If only optimism was worth money....

You have to admire the Independent's sense of humour. Every now and then the publish articles that are unintentionally hilarious.

Paddy Stronge, who might just have connections with the banking industry, was unleashed on the unsuspecting readers this weekend with the balanced headline:

Our economic 'big freeze' is already starting to thaw

It's line after line of hillarity:

We should realise, however, that we are actually very close to the bottom already, and then things will start to improve. Significant government investment, falling mortgage rates, bank recapitalisations, and a stabilising of house prices, all mean that the big freeze may actually soon begin to thaw.

Really? And there was I thinking the economy was in an uncontrolled graveyard spiral while our leaders dithered. But what does he base this optimism on?

Firstly, the Government is planning to borrow €18bn this year and pump it in to our economy. That is an investment of €4,500 for every person in Ireland. Much of this money has been allocated to improving school buildings and roads, so more people will be employed. Businesses will benefit from higher sales as those working on Government projects are tempted to spend.

The government is actually planning on borrowing 18 billion to fill a huge hole in tax revenues equivalent to around 20% of the budget. Yes, we're spending on existing capital projects but only because we've already signed the contracts. And as for 'tempted to spend'? The last builder I dealt with kept running out of credit for his prepaid phone.....

For the ailing property market, there is also a break in the clouds. According to recent reports, the decline in the asking price for houses in Dalkey, Dublin, is of the order of 40 per cent and real bargains are now available.

Many are beginning to realise that now is the time to plunge into purchases, while house prices and interest rates are at such low levels.

A 'real bargain'? In Dalkey? Given that the historical average house price is 3-4 times income 'real' prices in Dublin would be around €170,000. In Dalkey even now you'd be lucky to get anything for ten times that....

It's at this point we really start to wander off into fantasy land:

Ulster Bank recently announced a scheme where builders will pay up to 15 per cent off new mortgages if house prices are up to 15 per cent lower in five years. Under this arrangement, the purchaser of the property is protected from downward price movements, so the fear of overpaying is eliminated.

The builders will pay you if the price goes down. Ah! right. I can see that working. And will Ulster Bank guarantee that the builder will pay? No, didn't think so....

The stabilising house market will encourage builders to build again to meet demand. They will need employees, and so, the increase in those joining the unemployed should begin to slow down.

Once the building industry shows signs of life, there will be an improving, albeit slight, trend in government finances too.

"stabilising house market"? 1 in 6 houses were built in the last 6 years. One in six houses is vacant - allowing for holiday homes. So 'demand' to build new houses as opposed to shift the current inventory is a long way off, especically as the banks will sooner or later have to unload them for whatever they can get. And we're still clinging to this notion that construction drives the Irish economy.

Good news should also be around the corner for share investors. The recapitalisation of the banks involves the funding of preference share issues and not the issue of new ordinary shares

...which is actually catatophic for the taxpayers. How are the government going to explain to the electorate that we've given what is it 7 billion to the banks in exchange for non voting equity and have no practical power over the banks? And that nobody only planet earth except us was stupid enough to want preference shares in an Irish bank? You do realize they now play "Road To Nowhere" in the lifts at B of I? Actually the lifts may now be silent - Muzak corporation has gone bankrupt.

At some stage, the markets will realise that this course of action will support improving bank share values. Share investors should start to see the beginnings of an upward movement taking place in bank shares. Confidence will then begin to return to the financial markets.

Anybody who invests in bank shares for any reason other than they wanted to gamble wildly and couldn't be arsed to go to Vegas deserves to lose every penny. Sorry.