July 22, 2010

Ireland is staring down the barrel of bankruptcy

Posted in Debt · 138 comments ·
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Why are interest rates for Irish debt rising? Because the risk of a blowout here is rising — it really is that simple

IN THE summer of 1787, determined to show foreign ambassadors the might of Russian power in the newly subjugated Ukraine, Catherine the Great organised a boat trip down the Dnieper, past modern-day Kiev.

Her trusted field marshal — who was also her lover — Prince Gregory Potemkin organised a series of mobile villages to appear as soon as the imperial barge, stuffed with innocent and gullible foreign dignitaries, came into view.

When the boat came within earshot of the river bank, the villagers would break into a spontaneous, sycophantic chorus of praise for the empress, giving the perplexed foreigners the impression that not only had Russia pacified Ukraine, it had also managed to win over the local peasantry — which was no mean feat in the 18th Century.

As soon as the imperial barge turned the corner, the villagers would dismantle their villages and rebuild them overnight further downstream, with a view to performing precisely the same malarkey the following day.

This continued each day for over two weeks. The overwhelmed foreign dignitaries then reported back to Berlin, Paris and London on the marvel of the Russian conquest and pacification of Ukraine.

Thus was born the ‘Potemkin Village’ approach to economic and political progress. Over the years, the Russians perfected this approach of half-truths, misinformation, disingenuous analysis and obfuscation.

Russian governments perfected the art of identifying culprits on whom to pin the blame for their own failings: Jews, Poles, profiteers, priests, intellectuals, kulaks, enemies of the revolution and so on.

Typically, if there is a problem, a few culprits are rounded on and grandiose decrees are announced to fight the evil, whether it is economic, social or political.

Our Government behaves the same way. The truth is always secondary to the spin. So during the ‘binge’ (because it wasn’t a ‘boom’, it was a splurge), the Government accused the few who saw through the hype of “talking down the economy” and tried to pin the slur of “doom-mongers” on others.

Now, we know what was going on. Yet, despite this, no lessons have been learned. We see again today the Government complaining about too much “negative” comment. They just don’t get it.

Analysis is not about positive or negative anything, it’s about the truth and telling it like it is. And in truth, the situation is getting worse.

We are not turning any corners. In contrast, we are being subjected to a series of economic Potemkin Villages — such as guff from silly politicians — that are designed to obscure.

Before we get bogged down in more spin, let’s look at the facts.

The Live Register is at 444,900. The ESRI predicts that 120,000 will leave the country in the next 18 months, on top of the 100,000 who have already gone in the past 18 months.

Government income is only covering 70pc of its expenditure (that is before accounting for the bailout of Anglo.)

Our national debt is heading inexorably towards 100pc of GDP, driven by both our falling GDP and our rising debt.

And now that the State is paying nearly 6pc interest on our debt, this means that the debt-to-GDP ratio will spiral out of control. A simple rule of thumb on debt dynamics is that if a country’s debt gets to 100pc of its income, the growth rate has to be greater than the rate of interest on the debt in order for the debt to stabilise.

Our growth rate will probably not hit more than 6pc again in a generation. So without huge increases in taxation and deep cuts, the deficit will spiral out of control. But the more you cut and tax, the less the growth rate and the more the efforts to cut the debt fail. This process — known in economics as a ‘failed fiscal adjustment’ — occurred all over the world in the 1980s.

This is why the markets are penalising Ireland. As pointed out by Paul Krugman, the Nobel prize winner for economics, far from being rewarded for our orthodox, IMF-friendly deficit-cutting programme, the markets are charging us more for debt. Why are interest rates for Irish debt rising? Because the risk of a blowout here is rising. It really is that simple.

The internal inconsistencies will overwhelm the whole effort.

Think about it. The latest NAMA loans transferred from Irish Nationwide have a discount of 72pc. This is just junk.

It means that the value of the loans extended against property during the binge have fallen by 72pc. And we are supposed to pay for this.

Because of this collapse in loan quality, the banks — which we are stupidly trying to save — need to get money from somewhere, anywhere. So yesterday, they announced that mortgage rates for 300,000 people will be increased.

What do you think this will do? In a situation of rising negative equity, rising unemployment and rising taxes, higher monthly interest payments will obviously lead to increased defaults.

The ‘haircuts’ we are seeing from the ‘big guys’ in NAMA will be repeated for the ‘little guys’ all over the country in the form of mortgage default.

This is why the financial markets are worried — because they see the steady path towards bankruptcy. And investors realise that there will only be a recovery when the return on equity rises dramatically. This will only happen if either we become considerably cheaper or productivity rises rapidly.

We can’t get manifestly cheaper while we are in the euro and we can’t raise productivity unless we have a massive increase in investment — but investment is collapsing.

So we are stuck, staring down the barrel of bankruptcy.

Instead of this honest — if admittedly unpleasant — analysis, we are forced to listen to so-called economic commentators bleating about practically inconsequential press releases from multinationals who might want to employ a few dozen people here and there.

But by focusing on these tiny scraps, some parts of the media are behaving like propagandists for the State. They then appear surprised when the facts on the ground don’t match the rhetoric of the spin.

This press-release approach to analysis is the Potemkin Village of modern Ireland — and obscuring the truth does nobody any favours.


  1. The Irish Solution is being hailed as an example of how to get out of this crisis by the IMF, the ECB and all the other usual suspects with skin in the game but if this Totem Pole falls, wherefore Europe?
    David has just written the epitaph to the Euro experiment methinks.

    • Deco

      Yes, it really is hilarious, that term Irish ‘solution’ gets used. So far it is only an attempt. Most people are not getting anything out of it.
      Therefore, I am tempted to ask ‘ a solution for whom ? ‘

  2. Gege Le Beau

    When Mao was travelling by train through China on his ‘inspection tours’, local party functionaries (not too dissimilar to FF hacks) would ‘transplant’ corn from the surrounding countryside and plant to the left and right of the railway track for as far as the eye could see.

    Like extras from a Hollywood film, ‘peasents’ in brightly coloured clothing (reds of course, yellows, blue silk clothing), smiling and working were dotted amongst the apparent plenty.

    Mao would then be led to the window where his advisors would proclaim the leader’s vision and extoll the virtues of the Revolution. Mao would return to his chair, comforted by such knowledge and praise.

    • coldblow

      Chang and Halliday’s biography of Mao is well worth a read. They contend that he deceived everyone, including Edgar Snow and the other US journalists who visited his Yunan (?) stronghold in 1944, Gen. Marshall, Nixon and Kissinger. The Long March was a con. The heroic storming of some bridge or other, which he made into a big propaganda coup, was staged. While everyone else, including members of his own family were literally farming, Mao was the only person in China piling on the pounds. An inspiration. As a student I bought a copy of his Little Red Book out of curiosity (it was only 10 or 20p) but it was pure gibberish and I threw it away. His main PR guru/courtier wrote it for him to keep on the right side of him but I think he narrowly escaped with his life a few years later (well, who didn’t?). If FF/ Amish start spouting about peace growing out of the barrel of a gun etc then it really is time to run for the hills!

      Actually, there’s a thought: Chairman Cowan’s Little Leprachaun Book. The fundamentals are eternal and sound. The smart economy is a clear fountain that sparkles. Plant a bucket of diamonds in the Paddy Nama field and it will yield in abundance. When there is fear and unemployment you will see the wise man spend his money. He who buys property buys serenity. You can bail out a bank but you can’t make it lend. When Anglo hurts, the people cry. Well, maybe not.

  3. SLICKMICK

    http://www.independent.ie
    Seanie is really taking the piss.

    • Deco

      ‘Truth is stranger than fiction’.
      It keeps getting more absurd the more revelations that appear.

      Of course, though absurd, there is nothing unusual about Seanie’s “dealings”. ‘Funny business dealing’ type behaviour is very frequent in Irish business. Seanie is an angel compared to some of the people you hear about….

  4. Original-Ed

    David, what can they do but keep the bullshit train on its tracks for as long as possible. This is going to be like an organised crash ,no forewarning ,but the emergency services will be already in place before the impact..

  5. Great article:

    From above:

    “Analysis is not about positive or negative anything, it’s about the truth and telling it like it is. And in truth, the situation is getting worse.”

    Also

    “From Shakespeare’s The Merchant of Venice, 1596:

    LAUNCELOT: Nay, indeed, if you had your eyes, you might fail of
    the knowing me: it is a wise father that knows his
    own child. Well, old man, I will tell you news of
    your son: give me your blessing: truth will come
    to light; murder cannot be hid long; a man’s son
    may, but at the length truth will out.”

    Pravda RTE, politico/media propagandists note:

    The story of the destruction of the Irish economy, we’ll help get it out, if you won’t!

  6. Deco

    Yesterday, Dermot Ahern (a lawyer) declared that the problem was that the level of saving in the economy was ‘needs to be reduced’. I reckon that IBEC must be pleased. Because IBEC made an announcement at the beginning of theweek concerning the economy. Basically, IBEC said that Ireland’s export sector was growing – but that the problem was that this money was not getting to other sectors. (By this they mean sectors where they predominate with their price rigging arrangements – nod, wink). So there you have it. IBEC wants export growth, and then wants the money to sick into the balance sheets of it’s members-gombeenism.

    And then, we see a minister going to decide on government policy, telling us that there needs to be less saving. (What a load of patronizing condescension…). This is proof that IBEC are running the countries, because the country is being run for the benefit of IBEC.

    Basically, if you are in the PAYE sector, you are not supposed to save. You are supposed to spend. For most people, the wonder is that you would be able to save at all, considering the margins gouged by IBEC members from everybody else.

    So, what should we expect – well I reckon we will get a saturation level media onslaught (Lisbon 2.0 style) to prevent you from saving. Ads of ridicule about spongers, guiltrips, savers, Newry shoppers, etc….And attention given to heroic deeds performed (by clowns) in the shopping malls. With RTE churning the roadcaster to loads of shopping centres Lucan, Blanch, Dundrum, Athlone, etc.. And sports coverage on TV – including all sorts of irrelevant trivia. (People will be gently encourage to shop to fight the recession – A bit like what Dubya tried a few years back). You are about to see gombeenism try to rebuild it’s influence in popular culture, and to get the lemmings herded up and prepared to be sent running again. The problem now is that too many people are starting to think about economics. IBEC would prefer if you just got into a herd and ran.

    By the way, many people I know who are saving are doing so because they want to get out of debt, because they want to have a rainy day fund, because they have kids who are going to be in third level for a long time, because they want to go to college themselves, or because they want to be able to buy residential property on their terms (and not get snookered into a ridiculous deal by auctioneers).

    Surely, these are the behaviours that should fix an economy, and restore individual balance sheets ? Well, officially, this is a dangerous threat.

    It seems to me that the clowns running the country are more interested in their own political careers than in actually allowing people get on with their own lives. It also seems very clear that IBEC are far too influential. Last year that pretender Dan Boyle pulled the IBEC line when he proclaimed that the banks had to be saved and that it was more important than the factories. Now it seems that the problem is that the people working in the export sector are not doing enough for IBEC. We are intellectually already making steps towards the stupidity that created this problem. IBEC have no interest in this country getting it’s finances in order. It just exists to maximize it’s own cut.

    • BrianC

      Interesting article and comments. The key to politics is a positive spin that favours your re-election. This means facts and truth are secondary which also impinges and or sacrifices accountability. In Ireland we have few facts little truth and no accountability and a lot of self interest thus the poor state of affairs.

