September 14, 2011

Germany profited in boom so must deal with the bust

Posted in Irish Independent · 195 comments ·

It is now down to Germany. Does it want to save the euro or not? If it does, it will have to underwrite the Irish along with the Italians, Spaniards and a few others besides, not to mention the Greeks.

If it doesn’t want to save the euro, it will have to deal with a rapidly rising new deutschemark, which will soar in value against every currency — not just in Europe but against every currency in the world. In fact, the blueprint for Germany is Switzerland, and last week the Swiss National Bank responded to the rising Swiss franc by capping its rapid appreciation because it is hurting Swiss industry. A post-euro Germany with the new deutschemark would be like the Swiss Franc on steroids. It would be like a massive Switzerland in the heart of Europe with a hugely overvalued currency.

The reason for this is that everyone would seek the “safety” of the new deutschemark as the new currencies or new blocs of new currencies fall in value, trying to find their new level. For the European economy to work properly, the rest of Europe would have to be much cheaper than Germany.

In the event of a euro collapse (which is no longer that unimaginable), strategically, Ireland would be in a better position than say Spain or Italy because our natural home would be with sterling — as it has always been. Yes, the new Irish punt would fall dramatically, as it should do. The basic rule of economics is that weak economies should have weak currencies and vice versa. However, with an implicit link to sterling, rather than an explicit exchange rate target, there will be a level against sterling where the market will buy punts again. Things will settle down — as they always do.

In Ireland, although there would be one new currency, there would in effect be two. There would be one currency for transactions — a new punt — and one for savings, the new deutschemark. In this post-euro world, people with savings will try to convert their punts into deutschemarks, as happened when the euro was introduced in 2000. Over time, as the new currency becomes more credible, savings will flock back to the punt because interest rates in punts will be much higher than those of the deutschemark.

Changing the currency that people “transact” in is nothing new. For example, there have been four different currencies circulating in this country during my lifetime. When I was a very young boy, we had pennies with big hens on them, the old pre-decimal currency. Then we had a new decimalised currency with totally different denominations and shapes and sizes. People adapted quickly, even though this was in a decade when inflation was raging. Then we changed currency again in 1979, breaking a monetary union with Britain, which was centuries old. (This new monetary union with Germany is only 11 years old).

We introduced a new currency with a new name — the punt — which no one had ever heard before. Official Ireland claimed that this would be a “strong” currency but in fact it devalued five times in its first 14 years! Then in 2000, we introduced the euro. So that’s a currency for every decade of my life! These things happen and have happened. In Europe, following the end of the Soviet Union, close to 20 new currencies were issued between 1990 and 1992! Changes are not without cost, but they happen. Currencies change, that’s the lesson of history.

There is no reason for the euro to be any more permanent that the others . . . or is there?

Of course there is. At the outset, the euro was seen as a political initiative that would force all the economies of Europe together. In the context of political integration, this wasn’t a bad idea, except that not all economies were suited to it and not all countries wanted it. Of the three countries that joined the EEC in 1973, Ireland, the UK and Denmark, only Ireland joined the euro. The other two opted to keep their currencies having done rigorous analysis of their trade and investment patterns. So too did Sweden.

Despite what you hear from “serial integrationists” now about the link between the euro and the EU, Britain, Sweden and Denmark all remain members of the EU. Are they any the less European for having their own currencies?

The main beneficiary of EMU was the dominant industrial nation in Europe: Germany. It could export all it liked to the rest of Europe with no exchange rate risk and, more importantly, no political ramifications. Germany got a free lunch, which was paid for with borrowed money by the rest of Europe. But who lent this money to the rest of Europe? Why Germany of course! So Germany was lending money to the poorer EU countries in order to give them the wherewithal to buy German goods, which had generated the German savings in the first place!

When these countries had difficulty paying back the German banks, what did the Germans do? They penalised them in the draconian terms of the EU “bailout”. Instead of acknowledging its own role at the centre of this European-wide Ponzi scheme, Germany initially played the role of major loan shark, borrowing at 2pc and lending to the distressed states at 6pc! This penal approach didn’t work because the balance sheets of the distressed countries were too weak to pay this money back and the crisis became more acute. The “patched up” solution of a few months ago is unraveling.

We are at the brink. The Germans have four choices: (1) take the losses their banks will suffer on the likes of Greece and Ireland, Spain and Italy on their own balance sheet; (2) force their own banks to take the hit for their reckless behaviour; (3) allow Greece to default — which would give “permission” to the rest of us to default; or (4) force the Greeks out of the euro which would lead to the unravelling of the currency.

Angela Merkel knows that the German public doesn’t want to pay for anyone, particularly the Greeks, who have been viciously caricatured in the German tabloids. She also knows the end of the euro would knock the shine off European integration, but then again she is not Helmut Kohl — a war survivor and driver of EU integration. Ms Merkel is an East German, fluent in Russian not French — a different kettle of fish altogether. She also knows that if she bails out Greece or anyone else with German money, she loses the next election. So what do we have? A stand-off as politicians have no idea what to do next.

As for Merkel and Germany, their role in this debacle is clear. They benefited from the boom and now, naturally, want to insulate themselves from the consequences. But they can’t have it both ways.

As Duc de Levis, a staunch enemy of Bonaparte, himself an earlier champion of European integration, said: “To govern is to choose.”

Your choice now, Angie.

  1. The availability of unlimited credit on the international market for both profligate governments and profligate bankers, has brought us to where we are today.
    The Euro currency clearly allowed money to flow across borders,in the belief that we are all one, and the loans are underpinned by the governments of the responsible economies like Holland, Finland, Germany and France.
    The Euro should have had a stricter oversight regime, and implementation of the rules for budgets,and borrowing by both governments and banks.!
    European banks poured the fuel on the fire.i.e. the Ponzi style property racket encouraged by a Fianna Fail government Ireland.

  2. Nina Ogden

    Spiegel Online Poll Shows Majority of Germans for D-Mark

    A striking example of how a right idea coming at the right moment can make history, “surprisingly”, is the way Spiegel Online, one of Germany’s leading news websites, this afternoon takes up the call for a referendum on the euro and on the EU . Spiegel goes through numerous pros and cons, being on the pro-euro side, naturally, but concluding that there should be a referendum nevertheless, because, in the present crisis situation, where the “gulf between the people and their [elected] representatives” is widening, it would be more detrimental to not hold a referendum.

    The article goes with a poll that readers can click on, asking the three following questions: 1) Germany should become a member of a kind of United States of Europe, and sacrifice sovereignty in key areas such as financial policy; 2) Germany should again become an independent nation-state and reintroduce the d-mark; 3) undecided.

    As of 5:45 pm, the majority were for the d-mark,

  3. NeilW

    Perhaps the Irish might like to try genuinely free floating its currency and concentrating on generating domestic demand and supply rather than trying to supply the rest of the world (whether with labour, goods or services).

    Ireland constantly seems to want to export its real goods and services rather than holding onto that output for its own benefit.

    Is it any wonder it ends up poor all the time with that approach?

  4. straboe1

    I sincerely believe that the higher authorities in Europe, those who want a United States of Europe, wanted to be able to put pressure on the smaller states by loaning them too much money. With the collapse of the world financial markets, their plan went awry. They are afraid of pushing things too much in case the whole pack of cards collapses. But we need to be very careful about what we do next, as they will continue to try and get their U.S.of E.

    • dwalsh

      I completely agree with your point about Europe. For the Euro elites this is an opportunity to fast-track federalisation.

      Now…expand the insight to the global level…think big!

      • Adam Byrne

        The European elites can’t do any worse of a job than the twats who were running this place for the last 100 years. Look at it that way.

        • dwalsh

          Lets hope you’re right.

          For all its faults Europe is thus far the best humanity has managed in terms of civilisation – in my opinion (considering America as essentially an extension of European civilisation).

          Are we on the eve of collapse and a dark age; or are we on the cusp on a new era of civilisation?

          • Adam Byrne

            Probably both in the order you described. Creative destruction. That would be the optimistic view anyway.

          • redriversix

            “same meat , different Gravy”

          • coldblow

            It’s a coincidence that you talk about the possible emergence of a new civilization. I’m just re-reading Desmond Fennell’s 1999 “The Postwestern Condition” where he argues that we have been living in a new civilization for some time (explicitly from August 1945 when the bomb on Hiroshima turned the rules of civilized warfare on their head, although there had been a lead up in the years beforehand). People are by and large unaware that they are in a new civilization, believing themselves to be merely in a new phase of the old one. It’s a closely argued book and it makes a lot more sense to me now on my third reading.

            He argues that, while people in the West are better fed and provided for than ever before, the rules for the new civilization are chaotic and self-contradictory and that a financial crisis could topple the whole edifice. However, in the unlikely event that the rules of behaviour are rationalized (instead of running merely on instinct and emotion) then this can be avoided.

            He sees the current “Ameropean” civilazation, bsaed on American “Superpower”, as following on a line of four earlier efforts in modern times to create Utopia: American Rev., French Rev., Nazi Germany and Communist Russia, all of them arising from reactions to perceived (and often real) oppressive and restrictive elements in the Christian western civilization (dating back to Constantine) and seeking to replace them with new ones based on human perfectibility. Unlike you he sees Europe as a satellite of the US and argues that all 5 attempts at founding a new civilzation were essentially based on the idea of achieving “Non-Europe”.

            I don’t usually go in for this kind of analysis (most of those purporting to explain the changes seem to be creatures of them, and unaware of the fact) but I make an exception of Fennell who gave a priceless insight into the madness that is modern Ireland in his “Nice People and Rednecks” and writing. As I mentioned here once before he was harangued on the Bibi Baskin show by Michael McDowell: “Mr Fennell, you think you are an intellectual. Well let me tell you this, you are not.” Considering his demonization by the ‘liberal’ elite during the Celtic Kulturkampf he is unusally dispassionate (“non-judgmental”) in this book.

          • Adam Byrne

            He sounds like an interesting writer whom I have not heard of. He has 8 books available at my local library – I’m wondering which one to order – I don’t see the one you refer to as ‘The Postwestern Condition’ and the ‘Rednecks’ one is from way back in 1986 and (I would assume) would be somewhat dated. Can you be more specific in your recommendation please?

            The Bibi Baskin show! Haha, that says it all. Wherever did she go to? Well, she can stay there.

          • coldblow


            Rednecks I remember as being entertaining, but I gave my copy away. I must look in the library too. I’d avoid his book on the Irish national question which I’m afraid I found ‘worthy but dull’. Try Rednecks, but you might not like it.

          • Adam Byrne

            Ok thanks.

          • dwalsh

            @ coldblow

            Thanks for that.
            Fuller response below.

      • Stiofan

        Don’t be afraid of Europe Walsh. It can be a great opportunity. I wrote again to Jose Barossa today, to make my suggestion. Let the HQ of a federal Europe be the IFSC. We are perfect for the role; speak the international tongue, educated, bureaucratic temperament, neutral, tolerant, and the West Building will suit with just a tiny re-fit. Loads of buildings down there in Spencer Dock. We can be The European Capital Territory. Forget the Belgians. Think of the money we save on Irish MEP travel. It’s gold plated this idea, so get onto Jose and express support.

    • nt

      This guy, Gunther Oettinger, is a blessing to all German cabaret artists/comedians. Dont take him too serious really. The Germans have the tradition to send all the politicians that are of absolutely no use to Brussels.

  5. dwalsh

    (didnt notice the new blog was up when I posted this reply on the previous one. So re-posting here)

    @ coldblow

    Much of what Lammert says is incomprehensible to me too.

    No I am not influenced by Kunstler. Don’t know his work in any depth. He seems to be mostly concerned with the crisis of the physical economy — which is the biospheric crisis; depletion of resources (peak oil etc) and environmental degradation. The crisis Lammert is talking about is the financial crisis. They are interconnected naturally but they are distinct. The biospheric crisis is a much bigger problem than the financial crisis in my opinion.

    Re America: beneath the surface I sense America is highly unstable. The population is furious and fractious and armed to the teeth. If there is a serious crisis and a bank holiday (no ATMs) and possibly disruption in supplies, things could get very messy.

    I know it is currently popular to believe that the world is some sort of Darwinian chaos equation working itself out entirely blindly or deterministically (non-linear and non-stochastic as Lammert puts it); but I personally believe that is a mistaken view.

    It is also currently popular to believe that everybody is on a treadmill of making money day to day to pay the bills like all ordinary folk are. That nobody is mindful of the direction of world events at the global and historical level other than in the relatively short-term reactive manner that politicians are. I am convinced this is a mistaken view also.

    There are people in the highest echelons of power — and I am not referring to politics here — who have anticipated this scenario and many other possible scenarios and have been preparing. The UN and IMF for instance, as well as many other interested parties, have had think tanks working on all this for years. I think we can be quite certain that plans for a new global banking system and reserve monetary unit are essentially ready to be rolled out.

    Even so, when the s*** hits the fan they wont just say here’s one we made earlier. No, it will be more subtle than that and will look perhaps as if it is being worked out by the politicians; but really there will be powerful forces moving in the background to direct the process in preferred directions.

    But that is just my estimation.

  6. Gunther is bloo*y right.!
    If the electorate of the PIIGS continue to elect governments which continue to act irresponsibly,we need a Europewide referendum to give more powers of responsible fiscal management to a central authority which answers to no individual power.


    I dont see anything wrong with what Germany did.
    They made quality goods that the rest of the world wanted.
    They sold them for a profit and used that profit to loan to the rest of the world to buy more goods,they reinvested their profits,whats wrong with that?
    Contracts were signed by all,Germany has not reneged on anything.
    It is not a Ponzi scheme,Germany did not get in and get out quick with the takings.
    If they dont get paid back then they will be the victims,but they will pull themselves together and get over it.
    They will work harder and be more innovative and within five years it will be like nothing happened,they wont emigrate like the Irish and hope someone else will look after them.
    They would be well within their rights to not only pull out of the Euro but the whole EU thing.
    Poor countries like Ireland wont be much use to Germany in the future anyway,There was one new Porsche sold in Ireland last year,how much food produce do we sell to Germany,who needs who?
    They can go it alone and deal with other exporting countries like China only and slap an import tax on defaulting countries to get there money back thet way.
    The defaulting countries were greedy and feckless and now want to tear up the contracts,no amount of ranting and raving can justifying that.

