Cowen tells us to shut up

gurramok

nesf wrote: »

Agreed and this is actually getting into the meat of the issue regarding where aggregate demand should be given that credit has dried up (i.e. in the sense that where aggregate demand would have been if there wasn't abundant cheap credit in the economy). It's not going to return to 2006/2007 levels any time soon and we really need to adjust the budget to this reality.

Just to add, you're right in the global sense of the aggregate demand. (you would be right domestically if we manufactured stuff on a large scale with some sense of a demand for that stuff here as well)

Just the other day, a car parts factory is laying off hundreds. Now, we can do nothing about that as they export based on that aggregate demand in international countries.
If that global demand returns with positive sentiment, then maybe some industrialist will replace those jobs with new similar ones. It will have minimal effect here as our cost base is so high.

For Ireland, because of mismanagement, there is nothing much the buying public can do to rescue the economy with positive sentiment because of:

A - record private sector debt at €400bn
B - we are so open to global events(that car parts factory)
C - Economy is mismanaged (that construction related activity accounting for 23% of GNP in 2006 thing)
D - We cannot really buy Irish as we don't manufacture much(where are the Glen Dimplexes?), maybe a few retailers would be saved where the big population centres are.
E - banks are in trouble due to some of A and bets on Residential/Commercial property here and abroad

So, to add to my post, we are getting crucified on 2 fronts, domestic and international. If we did not have that bubble, we wouldn't be talking much about a domestic problem and can rightly blame Bush

Hence Cowen is only hoping that everyone will shut up so international investors will buy Irish debt, rescue the country from bankruptcy and all will be grand.
Thing is, these investors are not stupid and they are big players and don't have their heads buried in the sand hence they do not believe Cowen.

BlaasForRafa

nesf wrote: »

Well the fact that they haven't run up huge public debt over the past decade makes a return to 80s style misery less likely at least. Though McCreevy's expansion of public spending was real bad thing to do and to an extent Cowen later inherited these levels of public spending which the public now expected since they had gotten used to it! That's where the real **** ups were made, early on in the boom.

Thats true, one good thing the 90's governments did was to reduce the national debt which leaves us at least some leeway for the government to borrow.

Even during the 80's though at least the country had a manufacturing/exports led economy, now that sector will probably shrink greatly and move to eastern europe/china.

And the services jobs (aka call centres basically) are under threat from cost undercutting from India so its difficult to see where jobs are going to come from unless something is done about Irelands lack of competitiveness. We're never going to be able to compete on wage costs any more but the government has got to take the lead on reducing energy costs, red tapes etc so that we have at least some chance of competing.

nesf

gurramok wrote: »

Just to add, you're right in the global sense of the aggregate demand. (you would be right domestically if we manufactured stuff on a large scale with some sense of a demand for that stuff here as well)

Just the other day, a car parts factory is laying off hundreds. Now, we can do nothing about that as they export based on that aggregate demand in international countries.
If that global demand returns with positive sentiment, then maybe some industrialist will replace those jobs with new similar ones. It will have minimal effect here as our cost base is so high.

For Ireland, because of mismanagement, there is nothing much the buying public can do to rescue the economy with positive sentiment because of:

A - record private sector debt at €400bn
B - we are so open to global events(that car parts factory)
C - Economy is mismanaged (that construction related activity accounting for 23% of GNP in 2006 thing)
D - We cannot really buy Irish as we don't manufacture much(where are the Glen Dimplexes?), maybe a few retailers would be saved where the big population centres are.
E - banks are in trouble due to some of A and bets on Residential/Commercial property here and abroad

So, to add to my post, we are getting crucified on 2 fronts, domestic and international. If we did not have that bubble, we wouldn't be talking much about a domestic problem and can rightly blame Bush

Hence Cowen is only hoping that everyone will shut up so international investors will buy Irish debt, rescue the country from bankruptcy and all will be grand.
Thing is, these investors are not stupid and they are big players and don't have their heads buried in the sand hence they do not believe Cowen.

