The €50 charge for the medical card is surely a decoy, on the list purely to make increased prescription costs and bed closures seem more acceptable. Don’t let them away with it. There are ways to save money – or save the euro – that don’t involve ritual human sacrifice. We have a two-tier health system more wasteful than you’d see in any nightmare, even if you regularly dream about inefficient public resource allocation.
Consider a moment: We have to maintain a huge national infrastructure, staffed by public employees with all that entails, and then not let the majority of people use it because they’re not poor enough. Those who don’t qualify are forced into the hands of the profit-making health industry – which we then subsidize by allowing them to use the huge public infrastructure. We’ve basically taken on their capital costs.
This government was elected on the promise of introducing a single-tier health system. OK, they could have got elected on the promise of doing a little dance, but this is the one they made and it’s a highly desirable – in fact a necessary – thing. Problem is, it looks as though they’re employing the simple expedient of killing the lower one off.
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.
Today was spent at the Dublin Institute of Advanced Studies, a curious seat of learning I have written of before. I was there for Tionól, a symposium on Celtic Studies. Not my usual stomping ground, but it’s good to go off and explore sometimes.
Ireland is fascinating because so much of what seems like the distant past happened so recently. (And vice versa.) The coming of Christianity didn’t overwrite pagan social structures. Much of their law and their system of values continued alongside the new religion. Nor did Viking settlement or Norman invasion destroy that cuture; it was only in Elizabethan times that real efforts to replace it began. So it’s almost as though we moved from the pre-Roman era directly to the early modern.
Yet there is so much we don’t understand about that past. When the change came it came fast, and though it left us a rich supply of written records, we do not always understand them.
For example, there is a word findruine that means…. Well, from its context it appears to be a precious metal. Stories speak of valuable objects of “gold, silver, findruine and bronze’ – in some it even outranks silver to become the most precious substance after gold. Yet we don’t know what it was.
Theories abound of course. My own first thought was that it might be a special version of bronze, with more copper in the mix. Or perhaps one that substituted zinc for the tin to make gold-coloured brass. But all these have been suggested over the years. Our speaker argued that none of them were right, and that the material was bronze (and perhaps other metals) that had been ‘tinned‘.
Which is not to say it had been put into cans. Tinning is the art of heating metal and then introducing solid tin to it. Tin melts at a relatively low temperature, so it spreads out on the hot surface, bonds with it, and forms a bright silver-coloured coating that resists corrosion and tarnish. The art was widely practiced until quite recent times – it gives its name to the trade of ‘tinker’ – and we know it was done by the ancients because, though it’s less robust than a pure metal, some beautiful articles of tinned work still exist.
So perhaps an ancient riddle has been solved. In the scheme of things though, it’s a relatively minor one. For example one of the most important roles in traditional Irish society was that of file. The word is usually translated as ‘poet’, yet fully qualified members of the file class were social equals to kings. And we still don’t know exactly what it was they did.
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.
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.
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.
I woke up this morning with just one thought in my head: As James Bond does most of his work outside his home country, he should apply for an International Licence to Kill.
The subconscious mind is weird, yet annoyingly trivial.
Anyway, the G20. Thought this is basically just another of those international showcase conferences where everyone makes the right noises and little of real substance is done, it did act as a deadline for the EU leaders to have their house looking pretty. Like a station mass, if you will. So they – Sarkozy in particular, as host – were not well pleased when Greece crapped on the doorstep. Batting the EU leaders’ kind offer back with a referendum threat has sent the markets into turmoil once more, just when Sarkozy and Merkel wanted to impress the world with their authoritative grip on the situation. It makes them look helpless and incompetent, so naturally they are enraged. It is now all right therefore to talk openly about dumping Greece unceremoniously out of the euro.
Greece will probably not hold the referendum – there is severe doubt that Papandreou could win the parliamentary vote necessary to hold one anyway – but I am making plans in case the opposite manifests, and it returns to its own currency. It’s a nice place to live. It has weather and wine, as well as all the olives and history you can eat. And when its currency is free to float again it will float ever downwards, as their relaxed taxation chases after their optimistic expenditure. So if I move there, but live on what I’m making here, I’m going to be relatively wealthy – increasingly so indeed. I’ll hardly need to work at all.
So that’s my retirement sorted. Unless Ireland leaves the euro too, in which case I’m buggered.
The Greeks played a game of brinkmanship and got a huge debt write-down from it. What did they learn from that? To do more brinkmanship.
So they’re getting a referendum on whether they’ll accept better terms, while we give it away without even a vote in parliament. €700 million to people who should, if they were treated like anyone else in a free market, have simply lost their money.
From this the banks learn that they can lend to people who can’t afford it and still make a profit, because those who did not the make the mistake of borrowing will be forced, by their government, to pay them back.
So what do we learn? That major international banks are our enemy, that the only way to fight them is to threaten the whole European economy, and our government is too supine to do that for us so the people will have to do it themselves.
Well… On the whole I think it’s better over here. If no one minds. Can I help you search for any more loose change? Whatever help you need, just ask. I’m not an accountant, but I could hardly be less competent than the shower you seem to have now.
Maybe it’s time to look more closely at the Department of Finance. While Ministers and Taoisigh must bear primary responsibility, the Department was the enabler of their problem. Could they be, you know, not actually very good? If they can just stumble across three billion here, how can we be sure that another few haven’t fallen through the cracks over the years?
Or maybe we could just forget about that for now and emphasise the upside. It’s three billion we didn’t know we had, the repayments we’re making on our children are already scheduled, so the obvious thing to do is get some real value out of it – with a big treat to cheer us all up.
As it should happen, today is the anniversary of the first hydrogen bomb – “For those times when ordinary nuclear weapons just aren’t enough”. Fifty-nine years they’ve been around, isn’t it high time we had one? And maybe a nice missile to show it in.
