Don't criticise the government!

Long Onion

asdasd wrote: »

Neither Lee, nor Williams said that there would be an end to a boom and that's all. They predicted a property crash causing a severe recession. ( Most recessions, on the other hand, cause the property crashes).

I don't think that you can say that the Irish property crash caused the current recession. It may have magnified the impact in Ireland, but it was not the cause. Had the global credit crisis not reared it's ugly head, the money markets would have continued to provide liquidity to the banks here who would have continued to lend to developers (though eventually it had to collapse, which is what I was saying in the first place.)

asdasd wrote: »

In other words they argued that the cause of the boom ( they said bubble) was private debt, and not anything else - like favourable demographics. All correct. All obvious to me. My first post on this is my first post here. 4 years ago.

The cause of the boom was partly debt (not just private, but more so the fact that the model of banking changed with the emergence of global money markets - it was this development which allowed for the private debt to increse in the first place) but also partly the fact that we lost sight of the inherent value that assets should be linked to. The seconde we decided that by the stoke of a planning officials pen we could increase the value of an acre of agricultural land by 1000% we were heading for trouble.

asdasd wrote: »

The other side said there would be a slowdown, yes, and maybe even a small retraction, but it would be a mere blip, a soft landing.

Without a shadow of a doubt the 'other side' were phenomenally wrong

asdasd wrote: »

So McWilliams and Lee were not predicting a typical cyclical recession, but what happened. A severe recession caused by property collapse. Which is where we are.

Once again, I think you are quite wrong in saying that the current recession was a result of the property bubble, in Ireland we just have a confluence of events, it is not a causative relationship.

asdasd wrote: »

However, you still are of the opinion - like many Irish people - that Mc and Lee were merely "lucky", having not read their scary prognosis during the bubble. Since all that information was out there, the responsibility lies with the people who bought houses, having not read McWilliams, or ahving read him and dismissed him. He had two major platforms, a Sunday and a weekly, for years.

Not "lucky" as a crash is inevitable. I agree that the responsibility is with those who bought - this is what I have been saying, we all have a burden to share, some deserve to take more than others, but few, if any of us are 100% innocent.

asdasd wrote: »

Regulation would not have worked, by the way, because the only way to regulate a bubble economy is to burst it. And there was no political desire for that.

No, but prudent fiscal policy could have taken much of the heat out of the system. McWilliams, Lee et al did not propose the need for de-limiting the extent of property related tax breaks pre the boom years because they did not forsee the boom. Once we were already in it it was inevitable that it would end at some point. I do grant you the fact that had more heed been paid, the landing would have been less severe, but the pop would have come eventually.

Dannyboy83

Liam Byrne wrote: »

I beg to differ on this; I've lived prudently and sensibly, but I'm worried about my ability to make ends meet at the moment.

I just had a walk around Cork last night and I was shocked to places like Matty Kielys which has been around since 1940 and Ludgatte O Keefes and a lot of old businesses, which have been in Cork since I was a child, have gone.
Cork City was deader than a Fianna Fail voter's brain stem.
You could walk around naked without feeling embarassed ffs.

My GF had her SW canceled last week (12month expiry) and isn't allowed any allowance at all, as apparently I'm paid too much (ignoring how much is clawed back off me immediately, not to mind stealth taxes and the fact that I have to pay all bills by myself etc.).

Its gotten to the stage now where paying the car tax requires me to budget at least 3 months in advance (you have to own a car out here), so I sat down on Friday night and made up budgets and spreadsheets that we'll need to stick religiously to for the next 3 months at least. I planned out various things that we'll need to do from January 2010 which will take the pressure off us considerably.
Yesterday I took the day off work and went about cancelling various things such as my gym membership (which is about the only single luxury I have, luxury is probably the wrong word as I would consider it a necessity) and these things.

