# We are living through an economic sweet spot



## cremeegg (6 Nov 2017)

Unemployment is low and falling,

interest rates are on the floor,

Average incomes at their highest ever in the country and Irish incomes are higher relative to other countries than ever before.

GDP growth is among the highest in Europe.

Ireland today really is in an economic sweet spot.

This is even better than the Goldilocks scenario, growth hot enough to reduce unemployment but so hot as to stoke inflation. We actually have a superGoldilocks situation, growth is fast enough that unemployment is falling like a stone, while inflation is almost non existent due to our membership of the Euro.

Long may it continue.


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## Firefly (6 Nov 2017)

I agree. Although a lot of people are giving out, I think we will look back on this period quite fondly. The only fly in the ointment is obviously the national debt, which has been ballooned to 200bn mainly as a result of spending more than we have earned since 2008 and capitalising the banks (20% of the national debt).

If our national debt was lower we would be on the hock. Unfortunately, the private economy is doing well but being pulled back by the need to finance an ever-expensive government


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## Brendan Burgess (6 Nov 2017)

Hi cremeegg

To add to that, we have artificially high Corporation Tax receipts from foreign multinationals. I don't think that they are sustainable. 

I wouldn't regard the national debt as a "fly in the ointment". It's actually a massive sword hanging over us.  When interest rates rise, we will be in deep, deep trouble.

Brendan


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## noproblem (6 Nov 2017)

When you say, "average incomes are at their highest ever in the country" you may indeed be correct. However me thinks this may be very misleading because the very, very, high incomes earned by the few make the average amounts look and sound good when in fact a massive amount of people are on very low incomes indeed. As Brendan says, when interest rates rise this scenario will hit the fan in a big, big, way. Personally and I know i'm in the minority, I feel this is happening already but i'd imagine Xmas and all its crazy spending will once again camouflage this, but not for long.


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## cremeegg (6 Nov 2017)

Brendan Burgess said:


> we have artificially high Corporation Tax receipts from foreign multinationals. I don't think that they are sustainable.



You may well be right, however this is something that may cause the present sweet spot to come to an end. It does not mean that at present things are going very well in the Irish economy.



Brendan Burgess said:


> I wouldn't regard the national debt as a "fly in the ointment". It's actually a massive sword hanging over us.  When interest rates rise, we will be in deep, deep trouble.



This is again a threat to the future and does not negate the present success.


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## cremeegg (6 Nov 2017)

dub_nerd said:


> Unfortunately, like Goldilocks this is a fairytale. It is one of the most basic tenets of macroeconomics that growth and inflation go together. If we are not seeing inflation we should be asking pointed questions about _why not_, not marveling at ourselves having arrived in a magic kingdom



Perhaps in terms of preparing for the future we should be worrying about, the sustainability of the tax base, the size of the national debt or the reasons behind the lack of inflation. But none of these things mean that we are not living through a time of extraordinary success in the economy.


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## galway_blow_in (6 Nov 2017)

noproblem said:


> When you say, "average incomes are at their highest ever in the country" you may indeed be correct. However me thinks this may be very misleading because the very, very, high incomes earned by the few make the average amounts look and sound good when in fact a massive amount of people are on very low incomes indeed. As Brendan says, when interest rates rise this scenario will hit the fan in a big, big, way. Personally and I know i'm in the minority, I feel this is happening already but i'd imagine Xmas and all its crazy spending will once again camouflage this, but not for long.



vast majority of high incomes are earned in dublin cork or galway with dublin dominating , these high wages are heavily tapered by a high cost of living


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## noproblem (6 Nov 2017)

But they make the average look higher. That's my point. Some may be having a great time right now but the vast majority of people aren't.