      It was interesting to note that the Central Bank pulled in a tidy profit of some €950 million. The Central Bank in the US and the UK are privately owned hence the right to print money is a very lucrative business and the individuals who control these Central Banks are the ‘Money Masters’ who also control the IMF. The IMF is a proven country breaker/ destroyer enslaver and not a Knight in shining armour on a steed making speed to rescue economies in despair.

      The Irish politician are too dumb to realise that they are being forced down a road where the destiny is the inevtaable disaster of bankruptcy. They ought to step back and start to serve the people of Ireland and stop all this nonsense of rescuing a failed Banking System run by inept management. Dispense with the old one let the incumbent bear their rightful loss, (true performance reward advocates responsible behaviour as rewarding failure encourages and promotes a future of failure supported by bail outs), and institute a new bank via the vehicle of Nationalisation, manage it to realise a profit and then sell it off. It is actually very simple but we seem to have the habit of making matters complex perhaps with a mind to veil the truth to protect against true acoountability.

      We are in a dismal sad state of affairs due to our lack of ability to solve ‘our’ own problems and those occupying positions of power and executiveship are not of the intellectual capacity to manage the affairs of their positions further compounded by the absence of true leadership too eager to account exogenous events for the present woes. They talk of recession and the green shoots of growth via the seeds of foreign investment, pure folly as realises a paltry few jobs in the panorama of some 400K unemployed. Common sense alone dictates that stimulating the indigenous industry is the only way to relieve massive unemployment. However, if they cannot recognise that Ireland is in severe depression qualified by falling asset values severe restriction in credit and flow of funds to the public sector then there is little hope of engineering a credible road map out of our dismal state of affairs. You can have all the best plans ideas products and services that you like but without access to finance you cannot deliver to market to generate revenue. I there really any need to state the obvious sadly it seems so for the Irish Govt.

      A key part of the Media in Ireland is lacking in its ability to help impose and force accountability on the govt as they are probably too close to the offices of the state thus prone to slavishly regurgate the positives the govt wishes to dispense at the expense of the public and demands to get the country out of this economic mess. The opposition parties are of no effet whatsoever with very questionable leaders as to their ability to deliver the required vigorous probity to achieve accountability. What have they achieved so far? Nothing of any consequence.

      It would be fair to say that the vast majority of the public service are good people well meaning and genuine in their efforts; all you have to do is look at the front line interfacing with the general public. But there are far too many not up to their positions of responsibility evidenced by the debacle of the HSE and the ineptitude of the Department of Finance to regulate and plan. A root and branch change is required in the positions of power. But so far no willingness to create change. Managing change is not a strength of this Government despite what they may claim where they in truth are heavily predisposed to knee jerk reaction resulting in negative consequences.

      So as the Irish Govt continues to mask the truth and their part in the true state of affairs Ireland is indeed destined for bankruptcy. I wonder how many politicians were clients of Anglo Irish thus eager to support a falacious bail out. If the NTMA was only prepared to deposit a paltry sum in Anglo are we to seriously believe that those in key positions of fiancial power in the Govt did not know the true financial state of the banks predicated by the severe silence of AIB.s Eugene Sheehy which was deafening in defiance and B of I’s Goggins offing’s were seriously out of step with reality but we have our Bete Noire Sean Fitzpatrick who is only the tip of the maligned ice berg that has frozen the Irish State in a paralytic depression on the IMF road to bankruptcy. But it is not too late to revive Ireland from this state of parlysis ‘fold NAMA Nationalise the Banks square off the bond holders offer terms that suit the state if they do not like it then they can have the ultimate haircut stop listening to the dross peddled by credit rating agencies and do some serious talking to the EU regards budgetary paramater controls’. It is really simple it is called ‘Management’ but this time act on terms that suit Ireland’s needs and not a few favoured vested interests.

  7. Gege Le Beau

    Once FF have finished their Viking-like plunder and NAMA truly kicks in……………….
    http://www.youtube.com/watch?v=hbLgszfXTAY

  8. DP Ambrose

    So will someone tell me, if I can’t leave cash in the Irish banks, what is the most reliable alternative?

    • Gold is the best bet now. Bet against this whole system holding together in its current form..

    • tony_murphy

      Following David’s comments in the previous article on the Government potentially taxing savings, and the news in the last couple of days that the Government were planning on forcing people to spend.

      To me, it’s obvious that the savers are going to be targeted and the debtors let off the hook

      If I had enough cash, I would go to somewhere like Germany and buy cheap property with land somewhere in the countryside. It would be plan A for when Ireland does go bankrupt and when they try to raid everyones piggy banks

      • crossroads

        Re Taxing of Savings

        The return to the 80′s will be complete. While those who can and those that need to rush to leave the country, soon anyone with money will be hiding it under the mattress or offshore accounts.

      • coldblow

        Buying a place in Germany is exactly what occurred to me too. I know a couple who bought a small apartment (which I haven’t seen) in Trier for about 40k or something a couple of years ago. My SSIA and other savings put together might reach to that. But I’ll never do it of course.

  9. daramac

    The latest batch of property developers to have bequeathed their enormous personal gambling debts to generations of taxpaying citizens of this State to service, through NAMA, reportedly included a well-known philanthropist in their number. Philanthropy is variously described as, alms-giving, altruism, benevolence, munificence and public-spiritedness.
    The Nobel Prize winning economist Joseph Stiglitz has blasted NAMA as ‘highway robbery’ and has said that the bank bailouts represented “a simple transfer from taxpayer to bondholder which would saddle generations to come.”
    Rather like the ideology of free-market capitalism which held that the obscene rewards which property developers enjoyed were justified in light of their extreme exposure to risk, the very basis of philanthropy, it appears, is stood on its head when the economic tables are turned.

    • Tony

      The conspiracy theorists must be loving all this. But you can’t help but wonder if some of them aren’t too far off the mark. And it’s getting harder to argue with them. Stiglitz is right; we’re simply looking at another transfer of wealth from Joe Soap to Joe SuperRich.

    • michaelcoughlan

      Hi Daramac,

      To fully understand what is going on let me clarify various different categories of player in the property game to better inform people about who was and wasn’t making a killing. A builder is a person who undertakes a contract to build a building and earns his money doing this. A developer buys land and employs a builder to build a house or apartment and makes a profit from the activity once the building is sold or rented. An investor buys a building to rent it to make money from the rent and maybe a capital gain on a subsequent sale in the future. A land hoarder hoards land and drip feeds the land into the market without every adding value and does so slowly to keep the price up. A syndicate is a collection of individuals engaged in a musical chairs type situation where a group of individuals usually close to the bankers will buy a site with short term money and flip the site in a short space of time for a profit. Syndicates can only make money when capital values are rising as they do when there is an increase in the money supply. Neither the land hoarders, bankers, nor syndicates ever add value. The other players do. It was debt fuelled speculation on land hoarding, syndication and corrupted lending practices driving all this which has landed us in the shit.

      • coldblow

        Hi Michael, I left a reply to a post of yours in the last thread (re turning Ireland into a cattle walk).

        • michaelcoughlan

          Hi Coldblow,

          I read your other post and thank you for letting me know. You appear to be very well read on this area. It is very interesting to see that there is so much published work on this whole area of the question of land ownership in Ireland. Our national obsession with property can be easily explained considering our long and tortured history.

          Regards,

          Michael.

  10. jheffernan

    I think the entire NAMA debate confuses me. The larger the discount (‘look we’re being real hard on the Banks aren’t we great’) means we (via the Government) pump more in to improve capital directly or mortgage holders pay more. The smaller the discount, the less we pump in directly but NAMA picks up the tab. The discount debate is a distraction right? For NAMA to work we need property to improve, for property to improve we need an economic miracle. For an economic miracle to happen we need leaders. So we can rule that one out.

    • re “The larger the discount (‘look we’re being real hard on the Banks aren’t we great’) means we (via the Government) pump more in to improve capital directly or mortgage holders pay more.”

      That’s another Government canard or myth or piece of propaganda. “We” don’t have to pump anything in. We let the bank close and go into bankruptcy. “We” should be prevented by legislation squandering taxpayers money on croney zombie banks.

      Closing Anglo and Nationwide immediately would save €17 bn of Irish taxpayers money! Anglo was not a bank with a nationwide branch network servicing the economy. It was a casino, speculators bank pure and simple.

      We need to close preferably by liquidation the casino that’s sucking taxpayers into its black hole of debt generated by Government, croney incompetence.

      Only then will be begin to deal with our financial problems. Until then, they will get worse. What is the figure now? Cost originally estimated by our shape changer, Lenihan, was €8 bn, then he gave it as possibly another €10 bn on top of that. In the Dail, they went ‘ooh’ and ‘aagh’. Then it went to today’s favorite, €22 bn. According to Peter Mathews at the Oireachtas Committee he could prove it was closer to €32 bn. I believe if you add in restructuring and Nama bailout figure could be closer to €50 bn.

  11. David Murphy on Pravda RTE with the bespoke FF line re the guarantee that banks were falling all over Europe so they had to ignore Merrill Lynch advice e.g €20 bn fund for AIB/BOI, nationalise Anglo/Nationwide. Crap, should have been an alert not to guarantee everything. Plus propaganda that all this happened overnight. No, Neary, who is safe now out of the way with his big pension fund, is the fallguy/scapegoat, who didn’t tell them about the property bubble! More bullshit. In fact, they knew for a whole year the exposure of the banks. Neary supported the €7bn Green jersey shifting of funds from BOI/ILP and it appears there’s evidence this scam occurred multiple times so this was no overnight fitup unknown to DofF and Lenihan. This is only more bullshit lies and coverup. The fact is the guarantee gave Anglo the best hiding place and coverup designed to allow time to throw taxpayers money at Anglo to save it at any cost. Then there’s the curious aspect of the blanket guarantee no one asks about. If you look at Merrill Lynch advice. Implicit in the ‘taking into conservatorship’(nationalisation) of Anglo and Nationwide and the provision of a €20bn bailout fund, was the notion that Nationwide could need approx €2bn and Anglo €8, figures found to be totally misleading! Obviously, Merrill were flagging the Govt things could be much worse. Instead, probably set against any notion that involved the word ‘nationalisation’ Govt gombeens went ahead led by Lenihan and the advice of DofF no doubt. Murphy was asked if in hindsight they regarded the guarantee as the best option chosen? Noooh, they wern’t asked that. If I buy something that I think costs €10, but later climbs to €50 bn, then surely I should realise I’ve made a mistake? noWayHose, not with this lot. They’re used to it. Its like bidding for the M50 construction job, you put in the lowest bid and get it. Later, pleading higher construction costs, you put in for more and more and more. Meanwhile Gormless The Incinerator appears to have stopped 500 construction jobs going ahead at Ringsend, Hangar 6 deja vu all over again. According to Govt propaganda we are the envy of the world for NAMA and the blanket guarantee.

    OT anybody got any info on Anglo Credit Default Swap credit event profiling? In other words, did Goldmann or any other financial entity hold CDS liability insurance requiring payout if Anglo went bust. If they did, perhaps their advice to Govt was suspect?

