September 19, 2011

It’s pointless to be an EU poster boy

Posted in Sunday Business Post · 192 comments ·

So now we are the ‘poster boy’ again. Do we ever get sick of being the poster boy?

A few years ago, we were the poster boy for deregulation, low taxes and free capital movements. Our politicians went around Europe advising the rest of the continent to copy Ireland. Just be like us and it’ll all be grand, they said.

Having fallen so sharply, we are again the poster boy, but this time for austerity. Our politicians are now advising the rest of Europe to be like us. If you – Greece, Portugal, Spain and Italy – can just do austerity like Ireland, it’ll all be fine, they say. Sound familiar? The problem with austerity is that it has never worked anywhere in the world without either being preceded, or followed, by a massive devaluation or massive credit injection. Our ‘successful’ period of austerity from 1987 to 1990 was preceded by a devaluation in 1987 and followed by another one in 1992, and all the while interest rates fell dramatically.

Likewise, Reagan and Thatcher’s massive fiscal contractions of the early 1980swere accompanied by the most rapid injection of credit either economy had seen since the 1920s, leading to a bubble and two housing busts in the late 1980s.

Without a massive injection of credit or a massive devaluation, austerity can’t work. It will lead to long-term, higher levels of unemployment and emigration. This is what is happening in Ireland right now.

In many ways, economics is really very simple. If you try to do something that isn’t governed by the basic rules, you will fail. If there is one thing most sensible economists can agree on, it is that too much money in circulation causes inflationary booms which, if not checked, will crash. Too little money in circulation will cause deflationary depressions which, if not checked, will lead to social upheaval.

The way to stop an inflationary boom is to take money out of the economy; the way to stop deflationary busts is to add more money to the economy. Simple. Deviate from this at your peril.

One other thing most economists also agree on is that wages and prices are ‘sticky’. This means that it is very hard for wages and prices to fall in response to a fall in demand. Typically, if there is a fall in demand, it will be felt much more in unemployment and emigration than in falling prices.

This is because of what is termed in labour market economics the insider/ outsider dilemma, which examines the dynamics of the labour market when demand changes. When demand falls, those with jobs stubbornly defend their own pay rates, which keeps wages from falling. But those who have lost their jobs need general wages to fall, so that they can look attractive to potential employers.

But if this doesn’t happen because the ‘insiders’ in a job are keeping wages up, short and long-term unemployment rises.

This is what is happening at the moment in Ireland. Figures last week revealed that unemployment is still rising, as is emigration, while wages and prices have remained stubbornly high. They are ‘sticky’.

The implication of this is that it is nearly impossible to get a competitive edge via austerity – or it is possible, but the cost to society in terms of unemployment and emigration is horrendous.

As a result of the stickiness of wages and prices, and the need for depressions to be offset by injections of new credit, all austerity programmes are destined to fail because they can’t succeed mechanically.

This is why all slumps are ultimately followed by massive falls in the currency of the country, with the new exchange rate repricing everything downwards.

This is what happened in every Asian tiger in the 1990s.This adjustment makes everything in the country cheaper and all imports more expensive. Once the economy has found a new price level to match its fundamental position, money floods back in.

Some of that money is new, looking for investment opportunities at the new lower price level, but most of the cash tends to be domestic money that has fled the country because it was afraid of higher and higher taxes as the ‘austerity with no growth’ madness took hold. Once this cycle of dogma is broken, the economy can prosper again.

This is why there is so much talk in Europe of the euro breaking up. It is not driven by ideology or politics, but by basic economics. If you don’t have a single budget to dole out cash in a slump, then the exchange rate has to adjust downwards.

If you don’t have an exchange rate, you get no adjustment, growth stops and austerity fails. It is not hard to understand, is it? Countries need away out. There is a choice. One is fiscal federalism for all. This would need a referendum in many countries, and would never pass. Think about it, three of the last four referendums seeking greater integration in Europe have been beaten by electorates as diverse as the Dutch, the French and the Irish.

So this is not a runner and, if it were put to a vote in Germany, it would be blown out of the wasser. So what is left is some break-up of the currency, and Greece is the first candidate. Yes, there would be huge capital flight in the months after Greece left, but a major European crisis might give us the opportunity to move back to our own currency.

Back in 2007, this column argued that one of the upshots of the financial crisis that was coming, but not appreciated by many, was that we would leave the euro, not just because it was inappropriate for Ireland, but because it would implode as it was half-baked.

We are now close to this moment. A new currency and a massive devaluation will make us no friends in Europe, but by that stage they will be scrapping with each other so viciously that what we do won’t matter. Such a bold move will accelerate a recovery, just as the same policy has done everywhere else in the world – Iceland being the most recent example.

Otherwise, the poster boy will trip up, having exalted everyone to follow his example as he waltzes himself up a financial cul-de-sac of unemployment, emigration and asset-stripping.

  1. paddyjones

    This is really just populist tripe.
    Fact …we are in the euro, fact …..we are reliant on handouts from the EU/IMF/ECB.
    Austerity is working , it makes sense and its the right thing to do .
    There will be no breakup of the euro , we will all just muddle along, this is the new normal ….get used to it .
    There is nothing wrong with emigration , I spent most of my working life outside Ireland and it did me no harm . Those kids going to australia or canada are having the time of their lives .
    as for unemployment yes it is high but a rate of 10% in the EU is normal . many EU countries are doing very well so dont just concentrate on Ireland it is going through a bad phase at the moment but we will recover in a few years when austerity works its magic.
    We are committed to cutting the deficit to 8.6% of GDP next year and we will get to 3% by 2015 , yes its going to be difficult but its only money , a person can still be happy with less money , its no big deal just adopt your own personal austerity and cut your spending by perhaps not going on holiday or shopping in Lidl or Aldi.
    I find Davids opinion doesnt reflect reality and is really quite amitorish , I wonder if he will enter politics one of these days he would look good next to Joe Higgins he talks the same tripe.

    • MarbleGirl

      If David’s scribing is just “populist tripe” and so very “amateurish” — then what reason would a smart man like you have for spending so much time on this site, PaddyJones?…..

    • silentobserver

      Yeah.. David´s a real populist! Remember when he was cheer leading the Celtic Tiger and the property boom!

    • Jimmy

      Are you a guy that believes that a bank position at AIB should get 690000 euros per year whilst the rest of us get raped by he bankers. You must be a banker to come up with tripe like that.

    • molly66

      i think david is right, how many times in the past has he hit the nail on the head. austerity is not working i am self employed since 1990 am i am hanging on buy my finger nails ,so to are most of the self employed people i know or deal with,i feel greece will leave or will be forced out and things will become a lot worse this government will find its self in real hot water in the coming months, when the sleeping irish wake up and say stop we have had enough and we wont be having any more of the lying down walk all over us tripe.

      • +1

        Well said molly66. It is nice to know that when the march does come it will be people from all walks of life and that western capitalist media will not be able to put it all down do a lawless minority!

        If there are riots and widespread social disorder then we all know where to point the finger of blame when the predicable ‘something should be done’ plea comes over the wire – the Irish Government

        I am Listening to Flight of the Earls and I feel quite angry but mostly all I feel is apathy and loss of hope for this country. I might try London

    • @Paddyjones,

      RE “Austerity is working” nope, its a total failure for Greece, its failing to meet its austerity targets, here’s a few hours ago: Greece at this moment is fighting to prevent almost inevitable default, its creditors are about to pull the plug:

      try and keep up with the news and stop burying the head in sand:)

      • looks like Greece will barely scrape through this time and gets its impailment tranche from the bailouts, but meanwhile Italy are downgraded by S&P and the debt pileup under austerity gets worse. Note this is not rocket science, Ireland and PIIGS and indeed to a lesser extent the rest of the world need growth to get out of almost impossible debt burdens. Austerity is cutting the legs out from under the required growth. Debt therefore as a percentage of GNP and GDP, at unsustainable levels already even without bailouts that factor in growth to pay for bailouts, increases in real terms, like a weight lifter who, the more weight lifted, the more weight gets added! The mathematics of this are easy to grasp.

    • redriversix

      Hi Paddyjones

      I never knew you had such an excellent sense of humour.

      It’s amazing what you can write from a balcony overlooking Dakley , now please do not think i have a problem with wealth , quite the contrary, I used to have some.

      Lidl and Aldi are quite excellent even if you are rich or poor.

      Now , to the point , you are clearly in need of some help or reality.I am pretty sure there are plenty of caring people who would be delighted to help you on this forum , however you are entitled to your opinion.

      Even if you do make George W bush sound like Einstein.

      Wishing you a quick & speedy recovery

      Please do not forget to take your meds before six.

      “you know what happens when you forget”

      your friend RRsix

      • redriversix


        • paddyjones

          What part of my analysis do you not agree with ? I think I am pretty much of the same opinion as FG/LAB/FF also IMF/EU/ECB .
          David is the ultimate ” hurler on the ditch” but when push came to shove it was his idea to guarantee the banks , Brian Lenihan called the bank guarantee “the McWilliams solution”.
          If you have an alternate opinion lets hear it.

          I say

          Austerity => balanced budget => surplus => repay debts => problem solved .
          The reality is that we will never be able to borrow on the markets again , so as the chinese say ” Get your house in order”

      • Two options:

        Paddyjones is David McVillains alter Ego commenting on himself from the other side to add the required spice to a blog that otherwise would drown in the overwhelming presentation of incomprehensible language, half-knowledge, utter nonsense and fanboy jibber jabber.

        He is a reflection of the reactionary circles that had this country in it’s grip for generations, mind you, they still maintain this grip to date, stronger than ever!

        These circles that never went away with the fall of FF, the true powers steering behind the scene, and presenting the public a choice, the classic case of cognitive bias disorder in persona, Enda Kenny as the alternative.

        Count me in for 2.


