July 19, 2010

There is a simple solution

Posted in Sunday Business Post · 91 comments ·

In the preface to The General Theory of Employment, Interest and Money, John Maynard Keynes writes: ‘‘The difficulty lies, not in the new ideas, but in escaping from the old ones, which ramify, for those brought up as most of us have been, into every corner of our minds.”

This is the problem in every crisis.

The issue is not that the lack of solutions to Ireland’s problems; the issue is that we don’t allow ourselves the permission to think our way out of the mess. So instead of examining new ideas, the first reaction of the establishment is to attack the premise of any new idea.

When obvious solutions are proposed for our economic dilemmas, the default position for those who don’t want change is to dismiss such ideas as ‘populist’.

The slur ‘populist’ is supposed to be enough to render new ideas useless or naive. Many of us who have seen what has happened to this country over the past two years would take ‘naivety’ over the ‘experience’ that has been on display from the ‘safe pairs of hands’ who run this place.

What about the counter-idea that populist ideas are popular because they are right?

Maybe we should consider that popular ideas are naive not because they are shallow and ill-conceived, but because they are devoid of the dripping cynicism that characterises economic policy in Ireland.

And what, we should also ask ourselves, is wrong with being popular or on the side of the people.

This is particularly apposite in Ireland, because the opposite of populism, or putting the people first, is elitism and elitism in Irish economic management means crony capitalism. So the people who oppose the crony capitalist and the interests of the insider elite in Ireland get tarred with the populist brush.

But what if there is some significance or merit in populism simply because it isn’t cronyism?

The obvious solution to the banking crisis is to let the bank guarantee lapse, protect the deposits with a deposit guarantee scheme backed by the European Central Bank (ECB) and let the other non-trust creditors hang.

The reason I say an ECB-backed guarantee of deposits is because this is an ECB problem. It controls the monetary union, and a banking problem in a member state is a monetary problem, and the ultimate monetary authority in the eurozone is the ECB.

Such a suggestion is popular and populist not because it is naive, but because it is right.

However, the people who will suffer are the cronies and the elite who might see their investments – or their so called ‘credibility’ – go up in smoke. Rather than do this, the insiders continue with their less than credible policies, and now we have the spectacle of them all pointing the finger at each other in order to survive.

When I see the likes of Patrick Neary being tarred and feathered by the same people who employed him, I see a smear campaign orchestrated by one bunch of insiders against another insider.

But the horrible thing is that the former bunch is still in power.

Why not just move on and entertain new ideas that put the people first and destroy the crony system that has got us into this mess, rather than waste our time concentrating on a piece of ‘after-the event’ bullying that is designed to put distance between the people who took the decisions and the decisions themselves?

It is also heartbreaking to see the media playing along with this game. The only way we will get out of this crisis is to think differently and risk being accused of populism not because it is easy but because it is right.

Let’s look at examples of politicians who took populist financial decisions on banks and currencies because they were right and in so doing liberated the people.

Franklin D Roosevelt was accused of being naive and populist and his solutions were consistently attacked as being too simplistic.

Yet they were right.

Roosevelt understood that simplicity was good, not bad. In fact, sometimes the more simplistic the solution, the more the person who proposes the solution understands the issue.

So when faced with banks lying to him, Roosevelt simply closed them down.

He protected depositors and then allowed the banks and their investors to go to the wall.

He also chose to keep others open, fully realising that the US needed some banks, but not every bank.

He did this rapidly with a series of bank holidays, which allowed the authorities to close down banks and move on without the people panicking and causing a run on the banks.

Equally, he defaulted on all of the US’s debts by taking it off the gold standard in 1935.

All the advisers said this was a populist move and would ruin the US’s credibility. It did precisely the opposite: the move off the gold standard was welcomed the very next day as equity and bond markets rallied, because the markets understood that, by changing the currency, Roosevelt had given the US a chance to recover.

Right decisions can be popular because they are right.

With our banks, the government should follow Roosevelt’s example and do the right thing.

Let the guarantee lapse, as envisaged two years ago. It prevented a bank run two years ago. It has done its job, so just let the guarantee lapse.

Then the problem becomes an ECB problem, which is what it should be, particularly because the majority of Irish bank creditors are other eurozone banks.

We move on. It really is that simple. This is a real plan and it would be popular.

However, we are now being exposed to the unedifying spectacle of the cabal of insiders turning on themselves – as if that will solve anything.

At the end of all this, the Irish people will vote with their feet and take their money out of the Irish banks because we don’t believe the ‘insiders’ about our banks any more.

Why should we?

That’s what is likely to happen here, and a run on the banks will be considerably nastier than anything imaginable from even the most populist solutions.

  1. paddyjones

    What you are really saying David is that the banks should default on their creditors, if this happened then the banks would be closed down and assets liquidated. This could never happen, not now anyway.
    I do however see problems with the stress tests as both AIB and BOI will undoubtedly fail which in turn will drive down their stock prices and they maybe nationalised , worst case senario.
    I don’t know why you are so worried about the banks, the government will bail them out again and again.
    If on the other hand you are talking about default on our national debt that is a different kettle of fish, that would be a complete disaster. But I hope you are not advocating this.
    I cannot see the guarantee being withdrawn because the government are convinced it will never be required and it provides technical income in the form of shares in the banks. As for the possibility of the guarantee being withdrawn and the ECB guaranteeing the depositors….dream on.
    There are no quick fixes there is no easy way out, peddling populist ideas that there are is just folly.

    • I think David is contemplating a sovereign default along these lines.

      At the time of the guarantee, you mistakenly believe exposure to Anglo is €8 bn. Its part of a group think state of denial that made you deny there was any problem with Anglo throughout 2008, or indeed with the property bubble that was fired up through 2000-8.

      Having got that wrong you compound your mistake by setting up NAMA based on the blanket guarantee you believe will reignite the economy, maintain property prices, inspire international bond markets. Judging by the Moody’s ‘confidence’ assessment of our economy today plus the recent downgrading by NAMA of its toxic loan portfolio, you fail there again.

      The sovereign default scenario will bubble up from all these mistakes and further ones such as austerity measures that impact the lower paid with increased taxes and reduced job numbers and increasing borrowing costs. A debt spiral.

      The process is helped by a process of denial, labelling of alternative measures as ‘populist’ building on the mistaken assumption that because its not populist to jump off a cliff, that its good practice to do so.

      Bailing out Anglo, setting up NAMA, are mistakenly believed to be the best response to our crisis. All of this in spite of good advice from Merrill Lynch et al that the titanic course embarked upon is sheer folly. ‘Et al’ being of course, all those academics, the FG and LAB parties, combined set of journalists/commentators who advised against this action that would appear to now bring us on the road to default with 120,000 emigrated since 2008, jobless rate still around 14% in spite of the emigrants, a collapse in the property market, small businesses decimated….and we’re just entering the tunnel of debt.

      Of course its all about taxpayers conned into the payment of debt reparations to pay for C(L)owen’s mistakes, the Anglo bank built by FF croney incompetence, must be saved at taxpayers expense.

      • Deco

        Allowing a private sector company to fail is an entirely different matter from sovereign default. The government seems driven to make us equate one with the other.

    • Rory

      The media does not just buy the government line. It actively promotes it. You shouldn’t be surprised by this as the owners of the media are cronies of the government themselves. Of course there is the pretence at impartiality, so the owners let people like you write for them. But if you simply count the number of articles, broadcasts and opinions given in favour of these anti-democratic policies, the sheer volume gives the lie to the idea of impartiality. The state broadcaster doesn’t count, it just does as it is told. For example RTE wheeled Olivia O’Leary out to deliver a sickening paean to Lenihan on the eve of the budget.

      So, to take up your theme of how difficult it is to get rid of old economic ideas, the indoctrination of economics students in Friedmanite thought has been going on for over 30 years. It is now almost impossible for these indoctrinees to see past the “truths” they have learnt. The owners of the media simply have to employ someone who attended any english language university to get the views they need because at this stage, all anglophone universities teach the same view. Some small few students are independent minded enough to remain outside. So, thankfully, we have people like you. But do not be misled, when you are permitted to speak in their papers you are being used to pretend that there is such thing as journalistic impartiality.

      This government’s hateful burdening of the people with the debt of the elite and consequent savage cuts in services to the people paying for those very services is entirely in keeping with Friedmanite thinking. I read Naomi Klein’s Shock Doctrine at the start of the recession so I knew what was coming.

      The only reason we still have this government is because the media have deemed it so. It pretends that Cowen is a good politician because he has remained in office in such difficult times. Rubbish. He has remained in office because he has not been put under any media pressure to resign.

      Unfortunately, we as a country need exactly this. We don’t just need to get rid of this government we need to destroy FF permanently. We cannot afford a fourth FF recession. We cannot do this by voting FG. We are stuck with FF because FG are so useless. We need to destroy them too. How is the question we need to ask ourselves.

