Best of the Week
Most Popular
1. Stock Markets and the History Chart of the End of the World (With Presidential Cycles) - 28th Aug 20
2.Google, Apple, Amazon, Facebook... AI Tech Stocks Buying Levels and Valuations Q3 2020 - 31st Aug 20
3.The Inflation Mega-trend is Going Hyper! - 11th Sep 20
4.Is this the End of Capitalism? - 13th Sep 20
5.What's Driving Gold, Silver and What's Next? - 3rd Sep 20
6.QE4EVER! - 9th Sep 20
7.Gold Price Trend Forecast Analysis - Part1 - 7th Sep 20
8.The Fed May “Cause” The Next Stock Market Crash - 3rd Sep 20
9.Bitcoin Price Crash - You Will be Suprised What Happens Next - 7th Sep 20
10.NVIDIA Stock Price Soars on RTX 3000 Cornering the GPU Market for next 2 years! - 3rd Sep 20
Last 7 days
Trump and Coronavirus Pandemic Final US Catastrophe 2021 - 19th Jan 21
How To Find Market Momentum Trades for Explosive Gains - 19th Jan 21
Cryptos: 5 Simple Strategies to Catch the Next Opportunity - 19th Jan 21
Who Will NEXT Be Removed from the Internet? - 19th Jan 21
This Small Company Could Revolutionize The Trillion-Dollar Drug Sector - 19th Jan 21
Gold/SPX Ratio and the Gold Stock Case - 18th Jan 21
More Stock Market Speculative Signs, Energy Rebound, Commodities Breakout - 18th Jan 21
Higher Yields Hit Gold Price, But for How Long? - 18th Jan 21
Some Basic Facts About Forex Trading - 18th Jan 21
Custom Build PC 2021 - Ryzen 5950x, RTX 3080, 64gb DDR4 Specs - Scan Computers 3SX Order Day 11 - 17th Jan 21
UK Car MOT Covid-19 Lockdown Extension 2021 - 17th Jan 21
Why Nvidia Is My “Slam Dunk” Stock Investment for the Decade - 16th Jan 21
Three Financial Markets Price Drivers in a Globalized World - 16th Jan 21
Sheffield Turns Coronavirus Tide, Covid-19 Infections Half Rest of England, implies Fast Pandemic Recovery - 16th Jan 21
Covid and Democrat Blue Wave Beats Gold - 15th Jan 21
On Regime Change, Reputations, the Markets, and Gold and Silver - 15th Jan 21
US Coronavirus Pandemic Final Catastrophe 2021 - 15th Jan 21
The World’s Next Great Onshore Oil Discovery Could Be Here - 15th Jan 21
UK Coronavirus Final Pandemic Catastrophe 2021 - 14th Jan 21
Here's Why Blind Contrarianism Investing Failed in 2020 - 14th Jan 21
US Yield Curve Relentlessly Steepens, Whilst Gold Price Builds a Handle - 14th Jan 21
NEW UK MOT Extensions or has my Car Plate Been Cloned? - 14th Jan 21
How to Save Money While Decorating Your First House - 14th Jan 21
Car Number Plate Cloned Detective Work - PY16 JXV - 14th Jan 21
Big Oil Missed This, Now It Could Be Worth Billions - 14th Jan 21
Are you a Forex trader who needs a bank account? We have the solution! - 14th Jan 21
Finetero Review – Accurate and Efficient Stock Trading Services? - 14th Jan 21
Gold Price Big Picture Trend Forecast 2021 - 13th Jan 21
Are Covid Lockdowns Bullish or Bearish for Stocks? FTSE 100 in Focus - 13th Jan 21
CONgress "Insurrection" Is Just the Latest False Flag Event from the Globalists - 13th Jan 21
Reflation Trade Heating Up - 13th Jan 21
The Most Important Oil Find Of The Next Decade Could Be Here - 13th Jan 21
Work From Home £10,000 Office Tour – Workspace + Desk Setup 2021 Top Tips - 12th Jan 21
Collect a Bitcoin Dividend Without Owning the King of Cryptos - 12th Jan 21
The BAN Hotlist trade setups show incredible success at the start of 2021, learn how you can too! - 12th Jan 21
Stocks, Bitcoin, Gold – How Much Are They Worth? - 12th Jan 21
SPX Short-term Top Imminent - 12th Jan 21
Is This The Most Exciting Oil Play Of 2021? - 12th Jan 21
Why 2021 Will Be the Year Self-Driving Cars Go Mainstream - 11th Jan 21
Gold Began 2021 With a Bang, Only to Plunge - 11th Jan 21
How to Test Your GPU Temperatures - Running Too Hot - GTX 1650 - Overclockers UK - 11th Jan 21
Life Lesson - The Early Bird Catches the Worm - 11th Jan 21
Precious Metals rally early in 2021 - 11th Jan 21
The Most Exciting Oil Stock For 2021 - 11th Jan 21
Financial Market Forecasts 2021: Navigation in Uncharted Waters - 10th Jan 21
An Urgent Message to All Conservatives, Right-Wingers and Patriots - 10th Jan 21
Despite Signs to the Contrary, Gold Price at or Near Top - 10th Jan 21 -
Ultimate Guide On The 6 Basic Types Of Index Funds - 10th Jan 21
Getting Vaccinated at TESCO - Covid-19 Vaccinations at UK Supermarket Pharmacies and Chemists - 10th Jan 21
Cheers for the 2021 Stock Market and These "Great Expectations" - 9th Jan 21
How to Plan Your Child With Better Education - 9th Jan 21
How To Find The Best Casino - 9th Jan 21
Gold Is Still a Bargain Buy - 8th Jan 20
Gold Price Set to Soar as Hyperinflation Looms - 8th Jan 21
Have Big Dreams? Here's How to Pay for Them - 8th Jan 21
Will the Fed Support Gold Prices in 2021? - 8th Jan 21
Stocks trading strategies for beginners - 8th Jan 21
Who is Buying and Selling Stocks in 2021 - 8th Jan 21
Clap for NHS Heroes 2021 as Incompetent Government Loses Control of Virus Again! - 8th Jan 21

