May 4, 2010

Lenders must share the blame

Posted in Banks · 144 comments ·

How do these financial crises normally end? Many people are asking when this Greek episode will end and how it will affect us.

There’s good and bad news on this score. The good news is that, if the state does the right thing, a financial crisis can usually be managed.

The bad news is that, if our government remains in denial, trying to avoid the hard decisions, there will be a run on our banks. Ordinary people will take their money out and put their savings somewhere safe.

At the centre of all this is that most precious of commodities -trust. Financial trust has been destroyed. No one trusts banks any more, and no one trusts our government’s ability to make us financially secure. Thus, we are in a precarious position. All it takes is a small shock to tip the whole thing over.

Let’s paint the bad picture before we examine the way out, which would ensure that we avoid this.

Think about what is happening in Europe at the moment. The simple story – one that is being peddled constantly, and shamefully hyped by our own government -is that the Greeks are a race who can’t be trusted.

The mainstream view is that Greece is a country that has run up huge deficits and is paying the price -and that it is, in some way, uniquely delinquent. This is only half the story. This is the lender’s story, which points the finger at the borrower.

Greece is the symptom of this crisis, but Germany is the cause. This is a crucial thing to understand and one that gets forgotten in the constant spin coming out of Brussels. It is only right that Germany pays for the Greek problem, because Germany is the reason for the crisis.

German banks and the German populace are no angels in this narrative and, despite their protests, they need to be reminded of this. For every loan for which there is a borrower, there is a lender.

This European crisis was created more by lenders than borrowers because, taken in the aggregate, Europe has more savers than borrowers. This fact is manifested by a large current account surplus with the rest of the world.

At the core of Europe and the euro is Germany -a country that prefers to save than spend or invest. So the German banks are stuffed with money that not enough Germans want to borrow. If the German banks don’t find a home for this cash, the banks start to make a loss, paying out interest on deposits without enough corresponding lending on the far side of the balance sheet.

So the German banks had to find someone to lend to. They found Greece and Ireland and others, Spain included.

They did little or no research on Greece or Ireland. They could get a margin over what they had to pay German savers, so they stuffed the periphery of Europe with money. The Germans bet on the notion that, because of the euro, there was no currency risk. Then they made the fatal mistake of confusing no currency risk with no risk. But of course there was risk. There is always risk.

The German bet was that the rest of Europe would never let Greece go under (or Ireland for that matter) so they were actually getting risk-free margin in Greece. So what did the German banks care if Greece’s borrowing was going through the roof? There was an EU backstop, so they could give the bill to someone else if things went pear-shaped.

Well, things have now gone pear-shaped and the German banks, the EU and the IMF have decided that the solution is austerity in Greece.

But many in Greece believe that the solution is an orderly default. After all, it takes two to tango, and why should the borrowers be uniquely culpable, when the lenders were greedy and did no proper due diligence?

The Greek position is understandable.

An orderly default is the only obvious way out. Greece can’t pay all these debts. We know that, the markets know that, and the German creditors know it too. So why the IMF/EU charade?

My view is that the charade is a failure of conventional wisdom. Conventional wisdom is always out of touch in a crisis.

The conventional wisdom is that countries don’t default. But this has never been true.

Dozens of countries do, particularly if they have been stuffed to the gills with money by reckless lenders who were in it for a fast buck.

If the world demands that Greece forces austerity through, the Greeks won’t be able to deliver, and there will be another crisis, even with the new €100 billion-plus deal expected to be announced today.

In this next phase of the crisis, Greek corporates will take their money out of their own banks, because they are not being paid for the risk of keeping their money in Greece when they could keep it in Germany. This is why there was a run on Anglo in January 2009 -corporates took their cash out.

This run by corporates will be followed by individuals who don’t want to be last at the ATM machine and find that there is no cash left. Panic will follow. When the bank fails, the crisis is over. The money comes back home from abroad into a new bank, and the country starts again. This is likely to happen in Greece.

The alternative to this, of course, is that The Greek government gets the creditors in a room and says: ‘‘Sorry, your gamble didn’t work, there is no money, let’s do a deal.” This would solve the crisis before a run on the banks and leave the small saver reasonably unscathed.

So what does all this mean for Ireland?

Contrary to popular belief, which says that if Greece defaults it would be a disaster, my contention is that, if Greece doesn’t default, there will be eventual and very serious panic in Ireland.

The real risk is that a bailout of Greece will fail, and the Greek people will be the first to abandon trust in their government.

The IMF and EU will continue to mouth platitudes about solidarity and the like.

Meanwhile, your average Greek will put his cash under the mattress. A Greek bank will fail and the contagion will no longer be limited to bond markets (that frankly means nothing to anyone on the street), but the panic will spread to depositors. We are in the same boat here and, unless something is done, will head in the same direction.

Our debt is unsustainable, just like that in Greece and other peripheral countries, such as Portugal. Thus, the great Irish financial/banking crisis will see us come under similar pressures to Greece -and head us in the same direction, with confidence evaporating, the state struggling to raise cash from reluctant lenders and our banks at risk of big outflows of cash.

This is the upshot, not just of the great Irish borrowing binge, but also the great German lending splurge. So now we have to hope that the Greeks put their hands up -and give us permission to do likewise.

  1. Salad Oil Scandal

    what does it mean-

    One of the worst corporate scandals of its time. It occurred when Allied Crude Vegetable Oil Company discovered that banks would make loans secured by its salad oil inventory.

    When the ships full of salad oil would arrive in the docks, inspectors would test it and confirm that the ship was full of salad oil. However, the company didn’t remind anyone that oil floats on water. They had filled salad oil tanks with water and put a few feet of oil on top, fooling everyone. The company would even transfer oil to different tanks while taking inspectors out to lunch. In 1963, the scam was busted and over $175 million worth of salad oil was missing.

    What is the name of the Irish version?

  2. kissane

    The article like most of D Macs just makes sense.
    If you dont put your money under an Irish mattress – try an australian one….appreciation and interest until the yuan takes over – and no bed-bugs.

  3. Deco

    I am not in agreement with the general premise of this article. I think that those that live beyond their means must make their reckoning. And if that includes us, then we must live within our means. A gradually increasing proportion of us have been living like a nation of CJHs for almost two decades.

    Secondly, I point to this graphic, which shows that the most exposed country is France – not Germany. This is from the New York Times.

    However, the question must be asked about the lenders – as to why they never did any homework. Basically the bankers should know when they are feeding a ponzi scheme.

    I think we should also differentiate between private sector debt and public sector debt. (Something which nobody in Kildare Street has done yet in a clear, consistent and definitive manner, apart from Senator Shane Ross). Bringing the state into the picture to bailout failed banks is very very dangerous for the taxpayer, the economy and the future.

    I also think that the ECB and the EU Commision have been absolved from any responsibility for the current mess. They both backed the low interest rate policy that predominated in the middle part of the last decade, so as to create prosperity and a feel good factor in the aftermath of the EU Enlargement. This was being reckless with the economy so as to attain a political objective. This is the real source of the problem. Cheap credit enabled a lifestyle to persist in Club Med countries which was unsustainable on the basis of cost competitiveness. This was goosed up by local political interests in Club Med who pursued one ridiculous scheme of state patronage after another, on all sides of the political spectrum.

    • mediator


      I had mixed feelings when I read this article. Generally I would agree with you that borrowed money should be repaid etc… However, in the current “crisis” there are elements of debt being used as slavery enabler. Another analagy might be illegal money lenders. If you look at basic financial distress literature you can see that equity holders also have an option to default on bonds and so hand over the firm to the control of debtholders
      and ultimately I think this is what is happening. When we default we will lose the last vestige of control or indeed the will to exercise control over ourselves. Indeed the sheeple will probably welcome what follows and hail the IMF etc as our saviour. Already most clowns in Ireland march to the drumbeat of whatever the media agenda wills.

      What follows will be dictat from our creditors. slash and burn of public services etc while the private sector masses clap and cheer (until it dawns on them what the long term consequences will be for anyone below the elite levels of our society)

  4. —- EUROPA?—-

    Good Morning,

    The sixth moon of Jupiter was discovered by Galileo around 1610. It took the catholic church 382 years to admit that they were wrong, and it took them another 16 years until 2000 to completely rehabilitate his reputation, and well, now there is a statue of Galileo in the Vatican.

    However, the now reasonably controversial leader of the catholic church, Ratzinger, wrote as late 1990, at this time holding the position as Cardinal in which he seems to have performed some more than questionable actions of hiding informations, that in his understanding ’The Church at the time of Galileo kept much more closely to reason than did Galileo himself, and she took into consideration the ethical and social consequences of Galileo’s teaching too. Her verdict against Galileo was rational and just and the revision of this verdict can be justified only on the grounds of what is politically opportune.’

    Denial is a wonderful thing!

    It is the same denial that guides the politicians of our Countries when it comes to the financial Heist performed on our Nations. They are as deliberately blind as Ratzinger and the catholic church was for 398 years.

    They just do not want to know the truth because it does not fit into their framework of ideologies and beliefs that drives them.

    The whole Euro Lie was based on ever increasing liabilities of importing countries, and as such is unsustainable, early and outspoken critics were condemned to the ‘Galileo chair’ with similar methodologies the church performed for a long time.

    Angela Merkel did not call for restructuring of debts, hence I have to correct my earlier stated prediction. I was hoping that she might show responsibility, she might do what is right and what is required in this situation as a leader who has to show responsibility and leadership.

    I was wrong!

    I gave her too much credit, against better knowledge I might say, and out of false hope. They are continuing to share the Junkie’s needles of debt amongst them and drive the system forward into oblivion, buying time for the very people who caused this Heist to gain even more profits by shifting debts around.

    See, this little sentence? – I was wrong! – Did you ever hear that from the politicians who were elected to represent the will of the people and who act against it instead? Of course not, they know what is best for you and I and continue to line their own pockets and those of their political friends with our money.

    Like the somewhat popular David Mc Williams, and other lesser publicly known but well respected economists are showing since a long time now, the notion of ‘no default’ at any cost, is what we are confronted with here like it is a matter of principle belief.

    The latest news about Bank of Ireland is another stunning example how the system is worked. To take up an analogy that proved to be somewhat provoking, the big pile of steaming pig shit has been increased substantially now by Lenihan’s statement ‘ This transaction represents a good deal for the taxpayer . . . the transactions announced today are consistent with the long-stated government preference that private market solutions to capital raising are found and implemented,’ yeah right!

    Richie Boucher was the investment hot shot of BoI miraculously now signing as CEO. – The NPRF in my humble opinion is nothing but another toxic waste dump, but time will tell. –

    So Lenihan agreed with Boucher to cancel a 1,7 billion Euro debt, owed by Bank of Ireland to the Irish taxpayer. Read that again!

    Yes, he essentially cancels this debt, by gambling on a profitable future, what a big steaming… well you know it already, they are talking up, believing in their own dogma that a pile of crap will turn into a pot of gold. – Amen! No offense, but this has a near fatalistic quality! -

    But let’s look at it again, so the state, in persona Lenihan, that is essentially you and I and everyone in Ireland, sees fit to cancel 1,0 billion Euro in preference shares, and replace them by ordinary shares at….drumroll…. Euro 1,80 per share, where a private investor snaps it at 18% lower, 1,53.

    Same old story, banks are overpaid by the state. Politicians represent special interests under the cover of public interests, and slowly begin to drum up the tune of patriotism and loyalty at the same time. Can you hear the drums beating in the distance already? This drum beat is the mold that develops on top of our ever increasing big pile, and once it is covered, you will be told there are truffles to be found in, you just have to dig deep.