    • Adam Byrne

      I agree with you on most points apart from the fact that the Germans should have done their due diligence on who they were proposing to loan cash to and thereafter refused to advance finance to the feckless banks in this country and elsewhere. The lender must bear a responsibility as well as the borrower.

      • nt

        Absolutely right. Ireland still is a way overvalued and nobody forced this country to let their property prices and wages go through the roof. Sure, a couple of bankers, solicitors etc. did and the people joined the craze. 5 years ago Ireland felt like Germany in the 70s apart from the fact that there was no productive value behind the whole thing. And the latter would have been the only justification for the prices everybody here asked for their work and property. Anybody ever thought about the minimum wage in Germany? They will hardly ever agree on a fiver! So what? This is a big country, having a high unemployment rate (although not in the insanely faked statistics), producing a few valuable goods with a handful of large companies and many hard working SME’s which are all massively susbsidised. If the people on this island would ever stop to think “Me first!” and would start to cooperate instead of compete they would have so much more force on this oh so unjust European continent. Roll up your sleeves and come up with something valuable. Especially in SME’s: stop the competition, start cooperation. There is still money at reasonable rates out there, it is just not given to any random chancer.

      • Praetorian

        @ Adam Byrne – you might want to check out the Vanity Fair article on the Germans which is posted below, paints an interesting picture on how they ‘managed’ their financial dealings, according to the author, the Germans were regarded as suckers by the Americans when it came to deals.

        • Adam Byrne

          Yep, I read it last night Praetorian. Good read apart from the boring, unproven and irrelevant scatological references which he got some criticism for in the comments section. The Germans surely had the wool pulled over their eyes by those Wall Street types. I hope they learn their lesson. At least they were being paid a non-obscene amount of money for their profession and the civil servants in the finance mininstry were mostly uninterested in the kind of revolving door career moves that go on between Wall St. and, say, the SEC. They had some intergrity.

    • Deco

      No matter how broke Ireland becomes, there will always be a collection of beemers parked outside the K-club in Straffan, Portmarnock, Drury’s Glen, etc….

  8. Lets be honest thanks to our own generations of so called leaders we never did really get to enjoy the free movement of goods and services as envisaged indeed promised. (And voted for)

    Almost everything was more expensive here – including Irish goods!
    Who invented VRT? It was clearly anti-European and represents more than anything else the utter contempt our own leaders have for us; (Why should the people enjoy cheaper goods when we can tax them the difference and protect the vested interests in return for their kind donations?)

    European funding allowed us to potentially become a first world economy since the dark days of our entry to the EEC back in the seventies. But we could never get there intellectually; It really was our own leaders who let us down – I therefore cannot blame the Germans for looking aghast at our situation and concluding that it was self inflicted by repeatedly elected dysfunctional, incompetent governments.

    In fact if I were German I’d probably wonder if there were any intelligent life-forms left in Ireland and why they are not in absolute revolt against such obviously idiotic, condescending, incompetent government?????

    The Germans like any analyst/doctor/healer know that you cannot cure those who will not see that they are truly ill.
    As an people we’re obviously suffering from Stockholm Syndrome. And as for me?
    Mia Culpa!

  9. Adam Byrne


  10. Deco

    For a long time we blamed the English for our problems.

    And guess what, we brought them in to sort out an internal quarrel amongst ourselves. We were responsible for starting that debacle.

    Every time there was an independence movement of some sorts, it got betrayed by somebody who wanted to grovel to the regime, rather than move to more liberty and freedom.

    We spent money like fools, pi55ed it against walls the length and breadth of the land and “celebrated” something. (for the life of me, I am still not exactly sure what was being celebrated).

    We invented the transgression of democracy that is “the social partnership talks”. We paid for the IBEC market rigging, and ICTU’s benchmarking experiment.

    Of course the full repayment of the bank collapse by the taxpayer is both ridiculous and criminal. But we voted in favour of that two under the promise of “Vote Yes for Jobs” and “putting us at the heart of Europe”.

    Intellectually, we created this mess. Let’s be brutally honest about it. And then we can draw up a blueprint to go beyond it. And the first step of the blueprint will be to call Sarko’s bluff and refuse to bailout the Anglo Bondholders.

    • Adam Byrne

      Pissed it up against the wall is right. Buying absolute tripe from all and sundry and enjoying the ‘craic’ (what exactly is that – some sort of banter?) on mammoth sessions down the ubiquitous pub thinking we were the bees knees. Well I wasn’t here so I plead innocent m’lud. Thank f**k I wasn’t.

    • “We invented the transgression of democracy that is “the social partnership talks”. We paid for the IBEC market rigging, and ICTU’s benchmarking experiment.”
      Who is “we”?
      Do you mean Bartholomew Ahern?
      Do you mean cunning self serving politicians?
      Do you blame the electorate?
      do you mean the greedy oligarchy of developers who were matched with the public service unions,(and an army of carpetbaggers ) by “The Bertie”,in order to guaranteed re-election ?

  11. craxihuber

    Don’t agree with the headline. “Germany” didn’t profit during the boom. Until Schroeder brought in some reform in 2004/05, everyone was saying Germany had gotten it wrong, too much manufacturing etc. Wages hadn’t increased for a decade (compare that to Ireland!), and even after the reforms, wages have increased only little. It was Ireland, Britain etc who profited during the boom. Hardly any unemployment and substantial wage increases.

  12. Germany continue to be exceptional in the production of many goods, however their individual fiscal prudence aggregates into an economy with a lagging domestic consumption, the oft cited paradox of thrift applies, Germany needs a deficit of demand to be plugged from elsewhere and with the same currency the Euro delivers that demand to a level not possible with a floating currency.

    Germany has a well recognized and established national arrogance and air of superiority that has become increasingly more amplified since their power in Europe has increased ( they have never been more influential in Europe as they are now since the War) The arrogance is extreme, Merkels more sedate gestures are not reflective of the real view across the German establishment. Jurgen Stark former ECB chief economist dismissed talk of non repayment of unsecured private creditors of Anglo as follows ““I’m as surprised as the president that this issue seems still to be on the political agenda” echoing a degree of arrogance in his dismissal reflective of contempt. Today despite a lame attempt at retraction we hear of the suggestion that flags should fly at half mast out of shame!

    Apart from a currency union devised in their maximum interest, the inequity of Germans current position goes further. And reveals a blatant hypocrisy. Amidst all of this moral lecturing and arrogant patronizing by many in the German Establishment. Germanys position must be considered alongside the reality of the behaviour of German Banks. If as itsclearly the case with the German authoritative view, that Irish taxpayers deserve to be punished for the recklessness of Irish banks, so too should Germans taxpayers be punished for the recklessness of German Banks. Instead the burden of recklessness of German Banks is being placed on taxpayers from other countries financed at a further profit to the lenders enabling such a stitch up. The Irish Government failed miserably to properly expose this inequity of thus hypocrisy to the wider world, and yet the Germans continue to lecture us.

    German banks were conservative domestically ( high deposits required for mortgages etc) but completely reckless in then trying to generate high retruns overseas from all of the stockpiled German cash . In this case they lent money as recklessly as Anglo. They were in reckless interbank lending, cds, cdo etc and have incurred heavy debts, that anyone in Ireland paying tax will contribute to making whole.

    See Michael Lewis on the duality of Domestic German Prudence and International recklessness

    Germany has a well established national arrogance and air of superiority that has become increasingly more amplified since their power in Europe has increased (They have never been more influential in Europe as they are now since the War). In light of a swath of recent comments from the German Establishment, Merkel’s more sedate gestures are clearly not reflective of the real view across Germany. Unlike some of the comments on this board Germans are not as far removed from culpability for the mess we are all in as they and such commentators suggest. They could care less for Ireland or any other country outside of their own and should be considered accordingly.

    We have incompetent political leadership internationally and this charade will most likely continue but what hat will deliver Europe from this crisis is what is also most just. Ireland is culpable to a degree and has to pay for that but so too are Germans and others and until that reality is properly exposed and the burden is distributed in accordance with such ratios of culpability, this European debt crisis will not be resolved. Ultimately what is just is what is most likely to succeed.

    I would love to see a harmonious mutually beneficial just and equitable EMU economy emerge from the current mess but such an ideal is impossible until the inequities are exposed and resolved justly and thus sustainably. Germany has it in its power to take the altruisitic step but as we have failed to properly articulate our position internationally they easily lump Ireland in with Greece (a completely separate league of recklessness and deceit) and punish us the same. Maybe a statement exposing this inequity and a press release announcing the revocation of all unsecured Anglo debt would be a step in the right direction because bowing down to Germans is proven to fail.

    • That vanity fair link is a wonderful read.Thanks for posting it.
      I particularly love this:
      “Nölling has railed against the euro. He wrote a mournful pamphlet, Goodbye to the Deutsche Mark? He wrote another, more declarative pamphlet, The Euro: A Journey to Hell. Together with three other prominent German economists and financial leaders, he filed a lawsuit, still wending its way through the German courts, challenging the euro on constitutional grounds. Just before the deutsche mark got scrapped, Nölling had argued to the Bundesbank that they should just keep all the notes. “I said, ‘Don’t shred it!,’ ” he now says with great gusto, leaping out of an armchair in the living room of his farmhouse. “I said, ‘Pile it all up, put it in a room, in case we need it later!’ ”

    • imithe

      Very eloquent post. How can this message be spread past the boundaries of this site? The more people understand the wool is being pulled over their eyes through the promotion of austerity, the more likely they are to vote for change. The message is getting through but too many are not interested.

      Unfortunately, the German public are being fed the opposite message. The PIIGS countries and their people are caricatured as being reckless lunatics. The truth as regularly explained here is that the banks were the reckless ones.

      Keep spreading the word.

    • spawny

      How many times are you going to say arrogance in one post? Is that something you can measure statistically or do you just dislike them alot?

  13. CliveG

    Great Article David,

    In conversations with some German friends recently, I was amazed how blissfully unaware they were that their savings were splashed around the globe in a Brewster’s Millions & Millions bonanza.
    Like us [some years ago] they listed off statistics… employment, exports data and a ream of other data that proves beyond double that Germany is financially secure and the economy is growing.

    When I asked them where did the money Germany has loaned come from?
    No one could answer!

    Like all great democracies the banks and government squandered / allowed the squandering of the Germans peoples money.

    I didn’t have the courage to tell them either.

    • But the German financial institutions did not believe that the American financial institutions were capable of such scams and skulduggery as we now know they were capable of.
      I think there is some kind of unique gene in the Germanic tribe that is naive in the ways of the world.
      The Germans should be ruling the world-at least the financial world.
      Alas, they seem doomed to have to suffer the sins of others,(read criminal bankers) because of the horrific transgressions of their leaders of yesteryear.
      It’s not fair and I don’t think the average German citizen will tolerate being a fall guy for other profligate nations for much longer.

  14. wills

    The longer this whole banking fiasco continues the clearer the true picture emerges.

    German banks drowning PIIGS in debt to buy German products is just one of these picture puzzle pieces.

    So, banking elites orchestrated a housing bubble through which massive demand for domestic products to fill those houses kicked in and German Industry was on hand to provide alot of these products.

    German banking used German savings to market make massive demand for German products.

    An orchestrated plan by people in the know to make a killing.

    The plan had to have a property bubble, and banking interests who were prepared to play ball with the German plan.

    And it now is clear, Ireland, Spain, Greece and Portugal had exactly such banking interests who went along with the German plan and played ball.

    • I think we should look at the facts there is no evidence of a German conspiracy to create a property boom and thus demand for their products to fill them, there is alot of evidence of German Banking recklessness across an array of different areas of industry with no other objective than to maximise returns and yes it seems the Germans bought the charade of US Capitalism and Equity and Intergrity standing together when in reality they are now ever more in conflict

    • StephenKenny

      So their markets are now incapable of buying their consumer goods?

      Germany generates the majority of it’s wealth from the high-tech machine tools sector, turn-key factories, and so on.

      So, this is a Buchan-esque conspiracy of “Germans in high finance buying up the economic wreckage of the PIIGS”?

      David is being a little silly in this one. Certainly the German’s will have to pay the price for reckless lending, as everyone will, on both sides of all these transactions. The problem is that the fundamentals of the PIIGS are unsound and have not changed – unlike Argentina, Brazil, and Russia, who’s fundamentals were resource based.
      So, after the smoke of default has cleared, the Germans, and other creditor nations, will take the advice everyone is so frantically giving them: Don’t lend to the PIIGS, after all, you can’t even trust their banks to do the right thing – they all just spend it on sweets.

  15. Adam Byrne

    There was a good segment on the Greek situation on Newsnight just now. I encourage posters to seek it out.

    All three guests expect imminent Greek default.

    Newsnight’s excellent economics editor Paul Mason wrote this article today too which I am just about to read.

    • Adam Byrne

      Constantin Gurdgiev made an appearance on Newsnight too with some comments. Vincent Browne just started and he opines that a Greek default is considered ‘inevitable’ now. Fascinating times.

      • Either the powers that be in Europe announce something convincing and quickly act on it or a self fulfilling market prophecy will most likely pass. If they announce another parcel passing measure it will be confirmation of a present unwillingess to deal with the crisis properly.

  16. Dorothy Jones

    The title of the above article is extraordinary….. The commentary on Angela Merkel also. In view of the complexity and seriousness of the current state of affairs, the tone of the final sentence is inappropriate at this time, regardless of how one evaluates recent events.

  17. It is important to stress the obvious that the Germany is a very valuable contributor to the EU not only monetarily, that German people make a very positive contribution and that I would like to see a fair and equitable resolution to the debt crisis with a strong economic opportunities for all to compete fairly. I do not want the tone of the article to infer any issue with German People but it is fair to say that the German establishment has imposed a supposed resolution to this crisis on Ireland that is neither equitable or sustainable.

