what's happening?

[roosta]

this is in the wrong section, but fuck it, i'll turn it into a political post.

what's happening in your country?

Ireland is fucked, had to take a bailout, which screws the citizens to save the arse of bond holders. Our government is corrupt, and weak, and pathetic.

Elections soon, but what we really need is a revolution. A complete overhaul of our political system. There's a slight chance, but it won't happen. We went from a nation of rebels who fought for our independence, to nation of people who won't complain until its too late and we are under the thumb of the IMF/EU.

[Whatitis]

.

[Adam]

doesn't look great for Ireland.

But on the plus side for the Irish, the UK is still modelling their economic recovery on what Ireland did so you'll soon have the English to laugh at. That's always worth something, right?

[kaiser soze]

The U.S. is fucked, had to take a bailout(s), which screws the citizens to save the arse of the wealthy. Our government is corrupt, and weak, and pathetic.

Elections passed and well nothing really came of it - the GOP/Teabag scam worked and now the new electorate will throw temper tantrums and blackmail their opponents at every turn. They'd rather gridlock than get to the grind. We really need a revolution. A complete overhaul of our political system. There's no chance, Corpo-America has bought and sold this country. We went from a nation of the brave who fought for our independence, to a nation of people who'd rather concern themselves with B list Celebrity Dancers and we are under the thumb of Big Oil, The Military Industrial Machine, and Slimey Bankers.

.

[saz]

i feel very sad and sorry for the irish who did not support and warned against having the government run like a business. this is what you get when you adopt extreme conservative economic ideology, ie reckless tax cutting and deregulation of the financial industry.

[HAL 9000]

I am heavily involved in the Ireland situation at the moment with work, it is pretty sad. Quite simply the banks invested too much into an asset bubble, and now people are going to be paying it back for a generation. In defense of the banks, it can be hard not to lend when your shareholders are demanding you match the performance of your competitors and the government is demanding rapid growth. Meanwhile the government has to achieve that high growth or be replaced by the next party.

It is the job of regulators to step in and spoil the party before it gets out of control, but the powers of regulators were systematically stripped back during the naughties because society, wrongly, thought we didnt need them. I find it hard to point at any one party and say 'This would not have happened if different people had been in charge'

[saz]

i'm not going to post the entire article as it's long as hell, but thought i'd share some portions which really highlight what went wrong.


Right-Wing Think Tank Praised Ireland's 'Economic Freedom' ... and Then Its Economy Crashed

By Terrance Heath
Alternet (http://www.alternet.org/economy/148993/right-wing_think_tank_praised_ireland%27s_%27economic_fr eedom%27_..._and_then_its_economy_crashed/)
November 26, 2010

Any time the Heritage Foundation holds up any country as an economic example, it should set off alarm bells.


It hasn't even been a year since the Heritage Foundation placed Ireland among the top ten countries on its Economic Freedom Index (http://www.ourfuture.org/blog-entry/2010041408/heritage-and-luck-irish). I wasn't intending to write about Ireland at the time, but any time the Heritage Foundation holds up any country as an economic example attention must be paid. It's an invaluable opportunity to learn what not to do, in terms of economic policy.

Even way back then, in April of this year, Ireland's economic crisis was serious enough to make it a real head-scratcher that anyone would place it on top ten list, and hold it as an example of economic success, as the Heritage Foundation's Index is intended to do (http://www.heritage.org/index/about). Ireland is indeed an example. It's nearly a textbook example of the epic failure of conservative economics to grow an economy and austerity to spark a recovery.

At the time, Heritage glossed over Ireland's economic trouble with a short paragraph.

Despite the crisis, Ireland’s overall levels of economic freedom remain high, sustained by such institutional strengths as strong protection of property rights, a low level of corruption, efficient business regulations, and competitive tax rates. These strengths provide solid foundations on which to build recovery and curb long-term unemployment.

