What was Ireland's problem?

[trefoil]

Quote from Debaser82:

People say Ireland was a terrible place to live before they joined the Euro.

Practicly a 3th world nation.

People often tend to romanticize the past.

Oh how better the Irish were off when they still enjoyed sovereignity and in control of their own monetary policies...

Or were they?

Mass emigration from Ireland stopped way back in the 1970s. Things were improving there for a long time before the euro, and that was due to its membership in the EU, which started in 1973.
Ireland actually gained sovereignty over its monetary policy when it went to the EMS in 1979, since the Irish pound had, prior to that, been linked to the British pound. That helped them immensely in the eighties and nineties, in terms of finally breaking loose from the UK's economic grip.
The euro was a step too far. I can easily see why Ireland enthusiastically joined it, but from an objective economic POV, it makes no sense. 20% of its exports go to the US, and 16% to the UK. So, more than one third of its exports are outside the eurozone; obviously, sharing a common currency with the rest of Europe isn't nearly as important for them as it would be for, say, Germany.
It's hard from a political POV to realize, but membership in the EU did far more good than did membership in the euro. The first helped immensely, the second unwound a lot of the good done by the first.
This is also the case with Spain, Portugal and Greece, at minimum. The UK stayed out of the euro, and has done just fine without it.

 

[Ghost of Cutten]

Quote from trendy:

Wrong! The NINJA loans and their ilk fueled the real estate bubble. If the NINJAs couldn't get a loan then demand would have been dampened, and prices would not haven risen like a sub-launched ICBM, and the bubble would not have formed.



Well, that goes for any asset-class that is in the bubblesphere. The only problem is, is knowing when an asset-class in a bubble. Are people buying gold at $1,300-$1,400/oz topping the market? Hard to tell sometimes isn't it? As they say, hindsight is 20/20.



If it costs 2k monthly all-in to own a place, then the homeowner is not going to rent it for $800, at least not for long, and if it can be rented for that, then it means that prices WERE out of whack, but have since corrected, since demand is surely down or the homeowner would simply sell rather than continuing to bleed money.

Many countries without NINJA loans have had real estate bubbles, so your first claim is demonstrably false.

Knowing an asset is in a bubble is easy, as long as there are valuation metrics. This was not hindsight as I was calling a bubble at the time back from late 2005 onwards, and posted it here on ET making numerous threads warning people there would be a crash, refuting the bull arguments etc. I also put my money where my mouth was, loading up on puts on real estate & financial stocks, and selling my personal real estate holdings.

Your last point is also wrong - at the top, many people paid 2k a month to own homes they could get for 800 by renting. That's what happens during a bubble. If you look at Australia, a current housing bubble, that is exactly what they are doing now.

 

[Ghost of Cutten]

Quote from zdreg:

"When I see a bird that walks like a duck and swims like a duck and quacks like a duck, I call that bird a duck."

you are a socialist through and through.

"these are all pretty run off the mill. People support those government services even if they would make an ideological statement such as "all growth comes from the private sector"

only socialists would agree with your presumptious statement.

He's a mainland European. Mainland Europeans, on the whole, think that socialist policies aren't socialist. They are so used to an all-powerful state interfering in every aspect of life, that it has become the norm for them, and they see nothing remarkable or unusual in it. The idea of sovereign individuals and inviolable rights that shall not be infringed, is completely alien to them. That's why they get so confused by America.

The same thing happens with people from the 3rd world. There is just no culture of individual freedom and rights, and social engineering by the state is viewed as not only normal, but the only possible model of society that any rational person could contemplate.

 

[Ghost of Cutten]

Quote from Debaser82:

People say Ireland was a terrible place to live before they joined the Euro.

Practicly a 3th world nation.

People often tend to romanticize the past.

Oh how better the Irish were off when they still enjoyed sovereignity and in control of their own monetary policies...

Or were they?

Ireland did great in the 1990s before the Euro. Their success came from rolling back a highly regulated socialist economic system that impeded growth and opportunity. That is why Ireland became famous for people emigrating all over the world. It was very difficult to raise capital, start a business, hire and fire people etc. After decades as a poor backward country, the government hired a team of economists to advise them how to improve matters, and they adopted a general smaller government, less regulated, more pro-business model. This worked extremely well and in less than a generation their living standards rose to the same as the UK (actually at the peak went slightly beyond it). It was similar to how the Uk recovered from the disastrous 1970s by deregulating under the Thatcher era - a model that was copied all over the world with great success, for the most part. The UK also had a boom that went too far and led to a bust in 1990.

