August 24, 2011

Without debt forgiveness our economy can't grow

Posted in Irish Independent · 195 comments ·

FOR some reason, the issue of debt forgiveness, which has been discussed for years, seems to be back on the table as if it is something new. It is not new. Debt forgiveness, debt write-offs, debt restructuring — whatever term you want to use — always happens after a credit-driven growth mirage. The reason is simple. In the boom, too much credit was given to people who had no prospect of paying the stuff back and now they can’t pay it back. So, as the saying goes, “can’t pay, won’t pay”.

In order to think about this, let us consider a person who still has a job, but who is in the generation that were unlucky enough to come into the housing market in the boom. We are talking broadly about people who were born in the mid-1970s to mid-1980s — 600,000 people.

If you are one of them and borrowed lots of money to buy a house in the years up to 2008, how are you going to pay it all back on the same terms? Now the house is worth possibly 50pc less than you paid and as there is no market, because the very banks that lent you the money are bust and have no new money to lend to anyone, so this 50pc drop might be simply notional and the actual drop may be higher.

Your wealth has been decimated and there is no prospect of it rising again in the next 10 years. Meanwhile, your income has fallen because taxes have not only risen but are due to rise again and again. Worse still, your taxes have risen to bail out the very banks that gave you the ludicrous loan in the first place.

Therefore, you have no wealth, just an enormous debt and interest rates are likely to rise rather than fall in the years ahead (according to the ECB). Your income has fallen and your taxes, direct and indirect have risen. The only way you can pay the mortgage is if you spend less on something else. So you stop buying things you used to buy.

But you are not alone. There are thousands of people in your position, buying less in order to pay off the mortgage, which is now enormous relative to the value of the house. Therefore, aggregate demand in the economy falls like a stone.

This obviously affects the rate at which the Government can raise revenue because if people are not spending, there is a taxation problem.

What does the State do when faced with this and the strict budget targets stipulated by the IMF/EU? It needs to raise taxes somewhere else or cut spending somewhere else. So it makes large cuts in spending, which again reduces total demand in the economy, making the demand problem even worse.

In normal economics, this all should be no problem. If some people spend less and save more because they spent too much in the past and saved too little, the money they now save will be used by other people who will borrow the saving to spend on new investment.

This smooth transfer of cash from one section of society to the next presupposes that the banking system is functioning. But in Ireland, it is not.

The banks are now largely safe-deposit boxes for the ECB. This gradual disappearance of money from the system is called “deleveraging”.

The banks, having blown the balance sheet of the country by their recklessness, are no longer trusted by anybody.

But now something odd that might be called “the law of unintended consequences” occurs. In order to make sure that they don’t go mad again, the new regulator raises the amount of capital the banks need to discipline them. The banks now have to keep much more capital on their books. All the while, the banks have also to pay back the money they lent because Irish bankers ran out of our savings in 2005 and started to borrow to keep their bonuses.

Now we have come full circle; whereas we had too little regulation in the boom, we might have too much now.

Clearly, it is human nature for the regulator to demand higher standards from the banks, but at this stage in the cycle — with people saving not spending — tighter regulation makes the overall situation worse. This process of much tighter regulation reduces the banks’ willingness to lend.

There is an added reason why, arguably, generally tighter regulation at this stage in the cycle could be a retrograde step.

If the regulation is seen as too tight because the old banks screwed up, this very regulation may repel new banks from coming into the game. What Ireland needs now is not a few equity investors in Bank of Ireland, it needs a new balance sheet, new capital and a new source of financing. This can only come from fresh capital, which can only come from a new bank or banks. But if there is too much regulation, these new banks might stay away.

ANOTHER aspect of the deleveraging process is that the old banks hold on to deposits like they are gold. Deposits are the cheapest and most stable form of capital a bank has and so now they are king. All our banks need to attract more deposits. This leads to a deposit war as they push up deposit rates to get cash. Ultimately, they don’t lend.

All the above basic economics means that the “normal” laws of economics don’t apply in Ireland. The banking bottleneck is preventing saving being recycled. Therefore, the more the generation who got shafted in the boom pay back their mortgages — despite their balance sheet being decimated — the less money they have to spend on something else and the more the tax base shrinks. If the money they save gets stuck in the banks and doesn’t find its way to people who would like to use this money profitably, the economy will shrink more.

Thus, coming back to debt forgiveness, restructuring or whatever you are having yourself, the arguments are less to do with morality, moral hazard or bailing out the profligate and more to do with how demand and employment are generated.

For many these issues are contentious and some might say, why should this generation get special treatment? But bear in mind that big policy changes always have a generational aspect to them because of the way wealth is created and at what stage in life it is created. For example, the generation older than me received a massive once-off transfer of wealth when we joined the euro. They had saved in the old, soft currency, the punt, which was a “serial devaluer”, yet, as if by magic, they got all those savings in a “weak” currency redenominated in the “hard” euro currency. Did we hear much from them about the “fairness” of this once-off windfall?

Debt restructuring is going to happen; it is just a matter of when — not because it is right or wrong, but because that’s how the economy works.

  1. seamus

    Join (Irish Homeowners Unite) Face Book web page

  2. adamabyss


  3. Gerry Murphy

    In the mid-to-late 1970 there was substantial overlending to farmers by AIB and Bank of Ireland and in the late 1970s a debt forgiveness programme was introduced and implemented with IFA and government support. There was no talk about moral hazard back then just a pragmatic solution to the farmers’ debt problems at the time. Debt forgiveness in Ireland is not new! Check it out.

    • Colin

      Welcome Gerry, a very fine debut post, but just letting you know that if you continue to post about how well the farming classes have been treated in the past and in the present, you will be targeted with emotional responses about how noble the rural folk are and how humble their lifestyle is.

    • Deco

      Well, the farmers it seems are prepared to negotiate with the banking sector. Maybe it is because they are pragmatic about the situation and they realise they have to.

      There seems to be a massive stigma in the suburban belt when it comes to doing such a thing. The concept of outward respectability takes hold. Lack of pragmatic thinking, an pervasive culture of face saving seems to become the contemporary value code.

      Of course any debacle in the 1970s was quickly overcome by the fact that the Central Bank of Ireland could print money – and they duly did this also – in order to work down the debts. It drove up the cost of imported fuel, and imported manufactures.

      • dwalsh

        The farming community are organised in ways those languishing in the the suburban negative equity belt are not. Perhaps that needs to change.

        • Praetorian

          Farmers have land, which can mean equity, which interests………

          • dwalsh

            @ Praetorian


          • Deco

            The problem with the mortgage holder, is that they thought their house was an investment. Actually, it is turning out to be a financial prison of sorts.

            The greatest joke of all was calling it “equity”. I remember some very corny and annoying advertising in the middle of the last decade calling housing “equity”. It was a loaded assumption, and helped propel the subconscious assumptions that eventually fell apart.

          • Praetorian

            @ dwalsh – as the man said ‘they aren’t making anymore land’ – land is where is has historically been at, and this still was the case up untill recently and of course there are still those in the game who hope the property-ponzin scheme return. So agents working for bigger fish may be looking a little less to increase land banks. Who sits on the majority of land along with the State and Catholic church? The answer is above.

            Of course there are struggling farmers, some smallholders others who made bad financial calls, but I have heard of more than a few who made a killing and who are now able to go back and the purchase the land they sold during the debt fuelled economy masking as a boom for enormous sums.

            In my experience of 35 years living on this island, often the only time you hear from the IFA is when there is something to complain about, as another commentator said, working people have hardly been represented or looked after to the same extent, no CAP for working people, and they have no ‘potential asset’ as a lot are renting or in State housing, property investments was mostly a middle class game with a few pretenders getting in on the act but they are all being squeezed now.

          • dwalsh

            Hi Praetorian

            Still not sure what you are expressing here.

            My point above was simply stating the fact that farmers are organised as a group and thus have political clout to a degree that those in the the suburban negative equity belt dont.
            I have no gripe with the farming community. No doubt some farmers did very well out of the boom as you suggest.

          • dwalsh


            Yes they did not understand the difference between an asset and a liability.

          • dwalsh

            PS Deco

            But lets not forget there are a lot of people out there who bought ‘homes’ not assets or equity. Young couples unlucky to be marrying and buying at the wrong time.

            They should be helped – I think.

    • El Duderino

      I know the movement is building for the “cant pay, wont pay” people. But what about the people (including myself)who can afford to pay their mortgage but cant afford to sell because of the negative equity. We are just stuck?

      • Deco

        Nothing to stop you from selling.

        The problem is that you will not have a deposit to buy again. In fact you will need a 20-30% deposit.

