GNP up 4.3% – sounds like significant growth so far in the second half of 2012?

Spot on Conor :)

The ESRI and their fellow well remunerated clowns of the Fiscal Advisory Council have no more ‘forecasting’ ability than a well lubricated bar stool commentator. When pressed last year in the Dail as to the source of their forecasts , the best FAC chair John McHale could come up with was “..historical trends..”. He had nothing else to say about what period of ‘history’ he might have been thinking appropriate.

The reality is that the best McHale, ESRI & co. can offer is somewhere between wishful thinking & magic & fairies. Part of the reason for this is that their mainstream thinking colleagues in the various $10s of millions funded mega computer global macro economics modelling institutions have been basing their efforts on completely bogus economics assumptions that bear little relation to the real world. Principal among their many errors was the exclusion of such things as debt, money & banking – seriously, they’ve based the last decades of work on the assumption these things did not matter!

Not surprising then, these forecasters had no clue economies were set to crash mere weeks before it all kicked off in 2007. The arrogance & hubris of these economists & their nodding donkeys of the ESRI & FAC etc etc. is such that they have barely even aknowledged these fundamental failings, let alone begun to re-think anything – 5 years on.

Ok, the models are rubbish because the mainstream macro economics thinking is rubbish, so what can we say about the prospects for Ireland & other countries & the direction of policy in the Eurozone & elsewhere?

Well, for a start, austerity – the drastic reduction of spending power – in the domestic economy, in combination with citizens & businesses unwilling or unable to increase borrowing in order to make up the spending gap, will lead to economic contraction. GDP (spending) = Income + change in debt (Steve Keen – a ‘real’ economist) . Net income is being reduced by reduced government spending & increased taxation whilst most sectors of the economy are paying down debt, not increasing it (deleveraging). Tho’ as regards the latter, there is one area which should be ringing alarm bells. Mortgage arrears. These are steadily increasing & significant – indicating that some people are needing/choosing to spend rather than pay down mortgages, but this is obviously not sustainable…..

So, the above only leaves one game in town, exports – the purchasing power of foreigners to spend into our economy – as a potential source of growth. Ireland is a tiny economy in Europe with a disproportionately large (multi-national corp) export sector. Since these exports are mostly in the more ‘essential’ rather than ‘discretionary’ spending areas – eg pharmaceuticals – and are the main sales outlets for the entire European continent, they rebounded & have held up well. But they are not employment ‘rich’ & will not make much inroad into the dole queues, nor does this sector buy much from other local businesses (relatively), so not much in the way of secondary effects on the domestic economy.

Since in the rest of Europe, doing austerity as well, growth is either negative or stagnating, it’s clear the prospects for our export buying partners is poor. We might get very modest growth in our exports, if we’re lucky, but to expect this sector to produce the kind of ‘historical’ trend growth McHale & co. believe, jumping next year & the next couple of years is laughable. (Without these fantasy growth rates, & at the current ‘market’ interest rates, our gov debt is not sustainable.)

We’ve got away lightly thus far, even tho’ we’ve decimated our domestic economy with 15% unemployment & all the wasted output of real goods & services – prosperity – that represents, because we are a minnow, have a massive foreign MNC sector & started from a far better position than Greece, Spain, Portugal & Itlay.

But we have now reached the limits of these benefits. More austerity next year & following years will have us going down the death spiral direction of Greece & Spain. Portugal is also at this point. Their is no prosperity to be had from wasting 15% to 25% of the population in idle unemployment.

The only way to prevent the massive waste of a lost decade (or longer) of falling output & living standards, with far reaching social effects, is to get stimulus spending into the economy. Iin Ireland & the rest of Europe.)

If Ireland, even with it’s illegitimate burden of banks’ losses, (& most others) were able to borrow at the low interest rates that countries like US, UK & Japan have, there would be no government debt crisis at all. Interest rate IS the total cost. When a country can borrow at 1% rather than 4%, it means it can carry 4 TIMES the debt, sustainably. Economic (GDP) growth ensures that the aggregate debt prinipal does not need to be repaid (it never is in any significant amount – anywhere) – it ensures the all important debt/GDP +ratio+ remains sustainable whilst the level of debt can increase when needed – as now, in a recession.

