December 28, 2011

Leaving the euro may be our least extreme option

Posted in Irish Independent · 141 comments ·
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In the year ahead, the exchange rate question will rarely be far from the headlines. If we are to have a referendum — which, according to the Finance Minister, will be a vote on whether we are in or out of the euro — we should get our heads around what the exchange rate does, what having your own exchange rate allows you to do and why that might be a valuable alternative for Ireland.

 

At the moment, the central plank of Irish economic policy, backed by the IMF and the EU, is something called “internal devaluation” and the logic of it goes like this: Ireland is uncompetitive and needs to export its way out of the recession. As we don’t have an exchange rate that can fall, we need to grind down wages over a period of years so that Irish industry can be competitive again.

At the same time as we are forcing down wages, we must also reduce government expenditure, because we can’t afford to pay for it. As the government deficit at the start of the IMF bailout programme was 14pc of GNP and we need to get the deficit down to 3pc, we will reduce spending by 11pc of GNP over the next two or three years.

Therefore, government spending will be reduced dramatically. But if the government is not spending, who is?

We should be, but we are not because we are worried about the future, so we are saving. Who is spending the missing 11pc of our income which has just been taken out of the Irish economy? Now here is where our policy gets a bit hopeful to say the least because in order for our economy to stay just as it is, foreigners need to massively increase their buying of Irish goods.

But why would they do this? Have Irish goods become dramatically cheaper so that they have become dramatically better value?

The theory of “internal devaluation” says that the Irish economy and workforce are so flexible that we will all take dramatic paycuts, this will drive down wages and we will become competitive this way. Because we have no exchange rate and are members of the euro, we will devalue by canabalising our own wages — but according to the present policy, even at these much lower wages we will be able to service the huge debts built up in the credit bubble. How is that possible? Well, it is not.

But before we explain why debt dynamics at lower wages makes servicing old debt impossible, let’s examine the first bit of the theory which says that Irish wages have fallen dramatically and will continue to do so. Let us examine the evidence that Irish workers — or any workers for that matter — accept reductions in their wages as the theory says.

Look at the cartoon. It shows wages in Ireland, Iceland and Latvia. Ireland and Latvia are in the euro (well, Latvia has a fixed exchange rate with the euro). We are both locked in austerity programmes, and we are supposed to be devaluing internally. The other chart shows Icelandic wages measured in euro. Iceland has its own currency, the kroner.

What the chart in the cartoon reveals is that Irish and Latvian wages have remained more or less the same since 2008 against our competitors. In contrast, Icelandic wages against its competitors have fallen dramatically. Iceland has become dramatically more competitive vis-a-vis Ireland and Latvia because it devalued its currency dramatically in 2008/09.

Iceland in one sharp devaluation has achieved what Ireland and Latvia are supposed to achieve over years of grinding down wages. If we are supposed to achieve Icelandic levels of wage competitiveness, we will have to shrink the economy over the next few years. By having their own currency the Icelandics did in a few weeks what we have been trying — unsucessfully — to do over four years.

Having its own exchange rate allows a country to adjust quickly. Yes, living standards when measured in euro fall, but that has to happen in both the Irish and the Icelandic case. The question is how do you achieve this and are you giving your people a chance?

There is a reason why no economy in the world has ever emerged from a recession like ours without changing its exchange rate. The reason is that it simply can’t be done. There is no evidence anywhere, ever, that shows that a country can operate a successful “internal devaluation” — particularly an economy carrying as much debt as we have.

So if it can’t be done, what are we trying to do? And more to the point, what is the cost of this lunacy? Look at the chart again. Much is made of the “flexibility” of the Irish labour force. But the flexibility is not in wages but in levels of unemployment. The Irish labour market adjusts alright, but the adjustment comes not in falling wages but in rising unemployment and emigration. This is what we don’t want to happen, yet this is what the policy is leading to.

So those getting paid too much in Ireland still get paid too much, yet the people who feel the real cost of the “internal devaluation” are those who lose their jobs because rather than cut wages, employers cut staff.

When people are laid off, it is very difficult to get a new job because no one is spending in the economy. The government is not spending and the people are not spending. But what about the the much heralded export-led growth which postulates that foreigners will buy loads of Irish goods, more than compensating for the fall in domestic spending?

Well it doesn’t happen, partly because Irish wages don’t fall as we can see in the chart, so Irish goods are no more competitive than they were a few years ago. Yes, exports have risen, but nowhere near enough to offset the local contraction. This is why unemployment has trebled in three years and why emigration is running at over 1,000 people a week. It is not that the policy of internal devaluation is not working, it can’t work. It has never worked anywhere, ever.

Yet the really strange thing is that it is billed as being mainstream economic thinking. It is not mainstream economics, it is highly radical. What is mainstream and proven is the power of devaluations. Yet those recommending the course of action that mainstream economics tells us to do are labelled radicals.

