Monday, August 29, 2016

A Cash-Strapped Recovery?

I've holidayed in Ireland this summer, and one of the things that has struck me on my travels is the number of shuttered and boarded-up shops: even on the main streets of seemingly thriving towns and villages. What's going on? The latest retail sales data for July from the CSO has been heralded as further evidence of recovery and proof, if proof was needed, that things are getting better. 

But I'm not so sure: there are two stories in the Retail Sales Index report, the one we hear about and the one we don't. The one we hear about is real for sure: the value and volume of retail sales keep rising year-on-year, with some sectors rising a lot faster than others. But there's another story we don't hear so much about and the clue is in the name: the Index of retail sales is indexed against sales way back in 2005 - that's eleven years ago. The Index has been running above it's 2005 level for some time now, so recovery all done? Not quite, because 2005 wasn't the peak in retail sales: 2007/2008 was and we're nowhere near the peak yet, as the chart below shows (I've excluded motor sales as they are a capital purchase rather than a measure of current consumer spending, plus they have their own 'funding' in place these days from the car manufacturers themselves):


In fact, retail sales - excluding the motor trade - are still some 20% below their peak, and I very much doubt they'll ever get back to that peak again (due to online shopping, discounters, sterling etc and many other factors I won't go into now but I see playing out with clients every day).

And there's something else going on: there doesn't seem to be enough money in the economy to sustain anything like the level of spending in years gone by - it's as if we're living through a cash-strapped recovery. Look at the Central Bank's data for currency in circulation and M2 (a broad measure of money supply): the former has risen inexorably over the same period as the retail sales data (start of 2005 to mid-2016), but the latter has been fairly stagnant:



What could be driving this? The obvious culprit is debt repayment, and sure enough the amount of money Irish households owe by way of outstanding bank loans is now below the amount they have on deposit with the same banks:


But it isn't just households that have been on a 'debt detox' after the 'debt binge' of the Celtic Tiger era - sometime soon, if it hasn't happened already, Irish businesses will have more money on deposit than they owe in outstanding debt:


It's no wonder then that retail sales are still so far below their peak: households and businesses are hoarding billions on deposit that they might otherwise have spent or invested - but the scars of the crash are still hurting and nobody wants to go through that again.  Add to this the fact that the 'pillar' banks are equally risk averse and would prefer to lend only to people and businesses that don't actually need to borrow then no wonder progress is slow: 'tits on a bull' and all that.





Friday, August 19, 2016

Politics After Democracy

“How small, of all that human hearts endure, that part which laws or kings                         can cause or cure.” Samuel Johnson
What if the people voted to end democracy: would it be a democratic decision? We're witnessing a 'crisis of faith' in Ireland right now, and it'll probably get worse. It's a bigger story than 'the church in crisis' or 'the media in crisis', but it isn't getting the attention it deserves.

I've observed before that politics is sport for nerds, but the national interest in sport is looking a lot healthier. The latest Eurobarometer poll shows that Ireland is number six in the EU28 for our lack of interest in politics:


What's more, when we look at the results for Ireland in detail, we see that women, young people under 25, and the working class are the cohorts least interested in politics:


So what? The big 'So What?' is that there is growing evidence that younger generations in Europe and the United States are less and less enamoured with democracy, and aren't sure it's 'worth the effort' any more. A recent article by Roberto Stefan Foa and Yascha Mounk on The Democratic Disconnect drew on similar survey data and reached some very disturbing conclusions. Essentially they chart a strong growth in support for undemocratic political ideas (such as rule by the military) in many mature democracies, especially among the young.

They observe that:
Citizens of democracies are less and less content with their institutions; they are more and more willing to jettison institutions and norms that have traditionally been regarded as central components of democracy; and they are increasingly attracted to alternative regime forms. 
Far from showing that citizens have merely become more willing to criticize particular governments because their expectations of democracy have grown, this indicates a deep tension at the heart of contemporary politics: Even as democracy has come to be the only form of government widely viewed as legitimate, it has lost the trust of many citizens who no longer believe that democracy can deliver on their most pressing needs and preferences. The optimistic view that this decline in confidence merely represents a temporary downturn is no more than a pleasing assumption, based in part on a reluctance to call into question the vaunted stability of affluent democracies.
At the same time, 'politics is the new religion' in the sense that people are less and less tolerant of dissenting political ideas and choices in the same way previous generations were intolerant of dissenting religious preferences. What Michael Schulson calls The Moral Tribalism of Contemporary Politics.

Combine increasing scepticism about the efficacy of politics with a growing lack of interest in party politics and with a narrower and narrower definition of 'acceptable politics' and the stage is set for a very different type of politics. The type that doesn't see much point in people wasting time ticking boxes in booths every four years or so. There'll still be politics, of course, but there might not be democracy and I suspect a lot of people probably won't care...









Tuesday, August 9, 2016

The Puppies Win

I do a lot of work in the newspaper/media research space, and I found John Oliver's recent tour-de-force on the state of modern journalism to be, well, depressingly accurate (but in a very funny sort of way):



Over 3 million views since it went up on You Tube yesterday, so it has obviously struck a chord with more than just me.

But not everyone agrees with Oliver's analysis. David Chavern from the NAA thinks that:
People want, need and consume more hard news than they ever have. The core demand for the product isn't decreasing at all, and based upon that we will find our way to the far shore where the industry is thriving and growing once again. 
Which does sound worryingly like the sort of corporate speak Oliver has a go at in the video.  Still, I hope Chavern is right. I just hope that the shore doesn't prove further away than is possible to reach...
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