Government responsible for collapse of economy.

ballinatray

Many viewpoints have been expressed as to the causes of the terrible dilemma we now find ourselves in.

Whilst working as an average income earner with a family, ( and no desire to be wealthy but with a grenuine interest in political and economic affairs ) I have long held the view, like many mainstream political and economic commentators, that our Economy was being led in the wrong direction right since the start of the transition of the economy towards the Euro. Many of my friends worked in the building trade and in the run up to start date for Euro changeover I was very cautious and advised one or two small style builders I socialised with ( and I did not need to be hanging off the bar stool to offer these views !!) to be cautious for a moment as they were considering at that early stage buying into small parcels of land to do a speculative build.

As the due date came close I felt that many of the worlds big players would attempt to scupper the change as it would interfere with their main source of income vis-a-vis currency speculations etc...As was easily observed the introduction of the Euro led to a gradual decline in interest rates right across Europe and it was my view ( 10 years ago now ) that once adopted the currency would be permanent and lead to a long term scenario where interest rates would be very low, and therefore assist business and individuals, all across Europe, to have access to low cost capital for the first time. The Euro concept was in fact a "Political" ideal rather than "Economic" one. A united Europe needed access to cheap money to spur industrial growth similar to the USA where access to cheap money has always existed. Europe, made up of different cultures and currencies, was stifled, as boom and recession moved like a chess game around the map. In simplistic terms a Boom in Italy and a recession in France, A boom in France and a recession in the UK, a Boom in Holland and a recession in Spain etc, etc, etc. The consequent effect of all of this was, that Francs, Lira, Punt,Deutchmark,Escudo,Krone, etc were traded in, like goods themselves. The Euro was intended to put a stop to all of this and its introduction was preceded by strict guidelines as to, Debt ratios,inflation etc. The primary one related to National Debt ( 3% the suggested max ) now expected to run to 3 or 4 times that figure because of Fiscal mismanagement.. As any unfortunate businessman in the Ireland of the 80's or home owner,or small borrower can testify interests rates were crippling, while the USA enjoyed constant low interest rates even after the first oil crisis of the early 1970's.

But the USA, while large, had a common language and common Business and Legal System and money borrowed or stolen was intended for business. Once Europe accepted this it could equally compete on a global scale with access to cheap money for Business. However as I have said I believed at that time that the deal would be scuppered and how wrong I proved to be as the Euro finally reached our pockets. Once this was the case I felt the dynamics of Banking were going to change and for the first time the rich, especially in Ireland, ( with interests rates on deposits virtually wiped out ) were going to have to finally begin to look to other areas to protect their wealth and finally consider investments in new business ideas either through government sponsored tax incentive programmes or other venture capital outlets. I ( childishly now as is obvious ) explained to my few dynamic friends that the bank managers of the future would no longer be hanging around the Golf clubs and Sailing Clubs and Rugby Clubs " courting " big earners deposits, but would be proactively travelling the country side encouraging enterprising people on the streets, in the schools and universities, in factory canteens, up trees if necessary seeking out " likely borrowers " because it was here that in the future that the banks would only profit, with few depositors, and money made only by lending.

This did in fact occur but with no vision other than short term gain. The narrow Fiscal focus of the wealthy limited their vision to bricks and mortar. But I do not blame Bankers for this short sighted view as they are equally driven by a desire to make money. What was required was Government intervention. Now that control of interest rates was in the hands of the ECB where they took , a rightly viewed, europe wide analysis . As inflation in property prices exploded and as a direct consequence led to rapid inflation across every area of Irish Business, from the warehouse to the High street and encouraged wage inflation to cope, it was clear that we would eventually run out of steam and become too costly for business in general vis-a-vis Eastern Europe and the Asian economies. The correct response would be to raise interest rates but the Irish could no longer use that mechanism to cool the market place. The next step should have been for the Government to withdraw its influence on the property market ( I believe this should have been immediate from the start of Euro ) by simply withdrawing all the tax incentives geared towards property and transfer them to areas that would stimulate industrial employment . Instead of the many schemes offering as much as 100% capital allowances and other Section23 style schemes on property why not transfer those same allowances to projects like county enterprise boards, venture capital funds etc.. for R&D in any area of business or start ups etc.. Even public/private partnerships on roads, bridges, etc..

