National Asset Management Agency

Re: National Asset Management Agency

Postby garethace » Fri Sep 04, 2009 9:13 pm

I don't know if I linked Anthony Leddin's article from Thursday's Irish Times or not. It is well worth hearing Leddin's perspective too, which deals a lot with getting Ireland out of recession, as fast as possible.

WILL THE proposed Nama toxic bank prolong the recession?


http://www.irishtimes.com/newspaper/finance/2009/0904/1224253814185.html

Brian O' Hanlon
garethace
 
Posts: 1579
Joined: Wed May 14, 2003 9:01 pm
Location: Dublin, Ireland

Re: National Asset Management Agency

Postby jimg » Sat Sep 05, 2009 1:24 am

PVC King wrote:Wait until the valuation exercise is completed before swallowing the suicide capsule that is in you hand! I have not read such a defeatist ill informed statement previously

Valuation exercise? Don't make me laugh. Producing the "valuation model" will be in the hands of one of the most senior auctioneers in the country. So we have a senior auctioneer deciding how much the government should pay for bank loans.

"ill informed"? Before the start of this year I spent half a decade working in an Irish bank and now I work for an incredibly profitable proprietary trading company. I know markets and how they work, I can read balance sheets and I've done financial models for huge government projects. All you have contributed to this thread is a load of horse shit figures pulled from your arse mascerading as "macro economic analysis" which clearly demonstrate that you know f*ck all about macro economics or markets. Your bluster might impress people who know no better but it wont work with me. You are a bullshitter, plain and simple. You wouldn't survive a second in the company of the people I work with.

I don't think I've been as blunt with anyone else on this forum and I am almost embarrassed that I've risen to your bait but even missarchi provides far more enlightening input here than you. I don't know how you've managed it but you're making maramjam look good on the transport21 thread.
jimg
Member
 
Posts: 480
Joined: Mon Nov 22, 2004 9:07 pm
Location: Zürich

Re: National Asset Management Agency

Postby PVC King » Sat Sep 05, 2009 9:01 am

jimg wrote:Valuation exercise? Don't make me laugh. Producing the "valuation model" will be in the hands of one of the most senior auctioneers in the country. So we have a senior auctioneer deciding how much the government should pay for bank loans.

"ill informed"? Before the start of this year I spent half a decade working in an Irish bank and now I work for an incredibly profitable proprietary trading company. I know markets and how they work, I can read balance sheets and I've done financial models for huge government projects. All you have contributed to this thread is a load of horse shit figures pulled from your arse mascerading as "macro economic analysis" which clearly demonstrate that you know f*ck all about macro economics or markets. Your bluster might impress people who know no better but it wont work with me. You are a bullshitter, plain and simple. You wouldn't survive a second in the company of the people I work with.

I don't think I've been as blunt with anyone else on this forum and I am almost embarrassed that I've risen to your bait but even missarchi provides far more enlightening input here than you. I don't know how you've managed it but you're making maramjam look good on the transport21 thread.


If you have an issue on the Transport 21 thread post it there I have no doubts €2bn to deliver 24.4m passengers is a complete white elephant.

We all know the mess caused by quants led modelling in every market from equities to currencies to commodities. There is no economic model that works in volatile markets full stop; before you to claim that anyone knows anything about what markets will do next I would refer you to Long Term Capital Managment

http://en.wikipedia.org/wiki/When_Genius_Failed:_The_Rise_and_Fall_of_Long-Term_Capital_Management

Your background is finance or trading; I have no idea how good or bad you are at it so I will not comment. However your area is not real estate and Nama is an issue dealing primarily with Real Estate a sector to which I have a lot of experience in and exposure to.

Your analysis was that Nama is a loan book of €90bn and has a net realisable value of €30bn. That unlike the LTCM fiasco which was overly complicated you view is deficient due to an oversimplification. It is like comparing equities in the US, Taiwan and the UK after the Asian crisis; every asset class has its sub markets and geographical variances.

The position with Nama is simple two thirds of the loan book can be valued very easily; it is known that prime commercial yields in London are back to c6% from recent transactions that have completed and those that have exchanged with concrete funding behind the offers. It is likely that International pension fund investors will purchase prime commercial stock in Ireland at yields of 7% - 8% if prime stock reaches the market. The potential to access a top slice of 200-300 bps with tenants they have elsewhere in their portfolios e.g. Vodafone, Citigroup etc will be too attractive to pass up; they are in effect betting on the tenant and not the property market as rent reviews are upwards only.

The final third of the loanbook is difficult to value, there is limited occupier demand for commercial space and residential value indexes being quoted in asking prices as opposed to completed transactions makes valuation difficult. However you need a set of assumptions on likely selling/rental prices, constructions costs, void period or time to let/sell and what level of discount you concede in the form of developers profit.

Until that process is complete no one will know the outcome not even those as celebrated as LTCM or Seanie Fitz
PVC King
 

Re: National Asset Management Agency

Postby garethace » Sat Sep 05, 2009 9:42 am

I know, guys this is dreadful times for all of us to be attempting any kind of rational debate on the issues. But I feel it is important that everyone, from every walk of life, attempts to form some kind of an opinion in their brains. That will stand to them as they try to navigate through life, either well or poorly, over the course of the next ten to twenty years. This NAMA thing, or whatever alternative there is, will see many of us into retirement or close to retirement age. It is important to start by forming some opinion, whatever kind of opinion it is today, in preparation for the coming decades. I wish everyone the best of luck in that endeavour.

I have one question for all people here. Why is it, that every time I read an article by Alan Ahearne, well structured as his arguments may sound, I don't think that Ahearne is able to support too many ideas in his brain at the same time. Nor do I think, is Ahearne able to think more than a couple of steps out into the future. The more I read Ahearne in fact, the more I like what FG are proposing.

After US investment bank Lehman Brothers collapsed last September, cross-border flows of funds dried up as financial institutions stopped lending to each other. For a small open economy like Ireland with banks that rely heavily on financial institutions abroad for funding, the impact of the global credit crunch was devastating.


http://www.irishtimes.com/newspaper/opinion/2009/0905/1224253890855.html

I seems to me, we have three basic perspectives from which NAMA can be viewed. We have the very Eurosystem centric point of view, which minister Brian Lenehan and his team seem to be taking. Which aims to improve the amounts of collateral for deal making and banking done within the EU economic union.

We have the very Ireland as an island centric way of discussing the matter. Which sometimes, totally ignores the outside world.

Then we have the Alan Ahearne approach, which owes a lot to Ahearne'e experiences abroad in the United States and so on. Perhaps it could be argued that Pat Honohan looks at things from this perspective too.