    So, is anyone from the state asking the essential question here? BoI is valued at 2,0 billion and seeks to raise 3,4 billion. Hello? Anyone else here in favor of a used needle?

    Concerning the state/banks bailout in Greece, DSK’s monies will have, by statue, preferred creditor status, ahead of private bond holders, and Eurozone monies subordinated to that of private bondholders. Mind blowing, isn’t it?

    This is supposed to entice private financial markets to lend to greece again, I rather call this betting everything on zero at the roulette table.

    For decades the German banks pumped money into Greece, so did the French banks, let aside those who gambled from London.

    The assumption, and message to the public is that Greece will pay it all back, yeah right! I do not even think that such statements deserve any further comment, same counts for Lenihan’s drumbeat. They all have reached a stage of producing nothing but lies and smoke screens now, they cannot track back from it anymore, so the medicine prescribed by banksters has entered the blood stream.

    Again, and I do think this in deed deserves re emphasizing here, Merkel’s refusal to call for debt restructuring is irresponsible and serve special interests only! Period.

    There is a small glimmer of hope left, some brave lawyers, economist and the ex CEO of the KfW bank in Germany are going to file a law suit in the Constitutional Court in Germany, remains to be seen what comes out of this.

    I risk another prediction here, looking at the sums involved, and the challenge based on the Lisbon Treaty, I would think that the German Constitutional Court will accept this complaint and enter proceedings. From there it has two ways, it can suspend the aid, or risk of later deciding if this is in breach of the constitution. 69% of Constitutional complaints are decided within one year, 88,7% within two years, hence the ruling would be just in time of the outlined initial three years Euro/IMF bailout.

    One thing is for certain, the market’s judgement will be based largely on these events unfolding in the next few weeks. It also remains to be seen whether the current government in Greece can ride out the storm that they seeded, the expression of public anger has just started I guess.

    The court in Karlsruhe seems to be rather critical of Germany’s EU activities in the past, it is in their powers to delay the Greece bailout, which eventually could lead to restructuring debts.

    To the best of my knowledge, Lisbon, I mean Portugal now, has not asked for FLC, flexible line of credit, that the IMF can grant. Neither did Spain, but they should, to build an up-front contagion protection. Why they did not do it comes down to wrong pride.

    Denial? Probably!

    Wong is wrong, no matter who says it!

    EMAIL to Eamon Gilmore, Leader Labour Party. 3rd May, 2010:

    Dear Eamon,

    to the best of my understanding the proposed participation of Ireland in the Greek bailout, causes not only an additional 1 billion to be borrowed and dumped into a bailout package that never will see any returns, but also raises questions in the light of article 125 of the Lisbon treaty.

    I would like to challenge you here in a friendly but serious way nevertheless, not only to raise this issue in the next dail meeting as you indicated in Irish newspapers, but to go the extra mile and truly show leadership on this matter as the opposition Leader with ambitions to run Ireland as a government party.

    I challenge you to get together with a group of economists and legal eagles and bring this matter forward to the Irish Supreme Court as a matter of urgency, instead of wasting precious time on useless and predictable debates with the current government .

    A group of economists, lawyers and the ex CEO of the KfW bank plan to bring this to the German Constitutional Court, and my prediction is that the court will accept this complaint and proceed. From there it has two ways, it can suspend the aid, or
    risk of later deciding if this is in breach of the constitution. 69% of Constitutional complaints are decided within one year, 88,7% within two years, hence the ruling would be just in time of the outlined initial three years Euro/IMF bailout.

    Please take this matter to the Supreme Court.

    Best wishes

    • ps200306

      laughingbear said: “The sixth moon of Jupiter was discovered by Galileo around 1610. It took the catholic church 382 years to admit that they were wrong

      You’re implying the Catholic Church denied the existence of the moons of Jupiter? I’d like to see evidence for that one.

      laughingbear said: “However, the now reasonably controversial leader of the catholic church, Ratzinger, wrote as late 1990, at this time holding the position as Cardinal in which he seems to have performed some more than questionable actions of hiding informations, that in his understanding ’The Church at the time of Galileo kept much more closely to reason than did Galileo himself, and she took into consideration the ethical and social consequences of Galileo’s teaching too. Her verdict against Galileo was rational and just and the revision of this verdict can be justified only on the grounds of what is politically opportune.’

      Nice attempt at a not-so-veiled slur, but in fact Ratty was entirely right. He also quotes Galileo entirely approvingly as recently as 2006, with regard to his insightful connections between mathematics and science. Something tells me you have the wrong end of the stick about what was actually at issue in the “Galileo affair”.

      laughingbear said: “They are as deliberately blind as Ratzinger and the catholic church was for 398 years.”

      The heliocentric model (which, let’s not forget, is wrong in spite of being a better approximation than the geocentric one) gained widespread scientific acceptance after Tycho and Kepler. Are you saying the Catholic church stuck to geocentrism as a scientific theory for 398 years?

      • Hi ps200306,

        I referred to Jupiter’s sixth Moon firstly because of it is name Europa, secondly Galileo discovered it, and last not least because the Galileo case is a good example for denial and the ways both entities, church and politics were and still are acting today.

        Certainly I am not contributing here to discuss ancient models, by now we live in the age of the large hadron collider.

        On recent events, Ratzinger had the nerve to instruct his propaganda channels to publish statements such as ‘Petty Gossip of Abuse’ when it came to revelations in these events.

        However, I am not contributing here to discuss the church or matters of religion.

        The analogy was used because it came to my mind that this level of denial and falsities is the pre dominant message spilled these days.

        It would appear that I failed to bring my point across.

        • ps200306

          I hear you too laughingbear. It’s just that it’s not a very good analogy. The history of the dramatic “triumph of science over medieval superstition” is one that is almost always rewritten in a rather post hoc way. The actual story of the superstitions and occultism of people like Galileo, Kepler and Newton is one that is generally omitted from histories of science — rightly so, I would point out, if we are only interested in science. But if we’re to have a fair analysis of the supposed historical conflict of science and religion, its one that needs to consider the unwarranted (and sometimes downright comical in retrospect) forays into philosophy of those famous scientists. The bottom line is that neither science nor religion of the time had the remotest idea of the proper (in modern terms) separation of their respective domains. (For examples, see Galileos attempts to overturn the entire edifice of Aristotelian-Thomist philosophy, Kepler’s ideas about the relation of the planetary orbits to the Platonic solids, and Newtons potty ideas about the “substance and lightness” of the eucharist as well as his alchemical researches).

          This simplistic idea of four centuries of obscurantism on the part of the RC church is a bit laughable considering that Vatican astronomers, no less than scientists in general, entirely accepted the heliocentric model within a few short years of the unfortunate incident with Galileo. Indeed, many theof them accepted it before Galileo — the dispute was more to do with petty politicking than the substance of the arguments.

          • ps200306

            I also note with some irony, some of the obscurantist pre-Galilean astroturf I keep seeing in these commments about “moon wobbles” and such stuff that seem to pass by here almost without a murmur.

      • Did you know Copernicus was an economist?

        “Six Great Scientists: Copernicus, Galileo, Newton, Darwin, Marie Curie, Einstein”
        J. G Crowther; Hardcover;

    • Colin_in_exile

      Why don’t you aim your fire at other religions for a change, we’re getting fed up with your RC Church bashing here.

      You said before you love having Hindu, Muslim, Miscelleanous etc… living in your neighbourhood. Why not rant about the despicable Caste system in the Hindu world with the lowest caste being called untouchables – a caste you cannot escape from no matter what you may achieve in life? Why not have a go at Sharia Law in Islam, which demands homosexuals to be executed, which happens in 2010 in Iran? Why not rant about Mormons and the way they feel entitled to have more than 1 wife? Why not rant about Jehovas Witnesses about their beliefs on blood transfusions which have caused many of their followers to needlessly die?

      Get a life Laughinbear.

      • I hear you, thanks for your thoughts.

      • @Colin_in_exile

        Count me out, Colin_in_exile, Laughing bear makes a very decent effort to unmask coverups of all kinds, I’m not at all fed up with his posts.

        I would worry about a post such as yours though, which would attempt to muzzle and deny a person his/her freedom of speech.

        Especially in so far as he hasn’t ever denied or called for, unlike you, anyone else’s freedom of speech to be curtailed.

        Better to tackle him on the facts of his argument if you need to, not try to raise a lynch gang against his views.

        Play the ball, not the man!

      • liam

        A fair point I guess, however, you speak for yourself when it comes to the RC bashing fatigue, as you also do when comparing it to random other religions.

    • Dilly

      Well I enjoyed reading your post.

  5. AndrewGMooney

    I studied German and Greek culture and literature at University. S’funny how ‘useless’ it seemed to the finance and business cliques in the Union Bar. In whatever hedge fund cubicle hell they are today: They’re about to learn just how important cultural and literary history are to ‘economics’.

    ‘Lenders must share the blame’ says DMcW. Absolutely true. Caveat Emptor. Every German regional bank’ pension fund and indeterminate financial intermediary who bought the debt of other nations needs to ‘get real’. ‘The Great Repression In Germany’ by Niall Ferguson

    Along with China, Germany is the incubus/succubus of the world economy, hypocritically lecturing the spendthrifts whilst it was they who enabled this impasse with their greed and devious gambling in the casinos of The City. In Germany, hegemonic elites have ruthlessly exploited their untermensch workers, instilling in them a neurotic fear of credit by distorting and abusing the cultural PTSD around Weimar and the rise of the Nazis. They are very dim and short-sighted. Germany should be expelled from the Euro. ‘Germany Is Unfit For The Euro’ by Joerg Bibow:

    This isn’t only about economics, it’s about national pride. Greece, like Ireland, Italy, Spain and Portugal has a ‘culture of pride’. Blood feuds. Land fetishism. Hitching their wagons to the current neurotic iteration of German thought and culture was always going to end in tears unless there was a synthesis, a hybrid intertwining. But, alas, we now have a German Europe, not a Europeanised Germany. The consequences will be epic.

    As for the clowns at the ECB. Didn’t anyone notice that the Greeks paid themselves 13th and 14th month salaries (huh?) and bonuses for arriving at work on time and using a computer? Retired in their 40s and 50s, spent vast sums on ‘defence’, didn’t use modern accounting methods, all the while keeping to their very own idiosyncratic Drachma QE within the Euro? Didn’t anyone suss that the Greeks regard the whole EU/ECB ‘project’ as a polite way for Germany, Britain and France to pay war reparations for having allowed Hitler to trash their nation, stolen their gold and killing huge amounts of their citizens? Then allowed fascist juntas of generals to torture and kill Greek citizens who tried to free themselves from the post-war yoke? When the architects of the Euro were building their castles in the sand: Did any of them actually study Greek history, philosophy and culture? Didn’t anyone notice ‘Macedonia’? Cyprus? Turkey? A similar post-factum narrative will emerge in Spain and Portugal. The Italians will try it on, but after Mussolini and with the Vatican/Holy See abomination still in existence, they will get short shrift. You couldn’t make this up.

    As for Ireland?….t.b.c

    • Deco

      Andrew. I find you posts good. But you are making a premise that is not correct. Please see my link above to see the country that has the most exposure to the PIGS. It is not whom you would expect.

      • AndrewGMooney

        Deco, my premise is entirely valid. There’s a huge difference between Germany and the UK’s attitude towards Ireland.

        The UK has proactively engaged with the collapse of Greenspanism, seeking to engineer a reflation of world trade – the only scenario that can possibly save Ireland from oblivion. Whilst Germany has bogusly postured as virtuous and sober, all the while trying to hide their colossal exposure due to irresponsible lending. Hypo-Real? At least Ireland dodged that bullet. But the Germans won’t forget it. Or forgive it.

