# Generation Game- David McWilliam's take on Irish economy



## Carpenter

I hope I have this in the right place; this was aired last night and I am interested to hear what others thought of the programme.  Nothing new from David McWilliams I suppose, although I thought the programme was well made and it would be hard to disagree with much of the material presented.  One thing did grate with me though and that was the couple in Kentstown (never heard of the place before), moaning about their mortgage, childcare costs etc.  A bit rich I thought considering the large house they were living in (certainly not first time buyer material) and the two large cars in the driveway (one an SUV)- "living beyond your means a little" came to mind.  I just didn't feel they represented the average family who were living in a starter home in the commuter belt.  Any takers?


----------



## ubiquitous

Carpenter said:


> Kentstown (never heard of the place before),



Were you living in a cave when the school bus tragedy happened in Kentstown a few years ago?


----------



## Carpenter

ubiquitous said:


> Were you living in a cave when the school bus tragedy happened in Kentstown a few years ago?


No.


----------



## demoivre

Carpenter said:


> Nothing new from David McWilliams I suppose, although I thought the programme was well made and it would be hard to disagree with much of the



Did he preempt his ongoing doom and gloom mantra with an apology to the people who listened to his drivel, in the late nineties and for several years thereafter, about property prices having reached their peak?


----------



## Guest111

This programme could have been made in 2000, 2002, 2005 or 2007...I like McWilliams but his credibility is shot. He IS the guy with the sandwich board saying "The End is Nigh".


----------



## nelly

Carpenter said:


> IOne thing did grate with me though and that was the couple in Kentstown (never heard of the place before), moaning about their mortgage, childcare costs etc.  A bit rich I thought considering the large house they were living in (certainly not first time buyer material) and the two large cars in the driveway (one an SUV)- "living beyond your means a little" came to mind.  I just didn't feel they represented the average family who were living in a starter home in the commuter belt.  Any takers?



yes the exact same comments were made in my house! 
Ms Pencil skirt i could identify with though having looked at houses shown by folks like her!  I would say that comparing Uraguay and Ireland was very wide of the mark.


----------



## ivuernis

Are Celebrity Economists (David McWilliams, Eddie Hobbs, etc.) the new Celebrity Chefs?


----------



## robd

Carpenter said:


> A bit rich I thought considering the large house they were living in (certainly not first time buyer material) and the two large cars in the driveway (one an SUV)- "living beyond your means a little" came to mind.  I just didn't feel they represented the average family who were living in a starter home in the commuter belt.  Any takers?



I believe it was supposed to represent 2 high earning professionals not the average couple.  The point was that 2 high earners are stuck in Meath, priced out of the Dublin market.  If they can't afford in a reasonable suburb of Dublin how can an average couple possiblely afford anything.

The part I liked most was they way he let that independent EA from Sherry Fitz hang himself.  He really looked like a fat cat idiot.  His comments seemed to indicate he was completely detacted from reality.  I wonder how many EA's they interviewed and discarded before they found that gem.


----------



## Carpenter

robd said:


> The part I liked most was they way he let that independent EA from Sherry Fitz hang himself. He really looked like a fat cat idiot. His comments seemed to indicate he was completely detacted from reality. I wonder how many EA's they interviewed and discarded before they found that gem.


 
I was surprised at his involvement in the programme really.


----------



## nelly

robd said:


> I believe it was supposed to represent 2 high earning professionals not the average couple.  The point was that 2 high earners are stuck in Meath, priced out of the Dublin market.  If they can't afford in a reasonable suburb of Dublin how can an average couple possiblely afford anything.


 I thought it was to represent average couple also. IMO Folks choose to move to Kentstown so they can still shop in Blanch and keep this "standard" 





robd said:


> The part I liked most was they way he let that independent EA from Sherry Fitz hang himself.  He really looked like a fat cat idiot.  His comments seemed to indicate he was completely detacted from reality.  I wonder how many EA's they interviewed and discarded before they found that gem.


I did not agree, he told us how he made his money end of. They only thing i laughed at was that he said Mullingar was fairly underdeveloped - which unfortunately is true if the planners have "great plans"....


----------



## Thomas22

His predictions been wrong previously but does anyone really think he'll be wrong this time


----------



## nelly

comparing us to Uraguay - yes i think he is wrong. We have the added advantage of being near centres of employment - 5 hours from NY 1 hour from London etc. Also we have folks all round the world who would love to buy a cheap house at "home" and happily use it as a holiday home - In my own family 2 uncles have vacant houses here and visit once a year. If house prices drop to the predicted 50k then these folks will come out of the woodwork i would say.
The only real concern i have is that we are not investing enough in the people who will have to go abroad if there is a bust. the education system is weak and they are talking about bringing back university fees so even less folks will have a degree to go abroad with.


----------



## Carpenter

nelly said:


> They only thing i laughed at was that he said Mullingar was fairly underdeveloped - which unfortunately is true if the planners have "great plans"....


 
Mullingar hasn't seen a lot of new house development due to problems with the inadequate sanitary services available up until now, so it is probably prime for development in the future.


----------



## Abbeykiller

Thomas22 said:


> His predictions been wrong previously but does anyone really think he'll be wrong this time




The beauty of spouting economic theories like these is that there is no wrong and right or black and white. When things are very good they will inevitably get worse and when things are very bad they will definitely get better. The question is when will it happen, how long it will take, how bad will the downturn be etc. So in fact he hasn't been wrong previously merely 'out with his timing' !!


----------



## nelly

Carpenter said:


> Mullingar hasn't seen a lot of new house development due to problems with the inadequate sanitary services available up until now, so it is probably prime for development in the future.


in that case what he was saying was true and he will make more money ouf og folks who get a bargain  4 bed detached in Mullingar instead of 2/3 bed terrace in the city for the same


----------



## Thomas22

Abbeykiller said:


> The beauty of spouting economic theories like these is that there is no wrong and right or black and white. When things are very good they will inevitably get worse and when things are very bad they will definitely get better. The question is when will it happen, how long it will take, how bad will the downturn be etc. So in fact he hasn't been wrong previously merely 'out with his timing' !!



 That's very true but if 9/11 or the dot com bust hadn't happened or until recently the German continued slump then world interest rates wouldn't have been get at artificially low levels for so.  It would have been very difficult to predict all 3 of these events and low interest rates and the world credit bubble are the main reasons the Irish property market kept going.  World interest rates are now on the increase with the rise of inflation, the credit bubble has come to a crashing end  and the world property market will not be able to defy gravity any longer.  Just as the World property market was inflated by these external factors the reverse of the factors will do the opposite.


----------



## Betsy Og

Plus ca change, plus la meme chose from McWilliams.

Encore de smugness
Encore de taking the p*** out of ordinary folk
Encore de statements of the obvious
Encore de stupid labelling of "types" - he must be at self-parody at this stage

Pas de solutions or advice.

It was interesting viewing though (complete with, by now, obligatory re-enforcing soundtrack), just so many grating moments detracting from his points. His enthusiasm for only 1 view of the world damages his credibility a bit also.

Even he even said something like - "Now is the time for this younger generation to tighten their belts, pay down their debt, upskill if they are in manufacturing jobs or perhaps even consider selling now and seeking a better quality of life abroad". Well then there'd be something to consider, something to debate. As it was all you were encouraged to do was say "ahhh, we're all f*****, theres no escape!", & pull the covers over your head.


----------



## Moggy

There is definitely a hint of scaremongering in his program.  He does very little to try and put peoples minds at ease other than to say if we are smart we can get through this.  No doubt in 10 years time if things work out he'll be saying I told you we could get through it.  One very obvious thing which I feel he should have pointed out throughout his program is that a drop in house prices will not affect the majority of people.  The only people it affects are investors.  If your house is worth €1million or €200K it makes no difference, your mortgage will still be the same.  Even if you want to move home, ok your house is now only worth €200K but at the same time the home you are buying will also have gone down by the same amount.

The credit crunch, property bubble, multinationals pulling out, to me this is a well over due wake up call for Ireland.  People these days do not work for their money. Time to pull your socks up, if you want to keep driving that BMW you're going to have to earn it.


----------



## Afuera

Moggy said:


> One very obvious thing which I feel he should have pointed out throughout his program is that a drop in house prices will not affect the majority of people.  *The only people it affects are investors.*  If your house is worth €1million or €200K it makes no difference, your mortgage will still be the same.  *Even if you want to move home, ok your house is now only worth €200K but at the same time the home you are buying will also have gone down by the same amount.*


It won't affect the majority of people but more than just investors can be affected. If I bought a home for 300k and now it's only worth 200k, it doesn't really matter what price the house I want to trade up to is, since I probably won't be able to afford it anyway.


----------



## ninsaga

Of course if he posted here he would accuse us of burying our heads in the sand. Mrs ninsaga gave me a call last night when it started - I was able to tell here what he was gonna say in terms of us all being screws at this stage so we might as well call it a dy now & go to China & work for a bowl of rice a day.
He's becomming a bit spent now - sort like Eddie Hobbs is.
As far as I can see DMcW just wants people to buy his books.
Enough!


----------



## ubiquitous

Its hard to believe that any situation that might involve a tightening of bank lending policies, an increase in taxes (to compensate for lost tax revenue on construction activity and property transactions) and increased unemployment among ex-construction workers, would not impact seriously on the majority of people in the country.


----------



## Moggy

Afuera said:


> It won't affect the majority of people but more than just investors can be affected. If I bought a home for 300k and now it's only worth 200k, it doesn't really matter what price the house I want to trade up to is, since I probably won't be able to afford it anyway.



But that is down to interest rates, not due to a fall in house prices.  People are saying oh my god the price of my house has dropped by 5% and could drop by 20% but then ask these people what they are worried about and they start talking as if their home is some kind of investment fund.  Their plans of sitting back on their backsides and not working for a living have been demolished.


----------



## homeowner

David McWilliams has been harping on with this since at least 1999. I first heard him on the radio saying that if house prices continued to rise that a 1 bed apartment in Dublin could cost IR£250K and that is ridiculous. Well it happened and ever since he has been saying the same thing. 

I used to be a big fan of his until I saw a review on amazon.com of his book The Pope's Children, its basically a rip off of a book written by David Brooks in 2000 "Bobos in Paradise --The New Upper Class And How They Got There" 

To paraphrase from amazon.com: 
HiCos = The Bobos -- Bourgeois Bohemians (from Brooks's book) 
DIY Declan = Patio Man; 
DIY Declan goes to Woodie = Patio Man goes to Home Depot

Brooks found that so many blue delivery bags containing the New York Times lay on suburban lawns that the bags were visible from outer space. McWilliams  decides that, along with the Great Wall of China, Christmas decorations in Celbridge gardens are the only things that can be seen with the naked eye from space.

For Brooks, lifestyle magazines like Conde Nast Traveler are the new pornography. For McWilliams, The Irish Times Thursday supplement is 'property porn'.

Brooks has an Achieveatron, while McWilliams invents an Attainometer.

Brooks's book was published in 2000, McWilliams published his book in 2005.

If McWilliams ever has an original thought I think it will die of lonliness. He has to make a living I suppose.


----------



## Thomas22

Moggy said:


> But that is down to interest rates, not due to a fall in house prices.  People are saying oh my god the price of my house has dropped by 5% and could drop by 20% but then ask these people what they are worried about and they start talking as if their home is some kind of investment fund.
> 
> People who are looking to upgrade will have trouble selling their homes at inflated prices, so drop your price and make sure you get an equally significant drop in the price of your new home, if you can't then don't buy it and look elsewhere...whats the problem?



 It still matters so lets take and example.  FTB buys an apartment in Dublin City for €350k and wants to trade up to a house currently valued at €450k at a later stage. Takes out a 100% mortgage for €350k.  Prices fall to €300k and €400k respectively. Sells apartment for €300k and now wants to buy the house which has reduced to €400k. He now needs to get an extra €100k from the bank to fund the purchase.  But what bank is going to give him a €450k (€350k + €100k) mortgage to buy a house worth €400k


----------



## ButtermilkJa

Thomas22 said:


> ...He now needs to get an extra €100k from the bank to fund the purchase.  But what bank is going to give him a €450k (€350k + €100k) mortgage to buy a house worth €400k


Exactly, this is whole point people are completely missing, and it's such an obvious one.

