The Irish economy: where next?

leninbenjamin

the lack of activity on this board is a bit of a shame, so in an attempt to stimulate a bit of lively debate...

what do people reckon is in store for us in the near future? seems to be a huge amount of pessimism creeping into people's minds these days, even the economist there recently had a leader on why America is doomed to recession. I thought at first we wouldn't fare too poorly, all things considered, that it was just media scaremongering, but the announcement of the Abbott losses has gotten me a bit stirred up now...

is a serious recession on the cards?

shnaek

I agree - it would be nice to stimulate some more activity on this board.

Personally I think there is a good chance of a bit of a recession. It is the same herd mentality that had everyone believing the only way is up that will now switch to a bearish mentality. Our economy has been over-reliant on construction over the past number of years. We need to develop Irish Nokias and Siemens. We need to get back to the business of trade.

We seem to be doing well in regards to jobs creation, so even though the Abbott closure is a blow, it isn't a killer blow. I am also watching Dell in Limerick with interest. Their Polish plant opened this week. If we start loosing the big guys like Dell, Intel and Microsoft - then we're in real trouble.

silverharp

the big negetives I see over the next 5 or 10 years is Peak Oil, which will make it difficult for the global economy to grow and the deflationary effect from the end of the credit bubble. You can be pretty sure that the next 10 years will be more difficult then the last

Ekancone

The reason there is no activity is because no one knows where it is. I mean, personal? What the **** has that got to do with economics?

Jesus Wept

silverharp wrote: »

the big negetives I see over the next 5 or 10 years is Peak Oil, which will make it difficult for the global economy to grow and the deflationary effect from the end of the credit bubble. You can be pretty sure that the next 10 years will be more difficult then the last

Not to worry, loads of oil in Africa.

America to the rescue!

doolox

Ireland faces HUGE challenges from the upcoming economic superpowers India and China because, physically, culturally and linguistically we are remote from them. Our present economic boom stems mainly from our lucky geographical and cultural position as a "halfway house" between the US and the EU. Although we may be part of the EU we are much more culturally aligned with the US and the UK spheres of influence and this has been of enormous benefit to us.
As Europe and US economies age and become less important Ireland will become poorer unless we become cleverer. Expert opinion has it that we need every iota of human brainpower that we can muster. In the past people were disqualified on the grounds of academic performance and learning difficulties were largely ignored. Also other forms of discrimination on gender, race etc... were widespread. We can no longer afford this. Educational opportunities must be expanded. Reasons for people not attaining their full academic and, hence, economic potential must be investigated thoroughly.
People in power in the past shied away from this process since it endangered their position and reduced their chances of competing for jobs in a limited job pool. There was a lot of low status jobs available for taking up by the less able academically. This is not the case now. Countries such as Japan, Switzerland, Finland and the other Nordic countries which have invested heavily in Education and other areas of advancing Human Development stand a much better chance of staying viable in the future.
If we don't invest in the educational development of our general population now we will all lose out in the future.

silverharp

The-Rigger wrote: »

Not to worry, loads of oil in Africa.

America to the rescue!

you will need to define loads. Africa will be a growth story in the future but I havnt read anything that says it will make up from depletion in the North Sea and other existing oil fields. Remember there has been no major oil finds like the North Sea since the 70´s

Digi_Tilmitt

The biggest thing that I think is a danger to the world economy is the Chinese equity bubble bursting. Some many ordinary people in China have thrown themselves into the market that when the bubble bursts I believe it could cause massive upheval and potentially revolution and even a disintigration of China into multiple states. That sounds ridiculous but when the common folk lose everything on the market they`ll have to blame someone for their own stupidity and I believe it will mostly fall on the government. Some people may not be even able to feed themselves after they lose it all, especially considering the leverage involved. This will fuel instability, rioting etc..

I definitely believe that the Chinese bubble is a bigger issue than subprime or even the carry trade.

When China blows up all the massive exponential demand that is being extrapolated out by commodity bulls will disappear, therefore I am long term bearish on commodities, Chinese stocks and also the euro (purely from a purchasing power perspective). Bullish on the Dollar. Also bullish on the Yen especially as the collapse of China would trigger at least some unwinding of the carry trade, though such a crisis would hardly give the BoJ room to raise rates meaning that the fundamental reason for the carry trade would remain in place.

Feel free to tear my analysis apart, debating this stuff is good fun!

silverharp

Digi_Tilmitt wrote: »

I definitely believe that the Chinese bubble is a bigger issue than subprime or even the carry trade.

