Economic Recovery

[dahamsta]

Right lads, the range I'm getting from people for recovery is varying from 6 months to 10 years, both of which I consider ridiculous, so I reckon it's time we nailed our colours to the mast. Place your bets.

[EDIT: The definition I'm going with is 2 quarters of positive growth, i.e. above inflation. I reckon it'll be mid- to late-2010.]

adam

[Dodge]

Anytime now...

[mypost]

At least 5 years, probably more.

[passinginterest]

If we're defining it as two quarters of positive growth I'll go with 2 years.

[centre mid]

End of 2010 before any recovery, next year will be very tough.

[mypost]

Slowdowns last a couple of years, recessions take much longer to turn around.

While 2 positive quarters may technically be "growth", it will be much longer before Mr/Mrs Average see the benefits.

[OneRedArmy]

Depends how you define it.

If you define it as asset prices breaching previous highs then I would say at least 5 years for equities and 10-15 for Irish property.

I don't see this as a particularly conservative estimate either.

If its simply positive GDP growth then 2011. But its the pace of economic growth that is important (obviously after everythings stops falling) and I can't see that being particularly robust.

[anto1208]

March the 16th 2010 so about 1 year and 4 months

[Reality Bites]

next year is just over 6 weeks away - so yeah 12 months more of this perpetual state of anxiety before we're out of the wilderness...and with that kind of shock treatment to the credit boom generation, don't expect any return to property mania for a long long time after that

[OneRedArmy]

Slowdowns last a couple of years, recessions take much longer to turn around.

While 2 positive quarters may technically be "growth", it will be much longer before Mr/Mrs Average see the benefits.
Whats a slowdown, other than an artificial construct of an estate agent desperate for business?

Economies go in cycles which invariably have a recession in there somewhere.

[pete]

Can't find a definition. I would guess official recovery as positive GNP growth (i.e. above inflation) ?

I'll got for 2nd half of 2010 based on such a definition.

Our government is contracting the economy by withdrawing money from it so we are more dependent on World economic recovery more than ever.

[mypost]

Whats a slowdown, other than an artificial construct of an estate agent desperate for business?

Economies go in cycles which invariably have a recession in there somewhere.

A slowdown is what we had between 2001-2003. This recession though has already gone on for 2 solid years, and has a good deal longer to run.

[OneRedArmy]

A slowdown is what we had between 2001-2003. This recession though has already gone on for 2 solid years, and has a good deal longer to run.
GDP deflation has only started this year, which is the usual definition.

Agree though that if you look at property assets we're coming up on two years. Unemployment midway between the two?

[Longfordian]

Ireland's successful World Cup campaign of 2010 will bring the feelgood factor back so we'll say Autumn 2010.

[dahamsta]

If you define it as asset prices breaching previous highsAbsolutely not, prices were - still are - artificially high, should never have reached the levels they did, and we shouldn't use them as a benchmark.


I would guess official recovery as positive GNP growth (i.e. above inflation) ?That sounds like a good definition to me, let's make it 2 quarters of positive GNP growth. The economist blognerds can tell us we're wrong when they find us.


I'll got for 2nd half of 2010 based on such a definition.I think you may be right, but I'm planning to buy in early 2010 just in case.


This recession though has already gone on for 2 solid years, and has a good deal longer to run.As ORA pointed out, we only went into recession this year, and it was only confirmed in the last two months. 2 quarters of negative growth, it really isn't much more complicated than that. Economists may argue about the nigling details, but I don't think we're allowed.

adam

[mypost]

That sounds like a good definition to me, let's make it 2 quarters of positive GNP growth. The economist blognerds can tell us we're wrong when they find us.

As ORA pointed out, we only went into recession this year, and it was only confirmed in the last two months. 2 quarters of negative growth, it really isn't much more complicated than that.