        Getting mortgage approval is extremely difficult. Even for people who never got into negative equity, and who spent recent years saving.

  4. mmiesyerus

    That’s all fine and dandy, but debt foregiveness is currently in danger of getting the ‘free ride’ status..I believe that a structure of debt foregiveness comes with some binding advice from e.g. Budgeting services..I believe that people deserve a second chance; and with debt forgiveness changes to bankruptcy laws become inevitable.. But before we start the coin rolling we should know how to control this as the current Irish system is very open to fraud..and I’m done paying for that! …my recommendation would be that people under debt foregiveness would have budgetary measures imposed on them and can we also talk about banks taking responsibility and actually taking the hit without passing it on (so that people like me can continue to pay for their mortgage?) …any ideas?

  5. Colin

    Great article David. I’m of that generation and although I did not buy property, I have no wish to see my peers continue to suffer the way they currently are. Therefore, we need to deal with this post credit binge problem sympathetically. Now, there may well be anecdotal evidence of parents helping out their children stuck in negative equity, but not everyone has parents with deep pockets. In summary, we need wealth taxes and new taxes on economic rents, not new taxes on low and middle income earners. And yes, we need a stimulus to reduce unemployment, our single most biggest problem, affecting our 25-40 agegroup disproportionately.

    • Deco

      Our biggest problem right now is the jobs market. The people in the most trouble are those who simply have run out of work. It is a massive human crisis. Because when people cannot find work, they are out of hope, for a future.

      This means everything has to be on the table – including the minimum wage, the taxation policy (which is against employing new hires), business taxation (which gives allowances for money spent on labour saving machinery-still), and of course training. In particular FAS, and the third level sector. There are lot of experienced people with only a leaving cert who do not want to spend three years in uni studying a course that might not have a job at the end of it – they want to study max two years for some area where there is a viable job option.

      Maybe a mortgage allowance/deferment scheme for people who are unemployed but who are getting vocational training to get themselves back into the workplace, for a minimum of a course length of 18 months – and where there are employers who are committed to giving applicants an interview upon completion of a course.

      There is a labour market readjustment process at all times, and there are people who want to adapt – and who need some assistance with the process – or at the very least need a break from the Dept of SW who seem to be pre-occupied with cutting allowances.

      • Praetorian

        Have to echo this, it is one of the great shames that it is a) not being discussed enough and b) no resolution has been put in place. Mere tokenism from overpaid politicians with this dam apprenticeship thing and a few courses here and there, it is not radical enough, people are moving into ‘long term unemployment’.

        As Churchill said about the commander at the Battle of Anzio, ‘we thought we had thrown a wild cat on the Italian beaches, instead we got a beached whale’, so it seems is the case with the current government, there is no urgency whatsoever, they are wandering around the country as if all is normal, we need a national government as you had in war time, we have got to get these people around the table, knock some heads together and work!! Churchill slept in the map room in Whitehall at the height of the crisis in WWII, which we called ‘the emergency’, we called the conflict in Northern Ireland ‘the troubles’, time we got a grip, this is a national crisis but the response is like it is some kind of annoyance that may go away if we ignore it. It is amateur hour yet again and we as a people will go on suffering as long as we accept such mediocrity.

  6. merrion

    David. I am glad to see you are advocating debt forgiveness and supporting it with sound economic reasons rather than emotional arguments.I think families ( as these mortgage holders mostly have children) have to be given a second chance.
    I did not understand how the older generation benefitted wiith euro changeover?

  7. CliveG

    Impressive article.. I have just seen the film Inside Job and was numb at the greed.

    This film would certainly make you think about hurling your youth into the grave to pay a mortgage..

    [Inside Job (2010) is a documentary film about the late-2000s financial crisis directed by Charles H. Ferguson. The film was screened at the 2010 Cannes Film Festival in May and won the 2010 Academy Award for Best Documentary Feature.
    Ferguson has described the film as being about "the systemic corruption of the United States by the financial services industry and the consequences of that systemic corruption. From Wikipedia]

  8. Great article stating some home truths. But the only way debt restructuring will come about is with leaving EMU.

    Its possible through some Currency Board we need to set up, that we could peg the puntEuro and fix its value against the Euro if and only if the euro remains following present upheavals.

    We are heading towards September Titanic icebergs. The ECB cannot provide unlimited funding to the peripherals.

    The following is an extremely interesting analysis of reliance of European banks on their external, international balance sheets, exposing them to dollar credit risk.

    • Deco

      The ECB is involved in trying to keep too many plates spinning at the same time.

      Greece, Ireland, Portugal are already being propped up. Hard to say if it will be sufficient. Spain’s banking system also. And a few weeks ago the ECB was buying bonds from the Italian state. Cyprus is another Eurozone member in trouble. And then there is that impending divorce in Belgium, with both parties squabling over the finances.

      Yes, the ECB is running out of options and accumulating headaches.

      • thirdeye

        Cyprus debt appears to be off the financial media attention due to the fact were the same financial banks also involved in exposure to the present Greek debt.
        Added tot he news that 2 German economists have taken a case in German courts about the legality of bailout of Greece,Ireland and Portugal under the present Lisbon Treaty contradicts German National laws with a decision due in September may add to the problems of sorting out the Euro Currency. An Article I had come across on the Der Spiegal English website shows with the present Belgium divorce taking place that voters in Austria,Finland and Holland are starting to view EU itself in a different light with large gains of the far right parties if elections were to be held at the present time.
        Rich EU Members Lose Patience with the ‘Olive Zone’ of,1518,781710-2,00.html
        Has shown maybe the divorce of Belgium is the way the EU itself is going to end up.

        • Deco

          Well, I reckon the people in the contributing countries have every right to be alarmed.

          Just look at the level of waste, excess and patronage that comes from the state in this country.

          And I assume that what is going on in Club Med is very bit as bad. I mean if a clown like Berlosconi is at the top in the Italian state, you can be certain that there are thousands of mini-Berlosconis all through the system, fiddling the system. Greece is worse, and Spain may well be no better.

          In Ireland, we even have books like “The Wasters”, “Snouts in the trough” and “Who (really) runs Ireland” covering this subject.

          The taxpayers of these countries should demand more accountability as to what goes on in state systems where the money is going. It would do Irish taxpayers a massive favour.

    • dwalsh

      “The ECB is involved in trying to keep too many plates spinning at the same time.”

      Excellent metaphor Deco.

      I think Colm’s right. Can’t be done unilaterally within the EMU. Especially now we are not masters of our own central bank or national budget.
      It would have to be a multilateral arrangement; but can you imagine the political ostriches miss-managing Europe at this time doing it?

      I think it may eventually happen; at a global level; but not until things get a lot worse.

  9. wills


    If we are to award *debt forgiveness* to people I say award it to people

    - who only own one home
    - who are NOT renting out properties for rent
    - who did not enter into the property market to ATM property for a profit
    - who purchased a mortgage strictly to buy a house to live in it and not to profit out of it by buying into a bubble market knock off.

    To award debt forgiveness beyond above conditions amounts to providing support to an economy which is rigged and run by insiders and facilitating re-setting the game again for the all the same bunch of players to go again and cream the system and cause economic anarchy again.

    If debt forgiveness is to be awarded it must be awarded to people who bought a house for to live in it.

    If debt forgiveness is awarded to people who ATM’d properties. Who bought into the housing property bubble to play the housing market these people must suffer the consequences.

    If we do let these house buyers off the hook we are laying the seeds for more economic anarchy and chaos again.

    • TonyB

      Hear hear!
      “Please remember the value of your investment can go down as well as up”.
      If it’s introduced, it has to be a seriously limited scope. People spend money and it benefits the economy, but it also benefits themselves. What about those who didn’t buy a house and can’t get a mortgage because of recap rates?
      Priority belongs with those who didn’t err. Nobody forced anyone to do anything. Those who bought, bought into an expectation that the value of their investment would rise – they were investing in gain. They could have rented.

    • worded

      I certainly don’t want to end up subsidising my landlords mortgage through debt forgiveness via my taxes just because he foolishly outbid some young family for the house I rent.


      Anyone who bought during the boom was aware that they could profit from it in the future.
      They were also aware that the increases in prices were irrational and way above inflation.
      While they may have needed a roof over their heads at the time,they were not going to say no to any future profits either.
      How do you identify those who planned on cashing in but got stopped short by the sudden collapse of the property market? Its not like they’re going to put their hands up and admit it.

      • wills


        Yes, true. Where does this bailing interested parties out end.

        The problem is bailing out the banks, property developers, begun a process that will never end.

        It turned market efficiency into market magic markers.

