Government responsible for collapse of economy.

ballinatray

Many viewpoints have been expressed as to the causes of the terrible dilemma we now find ourselves in.

Whilst working as an average income earner with a family, ( and no desire to be wealthy but with a grenuine interest in political and economic affairs ) I have long held the view, like many mainstream political and economic commentators, that our Economy was being led in the wrong direction right since the start of the transition of the economy towards the Euro. Many of my friends worked in the building trade and in the run up to start date for Euro changeover I was very cautious and advised one or two small style builders I socialised with ( and I did not need to be hanging off the bar stool to offer these views !!) to be cautious for a moment as they were considering at that early stage buying into small parcels of land to do a speculative build.

As the due date came close I felt that many of the worlds big players would attempt to scupper the change as it would interfere with their main source of income vis-a-vis currency speculations etc...As was easily observed the introduction of the Euro led to a gradual decline in interest rates right across Europe and it was my view ( 10 years ago now ) that once adopted the currency would be permanent and lead to a long term scenario where interest rates would be very low, and therefore assist business and individuals, all across Europe, to have access to low cost capital for the first time. The Euro concept was in fact a "Political" ideal rather than "Economic" one. A united Europe needed access to cheap money to spur industrial growth similar to the USA where access to cheap money has always existed. Europe, made up of different cultures and currencies, was stifled, as boom and recession moved like a chess game around the map. In simplistic terms a Boom in Italy and a recession in France, A boom in France and a recession in the UK, a Boom in Holland and a recession in Spain etc, etc, etc. The consequent effect of all of this was, that Francs, Lira, Punt,Deutchmark,Escudo,Krone, etc were traded in, like goods themselves. The Euro was intended to put a stop to all of this and its introduction was preceded by strict guidelines as to, Debt ratios,inflation etc. The primary one related to National Debt ( 3% the suggested max ) now expected to run to 3 or 4 times that figure because of Fiscal mismanagement.. As any unfortunate businessman in the Ireland of the 80's or home owner,or small borrower can testify interests rates were crippling, while the USA enjoyed constant low interest rates even after the first oil crisis of the early 1970's.

But the USA, while large, had a common language and common Business and Legal System and money borrowed or stolen was intended for business. Once Europe accepted this it could equally compete on a global scale with access to cheap money for Business. However as I have said I believed at that time that the deal would be scuppered and how wrong I proved to be as the Euro finally reached our pockets. Once this was the case I felt the dynamics of Banking were going to change and for the first time the rich, especially in Ireland, ( with interests rates on deposits virtually wiped out ) were going to have to finally begin to look to other areas to protect their wealth and finally consider investments in new business ideas either through government sponsored tax incentive programmes or other venture capital outlets. I ( childishly now as is obvious ) explained to my few dynamic friends that the bank managers of the future would no longer be hanging around the Golf clubs and Sailing Clubs and Rugby Clubs " courting " big earners deposits, but would be proactively travelling the country side encouraging enterprising people on the streets, in the schools and universities, in factory canteens, up trees if necessary seeking out " likely borrowers " because it was here that in the future that the banks would only profit, with few depositors, and money made only by lending.

This did in fact occur but with no vision other than short term gain. The narrow Fiscal focus of the wealthy limited their vision to bricks and mortar. But I do not blame Bankers for this short sighted view as they are equally driven by a desire to make money. What was required was Government intervention. Now that control of interest rates was in the hands of the ECB where they took , a rightly viewed, europe wide analysis . As inflation in property prices exploded and as a direct consequence led to rapid inflation across every area of Irish Business, from the warehouse to the High street and encouraged wage inflation to cope, it was clear that we would eventually run out of steam and become too costly for business in general vis-a-vis Eastern Europe and the Asian economies. The correct response would be to raise interest rates but the Irish could no longer use that mechanism to cool the market place. The next step should have been for the Government to withdraw its influence on the property market ( I believe this should have been immediate from the start of Euro ) by simply withdrawing all the tax incentives geared towards property and transfer them to areas that would stimulate industrial employment . Instead of the many schemes offering as much as 100% capital allowances and other Section23 style schemes on property why not transfer those same allowances to projects like county enterprise boards, venture capital funds etc.. for R&D in any area of business or start ups etc.. Even public/private partnerships on roads, bridges, etc..

The government now speak of competitiveness 10 years too late. So much for Michael Martin's knowledge based economy. Where were the financial incentives offered to the rich here for example, to invest in the many Graduates leaving our Universities during this time. What venture Capital Fund ever entered Campus to encourage young graduates to use new capital for start ups. None at all. As many thought Bricks and Mortar was a sure thing.

I have not voted for Fianna Fail for 10 years knowing instinctively that they would mess up. I expected Ireland to end in recession with a property bust and not a soft landing as predicted, simply because other cheaper Eastern European Economies were a new challenge but also the Asian Economies. For example India produces 3000000m University Graduates each year and 60m of the population speak English. However I never saw the world recession like this coming and this is where we now stand in quicksand. The fundamentals of our economy in tatters and we dont even build " bicycles" with nothing to sell on the International marketplace.

How is that Holland with a population of 17m and living in an area the size of Munster does not have a land supply problem and where property is cheaper.
In the middle of last year I read a piece by David Mc Williams where comparisons were made with Ireland, Germany and the US in relation to the ratio of morgage debt to GNP. US was 43%. Germany was 19% and Ireland was 190%. Dear God!!!!!! While the US property market was in meltdown our Government and its entourage of vested interests were talking of a soft landing!!!

