November 10, 2010

Government must cut deal that gives the people hope

Posted in Banks · 225 comments ·
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In the back of The Tavern on Castle Street in Carlow last Saturday night the lads, under the watchful eye of proprietor Sean Furey, were downing large bottles of MacArdles.

Apart from a recent local incident involving the slaps given out to a young fella from Eire Og, top of the lads’ worry list was the IMF and what they might do to you.

The conclusion, well into the night, was succinct — “d’IMF will be the new ‘Tans”.

When lads in The Tavern in Carlow are discussing global economics, you know that the world has changed. In fact, their conclusion, painting the IMF as an occupying force, may well prove more in tune with the populace than the over-the-top welcome given to Olli Rehn by the Irish political elite — many of whom were directly party to the destruction of the country.

In fact, the elite’s al fresco sycophancy towards Rehn was a lesson in unrivalled post-colonial forelock tugging and it reveals what path the elite is likely to take in the next couple of months. That path can best be summed up by “what do we have to do for you to love us”.

The fact is that Rehn will not save Ireland. On the contrary, he will use the Irish people to save the German banks.

Let’s cut to the chase to see what is really going on here. Ireland’s banks owe German banks alone €127bn. Looked at from another perspective, the German banks are in the hole to Irish banks and developers to the tune of close to 90pc of Irish GNP. By rubberstamping the Irish elite’s bank bailout, the European Commission has saved the reckless German banks — who don’t deserve to be saved — and punished the ordinary Irish citizen, who doesn’t — in the main — deserve to be punished.

Rehn knows that the credibility of the euro rests in the Commission preventing a bank default or sovereign default in Ireland; but the choice facing the country now if we do nothing, is either we default eventually or, worse, we experience a slow run on the banks as the middle classes take their money out of the banking system because they simply do not trust the authorities any more.

Only by negotiating a restructuring of private debt can we avoid this eventuality. But it can be done.

The ‘bank crisis’ that lead to the guarantee being introduced is still rumbling on. Financial crises tend to come in waves. This first wave was a bank-funding crisis sparked when the German financiers panicked and refused to lend any more to the Irish banks. This turned into a debt crisis caused by developer loans going south. Now we have the third wave, the coming domestic mortgage crisis.

Let’s be clear, this is all one big crisis. As each domino falls, the desperation of our situation becomes more obvious. But once the first domino (the bank funding crisis) had fallen, there was no stopping the process. The guarantee was supposed to make this process easier. The endgame is always an unpleasant deal with creditors where they lose. We could have used the guarantee to do this, but we chose not to. Our elite chose to pay every cent to delinquent lenders.

The first wave of the crisis, the bank funding crisis, used up all of the Government’s reputation and credibility. The second wave, the large borrowers going bust, used up all of the Government’s money. The third part, the residential mortgage crisis, is going to use up what’s left. But the Government has no reputation left — they can’t offer another guarantee because it will not be credible. We all know they are broke, so they can’t offer a bailout.

So, what does that leave? There are, believe it or not, several options still open, even at this late stage. We can decide that the mortgage holders who are in trouble are being rightly “punished” for their sins. Last week, this column tried to make it clear why this ‘do nothing for the little people’ policy will lead us all into the mire.

By doing nothing, we will condemn our whole society to years of zero growth, depression (the psychological kind, as well as the economic kind) and mass emigration. The generation that the Irish State would be giving up on, reacts by giving up on Ireland.

All the while as the Government’s bankruptcy is laid bare, the middle classes with savings will panic and get their cash out of the country.

If we want to avoid a bank run we have to give some form of debt amnesty. It might be that the banks would have to write down the value of outstanding mortgages before they are defaulted on, rather than after. It could come through changes in the mortgage contracts so the mortgage becomes tied to the property rather than to the borrower. It could even come through changes in our bankruptcy laws so people who are in dire straits can draw a line under their past and have some chance of starting afresh.

Currently, none of the alternatives are being discussed. Yet it is clear that people are struggling with their debts and as time goes on, more will fall into the trap. The Government’s excuse for inaction is that writing down the value of mortgages will leave the banks in more trouble, and by extension, the Government.

This excuse might hold water, except for one thing. The write-downs are going to happen anyway. Whether the Government is willing to admit it or not, there will be mortgage defaults in Ireland. Ignoring the problem will not make it go away. Dealing with it is the only solution.

But won’t moving more debt on to the national balance sheet just make Ireland’s situation worse? Yes and no. True, government debt will grow bigger when it has to bail out the banks again to cover the mortgage losses, but it is important to remember that this debt already exists in the economy. We will just be moving it around a bit through some creative accountancy (and anyone who read the government press release last week on the promissory notes will know this Government is not afraid of a little creative accountancy).

Of course, this will put more pressure on our bonds, as government debt would rise again, but not if we did a deal with our creditors to restructure all our debt at the same time. The deal with mortgage holders would be paid for by a similar but more severe deal with the creditors. The fact that the main creditor is now the ECB, actually makes renegotiation easier. What bit of “lender of last resort” does Mr Trichet not understand? In fact, what bit of “bank run” does he not understand?

There is a deal to be done which puts the Irish people first. It is not the deal that Rehn came here to do, but it is the only deal that will give the average Irish person hope. And if politics isn’t about hope in the future, what is it about?

David McWilliams hosts Ireland’s first economic festival in Kilkenny this weekend. www.kilkenomics.com


  1. adamabyss

    subscribe.

    • shtove

      Why is DMcW so obsessed with German bankers? The biggest hit on default would be RBS ie. UK taxpayers:

      “THE UK would be facing the biggest losses if Ireland, its banks or mortgage borrowers defaulted on billions of euro in debts, economic statistics show. The UK’s total exposure to Ireland comes to $230bn (€186bn), far higher than the approximately $175bn exposure of Germany.”

      http://www.independent.ie/business/irish/uk-banks-exposed-for-230bn-on-loans-in-ireland-2227308.html

      Sterling not looking so hot now, is it?

