Do you feel our pain?
Where do we begin? Do we begin today and make a call on if Brian Lenihan’s Budget debut was good or bad? Do we ask if he went far enough? Or if he went too far?
Or do we begin in July when somebody down in the hull discovered that the boat was leaking? Cap’n Cowen and First Mate Lenihan went down and investigated the damage, decided that they would have to throw some of the valubale ballast overboard to keep the ship afloat? Or in the months since then when leaks have sprung all over the place making the ship of State list to almost the horizontal?
Or last year when all the political parties out-bid each other with crazy stamp duty incentives to puff more dangerous air into a hyper-inflated property bubble?
Or anytime over the past five, six, seven years when the Government, the banks nor the population did zilch to cool an over-heating property market. Or to question the Grand Canyon size gaps between budgetary projections and actual out-turn (taxes were billions more than predicted)? Or to think deeply about the manner in which the windfall taxes were being spent and invested and how the elite of Irish society – politicians, barristers, consultants, public servants, the construction industry, corporations, grasping banks – rewarded themselves so disproportionately?
Enough questions. Though deeper cogitatin will have to be made than spewing out the cliche from the Northern peace process the Government wants us to buy into: “We are where we are”.
Yes indeed we are where we are. And where is that exactly? Deep dans le merde. But the good news is, folks, we are not alone.
A couple of weeks ago, I was more or less like the guy on the double decker bus who stands up and says: “I don’t know what a tracker mortgage is”.
But since then, I’ve learned. And become a bit of a compulsive reader of the financial pages, newspapers, magazines as I waded into the murky and polluted waters of so-called high finance.
There follows a long (but hopefully chunky) paragraph with some of the idiot guide fruits of that knowledge, for what it’s worth. My sense of what has happened – in its simplest terms – is a Michael Lynn caper on a global scale. Everything possible was done to facilitate borrowing. And when people are in that bubble, there is an air of unreality about it. They begin to believe that the bubble will go on forever, that property and shares and stock will continue to rise in value into perpetuity. And if a security looked a teensy weensy bit dodgy – an unemployed person in eastern California with no fixed income getting a mortage for $200,000 – you could always hedge with derivatives and credit swaps. And just in case those derivatives didn’t work out, you could take out a derivative on that derivative. And when that tightly-knotted system is finally unpicked and unknotted it emerges that the collateral is not only dodgy some of the debt – God knows how many billions or trillions of dollars globally – has zero collateral at all. But we all bought into it. Those of us with houses actually believed that the value that was placed on them had some relationship with reality, would last forever. And that would give us a permanent cushion about all the bad decisions we made when going into debt.
Anyway, the Government have used the global crisis as a cover for some of the awful decisions that were made in the past couple of years (in which – if truth be told – a lot of us were complicit).
And today’s savage Budget must be seen in that context. I have a long analysis piece up on the website on the specifics of this year’s Budget (if you feel in a martyr frame of mind, access it HERE)
How did we end up in this mess? The figures that scared me most was the General Government Deficit for €12 billion or 6.5 per cent of GDP. Our debt to GDP ratio has risen to 43 per cent. That compares with a ration of under 25 per cent only two years ago in Budget 2007 when Finance was predicting a surpluse of 1.2 per cent.
Lenihan has looked authoritative after a shaky start. He’s stuck the ‘under new management’ sign up. The problem is that the rusty old vessel is still the same.