To comment on the programme last night, I thought one point he made rang very true... 'Our economy has grown on the back of buying and selling our houses to each other with other peoples money...'. How true he is. It is such a false economy we have it's unbelievable how people think we can survive if workers, corporates and investors leave this country.


----------



## Moggy

Thomas22 said:


> It still matters so lets take and example.  FTB buys an apartment in Dublin City for €350k and wants to trade up to a house currently valued at €450k at a later stage. Takes out a 100% mortgage for €350k.  Prices fall to €300k and €400k respectively. Sells apartment for €300k and now wants to buy the house which has reduced to €400k. He now needs to get an extra €100k from the bank to fund the purchase.  But what bank is going to give him a €450k (€350k + €100k) mortgage to buy a house worth €400k



I'm not saying its easy but in that case he needs to get a price for the second house that makes sense for him, the house for €450 should drop by more than €50k if we are talking percentage drops.

Apt drops by 10% - its now worth €315
House drops by 10% - its now worth €405

He now only needs €90K where as before the drop he needed €100K.


----------



## shanegl

I think you're missing the point here. The bank will only loan to value €405. He has €315 in cash. He owes the bank €350. So he has to come up with €35k by himself. The only way you have a chance of trading while in negative equity is down.


----------



## Thomas22

Moggy said:


> I'm not saying its easy but in that case he needs to get a price for the second house that makes sense for him, the house for €450 should drop by more than €50k if we are talking percentage drops.
> 
> Apt drops by 10% - its now worth €315
> House drops by 10% - its now worth €405
> 
> He now only needs €90K where as before the drop he needed €100K.



 The scenario still stands. 
What banks is going to give him a mortgage for €440k on a house worth €405k


----------



## ubiquitous

Moggy said:


> I'm not saying its easy but in that case he needs to get a price for the second house that makes sense for him, the house for €450 should drop by more than €50k if we are talking percentage drops.
> 
> Apt drops by 10% - its now worth €315
> House drops by 10% - its now worth €405
> 
> He now only needs €90K where as before the drop he needed €100K.



Yes, but this ignores the possibility that this scenario will also see the valuations of banks' security decreasing (due to falling property prices), and average take-home incomes also decreasing (due to higher personal taxes).

In such a scenario, it would be hard to see the banks being willing to lend more money to someone who is already in negative equity.


----------



## samfarrell

There was a program on RTE a few months ago with a similar message, that we are all doomed basically. Why are these washed up economists so hell bent on talking us into a recession ?  to sell their books maybe...


----------



## ButtermilkJa

I think this thread only goes to prove McWilliams right in some of his points, namely, that most people refuse to believe that they will be affected and that the economy can withstand a downturn (inc. Bertie and the rest of the clowns!).

The simple fact is that if everything drops in value (shares, property, cars, etc...) then we are all left with assets that are worth less than what we are paying for them. In other words we all go further in debt. I'm not saying it's all doom and gloom scenario, but for those who refuse to believe they can be affected this could be disastrous.


----------



## ButtermilkJa

samfarrell said:


> There was a program on RTE a few months ago with a similar message, that we are all doomed basically. Why are these washed up economists so hell bent on talking us into a recession ?  to sell their books maybe...


In fairness though, the main (only?) reason Ireland boomed was because of cheap credit. It meant we could all buy houses, and we wanted them yesterday. So construction soared. What other sector grew at such a rate. What else happened over the last 10 years that you believe is strong enough to sustain the present economic climate? Even the 'healthy' financial sector we enjoyed is showing signs of slowing, with large multi-nationals pulling out of the IFSC. What do you think will happen if construction dries up to early-nineties levels. What else has this country got to sustain such high levels of consumer spending/debt?


----------



## shanegl

samfarrell said:


> There was a program on RTE a few months ago with a similar message, that we are all doomed basically. Why are these washed up economists so hell bent on talking us into a recession ? to sell their books maybe...


 
Its ok, Bertie and the EA and bank economists will talk the economy back up into another boom for us, no need to worry.


----------



## samfarrell

shanegl said:


> Its ok, Bertie and the EA and bank economists will talk the economy back up into another boom for us, no need to worry.


thats a useful comment
but seriously if we are so doomed should we all leave the country and turn out the lights now?


----------



## Thomas22

shanegl said:


> Its ok, Bertie and the EA and bank economists will talk the economy back up into another boom for us, no need to worry.



 Didn't you know the boom was getting boomier!


----------



## Moggy

shanegl said:


> I think you're missing the point here. The bank will only loan to value €405. He has €315 in cash. He owes the bank €350. So he has to come up with €35k by himself. The only way you have a chance of trading while in negative equity is down.



If he cannot afford to come up with €35K or the bank feel he cannot afford the repayments on an increase in his mortgage of €35K then yes, he'll be stuck.  But in this scenario he cannot afford to upgrade to that house even before the drop in house prices.  What you are saying is that he is not allowed to buy house he cannot afford, whereas before he could buy a house he cannot afford......isn't this the problem in the first place?  My point is, if you want to upgrade to something you can afford you should do it, whether house prices have dropped or not, there is no difference.


----------



## Thomas22

Moggy said:


> If he cannot afford to come up with €35K or the bank feel he cannot afford the repayments on an increase in his mortgage of €35K then yes, he'll be stuck.  But in this scenario he cannot afford to upgrade to that house even before the drop in house prices.  What you are saying is that he is not allowed to buy house he cannot afford, whereas before he could buy a house he cannot afford......isn't this the problem in the first place?  My point is, if you want to upgrade to something you can afford you should do it, whether house prices have dropped or not, there is no difference.



 But there are 2 issues as to whether a bank will loan him the money. 
1. Can he afford the repayments.
2. Is the property good security for the loan(i.e. property value greater than mortgage.
 He may be able to get around point 1 but if property prices fall as given in the example than he still won't get the loan


----------



## Moggy

ButtermilkJa said:


> In fairness though, the main (only?) reason Ireland boomed was because of cheap credit. It meant we could all buy houses, and we wanted them yesterday. So construction soared. What other sector grew at such a rate. What else happened over the last 10 years that you believe is strong enough to sustain the present economic climate? Even the 'healthy' financial sector we enjoyed is showing signs of slowing, with large multi-nationals pulling out of the IFSC. What do you think will happen if construction dries up to early-nineties levels. What else has this country got to sustain such high levels of consumer spending/debt?



People are going to actually have to work for a living.  It's awful isn't it.


----------



## MelF

Read somewhere that McWilliams got paid €1m for this book, so don't suppose he's too worried in any case!!!!!


----------



## demoivre

Thomas22 said:


> It still matters so lets take and example.  FTB buys an apartment in Dublin City for €350k and wants to trade up to a house currently valued at €450k at a later stage. Takes out a 100% mortgage for €350k.  Prices fall to €300k and €400k respectively. Sells apartment for €300k and now wants to buy the house which has reduced to €400k.



Legally how can the FTB sell the apartment for 300k when the apartment itself  is security for a 350k loan unless the FTB can come up with the balance owed?


----------



## ninsaga

MelF said:


> Read somewhere that McWilliams got paid €1m for this book, so don't suppose he's too worried in any case!!!!!



Exactly as I mentioned - he's doing this to sell books....... this is free advertising for David mcWilliams!


----------



## Afuera

Moggy said:


> If he cannot afford to come up with €35K or the bank feel he cannot afford the repayments on an increase in his mortgage of €35K then yes, he'll be stuck.  But in this scenario he cannot afford to upgrade to that house even before the drop in house prices.


Sorry Moggy, my last post didn't go into enough detail. I'll try and explain it better so you can see the problem that falling prices in houses presents to trader uppers.

Original Price
Starter House: 300k
Tradeup House: 400k

Originally, if the owner of the Starter House wants to trade up to the Tradeup House they will need to take on a mortgage that is 100k more than their current one. Their wages would dictate whether this is possible or not.


After Crash Price (-20%)
Starter House: 240k
Tradeup House: 320k

Now the owner of the starter house has a mortgage for 300k on a property that they can only sell for 240k. Unless they have 60k saved up, they will be unable to take a mortgage out to buy the Tradeup House. The bank will only be able to give them as a maximum a 100% mortgage for 320k, while they will infact need 60k + 320k. Even if they have a wage to afford the Tradeup House, their savings will dictate whether they are able to make the move or not.

Hopefully this clears up what I was trying to say earlier.


----------



## Afuera

demoivre said:


> Legally how can the FTB sell the apartment for 300k when the apartment itself  is security for a 350k loan unless the FTB can come up with the balance owed?


Exactly. Unless the FTB has enough savings they will not be able to trade up.


----------



## Moggy

Afuera said:


> Sorry Moggy, my last post didn't go into enough detail. I'll try and explain it better so you can see the problem that falling prices in houses presents to trader uppers.
> 
> Original Price
> Starter House: 300k
> Tradeup House: 400k
> 
> Originally, if the owner of the Starter House wants to trade up to the Tradeup House they will need to take on a mortgage that is 100k more than their current one. Their wages would dictate whether this is possible or not.
> 
> 
> After Crash Price (-20%)
> Starter House: 240k
> Tradeup House: 320k
> 
> Now the owner of the starter house has a mortgage for 300k on a property that they can only sell for 240k. Unless they have 60k saved up, they will be unable to take a mortgage out to buy the Tradeup House. The bank will only be able to give them as a maximum a 100% mortgage for 320k, while they will infact need 60k + 320k. Even if they have a wage to afford the Tradeup House, their savings will dictate whether they are able to make the move or not.
> 
> Hopefully this clears up what I was trying to say earlier.



I do understand what you are saying.  But let me argue my point a bit more because I don't think people understand what I am trying to say.

1. He needs a 380K mortgage, previously he needed a 400K mortgage.

2. 380K works out at about 120% of 320K. I've heard of 120% mortgages, or are they a myth?  In reality even with negative equity he is actually saving money due to the fact that is mortgage is less than 400K.

I agree though if the banks do not give him a mortgage in the first place then he's not going to get that upgrade.


----------



## shanegl

> If he cannot afford to come up with €35K or the bank feel he cannot afford the repayments on an increase in his mortgage of €35K then yes


 


> I've heard of 120% mortgages, or are they a myth?


 
Its not a case of whether he can afford the increase, the bank simply won't lend you more money than the house the mortgage is secured on is worth. The only option is to have a large wad of cash lying around to pay the rest of the mortgage off. e.g. clear the negative equity. And how many people could do that?


----------



## shanegl

samfarrell said:


> thats a useful comment
> but seriously if we are so doomed should we all leave the country and turn out the lights now?


 
About as useful as claiming that we can be talked into a recession. 

In answer to your other point, the prudent thing to do in the face of possible economic hard times is to tighten your belts and start saving while the times are still good. some upskilling wouldn't go amiss either to basically make yourself more employable.


----------



## samfarrell

shanegl said:


> About as useful as claiming that we can be talked into a recession.
> 
> What's so unusual about talking the global economy into recession? After all, the world markets talked themselves into a technology boom. In the same way that the tech boom went too far one way, the recession will be that much worse because of the hype and fear.
> 
> As for Mr. Mcwilliams. i remember he was predicting the collapse of the housing market here in 2001. After 9/11 and the Asian market crisis he said we would not recover. I hope he is as correct this time as he was back then


----------



## Thomas22

Moggy said:


> I've heard of 120% mortgages, or are they a myth?



 Yes, Northern Rock used to offer them.


----------



## polaris

Apparently, in future episodes he will be proposing some solutions that will rescue the situation. From the interviews he gave yesterday these seem to include;

Leaving the The European Monetary Union to regain control over our interest rates. 

Offering passports/entry visas to the Irish diaspora. I can't see how this is going to help in great way but i'm sure the explanation will be meandering and laboured like every point he makes in his programmes.


