David McWilliams was online from 1pm to 2.30pm on Tuesday 18 September to answer questions.
Timothy Goggin: Do you see strong similarities between the Florida crash of the 1920s and today's situation? And why are the so- called experts so desperate to keep the over-inflated bubble afloat? Keep up the good work and sense of realism and truth while all around are talking pure rubbish.
David: Hi Timothy, and thanks to everyone for all your questions. We will try to get to as many as possible. There are so many vested interests who have made a fortune out of this boom and want to keep the whole thing going. These people have no interest in whether a house price boom is good or bad for the economy or who gains or loses. The present status quo suits banks, builders and the State, and it's not surprising that people who are employed by any of the above continue to talk up what is clearly a bubble.
Robert: You have been accused of being slightly sensationalist in your predictions for entertainment's sake. What do you have to say to this?
David: Hi Robert. My basic premise is that for the Irish economy - and therefore the future for all of us - to keep ahead of the pack house prices have to fall. The reason is very simple: too much of our productive cash, 83 cent in every euro actually, is now being invested in property to the exclusion of all other industries. This is dangerous, inflationary and ultimately ridiculous. As for the sensationalist tag, the story tells itself without any embellishing from me.
Paul C: I work for an American multinational in the manufacturing industry, and my wife and I have quite a large mortgage (€370,000). Do you see manufacturing wavering in this country? And should I fear the adjustment happening to the Irish economy? How long can we protect our low corporation rate?
David: HHi Paul. Unless we get our inflation under control, which is in turn dependent on house prices easing and the associated bonanza coming under control, the housing obsession will continue to cannibalise real businesses like the multinationals by driving our costs up much more than other countries. So I see both of these as related. Recovery in the real economy is dependent on house prices falling. Only when that happens will multinationals feel that Ireland is a place where costs are under control.
Robert O'Sullivan: Do you think that any possible collapse in the Irish economy would or could leave Ireland in the same economic situation as in the Eighties? Can it get that bad again?
David: Hi Robert. Possibly like yourself, I have children and a wife and live here. I have no interest either personally or professionally in the economy going pear-shaped. But I believe that history is littered with examples of countries that believed their own propaganda and suffered as a result. Any downturn won't be like that of the 1980s because the world has changed so dramatically. However, economic history tells us that it takes four to six years for these type of house price booms to stabilise to lower prices. But this simply means that the nature of economic growth will change here: there will be less SUVs, less traffic and less queues. Which might not be a bad thing for a few years.
Tiernan O'Rourke: Hi David. I found the show very entertaining and amusing. I also found the history of Uruguay insightful and, obviously, our history is well known. However, what I don't remember hearing was advice or suggestions as to where we should go from here... What is the solution to the current situation?
David:Hi Tiernan. The solution is honesty and not sticking our heads in the sand. I don't believe that progress in Ireland can be achieved by house prices rising continually. This is enslaving an entire generation. In other countries that have gone through boom-bust cycles the key is to cut interest rates. If we can't do this as members of EMU, then maybe it's time to consider EMU. Difficult times call for difficult decisions.
Kirsty Halloran: I missed tonight's show :-( Is there a repeat planned for any night? Surely it's not just going to be aired once a week? Well done for bringing the realm of economics to the average person.
David: Hi Kirsty. I'm not too sure if there will be a repeat, but the next two shows are next Monday and the Monday after. As for economics, it's far too important to be left to academics.
Andrew Dennison: The reporting of the downturn in the economy and especially the property market is getting a lot of media attention. From what I can see it is very unbalanced and negative. Is there a danger the media will talk the country into thinking it is all doom and gloom?
David: Hi Andrew. I take your point. And if I have been in any way culpable I apologise. However, I think the biggest culprits here are the 'talker uppers' not the 'talker downers'. The 'talker uppers' are the ones who scared people in the last 36 months into getting into huge debts to buy commuter homes which people cannot sell. These are the guys you'll find teeing off this weekend in the Algarve or hanging around at the tent at the Galway Races. I don't think that I am doing anything else except pointing out what is wrong with this scenario, and maybe injecting a bit of realism into the debate. Finally, one of the least densely populated countries in Europe cannot sustain the highest land prices: it is a scam.
