Occupy Galway Group (mod note added)

antoobrien

Predalien wrote: »

Except that the figure for social welfare payments is misleading, only about €4.4b are dole payments, much of it is just funding a bloated, inefficient government department. Also spending on social welfare ballooned because of the trebling in unemployment figures, not massive increases in payments. Plus the lack of means testing for children's benefit means millionaires get a social welfare payment.

Did you read the article or just the bit I quoted - the author deals with the increases in SW between 1997 & 2009.

I'm really interested in how you can explain the 66% increase in the SW budget between 1997 & 2002 as unemployment fell from 255,000 to 162,500 (lowest in 2001 @ 142,253)?

I'm also interested in how the increase in the SW budget had nothing to do with the more than doubling of rates of dole payments over the 12 year period mentioned or with policies like children's allowance payment of 1,000 a year to every child for the first 5 years (which was scrapped a couple of years ago before the unemployment figures really jumped).

Ah well, let's just stick our heads back in the sand and pretend that the SW bill increases over the past 15 years are only to do with in increases of the unemployed even while the numbers were dropping.

skelliser

Here Antoobrien, can you explain why house prices increased from an average price of 200k in 1998 to just under 400k in 2007, thats an increase of over 80% in a period of just 9 years.
And it wasnt because of demand because the we now have over 200,000 empty houses.

I wonder does it have anything to do with the euro and the unleashing of virtually free money and the ideology that markets should be left to regulate themselves.

celty

I think the Occupy people have just woken up before the rest of us. I copied and pasted the below from David McWilliams' website. Basically the level of debt in this country is way, way beyond Greece and Portugal. Our Government haven't the balls or are too afraid to admit how badly this country is f--ked. We are going to have to default sometime in the next few years because we will never, never be able to pay off our debts. Which makes yesterday's pay off to Anglo bondholders even more unforgivable, when paying such faceless people is now seen to be more important than treating people who are lying on trollies at UHG.

http://www.davidmcwilliams.ie/2012/01/25/private-debt-so-enormous-that-default-is-only-option

It's scary what has been done to this country and its people and at least the Occupy people are expressing some of the anger out there. Ireland is not a 'normal' capitalist country, it's completely broke and can't be saved while we are in the euro.

---

Private debt so enormous that default is only option
January 25, 2012

Posted in Articles | Debt | Euro | Irish Economy | Irish Independent by David McWilliams
244 Comments

When all the people you read every week for information are talking about the same report, you know that you should read it. From Paul Krugman on the left to John Mauldin on the right, some of my favourite reads of the week are citing a McKinsey Consulting report on global debt.

Reading through it, one chart jumped out at me. Have a look at the chart. Yes, the one accompanying this article. It is taken from data of the Bank of International Settlements. It shows just how much debt the Irish economy is carrying. What it tells you is that Ireland is the most indebted country in the world. When compared with Greece, Ireland is carrying more than two-and-a-half times more debt. We are twice as indebted as Portugal.

This deterioration happened when we were members of the euro. When we borrowed hand over fist from German and British banks in particular.

The implication of this figure is that the Irish economy has to grow six times faster than the interest rate charged on this debt in order for the overall debt burden to remain stable. Assuming that the rate of interest — even with all the negotiations — is 4pc. This means that the Irish economy would have to grow by 24pc next year, just to ensure that the debt/GDP ratio stays stable.

Much is made of the government debt –which remains enormous — but the real problem seems to be the debt held by the banks or the financial institutions and the debts built up by Ireland Inc, as well as the debts which we, the people, incurred in the boom.

The implication of this for the next few years — if we try to pay this money back — is that the huge outflow from the economy every year will amount to just over €30bn — that’s at an interest rate of 4pc. Quite how we can cope with this is anyone’s guess.

So it is time to get real. There is little or no hope of this money being paid back in total. In fact, the least of our worries is the government debt when you consider the size of the private sector, corporate and banking debts.

In terms of default, conventional wisdom suggests that Ireland should not default on its sovereign debt. This is a persuasive argument and we — the Irish citizens — should probably go along with it.

But when it comes to the private debts, whether it’s the debt you might be carrying on the house you bought in the boom, or a company’s debts or even the debts of the financial system, the iron rule of capitalism needs to be applied.