Even before the last election, the downward economic spiral had begun. Although people haven't seen the effects of that until this year. 2 positive quarters may technically constitute growth, but until jobs are created, unemployment falls, people stop getting taxed* on their income, and can afford what they were able to 5 years ago, can we say we have recovered from the recession. That will take a good deal longer than 2 technical periods of economic growth.

*1-2%

[pete]

A slowdown is what we had between 2001-2003. This recession though has already gone on for 2 solid years, and has a good deal longer to run.

No chance we have been in recession for the last 2 years. Things have been on downward slide but that only really picked up pace in last 6 months.

Recessions seem to be all about keeping your job & riding it out.

I think some posted elsewhere that land prices have been reducing rapidly which can only be a good thing of the long term future of the country.

[dahamsta]

Even before the last election, the downward economic spiral had begun.No one is arguing that the economy started slowing some time ago, but that's not the same as a recession. A recession has come to be accepted as a very specific thing, and I know it's pedantic to argue the point but I don't see why we should perpetuate a defintion that's only bandied about by crap "economists" in the Star and it's ilk.

adam

[DmanDmythDledge]

I think you may be right, but I'm planning to buy in early 2010 just in case.

adam
What do you mean exactly? Property or shares? Was going to buy shares myself now and make a profit in a few years but may wait if the price will go down further...

[dahamsta]

House. Been putting it off for years.

[mypost]

No chance we have been in recession for the last 2 years. Things have been on downward slide but that only really picked up pace in last 6 months.

Recessions seem to be all about keeping your job & riding it out.

It's only one area of a recession.

Falling house prices, less consumer spending, wage freezes, higher taxes are other areas.

[OneRedArmy]

It's only one area of a recession.

Falling house prices, less consumer spending, wage freezes, higher taxes are other areas.Ceteris paribus, tax changes have nothing to do with a recession.

Recession is defined by output.

[Billsthoughts]

http://www.folens.ie/uploads/images/thumbs/CELERS.jpg


I see they have released all oneredarmys posts in one handy book!:D

[dahamsta]

Keep it factual please.

[pete]

Ulster Bank economic forecasts (http://www.finfacts.ie/irishfinancenews/article_1015269.shtml)



Irish Economy:Ulster Bank says today that Ireland's GNP (Gross National Product) will fall by 4% in 2009, to be followed by a modest recovery in 2010. Deflation for first time since 1946 forecast in 2009 and 85,000 job losses. In a blunt and spoof-free appraisal, Ulster Bank's economists say that the government has failed to communicate the seriousness of the fiscal situation, blurring it by the complexity of the budget day decisions, and by yielding to public pressure for changes. They say that the likely 2010 deficit could be as high as €14.5 billion, instead of the €9.3 billion official forecast.

2010 seems an optimistic view of recovery based on does predictions.

[dahamsta]

Should we be believing these predictions now though, given the ones they were making last year and the year before? Perhaps we should bring in a few proper economists. :)

[OneRedArmy]

Should we be believing these predictions now though, given the ones they were making last year and the year before? Perhaps we should bring in a few proper economists. :)Exactly.

Nobody has the first idea whats going to happen, and if someone does, why on earth would you broadcast it, you'd be a fool not to keep quiet and trade on it to your advantage.

The last 12 months have been a sobering experience for economists and analysts. They have been so spectacularly wrong they can have no credibility around predicting a recovery.

E.g. how can you reconcile equity analysts having a buy recommendation on Irish bank stocks all the way down from E18 (BoI) and now having a sell rating at less than E1? Talk about shutting the stable door after the horse has bolted....

Whatever people say, human nature is to look to the future through the prism of past experiences, and there's now a very strong probability we are in a new economic paradigm, therefore whats gone in the past is irrelevant.

[Reality Bites]

2009 - appears to be an Abyss - the system has effectively collapsed - the Banks have stopped functioning - no credit to keep the merry go round turning, small businesses are now starting to choke, retailers rely on Christmas shopping, this is a dead duck as people are now in fear over their Jobs so are not willing to spend - January will see a swathe of small businesses close down with furniture and electric commodity stores first and then clothes and small family run business thereafter.. Its an epochal time!

