ECB, developers, bankers,..who else will we blame?

dlouth15

Scofflaw wrote: »

Coming back to my little model, and the point about Joe not wanting "bank assets" but cash:



One of the major points there is that without borrowing anything from outside the two-bank system, the amount of deposits - that is, money even according to Joe - has been increased by €130bn, or 2.3 times. From Joe's perspective, the fact that the banks' assets are now more in the form of loans than reserves is completely irrelevant - Joe, and everybody else, has not been paid with "bank assets" but with deposit money.

And you can simply keep running that model. Reserves don't get depleted unless they're lost outside the system.

It's the same bit of cash being recycled. When Joe receives the money for the land, in this closed system of two banks, he deposits it in one or other of the banks where it can be lent out again. Joe is the enabler of future landing by the banks. Now even if Joe puts all of the cash back in the banking system, the system itself can't grow indefinitely as it needs to keep a certain reserve as a percentage of all deposits. It needs to find this money to grow. But on top of this, Joe may decide that the banks are engaging in risky lending and he may take it all out and put it in his mattress. Hence there are limits even in a system such as this to how big the system can grow.

All this is very theoretical however. Rather than quibble about the details, we do know that money flooded into Ireland from outside. This is not disputed. This money went to banks like Anglo which in turn lent it to property developers and others unwisely. The lending to Anglo which was known to be lending heavily to developers during the bubble was itself therefore unwise.

Again, Sea Sharps point is therefore valid that there was no complaint among these lenders when things looked good. Only when they realized their mistake were moves made to ensure that they were paid back in full by the Irish.

GCU Flexible Demeanour

dlouth15 wrote: »

All this is very theoretical however. Rather than quibble about the details, we do know that money flooded into Ireland from outside. This is not disputed. This money went to banks like Anglo which in turn lent it to property developers and others unwisely.

Indeed, this is the plain fact.The contention that Irish banks found a way of manufacturing euro between them by performing a rain dance is just weird.

Scofflaw

GCU Flexible Demeanour wrote: »

Indeed, this is the plain fact.The contention that Irish banks found a way of manufacturing euro between them by performing a rain dance is just weird.

It may be weird, but if the BoE are correct, then frankly that doesn't amount to a row of beans in terms of showing that it didn't happen.

The process of money creation is not something undertaken by central banks, but by commercial banks. That Irish commercial banks created money is therefore something that needs to be shown not to have happened. The assumption that money must have come in from outside the country to supply the money that was loaned in the Irish economy is an assumption based on the belief that banks can only lend out money that they borrow.

Ah well, at some point I should evidently catch an intelligent economist and subject them to the third degree.

cordially,
Scofflaw

macraignil

Thanks for all the information about banking.

My point in opening this thread was that there were others, besides bankers and developers, responsible for Ireland's economic problems. The influx of money into the economy in the property boom from my perspective was creating a problem that was never addressed by government or civil service. For me finishing school in the late 1990's I remember a house near my parent's being advertised in a newspaper for £75,000. By the time I graduated and could secure a job where I could consider buying a home, the price of a similar home had escalated to quarter of a million euro (or more depending on the quality of this house that would have previously been priced at £75,000). To pay for a home valued at over quarter of a million euro I need a very good job.

To allow a situation where only the highest paid members of a society can buy a home when we have one of the lowest population densities in the EU is to me negligence on the part of government and civil service. Yes it was banks and developers that facilitated the flow of money into the economy, but while this was happening who was looking out for the workers on average wages?

If Joe on average national wage working in Dublin needs to go to Leitrim if he wants to own a home how do we expect Joe to stay living in this country. While the Fina party in government could point to higher home values for their more mature voters to insure they were voted in, both them and the civil service could increase their wages so they could still afford to live here comfortably. For Joe working for an independent business how could they keep paying him more and still be competitive with businesses worldwide?

In construction where I ended up working for some of the boom years the answer seemed to be to import labor from other EU countries where the cost of living is lower. This continues to be the case and wages for jobs advertised still do not pay enough for many to have any hope of owning a home. Was it not the job of government and civil service to keep consideration for those on average wages wanting to stay living in this country? When will any action be taken to stem the tide of youth unemployment, emigration, suicide and mental health problems that are caused in my opinion by denying so many the hope of having their own home.

Scofflaw

GCU Flexible Demeanour wrote: »

If Irish banks found it easier to raise euro from non-eurozone entities, it sort of suggests something was seriously wrong with the operation of the single currency.