        • Praetorian

          Those unable to think about alternatives to the current socio-economic model, ‘there is no other way brigade’ are under serious assualt themselves, their entire ideology, the mental matrix they have created from themselves is collapsing from within or as Einstein put it “Great spirits have always encountered violent opposition from medicore minds”.

    • BrianC

      Why bother trying to argue anything with a closed mind set. Pointless exercise. Austerity does not work. You are entitled to your beliefs. And your opinion is as useless as Trichets actions to address the lack of liquidity in Europe. They are not prepared to recognise the truth of the real facts. What is it Goethe said “The hardest thing to see is what is in front of your eyes”. And they believe austerity is working. Holy mother of divine give me a break. Oh yeah lets give it a few more years. Moroneconomics that is firmly rooted in the failed economic thinking of the past.

      The Irish Govt is pure mule thick and spineless when it comes to dealing with Europe but real strong when administering austerity to the Irish electorate. Sadly the Irish electorate are stupid they should have distinguished FF completely and voted in more independents who could at least make some attempt at holding up the mirror of reflection to FG and L so they could revile at their breach of promise. I think Fredie Forsythe made sense in the Sunday Independent but the day of the Connacht Cavaliers is well past as we have Knob Head Kenny and his report card and Guteless useless Gilmore. When Wellington was approached by a German General as to the state of the Irish referring to them as rabble Wellington said they may not look much but they don’t run away. And all we have is an Irish Government on the run. We should ask why. David answered it with the sticky price bit and the fact that the Public Sector in this country is overpriced and in toe with an overpriced Political class. Remember Kenny was the very first to refuse a pay cut. If they addressed the core non competitiveness of the Public sector yes you would made headway with austerity program but some are more equal than others. Gilmore was pathetic in his reply to the Germans making the point that the public sector was overpaid. And then why should they take a pay cut when they expect those on Social Welfare to take the hit. Oh and I forgot we can massage the export horse to run faster but he only needs one jockey but the tax income will pay for the overpriced over bloated public sector and puffed up moron politicians.

      So yes Paddyjones you are entitle to your opinion in all its stupid glory.

      • Great post BrianC which nails the absurdity of the Irish Politics to the wall

        I’d love to nail messrs Kenny and Gilmore to the wall by the lapels and have a serious word in their ear

    • @paddyjones

      Your Goddess of Logic has failed you on this precipice and your tunnell vision in search of a solution only sees less .Stand back and breath and experience new ideas and feel the difference and cry ….’ Hallelulia Praise The Word of David ‘

      chapter Sept
      Line 19th
      verse 2011

    • tony_murphy


      You are in for a real shock soon..

      I firmly believe that the fiat currencies will collapse, it could happen any day.. Despite the globalist bankers manipulating the gold and silver markets prices with their paper metal con. I suggest you look into getting yourself some real gold & silver today, checkout, Real money is backed by precious metals. It’s not 1′s and 0′s on an ECB computer. Those who control the paper/digital money supply are not to be trusted imo.

      Ron Paul, who is running for the republican party nomination in the US, discusses monetary policy in the linked youtube video. The mainstream media try to ignore him, but he is the only real hope the world has to put an end to plans of globalist bankers, bilderbergs, trilateral commission!

      The greatest transfer of wealth in history is happening right before our eyes. But they’re not getting anymore of my savings if I can help it!

      • Adam Byrne or any of those other sites you mentioned could disappear overnight and you have no proof that they hold any real gold to back up their deposits. I have been through this discussion many times before on this site and won’t repeat myself at length but I have personal/business experience of these sites just vanishing from the face of the earth in the blink of an eye.

        • tony_murphy

          perhaps, but are regulated

          do i trust them more than a central bank, yes
          do i trust them more than a high street bank, yes
          do i trust them more than an investment bank, yes
          do i trust them more than a fund manager financial service thing, yes

          might i be wrong, yes, but i’ll take my chances on them

      • Adam Byrne

        Land would be your best bet for investment and if things get really bad be prepared to sit on it with a gun in your hands hoping your crops will grow while you are trying to shoot the competition that wants to eat your crops, your kids and you – in that order.

    • Emperorsgotnoclothes

      Paddyjones – your views are well known on this site, and almost universally condemned. It’s difficult to know for sure if you are genuine or just trying to stir things up with your nonsense. You see, most of us in here find it almost impossible to appreciate that there are actually people out there (not working in the DOF!) who hold the views you espouse. You have consistently demonstrated a complete lack of sensitivity, or even awareness, for the great suffering imposed on the lives of so many in this country by your favoured solution – austerity. Maybe it’s only money to you but there are many many people for whom every penny counts. You sound like a person who doesn’t really have any money worries to me. It might come as a surprise to you to hear that there are people who can barely afford to feed themselves and their families, and for whom a shopping trip to Aldi or Lidl would be an extravagance. As for the notion of “not going on holiday” – you really haven’t a clue Paddy. The utter absence of compassion from your regular comments is their most defining attribute and explains why you come in for such wholesale derision. Maybe you should consider engaging your brain instead of swallowing the mantras and destructive policies of the ruling incompetents who are hell-bent on taking us to destruction whilst toadying up to their masters in Europe. Maybe the reason that David McWilliam’s articles are “populist” is that they resonate so strongly with the reality that most sensible people can perceive and flies in the face of the official nonsense that we’re consistently bombarded with by austerity doctors and their media lackeys. You consistently refrain from addressing any of the criticism that you receive on this site and my advice to everyone here is to ignore you in future. Your views are so patently absurd that any effort to consider them is a complete waste of time given that they are simply discredited at this point.
      Go out to Dublin airport someday and see the devastation that enforced emigration is wreaking on families up and down the length of the country. It’s not only kids on a year out that are leaving Paddy. It’s whole families being forced to leave because our economy, and their futures, have been wrecked by fools and criminals who share your views on how an economy ought to be managed. Your defining attributes as a person appear to be insensitivity and lack of compassion – consistently coming through in your postings. Give some serious consideration to the real pain and suffering being endured by people across the country. Consider the escalating epidemic of suicide as a direct consequence of “austerity”.
      As for Joe Higgins – he was one of very few people who actually had the courage to stand up and denounce the scandal and immorality of socialising private debt – I suppose you agreed with that policy as well.
      I think there’s one person who consistenly talks tripe Paddy and anyone who has read your posts will know who that person is.

      • “Your defining attributes as a person appear to be insensitivity and lack of compassion”

        You can throw psychopathic into that sentence and it would still be accurate

        PaddyJones may be real or not or he/she might be someone’s alter ego. Who knows. As long as the views expressed by P Jones esq are continually riduculed by good people it does not matter diddly squat what P Jones thinks or says. Just don’t feed the fire by wasting oxygen fighting it. There are other posters to engage with after all who are far more empathetic

        • dwalsh

          Definitely psychopathic. Most of the people running the insane financial market system are. That’s why they can see the destruction of civilisation merely as a profit opportunity. The only hope we have is if they are found-out and shut-down.

          And you are right…pointless to argue with them.

      • dwalsh

        ++1 Emperorsgotnoclothes

        Excellent points.

    • Gazza73

      I also spent most my life also working outside Ireland because I had no other choice. I always wanted to return to my home in the west, and now after being home for 6 years me and my family of three young kids & wife must leave, because we have no other choice. this magic
      austerity you speak has striped us of our home and business, people all over this country are evading unfair taxes and I know people who have had vegetables stolen from their gardens. such things have not happened in this part of the world since the famine never mind the 1930s.
      So me my wife and kids are off and we dont feel that we are going to have the time of our lives, so enjoy your shopping in Aldi and get real.

    • bentley

      What time warp are you living in ? Think you need a reality check ! The euro in its current guise is doomed. If the Irish government had good fiscal sense they would have refused to accept the EU/IMF ECB funding. We would have achieved much more by leaving the Euro and returning to the Irish Pound. This is going to happen now anyway … maybe sooner than we expect. When you hear a “company man” like Brendan Keenan hinting at this you just know reality is starting to dawn on some members of the Establishment. You obviously have no idea about how economics works

  2. JapanZone

    As a longtime reader/lurker, if I may ask – if someone overseas has a chunk of their savings in Euro in anticipation of a return to live in Ireland (don’t ask why, it’s a long story!), should they be holding onto that or moving it into another currency? Will holders of Euros be initially offered a 1:1 exchange for Punt (or whatever it may be), but only those resident in Ireland, for example?

    The ever-changing, ever-worsening state of affairs at home over the last few years has scuppered a few plans to return as it’s always been hard to know just how bad things would get. But presumably the handling of a drop out of the Euro would be handled according to some historically established procedures.

    • brianh

      It all depends on which country you have the bank account in. Personally I would open up a german bankaccount and keep they euro in that.

      In case the euro breaks up they will be converted to new “deutschmarks” and all is good since it will be a strong currency.

      If you keep it in a irish bank it will be converted to new “punts” and then shortly after the punt will be devalued. Meaning they will be worth a lot less.

    • imithe

      Very good question. It seems the dollar is no longer the safe haven it once was, with continual QE – but in a crisis, you’d expect a mass influx to the USD. The sensible option would be to diversify.

    • CitizenWhy

      The Euro will still be worth more than the punt, so no one would convert ahead of time. In fact the big problem would be Irish people transferring their savings to Germany, France, or the Netherlands before the punt is reborn. The flight of savings is one of the main reasons there is a refusal to consider leaving the Euro.

    • mcquade

      “Will holders of Euros be initially offered a 1:1 exchange for Punt”

      Not a chance, I’m afraid JapanZone. The whole point of reverting to the Punt would be devaluation.

  3. redriversix

    I agree with you David

    But what is happening in the meantime is the utter destruction of the middle class , 10 suicides per week on average.

    Up to 800 people emigrating every week and unemployment at 450,000 and rising.

    This Government does not have the courage to be so bold , it would rather be “loved” by strangers in Brussels than take care of its own people.

    Is it possible that Europe could invoke some special decree to bypass a referendum… ?

