# Should Ireland leave the euro and devalue the punt?



## Brendan Burgess

I listened to David McWilliams at the Irish Skeptics last night. He ego-tripped for around an hour on the interesting people he met and corrected and the funny incidents and how right he was and how unpopular he now is for what he said about Miriam O'Callaghan.  He spent around 5 minutes of the total time making the following two points.

1) There are three stages in the "system's" reaction to visionaries like himself: 


Ridiculing of the idea
Aggressive attacks on the idea
Adopting it as conventional thinking
2) No other country in the same mess we are in has got out of it, except by devaluing their currency. We have to devalue our currency.

Devaluing the currency forces a reduction in salaries on all of us and devalues our expectations. The alternative is social chaos as the government tries to slowly "grind" a 20% pay cut on us all.

Unfortunately, that was as far as he went. 

Listening to him, it was quite clear that we must devalue our currency. The people who run the country and their economic advisors have no idea what they are doing. Argentina refused to devalue, and then after 4 years, they devalued and started booming again. 

No other economist in Ireland worth their salt, disagrees with him. Or maybe, all the other economists know this.

I spoke from the floor along the following lines:
         His argument seemed coherent to me, but I am not an economist
         I would like to hear the other side of the argument.
         I would like to hear the point of view of Alan Ahern and Patrick Honohan. I asked if he respected them and he said that they did. 

His response was that his record shows that he has been right all along, so by implication, he is correct now as well. 

Another questioner said that devluation was a good idea, but it would never be agreed as none of the three big parties supported it. Mc Williams correctly countered that none of the big parties supported free trade until Ken Whitaker proposed it. And eventually they agreed. 

Another questioner asked what the downsides were. Mc Williams replied that there would be some pain, but not nearly as much pain as we will experience doing it the slow way.


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## Brendan Burgess

I would like to see a rational discussion of this issue. I don't want to listen to the ridicule and the attacks on McWilliams.( Feel free to attack his manner in this thread) I don't want to listen to his egotrips - but I do want to hear both sides of the argument. 

Let's discuss the point  and not the man. 

1) I presume that we could actually leave the euro zone? I think it would be difficult, but if we had to do it, we would. 

2) I presume that if we do so, the country as a whole must declare bankruptcy. 
We will have a massive international loans denominated in euros and we will be trying to pay them off from the punt, which will be worth,say 40% less than it is now. 

3) If the country goes, the banks go as there is no point in having a bankrupt guarantor. 

4) What happens all our deposits in Irish banks which are currently denominated in euro? 
I presume that they become punts on a one for one basis. So they effectively lose 40% of their value. 

5) What happens to mortgage holders? 
I presume that interest rates will rise to around 10%. They are being kept low by the ECB at the moment. Depositors will want some compensation for keeping their savings in a mickey mouse currency.


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## Trustmeh

Brendan said:


> 5) What happens to mortgage holders?
> I presume that interest rates will rise to around 10%. They are being kept low by the ECB at the moment. Depositors will want some compensation for keeping their savings in a mickey mouse currency.



So mortgage holders would own the same debt, have smaller wages, and have to try and afford a much higher interest rate? Would this mean that you would have to allow people hand the keys back to the banks?

Why not devalue the euro instead? If the rest of Europe wont allow that, will they really allow one of its member states to go bankrupt?


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## queenlex

yankinlk said:


> Why not devalue the euro instead? If the rest of Europe wont allow that, will they really allow one of its member states to go bankrupt?



Dont worry the cuts in the budget will make sure this doesnt happen.  This is Irelands own foolishness/greed that created this problem so why should Europe take any responsibility???  

Irish people just have to all take a cut in some way obviously I think it should be scaled from the highest down with bigger cuts from the ridiculously wealthy and the wealthy and prices are going to all come down in everything anyway so in real terms the cuts are less than people think its more your wealth than your standard of living are going to fall its all relative like when a lot of people here thought they were rich the last few years they didnt take the higher cost of living here into account....


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## sunrock

Well if the choice is between devaluation of 20% or an across the board pay cut of 20%, I`d be in favor of a 20% pay cut.You still have the security of the euro and its guaranteed stability and low interest rates.
I don`t see devaluation of the currency as an option...our foreign debt would be instantly much bigger and the new currency would be very volatile.
Our politicians have just got to get on with it and introduce the necessary pay cuts across the board....It seems they are going  for the thousand cuts strategy, backed up by a sophisticated letting off steam P. R. campaign, where no cuts  will be made without various critics insisting on them  and the unions and opponents screaming blue murder.....by the time the cut is announced all the pent up outrage will have been used up and the cuts will have been seen as inevitable.
Leaving the euro would be a disaster and would solve nothing.


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## Brendan Burgess

> I don`t see devaluation of the currency as an option...our foreign debt would be instantly much bigger



McWilliams argues that this is not a problem. We just have to write off our foreign debt.


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## sunrock

Well our government was terrified of not paying the irish banks senior bond holders...so much so that the government decided to saddle the taxpayer with a 65 billion bet.I don`t think it is possible for the government to actually write off the foreign debt without severe and more painful repercussions.Don`t forget we are still borrowing 400million a week....this would be instantly cut off.The "punts" purchasing power would plummet,so we would be able to buy less than if we had a 20% cut in our euro salary/dole.The perceived advantage is that we could trade our way out by increased exports  but we could also do this with pay cuts.
I think the government will be forced to introduce the necessary cuts. There is no external pressure to devalue. I am no economist but I don`t see the point of devaluing.
It is different for argentina which has its own currency and exports a lot of commodities.Presumably they print more money to achieve the necessary devaluation.


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## Brendan Burgess

The point in devaluing is that we just have to admit that we are bankrupt and cannot trade our way out of it. By devaluing and reneging on our international debts we can start again. Much like a person filing for bankruptcy.

For a year or two, the international markets will be annoyed at us. But then they will respect us for what we have done and start lending to us again.

Brendan


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## pjmn

Brendan said:


> to visionaries like himself:



Brendan - I know you said we weren't to say anything about him, so I won't, but I think the above quote speaks volumes...

I think (in the very unlikley event that we unravelled the whole euro project and reverted to the Irish Pound - I presume he's only proposing to go back to decimalisation and not £.s.d.) - that we wouldn't actually need to devalue the currency - because it would be absolutely worthless, what country in their right mind would want to buy a currency of a country that the world perceives to be a basket case, and in effect has just declared itself bankrupt?

While being in the euro probably has its downsides, I think if we were to follow McWilliams stance we may as well take a chisel to the east coast of Ireland to detach whatever connection there is to Europe and let us float out in to the Atlantic - and sink!

