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TRADITIONALLY THE IRISH, who can sing the dead to sleep, have been good at organising wakes. The financial wake of 2008 is another matter. It will be known as the year that initiated the great Irish financial crisis, just as 1847 has gone down as “Black 47,” the year when the Great Irish Famine peaked. “Black 47” involved a massive loss of population and a debilitating legacy of emigration.
While not as catastrophic in human terms, “Black 2008” caused extensive damage to a sizeable part of Ireland’s economic fabric and had major repercussions for all parts of society. The scale of the economic and financial catastrophe that befell Ireland was virtually unprecedented in post-war industrial country history.
Ireland experienced four interrelated crises: a property crisis, a banking crisis, a fiscal crisis, and a financial crisis. Several key questions continue to be highly controversial.
First, exactly who or what was “to blame” for what happened? While the international dimensions (the prevailing philosophy of light financial regulation, the inadequacy of the EU, and euro area architecture) were important, major responsibility lay at the domestic level. Very many were happy to benefit greatly from the artificial riches of the boom (especially public sector employees whose salaries soared as well as those involved in finance and construction).
There were the “cheerleaders” (politicians of all parties and most of the media) and the “experts” (the Financial Regulator, the Central Bank, the Department of Finance, and much of the economist profession), none of whom shouted “stop.” All share responsibility, in different ways, for the fact that collectively Irish society “lost the run of itself.”
Second, once the financial crisis began to emerge in 2008, could anything have been done differently to reduce the massive costs to the taxpayer or to avert the indignity of the bail out from the EU/International Monetary Fund (IMF) troika in late 2010?
This appears very doubtful. Given the paramount need to avert the collapse of the banks (with potentially catastrophic consequences), it is difficult to see how some form of comprehensive bank guarantee along the lines granted by the Irish government in late 2008 could have been avoided. At the same time, given the soaring underlying budgetary deficit, subsequent interventioby the EU/IMF became inevitable.
There is, however, a third very important question. Ireland has faced two financial crises in the last 25 years. What conclusions can be drawn about the inadequacies of the Irish policymaking process? In the first place, there is a clear need to pay more attention to learning from elsewhere. Although Ireland’s property bubble was similar to that experienced by many other countries, many erroneously came to believe that this time was somehow “different.” History, including economic history and the history of economic thought, is still of paramount importance to avoid the excesses of those who think that the present is unique and the past of little relevance.
The absence of sufficient self-questioning and internal debate lies at the heart of the run up to the Irish crisis. Each component of the economic policymaking apparatus took solace from the belief that others must be doing a good job and from the praise lavished by official international agencies, most of whose judgments turned out to have been spectacularly wrong.
Any small economy on the periphery needs to guard against insular thinking by ensuring that key decision makers bring to the table sufficient technical expertise and exposure to today’s sophisticated environment. In Ireland’s case these elements were clearly lacking. There was also a noticeable tendency among senior officials to dismiss “contrarian” views while the boom was in full force. Those few who did raise unpleasant issues encountered considerable opprobrium — including from much of the media, lobby groups, and senior politicians. A “comfortable consensus” stifled serious analysis and the preparation of contingency plans to deal with perceived low probability, but high cost outcomes. Moreover, officials appeared reluctant to place their views explicitly on the record in advance of the emergence of a “consensus,” thus hindering the accountability that is critical for good governance.
It could be argued that some of these tendencies are inevitable in a small country like Ireland where sharp disagreements could cause friction to long standing personal relationships. However, the record of other similar countries does not suggest that this is inevitable. Ireland might not witness for a long time another property bubble, reckless lending by the banks, or a return to fiscal profligacy. But another crisis in the future — from whatever currently unknown source — cannot be excluded. A wide ranging systematic reflection on what is required for Ireland to establish a fundamentally sound policy making process is therefore essential.
Donal Donovan is a former deputy director at the IMF and a member of the Irish Fiscal Advisory Council. Antoin E. Murphy is a Professor Emeritus of Economics at Trinity College Dublin. Their book The Fall of the Celtic Tiger: Ireland and the Euro Debt Crisis was published by Oxford University Press in June 2013.
This article originally appeared on the Oxford University Press blog.
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I find this article a bit of a joke to be honest. I say that because when I was lectured by Antoin Murphy in Trinity back in the height of the Celtic Tiger he used to speak of Alan Greenspan and Ben Bernake in tones of admiration. At no point did he speak of a housing bubble yet it was right there before his very eyes back in 2006. And now he is writing books telling us all how it went wrong, why didn’t he warn us of unsustainable economic policies back in 2006 ?
