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Ireland's Problems Linked To Housing..

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Is it me, or does it seem widely acknowledged that Ireland's problems were largely linked to reckless bank lending and an insane property boom.... yet nobody draws the same conclusion with us? This goes for most media, but also a lot of people I speak to.

Gah - I need to get some sleep and wake up from this nightmare (does that make sense!?).

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Is it me, or does it seem widely acknowledged that Ireland's problems were largely linked to reckless bank lending and an insane property boom.... yet nobody draws the same conclusion with us? This goes for most media, but also a lot of people I speak to.

Gah - I need to get some sleep and wake up from this nightmare (does that make sense!?).

Go back for "neither" reprogramming, does not compute.

Arttificially inflated cost based, exported whole industries as a result, knackered economy. Rocket science it is not.

Our central bank and politicians still want to carry on living the lie. This will fail badly.

Edited by OnlyMe

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I think they have the same issues as us - if they do what needs to be done to get the housing market going again (ie sell at lower prices the balance sheets turn to crap) would sink the banks immediately.

That is to say the overwhelming majority of houses in Ireland still look massively overpriced, even more so than here, with supply being restricted.

I guess the choices are either let the banks fail and give the good assets and liabilities to responsible building socs(my choice)

Or have a TARP type scheme where banks can put the stuff with less than 50% equity in them (ie the 50% overpriced homes) and money is printed to cover the deficit after forced sales in deposits allowing the market to return to affordable levels.

Yet both our and the irish politicians just seem to be happy to sit on their arses and keep bailing each other out instead of sorting things out. I guess as Gordon found, its easier just to give responsibility to the BoE than bother with regulations and stuff.

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I think they have the same issues as us - if they do what needs to be done to get the housing market going again (ie sell at lower prices the balance sheets turn to crap) would sink the banks immediately.

we often talk about HPC sinking the banks = hpc won't happen.

But hpc has/is happening on a MEGA scale in the US and their banking system is still going...

why are we so special?

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Go back for "neither" reprogramming, does not compute.

Arttificially inflated cost based, exported whole industries as a result, knackered economy. Rocket science it is not.

Our central bank and politicians still want to carry on living the lie. This will fail badly.

All depressingly true.... :rolleyes:

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Is it widely accepted that Irelands Bubble was worse than our own?

I remember seeing very ordinary looking 2 up 2 down houses on sale for well over 1 million euro in Dublin. Even after the large falls they have experienced, prices still seem higher than ours in the regions.

And of course, they had even less of a foundation for it all than we did. Just 4 million people, much more space, a building and supply boom.

I'm not sure we can reliably compare our housing market with Irelands.

Edited by Kyoto

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I agree with the above post:

No printing press

No North Sea oil

No London Stock Exchange

Ireland, is in big trouble compared to the UK.

Edited by Money Spinner

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Definately seems like Ireland has a lot longer to fall.. and already the nation has collapsed economically and is a ward of the EU.

The cognitive disconnect imo is we've basically had 20 years of basing our economy on asset price inflation. It was the money train the central bankers were using to get money into the hands of the people. Because income growth was not happening anymore, even in the face of impressive technological advance improving productivity.

So after 20 years and people building their financial life on the assumption of continuing asset price inflation they can't admit the problem. To admit the problem would also admit the asset price inflation in the UK can't go on at least, and may even collapse.

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Definately seems like Ireland has a lot longer to fall.. and already the nation has collapsed economically and is a ward of the EU.

The cognitive disconnect imo is we've basically had 20 years of basing our economy on asset price inflation. It was the money train the central bankers were using to get money into the hands of the people. Because income growth was not happening anymore, even in the face of impressive technological advance improving productivity.

So after 20 years and people building their financial life on the assumption of continuing asset price inflation they can't admit the problem. To admit the problem would also admit the asset price inflation in the UK can't go on at least, and may even collapse.

Yep, rather than follow their defined polcies and metrics that they said they were following in fact they started meddling, they then continued to meddle, if the stats got bad the stats were changed, they know very little about investment or growth, just numbers and the headline number means nothing.

