Sunday, May 24, 2009

Irish Economy: Arsonist Cowen claims credit for dousing the fire

In the week, the Ryan Commission reported on forty years of abuse at Irish juvenile prisons, known as industrial schools run by Catholic religious orders, and the conspiracy of the high and mighty in keeping the official more wholesome image of Ireland intact, an arsonist claimed credit for assisting in dousing the fire he allowed start and rage out of control.

Brian Cowen together with Bertie Ahern and Charlie McCreevy, through negligence and self-interest, head the guilty for responsibility, in the crash of the Irish economy.

His speech on Thursday night last, blaming the Opposition for the loss of Ireland's international reputation and claiming a "rapid recovery" is in store for the Irish economy next year, would not happen in most advanced democracies.

Given his own and his party Fianna Fáil's record of monumental misgovernance, people power elsewhere would have ousted such an appalling government from office and forced a general election.

In the past, "republican principles" were bragged about but the reality was grimly different.

The senior leadership of Irish banks have left or are on the way out, but Cowen like his predecessors, accept no responsibility for 12 wasted years.

What would suit him best is if the majority of the people remain as the eejits, Cowen' believes they are!

A Finfacts visitor made the following comment last Friday:

The guillotine is the only thing that this idiot Cowen would understand.
Either he believes the rubbish that comes out of his mouth, which means he is a
cretin, or else he doesn't, which means he is a lying, manipulative bastard. I
would prefer if it was the second, but I think it might be the first.

"The politics of the past" is about someone taking responsibility for the
dreadful state of Ireland's economy. Doubtful that this will happen, as
politicians need to fear the electorate to implement change, and there is no
fear in Irish politics. If FF lose power the life of an Opposition TD probably
isn't that bad, just sit on your hands and wait for the next election, bickering
over the minutiae, not addressing the real questions.....I really don't know
what it would take for a people power revolution, maybe the finances of the
country getting much worse.

I am coming around to the idea that the country actually needs some civil
unrest, needs the change and engagement that this might entail. The complete
inertia in the system seems totally incapable of coping with the requirements of
a small open economy.

Finfacts articles:

Irish Economy: Cowen says his policies will bring “rapid growth” in 2010; Rejects “dead-end politics of the past” but provides no credible vision of change for the future

Irish Economy: The 2001 economic consensus that paved the road to economic ruin

Ireland's economic recovery will be dependent on America's but President Obama's isn't making economically idiotic statements on a "rapid recovery" in 2010 even though the recession is expected to end in the second half of next year:

US Economy: V-shaped recovery unlikely: Recession has further to go; Prolonged convalescence likely

Saturday, May 09, 2009

Choice in Dublin Bye Elections on June 5th: Crony Ireland or New Ireland

There is no better illustration of the stark choice facing the Irish electorate, than the forthcoming Dublin bye elections on June 5th.

I have recently written how the Irish and Japanese systems have many similarities.

They both have a dominant political party which has ruled for decades.

Nepotism is a strong characteristic of both systems and the dominant parties have strong links with their construction sectors.

This week the governing Fianna Fáil Party, selected the 72-year Maurice Ahern to stand in the Dublin Central constituency and 35-year old Shay Brennan to stand in the Dublin South constituency.

Ahern wishes to join his brother former Taoiseach and Fianna Fáil leader Bertie and another brother Noel in the Dáil (Lower House of Parliament ) while Shay Brennan wants to inherit his late father's seat as did current Taoiseach Brian Cowen, Tánaiste (Deputy Prime Minister) Mary Coughlan and Minister for Finance Brian Cowen.

Days after Minister for Foreign Affairs Micheál Martin said he needed to retain his teaching job after 20 years on leave and prevent another person having a full-time job, because the job of a TD is "precarious," George Lee, the economics editor at the State broadcaster RTÉ, decided to run for the main Opposition party, Fine Gael, in Dublin South.

Lee had become a household name for his warnings of risk and bad policy making during the runaway property boom and the wreckage in recent time, left by the bust.

Ireland desperately needs hope of change from the current motley cocktail of teachers, auctioneers, small-town solicitors and farmers, who preside over a broken political system.

George Lee has left a secure job behind and Ireland needs more like him.

It's laughable that teacher and minister Micheál Martin had charge of enterprise policy when he encouraged entrepreneurs to take risks.

We need to leave behind the "bogman" politics and build a modern democracy with people of ability taking risks in politics and business.

I took risks myself in becoming a business entrepreneur and I applaud George Lee for his decision.

New approach needed to fix broken Irish political system

Ireland and Japan; the Human Cost of broken political systems

Monday, April 27, 2009

Irish Golden Fleece Award - - Minister still a teacher after 20 years on leave!!

Ministers Mary Hanafin and Micheál Martin, flanking former Taoiseach Bertie Ahern in 2007

For their brass necks and shameless greed, the Irish Golden Fleece Award goes to two senior ministers who have held on to their teaching posts and are each clocking up three pensions worth upwards of €140,000 a year in total - - almost 3 times the annual pay of a member of the New Zealand Parliament.

The Irish Independent says Ministers Micheál Martin and Mary Hanafin will benefit from ministerial, TD and teacher's pensions. And another nine TDs are filling two pension pots. They each stand to get upwards of €60,000 a year in pensions, an Irish Independent investigation can reveal.

Regulations allow for ministers and TDs to continue paying into their teacher pension fund, while a temporary teacher is employed in their school position.

Martin left his teaching post 20 years ago, while Hanafin took secondment 12 years ago.

Due to their high political office they stand to get a TD's pension worth in the region of €53,000, and also a ministerial pension worth about €70,000.

But on top of this they will get a teacher's pension worth several thousand euro depending on the amount they continue to pay into it while on 'Oireachtas leave'.

In Hanafin's case, with 17 years teaching experience, she would be entitled to around €12,500 on retiring her position.

The majority of Irish private sector workers do not even have a basic occupational pension scheme.

Before the Irish General Election in 2007, members used their role in electing members of Ireland's Upper House of Parliament known as Seanad Éireann - - a useless talking shop - - to force members of the governing Fianna Fáil to support demands for severance and pension payments.

Following news that 7 sacked junior ministers who had titles but no jobs, are in line for thank-yous worth over €50k even though they will still remain overpaid as TDs, the Sunday Tribune has reported, that local authority candidates who are not returned in elections will reap tax-free lump sum of up to €70k

City and county councillors who are not re-elected next June will be paid tax-free lump sums of up to €70,416 each out of a €10m goodbye fund set aside to compensate them. All non-returned councillors aged 50 and over will automatically qualify for immediate payment, whether or not they have stood for re-election.

They will be entitled to €3,300 a year for each year that they have served since 2000 and a lower amount for years before that. Councillors who have served since the 1999 local election will get about €30,000, while representatives with 20 years' service or more will qualify for the maximum payment of over €70,000.

Michael Clifford of the Sunday Tribune wrote that the status of politicians went through enormous change during the boom years. It was gravy all the way. Salaries leapt by over 100% since 2000.

"There was gravy aplenty poured in expenses and allowances. Any TD who totted
up less than €150,000 a year needed a lesson in creative management. For
instance, it would be interesting to know whether any TD ever submits a train
ticket for expenses instead of claiming the generous mileage allowance.

My own favourite expenses story involved the two Fine Gael TDs, Joe McHugh
and Olwyn Enright, who got married in 2005. As reported in this newspaper, the
happy couple continued to claim separate €140 overnight allowances for three
years, pulling in an extra €30,000.

The result of these readjustments was the servants of the people took on the
status of rulers. How could a TD awash with gravy relate to anybody on the
average industrial wage of €38,000? How could they empathise with, or serve the
interests of, the vulnerable, that constituency so beloved of political
speechwriters today?"

New approach needed to fix broken Irish political system

Ireland and Japan; the Human Cost of broken political systems

Lenihan says total cost of State pension for an Irish public sector worker hired after 2004 is 26.1% of pay - - benefits for politicians are even greater

Irish public sector pay excluding pensions exceeds private sector pay by 10% for top jobs to up to 30% for other grades

The European Parliament Gravy Train - - Irish MEPS on up to €360K in Annual Expenses

Irish MEP Kathy Sinnott claims to TV crew at 7:00 am sign-in for expenses, that she was working through the night!

Sunday, March 08, 2009

CNBC gives Financial Advice! UPDATE

A showdown between a comedian who the FT says has become one of America’s most challenging news commentators and a news commentator known for his comedic antics has shone the brightest spotlight on the media’s market coverage since the financial crisis began.

On Thursday night, two cable television celebrities squared off as Jon Stewart, host of The Daily Show news parody programme on Viacom’s Comedy Central channel confronted Jim Cramer, the former hedge fund manager and star of CNBC’s Mad Money programme.

Following a week of digs at the GE-owned financial news channel, blaming it for boosterish coverage of Wall Street institutions before they collapsed, Stewart played the role of a prosecutor as he castigated his guest in person as a “snake-oil salesman”.

Cramer, usually over-the-top, was sometimes contrite, admitting he had got many things wrong, and CNBC was fair game.