There are a lot of things about NAMA which are hard to un-tangle. We have three different methods of property valuation - the Red Book, the market clearing price and the Celtic Tiger boom price. (Not to mention the 'hope value' which lies somewhere in the middle of all of that)

Then we have the point raised by Pat McArdle, a recently retired chief economist from Ulster bank.

The difference between the initial value of the projects funded, €115 billion, and the current market value of €50 billion is split 45:40:15 with the borrowers losing €30 billion equity, the banks taking a hit for €25 billion and the Government putting up €10 billion.


http://www.irishtimes.com/newspaper/opinion/2009/0904/1224253820646.html

Contained within McArdle's statement above, is a notion I understand from Joesph Stiglitz, the assymetry of information in the marketplace. Stiglitz has written a thesis on this subject if I am not mistaken. Even in the game of chess where all of the pieces are clearly visible on the chess board, it is highly depended on the intelligence of the player, to extract what information that chess board is making available.

In the case of the 'NAMA tree', the interested parties are distinguished by their respective abilities to unwrap the presents they will find underneath that tree on the 16th of September. That fact that minister Brian Lenehan isn't allowing the parties to see their presents until then, isn't much of an issue.

The fact will not change, that two of the three parties have the tools to understand their losses. The third party, the borrowers may take decades to try and understand their situation and still not succeed. Due to lack of the necessary skills in that department.

So this is my point, how one see's NAMA is dictated by one's point of view and one's ability to compute the information. On the one hand, you might have experience in global financial markets, you might be in favour of using the market clearing price for the bad assets and you may have all the tools at your disposal to understand the losses to be absorbed by each party.

On the other hand, you might be in favour of an inflated price, you may be very Ireland centric in your point of view and you have not have any tools with which to appreciate the scale of losses that NAMA is going to crystalise.

John Waters Column

One more reminder, everyone should have a read of John Water's column for yesterday's Irish Times. It is refreshing to read a bit of proper journalism for a change.

A friend of mine says, “We are a family of knackers who won the Lotto”, and, although an Irish Times columnist could never endorse such a mode of expression, I have to grant him his point.


http://www.irishtimes.com/newspaper/opinion/2009/0904/1224253820608.html

Brian O' Hanlon
garethace
 
Posts: 1579
Joined: Wed May 14, 2003 9:01 pm
Location: Dublin, Ireland

Re: National Asset Management Agency

Postby PVC King » Sat Sep 05, 2009 10:23 am

garethace wrote:I know, guys this is dreadful times for all of us to be attempting any kind of rational debate on the issues.


What is so dreadful about it?

The property collateral tro these loans is if Pat McArdle is right was bought for €110bn

The outstanding loan book is €90bn

The Value of the collateral underpinning the loan book is undetermined.

From this point it can't get any worse unless the position we have been led to believe i.e. the split of three classes is incorrect and a higher proportion relates to the landbank which in itself is going to be a very mixed bag.

What we do know is that outside Ireland economic activity is picking up; from an employment location point of view that commercial rents are a lot more attractive when compared to rival markets than in the recent past and that many unemployed people will be happy to work for a more competitive wage than they would have 2 years ago. Unemployment fell by 4,000 last month which is a long way from the 20,000 positions wiped out in March. The challenge is to get unemployment down and spread opportunity across a wider percentage of the population.

The first step to resolving the Nama issue has to be to get a reputable International Property Consultancy with the Geographic reach to the value assets to give a red book open market valuation of the total loan book.

The global economic pick up will feed into values over time and values will recover; if Pat McArdle is right borrowers will take a hit for €30bn or not if there loans are performing they will hold onto their equity, the three main banks have already written down close to €10bn which if you add other players such as RBS, BoSI etc you can probably double that figure to arrive at write offs to date to €20bn.

If that is the case the unprovisioned postion with the Nama loanbook is probably about €65bn from an initial purchase value of the assets being some €115bn or put another way €55bn is not the Governments problem. Looking individually at asset sub-classes the Q3 2009 book right downs on a class by class basis my look something like the figures below. Again these are worst case scenario as a lot of this debt will have been taken on long before the peak values were reached whilst the rent roll may have increased in line with the market.

The UK market is off about 30% from peak to Trough - book loss €11.5bn
Irish Commercial is off about 43% from peak to trough - book loss €16.5bn
Development land is probably off about 65% from peak to trough - book loss €24.9bn

On that basis the value of the portfolio is probably about €62bn and with €20bn already provisioned in losses that leaves a gap of €8bn or €10bn arcording to Pat McArdle to be plugged in.

Medium term commercial yields accross a European market would suggest c5.00% - 5.50% are typical; in assuming yields of 6.00% for the UK and 7.00% in Ireland there is a lot more upside than downside in the next decade.
PVC King
 

Re: National Asset Management Agency

Postby garethace » Sat Sep 05, 2009 11:16 am

What we do know is that outside Ireland economic activity is picking up; from an employment location point of view that commercial rents are a lot more attractive when compared to rival markets than in the recent past and that many unemployed people will be happy to work for a more competitive wage than they would have 2 years ago. Unemployment fell by 4,000 last month which is a long way from the 20,000 positions wiped out in March. The challenge is to get unemployment down and spread opportunity across a wider percentage of the population.


Point taken.

I scribbled something at Designcomment quickly this morning, 'As seen through a lense'.

If that is the case the unprovisioned postion with the Nama loanbook is probably about €65bn from an initial purchase value of the assets being some €115bn or put another way €55bn is not the Governments problem.


Point also well made.

Medium term commercial yields accross a European market would suggest c5.00% - 5.50% are typical; in assuming yields of 6.00% for the UK and 7.00% in Ireland there is a lot more upside than downside in the next decade.


I understand you point here too, thanks for taking the effort to make it. This is the more realistic breakdown of figures I have been looking for. In fairness, the way the economist's present the property industry, is rather like how Passive designers want to present housing design. In other words, that all dwellings should operate without consuming any fuel whatsoever.

Sure, it doesn't take away from the fact, that we all have a huge big mess on our hands. But it is important to understand that large portions of the figures being quoted, are a standard and normal part of how business is done in this little island of ours. We should aim to make our business much more efficient, but there is always going to be capital invovled. It doesn't run on fresh air completely.

This argument gained a lot of traction in the 1980s, particularly in the United States, when consumers became a powerful lobby. On the one hand they wanted agricultural produce, but on the other hand, they didn't understand why it should cost any money. That is why you got the huge big factory farms in the United States. The consumer demanded its meat and grain for less. Not that I am against efficient farming production - agriculture needed to go through a revolution in order to feed people. But in recent times, with things such as bee colony collapse, the whole system threatens to fall apart - from an ecological point of view.

It is well worth reading Patrick Symth's 'World View' piece in today's Irish Times.