Steve: What kind of strategy should we be adopting to take advantage of the Chinese economy?
David: Hi Steve. I've visited China twice in the past year, both writing the book and doing the series. It strikes me that there is a huge opportunity in marketing services such as education, legal and even the beleaguered banking sector to the Chinese. Also, fund management in China would seem to be logical as Chinese businessmen are desperately trying to get some of their money out of the country because they live in fear of the Communist Party expropriating it. So there are loads of opportunities; if we could just stop obsessing about land and instead go out and see what's going on in the rest of the world we'd be in a better position.
Richard Moyles: Should we not be focusing on inspiring people to create new business and look at opportunities available across the world instead of negative commentary?
David: Hi Richard. Hopefully that is the message both in the book and the TV series because, as we discuss in the third part of the series, I believe that globalisation could be the golden era for the Irish. We just have to get over this hump. If house prices were to fall we would be free to look at these opportunities. But at the moment everybody is caught in a neurotic obsession about land so we're missing the big picture.
James: Hi David. Do you not think you could be more balanced in your assessment of Ireland's economy and what the future holds? You seem to take the most extreme worst case scenario…
David: Hi James. By citing Uruguay I was trying to suggest that we can look at countries which seem to blow everything and learn from their mistakes. Uruguay is a good example of this and we should realise that over-dependence on one sector or another makes you vulnerable. When 93% of all Ireland's exports come from multinationals we should be doing all in our power to A) Ensure they stay here and B) Create alternative industries or activities in the event that the multinationals take their business elsewhere.
Tostao: David, you foresee a growing resentment occurring between the Jugglers and the Boomers as a result of the wealth transference. Do you think another factor could arise from the Jugglers not having the luxury of raising their own children, instead reluctantly handing them to their Boomer grandparents?
David: Hi Tostao. I think there is a serious generation gap in Ireland in terms of wealth and this is both democratically unfair and economically inefficient. Grandparents bringing up kids is already a reality in Ireland. And yes, I do see growing resentment from one generation towards the other. As I said last night, the Jagger Generation are not a bad generation, they're just lucky. There is no blame apportioned in either the series or the book, it's just telling it as it is.
Declan Farrell: Hi David. My wife and I have three children and are thinking of moving to a larger house in the price region of €489k plus stamp duty. We have 17 years left on our current mortgage, of which 10 are fixed rate, current worth €385k. Is it a good idea to climb the property ladder? Would you hold on to the current property?
David: Hi Declan. My view, and it is only one of hundreds, is that the property market is now akin to a slow puncture. Prices will continue falling, maybe not dramatically but persistently, for possibly a few years. I think you will pick up better value in the years ahead.
Alan Green: How long do you envisage a bottoming out of the housing market will take? I have read all sorts of various reports, ranging from a year or two to almost a decade. What's your opinion?
David: Hi Alan. In the Irish situation, the evidence from nearly 40 years of house prices from 17 OECD countries shows that when you adjust from inflation, house prices typically give up about 70% of their value in the subsequent fall. Normally the period of a slump is five to seven years. But in at least three recent cases, Switzerland, Holland and Japan, the housing market stagnated for a decade. I discuss this in detail in chapter nine of the book.
Christopher: I don't believe the doom and gloom message. Our employment data is among the best in Europe. Inflation is very manageable in what is still a very low interest regime. GDP shows little sign of slowdown. Where does David think the hard evidence is going to come from for us to accept his theory?
David: Hi Christopher. Maybe you're right. The hard evidence is everywhere. If you look at the employment figures, the lion's share of employment from the last three years comes from the public sector and construction. The latter is collapsing, the former is fool's gold. Regarding interest rates, they are already too high not too low for Ireland. As house prices fall we will need lower interest rates. In terms of people's real experience, GDP figures are not particularly accurate. Even when Ireland was experiencing in the late 1980s emigration on a monumental scale, year after year, GDP only registered a negative number once. But that said Christopher, I have no monopoly on the truth. And you could well be right. I've been wrong before and will be wrong again.
Joanna:I am currently renting in Dublin and am afraid to buy as I may move to London in next year or two but will return to Dublin. Is it a better idea to buy anyway and rent out when not in Dublin? What do you think of purchasing something from the affordable housing scheme?
David: Keep renting Joanna.
Tony Kennedy: Do you have faith in the current Government to implement the appropriate policies to re-balance the difference between generations?
David: Hi Tony. Unfortunately, I've no faith in this Government as I've never heard anyone from the present Government even discuss generational problems in Ireland.
Avril: I am a first-time buyer. Myself and my partner would like to purchase property but are unsure now is the right time to do it. Prices have fallen over the past six months, so the dilemma is do we wait longer in case they fall further or jump in now and get a bargain relative to last year's prices?
David: Hi Avril. If I was you I'd hold off. Prices are falling, and the extent is being disguised by builders, auctioneers and estate agents because they don't want to admit the extent of the slump. But this will become apparent so just hold your horses. It's a long race!
Henry DeButler: Do you think the school system should be overhauled so that children are taught how to think and not what to think?
David: Hi Henry. Yes, I think the school system hasn't changed in years but the world is a considerably different place. I believe our approach to education doesn't teach people how to think or dream and this deficiency gets worse as they progress on to university.
Niall Gallagher: Hi David. Where do you see Ireland's economy being positioned in terms of European and world economies in the next 10-20 years, given the possibility of EU enlargement and the continued strong growth of Asian economies?
David: Hi Niall. In the third episode and in the book I argue strongly that the best long term resource we have in Ireland is the Irish Diaspora. In the same way as the Israelis could never exist without the help of Jewish people abroad, we too should actively engage with our exiles and realise that this is the single biggest and unique advantage we have. This I term 'The Jack Charlton Theory of Economics'. Charlton threw the net of Irishness very wide and the team performed brilliantly as a result of this. When Kevin Sheedy scored for Ireland against England, did we care that he was actually born in England? The economy works in a broadly similar way to a sports team: the greater your capacity the more likely you are to succeed.
Jerry Mulcahy: Will your show 'Ireland's Generation Game' be repeated on RTÉ anytime soon, please? I caught a portion of it and would love to see it again. Keep up the good work.
David: Hi Jerry. The show will be available online to watch on the RTÉ website later today.
Brendan Doherty: Regarding the point you made in your programme about high oil prices creating excess liquidity and subsequent asset price bubbles, why is the crunch happening now when oil prices are climbing higher and higher and therefore Arab states have more revenue to put back into financial markets?
David: Hi Brendan. The reason the crunch is happening now is because mass fear has replaced mass greed. These emotions are holding more sway over the market than the macroeconomic impact of oil prices.
Dave Kennedy: Have you only got the one suit? You travelled around the world but wore the same suit whether hot or cold. Give Louis a shout.
David: Hi Dave. Unfortunately we only have the two. The RTÉ budget doesn't stretch! But how did they look after 40 days and 40 nights in the wilderness?
Lisa: Hi David. I am saving with my boyfriend for a house. When is good to buy? We are buying in Dublin. We hope to buy by this time next year.
David: Hi Lisa. If I was you, as I said to a previous questioner, I would hold off. You will get better value next year than this year. There is so much supply coming on the market that you're bound to get more for your money in a few months' time.
Liam: Your track record has not been that good with your predictions (hope you don't mind). There have been many 'false dawns'. What makes you sure you are right this time?
David: Hi Liam. Very fair points and of course I don't mind. The interesting thing about ideas is that initially people think you're mad; then they slag you off; then they say you're working for somebody else and then there comes a time when you can't find anybody to disagree with you. It seems we're at the latter point now.
Mike Concannon: What percentage of goods leaving Irish shores for export are generated by foreign companies based in Ireland? On your programme you suggested 93%. Is this true?
David: Hi Mike. Yes, that's the figure. Hard as it is to believe, it's the latest Enterprise Ireland report. Just to put things in context Mike, the collective output of Dell, Microsoft and Intel in Ireland is equivalent to 20% of our GDP!
Steve D: Hi David, in your response to Tiernan, you say cutting interest rates is key. Will this not increase borrowing, drive more money into the economy and ultimately increase inflation?
David: Hi Steve. On the issue of interest rates, there never has been a so-called soft landing in a country that could not reduce its interest rates. It's not that it encourages more borrowing in a downturn, it just makes repayments that bit easier. This I believe will be necessary if we are to avoid a long recession. And this is why our EMU commitment is counter-intuitive, economically at least.
Brendan Doherty: Why has the media ignored the ongoing crash of the Irish stock market? The ISEQ has dropped by over 30% in a matter of months and no sign of a raised eyebrow. With stocks of recruitment companies bombing, how can vested interests keep lying to the Irish people about the true state of the economy?
David: Hi Brendan. Not all of us have ignored it. The falling ISEQ means that the views expressed last night in the programme are not mine alone but are shared by people in financial markets. This is a large alarm bell.
Mark: Hi David, I watched your show last night. In my view the press and media are causing the slow down. It is shows such as your one last night that are worrying people and causing people to be scared of investing or continuing to invest in this country. Maybe a more positive show next time?
David: Hi Mark. I'm sorry you see it that way. This is not the intention. I am just telling it as I see it. If you stick with the series you will see that the second and third episodes are much more uplifting. In fact, the end of the series and the end of the book outline why we Paddies are exceptionally well placed to profit from globalisation in the coming decades. We just have to get over this property madness. So keep the faith. The game has just started.
Kevin: Soft or hard landing over the next 18 months?
David: Hi Kevin. There's no such thing as a soft landing. It's like the Dodo: it has never been seen in modern economic life in any country at any stage in the economic cycle. God knows who thought it up, but it doesn't apply to houses.
Boby: Hi David. To what extent do you think the circumstances of the last few days have overtaken your programme and book? Any likelihood of a rewrite?
David: Hi Boby. I don't think they have so much overtaken the programme and the book as substantiated my concerns. So let's just see how things pan out.
Paul: I am 43, with a tiny mortgage, a Merc and huge savings. I dislike the Rolling Stones and so I don't think I am a Jagger or a Juggler. Is there any hope for me?
David: Paul, you're laughing so! Anyway, the characters are just a bit of fun, not to be taken literally.
Declan T: Are you away now for your dinner or will you be staying longer? I have to go out.
David: Hi Declan. I'm here for another half-an-hour. Sure I've no job to go! Unemployable at this stage.
Paula: Hi David. I'm a 24-year-old who has just completed an MBS in Smurfit Business School. I would love to start up my own company. Do you think this entrepreneurial spirit is advisable in the current economic climate?
David: Hi Paula. I think the entrepreneurial spirit is the only thing we have. As long as you're not caught up in property and its many different subsectors, there are loads of opportunities here so go for it.
Chris A: Just sold in May before things started softening. €500K in the bank earning 4.5%. If your advice is to hold tough, what to do with the proceeds?!
David: Hi Chris. I have always been a believer in investing in real businesses that buy and sell real stuff to each other for profit, rather than businesses that are looking for a speculative windfall. There are many hundreds of companies that because the banks will only give loans based on security of property are actually cash starved at the moment. Typically, these types of companies will give you better value for your cash and normally have great resale value in the years ahead.
Denis C: Hello David. My partner is American and we are considering moving to the USA in two to three years' time. What is your opinion and the status of the housing and employment in the USA going forward?
David: Hi Denis. Alan Greenspan has just produced his memoirs and assessments of the world. He is cautiously upbeat on the US and, like Ireland, I believe that once the froth has blown off, the housing and credit markets and the extraordinary ability of the US to recover and prosper economically will reassert itself. However, the China factor will continue to overhang US manufacturing.