This rule says that in order to get out of the debt mess, the lenders and the borrowers must pay. Given what the data is telling us, it is amazing that the line has been held for so long, without massive default. Indeed, what is more amazing still is that the national narrative has been dictated for so long by the lenders who, having lent the various players in the country over 600pc of income, are clearly the villains in this story. If anyone wants evidence of reckless lending, there it is straight in front of your eyes.

At the moment, the Irish Government is reading from the creditors’ script, trying to wrangle a few euro out of them and being apologetic in the process while resorting to sound bites like “who would lend to us?”

The problem with these type of debt numbers is that the people who are lending to us are only facilitating the payments of other creditors. So the money they are lending now is being stuffed recklessly down into a hole of debt and all it is doing is creating yet another pyramid scheme and yet more dependency.

For example, this includes the Anglo €1.25bn, which is being paid (pathetically) today. This is just adding to the mountain of debt, which is already built up, because we are just adding more and more debt to the huge financial burden to pay for this existing liability.

Can you see how this is yet another pyramid scheme? It is the inverse of the credit pyramid scheme in the boom — which couldn’t last. It is a debt pyramid scheme where the likelihood of getting out at the top, is based on how much more debt we stuff into the bottom of the pyramid.

We are not the only country facing this dilemma, but our situation is by far the most precarious. The whole of the West is dealing with the consequences of the credit boom. Most countries are condemned to years of debt repayment, rebuilding their balance sheets and increasing savings. This is termed deleveraging.

In Ireland, given the magnitude of the debt, it is very clear to me that only a fraction of this household and corporate debt will be actually paid off. The figures scream default.

Take a typical Irish case where a business — like a local convenience store — borrowed €4m to build a few retail units and a few apartments in the boom on a turnover of €700,000. The bank lent the money and everyone clapped the “entrepreneur” on the back.

Today, turnover is €450,000 but the development can’t sell for more than €1m. Even if they could find a buyer, at €1m, where will they get the money to pay the rest of the €3m outstanding?

They won’t. So the hit will be taken by the bank that lent the cash. Then the bank has a default problem. This is what is happening all over the country. This presages massive defaults on an ongoing basis.

There are two ways you can get out of debt. One is that you can work your way out over years and years. This is the “right” thing to do. But sometimes, when the weight of debt is just too heavy, it is impossible. I fear that this is the case for Ireland, irrespective of how certain parts of the economy — for example the export sector — are moving. It is just not possible, without inflation, to pay this debt in full.

We have been told this week that a “bomb” would go off if the Anglo debt were to be defaulted on today. That is nonsense. The bomb has already gone off. It went off when all this lending was incurred and every time someone got more into debt, a further little device detonated, creating the economic wasteland we walk in.

Before you finish, take a look at the chart again. Examine the numbers for Ireland and you tell me if there is possibly another way out of this?

Predalien

antoobrien wrote: »

Did you read the article or just the bit I quoted - the author deals with the increases in SW between 1997 & 2009.

I'm really interested in how you can explain the 66% increase in the SW budget between 1997 & 2002 as unemployment fell from 255,000 to 162,500 (lowest in 2001 @ 142,253)?

I'm also interested in how the increase in the SW budget had nothing to do with the more than doubling of rates of dole payments over the 12 year period mentioned or with policies like children's allowance payment of 1,000 a year to every child for the first 5 years (which was scrapped a couple of years ago before the unemployment figures really jumped).

Ah well, let's just stick our heads back in the sand and pretend that the SW bill increases over the past 15 years are only to do with in increases of the unemployed even while the numbers were dropping.

The bit you quoted places the majority of blame for the budget deficit on welfare payments! Which is tripe of the highest order. 1997-2002 was a period of rampant inflation (near 6% in 2000) requiring welfare to be increased (inflation affects lower socio economic groups more than higher earners). How much did our welfare budget change as a proportion of GDP? That's a far more accurate appraisal than just looking at a headline figure of 66%.

Much of the increase in the welfare budget were the increases in child allowance benefiting middle and high income families, these increases were driven by cynical vote buying policies.

The deficit crisis is related almost entirely to the collapse of the property market, the tax base was decimated as much of it was composed of unsustainable revenue. The government can't say they weren't warned either, every property bubble bursts, and numerous economists warned of this constantly.