This is NOT a "woe-is-me!" post.
I simply wanted to make the point that when I was walking around Cork City last night, it occurred to me, that just based on me alone, I'll be taking at least €10,000 out of the economy next year due to necessary changes in expenditure.

The money I'm paying in tax is paying for the over-inflated wages of public servants whom I have absolutely no contact with, ever. Its also paying for astronomical social welfare bills of which neither of us are recipient. Their over-inflated wages are keeping the cost of living and property over inflated, so its a two fold cannibalization.

My gym, the broadband company, the butchers, all of those private companies.............they're all going to bankrupt as a result of droves of people like me having to cut even the bare necessities.

Honestly, if this keeps up for another 12 months, this country will have passed the point of no return. I love this country and the people & I want to stick around, but I can take my skills to Canada if I want. And I will if I have to. I've been through a long third level education, I'm nearly 27, I don't have a pension or a mortgage, and we are struggling hard. I don't drink any alcohol, we gave up smoking in January this year, we don't have kids. I'm scratching my head wondering what the hell am I doing wrong here?

So for the OP, when you say don't criticize this government, if you think ahead about 12 months to whats in store for us, you will have to compare Ireland to Zimbabwe to see another country which has had the potential for so much success, but been so utterly mismanaged and corrupted, that its become a failed state.

Tim Robbins

Long Onion wrote: »

Do you not think that you have some responsibility here, after all, you openly admit to paying for a ridiculously overpriced one bed apartment, despite being on regular pay freezes at the time. I am not trying to be personal here by the way, but we can't have things every which way. We can't mumble about how overpriced houses were, hand over the money anyway and then cry foul.

My other option was to rent in which case I also be getting fleeced.
First pay freeze was 2002. 97 <-> 2001 got pay increases.

In 2002, the government had stupidly just overturned legislation which brought investors back into the market just as property was looking to reach a natural equilibrium. This meant there was a forseeable increase for the next few years.

I was correct with all this. Ther were increases for the next 7 years. Even though McWilliams was wrong for seven years in a row before he was correct. But don't forget even a broken clock tells the correct time at least once a day!

What really annoyed me was the lack of legislation on things like management agents, builders, developers. This became evident when you moved into the place when you were trying to track them down because they never finished things off.

I wanted to bring the developer to court but my neighbours didn't. We shouldn't ever had to be in that situation but we were because the government never legislated properly and just gave a carte blanche for all sorts of cr*p.

As I have said I was critical of the government legislation (or lack of) before I bought, after I moved in and I am still am now.

I again ask you why should I all of sudden be inconsistent?

I know a few colleagues who refused to buy because they didn't think the prices were realistic, I bought. They were right, I was wrong - I can't blame eveyone else because I made a choice which turned out to be incorrect.

Well hindsights is always 20 / 20 vision. You could say the same about gambling.

Good economic policy means price stability. That's why things such as low inflation are good indications of an economy under control. That means you don't get things like unsustainable property booms and subsequent crashes.

This government failed on both accounts. They created an unsustainable boom and the subsequent crash.

And if you forget about Nama, pretend that farce never happened, thousands and thousands are stuck in high density housing in the middle of nowhere in developments that never should have got planning permissions.

The developer who developed them are no broke.

Everyone has lost. A very small percentage have gained.

But you say we shouldn't be critical. Would you get real please.

Amhran Nua

Tim Robbins wrote: »

A very small percentage have gained.

The banks look to be sitting pretty though, years of profits being handed to them and they don't have to lend a penny for the pleasure.

Tim Robbins

Long Onion wrote: »

So you lived prudently but hung on to two appartments? Property investment always has risk attached.

My wife and I bought our respective apartments before we were even going out with each other.

Neither of us were investors.

This isn't really about me. It's about the country, the government and the bad policy which has made it very difficult for most of us.

Yes you can pick my personal situation apart in hindsight and come up with something we could have done better. But you are missing a major point.

Bad government policy for 15 years has meant there has been an extremly high risk associated with property. You could win big or lose big.

