# Have we any lessons from the last 10 years



## simplyjoe (4 Dec 2009)

I am worried that the main problems encountered in the boom and post boom have not been addressed. 

Due to our human instinct to blame someone else most people have not looked at their behaviour during and after the Celtic Tiger era. The issues of over optimistic expectations, poor credit control, poor cost control, no savings, poor staff management, too high personal drawings and standard of living, no strategic planning and many more matters need to be corrected so that any future growth will be better handled. 

These issues need to be tackled by both the Government and individuals or private enterprises. 

Is there any strategy being planned so that future entrepreneurs/business people will be better educated or prepared? 

I would also say that these poor practices were in the main encouraged by the example given by our government and the way they handled our affairs.


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## Mpsox (4 Dec 2009)

I think one thing the generation who grew up in the Celtic Tiger era and knew no different have learnt over the last 2 years is that life is not always easy. That might be no harm in the long run


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## canicemcavoy (4 Dec 2009)

I find it shocking that the government has still not put in legislation to stop the banks recklessly lending in the exact same manner as they have during the bubble. There's absolutely nothing to stop them doing it again, then put their hand out for money shamelessly when the proverbial hits the fan another 10 or 15 years down the line.


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## censuspro (4 Dec 2009)

History always repeats itself.


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## roro123 (4 Dec 2009)

....but it seldom rhymes....


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## delgirl (4 Dec 2009)

There was a TV programme on from the States earlier in the week about families who are now homeless and living in tent cities due to job loss and business failure.

When asked what they would have done differently, they all said save.

Too many people were spending their incomes and more by using credit cards and loans to prop up their lifestyles.

Only those who have savings to see them through the recession will survive.


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## ajapale (4 Dec 2009)

Moved from  Askaboutbusiness (which is for specific focused questions about running businesses in Ireland) to The Great Financial Debates (which is where broad sweeping discussions on economics and business in general is discussed).


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## z101 (5 Dec 2009)

We went from a society that was starved of credit to one where anybody got it. I remember working in the US as a waiter in the early 90's and was amazed at the cars some of the people I worked with drove as allot were college students. I was amazed banks would give them loans as in Ireland at that time people with full time jobs could barely get a loan.
When credit became freely available here people gobbled it as some sort of a reaction to the previous meanness of the banks. Others simply followed what they saw others doing. That said I know ordinary people who never bought into it, as Ben Dunne said on tonight’s Late Late show the banks were telling him for 10k they give him a 100k loan. He knew it was not right and so did a lot of people in fairness. 
There is some argument for borrowing working capital within the means of the business it's used for, but people borrowing for holidays or even new cars every year was incredible and stupid. People have to take responsibility for themselves and what they put their signature on and have NO one else to blame in my mind. I know banks were giving loans the hard sell but I don’t understand how people felt compelled to buy and somehow that’s the banks fault. I do believe that a huge number of people don’t actually basically understand financial products, compound interest, how term/car loans work or even mortgages not to mentions different insurance. They just trust what they were told by someone who SELLS the stuff. Does that make the seller dishonest or the buyer (an adult) an idiot? Most people don’t realise that to buy a car you BUY a loan first. There is a chasm in the thinking process and responsibility needed in buying such products and the thinking of allot of buyers, namely been blinded by the new car, house or TV, Sofa, holiday etc. 
This should be drilled in at secondary schools before the Credit card takes the mindset. There should be night course's in this stuff and how to understand financial products and more so how to recognise better deals for your needs. How to define your needs properly with objective criteria. 
Banks definitely should be better marshalled in how they sell products. There is regulation but we need it to be better policed. We are great in Ireland for legislation but poor at seeing it supported with seeing it administered. Now we are gone back to the banks starving us of credit which is also wrong. Banks sold investment products to people without the customer’s best interest in mind. The bonus culture created this. But no bank forced or codded a person into buying a housed. The only person I remember saying wait a minute was David McWilliam so no one has a moral high ground on that, but still adults made their own decision with some deciding not to buy it should be remembered.
I even heard a public servant using that fact they bought a house in 2006 as a justifiable reason why they cant take pay cuts.. It was their decision and no one else’s and the rest of the country should not be indebted because of it.


