Tuesday, June 28, 2011


There's (another) spectre haunting Europe right now: it's the spectre of angst about the future. Even when that future looks - objectively - bright. It isn't only Europe that is affected: America, we're told, is suffering from an Optimism Deficit. Meanwhile back in Europe, Germany appears to be caught in a season of angst - despite record levels of growth and low levels of unemployment. As Canadian Doug Saunders reports about Germany's conflicted feelings about their economic success driven by globalisation and immigration:
So we have a situation in most modern economies (including Canada) where prosperity intensifies our connections, economic and personal, to the less secure countries of the world, and to their people. 
 That's certainly part of it all right. But beyond Germany there is another concern: that of stagnating incomes. As today's Financial Times reports, stagnating incomes is the new spectre stalking the globe.

Reading reports from the United States (especially in relation to housing, unemployment and consumer spending) it reads remarkably like the situation we have in Ireland right now. Which makes it all the more ironic that our Minister for Finance was quoted recently quoting George W. Bush after 9-11: the people need to spend, spend, spend to avoid recession. Though I'm not sure the Minister attributed his quote as such...

I think Minister Noonan needs to focus less on economics and more on 'emonomics'. By the latter I mean using the insights from behavioural economics and evolutionary psychology to better understand the needs of the Irish people. The better to motivate them perhaps. The chart shows a mood league table for Ireland: ranking the emotions Irish people feel the most (from a survey by my company earlier this month). The good news: happiness and enjoyment are the most prevalent emotions - well ahead of more negative emotions like stress, worry and - er - boredom.

Though I'm usually loath to begin sentences with the words 'the Government should' (I'm in the less-is-better camp when it comes to all things political), I'll make an exception in this case. The Government should do a better job of understanding the emotional world of Irish citizens and a better job of communicating a better, credible image of the future that inspires all of us to do our bit. Not just more shopping. 

The Futures Company have just published a useful primer on 'An Introduction to Happiness: Is It Your Business?' - even the busiest cabinet minister should be able to absorb its summary analysis.

Don't let angst and anxiety seize the emotional future.

Monday, June 27, 2011

Forgive and Forget?

Should we forgive the debts of Ireland's 'upside down' home owners? That's the topic on tonight's RTE Frontline, which includes a report on attitudinal research my company did for the programme. As with previous research we did (on attitudes to taxes), people want to see forgiveness - but don't want to fund it themselves. There of course no easy answers (and getting the questions right is pretty important too):

Saturday, June 25, 2011

Reap What You Sow

Ireland needs better metaphors. Indeed, I'm rather fond of metaphors myself, and I don't doubt their power. Gavin Kostick has written a thought-provoking post on the Irish Economy Blog about the metaphors we have used to describe and respond to Ireland's economic crisis.

He suggests we move away from metaphors concerning sexual abuse and war (you'll have to read his post for yourself to see what he's getting at), switching to more constructive metaphors instead. He mentions 'safe harbours' and 'beehives' instead.

Whilst I think he's right about the need for better metaphors, I don't think his suggestions will work. Rather we need something that resonates emotionally with the Irish people. Which is why I think we need to start using farming metaphors.

After all, most of us are just 2-3 generations removed from the land. Better still, farming has connotations of sowing seeds that bear fruit after the passage of time. Rewards in the future for hard work in the present and all that.

Of course, you would want to avoid any reference to Animal Farm along the way...

Friday, June 24, 2011

Quote of The Day

"The denial of creative destruction, by the EU, the ECB and government intervention has cut capitalism dead in its tracks.  The inability to allow debt to be written down by accepting that losses must be incurred is putting the existence of the euro on the line and is a massive bet which is, for those that understand risk, not worth taking when compared with the cost of letting Greece go." CheckRisk
ht Finfacts Ireland

Thursday, June 23, 2011

Resilient Optimism

My company's latest Recovery Indicator report is out for June. There is plenty of 'resilient optimism' on display, but not a lot of actual recovery:

Tuesday, June 21, 2011

Long Way Down

Yet another in the 'Ireland isn't Greece' meme currently doing the rounds - this time from Eurostat. It shows GDP per capita, adjusted for purchasing power at the end of 2010. And guess what? Ireland's GDP per capita is 25% above the EU average, while Greece is 11% below the average:

Let's hope the bond markets are taking note...