That is, I fear, simply hand-waving. Irish banks traditionally operated in the Anglosphere markets, and there's nothing even remotely strange in the idea of raising euro-denominated debt in London, or debt denominated in any other currency for that matter, London being the main world centre for doing exactly that.

As with many things EU-related, there seems to be a rather excessive belief in the depth of changes wrought by the euro. If you follow the patterns of international banking, you'll see that international connections from a century ago remain a good guide to modern connections.

cordially,
Scofflaw

dlouth15

macraignil wrote: »

Thanks for all the information about banking.

My point in opening this thread was that there were others, besides bankers and developers, responsible for Ireland's economic problems. The influx of money into the economy in the property boom from my perspective was creating a problem that was never addressed by government or civil service. For me finishing school in the late 1990's I remember a house near my parent's being advertised in a newspaper for £75,000. By the time I graduated and could secure a job where I could consider buying a home, the price of a similar home had escalated to quarter of a million euro (or more depending on the quality of this house that would have previously been priced at £75,000). To pay for a home valued at over quarter of a million euro I need a very good job.

But I hope you will appreciate that in order to answer why house prices are expensive, we have to talk about the influx of capital into the country and the fact that although the supply of houses rises, it doesn't rise as fast as the money bidding it up. We also have to talk about the fact that interest rates were higher in the late 90's prior to joining the Euro and that they dropped quite considerably during our boom when the core eurozone economies were sluggish.

I would never suggest that bankers for example were the only ones to blame for the crisis. Politicians (both inside and outside Ireland), regulators as well as private individuals of the country share in the blame, each in their specific ways.

GCU Flexible Demeanour

Scofflaw wrote: »

<...> there's nothing even remotely strange in the idea of raising euro-denominated debt in London, or debt denominated in any other currency for that matter, London being the main world centre for doing exactly that. <...>

Nobody is especially arguing about London being the location in which the debt was raised, and I guess you understand that.

Which makes it look like your posts are just pursuing some personal agenda.

GCU Flexible Demeanour

macraignil wrote: »

The influx of money into the economy in the property boom from my perspective was creating a problem that was never addressed by government or civil service.

Tbh, Government and Civil Service really just follow the consensus created by the political system. IMHO, the cause of the problem is quite fundamental. Collectively, we don't all have a shared view of what kind of country we want to live in.

Even now, I don't sense there's a consensus view that we should try to keep property prices low. Consider the amount of negative comment around the Central Bank's proposal to limit the amount that people can borrow - which, if implemented, should help to make housing more affordable. Yet, quite a few voices are arguing that people should be helped to borrow more.

dlouth15

Scofflaw wrote: »

It may be weird, but if the BoE are correct, then frankly that doesn't amount to a row of beans in terms of showing that it didn't happen.

The process of money creation is not something undertaken by central banks, but by commercial banks. That Irish commercial banks created money is therefore something that needs to be shown not to have happened. The assumption that money must have come in from outside the country to supply the money that was loaned in the Irish economy is an assumption based on the belief that banks can only lend out money that they borrow.

Ultimately that is true. What confuses people is that the money that they borrow may also be money that they've lent. Initially, as the BOE report points out, the bank creates a deposit (a loan to the bank, a liability) while simultaneously creating an asset.

However money can only be lent so many times. If the reserve ratio is 10% then the maximum that it can be relent is 9 times the original amount. In practice the multiple is less. Beyond that they need funds from outside.

So the initial stages of the bubble could be started domestically but for it to inflate to the extent it did required outside funds.

That is why withdrawal of those funds caused problems for the banks. If what you were saying was true, then they could simply have manufactured the money they needed.

There's nothing wrong with the BOE report. You just need to read all of it.

macraignil

GCU Flexible Demeanour wrote: »

Tbh, Government and Civil Service really just follow the consensus created by the political system. IMHO, the cause of the problem is quite fundamental. Collectively, we don't all have a shared view of what kind of country we want to live in.

Even now, I don't sense there's a consensus view that we should try to keep property prices low. Consider the amount of negative comment around the Central Bank's proposal to limit the amount that people can borrow - which, if implemented, should help to make housing more affordable. Yet, quite a few voices are arguing that people should be helped to borrow more.

I agree there is no consensus view that we should try to keep property prices low. Ireland as an English speaking country has become a great exporter of young educated workers. This country has failed these young people who would have benefited from more affordable homes here in Ireland. The Fina party core voters that dominate the electorate are in my opinion mostly older home owners and it makes no sence to the politicians to make life easier for younger people who can emigrate or as Bertie Ahern would suggest commit suicide.

