First of all I need to make sure you all understand I have full permission from Cassandra Syndrome, over on Politicalirish.com to reproduce this thread.
Recent growth reports on Ireland have suggested we are moving towards sound economic waters as the country continues to defy all the history books and continues to recover at rates never before seen.
The recent headlines show Ireland is positively booming.
Irish economic growth hits 7% as recovery outstrips targets
Latest GDP numbers reflect increasing output in all business sectors, says CSO Link
So everything looks good?????
There are many factors to the Irish Economy, so to examine this we need to take a look at each factor.
Ireland's gross government debt fell below 100pc of GDP, according to figures released by the CSO last week. The Irish state owed its creditors 204bn at the end of September 2015, 99.4pc of our GDP.
What is the difference between GDP and GNP?
GDP, or Gross Domestic Product is calculated either by measuring all income earned within a country, or by measuring all expenditures within the country, which should approximately be the same.
GNP, or Gross National Product uses GDP, but adds income from foreign sources, less income paid to foreign citizens and entities.
So our debt has fallen below the GDP, thats a good thing right?
Normally it would be, it suggests that Ireland is now on its way to creating a Budget Surplus, this means we can start paying down our debt, however can we trust the figures?
Ireland like many other countries operates something called `off balance figures`, this is where the government through some creative accounting can hide certain figures from the official national records.
For instance, imagine you did your household budget and it showed your income at around 1000 Euro per week and out out goings were 800 Euro per week. it would appear that you have 200 Euro left each week that is yours to do with as you please. However you failed to include your credit card bills that carry a total debt of 300 euro per week. In reality you cant hide the credit card debt to make your finances look better. But that is exactly what the Irish government is doing.
So what is our hidden debt?
The biggest item excluded from the government debt statistics is of course the value of future pension liabilities. These are enormous. The Department of Public Expenditure and Reform estimates that the total accrued liability of public service occupational pension schemes were 98bn at the end of 2012.
These future pension liabilities would, on their own, increase gross government debt by almost 50pc and push Ireland's debt/GDP ratio back up to almost 150pc.
While the value of future public service occupational pension schemes has been calculated, the value of future state contributory and non-contributory pensions has not. How much is the value of these liabilities? With the number of over-65s set to increase from 532,000 in 2011 to 861,000 by 2026 and 1.33 million by 2046, the figures could be astronomical! We won't find out until at least next year when the CSO is due to publish a figure, In 2012, TCD economics professor Brian Lucey calculated that the value of future non-contributory pension liabilities at somewhere between 25bn and 75bn.
If that wasn't bad enough Irish pension funds are also in crisis, actuarial consultants LCP estimating that the combined deficits of the largest Irish companies had climbed to 5.8bn by the end of 2014.
Public private partnerships.
When government use private sector capital to fund public capital projects such as roads, schools, hospitals, etc ithis cost is also allowed to be kept off the government's books and, so long as certain not-very-onerous conditions are satisfied, European Statistics agency Eurostat will not include it in state's borrowing figures.
While PPPs allow the cost of such projects to be "parked", the liability doesn't disappear and can, in certain circumstances, come back on to the government's books once again. This isn't an exclusively theoretical concern. In recent years the Government was forced to make payments to some road-building PPPs when toll revenues failed to reach the agreed level.
The State paid the operators of the M3 toll motorway and the Limerick Tunnel a total of 8m in 2013 and 7.5m in 2014 and now expects to pay them a further 48m between 2015 and 2020. How many other such PPP nasties have yet to come to light?
The CSO puts the potential liability to the exchequer from PPPs at 3.7bn with a further 25.1bn of guarantees bringing the total potential exposure from such contingent liabilities to 28.8bn. However, it is important to remember that this is very much a worst-case scenario and all of these potential liabilities would only fall back on the state in the unlikely event of every PPP turning sour.
If we take the 98bn figure for future state occupational pension liabilities, add the 28.8bn of contingent liabilities and the mid-figure for Professor Lucey's 25bn-75bn estimate for non-contributory pension liabilities, ie 50bn, then gross government debt increases by almost 177bn, raising the debt/GDP ratio from "only" 99.4pc to a totally unsustainable 185pc.
Its also important to note the Irish government have also costed in that Inflation in 4 years time is expected to reach 4.1%, this in itself is a startling figure as there is no evidence or fact to suggest why Inflation would even reach 2% . However the government needs inflation to start growing to reduce our overall debt.
Whilst inflation is a way to reduce your debt it also means rising costs and prices for the average consumer.
Source of imformation
The image above shows our GDP, here you can see how Irish companies are enjoying a boom at present, up from the lows of 2013 and helping the Irish Economy.
