Where do we stand economically?

Anglo Celt

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Bowing down to the economically literate here, but where do we stand at present with regards to the economy? No hyperbolic doom but realistically.

One poster suggested to me that we are still one of the richest countries in the world. But since our wealth is heavily reliant on foreign investment and foreign capital (i.e. it's not our money) what does current events mean for us?
 


DeputyEdo

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We've no money to pay for public services, we have to borrow to do that, but the cost or borrowing money is higher than it's ever been.
The gov haven't a clue how to get out of this, so they're gonna hang on to power for as long as they can, then let the next gov deal with the problem.
The people of this country will end up having to pay stupid amounts in taxes and levies and public service obligation charges etc so that the bond holders can be repaid all of their cash.

Basically, we're screwed.
 

Darren H

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It's a fair question, and the Germans will be asking why they are bailing out a country with a higher GDP per capita than them.

They are already paying for the Greeks to retire at an earlier age than their own taxpayers.
 

Asparagus

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The economy is experiencing a heart attack.

Money (Blood) has been flowing into the country (heart) but lately it brings with it so much debt (Cholesterol) that and now the Markets (blood vessels) are suddenly reluctant to give us any more money because we look like we are in danger of default (heart attack) and our leaders are not taking the appropriate action.

The governments response to this is to bring out austerity measures that will see them increase taxes and reduce expanditure (further reducing the amount of money in the economy)
We are ok for the time being but the markets have no interest in us

So one day soon a Public sector cheque will bounce and our nation will die.

The markets tell us that we are going the wrong way about things - we need lifestyle changes (austerity plus structured default)

The IMF and the EU will now attempt a rescue (bypass) and will essentially run the country (put us in ICU).

The problem is that the rescue that they plan for us does not address the issue of debt correctly and actually adds more debt on to us...

We may be bed ridden until we die.
 

Anglo Celt

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Asparagus, thank you! Wonderful description for people like me struggling with a lot of the information we're getting :)

Where do we stand as to one posters suggestion that we are still one of the richest countries in the world? Why do rich countries need bailouts?
 

thebig C

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OMG, Tony Kileen is on Newstalk now trying to explain our "economic situation"....jez he is such a moron.

IMO being treated far too respectfully by Damien!

C
 

Squire Allworthy

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Ireland needs to raise money. It cannot sell bonds to do this for if it does it will be at costs it cannot afford.

Ireland will not run out of cash for some months yet, when, or rather if, it does then wages won't be paid and the guarantees in place will be worthless.

The Banks need recapitalised and have effectively been frozen out.

You can call it whatever you want, but Ireland needs a bailout. It is essential that that is on very favourable terms for if it is not then Ireland will eventually default. So we are probably seeing opening position for negotiations. However in all such negotiations the question is ultimately who can wait? Who needs to do a deal first?

From a Eurozone point of view can it afford to see Ireland default? I think it can.

The only ethical issue here,IMO, is the question of who should be responsible for the bailout of the banks. I have never understood why this liability should be the responsibility of the Irish taxpayer. If this cost was separated off and dealt with by some other means, along with other ailing Euro Zone Banks, then Ireland would have no insurmountable problems. No such mechanism exists and that is the problem IMO. Basically ailing banks need to go into some form of receivership. The complication is that the Irish government decided upon direct intervention, but this was due in part because there was no mechanism in place for dealing with miscreant Banks. This issue, regulation and the role of the ECB needs to be properly addressed or the problem will return at some future time.
 
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sport02

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OMG, Tony Kileen is on Newstalk now trying to explain our "economic situation"....jez he is such a moron.

IMO being treated far too respectfully by Damien!

C

Less than two months ago, minister Kileen told Matt Cooper that Ireland had a perfectly working economy.
You coudn't make it up.
 

Asparagus

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Asparagus, thank you! Wonderful description for people like me struggling with a lot of the information we're getting :)

Where do we stand as to one posters suggestion that we are still one of the richest countries in the world? Why do rich countries need bailouts?
One of the richest countries in the world is a bit of a misleading headline.

We are over paid and as a result it can appear that we are rich.
Take a man in Ireland who has an income of 100,000 PA and savings of 33,000. He's rich right?
Especially if you compare him to a man in Canada who earns 35,000 and has 12,000 on deposit.

But when you look at how much they owe you get a true picture of their worth.
Man in Ireland probably owes 500,000 (5 times his salary)
Man in canada probably owes 105,000 (3 times his salary)

So its fairer to say that per capita we are one of the most endebted nations on earth.
 