        Currently Alastair Darling and Mervyn King are handling the UK’s IMF stance whilst Axel Weber and Wolfgang Schäuble are doing the business for Germany. Who’s more likely to behave responsibly towards Ireland?

        The UK’s debt exposure to Ireland is not an insoluble problem as the political necessities of peace in The North will hopefully ensure a balanced, reasonable outcome. Unless there’s another Haughey and the ‘real’ IRA blow up Birmingham again. The outcome will probably involving the ‘voluntary’ entry of Ireland into a de-facto currency union with the UK, just like Scotland after their Darien Adventure. *raises eyebrow*

        Ireland has had it’s Financial Darien Adventure. Wouldn’t listen to voices of reason, tried to be the cute hoor in a menage a trois with the USuk and HardCore Eurozone. It’s blown up in Ireland’s face. What happens to the I.F.S.C if the Euro implodes? Do you seriously think the Yanks would give a second thought to relocating back to the City of London if Dublin has no Euro-strategic/language/time-zone relevance anymore?

        Ireland has to choose whether to become a province of Germany or rebel and reclaim its’ national sovereignty. And it can just drop the delusional FF/FG ‘victim script’ which has ruined it since the foundational errors of its’ birth pangs. No more of this ‘Saxon foe’ drivel. ‘Your Country. Your Choice!’

        “foreigners coming into this country and telling us what to do…… We don’t want foreigners here. Michael Collins, Liam Lynch, Pádraig Pearse and James Connolly wouldn’t have these foreigners running our business. It is about time we looked after our Irish people who are well educated.”

        Jayzus! There are eejits, then there’s yer man above. Clearly he knows very little about Irish history other than his fantasy version which ignores the birthplaces of most of the patriots he mentions. Prat.

        I’m looking forward to the Tory Titanic setting sail, leading to the collapse of the Disunited Kingdom, and an English Republic as part of a federation of Sovereign Nation States of the islands of Britain and Ireland. But then, I’m a real revolutionary, so what else did you expect? Europe is about to enter its’ death-throes. Again. Ireland needs to decide whether to join the death-spiral.

        Once the UK Tories start their panicky premature Germanic balanced budget fanatic ‘cuts’- the prospects for indigenous Irish industry go further down the drain. Or who do you think will step in? China? lol

        Given it’s disgraceful behaviour towards Greece: You can be sure the Germans won’t give a flying fc-uk about the fate of the Irish so long as they can load it up on more debt. A cursory look at Bild (the German ‘Sun’) shows just how things will pan out. Ireland chose a ‘new best friend’ in Germany. I think that friendship has now ended in tears.

        Did Bertie really believe Blair when he said he’d join the Euro? Did he not read the UK Treasury criteria for membership? Britain may eventually join some NewEuro, but only when Germany has been brought to heel. Or expelled from the Euro for its’ manifest delinquencies.’The Irresponsibility Of A German Chancellor’ by Wolfgang Münchau’:

        Gordon Brown will probably be running the IMF/World Bank in a few weeks. Which will be amusing, to put it mildly. He’ll be telling Cameron what he can and can’t do. You couldn’t make it up!

        • Deco

          Well, I was really surprised to see that the biggest lender to the PIGS, according to the diagram, was actually France. Especially given that the French economy has high unemployment, high tax, and all sorts of regional disparities.

          French exposure to Italy is not a serious problem given than Italian exposure to Italy is many times higher. In fact Italian banks managed to contain their lending to within Italy mostly, and mostly to the Italian state. A good idea if you want to get your money back. They can effectively control their own repayment by means of interference in the political system.

        • Deco

          The rumour is that Brown is finished. Even if Cameron does not make it. Basically his internal enemies will be lining up to throw him out. Three bad debates. Bad poll numbers. All sorts of gaffes. And then the entire Rochdale incident which basically undermined the core vote. If it happened twelve months ago Labour would have reformed themselves and would probably be preparing for another term in office. The clowns would have been shafted. Currently Labour are playing for a minority Conservative government that will last 12 months. They will not want to be stuck with the Lib Dems because a bit of introspection will reveal that the Lib Dems are all over the place on policy.

          On Saturday morning Labour will realise that they should have put Alistair Darling in the leadership, and got rid of all the hate figures that are turning away voters. He has a better grasp of what is going on, and has a far better manner with people.

          The next IMF head will come from the US/Canada/Jap. This is because it is rotated, and a Frenchman currently holds the post.

          Now I see why the IMF are so eager to bail out the Greeks…

        • Deco

          There is a striking similarity between the Darien Misadventure, and the way Ireland signed up for Lisbon 2.0…..In both cases the leadership that brought it all about was particularly inept…

    • Andrew said: I studied German and Greek culture and literature at University.

      Awww, there is a man who can understand my pains reading Adorno, armed with two lexica, greek and latin, to the left and right at the same time.

      Andrew said: This isn’t only about economics, it’s about national pride. Greece, like Ireland, Italy, Spain and Portugal has a ‘culture of pride’. Blood feuds. Land fetishism. Hitching their wagons to the current neurotic iteration of German thought and culture was always going to end in tears unless there was a synthesis, a hybrid intertwining. But, alas, we now have a German Europe, not a Europeanised Germany. The consequences will be epic.

      Yes, and this is why we need structures that allow and demand more participation and responsibility by the people of our nations, individually, on european and global level.

      One example, Referenda should be engraved into every nations tools to involve their people in major political decision makings that will affect all the people. Ireland is the only country in Europe that has the tool of a referendum, while in need to be re defined, at least it exists already.

      This is not only the total collapse of financial systems and economies, it shows beyond any doubts, that our current democratic structures failed and need to be re invented, partly from scratch.

      This can only happen by the people, the one and only sovereign, not the politicians that abused this system and drove it further by making policies that serve special interests only, and not the people who elected them. One could call it a system of no accountability, this has to change!

  6. Deco

    The German (tabloid) newspaper Bild, did a series of articles on Greece. Those of you who work in the public sector will point to this as evidence that private sector misbehaviour as the source of the problem.

    There are insightful episodes where the journalist asks for a receipt for small items and is told “No”. Basically there is money in Greece, but the tax system is completely ineffective. It is the type of place that one would expect North Dublin FF TDs to relocate the contents of their brown envelopes.

    And here is the main beneficiary. Kind of like the Greek answer to Sean Quinn. He is heavily leveraged to Greek Government bonds, which have been losing value as a result of the crisis. Every bailout is helping minimizing his losses.

    We are giving 1.3 Billion Euros, which we have to borrow, to the Greeks. And this is so that Cowen and Lenihan can continue maintaining the pretence.

    Even more hilarious is that Spain will have to cough up an enormous amount to bailout out the Greeks while 50% plus of young Spaniards cannot find a job. This is extremely absurd, if not outright wrong.

    Merkel will probably lose control of the Upper House of the Bundestag, which means that any chance that we will get a similar bailout are greatly diminished.

    And then there will be the General Election in The Netherlands and another General Election in Belgium. Both these events will ensure that neither of these countries have a mandate to bailout out Greece.

    This is becomming an even bigger mess. But I am certain, that Ireland will be one of the first countries to give money to Greece, because it is in our interest that we provide moral pressure on the other Euro members to prevent them from backing out. In fact we will rush to send the money to the Greeks so as to maintain the pretence that everything here is in good shape.

    Basically Clowen and Co. have to keep up the pretence along with the other PIGS.

    Both FG and ILP politicians are now talking about concern about the Greek bailout, and that they want to see transparency. If they really want transparency, they should ask the MEPs who are members of aligned groups from Greece. Interestingly the FG/ILP political point scorers don’t think that this 1.3 Billion payment to Greece should be stopped. (It should be done in the name of “solidarity”). This is point scoring – this is definitely not standing up for the taxpayer. If they really cared about the taxpayer,then they would indicate that they are against the deal until the Greek tax collection system is shown to work.

    I get the suspicion that like a recently prominent Wall Street player, FG/ILP are essentially issuing a hedge bet on the basis that the whole thing will turn sour, and they want to be covered. But they are not going to say it will turn sour. Oh, yeah and as per usual the taxpayer gets suckered with the cleanup bill. This is so that they can claim that they had reservations all along. But they will not stop it. Because they know that it is necessary to keep up the pretence. Their monthly salaries depend on it.

  7. Savers are the big losers in this fractional (or maybe no reserves) central bank controlled fiat money system. Savers have had their money diluted by 8%pa since 1999. “This European crisis was created more by lenders than borrowers” but this has very little to do with people living within their means. See links to ECB monthly reports and summary of the monetary and credit expansion here.

    David I know you may be a fan of this monetary system but at least be clear when writing about it. Are you saying that for every loan there has to be savings for that amount?

  8. Ignore this post…. I am just trying to find out whether I can have bold, italic and stuff here….

  9. econarchist

    David writes “German banks and the German populace are no angels in this narrative“. I don’t think it’s fair to put the ordinary German savers in the same category as the German banks. The savers may have deposited their money with the banks but they did not do so with the intention of making a huge profit from reckless lending. Most Germans are risk-averse.


    Traditional protestant logic would say that simply, debts are the responsibilkity of the borrower in the end and in general I agree with this logic. Having said that in the case of Greece and all the peripheral countries deeply indebted to mthe likes of Germany, the countries , like our own youngsters in Ireland were suckered into making stupid borrowing decesions and we all know the result. The problem I see at the moment is that the syatem is broken because it was abused by both borrowers and lenders throughout the world, so we have two choices, the first is the road currently being taken by the establishment which is screw the taxpayer the small man and force them to honour their debts, the second, which requires much more imagination and innovative thinking, scrap the system that is broken, re negotiate the debt and stary again, in other words hitb the re set button. I cant see that happening though as there are too many people with too much too lose. I think what will happen is that we will destroy ourselves trying to sustain the unsustainable because we dont have the vision or the leadership to find another way. I think when it is too late there will be serious unrest but so much damage will be done by then that we will have ageneration of hardship, real hardship before a new system emerges, but, I really hope I’m wrong, I have a great family and a good life and I’d hate to have to face the challenges that may be ahead.

  11. SM

    My one life on this earth, dictated by those who lived hundreds of years before and by those who will live in hundreds of years to come.

  12. Crabbybear

    David, you say ordinary citizens will take their money out of Irish banks and their savings in a safe place. Where is that safe place?


    I might be stating the obvious here to the alert observer of the media landscape, but I find it important to point this out.

    Notice the language used, it is all over Europe, they speak of Greek Bailout, Greek Rescue Plan etc.

    It nearly looks like The PR departments of Finance Ministers and state leaders seem to collaborate on common style messages to be hammered down the publics brains.

    Such statements are deliberately used and they will increase in the short term, drumming up patriotism.

    This is not a Greek bailout, this is a bailout of the banks who recklessly pumped money into greece bonds to gamble on a profit.

    • Malcolm McClure

      Well said, laughingbear. It is a bank bailout, no question. John Mauldin said:
      ” It now looks like almost 30% of the Greek financing will come from the IMF, rather than just a small portion. And since 40% of the IMF is funded by US taxpayers, and that debt will be JUNIOR to current bond holders (if the rumors are true) I can’t tell you how outraged that makes me.

      What that means is that US (and Canadian and British, etc.) tax payers will be giving money to Greece who will use a lot of it to roll over old bonds, letting European banks and funds reduce their exposure to Greece while tax-payers all over the world who fund the IMF assume that risk. And does anyone really think that Greece will pay that debt back? IMF debt should be senior and no bank should be allowed to roll over debt and reduce their exposure to Greek debt on the back of foreign tax-payers.