Language will be very important in a referendum year and you will notice that the Irish and European economic establishment will deploy language to paint those who support the country returning to its own currency as extreme. The truth is that what is extreme is following a policy which has never worked anywhere and the cost of which is mass unemployment and mass emigration. Now that is truly radical.


  1. Adam Byrne

    Happy New Year.

  2. ‘Yes, exports have risen, but nowhere near enough to offset the local contraction’ :

    I disagree .

    Recent imports have fallen thus real projected exports must fall too .The confusion that has arisen is the entry of lumped in transfer pricing to foreign head offices at the end of calendar year to maximise group tax savings .But these are not real exports only paper
    entries to beef up to the government propaganda.

    This will only accelerate the default by the state in 2012.

  3. Deco

    “Internal Devaluation” – you work for less so that the debtors will not lose a penny. An obviously one-sided economic straight-jacket from the EU, and it’s lobbyists, if ever one existed.

    Gunther does not want anybody quitting the Euro. Because if that happened there would be a run….on the German banking system, because the reality of the money not being there to support the German saver’s deposit base would become one level more evident.

    James Howard Kunstler takes the view that in the modern Oil Age, the philosophy of the West has become “something for nothing”. The political establishment, is over-run with legal professionals who fully believe that the function of democracy is to auction off “something for nothing” policies, to various groups in return for votes, campaign funding and acqueisance. Of course the elements of society that grasp how this works best are the elements that have money. And they have lobbied to ensure their interests are met. In Ireland they have social partnership to enmesh their agenda as something that is part of a patriotic plan. In the EU, they lobby for control, so that they can ensure that anything that theatens them (like Greek Prime Ministers) get disempowered. Therefore we the people, should acknowledge that something is completely missing from the whole thing. The consumer confidence spin from the media is not adding up. It is no longer working.

    The eventual result is “kicking the can down the road” (to use the phrase of Roubini). And now we are running out of road, and reaching “Endgame” (to use the title of John Maudlin’s book).

    Fellow bloggers, get read for a long, arduous grind. The entire Eurozone banking system is overleveraged. This has nothing to do with subprime. This is basically a bad investment crisis. Banks bought bonds from lying politicians in Greece and other countries, which were approved by the ratings agencies and the ECB. Beyond all that the scale of non-official debt type debt on various EU states is enormous.

    Wills was right all along. It is a Ponzi-scheme. The entire system is a ponzi-scheme. It starts being a ponzi scheme when it is dependent on suckers at the bottom committing their entire working careers to keeping it afloat. It becomes a ponzi-scheme when the need for deceit prevaricates over any urge to tell the truth. It becomes a ponzi-scheme, when we do not get “mark to market” but instead gimicks to drive back up asset valuations.

    And 2012, it might just unravel. Well, if it starts to unravel, we would not want to be relying on Barroso, van Rompuy, etc.. to fix it. Because the deal that they agreed to along with Merkozy in early December will not solve anything. That is basically a restatement of the rules of membership of the trustees of the Ponzi-scheme. It is clueless nonsense that will not solve anything. It will not solve the problem, because the clowns that came up with it, never analyzed the true nature of the problem to being with. The instead engaged in something of a confidence gimick, except going further than they did any of the other 18 times they met to “solve” the problem.

  4. Deco

    Suppose you are a German depositor. You have money on deposit on the local bank. And the bank then loan some of it to the Greek government, some of it to an Irish bank, and so on. Some of it will come bank, as it has been loaned to good risks. And some of it has been loaned to some of the biggest liars in the Euro-Zone, and is incapable of returning.

    well, your entire state of mind would be highly perplexed if you found out that only 70% of that money stands any real chance of coming back, realistically speaking. It would knock you out of it.

    Well, that is what the role of the ECB has become.

    The Greeks might eventually accept that they elected stooges who auctioned power to various groups, and that it was their own fault. The ordinary Greek knew he is was dealing with a bunch of liars and played along.

    Similarly, about one in two Irish suspected that Ahern as not fit for responsibility, even at the height of his popularity. And a large section of the population, was always sceptical of the entire Celtic Tiger Binge years experience, and mania.

    But the Germans will wake up at some point realising that their banks were lied to and that the ECB tried to prevent them from finding out. And that Brussels has been fudging very serious issues for years, with an entirely unsustainable economic model in the PIGIS based on asset price speculation, grant aid, corrupt politicians, and cronyism. When that happens there will be havoc in Brussels.

  5. Deco

    I am coming around to the viewpoint that the only way for the Euro to survive is for the Bondholders to be burned.

    But that is unacceptable to the ECB, and the G-Sucks administrators running various trouble spots like Greece and Italy.

  6. molly66

    Ireland like the EU is spending more than it is taking in so we have to look at this like running a business if we where run properly we would not be in the mess we are in,also run a business badly and it goes bust ..
    How long before we go bust ,how long befor the EU goes bust.
    When we go bust who do we blame ?
    The current government like the last shower are sitting in the front row looking after there own intrests them selves and there cronies.
    This country is top heavy and is ready to topple over,the low hanging fruit is all picked and the revolt is coming.