----------



## samfarrell

have a read of this if you are inclined to follow mcwilliams advice

[broken link removed]

please note that this article was written in 2001


----------



## Betsy Og

the best one I've heard in ages, origin the US subprime market, is the "Ninja" mortgage which was given to borrowers with no income and no assets (other than presumably the property they were purchasing).

Now apart from renting rooms in your home to copious numbers of your ethnic minority of choice (3 to a bed stuff), how in name of God did that lender expect to get paid?

Is it any wonder things go bad when that recklessness occurs (and I'm presuming it was an isolated incident).


----------



## Betsy Og

shanegl said:


> In answer to your other point, the prudent thing to do in the face of possible economic hard times is to tighten your belts and start saving while the times are still good. some upskilling wouldn't go amiss either to basically make yourself more employable.


 

I'd accuse you of plagiarism (a la McWilliams) but its good to see someone in agreement, and sure the points are commonsense


----------



## webtax

samfarrell said:


> shanegl said:
> 
> 
> 
> As for Mr. Mcwilliams. i remember he was predicting the collapse of the housing market here in 2001. After 9/11 and the Asian market crisis he said we would not recover. I hope he is as correct this time as he was back then
> 
> 
> 
> 
> The way things are going we might be back at 2001 house prices before long! The reason they jumped so high since then was the extraordinarily low interest rates and the high liquidity levels which meant that banks would hand out mortgages to any man & his dog at huge multiples of their salaries to boost their profits (and bank directors bonuses).
Click to expand...


----------



## command

I think Ireland has lost the point. Small houses and apartments are for people with small earnings not for first time buyers. How many peopl grew up in a house where they shared a room with a sibling. 

We seem to have gone so far with our capitalisim that we are reverting into some warped form of socialism where someone without a formal qualifications who shows houses to prospective buyers expects to live in the same housing estate as solicitors and doctors. 

When the couple with one child can't afford the four bed house and full time child care they turn to the state expecting a socialist handout in the way of stamp duty exemptions and subsidised creches. 

Instead of a big house in Kentstown and running two cars why would they not buy a two bed house or apartment in Dublin. 

A starter home is for people getting on the property ladder. A small one or two bed house should suffice for the vast majority. If there careers pick up and they start earning more then they can trade up. If not then they should either start working harder, up skill or start decorating, because they are going nowhere.   

If you need McWilliams to tell you that property is over valued and current prices cannot be sustained then welcome back from Mars, I hope you had a good trip. 

If you went into a shop to buy bread and auld mister brennan had put his price up to a tenner while the three boys at johnston Mooney and O'Brien were still charging a euro why would you buy the over priced bread. Unless of course the guy infront of you in queue bought brennans then sure you would have to have it.  

Why, then, would a first time buyer purchase a property now. Rent or staying at home are the alternatives. Whether a crash or a correction is in the offing anyone who gets stuck in negative equity and expect to trade up is a lunatic. Thge evidence suggests that the buyers have deserted the market and only the lunatic fringe are left.


----------



## nelly

command said:


> I think Ireland has lost the point. Small houses and apartments are for people with small earnings not for first time buyers. How many peoplE grew up in a house where they shared a room with a sibling.


 I don't really get you - first time buyers tend to be lower earners than they will be so in the future so in many cases FTB are low earners. . Also apartments are not built for long term homes as far as i can see. 


command said:


> We seem to have gone so far with our capitalisim that we are reverting into some warped form of socialism where someone without a formal qualifications who shows houses to prospective buyers expects to live in the same housing estate as solicitors and doctors.


 While I do understand your logic i think you should understand that anyone with a degree and a bit of drive can get an LLB these days. We would lose our  entrepreneurs if they did not believe in this "warped form of socialism" and that would be a sad thing.


----------



## command

FTB are usually low earners because they get on the property ladder as early as possible. If it is a case that they are low earniner then when the mob demanded that stamp duty be abolished for all FTB why was it not pointed out that FTB don't earn enough to be able to spend more than €300k on a house long term. 

Its the expectation gap between a society that works hard and a society that assumes that all boats rise at the same rate. 

I take your point that anyone can get a LLB, but not everyone does. Anyone can get an auctioneering license as well. My point is that conventional logic would say that unless you work for it you will never get out of your FTB starter house. 

Too many people in Ireland have assumed that once you have done the whole FTB buyer thing you will be able to move to a bigger house by right. 

For the last few years the banks and society have been able to encourage this "90% aspiration, 10% perspiration lifestyle" through low interest rates and rising house prices. Now that the banks are becoming a little more conservative in what they consider applicants can afford to repay those FTBers who traded up too early are the ones left vunerable.

Apartments serve as suitable long term homes in other countries so why can't they serve the same purpose here.


----------



## Moggy

command said:


> FTB are usually low earners because they get on the property ladder as early as possible. If it is a case that they are low earniner then when the mob demanded that stamp duty be abolished for all FTB why was it not pointed out that FTB don't earn enough to be able to spend more than €300k on a house long term.


FTB main objective is to move out of home and get independence.  for many they are in their late twenties and not earning too much but with help from parents and family and their own savings they can buy their own place rather than rent.  Why pay someone elses mortgage when you can be paying your own mortgage?



command said:


> Too many people in Ireland have assumed that once you have done the whole FTB buyer thing you will be able to move to a bigger house by right.


As a FTB, I don't agree.  Alot of people are optimistic and hope that their careers will go well and they will be able to get a higher mortgage, others plan on moving further from the city.  There is also a large proportion that buy their first home on their own, obviously meeting someone else in the same situation enables you to sell both apartments and upgrade to a 3 bedroom house.  



command said:


> Apartments serve as suitable long term homes in other countries so why can't they serve the same purpose here.


Quite simply, the bedrooms are too small.  Most box rooms are suitable to put a cot and a baby in, but thats it.  Once your child grows up you will be in trouble.  Also you can forget about having more than one child, how will that leave society in generations to come?


----------



## command

Moggy, 

Its not long ago since I was a first tiem buyer as well. Thankfully my carreer has improved and I have moved house. 

Why should a first time buyer take money form their parents and strectch themselves to the point where they are over paying for a property to the extent that they are now. 

Even the most omtimistic don't expect to see price rises in the near future. There is a common expectation that a softening and maybe a small fall in prices is on the way. The there are the McWilliam's brigage who are running around like chicken licken telling us the sky is falling in. 

Is a first time buyer not better off renting for a year ot two while the property market dusts itself down. I think I would rather pay someone elses mortgage for a year than hand some other person €50k for them to fund their retirement because I paid above the realistic value for my first property.  

Everyone is optimistic about their future and we all expect to be earning more next year than this year. Thsi is no reason to telescope you future homebuying into an immediate trasaction. 

 "Quite simply, the bedrooms are too small. Most box rooms are suitable to put a cot and a baby in, but thats it. Once your child grows up you will be in trouble. Also you can forget about having more than one child, how will that leave society in generations to come?"

Going back to my original post, previous generation of Irish people were brought up in a house with no spare rooon, box room or not. 

As a FTB buyer then let me ask you how independent would you feel if you fall into negative equity in a period of rising interest rates and falling demand for houses where you are forced to sell the property and then move back in with your parents, the same parents who's savings as well as your own have been lost in the falling property market. Or would you prefer a two bed apartment that you can afford to keep.


----------



## tkc

Just on David McWilliams and his prognostications:

I came back from abroad in early 2001. I have a distinct memory of listening to McWilliams on the radio that summer saying that:
1) House prices were overvalued, there was a house price bubble and that it would inevitably burst. He said he didn't know when, nobody could see into the future, but the sooner the better in his opinion. 
2) He also said that his tentative advice to people would be to consider not buying, but to wait a while and rent.

At the time he couldn't foresee the combined effects of 9/11 and subsequent low interest rates, a compliant and compromised developer friendly government, ridiculous banking practices, the level of hype, lies and hysteria driven by the vested interests, and not forgetting peoples greed, panic etc. The upshot has been a prolonging and enlarging of the bubble that was already there.

The impact of this on his two main points to my mind are:
1) In the next 3 or 4 years the jury will be in with a definitive verdict. Because of what happened post summer 2001 the crash could be of biblical proportions.
2) He was probably wrong here, because he never thought the bubble would get as big as it has. Even if there is a major crash, it is unlikely that house prices will go below 2001 levels plus the rent anyone who has waited has paid out in the meantime, even with the time value of money (but they could!). 

In summary, if the property crash is Japan like in its size, McWilliams will have been proven broadly correct as far back as 2001.

None of this excuses the glibness of his programme, the stupid generic labels, and dramatised scenes. If anything they hinder the message he's trying to get across.

Personally, I bought in early 2002. The house I bought was 7% lower than a similiar one that sold in Summer 2001. I thought that the bubble had already burst!


----------



## Moggy

command said:


> As a FTB buyer then let me ask you how independent would you feel if you fall into negative equity in a period of rising interest rates and falling demand for houses where you are forced to sell the property and then move back in with your parents, the same parents who's savings as well as your own have been lost in the falling property market. Or would you prefer a two bed apartment that you can afford to keep.


I fall under the "my wages have increased" category, so moving back to my parents because of interest rates is not going to happen. I am not in a minority, I speak for just about everone in my circles when I say our wages have brought us out of the danger zone.  To be honest when I applied for a mortgage they took into account what is happening today, you didn't need McWilliams to tell you interest rates were going to increase.  As for negative equity, if I get hit by that I will have to stay put and ride the storm....lifes a biotch.


----------



## simplyjoe

Thomas22 said:


> His predictions been wrong previously but does anyone really think he'll be wrong this time


 
His previous predictions were not wrong. The property was overvalued! It was only that we refused to believe it and the gamblers/greed took over. Please don't continue to deny the existence of this monstrosity. We cannot live and continue to thrive off a building boom. Saturation point has to arrive at some point. We cannot have property esp in Dublin aat prices that exceed London, the USA, Germany, France, etc. What then do we fall back on - manufacturing?. We cannot survive on the few major US multinationals. Fianna Fail are complicit in this - they continued to drive this false building boom - took the stamp duty and turned around and said 'what brilliant managers of the economy we are'. McWilliams is and was right. We will be back to 2001 property prices. The developers will have got their money and Joe Soap will still be paying his massive mortgage together with his loan for his BMW Jeep and the wifes mercedes convertible. I worry about people that cannot see that a nation with the highest level of personal debt in the world is not in trouble. Denying it again is not going to work. We have denied it now for the last 5 years.


----------



## gonk

simplyjoe said:


> His previous predictions were not wrong . . . Saturation point has to arrive at some point.


 
I can't do better than quote this post:



room305 said:


> If you're out by ten years then you're out, simple as.
> 
> I'm as bearish as they come but nobody can credibly claim it was a good idea to sell an asset and forego triple-digit gains, in anticipation of a crash a decade later ...


 
It's one thing to recognise that a market is in a bubble state - it's quite another to identify when the market is peaking. Those who put off buying in 2001 on McWilliams's advice will be a lot less able to afford today's prices.


----------



## joe sod

I thought it was an excellent program much better than last years "popes children". He is absolutely correct in pointing out that the real economy has done nothing since 2002 and we have been living in a false economy ever since then. I am amazed at the mostly negative reaction to the program on this site. Maybe it is because he did not single out any single group like low skilled workers etc. He criticised all levels in the irish economy ,the accidental millionaires, the young middle class up to their eyes in debt. This is the truth and people don't like to hear the truth especially when it applies to them. I agree that he has taken some of his ideas from international commentators and applied them to the irish economy. Why has bertie ahern gone out of his way to criticise economists like david mcwilliams maybe he knows mcwilliams is directly criticising fianna fails handling of the economy where populism wins out over long term planning.


----------



## webtax

gonk said:


> I can't do better than quote this post:
> Originally Posted by *room305* http://www.askaboutmoney.com/showthread.php?p=486064#post486064
> _If you're out by ten years then you're out, simple as.
> I'm as bearish as they come but nobody can credibly claim it was a good idea to sell an asset and forego triple-digit gains, in anticipation of a crash a decade later ...
> _
> It's one thing to recognise that a market is in a bubble state - it's quite another to identify when the market is peaking. Those who put off buying in 2001 on McWilliams's advice will be a lot less able to afford today's prices.



