economics finance politics

The Joy of Self-Employment in Ireland

An ironic title as such joy is largely confined to the freedom to pick your work hours that exists in a quite limited sense if you’re providing services to people and you have to fit around their schedules.
Let’s look at the positive side:

  1. You’re the boss. Customers or clients may harass or harangue you but at least the boss won’t bully you.
  2. You have some flexibility regarding place and time of work that you may otherwise not be afforded as a PAYE worker.
  3. Expenses. You get to factor in some expenses associated with a home office into your tax bill. More on this later.
  4. Job security in the sense that you are ultimately responsible for whether you have it rather than a VP or SVP with no personal stake in your life deciding you need to be downsized because your division doesn’t look good on his spreadsheet or you’re at a grade where his costings suggest he could bring in someone younger to bugger up your job.
  5. The sense of achievement that comes with making it on your own.

lack of foresight or willful ignorance?

A friend of mine suggested that my comments about the government’s bungling of the banking sector clean were hindsight and that foresight was rare. Well, while I agree that foresight was rare, we saw a mass mobilisation of academic economists against the government’s plan while it was happening. Therefore I don’t believe it’s in any way fair to say that the criticism was hindsight.

It wasn’t just hindsight. People suggested it
Even stuff like this
suggesting that Roubini and Buiter disagree on NAMA is nonsense. Roubini’s version of NAMA crystalises losses for bond-holders in the banks. That plan was never put into effect as the ECB bullied us into paying almost all the speculators back. NAMA as implemented is totally dumb. Krugman thinks it’s dumb aswell.
And the fundamental flaws of NAMA (as impelmented) were pointed out by the infamous “20 economists” letter
But because the government and a decent portion of the electorate are anti-intellectual and therefore distrustful of advice coming from academics or journalists imho they decided to ignore it. Instead we opted to listen to eurocrats with the most horribly vested interests in Eurozone currency stability at the cost of the Irish taxpayer. It was dumb at the time, it’s still dumb.
We setup a bad bank and left the existing banks to “wither and die” as confidence in their ability to hold deposits withered. We could have setup a good bank but we implemented half a plan.
I think I’ve been pretty damn consistent over the past few years and there was no special insight beyond doing some calculations based on publicly available data AND reading the opinions of non-Irish bankers discussing their fundamental problem with both ECB and Irish mgt of the banking crisis.
We needed to draw a line under the debts and give them a good bank to invest in. We could have swapped out debt in the old banks for equity in the new one. People like McWilliams aren’t fortune tellers and they’re not cranks. All they do is do some simple sums and pay attention to what the people who count are saying. That’s not the ECB, it’s the investment bankers who would have taken losses on the chin if they’d been given a credible plan to move the economy forward, giving them a share in the profits. All we gave them, and Irish deposit holders, was more risk. Hence, people took their money out en masse.

The good bank scenario was suggested by many economists. It ties in with the nationalised banking sector proposal whereby an intermediate stage would be a semi-public good bank where depositors could leave their money with some confidence they would suffer from a “Computer says no” shock at the ATM machine.

economics finance

Definitions for the novice investor

I’ve been reading Liar’s Poker recently and it’s given me a better understanding of how market’s don’t work. To save time for novice investors I’ve created a few helpful definitions to guide them in their investment choices. In no particular order:

Bank – the generic term for an organisation that seeks to profit by controlling the flow of money.

Market – a mechanism to exploit the foolishness gap (often slim) between someone who has the means and desire to buy something and someone who knows what it’s worth. Innovations in the market have effectively rendered the “means to purchase” an outdated concept. Markets have the trappings of formality and the veneer of structure.

Risk Management – The process of substituting a relatively reputable product like insurance for bonds of indeterminate risk with the objective to save money over a specified term.


Worst decision in the history of the state

I’m going to stick my neck out and make a prediction. I believe that if you ask this question in 5 years time the answer will be NAMA as a catch-all term for the taxpayer support of dysfunctional banks. NAMA fuels the nightmares of the public’s imagination. The amounts are staggering. Effectively Anglo has already cost over 12Bn and could cost another 10Bn. These are just estimates remember. NAMA requires a recovery in the property market to avoid the “fire-sale” losses Lenihan fears in an immediate wind-down.

To say that we could need another 10Bn is like saying that it might be a fine day on March 30th next year. The variables are arguably too complex to give a good prediction. This is partially why Lenihan is so vague about the period in which the promisory note backing the recapitalisation is payable. He just doesn’t know. It assumes a solidity to the rest of the loan book and the Irish economy which appears difficult to justify given what’s transpired over the past 18 months. Ireland Inc’s actual exposure is only limited by the size of the loan book and depositor base. We cannot legally compel depositors to stay with the bank, no matter how tempting the lock-in interest rates are.