Jon Stewart v Jim Cramer in The Daily Show Episode March 12, 2009 in response to previous week's video below on CNBC


We at Finfacts are fans of the CNBC business television network, but as in so many areas of modern punditry, we are struck by the conveyor-belt of "experts" of the moment, who tender advice and make forecasts but their batting average doesn't seem to matter.

A brass neck appears to be a lot more important, than prescience, in the world of punditry. The term "inoperative" comes to mind.

In April 1973, Time Magazine reported that "White House Press Secretary Ronald Ziegler enlarged the vocabulary last week, declaring that all of Nixon's previous statements on Watergate were "inoperative." Not incorrect, not misinformed, not untrue—simply inoperative, like batteries gone dead."

On US cable talk television, apart from the contributions of "experts," presenters are given leeway to project their own prejudices.

In a recent article on the free market, I referred to CNBC's Rick Santelli angry reaction to bailouts for "loser homeowners," while Wall Street and wealthy rancher beneficiaries of the most recent Farm Bill, would be a fairer target for his ire.

Santelli has at least been consistent unlike colleagues.

The above is Jon Stewart of the popular The Daily Show, holding CNBC to account.

Tuesday, February 17, 2009

Ireland: Scapegoating the Euro - Giving Reckless Poltroon Politicians a Pass

Some Irish people besides economic illiterates, suggest that the euro is the primary reason for Ireland's economic woes. This claim is ridiculous and is an effort to provide a fig leaf to the poltroons in charge of fiscal policy during the boom, who set the economy on fire.

The notion that reckless fiscal policy would have operated hand-in-hand with prudent monetary policy, is an absolute joke.

The case was compelling for joining the euro in the late 1990s. Ireland was a developed country with the biggest dependence on foreign direct investment and its membership of the European Union was a key selling point in winning significant investment from America's biggest companies. A decade later, outside of the euro, the Irish economic crash would have become a meltdown comparable with Iceland's.

In recent times, anti-EU/Lisbon Treaty types, have latched onto arguments, that through joining the euro, Ireland had to accept interest rate levels suitable for Germany while forfeiting the flexibility provided by devaluation during an economic downturn.

So the euro becomes the main reason for the economic crash while reckless fiscal policy and comatose central bankers have a minor role in the dénouement.

Policy choices usually have downsides and even if Crony Ireland had an independent central bank, as the UK had since 1997, it would have had limited room for manoeuvre during a period of low inflation.

During the boom, when global rates fell to historic lows, the search for yield would have pushed up the punt rate.

The UK experience shows that fiscal policy is paramount in a period of sustained low inflation.

Even if an independent Irish central bank (not a credible concept in the real world) had maintained a margin of for example 3% above the ECB level, in Ireland's system of crony capitalism, where land is made artificially scarce in a country that is 4% urbanised, the politicians would of course found other means to keep the party going.

Even with a milder boom, outside the euro, we would not have been able to maintain a strong currency during the worst financial crisis since 1945, without double-digit interest rates.

Ireland and Iceland would have been in the same boat.


Financial Times - - Ireland woes are not linked to Emu membership

Published: February 16 2009 02:00

From Prof Philip R. Lane.

Sir, Bill Bailey (Letters, February 11) attributes Ireland's economic difficulties to its membership of the eurozone. However, the problems facing Ireland are not fundamentally linked to economic and monetary union (Emu) membership. Equally, it would be a serious misjudgment to believe that abandoning the euro would be helpful in promoting economic recovery.

In particular, it is probable that a significant housing boom would have occurred even if Ireland had not joined Emu: many peripheral European countries (including both members and non-members of the euro area) experienced a credit boom over the last decade, due to low global interest rates and the decline in risk aversion. Even if Ireland had been able to raise interest rates, policy rates have relatively limited impact on the housing market when bubble psychology dominates investor sentiment.

Accordingly, if the relevant comparison set is composed of other non-advanced European countries (in terms of income levels in the late 1990s), it is not clear that Emu was a fundamental factor in driving the Irish credit boom.

Had Ireland remained outside Emu, it is likely that it would now be suffering the same severe currency crises that face several countries in central and eastern Europe.

While Emu membership does provide a safe haven, the policy framework in Ireland requires a major overhaul in order to live more comfortably with the constraints imposed by participation in a currency union. In particular, success under Emu requires national governments to maintain discipline over budgets, the banks and the labour market.

On all three fronts, the Irish government is now actively engaged in active reforms.

Philip R. Lane,
Professor of International Macroeconomics,
Trinity College Dublin,
Dublin, Ireland

Saturday, February 14, 2009

Real-Time Economics - - Wall Street Journal



Economic insight and analysis from The Wall Street Journal.

Tuesday, February 03, 2009

Benchmarking of 9% still leaves Irish Public Sector in the Money after Cuts

The average so-called benchmarking increase for Irish public service staff was 9%.

The "benchmarking" scheme was shown to have been a sham and claims that private sector staff for comparable grades were earning more, were shown to be false.

No Irish Government minister has ever disputed the claims that it was a fraudulent scheme.

Add the subsequent increases on the average payment and a cut of even more than 10% would still leave public service in the money.

Before the recent spate of cuts in the private sector, public sector pay by comparable grade, had a margin of 10% to 30% according to the ESRI, research published in December 2008.

Crony Ireland and misperceptions on pay and pensions between Irish public and private sector workers

Saturday, January 17, 2009

Anglo Irish Bank seizure - a gift to Fianna Fáil's developer friends with support of Planet Bertie man Gormley?

Anglo Irish Bank closed at 22 euro cent on the Irish Stock Exchange, on its last day of trading before becoming a State-owned bank.

On February 21, 2007, the ISEQ index rose to an-all time high of 10,041 and the Financial sub-index rose to 18,098. Bank of Ireland closed at €18.65; Anglo Irish closed at €16.64 and AIB closed unchanged at €23.95.

A year later, on February 21, 2008, AIB closed at €13.80, Anglo Irish Bank finished at €8.84, while Irish Life & Permanent closed at €10.20 and Bank of Ireland traded at €9.50.

Seven issues dominate the Irish market and in recent years, overseas residents, dominated by institutions, have owned more than 60% of Irish bank shares. Ireland's biggest company CRH, accounts for about a third of Irish market capitalisation and in December 2007, foreign holders held 84% of the issued shares.

Strange times indeed when a bank that was trading at close to €17 on Feb 21, 2007, when the Irish stock index, hit an all-time high and two years later, Anglo Irish Bank closed at 22 euro cent last Thursday - - without reporting a loss.

Wthin hours, the Irish Government announced the seizure of the bank, as once very profitable Irish banks may yet have to take huge hits from the property market crash.

The current Irish coalition government is headed by the dominant political party Fianna Fáil, which has traditionally given primacy to construction interests and facilitated property developers to turn the Celtic Tiger boom, that had its genesis in the location of America's world-class companies in Ireland in the early 1990's, into an out-of-control property bubble.

The State takeover of the commercial property lending Anglo Irish Bank, has raised legitimate fears that Fianna Fáil will lend a hand to its over-stretched property developer friends through the control of the bank.

Irish Economy 2009: The Bulldozer at Bay and Benchmarks for Brutal year - - background on Irish crony capitalism.

In early 2007, Green Party politician John Gormley, warned about the nexus between Fianna Fáil and the property industry.

In his Planet Bertie speech, Gormley warned: "...there's a strange cult called Fianna Fáil, a type of religion without vision or values; and every year in August they go on their annual pilgrimage to one of their sacred sites, the tent at the Galway races (Ireland's Woodstock for Property Developers - - when Fianna Fáil sold influence to the highest bidders), where they pay homage to their gods and the gods bestow them with gifts for doing their bidding. Oh yes, it's a strange place Planet Bertie. So strange and so alien to our sensibilities, that it's a planet that we Greens would like to avoid. For let there be no doubt, we want Fianna Fáil and the PDs out of Government."

On Friday, Gormley as Minister for the Environment, defended the nationalisation of Anglo Irish Bank.

He said it was "too early to determine the cost to the taxpayers of the nationalisation."

"If we had not acted, the costs to the economy would be incalculable and that is why we had to act," he said.

This is absolute cant and bullshit as Gormley hasn't a clue what the public exposure is to the future bad debts of Anglo Irish, which has a loan book of €80 billion.

Gormley is reported to have said that everybody needed to see the bigger picture and he wanted to see the opposition backing for the Government's moves.

"We need to sit down and work in the best interests of the country. Let's put the national interest first. And let's stop the point scoring," he said.

The Planet Bertie man, who jumped on every passing bandwagon in opposition, knows who now butters his bread and the once scourge of Fianna Fáil and property developers, has become their poodle.

The Financial Times Lex column- Jan 16, 2009:

Anglo Irish Bank, Ireland’s most reckless commercial property lender, has at
last been committed to the safety of an institution: the Irish government.

Dublin procrastinated as Anglo Irish gasped its last, the chairman resigned
over governance lapses and risks grew of a dangerous run on the bank. Full
nationalisation fast became the only option to avert a collapse of the Irish
banking system.

Ireland’s banks got carried away in the heady years of a property and consumer spending boom that is now a sickening memory. The economy could contract 4.5 per cent this year, unemployment is headed for 10 per cent and with the government deficit zooming towards 10 per cent of GDP, there is even talk of a rescue by the International Monetary Fund. The government has been flat-footed from the outset.