Ireland are going to lose the very thing they think they are going to rely on - poaching jobs and income from ultra low corporate taxation rates - no chance in hell the rest of the EU are going to bail them out and then watch future jobs be exported in a corporate tax saving scheme.

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Is it widely accepted that Irelands Bubble was worse than our own?

I remember seeing very ordinary looking 2 up 2 down houses on sale for well over 1 million euro in Dublin. Even after the large falls they have experienced, prices still seem higher than ours in the regions.

And of course, they had even less of a foundation for it all than we did. Just 4 million people, much more space, a building and supply boom.

I'm not sure we can reliably compare our housing market with Irelands.

Yes, when you see the numbers on the TV, you have to mentally multiply by 15 to get the equivalent for the UK, so their 70 billion Euro bailout would be about the same as the UK needing a 1 trillion Euro bailout.

And their housing market is worse.. there are something in the region of 300,000 empty new houses/flats if my memory serves. That's the equivalent of 5 million for the UK; so many that many areas are going to be like the market in some US cities where there is no one willing or able to pay the basics costs of owning a property (taxes, heating, electricity, upkeep, etc), so houses become absolutely worthless, or worth less than nothing.

They need to go bankrupt and have a massive debt jubilee, or have a decade of double digit inflation, to have a chance of getting out of their mess. Neither looks on the cards right now.

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I've come to the conclusion the Ireland is simply being subject to a bank takeover, enabled by the other EU governments (under pressure from their own banks).

The process is simply:

1. Foreign Banks overlend - housing is probably the best target asset by being leveraged and using high income multiples

2. Population endebted beyond any possible means to repay (takes a while to realise it)

3. Bank takes over populations future income forever (via tax system)

The above process is simply the banking process running through its natural path. You either bend over and accept it (handing over all your wealth) or tell the banks to p*ss off for being so stupid.

Ireland has one chance left and that is to stop the process getting to stage 3. Default is the only option. The pain then lands up with the banks where it belongs. After a default, the Irish government has to run a balanced budget for a couple of years until the bankers forget and the process can start all over again. That's how it all works.

Then we can go through the same process over here.

VMR.

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Yes, when you see the numbers on the TV, you have to mentally multiply by 15 to get the equivalent for the UK, so their 70 billion Euro bailout would be about the same as the UK needing a 1 trillion Euro bailout.

And their housing market is worse.. there are something in the region of 300,000 empty new houses/flats if my memory serves. That's the equivalent of 5 million for the UK; so many that many areas are going to be like the market in some US cities where there is no one willing or able to pay the basics costs of owning a property (taxes, heating, electricity, upkeep, etc), so houses become absolutely worthless, or worth less than nothing.

They need to go bankrupt and have a massive debt jubilee, or have a decade of double digit inflation, to have a chance of getting out of their mess. Neither looks on the cards right now.

To give an analogy where a mass default worked.. look at US railroads in the late 1800's. Foreign banks and investors had poured unbelievable amounts of money in building and speculating on railroads. Because of the overbuilding most of the investments went broke and creditors got what they could liquidate the railroads for.

But the big winner in the end was the USA. Because basically foreigners paid for a world class rail system, overbuilt, that the USA has used for over a century.

The poor Irish should simply default on the loans, and keep the shiny new houses for themselves, give them to the people of Ireland. It would be a major competitive advantage. But it appears to me the government of Ireland is betraying the people and stepping in to collect on the loans on behalf of the banks, including foreign banks.

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Ireland has one chance left and that is to stop the process getting to stage 3. Default is the only option. The pain then lands up with the banks where it belongs. After a default, the Irish government has to run a balanced budget for a couple of years until the bankers forget and the process can start all over again. That's how it all works.

Then we can go through the same process over here.

VMR.

Do we know how long it took for other countries which took the default option to get favourable rates again?