    As you are all too well aware I am in the trenches on a daily basis and what I see is never reported on the media , Fear , Families under severe pressure , even those working who’s income has now dropped below their outgoings , growing addiction , either prescribed or alcohol.No communication amongst families , I could go on and on , but I think you know what I

    Hospitals close while demand for them rises.

    Crime levels rise while Gardai retire and no sign of any recruitment.

    Social upheaval David….?

    Not a chance , we will go back to wearing donkey jackets and soft caps and doffing our cap to the man in the suit.

    Maybe “they” are hoping that the lure of “Drink and self pity” will keep us in our place for another Seventy years.

    I shall stay postive……

    • Deco

      Maybe “they” are hoping that the lure of “Drink and self pity” will keep us in our place for another Seventy years.

      These are the suggestions of the establishment to the toiling classes, so that the toiling classes stay weak.

      I shall stay postive……

      You have the right antidote also. Well said. Positive, and of independent mind.

    • Praetorian

      Not just about the ‘middle classes’. Working people generally have been taking the lash for decades, and it is coming faster and harder in recent times, but they are used to living tough and without hope, sooner the middle class find common cause sooner things change for the better but self interest rules.

  4. redriversix

    I agree with you David

    But what is happening in the meantime is the utter destruction of the middle class , 10 suicides per week on average.

    Up to 800 people emigrating every week and unemployment at 450,000 and rising.

    This Government does not have the courage to be so bold , it would rather be “loved” by strangers in Brussels than take care of its own people.

    Is it possible that Europe could invoke some special decree to bypass a referendum… ?

    As you are all too well aware I am in the trenches on a daily basis and what I see is never reported on the media , Fear , Families under severe pressure , even those working who’s income has now dropped below their outgoings , growing addiction , either prescribed or alcohol.No communication amongst families , I could go on and on , but I think you know what I

    Hospitals close while demand for them rises.

    Crime levels rise while Gardai retire and no sign of any recruitment.

    Social upheaval David….?

    Not a chance , we will go back to wearing donkey jackets and soft caps and doffing our cap to the man in the suit.

    Maybe “they” are hoping that the lure of “Drink and self pity” will keep us in our place for another Seventy years.

    I shall stay postive……

  5. DmcW makes a msssive contribution to economic and arguably political discourse in Ireland, he is the voice of clarity amidst all the official nonsense, we can discuss all the economics but until an Irish person can vote for an executive seperate from a vote from a local representative, those who conceed to such a charade will be the ones that lead the country, we can debate the issues all day long until an Irish person can directly vote for the executive the nonsense will continue and the inevitable cots of same will continue to be exetered

  6. inevitable costs of same will continue to be exerted

  7. Spelling

    inevitable costs of same will continue to be exerted

  8. madman

    spoken like a true gombeen paddyjones

  9. Paddy I appreciate your view but Ireland is the nly country in Northern Europe where it is acceptable for a generation to emigrate every now and again, alot of people in Ireland don’t seem to appreciate how primitive that is, what other country could dismiss its youth from generation to generation with such candour, immigration by choice sure but by economic neccessity is hardly something to defend let alone advocate, its embarrasing

  10. What govt would make any decision other than the easiest one at the time, (default on unguaranteed private debt or go along with the ECB) Govts chose decision easiest in the short term , clearly there is no real leadership in Ireland because if there was the case for short term upheaval but long term independence would have been made

  11. Malcolm McClure

    David: I accept most of the points in your Sunday column; they are well researched and clearly put. It would help your readers further if you addressed the possible mechanics of transition to the Nua Punt.
    – Will the defunct Euro still be valid tender in shops?
    –For how long?
    –What effect will it have on deposits entrusted to Irish banks by American companies with investments here?
    –How long will it be before said American companies depart our shores for pastures nua?
    –What would ?president McGuinness’ s attitude be to re-entering the Sterling zone?

  12. Alf

    During the boom years, Ireland was held up as the example to follow – the ‘poster boy’ for Europe, Bertie flew around the world boasting his methods to the world. Today, Ireland is like a dog that has lost his master. It’s constantly looking back at the ‘good ole days’ with rose tinted glasses. There is no acknowledgement of the mistakes that were made and no realisation of the root causes of the problem. Our politicians just love to be patted on the head and told they are a ‘good boys and girls’. However, the Irish ‘elite’ are caught in psychological dependency wishing for a glorious past to return. If people can’t accept that a big cause of the problem was the flawed currency then they won’t accept it as a solution. They won’t until it is forced on them.

    The current austerity solution is comparable to giving a bankrupt homeless man a credit card so he can pay off his old debts. The homeless man gives back the money he borrowed plus his shopping cart (interest). The next austerity measure is the rags off his back. Finally we are left with a naked homeless selling his blood.

    @paddyjones, you must be a comfortably off to not see the hardship that the current policies are creating. Sure, “It’s only money” is fine if you have lots of it. But what if you can’t pay your bills or feed your kids? If you think that shopping in Aldi is going to fix Ireland’s problems then you are in serious denial.

  13. Dont fool yourselves if the Euro collapes (a real possibility) there will be no notice and the certainty of consequence some are searching for will not be realised it will be sudden and incalcuable, the EU will not be making announcements on that

  14. Lius

    OMG paddyjones, don’t you know that the “new normal” (as you call it) is that anything can happen at any time, we are in free-fall with nobody at the helm.

  15. wills

    Clearly depicted diagram of the econ 101 mechanic levers and pulleys.

    Unfortunately those at the switch are operating it to suit ideology.

  16. Peter R.

    Subscribe. However, we are also being told that the costs of a Euro break up would be several trillion, whereas the costs of bailing out would be and few hundred billion:

    What’s the easier bill to stomach …?

    • ps200306

      That’s missing the point. The few hundred billion would be paid primarily by the German taxpayer. The several trillion would be paid by banks all over the world (and possibly by their national bailer-outers) as financial contagion spreads. Which do you think the German taxpayer will vote for?

      • Peter R.

        Not sure ps200306 – your average German voter reads the Bildzeitung (real tabloid trash) and their politicians have dropped the ball more than once. But a drop 20-25% of their GDP in the first year of a new DM (and about half that in the following years) sounds pretty convincing to me.

        This is in there too (not sure how it affects Ireland):

    • NeilW

      They would say that wouldn’t they.

      Have you looked at Iceland?

      Generally the approach is to listen to what the IMF and the neo-liberal economic priesthood suggest and then do the exact opposite.

  17. Adam Byrne


  18. Think of those quisslings already rewarded for good behaviour eg developers on ¢200,000/annum paid by NAMA, the huge salaries/pensions of our political class and members of our semi states and public service doing very well. There’s a proposal for no cuts to income tax to ensure those scammed by the mortgage property bubble can pay their mortgages.

    Think of farmers fed by cheques from Europe and 20% increase in prices last year. In the broader scheme of things, Irish austerity as with Greece is a no brainer and is looming closer and closer on the horizon, it will lead to inevitable default.

    But sure begorrah, us gombeens Gilmore/Noonan/Kenny & Co, don’t have to bother with that. Sure that’s Europe’s problem, not ours.

    And sure to keep our party going, we’ll have to gut the poorest in the country once again; we ourselves are doing very well, our debt is sustainable and growth is returning…LIES…who’se been slurping at the trough?

    Wow, there’s going to be the biggest Gombeen budget ever been in this country next December.

    It’ll be a mighty laugh to see FG LB sell it to us all. Come on, Joan Burton and others, time to jump ship and resign from the Titanic.

    • dwalsh

      @ colm brazel

      in response to your response to Lammert in previous blog.

      Excellent post :)

      Which I think shows that there is nothing inevitable or deterministic about our global monetary systems. They are rigged to enslave and rob populations and nations by means of debt. It could be completely different and a lot better. I agree with you about sovereign money; private fiat money is a crime against humanity.

      Furthermore, in my opinion, since major wars are no longer an option on account of nuclear armaments, the financial oligarchs are presently using economic warfare (derivatives especially) to bankrupt the nations as a means to implementing fundamental changes in the world system.

      To answer my own question in my response to Lammert…it is the financial oligarchs who would want me to believe it is all happening deterministically and involves no intention on any ones part…in fact that there is no one who can have any intentions because we are all just material automatons acting entirely deterministically.

      The cult of scientific materialism is just a new disempowerment program designed to replace the old religious disempowerment programs of sin and salvation which no longer works for many people today.

  19. NeilW

    In a nutshell.

    Beatings will continue until morale improves.

  20. DC

    Roubini sees the light – it has taken 3 years of a rapidly growing financial/economic/social crisis to come to this conclusion.

    Isn’t it amazing how the glaringly obvious crystallises so clearly when there are no options left!

    Who is next Portugal, Ireland, Italy?

    The problem is one of simple mathematic’s, once that is understood then the endgame can be viewed as a natural conclusion to a monetary system that has failed.

    The notion that a sovereign nation must go to a bond market (and thus indenture its citizens with promises and debts it cannot cover)to finance it day to day operations is simply ludicrous.

    The very idea of a central bank in thrall to a voracious bond market is an anathema to all that is desirable in a properly regulated economic enviornment. We borrow today on the promise of growth tomorrow.

    The major european Banks are INSOLVENT.
    The ECB is insolvent.
    The FED is insolvent.
    The top five American Banks are insolvent.

    There is no easy alternative – all solutions will bring pain, it is really about choosing the solution that heals the quickest and leaves the least scarring.

    • BrianC

      Yes rather amazing when the failed humpty dumpty economic system lies broken in trillions of pieces on the ground and all the kings horses run about like headless chickens trying to put together what cannot be put back together again. And they still insist in trying to put it back together again.

      Dead right there is no alternative but radical new thinking is required because the pain of staying in this groundhog mess if far worse than the short term pain new thinking will bring. And as I step back up onto my hobby horse again for those who have heard my utterances before FRB does not work. There is an alternative the only problem is you do not make money out of money. How many trillions of useless derivatives are there in the Global financial markets and all held by a few and the only way they can get out is loosen their grip in the cookie jar and when they do that then the losses will crystalize on their balance sheets. Some how I doubt they will let go so we are hostage to their failure to recognise the truth.

