We have heard much about this so called recovery as we edge closer to local and European elections. But the key question is, a recovery for who and a recovery of what? A recovery of house prices? A recovery of profits? A recovery of jobs or incomes? Or a recovery of government revenue? Below are some statistics
BENCHMARKING 2014 - ETUI ‘Is Europe still suffering the consequences of crisis, or is the current situation rather the outcome of inappropriate policy choices? And if the wrong policies have indeed been followed, is it possible to envisage more effective alternatives?’
Dr Conor McCabe gave an excellent presentation at the Communist Party’s meeting this weekend, ‘They partied, we paid!’ In his presentation he put up a number of slides that help us break down some of the myths and lies peddled by the establishment. Myth # 1 – ‘We all partied’ The establishment constantly push the
In 2013 Oxfam reported 85 people had the wealthy of the poorest 3.5 billion but the rich have got richer and Forbes now reports it is down to 67 people who have the same wealth as the poorest 3.5 billion of us. Full Forbes article at link below. http://www.forbes.com/sites/forbesinsights/2014/03/25/the-67-people-as-wealthy-as-the-worlds-poorest-3-5-billion/
An excellent report from India and the affect of the crisis of capital on the people much of which is very relevant to Ireland. As we shall see, the ‘growth’ around which the discussion is focussed is irrelevant to the people. We shall also see how those demanding interest rate hikes are actually unconcerned about
We have heard much about this so called recovery as we edge closer to local and European elections. But the key question is, a recovery for who and a recovery of what? A recovery of house prices? A recovery of profits? A recovery of jobs or incomes? Or a recovery of government revenue?
Below are some statistics taken from the latest NERI report that highlight the state of the economy and expose the shallowness of Government soundbites.
Full report here NERI Spring 2014
So, the recovery has obviously meant a recovery in jobs right? Afraid not.
What? So, jobs haven’t recovered, incomes haven’t recovered, government revenue still isn’t enough and our deficit and debt levels are still our of control. So what is this recovery we keep hearing about?
The number earning more than €500,000 grew by 61 to 3,443 last year.
Austerity has increased disposable income for the richest 10 per cent.
The recovery is a recovery of wealth, profit and asset appreciation for rich people. Austerity is working to secure the wealth of the wealthy and make us pay for their crisis.
Thank you to NERI for the research for this post.
BENCHMARKING 2014 - ETUI
‘Is Europe still suffering the consequences of crisis, or is the current situation rather the outcome of inappropriate policy choices? And if the wrong policies have indeed been followed, is it possible to envisage more effective alternatives?’
Dr Conor McCabe gave an excellent presentation at the Communist Party’s meeting this weekend, ‘They partied, we paid!’
In his presentation he put up a number of slides that help us break down some of the myths and lies peddled by the establishment.
Myth # 1 – ‘We all partied’
The establishment constantly push the line that we all partied, we all got involved, we were all overpaid and we all bought properties. Nothing could be further from the truth.
68% of us earned less than €40,000 in 2009.
And during the so-called Celtic Tiger owner-occupancy actually reduced, meaning many of us did not get involved.
Myth # 2 – Housing ownership is in our DNA
Owner occupancy actually reduced during the boom years and Ireland is no different than most of Europe in terms of owner-occupancy trends.
Our owner-occupied with a mortgage or a loan is about the EU average and stands below countries like Finland, Belgium, UK, Denmark, Netherlands, Iceland, Sweden and many other countries. So, no, the famine has not created a genetic desire to own a home.
And the property bubble was not a uniquely Irish phenomenon.
Myth # 3 – House prices rouse responding to demand
It’s often suggested that the rise in house prices was a logical consequence of our rising wages and it’s what we deserved for giving ourselves massive pay increases. Again, nothing could be further from the truth.
House price rouse at many multiple times the rise in wages.
And the rise in house prices actually resulted from the sudden influx of cheap money for Irish Banks on the interbank market that facilitated them flooding the Irish market with credit.
Myth # 4 – NAMA is necessary to stabilise house prices to help those in negative equity
Almost whenever NAMA is mentioned they talk about our mortgages and our homes as if that is what NAMA is all about and so homeowners quietly support it on the presumption it is somehow helping them. But once again this is nonsense as the overwhelming value of loans socialised by NAMA are commercial loans not homes at all.
So who is NAMA really protecting?
As always, thank you Conor McCabe.
In 2013 Oxfam reported 85 people had the wealthy of the poorest 3.5 billion but the rich have got richer and Forbes now reports it is down to 67 people who have the same wealth as the poorest 3.5 billion of us.
Full Forbes article at link below.
An excellent report from India and the affect of the crisis of capital on the people much of which is very relevant to Ireland.