    • shtove

      And here are some comments from the best blogger of the lot, Calculated Risk:

      “My guess is if Ireland accepts aid, then Ireland’s bonds will rally (and the yield will fall sharply) – however this will probably lead to a “buyers strike” for Portugal’s bonds. And then Portugal will have to ask for aid. Then Spain and / or Italy would be next in line … and I think that is the real concern …”

      “This reminds me of the weekends during the financial crisis. The situation is constantly changing …

      “If a deal is announced, I expect to see the yield on Portugal’s bonds increase sharply – and Portugal needs to borrow soon, so they will be next in line for the IMF or EFSF.

      “Also, I’ve seen several comments from the Irish leaders that the “sovereign” doesn’t need cash. Sure – they don’t need to sell bonds right now for the “sovereign”, but they might have to support the banks if there is a further funding problem.”

      http://www.calculatedriskblog.com/

      It’s a feeding frenzy. Get out of the water.

  2. Deco

    Will comment later on the article. Sorry for going slightly off point, but this is in reply to the first news on the garda inquiry into Anglo, in a long time.

    Just seen this link.
    http://www.independent.ie/national-news/anglo-told-to-sue-exstaff-over-password-obstruction-2415302.html

    What does this mean ? Well, presumably it means that employees in Anglo were breaking the law, behaving recklessly. In all probability with the consent of their superiors. And they know that they cannot be forced to provide their passwords.

    There is a garda team investigating what was going on. And this is the real news, as such….

    “It is understood to be examining 10 strands of illegal activity at the bank.”

    This means 10 different paths of ‘funny business’ were in progress. Up to now, it was officially admitted that there were two – Seanie’s loans in INBS, and the Anglo-Permo loan. Now there are 10.

    Would this be the evidence that directly implicates some of these people, and their developer pals ?

    I have heard rumours about Anglo Banglo. Rumours about loan executives who seemed to report to builder-speculators as if they were their own superiors.
    About ‘incentives’. About high level priveleges provided to loan executives in Anglo, by customers. “Prime-time Investigates” touched on this with evidence of the bill for a function involving Anglo executives and developers at a posh restaurant.

    And somebody made the comment a few weeks back that the excessive confidence, and crazy behaviour eminating from professional circles in Dublin, came as a result of cocaine addiction. Rationality was not as much of a factor in decision making as it should have been. The implosion was an inevitable result.

    This reminds me of the Annabels Case, with the wagon-circling that is going on.

    • These files could easily be accessed with the right expertise. They are being used as an excuse for delays. If justice is delayed sufficiently it is not served at all. The file password excuse is a red herring.

    • Its well known that most of these guys are off their heads with Coke.

      I find it hard to believe that the guards cant find anyone to crack the passwords.
      Password cracking is a challenge but someone with the right knowledge can do it. Someone like me for example :-) who is a computing grad who received his education from the state for free – would be only too happy to open up this can of worms and do his little bit for Ireland. Maybe it would also send some of these criminals to jail. Then again we have justice for the rich and porridge for the poor in Ireland don’t we? I notice how Vinny Broon touchy when people start to question his beloved legal system.

      Things are getting more interesting every day and the heat is rising.
      Realising that the Irish people have woken up gives me hope. The boys in Carlow are proving that once you push the Irish too much then you had better be prepared for a storm.

      The cancer of crony 1950s conservatism is about to gouged from the Irish consciounsness once and for all. It might take a generation but it will happen.

      As for Rehn I would have sent him homeward to think again with a flea in his ear as he is no friend of Ireland and is merely a wolf in sheeps clothing. As for Lenihan being subjected to monkey calls at the conference call David mentioned on Vinny last night I think this is bang out of order. I dislike FF as much as the next person but I won’t have this. By insulting Lenihan they are insulting us all. Funny how RTE never saw fit to mention this disgraceful behaviour.

      There is one phrase the Irish need to learn and make more use of:
      Who the fuck do you think you are?

      Good luck with the festival David and thanks for telling it like it is.

      • mcsean2163

        You guys are crackers.

        Pretty Good Privacy is free and provides AES encryption. 256 bit AES is still virtually uncrackable.

        Each document should have a different key.

        If they were trying to encrypt their documents so that nobody could crack them, then it wouldn’t be that difficult but it would be incredibly different even to crack one document.

      • BrianC

        Vincent Brown likes to pass himself off as a radical incisive go getter journalistic editor. But the truth is he is conservative all the way to the core of his being and just one of the pack. He serves their purpose pretending to execute penetrative journalism, pure window dressing.

        He also promotes himself to be very intellectual capable of getting to the core of matters but I would beg to differ. When he interviewed the Minster for Finance Brian L recently he was not up to much and more like a schoolboy, in fact to put the truthful words on it rather pathetic.

        The behaviour of the Govt and the opposition in their dealings with Rehn is pathetic and offensive to Irish citizens. You description of a wolf in sheeps clothing is on the mark and if there was a man amongst the timid Dail they would have sent him back with his head on the ECB spike.

        • I agree with you Brian.

          I have seen through Vincent Browne and now believe him to be a smoke screen fabricated to make us all believe that this country does serious debate,. It does nothing of the sort. For example they dont mention the Eye of the Tiger group that are mentioned in the link from Deco below. This is potentially explosive stuff because it might explain what is really going on in Ireland. More importantly such a trail will make people realise that the world really is run by psychopaths and financial terrorists.

          Now that everyone has decent internet connections it should be possible for people like DcW to get together and operate an independent media operation that creates real news about economics and Ireland in particular. Speakers from all over the world could be invited to talk over broadband and the sessions recorded, edited and put online to educate and inform the nation. If you are in the business of educating people then it’s better to do it properly.

      • Deco

        You know that problem of the files that cannot be decrypted would be solved if them left them on the net, and asked for volunteers to break copies of them.

        That very action would make some of these reluctant authors more accomodating to ideas like transparency, and respect for what is not taxpayers property.