Duncan: I live in China. I have done for the last three years. I'm just back for a short while. I used to work for the Chinese Government (for two years). Saw the show, and can certainly say this: the abilities of the Chinese government are very often overestimated. They aren't all that!
David: Hi Duncan. That's very, very interesting what you say. And you obviously have a better handle on what's going on in China than I do. I'm glad to hear that we overestimate them because we're going to need all the help we can get.
Michael: David, you remind me of Bob Beckman, author of the book 'The Downwave'. Only thing is he wrote the book at the start of the Thatcher boom years, so was wrong for a decade. When things finally went pear-shaped in the UK, Beckman wrote 'The Upwave' (what a guy). A broken clock is correct two times a day
David: Hi Michael. Speaking of broken clocks, at least I can tell the time, unlike other commentators, who just follow the herd.
Andre: David, I think you are completely wrong about the need to reduce interest rates. Of course this will keep the prices up. To make repayments that bit easier could be and should be done through other means. And this should be done targeting those people who really need it not everyone. Don't you agree?
David: Hi Andre. You've hit on one of the problems of macroeconomics, because it doesn't target the individual. I am only looking at the tools at our disposal. It's not just interest rates I am talking about, it's also our exchange rate. It makes no sense for us to be involved in a currency arrangement which is overvaluing us against the two currencies that we do most of our trade in, Sterling and the Dollar. We need a lower exchange rate to encourage profits in the Irish export sector, not so much for multinationals but for small companies that are struggling to compete.
Liam O: David, if things do go belly up, you do a good impression of 'Spooky Mulder' of the 'X-Files', and the filming of the programme was like an episode. You won't starve!
David: Cheers Liam, I'll keep it in mind.
Peter Bovril: Ireland is a knowledge economy. The shift away from manufacturing is indicative of globalisation generally. Do you not think that we should instead concentrate on our skills in financial services etc, which lend themselves to such a skilled workforce?
David: Hi Peter. Yes, that's what I was saying to one of the questioners about how we can profit from the likes of China's growth. We have things in the service industry that they want and are prepared to pay for.
Mark: Hi David. There is a notable absence of questions regarding political culpability (my own included). Are the chat hosts censoring questions they fear may offend their paymasters?
David:Hi Mark. Sorry I didn't pick that up here answering the questions. But it is not for nothing that Fianna Fáil have been called the political wing of the construction industry!
Jon: Do you think that Ireland will see net emigration again as the un-mortgaged young people leave due to a declining economy? Will this leave us with only the well-off over 50s and the mortgage-trapped youngsters?
David:Hi Jon. The issue of emigration and Irish people is very interesting. We have always travelled, unlike most other races. For example, when unemployment was 18% in Ireland and Spain in the late 1980s, the Irish, myself included, emigrated en masse while the Spaniards hardly budged. I suppose the lesson is when the going gets tough the Paddies get going.
JD: Hi David. I'm a big fan of yours and I think it's great that someone is brave enough to talk realistically about our current situation. Maybe get rid of the '07 Saab for future shows and hire an old Toyota so that you can really snigger at the people driving in their convertibles!
David: Fair point on the Saab, JD.
Noel Grainger: Would our economy be boosted in the future by teaching children science instead of superstition?
David: Hi Noel. Spot on. Science and some of the 'harder' subjects seem to have suffered badly in the past few years. The most successful countries are churning out graduates in these areas. We don't seem to be.
Martin:Say there is a property crash, are there enough people with ready cash waiting to sweep up bargains? And in doing so cause prices to stabilise?
David: Hi Martin. That's what normally happens: prices fall to a level where rents, which will be rising at this stage, more than cover the interest rate cost of buying. At this stage new investors will come back in. And people who have held off on buying their homes will feel they're getting value.
Stephen Hogan: Will you be hosting a webchat next week, David? Same bad time, same bad channel? Love the show, books and commentary by the way!
David: Hi Stephen. We'll definitely do another webchat either after next week or maybe the last one. Thank you all very much for your questions and comments. The show will be available to watch on the RTÉ website and on my own website www.davidmcwilliams.ie. Thanks again. David