Estd. 2002. Politics, tech, startups, media, law, history, philosophy
The FP blog has a good story in US and British students outsourcing their “studies” to people in India.
Work is being contracted out for as little as £5 on contract coding websites usually used by businesses. Students are outsourcing everything from simple coursework to full blown final year dissertations. It’s causing a major headache for lecturers who say it is almost impossible to detect.
The Wall Street Journal highlights the downturn here with a story on immigrants leaving. The statistics are pretty stark, and I like how the WSJ uses these and most Irish media don’t:
Citigroup economist Piotr Kalisz in Warsaw estimates that up to half of Polish émigrés to Western Europe since 2004 will return home in the next two years. In the U.K., half of an estimated one million Eastern European arrivals since 2004 have already left, says the London-based Institute for Public Policy Research in an April report.
Aiding the reversal: currency dynamics that have narrowed the East-West wage gap. Poland’s currency, the zloty, has benefited from the stability of EU membership, the growing economy, a steady flow of remittances from Polish emigrants and, more recently, Poland’s central bank raising its interest rates.
Andrej Golczewski, who arrived in Ireland in 2005 expecting to stay five years, at first earned a monthly salary for laying sheet metal that was equivalent to four times what he could earn at home in zloty, a boon in saving for his daughter’s university fees. But the euro has dropped 30% since May 2004, and with Polish construction wages rising, Mr. Golczewski left Ireland for home last month.
Similar dynamics are at work in the U.K., where a housing bust is threatening to tip the economy into recession and the pound is down 40% against the zloty since May 2004.
I should remind readers that the Economist Intelligence Unit in November 2007 said the following:
* Despite an estimated increase in the euro area inflation rate to 2.6% in October, the European Central Bank (ECB) is not expected to increase interest rates above the current rate of 4%.
* The fiscal position is deteriorating, and this will place constraints on government expenditure. A deficit is expected by 2009.
* GDP growth is expected to slow sharply in 2008, mainly because of the ongoing slowdown in the previously overheated property sector. However, there is a real risk of recession.
* Unemployment is expected to rise over the outlook period, as the construction sector shrinks, but inflation and the current-account deficit will both fall.
I blogged about it back then as Ahern had recently said people who talk down the economy might as well kill themselves. Well, I guess those naysayers were correct. And Ahern was simply ignoring the problem. His successor has also ignored the problem. Now we have to deal with what the EIU forecast.
Anyone who has been watching sites like Treesdontgrowtothesky, DaftWatch or Irish Property Watch will see that the property market is in very serious doo-doo. And it is getting progressively worse. The number of houses coming on the market is rising, and the number of buyers out there is falling as a result of a return to normal lending conditions (yes we were living in a credit bubble for some time).
So what does all this mean for Ireland?
It’s the big R. And it will be with us for a while.
Update: The ESRI press release is available here.
As petrol prices hit record highs in the US, people are driving less, and taking public transportation more.
According to AAA, the national average price for a gallon of regular gas rose to a record $3.936. That compares with an average price per gallon of $3.23 last Memorial Day.
“With it being near $4 a gallon, you definitely have to drive slower and pick and choose when you’re going to do it,” said Steve Kahn of Roswell, Georgia, at a Memorial Day festival in Atlanta.
Some Americans have turned to public transportation. Ridership increased by 2.1 percent in 2007, in part because of rising gas prices, according to the American Public Transportation Association.
Americans took 10.3 billion trips on public transportation in 2007, the highest level in 50 years, the group said.
The Energy Information Administration says gas consumption for the first three months of 2008 is estimated to be down about 0.6 percent from the same time period in 2007.
For the summer season, gas consumption is expected to be down 0.4 percent from last year.
At current exchange rates I am paying $7.57 a gallon (€1.27 a litre) for petrol here in Ireland, most of that composed of taxes. It would be more if the euro was not so strong right now.
Oh for the days of $3.936 a gallon…(67 euro cent a litre).