The ECB (Euro central bank & currency +issuer+) has the (limitless) capacity to ensure no country need borrow at more than 1%. (Whilst not revealing its ‘target’ rate, this what Draghi’s recent ‘whatever it takes’ announcement means.)

And do not think for a moment that the private financial sector will not happily avail of 1% bonds. It is doing just this in UK US & Japan. Allowing for inflation, this sector is actually +paying+ to keep it’s money at what is effectively a deposit facility for its surplus financial assets. Why is this? Simple, there is no where else risk free (backed by a currency issuing authority) to store their money in such large amounts. Our governments (thru their central banks) are doing the financial sector a ‘favour’ by ‘selling’ bonds – not the other way round!!

The notion of ‘risk premia’ on Eurozone bonds from any country (even Greece, if we stop destroying their economy with austerity & ‘odious’ creditor demands) is disingenuous & a profit gouging charade. Either the Euro, just as the $, £ or Yen, is a going, ‘risk free’, concern – or it isn’t. There is no sustainable middle ground for such a currency. Our Euro economies must be joined together with a common currency, ultimately backed without limit by a central bank (currency issuer) or it cannot work in the long term. Period.

If authorities are adamant that the Eurozone is permanent (as they say) then they must stop the economic wrecking of austerity & the predatory financial sector, or we will remain on the inevitable path to break up.

@ Donncha Foley

The GNP figures are a glitch caused by the difficulties of measurement with such large non factor incomes of the relatively huge foreign MNC sector here (ie when they choose to repatriate profits). Domestic growth is nothing like this in reality – look at the retail figures.

GNP does not include the profits of foreign multinationals. You’re thinking about GDP, which does include those profits.

How is been strangled Mick? By telling us to pay our debts, and stop living beyond our means. That seems like common sense.

Hi Ned,
That is a good question you pose. The economy is being strangled as there is little incentive for people to go and make money. Taxes are increasing and more being introduced, many of which people simply cannot afford. This reduces the amount of money in circulation, that may ordinarily be spent in shops, restaurants, bars etc. For an economy to function at a high level, money needs to be circulating. For example, a stimulus to get people spending money would be to reduce VAT, and therefore reduce the overall price of goods/services to the consumer. Our government are forcing austerity on us, by forcing us, the tax payer, to pay the debts of unsecured bondholders in banks, on the instructions of the IMF/Troika. Do you think organisations like that have our best interests at heart? Hardly!!
Instead, the Government should be looking out for us and encouraging us to spend money, but they are taxing us out of the game, and therefore strangling the economy.
As mentioned above, I recommended a book called ‘Confessions of an Economic Hit man’. It really does help explain what is going on in the World.
Here is an interview with the author of that book. It is long, but quite interesting.

http://www.youtube.com/watch?v=yTbdnNgqfs8

It doesn’t mention Ireland, but i’m sure you’ll be able to relate what he is talking about to our situation.

@Mick B. If the govt were to reduce the VAT rate, we both know what would happen. Greedy shopkeepers and publicans would not pass on the VAT reduction to their customers. Instead they would pocket it. Just look at what happened when the govt dropped the VAT rate on certain tourism-related items.

Bet your book didn’t mention that.

@doesnotcompute
Of course my book didn’t mention greedy Irish retailers or publicans. I was just answering the question I was asked, and used that as an example. Your username is fitting in this case ;-)

Mick B – Excellent read – I actually sent it to several prominent journalists. Here is a summary from its author if you don’t have time to read the entire thing: http://www.youtube.com/watch?v=xLe9u9SffO0

Also check out money masters created in the 1990s. 3 1/2 hours long but tells us all about the history of money and who owns it: http://www.youtube.com/watch?v=lXb-LrVkuwM

@Nedstrak. This is how it is being strangled:
Central banks who own the supply of money to a country, flood that country, then contract the money supply.
This flood/contraction cycle causes an initial false wealth (with non existent ponzi money), then widespread bankruptcy.
The central bank private owners in the know then buy up the countries assets for a fraction of its worth.
We have no control of our money supply as we joined the euro voting in the Maastricht treaty.

If you think the IMF are the good guy police men of world economies then you need to read up on their record in South America. Watch Oliver Stones film South of the Border, the leaders of all South Americas countries will subtly and diplomatically tell you how they feel about the IMF and World Bank.
The IMF is the bankers liquidation machine. They ensure the country stays in debt and sells its asset by feeding false advice to ignorant politicians and civil servants.

