Economic Recovery

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.

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.

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Originally Posted by pete

We saw this when VAT was decreased in Ireland before.

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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

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.

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

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

Latest figures

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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.

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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.

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.

Quantitative Easing

Economic Recovery - 2014

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Originally Posted by Reality Bites

Economic Recovery - 2014

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Any 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).

Long live Keynes.

In the long run we're all dead - classic.

I always felt intuitively that fiscal policy was a necessary complement to monetary policy yet many western societies adopt the anglo saxon view that tax is theft. It's a shame that few economies have the fiscal ammunition to attack this crisis.

Economies self heal though God knows how lon it'll take this time. It'll get far worse before it gets better. In the UK I can see a gradual reversal of globalisation induced outsourcing, a reversal of the trend to service provision and an increase in engineering and manufacturing - though little of the latter can take place until demand recovers.

I think people are just going to have to get used to the idea that only exceptional people get to retire early, you have to work hard to get well piad, the time in life to earn the big salaries is aged 50+, we're all going to have to work longer. At the same time we'll all get to reassess the important things in life like getting home to see your kids.

It looks like the Germans & French were probably more right than wrong all along.

I agree Stutts, I have been saying that for years amongst my mates etc. Time off to be with family, or Ireland games or whatever it is, is invaluable and then also to be able to retire with full pension.

Over the last few decades we have had Reagan and Thather politics and lost our sense of the important thing in life and that is time.

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Originally Posted by 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.

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If the budget was today, as it usually is, then the government would have been able to make projections on the latest deficit figures.

As it was, it happened 7 weeks ago, and looks like it was written on the back of a Post-it note, then commended to the House.

...like most Irish legislation, which of course adheres to the well-known "errah-sure-we'll-fix-it-later" principle popularised by lazy, talentless Irish politicians. Or "Fianna Fail", as they're popularly known*.

adam

(* Or the Greens. Or Fine Gael, mostly. Or the other ones to a certain extent.)

I think part of the problem is lack of leadership especially in Ireland. I think even the biggest supporters of the government now realise they don't have a clue what to do. It is debatable if the opposition have any better ideas.

It is fairly clear more service cuts & tax increases are on the way but the government have to make at least symbolic gestures to at least make it look like they are taking a hit too. It is largely symbolic but cutting Junior Minister positions, no new car for Minister, ground the government jet etc... would be a good start.

The world is not helped by the lame duck Bush Presidency. Don't know if Obama has any solutions but at least there will be an effective leader & the US is very important for the world economy.

In the short to medium term consumer spending is fecked. When retailers had 25% off last year people saw it as a once off deal. Now when we see 25% off we don't spend as know that might be better next month. Will surely see deflation next year.

The EU interest rates have can be dropped a bit unlike other countries like US where it is so low can't drop further.

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Originally Posted by pete

The EU interest rates have can be dropped a bit unlike other countries like US where it is so low can't drop further.

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RTE

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The European Central Bank has cut its interest rate by 0.75%, its biggest ever move as inflation plummets and the euro zone economy sinks deeper into recession.

The move takes the ECB's main refinancing rate to 2.50%, its lowest in nearly two and a half years.

The Bank of England is expected to cut interest rates for sterling by another full percentage point later today, which would leave the main UK rate at 2%, while the Swedish central bank has brought forward its rate cuts to today. It too is expected to cut by 1%

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Sensible move.

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Originally Posted by pete

RTE



Sensible move.

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Valuable to a subset of people on a micro-level (home-owners not on a fixed rate), but completely irrelevant in the context of the challenges facing the wider economy.

They may as well have put them to zero immediately as that is pretty much inevitable within the next 3 months and even that will do little to slow the decline.

Those that benefit will increase their savings rate (and not spend it),banks are de-leveraging so won't be making any new loans and it doesn't make a jot of difference for the newly unemployed as they can't even pay back the principal never mind the interest.