There’s no point in having economists if they are only wise after an event.
Morgan Kelly was shouting it from the rooftops. If Ahern could have had him hung for witchcraft, he’d have done so.
…as is often said “Hindsight is the foresight of a gobsh•te.”
I disagree. Even economists who are only wise after the event are better than people who will not examine what went wrong. Infallibility should not be expected of anyone.
No one expects infallability from academics. They do expect them to be awake. Not a lot to ask?
No, and I have not said otherwise. I was not responding to your earlier comment, but to that of “Inanimate Carbon Rod”. The economist community is aware, and has admitted, that it – with some exceptions – failed to shout loud enough about what was going wrong, and in many cases, failed to even notice things that were going wrong. (I am not a professional economist, by the way.) But politicians, media and the public generally only listen to academics who are media-friendly and only want to take the advice that suits their prejudices, while discarding the inconvenient bits. The economists that you see on TV, hear on radio, and read in the newspapers are not necessarily the cream of the crop. This is as true today as it was in 2006 – and it applies to other fields of expertise as well.
In around 1730 an Irish economist penned his only work that has survived to the present. In this work, Richard Cantillon describes the economic catastrophe that befell England in 1720. A catastrophe that was created by an expansion of paper wealth, which was created to provide more funding for England’s profligate rulers. Cantillon was intimately familiar with credit bubble economics. He was party to the creation of an even larger bubble in France, which burst in the same year.
At the core of the greatest self-inflicted economic crises of recent centuries including our own and the Great depression is a preceding monetary expansion. Paper wealth more readily facilitates this expansion.
Professor Murphy wrote a biography on Cantillon, which was published in 1986 (I believe).
“In 1720, the shares of public stock in private companies in London, which were bubbles and scams, rose to the value of 800 million sterling. Yet, purchases and sales of such venomous stocks were carried out without difficulty by the quantity of notes of all kinds that were issued and the same paper money was accepted in payment of interest. However, as soon as the idea of great fortunes induced many individuals to increase their expenses, to buy carriages or foreign linen and silk, cash was needed for all that, i.e. for the spending of interest, and this broke all the systems up in pieces.
This example shows that the paper and credit of public and private banks may cause surprising results in everything which does not concern ordinary expenditure for drink, food, clothing, and other family requirements. In the regular course of the circulation, the help of banks and credit of this kind is much smaller and less solid than is generally assumed. Silver alone is the true lifeblood of circulation.”
Essai sur la Nature du Commerce en Général, Richard Cantillon
Fergus O’Rourke
It wasn’t a question of (mainstream) economists ‘shouting loud enough’. Their entire body of ‘knowledge’, built on political ideology, not evidence & rigour, that has utterly dominated for over 30 years, has been shown to bogus. They thus had no clue anything was happening. They either shouted nothing or continued to back the causes of the crash. Most are still in denial.
I’m talking here about the globally used ‘forecasting ‘models’ – at a cost of $100s millions – which did not factor in money, banking or debt (public or private). It was believed they were not relevant. (wonder where that idea came from? Cui Bono?)
Alan Greenspan spent his entire careers peddling the idea that financial markets & banks will self-regulate ‘naturally’ & based all policy on this false (absurd) assumption – a ‘mistake’ he famously admitted before the US Congressional hearing. (Only after he had retired on a lavish public pension of course.)
The exact same mainstream thinking has informed the last 5 years of mass unemployment, mirroring the same mistakes made after the 1929 financial crisis. (Economic starvation by deliberate & unnecessary ‘austerity’ policy’.)
There were dissenting voices throughout the last 2 decades or so (and still are), that have now been proven correct by events. They were systematically marginalised & refused normal academic engagement by the politically motivated (variously bribed & captured) mainstream. The Post Keynesian school which has now been shown to be among the most correct & insightful of the ‘heterodox’ was forced to publish their own academic Journal to get papers published. However, very few mainstream Universities even subscribed to it for their students libraries. Academic censorship at its worst. There is only more awareness of these issues now because of the Internet.
Economics academe of the last decades has been entirely characterised, not by honest & plural inquiry, but by the kind of exclusion not seen since the Earth was believed flat. Vested interests of the Financial sector have played a huge part in this. (It is still where most economists are employed.)
I could go on, but see my post above.
@Mike Hall
I disagree with you. Also, I see no post of yours “referred to above”.
