Ireland the Center of the Hurricane

   Posted by: chris   in Fish Talk

The Irish have woken up from their party into the stark landscape of a capitalism hangover.

The binge was amazing, everyone who was no-one was a property developer, every dog on the street was a real estate investor, money was free and easy and the faithful dined 5 star and guzzled fine french wines.

In 1986 hen I first left the motherland Ireland as officially a third world country. A third world country with a highly educated population hungry for success, willing to work for peanuts and most importantly a back door to the lucrative European markets.

The wizard waved his wand and out of nowhere Ireland was the second largest exporter of software in the world. What went unnoticed in this alchemy was that the natives stopped working for peanuts, spent their riches on grossly overpriced property and basically turned Ireland into the world epicenter for debt.

Houses on streets that I wouldn’t walk as a kid went from 65K to 600K in a 7 year period with anxious buyers hoping and praying that their offer would finally be accepted.

Banks treated the mortgage process like an ATM, you merely showed up with a P60 (W2) a few pay stubs and a pulse and the mortgage guy/gal said how much!

This wasn’t just the classic bubble, it took bubble theory to a new level. Ireland has a very steep tax for property buyers called stamp duty, the proud buyer of the 600K property on the once ghetto street with no parking, 1 bath and 3 small beds got to pay in excess of 50K to the government in cash at closing for the privilege of buying the house. What the Banana TD’s did with the proceeds of the real estate boom stamp duty is a mystery, but it appears that it all disappeared down the drain with the rest of the proceeds of the vanquished tiger.

The way out for Ireland is simple, let go of the strings that bind the economy and let it find it’s own balance. This includes letting the banks take care of their own debts if this is called default then default it is. House prices have to be let fall to levels that enable them to be purchased by people who want to live and work in the economy.

What countries who have no control over their finances like Ireland, the UK and the USA need to realize is that the economy is actually the people of the country living and interacting, not high-flying international corporate structures and systems.

If a person living and working in an economy cannot afford on his/her income to own a home then the prices of houses is too high.

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This entry was posted on Friday, February 4th, 2011 at 3:19 pm and is filed under Fish Talk. You can follow any responses to this entry through the RSS 2.0 feed. You can leave a response, or trackback from your own site.

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