October 14, 2009

Addicted to Money: Part 2 - Nowhere to hide

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Part 2 of the three part series, Addicted To Money

Nowhere to Hide

In Episode 2, “Nowhere to Hide”, David takes a road trip through the economic badlands, revealing the inescapable global reach of crisis, from bankrupt Iceland to struggling Honduras. Now that the credit meltdown has peaked, it’s left debris spread throughout the real economy. What we are witnessing is the ebbing tide of a failed ideology, supercharged capitalism, says David. And in its place are the skeletons of industries that can’t adapt to the downside of globalisation.

Further information on the RTE website.


  1. Does anyone else here see the advertisements of iFOREX flashing up? David?

    I find this hilarious to say the least. Here we are, talking about the outrageous events that climaxed in banks holding entire countries hostage, only to be invited to gamble on currency movements, one of the biggest high risk trades these markets have to offer, and now anyone is invited and can trade on the Forex, yeah right. Come on in and loose some.

    Surely you have full control over the advertisement offers on your site, and while your background in banking is known, I can not but wonder.

    Good second part btw.

  2. Hehehe :o) David was not aware about it apparently.

    Nice one! LOL

  3. cozzy121

    Another good episode David. Getting off topic, I think the ifoex ads are perfect-ably acceptable. If someone clicks on it, invests money in, and ultimately looses it that is their own fault. It’s not the fault of the site that they saw the add on. Personal responsibility appears to be a forgotten standard ie. we did vote the same government in 3 times in a row,

  4. adamabyss

    Much better episode than last week. More meat on the bones and the imagery wasn’t as annoying or distracting.

  5. Pablo

    Hi,

    I would like to add that Addicted to Money is a very interesting take on what is happening in the global economy althought it would be helpful if David elaborated a bit more on the issues & conclusions.

    For example in last night’s episode one of the conclusions appear to be that some countries such as the US, and presumably Ireland, had such high levels of debt that the only way the country could get out of the mess was to default on the debt. It was suggested that this would be done by deflation through printing more money (am I right in this?). I would have been very interested in learning more about this i.e. what would happen to people’s savings which presumably would be worth a lot less. So the winners in this case would be those in debt but the losers would be those with savings.

    I would like to hear from subscribers about that you think would happen in the case of deflation or debt default.

    • woodsey

      Ireland is already in deflation and unlikely to default on its debt as it’s no longer a sovereign fiscal nation but part and parcel of Europe. So this part of Europe (Ireland) is only likely to remedy its fiscal situation by either increasing its income or decreasing its spending as Europe sees fit. Therefore your savings (in Euro?) would be unlikely to be threatened other than interest rates are likely to remain low for the foreseeable future.

      D McW was dealing with America when he mentioned debt default. America is heavily indebted to other nations and its economy is now so badly damaged that one of the simplest ways to rid itself of the debt burden is to default on all or part of its debts. The ‘sneaky’ way to do this is for America to print more dollars, thus making the dollar less valuable to those holding dollar debt. America can then dip into its can of devalued dollars to pay off the debtors.

      Ireland holds somewhere around $40 billion of American Treasury Securities but China, where the real problem lies for America (and the rest of the world?) holds $800 billion.

      • beneficial

        China is already off loading some of its Dollar exposure
        The pozi scheme which is the Federal reserve has run out of road.US debt running at 430% of gdp! The US inc
        is now dipping into the pension fund and leaving iou’s another $600 billion is be printed to buy back their own debt because nobody else will buy it. Think what that will do to savings 401k pension values !This dilution of the value of the dollar will filter down and hyper inflation is on the way.The only reason they can keep printing dollars is because its the reserve currency (at the moment !) should that change then all bets are off and watch out for a negative financial Tidal wave.
        The writing was on the wall when Nixon broke away from the gold standard.

  6. Dilly

    Will the euro go down the drain with the Dollar ?. Some believe, that we were brainwashed to embrace globalisation, but it is a wolf in sheeps clothing, sending us into debt slavery, and that carbon tax is just the next phase of a controlled take over. I know people, just ordinary people (my Dad), who predicted all of this 25 years ago, and they were just laughed at. No one is laughing now.

