19/7/2013: WLASze Part 1: Weekend Links on Arts, Sciences and zero economics

The first part of my regular WLASze (Weekly Links on Arts, Sciences and zero economics)... enjoy!

Before we begin, you can now follow my art wandering on-line here: http://theartstack.com/gurdgiev

And a nice pre-cursor to news yet to be released... something special is brewing for September 14th... news here, once public...

Now, on to WLASze:

Starting with some art. Altman Siegel Gallery showing Trevor Paglen photography. Here are select two images from the show and one image from archives:

A nearly abstract expressionist quality to this panoramic shot's composition:

Followed by 'spin'-styled composition:

And one of delightfully dark and dynamic, almost threatening with density and light:

The photograph's texture is so rich and viscous and the composition so stripped out of superfulous positioning drama to its raw natural subject that it reminds me of one of my old favourites: Emil Nolde. Especially his poignant late watercolours - artist's favourite medium in the 1940s after he was forbidden to paint by the Nazi regime in 1941 (though Nolde was a member of the Nazi party and yet was deemed to be unworthy of being called an artist. His work featured in the famous Entartete Kunst, 1937).

Meanwhile, in Orange County (yes, Detroit's bankruptcy spings to mind) we have an on-going California-Pacific Triennial, showing an excellent Araya Rasdjarmrearnsook Two Planets: Millet’s The Gleaners and the Thai Farmers, 2008

Some more of the Thai artist works: http://www.trfineart.com/exhibitions/28. Millet too dressed up his gleaners as if they were heading out to the church, just as Rasdjarmrearnsook’s Thai framers are dressed as if for posing...


Loving juxtapositions and ever slightly shifting toward science: "Ulric Collette is a French-Canadian photographer who does some quirky portrait work. In his photo series “Genetic Portraits” he photographs family members and then cuts them side by side to create one portrait." Genetic manipulation or photographic nature? Or vice versa? It's juxtaposition of age and genetics - one denotes distance, another proximity.


Proximity v distance juxtaposition leads to time v gravity juxtaposition and to Trinity College, Dublin where it took scientists 69 years to carry out one experiment - not to discover something new, but to illustrate a point: it takes a very long time for very viscous stuff to succumb to gravity...
http://www.scientificamerican.com/article.cfm?id=worlds-slowest-moving-drop-caught-on-camera-at-last Best quote: "it takes 7 to 13 years for a drop to form, but only a tenth of a second for it to fall". I dare not think what Sunday Indo might say about the use of taxpayers money for this stuff, but it made Scientific American and that is worth an Irish punt or two or few thousands... Oh, and in case you wonder - no, Physics gang did not invite celebrity economists to watch the historical moment...


Staying with juxtapositions for one more trip... WordlessTech has a photoshop fascination with merging 'two opposite place, New York and the Grand Canyon' that worries me for one reason: what is it in Grand Canyon's imagery that makes people constantly desiring to do aesthetic violence to it? http://wordlesstech.com/2013/07/18/merge-new-york-in-the-grand-canyon/ . I wrote about Grand Canyon as the focal or experiential point last week here. My plea is for people to stop attempting to fill Grand Canyon with 'stuff', bridge it with hotels and make it accessible to couch potatoes beyond the usual 'view from the top'. It is here to challenge, beat us into dreadful sweat and wear our legs out. It is not here to sip double-skinny-caramel-dill-latte while levitating in some fancy capsule over the abyss...


And onto science, simple: Classic dilemma for those in pursuit of public health and personal well-being: drink or dry… or trilemma for some cultures: drink till you drop, drink or dry… or 'To Drink or Not to Drink' problem.

Much of the research on life expectancy in relation to alcohol consumption shows an inverted U-shaped relationship: mortality is high for those who drink alot and... for those who do not drink. The question, that so far remained un-answered is: but why? What explains higher mortality for those who do not drink at all.