Aggregate demand can be as much for services as manufactured products though and we do have a very large services sector that will be impacted strongly by negative sentiment. I agree completely that international demand is what's going to be necessary for us to pull back up "into the black", but we can make things worse for ourselves with respect to our services sector.

We are very much dependent on the global economy picking up to bring us back up again though, that said we'll (potentially) benefit more from a global upturn than more closed economies like France or Germany etc.

nesf

BlaasForRafa wrote: »

Thats true, one good thing the 90's governments did was to reduce the national debt which leaves us at least some leeway for the government to borrow.

Even during the 80's though at least the country had a manufacturing/exports led economy, now that sector will probably shrink greatly and move to eastern europe/china.

And the services jobs (aka call centres basically) are under threat from cost undercutting from India so its difficult to see where jobs are going to come from unless something is done about Irelands lack of competitiveness. We're never going to be able to compete on wage costs any more but the government has got to take the lead on reducing energy costs, red tapes etc so that we have at least some chance of competing.

I can't remember who said it but someone on Questions and Answers before Christmas summed it up extremely well, the FF approach under Bertie was right one in the 90s but completely the wrong one since 2000.

gurramok

On the topic, we are really been pointed out in Euroland as like the Wild West.
http://www.irishtimes.com/newspaper/world/2009/0120/1232059661794.html?via=mr

The normally restrained financial daily Handelsblatt summed up the worsening situation under the headline “Panic Broadens in Ireland”, while the Frankfurter Allgemeine Zeitung reflected last week on how “Europe’s periphery is now losing the confidence of investors” and how states such as Ireland were finding it more difficult to borrow money.

On Saturday, Le Monde picked up this theme and listed Ireland as one of “black sheep” within the euro zone that are destabilising the currency. Portugal, Greece and Spain also share this dubious distinction from Le Monde , suggesting to its readers that Ireland is now some sort of Mediterranean of the north when it comes to finances.

Sort out the economy Cowen now instead of telling us to shut up, make the hard decisions and lets win back that trust.

nesf

gurramok wrote: »

Sort out the economy Cowen now instead of telling us to shut up, make the hard decisions and lets win back that trust.

Fiscal discipline is the order of the day tbh, and in the last Budget it most certainly not evident.

BlaasForRafa

nesf wrote: »

I can't remember who said it but someone on Questions and Answers before Christmas summed it up extremely well, the FF approach under Bertie was right one in the 90s but completely the wrong one since 2000.

It stems from the Macsharry budget of 1987, I can remember the misery caused by the hospital closures and the swingeing cuts in public spending but things had gone out of control by then. The tallaght strategy allowed the government time to get things under control allied to a reduction in taxation (which was massive) that got people spending.

The devaluation of the punt in 93 is where the boom stems from though, that allied to low wage costs, access to eu markets and low corporation tax made ireland the go-to place for inward investment. Both the rainbow and early bertie governments had prudent budgets which nudged the boom along.

The the loss of interest rate controls to the ECB and the housing boom came into effect around 2001/02 and the government did little to stop the property bubble. Like an earlier poster said people allowed themselves to get saddled with huge mortgage and credit card debt and low savings which means spending our way out of the problem is not really an option.

Also we can't devalue the currency any more to make ourselves more competitive. I'm not arguing for an exit from the euro though, thats probably the one area of stability we've got. I know it would be begging but at this stage some assistance from the richer and more stable euro zone economies would help Ireland out big time.

nesf

BlaasForRafa wrote: »

It stems from the Macsharry budget of 1987, I can remember the misery caused by the hospital closures and the swingeing cuts in public spending but things had gone out of control by then. The tallaght strategy allowed the government time to get things under control allied to a reduction in taxation (which was massive) that got people spending.