A Leaving Certificate student of Economics could see the hidden dangers to national competiveness, particularly in the Globalised Business World we now lived in. Globalisation the poetic phrase our polititions love to use regularly but choose to ignore. How many people recall a bombastic Charlie McCreevy as Finance Minister speaking out arrogantly against the ECB when he was warned about overheating our economy and shouted back that our Economy was the envy of Europe. Now our enlightened Government backbenchers called sometime ago, for Prince Charlie to return to save us all. Has anything been learned.

Any "Gombeen " Government can manage a recession, but it takes "Responsible" Government to manage a BOOM.

Where to now ? !!! I wish I knew, but I fear it will take a total collapse of the economy, before the carelessness of the Government and Dept Of Finance will be truly seen for what it was. With proper Government insight and planning the Bankers could have been encouraged to show their dynamism in many areas of business life rather than the narrow focus on property speculation. After centuries of dealing with the scourge of Landlordism it seems the Irish themselves wished to emulate their colonial masters. The ideals of the Land League which ultimately led to us achieving control over own destiny were quickly forgotten.
The 3 F's, Fair Rent, Free Sale, Fixed Tenure were truly ideal but lost in time. Often, I asked many farmers what the 3F's were and sadly 90% could not answer just like our Government. They in their " innocence " were equally blinded by Government profligacy. The courage of the bankers too was simply sidetracked by a Government devoid of idealism or imagination.

ballinatray

NAMA cost €54,000,000,000 carried by the tax payer. In return all first time mortgage holders, should have their properties re-valued as at 2009 values. Particularly, those mortgaged since 2005.

Flamed Diving

ballinatray wrote: »

NAMA cost €54,000,000,000 carried by the tax payer. In return all first time mortgage holders, should have their properties re-valued as at 2009 values. Particularly, those mortgaged since 2005.

What potential effects do you believe this policy of yours would have?

ballinatray

Flamed Diving wrote: »

What potential effects do you believe this policy of yours would have?

At least restore the concept of fair play to the market place, particularly after such a massive bail out....

Raiser

Any proponent of common sense, logic, reasonableness, plain cop-on or level-headedness knows that NAMA is ill-conceived, flawed, biased, corrupt, agenda-ridden and destined to escalate its losses exponentially far, far beyond its initial ~€60,000,000,000.

- When NAMA has finished with this State we shall be left considering its beaten, extorted, raped husk and wondering how we allowed it to happen.....

I predict that, when its time comes, the NAMA Secret Enquiry will be even more clandestine, skewed, dishonest and laughable than our current Secret Banking Enquiry.

johnnyskeleton

ballinatray wrote: »

At least restore the concept of fair play to the market place, particularly after such a massive bail out....

What about fair play to those who didn't overpay for property? Where's their bailout?

mossfort

johnnyskeleton wrote: »

What about fair play to those who didn't overpay for property? Where's their bailout?

i agree nobody was pushed into buying property at inflated prices,but i think people lost the run of themselves during the boom years.
we all remember people queing to buy new houses ,was it really necessary.

Guy:Incognito

mossfort wrote: »

i agree nobody was pushed into buying property at inflated prices,but i think people lost the run of themselves during the boom years.
we all remember people queing to buy new houses ,was it really necessary.

That doesnt change the fact that some people were'nt sucked in. You cant just ride roughshod over those people and give effectivly free money to those who did.

johnnyskeleton

mossfort wrote: »

i agree nobody was pushed into buying property at inflated prices,but i think people lost the run of themselves during the boom years.
we all remember people queing to buy new houses ,was it really necessary.

The point is that if you're going to have one of these people's nama jobbies, it can either be given out either equally among the citizens or to a special interest group.

"Homeowners" are not 100% of the people, so they are a special interest group and are the same as developers/builders/banks except that they are a much larger group.

hapenny

do you really belive their not?? c'mon!!

SkepticOne

It is not simply those who did not purchase property who are being unfairly burdened with NAMA.

A certain number of people did lose the run of themselves in the boom. Many people did indeed overpay for property.

However I think the point needs to be made that if you took on a loan that was freely offered by the banks whether or not it was a financially wise decision, it was never your responsibility to check the balance sheet of the banks before you take on that loan. That responsibility lies with firstly the banks themselves and secondly their regulator.

You do have the very clearly defined responsibility to pay back that loan but you are not responsible for NAMA.

AlekSmart

Even still it`s the great unanswered question.......why exactly did it have to be National Policy for everybody to buy their own property.

How was it possible for Billions of fellow Europeans to be born,raised and die in rented properties and to live largely happy productive lives in the process....yet the Irish were brainwashed into thinking they would all die if they could not buy a property before they reached 25 !!

ballinatray

Raiser wrote: »

Any proponent of common sense, logic, reasonableness, plain cop-on or level-headedness knows that NAMA is ill-conceived, flawed, biased, corrupt, agenda-ridden and destined to escalate its losses exponentially far, far beyond its initial ~€60,000,000,000.

- When NAMA has finished with this State we shall be left considering its beaten, extorted, raped husk and wondering how we allowed it to happen.....