A bubble is a bubble, simple as too.

Same thing happened with internet shares - Alan Greenspan called it a bubble and some people still made big money off it before it crashed by finding a bigger fool to sell on to. This did not mean Greenspan was wrong, just that you can't put a time limit on when people are going to see reason.


----------



## gonk

webtax said:


> A bubble is a bubble, simple as too.
> 
> Same thing happened with internet shares - Alan Greenspan called it a bubble and some people still made big money off it before it crashed by finding a bigger fool to sell on to. This did not mean Greenspan was wrong, just that you can't put a time limit on when people are going to see reason.


 
Not the same thing at all. People were throwing money at anything with dot com in its name, regardless of whether there was a viable business plan, never mind any revenue. Many of the companies concerned collapsed with zero or near zero value to shareholders (remember Baltimore?)

While houses may very well fall in price, I don't think even the most pessimistic prophet of doom would suggest they'll be worth nothing.

The Permanent TSB/ESRI index would have to fall about 40% to be back to 2001 levels. While this is within the range of possibilities, it would just mean those who didn't buy in 2001 could buy now at the same price having rented for the last six years. Their peers who bought will on the other hand be six years closer to having their home loans paid off.


----------



## webtax

Gonk,

Not likely we're going to agree, but many people did buy property regardless of value e.g. all those box apartments outside the M50 (poor quality build, no infrastructure, schools etc). Accept they're not going to drop to zero but these could  fall very far from the price people paid, if they can even find a buyer.
On those who bought in 2001: yes, they have a substatial cushion before negative equity, but many who bought since then do not. My view is that if people like David McWilliams had been listened to in 2001 about prices rising too fast there would have been no excesive bubble since then and no one would be facing difficulties today.


----------



## ubiquitous

There is a subtle difference between the dotcom bubble and the recent property craze. The dotcom bubble was driven by equity, a lot of which ultimately turned out to be worthless. The property craze has been driven by debt, which ultimately must be paid off regardless of what happens in the market.

If property prices were to fall significantly, a lot of people might find that the ultimate value of their  investment (net of debt) might not be a whole lot higher than the ultimate value of their dotcom shares. I'm not saying this will necessarily happen but its not beyond the bounds of possibility.


----------



## command

Maybe the parallels with the dotcom bubble are relevant. It was a new and unknown marekt place where the value of a asset was whatever someone was willing to pay for it. Advisors priced IPO and the share price went through the roof as soon as the share was listed. 

In Ireland auctioneers listed properties for auction and once the acution started the price lost all logic.

So long as there are gullible fools who arew willing to buy there will be a buck to be made in the market. 

The whole thing went bust when the market relaised that the companies were never going to make money. 

Surely if a property never has a hope of returning a relevant rental income or increase in price then it also is bubble in itself waiting to burst. 

Apply a P/E ratio to a three bed house on Nutley lane and see how overvalued it is.


----------



## simplyjoe

Ubiq is right. I bought my home, a flat in London in 1990 (91?). Six months after buying it was worth 60% of the value I paid for it. I was lucky in that I found a long term tenant (even better a German) who paid the mortgage and I sold the flat 10 years later at a very small profit. Adjusting for inflation this was actually a loss. Negative equity is horrific. All your choices are taken away. It leads to an increase in interest rates. Anyone aged under 30 will find it hard to understand what Ireland was like prior to 1995. Please someone prove to me that our economy has really improved that our exports have increased - that there is some real basis to the economy not just building boom.


----------



## imogen

My dad keeps pointing out everyone has forgotten the UK property crash in the mid 1970s. The problem that arises is no-one can sell anything -> no-one can value anything -> no-one can sell anything -> nothing moves, it does not matter what your reason for selling is, there are no transactions, everyone is stuck where they are, and as a result confidence plummets in all areas of the economy. I have some UK friends who experienced negative equity in the early 1990s and they reported the same feelings of entrapment and helplessness.


----------



## z106

I can understand how people can dismiss mcwilliams due to him being incorrect in the past.

But even the dogs on teh street now know that house prices cannot continue to grow in any significant way.


----------



## demoivre

simplyjoe said:


> Ubiq is right. I bought my home, a flat in London in 1990 (91?). Six months after buying it was worth 60% of the value I paid for it. I was lucky in that I found a long term tenant (even better a German) who paid the mortgage and I sold the flat 10 years later at a very small profit. Adjusting for inflation this was actually a loss. Negative equity is horrific. All your choices are taken away. It leads to an increase in interest rates.



This does not illustrate Ubiq.'s point at all - quite the opposite in fact, and you only held the property for ten years - how much would the property be worth today (use this calculator to work it out) and what rent could you get for it.
How does negative equity lead to higher interest rates?


----------



## demoivre

imogen said:


> I have some UK friends who experienced negative equity in the early 1990s and they reported the same feelings of entrapment and helplessness.



Hardly the end of the world is it? They still had a roof over their heads or did negative equity mean they couldn't afford the mortgage repayments? Out of curiosity are they still in negative equity?


----------



## Afuera

demoivre said:


> Hardly the end of the world is it? They still had a roof over their heads or did negative equity mean they couldn't afford the mortgage repayments? Out of curiosity are they still in negative equity?


I don't think anyone said it was the end of the world. I think imogen's post serves more of a reminder of the feeling of entrapment and helplessness if you get stuck with negative equity. Many people seem to think, if you get into trouble then all you need to do is sell up (as if it was the easiest thing in the world). That may have applied for the last 10 years or so, but not anymore.

Comparing what happened in the UK with the current situation in Ireland is probably not that useful though. The UK didn't have people paying up to 10 times their annual salary on 40 year mortgages the last time they had a slump. Also, the notion of people buying a starter property that they would have to trade up from within a 2 or 3 year period was not commonplace back then. Combined with the fact that over 15% of our economy is directly dependant on construction, it all suggests that we could encounter a harder and longer slump than that experienced in the UK.


----------



## MichaelDes

No amount of doomsday talking can cause an economy to go into a tail spin otherwise pundits would have been right before the Millennium. The economy fails due to internal and externals mechanisms and fundamentals. We all know what these are at the moment, but when this will cause a complete fracture no one can say. Down turns however are inevitable within any economy. It is good to get rid of the chaff - a bit like an essential spring clean.

In this case of house prices, it is like any other investment cycle; for every profiteer someone will eventually get burnt (and will always be the case). _Doomsday scenarios for what happened in the past are not a guide of future inevitabilities_ – no one can predict the future direction of an economy for definite – not even Mc Williams. But after a fall off, things always seem to pick themselves up - the UK survived more rounds than I care to remember and is still robust.


----------



## Trish2006

I bought my first (and current) house back in 2001. I remember at the time being sickened by the price (200k punts), thought it ridiculously overpriced and listened to all the predictions of 'the crash'.  But we wanted a family home and decided to take a chance.  But just in case we extended ourselves as much as the bank would allow (nowhere near as much as they'd allow in later years) to get a home in an area that we would be happy to stay if indeed we ended up in negative equity.  Best decision ever.  Same houses currently asking for just under €600k.  The only problem we have is that with a growing family we'd like to trade up but refuse to get into higher debt.  So teh option is to get a bigger house in a cheaper area.  That's what we're currently looking for.  Of course stamp duty means that the area has to be considerably cheaper so we can pay the duty without having to add it to the mortgage. 
But realistically I can see us still being where we are in a few years time, houses just don't seem to be selling.  For us I think the key was picking somewhere that we knew we could bear to stay longterm in case the economy started to weaken.  Too many people didn't consider this and are now stuck with the prospect of raising their kids in areas with no green space, no schools, no facilities, etc..
I'm just glad we bit the bullet when we did and didn't listen to advice to 'hold out'.


----------



## Thomas22

Trish2006 said:


> I bought my first (and current) house back in 2001. I remember at the time being sickened by the price (200k punts), thought it ridiculously overpriced and listened to all the predictions of 'the crash'.  But we wanted a family home and decided to take a chance.  But just in case we extended ourselves as much as the bank would allow (nowhere near as much as they'd allow in later years) to get a home in an area that we would be happy to stay if indeed we ended up in negative equity.  Best decision ever.  Same houses currently asking for just under €600k.  The only problem we have is that with a growing family we'd like to trade up but refuse to get into higher debt.  So teh option is to get a bigger house in a cheaper area.  That's what we're currently looking for.  Of course stamp duty means that the area has to be considerably cheaper so we can pay the duty without having to add it to the mortgage.
> But realistically I can see us still being where we are in a few years time, houses just don't seem to be selling.  For us I think the key was picking somewhere that we knew we could bear to stay longterm in case the economy started to weaken.  Too many people didn't consider this and are now stuck with the prospect of raising their kids in areas with no green space, no schools, no facilities, etc..
> I'm just glad we bit the bullet when we did and didn't listen to advice to 'hold out'.



 Would you do it again right now?


----------



## Trish2006

wouldn't be able to afford it now!


----------



## gonk

Thomas22 said:


> Would you do it again right now?


 
Coming back to the thread topic - David McWilliams - the point is he has been saying for as long as I can remember that there is a bubble in property prices and it'll all end in tears.

Identifying that the Irish residential property market was in a bubble was not hard and McWilliams can't claim credit for any great insight. Obviously double digit property price percentage growth rates cannot be sustained indefinitely while general inflation and wages are growing in low single figures.

What is extremely difficult to do and is usually only possible in hindsight, is to identify when prices have peaked. I'm open to correction, but I don't believe McWilliams spotted the peak in advance, except to the extent that he was continuing to say what he had been saying for years.


----------



## samfarrell

Yes I think everyone agrees it hardly takes David McWilliams TV programs and several books,all about the same topic really, to tell you that residential property is overvalued. He spoke about how we cannot compete with China and India, I am not aware we ever did really compete with them, they generally make mass produced low value products, we dont
I would be more interested to hear what he proposes we do about the impending doom.


----------



## Moggy

samfarrell said:


> I would be more interested to hear what he proposes we do about the impending doom.



Exactly.  Apart from saying we need to be smart he hasn't said 1 thing about what he thinks needs to be done.  And how often do you see made in Ireland on products around the world?  China is hardly robbing our business.  After surviving the IT (dot com) bubble pop I can now look back and say its the best thing that has ever happened to the industry.  Gone are the days of working with complete muppets who know nothing about computers (there's still a few hanging on mind you )  Things like this put the professionalism back into the industry.  Think of it as a forest fire, it looks devastating but its actually a very good thing for the forest.  We might start to see houses with gardens and bedrooms to fit a decent size bed in....and a professional touch.


----------



## MichaelDes

_"Think of it as a forest fire, it looks devastating but its actually a very good thing for the forest. We might start to see houses with gardens and bedrooms to fit a decent size bed in....and a professional touch"._

I think everyone will echo your last sentiment. Let normality rule for a change..less oversized EA Range Rovers too.


----------



## Carpenter

samfarrell said:


> He spoke about how we cannot compete with China and India, I am not aware we ever did really compete with them, they generally make mass produced low value products,


 
That's not the case any more, a lot of our higher value manufactured goods (from passenger lifts to electronic consumables) are being produced in China and consequently Europe has lost much of its manufacturing jobs.  His point was that they (China) will soon be competing with Ireland for our "knowledge based" or "highly skilled" manufacturing and IT jobs.


----------



## MichaelDes

Trish2006 said:


> The only problem we have is that with a growing family we'd like to trade up but refuse to get into higher debt. So teh option is to get a bigger house in a cheaper area. That's what we're currently looking for. Of course stamp duty means that the area has to be considerably cheaper so we can pay the duty without having to add it to the mortgage.


 
Trish,

Would you not stay put and just add an extension or do an attic conversion? I think the paralysis in the market has been caused by stamp duty. People instead of trading up and adding liquidity to the market have been extending properties instead. That way they get what they want, at a cheaper cost without giving money to the government for what amounts to nothing. In London the new craze for the hnw's (£50m+ brigade) are subterranean basements, which are the full size of back gardens & going 4 storeys down. Might catch on here yet?