[cheifo]

What do you reckon Ulster Banks motives for broadcasting "a blunt and spoof free apprasail" this are ORA or did it just come out before the PR guys got hold of it?

[Reality Bites]

The causes of the Depression are debated. The primary cause of the depression was a shortage of available money to facilitate trade

The above is an extract from Wikipedia for the Origins of The Long Depression 1873 -1896, it was I believe eye -wateringly worst than The Great Depression in 1930's - the above extract is frighteningly similar to current scenario - I don't wish to be an agent of doom or a sensationalist but the similarity with current situation is scary!

[rebs23]

If we all agree two annual quarters of positive growth then I'll go with 2010 but with 2009 being a disaster so it won't take much for two positive periods of growth from a depressingly low base.

[Dodge]

What do you reckon Ulster Banks motives for broadcasting "a blunt and spoof free apprasail" this are ORA or did it just come out before the PR guys got hold of it?

I think thats a bit of editorial from the finfacts writer. I doubt Ulseter bank used the words (hope I'm proved wrong though)

[Ringo]

SIPTU criticises Kenny's call for freeze of national pay deal
SIPTU is criticising Fine Gael leader's call for a freeze on the national pay deal.

Enda Kenny said wage restraint in the short term is preferable to job losses in the long term.

SIPTU is reacting to the call this morning by accusing Enda Kenny of attacking workers in order to shore up company profits.

The Union's President Jack O'Connor said suspending the national wage agreement would make our economic problems worse.

http://www.rte.ie/news/2008/1122/finegael.html


can't see this being a runner withe unions or the workers.

[pete]

The Union's President Jack O'Connor said suspending the national wage agreement would make our economic problems worse.

Would like to know the reason behind that comment.

Currently 7% unemployment & that will continue to rise. Biggest budget deficit ever means no money for wages. I think a lot of people in the private sector would take a pay freeze if guaranteed their job in 2 years time. If benchmarking is to mean anything must mean a pay freeze to match the private sector. Pay review has not even been mentioned in our office.

[Macy]

Would like to know the reason behind that comment.

I would suspect it's to do with the negative sentiment on consumer spending. Same kind of philosophy that says we should be cutting taxes, only giving the money to workers rather than corporations.


I think a lot of people in the private sector would take a pay freeze if guaranteed their job in 2 years time. If benchmarking is to mean anything must mean a pay freeze to match the private sector. Pay review has not even been mentioned in our office.
But the public sector are having a pay freeze under the new agreement - 11 months. The last round of benchmarking gave no increases for most workers. As with T16, the Transitional Agreement is quite draconian on how modernisation is to be handled.

[pete]

But the public sector are having a pay freeze under the new agreement - 11 months. The last round of benchmarking gave no increases for most workers. As with T16, the Transitional Agreement is quite draconian on how modernisation is to be handled.

Don't want to drag topic into public v private debate but my understanding is benchmarking is separate than normal cost of living increases. I am open to correction but if no benchmarking increases does not mean no increases.

News todays suggests "Irish lead" private investors willing to buy a majority share in Irish banking market by taking on BoI+Irish Permanent. By Irish lead I presume they have a figurehead in the same way eircom purchase was lead by Sir Tony. Not sure if that is a great plan but whatever happens the we will pay with higher mortgages, loans or government taxes.

[Macy]

Don't want to drag topic into public v private debate but my understanding is benchmarking is separate than normal cost of living increases. I am open to correction but if no benchmarking increases does not mean no increases.
You brought benchmarking into it, saying if it is to mean anything there should be no increases to match the private sector? Last round of benchmarking didn't give any increases for 99% of public servants, and in the current environment the next one is likely to be the same I would've thought.

[Closed Account 2]

The company I'm at (Investment Company in London) have just said there will be redundancies after saying previously that all employees would be safe and savings could be generated in other areas.

