We can chart how effective the Government has been in keeping our borrowing costs contained. On the first trading day in 2009 our 10 year plus bonds started at 4.46. After three deflationary interventions, in which we were assured that the bond markets would bless the Government’s efforts, borrowing costs increased to 5.22 on the first trading day in 2010. And now, with the markets up in arms, our borrowing costs have jumped again.
Over the last year we have had the ‘panic brigade’ –commentators and analysts who insisted that if the Government didn’t cut, cut, cut the situation would end up dire. Guess what. The Government made all those cuts and the situation is, well . . dire.
Funny, then that the panic brigade is now reassuring us. Apparently we won’t end up like Greece because our overall debt is below the Eurozone average. This is an odd argument to use. Some of us have been pointing this out over the last year to show that we have the fiscal manoeuvrability to employ investment stimulus to grow the economy and repair public finances. But at every turn this position was attacked.
‘Yes, our debt level is below average, but at the rate we’re borrowing we’ll soon overtake the average. The markets won’t allow you to rely on that figure.’
And, yet, our below-average debt is now being trotted out by the former panic-turned-reassuring brigade to claim that the markets know we are different from the ‘PIGS’ countries. But to reassure us they have to omit some uncomfortable data. Such as the 10-year bond spread. Given that Greece is off the charts and in another universe, where does Ireland stand now?
But this perspective won’t emerge because a number of analysts have too much invested in the ‘if we cut public spending the markets will be appeased’ argument. If they accept that the markets are ‘angry’ then that would beg the question – why didn’t cutting spending work? That would be an awkward question. And it would provoke many more.
So best for those commentators who don’t bother to look up the facts to repeat the spin by those who actively cover up the facts. And so the debate goes.
Given that we’re not going to get a fact-based analysis, we might as well have an entertaining one. Millhouse van Houten should be appointed economic correspondent in every media outlet in the country. Why? When the parents of Springfield started going to bed early after drinking Grandpa Simpson’s magical elixir that boosted their sex drive, the children couldn’t explain it. Except for Millhouse:
‘OK, here's what we've got: the Rand Corporation, in conjunction with the (outer space) saucer people, under the supervision of the reverse vampires, are forcing our parents to go to bed early in a fiendish plot to eliminate the meal of dinner. We’re through the looking glass, here, people.’
So you see – bond yields, German spreads, borrowing costs: it’s all down to reverse vampires.
Millhouse will go far in Irish economic commentary.