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## Complainer (5 Dec 2009)

Ceatharlach said:


> I even heard a public servant using that fact they bought a house in 2006 as a justifiable reason why they cant take pay cuts.. It was their decision and no one else’s and the rest of the country should not be indebted because of it.


Yes and No - personal responsibility does indeed come into it. However, you have to remember the context. Banks throwing money around like there was no tomorrow, property prices steadily increasing for 15+ years, so there was a whole generation of adults who had never experienced anything other than price increases. Strong economic growth fuelling demand. 

For anyone considering buying their first property in 05/06, there was the substantial risk of being 'left behind' and losing the chance to ever own their own property. It is easy to be clever with hindsight.


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## brigade (5 Dec 2009)

Ceatharlach said:


> I even heard a public servant using that fact they bought a house in 2006 as a justifiable reason why they cant take pay cuts.. It was their decision and no one else’s and the rest of the country should not be indebted because of it.


 
I agree with everything else you said except this.
The reason being if you went to get a mortgage it was based on your salary and your ability to repay based on that salary.
If people are having salary reductions and this affects their ability to repay their mortgage, I would have some sympathy for them.
Not sure why you brought up the example of a public servant, surely this applies to private sector also.


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## UFC (6 Dec 2009)

Complainer said:


> Yes and No - personal responsibility does indeed come into it. However, you have to remember the context. Banks throwing money around like there was no tomorrow, property prices steadily increasing for 15+ years, so there was a whole generation of adults who had never experienced anything other than price increases. Strong economic growth fuelling demand.
> 
> For anyone considering buying their first property in 05/06, there was the substantial risk of being 'left behind' and losing the chance to ever own their own property. It is easy to be clever with hindsight.


 
In fairness I know nothing about economics but because I'm have some sort of brain I could see paying 10 times the average salary for a tiny ex-council house made no sense and suggested something was wrong. So instead of taking a gamble I went with my instincts and started researching property bubbles and found out instantly we were in the middle of the mother of all bubbles.

I think the elephant in the room is the fact that most people aren't particularly intelligent, so trusting them to have personal responsibility or do any sort of research isn't realistic. So the only solution is extremely tough regulation of the banking industry.


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## censuspro (6 Dec 2009)

When I went to visit my uncle in the states back in May, he asked how things were back home. When I told him about the economy he said " I knew something was seriously ****ed up over there when a house on Melvin Road in Crumlin was going for $750,000" I think that sums it up.


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## censuspro (6 Dec 2009)

UFC said:


> I think the elephant in the room is the fact that most people aren't particularly intelligent, so trusting them to have personal responsibility or do any sort of research isn't realistic. So the only solution is extremely tough regulation of the banking industry.



Individuals are smart, people are stupid


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## Carolina (7 Dec 2009)

Lesson 1: Don't treat a windfall as regular income - this is why we have a huge deficit.
Lesson 2: Res mortgage lending multiples should be set by the central bank.
Lesson 3: Global property markets are now correlated so find other ways of diversifying.
Lesson 4: A country's stock market can fall across all sectors.
Lesson 5: We are not as smart or as rich or as different as we thought we were.
Lesson 6: Trade unionism has become anachronistic, destructive and self-serving.
Lesson 7: The building industry always does better under Fianna Fáil


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## Chris (7 Dec 2009)

UFC said:


> I think the elephant in the room is the fact that most people aren't particularly intelligent, so trusting them to have personal responsibility or do any sort of research isn't realistic. So the only solution is extremely tough regulation of the banking industry.