Ten years after the anti-tax revolt in 1988, teacher unions and education groups got their revenge by pushing through Proposition 98, mandating huge rises in education spending. It wrote into the state constitution a complex formula requiring the state to spend 40 per cent of its budget on education. Both contradictory propositions now co-exist in the state constitution, ensuring budgetary gridlock.


http://www.irishtimes.com/newspaper/opinion/2009/0905/1224253890863.html

To return again to PVC King's comments above, in relation to the Pat McArdle Irish Times article.

When you take out a lot of the portions, which you have done about in all three categories - taxpayers, banking and borrowers - you do start to get down to figures that are more workable. It is a bit like city people who don't understand farming. They imagine that farmers can do their business without having some of their capital tied up within the business itself. Of course farmers know that in order to farm at all, they need to have a significant amount of financial resources tied up from year to year.

Another thing about the agricultural end of things - agriculture was heavily criticised by architects I know during the Celtic Tiger boom - that agriculture had it's own department, yet it only accounted for 3.0% of GDP. Compared to building and development at the time, which was much larger. But the fact is, we should be glad that agriculture is a small portion, and is efficiently run. We only need something such as the 'bacon scare' to materialise in order to understand, how much more GDP could be tied up in agriculture if things went wrong.

This is the point that Amory Lovins makes in his book Natural Capital. How do we pay designers, in order to work harder so that what they build costs a lot less to build and saves a lot more energy. Basically, in the current scheme of things, the harder you work, the less you earn as a design consultant. Which is why measures such as energy conservation are a non-runner. It should not be the case, that we require oil to surpass €200 a barrel for energy conscious design to become 'feasible'. Which is what most energy conservation designers are proposing today.

Brian O' Hanlon
garethace
 
Posts: 1579
Joined: Wed May 14, 2003 9:01 pm
Location: Dublin, Ireland

Re: National Asset Management Agency

Postby garethace » Sat Sep 05, 2009 3:07 pm

This has been in development for quite a long time now, amongst the Green party and their associated economic policy development partners. I was pleased to read on the front page of today's Irish Times.

GREEN PARTY Ministers are insisting on the introduction of a windfall tax on property developers as “an essential and indispensable” corollary of the Nama legislation.


http://www.irishtimes.com/newspaper/frontpage/2009/0905/1224253909839.html

The article refers to the Kenny report undertaken in the 1970's, which I don't remember but I have heard mention of by retired local authority planners. The article also mentions that the Atorney General's office was looking into the legal side of implementation.

Brian O' Hanlon
garethace
 
Posts: 1579
Joined: Wed May 14, 2003 9:01 pm
Location: Dublin, Ireland

Re: National Asset Management Agency

Postby missarchi » Sat Sep 05, 2009 10:43 pm

Interesting but there is the windfall expenses argument...
fuel for thought.
missarchi
Old Master
 
Posts: 1796
Joined: Sat Dec 08, 2007 7:53 pm

Re: National Asset Management Agency

Postby PVC King » Sun Sep 06, 2009 10:32 am

GREEN PARTY Ministers are insisting on the introduction of a windfall tax on property developers as “an essential and indispensable” corollary of the Nama legislation.


The example used to justify this was the Sandyford Luas Line which they do have a point on, public money created significant value for anyone who lived on the line including those who held development land. I do however feel that the game moved on after the success of that investment and the concept of specific development contributions has been accepted by all sides once the scale of the contribution is reasonable.

I do not however feel that targetting specific sectors of the economy in a uniform way for disproportionate taxation is any solution. Take a developer who has paid top dollar for a site on an existing Luas line; the value added by the piece of infrastructure has already been fully priced into what they paid for the land. The last vendor has already walked away with the value added by Government in a previous cycle.

What would be more equitable would be to set up a regional transport planning unit who would plan the number of development consents to be added in specific locations over a ten year time frame and set a level of development contribution per square meter of space.

Why that is the only equitable method is that if you take two different scenarios with a windfall tax of 27.50% in addition to the 12.50% Corporation tax; scenario 1 involves a regional housebuilder in Sligo building 16 houses of speculative quality adjoining a comuter town to Sligo; land cost €250,000, construction cost €2,400,000 including legal and auctioneer fees, sale price €3,750,000 - PBITA €1,100,000 - net profit say €660,000 net margin 25.38%

Scenario 2; development company buys parcel of land adjoining rail line in Dublin 8 to build 16 apartments; land cost €2.4m; construction cost to include decent and environmentally freindly specification €2.82m; sale price €6.4m- PBITA €1.18m - net profit say €708k - net margin 13.56%

My interpretation of Green thinking is that a large part of it stems from a frustration of people like the Healy Reas who may have encouraged people to takeg the absolute Michael in terms of site farming over a number of years and regional developers building 150 houses on the edge of towns which lacked the road, water, waste or educational infrastructure to support these developments and led to clientist TD's demanding expensive water, road and educational investments to prevent localised meltdown in subsequent years.

What is required is that unlike the past 15 years future development occurs in the right places where the infrastructure exists; and that infrastructure planning provision drives development patterns going forward. Put simply a regional planning authorities for Dublin, Cork, Limerick and Galway that devises plans on a ten year time frame and sets out clearly in advance that specific electoral wards are in specific development zones which are subject to pre-stated infrastructural contributions to transport, water and educational levies based on a square meter or in residential unit basis. There may be an angle in using environmental performance ratings to provide discounts where it could be demonstrated that energy efficiency, bike parking etc were provided.

As for one off houses a €50,000 levy should be introduced immediately on these as the biggest subsideis of all over the past decades are the ongoing service costs of servicing population densities that would not have been permitted in any other northern european country. A reduced levy should be applied for multiple unit applications based on the additional infrastructure that they consume.
PVC King
 

Re: National Asset Management Agency

Postby garethace » Sun Sep 06, 2009 2:36 pm

In today's newspaper the following did catch my eye.

David McWilliam's puts together a masterful piece of argument in the Sunday Business Post.

http://www.sbpost.ie/post/pages/p/wholestory.aspx-qqqt=DAVID+McWilliams-qqqs=commentandanalysis-qqqsectionid=3-qqqc=5.2.0.0-qqqn=1-qqqx=1.asp

Also in today's Sunday Business Post is Philip Lane's carefully written explantion of the Patrick Honohan argument for 'risk sharing'. Everyone, including Green Party spokesperson Dan Boyle seems to offer their own explantion of the 'risk sharing' mechanism proposed by Honohan in an Irish Times article months ago. (I think I may have linked it earlier in the thread) But Lane's Sunday Business Post piece today, is the only worthwhile, comprehensive explanation I have seen to date.

