From Kilkenny Arts Festival, Hubert Butler Lecture @ Soundcloud.com:
On a fateful night in September 2008, the former government urgently needed some good advice. “Astonishingly,” wrote Richard Tol in The Irish Times, they “knocked on David McWilliams’s door.”
Many people think they should have knocked on Morgan Kelly’s. Since his now-famousarticle on the property bubble in 2006, Kelly, Professor of Economics at UCD, has been predicting disaster for the Irish economy in a series of (strangely entertaining) articles in The Irish Times. So far, he has been proved all too right, and he hasn’t finished with us yet. In May the man described by the Irish Independent as ‘Dr Doom’ launched another coruscating attack. Describing Central Bank governor Patrick Honohan’s miscalculation of the scale of bank losses as “the costliest mistake ever made by an Irish person”, Professor Kelly declared that Ireland has become “an object of international ridicule” and predicted that, within a year or two, the country will be facing bankruptcy. But there is, he argues, still a way out.
Quotes: Professor Morgan Kelly @ Kilkenny Arts Festival, Hubert Butler Lecture
From IrishCentral.com – ‘Dr Doom’ predicts another near collapse for Irish economy
“We are very far from the bottom of the real-estate market, it is going a decade for it to recover,” warned Kelly as he pointed out that Irish property prices may decline as much as 80%.
“While prices had fallen by 50 per cent, almost no transactions were taking place at that price and with unsold properties starting to accumulate, we are very far from the bottom of the market.”
“If the US goes under, that hits us very, very badly.”
“The Eurozone is too complex to collapse, the logistics of undoing the Eurozone especially for us.
“We’ve got €160bn in European deposits in our banks, what happens to those if the Eurozone disappears? It’s a nightmare. But I think mostly what will keep it going is that it is in Germany’s benefit.
“I think at some stage what we are going to see are very large ECB loans to Ireland and Greece, and bigger ones to Spain and Italy.
“But assume that we get through the European crisis and suppose they lend us €100bn for 50 years at one per cent interest. That would be the end of the problem for us, and we would be able to go and borrow again from the international markets.
“Even if we get through that, we still have very big problems in Ireland.
“The whole banking and government crises have taken attention away from very deep and pretty much intractable problems of the Irish economy.”
“We have dumbed down our education system. Unfortunately, the rest of the world hasn’t. We’ve given up, the rest of the world hasn’t.”
Some notoriety so far (from the dead tree media – a day or two after we blogged it…)
- Wall Street Journal – Ireland’s ‘Doctor Doom’ Predicts Deeper Banking Losses: Speaking at a public lecture in Kilkenny City Saturday evening, Kelly said the banking losses will rise to EUR100 billion, while the government’s debt pile will peak at EUR250 billion, because of uncounted losses on interest-only-repayment home loans advanced to Irish professionals, including lawyers, solicitors and realtors at the height of the boom.
However, the Irish coalition government and its bailout lenders–the European Union, International Monetary Fund and European Central Bank–forecast that the Irish debt pile will peak at about EUR200 billion. Irish Finance Minister Michael Noonan said last month that the total recapitalization cost to the Irish government of saving the Irish banks may now be no more than EUR65 billion.
- The Guardian – Morgan Kelly warns of new middle-class debt default: An Irish academic best known for correctly calling the property crash four years ago has raised fresh concerns over a potential tsunami of debt default from “high rolling” professional classes.
Professor Morgan Kelly said there is about €11bn (£9.6bn) tied up in domestic loans that were handed out to lawyers, doctors and estate agents for homes they can no longer afford – loans the banks are not counting as problematic.
- Irish Times – Economist reveals appalling vista of bankrupt and beleaguered Republic: Kelly described the bank guarantee that followed as “Cowen and Lenihan’s idea of shock and awe” which, designed to frighten speculators, instead turned out to be “shocking and awful”.
He said the real mistake, however, was not establishing the guarantee, but in sticking with it. Describing governor of the Central Bank Patrick Honohan as the government’s “chief economic adviser”, he said “he could have walked away from it . . . but he said no, the losses were manageable”.
Referring to the subsequent EU-IMF bailout, Kelly said while Honohan and the government might have expected easy terms for being “good kids”, instead the European Union made an example of us.
He said Ireland was now a sort of “EU protectorate”.
- Irish Independent – State bank control gives politicians say over home debt; Two-thirds of banking staff must go, says academic [wow. they can’t even bear to say his name]: Mr Kelly predicted that the inability of some people to repay mortgages might soon lead to organised opposition to repayment and the emergence of some “Michael Davitt figure” who would resist evictions like the 19th century nationalist agrarian agitator who founded the Land League.
The campaign could even lead to paramilitary organisations which would act like Robin Hood to prevent people from being forced to leave their homes, he speculated.
- Joe.ie – Morgan Kelly’s article – the digested read