    • Original-Ed

      Poor old Neary was more into Greek tragedy than into the Irish Economy – so he can’t be held accountable for something that he knew nothing about. He was the perfect choice for the job during the bubble – he was a sort of trinity, all three wise monkeys in one person – he saw no evil,heard no evil and spoke no evil

      • As far as I know there’s strong evidence he may not only have known about but supported the BOI/ILP scam money transfers to Anglo. This should be investigated by the Garda Fraud Squad. How could he not know? What methods of investigation did he have? Light regulation? Did he sit at home all day with earplugs on reading old copies of The Dandy? Plus why in this country is ‘lack of knowledge’ offered as proven defence against accountability. If he didn’t know, he shuda known. Given the extent of the disclosures re the banks since their fall, its more likely he had one thing to do as Regulator, Look The Other Way! No chance I guess that he’ll redeem himself and blow the whistle, his lips are sealed!

        • Julia

          Does anyone know ho actually has our 20bn now (or 30bn or 50bn). It’s a black hole to us, but it must be somebody’s birthday. Who’s mattress now contains our money. Who is benefiting from our Government’s wild promises? Surely someone is laughing all the way to the bank?

  12. Malcolm McClure

    I get the impression that few bloggers here are following the webcast discussions at the MacGill summer school linked at http://www.donegalcoco.ie. This is a pity as they are very relevant tto the themes discussed by DMcW over the past year.
    This morning within the overall title “Reforming the republic” the theme was “Parliamentary reform is long overdue” . There was a particularly poignant moment when Elaine Byrne a young politics lecturer at TCD responded to the ancient Popeye figure of Pat Carey who earlier in the session had patronised younger politicians and droned on about the wisdom only attainable with years of experience.
    Elaine spoke up for the situation of the educated younger generation who she said were emigrating to find opportunity abroad that the older generation of politicians had denied them (through the obvious lack of wisdom of their policies.) A star was born there and then.

  13. adamabyss

    subscribe.

  14. Alan42

    http://www.youtube.com/watch?v=wNFbl525fkM

    It’s beyond pathetic or tragic it’s now just funny .
    Does anybody really expect Frank to sort out the mess ? He does not even understand the basics .

  15. Hoops

    Agreed.

    OT: I cannot resist asking in this forum…

    Why is Bertie Ahern getting so little heat about all of this? All I keep seeing was how clever he was to have “left at the right time” – what?!

    He was the Taoiseach for the entire period during which this mess was created. He was even caught-out receiving funds for property himself and started crying in a television interview (the shame to be Irish that day) in order to wriggle out of it.

    The boom years did not see any significant improvements in Dublin city and our countryside has been destroyed by seas of white Spanish-style bungalows – the countryside is without doubt our greatest loss as everything else (i.e. the debt) will pass in time.

    If I were to see Bertie (or indeed any of his immediate family) out in public I really don’t think I could stop myself from creating some sort of scene. (And I am no longer even living in Ireland and so not burdened by decimated house prices and the debts of others for the next X years) Please somebody tell me that this sort of thing is happening.

    How could he _ever_ still be entertaining the idea of running for public office – Mayor/President?

    • Colin

      Why is Bertie Ahern getting so little heat about all of this?

      Because most Irish people prefer a popular cute hoor chancer who means all things to all people (he bought off the wrinklies by increasing the OAP, he gave the trade unions power in “partnership”, he gave first time buyers equity in their homes giving them the illusion they were very rich, he always attended rugby and football internationals to appeal to sportsmen, he bought off the Public Service with Benchmarking, he even praised the muslims (the new Irish as we’re told by the right-on media) living here following 9/11) more than a straight honest man of Intregrity.

    • paddythepig

      There are a few reasons I think why he hasn’t yet been tarred and feathered. One is that a lot of the population still admire him, because his behaviour is identical to theirs, only theirs is in a less public arena. In other words, the country is full of self-serving cute hooers, who would just love to be Bertie.

      Secondly, the FF party have fudged dealing with the crisis he left behind, so the reality of what he did hasn’t yet sunk in. By 2014, when the real cuts are finally made, more people will ask ‘How did this happen’.

      Thirdly, there is a subversive streak in Irish people, who admire the rake who subverts the system. Remember Haughey being fawned over down in Dingle. Remember Lowry being lifted sky high after being re-elected. Bertie, the rogue, appeals to this audience.

      Fourthly, Ahern is out of the country a lot, promoting himself. He is never in the Dail, so ‘out of sight, out of mind’.

      Fifthly, are Irish people just plain thick?

      • Deco

        Low interest rates, and the expectation that the Con-Dem coalition will throw out simplify the house building regulations has resulted in an upsurge of construction in the UK. This is beneficial to Irish construction workers – provided they can turn up for work every day sober enough to do a days work.

        http://www.telegraph.co.uk/finance/economics/7906732/UKs-startling-economic-growth-reignites-austerity-debate.html

        Interestingly enough, in comparison to Mr. Positivity Cowen, Britain’s George Osborne is advising caution, and recommending that people concentrate on debt and not on short term statistical freaks. And he is correct, Britain is still in a serious mess. Talking up the economy is for clowns and liars….like Cowen, Gormless, etc…

    • Deco

      Hoops – some day in your lifetime, you will see people naming sewers after Bertie Ahern.

      No chance of him becomming a President or a Mayor.

  16. Maire

    Yes I agree with everything David says, but I still blame David for the Bank guarantee. We would not have a bank guarantee if it were not for David advising Brian Lenihan to give the guarantee on that night. I just heard today that the Civil Servants of this Country were briefed on the day of the guarantee and told that Anglo and Irish Nationwide were going to be Nationalised, it all changed at around 7:00pm when someone or something changed the Finance Ministers mind and I am told, that person was David. Apparently the Finance Minister was in Davids house having tea and being advised to give the guarantee.

    • Colin

      If a man drives to his local pub, sits up at the bar, and asks the barman would it be alright to have just 1 pint and drive home, and the barman says yeah, thats fine and hands him the pint. Later on, if the driver insists on having another twelve pints, gets in his car to drive home, crashes, killing many others, is it the driver’s fault or is it the barman’s fault?

    • tony_murphy

      Marie,

      What would have happened if there wasn’t a Temporary bank guarantee?

      What would you have done?

    • crossroads

      Maire, as I understand it there is no difference in outcome between the intention in the initial briefing to nationalise Anglo and Irish Nationwide and the later decision to include them in the blanket bank guarantee.

      In nationalising Anglo, the government takes over the bank and is then responsible for its debts, which is where we are now.

    • michaelcoughlan

      Hi Marie,

      I think David expected the government to use the breathing space after the guarantee to wind down the banks and not bail them out.

    • Hi Marie, sorry it has taken so long to get back to you on your legitamte questions re the bank guarantee.

      Back in September 2008 it was clear to me that there would be run on the banks and the small guys would be caught out because the big corporate depositors would have got out first. I suggested a temporary gurantee which I had seen working in Sweden and Switzerland. The idea was to prevent the run on the banks and then in an orderly fashion see just how bad the situation was. As i told lenihan that night, the main thing was to stop the panic. then when the situation got more clear the banks should be told that they are on their own to raise capital. if they couldn’t they should be closed down. if they were bad enough we could let the guarntee lapse and get the creditors in a room and tell them that the deal would have to be done with the government acting as the broker rather than the principal.

      this was the plan, but somewhere along the way the banks convinced the state to extend the gurantee and the whole thing is now fraught. maybe i should have seen this, but i didn’t and i thought that the department would stand up for the people not the banks creditors. i was wrong.

      all the best david

  17. mmitche1

    Hi David,
    If you haven’t already done so, would it be possible for you to explain the “astonishing” means by which money is created in the economy. I have carried out a little research into “Central Banks” and “Fractional Reserve Banking” and am truly frightened for the future. When the broader populace learn how money is created and multiplied through “Fractional Reserve Banking” then It highlights how banking fraud has been billed to the ordinary people.
    Just to whet your lips, research “Jerome Daly’s” legal fight against bank foreclosure in the US in 1969 (I think that the chairman of Morgan Stanley was called to fact the judge). He won the case and kept his house as it was proven that the Bank didn’t honour their side of legal consideration as they had created illegal money from nothing through the “Fractional Reserve”.

  18. distributist

    David,
    Please excuse the somewhat off topic, but…
    I have just conducted a little experimental research into the country of origin of our euros.
    I withdrew €5000 in cash yesterday from my account in Bank of Ireland. I examined the code on the back of each of the 100 €50 notes. The letter at the start of the code indicates the country in which the note was printed. A bit like the Eurovision, Ireland did not fare too well despite this contest being held “at home”. Here are the results from the Bank of Ireland con-jury.
    79 €50 or 3950 euros marked “X”…………Germany
    7 €50 or 350 euros marked “Z”………….Belgium
    7 €50 or 350 euros marked “V”………….Spain
    4 €50 or 200 euros marked “T”………….Ireland
    2 €50 or 100 euros marked “S”………….Italy
    1 €50 or 50 euros marked “P”………….Netherlands
    The figures speak for themselves. We are borrowing German origin cash up to our eyes.

  19. Maire,
    That’s been explained before. The Guarantee was mooted as a stop gap to prevent imminent meltdown at the time, not as a long term recuperation ward for afflicted insiders.
    But I’m sure David will explain this in his own inimitable way.

  20. Looks like the fire sale of the Crown Jewels is on. This is frightenly like Thatcherism on the march again. I’m back at groundhog day but with different accents.

    http://www.businessworld.ie/bworld/livenews.htm?a=2637269

    Watch all the insiders scoop up former semi states at bargain basement prices, pay a “windfall” to the Government and then plunder the booty.

    • tony_murphy

      yes furrylugs.

      they’ll sell to insiders/private equity who will run them further into the ground, asset strip whatever they can and leave a skeleton behind. just like what they did with eircom

      • Insiders/private equity will cull the jobs first, cut services, sell the infrastructure, with no more bootstrapping room they’ll sell on again to continue downward spiral. Some of these are currently making a profit for the State and could be used to generate cost efficient jobs/better services.

        To echo Furrylugs and tony_murphy, here’s typical example:

        http://bit.ly/8jFPr5

        hereeeeeeeeeeeeeeeeeeeeeeeeeeeeeeeeeeeeeeeeeeeeeeeeeeeeeeeeeeeeeee

        “TIME.com: Sixteen people have died in Argentina in the last 24 hours in violent protests against the

        government’s austerity measures, and most of the cabinet has resigned. Attempts to deal with the economic

        meltdown appear to have rendered the government untenable, and investors fear the international

        repercussions of the country’s apparent inability to meet its debt burden. How did this volatile situation

        evolve?”

        also

        “A wave of privatization in the 1990s under Menem had already thrown a lot of people out of work, and

        because many of the privatized companies were utilities, prices for such basic services as electricity and

        phones spiraled upwards. So Argentina’s recession had started three-and-a-half years ago, and it grew

        steadily worse as domestic demand went into a downward spiral as companies lost business and were forced

        to lay off even more people.
        The downward spiral increased the debt burden, because the government’s tax revenues were shrinking.

        And the IMF made clear they were not inclined to bail Argentina out by making an advance payment on a

        previously agreed loan to allow it to make its next debt payment.”

        aboveeeeeeeeeeeeeeeeeeeeeeeeeeeeeeeeeeeeeeeeeeeeeeeeeeeeeeeeeeee

        To parallel above more re Brasil/Argentina, consider the possibility of a sterling devaluation? You ain’t seen Newry yet.

        OT, new just now online re stress tests, about 10 of the 91 sample to fail:

        http://bit.ly/chNSJT

        “The banks that would fail the KBW stress test — assuming that dividends would be cut to help preserve capital — are Greek banks National Bank of Greece, Piraeus, EFG, Marfin and Alpha Bank, Portugal’s BPI, Germany’s Deutsche Post Bank, Italy’s Monte Dei Paschi Di Siena, Bank of Ireland and Turkey’s BKT.”