    • Juanjo R

      I think maybe some protection could be afforded under the constitution somehow. Would require a referendum but if it was worded properly it could be a landslide in favour.

      But I think there would be a cavat needed that any protection given to a family home would have to be appropriate to ‘basic family needs’. We don’t – I think – need the spectacle of supposedly hard up developers who paid €20 million for a 10 bedroom gaff for just themselves and the trophy wife on Shrewsbury road claiming protection under this.

      THAT would be sickening.

  10. ladygee2

    I’ve been an avid reader of the various comments that have been made by the different contributors along with all of the articles written by the webmaster himself for quite some time now and I have to say that the majority of those articles have been succinct and to the point, but I’m sorry to say this latest offering has to ‘take the biscuit’ in my book. My reason for stating that boils down to the fact that I bought my house back in August 1988 and now sooner had I paid the first instalment of my mortgage the interest rates began to go up and up until they hit the heady heights of 19%!!! Yes, 19%. Just imagine what things would be like if the interest rates reached that height in these troubled times??? I’m sorry to have to say this, but now that we’re back living in troubled times, which was down to total incompetence of the last 3 governments, the bankers, the property developers and Uncle Tom Cobbly and all I’m not at all symphathetic to the people who now find themselves in all sorts of trouble in regard to they paying off their mortgages. Yes, I’m sorry for the people who’ve lost their jobs and are in genuine difficulty paying back their mortgage, but I’ve no sympathy whatsoever for the greedy bastards who took out mortgage after mortgage on properties either at home or abroad and now find themselves ‘up shit creek without a paddle’!!
    I was in the position of being able to pay off what was left owing on my mortgage earlier on this year and with the fact of I having been in the position to do that I’m now as ‘happy as a pig in shit’.
    Most of the people who are in trouble with their mortgage bought their property or properties during the boom and now they’re quite literally in the manure.
    In answer to the topic of there being debt forgiveness to get the economy going again it’s the people who are genuinely in trouble with they being able to pay their mortgage who should have that debt forgiven not the greedy bastards or the speculators!!!

    • Colin

      I’m sure David’s prescription of debt forgiveness applies to owner occupiers of only one property. Anything else would be socialising the losses of capitalistic ventures gone sour. Can you find any sympathy for the mere single mortgage holder in negative equity on this basis?

      • Steven Shaw

        Colin, since you say “socialising the losses” it looks like you are assuming that debt forgiveness would involve the public/tax-payer paying out the debtors loans and therefore increasing government debt. I reckon that’s a terrible way to go about it. There seem to be many options for a debt forgiveness but I’ve yet to hear one that sounds just right for our current circumstances.

    • dwalsh

      “the greedy bastards or the speculators!!!”

      The greedy bastards and speculators are already getting their debt forgiveness…it’s called NAMA.

      Ditto for the bankers and bondholders…it’s called bailouts.

      I think David is talking about homeowners.

  11. worded

    I dont agree with debt forgiveness.

    I paid my taxes for the banks to be bailed out.
    Now Ive to pay more tax for other peoples houses?
    Total BS.

    What about an equity swap instead.

    • Colin

      Wills has nailed it above with his brief list of conditions. Back in 2008, I was initially completely against any idea of debt forgiveness, but many of David’s articles since then have convinced me to change tack, and to view the misfortunates with more sympathy. We should have had ‘Jingle Mail’ laws in place like they do in the USA, and in their absence we now need to look at ways of forgiving debt.

    • Steven Shaw

      The banks should never have been bailed out with government debt i.e tax payer funds. However, debt forgiveness doesn’t need to be about the government going deeper into debt. The debt needs forgiving, not transferring.

      I don’t think an equity swap works. No bank in their right minds would want equity in busted housing assets. If there’s some deluded person(s) out there who would take equity in your home (paying out a portion of your loan) then find one. There aint one. If we were to force the govt to be that person then it _would_ be just another massive govt (and tax payer) bailout – with the requisite increases in govt debt.

  12. TonyB

    David McWilliams, you’re as much a populist celebrity as an economist.
    Are you running for president yet?

  13. kenzo

    I seriously disagree with this; if people are allowed to renege on their commitments, then what sort of message does that give them going forwards? “Don’t worry – borrow borrow borrow, live beyond your means and sure no hassles, you won’t have to pay it back”. They’ll be pissing themselves laughing at more prudent folk like me (born in ’77, never bought a house during the bubble since I was very sure that there would be a crash), and will repeat the same mistakes again.

    • Steven Shaw

      I don’t think the prudent have to suffer. I was born in ’71 and never bought property having found it to be already overpriced in 2001 (in Australia I might add). Forgiving debt doesn’t have to mean a bonanza for the indebted. The houses are owned by the banks, not the debtors. One way for debt forgiveness to work if for the mortgaged asset to remain the bank’s property. After all, it’s the house that underlies the mortgage asset at the bank. Of course then the bank needs to sell the house or become a landlord (and I don’t abide that!). The US as a problem like this at the moment. However, because of bailouts etc, the banks are not selling the houses that debtors have walked away from. They are pretending that those houses are still worth what they were. The thing is that the banks would probably be balance-sheet insolvent should they sell all those houses. A solution for insolvent banks is also needed. I reckon that bankruptcy is probably a fine mechanism.

  14. Evening,

    Just to clarify. This article is a general piece on how demand and employment are generated. It is obvious some sort of debt “deal” will have to be very targeted, so as not to, rightly, anger many other taxpayers.

    Why not isolate the actual figure needed (various estimates from €5 to 10 billion) and get the glorious bondholders to pay for it? Just an idea. If everyone in Ireland is being asked to make sacrifices, why not the most obvious group, the creditors?

    There is no silver bullet here but just the ordinary course of economic policy. If you have a problem, you fix it. We have “adminisration” for companies with too much debt but decent businesses, because at a certain stage you save the company by reducing its debt. The same should go for households.

    All the best and thanks for the comments,


    • wills

      Any business thats ended up drowning in debt must be left to the logical outcome of the reality its ended itself up in.

      So, if a *decent business* has ended up in too much debt its up to the *decent business* to figure a way out of this for themselves. This is the way the market works. Now, if one is to bail out this *decent business* well then we are not in the real world market anymore we are operating a model of doing business that shifts the goalposts up and down the playing field.

      • dwalsh

        I think David’s right on this. The goal post is a moving target. An illusion actually.

        These kinds of adjustments are required from time to time because capitalist markets fail from time to time. This current failure is the biggest ever; but there have been many of various importance in the past centuries.

        The historical fact of booms and busts on a regular basis, and government (tax-payers) bailouts, exposes the lie that is the myth of the free market.

        • wills

          I disagree on the illusion point.

          In fact if one is to view market corrections as a fact of free market capitalism, which I do, the ultimate market correction mechanism is availabe inherent within free market dynamics. Only problem is, certain interested parties keep market dynamics in a state of dysfunction thereby introducing the fallacy of having to move goalposts up and down the playing field.

          • dwalsh

            Yes… but you are switching the sense of illusion here.

            The activity of “certain interested parties” you refer to is real capitalism in acion; keeping “market dynamics in a state of dysfunction” to profit by it… dysfunction is the actuality of capitalist markets… especially financial markets… played out in cycles of boom and bust… hence the illusion of goal posts… there are none… except in the textbook myths of free market economists. In my opinion.

            Also these market correcions destroy people’s livelihoods and actually kill people.

            I think this free market fetish that has gripped our civilisation needs to be purged.

      • dwalsh

        @ wills
        PS: I think your list of conditions above is excellent btw.

    • Steven Shaw

      David, is that _bank_ bondholders that you’d get to pay for the debt forgiveness? I’d love to get some detail in the plan. I tend to think that some banks will be insolvent and so shareholders will pay in addition to bond holders. What about depositors? As a prudent saver, I am keen to keep my savings… is that rotten of me?!?

  15. barry1969

    Im really not sure about debt forgiveness until I see the small print. Not everyone in the generation David talks about went nuts. Should the state transfer money to these people who will now enjoy in many cases a sizeable home while others are left in squalor? Many rented places are in poor condition. Many home owners didnt buy in the ideal place because they didnt want to go over board. Are they fools? Many bought in rough areas and make payments because it was cheaper. Not ideal area but reasonable price.

    Unless this forgiveness involves an equity stake by the bank in these homes-I and others like me will fight this tooth and nail.

    • wills

      Debt forgiveness for Mom n Pop property developers can only be justified by a corrupt, rigged, feudal, narcissistic, bent, back to front model of economy.

      We got NAMA pambee for property developers.