The government now speak of competitiveness 10 years too late. So much for Michael Martin's knowledge based economy. Where were the financial incentives offered to the rich here for example, to invest in the many Graduates leaving our Universities during this time. What venture Capital Fund ever entered Campus to encourage young graduates to use new capital for start ups. None at all. As many thought Bricks and Mortar was a sure thing.

I have not voted for Fianna Fail for 10 years knowing instinctively that they would mess up. I expected Ireland to end in recession with a property bust and not a soft landing as predicted, simply because other cheaper Eastern European Economies were a new challenge but also the Asian Economies. For example India produces 3000000m University Graduates each year and 60m of the population speak English. However I never saw the world recession like this coming and this is where we now stand in quicksand. The fundamentals of our economy in tatters and we dont even build " bicycles" with nothing to sell on the International marketplace.

How is that Holland with a population of 17m and living in an area the size of Munster does not have a land supply problem and where property is cheaper.
In the middle of last year I read a piece by David Mc Williams where comparisons were made with Ireland, Germany and the US in relation to the ratio of morgage debt to GNP. US was 43%. Germany was 19% and Ireland was 190%. Dear God!!!!!! While the US property market was in meltdown our Government and its entourage of vested interests were talking of a soft landing!!!

A Leaving Certificate student of Economics could see the hidden dangers to national competiveness, particularly in the Globalised Business World we now lived in. Globalisation the poetic phrase our polititions love to use regularly but choose to ignore. How many people recall a bombastic Charlie McCreevy as Finance Minister speaking out arrogantly against the ECB when he was warned about overheating our economy and shouted back that our Economy was the envy of Europe. Now our enlightened Government backbenchers called sometime ago, for Prince Charlie to return to save us all. Has anything been learned.

Any "Gombeen " Government can manage a recession, but it takes "Responsible" Government to manage a BOOM.

Where to now ? !!! I wish I knew, but I fear it will take a total collapse of the economy, before the carelessness of the Government and Dept Of Finance will be truly seen for what it was. With proper Government insight and planning the Bankers could have been encouraged to show their dynamism in many areas of business life rather than the narrow focus on property speculation. After centuries of dealing with the scourge of Landlordism it seems the Irish themselves wished to emulate their colonial masters. The ideals of the Land League which ultimately led to us achieving control over own destiny were quickly forgotten.
The 3 F's, Fair Rent, Free Sale, Fixed Tenure were truly ideal but lost in time. Often, I asked many farmers what the 3F's were and sadly 90% could not answer just like our Government. They in their " innocence " were equally blinded by Government profligacy. The courage of the bankers too was simply sidetracked by a Government devoid of idealism or imagination.

ballinatray

NAMA cost €54,000,000,000 carried by the tax payer. In return all first time mortgage holders, should have their properties re-valued as at 2009 values. Particularly, those mortgaged since 2005.

Flamed Diving

ballinatray wrote: »

NAMA cost €54,000,000,000 carried by the tax payer. In return all first time mortgage holders, should have their properties re-valued as at 2009 values. Particularly, those mortgaged since 2005.

What potential effects do you believe this policy of yours would have?

ballinatray

Flamed Diving wrote: »

What potential effects do you believe this policy of yours would have?

At least restore the concept of fair play to the market place, particularly after such a massive bail out....

Raiser

Any proponent of common sense, logic, reasonableness, plain cop-on or level-headedness knows that NAMA is ill-conceived, flawed, biased, corrupt, agenda-ridden and destined to escalate its losses exponentially far, far beyond its initial ~€60,000,000,000.

- When NAMA has finished with this State we shall be left considering its beaten, extorted, raped husk and wondering how we allowed it to happen.....

I predict that, when its time comes, the NAMA Secret Enquiry will be even more clandestine, skewed, dishonest and laughable than our current Secret Banking Enquiry.

johnnyskeleton

ballinatray wrote: »

At least restore the concept of fair play to the market place, particularly after such a massive bail out....

What about fair play to those who didn't overpay for property? Where's their bailout?

mossfort

johnnyskeleton wrote: »

What about fair play to those who didn't overpay for property? Where's their bailout?

i agree nobody was pushed into buying property at inflated prices,but i think people lost the run of themselves during the boom years.
we all remember people queing to buy new houses ,was it really necessary.