    • rebean

      This govt needs to keep taking the cash for as long as it can . There will be mayhem some Friday when they run out of money to pay civil servants. They will rob Peter and Paul to pay themselves their excessive salaries and then we will have the 2014 rising. We can start again then with anothert load of nationalistic stuff that sounds great.

  7. John McGowan

    What has surprised me the most in the last 4 years is how long the road is and how strong the can is. it must be near time to give collapse a chance….

  8. Gege Le Beau

    Must read article on the dire impact of austerity on Greeks, a country, according to the article which is being ‘hollowed out’, poverty has spiked, some horrific cases are arising, mother’s abandoning children on the steps of charities because they cannot afford to look after them. Let this be a warning. The bitter fruit of neoliberalism.

    “Greek economic crisis turns tragic for children abandoned by their familiesNation shocked by stories of parents forced to give up children because of poverty — but charities warn of more cases to come”
    http://www.guardian.co.uk/world/2011/dec/28/greek-economic-crisis-children-victims

    • Deco

      Greece is a society under severe stress.

      It will get tougher here yet, also. Probably in 2014, when our debts will be massive, and the ECB will demand that we do more to “help the Euro”.

      This problem will be around for a decade. Unless there is a sharp hard crash.

    • paddythepig

      The real blame lies with those irresponsible crack-addict over-spending Greek socialists.

      • Deco

        http://www.economywatch.com/in-the-news/IMF-EU-demand-greek-solution-include-debt-crazed-national-railway-03-08.html

        [
        John C. Mourmouris, a former chief executive of the railway who is now an economics professor,
        “But a company with 100 million euros in revenue can no longer borrow 1 billion euros a year.”

        In the latest annual figures available, Hellenic Railways reported a loss of more than $1 billion in 2008, on sales of about $253 million.
        ]

        Now, this is absolutely startling. Even Irish rail can do better, which is saying something.

        Every time you spend 25 Euro on Greek Rail tickets, the government is paying 75 Euro subsidy to the railway organization.

        It is madness. If the company is that badly organized, then large parts of it should be closed down until they come up with an operating plan to at least break even.

        This is union power, at it’s worst. Unionized workers getting overpaid, while people on social welfare are starving.

        • Colin

          Unions represent the anti-worker nowadays, a far cry from the 19th Century general worker. Today’s anti-worker wants and has won; more holidays, more sick pay, more future pay rises, more job security, more maternity leave, less weekly hours, less supervision, less subordination, less flexibility, less modernisation and less accountability. They laugh at the real worker in the modern world.

  9. Lyndon Jones

    Resistance is futile Mr Mc Williams .
    We have 2 major problems 1. The deficit 2. Sovereign debt.
    The deficit will have to be narrowed to .5% of GDP in the next 2 or 3 years, no escape.
    We will owe sovereign debt no matter what , we will require budget surpluses to begin repayment as we NEVER be able to go back to the markets again , NEVER.
    The referendum will be passed even if it takes two efforts .
    Leaving the euro would drive up interest rates and all tracker mortgages would go on standard variable ….try selling that one to 400,000 families.
    If David wants to campaign for a NO vote then let him go before the people and argue his case , thats fine.
    But high interest rates and high inflation would accompany the new punt and in the short term things would get very bad . Would you rather be a European or solely Irish, why would US companies stay here if we are not in the Euro ?
    As regards our competitivness, when Polish people came here they showed what real workers were, most Irish colleagues of mine have a real attitude but the Poles are brilliant never a problem.

    • Alf

      I think you are misunderstanding the David’s point in the article. “Internal devaluation” or deflation is making the debt harder to pay off. Deflation equals more taxes(less takehome) and, ultimately, more debt default. This will lead to many people eventually losing their houses. What Ireland needs (other countries had to do) is inflation. Inflation, for all the bad press, is a godsend compared to where Ireland is heading. There is a reason why inflation is preferred to deflation and that reason is debt repayments. Inflation leads to higher prices which leads to wage inflation which leads to relative cost of debt going down, Debt becomes easier to pay off. If Ireland leaves the Euro, debt (mortgage, sovereign, etc) will be converted to the new currency. This new currency will devalue to the Euro (by market forces) for many reasons such as “market demand” for Irish goods but also because it will be in greater supply (the government can easily print it to pay bills). Inflation is the only way out of the hole Ireland is in, if mortgage payers look at long term they really should not want their debts to be owed in a currency with a decreasing supply, i.e. Euros.

    • juniorjb

      In fairness LJ, the typical wage in Poland, if you can get one at all, is around 600 to 800 euros per month and that in a fairly decent job. Consumer prices would also be relatively high, so that wage wouldn’t go too far either. This is true of many other central european states. Now add that to a young, mobile worker who has few family commitments in a host country where the monthly wage is several multiples of that at home – the Polish work ethic starts to make more sense. You would be mistaken if you thought they were always like that. They respond to incentives, just like everyone else. Many of my Irish colleagues work 60 and 70 hour weeks and have never been more productive or under such pressure, so I wouldn’t be so quick to start implying that we are poor workers or have some sort of attitude problem. Of course I cannot speak for your colleagues.

      • juniorjb

        And while we are talking about competitiveness, it is a bit of a cliche in Irish life to blame the Irish worker (a bit of middle-class snootiness, perhaps? We don’t hear about the superior Polish accountants and solicitors, but construction workers and shop-girls, oh they are awful types, as we all know!) One of the greatest drags on our competitiveness has always been the consistent determination to protect the incomes of the upper and middle classes of Ireland at any cost and one of the most carefully cultivated sources of that wealth has been property – speculation in, rent-seeking from and possession of. This has cost us dearly in many ways and has had an inflationary effect underneath all the other price rises and demands for wage increases and yet it is rarely fingered as a major cost to our competitiveness. How many substantial incomes in Ireland have been created and continue to be fed on the back of the simple possession of the title deeds to a few buildings? Just how much is this costing us, that wealth has to be created somewhere before transfer to these individuals?

  10. 2012

    The Movie Tonight on RTE1 must be full of surprises to foretell what will happen in 2012 .In one word… ‘disaster ‘.

  11. george

    In my opinion Internal devaluation is needed. And the implementation of a new currency without removing the privileges and the disparities that in many ways brought are here, is not going to solve anything.
    .
    Or are there doctors getting nearly a million euro a year from the State in Germany? Or teachers with three-month holidays in the year, that are constantly complaining about their salaries, and ask for others to pay their pension contributions, extensive holidays and retirement packages, that others in the State don’t get? Or politicians and top civil servants getting golden handshakes, and lump sums, pretending to be patriots?
    Or radio and TV presenters getting small fortunes, that scientists are not paid in other EU Countries, from a “public” company that gets money from the general public and from advertising. Or millionaires and bankers getting away with paying little taxes in comparison to the rest of the population?
    .
    Shops have to pay exorbitant rates to a Council that provides almost no services, and money that should be allocated to public services, and the development of indigenous industries and infrastructure, is being wasted in quangos executives, and going along with Bank’s demands. In 2003 I paid in Frankfurt Airport for a beverage and a top quality bar of chocolate, half of what we were paying here for machine coffee and an ordinary bar, in a Petrol Station without toilets.
    .
    The elite and their political friends are doing as little as possible so they can get away with their privileges. Internal devaluation can be a good recipe, but at the moment is not applied correctly. First there should be a debt restructuring to help people and companies in trouble, followed by a removal of all privileges for sectors of the population that through good PR or financial might got things that most of the rest didn’t get.

    • george

      And through it we can get a State that would require less money to run the Country, with a smaller Public Sector and Social Welfare Bill.

    • Deco

      There is a lot of rent seeking still in existence in Irish society.

      And it all leads to the internal troika. The state institutional structure, IBEC and ICTU. They control the direction of the state, and thereby the money flows. They are not keen on reining themselves in.

    • Deco

      Just wondering – how many of the quangoes have been closed down ???

      Then we have quasi-quangoes, organizations that get annual subventions from various government departments for various tasks. Most of which is nonsense.

      • bonbon

        Instead they shut down governments, replace them with “governance” (Monti et al). After all NGO means just this!
        FG/LP is a Non-Governmental-Organization! The poster boy for good governance!

  12. CorkPlasticPaddy

    Since the beginning of the recession we no find ourselves in there’s been a lot of comments made on this blog and lots of other blogs about ‘stimulating the domestic economy’ by the people spending more. It’s a good idea, in principle, but when it comes down to actual practicality it doesn’t seem to work out the way it’s supposed to work. The main reason as to why it doesn’t work as it should is down to simple economics.
    First and foremost, it boils down to people just not having the money to spend and secondly people are not going to be going out after 2, 3 or even 4 years and they replacing fridges and freezers, dishwashers, washing machines and tumbledryers along with a whole load of other electric or electronic goods. The main reason these days as to why people go out and buy these products is that they tend to hang on to them longer than they did back in the ‘boom’ years. If some thing broke down in the average home back in the ‘boom’ years a lot of people went out and bought a new piece of equipment or furniture because they had the money to do it and there was also a certain amount of people who just couldn’t be bothered to have the thing fixed and one of if not the most likely reasons for that was the cost of call out charges and the cost of any spare parts on top of labour charges it was more than likely a whole lot cheaper to replace some thing than get it repaired.
    Now that things have turned for the worst people are economizing and making do with what they have and the way things are going in this country I can’t see things changing for the better for a long, long time.

    • rebean

      You are dead right . This shit we are in is for the long haul. Many people are in this recession for years to come and the only way out is to emigrate. Nobody wants to hear the plain facts that we are not going back to mega bonuses and mega credit etc. There is and will not be NO CHEAP MONEY ANYMORE.The only people getting pay increases are public servants right now. Thats OK if you are not on big wages but it seems a little unfair if you are on 80000 euro. BYE NOW

  13. Peter Atkinson

    David we have been listening to this b****cks from you for the last year or so and from what I can gather you are advocating this based purely on your academic opinion and a couple of populist books and a few TV programmes.Do you have any major export contracts brokered in Euros or have any property purchases made in Euros.I think not from your ongoing commentary over the intervening period.

    The simple facts of the matter is that its not a case of leaving the Euro rather an orderly wind down of the currency known as the Euro.For every action there is an equal and opposite reaction so surely the action of forming the Euro could be neutralised by all the Euro members sitting down around the table and putting into place a plan to unwind it over the same period.Those who believe in a strong currency and anti inflationary measures get their way and those who don’t go their own way.Its not a case of unilateral action by one member state as we will be used a guinea pig and should we perish we will be told in no uncertain terms “I told you so”.

    Its time we as a country who formerly had financial independance stood up and took responsibility for our feckless approach to economics and realise that it is us as a people who are jointly and severally liable for the mess we are in.Stop solely blaming those gobshites who we kept returning to power over a twelve year period.We had the drug called credit, it was available to everyone at cost and if we are to believe the figures a hell of a lot of credit junkies took advantage of it.

    Of course if you were to believe everyone you spoke to these days not one of them voted for Fianna Fail.Again the same people who swear they were in the Giants Stadium the day Ireland defeated Italy back in 1994 and they personally shook hands with Ray Houghton

    • juniorjb

      “Your academic opinion and a couple of populist books and a few TV programmes.”
      Wow, how underqualified is that – perhaps if he’d bought half-a-dozen flats in Zagreb we’d have to take him seriously!
      BTW, I didn’t borrow silly money and I never voted for FF. In fact I constantly warned all who would listen that both practices were tied to the ongoing Irish practice of self-deception. Generally, those who refused to listen are now the same ones arguing that we are all, in some measure, to blame.
      I would suggest that you stick to the more persausive and rational part of your argument and park the characterisation and attitude.

      • Colin

        You’re right juniorjb,

        Those who ignored the advice McWilliams offered regarding property 10 years ago are the ones who are attacking him most vociferously now. It’s a futile and ignorant attack as you can imagine. Water off a duck’s back to David at this stage I’m sure. I’m also sure I’m hated by many people for not buying property. In Ireland, going against the herd is the biggest crime in most people’s eyes. Never before in the history of the world has one country produced so many shysters.

  14. Philip

    U cannot devalue skills which have a global constant value. A good software engineer costs the same everywhere. ditto for all knowledge skills. There is no escaping this fact. the good polish workers are just going to the highest bidder. most of the irish in the building domain simply do not match them. And so it will go like this.

    Wage flexibility is only for those whose wages are too high anyway. The others simply go to the highest bidders. Other aspects of devaluation such as energy seem to be completely missed. Do not see that input cost coming down too soon.

    This view of them versus us needs tackling. the narritive goes thus: we shall ne cheaper exporters

    • juniorjb

      I have to take issue with your comments about Polish construction workers – I worked alongside Polish, Irish, UK, Germans, Japanese, French, Australian and many other nationalities in the construction industry, both at home and abroad and while Polish workers were often very good it simply is not true that they were especially skilled or harder working than many of the Irish. In fact, at the height of the boom, I met many foreign workers who had no previous construction experience and were not bringing any trade skills to the market – the demand for labour was so high that they were worth hiring anyway. Ok for house building, but not so good in more specialised engineering.

  15. rebean

    Alas David They will not listen to you. The big boys want their money back, What was it that they called it Capitalism for the poor and socialism for the rich.More like f**kin greed I would say. Keep the squeeze on the lower classes and pay the lucky ones well. Keep the civil service happy and the status Quo intact. Germany have the EU under their thumb now. You will heel to the masters of Europe. You can write what you like next year but you will not change anything. yes we will be more educated but what difference will that make

  16. Philip

    This idea of being the cheapest suggests a profound ignorance of what it needs to be a global contributer. This is becoming an innovation play. WHATEVER WE DO IS NEW.

    This brings me to the euro. The availability of credit has destroyed this country. The availability of credit for mergers and acquisitions has done more to destroy irish business than any recession. It created the concept of startup and flip entrpreneurship which emasculated the core of many good businesses in this and many other countries. The destruction of this credit is a good development because wealth is now seen as having a business and keeping it and building it. When no one has credit to the same degree we had over the last few years. you will see a new scene where there will be a real business roots put down. Slow growrh. dependable growth and service and products based on reputation rather than hype. The move or not from a euro makes no difference at all.