That short paragraph is actually loaded with irony. The very "institutional strengths" that Heritage highlights effectively neutered the "Celtic Tiger" that the Irish economy was suppose to be. Just a year before it was written, Ireland became the first Eurozone country to fall into a recession (http://afp.google.com/article/ALeqM5j9uch9QDg5jtnuh1jLjatAYpER6A). A month after Heritage published its index, Ireland's recession evolved into a depression. As in the U.S., Ireland's economic boom was driven by a housing bubble that took the economy down with it when it burst, with shrinking economic output and spiraling unemployment following in its wake. The bursting of that bubble was made even more devastating by the effect of conservative policies on the Irish economy.

On top of the housing bubble, Ireland's economy largely relied on exports, 90% of which were made by foreign-owned multinationals, attracted by the corporate tax rate that was among the lowest in Europe. The tax rate was sweetened by more lucrative concessions designed to attract multinationals. Indeed, when tax-cutting advocate Charlie McCreevy (http://en.wikipedia.org/wiki/Charlie_McCreevy#Minister_for_Finance) became Labour Finance Minister in 1997, he soon implemented what some deemed were unnecessary property-tax incentives, along with a 20% cut in capital gains tax for property investment (http://www.finfacts.ie/irishfinancenews/article_1013998.shtml). Banking on permanent prosperity, essentially, led to tax cuts that have deprived the country of much-needed reserves, and left it stuck choosing between severe budget cuts in service of the national debt, or investing in programs to keep people working and stimulate the economy.

The "competitive tax rate" for which Heritage rated Ireland so highly turned out t o be catastrophic not just to Ireland but to its neighbors too. Ireland's deficit was caused by a an incredibly low corporate tax rate the benefited the corporations that came to Ireland more than it did the country itself. Ireland's "excellent tax climate for businesses (http://www.cato.org/pub_display.php?pub_id=8136)," praised by conservatives came in the form of a 12.5% corporate tax rate that turned Ireland into a tax haven for corporations without profiting the Irish economy much at all (http://baselinescenario.com/2010/05/20/the-very-bad-luck-of-the-irish/).

Ireland’s problems are, sadly, far deeper than the need for simple fiscal austerity. The Celtic tiger’s impressive reported growth over the past decades was in part based on its aggressive attempts to help major corporations in the United States reduce their tax bills. The Irish government set corporate taxes at just 12.5 percent of profits, thus attracting all sorts of businesses — from computer services such as Google and Yahoo, to drug companies such as Forest Labs — that set up corporate bases and washed profits through Ireland to keep them out of the hands of the Internal Revenue Service.

The remarkable success of this tax haven means that roughly 20 percent of Irish gross domestic product (G.D.P.) is actually “profit transfers” that raise little tax for Ireland and are owned by foreign companies.

Corporate profits were essentially funneled through Ireland, and money funneled through a country's economy doesn't get reinvested in that economy in any meaningful way for the middle and working class who provide labor for those multinationals. It did considerable damage to with what Polly Toynbee called "tax piracy" (http://www.guardian.co.uk/commentisfree/2010/nov/22/no-bailout-for-ireland) in The Guardian this week, lowering not only it's own tax base with a corporate tax rate that not only failed to enrich Ireland, but beggared its neighbors by attracting corporations to move their headquarters and thus their profits to Ireland.

The "efficient business regulations," for which Heritage rated Ireland so highly were non-existant. In a review of Fintan Toole's book Ship of Fools: How Stupidity and Corruption Sank the Celtic Tiger (http://www.amazon.com/dp/1586488813?tag=washinmonthl-20&camp=14573&creative=327641&linkCode=as1&creativeASIN=1586488813&adid=0VR13F36915PBE7TAW6Y&), Henry Farrell cites lax regulation and bad business judgement (http://www.washingtonmonthly.com//features/2010/1005.farrell.html) as factors in Irelands economic crisis, and relates that in one instance in which the Irish Central Bank failed to discipline Ansbacher Bank for running a tax evasion scheme for prominent individuals.

