Ireland set to go bust, claims economic historian
Friday, 29 May 2009
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A dire warning that the Republic is a prime candidate to go bust has come from one of the world's leading economic historians.
"The idea that countries don't go bust is a joke," said Niall Ferguson, Harvard professor and author of The Ascent of Money.
"The debt trap may be about to spring" he said, "for countries that have created large stimulus packages in order to stimulate their economies."
His chosen prime candidate to go bust is "Ireland, followed by Italy and Belgium, and UK is not too far behind".
Argentina is top of his list of shaky countries but "the argument that it can't happen in major western economies is nonsense".
Professor Ferguson believes the economists are ill qualified to analyse the current economic situation since they lack the overview of historians such as himself.
"There are economic professors in American universities who think they are masters of the universe, but they don't have any historical knowledge. I have never believed that markets are self correcting. No historian could."
The historian does not subscribe to the theory of the "Great Depression" repeating and says this scenario is unlikely because the Federal Reserve has "massively expanded the monetary base which is the opposite of what happened in the 1930s".
The problem now is what happens when current monetary policy collides with a policy of "vast government borrowing" on a scale unknown since the 1940s.
"We have the fiscal policy of a world war without a war."
Referring to the clash between inflation and deflation he added: "I don't know who is going to win but we know that while the struggle goes on ordinary people will get trampled. There will be more economic volatility and ordinary people will pay."
He has also warned that in Britain he expects "more riots in major cities this year" because of the economic situation and says the recent "drip feed" of the peccadilloes of British MPs and their expenses is "just the beginning of a crisis of political legitimacy that will be played out over the next 18 months".
Ferguson, a native of Glasgow, specialises in financial and economic history as well as the history of the British empire.
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33 Comments
looks like irelands luck is changing....they just found oil off their coast.
Posted by karen_j66 | 12.06.09, 16:54 GMT
The study of economics includes scientific analysis of the past. Ferguson is wrong to suggest that the Fed's response in the 30s was to contract the money supply. The money supply fell because the banks reduced lending. He needs to understand the science behind economics before making these extraordinary pronouncements.
I do agree with the general theme though that we are in a false dawn and things will get a lot worse.
Posted by James Love | 10.06.09, 10:11 GMT
MS: oil costs did of course contribute but what really caused the crash was poor regulation & a low interest rate fueled credit boom that inflated the price of assets - most damaging being property. Bottom line many people who should never have been given loans were and as interest rates increased from a low base defaults began. The theory of oil alone is incorrect take Canada for example. It paid the same for oil but its banks did not engage in reckless lending & it has emerged relatively wel
Posted by Jake M | 02.06.09, 13:35 GMT
In summary, everyone who interacts with industrial society is on the Titanic, no country, group or individual is immune, there is no getting around it. When the penny finally drops no doubt people will blame some unseen oppressive threat but reality will simply be - not enough oil.
Societal inertia has ensured that when Peak Oil becomes so obvious as to be impossible to ignore, it will be too late to re-tool energy, transport, government etc so enter - collapse.
Nice scenario ehhh!
Posted by M S | 01.06.09, 15:18 GMT
We have passed Peak Oil production, this is almost certainly numerical, physical and geological fact.
The 'Global economy' has hit a key resource limit. During 'normal' running (insert the last 60 years) demand has been driving price, once Peak passed supply took over as the key driver of price. So when economies recover Oil will go through the roof again because there is no longer enough to go round plunging us all back into recession, except next time it will be more painful.
Posted by M S | 01.06.09, 15:08 GMT
Jake M,
While I think it is great you are making an effort to understand what is happening you clearly have a very vague understanding of macro economics (the big picture).
Now let me explain to you what really happened. The failure of credit markets was due to increasing defaults which were due to higher costs inflicted on the US consumer who is particularly vulnerable to rising input costs i.e. Oil!
When the history books are written, Oil will be the villan, join the dots!
Posted by M S | 01.06.09, 14:57 GMT
To go on your own you need a Jefferson, Washington and Hamilton.
