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Thread: The Real Lesson About Irelandís Austerity Plan

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    Politics.ie Member Dreaded_Estate's Avatar
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    Default The Real Lesson About Irelandís Austerity Plan

    The Real Lesson About Ireland

    This argument reflects a fundamental misunderstanding of the scale of the problems facing Ireland. It also badly mischaracterizes the policy steps taken by the Irish government. The problems facing Ireland are far greater than the solutions the government has proposed to date. It should be no surprise that market confidence has not returned because there is no reason for Irish creditors to be confident that they will be repaid in full.
    There are no signs that any of this is temporary or that adjustments made to date are sufficient to maintain access to credit. The initial austerity measures taken by the Irish government Ė tax increases and large cuts to public employee wages Ė seemed ambitious, but they turned out to be a drop in the bucket relative to the cost of the bank rescue. The Irish government created the National Asset Management Agency (NAMA) to acquire property development and commercial real estate assets from banks at a sizeable discount to par. As with similar schemes, this government-sponsored fund faces a catch-22: overpay for assets and transfer losses directly to taxpayers or drive a tough bargain and further expose the banksí insolvency. To date, NAMA has recorded Ä30 billion of losses, or more than 10% of GDP. S&P estimates that ultimate losses will be between 29% and 32% of GDP. To put this figure in perspective, this would be equivalent to U.S. taxpayer losses on Fannie Mae and Freddie Mac of $4.2 trillion, or about 11-times the CBO estimate of $380 billion.

    Analysts on the political left are using the implosion of the Irish economy to advance their mistaken narrative about the supposed dangers of reductions in public expenditures. This overlooks that any savings generated by spending cuts were more than offset by outlays associated with the Ä90 billion NAMA to acquire bad loans in the banking system. While Ireland has made additional pledges to reduce the deficit to 3% of GDP in the medium term, its ďconsolidation plan would benefit from greater specificity,Ē as the IMF diplomatically puts it. In other words, Ireland has no credible plan to bring spending and revenues in line and has not done what is necessary to ďreduce the uncertainties associated with the consolidation process.Ē
    The U.S. is in a very different situation. The TARP has largely been paid back. The losses from Fannie Mae and Freddie Mac are running at about 1% of GDP. The U.S. is not suffering from large increases in implied spending associated with an ongoing bailout. Over half of the increase in the budget deficit is attributable to discretionary outlays, which have pushed the governmentís share of GDP to new records. Indeed, the reason the U.S. is likely to benefit so greatly from large reductions in federal spending is because of the growth in private sector investment likely to occur from taking the potential for confiscatory levels of taxation or an Irish-like debt spiral off of the table. Policymakers should not be misled by the Irish crisis. It is debt-financed government expenditures arising from a banking crisis thatís bringing down Ireland, not austerity.
    Interesting piece comparing the cost of the banking bailout in Ireland to the US. And the insufficiency of the austerity so far.

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    Politics.ie Member HarshBuzz's Avatar
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    but St. Patrick Honohan and the Blessed Matthew Elderfield said....

    etc

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    Politics.ie Member Squire Allworthy's Avatar
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    Good article and accurate perspective.

    Question now is how to get out of the utter mess created with reduced loss. Terrible waste of money which cannot be afforded.

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    Politics.ie Member slumdog1971's Avatar
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    Quote Originally Posted by Dreaded_Estate View Post
    Interesting piece comparing the cost of the banking bailout in Ireland to the US. And the insufficiency of the austerity so far.
    So should we just forget the whole austerity thing?

    From reading the article, the Bank debts that the Gov have forced on us are going to wipe us out anyway so we should go out on a spending splurge.

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    Well while this is an interesting article it's worrying that every day leading publications read by millions are describing the doom and gloom in this country.

    The ten year yields are rising again to 6.32% from 6.27% this morning.

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    Politics.ie Member HarshBuzz's Avatar
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    Quote Originally Posted by slumdog1971 View Post
    So should we just forget the whole austerity thing?

    From reading the article, the Bank debts that the Gov have forced on us are going to wipe us out anyway so we should go out on a spending splurge.
    max out the credit card baby, we're going to Vegas!

    I quite like that idea

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    While irelands elites(developers,politicians , shady bankers, professionals etc) have moved their money offshore or into their spouses or families names, and irelands unemployed( will not be emigrating to compete with ronnie romanian and paddy polack for 4 uros an hour) and public servants still 40% overpaid the paddy gombeen proletariat(ex middle lass private sector wealth generators) will collapse with the taxes to support above, Real AUSTERITY measures call for real cuts not pretendy make believe as is currently being undertaken Ireland RIP

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    Politics.ie Member slumdog1971's Avatar
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    Quote Originally Posted by HarshBuzz View Post
    max out the credit card baby, we're going to Vegas!

    I quite like that idea
    Im my humble opinion, you might as well be hung for a sheep as for a lamb.

    These articles are all agenda driven. There are speculators and spivs making absolute fortunes from us at the moment and these articles and magazines aregenerally owned by someone or something who has an interest in the game.

    It's time we played the game a bit differently. Introduce this budget, cut and raise taxes and then go to the stabilisation fund and offer some debt for equity to the British and German banks.

    Also it's time we started sweettalking the Russians and the Chinese. The chinese are flooding africa at the moment buying huge tracts of land for agriculture and mining etc. There has to be an opportunity there for us to sell off some of the land that those idiots in the banks provided millions for other idiots to buy.

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    Politics.ie Member libertarian-right's Avatar
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    So the plan is slummy, just to tell the NTMA to be ahead of target not just by 6 months, but 6 years spend all the money and then default

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    It's hard to believe though that we couldn't make 3-4Billion in cuts without cutting salaries etc. This should be the aim - don't take money out of peoples pockets right now because people are under serious pressure.

    The amount of waste in this country is incredible.

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