Tag Archives: David McWilliams

Web PointsofView 13Dan

From top: David McWilliams; Dan O’Brien, columnist at the Irish Independent

You may recall David McWilliams’ documentary, Ireland’s Great Wealth Divide, on RTÉ One on Monday night.

Dan O’Brien, former Irish Times economics editor, chief economist at the Institute of International and European Affairs and Irish Independent columnist, has taken issue with the source of Mr McWilliams’ data and his following conclusions.

In the Irish Independent, Mr O’Brien writes:

“Early this year the Central Statistics Office and number crunchers at the Central Bank published the first ever set of figures on how wealth is spread in Ireland. These figures provided a treasure trove of new insights into wealth distribution. Monday’s programme never mentioned these figures or even referred to them, despite the fact that they are the only hard data available on wealth equality. Instead, the programme used guestimates made by investment bankers. Those figures were published last year by Credit Suisse, a Swiss bank, in an annual study it does on wealth around the world.”

…If the more reliable and more up-to-date figures had been used, the story told on Monday night might have been very different. The actual statistics show that the spread of wealth is more equal in Ireland than the average across the Eurozone. That was certainly not the impression the programme gave.”

“…Those who have great power and wealth should be subject to great scrutiny, and should expect to be subject to great scrutiny. That includes, by the by, the main shareholder in the group which owns this newspaper, Denis O’Brien. But David’s assertions about a “reality” of the “working middle classes being excluded” and that it is now more likely for those in the middle to fall to the bottom than rise to the top were opinions presented as facts. In Ireland, we simply don’t have good evidence on social mobility. As such, David’s claims on this issue on Monday cannot be proven or disproven, but there is very good reason to question them.”

FIGHT!

Hard data shows ‘great wealth divide’ is not as big as you think (Irish Independent)

Previously: Good Room Gone Bad

Screen Shot 2015-09-22 at 01.23.36

Kevin Nowlan, CEO of Hibernia REIT

Ireland’s Great Wealth Divide was on RTÉ One last night introducing us to some of the colourful characters defending and profiting from Ireland’s unprecedented inequality.

David McWilliams spoke with Kevin Nowlan, CEO Hibernia REIT, a real estate investment trust which has raised over €600million from a variety of investors, including George Soros, by helping them find bargain properties in Ireland.

Kevin Nowlan: “Ireland became an extraordinary place for a moment because virtually everything was for sale. It was a catch 22 in Ireland. If you didn’t have the money, you couldn’t buy the property and if you didn’t have the property, you couldn’t raise the money.”

David McWilliams: “There was no cash in Ireland, no access to cash, so you had to go to where the cash was. When you knocked on the door of Georg Soros’s, what did you say to them?”

Nowlan: “So we basically said that Dublin is a great office market. We said that you can buy office buildings basically in, or below, basement cost.”

McWilliams: “What does that mean?”

Nowlan: “So you can buy them below what they can be built for. What we had to answer was we said we could do off markets.”

McWilliams: “What does that mean?”

Nowlan: “That means, you know, a lot of property ends up in the Irish Times or in the Irish Independent for sale by receivers or whatever. Be basically said we know enough people in Dublin to be able to go and buy the properties, without having to go to auction. Or having to go to the market. And we’ve done 18 deals, and 16 of them we’ve done off market. We’ve bought debt, we’ve, you know, we’ve done quiet deals with people, we’ve done deals with banks, we’ve done them in a variety of different ways. If you buy something in an active vibrant economy, below what it actually costs to replace it, you should be in pretty good shape to make money.”

McWilliams:Who, just in that case, who pays the outstanding debt then?”

Nowlan:Nobody.”

McWilliams:Not the taxpayer?

Nowlan:Well yes, I mean it is being factored in now. You move back three years and it’s factored into the bailout. I mean that…”

McWilliams: “So there is a massive transfer of wealth from the average Joe who pays tax to the incredibly wealthy guy who sees the opportunity.”

Nowlan: “He sees the opportunity and he works, you know, let’s say he bought, you know let’s say they bought those loans for 35c in the euro, or 30c in the euro and they sell them for 40c, they make their 10c and they move on. And it’s basically a bulk business model.”

McWilliams: “But the difference is the 35c in the euro means somebody else has paid the 65c, the 65c – and that’s the taxpayer.”

Nowlan: “The 40 to the 80, unfortunately, ends up on our…”

McWilliams: “On the taxpayer.”

Nowlan: “On our national debt.”

McWilliams: “The taxpayer ends up subsidising or financing or, in some way, underwriting the opportunistic move which is totally legal and totally within their rights of the already wealthy.”

Nolwan: “Yeah. Basically.”

