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What the Eurozone Means for Irish Economy

Posted on March 25, 2019 by TBR Network One comment

Since 1999, and the introduction of the currency, Ireland has adopted the Euro as its currency of choice. Along with the obvious benefits of improving trade possibilities for our economy, and improving travel opportunities for our inhabitants, this currency union has many drawbacks.

These drawbacks centre around the loss of control of monetary policy. The issue this posed manifested itself most clearly in the lead up to the crisis of 2008; for q3 to q4 2007, real GDP grew in Ireland by 4.5% and by only 0.49% in the Euro area. Similarly, Irish inflation in 2007 averaged 4.9%, whilst in the Euro area inflation was at 2.45%, a level far closer to the usual ECB target of 2%. At this time the ECB deposit rate was 3%, arguably far below the optimum level that would have been required to dampen the Irish Economy.

In the meantime, the UK managed to maintain levels of inflation which were stable and close to 2%, as is its target because of its control of the supply of the Pound Sterling. Not only were levels of UK inflation the envy of Irish policymakers; looking historically we see that the level of Irish inflation pre-Euro era was in fact low and stable, as is desirable.

Euro Ire

Having examined the missed dampening opportunities, consider the monetary response to the Irish crash, specifically in comparison to a country of similar conditions but independent monetary policy; Iceland. Due to its astronomical level of privatised bank debt pre-global financial crisis, Iceland experienced an economic downturn of epic proportions in 2008. Per Capita GDP had fallen by 26.9% at the height of the crisis, in comparison to a drop of 14.9% in Ireland, however unemployment increased by a far greater percentage in Ireland and was more prolonged. Iceland managed this mitigation of negative outcomes through a dramatic devaluation of their currency, thus inciting a trade surplus by making Icelandic goods relatively cheap to foreign buyers, and reducing the cost to Iceland of foreign debt interest payments.

euro ire 2

As Ireland was locked into a currency union with countries not going through downturns of the same magnitude, monetary policy such as this could not be implemented. As a result, the Irish economy took many years more to recover from its downturn and felt effects which were exacerbated by mismatched interest rates imposed by the ECB.

Leaving the European Monetary Union does not imply a departure from the EU, rather it suggests the implementation of a structure similar to the UK’s pre-Brexit relationship. This still allows for movement of people and money, along with maintenance of the Customs Union. From a regulatory perspective, no changes would be made to current trade and travel arrangements with the EU. However a departure from the Eurozone would imply poorer EU relations.

The current view of the Eurozone is that it is a long term investment. One which will see favorable returns when all participating economies are closely developed and interlinked on a level playing field. However like all investments, return is not guaranteed.

A departure from the Eurozone would imply a trade-off between the macro benefits of an Irish currency versus the micro drawback of travelling & trading with the Euro and the Euro-politics that comes with.
Should we maintain a peg (fixed or floating), the risk of exchange rate fluctuations to travellers and cross border firms is mitigated against whilst leaving The Central Bank of Ireland with the option to break the peg and implement independent monetary policy should the need arise.

Deep Dive

Elon’s Galactic Distraction

Posted on March 19, 2019 by TBR Network Leave a comment

Rory Gaffney

At 5:51 am ET, on March 3, 2019, SpaceX’s Crew Dragon unmanned spacecraft docked successfully with the international Space Station. This is an incredibly impressive achievement for chief executive officer Elon Musk, his team and the American space agency. However, as Elon’s celebrity status reaches newfound heights, many believe Tesla is falling apart back here on Terra Firma.

Last week, Musk caught many of Tesla’s employees off guard with his announcement that the electric-car manufacturer would close down the majority of its stores, choosing to revert to an online-only only sales model. As news of these looming closures began to emerge, people with ties to the company began to fear the worst. Alec Chalekian, CEO of Lake Avenue Financial in Pasadena, California, who manages over $150 million in client assets, sold it all off on Friday as he voiced his worries that this decision by Musk signals a “huge financial concern and a possible cash-flow issue fro Tesla”. Tesla had only recently been “talking about expanding stores, and all of a sudden they are closing them”, this has caused Chalekian’s suspicions to rise resulting in him to reinvest his assets, that were initially with Tesla, elsewhere.

Tesla’s stock has dropped almost 11% in a matter of days, resulting in a loss of almost $6 billion from their market value and it’s share price dropping to $282.83, the lowest it has been since October 22, 2018. Musk’s decision seems to have come out of nowhere. In the last quarter alone, according to its letter to shareholders, Tesla opened 27 new retail centers. This was the most openings for a quarter since mid-2017, which makes their decision to close all of these stores down even more peculiar.

Musk himself tried to justify his seemingly rash decision to close the stores as a cost-cutting move that will enable Tesla to offer a long-promised version of the Model 3 sedan that will retail at $35000, if this model goes ahead it will be the company’s first mass manufactured car. Tesla anticipate that their decision to operate all their sales through an online platform will reduce the prices of all their vehicles by an average of approximately 6%. 78% of Model 3 orders were placed online last year which has encouraged Musk to make this decision.

Days after Musk tweeted that the cheaper Model 3 is available to order, he announced that Tesla plan to unveil the Model Y on March 14, followed by a a truck later in the year. Chalekian has voiced concerns that “the Model Y is probably going to eat into Model 3 sales”, “with all of the stuff going on right now, [he doesn’t] know if people are going to race to put a deposit on the Y in the way they did with the 3. But Tesla is using this to raise capital through customer deposits. [He feels] like Tesla is just buying time at this point.”

Many people in the financial world fear the worst for Tesla. Prominent short seller, Whitney Tilson posted a severely critical takedown of Tesla online on Monday morning. Tilson did admit that he has been a fan of Musk and has admired some of his feats, but due to “weak” demand and the “piling up” of inventories, Tilson had decided to short the stock. He also offered an ominous prediction that by the years end, Tesla’s stock will be trading below $100. He regards last Friday as “the beginning of the end for Tesla’s stock, saying that he believes “Musk has no more rabbits to pull out of his hat and therefore it’s all downhill from here”.

With its falling market value, share prices dropping and skepticism surrounding their upcoming projects, are Tesla’s days numbered, or does Elon have one last trick up his sleeve?

Deep Dive

The Business Benefits of Participating in the Fight Against Climate Change

Posted on March 19, 2019 by TBR Network Leave a comment

Ellen Quigley

climate-change-money_1_orig

The science behind global warming, and the general trend of climate change, was first discovered by an amateur scientist some 81 years ago. Since it was widely accepted by scientists as being a side effect of human activity in the midst of the 20th century, numerous international treaties and protocols have been agreed upon in an attempt to reduce global greenhouse emissions and waste.

We, as individuals, have been told to ‘reduce, reuse, recycle’ and to cut down on our energy use in an attempt to reduce the negative impacts of human activity. Unfortunately, at an individual level, the impact of our attempt to reduce emissions is relatively small. A recent study published in the journal of climate change revealed that just 90 companies produce a whopping 63% of man-made global warming emissions. Numerous studies have revealed that the fight against climate change could be boosted significantly at a macro level if businesses, who produce the wasteful products we as consumers use, actively made an effort to change production habits, alongside the actual products they sell.

In recent years, the Irish government has introduced more stringent regulation on how businesses should operate in an eco-friendly manner, such as fining businesses for disposing of recyclable waste in non-recycling bins. However, it appears the general attitude among business owners is that these regulations are necessary evils that must be followed, rather than beneficial rules for the business and society as a whole. A recent survey conducted by Bord Gáis through RED C revealed that half of Irish businesses do not have a formal environmental policy, and that only 40% of businesses encourage employees to be energy efficient in the workplace. When the numerous benefits to businesses of actively participating in the fight against climate change are considered, it’s difficult to understand the apathy of Irish business owners in combating waste and pollution.

In introducing waste reducing methods, businesses save big on costs. Waste reduction can be implemented in all stages of the development, production and sale processes, as well as reducing packaging used on the finished product. The most significant example of this can be seen in Nestlé, who in 2014 removed 175 tonnes of plastic packaging from their Easter eggs. This reduced production costs for the firm significantly, whilst also aiding in the company’s image in the public eye, as the move attracted significant publicity from most major news outlets.

Reducing emissions throughout a firm also has significant benefits. When M&S in the UK introduced its “Plan A” sustainability programme in 2007, it was believed that it would cost more than £200m in the first five years. However, the initiative had generated £105m by 2011/12 according the company’s annual report. Many industry leaders such as Tesco and Sainsbury’s are now following suit, and have now committed to introducing environmental impact programmes, not out of the goodness of their heart, but in order to increase profits and reduce their costs.