Friday, June 17, 2011

Quote of The Day

Beware the 'just-so story':
"Any theory, no matter how ludicrous, can be squared with the evidence, given enough ingenuity. Every last anomaly can be explained away. There is a popular myth about science that if you can make your theory consistent with the evidence, then that shows it is confirmed by that evidence - as confirmed as any other theory. Lots of dodgy belief systems exploit this myth. Young Earth creationism - the view that the whole universe is less than 10,000 years old - is a good example. Given enough shoehorning and reinterpretation, you can make whatever turns up "fit" what the Bible says."
Stephen Law

Thursday, June 16, 2011

All Together Now

It seems the Internet and social networks are bringing us closer together rather than pushing us apart. A new Pew Research report on Social Networking Sites & Our Lives shows a remarkably positive trend in voluntary activity in the United States since their recession began, especially among internet and social network users:

I think something of the same social resilience is happening in Ireland. The fact that we have the second highest level of civic engagement in the world - after the United States - would bear that out.

Spontaneous order at work once again ...

Dublin in the Green Oul' Times

This is delightful: a 'collaborative' effort between photographers Paul Walsh and Charles W. Cushman, spanning fifty years.

Just go to the site and scroll over each picture from 1961 to see the same view in 2011. One thing that struck me: we have a lot more trees in Dublin nowadays...

Tuesday, June 14, 2011

Barbarous No More

Control-freak politicians abhor gold because it ignores them; it won't do what it's told. It defies economists and laughs at central bankers. Jeff Randall

 Standard Chartered has just published a fascinating report on the outlook for the price of gold (ht zero hedge). Long story short (and it's 68 pages long): when it's easier to print money than it is to find gold, then there's only one way the price is going to go...

One interesting factoid:
The limited supply comes at a time when central banks have completely changed their tune on selling down their gold stocks and now appear likely to accelerate their net buying programmes. China is way behind the curve. Currently, only 1.8% of China’s foreign exchange reserves is in gold; if the country were to bring this proportion in line with the global average of 11%, it would have to buy 6,000 more tonnes of gold, equivalent to more than 2 years of gold production.
Could be a good time for the Central Bank of Ireland to stock up on some bullion. Though don't tell the IMF/ECB we've got it...

It looks like the old relic is barbarous no more.

Monday, June 13, 2011

Our Bến Tre Moment

Three pieces of news got me thinking about the Vietnam War today. The first, from ISME, was that 54% of SMEs have been refused credit by Irish banks in the past three months. Then there was the news from Deloitte Ireland that the biggest barrier in the way of Irish companies expanding overseas is access to finance. Finally there was the news from Intertrade Ireland that half of all businesses in Ireland has seen their sales fall in the first quarter of 2011.

That's when it struck me: just as the Americans had to infamously destroy Bến Tre during the Vietnam War 'in order to save it', we appear to be destroying Ireland's economy in order to save our banks.

And so by the time the recession is over we will have the most solvent banks in the world, with the highest Tier 1 liquidity ratios and the cleanest balance sheets on the planet. Thanks to a policy of only being prepared to lend to those who neither want to nor need to borrow. Or about as useful as tits on a bull, as my old economics lecturer used to say.

Of course, it didn't end well for the Americans, despite their best efforts to 'save' Bến Tre.  I wonder is there a lesson there for us?

Sunday, June 12, 2011

Quote of The Day

William K. Black quotes Jonathan Swift to explain the criminogenic origins of Ireland's banking crisis:
"The Lilliputians look upon fraud as a greater crime than theft. For, they allege, care and vigilance, with a very common understanding, can protect a man’s goods from thieves, but honestly hath no fence against superior cunning. . . where fraud is permitted or connived at, or hath no law to punish it, the honest dealer is always undone, and the knave gets the advantage." Jonathan Swift
As Black notes: 'Swift’s words should be etched on every building housing a financial regulator.' Do read the whole article.

Saturday, June 11, 2011

Should We Ban Organic Food?

