May 30, 2011

Memo to ECB: print money

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Is the European Central Bank (ECB) Europe’s AIG?

In other words, will the ECB be left holding the can, having lent all this money to the peripheral countries in order to save rich banks in Germany and France, in the same way as insurance giant AIG was destroyed by the sub-prime market?

If you remember back to the Lehman crisis, it was the collapse of AIG that really spooked the world’s financial markets. It had recklessly insured most of the toxic waste of Lehman’s and other banks’ balance sheets – all the sub-prime mortgages and worse.

When they all defaulted, the damage went straight on to AIG’s balance sheet as the insurer of last resort.

The ECB in 2011 is beginning to look Like AIG in 2008. It is certainly also beginning to sound not like an institution that is in control, but an institution that is beginning to panic.

For example, speaking on Thursday, executive board member of the ECB, Lorenzo Bini Smaghi (who, despite sounding like a character from Lord of the Rings is actually an Italian economist) opined that high-debt countries must stick to the terms of their bailouts. If they don’t, they risk having their banks cut off from ECB capital measures. Surely this is not how central banks work?

There are two things worth noting about this statement. First, why does an executive board member of the ECB think it is part of his job to place political pressure on democratically elected governments in Europe? He is a civil servant, nothing more.

He should leave the political manoeuvres to people with an electoral mandate.

Second, why is the ECB worried about whether the Greeks default or not? Currently two-year Greek bonds are yielding 25 per cent. There is a good reason for that – everyone knows that Greece is about to default.

Of course, if everyone knows this, then so does the ECB. And if the ECB knows this, it has to be placing very large haircuts on the value of Greek bonds when it accepts them as collateral for liquidity operations. It makes sense that when Greece is on the verge of default, the central bank which is taking Greek assets as collateral should be only giving the Greeks a fraction of the face value of these asset because the risk of holding them and giving real money in return is enormous.

Interestingly the ECB is not applying these haircuts. It emerged in an article in German magazine Der Spiegel this week that the ECB is not placing correct haircuts on the bonds. It is not looking at this collateral and saying, ‘‘This is risky stuff and we are not giving you good money for bad collateral’’. It is making the same mistake that the financial market- and AIG in particular – was making before 2008.The ECB is mispricing risk and it is beginning to panic.

In 2008, many banks in Europe were caught holding assets that had little or no value.

For example, an Irish bank had lent out €3 million for a field in Athlone which was falling in value towards €100,000. Because of the so-called ‘systemic value’ of financial institutions – meaning that one bank might bring down other banks, and risk damaging the euro, the ECB decided that no bank in Europe should be allowed to fail.

So, instead of letting banks collapse and risking a run on the euro, the ECB stepped into the market. It did what the Leaving Cert economics tells you a central bank should do during a financial crisis: it acted as lender of last resort to the troubled institutions.

This worked for some banks as it gave Them a chance to trade out of their difficulties. With extra government capital injected in the crisis in the form of equity, many European banks are today in a position where they no longer have to rely on the ECB to get liquidity.

They are credible enough to go to the market and raise the money they need from private sources – namely other banks or other investors.

But, as this column argued as far back as 2002, the flaw in the eurozone was that countries like Ireland and Greece would get too much credit in the boom and too little in the bust, rendering them bankrupt in the downturn. Because of this, our banks are still unable to access funding from the market. No one bar the ECB will touch us.

The ECB now finds itself holding nearly €300 billion of ‘assets’ from Greece, Ireland and Portugal. But the assets are not worth €300 billion. It has some buffers in place from the haircuts or discounts it has imposed on those assets. But if the haircuts are less than 100 per cent, they are not big enough for a major default event, as is now likely in Greece.

So what is the ECB to do? It now finds itself holding the can for the mistakes made by the commercial banks upto 2008, and by itself since 2008.

This would be extremely worrying if it were a bank, but of course it is not a bank in the normally understood meaning of the word. It is a central bank and this means there is one important difference. The ECB does not have to ‘earn’ money to have money – it can simply print it.

So, let’s play out a scenario. The Greeks default. This means that the ECB has to take a loss on its ‘balance sheet’ of €50 billion. For a normal bank, this would mean the bank would be bust. But the ECB’s balance sheet is a strange beast. The ECB makes its balance sheet balance, not the other way round.

By this, I mean the ECB looks at its liabilities and creates assets to match. It really is that simple. So if the ECB finds itself taking a €50 billion loss, it can go to its member central banks and ask them to get the money from their governments. Or it can write €50 billion into the assets side of its balance sheet and bother nobody about the loss.

This is what Ben Bernanke, chairman of the Federal Reserve, has done in the US – and the world hasn’t ended there. It is what the ECB should do here, and you can bet that the world won’t end here either.

But the really worrying thing is that you have central bankers who don’t seem to understand central banking – now that is a problem.

When you print the cash, you are the boss, you can do whatever you like to solve a crisis.

For example, our central bank in the 1980s continued to accept government debt for cash, even when the government was issuing debt as if it was going out of fashion. The ECB can do the same thing.

The issue is not about rules and regulations any more, it is about a mindset shift. The ECB top brass has to understand that the world has changed.

They have to see the world not as they would like it to be, but as it is. Then once they have done this they need to stop panicking and appreciate that the solution is in their hands.

The ECB should stop shouting stupidly at politicians and begin to behave like the true, credible institution it so desperately craves to be.

PS: I am travelling today to Argentina for business, but I will keep you posted on the website and here on what a country that has defaulted looks and feels like.


  1. adamabyss

    subscribe.

    • NO HOPE

      Mindset Shift David???? Hey listen, we live in a country that is now spending 2.1million to put up one of Diurmuid Gavins ridiculous garden contraptions in the sky in Cork. Oh, and it is 100k over budget. I have only now realised that the entire country must be completely insane, to allow this, when we are bankrupt. No need for actuarial accounting or worrying about the banks, debt or useless politicians. Just take a look at Duirmiud Gavin`s sky garden in Cork and everything will be all right. What is the point of worrying about anything else, when we have buffoons who are prepared to pay for 2.1million for one of Gavin`s ridiculous garden contraptions, while people on the dole ARE GOING TO have their dole cut. The problem is the ECB have a similar mindset and cannot effectively execute, any real accounting. They are hoping we will all get along merrily and this whole thing will go away by rolling the debt over and over. Well here`s some news. Nothing is going away and we are heading for an EU dissolution. The only question is what happens when the Germans say ANSCHLAG!! GENUG!!

  2. 1992 / Maastricht Treaty – 1993 / USA switched to SNA, The Golden Calf of Hedonic Pricing is born or…, Austerity is an ideologically locked in dogma, it constitutes social genocide.

    Summary:
    Austerity is a destructive force, useless as a solution to the debt crisis and constitutes a forced upon scheme by those who are clutching at ideological dogmas based on accounting fraud, insufficient and flawed economic models. Any further austerity or sale of peoples assets needs to be rejected loud and clear!

    Weekly Suggestions:
    1.
    Media critic should become an important and integer part of school curricula, to enable the younger generation to read, watch and listen to media with trained eyes and ears, to be able to distinguish propagandistic and indoctrinate messages, deliberate disinformation, censorship or neglect of information, from useful Information, to develop a sense for truth and lies and to be able to really read, and not consume only.

    2.
    Government debts, the handling of and the amounts being borrowed need to be part of constitutional regulation and linked to government revenues and not GDP. Governments cannot be trusted, to avoid their excessive borrowing it needs to be under the control and scrutiny of the people of this state at any time. The Constitution as a whole needs to be ditched and written from scratch, this should have absolute priority and preference to the election of a state galleons figure, the president, or a referendum on the senate.

    x x x x

    I was born in 1961, the year when the Berlin Wall was built, a single bottle of 1961 Chateau Lafite Rothschild Grand Cru Classe Pauillac Bordeaux sells today for round about Euro 2,900. A case of six bottles of Pauillac 2009 – which can be delivered from the end of 2011 to early 2012 – goes over the counter for Euro 9,300. If you know something about wine of this order, then you will also know that it should evolve for about 30-40 years and can last easily 50 years and more with adequate storage.

    9,300 Euros can buy 6 bottles of an admittedly world class Bordeaux that will gain value over time. The same amount of money today can feed 38 children in Malawi…. for an entire year!

    After the wall came down in 1989, in the early 90s I was a R&D management consultant in the chemical and pharmaceutical Industry, negotiating on behalf of the Industry with the BMWi, the federal ministry of economics and technology in Berlin. I was a young and ambitious man with a talent of winning hearts and minds, and my days were filled with appointments, at least 3-4 every day. I drove around in a limousine with a chauffeur, and on the journeys to the next client I was working in the car, dictating letters and scientific reports, reading papers, making phone calls. Life in the fast lane with no weekends and no time for a healthy private life. The economic side of things was not my main interest, more the management and scientific side, although the economic result was in the higher 3-digit million Deutsch Marks that went into the accounts of the industry.

    It was in this time that I was reading about people such as Joseph Schumpeter, Peter Drucker and at a later stage Fredmund Malik. The term creative destruction is a Marxist term originally, but somehow it was Schumpeter who managed to bring this term into the public sphere. – Sorry, but this blog does not allow a longer link list to be attached, but google is your friend! –

    In 2002 Fredmund Malik published an article in the conservative German Manager Magazin on the status quo of American finances and the high probability that the official figures were all wrong, and Malik was right!

    In 1993 the USA switched to SNA – System of National Accounts – which was originally developed by the United Nations as early as 1953 in an attempt to be able to better compare economies. However, the motivations for the United States to switch to SNA was of a different kind!

    The fascinating aspect of this timing is that in Europe a few months earlier the Maastricht treaty was born, which is based on the same and not accidental but deliberate error, that you can take sovereign debts and relate them to GDP. – It is what I always called the Euro Lie! – From Maastricht treaty: The ratio of the annual government deficit to gross domestic product must not exceed 3% at the end of the preceding fiscal year…. The ratio of gross government debt to GDP must not exceed 60% at the end of the preceding fiscal year.

    In the US, the creative accountants and Alan Greenspan entered the stage during the Reaganomics area in 1987 and Greenspan should stay there until 2006, for nearly 20 God damn years!

    Conveniently, the World Bank, representing American interests of course, delivered the handbook for what I would call protracted state default: http://preview.tinyurl.com/3vg5hv7

    US debts went from 900 billion in 1980 to 3,2 trillion in 1990, tripling in a decade. If you take on debts, your creditor will want to know how you can afford to repay the debts, well, he should want to know, but as we learned, this was not the case in Ireland.

    In a sane world borrowing should be related to tax revenue income streams, the sole income stream of a state, hence the income that will allow the state to repay the debts, wouldn’t you agree? Not so in our world, it is related to GDP instead.

    Since the US switch to SNA in 1993 they were able to change this. A production account on the plus side of the books would be booked against a capital account on the minus side. Then came the excel spread sheet artists, mathematized conformist economists, creative accountants, you name them and the games started.

    The higher GDP climbed, the more debts they could make, and the position of ‘Production Account’ opened the box of Pandora. It allowed them to freely define the prices for consumer goods, but industries such as Computer and Software for example are notorious for rapidly falling prices. So logically, the GDP on their books in this Production Account would fall equally, right?

    Not!

    ‘Hedonic pricing’ is the magic wand here, as it turns the relationship around. Computers that have already fallen in price, now are listed twice as expensive if they doubled CPU and memory capacity, I know this sounds ridiculous but it was exactly that! Hey, no doubts, you can find an entire army of economists that will shit in my moccs now, Nobel prize winners, established writers, but I urge you, think about it yourselves and do not take for granted what the debt junkies trumpet as righteous, the legions of sustainable growth priests and conformist economists with their spread sheet schizophrenia.