Euro = 87p sterling. No VAT rates can compete with that. :eek:

Car Dealers getting desparate :cool:

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IRISH car dealers are so desperate to get rid of growing stockpiles of second-hand motors that they are reducing prices by as much as 25%, a Sunday Times survey has found.

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Euro = 95p today, parity can't be far away

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The British pound weakened to 95 pence to the euro for the first time this morning, before trading at 94.49 pence as of 2.57pm in London.

Mr Barry said this level would correspond to £1.20 in “old money” (ie Punt) terms for those with memories of the pain of the early 1990s currency crisis in which the peak for the Punt/sterling rate was just over £1.10.

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Government Rescue plan for the economy

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The Government is to establish a series of venture capital funds worth a total of €500 million in a bid to lure innovative industries to the Republic and boost research and development activity here.

The funds will be 49 per cent supported by cash from the National Pension Reserve Fund (NPRF) and 51 per cent backed by private sector venture capital players who specialise investing in start-up companies focused on developing new technologies and products.

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Seems like a reasonable idea & much better than same wasting 500m on propping up the housing market. Overall though 500m isn't a lot of money. These companies are likely to be exporters which is what the country needs.

I presume there are other plans or schemes on the way?

Thats a good long-term plan and is the kind of thing thats useful at any stage in an economic cycle. But it will do nothing for stimulation in the short-term.

I think the Government have decided that they'll let the ECB do all the work through interest rates and quantitative easing to stimulate demand. Unfortunately thats not going to help Ireland as much as we have our own economic issues that the rest of the Eurozone don't have (apart from Spain arguably).

The only thing that will work are US style tax cuts and capital investment plans but we've decided to reduce spending. By doing that we effectively accept we are prolonging the depression.

Tough calls.

Seems this is THE Plan. Got to wonder how it took them months to come up with this. 500m is far too small stimulus package. Its E200-250 per worker in the state. Very light on details because I suspect they don't actually have any...

heard on the work grapevine that we're pretty much set for 2009 and have half our order book for 2010 filled up. thank god for investment in infrastructure by stormont. would probably be the best thing that the republic could do at the minute.

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Originally Posted by shantykelly

thank god for investment in infrastructure by stormont. would probably be the best thing that the republic could do at the minute.

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There is the National Development Plan, active until 2013. Don't know if spending for this is now on hold though.

thats the impression that cowen et al. are giving on the news - cut spending, renegotiate the national pay deal, rein in all government depts. and remove agencies where possible. they seem to be laagaring up for the long night of the crunch.

Reading that it took 6 months to come with THE plan. :rolleyes:

ESRI Gloomy Projections

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The Economic and Social Research Institute has warned that economic output will fall dramatically next year and that unemployment will reach 10% of the labour force.

Its latest Quarterly Economic Report warns of a 4.6% fall in activity in 2009, which would be the largest annual slump in economic activity ever recorded.

The ESRI forecast suggests that 117,000 jobs will be wiped out, and net emigration will soar to 50,000 people, which would be one of the largest annual migration totals ever recorded.

The contraction in activity, it says, will plunge our public finances deeply into deficit. The ESRI says Government borrowing will soar to almost €17 billion in 2009. The General Government Deficit will exceed 10% of GDP - close to four times the EU borrowing limit - and the public debt burden will have doubled in two years.

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These seem to be the most reliable as don't have the agenda of some bank economists or the blinkers of the Department of Finance. Looks like a lot of the National Debt paid off in the last ten years will be borrowed again.

In this question, I think a recovery is defined by an upward movement for a period of time after Ireland has hit the bottom.
We do not know when that bottom will be. There is no model to predict when the bottom will be reached. Forecasts have been way off the mark so far. At present it is just a question of how many months will it take unemployment to reach 10%.
There are enough visible signs that the recession has a "fair bit" to go yet.
Then there are the big unknowns eg the blow torch potential of a rise in the price of oil.
Then there is the world economy, the state of the UK, then the USA economy will be one of the last to topple.