It will be interesting to see if Germany does. After all, a nuclear accident 9,000 kilometres away in Japan (resulting - so far - in one death, that of an older worker at Fukushima from a heart attack) was sufficient for Germany to decide to shut down all its nuclear power stations by 2022. No Germans have died as a result of the disaster at Fukushima.

Today, we learn that bean sprouts grown on an organic farm near Hamburg have killed 30 Germans and hospitalised thousands more. Further fatalities are expected. I await Angela Merkel's response to this rather more serious threat.

But I'm not holding my breath. As Matt Ridley notes in a timely post on the Precautionary Principle too often European policies on risk ignore the dangers from not adopting new technologies. For example, food irradiation that kills precisely the type of e-coli responsible for the horrendous outbreak in Germany.

Sometimes the riskiest thing we can do is to stick with the solutions we know rather than try new solutions. Or with the solutions we imagine are safer but that ultimately cost more lives when they fail.  The sensible thing, of course, is not to have all our eggs in one basket - organic or otherwise. A diversity of agricultural practices - from organic to GMO-based - will ensure a better outcome for society and the economy as better ways of growing better food are identified and shared. The same goes for energy supply: putting all our eggs in the renewable basket is extremely unwise. As Germany is about to find out.

Time to throw precaution to the wind.

Friday, June 10, 2011

Quote of The Day

From today's Financial Times:

"The expression “good servants and bad masters” has been applied to so many things: technology, government officials, mathematical models and much else. Today I want to apply it to the financial markets. It goes without saying that we need mechanisms for channelling surplus savings into physical investment, for a second-hand market in titles to ownership, for shifting personal spending over time, for saving for old age, and much else. But when these markets become overextended to the point of determining the fate of governments it is time to call a halt. This is especially the case when the funds in question arise from artificially created money rushing across frontiers. To change the metaphor, it is the tail wagging the dog."

Wednesday, June 8, 2011

Meet the Grandparents

Desperate times require desperate measures: so should we threaten the French and Germans that we won't look after them when they're old?

The latest Eurostat data shows that Ireland will have the largest percentage growth of any EU over the next half century:

Of course, there'll still be more French (though a lot fewer Germans and Italians) than there are now. But they'll be a lot older - with Ireland retaining its title as one of the youngest populations in Europe (as revealed in another Eurostat report on The Greying of the Baby Boomers):

If the youthful Irish are too busy working to pay back the debt plus interest kindly 'loaned' by our German and French (and British) compatriots, then they'll be less willing and able to look after a rapidly greying Europe.

Of course, a lot can happen in fifty years...

Tuesday, June 7, 2011

Not Watched Over

Last night I watched the third and final instalment of Adam Curtis' series All Watched Over by Machines of Loving Grace. You can catch it on YouTube if you don't have access to the BBC iPlayer.

I'm still not sure what it was about. Episode 1 was a straightforward (or as straightforward as an Adam Curtis programme can be) exposition of the idea that Wall Street captured Washington in the 1990s and turned the IMF into a global enforcer for Big Finance. No argument here. Episode 2 was a quirkier essay on how the failed dreams of the hippies in the 1960s were channelled instead into Silicon Valley and the IT revolution we are still living through. Last night's episode was much darker: linking evolutionary psychology to genocide in Rwanda to our increasingly machine like indifference to the world around us. I think.

But as with all such narratives about the rise of the machines, there is an unhealthy tendency to see humans as hopeless pawns in the digital hands of our new, silicon masters. This is nonsense of course. A recent RadioLab show on Talking to Machines explores just how human-like are the machines that Curtis and others fear. The answer is: they're not. The show introduces us to Cleverbot - one of the leading examples of machine intelligence. If your conversational level doesn't rise much above 'what's the weather like?' then Cleverbot can sustain a convincing conversation of sorts.

But chat to Cleverbot about something more challenging (Ireland's economic predicament, for example) and one quickly reaches the limit of machine intelligence. As you can see from the screen grab in the image above, Cleverbot is non-committal about Ireland leaving the euro. And hates the idea of burning the bondholders. Though my questions were a little too taxing I guess: Cleverbot ends by asking 'are we dead then?'.

That's all we need: a computer with existential angst - there's plenty of that around already...

