NI out of recession - implications?

mrgaa1

http://www.rte.ie/business/2009/1207/nireland.html any implications for the south?

ei.sdraob

yes lower VAT

also ask yourself this if we had same welfare/PS cost levels as NI, would things be so expensive here? would people bother traveling to NI?

we need to deflate fast

bangersandmash

ei.sdraob wrote: »

yes lower VAT

also ask yourself this if we had same welfare/PS cost levels as NI, would things be so expensive here? would people bother traveling to NI?

we need to deflate fast

I think this is what David McWilliams was recently referring to as the 'Newry Test'.

If we can’t get wages and prices down dramatically, then we will fail the Newry Test. This is whether an item can be bought more cheaply in Newry than it can in Dundalk. Only when we pass the Newry Test will it be possible to suggest that Ireland is becoming competitive. When do you think that will happen? As long as we fail the Newry Test, the business model in the Republic is not working.

http://www.davidmcwilliams.ie/2009/12/06/stuck-in-an-economic-cul-de-sac

ei.sdraob

bangersandmash wrote: »

I think this is what David McWilliams was recently referring to as the 'Newry Test'.

http://www.davidmcwilliams.ie/2009/12/06/stuck-in-an-economic-cul-de-sac

but his solution is to completely collapse the economy by somehow switching to an own currency and devaluing (well new currency would end up being worthless in no time)

my solution is much more simple, cut the costs until we become competitive and carries much less risk of total breakdown

gleep

ei.sdraob wrote: »

but his solution is to completely collapse the economy by somehow switching to an own currency and devaluing (well new currency would end up being worthless in no time)

my solution is much more simple, cut the costs until we become competitive and carries much less risk of total breakdown

If your talking about just cutting costs, this means peoples wages. Cut peoples wages and you'll find everyone stops spending, people who are just about getting by are sunk and we STILL have an abnormally strong currency. A currency that is preventing us from trading with our two biggest partners, the UK & America.
I agree with DMW, the way out of this is not by slashing spending, wages etc, this will just prolong the pain. Devalue, go back to the punt, we all take a hit in terms of what our assests / savings are worth internationally, but at home we are pretty much as you where. Foreign investors can get more for their money here ( an educated, skilled and proven workforce) and money flows into the country as investors take a bet on a new, emerging economy led by experienced business people.
Who would invest money in Ireland at the minute? The whole world can see that we are hiding from our problems and the ECB is running the country. They are not looking out for our interests, they are looking after the ERM.

murphaph

gleep wrote: »

If your talking about just cutting costs, this means peoples wages. Cut peoples wages and you'll find everyone stops spending, people who are just about getting by are sunk and we STILL have an abnormally strong currency. A currency that is preventing us from trading with our two biggest partners, the UK & America.
I agree with DMW, the way out of this is not by slashing spending, wages etc, this will just prolong the pain. Devalue, go back to the punt, we all take a hit in terms of what our assests / savings are worth internationally, but at home we are pretty much as you where. Foreign investors can get more for their money here ( an educated, skilled and proven workforce) and money flows into the country as investors take a bet on a new, emerging economy led by experienced business people.
Who would invest money in Ireland at the minute? The whole world can see that we are hiding from our problems and the ECB is running the country. They are not looking out for our interests, they are looking after the ERM.

We wouldn't be the same. We'd be able to import oil with our new Zimbabwe like currency how? Energy costs would skyrocket. In fact, anything not entirely made in Ireland, from Irish raw materials without using energy would cost more! The Euro, luckily, forces us to address the real issue: We paid ourselves way too much during the false boom and now our standard of living must fall to come into line with the Eurozone average (for a start). People don't want to give up their standard of living, but Ireland didn't earn it. It borrowed it.

ei.sdraob

gleep wrote: »