Guy:Incognito

mossfort wrote: »

i agree nobody was pushed into buying property at inflated prices,but i think people lost the run of themselves during the boom years.
we all remember people queing to buy new houses ,was it really necessary.

That doesnt change the fact that some people were'nt sucked in. You cant just ride roughshod over those people and give effectivly free money to those who did.

johnnyskeleton

mossfort wrote: »

i agree nobody was pushed into buying property at inflated prices,but i think people lost the run of themselves during the boom years.
we all remember people queing to buy new houses ,was it really necessary.

The point is that if you're going to have one of these people's nama jobbies, it can either be given out either equally among the citizens or to a special interest group.

"Homeowners" are not 100% of the people, so they are a special interest group and are the same as developers/builders/banks except that they are a much larger group.

hapenny

do you really belive their not?? c'mon!!

SkepticOne

It is not simply those who did not purchase property who are being unfairly burdened with NAMA.

A certain number of people did lose the run of themselves in the boom. Many people did indeed overpay for property.

However I think the point needs to be made that if you took on a loan that was freely offered by the banks whether or not it was a financially wise decision, it was never your responsibility to check the balance sheet of the banks before you take on that loan. That responsibility lies with firstly the banks themselves and secondly their regulator.

You do have the very clearly defined responsibility to pay back that loan but you are not responsible for NAMA.

AlekSmart

Even still it`s the great unanswered question.......why exactly did it have to be National Policy for everybody to buy their own property.

How was it possible for Billions of fellow Europeans to be born,raised and die in rented properties and to live largely happy productive lives in the process....yet the Irish were brainwashed into thinking they would all die if they could not buy a property before they reached 25 !!

ballinatray

Raiser wrote: »

Any proponent of common sense, logic, reasonableness, plain cop-on or level-headedness knows that NAMA is ill-conceived, flawed, biased, corrupt, agenda-ridden and destined to escalate its losses exponentially far, far beyond its initial ~€60,000,000,000.

- When NAMA has finished with this State we shall be left considering its beaten, extorted, raped husk and wondering how we allowed it to happen.....

I predict that, when its time comes, the NAMA Secret Enquiry will be even more clandestine, skewed, dishonest and laughable than our current Secret Banking Enquiry.

I agree completely!!!!question is why did the compliant Irish allow it to occur...As for the idea that people made conscious choices , that is true only in so far as the information the young were fed about a so called property shortage, with large crowds gathered outside auctioneers offices, was false ( market manipulation as in a communist controlled strate. True capitalism allows for supply and demand cycles to dictate price ) As we now see with the vast swathes of property lying idle, 350.000 units excluding the nama quantity..is proof that many were duped.. Its time to march!!!!!!!

ballinatray

johnnyskeleton wrote: »

What about fair play to those who didn't overpay for property? Where's their bailout?

One wonders where such people got their wisdom!!!!clearly they are not in need of help....BUt the property market was manipulated in a criminal manner as we now have in excess of an estimated 400,000 units idle while people were led to believe there was a shortage...True capitalism allows for supply and demnd economics to dictate price ...Here the market was controlled in a centralised fashion like a communist states 5 year plan....Its time to march!!!!!!!!!!

Flamed Diving

ballinatray wrote: »

At least restore the concept of fair play to the market place, particularly after such a massive bail out....

Can you think of any way that this policy could be counter-productive?

woodseb

ballinatray wrote: »

At least restore the concept of fair play to the market place, particularly after such a massive bail out....

to do that would completely frustrate the aim of NAMA in terms of recapitalizing the banks

it would also punish those who did not borrow excessively and still retain equity in their homes

Seth Brundle

ballinatray wrote: »

NAMA cost €54,000,000,000 carried by the tax payer. In return all first time mortgage holders, should have their properties re-valued as at 2009 values. Particularly, those mortgaged since 2005.

Why 2005? Why not everyone with a mortgage?
Why not just people with a current FF membership card?
You cannot do something like this. It simply endorses bad financial planning on peoples part.
Your house is in negative equity? Tough! I didn't buy an over priced house (although I could do with some extra space) because I realised my limit!

mossfort wrote: »

i agree nobody was pushed into buying property at inflated prices,but i think people lost the run of themselves during the boom years.
we all remember people queing to buy new houses ,was it really necessary.

Its called personal responsibility! We all know that the banks were dishing out unsuitable loans to people. The people knew well whether they would be able to pay it back or not should things go the way they have!