      • coldblow

        Rory (Ruairí). Someone else agrees with you (taken from a recent link of mine):

        “Dysfunctional practices will not be dropped until an alternative concept is at hand. An alternative exists — the classical political economy that today’s censorial “free market” orthodoxy rejects. The problem is how to restore the analytic distinctions it drew.
        It seems a hopeless task to retrain economists once their minds are channeled along particular simplistic lines. New ideas almost always require new individuals to expound them. And by the same token in academia, it is easier to create a brand new department or discipline than to reform an obsolete or dysfunctional body of thought. This was the problem that confronted American protectionists after the Civil War.
        Prestige universities in New England and the South taught British free trade theory — that era’s analogue akin to today’s neoliberalism. The Republican solution was not to reform these colleges, but to found state land grant colleges and business schools to promote their more technologically modern economic logic[5].
        New government departments were formed, most notably the Department of Agriculture. Already in the 1840s, protectionist economists were calculating the ecological effect of plantation exports such as cotton and tobacco on soil depletion. And the Department of Labor compiled statistics to verify the “economy of high wages” doctrine correlating wage levels, education and what today is called human capital with labor productivity. Yet the doctrine that steered the United States to industrial and agricultural supremacy doesn’t appear in today’s textbooks, or even in political or economic histories.
        The history of economic thought was taught as a core course when I attended graduate school in the early 1960’s. It has been replaced by mathematical economics, trivialized by being based on conceptually questionable, ideologically based statistical categories. My most imaginative students at the New School where I taught in New York City dropped out of the discipline and went into sociology or something else. They wanted to study economics to discover how the world operated, but were disappointed to find that this is no longer what the discipline is about.
        The situation is worse for those students who stayed in the field and sought academic positions. Promotion is conditional upon publication in “vetted” journals. The key publications are controlled censorially by an intellectual inquisition that blocks any critique of pro-financial free market ideology.
        It is telling that one of the first acts of the Chicago Boys in Chile after the military junta overthrew the Allende government in 1973, for example, was to close down every economics department in the nation outside of the Catholic University, which was a University of Chicago monetarist stronghold. The junta then closed down every social science department, and fired, exiled or murdered critics of its ideology in the terrorist Project Condor program waged throughout Latin America and spread to political assassination in the United States itself.
        What the Chicago Boys recognized is that free market ideology requires totalitarian control of the school and university system, totalitarian control of the press, and control of the police where intellectual resistance survives against the idea that economic planning should become much more centralized — but moved out of the hands of government into those of the bankers and other financial institutions.
        Free market ideology ends up as political Doublethink in countering any freedom of thought. Its remarkable success in the United States and elsewhere thus has been achieved largely by excluding the history of economic thought — and of economic history — from the economics curriculum.
        The existence of neoliberal thought police and academic censorship that brands any revival of classical liberalism as heresy has become a major barrier to restoring the analytic distinctions drawn by classical economists and other critics of shifting planning power to the lords of high finance.”

        But you’re being harsh on our press. You obviously weren’t there that evening in the 90s when that posh lady announced to me out of the blue: “Isn’t the Irish Times just wonderful!!”

  2. Hi David
    Like your comments about Ireland and defaulting on bank debt. Equally I don’t think its right to ‘tar and feather’ a few individuals while everyone else gets off scot free. But saying that Roosevelt did a good job dealing with the downturn in 1929-1930 is a slightly incorrect reading of history that would probably be a majority view today. The US government of the time is full square to blame for the depression – the introduction of smoot-hawley is what lead to the initial market drops and the rise of currency devaluations across the international board lead to more tariffs and government interference that turned a sharp downturn into a depression… To say that Roosevelt did a good job when he was at the centre of all this is stretching the point a little bit.. Remember fannie mae, freddie mac and the fdic all came from government initiatives in the 30′s – all important in the creation of todays mess…

    • StephenKenny

      You are quite correct that Roosevelt didn’t do a good job looking after the economy in 1929-30, but it was because he didn’t become president until 1933. Herbert Hoover resided over the early part of the Great Depression.
      In saying that, his real contribution seems to have been fixing the financial services system, which had got completely out of hand, although not the the same degree as it has today. It’s interesting to note that the US Senate had been trying for several years to investigate and sort out the mess (in the sense that they try), and it wasn’t until their third effort, in 1933, that any headway was made. So far, we’ve seen the first, ineffective, effort in the US.

      • Hoover did little for employment during the Great Depression, he did make a contribution to a rather large project I had the good fortune to visit recently, the Hoover Dam, finished approx 1935 and dedicated then by Roosevelt http://bit.ly/bCaSim , led by the amazing Crowe, but he did did little to end the downward spiral of unemployment. Cowen will be read by history as our closest approximation to Hoover, though much worse in every respect. At least Hoover had volunteerism, a respect and knowledge of engineering, at least one decent project…..Maybe I’m being populist and negative but Hoover could at least recognise a depression when he saw one!

        • Gege Le Beau

          The Hoover Dam project was quite controverisal, the workers and their families were allegedly treated appallingly……there was a good documentary on Discovery 18 months ago on this very topic….

    • Deco

      Smoot-Hawley was the type of brainwave that occurs to people who fail to grasp what is going on. Trade collapsed, and the two politicians stepped into the breech to make sure it never recovered. Incidentally one was a Republican and the other was a Democrat, as far as I can remember. Put that one under the category, fools seldom differ.

      They were influential in driving up the prices of food in Europe – which contributed to the rise of Fascism in urbanized regions where food had to be imported. They also contributed to the improvrishment of rural America, which was never reversed until WW2.

      Well,othen politicians are good at making a bad situation a good lot worse. And when there is a consensus, then you know you are in trouble !!!

    • jbchalk

      It was the Federal Reserve (a private corporation with private Banks holding 100% of the shares) who reduced the money supply by 30%. That is was drove the economy into depression.

  3. ps200306

    It goes without saying that the popularity of an action proves neither its rightness nor wrongness.

    There’s more than half a chance that DMcW’s “solution” could be popular because of its kinship to “victimless crimes” like insurance fraud. Investors in Irish banks are indirectly European (including Irish) citizens with pensions, insurance policies, etc. etc. They will be the victims of such a move. I suspect many of us Paddies imagine that we can wave a wand, roll back the tax increases of the last couple of years, restore bank lending, and get back to our property fetishes.

    I’m inclined to agree with DMcW that we’re going to default on our borrowings eventually anyway. But let’s not kid ourselves that such an action is going to be less painful than the grin-and-bear-it option. Its only merit is that we might get past the pain a bit quicker, but a lot of bad shit must hit the fan either way.

  4. Deco

    Exactly. Common sense should apply. But this is the problem with common sense. For the vested interests it is too common, and for the situation that we face it is too scarce.

  5. Always worth a read. Pity the country didn’t follow through on such thoughts. Although, we (the ordinary folk) all have the same views but not the money to act.

  6. pajw

    David, I would be very interested to read your views on the implications your recent articles have for your readers in terms of personal finance options. These are also key to figuring out how people will behave, and thus on whether a bank run is actually inevitable at some point. I’m not so sure.

    What options does Joe Public have with his Euro savings in an Irish bank if he feels there is a risk the euro might not survive the next few years, and he might end up with forced conversion into a debased punt instead of his current euro savings? Its not particularly easy to open off-shore accounts, and anyway what currency is going to stay strong. Don’t sterling, and dollar etc all have their own problems? Doesn’t inertia win out, and with it – don’t our banks stay alive?

    I know share tips etc are not your thing

  7. dermo

    The ECB are the main players here along with the Banks and Government.The ECB controls Ireland we have no control over our monetary system,they control the printing ,the supply ,they control us full stop.The banks make money off debt and fractional reserve banking ,no debt no mula ,credit crisis.People are paying down debt no spare mula hopping about.
    The ECB created this credit crisis with low interest rates one size fits all ,they turned the other way when banks where leveraging up to their tits.BTW where was the BANK OF INTERNATIONAL settlements when all this stuff was ongoing?.

    • Deco

      What strategic imperative exists to rescue INBS or the EBS ? I mean how exactly are they important to the production and services in this economy ? they are mortgage banks on steriods !!! They are cheaper closed down than retained open. 2 Billion for INBS.

  8. adamabyss


  9. Malcolm McClure

    David: Roosevelt’s great advantage was that he was simultaneously a populist and a patrician.
    Noel Dempsey gave a well-balanced analysis of the electoral system at the MacGill Summer School this afternoon, concluding that the Irish system leans too far in the populist direction responding so avidly to constituency concerns that they have no time to think of national issues that would benefit everybody.
    The school is live webcast this year at http://www.donegalcoco.ie/
    The session tomorrow afternoon (Wednesday) at 4 pm will be worth watching as it is about lessons and prospects for the banking system.

    • Hi Malcolm, Your eulogy of Dempsey ‘well balanced analysis’ coming on foot of recent eulogy of O Donoghue, you certainly deserve a FF job as PR for one or both of them:)

      You would be referring to Noel Dempsey TD, a FF party leader contender?

      I’d say C(l)owen and Dempsey have their occasional differences, see below, lol

      C(l)owen: Jayses, where is he? We’ve a countrywide lock down. Nothing can move because of the ice. They’re calling them ‘the Dempsey Fractures’ and we’ve a national transport calamity. We need something to give to them, a bit of hope, some little bit of disaster relief.

      Dempsey(PR person): He’s on holidays abroad and says feck off, he’s not coming back till the weather gets better. The disaster agencies know how to deal with it!

      C(L)owen: Is he over in Malta trying to sell the feckin E Votin machines again?

      Dempsey(PR person): No, he signed all the storage contracts around the country to your cronies just before leaving.

