May 5, 2010

Fatal attraction to euro driving us over the edge

Posted in Banks · 350 comments ·

Now things are getting really bizarre. A few weeks back, this column highlighted how Ireland had changed from a democracy to a “bankocracy”. A bankocracy is a state where government policy puts the interests of its banks over the interests of its citizens. Our Government is the conduit for the transfer of wealth from our own “outsiders” — in this case the ordinary people — to our own “insiders” in the banking system. But now it is even worse because it is transferring that wealth to the insiders in another country.

Make no mistake about it, the bailout of Greece, which will cost us €1.3bn, is not a bailout for the Greek people, it is a bailout for the banks that lent money to Greece. It is not a loan either: it is a gift. What has been dressed up as a sovereign bailout with an appeal to our sense of European solidarity is nothing more that a direct transfer of money from you to the foreign creditors of French and German banks. These creditors stood to lose if Greece defaulted last week. The “bankocracy” is now transnational.

Think about this. The bailout to Greece comes with conditions. The Greeks will have to suffer austerity and pay more taxes. But what exactly is the actual cash being used for? A considerable amount of it will be used to roll over old bonds. This means that the original investors in Greece — the banks and investment funds — will be allowed to reduce their exposure to Greece. In turn, the ordinary taxpayer — you — assumes this risk. So the Greek taxpayer and the other European taxpayers are lumped closer together, while the banks that had stood to lose out get away scot-free and are giving the bill for their errors to us, the people who had nothing to do with Greek bonds in the first place.

How could this be?

We are told that this is all being done to enhance the credibility of the euro. But how can a currency’s credibility be enhanced by something so patently incredible? How can the reputation of a financial area be made more solid by rewarding bank failure, not bank success?

When trying to understand why apparently clever people — such as central bankers and senior civil servants — do silly things, it is helpful to look at history. When discussing the fatal attraction to the euro and the inability of mainstream economists to see that the euro, as much as Greece, is the problem, it is useful to consider the similarly flawed Gold Standard.

The Gold Standard in the 1920s and 1930s, like the euro now, was considered an article of faith by the banks, the financiers, civil servants and politicians. They simply couldn’t imagine a world where money wasn’t tied to gold. Anyone who questioned the Gold Standard was ridiculed.

It was the great John Maynard Keynes who, as always, went against consensus and argued that the Gold Standard was forcing governments to cut back when they should be spending in the Depression. He argued that making Germany pay all reparations would cause a crisis because either the Germans wouldn’t be able to pay, leading to chaos in Germany or, if Germany did pay, it would be so competitive as to destroy the competitiveness of the other countries leading to mass unemployment in those other countries. He was laughed at. He then went on to say the Gold Standard should be scrapped. He was ridiculed.

The Gold Standard, like the euro, meant there was no exchange rate risk between all the big economies. This facilitated a huge increase in loans from bankers in one country to lenders in another. Britain owed vast amounts to the USA and Germany owed vast amounts to everyone. France became the banker of Europe and it lent billions to Germany, while at the same time demanding that Germany paid full reparations for the First World War. So, increasingly throughout the 1920s, the Gold Standard became the guarantor of these huge loans among countries’ banking systems.

The banks gambled that the Gold Standard was so important to the prestige of the big powers and so central to the way the big powers thought about the world, that loans would always be repaid. Doing otherwise would “undermine the credibility of the system”. Keynes saw through this canard from an early stage.

If we examine the euro in the boom, we see that it operated in exactly the same way as the Gold Standard. The single currency encouraged banks to take risky bets. The banks lent money to anyone, safe in the assumption that even if there was a crisis, the euro would be so sacrosanct in the minds of politicians, that all their loans — no matter how dodgy — would be paid back. Because to do otherwise would “undermine the credibility of the system”. Sound familiar?

Look at the cartoon above, which would be funny if it wasn’t so serious. It shows you who the Irish banking system owes money to and who owes money to us. You can see that we are at the centre of an intricate web of borrowing and why international banks are worried about possible defaults. It also explains why Greece was saved to protect the international banks rather than the Greek people.

Take the Irish balance sheet with Spain for example. Irish banks have lent €21,987,000,000 to Spanish banks, while the Spanish banks have lent us €10,153,000,000. You can see who would lose out if we were to go the way of Greece or if Spain were to topple.

Think now about the relationship in the cartoon between Germany, France and Ireland. Irish banks owe €127,458,000,000 to the German banks and €41,844,000,000 to the French banks. These are debts incurred in the good times and most of the cash was lent out to buy property in Ireland. Can we pay them now? I doubt it. Should we repay them after the guarantee expires? We will need a lot of austerity to generate the surplus to repay these loans.

Let’s just go back to history for a second. As the booming 1920s led to the collapse of the 1930s, the governments realised that they couldn’t pay back all the cash. But instead of defaulting, governments everywhere first cut spending and raised taxes. New loans were made conditional on austerity.

So a country like Germany was encouraged to borrow more through its banks to enable it to pay back more — even though, at the same time, the country was forced to embrace austerity.

This is precisely what is happening to the periphery of Europe now. We are being told to deflate, while the core countries of the euro enjoy easier credit conditions. This is hardly a recipe for stability or for an enhanced and more credible euro. It is the recipe for division and instability where unemployment on the periphery begets more instability, more tax increases and more capital flight.

In the 1930s, as Keynes predicted, the upshot was that the centre couldn’t hold and one by one the major countries abandoned the Gold Standard and defaulted on their debts.

Could the same happen the euro? It could. Particularly if, in order to keep it together, politicians have to take money from the poor outsiders to bail out rich insiders while dressing it up as European solidarity. Come off it!

  1. Fatal Attraction or Fatal Error that is the question .

    If you want to see the war on your doorstep forget about the Russians you only need to look around you and see who owns the local grocery shop near you and they are not Irish .
    A lot of Chinese have begun trading as traders and in commodities and most of their transactions evade the usual banking security system at first .It is only further down the line that the visability is registered to show a face .Until then ‘out of sight and out of mind’. I usually call this ‘rising damp’. It happens over night and we do not know where it came from.
    Banks and currencies is one aspect what we discuss here but the playing field is much wider than that and should include ‘commodities ‘ and in this case finished manufactured products from far east. The definition of commodities can include certain manufactured goods in certain circumstances.Now tax is another issue .

    • I agree, one small effect that we do have in the face of seemingly overwhelming economic forces is with our spending power – I try to avoid buying cheap Chinese junk – too many bad associations with sweat shops, child labour and environmental pollution -not to mention the energy waste in transporting it here.

  2. Local Sponsor
    We in Ireland are careless to allow foreigners commence trade etc without proper safeguards in place .In the middle east and other places it is the norm to have a ‘local sponsor’ to act as a steward to ensure laws are complied with.

  3. Dilly

    And if you needed reminding of how we got here. Someone sent me this link, this morning.

    “chef, personal shopper, masseuse, butler, maid, personal trainer and the use of a helicopter and private jet with chauffeur driven connections. ”

    We were in cloud cuckoo land there for quite a few years.

  4. MK1

    Hi David,

    There is some similarity between trying to remain within a gold standard and trying to maintain a euro system. However, the problem is not in trying to maintain a system but in the way that the system itself has flaws.

    Now the euro as a system is under pressure, not by what is happening today, but by the mistakes in the past. And the euro is a currency that competes with other global currencies, and the de facto US Dollar reserve which replaces gold reserves.

    The euro system may (=will) have to be improved if it is to survive long-term, although its arguable whether any financial system in the current point in humanities evolution and chaotical financial system will survive.

    As one poster has pointed out, the financial ‘utility’ economy is sucking out far too much ‘value’ (=money) from the real productive part of the economy.

    In the future, an efficient economy and financial system will have banks that are ran by few staff from portacabins, etc, and based in low cost countries. Banking is completely inefficient in most if not all countries as is finance.

    I welcome any lancing of the boil(s).

    > The Greeks will have to suffer austerity and pay more taxes.

    Yes, and why not? If a developer is getting loans way above his means and doesnt have the wherwithal to pay it back, or course we ask them to change their practices and work for it and pay it back. Its the same for any country that has been borrowing beyond its means at a governmental level. Greece has, Belgium has, Italy has, the US has, Japan certainly has, the UK has.

    We here in Ireland have a bit more powder in our gun but are burning through it at a rapid rate.

    You say that the money to Greece is not a loan. Well, it is, officially at least and I would hope long term de facto as well. Set at 5%. But we as lenders is the unusual part. Its a bit like broke drunks at the credit free bar giving themselves IOU’s on paper.

    The Euro project is under pressure. It doesnt seem to be well steered at the moment. Trichet is trying but perhaps Merkel and Germany and co are thinking back to the good old days of the strong and stable Deutsch Mark. Do they really need less well managed countries bringing down theirs and holding it back? Thats why there aren’t ‘federal euro’ bonds in the first place, but national bonds and market spreads. It was a fudge to begin with and is coming home to roost.

    Now, if you were designing a financial system, would you copy the euro? Not likely …..


