February 12, 2009

Curse of Rumsfeld adds to the strife of Brian

Posted in Banks · 209 comments ·

What have Brian Lenihan and Donald Rumsfeld got in common? Why “unknown, unknowns” obviously! The security dilemma outlined infamously by Rumsfeld in February 2002 sums up our minister’s dilemma perfectly. What most people fail to realise about the recapitalisation is that it is an exercise in reassuring the rest of the investing world that it is safe again to invest in Irish banks and, by extension, Ireland.

To achieve this, the recapitalisation needs to satisfy sceptical investors that the share prices of Irish banks constitute a “once in a generation” bargain.

Certainly on a historic basis or in terms of the banks’ assets, the share prices look unbelievably cheap. A successful recapitalisation leads to a rapid increase in the banks’ share price and ultimately bond investors flock back to the “clean” bank. This way, the share price rises and the Government can sell its stake — now worth considerably more than when it bought the stuff last night — at a significant profit. This is why the Government says it has no interest in owning the banks. The State believes that it will be able to profit from the deal.

But the assumption that €7bn will be enough runs straight up against the Rumsfeldian conundrum of “unknown, unknowns” which is why Mr Lenihan and Mr Rumsfeld are unusual, but desperate, bedfellows.

In 2003, Donald Rumsfeld won the Plain English Society’s “foot in mouth award for garbled speech” for his immortal “known, unknowns” speech. At the time he was ridiculed but when you cut through all the cheap jibes, you realise that he was on to something.

Rumsfeld articulated the investors’ conundrum perfectly and in his words of wisdom lies the fate of last night’s bank recapitalisation.

Let’s recap what Rummy actually said.

“As we know, there are known knowns. There are things we know that we know. We also know that there are known unknowns, that is to say that there are some things we know we don’t know. But there are also unknown, unknowns, the ones we don’t know we don’t know”.

In the Irish bank recapitalisation, the unknown unknowns are the extent of the bad debts. No-one has any idea how big they are and this is why the whole recapitalisation programme is a leap in the dark. The reason they are unknown is that no-one has any idea what other bad news will emerge from the upper echelons of the Irish banking system, its pathetic regulation and its craven cheerleaders in the golden circle.

In many ways, the banks are acting like the Catholic Church when the child abuse allegations arose. The first reaction was to quash the rumours and draw a line in the sand. This was the regulator’s, the Central Bank’s and the Government’s reaction in September. Back then, I remember going on a radio programme with Mr Lenihan and predicting that an Irish bank would be bust by Christmas. The minister warned that such talk was dangerous and irresponsible. The Central Bank declared that the banks were well-capitalised and the regulator stated that its “stress testing” proved that the banks were fine.

This was the same as the Church saying that child abuse was a rare, random isolated incident. Then there were more and more and more revelations.

Efforts to restore the credibility of the Church were irreparably damaged by the unknown unknowns. In the uncertainty, the institution was badly tarnished. Few bishops were trusted and even the good ones were regarded as suspect — or, at best, patsies defending a dreadful institution.

Think of the banks in the same light. The investors in this case are like sceptical but ultimately believing Catholics who want to believe that the system has rooted out the bad eggs but are not prepared to bet on it.

Investors are afraid of the unknown unknowns, which have not even been thought about, let alone quantified in the Irish banking system.

How many more ILP “bed and breakfasting” deposits in Anglo which were exposed on Tuesday, will emerge? How many more ludicrous examples of banking malfeasance will there be, and, more significantly, just how big will the bad debts be?

No Irish citizen has any interest in Lenihan’s great gamble failing, but the unknown, unknowns make the chances of failure extremely high. If we don’t know how much the bad debts will be how can we, with any certainty, say that the €7bn figure will be enough?

We do know that in 2002 both the Bank of Ireland and AIB senior management were furious that Anglo were hoovering up all the best commercial land deals, and that they vowed to “out-Anglo” Anglo.

Both banks ramped up their loan book, lending to every two-bit eejit who thought he or she was Donald Trump. As JP Morgan once said, “nothing so undermines your financial judgment as the sight of your neighbour getting rich”.

Bank of Ireland and AIB financed the economics of envy in the commercial property and development land game and it follows that their loans books are likely to be worse than Anglo’s. The extent of their bad debts will be horrendous.

Think about it: they doubled their loan books in the final four years of the boom. This means that their bad debts will be considerably more than the 10pc which is common in boom/bust scenarios. Even looking at the past four years, both banks lent close to €120bn each; 10pc of this means bad debts of €12bn.

This means that Lenihan’s €7bn will be swamped by bad debts. So why would any investor come in until this cash was gone? If they did so, they would risk losing their investment and equity capital in a deluge of yesterday’s bad debts.

The unknown, unknowns …

  1. This article is timely and well written and should put Lenihan to the back of the class

    while the teachers contemplate his removal from his school and tell his mammy .The

    other boys in his class know that they know what he only thought he had

    known .Now that everyone knows he knows nothing anymore all his

    neighbours now know more than him.His class misbehaviour has caused a serious

    embarassment among his neighbours and they will tell their own kids not to talk with

    him anymore .The boys in his class know he is sticking his gum under his class seat

    and table and hoping the next person to take his place wont get up .

  2. Brilliant. Helpful. Evocative.
    David you inspire me to remember another model.

    The new Taoiseach and Minister for Finance in RoI took on their offices in a state of “unconscious incompetence”. They have moved on to a more advanced state of “conscious incompetence”. This is where I think they are right now.

    The next stage, which I agree we all have an interest in them achieving, is “conscious competence”.

    However it is, I suggest, very difficult for either of them to achieve this – they are surrounded by advisers who are back at “unconscious incompetence” believing they know best. We have all been talking about getting shot of the bankers. I think, before we do that, we need to change all the top civil servants who have collectively failed to give both men advice that they dare not follow. The minister’s office should have given him advice in such a way that he could not afford to ignore it. Whoever advised Mr Cowen to address the Dail on Tuesday 15th February in that manner deserves to be outsourced.

    By now, we should have had one high placed civil servant as deep throat. You David should have a source deep within the government’s machine feeding you vital leads and challenging you to dig deeper. When Woodward & Bernstein were struggling, they had no model to inspire them. Irish civil servants have seen the film, probably see it many times. They can’t say it would be so counter-cultural that my grandfather would turn in his grave. We have all come to respect and value deep throat.

    It is not too late for one of the inner circle to free up their conscience and make a call to you or Shane Ross from a public telephone box.

    In case anyone is interested in the remains of the model I’ve used, after a long period of “conscious competence”, it is possible to reach the stage of “unconscious competence”. For example, I think Bertie reached that stage for a while…

    Thank you. Donald Rumsfeld is my third cousin.

  3. mespilroadflats

    Well done David – good, timely posting again, given what we just heard about BOI. And yes, that phrase “golden circle” crops up again – not that you will hear it used on chat shows on RTE radio on weekend mornings. As per your radio interview yesterday on the 1pm news on RTE – the banking system in Ireland is corrupt to the core.

    More of the same old Cosy Irish Capitalism. The same names – Gillian Bowler, Michael Fingleton, and the others – keep cropping up, don’t they?


  4. [...] I’ve been reading David McWilliams on line- all about "unknown unknowns" [...]

  5. AndrewGMooney

    Spot on, bullet to the brain with this one David.

    Cowen and Lenihan need to explain why they issued a blanket guarantee to all the sicko psycho Irish banks via the possibility unconstitutional wheeze of ‘incorporeal’ Government decision-making on the fly.

    “As we know, there are known knowns. There are things we know that we know. We also know that there are known unknowns, that is to say that there are some things we know we don’t know. But there are also unknown, unknowns, the ones we don’t know we don’t know”.

    Which of these did Cowen and Lenihan map out on the whiteboard that fateful night?

