have flights to Dublin, so how anyone could think it was a PSO airport is just indicative of how ill informed they must be about general transport issues in Ireland.

juanpablo

22-07-2009, 06:00 PM

It's a pretty fair assessment.

It recommended closure for
Limerick-Ballybrophy
Limerick Junction-Waterford
Waterford-Rosslare
Ballina-Manulla

That is no lines going to Dublin and all lines not going to Dublin other than Cork-Cobh.

....

On the Ballina-Manulla line the bus is quicker and cheaper. The line doesn't have to close to all traffic, it just doesn't need to have a little used branch train running on it several times a day.

As for Limerick/Waterford/Rosslare line, with significant investment it could be brought up to scratch for passenger services. But where is this going to come from? where is the political will? I too think in the long term privatisation is the best solution but again who or what is going to provide the resources to make this happen?. The harsh reality is that an upgrade of the N24 and N25 will be cheaper to provide rather then upgrading the railway.

Waterford is not a PSO airport; it operates on a commercial basis. It was awarded a grant for a runway extension, but I wouldn't be surprised if that had already been paid over at this point.

As mentioned in my previous post the ending of all state financial aid to Farranfore & Waterford can only benefit Cork airport. Waterford has had its extension but it & Sligo have plans for future expansion based upon Gov. funding (not to mention at least one plan for another airport in Offaly:shock:) all unlikely to succeed if McCarthy is listened to.

Professor Piehead

23-07-2009, 01:39 AM

In its own twee way, the very name, An Bord Snip Nua, gets to the heart of the issue.

Its utter bogusness echoes so much of what state endeavour has been about: pretending to protect and preserve ancient forms of Irishness, whether it is some precious cultural commodity west of the Shannon, or a peat bog in the Midlands, or the Irish language. Whether the McCarthy report is implemented in part or in whole, it is now on the political agenda: and underlying its proposals is a desire for minimalist government, without any great non-political projects as policy. In other words, an end to the notion of the State as a means of shaping the culture of Ireland, and how its people think.

This would be one of the most revolutionary events since 1916, which in essence was not merely about achieving a Republic, but giving that Republic great cultural projects. Thus Pearse thought that the Congested Districts, the most forlorn and impoverished corners of all of Europe, should be the social models for the new State. Which is the equivalent of making Bord na Mona the cornerstone of a space project. However, the actual founders of the State, after a more than usually stupid civil war, realised that nothing could be done with these human tipheads: they were capable of accumulating no capital, and generating no enterprise.

So they became Indian Reservations, where to stultify was to be Irish, and where backwardness was a form of cultural purity. The people here actually received government grants merely for talking. Everyone over 40 was crippled with rheumatism, and the entire population subsisted on a unique frying-pan diet, which explored the extent to which the human frame could survive without any vitamin C whatever.

There were other places of distinctive national virtue, namely the islands. The idealised role model for young people was thus Peig Sayers, whose senile ramblings were jotted down feverishly by teams of folklore stenographers, and turned into the Holy Scripture of the New Old Ireland. Prophets in other lands have emerged from the deserts. Our native form of revered dementia came from a wind-lashed and uninhabitable island: hence the term, Blasket Case.

Generations of children had their will to live broken on the wheel of Peig Sayers. Did any one of them ask, how come if she is so Gaelic her name is Sayers? The same, of course, for that other cultural icon from the West, Brian Merriman. So the very notion of some pure aboriginal Gaelic island folk offering a model to future generations of free Irish people was based on the words and thoughts of descendants of English settlers -- actually, rather like Pearse himself.

So the Irish language itself became a Government Protected Zone (GPZ). The Gaeltacht naturally became an extended GPZ. The islands became a GPZ. History became a GPZ. Even turf-burning became a GPZ. Moreover, this insanity became a perverse template for all sorts of other state projects. Mail and phone services were already GPZ. In the 1940s, all public transport became a GPZ. Air travel then became a GPZ. Arts became a GPZ -- indeed, the arts were hardly seen to be arts at all unless the State gave them a subsidy.

Even economic development was graded around a GPZ hierarchy.

The plain people of Ireland got the IDA. The semi-pure in the west got the Shannon Development. But the purest of the pure got Udaras, the job-creator for people who spoke Irish in a GPZ, a local shop for local people. In more recent times, Udaras has operated within the very ministerial embodiment of the GPZ, the Department of Community, Rural and Gaeltacht Affairs, which has a budget of €40m, with some 240 civil servants: almost one for every native Irish native speaker left.

Through these GPZs, the State became deeply involved in matters it knew nothing about. To be sure, this pleased politicians, for it increased their power of patronage, and thus accorded neatly with a culture of populist clientelism, as well as satisfying the ambitions of the few political ideological TDs, such as Eamon O Cuiv and Michael D Higgins. These see the primary duty of the State to be the pursuit of Great Cultural Projects, each within its own respective GPZ.

The dreams of such zealots are now dross. Nearly all state cultural projects have failed. The Irish language is effectively dead in its GPZ. The preposterous and Haugheyite confection, Aosdana, has achieved nothing whatever in its GPZ. CIE is a mouldering corpse in its GPZ. Every town now has its own empty GPZ, namely an arts centre, with its deserted craft shop offering (but not selling) environmentally sound raffia condoms, seaweed dental floss, and hand-crafted soaps made from pigfat. Government bribes have resulted in two multi-million pound GPZ stadiums in Dublin -- both of which will be empty, most of the time. And the fortune spent on the GPZ that is Olympian sports has produced just one bronze medal -- in bee-keeping.

The great dream is over. It's finally time for Ireland to be a normal country, one in which governments simply govern. Let the Great McCarthyite era begin.

http://www.independent.ie/opinion/columnists/kevin-myers/governments-must-govern--not-try-to-shape-our-culture-1833920.html

Actin The Sham

23-07-2009, 12:28 PM

http://i27.tinypic.com/2py3pd2.jpg

Poor pie-y, bless.

:lol:

hemlock666

23-07-2009, 02:35 PM

So does anyone else think theres a possibility the government will dissolve before the budget as the greens look for an opt out and the whole snip nua mess will be delayed long enough dumped into FG's/Labour's lap? Then FF will come out shining yet again, which lets face is the only thing that matters to them.

jd26

23-07-2009, 03:36 PM

I doubt we'll see a collapse before the budget, but there's a good possibility the budget will bring down the government. And I wouldn't expect the next FF leader to do an Alan Dukes on it then.

Haro

23-07-2009, 04:30 PM

Axeing transport will further hurt our economy. The shitty transport was one of the worst things about this country to begin with, and they want to make it considerably worse.

Having to change in Limerick junction as is for so many lines is atrocious.

Haro

23-07-2009, 04:48 PM

From where, Mars? Haro, that statement shows how little you know about what is going on.

Well, what countries are we currently borrowing for? Different ones to those then, hurr.

Though my main point I think I tried to make earlier is that it's not just about your debt or even your credit rating. Ireland is as far as first world countries go, a shithole. We have unfriendly people despite our reputation, terrible services, terrible cost of living. The only decent thing we have is good welfare, but they're looking to cut even that, and the system is such a headache anyway.

More importantly from a foreign point of view; why invest in Ireland? A lot of multinationals have fecked off and the supposed Tiger is gone. Why bother? If people are loosing confidence in Ireland, it's less to do with how much we're borrowing and more to do with the long term cost/benefit analysis.

Basically any small country like Ireland is saying "I'll pay you back when I'm famous." If we start cutting funding to sciences, the arts, education, we'll have less and less in the way of worthwhile cultural output and exports. If we make cuts to welfare, people on welfare will likely become less productive since you can't just say "get a job" anymore.. There are some even on this forum still pulling this, which just proves the sheer level of delusion in the right wing mentality. If people have less money, they'll spend less, and there won't be as much reason for multinationals to be here to begin with.

Some countries would be wiling to dump irrationally silly amounts of money on other countries if they know they'll probably get some return on investment. Countries like to help other countries out because essentially, it makes them their bitch. But why would anyone want Ireland to be their bitch? If we're unproductive, both these reasons for lending start to wither away. How much we're actually borrowing is secondary to these ideas.

These kind of cuts are ludicrous and wrong and should be barely debated. The way out of a recession is not to become less productive, but more so.

For example Sweden has even more welfare than we do, but people ON welfare are more productive since they're not regarded as second class citzens. Sweden has a strong culture of science and it's own very successful multinationals. What do we have? They are in a much better position to recover from the recession than we are.

On the grand face of things, Ireland is more and more becoming a useless, embarassing piece of shit.

What's the solution to this?

Don't make more cutbacks. Keep borrowing but put that money to real use. Guys like daithi are acting like the concept of return on investment doesn't exist. People get paranoid in a recession so they forget.

Science is doing some amazing things at the moment. Ireland could very easily become a center for science and the arts. Just take a look at TED some time - the amazing things we're doing with manipulating genetics, stem cells and bacteria as well as the development of robotics, artificial intelligence. How many people are there loitering around such as myself with Computer Science degrees that could be put to some good in these fields?

Medical science in particular is a huge area but we're making more and more cutbacks to the health system which for many people is a starting point to get into serious research.

If people are loosing confidence in Ireland, it's not because we're taking so much of their money, it's because we're not doing anything with it. Ireland is currently a nation of incompetent, apathetic, cowboy business men. Organised religion still has far too strong a hold which is one of the reasons science isn't taken seriously.

A simple plan for getting out of this recession:

1) No more major cutbacks, except to TD pay and laying off people that need to be laid off. In fact, reverse some of the cutbacks made to the HSE.

2) Some serious restructuring of government, and emphasise it's presence on bringing down the cost of living. Welfare and minimum wage NEEDS to be buy because no matter what people say it's still very expensive to live here. People do more with more spare cash, and that's what we need.

3) Keep borriwng, but invest some of that money in scientific research, particularly robotics and medical science. Set up programs within the HSE that allows people to do work experience in Hospitals, etc. and more money to the research departments of major hospitals like CUH.

4) Particular look for investors in countries which are heavily into this research such as Sweden, Denmark, Germany. Countries that are interested in medicine/health care, or robotics/engineering.

5) Better education. Cut the shit in the Leaving Cert especially, more focus on actual culturally relevant or productive subjects. More science in schools, better science in schools, spend time researching the best recieved texts/reading materials instead of "Teacher knows best"(the same with colleges). Maybe put money into studying teaching methods and writing better books so people aren't chased away. I did a lot worse in Chemistry than I could have because of this. The relationship between Science and Design is a huge thing all of a sudden and another wave we need to ride. And actually teach critical thinking/logic/debate so we don't end up with awful voters and politicans. Leaving Cert students are treated like rats and it produces a terrible mentality that overstates time spent working and "grinding" rather than quality of work and independant thought.

6) Full seperation of Church and state. Again, I think this is the reason why Ireland is not the centre of science it could be today.

7) Legalise Marijuana and tax it. Honestly. There is no reason not to.

8) As we begin to exit the recession, pump money(not aimlessly of cousre) into infrastructure, particularly transport(rail networks are abysmal) and internet. This will accelerate the rate of recovery. When people can commute and communicate more efficiently, better business is done better.

This is a long term idea and I'm by no means an economist. But there is a huge wave coming of scientific advancement and the best way for Ireland to get out of this recession is to ride it instead of trying to swim ashore in a sea of debt and cutbacks.

i_didnt_do_nawtin

23-07-2009, 04:58 PM

No, he's entitled to decent living conditions; he shouldn't have to accept any kind of crappy place available...

Easy for you with that option open to you, but what about those who don't have the luxury of going back home to the folks when things go bad??

Then why are there homeless on the streets of Cork?

You're entitled to what you can afford.

Haro

23-07-2009, 04:59 PM

Then why are there homeless on the streets of Cork?

You're entitled to what you can afford.