When China blows up all the massive exponential demand that is being extrapolated out by commodity bulls will disappear, therefore I am long term bearish on commodities, Chinese stocks and also the euro (purely from a purchasing power perspective). Bullish on the Dollar. Also bullish on the Yen especially as the collapse of China would trigger at least some unwinding of the carry trade, though such a crisis would hardly give the BoJ room to raise rates meaning that the fundamental reason for the carry trade would remain in place.

Feel free to tear my analysis apart, debating this stuff is good fun!

I disagree that China is driving the world economy. alot of the increase in demand for commodities relates to transfer of operations from the west so in effect the west is the ultimate consumer. I do believe China will have major problems in the next couple of years, there is major mal investment going on. I would expect a property crash as well as a stock market crash.

As a sidebar I would say that you should look at Russia and the OPEC countries as being major drivers of commodities from now on. they all have infrastructure that needs to be replaced and with the exception of Russia rising populations. Given that they will increase domestic demand for oil there will be less oil for export which will underpin prices while giving them vast amount of cash to invest internally.

blue shimmering

leninbenjamin wrote: »

the lack of activity on this board is a bit of a shame, so in an attempt to stimulate a bit of lively debate...

what do people reckon is in store for us in the near future? seems to be a huge amount of pessimism creeping into people's minds these days, even the economist there recently had a leader on why America is doomed to recession. I thought at first we wouldn't fare too poorly, all things considered, that it was just media scaremongering, but the announcement of the Abbott losses has gotten me a bit stirred up now...

is a serious recession on the cards?

I have been watching the international and home economies for the last few years and think we are definitely in for a recession, I was there for the one in the 1980 and boy but it was bad!!! Now it is happening again, jobs are going etc..., it has started with America, lending money to people not able to pay it back, stocks and shares going through the floor, it will end in a wall street type of crash but not the way it happened that time - things have become more sophisticated so this crash will be much more subtle! What about what happened in UK with banks, lending not having enough liquidity and having to go to the government for help, are we really to believe that this was not thought through thoroughly before it went public? Now we have Pakistan in turmoil and this effect all of us, we had 9/11, train attacks in UK and also in Spain... How could our and all the other economies come out of these without a scratch, they can not and we need to be aware that it doesn't seem to take very much nowadays to send shock waves across the whole world and this I feel will eventually lead to a recession world wide that will be of mega size that has never been seen before.

Oil was talked about above but there are alternative to this - there is little we can do with the unpredictable attacks on our democratic economies by maniacs who unfortunately have our future in their hands, sorry for being so pessimistic but I really hope I am wrong and that our economy will grow this year! Building sites, banking jobs, government jobs, retailing, manufacturing..... I really do not want to see a bad time again with all our young people having to immigrate to where????

Abbott, an American company, Hospira the spin off, subsidies given to them to open a factory in Donegal Town called Abbott again, it was Abbott then Hospira, now Abbott again! How can things be going right, when we are paying with tax payers money to entice foreign companies in who are only here while the price is right and will move on to cheaper economies when it suits them?

China, oh boy China - we really need to be worried about them because they are really workaholics and we are not, partying is our way to release our frustration but this will have to come to a climax soon it can not go on, why do we want drink, drugs, drive fast, kill each other, drug barons, fat cats....? The sooner we realise that we do not need these the better, our young people are not getting told no to anything and this is bad because when they do meet a rejection situation they don't know what to do! Give me, give me, give me all the time cannot continue it has to become take from me, take from me, take from me for our whole welfare system to survive, it is dependent on taxes coming in and these are going to dry up so what will happen then?

A lot of questions and not too many answers, hope this gets a debate going because it does need to happen, economics is a social science after all and the above are all social events that will eventually impact on our economy, I think!

Best wishes,

blue shimmering

ditpoker

shnaek wrote: »

Our economy has been over-reliant on construction over the past number of years. We need to develop Irish Nokias and Siemens. We need to get back to the business of trade.

what are we talking here? invent the next mobile phone, or next personal computer?

i agree we need some big product that can be sold internationally.. but the reality is, identifying the next thing that can be exported in mass quantity is not easy. so it is easier to attract people like dell to our shores than trying to be the next dell.

Ekancone

ditpoker wrote: »

what are we talking here? invent the next mobile phone, or next personal computer?

i agree we need some big product that can be sold internationally.. but the reality is, identifying the next thing that can be exported in mass quantity is not easy. so it is easier to attract people like dell to our shores than trying to be the next dell.