    • I understand Dorothy you are referring to DmCW’s article and thus should have said “my post”.

      • Dorothy Jones

        Yes, it is an extremely complex issue for Germany. Austerity, prudence and concensus are ingrained in the German culture. The approach to the EU debt issue to date has certainly not worked. However, I do not envy Angela Merkel in her current position which poses a moral dilemma, and where certainly a change of strategy will have to be adopted. This is not only likely to have a detrimental effect on her role in politics but will have a significant impact on the Nation as a whole.
        The world as we know it is changing forever. I hope that Ireland manages to recover on the premis: ‘what does not kill you will make you stronger’. There are no shortages of sound ideas and our host for one, has been doling out patient advice for many years. Hopefully the turbulent waters ahead can be traversed with some form of unity. However at present political confusion and inadeuate action are causing untold damage.

  18. All of the PIIGs should hold a national referendum giving their citizens a right to vote a ceding of sovereignty, such that the ECB has new powers to examine each and every nation suffering from corrupt/servile/incompetent governance, and decide how and where the financial pain be imposed, in order to bring order to each nation’s national debt.

  19. redriversix

    Excellent Greek Economist on Vincent Browne tonight , you could have heard a pin drop while he was speaking.

    Greek default imminent…He claims , and certaintly seems to know what he is talking about.

    “The perfect storm may be only days away”

    He also predicts that Germany will return to Deutschmark and that Germany would rather suffer a bad recession than have to prop up 50 % of European debt.

    First time I saw Vincent Browne quiet and in awe of someone !

    Remember , Look after your self and your Families first.

    Take care & Goodnight

  20. joe sod

    basically the case for allowing euro to break up is stronger than case for trying to keep it together, ireland has been in a state of suspended animation since 2008, i think a euro break up while traumatic is the only thing that will shock the country back to life and redistribute resources back to the productive sectors of the irish economy, it would make croke park agreement irrelavant , i think a crisis like a euro break up while dangerous might bring real leadership and proper critical thinking to the top of irish society,

  21. I agree,

    Todays crisis may turn out to be the only viable option we’ll ever get to reset our economy and societal hierarchies and values.
    There will never ordinarily be the mindset to change the “L’Oreal” attitude (we’re worth it!) that exists in the so called upper echelons of Irish society.

    Our current political system guarantees that national interest will always be secondary to those of the party.
    A full scale crisis is probably the only thing that will prevent people from ever tolerating such things again.
    Maybe amidst the panic, pain and confusion there might possibly be a Eureka moment where people realise we have nurtured and sustained the people and ideas who brought us here.

    After almost 100 years we are on a journey that began with minority reluctant revolution. The Proclamation spoke of the equality of men and women and freedom of all religions.
    Immediately on accession to power our very first leaders robbed our great grandparents and following generations of both!

    And so it continued and will continue until and unless we guard against the next revolution being stolen!

    • coldblow

      Hi Paul

      My understanding is that our elite are merely the successors of the colonial elite who looked to the metropolitan power for security and protection of privilege. The country was just an asset to be sweated. The new crowd just carried on in the same way – their basic allegiance is to themselves. The main precipitant of revolution, it is argued, was to resist conscription into WW1 and to avoid saddling Irish taxpayers/property owners with the cost of the new fledgling welfare state which the Liberal Govt had brought in in Britain.

  22. Morning All,

    Today will be interesting. Just to clarify, the titles are written by sub-editors not me and can sometimes be misleading. All I am saying here is that “Germany is destiny”. What Germany decides will be what happens and the German people need to be informed that a single currency is not a one way bet. There are responsibilites on the lender and the borrower.

    My preference as both an Irish citizen and an economist is to revert to our own currency a la Denmark/Sweden/UK etc. Many arguements on either side. The last thing I am is some jingoistic anti-German. In fact, the contrary is closer to the truth.



    • joe sod

      well david you have put your cards on the table, but as other commentators have said, how can it be unentangled, it will have to be an agreed process, of course the agreement will have to be in secret and announced just like the bank guarantee was, but it is clear that if something like this happens then enter sinn fein, i think there time is coming, they are the only irish party that actually does play the long game and actually has long term core policies,

    • Does this assume that we can renege remaining assumed private bank debt, leave the EMU but remain in the single market and thus actually improve our FDI appeal by having an immediate reduction in debt, a lower currency and the same unencumbered access to the European market. It would be really great if you could lay out your view in detail as obviously a lot of people quite rightly value your views

  23. Praetorian

    Good to see the game coming full circle. German leadership is pragmatic, they will opt for a bailout of the euro, population will have to suck it up, possibly the end of Merkel given the poor handling of the issue since 2008, Sarkozy might join her in retirement.

  24. Praetorian

    John Pilger in the New Statesman:

    “On 13 September, one of the world’s biggest arms fairs opens in London, backed by the British government. On 8 September, the London Chamber of Commerce and Industry held a preview entitled “Middle East: a Vast Market for UK Defence and Security Companies”. The host was the Royal Bank of Scotland, a major investor in cluster bombs. According to Amnesty International, 98 per cent of the victims of cluster bombs are civilians and 30 per cent children. RBS has received £20bn in public money.”

    Full Article:

  25. Hi,

    So we’re finally PIIGS and those responsible for the PIIGS are getting into the roller coaster trolly, its been ascending slowly but inevitably. When we reach the apex of the slope today brakes off and wheeeee …..

    By now they’ve designed the vector route of the tracks. Its probably similar to the same layout of 2008. In this instance consider sovereign countries similar to the following banks pre 2008 in the US.

    This is what they did? First up, Bear Stearns sold to JP Morgan. Now I’m hoping the EMU replay of this will be Ireland Inc sold to Sterling in return for certain amount of debt write off. But, alas, this is not likely, to happen.

    They nationalised Freddy Mac and Fanny Mae. Unfortunately, we’ve aleady passed that rubicon in the EMU with the impailments (bailouts) for e.g Greece and Ireland. But hey, its not working, there’s ¢150 bn of Greek debt will never be repaid.

    The meltdown in the US saw Merrill Lynch shot gun marriage with Bank of America. We’ll properly have a mirror of this in deeper financial ties between France and Germany with more power concentrated into giving them a greater voting power in whatever new powers given to ECB.

    As well as greater voting power or a greater centralisation of power we will probably see this power manifest itself in a way similar to 2008 when
    Goldmann Sachs/ Morgan Stanley became bank holding companies.

    This will allow France and Germany to exercise deep regulatory oversight of central banks and sovereign economies across the EU similar to the type of control exercised by the Fed in regard to its own central banks.

    It will also give the ECB more authority and control in return for a massive bailout that will give permission to the ECB to print money and flood impailment money at the problem similar to the Fed response with a ¢700 bn dollar bailout plan in 2008.

    So, who gets to be Lehman’s. Greece of course?

    Who gets taken over by ECB acting as it will with its greater bank holding powers? Probably us. We’re talking about economic annexation, pinocchio puppets.

    We can ask the ECB how many doctors we can have and what we can pay them from our budget? And we really dont need an expensive and wasteful political system in Ireland when we’re governed from Brussels, not from the DÃ¥il.

    def of a bank holding company

    With Greece(Lehmans) the fall guy, in two years, when the dust settles, yes Italy and Spain will haunt the EMU again and threaten to break it up further, but the hope is the above band aid will hold until then:)

    • “We can ask the ECB how many doctors we can have and what we can pay them from our budget? And we really dont need an expensive and wasteful political system in Ireland when we’re governed from Brussels, not from the DÃ¥il.”
      Roll on,it cannot happen too soon

  26. Original-Ed

    The end of the line is not too far away. Spoke to some Italians in Italy this morning and in their minds, they’re gearing up for an exit. Up until now, their own citizens always bought government debt, but not any more, and unless the Chinese step forward, they see writing on the wall.
    To the Chinese, Europe is a very important market, so it’s in their interest to preserve the status quo.

    As for Germany, they’re suffering from crisis fatigue and will exit the whole mess at the first opportunity.

    They can’t understand us, having been given the gift of a stable, low interest currency, instead of using it for prudent investment, we went on a wild speculative binge. They believed our politician’s hype and thought we were a safe pair of hands – they didn’t realise, until it was too late,that someone as basic as Bertie could possibly get elected as leader in a modern economy.

    • joe sod

      agreed the gombeen politicians codded the europeans, they believed what they were being told, it is true that they (europeans) were essentially naive, the irish ruling class is brilliant at talking the talk but not walking the walk, there has been a dumbing down in irish society over the last few decades, de Valera, lemass, Cosgrave, fitzgerald even haughey, these were highly intelligent and educated people, of course we could have elected better than this then but they had some pedigree,

      then we went for the bertie aherns and enda kennys with no ideals no pedigree but they could talk to the ordinary man, this is the difference de Valera was an idealist, an intellectual, somewhat aloof, modern irish society didnt want that anymore, they didnt want leaders that had vision that would say no, they wanted the bertie aherns, leaders who would have a pint in the pub, and look where its left us

  27. red bull

    So if the collapse of the Euro is being discussed/floated, it’s likely that the European/Irish banking system is well ahead of us and have worked out how to use the process to enrich themselves and rip off the people further (just as they did in both the boom and the bust!).
    Can anyone say what are the likely steps between the ‘collapse/demolition’ of the Euro and the reestablishment of national currencies. My feeling is that the bankers are well ahead of us on this and will have no doubt ‘gamed’ various scenarios and worked out which will profit them. Is there any way the people can avoid being ripped off again?

  28. uchrisn

    Pratically many people are coming around to the fact that southern European economies won’t compete with the northerners in productivity and economic growth.
    They have a different outlook on life, they like long lunches and longer holidays etc.
    On key graph is the competitveness graph. Germany has been getting more competitve and Greece has drifted.
    Should they be in the same currency zone? The Italians seem to understand this.

  29. BlahBlah

    as usual David McWilliams is full of sh*te. First he sells the country to the devil and recommends a blanket guarantee to the minister of finance and now he is trying to piss off the Germans, the last lifeline for Ireland.

    David McWilliams has the talent to destroy stuff unfortunately he can’t make any meaningful contribution to the discussion. David McWilliams is and always was just a media punk.

    • What a gombeen dumb ass ignorant comment? Talk about a turkey waiting for XMAS? Lol.

      Re “piss off the Germans, the last lifeline for Ireland.”

      The Germans and/or French have clearly shown through their impailment(bailout?) , profiteering policies for Ireland, 5.8% borrowed by them at 3%, their refusal to sanction burning of Anglo bondholders (read their banks), their only lifeline is the one they are giving to their own banks, at our expense.

      Where does this craven, infantile, ‘lifeline for Ireland’ bullshit come from?

      We’ve been screwed left, right and centre by the EMU and the ECB and fed to the lions by both Merkel and Sarkozy.

      Have a read here, you’ve a bit of catchup to do to understand the meaning of lifeline for the banks.

    • Dorothy Jones

      No – Wrong

  30. stiofanc02

    @ Blah blah. What are you 14 or 15 years old? Who told you David recommended a blanket guarantee? You are an asshole of the highest order. Shut your cake hole as you dont know what the fuck you are talking about. You aren’t man enough to carry David’s jock strap much less refer to him as a punk you little puke. What do you make a year? €30 maybe €40K? He can crush you like the insect that you are anytime he wants you loser. Goddamn,… guys like you make me sick.

      • Paddy,

        I also told you – again and again – to stop borrowing in 2003! Had they done that we’d have no problem…as for the guarantee, I said temporary and selective in order to wind down banks in an orderly have conveniently forgotten that. btw what would you have done to stop a bank run in sept 2008??

        best David

        • Praetorian

          One of the main banks rang me, wanted to know if i was interested in a mortgage (first time buyer, permanent job etc), the fixed rates seemed very high for a modest amount of money over 30 years, prices still have a way to go while their is great uncertainty all around. Welcome people’s thoughts on this.

          Interesting to see Irish Times property supplement today, beautiful house of course, with price tags of 1.2 million, 2.75 million etc I’d prefer to live in a decent society, what the hell were they thinking, property, it is so bloody predictable, surely can’t base an economy around it and yet they did. Ludicrous.

          Watch the multinationals go, the last leg of the stool. Irish Times reported over 40,000 emigrated since April 2010, true figure has to be higher while barely a drop in the ocean in terms of job creation has taken place while those in employment are just hanging on and saving the pennies.

          • wills

            My viewpoint is the economy is divided between the insiders and outsiders. The property game is played by the insiders.

            The outsiders are trying to live an normal life and do an honest days work while all around them, media, govt agencies, private banking system are in cahoots working a kelptocracy looking to begin a new ponzi scam.

          • On the Irish Bank Guarantee “We have set the template. The upside greatly outweighs any possible downside”. I assume DMcW stated this based on a belief that the irish Banks had a liquidity problem and not a solvency problem. Although he was clear that Irish Banks were essentially lending out German Savings. Clearly and I am obviously stating this with the benefit of hindsight, Ireland should have attempted to save the least insolvent bank, protected depositors to a point in all other banks and let the rest collapse, of course this would have been chaotic and relevant to economic expectations at the time would have seemed like lunacy but we would have preserved a basic banking system, avoided the majority of the debt now incurred, no Nama, No Eu Bailout…It would have been like Iceland, there was no easy way out but a sharp shock and rapid reduction rather than a prolonged continued decline. The point is the bank guarantee was a disaster, the state could obviously not afford to guarantee all that private debt but I am assuming DmCW is defending his advise at the time based on his then perception of a liquidity problem. The interesting thing is that it is fair to say that DmcW view was an intergral part of the decision to actually do it ,

        • stiofanc02

          @businesslunch: Once again, if you dont know what he reccomended, in both scope and tenure, as you obviously do not,zip it. Im afraid those business lunches are of the 3 martini variety bud. Do you prefer gin or vitamin V?