Meanwhile…

Screen Shot 2015-09-22 at 01.41.44

David McWilliams with Professor Richard Murphy, director of Tax Research UK

Mr McWilliams tackled the subject of Ireland’s corporation tax, saying Ireland has made a distinct choice – to tax labour much more than capital. As an example, he spoke about  American corporations based here in Ireland. He said US corporations make $970,000 profit per employee per year in Ireland yet, on those profits, they only pay $25,000 tax per employee per year to the Irish exchequer.

Mr McWilliams spoke to to Prof Richard Murphy, director of Tax Research UK and a campaigner for tax fairness. He said we needed to be braver and raise our corporation tax rates in order to narrow the wealth gap in Ireland.

David McWilliams: “In a way, Ireland it taking a massive bet on the very wealthy.”

Professor Richard Murphy: “Oh yes. Ireland’s role in all of this is to increase the wealth of the wealthiest. That is the position it has chosen for itself. By offering a low tax rate to the world’s major corporations which are, of course, owned by the very wealthiest in the world and of course are also staffed at their top levels by some of the wealthiest of all the world then Ireland is betting that that’s going to carry on. That the wealthiest are going to carry on getting wealthy and those who are at the very top of those corporations are going to want to carry on using Ireland as their launchpad into Europe and beyond Europe, particularly if they’re US corporations.”

McWilliams: “We’re in Soho [in London] which is traditionally the red light district of this part of the world so are you saying Ireland is a bit like Soho, you can do stuff here you can’t do at home?”

Murphy: “Absolutely. You can do stuff in Ireland that you can’t do at home which you wouldn’t want home to know about either.”

McWilliams: “Precisely.”

Murphy:The 12.5% tax rate, and we actually know of course the real tax rate is less than 12.5%, that is sort of a prop for their insecurity and that is the weakness in the Irish political mentality. That it has to get over this lack of confidence in its own ability to sell the qualities of the Irish people in the international community. If Ireland actually established itself as a better location to exploit its real ability to, and in particular, its people, then Ireland could actually guarantee a tax base which it could tax, not at just 12.5% but at the same rate as the UK and have no problem at all, contribute more to the Irish economy, make a better balance and actually not be seen as the pariah state which, I hate to say it, it is seen as around the world at the moment.”

Meanwhile…

Screen Shot 2015-09-22 at 09.14.46

Danny McCoy, CEO of IBEC

IBEC doesn’t agree with Prof Murphy, as was evident when Mr McWilliams spoke with the CEO of IBEC, Danny McCoy:

McWilliams: “Do you think that it’s sustainable for us to keep a tax policy which many countries seem to think is ‘beggar my neighbour’?”

Danny McCoy: “No, it’s not ‘beggar my neighbour’ because…”

McWilliams: “But many countries seem to think it.”

McCoy: “Of course they do. And in fact, you know, you lose your reason. There’s nothing, as I think it was JP Morgan said, ‘there’s nothing to make you lose your sense of proportion than seeing your neighbour getting rich.’ To see people on the western seaboard of Europe who have been, by generations poor, suddenly have this huge surge in wealth in a 40-year period, people are saying there must be something wrong there, there must be some factor that’s creating this surge in Irish prosperity. Aw – it must be the corporate tax rate.”

McWilliams: “What effective tax do they pay?”

McCoy: “Well, look, the headline rate is 12.5% but legitimately companies go through losses. So effective tax rates can be lower than 12.5% but that’s the official rate. I wouldn’t get hung up on the rate so much as the money…”

McWilliams: “And the revenue is what?”

McCoy: “The revenue is in the order of about €4billion which, again,for a small open economy is a disproportionate amount of, of actual cash to raise from a  corporate sector.”

McWilliams:The income, the Americans, suggest is close to €100billion. The tax revenue that we get is €4billion. They are supposed to pay, let’s say €12billion – does that mean that there’s €8billion potentially not being paid here?”

McCoy: “If we’re after more revenue, to deal with the wealth distribution. For a small, open economy the logic here is get more activity in here. The way to encourage that is to put up a flare that says the tax rates, their trajectory is actually downwards. We’re, you know, 12.5% is going to be the maximum as we move through time, we get more competitive, corporation rates should go down, it doesn’t mean revenue goes down.”

McWilliams: “So we’re in a situation where into perpetuity we have to accept a 4% effective tax rate.”

McCoy: “Well we certainly have to realise that we are 4.6million people in a 7,000 million world. We don’t get to do demands. What we do get to do is leverage our position which is a gateway into the Europe of 500 million and to be tax efficient, not a tax evasion country, a tax efficient country that gives rise to activity, that gives €4billion from corporations to 4.6million people is off the chart.”

Towards the end of his programme, Mr McWilliams proposed his own theory in relation to the Irish psyche and its seemingly inability to be braver.