A recent paper (here is its 2012 version http://paa2012.princeton.edu/papers/122744) looked at a huge data set on drinkers and non-drinkers that covered their 'survivorship' data and also data about their social and physical health. The study divided nondrinkers into three major categories:

• "abstainers" - people who had 12 or less drinks in their lives; 
• "infrequent drinkers" - people who consumed less than 12 drinks a year; and 
• "former drinkers"

They then sub-divided Abstainers into sub-clusters.

• Abstainers with religious or moral motivations for not consuming alcohol, not drinking due to their sense of responsibility to their family had similar mortality risks to light drinkers.
• Abstainers who dislike the taste of alcohol and referenced this dislike as the main driver for not consuming alcohol had mortality risk 17% higher than light drinkers. 
• Infrequent drinkers overall exhibited a slightly higher mortality risk than light drinkers. 
• Former drinkers had the highest mortality risk of all nondrinkers. 
• Former drinkers with reasons for abstaining included being an alcoholic and problems with drinking had 38% higher mortality risk

So the dilemma/trilemma is sorted: enjoy your life, but don't abuse the enjoyment lest it becomes an addiction?


And while on drink subject, here is a more current data study on 'drink till you drop' cluster mortality outcomes: http://www.sciencedaily.com/releases/2013/07/130719085152.htm
Not a light-hearted piece of research, although I disagree with one of the scientists' policy prescriptions, but, hey that 'ze' in WLASze stands for 'zero economics', so no more on this...


Small Print Stuff: The above statements and research are not an endorsement of either consumption or non-consumption of anything, including alcohol. Please, exercise caution when operating heavy machinery while consuming vanilla ice cream. But seriously - do stay safe!

And stay tuned for Part 2 of WLASze coming up tomorrow.

19/7/2013: Global Asset Returns: 10-year Averages

A nice inforgaphic on 10-year average annual returns for a number of major asset classes from Pictet:

Details of calculations and strategy discussion - as usual, with Pictet's no-nonsense straight talking analysis - is here: http://perspectives.pictet.com/wp-content/uploads/2013/07/Pictet-Horizon-EN1.pdf

What can I say, I like these guys...

19/7/2013: Reuters TV on Irish Economy & Bankruptcy Tourism

Two recent Reuters TV programmes on

• Irish Bankruptcy Tourism http://www.reuters.com/video/2013/07/15/is-holiday-over-for-bankruptcy-tourists?videoId=244230864 and 
• Whether Ireland is on the Road to Recovery http://www.reuters.com/video/2013/07/12/is-ireland-really-on-road-to-recovery?videoId=244195065&videoChannel=5

Note: both programmes feature my contributions.

19/7/2013: Ireland: Six Points on Government Spending Stats for Q1 2013

Four key trends in Irish Government expenditure through Q1 2013:

Chart above shows three aspects of Irish Government spending:

1. Overall, expenditure continues to outstrip revenues, generating deficits well in excess of the target and accelerating in Q1 2013 once again, although part of this acceleration is seasonal and part is riven by the IBRC shut-down cost (see my earlier post on this: http://trueeconomics.blogspot.ie/2013/07/1872013-irelands-government-deficit.html)
2. Decline in Government spending since Q1 2009 has been much shallower, once we strip out banks measures than at the aggregate level. This highlights the nature of our fiscal statistics reporting, whereby there is not a single full database (by either the Department of Finance, or CSO) which actually provides clear accounting for ex-banks spending. Question is: why? The IMF this week praised Irish Government for delivering on fiscal transparency. Yet, the very same Government continues to cherry-pick data to show desired effects. 
3. Q1 2009-Q1 2013, overall reduction in gross public spending ex-banks, based on Q1 figures alone (so a caveat here) is closer to EUR470 million or 2.67%. Meanwhile, tax and social security contribution revenues are up EUR979 million or 9.2%. And this disregards the fact that much of the expenditure reductions came from higher charges on private users of public services, not an actual budget cut to budget-covered institutions.