    Have they ever read ‘The Black Swan’ or had a precis handed to them by their underlings? For Nassim Taleb used the Rumsfeld Mantra as the basis for his expose of the entire debauched math model underpinning risk and credit allocation. A model that has now spectacularly collapsed, taking the Irish economy down with it into the abyss.

    The banks were like some mass conjoined nightmarish birth. Instead of the long, slow surgical operation to remove those that could survive, the decision was just to leave them on life support and pray for a miracle, that all would survive. Discounting the possibility that they could also, all die. You supported the Guarantee, but had no knowledge of the murky depths of the golden circle. How much did the 2 Brians know? How much should they have know if they were effective leaders?

    The recapitalisation will fail. The current Irish government will fail. There will be uproar and chaos, but from this there arises the hope of national renewal. The collapse is not within the remit of Cowen or Lenihan to control. They must just await developments elsewhere whilst they pretend they still have power and influence. They will ‘resort to FF type’: FG will be complicit, they’re enmeshed as well.

    All looking to engineer a renewed ‘victim script’ that will include American FDI, a Brit Eurosceptic banking conspiracy, an invitation to the younger generations to emigrate till things improve. But their will be endless forelock tugging to the new masters of Ireland’s desinty: The ECB.

    The ECB have encouraged this vanity project of recapitalisation as it will leach any remaining power or control from Dublin, making the effective takeover from Brussels and Frankfurt so much easier to sell to the demoralised and defeated Irish nation. They’re giving just enough rope so every eejit can hang themselves before they ‘come to the rescue’.

    All very sad, but not that surprising.

  6. >In the Irish bank recapitalisation, the unknown unknowns are the extent of the bad debts.

    Actually, these are the “known unknowns”. We know that they exist, but we don’t know what their extent is.

    Good article otherwise though. Six months to nationalisation of AIB & BoI, I reckon.

  7. The unknown unknowns, of course, would be things like the…ahem…”circular accounting” that was going on between Anglo and other banks, at least until we found out about them (when they became either known knowns or known unknowns).

    • goinghome

      Many people feel that the pension levy on public servants is also ‘circular accounting’ on the understanding that it is, as of now, going directly into nobody’s pension but rather into bailing out the country, especially the banks.

      A Chinese saying comes to me:
      He who knows and knows he knows, he is a wiseman, seek him;
      He who knows and knows not he knows, he is asleep, wake him;
      He who knows not and knows he knows not, he is a child, teach him;
      But, he who knows not and knows not he knows not, he is a fool, shun him.

      The fear is that, even after finding and giving the floor to the wiseman, the world won’t listen…

  8. today I witnessed the leprachauns having a picnic on the rocks in ballybunion seafront and they have agreed to travel to iceland to meet their cousins the throlls to protest this saturday and to tell them that our banks are going the same route as theirs – nationalisation – its going to be fun

  9. MK1

    Hi David,

    Yes, we (the state) have picked up the tab at AIB/BOI without yet knowing what the tab will be. Not only the ‘recapitalisation’, but also the guarantee. There are parallels with what the yanks did in Iraq. However, I wouldnt use child abuse in the catholic church as an analogy/metaphor. Every man and woman in this country are abhorred by that, but people are not equally abhorred by what has gone on in the banks/regulators/government, etc.

    At least not yet. If they were, everyone would go on all-out strike and stay out bringing the country to a standstill and wait until the government folded. There are various stages of emotion, and people are not all on the same stage. As individuals we change as well.

    I am angry and dissapointed at the moment, although not surprised, because yesterday when we were announcing giving 7 billion to the banks to save their proverbials (lets call a spade a spade) the other hand of the government was withdrawing 128x special needs assistants in schools, a move which hits the ‘innocent’ and the needy. Where is the equity in that?

    I just read this:
    “In a statement released to the Stock Exchange this morning, BOI says its previous estimate of €3.8bn for so-called loan impairments could hit €6bn by 2011 under a worst-case scenario. The bank says it believes its current impairments total €4.5bn given the further deterioration in economic conditions. It says €1.4bn of this is expected to arise before the end of March this year.”

    Our money will be used to cover for ‘impairments’ like this. Thats rich. The bank will be writing off bad debts to developers/large loanees who clearly havent been paying any/enough interest for up to a year come this March. Our recapitalisation will thus be saving both the asses of those loanees as well as the banks. And we allow a child with reading difficulties to suffer at the same time whereas to provide them with what they as humans deserve would be but a small pittance fraction of what we have given to the banks.

    Are We Insane ?????

    Perhaps that is a known known.


    • Johnny Dunne


      Totally agree – this morning there is massive ‘dissapointment’ that we are putting ourselves in this position.

      BOI whose share price is down 10% already today, stagge manages an announcement of doubling writeoffs from a loan property loan book of over €100 billion and €180 billion of state guaranteed liabilities. How much more….

      How could the dept of education slash €7 million from a budgeted spend for 2009 of over €10 billion on ‘Education’

      The Minister for Finance (and probably other Ministers) don’t read the detail, so these numbers mean very little to them. It’s all about ‘soundbites’ for these guys….

      Understand why the finger is being pointed at the politicians, but its no surprise to see now the top civil servants are running the country into the ground with poor decisions made from a perspective far away from reality.

      To prove the point, I bet the Minister did not attend most meetings to decide / communicate naitionalisation and recapitilisation to the banks….

      Could some of these decisions be unconstitutional – any legal experts see issues with Artcile 45 re providing social and economic rights to all not the few ?

      Some of these heads of departments have had the same job for 20 years – how coudl they know what is going on in the ‘real’ economy and with ‘ordinary’ people trying to get the best for their young kids with educational need…

  10. mcsean2163

    If only David hadn’t recommended the state guarantee of the banks and Mr. Lenihan hadn’t followed his advice. It appears Mr. Lenihan was dazzled by the youthful and vigorous David, who answers to nobody and can change his opinion at the drop of a hat without any repercussions.

    David launches his opinions into the ether and then hammers on forever about the few that are correct. Notice he isn’t boasting about his state guarantee of the banks, coincidentally the single worst decision by the Irish state since the credit crunch began.

    Still the articles are interesting….

    • liam

      to be fair..

      The guarantee was necessary, at the time. The failure was in the State not using the breathing room this provided to sort out the banks. At that point the State effectively owned the banks and they cound really have restored confidence in the system by removing the director and senior management, maybe even temporarily nationalised the entire system while an independant regulator and assessor was appointed. Instead they did absolutely bugger-all. Worse they drew the banks in to the bosom of the state. I imagine they thought that by closing the golden circle they were issuing a signal of strength, hence all the nonsense with Lenihan calling various broadcasters patriotism etc in to question. I guess in hoping that nobody would rock the boat, point out the emperor was nekkid etc, they could pull a fast one and maintain the status quo.

      What was misunderstood at the time (and is even more apparent now after seeing Gilmore’s broadsides in the Dail), is that the State was (maybe is) still in denial about the reality of the situation they were (are) facing. Instead of a bold move that could have be used to purge the system, it was an act of desperation in the face of imminent doom. it is this failure to proactively deal with the problem that turned it from a “stroke of genius” to the “Peace in our time” moment of the collapse of the Irish economy and the Irish state.

  11. Who knows, maybe he’ll follow in his father’s footsteps and one day remember reading the report after “mature recollection”…

  12. Lorcan

    Good article David. Nice to see you’re getting some over-time out of this!

    For any that are interested, here’s the statement to the stock exchange re the capitalisation. http://www.londonstockexchange.com/LSECWS/IFSPages/MarketNewsPopup.aspx?id=2089397&source=RNS

    If all is so rosey why are the banks down 5-10% this morning?

    I posted this note from Dresdner a few weeks ago, but I think it’s worth a re-run.

    “The announced nationalisation of Anglo leaves questions over what
    happens to the other Irish banks. We do not count the government prefs
    as core Tier 1 as they do not appear loss absorbing in the course of
    normal business. This leaves us with up to €3-3.5bn of capital deficits and
    a high risk of large dilution. We reiterate our Sell on both stocks. Allied
    new TP 50c, BoI new TP 30c.”