TBH though, governments should be balancing their books all the time anyway, so why they need to borrow money at all is a bit of a mystery to me. Only spending what you tax is hardly rocket science.

edit: typo

Edited by Traktion

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Is it me, or does it seem widely acknowledged that Ireland's problems were largely linked to reckless bank lending and an insane property boom.... yet nobody draws the same conclusion with us? This goes for most media, but also a lot of people I speak to.

Gah - I need to get some sleep and wake up from this nightmare (does that make sense!?).

Yep, I noticed it too. The British media have no problems reporting and commenting on the damage that an unsustainable property boom did to Ireland but are resolutely quiet when it comes to reporting the ongoing negative effects of the UK's own property bubble.

That's why you should never, ever believe what UK media are spewing out on UK-related matters. There are a number of international news channels available on satellite telly, it's well worth watching their coverage of UK affairs to get a more balanced and accurate view. Just don't rely on the Russian channel for coverage of Russian stories, the French one for coverage of French stories etc. as the same goes for them with regard to 'local' stories.

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Yep, I noticed it too. The British media have no problems reporting and commenting on the damage that an unsustainable property boom did to Ireland but are resolutely quiet when it comes to reporting the ongoing negative effects of the UK's own property bubble.

That's why you should never, ever believe what UK media are spewing out on UK-related matters. There are a number of international news channels available on satellite telly, it's well worth watching their coverage of UK affairs to get a more balanced and accurate view. Just don't rely on the Russian channel for coverage of Russian stories, the French one for coverage of French stories etc. as the same goes for them with regard to 'local' stories.

Come to that conclusion too.

Mentioned Asia Times a few times before, check them out..........

http://www.atimes.com/atimes/Global_Economy.html

Very much on topic check out this analysis of the action and reaction to Ireland/Iceland.

http://www.atimes.com/atimes/Global_Economy/LK20Dj03.html

Edited by OnlyMe

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To give an analogy where a mass default worked.. look at US railroads in the late 1800's. Foreign banks and investors had poured unbelievable amounts of money in building and speculating on railroads. Because of the overbuilding most of the investments went broke and creditors got what they could liquidate the railroads for.

But the big winner in the end was the USA. Because basically foreigners paid for a world class rail system, overbuilt, that the USA has used for over a century.

The poor Irish should simply default on the loans, and keep the shiny new houses for themselves, give them to the people of Ireland. It would be a major competitive advantage. But it appears to me the government of Ireland is betraying the people and stepping in to collect on the loans on behalf of the banks, including foreign banks.

I think everyone in the whole wide world should do this - I can't see any problem with it (I'm sure Injin will agree!)>

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Come to that conclusion too.

Mentioned Asia Times a few times before, check them out..........

http://www.atimes.com/atimes/Global_Economy.html

Very much on topic check out this analysis of the action and reaction to Ireland/Iceland.

http://www.atimes.com/atimes/Global_Economy/LK20Dj03.html

Thanks for the links - good reads and very contrasting to our local media.

I found the CDS graph rather interesting too. It looks like Iceland's pain was short and they are now recovering. Ireland on the other hand, have just built up an even bigger and longer problem.

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Do we know how long it took for other countries which took the default option to get favourable rates again?

TBH though, governments should be balancing their books all the time anyway, so why they need to borrow money at all is a bit of a mystery to me. Only spending what you tax is hardly rocket science.

edit: typo

Borrowing per se doesn't seem to be wrong. Many government projects are long-term ones, so that if you had a policy of only spending the money of the current generation, the people paying for an asset wouldn't get the benefit of them. By borrowing money, the people who get the benefit also have to pay the costs, which seems fairer. Of course, it puts the onus on the government making the decisions to only borrow for projects which will produce a benefit.

The fly in the ointment is that governments depend upon short-term popularity, which distorts the above process. We need a long-term governing system to go along with the short-term one,

Peter.

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The poor Irish should simply default on the loans, and keep the shiny new houses for themselves, give them to the people of Ireland. It would be a major competitive advantage. But it appears to me the government of Ireland is betraying the people and stepping in to collect on the loans on behalf of the banks, including foreign banks.