      Are we goin to get NAMA pambee mark II for Mom n Pop property players???

    • Steven Shaw

      I understand how you feel. I was there once. However, I think debt forgiveness has merit for savers/renters as well. Of course something would need to be done so that this kind of credit expansion didn’t happen again. In this senario, I think it’s quite likely that the money supply would shrink and house prices would tumble (even more) giving the prudent saver an opportunity to purchase a home perhaps even debt free.

      btw, the banks would have to be forced to take this “equity”. Noone in their right minds would do it…

  16. Praetorian

    Rivals the great offer from Irish millionaires and billionaires, oh wait, there wasn’t one…………

    France’s rich keen to pay more tax as PM Fillon announces ‘rigour package’Sixteen wealthy French citizens have signed a petition

  17. Malcolm McClure

    Why do almost all religions, Christians, Muslim & Jewish, believe in a dooms day?
    And not just religions, but pagan philosopher’s like Plato believed in a final judgement of the soul.

    People naturally desire justice and fairness.
    We live in a world where it would appear that often, good people lose out, while the immoral finish first. And where people who pay their debts are out-manoeuvered by those who don’t.

    It helps to make sense of this if there were to be some unavoidable judgement, some celestial court that punishes wrongs, rewards rights, and cannot be escaped.

    If we believe this, then we can still believe in a good, just and fair universe.

    If that were not the case, then life would be a rather depressing experience.

    Is God reminding us that he is not dead? Should we rejoice that many in negative equity are going straight to hell?

    I don’t think Sartre would necessarily support this philosophical tangent from existentialism.

    • Malcolm McClure

      Significantly, in this nominally Christian nation, nobody has commented on the above so let’s try again.

      In the paternoster, here are slight but interesting differences of wording in the petition for forgiveness as recorded in the First and Third Gospels. St. Matthew’s version, literally rendered, is:

      Forgive us our debts,
      As we also have forgiven our debtors

      and St. Luke’s:

      Forgive us our sins,
      For we ourselves forgive every one indebted to us.

      Have we all thrown out the baby with the bathwater?

    • Colin


      The problem is pride. Irish pride is top of the global pride pile. Pride was the first sin against God – you don’t need God when you’ve been conditioned to be full of pride by the Irish Pride Meeja. And then temperance goes out the window shortly after pride has been elevated. Secularism has become the default mindset of the lefty liberals and PC meeja brigade throughout the West.

      Also, there is a backlash against any kind of public Catholic piety, particularly if you’re a man. There’s something unmanly about kneeling down and praying in public in a church pew. Contrast that with Muslims, who combine public piety with a belief their God allows them to use violence against perceived unislamic acts. The Christian God doesn’t reward masculine martyrdom with 77 virgins either.

      • Malcolm McClure

        Colin: Thanks for your response. You are quite right about the pride aspect, but it is interesting that you consider deference to a higher intelligence as unmanly.

        Of course it was the macho culture of the wide boys in banking and stock markets that created the problem in the first place. So the Irish concept of manliness is actually a symptom of the problem that needs to be discussed.

        • Colin


          You may have misunderstood me there. I meant to say that it is considered by society to be unmanly. My own personal view is different.

          You’re right about macho boys getting us into trouble. Deco has pointed out her on this blog the role of rugger bugger macho types getting promotions in our banks in D4, causing the crisis in the banks, and I concur.

    • No, he probably wouldn’t :)

  18. thirdeye

    EU and American monetary policy aided by Irish financial and political establishment gombeenism have all added to the problems not just in Ireland but throughout the EU and Euro Currency area.Light touch regulation espoused by 1980′s Thatcher and Regan and markets find their own level mantra was the clarion call that ushered in easy money to various parts of europe that if media was to be believed and appears it was that Ireland was the EURO poster boy of the benefits of EURO membership.Banks in other parts of the world of similar size to Ireland 3 main Irish banks had profits that were about oone tenth of Irish banks and everyvbody wondered how this was possible.We all know now to ur bitter cost.

  19. Optimistix

    I agree we have to forgive debt when the debtor simply cant pay but we need a proper debate on how to do it in fair way. We have stuffed the banks with money, banks that were insolvent and who should have been put into examinership or receivership. In the real world the staff would have been laid off, costs slashed and brought under control before any new investor put one cent back into these zombies. But no we dont do that. Instead now we have well capitalised banks who will now start to make their staff ( who should have been fired) redundant and pay them our taxpayer money and worse still pay them their pensions. What a crazy system to reward the people who brought gave out these crazy loans and now we simply write them a nice cheque to help them on their merry way. David we have a corrupt and bankrupt banking system and we have politicians who have been taken for a ride and to the cleaners by the so called insiders including the accountants, lawyers and senior civil servants who have set up the system to suit themselves.

    We need to purge this state of insiders who have helped themselves on the way up and incredible as it may seem they are now helping themselves again on the way down. Shame on us. The lack of leadership is appalling and it feels like the inmates have taken over the asylum.

    It feels like we have a government that is not in control and that the insiders have taken the opportunity to help themselves to the loot while Rome burns! Lets cope on to ourselves before there’s nothing left. Nama is the insider ATM machine and its daft to keep it going, it should be wound up asap its nothing more than a state backed scheme to transfer funds from the state to the insiders in the form of fees and expenses.

    The banks should be made sort our the mess and that includes the private developer loans and the bad debts given out to homeowners. Make the bankers responsible to collect or come to a settlement on all debts. Why give bankers a pay off instead make them work out the mess they made.
    They know where the bodies lie and they should be made to clean up the mess. They can agree the deal on each single loan on a case by case basis that is fair to all parties. Where they can get in the money back they should do so and they should be rewarded for doing their job. No banker should be laid off with a golden parachute instead put them to work. Debt forgiveness should be part of the solution as should swapping debt for equity. In parallel we need to change the law for personal bankruptcy and let people restart afresh. The big question is does this suit the “Insiders” ?

  20. Scipio

    Nobody put a gun to these guys heads and made them buy an overvalued house. They were in it for the upside and lemming-like all jumped in the property cart.

    So why should Joe Public pay for their greed and stupidity ?

  21. wills


    You say….

    The activity of “certain interested parties” you refer to is real capitalism in acion; keeping “market dynamics in a state of dysfunction” to profit by it… dysfunction is the actuality of capitalist markets… especially financial markets… played out in cycles of boom and bust… hence the illusion of goal posts… there are none… except in the textbook myths of free market economists. In my opinion.

    I say…

    The *certain interested parties* is NOT real capitalism.

    Real capitalism is free market functionality according to market efficiency and allocation.

    This quite evidently is NOT taking place in the western world economy.

    But you do agree market s are dysfunctional and you conclude capitalist markets are inherently dysfunctional.

    And you then say boom and bust the manifestations. I agree too here.

    Then you jump to the *goal posts* idea of moving been an illusion and conclude there are no goalposts.

    I disagree there on your assertion there are no goalposts.

    You state there are NO goalposts, I insist that there are goalposts.

    Lets agree to disagree.

  22. imithe

    Nice article. You’ve identified an economic problem – lack of spending and suggested a solution – debt restructuring (forgiveness).

    Without getting into the “who should be forgiven?” debate can I question whether spending would be the natural consequence of the solution?

    In Australia where I live, the Reserve (Central) Bank keeps citing declines in retail spending each month. I don’t think there are any parallels with Ireland as regards unemployment and mortgage stress. General consensus is that the resources boom is continuing. But people are just spending less. Perhaps we have reached “Peak Consumption”.

    I would suggest that many families benefitting from partial or full debt forgiveness in Ireland will be stung by their previous experience and will not spend as much as expected. I learnt from previous articles that in times of fear, people save rather than spend.

    • Dilly

      I have been a very very bad comsumer this year. I have bought literally nothing.

    • Deco

      As evidence of Peak consumption, look at consumption of road transportation fuel.

      I do not have the figures at hand, but I understand that fuel consumption for transport in 2010, was 33% below that used in 2006. Now, a lot of construction equipment lying idle explains some of the story. And new roads and less traffic congestion also reduces the bill. And then we have all the mothballed helicopters which are standing up. Plus all the high powered executive cars, and Terenure Tractors which are moving around less.

      But for a lot of people, it is a matter of cost.

      Then we have retailing.

      I think we hit a definite peak in consumption circa. 2006. With the passage of time, it is begining to look as if that was “The Peak in consumption”. The Irish concept of lifestyle is under threat.