    By the way David. do u really understand anything about globalism except the idea of race to the bottom. economics driven by fast buck serial entrepreneurs leveraging the lesser rights of those less fortunate. The only thing we are witnessing is the true value of labour being levelled out. We and many countries in the EU had too many of the wrong sort of skills due to a looney decision making culture based on too much credit.

  17. redriversix

    We need to default/cancel all debt now before its too late if it is not already too late.

    As a nation we are Bankrupt and our people are suffering and if we continue on this present path ,as Deco says it will only get worse by 2014,I think it will be earlier because their is no money.

    January to March is going to be a bloodbath for small and medium Business.

    HAPPY NEW YEAR.

    Financial strike now..

    Family first

    RR6

    • molly66

      Yes a friend of mine said when he was young he went the hard road, he had an army coat he wore it to keep out the cold and at night it was his bed blanket,we could end up like living in the 1930s.
      People wake up this government and europe are tearing this country apart.

    • Steaf35

      Exactly; Its the absolute first item on a long list; As yet though there is no one group/new party to unite all under one banner; Govt are quite content to repel attacks from various small groups (Divide & conquer theory)

  18. bonbon

    China is investing in Europe Greece and Portugal. Its terms and volume outweigh the World Bank which has some daft idea of “appropriate technology” whatever that is.

    A Fitch study shows that the Chinese Export-Import Bank extended $12.5 billion more in loans to sub-Saharan Africa in the past decade than did the World Bank. The state-owned EXIM Bank lent about $67.2 billion to the world’s poorest region between 2001 and 2010, compared with the World Banks $54.7 billion. It is estimated that 20 percent of EXIM Bank’s total business volume is conducted with Africa, Fitch said, as reported in Bloomberg.
    Angola, Ethiopia, Nigeria, and Sudan had been the primary recipients of EXIM loans since the banks founding in 1994, but recent projects suggest an even distribution across the African continent. “In return it has provided African governments with financing to help develop their economies, attaching less stringent loan conditions than institutions such as the World Bank and International Monetary Fund,” says Bloomberg.
    Absence of political strings, competitive interest rates, and flexible repayment schedules compared with Western counterparts, makes China’s loans highly attractive, Fitch said. Most important, EXIM loans have been used for infrastructure projects.
    Also, by the end of 2009, 35 African countries had debts cancelled by China, amounting to approximately $30 billion.

    • Adam Byrne

      Sounds like everyone’s a winner under these deals.

      What’s the downside?

      Why shouldn’t the future be Chinese?

      Obviously, China will and should have to politically liberate but personally speaking I’m not bothered if my grandchildren are to grow up in Beijing instead of Dublin.

      I don’t feel allegiance to patches of land.

      • bonbon

        The upside is China believes in developing the patch of land i.e. infrastructure following FDR’s policies as openly stated. The World Bank considers this inappropriate.

        Europe and D.C. today are hardly pictures of political literacy. China has very sharply criticized some of this.

        The empire does not like China not playing their game. The downside is the empire will attack, smear, all of this, but at least their favorite tool, Dalai Lama, has turned 180deg to pro-nuclear power after visiting Fukoshima.

        • Adam Byrne

          Right, but no downside from the perspective of Chinese intentions? It’s all just mutually, everlastingly beneficial?

          • bonbon

            Is the WB’s intention beneficial? Everlastingly not!

            Targeted credit with good terms for the real economy is something the transatlantic banks just cannot even conceive of right now. China does as we did it before the unmitigated post 2000 bubble insanity.

            The most immanent downside is Obama will start WWWIII using some pretext, targeted at Asia especially China which fully understands the threat and is reacting together with Russia. That is sinister intention enough.

          • Adam Byrne

            Yes, I know all that Mr bonbon and your take on it too but I’m just wondering if (in your opinion) the Chinese will turn out to be just as bad, in say, 50 years, as the US neoliberal system has revealed itself to be?

            OR, is Chinese hegemony a new and marvelous direction for the human race? Assuming they escape Obama’s missles that is.

          • Adam Byrne

            ‘missiles’

          • bonbon

            The best way to measure that, rather than just opinion or “gut-feeling”, is to see how they deal with their population density, its energy, water, transport, education, health needs. They have 700 million at UN poverty levels now. Project 50 years as you say, and look where they should be. Compare that to Gov’t policies.
            China has an active space program, nuclear policy, desert policy and transport. Raw materials it needs from Siberia so a very good partnership with Russia is signed and sealed.
            China sits on a mountain of T-Bills and Dollars which might suddenly devalue so invest them. That’s rational. Saving the Euro is not their interest at all.

            No-one could possibly escape thermonuclear missile exchanges so that is not an option (other than for Obama’s interests).

          • bonbon

            First one must honestly admit what the neo-liberal system is. With an honest historic analysis of that exactly this is, one can look ahead.
            The neo-liberal system is a phase of an ancient oligarchical “tradition”, European, going back millennia. Today its 4th incarnation is the British Empire – that which most avoid even mentioning -terminally threatened meaning extreme reaction. It of course has grown roots in Wall Street, Boston etc., but its center is London which knows exactly the trouble it is in.
            China has had 2 historic wars with this, 3 including Japan’s attack on that behalf. For this reason it is unlikely to become part of it. That is not to say Europe has not exported all kinds of stuff – Communism came from Marx’s London after all.

          • Adam Byrne

            Thanks for the expansive answers. I just visited Marx’s grave in London 2 days ago as it happens. Highgate cemetery is quite something and it was a photo opportunity not to be missed for a (mature) student of Business & Economics.

            Space travel is paramount. They should be throwing thousands of people up into space every year, but all this safety nonsense prohibits it. If only one heterosexual couple survives and procreates – then all of a sudden we are a multi-planet species. There’d be plenty of volunteers too, including myself.

          • Colin

            Adam,

            Next time you’re around those parts give me a shout and we’ll have a pint nearby discussing Marx and McWilliams. There were plenty of flowers on his tomb when I visited a few months ago, is that still the case?

          • Adam Byrne

            Colin,

            I most certainly will do that, thanks. In fact it had crossed my mind but I knew you were going back to Limerick for Christmas. I’m back in Dublin myself now studying for January exams.

            Here’s a link to a photo of myself at Marx’s grave with my friend’s young daughters. Not sure if it will work though…

            http://www.flickr.com/photos/39596628@N00/6595945993/in/photostream

            Not too many flowers, probably due to the time of year that it is?

            Safe trip back to London for you Colin.

            Adam.

          • Colin

            Seen the Photo, thanks. So you stand to the right of Karl Marx then, like most people do. Did you notice Jeremy Beadle’s tombstone too? You may have passed through Waterlow Park – a lovely spot especially in Summer.

            I’m back over there on the 3rd, so yes I would have been unable to meet you.

            Hope you enjoyed your trip over there.

          • Adam Byrne

            Aren’t I on his left? Only on his right as we look at the photo.

            Didn’t get to Waterloo Park, but my friend lives opposite Dartmouth Park – some nice views of London from there. Could probably see your new building when it’s finished.

            Yes, I saw Jeremy Beadle’s grave – pretty sad, he died at 60.

            See you next time Colin.

        • bonbon

          It seems Obama is against procreation in space – he wants to reduce the population!

      • redriversix

        The downside Adam,is America………

    • redriversix

      China can financially control the Resources of Africa and the Countries you mention,BonBon.

      But America is trying to control them through protectionism,Like Afri-Com for example.

      China recently signed a deal with Afghanistan Government to explore for Oil using Chinese state Company

      I wonder how long in to the new year before a French or German Bank comes under severe pressure ?

      • bonbon

        There will be severe pressure, but not from China. Also I do not expect China to rescue them, it is more interested in the real economy as we should be too.

        Great we have a reminder that the real economy exists!

        • redriversix

          it is far more beneficial for China if the Bank[s] fail.

          cheaper to pick up the pieces afterwards……..

          • bonbon

            Only because we do not put the banks through the Glass-Steagall ringer. It is our fault, especially Obama who should use his constitutional powers but refuses.

            China is a reminder the real world does exist!

  19. goldbug

    WHY ARE CLINICALLY UNTESTED UNPROVEN SUBSTANCES ADDED TO IRISH WATER?

    GERMANY 0%

    FRANCE 0%

    .
    .
    .
    .
    .
    IRELAND 100%

    EU WARNING FOR BABIES

    http://www.eutimes.net/2011/06/eu-ambassadors-in-ireland-warned-that-tap-water-is-not-safe-for-baby-bottles/

    • redriversix

      The reason they Fcuk with the water , Goldbug is to make us pacifist dud……

      That way we Drink too many pints to care whats going on and if we do “protest” all we do is Phone JOE DUFFY and say to each other “isn’t it terrible whats goin on”ah sure , could be worse you know , theirs terrible things happenn all over the World ,sure wer very lucky to have what we have…….”we should be more grateful,so we should be”!!!

      “Sure dem boys up in Dublin have been messein with the water for years”

      Anyway..European Championship next year,bejasus,Micko Wallace thinks we have a great chance,aye and he knows what his talkin about,sure he wears as much pink as one a dem premiership footballers”

      “Right so,I’m off for a pint,jasus it must be 5.00 somewhere”

      Take her handy

    • bonbon

      That same page claims 14,000 US citizens dead because of Fukoshima.
      Reminds me of the Daily Mail claiming 25,000 dead after Chernobyl.

      This kind of stuff would drive one to drink!
      It’s always 5.00 somewhere in the Diaspora!

      • Adam Byrne

        Utter nonsense then.

        • bonbon

          In Germany I know US Marines training were told not to drink the tap water in a very nice “Naturgebiet”. One who turned up under an auto, lost, related this story.