  31. Adam Byrne

    Off topic, what really gets me about this breaking rogue trader story is that the RBS have called the cops at 1am in the morning to report him and have him arrested and you can bet your bottom dollar that he won’t see the light of day for about five years.

    But the very same twats at the top who are dobbing in this 31 year old (whom they manifestly failed to mentor and supervise) carry on regardless as if the are innocent of all crimes.

    The young guy has lost 2 billion gambling for this ‘bank’ and ‘no clients have been affected’; meanwhile the tossers at the top have probably had it away with at least 2 trillion in the past 3 years, pushing the world economy close to total collapse and millions (if not billions) of people into poverty (and in some cases – starvation) and yet, not one of them has seen the inside of a cell, neither here, in the UK or (for the large part) in the USA.

    Utter hypocrisy!

  32. dwalsh

    @ coldblow

    Thanks for that excellent summary of Fennell’s work. If Michael McDowell doesn’t like him that probably means he’s right…or at least right enough to spook McDowell.

    Back in the Cold War 80s the great civilisation destroying fear was nuclear holocaust. It was and still is a threat, but at that time I used to argue that the civilisation crisis when it came would be economic collapse not nuclear holocaust.

    I could see that the global economy as constituted was not viable. The physical economy was running a mounting deficit with the biosphere; and the virtual economy, or the financial sector, was clearly building a house of cards; multiple layers of notional abstract assets that had no basis in reality. In the last decades with lobbied (purchased) deregulation the virtual economy has gone into hyper-drive and generated stratospheric levels of notional virtual assets that dwarf the real physical economy.

    The financial sector is the heart of this crisis.

    They lobbied and propagandised us all into their crazy economic ideology — the cult of the Free Market. What they really mean is ‘unstable markets’ which they have a free hand to exploit and gamble on.

    Stable markets are useless to them; but are exactly what the real economy and ordinary people’s lives need.

    We have all been duped.

    It wasn’t only our politicians who were duped; most of us were. We have to get over blaming each other, now that the house is falling down, and pull together instead.

    And stop blaming public servants. The rank and file of our public service workers are ordinary working people with very modest incomes; especially compared to the people who have caused this crisis and continue to profit from it.

    Right now the collapse of their mountains of virtual financial assets is being transferred to the balance sheets of our nations as sovereign debt and being doled out to each one of us as austerity therapy.

    • Smaller finance, heavily regulated, don’t understand it don’t allow it, These parasites should have the freedom to take all the risk they like so long as democratically elected governments ensure that any adverse consequences of the parasites risks are assured to land on their shoulders alone, the fact that this has not happened shows that their is an elite establishment in the western world that hid itself under the veneer of democracy, responsibility and meritocracy but after the financial crisis when the interests of democracy, responsibility and meritocracy came in conflict with the interests of the elite, it was the elite whose interests prevailed and arguably this fundamental systemic disregard for the basic principles of a democracy by Govts will pose a greater cost to a healthy society than the cumulative financial one.

      • coldblow

        “don’t understand it don’t allow it”

        Angus Deayton’s radio comedy series Radioactive did a good sketch on the difficulty of investigating financial fraud back around 1986. It was obviously getting out of hand even at that early stage.

  33. dwalsh

    Greek sovereign debt is not manageable within the terms being enforced by the Troika. Austerity further reduces Greece’s ability to pay. And another bailout will only make things worse.

    If Greece goes into a rogue default that would surely start a cascade of defaults and possibly destroy the Euro and the EU.

    A structured default for Greece would require the same for Ireland, Portugal etc. A European structured default.

    But if Europe goes into a structured default that would surely start a cascade of defaults and possibly destroy the dollar and other currencies.

    Unilateral defaults could plunge the world into chaos.

    The only option seems to be a global structured default.

    We are all in this one together.

  34. Gege Le Beau

    As David points out, had to come back to the Germans in the end, boomerang effect. Merkel is trying to work a political solution to try and salvage her party with elections looming (SPD resurgence) and an economic solution to salvage Germany’s stake in the EU – if they keep their heads they should be able to work something out with the French. All highly ironic given the role of both German banks and the German government in allowing all this to happen in the first place, while the German population seemed bamboozled, in a rude awakening.

    • Gege Le Beau

      No doubt the Chinese are pushing for some sort of resolution as well given their growing investments on the continent and considerable hand in the euro.

  35. gizzy

    I think the posts on this article sum up where the world is now. People have their views and are not influenced at all by the views of others, either dismiss them or ignore them unless they are in agreement with their own cerebal workings.Is there some major global conspiracy or are the world and its inhabitants just reacting to information that comes so quickly that they cannot even process the previous piece before the next one hits them. The markets are irrational. ( the markets drop on fear of Greek default yesterday, the markets poitively view central bank statements today, some nobody we know reigns from some job in Brussels tomorrow and the markets throw a hissy fit. Up 1.25% down 1.15% and the fundamentals have not changed. Time was when businesses including the banks had five year strategies now you need to please Bloomberg whose staff are no more than good looking racing commentators on speed.

    So is it zee Germans are good and it’s the fault of the slovenly Greeks and pissing againt the wall Paddies or is it the arrogant racist supremacists Jerries and the robbed of their gold Greeks and unlucky to have had so much money foisted upon them noble Celts.

    Maybe it’s somewhere inbetween. Maybe the Germans do some stuff better than us. They are better at governnment but shite at power. Maybe we are more careless but we are younger and younger people do spend differently, We should understand that they are hardworking and diligent but maybe they should understand that we had no control over monetary and fiscal policy during a boom and endured very unsuitable low interest rates while they rightly reunified their country.

    Things ain’t black and white.

    • The need to reduce complex phenomena into simple narratives can never be underestimated

      • gizzy

        especially when intellectual snobbery is so much more fun

      • Indeed, but beware of the narrative that seeks to make the transparent opaque, that uses ‘complexity’ to hide the Enron ‘black and white’, that swallows lies and is a purveyor of mistruths:

        :-)Speaking of which I heard Happy Gilmore on Morning Ireland echo Ollie Wren in Laurel and Hardy mode this am:

        “Ireland is meeting its objectives and doing well”

        I don’t know why this reminded me of a quote from Hal in 2001:

        “I know I’ve made some very poor decisions recently, but I can give you my complete assurance that my work will be back to normal. I’ve still got the greatest enthusiasm and confidence in the mission. And I want to help you.”

        Gilmore also use the phrase a lot: “more and more,,”

        I wasn’t quite sure if he was calling me a Moran MÓr, lol, or not! I try not to listen too closely to him.

        • It is in the Grey that the culpable can best avoid the responsibility for the consequences of their action. The situation in Europe is complex and there is culpability all round but the facts are clear nonetheless and any view supported by such fact is a valid one, this is a forum for the exchange of such views after all

    • @gizzy

      “Up 1.25% down 1.15% and the fundamentals have not changed”

      Actually, they have and they’ve changed a lot.

      On the one hand, the effects of the $750 bn unregulated trade in derivatives is finally making its mark in Europe.

      Nobody is quite sure which banks have paper that is subprime in regard to dollar hedge funds held by EMU banks; in regard to ‘sub prime debt’ a la Greece; in regard to CDS swaps held against Greece via US investment banks; in regard to currency swaps between the dollar and the euro.

      The amount of unregulated lending as a proportion of the world trade market has made giant leaps in the past number of years and trade in virtual financial instruments is increasingly predominant over real trade in goods/commodities.

      Add to this the increasing volatility caused by low interest rates encouraging more finance into global financial markets making the markets a casino replacement for real trade as opposed to the virtual trading of the financial markets.

      Unfortunately, governments in trying to fix the problem, have tended to make the problem worse. They’ve approached the difficulties of banks by trying to bail them out. They’ve been bailing out problems instead of ending problems and generating solutions.

      Of course the banks use bailouts to go back to the casino tables and spend it on themselves and in so doing threaten both sovereign default and even currency default.

      In the US we have the ‘dead cat bounce’ following QE1 and QE2 stimulating bad lending practices in the banks while increasing the money supply and eroding the value of the dollar on the currency markets.

      Obama is now doing what he should have done earlier, spend money on generating real jobs in the economy, not give it to the banks to play the tables with.

      In summary, volatility is caused by casino trading in financial instruments becoming loosely decoupled from real trade in commodities and manufacturing.

      The markets sense the smoke and mirrors schenanigans and ponzi scams involved in the above.

      The world needs a new reserve currency pegged on gold and supported by world governments: to bring back stability to world trade and build progress instead of the progressive endangerment to us all that current market volatility represents. US needs a new Glass Steagall.

      Politicians need to tackle the banks, bring back a stabilising gold peg to currencies, cull trade in derivatives especially OTC’s.

      I support the efforts of the EU in this regard but believe it may be a case of the horse has already bolted and its too late to do this:

    • coldblow

      I’m sure “it’s somewhere in between”. I get the impression that posters here have quite a lot in common although they might express it in different ways and few seem to offer simplistic explanations. I like to read the ‘cerebral’ meditations on events (as well as refs to the work of others who have already done the heavy lifting in that regard – why waste time and energy reinventing the wheel?) but at the same time I also like to hear about their personal experiences. I think all efforts at explanation have to have some regard for actual lived experienc.

    • Adam Byrne

      I think ‘Pissing against the wall Paddies’ is about right, that’s one thing I’m certain on, having only been back here one year after twenty years away from this debacle of a place masquerading as a ‘sovereign’ country.

      • Adam Byrne

        Sorry to be so negative but it’s absolutely shocking what goes on here – you wouldn’t get away with it in Haiti and that’s no exaggeration.

        • I concur completely!
          It’s absolutely staggering the stuff that goes on here;
          Callelys, Lowrys, Healy Raes etc. Ex Premiers writing columns in Red Tops, Finance Ministers only dealing in cash. Opposition parties pushing Finance Bills through the House while claiming to fundamentally disagree with the contents.
          The list is endless – I think we should stop complaining about handing over sovereignty – Instead we should celebrate it!
          Because when we tolerate these crass standards – we absolutely deserve the consequences!

          • dd

            Thats because FG/Lab/FF are all the same. Same shop – different management.

            If anyone knows of any new movements/parties forming etc please share

            Also, am I correct in thinking that 1.5bn was paid out today on an AIB bond?

  36. Anyone any idea of the amount required to finally end the Euro debt crisis, not expecting specific figures but a 1 Trillion Euro in debt write offs paid for by a once off Eurobond type offering from the ECB suffice? I have no idea I am not familiar with debt ratios etc, surely a TARP type deal with a bit of QE to bridge the GAP ala US is the obvious solution economically and thus the real uncertainty is solely the conflict of interests politcially. The US of course is actually in a worse debt position than the EMU as a whole.

    • Adam Byrne

      This is the kind of solution that Janis Varoufakis was proposing last night in the Shelbourne Hotel during his excellent lecture.

  37. coldblow


    I just happened to have this to hand (!) Usual apologies for length, no link etc. I think it gives a picture of a sleepwalking society. Of course, time will tell.

    From Desmond Fennell “The Postwestern Condition” (1999)

    “Just as the period of the Industrial Revolution had a ‘social problem’ specific to it, so, too, has the contemporary West. From Los Angeles to Stockholm and Naples, anyone who reads the newspapers, or looks for a thoughtful moment at the life he is living, sees it — the moral chaos. Quite regardless of their individual merits, the rules and values that are being proclaimed and that are often supported by laws and state financial measures do not add up to sense. They clash with each other logically or conflict with unapologetically contrary behaviour by those who preach them. They snub emotional and spritual needs felt by many people. In the absence of an order of justice generally agreed, they offend the sense of justice, now of one large swathe of people, now of another.As advancing physical science presents new, disturbing possibilities, the only apparent rule is: “Unless an ad hoc regulation stipulates to the contrary, people may use these if they want to and can.” Journalists, functioning as public moralisers, try to police the chaos. Confronted with it — perceiving it as ‘life’ — people find life intrinsically senseless, and this has two results.

    “The chief sense-giver of the age is the increasing flow of money, together with the comforts and mobility, the physical health, longevity and protection, the education and mass distractions that this provides. Most people most of the time find that their life makes sense because the amount of money available for spending is constantly increasing and they can share in the benefits, public and private.

    “But those who for one reason or another cannot find meaning through money and its increase — those who must frequently or continually look the senselessness in the face — are in great and growing numbers ravaged by it. We see this in the craving for mind-negating drugs which makes the drugs trade, after the arms trade, the biggest branch of commerce. We observe it in the many suicides of young men and attempted suicides of young women; the reckless pregnancies and abortions of many young women; the desperate faces of football hooligans; the organised paedophiles scouring the Internet for children to rape; the growth of random violence and cruelty against the physically weak — now often children against children. We see it in trek to the soul-doctors, pill shops and New Age sects and therapies. What the senselessness would wreak, from Los Angeles to Berlin, if the flow of money stopped increasing, can be imagined.

    “The flow of money will sooner or later stop increasing. Therein lies the structural fragility of our Ameropean system. It depends for its existence on its existing flow of money being maintained, and that will stop, just as the flow of centralised compulsion that maintained the Soviet system stopped. Following a severe financial crash, a shift in the focus of world trade, a damaging external attack, or a natural or man-made catastrophe, the system will cease to function. Whether the result for most people will be a life of dread and chaos, or a frugal, humane and stable life, depends on how our rulers and preachers deal with the sense problem now.

    “They can continue on their present short-sighted course callous about the ravages of senselessness. In their unreflecting view, because the values and rules being preached are right and maintain consumption and the increase of money, the West is in good order. People who ‘find life senseless’ suffer from a subjective disorder which does indeed give rise to social problems. But the ever-increasing money can cope with these. It can provide more counsellors and treatment centres, more special lessons in the schools, more police and security firms with better equipment, more prisons, more fenced-off residential communities with private guards, bigger public games with balls or jackpots, hundreds instead of dozens of television channels, and rhythmic sound with ads and chatter reaching more people continuously in more places.