Fergus,
If you rearrange the comments ‘Ordered by Date’, my comments are ‘above’ here.
There is a link there to a recent (brief) article by Lord Adair Turner in which he places responsibility for the mess on the systemic failure of mainstream economics thinking.
Greenspan’s ‘admission’ is also on Youtube.
It is then evident that a bank, with the complicity of a public administrator, is able to raise and support the price of public stock, and to lower the rate of interest in the state at the pleasure of this administrator. When the steps are taken discreetly, this can pay off the state’s debt. But these refinements, which open the door to making large fortunes, are rarely carried out for the sole advantage of the state, and those who take part in them are generally corrupted.In 1694, following years of conflict between England and its neighbors- France, Scotland and Ireland – the English sovereign was on the brink of insolvency. To remedy the crisis a the sovereign, William of Orange, granted a charter which founded the Bank of England, which granted the English king access to an addition £1.2 million pounds in new funding. Over time, due to the escalating cost of war, the funding provided by the Bank of England proved inadequate. So a similar arrangement was reached with the South Seas company. This resulted in the 1720 crash and economic devastation for most of England.
The lessons of the 18th century were well learn. In the 19th century conventional wisdom dictated that the state must be isolated and its ability to influence monetary, economic, commercial, social or theological developments must be strictly limited.
The newly independent Ireland placed the catholic church at the center of the state initially. At the end of the 20th century offered leaders of labour and capital unrestricted access to the corridors of state power. Go figure!
Well yes. But they are capitalising on the disaster by selling a book. And like so many other comments the so called experts never saw it coming and if they did they were too impotent to do anything about it.
When a man of below average intelligence somehow finds himself with way too much power, then bad things happen!
You’re talking about Bertie Ahern then no doubt.
Greed sums it up. Not just bankers, politicians but those who spent beyond their means.
I agree. Stupidity had a lot to do with it as well, buying a 1 bed apartment in dundrum for €500,000, people were expecting 6 months down the line for that value to double, nobody wants to buy a 1 bed for €1 million
Greed, yes, but let’ get a couple things straight.
Let’s cut out this ‘collective we lost the run of ourselves’ cr@p. The ‘we’ that caused all this comprise the top few percent in income and wealth. Including those paid very large salaries from the public purse to advise and implement prudent macro economic policy, on monetary policy & banking and fiscal policy. It is absurd, disingenuous & insulting toward ordinary citizens to suggest they should have should have endeavoured to shove the lavishly paid ‘experts’ aside, and spend some years on 3rd level, or even post graduate studies on the macro economic impacts before deciding if it was ‘prudent’ to buy a home.
This article was written by two such highly paid, highly educated, so-called ‘experts’ – who still retain their lavish incomes & pensions, who should have known better. After fives years of doing precisely nothing about the global – not just Ireland – mess that has been economics education & policy, they still have chutzpah to push responsibility onto ordinary citizens with propaganda like ‘we lost the run of ourselves’. Disgusting.
And of course, there were the greedy bankers who have systematically lobbied & won deregulation & built a global rigged casino, taking full advantage of the revolution in computing and data communications to enrich themselves via a too big to fail or jail system of exploitation which serves little or no useful social purpose.
The crisis has demonstrated that we do not have a Euro EMU system that is fit for purpose. Has any of this been addressed in the last 5 years? No, only by the handful of non-mainstream economists who were critical of much of it before it was introduced. Any of the mainstream taking notice now? No, virtually none.
So, Messrs Murphy & Donovan, do you want to do something useful? Then please resign and make way for economists who have taken the trouble to understand monetary systems properly & the macro options that follow from that, including the indisputable +fact+ that near (within 2 or 3%) full employment is entirely possible & +purely+ a matter of political choice, not ‘economics’. And please desist from this self-serving propaganda of ‘we’ were all responsible. You and your fellow travellers were in charge & still are.
Enough is enough. I have no patience for your nonsense & lies any longer. A rerun of the 1929 financial bubble & exactly the same mistakes in the years that followed which devastated the lives of millions of ordinary people thru’ entirely unnecessary loss of jobs, and falling incomes & prosperity. The mainstream of your ‘profession’ are no better than charlatans in effect, and I see nothing from either of you to exclude you from that group.