SkepticOne wrote: »

It is not simply those who did not purchase property who are being unfairly burdened with NAMA.

A certain number of people did lose the run of themselves in the boom. Many people did indeed overpay for property.

And should I pay for their carelessness as well as that of the banks, etc?

SkepticOne wrote: »

However I think the point needs to be made that if you took on a loan that was freely offered by the banks whether or not it was a financially wise decision, it was never your responsibility to check the balance sheet of the banks before you take on that loan. That responsibility lies with firstly the banks themselves and secondly their regulator.

It was the governments responsibility through the regulator, etc. to keep an eye on the banks and we are paying for that now. However, people must realise that whilst it was common knowledge that banks were giving out loans, people were not forced into signing the application, etc.

ei.sdraob

kbannon wrote: »

Why 2005? Why not everyone with a mortgage?
Why not just people with a current FF membership card?
You cannot do something like this. It simply endorses bad financial planning on peoples part.
Your house is in negative equity? Tough! I didn't buy an over priced house (although I could do with some extra space) because I realised my limit!

NAMA and bank bailouts have opened up a pandoras box

and hence should have never been allowed to happen

now everyone and anyone wants their "bailout"

ballinatray

mossfort wrote: »

i agree nobody was pushed into buying property at inflated prices,but i think people lost the run of themselves during the boom years.
we all remember people queing to buy new houses ,was it really necessary.

true capatilism works on the principle of supply and demand playing a part in setting pricing...Hence gold is more valuable per ounce tahn copper but a false market was created with property in Ireland like "Ponzi " scheme. and sadly many young people were duped into believing they were queing for a dwindling resource outside the auctioneers offices...now we see vast swathes of property lying idle...at census 2007 records show 260,000 empty units now estimated at 370,000 units excluding nama property, how much more lies idle while young people struggle with incredible negative equity.....

ballinatray

kbannon wrote: »

Why 2005? Why not everyone with a mortgage?
Why not just people with a current FF membership card?
You cannot do something like this. It simply endorses bad financial planning on peoples part.
Your house is in negative equity? Tough! I didn't buy an over priced house (although I could do with some extra space) because I realised my limit!

FEAR played a part in that and all done with the active encouragement of Government spin....now the result is vast swathes of property lying idle across the length and breath of the land....


Its called personal responsibility! We all know that the banks were dishing out unsuitable loans to people. The people knew well whether they would be able to pay it back or not should things go the way they have!


And should I pay for their carelessness as well as that of the banks, etc?

It was the governments responsibility through the regulator, etc. to keep an eye on the banks and we are paying for that now. However, people must realise that whilst it was common knowledge that banks were giving out loans, people were not forced into signing the application, etc.

FEAR played a part in that and all done with the active encouragement of Government spin....now the result is vast swathes of property lying idle across the length and breath of the land....

ballinatray

kbannon wrote: »

Why 2005? Why not everyone with a mortgage?
Why not just people with a current FF membership card?
You cannot do something like this. It simply endorses bad financial planning on peoples part.
Your house is in negative equity? Tough! I didn't buy an over priced house (although I could do with some extra space) because I realised my limit!


Its called personal responsibility! We all know that the banks were dishing out unsuitable loans to people. The people knew well whether they would be able to pay it back or not should things go the way they have!


And should I pay for their carelessness as well as that of the banks, etc?

It was the governments responsibility through the regulator, etc. to keep an eye on the banks and we are paying for that now. However, people must realise that whilst it was common knowledge that banks were giving out loans, people were not forced into signing the application, etc.

....

Guys, I am debt free thankfully..But then as previously stated I was never driven by a need to validate myself by the strength of my wallet but I am well aware that the vast bulk of mankind are driven by such needs ..This is why we require conscience driven politics to control the economy for all benefit... This was not done and the lack of vision of governement created a climate of fear where even young un married people felt the need to secure their future.. A false market was created supply and demand economics was manipuated, with the connivance of government !!!!

skearon

ballinatray wrote: »

NAMA cost €54,000,000,000 carried by the tax payer. In return all first time mortgage holders, should have their properties re-valued as at 2009 values. Particularly, those mortgaged since 2005.