Looks like a political betrayal to me. (and a UK betrayal if we bail out the Irish taxpayer by indirectly bailing out out our own banks as well, its only been a couple of bonus-ridden years since the last one). As the nature of most industries is to tend towards monopolies, the nature of the banking system is to own everything. There needs to be a counter-force, for monopolies it is regulators, for banks, it is default.

In the event of an Irish default, it strikes me that the current politicians could come out of it rather well it they made it clear that they have just mugged foreign banks for a couple of hundred billion for the benefit of the Irish people. That a better return than the traditional British approach of invading, nicking all the local resource and taxing the locals until there is a revolution.

Note to banks : "A loan to a foreign nation is unsecured unless you are prepared to invade".

Is there anyone here that doesn't think these bailouts are effectively a takeover by the banking system?

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Borrowing per se doesn't seem to be wrong. Many government projects are long-term ones, so that if you had a policy of only spending the money of the current generation, the people paying for an asset wouldn't get the benefit of them. By borrowing money, the people who get the benefit also have to pay the costs, which seems fairer. Of course, it puts the onus on the government making the decisions to only borrow for projects which will produce a benefit.

The fly in the ointment is that governments depend upon short-term popularity, which distorts the above process. We need a long-term governing system to go along with the short-term one,

How about a golden rule, say to not spend more than we earn over the economic cycle (defined by whoever is in charge)

;)

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Is there anyone here that doesn't think these bailouts are effectively a takeover by the banking system?

Was that not the message of "The Quiet Coup"? Or, rather, that the banking system has taken over, and therefore things are done for their benefit i.e. these bailouts are not "the takeover"; that's already happened. They are just evidence that a take-over has happened,

Peter.

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Was that not the message of "The Quiet Coup"? Or, rather, that the banking system has taken over, and therefore things are done for their benefit i.e. these bailouts are not "the takeover"; that's already happened. They are just evidence that a take-over has happened,

Looks like the quiet coup is a nice summary.

So the stage we are at is that the banks have sufficient political control but they haven't yet managed to dump all their problems on the taxpayers, although they are part way there with the previous bailouts and taxpayer guarantees.

For Ireland, they are about to sign over their housing assets and future income. Looks like a financial death warrant to me.

Instead, they could just say "thanks for the houses and the infrastructure, we will dump the debt and force a balanced budget with no foreign borrowing ". Basically a pre-pack administration at a national level.

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How about a golden rule, say to not spend more than we earn over the economic cycle (defined by whoever is in charge)

;)

Actually, if your long term average economic growth is, for instance, 2%, then you can run a deficit of 2% on average in perpetuity.

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Very much on topic check out this analysis of the action and reaction to Ireland/Iceland.

http://www.atimes.com/atimes/Global_Economy/LK20Dj03.html

Excellent article.

'A Fistful Of Euros' makes the same point as you guys.

In America, the Wall Street Journal reporting on Ireland:

"Ireland, by contrast (to Greece), went into the crisis with a budget surplus, a debt-to-GDP ratio of some 27% and a strong record of recent growth that has left it one of the richest countries in the world. Ireland does have a serious problem with its banks, which are the source of its current and recent woes. A property boom and bust have left Ireland’s biggest lenders with billions in bad loans on their books."

At home though, the people are being told that the budget gap between ongoing expenditures and revenues is the key to the problem.

http://fistfulofeuros.net/afoe/ireland-the-importance-of-the-right-question/

Ireland could also take a look at Latvia, of course. Same thing. Latvia had no sovereign debt until it nationalised the failed Parex in 2008. Since then its citizens have been thrown into poverty and the country is in hock to the IMF. Two years on, Ireland will likely have more problems than it has now.

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  • 145 Brexit, House prices and Summer 2020

    1. 1. Including the effects Brexit, where do you think average UK house prices will be relative to now in June 2020?


      • down 5% +
      • down 2.5%
      • Even
      • up 2.5%
      • up 5%



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