Scipio

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Asparagus, thank you! Wonderful description for people like me struggling with a lot of the information we're getting :)

Where do we stand as to one posters suggestion that we are still one of the richest countries in the world? Why do rich countries need bailouts?
Being that I made the claim, let me respond. The current state of the public finances (or more specifically the state of the banks debt exposure), is somewhat separate from Ireland's level of development, or in other words, "richness". Our balance of payments for 2010 is positive, the country remains a leading centre for multi-national investment, especially as regards pharmaceuticals and technology (Google, Facebook et al.) Gross National Income remains one of the highest in the world. Ireland is still the fifth most developed country in the world according to the UN HDI for 2010, and so on.

Countries like Iceland, and even Greece, remain "rich'' relatively speaking, in the same way that the United Kingdom didn't suddenly become a third world nation overnight when it applied for an IMF loan 30 years ago.

Ireland's problem is that it can't gain access to the bond markets to borrow because the market doesn't trust Ireland to not default in the long-term, or more specifically, it doesn't have any confidence in this government whose speculations have turned out to be consistently wrong.

Thus the need to approach the EU/IMF for a loan to tide us over and prevent the contagion spreading to other at risk members like Portugal (probably too late), Spain and so on. Our problem is not that our economy is leaden-foot, it's that our banks have, for all intents and purposes, gone bust.

We're the United States of late 2008 with no Federal Reserve to get us out of the immediate hole (as Patrick Honahan said this morning, the banks need supplemental funding that can be shown is there if needed, just as the U.S. pumped supplemental funding into its banks in 2008 for the same reasons, more than them actually needing it as of now), thus where else to go but Brussels.

From reading some on politics.ie, you'd swear that we're going to go back to the 1930s Germany. Iceland is currently getting back on its feet after an even bigger crash, relatively speaking, as is Latvia - Ireland can, and will, too.

This isn't end days.
 

Mister men

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We are as a nation a great people but i think this is one bridge too far for us to cross. They say it's not when the unemployed people of a nation start to emigrate that you need to worry but when the employed people emigrate you know the games up. Sad times and glad i'm bound for Canada in January.
 
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There's no sense throwing money (bailout) at the problem if the underlying issues are not addressed. If we take 6bn out of the economy in 2011, and more in subsequent budgets we will not be able to grow the economy sufficiently to balance the books. We need to reduce expenditure - Public Sector wages is the big killer, and grow our economy to increase the tax take from the private sector - invest in job creation and make it easier to do business. If we take this bailout and go ahead with the 6bn budget we will be back asking for another handout in 1-2 years.

The big underlying issues are -
Public sector wages,
Public sector reform, (2 people in the dept of finance with financial qualifications!?!),
A coherent strategy for job creation.
Reduce cost & red tape for doing business, 12 years bankruptcy legislation is way too penal,There's no incentive to being an entrepreneur.
 

Anglo Celt

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Thank you all for the info. It'll take my economically illiterate mind awhile to digest :)

Scipio, I had forgotten that you also suggested the richness of Ireland. I was going off another posters claim. Apologies. Did not mean to single anyone out.

When you say "richness" though, do you mean economic richness or the richness that people like HDI measure by how long people spend in school and such? And how do you see Asparagus' post that we are one of the most heavily indebted nations in the world? Interested to get your POV.
 

Hogwash

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Nov 17, 2010
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Ireland needs to raise money. It cannot sell bonds to do this for if it does it will be at costs it cannot afford.

Ireland will not run out of cash for some months yet, when, or rather if, it does then wages won't be paid and the guarantees in place will be worthless.

The Banks need recapitalised and have effectively been frozen out.

You can call it whatever you want, but Ireland needs a bailout. It is essential that that is on very favourable terms for if it is not then Ireland will eventually default. So we are probably seeing opening position for negotiations. However in all such negotiations the question is ultimately who can wait? Who needs to do a deal first?

From a Eurozone point of view can it afford to see Ireland default? I think it can.

The only ethical issue here,IMO, is the question of who should be responsible for the bailout of the banks. I have never understood why this liability should be the responsibility of the Irish taxpayer. If this cost was separated off and dealt with by some other means, along with other ailing Euro Zone Banks, then Ireland would have no insurmountable problems. No such mechanism exists and that is the problem IMO. Basically ailing banks need to go into some form of receivership. The complication is that the Irish government decided upon direct intervention, but this was due in part because there was no mechanism in place for dealing with miscreant Banks. This issue, regulation and the role of the ECB needs to be properly addressed or the problem will return at some future time.
Interesting post. If the "bailout" is not actually a bailout but a loan with an interest rate attached then can the Irish taxpayer really afford tens of billions more in national debt? Surely at this stage a bailout with debt restructuring has got to be preferable???
 


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