Chart above shows breakdown of the expenditure for four main lines of spending:

1. Compensation of employees has declined 7.53% on Q1 2009 (saving EUR390 million). We were promised billions in savings here and we have attained… well sort of short of that. 
2. Use of goods and services (gross of taxes payable) declined 37.47% or EUR1.01 billion, with parts of these savings now arising due to timing issues. Bunching in spending on this line has increased from 2009 through 2012. Q1-Q2 quarter on quarter changes used to be negative (higher spending in Q1 than in Q2) in 2009 and 2010 and they are now positive for 2011 and 2012. Swing in the rate of change q/q between Q1-Q2 2009 and 2012 was from -13.2% to +10.4%. Which neatly summarises the austerity we've been living through: taxes massively up, capital spending massively down, current spending… err… 'don't ask-don't tell'

One of the worrying trends in the overall expenditure, however, is the interest on our debt. Chart above shows its evolution over time and a clear trend up and up even as taxes are continuing to rise. Now, I know it is trendy nowadays to say 'debt don't matter'… actually, when 20% of your tax revenue goes to pay interest on it… err… it sort of obviously does.

19/7/2013: Spain's Bad Loans: Heading for the Eurotroit solution?

Spanish banks bad loans ratio of all assets for May 2013:

H/T: Ioan Smith @moved_average

The Eurotroit keeps rolling on... Notice how Spain has by now largely erased the reductions in bad loans driven by assets shifts to 'bad bank' Sareb (EUR50.45bn portfolio, with 76,000 empty housing units, 6,300 rented homes, 14,900 plots of land and 84,300 loans). Spanish bad loans as a percentage of total credit rose from10.5% in March to over 11.2% in May.

And they will continue rising.

That's because in Spain, ultimate level of bad loans is going to be closer to Ireland's, where over 50% of SME loans are non-performing, over 25.8% of all mortgages are non-performing or at risk of default, and as of June 2013, 24.8% of all loans were non-performing, against EuroTanic's average 7.5-7.6% (EUR920bn or so). Irish numbers exclude Nama.

So even with the sunshine and sea, Costa del Concrete is going to cost Spain over 20% in terms of bad loans ratio in the end.

19/7/2013: Detroit officially files for Chapter 9

So after much of prevarication and discussions with the unions (there always discussions with the unions involved), the City of Detroit has filed for Chapter 9 federal bankruptcy protection. Detroit recently missed USD40 million payment to its own pension system and has amassed estimated USD18.5-20 billion in long-term liabilities.

Washington Post has an excellent timeline on the crisis: http://www.washingtonpost.com/blogs/wonkblog/wp/2013/07/18/detroit-just-filed-for-bankruptcy-heres-how-it-got-there/

The city has shrunk over the decades from over 1.8 million in 1950 Census to around 700,000 currently (2010 Census put Detroit population at 713,777). In 2000-2010 the city population fell by 25% with the city rankings in the US by population falling from 10th largest to 18th largest. Meanwhile the six-counties Metropolitan Detroit area population is healthy at 4.296 million and ranks 13th largest in the US.

Quote from the Washington Post: "The official unemployment is now 18.6 percent, and fewer than half of the city’s residents over the age of 16 are working. Per capita income is an extremely low $15,261 a year…"

And another quote: "“The city’s operations have become dysfunctional and wasteful after years of budgetary restrictions, mismanagement, crippling operational practices and, in some cases, indifference or corruption,” Orr wrote in May. “Outdated policies, work practices, procedures and systems must be improved consistent with best practices of 21st-century government.” (Detroit has been a one-party city run by Democrats since 1962.)"

A good compendium of information on Chapter 9 bankruptcy for the cities from the Business Inside here: http://www.businessinsider.com/municipal-bankruptcies-explained-2013-7

Apocalyptic imagery of the city: http://www.marchandmeffre.com/detroit/

And my earlier post on the lessons Detroit bankruptcy process offers in comparatives to Ireland's errors in relation to the banks crisis:
http://trueeconomics.blogspot.ie/2013/06/662013-detroit-is-about-to-go-bankrupt.html
As usual, this blog was ahead of the Irish news curve by a month...