In September, it tried to steal a march on other countries, by guaranteeing
all bank deposits and funding, but did nothing to bolster its banks’ capital
position, leaving them looking light when,shortly afterwards, the UK government
sharply raised capital requirements for HBOS, Lloyds TSB and Royal Bank of
Scotland.

Dublin then fatefully procrastinated until December, when it launched a €5.5bn bank recapitalisation plan. Bank of Ireland and Allied Irish Banks were offered €2bn a piece, and told to raise €1bn each in rights issues. Anglo Irish was in line to receive €1.5bn, in exchange for 75 per cent voting control, but the run on deposits has now intervened.

Bank of Ireland and Allied Irish Banks may be marginally safer bets now that the
government has removed the sector’s main systemic risk. Time, then, for Ireland’s cosy coterie of bankers and politicians to resume discussion of their golf handicaps in the club bars. But not for too long: neither bank has a price/earnings ratio of more than one, which speaks volumes about investor confidence in the sector’s prospects.

Irish Economy: State bank guarantee tolls the death knell of the Celtic Tiger; Fairytale ends debunking the myths and exposing the reality of foundations built on quicksand

Anglo Irish Bank says total level of loans to directors stands at €179m - Where were the auditors Ernst & Young?

Anglo Irish Bank to be nationalised; Europe's most successful bank during Irish property bubble becomes its biggest casualty

The New York Times Jan 04 2009: The Irish Economy’s Rise Was Steep, and the Fall Was Fast

Saturday, November 29, 2008

Newspapers, the Web and IBM Syndrome

In early October, some attendees at the American Magazine Conference, in San Francisco, took a side trip to the offices of a significant media player and were told that if the great brands of journalism — the trusted news sources readers have relied on — were to vanish, then the web itself would quickly become a “cesspool” of useless information.

The broadcast media has had a dependency on newspapers that long predates the arrival of the Internet. For example, much of the material for daily talk radio shows, is garnered from newspapers. It is for example interesting to observe how often Wall Street Journal stories, set the agenda for the CNBC business television service in its morning programming hours, while later in the day, the On-Air Editor Charlie Gasparino claims credit for breaking stories and presenters are primed to coo about a story that "Charlie broke." Picking up a tidbit or two over the phone from contact and writing a detailed analysis article with content from multiple sources, is a different kettle of fish, of course.

New York Times columnist David Carr recently wrote that newspapers and magazines do not have an audience problem — newspaper web sites are a vital source of news, and growing — but they do have a consumer problem.

Carr wrote that more than 90 percent of the newspaper industry’s revenue still derives from the print product, a legacy technology that attracts fewer consumers and advertisers every single day. A single newspaper ad might cost many thousands of dollars while an online ad might only bring in $20 for each 1,000 customers who see it.

The difference between print dollars and digital dimes — or sometimes pennies — is being taken out of the newsrooms that supply both, he said.

In the US, advertising from the car industry, retail business and financial services — for years, the three sturdy legs of a stool that print once rested comfortably on — are in steep decline.
As the younger users of the web who rely on it for news, get older, the audience for the printed media is likely to continue shrinking.

The New York Times recently reported that as America’s newspapers shrink and shed staff, and broadcast news outlets sink in the ratings, a new kind of web-based news operation has arisen in several cities, forcing the papers to follow the stories they uncover.

The Times said that VoiceofSanDiego.org, offering a brand of serious, original reporting by professional journalists — the province of the traditional media, but at a much lower cost of doing business. Since it began in 2005, similar operations have cropped up in New Haven, the Twin Cities, Seattle, St. Louis and Chicago. More are on the way.

Their news coverage and hard-digging investigative reporting stand out in an Internet landscape long dominated by partisan commentary, gossip, vitriol and citizen journalism posted by unpaid amateurs.

The fledgling movement has reached a sufficient critical mass, its founders think, so they plan to form an association, angling for national advertising and foundation grants that they could not compete for singly. And hardly a week goes by without a call from journalists around the country seeking advice about starting their own online news outlets.

“Voice is doing really significant work, driving the agenda on redevelopment and some other areas, putting local politicians and businesses on the hot seat,” said Dean Nelson, director of the journalism program at Point Loma Nazarene University in San Diego. “I have them come into my classes, and I introduce them as, ‘This is the future of journalism.’ ”

While publishing online means operating at half the cost of a comparable printed paper, online advertising is not robust enough to sustain a newsroom.

The Times says financially, VoiceofSan Diego and its peers mimic public broadcasting, not newspapers. They are nonprofit corporations supported by foundations, wealthy donors, audience contributions and a little advertising.

New nonprofits without a specific geographic focus also have sprung up to fill other niches, like ProPublica, devoted to investigative journalism, and the Pulitzer Center on Crisis Reporting, which looks into problems around the world. A similar group, the Center for Investigative Reporting, dates back three decades.

But some experts question whether a large part of the news business can survive on what is essentially charity, and whether it is wise to lean too heavily on the whims of a few moneyed benefactors.

“These are some of the big questions about the future of the business,” said Robert H. Giles, curator of the Nieman Foundation for Journalism at Harvard. Nonprofit news online “has to be explored and experimented with, but it has to overcome the hurdle of proving it can support a big news staff. Even the most well-funded of these sites are a far cry in resources from a city newspaper.”

The New York Times says that the people who run the local news sites see themselves as one future among many, and they have a complex relationship with traditional media. The say that the deterioration of those media has created an opening for new sources of news, as well as a surplus of unemployed journalists for them to hire.

“No one here welcomes the decline of newspapers,” said Andrew Donohue, one of two executive editors at VoiceofSanDiego. “We can’t be the main news source for this city, not for the foreseeable future. We only have 11 people.”

Ireland and IBM Syndrome

In the US during this presidential year, there was evidence that the IBM Syndrome attitude to the new media was changing and representatives from online political sites, were not uncommon on mainstream broadcast programs and quoted in newspaper reports.

Ireland being conservative, has yet to change and the cronyism on the political side, is mirrored in the media, in particular at the State broadcaster RTE.

Last week in the Sunday Independent, Senator Eoghan Harris commented: "But my effective exclusion from the News at One for 18 years, followed by exclusion from the Week in Politics -- which has never once asked me onto its weekly panel -- was not in the public interest. My absence made it easier for RTE to avoid awkward issues."

Harris should know more than most how cronyism works in an organisation like RTE , as he worked there for years.

Journalists use the web for sources and it has in effect become a two-way street but mainstream journalists seldom acknowledge this.

On one occasion, an Irish Times columnist used six references from a Finfacts story, in his article without attribution.

There is of course a huge amount of publicly available information on any topic easily accessible at any one time but paid journalists who find useful and free, uncommon information and generally hard-to-find facts conveniently, should have the grace to acknowledge the source.
In an article on Nov 21st, I referred to a 1933 letter that British economist John Maynard Keynes wrote to President Roosevelt in 1933 and I linked to a copy of the letter.

Two days later, a Sunday Independent article by journalist Jody Corcoran on Bertie Ahern began: "There is a recrudescence of wise head-wagging by those who believe that the nose is a nobler organ than the brain."

When he wrote that to President Roosevelt in 1933, the economist John Maynard Keynes was referring to "the average City man" who believed the New Deal was a hare-brained expedition in the face of competent advice.

Coincidence maybe or maybe not!

And finally....

It was Eric Schmidt, the chief executive of Google who warned that the web would quickly become a “cesspool” of useless information, without the big brand print media.
But like so much else in the world, it's increasingly becoming a two-way street.

Friday, October 17, 2008

"Independent" TD Finian McGrath took his "eye off the ball"

Non-party TD Finian McGrath who calls himself an "independent," sold his vote to Fianna Fáil after the last election in return for five years of job security.

Having voted for the Budget, he told the Irish Times that he took his "eye off the ball" in advance of the Budget. He said he would be lobbying the Government on medical cards for the over 70s and the imposition of the 1 per cent levy on persons who are not in the tax net.

How pathetic, fatuous and self-serving!

McGrath says the following about himself on his website: "Anyone who meets Finian McGrath gets an immediate sense that he genuinely cares about people.

Shortly after that they perceive his strong sense of community spirit and appreciate he is a man of integrity. Anyone who knows his history knows how deeply ingrained in his personality these characteristics are."

My father used to say self-praise is no praise.!

So McGrath got his Faustian bargain and didn't bargain for the downside. He may well be a better teacher than politician and he should be returned to his old job at the next general election.

The following is an excellent letter on McGrath's associates, from the Irish Times on Oct 16, 2008:

Madam, - Truly we are a very docile people. The dominant political party has behaved in a profligate manner with our resources and has used our unaccustomed wealth in craven attempts to bolster its political position and its chances of re-election — vide its gross favouring of developers, its ridiculous decentralisation proposals, the quangos, the consultants, the advisers and the costly Dáil committee talk-shops. That party's offhand carelessness and lack of application also precipitated the Lisbon Treaty referendum defeat, still lurking off-stage to batter us still further.