Scofflaw

dlouth15 wrote: »

Ultimately that is true. What confuses people is that the money that they borrow may also be money that they've lent. Initially, as the BOE report points out, the bank creates a deposit (a loan to the bank, a liability) while simultaneously creating an asset.

However money can only be lent so many times. If the reserve ratio is 10% then the maximum that it can be relent is 9 times the original amount. In practice the multiple is less. Beyond that they need funds from outside.

So the initial stages of the bubble could be started domestically but for it to inflate to the extent it did required outside funds.

That is why withdrawal of those funds caused problems for the banks. If what you were saying was true, then they could simply have manufactured the money they needed.

There's nothing wrong with the BOE report. You just need to read all of it.

Mm. I did actually give in my original post an estimate of the extent of external versus internal money put into the bubble. You should...well, read all of it, perhaps?

cordially,
Scofflaw

jimmycrackcorm

realitykeeper wrote:

This letter from Jean Claude Trichet that the government keeps going on about is a joke. Nobody forced Ireland to accept a bailout. Ireland choose a bailout because it was to cowardly to do what Iceland did.

We could have been smarter. Refused to bail out Anglo but supported the main banks.

dlouth15

Scofflaw wrote: »

Mm. I did actually give in my original post an estimate of the extent of external versus internal money put into the bubble. You should...well, read all of it, perhaps?

cordially,
Scofflaw

Well I did read this from the central bank's Patrick Honohan writing in 2009:

Up to 2003, the property boom was financed without significant recourse to foreign borrowing, but after then the banks started to borrow heavily from abroad. This was an effortless undertaking thanks to the removal of currency risk and went essentially unnoticed by analysts, the focus of policy attention having shifted away entirely from balance of payments concerns. Unlike imbalances of the past, overborrowing did not lead to interest rate increases, again because currency risk had been altogether removed. Only when credit risk became an issue after September 2008 did the financial markets belatedly sound a warning sign.

So you can see that there was indeed heavy borrowing from abroad in the latter stages of the bubble. Like I said earlier, this is not in dispute.

AlekSmart

GCU Flexible Demeanour wrote: »

Tbh, Government and Civil Service really just follow the consensus created by the political system. IMHO, the cause of the problem is quite fundamental. Collectively, We don't all have a shared view of what kind of country we want to live in.

Even now, I don't sense there's a consensus view that we should try to keep property prices low. Consider the amount of negative comment around the Central Bank's proposal to limit the amount that people can borrow - which, if implemented, should help to make housing more affordable. Yet, quite a few voices are arguing that people should be helped to borrow more.

Great Post !

It focuses on the nature of the beast.

Why we traded on the love of foreigners for the whimsical,illogical,irrevant Irish "way of life" and the equally feckless way we applied those qualities to our parliamentary elections.

We don't really have a notion of what makes us Irish,let alone a way to describe it to outsiders.

With the ending of the "Northern" conflict,with considerable "foreign" assistance,we surendered the centuries old prop of our nearest Imperially Oppressive Neighbours shadow,and were forced to step forward into the light of a future with no big schoolyard bully left to blame for our difficulties.

What we were left with was/is an Ireland in pretty good shape,no imposed poverty,hunger,ignorance or pestilance,but healthy,well educated,literate,confident young people,all keen to travel abroad and explore the limits of their upbringing.

Boy do these young Irish people present a threat to the "anti-everything" camp,as their very existence proves that Ireland is functioning at a level far beyond the Oppression,Depression,Poverty and Ignorance required to keep the malcontents bile levels topped up.

Jim2007

This discussion seems to ignore the obvious - this was a bubble and bubbles have been happening for hundreds of years! Extraordinary Popular Delusions and the Madness of Crowds was published in 1841 and documents many popular follies up to then.

The reality is that in a bubble, everyone gets drawn and inside the bubble everyone believes they are acting rationally! Should the valuer who valued the property at the going market rate be blamed? Should the bank employee who relied on the valuation to satisfy himself that the loan he was about to grant was covered by a solid asset? And how about the buyer, shouldn't he have known better than to risk everything in a time when prices were rising so fast? And the list just goes on.

There are two things you can be sure of: one, that you will live through a couple of bubbles in your life and two, figuring out who is to blame for the last bubble, will not help you avoid the next one! If it did bubbles would have been a thing of the past a long time ago.

