Ex-IMF Chief: Ireland is Insolvent

[canicemcavoy]

The summary of the summary: we're in trouble;

http://baselinescenario.com/2010/09/02/irish-worries-for-the-global-economy/

Ireland’s difficulties arose because of a massive property boom financed by cheap credit from Irish banks. Ireland’s three main banks built up loans and investments by 2008 that were three times the size of the national economy; these big banks (relative to the economy) pushed the frontier in terms of reckless lending. The banks got the upside, and then came the global crash in fall 2008: property prices fell more than 50 percent, construction and development stopped, and people stopped repaying loans. Today roughly one-third of the loans on the balance sheets of major banks are nonperforming or “under surveillance”; that’s an astonishing 100 percent of gross national product, in terms of potentially bad debts.

[...]

However, it is now apparent that Ireland has not done enough to stem its march toward further crisis. The ultimate result of Ireland’s bank bailout exercise is obvious: one way or another, the government will have converted the liabilities of private banks into debts of the sovereign (that is, Irish taxpayers), yet the nation probably cannot afford these debts.

[...]

This misunderstanding stems from Ireland’s success as a tax haven. Many years ago Ireland cut corporate taxes to attract business. This created one of Europe’s most impressive tax havens – it is possible to set up a corporation in Ireland, channel sales through that head office (with some highly complicated links to offshore tax havens in order not to pay Irish tax) and then pay a minuscule corporate profits tax. Ireland boasts a large industry of foreign “tax minimizers” that do this, but these tax minimizers hardly employ any people. Nearly one-quarter of Irish G.D.P. comes from the profits of these ghost corporations.

[...]

Ireland, simply put, appears insolvent under plausible scenarios with current policies. The idea that Ireland, Greece or Portugal can cut spending and grow out of overvalued exchange rates with still large budget deficits, while servicing all their debts and building more debt, is proving – not surprisingly – wrong. Such policies leave nations burdened with large debt overhangs that effectively tax businesses and borrowers – because interest rates must stay high to reflect risk.

[...]

Under the current program, we estimate each Irish family of four will be liable for 200,000 euros in public debt by 2015. There are only 73,000 children born into the country each year, and these children will be paying off debts for decades to come – as well as needing to accept much greater austerity than has already been implemented. There is no doubt that social welfare systems, health care and education spending will decline sharply.

 

[mercman]

Brilliant, another piece of sideline journalism to tell us all what we all already know, and in the case that our local journalists have not rammed the point home, we now have a plethora of yanks fitting the press to justify their own wellbeing.

Why hasn't some persons made an effort to tell us all about the measures that have been made and the instances to incur confidence back in the nation. Mind, doing something like that just might be classed as sensible but no doubt will end up counter productive.

OP as per the original script, did you obtain permission from the New York Times to reproduce this thrash ??

 

[Robin Banks]

Why hasn't some persons made an effort to tell us all about the measures that have been made and the instances to incur confidence back in the nation.

Why dont you do it mercman.

Tell us about the measures and the instances.

 

[mercman]

Tell us about the measures and the instances.

These have been well documented and applauded by the International Community but only make the small print in reporting. If we all were aware of other countries problems we just mightn't have the same attitude and some confidence might return.

 

[Robin Banks]

Simon Johnson is part of the International Community and he is not applauding.

 

[canicemcavoy]

Why hasn't some persons made an effort to tell us all about the measures that have been made and the instances to incur confidence back in the nationWhy hasn't some persons made an effort to tell us all about the measures that have been made and the instances to incur confidence back in the nation

I presume you kneejerked without actually reading the article. If you had, you would realise that the point he's making is that these "measures" and "instances to incur confidence" will have absolutely no affect.

Now, if you have any arguments to counter his facts and figures rather than just sarcasm, please lay them out.

 

[mercman]

No sarcasm intended. I simply fail to understand how these economists are so wonderful about playing the 'I told you so' game. There were very few who predicted this worldwide disaster only to say we could see it coming. Very much a case of they should have 'put up' or 'shut up'

 

[canicemcavoy]

Ah right, so you don't actually have an argument; this is just a repetition of the "no one saw it coming, noone's to blame (and therefore everyone's to blame)" meme we've heard ad nauseum.

 

[mercman]

I saw it coming -- partially wound down my business in Mid 2007 as much as possible.

 

[Robin Banks]

These have been well documented and applauded by the International Community but only make the small print in reporting. If we all were aware of other countries problems we just mightn't have the same attitude and some confidence might return.

This is classic Fianna Fail codology that has the country banjaxed.

Irish banking system 'a shambles', says top Swiss analyst

http://www.tribune.ie/business/article/2010/sep/12/irish-banking-system-a-shambles-says-top-analyst/

Today's editorial from the Financial Times

It is time to let bank losses fall where they should: on unsecured creditors once shareholders are wiped out. But Irish leaders are prolonging the uncertainty in the hope that zombie banks will, Lazarus-like, come back to life.

http://www.ft.com/cms/s/0/07b06b20-be9a-11df-a755-00144feab49a.html

International Community applauding my foot.

It's interesting that the same people who were full of it during the bubble are still full of it during the bust.

You're (still) part of the problem mercman..

 

[csirl]

I think the IMF has a big grudge against Ireland which dates from the economic problems in the 1980s.

