Whew – well that's all right then. What a relief. There was I thinking that the Irish economy was just at the beginning of a catastrophic economic crisis when, like magic, it’s all over!
How do I know this? Because all the great and the good say it’s so. By this I mean our political leaders, the economists (and not just the media whores who shill for their bank employers), the IMF, the Central Bank, the ECB….I could go on. For example Marc Coleman, by no means the worst of the economic commentators and a genuine independent, assures us that ‘signs of recovery are everywhere’. In fact while everyone admits things are bad just now, it’s almost impossible to find anyone who thinks it’s going to get worse.
Apart from your beloved Savant.
Now why would I doubt these eminent sources? Well, their being spectacularly wrong on just about everything to date could be a factor. For instance Peter Sutherland, The Greatest Living Irishman, and former Chair of both BP and Goldman Sachs, was not so long ago sternly wagging a finger at those who were ‘talking down the economy’. It was ‘not a bubble’ he assured us. I can see how he made the Chair at GS. All the rest of those worthies have similar track records.
Now here I must put aside my customary modesty and self-effacement. I'm forced to do it in order to show that the truth about our economy was there for anyone to see. Well anyone who wasn’t a fool or a rogue. Yes, almost three years ago I called it out – see here. In the same post I showed how the economy was being fundamentally undermined by sidelining science and technology. Just like the US has been doing.
It’s astonishingly simple to show that we haven't even come close to turning the corner. The ‘Government’ is running a massive deficit of over €20 billion equal to about 40% of its entire budget. It’s been hysterically praised for its ‘bravery’ in shaving off €4 billion off that. But that’s only a fraction of what needs to be cut.
Surely that's self-evident?
Meanwhile, despite these cuts we’re adding about €20 billion to the national debt each year. Which means that the principle and the interest on the borrowings continue to rise. If you do the math you’ll see that this will almost demolish the €4 billion savings within a few years.
What then? Well, the US is getting around the same problem by printing money. This works, up to a point, but self-evidently has colossal negative implications down the line. And being in the Euro zone, Ireland can't do this. For a variety of reasons which I can't go into here, pulling out of the Euro just isn't an option. And we can't continue borrowing as this would mean unsustainable repayment levels and/or unsustainable increases in what the lenders charge us.
This leaves a sovereign default, or massive draconian measures to correct the budget. That's what I hope happens, as our bloated inefficient public sector and indulgent social welfare (on the dole in Ireland you earn triple what you do in the UK) need to be cut drastically. That will set us back on the road to recovery. But it'll be slow and painful
Take a micro example: Say a Diversity Manager in the Health Service Executive has to get laid off, together with her staff. She - it will of course be a she - will suddenly go from earning about €200,000 a year to a tenth of that. Now even if she gets the usual obscene public sector pay-off, she still won't be rushing to spend it. There will be tens of thousands of people like her if the essential deep cuts take place.
Add to this the certainty of continued pay reductions for everyone – apart from the golden circle – and major taxation increases and you get a sense of the amount of money that will - has to be - be taken out of the economy.
To compound the problem we haven't seen the last of the property bubble collapse. This will soon enter its second phase when the huge numbers of borrowers who survived up to now by living off savings will dump their problems at the doors of the lending institutions. This is going to be a severe problem, but nobody’s talking about it.
Does the ‘Government’ have a plan? Well, kind of. The plan/hope is that a miracle occurs in the form of a major boost in our exports once the international economy takes off. But as I showed in the earlier post I referred to, the madness of the last seven years or so has meant that Ireland has become a very expensive place to do business, while technology and entrepreneurial skills and capabilities have been drastically undermined.
Is it all doom and gloom then? For the next few years, an emphatic yes. But out of evil cometh good. Because the forthcoming cleansing hellfire will hopefully result in a lean, efficient public sector, the elimination of welfare dependency as a lifestyle choice, honest competition in the 'professions', and an environment that actually, as distinct from verbally, encourages technology entrepreneurs.
Consider it as a kind of enema.