Monday, June 6, 2011

Frankenstein's Metaphor

"Today all the available sources of intuitive life - cultural tradition, the natural world, the body, religion and art - have been so conceptualised, devitalised and 'deconstructed' (ironised) by the world of words, mechanistic systems and theories constructed by the left hemisphere that their power to help us see beyond the hermetic world that is has set up has been largely drained from them."
Iain McGilchrist
To a man with a hammer everything looks like a nail, and having read Iain McGilchrist's The Master & His Emissary I now see everything in terms of the left and right hemispheres of the brain. He observes that the brain creates its own projections in the outer world, such that the world then reinforces the workings of the brain in feedback loops through culture, technology, institutions etc. But we have 'two brains' - the left and right hemispheres - that operate in complementary but quite different ways. So we can potentially create two very different projections in the outer world. The genius of McGilchrist's thesis is to explain the history of Western civilisation - from the Ancient Greeks to the 21st century - in terms of these different projections, e.g.: the Reformation and Enlightenment as projections of an ascendant left hemisphere world; the Renaissance and Romanticism as projections of an ascendant right hemisphere world. Today (and for over the past hundred years) the left hemisphere has been in the ascendant - and the feedback loops of technology and political correctness appear to be accelerating us even further into its hermetically sealed world.

So I reached for my 'hammer' when I read about the Metaphor Program at the Intelligence Advanced Research Projects Activity (IARPA) - an intelligence initiative of the US Government (ht Next Wave Futures). The goal of the project is to 'exploit the use of metaphorical language to gain insights into underlying cultural beliefs… by developing and applying a methodology that automates the analysis of metaphorical language'. In other words, by understanding how people in other cultures think then it might be possible to change how they think. PsyOps with a dash of Jungian analysis. 

The program proposers (in the documents on the IARPA site) say they will deliver a methodology, tools and a prototype that could be used as the basis for a system in the future:
  • The teams will deliver a functional prototype that demonstrates the automated handling of data, discovery and semantic definition of metaphors.
  • Teams will produce and deliver a formal description of the methodology and tools developed for the metaphorical language analysis and their application to case studies. This will include a formal description of the constituent framework design and functions that results from the case study analysis.
  • The teams will develop tools and techniquesfor the various stages of the metaphorical analysis, deliver the tools to the Government and describe their application to the stages of the process.
  • The teams will deliver the metaphor repository with a description and definition of the repository design, the semantic principles that were used and all results from the analysis of the linguistic and conceptual metaphors. Discussion of the outstanding issues, lessons and future directions will be included.
 This is the left hemisphere in action. For metaphor is the domain of the right hemisphere yet here we have a left hemisphere mindset seeking to occupy the territory of the right hemisphere. McGilchrist says about metaphor:
Only the right hemisphere has the capacity to understand metaphor. ...Metaphoric thinking is fundamental to our understanding of the world, because it is the only way in which understanding can reach outside the system of signs to life itself. It is what links language to life. ...I am talking about any context ...in which words are used so as to activate a broad net of connotations, which though present to us, remains implicit, so that the meanings are appreciated as a whole, at once, to the whole of our being, conscious and unconscious, rather than being subject to the isolating effects of sequential, narrow-beam attention. As long as they remain implicit, they cannot be hijacked by the conscious mind and turned into just another series of words, a paraphrase. If this should happen, the power is lost, much like a joke that has to be explained (humour is a right hemisphere faculty).
The joke, of course, is that the IARPA initiative to deconstruct metaphors in foreign cultures (read 'Muslim') will serve to drain the same metaphors of their power to persuade. Though it might throw up a few handy tips for aspiring politicians seeking (re)election in 2012. And for their speech-writers.  But that isn't my main point. Rather the Metaphor Program is simply a late-stage sign of the increasingly dysfunctional left hemisphere world in which we are now trapped. Mary Shelley caught the spirit of an age when she wrote Frankenstein - a novel depicting the hubris of a left hemisphere world view that sought to create the whole out of mere parts. Nowadays we don't have Frankenstein's monster, we have Frankenstein's metaphor - but it is the same hubris, one that seeks to deconstruct the values and cultures of others and to reconstruct a 'newer/better/nicer' culture in its place. No doubt made up of parts supplied by the United States of America.

