May 11, 2011

A sea change is needed in ECB - or we're sunk

Posted in Irish Independent · 207 comments ·
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Do you remember Hurricane Katrina in New Orleans? Do you remember the devastation, the debris, the human loss of life? Do you remember the scene of the New Orleans Superdome with thousands of people — now jobless and homeless — crammed inside with no sanitation? Well how do you think the government of Louisiana, devastated by a hurricane that cost so much that it would bankrupt the State, was able to rebuild the city?

The United States cavalry rode in to save New Orleans and the State of Louisiana. The President declared a state of emergency, Treasury wrote the cheques and the Federal Reserve credited Louisiana’s accounts. They then spent those dollars on cleaning up the city. So the central bank credited the account of the State of Louisiana because emergency economic conditions meant the State needed it. The State issued no bonds; there were no IOUs, except that the deficit of the US rose. There was no effect on inflation.

Louisiana was financed without the people of Louisiana putting their hands in their pockets. This is what is done in the US –where the concept “United” is taken seriously. The Federal deficit rises and the Fed prints dollars and the region in difficulty recovers or at least is helped towards recovery.

Could this happen in Europe? In Ireland? Is there any way the Irish government could access funds without going to the bond market and, in so doing, have an orderly reduction in the budget deficit rather than something dramatic?

The question is whether there is a third way. At the moment there are only two ways out of this crisis if we want to stay in the Euro. The first way is happening now. The ECB forces the Irish, Greeks and Portuguese into drawn out austerity packages without any debt forgiveness. This is not the behaviour of a “United” Europe. The ECB lends to Ireland at a time when Ireland is overwhelmed by debt — and adds injury to insult by demanding austerity policies that make the recession worse, inflicting suffering on the Irish people. This does not happen in the US. The ECB’s anti-European response causes a toxic cocktail of problems. It means much higher levels of unemployment, increased emigration and severe drops in wages. This cocktail makes people so insecure that they save more, which is bad for an economy in recession.

The central economic difficulty with this is that if the people who have money are saving, money is being sucked out of the economy. If the banks are bust, this money that is being saved will not be recycled. So there is a credit crunch. This is what is called the balance sheet recession and this is what is happening in Ireland.

If we are saving lots and the government is not spending lots, who is going to buy anything here? If no one else buys, the economy contracts because no one is spending. The only way a country like Ireland can grow or even remain stable in this environment is through an enormous trade surplus, where we sell our stuff to foreigners because we are not buying any of it.

So the only way that we can reduce the government deficit to zero and not destroy the economy is to have a trade surplus equal to the amount of money we are saving.

On the back of the envelope, it means that our trade surplus will have to expand our current account balance by 16pc of GDP or $30 billion in the next few years because we are saving 16pc of GDP. But here’s the kicker, according to the CIA fact book in 2010, net exports increased by over €5bn, but we ended up with a current account deficit because the multinationals sent the proceeds of their exports to other nations. No export strategy can guarantee success when it depends largely on multinationals.

With world growth modest and the ECB tightening in Europe, expanding exports is going to be almost impossible, so the government will have to keep spending.

But we can’t go back to the markets to finance this spending because the markets are shut to us. So is there any way out?

Well the second option is full political integration in Europe where we go for what is called fiscal federalism. This means that we pool our parliaments, our resources and our sovereignty together into a super-state and the difficulties of the likes of Ireland and Greece will be paid out of the central EU budget. But the problem is that no one in Europe wants this. Not the True Finns or the citizens of any other country.

So is there a third way? Is there possibly a way we can inject capital into countries in danger without going to the bond markets?

Consider the New Orleans debacle. The US Federal Reserve credited the State of Louisiana and gave it the cash to spend. Now the Fed just printed that money. It printed the money, backed by a piece of paper issued by the US government. So the US deficit rose modestly.

Could something like this be done in Europe? If you could persuade the ECB to set aside a certain amount of money for emergency economic times which would be lodged into the account of the governments of those countries which are affected by an economic emergency. How could you do this without raising corresponding taxes from the richer countries to pay for the ones in crisis?

What about just printing a certain amount of money, without any backing, and setting this aside via let’s say the European parliament for each country divided up by population so that there can be funding during a crisis?

Why would anyone in creditor countries go for this? Maybe they will see the value in this because without such a mechanism, debtor countries will be at the mercy of bond market vigilantes and will always be unstable. This will force periodic crises in the Euro, with some countries like the Greeks saying they might have to leave.

So who loses? Well no one really, if you can persuade the ECB not to worry too much about its balance sheet. If you can persuade it to be a bit more like the Fed, the Bank of Japan and the Bank of England and understand that the central bank can’t go bust because it is the only entity that can print the currency. In current conditions, the ECB could establish this emergency fund without any risk of inflation.

Only with a sea change of opinion and attitude inside the ECB can Europe and Ireland escape the economic trap we have set for ourselves. Had the Fed behaved like the ECB, the hurricane in New Orleans would have devastated the city in the way cities were erased in the old days. New Orleans would have become like Carthage, a footnote.

But the interesting thing about Carthage was that it was destroyed by men not nature. The expression a Carthaginian peace comes from the Roman idea that you obliterate a city so that it can never recover and call it peace. Is this the type of financial and economic settlement the ECB and the Irish elite wants?