      I don’t think I signed on for that duty. Why should my tax money go to help European banks? “

      • Your Friedmann/Stratfor reference, thanks for that, summarizes neatly what I say since long, they are complicit, of course they are, and as we know from history, now they will drum up more Propaganda and more Lies, the last resort then is activating patriotism for desert.

        Bon appétit.

        Their three course dish make me sick just by looking at the menu.

        • Malcolm McClure

          laughingbear: Enough already of blame and vituperation, it’s time to consider what went wrong with the trans-european ‘elite’ philosophy and how we can build something stable in the aftermath of eventual collapse.
          Friedman points to something the Irish realized instinctively when they rejected the first Lisbon referendum that also sustains UKIP and many Torys in UK:

          EU intentions were to harmonize Europe and to create European-wide solutions to economic problems. A united Europe would benefit the elites, rather than the broader public. It would also benefit the Franco-German core of Europe rather than Europe as a whole. In Germany, elite sentiment accepted that some sort of intervention in Greece was inevitable. Public sentiment overwhelmingly opposed intervention, however. The political elite moved into tension with the financial elite under public pressure. In Greece, a similar crisis emerged between an elite that accepted that foreign discipline would have to be introduced and a public that saw this discipline as a betrayal of its interests and national sovereignty.

          The problem in Ireland is that the political elite is acting in unison with the financial elite rather than reflecting overwhelming public opposition to every last man jack of them.
          History tells that when the elite fails to respond to public opinion there is always serious trouble. Greece has a proper army to maintain some semblance of order. Ireland has only a weak defense force and 14,000 garda who now seem seriously disenchanted with the elite.

          Support your local garda. Most of them can still distinguish right from wrong.

          • Hi Malcom,

            We need a soft revolution to have even the slightest chance to clean up this mess, and again, I am not saying this easily!

            Yes, I fully agree with you on the remarks of garda. I was very positively astonished on their courage to stand up and NAME it for what this really is.

            Honestly, it gave me back some hope here. If they have this courage, well, we should think about out own as well.

            LOLOL…. sorry, but I just had a funny thought…. using Lenihans own statement to drive them out of Dublin.

            There is no other way!


  14. MK1

    Hi David,

    > the Greeks are a race who can’t be trusted.

    I dont think anyone is peddling this idea as the fault or cause of Greece’s debt mountain and the credit crisis. The Greeks have cultural differences with other areas, thats true, but all countries and regions have its nuances, evolving nuances at that. I dont think anyone here in Ireland can be proud of our current cultural and average moral’s, do you?

    > The mainstream view is that Greece is a country that has run up huge deficits and is paying the price. Greece is the symptom of this crisis, but Germany is the cause. It is only right that Germany pays for the Greek problem.

    That is not a valid viewpoint David as its exagerates way beyond the facts. Yes, German and other banks lent to to Greece and other countries, but well within reasonable norms. This is unlike our bank story here lending like crazy.

    True, Greek debt was built up and above that of the Euro (“wise -owl”) rules/guidelines. But other countries were doing likewise, suich as Italy, Belgium from euro-entry, etc.

    We can no more blame the Germans as we can the whole euro-project and in that regard we in Ireland are proportionally responsible. The Greeks, for their sheer mismanagement of their debt and the hiding of figures are MORE culpable than the rest.

    I take your point that Lenders in general can be equally as responsible for the credit abuser, just as a drug dealer can fuel drug dependence. But Germany was far from a debt ‘pusher’.

    DavidMcW> Greece cant pay all its debts

    But are we saying that countries with similar levels of debt also cant make their debts back, the US, the UK, Japan, Italy, Belgium, etc???? Why pick on Greece?

    Dont get me wrong, I believe that debt ‘forgiveness’ can at times help, and that for sure debt levels by nations, people, businesses, etc, have got way out of line above norms, the banking credit bubble was passd onto nations, as we are doing with nationalisation, NAMA, etc.

    The globe needs fixing, but Germany is not the fault. Greece are victims to a certain extent, thats true, but willing participants in a system which has gone awry.

    Reality is whats needed, and yes, the Greeks CAN pay off their debts.


  15. This Greek bailout is extraordinary to say the least!
    We in Ireland have to borrow this money to bail out a Friend? Everybody knows what a chance one takes to borrow money to help someone else!
    In the best of times it’s questionable but when one is on the bread line it’s downright foolish
    We have gone in the space of 3 weeks from giving 250 million (according to Brian Lenihan) to now having to pay 1,300.000.000 Billion
    This Gob**** cannot count and is high on something! (Headshops!!!!)
    This is sheer madness!
    When you have it, then it’s not a problem! but we ourselves will have to be bailed out and borrowing to bail out another country smacks of ignoring the real Soverne European debt.
    The Euro is not working at least in the setup it is now
    We need to have a complete overhaul of the Euro currency
    To help Greece get out of its situation it needs to devalue by about 35% to 40%
    And we will need to do the same but the system does not allow for this scenario and so we are where we are to cone a popular phrase (used by clueless politicians) to get out of having to explain their culpability

    • You know, I have never said that before here, and I do not say that easily, but by now, I seriously think what we need here is a Revolution Iceland style, substitute ‘pots and pans’ with other symbols closer to the Irish, march onto Dublin, daily sit ins, ever growing numbers to demand this government of inept to step down as a first step towards possible solutions.

      I see no other way from here, particularly because time is running out fast for all of us, and they are continuing to cause more damage.


    Totally agree with D, the spotlight has to be turned on the bondholders. The solution is not TED, increase taxes, reduce expenditure(public services), Debt enlargement.

    Moral Hazard, serfdom for life to the vampire money lenders for each of the PIIGS is not the way to go, that’s the way of Transylvanian economics built on the premise that an economy can repay unlimited debt obligations and still have money left over to invest in its future, pay for public services etc. It can’t when its sucked dry!

    If the bondholders were acting without due diligence and not hosing money to the PIIGS in the same way Anglo hosed it to developers, we wouldn’t be where we are now. TED would have worked early in the euro project, now the money has been wasted and its too late.

    So, the so-called solution bailout is to lend even more destitution/family silver money to the PIIGS in the hopes a debt crisis can be staved off.

    Nope, this only makes matters worse and kicks the can down the road to the kingdom of Amageddon….

    You could argue there’s a global debt crisis built on leveraging the future through fraudulent CDO’s derivatives and other schenanigans, see southof dub link below for a pot pourri of these ponsi frauds the SEC with Goldman is playing cat and mouse with at the moment.

    Market CDS Credit Default Swap betting against the PIIGS is part of the fun at present, risk of contagion and the demise of the euro heightened. Forest fire in Ireland through NAMA, give them more money to pour on it! Whose to pay, taxpayers?

    But If the global marketplace is so corrupted by fraudulent financial instruments built on deregulation, opaqueness rather than transparency, that tinkering with it will bring the house of cards down on our heads, bondholders will do anything to avoid the spotlight that will come with renegotiation and the possibility of default.

    Even worse, if we believe what is coming out of SEC and Goldman probe, its not beyond the bounds of probability that banks, German? are taking out CDS in favour of PIIGS defaults, so the more they lend, the higher the default risk? Its difficult to examine this, because of the secrecy surrounding information on banks.

    Another problem is the ECB morons only know how to lend money and make profits, not how to regulate and do due diligence on lending. We need to make the bondholders accountable, clean up the financial mess caused by their lack of due diligence, examine their modus operandi.

    They’ve kept our own FF puppet regime in power for so long. In return, FF Government got hosed with ECB bonds. For this German banks could make a steady profit all during the blind years.

    We need not only to renegotiate our debts, we also need to clean up the financial services industry wordwide by introducing licensing of financial products with rigours as exacting as a new pharmaceutical product sent to FADA Food and Drugs Administration, nb new capital reserve to borrowing ratios requirements for banks.

    Get back to a situation where we can see what’s exactly in the hold of the ship.

    Conglomerates, corporates and bondholders, a so-called corporate elite of banks lending money to governments who hand it willy nilly to their cronies and developer friends, who exact servitude from a public servant by selling him a shoebox for €.75ml aint the way to go. This is a recipe for the collapse of the euro. We are now inside that collapse.

    “California’s state and city bonds fail—meaning they make big fees selling the bonds in corrupt deals, then they bet against the bonds buying CDS derivatives”

  17. G

    An excellent film that explores the heart of German society is Michael Haneke’s ‘White Ribbon’, what a beautifully shot film which gracefully touches on some of their ‘issues’.

    2010 Golden Globe Winner for Best Foreign Film.
    Palme D’Or Cannes 2009.

    The White Ribbon

  18. Malcolm McClure

    George Friedman of Stratfor says:
    The financial institutions in Europe were fully complicit in the global financial crisis. They bought and sold derivatives whose value they knew to be other than stated, the same as Americans. Though the European financial institutions have asserted they were the hapless victims of unscrupulous American firms, the Europeans were as sophisticated as their American counterparts. Their elites knew what they were doing.

    Complicating the European position was the creation of the economic union and the euro by the economic and political elite. There has always been a great deal of ambiguity concerning the powers and authority of the European Union, but its intentions were always clear: to harmonize Europe and to create European-wide solutions to economic problems. This goal always created unease in Europe. There were those who were concerned that a united Europe would exist to benefit the elites, rather than the broader public. There were also those who believed it was designed to benefit the Franco-German core of Europe rather than Europe as a whole. Overall, this reflected minority sentiment, but it was a substantial minority.

    The financial crisis came at Europe in three phases. The first was part of the American subprime crisis. The second wave was a uniquely European crisis. European banks had taken massive positions in the Eastern European banking systems. For example, the Czech system was almost entirely foreign (Austrian and Italian) owned. These banks began lending to Eastern European homebuyers, with mortgages denominated in euros, Swiss francs or yen rather than in the currencies of the countries involved (none yet included in the eurozone). Doing this allowed banks to reduce interest rates, as the risk of currency fluctuation was pushed over to the borrower. But when the zlotys and forints began to plunge, these monthly mortgage payments began to soar, as did defaults. The European core, led by Germany, refused a European bailout of the borrowers or lenders even though the lenders who created this crisis were based in eurozone countries. Instead, the International Monetary Fund (IMF) was called in to use funds that included American and Chinese, as well as European, money to solve the problem. This raised the political question in Eastern Europe as to what it meant to be part of the European Union.

    The third wave is represented by crisis in sovereign debt in countries that are part of the eurozone but not in the core of Europe – Greece, of course, but also Portugal and possibly Spain. In the Greek case, the Germans in particular hesitated to intervene until it could draw the IMF – and non-European money and guarantees – into the mix. This obviously raised questions in the periphery about what membership in the eurozone meant, just as it created questions in Eastern Europe about what EU membership meant.

    But a much deeper crisis of legitimacy arose. In Germany, elite sentiment accepted that some sort of intervention in Greece was inevitable. Public sentiment overwhelmingly opposed intervention, however. The political elite moved into tension with the financial elite under public pressure. In Greece, a similar crisis emerged between an elite that accepted that foreign discipline would have to be introduced and a public that saw this discipline as a betrayal of its interests and national sovereignty.

  19. econarchist (9)
    I agree with you, the ordinary German citizen has no more to do with the foolish investments of the top bankers in Germany than the ordinary account holders of AIB or BOI

    • Deco

      Yes. And the ordinary German taxpayer will not be in favour of bailing out their banks.

      On the other hand, in Ireland, from McUseless, Biffo and Lenno all the way down the hierarchy, we are all eager to throw money at Irish bankers. (Sure, they represent an excellent Long Term Economic Value)….