I predict that, when its time comes, the NAMA Secret Enquiry will be even more clandestine, skewed, dishonest and laughable than our current Secret Banking Enquiry.

I agree completely!!!!question is why did the compliant Irish allow it to occur...As for the idea that people made conscious choices , that is true only in so far as the information the young were fed about a so called property shortage, with large crowds gathered outside auctioneers offices, was false ( market manipulation as in a communist controlled strate. True capitalism allows for supply and demand cycles to dictate price ) As we now see with the vast swathes of property lying idle, 350.000 units excluding the nama quantity..is proof that many were duped.. Its time to march!!!!!!!

ballinatray

johnnyskeleton wrote: »

What about fair play to those who didn't overpay for property? Where's their bailout?

One wonders where such people got their wisdom!!!!clearly they are not in need of help....BUt the property market was manipulated in a criminal manner as we now have in excess of an estimated 400,000 units idle while people were led to believe there was a shortage...True capitalism allows for supply and demnd economics to dictate price ...Here the market was controlled in a centralised fashion like a communist states 5 year plan....Its time to march!!!!!!!!!!

Flamed Diving

ballinatray wrote: »

At least restore the concept of fair play to the market place, particularly after such a massive bail out....

Can you think of any way that this policy could be counter-productive?

woodseb

ballinatray wrote: »

At least restore the concept of fair play to the market place, particularly after such a massive bail out....

to do that would completely frustrate the aim of NAMA in terms of recapitalizing the banks

it would also punish those who did not borrow excessively and still retain equity in their homes

Seth Brundle

ballinatray wrote: »

NAMA cost €54,000,000,000 carried by the tax payer. In return all first time mortgage holders, should have their properties re-valued as at 2009 values. Particularly, those mortgaged since 2005.

Why 2005? Why not everyone with a mortgage?
Why not just people with a current FF membership card?
You cannot do something like this. It simply endorses bad financial planning on peoples part.
Your house is in negative equity? Tough! I didn't buy an over priced house (although I could do with some extra space) because I realised my limit!

mossfort wrote: »

i agree nobody was pushed into buying property at inflated prices,but i think people lost the run of themselves during the boom years.
we all remember people queing to buy new houses ,was it really necessary.

Its called personal responsibility! We all know that the banks were dishing out unsuitable loans to people. The people knew well whether they would be able to pay it back or not should things go the way they have!

SkepticOne wrote: »

It is not simply those who did not purchase property who are being unfairly burdened with NAMA.

A certain number of people did lose the run of themselves in the boom. Many people did indeed overpay for property.

And should I pay for their carelessness as well as that of the banks, etc?

SkepticOne wrote: »

However I think the point needs to be made that if you took on a loan that was freely offered by the banks whether or not it was a financially wise decision, it was never your responsibility to check the balance sheet of the banks before you take on that loan. That responsibility lies with firstly the banks themselves and secondly their regulator.

It was the governments responsibility through the regulator, etc. to keep an eye on the banks and we are paying for that now. However, people must realise that whilst it was common knowledge that banks were giving out loans, people were not forced into signing the application, etc.

ei.sdraob

kbannon wrote: »

Why 2005? Why not everyone with a mortgage?
Why not just people with a current FF membership card?
You cannot do something like this. It simply endorses bad financial planning on peoples part.
Your house is in negative equity? Tough! I didn't buy an over priced house (although I could do with some extra space) because I realised my limit!

NAMA and bank bailouts have opened up a pandoras box

and hence should have never been allowed to happen

now everyone and anyone wants their "bailout"

ballinatray

mossfort wrote: »

i agree nobody was pushed into buying property at inflated prices,but i think people lost the run of themselves during the boom years.
we all remember people queing to buy new houses ,was it really necessary.

true capatilism works on the principle of supply and demand playing a part in setting pricing...Hence gold is more valuable per ounce tahn copper but a false market was created with property in Ireland like "Ponzi " scheme. and sadly many young people were duped into believing they were queing for a dwindling resource outside the auctioneers offices...now we see vast swathes of property lying idle...at census 2007 records show 260,000 empty units now estimated at 370,000 units excluding nama property, how much more lies idle while young people struggle with incredible negative equity.....

ballinatray

kbannon wrote: »

Why 2005? Why not everyone with a mortgage?
Why not just people with a current FF membership card?
You cannot do something like this. It simply endorses bad financial planning on peoples part.
Your house is in negative equity? Tough! I didn't buy an over priced house (although I could do with some extra space) because I realised my limit!

FEAR played a part in that and all done with the active encouragement of Government spin....now the result is vast swathes of property lying idle across the length and breath of the land....


Its called personal responsibility! We all know that the banks were dishing out unsuitable loans to people. The people knew well whether they would be able to pay it back or not should things go the way they have!


And should I pay for their carelessness as well as that of the banks, etc?

It was the governments responsibility through the regulator, etc. to keep an eye on the banks and we are paying for that now. However, people must realise that whilst it was common knowledge that banks were giving out loans, people were not forced into signing the application, etc.

FEAR played a part in that and all done with the active encouragement of Government spin....now the result is vast swathes of property lying idle across the length and breath of the land....

ballinatray

kbannon wrote: »

Why 2005? Why not everyone with a mortgage?
Why not just people with a current FF membership card?
You cannot do something like this. It simply endorses bad financial planning on peoples part.
Your house is in negative equity? Tough! I didn't buy an over priced house (although I could do with some extra space) because I realised my limit!