  5. Place your bets :

    New Uber DM 2/1
    Euro Devaluation 9/8
    Euro unchanged 10/1
    Inflation 11/9
    Rise in interest 10/9
    Bank Accounts Frozen no bets
    Exchange Control Regulation no bets

    • Josey

      in my opinion all major currencies USD, UKP and the euro will be devalued ( are being delvalued ) similtaneously…you can see this in the rising price of gold and oil.

      What do you good folks think that this is a concerted attack by the US on the euro to keep the Dollar as the global reserve currency???

  6. Malcolm McClure

    Having been impressed by David’s ‘fatal attraction to euro’ article, I came across a very thoughtful analysis of the situation by Charles Gave (of GaveKal), which I paraphrase below. It will be particularly illuminating to those who view the present mess from an historical perspective:

    Two ‘ideologies’ have been competing since the 1950s to define what the future organization of Europe should look like:

    The ‘Roman Empire’ Model:
    the main goal is to have Centralized State, managed by an efficient techno-structure with a supremacy of the center over the periphery. Unification of the law through a common jurisprudence is necessary, as are regulatory powers leading to a de facto unification of all regulations. The main problem is that the institutions being built are less and less democratic and increasingly more technocratic and removed from public control (Commission, Court of Justice, ECB, soon a European EMF).
    This leads to a general disenchantment from voters and a backlash from the countries with the longer democratic traditions (UK, Sweden)

    The Catholic Model.
    In earlier times, Western Europe was catholic from one end to the other with free movements of people, traders, businesses, etc… But political structures were massively different systems, from independent cities in Flanders and Northern Italy, to Kingdoms, to Republics like Venice… So it could be argued that political diversity served Europe well; until, of course, the 19th and 20th century when Europe’s nation-states (well, really France and Germany), in a mutual suicide pact, went for each other’s throats in a bid to each become ‘the new Rome, the new Imperial Power”.

    Resolution through founding the EEC:
    These fratricides led to the efforts towards European integration which, in their infancy, were heavily supported by the Catholic Church. Indeed, the real founding-fathers of Europe, Schuman (France), Adenauer (Germany), Alcide de Gasperi (Italy) were all Christian Democrats, and (German-speaking) Catholics. And their main bond was obvious enough: they shared a common, Christian, civilization. But beyond that, at inception, the European ideal’s main legal principle was subsidiarity. Competing political systems were the norm, integration was the exception. Pieces of political sovereignty could be abandoned but never the principle of sovereignty itself (incidentally, we now have had a reminder of this view in the recent decision by the German high court to block any further abandonment of sovereignty by Germany).
    Such a system automatically leads to the re-emergence of old political systems centered on provinces and ever closer proximity to the voters. Examples of such an evolution include Spain, Switzerland and Germany (with a lot of political powers such as taxation, education, police… being decentralized). Italy might be moving fast in this direction. Another fine example of this trend is the re-emergence of forgotten nations following the collapse of communism across Eastern Europe, either peacefully (Slovakia) or through bloodshed (Bosnia).

    To summarize and put it in the language of today, at the risk of oversimplifying: In partisan political terms, Europe’s Christian Democrats, typically led by Germany and Holland, were usually aligned with the “Christian” view of Europe, while Social-Democrats and Socialists, usually led by France, were more of the “Roman Empire” persuasion.
    However, this marvelous equilibrium was broken with the collapse of the Soviet model and the German reunification. With a stronger Germany, a free (and very Christian) Poland, Hungary, Czechoslovakia… came the threat that the ‘Christian’ vision of Europe would overwhelm the ‘Roman Empire’ camp. The sense of urgency was profound: If a European State was not built rapidly, the newly freed Eastern European countries would, in the future, likely be very wary of abandoning large chunks of the sovereignty they had just recovered from the Soviets.

    For the proponents of the “Roman Empire” model, the European State had to be organized immediately, whatever the risks, and become inevitable. Otherwise, the proponents of ‘Christian Europe’ would win by default and History would likely never reverse its course. The collapse of the Soviet Union was the crisis which gave the opportunity, and drive, to the Roman Empirists to push though an overly ambitious program. The scale had been tipped and the “Roman Empire” needed to tip it the other way; so the creation of the Euro, more than anything, came to symbolize the push by the Roman camp towards a centralized super-structure.

    Of course, the reasoning was that a common currency would facilitate trade, tourism and exchanges amongst Europe’s people and thus generate a large growth spurt. But the common currency was also seen as a first step towards the creation of a European State. And the only reason “Christian Democrat” Germany, which for historical reasons should have been wary of such an endeavor, went along with the plan is that it was seen as a qui-pro-quo for German Reunification. The Germans thought: “we allow the French to build their European ‘Roman Empire’ and sacrifice the DM, and we get to re-unify with East Germany”.

    In this ‘Roman empire’ roadmap, The second step would be the writing of a constitution that would establish the super-structures of a functioning state. Unfortunately, this constitution was immediately voted down by the French themselves and then by the Dutch (and Irish).
    Having been thrown out of the door, the constitution came back through the window, as the Lisbon Treaty. Apart from idealistic legislation, the Euro became the main tool for the ‘European State’ to deploy its nascent power.

    This is why today one reads everywhere that, should the Euro be consigned to the trash heap of History, then the whole European Union effort might disappear along with it. Of course, this is dead wrong. Rather than the death of Europe, a demise of the Euro would simply mean the collapse of the “Roman Empire” idea of Europe and the resurgence of the “Christian” idea of Europe.

    After all, if some countries start to revert to their own currencies, why should this impact common market rules? A number of European countries are not members of the Euro (UK, Sweden, Denmark, Poland…) so who cares if Greece, or Spain, or Ireland join them? Instead, the bigger question investors, and commentators should ask themselves when confronting the current crisis is simple: for Europe to function, do we need more centralization, more government and more intervention? Or does Europe need more freedom to experiment? The answer to that question will dictate whether our reader is a proponent of the ‘Roman Empire’ idea of Europe, or the ‘Christian’ idea of Europe.

    The revival of the ‘Christian idea’ of Europe, and the possible demise of the ‘Roman Empire’ idea of Europe could actually be one of the most bullish developments since the collapse of the Soviet Union. So why does every one think it is bad news? “

    • I found Gave’s rant to be a load of bogger rubbish. Bet he’s trying to fence out some prejudice or other!

      Danger with stuff like this is it foments religious and ethnic conflict and division of one kind or another.

      ‘Roman Empire’ idea of Europe, or the ‘Christian’ idea of Europe, who cares, your mother?

      Except maybe Muslims in Serbia afraid of genocide from one another.

      We live in a new world order of globalisation/communication/technology and trade with newer problems for each and every mother.

      We need newer solutions than what’s to be found in many a painful lesson from the past, ye’all global consumer rastaFarians on Dun Aengus take note and fast!

      Thos on euro o wing take note.

      (Hope I got in there b4 John Allen:)

      • Malcolm McClure

        Somehow seem to have touched a raw nerve with this piece. I read it more as an allegory about the difference between Christian Democrats and Social Democrats, not about the difference between religious philosophy and technocracy.
        cbweb, do you relish the idea of big government? Globalisation? Big brother?

        • @Malcolm,

          Thanks for your patience, I did lose it a bit there.

          Still bothered by the Ryan report and all the shenanigans there, lack of resignations among bishops, cardinal interrogating a 10-13yr old to make him sign an NDA and the case relentlessly fought for 13yrs.

          Lest colin_in_exile accuse me of rc church bashing, you need to see Michael Haneke’s The White Ribbon, winner of the coveted Palme D’Or Award at the 2009, critique of German Lutheranism, and note recent ethnic conflict in Europe, Ruanda, also fanatical and extreme elements of Islam and other religions. Have I covered them all?

          Religion is a growing spent force and is no longer regarded as a credible world view, a case of physician heal thyself. Often perceived as part of a problem of fanaticism of one kind or another, rather than part of the answer.

          To answer your question, nope, don’t relish big government, Big Brother, Corporate Globalisation, but I think you’ve put your finger on a major cause for concern there that is an area where our views converge I bet :

 for NB critique of WTO, could equally be a critique of what’s happening without transparency/accountability, the rollover of Eurozone political leaders to the banks in Brussels today.

          From link above:
          “Instead, the U.S has accepted harsh legal limitations on what domestic policies it may pursue. Approval of these agreements has institutionalized a global economic and political structure that makes every government increasingly hostage to an unaccountable system of transnational governance designed to increase corporate profit, often with complete disregard for social and economic consequences.”

          “This new governing regime will increasingly provide major generic control over the minute detrail of the lives of the majority of the world’s peoples. It is not based on the health and economic well-being of people, but rather on the enhancement of the power and wealth of the world’s largest corporations and financial institutions”.

          “The emerging system favors huge multinational companies and the wealthiest in developed and developing countries”

          So, let people put aside what divides them, religion or whatever, and deal with that one!