Below is a image that shows our GNP, unnoticed by the media is the slow decline of GNP over recent years, this would suggest that the benefits of foreign investment are being stripped away and the big multinationals in Ireland are either paying less tax or are leaving our country.
But is it not better to have GDP increasing?
Whilst its not a bad thing, the alarm bells should be ringing all around that our GNP is falling and falling fast. Many home grown businesses in Ireland rely on multinationals, and overall so does the country. At the end of the day GNP is money and the fact that GNP is falling tells us the country is receiving less money from GNP. And if GNP is falling does that further signal a big problem in the global economy?
Measured on a gross national product (GNP) basis, which strips out the impact of multinational profit flows, the economy contracted by 0.8 per cent in the third quarter. This compares with 1.9 per cent GNP growth in the second quarter.
While it is GDP figures which form the basis for key budgetary calculations, the data shows that annual GNP growth in the three months to September reached 3.2 per cent. GNP growth in the year to date reached 5.6 per cent.
Whilst the media was quick to hail our GDP growth in the last qtr, they were also slow didn't mention how our exports have started to slow, now unless Ireland is selling stuff to itself we highly need exports to maintain our growth in GDP.
The above image shows what countries Ireland relies on most for our exports.
In the order of highest the following is who we trade with most
The EU accounted for 5,049 million (56%) of total goods exports in January 2016 of which 1,439 million went to Belgium and 985 million to Great Britain.
The USA was the main non-EU destination accounting for 2,238 million (25%) of total exports in January 2016.
The United Kingdom
One of our biggest trading partners has recently in their budget revised their growth forecasts down.
The Office for Budget Responsibility (OBR) is expected to downgrade its forecast for UK growth to 2.2pc in 2016, from a projection of 2.4pc in November.
Some economists believe the economy will expand by just 2pc this year, which would represent the slowest annual pace of growth since 2012.
Growth in 2017 is also expected to be downgraded. George Osborne has already warned that he may have to implement more spending cuts over the next five years.
Naturally if the UK is forecasting slower growth it further indicates more trouble in the world Economy. In fact Osbourne has warned he may have to impose bigger than expected cuts to public spending towards the end of the current parliament as the storm clouds in the global economy hit economic growth.
The UK is also set to hold a referendum on exiting the European Union. Should they vote yes (And all polls are suggesting a vote to leave) then a shock wave will hit the whole of the EU and spread across the world. How it effects Ireland is still to be decided, but a lot of this will resolve around what the Irish government chooses to do.
The table below shows that our overall debt continues to grow, Ireland's national debt as a percentage of estimated 2015 GDP (196.565 bn) , and as a percentage of 2015 GNP (168.278 bn).
A lot of this debt was purchased in long term bonds, some of these bonds were also short term bonds, as they begin to start maturing the government will again have to borrow to pay of the short term bonds, this in turn will increase the interest rates an the amount borrowed.
Total Exchequer debt servicing costs at end-August 2015 were 4.61bn.
Irish household debt stood at 153.2bn or 33,056 per capita at the end of June 2015.
This is still a thorn in the government`s side, creative accounting still cant hide the bare truths surrounding the unemployed in Ireland.
The seasonally-adjusted total on the Irish Live Register and in public activation jobs schemes was at 405,509 in the first month of 2016 according to the CSO today. The broad jobless rate was 18% compared with the narrow rate of 8.6% based on the International Labour Organisation's (ILO) definition of employment as paid work of at least one hour per week. France's broad rate is about 20% and the US rate in December was 9.9% compared with the ILO rate of 5%.
58,000 of the 82,000 unemployed in Irish activation schemes are counted as employed and 24,000 are attending education courses that the ESRI views as generally useless
The broad rate includes part-time workers seeking full-time work, which was over 100,000 last September, the 82,000 in activation schemes and about 35,000 estimated by the CSO as the Potential Additional Labour Force: 18.4% (8.6% ILO rate + 9.8%).
Alternatively, the numbers on the Live Register + activation schemes as a ratio of the workforce is 18.4%.
We are totally screwed, the media can peddle all the good news they want, the evidence is there for all to see, even George Osborne can see the `storm clouds` coming and yet the media in Ireland would have us out buying new cars, and apartments in Bulgaria.
The government has screwed the people for thousands and we have only moved an inch in the right direction, even the conservatives in the UK are suggesting more cuts and tax increases to try and salvage the country.
Its going to be rough, and its going to be tough.
I didn't even touch on the immigration crisis in Europe, the Billions being paid to Turkey, the Billions needed to pay for these people.
Its time to prepare for the inevitable.
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