Black Swan

October 21, 2016

 

black-swanCoveneys support of first time buyers springs more out of a concern with the needs of developers.

Notwithstanding supply shortages some developers are unable to sell properties at the current high unaffordable prices.

Coveney mistakenly confuses the inability to raise a deposit with inability to afford to pay back a mortgage.

Alarmed at the possibility of more people on foot of Coveney’s proposals taking on mortgages they simply cannot afford to pay back, the Central Bank has forced a government climb-down restricting the amount that can be borrowed  to 70% instead of 80%.

(1)“The Central Bank has said that they think the threshold whereby the loan-to-value of the property should come down from 80 per cent to 70 per cent, which would ensure that nobody is overborrowing to try to avail of the grant and I think [Minister for Finance] Michael Noonan thinks that’s a sensible alteration.

“It essentially means that more people will be able to avail of it. It’s relatively minor change but it’s a change I think that’s worth doing and so he’s happy to accommodate that.”

Actually, Simon, this is not a relatively minor change, instead this makes your proposals ludicrous. It makes any savings possible under your scheme will be eaten up by the higher cost of raising the difference between what the bank will lend and what ever savings the borrower has to make up that difference.

If there is a strong uptake, house prices will rise absorbing even further any gains  made to help the buyer. Ironically, the proposal has about as much value in increasing house supply and new house construction, as a ball of smoke.

It’s another case of Nero fiddling while Rome burns. Fiddle while Rome burns definition. “To do something trivial and irresponsible in the midst of an emergency; legend has it that while a fire destroyed the city of Rome, the emperor Nero played his violin, thus revealing his total lack of concern for his people and his empire.”

What Coveney should be doing is demanding from Europe a derogation from its fiscal space rules to raise capital on the open market or to invest from our pension fund in a large-scale construction project to build Olympic Village type apartment blocks in the larger cities to deal with this growing crisis. That and a whole range of building projects to build “affordable” housing for the whole generation of young Irish people shut out of the housing market.

Not to be outdone Richard Bruton is advertising for parents to be paid to undertake supervisory duties to help break the teacher’s strike. The irony is teachers were not being paid to do those duties since they were forced to do same under Croke Park hours. Inflammatory and incendiary as this move is pouring petrol on Rome burning, a greater irony is that teachers are striking not for better pay and conditions for themselves, but on behalf of the ruthless and unfair way new entrants to their profession have been penalised forced to accept rates of pay on a par way below that of their peers. Another example of how young people are being shafted by future leadership contenders within Fine Gael.

I’ve no doubt whatsoever targeting of teachers is a fallout from European austerity hawks from the troika down to impose gauging cuts on our public service bill to reduce the standards of health care and public education to that of public health and education expenditure in the US where it is lowest in the world.

This despite abundant riches being further amassed by the 1%.

(2) Meanwhile Europe is targeting Ireland’s corporate tax regime in its current proposals:

At present companies, or groups of companies, must deal with potentially 28 different corporate tax regimes across Europe.

The Commission will recommend that, instead, member states would sign up to a Common Corporate Tax Base (CCTB).

That would create a harmonised tax base so that a company which operates in several member states would know that in each member state its profits would be taxable the same way, and that exemptions, deductions and losses would be also be treated the same way for tax purposes.

Once a Common Corporate Tax Base was established, the next phase would be to create a system whereby tax liabilities would be “consolidated”.

That would effectively operate on a formula that would apportion how much tax is due to which member state.

Under the proposal, a group of companies would be allowed to add its profits and losses from all subsidiaries together to reach a net figure.

Tax would then be paid on the group’s net profit for the whole of the EU.

This will effectively bring to an end Ireland’s tax haven incentives such as Double Irish.

(3)…European heavy-hitters have been warned not to come after Ireland’s low corporation tax or we will leave the EU, too.

Our regime is expected to come under renewed scrutiny in the wake of Britain’s exit as they were our strongest ally in fending off demands for tax harmonisation.

…But Fine Gael MEP Brian Hayes told the Irish Independent: “That is the absolute red line issue. Any attempt made to cajole us [on corporation tax], as far as I’m concerned, we’re out the door.

Ireland’s tax haven status and leprechaun economics regime will soon end.

(4)Times they are a changing: It’s not only on this blog you will find growing support for Ireland exiting the growing shambles of the EU. Gay Byrne is now in favour of Ireland’s exit. Let’s ignore his implied call for a rerun of the Brexit vote.

To follow on from last blog, some links on the growing mess of Deutsche bank commentary by Bill Holter:

a) Deutsche Bank Walking Dead (under capitalised) https://goldsilver.com/blog/deutsche-bank-walking-dead-bill-holter/

According to Bill Holter Deutsche bank is the most systemically dangerous bank in the world, the biggest link in the derivative chain. It cannot return from the dead. 50-77$ trillion derivative exposure, walking dead institution, once you start talking about them being solvent, game is over. Zero volatility in credit and stock markets they are in lockdown.

Deutsche Bank stock market capitalisation something like 12-15bn dollars, they are under capitalised just to get to Basil 111 requirements, then there is a 14.4bn  fine against them, they have no money to cover this.

Any type of margin call will take them down…if they break the whole market goes, Italian,Spanish, Austrian banks Irish banks Portuguese banks waiting in line, amount of capital they have against the amount of derivatives they carry and are counter party for….what took years and years to grow the derivative market they will destroy markets…

Deutsche Bank is a Black Swan being pumped with air from QE that cannot go on forever. There is a limit on what can be pumped from the 99% to further inflate the assets of the 1%.

Looking forward the EU brought about a lot of good to Europe. The challenge will be to retrieve in any future cross border free trade agreements. cultural, social and educational relationships, that the bonds that have proven of real value, be retained and nourished to grow and prosper.

An inner core that has fed on the periphery to the extent that Greece, Ireland, Portugal, Spain have been forced into economic collapse by a plan promising stability, security and prosperity for all, will not hold forever.

Meanwhile Europe needs to rid itself of the legacy of a poorly constructed plan built only to serve the needs of the 1%.

 

 

till again

(1) http://www.irishtimes.com/business/budget-2017/coveney-defends-70-mortgage-threshold-for-help-to-buy-scheme-1.2836721

(2)https://www.rte.ie/news/business/2016/1019/825341-eu-commission-to-launch-controversial-tax-proposal/

(3)http://www.independent.ie/business/brexit/eu-has-our-corporation-tax-in-its-sights-after-uk-quits-34835831.html

(4) http://www.independent.ie/business/brexit/we-should-leave-eu-on-same-day-as-british-gay-byrne-backs-irish-eu-exit-if-brexit-happens-35139500.html

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