    The whole economic boom in the US of the 90s never took place. It was a pure PR exercise. By using this statistic effect of Hedonic Price Indexing, they created the Illusion of a growing GDP. De facto, during the dot com area, the enormous IT Investments appeared in the US accounts 20 times higher then their real economic value.

    There was no evidence for quantitative gains in US productivity, it was a scheme to raise debt levels. Creative accountancy at it’s best, in other words, legitimized protracted default, outright fraud. The entire US economic data was based on fraud, and this clever/fucking stupid move to relate debt to GDP.

    The parrot like copy cat of European economies of US models, hey they have to be right, they are from Harvard, Nobel price winners and so on you know, was no surprise at all. We all know what this Swiss Bank Nobel prize in Economics means, LTCM, Long Term Capital Management shall be remembered in this context.

    The percentage of hedonic pricing in the US accounts became bigger and bigger. The most important aspect, and this is what I am saying since I post here on David’s site, is the relationship of economy and war, hence weaponry.

    Every Apache, every missile shot, every aircraft carrier, Homeland Security, and the two million people incarcerated in privately run businesses in the US, all this lets their GDP grow in the SNA accounts. Tax revenues would never be enough to pay for the worlds most expensive army, police and justice institutions and businesses, it is paid with debts through this SNA scam, and the very same costs at the same time, they let the GDP grow again, hence they can make more debts.

    Perpetual GDP growth = perpetual debts.

    There are economists who calculated what the US GDP would look like without hedonic pricing and they concluded that there was no economic growth in the US since 1993.

    The very same methodologies are applied in Europe since the Maastricht treaties, the Euro Lie, GDP is used to relate to governments debts, and not tax revenue!

    Governments, Central Bankers, FED, ECB, they all were in this debt scam since 1992 and 1993, they used the establishments like London School of Economics, Harvard, Nobel prize winners and everything at their disposal to force this down the publics throat.

    Those countries who point their fingers at Greece for accounting fraud make me laugh out loud, those who call them sinners and lazy Mediterranean workers, such statements you can read from Angela Merkel these days, the hypocrisy they display is disgusting to the bone and has only power political motivations.

    Yes, Greece tried to hide their debts with the help of, big surprise, Goldman Sachs, but Ireland and the UK just did the very same just the other way around, by manipulating growth figures to pretend high GDP.

    Austerity and the sale of peoples assets is downright theft and it will not help a sausage to solve this debt crisis. This theft is performed by Banksters and their mafia, the EU Commission and the IMF, who play the good cop bad cop game with us.
    The Trichet style if you don’t pay I brake your legs could come right from the film The Godfather, I think I will refer from here on to Trichet and his successor as the Godfather, it is appropriate. The assault and destruction of the productive class is a declaration of war against the people of these Nations. They are under attack by the ideologically locked in forces who steered these nations into catastrophe. The practice of deliberate over leveraging GDP is the underlying cause for sovereign debt crisis. The accounts of all these nations are fraudulent. The pretended US economic boom of the 90s was used as an excuse to slash wages in Germany to stay competitive.

    x x x x

    This crisis is one of many, and the transgression to a new consent needs to involve the people. Austerity and paying odious debts to Banksters is the methodology of the old guard who is willing to commit social genocide instead of admitting they were wrong, they are ideologically locked in. Lagarde is part of this old guard. The IMF always used austerity as a means to steal national assets, this is what the IMF does.

    Economic mainstream schools will not admit that they were wrong, history will pass this judgement, as it did with LTCM.

    Solidarity and unity amongst the people is needed to stand up and bring this insane and absurd theater to a full stop. There are other ways, there are always other ways, and those who you listen to since many years with their ‘There is no other way’, well, they are the austerity priests, the executioners of millions of people, they will do everything to pressure Greece into selling their assets and of course, their Gold as collateral. The multinational vultures are already circling the skies awaiting the wave of privatization.

    Water, Energy and Food is the basis for any human development, the basis from which more equality and true democracy can grow. Assets like water, food and energy do not belong into the hands of ruthless profiteers, they are part of human dignity and human rights, the universal declaration of human rights.

    The result of FED’s QE policies are correlated to the increasing commodity prices!

    The ECB is overexposed to worthless collateral, and they brought this upon themselves when they abolished their standard for Investment grade collateral before Greece went belly up. On May 25th, the European parliament decided to accept Gold as collateral, this is the legitimization for the theft on peoples assets, and it will start in Greece but not end there.

    The dumbing down of public opinion in Ireland that this crisis is due to Lehmann Brothers was a deliberate misinformation to distract from the fact that Irish Banksters and a complicit government with their cronies have brought this misery on Ireland, and to date all of them are free, enjoy their riches and their lifestyles or even stand in line with well wishers to greet the visiting Queen of England.

    This Heist is far from over!

    This here:

    http://www.economist.com/content/global_debt_clock

    is the ultimate dooms day machine, it is the countdown timer to social upheavals, revolutions and wars, the counter for social genocide, starvation and death, and it constitutes nothing but bits and bites in computers that can be deleted, reset, push the fucking button! – Debt forgiveness! – Economists notion that ones liabilities are another ones assets does not apply on this level anymore, it is unethical, and nothing but stereotype STE, Standard Textbook Economics.

    We all need to feed our children, we all want to live in peace and prosper, we all want to live a healthy life in dignity, happiness and freedom, it is our all human right to demand this. The real problems we all face are of much greater importance and they concern the entire planet and the very future for our children.

    Countless people died for these values, freedom and peace, these values are being disregarded, taken away and substituted with a totalitarian bureaucracy and police state methods. The Lisbon treaty was not empowered by a European Referendum as Habermas so rightly demanded, how can this be legitimate if the people were never asked, it is not!

    ECB/EU-Commission and IMF are committing social genocide on behalf of vested interest groups in Banks, beneficiaries of accounting fraud, reckless lending and ruthless casino capitalism.

    Firing teachers and nurses and slashing government wages 35% would lead to an economic renaissance, said Anders Aslund, IMF economist, and this is just one of the many voices shouting from Absurdistan, one of the many spread sheet schizophrenics, and nothing else. All these inhuman measures imposed now on Greece, Ireland, Portugal and more to come are based on those absurdities.

    All private Banking debts and all bailouts to repay them are odious debts, they are hostile acts against the people of Ireland and need not to be repaid. Any further austerity and selling of the peoples assets needs to be rejected loud and clear! To not hold a referendum on the private banking debts and constitutional matters is undemocratic.

    Best
    Georg

    P.S.
    This article is dedicated to ‘doflynn’, Diarmuid O’Flynn, one who stands representative for the many and their personal courage and efforts to show solidarity and stand up against what is unjust. Thank you Diarmuid!

    P.P.S.
    This article is based on text and audio sources from:
    World Bank – IMF – European Parliament – System of National Accounts Handbook 1993/ SNA93 (the United Nations Statistical Division, the International Monetary Fund, the World Bank, EUROSTAT and the OECD) – World Gold Council – Real-World Economics Review Blog – World Economics Association (Member) – The Basel Institute of Commons and Economics – Bureau of Economic Analysis U.S. Department of Commerce Washington, DC – Prof. Dr. Fredmund Malik, Malik Management St. Gallen Switzerland – Prof. Max Otte – The German Morgan Kelly! ;) – and many more…

    • Deco

      For an interesting perspective on US national statistics, check out a website called “shadowstats”.

      http://www.shadowstats.org

      The main author is former US statistician general, John “Walter” Williams.

      In it he exposes how Reagan’s team changed the inflation statistics in the 1980s, how Clinton’s changed the inflation statistics and the unemployment statistics, and then how Bush and later Obama administrations introduced new “improvements”.

      Using the older mechanisms, Williams reckons US inflation is twice what it is reported to be. He reckons that the official unemployment rate is half the real rate.

      Europe after Maastricht went in the wrong direction. It became more about power, and less about co-operation. The Treaty of Maastricht was the Rubicon that was crossed that marked the end of the Republic, and the begining of the Imperial Age.

    • MidasMoney

      Georg has it well sussed. For a detailed insiders bird’s eye view of how the criminal neo liberals and their criminal associates took over back in the 80′s, read Catherine Austin Fitts article;

      http://www.dunwalke.com/

      Austin Fitts, former managing director of Dillon Read on Wall Street, was Undersecretary to the Treasury in the George H W Bush administration, and she discovered massive fraud and criminality in both of those roles, particularly in Freddie Mac and Fannie Mae. Read about how Corrections Corporation of America led to the highest incarceration rate in the world through the privatisation of the prisons system and how KKR, (Barbarians at the Gate) laundered drug money, and Dich Grasso, former boss of the NYSE was pictured embracing FARC leaders as he visited them to pitch for their narco dollars for investment in Wall Street.

      The Matrix isn’t fiction, it’s real. It’s our reality that’s fiction, or at least the reality that’s presented to us that’s fiction.

      This is the insider story of how the oligarchs took over government.

      • Deco

        That is the number one benefit of this website. So many people who have found a different aspect to the crookery that is in progress, make their own contribution in some way.

        The official purpose of Freddie and Fannie is to “promote home ownership”. Actually, it is to provide subsidies to the ponzi scheme that is the real estate market. They effectively create a floor in the market. They are now both bankrupt. Run by jokers, for the benefit of jokers, at the expense of US taxpayers. They are responsible for the suburban buildout of America since the 1940s, which is responsible for the US Oil import bill.

        At the root of America’s chronic problems with it’s trade deficit, are to be found two government sponsored agencies for promoting suburban sprawl.

    • mrlennyman

      Mr. Baumann you show great knowledge and elucidate these matters succinctly and without prejudice or tailored vision. Up until this very point I followed most of Davids theses. But I am now aware that his is the kind of learned insider knowledge which is trapped by a limited ideology. How could someone who purports to being a voice of reason and economic wisdom come out with such outlandish comments and regard following Bernanke and his cohorts in the good ole US of A as being something which we should ascribe to?
      I am deeply puzzled to be honest. Surely there are more people here who share your notion that we are in the whirl of a massive power struggle between old school Keynesian economics, funded by those in the power elite, against the free market which gives everyone an even keel, even those who are socially less ambiguus.
      The points you rasie about Debt vs GDP is a fundamental issue. We live now in a world where IMF, ECB and Fed Reserve all issue us dictates on what we should do and how we should borrow. There is no sovereignity anymore. The majority of politicians are either too stupid or too corrupt to do anything about it.
      Big change though has to be upon us soon. I recommend you read http://www.thedailybell.com/2417/Queen-Worried-About-Empires-Meltdown.html although I am sure you are well versed in this very fine publication.

      Good luck to you sir

    • markfl

      Georg, what was the effect of USA going off the gold standard in ’70s ?

      • :) such a small question, but perhaps one of the most important to ask for a better understanding of our Situation. Thanks!

        Democracies can not function when there is a extreme concentration of wealth. This is insight goes back to Aristotle.

        The greater the so called middle class is, the higher are the chances for a functioning democracy, however, it does not automatically bring a better democracy, as it is dependent on the direct participation of this middle class, and if they are constricted to pure consumerism it is counter productive.

        Without a broad basis of a middle class however, democratic basics values will just be ignored by those who hold the majority of wealth. What we see on a global scale now is the eradication of this middle class.

        The implementation of Malthus and Ricardo lines of thought, If you can not survive by what you can make on our markets, go and die, led to riots in Britain that were put down with military might.

        If you go back to the early 70s, which was the point where global industrial growth went into a long downward slope, stagnation of productivity and wages was the trend until the 90s, then it changed, which I explained in my longer attempt on debt that is related to GDP above.

