Addicted to Debt

There’s a school of thought that says that much of the BOOM in recent years in Ireland hasn’t been driven so much by fundamental improvements in productivity and infrastructure as it has by borrowing.

Does it matter? Isn’t the Boom the important thing, not the source of it?

Well the difference is similar to the difference between a family that buys a new Merc and a big house because they get a big pay rise, and a family that buys a merc and a big house because someone gives them a big loan. To the neighbours the outward signs are the same, but the foundations of the apparent wealth are very different.

Almost certainly some of the boom in Ireland was down to the National Equivalent of a Pay Rise. Huge inward investment, a global IT Boom, in other wards at least in the early years of the so called Celtic Tiger there were fundamental factors that supported the growth.

By now it’s almost certain that the continuation of the boom far beyond the expectations of “experts” has been fueled to some extend by borrowing. In simple terms, Ireland has been like a family that got both a pay rise AND their house shot up in value and they released equity in it. They were swimming in Cash. They bought the big car, moved to a new house, bought every gadget they could find, holidays abroad, the works.

At some point they used up the cash they’d released from the house, but in the meantime house prices jumped further, and there was a whole new trough of equity to drink from.

It was a win win game because the spending itself drives the economy forward, drives up house prices more, It’s like a financial perpetual motion machine.

Except as everyone knows, perpetual motion isn’t possible. Some machines look like they achieve it, but ultimately on each turn of the motor they lose a little power until they eventually run to a halt, unless some fuel is added.

In terms of the Irish Economy the Fuel was debt, and the motor has started turning a lot slower. Even the Energiser bunny has to stop beating his drum eventually.

What should we expect when the fuel runs out? How should people start to behave? If the economy really is running on debt rather than prosperity then we should start to see a shift in the pattern of debt. When the House Equity ATM runs out of cash we should see a jump in other sources of credit. In other words when your Drug Dealer get’s locked up, you don’t quit drugs, you just find a new dealer.

According to this story it seems to be happening. The level of Credit Card debt has jumped almost 19% over the past year. That happened at a time when total lending growth (including mortgages) slowed from 27.9% to 25.9%.

If overall drug use was down slightly, but heroine use had shot up by 19% would you be happy? Neither would I. Hard Credit just like Hard Drugs sows seeds for an unhappy future.

The story ends with talk of sleight increases in mortgage lending towards the end of the year, but down overall from it’s peak. This isn’t good either. Again with the Drug metaphore, Weed use is down overall but there are signs that it crept up again towards the end of the year.

There’s no evidence that the Heroine addicts switched back to softer drugs, it looks more like a new crowd of customers were recruited. Perhaps the Weed dealer got released from Prison.

Money Talk

Ireland is to be served by another Financial Forum. I’m reminded of a pair of photos I saw some time ago of a queue outside the dole office and a queue beside an ATM, which showed how far Ireland had come financially. Now there are seemingly endless sources of information on how to Save, Invest, and perhaps more importantly how to deal with debt.

Moneytalk.ie has a green color scheme. That’s a good start, both from an Ireland perspective, and a financial perspective. The Flag should also help hammer home the Irishness of the site.

It’s early days, I believe I was member number 25. But that number will certainly grow. Whether or not the site will ever have as many members as other financial sites, or as much traffic, isn’t really important for now. The only thing that matters for now is that it exists, it’s an alternative for the growing number of people who are unhappy with existing options.

From talking to the creator it appears MoneyTalk.ie wasn’t created in response to AskAboutMoney or the goings on there. There’s a determination not to get drawn into any bickering about which site is better, which is good. Comparisons will be inevitable, but there’s definitely room for both sites.

Moneytalk.ie does have the advantage of seeing what went before. There are potholes in the road that can and should be avoided, and they’re not hard to avoid.

ThePropertyPin.com on the other hand embraces former AAM members who have either been banned or left because they became disenchanted with the way things were. It has taken the approach of setting itself up in direct competition, threads exist specifically to monitor the goings on on AskAboutMoney.

And why not watch?, AAM is producing some funny stuff lately. Funny in the same way that crazy world leaders can be funny, for those of us fortunate enough to not live under their regime.

Update: I had originally said that The Property Pin was set up as a result of AskAboutMoney’s shenanigans. They’ve kindly corrected me on that error. They existed prior to AAM going off the deep end, but their membership has grown since AAM began hounding people away.

Will the AAM factor mean that the site will forever be fruit of a poisoned branch? Time will tell. The quality of discussion, the facts and figures, and the commitment of it’s members are all extremely impressive. The site certainly has the potential to be The Go To Place for those with questions about Irish Property. In time I’m sure members will tire of watching Turkmenistan AskAboutMoney.

If MoneyTalk really does manage to sidestep debates about AskAboutMoney, then it will be interesting to watch how it and ThePropertyPin fare. Will the different approaches make any difference to the two sites?

What if any will the impact be on AskAboutMoney. If it means less posters and a more controlled form of debate then AskAboutMoney will be happy. They don’t seem comfortable with popularity.