There's no sticking of heads in the sand. Welfare needs reform. not indiscriminate slashing. You go along with basically every policy of slash and tax. Where is the room for job creation/stimulus? We have half a million unemployed people, until that issue is addressed (which needs careful spending, not cuts) we're just digging ourselves into a deeper hole. Even the IMF were critical of cuts to the capital budget. All the money spent on bank bail-outs literally disappears from our economy, a large portion of money paid to dole recipients is spent in Ireland and in one way or the other either returns to the exchequer or goes into the hands of Irish businesses.

K-9

celty wrote: »

I think the Occupy people have just woken up before the rest of us. I copied and pasted the below from David McWilliams' website.

McWilliams' original solution was the bank guarantee, including bondholders, indeed he speaks of Lenihan visiting him in his book.

skelliser

K-9 wrote: »

McWilliams' original solution was the bank guarantee, including bondholders, indeed he speaks of Lenihan visiting him in his book.

he did but he didnt envisage a guarantee that included all the banks, especially not anglo.

Predalien

skelliser wrote: »

he did but he didnt envisage a guarantee that included all the banks, especially not anglo.

Nor did he envisage the government even paying much of the subordinated debts, which under no circumstance should have happened.

antoobrien

skelliser wrote: »

Here Antoobrien, can you explain why house prices increased from an average price of 200k in 1998 to just under 400k in 2007, thats an increase of over 80% in a period of just 9 years.
And it wasnt because of demand because the we now have over 200,000 empty houses.

Possibly the single most deluded thing I've seen on this thread - of course it had to do with demand. 200k empty houses is only about 2-2.5 years of completions. That gives us 2007, 2008 & 2009 - just when buying started to fall off but building didn't stop quickly enough. We have a massive oversupply now because of the sudden fall off instantaneous stopping of demand for housing, not because of a long term over supply.

skelliser wrote: »

I wonder does it have anything to do with the euro and the unleashing of virtually free money and the ideology that markets should be left to regulate themselves.

In part, but at the bottom of it all is the willingness of people to pay outrageous amounts for dwellings (and do stupid things to get loans).

K-9

skelliser wrote: »

he did but he didnt envisage a guarantee that included all the banks, especially not anglo.

Predalien wrote: »

Nor did he envisage the government even paying much of the subordinated debts, which under no circumstance should have happened.

Indeed, which is why pop economists aren't worth listening to, they don't deal in facts or information Governments have. We should be a massive financial centre of the world by now apparently.

Predalien

K-9 wrote: »

Indeed, which is why pop economists aren't worth listening to, they don't deal in facts or information Governments have. We should be a massive financial centre of the world by now apparently.

Why? I'm confused, he was right... he was also right in his analysis before the crash that it was a house of cards that would collapse. So you're saying we shouldn't have listened to people that were proven correct? As George Lee put it "we are borrowing against our future" in reference to the massive borrowing of our banks, he's a pop economist, he was right, yet we were right to ignore him because he was high profile?

skelliser

K-9 wrote: »

Indeed, which is why pop economists aren't worth listening to, they don't deal in facts or information Governments have. We should be a massive financial centre of the world by now apparently.

this makes no sense!

McWilliams called the property bubble in 2003 but no one listened.

If anything Lenihan didnt listen to him!

skelliser

antoobrien wrote: »

Possibly the single most deluded thing I've seen on this thread - of course it had to do with demand. 200k empty houses is only about 2-2.5 years of completions. That gives us 2007, 2008 & 2009 - just when buying started to fall off but building didn't stop quickly enough. We have a massive oversupply now because of the sudden fall off instantaneous stopping of demand for housing, not because of a long term over supply.

im sorry but this is absolute rubbish.

You tried to back up the advertiser op ed that social welfare spending was the cause of the crash. That is utter insanity!

In the last thirty years the average completions for houses are in an around 30/40 thousand houses per year.
Atr the peak in 2006 90 thousands houses were built.
There was no demand for these houses. if there was then why have we a 17% oversupply?!!
The massive loans that developers got went into building as many houses as possible.
Why? because the pyramind scheme that was our property bubble had to get bigger and bigger to sustain itself which had nothing to do with demand.

