How We Blew the Boom

Permabear

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mad m

Tits....Missed it. I suppose it will be repeated?

cm2000

donegalfella wrote: »

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News to me that FF/PDs were able to set interest rates. ffs, you'll blame them for anything

ejmaztec

donegalfella wrote: »

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Did they mention the fanning of the property boom flames when, in their wisdom, the government decided to re-introduce loan interest relief on 2nd property loans?

Fluffybums

donegalfella wrote: »

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Wish I'd seen it.
The interest rates were set by ECB so in fairness we can't blame the gibbering idiots in the Dail for that. However, they do seem to have beenkeen to develop an economy which was heavily based on construction and everyone bought in to it.

Permabear

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anonymous_joe

donegalfella wrote: »

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And they would have gotten away with it if American banks hadn't been extraordinarily greedy in giving loans to poor people who couldn't pay them back.

It was basically a total fluke it didn't pay off.

gurramok

Yep, and he explained it in plain English the serious faultline in the Irish economy to date.

The housing bubble has destroyed the economy.

Time Magazine

anonymous_joe wrote: »

And they would have gotten away with it if American banks hadn't been extraordinarily greedy in giving loans to poor people who couldn't pay them back.

"Extraordinarily greedy"? :rolleyes: Why do people always try and blame the world's problems on greed? The main backers if the sub-prime mortgage market were Fannie and Freddie, two state agencies, who were put under political pressure by the Clinton administration to do so. It wasn't greed, it was poorly thought out left-wing policy.

It was basically a total fluke it didn't pay off.

No, it was fuelling a bubble that would inevitably burst.

MIN2511

I watched some of it... Didn't pay attention, very interesting...

We need to stop blaming the banks/Government...

anonymous_joe

The Economist wrote: »

"Extraordinarily greedy"? :rolleyes: Why do people always try and blame the world's problems on greed? The main backers if the sub-prime mortgage market were Fannie and Freddie, two state agencies, who were put under political pressure by the Clinton administration to do so. It wasn't greed, it was poorly thought out left-wing policy.

Ok, good point.

Greed is not a bad thing per sé, if you're going to call it a desire for wealth, in this context, greed without sense led to risk taking of an extraordinary nature.

That's the genesis of this problem.

DadaKopf

I think the programme was light-weight and not to be taken seriously as a piece of analysis. His bias was obvious, but despite this, aspects of it were confused and levels of analysis were blurred in order to make a TV-watchable piece of doom'n'bloom magazine documentary.

P. Breathnach

DadaKopf wrote: »

I think the programme was light-weight and not to be taken seriously as a piece of analysis. His bias was obvious, but despite this, aspects of it were confused and levels of analysis were blurred in order to make a TV-watchable piece of doom'n'bloom magazine documentary.

Agreed. I was very disappointed. I expected better. It was a colour piece, not a serious analysis.

Permabear

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gurramok

donegalfella wrote: »

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Some people are still in denial and may dismiss the truth as scaremongering/doom mongering. People with heads in the sand are still out there!

Darragh29

anonymous_joe wrote: »

And they would have gotten away with it if American banks hadn't been extraordinarily greedy in giving loans to poor people who couldn't pay them back.

It was basically a total fluke it didn't pay off.

Don't agree at all. Where I live, property prices went from 220K for an apartment to just below 400K in the space of 2 years. This was never sustainable, it was driven by pure uncontrolled greed, nothing else. This rampant increase in property prices was enabled by an FF government that allowed builders and developers who were lining their own pockets to the detriment of the common good, to dictate tax policy.

Darragh29

Darragh29 wrote: »

Don't agree at all. Where I live, property prices went from 220K for an apartment to just below 400K in the space of 2 years. This was never sustainable, it was driven by pure uncontrolled greed, nothing else. This rampant increase in property prices was enabled by an FF government that allowed builders and developers who were lining their own pockets to the detriment of the common good, to dictate tax policy.

In all fairness now did you have a look at the FG and labour manifesto's at the 2007 election?
What specefic measures were in there that would not have continued the frenzy ?

The nature of politics is not to rock the boat lest you not be elected.
It comes from the realism of how fickle and yes greedy most of the electorate are.

jimmmy

One of George Lees main points on the programme was how the government gave in to the social partners, to the extent that average public sector pay was 49,000, private sector ( and without the benefit of the big subsidised pension ) was 35,000 I think he said. A quarter of govt spending is borrowed - the solution seems obvious.

Dob74

donegalfella wrote: »

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Was pretty good.

Getting sick of hearing it was "de american" sub-prime loans got us into this mess.
When are we going to put our hands up and except the fact that we are responible for most of the our current problems.

DadaKopf

Dob74 wrote: »

Was pretty good.

Getting sick of hearing it was "de american" sub-prime loans got us into this mess.
When are we going to put our hands up and except the fact that we are responible for most of the our current problems.

