Finding the right words in a downturn


COMMENTARY:TO UNDERSTAND the power of language, one need only look at US president Barack Obama’s universal healthcare plan. It no longer exists, writes FRANK HUMPHREYS

At least, the word “universal” has been dropped. Perhaps it was too close in meaning to “common” and, by association, “communist”. Now, Democrats talk of a public option. Influential pollster and wordsmith Frank Luntz advises Republicans to call it a Washington takeover. He has even produced a 28-page guide, The Language of Healthcare 2009.

New phrases don’t always last – “enhanced interrogation techniques” and the “war on terror” are unlikely to survive – but those that succeed in the short term can have long-term repercussions. Therefore, some of the changes in Irish economic discourse deserve scrutiny, particularly surrounding discussions of the National Asset Management Agency (Nama).

The word “sale” has been temporarily replaced by “fire sale”. The so-called “current market value”, better-known as “price”, is facing stiff competition from “long-term economic value”. Nama is itself a new phrase and acronym in the language, although its full meaning is to remain commercially confidential.

If there was a market in language, investors might be concerned by the current verbal volatility. With “the fundamentals are sound”, “renting is dead money” and “soft landing” out of favour, more stable investments could be in demand. One long-term prospect is “when the property market recovers”. However, conservative investors would seek phrases that seem independent of market conditions, such as “now is the time to buy”.

Of course, past performance is not a reliable guide to future performance. Indeed, “the past” no longer exists. In an earlier period of vocabulary contraction, it was replaced, along with “responsibility”, “accountability” and “embarrassment”, by the single phrase “going forward”.

Many of the phrases are not, strictly speaking, new but they are being popularised in the optimistic spirit of the boom by many of the same people who fought for so long to counter or ignore negative terminology such as “value”, “risk”, “affordable”, “exposure”, “business cycle” and “burst”.

For want of a better name, we could describe the underlying philosophy as “neo-bubblism”. It provides a straightforward analysis of the property market: in a boom, property is undervalued; in a downturn, it is undervalued. It may have been overvalued at the peak but that’s a retrospective judgment rather than one going forward.

In March, Japanese house prices were at a 24-year low and 50 per cent below their peak in 1991. As recently as last autumn, Irish second-hand house prices were three times the inflation-adjusted prices in spring 1996. Given the excess housing capacity, high ratio of price to (falling) incomes and rents, and drastic changes in fundamentals (our fair-weather friends), prices may have some way to fall.

The property market will recover but not in the manner that some hope. Yes, there will be another bubble. However, anyone who buys now and somehow manages to sell at the peak of the next bubble is not guaranteed a good return on their investment. That’s what critics might say.

However, some neo-bubblists reject the existence of critics. They prefer to see their ideology as universal, and exhibit a fondness for “nobody predicted” and “we all”.

A certain amount of optimism about the Irish economy is welcome. Some of the terminology in vogue is relevant to the valuation of property development loans. But the danger is that repetition of wishful language will again lead to wishful decision-making – and not just by Nama.

Frank Humphreys is an economist and editor of, an online news and information service for the media concerned with international development and human rights issues