----------



## Carpenter

Moggy said:


> We might start to see houses with gardens and bedrooms to fit a decent size bed in....and a professional touch.


 
This is starting to filter through to the market already- developers are already offering a completely fitted out package now (with fitted this, solid stone that etc) to lure the customer in a more competetive market.  when I bought my home 9 years ago I was offered lousy allowances and a take it or leave it attitude from the builder's agent.  In simple terms we have become fat and lazy (uncompetetive) and the market (like evolution) will correct this imbalance....


----------



## joe sod

Carpenter said:


> That's not the case any more, a lot of our higher value manufactured goods (from passenger lifts to electronic consumables) are being produced in China and consequently Europe has lost much of its manufacturing jobs. His point was that they (China) will soon be competing with Ireland for our "knowledge based" or "highly skilled" manufacturing and IT jobs.


 
another crucial point is these "knowledge based" jobs are not ours, ireland does not own the intelectual property rights, they are owned by the multinationals head offices in america and they licence the irish operations to produce their products. Ireland has done little to develop its own intellectual property, this is another case of lack of long term planing. Rather than use the multinationals operating here as a base to develop our own products we simply took them for granted. Intel probably the most high profile multinational in ireland is opening a huge plant in china. Therefore irish middle income workers working there will be in direct competition with chinese workers. They will be doing the exact same work as the irish workers, therefore irish middle income workers are directly benchmarked against chinese workers.


----------



## MichaelDes

joe sod said:


> They will be doing the exact same work as the irish workers, therefore irish middle income workers are directly benchmarked against chinese workers.


 
Good point but watch out for more trade tariffs on China from America (steel a big issue at the moment)  - many new sectors being considered by the hawks around Washington as a result of the American mess. However China is now so big a monster its to big for America to handle, not the same as the Tiger Economies of the 1990's who had there wings clipped and exports retrenched, e.g. S.Korea. However of these types economies, I do not think Ireland will suffer same fate as Japan and have a lost decade in the wilderness. Well I hope not?!


----------



## csirl

I dont entirely agree with his views on China. I think China is in for troubled times in the future. Reason?

A consumer driven middle class is an autocracies worst nightmare. If the Chinese middle class continues to grow, the Communists will not survive. And "smooth transitions to democracy" just dont happen, even with the best will in the world - ask Gorbachev. 

As the % of middle class people grows, it will eventually reach a tipping point. And like a titration experiment, things will change very quickly. The autocrats will not be able to keep up with the demands of the people for a greater say and more freedom. There will be a revolution and in a country the size of China with many different ethnic provinces, it will split into many different countries ala USSR. Some of the countries will probably do well long term, others wont. 

What does this mean for the economy? It means a short period of unstability and uncertainty, causing a short sharp shock to the markets. What happens afterwards depends on how things pan out.

But the idea that China, as it is today, will get more powerful and the communists becoming a major world force is a fantasy.

The nightmare scenario (for the Chinese) is the communists refusing to go quietly and using military might against there own people - thus turning a quick transition into a long drawn out devastating process.


----------



## room305

That collapse could be sooner than you think.

[broken link removed]

Price freezes always fail.

Expect shortages of the regulated goods and possibly major civil unrest.


----------



## command

csirl said:


> A consumer driven middle class is an autocracies worst nightmare. If the Chinese middle class continues to grow, the Communists will not survive. And "smooth transitions to democracy" just dont happen, even with the best will in the world - ask Gorbachev.
> 
> From my experience middle classes in China are not looking for policitical freedeom. In that case so longs as the Party continue to pump the ecomony and allow the middle class to acquire more wealth, whether it is through owning property or investing overseas.
> 
> 
> China's stated aim is to move up to 400 million people form the countryside to the cities over the next few years. So long as the goverment can supply them with electricity and jobs there will be no pressure for change.
> 
> The middle classes in Shanghai and Bejing don't want power. They know that running a country of that size would be impossible and are also aware the the paralasis that arrives with democracy would never allow the enviromentally destructive projects like the dam on the yangtze and foreign policy in Darfur to persist. They just care about the hydro electric power the dam will bring them and the oil the arabs in darfus will continue to supply their factories and 4x4's.
> 
> I think the biggest threat to China is America defaulting on their debts. What would happen if an American Government turned around as said that they wanted ot renegotiate the trillions of dollars in government bonds that China has bought with all the cash that the consumer spending boom in the US has given them?
> 
> Refusing to negotiate could cause a recession in America which will affect Europe and the rest of the Americas which in turn will cause a slow down in demand for those consumer products that have fuelled the success of the Middle Kingdom.
> 
> Would an american president have the balls??


----------



## csirl

> The middle classes in Shanghai and Bejing don't want power.


 
That is because most of the current middle classes are already in power - part of the establishment - they are members of the communist party who have been given favourable jobs as a reward for their loyalty.

The problem is that a new larger middle class will emerge from those who are currently ordinary workers. These people will resent the closed shop establishment.


----------



## command

The chinese are a comliant people, they do not question authority like we would. I don't mean it badly. 

I have worked with them in the area of tax and while I and most Irish people would be programmed to always look for a loophole in a tax the chinese accept the tax law as a law. This include individuals who are managers and partners in large accountacy practices. These are middle class. 

I have been there a few times and still can't get my head around it. This is what makes it hard for us to second guess them


----------



## samfarrell

There is no doubt that China is a major economic power and will grow more. this prospect must scare the US as their world dominance will be tested more and more. Inevitably there will be a major conflict between the US and China, but that maybe 50 years from now
We obviously cannot compete with China on cost, so we need to innovate, use our advantages, whatever they maybe


----------



## joe sod

it is amazing that for the last 20 years when china was producing cheap manufactured goods nobody saw it as a threat it was only the textile workers in donegal, or the electronics assembly workers that suffered. when these workers complained they were more or less told to shut up, this was globalisation and it benefited the economy as a whole. now that china is threatening middle class jobs the attitude to china is changing, the talk of tarriffs and reneging on debts surfaces. why is it always the case that globalisation is allowed to destroy low income jobs but when it threatens middle income jobs then globalisation becomes something evil to be controlled


----------



## badabing

csirl said:


> I dont entirely agree with his views on China. I think China is in for troubled times in the future. Reason?
> 
> A consumer driven middle class is an autocracies worst nightmare. If the Chinese middle class continues to grow, the Communists will not survive. And "smooth transitions to democracy" just dont happen, even with the best will in the world - ask Gorbachev.
> 
> As the % of middle class people grows, it will eventually reach a tipping point. And like a titration experiment, things will change very quickly. The autocrats will not be able to keep up with the demands of the people for a greater say and more freedom. There will be a revolution and in a country the size of China with many different ethnic provinces, it will split into many different countries ala USSR. Some of the countries will probably do well long term, others wont.
> 
> What does this mean for the economy? It means a short period of unstability and uncertainty, causing a short sharp shock to the markets. What happens afterwards depends on how things pan out.
> 
> But the idea that China, as it is today, will get more powerful and the communists becoming a major world force is a fantasy.
> 
> The nightmare scenario (for the Chinese) is the communists refusing to go quietly and using military might against there own people - thus turning a quick transition into a long drawn out devastating process.



I don't think you are likely to see claims for a western style democracy in china. Look at their neighbour Japan, who have been running a centralised 'militarized' economy since WW2. 'Favoured' companies get investemnt till this day. As another poster mentioned, the chineese do not see the world through our eyes or crave our  style of democracy. the 'communist' chineese government views that 'to die wealthy is glorious' and is succombing to growing demands for property rights. I would be careful about thinking that autocracy and democracy are mutually exclusive. Of course it will be the centralised economy that will bring the eventual downfall of China as we have seen with Japan. I think you are more likely to see economic adversity (which may it self precipitate a revolution) happening before a natural revolution.


----------



## MichaelDes

You are all caught up for some reason about China stealing middle class jobs. How can that be the case. The country can not compete on international commercial language, that is English. India is the big threat not China that will affect things. Whether it's ancillary services for banking (whom BOI now use very extensively), CAD services, accountancy etc etc. Anything that is data transferable. The country is producing 500,000 educated graduates per year that are highly skilled and highly motivated and are working on much cheaper rates. English again is their extensive language.


----------



## brodiebabe

imogen said:


> I have some UK friends who experienced negative equity in the early 1990s and they reported the same feelings of entrapment and helplessness.


 
Britain had a high divorce rate at this time (as it does now) so when property prices crashed there was a hge amount of couples who had split up and who needed to sell their properties.  If they did not have to sell their properties they could have had the option of riding the decreased prices, held on to their properties and hope they would have increased in value after 10 yrs or so.

How does this bode for Ireland - falling house prices combined with an increasing divorce rate?


----------



## GeneralZod

MichaelDes said:


> India is the big threat not China that will affect things.



They don't have the demographic problems of China's aging population either.
China is already losing manufacturing jobs to cheaper locations as they're becoming more service orientated. 
Graduates from the Indian subcontinent are much more prevalent in the work place and in consultancy roles.


----------



## noilh

ubiquitous said:


> Were you living in a cave when the school bus tragedy happened in Kentstown a few years ago?



Were you living in a cave when good manners were being passed around?


----------



## busman

I like the comment 'Irish Celebrity Chefs' so wake up folks - they are only out for themselves.  Hobbs, McWilliams, Ahern getting rich by using the 'fear' tactic.  If they were genuine and actually knew something they would have made lots of cash on their knowledge rather than writing books and spreading fear to generate same.
We have lots of successful Irish people like - O'Leary , Desmond, MacManus etc - why should we listen to these guys shouting 'doom & gloom'.

Success is an attitude to a great degree and dont let these so called experts (only interested in personal gain) ruin it on everyone else.

As one great man siad "Limits exist only in one's mind"


----------



## Perplexed

Is that a party political broadcast ??


----------



## ubiquitous

busman said:


> Hobbs, McWilliams, Ahern getting rich by using the 'fear' tactic.  If they were genuine and actually knew something they would have made lots of cash on their knowledge
> 
> 
> ....these so called experts (only interested in personal gain)...



I think there may be a contradiction here?


----------



## Moggy

http://www.independent.ie/national-...om-not-bust-say-the-real-experts-1085746.html



> So, why don't we start actually listening to the true voices of authority, the business owners, on how the economy is performing and not these jumped up so-called experts who are spreading the doom for their own financial benefit.


----------



## room305

Surely businesses owners have just as much of a vested interest in maintaining an "all is well" stance as McWilliams et. al. have in claiming we're doomed?


----------



## Moggy

room305 said:


> Surely businesses owners have just as much of a vested interest in maintaining an "all is well" stance as McWilliams et. al. have in claiming we're doomed?



The point is the statistics are positive.  I know statistics can be manipulated but the phrase "you can't polish a turd" comes to mind.  If we were in for it there'd be no hiding it.


----------



## ubiquitous

So if the dogs on the street know (1) that the residential construction sector accounts for a large element of our economy, and (2) that this sector is decreasing its production; should we collectively act on this information as soon as we learn of it, or should we bury our heads in the sand for a year or two until the statistics are published?


----------



## z106

I'd be very curious to know if david mcwillliams has any residential property still in ireland?


----------



## Moggy

ubiquitous said:


> So if the dogs on the street know (1) that the residential construction sector accounts for a large element of our economy,



An economy is based on imports and exports, considering the Irish construction industry is all imports how is this going to affect the balance of the economy? Mcwilliams is great at looking at past examples, so lets take an Irish example.  In the late 90's and early 2000's our economy was largely based on IT.  That got whacked and to top it all off along came India and increased competition.  Now I know alot of people got burnt but the industry survived and competition from India has been a very healthy thing.  Things are now "Normal".



ubiquitous said:


> and (2) that this sector is decreasing its production; should we collectively act on this information as soon as we learn of it, or should we bury our heads in the sand for a year or two until the statistics are published?


Not bury your head in the sand but unless you are involved in the construction industry you should continue as normal.  A decrease in production does not mean a crash.  Things go up and down, thats life.


----------



## room305

Moggy said:


> If we were in for it there'd be no hiding it.