Posted by lanelle, happily planted in Virginia | 01.06.09, 03:02 GMT
Lets get one thing straight.
It is in nobody's interest for the Irish economy to fail. Not everyone in the North wishes it to do so.
Posted by SteveW | 29.05.09, 17:42 GMT
And yet,
the republic STILL has a higher standard of living than the UK and nearly all other nations. No. 7 the last time i look at the UN website.
Posted by Enlightened one | 29.05.09, 16:58 GMT
Arnie,
re your analogy, it's not the number of lifeboats but the number of lifeboats for the number of passengers that counts.... check out the history of the Titanic....
Anyway not sure what a lifeboat is in relation to the Irish and British economies.
Posted by Martin | 29.05.09, 16:48 GMT
Soarer:
Some facts for you. Ireland is now a net contributer to the EU budget. Yes it has benefited from structural funds in the past as have most EU nations. Economic analysis has shown these EU contributions added about 1.5% per year to growth when the economy here was growing by 7-10% over a 10-15 year period -so they were not the defining factor. But dont let the facts get in your way. Throwing out tired clichés about the Republic seems to be typical of many ill formed folks in NI
Posted by Jake M | 29.05.09, 16:37 GMT
Perhaps they can have another whopping charity cash hand out from Brussels to have 'Celtic Tiger 2- no mess ups this time, to be sure'?
Posted by soarer | 29.05.09, 15:57 GMT
MS:
Let me help you - there were 3 points all related to the current economic situation. The first point related to the fact that the overall global credit cruch will resolve its self despite what the nay sayers are saying. The second related to the fact the Republic will rectify the situation it is in and is making progress and the last relates to the lack of understanding in NI about what will come down the tracks when the UK finally starts to tackle it huge deficit. Get it now?
Posted by Jake M | 29.05.09, 15:44 GMT
At the end of the day, when all the ships are sinking, id rather be on the one with more life boats...ie We are better of in the UK, irrespective of the reasoning for it, than we are with the republic. That is fact. Ireland get their share of handouts and have done for years. Now they have such a wide wealth gap, the poor will continue to get poorer and the wealthy will live happy ever after
Posted by arnie | 29.05.09, 15:13 GMT
Who cares people!!
The sun is gonna shine...I suggest you all enjoy it!!
Posted by HB | 29.05.09, 15:12 GMT
Jake M,
As per usual your incoherant ramblings, confuse and confound. Do you think before you type or just fire down the first thing that comes to mind followed by the second without much consideration for whether one statement contradicts the other?
Posted by M S | 29.05.09, 15:12 GMT
First the article about the Irish election candidate, "Politician's Facebook boob", and now "Ireland 'set to go bust'".... I think the main message here is that we should be thinking about breasts and not the economy.
Posted by Martin | 29.05.09, 14:55 GMT
Norn Iron is a society which can only function because of handouts from "the mainland". With the way the UK economy is going it won't be long before Gordon Brown takes wields the axe. The bloated public sector here is an absolute scandal. Sack half of them and we wouldn't notice - not of course front line people such as nurses, teachers etc, but the do-nothings in dozens of offices dotted around the "province".
Posted by Sam | 29.05.09, 14:36 GMT
Maybe the UK should abandon the EU instead of some ?loyalists crowing about the hard times of a member nation, in an integrated community, across the border. According to the article, the UK is not far behind Europe's traditional strugglers. Stronger economies can buy and sell you at the moment. I live in Australia. At the moment we are 49c to the pound. Once upon a time we were 30-33c. The Euro is actually stronger than it was. Some commentators really have no shame. Laughing stocks.
Posted by Niall | 29.05.09, 13:51 GMT
The "irish" state continues to sink itself deeper in debt by dishing out more than €400 million a year to foreigners on the dole. Stop immigration, send all
the aliens home, and encourage tourism by simply displaying Irish culture, not diversity.
Posted by Seán Mac Curtáin | 29.05.09, 13:43 GMT
33 Comments