David McWilliams will be on a panel discussing the Euro and the ECB on May 16 with Professor Joseph Stiglitz and British Chancellor George Osborne at www.zeitgeistminds.com


  1. gizzy

    George

    I think you are missing the real guilty parties in all this mess. The professional advisors. Those firms
    that were on all sides of every deal posturing for fees. They advised bankers, developers, civil servants, government, regulators. They brought the deals to developers, they sourced the finance from the banks while advising those same banks on risk management. They advised the dept of finance on financial system management and the regulator on prudent banking through such splendid things as sectoral lending limits etc. They were at the centre of everything to do with the boom and now they are at the centre of advising on solving the problem of the bust. The problem is they don’t want to solve it, just like the drug companies, treat don’t cure so the fees role in. So unlike the so called radical thinkers they will offer solutions based on incremental change to conservative civil sevants ministers etc and watch the fees roll in.

    • Gizzy,

      There are advisors and advisors…. Former KPMG Consulting ( now bearing point I believe), PWC, as well as Banks such as Worldbank, UBS, Credit Suisse First Boston and many more, they were all on my client list in ‘my former life’. I used to walk into these boardrooms, and many of the Fortune 500, Siemens, BMW, Bayer Leverkusen etc., living from a suitcase. – I cancelled my ‘Armani-Life long ago! -

      You are correct to say that the Fee-Vultures are to be named and shamed, and yes, many millions were spent on utterly useless reports, many times, but don’t forget they were contracted to create these reports by the political class. In Ireland certain accountancies belong to the inner circle club in some respect, but the real big advisor behind and in front of the curtain to stand a trial as I would wish to see would be Peter Sutherland on a bench together with Lenihan, Cowen and many more.

      But while we are at it, you are totally right to point to the structure, and there solicitors that operate in very well known waters are to be pointed at as well. I did that many times, Maples & Calders, one of the legal 500 so to speak sudden appearance in Ireland in 2006 I think, then 2007 Goldman Sachs… coincidence?

      I don’t think so!

      As Bill said in his interview with David, see podcast, we need people who don’t hesitate to ask the right questions and who are NOT afraid to rattle cages, regardless the ripples that might cause in international waters.

      Boy would I like this Job! :)

      • P.S. Don’t forget, often such reports are created after decisions are already taken behind closed doors, but not signed on paper, cover your ass strategy.

        Some of such advisory reports are designed to fit, beyond the slightest shadow of a doubt, I witnessed it myself in Germany, at this time reporting to ‘Unter den Linden’ in Berlin.

        It’s all very smooth and slick you know. Hard to proof afterwards, but other stuff, well… this can be proven…. it is a matter of investigation and confrontation with facts established.

        • P.P.S.

          Apparently, even Irish Judges, forgot who it was, Kelly or so I believe, begin to wonder on the timeframe involved into the investigation, and this is ONLY concerning Anglo!

          April 2010
          On 12 April, Iceland’s Special Investigative Commission (SIC) presented a 2,000-page, nine-volume report on the causes of the banking collapse of October 2008, pointing the finger of blame at former Conservative Prime Minister Geir Haarde and former central bank governor David Oddsson.

          • It is all about context:

            The commission, made up of independent experts, was established by the Icelandic parliament in December 2008.

            Meanwhile in Ireland….

            Brian Cowen; 30 Sept 2008. Six One News.
            We have a banking system which has over the past number of years had good profits, in a healthy state, well capitalisted, well-secured loans. The first people to hurt if anything happens in the bank are the shareholders

            Brian Lenihan; 30 Sept 2008. Morning Ireland.
            “Does this mean the Irish government is exposed? No that’s not correct, of course every Irish bank has to write up their assets and liabilities in balance. The banks would be insolvent otherwise”

            Brian Lenihan; 8 Feb 2009. The Week in Politics.
            “We are now going to commit an investment for a definite return to the taxpayer. This is not bailing out the banks. This is a commercial investment for the state…”

            Fast forward to 2010

            Goldman Sachs; 24 Sept 2010. Irish Times.
            One bright spot for the Government today came from a research note by Goldman Sachs Group which said Ireland was “very unlikely” to experience a financial crisis as severe as the one that forced Greece to seek an international bailout earlier this year.
            “A repeat of the Greek debt turmoil in Ireland is very unlikely,” Michael Vaknin, a senior fixed-income strategist at Goldman in London, said.
            “With Irish spreads already at all-time highs, we would argue that refinancing risks in the Irish debt market is aggressively priced-in already.”

            Brian Cowen; 7 July 2010. Irish Times.
            Speaking in the Dáil this afternoon, Taoiseach Brian Cowen said [Nama] would make a profit “somewhere in the order of €1 billion”.

            Brian Cowen; 16 Nov 2010. Irish Times.
            Speaking in the Dáil, Mr Cowen reiterated that Ireland had made no application for external support and said there had been some “ill-informed and inaccurate” speculation about the Government seeking a bailout in recent days.

            ….

            Sickenig isn’t it? Really Long day… hitting silk now…. NN Folks.

  2. PMC

    This nonsense has gone for long enough at this stage.