        • Gege Le Beau

          Think online, independent media is critical, been calling for independent media for years, would love to see it develop, http://www.democracynow.org/ – good example. Must be easy enough to set something up online, wonder how the licensing laws would work in that regard, wasn’t there pirate radio in the 1980s…..

  3. [...] David McWilliams writes, we need to tell the lying scumbag cartel that they lose, otherwise they will skin us and then [...]

  4. Deco

    I have read the article and it makes many valid points.

    I do not think that people need to worry yet about taking their money out of Irish banks, unless maybe INBS or Anglo. (these are failed banks already and depend on the Irish state being able to borrow money to keep them in operation). The time horizon of problems with AIB is short – but is much longer for BoI and Permo.

    I think that the ECB have got themselves into a right mess with the Irish banking system, and will need to make sure that it survives, so they get the money they already put in back.

    You might see the clowns in government give the ECB Coillte or the Ports in exchange for more bailouts so as to convince the Germans, and Benelux that we are not getting money for nothing. Because it has implication with regard to Spain.

  5. paddyjones

    Debts and more debts, there is the 90 billion sovereign debt, there is the NAMA/ECB debt 40 billion, there is the promissory notes 30 billion, there is the German banks 127 billion, mortgage debts 120 billion, and also the ECB 82 billion. thats how much???? 500 billion more?
    Morgan Kelly wrote that there is now a team from the ECB in the department of Finance, I wonder if they have added up all of our debts and come to the inevitable conclusion that the IMF/EU will now have to bail us out. We have enough money until next June and then there is the pension reserve which will probably last another 6 months. On CNBC yesterday they said that Ireland was bankrupt and that we only had enough money for 60 days…not quite accurate but not too far from the truth either.
    Most of the mortgage defaults are actually investment properties, people who bought a number of houses during the boom , I would guess that many of the repossessions are these type of mortgages.The mortgage default wave is going to be a slow burner it will not happen overnight so I would suggest that it is the least of our problems but it will occur no doubt.
    In accounting terms the banks could give a debt amnesty but they would pass it on to the government but David ommits the part where the government then pass it on to the people so everybody ends up paying for the wrecklessness or otherwise of the few who cant pay or wont pay their mortgages.

  6. French Radio News today reported Ireland is on the road to bankruptcy and was serious in tone too .

    • Harper66

      I work with a woman from slovakia. She told national radio there carried a report yesterday that Ireland was bankrupt.

    • Deco

      tut..tut…
      You should listen to Pravda-RTE News. Much more cheerful. Provided fantastic news during the boom…

      And don’t forget to read the IT Business Supplement, Dan McLaughlin, and Austin Hughes….(‘Laurel & Hardy’)

  7. ladygee2

    I thoroughly agree with everything David stated in the article. This present Fianna Fail led government and all of the previous Fianna Fail led governments going back to 1997 are the the main guilty party along with their buddies the bankers, and the developers and those in big business. The way all three political parties tried to ‘cosy up’ to Olli Rehn was just totally cringeworthy. He’s not the messiah, but all of the three main political parties thought that he was and on our side.

  8. Deco

    If we are to get out of this mess, the very first thing that has to be returned to it’s former vigour, is the private sector labour market.

  9. Ravished By The Sheer Implausibility Of That Last Statement

    I would welcome the IMF at this stage in the game.I reckon we deserve to be thrown out of the European Union for our greed and incompetency, it would be a salutory lesson for all.

  10. d’IMF will be the new ‘Tans”.
    Witty

    • shtove

      Why take on more debt when the state can just default? Total crash in house prices, but the black hole will capture all light anyway.

  11. wills

    David.

    Sparked :

    ‘This first wave was a bank-funding crisis sparked when the German financiers panicked and refused to lend any more to the Irish banks.’

    Wasnt it a good thing that this sparked ignited.

    How much longer would Ireland and the hollowing out of its real economy by the Ponzi property bubble scam gone on for.

    I say thank christ the interbank market pulled the plug and burst the lunatic property pyramid scam underway here destroying everything of real long term value in its wake.

  12. John Q. Public

    ‘the reckless German banks – who don’t deserve to be saved ‘ hmm. Is this not a childish statement? Only the few high up executives in these German banks actually make the decision to lend to other institutions so you can’t blame German bank employees or shareholders. A lot of German pension funds are tied up in the banks so let’s be fair.

    • Harper66

      Hmmm….only a few high up executives in our banks and government actually made to decision to take private debt and make it sovereign.Alot of Irish people require the income from their work to feed,cloth and provide a house for themselves and their children.Lets be fair.

  13. wills

    David.

    I think the question regarding the German banks providing the funds into the Irish banks to fund the Irish banks Property pyramid scam must be looked at more closely.

    How do we know that the Irish banks dealing with the German banks to get their greeedy grubby paws on the german peoples savings how do we know the Irish bankers did not spoof and spin and withhold from full disclosure of the facts too the German banks.

    Look at today and ANGLO and their bankers refusing point blank to the authorities to divulge the passwords needed to access accounts and documents.

    Did the Irish banks scam the money out of the German banks?

    i would like too know the truth about this.

    Did the Irish bankers deliberately pull a fast one on the German bankers to get more funding for the Irish bankers POnzi property pyramid scam.

    • Black Cat

      I want to know if we were the only country that screwed things up when we got access to the german money or did any other countries do it too – were we the only ones to act this irresponsibly?

      • coldblow

        From what little I know, no. Greece certainly and presumably Portugal and Spain. I am sure that free uncontrolled access to global money/ credit would wreck most economies. I presume that more sophisticated countries aren’t as badly affected as they not only have better controls but have developed industries of their own where money can be invested productively rather than used just to inflate an asset (housing) bubble as happened here.