This shouldn't be the case for something that is a neccesity. Maybe for the stock exchange but not for something that is a requirement.

Could you imagine if you had to pick at random the correct time every week to buy milk and bread and you could win big or loose big based on whether you bought on Monday morning or Thursday afternoon?

Would you just say ah you should have known better!

Nonsense. People shouldn't have to take such huge risks with an essential part of life. Proper government policy means stability not Russian Roulette with essentials.

Long Onion

I never said we should not be critical. All I was saying is that we need to take some accountability ourselves, we can't blame everyone except ourselves for the problem.

I am not saying that I have no sympathy for those who have fallen on hard times, nor am I saying that the government are blameless - they could have done many things to slow the pace of growth, but chose to ignore these options in the chase for the populist vote.

The fact of the matter is that I didn't have to buy a house - I did, it was my choice, no-one put a gun to my head. I have come across a number of people who embelished earnings in oreder to afford the bigger house and now that they can't meet the re-payments are blaming the banks for giving them the money.

The country has been shoddily run, cronyism has been left unchecked, tax breaks were stacked high for certain people, money was heaped into the public service to avoid having to tackle the productivity issues, the Unions happily rode on the boom and used profits and inflation to improve their lot in the partnership talks - all these things were wrong, all could have been handled better.

I am not disputing these things, I am simply adding to them the fact that I have some personal culpability here as I enjoyed the good times. The sooner we all realise the extent of our personal responsibilty, the sooner we can grow a collective 'pair' and address the problems.

I thnk that this is being real, no?

Tim Robbins

Long Onion wrote: »

I never said we should not be critical. All I was saying is that we need to take some accountability ourselves, we can't blame everyone except ourselves for the problem.

I am not saying that I have no sympathy for those who have fallen on hard times, nor am I saying that the government are blameless - they could have done many things to slow the pace of growth, but chose to ignore these options in the chase for the populist vote.

The fact of the matter is that I didn't have to buy a house - I did, it was my choice, no-one put a gun to my head. I have come across a number of people who embelished earnings in oreder to afford the bigger house and now that they can't meet the re-payments are blaming the banks for giving them the money.

The country has been shoddily run, cronyism has been left unchecked, tax breaks were stacked high for certain people, money was heaped into the public service to avoid having to tackle the productivity issues, the Unions happily rode on the boom and used profits and inflation to improve their lot in the partnership talks - all these things were wrong, all could have been handled better.

I am not disputing these things, I am simply adding to them the fact that I have some personal culpability here as I enjoyed the good times. The sooner we all realise the extent of our personal responsibilty, the sooner we can grow a collective 'pair' and address the problems.

I thnk that this is being real, no?

It seems ridiculous giving out to people for not making the correct bets with their mortgages but at the same time making a gross generalisation about anyone who is critical of government.

Generalisations about people usually solve nothing.

My point which (unfortunately you seem to have missed) is that people shouldn't have to make a bet with their mortgage. They should neither win big or loose big. They economy should be stable for neccesities and get risk out of it.

Long Onion

Why are you of the opinion that people have taken a bet with their mortgage? Rates are low compared to the 80's & 90's. Negative equity only effects property investors and those who planned to sell their homes in the short term for a gain which would allow them to move up the property ladder. I both cases there is a risk involved, sometimes you win, sometimes you lose.

gurramok

Long Onion wrote: »

I don't think that you can say that the Irish property crash caused the current recession. It may have magnified the impact in Ireland, but it was not the cause. Had the global credit crisis not reared it's ugly head, the money markets would have continued to provide liquidity to the banks here who would have continued to lend to developers (though eventually it had to collapse, which is what I was saying in the first place.)

Trying to rewrite history here?

The global credit crunch started in August 2007.

The Irish property bubble stalled and started to burst around August to late 2006. Do you remember the vested interests trying to get stamp duty abolished and blaming McDowell's famous stamp duty blurp in Sept 2006 for the lack of house sales?