However, like many such things, they just extrapolated to infinity. Like most people, they did not understand slightly more sophisticated financial concepts such as the business cycle, fractional reserve banking, bubbles etc. So they ended up with the classic boom into bust story that repeats every business cycle in systems with highly leveraged fractional reserve banking.

It has little to do with the Euro, it would have happened anyway. USA, Australia, Canada, Dubai, Eastern Europe outside the Eurozone - they all had RE bubbles without the Euro.

If Ireland, or any of these countries, had full reserve banking, then no real estate bubble would have collapsed the banking system. That is the problem that caused the crash, not the single currency. The single currency simply means that there would be another method of adjusting - devaluation - which would be quicker and probably less harmful than adjusting via a collapse in domestic prices.

What Ireland should have done is exactly what they did, but with better policies to mitigate the development and consequences of asset-price bubbles. Either much higher bank reserve ratios, tighter leverage limits on property, or simply full reserve banking, or some combination of them.

 

[Ghost of Cutten]

Quote from fundjunkie:

No he is not. To describe someone as a socialist you have to first understand what socialism is. By applying that crude caricature of socialism that has long existed in the US you show that you clearly do not.

Note that, before you rush to brand me as one, I am not a socialist. But I have taken the time to understand what it is, its merits (elementary prerequisites of a moral and civiziled society, you might say), and why i disagree with it. I suggest you do the same.



Are you suggesting that only socialists would agree with a notion that is clearly common sense? Surely not.

Please outline for us those Govt services that you think would be better handled by the private sector? I'm interested in where you draw the line of demarcation.


Thx
D

Well socialism is just government control of the economy. Ferdinandalx was proposing several policies that involve government control of the economy, so it is fair to describe them as socialist. What else would you call them - libertarian? Free market? Small government? They are socialist, plain and simple.

 

[trefoil]

Quote from Ghost of Cutten:


It has little to do with the Euro, it would have happened anyway. USA, Australia, Canada, Dubai, Eastern Europe outside the Eurozone - they all had RE bubbles without the Euro.

If Ireland, or any of these countries, had full reserve banking, then no real estate bubble would have collapsed the banking system. That is the problem that caused the crash, not the single currency. The single currency simply means that there would be another method of adjusting - devaluation - which would be quicker and probably less harmful than adjusting via a collapse in domestic prices.

What Ireland should have done is exactly what they did, but with better policies to mitigate the development and consequences of asset-price bubbles. Either much higher bank reserve ratios, tighter leverage limits on property, or simply full reserve banking, or some combination of them.

Full reserve banking has never existed anywhere in any developed economy, ever. It's not even banking, really.
The italicized part makes no economic sense at all, unless it's a typo. Did you mean to say the absence of a single currency? That would have made sense.

 

[trefoil]

Quote from Ghost of Cutten:

Well socialism is just government control of the economy. Ferdinandalx was proposing several policies that involve government control of the economy, so it is fair to describe them as socialist. What else would you call them - libertarian? Free market? Small government? They are socialist, plain and simple.

Back when people were sane, it was described as economics, Western-style. These days, when people seem to have forgotten that what was fought for and won in the West wasn't lack of government, but representative government, it's described by extremists as above, and apparently the extremists, who don't seem to know any history that wasn't first posted at mises.org, have won the day on the Internet.
The majority of people, throughout the world, live in the real world though, and do understand, even if they can't put a name to, arguments that rely on the fallacy of the excluded middle.

 

[lurefo]

Quote from Ghost of Cutten:

What Ireland should have done is exactly what they did, but with better policies to mitigate the development and consequences of asset-price bubbles. Either much higher bank reserve ratios, tighter leverage limits on property, or simply full reserve banking, or some combination of them.

No way. Too Big to fail is you best friend in this economy.

 

[tickmagnet]

Free trade and the dollar caused all these problems and how can you forget our beloved USA.

 

[kingfisher3210]

The problem was price makes news.

Once the price of euro and stocks started to tumble, business channels took on Ireland issue to explain the cause.

Prices tumbles because of 'collective psychology'.

It is the price which makes news not news which makes price. I believe in it.