Using the GNP figures is not enough of a determination, you have to look at trends in many areas including the vital areas of unemployment and real standard of living.
Job creation outdoing job losses.
Then you are looking at what type of recovery, sustained or slow or flaccid after a short period of stimulous.
Regardless of what restricted economic formulas say, Ireland's recession has been hidden for years by the huge personal debt taken on board by thousands of people around the inflated price of housing. When someone buys a home they also purchase many other things—appliances,furniture etc. A housing boom is the best thing that can happen to an economy.

Where are the new jobs going to be in 5 or 10 years time? The cute government focuses investment in productive job creation and uses part of that revenue for job creation through infrastructure.
Probably the árse about face governments think that borrowing to invest in non productive infrastructure is going to stimulate a recovery.

The external debt that is choking Ireland is recorded by the CSO 2 page pdf
Averages at over €400k per 4m.citizens.
There may be even a need for national debt clock counter on O'Connell st. and leave a bit of room for a few extra zeroes - €1,670,000,000,000 and only going one way.

Gonna be a hell of a lot harder now in the wesht.

http://www.sbpost.ie/post/pages/p/st...366-qqqx=1.asp

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Originally Posted by Sunday Business Post

Dell plans closure of Limerick plant as ministers’ trip fails

Up to 2,000 job losses are expected at Dell in Limerick in the new year when the computer firm announces its intention to cut back manufacturing in Ireland.

The Sunday Business Post has learned that Mary Coughlan, the Tanaiste and Minister for Enterprise, and Willie O’Dea, Limerick-based Minister for Defence, flew to Dell’s headquarters in Texas early last week in a bid to persuade chief executive Michael Dell to retain the Limerick operation.

Their pleas were unsuccessful, although ministers hope that the company will retain at least some of the jobs in Limerick. However, informed sources said that fewer than 1,000 jobs may be saved out of total employment of more than 3,000 in Limerick.

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That is a big blow for Limerick even if it was only a matter of time before they cut back manufacturing here. I suspect if you buying a PC for E500 then labour is a significant part of the cost. Since Michael Dell cam back to the company he has been cutting costs across the board.

This has been on the cards for two years and all the Government could do was a quick trip to the US to beg last week when it was too late?!

They should've had re-training and local stimulation plans in place and ready to roll out.

But what else should we expect from this bunch of clowns other than a pathetic, reactive, empty-handed gesture?

Anyone hear Lenihan on Morning Ireland? We're totally goosed with these spoofers in charge.... We're currently engaged in intensive discussions with the social partners, starting next week!?! We're waiting on reports on what to do with the banks! Then the dick tried to make out they were acting decisively and said there was no need to recall the dail if all that's going to happen is the opposition debate what's going wrong! It's like a Bird & Fortune gig, without the bloody gags...

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Originally Posted by Macy

Anyone hear Lenihan on Morning Ireland? We're totally goosed with these spoofers in charge.... We're currently engaged in intensive discussions with the social partners, starting next week!?! We're waiting on reports on what to do with the banks! Then the dick tried to make out they were acting decisively and said there was no need to recall the dail if all that's going to happen is the opposition debate what's going wrong! It's like a Bird & Fortune gig, without the bloody gags...

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Thought exactly the same myself.

The (lack of) speed and decisiveness of decision making is absolutely astonshing.

How long can they be rabbits in the headlights?

And where is Enda Kenny?!?! Any decent opposition would be tearing the Government to pieces right now. On second thoughts, any decent opposition would be in Government by now....

Bringing the budget forward was supposed to bring clarity, but it's managed to muddy the waters further, as they were so optimistic about the outcome of 2008 when they didn't have the actual figures.

The other thing that really annoyed me was Lenihan effectively blaming our lack of a direct tax base for his inability to do anything on the tax side. FFS it was FF that kept reducing the tax rates and basing the tax take on indirect taxes. You'd swear they'd been in opposition since '97 and had just come in to clear up the mess...