I would imagine there will be massive job losses all across Western Europe (indeed most of the world); in terms of the cross-sector economy this is snowball that is only just starting to roll. I wouldn't be at all surprised to see unemployment* levels at around 15-20% through 2009. Countries that lack resources or manufacturing and have economies heavily dependant on services will be very badly hit (e.g. Ireland / UK). The UK is in a very bad way, there is a massive government debt and I just don't see how / where the repayment means will come from. In the very long run think Ireland might be safe simply because, as we're in effect part of the Eurozone, it's a big enough zone to weather the storm and the industrial make up for the Eurozone is sufficiently diverse to survive. I think the UK will slip into the economic abyss and I just don't see where it will recover... so much of its economy is dependent on Banking / Finance and the economy is too big to change it or restructure it.

Whatever you say about history etc, I feel sorry for a lot of people over here in the UK. Lots of people I know, good decent people, have kids and mortgages and they are going to go under - houses will be re-possessed and families will be out on the streets. In socio-political terms I really do wonder where the UK is heading...

Sorry to be a merchant of doom, but in Western Europe I don't think we'll see the upside for at least two years (and realistically I'd say 5).


*by this I mean unemployment that does not include incapacity etc.

[Reality Bites]

The company I'm at (Investment Company in London) have just said there will be redundancies after saying previously that all employees would be safe and savings could be generated in other areas.

I would imagine there will be massive job losses all across Western Europe (indeed most of the world); in terms of the cross-sector economy this is snowball that is only just starting to roll. I wouldn't be at all surprised to see unemployment* levels at around 15-20% through 2009. Countries that lack resources or manufacturing and have economies heavily dependant on services will be very badly hit (e.g. Ireland / UK). The UK is in a very bad way, there is a massive government debt and I just don't see how / where the repayment means will come from. In the very long run think Ireland might be safe simply because, as we're in effect part of the Eurozone, it's a big enough zone to weather the storm and the industrial make up for the Eurozone is sufficiently diverse to survive. I think the UK will slip into the economic abyss and I just don't see where it will recover... so much of its economy is dependent on Banking / Finance and the economy is too big to change it or restructure it.

Whatever you say about history etc, I feel sorry for a lot of people over here in the UK. Lots of people I know, good decent people, have kids and mortgages and they are going to go under - houses will be re-possessed and families will be out on the streets. In socio-political terms I really do wonder where the UK is heading...

Sorry to be a merchant of doom, but in Western Europe I don't think we'll see the upside for at least two years (and realistically I'd say 5).


*by this I mean unemployment that does not include incapacity etc.

Yes but at least the UK Government seem to being promoting Fiscal stimulus by reducing Taxes and encouraging People to spent Cash, the Irish Government are just flapping like two sheets in the wind, It seems like there is no coherent action plan here at the moment..

[Closed Account 2]

Maybe but in my opinion it's got no chance of working. A cut of VAT from 17.5% to 15% isn't going to counteract the massive drop in consumer confidence. I just don't see legions of shoppers roaming the high streets and thinking, "this £500 plasma screen will now only cost me £575, which is £12.50 cheaper than the previous inc. VAT cost". I really think the fear of unemployment is now the primary factor for most UK workers. I think Christmas spending this year will be minimal and the knock-on effects of that will be catastrophic for the UK economy.

The stamp duty cut / pause was well intended, but I think it will have a marginal affect. It applies below the £175,000 mark the average uk house price is around £220,000*. I still think getting loans (i.e. being deemed credit worthy and getting a large enough deposit) will be a major obstacle for first time buyers. In my opinion the only effect the stamp duty pause will have it to skew the market cost of property. Houses that had a value of less than £190,000 will now have a capped value of £175,000....

I'd actually rather the UK goverment was less interventionalistic. I don't see these measures working at all and I think in the long run it's just building up bigger problems for the UK economy.


* based on this: http://news.bbc.co.uk/1/shared/spl/hi/in_depth/uk_house_prices/html/houses.stm

[OneRedArmy]

Paul Krugman had an excellent bit in his NY Times blog about exactly this.