In the Sunday Tribune, political editor Shane Coleman interviewed Alan Dukes. I got more satisfaction myself out of that small piece, than out of the full page interview with finance minister Brian Lenehan, also in today's Sunday Tribune newspaper.

http://www.tribune.ie/article/2009/sep/06/dukes-backs-governments-nama-proposal/

I think that Neil Callanan in today's Sunday Tribune got his analysis of the 'Phantom Equity' problem for NAMA bang on the nail.

http://www.tribune.ie/business/article/2009/sep/06/phantom-equity-could-haunt-nama-for-years/

Everything in Callanan's article today, conforms to my own experience working on projects during the Celtic Tiger. Specifically, the tier one larger developments where 'nine figure' sums were involved. The only thing I would have to add, is what ACC Bank's council mentioned in the High Court, why are only seven of the Zoe companies represented in court. Why hasn't the Greencore shares been presented as part of the business plan. But Callanan raises the point, of loans with personal guarantees by the Carrolls which are now worthless, would also play a part in the Zoe developments High Court case. Also that every 0.5% rise in interest rates results in an additional €40 millino to pay - €700 million worth of the €1.2 billion of Zoe's loans are floating rate, the rest are fixed.

In the Independent, the back page had very good articles by Shane Ross and Karl Whelan, the UCD economist. Shane Ross wrote:

It later emerged that his bearishness was not unqualified. Just over two years ago, as the property market was turning downwards, the latest sailor on the sinking ship Nama had also been a bit of a bull.


http://www.independent.ie/opinion/analysis/puffers-paradise-named-nama-1879456.html

Whelan wrote:

It is a watertight tautology. The minister is watching the markets who are, in turn, watching the minister. And everyone's agreed the banks won't be nationalised. So they won't be. Meanwhile the taxpayer is left carrying the can.


http://www.independent.ie/business/irish/lenihan-formula-will-ensure-banks-win-and-taxpayer-loses-1879522.html

My favourite article of all, was in the Irish independent, the interview between Ronan Quinlan and Michael O'Leary of Ryan Air.

"Liam Carroll owns lots of properties that are being let to Government institutions. These are performing assets. They can be sold tomorrow to international investors at face value. We need to sort this out. There are lots of worthwhile properties there that are saleable, but the only ones who can work that out are the bankers.


http://www.independent.ie/national-news/developers-and-banks-should-take-the-pain-oleary-1879550.html

O'Leary also mentioned correctly, that the Irish banks 'know where the bodies are buried'. On the other hand, what McWilliam's described as a powerful and growing stronghold on Grand Canal Street of the NTMA - all that they can do is hire an auctioneer to go out and do their dirty work for them. The exact ones who made a 'bollocks' of the property market.

I raised the same issue myself not too long back. Because Constantin Gurdgiev was demanding to know why the Irish taxpayer didn't receive any deeds or title with the NAMA bound loan book - there is not a hope in hell, in my opinion, that a government agency or anyone associated with the government can be seen to be dealing with the s*** that Irish property developers handled. That is the service that the private sector property development business, in association with banking institutions provided.

I mean honestly, the Irish state institutions cannot even lease a property where there isn't 100% assurance on the deeds and title. The fact that Carroll managed to leases so much of his commercial space to the Irish State, ensures that those properties are sound. Why aren't those assets being presented in the High Court as part of the KPMG business plan?

Or yeah, by the way, Shane Ross points out that KPMG are the auditors of AIB who have €500 million of loans outstanding to the Zoe group.


Brian O' Hanlon
garethace
 
Posts: 1579
Joined: Wed May 14, 2003 9:01 pm
Location: Dublin, Ireland

Re: National Asset Management Agency

Postby garethace » Sun Sep 06, 2009 7:23 pm

I know that many of the posters here have opinions both for and against NAMA. I know I have found it impossible almost, no matter how I try to look at this, to make up my own mind. But for the record, having listened to the George Lee interview with Pat Kenny, I have decided to settle against NAMA and stick to supporting the Fine Gael 'good bank' solution.

http://www.rte.ie/radio1/podcast/podcast_patkenny.xml

I think it is worth your while downloading. I know that Lee can come across as over-excited on radio. Indeed, it is one of the reasons that he made a very good finance and business correspondent for RTE for so long. I do believe that Lee raised the crucial point in the Pat Kenny interview.

The Fianna Fail government hired 3 no. consultants to try and sort out the different problems they are facing. There is nobody joining up the dots here. All the consultants did was go off and solve the particular problems they were given from their own point of view. They were not talking to one another. In fact, our understanding of what the problem was, was very different when Peter Bacon received his brief, from what our understanding of the problem is today.

By the way, all that I can say about Dara Calleary, Minister of State at the Department of Enterprise, Trade and Employment, is we need a new minister for that position. I would nominate myself, except that would invovle becoming an elected official. Not now, perhaps in another decade, when I get to around Lee's age.

Brian O' Hanlon
garethace
 
Posts: 1579
Joined: Wed May 14, 2003 9:01 pm
Location: Dublin, Ireland

Re: National Asset Management Agency

Postby garethace » Sun Sep 06, 2009 7:24 pm

I hope that the Sunday Business Post will have Philip Lane's article posted soon on their website. It is the clearest explanation of Patrick Honohan's risk sharing mechanism, I have seen to date. Not so much it's implementation, but the reason why Honohan wanted it in the first place.

Understanding Pat Honohan's exact reasoning for the need for risk sharing, is crucial to the national debate. I think Philip Lane has done a great job in terms of explaining it.

Brian O' Hanlon

http://m.thepost.ie/quickPage.html?page=16693&content=20380826&pageNum=-1

Nama must play a long game
September 05, 2009 7:00 PM EDT
There is a case to employ long-term economic value in determining the price for Nama loans, but how will they decide on the figures, asks Philip Lane.

In line with the European Commission framework, the Nama draft legislation proposes to incorporate ''long-term economic value'' in the method employed to determine the appropriate transfer price for loans to be acquired by Nama from the banks that participate in the scheme.

In principle, long-term economic value may be interpreted as corresponding to the expected ''hold to maturity'' value of a loan. Its use can be defended on several grounds. First, where a loan is to be acquired from a bank on a voluntary basis, the transfer value should correspond to the internal shadow valuation that a bank may reasonably apply to a loan on its books.

Secondly, a key role for banks is to fund long-term investment projects, where the full value of the underlying asset is only realised over time. If funding for such projects is interrupted, the disposal value of a loan that is backed by an incompletely-developed asset lies below its potential long-term value were the project to be completed. (Clearly, this point only applies to a fraction of the loans held by Irish banks, since it does not apply with the same force to loans that are backed by mature assets.)