  20. Colin_in_exile


    I currently have debts of €6,000.00, a legacy of funding myself through college where I had to pay full fees. The qualification I received allowed me to find work. An economic downturn has taken my job and income away from me. I now received €196.00 a week, which after bills (food, rent, heating and other essentials), typically gives me €40 a week to dispose of, €2,000.00 annual income.

    Should I contact my bank and tell them I’m planning on defaulting since they were not obliged to award me a loan?

    • @ Colin_in_exile

      Nope, due diligence was exercised by the bank in your case. You were a good bet, funding your own way through college, making sacrifices, proving you could defer gratification and achieve your own goals successfully.

      Whereas the bondholders hosed money without due diligence to FF morons, fraudulent incompetents, who funded their cronies binge of pouring money down the toilet in ghost estates etc .

      Taxpayers in the latter group have a case for defaulting, its not their money was lost, its Seanie’s. In your case, I’m sure deferred payments, interest only payments, some arrangement can be made with the bank to give you time to bounce back

    • No no no!

      You should ask them to grant a you a 12 month ‘payment holiday’, may be offer interests only if you can, otherwise ask for a 6 months 100% payment holiday and a review your situation afterwards, as you currently are not in the position to serve your payments.

      Do everything in writing, registered. Do not take no for an answer.

    • Colin_in_exile – what did you do your degree in? A lot of people with degrees seem to be finding it hard to find work these days, my sister is just finishing her nutritional science degree – four years – no loan though thankfully. I am considering spending my savings on one but not sure yet.

      • Colin_in_exile

        Black Cat,

        Degree in Civil Engineering. I’m thinking of applying for a Masters in Sustainable Energy in UCC, I’d be more definite if there was a job waiting for me when I complete the course.

        laughingbear & cbweb,

        I’m not trying to censor laughinbear, laughingbear does make valid points, and I should have said “I” instead of “We”. The faults of the RC Church need to be put in context with other organised religions, or does this view make some people uncomfortable?

        • liam

          The only religious context that matters in Ireland is the one around the RC church. Are you concerned that not all religions have been insulted equally?

          • Colin_in_exile

            “The only religious context that matters in Ireland is the one around the RC church.”, you gotta be joking Liam right? What’s the fastest growing religion in Ireland? Answer, its not RC, open your eyes when you’re walking down the street in your nearest city.

          • liam

            OK, I’m done with this.

        • No worries, colin_in_exile, congrats on your Degree in Civil Engineering, best of luck on taking the right decision on what next to do in Cork, or etc

        • Deco

          I know it might sound like a harsh thing to say…..but at this point it is a matter of getting experience. And even if you have to travel, or work for barely enough to keep you going, then this is what you have to do. I was in a similar position in the mid 1990s. And I changed focus and opted for vocational skills, so as to get earning money. It did not matter if it was not an awful lot. It is surprising how, when you are on small money, you become really inventive and good at making this stretch. You learn that a lot of expenses really are optional. It is that we have conventional modes of thinking in this country that force people to spend large amounts on beer, events where there will be beer, etc…

          A Masters in Sustainable Energy would be a good idea. But if you get any chance at anything this summer, take it. Best of luck !!!

        • Sustainable energy is the way of the future isn’t it – hard to imgaine that there wouldn’t be a job at the end, think a masters is necessary these days to stand out from the crowd. Would have thought a civil engineering degree was a sure thing for finding work

          • Colin_in_exile

            Only about 10 out of a class of 65 working in Ireland, and clinging onto their jobs, UK & Australia are the most popular destinations, but even there, any kind of non-engineering work is gratefully accepted by my former classmates.

            I was told by my FYP Supervisor who happens to have many post grads on his books, that a Degree is sufficient for a good career, that the industry looks down on PhDs and Masters grads, since there is a perception that these students like the “cushy student lifestyle” rather than working in the real world.

    • liam

      Discuss terms with them (but agree to ‘restructure’!), take a payment holiday if possible. Remember the bank wants its cash back first and foremost and since its an unsecured loan, which you can now no longer afford to pay, you may find that they are happy to negotiate!

    • Colin_in_exile

      Thanks for all your advice. I’m sure something will turn up somewhere soon. I’ll keep you posted.

  21. Atlantic Eye :

    We dont need to proffer the histories of Greece and Germany to be our own or their greatness to succumb to .They have their Mediterranean and we have our Atlantic .Ours are tidal and theirs are not .We have resources that they dont .
    The lender be a lender and let his risks be his own too .The dice was thrown in and the numbers turned up .Its a casino you lose and you win.Let the lender take it on the chin.Its life so whats new?
    Laws are made by people for people to make a better life and this was the idea of the EU for the wider Euroland .In these moments these laws are being revised and made up as they go along and the original structures are crumbling down.Greece had the Pantheon and their God of Gods all fell .Atlantis had its own off the west coast of Ireland in an earlier time that Plato spoke about and that world fell apart too .
    Be ready to fall and swing and dance .Be ready to adapt and fish in new waters and to become closer to mother nature .Be ready for surprises and most of all always be ready just to be ready for we do not know the hour .

  22. Sovereign Debt –
    Lets get closer to the meaning of this in a local mindset .Sovereignty exudes the power of supremacy over others .Have we seen recently that the Emperors in RTE have no clothes and owe their lives to threaturous Irish banks.Will this be a new volcano in our midst?

  23. Peter R.

    Hi David,

    A good article, but I have a couple of points. It is not the German people who are to blame for lending to Greece — it is their banks. However, it is the German people who are going to be stuffed with shelling out over €22 billion of tax money through KfW, which may never be paid back.

    Greece’s overall debt is €300 billion (soon to be €420 billion). The Economist recently stated that German and French banks have between them lent approx. €100 billion to Greece. The question is who lent the rest (€200 billion) to them? Are they not equally to blame for not carrying out due diligence? Could due diligence even have been carried out on the basis of dodgy Greek figures and state-sponsored Goldman Sachs chicanery?

    Germany has spent the years since the introduction of the Euro pushing through painful structural reforms to remain competitive, which included little to no increases in real wages. Certain other countries in the Eurozone in the meantime saw low interest rates as a great reason to live on borrowed money (and thus borrowed time). In the light of this fact, and recent increases of German debt to bail out their own zombie banks, is it any wonder that the German public is up in arms about having to bail out a country, which is more allergic to hard work than it is to paying taxes?

    At least Dr. Merkel had the balls to at least try to defend her voters’ interests, which is a lot more than we can say for the shower of wasters in Dail Eireann.

    Is mise le meas,

    Peter R.

    • Deco

      Yeah… well…. Lisbon 2.0 shows us what the clowns in the Kildare Street Circus think of the voters.

      They are all in favour of giving Greece 1.3 Billion (which we do not have) so as to keep up the pretence of PIGIS on a diet. So that we can keep borrowing money for their salaries, their expenses, and the jobs that are held in all the quangos by their relatives and cronies.

  24. Deco

    Nobody seems to get it. According to the New York Times Germany is not the country with the highest level of PIGS exposure. Have a look.

    It is fairly clear and should surprise some people.

    I find it amazing also that the Irish Banks (somebody mentioned Rich Butcher) managed to lend to other PIGS when they were not throwing money at developers building apartments in fields in Laois). Should we offer a straight swap of debt between the other PIGS ?

  25. Its worth pointing out the difference between the savers in Germany and the banks who were lending out their money in a fractional reserve system.

    Take it from me, the German people are starting to wake up to the fact that precious metals are the only form of money worth saving their money into. Don’t believe me? Well look at how much the spot price of those metals have risen recently against the Euro. Hitting record times constantly.

    David is a well meaning guy, but he’s a Keynesian and thinks its okay to steal from savers by diluting the money supply. For me that is down right theft.


    Greece hired Lazard for financial advice though the bank said a restructuring of debt “has never been an option to be considered.”



  27. Good article.

    I hope Greece does default by legitimate means and not receive a bailout but this isn’t looking very likely. If they default legitimately, it will be incredibly positive for the Euro and the EU as a whole despite the burden of other countries that are also bankrupt.

    Not bailing out Greece will show investors that the Euro will be a strong currency in the future and will restore strength because the EU powers won’t tolerate weak government balance sheets.

    Bailing out Greece on the other hand indicates that they will also bailout the rest of the PIGS and by doing so will only deepen and prolong the recession individual failed states and hurt the rest of the EU.

    • paddyjones

      We all know him, he is the brother or the uncle who borrows money from the rest of the family and never pays it back , he is like the PIIGS. DMcW would have you believe he is worth bailing out , forgiving his debts . David shows incredible weakness with his constant statements about forgiving debt. The PIIGS are living it up while the Germans are working their butts off and saving their hard earned money.
      Stating that somehow prudence of the great German people is wrong is incredibly stupid for a man of DMcW s intellegence.
      I have a brother that borrows from everyone in the family but who can’t cook for himself so eats out everynight. DMcW would have you believe that the whole family who work hard and save money should carry this man.
      Debts should never be forgiven or forgotten whether it is Greece, Ireland , Anglo or a mortgage holder. It is not the fault of the lender , the PIIGS are exactly that… pigs they borrow as much as they can without ever having the intention of repaying.
      In Ireland we owe 140 billion ( end 2010 ) even to have a surplus of 1 billion and repaying it would be an enormous task let alone 140 billions. We will never repay the debt , it will just keep on rolling over just like Greece.
      DMcW show some prudence please.

      • Debts should never be forgiven or forgotten whether it is Greece, Ireland , Anglo or a mortgage holder. It is not the fault of the lender

        Oh my….

        the PIIGS are exactly that… pigs they borrow as much as they can without ever having the intention of repaying.

        With respect, but I think you are totally missing the point if you think that the lenders were not responsible.

        They are the reason for this mess in the first place!
        Reckless lending practices have this bubble paddyjones, and deliberately I might add.

        No, david does not show weakness on this point at all, on the contrary, he is right about many predictions since a long time, and the possible alternative solutions that he presented here, amongst other economists, think tanks etc. are valid and have substance.

        Did you not read Malcom’s Stratfor article?

        This is a european wide orchestrated Heist, the notion that this would have happened only because of Lehmann Brothers, and poor europeans were finding themselves in the middle of a crisis they bare no responsibility for is nothing put one of the many smoke screens, deferring from the truth that they all were instrumental in this Heist and attempt to implement a new world order by enslaving the middle class by debts.

      • So let me get this straight. You are saying that DMcW is weak because he’s suggesting that the EU should ‘forgive’ Greek (and Ireland) debt?

        Think about your brother that never pays you back. Why do you lend to him if he never pays you back – why because he’d my brother of course. Are these ‘bailouts’ actually beneficial to him – no. All they do is prop up a luxury life that he is accustomed to. So who is to blame? You are and he is. Now that he is in debt, what should happen? Should you give him another loan to re-pay his old loan – this is folly that will only help him in the short term but damages both you the kind brother and him the dependent leech for the near future.

        Instead why not make a deal? Or as an analogy to the article “The alternative to this, of course, is that The Greek government gets the creditors in a room and says: ‘‘Sorry, your gamble didn’t work, there is no money, let’s do a deal.”

        Cut off your lending to your brother, accept that you shouldn’t have leant him money in the first place knowing that you knew he wouldn’t pay back and find how much he can realistically pay back based on his current income. This markdown in debt helps everyone and what DMcW is suggesting in this article as the ‘best’ means of resolving the PIGS position: “So now we have to hope that the Greeks put their hands up -and give us permission to do likewise. This is so because investors waiting on the sidelines will see that you the kind brother is also responsible and will want to do business with you in the future. Sure, you will lose money – that’s the risk that you must accept by lending in the first place, but at least you won’t lose more through a further loan and will be on the path to recovery and economic soundness.

