Permanent Problems and Temporary Fixes

[eyeswideopen]

I don't expect any boom. But a recovery is inevitable, barring some massive international event causing a second global collapse.

Would you not consider the possibility that you're falling for permanent-bear thinking, imagining that no positive results will ever emerge?

It's normal for people to assume that the facts of the last few months will continue forever, whether they are boom or bust.

The global economy has enormous productive strength, but that has become the problem. When it gets going it takes little time to oversupply the market and profits collapse. The current crisis has also exacerbated the tendency to monopoly - bigger, luckier players have survived and others gone out of business. Low interest rates were used as a means of trying to get the resulting turgid economy moving: they led to a credit bubble, even more overproduction and spectacular collapse. At the same time, there is an ongoing shift in manufacturing investment to the east, in particular India and China, but also to countries like Brazil.

There will never be a return to the system of western based manufacture with high wages for skilled manufacturing workers, supplied with cheap raw materials from undeveloped countries. The whole thing is shifting and evening out, at the same time as the cyclical crises of overproduction get more and more intense. The best scenario for Ireland under capitalism is retrenchment followed by stagnancy, the worst, collapse.

Ireland could be doing better than it is, but it has been and is being plundered and mismanaged by an entrenched caste of politicians, acting for their wealthy supporters and associates. But given the historic and global context, there is no way that things are going back to 2005, or anything like it.

[feargach]

The global economy has enormous productive strength, but that has become the problem. When it gets going it takes little time to oversupply the market and profits collapse. The current crisis has also exacerbated the tendency to monopoly - bigger, luckier players have survived and others gone out of business. Low interest rates were used as a means of trying to get the resulting turgid economy moving: they led to a credit bubble, even more overproduction and spectacular collapse. At the same time, there is an ongoing shift in manufacturing investment to the east, in particular India and China, but also to countries like Brazil.

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Hee hee, without meaning to, you've reiterated Marx' critique of the world economy.

As to the shift, there are, luckily for us, still many important high-tech jobs that cannot be done in India, China or Brazil. The rampant corruption and poverty in those nations means that for trifling sums, corporate spies can steal vital trade secrets from the companies by bribing employees for hundreds of times their salaries.

Ireland's high salary level is as actually a benefit. To bribe an Irish worker, he'll demand seven figures.

This is why high-end pharmaceuticals are made in Cork and not in Bangalore. The owners don't want to wake up one morning to discover that a tiny Delhi start-up is producing a molecule which is only slightly different to the one they invested all that research in, but different enough not to violate their intellectual property.

[Dreaded_Estate]

I don't expect any boom. But a recovery is inevitable, barring some massive international event causing a second global collapse.

Would you not consider the possibility that you're falling for permanent-bear thinking, imagining that no positive results will ever emerge?

It's normal for people to assume that the facts of the last few months will continue forever, whether they are boom or bust.

I think we can and will get back to decent growth by 2012 feargach.

It is not a question of boom or bust cycles, one of the largest sectors in the economy has just disappeared though.

Do you really think all the deficit will disappear when the economy recovers?

[feargach]

I think we can and will get back to decent growth by 2012 feargach.

It is not a question of boom or bust cycles, one of the largest sectors in the economy has just disappeared though.

Do you really think all the deficit will disappear when the economy recovers?

It all depends what happens. How well we rebalance the tax regime so as to raise more from the wealthy. How well international demand for our exports grow. How many emigrate. How well we manage to get Irish banks to fund start-up businesses. How well we manage to boost tourism in 2010 and 2011.

Depending on the assumptions you make about all those factors, you can justify any prediction from a decent surplus to a huge deficit.

[Dreaded_Estate]

It all depends what happens. How well we rebalance the tax regime so as to raise more from the wealthy. How well international demand for our exports grow. How many emigrate. How well we manage to get Irish banks to fund start-up businesses. How well we manage to boost tourism in 2010 and 2011.

Depending on the assumptions you make about all those factors, you can justify any prediction from a decent surplus to a huge deficit.

True if you pick your assumptions you can predict almost any outcome.
But even with the most optimistic but realistic set of assumptions there is on way we will get to a surplus before 2015 without cuts/new taxes.

What inputs are you using for growth, unemployment and tax revenue to get to a surplus by 2012 without any cuts

[Harmonica]

If this is sold as a temporary measure tye are making the same mistakes as the income & pension levies. People need some degree of certainty however bad the news is. Until people have some confidence in their wages and taxes they will not spend money.

Cowen seems to be saying today that PS changes are permanent so we will see what happens...

[feargach]

True if you pick your assumptions you can predict almost any outcome.
But even with the most optimistic but realistic set of assumptions there is on way we will get to a surplus before 2015 without cuts/new taxes.

What inputs are you using for growth, unemployment and tax revenue to get to a surplus by 2012 without any cuts

We are lower taxed than any West European country and the USA, so I agree that the rich are going to have to give up their long low-tax holiday.