Ah no, thats not the next step at all. Where we need to go is post-manufacturing and into R&D, or at least in the development of R&D that originates from the motherships in the US*. This will of course spillover and lead to homegrown companies of the same kind, and perhaps then we could look at having our own Nokia, etc. But we are a long way off that. One step at a time lads!

*In fact, this is exactly the policy that the government are pursuing.

djpbarry

daithifleming wrote: »

Ah no, thats not the next step at all. Where we need to go is post-manufacturing and into R&D, or at least in the development of R&D that originates from the motherships in the US*. This will of course spillover and lead to homegrown companies of the same kind...

Agreed, but it seems the Irish people do not want such an economy. Just look at the empty places in science and engineering courses in various institutions around the country.

Besides, there is still virtually no R&D in Ireland outside the universities and IT's. The government has been paying much lip-service to the idea of a knowledge-based economy in the last number of years, but we're yet to see any substance.

We'll see what comes of Bertie's promise of a "Green Revolution".

Ekancone

djpbarry wrote: »

Agreed, but it seems the Irish people do not want such an economy. Just look at the empty places in science and engineering courses in various institutions around the country.

Besides, there is still virtually no R&D in Ireland outside the universities and IT's. The government has been paying much lip-service to the idea of a knowledge-based economy in the last number of years, but we're yet to see any substance.

We'll see what comes of Bertie's promise of a "Green Revolution".

Well the problem with science is worldwide phenomenon, so i wouldn't place that as being unique to Ireland. However, there seems to be inroads being made by govts and universities to reverse this trend. Whether it will work remains to be seen.

I do think that the potential for a knowledge based economy is there, at least with human capital. However, i think that our infrastructure is not ready to meet this potential, and won't be for another 5-7 years. In this meantime, we will walk a bumpy road as we lose our manufacturing jobs to the east and the construction sector finds a stable growth pattern after years of living in cuckoo land.

patslatt

leninbenjamin wrote: »

the lack of activity on this board is a bit of a shame, so in an attempt to stimulate a bit of lively debate...

what do people reckon is in store for us in the near future? seems to be a huge amount of pessimism creeping into people's minds these days, even the economist there recently had a leader on why America is doomed to recession. I thought at first we wouldn't fare too poorly, all things considered, that it was just media scaremongering, but the announcement of the Abbott losses has gotten me a bit stirred up now...

is a serious recession on the cards?

The lack of activity is down to the hard to find location of the economics board under "personal".

My expectation is for modest economic growth for several years,at maybe 2 to 3% a year. We can try to spend ourselves rich for a year or two as increased infrastructure spending helps to partially offset the housing construction correction. But as infrastructure spending pushes the economy to around the Brussels 3% limit on the GNP deficit,Keynesian stimulus will be played out. Then the economy's progress will depend on pay restraint in the public sector,spending restraint in the massive health care budget, the effectiveness of infrastructure spending and foreign direct investment.

Public sector pay restraint will prove hard for the government. Given the position of Bertie and the Cabinet as the world's most overpaid democratic politicians,how can the government call for pay restraint with a straight face? They could impose it unilaterally,but that would alienate the public sector unions, a major source of Fianna Fail's electoral support.

In health care,technology continues to drive costs at an inflation rate two or three times consumer inflation. The dysfunctional HSE has no chance of coping with this. The plan to bring in McKinsey Consultants to improve on HSE organisational structures merely postpones for a few years the inevitable and necessary changes to a radically different model of health care such as those successful models on the European continent. Meanwhile, the government will be tempted to continue throwing money at the HSE to placate public anger at hospitals' health care deficiencies.

As for the effectiveness of infrastructural spending, there is good news. With contracts tendered on a single price instead of the former,wasteful cost plus system,most projects are coming in on budget and on time. The basic national motorway system is nearing completion and should be a continuing source of productivity increases outside of Dublin. The rail system is achieving major capacity increases and line signal system improvements. If only ESB unions could be persuaded to let ESB transfer its share of the power distribution grid to Eirgrid this year as planned (I don't expect they will),many independent electricity producers would enter the market,enabling plentiful capacity.Arguably,broadband capacity and availability should be comparable to other EU countries with a catch-up in five years or so. On the negative side, Metro,the largest transport project,is just a prestige project that will not help the economy's productivity.