Lastly, a ray of hope: http://www.businessinsider.com/after-filing-bankruptcy-detroit-is-on-the-verge-of-an-epic-comeback-2013-7

Which echoes some of my tweets on the subject (read from the bottom tweet up):

18/7/2013: Ireland's Government Deficit & Debt Up in Q1 2013

Good news: CSO is doing its job well covering Irish Government Financial stats. Bad news: the stats aren't exactly encouraging:

I will be blogging on this later tonight, so stay tuned. But for now, the table above should do: year on year:

• Deficit is up (from EUR5.029bn to EUR5.387bn)
• General Government Debt (GGD) is up (from EUR174.15bn to EUR204.05bn)
• GGD is now in excess of 125% of GDP (few years back when I predicted it will be above that marker, there was a sound of hissing and sniggering coming from the 'outraged economists' corner of Irish academia)
• General Government Net 'Worth' is down to EUR81.13 bn. 

Small corrective bit: based on Q1 2013 GDP/GNP gap the above level of debt is at 149% of GNP.

Most of the deficit increase is accounted for by payments under the Eligible Liabilities Guarantee Scheme arising from liquidation of IBRC, and due to higher interest spending. In fact, interest spending rose by EUR543 million year-on-year, while deficit rose EUR358 million over the same period of time.

18/7/2013: One table, four entries, wealth of irony...

One cannot contain a sense of deep irony when looking at today's mid-day CDS markets snapshot from CMA:

In one table we have:

• Euro area CDS spread from Finland (implied cumulative 5 year probability of default of 2.02% - which is asymptotically zero), Greece (implied CPD of 50.85% after two previous defaults), and Cyprus (implied CPD of 65.39% after previous default). 
• Egypt (implied CPD of 41.22% after a coup d'etat) 

That's, as Mario Draghi put it on June 25th, "reflect[s] on the importance of a stable euro and a strong Europe" or perhaps, as he put it "the euro area is a more stable and resilient place to invest in than it was a year ago" or may be "I am confident that the project for Europe will continue to evolve towards renewed economic strength and social cohesion based on mutual trust, both within and across national borders, and above all stability". Take your pick... (link)

18/7/2013: Anglo Irish Bank: Tapes Fallout

A quick link to a recent Yahoo Finance and Aljazeera article citing myself on the issue of Anglo Irish tapes fallout.
http://en-maktoob.news.yahoo.com/leaks-expose-rotten-core-irish-banking-121539828.html

17/7/2013: Wrong Austerity Compounds the Failures of the Monetary Union

Recent CEPR paper DP9541 (July 2013), titled "Debt Crises and Risk Sharing: The Role of Markets versus Sovereigns" by Sebnem Kalemli-Ozcan, Emiliano Luttini, and Bent E Sørensen (linked here: www.cepr.org/pubs/dps/DP9541.asp) used "a variance decomposition of shocks to GDP", in order to "quantify the role of international factor income, international transfers, and saving in achieving risk sharing during the recent European crisis."

Basic idea of the exercise was that a lack of saving in good times may reduce consumption smoothing in bad times, forcing households to cut back their spending and consumption more dramatically once recession hits.

Under perfect risk sharing, the consumption growth of individual countries should be completely independent from all other factors, conditional on world consumption growth.

The authors of the study "calculate how much of a shock to GDP is absorbed by various components of saving, in particular government saving, and other channels, such as net foreign factor income for the sub-periods 1990-2007, 2008-2009, and 2010." The key finding here is that "overall, risk sharing in the EU was significantly higher during 2008-2009 than it was during the earlier period, but total risk sharing more or less collapsed in 2010." Notably, 2010 is the year when European economies embarked on 'austerity' path, primarily and predominantly expressed (especially in the earlier stages) in tax increases. It is worth noting that there virtually no reductions in public spending during 2009 or 2010 across the EU and even in countries where spending was cut, such as Ireland, much of the reductions came from indirect taxation - e.g. transfers of health spending from public purse to private insurance.