    Add the IL&P money laundering deal with Anglo and it is easy to see why the markets are deserting the Irish banks. With this in mind I was not surprised to see an analyst from Moody’s on Bloomberg this morning saying Ireland is set for a downgrade on its sovereign rating because of the massive liabilities it has left itself open to.

    Re the ‘known unknowns’. I was watching Mervyn King’s speech yesterday where he was asked about ‘unconventional methods’. His answer was very Donald Rumsfeld. “there are converntional methods, conventional unconventional methods and unconventional unconventional methods.”

    David > If we don’t know how much the bad debts will be how can we, with any certainty, say that the €7bn figure will be enough?

    I think all that be said about the €7bn is that it is all we can give. It has to be enough, if it isn’t (for the record I don’t think it is) we will certainly have to resort to unconventional unconventional methods. Contingency plan, anyone?

  13. Deco

    For Brian Lenihan, there are an awful lot of unknown unknowns. And the unknown unknowns than known knowns and more known knowns than garden gnomes. And just like garden gnomes, they pop up all over the place, in all sorts of scenarios. Basically Lenihan is not in the know. In fact nobody is rightly in the know. The people who are most in know aren’t telling anybody. The IFSRA chairman seems to be a case in point.

    We have learned that we cannot trust any of the banks. What was going on between ILP and ANIB was much more dangerous than the directors of ANIB moving loans over to INBS. No wonder Enrst & Young missed the Fitzpatrick loans – there were looking at even more ridiculous schemes between bankers.
    And, now all the time we are getting more and more information. And the information is proving that there is an incestuous relationship between the various bankers and banks. We are learning that a bunch of corrupt careerists are running these banks. We are finding out that the culture of Irish management of Irish quoted companies on the stock exchange is corrupt. What next ? I am very suspicious of CRH. Sean Quinn has been discovered to be in a really painful position with his ANIB involvement. I find it hard to imagine that CRH are not up to something fishy. I read an article in the previous edition and Phoenix, and it is very critical of CRH. And the directors of CRH are close to the directors of the two main banks, and the other networks at the top.

    ILP-TSB is now in controversy – after a very successful PR attempt, it seems as if “The Permo” has been found in a state of embarrassment. ILP successfully launched a loan bond on the market in the last few weeks, as a result of it’s very smooth PR handling of the controversy. I don’t expect ILP to be in a position to do that again for a long time. Currently we are in the midst of the commercial property collapse in the property market. The development speculator collapse has already occurred. The third leg of the stool is the residential mortgage market. And that is only a trickle.I am really concerned about who is exposed the most to expensive, overvalued suburban residential property. A decklander in Navan with a 250K mortgage will somehow or other pull the money together over the next 15-20 years, in a mixture of good years and bad. But HiCos in Cabinteely are never going to generate enough economic activity to pay for 1M plus mortgages. Basically the scale of the thing is excessive. And I just wonder in all of the nonsense and prestige games that went on at the height of the boom – what happened to financial decision making in the affluent,upbeat districts that were blinded by status obsession ?? Well I think it became a form of intellectual farce.

    We know now, almost to the point of it becomming officially true, that there is such nepotism at the top in Irish companies that you never know who to trust.

  14. gadfly55

    David, the Saturday afternoon radio programme is indelibly etched into my mind, along with the pusillanimous performances of all others when at last you made the assertion regarding the banks for which you were immediately gang mugged, with no doubt instructions issuing from outside the studio to silence your voice. The ongoing revelations about what Lenihan read, didn’t read and would not have noticed if he had bothered to read about the ILP transfer to Anglo has now achieved notoriety beyond these shores and has succeeded in rendering , and I use that word in all its horror, the Irish Government as beyond derision, into the realms of fantastically ridiculous. The word confidence and Irish banking, and Irish economy will not be joined for decades. Transfer your money to Luxembourg, buy ECB bonds, fully guaranteed, and watch the edifices crumble. It ain’t going to be pretty.

    • roc

      Forget about ‘confidence’. It’s become a stupid word at this stage. Let’s substitute ‘TRUST’ for ‘confidence’. Imo that would help us make much more headway.

  15. roc

    “In the Irish bank recapitalisation, the unknown unknowns are the extent of the bad debts.”

    That is not correct.

    The extent of the bad debts are the ‘KNOWN unknowns’

    The UNKNOWN unknowns are more possible events along the lines of the ILP scandal. And it’s likely that there are many more ‘unknown unknowns’ imo. Never mind the ‘known unknowns’.

  16. MK1

    Johnny Dunne> Could some of these decisions be unconstitutional – any legal experts see issues with Artcile 45 re providing social and economic rights to all not the few ?

    I am not a legal expert, but I would ‘hazard a guess’ that going down the legal constitutional route would be slow and nigh on impossible to stick. Looking at the said article:

    “The principles of social policy set forth in this Article are intended for the general guidance of the Oireachtas. The application of those principles in the making of laws shall be the care of the Oireachtas exclusively, and shall not be cognisable by any Court under any of the provisions of this Constitution.”

    This to me means that these are aspirational rather than ‘contractual’. Its a ‘best effort’ in other words and is guidance, not “law”.

    “The State shall strive to promote the welfare of the whole people by securing and protecting as effectively as it may a social order in which justice and charity shall inform all the institutions of the national life”.

    Well, many governments have been in breach of that. It is also subjective to determine.

    “The State shall, in particular, direct its policy towards securing: That the citizens (all of whom, men and women equally, have the right to an adequate means of livelihood) may through their occupations find the means of making reasonable provision for their domestic needs.”

    Does the dole qualify? Did it in the the 1970′s and 80′s?

    “The State shall endeavour to secure that private enterprise shall be so conducted as to ensure reasonable efficiency in the production and distribution of goods and as to protect the public against unjust exploitation.”

    I guess its a known known that the state did not live up to this in many functions of society.

    “The State pledges itself to safeguard with especial care the economic interests of the weaker sections of the community, and, where necessary, to contribute to the support of the infirm, the widow, the orphan, and the aged.”

    yeah, right ……. !

    Other articles are being ‘broken’ on a frequent basis:

    “Article 41: the State recognises the Family as the natural primary and fundamental unit group of Society, and as a moral institution possessing inalienable and imprescriptible rights, antecedent and superior to all positive law”.

    Superior? and how did ‘tax individualisation” give it superior law?

    “In particular, the State recognises that by her life within the home, woman gives to the State a support without which the common good cannot be achieved. The State shall, therefore, endeavour to ensure that mothers shall not be obliged by economic necessity to engage in labour to the neglect of their duties in the home”.

    Do Mothers (or Dads?) of young children get the equivalent to the minimum working wage, ie: 320 euro per week? And those parents of kids of school going age, get an equivalent pro-rata?

    “The State shall provide for free primary education.”

    Hands up any parents that dont have to contibute to their primary school for sometimes basic essentials?

    “The State guarantees not to endow any religion.”

    So why did the state guarantee all payments for damages against the Catholic church? Pull the other one.

    If we were to start going down the constitutional route of all the things that have not been lived up to, I will be long in my grave before that one is solved.

    Reckless Trading may be a better route. I have no idea which laws pertain to actual nationalisation steps and procedures pertaining thereto, whether in company laws or elsewhere. But not fully reading a report has to be a major ‘boo boo’, one would have thunk …..


    • Tim

      MK1, Hello again.

      I am not a legal expert, but I would ‘hazard a guess’ that going down the legal constitutional route would be slow and nigh on impossible to stick. Looking at the said article:

      “The principles of social policy set forth in this Article are intended for the general guidance of the Oireachtas. The application of those principles in the making of laws shall be the care of the Oireachtas exclusively, and shall not be cognisable by any Court under any of the provisions of this Constitution.”