Of course, by drawing attention to this fundamental flaw in the IARPA program I may well be doing my bit to ensure a more successful one replaces it. In the Global War on Terrorism we are all conscripts...

Saturday, June 4, 2011

Quote of The Day

Or 'quotes' this time - 80 quotes on the theme of success. Here's one for my 'older' readers:
“The great thing about getting older is that you don’t lose all the other ages you’ve been.”
Madeleine L’Engle
ht Daniel Wood

Thursday, June 2, 2011

No Going Back

How do we get back to the way things were in 2007? To a high employment, high investment, high spending economy? The short answer is: we won't. 2007/8 was the apex of a credit-fuelled boom - caused not by the euro (the Dutch somehow missed the bubble) but by our own excesses (generously fuelled by domestic and foreign financial crack dealers).

This struck me reading a post by Michael Taft on the TASC blog. Michael points out the collapse in domestic demand since the peak, and challenges those proposing that wage cuts to explain how this would help us get back to the peak. He's right of course, supply side measures are necessary but not sufficient to get Ireland back on a path towards sustainable growth. But there's more to it than that. I left a long-ish comment on his post - which I have reproduced below:
A few things strike me about the issues you raise Michael. One is that consumer spending in 2007/8 'overshot' what was sustainable/appropriate for the economy because of a credit bubble.

Too many businesses (especially in retail) were established or expanded on the basis of a mis-reading of the underlying reality. They geared up through borrowings for 'more of the same', but instead have gotten a lot less. But the debts are still there of course. As I remind people from time-to-time: debt is a fact, wealth is an opinion.

That said, consumer spending this year will be back to where it was in 2005/6 in nominal terms, maybe a little higher in real terms (due to deflation). Enough for many businesses to survive on, but not for all of them.

So yes, the problem is a collapse in demand from the peak - but the peak was the problem: the subsequent collapse was an inevitable (and very painful) consequence.

As for sustainable recovery, investment is part of the story to be sure. But only part. A return to full employment will come through the services sector which is more labour intensive than capital intensive (with some obvious exceptions).

Wage-led consumption will help in this process - but you can only have a wage if you have a job. Which is why I continue to be perplexed by the view that lowering entry level wages (which is mostly what we are talking about in the case of the minimum wage) is somehow a bad thing.

Getting people (and let's be clear - we're talking mostly young males) into the labour market is vital. Employers will only hire unskilled workers when they believe that the marginal cost of doing so is a risk worth taking given the potential additional staff provides to deliver better or more services.

The same goes for entrepreneurs: in the current climate their main set up cost will be staff wages. So lowering the cost of setting up a service business in Ireland will make it easier to set up business.

The issue isn't aggregate demand - it is marginal demand. No employer cares about GDP and other abstractions like aggregate demand: they care about cost of hiring the next employee and serving the next customer.

Economic recovery will be 'a game of inches' - we'll get their one job at a time, one customer at a time, one start up at a time. Alchemy has nothing to do with it. 
 As I've said before about the minimum wage - it victimises the unemployed, not the employed. And it creates a barrier to entry into labour-intensive industries that only benefits incumbent employers.  Restoring full employment - and the dignity and hope that will bring to hundreds of thousands of unemployed men and women - will only come about through an expansion of the services sector. Which will certainly require a return to consumer spending growth. The one can help bring about the other - there is a significant, negative correlation between the change in the unemployment rate and consumer confidence. And confidence is positively correlated with retail sales.

So reversing the rise of unemployment is vitally important to reversing the collapse in domestic demand - even if that entails reducing the hourly rate of unskilled, zero-experienced, would-be workers with no alternatives but unemployment or emigration.

Wednesday, June 1, 2011

Quote of The Day

I'm not usually a fan - but this one seems spot on:
"So the ECB keeps saying that restructuring is unthinkable. Yet austerity programs are not working; the prospect of a return to normal financing is receding rather than approaching.

If you ask me, the water level has now dropped so far that the fuel rods are exposed. We really are in meltdown territory."
Related Posts Plugin for WordPress, Blogger...