        The alternative of course is for you to keep lending him money – like the German bailout of the Greeks. If you do ‘bail’ out your brother this time, this indicates to your other 3 indebted brothers that they will also receive loans – if you’re in for one, your’e in for all. Investors in this scenario will take their money elsewhere to more economically sound friends where they are lending money (capital) to entrepreneurs that in turn generates innovation, jobs and wealth.

        • graceunconditional

          This article makes so much sense, basic common sense, why keep lending to someone who doesn’t pay back, come to an arrangement and waken up. If you keep lending you will also run out of money and that will make you the same as the borrower, broke. It is not just the financial system that is broke all systems are broke. Self sufficiency has been destroyed and replace by handouts this has lead to a culture of dependency or borrowing. We need courage as a people, hands up and a new beginning built rock and not sand.

  28. Ouch!…. Looks like the markets take another heavy beating today.

    • Officials from Greece and other euro-zone nations have rejected the idea of a restructuring. German Finance Minister Wolfgang Schaeuble said Monday any discussions of debt restructuring should be prevented so as not to hurt market confidence, according to Dow Jones Newswires.

      Here we are, nothing but propaganda and lies.

      Market Confidence? Hahahahaha! You Fools, you god damn fools.

      IBEX down -5.41%
      PSI20 down -4,72%
      NASDAQ down -3,10%

  29. AndrewGMooney

    @Deco.The figures in the NYT you quote total as follows:France $911 billion.Germany $702 billion.Britain $481 billion. But the important figure is the combined Franco-Prussian alliance sum of $1613 billion. It’s the PIIGs who hold all the ammo, not Germany and France. Creditor and debtors are inseperably linked by the Euro and thus share a common fate.

    Britain is an entirely different kettle of queer QE fish altoghether and is probably plotting with the US to shaft Core-Euro good and proper. Can someone clever explain what’s going on with the latest figures on US Treasury holdings by foreign governments?

    The UK holdings have risen from $128 to $233 billion in less than a year. Even allowing for offshore havens of I.o.M and Channel Islands in this, can’t help there’s something going on here. Ireland has reduced its holdings from $54 to $37 billion. Spain have tripled theirs. Germany and France have barely budged. Surely US Treasury holdings are catastrophe insurance unless the world is going to end? Why would Ireland start selling them only to fund loans to Greece? Je ne comprends pas. Those stats from Constantin Gurdgiev are surreally scary:

    How much deflationary austerity would it require so Greece or Ireland rescue themselves from this debt death spiral, never mind be ‘cost competitive’ with Germany? Would they still exist as ‘countries’ if they do so? Debts that can’t be repaid, won’t be.

    You’re right about Alastair Darling, he’s the next UK Labour leader, hopefully. A political velociraptor pretending to be a harmless puppy. Gordon Brown? The poll of polls show no collapse in his support from last week, despite the feverish imaginings of the Telegraph and Sky. Cameron will edge it, which will be great. Smoke out the Liberals for who they really are, whilst The Prince of Darkness, Lord Mandelson ‘regroups’ the progressive Project. Blair nearly destroyed it, but not quite. The Tories simply do not understand modern British society. Like the Bourbons, they have learnt nothing and forgotten nothing. It’s time for their final curtain call before they vanish into the mists of history.

    • G

      Not so sure, think there could be a swing on the day when people are actually faced with the prospect of a Conservative government, silent majority etc, close, that is for sure.

      • @G,

        I’d go for Labour over Cameroon anyday, too much of a Thatcher legacy plus too many unanswered q’s. Darling and Browne did a fair job on the banks during the Lehman’s debacle, even stopped Barclays taking over Lehmans and getting stuck with a lemon, later Barclays got a better deal. Plus they taught the FED a thing or two by direct investment in the banks later regarded as a much better approach
        for taxpayers than TARP and copied by the FED. Our bright sparks went for a TARP rescue, but, we didn’t have a Lehmans. Best we could do was to create a toxic equivalent, NAMA, difficult to achieve, but we did manage it, worst of both worlds! thx for White Ribbon link earlier, looking forward to it..

  30. G

    I don’t think it’s a question of ‘if’ Greece defaults, I think it is inevitable given the structures in their economy and the sheer mountain of problems they have racked up, defining moment for them, could well tear the society apart given what I am hearing from Greeks in Athens, they people don’t want it.

  31. coldblow

    By coincidence (I hadn’t read the article until this morning) I was at my German conversation class last night, my third week, I’ll see how long it lasts.

    The economy was mentioned and she said that it wasn’t fair that Germany was having to bail out the likes of Greece. I pointed out that they shouldn’t have lent to the likes of us in the first place. Coincidence or what?

    Our teacher does a bit of tour guiding among other things in trying to make an honest living. She had been reading up on Irish history and gave a summary which was the usual orthodox (Irish) version of events. I suggested that might be a little simplistisch, vielleicht, an proceeded to enlighten her on some of Crotty’s ideas making mention of the Normans capitulation to the Irish weather, the novel concept of ‘property in land’ as introduced here by the Tudors, Redmond, conscription and 1916. Familiar themes to readers of this site. Perhaps it was my unzusammenhangendes Deutsch (if that’s a proper word), or the depth and breadth of my discourse, or the fact that the others have even worse German than myself, but there was much shuffling of feet, fiddling with handbags and coats and dark mutterings about having had enough of this stuff first time round at school. Next week it will surely be back to food and pets. It’s a battle of hearts and minds folks and it ain’t gonna be easy…

  32. Tim

    FoI Act requests too expensive? (Deco)

    Here is another route, from Gavin Sheridan of and

    “A powerful new weapon in the journalist’s armoury, the AIE, is similar to the Freedom of Information act but is largely unknown to Irish journalists. Gavin Sheridan examines this cost-effective way to get at the truth.

    Seek and ye shall find

    There are two main methods of getting information from public authorities in Ireland. The first is the Freedom of Information Act, as amended in 2003. This is the best known and most utilised by journalists. The second is less known — the Access to Information on the Environment (AIE) Regulations.

    There are likely a few reasons as to why the AIE has been ignored, the main one perhaps being that the word ‘environment’ may put off many. Unfortunately this has led to a serious under-utilisiation of what is is a powerful weapon in the armoury of any journalist.

    AIE was transposed into Irish law using a Statutory Instrument in 2007. It brought into force the 2003 European Directive. There are a number of very positive aspects to the legislation, and there is a reasonable overview on the Department of the Environment’s website.
    Requests are free

    The first it that AIE requests are free. This means requests can be emailed. The second is that internal reviews are also free. They can also be emailed. Appeals to the Office of the Commissioner for Environmental Information (OCEI), which is essentially the same office as the Information Commissioner, cost the same as under FOI, €150.

    The public interest test under AIE is also superior to that under FOI. This means that your appeals will be stronger by virtue of this test.

    But here is where it starts to get really interesting. Under FOI, only certain bodies are prescribed — the Minister for Finance decides what bodies fall under the Act, and what ones don’t. Most notably bodies such as the Financial Regulator, the Central Bank, the NTMA, and An Garda Siochana, are not under FOI.

    All public authorities are eligible
    But under AIE, all “public authorities” are prescribed by default. This would include bodies that have never been under FOI, including all the VECs, Harbour Commissioners, Port Companies, CIE, ESB, Bord Gais, An Garda Siochana and Coillte, among others. Indeed the test for what comprises a public authority is itself quite wide. It is useful to examine the decisions of the UK Information Commissioner to see just just how widely this is being applied — as the legislation here is so underused, there are very few decisions on which to rely.

    Wide definition of environmental information
    Of course the critical question is what you go asking for and so what constitutes “environmental information”. Again it is worth seeing just how wide this definition is being applied in Britain. While the first thing you might think of is information related to waste, fuel or recycling, the further you explore the regulations, the more you realise that the definition of environmental information is extremely wide in scope.

    Many bodies are completely unaware that they fall under the regulations and so would not have a dedicated officer, as in the case of FOI, who handles requests. In this case it is best practice to prepare your request, find a person to address it to (senior perhaps), and then call to confirm receipt of the request. Like under FOI, the body has 20 working days in which to reply. If they fail to reply, it is a deemed refusal, and goes to internal review, and on to appeal to the commissioner. There are no set search and retrieval fees (bodies set their own), but you are free to appeal if you feel the fee is too high, and generally the legislation errs on the side of lower fees.

    Britain has a far more progressive regime: their Information Commissioner’s Office (ICO) handles Data Protection, FOI and AIE all under the one roof, and decides whether a request would be better handled under AIE than under FOI. Our system is far more fragmented.

    But in future, if any request for information relates in any way to something vaguely environmental in nature, write simultaneous requests under both AIE and FOI.” ENDS.

    In particular, I like the fact that the AIE includes bodies that are exempt from the FoI Act. NAMA, anyone? Lots of “Environmental issues” with land-use, etc……..

    It might just get even more interesting….

    • Deco

      Tim thanks for reminding me.

      Watching sNeary on the TV many moons ago made me realise that the FOI (a bit 1984ish calling it the Freedom of Information Act) was a key problem in this country.

      Let’s face it, everybody in Ireland enjoys telling lies. And those in authority go several leaps above this, by basing their entire careers on a hill of lies and deceit.

      The FOI is a liars charter. And in Ireland Liars have rights. Like rights to prevent ordinary taxpayers/voters from know what is going on.

      Bin the FOI act and it’s stupid fee.

  33. coldblow

    Apologies for posting this link yet again but it seems to be highly relevant here. Global trade imbalances, danger of trade war.

  34. Philip

    I think MK1 has indiretcly nailed it 100% “But are we saying that countries with similar levels of debt also cant make their debts back, the US, the UK, Japan, Italy, Belgium, etc???? Why pick on Greece?”

    I think China is starting to implode. See P 41 of Business in today’s Indo.

    Financial Information (in the form of credit exchange information) has reached the equivalent of a broadcast storm in telecoms parlance. In trying to keep margins maximised in the business of money for money, the whole system is lending to itself in an ever increasing frenzy as debt payment falls further and further behind debt issuance + interest. the only way to kill such a storm is to switch it all off – every single last bit of it for a few months and then do an ordered restart. The existing Elite have lost – very badly. The new emerging elite are our new technocrats who know how to manage the myriad of specialists skills that are the new medium of wealth. Some call them the Greens or the Liberals.

    Nanny world…here we come!

    • Deco

      There is another acronym.
      STUPID Spain Turkey Uk Portugal Ireland Dubai.

      Common themes are house price inflation as a result of artificially low interest rates, competition driving down investment in the productive sector, government waste, bureacratic mangling, inept political leadership….


    There was a interesting o-tone document on DER SPIEGEL on the last world climate change conference in Kopenhagen 18th december 2009. This was apparently a stealth recording that was played into the press hands.

    Global Leaders came together in a small conference room to make steps forward, as talks were not followed up with concrete numbers on CO2 reduction responsibilities of the participating countries.

    When it came to the point of committing to concrete reduction figures, China blocked and stated that it is not willing to make these contributions.

    It emerged that they came to an agreement behind closed doors with India, Brazil and South Africa to sabotage the talks.

    Sarkozy lost patience and started bitching in his mother tongue that this would be a deliberate blockade.

    Obama took position and stated that they need to put figures to the plan to make progress and that Nicholas and other would not be willing to wait much longer on this as there were other urgent issues to attend.

    China responded rhetorically with the blame game, stating that 200 years industrial revolution would have caused 80% of the catastrophe, and then asked for a short break to reconsider with partners.

    The meeting was interrupted and they never returned to continue the talks.

    The Conference was a 100% failure!