He said:

“My granny had a good room. It was so good, I wasn’t good enough to go into it. It was preserved for people who were better than our family, good-er than our family if you will. The core of the good room psychology is a fear of rejection. It’s a fear that what you are is just not good enough so therefore you pretend to be something that you’re not.

“This good room mentality, I think, permeates a lot of the ways in which the Irish Government, for example, negotiates abroad, for example, this discussion we’re having now about the tax system: rather than say, ‘it would be in our interests to revisit this’, we say, ‘don’t rock the boat. Will the multinationals reject me if I have that conversation about tax? Will, for example, the European Union reject us if we have that conversation about bank debt?’ It’s all of a certain similarity and it’s down to a national insecurity.”

Watch back in full here

Previousy: Staying In Tonight?

macker
Economist David McWilliams

 

Give a man a fish and you feed him for a day.

Give him a shovel and he might complete a ghost estate.

David McDreamy writes:

My daughter suggested that maybe a good thing would be to give the Syrians the tools to complete these houses that were half-built. This doesn’t sound preposterous. After all, Japanese women rebuilt much of urban Japan with rudimentary tools after the Second World War…

Let the homeless refugees breathe new life into our ghost estates (David McWilliams)

Earlier: A Spin Out Of Crisis

2015-02-26

Economist David McWilliams at the Banking Inquiry this morning.

More as we get it.

Asked by Fianna Fáil’s Michael McGrath about critical articles shortly after initially describing the bank guarantee as a masterstroke, Mr McWilliams said if it had not been done, the banks could have been bust. But he said it moved towards being used not as an emergency measure but as a full payment mechanism in event of bankruptcies. Mr McWilliams said he told then minister for finance Brian Lenihan that more conditions should be added.

He earlier told the inquiry that the property and banking crash was incredibly predictable and absolutely preventable.

Mr McWilliams said he spent a decade warning that the property market would crash and money would fly out of the banking system.

He had a moral imperative and a patriotic duty to warn of catastrophe, he added.

The Irish banking system and by extension, the rest of the economy, was set up to fail, he said.

He said he believed hundreds of thousands of ordinary people would end up in negative equity and debt where their lives were destroyed due to the debt associated with the housing market.

The panic of September 2008 did not have to happen and was not pre-ordained, he added.

If there was no housing boom, there would have been no banking boom.

Bank guarantee should have been temporary, says McWilliams (RTÉ)

Meanwhile earlier….

90371958 90371961 90371962

Got a problem?

Odds against you?

Call the Predictor.

David McDreamy arrives at the Banking Inquiry this morning.

(Leah Farrell/Photocall Ireland)

Update:

From the close of proceedings:


Ciaran Lynch
[Chairman, Banking Inquiry]: In your opening statement, you said you had published 2.5 million words.

David McWilliams: I have published 1.2 million words, and I have read nearly all of them during the past three weeks.

Lynch:
“Excellent, because I have a question on them. Did you ever get it wrong?”

McWilliams: “We all get lots of things wrong.”

Lynch: “What did you get wrong?”

McWilliams: “Wow. This is a trick question.”

Lynch: “It is not.”

McWilliams: “While we all get lots of things wrong, I do not think I got anything wrong during the period we are discussing. I am an economic commentator. I am an independent economist and have never been paid by the State for advice.

Lynch: “I had many professions before I came here and I have got things wrong in those professions. It is not just politics.”

McWilliams:
“Of course one gets things wrong.”

Lynch: “Give us an example of something you got wrong in 1.2 million words.”

McWilliams: “I get things wrong every day.”

Lynch: “Give us an example. In the 1.2 million words you have written about the economic crisis in this country, did you get anything wrong?”

McWilliams: “It is an unfair question. One gets things wrong every day and one hopes to learn from them.

Lynch: “In terms of getting things right for the future, what is your assessment of the Irish Government’s level of preparation for the banking problems that emerged in September 2008? How well was the State prepared? Are Irish policy making authorities better prepared today, particularly regarding the regulation of the property and banking sectors?”

McWilliams:
“We were totally unprepared in 2008 because we had not listened to any of the warnings. I am not sure I see anything now that would prepare us again for such an eventuality. The most important thing is to be hyper vigilant on a sector which, if managed well, can serve the needs of the economy very well but, if managed badly, can lead to a financial catastrophe.”

Lynch: “Is there anything else you would like to add before we conclude?”

McWilliams: “No.”

Full transcript here

mcw

[David McWilliams]

An online David paper.

We’re They’re calling it the Daily McDreamy.