    • Roubini is correct, but surprisingly short on ideas other than Greece doing a structured default.

      We need more on the implementation of financial reforms to end the cancer of deregulation and global debt scams.

      I’d rather the turmoil be a catalyst for change than a doom and gloom tunnel without a light at the end of it.

  21. lifeonmars

    “But those who have lost their jobs need general wages to fall, so that they can look attractive to potential employers.”

    They may think that, but it would be a classic fallacy of composition. A general fall in wages won’t price them into the market, because it will result in a general fall in demand – and an economic death spiral.

    Are there any examples where a growth in GDP (national income) has coincided with a generalized fall in wages (national income)?

  22. StephenKenny

    paddyjones is, of course, essentially correct, in the core of his argument: the standard of living is totally unsupportable by the wealth generating capacity of the country, so the standard of living will fall. This is absolutely inevitable, and is nothing to do with governments implementing ‘austerity programmes’.
    The only question is: how is this to come about?
    We could look at the economy, and decide where the cuts in standard of living should go, to a greater or lesser degree. We might argue that teachers and engineers get a lesser cut, while politicians get a greater cut. However it is done, there is an attempt to rationally make these decisions.
    The alternative is to let the market do it – i.e. inflation. Just borrow and throw the money into the economy via the maintenance of state employment and welfare.

    Neither approach is necessarily better or worse. If done well, cutting effect is finally positive, but if done badly, it’s negative. Inflation tends to reward short term speculative thinking, while punishing longer term investment programs, so runs the vey real risk of achieving the fall in standard of living without any improvement in wealth generating capacity.

    Since both routes will get us there in the end, I’m not sure that it’s necessarily worth asking the question – inflation is the route every politician chooses in the end.

    All this is, as ever, predicated on an inevitable, as I see it, default.

  23. Realist


    Wages cannot really be sticky for the long period of time without government intervention, laws, pumping money and so on.

    I am not sure I like Irish austerity way coupled with raising taxes.
    But not sure what it means austerity in general are bad ?
    Are you saying we should increase public spenditure or what ?
    The government needs to reduce the size and remove their inefficiencies from the economy, many things should be privitized, including healhtcare, welfare, education and … or at least should be think of
    It is not normal to pour so much tax money into the black hole as we do.

    Other measures are to default on debt, either partially or fully and that will eliminate tax payers burden.
    Who risked to borrow to ridiculess Irish government should suffer.
    Governments should be able to bankrupt similarly as companies.
    Nobody will ever borrow to them and that means good to us as they will need not to spend what they do not have.
    Also with the hope they will not be as big to tax us more :)
    Of course that will mean our own currency as David pointed out.
    Also make the new currency related to some real money, e.g. gold, get rid of central bank as unecessary evil.

    This will all reduce taxes, where we will have more money to decide what to do with it. The market will be more free and we will be able to save/invest and prosper.

  24. Deco


    You are right. Basically, we are going through the motions of a long running official denial. Brussels and the local political elite [what is left of it after FF collapsed - and FF were the main proponents of increased EU centralization ("integration")] have treated the people like a bunch of wayward children. This is particularly evident in EU Referenda, when teacher promises us all a big sweet lollipop if we pass the test. And it is always presented to us as a test of our merit and standing. It is never seen as a test of the actual project. The biggest lollipop of all was “albert’s 8.8 Billion”. (God be with the days when Irish politicians knew how to negotiate). The lollipop from Lisbon 2.0 was “cast iron guarantees” and “vote yes for jobs”. (The jobs are not in the EU by the way – they are in Canada, Australian, Switzerland – outside of the EU policy highjinks).

    Europe has legislated itself into failure. And it has reacted to the current crisis by raising the game, and increasing the effort to produce more failure inducing legislation. Barosso (former PM of one of the PIIGS), Van Rompuy (senior politician from a country that is about to have a nasty divorce – just wait and see – you will pine for the simple breakup of Czechoslovakia when you see what will transpire in Belgium in the next two years). Throw in the likes of Prionsias de Rossa, Brian Crowley and Gay Mitchel and you get the EU Parlaiment. And let’s face it – it does not work because it is all about pulling money from countries that are less corrupt like Germany, the Netherlands, Finland and directing coutries that elect clowns like Berlosconi, Dithering Bertosconi and whoever is the current senior member of the Papandreou clan.

    The whole thing is a disaster.

    And the best that the Irish media can do is castigate anybody with enough decency and self respect and civil conscience to say it is a sham.

    Two hundred years ago, in another age of rampant stupidity and delusion that amounted to a scam, rife with opportunists, Shiller stated that “history has a tendency to produce a great moment, and place it in the hands of mediocre people”. Just look at the clowns running Europe !!! Case proven.

  25. dwalsh

    A lot of what David says is right; in the way a textbook might be right; theoretically right. Specifically what he says about busts and booms and fiscal controls seems right…but…the problem is, the ‘fiscal control’ bit is out of control. That is, it is out of the control of sovereign nations; and under the control of global bankers, financiers and speculators…aka The Market.

    These people do not adjust their fiscal policies to produce balanced stable economies. They are not interested in stability; they make more money from instability. They adjust fiscal policies to produce unstable economies — booms and busts.

    As long as we have privately controlled debt based fiat currencies disguised as national currencies we will have these cycles of booms and busts.

    At this time the economic fate of Europe and the world is being determined by the economic warfare being waged by powerful forces within the financial sector and markets. What is incomprehensible about all this is why do our politicians permit our nations to be attacked in this way?

    What paddyjones writes at the top of the page is also right in a way (not about David). It’s right within the cold-blooded perspective of neoliberal economics. Austerity is part of the neoliberal deal.

    Unless our politicians wake up from the thrall they are in to the financial oligarchs, austerity and worse is what lies ahead for us.

  26. Harper66

    The Financial Times reports that Siemens has withdrawn half a billion from a French Bank and deposited it directly with the ECB.

    The Ft goes on to report that siemens took this action as a precautionary measure amid concerns over the “financial health ” of the French bank and also to avail of slightly higher interest rates….which was the more pressing concern for siemens?

  27. Adam Byrne

    If anyone missed Yanis Varoufakis on ‘Tonight with Vincent Browne’ last week – here’s the link. Well worth a watch and he was equally as impressive the following night at the Shelbourne Hotel, at which I was lucky enough to attend:

    • dwalsh

      Thanks for posting.

      Does anyone have thoughts on the differences of opinion between Yanis Varoufakis and Peter Brown?

      Brown struck me as a typical cold-blooded marketeer. The kind that will view the collapse of civilisation as a profit opportunity. They cant see anything else.

      • Praetorian

        All about the numbers.

      • imithe

        Peter Brown was very smug, slyly trying to pull the wool over our eyes. A poster boy for the insiders!

        The other woman was totally clueless. The only clarity came from Yanis and Pearce Doherty has a talent for getting his point across well (whether you agree with him or not).

  28. dwalsh

    In theory Ireland could make a solo run. David often suggests and seems to want that. In actuality I don’t think our elites would do it; I don’t think they would permit it. It would require the emergence of an extraordinary leader. I don’t see anyone. Do you?

    So under present leadership we will be staying in Europe — like it or not.

    The question of whether we should or shouldn’t be in Europe is another matter. I think we should be. I think Europe is a step forwards in the right direction for humanity and human civilisation. I say we stay and fight for Europe and civilisation.

    The money changers have taken over the temple. We have to take back what ought not to have been theirs in the first place. We have to re-establish sovereign democratic control of our economies and currencies.

    Our politicians should be fighting to defend our European economy and currency from predatory financial speculators. They should ban credit default swaps and other toxic derivatives. They should implement financial transactions taxes. They should put our banking system into some sort of deep freeze that enables it to continue its high street utility functions while the black hole of derivatives is dealt with. That’s where all the bailout money is going; into a derivatives black hole; and there isn’t enough money in the world to fill that hole.

    Instead of Ireland making a solo run…Europe could make a solo run. Europe could lead the way and lead humanity out of the looming feudal nightmare of neoliberal market economics. Europe could make the stand for humanity and humane civilisation.

    I vote we stay and work within Europe; to rid Europe of the anti-human financial systems that are passing for acceptable social and economic behaviour.

    How about that David?

    • Adam Byrne

      You are right dwalsh about the evil financial systems, you are also right about their being no Irish leader to take this country on a solo run but you have neglected to mention that there is no European figure with the guts to lead the whole continent on any such noble crusade either.

    • Realist

      You must be joking calling European Union and ECB the way to go. Politicians brought us into this mess.
      You are easily forgetting why ECB is evil and that is controlled by politicians, the same with other modern central banks.
      Coercion is never good, to earn money by taxes. Government based on 4 years term abusing resources till they can and running away without even any responsibility is the shame for the society.
      Economics is based on human action, what you, me and other wants, not what governments want.
      They are not human, nor they know our individual wants.
      They bundle stupid statistics into GDP and other useless invention and then tell us how much tax to pay to make it worthwhile.
      ECB even intervened on the market directly and bought around 300 billion of government bonds around Europe.
      They have no statistics available how much more government bonds are put down as collateral by banks to print money.
      They want everybody to have same laws, same taxes (e.g. corporate), to control us even easier so no real competition allowed between nations. As they can control money flow it is perfect for them to earn money by coercion through taxes and spread the wealth where they want.

      You should read the article on printing the money by governments and realize why politically built Europe is no good.

      • dwalsh

        You have managed to completely misunderstand my post Realist.

        I personally do not find your ‘tea-party’ philosophy and economics at all convincing.

        I have argued before that the money being printed by the Federal Reserve in America is not being printed by the US government — although it is being accrued as the sovereign debt of the American people.

        The Federal Reserve is a privately controlled central bank; completely independent of government.