The money markets were going to squeeze the Irish banks with or without a credit crunch as they saw the whole bubble burst by then.

Tim Robbins

Long Onion wrote: »

Why are you of the opinion that people have taken a bet with their mortgage? Rates are low compared to the 80's & 90's. Negative equity only effects property investors and those who planned to sell their homes in the short term for a gain which would allow them to move up the property ladder. I both cases there is a risk involved, sometimes you win, sometimes you lose.

I don't think you get my point.

For quite a long time Irish property has been completly out of sink with inflation.
1. Do you think that makes good macro economic sense?
2. Do you think that creates a healthy society for people to live in? Or do you think fluctations that are more than both inflation and deflation for something so expensive creates stress for people?

As for who this effects, that's completly incorrect.
Firstly, say you never plan to move. It's just not nice knowing you wasted 150K by getting your timing wrong. You're stuck with a paying an extra 600 quid a month for 30 years.

Secondly, if you do plan to move and your property has depreciated by a greater value than what you planned to move to.

Where I live apartments have depreciated greatly because there is high supply. Houses not so much as they are in low supply. Because the muppets who run this country had development policies which meant the majority of developments in the last 15 years is 1 and 2 bed apartments.

Thirdly, and this is the point you really are missing.

If you loose your job and can't pay your morgage if you have built up a good bit of equity on your house the bank will take a more relaxed attitude to you.
However, if your house / apartment is in negative equity they'll play a very different tune.

asdasd

The Irish property bubble stalled and started to burst around August to late 2006. Do you remember the vested interests trying to get stamp duty abolished and blaming McDowell's famous stamp duty blurp in Sept 2006 for the lack of house sales?

He is both right and wrong ( I thanked his post because it was a nice articulate response to mine).

right:

There was a confluence of events

Wrong

The Irish propery market was doomed when the EU raised it's rates. In fact, although it has been flushed down the memory hole ( along with the nonsense about McDowell's famous stamp duty blurp) , the initial fall in irish property was a (lagged) reaction to the ECB raising rates - something which caused some consternation at the time from the Property-Never-Falls and Interest-Rates-Are-At-A-Historical-Low goobers.

They were spurned a bit.

And that second bite has yet to come. Most recessions are caused by the central banks taking away the punch bowl - that has yet to happen. At the moment we have caused our own hangover and they are giving us the hair(s) of the dog. Government sponsered punch.

when they remove that the second hangover begins.

asdasd

So davys dan feck off with their 4% growth nonsense. Lets hire tea leave ladies.

Long Onion

gurramok wrote: »

Trying to rewrite history here?

The global credit crunch started in August 2007.

The Irish property bubble stalled and started to burst around August to late 2006. Do you remember the vested interests trying to get stamp duty abolished and blaming McDowell's famous stamp duty blurp in Sept 2006 for the lack of house sales?

The money markets were going to squeeze the Irish banks with or without a credit crunch as they saw the whole bubble burst by then.

Not trying to re-write history at all gurramok. I was merely pointing out the fact that the collapse of the property sector here was not the cause of the recession. As I mentioned above, we suffered a confluence of events which has magnified the effects of the recession in this country. As we are in the midst of a global recession, I don't think it's accurate to say that it was all caused by the Irish property bust - unfortunate though it may be, we are not that influential.

gurramok

Long Onion wrote: »

Not trying to re-write history at all gurramok. I was merely pointing out the fact that the collapse of the property sector here was not the cause of the recession. As I mentioned above, we suffered a confluence of events which has magnified the effects of the recession in this country. As we are in the midst of a global recession, I don't think it's accurate to say that it was all caused by the Irish property bust - unfortunate though it may be, we are not that influential.

Its correct to say most of it was structural which was magnified by global events, not the other way around.

Long Onion

I would have to disagree with you here. If the credit crunch had not reared it's ugl head, it would have been possible to embark on a series of sensible fiscal policies which would have take the heat out of the sector. Introducing windfall taxes on re-zoning, capping CPO payments at agri rates +%, withdrawal of tax breaks etc. thus allowing for existing projects to be completed whilst stopping new developments.

Would this have prevented all declines on property values - no, in my opinion, but I doubt that we would have gone into a recessionary spiral. I am not saying, by the way, that this would have happened, FF would never have put in place such policies, so this aspect is largely a moot point.

My own opinion (and I am well aware that some may disagree, as is their want) is that our structural problems could have been underpinned (if the political will was there) right up to the emergence of the credit crunch. After this, the flaws of the thoroughly unsustainable 'new world' banking model really came to light and crumbled our structural defects.

gurramok

Dreamland there Long Onion. Sensible fiscal policies you suggest have still not been introduced at this stage of the crash.

Too much invested in construction related activity(accounted for nearly quarter of GNP at peak) with 286,000 employed in construction alone(double of what it should of been) was the cause of our woes. Prices went too high & they overbuilt so there you have 140,000 builders unemployed straight away without a credit crunch.

Add in the retail & banking sectors which depended on this bubble, a spiral of a collapse.

Happy reading http://www.environ.ie/en/PublicationsDocuments/FileDownLoad,15353,en.pdf

asdasd

Even though McWilliams was wrong for seven years in a row before he was correct. But don't forget even a broken clock tells the correct time at least once a day!

meh. I lose all respect ( and pity) for people who make that argument. McWilliams ( and plenty like him) correctly pointed a boom bubble from 2001/2 and pointed out that property prices would probably go back to that level. I actually wrote what he said on this thread before. He was not wrong. Nor was he guessing that a recession would come along with a soft landing. Irish property was always going to fall back to it's long term multiple of wages, if not further because of the overhang.

we are almost there in real terms, and there are more property falls to come. Even if property begins to recover next year, the reaction of the ECB will collapse the market again, if rates rise, which they will. Al predicited by McWilliams.

I personally dont think the global crisis had much a hand in the local crisis. Interest rates are still low by historical standards, the banks still lending. Demand has dried up due to the lack of confidence. The other way this was likely to happen was an increase in interests rates to historical norms - which was on the cards just before the bust - the reduction in supply, and an increased demand for desposits by the banks. Then property would have crashed and demand fallen to match supply, which itself would have fallen if proeprty prices fell ( i.e. 100% mortgages were never going to survive a fall in the market).

That is how it normally happens.

We were driving drunk and we were either going to hit the wall, or drive off the road.

Liam Byrne

Long Onion wrote: »

Property investment always has risk attached.

Apparently not, actually; the banks invested in it, and they're getting their our money back.

asdasd

Fair Point.

PeteHeat

I believe the elected government of the day take on the responsibility of managing the economy, the FF government went with the flow instead of chanelling it which in my view was their duty.

The ridiculous pay levels in both the public and private ectors are directly in proportion to the level of private borrowing that had to be serviced, the majority of which was to buy over priced houses.

If pay levels had been kept at sensible levels by that I mean in line with our international competitors the banks would not have lent at such high levels even if the borrower was using massaged income figures.

What we had was kin to the tail wagging the dog, we started off coming from a low income base in the early to mid 90's along the way we got access to cheap money based on the Euro.

There was never a better time to be a popular government, a pity they didn't try to be a responsible government.

dan_d

PeteHeat wrote: »

I believe the elected government of the day take on the responsibility of managing the economy, the FF government went with the flow instead of chanelling it which in my view was their duty.

The ridiculous pay levels in both the public and private ectors are directly in proportion to the level of private borrowing that had to be serviced, the majority of which was to buy over priced houses.

If pay levels had been kept at sensible levels by that I mean in line with our international competitors the banks would not have lent at such high levels even if the borrower was using massaged income figures.