    Europe should split into a temporary two tier model with ourselves, Greece, Portugal and anyone else in trouble, adopting their own currency and re-positioning their respective economies to take on a new direction and increase growth.
    Each currency gets devalued and we then harness the positives already in place, such as infrastructure, education levels etc to compete with the emerging markets for new businesses of a manufacturing nature.

    Lets face it, this drivel about cloud computing that Richard Bruton is on about is complete pie in the sky for most on the dole at present.
    We ain’t going back to construction any time soon, therefore if these guys are to work again SOON, it needs to be in manufacturing – Practical skills that are learnt on the job.
    It’s pointless pussy-footing around with retro-fitting, which only has so much allocated to it! Then what?? Back to square 1??

    Back to the point; we leave the Euro and tell ECB / IMF where to go. (I don’t believe we as a nation are completely innocent, because for years, the Irish public voted like morons for complete amateurs and now the chickens have come home to roost) (Likewise, EU banks took a punt, lost, so that’s it, unlucky chief, you lost and don’t get anything back)

    It is then up to each nation to form a coherent plan and target a balanced mix of industry which serves to offer employment to every demographic in society. Like a ratio format to ensure no over reliance on any given sector.

    Irish, Portuguese Euros etc… simply become worthless and are withdrawn from circulation, in place of devalued punts etc…

    This two tier scenario should last for as long as it takes for each country to get back on its feet.
    When the balance is struck, any given country can then apply for tier 1 membership again.
    This entire process could then allow the entire EU project to be re-evaluated from top to bottom, and the lessons learnt taken written in stone, (should we tempted to veer down this road again).

    For three years, the can has simply been kicked further down the road as issues arise. This will go on and on until someone takes the bull by the horns and takes meaningful action.
    The PIIGS have power in numbers to carry this through.

    To go back to the point earlier re the blame; whilst I agree the “deal” given to Ireland and Greece is unfair, and that Germany and France are up to no good; I don’t think we’re doing ourselves any favours by trying to exonerate ourselves from any blame.

    As a nation, we need to grow up and take responsibility. It’s no use blaming Lenihan, Cowen, FG, Lab etc… for all the problems, because we as a nation vote for these people and accept the weak political system that exists.

    People aged 50 and above destroyed this country at every level.
    Politicians, priests, developers, media figures,and the voting public.
    That age group of the populace sat idly by and allowed a toxic mix of skullduggery, malaise, and incompetence to bring about the circumstances at present. To think the same lot are still in charge with the same ideology is depressing.

    Constantin Gurgiev, Paul Sommerville, Morgan Kelly, Brian Lucey, David… these guys are independent and beholden to no party whip bullshit. These are the people who should be doing the bargaining because THEY KNOW WHAT THEY’RE TALKING ABOUT.

    • Deco

      It is in our interests, that we promote and support independent thinking.

      And this also means that we make the effort to expose all vested interest, official-release and “consensus” thinking.

      The purpose of consensus thinking is always to shaft those who are outside of the consensus, but given token recognition to one to the parties to the consensus (‘giving them a voice’). What a load of patronizing condescending claptrap.

      Undermine the ‘consensus’ model.

  3. gizzy

    Most bankers I met did not move without taking external advise as they were operating way above their comfort level. Same can be said for our civil servants and politicians. So by default significant decisions in this country are generated by unknown advisors in the big legal and accountancy firms.
    Advisors love insecure underqualified clients.

  4. uchrisn

    Certainly one of the factor in an Optimal Currency Area is Fiscal (government money) Transfers in times of assymetric (uneven shock).
    One could argue that Ireland experienced assymetric shock in Finance and construction in that they were much more dependent on them than other sectors. So they should be helped for free. On this Europe scores a big fat 0.
    Here is an online course on Eu integration on powerpoint, try lecture 8 for OCA.
    http://courses.essex.ac.uk/ec/ec329/

    It not that risky for the US to print dollars as it is the worlds main reserve currency and used in about 80% of Foreign Exchange transactions.
    However the Euro already had to be helped by the G7 due to a crash just after it was launched and is a relatively new currency. Also Germany is a saver country and hates inflation so the Germans really don’t want to start printing like the US.
    Any suggestion on printing Euros unless as an absolute last resot requires convincing the Germans.
    This is a nice talk on the ECB and Euro, John Taylor
    http://www.tudou.com/programs/view/jGILwJgvpnc/

  5. Gravity

    National Economics is always living above gravity not because of choice but because from the hot air created by man .There is a Time when all that hot air vanishes and depletes and the real economics rears its head .

    Ireland has just now arrived at such place and the weight of this Gravity is been spoken about and seen in four dimensions that sometimes its hard to recognise anything else in the room of life as we know it .

    This Gravity carries with it a case in Time full of goodies to keep us occupied for a long time .We will be Rewarded not in a language we once knew it to be but in a manner where we learn to Experience something new and for many of us the next generation will have it birth marked on them .

    Gravity will definately arrive and no man can stop it or force of law .Adaptibility is the best resource to make best what is yet to come .

  6. The last days of the Union… Libya a proxy war?

    Under the camouflage of humanitarian motifs, we saw the attack on Libya unfolding. EU-US Interests combined in a somewhat bizarre operation, US supporting the Transnational Council, the rebels, with weapons, intelligence, cash, training, assist them to establish a Central Bank in Benghazi.