Its called personal responsibility! We all know that the banks were dishing out unsuitable loans to people. The people knew well whether they would be able to pay it back or not should things go the way they have!


And should I pay for their carelessness as well as that of the banks, etc?

It was the governments responsibility through the regulator, etc. to keep an eye on the banks and we are paying for that now. However, people must realise that whilst it was common knowledge that banks were giving out loans, people were not forced into signing the application, etc.

....

Guys, I am debt free thankfully..But then as previously stated I was never driven by a need to validate myself by the strength of my wallet but I am well aware that the vast bulk of mankind are driven by such needs ..This is why we require conscience driven politics to control the economy for all benefit... This was not done and the lack of vision of governement created a climate of fear where even young un married people felt the need to secure their future.. A false market was created supply and demand economics was manipuated, with the connivance of government !!!!

skearon

ballinatray wrote: »

NAMA cost €54,000,000,000 carried by the tax payer. In return all first time mortgage holders, should have their properties re-valued as at 2009 values. Particularly, those mortgaged since 2005.

Wrong, NAMA hasn't cost the tax payer a single cent, it is designed to be self financing, and if there is a shortfall the banks will pay for this via increased corporation tax

ballinatray

AlekSmart wrote: »

Even still it`s the great unanswered question.......why exactly did it have to be National Policy for everybody to buy their own property.

How was it possible for Billions of fellow Europeans to be born,raised and die in rented properties and to live largely happy productive lives in the process....yet the Irish were brainwashed into thinking they would all die if they could not buy a property before they reached 25 !!

Again FEAR played a part here.... The aspirations of the Land League , a long time ago now , were simple 3 F's..... Fair Rent, Fixed Tenure, Free Sale !!!!!! Wonderfull sentiments lost in time fighting against the landlord and yet the biggest scandal of modern Ireland is that the irish wished to emulate their own and become landlords themselves....Keep, in mind that there is no legislation in place to allow people to Rent long term ( say 50 yrs ) .......Nama may yet have to consider that option to cover their costs...

AlekSmart

Wrong, NAMA hasn't cost the tax payer a single cent, it is designed to be self financing, and if there is a shortfall the banks will pay for this via increased corporation tax

There speaks an Optimist

Keep, in mind that there is no legislation in place to allow people to Rent long term ( say 50 yrs ) .......Nama may yet have to consider that option to cover their costs...

Fair play Balintray,my belief is that not alone should it consider that option,but that NAMA should have been forced to embody that option within its core setup....It would at least offer some hope of long-term change of mindset from the largely valueless one which now typifies the modern Irish citizen.

SkepticOne

kbannon wrote: »

And should I pay for their carelessness as well as that of the banks, etc?

It was the governments responsibility through the regulator, etc. to keep an eye on the banks and we are paying for that now. However, people must realise that whilst it was common knowledge that banks were giving out loans, people were not forced into signing the application, etc.

I disagree with the OP that those who did not take out mortgages should compensate those who did. What I wanted to counter was the idea that NAMA and the other ways the ordinary citizen is burdened is due to irresponsible activity on the part of the borrower as opposed to irresponsible lending.

Mr. Presentable

OP, I completely oppose the idea of a bailout for people who borrowed more than they could repay. Completely.

Negative equity only affects people trying to sell a property they bought relatively recently. Apart from this it is an empty buzzword.

The solution to the unsold units (variously 370,000/400,000/450,000 in your posts) has been mooted - demolish 75% of them. That will directly effect your negative equities and create healthy demand again. Cost less than bailing out everyone who bought a house in the last five years too!

ballinatray

Flamed Diving wrote: »

Can you think of any way that this policy could be counter-productive?

anything that is fair!!!! is never counter productive.

Welease

ballinatray wrote: »

anything that is fair!!!! is never counter productive.

There is nothing "fair" about your proposal.. Recapitalising the banks is bad enough, but that needs to be done to get money flowing to business's etc (no comment on NAMA being the correct solution or not)..

Bailing out every individual who has negative equity is not affordable by this country, nor should it be desirable. Eventually that negative equity will disappear, and in the short term well people will have to live with it. If you don't want to run the risk of losing money then don't make investments.

Why should I (and everyone else) have to bail out those who overpaid for their properties? Can I also claim for the 70% loss on the shares I have? Is the government going to prop up my pension losses for the last few years also?..

Sorry to sound like a hardass, but I for one am sick of being forced to pay out for other people's dumb decisions. Mortgage payments are in most cases less than they were previously, so unless unemployment has hit (which is a separate issue), then those folks can still afford the roof over their heads. It's worth less in the short term... so what?

ei.sdraob

ballinatray wrote: »

anything that is fair!!!! is never counter productive.

"fair"ness is highly subjective

namenotavailablE

By offering a 'NAMA for the people' you increase the moral hazard risk in the future. Future borrowers may look to such a scheme and feel that they can borrow 'that little bit more'/ overstretch themselves as they feel entitled to rely on the state for help if things go awry.

Having said that, I'd agree that those banks now being recapitalised by NAMA ought to be legally and morally obliged to exercise reasonable leniency with borrowers in difficult financial circumstances- once the borrowers are seen to engage in the process and are making reasonable effort to sort out their financial affairs they ought to be afforded leeway with their mortgage/ other debts rather than face repossession.