    “This manner of thinking and proceding ensures that when the collapse comes it will have even more drastic effects than the collapse of the Soviet Union. There will be no rich West on hand to give assistance. The stricken West will enter an impoverished, violent winter with no foreseeable spring. The rage which senselessness provokes, and which the money flow now holds in check, will see to that. The latest attempt to break free from oppressive western civilisation and found an enlightened, lasting alternative will have failed utterly.

    “In fact, however, this outcome is as unnecessary as the sense problem itself…”

  38. dwalsh

    @ businesslunch

    In my view the underlying problem is the financial market itself. How it is constituted at this time is inherently destructive. A Eurobond offering will only feed it…it will not satiate it.

    The Financial market cannot be satiated.

    It has to be shut down.

    • dwalsh

      PS: Of course they wont do that at this time because the dysfunctionality of the financial markets is giving them enormous leverage on their domestic populations to fast-track all kinds of agendas they could never implement under mormal conditions.

      For instance European Federalisation; which will naturally involve significantly reducing national sovereignty and democracy.

  39. Timothy Geithner tried to pull the same rollover crap he made Obama with QE1 and QE2 swallow, namely, more money for the banks’ slush fund to dip into to pay for their debts.

    This time the europeans, especially Germany and France, didn’t buy it.

    Stalemate is bad for everyone so today’s meeting will make the markets even more jittery and add to the turmoil.

    As per usual nothing got fixed today and things were made worse.

    Instead of a roller coaster ride, world leaders have turned the future into a ride in a ghost train.

    We’ll have to wait and see what surprises are in store for us all!

  40. dwalsh

    @ coldblow

    Thank you for posting that passage from Fennell.

    “The stricken West will enter an impoverished, violent winter with no foreseeable spring.”

    There are others warning of such an outcome. It is a possibility which I hope will be avoided by good sense prevailing in the nick of time – fingers crossed.

    He also writes about senselessness and alienation; I think this is important.

    At this time the people who do best in our world are those who believe business is what life is about. They see the world in Darwinian terms as an economic jungle in which to compete with others for wealth and position and power. They have their own favoured economic retainers who support them with intellectual justifications, such as the ideology of the Free Market; and with technical expertise and implementation. In their vision of the world Capital must be unhindered by either law or scruple in its Darwinian struggle for profit and power.

    The cult of the Golden Calf requires that every aspect of human life be a commodity and generate profit; this now includes our very life-breath itself (carbon taxes).

    The humans of this group — I suppose we might call them The Merchants – are the rulers of our world at this time. They pretty much own and run everything. They own the money production systems; the commodities production systems; the information production systems; and I would maintain they basically own or at least control the political systems too.

    There are however many humans for whom this vision of life is entirely empty. It conflicts fundamentally with what they see as the value and purpose of human life.

    Anyone whose focus is predominantly social and family centred, or intellectual and knowledge centred, or spiritual and transcendentally centred, is not at all enamoured by this vision of life championed by the financial elites. They could never devote all their life and energies to money and wealth.

    There is no doubt that the merchants are an enormously important class of human being with vital functions in any civilisation. What is amiss today is the merchants have taken over and are imposing their vision of human life on the entire human race. They are imposing their economic productive function in civilisation as being the universally true function for all humans; and as being the very purpose of human life.

    But it isn’t; it is just one aspect of human life.

    As a species and a nascent global civilisation we are dangerously out of balance with ourselves and with our planet.

    • @dwalsh

      Fennell tends to be a bit of a whiner and a whinger. I’m not into this cassandra misery everywhere scenario. Yep, there’s problems, always have been, always will be, and everyone dies. But hey, its also possible to party and have a good time excavating the truth and hopefully making the place and time we live in a tiny bit better. Fennell needs to enjoy life a bit more:)

      • coldblow


        Fennell is a bit of a Cassandra all right but I don’t think he is like that in real life from what I have heard – in fact, he is apparently a political animal if anything. However I sympathize with any ‘image issues’ because he was usually on the receiving end of ad hom mob behaviour. At least he stood up in public – very few have done this, at least in Ireland. His Postwestern book is actually a bit disappointing in that it seems a bit too reasonable and accommodating. He agrees (as I said in my summary earlier) that we are better off materially than at any stage in history but of course that isn’t the point – we all know that anyway. I found myself longing for the indignant Fennell of old but I don’t begrudge him a bit of peace and quiet.

        I found this particular passage to be of interest as I don’t think he has an in-depth formal knowledge of economics (he’s more interested in ideas) but he seemed to have divined something of what was on the way.

        The trouble with your point about making the world a tiny bit better is how is this to be achieved? Is it by further, minute control and regulation? By ‘educating’ people to the self evident benefits of certain kinds of behaviour?

        Galbraith made the point that it is much harder to be an economic optimist than a pessimist (except of course when there’s bubble hype going on all around you). Years ago a schoolfriend once told me, breathlessly, that his brother and his brother’s friend had just got an amazing idea for a novel. There had been some kind of huge disaster and they were the only people left alive in the whole world. What an imagination the Brother had!

    • dwalsh

      Yes excavating truth is all a bit of a lark, but we don’t want to get too deep into it, might spoil the fun. Fennell sees a little too deep for comfort.

      • re “Yes excavating truth is all a bit of a lark”

        Nope, its serious business you should do it professionally and well.

        Re “Fennell sees a little too deep for comfort.”

        Nope, he doesn’t see deeply, he’s shallowed out by his own filtering cassandra ego.

        I’m not going to beat the drum of the advances in education, health care, technology and the growing globalization that has begun to bring rewards to the third world, because this will only end in banana statistics.

        I’ll not differ with your insights into the derivative OTC markets, insights we share, but we differ on other stuff, we’ll have to learn to disagree on I guess:)

        My own weltanshuung fyi is a bit of a mix between Beckett, Joseph Conrad and the scientific deductive method of fly on the wall patient patient panning for gold, but I havn’t found much gold yet, nor am I great at it:)

        E njoy your posts:)

      • dwalsh

        Yes I take it seriously too; and like you I do my best. Not everyone brings the same perspective to the discussion. That’s good. We can learn from each other.

        My perspective tends to be global and planetary. I criticise corporate globalisation, the true results of which we see unfolding in the financial crisis which is bankrupting our nations, and the environmental degradation (biospheric crisis) which is bankrupting our life-support systems.

        I value the work of people like Fennell because he thinks through the inevitable outcomes of our current systems. That kind of analysis is valuable and worth listening to.

        To me it seems obvious that as a planetary species we need to develop new systems and a new way forward if we are to create a truly global civilisation in which all may prosper…including future generations. I believe we have an obligation to our descendants. They may not be born yet but this will be there planet and their world too. I for one care about what kind of world and planet we bequeath to them.

    • coldblow

      “own or at least control the political systems too”

      I posted this link before

      About 70 former members of Congress lobbying for Wall St. And Hennigan isn’t given to feverish conspiracy theories of course.

    • coldblow


      Re your final sentence, I posted this link before too – it’s certainly an unusual take on the subject.

  41. Malcolm McClure

    Someone suggested a couple of years back:

    “A new genre of economics is blossoming. Existential economics (or EE as it is affectionately referred to by insiders) is becoming so popular that it is about to extinguish itself. Existentialists need to stand about, in the corner, observing everyone else’s reality. Alone. So what happens when they are no longer loners? A crowd of existentialists is a self-negating idea.

    “What drives an Existential Economist? Questioning the expectations of the masses brings a certain kind of validity to being alienated. Non Satis Scire. ‘To know is not enough’ is the EE motto.

    “So, let’s attempt that impossible abstraction, the group of EE’s. – They are standing about, though now they have blogs in their hands rather than cocktails. –Some of them wonder at the twin follies of ambition and a planned career. Others are having a moral crisis about the disconnect between perception and reality. Yet others are taking it in stride and sounding rather jolly. ”

    This blog is a fair cross-section of concerned Irish society, which demonstrates that Ireland has now become a nation of EEs. We are all powerless in the face of events. Protest is futile. The complexity of the problem is beyond human understanding.

    I have seen this happen on a small scale. People start rushing about in a frenzy of activity, like rats in a maze. Successful workers in the new fast capitalist economy are not defined by fixed qualities such as intelligence or qualifications per se but by a capacity to compete and thrive on new experiences and projects. Challenged by a competition where survival depends on new learning, we don’t so much choose lifelong learning, but like convicts sent to Australia, and emigrants to America, we are condemned to it for the rest of our natural lives.

    If you have been doing something for more than a year, and its not leading forwards, life is telling you that you need to move on, try a different approach.

    • @Malcolm

      Re “Challenged by a competition where survival depends on new learning, we don’t so much choose lifelong learning, but like convicts sent to Australia, and emigrants to America, we are condemned to it for the rest of our natural lives.”

      Re speaking as a person who enjoys learning I’d rather use the words ‘gifted by it’ to replace ‘condemned to it’ :-)

      Also, “The complexity of the problem is beyond human understanding.”

      Now we can go all philosophical about this and say everything is an illusion. But I’d rather keep my feet on the ground and aim to call a spade a spade.

      If you start by doing some research into the origins and workings and development of our fiat money system, it can go along way to understand certain simple truths underlying our meltdown.

      Just because you may be a bit overwhelmed by the knowledge you are grasping at doesn’t mean some of the rest of us are in the same boat:)

      PS Always enjoy your posts:)

      • Malcolm McClure

        colm brazel said about lifetime learning “I’d rather use the words ‘gifted by it’ to replace ‘condemned to it’ ” I totally agree. Bad choice of words on my part. Education, more than ever, is about learning how to learn; it is not an apprenticeship, learning a few skills in a narrow field for lifelong application.

        I still hold that “The complexity of the problem is beyond human understanding.”
        For example, say what you like about Geithner, but nobody knows ore about the mechanics of monetarism than he does. Yet he hightails it to Poland and engages the ECB in a prodigious 3 month currency swap of euros for dollars. Assuming that the Fed knows how to hedge currency risk, the only risk is if the ECB and the euro somehow ceased to exist.

        It is clear that the European system is not capable of surviving the intensifying crisis without dramatic changes. Those changes include federalizing banking regulation, radically altering the European Central Bank’s charter to grant it the tools necessary to mitigate the crisis, forming an iron fence around the endangered European economies so that they don’t crash everyone else, and above all recapitalizing the European banking sector to the tune of hundreds of billions (if not trillions) of euros — so that when trouble further intensifies, the entire European system doesn’t collapse.

        All this is just an exercise to kick the can down the road to give central banks of the PIIGS time to plan a response to the inevitable collapse. Not least of which is how to print billions of new currencies without anyone getting wind of it.

        Sorry if we existentialists seem a bit languid about it all, but anyone still clinging to the old certainties, just doesn’t ‘Get’ it –yet.

  42. Tull McAdoo

    I’m not quite sure about the influence of “Existential Economics” in the overall scheme of things Malcolm but I do know that “Behavioral Economics” has gained a lot of traction of late.

    Marketing departments with large budgets etc. are turning towards Economists who show a greater understanding of the type of behaviors’ that underpin decision making i.e. purchasing decisions, upgrading decisions and so forth. It is generally accepted that a marriage of these various disciplines, Marketing, Economics, and Finance etc. should give a more favorable outcome, in terms of a business’s ability to grow and prosper.

    The above is the dry analysis of how things are developing in theory, so how does it translate into practice in and around Ireland at the minute? Who are the various Economists/ Financiers/Marketers and what are their various agendas and more importantly who is paying for their services? Here in lies the nub of the matter and it is the search for answers to these questions that brings people like me onto these forums with one goal and it is to determine. Why?

    People like Philip Lane the Prof. of Economics over in Trinity College believes in austerity and he in fact believes that greater cuts should be made in the upcoming budget. Is it the short, sharp, shock school of monetary and fiscal corrections or adherence to some dogma ala Greenspan/ Friedman et al. you decide?

    People like Constantin Gurdgiev will crunch numbers on Nama, bond yields and bond spreads etc. until the cows come home. I mean no disrespect as he is a brilliant financial interpreter and when he says that something like Nama will loose money, then people tend to take notice and rightly so.

    It is in the area of behavioral economics and in particular the ability to associate various characters, “breakfast roll man” “jugglers” and so on that with underlying economic developments that shape these characters lives that makes David McWilliams stand out from the crowd.

    We can all look back now with 20:20 vision and point to how we were misled and in some cases who was doing the misleading. We have a better understanding of what drove certain policy decisions by banks, governments, speculators and so on.

    David McWilliams documenting of his travels around the country through his newspaper articles and books, his training as an economist and in particular his inclusion of the historical context where necessary have proved invaluable to me personally as I try to understand how Ireland is ripping itself apart from these distant shores of Perth in Australia.

    In conclusion, behavioral economics puts people back at the centre of decision making. It should by its very nature, if it is well argued, elevate labour over capital. It should help some of the more formally trained, let’s say, agrarian economists, to include “society” in their thinking.

    Now that the honeymoon for Thunderbirds Enda and Happy Gilmore is over I will leave ye with an old favorite “after the love has gone”. So take it away boys and…… Goodnight Ireland. Sleep well

  43. paddythepig

    David, when I look through your articles written at the time of the bank guarantee, I see no mention of the words ‘temporary’ or ‘selective’. In fact, what I read is, and this is a direct quote from your article of September 28th, 2008.

    “The only option is to guarantee 100 per cent of all depositors/creditors in the Irish banking system. This guarantee does not extend to shareholders who will have to live with the losses they have suffered. However, it applies to everyone else.”

    But you do ask a great question. What would I, or anyone else, have done to prevent the bank run? I can only speak for myself here, but I can tell you I haven’t got the foggiest what I would have done. Nor, as far as I’m concerned, did anyone else have a clue what to do.

    Once the cancer has spread, there are no panaceas in my view.

    In rugby parlance, in September 2008, yourself and Brian Lenihan were deep in the 22, under a high garryowen, with the entire Aussie pack descending upon you; the wind was swirling, the ball slippy; the howls of the crowd were ringing in your ear ; your team-mates had all gone awol; the management team of Neary, Fitzpatrick, Ahern, Cowen, Hurley and Begg were asleep; Lenihan couldn’t catch a ball to save his life, it was panic stations all around, and a decision had to be made.

