Optimists See Light at the End of Our Economic Tunnel. It's Probably a Train

Daily Mail (London), January 11, 2010 | Go to article overview

Optimists See Light at the End of Our Economic Tunnel. It's Probably a Train


Byline: The Mary Ellen Synon COLUMN

ECONOMIC rule for the day: it is wrong to assume that since our economy went very bad very quickly, and that since things aren't now getting worse at quite such a rate, we must be ready for a rebound. As I say, wrong. This is a national economy, not a Wile E Coyote cartoon. Most likely, when a national economy falls off a cliff it will lie splat at the bottom for a long time.

Yet some analysts and politicians are insisting we must be 'optimistic'. They give no reason. They want us to believe optimism is a good thing in itself. But optimism is just an emotion, and as the philosopher Ayn Rand told us, an emotion is just any old shyster passing by and ought to be ignored.

Anyway, even at 'splat', our economy has not actually stabilised. Our output is still shrinking, and our debt is still increasing. All we have is a Finance Minister who asserts in his Budget that the economy has stabilised. But Mr Lenihan offers no evidence. Somehow the minister wants us to believe that since he has announced (minimal) spending cuts - and since his department has at last delivered some revenue forecasts that are respectably near reality - some more of the same is all we need.

Dangers

What he refused to acknowledge in the Budget were the huge dangers that still exist because of our zombie banks. Nama, his pet project - it's a pet, like some people see a boa constrictor as a pet - will not protect us from these dangers.

Our economy is going nowhere until lending to businesses gets back to a healthy level. But Irish banks are going to be forced to repay their wholesale international borrowing. That will shrink their balance sheets, and that can only shrink their lending.

More, how are the banks going to deal with the hits they are going to take on mortgages and business loans? Nama won't touch any of that.

The minister has also refused to acknowledge the further dangers to our economy that lie in Nama itself.

Despite the fancy bookkeeping he has planned for Nama's billions in liabilities, in the end the liabilities will rest on the backs of the taxpayers.

What does Mr Lenihan intend to do about these dangers? We don't know, and the truth is that by the time the worst of the troubles appears and absolutely must be dealt with, Mr Lenihan may well be out of the Cabinet and convalescing.

In his place will be Dermot Ahern, Micheal Martin or Noel Dempsey; or possibly Brian Cowen will imagine he can take the finance portfolio into the office of the Taoiseach. None of these men can match even the flawed talents of the over-confident Mr Lenihan.

The Taoiseach is the man who, more than any other, helped Bertie Ahern lead our economy over the cliff edge. As for the others, Mr Dempsey is the man who judged e-voting machines to be a good idea. The fact that he is on anybody's shortlist to become the next finance minister tells you just how shallow the Fianna Fail talent pool is.

Yet some people appear to be imagining that if we just endure this depressed economy for another year or so, despite whoever is finance minister in six months or a year, some happy level of growth must inevitably occur. Certainly, one day a 'happy level' will reappear. But in just another year or so?

We have to remember that the economies of our two most important trading partners, America and Britain, are still looking weak. Lombard Street Research reckons that the U.S. recovery, such as it is, will even slacken this year.

The eurozone isn't looking so hot, either.

What recovery there is can only be described as 'fragile' and unemployment in the eurozone now matches American unemployment of 10 per cent.

Gloom

The Financial Times last week reported that the jobs gloom has hit the west's recovery hopes.

More, membership of the euro is causing such economic problems among Mediterranean countries that it could give rise to serious social unrest, particularly in Greece and Spain. …

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