Flamed Diving

ballinatray wrote: »

anything that is fair!!!! is never counter productive.

What an intelligent riposte.

:rolleyes:

DJDC

The idea that Negative Equity can be removed in an act of moral fortitude is innumerate nonsense peddled by people who have no understanding of basic finance and the modern market driven capitalist model. Imagine what would happen to AIB, BOI et al. tomorrow morning if a Irish governmental press release annouced overnight that all NE on propeties sold after 2004 will be written off as bad debt. Share price would rapidly descend towards 0 as the equity in the companies become worthless in the face of massive debts.

In short, its not going to happen.

Seth Brundle

ballinatray wrote: »

a false market was created with property in Ireland like "Ponzi " scheme. and sadly many young people were duped into believing they were queing for a dwindling resource outside the auctioneers offices...

Nobody was duped. They were offered property at vastly inflated prices, along with loans to match the asking prices. Nobody put a gun to buyers heads.
I'm in a house that is not exactly what I want but its fine. I could have bought a house worth two or three times what mine is worth but I didn't because I, like so many others who were ignored, were able to see that it was not sustainable. It really wasn't that hard to see! Now I don't want to sound cold hearted to those who own houses worth less than they paid for them, but they knew the risks.

ballinatray wrote: »

now we see vast swathes of property lying idle...at census 2007 records show 260,000 empty units now estimated at 370,000 units excluding nama property, how much more lies idle while young people struggle with incredible negative equity.....

People aren't struggling with negative equity. They are struggling because they borrowed much more than they could afford. When phrased accurately, it takes on a whole new light.
Should I be compensated for not buying an expensive house? Should I be compensated for buying a 1997 registered car rather than buying a brand new one every couple of years?

Flamed Diving

kbannon wrote: »

Nobody was duped. They were offered property at vastly inflated prices, along with loans to match the asking prices. Nobody put a gun to buyers heads.
I'm in a house that is not exactly what I want but its fine. I could have bought a house worth two or three times what mine is worth but I didn't because I, like so many others who were ignored, were able to see that it was not sustainable. It really wasn't that hard to see! Now I don't want to sound cold hearted to those who own houses worth less than they paid for them, but they knew the risks.


People aren't struggling with negative equity. They are struggling because they borrowed much more than they could afford. When phrased accurately, it takes on a whole new light.
Should I be compensated for not buying an expensive house? Should I be compensated for buying a 1997 registered car rather than buying a brand new one every couple of years?

If anything, the idea of you being compensated makes far more sense than Ballina's idea.

mossfort

i worked as a bricklayer on housing estates in galway and there were certain areas of the county where houses commanded way higher prices than others because people thought it was more fashionable to live there.
take oranmore for example where 4 bedroom detached houses were making 500,000 euros.
you could drive 20 miles out the road to tuam where the equivalent size house could be bought for 220,000 euros.
why should the government compensate people who wanted to live in houses which were clearly overpriced from the start.

Liam Byrne

kbannon wrote: »

Nobody was duped. They were offered property at vastly inflated prices, along with loans to match the asking prices. Nobody put a gun to buyers heads.

Very valid point, but no-one put a gun to the banks' or developers' heads either, and FF are bailing them out.

THAT'S where the imbalance and "what about me?" arises.

Investors in banks wanted a quick profit, ditched the best practices and landed themselves in the ****.

They should be left to rot.

kbannon wrote: »

Should I be compensated for not buying an expensive house? Should I be compensated for buying a 1997 registered car rather than buying a brand new one every couple of years?

No - and BTW, I'm in the same boat as you, having been offered a loan for twice what I wanted despite telling them how much I could afford, and then having the cop-on to turn down the loan.

But neither should the bankers and developers (already multi-millionaires being paid TWENTY TIMES the average wage).

And given that our disposable income is down BECAUSE we're paying for them, we're entitled to at least some allowance of some sort in order to make up the shortfall, no ?

ei.sdraob

Liam Byrne wrote: »

They should be left to rot.

exactly

and in a proper capitalistic system they would have been left to rot, and a harsh lesson would have been learned, theres a reason why bankruptcy exists


except someone got a bright idea to "socialise" the risks and bailout the banks :cool:

opening a pandoras box

and now every tom, dick and harry wants their NAMA bailout
:mad:

Flamed Diving

ei.sdraob wrote: »

exactly

and in a proper capitalistic system they would have been left to rot, and a harsh lesson would have been learned, theres a reason why bankruptcy exists


except someone got a bright idea to "socialise" the risks and bailout the banks :cool:

opening a pandoras box

and now every tom, dick and harry wants their NAMA bailout
:mad:

Perhaps this is the wrong thread, but, could you summarise why the philosophy of 'letting the banks rot' failed so spectacularly in 1929-33? Bear in mind that I know the details, so you can keep in concise.

SkepticOne

Flamed Diving wrote: »

Perhaps this is the wrong thread, but, could you summarise why the philosophy of 'letting the banks rot' failed so spectacularly in 1929-33? Bear in mind that I know the details, so you can keep in concise.

If you have a point to make why don't you make it?

Flamed Diving

SkepticOne wrote: »

If you have a point to make why don't you make it?

I was talking you, too.

