The Psychology of Taxation

Posted on January 22, 2013 | Leave a comment

“Death, taxes and childbirth! There’s never a convenient time for them.” – Margaret Mitchell, Gone with the Wind, 1936

It is hardly controversial to suggest that rational people prefer to pay less tax rather than more, assuming all else is equal. If one follows the public debate in Ireland, however, it soon becomes clear that rationality is not universal on fiscal matters.

As the government struggles to bring the budget deficit under control, and as we are in a phase of increasing rather than stable or falling taxes, this is all the more pertinent. What is at issue, from the government’s perspective, is how to distribute and minimize citizens’ inevitable displeasure at rising taxes.

All taxes are not created equal, it would appear. What you pay tax on, and how you pay it, seems to matter a great deal,  perhaps even more so than the extent to which taxes hit our pockets. Continue reading →

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Posted in Articles for SIPTU's Liberty, Ireland

Ireland’s Top 1%

Posted on January 8, 2013 | Leave a comment

Nobel Laureate Joseph Stiglitz can stake some claim to being the intellectual father of the ‘Occupy’ movement with his May 2011 Vanity Fair article ‘Of the 1%, by the 1%, for the 1%‘. He followed up with a book in 2012, ‘The Price of Inequality‘. This, in turn, builds on inter alia the 2003 and 2004 scholarly works of Thomas Piketty and Emanuel Saez on income inequality in the US since 1913.

top1a

Piketty, Saez and others – including Ireland’s Brian Nolan – have since worked to bring together data on top income shares for some two dozen countries and counting in a consolidated database (complete with helpful interactive graphics).

Continue reading →

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Posted in Euro, Ireland, United States

Top Posts of 2012

Posted on January 3, 2013 | Leave a comment

This blog is a year old this week.

In 2012, the three most popular posts (in terms of hits) were:

1) Financial Repression Update

2) The Boom Bust Life Cycle of Ireland’s Balance of Payments and Net Foreign Assets

3) Mexico: A Political Risk Assessment

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Posted in emerging markets, Ireland, Mexico, Political Risk

Happy Holidays!

Posted on December 24, 2012 | Leave a comment

Wishing a merry Christmas and prosperous 2013 to all my readers !!

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Posted in Uncategorized

35 Things the IMF is Saying About Ireland

Posted on December 20, 2012 | Leave a comment

The IMF yesterday published its 8th of 12 quarterly reviews of Ireland’s bailout program. This is what they had to say:

  1. We continue to meet our headline targets.
  2. Regaining sustained access to sovereign bond markets, and successful graduation from the bailout, requires an EU deal on Ireland’s bank debt burden.
  3. Net exports are the key growth driver, but their rate of increase has slowed. Overall, growth appears to be slowing in Q4 2012.
  4. Domestic demand will contract in 2013 before returning to growth in 2014 as private consumption becomes a net positive. Government austerity means ‘fiscal drag’ will continue until at least 2015.
  5. Real GDP growth would reach almost 4% by 2015 if it were not for government tax hikes and spending cuts. Continue reading →

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Posted in Ireland

A Clarion Call to Reject the ‘Axis of Austerity’

Posted on December 15, 2012 | Leave a comment

This is my review of Gene Kerrigan’s latest book, “The Big Lie: Who Profits From Ireland’s Austerity?”, published in today’s Irish Times.

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Posted in Articles for Irish Times, Book reviews, Ireland

’13: Another Year of Living Dangerously?

Posted on December 10, 2012 | Leave a comment

We saw the first ripples of the US sub-prime crisis in the summer of 2007. A year later, the global economy was on the precipice of disaster. Only resolute action by world leaders, Gordon Brown not least among them, and coordinated fiscal and monetary stimulus prevented a re-run of the Great Depression.

Cracks in the Eurozone edifice which had been papered over during the good times were soon brutally exposed. As the crisis enters its seventh calendar year, we are more than half way through a lost decade. The question, particularly on Europe’s periphery is whether one lost decade will turn into two.

2013 promises to be yet another momentous year in Irish economic history; the year Ireland hopes to cease being a ward of the troika; a year plagued with potential banana skins. Without doubt, the fallout from yet another hair-shirt budget will dominate the early months of the year. It follows that we will face into a similarly challenging budget cycle as 2013 draws to a close. Like peeling an apple, the closer you get to the core, the more the pips squeak. Budgets will only get harder. Continue reading →

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Posted in Articles for SIPTU's Liberty, Euro, Global, Ireland

Keeping Greece on the Bus

Posted on November 27, 2012 | Leave a comment

For all the doomsayers predicting an imminent ‘Grexit’ from the Eurozone, the latest EU deal to ease their debt burden to 124% of GDP by 2020 should surely give pause for thought… at least on timing, if not necessarily on the eventuality.

In observing the interminable crisis response efforts of Europe’s leaders, it is easy to confuse a lack of haste for a lack of resolve or a lack of understanding.

Certainly, the process may be frustratingly slow. This is particularly the case for financial markets with ADD and journalists with deadlines and a need for a simple narrative. Continue reading →

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Posted in Euro

Financial Repression Update

Posted on November 9, 2012 | 1 comment

Six months ago, I highlighted the increasing tendency of Irish banks, many of which are owned in whole or in part by the state, to hold on their books significant amounts of Irish government debt. Far from the ‘vicious circle’ between banks and sovereigns being broken, it is growing stronger than ever.

I noted then that in the 9 months to March 2012, Irish banks’ holdings of our national debt had increased by 40%, or more than  EUR 4bn, during which time the benchmark yield on Ireland’s sovereign debt fell from 14% to 6%.

In the intervening 6 months, the banks’ holdings have increased by a further  EUR 4.2bn (of which  EUR 3.1bn is accounted for by the financial chicanery that saw Bank of Ireland effectively lend money to the government so that they didn’t have to borrow it elsewhere) to  EUR 18.9bn, more than 10% of the total outstanding.

Irish Banks’ Holdings of Irish Sovereign Debt (EUR millions):

Source: Irish Central Bank Monthly Statistics, October 2012 and ntma.ie

Continue reading →

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Posted in Ireland

Whose Debt is it anyway??

Posted on October 29, 2012 | 2 comments

When Europe’s leaders gathered in Brussels at the end of June, they decided to break the ‘vicious circle’ between bust banks and the countries that host them. Otherwise, the fear was that its banks could bring down Spain much as happened in Ireland.

Importantly, and in line with long-standing EU practice, it was agreed that favorable terms applied to Spain would be applied retrospectively to Ireland. Moreover, the Irish bailout was to be looked at with a view to ‘improving its sustainability’, recognizing implicitly that it was not on a sustainable path as things stood.

The agreement was hailed as a ‘game changer’ by some, a ‘seismic shift’ by others, and universally as at least a step in the right direction. Partly in expectation of a deal on its bank debt, Irish benchmark borrowing rates have fallen below 5% to levels not seen since before the 2010 bailout. Continue reading →

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Posted in Articles for SIPTU's Liberty, Euro, Ireland