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Thread: "We will wreck the economy if the adjustment is too severe"

  1. #1

    Default "We will wreck the economy if the adjustment is too severe"

    Is anyone else getting totally sick of the constant repetition of this mantra by every commentator in the land, no matter what side they are on? Every single Policitican, Journalist, Trade Unionist, Economist and any other waffler given air time or allowed to put pen to paper in the pages of the national rags has some variation on this theme.

    I understand the economic principles and have studied them but Keynes is one of the most misunderstood and misquoted economists out there. His prinicples assume efficiency in spending (implying drastic knock on effects of spending cuts in recessions through money multipliers and the like on demend) and control of exchange rates and its not directly applicable to Ireland. Even when commentators espouse his principles here, they tend to pick and choose which aspects of his policies they like (for example, you don't hear anyone here calling for tax cuts).

    The thing that is killing this economy is the extend and pretend as the Yanks call it. Kicking the can down the road and the lack of certainty as to whats coming down the line. I laugh when I hear David Begg this morning for example, talking about possibly killing the economy. Guess what David, the economy is dead, and its our failure to get a grapple with the deficit thats causing it.

    We need to find the bottom so that we can look upwards. We need to know that its over, that yes our take home pay has just got cut by 30% but THATS IT, IT ONLY GETS BETTER FROM HERE.

    The problem with the death of a thousand cuts approach is people are afraid to do anything. There is undoubtedly still a great pool of wealth in Ireland. But people wont spend it because they are afraid that worse is comign down the tracks.

    Can anyone say for certain that we would not be better off now, had we just closed the gap in 2 budgets? Make marginal rates all-in 60%, limit pension reliefs to standard rates, cut property reliefs, bring the lower paid into the tax net, abolish all the useless quangoes, reallocate wasted HSE admin staff to SW or make them redundant, cut upper public servants wages by 30% and lower paid by 15%, bring in property tax, water charges, means test child benefits, cut the OAP, cut the dole, do it all in one fell swoop.

    Part of the problem here is generalisations. In Ireland, we have a tendency to make policy on the basis of very broad sweeping perceptions that make no sense in reality. So try to means test or cut medical card benefits to Pensioners, and you have mass demonstrations. All public servants are poor "workers" who have been savaged by the cuts. Everyone earning over €75k/€100k/€120k[*delete as appropriate] is wealthy and not paying their fair share. All of these generalisations are totally inappropriate.

    In reality, in each of these groups there are people who (because of personal choices they have made, and perhaps some element of fortune) are absolutely fine in the recession and others who are totally screwed, but the system should try to look through the groups, because if we try to cater for each individuals personal circumstances we will get nowhere. We won't know what the tipping point is until we start pushing the envelope. It can't be any worse than what we have endured for the last 3 years.

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    Politics.ie Member hammer's Avatar
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    €15 billion adjustment over 4 years MINIMUM and they still want people to increase spending / consumption

    They must have meant on extra charges for

    VHI - Dublin Bus - Iarnrod Eireann - Waste charges - Tolls - ESB

    ( all Govt controlled !!!! )

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    The Irish Economy » Blog Archive » Fiscal Adjustment After a Banking Crisis

    Reference to an IMF paper posted by Philip Lane

    Summary: This paper analyzes the experience of 99 advanced and developing economies in restoring fiscal sustainability during 1980 - 2008 after banking crises, which led to large accumulation of public debt. It finds that successful debt reductions have relied chiefly on generation of large primary surpluses in post-crisis years through current expenditure cuts. These savings have been accompanied by growth-promoting measures and a supportive monetary policy stance. While these results are consistent with the existing literature, the paper finds that revenue-raising measures increased the likelihood of successful consolidation in countries that faced large adjustment needs after the crisis. This reflects the fall in effectiveness of spending cuts when deficit reduction needs are large independent of initial tax ratios.
    The depths of our own financial hole are due only in part to the banking crisis - exuberant mismanagement of the economy must be added to the mix.

    We can try some of the solutions mentioned above, but where will the "supportive monetary policy stance" come from, and where is the fat that can be used for "growth-promoting measures"?

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    Politics.ie Member hammer's Avatar
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    Interesting also how the entrepeneurs that will be declared bankrupt are going to get back on thier feet after 12 years.

    Well the depression is expected to last 10 years, not just until 2014.

    We need about 250,000 unemployed to emigrate pretty fast.

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    Politics.ie Member A view from England's Avatar
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    This is what went wrong..
    I just can't cope, mum tells court as she loses home - Courts, National News - Independent.ie
    Now take this poor family as an example. I'm assuming that he worked as builder in the good times. WTF was any bank up to when lending 336K to a brickie? Now, play the same scenario out across Ireland, the UK, the USA, Portugal, Spain, Greece and Italy and you can see what went wrong. The banks packaged up thousands of mortgages just like this one into investments for other banks, companies and individuals to invest in and it all crashed down.
    The economy is wrecked and will never be the same again.

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    The quote should be:

    We have already wrecked the economy on the society of Ireland. There is no hope for us at all. Please will those useless ************************es in Brussels get the finger out and fix us....or better still President Obama."

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    We have to reform our bankruptcy laws.

    Follow the UK model and allow people to go bankrupt, manage their debt and get back up on thier feet when things improve.

    As it is, we have a system that hits you, cuts you and ruins you for life.

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    Politics.ie Member HarshBuzz's Avatar
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    that's a great post Chicken Biryani

    Begg was at it again this morning on Newstalk
    “'retail deposit flight, I don't see that as a great danger. Ireland is an island” - Brian Lenihan - to hundreds of international investors

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    Politics.ie Member Telemachus's Avatar
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    Quote Originally Posted by Bi ciuin View Post
    We have to reform our bankruptcy laws.

    Follow the UK model and allow people to go bankrupt, manage their debt and get back up on thier feet when things improve.

    As it is, we have a system that hits you, cuts you and ruins you for life.
    That would be all grand if we hadnt bail out the banks.

    Already our standard of living has been permanently lowered by taking on the banks debts.
    Last edited by Telemachus; 19th October 2010 at 10:52 AM.
    ..the Irish nation can become other than white, by privileging the voices of the racialised and subverting state immigration but also integration policies. – Ronit Lentin

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    Politics.ie Member dresden8's Avatar
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    Government took money out of economy last year.

    Government is now surprised tax take is down this year.

    No connection, no?

    We're in a nasty little trap, all designed to save the wealth of the uber rich.

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