Tuesday, 6 September 2011

Irish property crash - lessons have not been learnt?

Two posts ago we considered how once in a blue moon one might see a letter worth reading in Dublin’s freebie Metro Herald.

That post was prompted by an unusually intelligent missive to that publication, from someone called Bruce who articulated on what he saw as Ibec’s (the Irish employers’ union) hypocrisy.

Let us see the other side of the coin now, and a letter from somebody who lacks the grey matter quotient of our friend Bruce. It seems the lessons of the boom and bust in Ireland have been lost on this particular character, who signs him/herself off as “Another Concerned Citizen”. Witness the following excerpt:

“… I am a very responsible person with a young family and I made five property transactions during Bertie’s Tiger – some on private residences and a couple for Buy to Let.

It was people like me, and thousands of others, who drove this economy and had confidence in it to spend on property. The tax we paid to the Government on property-related earnings was huge. So I think people genuinely struggling need help and deserve to get some of the tax we generated back…”

Can you believe the stupidity of this person? And what about the projection of “Bertie’s Tiger”?  Nothing to do with him/her.  Most of these fools were voting for Bertie not that long ago. My ears are bleeding from hearing the cock crowing, they have denied him so many times.

Speaking of ears, when I lived in London for nine years some time ago,  if anyone told an (anti-) Irish joke within shot of mine they would have been cruising for the proverbial bruising. But now I am beginning to wonder if Bernard Manning, for instance, wasn’t just terribly perceptive? I jest – he was an ignorant racist bigot – but you take my point.

There seems to be a serious disconnect between cause and effect, reality and fantasy, in Ireland. You see it manifest itself in many ways – the denial of divorce rights for so long to people who were separated; the pretence that abortion does not exist here, because Irish women are forced to travel abroad for it; the joke that Gaeilge is our first national language, even though the majority of us do not speak it.

Then there is the property disconnect. This letter writer cannot make the connection between his/her – and “thousands of others property investments” and their requisite borrowing requirements – and the massive debt the country now finds itself in.

It seems that no lessons have been learnt

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anna said...

hear, hear!!!! yes I have noticed this with bafflement, many many times- the fact that growing up in ROI means that people take No responsibility for their own actions and a Huge Void where there should be a national sense of pride, empathy, a sense of common purpose as nation,a feeling 'we are all in this together' etc.
BTW I also read That letter- and thought it was a howler too!!!

Anonymous said...

mr gm there are the usual begrudgers around who think BERTIE was more pig than tiger much like the celtic tiger

Anonymous said...

The letter writer could be thick. Really thick.


john said...

Man's mind, once stretched by a new idea, never regains its original dimensions. ~Oliver Wendell Holmes; so said the great American jurist. I see in the UK papers that 100% morgages are back so when will it happen here?. It would appear that this man some people does not get it that the property scam has finished for now.

The Gombeen Man said...

@ Anna. Yes, even by Metro Herald standards it was a corker.

@ BH. It seems that rather than keeping his head down and mouth shut, old B-B-B-Bertie is still sticking his oar in left, right and centre. Even having a pop at the FF local party faithful, bejasus.

@ Eoghan. Yes indeed. I think we can safely conclude he/she is not the brightest button in the box.

@ John. That is a very good saying. I'd say it will be decade or two before they are back to the old 100% mortages here, though. But yeah, give it time and it could happen all over again. There's certainly the public appetite for it. They'd do it all again if they could.

Dakota said...

Herein lieth the rub, in my opinion the erudite, yet rapacious, individual has a point about the tax issue, GM. The throughly useless, cynical and inexcusable tax, eponymously known as STAMP DUTY, that is. The word duped comes to mind here.........Ah yes but not even the poor unfortunates even mention this now, for some reason.......I thought the penny would eventually drop but it looks like it never will. Ireland is not Scandinavia.......It is the opposite end on the spectrum..........But, alas, with regards to that one issue, really, in any analysis, economic or otherwise, why would someone think that such a levy could ever be justified in a country which; (1) already has at the very least, a complicated tax system, which relies on stealth to increase revenues? (2) in a nation where even the most basic of public services e.g. public transport is nothing more than a quango, with all the deficincies associated with same? (1+1=2, 2+2=4, 4+4=8, 8+8=16, some basic arithmetic there for all Quango loving individuals).

Dakota said...

Hi GM, for some reason the blog couldn't take this part as well. Anyway here's the second part.

Ok GM, so after mentioning the elephant in the room (something no one else in this supine country has uttered since 2007, for good or bad), lets just first establish that the celtic craic was nothing but a elaborate experiment by a rampant and out of control capitalist megalomaniacal fantasty. The same experiment and exponential growth, a growth which was not experienced globally since WW11, was experienced in much of the post industrial world. Ireland was swept willingly along. Great achievement that......."AFTER ALL WE"RE ALL WORTH IT?"