  36. Alf

    Hi David,

    The Germans and French are loaning to the Greeks so they can pay interest on previous loans. In your local community you would call it loansharking; when done on an international level – it’s a stability pact.

    Like the old saying goes:-

    “if I owe the bank a dollar and I can’t pay then it’s my problem; But if I owe the bank a million and I can’t pay then it’s their problem.”

    As you outlined, the real issue with this whole ‘bailout group-think’ is not just rewarding failure; it is propagating the idea that the lender cannot lose. Lenders can lend all they want and the taxpayer will guaranteed the return. No need to do due diligence because the good taxpayer will step in.

    The big problem with this, apart from it being very expensive, is that it is a con. All loans contain risk and this is universally accepted. It is because of this that some bonds sell at a higher premium than others. This premium is key because the lenders are really continuously paid for taking the risk. These payments are default insurance premiums. But if the lender is always guaranteed then this would mean two things :-

    a. That the premium is a lie and the contract is a fraud; It should be immediately paid back to the borrower.
    b. That risk premium should be abolished.

    But they say this can’t happen because the lenders are taking a risk. Well, what risk?

    The bailout mindset is a con and the taxpayer is the mark.

    Should we have sympathy for a lender if they lose out in a default? No, absolutely none. Why? Firstly, because they get an insurance premium and secondly they were not accurate in their due diligence. If they were they would have seen that the borrower was over stretched.

    It is that simple.

    • @Alf,

      Risk Premiums, can you say about more about these?

      For example, who underwrites/pays out/is liable for the risk premium in event of default?

      Does the risk premium cover the whole loan that has been advanced or part of it?

      What happens in the event of a negotiated settlement of say 40%. Do lenders, insurers and clients hammer out an agreed settlement?

      Are lenders forbidden from taking out CDS Credit Default Swaps on their own loans?

      What regulations govern the situation where the lender has not done due diligence in his lending?

      • Tim

        cbweb, Good questions, except, maybe, the last one about “What regulations govern”, since, I suspect that regulations governed nothing. (Still worth asking, though, I guess).

      • Alf

        HI cbweb,

        By risk premium I mean any reward that the lender gets for taking more risk. With bonds this may come in the form of a juicy coupon or for a bank a higher interest rate on your mortgage. My point is that while this is not exactly called a default premium, it is one in practice. And could be used to hedge or insure the loan.

        I think that the whole CDS thing was allowed to go on pretty much unregulated. As for a lender getting a CDS and pushing the risk onto the next guy – I think this was not only legal but the general idea.

      • Alf

        The danger of the CDS is that once the loans were insured (with some of the premium) the remaining premium allowed the lender to have an apparent risk free gain. The loans then got the credit worthiness of the seller of the CDS rather than the original borrower, which allowed more pyramiding…

  37. —- THIS IS GERMANY IN MAY 2010—-
    I am disgusted, really!

    This gentleman here in the green jacket:×304.jpg

    He is the Vicepresident of the german Bundestag!

    Wolfgang Thierse (SPD social democrats), who you see here when he joined a sit in blockade on the first of May to demonstrate and protest against a phalanx of Nazis who announced to come to Berlin.

    IMHO, this is a courageous and a good example of civil courage, and for once I thought well, here is a reason to be proud, they are not putting up with the new emerging fascism that goes from strength to strength in Europe.

    But, this feeling would not last very long….

    Thierse joined the protest and only left after police instructed him personally to leave.

    Respect Mr. Thierse! RESPECT!

    Only, you know, this is Germany 2010, and the whole Merkel bunch (CDU as well as CSU) started an outrage about this, claiming he would damage democratic law and order principles, and they started a campaign of slander and asking for disciplinary actions against the vice president now.

    The public prosecutor in Berlin is looking into this case now to find out whether Thierse’s sit in had illegal aspects he can construct a felony against him.

    The Minister fro family affairs Kristina Schroeder said ‘How shall we explain democracy to our young people, if even the Vice president ignores the german constitution and law and order.’

    Damn you Schroeder! This is outrageous and nothing but a pre election Slander campaign so typical for you right wing hypocriticals.

    This is Germany in 2010!

  38. Intersesting Article, but can I put it a bit simpler. The German Banks wanted to lend to get interest in return. The Greek upper bussiness class wanted to borrow to build their investment projects so as to collect rent and proffit from their ordinary workers. Both the German Banks and the Greek upper bussiness class had already done a dirty deal behind close doors before the loans were drawn down. That dirty deal was that the Greek banks and their frients in the government and the media would cry “Financial Crisis, all the money has disappeared” and the ordinary Greek worker would have to repay the loans through higher taxes and wage reductions. Simple! Just like whats happening in Ireland. Thats all there is to it, everything else being peddled by the media is just smoke to confuse paralize the workers.

  39. Tim

    Nouriel Roubini: forget sub-prime mortgages. It’s the sub-prime financial system we need to fix.

    You can pre-order on my new book – Crisis Economics – to be published by Penguin on May 11th

    • Deco

      Based on his track record, Nouriel Roubini should be taken very seriously. Roubini is as likely to get it right as much as anybody else.

  40. wills


    Another angle on this Greece debt debacle is that Goldman Sachs assisted Greece government back in the day, using the ‘ol CDO weapon of mass destruction to hide the level of debt already kerchinged up by the greek insiders before they joined the euro.

    And all the fuss going on concerning the Greek debt spiraling out of control is the direct consequence of the goldman sachs cdo book keeping gimmick the greek insiders employed to join euro and its all come home to roost.

    There is no way could this greek sovereign debt lunacy come out of nowhere supposedly as media reported, this is a story which threads through the greeks employing goldman sachs to hide large debt to join the euro and the future on which they used cdo’s to hide it in has arrived and it s all gone rotten.

  41. Deco

    Well I find this fascinating. The paper that told us that property was great value in 2005, that the economy would go up forever, and that companies on the ISEQ were run by geniuses….has dropped a bombshell.

    It certainly is a bombshell, because the Old Lady of D’Olier Street was telling us that Spain was …to use one of the favourite terms used in recent years….As safe as houses. And sure enough….that is how it has turned out.

    Folks this is the elephant in the room. Espana. This is the mess that will undo the Euro if it is not fixed immediately. The problem is that Barrosso does not get it. The ECB is fudging while Spain falls into the abyss and it will bring the entire Eurozone into it. An economy where Keynesian stimulus packages are having no effect except to aggravate those who are not sufficiently politically connected to get work or contracts from state spending.

  42. wills


    I reckon Goldman Sachs helped other countries alongside Greece to meet the requirements set by the EU to switch their currency for the Euro.

    Alorra debt taking of the books and stashed away into the future which when it arrived would be some one else’s problem to fix.

    The future has arrived. The CDO gimmicks used to keep the debts off balance sheets of different euroland countries are now reaching the deadlines on the can.

    The Euro as a project was rushed through it’s now looking like to me anyways.

    Now, one must look to the euro printing presses and the engineers behind the euro project.

    Someone sets up a money printing machine in the back garden shed and a new plate for a new currency. They have a brainwave, why not figure out a way to get the community using the currency the machine they own can print.

    I reckon this is the lens through which Greece and Portugal and Spain and Italy be best examined.

    The book keeping rules were rigged to facilitate the euro coming to their countries as a medium of exchange and all across Europe whomever was in the euro printing press loop were on to a winner for a number of years.

    The savings resting in german bank accounts in germany is one aspect but so to is the introduction of a new currency coming on stream and the printing of the currency and the irrigation channels through which the new currency flowed and the gate keepers.

  43. Deco

    I have just realised something. The idea that we should not pay for the share of the fun that each of us had spending money that we had not earned is the type of concept that is increasing catching on here. Everybody has decided that it was somebody else’s fault. You voted for Ahern three times, but it was the fault of the other people that he got elected. You went for 1000km troundtrip pissups (stag weekends) but it was peer pressure that forced you to conform. You spent money on clothes even though you had enough already but you had to do this in order to be level with the Jones….etc….etc….

    In other words we can be really selfish when we want to be. All we need is a theoretical/moral framework to justify it, so as to preserve the veneer while being quite offensive to others. Something along the lines of the lender never deserving to have it in the first place. Or maybe we are special therefore we should get away with it.

    In financial matters, an awful lot of Irish people are CJH types deep down. In fact most of the leadership of the country in many realms fits this profile. And most have no idea that this is the case. It is their own personal method of survival.

    For every Seanie Fitz doing a commercial development there were thousands of lemmings who could be depended upon to make the project credible. For every clown in Kildare Street tens of thousands were behind them. For every stupid fad there were thousands of lemmings buying in. Maybe you were not one of them. But there is a sizeable proportion of the population that never flinched with David McW, Shane Ross, Eddie Hobbs, etc.. said that it was a ponzi scheme.

    Lifestyle. It is all about lifestyle. And like a collection of spoiled pups legions of Irish consumers will jump at any possible theory and adopt to sustain the unsustainable. These are not my thoughts. These are the thoughts that Kunstler has already told us about his own suburban lemmings. And the same applies here. The more sophisticated the appearance the more inadequate the intellectual base beneath.

    • Tim

      Deco, I did not do any of that. My employer (Government), is stealing my hard-earned money to pay for it, but I never did that.

      I only ever bought what I could afford and I refused to borrow for holidays, etc..

      I am not alone. There are many like me, being screwed by the system, for the profligacy of others.

      It has to stop.

    • wills


      An individual goes into a bank and through a few nods and winks can get a loan to buy a house.

      Another individual can go into a bank and be told to go and fcuk off out the back door there not getting anything.

      The ‘nod and wink’ borrower see’s no value in the loan and gambles the money away in a property Ponzi scam and declares bankruptcy cos for them the system is there to be kerchinged.

      And there are the those who see the system as a life enhancing organism to be operated and engaged accordingly.

      • G

        Indeed, question is what do we do about it………

      • Deco

        Yes. And if the individual plays golf with the person who is approving the loan, or the approvers boss, then there is no need for documentation in order to get the loan.

        And then we have the banks, the loan approvers, the helicopters, and the matches in the UK rumour that is running around at the moment.

        The Irish concept of lifestyle is tied into this entire flawed decision making process.

  44. Tim

    Folks, via Paul O’Mahony:
    EU warns credit rating agencies;

  45. Tim

    Is America Just an Oversized Ireland?

    – By Kevin Drum
    | Tue May. 4, 2010 10:14 AM PDT

    In a review of Fintan O’Toole’s Ship of Fools, a book about the boom and bust of the Irish economy, Henry Farrell summarizes the pathologies of Irish political culture and then concludes:

    Yet is American politics so very different? Irish politics is profoundly shaped by perceptions regarding the difference between those who have influence within the system and those who are relegated to the periphery….This is as plausible a description of the United States as of Ireland. In the U.S. system, too, the broad imperatives of globalization are marshaled by well-connected and “untouchable” business interests to defeat regulatory oversight, of the financial system and elsewhere. The American version of these interests is less roughly spoken than its Irish equivalents, and wears better suits, but otherwise it is not very different from the forces that brought Ireland to near collapse. If Ireland once seemed like a miniature America, America looks increasingly like an oversized Ireland. A comparison that was once all too self-congratulatory now has disturbing implications.

    I had a hard time staying interested in Ship of Fools even though it’s a short read. That’s not because it’s an especially bad book – though I would have preferred a little bit more analytical meat to go with the unrelenting outrage – but because if you covered up the names you could have fooled me into thinking it was just another book about America’s financial collapse. If O’Toole is to be trusted, the only real difference is that American politicians will generally be prosecuted if they’re caught in obvious and provable corruption while Irish politicians aren’t. Beyond that, though, the political culture is pretty much the same, the financial culture is pretty much the same, the real estate boom was pretty much the same, and all the rhetoric that supported it was pretty much the same.