          • Malcolm McClure

            cbweb: I think i can agree with you on most of the points you raise above. Your WTO reference explains why we must always be vigilant of the motives and purposes of unaccountable international organizations. However relative freedom from common diseases, due to advances in medicine, has left the world vastly overpopulated. The only way the world can sustain so many people is through complex international co-operation. What we need to avoid is one-size-fits-all solutions, such as those promulgated by the WTO and the EC.

  7. dwalsh

    Good discussion.

    thanks to laughingbear for the link about the hedge funds attack on the Euro (see below).

    What is not being mentioned in the official media is that the root of the Euro crisis (and IMO the global crisis) is the agressive predatory financial speculators who are making billions on betting against the Euro (derivatives). The global hedge funds are cleaning up at the moment and that is where the Greek bailout is going. IMO it is an outrage that the international community allows these predatory parasites to wage economic war against the nations and peoples of the world.

    These guys are no more than privateers and bucaneers; no better than the barbary pirates and slavers of old; operating from their off-shore trans-national enclaves; tragically with international political approval.

    eg: referring to betting against the Euro this bucaneer says…

    “This is an opportunity…to make a lot of money,”
    Hans Hufschmid, a former senior Salomon Brothers executive who now runs GlobeOp Financial Services SA, a hedge-fund administrator in London and New York.

    This is what is really going on. These monsters are feeding on the carcass of the physical or real economy of the world…and it seems to be international practice to place their right to profit above the lives and livelihoods of the consumers (formerly known as citizens) of the world.


  8. Cost of borrowing for Ireland jumps to 5.5% …..

    Appears Trichet’s Eurozone backstop confidence building failing badly.

    Cowen confidently predicts return to growth for Ireland Inc

    Markets tell a different story! Denial is rife.

  9. manofiona

    The euro is not the cause of banks behaving badly. The US and UK financial systems have got themselves into trouble also and Japanese banks fed and then suffered from a property bubble 20 years ago. What makes the euro different is that there is no one with the possibility of being in charge, since national governments refused (and still refuse) to give up tax sovereignty and the power of financial regulation. There is no reason why they should do so unless a democratic European government takes over those responsibilities. Since no one is in charge, individual states could treat the euro as an external support for whatever policy – or non-policy – they felt like adopting concerning both public and private credit. Each in its own way, Greece, Spain, Portugal and Ireland used that external support to incur enormous public or private external debt , which they could consider not to be external at all. The only way to bring this situation under control while preserving the euro, and without forcing deflation on individual member states – is to Europeanise both responsibility for the debt – and the fiscal and regulatory powers which will have to be used to stabilise the situation and return Europe to a path of growth. A European state would have real power to ensure that the single market became a reality – and that is the best way of ensuring that all parts of Europe share in growth, development and modernisation – and that prices are the same in Newry and Dundalk. Europeanisation would, incidentally, permit Anglo Irish Bank to be put out of its misery without anything more than the mildest of ripples on the waters what would then be a genuine European financial syatem

  10. Thanks for all the comments. The quality of the inputs is wonderful. You hardly need me to write at all now! The game is changing very quickly and the EU is in a bind. Expect something characteristically vague to come out of the Euro summit on Friday night.

    History suggests that the center won’t hold on this. It reminds me of a the 1993 currency crisis all over again. The only way France and the franc was not engulfed in that was due to a deal between Germany and France that let small fry like Ireland swing. The same core/periphery split will emerge in diplomacy which will reflect the split that has already occurred in the markets.

    Best David

    • MK1

      Hi David,

      History does indeed suggest that the core/centre wont allow itself to be dragged down, but this has still to be played out. A lot is on confidence, and bond markets are moving wildly.

      Strangely, 10 yr Bund money is lower today, whilst Irish and Portuguese is up, perhaps an indication that if a split were to occur that it would in fact benefit Germany or those that would retain a euro or DEM.

      Just checking 10-year bonds:

      JP 1.28%
      DE 2.7%
      US 3.47%
      UK 3.8%

      So, whilst the US may be talking about basket case Europe, it is paying more than Germany and has its own basket cases as in California.

      Its true that global focus is on Greece and will spread to Europe as a whole, but the benefit will be a dropping in value Euro which will help exporters such as Germany! BMW should do okay thank you very much.

      The real elephants in the room are actually US debt and Japanese debt, which dwarf Greek debt. Greece does need to be fixed but it is small beer in the global system of debt.

      Meanwhile hedge funds etc are only making money based on speculation and risk, rumour, perception, etc. Twas ever thus,. ask any tulip trader from 100′s of years ago, or indeed real estate agents in Ireland from the very recent past. Dont blame the traders! They dont solve the problem, they feed off it, but they are not the cause!


      • @MK1

        Thanks D and thanks posters all including posters whose views I don’t share, continue to learn a lot from y’all, keep up the great links and shared knowledge.

        have to say that your speculation re US, which may prove correct in the future, right now is flawed.

        Look at the drop in the value of the euro against the dollar, btw thx again those who called this, I took advice and cashed out some savings into dollars just before the drop:)

        While the US economy not exactly steaming ahead and though it may be full of basket cases, the Dollar doing quite well at the moment.

        • MK1

          Hi cbweb,

          Not sure if the dollar is doing that well if you take a longer view at it over the last 5 years, as it has weakened against the basket of currencies quite significantly.

          US debt is a worry as it is so large, 13 trillion or so government debt and according to overall debt is 55 trillion.

          This article ( correctly reminds us that debt is a tool that nations SHOULD use, but over-use is dangerous. Ireland’s ‘external debt’ may be high but we have outlier characteristics as we are a small island nation with a very open economy. But debt is debt, and has to (should be) paid, and our external debt is less if the euro debt is not considered as really external.

          Our debt is bad, and overall debt (gov + privaye + business_ is worse than that of Greece, as is the US’s, as is the UK’s, as is Japan’s etc …..


          • @MK1,

            cheers, ta for great links, re your point

            “But debt is debt, and has to (should be) paid, and our external debt is less if the euro debt is not considered as really external.”

            David explores the very interesting aspect of our euro debt ……..

            “Think now about the relationship in the cartoon between Germany, France and Ireland. Irish banks owe €127,458,000,000 to the German banks and €41,844,000,000 to the French banks. These are debts incurred in the good times and most of the cash was lent out to buy property in Ireland. Can we pay them now? I doubt it. Should we repay them after the guarantee expires? We will need a lot of austerity to generate the surplus to repay these loans.”

            You have to wonder if this is the only reason we are not Lehmans yet?

            We default on approx €170bn, its not like Iceland hitting the Brits with the bill, its Ireland defaulting on its eurozone paymasters.

            Appears FF have treasonously sold taxpayers out and put them on the hook of penury for gambler banker and FF debts and we are the suckers for TED, increase taxation, reduce expenditure, pay more debt coupons while indoctrinating taxpayers they caused the problem!

            Time to default and say goodbye to Eurozone politicos and bankers who did not act with due diligence, did not guard taxpayers interests, who plundered interest in the ‘good times for them’, who now want to shaft us with more debt, to pillage more profit !

            Could you even make this up?

  11. dwalsh

    It is heartening to see that others are awakening to the criminal reality of international finance.
    In future times historians will tell the true tale of these vipers and the destruction and mayhem they have caused in the world.

    In an interview I recently watched with George Soros he was asked if the hedge funds were going to take-over the world; and he answered…they already have.
    The audience laughed and applauded. The interviewer almost fell to his knees in awe.

    I was reminded of Jabba the Hut.

  12. wills


    Elephant in the room I reckon is…….

    Bonds and fiat paper money and virtual money gambling through hi tech super dooper info flow.

  13. wills


    I’ve re-discovered one of your posts and it call’s it out better than my post above……..brilliant comment below,

    ‘ps200306> Take it as read that I know what fiat currencies and fractional reserve banking are ….. I still don’t get what the fuss is about.

    The whole thing about our economic system is that it is based on trust and money is created out of nothing. Thats what central banks provide, new money, and out of nothing.

    The fractional banking system allows banks to provide credit, but what levels of capital adequacy are correct to keep the system up and the trust there? Basle I had it at 12%, Basle II about 8%, and banks that were tading and not regulated properly indeed dipped below that.

    So, yes, in an economic system credit is like an oil that allows people to work, create, etc. But when there is too much credit given out, it becomes an end unto itself, a monster, and bubbles ensue. Humans are the fault in the system.

    So, its all about control. There is nothing wrong with alcohol, indeed I’m partial to a Corona served at 1C, preferrably in Mexico, but if I am an alcoholic, I may not perform as a human, I break down. That is what has happened with the financial systems of the world.

    Too much credit plus too much credit based on assets that were not really assets, whilst central banks ‘race’ and compete with each other to create more money out of nothing.

    Economics is not a science and us mere humans are at the begining if learning how to deal with it in a world that has become more and more interconnected and volatile.

    Money (paper, electronic) may collapse at some point, whether in 2080, 20,080 or 200,080 !’


