Economic Crash: When will Panic with a capital P set in?

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Economic Crash: When will Panic with a capital P set in?

We are living in very interesting times indeed and most certainly are in unchartered waters (especially for the new "celtic tiger" generation).

Today we had growth rate predictions for '08 slashed to a level not seen since 1986. It looks now that this is not simply a rerun of the 2001-2003 slowdown; we are heading for proper humdinger of a recession.

With the prices of essentials rising dramatically (esp. oil & food), property crashing, and tens of thousands of construction jobs gone, when will the ordinary joe en masse start to panic ? - panic that their job is at risk, panic that they cannot afford their mortgage repayments, panic that the value of the mortgage they are lumbered with is substantially more than they will ever get if they sold up, panic that they wont have the disposable income they need to enjoy the social life that they currently lead.

There certainly will be a psychological inflection point - but when. My guess is September/October of this year, with the worst economic winter since 1983 to come- but at least we have each other though!
 


Sidewinder

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September, yeah that's about right. Once people get back from their holliers and see the scale of their debt and the shakiness of their job and the size of their negative equity. Everyone will deny anything is wrong until they've had one last holiday.

A lot of people are still in Denial, with some only starting to move into Fear. Panic is a good way off yet.

I must admit I've been stunned and not a little disturbed and creeped out by the extreme length of the Denial phase. It usually takes bout 9 months....but here it has held sway for 2 full years now :shock: I don't know whether that means the other phases will be equally drawn-out; or whether all that pent-up Denial will burst all of a sudden and we'll move very rapidly to the bottom of the sentiment cycle.
 
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Wonder will they chase the Eastern Europeans who'll do a legger very soon back to the fatherland. I stand to be corrected but I recall that in 2007 30% of mortages were given to non-nationals.
 

Squire Allworthy

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We have a bit of recession and after the long period of growth that will seem unfamiliar, but it will be like most recessions, some lose their jobs but most don't. As for general panic, that will only happen if Banks start to fold.

We are just going to be a little poorer next year and judging by the way money has been squandered perhaps no bad thing?
 

Squire Allworthy

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Sidewinder said:
September, yeah that's about right. Once people get back from their holliers and see the scale of their debt and the shakiness of their job and the size of their negative equity. Everyone will deny anything is wrong until they've had one last holiday.
But most people do not have negative equity and in a recession the vast majority of people retain their jobs.
 

Tizona

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Sidewinder said:
September, yeah that's about right. Once people get back from their holliers and see the scale of their debt and the shakiness of their job and the size of their negative equity. Everyone will deny anything is wrong until they've had one last holiday.

A lot of people are still in Denial, with some only starting to move into Fear. Panic is a good way off yet.

I must admit I've been stunned and not a little disturbed and creeped out by the extreme length of the Denial phase. It usually takes bout 9 months....but here it has held sway for 2 full years now :shock: I don't know whether that means the other phases will be equally drawn-out; or whether all that pent-up Denial will burst all of a sudden and we'll move very rapidly to the bottom of the sentiment cycle.
Sounds like you're in a panic already.
 

Sidewinder

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Squire Allworthy said:
But most people do not have negative equity and in a recession the vast majority of people retain their jobs.
But in our case, 23%-odd of our economy relies on construction and that will be falling to maybe 10% if we're "lucky". 25% is FDI, mostly US-based and the US economy has just disappeared down the toilet. And about 34% of the rest is public sector, and there will certainly be cuts there because the money simply isn't there anymore. And since joining the Euro we have no control over exchange rates (40% of our trade with US & UK), or interest rates (which will only be going up), nor can we run massive deficits to spend our way out of it because of the Stability Pact criteria. And there's a global credit crunch after the Great Credit Binge. And we've no savings and the most indebted populace on Earth. And we're the most expensive country in the Eurozone to live and do business in.

We have little or no indiginous industry, we're simply too small to have a relatively-closed economy based on internal consumption, and the only Irish industry likely to be making money in the next 2 years is agriculture FFS.

This is no normal recession.

Where's the silver lining, eh? Which sectors of our economy, exactly, have anywhere near the spare capacity, growth potential, under-utilised skilled labour, and stable export markets to be able to ramp up this year and next to take up the slack?
 

Squire Allworthy

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Sidewinder

You are as always a ray of sunshine.

There are many jobs in construction that are overlooked, repairs maintenance and often when new build declines repairs etc increase. Though there will be a reduction. Civil Service well just how much can you reduce that? Health care or Education do you see room for reduction? We may buy less cars but do we make them, and we may drive less but do we have any oil? Less holidays abroad, less foreign homes bought etc We will have a couple of years of this and when we hit a floor off we go again.