I agree on the point it made about past government policy being largely responsible for our crash. If we had continued to be an export-led, high-tech/high-value-added country, we would have been affected but we'd be on a surer footing. This is now where policy consensus is shifting towards. Unfortunately, preparations for this should have been made in 2002 when it became clear that the Celtic Tiger had ended because imports fell well below imports. The government should have also taken seriously the massive drop in tax revenues already apparent in 2006. Yet we were told that everything was OK, the 'fundamentals were sound'.

Sorry, chaps, but crowding out a vibrant business-winning, creative, entrepreneurial, export-oriented and competitive market economy by promoting a property boom was, to most, pure suicide. It's correct that development strategies will have to be more horizontal. The belief that houses are tradeable commodities like frozen concentrated orange juice. Anyone with a basic understanding of the impact of such bubbles would have - and did - raise alarm bells.

And why should ordinary people, who wanted nothing more than to improve their lives, be blamed for this? The scheme was led from the top, and was designed to pass the burden on to individual people. The banks are getting away more or less scott-free.

Part of my problem with the programme is how he distinguished and blurred the lines between politics and economics to suit his argument. He didn't display an adequate understanding of the complexity of the problem. And he remained stuck in his own narrow-mindedness. And what we need is new thinking.

I say the programme shouldn't be taken seriously because people will take it seriously. This programme will form most people's frame of reference for what's happening and what's going to happen. And it needs a corrective.

djpbarry

DadaKopf wrote: »

Part of my problem with the programme is how he distinguished and blurred the lines between politics and economics to suit his argument. He didn't display an adequate understanding of the complexity of the problem. And he remained stuck in his own narrow-mindedness. And what we need is new thinking.

I say the programme shouldn't be taken seriously because people will take it seriously. This programme will form most people's frame of reference for what's happening and what's going to happen. And it needs a corrective.

So what would you have changed, bearing in mind that the documentary was an hour long (minus ad breaks) and was broadcast to an audience who, for the most part, have a poor grasp of basic economics?

DJDC

RTE is a state owned enterprise and while obviously not censored to the same extent as CTCC I really can't remember last time it went for the FF jugualar and talked about its incestous relationships with property developers and obsession with rezoning land to shopping centres and housing estates. The amount of damage done to the Irish environment in the last 10 years is simply devasting.

Permabear

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Zynks

DadaKopf wrote: »

And why should ordinary people, who wanted nothing more than to improve their lives, be blamed for this?

There were four types of people that made the situation: the greedy ones who knew what they were doing, the greedy ones that didn't have a clue, an inept government that thought it was great to see all that stamp duty and VAT coming in, and a bunch of fools. All of those are responsible. It takes two to make a deal.

DadaKopf wrote: »

The scheme was led from the top, and was designed to pass the burden on to individual people. The banks are getting away more or less scott-free.

Are they? Are we in the same country?

The "burden" is the mortgage that individuals signed up because they wanted to. If they can't afford it, it is their problem to a very large extent. You need to be a responsible adult to sing up for those things. When did they revert to hopeless kids?

Dob74

donegalfella wrote: »

And yet people continue to represent the current recession as a failure of free-market capitalism, rather than a failure of government.




I think it was the failure of the free market.
Which the government should have regulated.

Basically you have to regulate markets and not let them run wild.
Is there such thing as the free market?
If not regulated the market can be manipulated by the bigger players.
The market most be regulated, something like stock watch in the states.
But controlled from the EU or another international body.

Joe Kennedy wrote the rules for the US stock market in the 1930's.
They need to be updated for the world market now.

silverharp

Dob74 wrote: »

I think it was the failure of the free market.
Which the government should have regulated.

What you are underestimating is how markets work. The very act of regulating could cause the effects you are trying to avoid. You only have to look at the Fed under Greenspan to see that even with supposidly 100's of the smartest economists to choose from that they possibly cant keep on top of the interaction of trade , interest and currency flows.
Reduce that to the Irish situation where a hack regulator who was too chummy with his bank collegues, and dont rock the boat politicians be they FF or FG was only ever going to lead to chaos

DadaKopf

And yet people continue to represent the current recession as a failure of free-market capitalism, rather than a failure of government.

They're interconnected, you know. Politics takes place in an economic environment; and the economic environment is influenced by government policies. Even the godfathers of modern economics called it the 'political economy'. So: it's both. When will you realise this?

The "burden" is the mortgage that individuals signed up because they wanted to. If they can't afford it, it is their problem to a very large extent. You need to be a responsible adult to sing up for those things. When did they revert to hopeless kids?