Further, the authors "study how the crisis a affected risk sharing for "PIIGS" countries (Portugal, Ireland, Italy, Greece, and Spain), which were at the center of the sovereign debt crisis, compared to non-PIIGS countries (Austria, Belgium, Denmark, Finland, France, Germany, the Netherlands, Sweden, and the United Kingdom)."

Again, the findings are revealing: "For 1990-2009, risk sharing was mainly due to pro-cyclical government saving but the amount of risk sharing from government saving turned negative in 2010 for the PIIGS countries: government saving increased at the same time as GDP decreased." In other words - this is the exact effect of austerity as practised by the EU periphery.

"For [euro area peripheral] countries our measure of overall risk sharing turns negative because (conditional on world consumption growth) the decline in GDP in 2010 was accompanied by a more than proportional decline in consumption. This mirrors the behavior of emerging economies where government saving typically is counter-cyclical as shown by Kaminsky, Reinhart, and V egh (2005)."

Crucially, the study shows that there is basically no risk-sharing mechanism that operates on the entire euro area level. Even common currency zone - via lower interest rates - does not deliver risk sharing in 2010 and has potentially a very weak effect in 2008-2009 period. Worse, for the euro area peripheral states, euro has been a mechanism that seemed to have removed risk sharing opportunities both in and out of the crisis:

"…although non-PIIGS countries shared a non-negligible amount of risk during 2000{2007 while the PIIGS shared little risk in those years: in the good year 2005, consumption increased faster than GDP leading to "negative risk sharing." In 2008 and 2009 the major amount of GDP risk is shared for non-PIIGS with low consumption growth rates in spite of large drops in GDP, with the amount of risk shared in 2008 over 100 percent (positive consumption growth in spite of negative GDP growth). For the PIIGS, consumption declined very little in 2008 in spite of a large drop in GDP, while the drop in GDP in 2009 clearly led to declining consumption and, in 2010, consumption fell by almost as much as GDP, indicating little risk sharing."

Top line conclusion: once the authors "decompose risk sharing from saving into contributions from government and private saving", data reveals "that fiscal austerity programs played an important role in hindering risk sharing during the sovereign debt crisis."

17/7/2013: Sunday Times, July 14: The New Normal for Ireland

This is an unedited version of my Sunday Times article from July 14, 2013.



The release of the Irish quarterly national accounts for Q1 2013 two weeks ago should have been a watershed moment for Ireland. Aside from confirming the fact that Irish economy is back in a recession, the new figures reinforce the case for the New Normal – a longer-term slowdown in trend growth and continued volatility of economic performance along this trend. The former revelation warrants a change in the short-term policies direction. The latter requires a more structural policies shift.


Months ago, based on the preliminary data for the last quarter of 2012, it was painfully clear that Irish economy has entered another period of economic recession. This point was made on these very pages back in early March although it was, at the time, vigorously denied by the official Ireland.

Irish economy is currently in its fourth recession in GDP terms since 2007. Q1 2013 marked the third consecutive quarter in the latest recessionary episode. Since the onset of the crisis, Ireland had 17 quarters of negative growth in private and public domestic investment and expenditure, and counting.

For the Government that spent a good part of the last 2 years telling everyone willing to listen about our returning fortunes, things are looking pretty grim. Since settling into the office by the end of H1 2011, through the first quarter 2013, Coalition-steered economy has contracted by EUR1.52 billion or 3.75%.

The fabled exports-led recovery, first declared in Q1 2010, is not translating into real economic expansion. Neither do scores of strategic policies documents launched with promises of tens of thousands of new jobs.

With the national accounts officially in the red, the bubble of claimed policies successes is bursting. What is emerging from behind this bubble is the New Normal. Whether we like it or not, in years to come we will continue facing high risks to growth and a lower long-term growth trend. Traditional Keynesianism and Parish Pump Gombeenism - the two, largely complementary policy options normally promoted in Ireland - cannot sustain us in the future.

Prior to the crisis, Irish economy experienced three periods of economic growth, all driven by different internal and external forces, none of which are likely to materialize once again any time soon.