As we shall see, the ‘growth’ around which the discussion is focussed is irrelevant to the people. We shall also see how those demanding interest rate hikes are actually unconcerned about inflation as it affects the vast majority of the people. Indeed the entire discussion of the slowdown brings to the fore once again the gulf between the economy of the elite and that of the masses of people. This should not be taken to mean that the two operate independently of each other; rather, the former is rising on the bony and weary back of the latter. As the elite strains to reach higher and higher, it plunges the people into the depths.
Full paper below:
Read the full paper here A crisis made in the eurozone
Report from Research on Money and Finance
Entry into the euro, followed shortly by the Eurozone debt crisis and subsequently by the problematic management of the banking crisis by the EU, has had profound and detrimental effects on the Cypriot banking system. This brief note highlights how adoption of the euro and the Eurozonecrisis jointly formed the critical backdrop to the Cypriot crisis.
Taken from Michael Taft’s
Some commentators are celebrating our ‘recovery’. Some have even said that we have recovered relatively quickly, after a dramatic fall. Here we go again – rewriting history, distorting the current situation.
Ireland holds the record for the longest domestic demand recession in the EU. And the really bad news is that we may not be out of it yet. The following table breaks down the length of consecutive domestic demand recession that EU countries have suffered since 1960.
Almost all EU countries have, since 1960, suffered at least a two-year domestic demand recession – with the exception of France and Malta (though data only goes back to 1996 for the island). Some domestic demand recessions have been harsh – Estonia’s two-year experience saw a fall of over 30 percent; some have been mild – Poland’s two-year experience saw a fall of less than one percent.
Ireland – along with Spain and Greece – have the longest consecutive domestic demand recession: six years. And in the tradition of breaking the tie, let’s count the number of years that domestic demand fell since 1960:
- Ireland: 12 years
- Greece: 10 years
- Spain: 9 years
With 12 years where domestic demand fell, Ireland wins on points.
Indeed, Ireland wins the double: longest domestic demand recession and the highest number of years where domestic demand fell. Since 1960, Ireland has spent 23 percent of the time suffering from falling domestic demand. That’s the cup.
But, surely, this is nit-picking – what with all that recovery going on. So don’t worry about it.
A number of mortgage books have already been sold to unregulated private equity companies or hedge funds, mostly American; but in the proposed sales of the IBRC residential book (13,000 former INBS mortgages) we are looking at the largest sale ever of mortgages to unregulated vulture capitalists.
What does this mean for mortgage-holders?
Their mortgage will now be held by an unregulated entity whose sole purpose is to squeeze as much money out of the debt as possible. If it paid 30 cents for each euro of debt it will try to secure 50 cents or more back. As unregulated entities, mortgage-holders will not be covered by the Central Bank’s code of practice on mortgage arrears, which provides some minimal regulation and process for mortgage-holders who fall into arrears. Families will be completely at the mercy of these entities.
The voluntary agreement, much trumpeted by the special liquidator of the IBRC, is worthless. it is not even written down, which he confirmed to the Finance Committee of the Oireachtas late in February.
These vulture funds will base all their decisions on maximising the return for their investors. They are not vulnerable to political pressure or to negative publicity. If an asset becomes more valuable than a prospective return, they will evict families, seize the asset, and sell it on. They may securitise some mortgages further and sell these on to other entities. As most of the former INBS mortgages are on variable interest rates, they may increase the interest rates, especially on performing loans, if they feel this will increase their return.
The list of options are there for these funds, none of which are good news for any families involved.
One option not pursued by the IBRC, however, was that owners of the mortgage might be able to buy their own loan. Even if the mortgage-holder was willing to pay more for the loan than the vulture capitalist, they would not be allowed to buy it.
This sale process has also exposed, once again, the circle of big business that continues to profit from the misery they were involved in creating. The special liquidators appointed to manage the winding down of IBRC are KPMG. But KPMG were also the auditors of INBS and approved their accounts, which were so horrifically skewed towards speculative lending.
The legal advisers to the special liquidators are McCann Fitzgerald, who advised INBS on corporate governance; and a wonderful job they did.
And the “independent valuation” of the IBRC loan books for sale was carried out by PWC, the firm that valued the Anglo-Irish book in 2008 and reassured the Government that they would only require recapitalisation of €300 million. Only off by a factor of 100!
So it’s clear who this process has been designed to benefit, and what the Government means by a “recovery.” It’s a recovery of property inflation and profits for the wealthy, and a recovery of contracts and profits for big business.
Irish billionaires are worth a whopping $25 billion between them
The Celtic Tiger may have left the building, but Ireland’s billionaires are sitting on a combined fortune of $25 billion, according to the latest figures from Forbes magazine.