BTW - I'm sure you've worked this out already - but I'm not an economist either....


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## Brendan Burgess

Philip Lane dismissed it on The Irish Economy back in January.

Brian Lucey sets out the arguments against it here. Patrick Honohan, now the Governor of the Central Bank, doesn't want to leave the Euro either.

I think McWilliams himself contributes to the debate on [broken link removed]





Brendan


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## Chris

pjmn said:


> I think (in the very unlikley event that we unravelled the whole euro project and reverted to the Irish Pound - I presume he's only proposing to go back to decimalisation and not £.s.d.) - that we wouldn't actually need to devalue the currency - because it would be absolutely worthless, what country in their right mind would want to buy a currency of a country that the world perceives to be a basket case, and in effect has just declared itself bankrupt?



The new currency would only be worthless if it wasn't backed by something more tangible than an 'I O U Nothing'.

I agree that leaving the € and devaluing the new punt would have a very severe effect in the short term. But just leaving the €, and then setting up a fresh banking system based on central and fractional reserve banking of a fiat currency will only leave the door wide open for future financial crises.
If the solution is to be to leave the € and then set up the following, then I would fully support it:
1) set up a currency fully backed by gold and 100% redeemable at any time (enforced by the a constitutional amendment)
2) banking to be separated into deposit banking and loan banking, where 100% reserves must be held for demand deposits
3) Interest rates not to be dictated by a central body, but rather by the free market based on supply of and demand for credit

If the above were not to be introduced then I would have more faith in the ECB than an Irish Central Bank in control.


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## jhegarty

Brendan said:


> 5) What happens to mortgage holders?
> I presume that interest rates will rise to around 10%. They are being kept low by the ECB at the moment. Depositors will want some compensation for keeping their savings in a mickey mouse currency.



10% would be optimistic. I could see us getting into a south american style hyper-inflation.

All the mortgages are secured on foreign funds then everyone mortgage effectively goes up 40% overnight.



yankinlk said:


> Why not devalue the euro instead? If the rest of Europe wont allow that, will they really allow one of its member states to go bankrupt?



Never going to happen , the Germans are paranoid about inflation.


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## Duke of Marmalade

This is totally, totally impractable.  

Maybe, just maybe, we could get away with an overnight declaration that all our euro obligations were now in the Irish Punt.  

But the real world is that this would need some advance notice.  Ergo the total withdrawal of all euro funding of Ireland inc. as investors, domestic and foreign, rush for the exits.  This logistical problem of a break from the euro is well documented.  

When DMcW  profers this solution he is so way off the mark.


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## Protocol

Brendan said:


> The point in devaluing is that we just have to admit that we are *bankrupt* and cannot trade our way out of it. By devaluing and reneging on our international debts we can start again. Much like a person filing for *bankruptcy*.
> 
> Brendan


 
While the public finances may be near to "bankruptcy", *the nation is not*.

Indeed, we are fast heading towards a balance of payments surplus, which means our annual income will exceed our annual expenditure, and so we will soon be a net saving nation.

OK, this is after a few years of spending exceeding income, and being a net borrowing nation.

But the country is not bankrupt, although the Govt may be.


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## darag

Obviously this is all completely hypothetical.

But leaving the euro would be possible without defaulting on government debt.

The government could also default on it's debt without leaving the Euro.

I cannot see any positives to doing either, separately or in combination.

For example, I don't see what problem would be solved by the government defaulting on its debt obligations.  The interest payments on the debt are reasonably manageable at the moment.  A few more years of 25-30 billion deficits and the cost of bailing out the banks will change this picture but in the short term the cost of meeting the bond obligations is an insignificant drain on the public purse (certainly less than 5 Billion a year).  So the benefits to the exchequer would be relatively small while the financial and economic effects would be catastrophic.  It's a completely ludicrous idea.

I suppose if Ireland left the Euro and despite much higher interest rates, the new punt lost 80 or 90% of it's value, then this picture would change and default might become attractive.  But I'd argue that at that stage (as an open economy this would translate to 500%-1000% inflation), we'd be facing economic Armageddon ala Zimbabwe and it'd wouldn't really make much  difference what economic policies the government decided on as every person in the country capable of doing any sort of work would be queuing to get onto the boat out of the place.

I don't even know why I'm writing this; the suggestion is absolute  clownfoolery.  It's hard to take DMcW ever seriously when he peddles this sort of sensationalist publicity seeking rubbish.  He has to know it's stupid.  This is unfortunate because I've read other stuff he has written which is reasonably insightful.

Even the claim that there is no historical precedent for economy recovery without a COUNTRY devaluing it's currency is completely bogus.  It only stands up because of the novelty of the Euro.  Different parts of the US for example have (independently of the country as a whole) gone through economic cycles many times.

Devaluing your currency is only a means to an end.  It is inevitable that the levels of pay in Ireland will have to drop significantly but nominally (in Euros) instead of in real terms (in punts).


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## Duke of Marmalade

Protocol said:


> Indeed, we are fast heading towards a balance of payments surplus, which means our annual income will exceed our annual expenditure, and so we will soon be a net saving nation.


 [broken link removed]contradicts your assertion, _Protocol_. It is true that we have a positive balance on visible trade, and have had for some time. But we can see that this is mainly transfer pricing as any surplus goes right back to its foreign owners.

In fact, we know that the private sector is massively in debt to foreigners which shows up in the dependence of the banking system on international interbank support.

So the point is quite the opposite. Even if the Government found some way to alleviate its debt by a devaluation the private sector/banking sector has no such escape valve.

Let's hope all that foreign borrowing has gone into foreign assets and not been blown on mercs and club med.


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## Towger

Another problem with reintroducing the Punt is the large amount of euro cash in the country, and people hording (hard currency) cash with a run on the banks, if the word got out before hand. You would end up with a two tier price system in the shops etc. 

Mind you the only actual economist I have talked to was last year predicting very high inflation and advising me stock up in high end consumer goods to use for bartering. This was long before Mr Hobbs jumped from his 'property investment for the punter' bandwagon on to the 'high inflation' one.


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## Protocol

Duke of Marmalade said:


> [broken link removed]contradicts your assertion, _Protocol_. It is true that we have a positive balance on visible trade, and have had for some time. But we can see that this is mainly transfer pricing as any surplus goes right back to its foreign owners.
> 
> In fact, we know that the private sector is massively in debt to foreigners which shows up in the dependence of the banking system on international interbank support.


 
Correct, the balance of payments is *currently in deficit*, but the deficit is falling fast.