I think you are over stating and I say this as someone who believes we in the west have long ago lost our competitive advantage and are in for some sharp declines in relative importance and wealth.
 

stalins granny

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Theres a huge issue with indebtedness here and i am not just talking mortgages for the last 8 years the banks etc have been allowing people to max their credit cards take a term loan max them again consolidate debt etc all those options are now gone, the panic is starting to set in as the usual january credit card defaulters have now become the feb and march defaulters as well, the growth business for the next two years is the repo business.
 

expat girl

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stalins granny said:
Theres a huge issue with indebtedness here and i am not just talking mortgages for the last 8 years the banks etc have been allowing people to max their credit cards take a term loan max them again consolidate debt etc all those options are now gone, the panic is starting to set in as the usual january credit card defaulters have now become the feb and march defaulters as well, the growth business for the next two years is the repo business.
.....and agriculture, infrastructure, renewable electricity generation.... and we have enough underutilized land for a bit of biofuels too. Thankfully the govt still has a bit of cash in reserve. As the Squire pointed out, cars and oil are imports, and if we use 'em less, that's less expensive carbon taxes going to the EU

btw, we might be almost the most indebted people on earth....but apparently more of our debt is in relatively low interest mortgages and we have much higher personal savings ratios than the Brits, at least...According to a close personal friend in the banking industry anyway. The bad news is that the banks ratings agencies apparently give British banks a higher rating as they think the BoE has deeper pockets with which to bail out any banks in trouble...was wondering about the rationale for that, apparently that's it.
 

Sidewinder

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Squire Allworthy said:
Sidewinder

You are as always a ray of sunshine.

There are many jobs in construction that are overlooked, repairs maintenance and often when new build declines repairs etc increase. Though there will be a reduction. Civil Service well just how much can you reduce that? Health car or Education do you see room for reduction? We may buy less cars but do we make them, and we may drive less but do we have any oil? Less holidays abroad, less foreign homes bought etc We will have a couple of years of this and when we hit a floor off we go again.

I think you are over stating and I say this as someone who believes we in the west have long ago lost our competitive advantage and are in for some sharp declines in relative importance and wealth.
But that's just "Ah shure it'll be grand lads" handwaving.

180K people employed in residential house building in 06. The output of housing is going to fall by about 60% in the 2006-08 period. That's around 100K jobs. And you think a few loft extensions and patios will soak them all up?

Every single sector of the Irish economy in in recession apart from agriculture on the latest figures. There's no growth anywhere. If it was just a construction slump but manufacturing and traded services were roaring ahead to take up the slack I'd be less worried. But we've got a big fat Nothing. And I think deep down we all know just how much of our GNP is bubble froth - conspicuous luxury consumption and big fat profit margins to beat the band while money was no object and the name of the game was to be seen to be coining it. In any lean times all that will simply vanish.

As for the public sector, well when budget deficits are charging past the 3% limit I think you'll find that all of a sudden our moronic oliticians will suddenly discover the joys of public sector reform and head-trimming. We all know the pulic sector is wildly bloated at the administration end while being starved of resources at the front delivery end. And of course they can "blame Brussels" for the job cuts.

In my personal life I often get mild criticism from friends and loved ones for being too relentlessly upbeat, optimistic and grinning far too much, as it happens. As far as the Irish economy is concerned though I look past the guff to the numbers and reality, and all I see is a big bag of spoofery. Economic miracle me hole, it's an offshore tax scam with a property bubble and very little else....and far too expensive, inefficient, and corrupt, with shoddy infrastructure and services, to be worth the hassle of doing business in.
 

just_society

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Agree with previous posters. Panic, or at least anger will begin in September/October.

Housing construction is a gonner, but if FF have any sense they'll put builders to work on infrastructural projects, which will be mostly financed from capital borrowing and not subject to the same tut-tutting from Brussels as current budget defecits.

I'm not sure I agree that the MNC's are in that bad a shape. I fully believe they would have outsourced already at this stage if they wished. Back in '03 we were told that building here was more expensive than Boston, and they still built a huge building in our company. I don't think many people working for MNC's are over-paid relative to the rest of Europe anyway, so I don't think that's as big a threat as some think. Obviously we need to worry if the Euro goes too high. But wage demands will go down in a downturn, making us look better. Cheaper property and construction costs in the near future, all good.

The very best approach the govt could take is to let housing go to the wall, reducing the toxic effect high house prices have had on wage demands, thus reducing the rip-off prices we have been paying for everything else, making us leaner and fitter.

And they definitely need to put more money towards science and technology at 2nd and 3rd level. Lack of suitable graduates is probably the biggest threat to MNC investment, worse even than the corporation tax in my opinion.