I suggest you research the basics of a property bubble.

http://en.wikipedia.org/wiki/Real_estate_bubble


do you see a pattern?

we are at the "return to "normal"" stage imo

thesandeman

Vincent Browne showing Enda up again at the moment. I hate to say it but Im getting to like VB :-o

WallyGUFC

skelliser wrote: »

this makes no sense!

McWilliams called the property bubble in 2003 but no one listened.

If anything Lenihan didnt listen to him!

Why didn't you listen to him so? Isn't hindsight just so bloody wonderful. We are where we are because the electorate continued to vote in FF. Parish pump politics is the only way in this country. Once the potholes down your road are fixed, you'll vote for your man. And why wouldn't ya? It'll never change, people in Ireland have woefully short memories. FF will be back in soon enough.

FG inherited a shambles and there isn't much they could have done. But people are blaming FG now for the mess, the banana republic that this country is. The political system is so ridiculously flawed. Everyone these days is an economist.

Social welfare was/is too high in this country and that's a fact. Should get rid of politicians altogether in this country because they ALL have their self-interest at heart. It would be great if you had people in each ministry who actually knew something about that particular field. But no, never going to happen here. And unfortunately, sitting in Eyre Square all day will never, ever change that.

We had it good. We don't now. But we'll have it good again someday. Hopefully...

Sponge Bob

Right Lets Get Practical. I suggest the next Galway Boards Beers are to be held in Richardsons and that the crew from Occupy are invited over for a natter as well as beers.

antoobrien

Predalien wrote: »

The bit you quoted places the majority of blame for the budget deficit on welfare payments! Which is tripe of the highest order.

Really, can you read an exchequer statement, or the reports form the DSP? They'll make depressing reading for you then. FYI the total income taxes USC & PRSI raised by the government is about equal to budget of the DSP (prsi is a departmental receipt of the DSP, so does not show up in the exchequer accounts - you have to go to their website to get the entire figure for DSP spending).

Btw the bit I quoted puts the majority of the blame for the current exchequer imbalance on SW payments - that is true. You read it as being the blame for the crash.

There's a bit of truth in that, after all job losses started in 2005 when the construction boom was starting to hit it's peak output. Or do you really expect us to believe the likes of Dell leaving Limerick was solely down to construction & the banks. As usual the truth is more complex, and no I'm not putting it solely on SW (or the construction boom) either.

Predalien wrote: »

1997-2002 was a period of rampant inflation (near 6% in 2000) requiring welfare to be increased (inflation affects lower socio economic groups more than higher earners). How much did our welfare budget change as a proportion of GDP? That's a far more accurate appraisal than just looking at a headline figure of 66%.

Oh dear, use of one year of very high inflation in 5 to justify a 2/3 jump in the SW budget. So let's take a look at what really happened, the cso figures on inflation might help.


1997 1.5
1998 2.4
1999 1.6
2000 5.6
2001 4.9

2002 4.6
2003 3.5

However, reckless spending by successive governments saw the cost of social welfare payments swell by two thirds between 1997 and 2002, by a further fifth in 2002 and by another 10 per cent in 2003.

The inflation increases between start of 1997 & end of 2001 are 17%.

Now please tell me that I'm wrong but that looks like a budget increase of almost 4 times the rate of inflation

Then another one of over 4 times inflation in 2002.

Then another one of a more modest nearly 3 times inflation in 2003.

All of this while unemployment was dropping to historical lows.

At the peak of the boom, the social welfare budget increased by almost 12 per cent in 2006 to €13.6 billion. In 2007, it was hoisted again by a further 14.2 per cent and again by almost 15 per cent in 2008.

Again the relevant CSO inflation figures
2006 4.0 (vs 12%)
2007 4.9 (vs 14.2%)
2008 4.1 (vs 15%)

2008 is the first year that the increases can start to be justified as unemployment jumped from 4.8% to 8.6%. However the increase of expenditure of €2.3 billion is more than can be accounted for by just counting increases in unemployment figures

Dan_Solo

What was UB as a % of the average wage as a matter of interest? Any ideas if this has gone up likewise?

antoobrien

Dan_Solo wrote: »

What was UB as a % of the average wage as a matter of interest? Any ideas if this has gone up likewise?

Judging by the information available from the cso in

2000 the average industrial wage was €423.24/week - 22% of the average wage

Q3 2011 average wage €693.40 vs €188 = 27%

Both figures are just the dole and do not take into account the other payments such as rent supplement, fuel allowance etc.