    Observers of the events unfolding in the past few years might have experienced the same gut feeling that the EU and in deed the currency the Euro is finished, imho it was build on a rotten foundations to start with, but that is a different story.

    The Schengen Contracts, enabling EU citizens to move freely an cross borders within the EU without being controlled on border, well, it is more than likely that this will be abolished and border controls become reality again.

    Over the past few years China has actively engaged in Africa, made huge investments and advanced diplomacy, one could say, China is on a shopping spree. It is countries like Libya that are contributors to China’s oil purchases. Petrochina, Sinopec and CNOOC are China’s giant energy companies.

    In 02-2009 China also signed contracts with Russia, Venezuela and Brazil after XI-Jimping toured the Latin America Oil producing countries. We do not talk about peanuts here, contratcs worth >30 bln were signed.

    China has a substantial workforce in Libya, many thousand people are employed there. The stereotype intervention of US interests in Libya follows old methodologies, spread intelligence, weapons and cash amongst those you can use. They did this during the Iranian contra crisis, they did it in Afghanistan, and all over the world with success. Libya is a tribal country, and what emerged there was a civil war, it followed the uprisings of Arabian nations against their oppressors.

    The West had no problem with ‘The one who has sand in his brains’, on the contrary, he was welcomed with his bizarre circus of servants in the EU on many occasions, setting up his tent in Paris and other places around the world.

    The people of EU and the US are told that we fight a war to protect the people of Libya and help them to get rid of an oppressive regime. With the public eyes focus shifting to Libya, a blind spot developed at the same time concerning Israel’s activities.

    Again, one needs to look at arms trade tendencies in this decade, arms trade is up, regardless the economic down, arms trade is up big times.

    Is Libya a proxy war of US, British and EU interests? Certainly their real motifs are not to be described by their desire to have Libya become a nation of true independence. Their vested interests are of a different nature of course.

    However, lets go back to the European Union, a construct and a vision that once had fundamentally honorable motifs and ideas. Every day you can read more on the headless incompetence and dislocated joints of this Union which never was one to begin with.

    Perhaps one must remember that the dollar hegemony and the hedgefund attacks on the Euro are related. Perhaps we should ask why Christina Romer resigned in 09-2010 from obamas Council of Economic Advisors.

    http://www.nytimes.com/2010/10/24/business/24view.html

    I think David is spot on to remark the ECB had become a threat to this Union. had they agreed to restructure Greek debts, hence the banks would have been forced to write off debts in operations.

    The most interesting aspect in Morgan Kelly article to me was the Geithner story. One could understand that putting pressure on the Euro means to make the workers pay for the private debts, hence allow this megalomaniac transfer of income towards financial institutions.

    The armed wings of the markets, the US administration were driving that initiative in 2010 with force. The attack of rating agencies, privately held organisations, against the debts of Ireland, Greece, Portugal and Spain and the downgrading to junk bond status as in the case of Greece is the result.

    The market enthusiasts of course will not accept that these very markets are rigged from the very core. Isn’t it a curious thing> We know since 2004 that the Greeks falsified their accounts with the help of Goldman Sachs, however, this did not trigger a downgrading by S&P, Moody’s and Fitch. Go figure!

    I wish David would write an article on global capital flow in the past years for people to better understand the dynamics involved there. I would be interested to learn his views on this dynamic which is intrinsically linked to the power dynamics shaping our societies to come. I do feel that this is a fundamentally important teaching to have people better understand what forces are at play.

    http://www.mckinsey.com/mgi/reports/pdfs/gcm_sixth_annual_report/gcm_sixth_annual_report_full_report.pdf

    One thing is clear to me, the operation against the people’s wealth, requires to eliminate all decision making processes at the level of national states, and it is from here that I understand the presence of Eu and IMF in Ireland and other countries.

    Do you remember when Lenihan was greeted by imitation of Monkey voices on a phone call with Investors? I can not know know what that event triggered for thoughts in you, to me it was an comical example of how these so called markets are placed totally our of reach of political influence or pressure.

    You might remember that I warned form early stages on the reemerging fascist forces from within our societies, and the news of late unfortunately confirm my concerns.

    The policy of fiscal consolidation is doomed to fail and nothing but an instrument to directly and indirectly reduce wages, and force the privatisation of public services and abolition of social policies.

    The Union envisioned by some never existed, it was based on structural imbalances, and this is going to bite their proponents in the ass now. Without a minimum amount of unity we have nothing, and I think the Irish can sing one or the other song about his fact of life.

    The totalitarian implementation of austerity and policies driven by a minority elite of ideologically motivated forces does not represent any form of unity, it represents brute force, nothing less.

    The worst thing that ever happened to this European union was the hasty implementation of the Lisbon treaties, they direct results we witness these days.

    Best
    Georg

    • I think David is spot on to remark the ECB had become a threat to this Union. had they agreed to restructure Greek debts, hence the banks would have been forced to write off debts in operations…. the developments would have taken a different course for the whole of Europe.

    • CitizenWhy

      Some of the post colonial maps, and prior historic maps, called for what is now Libya to be two countries, East and West. The tribes of Libya are divided into two main ethnic groups, East and West. The Easterners are despised by the Westerners. And a small but substantial number of of the Easterners have converted to US style evangelical Protestant Christianity, whose ranks are growing.

      The big problem is that the oil fields are in the East. It would be in the interest of the EU to see the country split in two. But there would be many problems with such a division in the areas of public safety and general government administration. And if Ghadaffi remains (as he most likely will), then he will continue to menace the East.

      • Colin

        “And a small but substantial number of of the Easterners have converted to US style evangelical Protestant Christianity, whose ranks are growing.”

        Really? Where is your source for this information? How is it all the mainstream media have omitted this earth-shattering change? Numbers-wise, are we talking about a dozen individuals, or a few thousand, or tens of thousands?

        And if its true, it could simply be a ploy to gain admission into the good aul US of A, or the European Union, where they can then revert to type. Remember, deceit is permissable in Islam.

  7. SLICKMICK

    E 480 per hour + VAT is the rate charged by acountants and soilicitors advising the govt/Nama..Nice to see some people are doing very nicely.

  8. vincent

    Maxwell Jordan-You are the property of the Rothschild family http://www.youtube.com/watch?v=jlOUXWQP-KM

    • LOL, this is funny as hell:

      http://www.jordanmaxwell.com/

      A bit of Shopenhauer, a drizzle of occultism, few shaves of symbolism and you have the perfect mix for the not so educated americans outside of mainstream urban centers.

      Surely this kind of stuff is flourishing and not only in the US. I have seen educated people in their mid twenties talking about fairies in the tree’s and the power of blah blah blah….

      This world is a Hell of a funny place isn’t it? :)

  9. Colin

    News just in from the Central Statistics Office.

    http://www.cso.ie/newsevents/pr_rppi_mar2011.htm

    Property Prices continue to fall. Bad news for the Green Shoots Brigade calling the bottom a few days ago.

    • PMC

      It’s like “the boy who cried wolf” for that lot now.
      Still an awful long way to fall for many until VALUE is on the cards.

  10. Tom79

    For all the talk on union and we been a member of the EU, we are not getting a lot of help from them.

    With a 5.8% interest been charged and even a 1% reduction won’t help us much.

    I would have thought since we are all members of a union(a family so to speak) we would have gotton a much reduced rate.

    Would you lead your brother/sister money at that rate if they where struggling to pay the mortgage?

    They have no values!

  11. pilkingtonphil

    “This cocktail makes people so insecure that they save more, which is bad for an economy in recession.”

    Think the problem might be moreso people paying down debt rather than saving. ‘Debt deflation’ rather than simple ‘liquidity trap’. Irving Fisher rather than JM Keynes.

    Other than that — which is a minor point anyway — good article. Shades of Modern Monetary Theory… hmmm?

  12. Tim

    Folks, a tiny bit of good news: Ernst & Young fail in Court bid to halt Anglo audit inquiry:

    http://www.politics.ie/justice/160374-ernst-young-fail-court-bid-halt-anglo-audit-inquiry.html

  13. CitizenWhy

    US Republicans push bill to move oil lawsuits to courts with oil interests:

    http://thinkprogress.org/2011/05/12/drilling-oily-judges/

    This how the US is governed. Sound familiar?

  14. LIPSTICK

    This is a Red Line showing where one of our bodily orifices is .It moves and it talks and sometimes says nothing .Sometimes it locks in with another one.

    Recently , Lucinda Creighton says that the corporation tax rate was ‘not a red line issue for Germany’ , however France differs and believes that its fashionista philosophy will compel the Irish orifice to pout when strutting on stage in Paris at the next EU event.Ms Creighton continues to explain to say that the French are much more trenchant in their posture and composure.There is a political perception that she does appear to have lost her balance in the laws of attraction in her elysian world and her cat walks she turns up at.

    Later tonight at a public gathering on stage in Germany the red line issues will be watched and will continue to be bellowed out loud and clear for the world to hear and in the background will lie close by both the French resistance and the German occupation of what will finally determine who will pout on stage.

    • Apres Song Contest

      C’est Triste de Dublin

      Yes it was a Karla Bruni moment tonight when her stubborn blink husbands political policies were transparent on stage denying any vote for Ireland .

      Sarkozy has spoken through his puppets in Paris and Irelands will be made walk the walk and pout at the table for negotiations of the bailout for the French Banks ~( sorry ed should that be Ireland ? ).

  15. The Irish Elysian Tax Rate

    Conductor : Lucinda Creighton

    Choreographer : Richard Bruton

    Director : Michael Noonan

    Executor : Michael Howlin

    Producer : Enda Kenny

    Ozymandias

    by Percy Bysshe Shelley (1792-1822)

    I met a traveler from an antique land
    Who said: Two vast and trunkless legs of stone
    Stand in the desert. Near them, on the sand,
    Half sunk, a shattered visage lies, whose frown,
    And wrinkled lip, and sneer of cold command,
    Tell that its sculptor well those passions read
    Which yet survive, stamped on these lifeless things,
    The hand that mocked them, and the heart that fed;
    And on the pedestal these words appear:
    “My name is Ozymandias, king of kings:
    Look on my works, ye Mighty, and despair!”
    Nothing beside remains. Round the decay
    Of that colossal wreck, boundless and bare
    The lone and level sands stretch far away.