      C(L)owen: They’re his feckin cronies, not mine!

      Dempsey(PR person): Well, if ye’d have carried out your policy on decentralisation, ye wouldn’t have this problem….
      There’s be no one in the cities, ye’d all be cosy by yur fires down the country and not complaining about feckin transport.

      C(L)owen: Now they’re sayin they’ve no feckin salt! Could ye ask him to bring back a little on the boat!

      Dempsey(PR person): He’s ordered a couple of ships of salt and they’ll be here in a couple of weeks!


  10. Deco

    There was also an event called the Depression that wasn’t from 1919 to 1921. Basically, the speculators were liquidated. There was a sharp 18 month recession, and then it ended, and a normal recovery. The begining was just as severe as the Wall Street Crash – as it was based on the collapse in demand as a result of the normalization of the US economy as a result of the ending of WWI.

    Of course, IBEC are in control of Ireland, so this is not going to happen.

    • Gege Le Beau

      Dr. Paul Craig Roberts in an excellent interview with Max Keiser (available on his site), touched on the Great Depression and said the principle cause was the Fed a shrinkage in the money supply (up to a third in fact), he also pointed out the obvious, that US economic strength wasn’t about Free Trade, no such thing, the US has always had tariffs, indeed protectionism played and continues to play a major role. It is protectionism for us (the North), free trade/strutural adjustment/privatisation/neoliberalism for you (South). Roberts maintained that low interest rates and debt fuelled consumption which disguised the true nature of the economy, we witnessed a subsitution of debt for real growth in incomes…..more worrying for the US and Ireland, he highlighted the concept of the ‘jobless recovery’, and that the US will see more and more characteristics akin to a developing country, gap between rich and poor, destruction of the middle classes, decline in infrastructure, long term unemployment, rise in crime, longer working hours, decreased pay, its like importing the negative aspects of developing countries to the so called 1st world where people are superfluous, the needs of the business community are not only met but ring fenced, greater inequalities, tighter control of the centre by insiders, atomised, self-centered society etc

      The figures to look out for in the US are the monthly employment stats from the Bureau of Labour, Craig points out that the jobs being created are service jobs, bar tenders, waitresses etc, seeing a decline in skills, manufacturing naturally and the US is in fact going through a cycle of ‘dis-development’………..the key jobs are being outsourced along with the manufacturing base as they go hand in hand, the concept of the knowledge economy comes across as an old canard, because the jobs don’t exist in the first place and if they did you need to upskill people for them……..he commented that the US’s biggest export was its own jobs, which neither the government nor the corporates want to tackle for fear it impacts profits.

      Obama’s stimulus package for example is an interesting one, Obama came out and claimed it created 1.3 million jobs, but he didn’t state what kind of jobs, most of the jobs were temporary government positions, the Huffington Post reported that 700,000 were census workers, the majority of whom would be left go by the end of July and the remainder in September.

      • thanks for your links to book “Upside down: a Primer for the Looking-Glass World” (ordered) and other links on ft.com plus other posts/posts. Paul Craig it appears from your synopsis has very similar views to Michael Hudson, see Coldblow link to Michael Hudson on ‘financial capitalism’

  11. michaelcoughlan


    If we take he course of action advocated in this article does that mean that all the people working in the banks which would collapse overnight be put on the dole? Also what would happen to the money the pension funds have tied up in the various methods of investments in such banks? I presume they would be thrown to the wolves also? It might be fine to suggest that the ECB should pick up the tab to secure the deposits and they may even be responsible but would they come up with the readies? What would it mean for the State’s capacity to borrow on the markets? Could someone enlighten me?

  12. Deco

    Moody’s have downgraded the chances of the Irish taxpayer to meet an ever-growing list of commitments.

    Maybe they realise that the commitments are just too large, and that the economy will be undermined by debt and zombie banks ?

  13. bankstershill

    Totally agree David with the procedure outlined in your article.
    The question is how do you get the treasonous incumbents out of the way in order for a nationalist government to be formed to implement these populist policies ?. Could you use for example violation of the constitution to get rid of Cowen and his ilk. For example since it is clear that Nama and the guarantee is designed to only benefit and protect the domestic and international financier elite, then is this not a clear violation of;

    “article 45.2.iv. That in what pertains to the control of credit the constant and predominant aim shall be the welfare of the people as a whole.”

    What are the options available to us in the wake of such an overt violation such as this?.

    The primary legislation enacted during the Roosevelt administration pertaining to banking law, was what became known as the Glass Steagal act,which separated out retail and investment banking and was successful in maintaining a level of stability up until September 1999 when it was repealed. There was a ferocious attempt to get it reinstated as part of the recent financial reform bill but this attempt was sabotaged by Obama or rather his Wall street and city of London handlers since Obama, like our Brians’s, is simply a tool of the banking elite.

    The procedure outlined in you article would basically be our version of Glass Steagal. However for us to move in that direction requires that Ireland, and for that matter all nations, rid herself of the agents of the bilderbergers.

  14. bankstershill

    Maybe i’m way out of line here, but I a have a feeling that some of these reply’s are the work of the government’s disinfo spreading trolls. You know who you are.

  15. Deco

    For any of you who bought apartments in Budapest (at prices that had the locals all laughing with glee). Eddie Hobbs warned you that it was a daft idea. But even in his considerations, little account was taken of the potential of the Hungarian Florint to lose a lot of value. So much for the ‘must-have’ property portfolio. This will lead to people phoning the Joe Duffy Show, explaining their predicament. I just hope that is about all that happens out of it. The Property mania culture has come at an enormous cost.


    All the more reason for an improved approach to investing across the entire society. In particular with respect to technology and resource utilization.

    • Great link, propaganda would have us believe we’ve turned the corner. The reality is we’ve just entered ‘the tunnel of debt’(my phrase:)).. The IMF claim they’ll raise the buffer fund from €250 bn to one trillion. In the wake of story on Hungary, news of the worsening problems of the Baltic states http://bit.ly/cneL73

      And yet the euro continues to soar against the dollar?

  16. Deco

    Unbelievable. Basically, those who differ from the consensus get this sort of treatment. [I have to admit when I seen the headline first I thought it might have alluded to Desperate Dan - given his poor popularity and his disastrous forecasting record].


    Everybody should know about this. Basically the DoF is trying to muzzle disent.

    I imagine that David McW, Constantin Gurdgiev, Eddie Hobbs, Morgan Kelly, Moore McDowell must be getting severe hassle from the authorities.

  17. econarchist

    David, what you’re proposing is not populism, it’s just the normal rules of capitalism. As you’ve pointed out before, usually when a business goes bust, its shareholders and bondholders lose out and the company’s assets, for example the bank’s loan books, are sold to recover as much as possible.

    You can’t be described as populist anyway when most of the population doesn’t seem to agree with you. I’m afraid that you are still a voice in the wilderness that is not even heard by a significant minority. Most of the Irish people are still in denial and seem to think that the economy is recovering and that the bailouts are, at worst, a necessary evil. It’s not surprising when they hear so much propaganda every day, as I noticed on a recent trip to Ireland. The worst examples of this are probably RTE’s Sean Whelan and the Irish Times which used to be anti-Fianna Fail. Both were talking up the improved GDP figures which include profits that are repatriated by foreign-owned multinationals, and they barely mentioned the worsening GNP figures which reflect the real Irish economy. As well as that, nearly all of the sponsors of radio programs seem to be banks or financial institutions. As Deco has said before, nobody wants to upset their advertisers.

    A lot of Irish people own property and still want to believe that the prices will “recover” (become even more over-priced). The real populists are the politicians from all parties who have been tapping into this greed, just like Thatcher did before with her “property-owning democracy”.

    • Deco

      Econarchist – you have a point. C Gurdgiev has been making this point for the last year – it is GNP that measures income on aggregate in an economy much better than GDP. GNP is less than GDP because of the Pfizer effect, and because of the bad investments in other countries that were made by Irish citizens (like those apartments in Budapest). Therefore the recovery is merely a feat of statisitical engineering.

      We are also completely ignoring the national policy blind spot that is the efficiency within which we operate. Proposals to have a Metro North – when nobody with one mile of the proposed line will accept higher density housing – as is usually the norm in other countries where these infrastructure projects take place. I remember a few years ago reading a peice in the Irish Times, about how local councillors were spearheading a drive to limit development along a band of land next to the coast line of Dublin -which incidentally was served by the DART. (Never mind the fact that parts of the DART natural catchment area- are located under the sea-and this is good planning in Ireland….). Oh, and the IT was positive about this. (Even though they seem to be continually lamenting the lack of infrastructure spend, then never actually think about the economics that are required to justify such projects).

      And we have it again with Gormless and the Incinerator. The best place to locate an incinerator is close to the source of the rubbish. It even makes sense from the view point of the much commented upon ‘carbon footprint’. We are even antagonizing the Americans (the one country that have given us investment when their own cities are crying out for investment, and which has been consistently helping us) with the political football being carried out to save the Minister’s seat. If the state ends up liable for 350 Million compensation, then it will go down as the most expensive non-achievement in Irish history – with the possible exception of the ANIB/INBS bailout. And the rubbish will get dumped into some superdump to be located in a Bog owned by Bord na Mona. (For a critique on BnM ask Ming the Merciless).