Why? Why push shitty right wing ethics when there is an alternative?

There shouldn't "be" homelessness to begin with. There shouldn't be people forced to live with their parents, either. You do understand that making people on a whole less productive is bad for getting out of a recession right? People are more productive when they're out being active and doing their own thing, not shipped back to Ballybunion or wherever.

i_didnt_do_nawtin

23-07-2009, 05:06 PM

Why? Why push shitty right wing ethics when there is an alternative?

There shouldn't "be" homelessness to begin with. There shouldn't be people forced to live with their parents, either. You do understand that making people on a whole less productive is bad for getting out of a recession right? People are more productive when they're out being active and doing their own thing, not shipped back to Ballybunion or wherever.

So you playing your expensive guitar will save the economy?

The money for your wailing has to come from somewhere.

daithi81

23-07-2009, 05:11 PM

Well, what countries are we currently borrowing for? Different ones to those then, hurr.

What short-minded thinking!

:lol!:

Ok, lets assume that things work as they do in your world above.

You still haven't addressed what happens when we run out of 'countries' to borrow from. Or are there infinite countries? What happens when we keep borrowing money, keep paying higher interest rates and compile so much debt that we don't even generate enough money to pay the interest? Do you know what that means, Haro?

You're going back to Clare.

:lol!:

Rebelred

23-07-2009, 05:21 PM

Why? Why push shitty right wing ethics when there is an alternative?

There shouldn't "be" homelessness to begin with. There shouldn't be people forced to live with their parents, either. You do understand that making people on a whole less productive is bad for getting out of a recession right? People are more productive when they're out being active and doing their own thing, not shipped back to Ballybunion or wherever.

paying unsustainable levels of welfare to an increasing percentage of the population on a smaller tax intake is not an alternative.

daithi81

23-07-2009, 05:22 PM

paying unsustainable levels of welfare to an increasing percentage of the population on a smaller tax intake is not an alternative.

No, just keep borrowing money from countries.

It's easy.

Rebelred

23-07-2009, 05:28 PM

No, just keep borrowing money from countries.

It's easy.

makes perfect sense to me Daithi-Y!

Also:

Don't make more cutbacks. Keep borrowing but put that money to real use. Guys like daithi are acting like the concept of return on investment doesn't exist. People get paranoid in a recession so they forget.

Science is doing some amazing things at the moment. Ireland could very easily become a center for science and the arts.

you can't put those two things together and list them as a national priority. "Arts", or whatever that umbrella covers these days, is a luxury we can no longer afford to fuck millions away on.

Haro

23-07-2009, 05:51 PM

Rebelred, did you even read the rest of my post?

you can't put those two things together and list them as a national priority. "Arts", or whatever that umbrella covers these days, is a luxury we can no longer afford to fuck millions away on.

Is exactly the attitude I was talking about. Cultural output leads to Ireland being a country to actually invest in. People who just want to cut everything are not thinking long term. Once you set a standard for luxury, you're setting a lower standard for yourself. We don't "have" to accept losses. That attitude gets nobody nowhere. Even if it seems impossible, there has to be another solution. When has a recession been solved with cutbacks? Never.

It's frustrating that one comment I made at the start was focused on and the actual body of my argument was ignored.

So you playing your expensive guitar will save the economy?

The money for your wailing has to come from somewhere.

My guitar is not expensive. My guitar is in fact about as cheap as they come. This seems appropriate for someone on welfare. I'm pretty sure I've stated how cheap it was everytime I posted it. Again this shows how delusional the right wing mentality is.

Do you think I don't deserve my guitar? Why not? What would you rather have me do instead? If anything you mention was plausible, we wouldn't have such a problem with jobs to begin with.

It seems you'd rather have people suffer from good old Catholic guilty and sit around in their rooms all day.

This is not productive. Yes, me playing guitar is more productive than me doing nothing. The more people you have doing that, the more bands you have, the more bands you have the more entertainment you have, and enterainment draws people to places and makes money.

What short-minded thinking!

:lol!:

Ok, lets assume that things work as they do in your world above.

You still haven't addressed what happens when we run out of 'countries' to borrow from. Or are there infinite countries? What happens when we keep borrowing money, keep paying higher interest rates and compile so much debt that we don't even generate enough money to pay the interest? Do you know what that means, Haro?

You're going back to Clare.

:lol!:

I honestly think at this stage you're a piece of shit who's just delighting in general sadism and doesn't really give a toss about the state of the country. Anyone who did would have some level of sympathy. You are a huge part of what's wrong. "Decent" people wouldn't settle for less than desirable scenarios and wouldn't accept doom and gloom just because our government perscribes it. You're just using the recession as an excuse to feel more mature than everyone else instead of using it as a springboard for new ideas.

If you're arsed about how right you are, then actually read the entirity of my post and come up with why it's a bad idea. Cutbacks are not going to bring us out of a recession. Even (the more intelligent) right wingers agree on this. Putting money into science, and yes the arts, thanks to the new relationship between design and science, will.

I am not the only one that thinks this way.

http://www.ted.com/talks/juan_enriquez_shares _mindboggling_new_sc ience.html

This is the kind of stuff that's coming up and it's important for us in the long term to be a part of it.

daithi81

23-07-2009, 05:53 PM

I feel the need to post this again, for Haro's benefit. Cause he doesn't seem to be grasping this situation.

I will put it this way. Imagine that you earned €100 p/w and you spent €100 p/w. The books are balanced. Suddenly, there is a drop in income to €80 p/w, yet you continue to spend €100 p/w. So you are borrowing €20 p/w to maintain your lifestyle and over time your TOTAL debt is piling up, with interest. As this piles up, the bank becomes less willing to lend, or starts charging higher interest rates. This of course increases your TOTAL debt and a vicious cycle begins which leads to the individual being unable to service the interest payments, let alone the principal debt.

Now, factor into this model a slowly decreasing income and an ever increasing debt, cause some of his mates asked him to go guarantor on a loan (NAMA, AIB, BOI, etc). This is where Ireland stands, at the moment. If we keep spending money that we don't have, at least in the volumes we are doing it, we will not be able to meet our obligations to foreign lenders. They will stop lending to us. Capital will fly out of the country. This is your typical default story minus the exchange rate issues, which we wont have cause of the Euro.

daithi81

23-07-2009, 05:54 PM

Rebelred, did you even read the rest of my post?

Is exactly the attitude I was talking about. Cultural output leads to Ireland being a country to actually invest in. People who just want to cut everything are not thinking long term. Once you set a standard for luxury, you're setting a lower standard for yourself. We don't "have" to accept losses. That attitude gets nobody nowhere. Even if it seems impossible, there has to be another solution. When has a recession been solved with cutbacks? Never.

It's frustrating that one comment I made at the start was focused on and the actual body of my argument was ignored.

My guitar is not expensive. My guitar is in fact about as cheap as they come. This seems appropriate for someone on welfare. I'm pretty sure I've stated how cheap it was everytime I posted it. Again this shows how delusional the right wing mentality is.

I honestly think at this stage you're a piece of shit who's just delighting in general sadism and doesn't really give a toss about the state of the country. Anyone who did would have some level of sympathy. You are a huge part of what's wrong. "Decent" people wouldn't settle for less than desirable scenarios and wouldn't accept doom and gloom just because our government perscribes it. You're just using the recession as an excuse to feel more mature than everyone else.

If you're arsed about how right you are, then actually read the entirity of my post and come up with why it's a bad idea. Cutbacks are not going to bring us out of a recession. Even (the more intelligent) right wingers agree on this. Putting money into science, and yes the arts, thanks to the new relationship between design and science, will.

I am not the only one that thinks this way.

http://www.ted.com/talks/juan_enriquez_shares _mindboggling_new_sc ience.html

This is the kind of stuff that's coming up and it's important for us in the long term to be a part of it.

http://intepid.com/res/417.gif

Haro

23-07-2009, 05:56 PM

http://intepid.com/res/417.gif

That is not an acceptable response to my post, and certainly not the talk I linked to. There is never such a thing as having no money. As long as we have some money, this is what we should focus on.

Social standards aren't real. "Doom and gloom" isn't real. Countries aren't really even real, nor is money since the abolition of the gold standard(part of the problem). The harsh reality you project actually doesn't exist. Paying back interest is currently a short term worry. So that image couldn't be more inappropriate.

Grow the fuck up, honestly. For someone so grounded in reality you sure seem to be far removed from how to argue properly.

Actin The Sham

23-07-2009, 05:58 PM

International investment sentiment towards Ireland has improved in the past three months, according to the Chief Executive of the National Treasury Management Agency.

International investment sentiment towards Ireland has improved in the past three months, according to the Chief Executive of the National Treasury Management Agency.

Dr Michael Somers said today that the announcement of recent measures by the Government to tackle budget deficit had sent out a positive signal.

The NTMA has revealed that the national debt up to the end of 2008 was €50.4bn, which compares to €37bn at the end of 2007.

"Earlier in the year we could only really get money for about three years," Dr Somers said.

"In June, that had increased up to ten years. We were able to get €6bn - ten year money - which showed the enormous change in sentiment towards Ireland.

"Even this week, we've had three different financial operations - in each of those we raised about a billion euro."

***

Haro

23-07-2009, 06:00 PM

Well, that's fantastic news.

That does mean of course we actually have the money to invest in medical research and technology, unlike what Daithi says.

However if these measures to tackle things involve cutting everything until we're no longer productive, then confidence is going to drop. Unfortunately much like our government, other countries don't realise the effect of it until it's done.

Now that we have some money secured we need to put it to good use. It's a lot like third world debt, just giving them shit isn't enough, it has to be put to use. Same concept here, that's all I'm trying to say. But to Daithi this is fantasy.

Actin The Sham

23-07-2009, 06:05 PM

If we are seen to be serious about tackling the crisis in the public finances the markets will respond positively.

We are in no way out of the woods, but in spite of Mary Coughlan and Brian Cowen things might improve early next year.

We should start to bottom out then. After that it is a long hard slog back up. Current estimates put our eventual recovery to be in 2017. But we will never return to the "celtic tiger" days.

Which probably isn't a bad thing. Consistent gradual growth is probably what we need, rather than breakneck "catch up" growth on the back of a property bubble.

When we get to the stage where the megane scenic or citroen picasso is more popular than the BMW 3-Series, then hopefully we can say we have matured as a nation.

Haro

23-07-2009, 06:08 PM

2017 is a depressingly long time to recover from a recession. Hopefully I'll skip out of the country before then to somewhere that won't be so crap.

daithi81

23-07-2009, 06:11 PM

That is not an acceptable response to my post, and certainly not the talk I linked to. There is never such a thing as having no money. As long as we have some money, this is what we should focus on.

Social standards aren't real. "Doom and gloom" isn't real. Countries aren't really even real, nor is money since the abolition of the gold standard(part of the problem). The harsh reality you project actually doesn't exist. Paying back interest is currently a short term worry. So that image couldn't be more inappropriate.

Grow the fuck up, honestly. For someone so grounded in reality you sure seem to be far removed from how to argue properly.

Haro, you talk so much nonsense I honestly don't even know where to start. Sure, not everybody is an economics head, thats fine, but you seem to be completely unwilling to listen to anything other than whatever nonsense that comes to your mind. You don't seem to have a laymans grasp of how public finances work, how countries 'borrow' money, how powerful a variable interest actually is, etc, etc. Not only are you ignorant of all these things, but you seem to wear this fact as a badge, and display what only can be described as a pig-headed, arrogant defiance to reason.

This, Haro, is why no one on here is taking you seriously.

daithi81

23-07-2009, 06:13 PM

That does mean of course we actually have the money to invest in medical research and technology, unlike what Daithi says.

That's a direct quote, then?