        I have also argued that the US government is not a legitimate government in the constitutional sense of ‘by the people and for the people’. It is not acting on behalf of the American people; it is acting on behalf of Wall Street.

        Exactly the same scenario is true here in Europe.

        Our democracies have been usurped by your precious markets and they are in the process of destroying our civilisation.

        You really do have the whole thing the wrong way around in my opinion.

        • Realist

          I am Austrian economist follower.
          Do not like politics nor I believe they are needed.
          I heard abour tea party first time from you or some other poster on this forum.

          Neither ECB or FED are independent. I would like to find somebody else who believes in such dream like you.
          Read this first:

          What is ECB buying 100′s of billions of bonds directly called ?
          You must be joking if Merkel and Sarkozy will leave ECB independent as you dream about.
          that is political organization and you should read it in tragedy of euro book.

          What is your economics school you are following ?

          • dwalsh

            I am a human economist.

            I will post a video for you in the next blog where Greenspan clearly states the Fed is completely independent. I hope you will consider opening your mind sufficiently to hear him say it and then consider what that means.

            I respectfully suggest you have a look a little deeper down the rabbit hole.

        • Realist

          We are all humans I assume :)
          Greenspan was a chairman of FED for almost 20 years, so how on earth you can use him to tell us that FED is independent ?????
          You need to find somebody else, somebody really independent, somebody respectful and not related to FED.
          I showed you exact links and books from respectful professors. I can forward you to other books and links if necessary.
          You offered me just human economics argument. That is not enough.
          I am scientist and working on each subject up to the maximum. If you tell me for some good resource or book, I will research it, and read it and tell you what I think.
          I bet you did not even read a single article I sent you and you are calling it rabbit hole, not nice :)

  29. redriversix

    Adam & Dwalsh

    I agree with both of you but Adam makes the point of finding a “Leader”

    As you know , this is were the problem is.

    How do we find someone who is strong enough but is not influenced by “big business”?

    George Lee may have entered politic’s with great ideals and ambitions , but even in opposition , I suggest he could not put up with the terrible dithering that goes on.

    I believe Corporations and large lobbying groups have too much power and influence across politic’s in the U.S and Europe including Ireland.

    They may operate within the laws of governance set down by each Government , but you cannot legislate for politicians who are impressionable.

    Remember Mr Noonan when he arrived on the European stage ? He looked like a school kid who just got accepted in to the “cool gang”

    if what is going on is a “financial War”..
    Then what is needed is a “Patton type politician”

    In WW2 , Patton was an American General who some would consider a “rogue”

    As his third army tore across Europe the “Red ball express”which was the transport/supply arm of the Allies had to ask him to slow down as they could not keep up with him.

    He was not without his faults and was relieved of command several times , but Eisenhower knew he needed him for his skills and he was reinstated and given some of the biggest challenges of WW2.

    In military terms he was a genius and a “one off”

    To try and find someone today in the political world with his independence and guts would be the answer to a lot of our problems.

    Today’s backbencher could be tomorrows leader and large Companies know this and “play” several of them to keep their options open.

    I am not suggesting politicians take bribes , maybe they do not have to with all the money sloshing around for wages and expenses etc.

    Moving in the “right circles” can just be enough.These guys all like to think they could get a very nice position on the board of a Company when they Retire.

    “What political party across Europe , who has been in opposition for years,when they get in to power they change their Pre-election platform/mandate when they get elected”?

    I believe it is the “civil servants” across Europe who hold the power because they always “inform” incoming Governments as to whats going on and what the new Government “can and can’t do.

    Damned if I could point out an up and coming politician who would be willing to stick his/her head above the parapet and lead from the front…….

    None of us want the horror that is predicated on these pages but the simple truth is , if Leaders continue on this path of self[people] destruction then it seems inevitable.It simple boils down to debits and credits and there is not much credit left.

    • Realist

      The problem with the leader and finding the politician that wants to release the power to the free market, cut the government, is very hard to find.
      All they want are more power and this is why last 50 years government/public sector grew so much, with taxes rising to the incredible limit.
      On top of income taxes, you have sales tax (backward income tax), you have inflation tax (taxes gained indirectly through printing money/inflation), …
      In the US Ron Paul is an old guy fighting the war there :) You should read on his ideas of 10% tax and why is that good, cutting public sector and such.
      This is what Ireland needs, somebody radical.
      Irish politicians are just in hands of European stronghold and they are not going to break out easy.

      Ireland politicians really release the power.
      Look the growth of public spending while the country was going into Celtic Tiger mode:

      Look how government is doing in the US for example in the last 100 years they increased 8 times.
      I bet in Ireland is not too much different.

      It will all be great if the government really spend money the proper way, e.g. like NAMA did :) (joke of course)

      • Austerity does not work but even if we could cancel all assumed private debt, we have no independence until we pay our current bills with current income. And while a retracting of govt spending is clearly hurting the economy you cannot get out of debt crisis with more debt nor can you continue to operate extensive waste and inefficiency in public spending under the guise that its good for the economy on the whole. Ideally without the burden of assumed debt , Ireland could cut expenditure and raise taxes as it had done, try and get to a balanced budget and more efficient use of scarce public resources as soon as possible but offset the negative effect of same on growth by significant spending in labour intensive long term investments. If we were to get what we need from Euro it would not only be a renegotiation of alot of the assumed private debt it would also be 10-15 Billion for such investments, the cutting is neccessary and borrowing more to continue ineffecient spending out of an argument that its could spur growth is a very risky strategy that is most likely to end in greater debt, more money in the economy is needed but have it as money spent on long term national assets. As for exiting the Euro, it would work so long as we remained with the same access to the internal EU market although most of our Trade is with the UK all the attractive employment in FDI is contigent on access to the EU market, leaving the euro and losing that would be worse than where we are now

      • dwalsh

        We are not talking about a leader who will shut our government down and hand us and our nation over to the markets. That’s already what we have.

        We need leaders who can defend us from the markets.

        We need to shut the financial markets down; not our democracy and our governments.

        • Adam Byrne

          Again, I’ll tender the possibility of Pearse Doherty in the not too distant future.

        • Realist

          You have no clue what markets are or what free market means from my perspective. It is not market where governments can print money to subsidize their mistakes and huge debts, or market where government cannot go bankrupt but rather tax or print money.
          How come government can be democratic if it is taking money from you by coercion through taxes and spend it on whatever it wants (e.g. bailing out developers with NAMA, or bailing out banks).
          Income taxes, inflation taxes (printing money from thin air), sales taxes, pension levy, ….
          What happens if you do not pay tax ?
          Nothing is voluntary with the government so I have no clue what you are talking about.

          Governments invented fractional banking system and not markets!!!!!
          Governments get rid of gold standard and not markets!!!!!!
          Governments are corrupt if they allow any person or company or bank to influence them!!!!!!

    • Adam Byrne

      I think Pearse Doherty has the potential to be a good (if not great) future leader of Sinn Fein and Ireland.

    • dwalsh

      @ redriversix

      I agree. No matter how this plays out at the European and global levels, we do need a ‘wartime’ leader with the balls to defend and guide our democracy and nation through what is shaping up to be an enormous disaster.

  30. Juanjo R

    It seems these defaults and exits from the Europe are coming closer…I have one big question…

    When will these massive breakouts/exits from the Euro or defaults occur?

    Personally I’m guessing that it will be Spain not Greece that will be the log that breaks the camels back – sometime around the Spanish general election which is slated for next year.

    I think things will limp along as they are more or less until something so big to be unable to stop occurs and the game will be up.

    I’m not convinced the old core countries ( Benelux, France and Germany ) will want to give up on the euro – it suits them.

    So I’m throwing it open to the floor – does anybody have any opinions or rational for all this that they wouls like to share?

    • rebean

      By the way the European leaders are acting you would have to speculate that the whole European project will bo belly up soon.There seems to be no plan. Germany wants everything their own way. They started the Euro to suit themselves because they have a huge export base. Now that a number of countries are just not able to manage their affairs Germany sees that it has to pay out to help these countries. Make no mistake your average German wants paying and they want their money back. They are ruthless when it comes to business. How long do you think they will put up with bailing everyone out . Not long more

  31. uchrisn

    Paul Krugmans 2nd generation theories of currency crises says that when the incentive for as government to leave a ‘fixed exchange rate’ is much higher than staying, speculators will short the currency and cause the country to leave long before it would have happened naturally.
    Speculators shorting the currency will cause the Central bank to sell its foreign reserves and raise interest rates to combat it. This will cause further pain and unemployment making the incentives to leave the ‘fixed exchange regime’ higher. So according to this theory the argument for Greece to leave seems pretty strong. If Greece leave then the national pride and co-operation reasons not to leave would be reduced for Portugal, Spain, Ireland and Italy.They would be likely to leave too. .This is what happened to the U.K., Sweden, Italy etc in the EMU 1992. We had currency crises in Mexico 1994, Thailand and Asian countries 1997, Argentina 2001, Iceland 2008. Its happening now to Greece, Portugal, Ireland, Spain and Italy 2011.
    None of the countries above wanted to leave their fixed exchange rate, they were forced to in the end by no longer being able to defend their currencies strenght – Interest rates in the U.K. wnet to 16% before they left the EMU.
    I agree with M. Feildsteins suggestion/comment that there is nothing in the treaties specifically banning countries taking a ‘break’ from the euro – with no set date for rejoining.

    • Realist

      Krugman’s keynesian or whatever called theory is dead. They caused this crisis once again and they will hopefully soon become the history.
      Why does he need 2nd generation of theories, like economics needs to change or something :)
      Their whole idea is based on printing money to get out of recession and that is badly wrong as we are seeing it here in Europe. He is in Obama’s cabinet and they started pumping money again. They injected a few trillions of dollars with treasuries and now they are starting being used as printing new money mechanism by banks and FED.
      Krugman and Obama are the worst nightmare for the US and the world.