Statistics are a lagging indicator and as such they will only tell people that we're in a recession when we're already in the thick of it. On a micro scale that's about as useful as deciding to ignore the prospect of being made redundant until a year or so after you're let go.


----------



## Moggy

room305 said:


> Statistics are a lagging indicator and as such they will only tell people that we're in a recession when we're already in the thick of it.


Lagging back to 1999 when McWilliams was still spouting the same rubbish?  Open your eyes.  People need to get on with work.  The dream of sitting on your ass waiting for your house to make you a millionaire are over, that is all...nothing more.


----------



## room305

Moggy said:


> An economy is based on imports and exports, considering the Irish construction industry is all imports how is this going to affect the balance of the economy?





Moggy said:


> Not bury your head in the sand but unless you are involved in the construction industry you should continue as normal.  A decrease in production does not mean a crash.  Things go up and down, thats life.





Moggy said:


> If we were in for it there'd be no hiding it.





Moggy said:


> Open your eyes. People need to get on with work. The dream of sitting on your ass waiting for your house to make you a millionaire are over, that is all...nothing more.



So you're saying that the construction sector will experience a downturn but the economy will prosper regardless?


----------



## Moggy

room305 said:


> So you're saying that the construction sector will experience a downturn but the economy will prosper regardless?



What I'm saying is the construction industry in Ireland is no more than a redistribution of wealth and credit.  It is not bringing money into the country and I do not think a normalisation will have a major negative effect on people outside of the industry or on the economy as a whole.  In fact I think it will be healthy, see my forest fire analogy. People will now have to work for a living and those with money to spare will have to invest in something which is of benefit to the country.


----------



## diarmuidc

Moggy said:


> I do not think a normalisation will have a major negative effect on people outside of the industry


But isn't the whole point, that so many people are *in *that particular industry (and its offshoots), and when it turns down many will be impacted.


----------



## Moggy

diarmuidc said:


> But isn't the whole point, that so many people are *in *that particular industry (and its offshoots), and when it turns down many will be impacted.



But there are people in the industry that should not be there.  They are riding the gravy train.  For them it will be a case of back to the day job.  Anyway, the smart ones have already cashed in and gone back to the day job.

As for the construction firms, they will simply have to pull up their socks.  Gone are the days of shabby jobs and a take it or leave it attitude, and why should we have any sympathy for them?


----------



## samfarrell

I noticed McWilliams new book costs 25 euro. I hope he includes this in his assessment of a high cost economy !


----------



## ubiquitous

Moggy said:


> But there are people in the industry that should not be there.  They are riding the gravy train.  For them it will be a case of back to the day job. Anyway, the smart ones have already cashed in and gone back to the day job.



Do you mean emigration? Or back to school? A good percentage of the building contractors and subcontractors in my own neck of the woods were either working abroad, or were in school or college 10 years ago. I actually don't know of any of them who "have already cashed in and gone back to the day job" in recent times.


----------



## Sar

I noticed McWilliams new book costs 25 euro. I hope he includes this in his assessment of a high cost economy !€25 is not particularly expensive for a hardback book. It's the standard price for an Irish published book of that length and quite cheap compared to a UK published one.


----------



## MichaelDes

Moggy said:


> What I'm saying is the construction industry in Ireland is no more than a redistribution of wealth and credit. It is not bringing money into the country and I do not think a normalisation will have a major negative effect on people outside of the industry or on the economy as a whole. In fact I think it will be healthy, see my forest fire analogy. People will now have to work for a living and those with money to spare will have to invest in something which is of benefit to the country.


 
I agree recession is good for getting rid of the rot but how long do you anticipate a downturn? Has the economy become too expensive, as like what happened to Germany and Japan. Both countries had an over reliance on property and had a to strong "a feel good factor" among its citizens. It took 12 years plus to regain stability - if it can be fully called yet.

My view is, if the government had the bottle, it should have stuck to its property agenda in circa 2001 and penalised second homes through higher tax. Therefore this quagmire we are in, would not have reared its ugly head. We may have retained a "Nordic style" stable economy. Credit booms always burst and cause a headache. But for now we should learn possibly from Germany and Japan who've had to fight their way out of deep holes. Both have been imaginative in creating the right conditions for stability through output/productivity & FDI, whilst restricting consumer speculation (especially Japan).


----------



## gonk

MichaelDes said:


> My view is, if the government had the bottle, it should have stuck to its property agenda in circa 2001 and penalised second homes through higher tax. .


 
It tried to do this in 1998 after the 1st Bacon report, when it removed mortgage interest relief on rental income for investors. The aim of this was to reduce competition from investors in the first-time-buyers market. The result was an exodus from the private rental market, followed by a shortage of rental acommodation and higher rents. The government was forced into a u-turn on this measure.

Experience shows attempts by government to control the price of housing through the tax system either don't work or have drastic unforeseen consequences.


----------



## Mr Big H

I do like his Saab. Nice car David.


----------



## MichaelDes

gonk said:


> It tried to do this in 1998 after the 1st Bacon report, when it removed mortgage interest relief on rental income for investors. The aim of this was to reduce competition from investors in the first-time-buyers market. The result was an exodus from the private rental market, followed by a shortage of rental acommodation and higher rents. The government was forced into a u-turn on this measure.
> 
> Experience shows attempts by government to control the price of housing through the tax system either don't work or have drastic unforeseen consequences.


 
Do you think the government gave enough time for Bacon 2 to settle or did it have its arm heavily twisted by certain interest groups such as CIF? It was a crisis acknowledged by the government back then in 1999 that instigated these reports. Little did they know how worse it would get? 

Maybe the intervention needed certain tweaking rather than a total u-turn. Surely intervention could have worked. Since its reversal, haven't rents gone up considerably although not totally in synch with house price growth. HPG has gone through the stratosphere and way beyond and in essence will not served the economy well in the long term. I support free market to an extent but mechanisms are necesscary to control reckless abandon.


----------



## Carpenter

As someone who works in the construction sector I have been absolutely amazed at how the expectations of the Irish consumer have risen so much in the past ten years; when I purchased my own home nearly ten years ago a (pretty cheap and flimsy) laminate fitted wardrobe was "de rigeur" and the only debate in relation to floor finishes was "will I go for solid or semi-solid, vinyl or tile".  Even a random inspection through the Home and Garden forum will show how far we have come: we worry about our solid wide plank flooring and underfloor heating/ where can we source the natural  stone flags for our conservatory etc etc.  To my mind this type of extravagence in terms of spending on our homes was always a little worrying, especially amongst younger, first time buyers who had little savings and wanted everything "now".  There was an enormous amount of growth in the DIY and home furnishing and accessory retail sector over the last ten years and I have always felt that any newcomer entering that retail market in the last 3-4 years had just missed the boat.  As already stated all these enterprises fueled imports and generated no new wealth.  In the bom times we've just come through the construction sector did rise to the challenge posed by government: build more units- but many would argue (I can't disagree) that quality suffered, both in terms of actual build quality and the quality of design and planning of towns and villages around the country.  The construction sector will downsize, it has no choice, but we will see smart operators embrace the challenge, building better quality; improved sustainability, quality design and planning for people.  I like the "forsest fire " analogy that was used before, unfortunately there will be a lot of people hurt in the process but cest la vie......Let's see what Mr McWilliams has to say tonight?


----------



## room305

gonk said:


> Experience shows attempts by government to control the price of housing through the tax system either don't work or have drastic unforeseen consequences.



Government attempts to control the price of anything tend to end inevitably in failure but interventions in the property market are especially disastrous, probably because they take so long to manifest.



MichaelDes said:


> I support free market to an extent but mechanisms are necesscary to control reckless abandon.



People who say "I support free markets _but_ ..." are generally not in favour of free markets (which are defined by their absence of intervention).

The "reckless abandon" (irrational exuberrance?) you speak of could be avoided by

- Returning to the gold standard or some comparable fixed money system
- Abandoning fractional reserve banking
- Scrapping the central banking system


----------



## gonk

MichaelDes said:


> Since its reversal, haven't rents gone up considerably.


 
Not really - they're only now back where they were five years ago:


http://www.daft.ie/report/images/daft-rent-index-aug-2007.png


----------



## z106

Isthat daft report displaying real terns or nominal terms?


----------



## MichaelDes

People who say "I support free markets _but_ ..." are generally not in favour of free markets (which are defined by their absence of intervention).

The "reckless abandon" (irrational exuberrance?) you speak of could be avoided by

- Returning to the gold standard or some comparable fixed money system
- Abandoning fractional reserve banking
- Scrapping the central banking system[/quote]


Japan is an example of a country that has learn't from its past mistakes and no longer follows the path of a consumer spending euphoria to prop up its economy. Its marketplace today is built more on sound principles. Coupled to this the BOJ although with government intervention has limited credit availability to its citizens thus avoiding another bad run like the 1990's. (That's what I mean on free market with some level of intervention). I reckon Japanese would call their past antics reckless abandon, we may do so too - but later on from now.


----------



## gonk

qwertyuiop said:


> Isthat daft report displaying real terns or nominal terms?


 
Nominal terms AFAIK, so in fact in real terms rents are lower now than in 2002.


----------



## z106

You may well be right gonk that it is nominal terms but i find that hard to believe to be honest.

I may be proven wrong on that one though.


----------



## gonk

Well, for what it's worth it reflects my personal experience. I'm getting the same rent today for an apartment in Dublin as I was getting when I bought it first five years ago.


----------



## rabbit

You are lucky.  I know more than a few people involved in small home-grown Irish manufacturing firms, who were doing ok years ago, and who now find it increasingly difficult to compete with cheap imports from China.  Go in to any goods shop - the labels may be European or American, but I can guarantee you everything that is selling is made in the far east now.  Toys, clothes, sports goods, you name it.


----------



## z106

gonk said:


> Well, for what it's worth it reflects my personal experience. I'm getting the same rent today for an apartment in Dublin as I was getting when I bought it first five years ago.


 
Fair enough gonk - that is interesting. 
Mabe it is nominal so.

I'm guessing that apartment must be outside the city centre though ya?

Funnily enough,just today I actually just rented a standard enough 55 sq. mtr. 1-bed apt with parking in the south docks,dublin 2 for €1,575 / month.
I can't see that happening 5 years ago anywhere in dublin.

I suspect that city centre rents have continued to rise over the last 5 years - outside the city centre may not have.


----------



## ubiquitous

MichaelDes said:


> Do you think the government gave enough time for Bacon 2 to settle... .



Bacon 2 was in place for 3 years 9 months - from March 98 to Dec 01. How long do you think it needed? Five years? Ten years? The main victims of Bacon 2 were the tenants who either didn't want to, or couldn't buy their own homes, and who ended up being screwed on higher rents.


----------



## ubiquitous

posted twice


----------



## gonk

qwertyuiop said:


> I'm guessing that apartment must be outside the city centre though ya?
> Mabe it is nominal so.


 
Kilmainham - v. close to Luas. And the Luas wasn't running when I bought it!

If you think about it, the Daft index is itself a metric of inflation in rents. It wouldn't make sense to be adjusting it for general inflation.


----------



## MichaelDes

ubiquitous said:


> Bacon 2 was in place for 3 years 9 months - from March 98 to Dec 01. How long do you think it needed? Five years? Ten years? The main victims of Bacon 2 were the tenants who either didn't want to, or couldn't buy their own homes, and who ended up being screwed on higher rents.


 
Ubiquitous,

I think the Bacon report was flawed but could some other interventionist means have been used to flatten the market. With 15% of property presently lying vacant and the possibility that many young transient immigrants may move on if business flattens (renting on mass - a bit of unforeseen luck to prop our market). Will this exaggerate a worse effect in the longer term for the market?

Qwertyuiop is in the right position between the two canals - demand will always be greater in a capital city and withstand any aftershock.


----------



## gonk

MichaelDes said:


> I think the Bacon report was flawed but could some other interventionalist means have been used to flatten the market. With 15% of property presently lying vacant and the possiblity that many young transient immigrants may move on if business flattens (renting on mass - a bit of unforeseen luck to prop our market). Will this exagerrate a worse effect in the longer term for the market.


