Tuesday, March 25, 2008
Posted by Macro Man on Tuesday, March 25, 2008 with 9 comments
They say you can never go home. Now, Macro Man doesn't really know if that's true or not, but he gave it the old college try over Easter weekend, visiting a city that, if not "home", at least provided a relatively happy residence for a few years earlier in the decade.
It's nice to know that some things never change; the weather in Dublin is still "bracing", to put it euphemistically, and the traffic laws appear to more suggestions than hard and fast rules.
For the most part, however, Macro Man and Mrs Macro were flabbergasted at the change in the city that they left little more than four years ago. For one thing, it appeared to be less of the Irish capital than Cracow-on-the-Liffey. While there's certainly been a huge influx of Eastern European labour into the UK, to a degree the scale of it has been dwarfed by the sheer size of Greater London. Dublin is a city a little more than a million souls, so the sudden emergence of Polish food shops on every street corner is pretty noticeable.
Even more noticeable, however, was the massive increase in the price of...well...everything. For starters, Macro Man's old house would now go for roughly twice what h sold it for in December 2003- and that's with the assumption that prices have started to roll over. Beyond that, Dublin (and, more likely, Ireland as a whole) provides a useful rejoinder to those who seem to think that monetary inflation is extinct.
Pizzas at the old neighbourhood eatery, which cost roughly eight euros four and a half years ago, now go for 14.95. A simple cab ride from Ballsbridge to O'Connell Street cost 15 euros with tip- it's probably a mile and a half as the crow flies! On the plus side, however, at least the water is still free (and there's not many places these days that have that going for them.)
Still, it was really striking to see what an extended period of too-low interest rates can do do prices, and provided some comfort to Macro Man's view that the ultimate outcome of the Fed's policy action will be inflation. There wasn't really a trade that emerged from the long weekend (indeed, Macro Man is struggling at the moment to grasp onto any macro trades), but that's not to say that it wasn't educational. Far from it!
He learned that you can go back home....you just can't afford to stay for very long.