Sunday Times -Comment - December 4, 2011

Posted by Jill Kerby on December 04 2011 @ 09:00

When the squeeze comes we’re gonna party like it’s 1990


There is absolutely nothing any of us can do to prevent the spending cutbacks and tax increases that will be announced tomorrow and Tuesday.

How you endure them is another matter and I think the government believes there’s still plenty of ‘give’ in the incomes, savings accounts, pension funds and the other wealth assets of the Irish people.

We’ll keep giving, they believe…until we can’t, and since this is just the first of four austerity budgets the government has agreed to impose on behalf of their EU/ECB and IMF paymasters, the endurance game only ends in 2015.   

We’ll see. 

I think these technocrats may get their walking papers much sooner than 2015 if they can’t work out a way to prop up Europe’s insolvent banks and countries and “save” the euro.  In that case, we’ll be imposing austerity budgets of our own and paying our taxes with a new Irish punt.

In the meantime, if the Irish Taxation Institute’s recent figures are correct, the average Irish family is already €600 a month worse off from budget changes since 2008. If another €12.4 billion is extracted from the economy, the loss of monthly disposable income could double to €1,200 or €14,400 annually by 2015.

Welcome back to circa 1990, the year when a single family car – if you even had a car – was the norm, and few of them were brand new models.

Child benefit payments were just under €20 a month, not €140 and higher rates were only paid for the sixth and subsequent children instead of the third.

Mobile phones were still a novelty in 1990.There certainly wasn’t a smart phone for every member of the family. If you were lucky, ‘the pipe’ picked up the BBC and ITV but not 700 satellite stations along plus the internet and broadband.  

Package holidays were still in the Costas and Paris was where crooked politicians went to buy their shirts. Buy-to-let property was what professional landlords and moonlighting Gardai owned.

If you’re wondering how the government could possibly expect the struggling middle classes to afford any more tax, do the math. This is the post 1990 spending they expect you to sacrifice to pay back the bondholders and technocrats.

Safe deposits


Nearly every other letter or email I receive these days is from a worried reader who wants to know what they should do with their savings, just in case Ireland has to leave the euro, or the entire eurozone breaks up.

For all of you waiting for a reply, this is the same one I have been giving for the past year:

Keep your hard earned cash in a solvent financial institution, preferably in a solvent country.  At the very least, don’t leave more than €100,000 of your money – the deposit guarantee rate - in any bank or institution if you have any doubts about its solvency.

Be aware of the risks you take leaving all your wealth in any single asset – like cash or even in a single currency, especially the fragile euro. However, by shifting euro into other currency, you take on exchange value risk and the new currency could fall in value as well as rise.

Even if you do exchange euro for what you believe to be a better currency and hold it in a non-euro deposit account in your Irish-based bank, you need to make sure that the bank, whether Irish or foreign owned, will honour the foreign currency, even if we revert to the Irish punt.  The only way to safeguard against this risk is to move your money outside the Irish jurisdiction and perhaps outside the eurozone.

Commentators disagree on many aspects of the euro crisis, but they tend to agree that if we leave the euro and revert to the punt, it will suffer a sharp devaluation and a large part of the spending power of your savings could be wiped out, especially as the cost of imports soar. 

Finally, consider the risks you take leaving all your wealth in any paper and ink currency, backed by nothing but the faith and promise of their often hugely indebted state or states.

If you shift some of your paper money for real money like gold, which has a long tradition of at holding its spending value, especially during times of economic and political crisis, you may offset the terrible devaluation risk inherent in holding fiat currency.

Time would no longer appear to be on the ordinary saver’s side.  Anyone with large amounts of savings, whether in cash or tied up in pension funds, should consult and use the services of a good, fee-based advisor… sooner than later.


Up in smoke

Have you ever had a chimney fire?  They can cause considerable smoke damage - and worse - if the fire brigade doesn’t arrive promptly.

From next year, if you live in Dublin, a chimney fire callout will cost you €610 for the first hour. The first hour fee for a domestic fire will be €500 and the council will also charge €610 for the first hour cost of sending out emergency services to a motor traffic accident.

“Virtually every house insurance policy will cover the cost of fires,” Sean O’Connell of the Insurance Shop in Fairview told me last week, “though you want to make sure to ask for the chimney fire brigade – they do a lot less damage than the normal fire brigade team.”

Having the chimney’s cleaned is the obvious solution. But what you most certainly want to double check, says O’Connell, is the size of the cover your motor insurer allows for the cost of ambulance and fire brigade callouts if you have a serious motor accident.

“I had a client who nearly totalled their car one frosty morning down the country,” he recalled. “Both passengers miraculously survived with barely a scratch but it took so long for the tenders to cut them out and get them to hospital that the bill was over €3.000.” 

0 comment(s)

Leave a comment

Subscribe to Blog