Recession is over - stop beating the beards

Rujib1

I reckon the Irish recession is sooooooooooooo over that the Brits are jealous.

Ireland overtakes UK to emerge from recession

UK Times
Grainne Gilmore, Economics Correspondent Recommend?

Gordon Brown faced further embarrassment today over Britain’s recovery after it emerged that Ireland's beleaguered economy has emerged from recession.

Irish economic output rose by 0.3 per cent between July and September compared to the second quarter, official figures showed today, leaving the UK as one of the few Western economies still mired in an economic downturn.

The technical definition of a recession is two or more consecutive quarters of falling gross domestic product — a key measure of economic strength. A number of countries emerged from recession in the third quarter, including America, Japan, China, Germany and France.

However, Britain’s economy continued to shrink, falling by 0.3 per cent in the third quarter according to the most recent estimates from the Office for National Statistics (ONS).

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Although new estimates out next week are expected to show a more modest contraction in the third quarter, analysts are not forecasting that the UK has exited recession.

Last week, Alistair Darling outlined measures to return Britain to health and cut its £178 billion deficit in the Pre-Budget Report ahead of a general election next year.

Despite Ireland’s upbeat data, analysts were cautious about the outlook.

Eoin Fahy, chief economist at KBC Asset Management said: “The process is still very volatile. Clearly, we shouldn’t overstate. It is good news that GDP is growing rather than falling but we still have to remain cautious because of the volatility."

The toll taken on the Irish economy by the financial crisis and the recession was laid bare in today's figures, which showed that GDP fell by 7.4 per cent in the three months to September compared with the same period one year earlier.

The UK economy contracted by 5.1 per cent over the same period.

T "real deal" J

I must admit it's slightly amusing when you have people saying

"I reckon the Irish recession is sooooooooooooo over that the Brits are jealous."

except that i live here. Did any of you see prime time investigates last night on the bankers..the figures are staggering.
watch it here...
http://www.rte.ie/player/#v=1063007

The amount this govt has to pay off is ridiculous.

Any doubts about the recession continuing watch this interview of Joseph Stiglitz (economic nobel prize winner) by Mark Little:

http://www.rte.ie/news/2009/1006/primetime_av.html?2623786,null,230

It's time to get real. i wish everyone the best of luck...

Flamed Diving

Any insight of your own that you wish to offer, or are you going to keep referring us to your little videos?

T "real deal" J

Flamed Diving wrote: »

Any insight of your own that you wish to offer, or are you going to keep referring us to your little videos?

Since you're interested I posted a "little" opinion on page 2 of this thread. The videos provide more substantial material than the newspaper media.

I'm not exactly sure what makes the videos "little".

You are somewhat irritating in dismissing people's analogies as "silly" and calling people "stupid". I don't understand what your logic is behind this derogatory language. You're simply expending uneccessary energy instigating arguments with people. It certainly doesn't add to the debate.

Flamed Diving wrote: »

I would maintain that our biggest problem has been the fall in global demand

This would suggest a lack of understanding of the prevalence of the uniqueness of the irish economic problem to our continued recession. The staggering socialization of private property investment losses (almost the same as Dubai's property investment losses!) and the ongoing burden of servicing interest on this debt will have much more of a bearing on our continued fiscal contraction than the fall in global demand.
We still have a net surplus in exports. There is still steady demand at least for our multinational exporters. Ireland's fiscal surplus was always heavily dependent on our artificially overheated property market, this making our case so special. The consequences of this alone is by far our biggest problem.

bangersandmash

Flamed Diving, I understand that you're not a fan of watered-down articles in the print media.

But would you instead consider Morgan Kelly's December working paper on the bubble as providing a much strong argument for a pessimistic economic outlook for Ireland? To me it is rather more compelling as it considers the bigger picture, as opposed to the narrow focus on minor improvements in the CSO figures which formed the basis of the OP's newspaper article.

The issue therefore is not whether the Irish bank bailout will restore the Irish banks so that they can function as independent commercial entities: it cannot. Rather it is whether the Irish government’s commitments to bank bond holders when added to its existing spending commitments, will overwhelm the fiscal capacity of the Irish state, forcing outside entities such as the IMF and EU to intervene and impose a resolution on the Irish banking system.