The dna of a website, the thing that defines it’s character is the relationship between it’s moderators and it’s regular posters. How will the new sites fare?

AskAboutMoney has a style of moderation that has evolved into a very authoritarian approach. Some topics are off limits despite being the hottest financial topics of the day. Questions by new posters are routinely moved to areas where the original poster can’t contribute. Criticism of the moderation style is not tolerated. Repeated criticism is cause for banning a member.

As the site has grown these problems have become more pronounced. This seems to be as a result of trying to control the discussion, to maintain a level of quality that the moderators feel is appropriate. That gets harder as the number of participants grows and the “corrective maintenance” has to get more severe to keep things in check. Getting rid of those who don’t tow the line is considered the best way to maintain the quality of the site. It’s an interesting an novel approach to internet forums, but not one that’s universally liked.

I’m a member of about half a dozen forums and have participated in many more. AAM is the only one that adopts that style of Moderation. They would claim that’s what sets them apart from all the other forums. That’s what makes them better than the rest. Well, you can decide for yourself if that’s true. I wouldn’t have spent a couple of years trying to change their mind about that If I believed it.

ThePropertyPin comes from a more indy style of moderation. If AAM style moderation is a bow-tie then thepropertypin is a T-Shirt and Jeans kind of guy. Of course a bow-tie doesn’t make you smart and a T-Shirt doesn’t make you dumb.

How will Moneytalk.ie handle it’s growth? How far will it’s moderators go to maintain their idea of order? Early indications are that on matters of racism or offensive posts they will err on the side of caution. Deleting the post to be on the safe side.

That isn’t a bad policy. It’s the norm in fact. They point out that they’ll depend on members to bring offensive posts to their attention, which is a good approach.

One of the flaws in the AAM moderation style was that “Offence” was a very fluid concept. Moderators could choose to take offence at anything, and could therefore delete any post they liked.

That’s the tightrope that the new sites will have to walk. Hopefully Ireland will soon be served by a couple of Financial Websites that offer very different approaches to moderation and community building.

If you like the controled conditions of AskAboutMoney you’ll have that option. If you want a more free flowing debate, and less interference by moderators, you’ll have two new sites to choose from.

I’ve registered with both ThePropertyPin.com and MoneyTalk.ie. I have no immediately interest in buying property in Ireland, so I may be able to make a more valuable contribution to MoneyTalk. But I wish both sites Luck in carving out their piece of the Irish Financial Pie.

And what of AskAboutMoney? Now that there are alternatives, I hope they can get rid of the members they don’t like and can become the kind of site that Brendan is comfortable with. He hasn’t seemed very comfortable with it’s growth to date.

The future looks bright for all concerned.

The Future Is Here

Every now and then I use a piece of technology that really stands out as a big step forward, something that makes you involuntarily say “this changes everything”.

The first time I saw HTML, used email, a mobile phone, a digital camera, skype. I’ve jsut noticed all of those things happened during visits to the US. I guess it’s true, they really are 5-10 years ahead of Europe.

Last night it happened again. Since September we’ve been using Netflix for our DVD rental needs. The discs arive in the mail, we watch them and drop them back in the mail box outside our door. A day or two later another disc arrives. We manage the list of disks we want through the netflix.com website.

It works, and I love it. There have been a few hiccups. 3 discs so far have been cracked, one or two more were scratched and unplayable. But they ship replacements fast, and the list of movies we’ve gotten through since September is impressive.

Last night, “The Corporation” arrived, cracked, unplayable. When I logged in to report the damage and request a replacement, I noticed that the new “Watch It Now” service had been launched.

I tried it out, and it works perfectly. A quick trip to Walmart for an SVGA cable and we watched “Clue” on our living room TV. The streaming started immediately, and there were no pauses or skips. The quality was excellent, although our TV isn’t a good machine for checking quality.

Now you might wonder why we would choose “Clue” of all the movies we could have chosen. Here’s the only problem. The selection is very very poor. Apart from the fact that there aren’t many movies and TV shows to choose from, those that are there are pretty pad. Clue is a fine movie and a good laugh, but it’s not great.

This is a pilot program, we are apparently one of the few to get early access to it, it will be rolled out to all Netflix subscribers over the next few months. I’m sure the selection of movies will improve.

It will need to. This move has been prompted by competition from Blockbuster who have been touting the fact that they have a network of stores which you can use in addition to their mail service. Netflix have hit back with instant gratification from downloads. The licencing costs of this are enough to wipe out almost all of their profits. So for it to work it needs to attract a lot of new customers.

But here’s the rub. Now that Netflix customers like me are being turned on to instant streaming movies, we might start looking at some of Netflix other competitors like Vongo who have streaming movies and a better selection of movies.

For now we’ll stick with Netflix, for the $15 a month we spend we get as many DVD’s a month as we can watch and ship back and forth, along with 15 hours of streaming viewing.

Regardless of who we settle on, instant movies and TV shows streamed over the internet is here. TV will never be the same again.

This changes everything.