 
Government intervention is a very significant reason for there being so many empty houses. Tax relief designation for entire counties like Leitrim and Longford as well as holiday homes have resulted in large numbers of houses being built in areas where there would otherwise have been no demand. When the tax relief for the "investors" who bought these runs out, I can't see what resale market there will be for them and in the meantime the rental market is poor to non-existent. These reliefs have also had the result that places like Achill have been scarred with totally inappropriate holiday homes scattered like confetti all over the landscape. And again, these houses would be occupied for at best 10 to 12 weeks in the year, with the odd bank holiday weekend in between.


----------



## ubiquitous

MichaelDes said:


> I think the Bacon report was flawed but could some other interventionist means have been used to flatten the market.



That's a good question. Perhaps an annual property tax or domestic rates system might have acted as a brake on the market at the time in order to quell the excessive demand for housing. I don't believe that a measure along these lines would have worked after the market started going crazy around 2002, but it was worth a try around 1997 or 1998 before things got out of hand.


----------



## MichaelDes

gonk said:


> Government intervention is a very significant reason for there being so many empty houses. Tax relief designation for entire counties like Leitrim and Longford as well as holiday homes have resulted in large numbers of houses being built in areas where there would otherwise have been no demand.


 
Gonk,

You are entirely right on that point, the government has been wrong on gross rural development - but also it has been wrong not to control runaway growth. Houses in Leitrim etc are not worth the cost of building materials etc. How did they get it so wrong? Hindsight would have been wonderful.


----------



## room305

MichaelDes said:


> Japan is an example of a country that has learn't from its past mistakes and no longer follows the path of a consumer spending euphoria to prop up its economy. Its marketplace today is built more on sound principles. Coupled to this the BOJ although with government intervention has limited credit availability to its citizens thus avoiding another bad run like the 1990's. (That's what I mean on free market with some level of intervention). I reckon Japanese would call their past antics reckless abandon, we may do so too - but later on from now.



It's a strange example to pick. Given that

- The government and the BoJ loosened credit rules considerably during the boom years, fuelling spectacular asset price inflation (sound familiar?)
- After the collapse, the BoJ refused to allow banks to fail, keeping non-performing loans on their books for the better part of a decade with no means of writing them off
- The government continues to intervene to try and "kick start" the economy with government works programmes of every hue, including bridges to nowhere and free coupon passes for food, this has seen the debt-to-GDP ratio exceed 100%
- In the misguided belief that they can kill off deflation through a combination of low interest rates and a weak currency, the BoJ intervenes relentlessly in the currency markets to keep the Yen weak. This has fuelled asset price booms in everything from New Zealand property to modern art. This policy sees Japanese citizens shunning investment in their own country, preferring to borrow in Yen and place the money in high interest rate NZ deposit accounts.

It was the BoJ's inflationary loose-lending policies that caused the original bubble, the very same policies are unlikely to also be the solution, and help explain "the lost decade" from which the country has never recovered.


----------



## acannydoitji

Getting back on topic - The Generation Game.

I enjoy McWilliams's musings and hypotheses in general, however I feel that last nights programe was very poor.  It was dis-jointed and rambling and really added little to the debate or expanded in any significant way on points made last week.  Hastily put together and ill thought through I believe.  Can't wait to see what the big plan is next week!


----------



## Afuera

ubiquitous said:


> The main victims of Bacon 2 were the tenants who either didn't want to, or couldn't buy their own homes, and who ended up being screwed on higher rents.


Surely this was due to the lack of landlord-tenant legislation though? It was reformed in 2004 but is still greatly lacking when compared with international standards.


----------



## gonk

Afuera said:


> Surely this was due to the lack of landlord-tenant legislation though?


 
No, it was due to the lack of rental accomodation as a result of the government's hamfisted intervention. (No pun intended, Dr Bacon!)


----------



## MichaelDes

_It's a strange example to pick. Given that_

_- The government and the BoJ loosened credit rules considerably during the boom years, fuelling spectacular asset price inflation (sound familiar?)_
_- After the collapse, the BoJ refused to allow banks to fail, keeping non-performing loans on their books for the better part of a decade with no means of writing them off_
_- The government continues to intervene to try and "kick start" the economy with government works programmes of every hue, including bridges to nowhere and free coupon passes for food, this has seen the debt-to-GDP ratio exceed 100%_
_- In the misguided belief that they can kill off deflation through a combination of low interest rates and a weak currency, the BoJ intervenes relentlessly in the currency markets to keep the Yen weak. This has fuelled asset price booms in everything from New Zealand property to modern art. This policy sees Japanese citizens shunning investment in their own country, preferring to borrow in Yen and place the money in high interest rate NZ deposit accounts._

_It was the BoJ's inflationary loose-lending policies that caused the original bubble, the very same policies are unlikely to also be the solution, and help explain "the lost decade" from which the country has never recovered.[/quote]_

Everyone can be choosy about the facts they pick, so let’s have a go at where they are in 2007 for Japan as it sounds very different to our own.

Unemployment - 4.4%
Total population 127 million (workforce 66 million) Growth of pop 0.1%
GDP growth - 2.7%
GDP per capita - $38,341
Inflation - 0.1%
FDI - increasing monthly
Exports in June 2007 - 6.69Y trillion
Imports in June 2007 - 5.90Y trillion

A more self sufficient economy not reliant on China to dampen inflation (well there's a lot of history there). I'll give you the point about the carry trade versus toxic debt but this was greedy bankers and hedge funds being inventive to make money - as always these people make mistakes eventually and get bailed out by governments e.g. NR.

Now where is the problem with their economy? I personally think our model is in deep trouble since China is exporting inflation through wage demands. Also what happens to the Chinese system when it explodes – it’s a capitalist system on acid. Each week there are 300,000 new day traders who sign up into a market whose P/E is making the dot.com situation look reasonable. What happens to our types of economy if there is a blip – Japan will not suffer the same fallout?


----------



## room305

MichaelDes said:


> Everyone can be choosy about the facts they pick, so let’s have a go at where they are in 2007 for Japan as it sounds very different to our own.



I was not trying to compare the health of the Japanese economy to our own, merely pointing out that your example of an economy with the right amount of government intervention in the markets leaves a lot to be desired, given the BoJ's role in sustaining an unsustainable asset price boom and their hindering of any subsequent recovery.

It is also illogical to blame hedge funds for borrowing money that the BoJ was offering to them practically for free.


----------



## MichaelDes

room305 said:


> It is also illogical to blame hedge funds for borrowing money that the BoJ was offering to them practically for free.


 
Very true room305 - you can not blame the hedge funds etc, they are only making money, it's a capitalist system afer all. But all I am trying to point out is that certain economies went down the drain but have reinvented themselves, without doing so on the back of excess consumer expenditure. I think 70% of the Irish economy is great but the rest needs re-evaluation. Food, Tourism etc are all major USP's etc but we need to get rid of the reliance on construction at 21% GDP. It is to high by at least 11 of these percentage points. If this can be curtailed without causing trouble and wage inflation controlled we may have an easier ride in the global markets and avoid any upsets.


----------



## Sarsfield

acannydoitji said:


> Getting back on topic - The Generation Game.
> 
> I enjoy McWilliams's musings and hypotheses in general, however I feel that last nights programe was very poor. It was dis-jointed and rambling and really added little to the debate or expanded in any significant way on points made last week. Hastily put together and ill thought through I believe. Can't wait to see what the big plan is next week!


 
My thoughts exactly!  I was very disappointed at last nights programme.


----------



## samfarrell

I watched last nights program and again i didnt hear anything i didnt already know, and i was waiting for some practical advice ie: what i should be doing to safeguard my future , again nothing
maybe you have to buy the book for all the good stuff


----------



## MichaelDes

Sarsfield said:


> My thoughts exactly! I was very disappointed at last nights programme.


 
Ditto. The programme took a 20 minute point and expanded it out. There were no solutions. Anyone can report on what the fault lines are but how to fix them is another thing. But overall how do we land the economy towards sustainable stability? Hopefully he'll enlighten us further.


----------



## webtax

MichaelDes said:


> Hopefully he'll enlighten us further.



From what he's being saying so far it might be to sell our houses and invest in the chinese stock market! 
Hard to see how there's going to be any easy fixes, as investing in education and indigenous intellectual property take time to produce returns.


----------



## annR

He's been going on about this for so long, I am living in hope that he is building up to a bumper episode (and maybe a book) about what we should all be doing to survive in the new global economy.  I was ready to enroll in Chinese lessons after watching last night!


----------



## Wing&Prayer

I think the programme was useful, at least to spark debate on the issues, which has certainly been the case on this forum. While I agree the programme was a little wide of the reality mark we all must agree that property speculation and the explosion of personal wealth statements (SUV's etc) has become a little sickening of late, (personally I think that anyone with an SUV should actually park it 'off-road' and leave the legitimate spaces for everyone else!)
I think he is right insofar as it's time for a reality check.


----------



## Calico

I just took a flick through is book, and crikey it is so full of these god-awful phrases he keeps trying to coin...botox bettie/bono boomer etc. I like him but all that annoys me. He was so much better when he was interviewing people.


----------



## ivuernis

annR said:


> He's been going on about this for so long, I am living in hope that he is building up to a bumper episode (and maybe a book) about what we should all be doing to survive in the new global economy.  I was ready to enroll in Chinese lessons after watching last night!



Granted China has made huge strides in recent years and is now a global force to be reckoned with and will continue to be. However, it has many flaws and weaknesses of its own and is storing up some big future problems which David McWilliams fails to mention. A more balanced view with his Chinese love-in wouldn't go astray. He makes many valid points but in his quest to prove his point goes a bit overboard on the hyperbole imo.


----------



## MichaelDes

ivuernis said:


> Granted China has made huge strides in recent years and is now a global force to be reckoned with and will continue to be. However, it has many flaws and weaknesses of its own and is storing up some big future problems which David McWilliams fails to mention. A more balanced view with his Chinese love-in wouldn't go astray. He makes many valid points but in his quest to prove his point goes a bit overboard on the hyperbole imo.


 
Very true, also fails to mention India, which is hurting China and is a threat to stealing middle class incomes in Ireland. I know its mentioned in earlier threads. Many other emerging markets affecting China such as Pakistan etc too. Quality coming out of China is terrible, many factories sub contract to smaller street factories with no quality control system. The Mattel is the tip of the iceberg, CEO of main supplier committed suicide (3 weeks ago) due to their subcontracts leading to major errors. My brother is a Quality Control Direction in Asia, of all the countries, China is acknowledged by him as one of the worst. It is not the only beacon that should have been used in Mc Williams progamme. It will take them a lot of years to up their quality control at which time it will no longer be as low cost a country - whilst Indonesia will continue to be.


----------



## Calico

Slightly off-topic, but I remember when I lived in the US I was always buying things that were breaking - lights, alarm clocks, cd players etc. The common link being that they were all made in China! After I clocked this, I never, ever bought anything that was made and China and still don't. Occassionally when it happens accidently (usually because the company is Japanese etc. which manufactures in China) I am amazed if the damn thing doesn't break which is about half the time.


----------



## z106

Calico said:


> I just took a flick through is book, and crikey it is so full of these god-awful phrases he keeps trying to coin...botox bettie/bono boomer etc. I like him but all that annoys me. He was so much better when he was interviewing people.


 
Ya - I'm teh same. It annoys me too - It's like he goes out of his way to introduce these phrases.

However - in his defence - using these names  is a convenient way for him to revert back to a character described earlier on in the book such as 'botox bettie' etc.


----------



## MichaelDes

Very interesting programme about the Diaspora. Israel is punching its weight very highly on the world stage (no great fan of theirs etc). The country is ranked 18th globally on GDP per capita with a country that has 1.5 million more than ours (as an island that is). Irish seem to be well liked and bi-partisan and this has a lot of mileage. Passports should be given to those shown in the programme; it would have benefits to our economy and spread the love of Guinness guzzling etc. Whatever your views of David Mc Williams, I think he has to be congratulated for causing us to think outside the box - if he sells books on the back of it, good luck to him, he's contributing to the taxes. (or is he exempt for writing it under the artist tax breaks).