    A decision was made.

    I have no problem with that decision. I’ll repeat that. I have no problem with the bank guarantee decision. It was made in the heat of the situation, and was as good a guess as any other out there as to what to do. Everyone is smart in retrospect, saying they would have done this, or they would have done that. But the only thing that counts is what the options were at the time, not afterwards. And even if in retrospect the wrong decision is made, so be it. Shit happens.

    There is also no proof that any other decision would be any better. The world is full of theorists with trite solutions to complex problems.

    What I don’t get is the revisionism you seem to be engaging in, distancing yourself from what you wrote at the time.

    • Morning Paddy,

      Nice rugby analogy and as I am up waiting to watch the game, having just put together a broken X box amid tantrums, I am delighted to be able to come back to this issue.

      You are right about the chaos and panic at the time. But I spoke to Lenihan before and after those articles were published and kept telling him to have his exit strategy ready which was to limit the gurantee timewise and to give himself a get out clause. I didn’t know the maturities of the banks funding, but his people did. I told him to guarantee up to the date when the big refunding takes place. In this case you are not hoisted on your own petard and you put an element of doubt into the bondholders’ minds…and this allows you to (when the time is right) get them into a room and tell them the clock is ticking, here’s the deal we will give you 10%.

      In the weeks after the guarantee announcement, I was shocked at what was happening. Now was never been asked for my advice after the announcement – the mandarins wouldn’t have that.

      So – as I began to see what was happening – I began to write that we’d end up destroying ourselves if we kept wideneing th terms of the guranatee.I went so far as going on M Finucane Jam 09 saying we would end up being shut out of markets which happened in Nov 10. The establishment economists thought I was mad or worse “unwise”.

      Then finally, in April Lenihan wrote a 1000 word editorial piece in the Indo denouncing me as a crank – the first time this has ever happened in Ireland hat a Minister of Finance personally attacks an outside commenator. The crux was I had said if the guarantee is going to be widened it should be rescinded.

      So you can see a series of events which explain that an opinion in a newspaper article, gets taken on board (I had no idea they were going to do this as I only spoke to Lenihan once or twice and I was actually working in China during the final week of that crisis) without any real discussion or analysis and then because no one was in charge, it gets used and abused by all sorts of vested interests.

      Best David

    • goldbug


      • paddythepig

        Incorrect. Go back into the David’s archives, and read the article.

        And come back on here, and take back your slur, if you’re man enough.

    • Actually, what should have happened was to pick up the phone to Alistair Darling and more importantly, Christine Lagarde, and to put down the caveat, the Irish public have to be protected. Not done, they were as horrified as anybody else on the decision made. Plus since then the guarantee has been put out as an obstacle preventing EMU doing more for us!

      Plus contrary to public myth, there was no high garryowen, the policy was brewing six months beforehand and was the subject of much thought and research among the DoF mandarins, Lenihan, and the ‘Irish Elite’. DmcW was canvassed for his views, so were many more.

      Re “the management team of Neary, Fitzpatrick, Ahern, Cowen, Hurley and Begg were asleep” Nope, do not believe that for one moment. Add some names like Fingers and Seanie and a few golf outings where the plot was hatched…..

      Re DmcW “You are right about the chaos and panic at the time.”

      This was given out as an excuse to cover the hatching of the above plan; but there was no chaos and panic in regard to its etching out over previous months.

      This was a plan as ill considered and devised as the NAMA both designed to con the markets and the public and lift the boats of the sinking elite in the Irish banking sector.

      Unfortunately, here in Ireland we do not have an institution like the senate hearings committee compelling the above to answer under oath questions related to the above.

  44. Some useful excerpts from that very famous article:

    “A few months after the spell was broken, the short-term parking-lot attendants at Dublin Airport noticed that their daily take had fallen. The lot appeared full; they couldn’t understand it. Then they noticed the cars never changed. They phoned the Dublin police, who in turn traced the cars to Polish construction workers, who had bought them with money borrowed from Irish banks. The migrant workers had ditched the cars and gone home. Rumor has it that a few months later the Bank of Ireland sent three collectors to Poland to see what they could get back, but they had no luck. The Poles were untraceable: but for their cars in the short-term parking lot, they might never have existed.”
    “This time Kelly sent his piece to a newspaper with a far bigger circulation, the Irish Independent . The Independent’s editor wrote back to say he found the article offensive and wouldn’t publish it. Kelly next turned to The Sunday Business Post , but the editor there just sat on the piece. The journalists were following the bankers’ lead and conflating a positive outlook on real-estate prices with a love of country and a commitment to Team Ireland. (“They’d all use this same phrase, ‘You’re either for us or against us,’ ” says a prominent bank analyst in Dublin.) Kelly finally went back to The Irish Times , which ran his article in September 2007.”

    “The government had a report thrown together by Merrill Lynch, which declared that “all of the Irish banks are profitable and well capitalised.” The difference between this official line and Kelly’s was too vast to be split. You believed either one or the other, and until September 2008, who was going to believe this guy holed up in his office wasting his life writing about the impact of the Little Ice Age on the English population? “I went on TV,” says Kelly. “I’ll never do it again.”

    Kelly wrote his second newspaper article, more or less predicting the collapse of the Irish banks. He pointed out that in the last decade they and the economy had fundamentally changed. In 1997 the Irish banks were funded entirely by Irish deposits. By 2005 they were getting most of their money from abroad. The small German savers who ultimately supplied the Irish banks with deposits to re-lend in Ireland could take their money back with the click of a computer mouse. Since 2000, lending to construction and real estate had risen from 8 percent of Irish bank lending (the European norm) to 28 percent. One hundred billion euros–or basically the sum total of all Irish public bank deposits–had been handed over to Irish property developers and speculators. By 2007, Irish banks were lending 40 percent more to property developers than they had to the entire Irish population seven years earlier. “You probably think that the fact that Irish banks have given speculators €100 billion to gamble with, safe in the knowledge that taxpayers will cover most losses, is a cause of concern to the Irish Central Bank,” Kelly wrote, “but you would be quite wrong.”
    T his time Kelly sent his piece to a newspaper with a far bigger circulation, the Irish Independent . The Independent’s editor wrote back to say he found the article offensive and wouldn’t publish it. Kelly next turned to The Sunday Business Post , but the editor there just sat on the piece. The journalists were following the bankers’ lead and conflating a positive outlook on real-estate prices with a love of country and a commitment to Team Ireland. (“They’d all use this same phrase, ‘You’re either for us or against us,’ ” says a prominent bank analyst in Dublin.) Kelly finally went back to The Irish Times , which ran his article in September 2007.
    A brief and, to Kelly’s way of thinking, pointless controversy ensued. The public-relations guy at University College Dublin called the head of the department of economics and asked him to find someone to write a learned attack on Kelly’s piece. (The department head refused.) A senior executive at Anglo Irish Bank, Matt Moran, called to holler at Kelly. “He went on about how ‘the real-estate developers who are borrowing from us are so incredibly rich they are only borrowing from us as a favor.’ I wanted to argue, but we ended up having lunch. This is Ireland, after all.” Kelly also received a flurry of worried-sounding messages from financial people in London, but of these he was dismissive: “I get the impression there’s this pool of analysts in the financial markets who spend all day sending scary e-mails to each other.” He never found out how much influence his little newspaper piece exerted on the minds of people who mattered.
    It wasn’t until almost exactly one year later, on September 29, 2008, that Morgan Kelly became the startled object of popular interest. The stocks of the three main Irish banks, Anglo Irish, A.I.B., and Bank of Ireland, had fallen by between a fifth and a half in a single trading session, and a run on Irish bank deposits had started. The Irish government was about to guarantee all the obligations of the six biggest Irish banks. The most plausible explanation for all of this was Morgan Kelly’s narrative: the Irish economy had become a giant Ponzi scheme and the country was effectively bankrupt. But it was so starkly at odds with the story peddled by Irish government officials and senior Irish bankers–that the banks merely had a “liquidity” problem and that Anglo Irish was “fundamentally sound”–that the two could not be reconciled. The government had a report thrown together by Merrill Lynch, which declared that “all of the Irish banks are profitable and well capitalised.” The difference between this official line and Kelly’s was too vast to be split. You believed either one or the other, and until September 2008, who was going to believe this guy holed up in his office wasting his life writing about the impact of the Little Ice Age on the English population? “I went on TV,” says Kelly. “I’ll never do it again.”
    K elly’s colleagues in the University College economics department watched his transformation from serious academic to amusing crackpot to disturbingly prescient guru with interest. One was Colm McCarthy, who, in the Irish recession of the late 1980s, had played a high-profile role in slashing government spending, and so had experienced the intersection of finance and public opinion. In McCarthy’s view, the dominant narrative inside the head of the average Irish citizen–and his receptiveness to the story Kelly was telling–changed at roughly 10 o’clock in the evening on October 2, 2008. On that night, Ireland’s financial regulator, a lifelong Central Bank bureaucrat in his 60s named Patrick Neary, came live on national television to be interviewed. The interviewer sounded as if he had just finished reading the collected works of Morgan Kelly. Neary, for his part, looked as if he had been dragged from a hole into which he badly wanted to return. He wore an insecure little mustache, stammered rote answers to questions he had not been asked, and ignored the ones he had been asked.
    “A banking system is an act of faith: it survives only for as long as people believe it will. Two weeks earlier the collapse of Lehman Brothers had cast doubt on banks everywhere. Ireland’s banks had not been managed to withstand doubt; they had been managed to exploit blind faith. Now the Irish people finally caught a glimpse of the guy meant to be safeguarding them: the crazy uncle had been sprung from the family cellar. Here he was, on their televisions, insisting that the Irish banks were “resilient” and “more than adequately capitalized” … when everyone in Ireland could see, in the vacant skyscrapers and empty housing developments around them, evidence of bank loans that were not merely bad but insane. “What happened was that everyone in Ireland had the idea that somewhere in Ireland there was a little wise old man who was in charge of the money, and this was the first time they’d ever seen this little man,” says McCarthy. “And then they saw him and said, Who the fuck was that??? Is that the fucking guy who is in charge of the money??? That’s when everyone panicked.”
    “The first thing you notice when you watch the Irish Parliament at work is that the politicians say everything twice, once in English and once in Gaelic. As there is no one in Ireland who does not speak English and a vast majority who do not speak Gaelic, this comes across as a forced gesture that wastes a great deal of time. “

    “The first to take his seat is Bertie Ahern, the prime minister from June 1997 until May 2008 and Political Perp No. 1. Ahern is known both for a native shrewdness and for saying lots of spectacularly dumb-sounding things that are fun to quote. Tony Blair had credited him with a kind of genius in how he brokered the Northern Ireland peace negotiations; on the other hand, seeking to explain the financial crisis, he actually said, “Lehman’s was a world investment bank. They had testicles everywhere.” Ahern spent his last days in office denying he’d accepted bribes from property developers, at least in part because so much of what he did in office seemed justified only if he were being paid by property developers to do it. But Bertie Ahern too obviously believed in the miracle of Irish real estate. After Morgan Kelly published his article predicting the collapse of the Irish banks, for instance, Ahern famously responded to a question about it on national radio by saying, “Sitting on the sidelines, cribbing and moaning is a lost opportunity. I don’t know how people who engage in that don’t commit suicide.”

    “Now Ahern is just another Irish backbencher, with a hangdog slouch and a face mottled by broken capillaries. To fill the empty hours, he’s taken a job writing a sports column for the Rupert Murdoch tabloid News of the World , which might just be the least respectable job in global journalism. Ahern’s star, such as it was, has fallen. “
    “Just before the closing bell, the two men who sold the Irish people on the notion that they, the people, were responsible not merely for their own disastrous financial decisions but also for the ones made by their banks arrive in the chamber: Prime Minister Brian Cowen and Finance Minister Brian Lenihan. Along with the leader of the opposition, and the second in command of their own party, both are offspring of politicians who died in office: Irish politics is a family affair. Cowen happens also to have been the minister of finance from 2004 until mid-2008, when most of the bad stuff happened. He is not an obvious Leader of Men. His movements are sullen and lumbering, his face numbed by corpulence, his natural resting expression a look of confusion. One morning a few weeks before, he went on national radio sounding, to well-trained Irish ears, drunk. To my less trained ones he sounded merely groggy, but the public is in no mood to cut him a break. (Four different Irish people told me, on great authority, that Cowen had faxed Ireland’s 440-billion-euro bank guarantee into the European Central Bank from a pub.) And the truth is, if you were to design a human being to maximize the likelihood that people would assume he drank too much, you’d have a hard time doing better than the Irish prime minister”

    “A mile from the conference table where we take our seats is a moonscape of vast, two-year-old craters from which office parks were once meant to rise. There are fully finished skyscrapers that sit empty, water pooling on their lobby floors. There’s a skeleton of a tower, cranes resting on either side like parentheses, which was meant to house Anglo Irish Bank. There’s a city dump for which a developer paid 412 million euros in 2006–and which is now, when you include the cleanup costs, valued at zero. “Ireland is very unusual,” says William Newsom, who has more than 30 years of experience valuing commercial real estate for Savills in London. “There are whole swaths of either undeveloped land with planning permission or even partially developed sites which, I believe, for practical purposes have zero value.” The peak of the Irish madness is frozen in time, for all to see. There’s even an empty Starbucks, in the heart of what was meant to be a global financial center to rival London’s, where a carton of low-fat milk curdles beside a silver barista pitcher. The finance minister might as well be standing in Pompeii and saying that actually the volcano wasn’t really worth mentioning. Just a little lava! “