        • Just in case someone scans above without going to original link. That news item was from Thursday, Dec. 20, 2001. Are we going down the same route?

  21. Deco

    The McGill Summer school has been used to float all sorts of ideas into the public domain. But as far as I know the number of economists present is low. The rest of the line-up is a series of non-economists talking economics.

    Listened to Prime Time last night. Paul Gogarty was advocating a new mayor, above the existing four local authority mayors in Dublin. He had no real concrete idea why. But he was seriously in favour of it. He told us that it would not cost extra. But again he could not provide details. He didn’tknow if this was effectively another quango. He had venom for FF backbenchers who opposed GP policies. (Proof that FF back benchers are the only hope that the government will fold, and also proof that the GP don’t like dissent from their power trip). But mostly it was a load of manure. Phil Hogan never critiqued “FU,DS” – Hogan said what he needed to say, and then stayed silent while FUDS made a fool of himself continually. And I have to ask myself what sort of muppets vote for the likes of FU ? I mean he is a complete waste of space, and when questioned all he can do is get personal and get vicious. His contempt for the interviewer was bursting to get out.

  22. Deco

    Today we see proposals to sell RTE, CIE and the ESB. This would raise 10 Billion. More critically it would turn RTE against any political party in favour of selling RTE. And also the large unions. It could be an effort to turn unions against FG, back to FF, and to undermine ILP efforts to increase the voter appeal in the private sector.

    We can still retain the critical parts of these organizations. TG4 could be transferred out of RTE, and given to local authorities in the West. To be honest, we do not need a public broadcasting organization in the internet age. If the TV licence was dropped the cost of living would be decreased. CIE’s bus services could be broken up and made compete with one another. We could use the Dutch method, of public ownership of the the track and the stations – but with the private sector owning the trains. And public ownership of the electricity grid would continue, with the power generation being privatized. This way the public retains the parts that could be used to monopolize control, and the private sector competes in the rest of the sector.

    But somehow or other, I cannot imagine IBEC being in favour of this. IBEC will want private sector price fixing in place of public sector price fixing.

  23. Deco

    We are finding out, what we suspected all along – that the banks were lying through their teeth when asking for the bank gaurantee.

    I am also suspicious that the real purpose of the bailout of ANIB/INBS/EBS is to prevent a collapse of the AIB/BOI behemoth. That the DoF regards 25 Billion as cheap compared to stump up money for a deposit run.

    But we still face a fundamental problem in this country. Ireland does not mean business. And this needs to be fixed very urgently.

    • Disagree with that, here’s another reading of it that’s all about Anglo:-)http://colmbrazel.wordpress.com/

      Anglo/Nationwide corpses are not part of the stress tests because they are corpses.

      We should give them a funeral and bury them both asap! Closing them would save €17bn. Add in renegotiating loans under conservatorship/nationalisation, we save more.

      This actually is the perfect time to do this. We could also just join their corpses to the other 10 across Europe who’ll fail stress tests today including one large German bank burnt with Credit Default Swap gambling. OT nothing is being said of Anglo’s CDS losses! If we’re smart, we’ll despatch a negotiating team to Trichet to negotiate a windup of all these banks for a group wind down!

      • It will be very, very interesting to see if taxpayers across EMU are asked by their respective Governments to pay up for the losses of their bust banks! Very little being said about this, let’s see what they do! Will they be as dumb as us?

    • I know this should be transparently obvious to everyone, but I should point out, the taxpayer is still liable for the deposit book, and by keeping the bank open by the guarantee the State has assumed all that deposit guarantee liability, plus the rest of the banks liabilities. Given the downturn of commercial/residential property and prospect of recession these losses can only get bigger. By saving the bank and instead of writing down the loss through moral hazard debt renegotiation, the State has bet taxpayers money on the prospect of an upturn. Basically, Anglo is a dead loss and as an anchor around our necks should be wound up asap. Given the stress testing of other EMU banks at the moment, doing so would not draw the market’s attention so much as doing this another time. Plus we now know that lies were told. Its time to adjust course based on better information, or plough on into the wall?

  24. Chester

    Nama are an African ethnic group which have mostly disappeared due to the discovery of diamonds at the mouth of the Orange River.
    Are we the new NAMA about to disappear under our bank debt

  25. Presumably there will be a couple of sacrificial lambs in the banking fraternity to prove the rest are fit to continue digging an even bigger debt hole?
    This may divert attention away from sovereign debt and an intergovernmental stress test which might inconveniently reveal the insolvency of a continent. This surreal situation surely cannot escape the attention of the so-called “Markets”.
    I can’t believe my brother-in-law is that thick.

    This surely has nothing to do with debt at all but is a concerted effort to maintain the credibility of a failed monetary system, i.e fuelled by credit, so the illusion of FIAT wealth is maintained. What I’m getting at is, if my few Euro was equally as worthless as Goldman Sachs billions, then social mores and norms cease to exist. The meek would inherit the Earth, so to speak.

    I’m sure Wills would put that much better.

  26. I think it’s worth posting Dr Gurgievs stress test assessment in full here for anyone not familiar with him.

    Economics 22/7/10: EU stress tests – what do they tell us, really?
    Posted by Dr. Constantin Gurdgiev
    The EU stress tests of the banks confirm the worst fears of all analysts — including myself. The tests were simply a PR exercise, so poorly conducted that no one can have any credibility in their outcomes. Worse than that, the whole circus:

    * The difficulty with which the EU member states appeared to be willing to release information about the tests;
    * The way in which information is being released (via a drip feed — bit by bit over time, with massive leaks beforehand);
    * The struggle through which member states have gone in order to even agree to carry out the tests in the first place;
    * The rhetoric from the EU regulators assigning an almost heroic quality to its efforts to test the banks in the face of a clear shambolic nature of the whole exercise.

    All of these things provide for a strong suspicion that the EU will not be able to undertake robust regulation and monitoring of the euro zone banking system in the future, plus a clear cut realization that the entire idea of the euro member states coming together to police their own fiscal behaviour will be even less honest, transparent or robust. In other words, how can we expect the EU to act as a functional policeman of its members fiscal policies if:

    1. It failed to do so over years past, even armed with already robust and automatic regime of the Stability & Growth Pact, and
    2. It failed to properly stress test its own banks?

    In the nutshell: German banks, including Landesbanken, have already privately leaked the ‘news’ that they all had passed the test. Ditto for banks in France, Ireland and Italy. Only one German bank — already failed HRE — has failed the test from among 91 institutions.

    In the case of AIB — the sick puppy was ‘passed’ by allowing to include into regulators’ calculations the €7.4 billion the bank plans to raise by the end of 2010. Good intentions count for hard evidence, then, per EU regulators. And Bank of Ireland passed – along with all the rest of the PIIGS banks is by the test excluding any possibility of twin shocks – simultaneous continued deterioration in quality of loans and a sovereign debt crisis. Now, in all likelihood, if the sovereign debt crisis continues to rage, does anyone in their right mind thinks that housing and other asset markets in the likes of Ireland and Spain are going to improve to alleviate the loans book pressures?

    Farcical!

    What the 91 tested banks did ‘pass’ was not a stress test, but a joke, concocted either by those with no understanding of banking (Eurocrats?) or created specifically with an ex ante intent of passing them all. The French and Greek banks privately said that the haircut applied to their holdings of Greek government debt were about 23%. Markets are factoring in 50-70% haircuts, so the EU stress test was less than half as severe as what is being priced already. Worse than that — the sovereign debt haircuts were applied only to bonds held in banks’ trading books. That accounts for just 10% of all Greek bonds held by the euro area banks, as 90% of Greek sovereign debt has been already moved to ‘held to maturity’ parts of banks assets portoflia, not reflected on trading books.

    In other words, when it comes to Greek sovereign debt exposure, the EU tests were capturing no more than 5% of the total risk of such exposure for the banks. Like a doctor, looking at the brain activity chart of the patient and saying: ‘Look, there’s no activity at all. But 95% of all other vital signs are performing just fine. Indeed, no worries old man, the patient is still looking 95% alive then…’

    And there’s more. Per media reports, a memo from Germany’s Financial regulator BaFin earlier this year said the real concern should be contagion from “collective difficulties” across the PIIGS, not an isolated default of Greece.

    All of this did not prevent Irish stockbrokers from issuing upbeat reports about ‘the good news’ for BofI and AIB. What good news? The shares in two banks rallied today because someone, somewhere, allegedly decided that if Greece softly defaults, Irish banks will survive? Did that someone actually paused for a second to think, before placing a ‘buy’ order if Irish banks can survive their own home-made disasters? Or whether they can survive a meltdown of Greek debt default as priced by the markets? Or whether they can survive both happening at the same time?

    Irish analysts, who issue these forecasts should be required to read Taleb’s ‘Fooled by randomness’, though one wonders if they will understand much of what Taleb is saying for years now. Investors who chose to belive that AIB and BofI passing of the ‘test’ this week is some sort of a ‘good news’ are simply fooling themselves by ignoring a simple fact of life – misdiagnosing a patient with heart attack as being free of an Avian flu is not going to improving the patient’s chances of survival. It actually reduces them.

    Shamed by this absolutely incompetent, if not outright markets manipulating ‘testing’, you’d think the EU leaders would step back and start an earnest conversation between themselves as to what has gone wrong here. Nope. They are hell bent on creating more Napoleonic sounding, but utterly unrealistic and even disastrously risky plans. This time around — for fiscal harmonization. France and Germany — the two countries that have been clearly at odds with each other in responses to the current crisis have decided that a bout of amicable activism is long overdue. So behold the latest Franco-German alliance on a list of fiscal policy co-ordination proposals.

    Per reports in today’s media: a French cabinet meeting took place with German presence, during which Sarkozy called for a complete harmonisation of European tax systems. ‘He did whaaat?!’ I hear you cry… yeah, he did call for that which was explicitly denied by him and the entire EU leadership core as ever having a chance of happening in the run up to the Lisbon II referendum in Ireland.

    Now, don’t take me wrong here — this is not a voluntary call for individual states cooperative action — it is a call for an EU-wide ‘reform’. And if you don’t think so, the same meeting called, once again, for member states with excessive deficits to be punished by withdrawal of voting rights in the Council of Ministers, plus a fine and the compulsory imposition of an interest-bearing deposit for member states.

    Eurointelligence blog has put it succinctly: “In other words, France and Germany [have called] to continue the same dysfunction regime, except that they strengthen those parts that have prove the most dysfunctional.”

    Let me be a tad controversial here – wasn’t all of this predicted to happen by Declan Ganley, Anthony Coughlan, Mary Ellen Synon and others who argue in favour of democratic reforms in the EU? Weren’t they ‘refuted’ on exactly these predictions by the entire ‘establishment’ in Brussels and the all-knowing dons of the Upper Merrion Street? You don’t have to agree with their points of view. You might as well agree that the idea of fiscal harmonization is a great thing. But what cannot be denied is that:

    1. Any policies absent meaningful ability to honestly, transparently and effectively enforce them (and EU has shown none of these in its stress tests of the banks – the easiest area to deliver them in current political and economic environment) is destined to be nothing more than a bullying pit for some states to arbitrarily control others; and
    2. Given grave doubts about EU’s capabilities to provide for (a), the automatic default option of any new policies should be to scale opportunism and adopt pragmatic, cautious, incremental reforms approach – when in doubt, measure and caution must be the prevalent guide.