@NedStark: we are paying our debts and continuing to live beyond our means on new debt. Where’s the sense in that?

The wonderful thing about Tiggers, is Tiggers is wonderful things.

Their tops are made out of rubbers, their bottoms are made out of springs.

They’re bouncy, trouncy, flouncy, pouncy. Fun, fun, fun, fun, FUN!

But the most wonderful thing about Tiggers, is I’m the only one.

Fair point, but the famine statue is, of course, brilliantly situated outside the Financial Services Centre and just down the quay from the Anglo white elephant. It’s that juxtaposition makes it a pretty neat go-to image for tales of economic woe.

Also apt since “laissez faire” capitalism was a factor in the famine.

Nice one Grainne and wouldn’t we just love it. Sickening isn’t it. PAYING the wealthy profits while poverty goes through the roof.

Not only are we giving 1 extremely wealthy person one third of the proposed cuts for the next budget, we’re giving it to a person who came in after the bank guarentee, you’d have to applaud his foresight and cynical move taking advantage of Irish political and economic stupidity…(albeit stupidity with a healthy dose of duress from our laughable termed European “friends)”……if it wasn’t so disgusting.

Mary – This guy knows the solution, enjoy :)

http://www.youtube.com/watch?v=rGkmgnprrIU

Yes, bouncing a check to the bondholders.

Another shot in the dark by this crowd of wasters. You’d have to be seriously wrong in the head to believe anything the ESRI come out with. What their actual purpose is beats me.

Going to have alot less people earning if your anarchists wet dream comes through,

Pull out of the euro and watch prices for the likes of oil go through the roof far more then they already are. Don’t forget the massive knock on affects this will have (food going up etc) and also because our currency would be worth 30% less then watch imports for all goods also get very very expensive.

Oh and the earning side of things, well with a worthless and unstable currency and economy just watch all the multinationals loose interest in Ireland as a base for any operations they have. So not as many people earning.

Many people look at argentina as a example of what Ireland should do, they forget that argentina has very very rich natural resources and that it certainly wasn’t a holiday and still isn’t for people living in the country.

Lets look at what just one of the things argentina went through, shall we?
Hyperinflaction….prices rising so fast shop keepers gave up updating signs and notices, it was at 2,000% as recent as 1994. Knock on affect of this is the poverty level hit 30% in 2010 but it increased to nearer to 50% in 2001-2002.

Inflation in the country has dropped alot but its still around the 30% mark as recent as 2011, but many many familys depend on credit cards to get by, this in tern is pushing up personal debt on people…whihc of course nobody wants.,

Good man Frank.
Did you ever think of going for Celebrity Bainisteoir?

Barry, alternatively we could look at Iceland being a more current example of a country that defaulted rather then the big boggy Argentina. Iceland went into crises the same time as Ireland. There used to be a joke making the rounds about what’s the difference between Iceland & Ireland only the C people said. The difference now?

Iceland burned her debts. Devalued and cut salaries etc across the board. Now days they are experiencing some of the highest growth in Europe. Unemployment is dropping and they are back in the bond markets buying at reasonable rates.

The joke is on us the Irish tax payer I’m afraid.

Kerry Blake, you are ignoring what happened in Iceland

Ok so our interest rates are very very very low and if they went up lots of people would loose their homes, now look at Iceland….in 2008 the interest rate was 18%!

Last time Ireland had such a high interest rate was in the early 80′s, if we had it now or even at anytime since 2007 so many people would have lost their homes it just wouldn’t be funny on any level……but then you ignored this very upsetting fact didn’t you?

You are making Iceland sound like some idealistic country, but so far you’ve forgotten the extremely high interest rate and the very fact that thousands have left the country and moved to Norway, figures are that around 250 odd moved in 2005 but in 2009 this was 1,625. For a country of just 320k people thats an awful lot of people leaving the country.

Thats the problem with people like yourself, you say Ireland should leave the euro and not pay debt and you sight other countrys as examples but you ignore any of the negative affects the countrys experienced.

I’d take off those rose tinted glasses if I was you because they are not showing you any negative affects of the “ideas” you want to happen,

Yes Barry, Ireland done none of them things, we played by the rules set out for us and sure we’d no emigration of note, no devaluing of property, no-one losing their homes and how long is this recession being trudging along?