The only way to avoid bubbles is to study them, to understand their nature and to develop some rules of thumb that will help you avoid or at least minimise their impact on you, because you can't rely on someone else doing it for you - they may well already have been drawn in!

the_syco

realitykeeper wrote: »

Ireland choose a bailout because it was to cowardly to do what Iceland did.

Probably because we import a lot of our energy, and very very little native grown employment. Iceland could go it alone, as it had the resources to do so.

GCU Flexible Demeanour

dlouth15 wrote: »

Well I did read this from the central bank's Patrick Honohan writing in 2009:

Up to 2003, the property boom was financed without significant recourse to foreign borrowing, but after then the banks started to borrow heavily from abroad. This was an effortless undertaking thanks to the removal of currency risk and went essentially unnoticed by analysts, the focus of policy attention having shifted away entirely from balance of payments concerns. Unlike imbalances of the past, overborrowing did not lead to interest rate increases, again because currency risk had been altogether removed. Only when credit risk became an issue after September 2008 did the financial markets belatedly sound a warning sign.

So you can see that there was indeed heavy borrowing from abroad in the latter stages of the bubble. Like I said earlier, this is not in dispute.

Good quote, highlighting a relevant point.

I think we also need to find (and I don't know if it exists) some clear text that differentiates between minimum reserve requirements (which is what's fueling the "rain dance" view of where the money came from) and the fact that, indeed, bank lending does need to be funded. Without checking figures, IIRC Irish banks loans were of the order of €400 billion. It should be fairly evident that they needed more than €40 billion to fund that, if they found it necessary to take out something of the order of €150 billion in "liquidity" financing from the ECB.

It should also be apparent that, if than banks lost 90% of the value of their loans, the remaining 10% wouldn't have been enough to repay their depositors.

Just as it should be apparent that developers don't leave the funds borrowed on deposit in the bank making the loan. They spend it on their planned development.

macraignil

Jim2007 wrote: »

This discussion seems to ignore the obvious - this was a bubble and bubbles have been happening for hundreds of years! Extraordinary Popular Delusions and the Madness of Crowds was published in 1841 and documents many popular follies up to then.

The reality is that in a bubble, everyone gets drawn and inside the bubble everyone believes they are acting rationally! Should the valuer who valued the property at the going market rate be blamed? Should the bank employee who relied on the valuation to satisfy himself that the loan he was about to grant was covered by a solid asset? And how about the buyer, shouldn't he have known better than to risk everything in a time when prices were rising so fast? And the list just goes on.

There are two things you can be sure of: one, that you will live through a couple of bubbles in your life and two, figuring out who is to blame for the last bubble, will not help you avoid the next one! If it did bubbles would have been a thing of the past a long time ago.

The only way to avoid bubbles is to study them, to understand their nature and to develop some rules of thumb that will help you avoid or at least minimise their impact on you, because you can't rely on someone else doing it for you - they may well already have been drawn in!

Good point, but I do not agree that figuring out who is to blame for the last bubble, will not help you avoid the next one. I think it is vital to find out why our government and civil service did nothing to limit the property bubble as otherwise we are doomed to repeat the same mistake again.

Sheldons Brain

macraignil wrote: »

Good point, but I do not agree that figuring out who is to blame for the last bubble, will not help you avoid the next one. I think it is vital to find out why our government and civil service did nothing to limit the property bubble as otherwise we are doomed to repeat the same mistake again.

Well the civil service did nothing because that was government policy, and it was government policy because people in general voted for it. Unless people vote for honest politicians nothing will change.

dlouth15

One of the points I tried to make earlier is that you can't single out particular groups for blame. If you do then the conversation goes round in circles in a game of whataboutary. The electorate is to blame for voting for that particular government, but governments for their are supposed to provide leadership and do the right thing even when it is not popular. The homebuyers and developers should not have borrowed recklessly but banks for their part should have assessed the market and seen that it was unwise to lend into an inflated bubble.

When the bubble burst, Ireland should not have succumbed to pressure and threats to protect bondholders in Irish banks, but likewise that pressure and those threats were unjust and caused a disproportionate burden of a Europe wide banking problem to fall on Irish shoulders.

Credit where credit is due but also blame where blame is due.

The OP is wondering why house prices are still high. I think before blaming government we need to figure out what they should be doing about the problem so that recommendations can be made. The problem I believe is that during the boom, although there was a lot of building, a lot of it happened in remote areas and euphemistically termed commuter belts distant from where the demand actually was. The boom confused genuine housing demand with demand for investment vehicles.