The first period of 1991-1997 witnessed rapid convergence in physical and financial capital, as well as in human capital utilization to the standards, observed in other small open economies of the EU.

From 1998 through 2003, Irish economy experienced a combination of rising share of economic activity generated in the domestic economy and rapid expansion of the financial services. This period is characterised by two short-lived, but significant booms and busts: the dot.com expansion and the subsequent dramatic acceleration in public spending.

From the late 1990s, Ireland also experienced accelerating property boom, which culminated in an unsustainable investment bubble. All three periods of economic expansion in recent past were underpinned by favourable external demand for MNCs exports out of Ireland, low or falling cost of capital and accommodative tax environments, in which tax competition was an accepted norm.

These drivers are now history.

Since the onset of the second stage of the domestic economy’s recession in H2 2010, Ireland has entered an entirely new period of development that will shape our long-term growth performance.

Externally, our capacity to extract rents and growth out of tax arbitrage is coming under severe pressures, best highlighted by the recent G8 decisions, the CCCTB proposals tabled in Europe and by accelerated tax policies gains in countries capable of serving big growth regions outside the EU. The financial repression that commonly follows credit busts is also denting our tax-driven growth engine by raising competition for tax revenues, and lowering our real cost competitiveness vis-à-vis Europe and North America.

Internally, since 2002, MNCs-led manufacturing in Ireland has suffered what appears to be an irreversible decline. Goods exports are down from EUR90.4bn in 2002 to EUR78.7bn in 2012 before we take account for inflation. Meanwhile, exports of services are up from EUR32.2bn to EUR93.3bn. Problem is: over the same time, services exports net contribution to the economy has expanded by only EUR18 billion. More worryingly, services exports growth is now falling precipitously.

Data from the Purchasing Managers Indices confirms the long-term nature of our economic slowdown. Average rates of growth in GDP are now closer to 1.5% per annum based on Services sectors contribution and closer to 1.0% for Manufacturing. Prior to the crisis these were 7.0% and 2.6%, respectively. In 1990-2007, all sectors included, Ireland experienced average annual growth of 6.6%. Now, we are looking at ca 1.5-1.7% average growth rates through 2020.

Lower growth rates for Ireland will be further reinforced by the lack of access to credit flows previously abundantly available from the global funding markets. This will impact our banks lending, direct debt issuance by companies, and securitised or asset-backed credit.

The retrenchment of the global financial flows away from the euro area, coupled with regulatory changes in European banking suggest that investment in the New Normal will become inseparably linked to the internal economy and significantly more expensive than the decade preceding the 2008 crisis. Much of this change will be driven by the same financial repression that will act to reduce our tax regime advantages.

This means that at the times of adverse shocks - such as, for example, a fall in revenues from exports or an increase in foreign companies extraction of profits from Ireland – our economy will be experiencing more severe credit and income contractions. This will put more pressure on investment and lower the velocity of money in the economy. Longer-term capital financing will become more difficult as domestic investors will face more uncertain returns and higher liquidity risk. A bust and severely restricted in competitiveness banking sector - legacy of the misguided post-2008 reforms - will not be helpful.

Thus, in the future, switch to services exports away from manufacturing and domestic investment, and reduced access to credit will mean higher volatility in growth, and lower predictability of our economic environment.

The New Normal requires more agile, more responsive and better-diversified economic systems, alongside a more conservative risk management in fiscal policies and less centralisation and harmonisation of policies at super-national level. It also calls for more aggressive incentivising of domestic investment and savings.

In terms of the fiscal policy stance, this means adopting a more cautious approach advocated, in part, by the ESRI this week. Irish Government should aim to continue reducing public spending, but do so in a structural way, not in a simplified framework of pursuing slash-and-burn targets. In addition, the Government needs to re-focus on identifying lines of expenditure that can be re-directed toward more productive use. In the short run, this can take the form of switching some of the current expenditure into capital investment programmes.