Were our rebel spirit still alive, were we to give justifiable expression to a well-grounded rage at how we have been abused and betrayed, we would opt for one of two traditional options. The real choice should be to hang them now or to give them a fair trial and then hang them. I support the more straightforward option.

The brazen, arrogant ones say they are not to blame. The schoolyard excuses abound - it wasn't me, it was the banks, it was the American subprime market, etc, etc. The craven morons should stand up and take the hit. Instead, we are now taking their hit. - Yours, etc,

COLM MULLEN, The Warren, Malahide, Co Dublin.

Saturday, September 27, 2008

Cowen's Trip to China- Marketing Spin has already Begun


The Opening Ceremonies of the XXIX Olympiad, Beijing, China, August 8, 2008 -- Fireworks light the sky above the latticed steel National Stadium known as the "Bird's Nest" where an estimated 91,000 spectators, athletes, executives and world leaders were gathered - - Photo: Xinhua

Taoiseach Brian Cowen is to lead a trade mission to China in October, in an effort to boost trade with the region and to encourage inward investment.The trade mission, which is being organised by Enterprise Ireland (EI), will take place from October 19 to 24, with a planned business events in Shanghai and Beijing.

Enterprise Ireland is no doubt feverishly working on planned announcements and deal "signings" as the fiction that the presence of a politician on a trade mission is like a magic wand conjuring up business, is easily sold to the media.

The Sunday Business Post said last month that previous trade missions, have resulted in a dramatic increase in trade between Ireland and the countries visited - more than €100 million worth of deals were struck during a mission to the Middle East last year.

Impressive indeed for gullible!

If it was true, the 4 ministers in the Department of Enterprise, Trade and Employment could have real jobs to do, for a change.

EI is likely currently engaged in trawling for business deals over the past year, that it can tie into the China trade mission.

This in itself is harmless spoof.

What is however a serious issue, is how State agencies like Enterprise Ireland, allow themselves to be used to feed the delusions of politicians who after almost 12 years of power, believe their own propaganda.

For example on Thursday, Health Minister Mary Harney said: “There are huge markets internationally for us to compete in and win: the pharmaceutical industry, medical devices, the high-end agri and food sector, information technology, communications, financial services, biotechnology, education services.”

“None of these real markets have disappeared… [So] let the message go out: ‘Brand Ireland is not broken,’” she added.

How convenient to ignore a pertinent fact. American companies dominate exports in most of these sectors!

Harney as minister for over a decade, has about 6 "helpers" on the public payroll doing constituency donkey-work; she hasn't had to drive herself anywhere in the same period and in addition, she has advisers and other gofors attending to her needs. Should it be a surprise that she would be somewhat divorced from reality?

The Sunday Business Post reported in August that "Irish exports to China are continuing to grow, according to EI figures, which show Irish companies had exports of €1.95 billion to the region last year, a 30 per cent increase on the previous year."

According to the CSO, these are the total merchandise exports to China in 2007.

As for sales by Irish companies i.e ones that are not foreign-owned, the amount may be as low as €150 million.

The job of Enterprise Ireland shouldn't be to feed the delusions of their political masters.

The result of the spoof is an absolute misreading of the challenges for Irish-owned companies, in doing business in China and Asia.

Even decisions on the destination of the exports from the likes of Intel and Microsoft, are not made in Ireland, never mind the fakery that they are "Irish companies," beyond the legal status of their Irish units.

Irish Economy: IBEC and understanding the world East of Suez

Saturday, September 06, 2008

Irish Economy - End of the Celtic Tiger and Credit where it's Due

Dan McLaughlin, Bank of Ireland economist with Health Minister Mary Harney T.D. at a Women In Banking and Finance (WIBF) Ireland forum in 2006 - - In February 2004, The Sunday Independent reported that Dan McLaughlin was the toast of the Society of Chartered Surveyors annual dinner at the Burlington Hotel: In a virtuoso performance, he declared that this country is currently enjoying an unprecedented "Golden Age of Construction" and - to thunderous applause - announced that "the Celtic Tiger is Back".

If the definition of an optimist is one who sees the bottle half full and a pessimist says it's half empty, the BofI economic guru left his audience of 1,300 property professionals in no doubt where he stands. "The economy in general has emerged from a period of sub-trend growth in remarkably rude health and is poised to enjoy a much more favourable global backdrop, which will propel Irish growth towards the potential of 6% over the next eighteen months," Dr McLaughlin opined.

Harney and her Progressive Democrats' colleagues became cheerleaders of tax cuts during the boom but were ineffective barnacles when at the pinnacle of power.

There is much attention these days to credit, given the impact on the international financial system of the US subprime loan crisis. There is also another form of credit that is often unearned.

The abrupt ending of the construction-fuelled boom in Ireland, has also highlighted how politicians and business folk alike, so ashamedly used the boom as a confirmation of their own business or political genius.

Now, the turn of events in recent times, can be attributed to international events.

The economists cum spin doctors who tried to provide an intellectual underpinning, to an economy built on quicksand, because their brief was to be artists who painted for the approval of their benefactors, should in a just world be on the dole, like the 73,178 additions to the Irish Live Register in the past year. Alas, there will always be a market for soundbite one-liners and who has ever called account on the forecasts of pundits? The simple truth is that a brass neck, is much more important than prescience.

Michael McDowell, a former leading light in the pre-defunct Progressive Democrats, during the heyday of its position as a powerless barnacle at the pinnacle of Irish political power, onetime made the bold claim that it was "credited with major responsibility for Ireland's economic boom by pioneering tax reform, deregulation and competition to end mass unemployment and emigration."

In 1997, Mary Harney and the Progressive Democrats tied themselves up in knots about public service reform because they were peddling soundbites about cutting 25,000 public service jobs, an approach that cost it seats. Since Dec 1997, the number on the civil service payroll increased by 80,000 according to the Central Statistics Office and there has been no public service reform.

In the Dáil debate on the appointment of the Cabinet in 1997, Alan Dukes said: "The Tánaiste said something very interesting to me on the last day of the previous Dáil. She commented: “I know Minister Dukes does not like soundbites, but if it can't be said in a soundbite it is not worth saying”. She should reflect on that because the electorate told her that in spades during the election. She was clobbered by soundbites and she is now a very junior partner in Government because of soundbites. People decided they did not want to fire 25,000 public servants, or oppress single mothers whose families are too numerous for them to live at home with their parents with another baby they did not expect, and so on. I hope for the sake of good government, if not for the sake of the parties in government, and for the kind of politics the Progressive Democrats is supposed to stand for — the party is supposed to be policy driven — that the Tánaiste has learned the lesson that soundbites are inimical to good politics. Life is more complicated than a soundbite and I hope she has found that out."

The PD's alas thought that cheerleading for tax cuts during a boom was radicalism and its legacy is basically akin to that of a person who walks across a field of snow and leaves no footprints.

It's said that a statesman is a dead politician and Dukes had provided essential support to Charles Haughey's Damascus Road conversion to fiscal responsibility, following the 1987 election.

Dukes was dumped by his own Fine Gael Party and Fianna Fáil took full credit for the benefit of its Fine Gael supported fiscal rectitude. The brave new Progressive Democrats refused to support Haughey until it joined him in government in 1989.

As for the public, it was a matter of appreciating Dukes' patriotism by some while a member of his own party dismissed him with the old canard that if it was raining soup, Dukes would be the one with a fork.

Stephen Collins in the Irish Times this week, said that 1987/89 government was underpinned by a Fine Gael Opposition under Alan Dukes that supported a strict clampdown on public spending in the so-called "Tallaght Strategy".

Minister for Justice Dermot Ahern suggested that the current Opposition should act responsibly and offer his Government similar support now.

The same suggestion has been made in recent months by other Fianna Fáil figures but the chances of it being adopted are zero, according to Collins. He says for a start Fine Gael and Labour roundly criticised Cowen's budgetary approach over the past four years but lost an election on the basis that Fianna Fáil was better able to deal with the economy.

Some joke indeed!

Green Party Minister Eamon Ryan wants an all-party consensus on climate change policy i.e. we cowards in government, cannot make tough decisions.

Statesman Alan Dukes lost his seat in the 2002 general election.

So why would any Opposition politician provide the current incompetents in government with a life raft while the same people would claim 100% credit for any positive results?

This is where the issue reverts to where the ultimate responsibility lies - the electorate.

If a significant section of the public is willing to put up with a system of limited accountability dominated by incompetent former schoolteachers, small-town solicitors and auctioneers, who deserves blame?

The most recent significant public demonstration against public policy was in 2003 when 100,000 took to the streets in Dublin. It was a protest against the planned invasion of Iraq by the United States.

We have to go back to 1979 for evidence of significant public protest against Irish policy, when an estimated 200,000 workers marched through the centre of Dublin in protest against an unfair tax system in March of that year.

In the interval, farmers have been effective in their public demands for cash and protections. Workers in the private sector, with more than 1 million without an occupational pension, are the ones who are now at the mercy of government incompetence and the most exposed to the economic downturn.

Isn't it time for public outrage on the death of the Celtic Tiger and the lamentable failure of the Government to prepare for the end of an unsustainable construction boom?

Sunday, August 24, 2008

Putin and his Irish admirers

Tom McGurk

It's no big surprise that the harshest critics of American foreign policy and many more, show indifference to other conflicts in the world or to the foreign policy of say China or Russia.