For those who think I’m exaggerating, here’s what Lord Adair Turner, former (UK) FSA Chair & BoE Board member (a rare voice approaching some honesty & real inquiry in the ‘establishment’) -
Well I know plenty of people that bough second homes and had many holidays a year and new cars because they could get the finance nothing to do with affording it. There’s no such thing as free money. While my pals on average salaries had two houses and two cars, and at least two holidays a year I saved for a rainy day and loved within my means while they are now blaming the banks for leading them money. I was also offered it but didnt take it so yes the normal joe soap did do it and has a part to play. It’s the dumb mans way to blame circumstance when there is choices to be made.
Anthony I completely agree with you
The ordinary person that mortgaged themselves up to the hilt was instrumental in the financial down fall of this country…..but joe soap doesn’t want to listen to the cold hard truth.
It was amusing at the time to hear the bullshit in the pubs as lads who really had not got an ar** in their trousers discussed the value of property and how smart they were. To a man they had this idea that they would sell for double what they had paid and then repeat the performance.Anthony got them in one.
Lesley Barclay (& others)
Have you been asleep during all the publicity over these last years concerning the unresolved situation of domestic mortgage arrears & the Personal Insolvency legislation?
Very few losses for this sector have either been realised or even made accounting provision for as yet. (So have not ‘collapsed’ anything.)
So they have NOT brought down ANY of Ireland’s banks. For God’s sake, Anglo Irish, with the biggest part of the losses dumped on ordinary citizens (via gov) was hardly in this sector at all, beyond a handful of high rollers.
The losses, around €64 billion so far, virtually all relate to commercial property investment, development & land purchase. Significant amounts of it not even in Ireland.
It is also worth noting that the mortgage arrears position, which has been steadily increasing over the last 5 years is considerably the result of the unresolved mass unemployment & fallen wages. Much of which was not caused by the original crisis, but by the ruinous austerity policies & un-addressed deeply flawed Euro currency system.
No mike I have not been asleep.
I am personally aware that money was being handed out left right and centre and joe soap was lapping it up.
Joe soap does not want to acknowledge that they were a part of a system that failed.
You are obviously a part of this system.
There were many parts to this failure.
Joe soap was one of these parts.
That’s all I will say.
You don’t want to acknowledge that fine.
But I and many others do.
Lesley
This issue is one of relative scale of the debt in each sector & ability to service it.
It seems you are only looking at your immediate surroundings which comprises households. Yes of course, we all know people who +now+ are over extended & borrowed more than, say, the more prudent of us did. But you need to get some perspective on this if you want to understand the national, macro economic position.
Fact. Domestic, household debt, did not cause the collapse of the banks. Most of this debt has continued to be repaid and serviced by households. Mortgage arrears have been growing, but this impending problem is as much a result of an unprecedented five years of mass unemployment, falling incomes & lack of economic growth. But the losses +already+ resulting from bank lending for commercial property development have cost ~ 40% of GDP (& are believed to be still increasing).
There would have been a downturn due to over extension in household borrowing, but nothing like what we are seeing.
Ireland was told at the beginning of the Century by every EU financial minister to cut spending and save. Mccreevy said Europe should follow Ireland and spend. Signs were there. We ignored them. We partied too hard and now we’re suffering a major hangover.
He was told to say that by Da Bert. Soon as McCreevy starting getting any way prudent, Ahern shipped him off to Brussles. Around the same time Ahern became a ‘Socialist’
“NONE OF WHOM SHOUTED STOP”. In 2006, the Central Bank made a statement to the government outlining the potential disaster in relation to the quantity of home loans given to the Irish citizen – the government failed to respond.
By 2006 the damage was well and truly done. 2000 was the time for amber and 2003 was a red light period.
The Celtic Tiger was never real in the first place.
Greed, arrogance and ignorance. The bit about the Celtic Tiger that cracked me up the most was when RTE News told me that we were the richest country in Europe but our healthcare suggested otherwise. Every Tom Dick and Harry (and Harriet) wanted to be a landlord, buying multiple properties to rent out and driving up the price for couples who needed a home to raise a family. It is these couples who were listening to their politicians and Chief Economists from financial institutions that get my sympathy. As for the landlord with multiple properties in negative equity, in a secured long term job with a guaranteed pension at the end who is scratching their head still wondering when it will turn around……
I blame Ahearn , Neary, Central Bank & Fianna Fcuking Fáil
Excessive wage increases to public servants , he says, and the poor old politicians had to give the bailout to the banks,
Education is waisted on these two, if throwing out government and ibec spin is the best they can do
Let’s be honest about this. When Troika came in they were aghast at the ridiculously high wages the public service were on….