Indeed, this characteristic helps to explain why banking crises are so costly and how there are self-reinforcing amplifying dynamics between credit conditions and collateral values. During periods of easy credit, asset values rise which in turn may tempt some investors to exploit rising collateral values to over borrow and invest in marginal-quality projects. In the other direction, a credit crunch leads to a decline in asset values, which in turn further restricts access by investors to liquidity and the non-completion of otherwise viable projects.

While the ideal solution is for the financial regulator to engage in counter-cyclical measures and avoid the occurrence of a crisis, these amplification dynamics also provide an explanation why market values can fall below long-term economic value if regulation is inadequate and a crisis does indeed occur. For these reasons, there is a prima facie case to employ long-term economic value in determining the price for loans that will be transferred from troubled banks to Nama. However, a major implementation challenge is to develop a high quality model of long-term economic value. Such a model should have both macroeconomic and microeconomic dimensions.

Macroeconomics is required in order to establish the likely economy-wide evolution of average property values, while microeconomics is required to model the cross-sectional dispersion of individual properties around the average value.The microeconomic task can be fulfilled by those with expertise in property valuation.

A key macroeconomic issue is the likely future evolution of the aggregate consumer price level, since property price inflation is typically modelled as the sum of CPI inflation and the growth in the ''real'' value of property. This is especially important, since the historical inflation data will not provide a good guide to the future for two reasons. First, the high inflation of the 1970s and early 1980s was sui generis for well known reasons and will not recur.

Second, as a member of EMU, the Irish price level is best interpreted as the sum of two components: the EMU wide price level and the deviation of the Irish price level from the EMU average level. The prospect of significant real exchange rate depreciation over the coming years may be an important drag on the evolution of nominal property prices in Ireland.

In regard to other macroeconomic factors, the Nama valuers can incorporate the projections for growth in GDP per capita, real interest rates and population size by agencies such as the ESRI and the European Commission. By relying on independent forecasts, there will be greater confidence in the objectivity of the Nama valuation method. However, it is abundantly clear that these projections are bound to be quite imprecise given the limitations of macroeconomic forecasts.

In addition to providing estimates of the evolution of long-term economic value over the coming years, it is also necessary for Nama to take a stand on the nature of the convergence process towards the long run. While the current credit crunch represents an important mechanism that acts to push current asset values below long-run equilibrium values, it is also true that current market prices may still be influenced by expectations that formed during the bubble period, with this 'backward-looking' influence on asset prices pushing in the opposite direction.

Accordingly, it is important that the Nama process recognises the inevitability of such uncertainty in determining long-term economic values and the nature of the convergence process. For this reason, as has been suggested by Patrick Honohan, a two-part pricing mechanism is optimal by which the initial payment for a loan reflects a discount on the ''best current estimate'' for long-term economic value, with a deferred second payment that will reflect the ultimately realised loan value.

Philip R Lane is Professor of International Macroeconomics at Trinity College Dublin and founder of The Irish Economy blog.
garethace
 
Posts: 1579
Joined: Wed May 14, 2003 9:01 pm
Location: Dublin, Ireland

Re: National Asset Management Agency

Postby jimg » Sun Sep 06, 2009 11:07 pm

PVC King, you are a complete bullshitter. I'm worried someone reading what you write could mistake it for being anything other than the inane ramblings of an ill-informed fool because I have to give you credit, you disguise it well.

You haven't the slightest clue about the fundamentals of the crisis which Ireland is afflicted with. I'm highly suspicious of your claims of expertise in any field. You makes such simple errors, not just in terms of concepts but in terms of approach. .......... You think bandying about some numbers and being able to perform multiplication impresses? You obviously haven't a clue about the cause of the Irish banking crisis as you constantly muddle it with unrelated aspects of international financial crisis but I guess you think it makes you sound erudite by mentioning LTMC or quants or whatever. You have no notion of macro economics; your claim that macro features are more predictable is absolute bollox. I could go on.

Perhaps you are a classic troll; if so - bravo - great performance.

At least Brian O'Hanlon, despite his (at times) unbearable prolix provides some interest and responds to factual corrections and moves on. You do none of these things and have just been repeating the same old sh*te over and over. I am refusing to get into a pissing contest with you, so undoubtedly, you'll have the last word on this. But I really have better things to be doing.
jimg
Member
 
Posts: 480
Joined: Mon Nov 22, 2004 9:07 pm
Location: Zürich

Re: National Asset Management Agency

Postby missarchi » Mon Sep 07, 2009 12:10 pm

missarchi
Old Master
 
Posts: 1796
Joined: Sat Dec 08, 2007 7:53 pm

Re: National Asset Management Agency

Postby garethace » Mon Sep 07, 2009 2:28 pm

I will have to reiterate Deputy George Lee's point here again, which I completely agree with. The government paid different consultants to go off and solve their own little parts of the problem. They haven't spoken to one another to try and come up with a joined-up plan at all. That is what the country is going to have to suffer from most of all, a complete absense and willingness to engage with joined-up thinking.

The Commission on Taxation has recommended the introduction of a new property tax, a carbon tax, and domestic water charges as part of a comprehensive reform package of the Irish taxation system.


http://www.irishtimes.com/newspaper/breaking/2009/0907/breaking29.htm

We have now wasted an entire year practically producing a public expenditure report, a commission on taxation report and a NAMA report. But none of this has been fitted together at all, to see if it works as a unit. This is a very costly mistake for the country, and when we realize the 3 no. separate solutions on their own are not doing the job, that needs to be done, someone like Fianna Fail will commission another spate of reports, and the whole process will start all over again. It is not that we have 'nothing' after a full year of 'humming and haw-ing'. In fact, we have worse than nothing. We have a big load of complicated components, none of which fit together to make a solution.

Too much of these reports revolve around Tanaiste Mary Coughlan and Taoiseach Brian Cowen's understanding that everything is for the press. You release the report, you do the photoshoot and make statements on RTE. That is supposedly enough, to ensure people 'think' the government is doing it's job. I can tell you, it is not doing it's job or anything like it. Deputy George Lee has seen the 'merry-go-round' enough of times in his previous life as an RTE news correspondant to know the score. We don't have leaders in this country. All we have in public relations stunt men and women.

It occured to me recently, that the Irish government has 150 members not counting the Senate house, who are all willing to sign off on €50-90 billion's worth of taxpayers money. But there is not one single 'leader type figure' amongst all of them, who is able to endorse payment of €1.0 million euro for anything. That is probably why we will need something akin to a Fascist regime in Ireland in the coming two decades, to ensure that people do not starve and all die. I realize now, that KB's suggestion that Dail deputies be sent down to the midlands to cut turf with a slean, may not be hyperbole after all.