    After all, if I were a person with the power to shape EU principles, I would adopt the milenia-old medical code of ethics, that is based on the fundamental axiom of morality: Primum non nocere, or First, do no harm.

    Then again, adopting such a principle would have meant not conducting these ‘stress tests’.

    • Very penetrating argument by Gurdgiev there, we’ll know 5pm if its 1 or 9 banks fail the ‘stress tests’. It’ll be a question of how the markets respond, whether the markets share the views above. My dumb question is, what will be done with the failed banks? Will there be a tax on every european citizen to gather the cash to give to them to squander again wherever they want, how will their losses be dealt with, will they be plied with the €440 bn rescue fund ? Of course this money is only in the form of bonded bailout loan guarantees, and do you bailout bankrupt banks like Anglo?

    • Deco

      Well, the question deserves to be asked “how useful is a stress test that allows so many dodgy banks to pass ? ”

      AIB are being left alone by the media because so many are is afraid to ask the real situation, in case they find out that it is as bad as they suspect. Similarly BoI.

      Phony-stress tests… This is the EU Commision trying to be Moodys, Fitch and whoever else.

      Maybe the real purpose of the stress-test is to convince other PIGS, plus Hungary, Italy and The UK to save their Anglo’s just like the Irish taxpayer….and thereby bail out the bond holders in Frankfurt and Paris ?

      And now we have another French plan at centralizing power in Europe.

      Where are Cowen, Roche, Martin and the much talked about “CAST-IRON” gaurantees when you need him ??? Chances are they are grovelling down the phone to Brussels…

    • Deco

      Another thought comes to mind.

      Given that the stress test is a statistical feat, one wonders would AIB/BoI pass without NAMA coming to rescue them with the overvalued payments for ‘development’ property …..

      The real hero of the stress test, is the PAYE taxpayer…(again).

  27. Philip

    I cannot help feeling that Ireland is merely a mirror of what is happening in the rest of the global. The bailout – any bailout is merely an exercise of pulling savings and working capital out of a nation to prop up financial recklessness (mind you, are they really reckless if they knew propping up was inevitable).

    Ireland and smaller economies are feeling the hit now merely becasue they are smaller. But I believe it is mushrooming. http://socioecohistory.wordpress.com/2009/01/17/geab-systemic-economic-crisis-the-sequence-of-global-insolvency-begins/

  28. Gege Le Beau

    Somewhere along the line we failed as a society.

    Vincent Browne made an interesting comment that private schools produce sociopaths. William Golding highlighted this in his book ‘Lord of the Flies’ and the importance of rules and civilisation to keep in check the activities of a certain group of people (with particular characteristics and response to certain situations).

    We have to wonder how and why it is we have produced the kinds of people that have led the country to ruin, those who display sociopathic tendancies in feeling no guilt for their actions, continue their old ways regardless of the impact on others, deceitfulness and lying to ensure profits, a failure to conform to laws, failure to act for the benefit for society etc

    We also have to wonder do we want a ‘business run society’ where the desires/needs of a tiny minority come before the great mass of the population?

    That is why I like the following two clips, they explore the fundamental issues, the core concepts at the heart of our very troubled country whether it be politically, economically, socially.

    Ireland has some pretty dark things going on and I have yet to see anyone really enquire as to where these troubling aspects are coming from, until we explore those items, then we will have another economist writing articles in 20 years (which seems like the period between economic crises in the capitalist system) about the dire situation the country is in.

    The Empathic Civilisation
    http://www.youtube.com/watch?v=l7AWnfFRc7g&feature=player_embedded#!

    The White Ribbon
    http://www.youtube.com/watch?v=JUj9gDtA9HQ

    • Hi Gege

      I recommend Haneke’s ‘The White Ribbon’ and it certainly raises question re empathy, as does the Jamie Bolger case etc. But note Haneke’s vision is an interpreted one seen through the prism of art. The other video I’ve looked at from RSA, ‘softwired to experience anothers plight as if we were experiencing it ourselves’ a load of new age psychobabble codology masquerading as science and knowledge, more like someone’s giant ego lost the run of itself. You could also take the preconceived view, among other views:), reality is an interpreted one with imagination associating what we see with preconceived positive or negative emotions based on self interest..I’m babbling now. However, the mere act of raising questions on what is right/wrong in my opinion is a valuable exercise. The journey towards answers, in my opinion, if there are any:), may be longer and less simplistic than either the Haneke film, or the RSA youtube video depict…and its worthwhile taking the Ulysses journey…. have a good weekend!

    • Philip

      You know, I have always indicated on this site that whatever you do, look after your community, see what you can contribute. I am not making a cry for insularity. I mean your community of friends and acquaintances no matter where they are. This is similar to DMcW’s call for the diaspora.

      What we are witnessing is the constant bootstrapping of leveraged debt to create the never ending story of debt servicing no matter what the cost. The internet has simply accelerated it to the ridiculous and hence the global bust we are witnessing. This is positive feedback with the gain ramped up and in such a scenario, we will have a blowout. The reason it did not really blow up before is because, there was always an escape value that saved the day for the perpetrators. There as always an aspect of the financial system that remained immune – always something you could run to. Not so any more. It’s all interconnected – even base metals and other “perceived” value are being way laid by access to communities and their knowledge. Everything is now approaching its value as a utility rather than as an item of mere scarcity.

    • Deco

      GB – It would be an improvement if this country was a business run society.

      Because in actual fact, what we have is a clique run society. In a business run society, it would be possible to say that there is a degree of meritocracy, competition, and performance. But in our society, all three are absent. There is a selfish ambition ethic however that includes a willingness to lie, deceive, collude and coverup. There is also a lot of induction of contempt. This best exemplified by the Annabels case.

      Your point about sociopaths being prepared to control society is an interesting point. The induction of conventions, intellectual limitaion, and group think are evident in the way the young elite are educated and the way their fathers behave when running corporate Ireland.

      Also fascinating is the concept that social structures exist, to effectively leave those who are outside of the cliques, outside of having any influence.

      GB – you have made a very salient point.

  29. Cleo

    Would suggest that people check out The Automatic Earth website, & also the visit to Europe – in particular Ireland – by Stoneleigh aka Nicole Foss. She is speaking in 3 venues nationwide – Cork, Mayo & Castlebar – details on Transition Towns Ireland website. This is one savvy lady, with some interesting thoughts on how we got to this situation, worldwide, & what we may be able to do.

  30. A few minutes ago, Reuters http://bit.ly/9VkiZE

    “(Reuters) – Seven European banks would not be strong enough to withstand another recession and would face a capital shortfall of 3.5 billion euros ($4.5 billion), tests run in an attempt to revive investor confidence showed on Friday.

    Five of Spain’s smaller regional lenders, known as cajas, failed the test and their recapitalization is likely to speed a restructuring of the troubled sector.

    Banks in Germany and Greece were also seen as weak spots and in need of restructuring, but state-owned Hypo Real Estate was the only German lender to flunk and state-controlled ATEbank was the only Greek bank to fail.

    Analysts had expected five to 10 banks to fail the test. As expected, no big banks failed the health check.

    German government bond futures hit one-month lows and the euro briefly pared its losses against the dollar after the results were released.

    Europe tested how 91 banks would cope with another recession and losses on government debt after the Greek crisis hit markets and raised fears the euro zone could unravel.”

    Soo, what the heck does restructuring mean?

    • Philip

      Bootstrapping – leveraging what you got left to reflate as much as you can before the next bang. Dominoes are falling.

  31. Malcolm McClure

    I wish to withdraw a comment I made concerning Irish Times economics correspondent Dan O’Brien a couple of weeks ago, having listened to his excellent address to MacGill SS this afternoon. Speaking after Peter Sutherland and Michael Summers, his analysis of Ireland’s governance problems was as clear and incisive as anything I have heard.
    At least O’Brien took the trouble to travel up to Donegal for this important meeting of minds. Apparently DMcW declined an invitation to attend, possibly because of holiday arrangements but there was some suggestion that the venue couldn’t afford his speaking fees. Did his economist’s economics preclude him from contributing to the national debate gratis on this occasion?

    • What comment? Following your paeans and FF hackery to O Donoghue and Dempsey recently, now your going for the man, not the ball, with a sneery comment like that.

      I enjoy D’s excellent articles on the basis of “Analysis is not about positive or negative anything, it’s about the truth and telling it like it is”. Fair dues to him if he can make a few bob out of it. Hope he keeps playing the ball, unlike you with a nasty comment like that!

      I believe there was a good speech from Summers up there that NAMA benefited no one except the vast array of lawyers/estate agents scamming €1.5 bn out of the exercise the banks themselves could deal with!!

      Re MacGill SS arguably its elitist and of no importance in the political scheme of things, just another Galway tent of a different sort. Sounds from your previous paeans to Dempsey and Donoghue, FF propaganda machine was out in force up there!

      • Deco

        Was Johnny Cash at McGill ? I missed that…

        Did he make commentary about some serious issue….or was he just there to redden up his whiskey nose ???

        • ivor davis

          Now! Now! you know full well that Johnny Cash spent the whole week with Kate Ann bringing home tractor loads of turf, for the forthcoming “winter of discontent”. Sure the roads down in South Kerry are coverd with the “clods” that fell off the tops of the loads. Anyway I’m sick and tired of telling that gobshite that he is overloading that “35x” ha ha.

      • Malcolm McClure

        cbweb: David is well able to defend his own decisions on how he contributes to the debate about the ongoing national crisis. My comment was intended in the spirit of clarification not censure. We bloggers don’t seek payment for our contributions here, which mostly are intended to enhance understanding of the problems that gave rise to the economic crisis and its possible resolution.

        David understandably gets paid for his books, his newspaper articles, his standup routine and his TV appearances. All this is founded on his early and widely acknowledged perception that the government’s approach to economics was unsustainable. I freely admit to mental reservations about his having founded a multifaceted and lucrative career on the worries and miseries of others. These reservations could be alleviated by a few ‘pro bono’ contributions like MacGill SS. I have been attending the school fairly regularly for about 15 years and it has given me continuing education in the arts and politics, with contributions from top politicians north and south of the border, and international authorities on the arts, including two Nobel prize winners.

        There has never been a sense that it is a vehicle for anyone’s propaganda, just a very civilised gathering of like minded people from the entire spectrum of political opinion, all intent upon learning more about the diverse range of subjects on offer.

    • Deco

      Well if that smug turkey plucker Suds showed up, then we can write the whole event off as a load of horse manure.

      I am more interested in the opinions and analysis of the people who did not attend.

      David McW, Senator Shane Ross, Eddie Hobbs, Constantin Gurdgiev, Brian Lucey, Morgan Kelly, Jim Power, etc…All the people who had interesting prognosis to provide were absent.

      Let’s face it McGill was a conference of those who failed to see this coming, (with the exception of Colm McCarthy) – and consists of the same losers telling us what to do next. All McGill was missing was Dan McLaughlin….

      • ivor davis

        Well feck it I just joined this forum and already I’m in “THE EYE OF THE STORM” and by Jasus when I find out who was responsible for snubbing Dan McLaughlin ther will be hell to pay.LOL.