      In West Dublin, there are fields full of horses. And the people are living in Carlow, commuting to Dublin. This is idiotic. I mean the horses should be in the countryside, and the commuters in the city. We have it designed to be as resource intensive as possible. There is even a new train station stuck between fields near the Wyeth plant (Celbridge line). What exactly is the plan there ???

      We badly need an outbreak of common sense in this country. And we need to think efficiency far more. The train connection under the city makes sense because the volume will support it. But I am sceptical about the Metro North. Often the Chamber of Commerce and IBEC are more interested in transporting shoppers/tourists/etc.. than commuters. Basically, they want infrastructure to support consumption rather than production.

      Is it possible to get a map for the major traffic flows in Ireland ? I presume it is information that the citizen is not allowed see, in case it raises their awareness of bad planning…….

  18. Philip

    Technically, does it matter one whit what David or DoF or anyone says? Nothing is going to stop default at this stage. The Irish banks will either be sold off or broke within the next year. NAMA’s highly discounted portfolio will still be too overpriced and we’l be downgraded maybe another 2-3 times more.

    Reality is that we are borrowing more than we can possibly repay. This is end-game territory.

    Question is – with no effective alternative for government, how does a country like this transition? New FF or what? Any comparative studies available for a gander?

  19. To put austerity into perspective, if you have time, you might want a peruse of last years Bord Snip report. Most of which hasn’t been implemented. But to catch up with austerity measures in e.g Hungary, perhaps the present incumbents are waiting for the next crew to implement these savings.

    Each dept below has 2 figures, the first is the savings in € millions, second is the number of staff reductions. NB Look at the staff reductions in Education and Health….


    “On the basis of the Special Group’s consideration of the issues arising in each area, the Group has been able to identify potential expenditure savings of €5.3bn in a full year, with associated reductions of over 17,300 in public service numbers.”

    Ministerial Vote Group /expenditure area savings a €m

    Staffing Reductions

    Agriculture, Fisheries & Food 305 1,140
    Arts, Sports & Tourism 105 170
    Communications, Energy & Natural Resources 66 106
    Community, Rural & Gaeltacht Affairs 151 196
    Defence 53 520
    Education & Science 746 6,930
    Enterprise, Trade & Employment 238 594
    Environment, Heritage & Local Government 130 30
    Finance Group of Votes 83 660
    Foreign Affairs 42 65
    Health & Children 1,230 6,168
    Houses of the Oireachtas Commission 8 42
    Justice Group of Votes 136 540
    National Treasury Management Agency 5 40
    Social & Family Affairs 1,848 -
    Taoiseach’s Group of Votes 18 77
    Transport 127 80
    Unallocated savings from State Claims Agency 21

    Total: 5,310 17,358

    • coldblow

      Hmmmm…. So the people who make the losses are saved while the people who make the savings are lost. Leaving aside the argument, just for the sake of argument, that savings all round means nobody is saved and everyone loses, the concept of OPL (Other People’s Losses) could lead to the country being saved. But the question is: For whom?

    • coldblow

      Colm, here’s an interesting article from last year from Ronan Fanning who is an expert in the history of the Dept of Finance about the composition of the group that produced the McCarthy Report.


      I don’t happen to agree with his call for “vital” cuts as I understand it – they should be directed at the middle to high earners mainly and keep people in jobs as far a possible. But when I looked through the report it just seemed like a blunt instrument, like a project you could give to a pair of industrious 6th formers, done at arm’s length. You’d really need to send a team of DMcW clones to examine the situation ‘on the ground’, ‘hands on’, ‘down and dirty’ or whatever the current cliche is. I mean, one of its solutions to reduce reproduction of support services is to have more ‘shared services’ serving various bodies (eg accounts functions). From my own experience and from what (very) little I’ve read about management they only make matters worse.

      • Agree, the proposed gutting of the Public Service could’ve been done by 6th formers. I think Ronan is missing the point though. Its not a question of Finance stamping its authority on other public servants or public bodies. Sadly, its rather a clear and stark example of what our host refers to as ‘the bankocracy’ stamping its authority on DofF. This represents a clear example of the pillaging of social services set up to serve the people and the turning of Ireland INC into a debt servicing agency, a rather humiliating exercise I’d imagine even for DofF. As you say, “The banking system is the real power behind the scenes and the state is a de facto subsidiary carrying out its wishes”. Sooner we default the better, as the longer it takes, the more damage, which could be irreparable, done.

    • paddythepig

      Why aren’t these cuts implemented already? Because politicians are good at spending money, but useless at saving it.

      They shouldn’t have needed Colm McCarthy to suggest a menu of cuts ; the Government should have showed some initiative, identified the cuts and implemented them.

  20. coldblow

    Weakest Link

    Anne: So Brian, why Pat?

    Brian: He got all his answers wrong. It’s my country and what I say goes…

    Anne: But you didn’t get any answers right either! “What are the fundamentals?”

    Brian: Sound, Anne.

    Anne: Quite. And what did you say the banks were?

    Brian: Sound, Anne.

    Anne: What are you laughing at, Richie? Like to share the little joke?

    Richie: Well, Anne, I gave him that answer too. I can help you out as well, after the show, if you like…

    Anne: Ooh! (giggles) Why Pat?

    Richie: Because he can’t do anything about it, Anne.

    Anne: Pat. What have you got to say about that?

    Pat: Nothing, Anne.

    Anne: You even voted for yourself! You’re a waste of space, aren’t you?

    Pat: That’s right Anne.

    Anne: Pat, you ARE the weakest link. Good-bye!


    Pat: It wasn’t as bad as I thought. She’s quite nice really. Is this the way out? Where do I go now?

  21. Alf

    They tell us populism is only for deciding who gets elected; once elected they tell us populism is always wrong.
    Right now, we have the State guaranteeing the banking system and the banking system is guaranteeing the States. Its like a game of musical chairs with the taxpayer left holding the bag. I think what it really means is the banks have more and more power over the state. The banking system is the real power behind the scenes and the state is a defacto subsidiary carrying out its wishes.

    • Deco

      One of the greatest bogus arguments ever is the idea that elections are bad for stability. Basically, the people cannot be trusted. The people cannot be trusted to do what – to ask questions about what is going on.

  22. Philip

    Having worked in many business large and small, I can only recount from personal experience that once the cutters gain any credibility it’s a moribund situation. I have a dozen of these under my belt and not one ever turned around the situation. Irish, German, Amercian, Japanese and English. What happens is that the good guys leave, the only ones with any money are the procurement dept and marketing/sales and of course Yes men. Engineering/ facilities/ R&D etc all get the chop. Company winds up bust or acquired or merged.

    And it is the same with countries. Dept of Finance & banks are procurement, enterprise = engineering & R&D, facilities are your services. Cowen and the lads with IBEC, IDA etc are the marketing and sales dept. And yes….Media better be yes men!!

    There is not a scintilla of mystery to this. People are walking away becasue they can. They are the ones that could cause revolt , but why bother. Just wait until the weather goes bad and watch those emigration numbers really ramp.

    • David,

      If there is a simple solution I don’t think you have identified it … Yes I agree we should default, ordinary people shouldn’t have to carry the can for your “insiders”.

      However, what happens after default?

      We do gain some advantage but isn’t it just short-term?

      We get a revitalised domestic economic and financial system, giving us just relative advantage over our competitors in the international market place but still looking abroad for Ireland’s prosperity, i.e. reliance on ‘winning’ foreign investment etc.

      If we run the economy under the same rules that have led the whole world into crisis, then how can we expect a different result?

      Surely what we need is a plan for the Irish economy (of which default should be part), organised on a completely different basis – producing what the people of Ireland need; not what we can skim off whatever gets produced by foreign corporations and finance houses.


    • michaelcoughlan

      Hi Philip,
      I totally agree with you. This is why it is so important for a society to pay talent properly. However in Ireland we more or less have had a Kleptocracy where talent has been kept at the bottom and the incompetent people are “promoted” to protect and preserve the status quo, the status quo being the transfer of wealth from the wealth creators (talent) to the piss weak zombies who get “promoted”. What’s left of the privately employed talent who decide to stay here will now be subjugated to pay for all the borrowings being heaped on the taxpayer now that Ireland is being converted into a debt servicing entity. What I would like to do is offer you an explanation as to why you have seen the same pattern repeated over and over again in so many different countries and which I detect from response seems to perplex you. I was similarly confused until I figured out what was going on. The people who operate organisations in this manner are only concerned with maximising the return on capital IRRESPECTIVE of how long the organisations last. In other words if these people can drive return on capital through the roof today and the organisation dies tomorrow “they” don’t give a rat’s ass about the consequences. The modus operandi of such individuals is exactly the same as that of a virus in that they invade a healthy organism and corrupt one cell after another until the whole organisation dies. The FASTER they can kill the organisation the quicker the return on capital. When Ireland was booming the people supplying the capital were making a killing in return on capital and were not creating any wealth. Now that we have a bust the same people are making a killing without creating any wealth through supplying money to the government to “save” our country. The people in charge should see what is going on and take the advice of Mr McWilliams and others and tell these people to go fuck themselves because the one trump card we have is that if nothing gets produced there is no return on capital at all. This is the message MrMcWilliams has been preaching but no one is listening. The reason no one is listening again only my two cents worth is NOT because our politicians are corrupt at all, it is actually because of the exact opposite in fact. We may have bumblers etc. etc. but most of them actually have the best intentions of our country at heart but believe that their political view is the best way to achieve this goal. The one guy who demonstrates this most of all is Brian Lenihan. He has an Oxbridge education, is very intelligent and wasn’t associated with previous administration who made bad decisions. He has also been diagnosed with cancer (pancreatic I think) and what does he do, take sick leave? No, he turns up for work every day. What would the rest of us do? we would be on sick leave. And why does he turn up to do a job which must be enormously stressful adding to his health problems, possibly a man literally dying for his country? I don’t know him are anyone associated with him but I would say it is because he loves his country and has a sense of duty to do his best no matter what personal sacrifice this may mean he has to make. So his mindset is to put the country first. Now what view do you think would be taken of such a dedicated individual by a quick buck merchant caught lying time after time after time attempting to transfer the liabilities of his own recklessness to the children and grandchildren of our great republic? I would say that they would view such an individual to be gullible and naive in the extreme! Do you remember the novel Animal Farm by George Orwell and what the pigs in charge did to the very popular workhorse that served the farm so well? The first excuse they got they sent him to the glue factory. The reason these people allowed the talent to quit in those companies you worked for was that for as long as the company lasted from that point on the return on capital started going through the roof. The EXACT same thing will happen to our country when all our talent is in exile at the end of this process when a few overpaid incompetent zombies “at the top” will be left in charge to preserve the status quo.