This past two weeks, the war in Georgia is a case in point and there have been some reactions from the Anti-American element only because they see a US hand in emboldening the Georgian President Mikheil Saakashvili.

It's a tangled tale with Vladimir Putin, the de facto ruler of Russia, who came to prominence by waging a brutal battle against Russian citizens who supported independence for their province Chechnya, claiming that the Russian invasion of Georgia was a response to protect separatists who were given Russian passports in recent times.

Saakashvili is viewed as having acted impulsively in attacking the breakaway South Ossetia region.

The Economist said last week that with the smoke of battle still in the air, it is impossible to say who actually started it. But, given the scale and promptness of Russia’s response, the script must have been written in Moscow.

Meanwhile, Irish journalist Tom McGurk who is a Northern Irish nationalist, wrote in the Sunday Business Post: "After all, it was Georgia who invaded South Ossetia and then the Russians, having quickly established military superiority, accepted a ceasefire, while Moscow went to enormous lengths using all its English-speaking government officials to mount a media offensive explaining its actions."

Confusing surely? Georgia invaded part of its own territory. It is not yet recognised as part of Russia.

McGurk wrote: "Seemingly there is nothing Russia can do to satisfy some in the West; Vladimir Putin’s clean-up of the mafia-dominated mess he inherited from Boris Yeltsin is merely characterised as ex-KGB man authoritarianism. Ironically, as Russia has become more and more stable and economically prosperous under his hand, the level of criticism aimed at him has only increased."

This benign armchair view of Putin is a reflection of what the blindspot of anti-Americanism can do to one's judgment. Earlier this year, penned a pean to Fidel Castro.

The Economist says: "South Ossetia is a tiny patchwork of villages—Georgian and South Ossetian—which was much easier to drag into a war. It is headed by a thuggish former Soviet official, Eduard Kokoity, and run by the Russian security services. It lives off smuggling and Russian money. As Yulia Latynina, a Russian journalist, puts it, “South Ossetia is a joint venture between KGB generals and an Ossetian gangster, who jointly utilise the money disbursed by Moscow for fighting with Georgia.”"

Monday, July 28, 2008

Irish Media: Top earning journalists promote anti-EU position; Some question the benefits of being in the Eurozone

It's interesting that most of the top earning Irish journalists have taken an anti-EU position and some are also against the Euro - - Browne, Myers, Arnold, Dunphy, McGurk and Cooper.

An example of being divorced from reality as they will continue to do well in a recession or boom! How many have ever been on a factory floor or understand what it is to work in international tradable goods and services sector?

In the Sunday Times on July 27th, Matt Cooper, the former editor of the Sunday Tribune suggests that Ireland made a mistake in joining the Euro.

"The first problem with the euro is that it is overvalued. The second problem is that the interest rate we are charged for borrowing money is way too high. This is costing us jobs and destroying our wealth. Worse, we are powerless to deal with these problems because we have signed away control of our monetary policy to the European Central Bank (ECB). As part of that process, we are also restricted in terms of how much the state can borrow," Cooper wrote. "The strength of the euro against the dollar and sterling in recent years has destroyed the competitiveness of our exports in vital international markets, reducing or eliminating their profitability. The cost of doing business in this country doesn’t help, of course, but our weakened position is bound up with the problems caused by our currency as its value has soared in recent years. Despite our euro membership we continue to do more trade with Britain and the US than any other country in the eurozone: about 60% of our exports go to these two areas, making us unique among EMU members in our dependence on countries trading in other currencies."

For starters, the ECB rate at 4.25% remains at a historically low level.

Outside the Eurozone, Switzerland is the only country in Western Europe with a lower rate.

The UK benchmark rate is 5%; Norway's is 5.75%; Sweden's rate is 4.5%; Denmark's 4.25%; Switzerland's at 2.75%.


Iceland, the open economy that is comparable with Ireland, has a benchmark rate of 15.5%.

Bizarrely, Cooper in his article doesn't suggest what rate he would expect an Irish punt to have against the backdrop of the current crisis.

As for the argument that Ireland has surrendered the flexibility to cut rates below the ECB rate, apart from the threat of an exodus from our own currency comparable with that of the majority owners of our public companies - in 2007 for example, 65% of AIB's shares were held by foreign investors - the Euro and the ECB shouldn't be blamed for a reckless Irish fiscal policy when current spending was allowed grow at double-digit rates and oil was thrown on the property fire with a bonanza of unnecessary tax incentives.

The argument about trade flows is also misplaced. It reflects a lack of understanding of the multinational sector, which overwhelmingly dominates Irish exports.

Raw trade statistics have been used to bolster the case of Sinn Fein and the expert scribblers that the Irish economy would be better in an Anglo-centric world.

Ireland's principal economic function is as a base for US multinationals. Our top home-grown tech company Iona is in the process of being sold and Xsil, the fastest growing Irish tech company of this decade transferred most of its operations to Asia last spring.

Foreign firms, mainly American, are responsible for over 90% of our exports. Even though the statistics show a high level of exports to the US, it is wrong to assume that US firms would see merit in returning to the punt or that it would serve an economy so dependent on foreign investment.

Some US exports to Europe have an Irish content and US companies can keep their profits abroad for many years for example for investment in the Eurozone. Ireland also provides US companies with the facility of parking patents here and the profits from other overseas operations, become Irish exports to the US. Besides, US companies are responsible for most of our direct exports to other Eurozone countries.

As for the potential of investment from the rising multinationals of the Emerging Economies, Ireland is the fourth most expensive economy in the world according to the World Bank. Anyone who would think that having our own currency would enhance our prospects compared with the sense of the security of the world's second reserve currency, should not be taken seriously.

Cooper writes: "...imagine how the usual suspects would respond if the issue (of leaving the Eurozone) ever became a live one. The soul-searching that has taken place in the wake of our rejection of the Lisbon treaty would have nothing on it."

Giving a second PFO to the EU, would please some but most of them would be found in the sheltered sectors of the Irish economy. It would of course be part of a national suicide pact.

And finally, the politicians who blew the boom would effectively get control of interest rates. Wouldn't 15% mortgage rates be something to worry us?

Sunday, July 20, 2008

Well-fed John Gormley: Anti-Science on GM Foods - Pro-Science on Climate Change

The Greenpeace flagship, Rainbow Warrior, arrives in Sydney in April 2004, to promote a future free from genetically engineered (GE) food.

In early July, Green Party leader and Minister for the Environment John Gormley gave support to a French plan that could enable member states such as Ireland to establish themselves as GMO (Genetically Modified Organisms) free zones in the EU.

This move would be as much of a fraud as sham neutrality and the opportunity to breast-beat about Ireland being a nuclear-free zone while importing electricity from the UK that may be nuclear generated.

At a meeting of environment ministers in Paris, Gormley was reported to have told his fellow EU ministers that the union needed to respond to citizens concerns in the area of GMOs - i.e pander to the misinformed. Brave politics indeed and no big surprise as Green Party politicians are well practiced at jumping on passing bandwagons, some powered by the extremism of environmental activists.

Gormley said the rejection of the Lisbon Treaty in Ireland had demonstrated there was a real need for the union to take action to address a disconnect between the EU and citizens, and signalled that GMOs were a prime example.

“I heard some of my colleagues talk about the disconnect between the people of Europe and the European project in the context of the Irish No vote,” he said.

Gormley told The Irish Times after the meeting. “When you have a situation and the perception exists that the majority of people in Europe and the majority of member states oppose GMOs, and are then overruled by the Commission, this is undoubtedly contributing to that problem.”

Gormley acknowledged that Irish farmers currently use GMO animal feed for their cattle and he said there were no immediate plans to change that policy. But he said he felt it was essential that the Government kept its options open in relation to the issue.

“We are conscious of the strength of consumer demand for GM-free products. We are also conscious of labelling initiatives being introduced, including those in other member states, which will facilitate consumer identification of food products derived from animals fed a GM-free diet,” he said.

So this well-fed European politician wants to follow the misinformed Europeans and prevent development of the next generation of GM seeds that will provide greater tolerance for salt and drought prone lands in regions of the world, beyond Europe.

Anti-multinational sentiment has been a big factor in the scaremongering about GM food. Of course, the US firm Monsanto shouldn't have the potential of a monopoly on global seed production but in Europe, the anti-science environmentalists have politicians on the run and public research institutes are subject to threats of violence to prevent them from engaging in research.

In fact, these people are more dangerous than the anti-science climate change deniers.

Despite the scaremongering and the violence to prevent scientific experimentation - in June for example, 35 masked intruders destroyed genetically modified wheat being tested by researchers near Zurich and threatened staff with harm - there is no evidence that GM foods have had any negative impact on human health.

The Irish Government's Chief Scientific Adviser Prof Patrick Cunningham, who issued a formal report to the Government on GM foods last summer, which looked at safety, benefits and risks, this week told an Oireachtas Committee that he believed GM was of value to Ireland: "The answer has to be yes," he said.

"[ GM] is not going to go away and it is advancing at a hell of a rate," he said. Countries around the world were growing about 100 million hectares of GM corn, cotton, soyabean and rice.

