The Irish Economy - Worrying Signs?

lomb · 17-04-2006 12:54pm

ronbyrne2005 wrote:

would be good in that it would encourage the development of economically viable alterative energy sources.

correct i agree, it would lead to the rebuilding of nuclear factories imho, but also expansion of solar and wind power. this is what will eventually get the world off its oil addiction, extortionate prices/

silverharp · 17-04-2006 1:06pm

if we get 150-200$ oil, it will damage tourism, and owning foreign property in Europe may not look so clever, most of Ryanair's fuel hedges run out this year.
The Fed will be forced to keep raising rates, and unlike the 70's when peoples debts were small, this time around there are alot of people will variable rates and this will crush the US economy
if you hadn't noticed The US and Europe are inflating the currency at around 10% pa this is a big fraud on savers and will only accelerate if oil spikes. I invested in oil and gold 2 years ago and havn't regretted it since.

Pa ElGrande · 17-04-2006 1:38pm

silverharp wrote:

The Fed will be forced to keep raising rates, and unlike the 70's when peoples debts were small, this time around there are alot of people will variable rates and this will crush the US economy
if you hadn't noticed The US and Europe are inflating the currency at around 10% pa this is a big fraud on savers and will only accelerate if oil spikes. I invested in oil and gold 2 years ago and havn't regretted it since.

The expansion of the money supply has been one of the main reason's that asset bubbles have been popping up all over the world. In fact the American federal reserve has stopped publishing the M3 data since March 2006. (If I were a conspiracy theorist, this would be highly suspicious)

http://en.wikipedia.org/wiki/Money_supply

Pa ElGrande · 17-04-2006 1:51pm

lomb wrote:

id tend to agree, 150-200 dollar oil could be great news for the west and put the new east out of business by crippling chinese factories and their competitivity with western enterprises.
im not saying this is good news for individuals but it could be great news for the irish economy. money is a strange thing never underestimate the twists and turns the river of business will take..

Look around you at the moment and find 10 things that you use everyday that are made in Ireland, then read this article by David McWilliams.

Celtic pirates plundering credit
http://www.davidmcwilliams.ie/Articles/view.asp?CategoryID=-1&CategoryName=&ArticleID=342

It happened to the Spanish before, its happening to us now in 2006.

Sponge Bob · 17-04-2006 3:07pm

Except that his theory of credit as a commodity is fundamentally flawed .

Unlike Gold, credit can be 'created' . Its called a 'reserve ratio' in banking. If you reduce it you create instant credit . Of course if you create too much you end up hobbling the economy long term and having debt crises but who gives a **** with an election coming up in 2007 .

There is a prudent amount of credit for each economy, it generates real incomes and goods. The Irish problem is that it has all been diverted into this ridiculous housing bubble of hours by bankers who do know better but who cannot thing of a better way to lend this credit.

If I went in looking for €1m to make a good or product I would get 8-10% interest rates, if I borrow to finance the housing bubble b buying second and third homes its 4-5% so where is the incentive to produce anything in that ???

Muppetry. Avoid the housing market until after or well after the correction , after all its cheap to rent now is it not

silverharp · 17-04-2006 5:39pm

Pa ElGrande wrote:

The expansion of the money supply has been one of the main reason's that asset bubbles have been popping up all over the world.

Absolutely, the US trade deficit creates assets in foreign central banks which then have to issue local currency, hence the money expansion in Europe and Asia. Japan created vast amounts of new money in 04 to keep its currency down against the dollar.

I think what the FED is doing is trying to pop the property bubble in the US but at the same time increasing the money supply. The FED will be up to all kinds of tricks to bring commodities down, as they can't pause on rates if gold and oil are still going up.

In reality the US is probably in recession already, inflation is more like 6% and unemployment is above 10%, they use a crazy births/death model which basically doesn't count people who have been unemployed for 6 months or more. I think the next 6 mths will be interesting.

blueshirt · 17-04-2006 5:45pm

Don’t worry, not a problem, benchmarking Bertie will sort it all out. Just give the public servants (and himself, charity begins at home) another huge pay rise that us idiots in the private sector will have to pay for.