The data is below, with the deficit estimated to fall to under 2bn in 2009 and turn into a surplus during 2010.

[broken link removed]

Year                                            2007     2008    2009    2010
Balance of Payments Current Account (€m) -10,128.0 -9,439.0  -1,692     2,390
Current Account (% of GNP) -6.3 -6.1 -1.2 1.8 ​


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## Finfacts: MH

This is simply bar-stool economics.

Until Iceland's meltdown, it was not uncommon to hear the argument that we would have been better off during the boom with the punt.

The notion of a reckless fiscal policy would have been matched by prudent monetary policy from Dame Street, is risible.

We would of course have countered carry-trade hot money and so on!!

It's not a serious proposal as the downside risks are treated as a politician would rather than considered analytically.

How would a transition work?

The IMF would replace the ECB as lender of last resort; why would control from Washington be better than Frankfurt?

The argument that the economy boomed because of the 1992 devaluation is fallacious.

Have a look at the third chart on this page:

http://www.finfacts.ie/irishfinancenews/article_1016593.shtml

Intel arrived in 1989, Dell 1990, HP a few years later etc. 

The devaluation had nothing to do with their location in Ireland but they supported Ireland joining the EMS and today they would be the key constituency on the issue of exiting.

These are global companies and US firms in Ireland today do not operate like their antecedents at the old freeport in Shannon.

According to the US Dept of Commerce, the Irish economy is more dependent on US FDI than any other country in the world.

The Eurozone will likely have 21 members in the next decade.

Irish indigenous exports are still dependent on the UK market.

Why not get costs under control by reforming the housing market including the land rezoning system; the public sector and ending public subsidies of high costs in the private sector -  e.g hospital consultants fees via high insurance premia; lawyers, consultants etc?

Why not have full public transparency on public spending?

Bloomberg says New Zealand's dairy group Fonterra accounts for about 40% of the global trade in butter, milk powder and cheese and sells products in more than 140 countries.

The Irish industry has relied on intervention and production of higher value products such as cheese is low.

http://www.finfacts.ie/irishfinancenews/article_1017985.shtml

There are no instant solutions but rather than try to chase dreams of creating a European Silicon Valley or nightmares such as quitting the euro, , why not focus on selling across Europe for a change, with the advantage of no exchange risk?


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## onq

Brendan said:


> I would like to see a rational discussion of this issue. I don't want to listen to the ridicule and the attacks on McWilliams.( Feel free to attack his manner in this thread) I don't want to listen to his egotrips - but I do want to hear both sides of the argument.
> 
> Let's discuss the point  and not the man.
> 
> 1) I presume that we could actually leave the euro zone? I think it would be difficult, but if we had to do it, we would.



We surely could and Ireland Inc's credibility would just as surely be gone.
One of the main selling points of our still too-dear economy - an english speaking door directly into Europe - [as opposed to Britain's half-open door] would also go.



> 2) I presume that if we do so, the country as a whole must declare bankruptcy.
> We will have a massive international loans denominated in euros and we will be trying to pay them off from the punt, which will be worth,say 40% less than it is now.


I would have thought that devaluing was a way to recognise and deal with a difficulty, as opposed to declaring bankruptcy, but I am not a commercial banker or legal eagle familiar with such things.
It appears that we will go from being a credible part of Europe, albeit having a difficulty selling uncompetitvely priced goods and services to service a huge loan, to being a discredited ex-EU Member State.
This State will have a lack of credibility for borrowers, and while it will be selling more competitive goods and services initially, it will then see these goods and services become less and less competitive as interest rates rise - there will be no "cheap" finance available and we will over-extend ourselves trying to do it all ourselves.
I well remember the late eighties running into 1992, when the commercial lending rate was 22% IIRC.



> 3) If the country goes, the banks go as there is no point in having a bankrupt guarantor.


I'm afraid I'm still not following this Ireland Inc. bankruptcy argument.
The time for letting the banks go is long gone, with money poured down their respective drains which we will now never see again.
As noted elsewhere, as far as I'm concerned the Banks are probably gone anyway due to their Derivatives Portfolios.



> 4) What happens all our deposits in Irish banks which are currently denominated in euro?
> I presume that they become punts on a one for one basis. So they effectively lose 40% of their value.


Surely deposits [or loans in accounts] would become converted at the stated exchange rate.
This gives an artificial boost to each depositor and a kick in the teeth to every borrower.
Given the assumption that more people owe than have money, the act of devaluation will cripple us unless its done the way you suggest.



> 5) What happens to mortgage holders?
> I presume that interest rates will rise to around 10%. They are being kept low by the ECB at the moment. Depositors will want some compensation for keeping their savings in a mickey mouse currency.


I foresee a return to the 22% Commercial rates in 1992.
We have a poor record of managing our own financies prior to joining the EU.
Foreign investment banks will lend to our banks and we will have to self-fund all our own loans.

To summarise:

In my layman's opinion, David Mc Williams is findamentally wrong is he is seriously suggesting that devaluation and leaving Europe will benefit us.

Devaluation in an of itself won't deal with this issue.
Our loans are in Euros, our guarantees are in Euros, there is little to be gained monetarily.
Devaluation will momentarily make our goods more competitive in relation to competition from other EU economies.
But this isn't the seventies - its not even the nineties- and the EU is moving towards more globalization and less trade restrictions so we are exposed to less costly comparison goods and services than ever before.

Deflation, the 20th Century  Nation-State fallback, simply will not work in the 21st Globalized Century world we now live in.
It may be an effect of McWilliams time spent in Nation-State teaching economic courses and economies that he doesn't see this.
This is not a slap for McWilliams, it is a fact and it is important that we understand the depths of his short signtedness.
McWilliams spends his time sauntering around Chinese airports made easily accessible through the benefits of price reduction through Globalization.
Yet he fails to see how Globalization, being brought into direct competition with China and India, will prevent his Nation State devaluation from working.

Our goods and services are overpriced in relation to places like China and India.
We won't become competitive enough to win huge market share from them through devaluation.
We don't even compete in some of he markets they excel in.

Devaluation only worked when our main trading neighbours like America, Europe and Britain stayed high and we went low.
Our two other trading partners are already devaluing ahead of us - so our advantage will be nil - and we're still tied to Europe
Leaving Europe is a non-starter, because the points raised above and my responses only touch on the real problem, implied by Brendan.

Our credibility would be so shot that all our loans would be called in at once - we would be bankrupted.
No form of rescue investment would be available to keep us going to avail of any meagre benefits of such a move.
Perhaps this was what Brendan meant when he referred to Bankruptcy - sorry, I'm only seeing this now as I work through this stuff.
Of course there might be the typical "rescue" investment from certain quarters buying Ireland Inc for a snip which might not be to our benefit.

