The Dow rose 102 points yesterday. Gold rose $21.
Nothing to get excited about…so let’s move on.
“Ireland is the only country that has been able to pull off any significant amount of austerity,” said Chris Hunter, an analyst with the Bonner Family Office here at its Irish headquarters.
“And it seems to be working. The Irish are remarkably passive about it. We haven’t had any riots. Not even a lot of complaining.
“I guess we realized it was a bit of a lark all along. I mean, building big houses all over the country. There was a time when property in Dublin was more expensive than property in London. We knew it couldn’t last. We knew we’d have to pay for it someday. So, here we are…and we all seem to accept the fact that it’s going to be difficult.”
We drove up to Kilkenny to have lunch with economist David McWilliams. He gave us a simple explanation of the European economy:
“If the Germans expect us to continue to borrowing money from them so we can buy their big cars, they’re going to have to accept the fact that we won’t always pay them back. It’s going to be like it was in ancient Israel. Every 50 years, debt was forgiven. It was a jubilee year. We need to do something like that.”
Later in the day, we went to look at a house for sale. Your editor has a weakness for old piles of stones. Especially if they are in bad shape. This qualified on both points. It was an Italianate mansion built in 1841. And it is falling down. The wind and rain blow through the broken windows. Dry rot eats through the floor joists. Horses trot over the once-gracious lawns.
Vandals and thieves have attacked the houses. Fireplaces are missing. Upstairs, they tore up the floor to take out the lead pipes. And in the front, someone is using the front steps as a stone quarry. Huge slabs of stone have been stolen. Anything that could be easy sold has been picked up and taken away.
“What price would you put on something like this,” we asked a local architect.
“Well, three years ago you could have gotten millions for it. There were plans to turn it into a hotel and a resort. But now, it’s not worth anything. The owner went broke. It’s in the hands of the bank. And the banks want to get rid of these places as fast as possible.
“You can see why. It’s falling down. They stole the lead off the roof so water is getting in. Another winter and it will probably not be restorable. And right now, it’s actually worth less than nothing. It’s a liability to the owner because he has to spend money to protect it. I’m sure you could get it for nothing. But if I were you I’d put in a bid for less than nothing. I’d make them pay me to take it off their hands. Because it is going to cost a fortune to fix it up.”
Is your editor fool enough to fall for another old fix-up special? He’s done it before. Several times. And he’s lost money almost every time. Will he do it again? Stay tuned!
Yesterday, Jose Manuel Barroso, president of the European Commission, lauded Ireland for having stuck to its austerity program. Ireland seems to be getting back on its feet.
But wait. What’s this? The WSJ reports that Ireland will have to cut another $5 billion:
DUBLIN — Ireland’s Fiscal Advisory Council Wednesday said the Irish coalition government will require four billion euros ($5.5 billion) of budget adjustments to meet a key 2012 target demanded by its bailout lenders, adding the country ought to consider even deeper cuts to impress financial markets.
The European Union and the International Monetary Fund lenders require the government reduce a budget deficit of about 10% of gross domestic product this year to 8.6% in 2012. To reach that target, government ministers have said it will consider “at a minimum” €3.6 billion in spending cuts and tax rises in its 2012 budget.
However, slower-than-expected economic growth will require an additional €400 million in adjustments for 2012 and total cuts of €4 billion, the fiscal council said. The council was set up to provide independent non-binding advice to the government after the country last November needed an EU and IMF bailout when the cost of rescuing its banks got too much to bear.
And urging the government to cut even deeper, the council said cuts of as much as €4.4 billion should be considered in order to pare the budget deficit to 8.4% of GDP in 2012. It urged the government to also exceed its bailout targets in future years by reducing the deficit to only 1% of GDP through 2015. That is much lower than the nearly 3% target set by the EU and IMF.
So the knife goes deeper. How long before the Irish howl?
And more thoughts…
Zombies to the right of us. Zombies to the left. Zombies everywhere. When Ronald Reagan first entered the White House only 30% of US households were supported by government benefits. Then came the Morning in America years — which were supposedly a lurch to more free-market policies. And then came the Bush years…the Clinton years…the Bush II years…and now the Obama years. And year after year, Republican or Democrat, there was a constant…or near constant: more and more zombies. The only exception was a brief period at the end of the Clinton years. In all other years, the zombies multiplied. And now we find that nearly half of all households get some form of government handout. The Wall Street Journal reports:
Families were more dependent on government programs than ever last year.
Nearly half, 48.5%, of the population lived in a household that received some type of government benefit in the first quarter of 2010, according to Census data. Those numbers have risen since the middle of the recession when 44.4% lived [in] households receiving benefits in the third quarter of 2008.
The share of people relying on government benefits has reached a historic high, in large part from the deep recession and meager recovery, but also because of the expansion of government programs over the years.
Means-tested programs, designed to help the needy, accounted for the largest share of recipients last year. Some 34.2% of Americans lived in a household that received benefits such as food stamps, subsidized housing, cash welfare or Medicaid (the federal-state health care program for the poor).
Another 14.5% lived in homes where someone was on Medicare (the health care program for the elderly). Nearly 16% lived in households receiving Social Security.
High unemployment and increased reliance on government programs has also shrunk the nation’s share of taxpayers. Some 46.4% of households will pay no federal income tax this year, according to the nonpartisan Tax Policy Center. That’s up from 39.9% in 2007, the year the recession began.
Most of those households will still be hit by payroll taxes. Just 18.1% of households pay neither payroll nor federal income taxes and they are predominantly the nation’s elderly and poorest families.
The tandem rise in government-benefits recipients and fall in taxpayers has been cause for alarm among some policymakers and presidential hopefuls.
Benefits programs have come under closer scrutiny as policymakers attempt to tame the federal government’s budget deficit. President Barack Obama and members of Congress considered changes to Social Security and Medicare as part of a grand bargain (that ultimately fell apart) to raise the debt ceiling earlier this year. Cuts to such programs could emerge again from the so-called “super committee,” tasked with releasing a plan to rein in the deficit.
Republican presidential hopefuls, meanwhile, have latched onto the fact that nearly half of households pay no federal income tax, saying too many Americans aren’t paying their fair share.
Of course, this only refers to those who get “benefits” from the feds. Millions more live directly on salaries paid by the feds. And then there are the millions more who live on salaries paid to them because of federal subsidies, tax angles, legal requirements and so forth. Think of the lawyer working for Goldman Sachs whose job is to keep the company from running afoul of the SEC. Think of the paper shuffler working at the University of Maryland whose job only exist because the feds subsidize education. Think of the private contractor getting paid billions to build the biggest embassies in the world.
They are all zombies…all doing things that probably shouldn’t be done at all…all draining the economy of real wealth.
And there are so many of them that the mathematics of democracy have now turned against it. More zombies than productive citizens. More people with a stake in further federal spending than people with a keen interest in stopping it.
And so, the feds borrow. The feds spend. And more and more of the real economy shifts away from real production…and towards the zombie economy…of pretend work and make-believe production.
for The Daily Reckoning Australia