What you are effectively saying is that all our taxes that go towards eduction have failed do adequately educate the public on things economic and finance. Instead of fixing THIS problem let's spend more money to create more regulations set by the same people that do not succeed in the education field. 

All that will happen with new or stricter regulation is that it will make it more difficult or impossible for competition to enter the market, and especially for new banks to be created. Why do you think banks are only complaining about regulations in executive pay and no others? The more regulation there is the more dificult it is for new competition to arise. 
Most people now understand that banks' behaviour was one of many factors that caused the crisis. Even if some of us could get funds together to start up a new bank with 'moral' lending practices, it would be financially prohibitive, if not impossible, due to all the regulations.

The main reason nothing will change in the future is because of the corporatist/interventionist economic system, where certain companies and industries are assigned the nonsense charateristic of 'systemic importance' by politicians. And direct government actions, through bailouts, guarantees, stimuli, etc. are taking away the hugley important loss part of the profit AND loss system. If banks hadn't been bailed out they would never make the same mistakes again.


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## Purple (7 Dec 2009)

carolina said:


> lesson 1: Don't treat a windfall as regular income - this is why we have a huge deficit.
> Lesson 2: Res mortgage lending multiples should be set by the central bank.
> Lesson 3: Global property markets are now correlated so find other ways of diversifying.
> Lesson 4: A country's stock market can fall across all sectors.
> ...



+1


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## Protocol (7 Dec 2009)

Carolina said:


> Lesson 2: Res mortgage lending multiples should be set by the central bank.


 

Yes.  I would go further.

Restrict the term to 25yrs max.  Ban mortgages beyond 25 yrs.
Legislate for max 90% LTV mortgages.
Maybe even legislate / regulate the income - mortgage multiple??
Can anybody see any problems with these proposals?

It would mean that house prices would have to fall to make them affordable to people.


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## canicemcavoy (7 Dec 2009)

Protocol said:


> Yes. I would go further.
> 
> Restrict the term to 25yrs max. Ban mortgages beyond 25 yrs.
> Legislate for max 90% LTV mortgages.
> ...


 
Also ban interest-only and multi-generational mortgages while we're at it. All ridiculous ploys by vested interests to get people to pay sums of money they can't afford in the first place.


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## oulguy (7 Dec 2009)

simplyjoe said:


> I am worried that the main problems encountered in the boom and post boom have not been addressed.
> 
> Due to our human instinct to blame someone else most people have not looked at their behaviour during and after the Celtic Tiger era. The issues of over optimistic expectations, poor credit control, poor cost control, no savings, poor staff management, too high personal drawings and standard of living, no strategic planning and many more matters need to be corrected so that any future growth will be better handled.
> 
> ...



This has happened before and will happen again. Children today will grow up with little or no memory of the present and will repeat the same mistakes in 20/30 years time. It's simply human nature.


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## Purple (8 Dec 2009)

oulguy said:


> This has happened before and will happen again. Children today will grow up with little or no memory of the present and will repeat the same mistakes in 20/30 years time. It's simply human nature.



Yep, the only thing we learn from history is that we learn nothing from history.


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## olddoll (8 Dec 2009)

Purple said:


> Yep, the only thing we learn from history is that we learn nothing from history.


 
We are all so busy trying to live that we don't have time to look to the past.  As has been said, history continually repeats itself, but will future generations look at this era and learn from it ?

Over the last number of years there was so much pressure on young people to buy a property as prices were rising all the time and if you waited, then the property would be priced out of your reach. Remember the long queues overnight to buy properties off the plans?  It was so crazy.


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## canicemcavoy (8 Dec 2009)

olddoll said:


> We are all so busy trying to live that we don't have time to look to the past. As has been said, history continually repeats itself, but will future generations look at this era and learn from it ?
> 
> Over the last number of years there was so much pressure on young people to buy a property as prices were rising all the time and if you waited, *then the property would be priced out of your reach.*


 
Here's the bit I never understood about that theory. If it got to the stage that a large proportion of the population couldn't afford to buy property, then surely the property system would collapse? I always understood that it would be self-correcting (which it was).