      By the way I agree Greece should default (not due to Krugan theory though) as this is the best for Greek people who should not pay for government/politicians fiasco. Also countries/banks invested in such government bonds should suffer as they pushed all this mess.

      Nobody should ever borrow to stupid governments till they get smarter and smaller, they should behave like private companies and go bankrupt when needed. They cannot have AAA ratings like they had. No company with such borrowing/spending criteria like governments will be AAA, they will be junk level.

      • uchrisn

        This is Krugmans currency crisis theory about the factors and reasons for countries leaving a fixed exchange rate system. He got his nobel prize for his work on Economic geograpy. Both are different from Keynes theories on stimulus and Krugmans views on that.
        I think that theory is quite relevant now to Ireland, Greece, Spain, Portugal and Italy. with the added complication that we don’t have our own ‘paper money’ to get out of the fixed exchange rate and people can quickly and easily transfer their money to another bank in the EU.

        • Realist

          Nobel prize does not mean he is perfect and his theory is correct. Obama got it so many others ….
          I am not sure about this particular theory but the problem with Krugman economics is that it is based on keynesian theory. he is modern Keynesian and this crisis is what is caused by their thinkering and economic knowledge.
          He is also sitting in Obama’s cabinet and the american pumping of money previously being locked, all those trillions Obama printed earlier are now started flowing into the economy.
          Their idea is to print more money to make economy going and this is why this crisis is so prolonged.

          This is why taking anything from Krugman is crazy if he is failing on basic economics

          But again this is just my view and that is the view from Austrian school of economics.

    • Juanjo R

      I don’t think you can just pull up any example from history…its clearly poor/scared/weak political decisions that are driving the eurozone debacle, not economic ones so many of the examples quoted don’t apply I feel.

      I think the difference will occur when a large politically unified country in trouble says no more – so I think Spain. I think a political party there will lead the way, before or at their general election.

      Us the greeks etc with the aid of our complaint leaders will be bought off in the interim I think.

      This has much in common with your insiders vs utsiders viewpoint. The insiders will only give in when the power and voice of the outsiders is very strong, I’d guess.

      • uchrisn

        The economic factor of not being able to devalue your currency in the short term and control monetary policy ala Sweden is a major one. This is causing more unemployment and less growth.
        Sure political decions in the EU are weak and selfish, after all Merkels no 1 responsibilty/job description is to look after the interests of the German people.
        You need an EU government with leaders who stand for all of the people to make strong decisions. I would be in favor of this, set-up properly, are the Germans?
        Currently the Germans are running the whole EU for the Germans, with the little annoyance of the ECB whos views are only slightly different from their own. Do they want to change this? They need to be pushed.

  32. uchrisn

    I think the insider/outside argument is key in currency crises and this kind of crisis.
    Devaluing the currency and monetary easing generally hurts the insiders in the short term and helps the unemployed.
    The insiders are close to policy makers and lobby them strongly not to let the currency devalue, as happened in the U.K. After the U.K. devalued many people in the City of London may have lost international balance sheet value, however the unemployment decreased.
    Interestingly when Insiders in Ecuador got wind of a currency crisis there they all took out/gave themselves large loans in Sucre, bought something else and weeks after the crash they were able to repay the loans at 25 times less than their origional value!

  33. JusMc

    paddyjones is correct- Mr.McWilliams is nuts.

    I will admit that on occasions he has spoken some sense however he was incorrect on the most important decision the country had to make- the bank guarantee. I believe I am correct in saying that he proposed the famous blanket banking guarantee in the Sunday Business Post 28th September 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”. ( Including fuppin bondholders I presume…the reason why we are all fupped. Perhaps I missed the time when Mr.McWilliams owned up to this minor misjudgment. Must have been out of the country that day…(oh yeh I was because Ive had to move to fuppin Singapore to get a fuppin job).

    BTW, on a totally different point, nothing to do with currencies going down the tubes etc, a real long term plan for Ireland’s future would be to basically copy what they are doing here in Singapore:

    1. Total overhaul of political system (revolution might be required here…I’m sure we could rely on Fintan O’Toole to get this going…maybe not). Democracy doesn’t work because most people don’t have the intellectual capability to assess a quality candidate. To have the ability to vote need to have a minimum IQ level (just above the mean). In addition people in office at both national and local levels required to undertake IQ test to demonstrate they are in top percentile of the population (I call this the Healy-Rae elimination method). Electorate can only vote for TDs at national level…no local level voting. 10 TDs only. Local representatives appointed by TDs, again based on IQ and competence. Dont deliver, fupped out. Appoint someone and they don’t deliver, fupped out. By deliver I mean basic services such as clean and safe streets, basic healthcare, (schools see below)

    2. Very strong primary and secondary education system with high standards and top quality teachers. Kids streamed early age. Focus on maths, science, English and Chinese. None of the mickey mouse subjects like history, Irish (jaybus what a waste of resources), art…these subjects are hobbies and should be treated as such. They are irrelevant to survival of an economy. Performance of teachers based on exam results- pupils tested at start and end of year, every year (exams set by international independent authority). Set number of pupils don’t show progress and hit the marks, teacher dismissed. (Still want 12 weeks holidays?) Teachers who perform paid at high levels (same level as hospital consultants)

    3. A social security system that is based on a willingness to work and on payment into an insurance scheme. Social security cut in half. State looks after basic needs for people who cannot financially contribute (sick, old, young). If you can work you should work- working schemes set up across the country (the place needs to be cleaned up- there’s litter everywhere). No dole. Nothing for nothing.

    4. A focus on a concentrated world class infrastructure in the capital. i.e never mind putting quality infrastructure outside the M50. Not enough people in Ireland to pay for it.

    5. Focus on entrepreneurship in schools and university. Teach kids how to start businesses, how to generate IP and how to commercialize ideas. A leaving certificate subject should be to “create a viable small business”. Points for an A1: 600

    6. Importantly, get quality people into the civil service based on IQ and ability. Kids streamed at an early age and directed to taking up top civil service jobs that are well paid (judges equivalent). Civil servants that dont deliver, fupped out.

    7. Get rid of Joe Duffy. The show is depressing. No coincidence that Joe Duffy is not in Singapore and their economy is flying and he is in Ireland and the economy has tanked. Get rid of Finucane and any of the clowns you get on those Saturday / Sunday morning chat shows that talk rubbish and think its all great craic. None of this is funny. Its only funny if you’re making 400k a year in a job at RTE where you can come in on the weekends and take 12 weeks off during the summer.

    8. Get Pat Neary back, he was misunderstood. (heh heh. that was a joke. everything else is not though. particularly the bit about joe duffy)

    Do this and Ireland should be back to Greek level of economic performance within 20 years.

    • Malcolm McClure

      JusMc: Singapore is a city-state like Venice in the renaissance. Its prosperity is due to three factors:
      –It began as a trading post of the East India Company, ideally placed to be a duty-free entrepôt between east and west.
      –Lee Kwan Yu who was highly intelligent had been educated at LSE.
      –It separated from the federation of Malaysia and ran its own show as a parliamentary democracy with autocratic leadership.

      To replicate this, we need to establish a 100 Sq Mile duty-free enclave in Wexford, centred on New Ross. Build an international airport there and fence this enclave off from the rest of the country. Abolish all taxes, planning restrictions etc. in that enclave.
      Appoint a smart, autocratic mayor (several names spring to mind).
      Attract many of the smartest people in Ireland to live there with good housing, excellent education and broadband.
      Let that enclave become a catalyst for change in the rest of this moribund island.

      • Malcolm McClure

        Correction: I meant to say Rosslare not New Ross as the centre of this visionary statelet..

        • Johno

          Ive read this a few times about the Bank Guarantee and how its used as a stick to beat David with.

          Yes he did advocate the guarantee and from what I remember it was when Lenihan called to his house late one evening.

          But what is always left off these type of post is what David said to do next which was ignored.

          From what I remember there was rumors of a run on the Irish banks. Lenihan went to David and asked him how to stop this from happening. David said guarantee all deposit as outlined above.

          But he said that it should be a limited time frame ( 2 years I belive ) and it should be followed by a complete audit of all the banks to see which banks were still viable and which were not and take action accordingly.

          This was never done. Hence why we still have the likes of AIB and the likes.

          I could be wrong in and if a more clued up poster would like to correct me by all means do.

          • Tim

            Johno, You are completely correct about the guarantee and the important follow-up that was ignored by FF/GP and continues so under FG/LAB and is also ignored by many commentators.

            Some people will never wake-up, it seems; no matter how many times the wak-up call is given to them on this site and others.


          • Shannon Airport Free Zone was the original of the species in the world and the Chinese came there to copy that plan and did a better job and the government has damaged it in recent years at the expense of Dublin Airport .

          • Malcolm McClure

            John ALLEN: Shannon was a great idea way back when, but through typical Irish lack of commercial vision, it is far too small. 243 hectares is only 1.55 square kilometers and the existing industries, while very attractive, are sitting shoulder to shoulder with no room for expansion.

            Shannon is an extra half hour by business jet from Brussels etc, fine for a weekend playing golf there but way out on a limb for business people. The free zone is confined to the business area, so the workers don’t even benefit from duty free.

            My suggestion is to create an uncompromising mini-state south of the road from Wexford to Wellington Bridge. Call it The Irish Free State. After all, we already have two jurisdictions on this island so a third wouldn’t hurt, and in time we’d all benefit.

      • JusMc

        @Malcolm McClure

        I like your idea. Not sure if we should base it in Rosslare although I can see the rationale based on vicinity to Europe.

        How much do you think it would cost…should work this out and start a campaign.