What we really need is much higher density housing within a few miles of urban centres. We need a revamp of planning policy to encourage building of this type in these areas. We need money to be put into it. Local opposition to development will need to be faced down. Even if you want a semi-d in the suburbs, decent quality high-density options in the centres will ease demand outside and lower prices all around.

macraignil

Sheldons Brain wrote: »

Well the civil service did nothing because that was government policy, and it was government policy because people in general voted for it. Unless people vote for honest politicians nothing will change.

The voting for honest politicians was put forward to me as a reason for voting for FG when they took over from FFail in the last elections. This FFail versus FG choice has been what has faced the electorate for all the elections I can remember, and both these political parties occupy the same centre right position in the political spectrum. I have heard interviews with members of these parties who were asked what was the diference between FF and FG and they strugled to give an answer.

Its easy to blame the electorate for what government is voted in but I see the political system here as offering very little choice to the voter. About seventy five percent of every election voting goes to these two almost identical parties and voting for anyone else has meant voting for a party or indapendant candidate who inevitably end up with none or very little power to make changes to existing policey.

While it is fair to say the civil service were just following government policey, were there not civil servants charged with responsability for the economic wellbeing of the country. Should they not have pointed out more forcefully that our banks were borrowing abroad to facilitate an unsustainable high price for residential property?

Some comentators have seperated the current massive national debt into what was required to bail out bank bond holders and what was needed to cover government spending. The reason there was such a difference between government spending and tax income was that FFail had allowed taxation to be far too dependant on tax from property. While this alowed popular measures like reductions in income tax the tax burden was switched from those simply working here to those who want to have a home here. While the property market is now so small would it not be a good time to reduce this tax burden on those wanting to have a home in this country?

andrew

GCU Flexible Demeanour wrote: »

Good quote, highlighting a relevant point.

I think we also need to find (and I don't know if it exists) some clear text that differentiates between minimum reserve requirements (which is what's fueling the "rain dance" view of where the money came from) and the fact that, indeed, bank lending does need to be funded.

My understanding is:
The Minimum reserve requirement is about 1%. Banks will lend out their deposits until they hit up against this limit. Then, with access to intererbank / wholesale markets, banks can continue to lend by borrowing money on the interbank market, and then lending this money out. So, that's how they funded additional lending.

Borrowing on the interbank market tends to be quite short term, so you've got to continually (re)finance your loans. You're borrowing short but lending long. This is fine when interbank markets are working, but when Lehmans collapsed the interbank markets completely dried up. This left Irish banks unable to refinance these loans, and this is what precipitated their collapse.

GCU Flexible Demeanour

andrew wrote: »

My understanding is:
The Minimum reserve requirement is about 1%. Banks will lend out their deposits until they hit up against this limit. Then, with access to intererbank / wholesale markets, banks can continue to lend by borrowing money on the interbank market, and then lending this money out. So, that's how they funded additional lending.

Banks have to retain reserves of about 8% of their risk-weighted loans in a reasonably liquid form, such as could be used to stem losses.

Again, I'd suggest folk contemplate the math. In reasonably recent times, Irish banks were reported to be borrowing €40 billion from the ECB to make good just the gap in their funding. Is anyone suggesting that this €40 billion allows them to lend €4,000 billion?

andrew wrote: »

Borrowing on the interbank market tends to be quite short term, so you've got to continually (re)finance your loans. You're borrowing short but lending long. This is fine when interbank markets are working, but when Lehmans collapsed the interbank markets completely dried up. This left Irish banks unable to refinance these loans, and this is what precipitated their collapse.

Yes, indeedy. Although, we could add that the liquidity problem revealed the underlying solvency problem.

andrew

GCU Flexible Demeanour wrote: »

Again, I'd suggest folk contemplate the math. In reasonably recent times, Irish banks were reported to be borrowing €40 billion from the ECB to make good just the gap in their funding. Is anyone suggesting that this €40 billion allows them to lend €4,000 billion?

I don't think that €40 billion implies that; what I understand is that €40 billion was there to finance loans which they had taken out and funneled on a 1-to-1 basis to make more loans, not to cover their reserve requirement vis deposits. But I've never looked in detail at how the accounting around all this works, so I don't actually know.

GCU Flexible Demeanour wrote: »

Banks have to retain reserves of about 8% of their risk-weighted loans in a reasonably liquid form, such as could be used to stem losses.

