If you refuse to have anything to do with all of a certain racial or ethnic group then yes, you’re a racist. Even if some people from that group did you wrong – Hell, even if everyone you ever met from that group did you wrong.
If you punish a person with a certain skin colour or a certain religion or a certain accent because of your feelings about other people from that group, then you are thinking as a bigot thinks. You are mistreating perfectly innocent people because “they’re all the same”. And that is evil.
Yes there probably are Africans in Naas who are rude and awkward and belligerent. They are wrong to be. But I am also sure there are rude and awkward and belligerent Irish people in almost every city on Earth. If public representatives in those cities refused to deal with their Irish constituents, what would you call them? You’d call them racists.
Darren Scully, Fine Gael mayor of Naas, you are a racist. And what is more, you’re a shithead.
So house prices in Dublin have reached half what they were at the height of the boom. That’s a good sign. If they halve once more they’ll be back to what they were pre-bubble. Look at the graph (ganked from the very interesting ronanlyons.com) if you don’t believe me. Converted to 2011 money, an average house cost about €100,000 for decades. At the height of the boom it peaked at nearly four times that. Well over a third of a million, for an ordinary home.
Just one question springs to mind. What the hell were we thinking? Houses costing the price of a house, plus three other houses? Cars didn’t quadruple in price in just a few years. Food didn’t, even drink and cigarettes didn’t. During boom times, market prices are supposed to fall behind rising incomes. Otherwise they wouldn’t be called boom times, they’d be called mysterious outbreaks of rampant inflation. But during ours the cost of housing left incomes for dead. Clearly, the housing market is a deeply flawed one – almost an object model in fact of how capitalism goes wrong.
In theory the price of something is set by supply and demand, which is both efficient and ethical. Well let’s pretend it is for now, it works well enough for most things. Why does it go wrong here? Because the supply and demand of housing is almost irrelevant to the housing market.
What does a house cost? It’s an interesting question. A house in an appropriate location can be a very important asset, so in general people will spend the absolute maximum on a house they think they can afford. That’s clearly unlike wine or cars or dinners or phones. So in short, the answer to the question “How much does a house cost?” is “Whadya got?”
Or more precisely, what can you raise? If easier money is available therefore, people will borrow more. They’ll pretty much have to, as prices will rise to meet the available credit. Of course they have the option of only borrowing as much as they would have before prices went strange, but if they do they’ll get a much worse house than they could previously have afforded, while those willing to avail of the softer terms will get the shorter commutes, the better school catchment areas, the safer neighbourhoods. Competing for their and their children’s futures, it is hard to blame them for taking all that the banks and other financial institutions offered.
Speculation happens in such runaway markets of course. People will buy houses in the hope of selling them at a profit, just as if they were buying shares or gold or currency. Capitalism teaches that there is absolutely nothing wrong with that. The vast, vast majority however are buying houses because they need a house. And while some postponed purchasing in the hope that prices would come down, far more rushed into buying out of fear that they would not.
There are other factors, but we shouldn’t overemphasise them. People had become better off, yes. But did your income double? Mine sure as **** didn’t. The euro facilitated the boom because such an influx of credit would otherwise have exploded the currency, but it didn’t cause it. Houses were said to be “historically underpriced”, but even if you can bring yourself to believe a thing could be consistently underpriced for decades without anyone noticing, could it seriously be by a factor of two, even four?
And there was net immigration, that could have been expected to fuel the market. After all prices go up when demand outstrips supply. Only… Supply vastly outstripped demand. People were building houses up the sides of cliffs.
There are no two ways about it. We had a housing price bubble because we had an oversupply of credit. The blame rests squarely with the financial institutions that offered these loans. That is, all of them. Major banks should have known better and could have resisted. Had just a couple of lesser institutions been left to their excessive lending the larger banks would have lost custom, yes. But they would have survived. And minor institutions could not by themselves have super-inflated house prices.
But these lending practices were adopted by the whole industry, and quite literally they forced people to pay too much – far, far too much – for houses. There is a clear case for debt forgiveness therefore. There is also a case for punishment – though of the lenders who made the irresponsible loans rather than the borrowers who had little choice except to take them. And by punishment, I seriously mean prison sentences. There must surely be some law against business practices so reckless that they ruin individuals, families, even a whole country.
Whatever the exact mechanism, it seems beyond dispute that the German parliament knew details of our budget before ours did. It may not have been the whole budget of course, but it still doesn’t look good.
Particularly in this context. What Merkel has proposed for the Eurozone is EU oversight of members’ budgets. Critics will say that that amounts to German oversight. So this is embarrassing even more for Germany than it is for Ireland.
We’re hearing a lot about how ‘the markets’ are reacting to changes in the Greek and Italian governments. It would seem the broad assessment is ‘unhelpfully’. Mysterious beasts, these markets. The only clear thing is that they’re damnable tricky to please. Whatever you do, it turns out to be not even close to what they wanted. Basically, the markets are a dreadful girlfriend. I know, in reality they are just bunches of people. But you can never trust people in bunches.