      • Philip

        So Mr Lenihan is the horse headed for the Orwellian glue factory? It certainly puts a sympathetic spin on things. I think you are totally correct on the sweating of capital at all costs. The virus analogy if worryingly accurate. Ireland and possibly a lot of developed nations in the world simply do not possess the antibodies/ culture to counter this kind of nonsense.

        Continuing my own analogy of companies going down the tubes, I have witnessed share prices heading from 100s to near zero. Once the race to the bottom starts, it seems unstoppable. Better-faster-cheaper is the mantra. But never different.

        • Unfortunately, Lenihan is no Lemass, has little knowledge of economics and is a pawn of the FF croney status quo. He has employed Alan Ahearne, a second rate academic, whose dubious views about the economy extend to validating the save Anglo campaign I’ve tried to write about here http://colmbrazel.wordpress.com/ Lenihan’s imperative is to save the FF crony Anglo bank and give whatever money the banks need taken from the taxpayer purse.

          This is ‘High Ho Silver Away’ economics. McCarty Report advocates cuts in the public service of the order of 15,000 jobs to save €5.5 bn. In fact, another €2 bn of cuts will be required on top of this. Most of these cuts will be in the lower echelons i.e young people. As noted above, the cronies or those ‘carry me up the escalator’ careerists including politico/banking stallwarts who’ve got the insider jobs will find their jobs uncut, it will be last in, first out, its the young and bright future of this island who’ll bear the brunt.

          Lenihan’s DofF knife instead of entering public debate by stating where the cuts will be, is currently, aided by Pravda RTE, stifling debate on this issue. We’re being fed with the dumb ‘its too early to say where the cuts will be’. The news about cuts will be kept from the media till the last second to prevent those getting axed taking to the streets.

          Solution to our meltdown is, export young people, no jobs for any qualification, PhD’s included. Expensive investment of a lifetime of education squandered with no jobs for the brightest and best.

          But expect to see as many silver haired oldies keeping their jobs as possible. Expect to keep all the quangos, NEDS, useless politicos, Pravda RTE high flying salaries, wasteful number of TD’s, bankers, the moronic echelons of power, blood sucking leeches, who created the mess, estate agents/auctioneers fed by NAMA, legals with crazy salaries fed by Lenny’s wasteful tribunals, DAA, DDDA, insiders who can only offer the boat to the young, bright people of Ireland including those young entrepreneurs who will be asked to pay as well for the mess in declining markets…..

          • Deco

            Contrary to popular opinion Lemass did not get everything right. Spent a while getting it wrong also. In the late 1950s it was hard for an economy in Western Europe not to achieve growth, if it was a democracy. Even non-democracies like Spain grew at the time.

            I feel sorry for Lenihan because his heart is in the right place. He is a tragic figure, because he has so many inept sorts around him.

          • paddythepig

            I think you make a decent point. When a cull is in force, survival is the name of the game, and bizarrely the deadwood can end up being kept on, while the person with potential can be side-lined. This, regrettably, is human nature.

            I think there should be a huge cull across public spending, but so much depends on who wields the knife.

            The charade is exposed when the remnants of the cull are asked to produce something, and no-one can step up to the plate.

            Though the deadwood will try to preserve themselves, it is inevitable that they will be outed in time. When that happens, minds will focus on what’s really important, and who has the skills that really matter.

            When this happens in Ireland, it will be a cathartic moment, for a lot of well-imbursed people across the spectrum will get a nasty shock to the ego, and more importantly the pocket.

            This will happen drip by drip, and can’t happen soon enough in my book.

            It is happening in private industry already, though regrettably not in our financial institutions to any meaningful degree.

        • michaelcoughlan

          Hi Philip,
          Thank you for your response. However if you re-read the final part of my post you will see that the analogy of today’s Orwellian horses is in fact the most talented individuals in our companies and country who will be forced to emigrate out of here. In other words the Zombies who will be left in charge to protect the status quo will be delighted with this outcome as there will be a substantially less risk of a challenge to their grip on our country.

  23. coldblow

    @MichaelCoughlan’s post just above and Philip’s response.

    I think the bit about driving a return on capital is getting near nailing it. It’s interesting that personal observation fits in with the best theoretical description (otherwise the theory is useless) I can find which is coming from Michael Hudson. It should be embarrassed to keep linking to him, but WTF, he’s right.

    This 1998 piece is prescient:


    Here are a couple of relevant extracts to the above but it’s worth reading it all.

    “Ancient economic thought focused on the debt problem, that is, the tendency of debts to grow exponentially, exceeding the economy’s ability to pay (and to produce). Modern economics assumes that money is only ‘a veil’, not intervening in economic processes as such. Concentrating on the ‘real’ tangible economy (depicted as operating without debt distortions or related debt overhead), modern economics banishes the debt problem to the realm of ‘externalities’.
    Culture is another economic ‘externality’ that is ignored. A century ago, optimists imagined that by increasing productivity, industrial capitalism would provide more leisure time, and hence would usher in higher cultural horizons. But by opposing a role for government and using the public debt as a lever to privatize hitherto public services — including public TV and radio broadcasting, national film boards, arts and other cultural programs — finance capitalism has tended to commercialize culture by downgrading it to the most common (lowest) but also most profitable common denominator.
    Ancient economic thought also viewed wealth and income as addictive. It coped with the threat that wealth tended to lead to abusive hubristic behavior on the part of the rich. A designated role of religious and social values was to counter this human tendency toward addictive selfishness. But modern economic theory is based on a view of human nature that unrealistically assumes diminishing marginal utility for each successive unit of wealth. The problem of wealth addiction — and hence, drives for personal power — is not recognized, nor are problems of consumer addiction.
    The new business mentality is different from that of traditional societies. Most tribal communities seek to socialize their members not to be hubristic. But today’s wealth is egoistic in ways that injure others, lacking a contextual self-steering mechanism. The personal characteristics required for success under finance capitalism are associated with a stripping away of anything not directly associated with a ‘bottom line’ mentality.

    New well-paid graduates are obliged to work between 80 and 120 hours a week. This is how corporations weed out new prospective employees. It was much the same for bankers, accountants and lawyers in the 1960s. The objective was to weed out any new recruits that had a personal life, family, hobbies, intellectual or cultural interests, or anything that might take precedence over the corporate life. Their entire personal horizon was supposed to consist of working in a dedicated way for their employer.
    Not everyone wanted to go through this weeding-out process. Bankers used to joke that the best foreign currency traders, for instance, had to come either from the Brooklyn or Hong Kong slums — someone from a poor household, without gentlemanly culture, often from an immigrant family, whose sole personal horizon was to make as much money as possible.
    In this sense today’s rentier culture is dehumanizing. As the leadership of corporations has passed from what Thorstein Veblen called the ‘engineers’ to the financial managers, the objective is not to produce more or expand market share, but to increase the price of stocks, other securities and real estate. If executives find their self interest in ‘working for the stockholders’, it is largely be-cause they take more of their remuneration in the form of stock options than in salaries. They use corporate revenue not to fund new direct investment but to buy up their own stock to support its price. They also cut back on low-profit activities so as to increase earnings, and hence to increase the per-share price.
    The resulting ‘culture of greed’ has become anti-technological in seeking short-term payoffs. Corporate managers are rotated from one department to another, running them as autonomous profit-centers, regardless of the company’s overall long-term position. One sees in these new managers — Russia’s ‘7 bank barons’ as well as US corporate managers — an adolescent immaturity, a childish, self-centered, narcissistic lifestyle. They tend to view life as a game, which one ‘wins’ by accumulating more toys/money than one’s rivals.