Flamed Diving

T real deal J wrote: »

This would suggest a lack of understanding of the prevalence of the uniqueness of the irish economic problem to our continued recession.

On your part, yes. Do you even know what the word unique means? A country has just suffered an asset related crash and is suffering a recession as a consequence. We are not even the only Eurozone country suffering this.

T real deal J wrote: »

The staggering socialization of private property investment losses (almost the same as Dubai's property investment losses!) and the ongoing burden of servicing interest on this debt will have much more of a bearing on our continued fiscal contraction than the fall in global demand.

Ha. I'm not confident that you know what I meant by that. You probably think I only meant that people will start buying products made in this country again, and that will be that. What I am really focussing on here is the role of FDI in all this. This country is heavily reliant on outside investment, as I already said above when I mentioned a SMOPEC. We all witnessed the spectacular effect that this fact had when American investment was flowing around in the 1990s, so no need to illustrate that. The collapse of global capital flows and demand has meant that there is nothing in the inbox but plenty in the outbox, for Ireland. If the global economy picks up, it will pick us up with it. We already have many MNCs here, and more will come if we tidy up the shop. However, I must mention that the academic literature studying the determinants of US FDI seems to find that exchequer surplus/deficits don't seem to have any significant effect on FDI (its one of around seven papers, I can't recall which, but I can provide names of all). Surprise, surprise, it is always the tax rate that has the biggest effect. We still have one of the lowest in the world.

Don't mention repatriation to me. Another year of deflation and budget cuts should ensure a lower cost of operating here, which should also attract more FDI.

T real deal J wrote: »

We still have a net surplus in exports.

And?

T real deal J wrote: »

There is still steady demand at least for our multinational exporters.

Good, it would be nice to see it increase.

T real deal J wrote: »

Ireland's fiscal surplus was always heavily dependent on our artificially overheated property market, this making our case so special.

Always is over-exaggerating, to be honest. You mean post-2001, and I never even mentioned the surplus. I don't know where you are going with most of this post, really. It just seems like you are repeating what you read in a newspaper, though badly. I suppose this is a condescending comment, also...

T real deal J wrote: »

The consequences of this alone is by far our biggest problem.

I think you mean, the potential consequences of this. Yes, this whole national debt problem is going to be a major issue for the next decade. Government spending on services will be reduced for up to a decade (save me the hyperbole) due to money being committed to NAMA, and the like. The government will have to be prudent with its spending over this time, and will have to show the world that this debt is being sensibly managed. If it can achieve something like this, and if world demand increases then we will be as well positioned as possible, considering the mess.

Of course, this is all down the the government, as mentioned. But, to my surprise, they seem to be making the correct(ish) moves so far, and the markets appear to be reacting somewhat positively. So far, so good. Time will tell...

Flamed Diving

bangersandmash wrote: »

Flamed Diving, I understand that you're not a fan of watered-down articles in the print media.

But would you instead consider Morgan Kelly's December working paper on the bubble as providing a much strong argument for a pessimistic economic outlook for Ireland? To me it is rather more compelling as it considers the bigger picture, as opposed to the narrow focus on minor improvements in the CSO figures which formed the basis of the OP's newspaper article.

Ok, I just had a brief run-through it. It appears that the vast majority of the paper is an overview of the crisis that just passed with some analysis. In the very last paragraph he makes the statement you quoted above. Unfortunately, he doesn't seem to elaborate on exactly why any banks cannot be restored to some kind of normal business function, nor doe he expand on exactly "when" would be the brink that Ireland cannot pass. It is a bit late at night, so perhaps I missed something there.

Anyway, just to point out to people who might think I am being overly-positive about the CSO release, I am not. Here is the basic economic model:

Y = C + I + G + (X - M)

So, in Q3 we had 'C' down, 'I' down 'G' down, 'M' down but 'X' up. Thus leading to Y (GDP) increasing. No one in their right mind should be saying that we are out of recession. However, I am pleased to see that for GNP/GDP the rate of decrease (second derivative) is decreasing. That is all.

CityCentreMan

Flamed Diving wrote: »

Any insight of your own that you wish to offer, or are you going to keep referring us to your little videos?