This is my shortlist of proposals, and none involve Ireland individually devaluing and leaving Europe.


We need to focus on value-added excellence in all things we do.
We need to focus on investment in infrastructure to free up finances and get some money moving in the economy again.
We need to invest in education and promote inventiveness, with returns to the state in terms of work done here pre-or post graduation.
We need think tanks to focus our indigenous industry on emerging lucrative markets which wave we can profitably surf until China and India figure out a way to give 80% of the quality for 40% of the price.
We need a new commercial bank to service this new economic activity, not an old bank burdened down with debt.
We need Irish people and companies to pay their debts to other Irish people and companies, even if its only staged payment of historical debts so we can get this economy mving again.
We need to use our connections to Europe to maintain our credibility, support our indebtedness and leverage our influence where we can to develop new ideas and markets we can benefit from.
 There may be an argument for the Euro devaluing in relation to the American, British, Chinese and Indian currencies, but that's for another thread.
Consideration of such a move will involve the double-edged sword of Oil bcoming priced in Euros, driving up demand for the currency.
The real question for economists is how to deal with the growing Pacific Rim economies and the potential collapse of America.

FWIW

 ONQ.


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## Purple

I have nothing to add, just to say that this sort of thread is the reason that AAM is so good.


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## ibaraki

A few comments:

1. There were a few months in late 2008/early 2009 where Ireland could only borrow money from the ECB. Would we not have went bankrupt if the ECB decided not to lend us the cash at that time?

2. As far as I'm aware (correct me if I'm wrong), no country with the euro has had to be bailed out by the IMF but those EU members outside the euro club (e.g. Latvia, Hungary) have got assistance from the IMF. 

3. The long term effect of all the current government borrowing is if interests rates move up drastically. Argentina had borrowings of ~110 billion and they defaulted when interests rates hit ~16-18%. By the way, the international community is now lending again to Argentina - their paying a good interest rate!

4. Before Argentina broke the link with the US dollar, the peso was trading at 1:1. After they broke this link (their devaluation), within a few weeks they needed three pesos to purchase one US dollar. In the 90's most homeowners took out morgages in dollars as the interest rate was a percent or two lower that borrowing in the peso. After devaluation, they still had to pay their morgage in dollars!

The way I see it, if there is a sustained recovery in the global economy, we can get out of the mess we're in but it's still going to hurt. On the otherhand, if the global recovery is very very slow, we may need to default and leave the euro. As DMcW says, it may be unthinkable today to leave the euro, but in a few years time it could become a necessity. The argenine economy hit the rocks in ~'98, they borrowed heaps of money and made big cuts to public spending and it was in ~2002 when they finally defaulted on their international debt and devalued their currency.


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## Chris

Finfacts: MH said:


> The IMF would replace the ECB as lender of last resort; why would control from Washington be better than Frankfurt?



If we didn't have a "lender of last resort" in form of a central bank or government, we wouldn't have the problems we are seeing now. Banks would have been too scared of actually facing bankruptcy.
If Ireland left the € and then wound down the Irish Central Bank's powers to set interest rates, then we wouldn't need a "lender of last resport". The idea of needing a lender of last resort only came into existence with the total abandonment of 100% reserve banking.


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## Shawady

Is there any possibility of the control of interest rates to be temporarly transfered back to the Irish Central Bank for a period of 3-5 years?

If the government could give a commitment to keep interest rates low, it would make it easier for people to accept a lower standard of living.
If things improve in the economy, rates could be adjusted to ECB levels (assuming they have risen in the meantime).


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## Chris

Shawady said:


> Is there any possibility of the control of interest rates to be temporarly transfered back to the Irish Central Bank for a period of 3-5 years?
> 
> If the government could give a commitment to keep interest rates low, it would make it easier for people to accept a lower standard of living.
> If things improve in the economy, rates could be adjusted to ECB levels (assuming they have risen in the meantime).



It is too low interest rates and too much borrowing that created this mess. How is more of the same going to possibly solve it?


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## Shawady

Chris said:


> It is too low interest rates and too much borrowing that created this mess. How is more of the same going to possibly solve it?


 
Yes, but if the government could keep rates low it would give it more scope to cut salaries in the civil service or introduce a property, for example. Therefore wages would come down but if monthly mortgages stayed low in the medium term it would help ease the pain. When thing improve in a few years they can increase the rate.


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## Protocol

ibaraki said:


> A few comments:
> 
> 1. There were a few months in late 2008/early 2009 where Ireland could only borrow money from the ECB. Would we not have went bankrupt if the ECB decided not to lend us the cash at that time?


 
It is not allowed for the ECB to lend directly to Govts.  This has not, and does not happen.

The ECB has not lent the Irish Govt any money, nor will they.

On a related note, we are not borrowing from the ECB for NAMA.

It's comm banks that borrow from the ECB.


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## Protocol

ibaraki said:


> 4. Before Argentina broke the link with the US dollar, the peso was trading at 1:1. After they broke this link (their devaluation), within a few weeks they needed three pesos to purchase one US dollar. In the 90's most homeowners took out morgages in dollars as the interest rate was a percent or two lower that borrowing in the peso. After devaluation, they still had to pay their morgage in dollars!


 

That's one of the big problems with a devaluation, esp as we have a lot of foreign liabilities.


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## Chris

Shawady said:


> Yes, but if the government could keep rates low it would give it more scope to cut salaries in the civil service or introduce a property, for example. Therefore wages would come down but if monthly mortgages stayed low in the medium term it would help ease the pain. When thing improve in a few years they can increase the rate.



This does not solve the problem, but fuel it. It would be like telling a recovering drug addict to take drugs once in a while to 'ease the pain'. The bigger problem is that it is impossible to objectively quantify what an 'improved' situation would be that should trigger higher rates.

Reducing the pay of the entire public sector is very unfair as it affects the absolutely essential parts of the public service (guards, military, health care and education). The only fair way would be to get rid of all government agencies, committees, back office administrative offices etc. and leave the rest unaffected.


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## Duke of Marmalade

Protocol said:


> Correct, the balance of payments is *currently in deficit*, but the deficit is falling fast.
> 
> The data is below, with the deficit estimated to fall to under 2bn in 2009 and turn into a surplus during 2010.
> 
> [broken link removed]


I stand corrected, _Protocol_. But this forecast of the ESRI is really hard to believe. By definition, the ultimate test of an exchange rate is that it achieves the correct BoP. By these projections the exchange rate looks just about right. But I do not believe that - not after a 40% appreciation against sterling. The ESRI is forecasting a huge fall in imports in 2010 compared to exports. I would love to see the breakdown of that for our trade with the UK. I suppose it could be positive if the big increase in the volume of our imports from there (witness border queues) does not counter the big drop in the prices, but it would also need our exports to hold up even though they are 40% dearer.