        The golden age of capitalism was an age of redistribution of wealth into the hands of a few, extreme profits were reaped and at the same time global income differential increased, hence inequality. The stock market was the temple that was worshiped. Again, less than 1% of global households own roughly 40-50% of the wealth, and if you filter that down further you will find that something like 0,5 % own 40% of that. Millionaires households and billionaires households.

        At the same time, policy makers argued, and here neoclassical economy was used, that competition requires us to slash wages of the productive class, the class that makes more than 70% of households, so wages stagnated or were even slashed.

        Of course, you know that this hit many families in the developed world, with many now in need to have both parents working, sometimes more than one job to make ends meet, but in the undeveloped world it hit with the greatest devastation.

        So all this can be dated back to the early 70s, and it was there that Bretton Woods was thrown over board for a fluctuating system instead of a fixed point system. Bretton Woods was very much for freedom of trade, and I related the dismantling of Bretton Woods to the deliberate, and not coincidently failure of the DOHA talks to date.

        Bretton Woods meant also that a fixed rate exchange was used, and financial markets were not on the loose, they could not create a system where $618 tln of
        casino money stand against 60 tln of real global GDP. The latest Boston Consulting Group Global Wealth Report 2011 noted $122 tln to be privately held capital, this more than twice the global GDP, and it is in the hands of a few that continue to maintain status quo.

        The Gold standard was not a gold standard per se, because the dollar was related to it, it was a dollar standard really. However, it was a fixed rate exchange and prohibited a global heist on the scale that we witness today.

        States that refused to leave this standard were forced by the neo liberals to do it by creating conditions in the market that excluded them if they were not compliant.

        It was the beginning of US policies to put pressure on to deregulate finaical markets , and force american imports. Britain of course played ball all along.

        As a result, the wealth concentration increased, and the income differentials spread, more inequality, more suffering. One of the main factor’s in their game to understand from an economical point is volatility. Markets with high volatility are fleecing grounds for speculators and rigged market that can use high frequency trading and other phenomenons to abuse this volatility and get what I call guaranteed profits. if you saw the google Zeitgeist video where David was on as well, you might have noticed how ‘Peackock Gabor’ from the Handelsblatt explained lloyd Blankenfein’s views, it is exactly that, guaranteed profits.

        You and I are excluded from this scheme of course. It is designed that way, you can not trade in these markets and have no access to the technologies and schemes that allow them to rig markets and reap guaranteed profits, they just can not loose in this concept.

        You have to consider that real world economic fundamentals play no role in these markets! The capital that is now concentrated in these hands can easily be used to shift global power dynamics, and to destabilize entire regions, manipulate commodities and literally everything at their disposal.

        Technical trading is their domain. Pushing huge amounts of capital around in short amounts of time, and reaping predictable, or even guaranteed profits. It is what the common people with little insights in these structures instinctively call the rich get always richer.

        Something like 75% of FX, foreign capital exchange has a turn around time of less than 5 days, again, filter that down more, and you find that a high percentage of the 75% have turnaround times of 1-2 days and less.

        This is why I call a certain type of economists, spread sheet schizophrenics. Of course, they are all equipped with a Ph.D. from LSE, Harvard and so on. Again, remember Long Term Capital Management, it was accompanied by the ‘Swiss bank’ Nobel price!

        The first crisis that followed the destruction of Bretton Woods was the Asian crisis.

        P.S.
        Pheww… it is fascinating how a little question sometimes requires a very large circle to be drawn to even remotely give an adequate answer.

    • paddyjones

      pompous idiot to think that we would read this

      • You are rather a case of advanced narcissism or you represent the readership of this blog.

        Have a productive day!

        • EMMETTOR

          Despite the fact that I agree with so much of what you say, your posts increase my knowledge and make me think. Your last 2 have made my head hurt from thinking so hard (I have got a very bad cold!). Keep up the good work Georg.

  3. Heron

    Memo to David McWilliams

    Printing money will only lead to hyper-inflation. The USA is as good as finished, and everyone, even the politicians will be able to see that within a year. Only the deluded or poorly informed could possibly think otherwise.

    I normally really like your articles, but your lack of knowledge in the broader economic sense is somewhat disappointing. You should read up on people like Gonzalo Lira, especially his hyper-inflation posts. It’ll educate you.

    • Deco

      Currently the US Treasury (Geithner) issues Treasury bonds and sells them to the US Federal Reserve (Bernanke). At this stage nobody else will buy them. The Federal Reserve is now the lender of resort for the Obama Administration. No mention of this while the Irish establishment was in the midst of its asskissing episode last week. It is literally printing money and hading it to state agencies who then throw it at the real estate sector in an effort to “stimulate” the economy.

      If that is not a ponzi-scheme I do not know what is. It is a synergy of the errors of Krugman and Bernanke combined. They get away with it thanks to the absurd CPI and unemployment measurement process that is going on. It is this type of idiotic, senseless, degenerate, ill-constructed assumptions about economics that will cause the US massive problems in the decade ahead. I reckon that this will seriously knock whatever is left of Western Civilization. (though another unofficial undeclared unpaid war is also an option – eg. Libya)

      David – your comments about the world not ending for Bernanke will come back to haunt you because Bernanke is printing money to keep the US economy afloat. It will result in an above normal US inflation rate.

      The most consistently Democratic Party (Tamany Hall) run states in the US are all as bankrupt as Greece. Michigan, Illinois, and California have layers of insolvency that even the Greeks don’t have to deal with – and their assets are even less. They do not own the ports or the telephone system. They don’t even have politicians who tell them that they are living beyond their means, which even the Greeks can manage to do every now and then. And they probably have even more connections with GSucks – which is a serious liability.

      We know that the major Democrat run states are bankrupt thanks to the internet. Pravda don’t even cover it because of the similarities between the political machines in the US and in Ireland. Probably, no mention of it in the Irish Times either. This is the problem with assymetric coverage – you only get to hear about one shower scelping working people, when the reality is that they are all scelping working people with equal determination.

      • Falls

        exactly…printing money is just increasing the availability while reducing its value…so in other words, i now have the irish government taxing me every time i move, now taxing my pension to create painting jobs in schools and now the ecb wants to take my savings…fantastic…

        so i am one of the idiots who actually pays their bills, paid their mortgage and for that i get shafted to pay for all the people who didnt give a flying fuk…i mean seriously, is this the best we can come up with in Europe and indeed the US?

        • Colin

          Memo to Falls

          You should count yourself lucky you have a job, pension, own your own house and all that jazz. If you don’t believe me, try living on the dole for over 1 year.

        • EMMETTOR

          Indeed, the world cannot afford the rich.

    • ouldbegrudger

      I disagree. A controlled burst of money-printing/inflation might be preferable to its evil twin, deflation. It would be a more socially equitable solution than austerity or looting private pension funds. For people in debt, that’s us, inflation is your friend because it eats at the value of debt. Deflation/falling prices and wages further increases the pain and burden of debt.

      And before anyone raises the specter of those on fixed incomes, please note that this implies their exposure to the bond markets and while inflation may lower their purchasing power somewhat, it is to be preferable to the bond wipe-out that is sure to result from present EU policy.

      There are no good solutions to this mess. A standard-of-living adjustment is underway for most regardless of the mechanism of economic policy. The deflationists have no equitable solution to the private debt problem.

      In a nutshell, deflation favors the wealthy and screws everyone else. Inflation, while painful, is at least going to help defray the debt problem. For our children and not-yet-born taxpayers, we should be working to solve this in our generation. The deflationists are trying to kick the can down the road (again!) by ensuring that we do nothing to get the debt/GDP ratio under control.

      • Inflation can quickly be self defeating if it turns into Weimer hyperinflation. It’s not a choice between inflation or deflation. there are other choices. The derivatives question needs to be addressed along with an overhaul and reform of the bondmarkets, return to new Glass Steagal and tighter regulation of financial instruments that have been corrupted.

        There’s no saving pension funds with unwise investments made into Icelandic/Irish banks or derivatives and CDO’s paper assets built upon the foundation of toxic property speculation.

        http://bizfinance.about.com/od/smallbusinessissues/a/Glass-Steagall-Act.htm

  4. Deco

    Print-Baby-Print.

    By the looks of matters with respect to real estate inflation in Western German cities like Hamburg and Munich, the ECB is already in druck-maschinen mode. [In the boom you could see people walking through Dublin Airport bringing printers from their trips to Germany, because they were half the price being charged in Dublin].

    The Krugman Doctrine – Borrow-baby-borrow.

    The Bernanke Doctrine – Print-baby-print.

    The Trichet Doctrine – keep pretending that you are more serious than the other two, that you are a hawk, and be just as useless as the two of them.

    The fact is that since the early 1990s, Europe has been in decline – except cheap monetary policies, and ponzi-nomics have been attempted to sweeten the road to building up the empire. It is necessary to make the people of Europe enthusiastice about their new empire. Therefore give them cheap money.

    There is no need to tell the ECB to print their way out of the crisis. The ECB printed their way into to the crisis.

    The ECB is involved in a game that we Irish know very well from our own institutional state – maintaining the pretence of propriety.

    When Spain hits the whirring object, that is the moment that the ECB wants to reserve as it’s “print-baby-print” move moment, in case proof of concept with regard to the bailouts of Greece or Ireland have failed before then.

    PRINT-BABY-PRINT.

  5. Deco

    Read Tom McGuirk’s article yesterday and it is fascinating in the context of Lenihan, NAMA and the Icelandic approach.

    In fact it verifies the sense of the Icelandic approach.

    But don’t worry. We are not going to do anything that renegade here. We are going to do as we are instructed. We fall into line. Nationally as well as individually, the Lemming is the one who is presented as the ideal behavioural model.

  6. [...] McWilliams latest article Memo to ECB: print money is right if a little simplistic.  The ECB has been crediting banks – their version of [...]

  7. dwalsh

    ECB printing would not and will not solve the crisis. All the printing thus far by the ECB and the FED etc has only delayed the end-game. The end will come when people begin to wake-up and realise how insane it all is.
    People have lost perspective on life. They were duped into an economic myth; the myth of the Golden Calf of the market; which is now collapsing; and threatens to take everyone and everything down with it.
    So long as we believe the myth we will be enslaved to it.

    • Deco

      Actually, the myth is the myth about real estate. And it is not a free market, because it has been manipulated in every possible way from various levies, and incentives – through to the entire remit of the ECB’s monetary policy, plus the active propaganda of the Irish mainstream media and the property porn epidemic.

      • dwalsh

        Real estate is just part of it Deco.

      • EMMETTOR

        Obviously I don’t need to point out that there is no such thing as a “Free Market” as it’s been defined by any economics texts I’ve read. It’s a theoretical abstraction that has never existed in the real world, despite being a cornerstone of Economic Theory. I equate belief in it with superstition.

    • Colin

      Memo to dwalsh

      What’s so wrong about Print Baby Print? How do you know ECB printing will not solve the crisis? Lets give it a chance at least, and if it doesn’t work, then what harm has been done in the meantime?

      If Print Baby Print brings down unemployment, then surely its a good thing. Maybe the € will be devalued as a result, and we can export more and create more jobs at home? Wouldn’t that be a good thing? So savings (aka childrens allowances) would be de-valued, too bad, you do not have a divine right to demand your savings should never be devalued.

      • dwalsh

        Not saying there’s anything ‘wrong’ with it Colin – nor anything right with it either; it’s just what the central banks are doing. I am only saying it will not solve the crisis or save jobs long-term; it’s only buying time.