One of the biggest troubles with a 'hire it out to consultants' kind of approach, is that the public accounts committee have to be recognized to be minimise-ing the expenses of their consultants. That is seen as a good thing. But the end result, is that consults, being restricted to a restricted and narrow focus, only focus their resources and efforts on a small segment of the larger problem - the need to inject adequate stimulus back into the economy. Deputy George Lee is correct, the British government has realized this now, and is adopting an approach with Northern Rock bank, which is akin to what Fine Gael propose to do in Ireland. Albeit on a much smaller scale.


Brian O' Hanlon
garethace
 
Posts: 1579
Joined: Wed May 14, 2003 9:01 pm
Location: Dublin, Ireland

Re: National Asset Management Agency

Postby garethace » Mon Sep 07, 2009 3:50 pm

An interesting comment made in relation to non-performing loans at the Sunday Tribune website.

The other issue that has been completely ignored by the promoters of Nama, that in addition to 100% LTV loans, subsequently those loans became "negative amortization" loans i.e. where no principal/interest has been paid over the last 2-years or so since the property slump began. Since interest rates were 4.5% to 5.5% during this period, a EUR 100 million loan becomes bigger over time with accrued interest to something like EUR 110 million! This has not been accounted for in the Nama debate so far.


http://www.tribune.ie/business/article/2009/sep/06/phantom-equity-could-haunt-nama-for-years/

Brian O' Hanlon
garethace
 
Posts: 1579
Joined: Wed May 14, 2003 9:01 pm
Location: Dublin, Ireland

Re: National Asset Management Agency

Postby PVC King » Mon Sep 07, 2009 7:32 pm

jimg wrote: PVC King, you are a complete bullshitter. I'm worried someone reading what you write could mistake it for being anything other than the inane ramblings of an ill-informed fool because I have to give you credit, you disguise it well.

You haven't the slightest clue about the fundamentals of the crisis which Ireland is afflicted with. I'm highly suspicious of your claims of expertise in any field. You makes such simple errors, not just in terms of concepts but in terms of approach. You pull figures out of your ass, feed them through a few school boy calculations and expect the gullible or stupid to accept the resulting figures as having some validity; the reality is they still stink of your anus. You think bandying about some numbers and being able to perform multiplication impresses? .


I have never claimed to be an expert in anything; merely expressing an opinion that you like so many others can only see downside at a time that the rest of the World is recovering and key markets are being restored. I note that as opposed to dispute what I've said you have taken the soft option of personal attack devoid of anything to back up what you say; I have used figures which were clearly marked as broad brushstroke as noone knows at what the portfolio will be valued at until independant international property consultants who value portfolios day in day out for loan to value ratio tests report back.

In any event your background is financial services; have you ever fund/asset managed a real estate portfolio do you even as your initial figure clearly did not differentiate between investment property and development land.


jimg wrote: You obviously haven't a clue about the cause of the Irish banking crisis as you constantly muddle it with unrelated aspects of international financial crisis but I guess you think it makes you sound erudite by mentioning LTMC or quants or whatever. You have no notion of macro economics; your claim that macro features are more predictable is absolute bollox. I could go on. .



The point on LTMC is that they who included some of the most celebrated economists on the planet at that time through the use of a quants model got it spectacularly wrong. The underlying issue is that ecomonics as a flawed science and those that make money in the absence of arbitrage do so by taking contrarian positions at times of volatility and structural change.

The fundamental point you fail to understand with Investment Property is that unlike paper or synthetic instruments they are not marked to market on a daily basis. Investment grade property involves long leases often with a 12-18 year unexpired term with no tenant break options; they are therefore insulated from oversupply in occupier markets. There are specialist investors notably German funds and Sovereign Wealth funds who buy this type of investment; at present in yield range of 5.25% - 7.00%.

The Irish investors who bought in the UK in the past decade tended to buy investment grade properties; notably tenancies include Shell, Citigroup and DeBeers. They typically bought at yields of 4.50% - 6% many of these investments have seen a lot of rental growth locked in by concluding rent reviews since purchase.

Whilst your pessimism is well placed when it copmes to rent review on the part of those tenants the landlords have the benefit of the upwards only rent review system. As much as the tenants need economic analysis from some one a lot more qualified than I to give it for their businesses unless they enter insolvency they have to keep paying the rent.

Clearly portfolio vlauers will weight covenant strength and risk of default into their calculations. There are international investors who would buy fully tenanted investments in Dublin once the tenant has an appropriate S & P scale credit rating and the yield is attractive to them; Michael O'Leary made a similar point in respect of Liam Carrolls buildings that are let or pre-let to the Government; why hold ten year bonds at 4.75% when you can acheive a yiled of 6.50% on a building let to exactly the same covenant?

The great irony of the whole thing is that in some shape of form either through Nama or an equity injection into the banks the government have turned the population into the largest landlord in London and Brussels.
PVC King
 

Re: National Asset Management Agency

Postby garethace » Mon Sep 07, 2009 7:53 pm

The underlying issue is that ecomonics as a flawed science and those that make money in the absence of arbitrage do so by taking contrarian positions at times of volatility and structural change.


Which misses the point.

The fundamental point, is that economics is not a science at all. It should return to its origins, to where it came from. Many decades ago, it wasn't known as plainly 'economics', but rather as 'political economics'. That is according to economist Kenneth Galbraith, a man who never subscribed to any one 'school' or tradition within economics.

Nowhere is the need for economics to return to being 'political economics' more visible than in the recent weeks and months in Ireland. Because the economists have engaged again with the political process, they have suddenly found a function and are busy doing constructive work. They are also busy learning from basic lessons, as I shall describe below. In Ireland at the moment, we have witnessed 'financially clueless' political ministers for finance batting with the best of them, in arguments about economics. That has certainly come as a surprise to quite a few people. Conversely, we have seen the 'real' academic economists participate in the public discourse and commit some cardinal sins in that regard.

In the forefront of my mind, is a Newstalk radio interview between Garret Fitzgearld and Karl Whelan, where Whelan got the best dressing down he has got yet, from anyone.

http://newstalk.ie/newstalk/shows/recommendations/0209LTnama.mp3

Fitzgearld pointed out that Brian Lucey didn't qualify what he was talking about, when he used the figure of 'close to €30 billion' for Ireland's deficit. Which includes the €4 billion given to Anglo Irish bank to re-capitalise it. As that is considered an investment (despite the fact as Whelan pointed out, we will not see a brass penny back, and it is €4 billion the excequer badly needs right now) it doesn't not need to be declared in the deficit figure to the ECB. Fitzgearld argued that the Irish deficit figure, as far as the ECB was concerned was much closer to €20 billion than €30 billion.