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## TheBigShort (6 Nov 2017)

Firefly said:


> I agree. Although a lot of people are giving out, I think we will look back on this period quite fondly. The only fly in the ointment is obviously the national debt, which has been ballooned to 200bn mainly as a result of spending more than we have earned since 2008 and capitalising the banks (20% of the national debt).
> 
> If our national debt was lower we would be on the hock. Unfortunately, the private economy is doing well but being pulled back by the need to finance an ever-expensive government



I disagree. The national debt is a chain around the neck, but without it, in the 2008-2015 period the private economy would have collapsed.
The national debt at current levels exists to maintain the status quo of 'our' standards of living.
The alternative was to allow the 'free market' to run its course, inducing conflict, perhaps even blood on the streets? 
Instead, Ireland, and others such as Greece, Portugal, Spain, Italy etc were exposed with their private debt ridden economies. These countries have staved off total collapse through the money printing scam of the ECB. Despite Draghi and his 'whatever it takes' money printing philosophy, the dam is still close to bursting, if not through private debt bankruptcy, then people power on the ground. Hence, in the same time period as the economic collapse of the capitalist system, the real emergence of a Scottish Independence movement, Brexit, Catalonia, Italian provinces of Lombardy and Veneto. Austrian, Belgian, German voters showing discontent.

This is not an economic sweet spot. This is prelude to economic collapse, and tragically war.


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## lledlledlled (6 Nov 2017)

War?! Are you saying we should be investing in the military instead of wasting money in health and education etc.?


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## TheBigShort (6 Nov 2017)

lledlledlled said:


> War?! Are you saying we should be investing in the military instead of wasting money in health and education etc.?



No. I imagine current conflicts in mid-East to spread to more proxy wars in South China Sea, NK (absent nuclear war, hopefully), pockets of South America. Escalation will occur if (when) US encroaches on Chinese and/or Russian and/or Iranian sovereignty. 
In any event, economies will fall when the money printing scam is exposed. Regional conflicts bubbling under the surface will/are emerging in Europe. 
Either common sense prevails and a new global economic order is agreed that is not subject to US hegemony or the outbreak of regional conflicts is inevitable. 
I can't envisage the US agreeing to anything against its own self-interest. I could (hope) be wrong.


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## Sarenco (6 Nov 2017)

Hi BS

Can you paint a picture for us of this "new global economic order"?  How will it come about?  Will it look anything like the failed Communist experiment that blighted much of the 20th century?

In the meantime, are you still an advocate of gold and crypto currencies as a home for our savings?


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## dub_nerd (6 Nov 2017)

cremeegg said:


> Ireland today really is in an economic sweet spot. This is even better than the Goldilocks scenario, growth hot enough to reduce unemployment but so hot as to stoke inflation. We actually have a superGoldilocks situation, growth is fast enough that unemployment is falling like a stone, while inflation is almost non existent due to our membership of the Euro. Long may it continue.



Like Goldilocks, this is a fairy story. There is no such thing as growth + low unemployment without inflation, so its absence should set off alarm bells, not celebrations. What has happened is that the QE money that was supposed to trickle down into stimulus for the real economy has instead inflated a vast asset bubble. The cheap money has also propped up zombie companies, reduced competition and stymied productivity gains in the economy, so there is a proliferation of low value jobs.

This has made one cohort (who own property, stock investments and pension assets) richer at the expense of another (who rent or pay bubble era mortgages,  or work in the low value jobs, or are under-employed, or are dragged down by legacy debt, so cannot afford to save for pensions or anything else). The future of the second cohort has been cannibalised to prop up the first cohort. That is why there is not blood on the streets _yet_. Many of the poorer cohort do not have the experience to realise that they are headed for an old age in penury, because on the face of it things look like they are going on as normal. It will take time to realise they do not have, and never will have, the assets of their generally older compatriots.


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## DeeKie (6 Nov 2017)

Sweet spot now, yes. Ending with Brexit.


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## TheBigShort (7 Nov 2017)

Sarenco said:


> Hi BS
> 
> Can you paint a picture for us of this "new global economic order"?  How will it come about?  Will it look anything like the failed Communist experiment that blighted much of the 20th century?
> 
> In the meantime, are you still an advocate of gold and crypto currencies as a home for our savings?



I couldn't tell what it will look like, but my guess is it will come about via G20, IMF, World Bank, BIS etc. If agreement isn't reached, assuming the US being the biggest stumbling block, then that is recipe for conflict.
I don't advocate what anyone should do with their savings, they should make that decision themselves.


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