Funny you should mention rose tinted glasses when it’s quite obvious you reject the economic soundings of the ESRI.

Kerry Blake, you are ignoring what happened in Iceland
Ok so our interest rates are very very very low and if they went up lots of people would loose their homes, now look at Iceland….in 2008 the interest rate was 18%!

Last time Ireland had such a high interest rate was in the early 80′s, if we had it now or even at anytime since 2007 so many people would have lost their homes it just wouldn’t be funny on any level……but then you ignored this very upsetting fact didn’t you?

Iceland put in a program to protect people in trouble due to high interest rates, they also increased their spending on social welfare to stimulate the local economy basically delayed any fiscal adjustment to support the economy while it was under sever strain.

Also in case it has escaped your notice 1 in 5 mortgages in Ireland are in diffuculty. Difference here is we are doing nothing to help those people.

You are making Iceland sound like some idealistic country, but so far you’ve forgotten the extremely high interest rate and the very fact that thousands have left the country and moved to Norway, figures are that around 250 odd moved in 2005 but in 2009 this was 1,625. For a country of just 320k people thats an awful lot of people leaving the country.

According to the ERSI emigration 2009 to 2012 will be 135,000. Sounds an awful lot of sons, daughters and family to me. Unemployment in Ireland stands at over 14% and is not expected to drop until at least 2014. In Iceland in 2011 it was 7%. and is currently dropping. Iceland also returned to the bond markets in 2011.

Thats the problem with people like yourself, you say Ireland should leave the euro and not pay debt and you sight other countrys as examples but you ignore any of the negative affects the countrys experienced.

Were you not the person who raised Argintina as a reason not to default? The expression pot kettle black comes to mind.

I’d take off those rose tinted glasses if I was you because they are not showing you any negative affects of the “ideas” you want to happen,

No ‘rose tinted glasses’ with me Barry. Just pointing out there are alternatives out there. You may not like that fact but there are.

BTW at the hight of the crises Icelands debt was €32 billion in debt owed by the banks. Icelands GDP was €6.8 billion at that time. Iceland public debt in Oct 2011 was around 100% of GDP Irelands public debt is forecast to hit 160% in 2013/2014.

Sometimes it’s good to open your eyes and look else where for alternatives.

Iceland also wrote down mortgage debt to the current value + 10%

More scaremongering Barry?
No mention that Iceland has reduced mortgage debts to levels that reflect the real value of peoples homes?
Not the contrived, overinflated, false, boom time prices that we use in here Ireland.

Iceland’s situation is not wonderful, but it’s better than ours. We haven’t started dealing with the crisis yet, but are stuck in a zombie limbo state. Sooner or later we’re going to run out of time and then we’ll reap the consequences of all the bad decisions over the last 5 years. I suppose you’ve seen the predictions that up to 20% of mortgages could default in 2013? What then?

No Martin. It’s the fact that we’re all used to this life of being broke that we don’t mention recessions and stuff anymore.

I’d tend to agree, I also see more and more people getting jobs…including my wife (4 years without a job that paid more then dole)…now has full time job she loves.

Mind you, last year when i was made redundant I had four interviews and out of them three jobs offers, ok only one of them was a full time permanent contract so I ended up taking it but it just goes to show that jobs are available.

Alot of it is a state of mind as well, as hard as things were for me and my wife I stayed away from all the negative crap on the news and radio…..I used to listen to the last word on todayfm every evening but just had to stop as it was almost 100% negative.,

Started listening to audiobooks instead of the radio each morning and evening when Ian Dempsey on the breakfast show also started going on about politics and the economy about 2 years back, I remember at the time people txting the show asking him to stop going on about politics but he wouldn’t.

keeping upbeat helps massively in my view,

People don’t mention the recession because we are sick of it and those “leaders” in the Dail. Mr. Kenny, Mr. Gilmore, Mr. Martin and Co. couldn’t lead themselves out of an open field even if all they had to do was walk in a straight line.
While it would not solve the crisis they could show real leadership by cutting their wages by 30%, remove expenses for two years, have vouched expenses after that, Work for more than 90 days a year and remove the economy from their power by setting up an all inclusive economic board comprising of some political but mostly business representation.
They should also stop talking down to the people of Ireland and they should treat us with respect instead of contempt.

