Irish politicians may not want to mention it, but worrying international issues could have huge knock-on effects here, writes Kyran Fitzgerald.
Three little pigs made houses with different materials. Like fools, the first relied on straw and the second on twigs. The third, a sensible fellow, resorted to bricks.
The Big Bad Wolf came along and blew down the twig and straw houses, eating those poor little pigs.
But he could do nothing about the third house of brick.
The wolf tried to come down the chimney, only to fall into a boiling cauldron that had been prepared for him.
So have our own little piggies in power, Enda, Michael, Joan and Brendan, managed to build an economic house with enough brick in it; strong enough to fend off the wolves, or is our recovery largely built on twigs and straw?
We may soon be about to find out, for the wolves and the bears are now prowling much of the land beyond our shores.
Last year, 2015, will be remembered for the rise and rise of the political populists of the right, for the return of mass terrorist murder to the West and for those huge crowds of migrants and refugees on the move across Europe.
But matters financial have definitely returned to centre stage as fears of another 2008-style meltdown begin to take hold.
The financiers divide up between those arguing that the stock market has blown off much of its froth and those who insist that the crisis is truly systemic, with persistent weakness in the price of oil and gas being one of the prime symptoms.
What no one can deny is that we have had the worst start to a financial year since the crisis, with the weakness spreading across pretty well all investment heads with the exception of gold.
The storm clouds are gathering. Very poor economic figures from Greece, Portugal and Finland are putting pressure on European Central Bank president Mario Draghi to ramp up quantitative easing, but many now view this as a resort to a financial version of methadone.
Easy money certainly prevented meltdown in the early stages of the crisis, but it has also promoted an international asset bubble and huge misallocation of resources.
Many investors are rushing into gold as fearfulness mounts. David Stockman was appointed by Ronald Reagan as a member of his first Cabinet at the age of 34. He has become a strong critic of the financial sector.
In his opinion, “the markets are being pawed by the bears. They are going to be mauled.”
Stockman, President Reagan’s budget director, observes that whereas the world carried $40tr in debt in 1995, this has risen to $225tr today.
In the US, household debts are still at close to twice income levels (180%) The bottom 90% are “living hand to mouth” with 60% having “no cash savings.”
“We are looking at global deflation due to massive over investment,” he warned in recent days.
The commentator may be out there with the uber bears, but his comments should be respected.
Bank shares have tanked in recent weeks.
Europe’s financial institutions are seen as particularly vulnerable.
Take the case of Deutsche Bank, Germany’s leading institution, with over 100,000 employees in Europe.
This is the bank that fuelled German economic miracles in the late 19th and late 20th centuries.
Yet its share price has halved on the back of trading losses, heavy fines and a sluggish economy.
Management has been seeking to prop up the stock with buybacks.
Last October, it shocked analysts by announcing a loss of over €6bn in the third quarter. It recently announced its first full year loss.
Its new CEO, John Cryan, has been cleaning the stables.
The bank has had to shell out billions in fines for its part in the Libor scandal. Its trading arm is heavily exposed on the commodities side.
Investors fret over bank exposures in general to commodity and property markets, now in meltdown, and to related corporate borrowers.
Alongside all of this we have the migrant crisis which is playing out in favour of supporters of a British exit from the EU, the implications of which for this country could be serious indeed, at least in the short to medium term.
Sterling is edging down, but it could fall much more precipitously if the financial markets take fright over the UK’s current deficit which is running at over 5%.
Back home, the politicians are ducking all such negative talk, not wishing to scare the horses.
We are binging on hope, right now.
Many of the voters may be still mad about recent events, but no one really wants to hear bad news.
Fine Gael is promising 200,000 more jobs on top of the 135,000 created since 2012. It is promising to abolish the Universal Social Charge, all going well (an important piece of small print, that).
Sinn Féin is offering 250,000 new jobs along with many extra billions for the health service. The others, too, are lined up like merchants in the souk, peddling their wares.
“For you, my carpet just $100!”
The election mart is in full cry. The cash tills are ringing, with lower petrol and higher overtime offsetting the surge in rents, apparently.
The motor industry is predicting almost 160,000 in sales of cars in 2016, a prediction that has been welcomed by Public Expenditure Minister Brendan Howlin, eying all those juicy revenues.
A similar surge in overseas trips being booked is also evident.
Happy days are here again, but are people doing enough to repair those roofs against the gale?
Are consumers here, not getting a little ahead of themselves with the assistance of lenders keen, once more, to get people, particularly, the young, back binging on credit?
Irish household debt — at just under €35,000 a head — is the third highest per capita in Europe. Our median net wealth at €105,000 (before the latest financial slump) is very close to the European average, but it is unevenly divided.
According to the Central Bank, the top 20% hold 70% of net assets — which may explain why the voters are slow to clap pro-Government candidates, or canvassers, on the back. The fatter cats are lapping up the cream.
The Government can argue with justice that it did much to put Ireland in a position to benefit from the recent upturn.
Ireland is no longer seen as high risk by overseas investors. That is no mean achievement.
Yet the gales are blowing again off our shores.
Has the Government, have we the voters, done enough to ensure that all the bricks required are securely in place in the national house just in case the wolf comes calling?
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