Wrong, NAMA hasn't cost the tax payer a single cent, it is designed to be self financing, and if there is a shortfall the banks will pay for this via increased corporation tax

ballinatray

AlekSmart wrote: »

Even still it`s the great unanswered question.......why exactly did it have to be National Policy for everybody to buy their own property.

How was it possible for Billions of fellow Europeans to be born,raised and die in rented properties and to live largely happy productive lives in the process....yet the Irish were brainwashed into thinking they would all die if they could not buy a property before they reached 25 !!

Again FEAR played a part here.... The aspirations of the Land League , a long time ago now , were simple 3 F's..... Fair Rent, Fixed Tenure, Free Sale !!!!!! Wonderfull sentiments lost in time fighting against the landlord and yet the biggest scandal of modern Ireland is that the irish wished to emulate their own and become landlords themselves....Keep, in mind that there is no legislation in place to allow people to Rent long term ( say 50 yrs ) .......Nama may yet have to consider that option to cover their costs...

AlekSmart

Wrong, NAMA hasn't cost the tax payer a single cent, it is designed to be self financing, and if there is a shortfall the banks will pay for this via increased corporation tax

There speaks an Optimist

Keep, in mind that there is no legislation in place to allow people to Rent long term ( say 50 yrs ) .......Nama may yet have to consider that option to cover their costs...

Fair play Balintray,my belief is that not alone should it consider that option,but that NAMA should have been forced to embody that option within its core setup....It would at least offer some hope of long-term change of mindset from the largely valueless one which now typifies the modern Irish citizen.

SkepticOne

kbannon wrote: »

And should I pay for their carelessness as well as that of the banks, etc?

It was the governments responsibility through the regulator, etc. to keep an eye on the banks and we are paying for that now. However, people must realise that whilst it was common knowledge that banks were giving out loans, people were not forced into signing the application, etc.

I disagree with the OP that those who did not take out mortgages should compensate those who did. What I wanted to counter was the idea that NAMA and the other ways the ordinary citizen is burdened is due to irresponsible activity on the part of the borrower as opposed to irresponsible lending.

Mr. Presentable

OP, I completely oppose the idea of a bailout for people who borrowed more than they could repay. Completely.

Negative equity only affects people trying to sell a property they bought relatively recently. Apart from this it is an empty buzzword.

The solution to the unsold units (variously 370,000/400,000/450,000 in your posts) has been mooted - demolish 75% of them. That will directly effect your negative equities and create healthy demand again. Cost less than bailing out everyone who bought a house in the last five years too!

ballinatray

Flamed Diving wrote: »

Can you think of any way that this policy could be counter-productive?

anything that is fair!!!! is never counter productive.

Welease

ballinatray wrote: »

anything that is fair!!!! is never counter productive.

There is nothing "fair" about your proposal.. Recapitalising the banks is bad enough, but that needs to be done to get money flowing to business's etc (no comment on NAMA being the correct solution or not)..

Bailing out every individual who has negative equity is not affordable by this country, nor should it be desirable. Eventually that negative equity will disappear, and in the short term well people will have to live with it. If you don't want to run the risk of losing money then don't make investments.

Why should I (and everyone else) have to bail out those who overpaid for their properties? Can I also claim for the 70% loss on the shares I have? Is the government going to prop up my pension losses for the last few years also?..

Sorry to sound like a hardass, but I for one am sick of being forced to pay out for other people's dumb decisions. Mortgage payments are in most cases less than they were previously, so unless unemployment has hit (which is a separate issue), then those folks can still afford the roof over their heads. It's worth less in the short term... so what?

ei.sdraob

ballinatray wrote: »

anything that is fair!!!! is never counter productive.

"fair"ness is highly subjective

namenotavailablE

By offering a 'NAMA for the people' you increase the moral hazard risk in the future. Future borrowers may look to such a scheme and feel that they can borrow 'that little bit more'/ overstretch themselves as they feel entitled to rely on the state for help if things go awry.

Having said that, I'd agree that those banks now being recapitalised by NAMA ought to be legally and morally obliged to exercise reasonable leniency with borrowers in difficult financial circumstances- once the borrowers are seen to engage in the process and are making reasonable effort to sort out their financial affairs they ought to be afforded leeway with their mortgage/ other debts rather than face repossession.

Flamed Diving

ballinatray wrote: »

anything that is fair!!!! is never counter productive.

What an intelligent riposte.

:rolleyes: