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Posts tagged ‘Dr. Constantin Gurdgiev’

“Irish Eyes Are Smiling” But Should They Be?

 by Dr. Constantin Gurdgiev via True Economics blog,

Ireland has been basking in the spot of an unusual sunshine this October. The cold spell, that normally takes the island over at the end of the month and into early November, coating it in a wet blanket of wind-swept and never ending rains was nowhere to be seen, replaced by the strangely regular appearances of the sun, blue skies and sight of the still leafy, colour-turned trees.

Similarly, the markets have been kind to Ireland too. There is not a day going by without a praise for the country reforms or recovery or both from some European leader or a Wall Street analyst or a hired gun from the ‘official’ sectors of the Irish state gracing international newspapers and media screens. CDS are down, estimated probabilities of default are down, bond yields are down. Sales of new bonds are up. Foreign direct investment figures are up. Jobs announcements are up. And forecasts… well, forecasts just keep on climbing.

In the latest round, the European Commission weighed in with its prediction that Ireland will outgrow its euro area peers by some 3-fold in 2014 and 2015.

Truth is, all of this is largely nonsense. Ireland is a small open economy with trade and investment exposures to the Euro area, the US and the UK. In almost even shares.

This means three things, relating to the Irish economy forecasts. 

Firstly, Ireland benefits from the accommodative monetary policy in the Euro area (making its gargantuan public and private debts overhang more manageable, for now, and its exports cheaper).


Secondly, due to the geographic distribution of its trade and investment links, Ireland is also benefitting from the faster growth in demand in the UK and the US.


Both points translate into more robust exports performance for Ireland than for its European peers. But both also mean that most of Ireland’s trade in goods and services is nothing more than transfer pricing and tax optimisation-driven shifting of digits across the borders. Yes, the multinational companies provide some employment – roughly 10 percent of the country total. But beyond that, they deliver little. The hiring they are doing is increasingly about bringing people with skills from abroad rather than taking people for training from within. And while in January-October 2013 corporation taxes accounted for just 9.46% of total tax revenues collected in Ireland, over the same period this year, the number is 9.24%.


So whilst the external trade tends to boost Ireland’s GDP, the fact that over 3/4 of the country exports are accounted for by the multinationals, making Ireland’s GDP / GNP gap the largest of all advanced economies. That’s “growth in and profits out” model of an economy run on FDI.


Which brings us to the third point about Ireland’s growth outlook: it is highly unpredictable. Whilst exports are volatile because they are dominated by the considerations of tax optimisation rather than actual production, the domestic economy is desperately searching for a growth catalyst, and to-date, finding none strong enough.


In H1 2014 the GDP / GNP gap was actually slightly lowered. But not by a pick up in the domestic activity. The reclassifications of R&D spending as investment in ESA 2010 standards adopted by Ireland ahead of all other countries in the euro area generated a significant uplift in GNP. Overnight, Irish ‘investment’ side of the National Accounts boomed by almost EUR10 billion (in full year 2013 terms). And surprisingly high retention of profits by the Multinationals in Ireland (most likely prompted by the sluggish capex spending in the stagnating global economy) further helped to temporarily and superficially boost the GNP.

Meanwhile, in the real Irish economy, the country remains the second worst hit by the crisis in the euro area. As shown below, Ireland’s real GDP in per capita terms is down off the 2007 peaks and all the miracles of the recovery are unlikely to get it anywhere near the euro area averages any time soon.


Of course, the real long-run question for Ireland is whether the current rates of growth observed in 2014 to-date (closer to 5% per annum) are sustainable in the medium term.

The answer rests with the potential growth rates in the two sectors that make up Ireland’s bipolar economy:

1) Domestic demand: Domestic demand is starting to show some signs of revival, exactly in the areas where one would expect these signs to materialise at this early stage of the recovery: first domestic investment, then domestic consumption.


Domestic spending is rising (at 1-2% per annum rate) on both household consumption and public spending uplifts. We can expect this trend to continue, without significant acceleration until H1 2016, as domestic spending is being held back by slow growth in wages and continued high rates of tax extraction from personal incomes.


Domestic investment has been a beneficiary (at the aggregate level) of institutional investors and some domestic cash buyers flooding into the distressed property markets since H2 2012. Accounting gimmickry of ESA 2010 standards is boosting this side of the National Accounts too. The property markets cash-buying spree is now tapering off, and is being partially replaced by the banks starting to issue new mortgages. I suspect this trend will lose more momentum over H1 2015. Aside from this, there is no uplift in domestic investment. Corporate investment is weak, stripping out foreign companies tax inversions. Demand for capital goods is weak. Which underpins the nature of jobs creation claims presented by the Government. Official figures for new jobs created include adjustments made to the labour force surveys in the wake of the last Census, resulting in a massive uplift in the numbers declaring themselves as being employed as farmers back in 2013. Stripping these adjustments out, instead of ca 70,000 new jobs ‘created’ claimed by the Government, real private sector non-farm payrolls are up roughly 27,000 on 2011 levels. No wonder capital investment is running weak. Meanwhile, labour force participation rate is falling due to exits from the workforce, early retirements, and emigration.


2) External demand picture is more complex. Rates of growth in exports of services – the factor that drove up Irish current account surpluses in 2010-2013 – are slowing down as Ireland exhausts large FDI sources in the ICT and Financial services sectors, and as negative reputation of Ireland’s tax optimisation policies sets in. In the short run, however, we can see an acceleration in FDI inflows as some of the MNCs rush in to lock into Irish ‘domicile’ before it becomes obsolete. Volatility of exports growth figures will be high in 2015-2016. But in the longer run, we can expect a downward trend in the rates of growth in exports and a pick up in the rates of growth in imports, assuming domestic demand picks up. On manufacturing side, things have been improving due to weakening of the euro. However, there are few new catalysts for growth in the sector at this point in time. Over the longer time horizon there are adverse potential headwinds coming up as patent-cliff-hit pharma companies are gradually starting to bypass Ireland in locating new activities.

In brief, there is little clarity on the future potential growth dynamics. Key ingredients for sustained optimism that are lacking include actual structural reforms (virtually none have been implemented to date and even fewer have been properly planned and resourced) and clear catalysts for growth (there are no broadly-based sectoral drivers for growth other than “things are so bad, they can only get better” argument for domestic demand and “we have lots of FDI” argument for externally trading sectors).

One last caveat – we are already witnessing the process of unwinding of reforms that aimed to deliver moderate savings in public spending. The Government is aggressively trading down any expectations that savings in public expenditure secured in 2009-2013 will continue into the future, beyond 2015. Political cycle does not favour continuation of the past reforms as deeply unpopular and internally torn governing coalition is facing general elections before April 2016.

As Europe gets hungrier and hungrier for a feel-good story, as Brussels longs more and more for a poster child for its ‘crisis management’ efforts of 2008-2013, as Dublin politicians get closer and closer to facing the crisis-hit electorate, the sunshine being lavished by politicians and the media onto Ireland’s economy is likely to get only brighter. It might not feel much warmer, though, on the ground. Nor will it stave off the onset of winter.

source: http://www.zerohedge.com/news/2014-11-13/irish-eyes-are-smiling-should-they-be


What a lode of crap Jesus this is just a fairytale and very surprising coming from Dr. Constantin Gurdgiev> I am wondering if he is also been bought off by Dennis the tax dodger??
Lucky for us another person with their eyes wide open has summed this article up and I hand the critique over to him gladly .Meanwhile this photo shows the real face of Ireland and take a good look ! Revolution is not very far away if we don’t get the puppet government to listen to us the people! 2014-11-01 13.06.21

comment from zerohedg article on zerohedg!

I live in Ireland. The recovery is utter bollocks.