Market Oracle FREE Newsletter

FIRST ACCESS to Nadeem Walayat’s Analysis and Trend Forecasts

The Irish Economy Collapses As A Result Of The Global Financial Crisis

Economics / Credit Crisis 2010 Sep 24, 2010 - 08:40 AM GMT

By: Christopher_Quigley

Economics

Best Financial Markets Analysis Article“A Guarantee Too Far”

Currently the Irish economy is in freefall following the collapse of the real estate market that had expanded ten fold in the decade from 1997 – 2007. The reasons for this “Celtic Tiger” boom are many but in the main it arose due to the following:


  1. Ireland’s entry into the Euro allowed Irish banks access to unparalleled pools of cheap credit.
  2. Ireland then had a low cost base.
  3. Ireland had an unusually well educated workforce.
  4. The integration of Europe brought many foreign companies to Ireland.
  5. We introduced a most favourable corporate tax structure for international transfer pricing.
  6. Wage rates rose at unprecedented levels due to job growth and a new liberal taxation policy.
  7. The “originate to distribute” banking model increased banking liquidity to unprecedented levels.
  8. “Social Partnership” brought industrial peace after many decades of instability.
  9. The Northern Ireland “troubles” were finally resolved and the country had true peace which had eluded it for over four decades. These troubles had artificially repressed the country financially. The arrival of peace engendered a new positive attitude and an economic outburst.

Due to a lack of government regulatory control and strategic foresight taxes from an unsustainable property base were used to fund a bureaucracy that is now overpaid and over extended  and is in severe danger of bankrupting the country for generations. As with many western democracies the executive system is proving incapable of making the tough choices necessary to stabilise the destructive spiral of debt interest compounding on debt principal.

However, apart from the reality of supporting a burgeoning government and semi-state bureaucracy, the Irish government made a particularly disastrous mistake in the autumn of 2008 when the financial catastrophe first broke. In a mid-night crisis meeting, at Farmleigh (the former mansion of the Guinness family which now serves as a luxury bolt-hole for Irish elites)  the department of finance cajoled the ruling Fianna Fail party in power into not only guaranteeing banking deposits but also guaranteeing all bank bondholders. Thus far, two years on, for one lone particular financial institution called “Anglo Irish Bank,” the bill for this “guarantee too far” is now 36 billion Euros and rising. No other government in Christendom has provided such a windfall to the privileged bondholder elite. Under this guarantee as bonds mature the holders are being paid off, in full, instead of for cents on the dollar. As long as this guarantee remains in place the country will continue to be fleeced. As a result of this largess the price on Irish government borrowings has rocketed to 6.6% almost twice the German bund rate. This situation is making a mockery of the concept of a “common Euro currency”. Increasingly the Euro is being seen as an exchange rate mechanism rather than as a true currency.

