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The economy is heading for an unmerciful crash


kerrynorth

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Joined
Oct 5, 2005
Messages
1,525
I came on here in a Spring 2007 thread over a year before the likes of the ESRI et al to say that the economy in 2008 was heading for recession and was proven correct (as well as being lambasted by posters who have long departed this forum for saying so). I have also been banging on about the coming crisis in the public finances long before it ever became a headline issue in current affairs. Well my next prediction is that the economy will likely hit an unmerciful wall from 2010 onwards as there are a number of factors now coming together that will send the Irish economy into a virtual deathspiral.

Forget all the wishful thinking predictions from bank and government economists of the economy returning to growth in 2011. What will in fact happen is that the economy will hit such a wall that we will see GNP fall in excess of 30% from its peak over the medium term to circa 2015. A range of factors are coming into play at the same time to make this inevitable: we have to deflate the economy in what will be a futile attempt to rein in the fiscal deficit; a rapidly increasing amount of national income will go to debt interest repayment; emigration will take off to levels last seen in the 1980's as the population begins to decline; interest rates will start to rise late in 2010 further deflating the economy; and the strait jacket of the Euro will prevent us from gaining competitiveness, particularly against Sterling.

The exact timing of when will hit that wall is something I do not have a crystal ball on, however, it should become obvious by late 2010 that the economy is beyond salvage. Once interest rates start to rise appreciably in tandem with deflating real incomes the levels of default will collapse (what remains of) the banking sector and the economy. At some point between 2011-15 Ireland will default on its sovereign debt and the ECB/IMF will be running the economy on life support but with severely reduced public services, public service pay and welfare payments.

The good news is that we should have a good football team come the 2026 World Cup as football talent thrives in times of economic hardship........
 

Cassandra Syndrome

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Joined
Aug 23, 2009
Messages
16,908
Well said Kerry.

Between Swine Flu and the next financial tsunami from the States, we are up the creek. But how will our population deal with it. Revolution? Anarchy? Food riots?

Or could a new financial system rise from the ashes?
 

SamVimesBoots

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Joined
May 27, 2009
Messages
139
Old freedomlover didn't have a mind of his own, he was just regurgitating received clichés. Ard-Taoiseach on the other hand showed signs of intelligence, albeit in a naive frolicking puppy dog kind of way.

It'd be interesting to chat to him now in a spirit of friendly honesty, one old soldier to another as it were, to see what he thinks of it all at this stage, with hindsight. Especially that period, late 2006/early 2007 when all the signs were there for those who wanted to see them and the arguments were raging furiously on here, AAM and the Pin.
 

cyberianpan

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Website
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I agree that we are at a dire stage and corrective action was obviously needed by summer 2008... (people may have predicted it sooner, but that was forecasting, by summer 2008 the fiscal situation was apparent to all but the far left loons in the trade union industry)

  1. we have to deflate the economy in what will be a futile attempt to rein in the fiscal deficit;
  2. a rapidly increasing amount of national income will go to debt interest repayment;
  3. emigration will take off to levels last seen in the 1980's as the population begins to decline;
  4. interest rates will start to rise late in 2010 further deflating the economy;
  5. and the strait jacket of the Euro will prevent us from gaining competitiveness, particularly against Sterling.
Why will 1 be futile... due to further falling revenues.... or lack of courage on seeing through the cuts ?

2: yup
3: not sure, depends on the other factors- but if it starts we'll have a vicious cycle
4: The ECB will really need to think about us here... we have different economic characteristics to say Germany ... I'm not sure what the answer is , but we need some form of 2 track monetary policy
5: Yup... as is I was horrified recently when I found out the cost of doing business in Belfast... a friend's company is getting very tempted to move 200+ high end jobs to there

cYp
 

SAHM

Member
Joined
Oct 23, 2009
Messages
43
well that's it. i'm changing all my euro savings to Icelandic Krone. They are well ahead of the rest of us having already invited the IMF in. So it's probably the safest currency out there at minute!!
 

sharper

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May 3, 2009
Messages
1,027
Indeed. The economy is beset on all sides and there's only a very slight margin for error. We need to deflate the economy in an orderly fashion (so far we're letting it do so chaotically) but no some that we trigger the mortgage default bomb. We have to close the deficit but do so without inflicting too much damage on the economy.

I think the probability of success is extremely low. Even with a competent government and a committed populace it would be a very tricky proposition. Instead we have an incompetent and frankly wishful thinking government combined with a population that literally refuses to accept reality, instead imagining their own more preferential reality and living in that instead.

Before it's all done I think a number of senior EU people are going to be "nation building" here - reforming whole swathes of our legal framework and economy to prevent the implosion of the Euro.
 

absconded

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Joined
Jan 31, 2009
Messages
398
I would love to agree with you.
However, I feel you are being way too optimistic. Tax receipts are going to be waaaaaaaaay worse month on month. Causing a deficit of practically double by this time next year. Panic and run on the banks by February.
All our food is imported as is our fuel. ESB, Telecoms and Gas will be cut off to non paying households. The country will grind to a halt. Xmass 2010 will be in Black & White via Cats Ears Antenna.
 

X-ray

Well-known member
Joined
Jan 17, 2009
Messages
443
I came on here in a Spring 2007 thread over a year before the likes of the ESRI et al to say that the economy in 2008 was heading for recession and was proven correct (as well as being lambasted by posters who have long departed this forum for saying so). I have also been banging on about the coming crisis in the public finances long before it ever became a headline issue in current affairs. Well my next prediction is that the economy will likely hit an unmerciful wall from 2010 onwards as there are a number of factors now coming together that will send the Irish economy into a virtual deathspiral.