People are poorer and working harder to try and make ends meet. We’ve exported our unemployment to the far corners of the earth by forcing our youth into emigration (in itself a crime against our people). We’ve been hit with tax after tax and now the fuckers are trying to reinflate the housing bubble that ruined us last time.

On the plus side, the next and promised final tax, a household water tax, brought 200,000 people out in protest 2 weeks ago. we already pay for water twice through VAT and inome tax, this one is a third and step too far. There’s a third protest in Dublin on the 1th that aims to bring it to an explosive conclusion. The authorities are backtracking and bargaining as hard as they can. 2 days after the protest they offered €100 euro to anyone who registers with the water authority. In some countries they call that bribery. They also threatened to use the IRS to collect the bills, strange considering Irish Water is a private company.

The government here is now more unpopular than the last bunch of crooked cunts and they are falling apart. Elections wont be far away, in which Sinn Fein and independents will excel. which will cause Europe and the ever so beloved “investors” to shit a brick.

We are corrupt and we are fucked. We deserve it for electing an endless string of cunts into power. But a lot of people are waking up over here, anyone for a Green Revolution?!

Decline in Debt and Regaining of Trust?


The following out this morning:

So is Herr Schaeuble correct? Did reductions of debt help ‘regain trust during the crisis’? Were there actual reduction in debt?
Table summarises 2007-2013 maximum debt levels (for General Government Debt as % of GDP) attained by the euro area economies and the year when this maximum was attained:

Three observations:

  1. With exception of two countries: Germany and Portugal, 2013 debt to GDP ratios are maximal for the entire period 2007-2013.
  2. In the case of Germany, peak debt level attained in 2010 was 82.44% of GDP, while in 2013 estimated level of debt/GDP is expected to be 80.393% of GDP. The reduction is small. Meanwhile, German bund yields are not reflective of any specific reduction – they were low in 2009 and 2010 and they are low now.
  3. Portugal’s peak debt/GDP ratio is notionally at 2012 at 123.8% of GDP. Country 2013 expected debt/GDP ratio is 123.56%, which is statistically indifferent from 2012 levels, so we cannot call this material by any measure.
Here’s evolution of debts over the period in two charts, confirming that there has been no reduction in debt levels relative to the earlier stages of the Global Financial Crisis:
full article at source: http://trueeconomics.blogspot.ie/

17/8/2013: Long-Term Great Unwinding for ECB?..


On foot of David Rosenberg’s pressie on Long-Term Inflation strategy switch (link here), here’s the ECB Monetary Policy dilemma illustrated.
First, the steep hill ‘walking’:

Per chart above, the wind-in-your-face breezing down the interest rates slopes for ECB is more severe than the Fed trip so far. And the duration of this episode is longer in the ECB-own historical context:

In fact, we are into 55th month now of staying away from the mean and that is for the euro era (already too-low by historical metrics) mean. Last two episodes of deviations lasted 30 and 33 months respectively. In severity terms: average overshooting post-revision……..

full article at source: http://trueeconomics.blogspot.ie/

Olli Rehn Departs Reality Once Again


If one needs an example of out-of-touch, reality-denying and self-satisfied EU Commissioner, travel no further than Olli Rehn. Here’s the latest instalment from Court’s Favourite Entertainer of Things Surreal:

The speech focuses on what went wrong in Cyprus.

In the speech, Mr Rehn commits gross omissions and conjures gross over-exaggerations.

Nowhere in his speech does Mr Rehn acknowledge that Cypriot banks were made insolvent overnight by the EU (including EU Commission, where Mr Rehn is in charge of Economic and Monetary affairs) mishandling of PSI in Greek government bonds.

Nowhere in his speech does Mr Rehn acknowledge that Cypriot banks were massively over-invested in ‘core tier 1 capital’ in the form of zero risk-weighted sovereign bonds (Greek bonds…………………….

full article at source: http://trueeconomics.blogspot.ie/2013/05/852013-olli-rehn-departs-reality-once.html

Live Register for November 2011

Dr. Constantin Gurdgiev,s latest posting on the live register figures

Live Register continued a parade of weaker Irish economy performance indicators for Q4 2011. Here are the headlines and updates.
November LR-implied unemployment rate edged up by another 10bps to 14.5% getting closer to 12mo high of 14.6% back in December 2010.