Genetic modifications impart resistance to herbicides and insect attack, providing cost and yield improvement for the farmer, he said. "This has given a tremendous competitive advantage to those using [ GM]."

Speaking in the wake of food giant Nestlé's call for the European Union to review its opposition to GM, Sir David King, former UK Chief Scientific Adviser told the Financial Times in early July: "There is only one technology likely to deliver [the yield increases needed] and that is GM."

A comprehensive feature report in the Financial Times this month, noted that herbicide tolerance still dominates the GM market. The biggest brand is Monsanto’s Round­up Ready. This enables the farmer to eliminate weeds by spraying with Roundup, an inexpensive broad-acting herbicide, without harming the crop.

The second trait in widespread use is insect resistance. A gene from a microbe called Bacillus thuringiensis (Bt) is transferred into the crop, which produces a toxin that kills voracious pests such as corn borers and bollworms. A study released last month by PG Economics, a UK-based agricultural consultancy, concludes: “Biotech crop commercialisation has resulted in significant global economic and environmental benefits and is making important contributions to global food security.”

The FT report says that while today’s GM crops are designed to resist what scientists call “biotic stress” – pests and weeds – the second generation, currently under development, will focus on “abiotic stress”. This encompasses non-biological factors such as drought and floods, heat and cold, salinity and acidity. The biggest research effort is to make plants use water more efficiently.

“Abiotic stress reduces yield in major crops by 65-80 per cent,” says Michael Metzlaff, head of crop productivity for Bayer of Germany. His company’s experiments show that “gene silencing” technology can reduce the production of a key enzyme called Parp, which controls plants’ response to stress. As a result the plant grows better under adverse conditions. Companies plan to launch drought-resistant maize varieties between 2012 and 2015. Chris Zinselmeier, head of water optimisation research for Syngenta of Switzerland, says the aim is to produce a strain that yields better than conventional maize in drought years but “carries no yield penalty when water is plentiful”.

In addition to drought resistance, the industry is working on several other traits. One product, Syngenta’s Corn Amylase, shows how GM could help the biofuels industry. It is maize genetically modified to produce high levels of an enzyme, alpha amylase, that is a critical ingredient in the production of bio-ethanol. John Atkin, Syngenta’s head of crop protection, says Corn Amylase will improve the efficiency of bio-ethanol manufacturing from maize by 5-10 per cent.

Monsanto is meanwhile working on adding genes that enable crops to use nitrogen more efficiently. Nitrogen fertilisers represent one of the largest input costs in agriculture: in the US alone, farmers spend more than $3bn a year applying nitrogen fertilisers to maize fields and at least half of the nitrogen is wasted because it is not taken up by the crop.

Well-fed anti-GM campaigners in Europe are unlikely to be impressed by the latest developments. Extremists can always google to find some argument to support their prejudices and their familiarity with tropical countries may only extend to packaged or backpacker holidays.

So to the people in countries that are most exposed to the risk of climate change, it's a simple message: Let them eat cake!

As for the craven Minister Gormley, at the climate change conference in Bali, Indonesia in December 2007, he said that he had difficulty getting used to the humidity. It's a fair bet that he knows little or nothing about the challenges for agriculture beyond his world of Ringsend, South Dublin.

The renowned father of the Green Revolution, Dr. Norman Borlaug does not see GM as a panacea but one very important tool for increasing food production.

France, which holds the six month presidency of the union, is aiming to reform the process of GM food approval in the EU and has proposed allowing some member states to become GM free zones.

“We want to make rapid progress, because citizens expect it, and our demands are high,” French junior minister for the environment Nathalie Kosciusko-Morizet said in a statement after the July meeting.

EU environment ministers agreed to establish a committee to study the issue. A final decision on a new EU policy on GMOs is to be taken at the summit meeting of EU environment ministers in December, she said.

So finally back to John Gormley the politician. To the public, he is simply anti-science on GM foods and pro-science on climate change.

Comment - Lisbon Treaty Aftermath: The case of European politicians confusing concerns of "people" with the anti-science opponents of Genetically Modified (GM) food

Global Food Crisis: Malthus, Food Price Surge, Climate Change and a 42% rise in World Population by 2050 - includes information on the contribution of Dr. Norman Borlaug. Professor M.S.Swaminathan, President, National Academy of Agricultural Sciences of India, said at a Congressional Medal of Honor award ceremony in July 2007: "The impact of the Borlaug-led Green Revolution symphony will be clear from the fact that during 1964-68, Indian farmers increased wheat production in four years by an order greater than that achieved during the preceding 4000 years."

Wednesday, July 02, 2008

US foreclosures and the hard times towards the top of the pyramid

Last month it was reported that more than one million American homes were in in foreclosure - the process that more often than not ends up in people losing their homes. It was the highest rate ever recorded, according to a trade group which warned that the number will continue to climb.

The Mortgage Bankers Association's first quarter report showed that a record 2.5% of all loans being serviced by its members are now in foreclosure, which works out to about 1.1 million homes. That's up from the 2% of loans, or about 938,000 homes, that were in foreclosure at the end of 2007.

The New York Times has provided many reports on the plight of the losers including one on the auctions of the personal effects of people who have lost their homes and are then unable to pay rentals for storage.

In June, the NYT had an article on the plight of the still well-off but who are not as rich as they were.

The article said that interviews with the people who actually see the bank statements, like divorce lawyers and lenders, say their clients are definitely living on less than they did a year ago, regardless of how expansive the definition of “less” may be. Hairstylists and private jet rental companies say the wealthy are cutting back on luxuries like $350 highlights and $10,000-an-hour jet rentals. Even nutritionists and personal trainers notice a problem. The wealthy are eating more and gaining weight because of the stress.

The New York Times said that these financial problems — if they can be called that — will hardly elicit tears from the rest of us. But in those gilded living rooms, there is a quiet nervousness about keeping up appearances.

“Even if they’re not in danger of not paying their mortgage, there’s still a psychological change,” said Chris Del Gatto, chief executive of Circa, which has watched its business jump by 50 percent in the last year as wealthy clients sell their spare diamonds and Rolexes. “The economy is an issue even for people who don’t need the money.”

Their spouses could leave them when they discover that their net worth has collapsed to eight figures from nine. Friends and business associates could avoid them as they pass their lunchtime tables at Barney’s or the Four Seasons. And these snubs could trickle down to their children.

“They fear their kids won’t get invited to the right birthday parties,” said Michele Kleier, an Upper East Side-based real estate broker. “If they have to give up things that are invisible, they’re O.K. as long as they don’t have give up things visible to the outside world.”

So New York’s very wealthy are addressing their distress in discreet and often awkward ways. They try to move their $165 sessions with personal trainers to a time slot that they know is already taken. They agree to tour multimillion-dollar apartments and then say the spaces don’t match their specifications. They apply for a line of credit before art auctions, supposedly to buy a painting or a sculpture, but use that borrowed money to pay other debts.

It's a tough life indeed and it just again illustrates that there are a lot more people with education than educated.

Today, the NYT reported that Leona Helmsley who became super rich by marrying a New York real estate magnate, and became infamous for her comment that "only the little people pay taxes," left $12 million in her will to her dog, Trouble. But that, it turns out, is nothing much compared with what other dogs may receive from the charitable trust of Helmsley, who died last August.

Her instructions, specified in a two-page “mission statement,” are that the entire trust, valued at $5 billion to $8 billion and amounting to virtually all her estate, be used for the care and welfare of dogs, according to two people who have seen the document and who described it on condition of anonymity.

Two people who described the statement said Helmsley signed it in 2003 to establish goals for the multibillion-dollar trust that would disburse assets after her death.

The first goal was to help indigent people, the second to provide for the care and welfare of dogs. A year later, they said, she deleted the first goal.

It would indeed be nice to think that there is such a place as hell for folks like her but on second thoughts she would probably enjoy even that.

Sunday, June 22, 2008

Democracy and the grip on the Public Megaphone

In the aftermath of the Irish defeat of the Lisbon Treaty ratification proposal in a referendum, it has been suggested that European politicians should respond to citizens' concerns and every other country of the EU27, should emulate Ireland and hold a referendum.

This would be democracy in action, it is argued, but interestingly it is not proposed that the votes be counted as one. If Malta was the only country to reject the Treaty, that would be the end of it. So what the best form of democracy may be, is sometimes what suits a particular agenda or argument.

Should the original Six have sought public approval for the admission of poor Ireland in 1973 and related commitment of German and Dutch taxpayers to supporting us?

If our admission had been approved, how would Ireland have voted on subsequent enlargements from 9 in 1973 to 27 today?

I have said before that it's bizarre that some of us get excited about a "democratic deficit" in Brussels, when our own "messenger boy" political system where the buck stops nowhere, is hardly something to hold up as a great template.

In Ireland, farmers and public sector unions have a firm grip on the public megaphone while the construction industry uses its money power to but influence.

As for the individual, there is always the local TD, who begins a daisy-chain of letters to get a response to what maybe a simple tax query. Government ministers have 120 people supporting this Citizens' Bureau type work but it's the collective power that matters.