Here's the source I got the dole figures from (don't know where Permabear got them).

Permabear wrote: »

The dole has increased significantly faster than the rate of inflation for the entire decade. Here are the increases in JSB/JSA over the past decade:

Budget 2000: €96.50
Budget 2001: €106.66 (+10.5%)
Budget 2002: €118.80 (+11.3%)
Budget 2003: €124.80 (+5%)
Budget 2004: €134.80 (+8%)
Budget 2005: €148.80 (+10.3%)
Budget 2006: €165.80 (+11.4%)
Budget 2007: €185.80 (+12%)
Budget 2008: €197.80 (+6.4%)
Budget 2009: €204.80 (+3.5%)

Now the dole is falling more slowly than the rate of deflation.

So social welfare recipients are still better off year-to-year, in real terms.

ladhrann

Dan_Solo wrote: »

What was UB as a % of the average wage as a matter of interest? Any ideas if this has gone up likewise?

Jobseeker's Allowance and Jobseekers Benefit both have the same maximum payment.

lobes

Saturday 28th January:

"Br€aking Our Bond$" Street Parade
from Occupy Galway, Eyre Square @ 1pm

http://www.notourdebt.ie/

orangebud

you could have waited till after the Liverpool V Man utd game
i call in after 2 show my support

Fuinseog

Does the OG group engage in any fun activities such a street theater and are they supported by any local musicians? The Dublin crowd seem to be active enough in this regard.

Niall0001

How's about someone starts pointing fingers at the untouchable wages of 110,000 HSE employees (thanks to the Croke Park agreement), of which 10% don't even show up for work on any given day, instead of blaming those who have nothing & penalising them time & time again?

Fuinseog

Niall0001 wrote: »

How's about someone starts pointing fingers at the untouchable wages of 110,000 HSE employees (thanks to the Croke Park agreement), of which 10% don't even show up for work on any given day, instead of blaming those who have nothing & penalising them time & time again?

who has nothing and who and how are they being penalised?
HSE employees are getting pay cuts every year and still have to pay massive mortgages. maybe they should just throw in towel and chill out in the square.

Niall0001

Fuinseog wrote: »

who has nothing and who and how are they being penalised?
HSE employees are getting pay cuts every year and still have to pay massive mortgages. maybe they should just throw in towel and chill out in the square.

Under the Croke Park agreement 110,000 HSE employees are not subject to pay cuts & 10% of these don't turn up for work on any given day. Keep reading & it might sink in eventually.

Also: their own Director of HR today admitted they have far too many managers:

http://www.irishhealth.com/article.html?id=17940

Their mortgages are absolutely nothing to do with anything but themselves & is a ridiculous point to make. Do you reckon none of the 450,000 unemployed in this country have mortgages either?

ladhrann

antoobrien wrote: »

Both figures are just the dole and do not take into account the other payments such as rent supplement, fuel allowance etc.

There is some confusion here I think over 'dole, UA, UB' etc., the payments are Jobseeker's Benefit and Jobseeker's Allowance, both have a maximum individual rate of E188 per week.

Certain additional payments are available under both schemes, in the case of Jobseeker's Benefit if your spouse/partner is unemployed or low-paid you may be entitled to an allowance for them and if you have children the same applies. This is a payment based on your PRSI contribution record, and is not means-tested.

Jobseeker's Allowance is a means-tested payment. Reductions are applied on a number of grounds i.e. if you are under-25 reduced rates are paid.

If you live with anyone that does not qualify for Fuel Allowance then you are ineligible for it. This includes anyone living with students, parents, a partner etc. Only one member of any household may be in receipt of it. You must be signing for 390 days i.e. be long-term unemploymed in the Department's view to qualify for FA

Rent Supplement is a payment made by the H.S.E. to an individual with a demonstrable housing need and that has been on the Council's Social Housing List for a certain period. It varies from county to county and within counties based on a theoretical level of maximum rent that you should pay. In Galway City it is E54.80 at the moment, if your rent is over this level you are not entitled to a payment or part payment. The landlord must sign and return a declaration to this effect (which many refuse to do).

The point I am trying to make is that few individuals qualify for all payments although many do. Individual circumstances result in different payments for different people, especially in the case of means-tested payments.