The devaluation of the punt in 93 is where the boom stems from though, that allied to low wage costs, access to eu markets and low corporation tax made ireland the go-to place for inward investment. Both the rainbow and early bertie governments had prudent budgets which nudged the boom along.

The the loss of interest rate controls to the ECB and the housing boom came into effect around 2001/02 and the government did little to stop the property bubble. Like an earlier poster said people allowed themselves to get saddled with huge mortgage and credit card debt and low savings which means spending our way out of the problem is not really an option.

Also we can't devalue the currency any more to make ourselves more competitive. I'm not arguing for an exit from the euro though, thats probably the one area of stability we've got. I know it would be begging but at this stage some assistance from the richer and more stable euro zone economies would help Ireland out big time.

The housing boom was there prior to 2001.

Some papers on this period that are worth reading (and available freely to non-academics):

Ó Gráda's paper: http://www.esri.ie/UserFiles/publications/20070724151930/QEC2002Spr_Policy_OGrada.pdf

Barry's summary of the two competing theories on the Celtic Tiger: http://www.nuigalway.ie/staff/alan_ahearne/documents/barry.pdf

Remember both these papers are from a few years back but the insight in there is worth looking at nonetheless.

BlaasForRafa

nesf wrote: »

The housing boom was there prior to 2001.

Some papers on this period that are worth reading (and available freely to non-academics):

Ó Gráda's paper: http://www.esri.ie/UserFiles/publications/20070724151930/QEC2002Spr_Policy_OGrada.pdf

Barry's summary of the two competing theories on the Celtic Tiger: http://www.nuigalway.ie/staff/alan_ahearne/documents/barry.pdf

Remember both these papers are from a few years back but the insight in there is worth looking at nonetheless.

The boom was there sure, but from my memory interest rates went down on the accession to the euro zone and things really rocketed from there.

Thanks for the links though, some good insights there.

nesf

BlaasForRafa wrote: »

The boom was there sure, but from my memory interest rates went down on the accession to the euro zone and things really rocketed from there.

Yup, but the ECB interest rates only aggravated what was already there. There is a false belief floating around the place that our housing boom was caused by low ECB rates which is utterly incorrect.

BlaasForRafa wrote: »

Thanks for the links though, some good insights there.

No problem, it's important that people realise that Celtic Tiger growth rates were a once off and that we can't expect to return to them without falling substantially behind the rest of the world again.

BlaasForRafa

nesf wrote: »

Yup, but the ECB interest rates only aggravated what was already there. There is a false belief floating around the place that our housing boom was caused by low ECB rates which is utterly incorrect.

Indeed there were a number of factors in play and the bubble was already growing.

Now we're stuck with an excess of houses (at least 40k unsold houses on the market), huge personal defts and from an aesthetic point of view...a country covered which crappy looking noddy houses. It seems like architectural taste went in inverse proportion to developer greed.

Svalbard

BlaasForRafa wrote: »

Thats the kind of "ah sure it'll be alright" type attitude thats gotten this economy into the state its in now.

Under FF and Cowens watch (and I did vote for them in 2002 so I don't have a set political "side") they allowed public expenditure to run out of control. now that exchequer returns have collapsed we have a huge budget deficit (estimated at 12.5 billion but could go higher) which will mostly have to be paid by increased borrowing....just at the wrong time when lending is at its tightest.

Income tax returns have fallen, capital gains, vat, stamp duty, corporation tax ...have all fallen through the floor and the money to pay public "servants", hospitals, education and other services has to be found somewhere. Oh and the increased dole queue that was 4.5% at the start of 2008 and was 8% at the end of 2008 (the highest increase ever) is estimated to go up to 12% by the end of the year.

The economy is going to be hit by negative growth this year and quite possibly deflation. Should we just ignore this and blithely saunter on without a care? Ireland got rich for a short while and the country went a bit mad, now the mistakes that the government made in the last 7 or 8 years are coming home to roost.

I don't know if you were around in the 80's but I was growing up then and this country was an utterly miserable place. I don't want the country to go back to that type of era but I have absolutely no confidence that biffo Cowen or Lenihan has a clue of how to avoid it. This seems to be a disaster prone government...theres no guarantee that FG or Labour could do any better but I don't see how they could possibly do worse.

Never for a second did I say our problems were small ones or we should ignore them. I just won't allow myself to become one of the miserable people who see doom and gloom everywhere.

BlaasForRafa

Svalbard wrote: »

Never for a second did I say our problems were small ones or we should ignore them. I just won't allow myself to become one of the miserable people who see doom and gloom everywhere.

Fair enough. Perhaps you could enlighten us as to what rays of hope there are for the economy at the moment?

Svalbard

BlaasForRafa wrote: »

Fair enough. Perhaps you could enlighten us as to what rays of hope there are for the economy at the moment?

In the short term there will need to be drastic cuts in public spending whilst maintaining a high level of investment in transport infrastructure and education. Assuming economic forecasts are true we should return to positive growth in 2010.
As has been spouted over and over, the future of our economy will not lie in manufacturing (obviously) but in developing service and knowledge based industries, home-grown niche industries. A certain amount of foreign and multinational investment is desirable, but should not form a disproportionate part of our economic output.

gurramok

Yes, the celtic tiger pre-2001 sort of justified the housing boom before then as the economy was in pretty good shape along with a housing shortage.

svalbard wrote:

In the short term there will need to be drastic cuts in public spending whilst maintaining a high level of investment in transport infrastructure and education. Assuming economic forecasts are true we should return to positive growth in 2010.
As has been spouted over and over, the future of our economy will not lie in manufacturing (obviously) but in developing service and knowledge based industries, home-grown niche industries. A certain amount of foreign and multinational investment is desirable, but should not form a disproportionate part of our economic output.

Public sector cutbacks will be painful for at least 1-2yrs to depress the economy further, i'd agree there.

I'm intrigued. What are these services and knowledge based industries?

Hope its not the IT sector, i know people who are in competition with India on that front with jobs been lost:)
Financials are ruled out for obvious reasons. You suggesting R&D homegrown?

I'd agree but isn't it a bit late now with our cost base so high?

nesf

Svalbard wrote: »

Assuming economic forecasts are true we should return to positive growth in 2010.

Those forecasts are predicting bad things for 2010 as well now given the events in other countries over the past 3 months. The basis for a 2010 recovery was on the rest of the EU (i.e. our trading partners) not being as hit as hard as it is now clear that they will.

gurramok wrote: »

Yes, the celtic tiger pre-2001 sort of justified the housing boom before then as the economy was in pretty good shape along with a housing shortage.

Exactly.

gurramok wrote: »

I'd agree but isn't it a bit late now with our cost base so high?

Not necessarily, there are industries further up the value chain that aren't as wage sensitive (i.e. industries where wages don't form the a large part of the product cost). Whether we can attract these industries though is a whole other question.

NewDubliner

gurramok wrote: »

I'm intrigued. What are these services and knowledge based industries? Hope its not the IT sector, i know people who are in competition with India on that front with jobs been lost:)

At present India has only encroached on low-end, knowledge-based work. Call centre staff working from scripts, data entry, OCR, transcription, programming to designs and specs provided from outside the country.

The most profitable knowledge-based work results in valuable patents (e.g. new wonder drugs and medical devices) or in innovative, licensable computer software.

Any job that can be codified and scripted (e.g. assembly line, call-centre etc) is ripe for export or outsourcing to low-cost economies.

Not all 'IT jobs' are high-tech.

andrewdeerpark

The reason for the “join the dots” media commentary is the secretive nature of the whole banking issue even though we are over 4 months into the crisis. Have the minutes of any important meeting being published? What about the governments PWC audit report on Anglo Irish Bank, again to sensitive for public digestion!

In this post Bertie Ahern Galway tent developer-backslapping era, we must only assume that big business is calling in their donations that won the last 2 elections for FF.

Brian Cowen for your own political survival you must:

- Distance yourself for Bertie Ahern (his economic miracle legacy is sinking fast like Alan Greenspan in US); quiet difficult considering you were a key member
- Address the nation direct for 10 minutes prime time outlining the issues and your remedy
- Publish all banking details into the public eye regardless of content
- All top bankers to go; cannot understand how Allied Irish Bank’s CEO has not left after the last 2 days with BOI’s.
- Ruin several big developers or Insurance Moguls owing money to Anglo by pursing them through the courts and winding up their personal assets
- Have a cabinet reshuffle and promote young FF blood to the table
- Haggle a public sector pay freeze over 2 years covering all increments and increases in the public sector, freeze public sector pensions for 5 years
- No increases in welfare for anyone next budget; pensioners, dole etc
- No change in tax credits next budget
- Reintroduction of college fees for any household with a combined income of over 100K
- Slash public sector staff in IT & Telecoms, they contract out most of the work (i.e. contractors do the work at ridiculous rates) and are a major source of overstaffing

FF’s other option is to replace Cowen, call an election, leave Labour & FG (which they win) with the mess for about 2-3 years then after they have taken the unpopular decisions FF slides back in to power for another 10 years; as happened after the rainbow government.

Liam Byrne

^ +1, with one addition

Ditch the expensive consultants and talking shops and commissioned reports; we didn't elect them and whatever they're doing is useless anyways because it hasn't worked.

gurramok

I've leeched this from the Pin about the 9 o'clock news:)

http://dynamic.rte.ie/av/230-2477425-320-180.smil [realplayer required]

2 minutes 54 seconds in

Ann Doyle: In the past few minutes a spokesman for the Taoiseach says that people commenting on the banking situation, should take into account the impact of their comments on a vital national interest. He stressed that the measures taken by the government were designed solely to address the question of confidence and stability in the Irish banking system, and, that suggestions they could have other objectives could warrant a loss of confidence in banking institutions which could be immensely damaging.
{long pause} aaand joining me now our economics editor George Lee.

Was this a direct attack on Morgan Kelly? (see other thread where he divulged certain info in the public domain via the Irish Times about Anglo bailout)

I love conspiracies

nesf

gurramok wrote: »

Was this a direct attack on Morgan Kelly? (see other thread where he divulged certain info in the public domain via the Irish Times about Anglo bailout)

I love conspiracies

Kelly's article was published today, Cowen's warning came yesterday. I'd say they are unrelated. It's not like there was loads of questioning of the Government's motives before today.

gurramok

Yeh but, MK probably wrote that article yesterday as it was ready for the morning publications today!

Guess we wil have to wait 30 years for the archives to be opened to find out

andrewdeerpark

Here is the Morgan Kelly article you speak about:
http://www.irishtimes.com/newspaper/opinion/2009/0120/1232059661333.html

I have said all along to let Anglo die, as I said before why is the government so afraid of letting a market run its course...

nesf

gurramok wrote: »

Yeh but, MK probably wrote that article yesterday as it was ready for the morning publications today!

Guess we wil have to wait 30 years for the archives to be opened to find out

Pretty much. His article isn't that much of an exposé which is what makes me doubtful.

gurramok

Even if if its a retort to opposition in the dail and not what MK wrote, i do think its disturbing that Cowen is trying to stop any discussion on the fate of Ireland's economy hence stop any negative criticism of FF handling of the economy.

It just smacks of something you would hear of in Zimbabwe or something.

andrewdeerpark

gurramok wrote: »

It just smacks of something you would hear of in Zimbabwe or something.

Free speech and open honest debate is the life blood of any true democracy, well said.

Vadrefjorde

andrewdeerpark wrote: »

Free speech and open honest debate is the life blood of any true democracy, well said.

