I’m presuming the plural of stimulus is stimuli - please correct me if I’m wrong.
Postive stimuli (beware generalities) -
The Obama effect: It might be corny or clichd to say it but this has the potential to improve market sentiment and confidence in the US and act as a fiscal stimulus. A global recovery will be driven by the US so this will be key.
Interest rate cuts: Recent interest rate cuts in Ireland are worth billions in combined savings for those with mortgage debt. Notwithstanding the fact that unemployment and the ‘correction’ in the housing market are serious issues, the rate cuts should at least free up a portion of household income and give consumer spending somewhat of a shot in the arm.
Decreasing inflation: commodity prices, like oil and food, are tumbling and this allied to interest rate cuts has seen Irish inflation fall to its lowest level since 1997. Personally, I’m even predicting negative inflation for January after compiling a few calculations earlier. Again, this should provide clear support to the economy but, like 2) above, it’s mitigated by unemployment and the housing market.
That’s where 1) comes in. Once the US gets moving again then Ireland will follow. The US has been in recession since the very end of 2007. But Lehman folding precipitated a massive collapse in the final quarter of 2008 and that appears to have had a huge knock-on effect and caused the house of cards to collapse behind it. It is quite a hunch but I don’t think investor confidence can get any lower and I think this new President guy and all his scheidt talk about hope and change will stimulate market recovery.
I think it’ll take a few months to ‘bottom out’ even though the average recession lasts around 8-10 months and this one’s been ongoing for 14 months now already. But I’m predicting that unemployment levels in the US will start to come down again from about Thursday, 23 July onwards. That will in turn have a positive effect on Irish unemployment rates and my estimate is that things will be looking much more healthy in Ireland from mid October onwards - the Monday just before Champions League matchday 3 next season if you want to push me for an exact date. I haven’t quite figured out what’s going to happen with the Irish housing market but I don’t own a house so I don’t give a shit.
But, overall, this recession has already given us its best shots. It’s still trying to land the odd haymaker or the cheeky low blow. But we’re still standing. The Irish workforce united will never be defeated.
A tip of the hat to Professor Morgan Kelly at UCD for seeing this coming. I remember he was slaughtered when he originally said that we might be heading for a Scandanavian style crash that could end with the nationalisation of our banks, admittedly I thought he was talking sh!te too. Article here is from 13 March 2008: (share prices on 16 March 2008 for the big three were: AIB €12.95, BOI €9.03, Anglo €8.20).
He was saying yesterday that house prices could fall to 80% below their peak!
In relation to the banks, I’m no expert but I can’t see this ending in anything other than a nationalisation of the banks that are left. Our government guarantee isn’t worth sh!te anyway as the country is likely to be bankrupt shortly. We’re headed for an IMF bailout and a decade long slump.
[quote=“briantinnion”]A tip of the hat to Professor Morgan Kelly at UCD for seeing this coming. I remember he was slaughtered when he originally said that we might be heading for a Scandanavian style crash that could end with the nationalisation of our banks, admittedly I thought he was talking sh!te too. Article here is from 13 March 2008: (share prices on 16 March 2008 for the big three were: AIB 12.95, BOI 9.03, Anglo 8.20).
He was saying yesterday that house prices could fall to 80% below their peak!
In relation to the banks, I’m no expert but I can’t see this ending in anything other than a nationalisation of the banks that are left. Our government guarantee isn’t worth sh!te anyway as the country is likely to be bankrupt shortly. We’re headed for an IMF bailout and a decade long slump.[/quote]
See my comment on prev page about his comments re 80% drop in values, think it is a gross generalisation myself. Cant argue with his other comments though.
Just heard that the gov has come out and comforted investors that AIB/BOI will not be nationalised, what that means in the current climate from the current gov who knows
[quote=“dancarter”]See my comment on prev page about his comments re 80% drop in values, think it is a gross generalisation myself. Cant argue with his other comments though.
Just heard that the gov has come out and comforted investors that AIB/BOI will not be nationalised, what that means in the current climate from the current gov who knows[/quote]
[quote=“therock67”]Agree with every word of that. The auditing structure is a joke. It’s designed to be a source of revenue for accounting practices not to serve any useful function for shareholders or the general public.
We won’t have the balls to change anything on our own there. It seems like if the UK hasn’t done something then we’re not willing to take the risk.[/quote]
I think you are being over harsh on auditors here lads. They do an admirable job given the time constraints they are put under to sign accounts in time for market release.
Anyone care to suggest what the auditors might have done different here? The simple fact is that auditors give an opinion that a set of accounts is true and fair at a point in time. Auditors don’t have a crystal ball, if a portfolio of loans is performing and the losses experienced on the portfolio are not historically out of line then how can an auditor declare that the loan needs to be written down? All an auditor can do is give an opinion on the evidence presented to them.
You can place a small amount of blame on the IASB (International Accounting Standards Board) who made is quite difficult for banks to make general provisions for losses. Under the old accounting principles the banks could write off loans as they pleased, however, under the international accounting standards they can only make them based on hard evidence for individual loans or statistical evidence on a collective basis. If you look at Spain (where there has been no government guarantees/bail outs to date) you’ll see the benefits of allowing the banks to make generous provisions, the Bank of Spain effectively ignores international accounting standards and forces the banks to make larger provisions, net result, banks in Spain are among the strongest in Europe at the moment. (They’ll probably be brought down by exposure to Argentina in due course but that’s a debate for another day).