  8. The Dork of Cork

    The ECB does not have to print money like the FED
    The BIS acting as the dealer could mount and I believe will mount a physical gold auction for cash from the CBs and other big players.
    They could fix the Euro problem over a dirty weekend in Basel.
    It would finish the dollar as the worlds reserve currency however.
    Hence the IMF/dollar – ECB/BIS friction.

    Roosevelt did something similar when he nationalised the Gold in the US treasuary – it will be done again.

    At 10,000 Euros a ounce the ECB will have a lot of cash……………..

    • Deco

      Germany’s gold is in New York – has been there since the Cold War. I don’t know why Kohl did not ask for it back.

      Spain sold 60% of it’s gold reserves on the way into this crisis in a move that effectively shortchanged the Spaniard in the street by about half it’s current market value.

      When the gold is sold, China will buy it. China will have real reserves, and Europe will have paper plus Club med apartments, and Irish bank shares…

  9. Look forward to postings from Argentina. Great thought provoking article.

    Read this morning a post by Seafóid on the Smaghi thread on irisheconomy, “In his 1926 book Wealth, Virtual Wealth and Debt: The Solution of the Economic Paradox (a book that presaged the market crash of 1929) Soddy pointed out the fundamental difference between real wealth — buildings, machinery, oil, pigs — and virtual wealth, in the form of money and debt. Soddy wrote that real wealth was subject to the inescapable entropy law of thermodynamics and would rot, rust, or wear out with age, while money and debt — as accounting devices invented by humans — were subject only to the laws of mathematics. Rather than decaying, virtual wealth, in the form of debt, compounding at the rate of interest, actually grows without bounds.”

    There’s a growing realisation in the world that there is a limit to the amount of debt that can be created out of nothing. The more money is printed, the less the value of the dollar or the euro, the less both can buy. Inflation occurs driving the value of the dollar or euro down more.

    There’s another problem the ‘print baby print’ won’t solve. In the US the economy has come back on stream producing once again GDP numbers it hit before the 2008 Financial collapse.

    But unemployment has not disappeared. Previous high GDP growth figures have occurred on profits, but only obtained on the cutback of tens of thousands of jobs in the manufacturing and other sectors. Profits are still made but fewer are needed to achieve those profits.

    In Ireland and Greece unemployment has skyrocketed and will continue to do so with further cutbacks in public services and in the construction industry. The downstream effects of this across the services industry and the whole economy are still accelerating and have still to peak. There are fewer at work to pay tax because of higher unemployment and emigration and the high cost of this.

    Refueling economies ballooned on debt with new debt will only create further debt and inevitably mean default when the debt reaches a point where it cannot be paid back. I believe this is where we are with Ireland and Greece.

    Printing more money and pouring more debt into Greece and Ireland is just pouring money debt into black holes that at the end of the day will suck the ECB and EMU into a debt vortex that will destroy them.

    Plus the savers/depositors of Germany and France get burned and see the value of their savings deplete as they disappear into the Irish and Greek black holes.

    Printing money in a fiat money system means nothing else but printing debt. Savers, depositors, investors pay for it through the depletion of asset values including the asset base of their own dollars or euros.

    If the newly printed debt is added to the stockpile of debt faced by countries with tax/revenue raising difficulties caused by austerity, this represents a further loss to savers/depositors and investors in the core EMU countries.

    Some form of debt forgivemess (‘m’ yes its a new word) rather than ‘print baby print’ is the way forward:)

  10. The Dork of Cork

    @DECO
    I believe much of the Swiss 1100 tons sold + the British 600 tons , the french 500 tons and even the Irish 5+ tons is in connected private western hands.

    Once this punch and Judy game is over you will see – the Euro was specifically designed to kill the dollar and soverginity withen the Euro zone.
    “They” will destroy the value of goverment money via the revaluation of private money when the drama has reached a crescendo.
    But they must hold just a bit longer. – timing is everything when you want to instill a feeling of suspense.
    Remember the big players must need a mechanism to get out of the dollar implosion which was inevtiable after the dollar default of 71.
    This dollar freeride is over.
    The Big players need another ticket
    Freegold is their ticket to ride.

    • Deco

      When money is printed, they rev up the GDP statistics – but that money usually flows firstly through the banking system.

      If printing money is such a good idea, why not print money and hand it over to the HSE, instead of the banks as a means of increasing GDP. There might even be the side effects of making people live better. But running it through the banking system is a disaster. And it certainly is not morally superior to allowing the banks to take a hammering for their stupidity.

  11. Philip

    Gold is just an element on the periodic table. Economics based on monetary value is now proving to be a nonsense for the exchange of goods and services in this age of increasing social awareness and increased inter connectedness. The ECB and Fed are kaput. People want a quality of life over gross possessions. People see they are dying from excess and idiotic responsibilities of ownig and managing too much.

    The joke is that the value of the recently over valued is now seen for what it is. Zero. Real value is about living with little and becoming more healthy and aware of what little you really need. Sorry if I sound a tad evangelical, but really I am getting sick listening of a creed the somehow suggests there is a way back to something slightly less noxious than the last 10 yrs. Why not write a book that goes against the current nausious groupthink of doomsayer and starts to suggest we are headed to the best of times with a new economics emerging not based on the Victorian dynamic of money but on knowledge and global diaspora. Start defining wealth in a new way and use some imagination rather than tout tiresome and negative told you sos. Money as a concept is finito. Start looking at first principles of economics which looks at the issue of scarce resources a nd work from there.

    • Emperorsgotnoclothes

      +1
      Great comment Philip! In order for the kind of social system you allude to actually emerging then the world as we know it, and the economic system upon which it is predominantly based, needs to be dismantled. Of course this isn’t going to happen while there are so many powerful vested interests at stake. The only hope really is if the tower of corruption that it is collapses spectacularly. From the rubble there would then be the possibility of reconstructing a more wholesome, kind-spirited system of economic interaction with the concept of value having an entirely different meaning to its current form. The institutions which promote and propagate the value-system which forms the basis for modern economics need to undergo a quantum leap in philosophical evolution. The hope for real change is there because people have begun to see through the spoofery of officialdom. Their greed and corruption will ultimately be their undoing and the seeds of their destruction have been self-sown. In my view the notion of printing more money to solve the problem just serves to highlight the absurdity of the system itself, and the debt/enslavement that it inevitably produces. Maybe when folk start to reassess their notion of what it means to be free then they might begin to examine more closely the world around them and questioning the economic assumptions that have served to shape the societies they inhabit.

    • Colin

      I agree Philip. Remember the old adage ‘Health is better than Wealth’? Its true. If you’re wealthy and unhealthy you cannot enjoy your wealth. What’s wealth for anyway? Is it coveted for status? or power? or to keep up with the Joneses? Its all bullsh1t.

      My advice for everyone is to adopt a healthy lifestyle. You’ll feel great when you’re physically and mentally fit, so good in fact that money wouldn’t be able to buy you that feeling. Some might say buying drugs will get you that good feeling, but you’ll pay for that another day.

  12. wills

    David.

    Keep your eyes peeled over there.

    The article in bringing the facts together seems to me to be bringing into focus that there is something fishy going on.

    The ECB know they can roll the printers at anytime.

    They are making a fuss where their isn’t one.

    Now if the ECB print rolled to soon they would raise eyebrows amongst the masses.

    People would be wondering to themselves why should they go to work 40/50 hours a week when the ECB can come along and print run euros to give to banks that are bankrupt.

    The ECB plays it all like a woman in a flap and throws everyone of the case before they go ahead and roll the printers and funnel the cash out to the [rivate banking bank robbing networks.

  13. The Dork of Cork

    @Philip
    The monetory powers will just create Gold fever to bail themselves out of their credit games so that they can start again.
    You cannot fight mass irrationality with indivdual rationality – you will get steamrolled.

  14. David, I’m confused on this one. In one of your previous articles you said that savers should be rewarded for acting wisely & not loosing the run of themselves during the boom. But this article advances the argument for printing money, this will lower the values of saver’s savings by the very fact that the more paper money there is in circulation then the less goods this paper money buys, hence savers are punished? Have I got my head around this correctly?

  15. Also won’t printing money drive up the cost of food & basics hurting the poor, while the elite will not be effected because most of this new printed money is given to them to pocket anyway?

    • Deco

      It already has. Look at Egypt.
      Of course the official reason from Bernanke is the fires in Russia last year. Blame it on the weather.

  16. uchrisn

    A more expansionary monetary policy in the form of low interest rates and a weaker Euro would help Irish, Greek and Portugese governments because it would make their now huge debts easier to pay. It would also help their businesses to boost exports and hopefully by doing do create employment. This should be done in conjuction with debt restructuring and issuing of Euro-bonds to fund these countries. The ECB may have to print Euros in the case of restructuring.
    On the downside the people who are owed money including German banks and normal savers would lose the value of their repayments and inflation would rise. There would also be some political cost in angering Brazil, India etc. People you are worried about losing savings should put them into Swiss Francs, Norwegian Krona or Silver/Gold.
    The Euro was going to crash in 2002 just after its introduction and had to be saved by intervention and co-ordinated buying by the G-7.
    Once a slide starts in the value of the Euro, with the speed of todays electronic markets the ECB could lose control again.

  17. uchrisn

    Incidently the G-7 were involved in selling Japanese Yen recently after it got too strong after the earthquake, They intervene in ‘free floating’ currencies in emergency situations. I wonder if Mr. Bruton was aware of this when he wrote of the end of the ECB and thus the world if the Irish don’t bail out the EU banking industry.

  18. uchrisn

    So if Greece can’t pay back the ECB and the ECB prints money to ship the loss, the Euro should weaken. The ECB being very concernced with inflation would sell foreign reserves (http://www.ecb.int/stats/external/reserves/html/index.en.html) and increase interest rates to keep the Euro strong. It cannot keep doing this indefinatly. So at a critical point, say Spain was to need a bailout, it might come under attack from speculators. It could experience large falls before the G-7 would step in and ‘save’ the day by selling their currecies and buying large amounts of Euros.

  19. Good Luck Diarmuid

    Its a beautiful morning today as the run to the Dail begins in Ballyhea and will pass through Limerick around 1.30pm .I am looking forward to seeing him in the City and to give him all the best wishes from this site.

  20. Emperorsgotnoclothes

    I don’t consider myself anything of an expert in finance or economics (reasonably well informed I reckon) but isn’t this the approach that got us into this mess in the first place? Correct me if I’m wrong on this but if the supply of money is suddenly increased significantly then won’t this ultimate devalue the currency and produce inflation? If the remedy to this crisis is as simple as Print-Baby-Print then surely that points to the absurdity of the whole system itself and calls into question its true meaning. I can’t accept that this is a serious suggestion for the solution to the debt-ponzi scheme scam we’ve been suckered into. Someone enlighten me please…..am I missing something elementary here?

    • Welcome to Economics …..the mighty animal is magic .

      • Emperorsgotnoclothes

        Well John, it seems that the whole charade is some form of alchemy alright – presided over by soothsayers, witch-doctors, and snake-oil salesmen! The suggestion by Philip above had a lot of sense in it. The whole circus needs to be brought to its knees in order for something more wholesome and benign to flourish.

        • and Irish financial sonderkommandos…..there needs to be a fairer distribution of wealth. Kudos to the fine Prime Time Investigates team for a great programme last night highlighting the awful effects of cutbacks on people with disabilities and their carers…

          ..Seems there is a debt tornado sucking resources away from both the poor and the middle class away to faceless bondholders helped by Smaghi financial sonderkommandos openly burning countries instead of bondholders… government haw haws used to operate and control the gear levers..

          Smaghi to leave on arrival of Draghi

          Ballyhea is on its way!

          http://bit.ly/k1lOGB

          • Praetorian

            I along with others had been directly lobbying Prime Time and its presenters to shift their gaze for a time off the bankers and to focus on the human story behind the cold statistics. I am glad this is finally happening to some depth, because a country is its citizens not its GDP or stock exchange quotation.