      This quote is from the preamble of the act and I think you are correct in your suggestion that an A45 objection will not succeed in the HC because this wording provides the semantic equivalent of a “get out of jail free card” in the game “Monopoly”. This wording excuses the Oireachtas from action. I know I said this earlier, posted on a different article, when furrylugs suggested looking to A45 for relief; I don’t remember a reply to my post ……. perhaps I should track back to it when I get a chance ……

      Anyway, I think it’s a long-shot. (still worth trying, though; we should try everything.)

      • MK1, Tim,
        I think if the recent and ongoing Tribunals are anything to go by, a constitutional challenge would be bogged down in treacle. Our leaders patently know little of high finance but their small town solicitors degrees would probably kick in for self preservation.
        I know of several actions taken via the Human Rights Act which were successful? Since I flagged up A45 though, it was on the presumption one of the opposition parties might just have a go. As we don’t seem to have an opposition worth talking about, maybe I’m flogging a dead tiger?


        • Tim

          Furrylugs, MK1, “the care of the Oireachtas exclusively” renders the Act impotent in current circumstances because, even if we did have a useful opposition in the Oireachtas, we would need a number of defectors from the ruling side of the houses to support the challenge. The corrupt whip system would probably prevent this. However, with the example of Joe Behan, it is still a possibility and, therefore, worth trying.

          As I said earlier, let’s try everything.

  17. mespilroadflats

    To quote Vincent Browne (from a different issue): “It simply ain’t credible.” I think Mr Lenihan DID read all that report. He commissioned it.

    On the subject of legality, I think you will find it’s a constitutional requirement for Mr Lenihan not to act on his own….


    How much is the recapitalisation of ILP going to cost?.How much bad debt will be found in the two building societies?.Between everything, I reckon 30 billion euro will be needed.Ireland will be bankrupt within 18 months thanks to FF cronyism.It has taken 80 years for this miserable windswept shithole to finally face the music.Were it not for the net emigration of 1 million people the day of reckoning would of come sooner.What happened to the idea of a bad bank?.Compare the standard of debate in the House of Commons with Leinster house!.

  19. Philip

    What about Unknown knowns? The thing Lenihan et al should’ve known a) becasue he did not read the full report or b) did not want to read it.

    I believe a lot was known and kept unknown. I cannot help get the feeling of cover up.

    Why? many if not most of the politicians on this land have big accounts in AnIB. Probably big debts as well. Their nesteggs are gone or seriously compromised. 7Bn a last ditch effort to rescue the situation?

    Or maybe the 7Bn is just our 1st tranche of EU funding we are giving back to the EU. When liquidation takes place, creditors take their place in the queue behind the taxman (aka ECB). Expect you will be able to stay in “your” property, but the new Landlord rates will be permanent and you will not be getting ownership ever.

  20. VincentH

    We have at the moment a problem beyond the foolishness of the banks. Our leading politicos are not Lucky. And I do not mean unlucky, that is when your horse in the Grand National falls at Beachers. Not Lucky is when the stirrup leather breaks having jumped the last in the lead and the jockey falls off. Mind you it would help a bit if they checked the tack for damage before the race. But I have the feeling that if it was not this it would be something else.

  21. mick4711

    Was Rumsfeld trying to say “Argh, beware me hearties , there be Black Swans about!”


  22. Tim

    Folks, on top of the hinted-at unknown, unknowns here, The Brians are actively creating new ones:

    How many debt-defaulters are they planning to create by taking money out of the pockets of their own employees to give it to the banks? How many PS workers will default on the car loan, the mortgage, the credit card?

    ….. and that’s on top of the loss of this spending to the private sector small businesses which will let more people go due to lost sales and create more unknown, unknowns of numbers on the dole.

    Put money into people’s pockets to stimulate the economy instead of causing more HARM.

  23. MK1

    Hi Tim,

    > How many PS workers will default on the car loan, the mortgage, the credit card?

    Hopefully not many. Yes, I agree that the ‘additional tax’/pension contribution on the PS workers recently introduced will hit many and take some money ‘out’ of the economy. But its money the government doesnt have otherwise.

    Which is better, the government borrowing money to pay people so that they can borrow more on their “wealth”, or realistic wages? A negative multiplier effect and a false economy results if we borrow to pay people. Granted it keeps people in jobs (and further down the consumption line) but we all have to realise that living off credit is a dead-end game which can only end in tears, which we are now seeing.

    I agree with you (your post in a previous thread) that hitting all 300,000 could take out spending power in the economy and drive things down further. However, mathematcially if by extension it means that the other 1.7m non-PS workers pay an equivalent less amount of tax, then the money isnt actually being taken out. All the measure does is move it from one cohort to another cohort of the population.

    I do agree that some in the 300,000 will be hit harder than others.

    One thing I would propose is as follows. There are 9,000 PS employees that are getting over 100k a year. Surely they could be forced to pay all the amount that is above the 100k in tax, in other words have a salary cap in PS with these monies to be used elsewhere in PS (30%) and the private sector (70%). I think that all PS workers who are earning under 100k should be clamouring for such a measure.


    • pera

      I had a discussion previously today and the term “borrowing by proxy” was used. There is concern now about the level of borrowing by the government and breaking the stability pact etc… But my understanding is that the government is borrowing no more or less than it has over the past 5 or so years? Except that they way the borrowing is done has changed.

      Considering the large increase of the banks loan books over the last few years combined with a loan to deposit ratio of 1.6. It means that a lot of money has entered country via banks borrowing instead of the government. This money has gone mostly gone to buying houses and cars. If 90k houses were built, the government probably got 3 billion in stampduty, probably a it got 3-4 billion in VAT on the houses. Then maybe 1-2 billion in VRT. I am just guesstimating on the amounts here so feel free to correct me. But would 8-9 billion seem reasonable amount in direct income from this proxy borrowing. They could have gotten some capital gains on this as well. In addition there is all the extra economic activity this borrowing created and indirect taxes associated with it.

      So maybe when all this is added up the government is not actually borrowing anymore than they have done in previous years. but at least now it is done in an more upfront manner and people dont have to be straddled with 35 year mortgages to fund the state

    • Tim

      MK1, thousands of them will default. They will have to. They live hand-to-mouth. When there is nothing in the hand half way through the month of March, because €200 net is missing, what do you think will happen?

      No-one will “re-capitalise” them; no-one will “bail them out”.

      So, they will hit the credit card; they will continue to do it until it is “maxed”; they will make no repayments; they will try to pay for the mortgage first, then the car to get to work to support the mortgage.

      Then, they will default on the credit card.

      When the credit card falls, they will default on the car payment so they can pay for the mortgage and food.

      When the car payment falls, they will buy less food and try and keep paying for the mortgage.

      When the food spend gets too low, they will default on the mortgage payment in order to continue to pay for food.

      Cutting the spendable income of the so-called “guaranteed” job-holders in a recession is a BAD idea, especially when they live hand-to-mouth and spend evrything they have, just to get by, thus “spinning” that money through the economy, sustaining private sector jobs along the way, and sending most of the money full-circle back to the exchequer it came from.

      While we’re at it: Government must stop cutting these jobs; the special needs teachers they cut today are in the bracket discussed above;

      This delivers a quintuple-whammy to the economy:

      1) Teacher let go = they cannot spend;
      2) = they cannot pay tax/prsi/vat/excise duty on spends;
      3) = they have to be given dole money instead of what they used to do at 4);
      4) = they cannot EDUCATE the weakest children of the country, giving rise to
      5) = they cannot prevent these kids becoming statistics that will cost the same exchequer MORE money in the future than “saved” now, by single parenthood payments and the cost of keeping them in Mountjoy prison (because that IS what happens to a very high % of children who drop out or receive poorly resourced education).

      We are sowing seeds …….. we will reep what we sow.