There's a difference, I think, about the reserve requirement with respect to loans and deposits (which is what I was talking about), and the overall reserve requirement in terms of assets versus liabilities. Though again, open to correction on most of this.

macraignil

dlouth15 wrote: »

What we really need is much higher density housing within a few miles of urban centres. We need a revamp of planning policy to encourage building of this type in these areas. We need money to be put into it. Local opposition to development will need to be faced down. Even if you want a semi-d in the suburbs, decent quality high-density options in the centres will ease demand outside and lower prices all around.

I think we did have tax exemptions for certain types of urban redevelopment at one stage but as far as I know once apartments were built there was no effort to make them affordable. I think that since it is in the area of comfortable family homes that there has been a shortage that it would be better to facilitate this type of development. With the population density in Ireland we should have the room for this type of development and not have to force people into high rise living as is necesary in other parts of Europe.

Thanks again for all the discussion on banking. It really surprises me, with the opening title of the thread, that so many posters have wanted to discuss the details of bank financing.

GCU Flexible Demeanour

andrew wrote: »

<...>what I understand is that €40 billion was there to finance loans which they had taken out and funneled on a 1-to-1 basis to make more loans<...>

That's my understanding, and that's also the point that some posters were stating wasn't the case.

Jim2007

macraignil wrote: »

Good point, but I do not agree that figuring out who is to blame for the last bubble, will not help you avoid the next one. I think it is vital to find out why our government and civil service did nothing to limit the property bubble as otherwise we are doomed to repeat the same mistake again.

The problem is that you are expecting a level of detachment that simply did not exist nor will it exist in the future. There is noting special about politicians or civil servants that makes them immune from the general feeling in the country. No doubt that they also bought over priced houses etc... as well.

And as for repeating the past, the bubble was a repeat of the past, where well known best practices were ignored! Take for example the purchase of a home:
- Borrow no more than about 2 to 3 times the main salary
- Borrow for no more than 20 to 25 years and fully paid off by age 60 or so
- Have 20% deposit in savings (not a gift from granny)
- Monthly payments should be no more than about 20%-30% of net take home pay

And then is the investment property
- Portfolios that hold more that 6% - 8% of it's worth in property is high risk portfolio (our so called investors went for 100%!)
- Don't borrow to invest...???
- If you do take on a high risk position ensure there is a high return (equities were at about 7% while property was at about 3%)
- Diversify to reduce risk - our boys concentrated in a single property!

Next up the banks:
- Ensure long term borrowing is linked to long term sources finance to ensure the rate. Our geniuses built a tracker produce based on an ECB rate while borrowing the money short term elsewhere!
- Keep a diversified loan book to reduce risk. Our boys concentrated it in property and even today they still need to divest themselves of a lot of property loans to improve their situation.

Even today after all that has happened, just look at the opposition there is to the enforcement of some basic rules for mortgages that have been around for ages. And of course there are lots of people trying to buy property again before it goes up... in all likelihood the next bubble has already begun!

macraignil

Jim2007 wrote: »

The problem is that you are expecting a level of detachment that simply did not exist nor will it exist in the future. There is noting special about politicians or civil servants that makes them immune from the general feeling in the country. No doubt that they also bought over priced houses etc... as well.

Yes there is something that separates politicians and civil servants from others in the country. While private sector workers struggled to cope with spiraling increases in living costs, politicians and civil servants gave themselves generous pay rises so they could still live here comfortably.

creedp

macraignil wrote: »

Yes there is something that separates politicians and civil servants from others in the country. While private sector workers struggled to cope with spiraling increases in living costs, politicians and civil servants gave themselves generous pay rises so they could still live here comfortably.

Another difference is when the sh1t hit the fan politicians and public servants (excluding semi-state employees) took a 15 to 20% across the board reduction in their salaries

andrew

macraignil wrote: »

I think we did have tax exemptions for certain types of urban redevelopment at one stage but as far as I know once apartments were built there was no effort to make them affordable. I think that since it is in the area of comfortable family homes that there has been a shortage that it would be better to facilitate this type of development. With the population density in Ireland we should have the room for this type of development and not have to force people into high rise living as is necesary in other parts of Europe.

One of the main reasons I think is that there was a lack of political capital for such regulations. Look at the reaction to the LTV and LTI ratio caps - people are still complaining about these kind of regulations after one of the worst, if not the worst, property bubble the world has ever seen. Think about that; literally one of the worst in human history, and yet some people STILL question the appropriateness of these regulations.

It's very, very, very hard to be the bad guy and put an end to a bubble.