In absolute seasonally-adjusted terms, there are now 448,600 people on LR, up 1,700 month on month from October 2011. Year on year, LR rose 3,700 or +0.83%, back in October, year on year LR stood at 300 down on October 2010 (-0.07%). 3mo MA through November

full article here :http://trueeconomics.blogspot.com/2011/11/20112011-live-register-november.html


These stats are all about real people who are forced to pay a heavy price for the mismanagement of the economy by so-called educated people in the banks and in politics .These gangsters will some day have to answer to the Irish people and I am not sure they will be that understanding  when it comes down to it .I say bring on the guillitien now!

Is the euro zone in a recession?

According to Dr. Constantin Gurdgiev latest posting YES

The euro zone is now most likely in a recession. That’s right, the R word is back.

Today, CEPR released its composite leading economic indicator for November – eurocoin – and the measure has posted it second consecutive monthly negative reading on foot of six consecutive monthly declines. Here are the details.

Eurocoin fell to a recessionary -0.20 in November 2011, from -0.13 in October and +0.03 in September.  The 3mo MA is now at -0.1 and 6 mo MA declined to +0.148. A year ago, the indicator stood at +0.45. Chart below updates, including eurocoin-consistent forecast for growth

full article here: http://trueeconomics.blogspot.com/2011/11/25112011-eurocoin-signals-recession-for.html

Irish GNP projections under new US tax proposals

Have a look at this excellent article from

by Dr. Constantin Gurdgiev

Much ignored by irish media so far, the US Congressional proposals to reform corporate tax system are gaining

speed and have serious implications for Ireland. In the nutshell, today, US

House Ways & Means Committee Chairman Dave Camp described some of his report

proposals (see Bloomberg report here),

which include:

  • Lower corporate tax rate to 25 from 35%

  • Exempting 95% of overseas earnings from US tax

  • Introducing a tax holiday on repatriated profits

For US MNCs operating in Ireland this will serve as a powerful incentive to
on-shore profits accumulated in Ireland. While the full impact is impossible to
gauge – it is likely to be significant, running into 50% plus of retained

This will, in turn, translate into higher Net Income Outflows from Ireland
(see QNA) and thus directly depress our Gross National Product.

full article at source:http://trueeconomics.blogspot.com/2011/10/26102011-irish-gnp-projections-under.html

Some observations on NTMA & NAMA statements to the Oireachtas Committee


Image via Wikipedia

Dr.Constantin Gurdgiev has posted a superb article on the statements issued by
NAMA and the NTMA to the Oireachtas committee last week I would highly
recommend that everybody  take the time and read it in full at source.

By Dr.Constantin Gurdgiev

 I was going over the statements issued by NTMA and NAMA to the Oireachtas
Committee last week and was struck by some rather interesting

Let’s start with the Statement by John Corrigan, Chief Executive
NTMA, to the Joint Committee on Finance, Public Expenditure and Reform, 9
September 2011:

“The banking stress tests carried out by the Central Bank
in the first quarter of 2011 quantified the additional capital support required
by the banking sector at €24 billion. The NTMA Banking Unit has worked very hard
to minimise the amount of this additional capital to be provided by the
taxpayer. Through initiatives like burden sharing with the junior bondholders
and the sourcing of private capital for Bank of Ireland, the net amount of this
capital provided by the State is now expected to be around €16.5 billion. The
savings generated can be redirected to funding the day-to-day operation of the
Can Mr Corrigan explain this: as of August 1, 2011, the State
has injected (under PCAR/PLAR allocations) €17.292bn (here)
according to DofF note. That €792mln difference is not exactly a
Oh, and while we are on the issue of being accurate –
PCAR/PLAR capital allocations are designed to deliver capital & liquidity
cushions for the period 2011-2013. Not a trivial issue, mind you, especially
since Mr Corrigan repeatedly relies on PCAR/PLAR recapitalization exercise as a
definitive (aka permanent) line in the sand on banking crisis.
Now, as to the “savings can be redirected to funding the day-to-day operation of the
country” – that is pure rhetoric, sir, isn’t it? Mr Corrigan himself shows that it is.