I dont think €15 an hour is too much for a medical post is it, really??
O’Reilly, aghast at the pay of senior management, and that hasn’t changed
Shay, aghast at all levels…
O’Reilly, review the pay increases, the pay increases were percentage based, the more you earn the more you got,
And the percentage pay increase was bigger for grades further u the ladder, the the difference was even greater
However pay cuts kept the percentages standardised , work it out, the basic grade worker gets done every time
Actually, €1800pm at 39 hours a week is €11 an hour. Hardly paid too much.
Shay, that’s just maths. Doesn’t take from the fact that PS payroll was too high across all grades…
I think I explained why
Rubbish article full if personal biases and anecdotal musings. Paul Krugman you ain’t.
Global finance is still a mess, particularly in Europe where we are one of the most vulnerable economies.
Compared to the United States European banks have much thinner buffers & haven’t been so generous in the amount of debt they’ve written off.
How long have we been waiting on a European banking union?
They’ve written off plenty of debt. Developers, politicians, INM etc. Not for the peasants though. F*#k them.
Do you not understand the difference between debt restructuring for a business and for an individual ?
We have learnt nothing from this crisis.
Same mistakes been made
Goverment out of touch.
Lack of any real good re form.
No full understanding what happened for this downfall from grace.
Austerity agenda complete failure
Nobody has been punished in the
Pension hole is so big we cannot possibly recover.
Mortgage can is been kicked down the road and we can see glimpses of the scale of problems to come with 100k in arrears and now re possession starting the house market will collapse further.
The working classes never made money during the Celtic tiger…
Paul, the working class don’t make money, we earn it doing what those who do make money want us to do,
Im working class and as a 15 year old I made 100 punts tips, on sunny days, working as a carwasher in a petrol station. If I finished a Saturday shift without 50 punts in tips id be going home to kick the dog. Crazy money around in them days and everyone got a slice (some more than others).
Paul, the working class made a fortune. Builders, plumbers, electricians working cash in hand earned huge money.
PAYE guy on liveline yesterday, whinging about not getting a write down on his debt for home plus 3 other properties. But of course, no one here went mad…
Never heard anyone ever use the word punts in Ireland.
O’reilly, my take home pay is €1800pm for my medical job. I couldnt and still cant afford to get onto that property ladder.
Matt,
Where you born in 2002? If not, then I reckon you have heard of punts before.
I heard the word. People did not use it. They used Pounds.
Matt, ‘punts’ would hardly be used in any other country as its an irish word.
Well of course. Irish people in Ireland didn’t use the word.
Its not that important. Punts/pounds,whatever. If a youngfella is earning 100 of them in tips on top of his wages for hosing down cars for 7.5 hours then the country had definitely lost the run of itself.
The changes of technology that makes life go small is another crisis. It’s also killing jobs
“Given the paramount need to avert a banking collapse (with potentially detrimental consequences if we don’t)….”
So he’s saying we dodged a bullet here by not allowing the banks and bondholders to go bankrupt and instead we’re left off lightly with 20 years of gut wrenching austerity in a zombie economy, waving goodby to our young people at the airport? Lucky us then
Yep, if you think the last 5 years was bad, read up about the aftermath of the Argentinian bank collapse on 2001. You will find compared with that, our experience is quite pleasant
Privately own banks mismanaged their business to an extraordinary extent. In a capitalist society, their greed, lawlessness and mismanagement would have been met with bankruptcy. Yes it would be devastating but it is also the chemotherapy to clear out the cancer and corruption.
Instead, our government chose to take responsibility for those debts and corruption. In a misguided bid to soften the blow. Leaving the cancer to continue to thrive.
We as a society needed to take the full and awful hit from a banking collapse. Then take to the streets demanding investigations and justice. The chance to rebuild a sound banking system as opposed to a gambling system.
Instead we will crawl for 20 plus years in a go nowhere zombie economy. Post capitalist nightmare where if your not in the golden “too big to fail and jail” your left to the wolves!
The piece starts by trying to project a falsehood that Ireland suffered from four interrelated crises, property, finance, economic and banking.
The falsehood lies in the portrayal of these crises as being of equal severity and being independent of each other.
The reality is that there was and remains one overarching crisis, the crisis in banking, from which all the others were caused, and none of which can be resolved until the banking crisis is properly addressed and remedied.
This doesn’t apply just to Ireland but to most of the developed Western economies that are being destroyed by the collective failure of their governments to act decisively to restore their financial well being.