Internationally, the US and UK economies,our best export markets, will experience low growth for several years as their past credit binges are gradually wound down to normal levels. (Borrowing about 3% of salary a year on consumer credit can enable an individual to have a great spending run for about ten years, until the debt repayments start to become a burden.) The US also faces a massive problem that doesn't get mentioned often enough in short term economic forecasts-the pressure in health care costs and social welfare payments for the ageing baby boomer generation,the bulge of babies born from 1946 to 1955, who are now entering their sixties.

The possibility of weakening exports to the US and the UK aside,how would low US and UK economic growth affect FDI,foreign direct investment in Ireland? If the government manages our economy well, US multinationals will continue to find Ireland an attractive platform for the EU market. While the decline in the dollar reduces potential investment funds available to US multinationals in Euro exchange rates,if the US economy is underperforming, FDI in the EU could still prove attractive despite the dollar's decline.So a likely decline in FDI could be substantially less than the decline in the dollar.

As for China,barring reckless overinvestment that would cause hyperinflation,Chinese growth prospects should remain excellent, helping to boost the international economy.Maybe half of China's population has still to access productive employment, as opposed to underemployment on farms or in very unproductive jobs. China's key advantage is that it can build modern infrastructure at an amazing speed. The government can brush aside most objections to development,since the state either owns all land outright or can cancel leases on land to farmers at short notice.

China's advance does not represent a threat to other economies. It is a well known fact in economics that a country's economic prosperity mostly depends on its own ability to improve productivity.

blue shimmering

blue shimmering wrote: »

I have been watching the international and home economies for the last few years and think we are definitely in for a recession, I was there for the one in the 1980 and boy but it was bad!!! Now it is happening again, jobs are going etc..., it has started with America, lending money to people not able to pay it back, stocks and shares going through the floor, it will end in a wall street type of crash but not the way it happened that time - things have become more sophisticated so this crash will be much more subtle! What about what happened in UK with banks, lending not having enough liquidity and having to go to the government for help, are we really to believe that this was not thought through thoroughly before it went public? Now we have Pakistan in turmoil and this effect all of us, we had 9/11, train attacks in UK and also in Spain... How could our and all the other economies come out of these without a scratch, they can not and we need to be aware that it doesn't seem to take very much nowadays to send shock waves across the whole world and this I feel will eventually lead to a recession world wide that will be of mega size that has never been seen before.

Oil was talked about above but there are alternative to this - there is little we can do with the unpredictable attacks on our democratic economies by maniacs who unfortunately have our future in their hands, sorry for being so pessimistic but I really hope I am wrong and that our economy will grow this year! Building sites, banking jobs, government jobs, retailing, manufacturing..... I really do not want to see a bad time again with all our young people having to immigrate to where????

Abbott, an American company, Hospira the spin off, subsidies given to them to open a factory in Donegal Town called Abbott again, it was Abbott then Hospira, now Abbott again! How can things be going right, when we are paying with tax payers money to entice foreign companies in who are only here while the price is right and will move on to cheaper economies when it suits them?

China, oh boy China - we really need to be worried about them because they are really workaholics and we are not, partying is our way to release our frustration but this will have to come to a climax soon it can not go on, why do we want drink, drugs, drive fast, kill each other, drug barons, fat cats....? The sooner we realise that we do not need these the better, our young people are not getting told no to anything and this is bad because when they do meet a rejection situation they don't know what to do! Give me, give me, give me all the time cannot continue it has to become take from me, take from me, take from me for our whole welfare system to survive, it is dependent on taxes coming in and these are going to dry up so what will happen then?

A lot of questions and not too many answers, hope this gets a debate going because it does need to happen, economics is a social science after all and the above are all social events that will eventually impact on our economy, I think!

Best wishes,

blue shimmering

What on earth are we going to do now, with all our young people losing their jobs and having to move - but were to? .......its such a worrying situation for us all!

Flamed Diving

You should have named yourself 'bump'.

BESman

Flamed Diving wrote: »

You should have named yourself 'bump'.

The lack of activity on this board is unsurprising.

Flamed Diving

BESman wrote: »

The lack of activity on this board is unsurprising.

Why?

nachoman

Theres gonna be more invested in the green sector and IT sector I think

thebman

IT Sector needs telecommunications and it will look after itself TBH.

The governments track record is poor in regards to development and regulation in this area. No using having IT if it can't leave the building

Green will be pushed like there is no tomorrow in the hope to kick of a continuing boom in this area IMO. I think that the only real good thing about that is it will result in a cleaner environment hopefully. I think the government will again put all our eggs in one basket.