  7. alpha

    David your program last night was excellent, except for the bit where the man in Iceland tell us that everything is still functioning fine despite the economic collapse. But excuse me, may be I misunderstood something. I
    thought the first part was excellent as well, and I’m looking forward to
    the next one.
    It is clear to me that going ahead with Nama will be a total madness.
    If the speculative projections of the Government are wrong, the citizens of this Country are going to have to repay it for generations to come.
    How can we trust the same politicians, which were telling us that we were going to have a “soft landing”, to put the future of the citizens of this Republic as “collateral”? Or to gamble with something that people of the status of Joseph Stiglitz and others, are warning us not to do, because it was tried in other countries and didn’t work? How can we ignore it?
    Then I think it is essential for the sake of democracy itself, that Nama is put to the people in a referendum!

    • woodsey

      NAMA came suddenly ‘off the blocks’ as an altered version of the Bacon Report of the ’90′s. It was suggested to the Dept of Finance by Peter Bacon in response to an Irish government request for help. The government had previously messed up by ‘guaranteeing’ both deposits and the banks lending in a nonsensical €400 billion ‘guarantee’ that Ireland couldn’t afford to meet. This ‘guarantee’ was a Dept of Finance ‘solution’ to Irish banks going bust, because they had lent money in bucket-fulls for repayment in tea-cups. However, the European effort to ‘rescue’ Ireland from its banking predicament, led by the European Central Bank (ECB) meant that the ECB pumped money into Ireland to keep it afloat. But the ECB is forbidden by EU rules from directly propping up a member state so (and this is where it gets silly!) the Irish banks ‘bought’ Irish government bonds and then used them as collateral to get an ocean of cash from the ECB. That money has to be repaid so the NAMA ‘trick’ is that the banks ‘pay’ the Irish State for these bonds by offering its debts to the nation, instead of cash. Most of this has occurred as a result of the badly thought out ‘guarantee’, based on Brian Lenihans stated belief that, ‘You wouldn’t want the banking system to go down?’ But Brian forgets that the banking system is not the issue. The system is not at risk. It’s the banks! These individual banks are private companies, whose ‘rescue’ could well bankrupt the State.

      Ireland is being simply robbed 24/7 and I don’t think it needs a referendum to help prevent this. A revolution probably, but please, not another referendum!

  8. nev

    Missed the episode, but they are subjects of lunch conversations now, which is a high praise I think.

    One suggestion: people seem to fall easily into this “bank personification trick”, the concept of “we bail out the banks now, but they’ll pay us later”. It is not obvious that banks are not people, and taking money from the banks in the future (through levy or whatever) is an attempt to punish its future shareholders, not the current bondholders. And in the end it is not going to work, as all that money will still be extracted from the public, just indirectly. The “grab” that is clear and obvious to Stiglitz can be quite hard for many to see…

  9. I think your programme is quite interesting although a lot of what you says is what I call — CSEA (Common Sense Economic Analysis) CSEA comes from being an intelligent human being and watching what is going on around you, clearly you do. Reading economics books is fine but reading the labels of where clothes are made being sold in Dunnes, Primark or Asda and you get the real picture of what is going on in the world.

    I am a firm believer in Asia Pacific excluding Japan and have had my (very) modest private pension fund entirely in this marekt for several years, despite recent bumps and a much quicker climb back to where it was in October 07 (I am now within a hairs breath of that value on a fund I have added nothing to ) I have another reason to believe Chinese markets are going to keep growing at an exceptional pace:

    Our money.

    By our money I mean the money of every fund manager in the white west who wants to get on the bandwagon

    Investment and Speculation fuels the market, we all know that from our own little domestic housing market, and from other booms in the equity market — late 20s the most perfect example.

    At the moment the only talk of market growth is coming about the far east , your programme is the kind of populist economic tele journalism adding fuel to the fire but Just read the kind of articles there are in the FT — there is serious stuff being written about these markets, in serious journals and been acted upon by huge fund managers.

    Plus the fact the Chinese are saving like mad, they are hoarders just like you said in your programme – probably comes from the peasant mentality and need to save for bad times (why don’t irish peasants do the same – search me!)

    Now returning to my modest Pension fund — the Standard life fund is now at 98% of its value at the end of October 2007. I have not put a penny piece into it in that time. Now how many other pension funds can say that, not many I think is the answer. In fact it has grown by 10% in the past month!

    Back to China — there is now a flood of investment going into these markets, as mentioned both internally and externally from the white west, and the Chinese want this investment so they can continue to buy the rest of the worlds economic raw material resources — witness the example you gave last night about Australian (now Chinese) mining companies.