Anyway, his language sounds very similar to that spoken by finance ministers around the world on the eve (and during the initial phase of) the Great Depression. I am just interested in his thoughts on the subject.

Do you have a problem with that?

ei.sdraob

Flamed Diving wrote: »

could you summarise why the philosophy of 'letting the banks rot' failed so spectacularly in 1929-33?

that was the philosophy?


it would be hard to keep somethings like that consise since its a complicated subject and rather offtopic for this thread, but anyways since you asked


1.

in the great depression the US and world were on gold standard, if the money gets hoarded due to fear of the market things turn nasty as there isnt enough money to go around (liquidity crunch)

now we are were not on gold standard

the central banks can quite literary create money out of thin air now (try to do that with gold), and thats exactly what they have done in US, UK and EU with billions appearing in all sorts of schemes with funky names such as Quantative Easing

2. heres graph of GDP contractions for UK, quite "spectacular" no ? im trying to find one for ireland and us

source


3. it was the continuing interference (Read: bailouts) in the markets in the 30s depression by the governments that prolonged the pain (sounds familiar?) what little money was available was wasted and misalocated on centrally planned projects by Roosevelt, whole book freely available here to read > http://mises.org/rothbard/agd/contents.asp


4. this Nobel prize winner would disagree with you

Flamed Diving

ei.sdraob wrote: »

that was the philosophy?

Yes. Fiscal deficits were a big no-no. Pure Capitalism (as you call it) was at play, where it was every man for himself, etc. That is all well and good if you exclude financial markets.

ei.sdraob wrote: »

it would be hard to keep somethings like that consise since its a complicated subject and rather offtopic for this thread, but anyways since you asked

I know it is, just like I said it is. But thanks for pointing it out as if I didn't.

ei.sdraob wrote: »

1.

in the great depression the US and world were on gold standard, if the money gets hoarded due to fear of the market things turn nasty as there isnt enough money to go around (liquidity crunch)

now we are were not on gold standard

the central banks can quite literary create money out of thin air now (try to do that with gold), and thats exactly what they have done in US, UK and EU with billions appearing in all sorts of schemes with funky names such as Quantative Easing

Right. But it was precisely because the Fed refused to increase the money supply (M2) that many of the banks collpased (you like your libertarian heads so ref: M. Friedman for why and how, there are more, but his stuff is easy to follow). It was the opinion of the time that fiscal and monetary austerity must be maintained, while the "bad" banks and businesses failed. This created the chain reaction that we are doubtlessly familar with. Your denial of this policies existence is amusing. Surely you came across it while scurrying around your various "Austrian School" websites?

ei.sdraob wrote: »

2. heres graph of GDP contractions for UK, quite "spectacular" no ? im trying to find one for ireland and us

source

This demonstrates nothing. You don't even know why.

ei.sdraob wrote: »

3. it was the continuing interference (Read: bailouts) in the markets in the 30s depression by the governments that prolonged the pain (sounds familiar?) what little money was available was wasted and misalocated on centrally planned projects by Roosevelt, whole book freely available here to read > http://mises.org/rothbard/agd/contents.asp

Whole slanted books available at. Is that what you mean? Why not pull out some socialist worker website while you are at it? You seem to be getting a little confused about the matter. How about going back to basics on the matter at hand:

http://en.wikipedia.org/wiki/Great_Depression#Monetarist_explanations

ei.sdraob wrote: »

4. this Nobel prize winner would disagree with you

Arguments from authority have to be the most pathetic form of argument. I know very well who Stiglitz is. Wheras you may have read his pop economics books, I have read his assymetric information theory papers from the 1970s for which he actually shared that Nobel. Stop regurgitating what you find on websites. It's sad.

My work is done here. :cool:

SLUSK

Flamed Diving wrote: »

Yes. Fiscal deficits were a big no-no. Pure Capitalism (as you call it) was at play, where it was every man for himself, etc. That is all well and good if you exclude financial markets.




I know it is, just like I said it is. But thanks for pointing it out as if I didn't.




Right. But it was precisely because the Fed refused to increase the money supply (M2) that many of the banks collpased (you like your libertarian heads so ref: M. Friedman for why and how, there are more, but his stuff is easy to follow). It was the opinion of the time that fiscal and monetary austerity must be maintained, while the "bad" banks and businesses failed. This created the chain reaction that we are doubtlessly familar with. Your denial of this policies existence is amusing. Surely you came across it while scurrying around your various "Austrian School" websites?



This demonstrates nothing. You don't even know why.



Whole slanted books available at. Is that what you mean? Why not pull out some socialist worker website while you are at it? You seem to be getting a little confused about the matter. How about going back to basics on the matter at hand:

http://en.wikipedia.org/wiki/Great_Depression#Monetarist_explanations




Arguments from authority have to be the most pathetic form of argument. I know very well who Stiglitz is. Wheras you may have read his pop economics books, I have read his assymetric information theory papers from the 1970s for which he actually shared that Nobel. Stop regurgitating what you find on websites. It's sad.