Please read full article at source here: http://trueeconomics.blogspot.com/

Retail Sales and Consumer Confidence: July (By Dr. Constantin Gurdgiev )

By Dr. Constantin Gurdgiev

In the previous post, we looked at the latest data on retail sales for Ireland
for July 2011 (here).
Now, let’s update the data for retail sales and consumer confidence.

Per  ESRI latest data, consumer confidence in Ireland dropped from 56.3 in June 2011
to 55.9 in July, with 3mo moving average down to 57.2 in July from 57.9 in June.

full article here :http://trueeconomics.blogspot.com/2011/08/29082011-retail-sales-and-consumer.html


Another excellent presentation of facts !

With the government in full denial that the economy is free fall,
maybe now these figures might give them a wakeup call. Austerity doesn’t work
because if it did, after three years we should be booming by now! The government
are about to announce another round of Austerity measures and thus tighten the
tap of credit and economic activity .Just where do they expect economic growth
to come from when the very consumers they are relying on are on their knees and
swimming in an ocean of debt ?

Putting IMF’s comment against data

 by Dr. Constantin Gurdgiev

According to the report by RTE: “The acting Managing Director of the International Monetary Fund has said Ireland’s economic recovery programme ‘appears to be on track’… However it still requires what he described as ‘forthright action by the Irish authorities to re-establish the basis for sustained growth.’ Mr Lipsky said there were positive signs in the Irish economy, such as a return to export growth. However Mr Lipsky described Ireland’s economic recovery as ‘a difficult challenge’.” [emphasis is mine]

One cannot expect RTE news to critically challenge Mr Lipsky on his pronouncements, but… can someone ask Mr Lipsky what did he mean by the ‘positive signs in the Irish economy, such as a return to export growth’?

Here are two charts showing that export growth did not return to Ireland any time recently, but in fact was here for some months before IMF showed up in Dublin and certainly well before this year.
So let’s give Mr Lipsjy a quick briefing:

read full article at source :http://trueeconomics.blogspot.com/


The above post appeared on Dr. Constantin Gurdgiev’s excellent blog http://trueeconomics.blogspot.com/

Based on Mr Lipsky of the IMF  Ireland is on track ,growth has again appeared and effectively its “steady as she goes” is the message we are getting from him. The government is quick to confirm the same if the daily pronouncements are anything to go by!  The positive signs in the Irish economy, such as a return to export growth however has not and is not resulting is jobs growth as is clearly the case when one considers we have had this “growth” now for at least a year.  Mr Lipsky description of Ireland’s economic recovery has been difficult is putting it mildly. Despite this news of “growth” the reality on the ground is not so rosy. People’s notion of their wealth has all but been destroyed and their expectations for their futures are diminishing every day. There is no commerce other than cash. Small business is creaking to a standstill as consumers are all taped out. I did a survey in my local area of 120 businesses on the possibility of them taking on new workers, not one saw any possibility of taking on new workers in the next six months to one year time frame. I also counted twenty tree businesses that closed down within the last four months. I believe the picture that this Me.Lipsky of the IMF and the Government are trying to paint is of one of deception, an attempt to convince the Irish public that the austerity measures are “manageable” and we can take on more of the same as the existing measures are not affecting “growth” in the economy. Effectively we are been prepared to take on more severe austerity measures. The screw is been tightened and we are going to be squeezes for more taxes and public services cuts are not far behind! This is coming to us from a government that promised us change. I say lies and dam lies! “Wake up Ireland”

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