  23. I’ve blogged on this and posted before on David’s last article, its a humanitarian approach to the issue of debt forgiveness and a call to set up a state sponsored NAMA BEAG. Comes with caveat the banks and their government proxies don’t wish to hand control of debt forgiveness away from inquisitorial banks:

    “Here is the outline of some suggestions to relieve the burden on families and on the state of mortgage debt arrears:

    1. Reform of the bankruptcy laws in this country to be brought in line with best practice in UK and US. The homeowner gets to hand back the keys to the banks but falls under a 3yr bankruptcy system similar to same in the US.

    2. A NAMA for homeowners with toxic mortgages: the State offers to buy back the mortgage at an agreed discount, which maps that used by NAMA to buy toxic commercial loans from the banks.

    3. The homeowner gets to choose 1 above or alternatively can choose a Family Protection Bundle. The FPB would be a binding contract on the homeowner following the hnadover of their home to the state that:

    a) They get to occupy the house for life.

    b) They pay a TBA Rent or Lease on the property which is a percentage of their income. The percentage would be scaled from say 5%, if they are on Social Welfare, to 40% if they reach income ceilings to be decided. If the contract is broken, the property reverts to the state.

    c) Upon death of the property owner, the same offer is extended re Rent/Lease is offered to the person’s next of kin to whom the property reverts per Will of the deceased.

    d) A clause in the contract allows for the state if it chooses at any time to make an offer against the property to the Rent/Leaser, to allow the Rent/Leaser buy back the property.”

    • Steven Shaw

      1 sounds pretty good. i.e. you can choose to walk away. Not sure about the “3 yr bankruptcy system” if that means garnishing your wages for 3 years. Without this feature, this sounds like a good recipe for debt forgiveness. You haven’t said what happens if/when this is taken up on mass and the banks balance sheets become under water.

      2 I’m not a big fan of the state buying mortgages. This would involve taxpayer financed govt debt.

      3. You’ve written a lot about this case so I figure that you favour it. I’m not a fan of the state getting into “social housing”. This would involve taxpayer financed govt debt.


    How the Federal Reserve bankrolled the rest of the world including the ECB with half a trillion dollars.

    If you havn’t time to read the above a couple of times, have a look at the short video at the outset.

    Alan Grayson Rep from Florida interviews extremely nervous, defensive and shifty Ben Bernanke Federal Reserve Chairman.

    Note the above is debt yielding interest for the Fed.

    Note also the effect of the above on floating currency fluctuations.

    Max Keiser or DmcW would much better than I be able to spot the scam going on here. As far as I can make out, it goes like this:

    A has no money

    B lends money to A

    A spends money and rises in value in terms of spending and acquisitions and more heated economic activity.

    A’s profiting economy is now able to pay back maturing debt interest to B.

    Rep Grayson is in awe at the ability of a small number of people acting as private fiat bankers to make a decision re lending .5 trillion dollars to foreigners.

    Note the above Fed funding of banks across the EU is in the form of swaps described in zerohedge and lie on the balance sheets and in some cases off the balance sheets in European banks ready to detonate.

    One major Swiss bank has already had to be bailed out.

    The fiat money system is surely now burning out of control!

    • “Note the above is debt yielding interest for the Fed.”

      refers to $500 bn

      “When the financial system almost imploded in the fall of 2008, one of the primary responses by the Federal Reserve was the issuance of an unprecedented amount of FX liquidity lines in the form of swaps to foreign Central Banks. The number went from practically zero to a peak of $582 billion on December 10, 2008. The number of swaps outstanding was almost directly correlated with the value of the dollar (much more on that shortly).”

      (mentioned in article and later above) lent out by the Fed to institutions like the ECB and banks across Europe and worldwide

      • Final point re above:

        While the European banks and banks worldwide funded themselves in dollar denominated borrowing

        “While the associated currency exposures were presumably hedged off-balance sheet”

        If the dollar falls against the euro, this vaporises large amounts of its dollar denominated funding based in dollars….perhaps this form of currency speculation is at the root of EMU’s current turmoil.

        Its a mess of a world if economic progress on the manufacturing front has been superceeded by fiat currency speculation of the kind exposed above.

        Good question Grayson:)


    With 100,000 people leaving the education system each yr, the situation is hopeless.Even the USA can’t create more than 1.5 million jobs per annum ! We still subsidise large families ! Land of the skint Mick.Only 60,000 out of work in NI !

  26. uchrisn

    I like the pionts by wills and colm on who and how for debtforgiveness.
    We need
    1. Proper bankruptcy laws and non recourse mortages for the future, its not that complicated we could basically copy most U.S. states for that.
    2. Debt forgiveness involving some sort of debt/equity swap for First time buyers owner occupiers who bought in a certain period and who simply can’t pay. These people would have to be provided with social housing anyway if thrown out so taxpayers are not funding so much. There could be a special court set up to deal with those cases.
    3. Some involvement of private capital from the banks that made these mistaken lending decisions, haricuts from bondholders.

    The gaurantee of the banks and NAMA had some good basic ideas in theory. In the wrong hands that basic theory goes out the window and it can all end up a bit of a mess. That is why Morgan Kelly has sarcastically advised people to join a political party that will be in power cause it might help them get their debts written off. One way to resolve that is setting up a speical court with people with no links to Iriland or its banks in power.

    • My suggestion differs to that of Wills.

      I’d point out that Davids 2nd last paragraph supporting a generalised debt forgiveness plan means all residential type property should be included in a debt forgiveness plan.

      Limiting the plan to owner occupiers would only deal with part of the problem.

      Also speculators were scammed by the banks as well.

      A once off overall clean solution should deal with residential property to detoxify the residential market.

      My own plan is a plan that deals with the whole residential, property market. It has a humanitarian component that can be fine tuned and adapted to the rights, entitlements and needs of families and owner occupiers:)

      In David’s 2nd last paragraph also he describes how

      “They had saved in the old, soft currency, the punt, which was a “serial devaluer”, yet, as if by magic, they got all those savings in a “weak” currency redenominated in the “hard” euro currency. Did we hear much from them about the “fairness” of this once-off windfall?”

      Actually, it wasn’t a windfall for everyone including savers. Many found the price of goods redenominated in euros overnight were more expensive in euros than they had been in punts:)

      Maybe a windfall for merchants and manufacturers not Joe Soap. Generation later finds the value of the euro rising against other currencies, but that’s another story.

      • gerry

        I can’t believe that you say speculators should be included in a debt forgiveness scheme! It’s one thing to say that someone who bought a home at the peak of the boom should have some/all of their debt written off but an entirely different matter to say that all residential property, including those who were greedy and bought perhaps a dozen or more , should be bailed out by the taxpayer. These speculators were not buying a home. They gambled heavily in the belief that the only way was up regarding property prices and were only too happy to tell us how much they were worth during the boom. Now that it has all come crashing down you say that we should bail them out, when they had a large part to play in creating the inflated property prices in the first place. I, for one, would fight any such proposal to offer debt forgiveness to any gambler.

        • @gerry,

          I’m not surprised you should take that view. However, this is nothing to do with morality. Its not a question of forgiving debt in that sense.

          Instead, its simply pragmatic to make a deduction A not only won’t pay the debt, but cannot pay the debt.

          So, what’s to be done? I say take ownership of the asset back to the State and get the individual to pay up as much as they can pay.

          Then call it quits and move on as follows.

          As uchrisn states above, we need proper bankruptcy laws and non recourse mortgages for the future. So we need to overhaul our bankruptcy laws as part of the process.

          Speculators and whoever else avails of the scheme go through this updated bankruptcy process perhaps keeping them under wraps for 3-5yrs, then they get to play again under hopefully new and better rules.

          The state seizes property assets and puts them up for sale through NAMAbeag.

          Job done:)

      • uchrisn

        Colm your post above refers to family protection laws so it seemed you were talking about owner occupiers similar to Wills.
        I wrote to the competition authority asking them to investigate anti-competitive behaviuor by banks in regards to price-fixing in the property market 2005-2008. Amazingly they said there is not enough evidence to start an investigation. Anyway if collusion was proven to have happened then everyone would be in line for compensation. This is unlikely to be investigated.

        • @uchrisn

          Well done on your letter. Not surprised it fell on deaf ears.

          NAMA is one of the greatest price fixing heists in history!

          • uchrisn

            The majority of people in Ireland support price-fixing in the property market – it benefits them in the short term by increasing the sale ‘value’ of their house.
            The competition authority should be able to act indepently, like in the U.K. where they fined government owned RBS for collusion.
            It seems here they are not interested despite overwhelming circunstantial evidence. I mean Shane Ross even wrote a book about it – The Bankers.

          • Deco


            The Competition Authority of Ireland are a joke.

            They never commented about anything done by Aer Rianta/the Dublin Airport Authority with regard to hiking up charges when throughput dropped. Too many chums running both organizations.