If your talking about just cutting costs, this means peoples wages. Cut peoples wages and you'll find everyone stops spending, people who are just about getting by are sunk and we STILL have an abnormally strong currency. A currency that is preventing us from trading with our two biggest partners, the UK & America.
I agree with DMW, the way out of this is not by slashing spending, wages etc, this will just prolong the pain. Devalue, go back to the punt, we all take a hit in terms of what our assests / savings are worth internationally, but at home we are pretty much as you where. Foreign investors can get more for their money here ( an educated, skilled and proven workforce) and money flows into the country as investors take a bet on a new, emerging economy led by experienced business people.
Who would invest money in Ireland at the minute? The whole world can see that we are hiding from our problems and the ECB is running the country. They are not looking out for our interests, they are looking after the ERM.

do we really need to have a 3rd thread on devaluation? its all been said over and over again, and the idea has been shown by multiple posters here to be downright daft


what do you think devaluation will accomplish? cut everyones wealth, everyone by an equal amount, and as been mentioned over and over again, majority of the debt will still be in euro, any changeover will create a giant risk of total society collapse as everyone rushes to preserve their wealth


what i propose is the people who are still in denial and earn well above what they should (ahem) when compared to just about everywhere else get the cuts


its been said again and again, all thats DMcW is doing is whooring himself up, its scary to see people like yourself look at him as some sort of a prophet and believe all that the school of DMcW preaches, theres a name for people like him > charlatan

gleep

ei, I think you'll find that it was yourself who mentioned devaluing, i just replied to your post.
As for the charlatan comment, I think you're going too far there. There are some facts here you seem to have forgotten about, DMW was RIGHT about the the housing market being a complete con and the economy collapsing.
Were you calling him a charlatan then as well?

Idbatterim

The Government has to cut the Vat in the budget, id imagine worst case scenario a cut would be revenue neutral, or could it even bring in more than it loses? 21.5% is madness. Its not just the Vat the goverment loses to the north, its all the people that would be employed here, rates, services bla bla bla....

SkepticOne

Regardless of one's view on the wisdom of leaving the Euro, it has to be acknowledged that Sterling's low valuation compared to the Euro is a big problem for the Irish economy at present. Consequently I don't think the modest recovery in the North will have much impact on the South.

bangersandmash

ei.sdraob wrote: »

but his solution is to completely collapse the economy by somehow switching to an own currency and devaluing (well new currency would end up being worthless in no time)

my solution is much more simple, cut the costs until we become competitive and carries much less risk of total breakdown

I agree with you and I wasn't advocating his solution. But his "Newry Test" sound-byte neatly sums up the problem of uncompetitiveness in comparison to the north.

ei.sdraob

gleep wrote: »

There are some facts here you seem to have forgotten about, DMW was RIGHT about the the housing market being a complete con and the economy collapsing.

jebus christ, he never stops to mention "i told you so"

he wasnt the only one who predicted it, the writing was on the wall, except everyone was told to go and commit suicide by our leaders for doommongering

gleep wrote: »

Were you calling him a charlatan then as well?

uhm yes, considering there were proper academics with much more insightful analyses

except this guy got more airtime with the "common" man since hes able to dumben down concepts

but he surely wasnt the first

he was just the loudest

TheScribbler

bangersandmash wrote: »

I agree with you and I wasn't advocating his solution. But his "Newry Test" sound-byte neatly sums up the problem of uncompetitiveness in comparison to the north.

I live in NI and have seen this report but I'm afraid not many people seem to believe it. The retail sector has picked up as has tourism, due in part to the disastrous value of Sterling. However the banks are not making it easy for the business community at all and those in manufacturing are still having a dreadful time of it. This is partly because they cannot readily secure the banking facilities to take advantage of export opportunities and the cost or imported raw materials is seriously problematic.

The only thing positive I can say is that being part of Sterling rather than the Euro has been advantageous but no thanks to Gordon Brown. His incompetence is stunning.

Another side to the North South story is that during the Celtic Tiger years RoI salaries were stunningly high compared to NI counterparts but the cost of living (including housing, food, leisure activity etc) was off the chart entirely.

My brother lives in Dublin and I would visit him monthly and was always stunned at how expensive everything was. The only exception aoppeared to be the cost of petrol. But with Sterling devaluation that is no longer an advantage.

Currently it is very difficult for people living in RoI. We have friends in Donegal and Wicklow and they come North to Newry, Lisburn and Belfast to do all their shopping at the moment. Food, clothing and white goods are much cheaper here (if you shop around you can cut your comparative costs by 30%). Dining out in Belfast is less than half that of Dublin.