Pa ElGrande · 17-04-2006 6:45pm

blueshirt wrote:

Don’t worry, not a problem, benchmarking Bertie will sort it all out. Just give the public servants (and himself, charity begins at home) another huge pay rise that us idiots in the private sector will have to pay for.

Of course, all that borrowed money proping up the government finances, no wonder Bertie was praising the contribution of the banks to Irelands miracle economy

http://www.finfacts.com/irelandbusinessnews/publish/article_10005395.shtml

Pa ElGrande · 17-04-2006 8:53pm

The pessimist complains about the wind; the optimist expects it to change; the realist adjusts the sails.
William A. Ward

Looks like I'm not the only optimistic realist out there, gonna get this and have a read.

The Second Great Depression
Warren Brussee
http://www.amazon.co.uk/exec/obidos/ASIN/1591136881/qid=1145303132/sr=1-1/ref=sr_1_2_1/203-4555340-1360748

replytohere2004 · 18-04-2006 4:30am

The party will definitely be over it this proposel is implemented:

Irish Independent, 18.04.6

[FONT=Verdana, Arial]By Mike Hayes, tax partner with KPMG

EU Company Tax Plans Could Be a Catastrope for Ireland[/FONT][FONT=Arial, Verdana, Arial]
[/FONT]
AS we commemorate Easter 1916, new proposals from Brussels could have us giving up one of our key sovereign rights - the automatic right to collect tax from Irish companies. [FONT=Verdana, Arial] The European Commission would like to find some mechanism to ensure that all companies operating in the European Union pay corporation tax on a consistent basis right throughout the EU, irrespective of where these companies are deemed to be resident for tax purposes.
The intention is not to harmonise tax rates but instead to harmonise the basis for calculating taxable profits to which the national rates of tax are then applied.
This would involve harmonising all of the different elements that are used by member states to calculate a company's taxable profits.
This is an admirable concept. However, these proposals could result in profits earned by Irish companies being deemed to have arisen in other countries, with the result that they would then become subject to tax at the rate prevailing in those countries.
The somewhat benign-sounding Common Consolidated Corporate Tax Base (CCCTB for short) is best explained by means of an example.
Take an Irish company which earns profits of €20m, but where its turnover is split 75pc-25pc between Germany and the United Kingdom.
Proposals
At present, this Irish company would pay tax in Ireland of €2.5m at 12.5pc on its €20m profits. Under the CCCTB proposals, a significant part of the profits of the Irish company could be allocated to Germany and the UK, on the basis that the Irish company has some physical presence or relationship with those countries and because of the turnover generated in them.
Most of the income arising in the Irish company would be taxed at the much higher corporate rates prevailing in both of those countries.
While this is a somewhat extreme example, there is a very strong possibility that the proposals will result in the tax base being shifted away from Ireland, resulting in a significant fall-off in corporation tax yield for the Irish Exchequer. More importantly, multinationals will begin to question the rationale for locating in Ireland if the corporate tax advantages disappear under these proposals (and one of the aims of the proposals is to reduce tax competition between member states, although not with respect to tax rates).
The key advantage Ireland can offer multinationals has always been its favourable corporate tax regime (whether it was export sales relief, 10pc manufacturing tax or the 12.5pc profits tax rate). This is even truer in the current environment, where we can no longer compete on labour supply and labour costs.
You do not need a degree in Economics to work out the potentially catastrophic implications if highly mobile multinationals no longer see Ireland as their first choice for the location of profitable manufacturing operations.
At this point, it is difficult to predict where all of this will end up, but the stated desire is to reach implementation by 2008. The issues are currently being examined by an EU working group which has been asked to bring specific proposals back to the Commission.
Earlier this year, the Austrian Finance Minister pointed out that around 20 of the EU's 25 member states would agree to move forward on a proposal to create the consolidated corporate tax base on their own this year, as they could theoretically do under the new "enhanced co-operation" rules.
There is no doubt that this issue is at the forefront of the agenda of the EU Taxation Commissioner, Laszlo Kovacs.
The Internal Markets Commissioner, Charlie McCreevy, has already publicly attacked the plan, leading to a strong rebuttal from Mr Kovacs.
These proposals represent a real threat to Ireland Inc and it is important that anyone who cares about the competitiveness of Ireland understands both the potential impact of these developments and also the gathering momentum behind such proposals.
Mike Hayes is tax partner with KPMG
[/FONT]

Sponge Bob · 18-04-2006 9:51am

replytohere2004 wrote:

The European Commission would like to find some mechanism to ensure that all companies operating in the European Union pay corporation tax on a consistent basis right throughout the EU, irrespective of where these companies are deemed to be resident for tax purposes.

remember the Nice treaty and threat to use national veto by UK with full Irish backing ? . Harmonisation of taxes is way off in the future if ever .