And why did so many people sign up to mortgages on second homes, speculative investments, etc? Partly on the basis of untrustworthy/dubious information flowing from banks, politicians, developers and the regulator. What regulator? Many people trusted these institutions. And many now realise that it was riddled with corruption. It is my understanding of new financial 'products' like Consolidated Debt Obligations that they were designed to spread risk more widely; this meant placing more of the burden of risk on society as a whole. It was my opinion all along that people could not afford these loans, and I did explain why (e.g. income-to-price ratios for homes; income-to-debt ratios; the trajectory of the domestic economy; history; etc.). But I'm just an individual, but people look to institutions for guidance. And it wasn't forthcoming.

But anyway, I have my views based on my understandings of the global economy and development/underdevelopment cycles in developing countries and developed countries. And I don't expect to engage in genuine discussion in this thread with various people around here willfully misinterpreting my positions on issues to perpetuate dogma. It's a waste of time.

ronaneire

donegalfella wrote: »

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Ah George Lee and all the rest. Keep listening to them and soon it'll be a depression and not a recession!!

nesf

DadaKopf wrote: »

It is my understanding of new financial 'products' like Consolidated Debt Obligations that they were designed to spread risk more widely; this meant placing more of the burden of risk on society as a whole.

No. The core idea behind them was diversification. In simple terms diversification is a way around having all your eggs in one basket. The idea is that by holding a diverse bunch of assets you can minimise risk if those assets are uncorrelated with each other (i.e. they don't move together in price/returns). The problem being that diverse housing markets can and do move together under certain circumstances (the last time they all did this in the US before this recession was the 1930s recession).

Permabear

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jimmmy

DJDC wrote: »

RTE is a state owned enterprise

Not surprising then perhaps it did not really go for the jugular. As I said, George Lee did highlight on the programme how the government gave in to the social partners, how public sector pay was so much more than private sector pay etc. A quarter of govt spending is borrowed - the solution to the country currently borrowing 25 billion seems obvious. Cut public sector pay + perks back to realistic levels, comparable with the real world. Why should Paddy the civil servant be paid 40% more than his counterpart in Boston, Birmingham or Berlin ?

Zynks

DadaKopf wrote: »

And why did so many people sign up to mortgages on second homes, speculative investments, etc? Partly on the basis of untrustworthy/dubious information flowing from banks, politicians, developers and the regulator. What regulator? Many people trusted these institutions. And many now realise that it was riddled with corruption. It is my understanding of new financial 'products' like Consolidated Debt Obligations that they were designed to spread risk more widely; this meant placing more of the burden of risk on society as a whole. It was my opinion all along that people could not afford these loans, and I did explain why (e.g. income-to-price ratios for homes; income-to-debt ratios; the trajectory of the domestic economy; history; etc.). But I'm just an individual, but people look to institutions for guidance. And it wasn't forthcoming.

But anyway, I have my views based on my understandings of the global economy and development/underdevelopment cycles in developing countries and developed countries. And I don't expect to engage in genuine discussion in this thread with various people around here willfully misinterpreting my positions on issues to perpetuate dogma. It's a waste of time.

Lets put it another way. I also always suspected we were heading for a crash. Four years ago a good friend of mine was buying his third and fourth properties and I got a bit flustered and told him to wise up because the market would run out of fools soon.

I still think the worst in all of this were the government and the press for their actions that bordered on prostitution. Banks, builders, speculators and genuine home buyers were just playing (irresponsibly) by what was perceived as a demand and supply game.

The press were the main tool in keeping the belief that this would go on forever, for the sake of the massive income they were getting on ads.

The government thought they were on for an easy ride and did nothing to slow things down a bit. Although they had no control over interest rates, they had many options and mechanisms at hand, but they chose to collect taxes, a lot of them.

Summary of my views on the players:

The criminals
Press
FF Government

The plain stupid & greedy
Banks (except for Anglo, which goes in the first group)
Speculators

The Greedy
Developers

The Fools
Buyers who couldn't realistically afford it

But all of them are presumed to be adults and fully accountable for their acts. I see no valid excuses for any party involved in this mess.

Permabear

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nesf

The show is now available on the RTE website for any who missed it: http://www.rte.ie/news/howweblewtheboom/

Just click the Watch link in the above.

thebman

silverharp wrote: »

What you are underestimating is how markets work. The very act of regulating could cause the effects you are trying to avoid. You only have to look at the Fed under Greenspan to see that even with supposidly 100's of the smartest economists to choose from that they possibly cant keep on top of the interaction of trade , interest and currency flows.
Reduce that to the Irish situation where a hack regulator who was too chummy with his bank collegues, and dont rock the boat politicians be they FF or FG was only ever going to lead to chaos

Yes but not having a regulator would have lead to the same conclusion IMO.

There would be nothing to stop the banks working together without a regulator. Only one less person to talk to. The CEO's wanted ever increasing profits and would push for this to make them look better as they only ever think of the short term they are in charge rather like politicians looking to the next election.