My work is done here. :cool:

Well the Austrians seem to have got more things right than most economists lately. Famous investors such as Peter Schiff and Jim Rogers seems to agree with them as well.

ei.sdraob

Flamed Diving wrote: »

Whole slanted books available at. Is that what you mean? Why not pull out some socialist worker website while you are at it? You seem to be getting a little confused about the matter. How about going back to basics on the matter at hand:

http://en.wikipedia.org/wiki/Great_Depression#Monetarist_explanations

thanks for making a point for me

the great depression:
* was caused (interest rate & monetary fiddling)
* and prolonged (bailouts, new deal)
by government interference in the markets

all of that is repeating again (tho this time there are other variables such as not being on gold standard and theres the matter of china and india flooding world with cheap labour)

if you read 2 paragraphs below what you linked earlier you would see the austrian explanation > http://en.wikipedia.org/wiki/Great_Depression#Austrian_School

which is where i stand


btw did you hear of the depression in the 20s where there was no interference and the markets rebounded very quickly?

very interesting video here

https://www.youtube.com/watch?v=czcUmnsprQI

jmayo

ballinatray wrote: »

NAMA cost €54,000,000,000 carried by the tax payer. In return all first time mortgage holders, should have their properties re-valued as at 2009 values. Particularly, those mortgaged since 2005.

I have no problem with them having their properties revalued, but not their mortgages.

You were doing so well with your first post opneing the thread, but we cannot have a bailout for everybody.
We shoudln't even have a bailout for some of those already included, but that is argument flushed out by some economists, or would be economists, later in the thread.

ei.sdraob wrote: »

NAMA and bank bailouts have opened up a pandoras box

and hence should have never been allowed to happen

now everyone and anyone wants their "bailout"

Very true, but there had to be rescue of some sort, maybe full guarantees as part of nationalisation, for primary truly systemic institutions i.e. AIB and BOI.
The rest I believe could have gone to the wall.

ballinatray wrote: »

true capatilism works on the principle of supply and demand playing a part in setting pricing...Hence gold is more valuable per ounce tahn copper but a false market was created with property in Ireland like "Ponzi " scheme. and sadly many young people were duped into believing they were queing for a dwindling resource outside the auctioneers offices...now we see vast swathes of property lying idle...at census 2007 records show 260,000 empty units now estimated at 370,000 units excluding nama property, how much more lies idle while young people struggle with incredible negative equity.....

Even though I balme government, banks & other vest interests for pushing the bubble and I blame the banks for ridiculous loans, I still believe people have to take level of personal responsibility.
Some people felt they had to get on property ladder, not out of their current personal cicrumstances, but because others were doing it.
In this chunk of people were the ones who had no savings, had to rely on renting to pay mortgage and either misled lender or sometimes along with lender doctored their accounts to get bigger mortgage.
They are not blameless in this.

To paraphrase the sage of Springfield, Homer J simpson.
It takes two to borrow, one to borrow and one to lend.

BTW who cares how many residential properties lie empty ?
I care how many commerical properties (not tlaking bloddy retial parks either) lie idle, because that is a true measure of how well the eocnomy is doing.

skearon wrote: »

Wrong, NAMA hasn't cost the tax payer a single cent, it is designed to be self financing, and if there is a shortfall the banks will pay for this via increased corporation tax

He he he.
Ever hear of how our credit rating is doing, or how the credit rating of the banks are dropping, thus making government borrowing & bank borrowing costs higher ?
I hope your post is p*** take because if it isn't then by God you are an opitmist.
Care to buy a field in Mayo, good deal sure to rise soon, get in now

mossfort wrote: »

i worked as a bricklayer on housing estates in galway and there were certain areas of the county where houses commanded way higher prices than others because people thought it was more fashionable to live there.
take oranmore for example where 4 bedroom detached houses were making 500,000 euros.
you could drive 20 miles out the road to tuam where the equivalent size house could be bought for 220,000 euros.
why should the government compensate people who wanted to live in houses which were clearly overpriced from the start.

Sorry, but Tuam ehhhh.
How can you compare Tuam to Oranmore ?
BTW both were overpriced.

Flamed Diving

SLUSK wrote: »

Well the Austrians seem to have got more things right than most economists lately. Famous investors such as Peter Schiff and Jim Rogers seems to agree with them as well.

Would that be the same Peter Schiff who starred in a video that you continually post where a bunch of wrestlers and "get rich quick" schemers and laughing at him entitled "The Economists get it wrong". Peter Schiff isn't an Austrian School economist because he isn't an economist. He is a black swan. Period.

Flamed Diving

ei.sdraob wrote: »

thanks for making a point for me

the great depression:
* was caused (interest rate & monetary fiddling)
* and prolonged (bailouts, new deal)
by government interference in the markets

all of that is repeating again (tho this time there are other variables such as not being on gold standard and theres the matter of china and india flooding world with cheap labour)

if you read 2 paragraphs below what you linked earlier you would see the austrian explanation > http://en.wikipedia.org/wiki/Great_Depression#Austrian_School

which is where i stand


btw did you hear of the depression in the 20s where there was no interference and the markets rebounded very quickly?

very interesting video here

https://www.youtube.com/watch?v=czcUmnsprQI

You seem to be struggling a little (I would never accuse you of quote-mining). Let me help you:

Monetarists, including Milton Friedman (your hero?) and current Federal Reserve System chairman Ben Bernanke, argue that the Great Depression was mainly caused by monetary contraction, the consequence of poor policymaking by the American Federal Reserve System and continued crisis in the banking system.[21][22] In this view, the Federal Reserve, by not acting, (let 'em fail) allowed the money supply as measured by the M2 to shrink by one-third from 1929 to 1933, thereby transforming a normal recession into the Great Depression. Friedman argued that the downward turn in the economy, starting with the stock market crash, would have been just another recession.[23] However, the Federal Reserve allowed some large public bank failures – particularly that of the New York Bank of the United States – which produced panic and widespread runs on local banks, and the Federal Reserve sat idly by while banks collapsed. He claimed that, if the Fed had provided emergency lending to these key banks, or simply bought government bonds on the open market to provide liquidity and increase the quantity of money after the key banks fell, all the rest of the banks would not have fallen after the large ones did, and the money supply would not have fallen as far and as fast as it did.[24] With significantly less money to go around, businessmen could not get new loans and could not even get their old loans renewed, forcing many to stop investing. This interpretation blames the Federal Reserve for inaction, especially the New York branch.[25]

One reason why the Federal Reserve did not act to limit the decline of the money supply was regulation. At that time the amount of credit the Federal Reserve could issue was limited by laws which required partial gold backing of that credit. By the late 1920s the Federal Reserve had almost hit the limit of allowable credit that could be backed by the gold in its possession. This credit was in the form of Federal Reserve demand notes. Since a "promise of gold" is not as good as "gold in the hand", during the bank panics a portion of those demand notes were redeemed for Federal Reserve gold. Since the Federal Reserve had hit its limit on allowable credit, any reduction in gold in its vaults had to be accompanied by a greater reduction in credit. On April 5, 1933 President Roosevelt signed Executive Order 6102 making the private ownership of gold certificates, coins and bullion illegal, reducing the pressure on Federal Reserve gold.[26]

The remainder explains another reason why the Fed witheld on supplying M2. However, one should not get drawn into this question, as it may easily confuse. The only thing people should worry about in this case is the consequence of inaction on behalf of the relevant authorities. Despite what libertarian nutjobs will tell you in books, markets are not efficient and allowing the economy "cleanse itself" naturally does not work.

ei.sdraob

Flamed Diving wrote: »

You seem to be struggling a little

not at all, you just again highlighted my points


short version:

its quite obvious that this recession and the great depression was caused and prolonged by manipulation of and interference in the markets


long version:

from your own quotes

Flamed Diving wrote:

Monetarists, including Milton Friedman (your hero?) and current Federal Reserve System chairman Ben Bernanke, argue that the Great Depression was mainly caused by monetary contraction, the consequence of poor policymaking by the American Federal Reserve System

it was the meddling by the newly created FED that led to the Depression, same as it was the meddling in rates that created this recession, see interference

Flamed Diving wrote:

the Federal Reserve allowed some large public bank failures – particularly that of the New York Bank of the United States – which produced panic and widespread runs on local banks, and the Federal Reserve sat idly by while banks collapsed.

and hence why laws were passed afterwards ensuring that banks insure a certain percentage with newly created FDIC (Federal Deposit Insurance Corporation), in case of bank run FDIC covers deposits
last year alone FDIC has covered deposits of ~150 banks that went (and were allowed) to go bankrupt in US, hence protecting the depositors
similar schemes exist in EU and here, until our braindead government decided to "insure" all deposits and protect all bondholders no matter how much it costs

Flamed Diving wrote:

With significantly less money to go around, businessmen could not get new loans and could not even get their old loans renewed, forcing many to stop investing.
.

as i pointed out the money supply was based on the gold standard back then, and there is only so much gold, hence why when hoarding occurs its so disastrous

once again the problem here is that the money supply is in the hands of the governments and central banks, not determined by the market itself, once again it all falls down to interference

Flamed Diving wrote: »

Despite what libertarian nutjobs will tell you in books, markets are not efficient and allowing the economy "cleanse itself" naturally does not work.

they quite efficiently rebounded in the earlier 20s depression with no interference, its all the historically documented

Flamed Diving wrote: »

the only thing people should worry about in this case is the consequence of inaction on behalf of the relevant authorities..

the government had acted in the 30s with huge public works projects like the New Deal, all that accomplished was to misalocate even more money at a tight time and prolong the Depression

once they stopped meddling (the govt quite simply had no more money left) the markets rebounded

ei.sdraob

anyways all of that is seriously offtopic FD

in the context of this thread

its quite clear that here in Ireland, the Government has distorted the property market and whats worse poured oil into the clearly developing fire by providing tax incentives etc

then when the bubble burst the very same government has handed publics money over to banks such as Anglo who didnt even have normal off thestreet private and business customers, the only customers Anglo had had were crooks

i asked before and i ask again, if a dead rotten tree falls in the forest (Anglo) would anyone hear it fall? the only people who would have been affected by this bankruptcy would have been galway tenter's

SkepticOne

ei.sdraob wrote: »

then when the bubble burst the very same government has handed publics money over to banks such as Anglo who didnt even have normal off thestreet private and business customers, the only customers Anglo had had were crooks

Well they did take deposits from ordinary people.

Liam Byrne

SkepticOne wrote: »

Well they did take deposits from ordinary people.

If you deposited your money with the local moneylender or crook, who's at fault ?

I'd presume you could take them to court, given their actions, and that the court might even pay you out of the half-a-million that the scum are paying themselves annually.

And since they were licensed by the Financial Regulator, then the buck stops there for not ensuring that they were above board.