It is akin to an economic war, and it will be lost totally if the Western nations refuse to place the interests of their citizens and taxpayers, if not ahead of the interests of the banking system, at least on a par with it.
It seems as though you would still trust an Irish accountant, Gary.
This is the real crisis. It’s not banking. It’s the fact that a lie can be dressed in Ireland to represent any fundamentally untrue thing, and those who did so got caught out, but nobody who signed off on the lies has been brought to account.
The problem as I see it is, if you want to be an accountant,lawyer,doctor or other such profession you need qualifications. If you want to lead the Country you just need a big ego and the gift of the gab.
The fall of Enda Kenny!
Anybody remember the talk of a soft landing?! 5 years in decline and our arses still haven’t hit the floor, maybe they were right.
The “soft landing” was then followed by “if we are not careful we will talk ourselves into a recession”. How many times did we hear that mantra repeated by those with an interest in getting the last few rolls of the dice.
The Irish are a ‘belief’ society not a rational logical society.
Until the Irish fix this they will fix nothing.
The same and similar mistakes will continue to occur in Irish society.
The Irish educational system does not provide a framework for independent rational logical thinking.
The points system does not do it … produces compliant regurgitaters.
They believe in leprechauns, goblins, banshees, the meeja, tooth fairies, pishogues, fairies, solicitors, doctors, virgin marys, economists, politicians, won it on the horses, bankers, the edge can play guitar ….
Should have gone to the ‘Tech’ for a proper education.
Mortar was invented in 1794 by Joseph Aspdin.
Sand, cement and water ….. No Platinum in it.
Remember banks just create debt …. debt till death in the EU (not so in the US).
They use houses, cars, etc to entrap you into max debt …. an odious occupation.
Irish society badly needs a framework for rational independent logical thinking … I think there is a name for it!
——————————————-
Put your future in good hands …. your own.
Funny how Donal ex-IMF hasn’t mentioned how the IMF itself kept giving the country the clean bill of health all through the boom. Our lot were feckless, but they weren’t alone.
what angers me the most, is the crazy fluctuation in prices, and the complete lack of regulation on this. House prices across Ireland dropped at least 20% at the start of the recession and now in parts of Dublin it has jumped up 7% in 12 months. Not only are we starting to see the shoots of another property bubble but we are in the middle of a renting bubble where demand is extremely high and as a result the rent for a house or apartment is substantially more than the equivalent mortgage payments. I know what I am about to say is unfair on people who were unfortunate ( and were forced) to buy at the peak of the boom, but housing prices are now at the level they should have always been at. We need to ensure that house prices cannot increase or decrease by 3% year on year (and keep mortgage interest rates below 2%). Secondly, we have to to stop people who view a house as a short term financial stock that can be sold as soon as a person buys it. That in my view, was the mentality of some (both bank and home owner alike) and this substantially increased demand and in my view created the property boom. Lets not repeat history, lets put in the regulation now to ensure that another generation is not forced to go through this misery.
We have learned that the incoming government merges the police and army under one minister, does nothing to investigate what happened, continues to blame their predecessors while lying consistently to the public to pursue an agenda that serves to concentrate power and place national assets in private hands.
We balance international perception of Ireland as a wonderful place to holiday in while the markets perceive Ireland as being full of untrustworthy under regulated tax haven providing cheats.
It is those who control the monetary system who control the world. everything else follows their design and plans. Economists dont talk about the FIAT system/fractionalised reserve banking because its not in their interest to do so. We all place our personal interest first (me too)..this is human nature. the internet has allowed us to do research and have a better understanding of how things work which is a world wide problem. check out the Nixon repeal of the gold standard..the repeal of the Glass Segal legislation..the Financial Services Act..the Ownership of Central Banks..the influence of the BIS Basle Switzerland..etc etc..you are right if you say all this doesnt solve the current problems and you are right….it only highlights what needs to change for the future. My view is…we need Goverments who focus on the needs of the many not the few. every country needs policies that encourage real growth…making and building stuff..not financial engineering things….me thnks UP TO THE PEOPLE TO MAKE SURE THEIR VOICE IS HEARD.
The question is “what next?” that is the question can politicians expect any back lash from the voting public or we the voters continue to elect the same non de script party activists or will there be a sea change in what we see in politics. So far the omens are not good.
Kerry there’s not a lot we can do.