The other day I heard someone say that markets are powerful mechanisms for finding the correct price of things because they depend on the ‘wisdom of crowds‘. This is a real and very interesting phenomenon. If you ask a crowd to estimate something, it often happens that the average of their guesses is more accurate than even the closest individual one. In other words, the crowd as a whole seems to know better than any one of its members. It’s as if all their ignorance, being distributed randomly, cancels itself out – leaving nothing behind but the smart.
Which in fascinating and useful to know. It’s not however how markets work. And particularly not financial markets, where what is being traded isn’t a tangible commodity but – when it comes down to it – promises. People making promises to repay a certain amount of money in the future (or, thanks to some of the more complex financial instruments, the past) in return for money now. People packaging up those promises and re-selling them as promises about promises. People trading on promises yet to be made. All for money – which is of course itself only a promise. It’s not a crowd trying to estimate something objective. It’s a crowd all trying to second-guess each other – a deeply unstable situation. It could turn into a stampede at the first peal of thunder. Yet this is what we’re depending on now, so soon after our experience with the property market. We’re incurable.
So Wall Street is no longer occupied; not by protesters at least. The encampment has been swept away on the – quite specious – grounds of health and safety. I’m a strong supporter of laws to protect innocent people, so it always angers me to see them abused. Taking something enacted for public benefit and repurposing it to oppress undermines the rule of law and draws democracy into disrepute.
To compound the dishonesty they were told that, this being nothing more than a cleaning, they would of course be welcome to return as soon as it was over.
Only… Don’t bring camping gear.
Whose health and safety anyway? The order cites that of local residents, the emergency services, and the protesters themselves. The former two you could understand if the encampment did present some sort of hazard. (It didn’t.) Those groups have little choice but to be in its proximity. But the protesters themselves? They’re being ordered to leave on the grounds that by assembling peacefully, they pose a health hazard to themselves.
One wonders what form of protest couldn’t be suppressed on such grounds. Leave the powers that be to get on with it. Resistance is bad for you.
I’m watching the replay of the inauguration of Michael D. Higgins as President of Ireland (Uachtarán na hÉireann), a significant threshold occasion in our history. An event in my personal life too – this is after all my old Sociology professor. And, one I missed. Yesterday I had to do something to sort out the utter mess my finances had gotten into since the economy hit the windscreen.
It is moving now though, to see one of the few politicians I’ve ever had any respect for become First Citizen. What the hell happened there? After over a decade of naked materialism we’re suddenly electing a socialist intellectual, and with no intervening transition except the global failure of capitalism.
It is a bittersweet occasion though. We now have as President a man who you can say without embarrassment is passionate about equality, about justice, about actually changing society. That we esteem him enough to raise him to this position is a wonderful thing. But at the same time, it’s sad that he was raised to a position of esteem only. As President he has less power than an ordinary citizen; they at least are free to express their own opinions.
Which is unfortunate. Now more than ever we need voices like his.
The British seem to be going particularly overboard for poppies this year, presumably inspired by the calendrical happenstance of all those ones lining up in a row. But unthinkingly, they only emphasize the tragic aspect of this occasion.
Why eleven? The agreement to end hostilities had been signed more than five hours earlier. The war officially ceased only at the eleventh hour of the eleventh day of the eleventh month because that seemed a suitably grand and historic way to end a ‘Great War’. So they kept on fighting, and they kept on killing, until that eleventh hour came.
How can one feel anything but contempt for that?
But this act of inhumanity was just the start. The victorious powers chose to accept no portion of blame for the hostilities. On the contrary, and despite the fact that a great deal of the credit for the war’s end belonged to the German people for rising up against their leaders, despite the fact that the Kaiser had abdicated and the empire been abolished, they chose to heap all blame – and punishment – onto the people of the new German democracy. The terms of this ‘armistice’ would lead directly to disaster on a previously unimagined scale.
This hour marks not the end of war, but the beginning of revenge.
Jesus. The UK’s Channel 4 had a documentary this evening called “The Man Who Killed Michael Jackson“. Did they make that last night? Maybe they went through a documentary they already had, bleeping out the word “allegedly”.
News has been extra weird today. A US Presidential candidate vows to shut down the Department of Education, and the most remarked thing is that he couldn’t remember the name of another agency he wanted to close down? Under the influence of the Tea People the Republicans are turning from the party of the American rich into the party of American national suicide.
In France meanwhile, Sarkozy is mooting a two-speed Europe. In this version there will be an ‘inner’ group of stronger economies using the euro, and an outer using… something else. There are merits to this idea. The part that makes least sense is his assumption that France belongs on the inside.
Who owns the banks in Ireland? You would be forgiven for thinking that we had some sort of controlling interest, after having mortgaged our children’s lives to save them from bankruptcy. Apparently not though, because both Bank of Ireland and AIB have point-blank refused a government request to pass on an ECB interest rate cut. You see, they have to obey the laws of the free market. Or all except the one where losing incredible sums of money means you can’t be in business any more.