Haro

23-07-2009, 06:16 PM

Haro, you talk so much nonsense I honestly don't even know where to start. Sure, not everybody is an economics head, thats fine, but you seem to be completely unwilling to listen to anything other than whatever nonsense that comes to your mind. You don't seem to have a laymans grasp of how public finances work, how countries 'borrow' money, how powerful a variable interest actually is, etc, etc. Not only are you ignorant of all these things, but you seem to wear this fact as a badge, and display what only can be described as a pig-headed, arrogant defiance to reason.

This, Haro, is why no one on here is taking you seriously.

This is coming from the guy that was just proven wrong.

International investment sentiment towards Ireland has improved in the past three months, according to the Chief Executive of the National Treasury Management Agency.

International investment sentiment towards Ireland has improved in the past three months, according to the Chief Executive of the National Treasury Management Agency.

Dr Michael Somers said today that the announcement of recent measures by the Government to tackle budget deficit had sent out a positive signal.

The NTMA has revealed that the national debt up to the end of 2008 was €50.4bn, which compares to €37bn at the end of 2007.

"Earlier in the year we could only really get money for about three years," Dr Somers said.

"In June, that had increased up to ten years. We were able to get €6bn - ten year money - which showed the enormous change in sentiment towards Ireland.

"Even this week, we've had three different financial operations - in each of those we raised about a billion euro."

***

You don't have a grasp of public finances either, at all. The difference is that you're buying into the consensus out there that we can't tackle the problem head on, which is spread by the government because they don't want to. Things are often much simpler than they seem. You only have the government's grasp of what public finances are. Not a very reliable source is it?
I pointed out that none of these things really exist and there's many different ways to run a country. You're just like the teenage girl who bought all Michael Jackson's records only after he died.

"Nobody" is not yourself and Rebelgirl, and neither of you are worth much.

ho chi feen

23-07-2009, 06:16 PM

Haro

23-07-2009, 06:25 PM

paying unsustainable levels of welfare to an increasing percentage of the population on a smaller tax intake is not an alternative.

How do you know it's "unsustainable"? Why is Sweden able to manage even heavier welfare than us? Do a search for Swedish welfare cutbacks, and you only get articles from the early 90s...

i_didnt_do_nawtin

23-07-2009, 06:27 PM

daithi81

23-07-2009, 06:32 PM

This is coming from the guy that was just proven wrong.

You don't have a grasp of public finances either, at all. The difference is that you're buying into the consensus out there that we can't tackle the problem head on, which is spread by the government because they don't want to. Things are often much simpler than they seem. You only have the government's grasp of what public finances are. Not a very reliable source is it?
I pointed out that none of these things really exist and there's many different ways to run a country. You're just like the teenage girl who bought all Michael Jackson's records only after he died.

"Nobody" is not yourself and Rebelgirl, and neither of you are worth much.

Again, I don't know what you are talking about. It's just gobbledy-gook. ATS's post 'proves' (do u know what a proof is?) nothing. In fact, it shows that the market is reacting positively to the governments plans, because it's much safer to lend to a country that is managing its finances in a realistic manner than a country that is spending like mad, with no thought for the consequences.

The same story (no, not article, Haro), in full:

Ireland Leaves Door Open to More 2009 Bond Sales (Update1)

By Anchalee Worrachate

July 22 (Bloomberg) -- Ireland may consider selling more bonds than initially planned this year to help finance the 2010 budget deficit as investor sentiment toward the country improves, according to the nation’s debt agency.

While the government has no “specific” plan, it may tap the markets if there is enough demand, said Oliver Whelan, the head of funding and debt management at the Dublin-based agency. Ireland has raised 22.7 billion euros ($32.2 billion), or 90 percent, of the 25 billion euros earmarked this year, he said.

“If the opportunity in terms of market demand is there, I wouldn’t rule out at some stage doing some elements of pre- funding,” Whelan said in an interview yesterday. “There is no particular plan to pre-fund at this stage.”

Ireland’s economy shrank 2.3 percent in 2008 and may contract as much 12 percent in the three years through 2010, the most for an industrialized economy since the Great Depression, the Dublin-based Economic and Social Research Institute said in April. Standard & Poor’s lowered Ireland’s credit rating twice this year, to AA, citing the nation’s deteriorating finances.

The yield difference, or spread, between 10-year Irish bonds and the benchmark German bund narrowed 1 basis point to 200 basis points today. It peaked at 284 basis points in March, the widest since the introduction of the euro in 1999.

Bond Returns

Irish bonds are the best-performing securities in the euro region this month, returning 2.1 percent, according to Bloomberg/EFFAS indexes. That compares with a 0.4 percent gain for benchmark German debt.

“Sentiment has improved,” said Whelan. “Ireland is serious about addressing the budgetary issues and the market is beginning to appreciate that.”

The country’s budget deficit will rise to 10.8 percent of gross domestic product this year, more than three times the European Union limit, according to the government.

Finance Minister Brian Lenihan said on July 16 that the government faces “difficult policy options” as it tries to reduce the deficit. He was responding to the publication of a government-commissioned report that recommends cutting 17,300 public jobs, reducing welfare spending and closing some state agencies and police stations to help save 5.3 billion euros.

http://www.bloomberg.com/apps/news?pid=newsarchive&sid=a0XahTpqFHOw

i_didnt_do_nawtin

23-07-2009, 06:33 PM

My guitar is not expensive. My guitar is in fact about as cheap as they come. This seems appropriate for someone on welfare. I'm pretty sure I've stated how cheap it was everytime I posted it. Again this shows how delusional the right wing mentality is.

Do you think I don't deserve my guitar? Why not? What would you rather have me do instead? If anything you mention was plausible, we wouldn't have such a problem with jobs to begin with.

This is not productive. Yes, me playing guitar is more productive than me doing nothing. The more people you have doing that, the more bands you have, the more bands you have the more entertainment you have, and enterainment draws people to places and makes money.

I'm sure you deserve your guiter, I'm not sure you require it to exist.

How will businesses that provide this entertainment make money if no-one has any?

Actin The Sham

23-07-2009, 07:00 PM

Again, I don't know what you are talking about. It's just gobbledy-gook. ATS's post 'proves' (do u know what a proof is?) nothing. In fact, it shows that the market is reacting positively to the governments plans, because it's much safer to lend to a country that is managing its finances in a realistic manner than a country that is spending like mad, with no thought for the consequences.

The same story (no, not article, Haro), in full:

http://www.bloomberg.com/apps/news?pid=newsarchive&sid=a0XahTpqFHOw

I tend to agree with Alan Dukes who yesterday said that "it was the credit rating agencies who got us into this mess in the first place." He was referring to the way that S&P and others gave securitised instruments triple a ratings in the US and contributed to the financial crisis there which led to a wave of subprime toxic debt washing over the worlds financial markets.

Here is another interesting article about this whole issue:

Drinking the Rating Agencies' Kool-Aid

By Vanessa Drucker

There is plenty of blame to go around for the financial meltdown of 2008. Culprits range from dozy regulators, to feckless investors, to consumers who didn’t bother to read the fine print. The three main rating agencies, who blessed the toxic instruments, played an especially pernicious role as gatekeepers. Both investors and regulators overly depended on those ratings, which had become hard-wired into contracts and investment guidelines.

Triple and double A insignia allayed the reservations of market participants, who relied upon them to throw caution to the winds. The coveted AAA grade created a false sense of security, conveying that an instrument was at least as safe as a typical investment grade corporate bond, and highly unlikely to default. As long as the house of cards held together, during rising property prices and declining interest rates, issuers skirted losses and criticism. When the cards collapsed, the models for assessing mortgage pools and for structuring the securitized deals finally came under scrutiny.

A Privileged Oligopoly

The predecessors to today’s rating agencies began over a century ago to offer research on the risks of railroads and other bonds, explains Richard Herring, Jacob Safra Professor of International Banking at the Wharton School at the University of Pennsylvania. That earlier system was less subject to conflicts of interest, since rating companies made money by selling their manuals to investors, who would buy more manuals if the credit assessments turned out to be accurate. However, the advent of the Xerox machine enabled other users to photocopy the manuals, compelling the rating firms to turn to issuers for compensation.

By the 1970’s, issuers, rather than investors, were funding the model. The three primary rating agencies, Standard & Poor’s, Fitch and Moody’s belong to an exclusive club of NRSROs, or Nationally Recognized Statistical Rating Organization. The designation, first established in 1975 by the SEC, eventually widened to encompass ten firms, although the others have never gained competitive traction.

The marketplace continues to rely on the big three, as a result of culture, path dependency and investment guidelines. “The SEC unwittingly promoted an oligopoly, rather than designing a process of approval that would permit new entrants and more competition or alternative companies,” says Michael Youngblood, a principal at Five Bridges Capital in Bethesda, Maryland.

Both U.S. and foreign regulators further entrenched the agencies’ dominance, by baking ratings into their rules. The Basel II Standardized Approach measures the adequacy of a bank’s capital cushion. It assigns a capital charge to each asset, which is weighted according to its rating. “It’s ironic that, just as reforms were being proposed in 2008 to remove ratings from SEC regulations, the adoption of Basel II was pushing regulators in the opposite direction,” Herring comments.

The pressures toward grade inflation are obvious, when companies are paying for their own bonds to be rated. To make matters worse, issuers pay maintenance fees for monitoring and re-rating, which clearly undermines any impetus to downgrade, and cloaks poor performance.

On October 22, 2008, the Congressional Committee on Oversight and Government Reform held a hearing on the role of the credit rating agencies in the Wall Street crisis. In his opening statement, Chairman Henry Waxman referenced an October 2007 presentation by Moody’s CEO, Ray McDaniel: “Analysts and MD’s are continually pitched by bankers, issuers and investors,” as McDaniel described in a confidential address to the Board of Directors, and admitted that sometimes we “drank the kool-aid.”

The problem is compounded when rating agencies are paid consulting fees to help to design the structured finance deals in the first place. “Everyone is sitting on the same side of the table at that point,” says Graham Henley, a director at LECG who formerly served as director of mortgage-backed securitization at Societe Generale. “The fox is in the henhouse!”

Faulty Models

Garbage in, garbage out. When models are based on erroneous or insufficient data, they produce misleading results. One of the stumbling blocks for rating securitized instruments was the dearth of long term data for extrapolation. Although the ratings analysts assumed defaults would increase during an economic slowdown, recent history offered no such modeling data for innovations like CDO’s.

Indeed, many CDO’s were simply unratable on the basis of the home loan characteristics in the reshuffled pools of mortgages. In his testimony Chairman Waxman refers to exchanges between S&P employees describing the pressure on analysts to devise shortcuts, based on guesswork, for coming up with some rating, any rating at all. “It could be structured by cows, and we would rate it,” one analyst wrote.

****

Heh heh heh..

Read the article in full here:

http://www.realclearmarkets .com/articles/2009/03/drinking_the_rating_ agencies_k.html

And remember, don't believe everything that comes out of ratings agencies; especially ones like standard & poor, who are currently under investigation by the securities and exchange commission in the US.

daithi81

23-07-2009, 07:06 PM

Those agencies are like wimmin, can't live with 'em, can't kill 'em.

Although my point stands, the current warming of investors to Ireland is a result of the government's recognition that the finances are in a mess and that action will be taken. Of course, this can turn cold at a moments notice, should the wrong moves be made. Remember, because of this deficit, and NAMA, and the inevitable further re-capitalisation of AIB/BOI, we will need to borrow €100bn+ over the next few years. That's almost half our GDP. But yeah, let's ignore all of Bord Snip's proposals and keep the party swingin'

Professor Piehead

23-07-2009, 07:48 PM

Well, what countries are we currently borrowing for? Different ones to those then, hurr.

Though my main point I think I tried to make earlier is that it's not just about your debt or even your credit rating. Ireland is as far as first world countries go, a shithole. We have unfriendly people despite our reputation, terrible services, terrible cost of living. The only decent thing we have is good welfare, but they're looking to cut even that, and the system is such a headache anyway.