[quote=“dancarter”]See my comment on prev page about his comments re 80% drop in values, think it is a gross generalisation myself. Cant argue with his other comments though.
Just heard that the gov has come out and comforted investors that AIB/BOI will not be nationalised, what that means in the current climate from the current gov who knows[/quote]
Apologies Daniel, forgot you had already mentioned this.
The bumbling actions of the government are doing our international reputation no good whatsoever, they keep making it up as they go along. First it was a blanket guarantee, then it was a capital injection, then it was nationalisation for Anglo, what next? The markets seem to think BOI and AIB are finished. The Govt haven’t got a clue what they are doing and people in the market know this. A government guarantee from a bankrupt state means nothing anyway.
I was in total agreement with you on the morgan kelly piece, with dan dissenting I wanted his opinion on how we are going to avoid meltdown withzero confidence i the banking sector in ireland worldwide
I was in total agreement with you on the morgan kelly piece, with dan dissenting I wanted his opinion on how we are going to avoid meltdown withzero confidence i the banking sector in ireland worldwide[/quote]
Wouldn’t say I am dissenting Art. I dont agree with one particular point he makes about property dropping by 80%, it is a massive generalisation. In some locations it will, in others it wont. Just because average prices could dropped 80% would not mean your house has, the huge number of empty units is diluting the average prices for years to come. A decent location will ultimately be ok.
Heres another piece of his, how the Anglo situation could bankrupt the state.
I think on a technical point, if Anglo failed it would put all of their deals into default.
Say Mr A owes Anglo 20 m, now in default. Mr A also owes AIB 100m, through standard cross default clauses this facility is also in default. As a result risk profile increases and capital levels are required to be increased to cover potential losses, less money to lend so the process is a vicious circle.
So maybe it requires less capital to support Anglo than it does to recapitalise AIB/BOI.
Bottom line Art, I havent the foggiest what can be done, I dont think Iv met anyone who really knows whats going on or whats going to happen
Daniel - I think all the banks will have to be nationalised in the end. Let’s be realistic, a 1bn injection into both AIB and BOI is nowhere near enough, they’re going to need way more. To do this we are going to have to use all of the national pension reserve, let’s just be thankful to Charlie McCreevy for putting that money away a few years ago, it’s the one thing that could save us from bankruptcy.
As for the investors who lose out in a nationalisation, tough sh!t, when you invest you need to be prepared to lose. This whole debacle just goes to show the need to diversify your investments anyway.
As for the investors who lose out in a nationalisation, tough sh!t, when you invest you need to be prepared to lose. This whole debacle just goes to show the need to diversify your investments anyway.[/quote]
When things go well they call it investment when things go bad they call it gambling.
You always hinted at it but now you are clearly gone over to the dark side.[/quote]
Farmer, our challenges may be new. The instruments with which we meet them may be new. But those values upon which our success depends - hard work and honesty, courage and fair play, tolerance and curiosity, loyalty and patriotism - these things are old. These things are true. They have been the quiet force of progress throughout our history. What is demanded then is a return to these truths. What is required of us now is a new era of responsibility - a recognition, on the part of everyone, that we have duties to ourselves, our nation, and the world, duties that we do not grudgingly accept but rather seize gladly, firm in the knowledge that there is nothing so satisfying to the spirit, so defining of our character, than giving our all to a difficult task. Tinnion recognises we have a difficult task - and he’s giving it his all.
Incredible echo in this excerpt of Roosevelt’s inauguration speech of things happening today. Unfortunately 50 years later Gordon Gekko had his day.
"Faced by failure of credit they have proposed only the lending of more money. Stripped of the lure of profit by which to induce our people to follow their false leadership, they have resorted to exhortations, pleading tearfully for restored confidence. They know only the rules of a generation of self-seekers. They have no vision, and when there is no vision the people perish.
The money changers have fled from their high seats in the temple of our civilization. We may now restore that temple to the ancient truths. The measure of the restoration lies in the extent to which we apply social values more noble than mere monetary profit.
Happiness lies not in the mere possession of money; it lies in the joy of achievement, in the thrill of creative effort. The joy and moral stimulation of work no longer must be forgotten in the mad chase of evanescent profits. These dark days will be worth all they cost us if they teach us that our true destiny is not to be ministered unto but to minister to ourselves and to our fellow men.
Recognition of the falsity of material wealth as the standard of success goes hand in hand with the abandonment of the false belief that public office and high political position are to be valued only by the standards of pride of place and personal profit; and there must be an end to a conduct in banking and in business which too often has given to a sacred trust the likeness of callous and selfish wrongdoing. Small wonder that confidence languishes, for it thrives only on honesty, on honor, on the sacredness of obligations, on faithful protection, on unselfish performance; without them it cannot live.
Restoration calls, however, not for changes in ethics alone. This Nation asks for action, and action now."