Fiscal stimuli only work when there is a credible expectation that the benefits are permanent and won't be replaced by tax rises in the near future (which is EXACTLY what the Chancellor in the UK has said!).

Where consumers fear that stimuli are temporary they increase their savings rate and hoard any surplus income, negating the effect of the package.

Japan is the best example of this as it has negative real interest rates for years and even that couldn't provoke demand.

So, banks won't lend to other banks because of fear and consumers won't spend because of fear. Problem is that emotion is sometimes impossible to change with reasoned argument.

[pete]

Don't see the logic of VAT decrease in the UK. In non-competitive markets the Sellers won't drop prices & will keep it themselves. We saw this when VAT was decreased in Ireland before.

I would think saving (not spending) is starting to become contagious as everyone gets concerned about the future & holds off on non-necessary spending.

Christmas is always an excuse to spend money but retailers could see very lean new year due to the annual Christmas hangover. January will be a good time to pick up bargains from desparate retailers.

[dahamsta]

We saw this when VAT was decreased in Ireland before.Was the Irish decrease during a recession though? I don't think it was. Plus there's a fair difference between 1% and 2.5%.

Of course there'll be some retailers that'll chance their arms with it, but Britain is more competitive by definition, and it's tough times out there.

adam

[Ringo]

In fairness to retailers , if someting is 1.99 / 9.99 etc , it doesn't make a lot of sence to change the price up or down i/2% or in the UK case 2.5%. It should be passed on by the supermarkets where price points aren't as important.

[OneRedArmy]

http://www.rte.ie/business/2008/1126/eurozone.html

Last person out of Ireland turn out the lights.....

[pete]

Latest figures (http://www.irishtimes.com/newspaper/breaking/2008/1202/breaking72.htm)



More cuts in public spending are on the way following a sharp deterioration in the tax revenues collected by the Government in November, according to exchequer returns data published this afternoon.

Minister for Finance Brian Lenihan said the latest tax returns, which included a €3 billion shortfall for the month of November alone, were "poor" and reflected the severity of an accelerating economic slowdown.

"There is now a major gap between spending levels and tax receipts," the Minister said in a statement.

The Department of Finance now expects that the overall exchequer deficit for 2008 to exceed €11.5 billion, the revised deficit forecast in October, while tax receipts are likely to fall short of start-of-year expectations by far more than the €6.5 billion predicted in July.

The Minister said it was now "inevitable" that the current budget deficit of €4.7 billion forecast for 2009 would now be higher given the developments in the last two months.


Who does the forecasting in the Dept of Finance? In 4 months they have had to "readjust" by 5 billion. Have things really changed that much since July?

Hard to think what 2009 deficit will be now. Should be a boom time for placard sellers.

[OneRedArmy]

Economically speaking, its become clearer over the last few weeks that the world is fecked, to put it bluntly.

Depression is now more likely as unlikely.

The worlds banks are effectively nationalised.

I would expect interest rates to be at or as close to zero as to make no difference early in the new year. That won't have much effect either.

The only positives are that the central bankers will hopefully have learned from the Great Depression and more recently Japan's delayed response to a similar asset price bubble.

Then the worlds Central Banks will be forced to implement Quantitative Easing (look it up, basically printing more and more money).

This notwithstanding, its impressive that our own Dept of Finance managed to overestimate revenue by E2bn in the few short weeks since the budget. It means that their 2009 projections are likely to be even further off. Clowns.

[dahamsta]

Quantitative Easing (http://en.wikipedia.org/wiki/Quantitative_easing)

[Reality Bites]

Economic Recovery - 2014

[OneRedArmy]

Economic Recovery - 2014Any particular reasons for 2014, or did you just pick 5 years ahead?

I honestly think nobody has a clue as we've never had a truly global depression before, its uncharted water (although Keynes seems to be very popular again after about 30 years of being a laughing stock).