  24. John Q. Public

    Is there no EU regulation or procedure or law to come into force in times like these for Ireland? For all the bureaucracy and red tape the EU is famed for, is there no action plan for a state that behaves like us? We have acted like a rogue EU nation and it could be argued that we would not have got ourselves into this mess were we on our own outside the EU. Considering the strict criterion we had to meet before joining the EU, economic stability with low levels of unemployment, inflation and public debt etc. Once we joined the EU we scoffed at these regulations and got ourselves the mother of all bar tabs. I think we should be put into administration as a nation by the EU just like when a company gets into trouble. An emergency team of outside independent auditors, lawers and economists etc. should be drafted in to steer us through this mess. Let’s be honest we are a laughing stock, a banana republic run by an unqualified mafia who play golf with each other at the weekend.
    The ECB needs to do more than just throw money at the situation especially when dealing with the likes of us. It needs to send in an artillery of brains to use that money wisely.
    An overhaul of the EU financial/banking laws is needed now more than ever to prevent our mess spreading or occurring again, after all we are the ECB’s problem whether they like it or not.

  25. Philip

    A bit off topic…over 1400 jobs axed around the airport today between SR Tech and Ryanair. I figure you only have a few more days left before you can escape by air. Contracts are drying up. Loss to competition or simply cost cutting by airlines as they take more and more of their fleets offline.

    The SR Tech says Dublin is no longer part of their strategy – meaning…”make us an offer and we might accept”. A bit of that 7bn could have been used for that. But the vision is not there and EU regulations would stop them anyway.

    Labour walkout today is not good. Lenihan could have handled that a bit better. You cannot just disengage a section of the community that easily. The Brians are not great at consensus building. I think TDs will be startng to look over their shoulders more. Certainly, if I was based in Dublin North and North East, I’d be taking a holiday.

    SR Tech is another example of highly specialised skillsets being brushed aside. Knowledge/ HiTech economy me A^$€!

    • Deco

      The problem with SR technics is cost. The Irish cost base is destroying the ability of Irish workers to compete. SR Technics are being told to cut their costs by 20%.
      Well fair enough – how much will that leave the workers after they have paid for their everyday bills ? The real problem is not wages – it is the fact that the wages need to be so high to pay to live in Dublin.

      We need to bring down our cost base – that means the Economic Rent Seekers need to get to feel the full rigour of Competition Policy. And this points the finger directly at IBEC have a lot of questions to answer.

      Also I find it sickening that one week after the ESB gives themselves a price increase (another one) at the expense of the rest of us – industrial employment is losing ground. The government needs to cut out the nonsense in the ESB. And the first thing they need to do is fire half of the managers.

  26. First david it is an insult to the Irish to bring Romsfieldminto a seriosu and correct conversation as Donald behaved badly and history will be judge.

    As for going on about gloom and doom, please stop this David. Cowen mayhave dragged his feet re the rescue and Lenihan is now admitting he did not understand Anglo Irish exposure but the whole situation is about scam, fraud and pending criminal charges aginst selct bankers , customers and possible civil servants – If you wish to discuss the Independnent Inspector as proposed by Labour fine ! but lets keep it simple as Fraud is fraud and scam is scam ! and so lets not lose the topic through wordy conversatiosn about just blogging for blogging !

    As Senator Boyle said back in middle December cull all Angklo executives ! now we wish to know what was the 4 Billion doing going from Iirsh permanent to Anglo and many many other questions about customer s who have been able to have a noose around the bank’s neck for too long and getting too much for nothing ! Donal O Conor should have resigned on day 1 but still there collecting – gosh these bankers do nto know what right or doing the right thing is !

  27. Mr Lenihan is a slow reader. He can’t read between the lines.He is a man of special needs. Mr Cowen doesn’t read at all.

    Mr Lenihan has no concept of reputation, honour and public morality. Both he and Mr Cowen have learned their trade from Mr Haughey, Mr Reynolds and others who went to the same school. I feel myself to be an alien in their company.

    When I came to Ireland, to Cork, in November 2005, I’d lived in UK for 30 years. I’d kept out of Ireland as much as possible for reasons it would not be appropriate to go into on this thread. I was immediately perplexed by the domestic economics of the housing estate. Down the road were people self-employed in small businesses. I imagined they couldn’t have been earning more than 50K each. But they had two brand new Rangerovers, and two other homes. I was struggling to get used to paying doctors. Where on earth was all the money coming from? What was the source of all the liquidity?

    I’ve never understood it adequately until this crisis. Perhaps I didn’t read the right books or articles. Every time someone flagged up that property prices for domestic and commercial development were unsustainable, they were dismissed by government ministers as not worth listening to.

    The central bank, regulator and economic think tanks spoke out with such a whisper that only the acutely sensitive ears registered the danger. Even Eddie Hobbs got in on the act of encouraging people to buy property abroad.

    I’ve found it valuable to listen to Joe Duffey. Listening to very angry people who feel betrayed and despairing. I was in Easons this morning in Cork, reading the papers. I felt insensed that Mr Lenihan hadn’t offered his resignation for having kept our leader ignorant. An old woman asked me “who would you put in charge?” I felt like saying ‘ a monkey from Fota Wildlife Park’. Instead I say ‘there are lots of Fianna Fail people who would be better now that Mr Lenihan won’t show he has an ounce of competence or respectability’. I said that because I thought it politic to express confidence in the ranks of FF TDs.

    No matter how bad this gets, I hope there won’t be litigation. We daren’t let the layers have their day.

    For what it’s worth, I now believe
    (1) Ernst & Young worked out a solution for Anglo Irish Bank to follow. They advised on the method which they could then not notice.
    (2) The respective sets of company auditors met over lunch and agreed on the overall approach and how they would respond if, God forbid, it all come out into the open.
    (3) Meanwhile, significant government ministers had loans and deposits with Anglo and it was imperative that their personal position be protected as much as possible.
    (4) Mr Lenihan and Mr Cowen lack the drafting skills to compose a decent letter of resignation between them.
    (5) The main thing we can do is think. Perhaps form alliances for the future. Study what’s coming out about UK and US practices and figure out how much example our establishment has taken from there.

  28. Deco

    Listening to the George Hook show-RyanAir are providing an explanation concerning their transfer of planes to lower cost airports. He is making a very tough point concerning the airport tax.

    Not sure if that affects tourists – another peice of stupidity if this is true – deliberately charging tourists – as if Ireland does not have already have enough of a cost problem.

  29. Philip

    E&Y should be sued by the state and any other nitwit auditors involved should be included in this suit as well. This is Enron style account cooking at a national level. Th electorate are been treated like fools.

    This case of malfeasance is being dressed up as misfeasance. This is slight of hand being dressed up as accidental clumsiness. We, the electorate are being treated as idiots.

    • Fergal73


      Don’t you get it? The Irish electorate ARE idiots. They are treated as such. They voted in FF time and again – Charlie, the Flynns, Bertie…. They voted FF and Lowrie.

      The Irish electorate are about as sophisticated as an alcoholic in an off-licence in a poorer part of town. There are a few gems, but plenty of cheap cider. The Irish electorate vote for the cider.

      I’ve said it before, pack your bags and go somewhere else. There’s few western countries in a worse position. Maybe the grass isn’t greener abroad, but it’s probably grass and not astroturf.

      • SeanOC

        Why dont you (and your fellow whingers) take your own advice, pack your bags and head off to those greener pastures and dont bother sending a postcard – some of us actually understand that the rest of the world is not much better. But at least we would have one less moaning bitter man in this counrty if you just left!!!

        • Fergal73

          Aw, Sean,

          I’ll actually answer your question – now, if only other people would actually answer questions.

          I have packed my bags and left. I’ve lived in Africa, Asia, Europe the Middle East and now I live in the USA. Why send “postcards”? Because I actually care for the people in Ireland who are being screwed, my family live there for example.

          I am stating fact. The Irish electorate have displayed their idiocy on multiple occassions. You only need to look at Irish history, particularly from the Haughey era on. Do you dispute this? Are the electorate NOT stupid? Please explain.

          Perhaps I am bitter. I emigrated in 2002 as a tiny house off D’Amien Street in Dublin, near the flats was being offered to me for 7.5 times my above average wage at the time. I knew it didn’t add up then and I left – a different type of economic emigrant, but a forced emigrant nontheless.

          Shouldn’t people be bitter? If you’re not bitter, then what emotion should you have? Bitterness can absolutely be used in a positive way. It can be used to create a new system as it galvanises the ambition to improve on the status quo. If you’re not bitter or angry at the incredible mismanagment / fraudulent / incompetency / stupidity that has brought Ireland to where it is, then I suggest that you’re a fool, an enlightened Buddhist or taking far too much Prozac.

          If you see the regulator getting 600K after not doing his job, Lenihan not reading reports, govt ministers talking about doing due diligence AFTER the recapitilaization, the IL&P board not accepting the resignation, no reduction in the number of junior ministries, no change to the political pensions (you can draw them while still working), the over $1BN wasted on tribunals that acheived nothing and now we now barely scratched the surface, the infrastructure projects consistently delivered late and multiples over budget, the e-voting fiasco….. and you’re still not bitter then tell me how you manage it!

          We’ve just seen the FF govt, with their links to Anglo Irish and the “development” industry put 7BN of Irish taxpayer money into banks without knowledge of the level of bad debt. They’ve bet blind in poker. Hey, they might win, but a loss will have repercussions for generations.

          Do you think the Irish electorate are smart? Answer me that and we can have a debate.

          There are two ways out of this mess. One way is emigration, surely easier for the individual. The other is to remove forever the spectre of Fianna Fail and cronyism, to remove parish pump politics from the national level of politics (it belongs at local level) and build a system of government that is for the people by the people. What we have now is a system of government by the wealthy for the wealthy.

          Be bitter. It’s a route to change.

      • JohnD15

        Sean I couldnt agree more! Get all the moaners (including Burton, B.Lucey…) and send them to that Island Gormley just bought for 2m

  30. What about Known Known’s ? did the goverment know what was going on and know it was wrong ,but turned a blind eye.What does Sean Quinn Know ? . Why can’t we let the banks go bust why is Keynes in favour over Schumpter? Politicially correct solutions aren’t necessarily the best. Would the last person to leave the country please switch out the lights.

    • Deco

      The problem is that even in the realm of known knowns they make a mess of it – as exemplified by the Minister for Industry and the Dell saga.

      There is a concept called “capitalist consequences for capitalist misadventure/failure”. It makes perfect sense. It is the best way of regulating capitalism. Capitalist enterprises go bankrupt – then let them disintegrate. The shareholders/bondholders who did not appoint proper directors are punished with destruction of their capital. And other enterprises take over the business and get it running again – at a firesale price. And everything is back again. Except the reckless people are in charge of nothing – and the prudent people are in charge of the corporate world. And the bankers who make the mistakes never get their pensions. In fact in the US, they lock them up, seize their assets and get them to repent the error of ther ways and help out with community service.

      Problem is that our commitment to the status society makes such an approach unworkable in Ireland.

  31. finbarr


    This was the lead in an article about Ireland in this weeks Economist….. We’re a laughing stock and I believe it’s a matter of time before we have some kind of social unrest… Our media can only concentrate on government blaming, expecially trash media like the tabloids or Newstalk all of whom are doing the country a diservice with their lack of journalist acumen. The biggest talent in Ireland is the blame game. We need solidarity to get through this only then start ripping reputations and heads from shoulders. I am very unsure there is anyone capable of sheltering this current storm. Fianna Fail will be out of government for a while, not for what they are doing now, but because of their relationships with builders. They need a cleansing within their own party. The opposition are pathetic, inept and void of anything other than soudbites and showboating. It’s scarey really.
    I think we should be marching on the streets, but not why populist tabloid rags/radio/tv pieces tell us, it should be on public service pay and to show our disgust at the unions who sucked on the tit of Bertie Ahern and unwilling to accept reality and present it to their members. These people are traitors to a country where their own self interest is first and at any cost.
    Before there is social unrest we need SOME people to think outside of the box. Our government are rabbits in the headlights and the circles around them, unions and bankers are self interested and self absorbed. There is a void.

  32. JohnD15

    More abstract thinking from McWilliams – God help us if he was running the country we would be have different plan everyday. I think I even prefer the cast of Police Acadamy that are currently in charge – and that’s saying something.

    Let’s get real for a change and stop killing at birth every effort of the government (no matter how bad you think they are they are we are stuck with them for now). It seems that once McWilliams has a brain wave and goes to print with it once govt follow with the idea David then rubbishes the very project he endorsed only a few months ago. Wake up and start being a little more responsible in your coverage and a little less sensationalist. Please.

    Now that the recap is in place I would suggest that we wish it well despite its missgivings and put forward ideas that can allow it be successfull. I think it was the right decision although I accept that without additional measures it will not be sufficient but that does not mean it was incorrect to go ahead.

    There are several additional options available to the government and it seems from speaking to many international investors/analysts the key to any successful solution is one which is based on an international effort. We no longer have any confidence in our government, regulator etc. and this distrust of anything Irish is even worse overseas. The doomsdayers like McWilliams are ‘manner from heaven’ for the foreign press especially the UK media which appears to be revelling in our missfortune.

    International effort: We are, in a way, lucky that other EU countries have major problems with their own banks (albeit different) so why cant we pool capital together as member nations and fund the EIB or another new multilateral to guarantee the dodgy real estate, ABS, CDO .. assets directly – this would have many benefits and not involve closing banks or transfering assets, and it would be beneficial not only for little Ireland but also the UK and even Germany which has a different type of banking crisis but every bit as bad in terms of capital requirements and funding. A pan European approach is the only thing which will stop us going over the edge (and possibly others). Of course if we do as a nation go bankrupt as Mr McWilliams has proudly predicted it wont be long before we will be in good company – thats what we now call the Lehman-effect.

    Lastly the ‘Bad Bank’ is a red herring – trust me everyone who actually works in international finance knows this – I hear it all the time – it seems that only polititians, academics and sections of the media want a Bad Bank i.e. people that dont fully understand the problem. The transfer cost associated with these so called toxic assets would immediately cyrstallise a banking system loss which not even the money printing USA could afford to fix. Better to protect against bad debt over time through government insurance and dealt with funding costs/yield issues separately.

    We can argue about the past and some of the disgraceful behaviour that went on later – when we can afford to – right now positive plausible suggestions only please and a little less of the scaremongering.

    • Lorcan

      Like I may have mentioned elsewhere, damn hard for Pollyannas these days. ;)

    • fordprefect


      1. Denial is obviously still a river in Egypt for you.

      2. Wishful thinking or not talking about it won’t solve the problems. Thats like having a rotten tooth and instead of going to the dentist trying to use wishful thinking to will the tooth better.

      3. The Government is worse than incompetent. Their “solutions” are botched, too little and far too late. Our financial crisis started years ago. We should have been worried when the cheap credit rolled in. Not when it rolled out. The Government never saw the boom coming and they never saw it going. It is now pretty obvious that they work for an entity that is not the people that elected them into office in the first place. The sad thing that has been exposed by this crisis is that we have never had a real democracy.

      4. David McWilliams is not a doomsayer. He is just saying what he sees. Not what he wants to see which is what you and FF seem to do. Good man. You shot the messenger. The problem is still there. Good work.

      5. If you say you fully understand the problem then you need to be nominated for the Nobel prize for Economics as you are obviously a genius. Being a genius and up on your bible studies you will note that manna came from heaven and not manners. “manner from heaven” means nothing apart from a clever boy not being so clever.

      6. It is clear that the toxic assets are not in the banks but sitting in the dail. The only plausable suggestion that would solve this problem once and for all is a revolution. The behaviour was not “disgraceful” it was fraud. Nothing is being done about it and we are being told to carry the can.

  33. Deco

    Well maybe we should think about the known clown who knew a lot more known knowns than the rest of us – and told no-one !!


    He should have his pension and ‘pay-off’ taken off him – and it should be spent on more necessary areas of public expenditure.

  34. Deco

    Furrylugs – you brought up the topic of known knowns a few weeks ago. You are the known gnome of known knowns, known unknowns, and unknown unknowns.

    • Unknowingly, I know nothing. Therefore all this palaver and confuddlement must be down to me. How dare I exercise my right to free speech and bring down the Country single handedly. I think therefore I sink?

      Anyone interested in Grameen banking?

  35. Deco – you could say it easier – we know furrylugs

  36. Tim

    Lorcan, “I think all that be said about the €7bn is that it is all we can give. It has to be enough, if it isn’t (for the record I don’t think it is) we will certainly have to resort to unconventional unconventional methods. Contingency plan, anyone?”

    How about this contingency plan: Identify the the former land-owners who sat on re-zoned land that they bought at agricultural prices per acre and waited for a starved market to multiply its value and then made a financial killing;

    Take 90% of their profit from them.

    Identify the solvent and highly profitable (because they were smarter and knew when to stop, or had insider information) developers who have moved their ridiculous profits off-shore;

    Take 90% of their profit from them.

    Identify the local government councillors who got the back-handers for rezoning the lands for this in the first place;

    Take 100% of that money from them but do NOT send them to Mountjoy, as it would cost us €120k for each one.

    Identify Every single “tax-exile” and back-tax them to the beginning of this utterly immoral avoidance measure.

    Identify every banker who approved a loan for an unsuitable applicant, just to “ramp-up” his/her bonus;

    Take those bonuses from them.

    That’s a reasonable start, I suggest.

    Please let no-one say the Dail cannot legislate to do these things and take this money – if they can take children’s teachers, resources and books away (you know the “free book grant” for poor kids is gone from Sept. ’09, right? It has not got much media cover) and if they can take medical cards away and they can take an average of 8% away from PS workers on average €40k, they CAN take these ill-gotten monies away FIRST!

  37. Tim

    Folks, “..a large number of persons…..” in the Dept. of Finance have been working for MONTHS on the investigations/reports/banks issues.

    Who is working on helping our economy in general? How many “persons” in the Dept. of Finance are focussing on how to generate production in the economy? How many are working on “cuts”? How many are working just to save the banks?

    Answers to these questions will tell us much about the real priorities in play.

    ….. just a thought…….

  38. @JohnD15 I would agree with you to a degree what has been done needed doing to survive the need of further financing the next step is begin criminal proceedings. If Brian could not tell his Boss Biffo then he must now publicly begin the shooting of his banking friends how Goggins could calmly state he will be earning just under 2 million this year is baffling, why does he think he deserves such rewards ?
    We have gone full circle here politically now and both FF and their counterparts FG are finished through the greed of the sons of the grandfathers who had freed us from our English Land lords. Of course been modern Paddies it will be a blood less change , all any Dubliner who has lost money in the bank shares , should have looked at Bertie ,even ten years back He didn’t trust the banks with his cash And he was this Country’s Finance Minister at the time….We are a living Comedy show us Irish this there can now be no doubt.But lets look at the up side , both rugby and soccer took victories while one of our own too McLory took the Golf. We have begun the fight back already. Now we simply close quango’s and all CEO’s removed without pensions. Starting with the ESB criminals

  39. oh and to the room , watch Bank of Ireland this Friday the 13th , Shakespeare couldn’t write this play

  40. McGoo

    Perhaps I’m missing something, but it seems painfully obvious that the only thing that will get the world economy going again is inflation. If the value of money is going down, people will happily borrow and, more importantly, they will spend it now, rather than later when prices will be higher. And all that nasty debt will shrink to almost nothing.
    I’m not alone in thinking this, the US and UK governments amoungst others regard deflation as a disaster and are desperately trying to create inflation.

    But our government is trying to bring prices and wages down, and increaing taxes to reduce peoples spending power. In other words, they’re desperately trying to create deflation, exactly the opposite of what the big boys are doing.

    I know Ireland can’t “print” money to create inflation like the US and UK can, but if the government succeeds in creating a deflationary environment in Ireland, the economy will simply stop, because no-one is going to borrow or spend when prices are falling. See the housing market for an obvious example.

    Given that inflation is the only way out, surely the central banks of the world should get together and agree to reflate the world economy by an agreed amount, to try and make it as coordinated as possible? Or is that not how they think?

  41. DarraghD

    David just departing briefly from the current subject matter, my missus and myself were watching you on Prime Time tonight and she thought you had put on a few pounds around the face since she last saw you, I think it’s all in her head though!

  42. Tim

    Mk1, Thanks for the engagement on this issue. I call your further attention to this:

    “hitting all 300,000 could take out spending power in the economy and drive things down further. However, mathematcially if by extension it means that the other 1.7m non-PS workers pay an equivalent less amount of tax, then the money isnt actually being taken out. All the measure does is move it from one cohort to another cohort of the population.”

    The point I am making is that the 1.7m non-ps workers, then, never pay the money IN; thus, the PS workers cannot pay it back THROUGH the economy, thereby “greasing the wheels” = keeping services going/repaying loans/paying for meals/waiters/chefs/restaurant suppliers/keeping people in jobs/keeping tax revenue generated by same/SPINNING around in the economy.

    Money MUST move, if it is to be useful. Your justification for the cuts/levies on the PS workers requires money to remain stationary/static; therefore it is no USE to the economy.

    • paddythepig


      the problem is that 1 in 4 euro of PS wages is currently coming from borrowed money. Therefore we have to pay it back, with interest on top. We could reverse the cuts, and increase PS wages and the amount of PS workers, and have even more money SPINNING around the economy, by your model. Trouble is, we’d have even more money to repay, with more interest. Even worse, chances are nobody will lend to us if we did this (or if they did, they’d charge a much higher interest rate) .. and one day, you’d go looking for your wages in the bank, and shock horror, the kitty would have run dry.

      I think the productive low-paid public servant got screwed in the cuts. The wasters – at all levels – got away scott free. Thats not an anti-PS jibe by the way ; there are wasters in all organisations, public and private ; the market (sort of) deals with the private variety. The PS needs to cull it’s wasters, and preserve its productive staff, and reward the low-paid especially. The over-paid PS higher management should have been given a major salary haircut, but they’re the ones making the decisions, so their self-interest supercedes the national interest.

      I’m with you on penalising the banks though. What is going on there is a disgrace. Goggin took the biscuit last night on TV.


      • Tim

        Paddy, I am trying to understand it and I get your point about the borrowed 1 in 4, but I am still not convinced by that argument because it assumes that spinning money through the economy does not give that economy increased momentum/impetus/increased production, generating production.

        Maybe I am not knowledgeable enough to get it right, yet, but I will keep trying – I believe we all should keep generating ideas.

        You are correct, of course, about Goggin – where the hell is the “pain” in living on €2million? For that matter, where is the pain in living on the €400,000 a year that Ruari Quinn suggested for bankers this morning? How does he think a public or private sector worker on less than €25k (and possibly contributing through union dues to the labour party!) feels about that “pain”? ….. and next month, the the public sector worker takes a further pay cut off their €25k?

        Cutting teachers and special needs kids ……….. and school books, etc., how many potential “great thinkers”, innovators, inventors, entrepreneurs of the future are we aborting here?

        You may be right about cuts being necessary, but I just cannot see how any of these can do anything but further harm. Again, I am TRYING to understand the gov.’s and your stance and I do not believe my mind is closed; I just don’t see how cutting my two young children’s education and their teachers’ pay is going to help.

    • Deco

      Lads – we have a massive problem with the public sector pay bill. The most expensive people on it do the least work. Even before Goggin became a semi-state employee on almost 2 Million Euro, there were serious problems. Classic example is the FAS directors who have not resigned – the FAS director who did resign(eventually), got a sweetener, and a pension, etc..
      The current Chairman was a former Chairman of AIB-he should be sacked-and he should lose his pension from AIB. In fact the entire pensioned retired director body of the banks should take a pay cut – they need the money much less than the Waterford workers who are occupying a factory – because they want to work !!