    Unless there is another global meltdown I confidently predict that China and Asia Pacific not including Japan will grow by 30 — 40% over the next six months — then I think there will be a minor realignment. The growth will in the large part be driven by fund inflows, which is always dangerous as it causes over inflation of the market, after the minor readjustment in the early new year growth will reinstate itself.

    My overall prediction for the next twelve months is 50% growth in value for funds in this area, with some dips and scrapes along the way. Hey Ho on we go.

    By the way here is an interesting thought on NAMA – If a house was worth 500,000 at the peak of the boom and is now worth 300 how much has it fallen in price by = 40% If it grows in value by 40% what will it be worth = 420,000, to get back to its original worth it has to grow by 66%. So why do the Government think that property prices are actually going to grow stronger than they did in the boom time — answer — they won’t! Although Far Eastern markets have done this, and I think a lot of the growth has come from speculation and cash investment. My modest pension fund fell in the crash with a drop of 27% from this point it has grown 38%.

    Now answer this — is the Irish property market going to enjoy the same level of investor confidence as say Far Eastern stock markets to fuel this kind of growth again. There is only one answer to this question.

    I do enjoy your programme a lot of what you see merely reinforces what I have myself have been thinking for a long time, but the great unwashed do need to be educated.

  10. alpha

    OK Woodsey! I’m glad at least we agree regarding NAMA.

    If you are talking about “a bloodless one”, then it becomes “evolution”. And as in the “famous joke”, the difference is only one letter.
    Mr. Stiglitz had something to say about it: “You don’t call it nationalisation, you call it “pre-privatisation”. And then we’ll see how far the Banks want to push it!

    If we make enough noise, some TDs might think it twice knowing that citizens are going to make them personally responsible, if they do it, without people’s consent. This could even constitute a violation of civil rights!
    Our message to the Goverment and to the Opposition as well, ought to be: If you want it!, “Put NAMA to the People”.

  11. Good morning,

    As we learned yesterday, until 2020 we get back approx 5,5 billion Euro from NAMA. On Top a childrens hospital with 350 beds and > 800 parking slots, valued at approx Euro 750 mio will be finished, in 2014.

    We have nothing to worry about, we are in competent hands. LOL

  12. MK1

    Hi David,

    I got a chance to watch episode 2.

    You say that globalisation is bad for Ireland. Well, no, its not, its just that we have to change and adjust ourselves as the globalised ‘model’ changes on a daily basis. This change is inevitable. Ireland is in a weak position as it is more open to changes in globalisation changes than many other countries.

    Icelands leverage was huge at 10x GDP. But is ours not more than that?

    The winds of ‘correction’ have affected China, no doubt. An interesting factoid is that whilst it exported 116billion USD last month, it imported 103 billion. China is a key cog in the globalised trade, not only export but import too. And you correctly highlight the ‘aggressiveness’ of its state intervention such as in raw materials. Note that Chinese held US debt is small potatoes really at USD 800 billion.

    The commentator was right, the global bailout of financial markets is reverse Darwinism. As I always state, moral hazard was ALREADY embedded long before this crisis took hold.

    You also correctly highlight that there is no guide to economies, that this could be one of many crises, this is a wake up call, that the system we have created is complex and very fragile and there is a lot of interdependence and fragility. More systemic crises could easily happen which may dwarf this recent one.

    Banana Republics? We are the BaNAMA Republic, looks like!

    good work David,

    MK1

  13. JF

    A very well known video exists with Peter
    Schiff, who is to see in the series. It shows
    and other financial experts forecasting,
    commenting, advising in 06 / 07, at the
    height of the media height pushing the
    bubble. Most of the those experts were
    incredibly wrong. Irish viewers may not know those US pundits, but it will be familiar. The experts from the banks who appeared on TV had all the same message. It includes a really proper
    diagnosis from Peter Schiff: “We have
    to stop borrowing and consuming and
    start saving and producing again.”
    That could be said for Ireland as well.
    The video is considered awesome,
    impressive. It is must- see for many
    reasons.
    http://www.youtube.com/watch?v=2I0QN-FYkpw

  14. alpha

    Peter Schiff sounds like a true American hero. The others like the ones were telling us we were going to have a “soft landing” and had the best economy in the world.
    Always singing from the hymn sheet they are given! I wonder why?
    Yeah we are in great hands!

  15. it is true what laughingbear says
    the iFOREX (currency trading) add is on the following page:
    http://www.davidmcwilliams.ie/2009/11/01/the-great-deception-must-end

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