Best of the Week
Most Popular
1. US Housing Market Real Estate Crash The Next Shoe To Drop – Part II - Chris_Vermeulen
2.The Coronavirus Greatest Economic Depression in History? - Nadeem_Walayat
3.US Real Estate Housing Market Crash Is The Next Shoe To Drop - Chris_Vermeulen
4.Coronavirus Stock Market Trend Implications and AI Mega-trend Stocks Buying Levels - Nadeem_Walayat
5. Are Coronavirus Death Statistics Exaggerated? Worse than Seasonal Flu or Not?- Nadeem_Walayat
6.Coronavirus Stock Market Trend Implications, Global Recession and AI Stocks Buying Levels - Nadeem_Walayat
7.US Fourth Turning Accelerating Towards Debt Climax - James_Quinn
8.Dow Stock Market Trend Analysis and Forecast - Nadeem_Walayat
9.Britain's FAKE Coronavirus Death Statistics Exposed - Nadeem_Walayat
10.Commodity Markets Crash Catastrophe Charts - Rambus_Chartology
Last 7 days
Stock Market Dow 30k before End of 2020? - 13th Jul 20
Credit Market Investments Turned Into End-User Risk Again - 13th Jul 20
Investors Are Going All-In on This Coronavirus Proof Industry - 13th Jul 20
5 Vital Insights That You Can Gain From Instagram Trackers - 13th Jul 20
Stop Believing The 'Economy' Is The Same As The Stock Market - 12th Jul 20
Spotify Recealed as The “Next Netflix” - 12th Jul 20
Getting Ahead of the Game: What Determines the Prices of Oil? - 12th Jul 20
The Big Short 2020 – World Pushes Credit/Investments Into Risk Again - 11th Jul 20
The Bearish Combination of Soaring Silver and Lagging GDX Miners - 11th Jul 20
Stock Market: "Relevant Waves Vs. Irrelevant News" - 10th Jul 20
Prepare for the global impact of US COVID-19 resurgence - 10th Jul 20
Golds quick price move increases the odds of a correction - 10th Jul 20
Declaring Your Independence from Currency Debasement - 10th Jul 20
Tech Stocks Trending Towards the Quantum AI EXPLOSION! - 9th Jul 20
Gold and Silver Seasonal Trend Analysis - 9th Jul 20
Facebook and IBM Tech Stocks for Machine Learning Mega-Trend Investing 2020 - 9th Jul 20
LandRover Discovery Sport Service Blues, How Long Before Oil Change is Actually Due? - 9th Jul 20
Following the Gold Stock Leaders as the Fed Prints - 9th Jul 20
Gold RESET Breakout on 10 Reasons - 9th Jul 20
Fintech facilitating huge growth in online gambling - 9th Jul 20
Online Creative Software Development Service Conceptual Approach - 9th Jul 20
Coronavirus Pandemic UK and US Second Waves, and the Influenza Doomsday Scenario - 8th Jul 20
States “On the Cusp of Losing Control” and the Impact on the Economy - 8th Jul 20
Gold During Covid-19 Pandemic and Beyond - 8th Jul 20
UK Holidays 2020 - Driving on Cornwall's Narrow Roads to Bude Caravan Holiday Resort - 8th Jul 20
Five Reasons Covid Will Change SEO - 8th Jul 20
What Makes Internet Packages Different? - 8th Jul 20
Saudi Arabia Eyes Total Dominance In Oil And Gas Markets - 7th Jul 20
These Are the Times That Call for Gold - 7th Jul 20
A Reason to be "Extra-Attentive" to Stock Market Sentiment Measures - 7th Jul 20
The Beatings Will Continue Until the Economy Improves - 6th Jul 20
The Corona Economic Depression Is Here - 6th Jul 20
Stock Market Short-term Peaking - 6th Jul 20
Gold’s Major Reversal to Create the “Handle” - 5th July 20
Gold Market Manipulation And The Federal Reserve - 5th July 20
Overclockers UK Custom Build PC Review - 1. Ordering / Stock Issues - 5th July 20
How to Bond With Your Budgie / Parakeet With Morning Song and Dance - 5th July 20
Silver Price Trend Forecast Summer 2020 - 3rd Jul 20
Silver Market Is at a Critical Juncture - 3rd Jul 20
Gold Stocks Breakout Not Confirmed Yet - 3rd Jul 20
Coronavirus Strikes Back. But Force Is Strong With Gold - 3rd Jul 20
Stock Market Russell 2000 Gaps Present Real Targets - 3rd Jul 20
Johnson & Johnson (JNJ) Big Pharma Stock for Machine Learning Life Extension Investing - 2nd Jul 20
All Eyes on Markets to Get a Refreshed Outlook - 2nd Jul 20
The Darkening Clouds on the Stock Market S&P 500 Horizon - 2nd Jul 20
US Fourth Turning Reaches Boiling Point as America Bends its Knee - 2nd Jul 20
After 2nd Quarter Economic Carnage, the Quest for Philippine Recovery - 2nd Jul 20
Gold Completes Another Washout Rotation – Here We Go - 2nd Jul 20
Roosevelt 2.0 and ‘here, hold my beer' - 2nd Jul 20
U.S. Dollar: When Almost Everyone Is Bearish... - 1st Jul 20
Politicians Prepare New Money Drops as US Dollar Weakens - 1st Jul 20
Gold Stocks Still Undervalued - 1st Jul 20
High Premiums in Physical Gold Market: Scam or Supply Crisis? - 1st Jul 20
US Stock Markets Enter Parabolic Price Move - 1st Jul 20
In The Year 2025 If Fiat Currency Can Survive - 30th Jun 20
Gold Likes the IMF Predicting a Deeper Recession - 30th Jun 20
Silver Is Still Cheap For Now - 30th Jun 20
More Stock Market Selling Ahead - 30th Jun 20
Trending Ecommerce Sites in 2020 - 30th Jun 20
Stock Market S&P 500 Approaching the Precipice - 29th Jun 20
APPLE Tech Stock for Investing to Profit from the Machine Learning Mega trend - 29th Jun 20
Student / Gamer Custom System Build June 2020 Proving Impossible - Overclockers UK - 29th Jun 20
US Dollar with Ney and Gann Angles - 29th Jun 20
Europe's Banking Sector: When (and Why) the Rout Really Began - 29th Jun 20
Will People Accept Rampant Inflation? Hell, No! - 29th Jun 20
Gold & Silver Begin The Move To New All-Time Highs - 29th Jun 20
US Stock Market Enters Parabolic Price Move – Be Prepared - 29th Jun 20
Meet BlackRock, the New Great Vampire Squid - 28th Jun 20
Stock Market S&P 500 Approaching a Defining Moment - 28th Jun 20

Market Oracle FREE Newsletter

AI Stocks 2020-2035 15 Year Trend Forecast

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