            They never comment about the fact that one brewery produces 70% of the beer consumed in this country.

            They do not have a problem with Irish Distillers controlling the Whisky production.

            Then there was the issue of housing density in Dublin, and the zoning controversies.

            The SIMI also never got properly investigated.

            They are a bit like the IFRSA during the Las Vegas on the Liffey era. They are an official body that maintain the pretence that everything is in good shape. To use Brian Lenihan’s favourite phrase – their function is to “instill confidence”. Mostly false confidence.

            If people sussed out the level of collusion, they would change their buying behaviour. Therefore “confidence” building institutions are required to maintain a pretence, and to fool consumers.

            Too things mislead consumers.
            i) Advertising, promotion, media coverage.
            ii) Regulatory bodies that are helping to maintain a pretence. I would include the ECB in that category.

            And your responsibility to yourself, is to not be conned by these two dimensions.

    • Steven Shaw

      I like (1) but what about changing the laws now retrospectively. Allow anyone to “walk away” home owners and landlords alike. People living in these houses, whether they are currently “owners”/borrowers or renters will have an opportunity to purchase the property once the bank puts it on the market.

      I don’t see how (2) works for two reasons. One, the banks don’t want the equity. Two, if the bank took equity, it would expect rent from your first time buyers. These people would end up part renting and part borrowing. They’d still be in a worse situation than if they took option (1) and “walked away”.

      Agree with the sentiment of (3). No more bailouts for banks. If fact perhaps they can be reversed! Bondholders and shareholders must take a hit, it will likely be 100%. Many of us will be affected by this due to pension funds and the like investing in these things.

      • uchrisn

        Steven, 1.changing the laws retrospectively is not a simple task. There would be very strong legal challanges from banks.Im not a lawyer though.
        2. If option 1 is not on the table this changes. Its a valid point about the rents though. I suppose the agreement would have to ‘cap’ or eliminate rents.

  27. Deco

    New phrase “collateral”.

    What will the PIGIS provide as collateral ?

    More specifically, what are the implications for Ireland ? More dilution of sovereignty.

  28. george

    David, “Nobel Prize Winners” meeting in Germany don’t see a way out of it! Your friend Stiglitz maintains that the Euro has no future! And if instead of doing what Constantin Gurdgiev describe as, we seated on our hands doing nothing, while we wait for the axe of the next budget to fall. What about doing something bold?
    What about a Public Declaration signed by few prestigious economic annalists, the more the merry, with five to ten points of concrete proposals, for the common good of society. And against the wishes of speculative economic mercenaries, who want to play with us, to satisfy their unsociable and endless greed, in partnership with most of our incompetent Political Class, waiting for their “disappointment money”.
    Ghandi said: “There is enough for all of our needs, but not enough for all of our greed”.

  29. DJR

    So people who have been struggling to make ends meet will suddenly start splashing the cash and give us a consume boom once they get debt relief? Sounds a lot like Brian Lenihan’s notion that NAMA would get the banks lending again!

    How about putting a few figures to back up your plans David – a cost-benefit analysis showing what growth debt forgiveness would generate as opposed to a focussed €6bn investment in jobs, growth and r&d initiatives would be worth seeing.

    Or will it be like your bank guarantee proposal where we get signed up and only find out what the bill is a few years down the line? Not that we need to worry about the cost too much, like the bank bailout we will leave the next generation to pay for it – what a great country! And the debt forgiveness fans have the neck to talk about fairness…

    We truly live in the land where that farrow eats its own young

  30. @DJR,

    Totally agree with your concern that taxpayers should end up footing the bill.

    Sorry if I didn’t make this clear. My plan getgo only occurs as part of a comprehensive debt restructuring default based on the principle of ‘ability to pay’.

    This inevitably means the burden should fall on banks and bondholders, not taxpayers.

  31. With respect, it may benefit some readers to more closely examine the argument here. Although our host has in the past suggested forgiveness be adopted as policy, in this particular case it seems that he is suggesting that it is going to happen, whether we like it or not, on the basis that the money isn’t there and its not going to magically reappear any time soon.

    Surely all notions of making the bondholders, banks etc pay are largely academic at this point as our largest creditor is the ECB?

    So it seems to me that the debts of individuals who cannot afford to pay them off themselves, will be paid either directly by the Irish exchequer or indirectly via our reparations to the EU for bailing out our bank’s bad debts, including personal mortgage defaults. In my largely inexpert opinion, the latter seems the more likely, once the Germans realise that (1) they are stuck in the Eurozone for the foreseeable future and (2) the Chinese gravy train will not last forever.

    That doesn’t mean its necessarily going to happen soon mind you.

    • wills



      Most Mom n Pop property players have swag socked away to pay a majority of their legal debt obligations they profited from in the bubble years.

      • What is a Mom n Pop property player?

        It seems like people want to play the ‘moral hazard’ card when this is not a discussion about morals, its one about basic arithmetic.

  32. Colin

    Case Study of Debt Forgiveness in Ireland.

    Era – 1980s.
    Parties – Farmers v Irish Banks (AIB & BOI)
    Agreement – 10% Forgiveness.
    Legacy – Very Rosy for Farmers.

    “The amount written off varied, but it was never below 10%. Each case threw up complex negotiations, traumatic for the farmers. But invariably, within six months, they would appreciate what was done, as they weight lifted off their shoulders, recalls Tom Clinton.”

  33. Steven Shaw

    I agree that debt forgiveness is what’s needed to heal the economy. However, the “morality”, “moral hazard” and “bailing out the profligate” cannot be ignored.

    What’s your plan?

  34. John Q. Public

    So we’re going to bail out a bunch of degenerate, gambling credit junkies, how nice. They need more money after all, they deserve a break and we need them to do what they do best; buying shit they can’t afford with money they don’t have so that they can stimulate the economy.

  35. wills


    You say….

    ‘Also speculators were scammed by the banks as well.’

    I say, in your magical thinking perhaps.

    Speculators are not a bunch of yams.

    Speculators had the gumption and know how to go find property, do the paper work, file the taxes and see through the deals.

    Thus, I find that statement lost in space.

    • Hi Wills,

      Its hard to disagree with you. Some were exactly as you say, others were simply caught out by banks who pressed loans into their hands for commission.

      Many take the plane late Sunday evening leaving their young families for another two weeks heading for their Luton bedsted.

      There they hope to work for 3 yrs hoping to put a business together and avail of the easier bankruptcy laws.

      The real culprits for this mess have gotten away scot- free

  36. wills

    NAMA for bankers.

    NAMA for developers.

    NAMA for Mom n Pop property investors.

    Stinks too high heaven.

    Rotten, insider wealth of nation robbery.

    • redriversix

      Evening All.

      We do not wait for debt forgiveness , we take it.
      A.I.B , amongst others , have been bailed out on average , every 10 years.

      They look for it in the middle of the night , claiming if they and their cohorts don,t get it by morning , the country will collapse.

      They and their like promote fear and fear get,s them what they want.
      But,you , me and Joe the plumber cannot get it.

      Why ????
      ” Are they any better than the small business person trying to get along “?
      Is your family worth less than theirs ?

      Their will always be people , who will take advantage of a “Debt forgiveness Programme ” Same way people took advantage of a ” Tax Amnesty programme ”

      The Majority of People do not want to abdicate their responsibility or walk away from them but when you see how one group in Society is treated above another ,
      you do have to wonder..” what is the best course of action I/We should take for our families “?

      Who is going to get landed with the majority of cuts allegedly needed in the next Budget.

      10 BILLION EURO IN CUTS ! ! !

      ” Has it suddenly become so wrong to have wanted a better life for ourselves and our children ” ?

      Is that not what are Parents tried to do for us ? “make a better life ” ?

      Why should we be punished for investing in a property or a commercial interest that fails when Banks can ” do what they like ” and walk away , get bailed out , continue to earn money they do not deserve and blind anybody who questions them with some financial ” Mumbo Jumbo “.

      I was self employed for over 16 years and took the good with the bad , but i was unlucky or ” not smart enough ” and i lost everything , including my family home,I went around and paid as many creditors as i could and put my family last , much to my regret.

      I Tell you this , not because i look for sympathy , but as i said before on these pages , i just wanted a “level playing field ”
      I have discovered that their is no ” level playing field “Their are Banks and there is “The People”
      It seems all over the World Banks come first and the People come last.

      Their will be debt forgiveness,sanctioned or not , for everyone…, simply because as i said before their is not enough money ANYWHERE to pay the huge debts that our and other Governments are accumulating.