Why does the government not give much more prominence to this very positive aspect of our macro economic position?

Why is everybody saying we have a problem with competitiveness?


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## Protocol

Duke of Marmalade said:


> I stand corrected, _Protocol_. But this forecast of the ESRI is really hard to believe. By definition, the ultimate test of an exchange rate is that it achieves the correct BoP. By these projections the exchange rate looks just about right. But I do not believe that - not after a 40% appreciation against sterling. The ESRI is forecasting a huge fall in imports in 2010 compared to exports. I would love to see the breakdown of that for our trade with the UK. I suppose it could be positive if the big increase in the volume of our imports from there (witness border queues) does not counter the big drop in the prices, but it would also need our exports to hold up even though they are 40% dearer.
> 
> *Yes, they are predicting big increases in our trade balance, driven by large falls in imports.*
> 
> *I suppose new cars are a big component of this?*
> 
> Why does the government not give much more prominence to this very positive aspect of our macro economic position?
> 
> *The budget balance gets much more coverage than the balance of payments.  This is partly reasonable, as the BoP is less important inside EMU.*
> 
> Why is everybody saying we have a problem with competitiveness?
> 
> *vERY good point.  I have been saying this all along.  Our exports are holding up, our industrial production is resilient.*
> 
> *Our problem does not seem to be pay rates in industry causing a lack of competitiveness in industry, it seems to be excessive non traded costs, like comm rents, insurance, energy, etc.*


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## Latrade

It has been covered in other posts but the argument of leaving the Euro and devaluing the punt is a typical Macro Economist outlook. 

The thing we have to consider is that around 60% of GDP comes from 50 or so companies in the country, all foriegn owned. They can't have been more vocal in their position on why they are still in Ireland and though the cost is a burden, the position of Ireland as a gateway to the European market is significant. Will changing currency affect this? Well even if it only means a few relocate, that's a massive hit. 

Both Iceland and Argentina aren't really case studies on the positive, but also aren't case studies because they weren't so dependent on foriegn investment. Also, Argentina's downfall was independent of a huge Worldwide issue. Whereas for us we're competing with every one else, letting the country slip even further back may present some semblence of a short-term fix, but in the long term we'll be so far behind we'll never really recover. Ok we'll never be where we would have been in 10 years, but we can still be comparable with everyone else.

The best example is the UK. As far as our media are concerned the UK's strategy is something of a model we should have followed, but this is nonsense, all the UK has done is deferred the pain that has to be taken. The only area to really benefit from reduced VAT is the North mainly because it is us who've utilised the cut, the rest if the retail sector in the UK is still perilous. While it has also affected us in terms of exports, it isn't sustainable, they're still importing and it hasn't really boosted their own manufacturing. And depending on what urgent action the UK takes in the next budget (serious cuts on public spending and increased taxes and more than we had and have to take because they left it so long) it may actually result in inflation in the UK.


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## Sunny

Isn't the main reason that our exports have stood up so well is the growth in the pharmaceutical industry which are driven by US multinationals. This growth offset the weaknesses in other traditional export sectors such as food, computers etc. So the competiviness issue is still relevant. It just gets hidden if you look at the headline figure.


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## onq

Protocol said:


> Correct, the balance of payments is *currently in deficit*, but the deficit is falling fast.
> 
> The data is below, with the deficit estimated to fall to under 2bn in 2009 and turn into a surplus during 2010.
> 
> [broken link removed]
> <snip>



Protocol, I'm a layperson when reading a country's accounts but I note the following:

Balance of Payments Current Account (€m)
2007:-10,128.0
2008:-9,439.0
2009:-1,692
2010:+2,390 (my "+", just for clarity)

This suggests that when "times were good" we were net importers.
When the recession hit, we flipped, massively stopped importing.
The figures point to the 2008-2009 interface as the time of the flip.
Since then we've continued this trend, which is ongoing at a slower rate.

In other words the issue of the positive integer, while it marks a point on the road, shouldn't be taken as suggesting the journey has changed direction, or that its the same journey we went on circa ten years ago when the figures were last like this.

In terms of an indicator of the economy, we'd need to go back to when our BoT was similar, which from a vague memory I have in my head from some economic programme was in 2000-2002.
However while the figures then and now may look superficially similar, the above figures in my layperson's opinion, do not say the same thing at all as the indicators from a decade ago.
A decade ago was when the latest bubble in the economy started to rise and when we were competitively priced in the world. It showed a genuine level of competitiveness and selling abroad.
The current ESRI figures just show that we have stopped spending on imported goods, as opposed to our exports exceeding our imports for all the right reasons.

I think that the current positive integer figure should be set it in its current context - a general retraction in buying foreign goods and services - and seeing the different context of the previous time when - on the surface of things - similar figures might have existed.
Things were different a decade ago, both in terms of what the actual figures mean and the journey the country has gone through since then.
Even were all things the same in terms of external competitiveness, we wouldn't be facing onto a building boom, because all the houses are built now and the incentives are going away.

While the positive integer seems to be an indicator that the balance of payments has turned, that credit is coming back under control in Ireland, that we are no longer splurging on foreign products, I think its pointing to something else - a continuation of the current corrective trend

This trend itself might not be the result of positive indicators, it might just be a reflection of the lack of available credit generally, or the cost of credit.
I think it points [in part] to the failure of the car industry, which is a constant source of foreign spending, and this points directly to Bank policy on personal loans, not to prudent fiscal policy by our population.

So by all means welcome any improvement in the figures, but let's analyse them to see what the might mean, as opposed to cheering the positive integer.
I'm not trying to be a wet blanket or in any way critical of you Protocol - because I thought exactly the same thing when I read it first.

But looking down the rest of the figures, instead of a raft of positive indicators, I saw rising government debt, employment and the ECB rate.
I saw all the other indicators still in free-fall, although the rate of fall had lessened, i.e. the curve was flattening out in 2010.

The positive integer therefore seems to be a sign of the lack of available credit and an economy in crisis correcting itself.
As I said, I'm a layperson on macro-economics, but when something like this jumps out at you it needs to be said.



ONQ.