More importantly from a foreign point of view; why invest in Ireland? A lot of multinationals have fecked off and the supposed Tiger is gone. Why bother? If people are loosing confidence in Ireland, it's less to do with how much we're borrowing and more to do with the long term cost/benefit analysis.

Basically any small country like Ireland is saying "I'll pay you back when I'm famous." If we start cutting funding to sciences, the arts, education, we'll have less and less in the way of worthwhile cultural output and exports. If we make cuts to welfare, people on welfare will likely become less productive since you can't just say "get a job" anymore.. There are some even on this forum still pulling this, which just proves the sheer level of delusion in the right wing mentality. If people have less money, they'll spend less, and there won't be as much reason for multinationals to be here to begin with.

Some countries would be wiling to dump irrationally silly amounts of money on other countries if they know they'll probably get some return on investment. Countries like to help other countries out because essentially, it makes them their bitch. But why would anyone want Ireland to be their bitch? If we're unproductive, both these reasons for lending start to wither away. How much we're actually borrowing is secondary to these ideas.

These kind of cuts are ludicrous and wrong and should be barely debated. The way out of a recession is not to become less productive, but more so.

For example Sweden has even more welfare than we do, but people ON welfare are more productive since they're not regarded as second class citzens. Sweden has a strong culture of science and it's own very successful multinationals. What do we have? They are in a much better position to recover from the recession than we are.

On the grand face of things, Ireland is more and more becoming a useless, embarassing piece of shit.

What's the solution to this?

Don't make more cutbacks. Keep borrowing but put that money to real use. Guys like daithi are acting like the concept of return on investment doesn't exist. People get paranoid in a recession so they forget.

Science is doing some amazing things at the moment. Ireland could very easily become a center for science and the arts. Just take a look at TED some time - the amazing things we're doing with manipulating genetics, stem cells and bacteria as well as the development of robotics, artificial intelligence. How many people are there loitering around such as myself with Computer Science degrees that could be put to some good in these fields?

Medical science in particular is a huge area but we're making more and more cutbacks to the health system which for many people is a starting point to get into serious research.

If people are loosing confidence in Ireland, it's not because we're taking so much of their money, it's because we're not doing anything with it. Ireland is currently a nation of incompetent, apathetic, cowboy business men. Organised religion still has far too strong a hold which is one of the reasons science isn't taken seriously.

A simple plan for getting out of this recession:

1) No more major cutbacks, except to TD pay and laying off people that need to be laid off. In fact, reverse some of the cutbacks made to the HSE.

2) Some serious restructuring of government, and emphasise it's presence on bringing down the cost of living. Welfare and minimum wage NEEDS to be buy because no matter what people say it's still very expensive to live here. People do more with more spare cash, and that's what we need.

3) Keep borriwng, but invest some of that money in scientific research, particularly robotics and medical science. Set up programs within the HSE that allows people to do work experience in Hospitals, etc. and more money to the research departments of major hospitals like CUH.

4) Particular look for investors in countries which are heavily into this research such as Sweden, Denmark, Germany. Countries that are interested in medicine/health care, or robotics/engineering.

5) Better education. Cut the shit in the Leaving Cert especially, more focus on actual culturally relevant or productive subjects. More science in schools, better science in schools, spend time researching the best recieved texts/reading materials instead of "Teacher knows best"(the same with colleges). Maybe put money into studying teaching methods and writing better books so people aren't chased away. I did a lot worse in Chemistry than I could have because of this. The relationship between Science and Design is a huge thing all of a sudden and another wave we need to ride. And actually teach critical thinking/logic/debate so we don't end up with awful voters and politicans. Leaving Cert students are treated like rats and it produces a terrible mentality that overstates time spent working and "grinding" rather than quality of work and independant thought.

6) Full seperation of Church and state. Again, I think this is the reason why Ireland is not the centre of science it could be today.

7) Legalise Marijuana and tax it. Honestly. There is no reason not to.

8) As we begin to exit the recession, pump money(not aimlessly of cousre) into infrastructure, particularly transport(rail networks are abysmal) and internet. This will accelerate the rate of recovery. When people can commute and communicate more efficiently, better business is done better.

This is a long term idea and I'm by no means an economist. But there is a huge wave coming of scientific advancement and the best way for Ireland to get out of this recession is to ride it instead of trying to swim ashore in a sea of debt and cutbacks.

'If we make cuts to welfare, people on welfare will likely become less productive '

:lol!: :lol!:

daithi81

23-07-2009, 07:50 PM

'If we make cuts to welfare, people on welfare will likely become less productive '

:lol!: :lol!:

:lol!:

Professor Piehead

23-07-2009, 07:53 PM

:lol!:

The guy is seriously out there.

'Set up programs within the HSE that allows people to do work experience in Hospitals'

Yeah, we'll get some unemployed brickies in to do some brain surgery.

:lol!:

Haro, you should lay off the LSD, you might get somewhere.

Professor Piehead

23-07-2009, 08:02 PM

2017 is a depressingly long time to recover from a recession. Hopefully I'll skip out of the country before then to somewhere that won't be so crap.

What country has a greater standard of benefits than Ireland?

You're going nowhere dreamer.

Professor Piehead

23-07-2009, 08:14 PM

How do you know it's "unsustainable"? Why is Sweden able to manage even heavier welfare than us? Do a search for Swedish welfare cutbacks, and you only get articles from the early 90s...

http://www.newgeography.com/content/00814-swedens-taxes-the-hidden-costs-the-welfare-state

You want us workers to pay higher rates of tax so you can get more money to lie in bed until three in the afternoon.

Mad as a balloon.

daithi81

23-07-2009, 09:24 PM

'Why is Sweden able to manage even heavier welfare than us? Do a search for Swedish welfare cutbacks, and you only get articles from the early 90s...'

http://www.globalinsight.co m/SDA/SDADetail7871.htm

http://www.offnews.info/verArticulo.php?cont enidoID=6964

http://tvnz.co.nz/view/page/411749/831669

http://news.bbc.co.uk/2/hi/europe/5353092.stm

Professor Piehead

23-07-2009, 09:33 PM

I only finished reading Colm McCarthy's report on the state of the nation yesterday. It is probably the most important single analysis of the Irish State since independence.

It is our Domesday Book, a tabulation of the costs and the follies of this Republic: and if it is to have any genuinely historical significance, it must now be followed by our own Magna Carta, which will curtail the privileges of the powerful. We must abandon the anachronistic language of the hungry 1930s, and accept that a) means tests do not rank as evils along with Hitler and rickets, and b) all those currently on welfare-benefits do not necessarily deserve them.

To quote from the Colmsday Book. "General social welfare rates have increased by between 90pc and 110pc since 2000 (or up to 67pc in real terms). . ."

So, every mother of four in Ireland gets €738 a calendar month in children's allowance, tax-free, regardless of family income or wealth. This is both fatuous and frivolous, and only those who take counsel from their own cowardice declare that nothing can be done about it. History has shown it was phased in; history could show it can be phased out. It is a question of will -- and that is a moral commodity conspicuously lacking amongst our political classes.

The Irish experiment in electoral structures, the multi-seat proportionally representative constituency, is a disaster, and the greatest single corrupter of Irish political life. Throw in the Irish term, for which English has no equivalent, flaithiulacht, which is not so much a word as a cultural concept, and the result is that ministers for finance have behaved like drunken sailors on shore leave, endlessly throwing money at the electorates.

And TDs thus find themselves in an endless bidding war within their own constituencies. For a politician to show "responsibility" is rather like a heifer queue-jumping in a slaughterhouse.

Another organic problem is the media. It is not possible to read and understand the McCarthy report even within a couple of days. Yet the RTE 'Nine O'Clock News' poisoned the public perception of McCarthy's report on the very day it was published, by announcing the various headline items, category by category, to be followed faithfully with a denunciation of each by either a trade union leader or a left-wing TD. This was not balance, but Pravda agitprop, showing more about the culture of the RTE newsroom than about the report.

McCarthy does more than expose the calamitous inner workings of this State. It tells us we have been betrayed. We have been lied to, by governments, by the civil service and by trade unions. We simply didn't know that teachers are allowed to take 30 days uncertified sick leave a year (more than I have taken in my entire life) -- the equivalent of six working weeks.

As Eddie Hobbs points out, with their preposterously generous holidays, teachers can effectively take one year free every four years. And merely to provide substitute coverage for absent teachers now costs the State €300m a year.

We didn't know -- and by God, the GRA were never going to tell us -- that there are 57 different pay allowances to gardai. Or that these allowances are then reflected in garda pensions: and that P-word then brings us to a public service world which looks as if it has been created by flaithiulacht on LSD.

It costs the State €7,700,000,000 -- yes, SEVEN THOUSAND, SEVEN HUNDRED MILLION EURO -- a year to provide pensions to public servants. These are effectively paid out of taxes drawn from the private sector, whose members, of course, enjoy no such pensions. If these public service pensions were to be paid for by those who actually draw them, through deductions at source during their working lifetimes, as in the private sector, the McCarthy report notes that they would cost 27pc of annual salary for a typical civil servant, 31pc for a teacher (retiring at age 55), 33pc for a hospital consultant, 48pc for a garda, and up to 87pc of the annual salary for a High Court judge.

Speaking of which, one largely undiscovered bombshell is a McCarthy proposal to end the difference between senior counsel and junior counsel. This wholly artificial, arbitrary and discretionary distinction has all the monopolistic hallmarks of a medieval guild. Not merely are the higher pay rates that SCs get a massive burden on the State, prosecutions and tribunals, they are an intolerable burden on the entire private sector whenever we are drawn into law.

So you can imagine my unbridled joy when I learned that government departments are in the habit of suing one another in court, thereby enriching the wigged ones further, and without even consulting their ministers beforehand. A mere footnote to that idiocy is the revelation that the employment of tipstaffs, those ornamental beadles of our courts, costs the State €2.5m a year.

Forget the self-interested commentaries from the trade unions, and ignore the wholly predictable reflex responses of the left. This report is an audit on how dementedly irresponsible the management of this State has been. If the Republic is to be saved, the blueprint for rescue lies in Colm McCarthy's Domesday Book.

http://www.independent.ie/opinion/columnists/kevin-myers/blueprint-for-rescue-lies-in-mccarthys-domesday-book-1835598.html

Rebelred

24-07-2009, 10:54 AM

daithi81

24-07-2009, 11:10 AM

What recession has ever been solved by borrowing €400 million a week at a high rate of interest?
As a nation Haro, we're living beyond our means, have been for years. This is not me having a go at you, this is fact. We cannot continue to do so. So yes, standard do have to be lowered for the long term benefit of the nation, for everyone. You say there has to be another solution, yet you can't think of one.

*tut*

You just keep borrowing, Rebely. How many times do I have to say this?

Rebelred

24-07-2009, 11:21 AM

*tut*

You just keep borrowing, Rebely. How many times do I have to say this?

hey Daithi-y, can I borrow a tenner there lad? I'll pay it back soon I promise, just gotta give a buddy 20 quid first.

daithi81

24-07-2009, 11:27 AM

hey Daithi-y, can I borrow a tenner there lad? I'll pay it back soon I promise, just gotta give a buddy 20 quid first.

Sure, but you have to pay me back 20 quid, in a weeks time.

Rebelred

24-07-2009, 11:30 AM

Sure, but you have to pay me back 20 quid, in a weeks time.

Ok, I'll have to ask someone else for 40 quid so, coz I owe me buddy 20 next week aswell. But it's all good!

daithi81

24-07-2009, 11:31 AM

Ok, I'll have to ask someone else for 40 quid so, coz I owe me buddy 20 next week aswell. But it's all good!

Ok, in light of that information, I'm going to ask for €30 return on my €10 investment.

