Sunday, June 11, 2006

The Long Con

First on

In main ways it might be to Fianna Fail’s and the PD’s advantage to lose the next election. There is a saying about economics “Don’t do what the banks say to do, do what they do”. With that in mind when I heard that AIB and Bank of Ireland were selling there buildings. I got to say I got a bit worried. The reason being that the banks now think that it is time to sell their buildings it must mean that they think the housing market is at its peak. Also a recent OECD report thinks that too. Which can only mean one thing the market is going to go down, bringing many people with them and possibly bringing the next government party down with it.

When he won the American presidential election in 1992 Bill Clinton’s catch phrase was “It is the economy stupid!” meaning that the only thing that really mattered in the election was the economy. People care about equality, and infrastructure and the like, but only when their pockets are safe. In Ireland now in many ways economic stability is taken as a given that the country is going to boom like the Duracell Bunny “On and On and On” but that is hardly going to be the cas

So what happens when the property boom goes. Leading to many people in the construction industry out of work. Leading to a knock on effect in the government finances and thus government spending. What happens when the ECB continuing interest rate rises result in people struggling with their mortgages. What happens if the price of fuel increases, hitting the pockets of the people. Now most of these factors are beyond the control of the government. Like the recent statutory rape crisis there is not much the government can do about things like the ECB and oil but like the statutory rape crisis the people will blame the government and the parties that are in government will take a massive hit.

The government is going to fight the next election on the basis that they are the best pilots of the economy but now that people seem to take the boom for granted that issue is unlikely to see many people rally to the government. But what happens if this collapse happens with FG/Lab in power. Suddenly FF and the PD’s prophesying doom under the rainbow will seem like sage like advice. Indeed many might see FG/Lab is totally inept at running the economy. Leading to a case where the 2002 election might seem like a great number of seats. With the electorate flooding to FF/PD/Sinn Fein in the hope of finding the perceived economic wisdom that gave rise to the Celtic Tiger.

Another aspect of the downturn in the property market would be the drop in stamp duty. A drop in tax usually requires a drop in government spending. Something that FG might accept but Labour would not. If this happens prepare to see the coalition fall apart with either an early election or FF leading a minority government.

That kind of economic collapse could destroy the publics confidence in FG and Labour. The drop does not even need to be that great. Just a enough for the average person to feel less well off. Indeed those parties might never recover leading to a rise in for all the parties not in the rainbow. There is often talk of Fianna Fail ready to play the long game. Maybe this is the game. Maybe they see the writing on the wall for the economy and think that it is better that anyone but them, take the fall and will be glad to lose the election in 2007 because it would mean winning the next few.

And yes the title did come from an episode of Lost.

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