Will they do this? Will they f&*k!!! Here's hoping though......
 

madura

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With the prices of essentials rising dramatically (esp. oil & food), property crashing, and tens of thousands of construction jobs gone, when will the ordinary joe en masse start to panic ? - panic that their job is at risk, panic that they cannot afford their mortgage repayments, panic that the value of the mortgage they are lumbered with is substantially more than they will ever get if they sold up, panic that they wont have the disposable income they need to enjoy the social life that they currently lead.

There certainly will be a psychological inflection point - but when. My guess is September/October of this year, with the worst economic winter since 1983 to come- but at least we have each other though!
Economic Crash: When will Panic with a capital P set in?

We are living in very interesting times indeed and most certainly are in unchartered waters (especially for the new "celtic tiger" generation).

Today we had growth rate predictions for '08 slashed to a level not seen since 1986. It looks now that this is not simply a rerun of the 2001-2003 slowdown; we are heading for proper humdinger of a recession.

With the prices of essentials rising dramatically (esp. oil & food), property crashing, and tens of thousands of construction jobs gone, when will the ordinary joe en masse start to panic ? - panic that their job is at risk, panic that they cannot afford their mortgage repayments, panic that the value of the mortgage they are lumbered with is substantially more than they will ever get if they sold up, panic that they wont have the disposable income they need to enjoy the social life that they currently lead.

There certainly will be a psychological inflection point - but when. My guess is September/October of this year, with the worst economic winter since 1983 to come- but at least we have each other though!
Or emigration. It worked for us before, although the destinations of choice may have changed. Perhaps you are too young to remember?
 

gentleben

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I think th level of interest in this thread answers the question best.

People are either in a state of ignorance ( the majority in my view) about the storm about to engulf us or they are in denial.
Most posters here even, are more concerned about posting on threads about Somalia or other crap like that.

Lets see if the trend reverses during the summer.
 

Sligoboy

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gentleben said:
I think th level of interest in this thread answers the question best.

People are either in a state of ignorance ( the majority in my view) about the storm about to engulf us or they are in denial.
Most posters here even, are more concerned about posting on threads about Somalia or other crap like that.

Lets see if the trend reverses during the summer.
Or mostly work in the Civil Service and feel insulated from any ecomonic turbulance we may encounter?

Thats me being facetious by the way, I thought I'd put the boot in first :oops:
 

madura

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Or don't quite know who to believe? After all, while economists in cahoots with the banks etc clearly have a vested interest, so too do the anti-establishment types with their persistent alarmism.
 

stalins granny

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In reply to expat_girl, my earlier comments about indebtedness are on the back of a conversation i had with a credit risk manager in one of the big two banks, they are seeing a huge rise in term loan defaults, basically unsecured lending is dead and starting to smell funny, this has huge implications for the people mostly in the 23-39 age group who are looking at neutral/negative equity in their house and have been financing their lifestyle via a seemingly unlimited suply of cheap credit.
 

feargach

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madura said:
Or don't quite know who to believe? After all, while economists in cahoots with the banks etc clearly have a vested interest, so too do the anti-establishment types with their persistent alarmism.
How exactly? Do we have short positions on the value of houses? Are we assured of a high place in the pecking order "come the revolution"?
 

Cookie68

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madura said:
Or don't quite know who to believe? After all, while economists in cahoots with the banks etc clearly have a vested interest, so too do the anti-establishment types with their persistent alarmism.
I agree with this. I think we need to be cautious but optimistic.

People who left school is the last 15 years know little other than prosperity, good times, two or three holidays a year, the advent of big f*ck off four wheel drives, more Mercs per capita than in Germany, all financed by banks offering pre-approved loans, 100% mortgages (sometimes 10 times your salary) and more credit cards than you can fit in your wallet with relatively low interest rates. This is being paid back by two people working and dropping the kids off in a creche for 14 hours a day. Any correction to this may feel like a disaster but relative to other times and countries I don't think as a whole we'll fare out too bad.

If you left school in the 80's things were very bleak indeed (but maybe not as bad as the 1950's). You could easily expect half your classmate to emigrate, if not immediately then after graduating. Many more spent months or years unemployed or flipping burgers. (This time around there'll be no point in going to the UK as they've got their own problems unlike the yuppie days in the 80's).

I'm not convinced (yet) that we're going to be worse off than, say other European countries.

Can any economists here suggest reasons why we won't be in serious trouble in the next five years?

Is our infrastructure (roads, rail, property) not vastly improved? We don't have a debt/GNP problem do we? Interest rates won't see 1980's levels will they? The future looks bright in Northern Ireland.

Lower house prices will mean lower wage demands surely?
 


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