Rebelred

24-07-2009, 11:34 AM

Ok, in light of that information, I'm going to ask for €30 return on my €10 investment.

huh :( but thats not fair! I was gonna invest a tenner in free work experience projects!

daithi81

24-07-2009, 11:38 AM

huh :( but thats not fair! I was gonna invest a tenner in free work experience projects!

Tell ya what, I'm gonna lend my money to my Chilean friend, at a return of €12.50.

Cheers.

Rebelred

24-07-2009, 11:43 AM

Tell ya what, I'm gonna lend my money to my Chilean friend, at a return of €12.50.

Cheers.

fair enough, better call my cousin in the IMF.

daithi81

24-07-2009, 11:43 AM

fair enough, better call my cousin in the IMF.

Why can't you just keep borrowing from your other friends?

Rebelred

24-07-2009, 11:49 AM

Why can't you just keep borrowing from your other friends?

I didn't want to say it on the INTERNET, but all my other friends won't lend me money anymore either.

daithi81

24-07-2009, 11:52 AM

I didn't want to say it on the INTERNET, but all my other friends won't lend me money anymore either.

What about all your planned spending? What of your current spending? Have you any income?

Rebelred

24-07-2009, 12:02 PM

What about all your planned spending? What of your current spending? Have you any income?

I have some income, it's less than it was and less than I'd planned it to be. My planned spending is a fair bit higher too, all those friends kept looking for extra interest on their loans. Fair to say Daithi-Y, I had this coming. One Friend told me this would happen if I kept going the way I was going, but I was playing my guitar at the time and the world seemed like a fair and just place, so I decided to ignore his advice.

daithi81

24-07-2009, 12:10 PM

I have some income, it's less than it was and less than I'd planned it to be. My planned spending is a fair bit higher too, all those friends kept looking for extra interest on their loans. Fair to say Daithi-Y, I had this coming. One Friend told me this would happen if I kept going the way I was going, but I was playing my guitar at the time and the world seemed like a fair and just place, so I decided to ignore his advice.

Ah, well I hope this has been a lesson for you. I was talking to your cousin at the IMF, and they will be cutting your spending in half. Far more than people were advising you to cut it, a while back, when you still had a chance to stop all this. Shame.

Proinsias

24-07-2009, 01:35 PM

I tend to agree with Alan Dukes who yesterday said that "it was the credit rating agencies who got us into this mess in the first place." He was referring to the way that S&P and others gave securitised instruments triple a ratings in the US and contributed to the financial crisis there which led to a wave of subprime toxic debt washing over the worlds financial markets.

Here is another interesting article about this whole issue:

Garbage in, garbage out. When models are based on erroneous or insufficient data, they produce misleading results. One of the stumbling blocks for rating securitized instruments was the dearth of long term data for extrapolation. Although the ratings analysts assumed defaults would increase during an economic slowdown, recent history offered no such modeling data for innovations like CDO’s.

Indeed, many CDO’s were simply unratable on the basis of the home loan characteristics in the reshuffled pools of mortgages. In his testimony Chairman Waxman refers to exchanges between S&P employees describing the pressure on analysts to devise shortcuts, based on guesswork, for coming up with some rating, any rating at all. “It could be structured by cows, and we would rate it,” one analyst wrote.

****

Heh heh heh..

Read the article in full here:

http://www.realclearmarkets .com/articles/2009/03/drinking_the_rating_ agencies_k.html

And remember, don't believe everything that comes out of ratings agencies; especially ones like standard & poor, who are currently under investigation by the securities and exchange commission in the US.
It's a fundamental failing of modern economics. Too many folk try to reduce the world to relatively simple (albeit with complex mechanisms) quantitative models of the world. It doesn't work. We can't quantify everything, so ratings from agencies are never, ever certain. They're merely best guess approximations.

Anyway, the ratings agency were a central cause of the problem in the US, but had little to do with the Irish situation beyond assigning a relatively meaningless string of letters to us and calling it a rating.

I only finished reading Colm McCarthy's report on the state of the nation yesterday. It is probably the most important single analysis of the Irish State since independence.

It is our Domesday Book, a tabulation of the costs and the follies of this Republic: and if it is to have any genuinely historical significance, it must now be followed by our own Magna Carta, which will curtail the privileges of the powerful. We must abandon the anachronistic language of the hungry 1930s, and accept that a) means tests do not rank as evils along with Hitler and rickets, and b) all those currently on welfare-benefits do not necessarily deserve them.

I've got a lot of studies that show that means testing creates more problems than it solves (especially for the people who are almost poor) and there significant data that shows the more means testing carried out, the less aid the poor receive. The reasons for this vary, from political patronage, to costs of measuring and so on. I've written a paper on this so I could keep going for a further 20,000 words but I won't.

Guitar Haro is right in many respects though, while Irish welfare is high, all too frequently, the comparison is made with the UK, which has a disgracefully low level of welfare. I really would not like to try and live on the amount the UK government provides, I'm very thankful of the fact that I've got savings, otherwise I would be truely fucked. Taking the bus into town and having a modest lunch with coffee would cost a sisth of my weekly income. That is not an example to follow.

There are very strong arguments for the social benefits that result from effective redistribution, social mobility in both the UK and Ireland have dropped off significantly over recent years. If it's not addressed in a period of recession, the chances of having a large proportion of our young population disaffected grow significantly. You don't need me to tell you that young people with few prospects and little support from the people tend to be troublesome.

Relate that back to the cost to the economy if you like, but it'[s not all about a financial cost/benefit analysis. That sort of thinking led to the disasterous policies that the IMF pushed on Africa on the 1970s and 1980s, leading to a reduction in education levels that should be a scandal.

Daithi, you keep going on about "where shall we get the money?".

I have a good answer. The ECB.

The ECB, if they're correctly sticking to their inflation targeting remit, should be pumping money into Ireland. Ireland got in trouble when it's inflation rate went above the target of 2%. Well, now we're stuck with a big deflation problem. CPI is -5.4%.

As inflating the money supply in Ireland poses little systematic risk to the rest of europe, the Irish market is too small to make much of an impact, they should be printing as much as they can and, if necessary, dropping it from helicopters while the ink is still wet (take that, Friedman).

No, the ECB shouldn't be loaning the Irish government money, it should be giving the Irish goverment money by creating new money. We can do that, money is based upon nothing in particular nowadays and it's WHY we don't rely on things like the supply of gold.

The ECB should realise that Ireland is dangerously close to a deflationary spiral and, given the scale of the planned government cutbacks, the lack of money on the government's side is likely to exacerbate that spiral.

Print, baby, print.

daithi81

24-07-2009, 01:56 PM

Daithi, you keep going on about "where shall we get the money?".

I have a good answer. The ECB.

The ECB, if they're correctly sticking to their inflation targeting remit, should be pumping money into Ireland. Ireland got in trouble when it's inflation rate went above the target of 2%. Well, now we're stuck with a big deflation problem. CPI is -5.4%.

The ECB's mandate is not to keep price inflation of each member state at 2%, but the whole of the Eurozone. Ireland's inflation rate will never be more than a very minor factor in the ECB's consideration, on this matter.

As inflating the money supply in Ireland poses little systematic risk to the rest of europe, the Irish market is too small to make much of an impact, they should be printing as much as they can and, if necessary, dropping it from helicopters while the ink is still wet (take that, Friedman).

So they should prop up the out-of-control spending of one of the member states of the EU, nay, a Eurozone member? Why should the ECB be encouraging such outrageous deficits? Why should the ECB put themselves in the position where they are treating one country this way, when there are nearly half a dozen more who would be grateful for the same treatment? What happens when they start demanding unlimited funds? These economies are not so insignificant to not cause Euro currency instability. Think of the big picture.

No, the ECB shouldn't be loaning the Irish government money, it should be giving the Irish goverment money by creating new money. We can do that, money is based upon nothing in particular nowadays and it's WHY we don't rely on things like the supply of gold.

See above. Really. There are so, so many issues you are not even considering here. What kind of behaviour are you trying to encourage?

The ECB should realise that Ireland is dangerously close to a deflationary spiral and, given the scale of the planned government cutbacks, the lack of money on the government's side is likely to exacerbate that spiral.

Print, baby, print.

The deflationary spiral is a definite worry, which would be a justification for the ECB liquidating the credit markets in Ireland, once this NAMA thing (come the fuck on!) gets the bad assets out of our banks. I don't see how encouraging the Dept of Finance to commence business as usual is sane. I just don't get it.

Proinsias

24-07-2009, 02:11 PM

The ECB's mandate is not to keep price inflation of each member state at 2%, but the whole of the Eurozone. Ireland's inflation rate will never be more than a very minor factor in the ECB's consideration, on this matter.
They penalise countries for going over the limit. They should aid them when it goes under.

So they should prop up the out-of-control spending of one of the member states of the EU, nay, a Eurozone member? Why should the ECB be encouraging such outrageous deficits?[Why should the ECB put themselves in the position where they are treating one country this way, when there are nearly half a dozen more who would be grateful for the same treatment? What happens when they start demanding unlimited funds? These economies are not so insignificant to not cause Euro currency instability. Think of the big picture.
That's a moralistic approach to it. What is required is to fix the problem, not debate the morality of it's existence.
My point is that they don't actually need to look at the bigger picture. Ireland can be treated in isolation or, to solve a possible deflation problem (a very real risk), they can throw some cash the way of other countries. Spain is also at risk of a deflation spiral.
The bigger picture is that by letting some areas of the eurozone rot on the vine, they threaten the long stability of the eurozone project, rather than the other way around.

See above. Really. There are so, so many issues you are not even considering here. What kind of behaviour are you trying to encourage?
I am not attempting to "encourage" any behaviour and neither should the ECB. The economic threats to Ireland are the gravest faced by any country in Europe for a very long time. Sort that problem out FIRST, then worry about the future behaviour.
It's like not helping someone in a car crash because they're driving like a dick. Yes, they are idiots, but without help, they're fucked. Moralistic handwringing won't help anyone in that situation.

The deflationary spiral is a definite worry, which would be a justification for the ECB liquidating the credit markets in Ireland, once this NAMA thing (come the fuck on!) gets the bad assets out of our banks. I don't see how encouraging the Dept of Finance to commence business as usual is sane. I just don't get it.
You don't get it because you're looking at it as a long run problem of "right" behaviour versus "wrong" behaviour. This problem is very much of a short term nature.
It's not quite encouraging the department of finance to commence business as usual. The finances if Ireland as a nation do need to be rebalanced. That will be a painful process. The ECB can stop it being a very severe and needlessly dangerous process by simply printing cash (or buying Irish debt, whatever...)
This is a once in 50 year event. The usual measures don't apply. I have three questions:

1. Would you agree it would aid in stemming the rise of unemployment?

2. Would you agree that it would greatly aid in helping Ireland to normalise debt, fiscal imbalances and growth?

3. Would you agree that, from a purely economic (and not moral hazard) standpoint, if the ECB were to print €20 billion and hand it to Ireland tomorrow, it wouldn't make a tack of difference to the economic systems of europe?

daithi81

24-07-2009, 02:17 PM

markinmanc

24-07-2009, 02:39 PM

I'm popping out, so I will address the big post in a sec.

One question:

Given Fianna Fail's (or any parties) past history, if you provided a supply of liquidity to a government who were trying to get re-elected. Would you expect them to still make the required cuts in public service?

Not if they were doing this:

http://www.irishtimes.com/newspaper/frontpage/2009/0724/1224251232860.html?v ia=mr

THE NATIONAL Asset Management Agency (Nama) is making plans for foreign banks not protected by State guarantee to Irish lenders to participate in the €90 billion “bad bank” scheme.
The inclusion of loans granted by non-Irish banks would reduce some of the complexity in Nama’s work, as many of the developers who have loans moving to the new agency also have loans outside Ireland. With plans well-advanced for the publication next week of draft legislation to establish Nama, this may also reduce potential for disruption to the scheme from foreign banks taking court action against Irish developers.

daithi81

24-07-2009, 02:47 PM

They penalise countries for going over the limit. They should aid them when it goes under.