        I think the US quantative easing (QE – printing money) is an attempt to reflate their own housing bubble to stave off depression but that their banks won’t be lending within the US (as US citizens are “all loaned up” and they won’t get their money back) but looking for opportunities to make a killing abroad on currency, stocks speculation etc. So it looks volatile now with extra funds (US dollars) flooding the world markets and this will destablize other economies if left unchecked.

        Please correct me anyone if any of the above is wrong (as if I need to ask!).

  14. wills

    its time for the truth about the level of skullduggery the Irish banking fraternity pulled over on the Irish public, the German banks and God only knows who else.

  15. wills

    The debate over the Irelands meltdown must be firmly placed on the shoulders of where the blame lies.

    It lies with the Irish banking system engineers a Ponzi property bubble using the funds from German banks.

    Lets find out did the German banks work in full knowledge of the facts that the Irish banking fraternity were running a POniz property bubble pyramid scam or NOT.

    Surely David establishing this piece of data is of primary importance before it can be discerned on the other stuff.

    What is the level of complicity the German banks played in the Irish banks running a POnzi property bubble pyramid scam.

  16. wills

    Did the Irish banks scam the German banks to fund the POnzi property bubble pyramid scam the Irish banks forced violently down all of our throats!

    • Julia

      I suspect the Irish banks did scam the German banks. And the German banks were delighted to be scamed, they thought they were going to make loads of money out of the loans. They probably didn’t check out what David et al were saying. Fools. The Irish banks made sure they didn’t know too many details about their own accounts( look how long it’s taken to come up with a plausible figure for what they owe. Even that is probably too low.) so they could lie quite easily. Whatever stories they made up they could get away with it. I think it’s called plausible deniability in the US. “Prove it,” they’ll say. That’s why Seanie and friends will never go to jail.

    • Fergal73

      Wills – The Irish Banks may have been overly keen to lend – but if people chose to open their mouths to get stuffed, then they bear a responsibility.

      I was offered 12.5 times my base salary (I had bonus / commissions that effectively doubled my take-home pay, but was by no means guaranteed income) in 2002. I knew it was madness and emigrated.

      Whatever about debt forgiveness, people who made bad financial decisions, irrespective of the govt spin, which was clear to see, even back in 2002, holds at least some responsibility for those decisions.

  17. chrisi313

    I imagine the solution will go something like this: our creditors will see how much we can afford to pay without making everyone emigrate, and restructure our debt to maximise the money they earn from us by way of perpetuity or long term bond (maybe 1000 years lol).

    As Weimar’s collapse proved you don’t want to tighten the thumb screws too much or the whole thing will fall down and you’ll diddle yourself out of money. At the same time I doubt very much they’ll just forget about the money “we” owe them. They need a strong Irish state to run the police and revenue commissioners and bailiffs offices, so I wouldn’t count on the government being even allowed to run out of money.

    This is what happens when you give populists like Fina Fail power.

  18. Or everyone emigrates, Ireland is made into a huge golf course for wealthy germans to holliday on in the summer. Low paid migrant slaves are brought in to up keep the golf courses & hotels & lookafter the holliday homes during the winter!!!

    • Fergal73

      Maybe the Irish government can organize that. A bit like “decentralisation”. Then they can “benchmark” their success at achieving the emigration targets outlined.

      As the emigration slows (because of the numbers already gone), they can set up a “Cohmitty” of junior and fading politicians to examine why the early success has not been maintained.

      As they continue to drain the country and the economy, they can continue to award themselves salaries higher than the more successful countries, where governments actually serve the people.

      Side perks (for which the politicians would be compensated) include more rapidly achieved lowering of carbon emmissions, lower imports, lower spending on services, improvements in road safety and reduced crime.

      “Vote FF!! Go-on, shure aren’t they de fellas dat got us into dis mess, and shure aren’t the other lot just the same anyway”

      Ireland passed through the rabbit hole a long time ago. Nothing makes sense, except that FF will screw Ireland in the long run, and the Irish will still re-elect them two to three general elections from now.

  19. marcahe

    Its like the clam before the storm in the Dail at the moment. I don’t know if we as a state can put up with another big sink hole on a road to some bit of a recovery. As i look at it we owe 500 bn+ there is about 4 million people in this country. We are in debt up to the hilt. If I could i pack my bag and go some where else. We are all guilty of greed. My heart goes to the people how tonight will lose sleep worrying about the roof over their heads and putting food on the table.

    • Deco

      You mean calm before the Pantomine…Lenihan acts patriotic…Cowen acts sober….Coughlan acts intelligent…Harney acts interested….Kenny acts capable….FG act united….Gilmore acts outraged….Burton acts disgusted….Sleevin acts perturbed….SF act civilized…and so on…

      All are acting except Healy Rae…he is comical enough anyway.

      Apparently Ireland can be ‘saved’ as long as a Casino owner’s proxy in the Dail shoves through legislation that ‘brings gambling into the 21st century in Ireland’ and starts Las Vegas to Two-Mile-Borris or maybe three mile something else.

      (sic….I thought gambling was what got us into this mess ?)

      We are losing our self-respect. And pride led us to this.

    • shtove

      The clam before the storm just shuts his shell. Clamdown.

    • “We are all guilty of greed”

      No we are not.

  20. adamabyss

    subscribe, bloody comments didn’t come through to email. Maybe I didn’t tick that box, I’m sure I did though…

  21. BrianC

    I was away in UK last week working on setting up a new business that will be based in Ireland. Boy do the British have some comments about the Irish situation. I will not bore you with all the comments. However, they feel sorry for the Irish people and are so thankful to have own currency. There is also a bit of the anti Irish sentiment where we were getting too big for out boots.

    One person remarked that although he thought all politicians were only worth contempt at least they had a change of government in the UK an attempt to turn the page and he said the Irish need to do the same and fast. He has retired from working in the square mile in London.

    As for the article very nice but I am afraid the decision is already made and if you look closely all parties in the Dail are posturing to deliver what Rehn came to rubber stamp. They are now going to sweat the Irish asset to pay off the German banks and the others will also be paid in full.