As the Irish economy teeters on the brink of a recession, the Oireachtas members will be soon off on a 3-month break. The New Zealand parliament set for about 90 days annually, similar to Ireland's but it is only shuttered for one complete month in the year.

As regards connecting to citizens at a European level, the case of genetically modified (GM) food, illustrates what happens when well-fed but ignorant activists who reject science, are confused with the public interest.

So we have the well-fed in Europe with no understanding of the challenges facing agriculture beyond the rich world and in Ireland, during the Lisbon Treaty campaign, wealthy media commentators led the opposition to the Lisbon Treaty.

So responding to citizen concerns is not easy.

Gallup discovered years ago that income generally determines voter choice. It also is the prism through which people view the world.

In Ireland, people who don't have any exposure to the world of selling tradable goods and services but have comfortable incomes/levels of wealth such as politicians, may not understand the concerns citizens in other sectors of life.

Lisbon Treaty: In Perilous post-Celtic Tiger times, Ireland opts for Impotence in Europe's greatest success of past thousand years

Comment - Lisbon Treaty Aftermath: The case of European politicians confusing concerns of "people" with the anti-science opponents of Genetically Modified (GM) food

Lisbon Treaty: Thousands of Irish private sector workers will face bleak employment prospects in 2009 as No campaign leaders fight for jobs at the heart of Europe - in the European Parliament

Sunday, June 01, 2008

The useless [Expletive Deleted] at the Irish National Consumer Agency


President McAleese presents Taoiseach Brian Cowen TD with the Seal of Office of Taoiseach at Áras an Uachtaráin

Last month the new Taoiseach Brian Cowen made waves when the Dáil microphones picked up a brief conversation with Tánaiste and Minister for Enterprise, Trade and Employment Mary Coughlan.

Fine Gael had earlier raised a report in the Sunday Business Post on the big disparity between what big British retail stores charge for the same items in Ireland and the UK.

“Bring in those people and get a handle on it,” Cowen instructed Coughlan. “You know all those fuckers.”

Coughlan soon after, met representatives of the National Consumer Agency.

The earthy language used by Cowen, may have surprised mother superior types but visitors to Ireland are often surprised by the Irish love of swear words and the common use of "Jesus Christ," not exactly in anything that might resemble a religious incantation.

When extensive transcripts of US President Richard Nixon's taped conversations in the White House Oval office were released, during the Watergate Congressional hearings, many passages, contained the term [Expletive Deleted].

One gem from 1971 when the US dollar's link with gold was broken, riled the Italians.

"Whatever about the pound," Nixon said. "I don't give a shit about the lira."

"Impeach the [Expletive Deleted]" became a popular slogan on protest posters.

Back to our own [Expletive Deleted]...

The National Consumer Agency had its genesis in the establishment of the Consumer Strategy Group in March 2004 under the chairmanship of Ann Fitzgerald who was Chief Executive of the Irish Association of Investment Managers.

It was a time when the issue of "rip-off Ireland" was getting a lot of attention.

More than four years later, the National Consumer Agency is run by Ann Fitzgerald and like many of the quangos, that have been spawned in the past decade, it has a questionable impact.

It appears to get involved in issues only after they have raised publicly elsewhere.

Its biggest failure is that it has failed to see the web as an effective tool in providing consumers with comparitive price information on key goods and services.

Finfacts said in its submission to the Consumer Strategy Group in 2004 that: The one dramatic measure to both empower the consumer and promote competition would be to set up a national web service providing consumers with comparative prices of key products and services in principal urban centres.

Dramatic measure is right. Wouldn't that be the day!!

Submission to Consumer Strategy Group July 2004: Public policy has failed consumers in two areas in recent years. Progress in deregulation has been glacial while thinking on consumer information is stuck in the mindset of the 1970’s when the display of price lists was first mandated.

Deregulation
Where market deregulation has been dependent on our own Government’s initiative, the preferred option has been to defer decisions, usually by using the Competition Authority to carry out a study. The deregulation of the taxi trade did not simply pose the same challenges as radical change in the legal or pharmacy sectors. Simply put, taxi drivers are not an economically powerful interest.

There has been some recent reform in the insurance sector, which has had an impact on prices and it is an illustration of what can be achieved. The Government is belatedly addressing the issue of tribunal lawyers’ fees and that may have an impact on charges generally. However, this is just a start. Reform of the system of designating development land is still awaited, three decades after the publication of the Kenny Report. There isn’t a political appetite to change the corrupt system where agricultural land can increase twenty-fold in value when zoned for development. The impact of land prices coupled with lack of effective competition in the service sector sustains high prices while global competition in manufacturing maintains a downward pressure on product prices. It’s a ridiculous situation that Dublin prime office rents are among the highest in the world (see: www.finfacts.ie/cbre.htm).

Where Brussels mandated deregulation has occurred e.g. air travel and telecoms, or new entrants have entered existing cartelised markets- Bank of Scotland entry to the mortgage market and German retail groups Lidl and Aldi entry to the food retailing sector, consumers have significantly benefited.

Consumer Information
Since the mid 1970’s publicans have been required to display prices in their premises. Even if such lists were positioned to be legible, which most of them are not, they are of limited value in large urban areas. Recently in Dáil Éireann, there was a discussion on requiring dentists to display prices of various procedures in their surgeries. Why not have these lists displayed so that they would be visible from the exterior of a premises or bring the issue into the modern age and use the web where practical?

The EU measure requiring pricing to be placed on products, which was introduced last year, is also of limited benefit as consumers have lost the price benchmarks for many products. This is particularly the situation in large urban areas where it is not uncommon for prices of standard items to vary in the range of 15%-30% in similar type business establishments, even on the same street. When the practice of printing recommended retail prices (RRP’s) on products ended, retailers in areas with large transient populations were giving the opportunity to profiteer.

The one dramatic measure to both empower the consumer and promote competition would be to set up a national web service providing consumers with comparative prices of key products and services in principal urban centres.

Through requiring business operators in designated areas to provide the prices of stipulated consumer products and services and having these prices updated bi-annually on an online searchable database, the consumer would be able to conveniently check for price ranking by street and area. It should also be possible to compare prices with the manufacturer/distributor’s recommended price level, which could differ for central Dublin than for example Kiltimagh.

The goal would be to establish a nationally recognised service that with the support of a significant budget (including marketing) would become a key part of the process of setting prices. The practice of increased prices for late drinking should also be highlighted as should the application of cover charges. Business operators would be reluctant to head the price league and be significantly out-of-line with comparable competitors. A separate category of the website could provide comparison of prices of a basket of products at the main multiple retail outlets.

The online system does not have to be a big bureaucratic operation as price lists could be updated online.

The online service would also be of benefit to tourists. We are deluding ourselves if we believe that our expensive brand tag will not have an impact on our travel business.

There should also be a requirement that the prices of certain products and services be visible from the exterior of premises similar to restaurants e.g. the services at a hairdressing salon.

Irish Trade Missions and Manufacturing Good News

Given the apparent success of Irish trade missions, we should surely have lots more of them in these difficult times.

Until recently, we had the Minister for Enterprise, Trade and Employment Micheál Martin, dishing out superlatives at "signing ceremonies" for business deals that appeared to materialise when the former Cork schoolteacher dropped off at some foreign outpost.

Well that is what the great unwashed believed at home and who would blame them when the media accepted the spin without question.

This past week, it has been reported that an Enterprise Ireland backed trade mission to Latin America has seen Irish firms secure a total of €9.1 million in contracts.

Participating businesses secured €3.6 million in the latter half of the week in Mexico, having already scooped up €5.5 million worth of deals in Brazil.

Businesses from all over Ireland were reported to have enjoyed success on the trade mission. Galway group Fintrax opened a new office in Mexico and announced its selection by the Mexican Tax Authorities to implement a nationwide value-added tax refund programme for tourists.
It's a fair bet that none of the business deals that were announced had anything to do with the trade mission to Brazil and Mexico.

A trade mission needs to have "good news" and the press releases are already prepared before the leading minister leaves Dublin.

So Enterprise Ireland compiles details on past business and then the minister claims bragging rights for the spin or spoof "good news."

Sunday, May 18, 2008

Economics Forecasting and the Irish Economy as oil price heads for $200 a barrel

Economics and financial forecasts have a dubious reputation for a reason.

In both finance and economics, just consider the record of the pundits from Fed Chairman Ben Bernanke and ex-Goldman Sachs head Hank Paulson, currently US Treasury Secretary to the legion of "experts" presented on CNBC, the US business television network, in the months following the news of subprime troubles in February 2007. Some were foolish in proclaiming "containment" when they should have known better. Most were involved in self-interested wishful thinking.

Goldman Sachs made money from subprime on the way up and down as it did not follow the consensus on the way down.

When its partytime, economists who are dependent wage slaves, have to play the game of optimism and forecasts tend to revolve around a consensus figure and it can take several adjustments to a more realistic forecast.

In the UK, during the tech boom, fund manager Tony Dye who was known as "Dr Doom," was well known for many years as the successful chief investment officer of the fund managers Phillips and Drew. However, he refused to follow investor fashion by buying shares in dot.com companies, fearing a slump in the markets was imminent. He lost his job and both he and legendary US investor Warren Buffett were proved right.