That is was important for Irish economists, who go on public record to sign their names to documents, that they communicate to the ECB, which debt sum they are talking about. We cannot afford to be too 'free and easy' when we use these figures. I think Fitzgearld or Whelan, I cannot recall whom, said that Brian Lucey's document would have been better off leaving out the sentence with 'close to €30 billion deficit' entirely. That is was not relevant to Lucey's argument, which was about NAMA moreso than the government deficit figures.

Of course, Fitzgearld didn't need to step down and allow Whelan the oppportunity to dominate the economics point of view. Fitzgearld went one step further and took advantage of his extensive political experience to nail one on Whelan. It was good for Whelan to receive the dressing down however. Though he doesn't believe it now, the lesson will stand to him in time.

Brian O' Hanlon
garethace
 
Posts: 1579
Joined: Wed May 14, 2003 9:01 pm
Location: Dublin, Ireland

Re: National Asset Management Agency

Postby garethace » Mon Sep 07, 2009 8:34 pm

The fundamental point you fail to understand with Investment Property is that unlike paper or synthetic instruments they are not marked to market on a daily basis.


There are two crucial aspects with regard to 'property'. Firstly, the talents of guys such as Liam Carroll, Sean Dunne, Bernard McNamara, if they had any talent whatsoever, is they knew how to assemble different bits of freehold interest, rub out the boundary lines (not completely, they do live on) and create what is affectionately known to guys like myself as 'a building site'. In addition to acquiring the deeds and titles, the likes of Carroll, Dunne and others did an enormous amount of wheeling and dealing. Not all people wanted to remove themselves completely from those sites. In fact, they continued to operate in those sites afterwards, in new accomodate[s] of some kind. That is how things got taken care of. There is no one more qualified to do this sort of dealing, than property developers.

Secondly, there is the financial aspect to it. I don't wish to display my own ignorance by pretending to know all about that, so instead I will quote something from a comment to a Sunday Tribune article about 'Phantom Equity'.

Refinancing or "Re-Gearing" as it is more commonly known was a widespread practice, especially since land was usually purchased by the developer in an individual capacity (due to 20% CGT rate, 'resting on contracts' - Sec.110 of Finance Act still not signed into legislation by Minister for Finance where land is bought with power of attorney no stamp is paid as final sale deeds are never signed, and licensing practices where individual builder licensed or sub-contracted the construction to a company, often owned by himself or a family member).

So when planning approval was obtained the same site would be 're-geared' to release the initial equity/cash deposit put in by the developer. Sometimes they would re-gear out a substantial profit, then use that cash as deposit for the next scheme. In essence, it is tantamount to almost infinite gearing and results in a massive 'house-of-cards' scenario!


Now, taking the two points above, about legal title and financing of property - that now allows me to make my real point.

After the crash of 1929, all of the books associated with stocks were money from toxic institutions by president Roosevelt to new institutions, whose job it was to clean up the mess. Everything stopped for a whole day, while that exercise was taking place. It is widely accepted now, that a lot of knowledge was lost in that transformation. Knowledge of what was contained in the various portfolios, who bought them, why they bought them etc. That was wiped out, but Roosevelt probably had no other choice.

The same thing cannot be done with property loans unfortunately. Although, it may appear to be very seductive to think that NAMA will work with the 50 guys in the NTMA Treasury building cleaning up the mess, re-packaging and re-financing, in practice it will be difficult to do. I was shocked to listen to Alan Dukes, who is on the board of directors of Anglo Irish, comment that NAMA will 'hold onto the deeds' as he put it. Alan obviously hasn't ever worked in a place such as Zoe developments or anywhere else, or he would instantly know how daft a statement that was.

The other point of course, is the financing and re-financing procedures. As Michael O'Leary, the Ryan Air CEO rightly put it, only the banking institutions know where the bodies are buried. Basically, what I am saying is that NAMA want property to conform to the neat rules and regulations that bonds and stocks do - but it won't ever.

In addition to that . . .

I contrast to what I said above, about the term 'economics' being incorrect - that it needs to return to being called 'political economics' . . . I find with the term 'investment property' I hope the opposite will be the case. That 'investment property' will cease to be. Instead we need to start thinking of 'property' simply as property and nothing other than that.

As economist Alan Ahearne rightly pointed out in last Saturday's Irish Times, the property loans are now probably worth more than the properties. Ahearne is hoping that will give the Irish taxpayer some profit, because borrowers will make good on their loans, rather than default. Rather like the way many Irish people continue to pay mortgages despite being in negative equity. It is a far stretch though in terms of commercial property, but I do grant Ahearne his point. Because it helps to reinforce my own point, that 'investment property' is a thing of the past, when loans suddenly become more valuable that the underlying asset.

I reckon the 'trick' that NAMA hope to pull, it that they can re-package the LOANs together in some way, that will make it agree-able for some poor eejit investor out there to buy. That is what all of the stress testing is about, to see if this 'trick of the loop' will actually work. Another Celtic Tiger sized building boom, would greatly assist the 'stress test model' I have no doubt.

The notion of property as an investment was very specific to Ireland. Along with the fact that spreads between property prices and industrial wages grew larger than anywhere else in the world. Along with the fact, that after a property 'crash' of 50% reduction off peak values, we are still more expensive than anywhere else in the EU in terms of property. Along with the fact, the GDP to debt ratio is still lower than anywhere else in the EU. In other words, our government hasn't the balls to go out and do any of the projects that need to be done.

Everything it touchs involves vast sums of money ending up in off shore bank accounts, washed by Goodbodys no less, and the taxpayer having nothing to show for it. Either that, or the unions get more money to buy Mercs. We are completely off the wall on a whole number of counts, the rest of the world is fast waking up to that fact, and we had better get our s**t together soon. Or Garret Fitzgearld correcting our wording in sentences will not be enough to save us.

The 'bubble mentality' is even present I dare say, in Green minister Eamon Ryan's interview on RTE radio one, Morning Ireland. On the one hand, the green minister made some very intelligent suggestions of how we can re-think our planning and development policy and procedures. He mentioned the option to re-think the hotels that were built during the Celtic Tiger years to re-invent them as nursing homes. However, minister Ryan seems to completely miss the bigger picture that David McWilliams draws our attention to - we have to opportunity now in Ireland to buy whatever land we need, and do whatever projects we want to do. For the first time ever.

Unfortunately, minister Eamon Ryan, though I have enormous opinion of him as a politician, smacks of a guy who simply never spent a penny on a real project himself. But that is what we are stuck with. What he described on radio this morning sounded like it came straight out of a Ciaran Cuffe workshop in UCD school of architecture and design. Which is fine if you want to spend the rest of your live cocooned within a safe haven of design thoughts and aspiration. But it doesn't cut the mustard out in the real world.