Nothing to stop them going crazy. The shareholders wouldn't police it because they would get what they wanted, higher profits and returns on their shares and higher share price worth because of this with nobody realising it was unsustainable or everyone realising it and planning to get out on time and take their high return on investment.

The system is setup around these bubbles whether you have a regulator or not. That is why the regulator existed but he did not do his job. We need a regulator that can't play to interest groups and just does his job. In order to do that the penalties have to be high when things go wrong, far outweighing any benefits of playing to the groups that would lead to a bubble for the regulator so that he has no incentive to cave to these groups.

Zynks

donegalfella wrote: »

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I am not sure I see any moves to protect mortgage defaulters, except for a "postponement" of repossessions. Am I missing something?

Permabear

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Mr.Micro

Originally Posted by donegalfella
I agree. But what about the people who exercised caution and prudence amidst the property mania? They are now expected to help the foolish keep the homes that they never should have been able to buy in the first place—while often having no homes of their own.

I am not sure how long the banks will do this for. At some point reality will have to kick in for the banks and the mortgage holders. IMO the free market ended some months ago when the bastions of capitalism ie. the financial institutions worldwide were bailed out.

Even today a new plan unveiled in the US for $1 trillion to buy up toxic debt. Essentially a free market with no risk for the banks and financial institutions is what we have now, a pseudo frre market, as they will be bailed out no matter what they do now or in the future.

schween

What really annoyed me was the clip of Bertie Ahern saying in 2006 that there is no problem with the Irish property market and gave out stink about some people scaremongering by predicting that Ireland faces a serious property crash.

Daragh101

What really annoyed me was the clip of Bertie Ahern saying in 2006 that there is no problem with the Irish property market and gave out stink about some people scaremongering by predicting that Ireland faces a serious property crash.


Ya i totally agree, i no brian cowen played a big role in all this,(he is getting slaughtered for it) while bertie has sliped out the back door and is totally out of all the chaos.
people think bertie was a great taoiseach, but in fairness anyone could have done his job, all he did was sit back and relax, while without knowing it he was f***ing up our country.

Alan1988

Its not all doom and gloom. Just got to stay positive and get on with it!

jimi_t

jimmmy wrote: »

Why should Paddy the civil servant be paid 40% more than his counterpart in Boston, Birmingham or Berlin ?

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

Daragh101

Its not all doom and gloom. Just got to stay positive and get on with it!

ya too right!!!!! i with ya there the sooner where out of this rescession the better.got to think positive. im just saying bertie got off the hook.

Nostradamus

donegalfella wrote: »

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Delighted to hear we have left the EU!

George Lee is an idiot like most of the so called journalists in this country. They cannot tell the difference between propaganda and corporate/political press releases.

I watched him one night in amazement on Prime Time arrogantly informing two top oil industry professionals they had not got a clue what they were talking about and that he did, as he had a press release from OPEC to prove it. The two of them were looking at each other and trying not to snigger.

I would take nothing Gerorge Lee says as anything but the mindless repetition of a classic, unquestioning, media parrot waiting for his latest version of "the truth" to be sent to his fax machine from some Common Purpose press office.

George Lee was reporting an "economic recovery in September 08" based entirely on what the DOF told him. He researched nothing of what they claimed, did not place it in the context of world economic data, and with a straight face comes on the 6 o'clock news telling us how the recession will taper off before winter 2008. Why? Becuase someone said so and our Geroge reports it verbatim, no matter bizarre. He has the press release so he does...

Peeple, stop listening to these muppets in media and journalism. They know nothing which is of any use to you in your own lives. It's all bull****.

Nostradamus

jimmmy wrote: »

Why should Paddy the civil servant be paid 40% more than his counterpart in Boston, Birmingham or Berlin ?

Ah come on now. Train fares back to Mayo every weekend adds up.

djpbarry

Nostradamus wrote: »

George Lee is an idiot like most of the so called journalists in this country. They cannot tell the difference between propaganda and corporate/political press releases.

Perhaps you could point out the "propaganda" in this particular documentary?

Permabear

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leitrim lad

sorry to but in donegal fella but is it going to be repeated ,as i missed it sunday night, was there much about our white collar criminals

sparklepants

donegalfella wrote: »

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I thought George Lee looked very nice tbh. God knows we saw enough of him.
...and he drives a very nice car!

Macha

donegalfella wrote: »

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I agree but it didn't go far enough. Were we supposed to feel sorry for the salesman who frittered away his money or the woman selling shoe boxes with her merc parked outside? I also felt he didn't spend enough time on the poor quality of the houses that were built and how much it's going to cost the taxpayer to bring them up to standard or the awful planning decisions - worst timing possible.

sparklepants wrote: »

I thought George Lee looked very nice tbh. God knows we saw enough of him.
...and he drives a very nice car!

Er..it was a show that he was presenting - what exactly did you expect?
His car is 10 years old.

Permabear

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