Ex-IMF Chief: Ireland is Insolvent

[Chris]

Easy credit was available in many other countries too it was our governments lack of action to control unsustainable house prices and actively encouraging them that compounded this.

Keeping rent prices below mortgage rates is not keeping them low. We have extremely inflated rent prices. I'm not saying that we need the Swedish system where there is little or no profit for investors there is a happy medium.

It was our government's constant interference in the housing market that propped up additional demand where there was none. The solution to a problem created by government is not to give government more power.
Whether prices are high or low is an entirely subjective matter and no person or government should pretend to know what the right price is. The right price is what people are willing to pay without being coerced.
Here is what the price system does. When prices for a product go up it is due to an imbalance in supply and demand. So let's say demand has gone up and supply has stayed the same; then prices will go up. This sends a signal to the market that higher profits are available, and will thus attract more competition who want part of that profit. This increases supply, and unless demand has also increased that will lead to lower prices. What price controls (even a little bit) do is destroy that mechanism, so that even when demand increases supply will not keep up. This is one reason why life in socialist and communist countries was/is utter misery.
There is also no logical correlation between mortgage rates and rental prices that would make any sense to try and fix.

Price controls never work in a diverse and open market.

You say it. Prices are like the road signs of the market. You start messing with road signs in a city, even just a little bit, and you will cause a mess.

 

[Potatoeman]

The rise of house prices had a direct impact on the rise of rents. House prices have fallen roughly by half but rents have yet to follow. We spend a much higher percentage of our income on housing than most countries which considering the population density is madness.

 

[Complainer]

Prices are like the road signs of the market. You start messing with road signs in a city, even just a little bit, and you will cause a mess.

Agreed - Road signs must be managed by a competent authority - perhaps maybe, the Government?

 

[shnaek]

Agreed - Road signs must be managed by a competent authority - perhaps maybe, the Government?

Funnily enough I thought I read today that drivers are having trouble reading the road signs erected at a cost of 250k on the new motorways - something to do with not taking into account the Irish weather - though I can't find any reference so maybe I just dreamt it!

As for competance and government - hahaha (laughs like the guys in GalaxyQuest)

 

[Chris]

The rise of house prices had a direct impact on the rise of rents. House prices have fallen roughly by half but rents have yet to follow. We spend a much higher percentage of our income on housing than most countries which considering the population density is madness.

Your statement cannot be backed up with any facts. The only impact on rental prices is supply and demand. That is why rental yields on investment properties went down to as low as 2% at the peak. There just wasn't the demand for rental as everyone was obsessed with buying.
Rental prices did not increase even remotely at the same level as real estate prices. And from my own personal experience I can tell you that rental prices have come down significantly, because all those empty investment propoerties have been forced on the market and so many renters have left the country. Increased supply and decreased demand equals lower prices.

Agreed - Road signs must be managed by a competent authority - perhaps maybe, the Government?

You are hardly arguing that road signage in this country is at any level good enough. I lost count of the amount of foreign drivers I have heard complain about the totally useless and misleading road signage.
And as for government being competent: you cannot be serious!?!?!? The government has proven that it cannot manage road signage, education, water supply, helath care, etc. and you think they can "run" an entire (or even part of) economny?
Hayek put it nicely in this quote: "The curious task of economics is to demonstrate to men how little they really know about what they imagine they can design."

 

[PaddyW]

Rental prices did not increase even remotely at the same level as real estate prices. And from my own personal experience I can tell you that rental prices have come down significantly, because all those empty investment propoerties have been forced on the market and so many renters have left the country. Increased supply and decreased demand equals lower prices.

Just on that point Chris, I've noticed prices starting to rise out around my area, Swords. What would be your view on that, as I can't see any great rise in demand in the area.

 

[Complainer]

You are hardly arguing that road signage in this country is at any level good enough. I lost count of the amount of foreign drivers I have heard complain about the totally useless and misleading road signage.
And as for government being competent: you cannot be serious!?!?!? The government has proven that it cannot manage road signage, education, water supply, helath care, etc. and you think they can "run" an entire (or even part of) economny?

I don't think Irish road signage is noticably better or worse than other countries. I've lost count of the number of times that I've got lost in Italy, France, Spain, USA etc.

And yes, Governments can and do manage the whole gamut of public services all the time. They're not perfect, and there is always room for improvement - just as is the case with any large organisation, public or private. Our Govt's problems are related to their abilities to administer. Our Govt's problems relate to the absence of any value system.

 

[Smart_Saver]

Hi
At this stage could this thread not be placed into the 'Rant' section ? It began with a reference to an Ex-IMF chief......way back 40 miutes ago when I began reading it. Now its onto signs on the side of the road.

This thread surely is now totally redundant.

Please guys - there is a DEDICATED section for "Letting off Steam".
If you want to make personal criticisms isn't that where they should be ?

 

[Chris]

Just on that point Chris, I've noticed prices starting to rise out around my area, Swords. What would be your view on that, as I can't see any great rise in demand in the area.

Rental prices can only go up if there are people willing to pay the price. If prices are actually going up, I'm not disputing they are, then it means that there are either more people who want to rent in the area or less houses available to rent. This is what the law of supply and demand dictates.

I don't think Irish road signage is noticably better or worse than other countries. I've lost count of the number of times that I've got lost in Italy, France, Spain, USA etc.

I've got lost by car in Spain and Italy as well, but due to a lack of fluency in the respective languages, not lack of road signs. And on foot I have noticed that in all European and North American countries I have been to there is a street name on every corner, which makes it very easy to find your location on a map. I cannot say that for Ireland. A Canadian tourist looking for directions in Cork a few years ago was totally baffled when I told him that it was pretty much hit and miss with street names being displayed.

And yes, Governments can and do manage the whole gamut of public services all the time. They're not perfect, and there is always room for improvement - just as is the case with any large organisation, public or private. Our Govt's problems are related to their abilities to administer. Our Govt's problems relate to the absence of any value system.

No, they don't manage the services well they merely take responsibility and dictate a monopoly for the services, and they are making an abysmal job of it. Some countries may do better than others, but no matter where you go and ask people about the quality of public services they will always complain. But let's say that road signage actually is reasonably good here. What about all the other "services" that government provides, how many can you list that you can actually say are well functioning?
This does not happen in the private sector. If a private sector company provides a product that people don't like, then they don't buy it and the company is forced to improve it or go out of business. The very opposite happens in the public sector, in that if the service is bad, then it is put down to lack of funding and more money is pumped in. But the service never improves in line with actual amount of money pumped in, because the incentive is not there to improve the service. And this is the case no matter what country or what political party is in government.

 

[Bcommercial]

If a private sector company provides a product that people don't like, then they don't buy it and the company is forced to improve it or go out of business. The very opposite happens in the public sector, in that if the service is bad, then it is put down to lack of funding and more money is pumped in. But the service never improves in line with actual amount of money pumped in, because the incentive is not there to improve the service. And this is the case no matter what country or what political party is in government.

+1 Well said! ..and so therefore on, and on, the wastage goes. In fairness very many PS employees admit that they could make savings if listened to, but since it's always their superiors who make the decisions, and turkeys don't vote for Xmas, nothing changes! ...Maybe we're now entering into different times though...some sort of national consciousness appearing at last?