    • Deco

      My name is Bertosconi, Ditherer of Ditherers:
      Look on my legacy, ye obedient fools, and pay up!
      Nothing beside remains. Round the pain
      Of thet New Colossoseum, Anglo bondholder sponsored and bare,
      The long and levelled egos stretch far away….

  16. Harold Plinth

    David, I think Local Community Default is a viable alternative. If Ireland could consider leaving the Euro, then the citizens of Skibbereen could withdraw (in all or part) from the Euro, the national currency unit of the Irish Establishment (IE). The good citizens of Skibbereen might decide that their interests are no longer represented by the Irish Establishment (IE) and begin to operate separately. The first step could be to remove themselves from reliance on the currency unit of the IE. Replace the Euro with a Local Exchange Trading System (LETS) based on the Skibbereen, a decimal unit where 100 Skibbs make a Reen. Conduct as much local economic activity as becomes possible in the Skibbereen, forgetting about the Euro to the maximum degree possible. In doing so, starve the IE of the ability to exploit, gouge and rob the people (children and grandchildren) of Skibbereen through the taxation system, to pay debts that they never incurred, have no responsibility for and should refuse to pay.

    If say a third of all economic activity in Skibbereen could be taken from the IE an unintended consequence might follow. The Revenue might feel a little short. Now LETS is not a scheme for avoiding the payment of taxation, and generally groups encourage all members to personally undertake their liabilities to the state for all taxation, including income tax and goods and services tax. The IE might like to have a chat to the people of Skibbereen, who would be totally forthcoming concerning their behavior, of course :o)

    From Wikipedia : “LETS can help revitalise and build community by allowing a wider cross-section of the community–individuals, small businesses, local services and voluntary groups–to save money and resources in cooperation with others and extend their purchasing power. Other benefits may include social contact, health care, tuition and training, support for local enterprise and new businesses. One goal of this approach is to stimulate the economies of economically depressed towns that have goods and services, but little official currency: the LETS scheme does not require outside sources of income as stimulus.”

    The citizens of Skibbereen would then enjoy a revitalised community, sustain their resources, have better health and an improved economy. The IE would get their just deserts in other ways, spending the Euro they still have in the cafes of Brussels, far from Skibbereen.

    Farewell the ECB. Long live the Skibb.

  17. The USD 33 Trillion woman…. or I bow to no one!

    The T’haktaar was originally a battle cruiser, a D’Kyr class Star destroyer in the 7th Generation.

    Although the T’haktaar was modified and rebuilt for scientific duties, this most impressive cruiser still retained all of his substantial defense capabilities, there is only space left for 250 people on board, most of them scientists in their distinctive fields, but all of them with extensive battle experience.

    The voice of the ships neuronal network sensors informed the whole crew:

    Full Scan finalized, Results available on all stations

    Third planet Solar system, Earth….

    Star date 64831.2 – Earth time: May 14th, 2011!

    The planets population growth has reached critical threshold. Progress in Nuclear fission research has not yet led to industrial applications. Unsafe Nuclear power is operated in 450 plants around the world. Radioactive waste is stored in dangerous sites such as abandoned salt mines prone to tectonic activity. Currently the Planet is in a cycle of increased tectonic activity.

    The United Nations Organization has been politically outmaneuvered by special interest groups that hold power in various countries and are interconnected. Revolutions on the African Continent, oppressed Nations in Asia, early signs of re feudalisation in the Europe, political and social imbalances and instabilities on the increase. Proxy wars are fought over energy resources, water and mainly oil. Energy creation is primitive and based on burning fossil fuels. Rapid Climate change events imminent.

    Approx 3200 years ago people started to use cowery shells as a medium for exchange goods, not much later 3000 yeas ago the produced mock cowry shells at the end of the Stone Age. 2500 years later, pieces of silver were accepted at coins for trade, they had pictures of their supreme entities imprinted, their Gods or their oppressors, emperors. 400 years later the first bank notes made from deer skin leather were used in China. The principle of this artificial exchange is still valid today. 1916 was the year that the british made Gold a benchmark of value.The US went on the gold standard in 1900.

    Early signs of electronic money or digital cash can be observed on the fringes of the current societies.

    The current global disparity of wealth was amplified in an event that lasted from 2004 to date and caused the beginning of the uprising of people.

    Current ICI rate (Interglalactic Civilisation Index): 7.3 out of 100.

    Recommendations and Warnings:

    - Extremely Hostile species
    - mental Illness of xenophobia
    - wide spread intrinsic suicidal aspects
    - social and scientific skills 749 base points below average
    - Main life support requirements, air and water quality severely impacted
    - Rapid decline in species diversity

    AVOID DIRECT CONTACT !

    Observation recommendations: every 250 years.

    Prognosis for next observations cycle. Negative.

    1.
    Total Area: 510,072,000 sq km

    2.
    Land: 148,940,000 sq km – 29.2%
     
    3.
    Water: 361,132,000 sq km – 70.8%

    2.1
    Around one sixth or 26,709,252 sq km are the property of the British monarchy, at a rate of the reserve currency set to USD 5,000 per acres this translates into USD 33 trillion wealth accumulation.