Brian O' Hanlon
garethace
 
Posts: 1579
Joined: Wed May 14, 2003 9:01 pm
Location: Dublin, Ireland

Re: National Asset Management Agency

Postby garethace » Mon Sep 07, 2009 9:10 pm

Michael O'Leary made a similar point in respect of Liam Carrolls buildings that are let or pre-let to the Government; why hold ten year bonds at 4.75% when you can acheive a yield of 6.50% on a building let to exactly the same covenant?


Brian Lucey made a point today in his article in the Irish Times. It is in relation to the variable of interest rates. If we take property valuation out of the equation for a moment. (Obviously yields being links to valuations, would mean values for need to fall, so that yields could adjust with interest rates rising)

NAMA are effectively hoping that property yields and interest rates will track one another for the next ten years. There is no evidence to suggest that may be the case. There is no evidence either to suggest that propery yields from their underlying assets will be robust enough to withstand a rise in interest rates - even if one neatly tried to match up with the other.

Brian O' Hanlon
garethace
 
Posts: 1579
Joined: Wed May 14, 2003 9:01 pm
Location: Dublin, Ireland

Re: National Asset Management Agency

Postby garethace » Mon Sep 07, 2009 10:10 pm

Karl Whelan explaing some of the 'in's and out's' of things at his blog web site.

Some people seem to believe that these assets will somehow be ”backed” by the property assets acquired by the government and that their value may fluctuate based on how these assets perform. I don’t know why these people think this. They will be government bonds backed by taxes levied on you and me.


http://www.irisheconomy.ie/index.php/2009/09/07/ecb-nama-bonds-and-the-irish-banks-as-issuers-of-sovereign-debt/

Further down the article, Whelan hypothesises:

Now, and only now, does the ECB come in to the picture. Knowing that there will only be a limited market for the NAMA bonds on the open market, it appears that the government and the banks have made something of a gentleman’s agreement not to sell many (any?) of the bonds at first. Instead, the banks can go to the ECB and look for loans. The ECB requires that a bank have eligible collateral to secure its loans. Dodgy developer loans are not on the ECB’s list of eligible collateral; government bonds are.


So it appears as though the Germans are buying into to Irish debt after all. In a round about kind of way. Something else that Whelan clears up a bit, is the following.

Note that contrary to what is commonly stated, the ECB will not be buying these bonds—they are forbidden from buying government bonds of member states—they are only requiring that the bonds be available as eligible collateral.



Brian O' Hanlon
garethace
 
Posts: 1579
Joined: Wed May 14, 2003 9:01 pm
Location: Dublin, Ireland

Re: National Asset Management Agency

Postby garethace » Tue Sep 08, 2009 3:57 pm

I always like to read Elaine Byrne's Irish Times articles. I think it is because Byrne often manages to join up a couple of dots, in her articles. I don't have the time available to follow in much depth every movement and development in Irish business, politics and social life. But when I read Byrne's articles, I can benefit from some kind of overview.

I shall be telling this with a sigh

Somewhere ages and ages hence:

Two roads diverged in a wood, and I-

I took the one less traveled by,

And that has made all the difference


http://www.irishtimes.com/newspaper/opinion/2009/0908/1224254065856.html

Brian O' Hanlon
garethace
 
Posts: 1579
Joined: Wed May 14, 2003 9:01 pm
Location: Dublin, Ireland

Re: National Asset Management Agency

Postby garethace » Wed Sep 09, 2009 6:16 pm

Document published by Labour party about NAMA.

http://www.labour.ie/download/pdf/protecting_the_taxpayer.pdf

Brian O' Hanlon
garethace
 
Posts: 1579
Joined: Wed May 14, 2003 9:01 pm
Location: Dublin, Ireland

Re: National Asset Management Agency

Postby PVC King » Mon Sep 14, 2009 7:55 pm

Meanwhile, Mr Sarkozy sought to blaze another new trail today, adding a "happiness index" to the usual measure of economic growth. Mr Sarkozy commissioned a report from the economists Joseph Stiglitz and Armatya Sen with the idea of shifting emphasis from gross domestic product to well-being and sustainability.

Receiving the report in the Sorbonne University, Mr Sarkozy said the old measure of GDP gave a false reading because people saw their living standards deteriorating while GDP was growing. "In the whole world, people think that they are being lied to, that the (GDP) figures are false, or worse, manipulated," he said. "Nothing is more destructive to democracy".

The President called for a revolution. New factors is national performance should include such things as "the services which are rendered inside the family", the quality of public services and access to leisure activities.



http://business.timesonline.co.uk/tol/business/economics/article6833689.ece


Any thoughts?
PVC King
 

Re: National Asset Management Agency

Postby garethace » Mon Sep 14, 2009 9:44 pm

Mr Sarkozy commissioned a report from the economists Joseph Stiglitz and Armatya Sen with the idea of shifting emphasis from gross domestic product to well-being and sustainability.


http://business.timesonline.co.uk/tol/business/economics/article6833689.ece

Three very different articles from the Sunday newspapers yesterday, tackling in detail the issues dealt with in the broad strokes by the French premier.

I read over Emmet Oliver's article in the Sunday Tribune which uses the figure of GDP quite a bit.

http://www.tribune.ie/business/article/2009/sep/13/the-greatest-gamble-in-history-of-economy/

Vincent Browne in the SBP also refers to GDP:

http://www.sbpost.ie/commentandanalysis/the-money-is-there--its-just-not-being-shared-44282.html

The Sunday Tribune again had a piece by Mark O'Byrne is executive director of wealth manager and international bullion dealer, GoldCore, who raises important points about Gold compared to other investments.

http://www.tribune.ie/article/2009/sep/13/gold-a-safe-haven-as-all-else-fails/

Then, this evening I was reading Joan Burton's site, where she discussed a danger of NAMA bonds coming into conflict with the Irish government's need to issue large amounts of debt at the moment.

The Minister must set out the expected cash flows and revenues over the coming 7 to 10 years of NAMA’s life. In the legislation the banks may use the NAMA bonds with the ECB or sell them. However we do not know under what conditions and when they may be sold on the bond market and the impact of such sales on Irish Government Debt at a time when the State will be borrowing heavily to meet capital and current public spending.


http://www.joanburton.ie/?postid=1161

I suppose the point is, everyone uses GDP in order to make some point or other. It serves that purpose when it is needed to frame some other point. I can remember a number of people lately, who have criticised GDP, while at the same time using the figure, in order to make some point or other.

Brian O' Hanlon
garethace
 
Posts: 1579
Joined: Wed May 14, 2003 9:01 pm
Location: Dublin, Ireland

PreviousNext

Return to Ireland