The intention is not to harmonise tax rates but instead to harmonise the basis for calculating taxable profits to which the national rates of tax are then applied.

...which implies the prior harmonisation of accountancy standards in order that the basis calculations are carried out in the same way. I feel that harmonisation of basis could have a better future than harmonisation of rates and bands though. The payment of operations tax is alrady a principle with VAT, why not ceatain operating profits where you have a presence ?????

You may not have a presence, eg Dell, by doing it all over the phone/web and running a lossmaking support operation in Germany instead.

Even harmonisation of basis is years away , albeit not a bad idea at all .

Sponge Bob · 19-04-2006 9:25am

...at least the estate agents claim it has and they should know

http://money.cnn.com/2006/04/18/real_estate/agents_bearish_in_blogs/index.htm

It took long term 30 year fixed mortgage rates of around 6.5% in the US to engineer what appears to be the soft landing we would dearly like in Ireland. As we tend not to have fixes over 10 years there is no comparable product here.

6.5% . OUCH

ronbyrne2005 · 19-04-2006 10:16am

Sponge Bob wrote:

...at least the estate agents claim it has and they should know

http://money.cnn.com/2006/04/18/real_estate/agents_bearish_in_blogs/index.htm

It took long term 30 year fixed mortgage rates of around 6.5% in the US to engineer what appears to be the soft landing we would dearly like in Ireland. As we tend not to have fixes over 10 years there is no comparable product here.

6.5% . OUCH

most people in america take out 30 year fixed rate mortgages so even when fed rates were 1% 30 year mortgage rates were 5-6%,im sure some people switched to variable in the low rate environment but it didnt last long.

whizzbang · 19-04-2006 10:27am

ronbyrne2005 wrote:

most people in america take out 30 year fixed rate mortgages so even when fed rates were 1% 30 year mortgage rates were 5-6%,im sure some people switched to variable in the low rate environment but it didnt last long.

If only we have 30 year fixed mortgages here, that would be sweet!

J

Sponge Bob · 19-04-2006 10:28am

ronbyrne2005 wrote:

most people in america take out 30 year fixed rate mortgages so even when fed rates were 1% 30 year mortgage rates were 5-6%,

actually good point that, when I checked it seems that the rates were around 5.5% at their lowest point

http://www.freddiemac.com/pmms/pmms30.htm

so the 6.5% rate is only 1% higher .

ronbyrne2005 · 19-04-2006 12:35pm

i think the higher rates in america due to long term fixed rates have held back the price increases in america, average hous prices in america arent as expensive as here/uk,there may be localised bubbles on coasts and in some other areas but theres still plenty of good value housing in most if not all states.

Pa ElGrande · 19-04-2006 11:03pm

Two very important long term developments which will eventually impact the Irish economy. it's rare that the Saudi's admit declining yields, but it does square with what some other oil exploration companies have been saying that they can't get equipment because the Saudi's have procured it all. The other is that American multi-nationals are coming under increased scrutiny from their own government as regards tax revenue, this could be a precursor to changes in the American tax codes, if there is grounds to this, especially following on from the Microsoft situation earlier this year.

Saudi Aramco boosts drilling efforts to offset declining fields
http://www.platts.com/Oil/News/8377179.xml

Symantec's $1 billion tax bill; US IRS in pursuit of Irish tax haven beneficiaries
http://www.finfacts.com/irelandbusinessnews/publish/article_10005560.shtml

More worrying is evidence of Ireland’s dependence on the screwdriver plants of foreign multinationals to create jobs and pay bills. A recent study by economists at Trinity College, Dublin, of the effect of globalisation on the Irish economy revealed that American companies accounted for 77 per cent of the Republic’s total exports, with domestic-owned firms accounting for less than a tenth of the total. Moreover, in 2002 foreign multinational investors paid €2.6 billion in corporation taxes to the Irish Government, 56 per cent of the total paid by companies in that year and almost 10 per cent of all tax collected.