+1 Barry well said. Things are improving in this country im noticing it every month now as im always out and about dealing with the public. Positive thinking will get this country back on track.

God bless your innocence Martin.

Wrong ! Everyone is depressed in this country thats the real story …cuts should start from the top down but in Ireland it’s the bottom and then nothing or very little .. We pay so much tax and more to come and get nothing in return sick of hearing about this tax and that tax that’s paid by other european countries but look what they get in return example free gp service to all school books paid good roads dental per school services ect so please Europe it’s not like with like …

Martin come to parts of disadvantaged Limerick and many other inner cities and rural poverty. Believe me Recession is alive and well. What planet are you living on?

@Barry, Yes you have mastered denial by listening to audio books and turning off the radio with nasty stories about horribe recession. Go back to cloud cuckoo land and get yourself a cappuccino.

“We’ve turned a corner” – the most hollow and preposterous sentence to ever enter the lexicon of the Irish people when discussing this deepening recession and insofar as agreeing with you about remaining upbeat and having confidence in a turnaround, I’d rather let my belief in current economics and an exit from depression be based upon fact and not some borderline superstition that keeping a smile on your face will somehow magically end the turmoil we’re in.

Well sadi dermot. We all believe in being positive but there are some people so self deluded that if they saw a Sunami coming them they say, oh well chin up lets go shopping. This smiling in the face of ruin is not positivity it is denial. Because simply. If you are barely coping and depressed in this recession with barely enough money to survive and bills coming in the door daily and you walked around with a smile on your face like everything is fine, then frankly people would think you suffering some kind of mental breakdown because nobody under massive stress and pressure in this recession can simply flick an imaginary switch and Feel positive. Its simply unrealistic and to suggest that people should simply forget all their problems in a pseudo bubble of positivity are not living in the real world. The bleak recessionary world that millions wake up to in Ireland every day.

Christopher Gardiner, think you are talking out your behind….get myself a cappuccino?

Whilst you may have hung around yuppie coffee shops like starbucks and the likes I certainly haven’t,

I’m not hiding from the reality….hell I’ve lived the reality with both myself and my wife loosing our jobs…the first of which happened the month after we moved into our house and got a mortgage, but being 100% negative 100% of the time like yourself isn’t going to do your life any good or for that matter your health.

I live in reality, but being negative like yourself won’t get you out the door in the morning and won’t improve your situation. I’ve never missed a payment for any bills I’ve had since the hard times hit, its not been easy by a long shot……but bitching and moaning on some website won’t get that bill paid faster and won’t pay for your shopping.

have i had sleepless nights? Nope, because loosing sleep on something you can’t change in the short term won’t improve things it’ll just mean you loose sleep and make you tired, instead I’ve found ways to improve the situation I’ve been in.

Mary we have hundreds of thousands of irish people who emigrated for work hundreds of thousands coming in to the country to sign on ,a political and judicial system that is broken ,no investigation in to what went on in our banking fiasco and if we think the economy is bad now we aint seen nothing yet ,basically we have nobody behind the wheel any suggestions as to how we should go .

@ Dermot Purcell

you say

“….hundreds of thousands coming in to the country to sign on….”

This is particularly nasty bigoted nonsense.

There are stringent ‘habitual residency’ rules in force for any new benefit claimants – even for Irish citizens returning from overseas. If a newcomer cannot live from their own resorces entirely for at least 6 months – often longer reported by Irish people returning & living off families – they have no chance whatever of coming here to sign on.

Most of the live register is people who had jobs here a few years ago, before the mess that they had no hand in creating.

Argentina is in trouble again, after a few good years exploiting their ample natural resources during the recent resource boom.

In theory, yes. In practice there are many people who have nothing to be happy about.

Great to see that 1 person lives in Utopia.

That’s a bit on the harsh side! What would you suggest that’d be better?

Given that this is a business story, a graph comparing the Irish economy to its neighbouring economies would spare one having to read or write a thousand words!

Famine victims juxtaposed against the wealth of International finance is over dramatising a dull story which brings nothing new to the table. The story is a mere jab from the ESRI to sucker us into taking a south paw blow on the chin in December. Perhaps a photo of a boxer taking one for Ireland would be more appropriate!