Thursday, 25 June 2009

IMF, Merril Lynch, Standard and Poor report on burst bubble.

"The economy is in the midst of an unprecedented correction. The stress exceeds that being faced currently by any other advanced economy and matches episodes of the most severe economic distress in post-World War II history."

International Monetary Fund report, 24th June, 2009.

It’s no surprise to any of us who were observers of the “boom” years, based on property tax breaks and credit that was not backed up by real money. The IMF expect the economy to shrink 13.5% in the period 2008-2010, and forecast 15.5% unemployment by the end of next year. The only surprising thing is that anyone could be surprised that it’s come to this.

Many was the time I walked around Dublin 15 and saw cars sitting in the driveways of houses that only a few years before were cheaper than the vehicles they now harboured. And no wonder… people were taking out mortgages to buy their wheels.

Anyone who was not caught up in the “feelgood” mood could see there was no logical basis for building apartments and houses that people did not want to live in. The boom was based on dodgy foundations (sometimes literally) and it was evident long before it was flagged on this, and other, blogs. And really, did American multinationals such as Microsoft setting up here really mean that the resultant increase in employment would make everyone a millionaire? Of course not. They’ve had jobs in other countries for decades and you didn’t see the same levels of ostentation that were evident in Ireland.

Finance firm Merril Lynch, at the height of the “can do / positive thinking” mood in 2006, predicted that Ireland would have 25,000 “millionaires” in 2009. At the time they made that forecast, there were supposedly 18,000 “millionaires” in the country. I use quotation marks because the term “millionaires” included the inflated prices of peoples’ homes.

In view of the correction to the inflated market that has already taken place – and I can tell you from experience that it is well over 40% in some parts of Dublin already - Standard and Poor have said that property prices will fall 13% this year alone, and 10% the next.

That means there will a lot less “millionaires” in the future.

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Anonymous said...

once again mr GM agreat pic is that our bertie the suicide advocate on top of the pile is he ready to jump do you think, iam getting fed up with the imf a bunch of furners critical of our great little country just because they expect to have take over in the next 6 months, when in fact the only real problem in oirland is the high concentration of 18carat assholes t5hat live there

The Gombeen Man said...

I wonder. But I reckon B-B-B-Bertie loves himself too much to do us all a belated favour Mr BH.

You'e spot on as usual about the 18carat assholes here. Sure they'd have everyone believe that its people like ourselves "talking the country down" thats to blame for reality spoiling the show!

Bring on Mr Bloch, they'll say - "Confidence, can-do spirit and optimism is what's needed."

Ooops. Isn't that what caused the problem (along with our investor friends in the Government, of course).

I wonder how Cowen's buy-to-let in Leeds is doing?

Anonymous said...

hullo there again GM its just awful that oirland has lost so many millionaires in 3 months ihope this is the end of it otherwise oirland might again be a pleasant enough place at least for a visit ,ihave a busy week ahead a couple of my neighbours and good friends have passed jacko has family in cahirciveen and was mad obout oirland like every one here in beverly hills- cheers

The Gombeen Man said...

Well Mr BH, I can understand it's a busy time for you there. Please extend my sincere condolences to the Fawcett and Jackson families.