Coupled with improving a firm’s image among consumers, the explicit benefits of reducing costs and increasing revenue in the long term should be enough to drive businesses to introduce methods of reducing their environmental impact. By employing waste and emission reducing methods, business can help lead the global effort in the fight against climate change

The War Against Plastic: Wasteful Consumers and Inefficient Regulation Have Allowed the Plastic Problem to Persist, but Who Else is to Blame?

Posted on March 14, 2019 by TBR Network Leave a comment

Malcolm Sheil

Contrary to popular belief, it wasn’t Europe that began the war on plastic. In reality, it all started at the turn of the century in Asia. The eighth most populated country in the world, Bangladesh faces devastating floods every monsoon season. In the early 2000’s, a severe flooding led government officials to discover that almost all of the country’s sewage system was clogged and to their surprise, the main reason for the clogging were plastic bags. Less than a year later, Bangladesh became the first country in the world to ban their use completely and by doing so, it paved the way for several nations to follow suit. Today, the movement has been taken up by non-governmental organizations, retailers and large-scale brands all over the world.

More recently, the fight against plastic was brought to the frontline of the environmental cause thanks to a turtle that made news in mid-2018 for having a straw stuck in its nostril. Though it seems logical that after the news broke many brands and supporters begun to announce plans for straw bans, research shows the problem is much larger. In fact, plastic straws account for less than 0.5% of the 5.25 trillion pieces of plastic that end up in oceans. Because of this, when put into perspective one sees that the plans put forward by companies like Disney and Starbucks feel like pretend concern. Of course, there are obvious positive externalities that will arise when the changes are put in place, but such large companies could without a doubt be involved in much larger efforts.

Most countries in Europe, the United States and Canada have yet to completely ban single-use plastic bags but have implemented a charge for the bags. Theoretically, the charge system allows for a new stream of revenue for the government while also keeping the consumers’ freedom of choice in mind. In reality, this system is far outdated and works similar to a Band-Aid on a bullet hole. It assumes that consumers will recycle the plastic bags after use but research has proven that less than 10% of plastic bags ever get recycled correctly. Furthermore, at this point in time, recycling is clearly not enough anymore.
Not to be misunderstood here, the blame should not lie solely on the wasteful consumer, but shared with the corporations that continue to put out plastic items and then demand that consumers solve the environmental crisis their products have caused. Numerically speaking, these great corporations have produced over 8 billion tonnes of plastic waste since the 1950’s, a number projected to grow to 34 billion before we reach 2050. Not only that, the World Economic Forum projects that if drastic change is not taken, the quantity of plastic in the oceans will outweigh that of fish by the same year.

These alarming rates should be enough for nations to impose a complete ban on plastic bags and to form legislation that prevents more plastic from being produced, rather than focusing merely on the customer side of things. As consumers, there is little recycling can accomplish without bigger and more extreme measures from local and international authorities. While countries like Costa Rica and India have become frontrunners in the race against a plastic-filled world, it begs to question why most of the developed nations are still struggling to stand up against corporate greed and to ban single-use plastic items.

Deep Dive

Why Companies Should Play More and Pay Less

Posted on March 5, 2019 by Seán Kelly One comment

Sean Kelly

“All work and no play makes Jack a dull boy”, right? It’s safe to say that employers tend to think so. With the modern day and all of its distractions has come the increasing importance of switching off from work and taking the time to relax. The phrase “work-life balance” has become a buzz word known to every person who has every entered the workplace and rightfully so. Work-life balance has become the most important aspect of a company people look at
when applying for jobs. Don’t believe me? A survey done in September of 2018 revealed that 63% of Irish job-hunters found work-life balance to be important when searching for a job. This placed it at the top of the list of priorities, ahead of “the ability to have nice things” which only 42% of job hunters found to be important.Why Work-Life Balance?Naturally we begin to wonder what has led us to the point where people value the ability to wind down over earning lots of money. From looking back at the previous generations of “Baby Boomers” and “Generation X” we notice how these generations didn’t have the luxury of demanding a work-life balance. Work was oftentimes scarce and so any work was good work as long as it provided an adequate income. As time has passed and economies and technologies have developed, endless opportunities have been bestowed upon “Millennials” in such a way that they know nothing else but being able to choose the best option possible. Now Millennials aren’t the only generation in the workforce, but they are in the overwhelming majority when it comes to the number of people who are seeking employment right now. As well as this it
is estimated that by 2025, 75% of the workforce will be comprised of Millennials.So why is it that work-life balance has become the most sought after feature of a job given that there are many benefits that a company can offer potential employees other than the ability to balance their lives. As it turns out there are quite a few reasons actually:

