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Monday 22 January 2018

Morgan -- the shy economist with the whiplash tongue

Kim Bielenberg on Professor Kelly, the controversial economics guru who has our ruling elite in his sightscaption caption

He has become Ireland's leading drive-by pundit. Every so often he arrives suddenly, aims at a target and fires. Then, just as rapidly, he disappears from public view and goes to ground.

Morgan Kelly, the UCD economist and popularly acclaimed 'Dr Doom', once described Brian Lenihan as a "corpulent tooth fairy'' and a "buffoon'' with a "lofty indifference to facts''.

He has dismissed NAMA as "cash for trash'' and warned in 2008 that we would be better off piling up €1.5bn in Stephen's Green and burning it than putting it into Anglo Irish Bank.

Most famously, he accurately predicted in the middle of the last decade that Bertie Ahern's Ireland was "a classic bubble -- and it's all going to end in tears''.

Last weekend, in one of his characteristic broadsides, Professor Kelly switched his sights from Brian Lenihan and gave it to our present Central Bank Governor Patrick Honohan with both barrels.

He accused the Governor, himself a distinguished academic, of the "costliest mistake ever made by an Irish person''. This referred to Honohan's suggestion last year that bank losses were manageable.

In a newspaper article that would have put many off their breakfasts on Saturday, Kelly talked of us being led along blindfolded by our EU partners "until the noose is slipped around our necks and we are kicked through the trapdoor into bankruptcy''.

Last Saturday morning, one of the professor's old adversaries, Jim Power, was sitting in a cafe in Rathfarnham reading the economist's latest jeremiad.

He and Professor Kelly had crossed swords on Prime Time early in 2007. Morgan Kelly had come on the programme to warn of a house-price collapse, but Jim Power said he was over the top and that "the market is sound''. Power later apologised publicly, graciously admitting: "I was totally wrong and he was totally right.''

Last Saturday, Jim Power looked up from his paper and was flabbergasted to see Morgan Kelly at the table next to him. They had a friendly conversation and Kelly asked him what he thought of the article.

"I had to tell him this time that I agreed with most of what he said,'' said Power.

When Professor Morgan Kelly first emerged from academic obscurity in 2007 he was treated by some economists as something of a crank, according to one of his peers.

In the closeted world of academia, he commanded respect for his work, mostly on esoteric historical subjects. But it took his prediction of a property crash and his rapid vindication to propel him into the public eye.

From his time at Templeogue College in the 1970s he was remembered as an academically gifted student. Although he played rugby, he wasn't one of the school stars. The sport cropped up in his latest diatribe when he said the banks were run by "faintly dim former rugby players''.

Ray Kennedy, former Templeogue principal, said: "He was quiet and unassuming, quite shy. He never caused trouble.''

Kelly now lives around the corner from the school in the solidly middle-class Cypress Grove area with his partner Nuala Brady and their children. She is a lecturer in psychology. A former colleague said: "She is just as high-powered as him. Academically, she is hot stuff.''

His fellow lecturers admire his foresight and the rigour of his academic work. But they probably would have preferred it if he had not suggested last weekend that they were paid too much.

He said it was nonsense for the Government to be borrowing money "so that civil servants like me can continue to enjoy salaries twice as much as our European counterparts''.

With fat wage packets, short hours and long holidays -- not to mention job security and gilt-edged pensions -- academics have continued to lead a charmed life through the crash.

As a professor, Kelly himself is thought to earn a salary of approximately €113,000. Between them, he and his partner would earn close to €200,000.

So did Dr Doom use his soothsaying powers to cash in on the property boom? At the height of the boom his house would have been worth around €800,000, according to a local estate agent. After the crash, which he forecast, the house is thought to be worth between €450,000 and €500,000. But the professor was not tempted to cash in.

He does not appear to be driven by money and has so far not been lured by television and book deals or the potentially lucrative public appearances of other "celebrity economists''.

An acquaintance said: "He is not flash at all and leads quite a modest lifestyle. He drives an old car.''

Moore McDowell, a former colleague at UCD, is full of admiration for Kelly because he saw what was happening to the Irish economy before anybody else.

"Hard-nosed economists such as myself failed to see it. Morgan's ideas would have been the subject of coffee-table conversation at UCD. We talked with him about them.''

Kelly's latest attack may have hit the Irish economic establishment like a perfectly aimed Exocet missile, but the man himself declined to elaborate on them this week when approached for interviews.

"I don't like to be in the public eye,'' he recently declared.

"Despite the way he writes, he is personally quite shy,'' says a fellow economist. "He wouldn't haunt the bar or the common room at UCD.''

More familiar with obscure subjects such as the economic impact of the little ice age, Kelly admits that he almost stumbled upon the Irish property catastrophe by accident in 2006.

He decided to investigate when he became irked by predictions by economists, some of them his former students, that Ireland was going to have a "soft landing''.

Kelly told Vanity Fair: "I was in this position-- sort of being a passenger on this ship. And you see a big iceberg. And so you go and ask the captain, 'Is that an iceberg?'"

Although he predicted the property crash late in 2006, it took him a few months to read the tea leaves accurately when it came to the banks.

In a paper on property prices in the spring of 2007, he said: "The larger banks which dominate lending are well capitalised and the banking system has, until recently at least, avoided the worst excesses of the sub-prime market.''

Within a few months, however, he had changed his tune and was predicting the collapse of financial institutions. He accused bankers, typified by Sean Fitzpatrick, of "catastrophic avarice and stupidity''.

Senator Shane Ross has hailed him as the "hero of the meltdown'' but some economists believe that he has got things wrong.

Dublin-based Dutch economist Professor Richard Tol said: "His academic work is sound, but some of his public statements don't stack up. He seems to believe our problems were all internal and does not take enough account of the international recession and the incompetence of our politicians.''

Professor Tol said his suggestion that we should try to balance our budget in a year -- with possible cuts in public pay of 30 pc -- would kill the patient, rather than cure it.

Jack O'Connor of SIPTU said it was a one-way ticket to the Stone Age.

His remedies may be dismissed, but the professor's predictions that we are facing the "trauma and chaos of bankruptcy'' will command attention given his past record as a prophet of doom. As our financial troubles mount, we must all fervently hope he's wrong.

Indo Review

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