    Obviously that’s not O’Toole’s fault, and certainly the details are often interesting in their own right. But basically, “Ireland was a mini-America” pretty much sums up the whole thing. Move along, nothing to see here.

    • Deco

      The thing about a boom bust scenario is that there are opportunists on the way up, and another set of opportunists on the way down.
      The system that operates in Ireland is Nepoto-consumerism. One half of the equation is about nepotism, cronyism etc…The other is about consumerism, borrowing, etc… One half accumulates profit. The other accumulates debt. And the two flow in the same direction. In a recession the flow is interrupted somewhat but it never gets reversed. But the profits only go one way. And this applies regardless of whether the economy is going up or down.

  46. DOBrien

    As of May 2003, space probes have identified 61 Jovian moons comprising 57 small moolets and captured asteroids. The brilliant Italian astronomer and mathematician Galileo Galilei first observed the remaining four (not six) large Jovian moons – Io, Europa, Ganymede and Callisto, all visible from Earth and now collectively called the Galilean moons – all are similar in size to our own moon. This discourse highlights the central problem surrounding Economic Science and theory and its application in a modern context (i) we generally know only half truths and our knowledge is based on prejudice and misinformation for the 4th estate (ii) its always under estimates Human greed and naked selfishness (iii) it is not science as it cannot predict an outcome better than chance in all but the simplest of cases. That’s why I’ve stopped reading the news papers business sections save for David McWilliams .


    The Press in Europe, in particular in Germany was painting a picture of the Greeks as Fraudsters who deceived the Euro.

    You know, this is only half the truth and the other half is deliberately kept low key.

    To understand that, one needs to look at the process involved in Europe.

    All european countries report their financial and budgetary data to a central agency located in Luxemburg, EUROSTAT.

    Brussels now has received numerous documents from within greece, from honest people, who are somewhat disgusted at the ways greek officials as reporting false figures. Brussels contacted Eurostat on these events, and Eurostat did….. nothing.

    So what is the procedure behind these allegations?

    Werner Radermacher, Director General Eurostat is on the safe side by stating that the corresponding policy on highest european level states that they are dependent on the ‘truthful’ reporting of european member countries.

    However, he continues, even when they are made aware that reports are downright fraudulent, there is a big ‘ GO NO FURTHER’ red light on front of them. Eurostat is not equipped with tools to be able to challenge the validity of data supplied to them, in fact they have no tools of such kind at all.

    Hence they are regularly fed with falsified statistics from, I would think it is safe to say all member states, some more some less.

    So the question why the Greeks falsified documents and abused flaws in a system, whereby the owners of the system knew since years that it can not work this way, well, the answer is simple.

    Because they could!

    Since many years the EU Statistics are fed with wrong informations, deliberately, and since many years Eurostat asks Brussels for the tools and legislation to fix that problem, with out success.

    Important to note here that it was Germany in particular that refused more transparency on these matters and blocked reforms, and by refusing more transparency, they allowed Greece to perform their accountancy tricks and falsifications.

    Coincidence? Of course not!

    The markets understood much earlier where the systemic flaws were to be found, but politics turned a blind eye.

    Have a lucky guess why?

    Because such lack of transparencies and tools came in VERY handy for Josef Ackermann of Deutsche Bank and his Speculations on bond markets and other areas, get my drift?

    Such is the red line through Euro-Politics-Banks all over the place Folks, this is the Reality of the Mythos of the Greek Frauds, they did it, because they could do it!

    • Forgot to say, this is just another example why I call this since 1999 the Euro Lie.

      • I was looking for some more background information to feed into my above post and luckily found this article in english from DER SPIEGEL from March 2010

        Built on a Lie
        The Fundamental Flaw of Europe’s Common Currency,1518,682432,00.html

        • In the dramatic tumbling of markets today, the Euro nearly came under the psychological barrier of 1,30, and I guess it will not take much longer until it goes below that, come summer 2010.

        • @George

          Cheers, good background material there, though article March dated, here’s excerpts:

          “… the definitive euro lie, because Article 125 of the Treaty on the Functioning of the European Union, the so-called “no bailout” clause, states unequivocally: ” A Member State shall not be liable for or assume the commitments of central governments, regional, local or other public authorities, other bodies governed by public law, or public undertakings of another Member State.”

          “In addition, the then-German Finance Minister Theo Waigel pushed for the so-called Stability Pact.

          Only financially sound nations were to be accepted, and to satisfy this criterion, the pact stipulated so-called stability criteria for the member states. Under these criteria, no country was permitted to accumulate debts exceeding 60 percent of its gross domestic product. In addition, member states were only permitted to take on
          new debt if the scope of the loans did not exceed 3 percent of their GDP. “Three point zero is three point
          zero,” Waigel’s rule stated. Violations were to be rigorously punished.”

          “Creative Tricks

          Since joining the euro zone, the 16 euro countries have violated the deficit rule, under which net new debt cannot exceed 3 percent of GDP, 43 times. Most of the infractions have occurred in the last two years.

          Greece is at the top of the list of violators. Only once did the country manage to push its deficit rate below the magic limit, and only with an extremely creative trick: The Greeks sugarcoated their statistics by including prostitution, black-market trade and gambling in the calculation of economic output. As a result, GDP rose by a stunning 25 percent in 2006, and the deficit dropped to 2.9 percent.

          Major investment banks also played a key role in fudging the numbers. With the help of complex financial
          instruments, the Greeks obtained additional loans that did not appear in the Eurostat deficit statistics. The
          concealed borrowing centered around so-called swaps “with which the Maastricht rules can be circumvented, completely legally,” says a trader with one bank.

          In early 2002, the US bank Goldman Sachs provided the Greeks with an additional loan for roughly $1
          billion, triggering a wave of indignation throughout Europe. Even German Chancellor Merkel was outraged, saying that it would be “a disgrace if it turns out that banks, which have already taken us to the brink of disaster, were also involved in the falsification of statistics in Greece.”

          “Cosmetically Enhancing Debt…

          Merkel could soon have even more reason to be outraged. A year after the Goldman deal, Deutsche Bank’s
          London office set up a questionable deal for the Greeks. Together with the government financing division of
          Eurohypo, now a subsidiary of Commerzbank, it provided Athens with a loan for the purchase of military equipment.

          “In 2003, Eurohypo took over a loan to the Greek government worth around €1 billion, which was repaid last year,” confirms a Eurohypo spokesman. “The transaction was based on two swaps, which a bank in London had made available to the Greek government.”

          Deutsche Bank is unwilling to comment on the details of the transaction. Behind the scenes, it is said that Eurostat investigated the deal, and its goal was never to engage in cosmetically enhancing debt — even though it can hardly be denied that this was precisely what the deal was intended to achieve. It meant that the Greeks did not need to enter the loan in its books right away, but only several years later, when the weapons were delivered.”

          “Otmar Issing, the former chief economist at the European Central Bank, insists that the clause allows no room for compromises. Current German President Horst Köhler was one of the architects of the Maastricht Treaty back when he was a senior official in the Finance Ministry. When asked in a 1992 SPIEGEL interview whether the monetary union could allow a country to go bankrupt, he replied: “Why not?” But such assurances seem to lose their value as soon as push comes to shove.”

          “Europe doesn’t need a new currency. What Europe does need is the culture of stability, transparency and credibility that its governments have promised citizens, but have never created. Although the euro zone has a common monetary policy, it lacks a shared financial and economic policy.”

          “Bearing the Burden….

          Government officials have also thought about creating an insolvency statute for member states of the monetary union. Economic Council Chairman Clemens Fuest has already envisioned what it could look like. With such a statute in place, an affected country would be able to petition for its own insolvency.

          In return for debt relief, it would be subject to harsh conditions from partner countries. It is important, says Fuest, that the donor nation be required to bear a portion of the burden by cancelling some of the troubled country’s debt. He reasons that donors will be more cautious from the start if they are stuck with a portion of their loss.”

          • Deco

            Good news….
            Greece has decided to have a CENSUS to find out how many people are working for the state.

            Presumably. everybody else will get a tax audit ???

            I am always wary about the term ‘laid back’ because it usually indicates somebody who has successfully managed to suck economic gain out of the system at the expense of hard working people…..
            When an entire country is calling itself laid back….then it must that the EU is the system ??

    • Malcolm McClure

      Now, we’re getting to the heart of the matter.
      Laughingbear, that clear explanation of Eurostat complicity in fraud is worth 6 months subscription to the Irish Times, Indo or any of the others.
      That single revelation means that the Euro is essentially worthless.

  48. Oh. BTW.
    Desperate Dan was back on TV tonight commeting about the price of petrol.
    A sure sign we’ll be driving donkeys next year.

    • Commenting (sic)….and he was.

    • Donkey Power

      I think we need to all meet on Dun Aengus on 27th of this month for the Full Moon Power Day and hold hands together and look out into the Atlantic and ‘think’.We must project ourselves into the future by looking into the past first .We will need to gather all the local donkeys on the island of arann and ask ourselves did camels arrive here before the donkeys and why did they dissapear only.These donkeys must form part of the encircling Haka Dance.I ask this because Padraic O’ Conaire told us about his beloved Neidin in M’Asal Beag Dubh .Any North African will tell you about their beloved Camel and can relate with the name Nadeen for this wonderful beast.Is the upcoming Greek tragedy about the missing links between the camel and the donkey on Dun Aengus and how did the name remain unchanged and why?
      I am reminded of the remaining Greek settlement in Alexandria , Egypt that eat ,drink and speak everything Greek and they have both donkeys and camels living side by side and the name Nadeen proliferates.Besides them remains the ruins of their Greek Gods under the sea from a lost Empirethat is no more.
      From the top of the rugged cliffs of Dun Aengus lies in the ocean the ruins of the Gods of Atlantis that must be found and restored .Therein our secrets lie in wait of discovery only to be found and our new energy harnessed once more.

    • Deco

      Wud dat be Dan O’Brien, Danny McCoy (IBEC) or Dan McLaughlin ?
      U mention donkeys…and that confuses me even more as to which one you are talking about…..

  49. DarraghD


    Sure aren’t we are the same auld shite ourselves, hiding mountains of debt in “Special Purpose Vehicles”, for the purposes of keeping it off the national balance sheet. At the end of the day it has to be repaid in full and for as long as that’s the case, a situation should not be allowed where we can dress it up as something other than part of the national debt that will fall due to the taxpayer.

    Part of the problem here is that we have over complicated the whole concept of what debt actually is, with SPV’s, and other such vehicles and products that purport to dress debt up as something else entirely…

    Another thing that has occurred to me is that it is only in very recent times that we have thrown off the control mechanism that is the Catholic Church in Ireland. It appears to me that we have traded one master for another, where we were subservient to the church in the past, we are now subservient to the financial markets. Yet again the same characteristics are present, a lack of transparency and information with regard to who exactly we are dealing with here, a lack of accountability, a lack of consideration for the common good, as opposed to overdue consideration for a small minority of players who must be protected at all costs.

    Entities that bet money on a country defaulting, there is something very fundamentally wrong with this in my opinion.

    • Deco

      I actually think a more accurate way to describe matters is to say that we have thrown out the Catholic belief system for the Consumerist belief system. And that basically we can criticize the Bishops but we are forbidden from saying anything about celebrities or advertising sponsors. We can criticize religion, but we are to obey retailing. Why pray and fast, when borrowing and buying are much more fun.

      The thing is that individual sovereignty is required to enable us to be free of this need to control people.

      I hope that you are supporting our advertising sponsors…..

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