There is no easy solution to this. It seems highly likely that the Labour Party's utter bungling on out of control public spending and debt, will force the value of Sterling through the floor in the coming months.

TheScribbler

SkepticOne wrote: »

Regardless of one's view on the wisdom of leaving the Euro, it has to be acknowledged that Sterling's low valuation compared to the Euro is a big problem for the Irish economy at present. Consequently I don't think the modest recovery in the North will have much impact on the South.

I would agree with your comments. The temporary cut in VAT across GB & NI actually had very little impact on stimulating growth. It just meant the Treasury lost revenue but we taxpayers have had to pick up the bill. Vat will be restored from 15% to 17.5% in January and even this hike hasn't forced everone out of their homes to buy. They simply don't have the money. What seems probable is that people will spend this Christmas but come January I suspect the shopping centres will be like ghost towns (except for southern shoppers).

mrgaa1

I was talking to a friend just earlier and he was in Newry over the weekend and there car parking spaces everywhere. People are avoiding Newry and going elsewhere because of the anticipated bedlam.

Personally from talking to friends in the north they don't see the recession ending. Work is unbelievably tough with cut-throat being a nice way of putting it. Most people are anticipating a huge ripple effect through 2010 caused by 2009.

Although one person did say that houses are starting to sell as they are now more affordable. In the north there is PP21 which basically means that planning is restricted and has a set criteria before approval.

TheScribbler

mrgaa1 wrote: »

I was talking to a friend just earlier and he was in Newry over the weekend and there car parking spaces everywhere. People are avoiding Newry and going elsewhere because of the anticipated bedlam.

Personally from talking to friends in the north they don't see the recession ending. Work is unbelievably tough with cut-throat being a nice way of putting it. Most people are anticipating a huge ripple effect through 2010 caused by 2009.

Although one person did say that houses are starting to sell as they are now more affordable. In the north there is PP21 which basically means that planning is restricted and has a set criteria before approval.

I would agree with your friend's comments. Houses are starting to move a little but the mortgage offerings (percentage and value) is much lower than a year ago and this will keep prices in check. A neighbour of mine put his house on the market in Bangor in October 2008 and received an offer of Stg 700,000 but he turned it down in the hope that he could get three quarters of a million. Well it didn't happen. His house was finally sold last week for around Stg 300,000. It was a value cut that has really hurt him.

TheScribbler

Sorry my mistake. He took a cut of Stg 300,000. Selling price was Stg 400,000

JackieChan

TheScribbler wrote: »

Sorry my mistake. He took a cut of Stg 300,000. Selling price was Stg 400,000

hindsight can be nasty!

TheScribbler

Recession can be a cruel tyrant

Zambia

The norths economy is so heavily linked to UK state spending it was never really gonna fall that badly.

One could argue the reason it ever went up at all was southerners buying houses up north thinking it had a Celtic tiger in it.

TheScribbler

I agree with you to a point. Proximity to the Celtic Tiger tended to infouence NI property prices to some degree as RoI developers started bidding off the wall money for properties that they believed would rise to Dublin levels. However you must remember that large swathes of the NI economy was disrupted or damaged by 30 years of troubles. Heaven forbid that that mindset should ever be allowed to nurture itself again.

However as the econmy is heavily integrated within the UK framework it has tended to mirror its infrastructure and performance. Stability has been a big positive though

Hair Ball

murphaph wrote: »

We wouldn't be the same. We'd be able to import oil with our new Zimbabwe like currency how? Energy costs would skyrocket. In fact, anything not entirely made in Ireland, from Irish raw materials without using energy would cost more! The Euro, luckily, forces us to address the real issue: We paid ourselves way too much during the false boom and now our standard of living must fall to come into line with the Eurozone average (for a start). People don't want to give up their standard of living, but Ireland didn't earn it. It borrowed it.

The big problem is we need to lower our cost ,reduce wages in the private sector
until its not worth working ,our friends in the public sector won't follow this strategy the banks are ratcheting up their charges the semi state company's are not lowering their charges ,at some point it will have to snap the only good thing is the Euro