We’re spending more than we’re taking in through taxes. We’re dependent on a bailout program to break even & when we finally exit this program we’ll need to stay under the ECB’s watch to take in the borrowing markets for a number of years.
The only real solution is the entire eurozone taking on this joint debt but unfortunately the Germans aren’t as permissive at taking on 3rd party debt as us Irish are.
I don’t think many, (including the public sector), in this country would mind reverting back to 1998 / 2001 rates of pay and employment in the medium term, orovided the cost of everything in the country also reverted back.
Unfortunately protection of the banks and international investors was not a ‘one-off’ act – it’s ongoing and is distorting or preventing a full reset of the economy.
For example upward only rent reviews still remain – putting Celtic tiger sized costs onto recessionary retail sales. Why? – because certain investments are deemed untouchable.
It’s a bit like trying to reboot a computer and wanting to keep one or two offending programs running.
Agreed a major offending ‘program’ is the public sector cost base but my point is that it’s only by turning the WHOLE ECONOMY off and back on again can we expect a quick fix.
Otherwise we’ll just need to wait until the world is again ready to pay us a premium for our refusal to handle financial reality.
What is the plan for when the EU collapses ? It is certainly not performing as it’s fans would have us believe.
Third paragraph from the end in this article describes exactly where we are now. History repeating itself from the opposite direction? Key financial decisions are being made by a small group – an economic council made up of Taoiseach and 3 ministers + unelected ‘advisors’- no debate or other views seriously considered and international praise for a stubborn single-minded policy, Austerity and more of it.
The Return
“The paramount importance of avoiding bank collapse” is the phrase that sums up the unsatisfactory tone of this article. I am not saying that the collapse of the banks would not have been bad, and was worth avoiding if possible. But what the paramount importance of the well-being of all of our fellow-citizens, including those who can (with more justice in some cases than in others) be said to have made bad choices ?
Whoops ! Third sentence should read: What OF the paramount…
woah, woah, woah, slow down. The Celtic Tiger is over? When did this happen?
One word that always sticks in my mind as an economical disaster is BENCHMARKING .
There NEVER was a Celtic Tiger folks. It didn’t roar like a tiger but mewed like a kitten in reality. Like the Brits under Thatcher you too were conned with repetitive bullshit phrases like ‘you’ve never had it so good’ or self congratulatory politicians patting themselves on their backs whilst making statements which belonged more in
‘cloud cuckoo land’. I lived in the UK at the time of Thatcher’s Boom and subsequent bust, and as soon as I heard the bullshit living here I suspected it was a barrel of shite. True, some Irish people DID make a lot more money than usual, but NOT everybody. It didn’t filter down thru the various levels of society. House prices etc, became ridiculous with the greedy property developers AND greedy estate agents falsely pushing up house values. And now you can’t sell the millstones around your necks. Ireland was fed the lies by it’s corrupt politicians, bankers etc and a sizeable portion of Irish society borrowed and spent way above their means. Probably because it was sucked into the mythology and lost commonsense and suspicion.
The normal “joe soap” who bought his home in the height of the celtic tiger 2006/2007, entered into a business transaction with one of the banks. With all business deals their is an element of risk the risk on the homeowner was that if he didn’t keep up repayments on that mortgage he would lose his home. But for the bank if “joe soap” failed to keep up repayments on the mortgage he would take his home and chase him for the remainder of said mortgage. It was a win win for the bank there was no element of risk for them, so why wouldn’t they give out as much money as they could? The banks didn’t care who they gave money to. So yes the banks are to blame.
Your conclusion is nonsense
Please explain why it is nonsense
Ireland had a reckless lending crisis which fuelled a unsustainable asset bubble crisis. The massive receipts from transaction taxes narrowed the tax base.
The reason is simple. An attack was launched on then people of Ireland by an alliance of self interested groups, banking, Central Bank of Ireland, senior civil servants, the Government and greedy property developers. The economy became largely influenced and drive by a false property speculative boom.
The public interest was overridden by an alliance of privileged persons.
The cause is simple, obvious and largely denied.
so these fellas are saying “we had to save the banks or things ould have been a whole lot worse”, worse for who exactly? the bankers,investers and politicians, or the ordinary man in the street, because were im sitting it looks very much as if the latter has suffered a lot more than the former. the banks and financial institutions at the heart of this debacle were (and still are) privatly owned businesses, they opperated as such with little or no interference from the state, government or regulaters of the day, yet it was decided that this country should be put into a financial holocaust to save them, they contributed NOTHING to the country and took everything from it , i’d like to know how many of these banks were actually tax complient in the years running up to the collapse.