            However, I was quite shocked and disappointed by Frontline last night which appeared to pitch carers/disabled against those receiving Irish Aid (some of the poorest people in the world). Judging by the stream of invective on Twitter as the programme was unfolding, I was not alone in my rage and disgust.

            For me, without sounding too much like a conspiracist, there is a clear agenda afoot, first there was the divide and conquer, public v private worker, then obfuscation, lack of information and denial (no IMF coming) and attack all those as unpatriotic who challenged the ludicrous consensus. Then we had the people have to pay, as part of the ‘tough decisions’, the ‘pain’, and of course ‘we all partied’, wage cuts, pension levies and remarkably, cuts to the dole and minimum wage. Now we have a ‘new government’ but it is more of the same, continued bailout, bondholders reimbursed through Ireland courtesy of the ECB, and yet another assault on working people with the focus on ‘overtime’ which Fintan O’Toole wrote well about today in the Irish Times. http://www.irishtimes.com/newspaper/opinion/2011/0531/1224298147947.html

            I am not sure what it takes to wake the Irish from their slumber but the population is sadly beginning to look a bit like Rip Van Winkle, maybe it requires a defining moment, which may not be that far off given the apparent inepitude of the current government, with ‘Catch-me-if-you-can’ Kenny.

  21. Deco

    We should have thought that Brussels and the various EU governments would have been wary of appointing a former GS executive in charge of the ECB – in the light of the Greek entry into the Euro being facilitated in a fraudulent manner.

    Instead they seem to be climbing over one another so as to make it happen.

  22. Argentina…. or, “Rule of Gondor is mine, and no others!” Denthor-Steward of Gondor

    The warning beacons of Gondor had been lit since a long time, the Helens of Greece were the first to lit the beacon, followed by the Gaelic in Ireland, and in quick succession, more beacons were lit in all Kingdoms.

    In the Kingdom’s scrolls, the FT, it is written that the whimpering voice of Bini Smaghi rejected the notion that we can compare our situation with Latin America, but Bini Smaghi would never succeed the old Grey-Hair in Brussels.

    Denethor is known to have secretly used a palantir to probe Sauron’s strength. The effort aged him quickly, and the knowledge of Sauron’s overwhelming force exacerbated the depression that had taken root. The Grey Hair had broken with the basic rules of Stewardship, listening to the voices of Sauron from Deutsche Bank, Goldman Sachs, Paribas, JPMorgan, UBS, Credit Suisse and more of his armies followers, and Sauron’s armies had gained strength and wealth from their raids of the past few years.

    Argentina’ recovery was not driven by exports and high commodity prices, but primarily by domestic demand. It was not constrained by declining direct investment, but most of all, the government stood their grounds and negotiated the restructuring of it’s defaulted external debts. – Denethor in his depressed insanity is pressing Ireland fast into a situation where we are forced to default on external debts if we allow the continuation of Denethor’s policy to not restructure private banking debts. – The real costs of Argentina’s defaultwere much lower than the Denethor’s forfathers commonly believed to be.

    It is embossed in the scrolls of the house of Denethor that access to international credit markets will be severely reduced after defaulting, this is Denthors basic rule since many generations.

    It has become a standard published argument in policy circles.

    The reality however is, to prioritize immediate economic recovery over satisfying foreign creditor and international credit markets was probably the most important contributor to Argentina’s recovery.

    x x x x

    Denethor Steward of Gondor committed suicide on March 15, 3019 he jumped, burning alive, from the Tower of Minas Tirith when he realized that he holds nothing but worthless collateral and although only exposed with 6-8% himself, he knew too well that the Central Banks will have to take the hit under the laws of the land, but the uprising of the enslaved Kingdoms hindered him to steal and control their assets.

  23. Emperorsgotnoclothes

    Deposits held by Non-Residents in Irish Banks
    Source : Central Bank Money & Banking Statistics
    Table A.12.1

    http://www.centralbank.ie/frame_main.asp?pg=sta_late_data.asp&nv=sta_nav.asp

    €bn EU Non-EU Total
    Jan-03 76 115 191
    Feb-03 82 116 198
    Mar-03 85 113 198
    Apr-03 87 113 200
    May-03 83 112 195
    Jun-03 90 114 204
    Jul-03 98 119 217
    Aug-03 97 124 221
    Sep-03 100 125 224
    Oct-03 96 127 223
    Nov-03 101 131 232
    Dec-03 101 132 234
    Jan-04 103 135 238
    Feb-04 104 138 241
    Mar-04 104 150 253
    Apr-04 105 147 251
    May-04 106 157 263
    Jun-04 105 160 265
    Jul-04 113 155 268
    Aug-04 114 152 266
    Sep-04 114 154 268
    Oct-04 118 150 269
    Nov-04 118 150 268
    Dec-04 118 158 275
    Jan-05 126 161 287
    Feb-05 125 169 294
    Mar-05 125 176 301
    Apr-05 127 178 305
    May-05 134 185 319
    Jun-05 141 189 330
    Jul-05 140 194 334
    Aug-05 138 200 338
    Sep-05 141 206 347
    Oct-05 147 213 360
    Nov-05 140 217 357
    Dec-05 144 219 362
    Jan-06 145 215 360
    Feb-06 147 218 366
    Mar-06 148 220 367
    Apr-06 147 223 370
    May-06 147 225 373
    Jun-06 158 235 392
    Jul-06 152 237 389
    Aug-06 152 238 390
    Sep-06 149 242 391
    Oct-06 149 255 404
    Nov-06 147 276 423
    Dec-06 153 277 430
    Jan-07 158 281 439
    Feb-07 158 280 437
    Mar-07 159 297 456
    Apr-07 168 300 468
    May-07 169 315 484
    Jun-07 175 321 496
    Jul-07 170 315 485
    Aug-07 178 328 506
    Sep-07 173 338 511
    Oct-07 186 320 506
    Nov-07 196 321 517
    Dec-07 192 341 533
    Jan-08 203 358 561
    Feb-08 197 361 558
    Mar-08 197 363 560
    Apr-08 206 373 579
    May-08 205 365 570
    Jun-08 212 360 571
    Jul-08 216 364 580
    Aug-08 215 372 587
    Sep-08 207 372 579
    Oct-08 225 395 619
    Nov-08 240 385 625
    Dec-08 244 357 601
    Jan-09 253 362 615
    Feb-09 245 345 590
    Mar-09 240 324 563
    Apr-09 239 333 572
    May-09 231 334 565
    Jun-09 223 329 552
    Jul-09 222 345 566
    Aug-09 228 337 565
    Sep-09 219 333 552
    Oct-09 215 330 545
    Nov-09 210 330 541
    Dec-09 200 325 525
    Jan-10 204 321 525
    Feb-10 201 322 524
    Mar-10 203 319 523
    Apr-10 208 306 515
    May-10 224 315 538
    Jun-10 227 313 540
    Jul-10 226 307 533
    Aug-10 228 313 542
    Sep-10 215 292 507
    Oct-10 180 272 452
    Nov-10 178 247 425
    Dec-10 152 195 347
    Jan-11 153 181 334
    Feb-11 148 171 319
    Mar-11 145 166 311
    Apr-11 136 163 299

    • NAMA only €3 bn of €30 bn assets disposed of.

      http://www.nama.ie/Publications/2011/NAMA_Publishes_Q4_ReportandAccounts.pdf

      No word of the Nama levy, where banks were to make up the loss on transfers if a loss occurred? Was this overhead in the stress tests carried out on banks such as AIB recently?

      “The current position for these top 30 debtors [end April 2011] is that agreement in the form of Memorandum of Understanding [MoU] has been completed with 16 debtors [and is close to completion with a further 2], the Agency has commenced enforcement procedures against 7 of the top 30 debtors, and the agency is continuing negotiations with 5 of these top 30 debtors.”

      The legal industry can’t wait to get its teeth into these court actions when developers with nothing to lose head for the courts all at taxpayers expense?

      In Ireland, we don’t have the gold standard, we have the nama standard. €27 bn (ALLEGEDLY) of toxic loans and property held by NAMA much of which will become the subject of court litigation at massive expense for taxpayers, is our gold reserves, determining property prices as it manipulates the market with its golden property reserves:)

      Nama gold reserves determine the assets on the books of the banks. If Nama floods the market, presumably the banks would require further deep capitalisation.

      So NAMA is a big white elephant our Don Quixote windmill tilters have bought for taxpayers with €30 bn we owe to the ECB making a fortune for our financial
      sonderkomandos in the legal and financial industry.

      Let’s be honest and count the €30 bn as a total loss, hand the stuff back to the banks and give the banks some work to do in making good the loans through firesales or other methods.

      First up in any crisis is, identify the losses.

      Nama is only hiding them and making them worse!

  24. SM

    Georg, excellent piece and thank you so much for the effort and research in writing it. It vindicates what I’ve long thought about the industry of money and debt.

    If only we could just stop using money overnight. The only control they have over us is our need for money. If we made real efforts to reduce our dependency on money by using barter on a local scale, the banks would have less hold on us.

    This is the new revolution and it’s worldwide. It is the French revolution all over again.

  25. Praetorian

    For those who don’t think neoliberal-capitalism is a monstrously exploitative system, then this is a must read.

    Far from 5th Avenue, NYC’s financial district with its shady practices and alleged laundered drug money, fancy restaurants, bars and call girls, is the underbelly of the system, the virtual-colonies, peripheral countries serving ‘core’ ones, not too dissimilar from Immanuel Wallerstein’s ‘World’s Systems Theory’ or in the parlance of others, the ultimate insiders being served by not even outsiders, I give you the un-people, the invisible, Franz Fanon’s ‘Wretched of the Earth’.
    http://www.guardian.co.uk/global-development/poverty-matters/2011/may/31/global-food-crisis-guatemala-system-failure

    Memo to the world, we have turned the place into a basketcase with those who give the lash (often virtual) and those that take it. Put that in the corporate blow-hole and smoke it.

  26. manofiona

    “Printing money” is the monetization of government debt and Article 123 of the Treaty on the Functioning of the European Union specifically forbids the ECB from doing that.

    There is even some question as to the legality of the ECB accepting the junk collateral it has taken on so far as security for funding provided to the banks.

    The ECB is taking the defensible view that in the interest of the common currency, no Eurozone state should default (however described) and that in order to avoid default, the political leaders of the Eurozone states should have the courage to assume their responsibilities: those of the economically stronger countries to provide the necessary support for the weaker members and those of the profilgate member states to drive the reforms to the real economy that will be necessary.

    There really does have to be an alignment of all the economies of the Eurozone to the prevailing model as practised in the core countries and massive help for the peripherals over the, probably fairly long, transition period while that alignment is taking place.

    Nothing less will do in order to ensure the stability and long-term survival of the Euro.

    • uchrisn

      “We violated all the rules because we wanted to close ranks and really rescue the eurozone.” – Christine Lagarde on the EFSM. Read Eurozone for French and German banks.
      As you say the ECB acepting junk collatoral already broke the rules and is one of the reasons Axel Weber didn’t want Trichets Job.
      When Greece defaults we could see rule violation again to save the core banks, or as we will we told the eurozone.

  27. Greece is being flayed alive

    100,000 protestors were on the streets in Athens on May 29th.

    In Ireland FG’s Phil Hogan is on RTE, displaying a nervous twitch in his thumb, and announces Water charges….you will hear his choice of words more often from here on.

    ‘We are obliged to…’

    The flaying of Irish citizens which started under FF now under FG continues.

    Flaying is a practice that was used in ancient times, they take off your skin while you are alive and then nail it to the city walls, as a warning to those who would defy the incumbents of power.

    Flaying was not only in ancient times, in 1831 in the US, Nat Turner who lead the Slave rebellion in Virginia was hanged, then flayed, then beheaded and quartered. This act alone was not seen as strong enough to make a statement, the state executed 56 more who were claimed to be part of Turner’s slave revolution, 200 more were beaten to death by white mobs.

    After that event, State legislators passed new laws that forbid education for slaves and free blacks, restricting rights of assembly and requiring white ministers to be present at black worship services.

    In Ireland no skins need to be mailed against city walls, warnings of such kind are not needed, and people stand willingly in line to become flayed.

    Human dignity and human rights no longer matter.

    We are obliged to…. become flayed!

  28. bankstershill

    “David McWilliams: A sea change is needed in ECB – or we’re sunk”

    David was the inspiration for the above column you penned a few weeks ago and the current article the result of your encounter with the MMT proponents mentioned in the following link;

    http://smarttaxes.org/category/money-systems/

    If that was in fact the case David do you not think it would be a little courteous to the promoters of MMT and also to your own fan base to at least quote a reference to the discipline as I am sure a few would find it interesting, as well as also help spread the word of such a promising economic concept.

    • Hi,

      Read your

      http://smarttaxes.org/category/resilient-investment/

      “Now is the time for the Irish government to abandon its ideological torture of its own people and exit the Eurozone and restore its policy choices. It will be relatively smoother sailing once it makes that very monumental decision.”

      Thx, agree with your excellent perspective, employment should be the target of all fiscal policy, share your views on this!

      • bankstershill

        exactly, use publicly created sovereign credit as a means to mop up surplus physical and human capital, and to channel it into the maintaining and creation of essential infrastructure through a policy akin to FDR’s New Deal. Idle capital, weather it be physical or human, succumbs to the ravages of entropy and loses it’s potential. Put it back to work for replication before its to late. Remember, Economics is the fight against entropy.

  29. PuntNua sounds a bit droll for our new currency. How about, the Turlough ? Lol

  30. bankstershill

    Someone has to have the power to create and issue money. The Question is who, how is it issued and to what purpose is it issued.

    If it is directed towards increasing the physical capital stock of a particular region then the effect of issuing new credit money into that region will not be inflationary as the supply of money (demand) rises in tandem with the rise of physical capital (supply). The problem is when the creation of credit is handed over to the investment arms of insolvent banks who in turn speculate in the commodity markets , driving up prices for everyone else, in effect swindling the rightful share of the collective stock of physical capital of the average citizen. The reason for this is you simply have a greater volume of paper chasing the same amount of stuff. Money issued in this manner and used for this purpose is tantamount to fraud and counterfeiting. So the key to making an issuance of new credit effective is to make sure it is directed either at physical production directly or for increasing the potential of physical production by building infrastructure, scientific education ect.

    Commodity money versus Credit money

    The problem that most people have with the concept of money, including myself until relatively recently, is that many are stuck in a commodity money paradigm. That is they think of money which either pre exists or something which you have to dig out of the ground, and which is therefore conserved in total amount. This was certainly the case in ancient times when money was the actual embodiment of value, that is the face value of gold and silver coins was equal to the intrinsic value of the gold and silver. But the world doesn’t use commodity money any more, and not for many years. Our money is now created by central banks as credit money, and its called credit money since to accept it as payment requires an act of faith on behalf of the seller of tangible capital. On its first passage through the regular banking system, credit money becomes in effect receipts representing claims on physical capital, and it is at this point that its creditworthiness suddenly increases. For example In the U.S when the treasury needs say for example $100 , the treasury writes an iou with a redemption value of $100 called a bond and gives it to a bond dealer who in turn exchanges it for another iou but this time written by the federal reserve and called a $100 bill which in turn is handed back to the treasury by the dealer. So all that has happened is the Treasury and the Federal Reserve have swapped their respective ious via way of the unnecessary middle man called the bond dealer. At this point the $100 bill is pure credit money since for anyone to accept it, say for example a public servant like a teacher, has to accept it on pure faith, as it’s not redeemable for anything useful other than another peace of paper called a $100 bond. Probably the one thing that makes people accept credit money is the fact that taxes can be paid with it and if the issuing authority has a lot of cred-ability (get it). This incidentally is another essential function of taxation, it’s simply a mechanism to maintain the circulation of credit money. Now suppose the said teacher deposits the $100 bill with his/her bank. The bank in turn then lends the $100 to a baker who puts up $100 worth of bread as collateral. It is at this point that the bill becomes a claim on physical capital , in this case the bread, since if the baker doesn’t pay back the loan, then whoever is in possession of the $100 bill can in principle exchange it with the bank in return for the bread through a repossession order issued by the bank to grab the bread. It’s at the point when credit money is lent out in exchange for collateral by the regular banking system does it take on a character more akin to a commodity since it becomes more like a receipt redeemable for the collateral held by the bank which is usually something useful.

    The problem today is that the banking system is it is not functioning in the manner described above, that is it is not converting public credit into claims on physical assets, with the result that there is a surplus of credit in the economy but with no assets to back it up, hence the inflation in the commodity markets, as all the investment and commercial banks are doing is conspiring with the fed to use public credit as a purely speculative vehicle as a lame attempt to try and stave of their encroaching insolvency.

    In the U.S until 1999 existed the Glass-Steagal legislation which separated out commercial banking activity from the speculative activities of investment banks. It meant that commercial banks could only lend credit money into the real economy and thereby convert it into claims on real assets, and that investment banks could not speculate with newly created credit from the fed, that is they had to use their own money or their clients money which in comparison to the entire money supply was relatively small, hence their collateral damage potential was limited. As of now a momentum is building in the states to bring back Glass-Steagal. If it succeeds then The EU will be forced to implement an equivalent type of measure as to fail to do so would mean the collapse of the Euro relative to the dollar, as the inflationary pressures currently on the dollar would be brought to a halt, whilst the inflationary pressures on the Euro would continue to rise.

    I’m a student of the Larouche school of thought. The above is only a brief outline of what has to be done.

    For more details see
    http://www.larouchepac.com/

    • PMC

      +1

      Hypothetically, I remember thinking in 07, when share prices the world over were sky high; what exactly would happen if every single entity, both individuals and institutions, cashed in their chips on the same day? With volatile notional values, the cash to hand in circulation worldwide on that given day would be insufficient to realise the “values”.
      When share prices crashed, I don’t recall any cash being “withdrawn” from the system? Why not? Because it was never there in the first place.
      The digits representing the values on computer screens around the world just got smaller.

      Also, the church and religion as we know it, is the biggest con-job ever crafted… in every sense of the word.
      We know about the disgraceful abuse and subsequent cover-ups, but when you see church organisations being the shareholders of millions of dollars worth of hedge fund units… well what more needs to be said. Is this why churchgoers put money in the basket at collections time?
      The sooner people wise up to religion AS WE KNOW IT, the better. When humans start living by a simple set of common sense values as opposed to polar opposite speculative religious beliefs that no one can verify, then we’ll start to see a more harmonious planet.

      • @ PMC

        Ponzi Scheme for the soul.

      • coldblow

        Re 2nd point

        As it happens, I had my sadly inevitable exchange of views on this matter with my German teacher the other day. I didn’t ask for it (it always, you know, just happens) but was interested to see if the Teutonic perspective was different.

        It arose when the discussion veered towards the church tax which all Germans who belong to a church have to pay.

        In summary this is what was said:

        Me: a good idea when you think about it because it makes people think seriously about whether they are in a church or not, and make a contribution towards running costs (ie not being a freeloader). I read on a blog about someone who claimed to be “shocked” that first communicants in Longford had each been asked to contribute 5 euro to the cathedral restoration fund. That’s what I call a serious human rights abuse!

        Lehrer: The church is evil

        Me: wow, go on. Why do you say that?

        Lehrer: it owns vast wealth in the Vatican

        Me: yes, I heard that one before (believe it or not). Is that sufficient reason for your view?

        Lehrer: No, I have read a lot about it. If people really knew what the truth was they would change their minds about the Church.

        Me Where did you read this? Bild? (thinks: Dan Browne?) That’s nonsense.

        Lehrer: I read it. I’ve read a lot about this.

        Me: So believers are misguided, uneducated?

        Lehrer: Yes. If they knew the truth they’d change their minds.

        Me: and journalists know more about it?

        Lehrer: of course!!

        Me: I disagree. I don’t think journalists know very much about anything and most of them just follow the current trends. If most journalists are anti-clerical then that is evidence that that is now the dominant view in society.

        Lehrer: of course journalists know more than ordinary people. My sister told me about a priest in Germany who has three children and the church pays for their upkeep.

        Me Go on(thinks: that’s nothing, my second cousin is a priest in Galway who openly has a family, another cousin (once removed) was known as the Bishop of Balla as he left the RC Church and set up his own Born Again group where they baptized converts in Lough Gara (people apparently would spy on them through the bushes in the hope of glimpsing a bit of flesh). Didn’t they watch the Late Late in Germany)

        Lehrer: and there was all that abuse

        Me: That was bad. Of course a paedophile would be attracted to promising walks of life.

        Lehrer: My parents used to take us to Church and we would be expected to contribute to the collection, even though we already paid the church tax. The priest would talk about how to live (Me thinks: I don’t listen to the sermons myself but prefer to go over the readings again as the sermons usually bore me) but they didn’t live that way, they never had time for us.

        Me: so for that reason you disagree with the church?

        Lehrer: of course! The church is evil!

        Me: do you mean everyone in it, or just the bishops and clergy?

        Lehrer: the church is a hierarchy. They tell the people what to believe. My brother in Germany believes. He is looking for security.

        Me: perhaps he has good reasons.

        Lehrer: if the people really knew what the Church was like they would all leave it. They all will in the end.

        Me: That is, if they knew what you know.

        Lehrer: Yes. I know, I have read about it. A lot. People don’t know. They are brainwashed. Perhaps you will remember what I have said in ten years time and you will see things differently.

        Me: (I hate to disappoint you but) I think your view is the predominant one in Ireland nowadays, at least among younger people.

        Lehrer: Yes, the church should be abolished. It’s evil. It’s a matter of choice. Everyone has a free choice. (everyone solemnly nods their heads in agreement with this last sentiment)

        What I find interesting about this is that it follows (disappointingly) pretty closely the same pattern that you’d get here. But the real reason I’m posting it here is because it invariably ends on the “it’s a free choice” platitude, even if it contradicts the earlier course of argument. It seems as if it is seen as some kind of clincher. I date its first use to around 1973.

        Re PMC’s point:

        People should live by a simple set of common sense values

        Where’s the common sense going to come from?

        • PMC

          Common sense will come from peoples inate sense of right and wrong. Values that encourage people to consider the overall affect of their individual actions on others.

          Below listed are some of the 10 commandments, those of which, that don’t make any direct reference to Gods etc…

          Respect your father and mother
          You must not kill
          You must not commit adultery
          You must not steal
          You must not give false evidence against your neighbour
          You must not be envious of your neighbour’s goods. You shall not be envious of his house nor his wife, nor anything that belongs to your neighbour.

          These are common sense values that aren’t beholden to any “higher power” BS.
          Hierarchies protect misfits at the top. They’re put in place to facilitate the reverence of a figure(s), and willing footsoldiers are put in place to shield the bullshit of it all from being exposed.

          If HUMAN values were tought to youngsters, we’d all get along an awful lot better. In addition, the suspicion element that exists at present between practitioners of different religions, would be removed. One of the reasons multiculturalism has failed is because of religion, and the insular grouping together of people from the same religion.