    The picture on the holo screen zooms to the Irish Island, people preparing the Queens visit….. In a near comical way, the entire crew on the bridge raises an eyebrow at the same time.

    The Vulcan in charge of the Mission to collect ICI data commands…..’Lay in a new course….!’

    x x x x

    I BOW TO NO ONE!

    • typo correction: Of course, it was the 1816 Coinage Act that tight the pound sterling to Gold, not 1916.

    • CitizenWhy

      Georg, you have a great concept for a movie/TV show here. The space aliens could comment on the planet as a whole but also on specific countries and people. When leaving they could leave behind a recording team. The recording team would not transmit back to their headquarters so that the Observation Team visiting every 250 years could take a completely fresh view before reviewing the records.

      Just do up a pilot script (this is a good beginning). A TV network exec could simply buy the concept and take it from there. Larry David (writer of Seinfeld) might buy into the concept, assemble the team, get the financing, do a pilot, etc..

      • Oh…. well, more than a Year or so ago, I had a great concept for a movie. Spoke with many authorities, I pre checked on who would be available for Interviews and ran in open doors, or walls of silence, as I expected, I spoke with established film makers, in Ireland and abroad.

        ANGLO THE FILM

        Yes, you are right, for crap like this there would be an interest, no doubt!

        In the US the liberals are dominating the landscape for docu style edutainment, to secure even the basic funding for such a project in Ireland is like expecting the Pope to convert to Islam.

        You have to belong to the circle and are connected to the right people. Then…. perhaps…. but with the subject and concept I came up with, I even was in contact with Michael Moore, but in conservative Ireland I ran into closed doors, they are too busy producing Capital -D or Reeling in the years. LOLOL

        Say I had financed everything from private investors, they would not have seen their money back, because the retail channels in Ireland would have blocked such a film.

        • CitizenWhy

          This concept is crap but fun entertainment. It would work in London, NYC, LA. Do not limit this to Ireland. Get something like this going and there will be a greater openness to other, more serious ideas.

          You might want to explore Newgrange Productions, entertainment oriented, an experienced Irish-English producer at the head.

          I could get it to my nephew in LA. Might go nowhere but it’s worth a try. He’s a well regarded Canadian TV/film writer/producer fed up with Canada’s narrowness (and a dual/quadruple citizen of US/Canada/Australia/others). Also entitled to Irish citizenship.

  18. Deco

    Update from Mish concerning
    i) Spain (complete upcoming disaster). In complete denial, with everybody shoving everything under the carpet. Spain has been kicking the can down the road for almost two decades, and has been deceiving everybody since this crisis began with respect to the real state of the state finances.

    http://globaleconomicanalysis.blogspot.com/2011/05/prepare-for-bailout-of-spain-spanish.html

    ii) Australia ( a bubble that is about to bust)

    http://globaleconomicanalysis.blogspot.com/2011/05/economic-bust-in-australianear-record.html

    Even regardless of the exports to China, Australia is being economically mismanaged at a Federal level by the Aussie Labour government and the clowns in the Reserve Bank of Australia.

  19. Their license should be taken from them passports taken away, handed back at the airport and the whole bunch should be swiftly deported from Ireland.

    Destination suggestion: Kabul

    http://www.irishtimes.com/newspaper/finance/2011/0514/1224296944167.html

  20. Via Prof G.

    http://www.imf.org/external/pubs/ft/weo/2011/01/weodata/index.aspx

    Check by countries, then Euro, then Ireland, then government gross debt (scale=billions):

    2013=208.711
    2015=224.906
    2016=232.207

    Next?

  21. Deco

    The latest official statistics (and you all know how useful they are – sic) are saying that on aggregate, Irish residentail property is 40% below the price level of 2007.

    The months with the fastest decline in that period were February and March of 2011. Therefore, there is NO bottom in the housing market. S&P, Myhole dot ie, that clown representing FG in Dublin SW, and the other commentators who are talking about the bottom or the bottom of the bottom, are completely incorrect.

    The rate of decline is roughly speaking 10% per annum.

    And that is assuming you can get a customer to buy a residential property. If you cannot, then this is effectively more, though it is not measured as such along those lines.

    The government is trying to turn around the labour market. At least they are getting that this is the source of the problem, and not the banks. However, the labour market is still in trouble.

    We are being told about high-tech job announcements. We are not being told about the death of retailing. We are not being told about the death of traditional manufacturing. A lot of people in their 30s and 40s who never thought they would be unemployed, are not trying to get their heads about how to get back into the labour market, and how to get assistance from FAS. (I know, it is as easy to blood from a stone as it is to get something useful from FAS).

  22. The Law of Gravity

    http://www.independent.ie/business/personal-finance/what-would-happen-to-your-money-if-ireland-defaulted-2647568.html

    Heavy is big , Height is frightening , Distance is long , Speed is fast , View is frightening , Crash is painful , Hunger is death defining , Poverty is soul searching and Life is over.

    • Tull McAdoo

      The Irish Independent desperately clinging to the “status quo”. Wheel out anybody you can find, to frighten the ordinary citizens of Ireland. Tell them if they do not continue to pay the debts incurred by their betters, then their whole world will cave in.