Reforms of social welfare, public education, health and state pensions systems will have to make these lines of spending more effective in helping people in real need, while slimmer in terms of total spend allocations. This can be achieved by direct means-testing and capping some of the benefits. But majority of these changes will have to wait until after the immediate unemployment and growth crises have passed.

In the longer run, going beyond the ESRI proposals, the Government should permanently reallocate some of the spending (such as, for example, overseas aid or poorly performing enterprise supports) to areas where it can increase value-added in public services (e.g. water supply or public transport) and create new exports platforms (e.g. e-health and higher quality internationally marketable education). Additionally, new revenues should be raised from severely undertaxed sectors and assets, such as agriculture and land, to be used to lower tax burden on both, ordinary and highly skilled workers.

Beyond a short-term stimulus, rather than directing tax- and debt-funded new investment, public sector should help generate new opportunities for more intensive growth. Increasing value added in existent activities, not simply scaling these activities up in terms of quantity of services deployed or employment levels involved should become the priority for future public sector growth.

Adding further to the ESRI analysis, the objective of using fiscal policy to drive enterprise creation requires simultaneously freeing more resources in the private sector to invest in new technologies acquisition and adoption, and development of indigenous R&D. We need to increase, not shrink, disposable incomes of the middle- and upper-middle classes and improve incentives for these segments of the population to invest. IBEC's suggestion this week that the Government should abandon any future tax increases makes sense in this context. The key, however, is that direct and indirect income tax increases of recent years must be reversed.

We need to recognise, support and scale up clustering initiatives in the tech and R&D sectors that deliver partnerships between the existent MNCs and larger domestic enterprises and start ups. To do this, we should create direct links between the existent clusters, such as for example IT@Cork initiative and public procurement systems. To re-orient public procurement toward supporting younger enterprises, larger procurement tenders should explicitly target new opportunities for partnerships between MNCs and SMEs or start-ups.

To address structural decline in debt financing available in the economy, we should exempt from taxation capital gains accruing to any real investment in Irish enterprises, including the IPOs and new rights issues, where such investments are held for at least 5 years. To qualify for this scheme, an enterprise should have at least a quarter of its worldwide employees based in Ireland.

The New Normal of lower trend growth and higher uncertainty about the economic environment is here. Addressing the challenges it presents requires robust policy reforms. The least painful and the most productive way of implementing these would be to start as early as possible.

Box-out:

Recent report from CBRE on office market in Dublin for Q2 2013 provides an interesting insight into the commercial real estate markets dynamics in Ireland. Despite the cheerful headlines and some marginally encouraging news, the market remains in deep slump and so far, hard data shows no signs of a major revival. Good news: vacancy rate in Dublin office space has declined by 4% on Q1 2013, to 17.2% in Q2 2013. The vacancy rate was 19.32% in Q2 2012. Bad news: at this rate, it will take us good part of 10 years to catch up with the EU-average rates. More bad news: office investment spend fell from EUR79.6mln in Q2 2012 to EUR72.6mln in Q2 2013. Adding an insult to the injury, prime yields fell from 7.0% to 6.25% in the year through June 2013. The office market in Dublin is firmly reflective of what is happening in the economy. Only 37% of offices take ups in Q2 2013 were by Irish companies. Massive 65-66% of the city and suburban office space was taken up by the ICT and Financial services providers in a clear sign that outside these sectors, economic activity remains largely stagnant. Overall, on a quarterly basis, offices take up in Dublin has fallen for the second quarter in a row while there was the first annual decline since Q3 2012.

17/7/2013: IMHO statement on Land & Conveyancing Bill

Irish Mortgage Holders Organisation response to the passing of the Land anf Conveyancing Reform Bill, 2013:
https://www.mortgageholders.ie/land-and-conveyancing-reform-bill-2013/

do keep in mind, while reading, that our view recognises fully that in many cases, in dealing with mortgages debt there will be no option other than foreclosure sale (voluntary or enforced).

The key to any economically and socially sustainable system for resolving this crisis is to create a symmetric balance of power and incentives between the banks and the borrowers to achieve a long-term sustainable solution to the debt overhang. This the current system does not allow for.