In Ireland, bank economists tend to be the optimists as retail products such as mortgages have to be supported. Stockbrokers such as Davy and Goodbody have a more credible track record. Although Alan McQuaid, Chief Economist of Bloxham Stockbrokers held out the prospect of an ECB rate cut in September 2007 and wrote in the Irish Times: "I'm sick to death of people writing off the Irish economy and next year could easily see the "Celtic Tiger" roaring more loudly than many pessimists think."

This was just months after then Taoiseach Bertie Ahern, told people who were engaged in "cribbing" from the sidelines, to "commit suicide."

It was also a time, when the new Minister for Education Batt O'Keeffe, then Minister for Housing, said that it was a good time for intending first-time house buyers, to purchase.

It should be remembered that the "sky is falling" pundits were easily outranked by the cheerleaders peddling snake oil.

The Economic and Social Research Institute (ESRI), which as an independent institute on public funding, was the inspiration of the architect of the modern Irish economy T.K. Whikaker, was regarded as too pessimistic last year about the prospects of the Irish economy in 2008.

This week, the ESRI issued its biennial Medium Term Economic Review and in contrast with the European Central Bank (ECB) which provides a forecast range, one figure was published for the forecast and provided a good headline for the Irish Government, but the spin ran-ahead of the story.

The Irish Independent reported that : Taoiseach Brian Cowen got unexpected good news on the economy last night when a major report predicted it would bounce back in time for the next general election.

Forecasting a major comeback in growth by 2010, the country's leading economic think-tank said the economy will grow by an average of 3.75pc annually between now and 2015.

The Economic and Social Research Institute (ESRI) medium-term review, published every two years, is optimistic about the country's economic prospects and predicts a return to full employment within a few years.

Throwing down the gauntlet to Brian Cowen and new Finance Minister Brian Lenihan, the report says that when the current slowdown ends, the economy should recover rapidly -- but only if proper policies are put in place.

New Minister for Finance Brian Lenihan commented: “It is encouraging to see that the ESRI’s view that the medium term prospects for the Irish economy are generally positive. Based on their analysis, real growth in GDP of 3¾ per cent per annum is sustainable over the medium term. This rate of growth is much higher than elsewhere in the euro area. In contrast to the prevailing mood of pessimism, the ESRI shares my view in that we should see a return to trend growth from 2010 onwards. I share the view that economic conditions in 2008 and 2009 will remain weak and that sensible policies be pursued. The Government remains determined to press ahead with our Infrastructural Development programme. Discipline on current expenditures under all headings will be critical over the next few years given the changed resources available.

The key message that we can take from the Review is that Ireland’s economy is flexible and resilient. Because of our sound economic and fiscal fundamental factors, our economy has the ability to absorb shocks in an efficient manner; to limit the economic fall-out and to return to its trend rate of growth fairly rapidly.”

There was no mention of the downside scenario in the report.

Assumptions on energy prices are derived from the International Energy Agency’s (IEA) forecasts. However, it raises a key issue on the reliability of the outlook as the IEA forecasts are not recent ones.

The oil price is forecast at $73.9 in 2012.

Earlier this month, the US Energy Department said that the US oil benchmark WTI (West Texas Intermediate) which averaged $72 per barrel in 2007, is projected to average $110 per barrel in 2008 and $103 per barrel in 2009.

The IEA said in its market report last July, that despite four years of high oil prices, it expected increasing market tightness beyond 2010, with OPEC spare capacity declining to minimal levels by 2012. A stronger demand outlook, together with project slippage and geopolitical problems has led to downward revisions of OPEC spare capacity by 2 mb/d in 2009. Despite an increase in biofuels production and a bunching of supply projects over the next few years, OPEC spare capacity is expected to remain relatively constrained before 2009 when slowing upstream capacity growth and accelerating non-OECD demand once more pull it down to uncomfortably low levels.

As to the oil price being $90.5 in 2020 according to the ESRI, the projection appears to be very much out of date.

Assumptions on energy prices are derived from the International Energy Agency’s (IEA) forecasts. However, it raises a key issue on the reliability of the outlook as the IEA forecasts are not recent ones. ESRI Medium-Term Review 2008-2015: Irish economy to grow at 3.75% annual rate; Business services exports very sensitive to Ireland’s competitiveness

Last November, in the Finfacts report on the World Energy Outlook 2007 (Check links in Related), we said: With the price of crude oil heading for the $100 a barrel benchmark, having risen in dollar terms by 61% and 45% in euro terms since January 2007, the International Energy Agency (IEA), the adviser to 26 industrialised countries including Ireland, said today that the world's primary energy needs are projected to grow by 55% between 2005 and 2030, at an average annual rate of 1.8% per year. Chinese and Indian crude oil imports will almost quadruple by 2030, creating a supply ``crunch'' as soon as 2015.

Before returning to the oil issue, the forecast that business service exports will rise to 70% of total exports, also raises an issue that is not covered in the report.

Companies with a small number of staff, could book huge amounts as Irish sales. One of the biggest companies operating in Ireland is Microsoft's Round Island One and it has no staff. It operates from the offices of a Dublin Law firm.

New York Times columnist Paul Krugman, who has another job as a professor of economics at Princeton University, wrote in early May: "The Oil Bubble: Set to Burst?” That was the headline of an October 2004 article in National Review, which argued that oil prices, then $50 a barrel, would soon collapse.

Ten months later, oil was selling for $70 a barrel. “It’s a huge bubble,” declared Steve Forbes, the publisher, who warned that the coming crash in oil prices would make the popping of the technology bubble “look like a picnic.”

Krugman wrote that all through oil’s five-year price surge, which has taken it from $25 a barrel to last week’s close above $125, there have been many voices declaring that it’s all a bubble, unsupported by the fundamentals of supply and demand.

So here are two questions: Are speculators mainly, or even largely, responsible for high oil prices? And if they aren’t, why have so many commentators insisted, year after year, that there’s an oil bubble?

Krugman says that the only way speculation can have a persistent effect on oil prices, then, is if it leads to physical hoarding — an increase in private inventories of black gunk. This actually happened in the late 1970s, when the effects of disrupted Iranian supply were amplified by widespread panic stockpiling.

But it hasn’t happened this time: all through the period of the alleged bubble, inventories have remained at more or less normal levels. This tells us that the rise in oil prices isn’t the result of runaway speculation; it’s the result of fundamental factors, mainly the growing difficulty of finding oil and the rapid growth of emerging economies like China. The rise in oil prices these past few years had to happen to keep demand growth from exceeding supply growth....Saying that high-priced oil isn’t a bubble doesn’t mean that oil prices will never decline. I wouldn’t be shocked if a pullback in demand, driven by delayed effects of high prices, sends the price of crude back below $100 for a while. But it does mean that speculators aren’t at the heart of the story.

The consequences of that scarcity probably won’t be apocalyptic: France consumes only half as much oil per capita as America, yet the last time I looked, Paris wasn’t a howling wasteland. But the odds are that we’re looking at a future in which energy conservation becomes increasingly important, in which many people may even — gasp — take public transit to work.

I don’t find that vision particularly abhorrent, but a lot of people, especially on the right, do. And so they want to believe that if only Goldman Sachs would stop having such a negative attitude, we’d quickly return to the good old days of abundant oil.

Again, I wouldn’t be shocked if oil prices dip in the near future — although I also take seriously Goldman’s recent warning that the price could go to $200. But let’s drop all the talk about an oil bubble.

Financial Times columnist Gideon Rachman wrote this week: Competition for the world’s oil supplies is intensifying. Chinese oil consumption doubled between 1994 and 2003 and will have doubled again by 2010. China’s foray into Africa is largely driven by its own search for “energy security”. The International Energy Agency predicts that in 2010 China will become the world’s largest consumer of energy. The IEA also thinks that the world’s energy needs will be 50 per cent higher in 2030 than they are today – and that we are going to become more, not less, reliant on fossil fuels.

This seems all too plausible. At present there are about 10 cars in China for every 1,000 people; there are 480 cars per 1,000 people in the US. But by 2015, China could be the world’s largest market for new cars.

Here are three facts about oil: it is a finite resource; it drives the global transport system; and if emerging economies consumed oil as Europeans do, world consumption would jump by 150 per cent. What is happening today is an early warning of this stark reality. It is tempting to blame the prices on speculators and big bad oil companies. The reality is different.

FT economics columnist Martin Wolf wrote: Demand for oil grows steadily, as the vehicle fleets of the world expand. Today, the US has 250m vehicles and China just 37m. It takes no imagination to see where the Chinese fleet is headed. Other emerging countries will follow China’s example.

Meanwhile, spare capacity in members of the Organisation of the Petroleum Exporting Countries is currently at exceptionally low levels, while non-OPEC production has equally consistently disappointed expectations.

It looks increasingly hard to expand supply by the annual amount of about 1.4m barrels a day needed to meet demand. This means an extra Saudi Arabia every seven years. According to the International Energy Agency, almost two-thirds of additional capacity needed over the next eight years is required to replace declining output from existing fields.

The oil price will provide the response to climate change not filling a laundry list with feeble initiatives.

In the meantime, what about a forecast with a more realistic average oil price - say in the range $150-$200?