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The Luck of the Irish Runs Out
theodp writes "Looks like threatening to take their ball and leave paid off for US tech firms. The Irish government announced plans this week to tap the welfare state and working class for much of the $20B in savings they've pledged to find over the next four years, but the austerity measures will not touch large businesses like Microsoft, Intel, Google, HP, Facebook, LinkedIn, and Pfizer, which created jobs and fueled exports in Ireland after being lured by low corporate tax rates. More than 100,000 Dubliners took to the streets to protest the bailout plan, calling for the Irish government to default on the country's debts, and demanding an immediate election. 'We should default,' said a retired union worker, 'the idea that the workers of this country should pay for the gambling of the billionaires is disgusting.'"
Going default will be a short-lived remedy. The country will go back to 1990 in terms of market appeal and productivity. And yes, if the big tech companies leave, the hope of reacquiring a high-tech knowledge industry will go away as well.
Paul Krugman's latest column addresses this. The main point is that Iceland let the banks default, while Ireland took the banks debts as public debts and guaranteed it. In the end, Iceland has recovered while Ireland's people have to bear the burden due to austerity measures.
god n. : the Supreme Being, indistinguishable from a good random number generator.
The debts involved are massive, too.
From this article (though note it was written back in September):
"Under the current program, we estimate that each Irish family of four will be liable for 200,000 euros in public debt by 2015."
Ouch.
Each American family of four is liable for about $200,000 in public debt.
That is why I figure the USA will default in 5 years, 10 tops.
This keeps getting repeated and it keeps being wrong. The US CAN'T default on it's debt. Our debt is denominated in US dollars, which means the US government can always make payments, either through raising taxes or inflating the currency.
The only thing really keeping us afloat is the Fed printing money as fast as the presses will run and using it to buy our debt, basically making the money worthless.
So then, there must be rampant inflation then correct? According to economic indicators our currency has been strengthening recently, and inflation has been low to non-existent. In fact it has been too low which has worried some that we would enter a deflationary period.
Then figure in the retiring boomers...
Yeah, who will be taking their SS money and dumping it back into the economy. Sure it will stress the SS program but that money isn't evaporating into thin air. It will be re-entering the system.
huge masses of working poor that are only kept afloat by social programs
Mainly because we don't have a real education system in place for people to gain new skill sets. There's a reason why we rank far below other developed nations in education.
and the cost of two endless wars?
No argument there. The money that was spent on those two conflicts alone could have done much more good here in the US.
Yeah I give it a decade tops. Enjoy it while you can folks, because from the looks of it another worldwide great depression will soon be upon us.
You're a little late to the party on that one. So far it has mainly been a recession. The US is in a recovery, albeit a slow one.
The only question is whether we will learn from our mistakes and put heavy regulations on the banks like we did during the last one, or if those that believe in the free market fairy will win out. Without control free markets quickly end up corrupted when too much ends up in the hands of too few, just as we have now.
People like to think a free market is like nature, where survival of the fittest would yield the best companies. However this is naive. Companies will influence the market much like humans influencing their environment. Humans alter their environment, wipe out all competitors for resources, and any possible predators. Companies in a pure free market would act in the same regard. Eventually you would end up with one or a handful of companies that would completely dominate the market.
You will always need to control greed.
~X~