        Interested in what you are thinking about in relation to a smart, autocratic mayor comparable to Lee Kwan Yu…not Healy Rae is it :)

        • Malcolm McClure

          JusMc: A careful combination of the advantages of Canary Wharf, Dubai, Disneyworld and Shannon FZ would attract investment from everywhere. It is exactly the kind of project the Chinese like, so get them into it from the beginning. They would establish zones of specialization: Focal centres for each of Financial services; Pharma; Electronics; IT; Education; Hospitals; Transport(Airport/Shipping Railways Roads); Administration; Leisure; Housing. Once the basic plan was decided, within those zones 5 hectare sites would be sold to the highest bidders with existing owners retaining a 10% perpetual levy on this and each subsequent onward sale. Every existing structure would be removed if in the way– including sadly the gems around Kilmore Quay.

          The world is awash with money seeking a safe haven, so finding investors for a visionary free market project like this would be no problem.

          For Mayor, someone like Michael O’Leary or Ulick McEvaddy

  34. @JusMc

    I accept in principle the general theme of your letter which is mostly your own current agenda and not part of what paddyjones jibe as above namely ”austerity measures made to work ‘.You do not address that .What you have said has been written here before by others .

    Nevertheless you are thinking very well and I will watch others comment on the rest about what you have said.

    • JusMc

      @John ALLEN

      Cheers, appreciate the comments. I agree- Im sure most of it has been said before.

      Most is tongue in cheek, but I suppose essentially what Im trying to say is that there is practically nobody in Ireland assessed based on performance. Thats dangerous in a global economy.

      We dont really understand what is coming from Asia competition wise and that is the way we should be thinking. They are different- more focused, prepared to put up with more. An example: in McDonalds at 12.30AM last Saturday night here and 4 kids of approx 12-13 years old studying. 12.30AM in a McDonalds in Dublin?

      Singapore is a model we could mimic. It works.

      • There is a difference (or ought to be) between a society and a corporation, its seems signapore is not a Nation State in a classical sense but a corporate state where all is measured with one integer, history has shown that economic prosperity is not contingent upon machination of human beings into a rigid corporate order. If you want to live in a country where children study in McDonald will then you should stay in Singapore. Alot of your points on efficiency competency and accountability are obviously completely correct but what you are suggesting is a type of reverse communism not unlike China, ultimately human beings should be free to pursue their ambitions in life, contribute to a common fund safe in the knowledge that is there is a very minimal basic economic security there for them in return. The right balance between the needs of a dignified and civilised democracy together with the ability of the market to reward and punish based on merit. Is that Singapore, I have no Idea both from what you say it is a corporate entity albeit with well paid and sustainable jobs but as for Culture and Society, I hope the vast majority of Irish people would prefer to stay closer to they way we are

        • Realist

          You mean to stay in socialism where the state and government is becoming bigger and fatter and us becoming poor with the need to pay more and more in taxes for them.
          Public services cannot be priced properly nor you can know are they efficient. Without competition in all segments of life it will be no prosperity.
          I assume you lived in all these countries to judge where there is freedom and where there is not ?
          What kind of freedom is when you need to pay 40% tax, 21% sales tax, inflation tax, pension levy and who knows what to be free. I do not call that freedom :)

          • “The right balance between the needs of a dignified and civilised democracy together with the ability of the market to reward and punish based on merit”. Taxes are the price of living in a civilised society, obviously revenue derived from taxes should be used as efficiently as possible to reduce the burden of taxation on people. Socialism is not a toxic word to most and it is prooven that one can live in a country with a social net for all and still prosper, in fact looking at global income mobility rankings it is more likely to prosper when you are not shackled with ever increasing private costs of the basic elements of fair and just societies, if you believe that there is something wrong with providing healthcare and education to citizens go and live in the US, you’ll love it there are a lot of people with your views here

          • Realist

            The problem with public spenditure is that it is not possible to price it properly.
            You do not know are things that are run in public cheap or expensive, most likely expensive.
            Without competition to bring prices down and make better product to us we do not know.
            What public sector is doing better than private ?
            If they are better and know what each human wants and how why then not move everything to public ?
            Why not have public car insurance, public bakeries, ….?

            Why not just have no salary (e.g. 100% tax) so public provides us with everything.
            Or we just all work public, have everything and live in the proper communism :)

        • dwalsh

          Good points businesslunch

          This kind of market fanaticism is toxic. It is similar to communism in the way you suggest. There is a lot more to human life and civilisation than business.

        • JusMc

          “If you want to live in a country where children study in McDonald will then you should stay in Singapore”.

          What do you mean by that??

          I want to live in my home country where I can be with my family (unlike now), where it is safe, where we have access to a basic healthcare and social welfare system that works, a good education for my children, and where the people in power are held accountable. If that involves kids wanting to get on so much that they feel the need to study in McDonalds until 12AM on a saturday night as opposed to going out and getting tanked up and causing trouble, so be it.

          I’m not suggesting a reverse type communism. I’m basing my suggestions, loosely, on a system that works here in Singapore. Education standards, healthcare etc are high. So is accountability. You screw up here you get the chop (an example recently here in Singapore was a flood in the main shopping area of the city…heads rolled. Did that happen anywhere in Ireland with the recent floods?). You’re a poor teacher and the kids you are responsible for don’t perform well? You get the chop. This is a critical concept. Otherwise people arent bothered and standards drop. Its human nature.

          Im interested in your concept of whether the vast majority of Irish people prefer the “way we are” as you put it. Its going to be very interesting to see if the vast majority think the same way when the cuts really hit home, say after the budget this year or next. I doubt it you know. I think most people in Ireland would go for a “corporate entity” as you describe it with well paid and sustainable jobs given the choice, over the way Ireland is and will be for at least the next 15 years. Thats my take anyway.

          Btw you dont think that culture and society are linked with a functioning economy? Without a functioning economy, both are irrelevant. If you haven’t a job, cant pay the bills, your family is miserable, do you think that you give a fupp about culture or society? The Abbey and the concert hall are really on these people’s minds!

          If the basic choice is a corporate state like Singapore that treats people with dignity compared to a nation state like Ireland that continuously lets down its citizens run by a bunch of incompetents, I know which i would prefer.

          Btw businesslunch, you’re not a civil servant are you? Culture and society…schhhsh

          Kind regards etc.

      • insider

        I have been based in Singapore for over a year now. It is quite a surreal place in many ways and not unlike Ireland in the way the people there take it from the ruling classes. The last election had a lot of hype from the younger generation but the status-quo remains.

        Singapore is as unofficially corrupt as any other state with Lew Kuan Yew’s family owning huge stakes in their biggest companies. It’s highly regulated(controlled!) but you can do the math on how the rich keep on top of things. In many ways it’s like Ireland in this respect.

        There is a real divide in the country. The ex-pats (but certainly not all of them) are living in a complete bubble. Locals can survive at a fraction of the price we pay for housing, food and other necessities in HBD flats and MSG hawker stalls. Ex-pats pay very high rates for our children’s schooling, accommodation, imported food & wine, cars, petrol etc. My wife would not send our children to local schools after reports from various friends regarding the lack of problem solving, low teacher/student interaction, shoddy sports facilities etc in the curriculum.

        Ex-pats are in complete control of the multinationals. Some Singapore companies do quite well but they are an exception. It’s quite dependent on MNCs otherwise it would be a complete backwater shipping port (remind you of anywhere?). Locals here don’t seem to understand this and it’s hilarious when they say they don’t want us in their country (from the CEO to the Bangladeshi brick layer). I’d be curious to see how Singapore would survive without its immigrant population. I haven’t lived in Ireland for a while now but do you really think this model would work in Ireland? Maybe it already is? I think Ireland has more going for it.

        • Realist

          Singapore is 2nd on the list of economic freedom countries. This is why they are an excellent example.
          Just look all criteria to be in the top :)

        • JusMc

          Hi insider,

          Thanks for your comments.

          I agree, there is a divide in the country with expats bankers etc doing better than the locals. But I think you have to appreciate where the country is coming from and the fact it is playing catch up.

          The approach it is taking to me seems like a reasonable one- ensuring the diverse ethnic populations get on as much as possible while striving to increase the standard of education so they can compete on an international stage; Attract international talent (I see this a lot in the sciences which is the sector i am involved in) with the aim of passing on knowledge to the locals over the longer term.

          Im interested to hear your thoughts on the schools- I intend to send my kids to a local school because of the high standards of maths and of course the opportunity to learn Chinese. At least for primary school anyway. I have heard about the lack of creativity etc but that has not been my experience from my colleagues that are Singaporeans (this may not be the norm- we are a young company and need to be creative to survive). The schools i have seen all have been of a high standard (running tracks, music rooms etc and the maths syllabus and teaching methods used is excellent (significantly better than Ireland…my kids are using the books at the moment)

          You are right- the country would not be able to compete without its expats. For the moment at least. Give the place another say 60 years and I dont think this will be the case.

          Straight up I agree, I think Ireland has a lot going for it- space, cooler. But unfortunately the skills of the people in charge in Ireland is extremely poor.

          As my partner says:”In Singapore, we have no EC to bail us out- we are on our own”.


  35. Praetorian

    “I’ve been noticing many indicators of hard times: empty houses, thousands showing up for a handful of job openings, New York’s mayor worrying about job riots, stores closing, empty parking lots at malls, unpatched highways, debt-burdened graduates not getting jobs, downward mobility. Every one of these indicators is a sign of human suffering. Meanwhile, the wealthiest 5% of Americans grabbed 82% of all economic growth since 1983. If that doesn’t preach, nothing will.” ~Tom Ehrich

  36. rebean

    It seems to me that we better keep being the poster boy in the EU until they finally tell us no more cash we are fed up loaning you money to pay some of the highest civl servant salaries in Europe. I am not atacking the lower paid workers and I am talking about the lecturers and consultants etc who are just too expensive. We have a serious problem of the higher paid workers hiding behind the lower paid ones.So what if we run out of money for a while and we have no wages for the civil service. In the private sector people have been losing jobs for years. Until we close our deficit we are not living in the real world.

  37. Morning,

    Thanks for all the comments and the vigerous debate. I see Roubini is now advocating Greece default and leave the Euro. If this happens, and it is a distict possibility, it changes the game entirely and I believe, gives us the opportunity to leave too. Its not a panacea, but its the first step to recovery.