    “A week later the department hired investment bankers from Merrill Lynch to advise it. Some might say that if you were asking Merrill Lynch for financial advice in 2008 you were already beyond hope, but that is not entirely fair. The bank analyst who had been most prescient and interesting about the Irish banks worked for Merrill Lynch. His name was Philip Ingram. In his late 20s, and a bit quirky–at the University of Cambridge he had studied zoology–Ingram had done something original and useful: he’d shined a new light on the way Irish banks lent against commercial real estate.
    The commercial-real-estate loan market is generally less transparent than the market for home loans. Deals between bankers and property developers are one-offs, on terms unknown to all but a few insiders. The parties to any loan always claim it is prudent: a bank analyst has little choice but to take them at their word. But Ingram was skeptical of the Irish banks. He had read Morgan Kelly’s newspaper articles and even paid Kelly a visit in his university office. To Ingram’s eyes, there undoubtedly appeared to be a vast difference between what the Irish banks were saying and what was really happening. To get at it he ignored what they were saying and went looking for knowledgeable insiders in the commercial-property market. He interviewed them, as a journalist might. On March 13, 2008, six months before the Irish real-estate Ponzi scheme collapsed, Ingram published a report, in which he simply quoted verbatim what British market insiders had told him about various banks’ lending to commercial real estate. The Irish banks were making far riskier loans in Ireland than they were in Britain, but even in Britain, the report revealed, they were the nuttiest lenders around: in that category, Anglo Irish, Bank of Ireland, and A.I.B. came, in that order, first, second, and third. “
    For a few hours the Merrill Lynch report was the hottest read in the London financial markets, until Merrill Lynch retracted it. Merrill had been a lead underwriter of Anglo Irish’s bonds and the corporate broker to A.I.B.: they’d earned huge sums of money off the growth of Irish banking. Moments after Phil Ingram hit the Send button on his report, the Irish banks called their Merrill Lynch bankers and threatened to take their business elsewhere. The same executive from Anglo Irish who had called to scream at Morgan Kelly called a Merrill research analyst to scream some more. Ingram’s superiors at Merrill Lynch hauled him into meetings with in-house lawyers, who toned down the report’s pointed language and purged it of its damning quotes from market insiders, including its many references to Irish banks. And from that moment everything Ingram wrote about Irish banks was edited, and bowdlerized by Merrill Lynch’s lawyers. At the end of 2008, Merrill fired him. One of Ingram’s colleagues, a fellow named Ed Allchin, was also made to apologize to Merrill’s investment bankers individually for the trouble he’d caused them by suggesting there was still money to be made on shorting Irish banks.”
    “It would have been difficult for Merrill Lynch’s investment bankers not to know, at some level, that in a reckless market the Irish banks had acted with a recklessness all their own. But in the seven-page memo to Brian Lenihan–for which the Irish taxpayer forked over to Merrill Lynch seven million euros–they kept whatever reservations they may have had to themselves. “All of the Irish banks are profitable and well capitalised,” wrote the Merrill Lynch advisers, who then went on to suggest that the banks’ problem wasn’t at all the bad loans they had made but the panic in the market. “

    “What exactly was said in meetings on the night of September 29, 2008, remains, amazingly, something of a secret. The government has refused Freedom of Information Act-type requests for records. But gathered around the conference tables inside the prime minister’s offices was an array of top government and finance officials, including Lenihan, Cowen, the attorney general, and bank officials and regulators. Eventually they brought in the heads of the two yet-to-be-disgraced big Irish banks: A.I.B. and Bank of Ireland. Evidently they either lied to Brian Lenihan about the extent of their losses or didn’t know themselves what those were. Or both. “At the time they were all saying the same thing,” an Irish bank analyst tells me. “ ‘We don’t have any subprime.’ ” What they meant was that they had avoided lending to American subprime borrowers; what they neglected to mention was that, in the general frenzy, all of Ireland had become subprime.

    “The report from Merrill Lynch, which touted the banks as fundamentally sound, buttressed whatever story they told the finance minister. Ireland’s financial regulator, Patrick Neary, had echoed Merrill’s judgment. Morgan Kelly was still viewed as a zany egghead; at any rate, no one who took him seriously was present in the room. Anglo Irish’s stock had fallen 46 percent that day; A.I.B.’s had fallen 17 percent; there was a fair chance that when the stock exchange reopened one or both of them would go out of business. In the general panic, absent government intervention, the other banks would have gone down, too. Lenihan faced a choice: Should he believe the people immediately around him or the financial markets? Should he trust the family or the experts? He stuck with the family. Ireland gave its promise. And the promise sank Ireland. “

    “These private bondholders didn’t have any right to be made whole by the Irish government. The bondholders didn’t even expect to be made whole by the Irish government. Not long ago I spoke with a former senior Merrill Lynch bond trader who, on September 29, 2008, owned a pile of bonds in one of the Irish banks. He’d already tried to sell them back to the bank for 50 cents on the dollar–that is, he’d offered to take a huge loss, just to get out of them. On the morning of September 30 he awakened to find his bonds worth 100 cents on the dollar. The Irish government had guaranteed them! He couldn’t believe his luck. Across the financial markets this episode repeated itself. People who had made a private bet that went bad, and didn’t expect to be repaid in full, were handed their money back–from the Irish taxpayer “

    “Lenihan offered a new reason for the government’s gift to private investors: the bonds were owned by Irishmen. Up until then the government’s line had been that they had no idea who owned the bank’s bonds. Now they said that, if the Irish government didn’t eat the losses, Irish credit unions and insurance companies would pay the price. The Irish, in other words, were simply saving the Irish. This wasn’t true, and it provoked a cry of outrage from the credit unions, which said that they owned hardly any of the bonds. A political investigative blog called Guido Fawkes somehow obtained a list of the Anglo Irish foreign bondholders: German banks, French banks, German investment funds, Goldman Sachs. (Yes! Even the Irish did their bit for Goldman.) “

    “It’s more than two years since the Irish government foisted the losses of the Irish banks on the Irish people, and in that time there have been only two conspicuous acts of social unrest. In May 2009, at A.I.B.’s first shareholder meeting after the collapse, a senior citizen hurled rotten eggs at the bank’s executives. And early one morning in September 2010, a 41-year-old property developer from Galway named Joe McNamara, who had painted his cement mixer with anti-banker slogans, climbed inside the cab, drove through Dublin, and, after cutting the brake lines, stalled the machine up against the gates of the Parliament. The elderly egg thrower was a distant memory, but McNamara was still, more or less, in the news: declining requests for interviews. “Joe is a private person,” his lawyer told me. “He feels like he’s made his point. He doesn’t want any media attention.”
    “Smack in the middle of the tiny village of Keel, was the source of all of Joe McNamara’s financial troubles: a giant black hole, surrounded by bulldozers and building materials. He’d set out in 2005 to build a modest one-story hotel, with 12 rooms. In April 2006, with the Irish property market exploding, he’d expanded his ambition and applied for permission to build a multi-story luxury hotel. At exactly that moment, the market turned. “We went away in June of 2006,” Ronan O’Driscoll, the Savills broker, had told me. “We came back in September and everything had just stopped. How does everyone decide at once that it is time to stop–that it’s become mad?” For the past four years the hotel’s site had scarred the village. But it wasn’t until early 2010 that Anglo Irish Bank, which had lent McNamara the money to develop it, threatened to force him into receivership.
    More at:

    • thx for reread of that including repeating pars:

      RE “It wasn’t until almost exactly one year later, on September 29, 2008, that Morgan Kelly became the startled object of popular interest. The stocks of the three main Irish banks, Anglo Irish, A.I.B., and Bank of Ireland, had fallen by between a fifth and a half in a single trading session, and a run on Irish bank deposits had started. The Irish government was about to guarantee all the obligations of the six biggest Irish banks.”

      I still maintain, see posts above, the guarantee was in preparation long months, perhaps 6, before September 29 and it was developed as a contingency against what might happen and did finally happen on Sept 29.

      But the the ‘guarantee’ is still an enigma and a mystery, an unturned stone in Irish history hiding plenty grubby worms underneath!

      The delayed investigation into the banks and prosecutions arising may somehow throw light eventually…but these real reports into the banks will be delayed at all costs.

  45. ‘We are at the brink…”

    We are. The world is.

    In past civilizationwith the passing of the old king, the new would declare debt forgiveness and the system frozen with inequality and debt would reboot.

    The bankers of the world hold debt as an asset. Currencies in which the debt is denominated are dear to bankers for the same reason debt is dear to bankers.

    The macroeconomic system has limits and the progression to debt default is mathematically predictable. The maneuvering of the the German political leadership has no appreciable effect on the timing of coming historical asset collapse.

    Of all global asset classes the DAX, whose valuation time evolution rests on a real economy – one that generally produces real manufactured goods and services rather than relying on low wage labor or annual continuous 6 percent GDP deficit military spending – the DAX represents the best mathematical model.

    A primer on the science of saturation macroeconomics.

    By the simple mathematical model a historical … historical …. collapse in the DAX valuation price will occur in the 6 -12 trading days.

    For the SPX the ubiquitous quantum mathematical fractal pattern for growth and decay can be seen on a 15 minutely basis using a five day chart starting on Monday 12 September 2011.

    The first base fractal is 40(forty) 15-minute units in length and follows a four phase x/2.5x/2x/1.5-1.6x Lammert quantum time pattern of growth and decay. (3 growth and 1 decay) A 6/15/12/10 15-minute fractal series can be observed.

    The follow-on second fractal to the 40 unit base is now 78(sevety-eight) 15-minute units in length with a nonlinear asset devaluation expected between 80 and 100 2x-2.5x.

    For the weekly DAX a fractal series of 7-8weeks as an intiating fractal is couple with a 19/47 first and second fractal series.

    The SPX ‘flash crash’ on 6 May 2010 represents second fractal nonlinearity of the 19/47 week first and second fractal series.

    The DAX initiating fractal in January 2009 of 7-8 weeks which had a lower low at the end of week 7-8 (march 2009)is integrated into this fractal series for a total of 71 weeks.

    The Dax’s third and fourth fractal are self organized as a y/2y/2y decay fractal of 14-15/29-30/27 of 29-30 weeks for a total of 71-72 weeks. (The model allows extension to 1.6x of the base which could allow up to an additional 2 weeks)

    The final daily series for the DAX has an initiating fractal starting on 9 August 2011 of 3 days and a base of 7 days. The second fractal of 17 days(2.5x) has an elegant lower low nonlinear gap between day 16 and day 17. (Please read the 2005 description of second fractal terminal nonlinearity).

    The (3)7/17/5 of 11-17 day decay fractal rest within a 17/39/29 of 34-39 :: y/2-2.5y/2-2.5y larger decay fractal.

    The DAX is currently on day 5 of its third fractal.

    This third fractal should be a very elegant skeletalized Lammert Fractal series that from a empirical observation point will help validate the deterministic quantum patterned progression.
    The decay progression will likely fall into this decay progression: y/2.5y/1.6-2.5y.

    The 1.6y-2.5y third fractal, if a 1.6y fractal proportionality, will be composed of a 2/5/4/3 day subfractal series. This could conclude the series with the last 3 day decay fractal representing the historical collapse.

    (the alternative is a final x/2x/2x 15/30/30 week lower high rise in the DAX – with an immediate ensuing collapse – would still fall into the 1.5-1.6x time period of the 4th fractal adding 2 trading weeks.)

    All of the DAX’s 142 week (8)//19//47//(14-15/29-30 /29-30) weeks :: (initiating fractal)/x/2.5x/(2x/1.5-1.6x) = x/2.5x/(y/2y/2y) fall at the end of a 9/22 year first and second fractal series starting in 1982 with Volcker controlling inflation 1982 Treasuries near 20 percent.

    But equity equivalent valuations pattern go further back to the US constitution in 1788 and in the late 1690′s for the British hegemony. The South Sea Bubble and Laws money scheme were a part of the debt-asset valuation countervailing macroeconomic system.

    Can macroeconomic system second fractal nonlinearity be transmitted over 150-210 years?

    ‘We are at the brink’…..’

    By the empirical time based quantum fractals of the saturation macroeconomics which elevate the study of the debt-asset system of macroeconomics to the level of patterned science ….

    The world …. with its massive nonrepayable debt, its leveraged equity (equivalent derivatives)and overvalued CRB futures whose valuations are based on the ongoing presumed value of that debt (as an asset)

    … is at the brink.

    • Re “The 1.6y-2.5y third fractal, if a 1.6y fractal proportionality, will be composed of a 2/5/4/3 day subfractal series. This could conclude the series with the last 3 day decay fractal representing the historical collapse.”

      I’m so sorry, Jimmy Lyanbas, in Singapore, gave incomplete fractal speadsheet analytics for the Sept 2008 meltdown period.

      We also had to revert to chaos theory to support your hypothesis, but our results have been inconclusive.

      Plus we’ve tried to mothball some equations based upon recent Libyan fractals as they also became unreliable.

      Our tsunami, nuclear accident, and earthquake physics on the basis of recent Euler graph theoretical models, are however, proving more reliable than ever before; though there is some factional dispute about this within our department.

      We would also like to point out, there is no truth whatsoever in recent rumours results have been illegally interfered with in any way.

      Investigations are ongoing and have nothing whatsoever to do with the recent resignations of four leading EERI members of our Wall St GS team….:)

      • redriversix

        ColmbrazeL & Lammert

        I respect you Guys,really I do…….But , for the love of God…,could you please speak English.!

        I am sure you have valid points and I am sure you Guys are very Bright , but you do not have to prove it all the time.

        With Respect

        We have to listen to enough Mumbo Jumbo every day on radio and T.V without having to decipher our own “Team”

        We know whats going on in the Country is bullshit..We know we have to listen to Media crap about Presidential elections,Maths teachers and results.

        Gilmore yakking on about “how we should present a positive attitude as the world is watching”

        How the E.C.B is so impressed with us.

        All the bad shit that you Guys are afraid of happening to you has already happened to me.

        I am in the Battlefield while you guys are flying over it at 10,000 ft directing the Fight,..

        “Any chance you might get your feet wet and give us some real fucken idea as what to do” ?
        Debits & credits…..These numbers you quote boil down to real people…

        Now what ?


        • dwalsh

          I had presumed cb was taking the piss.

          Just shows you how much I know :)

          • redriversix

            hi dwalsh

            maybe i picked up cb wrong

            still tired !

          • dWalsh yur right i was taking the piss out of pseudo mathematics used in a context it was not meant for in economics. Economics is subject to real world variables that are often too indefinable to be useful for mathematical purposes. Did Greenspan not say to the senate committee hearings he had incorrectly assumed for 40 years a mathematical approach he had used he now realised to be incorrect.

          • Malcolm McClure

            colm brazel: Your comment is brilliant, but far too short to demolish the pseudo-mathematics underpinning so many operations in economics. I can follow this argument to whatever depths others would go in their efforts to contradict you, but put very simply: No number resulting from any calculation can have more significant digits than the input number with the least number of significant digits.

            Thus it is pure and utter BS when economists talk about the difference between 0.2% growth rate and 0.4% growth rate. In reality they haven’t a clue what is happening, but they are being paid princely sums to make prognostications.

          • dwalsh

            Hey colm brazel there’s another thing we agree on :)

            Yes I remember hearing Greenspan say that…and also that he had presumed reason and self-preservation and good sense would have restrained the financial sector.

            I didn’t believe him at the time; and I’m not sure if I do still.

          • coldblow

            Malcolm, I think that is what is known in stats as ‘spurious accuracy’. About the only thing I ever learned in stats.

        • @RRsixtired

          ““Any chance you might get your feet wet and give us some real fucken idea as what to do” ?”

          Most people are smarter than they think they are, but if you can get a tiny piece of the rare wisdom, could you send it to me?

          Last week I went out for a long walk with rain in the sky threatening, not sure if it was Friday the 13th, or if this happened on a good Friday, I got soaked:)

          If you take care of the 100yds on front of your life boat and look for a bit of truth and wisdom to help with any decisions you make, you might get to meet Godot:)

          • redriversix

            Hi ColmB

            I believe I have lived 4 lifetimes in my 43 years.I have realised what is important , rather than what society expected of me or what i presumed what society meant.

            Although I have suffered Material loss , it was through this experience that lead me to realise what is important.

            I “lost” everything i did not need , although i would not wish my experiences on anybody , It has given by a different perspective on Life.

            Therefor I have achieved some “wisdom” and a view that others may not understand because they have not had my experience.

            Through this I gained Mental strength and fortitude. I Battled with mental and physical stress.
            The importance of my family.

            The realisation that Banks also have to earn respect and if you are dealing with them the best way you know how to ,and its not good enough.Fuck them.

            The ability to overcome fear , has been a great gift through these troubling times and it is with this experience that I want to help others because their is too much Fear out there and fear is not a fact.

            I do not have all the answers but I do have some.

            Why should someone suffer 5 minutes longer than me when I can reduce that Mental anguish and fear that is flowing through Irish households today.

            What Frustrates me is I know I should do something but I do not know were to start.

            World economies are telling lie after lie , I could care Less , what I care about Is Families and People , to help them and ease their minds if possible.

            To get them to pay themselves first and to realise they have a worth , irrelevant of wether their mistakes are their own or because of the depression.

            People First.

    • @ Lammert

      Your systemic deduction of the ultimate fractal nonlinearity is plausable .

      We need the passing of a King to reboot the current debt system to restore ‘ body organs’ again and the question is will the DAX declare itself ‘existionalist ‘ and just fade into the sunlight .

      The question I ask is ‘ where is Jesse James and the Sundance Kid ‘ ?

      Your presentation reminds me of those ‘ greasy till bankers wearing mittens on a cold day ‘,down in the basement . In the movies we all know Jesse James come into town and finds them out and blows out their bloody brains .

      I think I know how the Kind will be rebooted.

    • dwalsh

      Hey Lammert

      I hope you wont be discouraged by our philistinism.

      I for one enjoy your comments and I respect the mathematics involved; even if I believe there is more to it than pure mathematics can divine.

      As redriversix has mentioned a couple of times…any chance you could preface or append a summary to your posts in layman’s terms for those of us who are not up to speed with quantum mathematical fractal patterns.

      I wonder will the your fractal mathematics prove more prescient than John ALLEN’s celestial numerology.

      • Adam Byrne

        “I wonder will the your fractal mathematics prove more prescient than John ALLEN’s celestial numerology.”

        That wouldn’t be hard dwalsh. Eat your heart out Harold Camping.

        Just joshing with you John!

  46. dwalsh

    Hi lammert

    I think you may well be right about the end being nigh.

    A few reflections.

    Though I accept the immense value of mathematical analysis I do think it is questionable to presume that the determinism which applies within the mathematical model also applies in the underlying reality which the mathematics models…you know…the old territory and the map thing.

    The global economy is organic; not mathematical; not mechanical. There are factors which are neither deterministic nor merely random or stochastic. And although mathematical statistical methods can remove this non-stochastic indeterminism from the models, it nonetheless persists in reality. Human beings are the primary producers of the non-stochastic indeterminism I refer to; but the entire living planet is such a system.

    The deterministic conditions for collapse are undoubtedly in the system. They have been for years now; but I would argue that human decisions at the Olympian level — by which I mean at the highest global oligarchic level — have kept the system functioning. This is the modern equivalent of the jubilee or Royal fiat of old that you refer to. We still have ‘Kings’ in the sense of sheer fiat and agency at the pinnacle of the global financial hierarchy.

    Their financial power and political influence transcends the market system. For example, in the case of Lehman Brothers; although the deterministic conditions for collapse were in place, the actual event of collapse was a human choice — a decision at the Olympian oligarchic level. They decided to let it go. They could have decided otherwise. Many argued they should have decided otherwise.

    Of course theirs is not a Divine or Absolute fiat or agency. There are parameters and limits to their power; one of which is the non-stochastic indeterminism of ordinary human beings; the unpredictable ‘masses’ which they expend enormous effort to keep suitably ‘informed’ and acquiescent.

    In my opinion this crisis gives the global elites enormous leverage on the world system. It is to their advantage for everyone to believe it is all just happening deterministically and stochastically and involves no intention or opportunity on the part of some mythical conspiratorial global elite.

    However, whatever one may think of conspiracy theories, it is clearly a fact that the European debt crisis presents an opportunity for the European elites; it gives them enormous leverage to fast-track federalisation.

    • “it gives them enormous leverage to fast-track federalisation.”
      What’s bloody wrong with that?
      I welcome federalization, if it stops the Berties and the Berlusconis from hijacking and wrecking whole nations through pork barrel style “auction politics”?
      I have spent enough time in Germany to have the highest respect for everything about their way of life,and political system.

      • Adam Byrne

        Me too, I couldn’t care less what colour my passport is or what country’s name it has on it. Classifying people by such means is yet another scam (restrictive device) to keep us all in check and suck money upwards. Proper local government is what’s needed, then a set of equal rules for all in Europe and get rid of those chancers in the Dail.

        • redriversix

          I understand what you mean , Adam

          But lets be careful about what
          we ” care-less about ”

          Federalization will not stop corruption , it will just make fewer leaders have much more control and open to persuasion from the “Council for foreign relations” amongst others.

          IT will also take away more freedom and participation from the people

    • re: A few reflections.

      The rise and collapse of the South Sea Bubble followed the macroeconomic debt-money-asset system’s self-organizing self-balancing operating rules. The saturation growth and decay of the primitive US stock system from 1788 to 1858 followed the same patterns of today.

      With the exception of the Rothschilds’ who have been in the game for a long time and own just about everything, player elites have come and gone.

      While individuals, usually the elite and their bought and paid for politicians and judges, always make the dysequilibrium of the asset-debt-money system worse by setting rules to allow extraordinary advantage and gain via 10:1 to derivative 200:1 leverage or via rules to facilitate slave wage labor gutting the middle class, the time course of collapse for the 1982 first and second fractal 9/22 year :: x/2.5x series, follows a time course saturation pathway operating via an elegantly simple mathematical quantum fractal model of growth saturation and decay …. that again is identical in fractal proportionality to that of the US 1788 – 1858 primitive (derivative asset)stock system.

      Here are the two only necessary aphorisms needed for the world’s working class citizens to change the highly unbalanced, unfair, unstable, out of kilter money-debt-asset system.

      1. Good rules lead to good results.
      2. Bad rules lead to bad results.

      Do the people have enough power (via likely the creation of a new party) to take control of the system and create good rules to limit a private agency from profiting in usury and in the manipulation of the Sovereign money system?

      Can good rules be created to to have the monetary system and the banking system be a totally citizen owned monetary system, a totally citizen owned banking system, and a totally citizen benefit usury system?

      Can good rules be created to stop societally useless stock speculation churning and reward laborers and producers of useful social services?

      See Lammert’s Second Modest Proposal

      Current model of DAX collapse 18 September: from the 9 August 2011 DAX low: (3)7/17/(2)4 of 5/12.

      • dwalsh

        Hey Lammert I can actually understand almost all of that! Thanks :)

        I don’t know the details so I will have to take your word for it that the fractal patterns repeat in today’s and previous cycles.

        So you are saying the actions of the elites don’t affect the underlying determinism of the market cycles. That for instance the owners/controllers of the Federal Reserve don’t affect the global system; they are just deterministic cogs in a mechanical system that is blindly working itself out. This is difficult to believe to be honest; but as I said I do not have the data to contest your perspective on the cycles you mentioned.

        You do admit the existence of the Rothschilds; which many seem to believe are a myth invented by conspiracy theorists. If as you say they own “just about everything” then here we have a possible elite wild card…no?

        A power centre and structure that does have a transcendent capability — at least it is theoretically possible. Transcendent in the sense of being capable of rising above the usual embeddedness and bondage to the daily treadmill of work and profit and bills. A power centre that is not itself absorbed in the generation of profits — that function being delegated to CEOs — but is dedicated to power at the macro level; to the determination of the future development of the world — along lines it prefers.

        They would run and coordinate various research foundations and international high level think-tanks; maybe something like the CFR and the Trilateral Commission etc; all of which incidentally are either unknown to most people or regarded as conspiracy theory myths; even though they have web sites and publish reports etc.

        But perhaps I am only imagining such things. I don’t know them; I admit that. But it just seems daft to presume the opposite. That everyone is bogged down in survival or riches; and there is no one taking heed of where the ship is going. I think that is an even worse prospect for humanity than the neo-feudal scenarios described by mainstream conspiracy theorists such as Alex Jones.

        If it’s just a clockwork universe unwinding itself deterministically from conditions established a nanosecond after the big bang…well…one wonders, what’s the point?

        I wonder ‘who would want me to believe that; and why’?

        (not meaning you of course)

        I look forward to reading the article you linked.

      • Hi Lammert,

        Re “The saturation growth and decay of the primitive US stock system from 1788 to 1858 followed the same patterns of today.”

        Aside from the computerization and globalization of markets particularly the explosion in derivative based trading since 1970, there are distinct differences between the 19th century and now. I agree with your ‘hidden hand’ description though to a large extent.

        You’ll be interested in the following. Jackson and Lincoln below both struggled with the hidden hand of Rothschild private banking. The world needs to renew their struggle particularly since the private fiat money system now threatens the future development of civilisation itself. Its bubble making insider methodology is a hoax and a profiteering scam making a mockery of democracy.

        Debt can be got rid of. Governments can print their own money supply…..governments eg Iceland on the way to a fairer and more equitable system, can insist the only debt to be repaid is what can be repaid. We can also bring more openness, transparency and accountability to the smoke and mirrors world of the fiat hoax.

        May I also refer you to the work of bstill:)

        I’ve been ignored in the call for the founding of a public state bank here to replace the robber pillars of AIB and BOI

        Otto von Bismark chancellor of Germany 1876 On the 12th of April 1861 this economic war began. Predictably Lincoln, needing money to finance his war effort, went with his secretary of the treasury to New York to apply for the necessary loans. The money changers wishing the Union to fail offered loans at 24% to 36%. Lincoln declined the offer. An old friend of Lincoln’s, Colonel Dick Taylor of Chicago was put in charge of solving the problem of how to finance the war. His solution is recorded as this. “Just get Congress to pass a bill authorising the printing of full legal tender treasury notes… and pay your soldiers with them and go ahead and win your war with them also.”

        Colonel Dick Taylor When Lincoln asked if the people of America would accept the notes Taylor said. “The people or anyone else will not have any choice in the matter, if you make them full legal tender. They will have the full sanction of the government and be just as good as any money; as Congress is given that express right by the Constitution.”

        ……”Colonel Dick Taylor 1 Lincoln agreed to try this solution and printed 450 million dollars worth of the new bills using green ink on the back to distinguish them from other notes. “The government should create, issue and circulate all the currency and credit needed to satisfy the spending power of the government and the buying power of consumers….. The privilege of creating and issuing money is not only the supreme prerogative of Government, but it is the Government’s greatest creative opportunity. By the adoption of these principles, the long-felt want for a uniform medium will be satisfied. The taxpayers will be saved immense sums of interest, discounts and exchanges. The financing of all public enterprises, the maintenance of stable government and ordered progress, and the conduct of the Treasury will become matters of practical administration. The people can and will be furnished with a currency as safe as their own government. Money will cease to be the master and become the servant of humanity. Democracy will rise superior to the money power.”

        “Abraham Lincoln 2 From this we see that the solution worked so well Lincoln was seriously considering adopting this emergency measure as a permanent policy. This would have been great for everyone except the money changers who quickly realised how dangerous this policy would be for them. They wasted no time in expressing their view in the London Times. Oddly enough, while the article seems to have been designed to discourage this creative financial policy, in its put down we’re clearly able to see the policies goodness. “If this mischievous financial policy, which has its origin in North America, shall become endurated down to a fixture, then that Government will furnish its own money without cost. It will pay off debts and be without debt. It will have all the money necessary to carry on its commerce. It will become prosperous without precedent in the history of the world. The brains, and wealth of all countries will go to North America. That country must be destroyed or it will destroy every monarchy on the globe.”

        National Bank Act 1863 “The act went through. From this point on the entire US money supply would be created out of debt by bankers buying US government bonds and issuing them from reserves for bank notes. The greenbacks continued to be in circulatio national bank notes. To pay off the debt was to destroy the money supply.”"

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