“I have decided to write a daily update on how I manage my money day to day, what I watch, who I listen to and how, after absorbing all this, I act. The note is for your information as a supporter who has been reading my writing for years. It is not advice; rather it explains my thought process.
The reason I spend time thinking about how money works, is not to be a rich person but to be a sovereign and independent individual who can look after himself and his family. For me, this is very important and, as traditional employment and traditional pension schemes become more and more unreliable, I believe all of us have to rely on ourselves that bit more.
Relying on yourself, means taking time to figure stuff out for yourself rather than leaving it to so-called experts.
The daily note called Global Macro 360° will be a morning newsletter published before lunch, detailing what is going on every day in the global economy and where there may be opportunities….Should you decide to subscribe, you will get the first weeks’ subscriptions free and you can see what you think of it. Thereafter, the note, the information and all the ideas will set you back less than the price of three pints a week…”

David McWilliams, In an email to his website subscribers.

Sounds equitable.

FIGHT!

 GlobalMacro360.com

Screengrab via

Laura Miller writes:

It has been drawn to my attention that the Dalkey Book Festival has changed its status from non-profit making enterprise (which most book festivals are e.g. Hay festival) to a limited company. The festival is heavily sponsored, participants are not paid a penny and all who work
on it are volunteers. Who gets the profits and why hasn’t this been more broadly advertised? Surprised Broadsheet not onto it

 

Anyone?

“We are all looking forward to a summer brimming with sports events from the European Championships to the London Olympics. Our hopes are high with anticipation and expectation and it is no wonder, given the talented, primed and professional athletes we are fortunate enough to have representing us.

We can learn some lessons from them. They have achieved excellence in the sporting field, not by virtue of luck or by accident, but because they are thorough in their planning, methodical in their preparations and they leave nothing to chance.

…Similarly, there is no shortcut to getting Ireland back on track. I hope that we in Government have tried to be frank and honest about that. There are plenty of opponents of the fiscal treaty who will claim that we can magic our problems away, but we cannot. We must continue in the quiet, determined way in which we have tackled this financial crisis since it began. We must work steadily and with determination towards Ireland’s recovery, and voting Yes to the treaty is an essential element of that.”

Lucinda Creighton: No Easy Solution To Ireland’s Woes But Yes Vote is Only Way To Go (Irish Times)

“In football, there is the following expression: he reads the game well. All good players read the game well. The same goes for rugby. Today, you will hear commentators say about Brian O’Driscoll that he reads the game.
This means that Drico can see where the game is going, where the next play is and how to either deal with it or seize the opportunity. In soccer, the player who reads the game knows where the ball is going next. They used to say this of Roy Keane. It is the same for all major sports.

Many years ago, I spent a summer working in Canada, where the national hero at the time was Wayne Gretzky, the brilliant ice hockey player. Gretzky was so good that, when he retired, his number – 99 – was retired from all North American professional hockey teams.

His most famous quote followed a simple question from a commentator about why he was so successful. Gretzky didn’t even think, he just responded as if it were the most simple thing in the world: “I skate to where the puck is going, not where it’s been.”

Our politicians and those who negotiate for us, whoever they are, would do well to listen to the sportsmen. Head to where the ball is going, not where it’s been.”

David McWilliams: The Game Is Only Beginning (DavidMcWilliams.ie)

Cartoon by Blower (Daily Telegraph)

Thanks Andrew Murphy

httpv://www.youtube.com/watch?v=_4e8iAofnrw

There is a famous scene in the 1976 film, The Outlaw Josey Wales, starring Clint Eastwood as the eponymous hero. During a particularly brilliant exchange, the bounty hunter Fletcher, hot on the heels of Wales, comes out with an inspired put-down to the cowardly senator who is trying to pull the wool over his eyes.

Squinting into the sun, saloon door at his back, chewing tobacco, Fletcher disdainfully hisses: “Don’t piss down my back and tell me it’s raining.

When it comes to the fiscal compact, the EU is pissing down our backs and telling us that it is raining. And the fact that the government is also going with this line implies that it is party to this falsehood.


That’s Not Rain. That’s A Lie (David McWilliams)

Irish Permanent’s loans-to-deposits ratio remains 227pc, down from 247pc last year. What this means is that the delinquent management of this bank borrowed so much in the boom to lend out that now — even after three years of contracting — for every €1 deposit the bank holds, it has lent out more than €2.27. For the bank to be viable, it has to get this ratio back to €1 of deposits equal to €1 of lending.

This implies that it has to aggressively cut lending or aggressively increase deposits or a combination of both.

…If the bank gets into a deposit war at a time when there is no demand for loans because people and companies don’t want to borrow, it is toast.

Why? Because its cost of capital is likely to be greater than its return from that capital. That is how you go bust.

 

Our Bailed Out Banks Are In Process Of Going Bust Again (David McWilliams, Irish Independent)