      The status quo must be maintained at all costs. The gap between rich and poor must be maintained at all costs. Privilege must be maintained at all costs.

      Give it up you arrogant greedy f..ks, ye have bankrupted yourselves. Ye cannot be saved. Recognise the debts, negotiate terms and move on. Ye are humiliating the people of Ireland in the eyes of the world.

      That old system inherited from the British that was used to control a colonised people is no longer viable. Europe will not be brow beaten or cajoled into believing any different.

      What part of “over 200 billion of debt” do these jackasses not understand? Those dumb gobshites seem to think that having to find 18billion to bridge the gap in current spending is going to be in some way different in finding the 12 to 15 billion to service this massive debt. The deficit can be brought into line through various cash saving measures and growth of the economy, but this debt will not go away for generations.

      Somebody needs a good boot up” the you know what’s” over there in Ireland. Let’s start putting on the boots!!!!!

  23. Gege Le Beau

    This puts Strauss-Kahn under pressure, and potentially throws the entire French election wide open.

    Dominique Strauss-Kahn accused of sex attack on maid
    French socialist’s career in question following dramatic arrest at JFK airport and furore over lifestyle
    http://www.guardian.co.uk/world/2011/may/15/france-dominique-strauss-kahn-lifestyle

    • Deco

      Hilarious. The plan was that next years French Presidential election would be between two “politicially opposed” candidates, who have been scratching each other’s backs for years.

      Do the French have a clue about the well connected clique running their country ?

      Time for another Revolution maybe, and to throw out the Ancien Regime….

      Cannot comment on the alleged criminality. But I know that if he did it here, that the cops would be open to persuasion. Leaves me wondering why NY Irish cops can be so committed to serving the public, and at home the cops are subjected to such a high level of political interference.

    • Deco

      Fascinating quotation..
      [
      However, supporters were quick to jump to Strauss-Kahn's defence. Michèle Sabban, vice-president of the Île-de-France (meaning Paris region) socialists, told journalists: "Dominique is staying true to himself. He admits his relationship with money and that's good."
      ]

      There you go. It is alright to be a Champagne Socialist, as long as state publicly that you enjoy having a good lifestyle.

      Maybe we were all very hard about CJH all those years ago, and his veneration of that other French Socialist fake, Mitterand. Ah yes, CJH as the Irish Mitterand. An era before the internet and mobile telephony, when people knew very little about what was really going on in the world, let alone their own backyard.

      Well, if enough money is printed, everybody will be able to sit on their derrieres and drink champagne. What a collection of hypocrites.

  24. @Gege

    Re Dominique Strauss-Kahn, what a very odd story, the guy is 62yrs old, in the middle of top level negotiations, not a rock star on coke? He was taken off his own plane due to join talks on Greece and Portugal. Did someone on Wall Street decide they didn’t like his position? Or maybe I shouldn’t have read ‘Confessions of an Economic Hit Man’ by John Perkins? Is this a similar story to WikiLeaks founder Julian Assange ongoing problems fending off similar attacks. Was he set up, most strange indeed?

    • Gege Le Beau

      Whole range of variables, a French journalist has passed sentence on Sky: “this is the end of his political life”.

      At that level anything is possible, need to check drink and food and have someone you trust with you just in case, if proved true it could be a moment of pure madness, but timing is interesting, a year from taking on the French presidency….

    • PMC

      This thought crossed my mind also – It seems like a strange story, not only the description of events, but also that it happened in the US. His fondness for the ladies is known. We shall see…

  25. Deco

    I don’t know how true this is….but really…have we learned nothing yet from the FAS directors debacle ?

    http://www.independent.ie/national-news/nama-chief-in-pension-bonanza-2647540.html

  26. stiofanc02

    This rape accusation is bad news. Guilty or not he is now a rapist. This is how it works. One of the two things you dont want to be accused of in your lifetime, rape and child molestation guilty or not, youre guilty.

  27. Special Announcement :

    Today is a Special Day

    Dorothy Jones Birthday is Today

    The Room extends a Very Happy Birthday to Her on this Special Occassion

    WOW ….21 years …will I ever see it ?

  28. CitizenWhy

    Dominique Strauss-Kahn, Tim Geithner, and the IMF: Botching the economies of the world. See brief article below.

    Geithner bullied those in Europe who wanted to give Ireland a fairer deal, They recognized the irresponsibility of the German and British banks in lending to the reckless Irish banks, and they included the British bank regulator and Merkel herself.

    http://dailybail.com/home/dominique-strauss-kahn-tim-geithner-and-the-imf.html?utm_source=feedburner&utm_medium=email&utm_campaign=Feed%3A+TheDailyBail+%28The+Daily+Bail%29

  29. Folks,

    to get better ideas of what may unfold, one needs to take geopolitical considerations into account, and China is of particular importance to understand in this context.

    China does have very little interest in the banking regulations proposed in USA and Europe. Besides, Basel III does not change a sausage on international core financial-political paradigms.

    Highly recommended:

    ISBN-10: 1441977732
    ISBN-13: 978-1441977731

    http://europe.stanford.edu/publications/social_banking_and_social_finance_answers_to_the_economic_crisis/

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