    • Yep, the message is the Fed issues eg €100 as debt and by a process of bank lending and depositing the transactions of its customers around the €100, that debt quickly inflates to €1000 dollars in debt, assuming 10% capital reserve requirements, which we know were dispensed with over the past decade.

      We do need a new Glass Steagal Act. The Zeitgeist movie below is well worth a look if you have a free couple of hours:

      Simple explanation here

      Virtual cash

      Most money lives not in our wallets but in something like a banking Matrix — a virtual world of electronic numbers running between bank accounts. People typically look at their money as a figure in a bank statement, and trust that number is real. The economy runs on that faith as workers deposit their checks in banks.

      Banks then get down to the business of creating money by lending it out. Assume that you put $100 in your bank account. The government requires banks to hold a certain amount in reserve, say 10 percent, so the bank may just take $90 and lend it out to someone else. That person can then buy something with the $90. The store deposits the $90 in another bank, and the lending process continues to inflate the original $100.

      “The original $100 that came in gets blown up by the banking system into something much bigger — essentially $1,000 [assuming a 10 percent reserve],” said Menzie Chinn, an economist and public policy expert at the University of Wisconsin in Madison.

      This system may sound a bit magical, yet it works as long as banks and other lenders believe that debtors will pay them back. And if the loans go toward spending or investments that make even more money, everyone gets paid and the money-creation cycle continues.

      http://en.wikipedia.org/wiki/Glass%E2%80%93Steagall_Act

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

      The full Zeitgeist Movie

      http://www.livescience.com/2990-thin-air-money.html

      • oops, should be quotes on text starting “Virtual cash…..” as its lifted from livescience link

      • EMMETTOR

        Unless a new Glass-Stegall act is introduced in the EU and the US (and worldwide!)we are going to see a repeat of our current difficulties in 8 or ten years, that’s assuming we ever get out of the current mess. The lack of any real desire to do this, among our political leaders, causes me to have zero belief in their ability to sort this out. While other factors, such as the transfer of jobs out of the capitalist system (to China)has contributed to our current situation, it’s mostly Casino Banking and it’s insane claims to have eliminated risk, that has caused the immediate problems.
        Try to set up a company, with a turnover of a couple of million, manufacturing and selling a product and the number of rules and regulations that Government will impose on you is mind-boggling (ever hear of the Intrastat system?). However, set up a company to move billions in flows of speculative virtual money and you will have carte blanche to do whatever you want.

  31. Peter Atkinson

    Guys it appears that gold is just replacing property as the new bubble commodity.Hard to believe that in todays prices the total of gold extracted by the 49rs during the Calfornian Gold Rush still wouldn’t pay off Ireland’s bank debts.Interestingly gold seems to be the only commodity that really doesn’t have a use beyond its decorative value.We can’t eat it, burn it or grow it yet people are paying thousands for it.Its mined out of the ground, smelted, formed into ingots and then stuck back under the ground into vaults.

    As a race we really haven’t evolved much over the millenia.I think the end of the film “Planet of the Apes” where Charlton Heston bangs his fist in the sand and says “”We finally really did it. You maniacs! You blew it up! Damn you. God damn you all to hell!” says it all about us and our stupid quest for riches.Stupid monkeys the lot of us.

    • PMC

      I agree, gold is next big heist. Governments and Banks hold large amounts at present, and because both are strapped for cash, it’s in their interests to throw out press releases telling us that gold is the way to go. Why; because millions of guys the world over investing small amounts of 5K add up, hence the values held by the big boys goes through the roof. So once again, its the savings of the small fry that’s being used collectively to jack up the values for the biggies that got in when gold was much lower.

      When you see Gold Shops springing up on Camden St, and adverts on TV from some jeweller from the Ilac Centre in Dublin offering cash for gold, you know something is seriously wrong.
      The sad thing about this is, the first people to catch wind of gold prices peaking, will be the biggies, who’ll in turn redeem earliest. Large tranches will be taking out of the system, leaving the price to fall back, and the hits will be borne by the small guy who was led to believe he was doing the right thing.

    • Gold proves how our weakest sensory system ‘the eye’ colludes against our well being .

      Fith Fath is an old gaelic system of warefare that was used mainly in the forests to hide from the enemy using a technique of colours from the plants to cammoflage their bodies and fool the eyes of the enemy.

      Next time when you are buying jewelery ask the assistant to turn off the light beaming on it so your right mindset decides properly how much to pay.

      Gold is only about ‘Light’ and how it penetrates the soul .If you really want free gold look for a rainbow.

  32. That was a brilliant link MidasTouch thank you

    It is riveting stuff and you can’t stop reading it because the truth is stranger than fiction. I first read about the drug shipments going through Arkansas under the protection of the Clinton government about 10 years ago and found it difficult to believe even though the book was extremely well researched and referenced

    I never mentioned what I read in conversation lest people might think I was eccentric but after witnessing the events of the 10 years since 2001 I have come to the conclusion that the world really is insane

    I came to Ireland 12 years ago full of hope and thought I was streetwise but by god what a difference a decade has made and I have learned a lot in my time in this country through reading this site and couple of other good Irish blogs. I notice that more Irish people are wakening up to what is actually happening and know that many of them would read and absorb material such as that written by Catherine Austin Fitts (CAF) and stop being distracted by the small stuff

    The tone of the language on the forums is changing and the quality of conversations in places like this are opening minds that were once closed but are now opening in an attempt to find out exactly what just happened and who is behind it. All I will say is that knowing what I know now about our friends across the water I would not be in a much of a hurry to be seen sharing a guinness with them

    After reading the words of an insider like CAF it makes me feel today that the world is an even uglier place than it seemed yesterday. It also explains the boom and all the bullshit that has been spouted by neo-con lunatics for the past 40 years. They are stupid selfish bastards and we have let them hijack the ship. The enemy is inside the gates and going nowhere

    The vast majority of people living on this planet can’t handle the truth and it is only a minority who will question and go in search of whatever truth helps them make sense of a world that lost it’s way a long time ago. I don’t blame them for just wanting to settle for a quiet life, a dry roof and home comforts although I know that a lot of hard bitten cynics will despise them for their apathy. CAF didn’t despise them because she was aware of her responsibility had some semblance of a conscience

    People are now turning to the economists for answers but the economists are clean out of ideas. The economists must know about the one trillion dollar drug trade being laundered by American and Swiss banks yet they like to be seen in places
    like Davos mixing up with these financial nutcases

    No-one has the kind of power to required launder one trillion dollars in cash annually but I bet there is a connection between Ireland being awash with fast cash only few years ago and the laundering operations of corrupt banks. I would not be surprised if it turned out that what we think we know now is only the tip of an iceberg

    Most Economists and Politicians dare not touch upon the realities being documented by people like CAF. I wonder do
    they just retire and spend their last days in self loathing
    despairing at the thought of all those lost opportunities where they could have developed a spine and actually made a difference

    It all makes me thankful that I am an just an ordinary citizen who prefers to play the game of life straight and safe

    • PMC

      Society is treated with contempt; as demonstrated by that twat Eamon Gilmore – Telling the people that voted the gobshite in, that there’ll be no Lisbon II; yet telling the US that there will.

      Here’s Brendan Howlin trying to back track and curry favour, as a result of the cowardly attack on the lowest paid by Brutal Dick.
      Watch how this story will be used to balance the scales again, then simply fall off the edge of the earth shortly – The usual bollox about difficulties re-nogotiating contracts will be rolled out.
      http://www.irishtimes.com/newspaper/ireland/2011/0601/1224298207199.html

      The best thing that could happen here, would be for the IMF to take these pressing little issues out of our fellas hands, and just slash the shit out of top public sector salaries.

    • If you think about it Paul, it is rooted in the secrecy procedures of RD’s representative democracies. In ancient times, in participatory democracies, there was very little secrecy, or treating the people with contempt as PMC put it. The hierarchical structures that are part of our RD allow for selective Information and disinformation to be used.

      It does not need any dodgy and questionable rat catcher publications such as Zeitgeist or Larouchepac, the latter btw is no school of thought by any standards, to understand that.

      Selective Information and the notion of need to know basis alone make any society open for corruption, cronyism and fraud.

      Take the example if the by elections that were refused by Cowen’s power circle to the Irish people, this action was even unconstitutional, and served only one purpose, to delay, to gain enough time to press through their policies before they were voted out.

      The reaction of the electorate was more than moderate.

      As for economists, of course, the Neolassical economy was used to enforce neo liberal policies.

      It is important to remember that Neoclassical Economy – economic science – is basically science fiction because it is based on many hypothetical and unrealistic assumptions, and social issues are none of their concern!

      Now, of course this does not mean that all models derived are wrong, but it is here that ideologically motivated fatalism becomes involved that enables their applications in the real world.

      It means that policy makers and economists treat a select set of models as if they are the 10 commandments, and exactly this happens here, and of course, the select set of models are no coincidence.

      It is very simple, really!

  33. I cannot recall any ancient history on our isle denoting a name for money. Can someone assist me?

    • http://www.irishdictionary.ie/dictionary

      Morning John,

      Surprised…the word is airgead

      You’ll need to following lexicon if any defendants opt to answer as Irish when the DPP brings charges against Seanie, Drumm et al circa 2100 AD:

      they asked me where I left the money = d’fhiafraigh siad diom cén áit ar fhág mé an t-airgead

      money

      airgead(n m1)

      nb:

      it appears that he lost the money = is cosúil gur chaill sé an t-airgead

      I haven’t any money/books = níl airgead/leabhair ar bith agam(with negative):

      Then there is the old/new Irish

      to borrow money temporarily = airgead a fháil ar iasacht go díomuan

      Usage

      I need money = tá airgead uaim, tá airgead de dhíth or de dhíobháil orm(vt:)

      bags of money = na múrthaí airgid

      to make money = airgead a dhéanamh

      to lodge money = airgead a lóisteáil

      he wants money = tá airgead de dhíth air(need):

      I have no money = níl aon airgead agam

      sufficient money = go leor airgid

      money laundering = sciúradh airgid

      to wish for money = do bhinid a chur in airgead

      housekeeping (money) = airgead tís

      to plough money into = airgead a chur isteach i

      to plough money into = airgead a chur isteach i

      to box contains money = tá airgead sa bhosca(vt:)

      a huge amount of money = an t-uafás airgid

      it would involve money = bheidh airgead i gceist(concern)

      she requires more money = teastaíonn breis airgid uaithi, tá tuilleadh airgid de dhíth or de dhíobháil uirthi(vt)(need):

      the money is rolling in = tá na pinginí ar a gcorr againn

      as much money/many books = a oiread airgid/leabhar

      I haven’t any money/books = níl airgead/leabhair ar bith agam(with negative):

      the money was accumulating = bhí an t-airgead ag carnadh

      lending and advancing money = airgead a thabhairt ar iasacht agus ar airleacan

      to borrow money temporarily = airgead a fháil ar iasacht go díomuan

      it appears that he lost the money = is cosúil gur chaill sé an t-airgead

      illegal money-laundering activities = sciúradh neamhdhlíthiúil airgid

      they asked me where I left the money = d’fhiafraigh siad diom cén áit ar fhág mé an t-airgead
      monetary/money creation (by the banks) = cruthú airgid

      I have no or I don’t have any more money = níl níos mó or a thuilleadh airgid agam

      the non-payment of the bank of the moneys = maidir leis an banc do mhainneachtain an t-airgead a íoc

  34. http://www.financedublin.com/debtclock.php

    Among the key findings are the below:

    “If investors can peer through the fog of the EU authorities’ policy response, then the highly attractive valuations of Irish sovereign and bank debt will become all the more apparent.”

