Föhrenbergkreis Finanzwirtschaft

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Archive for 27. Februar 2011

When Irish Eyes Are Voting

Posted by hkarner - 27. Februar 2011

John Mauldin, 27/2

Most of the world is focused on the Middle East and Libya, and rightly so. We will look at that in a minute. (Sidebar: the White House spelled the country “Lybia” in a recent tweet. Can you imagine what the liberal media would have done to poor Dan Quail if that tweet was from him? Just saying.) And I agree the Middle East is important. But my eyes are focused on what I think is the far more important event of the day, and that is the election going on in Ireland.

I have written about Ireland before, but we need to once again focus on what are not smiling Irish eyes. Ireland was once the envy of Europe, with one of the highest growth rates in the world. It was not long ago that Ireland could borrow money at lower rates than Germany. Now rates are 6% and likely to rise with the new government. Let’s look at a few data points from a brilliantly written article by Michael Lewis, who ranks as one of my favorite writers. When he writes, I read it just for the education on what great writing should look like, as well as for the always fascinating information. The article is at http://www.vanityfair.com/business/features/2011/03/michael-lewis-ireland-201103 .

(I am often asked about how you can become a financial writer by young people who are starting out. I have just two suggestions. Write a lot and then write some more. Writing is no different than the piano or guitar. It takes a lot of practice, and then more practice. You don’t start playing concerts on day one, and your writing won’t be worth much either, but you will get better. Second, study the great writers and learn from them. Try to copy the styles of the guys you like for practice. Take the best and make it your own style. Lewis is one of the best.)

· Housing prices in Dublin had risen by 500% since 1994. Rents for homes were often 1% of the price of the home. A $1-million-dollar home went for $833 a month. That is a very clear bubble.

· Irish home prices implied an economic growth rate that would leave Ireland, in 25 years, three times as rich as the United States.

· In 1997 the Irish banks were funded entirely by Irish deposits. By 2005 they were getting most of their money from abroad. The small German savers who ultimately supplied the Irish banks with deposits to re-lend in Ireland could take their money back with the click of a computer mouse. Since 2000, lending to construction and real estate had risen from 8 percent of Irish bank lending (the European norm) to 28 percent. One hundred billion euros—or basically the sum total of all Irish public bank deposits—had been handed over to Irish property developers and speculators. By 2007, Irish banks were lending 40 percent more to property developers than they had to the entire Irish population seven years earlier. Den Rest des Beitrags lesen »

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