Although it is hard to generalise about the Occupy movement, those that make up the bulk of this type of protest i.e. non-unionised are male, young, single and unemployed. In this context it is likely that most of them are on a payment of E144 or E100 if the age-group is under 25.

As it is the young, male, unskilled, semi-skilled cohort that are statistically most affected by the current recession, in terms of cutbacks to payments and schemes for long-term unemployment the impact has also been disproportionately great on this part of the population.

Generic snubs against the unemployed or politicians are unhelpful to the debate.

"Total Social Welfare expenditure in 2010 was €20,848 million, an increase of 1.5% over 2009. Expenditure in 2010 represented 33.8% of Gross Current Government expenditure and was equivalent to 16.7% of GNP (Table A2). The main areas of expenditure by programme group were Older People (22.1%), Widow’s, Widower’s and One Parent Families (12.3%), Illness, Disability and Caring (16.6 %), Jobseeker’s Supports (19.6%), Child Related Payments (12.7%) Supplementary Welfare Allowance (4.6%) and Employment Supports (2.9%) Administration of the social welfare system accounted for 2.8% of total expenditure" DSP expenditure 2010 (latest year of figures)

E2.2billion goes on one non means-tested payment alone, that of child benefit. This is over 10% of the Department's expenditure. There is an argument to be made that all non-means-tested payments be eliminated.

Since 2008 social welfare payments for the individual have fallen by 8% in total from the peak of E204.20 to E188.

This is despite the fact that although there is a significant amount of deflation in the economy, the real cost of living i.e. food, light, heat, rent (or mortgage) and clothing have all continued to rise by at least 2.5%-3% per annum, and in certain cases much more i.e. electricity, gas, petrol/diesel.

The increases in fuel, V.A.T., etc. disproportionately affect the lower paid as they are taxes that do not take into account one's ability to pay.

I hope this has added some light and not heat to the debate.

Eman Resu

ladhrann wrote: »

I hope this has added some light and not heat to the debate.

So would I, but I doubt it! Both "sides" are too entreneched in their viewpoints!

Predalien

Niall0001 wrote: »

Under the Croke Park agreement 110,000 HSE employees are not subject to pay cuts & 10% of these don't turn up for work on any given day. Keep reading & it might sink in eventually.

Also: their own Director of HR today admitted they have far too many managers:

http://www.irishhealth.com/article.html?id=17940

Their mortgages are absolutely nothing to do with anything but themselves & is a ridiculous point to make. Do you reckon none of the 450,000 unemployed in this country have mortgages either?

The HSE absenteesism rate is actually under 5%, still a problem but not the 10% you keep stating. They do have too many managers (I know of one place that has a manager for every 3 nurses... ) and the whole system needs drastic reform but in general I don't think frontline staff are massively overpaid or anything, it's the bureaucracy that built up in management and clerical areas that needs stripping back in addition to finally taking consultants to task for their extortionate costs, not to mention pharmacists who've been running cartels for so long. Also the subsidising of the private medical sector doesn't help either.

Niall0001

Predalien wrote: »

The HSE absenteesism rate is actually under 5%, still a problem but not the 10% you keep stating. They do have too many managers (I know of one place that has a manager for every 3 nurses... ) and the whole system needs drastic reform but in general I don't think frontline staff are massively overpaid or anything, it's the bureaucracy that built up in management and clerical areas that needs stripping back in addition to finally taking consultants to task for their extortionate costs, not to mention pharmacists who've been running cartels for so long. Also the subsidising of the private medical sector doesn't help either.

"...with an average of 10pc absenteeism on any given day"

http://www.independent.ie/opinion/columnists/kevin-myers/kevin-myers-today-with-our-country-in-ruins-we-are-still-importing-fishermen-from-half-a-world-away-3000653.html

Predalien

Niall0001 wrote: »

"...with an average of 10pc absenteeism on any given day"

http://www.independent.ie/opinion/columnists/kevin-myers/kevin-myers-today-with-our-country-in-ruins-we-are-still-importing-fishermen-from-half-a-world-away-3000653.html

You trust Kevin Myers as a source? It's under 5% combined for all staff but I believe it is around 10% for non-medical staff

http://www.breakingnews.ie/ireland/hse-absenteeism-double-that-of-private-sector-522594.html