Dear Flamed Diving,

For someone who is obviously so intelligent and insightful I am surprised that you can be so insulting, and probably so without either intending to be condescending or realising that you are!

nesf

bangersandmash wrote: »

Flamed Diving, I understand that you're not a fan of watered-down articles in the print media.

But would you instead consider Morgan Kelly's December working paper on the bubble as providing a much strong argument for a pessimistic economic outlook for Ireland? To me it is rather more compelling as it considers the bigger picture, as opposed to the narrow focus on minor improvements in the CSO figures which formed the basis of the OP's newspaper article.

Banks will be forced to "deleverage" i.e. shrink their balance sheets and return to a deposit funded model rather than a wholesale funds + deposits model (or in Anglo's case, a wholesale and a tiny smidge of deposits model). Banks can't do this quickly because most of their assets are in the form of very long term loans (i.e. mortgages) and these aren't easy to get rid of. So banks will have to be very slow to hand out new loans to allow for their total loan book to shrink.

The issues are how big this deleverage will be and how tight the credit markets will be in the medium term (i.e. 4 to 5 years out from now). He thinks the market will be tighter than a duck's arse and the banks will have to deleverage by a large amount. The thing is while most analysts would agree that we won't see the excesses of credit that we saw in 2005/2006 again any time soon (hopefully!) this doesn't necessarily mean they believe that Irish banks won't be able to tap the wholesale markets for a fair amount of funding (which is the jump he makes from comments made by Mervin King). He's taking a pessimistic view, but given he always tends towards the more pessimistic side of things this isn't surprising.

The thing is Irish banks will have to deleverage by shrinking their balance sheets, the big unanswered (and unknowable!) question is by how much they'll have to shrink and this will have more to do with the international market conditions than internal Irish market conditions.

T "real deal" J

Flamed Diving wrote: »

On your part, yes. Do you even know what the word unique means? A country has just suffered an asset related crash and is suffering a recession as a consequence.

Unique = Fianna Fail + property developers + lunatic banks + irish financial "regulator" >>> Over dependence on 1 asset class. Pledges made by Ireland to support its banking sector amount to 220% of the country’s annual economic output. The total loans held in Irish banks are more than 11 times the size of the economy. This is unique in the european union.

Flamed Diving wrote: »

SMOPEC.

economic lesson etc etc

I got a 1.1 in Maths & Economics. Don't really need an explanation of simple macroeconomics (just for future reference). Look kid, i'm trying to be inclusive here...i'm writing under the assumption that most readers of these didn't do economics. Just give it in plain english....economics is the "dismal science" remember...i found it's a roundabout way of stating the obvious.

Flamed Diving wrote: »

We already have many MNCs here, and more will come if we tidy up the shop.....it is always the tax rate that has the biggest effect. We still have one of the lowest in the world.

This is true. The 12.5% is really our last card. We got some things very right at the beginning of the boom. Hopefully we can nab a few more MNCs...a few obstacles:

1 : Value for money ; This is something ireland has trouble with, MNCs are much more sensitive to this recently....a large number of MNC depts have simply been outsourced (eg. Hibernian's call centre 800jobs, DELL).
2 : Reputational damage ; This would involve "silly anecdotes" at a corporate level. But i don't really need to back this one up. Talk to germans and americans in finance.
3 : MNCs generally are looking to consolidate currently. I don't think they'll be looking to expand for a while.

I would not be as optimistic.

Flamed Diving wrote: »

It just seems like you are repeating what you read in a newspaper, though badly. I suppose this is a condescending comment, also...

Haha i'm just using my brain. Irish newspapers are for the most part political hymn sheets. The Indo has degenerated to the journalistic quality of a tabloid. The reason I posted in this thread (page 2) was in response to that muck article in the times "Ireland is out of Recession". The eejit who wrote it said the rate of economic decline is decreasing and => we're out of recession.

Flamed Diving wrote: »

Of course, this is all down the the government, as mentioned. But, to my surprise, they seem to be making the correct(ish) moves so far, and the markets appear to be reacting somewhat positively. So far, so good. Time will tell...

The ISEQ is a fiddly little cowboy market that is composed almost entirely of CRH ID, RYA ID, ELN ID with a few big players that push it around and coin it in off suckers. I assume your referring to the irish govt bond spread on the intl debt markets.

Finally, in response to your positivity on this govt and it's policies, I really think you should read Karl Whelans articles
http://www.irisheconomy.ie/index.php/author/kwhelan/
on the current mess we're in.
My opinions are aligned with his, but he's far better at expressing himself than me. He's a former lecturer of mine and is a seriously smart guy...much smarter than you or I.
This is my Christmas present to all of you who are interested in economics..Have a great time reading them!

Flamed Diving

T real deal J wrote: »

Unique = Fianna Fail + property developers + lunatic banks + irish financial "regulator" >>> Over dependence on 1 asset class. Pledges made by Ireland to support its banking sector amount to 220% of the country’s annual economic output. The total loans held in Irish banks are more than 11 times the size of the economy. This is unique in the european union.

Sure, but apart from FF, could you point to the unique determinant? I don't really see it. Scale didn't really come into your model there, until the end anyway. Ireland isn't the only Eurozone country with a guarantee. Unique?

T real deal J wrote: »

I got a 1.1 in Maths & Economics. Don't really need an explanation of simple macroeconomics (just for future reference). Look kid, i'm trying to be inclusive here...i'm writing under the assumption that most readers of these didn't do economics. Just give it in plain english....economics is the "dismal science" remember...i found it's a roundabout way of stating the obvious.

Kid... I'm picturing Mickey from the movie Rocky now. Anyway, this forum is in a desperate need of some decent economics knowledge, and not some manure they read in the paper. The concept of a Small Open Economy is not beyond most people and doesn't require doing a Macro module to get it. We are very much tied into the world economy now, anyone who has paid attention to half of the news over the last 20 years can see this. The Wiki article I provided gave a nice, concise summary of what I meant. I don't see what is wrong with people on this forum learning to back up their assertions with data, rather than... erm... nothing.

T real deal J wrote: »

This is true. The 12.5% is really our last card. We got some things very right at the beginning of the boom. Hopefully we can nab a few more MNCs...a few obstacles:

1 : Value for money ; This is something ireland has trouble with, MNCs are much more sensitive to this recently....a large number of MNC depts have simply been outsourced (eg. Hibernian's call centre 800jobs, DELL).
2 : Reputational damage ; This would involve "silly anecdotes" at a corporate level. But i don't really need to back this one up. Talk to germans and americans in finance.
3 : MNCs generally are looking to consolidate currently. I don't think they'll be looking to expand for a while.

I would not be as optimistic.

I agree with all of that, but if we can stop dropping at a rate of 7% per year, I would consider that a small victory. It seems that we might headed that way, at least. Is that optimistic? Given that the economy is restructuring itself (i.e. we are past the short-run now), I think not.

T real deal J wrote: »

Haha i'm just using my brain. Irish newspapers are for the most part political hymn sheets. The Indo has degenerated to the journalistic quality of a tabloid. The reason I posted in this thread (page 2) was in response to that muck article in the times "Ireland is out of Recession". The eejit who wrote it said the rate of economic decline is decreasing and => we're out of recession.

Fine. I probably would have taken the same position, however, some of the nonsense being posted against the OP caused me to chase them first. I am quite sure that there are people who want this country to fail, and are willing it to do so, perhaps due to their dislike for FF. This is shameful behaviour.

T real deal J wrote: »

The ISEQ is a fiddly little cowboy market that is composed almost entirely of CRH ID, RYA ID, ELN ID with a few big players that push it around and coin it in off suckers. I assume your referring to the irish govt bond spread on the intl debt markets.

I was. The ISEQ never really crossed my mind.

T real deal J wrote: »

Finally, in response to your positivity on this govt and it's policies, I really think you should read Karl Whelans articles
http://www.irisheconomy.ie/index.php/author/kwhelan/
on the current mess we're in.
My opinions are aligned with his, but he's far better at expressing himself than me. He's a former lecturer of mine and is a seriously smart guy...much smarter than you or I.
This is my Christmas present to all of you who are interested in economics..Have a great time reading them!

I do read that blog, although I'm kind of gone off it lately.