    Bohm-Bawerk and others imagined that more ‘roundabout’ technological modes of production would gain prominence, imagining that interest was a payment for waiting or ‘time preference’. But today’s financial system is slashing R&D and time-taking technologies in order to get quick payoffs, rather than going hand in hand with technology.
    Whereas industrial capitalism was nationalist and state-sponsored, today’s global finance-capitalism is dismantling governments. It claims to be peaceful, as only governments and nation-states can wage wars.


    The essence of the global financial bubble is that savings are diverted to inflate the stock market, bond market and real estate prices rather than to build new factories and employ more labor. The system threatens to collapse in such a way that will leave a legacy of financial cleanup costs for the bad debts that form the counterpart to the economy’s ‘bad savings’, that is, savings lent to speculators who use the money simply to buy existing properties rather than to create new assets.
    This recognition by Wall Street’s financial strategists underlies the push to privatize Social Security. The system is not sick, but that is not the point. The real objective is not to bail it out, but rather to bail out the stock market. If the vast sums invested in government securities could begin to be switched into the stock market, the effect would be to bid up equity prices. Of course, when it comes time for the system to begin paying out – when the number of retirees exceeds the number of new employees contributing to the system — the result will be a stock-market outflow.
    But that, as Rudyard Kipling would say, is another story. Most of today’s fund managers will be happily retired, living off their accumulated bonuses. The population at large will be advised to hold onto its stocks for the long run. They will be reminded of how equities have outperformed bonds over the past two centuries.
    Financial players themselves operate in the short run. At the first sight of a downturn they bail out, seeking to ride the waves both up and down. Never has their advice to their customers been so much at variance with the financiers’ own practice.
    Beyond the business cycle to a phase change
    Whereas industrial capitalism was characterized by business cycles, the new financial capitalism is not primarily cyclical in character. It represents a structural change, for as Hegel pointed out, an increase in quantity becomes, at a point, a change in quality.
    Industrial capitalism was technology-driven. Mechanized production undercut the costs of la-bor, while tending to make skilled labor and highly educated labor more important (viz. Veblen’s emphasis on society’s economic planners and ‘engineers’). But today’s financial capitalism seems at odds with technological advance, R&D and more ‘roundabout’ production. It devalues education, prizing something that cannot be taught in schools: greed, which earlier societies associated with crude narrow-mindedness.
    The global (i.e., U.S.-centered, outward-reaching) financial system is something new, yet also a retrogression to the ‘pre-capitalist’ usury problem, of debt claims coming to exceed the economy’s ability to produce and to earn. Interest-bearing debt growing at compound interest has been around since 3rd-millennium Sumer. After polarizing societies and being a major catalyst in the concentration of landownership (viz. Isaiah and the Roman historians), it ended up strangling antiquity.
    The problem of pre-capitalist rentier formations has survived, however, in the capitalist DNA molecule. This DNA may have imparted a fatal flaw to modern capitalism, a disease that has broken out as a cancerous form. The debt overhead rising to crush economic takeoffs signals the dominance of finance over industry, of ‘virtual wealth’ (that is, debt-claims on wealth) over what economists still call ‘real’ wealth, as if finance were less real than tangible physical structures.
    What is new today is therefore that in previous history, only at the end of antiquity — in Rome — were the dynamics of debt (which Einstein called the miracle of nature) unchecked. In the Mesopotamian homeland of interest-bearing debt, non-commercial debts were annulled by royal fiat when they became overgrown. In modern times, bankruptcy wiped out debts on the individual and enterprise scale, and even that of governments. But the debt phenomenon has now broken free of constraints to become autonomous, not subordinate to the ‘real’ economic processes, e.g., the tangible accumulation of wealth and the ability to pay.
    To call today’s finance capitalism ‘modern’ would be to imply that it is progressive. But it is retrogressive to the extent that it represents a relapse back into pre-capitalist problems of usury (but not direct slavery). What is modern is that whereas the debt burden was decried in classical antiquity, today’s debt fluorescence is welcomed in its mirror image — ‘savings’ on the asset side of the economy’s balance sheet — as heralding a prosperous postindustrial society.
    Savings (which find their counter part in other peoples’ debts) are supposed to be inherently associated with the ability to reach new technological horizons, medical and health horizons, and cultural horizons. But to the extent that debt/savings to hand in hand with economic polarization, these horizons are being limited rather than expanded.
    The question is, what is to be done? How should the genetics of our system be re-engineered so as to make it immune to the debt cancer?”

    Will Hutton was also flagging the short-termist ‘financial’ model in his books a few years ago. But as someone else says above. just how exactly do we get ourselves out of this mess? Well, I think it’s going to be resolved whether we like it or not, but what can we do to try to get the best outcome?

    • Deco

      ” Whereas industrial capitalism was nationalist and state-sponsored, today’s global finance-capitalism is dismantling governments. “.

      No, incorrect. It is corrupting, and controlling them.

      Schumpeter argued that “Creative Destruction” was a process whereby the inept were seperated from their money. Well, we have government policies that are designed to reconcile the inept with other people’s yet to be earned money.

      Interesting points though. It is good to see people actually trying to do some serious analysis and thinking about all of this. Instead of the pile of manure that IBEC shove at us via the media.

      • Deco

        I should alsoadd that it is providing pressure for governments to extract resources out of citizenry to prop up financial markets.

    • michaelcoughlan

      Hi coldblow,
      To take the point you and Mr Hudson are making to the extreme the conclusion can be reached that financial capitalism doesn’t even need human beings all. Don’t believe me? Well let me enlighten you. When the potato crop failed in Ireland in the 1840’s the authorities responded by offering the still living tenants residing in Ireland the opportunity to travel to the US for a small grant to cover the cost of their travel. In other words the country side in Ireland was denuded of the tenants. And why was this allowed to happen on top of the million who perished? The landlord tenant system had failed completely and landlords were “losing” a fortune. The industrial revolution in England was in full swing and it was far more profitable to convert the land in Ireland to agricultural production to feed the masses moving from the countryside in England into the cities and factories than to continue with the landlord tenant system of small holdings. In a nut shell it was far more profitable to have the country side in Ireland full of cattle, sheep and vegetables than full of human beings. This is because it is impossible to generate a return on capital from a human being who has no purchasing power. Financial capitalism isn’t a new phenomenon it is as old as man himself. There is even a parable in the bible where Jesus drives the money dealers and lenders out of a church for not showing respect for his father and his teaching. It isn’t really that complicated. It is absolutely vital therefore that the working and middle class people continue to receive a decent percentage of the wealth being created in society to prevent this rush towards the complete obliteration of humanity for the sake of the “markets”.

      • coldblow

        Hi Michael
        Just saw your comment and I agree. Hudson himself is (also) a serious historian of the Middle East (Babylonian etc) civilizations and shows that the ancients used to write off agricultural debts (not so much commercial ones) by means of a ‘jubilee’, an idea later taken up by the Jews.

        Crotty (Ireland in Crisis) is very good on the question of driving the people off the land. Until the English stopped it with the Cattle Acts of 1663-6 Ireland was exporting livestock to England on a scale exceeding any similar trade in the world at that time, which was extraordinary given that it only commenced following the completion of the Elizabethan Conquest. It was “a remarkable testimony to the efficacy of capitalist colonialism in mobilizing resources for profit.”

        “Sir William Petty, with the perspicacity of ‘one of the most original social engineers who ever lived” and who had himself nefariously acquired the extensive Irish lands on which the House of Landsdowne was founded, drew the logical conclusion from the fact of ownership of Irish land by metropolitan interests. Petty, in “A Treatise of Ireland”, written in 1687, recommended that most of the disaffected Irish be removed to England, to work there as labourers and tradespeople; that the country be converted into a cattlewalk, supporting six million cattle; these cattle to be attended by 200,000 people left in Ireland; and the cattle’s produce to be shipped to England. Petty argued that the island, by the removal thus of most of the disaffected population, could be most easily secured by England against foreign enemies;and could in this way also be made to yield the greatest profit to its new proprietors. Had Petty’s recommendations been implemented, there would have been no ‘Irish question’ any more than there had been a North American, New Zealand or Australian ‘question’.”

    • Hi Coldblow, ‘prescient’ is a very good word for it. Thx Just finished the complete article, excellent, prophetic even. Hard to believe it was written circa 1998

  24. coldblow

    Oh yeah, and Michael’s point about the same people being willing to ‘save’ the country by investing in our bonds. These lads are so smart that they call for austerity measures and then when they are implemented the country gets downgraded. Goose. Golden egg. Batty. You couldn’t make it up!

  25. Morning all, thanks for the comments and the references to Hudson’s work. This is a big gap in my economic education and I will need to read more of him. Suggestions?

    As for Ireland, this is still to my mind only going one way. The ordinary man on the street will, at some stage, get fed up of the lies and take his money out of the Irish banks. This can be prompted by a number of factors but one to watch will be the government’s efforts to tax savings – given that it refuses to tax other forms of wealth like houses/property, it has no choice. At the moment no one is talking about this….but they didn’t talk about a housing crash or a credit bubble either way back when. So this is the one to keep your eye on. Like everything this government does it will ultimately be a clumsy “smash and grab” exercise.

    Best David

    • Deco

      I reckon that it is held back from taxing other fixed assets, in the property sector, because it is gambling on LTEV. One euro earned in a property tax is an 8 euro reduction in property valuations. And the whole phantom book-keeping of the Banking sector, is based on property valuations. The problem for the government and taxing savings, is that the savings drift out of the country, causing a further credit squeeze.