Not in Brian "mugabe" Cowen's world...
Wonder if journalists will start to dissapear next.

Het-Field

Cowan is talking rubbish if he consideres that the nation is talking itself into a recession.

1.Was it talking that caused Dell to quit the country
-No, it was the fact that we have allowed ourselves to remain uncompetitive by trying to remian popular with workers through the minimum wage

2.Was it talking that caused Anglo Irish to go under and then expect governmental help
-No, it was inappropriate financial dealings, in conjunction with shady management dealings. The Government brazenly told the Irish people that the bank guarantee would never be touched. Now a bank is Nationalised

3.Was it talk that caused the spending slump before christmas
-No, it was the decision of our Government to raise income tax (through the levy), and raise VAT by 1/2 percent, while VAT just north of the border was almost 4 1/2 % less.

4.Was it talking that caused the government to cutback on the wrong things in Budget 2008...before renaging on them to maintain popularity ?
-No, it was in response to the reactive measures taken against the old the young and the handicapped. The only people who were going to survive that budget were the builders and the public service.

5.Was it talking that has seen CIE suffer savage cutbacks, which will adversely effect many many routes.
No, last summer it became apparent that the Government were squeezing private competitiors from the market, which was a disgrace. They have been unwilling to split up CIE and now the consumers are paying the price.

6.Was it talking which saw the negation of the PDs economic influence in Government in 2004 ?
No, Bertie decided to get all party political, and take John McGunness up on his advice about the PDs. Harney decided to move to health, while McCreevy was sent to Europe and Seamus Brennan (RIP) was demoted. In place of Maverick McCreevy was Cowan the man who would die for Fianna Fail even if it meant bad policy, while Cullen (Ireland' Gombeen man) replaced Brennan. Cowan dithered over the stamp duty issue, he dithered over competition, and look what we have.

7.Was it talking which ensured the conclusion of the new national pay deal, even though we knew that we were heading into the toughest time of many years ?

No, Bertie wished to be friends with the Unions, so much so that Jackie O Conner and his ilk walked all over him. The same lead to the disgraceful treatment of Willie Walsh when he was Aer Lingus. He was a man who was responsible, and could take that sham of a service forward...Bertie didnt allow him

8.Was it talking which had Bertie wandering up to the Mahon Tribunal day in and day out, while diverting the real business at hand ?

No, that was Bertie and his inconistent account of events. That circus, and his sham of a trip to the Joint Houses of Congress, where he brought his builder buddies highlighted that FF had their priorities completely arseways.

9.Was it talking which convinced Fianna Fail to put our trust in them in May 2007

No, that was a party hyped up on power, with breathtaking arrogance as Brian Cowan continuously laughed in the face of the opposition.

We have not talked ouselves into a recession, our clown college of a Government has done that for us. Furthermore, their partners in crime the Greens have been insisting on Green Taxes, Carbon Taxes, remunerating employees who ride bikes, and are only doing their part to drive a deeper wedge into this recession.

In the Sindo on Sunday, Willie O Dea chastised the opposition for no coming together with any solid solutions. I will hold my breath to criticise them until I see those with the power actually making a positive move.

BlaasForRafa

andrewdeerpark wrote: »

Free speech and open honest debate is the life blood of any true democracy, well said.

Indeed and if a few newspaper articles can sink the economy then we are really f****d

johnnyskeleton

D.S. wrote: »

Relax lads. He's not saying you don't have a right to say what you want. He's just pointing out (and rightly) that the amount of illinformed dribble that we are seeing in the press and generally spoken about is causing a crisis in confidence.

To be honest I think he's more concerned about the growing influence of commentators such as George Lee, Alan Ahearne, David McWilliams & Morgan Kelly, and also the meteoric rise in references to thepropertypin.com in mainstream media than he is about illinformed dribble.

In short, it's the informed analysis that really has him worried.