But yet people seriously seemed to believe property prices would rise linearly, with more and more people unable to afford them and presumably a core group of multi-millionaires owning them all.


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## VOR (9 Dec 2009)

canicemcavoy said:


> Here's the bit I never understood about that theory. If it got to the stage that a large proportion of the population couldn't afford to buy property, then surely the property system would collapse? I always understood that it would be self-correcting (which it was).


 

The correction should have come a lot earlier but the banks stopped looking for money. As long as people have to cough up cash they'll think twice about a purchase. But when you can use "equity" from House A to buy House B people generally don't give two hoots. In essence, there just isn't the same level of commitment to the purchase. Of course, it also inflates the bubble that bit more as you don't have to earn the 10%. You just pull it from the sky!!!

So that's another lesson - Banks should be mandated by law to look for a minimum of 5% cash. The money should not be borrowed or part of an equity release.


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## sinbadsailor (11 Dec 2009)

I think there is a simple fact that individual people need to be educated on how the money system works. I'm talking "modern money mechanics" here and once people realise that debt is not kind and getting into debt of any kind requires some very serious consideration, you will find that less people will borrow, and only when they can remain in control of repaying that debt.

This will not be popular of course because it will mean less debt taken on by the population, which of course means less money can be "created" in the Irish economy as a whole, which means less profits etc for financial institutions etc

So don't hold your breath.

You can rely on politicians and financial institutions to be the moral and secure guides on debt best practices, it's not in their interests.


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## sinbadsailor (11 Dec 2009)

I think another lesson that has to be learned is from a purely personal point of view. I just think that for some reason, Irish people have too high an opinion of themselves. Maybe it's because we suffered at the hands of the English for so long and we think we deserve everything.

But one thing is for sure, we behaved in a fashion not unlike an unemployed bludger winning the euro-millions. With no grasp of ever earning a living or putting emphasis on rewarding for effort, the bludger would just blow it all on self indulgent spending. Loadsa money, no class or education to be wise with it. Ireland got money-thirsty and everyone start believing they were entitled to have whatever they wanted, and that the banks should lend to them to get it.

Again, people need to re-find the lost innocence and humility of the 'old' Irish persona.
At the moment we are just mini-amercian wannabies!


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## Splash (11 Dec 2009)

Take the time to study independent financial advice from people through means such as this excellent site; before making life changing financial decisions. There are Pro's and con's to alot of things we all need to educate ourselves on.


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## Chris (12 Dec 2009)

sinbadsailor said:


> I think there is a simple fact that individual people need to be educated on how the money system works. I'm talking "modern money mechanics" here and once people realise that debt is not kind and getting into debt of any kind requires some very serious consideration, you will find that less people will borrow, and only when they can remain in control of repaying that debt.
> 
> This will not be popular of course because it will mean less debt taken on by the population, which of course means less money can be "created" in the Irish economy as a whole, which means less profits etc for financial institutions etc
> 
> ...



I could not agree with you more! The shouting and calling for more regulation is a complete sign of the public's attitude to blame anyone but themselves. Banks were reckless in their business practices, but at the end of the day they were providing the exact products and services so many people wanted. Had banks restricted their lending practices 5 years ago, they would have been lambasted for not giving out enough money. It blew up in their face and they should not have been bailed out for it. 
But people are so unwilling to take any responsibility for their actions and the situation they find themselves in. All they do is blame the regulator for not having seen it coming or not having proper regulations in place and are now demanding more regulations. These will only result in less competition and a more monopolized financial industry. That's why you hear no bank complaining about more or stricter regulations, they know any additional regulations will protect their businesses from competitors.
Personal financial responsibility has been completely lost and if it is not restored we will go from one financial crisis to then next with no lessons learnt.


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