      You are both right – we need to reform the public sector paybill. This means starting at the underperformers like the layers of titled wasters in suits in CIE, FAS, the ESB as well as the new semi-state owned banks. This means no more subscriptions by taxpayer owned/funded public organizations like FAS, being paid into lobbyist bodies like IBEC. If IBEC existed in the corridors of the US Congress – Barack Obama would have them thrown out of the building. But here they decide public policy and lobby to protect oligopolist market rigging.

      We need to sort out the corruption at the top. David McW was on Prime Time on RTE 1 last night and made this clear. Let’s see it happen. Let’s see Goggin, Sheehy, Casey, Fingleton etc.. pay up.

  43. mespilroadflats

    Casey and Bowler of IL&P need to resign full stop. Enough of the spin about salary and bonus reduction two days before this broke. We’re not stupid.

  44. Lorcan

    BrendanW > Shakespeare couldn’t write this play

    at least shakespeare would have given them better lines..

    Tim > Identify the solvent and highly profitable (because they were smarter and knew when to stop, or had insider information) developers who have moved their ridiculous profits off-shore;

    Not to defend the developers, Tim. But they didn’t have insider information, the information was all in the public domain. It was some of the most blatant outsider information for those who choose to listen. Poor David was going blue in the face telling all and sundry that it was a bubble and it had to pop. If anyone deserves a Cassandra complex, David does.

  45. jim

    Its the underlying fear of the unknown that is the cause of so much anxiety in Ireland and the World at present.Trust me when I say that fear of the unknown is an irrational fear and has no place in a mature approach to problem solving.Whats passing itself off as “unknown” in the financial world today is an attempt to disguise what is indeed known by people who do know, and their biggest fear is losing money,its as simple as that.When you combine that fear with the fears of being found out and found wanting its is understandable that these people will attempt to muddy the waters and deflect attention away from themselves.The culture that evolved around a poorley regulated market in terms of greed,fraud, etc was ineviteable( human failings and sharp practice being endorsed and excused in the quest for more record profits).Sub-prime credit and complete failure to properly price and assess risk is what has led us to where we are today both in Ireland and the World.All the wheeling and dealing you see at present both at home and abroad is about who will be left with the final bill to pay.People and indeed Governments will use every ploy to avoid that bill,but the truth is the bill has to be paid.The mature thing to do is to accept your losses and rebuild bigger and better and learn as you go.I have found throughout my Buissness life that people once they accept their losses,have a great capacity to re-invigorate themselves and in most cases recover the losses and feel a greater sense of achievement for having done so.Thats from the heart and this old head if ye care to take it onboard.As most of ye know by now I have to lighten things at the end so,imagine an AA type meeting in the future only for Bankers.Hello my name is Seanie Fitz and I lost 10 billion but I havent touched a Euro in 12 mths.Applause.Your welcome,have a seat next to Paddy Sneary,he will help you regulate your addiction.

    • fordprefect

      I think we need to separate the world crisis and the Irish crisis. The Irish crisis was sparked by a global freeze in the credit markets but it was not caused by the freeze. The corruption and cozy capitalism was our own creation and nurtured and encouraged by our own.

      To say that the Irish crisis was caused by “global forces” is like a drunk blaming the barman for having too much beer and besides nobody stopped him drinking. It is a complete abdication of responsibility to blame external forces.

      Most business failures come not from an external catastrophe but from internal delusions and incompetence. I say this from bitter experience. The key difference in Ireland is that if you are a failure and have connected mates you don’t get to fail.

      So lets get off this pussy footing around and being disappointed and mincing our words with the pretence that it was innocent greend and innocent fraud and lets get ready for the perp walks. We need them to walk and God knows the perps deserve it.

      To suggest Jim that the culture was inevitible is another cop out. We have no spine when it comes to institutional crimes in this country. Throw them in jail. And throw them in again if they do it again. Until there are consequences for every citizen regardless of their connections then we have a country. Otherwise we don’t have a functioning democracy. Simple as that.

      • Fergal73

        I really hope that some kind of laws were broken and that some senior heads go to jail and have assets taken by the CAB.
        Will it happen? Will it hell. The seizing of Kinsealy by the CAB with the exhumation of Haughey and a symbolic execution of his body for treason against the state is about as likely. We have yet to have an unforced resignation!

        Oh for the perp walk. It would be a start.

  46. furrylugs – i am in c’ote d’azur nice until 21 st feb……..hope to contact you afterwards …..best of luck

  47. In Iceland you can enjoy their national dish ‘ pickled ram’s testicles ‘ that’s exciting ! Maybe we should include our own version now that we all are in the same club. Any suggestions?

    • Deco

      Do we really want to compare ourselves to Iceland ?

      Maybe our national dish should be ‘a peice of humble pie’ ? In the context of all of the waste and pride based expenditure in the past decade.

    • How about “Biffo’s Bang(k)ers & M(c)ash”.

      On a note somewhere here it was suggested that David was in there shouting for the Bank Guarantee and now deriding it. Far be it from me to stand up for David as he is well able to fight his own corner, but the reality is that unless ideas are thrown into the pot for discussion we end up in limbo. No one person has all the answers, especially as the questions can be the unknown, unknowns.

      The bottom line is that something gets done – eventually – and we move forward. I am with Jim on taking the hit and getting back up again reinvigorated, deeply hurt, but determined to get out of the mess.

  48. Philip

    Ram’s testicles eh?

    Reminds me of an Irish version of Russian Roulette practiced in country fairs. Called tickling the asses balls. Basically, you tie a string to the genetalia of an ass and a chancer puts down a bet that he can pull the string (while reaching beween the hind legs) 3 times (good tugs now!) and walk away without a few broken ribs or worse.

    I think some level of catharsis is needed andI have an idea for a daily TV program just after the Angelus.

    You have your line up of the wrong doers Being the chancers they are, they are given a choice. a) Pull the string and go free b)Life imprisonment. I am sure those among you can dream up something better.

    The Ass would be prepped by either a combination of lower paid PS workers, parents of disabled children and anyone else whose basic social services were cut.

  49. David – you can’t tell us what the unknown unknowns are because then they become the known unknowns and we all know the future is an unknown unknown regardless of any known knowns you believe are unknown unknowns. We know there are unknown unknowns and Brian Lenihan knows thereare unknown unknowns but since they are unknown he knows they can’t be known and therefore he has to act on the known knowns that he knows.

    Or as Bob Dylan said: “The only things we knew for sure about Henry Porter is that his name wasn’t Henry Porter”

    I hope I have been as clear as you today.

  50. Isn’t there a healthy mix of humour, indignation, thought… going on here. The greater the diversity of expression the better I say. Right now, we have no way of knowing where the best way forward lies.

    Even though I’m flying the flag for absolutely no litigation or criminal charges for anyone (because that way only lawyers win) I love it when someone screams ‘jail the bastards’. That is catharsis in action.

    Looks as if there are a few honourable men among bankers: two senior heads to roll in the bank that passed billions over to Anglo to bolster their balance sheet, and gift their directors bonuses. Of course there would have been a quid pro quo…

    May I associate myself with these words

    “I have found throughout my Buisness life that people once they accept their losses,have a great capacity to re-invigorate themselves and in most cases recover the losses and feel a greater sense of achievement for having done so.Thats from the heart and this old head if ye care to take it onboard…”

    Already a lot of good is coming from this crisis. I’ve cut out waste. I now use all the food I buy. I now shop around. I look for best price everywhere. Unfortunately I still have a blockage against bargaining at the supermarket till, so there is still room for improvement.

    This forum may be used as a job application tool: by your words be known. I’d put more reliance in what people write here than what you write here on your Facebook page.

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