    The servile attitude that the Irish politicians are engaging in with the ECB is very disturbing and quite frankly sickening and disgusting. For the first time in my life I was embarrassed to be Irish. I am so annoyed over the last few days I cannot put it into words well actually I could but others would complain at my language and what I would like to do. In fact when negotiating with the UK company I just did not feel right I hate to say the confidence was dimed.

  22. Deco

    For those who are continually concerned about Ireland’s significance, and the near Freudian preoccupation with our importance in the minds of others….mundane economics shows up again….

    http://www.bloomberg.com/news/2010-11-10/german-bonds-decline-for-second-day-as-investors-prepare-to-absorb-issues.html

  23. wills

    David.

    Last few para’s of article are cogent but are the points relevant to the real situation on the ECB / Irish banking ground.

    Lets look at the Mrgan Kelly article other day.

    In it he disclosed a deal the ECB brokered on behalf of the Irish State to pay out 55 billion Euros to outstanding Bond maturation obligations.

    This is a serious piece of information here.

    It reveals a hidden away world of banking finance nobody outside of the inner sanctum of global finance know anything about.

    Lets look at it again.

    The ECB cashed out 55 billion on behalf of Ireland to pay off bond maturation obligations!!

    This is a story bigger and more significant than ANGLO.

    Do we now owe the ECB another 55 billion!!

    Where is this 55 billion debt going to be recorded?

    This 55 billion, will it be deleted when nobody is looking!!

    Its time to really delve into this and expose the racket going on here.

    ANGLO and the Irish banks and German banks cash ecosystem needs to be forensically examined here.

    Is it the case that perhaps the whole bond issuance and interbank lending markets are a sham and insiders merely spin stories out which fit in with preconceived notions downloaded into the public mainstream but in behind the curtain of finance a whole different narrative is at play.

  24. irishminx

    David, I am in despair, I read and read about what our Government are doing and more importantly are NOT doing. I believe the Irish Government are in denial or that there is some game plan where they gain and the ordinary Irish folk lose, yet again.

    I am at overload stage…………
    And I wonder if I can even take in what I will hear at Kilkeconomics?!?

    My reality is……….Our Irish Government are NOT listening…………I feel you and all of us here are writing and wasting our energy! For what? When our Government are not listening to us! I wonder do we even hear ourselves?!?

    Even look at JOD’s smarmy comments on your FB page. I feel his arrogance is so dishonouring of me, an ordinary decent human being. I know and understand that what he says is about him and what I say is about me. I am a human being and all I want now in my life, is to be a part of meaningful, honest, equal, compassionate and kind change in my country of birth. I love Ireland and it’s people.

    I serve Irish people as a Public Servant in the job I do, which is as a front line worker, in the scheme of last resort. I see the despair, I feel my own despair at our current economic mire! I am willing to stand up and be counted…………..

    That is all well and good……….UNLESS we as Irish citizens take action and if we don’t take action, then I fear we are lost. The talking must lead to action………..Because in my own experience of life, action ALWAYS speaks louder than words………..Words can not replace positive peaceful action!

    Folks can we please take this to the next level and take peaceful positive action in a shared vision forum, PLEASE?

    This is an invitation to you all. Will you accept my invitation? Or will you keep blogging about it!

    (Blogging is only one letter away from flogging!).

  25. wills

    Posters.

    Seems to me to be a bit strange all this focus by the mainstream news outlets on irish Bonds yield spreads etc etc.

    Can it be the case that all of this smokes and mirrors stuff is to distract the average citizen from the 55 billion the ECB paid out on behalf of the Irish State the other day???

    • Dorothy Jones

      @wills
      Yes. But thanks to Morgan Kelly’s timely clarification, it seems to have made it into many of the European and USA media blogs / articles

      • wills

        Absolutely agree Dorothy. Morgan Kellys disclosure is a nuclear bomb going off and hardly anyone here has paid a blind bit of notice to it.

        His article is in fact like an insider blowing the lid clean right off on what is actually going on. And it made it onto the front page of the Irish Times,… !!!!!!!!!!!!!

      • wills

        Here = ireland news feed.

        • Dorothy Jones

          Keeping with the Morgan Kelly thread. I was directed this week by an advisor to look at previous forecasts by Professor Kelly and to plot these against past outcomes in order to evaluate their accuracy. Like many posters, I have read Professor Kelly’s papers over the years. However, a more forensic / empirical exercise makes it quite clear why this most recent statement has found its way to jurno, trader, bank, politic, and popular media, outlets like wildfire. If markets are forward looking, this is the future.
          An aside: Posters of my generation might remember a band named Timbuk3. Their first hit was titled ‘The Future’s so Bright, I Wanna’ Wear Shades’. It was a success, so they were given resources to make a second album. If anecdotal evidence were to be believed, it would infer that a dependency problem developed subsequently. The second ‘single’ was titled ‘Life is hard’….. That was the last.

  26. wills

    Posters.

    Also, the Irish gubbermint are not looking for Bond sales till early next year so its all this media coverage on Bonds is null and void.

  27. Ravished By The Sheer Implausibility Of That Last Statement

    Emmigrate and don’t look back.

  28. Deco

    From the Irish Central Bank.

    http://www.breakingnews.ie/ireland/honohan-savage-cuts-resemble-imf-package-481287.html

    I will give a prediction. It will not be enough. Basically it will be insufficient. Now, after a lot of dithering we are going to see real austerity.

    Beyond the savage cuts, there is going to have to be a massive amount of reform in the coming weeks. I mean closing down quangoes, getting rid of NEDs, rationalizing local government to stop the waste, and rationalizing a lot of government departments as well. The problem is that this costs a fortune in terms of upfront payments.