What we had was kin to the tail wagging the dog, we started off coming from a low income base in the early to mid 90's along the way we got access to cheap money based on the Euro.

There was never a better time to be a popular government, a pity they didn't try to be a responsible government.

Couldn't agree more. FF didn't even try to stop what was going on - they simply congratulated themselves on how wonderful it all was.
You can't blame every person that bought a house either. People need somewhere to live. What you can blame, are those who bought second, third, fourth houses, and then sold them at a profit.And the reason that they were able to do that comes back to our banks, our Gov and property developers. 100% mortgages. 40 year terms. Massively over-inflated prices for pieces of land in the middle of nowhere. No consideration given to whether or not people would be able to afford their mortgage over a long period of time - were their jobs sustainable. And massive over-reliance on the construction industry. I am not an economist. But for the last 6 years even I have been able to see that this was not sustainable. However the people in charge closed their eyes and stuck their heads in the sand. And they're supposed to know what they're doing! Worse - they didn't even invest half the money they got in in any kind of infrastructure or public amenities or intelligent development - they squandered most of it on themselves.
It's absolutely sickening. Yes the Government should shoulder a large amount of the blame, because they are responsible. No the EU should not bail us out, because it would not solve anything. That's the bigger picture.

Amhran Nua

Long Onion wrote: »

I would have to disagree with you here. If the credit crunch had not reared it's ugl head, it would have been possible to embark on a series of sensible fiscal policies which would have take the heat out of the sector.

Why would they do that when policy to date has been intent on keeping the property bubble inflated as long as possible. Sure thats what NAMA is all about. There is simply no understanding on the part of the government that "property booms" are ruinous to the wider economy.

Shea O'Meara

I saw the bust coming.
In 2001 I said that in about five years we'll be screwed again. They (FF) put all their faith in the boom of the construction industry, spend, but not on essentials (health/education).
I was a few years premature, but I'm no economist. It's simple observation. Anybody read up on the eighties? Exact same scenario, (on an Irish basis). 'We're making money, to hell with tomorrow!' That's Fianna Fail, not the majority of the Irish public, who far from buying second or third homes, simply had more of an option when it came to choosing a minimum wage job. It's amusing to read people saying we've nobody to blame but ourselves, we got greedy etc. The vast majority of people were happy to be simply working.
...oh yeah, saw it coming....emigrated in mid 2007
Well done on getting Lisbon right this time, luckily we had the government to tell us where we went wrong.

PeteHeat

Hi,

I don't think you got your figures or dates wrong, while it may not be popular to point it out I think the one item nobody factored in was the SSIA scheme.

I think it released money into the economy at a time when we might have had a chance at the soft landing, if there had been a further incentive to encourage people to keep their savings instead of launching a spending spree that in many cases required second mortgages people may have chosen to live within their means.

The second and third houses with interest only mortgages terms of forty years to people in their 50's could never have really been seen as good lending practices, could they ?

Many who had worked hard, raised the family were just at the end of the mortgage suddenly saw their homes develop massive equity, the banks threw the money at them to buy apartments in Spain, Turkey and many other far flung places opened up by Ryan Air.

Mortgages were taken out on family homes to fund the deposits on homes for the sons and daughters and in some cases to pay for big wedding partys.

When such insanity took hold there was no going back to a soft landing, it was fly high until the day when companies like Dell looked at what their once fantastic Irish work force was costing them and how much they could get a similar work force for within the E.U. and made the only rational decisions they could, then it was crash and burn.

How can this government hope to bring this country back to a competitive level when job seekers allowance is €204.00 per week divide that by 39 (hours) €5.23 per hour Nett to stay at home when the workers at the new Dell plant arrive to work and pay their contributions to the state for €6.20 per hour ?

Take a quick look at the minimum wage rates that we have to compete with http://www.eurofound.europa.eu/eiro/studies/tn0808019s/tn0808019s_3.htm

Sorry don't know how to shorten the link.