What was that about moralistic approachs? ;)

That's a moralistic approach to it. What is required is to fix the problem, not debate the morality of it's existence.
My point is that they don't actually need to look at the bigger picture. Ireland can be treated in isolation or, to solve a possible deflation problem (a very real risk), they can throw some cash the way of other countries. Spain is also at risk of a deflation spiral.
The bigger picture is that by letting some areas of the eurozone rot on the vine, they threaten the long stability of the eurozone project, rather than the other way around.

I suppose the big risk is creating a wave of inflation, at the other end, considering the influx of US money that will hit the world in about 2-3 years. My issue is with the ECB providing the money to governments. I realise that it is not possible to filter this money through banks, which is why it is imperative to get NAMA working ASAP.

I am not attempting to "encourage" any behaviour and neither should the ECB. The economic threats to Ireland are the gravest faced by any country in Europe for a very long time. Sort that problem out FIRST, then worry about the future behaviour.
It's like not helping someone in a car crash because they're driving like a dick. Yes, they are idiots, but without help, they're fucked. Moralistic handwringing won't help anyone in that situation.

Well, the behaviour I speak of is moral hazard. True, it is a long-term problem, but it is not one that should be ignored, simply because of the current crisis. We have enough behavioural issues within our political system wrt the management of public finances, we do not need another. My problem is with the notion of helping these guy out of the car crash, dusting him off, and handing him a new Ferrari. If you suggest simply handing money to the governments, there should be some conditionalities, at least. Not IMF style ones, but surely one aimed at getting deficit spending below 10% and debt-to-GDP ratios below 100%. (I know we dont have the latter now, but very likely in a few years)

You don't get it because you're looking at it as a long run problem of "right" behaviour versus "wrong" behaviour. This problem is very much of a short term nature.
It's not quite encouraging the department of finance to commence business as usual. The finances if Ireland as a nation do need to be rebalanced. That will be a painful process. The ECB can stop it being a very severe and needlessly dangerous process by simply printing cash (or buying Irish debt, whatever...)

Ok, as I said above, as long as some stipulations are attached to the liquidity injection, I might support this. But it should not be used as a means of maintaining exchequer spending. How would you feel about a temporary, independant proxy state bank to issue credit to the public?

This is a once in 50 year event. The usual measures don't apply. I have three questions:

1. Would you agree it would aid in stemming the rise of unemployment?

Yes, but i dont think it is addressing the fundamental problem, and could make matters worse, in the long-run. Is that worth it?

2. Would you agree that it would greatly aid in helping Ireland to normalise debt, fiscal imbalances and growth?

No, because it entirely depends on the actions of the government, which cannot be predicted. Considering the government we have in place, and the fact that an election is due very soon, their use of this injection may not be economically sound. Think about it.

3. Would you agree that, from a purely economic (and not moral hazard) standpoint, if the ECB were to print €20 billion and hand it to Ireland tomorrow, it wouldn't make a tack of difference to the economic systems of europe?

It wouldn't even register. But that is holding all non-economic variables constant.

Proinsias

24-07-2009, 02:49 PM

I'm popping out, so I will address the big post in a sec.

One question:

Given Fianna Fail's (or any parties) past history, if you provided a supply of liquidity to a government who were trying to get re-elected. Would you expect them to still make the required cuts in public service?
I expect little from most governments. Yes, this government has failed, its spending and tax were poor. Still, to make the structural adjustment required as the speed it's likely to be carried out makes it more likely this government will make things far, far worse.

The best parallel I can think of is Thatcher and the miners. It was taken too far, decimating the UK coal industry for all time. If they had time and clear heads to sort it out, the UK cold (and should) have had a strong, efficient, modern coal sector.

Instead, they've recently had to spend very significant amounts of money opening up closed mines and training up staff to get them operational again.

It's using sledgehammer to crack a nut.

Proinsias

24-07-2009, 02:56 PM

What was that about moralistic approachs? ;)

I suppose the big risk is creating a wave of inflation, at the other end, considering the influx of US money that will hit the world in about 2-3 years. My issue is with the ECB providing the money to governments. I realise that it is not possible to filter this money through banks, which is why it is imperative to get NAMA working ASAP.

Well, the behaviour I speak of is moral hazard. True, it is a long-term problem, but it is not one that should be ignored, simply because of the current crisis. We have enough behavioural issues within our political system wrt the management of public finances, we do not need another. My problem is with the notion of helping these guy out of the car crash, dusting him off, and handing him a new Ferrari. If you suggest simply handing money to the governments, there should be some conditionalities, at least. Not IMF style ones, but surely one aimed at getting deficit spending below 10% and debt-to-GDP ratios below 100%. (I know we dont have the latter now, but very likely in a few years)

Ok, as I said above, as long as some stipulations are attached to the liquidity injection, I might support this. But it should not be used as a means of maintaining exchequer spending. How would you feel about a temporary, independant proxy state bank to issue credit to the public?

Yes, but i dont think it is addressing the fundamental problem, and could make matters worse, in the long-run. Is that worth it?

No, because it entirely depends on the actions of the government, which cannot be predicted. Considering the government we have in place, and the fact that an election is due very soon, their use of this injection may not be economically sound. Think about it.

It wouldn't even register. But that is holding all non-economic variables constant.
Conditional free money.

Or, loans that are guaranteed to be wiped, should certain conditions be met and repayments are frozen for, say, 5 years. Would also avoid moral hazard problems as, if Ireland fail to reform, the loans become active. While it would nominally raise the debt-to-GDP figure on the balance sheets, it would be just that, a balance sheet exercise.

All we need to do now is get the ECB to agree to it.

Right, that's Ireland's deficit sorted.

I think I might have a coffee. Finishing the first draft of my dissertation and sorting out the Irish deficit in one day. Can this day get any better? I may see if I can get into TED.

Haro

25-07-2009, 12:18 AM

http://www.newgeography.com/content/00814-swedens-taxes-the-hidden-costs-the-welfare-state

You want us workers to pay higher rates of tax so you can get more money to lie in bed until three in the afternoon.

Mad as a balloon.

Just because people in Sweden disagree with your ideals doesn't make them "mad as a balloon". You're not even open to the possibility it might be the correct way of doing things.

Can you provide some actual real evidence as to how it's WRONG? The article you link to does not cite any sources.

Haro

25-07-2009, 12:21 AM

Conditional free money.

Or, loans that are guaranteed to be wiped, should certain conditions be met and repayments are frozen for, say, 5 years. Would also avoid moral hazard problems as, if Ireland fail to reform, the loans become active. While it would nominally raise the debt-to-GDP figure on the balance sheets, it would be just that, a balance sheet exercise.

All we need to do now is get the ECB to agree to it.

Right, that's Ireland's deficit sorted.

I think I might have a coffee. Finishing the first draft of my dissertation and sorting out the Irish deficit in one day. Can this day get any better? I may see if I can get into TED.

I love TED.

Rebelred

06-08-2009, 12:10 PM

€16bn deficit as tax take falls short

By Shaun Connolly, Political Correspondent

Thursday, August 06, 2009

AS it was revealed collapsing tax takes punched a €16.4 billion black hole in State finances, homeowners were told to brace themselves for mortgage hikes after AIB reported massive losses.

Worse-than-expected Exchequer figures for July showed tax returns were €575 million below target as the predictions Brian Lenihan based his emergency April budget on veered badly off course again.

The bad news was compounded by a warning from AIB chief executive Eugene Sheehy that the bank is reviewing its mortgage interest rates after it posted a pre-tax loss of €900m for the first six months of its financial year as customer deposits fell 12%.

Any rise in rates is likely to fuel a political firestorm as Finance Minister Brian Lenihan was roundly attacked for not trying to stop Permanent TSB ratcheting-up rates, despite the bank being underwritten by the state guarantee scheme.

The pressure on the Government would be far more intense in AIB’s case, as the state has taken a 25% stake in the bank, as part of a semi-nationalisation bailout costing taxpayers €3.5bn so far. However, Mr Sheehy said while the review was under way, the bank had no current plans to raise rates.

Exchequer figures revealed the deficit in public finances soared to almost €10bn more than this time last year, as income tax dived €185m below the revised predictions to stand at disappointing €6.4bn.

VAT led the plunging tax returns, down €448m on forecasts as price cuts bit into Government revenue.

This is increasing pressure on ministers to make deeply unpopular spending cuts as the country’s weekly borrowing needs of €400m increases further.

At a worrying €5m, the corporation tax taken in July was barely one-tenth of the €48m expected.

All tax revenues collected in the first seven months of 2009 amounted to €18.7bn. This was down 17.6% on the same period in 2008 and is leaving the country headed for a year end deficit approaching €25bn, the opposition warned.

AIB’s position was badly hit by the huge charge of €2.37bn for impaired loans, along with its core business assets, such as loans to property developers and for mortgages dropping significantly.

The extent of the slump was also underlined by the fact that 6,350 redundancies were notified to the Department of Enterprise, Trade and Employment in July – an increase of almost 65% compared with the same month last year.

For the first seven months of the year, lay-offs are up 142%, from 20,255 to 49,009 – almost 10,000 more redundancies than in the whole of 2008.

Small businesses group ISME described the figures as "dismal", and called on the Government to set up a national employment task force to stop the "haemorrhaging" of jobs.

As black news came, the Lloyds Banking Group, which owns Bank of Scotland (Ireland), announced it had written off more than €1.8bn in bad loans relating to its Irish business.

Read more: http://www.irishexaminer.co m/home/euro16bn-deficit-as-tax-take-falls-short-98148.html#ixzz0NOcz XZTv

Rebelred

11-08-2009, 03:23 PM

http://www.rte.ie/news/2009/0811/welfare.html

Minister for Social & Family Affairs Mary Hanafin has confirmed that child benefit and social welfare payments will be cut in the forthcoming budget.

The McCarthy report, published in July, had identified cuts of €1.8bn in the social welfare budget.

Each Cabinet minister has been asked to look at their department to see where cuts can be implemented.

Speaking on RTÉ's Morning Ireland, Ms Hanafin conceded that child benefit payments and social welfare would not escape the axe, but said she would work to protect the most vulnerable.

She described the €21bn social welfare bill as a huge drain on the public finances.

'It would be impossible to have a budget that would make savings across expenditure, without looking at social welfare.'

Ms Hanafin also refused to confirm if child benefit would be means tested or taxed.

It was earlier revealed by the minister that extra staff will be recruited to help deal with the increasing number of people who are in financial difficulty and in need of advice.

The minister announced that additional money advisors will be appointed to 19 of the busiest Money Advice & Budgeting Service offices around the country, with immediate effect.

It brings to 271 the number of money advice staff working in 65 locations.

Ms Hanafin said there have been 10,000 extra clients this year alone and that the largest percentage are people between 26 and 40, who have run up debts of about €15,000.

Meanwhile, Bord Gáis has confirmed a 14% rise in the number of customers disconnected every month for not paying their gas bills.

Disconnections have risen from up to 350 per month last year to 400 per month this year.

A spokesperson for the company said that disconnection was a last resort and customers are given every opportunity to pay their bills.

In relation to MABA, the spokesperson said only 3% of MABS' clients come to them with energy bill problems.

Proinsias

11-08-2009, 03:28 PM

Do folks still think we should 'cut to victory?'
The world's most pre-eminent economist (possibly) disagrees.

http://www.guardian.co.uk/commentisfree/2009/aug/10/us-economy-tarp-great-depression

Saved by big government

Reagan was wrong. State spending is all that has stopped America's slump becoming catastrophic

Paul Krugman
guardian.co.uk, Monday 10 August 2009 22.00 BST

So it seems that America isn't going to have a second Great Depression after all. What saved us? The answer, basically, is big government. Just to be clear: The economic situation remains terrible, indeed worse than almost anyone thought possible not long ago. The US has lost 6.7m jobs since the recession began. Once you take into account the need to find employment for a growing working-age population, we're probably about 9m jobs short of where we should be.

