Ring around the Rosie

In the middle 80s, Ireland hung out the "welcome business" sign with all kinds of incentives to lure companies, start ups, whatevers to their fair shores.  There were plenty of government loans, small business loans, why even banks would loan because the government guaranteed virtually everything.  The best part, and I know this first hand, was that the government would give you years and years of no tax.  It was massive corporate welfare and it worked very well.

Ireland pretty much transformed itself from a door mat state to a thriving economy with housing prices shooting up, the average income going from zip to a respectable EU ranking, and all things being fairly rosy.  Now the pigeons are home to roost and we can see just how fragile the world has become and how much all of us are at the mercy of biz school graduates who went into banking.

Seems these bankers, like US bankers, figured that housing costs would go up forever and also "banked" on the idea that everyone would have money to pay mortgages - meaning that the business sector could cruise along at the 12.5% effective tax rate and therefore enjoying life.  Now the banks are under water big time.... really big time. 

Aside from the observation that banks are horrible at their primary business - banking -  Ireland appears to be a cautionary tale for the United States.  Banks mess up, governments have to move in or the system collapses, and the people  (better known as the average Joe bank customer) gets it in the neck.  If the EU has to move in with forced bailouts, they will put it to Ireland in the form of austerity and control. Taxes will go up to pay back the loans and of course the business sector, party to all this with their low tax rate to begin with, will scream that they can't afford to stay and the dominoes will fall and more people will be out of work and unable to pay.  Sound familiar?  It should.

We sit on the far shore of the lake on this one but the ripples from the Irish rock hitting the other shore are already here. The market hasn't done well of late (as if this Irish news is a surprise to investors) and I can tell you what is going to happen in the next few days in our market. You watch:

1. Today (Wednesday) will be a down day or neutral at best
2. The EU will announce a bailout and force down the Irish throats
3. Business here and there will demand exceptions to the forced austerity and decry government intervention
4. The market (our NYSE) will soar on the good news that the crisis is over.

You watch.