    There will have to be massive salary cuts in the state sector, starting at the top. I mean the entire thing will have to be rethought, otherwise they will be getting DoF promisory notes instead of payment in August next year. And massive rationalization of the entire state system with it various hierarchies, layers, redundant functions, priveleges, expenses regime, etc…

    I expect another budget in February. In a last ditch effort to avert reforming the state the marginal PAYE rate over 36 K will go to near 50% or even above. Throw in levies, PRSI etc.. and you will have people sparing every penny, and practicing personal austerity. Meanwhile the state system continues to dream about Metro North and Terminal Two.

    Personal austerity brought about by increased taxation, increased costs for the main factors of production -time, electricity, fixed assets(including local authority rates which are still at 2006 levels), unmovable costs like rent, will have the effect of contracting the private sector job market even more.

    The Dermot Ahern approach – take money off people before they save it, so as to spend it for them, and maintain this short term policy, is the next thing I expect to see.

    • wills

      Deco.

      The austerity ushered in will not go near the insiders or inner extended cozy collaborators.

      It will be exercised to preserve the rigged market system and keep it all in place i preparation for the coming of the next money making scheme somewhere out there in the near future.

  29. wills

    Posters:

    For anyone who doubts that ireland banking fraternity were not running a property pyramid POnzi scam on an industrial international scale then go to this WSJ link, NOW.
    http://online.wsj.com/article/SB10001424052748704506404575592360334457040.html

  30. Peter Atkinson

    Going a little off point but hearing that the Government will extend the bank guarantee beyond Christmas made me think that the real plan in their mind is to keep the poor “gobshite” savers on board until they are ready to announce the following

    “As and from (choose a date) the ordinary citizens of Ireland are being asked to do their patriotic duty and offer up their hard earned savings in the name of the sovereignity and future of the state”

    You may well laugh at this notion but when this bunch of feckless incompetents have finally run out of trump cards and their backs are to the wall they are likely to try anything.If it seems crazy, who would have contemplated the “funny” business with the banks happening five years ago.The family silver I reckon will be thrown on to the bonfire to be melted down for those famous “silver bullets” they have been talking about for the last couple of years.

    I was checking donedeal.ie and ebay recently just to make sure they hadn’t put the country up for sale.Can you imagine the spiel on ebay followed by the opening bid of 1 cent with one hour to go.

  31. Julia

    Hi Wills, Dorothy, Irishminx, Gege, Furrylugs, Michael, Adam et al.
    Have a great weekend at Kilkenomics. I can’t go sadly. But looking forward to news about what happens.

    Just remember, we’re all in the gutter, but some of us are looking at the stars!

  32. Dorothy Jones

    Posters
    Our host is on Vincent Browne this evening. Can we support this propisition or get a lin on the thread.

  33. theliammurphy

    Please sign the petition:

    I would vote for any political party that abandoned Anglo’s Debt.

    The Fianna Fail government took the decision to guarantee Anglo’s Debt without knowing the extent of Anglo’s rogue trading, true size of the debt & total inability to repay it. At the time the total bill was estimated to be €4.25 billion (we are willing to discuss this amount). We’re now facing an estimated €34 billion, 8 times the guarantee promise. The entities that loaned to Anglo were not naive school children. They knowingly lent to Anglo being fully aware of the risk involved with the property bubble in Ireland. We the people did not have a laser or ATM card for Anglo Irish Bank. This was not a people’s bank; this was a cosy cartel for developers. We the people would have never benefited from the Anglo cartel profits, in fact we were negativity affected by these fat cats driving up the price of starter homes, making it near impossible for an average couple to afford a new home.
    Why are we the people paying the debt of tycoons that employ specialist accountants to ensure that they themselves pay only 5% tax?

    I would vote for any political party that told the lenders to Anglo that your investment was based on risk, and with all risk your investment can rise as well as fall.

    Sincerely,

    The Undersigned
    http://www.petitiononline.com/No2Anglo/petition.html

    • adamabyss

      Signed it. Twitter button doesn’t link properly.

    • Fergal73

      FF may not have not have known the total in at-risk assets, but they must have been more than willing NOT to know. It is inconceivable that they believed any figure under EUR 20 Bn. FF simply didn’t want to know the truth. They were planning ahead, knowing that they could always say “we didnt know”. What they are hiding will probably come out in 20 years, when the players are retired or dead.

      I emigrated in 2004, and am no longer eligible to vote in Ireland, but I fear that FF has dragged Ireland so far into the mess that rejecting the Anglo debt could prove to be impossible in practice, although undoubtedly it is what is morally appropriate.

    • irishminx

      I’ve sent it to my friends and posted it on fb and twitter, thanks for the opportunity.

  34. Peter Atkinson

    Do we need it in any plainer language

    https://www.goldcore.com/goldcore_blog/gold-consolidates-cautious-trade-ahead-g20-summit

    If we had used the bailout money to buy gold in June and sold this week look at the profit that could have been taken and put back into the “real” economy.As it stands the Euro is the only currency that gold rose against as a direct result of the mess in Ireland.

    I rest my case.

  35. goldbug

    MAKE NO MISTAKE.

    T R E A S O N.

  36. Just got in from work and I haven’t even read the article, though not doing so, I still blindly agree with it. Nothing David McWilliams is saying any more is against the national interest.
    Contrary to this is the enemy within; to wit,
    http://www.businessworld.ie/bworld/livenews.htm?a=2679197
    Goldman Sachs have a disproportionate influence on events, it would seem.

    On another note, Vincent Browne really disappointed tonight. One wonders what possible relevance some Titty story had to the State of the Nation? Just another device to stifle valid economic comment from our host et al yet posing semblance of inclusive balance. As with the puerile treatment of C Gurdgiev some weeks ago, this program would appear to have been, as our neighbours would say, “Got At”.

    • joxer

      Agree,Vincent Brown show is mostly crap,the adds are as long as the show,i hate the way he talks over people just when they are about to make their specific point,and he mumbles like hell,mixing up billions and millions all the frign time.
      I am not as up to speed on economics as many of the posters here, but it’s very clear to me that this country is being run by idiots,cowards and traitors.