Iceland went about things in a totally different way, it let the banks fall, told the bondholders to ‘do one’ and told the forign banks the same. it nationalised its banking system and jailed those responsable for creating the mess. Iceland is well on the road to recovery financially and as a country, Ireland meanwhile is facing into another ‘Austerity’ budget with 2.8 billion to be taken out of the financial loop, yet top civil servents are to get pay rises (sorry incriment payments) not those on the breadline but the top 1000 or so, people who already get over 130k per year.
The government and the media would have us celebrate the fact that dublin house prices have risen by 7% in the last year, meanwhile those poor souls who bought in Priory hall are STILL without a home to call their own, not that it bothers the developer or any of our so called public representatives.
There are soup kitchens across the country, and shortly the cold weather will be back with us, people will once again face the dilema of ‘ heat or eat ‘, kids are going to school without proper meals, elderly people are facing into another winter of sky high fuel costs, no thanks to the government and its ‘green policy of ever increasing carbon tax’s, alongside the inevatable cuts to fuel allowence and increases to heating oil and coal that will emerge on budget day. there will however be no reduction in the pay or pensions of the political elite or reduction in any of their personal allowences.
this article tries to lay the blame for the economic collapse at everyones door, well not everyone benefitted from the so called ‘ tiger years’ personally i dont know one person that did. the blame lies with the finacial institutions ,regulators, speculators and politicians of this country, no one else.
If the financial institutions had been more cautious in lending then the collapse would not have happened, if the regulator had done their job properly then the banks would not have been able to lend so freely, if the politicians had made sure that the regulators were doing their job properly, then they would kept more control over the banks. with the ‘speculators’ well that was just a perfect example of the parasitic greed enshrined by bertie and his oppo mccreevy, notice how these last 2 shysters got out before the gigg went tit’s up?.
If we are to recover from this recession this country needs complete reform of the political system, the financial system, we need to exit from the euro and return to the punt, at least then we can have some control over our financial standing, we need a system of debt forgivness for those in dire financial hardship, not just for the big boys who owe millions, and we need to put proper working regulators in place to oversee the finacial and political process,not ‘yes’ men or former party members.
I’d imagine the authors didn’t write this. It was probably a snippet from the book taken by the Journal in return for publicising the book.
There are some great comments on here and it creates a good debate. The Irish people need to really start seeing the wood from the trees. However we have never been a very united people and begrugery and oneupmanship are very much among our traits. I think the majority will turn a blind eye as long as they have enough for themselves. Unless money is printed and put into the banks we are in for a long drawn out process of low or no growth. However the Germans are in control of our currency and the truth is we have very little say in anything that happens. Our only real option is to balance our budget and then start the procress of withdrawing from the euro. It seems our only option to force the hands of the ECB.
The only real value of past mistakes is in solid learning for the future. In relation to the matter under discussion, the learning needs to be reflected in policy going forward, regulation and importantly education. If the tiger debacle is to be avoided into the future, don’t count on political decisions to determine ever sound policies or to protect citizens from themselves. There must be a case to be made now for teaching the tiger meltdown, causes and effects, progressively at all school levels so that our children into the future will leave the educational system with as sophisticated an understanding as possible of finance matters as they pertain to states and to individuals. The realities, responsibilities and imperatives of personal budgeting should be hammered home. People make good and bad financial decisions, educated decisions are likely to be of the better type. In addition, an educated population is more likely to hold policy makers and regulators to account including early intervention. Close the door before the horse bolts! Let’s teach our children and future generations not to repeat the sins of the fathers, so that they in turn will not leave their future generations with the mess that they are to inherit. Good Policies -yes of course; Good Governance – yes of course; Education, knowlege and understanding – A Prerequisite. Can we start now?
We destroyed the economy by reckless spending by both banks and government while we all shouted for more. Until we understand that fiscal conservatism is a nessesary evil these issues will arise again. Considering most people in Ireland actually believe there is an alternative to cutting expenditure while borrowing for current expenditure I don’t hold out great hope for a different outcome next time.
This article has sparked a lot of comments / debate which the writers of the article should respond to in due course.
As the joint author of the 300 page book on which this very short article is based, readers may find reading the book itself useful,Just as an iliustration of the point and in reply to one comment, the book does contain a lengthy and critical commentary r the failure of the IMF pre-crisis.
All we need is a clone and we are all sorted
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