    • David , could you please spell out your opinion with a level of detail that is needed for a proper discussion. I assume you mean leave the Euro, stay in the Common Market and that you do not forsee a rapid loss of FDI employment but if possible in a platform you deem most appropriate you would do a lot for the people of Ireland, as you have done with independent insight, but by now stating your case in sufficient detail.

    • CitizenWhy

      To avoid too much misery on leaving the Euro, someone in Ireland, officially oar unofficially, should be working out a detailed scheme of how to leave and how to quickly print the new money. The Financial Times did a recent article on “How to leave the EUro” that was helpful. The FT article pointed out that prior planning is essential. Ideally, Ireland would now be working on this exit scheme in cooperation with the UK.

      People should send a copy of the FT article to their TDs.

  38. CitizenWhy

    “Without a massive injection of credit or a massive devaluation, austerity can’t work. It will lead to long-term, higher levels of unemployment and emigration. This is what is happening in Ireland right now.

    The way to stop an inflationary boom is to take money out of the economy; the way to stop deflationary busts is to add more money to the economy. Simple. Deviate from this at your peril.” D. McWilliams

    There you have it. The accurate “I told you so” of the future.

  39. Mother of Three

    Sounds like this could all happen over the Oct bank holiday weekend, this year.

  40. Deco

    Well, the latest news is that the debt rating of the Italian state has been moved down a peg.

    As a result we get a predictable response of commentary from the Italian government. This is nothing new. We had it when it happened to this country. We seen it in August when the US lost it’s sterling triple A rating. And we will see it when other Western governments lose rating points. Who is next ? France ? the UK ? (our main trading partner, by the way), Spain ?, Belgium ?

    Too big to bail (out). Is Italy too big to fix ? The austerity plan in Italy will not hurt Italy as much as it hurt Greece, because the Italians have a scepticism towards the government that had them living relatively austere anyway compared to their means.

    We are also about to see stubornly high unemployment of youth in Europe. Particularly in the peripheral regions. It is becoming very serious indeed.

    • Malcolm McClure

      Deco: I fully agree that this is very serious indeed. For those who would like to understand the immediate consequences of a Greek default this piece by Willem Buiter is worth reading:

      • The flawed ECB decision history 2008 to date can be described as exclusively EU core centric, serving the large economies, mainly France and Germany, and their activities were dominated by nationalistic slur and not pan european common sense, more concerned about national politics and fighting off inflation than having Ireland, Greece and other peripherals climb out of recession.

        • Absolutely dump the debt on the periphery and hope they can sustain it under the guise of ever increasing debt from the ECB, never once consider the idea that the consequences of recklessness should be distributed in proportion to those that were reckless, soft peripheral governments understandably afraid of the short term upheaval needed to retain independence acquiesced and here we are. What is just is most likely to succeed , what has transpired is neither just or succeeding.

          • Realist

            Soft peripheral governments did the most damage with reckless spending.
            They are so called socialist block with Greece, Ireland, Portugal, Spain, Italy and France as the leaders.
            They have majority of vote in ECB anyway.
            Malta has almost the same amount of vote as Germany even with 100 times smaller economy.
            I am not saying German’s are not guilty, but blaming only them is wrong as Ireland spent most of money per head than any other country in EU.
            Putting government bonds, issued to cover reckless spending, as collateral to central banks, and then banks printing fresh new money. The whole banking sector in Ireland caused so much grief.

            The only option out is to default and go to the bottom from which will come progress and prosperity. Of course only if government and public sector become smaller (by privatization mainly). And if state get rid of things that brought us to this crisis.
            Anyway nobody will borrow the money to government after the default so they will need to do whatever they need to do.
            Get rid of stupid laws, like minimum wage, protections and so on. Get rid of central bank, fractional-reserve banking, go back to real sound money, reduce taxes and leave people to decide what to do with it, what to buy and what to invest into.

  41. Euro Domino

    ‘The demise of the Dinosaur’ remains a cold case but will the aftermate of ‘the demise of the euro’ remain a cold case too and for how long ?

    We know the Dinosaur became extinct does that mean the Euro will follow too or is that a conclusion already arrived at ?

    More animals filled the Earth after the Dinosaur to fill the vacuum left behind and where was man then ?

    What will pay the bills after the Euro and which man survives and what happens the rest ?

    The Demise of Man is upon us now at least some of men will be deleated from ‘the functional position ‘ they currently hold.

    Are You one of Them ?

    The Galectic War of the Species of Man is upon us and the Prize is GOLD.

  42. Praetorian

    Same can be said of Ireland, the balance the book brigade may well cost us what little we have left, we need job creation.

    “The United States’ most significant economic problem is mass unemployment, not its current deficit or its long-term debt. This is something that both mainstream economists and the general public overwhelmingly agree upon. And yet, for more than a year now, talk about deficits has dominated our politics”

    • The powers that be in the US are not in any economic difficulty, record cash on corporate balance sheets, once the powers that be continue to prosper the unemployed will not be a priority , unemployment in the US is structural in that a significantly depleted Manufacturing base was never replaced, workers rights have gradually eroded and thus diminished their earnings and all of this was masked with cehap consumer credit and asset bubbles which are now gone 10% unemployment in a slowing but growing economy is perfectly acceptable depsite all the empty rhetoric, with taxes at historic lows a marginal increase on tax for anyone earning over 1000000 per annum in a country with unprecedented debt to fund a jobs stimulus is unacceptable, propaganda like Fox News is simply rejecting the idea as “Class Warfare” when in reality the class war has already been lost by any average American in a country where the costs of what most civilised societys consider basic are ever increasing and Jobs with decent wages are ever decreasing . As bad as it is in Europe, it is not the US in terms of the sheer cruelty imposed on citizens of the US by the dominant powers in same

  43. Colm

    Unless Ireland does what DMcW suggests, the game is up for all of us…someone on this blog said “car crash in slow motion”…excellent anology.

    • doppelganger metoo from a parallel universe are yu? :)

      Anyways, the bondholders get to squeeze another 3 months till end of December? Then the EFSF comes into play, but its against the rules to pump the QE that Geithner wants, so the money will have to come from money raised on the capital markets by participating countries enjoying their contributions to the EFSF.

      Two things will be asked for: a) that there be an increased injection of funding to up the ¢440 bn available and b) greater political and monetary cohesion to make sure the creditors get their say.

      The problem is EFSF puts Germany and France big time on the hook for bailouts, plus Spain, Portugal, Ireland and possibly even France itself (looking into bailing out some dodgy looking banks), may need to dip into the fund.

      Greater political and monetary cohesion is a political joke at this stage. It was not on a few years ago when Lisbon scraped through. It certainly isn’t now politically on the cards to give more hammers and sickles to the banking/bondholder class to give them more powers to impose more austerity on us rabbits!!

  44. Philip

    Austerity comes in 2 ways…
    1) External imposition by someone lending to you and you rape the taxpayers for the billions to pay the interest. You just churn the money, no one gets a penny except the ECB and their partner churners who charge interest. As long as the illusion of money is around, nothing happens and we all boil like frogs. Books never get balanced…ever (remember that Mr Paddyjones – the idea is never to balance the books)and generational wipeout occurs.

    2) Cant pay so fck off and default…now there is no money whatsoever, austerity is the default – books get balanced – zero both sides. So insiders and all get shagged. We start again and investors come in cos the baseline is established very quickly.

    No 2) is in play…the Italian default was the final pillar of the illusion. We have global institutional default. Dax should start to do a wobbly soon and China will be left with a lot of paper greenbacks.

  45. dwalsh

    My money is on the following.

    Europe will not dissolve; nor the Euro.

    But things will have to (be let) get a lot worse before the elites will present their solution (which is already prepared).

    What they have in mind will require extreme leverage.

    • Malcolm McClure

      dwalsh: The problem with extreme leverage is that either the fulcrum collapses or the beam breaks. The fulcrum is public trust. The beam is the bank’s solvency. Either event will lead to a run on banks’ remaining resources.

      Europe has already dissolved to all intents and purposes. EC leaders are in denial, unable to face the shattering of their dreams. The elites are in even worse shape, especially in France.

      Germany already has in place its bad banks and NAMA equivalent, the FMS or Financial Market Stabilization and most of the Greek default is destined to hurt the Public Sector.

      France is dithering. Unlike Germany, French lenders haven’t set up bad banks to hold their Greek investments. France has more to lose in a Greek default because most risks are held by its private lenders (ie elites) .

      Seems like your money has been flushed to the nether regions.

      • dwalsh

        Well time will tell Malcolm…but all you say is sound; especially about the fulcrum and the beam. What I am suggesting would be a risky enterprise.

        Extreme for me means the system completely breaks – fulcrum and lever – and with it the insane market-logic that is bankrupting the planet and driving us towards ruin. It would take something like that to implement what is needed…a fundamental reset.

    • Problem, reaction, solution?

  46. Deco

    Nearsourcing ?

    Sounds like the Talk-Talk debacle in Waterford. Still not clear about the exact results of this latest rumour. Supposedly started by Miriam on twitter….

    Wonder will the media still grovel in search of the advertising revenues…..or provide a sharper assessment. Talk-Talk was not a big media advertising spender, so Talk Talk got it on the chin from the media.

  47. Praetorian

    Seems like an exceptional documentary on China, the internet has well surpassed State maedia, which is pathetic

  48. Desmond LAchman was on Morning Ireland, amazingly Pravda RTE must be beginning to acknowledge the inevitable as well. Desmond joins growing list of economists forecasting breakup of the EMU possibly towards the end of this year:

    Surprisingly Stiglitz is in favour of euro bonds so unlike Roubini, Stiglitz seems to have lost the plot

    Unless we get an orderly breakup the problems and chaos will escalate

    Perhaps in preparation DmcW should issue a Kilkenny currency denominated in notes that return 120% on face value to the user in return for beer at his conference this year…:)

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