      Why doesn’t someone with influence organise a mass prorest march, i am from South Donegal,why not have a march in Donegal town soon and show these scumbags who ruined our country and sovereignty that we the people aren’t gona take this shit lying down,tell the German banks to go fuck themselves and shove their euro up their hole sideways

  37. waverider

    There’s almost no point in talking about mortgage forgiveness because the government cannot afford it after paying for nam a and the europeans are never going to allow that to happen after they help us. Mortgage forgiveness would undermine the Irish financial system and create a lot of inequity. Why should all the people who practice financial responsibility and avoid high risk gambles have to bail out people who speculated. It’s just not fair. Anyone who takes on a mortgage knows the risks. It’s a frightening experience for that reason. The property could could be worthless the next day. That is the way it’s been. You start tampering with the free market, you cannot predict what will happen. The greatest mistake the government has made so far is trying to rescue so many banks. They should have been more selective and pushed the bank debt onto the international financial market. I suppose it’s going to happen that way anyway.

  38. ladygee2

    Deco.

    I couldn’t agree more with your comment about the Dermot Ahern. He’s not known as ‘The Obergruppenfuhrer’ for nothing you know!

  39. David and panel gave good account of themselves on VB last night, congrats to all.

    So, David at the head of his article above states:

    ‘Government Must Cut Deal That Gives People Hope’

    Soo, what’s the deal?

    Firstly, the guarantee that’s freaking the markets should be done away with. Bottomline, we cannot deal both with the fiscal deficit and payoff the bank debt while at the same time cutting the legs off the economy that’s supposed to pay for this with austerity.

    That story belongs to the gombeen political and financial class who got us into this mess, who chase the fool’s gold with a new plan to levy taxpayers with their quest for more fool’s gold.

    I propose a simple 5 year plan focusing on the bank debt of €51 bn plus. The fiscal deficit can be handled via the budget, the bank losses cannot.

    Here’s the deal:

    A write off of one third, combination of senior bondholder and subbies, €17 bn

    European Stability and Financial Service and IMF loan at proportion 1:2 of one third total €17 bn
    (for simplicity say €10 bn from IMF and €7 bn from ESFS Rescue Fund)

    The final third to be paid by Ireland subject to rigorous debt renegotiation terms including promissory nots if required, or debt extension.

    The five year plan would incorporate the fiscal adjustment plans for bringing down the debt to GDP ratios already agreed with Rehn et al, with agreed extension to the four year plan to five year plan.

    The adjustment and budgetary elements to support the above would be monitored by the IMF, ESFS.

    Close Anglo and charge those guilty of financial fraud and fiduciary irresponsibility.

    IMF and ESFS should insist on regime change and eradicating NED, quango pollution and changes at the management level across the whole banking sector.

    If the above does not kick start the economy over 5 years, Plan B involves a more radical version of the above.

    • Interest rate to lend to Ireland stand at 9.25% this morning.

      Perhaps Cowen should look at the passionate speeches of The Fuhrer in the final bunker days to inspire him how to persuade us to ignore the above and pony up for his coming budget to pay for the fiscal deficit, the bank losses and ‘turning the corner’ polyNAMA return to growth of his broken economy!

      • I’d like to hear any better suggestions or improvements to above suggestions. We need to get real, work up a deal along the above lines and deal directly with Merkel who has advocated solutions along the above lines.

  40. george

    David you were superb last night with Vincent Brown. And the two guys you brought with you were amazing as well. I am with you regarding the restructuring of the national debt, and mortgage debt for the general public, but I have some doubts regarding the possibility of achieving it, if the issue of the Public Sector isn’t addressed simultaneously.

    My point of view is the following.
    Lets take what happened in Argentina during “the default”.
    The then president Néstor Kirchner told the bondholders “get in line and you’ll be paid whenever and whatever we can”. He devalued the currency to help the productive sector, and he increased the retentions (taxation) mainly over soja beans, the main argentine export’s commodity.
    Straight away the Country had commercial superavit and the State fiscal superavit, that allowed the Government to spend money to assist the poor, and to do public works to increase employment. He kicked the IMF out of the country, and by telling the bondholders “if you don’t accept my offer you’ll get nothing”, he reduced the debt approximately in 50 billion dollars, and today Argentina has almost 60 billion dollars in reserves in the Central Bank.

    If Ireland declares isn’t going to pay the debt and has to live from the money it generates. And if then the EU decides to stop the subventions it pays to the agricultural sector and others. And if the State has to spend 50 billion to run the Country, and only gets 33 billions, and can’t devalue it’s own currency to help the productive sector. And people in the private sector has to work until 65 years of age so people in the Public Sector in some cases can get early retirement at 50 or 55 with exhorbitant pensions, paying only a fraction of the real contributions.

    And if salaries, pensions, and conditions in the Public Sector are not modified.
    What realistic chance do we have that a “debt default” in our part it’s going to be successful?
    Where the money is going to come to keep the economy going?
    Isn’t the case that simultaneously we have to talk about the Public Sector issue, including the fees, doctors, lawyers, and accountants get from the State , and debt forgiveness?

    The following is an excerpt of the article professor John O’Hagan wrote yesterday in the Irish Times

    Tue 11 Nov 2009Fair is fair – public pay cuts of up to 20% justified
    ANALYSIS:The simple truth is that the cost of providing public services is too high. There must be benchmarking in reverse; the case for pay cuts is compelling
    MUCH OF the emphasis on the need to cut the pay of public sector workers has taken place in the context of having to reduce the fiscal deficit. This is the imperative that informs the debate, and rightly so. There are, though, other reasons for reducing the pay rates of public servants, which give added legitimacy and moral force to the fiscal rationale

  41. petercice

    just looking at the bond prices this morning and they are now at 9.2% this would now classify irish bonds as junk status.
    i have been thinking more about the governments croke park agreement and it has come to me that it is remarkable that no one has mentioned this before.
    ok we are going to have a very severe budget in dec with 6 billion in cuts and taxes. this will keep the government in play untill the new year when the remaining bye elections are to carrried out.
    when the government looses its majority and an election is called it is obvious that a new government will be form with the ff on the opposition.
    what happens next is very clear.
    ireland will no longer be able to go into the market place to raise funds so the EU/IMF shall move in forcing the new government to slash public sector pay and job losses.
    this will create mass strikes and huge problems for the new government and FF and there buddies can sit back and say look at what you have caused we didnt have any of this going on when we were running things.

    maybe its a simplistic way of my thinking but i bet i wont be far wrong.

