"It's not as bad as the 1980s"

Brendan Burgess

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Dónal de Buitléir, an economist and former Chairman of the Commission on Taxation has an interesting article in today's [broken link removed]

|1980s|now
Unemployment|17%|14.4%
Employed|1.1 m|1.8m
Workforce education|lower|much higher
Debt/GDP ratio|119%|118% (in 2013)
Interest cost/GDP|10.3%|6.3%
Tax burden|34.6%|30.5%
Balance of payments|in surplus|in bigger surplus
However the following factors are worse now

  • We devalued the punt by 8% in 1986
  • The world economy was much better giving us more scope for growth
  • Private debt was lower in the 1980s. But it’s not as bad now as is reported
  • We are now unable to borrow on the international markets
 
No direct reference to the budget deficit
One thing he does not directly refer to is the budget deficit. We are still borrowing one euro in three for public expenditure. This is providing a massive, artificial, economic stimulus at the moment. Or put it another way, if we cut public expenditure, pensions, and social welfare by 30%, there would be a very significiant deflationary effect. What was the comparable level of budget deficit back then?

Mortgage Debt in 2007
I think he underestimates the problem

80% of of households own their own home.mortgage
households represent 22% of all householdsonly
20% of mortgage households(<6% of total households)had mortgage repayment ratios of 22% or greater
Click to expand...
Firstly, it is a lot worse in 2011 than in 2007, which he acknowledges.

Secondly, I think that the 22% of all households having mortgages is incorrect.

There are 800,000 mortgages according to the Central Bank

I understand that there are around 1.9m houses. There are around 400,000 privately owned houses which are mortgage free, so around 66% of house owners have mortgages

The banking system is frozen for businesses and potential house buyers
He doesn't deal with this very serious issue. If I read this article by Colm Fitzgerald correctly, the reduction in the money supply will have a serious negative economic effect.
 
Dan O'Brien wrote an [broken link removed]about the debt burden back in April

 
Brendan, I don't know how personal debt figures compare between now and the 80’s but that's the big difference I see. If it really is not as bad as some say then I'll be a lot happier.
 
Let's see.

In the 1980's we had corrupt and incompetent administrations that couldn't balance the books and high taxes and high emigration and no real plan.

Now the whole world is in difficulty, reducing the immigration option, we have no market to sell houses on to fund the move and we are closer to Europe.

Hard call.

ONQ.
 
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