    • MK1

      Hi wills, I icouldnt have said it better myself! ;-) As you frequently write, ponzi scheme comes to mind. MK1

  14. Josey
    (Wait till I catch my breath and have my stick) .

    You have proclaimed your vested interest in Gold etc on the site for some time and no doubt you are winning and well done .Dont forget that when you are thirsty , hungry, tired or sick gold has no place in the short term for you so you muct knuckle down in the moments of now like everyone else and maybe your children will benefit from its gains.But for now all you can enjoy from it is the ‘glory’ as they did in the greek empire in another time .So go out in the sunshine and in your garden make yourself a wonderful garland.

    • Josey

      thanks for replying. I did invest in gold, nothing outstanding but enough to get me by on a rainy day. I followed what some people were proclaiming on the internet about 5 yrs ago…thought it was a bit whacky but further research lead to confirmation. I took posession of the gold too, wouldn’t trust a bank’s voucher. For now as I’m still self employed it will do as my pension. I don’t believe when I retire there will be any state pensions left…none worth speaking of anyway.

      Furthermore I have never been smug about this investment and I always encouraged as many people as possible to follow suit, I dont want to see anyone suffer during these times but we all are. I have dug up my back garden and planted it with veg, spuds, cabbage, sprouts, fennel and some others. I think that by the end of the year my front garden will be similar.

      You’re right about not being able to eat/ drink gold but you can’t do that with euros either, it’s just a safe haven from inflation and deflation….well a safer haven at any rate.

  15. Colin_in_exile

    I’m sure Mr Hreidar Mar Sigurdsson is wishing he was Irish like Seanie, Fingers et al.

    And, I’m sure Seanie and the lads are counting their blessings they are Irish.

  16. G

    Dow Jones went into meltdown, 25 minutes ago, felt 1000 points (10%), remarkable watching it live.

    How would one go about learning more about how the markets function as it is like looking at a foreign language?

  17. G

    Can David or someone give a quick lessson in financial markets 101…….explain what is behind a 1000 point fall in the Dow Jones – can you explain panic selling and what takes place within the mechanics of the market/trading place? Why do people sell off, the Dow Jones falls and then rallies again, can anyone give a rough guide or point to a good book which explains same?

    • Alf

      “market 101″

      Fear and greed move the markets with these kinds of sizes. Sometimes the trades are logical sometimes not.

      In this case there was a sell off of riskier assets (i.e. stocks) for cash (i.e. dollars) Some could be to buy US treasuries. The rally was because some think stocks went too cheap.

    • Alf

      The fear of stocks (i.e. the selling) is probably from the unknown exposure of each company to Greece or the euro.

  18. Philip

    Maybe the US are more exposed to Europe than Europe is exposed to US. Greek contagion may be a global pandemic.

  19. Foie Gras :

    David says : ‘Keynes saw through this canard from an early stage.’

    Davids demonstration of the banks gambling is liken to what the duck farmers in France do when they make ‘foie gras ‘, namely they force feed the duck first untill his belly can inflate no more and they then ‘obtain’ the end product and sell it .Sounds like sub prime mortgages to me.In France this is also called cullinary skills or ‘cuisine exemplere’ and it is very profitable and fattening .Now we know why we have fat bankers.

  20. wills


    Wall street now spoofing the dow jones 700 points decent is down to typo error into a computer….???!!!

    These drunken gamblers are seriously run amok ,,,,

    God help us….. if their gambling now goin to turn to ‘dennis the menace’ ah me finger slipped on the keyboard shamarama …

    • G

      I heard the guy on CNBC saying the ‘machine was broken’, he was alluding to an ‘issue’ like that, seemed like the Titanic.

  21. SandraCanada

    ok, so what does someone who has a few euros saved do?

    Should one buy another currency now before the euro completely implodes?

    Which currency? Canadian $? USD?

  22. Sandra – I am unsure anyone knows what to expect now to advise anyone.we are all moving into a ‘whish of ooo la la here we go’ .Its better just to hold tight and look around you all the time.
    Back to basics .I am reminded how the value of water changes from the shop at the bottom of the mountain to the guy with the donkey at the top of the mountain.Yes, Croagh Park mountain is a pilgrimage for many and a sport for some.

  23. David,

    Another great article. It is time we stopped deluding ourselves as to the situation we face.

    Below is link to CNBC website, it shows that we are miles out in front as being the biggest debtor nation in the world. Our external debt as a % of GDP is a massive 1,312%. UK is in 2nd place and it is mostly European countries that make-up the top 20. Not pretty!

  24. Absolutely amazing how irrelevant and invisible our Taoiseach has become. He appears on Primetime last night, the biggest current affairs show in the country yet not one comment here or not much elsewhere either.

    Amazing. The Totally Invisible Taoiseach.

  25. furrylugs – yes I saw him with his cranium incontinent and incoherent and gaping around himself not looking straight at the presenter as though he was watching who was behind his back .You should know when milking a cow their neck is always in a closed railing maybe he needs one on tv in future.

    • G

      He was watching for the Guards or if someone in the RTE/Pravda studio would make a citizens arrest and spark a revolt.

      I saw the interview, thought it appalling, zero credibility, should be in Mountjoy!

      • liam

        Everybody is watching the fun across the water. Meanwhile,

        Greek government bond prices fell sharply on Friday amid investor flight due to concerns the country might be forced to restructure its bonds

        …the cost to insure [Greece’s] bonds against default rose close to 1,000 basis points, which is considered an indicator that a country or institution will default.

        eurozone governments have arrived at the conclusion that changes to the design of European monetary union can no longer be postponed, which will be the main topic on the agenda at Friday night’s summit.

    • “”I saw him with his cranium incontinent and incoherent and gaping around himself “”

      Positively Shakespearean John. Like a quote from Lear out on the Heath.

  26. —- GREECE LIFEBUOY MADE OF LEAD—- and, The daily drama of War Refugees from Afghanistan, Iraq and Palestine

    The IMF doesn’t care for the people of the nations that he entered, he cares for financial institutions. Billions of dollars were used through the IMF to sponsor brutal dictatorships, such is the history of this Mafia Institution.

    Josef Ackermann cashed in a 10 million Bonus a few days ago, so serious is german politics when it comes to stop the overwhelming power of banks and speculators. Ackermann sits on Merkel’s shoulder like a monkey, Merkel who was a Junior Propaganda Minister in Honeckers DDR Regime.

    The system continues to crumble.

    A few lights on the horizon come from Iceland today. Both Sigurdsson, Gudmundsson CEO and Manager of Kaupthing Bank were arrested today and will be interrogated for the next two weeks.

    In Ireland, we have Mr. Dukes sucking his dail pension and being way too generously paid for his position in Anglo.

    One idea of Europe, that the wellbeing of the many is more important than the wellbeing of a few, it has been ridiculed by special interests, served by politicians.

    The german Bundestag is debating as I type here, and I am listening somewhat half hearted, because it really doesn’t take a lot of concentration to follow this jabber of politicians who failed for 3 years now to stop this Heist from increasing.

    What people here might not know, like Merkel’s history above, Finance Minister Schaeuble was the one who tried to implement what became known as the the Bundes-Trojaner.

    This was a computer virus that he wanted to deliver on every computer who has a german email adress, and eventually every computer who adresses certain websites in germany. This Virus would have traced data on all your hard drives and report the content back to the german controlettis.

    George Orwell’s vision was a Kindergarden against that.

    There is absolutely no doubt that the so called ‘center right and right’ political parties throughout Europe were and are complicit in this Heist, this warfare against millions of people who try to make a living with moderate to poor incomes.

    One word about the green parties needs to be said, make no mistake about it, the greens in germany have absolutely nothing to do anymore with the grassroots movement that once was born out opposition to Gorleben and the nuclear policies imposed on Germany. Today they are nothing but center right as well, whereby, the center is right in deed.

    The epitome of such change of heart in Ireland is Mr. Gormely who betrayed core values that may have been at the heart of a certainly more left rooted green idea and such betrayals made this party unelectable.

    I am under no Illusion how this heist will continue, the Greek ‘solution’ leaves no doubts.

    In Ireland we continue to have Brian Cowen and Lenihan and their crew of inept Politicians dictate our future, while we have to listen to Donegal TD James McDaid who defended his position to stick to his dail pension and brought a smile to Lenihans face in the dail with his sickening rhetoric.

    Clearly McDaid is convinced of his own intelligence and enjoys listening to himself. Others would probably say he is full of shit.

    The geo strategic position of Greece is another aspect to consider.

    For the forgotten war refugees from Afghanistan, Iraq and Palestine Greece is of a different strategic meaning of course.

    The Harbor of Patras is a the Gateway to Europe for them, with Italy being only a few hours away and from here they try to reach Germany and other places. Living the delusional dream of the promised Land, which will go up in smoke for all of them.

    Their exhausting journeys took them to Turkey and the place where Turkey and Greece is only separated by a very narrow channel of the aegis sea, may be 2 kilometers at the most, one can clearly see the Island of Samos, and it looks like you could throw a stone over the water so temptingly near it appears.

    Hundreds of corpses are collected on the turkish shores regularly, the tide has brought back those who did not make the distance and drowned.

    This is the reality of the financial warfare hidden in the media warfares that cover the Lenihan’s and Schaeuble’s with their news bulletins and leave out the reality of our time.

