December 15, 2010
We are only fiscally delinquent when we attach our banks to the people, so we should cut them loose
The 13.00 train from Waterford to Dublin pulls out bang on time in glorious sunshine and sneaks its way up the River Suir before turning right and heading inland, towards Kilkenny. Yesterday, the Sunny South East certainly lived up to its reputation as the low winter threw long shadows on the fertile fields either side of the track.
It was that very combination of river, sun and productive fields, which made Waterford the first city in Ireland.
The Danes — the Ostmen — founded the city in 914. The Danes, driven demented by the type of Arctic weather we are experiencing, set out from Scandinavia to find more fertile lands and more clement temperatures. They found us.
Initially, they sent raiding parties, but soon decided to settle and Waterford provided a perfect site on a huge river — close to the sea — which could be easily defended.
Interestingly, one of the reasons they settled in this part of the country might be the sunnier climate. In the days before industrial agriculture, the single biggest factor affecting wealth was agricultural productivity and, the biggest factor affecting productivity was the quality of the soil and sun.
Because the South East had more sun and longer days than the rest of the country, the yields per acre were marginally higher than anywhere else. But marginally higher yields meant an agricultural surplus and an agricultural surplus meant trade and that’s what the Danes did. So it was not by accident that the Vikings chose this part of the country.
As the train speeds north towards Thomastown, past huge medieval abbeys and castles, you can see how sustained agricultural wealth, broad trading rivers and proximity to the sea, made this part of the country more commercial and richer than anywhere else for centuries. That is why the abbeys and castles are here in such abundance; these people were rich.
Today, that is not the case. Waterford city has seen unemployment rise from 5,200 in 2008 to 11,500 now.
As I left Waterford following a performance of ‘Outsiders’ in the wonderful Garter Lane Theatre, it wasn’t the Vikings who crossed my mind, but the memory of John Redmond.
Redmond — the last boss of the Irish Parliamentary Party — was the Nationalist MP for Waterford. He was the last of the great nationalist leaders of a great parliamentary party, which stretched back to O’Connell. He and his party were destroyed by Sinn Fein in 1918. They were on the wrong side of history. In one election, 100 years of Irish political continuity was turned on its head and the idea of a negotiated, peaceful settlement with Britain — the working assumption of the Irish Parliamentary Party — was rejected emphatically.
Today’s vote in the Dail on the EU/IMF so-called “bailout” might turn out to be a similarly pivotal moment. The Establishment is pitted against the people, leaving a huge vacuum, which will be filled.
The people clearly do not want this EU deal. We know that you can’t solve a problem of too much debt with even more debt. You solve a debt problem with less debt.
We also realise that no other country has ever tried this policy combination of four years’ austerity with no debt restructuring. The reason is because it is not possible.
We are embarking on “econocide” or the deliberate killing of the economy. It is rarely practised for obvious reasons, but our Establishment seems intent on doing it. We must stop them.
These are the people who brought you the housing boom. These are the people who told you there would be a “soft landing”. These are the people who told you the banks were “well-capitalised”. These are the people who told you the bank bailout was “manageable”.
You would be forgiven for not believing a word that comes out of their mouths.
Next year, the economy will contract further under the pressure of the State taking out so much money. This might be tolerable if we restructured our bank debts and got them off the national balance sheet and achieved an interest holiday, while the economy reeled with the tax hikes and spending cuts.
Without this type of deal, the end result of the Government’s policy will be a bigger debt crisis in two years’ time. But in the meantime, more bank creditors will have been paid and the process of soldering the banks to the State will be complete.
The only argument the Government can come up with is the craven colonial riposte, no doubt heard in 1918, “sure how else will we get the money?”
We will get it from the market after we have passed a bank resolution law, which severs the banks from the State and forces the senior bondholders of the banks and the ECB, which now hold Irish NAMA bonds, into a debt-for-equity swap.
This is how banks are wound up in every proper country. This is what the Americans did in the early 1990s. Problem solved. It ain’t pretty and there will be plenty of shouting and roaring, but that’s the way it goes. That’s capitalism.
If we take the banks off the national balance sheet, the debt/GNP ratio of Ireland falls below that of Belgium, which raised money yesterday at 1.8pc. The world knows that Ireland’s growth potential, if we do the right thing, far outstrips that of Belgium.
Our debt/GDP ratio without the banks would be 75pc. The corresponding figures for other European countries are: Belgium 96pc, Greece 126pc, Italy 116pc, Portugal 76pc, France 78pc and Germany 73pc. We are only fiscally delinquent when we attach our banks to the people, so we should cut them loose.
If we did that, it is easy to say where the money would come from: it would come from the same markets that have always financed us. In fact, Irish treasury bonds — shorn of the banks and the obligation to pay off the bank creditors — would be the buy of the season. Money would flood into the coffers and we could then deal with our cyclical budget deficit without torpedoing the economy.
We could then outline a plan which would get the deficit down over time. This will impress the markets because it will ensure deficit reduction without econocide.
To reverse econocide, we need to turn the tables on the ECB and let the world know that the ECB is culpable. In fact, in this entire sorry European debt mess, arguably the man most culpable is Mr Trichet who presided over not a new currency but an inter-country, inter-bank debt pyramid, where out of control German and French lenders lent to out of control Irish, Spanish, Greek and Portuguese borrowers. According to the figures of the BIS (Bank of International Settlements), the banks of the peripheral countries owe the banks of Germany and France over â‚¬973bn.
That figure explains why the IMF is here. It is not here to bail us out; it is here to bail them out. The bailout is a bailout for the banks of Germany and France and the Irish taxpayer foots the bill. It is that simple. And where will the EU and IMF money come from? It will be borrowed from the very investment banks that will be bailed out. So they will get interest payments from us, in order that we pay for their mistakes.
Therefore, politicians who are queuing up to vote for this sell-out and stitch-up would be wise to wise to remember the fate of John Redmond in Waterford.