----------



## blondebimbo

MichaelDes said:


> Israel is punching its weight very highly on the world stage (no great fan of theirs etc).



Israel despite having 0.001% of the worlds population has received over a third of all US foreign aid . Thats impressive.


----------



## MichaelDes

blondebimbo said:


> Israel despite having 0.001% of the worlds population has received over a third of all US foreign aid . Thats impressive.


 
Blondebimbo. You can either be cynical and take side swipes at the issue such as Israel (every knows about foreign aid argument plus others). But it has one the highest level of business startup's in the developing world. Putting that aside, is there any point in using diaspora, or is it a watse of time?


----------



## command

I think the notion of giving them passports is a good one. Our culture is in danger of being consumed and diluted by the recent social shift in the country. Foreign workers and wealth have caused it and I think the rugby team is the embodyment of it. 

To continue the analogy if the team was ireland and the fans the diaspora then the absense of a flag and national anthem left the fans thinking that what they were supporting wasn't exactly what they had signed up for. They traveled expecting a traditional irish team to be full of fire and brimstone, instead they got a team with a more dispassionate "professional" outlook and ultimately it wasn't loosing that got to the fans but the manner of it, the absense of a soul.  

It would be the same for returning diaspora who live a dream in the US or Argentina who all of a sudden we give a passport to and when they arrive instead of a thousand welcomes and people unshakably possitive in outlook they get met by eastern europeans and a Irishness that is not quite what it was. 

Anyone with relations abroad who came to visit during their holidays will remember the fuss their mothers would make getting the house clean and making sandwiches or a meal for the arrival of the relations. 

I think we too would need to get the sandwiches ready and clean the house before we could expect to receive diaspora. 

How much better would our tourisim industry be if the reception desks of our hotels were staffed by a young Argentinian who is here to learn "Irishness" but is passionate about their Irishness and not some migrant worker. There is absolutely nothing wrong with eastern europen or any other nationalities working in Ireland. They are here for economic reasons and not becuase the love Ireland. 

Who knows, maybe the diaspora are exactly what we need to help us re-focus our minds on Ireland again and not just on pimping ourselves out to multinationalism to the extent that we are willing to become more generically european at the expense of our Irishness. This means we have diluted our unique selling point and are competing on a level playing feild. 

Playing the Irish card to a diaspora who have experienced Ireland to be everything their parents told them it would has to tilt the balance in our favour. It would be like playing downhill with the wind on our backs and the fans singing the feilds of athenry all around us. 

Sure we couldn't loose.


----------



## Sherman

Unfortunately McWilliams forgets the main reason we couldn't just issue passports to everyone in the 'diaspora' (by the way, I'd love to know how you'd define diaspora - an Irish granny? Great-granny? Great-great-great granny - all from the days when paper records weren't exactly de rigeur in places like Argentina) - the EU would have a hissy fit if we suddenly issued 3 million new Irish passports.

Being honest, most of those Argentinians and Americans would end up in London the day they got hold of their Irish passport...


----------



## gonk

Sherman said:


> Unfortunately McWilliams forgets the main reason we couldn't just issue passports to everyone in the 'diaspora' (by the way, I'd love to know how you'd define diaspora - an Irish granny? Great-granny? Great-great-great granny - all from the days when paper records weren't exactly de rigeur in places like Argentina) - the EU would have a hissy fit if we suddenly issued 3 million new Irish passports.


 
The rules regarding citizenship for descendants of Irish emigrants are already quite generous compared to many other countries - all you need is one Irish grandparent.

This, by the way, is probably the main reason successive governments have been so reluctant to extend voting rights to the Irish abroad. I remember seeing in the _Sunday Press_ years ago an estimate that there were about 21 million people worldwide (apart from those already in Ireland!) who were entitled to Irish citizenship by reason of the above rule. Imagine if they all decided to vote in a general election . . .


----------



## Afuera

gonk said:


> This, by the way, is probably the main reason successive governments have been so reluctant to extend voting rights to the Irish abroad. I remember seeing in the _Sunday Press_ years ago an estimate that there were about 21 million people worldwide (apart from those already in Ireland!) who were entitled to Irish citizenship by reason of the above rule. Imagine if they all decided to vote in a general election . . .



The restrictions on the rights of Irish abroad to vote go above and beyond that though. If you are an Irish citizen living outside the country temporarily, even if it's in an other EU country, you lose your right to vote! You can only vote in Ireland if you're an Irish citizen and you're resident there. I suspect that Irish citizens abroad would be more likely to look for a change in the regime at home and the govenment is reluctant to help that happen.


----------



## ubiquitous

Afuera said:


> I suspect that Irish citizens abroad would be more likely to look for a change in the regime at home and the govenment is reluctant to help that happen.



Is that a bad thing?


----------



## gonk

ubiquitous said:


> Is that a bad thing?


 
I think it certainly would be a bad thing if the number of potential voters resident outside Ireland was several times the number in Ireland.


----------



## Afuera

ubiquitous said:


> Is that a bad thing?


I'm not going to argue about whether it's good or bad thing. Only that it goes against standard practise in the developed world. Why do we deny our citizens the right to vote?

Most other developed countries have a postal vote for those living abroad. Australians by law are required to vote no matter where they are in the world. In this day and age, with increased movement throughout the EU, it seems very odd that we deny our citizens the right to vote, once they move a couple of hundred kilometres away.


----------



## Afuera

gonk said:


> I think it certainly would be a bad thing if the number of potential voters resident outside Ireland was several times the number in Ireland.


I don't think we should give people, who are only Irish citizens on paper (through a link with the great-grandmother or whatever), the right to vote on a country they have never been to. They could at least allow Irish citizens who have been resident in the country within the last 5 years or so to vote though.


----------



## ubiquitous

Afuera said:


> They could at least allow Irish citizens who have been resident in the country within the last 5 years or so to vote though.



Nice in theory but dodgy in practice. Given the poor state of the electoral register at home, it would be hard to be confident that the authorities could competently supervise the process abroad.


----------



## Afuera

Sherman said:


> Unfortunately McWilliams forgets the main reason we couldn't just issue passports to everyone in the 'diaspora' (by the way, I'd love to know how you'd define diaspora - an Irish granny? Great-granny? Great-great-great granny - all from the days when paper records weren't exactly de rigeur in places like Argentina) - the EU would have a hissy fit if we suddenly issued 3 million new Irish passports.
> 
> Being honest, most of those Argentinians and Americans would end up in London the day they got hold of their Irish passport...


Why would they have to issue them with Irish passports? They could give them a 3-5 year working visa for Ireland only? If they stay in Ireland for 5 years, they would be entitled to become an Irish citizen through the naturalization process that currently exists.


----------



## Afuera

ubiquitous said:


> Nice in theory but dodgy in practice. Given the poor state of the electoral register at home, it would be hard to be confident that the authorities could competently supervise the process abroad.


I don't think that a postal vote requires that much supervision tbh. You're right though on the point about the state of the electoral register though. It seems like a lot of things in Ireland are quite dodgy in practise.


----------



## webtax

MichaelDes said:


> I think he has to be congratulated for causing us to think outside the box



Agree completely - Bertie & co have been whingeing about the 'prophets or doom' for talking up our problems, but McWilliams offers more vision & initiative than anyone in the government. 
Have you heard of any coherent long term vision from the government besides their transport 2020 and decentralisation debacle?


----------



## samfarrell

How exactly will issuing passports to emmigrants solve the economic problems we have as McWilliams suggests it will ? 
and why do we think the well educated ones would return here to live ?, I suggest we would get the ones who are less innovative
this suggestion could be a disaster of great proportions


----------



## gonk

Afuera said:


> I don't think that a postal vote requires that much supervision tbh.


 
The British government attempted to bring in widespread use of postal voting in recent years to increase election turnout.

The result was chaotic, with widespread allegations of maladministration, fraud, vote buying and voter coercion.

http://politics.guardian.co.uk/election/story/0,15803,1458341,00.html

*New fears over postal vote fraud*



[FONT=arial,helvetica,sans-serif]System nears crisis point as main parties are told to stop interfering[/FONT]


----------



## Afuera

gonk said:


> The British government attempted to bring in widespread use of postal voting in recent years to increase election turnout.
> 
> The result was chaotic, with widespread allegations of maladministration, fraud, vote buying and voter coercion.


Overseas postal voting is not open to the same problems they encountered in Birmingham though. When they tried to do it there as a test case they had people burning postboxes, attacking and bribing postmen etc. This can only happen if everyone in the local area needs to use the postal system to vote, so I wouldn't rate this a very good reference for its viability.


----------



## ubiquitous

So to take one example, would you be 100% sure that the IRA/Noraid activists among the Irish community in the Bronx in the 1980s would have been above this, had they been given the opportunity?


----------



## Afuera

ubiquitous said:


> So to take one example, would you be 100% sure that the IRA/Noraid activists among the Irish community in the Bronx in the 1980s would have been above this, had they been given the opportunity?


If it's only Irish citizens, who were resident in Ireland within the last few years that could vote, I don't see how they'd get much of an opportunity from it tbh.


----------



## Sarsfield

samfarrell said:


> and why do we think the well educated ones would return here to live ?


 
But that's not the idea at all.  The idea is to create a global network that works to the benefit of Ireland.  Not to bring all the 10th generation Irish home!

The diaspora can invest in Ireland from abroad and create new sales opportunities for Irish business across the world.

That's what McWilliams proposes.


----------



## z109

Sarsfield said:


> But that's not the idea at all.  The idea is to create a global network that works to the benefit of Ireland.  Not to bring all the 10th generation Irish home!
> 
> The diaspora can invest in Ireland from abroad and create new sales opportunities for Irish business across the world.
> 
> That's what McWilliams proposes.


The bit I don't understand about the idea is what would these suckers, sorry investors, get out of it that isn't available a) to them in other investment markets b) to other investors in Ireland. Is he suggesting that poor business ideas should be invested in simply because they are in Ireland? To me that is poor business/investment/economics.

If it is not what he is suggesting, is he talking about some sort of Irish 'brotherhood' like the masons? (We could have a uniform for meetings, a GAA shirt, a sacred drink (anything with alcohol in it), speak gaolge as a secret code!).


----------



## almo

Personally as an Irish person living abroad I'm against giving "diaspora" the vote.  For those born and registered in Ireland and working abroad (for less than a year) I'd allow it at a local embassy.  

Reasons why not to allow "diaspora" a vote:  1.  Croatia.

This so-called "diaspora" not only egged on a war, but supported the warmongers to drag the country into an unnecessary war.  And ever since have cast their considerable vote for the far right party who currently control the country (with a little help from a certain Fianna Fail PR Master) and maintain the status quo from the previous communist/socialit regime.

I agree with the previous poster on the shennanigans that could have been, or would be possible, with certain elements in the Bronx, it happened and happens with the Croatian vote.

Give out passports, certainly if deserved, we missed out on one of the best defenders/defensive midfielders in Argentina back in the mid-80's, and given the developing prowess of the same country, surely there's an outhalf or two with Irish blood available for us!


----------



## colc1

almo said:


> Give out passports, certainly if deserved, we missed out on one of the best defenders/defensive midfielders in Argentina back in the mid-80's, and given the developing prowess of the same country, surely there's an outhalf or two with Irish blood available for us!


 

sorry I know a bit off topic but who was the midfielder (curiosity killed the cat!) haha


----------



## ivuernis

colc1 said:


> sorry I know a bit off topic but who was the midfielder (curiosity killed the cat!) haha



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


----------



## blondebimbo

MichaelDes said:


> Blondebimbo. You can either be cynical and take side swipes at the issue such as Israel (every knows about foreign aid argument plus others). But it has one the highest level of business startup's in the developing world. Putting that aside, is there any point in using diaspora, or is it a watse of time?



Ok what are you talking about ? I dont get you . Its arrogant to write such things as 'everyone knows.'  Everyone does not know.
I for one don't know what you are on about and take it you are taking a side swipe at my post ? 
Please explain yourself.


----------



## ajapale

enough of these bad tempered off topic exchanges.

thread closed for consideration by moderators

aj(moderator)


----------