    • Black Cat

      I agree that they may be planning that and banking on the inconvenience caused to the public to make the opposition unpopular. However, from listening to public opinion on radio etc. I think that the general public want croke park thrown out and whoever has the nerve to do it may get huge public support – maybe I am wrong too – no opinion poll to back it up just a huch of mine – people see the croke park deal as holding the country to ransom.

  42. Philip

    1.8M workers and 150Bn debts means around 90K per working head on an average wage of 35K. 300Bn implies 180K debt per head.

    As we are not paying off a farthing off the debt, which is rising by the current deficit per year. 25Bn. i.e. 18K of extra debt on every working person per year with an average wage of 35K. Interest payments??? – let’s round it off to 20K extra per head per year.

    Now, simple maths says that even with the best/worst austerity measures, you will run down in about 18months…even if you taxed 100% So we are shagged. I am assuming we do not consume anything in the meantime remember.

    The 55bn ECB bailout MUST be happening simply to allow the austerity measure to survive and prevent default. Even so, far from being a solution , I think it is buying time.

    People are becoming visibly desperate. I can see defaults becoming systematic and perhaps organised. Organised? Shure us bloggers would not dare tread the streets in protest. We are Irish.

    here is the scenario I see. Public service have taken a hit of 15-20% and mostly in the lower pay scale. My guess is you only need to wait ’til you see what happens when they take another hit…these guys can stop money flowing overnight.

  43. Deco

    There might some panic at the moment over people getting money out of the Irish banking system. This is not necessary – at least not at this point in time. I am serious.

    The ECB are caught already with a lot of money propping up the Irish banking system. The ECB needs to keep Irish interest rates down, so as to prevent secondary effects in the other PIGIS. Ireland is smaller than Greece, much smaller than Spain. Therefore the ECB will keep the system afloat.

    http://www.rte.ie/news/2010/1111/ntma-business.html

    We have seen in previous years, a tendency for lemming like behaviour driven by pride, the need to “be with it”, to impress, to chase significance, and an abhorence of others not being impressed by us. This is a load of bullshit.

    This sort of silly mindset has been at the root of many of our problems. It has driven much of the irrational behaviour of the past decade. A central preoccupation of the media has been to make sure that it is never broken. Because if that were to happen then people would behave as individuals rather than as a herd (or maybe I should say flock). We all need to work on this. I warn you, the media and the establishment do not want you to think for yourself, they want you to follow, and always be inclined to follow.

    There is a fear now that people will behave like a herd and stick their savings in banks in the North that in some cases are probably no more liquid than the banks here. (if the truth were told).

    In addition converting Euros into Sterling might not be a great idea in the long term. The fundamentals for the UK economy might have stabilised, but there still are very serious issues of debt to be resolved, and I do not think the ConDem coalition are doing enough. Therefore we have the scenario emerging where people form a herd of lemmings and head north, convert their savings into sterling and end up in two years time trying to figure out what they were doing.

    I am concerned because it sounds to me as if the people who are supposedly doing this, really have no idea what they are doing. (this sounds familiar with other lemming episodes).

    Vincenzo Bore has a tendency to try and create as much hysteria as possible, and create the sense that people take him very seriously. If people sit listening to Vincenzo ready to absorb everything, then this makes him an advertisers dream. He has his own agenda. Get back into RTE, become a presenter, and get a RTE scale salary. The hysterics are going a bit extreme. But if he can get people talking about him, then he is making progress.

    There is no need to panic. I repeat, there is no need to panic. The ECB is large enough to deal with this easily. The Euro will decline as a result of this intervention. But this is not a problem. In fact flooding the Irish banking system with Euros will make EU exports cheaper and please the polticians.

    There may at some time in the future be a need to get out of Irish banks. But that has not yet happened. Though I would not put money in INBS or ANIB because they are losers, and will have to be dropped at some stage. But the other banks will gte propped up.

  44. SLICKMICK

    Cheapest ticket for Ireland V New Zealand is E100.
    ” ” Scotland ” £60.

  45. wills

    David and Posters.

    The ‘debts’ can be done away with in a nano second.

    The wealth is in the system.

    The debts are extinguishable with the touch of a button.

    The wealth and debts are seperate elements.

    The debts are numbers on a ledger.

    Lets keep the debts in the right frame.

    The insiders set the agenda by forming the debate on debts as if debts is something immoveable for all time.

  46. Rory

    Thanks for the warning on the banks, i took all my savings out over the last few days. I think at 9% this morning and rising it is going to happen before xmas.

  47. Alan42

    David , any man who can marry economics and comedy together and make a weekend festival out of it is to be admired , well done . Now run for office . How long can you sit on the sidelines and watch your country sinking into the corruption and incompetence of FF / The Greens /FG / Labour .

    At this late stage , Tell the ECB to go and screw themselves . If they don’t bail Ireland out with favourable rates you will scream ‘ useless Euro , not worth the paper it is printed on ‘ from the top of your voices for every media outlet in the world to pick up .

  48. Deco

    In Ireland, it is the done thing for one profession after another to stick the snout in the trough, and have a good munch at everybody else’s expense.

    http://www.independent.ie/health/latest-news/hse-fails-to-recoup-fees-from-doctors-2415822.html

  49. Bottom line cutting jobs will reduce the efficiency of the public service in a far quicker way than cutting rates of pay.

    Cuts in jobs will make our society more socially divisive also.

    Reallocation of jobs in the public service into frontline services should also be a priority.

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