Am I missing something?
It is impossible to call a bottom on any market, except through sheer luck. And claims to have done so should be treated with nothing but derision. NIB clearly has vested interests in this sector.
The Big Picture speculates that Bernanke was caught out by Societe Generale dumping futures contracts. The WSJ Market Beat blog tends to agree.
Did Bernanke know about the fraud on Monday? Did Societe Generale tell the Bank of France, who then would have told the ECB? Did the ECB inform the Fed?
The dumping of all those futures contracts, says the WSJ, certainly contributed to the market falls on Monday and Tuesday. What now for the presumed Fed Cut on January 30? IF Bernanke knew of the fraud, then he acted partly on that basis, if he didn’t then he acted without knowing the full picture.
This story will run, and is certainly bigger than the individual fraudster himself.#
Update:
According to this breaking Bloomberg story: Federal Reserve policy makers didn’t know about a $7.2 billion trading loss at Societe Generale SA prior to their Jan. 21 decision to reduce interest rates.
Policy makers were convinced by late December that increasing volatility in financial markets reflected a weakening U.S. economy and that further rate reductions were needed, said the official, who spoke on condition of anonymity.
The Federal Open Market Committee convened a conference call at 6 p.m. on Jan. 21 after stock markets in Asia and Europe tumbled. Members voted to cut the federal funds rate by three quarters of a percentage point, the most since the Fed began using the rate as its main tool of monetary policy in 1990, to 3.5 percent. Chairman Ben S. Bernanke and his colleagues concluded that losses in financial markets may result in reduced credit for companies and consumers, the official said.
What stage are we at? Fear?
Good post from HousingPanic [via arandomwalk].
On a tangent to Frank’s discussion on the costs of corruption, I asked myself a slightly related question.
While I am of the opinion that government should be kept to a minimum, and that the market should be largely left to it’s own devices, I am dismayed by the lack of broadband in this country. I would like to put existing arguments concerning the legacy of state monopolies and local loop unbundling aside for a moment and ask a straight forward question.
Should the government have mandated several years ago, that all new housing estates be piped for fibre to the kerb or even fibre to the home technology? I ask that given that the housing boom has led to something like half a million houses being built in quite a short space of time.
Now I can imagine that a person in favour of free markets would say – if the market does not demand this technology, then developers will not provide it. And if people do demand it, they will either ask for it, or specifically choose a development that does incorporate it.
But is there not a bigger picture? Is there not an argument that says economies that have implemented such policies (Korean and Scandanavian models come to mind) have benefitted from the foresight, and that such government interference has actually led to the market benefitting from something that, if left to it’s own devices, may not have happened?
I know it sounds like I’m saying the governments knew best, but it puzzles me that given such massive house building we are still in the same situation we were a decade ago – copper to homes where DSL may not reach.
It may have been sensible for developers to approach ISP’s or TV stations and offer a deal to cable homes with extremely fast connections, both to save money digging roads up again later, and give companies instant access to customer’s homes without a proxy like eircom – or even to enable a huge amount of homes to have technology that may not be available to them over copper.
Did Korean people demand super fast broadband and then benefit from it, or did the government see the benefits in advance and force it on a market that did not see the potential positive future effects on the economy?
Incidentally Cringely’s piece this week covers a similar subject.
Comments welcome!
What happened the Beast? MSFT fell 11% in one day, wiping $32 billion off the value of the company. Results did not meet expectations. They are now trading at just over $24.
In related news read Cringely’s latest. He speculates that Apple will buy Adobe.
It looks like the Dow Jones Industrial Average is about to surpass the record levels it was reaching prior to September 11 2001. The Dow reached a high in May 2001, at 11,301. The highest closing figure of the Dow Jones was 11,722 in January 2000, right before the bursting of the dot com bubble.
Right after September 11 it plummeted to 8235, returning to an average of about 10,000 in the last few years. At close yesterday it reached 11,268.