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## Shawady

As a novice in this area, Is there a flaw in having a common interest rate for a large group of countries?
The ECB set interest rates low at the start of the decade which helped fuel the proprty bubble. Now it is possible in a year or two, if the bigger eurozone countries recover quicker than us, interest rates will rise and this would hamper any recovery here. I'm just wondering if the interest rate set by the ECB may not actually suit every individual country.


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## Protocol

Sunny said:


> Isn't the main reason that our exports have stood up so well is the growth in the pharmaceutical industry which are driven by US multinationals. This growth offset the weaknesses in other traditional export sectors such as food, computers etc. So the competiviness issue is still relevant. It just gets hidden if you look at the headline figure.


 
Yes, fair point.  I did make too much of a generalisation.


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## Protocol

ONQ,

yes, the coming surplus on the BoP is just one small positive item among many negative aspects of the macroeconomy.

Also, I suppose it is a positive symptom of a negative or bad situation.


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## Chris

Shawady said:


> As a novice in this area, Is there a flaw in having a common interest rate for a large group of countries?
> The ECB set interest rates low at the start of the decade which helped fuel the proprty bubble. Now it is possible in a year or two, if the bigger eurozone countries recover quicker than us, interest rates will rise and this would hamper any recovery here. I'm just wondering if the interest rate set by the ECB may not actually suit every individual country.



This is a perfectly correct point. It is impossible for one central body to accurately quantify the needs/wants of any large body of people. Even if the central bank were only decing the rates for one tiny country, this is an impossible feat to get right all the time.
My point being, that interest rates should not be dictated by a central body but by the market in the form of supply of and demand for credit.
Here is an example of how it should work:
1) increased demand for property results in increased demand for credit and an increase in property prices
2) the increased demand for credit in turn would result in increased cost of credit 
3) at some point the increased cost of credit will lead to a decreased demand for credit 
4) resulting in a decreased demand for proporty and lower property prices
Ultimately the market forces of supply and demand dictate what market aprticipants accept

Here is how it currently works with central banks setting interest rates:
1) increased demand for propoerty results in increased demand for credit
2) due to some political pressures and lobbying central banks keep rates low
3) this exacerbates demand for credit and prices rise even more
4) eventually a self perpetuating bubble mania is created


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## Shawady

Interesting point Chris. So ideally our interest rates should have been increased in the early 2000's to keep house prices down and reduce the demand for higher wages.
Would lower interest rates for the next couple of years be a good thing now though to encourage people to spend? There seems to be some evidence that people are saving more.


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## Latrade

Shawady said:


> Interesting point Chris. So ideally our interest rates should have been increased in the early 2000's to keep house prices down and reduce the demand for higher wages.
> Would lower interest rates for the next couple of years be a good thing now though to encourage people to spend? There seems to be some evidence that people are saving more.


 
That was a major issue for us (and other states), that because of problems in Germany and France, rates were kept low and it facilitated the property boom. 

Now I'll admit I haven't really done a detailed check, but did McWilliams call for us to leave the Euro Zone when we were benefitting from it so much? I don't mean point out the pitfalls, but actually state we should withdraw?

However, one positve is that because other States found themselves in a similar situation, I don't see the ECB being as gung ho with looking after one or two States and basing it on their finances. I'm probably way too optimistic, but I think a lot has been learned from the boom years at a centralised level.

The other issue is to have interest rates set locally would have to mean the complete end of the Euro. Not only won't this happen, but it can't happen. Again we rely so much on being the gateway to the European Market, any disruption to that (i.e. going back to individual currencies) will be far more devistating than a controlled rise in interest rates (which is inevitable).


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## Chris

Shawady said:


> Interesting point Chris. So ideally our interest rates should have been increased in the early 2000's to keep house prices down and reduce the demand for higher wages.


Supply and demand on the free market would have decided the rate, it shouldn't be a conscious decision by a few people.
It is impossible, even in hind-sight to say when a free market would have reacted and in what way. If interest rates had risen in let's say 2000, due to increased demand, it would still have been possible for demand for credit to rise (as long as consumers were happy with it), resulting in higher propoerty prices and costs of credit. The point is that at some stage, and nobody knows where that stage would have been, market participants' demand for credit would have decreased. People will only pay as much as they choose to; if people are OK with higher credit costs then so be it.



Shawady said:


> Would lower interest rates for the next couple of years be a good thing now though to encourage people to spend? There seems to be some evidence that people are saving more.


I'll reiterate a point I made before: credit based consumption is what caused this mess, building up savings and producing exportable goods will get us out of it. The reason people are not spending is because prices are too high. Keeping the prices high by making credit more easily available will cost us dearly in the long run. Essentially it amounts to keeping prices artificially high.
People will start spending again when they believe that the price is right. Again, it is impossible to say when that will be, maybe we need prices (for all goods/services) to go down another 10% maybe another 40%; at some stage though, consumers will enter the market again, and hopefully they will have saved the money they will spend.




Latrade said:


> However, one positve is that because other States found themselves in a similar situation, I don't see the ECB being as gung ho with looking after one or two States and basing it on their finances. I'm probably way too optimistic, but I think a lot has been learned from the boom years at a centralised level.


It wasn't a case of the ECB "looking after one or two States", the problem is that two states, Germany and France, make up such a huge proportion of the € economy. I don't have the exact figures, but it ultimately had the effect of reducing the €-zone wide inflation rate to a level that granted low interest rates. All the ECB did was try to keep the €-zone inflation rate as close to 2%, which is what it was set up to do. I'm no currency or banking expert, but it should have been clear to the financial world that you can have very large discrepancies in inflation rates between countries (within the €-zone), and that you cannot keep all of them adequately happy. However, politicians would lead us to believe that this is possible.




Latrade said:


> The other issue is to have interest rates set locally would have to mean the complete end of the Euro. Not only won't this happen, but it can't happen. Again we rely so much on being the gateway to the European Market, any disruption to that (i.e. going back to individual currencies) will be far more devistating than a controlled rise in interest rates (which is inevitable).


You give no reason for why "it can't happen". Just two years ago people were saying that a lot of things "just can't happen": real estate collapse, construction collapse, credit collapse, banking collapse, country collapse.
All we kept hearing was:
1) "there will be a soft landing"
2) when this didn't happen it was "the fundamentals of the economy are sound"
3) then we were suddenly officially in a recession which prompted "we're the first country officially in a recession, which means that we will be the first country out of the recession"
4) this was also proven wrong (due to construction and banking system collapse) and things have now got worse

As someone posted earlier on this thread, we may find our selves leaving the € due to it being the ONLY solution left. Or it could happen that the € itself collapses. I admit that the likelyhood is slim, but pretty much everything can happen!