And the job market still hasn't turned around – that slight dip in the measured unemployment rate last month was probably a statistical fluke. We haven't yet reached the point at which things are actually improving; for now, all we have to celebrate are indications that things are getting worse more slowly. For all that, however, the latest flurry of reports suggests that the economy has backed up several paces from the edge of the abyss.

A few months ago, the possibility of falling into the abyss seemed all too real. The financial panic of late 2008 was as severe, in some ways, as the banking panic of the early 1930s, and for a while key economic indicators – world trade, world industrial production, even stock prices – were falling as fast as or faster than they did in 1929-30. But in the 1930s the trend lines just kept heading down. This time, the plunge appears to be ending after just one terrible year.

So what saved us from a full replay of the Great Depression? The answer, almost surely, lies in the very different role played by government.

Probably the most important aspect of the government's role in this crisis isn't what it has done, but what it hasn't done: unlike the private sector, the federal government hasn't slashed spending as its income has fallen. (State and local governments are a different story.) Tax receipts are way down, but Social Security cheques are still going out; Medicare is still covering hospital bills; federal employees, from judges to park rangers to soldiers, are still being paid.

All of this has helped support the economy in its time of need, in a way that didn't happen back in 1930, when federal spending was a much smaller percentage of GDP. And, yes, this means that budget deficits – which are a bad thing in normal times – are actually a good thing right now.

In addition to having this "automatic" stabilising effect, the government has stepped in to rescue the financial sector. The bailouts of financial firms could, and should, have been handled better – taxpayers have paid too much and received too little. Yet it's possible to be dissatisfied, even angry, about the way the financial bailouts have worked, while acknowledging that without these bailouts things would have been much worse.

The point is that this time, unlike in the 1930s, the government didn't take a hands-off attitude while much of the banking system collapsed. And that's another reason we're not living through Great Depression II.

Last and probably least, but by no means trivial, are the deliberate efforts of the government to pump up the economy. From the beginning, I argued that the American Recovery and Reinvestment Act, aka the Obama stimulus plan, was too small. Nonetheless, reasonable estimates suggest that about a million more Americans are working now than would have been employed without that plan – a number that will grow over time – and that the stimulus has played a significant role in pulling the economy out of its free fall.

All in all, then, the government has played a crucial stabilising role in this economic crisis. Ronald Reagan was wrong: sometimes the private sector is the problem, and government is the solution. And aren't you glad that right now the government is being run by people who don't hate government?

We don't know what the economic policies of a McCain-Palin administration would have been. We do know, however, what Republicans in opposition have been saying – and it boils down to demanding that the government stop standing in the way of a possible depression.

I'm not just talking about opposition to the stimulus. Leading Republicans want to do away with automatic stabilizers, too. Back in March, John Boehner, the House minority leader, declared that since families were suffering, "it's time for government to tighten their belts and show the American people that we 'get' it." Fortunately, his advice was ignored.

I'm still very worried about the economy. There's still, I fear, a substantial chance that unemployment will remain high for a very long time. But we appear to have averted the worst: utter catastrophe no longer seems likely. And big government, run by people who understand its virtues, is the reason why. © New York Times

daithi81

11-08-2009, 03:31 PM

Proinsias, you should know better than to compare the US and Ireland.

corkoniense

11-08-2009, 05:45 PM

Proinsias, you should know better than to compare the US and Ireland.

The general point is still the same. Can you slash and burn your way out of a recession? I don't think so.

daithi81

11-08-2009, 05:51 PM

The general point is still the same. Can you slash and burn your way out of a recession? I don't think so.

Explain to me then, why you think that I said the US and Ireland are not comparable cases, wrt fiscal policy?

You seem to be hiding a great deal of knowledge behind that statement.

Proinsias

11-08-2009, 06:15 PM

Explain to me then, why you think that I said the US and Ireland are not comparable cases, wrt fiscal policy?

You seem to be hiding a great deal of knowledge behind that statement.
If anything, it's MORE appropriate to the Irish situation.

The US governmental spending only makes up about 20% of GDP, although those figures are somewhat contested.

Leo Varadkar reckons government spending will hit 50% of GDP next year:
http://www.irishtimes.com/newspaper/letters/2009/0723/1224251144148.html

Cutting government spending by 10% would effectively knock 5% off GDP.

I'm not directly comparing the USA and Ireland, I'm comparing macroeconomic policy responses to crisis.

daithi81

11-08-2009, 07:14 PM

Proinsias

12-08-2009, 12:46 PM

No, given the trajectory our finances are on, at present, especially with the NAMA situation. I really feel like I would be repeating myself here, but NAMA is the major (but not the only) difference between us and many countries, and that ridiculous bank guarantee. We don't have the room to borrow the way the US does, unless the ECB are willing to throw money at us for nothing. You seem to think that they will. Let us see.

The ECB won't be throwing money at Ireland for nothing, they'll be throwing money at Ireland to avoid a debt deflationary spiral, which is currently gripping Ireland. The ECB have an inflation target. Ireland is about 8% below that target, if I recall the recent inflation targets correctly.

They can't drop interest rates any lower, so to bring inflation back in line, they should increase the money supply.

It works from both a monetary and fiscal point of view.

Incidentally, the front page of the FT today has the IMF claiming that there's little evidence that QE has helped. There is one thing QE has helped, especially in the UK and that's the government deficit. The bank of england is said to have bought up 7% of GDP worth of government bonds, keeping the rates on them artificially low.

The UK government deficit would be horrific without it, especially with their purchase and exposure to the debts of RBS, Northern Rock and Lloyds. In essence, as NAMA is a new entity, everybody is up in arms about the government debt, yet when the UK government has done the same, just using existing banks, the debt somehow stays off balance sheet.

I would bet good money that Eurostat will allow the Irish government to keep the debt from NAMA off the national debt. It's a political decision, not an economic one. If NAMA stays off the national debt, then Ireland is mostly ok for the next few years, debt-wise.

daithi81

12-08-2009, 12:51 PM

Proinsias

12-08-2009, 01:03 PM

I have heard about that balance-sheet trick before, wrt NAMA. Even if the EU allow this, will the bond market fall for it? It's not as if the debt vanishes, is it? No matter what we label it, it is still national debt, at the end of the day.
It is and it isn't.

I mean, any loss we incurr will be paid for by the banks. If it's a profit, then it's a good investment. Technically, there's no possible downside to it on the part of the Irish government (the reality may differ), so why should it be lumped in with the rest of the general debt?

daithi81

12-08-2009, 01:56 PM

It is and it isn't.

I mean, any loss we incurr will be paid for by the banks. If it's a profit, then it's a good investment. Technically, there's no possible downside to it on the part of the Irish government (the reality may differ), so why should it be lumped in with the rest of the general debt?

I don't think you should be treating that levy as a guaranteed return. Very, vary naive, if you do.

Proinsias

12-08-2009, 02:11 PM

I don't think you should be treating that levy as a guaranteed return. Very, vary naive, if you do.

For accounting purposes, it should be though.

IMO, it's highly unlikely to be required. Selling off assets at a loss will be politically dodgy, so it's likely that the minute assets look like they'll turn a profit, they'll be out the door. From the pricing set up in the scheme, I'd say that even a modest recovery could allow the government to offload most of it at a profit.

daithi81

12-08-2009, 02:14 PM

For accounting purposes, it should be though.

IMO, it's highly unlikely to be required. Selling off assets at a loss will be politically dodgy, so it's likely that the minute assets look like they'll turn a profit, they'll be out the door. From the pricing set up in the scheme, I'd say that even a modest recovery could allow the government to offload most of it at a profit.

All, of course, depending on the discount they get, which again depends on how much they can chop without effecting banks equity capital too much.

Just... nationalise...

Proinsias

12-08-2009, 02:44 PM

All, of course, depending on the discount they get, which again depends on how much they can chop without effecting banks equity capital too much.

Just... nationalise...

The assets would still be on the country's back. It's just that, in the nationalised situation, there's no doubt as to whether or not these transactions are to be carried out off balance sheet. The country would still be on the line for the assets. In fact, it would make this situation even worse as they'd effectively be taking on even more debt, it just wouldn't show up as national debt. Just as they've done in the UK and the USA.

There would be the full downside risk too. State controlled institutions don't have a great reputation for efficiency. If the banks make losses for the next 5-10 years (possible if not particularly likely), those losses will fall on the taxpayer. With NAMA, that's one risk avoided.

I think there are 4 possible situations:
1. The banks return to profits and the loans that will be under NAMA turn a profit
2. The banks don't return to profit and the loans under NAMA manage a profit
3. The banks return to profits and the NAMA loans run a loss
4. The banks don't return to profit and the NAMA loans run a loss.

In situation 1, if the banks were nationalised (with the loans that were to be in NAMA staying in the banks and NAMA is scrapped), the ROI would be fantastic. Without nationalisation, the government makes a nice profit, but maybe not quite as much as nationalisation.
In situation 2, the government wins, the banks lose under NAMA, the government loses under nationalisation.
In situation 3, the profits from the banks can be used to offset the NAMA losses. Maybe not all though I doubt the profits the banks make will be allowed to be massively greater than the NAMA losses. With NAMA, the banks win, the government loses. Without NAMA, it depends on how big the profits are and whether or not the losses from the NAMA loans are bigger than the profits the nationalised banks achieve.
4 is the worst case situation and under NAMA, the losses incurred by the state are likely to be less than they would have incurred had they nationalised.

I would argue that under 3 of the 4 situations, the net result from NAMA is positive for the governemt (I say situation 1 is positive as the banking system has remained private and NAMA is profitable, that's a good result to me). Only situation 3 would result in a better result under nationalisation, however that depends on the ability of the government to run commercial banks.

Besides, they're just not going to do it.

daithi81

12-08-2009, 03:00 PM

The assets would still be on the country's back. It's just that, in the nationalised situation, there's no doubt as to whether or not these transactions are to be carried out off balance sheet. The country would still be on the line for the assets. In fact, it would make this situation even worse as they'd effectively be taking on even more debt, it just wouldn't show up as national debt. Just as they've done in the UK and the USA.

There would be the full downside risk too. State controlled institutions don't have a great reputation for efficiency. If the banks make losses for the next 5-10 years (possible if not particularly likely), those losses will fall on the taxpayer. With NAMA, that's one risk avoided.

I think there are 4 possible situations:
1. The banks return to profits and the loans that will be under NAMA turn a profit
2. The banks don't return to profit and the loans under NAMA manage a profit
3. The banks return to profits and the NAMA loans run a loss
4. The banks don't return to profit and the NAMA loans run a loss.

In situation 1, if the banks were nationalised (with the loans that were to be in NAMA staying in the banks and NAMA is scrapped), the ROI would be fantastic. Without nationalisation, the government makes a nice profit, but maybe not quite as much as nationalisation.
In situation 2, the government wins, the banks lose under NAMA, the government loses under nationalisation.
In situation 3, the profits from the banks can be used to offset the NAMA losses. Maybe not all though I doubt the profits the banks make will be allowed to be massively greater than the NAMA losses. With NAMA, the banks win, the government loses. Without NAMA, it depends on how big the profits are and whether or not the losses from the NAMA loans are bigger than the profits the nationalised banks achieve.
4 is the worst case situation and under NAMA, the losses incurred by the state are likely to be less than they would have incurred had they nationalised.

I would argue that under 3 of the 4 situations, the net result from NAMA is positive for the governemt (I say situation 1 is positive as the banking system has remained private and NAMA is profitable, that's a good result to me). Only situation 3 would result in a better result under nationalisation, however that depends on the ability of the government to run commercial banks.