Back then, the IMF was gung ho about coming into Ireland and taking over. The Government thankfully told them to get lost and implimented a lot of policies which were at odds with IMF recommendations and made some of the IMF "experts" look very stupid. I gather than the author of this piece was one of the IMF "experts" back then? He was spectacularly wrong in the 1980s, so why should anyone listen to him now?

 

[mercman]

You're (still) part of the problem mercman..

Good man, personalise the issue.

To date I have seen very few credible alternatives that one could say that the country might be best to move with.

Eh Smartie, have you not noticed the other countries that are in the same mess, or would you prefer if they were listed for you to realise that this is a world wide problem, not just an Irish dilemma.

Eh I forgot the opposition in this country have offered so many alternative policies !! This country needed a National Government which nobody realised could have been the saving grace.

But again people on the sidelines pasting insults know it all. In fact they know sweet FA apart from placing insults to those that are vague enough to even think about it.

 

[mercman]

I think the IMF has a big grudge against Ireland which dates from the economic problems in the 1980s.

A very good diligent point csirl. Wait for it. You are about to be insulted by others.

 

[Robin Banks]

Eh Smartie, have you not noticed the other countries that are in the same mess, or would you prefer if they were listed for you to realise that this is a world wide problem, not just an Irish dilemma.

"Miss, Miss the other boys were doing it too Miss."

Another line of bs straight from the Fianna Fail propoganda sheet.

You're a scream

 

[canicemcavoy]

I think the IMF has a big grudge against Ireland which dates from the economic problems in the 1980s.

1. The article has 2 authors, one of whom worked for the IMF.
2. The author who did work for the IMF worked for it in 2007/2008, not in the 1980s. Indeed, he's 47, which means that in the early 80s he was in his early 20s - possible as young as 17, depending on how early, and presumably still in school or studying. Perhaps these foreigners hold long grudges for no reason whatsover.
3. His other qualifications include being the Ronald A. Kurtz Professor of Entrepreneurship at MIT Sloan School of Management, a senior fellow at the Peterson Institute for International Economics in Washington, D.C. and member of the Congressional Budget Office's Panel of Economic Advisers. I realise that none of these are as good as being a solicitor from Offaly, but there you go - these foreigners have weird notions about books and learning.

 

[RMCF]

Ireland is in a mess, we all know this.

But so is the UK, France, Portugal, Greece, Spain, Italy .... and yes, even the US.

We are all screwed, its just degrees of being screwed if you ask me.

But its always nice to pick on someone who might be slightly worse off to cover up your own disaster, and make your own citizens think they have it good.

 

[canicemcavoy]

But its always nice to pick on someone who might be slightly worse to cover up your own disaster.

Er, is this a reference to the author of the original piece, who writes a blog mainly concerning the US economy? http://baselinescenario.com/ Can you explain how this one blog article somehow covers up the US disaster, and why a UK-born economist would do that?

So, just to get the stories straight - when the preeminent economist Simon Johnson writes a single blog post criticising Ireland, it's because he has a grudge about Ireland from the time he was in the IMF at the age of 17ish almost 30 years ago, and also it's part of some grand conspiracy to cover up the problems of the US, a badly-run conspiracy since he spends 99% of his blog criticising the US economy.

Do I have that correct?

Just use the Bertie response - it was Lehman's and its testicles. It's equally meaningless and self-pitying, but doesn't take as long to type.

 

[Robin Banks]

Lads dont be listenin to any of dem forrin begrudgers tryin to talk us down

[broken link removed]

We are in year 14 of de latest Fianna Fail economic miracle

 

[csirl]

1. The article has 2 authors, one of whom worked for the IMF.
2. The author who did work for the IMF worked for it in 2007/2008, not in the 1980s. Indeed, he's 47, which means that in the early 80s he was in his early 20s - possible as young as 17, depending on how early, and presumably still in school or studying. Perhaps these foreigners hold long grudges for no reason whatsover.
3. His other qualifications include being the Ronald A. Kurtz Professor of Entrepreneurship at MIT Sloan School of Management, a senior fellow at the Peterson Institute for International Economics in Washington, D.C. and member of the Congressional Budget Office's Panel of Economic Advisers. I realise that none of these are as good as being a solicitor from Offaly, but there you go - these foreigners have weird notions about books and learning.

The individuals may have changed, but the institutional attitude is still there. The IMF simply cant accept that they are not always right and countries dont always need their help. I hate the way that they seem to get portrayed as an almost god like solution to all the economic problems that any country may have. They have their strengths and weaknesses and are as human as everyone else.

The big flaw that many commentators seem to make is that they focus too much on the rate in which debt is increasing in Ireland. They forget that Ireland is starting out with a much lower debt than practically any other country in the world. Even with recent deficits and those projected over the next couple of years, or total debts are still lower per capita than USA, UK, Germany etc. etc.

 

[Chris]

These have been well documented and applauded by the International Community but only make the small print in reporting. If we all were aware of other countries problems we just mightn't have the same attitude and some confidence might return.

Were these the same people in the International Community that were, as Bertie used to say, so envious of the Irish economy? If you do a search in French or German papers for Ireland, all that you find is negative reports. Back when Bertie claimed Ireland was the envy of Europe, I used to search the foreign papers for such indications. Guess what I found: nothing, except for some articles on the smoking ban.
The actual economic benefits of the budget cutbacks are dwarfed by the ridiculous amounts of debts taken on in order to recapitalise the banks.
The only ones in the International Community that may applaud the bank bailouts are the foreign creditors.