Forget all the wishful thinking predictions from bank and government economists of the economy returning to growth in 2011. What will in fact happen is that the economy will hit such a wall that we will see GNP fall in excess of 30% from its peak over the medium term to circa 2015. A range of factors are coming into play at the same time to make this inevitable: we have to deflate the economy in what will be a futile attempt to rein in the fiscal deficit; a rapidly increasing amount of national income will go to debt interest repayment; emigration will take off to levels last seen in the 1980's as the population begins to decline; interest rates will start to rise late in 2010 further deflating the economy; and the strait jacket of the Euro will prevent us from gaining competitiveness, particularly against Sterling.

The exact timing of when will hit that wall is something I do not have a crystal ball on, however, it should become obvious by late 2010 that the economy is beyond salvage. Once interest rates start to rise appreciably in tandem with deflating real incomes the levels of default will collapse (what remains of) the banking sector and the economy. At some point between 2011-15 Ireland will default on its sovereign debt and the ECB/IMF will be running the economy on life support but with severely reduced public services, public service pay and welfare payments.

The good news is that we should have a good football team come the 2026 World Cup as football talent thrives in times of economic hardship........
I agree that next year will be far worse than this year. We have yet to see the full impact of a comsumer and banking crash. There are thousands of jobs to go in both sectors from Jan. Taking 4 billion out of the economy at a time like this will be like kicking a dying cat, whats worse it is only the start of what is promised. We should front load all of the pain and crash down to a sustainable cost base. The tax take will always be behind spending otherwise.

Wages are going to drop very fast, as will population and tax income. I think our only hope is to accelerate deflation and get it over with as fast as possible. We are going to crash, do it fast and make sure we have a low cost base to recover from.

If in 2011 or 2012 we are still able to borrow and costs in Ireland are much lower we might be able to rebuild. Maintaining what we have and trying to cut a bit here and there while basically maintaining the same economy is for the birds.

We must accept that massive debt default is required and we must face the fact that alot of the banks are just excesses baggage. Anyone who's wealth is tied up in property, lettings, debt etc is done for. We need to start again we new businesses with low costs asap.

We should also alter bankruptcy laws and tenancy laws so that people can escape debt that is keeping a floor on certain costs. Work to repay failed banks is a nonsense. If we dont give an escape route people will just leave and never return.
 

An Bodach

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Joined
Jun 30, 2009
Messages
9
well lads, I'd say youre great craic to go for a pint with.This is a bit like TP O Conchuir, the other great Kerry Oracle. Ohh the seals are foaming which means a wet September, the nettles are knitting geansaís befor ST Bricins day which means there will be a foggy July, and dont forget the amount of hedgehogs throwing themselves before cars, December will be cold. People have been predicting doom forever, Lee McWilliams et al... you are bound to be right sometime, just like July will be foggy sometime.

What value is in this post? To anyone? or is it just you can say I told you so?
 

cactusflower

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Joined
Oct 1, 2008
Messages
1,285
Default is on the way, and not only here. Some of the Eastern European states are in similar condition with the added complication that, like Iceland, they borrowed Euros and their currencies have devalued, or will, devalue.

 "Iceland Recovering From Neoliberal Disaster"     : Information Clearing House - ICH

A pragmatic economic principle is at work: a debt that cannot be paid, will not be. What remains an open question is just how these debts will not be paid. Will many be written off? Or will Iceland, Latvia and other debtors be plunged into austerity in an attempt to squeeze out an economic surplus to avoid default?
Between NAMA, personal debt and government deficit, and the passing of the temporary conditions that favoured Ireland as an IT assembly location in the 1990s, there is no chance of the debts being repaid.

The country will divide into emigrants, would-be-vulture Namoids, and the furious remainder.
 

Cassandra Syndrome

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Joined
Aug 23, 2009
Messages
16,908
I would love to agree with you.
However, I feel you are being way too optimistic. Tax receipts are going to be waaaaaaaaay worse month on month. Causing a deficit of practically double by this time next year. Panic and run on the banks by February.
All our food is imported as is our fuel. ESB, Telecoms and Gas will be cut off to non paying households. The country will grind to a halt. Xmass 2010 will be in Black & White via Cats Ears Antenna.

Blimey! When somebody says that I'm too optimistic, we truly are screwed.
 

cactusflower

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Joined
Oct 1, 2008
Messages
1,285
well lads, I'd say youre great craic to go for a pint with.This is a bit like TP O Conchuir, the other great Kerry Oracle. Ohh the seals are foaming which means a wet September, the nettles are knitting geansaís befor ST Bricins day which means there will be a foggy July, and dont forget the amount of hedgehogs throwing themselves before cars, December will be cold. People have been predicting doom forever, Lee McWilliams et al... you are bound to be right sometime, just like July will be foggy sometime.

What value is in this post? To anyone? or is it just you can say I told you so?
I hear a lot of people who think there will be a recovery in a couple of years time. Certainly, the government have banked everything on it (at the same time as doing everything possible to ensure it can't happen).

There will be serious social and political battles coming up. We need to be prepared to default on the best terms possible for the population, and to protect what assets we have left.

Also, it would be a good idea to have a government in place that gave a damn if people are fed.
 

liamfoley

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Joined
Jun 27, 2008
Messages
3,282
You saw that in your crystal ball Kerry?
 

X-ray

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Joined
Jan 17, 2009
Messages
443
Sure why don't we all go kill ourselves eh?

i would not give bertie the pleasure, if i have to live in a cardbord box in drumcondra i will survive this, i might mug him with a needle or somthing though
 

X-ray

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Joined
Jan 17, 2009
Messages
443
on the other hand sterling might sprial into inflation before the eurozone and ramp up interest rates before us making us competive again. We can then resume irresponsible borrowing and forget the whole thing.
 
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