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## Latrade

Chris said:


> You give no reason for why "it can't happen". Just two years ago people were saying that a lot of things "just can't happen": real estate collapse, construction collapse, credit collapse, banking collapse, country collapse.
> All we kept hearing was:
> 1) "there will be a soft landing"
> 2) when this didn't happen it was "the fundamentals of the economy are sound"
> 3) then we were suddenly officially in a recession which prompted "we're the first country officially in a recession, which means that we will be the first country out of the recession"
> 4) this was also proven wrong (due to construction and banking system collapse) and things have now got worse
> 
> As someone posted earlier on this thread, we may find our selves leaving the € due to it being the ONLY solution left. Or it could happen that the € itself collapses. I admit that the likelyhood is slim, but pretty much everything can happen!


 
The ending of the Euro as a currency?

The obvious answer as to why it can't happen is because of how we've (across europe) attracted the foreign investment on the foot of a common currency. But that begs the question about the UK and others that don't. Well, they're kind of tollerated because they're a minority and even then the real trade is still done in Euro.

The Euro has allowed the EU to group together as a market and place for investment, the common currency has been a huge and signficant selling point. The global competition is too large for the EU to stand a chance of competing with all the hassle that goes with separate currencies and trade.

That's why it won't and can't happen.

I honestly think we are a long, long way off even considering leaving the Euro and devaluing currency. But hey, yeah, never say never. But be prepared for the loss of the likes of Pharmachem from these shores. Is it worth gambling 60% of GDP on the say so of one economist who got lucky and got one of his guesses right?


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## Duke of Marmalade

_Chris_, the problem with the argument that the market will find the correct interest rates is that we are in a zone of 300M people. Whose interest rates will the market find?  In fact the interest rates were perfectly correct for Germans and we can assume that German rates would have been at that level with or without ECB intervention.

Now, interest rates in Ireland are indeed set by the market but they cannot differ very much from German rates because we are in a common currency zone.  A lot of our borrowing was sourced by international interbank lending and no matter how rapacious the Irish appetite for credit we were never going to make a significant dent in the overall cost of euro credit.


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## Chris

Latrade said:


> The Euro has allowed the EU to group together as a market and place for investment, the common currency has been a huge and signficant selling point. The global competition is too large for the EU to stand a chance of competing with all the hassle that goes with separate currencies and trade.
> 
> That's why it won't and can't happen.


I agree that there would be a hassle involved in trading in separate currencies, but this was not an issue before the € and I don't believe that the introduction of the € increased trade between Eurpoe and the rest of the world.
The best productivity based boom times were seen after WWII when every country had its own currency. In mordern banking systems currency exchange is not a problem, the only problem is fluctuating exchange rates within Europe; the rest of the worl has to convert to/from € anyway.



Latrade said:


> I honestly think we are a long, long way off even considering leaving the Euro and devaluing currency. But hey, yeah, never say never. But be prepared for the loss of the likes of Pharmachem from these shores. Is it worth gambling 60% of GDP on the say so of one economist who got lucky and got one of his guesses right?


A country that devalues its currency is not less attractive to foreign investment per se. While the assets that foreign companies would already own in that country would devalue, their production costs and costs of acquiring new assets would also go down, allowing them to achieve higher gross profits. It would be certainly have a very short-term impact on their business operations, but they would also immediately see the profit potential of paying their staff in a devalued currency.
The more immediate problem would be to domestic producers of goods that require the import of natural resources that cannot be produced in Ireland.




Duke of Marmalade said:


> _Chris_, the problem with the argument that the market will find the correct interest rates is that we are in a zone of 300M people. Whose interest rates will the market find?  In fact the interest rates were perfectly correct for Germans and we can assume that German rates would have been at that level with or without ECB intervention.
> 
> Now, interest rates in Ireland are indeed set by the market but they cannot differ very much from German rates because we are in a common currency zone.  A lot of our borrowing was sourced by international interbank lending and no matter how rapacious the Irish appetite for credit we were never going to make a significant dent in the overall cost of euro credit.



I agree, Irish property buyers wouldn't have made a dent in the €-Zone wide credit market on their own. However, at the same time as the Irish proporty bubble was expanding, borrowing was drastically expanding in France and Germany as well; not private citenzens borrowing, but large multi-national corporations. This should have resulted in higher interest rates as overall the supply for credit was expanding throughout the €-Zone.
This brings me to a point I made in a previous post, just changing from a central banking system to a free banking system is not enough. At the same time the money supply has to be fixed and based on 100% backing of some sort. In this case even a small country would have a noteable, albeit small, impact on credit demand of a limitied commodity, as the money supply is fixed and cannot be increased.
Money, in most ways is just like any other commodity. However, it has the very unique property that it is not used up by consumption, and therefore any increase in the supply will always have a negative impact on the long-term supply-demand balance.
Your post highlights very well the danger that a central banking system poses to small economies like Ireland. As mentioned before, Ireland leaving the € and setting up another central fractional reserve banking system of a fiat currency is just like telling a heroin addict to switch to cocaine to solve his addiction problem.


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## Duke of Marmalade

Protocol said:


> While the public finances may be near to "bankruptcy", *the nation is not*.


I really can't figure this one no matter how I try. _Protocol_ is correctly quoting from the ESRI forecast that we will be in BoP surplus in 2010. But this makes a lie of many of the soundbites:

1. _We are living beyond our means_. No, not if BoP is in surplus, and remember this is without the massive EU transfers which we needed in the past.

2. _We must accept a lower standard of living._ Again, no, not if we are paying our way internationally.

3. _We are borrowing €400M a week_. Emphatically no. As a nation we are net acquirers of international financial assets, that's what a BoP current account surplus means. The government is borrowing massively but clearly that is from its own citizens, or if it is from foreigners it is being more than compensated by Irish citizens investing/lending abroad.

4. _We have crippling international indebtedness_. We undoubtedly have a massive personal sector/banking sector international indebtedness but if the BoP is in surplus we are finding no difficulty servicing it.

What am I missing here? I can only think that maybe the BoP is one massive illusion. This could happen if Irish domiciled multi-nationals are accumulating financial assets in Ireland - and Irish citizens are themselves not in surplus.  The day of reckoning would then come when these funds are repatriated.

Some economist (not DMcW) please help.


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## flattea2

I have argued before for taking back the punt and making our own decisions, however that only works in a rational political system. Unfortunately our system is largely self interested so tends to make decisions which are politically popular. By having the Euro we force ourselves to make hard decisions (ie the wage cuts coming to the public sector, and social welfare cuts).