    It is estimated that currently 200 people arrive every day in Greece and try to make it further into Europe.

    Their fate in Italy is already sealed should they make it. In Greece, they get a 1 month permission to stay, and they ‘live’ their under inhuman circumstances. They are the first victims of our warfares on financial markets and real war zones.

    Their status is that they are persona non grata, they are not wanted, not in Greece, not in Italy, not in Europe, and none of these countries has put up sufficient resources to help them, on the contrary.

    Our media ignores them, for now that is, until their numbers reach proportions where they can no longer be ignored, and this day will come, sooner than most people want to know! It is easier to look the other way.

    What is the prize for a human being?

    For the refugees this is no questions at all, it is 2,500 – 3,000 Euro they have to pay to their contacts to bring them over.

    Human beings are a stock that is constantly shortened on the markets!

    I don’t care how many millions USD of altruistic smoke screens the Speculators are hiding behind, I never trusted their Philanthropy, seriously not.

    The voting in Germany is over.

    The fate of Greece has been sealed, this Greek Life Buoy made of lead, 390 votes in favor 211 against.

    People in expensive Armani suits, they all dressed up a touch more than usual on this historical, made their choice.

    Your choice?

    In Patras a young men in his early 20s tries to jump on a truck that is accelerating, aware about the constant flow of Refugees, the drivers speed up.

    The young man tried to open the back of the truck driving at 40 miles or more an hour, to sneak into it and try to make it onto one of the ferries that go from Patras to Italy.

    On Wallstreet in a few hours, someone will make a bet, placing 70,000 dollars in the hope of a crashing Euro. His potential gain you ask?

    1,000.000 USD

    The young man did not make it, he is arrested, and set free again, to go back the others, and he will try it again the following morning, until his one month permission runs out, and he is sent back to Afghanistan, to be killed eventually.

    Democracy has failed. The system is dysfunctional.

    • Josey

      great stuff. A few comments;

      The greens were orignially reds. They want to end private property and collectivise everything.

      As for the refugees, it’s a terrible situation, europe cannot support them. The only solution is to end the wars in their countires, get the IMF out and let them develop. Then they’ll stop coming and they won’t die of drowning or hunger or be put into concentration camps.

    • Correction:

      390 yes
      72 no
      139 no vote

    • P.S.

      One Truck driver reported I had to deliver Watermelons, one of these chaps took a melon, sliced it in half and hollowed it out, put it over his head and sat in a box of melons

      The Truck driver went away from the camera, laughing.

    • Colin_in_exile

      Why don’t the “war refugees from Afghanistan, Iraq and Palestine ” go to Saudi Arabia? I mean, there’s plenty of mosques, halal food, burkas and no temptations of alcohol, pork and loose women, instead of coming to europe looking for all these things?

      • Unfortunately, with all the advances in science, and medicine, a relative just got her liver transplant operation done this week, you know Colin, there is no pill against xenophobia available yet, until then the only medicine against it is clearly TRUTHFUL INFORMATION.

        Take care

        • Colin_in_exile

          Please answer my question

        • I think you have exposed yourself enough for what you stand and what your mindset is about, I see no point to engage in your rhetoric kindergarden school of hate and fear.

          Have a productive life Colin, I wish you well!

          • Josey

            In fairness there’s nothing wrong with fear…it’s a defensive reaction. For example most of us live in economic fear of losing our jobs and homes….on closer analysis of the fear factor i.e. the economy, our fears are justified. Fear of heights is another example.

            Nothing should be taboo, no PC should quieten free speech and thought.

          • @Josey,

            His fear is of a different kind, which I call a deliberately spread fear Josey.

            Colin_in_exile says
            Lets see if the pro-multiculturist, RC Church bashing mob give you as much a hard time as they like to give me.

            I mean, there’s plenty of mosques, halal food, burkas and no temptations of alcohol, pork and loose women, instead of coming to europe looking for all these things?

            Undoubtedly we will see more of that in Europe, very soon!

          • This was from me, coincidently indented.

            Undoubtedly we will see more of that in Europe, very soon.

          • liam

            In fairness, Colin is a very smart chap and has made some genuinely interesting contributions during his time here. But he has rather set out his stall on whom he identifies as belonging to what group and how they should be regarded in relation to other arbitrarily grouped people, which is something rather more premeditated than fear, though it plays upon it. And its really not very interesting.


    As I indicated in an email to Eamon this week:

    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.

    Best wishes

    Minutes after the voting in the german Bundestag a law suit has been filed in the German Constitutional Court.

    Eamon, I challenge you to do the same, collaborate with our academics in economy and law, use all the tools and influence at your disposal and bring this as a matter of urgency and in the national interest to the Irish Supreme Court.

    • The speaker of the german constitutional court indicated that they try to make a decision over the weekend eventually.

      Should they decide in favor, then the constitutional complaint will be accepted and legal proceedings take their course.

  28. Colin_in_exile


    I see you still haven’t answered my question. I know you’re not stupid, and I know you know the correct answer, but won’t say it because it doesn’t dovetail with your dogma. You do know Saudi Arabia, a wealthy country won’t let them in? Ever wonder why? Saudi is rich, and can afford to take them if they wish, hey they take in a few million every year on hajj which boosts the national economy even further on past the petro dollars!

    I see you have placed in a box, and marked me as a xenophobe. Typical slur from the dhimmi. Nothing is further from the truth. I’m not racist, I’m not xenophobe, I believe foreigners like our new financial regulator can offer this country quite a lot and I welcome his arrival, unlike some FF TDs who were wondering why an Englishman was calling the shots here.

    • I am afraid I have to ad ignorant as well.


      Because I provided you with the answer to your questions which you chose to frame in a particular way, you chose to skip it, in an attempt to play rhetoric games with me.

      This site is full of your vitriol statements, I let them speak for themselves, and yes, I am afraid I really have no more time for someone who insists Geert Wilders would not be a fascist.

      In this spirit, I mean it, I wish you well, but do not expect me to be dragged on to your level. Period.

    • ou do know Saudi Arabia, a wealthy country won’t let them in?

      In a 1993 Memorandum of Understanding with the Office of the United Nations High Commissioner for Refugees (UNHCR), the Government agreed to “provide protection to refugees present in the Kingdom” and grant refugees temporary permission to stay. Since 1998, UNCHR carried out refugee status determination on the Kingdom’s behalf.

      World Refugee Report 2008
      Saudi Arabia hosted about 288,000 refugees, about 287,000 of them Palestinians

      • I rest my case.



        • Colin_in_exile

          “In this spirit, I mean it, I wish you well, but do not expect me to be dragged on to your level. Period.

          “I rest my case.



          Can you make up your mind please?

          By the way, you are correct about Saudi allowing 288,000 refugees in. Since you did not answer my question, I had to presume at the time that Saudi did not let any in, an error I certainly won’t make again with you. Its worth noting however that refugees attempting to enter Saudi have to meet “religious requirements”, in laymens terms, no entry for non-muslims thank you very much. I’m sure you’re completely outraged with this situation.

          p.s. What has all this to do with the Euro driving us over the edge?

  29. ‘We must run glittering like a brook
    In the open sunshine, or we are unblest:
    The wealthiest man among us is the best:
    No grandeur now in nature or in book
    Delights us. Rapine, avarice, expense,
    This is idolatry; and these we adore:
    Plain living and high thinking are no more:’

    - also –

    ‘The world is too much with us; late and soon, Getting and spending, we lay waste our powers:’

    Excerpts from Wordsworth London, September 1802, Wordsworth recognised the corrupting influence of money on people over 200 years ago – things haven’t changed much.

    • Beautiful Black Cat!

      Well, ahem, as a musician and visual artist, I have a soft spot for the romantics. Coincidentally, because of a conversation I had yesterday with someone I really hold dear, I am listening to Alexandre Scriabin at the moment, one of my favorite composers, a recording with the unbelievable Vladimir Horowitz, Vers la Flame, nothing for the faint hearted though .

      You know, yes you are right, things haven’t changed that much, but I have no doubts, we can change all that, if we want that is.

      • More digestible Scriabin, from his more romantic period, this was the last piece I learned before my accident.

        Passion and drama on levels you can not exceed.

        Horowitz was a extremely funny character, a true gem! Ahem, He was my hero as a child.

        In one interview he admitted that early in his marriage he had laid a hard steel brush into the place in his bed where his wife laid down…. In the interview, his wife sat beside him and tenderly ‘smacked’ him stating that YES, I remember that, now where you said it.


  30. Tim

    Folks, Goldman boss has a few things to tell you:
    Goldman CEO: ‘There is a Gap’ in how we’re perceived:

  31. Tim

    Folks, so, you like the “Nikky”? Look at this:

    (via Stephen Kinsella).

    • And just in from Paul Krugman;

      “O Nao!

      Portugal is not looking good: interest rates where Greece was only a few weeks ago.

      I really really hope the ECB staff are huddling right now, nerving themselves up to do some serious quantitative easing. Otherwise Anno Domini 2010 is shaping up to be Anno Domino instead.”"