As with Portugal and Greece in Ireland the economic situation on the ground is becoming desperate. The main banks are basically insolvent and unable to lend. Capital expenditure by the government departments has stagnated. Taxes are rising to pay for the bloated interest charge on ballooning foreign borrowings. Business cash flow has collapsed and credit is non existent. Many enterprises now no longer accept cheques and insist on cash or payment through credit or debit cards. Money has become very scarce. It is the greatest crisis the country has faced since the 1921 Irish War of Independence. Unfortunately the media has failed to highlight this reality and many politicians and banking executives act as if this crisis is just a normal credit cycle event. They actually believe that soon Ireland will return to the boom years. They plead that all we have to do is wait the situation out. This type of complacency is preventing party leaders from taking the radical actions necessary and as each month passes the government borrows an additional 2.6 billion just to fund day to day expenses. Soon government borrowings will be over 100% of GDP and with exploding interest charges, increasingly taxes are simply being used to pay off foreign bondholders. Increased taxes are contracting the economy further and so the death spiral of debt is squeezing the life out of day to day commerce. Business is collapsing under a deflationary depression while bureaucracy is being sustained through misguided political policy. Ireland has become a socialist nightmare over-night.

What Ireland now faces is a highly competitive, low cost, low credit, web-interconnected, transnational and level-taxation based environment. Ireland must grow up and move on. It is time for fresh ideas and fresh action. It is time for leadership, courage and vision. It is time for affective sound bites to be replaced by effective strategic and tactical practicality. Hopefully the Irish people will wake up from their consensus trance and force the political elite to stop bailing out corrupt banking institutions and start to cut its public expenditure budgets. Enterprise not bureaucracy must be championed and its educated young workforce given hope rather than an emigration ticket. Whether this wake-up call will be headed is anybody’s guess. Increasingly the trend in Euroland is for Brussels to call the shots over local “sovereign” parliaments. In this crisis this development has turned out not to be beneficial. Local politicians have thus opted to pass the buck rather than courageously face up to the challenges.

However, in Ireland it would appear an end game is shaping up. There is a limit to the level of borrowing the country can run up particularly with exploding interest costs. Should the Irish political system continue to prove itself incapable of restructuring its bloated public service expenditure it is inevitable that at some stage the IMF, probably through the auspices of the European Central Bank, will wade in and directly instruct the Irish Department of Finance to act. From my point of view the sooner this happens the better because it is only then that people will realise that the bottom is in. It is then and only then that confidence will be restored to the wonderful Emerald Isle.

By Christopher M. Quigley
B.Sc., M.M.I.I. Grad., M.A.
http://www.wealthbuilder.ie

Mr. Quigley was born in 1958 in Dublin and holds a Batchelor Degree in Accounting and Management from Trinity College/College of Commerce, Dublin and is a graduate of the Marketing Institute of Ireland. He commenced investing in the Stock Market in 1989. in Belmont, California where he lived for 6 years. He developed the Wealthbuilder investment and trading course over the last decade as a result of research, study, experience and successful application. This course marries Fundamental Analysis with Technical Analysis and focuses on 3 specific approaches. Namely: Momentum, Value and Pension Strategies.

Mr. Quigley is now based in Dublin, Ireland and Tampa Bay, Florida.

© 2010 Copyright Christopher M. Quigley - All Rights Reserved

Disclaimer: The above is a matter of opinion provided for general information purposes only and is not intended as investment advice. Information and analysis above are derived from sources and utilising methods believed to be reliable, but we cannot accept responsibility for any trading losses you may incur as a result of this analysis. Individuals should consult with their personal financial advisors before engaging in any trading activities.

Christopher M. Quigley Archive

© 2005-2019 http://www.MarketOracle.co.uk - The Market Oracle is a FREE Daily Financial Markets Analysis & Forecasting online publication.


Post Comment

Only logged in users are allowed to post comments. Register/ Log in

6 Critical Money Making Rules