Who is really to blame for the crisis?

Today, buried on the inner page of the Independent Business section there was an article stating that an Oireachtas committee found that the responsibility for the financial crisis in Ireland was largely down to regulators and ratings agencies (the same agencies who down-graded Irish debt in 09′).

Sadly, it didn’t make massive headlines, nor will it… If you could get a picture of Sean Fitz, or some scandal element to tag on then it would be everywhere, but the humble work of one of the few independent studies done on the matter, lacking sex-appeal & scandal will be widely ignored by the public, meaning everybody will still only see ‘banks’ as the source of the problem rather than as the conduit, when in fact the source of the problem was the gatekeeper, the person with their hand on the tap of the conduit, who allowed credit to flow too quickly for too long.

I had coffee with a well known economist last April and we spoke about this matter, he felt that it was …

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Irish economic policy for the crisis: What next? (first session)

On Wednesday there was a conference in Trinity College Dublin called ‘Irish economic policy for the crisis: What next?’. This post is video footage taken at the conference (thanks again to Philip Lane and Patrick Honohan for allowing me to film it).

There are some really fascinating ideas in the talks and for those of you who couldn’t make it on the day it is really worthwhile watching.

The first speaker of the day was John Fitzgerald of the ESRI who gave a talk about competitiveness. The other parts are here ( part 2, part 3, part 4, part 5 )

Karl Whelan of TCD followed with a piece on Potential Output. Karl’s talk raised some great points about the structural deficit but pointed out (towards the end) that the actual deficit is the thing to focus on. …

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Irish economic policy for the crisis: What Next? (second session)

The second session was chaired by John McHale  now of NUIG, formerly of Queens University Canada, who I have emailed back and forth with in the past (so I was really pleased to meet him in the flesh!).

Colm McCarthy (more recently infamous for his role in an bord snip nua) talked about pensions and debt management. The audio on this one is a bit tricky as he was talking away from the camera but it is a great talk, the other segments are here ( part 2, part 3, part 4, )

Philip Lane gave a talk on on the challenges facing Ireland regarding our fiscal policy, the factors affecting Ireland (such as our EMU membership) were raised and his talk was fascinating, he also -and …

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House prices in the near term: Robert Schiller

Economist Robert Schiller of ‘Case Schiller’ report fame says that he believes the housing market will fall further, confidence is everything in the property market and he says that confidence is at a record low and that is one of the primary reasons for his feelings on future prices. This makes for some interesting viewing, his book ‘The subprime solution’ and another called ‘Irrational exuberance’ are both excellent reads if you want to get a view on the current situation from a man who saw this coming. A vital point he makes is that avoiding additional supply is part of the solution.

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Nouriel Roubini and Nassim Taleb on CNBC

Two world renowned commentators give their views on the economy and market. The points they are making are that the same people are in charge, the system is not fundamentally changing, and that drastic measures are required in order to solve the financial crisis.

The main points made are that cash is king, the bottom has not fully been reached, and that we need to change the way the economy is driven, we need to get back to real physical capital rather than unproductive activities such as housing and finance.

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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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