Besides, they're just not going to do it.

But everything I see points towards an overvaluation of these assets for NAMA (stated previously). I don't see it working out with NAMA turning a profit, in the long-run. One needs to also remember that nothing firm is written into the legislation regarding the levy, and only a brief mention in the FAQs. At least a temp-nationalisation would allow for an adequate devaluation of the assets. The risk of running these banks inefficiently for a while seems less than the risk of NAMA being lumped with vastly overpriced assets which must be sold at a loss.

I really think that issuing shares in NAMA would be a great way of raising money for the state. Just something like a 20% stake would raise billions, and remove some of the risk from the state.

Proinsias

12-08-2009, 03:05 PM

But everything I see points towards an overvaluation of these assets for NAMA (stated previously). I don't see it working out with NAMA turning a profit, in the long-run. One needs to also remember that nothing firm is written into the legislation regarding the levy, and only a brief mention in the FAQs. At least a temp-nationalisation would allow for an adequate devaluation of the assets. The risk of running these banks inefficiently for a while seems less than the risk of NAMA being lumped with vastly overpriced assets which must be sold at a loss.

I really think that issuing shares in NAMA would be a great way of raising money for the state. Just something like a 20% stake would raise billions, and remove some of the risk from the state.

And who would pay for this devaluation if the banks are nationalised?

irishmonkey

12-08-2009, 03:33 PM

has anyone asked the question
who will pay for the security and upkeep for all the empty buildings NAMA will own?
Are NAMA able to rent buildings etc?

Cliff Barnes

12-08-2009, 03:34 PM

has anyone asked the question
who will pay for the security and upkeep for all the empty buildings NAMA will own?
Are NAMA able to rent buildings etc?

The Irish taxpayer will pay................. ..of course.

Actin The Sham

12-08-2009, 03:38 PM

MnaNAMA:

hTkGXuiT55w

:shock:

daithi81

12-08-2009, 03:42 PM

And who would pay for this devaluation if the banks are nationalised?

The assets are transferred to NAMA, as planned.
The assets are devalued, to the appropriate amount.
The developer still owes the full amount to NAMA (i think you might be missing this point)
The banks are recapitalised (explained previously), using public money, but they are also nationalised.
Once banks are brought back to healthy state (need not be 2006 performance levels), they are re-privatised, at a profit to the taxpayer.

An alternative idea is to use NAMA shares to compensate old bank shareholders, instead of Govt bonds.

Proinsias

12-08-2009, 03:50 PM

But you still have the national debt problem if you advocate NAMA going ahead alongside nationalisation. I think that increases the risk to the government, rather than reduces it as they have to run the risk that they will not be able to nurse what remains of the banks back to health under public ownership.
AIB lost €786 million in the first half of this year. If the government doesn't run the bank more efficiently than the private sector, will they be able to stem those losses?

I'm not sure.

I think the government has enough financial risk on its plate for it to be taking on the running of the main banks.

daithi81

12-08-2009, 03:56 PM

Proinsias

12-08-2009, 04:15 PM

Then it must/will accept paying too much for those assets, and looking at the legislation, I don't see the contingency plan in place for retreiving losses. We may as well write them off now and be done with it.

Why?

Too much is also quite subjective. As far as I can tell, they're looking to use demographic information and long run multiples of incomes to calculate what the value of the assets would have been without the bubble.

If they do that, I don't see them overpaying *that* much. Certainly, they'd be looking to pay a heavy discount on current prices for any residential property if those sorts of measures are used.

daithi81

12-08-2009, 04:20 PM

Why?

Too much is also quite subjective. As far as I can tell, they're looking to use demographic information and long run multiples of incomes to calculate what the value of the assets would have been without the bubble.

If they do that, I don't see them overpaying *that* much. Certainly, they'd be looking to pay a heavy discount on current prices for any residential property if those sorts of measures are used.

Of course it is subjective, its not like I'm running models on Stata/MatLab here. But as previous calculations have shown, the discount can't be greater than 15-20%, without recapitalisation. Do you think that this is an appropriate cut?

daithi81

12-08-2009, 04:23 PM

BTW, this whole Liam Carroll thing may pose an interesting twist.

[This should be in my Irish economy thread...]

Proinsias

12-08-2009, 04:28 PM

Of course it is subjective, its not like I'm running models on Stata/MatLab here. But as previous calculations have shown, the discount can't be greater than 15-20%, without recapitalisation. Do you think that this is an appropriate cut?

On current values of the assets?

I don't think it's that bad, TBH. If the green shoots do indeed sprout in the global economy then the heavy falls in the property market could well slow. A further 15-20% drop is fairly significant, especiallly on top of the drop already experienced.

Is it appropriate? I wouldn't say it's a million miles off the sort of figure they should be paying. It's not as if they're buying at the top of the market, we've had two years of falls. At this stage in a lot of housing price crashes, the worst is over. A further 20% drop is a decent enough buffer.

If recapitalisation can give NAMA a further discount then, by all means, recapitalise.

daithi81

12-08-2009, 04:40 PM

On current values of the assets?

I don't think it's that bad, TBH. If the green shoots do indeed sprout in the global economy then the heavy falls in the property market could well slow. A further 15-20% drop is fairly significant, especiallly on top of the drop already experienced.

Is it appropriate? I wouldn't say it's a million miles off the sort of figure they should be paying. It's not as if they're buying at the top of the market, we've had two years of falls. At this stage in a lot of housing price crashes, the worst is over. A further 20% drop is a decent enough buffer.

If recapitalisation can give NAMA a further discount then, by all means, recapitalise.

Two points:

1) The book value of the loans is calculated off which year? I'm quite sure it isn't current market value of the property, but based on the value of the loan itself, when taken out. Therefore the recent two-year fall may not be accounted for. Where is nemesis? :p

2) Recapitalisation means the govt increases its 25% stake in both banks. How soon is nationalisation?

Proinsias

12-08-2009, 04:56 PM

Two points:

1) The book value of the loans is calculated off which year? I'm quite sure it isn't current market value of the property, but based on the value of the loan itself, when taken out. Therefore the recent two-year fall may not be accounted for. Where is nemesis? :p

2) Recapitalisation means the govt increases its 25% stake in both banks. How soon is recapitalisation?
1. AIB issued their half year results last week, I assume there's some recalculation of assets that must go with that. Does Ireland have marked-to-market rules?
I suppose neither of us knows...

2. Having had a bit of a read up on the issue, the level of capitalisation and definition of tiers appears to vary from country to country.
http://www.telegraph.co.uk/finance/newsbysector/banksandfinance/3191187/FSA-tactics-force-nationalisation.html
9% Tier 1 in the UK.
Min of 3% in the USA:
http://www.fdic.gov/regulations/laws/rules/2000-4400.html
(b) Minimum leverage capital requirement. (1) The minimum leverage capital requirement for a bank (or an insured depository institution making application to the FDIC) shall consist of a ratio of Tier 1 capital to total assets of not less than 3 percent if the FDIC determines that the institution is not anticipating or experiencing significant growth and has well-diversified risk, including no undue interest rate risk exposure, excellent asset quality, high liquidity, good earnings and in general is considered a strong banking organization, rated composite 1 under the Uniform Financial Institutions Rating System (the CAMEL rating system) established by the Federal Financial Institutions Examination Council.
10% in Germany:
http://www.forbes.com/2009/07/07/commerzbank-germany-reserves-markets-equity-banks.html

I couldn't find if Basel II requires a minimum Teir 1 capital requirement (the USA doesn't implement Basel II as far as I know) then Ireland can change its Tier 1 capital requirements.

Problem solved.

Well, partly.

daithi81

12-08-2009, 04:58 PM

Proinsias

12-08-2009, 05:22 PM

Yep, through the Capital Requirements Directive. Christ, you'd swear I had no work to do. Anyway, I've done some more reading.

http://ec.europa.eu/internal_market/bank/regcapital/index_en.htm

Here's some "interesting" bits to the recent amendments:
From http://eur-lex.europa.eu/LexUriServ/LexUriServ.do?uri=CE LEX:52008PC0602:EN:N OT

6.1.1. Distinction between the "core" component of banks' own funds and hybrids eligible in banks' original own funds (Article 57 points (a) and (ca) of Directive 2006/48/EC)

To date, there is no clear terminology for describing hybrid instruments eligible as banks' original own funds ('tier 1 capital'). Since a list of specific instruments in the Directive would quickly be outdated because of constant innovation, principles have been developed, which define hybrids eligible for original own funds.

Core capital within banks' original own funds includes all instruments that are referred to in the national definition of equity capital, fully absorb losses on a going concern basis and represent the most subordinated claim during liquidation. More particularly, these instruments should represent the "last line of defence" for any bank both during normal times and liquidation. Usually these instruments are common shares and corresponding premiums but, more generally, any type of instrument not providing preferential rights in case of negative economic performance.

However, there are also instruments not falling within this scope such as preference shares that create preferential rights for dividend payments and liquidation, which thus are included in the category of hybrids.

The bit in bold is interesting. The last line of defense for Irish banks is the Irish government guarantee. Maybe something could be wrangled around this clause.

http://www.bankofengland.co .uk/publications/fsr/fs_paper03.pdf
Under Basel II, capital requirements will be determined not only by the type of portfolio but also, to achieve greater risk sensitivity, by a credit rating assigned to each borrower within the portfolio.

So it's not universal.

While banks are free to build their own models to assign ratings to exposures within the constraints of supervisory review, the mapping from ratings to capital requirements is hardwired in Basel II.
A regulatory formula aims to set requirements to ensure that stressed credit losses over a one-year period do not exceed a bank’s capital — a Value-at-Risk approach. This stressed level of losses can be decomposed into the level of credit losses that is expected to occur on average, the Expected Loss (EL), and a peak level of losses above EL expected to be exceeded with only a small probability, the Unexpected Loss (UL), as shown in Chart 1.
Firms may offset the EL component with provisions,(3) but must hold capital against UL, and any EL that is not offset by provisioning. The ability to offset EL with provisions allows a bank to set aside a portion of current income to cover the losses it expects to occur over one year; however Basel II capital requirements do not recognise the loss-absorbing capacity of future income.

If it's based on risk profiles, then the risk profile can be shaped to match the story. As the riskiest loans are being offloaded, their risk profile is significantly improved, thus they require less capital. Redraw the graph and Bob's your weird auntie.

Here's a juicy line:
If the assumptions behind the formulae are correct, the output is a capital requirement sufficiently large that a bank is only expected to become insolvent once every 1,000 years

Ha.

Proinsias

12-08-2009, 05:29 PM

I assume all Eurozone countries have the same min capital ratios?

Might help:

http://www.centralbank.ie/data/finstarepfiles/regulatory%20develop ments%20in%20the%20c apitalisation%20of%2 0banks%20-%20a%20financial%20s tability%20perspecti ve%20by%20caroline%2 0gavin%20%20rebecca% 20stuart.pdf

Selectively quoting here, but never mind:
"Tier 1 capital must constitute at least half of the 8 per cent capital held, that is, the Tier 1 capital ratio must be at least 4 per cent."

"The Irish Financial Regulator has subsequently laid down specific criteria for the eligibility of non-standard instruments as Tier 1 capital. Such instruments are generally referred to as hybrid securities and are described briefly in Box 1."

"Generally, hybrids combine debt and equity instruments."
Not just equity then.

"On maturity, the investor may convert the security into equity or cash."
I would have thought the payments from the government correspond to this description.

I may not quite understand it all properly, but nothing I've read so far tells me that the rules are as fixed as the guy who writes the Irish Economy blog suggests (did you say he's your professor?) and it looks like there's a lot of scope for converting things like debt into Tier 1 capital without breaking the rules.