      • Malcolm McClure

        Deco: Sutherland’s subject was education in Ireland, which he considered inadequate to satisfy the needs of a modern economy, an assessment echoed by other speakers from an industrial background. This diluted the peaens of praise for third level standards proffered by some of the academic contributors.
        Your list omits that Varadkar contributed this year and last year Dukes and Hohohan as well as McCarthy foretold subsequent developments. The school is a sensitive weather vane for what way the economic and political wind is blowing. It made clear that exchanging the bums on ministerial seats for those of different political colours will not, of itself, solve the intractible problems facing us all. The bottom of the recession itself has not yet been reached. Politicans and economists were at a loss to avoid this eventuality and only Diamuid Ferriter showed a spark of revolutionary zeal.

    • ivor davis

      @Malcolm, I missed Sommers, so was just wondering did he give any indication as to what information he was working off, when he decided not to deposit any money from the NTMA in Anglo Irish Bank?. The reason I am curious is that Kevin Cardiff, speaking on behalf of himself, David Doyle and the rest of the big guns at the Dept. of Finance has said that Anglo and indeed the other Banks tried to “hoodwink” them. McDonagh over in NAMA was shocked at the loan books of the Banks, even though he was working alongside Sommers for years?.
      I suppose, without trying to re-raise all the old assertions of incompetence’s, I’m curious as to, how was it that Sommers seemed to be the only one to red flag Anglo? He always came across as someone who knew more than the figures that Anglo produced for it’s annual reports.
      I suppose it would be a bit naive of me to expect Sommers to tell us all in Donegal, just who exactly in the Fianna Fail party was putting massive pressure on him to deposit money in Anglo, which was by Sommers own assertions “foolhardy in the extreme” and “not a risk” he was prepared to take with Taxpayers money.
      Michael Sommer’s prioritising of the Taxpayers best interests will be very useful in his new role with AIB, after we become the largest shareholder, before the year is out.!!!

      • Malcolm McClure

        Ivor Davis: Yes Sommers was questioned about his deposits in Anglo and was clear in his explanation. In fact he put €40 million in Anglo in contrast to much larger deposits in BoI , AIB and many of about 100 other banks worldwide. He said he was concerned about Anglo’s lack of branch structure, higher deposit and loans rates but omitted to express his personal reservations about them to the MoF etc. being wary of systematic destabilisation.
        His experience gave him a good gut feel about the viability of Anglo. This is a valuable national asset in present circumstances.

      • Hmm. Young Kevin Cardiff, from my 3 hours looking at him yesterday, didn’t look like a man with any issues at all save would the weekend BBQ be ruined by a shower or two.
        But I’m too cynical by far since the previous Taoiseach didn’t even have a Bank Account which the Dept of Finance and the Revenue hadn’t an issue with. Presumably the Taoiseachs salary was paid in cash? Or in turnips or some other tradeable commodity? Bottles of Pink Gin perhaps?
        FFS
        Joke

    • Colin

      What kind of a summer school is this anyway? What are they supposed to be studying? Will there be exams to take on completion of this school term? Who corrects the exams? What qualifications can this school confer on these students?

      In summary, why is it called a fcuking school?

      Just like the famous “Tallaght Strategy”, which to someone new to Ireland, and unfamiliar with our banjaxed ways of labelling things, they’d think it was meant to describe some new urban planning on the outskirts of large cities, whereas we know it is used to describe a period of the late 1980s where the Opposition decided to support the Government in their attempts to get the country moving in the right direction. Why didn’t they call it the “National Consensus Strategy”?

      I’m convinced people use cryptic language and labelling to conceal and obfuscate, with the media being the worst offenders.

    • Ah C’mon Malcolm. You can do better than that. We’ve crossed swords before mildly but casting aspersions about a man on annual leave (and brought the dog too) is ever so slightly sub-polar.
      Look at what I posted below from Dr Gurdgievs blog.
      I’m a great admirer of what Brian Linehan achieved under pressure in 2008 but healthy critisism (as opposed to uninformed negativity) has surely shaped, and hopefully will shape, where we are going.

      All that having been said, I repeat my position that I will beat with large sticks those who seek to muzzle free comment.

      But I still don’t agree with you.

  32. Deco

    The proposal to have tolls on N routes has been floated.

    http://www.independent.ie/national-news/plan-to-introduce-national-route-tolls-branded-absurd-2270548.html

    Actually the biggest losers out of this is the unfortunate commuter living in Carlow, Portloaise, who has to live there because of the absurd housing density that exist (Los Angeles style) in suburban Dublin.

    The next biggest category of losers is rural business who transport/export their produce.

    Where does this urge come from to tax everybody repeatedly ?

    Why can’t they stop wasting all that they are wasting ?

    What about the quangoes ?
    What about the overmanning on local authorities ?
    What about the HSE farce, with 16000 managers ?
    What about the ridiculous rules and all the consultants employed by the state to prove known facts ?
    What about the endless reporting about irrelevant minutae in the state system, often generating reports on the wrong metrics ?

    And what about just dumping ANIB/INBS/EBS ?

    • It doesn’t matter Deco. You can challenge them to do what they want and they will anyway.
      They can’t spell meritocracy. They can’t spell anything beyond two syllables after a spell in the Bar.
      Europe is somewhere that funds the expenses that pays for the little woman to go away while the other little tart gets a crack at the title.
      It’s all a game and if you’ve got no skin on that game, you’re royally cooked.
      Welcome to the house of fun.
      The world has been shafted by those taking advantage of the labours of honest people. One lad said this a long time ago;

      “We don’t need a middle man.”

      Word for word, I kid you not, Jesus said this. And I’m no bible basher, far from it.

      As religious teachings go, Islam is far more prosaic and direct so;
      “A prostitute was forgiven by Allah, because, passing by a panting dog near a well and seeing that the dog was about to die of thirst, she took off her shoe, and tying it with her head-cover she drew out some water for it. So, Allah forgave her because of that.”

      Now if our lad Gormley was involved in that little escapade, the dog would be given illness benefit, the well would be subject to water charges, the head cover would be banned and the poor ould doll would be done for propositioning.
      And then the shoe would be recycled to keep everyone happy.

  33. LONDON/MADRID (Reuters) – Just seven European banks failed a health check and were ordered to raise their capital by 3.5 billion euros (£2.9 billion), much less than expected, confirming fears the continent’s long-awaited stress test was too soft.

    Ho Ho.
    Dr Gurdgiev will enjoy the cornflakes tomorrow as will our host.

  34. Strange how a Basque bank was the only one to fail in Spain? Quite odd given young Gurdgievs analysis.
    Repositioning?
    Or neolithic preservation?
    The Irish banks must owe the Germans big time.
    Fair play to Min Linehan if he can keep this show on the road and I hope there’s some end game but I give way to our host.
    The last of the bobs now heading for Canadian Dollars unless otherwise advised.

  35. dav0

    David, I’ve been an admirer of your work for many years now and listened to what you’ve had to say, even while most of my suburban neighbours who thought they had jobs for life, working for big American multinationals; were remortgaging their houses to buy Chrome fridges and SUVs to fill their driveways.

    They told me I was crazy and regarded you as ‘Chicken Little’ with your prophecies of doom. I guess they couldn’t face up to what Lord Denning would have called the ‘Appalling Vista’.

    Funny side story from 17th century Dublin history:

    After James II abdicated the English throne in 1688 he went to France for a short time. Then in early 1689 he came to Dublin.

    The first thing he did to fund his campaign was to issue a decree that increased the value of English gold by 20% and Silver by 8%.

    Later that year after he ran out of funds, he established a mint in Capel St. Dublin where he went on to make his own coins from brass and copper. This was originally intended to be a stop-gap measure, as he intended to convert them back to silver once he regained the English throne, of course that never happened.

    After he ran out of brass and copper he started to make coins from tin and pewter.

    By royal decree, he seized two brass cannons from Dublin castle.

    In 1690 he resorted to making coins from gun metal and broken cannon balls, this led to the adoption of the phrase ‘gun money’.

    The situation became so bad in 1690, that all half crowns were re-called and re struck as crowns and all other coins were reduced in size to save metal.

    After James lost the Battle of the Boyne. The mint came under the control of the Williamites and in early 1691 the currency was declared worthless.

    The first time I read this in Frank Hopkins’ wonderful book – Hidden Dublin – Deadbeats, Dossers and Decent Skins,
    I thought that it was a cute and laughable Dublin story but it now appears more to be a valuable lesson form history about
    the fate of ‘Fiat Currencies’.

    Now I’m not an Ayn Rand apologist but a few years ago read I Atlas Shrugged. One thing that stuck in my mind was the
    phrase: “So long as men live together on earth and need means to deal with one another–their only substitute, if they abandon money, is the muzzle of a gun”.

    In Rand’s mind, the only true money was gold. In the light of the story about the Jacobian mint this phrase assumes a
    poignantly ironic twist.

    I’m not a historian or an economist, I’m an engineer. In my job, I have to deal with truths and facts to get things working. I can’t resort to half truths or propaganda, the things I design either work or they don’t; simple Boolean logic.

    We all know who the deadbeats and the dossers are (the government). The big question is: Do we have enough decent
    skins left to take care of this mess?

    David.

  36. mediator

    Deco

    Jim Power has managed to reposition himself as though he called the boom for what it was (revisionism at its best) whereas he was one of the touts who kept the boom fueled. (See his debate with Morgan Kelly circa 2007 for example). That said he’s entitled to
    change his position however I wouldn’t mention him in the same sentence with Kelly, et al…

  37. Morning, thanks again for all the comments. Regarding the bank stress tests they remind me of the Flann O Brien proposal to give everyone in the country a degree at birth and thereby do away with the need for universities. This stress test is a version of financial “grade inflation”. i expect the markets to sell off as a result.

    David thanks for the stuff on “the Dublin Debaser”!

    Malcolm, regarding me and the McGill School – I am not in the country at the moment which might explain my not speaking more easily than any reference to fees etc. You might be aware that there appear to be many people in Ireland who try constantly to knock me – sometimes the charge is greed as in this case, sometimes it is other so-called personal failures, it is rarely on my record.

    This time the real and unfortunately very ordinary reason for my not being there is that I am taking a break with my family.

    BTW It seems to have been quite a shindig…..not really my style if the truth be known and I have some smypathy with Deco’s comments above on that jamboree. I’d prefer to remain outside that particular tent.

    All the best David

  38. I have to agree with Mediator on that last comment. I could cite all sorts of examples with Mr Power over the boom but – it would be ungenerous.

    One last point Malcolm, as far as I know I am the only economist in the country who truly works for himself – no university, no institute, no bank, no financial consultancy, no government quango – pays my wages. I have chosen this path for a reason, believe me, I would have had an easier life had I stayed in investment banking ten years ago.

    In fact, I could have taken up many of those reasonably comfy jobs over the years but I have chosen no to. I remain a freelancer i all things I do takin a fee and living by the quality of the work. If the work is not good, I will not be paid.

    I am happy with my decisions but I might ask you of all the speakers at McGill can you name one who gets up in the morning and says to himself where will my wage come from at the end of this week?

    Tell me how many who preach the free market actually live the free market? It is easy to lecture when others you are on a public salary like many who speak at these type of gigs. I suspect if you put most of them out into the real world on Monday, few would be able to figure out how get paid for their talents.

    I don’t seek praise for the way I live, but I am just makeing it clear that this is a choice.

    And btw on a lighter not, if you have any ideas about how we might get paid this week, gimme a shout!