There are 1,645 names on the latest list of the world’s billionaires from Forbes and between them they control $6.3 trillion in wealth, according to an Irish Independent analysis of the report.
The paper says India-based Pallonji Mistry (84), the patriarch of the sub-continent’s massive Shapoorji Pallonji construction group, is listed as being worth $12.8bn and, thanks to his Irish citizenship, is Ireland’s richest person by far.
Media and communications tycoon Denis O’Brien (55) is listed by Forbes as Ireland’s second richest person, with a $6bn fortune.
O’Brien also controls Communicorp, which owns radio stations in Ireland, the UK and eastern Europe.
In third spot in the Irish rankings is John Dorrance, the 70-year-old worth $2.5bn who renounced his US citizenship and moved to Ireland before selling his 10.5pc stake in Campbell Soup Company.
Forbes speculates that he moved to Ireland to avoid paying high capital gains tax in the US.
Glen Dimplex founder Martin Naughton (74) is named by Forbes as Ireland’s fourth richest person with $2.2billion in total assets.
Celtic football club owner Dermot Desmond is fifth-richest at $2bn.
The paper says that among the Irish billionaires missing from the group are Hilary Weston and her family, who are behind Brown Thomas, Selfridges and Associated British Foods, the company that owns Primark. They are estimated to have a $10billion fortune.
Dublin financier Paul Coulson, who owns a large stake in glass container maker Ardagh, is said to be worth just over $1.3billion.
The Forbes list is topped by Microsoft founder Bill Gates, with a $76bn fortune.
|The euro has worked well for the creditor (surplus) countries. Germany is the best example. The German mark would have risen in value if there was no euro, and this probably would have eliminated some of the surpluses.
These surpluses enabled the Germans to buy assets abroad: for example, Lidl and Aldi have expanded throughout Europe. They return profits to Germany, and this increases the German surplus and the Irish deficit. This applies to the other creditor surplus countries: the Netherlands, Austria, Finland, Belgium, and Luxembourg.
The Chinese are achieving similar results by keeping the value of their currency low. They have been able to buy up US government bonds, and mines in Africa and Australia, with the surpluses generated by this policy.
Some countries in the euro area were winners in international trade, and some countries were losers. The winners had trade surpluses, and the losers had deficits. In table 1 the surpluses of the winning countries are shown as an average percentage over the periods 1990–99 and 2000–09, as well as the cumulative sum of their surpluses in the latter period.
|Table 1: Average surplus or deficit as a percentage of GDP, creditor countries|
|Germany||2.2||–1||3.8||€883.5 billion||81.757 million|
|Netherlands||3||4.1||6.5||€332.1 billion||16.612 million|
|Belgium||–0.4||3.9||4.3||€127.8 billion||10.883 million|
|Austria||–1.8||–2.1||2.2||€57.7 billion||8.388 million|
|Finland||–1.4||0.9||5.3||€45.2 billion||5.363 million|
|Luxembourg||15.9||12||9.7||€28.2 billion||508 million|
|Average using population weights||1.7||2.1||4.2|
|Total||€1,474.5 billion||123.511 million|
|Note: Cyprus, Estonia and Malta adopted the euro in 2008, and Slovenia and Slovakia joined in 2007, and they are left out.
It is important to remember that the euro is a fixed exchange-rate mechanism (in 1999 each currency was fixed against the euro), with no exit mechanism. This gives rise to the surpluses and deficits.
|Table 2: Average surplus or deficit as percentage of GDP, France|
|–2.1||0.7||–0.2||–€59.4 billion||64.824 million|
|Table 3 shows the performance of the debtor (deficit) countries.|
|Table 3: Average surplus or deficit as percentage of GDP|
|Italy||–1||1.3||–1||–€150 billion||60.483 million|
|Spain||–1.1||–1.8||–6.3||–€579 billion||48.073 million|
|Greece||–0.6||–1.7||–13.3||–€115.5 billion||11.308 million|
|Portugal||–8.1||–6.4||–9.7||–€149.1 billion||10.637 million|
|Ireland||–5.8||1.4||–2.2||€36.2 billion||4.476 million|
|Average population weights||–1.8||–0.3||–2.9|
|Total||–€1,030.3 billion||134.977 million|
|Note: Cyprus, Estonia and Malta adopted the euro in 2008, and Slovenia and Slovakia adopted it in 2007, and they are left out.
The euro was overvalued with respect to the debtor (deficit) countries.
Solutions to the imbalances
1. The creditor countries could expand demand or increase wages. This would lead to extra imports from the debtor countries and go some way towards solving their deficits. The Germans object to this, because it might cause inflation in Germany. It also smacks of Keynesian economics, and the Germans are now in the neo-liberal camp and believe that governments should not interfere in markets.