That would hardly matter if one believed that Microsoft, Hewlett-Packard and GlaxoSmithKline were in thrall to the unrivalled skill and productivity of Irish workers or, at the very least, retained an extraordinary affection for Ireland’s climate and cuisine.

The study, by Philip Lane and Frances Ruane, suggests that foreign investors may be drawn for pecuniary reasons. The foreign multinationals earned a yield of 17.5 per cent on their Irish investments in 2003, more than twice the rate of profitability scored by Irish firms investing money overseas. The economists reckon that the enviable rate of return scored on Irish investments is in part due to an overstatement of profits, “the result of the tax-planning activities of multinational corporations, in recognition of Ireland’s status as a low-tax regime”.

To put it bluntly, US corporations are exporting profits to Ireland, transferring by a simple process of book-keeping the locus of added-value in the sale of a computer, reckoning that Ireland’s 12.5 per cent corporation tax rate makes it a more rewarding profit centre than the US or most European countries, including Britain.

This is not sustainable and the Irish Treasury’s golden goose could be strangled more quickly than Common Agricultural Policy subsidies. Even among Irish-American senators in Washington, such a huge subsidy to a foreign government will not stand.

Ireland's dispossessed are real threat to Celtic Tiger
http://business.timesonline.co.uk/article/0,,16849-2140480,00.html

Globalisation and the Irish Economy: Ireland extremely vulnerable to a global slowdown in either the high-tech or financial services sectors
http://www.finfacts.com/irelandbusinessnews/publish/article_10005330.shtml

Sponge Bob · 19-04-2006 11:35pm

Ireland is vulnerable to any global anything because we are an open economy

jimmycrackcorm · 20-04-2006 12:07am

Even at the height of a property boom - is housing not a good investment over a longer term (e.g. 30 years plus). In between it might be possible to have negative equity and other effects but surely the long term growth is practically guaranteed?

whizzbang · 20-04-2006 9:18am

jimmycrackcorm wrote:

Even at the height of a property boom - is housing not a good investment over a longer term (e.g. 30 years plus). In between it might be possible to have negative equity and other effects but surely the long term growth is practically guaranteed?

It might be an alright investment but if you believe you will be able to buy the same property significantly cheaper over the next 5 to 10 years then why buy now?

ronbyrne2005 · 20-04-2006 12:05pm

jimmycrackcorm wrote:

Even at the height of a property boom - is housing not a good investment over a longer term (e.g. 30 years plus). In between it might be possible to have negative equity and other effects but surely the long term growth is practically guaranteed?

yeah it may well be higher in nominal terms but even if houses only rose by inflation rate of 3% they would more than double in thirty years.if house prices are double what they are now in 30 years time it means they have actually declined a bit in real terms. people have the idea in there head that property only goes up in long term and thats right but only in nominal terms and if economy/incomes keeps growing in real terms which requires productivity gains which are falling in this country.

ionapaul · 20-04-2006 12:41pm

silverharp wrote:

if we get 150-200$ oil, it will damage tourism, and owning foreign property in Europe may not look so clever, most of Ryanair's fuel hedges run out this year.
The Fed will be forced to keep raising rates, and unlike the 70's when peoples debts were small, this time around there are alot of people will variable rates and this will crush the US economy
if you hadn't noticed The US and Europe are inflating the currency at around 10% pa this is a big fraud on savers and will only accelerate if oil spikes. I invested in oil and gold 2 years ago and havn't regretted it since.

Lucky / smart man. I've been piling into gold in recent weeks, hits a new 25 year high almost every trading day. LOTS of money is going to go into gold as the global economy gets further and further into trouble.

I've also just handed in my notice, I'm looking into perhaps moving abroad before what I am worried will be a prolonged unwinding of the Irish economy. Either that or I will do what I never thought I'd do - become a civil servant to ride out the economic bloodshed!

Maybe I've been hanging with the bears over at askaboutmoney.com too much...

kluivert · 20-04-2006 1:12pm

I have bee considering moving to england for a couple of years as I dont see any positive outcomes in the next couple of years.