The issue is that in good times we overspend in every area rather than saving for a rainy day. The government buys the next election and destroys the economy long term. It is easy now though to say take back the punt and feic Europe. Wage cuts now are the natural econonic decision to take as wages have been hyper-inflated for a good 7-8 years.

We have an corrupt political system though, that is the main problem. And remember, most of the FDI in Ireland is because of our membership of the Euro. It is easy and convenient now to say lets ditch the Euro.


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## Protocol

Duke of Marmalade said:


> I really can't figure this one no matter how I try. _Protocol_ is correctly quoting from the ESRI forecast that we will be in BoP surplus in 2010. But this makes a lie of many of the soundbites:
> 
> 1. _We are living beyond our means_. No, not if BoP is in surplus, and remember this is without the massive EU transfers which we needed in the past.
> 
> *The BoP may be in surplus during 2010, meaning that the GDP income of the nation exceeds the expenditure on consumption, investment goods and govt purchases (C + I + G).*
> 
> *This means that as a nation we are a net saver, running a small external surplus.*
> 
> *However, we may still have foreign liabilities greater than our foreign assets.*
> 
> 2. _We must accept a lower standard of living._ Again, no, not if we are paying our way internationally.
> 
> 3. _We are borrowing €400M a week_. Emphatically no. As a nation we are net acquirers of international financial assets, that's what a BoP current account surplus means. The government is borrowing massively but clearly that is from its own citizens, or if it is from foreigners it is being more than compensated by Irish citizens investing/lending abroad.
> 
> *Correct.*
> 
> 4. _We have crippling international indebtedness_. We undoubtedly have a massive personal sector/banking sector international indebtedness but if the BoP is in surplus we are finding no difficulty servicing it.
> 
> *I'm not very confident talking about this, but yes, the banking sector has huge foreign liabilities.  I suppose you are right in that the banks seem to be able to service these debts.*
> 
> *But won't the huge domestic bad debts put the banks under pressure? Isn't that where NAMA comes in?  The banks will swap loans for NAMA bonds, while trying to service foreign liabilities?*
> 
> 
> What am I missing here? I can only think that maybe the BoP is one massive illusion. This could happen if Irish domiciled multi-nationals are accumulating financial assets in Ireland - and Irish citizens are themselves not in surplus. The day of reckoning would then come when these funds are repatriated.
> 
> *I don't know.  It is so complex.*
> 
> Some economist (not DMcW) please help.


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## Protocol

Maybe these CSO documents will help to explain things.

This is our international investment position as of the end of 2008:

[broken link removed]


This is our external debt:

[broken link removed]


Both taken from here: [broken link removed]


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## Duke of Marmalade

Thanks _Protocol_. That's an awful lota figures.  But when I see _Net Errors and Ommissions_ of €8Bn in a quarter and when one considers the enormous impact of the IFSC, it is really difficult to assess the true underlying position.

There was a time that the BoP meant everything.  I can only assume that with the silence surrounding this apparently good news story, the BoP is no longer as relevant as it was.


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## FAUGH45568

Think like a company..

Nama --- Paying this back with revenues falling, unemployment rising, property price falling...
Budget Cuts-- need to see follow through not promises on Cuts.. If we continue to tax our way out of this as well, we will grind lower.
Still Uncompetitive---No matter what way you look at it we Irish are too expensive, however high unemployment rates will sort this out..
International--- Dubai incident should be a warning to anyone that the Credit Crisis is far from over, also a few indicators flashed to let us know how we are still viewed in the international community...Make no mistakes about it we are not viewed well! We talk the talk but we do not walk the Walk.. 

We are continuing down a slippery sloep and imho that slope is getting steeper..

nama, banks, guarantee our debt liability will IMHO cause us to default.. This wont happen over night but just like Dubai we will wake up one morning and we will be asking ourselves what the hell happened.. Dubai is a pebble in the Ocean.. dont wait for the Nuclear Bomb..


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## Towger

FAUGH45568 said:


> dont wait for the Nuclear Bomb..


y
So what is the Nuke? Rising interest rates along with a lack of action by the goverment etc, or Hyperinflation which should in the long run solve out debt problems ?


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## kerryjo

Brendan said:


> I listened to David McWilliams at the Irish Skeptics last night. He ego-tripped for around an hour on the interesting people he met and corrected and the funny incidents and how right he was and how unpopular he now is for what he said about Miriam O'Callaghan.  He spent around 5 minutes of the total time making the following two points.
> 
> 1) There are three stages in the "system's" reaction to visionaries like himself:
> 
> 
> Ridiculing of the idea
> Aggressive attacks on the idea
> Adopting it as conventional thinking
> 2) No other country in the same mess we are in has got out of it, except by devaluing their currency. We have to devalue our currency.
> 
> Devaluing the currency forces a reduction in salaries on all of us and devalues our expectations. The alternative is social chaos as the government tries to slowly "grind" a 20% pay cut on us all.
> 
> Unfortunately, that was as far as he went.
> 
> Listening to him, it was quite clear that we must devalue our currency. The people who run the country and their economic advisors have no idea what they are doing. Argentina refused to devalue, and then after 4 years, they devalued and started booming again.
> 
> No other economist in Ireland worth their salt, disagrees with him. Or maybe, all the other economists know this.
> 
> I spoke from the floor along the following lines:
> His argument seemed coherent to me, but I am not an economist
> I would like to hear the other side of the argument.
> I would like to hear the point of view of Alan Ahern and Patrick Honohan. I asked if he respected them and he said that they did.
> 
> His response was that his record shows that he has been right all along, so by implication, he is correct now as well.
> 
> Another questioner said that devluation was a good idea, but it would never be agreed as none of the three big parties supported it. Mc Williams correctly countered that none of the big parties supported free trade until Ken Whitaker proposed it. And eventually they agreed.
> 
> Another questioner asked what the downsides were. Mc Williams replied that there would be some pain, but not nearly as much pain as we will experience doing it the slow way.



No Way, Jose. Being part of Europe allows companies economic stability to provide me with employment and allows innovative companies abroad to compete for my business. Leaving the Euro would be a step back to DeValera Economics.


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## lostbiker

Guys, 
Ireland leaving the Euro will not happen overnight and luckily for you and thanks to the recent example "Greece" the EU has learned a lesson, but didn't find a solution!
The question however is: what is Ireland's contribution to the EU economy? Is there any real production of goods of any kind (except silicon;-). 
All countries in EU have similar problems - they either do not produce anything physical at all 'cause cost effectiveness or produce "something" at high risk (i.e. electronics or cars).
What is nowadays really "Made in Ireland" with significant contribution to the countries income?
What is the plan going forward - how to make Ireland more attractive for further development considering the EU competition?


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