Banks suffered no consequences for behavior that ruined the economy and destabilize the public finances. Regulators abdicated their authority to discipline financial institutions, and the result was akin to 50-foot toddlers running amok. Even a major tax evasion scam warranted no consequences. What else went on while the regulatory lights were out, the culprits have largely escaped under the cover of austerity.

[roosta]

i feel very sad and sorry for the irish who did not support and warned against having the government run like a business. this is what you get when you adopt extreme conservative economic ideology, ie reckless tax cutting and deregulation of the financial industry.

yup. it's very sad. Nice to see support though.


It is the job of regulators to step in and spoil the party before it gets out of control, but the powers of regulators were systematically stripped back during the naughties because society, wrongly, thought we didnt need them. I find it hard to point at any one party and say 'This would not have happened if different people had been in charge'

The regulators are really the problem here.

There's alot of talk within Ireland of blaming the people, but at the end of the day, should my niece, my sister, my auntie be financial wizards/experts...no! they elect people who will run the show. they and the regulators and the bank managers had the power, they had the responsibility...and they blew it.

But we pick up the bill. :(

[HAL 9000]

^ The trouble is the regulators didn't have the power. When Ireland was the 'Celtic Tiger' and everyone was prosperous, then the regulators had their powers stripped back and resources cut (note the article by Saz - Economic Freedom = low tax and low regulation).

These measures made investment flow into the country and for a time it made people very rich, but the level of growth was always unsustainable and an asset bubble was the result. The problem in these situation is who is the person who should switch of the tap of investment before it gets of hand?

If it should be the banks, then what will happen to the CEO of the bank who tells the shareholders that while rivals are making record profits, his bank should drop out of the market (answer is he will be fired and replaced by someone who will continue the lending).

If it the government / regulators, then what happens to the political party that puts the breaks on rapid growth, that drives big business out of Ireland, they will be the party of unemployment and sluggish growth and they will be gone at the next election.

If it should be 'the people' well that makes no sense either, no one can resist taking economic risks they dont understand when they see there neighbour's investments making them rich.

The answer is, I think, that it has to be the regulators established as an entirely separate, and unelected wing of government. This happens now with montetary policy which used to be set by politicians (and the same agency problems above arose). Now control is given to independent central banks with long term inflation targets.

Right now, regualtors are getting strong again, but after 10 years of growth, it is inevitable that the joint demands of the public and business will erode them and w will get in this mess again.

[p-branez]

^ I think the difficult task is assigning the correct mandate and appropriate oversight for the separate and unelected regulatory wing of government. We can look at the US central bank, the Federal Reserve, for insight.

First, the legislation creating the Fed outlines the Fed's responsiblity (http://www.federalreserve.gov/newsevents/speech/mishkin20070410a.htm) "to promote effectively the goals of maximum employment, stable prices, and moderate long-term interest rates." We commonly here about this "dual mandate" of low inflation and low unemployment. Anyone familiar with the Phillips curve
(http://www.econlib.org/library/Enc/PhillipsCurve.html) knows the short-term trade-off and negative correlation between unemployment and inflation (ie. when inflation is high, unemployment is low; and vice versa).

Second, just because the Fed players aren't elected politicians doesn't mean they don't use the same closed-door negotiating styles and cater to significant corporate influences when forming policy. The connections (http://www.reuters.com/article/idUSTRE68S01020100930?pageNumber=1) between Fed and Wall Street brings up conflicts of interest. There are big names out there criticizing the Fed - former Fed Chairman and Representative Ron Paul (http://globaleconomicanalysis.blogspot.com/2010/12/ron-paul-suggests-we-need-fed-wikileaks.html) (R-TX) to name just a couple. In the video, among other insightful comments, Paul believes that we need a more transparency of the Fed.

I agree a regulatory solution should reside with an outside agency. In Ben Bernanke's interview last night on 60 Minutes, the most confident answer he provided was a moving defense that monetary policy cannot be set by short-term seekers of re-election (politicians). But as Bernanke knows, this model still creates new & complex problems.

[saz]

for roosta (http://www.youtube.com/watch?v=koY6kXhQDQo)