The government will try to fuel the economy but when people realise that the game is up the ecomony in this country will collaspe.

Gold is the only international valuable trading commodity. Always good to ahve some gold hanging around. The phrase that the money is not worth the paper its printed on will become true.

Sponge Bob · 20-04-2006 1:16pm

ionapaul wrote:

Lucky / smart man. I've been piling into gold in recent weeks, hits a new 25 year high almost every trading day. LOTS of money is going to go into gold as the global economy gets further and further into trouble.

and the euro has tracked up too and therefore your net gain in € is a lot less than in nominal $ terms. Care to explain that ?

are you in possession of same Gold or do you pay to store it ? How much as a % ????

Maybe I've been hanging with the bears over at askaboutmoney.com too much...

Them bears are everywhere, except at pyramid scheme meetings in Cork and Kerry where they go a Bullin instead

Pa ElGrande · 20-04-2006 1:28pm

jimmycrackcorm wrote:

Even at the height of a property boom - is housing not a good investment over a longer term (e.g. 30 years plus). In between it might be possible to have negative equity and other effects but surely the long term growth is practically guaranteed?

In order to answer that you need to define what criteria meet a "good investment" for you?

You probably know the institutional maxim "The value of any investment and any income from it may fall as well as rise and you may not get back your original investment." In 30 years time when you might want to sell, the bottom may have fallen out of the property market at that time. It has done so before, take a look at the abandoned houses all along the west of Ireland.
Most people who have made money on property got lucky, they bought when a "house was for nesting, not investing".
In post-2000 Ireland they are retiring, they claim property was a good investment on their part and pass this "wisdom" on to the younger generation, even though this was not their goal when buying the house. :rolleyes:

silverharp · 20-04-2006 1:57pm

Re gold, I'd say gold is topping at the moment, I'm waiting until the summer before I buy more. I bought mine at www.gold.ie , they are good guys. if you felt you wanted to get in and out I'd go for www.goldmoney.com you can buy on line and the account maintenance is cheap, just be aware of the spread. If you take possession of say 1oz coins there is about a 5-6% cost over spot. To put it simply if interest rates are below inflation then gold is a good bet.

Although Ireland is exposed remember the US companies are here to service the European market and that isn't going to go away overnight, you might have a situation where property drops but has little affect on u****loyment.

whizzbang · 20-04-2006 2:01pm

silverharp wrote:

Re gold, I'd say gold is topping at the moment, I'm waiting until the summer before I buy more. I bought mine at www.gold.ie , they are good guys. if you felt you wanted to get in and out I'd go for www.goldmoney.com you can buy on line and the account maintenance is cheap, just be aware of the spread. If you take possession of say 1oz coins there is about a 5-6% cost over spot. To put it simply if interest rates are below inflation then gold is a good bet.

Although Ireland is exposed remember the US companies are here to service the European market and that isn't going to go away overnight, you might have a situation where property drops but has little affect on u****loyment.

you could also buy into a gold fund, I have some money in the Rabo Direct one, its going quite well.

Sponge Bob · 20-04-2006 2:33pm

emmmm what about Fab24 and especially Fab24-2 ?????

ionapaul · 20-04-2006 2:47pm

No, I buy via the Streettracks GLD ETF, so no storage fees, though of course the managers get their cut via an annual adjustment in gold-share ratio. The whole Gold-$-€ flow is of course something I keep track of...in fact, I don't hold any € equities at the moment, mainly £ and $, another thing to worry about!

ionapaul · 20-04-2006 2:53pm

I should state although I see lots to worry about in the Irish, European, American and World economies at the moment, I'm not all doom and gloom and don't think Ireland will go back to the 'bad old days' of the '80s anytime soon. Most people will be fine, lots of buy-to-let'ers will lose thousands, many might lose tens of thousands, but most will come out the other side wiser. Most owner occupiers won't care that much about negative equity, just might have to stay a few years longer in a home they hoped to 'trade up' from quickly. But most of us will be fine, life goes on, there is always money to be made and isn't life grand when the sun is shining and you're sitting with an icecream on the grass in Stephen's Green

The Irish Economy - Worrying Signs?

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