    “Given a 5.6% interest rate, the Irish economy should be able to achieve a primary balance and nominal growth of 4.0% to stabilise the debt/GDP ratio. The planned adjustment in the primary balance is of similar magnitude to that achieved in the 1980s. So, at least within the Irish political sphere, such fiscal adjustments appear achievable’, the 38 page report concludes. See the full report.”

    The Davy financial sonderkommandos persuaded Gombeen Kenny with the above muck. The 1980′s ..I wonder in the 1980′s did each person in the state owe €30,000 along with a large cohort carrying mortgage debt and personal debt in the hundreds of thousands?

    “Nominal growth of 4%” well, missed that one, its down to close zero and according to OECD will contrat upward of 2.5% next year.

    Enda hasn’t published his budget cuts of another €6 bn over 2012-2014.

    Water charges for next year, increasing energy/gas charges…

    Would someone knock on the door of the Dáil and tell the incumbents to please wear fancy dress, clown suits!

    • Colm,

      allow me to add something?

      It is a brilliant example for manipulating public opinion. Let me explain.

      Not the prime time report, but the Kenny Frontline that followed right after that on the same evening. Kenny put the question to the people if we should not stop the 600 something million of foreign aid to Africa and other countries to a full stop.

      I don’t know whether this show is also on the web, but if you saw this them perhaps you know what I mean.

      He even had a Lady, the most colorful dressed in the audience of course, from Aethopia sitting the front, and who made only one statement, and at a very carefully chosen time of course. That we should NOT pay these monies to other countries for aid, but use it at home.

      The entire show, the stage managed format and the content is following a well known methodology to form public opinion.

      x x x x

      The prime time was very good, and it is this hidden reality, parts of which I experience every day, that describes policies implemented on behalf of EU/ECB/IMF.

      • Agree with your analysis, discussion afterwards was rather pathetic. Questions re the relative spending between Ireland and UK, for example, with better spend for buck was not attempted. Most of the public sector workers in the health service in the audience on huge salaries compared to European norms. So none were challenged on this. Reilly has a privatisation agenda with a big personal stake in the whole area of private sector. The old story, lower the prices compared to public sector; then raise them and drop standards when public health goes private. Swathes of useless management, incompetence, indifferent trough feeding, schenanigans, payoffs, skullduggery; but good stuff getting choked as usual. Deco is a much greater expert than I in that area. I won’t mention the unions and IBEC:)

        But the Primetime Cutbacks documentary deserves an award for unblinkingly staring the truth in the face and giving it blow by blow. Well done to them.

        See comments re Guatamala and families starving by another poster on this site. Forget it, families in Ireland with children with disabilities are starving in Ireland today. Many middle class families who can’t meet their bills are going without food as well.!

        • Yes Colm!

          it is very much needed to make the public sphere better understand what AUSTERITY means in the real world.

          • Deco

            Monday night – kids with special diseases and their parents fighting for treatment with an expensive HSE that can do nothing right.
            Tuesday night – more debacles with the HSE – this time ripping off pensioners.

            somewhere along the way we found out that a RTE gardener spent 2.5 Million on a garden than needs a very expensive maintenance cost schedule – or else it should be discarded. But it did wonders for his profile and career.

            The rudimentary and essential are neglected.

            The superficial and irrelevant get pumped with money.

            Folks – there is a proof – a functioning Bananna Republic. We even have the bananas thanks to a clause in the Irish taxation law that defines ripening bananas as a low tax activity.

          • PMC

            Great mileage is being acheived from the buzz word du jour “tourism”.
            The Garden apparently, will attract overseas visitors to Cork. Jesus wept!
            It’ll attract them alright… the curiousity that is, of seeing a nation that’s broke, spending EUR 2.5M of taxpayers money on a bloody garden.

          • Deco,

            you are very right to point to the timing of news.

            The timing is highly political.

            It is carefully chosen to implement a maximum possible dose of these measures without risking the public to stand up against it to a substantial degree. It is the application of mass psychology and manipulation, textbook stuff really. At the same time, public anger is used to distract and steer to the vulnerable instead. It is all very obvious.

  35. paddyjones

    David is really scraping the bottom of the barrel on this one ……he is thinking like a loser wanting a easy way out. Thinking like a German …..the ECB will never be allowed to print money.
    I say

    Austerity => balance budget=> stop borrowing => repay debt => problem solved

    • I think I’d agree with the markets on this one:

      Austerity => balance budget=> stop borrowing => no money to repay debt => economy destroyed => problem unsolved:)

      Junk status

      Lol

      • :)

        Austerity=> dismantling of national governmental powers => higher debts=> confiscation of assets=> destruction of domestic demand=> less direct investment=> economy destroyed=> Introduction of slave labor=>

        Problem solved!

        • Deco

          Georg.
          Austerity is not a choice. It is the end result of a country with a prolonged period of inflation and debt buildup.

          The choice concerns who should have to pay.

          The bondholders that we know about thanks to the internet – but whom the media will not mention, because of “support our advertising sponsors”.

          or

          The welfare recipients.

          The political system is organized so that the different layers of working people are fighting each other – instead of apprehenending the lobbyists in Brussels, or clowns like Cowen who exist to do their bidding.

          • Yep, steering public anger… against each other and the vulnerable…. spreading lies and misinformation…. maintain status quo.

          • Deco

            Bailing out the bankers is a “necessity”.

            Talking about putting them in jail would be to make one liable for damaging their “right to good name”.

            Do any of them actually have a good name anymore ?

            Most citizens regard them as dregs is selfishness, pride and stupidity.

          • The honorable are declared systemic per definitionem, this is the reason why a true de nazification never took place, and many of them went back into leading positions.

  36. PMC

    Incredible – Unemployment still rising…
    As Gene Kerrigan said of Government recently “do they ever tire of getting it so wrong?”
    http://www.irishtimes.com/newspaper/breaking/2011/0601/breaking24.html

    Unemployment needs to be means tested immediately. There are groups of lads in their twenties living in towns and villages all over Ireland, who are living at home, yet claiming EUR 196 weekly of the state. They’ve no intention of getting jobs either, as there’s great “craic” to be had getting fed at home, then spending the welfare cash in the pub.

    Welfare for those under 30, depending on circumstances, such as house owner / renter, should be paid for a maximum of one year only for those that rent. It’s a tough situation, but after such time, looking for work abroad is the only option unfortunately. Things simply cannot carry-on the way they are, and people should be given a realistic assesment of where we stand. Jobs for 400,000 people will not be seen on this island for another decade at least. Do people want to sit and wait this long?

    The money that’s being donated to Africa needs to stop temporarily. Borrowing money to give it away is insanity beyond belief.
    The problem in the third world is uncontrollable population growth. Trillions of dollars poured in over the decades, yet populations doubling and standards of living being halved.
    It’s difficult to see a way out other than the implementation of a temporary one child policy, to hit the bottom per se. Start building from there up. The approach so far has failed beyond belief. Mugabe, Gadafi, and their ilk should be taken out by the SAS and some form of a UN with balls, installed to provide a bridging Government to govern until a democratic Government is elected in a transparent manner. Statements of denouncement from Ban Ki Moon are a waste of everyones time. Action is what’s required.

    • Deco

      Third world charity was described in a documentary that I seen on TG4 years ago, and which did was dubbed from a language other than English as

      “poor people in the rich countries sending money to rich people in the poor countries”.

      There are warehouses of equipment locked up in Haiti, because the police have not yet been bribed to pass them on to the people – as a result of the earthquake. And of course, this is also a way of saying – don’t send us material – send us money. (You cannot put a bulldozer into an account in the Caymans…). Now US authorities have found out that Haitian authorities have falsified the statistics to make it look worse in the hope of getting more money from donors and the UN.

      I have been hearing rumours about MSF and it is not great either.

      There have been similar reports about aid workers in Kabul having a great lifestyle, while poor teenagers from the Ohio rustbelt, looking for a free college education and engineering degree, risk life and limb to keep them safe.

      • PMC

        There’s a mental block that occurs in people when they hear the word “charity”. In Ireland, the word charity was, some years ago, replaced with the word “property”.
        The downside and exploitation that occurs to enrich a few is conveniently ignored.

        “poor people in the rich countries sending money to rich people in the poor countries”.

        This quote is spot on. I wonder what the spend is on wages for street-salespeople, radio / TV adverts promoting charities in Ireland.

    • EMMETTOR

      Well, PMC, what can I say about these groups of unemployed lads, living at home and getting €196 off the state? Never been on the dole, have you? You should be writing for The Oirish Daily Mail, they love the kind of ignorant crap you’re spouting. Sorry to be so insulting but that’s what you get for living in la-la land.

      • PMC

        I think your missing the point…

        Having a flat rate of welfare regardless of circumstances doesn’t make any sense. The key words in the post are “means tested”
        You’ve stated that you’ve a mortgage and have lost your job; EUR 196 probably isn’t enough in your case if the truth be told.

        Friends of mine who were on the dole not so long ago, stated that they themselves found that getting that amount whilst living in their parents homes was plain stupidity. So there you have it from the horses mouth.
        Perhaps if people such as my pals, who don’t need it, got less; more could be allocated to those in tighter circumstances.

        By way of example, if a single person was handed EUR 10 to go get lunch, followed by the same amount to a family of four; surely it doesn’t make sense.
        Perhaps EUR 4 could be given to the single person, with the remaining EUR 6 been added to the 10 already given to the family of four? Back to the key words, means-tested.

  37. adamabyss

    They are going nuts it seems over in the good ole US of A.

    http://www.bbc.co.uk/news/world-us-canada-13614125

    The death throes of an Empire…

    • We could ‘print-baby-print’ and make the dollar hyperinflate much like the Dmark did in 1922.

      Then the American dollar could be redenominated so new dollar becomes old dollar divided by 1000 or 100000 and the $15 trillion debt gets divided by same amount.

      This would swing the far right into action against government, an alliance of corporations, extreme right military groups, and military high spenders needed to control and cull disorder and dissent.

      You would need a strong propaganda machine to target the crumbling regime of Wall Street and government.

      Perhaps a Sarah Palin figure could root out the old guard.

      http://en.wikipedia.org/wiki/Hyperinflation

      “The Post-World War II hyperinflation of Hungary held the record for the most extreme monthly inflation rate ever – 41,900,000,000,000,000% (4.19 × 1016% or 41.9 quadrillion percent) for July, 1946, amounting to prices doubling every 13.5 hours. By comparison, recent figures (as of 14 November 2008) estimate Zimbabwe’s annual inflation rate at 89.7 sextillion (1021) percent.,[17] which corresponds to a monthly rate of 5473%, and a doubling time of about five days. In figures, that is 89,700,000,000,000,000,000,000.
      One way to avoid the use of large numbers is by declaring a new unit of currency (an example being, instead of 10,000,000,000 Dollars, a bank might set 1 new dollar = 1,000,000,000 old dollars, so the new note would read “10 new dollars.”) An example of this would be Turkey’s revaluation of the Lira on 1 January 2005, when the old Turkish lira (TRL) was converted to the New Turkish lira (TRY) at a rate of 1,000,000 old to 1 new Turkish Lira. While this does not lessen the actual value of a currency, it is called redenomination or revaluation and also happens over time in countries with standard inflation levels. During hyperinflation, currency inflation happens so quickly that bills reach large numbers before revaluation.”

      Name for this movement, National Alliance of Zionist Independents and Christians, NAZIQ

      It would mean a military takeover of the US and a curbing of neo liberal freedoms.

      I vaguely recall something similar happened in Europe in 1933 called the beginning of The Third Reich.

      That could never happen, could it?

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