      What you and I need to do is put our families first ..period ,

      Are you in a strong financial position
      today ?

      Where will you be next year ?

      What steps are you taking ? What,s your 12 month plan ?

      If you have not suffered yet , take steps to minimise your exposure,it does not matter if you are trying to run a Company or a household budget.

      Unfortunately , Everybody is going to suffer much more before this financial War ends.

      IT certainly was not “Mom & Pop investors who caused this crisis , that,s for sure.

      So Willis, I am Truly happy for you if the present crisis has not affected you and i hope it never does.But the one thing that keeps me going every day is trying to practise Humility , Compassion & understanding when listening to people and trying to pass on my experience, strength & hope to them.., Except when it comes to Banks……Forgive me but ” F@^& them ”

      Take care & Goodnight

      • +1

        I second that “” F@^& them ”

      • wills

        Still leaves the point on Mom and Pop investors liable for their bad debts.

        • redriversix

          Hey Willis

          Whats the point on Mom and Pop bad debts ?

          Did they make bad investments ? Sure they did.

          Did I make Bad investments ? Sure I did
          Who Bailed me out…..nobody
          who bailed them out…..nobody

          I did not expect anyone to bail me out,I am pretty sure they did not either.

          I/We took our chances in Business,celebrated the good and rolled with the bad.That,s the way it was supposed to be.

          Unless your a Bank , they day they got bailed out changed the playing field for everyone.

          Shit happens…..unless your a Bank.

          • wills

            Reprieve for regular Mom and Pop is fine by me.
            Reprieve for property playing Mom and Pop is another NAMA bailout.

  37. wills

    Hands up on here who have vested economic interest in playing the property market.

    • If you are implying I have “vested economic interest in playing the property market” you are wrong. When NAMA broke I threw up this webpage site but got no support to develop it further, its worst fears re NAMA have come to pass

      I campaign against the real culprits in the economic cul de sac we are in, the Banks who’ve gotten away scot free to the arrogant point of a recent gombeen complaining against an AIB salary funded by taxpayers of €500,000/pa

      Target the banks with your ire as I do:

    • Colin

      I might eventually buy 1 unit if property falls / is allowed to fall 80% from peak.

    • uchrisn

      Wills, i imagine most people on here have parents, friends or other family you own properties if not themselves.
      Most people on here also know some relative, friend or themselves who would like to buy a property if the price was right.
      The number in the first group is significantly higher than the number in the 2nd.
      The lack of consideration of those in the first group for those in the 2nd, even parents for their own children, was astonishing during the boom years.
      I commonly had debates during those years with those in the first group who had convinced themselves that young people ‘had it great’ and that house prices were in no way overpriced. When I calmly pointed out in clear figures that houses were way overpriced they downright refused to accept reality. For example in the 80s you could buy a house with 3.5times average salary. In the 00′s it was 10times average salary, and 2 public servants could not afford a 1 bed in Dublin. The common throwaway to this was that interest rates were higher. I was amazed at the capacity of those in the first group to ignore reality and basic facts in order to justify their own new found wealth.
      What do the same people say now? If I get them into a heated debate they will say that they had it hard growing up poor and actually enjoyed the boom years emmensly cause it was the first time they had ‘a bit of money’ and would not change a thing.
      Most of the plus 50 generation grew up on the land, they worked hard and didn’t have much spending money. So you can understand how they got excited when their house values started to rise ridiciuosly.

  38. Bernie Madoff and Nicky

    How Wall Street makes money through risk taking!

  39. wills

    What I am saying is incredibly simple.

    NAMA for bankers.
    NAMA for developers,
    And now…… the shadows been rolled out…….NAMA for Mom and Pop investors.

    And, it all fits.

    An insider class from top down gaming the system

    • true…..but if you only see the Mom and Pop , as the saying goes, you can’t see the wood for the trees

      look at the system

      • wills

        If its not apparent at this stage I look at the system then sure nothing more I can say!

        • yep to me you always looked at the system, but it appeared you were taking your eye off the ball, maybe I was wrong?

          • wills

            Eye is firmly on ball, and goalposts.

            Unless of course the goalposts are suddenly changed and moved somewhere else??!!

          • With respect, Wills, your eye is not on the ball. Read the above proposal carefully, it makes a distinction between owner occupier/family homes and your speculator Mom n Pop homes for investment purposes.

            The proposal treats Mom n Pop investment homes same as residential property investment by developers.

            The proposal is to seize these properties similar to US ‘post the key back’ solutions. The exercise should come under new bankruptcy laws.


    I’ve uploaded an Android App to the android market available for free here:

    Its a Beta test experimental ver 001, so be kind:)

    Its android and installs on android HTC phones and later for Balckberry and IOS.

    Users can email me with suggestions for further development.

    Basically it has a twitter app that allows you to search recent tweets on phrases of your choice eg on economics, also links to rss feeds with links to economics sites in Ireland and internationally, and runs a basic video app.

    But its under development:)

  41. dwalsh


    We probably wont agree…I agree with you on that…but I’ll have another go at it anyway.

    Real capitalism is the action of real capitalists in a real market. Effective capitalists will look to every means to increase their market advantage over competitors and maximise profits. Indeed this is a central principle of capitalism. CEOs are employed explicitly on this principle and rewarded accordingly.

    This principle means that capitalist will sail as close to the wind of immorality and criminality as they can get away with. And if they have a lot of power and influence, as global financial and corporate capitalism has today, they will sail where they like and do as they like, protected by their political protégées and legions of accountants and lawyers. That’s how capitalists like Soros are permitted to financially attack entire nations.

    These are ‘interested parties’ who foster unbalance and ultimately dysfunction in the market; and they profit from both the boom and the bust.

    You wrote:

    “Real capitalism is free market functionality according to market efficiency and allocation.”

    This is a theoretical definition of capitalism. Something which belongs in a textbook. In the real capitalist market it’s dog eat dog. It’s do whatever it takes to maximise market share and profits. Nothing at all to do with “market efficiency and allocation”. That’s economic apologetics; an academics rationalisation of a notional parameter. It’s an abstract concept; an illusory goalpost.

    There is only one real goal post for a capitalist — winning, by whatever means.

    This is where regulation comes in and is necessary. Just as on a football pitch we need to set parameters and goal posts and have an umpire in order for there to be a game at all and not just a scuffle; just so, if we want to have a market that is in line with your definition we have to set parameters or regulations and codes etc. and see they are abided by.

    What this crisis is showing us clearly is that many capitalists will behave immorally and criminally if they are permitted to; and their immorality and criminality will destabilise our markets and our nations and our lives.

    • wills


      *In the real world* we get rigged markets.

      In the textbooks we get the blueprints.

    • Deco

      In Ireland, the rules were all written in the book.

      And in addition, we had rulings on corporate probity based on Basel, and Sarbene Oxly for companies that were internationally traded, like the major banks.

      There was regulation, in theory.

      In practice we had a collection of muppets assigned the responsibility of doing the regulation. IBEC had a few nominees. ICTU had nominees. The political parties. And the banks, via that big lobbyist called IBEC made sure that the regulatory bodies were stuffed with “yes-men” and maybe even “yes-women”.

      This is regulation, Irish style.

      Despite all the scandals, nobody has ever been found guilty of anything. And it is very obvious that they were playing tricks.

      In addition, class action suits are declared forbidden, even though under the Common Law, the shareholders should be capable of suing directors and regulators for non-disclosure of pertinent information, for liability for reckless behaviour, and for liability for breach of trust.

      IBEC run the whole show. The chief gombeen outfit of Ireland has the whole thing rigged.

      • dwalsh

        “In practice we had a collection of muppets assigned the responsibility of doing the regulation”

        I would go further and say there was an international understanding emanating from the pinacles of the global central banking system that required regulators not to do their jobs. The understanding was simply this:

        ‘Look the other way or look for another job’.

  42. Economics is a body of knowledge but the economy is a machine .Wills calls it the market .

    “Cognitive dissonance is an uncomfortable feeling caused by holding conflicting ideas simultaneously. The theory of cognitive dissonance proposes that people have a motivational drive to reduce dissonance. They do this by changing their attitudes, beliefs, and actions. Dissonance is also reduced by justifying, blaming, and denying.”

    The latter sorts of responses are dysfunctional. Such thinking ran rampant among free market economists
    who simply could not deal with the fact that their beloved free market had gone so badly awry. And so Deco was born .

    • dwalsh


      “the economy is a machine”

      That’s precisely the error the academic economists make.

      They try to portray a phenomenon which is organic and living, possessing all the complexity of a living system, as a machine. But it’s not a machine; and it does not obey their mechanical theories.