I'd agree about Kenny being no where, but Bruton is the obvious man to talk economics. There is no one to blame for putting FF back in except the electorate. Labour are the real attack dogs of the opposition - hard for Lenihan to respond to what Quinn had to say, given Quinn's record in Finance.

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Originally Posted by Macy

The other thing that really annoyed me was Lenihan effectively blaming our lack of a direct tax base for his inability to do anything on the tax side. FFS it was FF that kept reducing the tax rates and basing the tax take on indirect taxes. You'd swear they'd been in opposition since '97 and had just come in to clear up the mess...

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Read this another way and its simply Lenihan trying to avoid admitting that the Government stoked the housing bubble and over-relied on unsustainable indirect taxation receipts directly related to the housing bubble.

The lack of leadership is the biggest problem. There are no obvious quick fixes but the government could at least act like they knew what they were doing.

If FG really want to be in government they should be putting together a plan for th economy as there are only so many points you can score by attacking the government which of course is all the more difficult with no Dail sitting.

Ignoring the left-right issues Labour have been stagnant in recent General Elections & I don't see they are any more electable now.

Irish Times

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WATERFORD WEDGWOOD appears finally to have run out of last chances. The luxury goods group has been in corporate intensive care for so long that the announcement yesterday of the appointment of a receiver came almost as a confirmation of the inevitable.

Over the past five years, the company has undergone six separate fundraising exercises involving a total of €550 million - aimed largely at restructuring the company and trimming its workforce. Sir Anthony, who first joined the company in 1985 - just ahead of its merger with Wedgwood - and his brother-in-law Peter Goulandris have between them poured about €400 million into the group in recent years.

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Can't see them surviving this one as debts are too large. Government grants would be a waste of time as they would spend it in a matter of months.

Existing employees likely to lose all or most of their defined benefit pensions as it is already underfunded.

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Originally Posted by pete

Existing employees likely to lose all or most of their defined benefit pensions as it is already underfunded.

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The Government needs to do something about pension protection legislation.

Its way behind most other EU nations in this area.

The galling thing for the Irish Waterford workers is that I'd hazard a guess the UK employees will be covered under UK legislation.

Not exactly a surprise but 1,900 jobs to go at Dell. Not manufacturing jobs to stay.

I presume the government politicians will be in hiding.

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Originally Posted by pete

I presume the government politicians will be in hiding.

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Aren't they all buggering off to Japan soon?

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Originally Posted by Macy

Aren't they all buggering off to Japan soon?

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Got to get in the free trips while they still here. Clearly no more junkets left to Texas.

Indo

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THREE carpet factory workers have been awarded five-figure compensation sums for unfair dismissal, despite admitting they slept on the job.

An Employment Appeals Tribunal heard workers at Waterford Carpets were clocked in and paid while still at home. At work, they sometimes played cards or "snoozed" in a warehouse.

The general manager said he was "shocked" by the level of absenteeism revealed by a CCTV monitoring investigation launched in February 2006 because he was concerned that production was not increasing despite the amount of overtime being claimed.

The investigation revealed that one worker was clocked in but absent from work on four occasions over a period of up 16 days.

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When people can get away with sh*te like that nit a good advert for companies to locate here.

UK Interests down to 1.5% from 2%

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Financial markets had been almost evenly split in pricing in a cut of either 50 or 75 basis points and analysts say another reduction next month looks a sure bet and that interest rates could fall below 1 per cent.

Rates never fell below 2 per cent, even during the Great Depression of the 1930s, and they are now at their lowest level since the central bank was founded more than 300 years ago

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Originally Posted by pete

Got to get in the free trips while they still here. Clearly no more junkets left to Texas.

Indo



When people can get away with sh*te like that nit a good advert for companies to locate here.

UK Interests down to 1.5% from 2%

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Employment tribunal nearly always favours the worker. all the payouts are never that high. cost is in going to it hiring lawyers (eventho ya dont have to.)and what have ya. smart companies will pay off the worker regardless. small businesses run by guys with big egos will always go all the way to the tribunal if necessary. expensive lesson.