    David

    • Tull McAdoo

      Patrick MacGill better known as “the navvy poet” after whom this gathering is named was forced into child labour at age eleven among the “big houses” in the North West. etc. When he reached a certain age he joined the rest of the Irish “work whores” picking potatoes in the field’s of Scotland, while the Scottish working class went on to bigger and brighter things in the mills of Glasgow etc.
      He was frog marched into the British Army to defend their dwindling Empire during the first world war, and took a bullet for “her majesty” the poor bastard. In the end he left these shores and died in exile in America, another of the many diasporians, and would have faded in the memories of many if it were not for the fact that “certain people “ in this country like to organise festivals and what David calls “shindigs” as an excuse for a good booze up in the pubs and a meeting place for insulated “insiders” to tell each other “ how different we are” and “ how proud we are” “and how everybody in the world loves the Irish”………
      Mary Coughlan for all her failings at least got this bit right when she said “ at least when they go THIS TIME sure wont they be better educated, and sure wont they be better able to manage”
      Now folks there ye have it, time to wrap the green flag around ye, as the Autumn is drawing in.
      P.S. David Mc Williams take note that I do the Flann oBrien references around these here parts, LOL.

      • Deco

        Tull – the biggest imapct that Calamity has made since leaving has been that the IDA have got their act together.

        Calamity is now in charge of a put together ministry whose main function seems to be to prevent any interesting information entering the public domain concerning FAS. And especially the fact that former FAS boss Rody Molloy is longtime pal of the Head Biffo, and even is a Biffo himself.

        Thanks for the information concerning Patrick McGill. I get the feeling that if Patrick McGill was invited himself, and if he looked at the invite list, that he would probably declare the whole thing a load of nonsense. Most of them have no similarity or understanding of the type of life he lived, because they have no consideration of the lives of ordinar people today – except to produce patronizing platitudes, and lecture you ‘for your own benefit’ (on topics that ‘you would not understand’ like NAMA, Anglo’s ‘Business Plan’, the Knowledge economy, etc….).

        There is something hilariously amiss about the whole thing.

        • Gege Le Beau

          Elites like to play cames because they can afford to. They called the business section in the University of Limerick, the ‘Kemmy Business School’..

          As for McGill, something of a would be intellectual side show, place to be seen and picture in the paper as Leo Varadkar and others achieved. Dan O’Brien had a recent article in the Irish Times about cutting the old age pension, if you want to pay and listen to that neoliberal stuff then be my guest. Some time back, Rudy Giuliani showed up in Cork’s aptly named ‘Imperial Hotel’ where the local ‘business community’ (a community all of its own, as oppose to the general community where most of them derive their profits) coughed up 2500 euro for a ‘business breakfast’ (so no ordinary breakfast then).

          We know Bertie’s speaking fees highlighted by the The Times and later used in Fintan O’Toole’s Ship of Fools (the Celtic Tiger talk in Honduras), a country I had visited but because of neoliberal/Washington consensus policies, a country of extreme wealth and dire poverty and too unsafe to walk around in the evening, so we remained ‘Green Zone-esque’ in the Hilton like prisoners for a New Year’s celebration with a Honduran elite who refused to acknowledge our existence.

          As for David and the accusation of a no show, he is a former investment banker/economist, he is I suppose not unfairly characterised as a ‘media economist’ if that is not too unkind, with books, articles, TV show, interviews with H. Clinton, Bono and Noam Chomsky (an unlikely trio if I ever saw one). David isn’t Che Guevara. He said it himself, if he wasn’t doing this malarky he would be back in private business, he didn’t say he’d be off to Nicaragua to assist the Sandinista’s or Chavez in Venezuela.

          I wouldn’t agree with all David’s statements/articles, I do not believe in regulating the beast, I believe in an entirely different way or organising the political economy/society. I find the contradictions interesting but I accept them because I am aware of the context in which they come, I have no illusions in that regard. Appearing to ‘rail against the system’ and appear on RTE/PRAVDA in relation to something like Farmleigh, which was a fine gathering of insiders not seen since the Trilateral Commission meeting, can leave one open to obvious charges, of which the ‘fee’ would be the least of my concern.

          I did reflect on all this and wondered if I would put my energies somewhere else, but decided it is better to have David in the game than to shoot the messenger, despite my reservations.

          Enjoy the holidays David.

    • Malcolm McClure

      David: Like you, I am an ‘ideas man’ rather than a team player and made my living though valid analysis rather than implementation. One of the buzz phrases that emerged from MacGill was IDD or Implementation Deficit Disorder, which is a characteristic failing of my Irish psyche and of our body politic (by contrast with the Anglo Saxon and German approach).
      I have a high regard for your analytical powers and their vigorous and rigorous application in several fields that entirely justify your earned income, so greed is not an issue.
      Politics, like management, is about implementation or getting things done. This requires networking with all sorts of pleasant and unpleasant individuals so ‘ideas people’ are often regarded with suspicion or contempt by ‘roll up yer sleeves’ individuals who consider them to be aloof from the hurly burly of the streets where real life happens.
      Others here have commented before on the sparseness of step by step solutions to this economic mess that you put forward. Practical people require a realistic plan. Avoiding opportunities to network like MacGill distances you from the very limited pool of people with a grasp of what is needed.
      If honorable people avoid careers in politics, how can politics be an honorable profession?

      • fair points malcolm, maybe i am too much of a loner for my own good.

        that said, i don’t regard my putative solutions as sparse, in fact by doing allowing the gurantee lapse as i advised lenihan on that fateful night (2 years max. if you go back to the articles i wrote in the 10 days before to guarantee you will see what the gurantee was suppoed to look like) then doing a serious deal with bank creditors, making anglo’s bondholders/creditors shreholders in a new bank, we have the basis for a plan. what they are doing now is not a recovery plan but a debt servincing plan.

        but my ideas would attack the insiders in our system first, deploying economics as a vehicle for social change. maybe that reason me and the politicians don’t hang out together!

        best D

  39. DavidMcWilliams – timely spoken and it clears the air among most of us .It would be nice if sometime you might consider a special day somewhere for a Forum Tea Party so that we might all have a cup of tea and a biscuit and a chat .I think furrylugs will not be short of ideas and just might have a nice place in Co. Cork for that special moment.

    • Thanks be to God the new site is back up to speed. That was a mighty exchange of views.
      There’s more honest intellectual debate here than in Leinster House.
      All are welcome to Iarthair Corcaigh should the need arise.
      Even the economic dog.

  40. Deco

    {
    Tell me how many who preach the free market actually live the free market?
    }

    Correct. Most of them are institutional yes-men. The most glaring episode was Dan McLaughlin’s outburst on the wage levels and Irish Ferries a few years ago. Dan is now technically a state employee. And when the next election comes, I will demand that all candidates tell me if they want to let him loose into the private sector of which he is continually talking about. I can tell you, his ‘analysis’ is something nobody would be willing to pay for if they have a choice.

    David – most of us here, and many others who read and do not comment, or who comment on similar websites, have realised that the there is something missing in the institutional state and the IBEC part of the private sector. And that is integrity. Irish people are waking up and realising the difference between reality and make believe (the official story).

    And we have a choice. Our choice is to decide which side will win. That is the intellectual battle of our era.

  41. SLICKMICK

    Had a look @ http://www.bankofireland.ie
    Not even 1 vacancy in their careers section!.Shows how completely screwed they/we are.www.bankermathews.ie has added some excellent new recent material.

  42. Gege Le Beau

    There is nothing ‘free’ about the ‘free market’, just like there is nothing ‘common’ about the ‘commonwealth’ nor democratic about the current Irish Republic, they are just words designed to deceive. We know from our economic history that Britain and the US built their economic might on protectionism, forcing there way into markets using the bayonet and battleship, destroying any competition (the destruction of Indian industrial and maritime might being an excellent case study), and this protectionism still exists, there is no such thing as free trade or the free market, it is Orwellian double-think and I wish people would stop invoking it as if it meant something.

    As many have pointed out the Irish State is a plutarky (combination of plutocracy and oligrachy), it is certainly not a meritocracy. In Ireland your birth determines a great deal, there are exceptions to the rule, but largely the circumstances you are born into, the school you go to etc determines the road you travel. If you are fortunate to be able to afford college well that can change things (open access is once again under attack), but still people go abroad to make it faster, arguably, than they would in a country where the status quo is cherished and protected.

    J. J. Lee in Ireland 1912-1985 documented the forces at work extremely well, the church, the politician and the merchant/’professional’ classes, and it is largely the same today, except maybe the boom period spread the money in places it would not normally have found itself (tradesmen, small builders etc) but now we are back to lock down, you can see it in government policy, the enormous fees to be collected from the running of NAMA by the same class of people who played a major role in the downfall of the Republic.

    The same insiders who turned a 50-60 year blind-eye to institutional child abuse on an enormous scale, turned a blind eye to wholesale political corruption, and to finish the golden triangle, financial fraud on an unprecedented level.

    The Republic is indeed dead and there is something rotten at the core, that rot has now spread its octopus like tentacles around the entire society and is squeezing those who previously had the comfort of staying out of the dirty games, living honest, decent lives.

    I come back to the fundamentals, we can write about the fall out, who did what etc but until we deal with the causes we will be condemned like some Greek tragedy to repeat these scenarios over and over again.

    I know you like to draw historical analogies David McW, Simon Schama (who has sadly lost it with his hero worship of Obama who looks increasingly like a one term President/CEO) has an interesting study of the lead-up to the French Revolution which might be worth looking into, while in the documentary ‘The Trials of Henry Kissinger’ based loosly on Christopher Hitchens book of the same name, a Professor of Law comments: ‘that when it comes to Revolutions, what seemed impossible one day becomes the reality the next’. We need a political, economic and social transformation in Ireland, it may come after the second and more serious wave of the recession (depression in Ireland’s case) hits these shores.

    The Trials of Henry Kissinger
    http://www.youtube.com/watch?v=OpMuH0FYmCk

  43. mmitche1

    Hi all,
    Please correct me if I’m incorrect here. If Irelands money creation mechanism is the same as the US then here’s how money is created.
    1. F.O.M.C. approves purchase of US bonds on open market
    2. Fed Bank purchases bonds from whoever offers bonds for sale on open market.
    3. Fed bank pays for bonds with electronics credits to sellers bank, these credits are based on nothing.
    4. These credits are used as bank reserves by the banks, the trick is that, because of “Fractional Reserve” banking rules, the bank can loan out 10x the reserve to borrowers at interest.

    To sum up, the Federal Reserve bank creates 10% of this “money” out of nothing and the banks create the next 90% again out of nothing.

    Now, if irelands central bank is privately owned then the above is how money is created. Take Anglo Irish bank, apply the above, and hey presto you have countless billions that Anglo created out of “Fractional Reserve” banking rules, which “don’t exist in any legal tender way ie no currency was printed. Also, note that deposits are also treated as reserves, which can also be multipled by 10 and loaned out. So, when this pyramid scheme fails, as it has, the taxpayer doesn’t realise that he/she is liable for “all” of Anglo’s losses because the virtual money that Anglo loaned out will have to be honoured within the banking system.

    I’m hoping that my above assumption re money creation is incorrect. So, if you are privvy to the Financial Structures in Ireland please answer the following:

    a. Is the Central Bank privately owned as is the case with the Federal reserve bank.
    b. Can the Central Bank create money as above ie buy bonds with imaginary electronic money and make interest on these bonds….

