Is there or is there not another housing bubble?

In reference to No evidence of another Irish housing bubble, IMF says by Peter Hamilton on 26 June 2017 in the Irish Times.

The answer is no but close monitoring is needed. A Washington-based company, the International Monetary Fund (IMF), has confirmed there is no housing bubble in Ireland. Even with the quickly rising prices of property and an increase of mortgage approvals, IMF realizes this is significant but it is not a housing bubble… yet.

There is no statistics to show there is an imbalance of the pricing of houses. However, there is an increase demand for housing that could lead to an imbalance, especially with the Central Bank’s mortgage lender rules and the help-to-buy scheme for first timers. IMF has recommended close monitoring of the market to make sure a bubble is not formed.

The likeliness of this increase of housing demand should …

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Coleman at Large – with Fionn Davenport, Donal O’Donovan, Regina Breheny and Karl Deeter

The ‘Coleman at Large’ show featured Donal O’Donovan (formerly of the IMF), Regina Breheny (Irish Venture Capital Association) and Karl Deeter (of this parish) on a show about the Irish economy and the problems facing it as well as ways we should be dealing with our problems. Fionn Davenport sat in for Marc on the evening.

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Let’s have some fun…. Bond Style

We have been shaken, and the markets are stirred. Why not have fun in our final days? When asked what I’d do if I was on a plane that was going to crash, my simple answer is ask somebody for a shag and drink champagne until it all goes bang, what a pity that during the bond market equivalent of this all we can do is shake in our boots, I say crack open the bubbly.

O.k. So we can’t afford to drink champagne, and with any flight/sex innuendo I’ll become the blog version of Prenderville so we’ll leave that alone too.

What could we do with our bond market to sort out this mess? The issue we currently have is that there is capital depreciation on our bonds leading to higher yields, when you hear that our yields hit 8% it doesn’t mean that we are paying more, it means people are selling at a loss and new buyers get a higher yield on the indexed mix of bonds (Read More →

IMF Report on Ireland, condensed.

The IMF released their report on Ireland yesterday, here are some of the bullet points of the report.

Executive summary:

Given our serious imbalances Ireland was especially vulnerable to the recent global shocks. Specifically, over reliance on construction, financial intermediation, and this was coupled with a loss of competitiveness. Our expected drop cumulative drop in GDP of 13.5% to 2010 is the largest amongst advanced economies. The decline in wages will need to be sustained to help redress our cost disadvantage. Rapid progress on bank restructuring is critical. Authorities have taken important steps towards stabilization through the blanket guarantee. ECB is providing vital liquidity. NAMA is potentially the right mechanism, but it requires realistic assessments. Fiscal consolidation has begun and must be sustained. A continued commitment is required to address sensitive expenditures including the public wage bill and the scope of social welfare programmes.

1. The Context

The problems in Ireland reflect the unwinding of critical imbalances, easy credit fostered a property bubble, bank exposure to property soared as did the use …

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Jim Rogers, David Frost interview

Jim Rogers talks to Sir David Frost about the role of Government and Central Banks in the current crisis, he believes that the ethos of ‘not letting anybody fail’ actually magnifies problems because doing this means the bubble continues to inflate far beyond the size it would have done otherwise.

Jim has a very simple and straightforward way of explaining things that make him ever popular, although some of the medicine he prescribes is considered quite harsh. His point about letting the market do what it must is of the libertarian strain and for all anybody knows, he may be right (right as in ‘correct’ not as in ‘wing’), if so then everything being done to counteract the crisis is the inverse of what we should be doing.

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How you are already paying for nationalization

With one bank totally nationalised and others due to get recapitalised any day now it is time to ask ‘Who is paying, or going to pay for all of this?’. And the answer is in short – the tax payer, it’s just a matter of when and how.

One interesting conversation I had today was with a banking colleague (and I don’t have many friends in the bank system!) who asked me this ‘How can some banks offer deposit rates that are so far above the money market?!’. I told him that this offer existed because of the margins being charged on their lending.

His belief was that they are effectively selling government bonds via their deposit function, the state can either capitalise them -and doing so goes on the official record- or they can be propped up with deposits paid in by the public for high returns, however those returns may eventually have to be paid for by the state and thus, ultimately, by the taxpayer.

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