    • liam

      There is some historical context to this. If you believe in such things as maximum economic carrying capacity (I have no idea if this is a real term, if it isn’t, it probably should be), this is a pretty good example of what happens when you meet and then exceed it.

      Given that practically all growth in the last ten years was export driven, the interesting part of the plot is 2000-2010 since it reflects what the rest of us have been up to. Given that neither the LDP nor the DJP have much appetite for serious economic reconfiguration this dependence is likely to continue.

  32. WOW, I have a hard time to believe that! LOL

    30 years ago, I was 19, I read a book about Entropy. A minute ago I found this interview by the chap who wrote the book.

    Jeremy Rifkin:

    • I second what he states here! We need to re consider our concept of priorities, the lack of empathy is a huge concern, so much that I consider it a matter of whether we manage to live in peace, or wage war.

    • Malcolm McClure

      laughingbear: Empathy as a sixth sense! What an interesting idea. I have always suspected that ‘survival of the fittest’ or ‘devil take the hindmost’ didn’t tell the full story about what motivates human beings. There is the basis of a very important scientific insight in what Rifkin is talking about. Thanks for the link.

  33. Tim

    This will help alot of people.

  34. —-ON THE EDGE
    Propaganda takes over!

    Well, even before they come out with specifics, and in the Light of David’s article, clearly, this is nothing but PROPAGANDA!

    The same type of propaganda that is produced when Merkel said the the banking industry will participate in the greek bailout with an 8 billion euro package, so what? Are we supposed to be grateful now? LOL

    Folks, Brussels estimated themselves, the possible bailout sum they would require 1 Trillion if more countries slide into the Greece situation, and I mean, come on, if you followed the raiser sharp analysis presented by Dr. Constantin Gurdgiev in his WORLD DEBT WISH series, and other recent works from him, well, we know where all this leads to.

    If you only would follow two sites to stay informed, I hope you don’t, but to make a point, I really recommend to read both in conjunction, David Mc Williams here, who has the ability to present his analysis in a consumer friendly style which is often Edutainment at the same time, clearly using his passion for the matter to educate and trigger peoples curiosity, and Constantin’s
    in conjunction.

    The latter, not being an economist myself, hence I admit that I approach his writings no other than armed with a coffee or two and time at my hand, printing his charts, and preparing myself for a extended head scratching and more secondary literature research session, knowing too well how he quickly can cause a thundering headache for anyone new to the world of macro economics on an academic level. LOL ;o)

    But, and this is important, his Analysis is raiser sharp and needs to be followed to the point.

    David spans the wider picture from different angles, and Constantin puts plenty of meat to the bone. This is how I personally see it.

    x x x x

    To make it criso and short, and as David predicted in line with my own feelings, Friday will be vague, and the package they will announce has to be put intoperspective of the above mentioned 1 Trilliion.

    Now I need a coffee….


    • P.S. @ David, if you ever enhance the functionality of your blog, please allow for a edit function on posts.

    • LOL, When it comes to the Eurzone rescue fund, I am hoping for some sharp analysis that ends with…. So, country xyz has to pay in xxx hundred years to reach the proposed goal to be able to cover …..

      I have a gut feeling we will see something like that shortly … ;o)

  35. —-ENTROPY—-

    We teach our children, a rock is a rock to bomb the hell out of it to get to it’s minerals, but we fail to learn and to teach that this rock is part of a system which is interdependent.

    From the dark memory of my clouded brain, I try to quote content form his book ENTROPY which i don’t have anymore and can not refer to right now other than from memory.

    We know that a piece of charcoal has a certain amount of energy inherent.

    Now, Thermodynamics has taught us that all the energy in the Universe is constant. Nothing can be added, nothing can be subtracted. This is the first law of thermodynamics.

    When we take that piece of charcoal and burn it to create a pleasant fire in the evening, the energy inherent in the coal is not gone, but transformed into heat, the coal reduced to ashes.

    We taught our children that we have a ever lasting supply of water and energy and just need to exploit it to make life more pleasant for all of us.

    In deed this is the notion of a petrol driven economy!

    The truth of the matter is, you can only burn this piece of charcoal ONCE! Period. Full stop!

    See what I mean?

    Oil as a resource is precious, very precious and the basis for a lot of much needed research in chemistry and medicine. It always struck me as incredibly stupid to just burn it.

    The closed system of our biosphere is precious and needs to be understood as a fragile and dynamic system, and we would be well advised to come back to the wisdom of some native american cultures that had a much deeper understanding on these matters than we, as civilized modern men want to admit. To approach this biosphere with the respect it deserves is not what we practice.

    Coming generations, hopefully, will have a good laugh at our stupidity and how we not only squandered and poisoned our resources, but also contributed to the climate problems sub consequently.

    This is where we need to re educate and go forward from, deep cultural changes are required to be able to do that, but it is possible if we accept the facts that stare us in the face and want this to change.



    Can the regulator please call Mr Dukes for an interview and check on his credentials and overall abilities with reference to the position he is holding?

    Thank you!

    • EMAIL to the financial Regulators office:

      Ladies and Gentlemen,

      With reference to your recently enhanced ‘Minimum Competency Requirements; I believe is welcomed by the public, can I suggest that you invite Alan Dukes for an Interview as a matter of urgency? I would think it is fair to say that his appointment was a rather political choice, and there is evidence that his abilities may not be suited for the position he currently holds.

      Thank you for considering this concern which I believe is valid.

      Best wishes
      Georg R. Baumann

    • paulmcd

      Laughingbear, I wrote to Emmet Oliver on this very issue subsequent to reading his article in last Thursday’s Independent – BUSINESS WEEK, supplement, page 12.

      Sir, Your reservations concerning Alan Dukes are quite appropriate. I am 59 years old and as far as I recollect Mr Dukes was Minister for Finance at the time AIB was bailed out of its Insurance Corporation of Ireland fiasco in the mid 1980s. I may not have as clear a recollection of many of the facts as others of my generation because I was working as a so-called “independent” <> with France Finance Informations in Paris during this period.

      In the minds of Irish banking executives of a certain age, the principle of “moral hazard” was established by Mr Dukes and they could afford to take levels of risk scaled for an Alan Dukes-like form of resolution if the proverbial should hit the fan. The nature of Finance Minister, Brian Lenihan’s, judgement can be gleaned from his nomination of Dukes to the Anglo Board and to his description of Dukes as the “public-interest” representative on the Board.

      There is no hope that detailed figures, on how the different options for Anglo Irish might work, will be released. The analysis is supposed to have been carried out by KPMG and I suspect that many of the assumptions are quite simply too ludicrous and embarrassing for the information to be subject to public scrutiny.

      Earlier this year I was trying relentlessly, without success, to obtain statistical information relating to the conclusions drawn by the committee reporting on Remuneration for Higher Public Servants. (I suspect that you or some of your colleagues would have run into the same brick wall which I, as an academic, came up against.) I simply wanted to know the data which were NOT of a commercially-sensitive nature, but the Department of Finance would not disclose them. Once I had established that some conclusions in the Report were false, based on sourcing facts from elsewhere, I phoned Hays Consulting, who had provided their data to the Review Body, but the Hays director did not wish to take my figures on board, although I was simply pointing out that a client or clients of Hays may, in the then recent past, have drawn incorrect conclusions intended for public consumption using wrong information from Hays’ Database. I sent the director a typewritten record of our conversation.

      CONCLUSION: You cannot trust an INDEPENDENT report especially if it has been commissioned by the son of Brian Lenihan Senior of “on mature recollection” notoriety.

      • paulmcd

        The two missing words after “independent” in the first paragraph of the letter are: Analyste Financier

        • Hat tip to Paul!

          I believe in what you did there, we need to increase pressure, substantially, we need to sit in Kildare street as true peoples representatives, with no political strings attached.

          The time of categorizing people as left or right is over, it is a post cold war relict and no longer valid, we need to work with all sides on specific issues such as the one you addressed.

          Thanks Paul!

  37. Heinz Beans

    ECB is emulating the Federal Reserves by buying up excess Euro Bonds surplus to their requirements and in doing so are in a different federal financial structure to the real US Federal Reserves.This is PANIC Attack.

    • John,

      all you folks here, I consider to start a movement ‘Iceland style” to influence Irish politics in any way we can. If you feel this is a valid approach, want to contribute and ponder about it together, here is my contact:

      Skype: Oceanviewstudio


  38. Euro Acropolis et Pantheon

    Shop Label : All sizes fits all.

  39. Vers la Flame

    I have been observing my astro cosmic maze of data and there is no doubt ‘the earth is moving ‘ as we speak.And all of this is coming closer to home.
    Its time for O’Meara camping or be ready for it .

    • (Smiles) I have a lot of time for hubble space science, but am rather skeptical on the influence the stars have on our fate, and intend to believe, as human beings, we are choosers, have choices, and it is up to us.

  40. laughingbear – you are correct .we have a greater influence on our fate .however if you know it is going to rain because you see the clouds and you do not wear a coat then you might catch the flu.

