Austrian economics and Ireland

Permabear

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Inquitus

donegalfella wrote: »

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Maybe I could save money there by making sure we only buy a copy for those who could understand it.

4gun

In light of this thread and my basic understanding of what the op was saying ihave a question ..How did interest rates get so low in the first place to fuel this international credit boom...I mean the ECB controlls interest rates through out the euro zone...should the interest rate have gone up as demand for credit rose

ashleey

Yes, rates should have gone up (and did in June 2008). In reality though the ecb looks at credit for the whole eurozone which was fine. Unfortunately over here in the 2% of the eurozone economy we went mad and they didn't pay much attention. It's a feature of all big economies. Compare Newcastle with London for example and you would need different monetary policy or fiscal transfers to offset the mismatch. Now we are in the 'newcastle' type place when once we were more like London. Hence the bailout. Sorry, I meant to say 'arrangement'

johnnyskeleton

donegalfella wrote: »

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Or, if we had paid attention to Keynes i.e. run large surpluses to level out bubbles and pay for stimulus during the bust.

Equally, nowhere in Keynsian theory does it suggest that stimulus should be in the form of social welfare and disproportionately high wages to public sector.

namloc1980

4gun wrote: »

In light of this thread and my basic understanding of what the op was saying ihave a question ..How did interest rates get so low in the first place to fuel this international credit boom...I mean the ECB controlls interest rates through out the euro zone...should the interest rate have gone up as demand for credit rose

The primary role of the ECB is to maintain price stability i.e. low inflation with a target of c.2% across the Eurozone. Something it has done pretty well with (note the peak in late '07 and early '08 primarily from the the high oil prices of $120+ per barrel):



It is not the ECB's job to increase it's rates because Irish people decided to go on a property bender in the 2000's. The Government of this country should have taken measures to calm the property market - interest rates are just one tool to do that. Instead Government Policy was to not only fan the flames of the property bubble but also to throw fuel on the fire by giving crazy tax breaks, and this coupled with crazy bank lending and poor control by the planning authorities destroyed this country.

Cannibal Ox

I'd guess the idea of abandoning empirical evidence in favour of inductive reasoning (from a presumed a priori position) would turn most people off the idea.

silverharp

namloc1980 wrote: »

The primary role of the ECB is to maintain price stability i.e. low inflation with a target of c.2% across the Eurozone. Something it has done pretty well with (note the peak in late '07 and early '08 primarily from the the high oil prices of $120+ per barrel):

what they measure is part of the problem. The older definition of inflation was an inordinate increase in the money supply, the "change" to only look at a subset of the effects ie rising prices is a receipe for creating bubbles. ie 147 dollar oil , all the time "inflation" was only ~2% . Flying blind is easier then using the current tools to try and manage an economy or monetary system

ei.sdraob

namloc1980 wrote: »

The primary role of the ECB is to maintain price stability i.e. low inflation with a target of c.2% across the Eurozone. Something it has done pretty well with (note the peak in late '07 and early '08 primarily from the the high oil prices of $120+ per barrel):



It is not the ECB's job to increase it's rates because Irish people decided to go on a property bender in the 2000's. The Government of this country should have taken measures to calm the property market - interest rates are just one tool to do that. Instead Government Policy was to not only fan the flames of the property bubble but also to throw fuel on the fire by giving crazy tax breaks, and this coupled with crazy bank lending and poor control by the planning authorities destroyed this country.

Jesus wept

those inflation measures that ECB and our government followed are artificial and don't reflect on the real economy, they dont include a certain major asset which underwent hyperinflation here and few other euro countries



the country is in a mess because house prices (inflation) let rip, and the government encouraged a bubble

Scofflaw

namloc1980 wrote: »

The primary role of the ECB is to maintain price stability i.e. low inflation with a target of c.2% across the Eurozone. Something it has done pretty well with (note the peak in late '07 and early '08 primarily from the the high oil prices of $120+ per barrel):



It is not the ECB's job to increase it's rates because Irish people decided to go on a property bender in the 2000's. The Government of this country should have taken measures to calm the property market - interest rates are just one tool to do that. Instead Government Policy was to not only fan the flames of the property bubble but also to throw fuel on the fire by giving crazy tax breaks, and this coupled with crazy bank lending and poor control by the planning authorities destroyed this country.

And in theory, bank regulation means ensuring that the banks have the assets to back their loans, at a sensible valuation of those assets, and with someone ensuring that each asset is only counted against one loan. Unfortunately, in Ireland, that was purely a theoretical form of bank regulation.

cordially,
Scofflaw

robbyvibes

the country is in a mess because house prices (inflation) let rip, and the government encouraged a bubble

Abolishing Residential Property Tax in April 1997 encouraged property speculation and an increase in house prices.

If it had not been abolished, Ireland would not be in the mess it's in now.

Many other countries who had property bubbles also removed taxing of land/property.

Taking a bailout from the IMF is the worst thing Ireland could do.

You cannot solve a debt problem with more debt...you people will eventually look back and acknowledge mistakes made but by that time it will be too late.

silverharp

robbyvibes wrote: »

Abolishing Residential Property Tax in April 1997 encouraged property speculation and an increase in house prices.

If it had not been abolished, Ireland would not be in the mess it's in now.

Many other countries who had property bubbles also removed taxing of land/property.

Taking a bailout from the IMF is the worst thing Ireland could do.

You cannot solve a debt problem with more debt...you people will eventually look back and acknowledge mistakes made but by that time it will be too late.

rubbish! Florida is a counter example. Bubbles are credit issues , not taxation ones

robbyvibes

RPT was abolished in 1997..wasn't the amount of tax you paid based on the value of your house? I'm not saying I agree with it, but there was nothing put in its place, such as a land tax which would have made more sense back then.

Instead of a proposed flat rate €100 property tax, the government should introduce a land tax where the rate is higher for land uncultivated.

Property tax hits the middle class hardest, not the rich who have mostly benfited from the property speculation of last 12 years.

What's wrong with charging higher rate of tax on land which isn't being used? What the hell is the owner going to do with it anyway?

He's not using it to grow anything so it isn't productive for the economy.
He won't be building anything on it...what is the point of him holding on to it? it's just sitting there doing nothing...

It should be freed up for more productive purposes, so a higher rate of tax should be paid until the owner either sells it or does something productive with it to help the economy.

But of course, the government would prefer those left working to pay more VAT, have wages reduced, property taxes, basically anything that will continue to protect the financial elite in Ireland and more importantly, abroad.