    • wills

      John, I would say the market is one part of the economy.

    • Deco

      Actually, the economy functions a bit like a crowd on a very busy street.

      But the media, can direct large sections of that crowd to do some very idiotic things. “Support our advertising sponsors” being the media’s main motivation – the advertisers’ penny.

  43. dwalsh

    Also Wills may I say the line you are pushing now is a ‘moral hazard’ line…the Mom and Pop investors.

    I dont think anyone is suggesting bailouts for investment properties. The social issue here is families and children and ‘homes’…not investment assets.

    • wills

      Their are taxi drivers who bought properties in Dubai.

      Do we get a NAMA for them??

      • The purchase of many properties were subject to The Family Home Protection Act 1976. (i.e. they were bought by couples and families for homes)

        Might I suggest that such properties would be a good place to start when it comes to debt forgiveness?

        Most of the other speculative, business or investment properties would not be subject to the FHP Act.

        There are afterall buildings and family homes – they are not necessarily the same thing. A society which can see this clearly and treats them differently has developed positive social fibre!

        • wills

          Tell you what.
          If you are so on for this why dont you pay for it, go ahead, but leave me and my monies out of it. I am not providing consent to any of this. It is all daylight ponzi robbery and will always be.

      • dwalsh

        Why ask me that?
        Didn’t you read what I wrote?

  44. wills

    NAMA for bankers.
    NAMA for developers.
    NAMA for Mom and Pop property players.

    An insider class top down.

    • Wills, you are not reading what’s being debated here. We’re talking about the state seizing properties, extracting from property owners what can be reasonably got out of them, property owners still get burned big time, they lose their property, they undergo bankruptcy, the state now has to flog those properties on the market.

      If the house is on fire, its no use imagining it not on fire, you have to be pragmatic and do something about it.

      Unfortunately, gombeens came up with the notion of NAMA, with the scam the properties could be bought at knockdown prices for the state, estate agents/solicitors the financial profession feed off it eg with consultancy fees of €14 ml annually, growth would resume and the state would make a profit.

      NAMA is a big septic boil ready to burst on the property market in Ireland. But why have one law or no law for the rich and another law for Joe Soap. No doubt you’ll say these are no Joe Soaps but the facts are there are 60,000 property mortgages at least under threat that wont be repaid.

      So, seize the stuff back, but protect family homes. The state gets them but the family/owner occupiers get protected by being asllowed to live there and rent/lease and possibly buy back them back from the state sometime in the future.

      Meanwhile the state should flog the lot including the NAMA stuff on the open market and take the loss on the chin.

      This loss can be set against bank debt to the ECB bondholders in later default negotiations.

      I’m curious to know why you are disagreeing with DmcW suggestion re a comprehensive solution involving debt forgiveness, or the other suggestions most of us here see as fair, pragmatic; and a step forward to putting out the Irish economy on fire scenario?

      Whats the blindfold you have about this? We’d all like to live in a ponsi free ideal world.

      • wills


        NAMA is working extremely well for a select group.

        NAMA is a bonanza for their own private economy. Not a boil.

        You say protect homes.

        I say protect families so they can keep their home.

        • Wills,

          “I say protect families so they can keep their home”

          If you read the proposal above, that’s precisely what it sets out to do.

          Also the NAMA boil I agree is a bonanza for a certain private economy, agree with you there as well.

          But NAMA is a septic boil for the rest of us. We’re paying through the nose for it, future generations will pay through the nose for it.

          Its task is to keep property off the market in order to falsely inflate property prices, so its a hidden tax on thoise looking to buy property.

          Maybe NAMA is waiting for the expected 50% further drop in prices so that it can fully maximise losses for taxpayers:)

  45. Note outside the property bubble, rich farmers with Euro grants had a great year last year with exports surging 20%, interesting data on their grants from 2008

    ECB liquidity lending provided for the banks, public service protected by Croke Park, agriculture and multi national sector protected by salaried and well pensioned bank/financial services Lambert wanderly wagon politicos….

    Not that he hasn’t been wrong before now Greenspan also believes the EMU is about to break up:

    “”The general feeling out there is of a lull before the storm,” Greenspan said.”

  46. Deco

    More revelations concerning the level of stupidity that emerged in the “feel good factor” took hold, and led people wildly astray.

    It is too much to expect the taxpayer to pay up for certain forms of madness, like high range, expensive housing for people who were loaded up with hyper-confidence. (Just wondering, were some of these “professionals” on drugs or something, given the decisions that were made ?).

    • “He said around 10,000 investors, often accountants, lawyers and other professionals, ”

      last time he said something like ‘accountants, lawyers and solicitors’ and a journalist took him literally going so far as to count the numbers practicing in those professions, he’s being more carefully assimilative above:)

  47. Decos Eulogy to a moking bird

    Much of what is missing from the current debate over economic policy is a fundamental question over what our nation’s economy most closely resembles – a sophisticated machine that can be fine tuned by special people with IQ’s several standard deviations greater than us common folk, or an ecosystem that selects the most relatively fit participants for success, while punishing poor decision makers with lower standards of living.

    If our economy resembles a machine, then the Keynesians in Washington are correct that managed health care; near $1 trillion stimulus packages; targeted subsidies and bailouts; quasi-ownership of banking and automotive concerns; green initiatives and much more can be successfully carried out by elected officials whom we entrusted in the voting booth. Let’s face it, we have been told over and over again that under the era of deregulation (presumably referring to Reagan, Clinton & Bush), led to the chaos that destroyed the American economy and, deservedly, our faith in capitalism. Unfettered capitalism, we have been told must be restrained by intelligent, diligent political officials and judges so that we can all be spared the ravages of another Great Depression.

    On the other hand, what if an economy is not unlike the wilderness and the ecosystem that exists in the wilderness? Think about this proposition for a moment. Out in the wilds of nature, the regulating forces that guide the “decisions” of plants and animals is simply the extent to which the ecosystem selects for success, or failure, the behavior of its participants. Life is a random walk where sometimes there is just enough rain, food, sunlight and lack of disease to allow living beings that are best suited for current ecological circumstances to thrive. Other times, naturally occuring ecological “recessions”, i.e. drought, floods, plagues, etc. cause participants that are ill-suited for the conditions that exist to face a greater probability of struggling, or even dying.

    The “market” for resources is unregulated but ultimately faces regulation. The regulation in this case stems from diverse life forms using only those resources needed to maximize chances for survival. There is also no punishment imposed for those living things that have the best genes, the greatest strength, or the luckiest location at any given time.

    Harsh as it may sound, what if we simply allowed our economy to copy what is “natural” to our condition? Human beings have a greater capacity to work together, a greater desire to share wealth and a deeper understanding of how to organize resources than animals and plants do. Government, one could argue, imposes unnatural regulations, taxes and laws that inhibit human being from maximizing the opportunities our economy (our ecosystem) has presented to us. Whether it is progressive individual and corporate income taxes; crony capitalism for businesses with the best lobbyists, but not the best products; or welfare and health care benefits for voters who would rather use a ballot to get money than a job to do the same, the examples are endless where unnatural, and unproductive decisions are rewarded all because government can use force.

    I would like to suggest that the more we encourage our fellow man to look to nature rather than government for guidance on how to structure economic policy the better off we will be in the long run. This would not mean the absence of help for the down-trodden. Far from it. What it would mean is that in the future, participants in our biological economy would not build nests that they cannot afford; would not eat enough food to become a strain to their neighbors’ wallet and would not use their businesses to invest in resources that are too risky.
    Remember, if we think our economy is a machine, it means that in the long run we must face a reality where more and more experts get to design and control the part of the machine that each of us helps support. I am not sure I want a future that the Soviet Union decided to leave behind.

    • FAiken


      Great post. You must be a fan of Ludwig Von von Mises. Capitalism should be natural and uninhibited. Bubbles rarely happen in nature.

      Unfortunately, Ireland is one of the most controlled economies and States in the World. If you really think about it, the Government have a hand in everything – banking, transport, utilities, the media, agriculture, industry, education, health, hedge funds (NAMA) etc., etc, etc!

      It already is the Soviet Union and it will end like the Soviet Union. I predict 2013-2014.

      • Ludwig , yes what I liked about him was his lucidity in economics without resorting to figures and masses of data .In that sense he was poles apart from the late Garett Fitzgerald who enumerated every ‘mot’ possible and drowned the words of speech in a sea of numerical logic .

    • I’ve always considered that particular debate to be one between two extremist ideologies. Whenever either has been tried on a significant scale, they have failed. Unfortunately for zealots endorsing either view, the world is far more complicated than all of that.

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