      In addition, the government has already increased the DIRT on deposits. (Even though the best deposit rates are to be found in the less solvent banks – a bit Icelandic that).

      They will tax anything that cannot be moved out. And increases in direct labour input taxes are unavoidable. As regards culling the quangoes, this is impossible given the amount of patronage that they provide for relatives of political insiders.

      The Asian economies dealt with this crisis in 1998 by becomming more efficient. But we seem to have decided to deal with the crisis by becomming less efficient. The solutions is to make government more efficient. But this is impossible to implement this side of a full-blown crisis. Therefore,the dithering continues. The GP want their cut of the pie. FF want to hold off the day of reckoning with the electorate. And the rest want to stay out of government. It is a stalemate of continued dithering.

      • coldblow

        Deco, you’re right, but with the proviso that in some cases govt does less damage by being inefficient not more!

    • michaelcoughlan

      Hi David,

      The ordinary man on the street as far as I know is already putting their money in the post office rather than the banks. Poor fools as if that will help them in the event of a sovereign solvency crises.

    • coldblow

      Hi David, I had half an idea you’d already read him, but it’s good to hear you seem to have reached similar conclusions by your own route as that gives them more validity.

      A contributor on irisheconomy.ie referred to him a couple of months ago and I did a bit of googling and found his website. The contributor mentioned his book “Trade, Development and Foreign Debt”. That would probably be over my head, especially when he talks about he currency markets.

      • coldblow

        Just a thought. Maybe you could bring him over here, or get him interested in the story somehow. He’s good on the Baltics, Iceland, China. Or someone similar. I think there’s a tendency (maybe justified) here that when a big name economist from abroad ventures to comment on Ireland he is dismissed as superficial and lacking an appreciation of the complexities.

    • Alf

      Hi David,

      The situation is frustrating but the elephant in the room is being ignored. The elephant is that the global banking/financial system is bankrupt. Bankrupt under the massive weight of worthless CDS. Just how much of this garbage is out there? Conservative estimates put it at more than the GDP of the world.

      What this really means is that the ‘elite’ are bankrupt. I don’t just mean the Irish elite, I mean the ‘old money’ ultra-uber elite are about to be made paupers.

      Have you considered that the reason your ideas (and others) are ignored is because we are watching a gigantic battle for who takes control of the future banking system (mark II).

      Old money vs Sovereign nations.

      What better way to wrestle control than to force the other into debt slavery?

    • Gege Le Beau

      @ David McWilliams, Hudson regularly posts long articles on the Counterpunch website, especially good on the Baltic Republics, his own website is a natural port of call.

  26. Deco

    Following on from a comment made two weeks ago concerning David’s journey through (Western) Germany.

    Meet a German CEO and he will start explaining all about this product, will show your a sample or a model, his mind captivated with it’s features.

    Meet an American CEO, and he will present you with his companies Annual Report, and the sales brochures. He will boldly proclaim his companies growth figures, business model, marketing, and loads of stats.

    Meet an Asian CEO and he will talk about his upbringing, the sacrifices, his education, his parents, his family, the fact that he never gets vacation etc…

    Meet an IBEC CEO, and he will dryly describe his business, and mention his own significance in it. He might talk golf, his club membership, his handicap, his favourite range etc….Somewhere along the way he will hint at his schooling (not to be confused with education which is something used to measure the workers). This is a prompt to see if you hint back, so that he can decide if he should trust you. In fact the whole conversation is about deciding if you are an insider or an outsider. And a common point of reference will be who you both happen to know personally.

    Well, I suppose there are parallels with how business is conducted !!!

    • Gege Le Beau

      Great post Deco, Ireland is a victim of itself, no point blaming the British, colonialism, the Gorta Mor, the weather, the global downturn, just look in the mirror and you see the problem, grrrrrrr………the comment about schooling is insightful, once I hear the question I know what informs it, ‘information gathering’ to inform ‘decision making’……….

      • Deco

        GB – you are correct. The problem with us is us. And that is the solution also, if we can get our thinking straightened out from the avalanche of noise created by those whose interest is served by us not knowing what is going on.

  27. michaelcoughlan

    I know I am off on a rant again but here goes. I feel there is a much bigger problem building than all the debts that are being put on the government balance sheets all around the world. It goes back to an article David published about Spain and all the gold plundered from South America increasing the money supply. The Spanish became lenders and lost their ability to earn their way because they did what the British did at the end of their industrial revolution. They abandoned manufacturing and became a nation of lenders. And when their credit bubble exploded and they couldn’t earn their way out of their problem how did they solve their balance of payments problems? As David said one war after another. If you go back to the First World War Germany was sandwiched in the middle between Britain on her west and Russia on her East. Britain was a nation of lenders and Russia was a country selling raw materials. Who was in the middle adding value? The Germans. And we all know what happened next. So it will be very interesting to see how heavily indebted nations like the US and others who have systematically abandoned their middle and working class populations deal with an issue where a trading partner who earns their way is confronted with a country who is up to its tonsils in debt and has been systematically abandoning the section of its society who could provide the goods and services needed to trade with this partner. The only way the indebted nations can solve the balance of payments problems in such a situation is 1) control the money supply 2) control the raw materials 3) control access to markets. I don’t suppose that any of you made the observation that the bodies of so many human beings whether in green British kaki or German grey still lie buried in the fields of Flanders which concidentially are very close to the port of Antwerp? This port is where Germany would have had cheap access to the sea for exporting her goods especially considering the fact that the Royal Navy had done such a good job at blockading her ports? I hope for the sake of our children that clam heads and intelligent and capable people prevail in solving the economic problems all of us face.

    • Deco

      There will be no problem, if people accept that people who work hard and apply themselves with diligence are entitled to more progress than those who do not. There is no need to go to war with East Asia over the resources of the third world. Basically, we have to admit that our behaviour is the root cause of the results we get. We elect idiots to power, we get idiotic policies. We elect wasters, and we get waste. If Irish people insist on calling in sick with ‘one-day-flu’ then the jobs will go abroad. If we spend money buying goods and services from companies that are in IBEC, then we are paying for the corporate takeover of our country. If we buy houses from the Ballybrit brigade, then we are paying for all that comes with that. We can choose to use alternatives besides inefficient state quangoes, given the opportunity, and even to live without. If we choose to be saturated with sports/soaps TV and not to read or debate like the contributors on this board, then we will end up in cul-de-sacs making subprime intellectual conclusions.

      Everyday, we are given choices – and sometimes the choice is to seek out choices. And we try our best to make those choices, to have better outcomes.

      • Deco,
        After 5 generations of nepotistic self-servers running the country, what you’ve just said, though making sense to the rest of us, just reads like a recipe for Lemming soup to those whose sole raison d’etre is maintaining the Status Quo.
        The avoidance of choice and change ensures, not only the survival of this parasitic sub-species, but that it will continue to flourish.
        Ireland today reminds me of the “Enterprise” when an unseen alien being took over the ships systems for its own needs. It only posed a threat when its control was challenged and then proceeded to eliminate only those who attempted to circumvent the invasion. It eradicated or transported those not essential for its own survival.
        In 2007 we were getting phone calls in England from Irish lads running out of work on Irish building sites. The site here is full of those who had to go. I believe to real emigration figure is underestimated and really stands closer to 200,000 with double that to go over the next 2-3 years.
        You are spot on when applying your comment above to practical people. They have a stark choice and they are taking the tough decisions. For dignity, They are leaving in droves and leaving behind a country rapidly losing the capacity to engineer any form of real GNP growth simply because there’s no-one of and entrepreneurial nature left to drive innovation. As a man said to me once, “Work is a habit and dole is a habit; Pick your habit”.
        Workers will work, wherever that work may be.
        Meanwhile the hopeless and eternally useless at both ends of the economic spectrum bumble along, blithely going where Ireland has never gone before, straight into Default.
        What will happen when the wages of the useless, ie The longterm Dole spongers dry up? Will they sigh resignedly and go look for work? Don’t think so. That concept is alien. And when the money dries up for all the freeloading perks and expenses, will the eternally useless roll up their sleeves and do something tangible to earn their grossly inflated salaries? Don’t think so. That concept is alien to them. The small people do that type of thing but the small people have left. No wealth generators left so the useless will be tapped up. Therein lies the collision course. Two diametrically opposed sponging sectors of Irish Society left to fight it out like Jackals over a rotten carcass.

        Meanwhile another generation of Irish wealth creators will flourish and enrich other jurisdictions. And the best of luck to them. At least they have some chance of advancement whereas here, the useless and permanently hopeless blithely sail on in , as Constantin Gurgiev called it, The NAMAtanic.

  28. Gege Le Beau

    The insiders are so ‘powerful’, so used to being powerful, so entrenched that they would rather see the entire ship of state sink under the weight of its own corruption than open the game up hence brain drain, emigration etc, good people leave because they know it is futile, so why waste your sweetness on the desert air, go somewhere where you can make a difference, if you are successful aboard (i.e. make a ton of money), then the insiders at home are interested, will invite you back, wine and dine, give honuary degrees (which highlights everyones ‘brillance’ – courtesy of the average citizen who never gets a look in) but it is a charade.