    • yeppers!

      Someone recently complaint about the amount of rain here in my beloved Donegal, I explained that there is no rain in Donegal, it is liquid sunshine. ;o)

  41. 40 words@rain

    you have recognised ‘sunshowers’ soon you will graduate to ‘spray’ .

  42. Tull McAdoo

    Cowen has reverted to his old comfort zone i.e. chairman of the local county council. He has that distracted look about him, like someone waiting for orders from Dept. of Finance in Europe……… As a footnote to my observations ” what part of stone broke, skint, bankrupt, pennyless etc.etc. does Cowen not understand” We do not have 13 euros to give the Greeks for a breakfast never mind 1.3 billion of them for their very own gangsters. You know thats the problem really, Cowen and his ilk just seem to think the public finances are an endless supply, even if it means borrowing from someone elses future. BRIAN please stop spending money you do not have……….

  43. wills

    @Laughinbear, from wills.

    Sir, enjoy your posts I do, one caveat though.

    Would you mind editing down the ‘chaff’ and self indulgence to a degree which tends to not clogg up the board a little.

    I get the impression you maybe using the forum to knead out your own inner stuff a little and be more effective to write that stuff out, privately.

    • wills

      typo.. ‘tends to clogg up’…

      Thanks Georg.

      • wills

        P.S. I do recognize I am NOT the moderator etc, but merely an avid reader of the blogg who means the best.

      • Hi Wills,

        Well, certain posts would have been better served in private messages in deed, but I could not let them stand they way it developed, not a matter of selfindulgence at all.

        Havng said that I, I realised this myself and agree with you, hence offered also my skype as a form of contact for the future.


  44. wills


    Euro forced into reality by ‘cooking books’.

    The political union forced it through for sheer political interests.

    Irelands political and economic game players piggy backed on the back of the Euro project forced through by the grand dames of european power.

    Due to forcing the euro through on the back of dropping the ERM in ’93 and so on the euro project is becoming undone.

    One interesting point here. Ireland s ride on the back of euro funderland project precipitated somewhat the Ponzi property bubble which resulted in cultural disaster for Ireland.

    • Cultural disaster, meaning distorted values , the defacing of the landscape from construction, social disadvantage, loss of a way of life or just damaging to us as a collective group ? what do you mean by cultural disaster, how do you envision life in Ireland changing from the econonmic fall out, what will we loose?


    Disheartening news!

    In the first instance, the emergency complaint filed by five Professor of Law and Economy was rejected, the final date of decision has not been avised on yet,

    The Judges justified their rejection by stating that any delay of the german funds could endanger the Rettungspaket, ‘RESCUE PACKAGE’, as a whole.

    They state further that they would have no indicators , which I find remarkable, tthat the german governments financial analysis and assumptions would be flawed.

    I think, it is unprecedented that a constitutional court take side on and makes statement concerning the fiscal decisions of the german government, wiping of the table Article 125 completly.

    • Their expertise is law not economy, and the complaint was based on law.


      • I guess this leaves only the European Court of Justice in Luxemburg.

      • wills


        I reckon the ‘structures of power’ are been operated in the executive, legislature and judicial areas of government in Europe, by interests who are in collusion perpetuating old world values under the kosh of in built obsolesence.

        • Yeah well, it just shows, the german constitution, Grundgesetz, which essentially is very good, was stretched over the maximum to be able to ratify Lisbon.

          There is no doubt, if germany would have had a referendum on Lisbon, they would have noted No, clearly. I doubt the five chaps, who also filed complaints in 1999 against the introduction of the Euro, have the means to go to Luxemburg.

          Hat tip to them, they saw it coming since long, and they represent not only a handful of Eurosceptics, but many more economists in deed.

          Disheartening though….

  46. —- SPEED—-
    1000 points as fast as light

    HFT, High Frequency Trading is currently the largest operated form of stock trading with an estimated total volume of 600 Trillion USD fiat derivatives, derivatives with no collateral basis. In other words, there are no goods, no hardwood is sold and picked up, no wheat or other goods exchanged, it is just computers that trade without any human interaction. This is the Casino!

    This instrument was and still is used to attack entire nations, like Greece, manipulate prices and markets to short sell. It is nothing but fraud.

    In this form of electronic financial markets, software programs are acting as traders whereby algorithms are used to make decisions without human interaction.

    This is nothing new, but since the 90s things changed and entire markets with full electronic interaction and execution were developed and other algo-trading forms established. Major Banks such as Goldmann Sachs, Deutsche Bank, Credit Suisse etc, developed their own algo’ with names such as STEALTH, SNIPER, GUERILLA, and their choice of military terminology alone allows for some hints on their mindset.

    In this Casino, on the fiat derivative markets everything is a gamble, and these tools are abused and used to manipulate prices and entire markets to make literally fraudulent profits. This has nothing to do anymore with the original stock market idea, it is a perversion and is highly destructive, hence this term financial weapons of mass destruction.

    Anonymous aftermarket trading in dark pools, ‘sharks’ sniff orders on the look for ‘iceberged’, larger orders, it is a perverted world in deed, but appeals to certain people a lot of course, and the money to be made there is ridiculous.

    I call this perverted, because nothing is produced in this economy, no goods, no services exchanged, it exists solely for the purpose rigging and fraud.

    The original motivator for such systems was of course speed, to be able to place an order quicker. This goes to extremes in deed, whereby these freaks are worried about the latency on data lines of course. Valuable nanoseconds per meter cable are lost on long distances, and it adds up and is amplified by routers and other latency introducing equipment. – For electronic musicians that might be around, think of sample buffers of your recording system and latency, and you get the drift. –

    A popular music recording sequencer I know of has around 2.5 million lines of code. Debugging code is more time consuming than creating new code, and major professional software applications updates, say from 2.5 to 3.0, are always pestered with bugs and unforeseen problems, even the best quality management can not change this, the codes are too complex to be able to deliver flawless updates, and the varieties of hardware and operating systems the software is supposed to run on contributes to that fact. Hence I always wait on .1 releases and never jump the wagon on the latest version.

    Now we also know what goes on in the software industry, code is stolen and implemented, programs manipulated and so on.

    The 1000 points fall of the DOW last week, the ‘fat finger incident’ has not been explained yet, and who knows what really caused this. However, malicious code is produced every minute, and in my opinion it is just a matter of time until this can cause a total Gau on 100% computerized markets, anyone who claims them to be safe has no clue about these aspects. Software and Safe is nearly a contradiction.

    I don’t think frog fingers caused this, it looks as if there was a complete dry up of liquidity, and this more than likely was caused by many computers that all sold at the same level. Will be interesting to learn what the SEC and Congress publish.

    Personally, I think this to be funny as hell, here we are, the speed freaks and HFT zombies, all use computer generated market manipulation to up stock prices, and out of nowhere KABOOOM, it reversed.

    I stated a couple of times that politicians are complicit and take advantage in these attacks. This week Max Keiser reported that the member of US Senate were selling bank stock short.

    Using an ETF, exchange traded fund, the very same congress people that claim to work on regulation to safe the banking system and look into the fraudulent matters that are going on, sold short banks.

    In an interview On Press TV with Ellen Brown author of ‘Web of debt’ Max showed a graphic, which came from this WSJ article.

    Dark pools and high frequency trading, both are used to manipulate markets and generate fraudulent profits, as well as destroying entire nations, they are the instruments of this Heist since more than three years, and no one saw fit to put a halt to it. of course not, they were busy placing bets.

  47. Tull McAdoo

    I have always been fascinated by the Fire Service and the Fire Fighters ever since I was young, no different than most boys I hear you say, and probably true. It’s the way they could sit around and let the world get on with itself, until that alarm went off and then it was battle stations, suit up, slide down the proverbial pole, bells and sirens blaring , off to the scene of an accident or fire……….. Jasus I always felt so proud of them, cool under pressure, doing what they were trained to do, no panic, no running around like headless chickens. There was no bluffing or spoofing in their world. Their world was a matter of life and death, in your face, up close and personal so to speak….
    Now I am sure ye have guessed where this is going, as I contrast a society in Ireland who have invested massive amounts of resources in training and education and nurturing of professional’s of all sorts in Science, Finance, Engineering and so on. The reason this investment was made was not for swanning about at the top of a business cycle but to get stuck in when the alarm bells went off, and do what they were trained for and most certainly NOT to jump ship and head off somewhere cushy and leave the old, young and under skilled to sort things out.
    I have no time for slackers who run off when the going gets tough, or whinging apathetic wasters and mammy’s boy’s. Harsh you say……. Well ok lets tease this sucker out very quickly with one simple question……. Why is it when you travel around the world ,the only people you meet in droves looking for a better quality of life is the Irish. No Belgians, Canadians, Dutch, Finns and so on and so on.
    Well I’ll answer it for ye, its because all the rest stay in their home lands, get up off their arses and make it happen, they don’t get fobbed off by snake oil salesmen like Cowen and Seanie Fitz and the rest of them hoors. They don’t take shit from no one, they don’t sell their futures or their childrens futures for bankers or any other fly by nights. People in Ireland need to grow a pair and then use all their training and other resources to drag that sucker kicking and screaming into the 21st Century. OR OR OR We could ring Joe bloody Duffy or even txt george hook……..Now you can pencil that pearl of wisdom into your notebooks from the Tull McAdoo and if ye pardon my French I have just given ye all the bloody “ my country my call” that ye need.