We should send them a signal. One bank – selected at random – should be allowed to collapse. Just to remind the rest what reality is.
Why has the Eurozone gone awry? Why have the economies of Ireland, Greece and – it looks likely – Italy shot off the precipice like runaway trains? Well as in any transport disaster, several things had to go wrong at the same time. Yesterday we looked at Problem one, the credit boom. That was hardly surprising. The next piece of the jigsaw though may be a little more unexpected…
Problem two:The success of the euro. Mad I know, but in many ways the euro crisis was caused by it acting exactly as intended. It immediately improved the economic prospects of the poorer countries of Europe. Well, the poorer ones that were rich enough to join. Currency stability made the ‘peripheral’ economies attractive to money from the richer ‘core’. They became more profitable places to find investment opportunities.
But there were downsides. When a small economy with its own currency enjoys boom times, one immediate consequence is of course inflation. This reduction in the effective purchasing power of the currency generally causes it to drop in value – as if there was a divine law saying the more money you earn, the less it’s worth. But though that’s frustrating, it at least exerts some moderating influence on the economy. It wasn’t long before a strong currency was the very last thing the rapidly-growing peripheral economies of Europe needed. But adjusting it for their sake was out of the question, their interests were secondary at best. The primary goal of the euro, nearly its entire raison d’être indeed, was to be strong. With no possibility of the currency falling it was almost inevitable that these economies would badly overheat.
This was a foreseeable structural problem with the euro. Loosely-attached economies at the fringes were bound to get yanked about violently by the slow but inexorable movements of such a leviathan currency. Yet we still haven’t decided how to deal with it. Had the credit bubble not coincided, we might have had greater time to adjust and put compensating mechanisms in place. But with the bubble and the fluctuation-amplifying mechanism, well, what we got was bursting boilers and third-degree scalding.
And you know what’s the crazy part? With all this turmoil on the bond markets, with all this panic and fear that countries won’t be able to pay their debts, need international aid from the IMF, be forced out of the euro, you might be forgiven for thinking that the euro itself was in trouble. Yet it sails on, imperturbable, as strong as ever. Indeed, many would argue, quite overvalued. Which is really not what you want from the currency that you have enormous debts denominated in.
There is no escaping this: The euro was devised mainly for the benefit of the larger economies, and it is those economies that have benefited most. Yet it is we in the smaller and more vulnerable ones who are being made to suffer for its failings. Here, we’re even expected to return the investments that outside institutions made into our over-inflated property market – the very money that caused it to explode. They want it back.
The enormity of that has still not really sunk in.
Italian stock markets rally on rumours that Berlusconi may step down. That says everything really. Usually the forced resignation of a head of government sends the markets plummeting, as a country switches from general predictability into leaderless chaos. But it seems even leaderless chaos would be more relaxing than Silvio Berlusconi. You can actually calculate the millions he’s costing his country every minute he hangs on.
If he does go though, he will be the third national leader directly forced out by the financial crisis. I don’t think there’s been such a wave of regime change across Western Europe since 1968. How did it come to this – and to ask the question that everyone really wants answered, whose fault is it?
You can’t pinpoint a single cause in these things of course, but surprisingly I think we can narrow it down to just three:
Problem one:The credit boom. We’ve spoken of this before, but its origins can be traced back to the liberalisation of the US banking industry, and the creativity this consequently introduced into a previously staid profession. In particular, the creativity about what the term ‘asset’ means.
It’s always been quite acceptable to loan someone some money and then consider their promise to pay you back as an asset you own – as long as the value you give to that asset realistically reflects the risk of them not paying you back at all. Be unrealistic however, and you’re in trouble. Though many complex and obscure mechanisms were applied to the task, I don’t think it’s grossly oversimplifying to say the basic problem was that overvalued loans were used as collateral to raise more money, which was then turned into more overvalued loans, which were used to raise more money, which was… Et voilà, magic money from nowhere. Inevitably this reached the point where it was mutually profitable for everyone involved to overvalue the loans they were all giving to each other.
This free money fountain naturally encouraged borrowing throughout the US and Europe, and indeed about everywhere with access to currency markets. The first I knew something had gone badly wrong was when I got a letter from my bank telling me I’d been ‘pre-approved’ for a loan I hadn’t asked for. I’m a freelance artist for God’s sake. When banks go round pushing loans on poor people, the Emperor is out waving his dangly bits to a cheering audience.
But it wasn’t just private borrowing that got out of control. Countries too found credit temptingly cheap. What’s more, easy credit helped fuel a consumption boom, which upped tax revenues, which encouraged governments to ease off rates and make more promises. The problem is that largely fictitious revenues can dematerialise overnight. Public borrowings and spending commitments on the other hand are not so easily gotten rid of.
This though merely sets the global scene; in Europe specifically there was further trouble brewing. To follow…