Fewer health problems- being overworked, tired and stressedleads to higher risks of mental health problems, flus and heart-related problems.
Higher productivity- employees who are able to achieve a work- life balance successfully will have the ability to be more engaged at work, leading to higher levels of productivity.
Decreased likelihood of burning out- employees that “leave workat work” are much less likely to burnout.
A healthy lifestyle- employees can pursue goals outside of work. such as travel, hobbies or raising a family without work interfering
Increased levels of happiness- working for an employer that gives you the freedom to live and enjoy your life outside of work really benefits how we feel on a day-to-day basis

These reasons all work massively in favour of the employee when we take into account their life as a whole, which is what really matters at the end of the day. As the saying goes “Money can’t buy the decreased likelihood of burning out”, or something like that. When we consider the above factors it is no wonder that work-life has become increasingly important in recent years and why employees value this more than that big pay cheque or fancy company car. Of course this isn’t to say that these things aren’t important to people. Not only is a good work-life balance important to employees but its benefits for employers can also be seen.

As we know employees will be more productive if they are happy at work and this will generate more profit for companies. Not only this but a company that strives to achieve this balance for its employees will have much more favourable employee retention and so reduce its costs. It has been reported that replacing an employee costs on average around £30,000 and it takes up to 28 weeks to get them up to speed. Not exactly what a company wants to deal with.

How is it being promoted?

Unfortunately for some employers they have misconstrued what is meant by a work-life balance and have truly promoted “play” in their “Millennial-friendly” workplaces by adding such features like bean bags and tables tennis tables. Now these perks are all well and good and some of the best companies to work for such as Facebook and Google employ these within their offices (along with effective techniques which we will discuss later) but employees don’t really tend to care for such things.

Many of you may think that giving your employees a healthy work-life balance is as simple as letting them work 9-5 and not giving them too much work to do. However, in today’s demanding world such an ideal job is just not possible, especially not for companies who want to be the best at what they do. So what are companies doing that is actually effective?

Encourage time off- offering and enforcing the usage of holidays will allow employees to shut off and take a break from work.
Implement short breaks throughout the day- allowing employees to go for a walk, grab a coffee or socialise for a few minutes really helps employees keep their concentration when they are working.
Offer a flexible working environment- flexible work hours, working from home and personal time off give employees the freedom to work around their busy lives and live their desired lifestyle.
Promote a positive culture- employers can promote a healthy lifestyle within the workplace and offer services such as meditation, sports teams and even social events.

Salesforce is a prime example of a company that has really adopted the idea of promoting a great work-life balance for its employees. Currently ranked 2 and in the “Fortune 100 Best Companies to Work For 2019”, it offers its employees a wellness reimbursement for engaging in healthy activities (getting paid to look after yourself!), the freedom to finish work at a reasonable hour every day and giving them huge flexibility in terms of when and where they can work. Companies should take a page out of Salesforces’ book as they have become such a strong firm in recent years and perhaps all down to their ability to keep their employees happy in this way.

Where to next?

Amazon CEO Jeff Bezos stated just last year that he doesn’t believe in the term “work-life balance” as it is “debilitating”. He says such a term implies a strict trade-off between the two and so employees should instead adopt a term he has pronounced “work-life harmony”. The wealthiest person in the world suggests that we should strive for a holistic relationship between work and life where it is not a balance between them but instead a circle where one feeds into the other. In reality there is little difference in the practical application between “work-life balance” and “work-life harmony” yet the mind-set of the multi-billionaire suggests a subtle difference in how we can structure our approach to applying the concept in our own lives and it has certainly seemed to work for him anyway.

Perhaps in the years to come employers will begin to use this term instead and look at truly allowing their employees to have full control of the healthy and happy lifestyles that they envision for themselves.

Yet we have to consider the other side of the coin. Will it really be practical for companies to give employees as much autonomy and flexibility as they desire? At what point will it become too much and stop benefiting the profitability of a company? Although this will be very hard to predict, we can rest easy knowing that it is in the interest of both employees and companies to continue to work together to promote the right work-life balance within organisations so that they can both reach their respective goals of happiness and profit.

Deep Dive

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