    The insiders are used to having it there way and they ensure it stays within certain parameters (family connections, associates, the right schools, right businesses), they check the party list, not on the list, you don’t get in……

  29. Gege Le Beau

    Interestingly, Niall Ferguson cites ‘The General Theory of Employment, Interest and Money’ by John Maynard Keynes in his article in the FT on July 19th.

    Today’s Keynesians have learnt nothing

  30. HBC

    I left Ireland in late 2009 with my wife and two kids for the UK. Over the course of the next 2 months I withdrew every cent we had in Irish banks. I am fortunate enough that we sold our house over 2 years ago at a loss of about 50K on what we paid for it back in 2005 (50% of the loss was due to stamp duty). I am also fortunate enough that I have a transferable skill where there is still a reasonable work pool for me in the UK. It got to the stage where I could no longer live in Ireland under the governance of an incompetent government and pay tax to them. The prospect of shackling my family and their kids to the burden of NAMA was also something I was not prepared to consider. Unfortunately nothing changes, it is the same old story …nobody goes to jail….there is no accountability or integrity and the cycle continues….I had enough and more like minded people will follow to other countries.

  31. I heard on Pravda RTE Peter Matthews spoke today to the Oireachtas Finance Committee telling them if NAMA was repealed and the toxic assets were sent back to the banks to allow them to deal with them; if the banks were brought under conservatorship(nationalised) for 5 years; if NAMA was closed down over 5 years: that a saving of €17 bn could be made. He also said the Anglo loss was closer to €32 bn rather than the €22 being currently flagged by the government and that he had figures to prove this. He also stated the Government lied when it stated NAMA was the only game in town as he had submitted these plans to the government before NAMA was proposed.

    I’d like to see recording of the webcast but its not available and I’m not sure if it will be.

    Others proposed alternatives along similar lines as Matthews above, including closing NAMA and selling of its guaranteed deposit book while renegotiating bondholder loans in a bankruptcy scenario to protect taxpayers.

    Plus there is the precedent of the Swedish model.

    The more people like Matthews speak up, the better.

    OT Dermot Ahearn on radio speaking about FF think tank (the mind boggles:)) remarked on the growing savings levels of Irish savers from 3% to 7%. They want people to start spending instead. I guess they’ll be taxing these savings as they achieve the magical turning of the corner while driving off the cliff.

    You might want to catch the excellent Christopher Nolan ‘Inception’ movie to give you some heart as you live in the dreamworld of FF Ireland Inc of Summer 2010 http://bit.ly/duiVf today:)

    • http://www.youtube.com/watch?hl=en&v=wNFbl525fkM&gl=US

      @CBWEB; herewith Frank (I’m skint without NAMA) Fahey trying to stonewall and bluff a superior intellect using FF Mantra Speak.

      • Very much appreciate that, thanks. Did you download that from oireachtas.ie website and upload it to youtube yourself, couldn’t find it yesterday? Instant saving of €17.5 bn and they won’t do it!

        Fahey clearly hadn’t a clue and was reading from a stock piece of propaganda nonsense on front of him.

        Here’s another one for you. Hilarious Hanafin on Morning Ireland this morning 22/07, listen carefully, won’t be available until tomorrow on Pravda RTE. Unfortunately Player not configured with meta tags, apart from the fact you have to wait until tomorrow, so its difficult to search through full Morning Ireland for the Hanafin interview.

        The Government having Nuked the tourism/hotel industry with the tax breaks, she said nothing about repealing them or making changes to them to allow hotels to close. But here’s the frightening thing, she’s going to talk to NAMA specifically about the viability of specific hotels.

        Given NAMA has to decide what to do with each individual loans, is this not stark political interference in the NAMA process, that which everyone feared. Obviously the cronies have been on to her. Now she is blatantly going into NAMA to make their case.

        As Max Keiser says, they make money on the way up and they make money on the way down. The cronies enjoyed the tax breaks. Now they’ve got them, they want extra benefits as the economy tanks.
        Hilarious, isn’t it?

        • The blatant arrogance is one thing and could normally be understood as a party too long in office, as with the situation across the water where Conservative indifference was replaced by Labour indifference following extended terms in office, but the crass neolithic levels of rank selfish stupidity is frightening.
          I bet all the Hotels she’s on about are in Donegal??

          Lorcan RK tweeted the Oireachtas exchange BTW. I’m getting info overload recently. David McW here, on Twitter and Facebook, Constantin Gurdgiev blasting broadsides on his blog and Twitter let alone email alerts etc.

          How to translate all this into plainspeak is a challenge worth addressing.

  32. Michael Hudson on Latvia, a dress rehearsal for Ireland, around 14mins in, the rest is good too.


  33. Gege Le Beau

    “Official history, mutilated memory, is a long, self-serving ceremony for those who give the orders of the world. Their spotlights illuminate the heights and leave the grass roots in darkness. The always invisible are at best props on the stage of history, like Hollywood extras. But they are the ones — the actors of real history, the denied, lied about, hidden protagonists of past and present — who incarnate the splendid spectrum of another possible reality.”
    Eduardo Galeano, Upside Down: a primer for the looking glass world, p. 325

  34. liam


    I would offer one crumb of thought: In my time back in the old country, I have met some very interesting people with some very interesting ideas. I’ve been lucky enough to have worked and networked within one of the worlds premier centers of innovation and entrepreneurship, and I am constantly amazed by the creativity and ambition of people I have met in Ireland, who are forging on, doing their thing regardless. None of these people are fools, they know the score about the environment they are in but I have to say, as far as I am aware none of this kind of innovative thinking and entrepreneurialism existed in Ireland when I left 13 years ago. This was always something that was done somewhere else, by somebody else, and the most profound change I have observed is the increasing number of people thinking outside those constraints.

    If you want examples of new thinking talk to the folks at SFI, in the research offices of the Universities, amongst the many start-ups in Ireland, in Enterprise Ireland.

    I agree the message from the media is heartbreaking, and its largely vacuous hot air. Its a misery train and a virus that will destroy moral. No doubt, it all looks very bad if the politics remains as it is, but this is a propaganda war and I think its about time that the media gave these optimistic folks some light instead of crushing us with their bitching. How about it David, are you up for it?

    • @Liam

      Unfortunately, our tanking economy is not vacuous hot air, but a reality that will impinge severely on the innovations you mention. If you need optimism, listen to the vacuous hot air propaganda coming from Government and Pravda RTE. Contrary to what you may read here,’good news’, ‘optimism’, ‘turning the corner’ is the propaganda currency of choice. E.G. Civil Engineering in Trinity was a popular programme amongst undergrads and postgrads up to the last 2 years. Hardly any have found employment in Ireland in spite of great qualifications. Best they can do is emigrate. Our problem is not trying to confront and analyse reality but Pollyannaism,
      blind or excessive optimism that is the propaganda tool of choice our incompetent Government use to blindfold the electorate and pursue their catastrophic decisions on NAMA, banking – Anglo/Nationwide nb, tourism, read above, tax breaks, basically a litany of one disaster after another. Also, see Matthew’s video above, I’d say most here see themselves in the minority, who, with better things to do, choose voluntarily to give of their time to advocate against the accepted status quo pursued by Pravda RTE and many in the mainstream media. Even in the mainstream media, the real story is bubbling up from the cracks. The sooner more get on board and seek to inform themselves and share information with one another, the sooner the innovative side of Ireland INC can be allowed to breath rather than asphxiate in silence. I’m optimistic the truth about our real situation will get out and become more widely held.

      • liam

        Colm, I don’t know about this ‘real story’ stuff. I would have thought its fairly apparent to anyone who takes an interest (and if you don’t your a fool) that a shafting is being dished out. The problem and the major risk is, as one acquaintance put it recently, is that “the crisis” morphs in to “thats just how things are” and its the 1980′s/1950′s/1850′s again, take you pick.

        I think its fairly obvious I’m not talking about Govt propoganda!

        There is a kind of brainwashing going on here. We have conservative horseshit from the Govt and conservative moaning in the press (with a few exceptions, here included). Nobody is trying to move things forward at all it seems, which is pity but its also toxic and possibly dangerous (though since I have largely given up on conventional domestic news sources, perhaps i am missing something?).

    • Gege Le Beau

      All is not what it seems Furrylugs, with ‘stories’ like this, and they are just that, a bad modern fairytale, people need to do ‘due diligence’, the reality on the ground (1.9 million in tents with hurricane season approcahing – deliberately left in the open), the moves on the chessboard could not be more horrific, plus France has just announced that it will not be paying the $32 billion in resitution for its colonial past and sucking the country dry in the form of repayments for Haitian freedom from 1825-1947, which Haiti paid in full plus interest.

      This is now about neoliberalism and nailing Haiti to the wall at its weakest possible time, to be fair, CNN remarkably reported that just four countries have delivered on any of the over $5.3 billion in new pledges collected at a major donor conference for Haiti’s reconstruction in March. Brazil, Norway, Estonia and Australia are the only countries to have paid so far, accounting for just two percent of the total pledged. Nothing from the US.

      • Agreed Gege,
        I meant Irony and certainly not flippancy where Haiti is concerned. The IMF, being the military wing of the G7, seem strong on grandiose statements but remarkably poor on viable delivery. We’ll get a taste of that particular medicine before too long if our host is correct in his predictions. Unfortunately, David is uncannily accurate.

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