    • Hi mmitche1, As far as I know, Ireland’s Central Bank is distinctly different to the Fed, others can give the technical details but some items on the list of its defining functions would be as agent of the the European Central Bank http://bit.ly/bqobVI It has been so since the 70′s. This contributes to our woes at present because tied to the euro, we cannot as before do some quantitive easing or devaluation of our own currency to ease our burden, as we could before joining the euro; however, given the extent of our woes, I’m not convinced that would by itself solve our current problems. The ECB, on the other hand, functions very similarly to the Federal Reserve and can manufacture, print money, as part of a fractional reserve system in the way you describe. EG the money made available up to €750 bn as a slush fund to support the euro recently, the ECB did say this was funded out of the selling of collateralised assets, but I’ve not seen any details of this. My opinion is the ECB can print any money it wants out of thin air, so long as the markets can bear it but e.g. print too much gives inflation, but inflation can be used to run off debt and, falsely give the pretence that EMU is on the rebound, turning the corner, if you will.

      I’ve a simple picture of this simple though abstract concept you can see here in the following analogy:

      Trichet/Merkel et al:

      De markeets are up dee sheets, what will we do?

      Trichet/Merkel et al:

      Ve vill stress test ze banks and prove they are great, no?

      Trichet/Merkel et al:

      But ve have no money, zee banks have no money. Dey got 800,000 unsolden housen in Espana and zzee Savings Banks in Espana are fookede. De Gricks worsen.

      Trichet/Merkel et al:

      No problemo, we can print any money we want out of the Cote D’Azur air and lent it to ze failen bancos broncos.

      Trichet/Merkel et al:

      But zee marketos will no believen us! Dey no buy this loonnz bizness no moré!

      Trichet/Merkel et al:

      Fools, that is why we need ‘The Magnificent Seven’ bancos. Zey vill die for euro and save us euro willagers and our wages!

      Trichet/Merkel et al:

      We do dat, all then. We tell all be confident, tell ewerybody be confident, we all be conhident, we laughing to ze banks, no?

      Trichet/Merkel et al:

      We wait till Monday to see if zey buy it. Fed print money, they allow us print money, Fed have all the oil, everybody happy. We enjoy our holiday then, No?

      http://bit.ly/X6RJ

      2 yrs later in the tunnel of debt:

      Trichet/Merkel et al:

      We better releave fast, here comes C(L)owen.
      They have no gas, no electric city
      Dday are taxing ze foootpats!
      Nobody buyin zzzz Nama properteye….

      We will send all our rubeech to him
      He has Gormless De Incinerator with him
      He will burn anything for him….

      Oh shheeet, there’s Lienihan
      With another Anglo buzziness plllan
      We have no more moon eye to give him!
      Lets scram!

      • mmitche1

        Thanks cbweb, zat vas very enlightening…

        So, the ECB creates 750 billion out of nothing which is loaned to european govts through the purchase of bonds ie our exceptionally smart govt sell lets say 24billion of irish govt bonds to the ECB who pay with 24billion (yearly deficit) from ze 750billion slush fund of virtual money. The Irish Govt ie ze people, are now an extra 24billion in debt to the ECB and have to pay interest on principal that didn’t exist!

        So, we’re back to the same situation, all money created by the ECB is created from nothing and debted to each of the ECB idiot govts. Therefore, price inflation is created similtaneously with increased govt debt. (which we repay through cost cuts and increased taxes). So, this is a spiral from which governments will never break free as money is created from debt (interest charged to govts), then multiplied 10x (or more) through fractional reserve banking with interest again charged to borrowers. Therefore, isn’t it obvious that there will never be enough real money in the system to even pay the interest?
        This fuels the boom bust cycles which are constantly going on world wide over the last 100 years.

        So everything points back to the ECB as we’re all going to end up owing a frightening amount of extra money to it, conservatively at over 100.000 per irish worker. I note from:

        http://endtheecb.ning.com/forum/topics/behind-the-private-central

        that the following banks part own the ECB

        —————————————————
        Owner of the European Central Bank :

        Bank of Germany (23,40%)
        Bank of Sweden (2,66%)

        Bank of French (16,52%)
        Bank of Austria (2,30%)

        Bank of England (15,98%)
        Bank of Greece (2,16%)

        Bank of Italy (14,57%)
        Bank of Portugal (2,01%)

        Bank of Spain (8,78%)
        Bank of Finland (1,43%)

        Bank of Netherlands (4,43%)
        Bank of Denmark (1,72%)

        Bank of Belgium (2,83%)
        Bank of d’Irleland (1,03%)

        Bank of Luxembourg (0,17%)

        —————————————————

        Therefore, the ECB is part owned by the Irish Central Bank (privately owned?). This ECB creates money from nothing and “lends” this virtual money to us “at interest”.
        Quoting another poster earlier in this thread “the irish central bank is privately owned and made 950million last year but the owners of the Irish Central bank are not published anywhere”. Sorry if I’ve misquoted you but I couldn’t get back to your post so please correct me if I’m in any way incorrect.

        This closes ze loop.

        Now if European Govts wished to get rid of govt debt in the morning, here’s how to do it.

        1. Issue real money (similar to the greenback in the US) which is “not” based on debt ie no govt bonds.

        2. Slowly print real non debt money to replace the virtual money created by fractional reserve thereby paying down all european govt debt within a year. Zis vould be ze end of ze boom/bust cycle und also inflation vould never again be a problem.

        3. Shutdown the privately run central bank monopolies which are pushing our govts into debt using virtual money which is actually diluting the existing money supply.

        Checkout the following website:

        http://www.themoneymasters.com/faqs/

        Now, be truly frightened for your future!!!

  44. Tull McAdoo

    Another golden parachute spotted over Dublin.David Doyle of the Dept of Finance it seems bailed himself out of the firing line, after they bailed the Banks out of course. Why the big payout? maybe its like the add say’s “because I’m worth it”. YEA RIGHT.

    http://www.independent.ie/national-news/bailout-mandarin-gets-euro725k-topup-2271781.html

  45. oe1

    Fair play to DMW who keeps the topic of the banks in the public eye. If nothing else comes out from this crisis it will be the education of wider public to keep a watchful eye on them. Can I propose this to be taught to everybody in schools so that our mistakes wont be made in future. There would be a very useful project – and could provide gainful employment!

  46. Tull McAdoo

    I have a question which might seem strange at this point in “de proceeeedins” as the ditherer from Drumcondra use to say and it is this.
    If Cowen and Linehan approved the payment of some 18million Euros to thwe likes of Merrill Lynch, KPMG etc. for advice that they did not take or use during the Guarantee deliberations, then what the hell do they owe David Mc Williams for his advice which they did take and use i.e the 2year blanket guarantee. My advice to Daithi is to submit an invoice to the Dept. of Finance for 30 million Euro’s.

  47. Tull McAdoo

    Maybe Flann OBrien was only half right when he suggested giving everyone a degree at birth so that we could do away with the Universities. Maybe everyone should be given a “bailout voucher” at birth also and not just Roddy Molloy, David Doyle, Goggin , Sheehy, Fitzpatrick, Drumm(1) and Drumm(2) and on it goes….

    What annoys the hell out of me Furrylugs is these clowns in the DOF who were happy to sit back and watch this property porn, and dish out the proceeds to every class of an un- accountable whore who stepped up with every class of a half baked idea etc.Invoices for whatever was the order of the day.
    Now their new mantra is “austerity” because its all they know, given that they dont know how to create wealth of any sort. Usless fuckwits.
    So there you have it Furrylugs these gobshites have led us from “property porn” to “penury porn” and all the while they are completely insulated from the effects of their own decisions. They are great at making the “tough decisions” as long as it does not impact on them or their families.

    I mean does anybody have the faintest idea where in the name of God the 30 odd cement mixers that Fas ordered down in Athlone ever went to or were they even bought at all. Did they fall into the same hole as the famous car for the draw that never was. Is Calamity going to sort this shit out for once and for all. Does anybody up at the MacGill summer school know anything about cement mixers, because it was a great joke going around here in an Irish pub here in Perth.” to loose one mixer is unfortunate” ” to loose 30 odd i would put down to negligence” Oscar would have a field day with this stuff.

  48. There’s a classic one here this morning, even better than the mixers.
    There’s a call by someone or other to create 5000 jobs in renewable fuels such as hydro and biomass. Cork County Council is cited as a potential winner from energy savings.

    All good stuff you might say but here’s the rub.

    A local energy company designed a pair if hydroelectric schemes which would be more efficient than the Carrigadrochid and Inishcarra dams, generating oodles of green power, construction jobs locally and ongoing maintenance roles.

    Cork County Council refused planning permission.

    Whatever about the banks and high finance, until we have reform of a system that allows inherent non-risk takers control of the entrepreneurial job creation market, we’re going nowhere.

    Some of the best business brains in the world, those that are left that is, hob-nobbled by State sponsored Clowns of Fools.

  49. Deco

    Furrylugs, and Tull made some comments that are very relevant.

    Furrylugs – the applicants were not sufficiently well connected. Same crap, different scenario. This is how Ireland has been operating for along time. I don’t know how to dismantle it. But the poll from today’s Sunday Indo suggests that something like 95% of those in a poll of those who bothered to make a point, are now against bailing out Anglo.

    Was talking last night. Heard a story about a solicitor working in a busy law firm. Has been in the family law/marital breakup area for the last five years. There are a massive number of marital cases in process at the moment. There are many complex and messy scenarios. And a lot of head wrecking arguments. But here is the interesting aspect, for a society that was obsessed with property over the past fifteen years.

    Because most of these former relationships have a third party. The mortgage. And the debt, has not gone away, you know.

    In the end of the negotiations, both parties end up in the same house. Maritally seperated. Loads of emnity between him and her. Often with kids also, but these are small kids, below the age of five. Both are arguing over all sorts of incidents. And perhaps one or even both, drifting into new relationships.

    And it is very very messy.

    They cannot sell the house, because the negative equity hit is beyond either of them. Basically, on top of the legal case over the collapse of the relationship, comes the ultimate insult to the pride of both parties. The fact that the mortgage was excessive. Another decision founded in bright optimism that has disintegrated. And there has been a fair amount of pride having been knocked. Because there was a time when a decision was made to be loyal to a marriage and to a mortgage. And the mortgage is something that you cannot walk away from. It used to be the other way around. But this mirrors the fall of the power of institutional religion and the rise of business institutional power. Lifestyle debt is often a big source of discontent – and a source of fees for the legal teams because it prolongs the arguments and the case work.

    But the real fascinating point is the way that both parties are stuck on the long term economic value hope trajectory. A bit like the country as a whole.

    • Malcolm McClure

      Deco: You have raised the most serious issue of all, the breakdown of family loyalty caused by failures of governance. This will have major resonance for future generations long after even NAMA debts have been paid off. There will be a huge rise in the number of children in care, and who will look after them? Footloose new partnerships moving to other places; neglected farmsteads, public service breakdowns, unemployment.
      Time to re-read ‘The Grapes of Wrath’?
      Will Ma and Pa Joad stick together this time round?

      • Deco

        Malcolm – I am not blaming the lazy clique driven regulatory bodies are directly responsible for the increase family breakup. There are often other factors. But, the binge economy, loose credit environment and loose regulation created a higher probability that it would occur, and made sure that when it did happen that it becomes very complicated.
        I am blaming them for increasing the misery level, and indoctrinating the people with the “manufacturing of consent” via advertising, lifestyle indoctrination and debt build up.

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