    • Malcolm McClure

      Tull McAdoo: I have worked with skilled and educated expatriates from many countries in many places. The benefits of overseas work are both rich experience and financial rewards. A few years overseas is no problem so long as the intention is to return to one’s homeland and invest those benefits in improving things here. Unfortunately forward-looking or corner-cutting ways to do things, learnt abroad, may not be compatible with the carefully balanced and conservative Irish way.
      It can take time and patience to re-establish rapport with the Irish modus operandi after prolonged absence in a ‘can-do’ environment. Returnees should avoid arrogance and seek local advice before seizing the initiative. Setting out to ‘drag the sucker kicking and screaming into the 21st century’ is not the way to redeem a country that has suffered the recent economic shockwaves. They know that it was that gung-ho spirit that got us into trouble in the first place.
      Applied intelligence and gentle persuasion is the way to go. That is why I respect Alan Dukes.

      • Tull McAdoo

        Im sorry to say this Malcolm but “ time and patience to re-establish rapport” is NOT something ye will have the luxury of in Ireland in 2010 as it is my contention that a wave of private debt defaults will hit later in the year causing the classic double dip recession and with the Government resources tied up with the Banks and unwinding the structural problems in the public finances, this second wave will overwhelm them.
        As regards Alan Dukes, I agree he seems to be a decent honest guy but who in their right mind would offer the present FF/Green front bench anything approaching a “Tallagh strategy”
        Finally with regard to the matter of foreign work experience, I would agree it is very worthwhile, but should not be confused with economic migration on the sort of scale Ireland will endure, 100 thousand predicted for this year??? Well in the words of that awful embarrassment and excuse for a tanasite Mary Coughlan “ at least this time when they go, sure wont they be well educated”

      • paulmcd

        Malcolm and Tull, You both need to read this article from Thursday last:

        Your naive perception of Dukes is at the heart of the inertia of the Irish taxpayer when faced with the Great National Swindle.

        • Malcolm McClure

          paulmcd: That anonymous article ignores the likelihood that Alan Dukes was put in place simply to establish confidence that the Irish government wants to be seen to be ‘playing by the rules’ and observing international law in the very fraught matter of AIB. As I said here a few weeks ago, Dukes’ role is simply to ‘hold the fort’ until the 30th September when the government’s blanket guarantee runs out.
          Colm McCarthy was interviewed about this on Newstalk last week. It was put to him that Anglo would be flushed down the sewer when the guarantee runs out. Interestingly he didn’t deny it, but said that he was confident that Lenihan had a whole range of position papers on his desk that included all options.
          I am prepared to trust Dukes’ ‘Omerta’ meanwhile. Let’s wait and see. Any people still with investments in Anglo have either CDSs protecting their position or deserve whatever happens to it. They have been warned.

          • paulmcd

            Alan Dukes is the man who told us that winding down Anglo would cost more than keeping it going, a ludicrous suggestion, and his reluctance to release the figures speaks volumes. This man may have been an excellent agricultural economist but he is clueless where accounting is concerned.

            Here in Ireland we have had two non-systemically important financial institutions – Anglo and Nationwide – specialising in the commercial real-estate area whose “sister” or equivalent institutions all across the United States have been allowed to fail at the rate of 2 or 3 per week throughout the financial crisis.

            We hear about Lehman Brothers but we do not hear about these other institutions because people like Dukes, if they have done their homework, have decided that we should not be allowed to know. Where Lehman is concerned Hank Paulson realised that the US taxpayer could only afford to save one of two institutions — AIG or Lehman. He chose AIG apparently because its “insurance” protected the interests of Goldman Sachs, of which he was the former CEO.

            Malcolm, you have been making very valuable contributions on this site; but I doubt if you have ever had the “privilege”, as I have had of working with people like Alan Dukes. Believe you me, they would gladly chew you up and spit you out if they considered it in their pecuniary interest to do so. In fact, come to think of it, that is exactly what is happening to the Irish taxpayer.

      • I agree with a lot you say here Malcom, I go even further and call it culture shock what people experience one they left this Island, stay abroad for some years, and then come back. It is like someone takes away some fog and you can see much clearer.

        However, I disagree on Alan Dukes, and also on gentle persuasion.

        This country needs a Revolution, and a movement that demands to sit in Kildare street to drive reforms and uncover what is wrong.

        • Malcolm McClure

          laughingbear: Revolutions in western Europe usually lead to several years of chaos and authoritarian governments — think Cromwell, France 1789, Franco’s Spain, Mussolini, Greece, Burma, China, Ireland in 1798 and 1922, I could go on and on. People instinctively resist revolutions as a solution to political problems.
          Look at the results of the UK election, after years of financial and political mismanagement. No revolution, Just a 5% swing to the Tories. I rest my case.

          • To clarify, I thought I would have made that clear by now:

            1. A Revolution ‘Iceland style’, pots and pans, to bring this government down. NO VIOLENCE!

            2. At the same time this peoples movement demand participation in a new government to drive changes.

            The democratic system has failed, we have no whistle blower protection, this has to change, not next year, next monday! Anglo Inquiries to be held behind closed doors, OPEN the doors today!

            and so on…. the List is long, and it is a enormous task, but one thing is for certain, to trust the very same people who are since decades in power is wrong.

            Without a peoples movement, sub consequent revolution as described, and their participation in government, abandon all hope!

          • Malcolm McClure

            laughingbear: ie popular pressure, not revolution. Even Jack O’Connor of Ictu on Dunphy’s Newstalk show today was concilatory in the extreme. When accused of being an establishment pussycat, his response amounted to “When you are in a hole, don’t dig deeper.”

      • liam

        “It can take time and patience to re-establish rapport with the Irish modus operandi after prolonged absence in a ‘can-do’ environment. ”

        Well, hallelujah. You are certainly not wrong there Malcolm. Georg refers to ‘culture shock’, forgetting about the reverse culture shock returnees may frequently experience.

        Tull, gotta fill the fridge, thats the bottom line. It is disheartening but true that those who leave are most likely a vote to remove FF lost to the rest of us.

        • Constitution Nua Liam;

          1.Fill the Fridge
          2.Lance the Boil
          3.Follow the money
          4.Mind the Moon Wobble

        • liam

          Georg, sorry, in fact on re-reading that is exactly what you are saying.

          How about the culture shock for those that are still here?

          I have a lot of time for Chomsky, and his political work has been referenced here frequently. However his academic reputation is built on his work in Linguistics, a discipline he is generally credited with founding. Its worth considering this as the theoretical basis for his political disposition.

          The relationship between language and understanding could be summarised as ‘language is culture’. Language acquisition can be considered as the acquisition of new grammar and vocabulary (and it is tested for as such) but if applied, it is in fact the acquisition of an entirely different way of thinking based upon the culture in which the language was created. This is most obvious to anyone who has chosen to live in a territory where the lingua franca is not their native language (and perhaps least obvious to those who have not).

          We accept the idea that negotiations between for example Germans and Chinese can be fraught with linguistic and cultural minefields (and it is possible to build an entire career on cultural arbitrage) but I would suggest that it is possible for intra-language cultural clashes brought on by linguistic divergences. The manipulations of the Irish Government, the EU etc are sold using a language framework that appears to be familiar but that allow massive distortions to pass unchecked and where terms such as liberal, conservative, free, open, necessary, alternative etc have entirely different meanings. The barrier McWilliams and others are attempting to overcome is not just a matter of seeking the truth, since ‘truth’ (unlike fact) is a concept that can be highly context dependent. They are bridging the linguistic and cultural gap that has emerged between those the wield power and those that are subject to it. That this divergence has emerged in what we call Democracies tells you all you need to know, and the disasters of the last three years serve to highlight this divergence. This has, I would suggest, placed entire populations in a state of “culture shock” in their own countries.

  48. wills

    Laughingbear great read @45.

    Could be what we are faced with in the HFT is a struggle between the new tech and gadgets is darwinism struggle between the new inventions been used as tools and been used as weapons!!!!!!!!!

  49. @Laughingbear & Wills

    “The Intelligent Investor: The Definitive Book on Value Investing. A Book of Practical Counsel (Revised Edition) [Paperback]” may be a good read, any other suggestions

    Met a broker recently who laughed at
    CFD’s Contracts for Difference, where you bet on the long or short, win and double your money, non taxable!!

    casino rules only

    • News today Eurozone leaders to enforce new loan guarantees to bolster the stability of the euro …..aka new rules for banks to save bankers losing money in the present financial turmoil…
      we are ruled by the banks, democracy how are ye?

  50. Debt to GDP is heading for double digits, before we add banks supports. Letting the EU run a rating agency is equivalent to letting an alcoholic run a bar!

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