The problem is and was, that the credit which was made available from European Banks to Irish Banks and which ultimately was part of a complex and overly sophisticated global ponzi scheme, was of a percular nature. It fundamentally, and almost comically was based on Computer Alorithims which nobody fully understood or understands to this day, and which are still being used constantly in the global financial world, by individulas who either don't care one jot, or still believe they are playing video games in their bedroom. It was rabid insanity. Has the ponzi scheme been checked, has any politician stood up and shouted stop, has any cizizen shouted for REAL reform of the rotten system, has any civil servant put his head over the parapit? In the Irish context, has there been any change of the out of date constitution to reflect the global realities? No, to all of the above..........Yet that's only the beginning of this "particular" nightmare, it has to be understood that this same recurring horror has been ingrained in the collective consciousness and the wisdom of crowds has been infected.....forever.... Remember here in dear Éire we have a generation of people who know no better, as they never experienced anything other than the "boom".....The intrinisic human causes of the last "boom," are still there. Just think of the psychological processes involved, a simple example being, group think, as that displayed in the Alsop Auction. Understanding that makes the national hysteria seem strangly rational. With Irelands over dependance on foreign direct investment any limiting of the nastier side of these basic human emotions is not part of the norm.

GM when you say the lesson has not been learned, you are fully correct. Old fashioned moral values are gone, the present generation in their teens and older, has as much concept of the word accountability as any of the out of control developers during the so called boom. A generation which is only partly to blame? Yes, the parents were the ones buying the properties. They have set the ultimate example.....A global phenomenon which sees the traditional passing of wealth among members of the same class, taken to new and more alarming levels as the young are now inculcated in the madness. They thought them well......Now wait for the rabid response, which will come. The English riots, or to give it it's propper title "shopping without money" being the perfect example. When there is talk of return to growth, for all those with an ounce of sensitivity it's almost as chilling as the present vacum. Ireland is special in that regard as there was never a halcyon era perse for the majority of the population. What's more they like it that way.....denial.........

Anonymous said...

What exactly is the point of your post?

You have, as have many others, missed a valid point from 'Another Concerned Citizen'.

Granted, it is wrapped a bit in airy-fairy but at it's core is a valid point that everybody bar none missed during the Tiger years.

I well remember one November when an RTE news reader proudly announced that the tax take for that month was higher than the entire tax take the previous year. Most of this was property tax and most of that was borrowed money. So we had a situation where the government was deluding itself that it was in the black, with all this tax take, when in fact it was spending borrowed money - just someone else's borrowed money.

Neither Enda Kenny, nor Finten O'Toole nor anyone said a peep about this at the time.

After spending all this borrowed money the government now proposes to wash its hands of it and Another Concerned Citizen and his like are left holding the baby.

One more Concerned Citizen

The Gombeen Man said...

@ Another Concerned Citizen. So many concerned citizens, eh?

The letter writer was not trying to accumulate properties out of altruism. He/she was doing so to make money, thinking prices would rise forever. Sure, the stamp duty paid on his/her transactions went into the exchequer, but it was all borrowed money and it actually masked a drop in sustainable income tax revenue writeen off in various property based tax incentive schemes.

Conversely, the bitter pill of stamp duty (and there are lots of unfair taxes, VRT being my particular example) was sweetened for investors by McCreevy having lowered capital gains from 40% to 20%.

As I say, much of the property madness was stimulated by tax incentives and shelters - which served as a mechanism for people to actually avoid income tax. Sure - Concerned Citizen can hand back the keys and walk away, IMO, but he/she cannot have it boths ways. He/she certainly can't have a tax refund, as it's his/her loans, and many others like them that have banjaxed the country.

Also, those who did not get suckered into this nonsense are the ones - IMO - who are truly left holding the baby. Bailing out the banks and failed property investors.

I am aware of the silence during all this madness from the press and the opposition - this blog made the point on countless occasions since it started in 2007. I think Joan Burton was the only one who raised it in any shape or form.

@ Dakota. Yes, Allsops is instuctive, D. That sentiment is still out there, and I'd swear if you had blanket debt-forgiveness this lot would be do the same thing all over again, as they would have suffered no financial penalty. Hence no lesson.

When talking about the silence (media and opposition) during the boom, I can't help cynically wonder how many of these people - be they journalists or "opposition" politicos had a few tax-incentive properties on their books?

Peadar said...

Sorry for slightly going off the main point,but,
I was just listening to the IBEC spokesperson on his reaction to the TALK, TALK call centre closure. First of all I never heard any words of sympathy for the people dumped on the dole. Second of all he suggested 2 areas where Waterford good get back with the multinationals.i.e turn Waterford Institute of Technology to a research facility for these same multinationls. So they would get all the benefits at practically no cost. So they would set the education agenda. Second point he made was that nationally we have to get the property market going again , "Get the banks lending" the new mantra. So it just shows where IBEC are at. Finally, Kenny is going on about how the 30 day notice was not polite. He fails to mention that is the minimum required by law in this country.

The Gombeen Man said...

Peader, just saw your comment now - after I'd done a post on the Talk Talk thing.

Yes, it is disgraceful they way those workers were treated. And Ibec are a shower of shites, no two ways about it.

Anonymous said...

The Irish go-getting 'eejit' wants all the benefits of capitalism but accepts none of the responsibility or consequences if their monetary risk doesn't work out for whatever reasons whether it's Europe, the banks or the regulators, corrupt or otherwise. It's always someone else's fault, not our job/responsibility. Well that's capitalism and gangsterism goes with it: 'You pays your money and you takes your chance'.

If this nation had the balls to really take matters into its own hands, banks wouldn't be getting bailouts and we wouldn't be wondering who's gonna save us, we'd be doing it ourselves just like Iceland.

The Gombeen Man said...

I couldn't agree more...