          The water must be more dangerous than the (then) Red Army!

          Makes me wonder about some of that stuff.

  20. Harper66

    And so the next phase begins.

    The same amount of hands fumbling around in an ever diminishing pot of money resulting in scaremongering and sabre rattling such as tracker mortgages and exports. This is of course a ploy to get people to toe the line. I find it funny that the usual call from the establishment is for all people to rally around a cause for the common good and yet that cause is rarely in the best interests of the common good.

    It is laughable to read comments about projections and repayments. The economy is an empty husk. I went to the sales in a major Dublin retailer on the 27th. The shop was quiet. I spoke to the cashier asking if the shop was busy the previous day. She informed me that it had been very quiet and they were disappointed with turn out. Whole sections of the economy have dried up.

    The area I work in requires at least a Masters degree level of education. I grew up in area where a small percentage of people progressed to third level education. My parents were not wealthy and so they did without to help pay for fees and expenses and I worked during the academic year and every summer. I have worked in every low paid job out there. I had to travel abroad for my Masters degree. I raised the funds myself and worked while there. I graduated with a Masters degree at twenty three and have worked ever since.

    I am proud of my achievements and I mention them here because if you listen to the government it seems these are the types of activities they wish to encourage and yet their policies are grinding people like me into the ground. My earnings have plummeted. I now have 400 euro a month left after bills. A month where my car is due NCT or some such 400 becomes 350 and so on….

    I laugh when I read Phil Hogan intends to send out warning letters about the housing charge. My house would fit into the mid range of charges which (if I intended to pay it) would see my money reduce by a further 50 euro a month. 350 becomes 300.

    Now add on water charges which are looking like 400 hundred a year. This takes a further 33 euro a month away. 300 becomes 267.

    So, depending on the month I am left with a pittance in which to support Irelands “burgeoning” economy. This is why the country is dying.

    You can complicate the discussion as much as you like by using acronyms, referencing other countries inside and outside the eurozone and any other nonsense you like but the fact is the figures don’t lie.

    • redriversix

      Happy New Year,Harper 66

      Excellent post.as you clearly state their is no money and wages will be eroded further over the coming years as the middle class are destroyed and we all become autonomous worker bees to keep the Elite in the manner to which they have become accustomed too.

      It is quite amazing how they use fear as a tactic now and how obvious it has become…or maybe its because we have become more enlightened.

      Hope your car passes NCT.!!!!!!!!!!!

      Maybe distributing “flyers” is not such a bad job after all if there is a Government contract involved……

      Financial Strike NOW

      Best

      RR6

    • paddythepig

      Harper66, the NCT money, the water charges and the housing charge, will go into Government coffers, and the vast majority of it will give it back out to the economy in the form of welfare or public service wages.

      So basically, those groups will spend that money instead of you.

    • paddythepig

      “So, depending on the month I am left with a pittance in which to support Irelands “burgeoning” economy. This is why the country is dying.”

      Your logic means that if only you have 500, 600 or 700 euro per month left to spend instead of 267 euros, and if everyone was in the same boat, the extra spending would create sustainable economic growth.

      Wrong.

      We had this excess spending during the Celtic Tiger, and the vast majority the excess money flowed into imported goods and services, providing a welcome stimulus for the German, French, British, US & Japanese economies, but nothing for us. We simply do not produce enough quality goods and services that people, either at home or abroad want to buy.

      The consumption model yourself and David favour has failed, and will continue to fail.

    • Lawr

      Harper66 hits on a good point here. Many of us would be fine if the government would not continue to devalue our take-home pay.

      My wife lost her job before Christmas in 2008. In 35 years, she had never been unemployed, her income always subject to the usual deductions, paye, etc. She was on the dole for a year, then received 38 euros a week for six months before getting another job. That short, six month stint in a part-time job made her eligible for another year on the dole. That dried up in November. Now she receives 2 euro 85 cent a week from Jobseekers allowance. It costs 3 euro twenty to get the bus to the post office and back each week to collect. She actually loses 35 cent a week to collect.

      I, like Harper66, hold two degrees. I am in third-level education. Though I have received incremental increases, my take home pay has only modestly risen (approx 50 euro a month) since the recession began. I earn 32 thousand gross.

      A mature student, I took out education loans when my legs would no longer support me in my restaurant work in the US. A third of my current debt is education loans for two degrees. I bought an equity loan to cover my education as the interest rates were 3 or 4 per cent lower than the 8% charged by the US Dept of Education. Our mortgage runs around 1000 euro a month. (We took out a 20 year mortgage on a relatively cheap, at the time, home. We were both approaching 50 years of age.)

      I take home around 2100 euro a month. About 1350 straight away goes to pay our mortgage and my education loan. That leaves us with 650-750 a month(depending on interest rates)/approx. E140-170 per week (depending on the number of weeks/month) for everything else. I wanted to sell my 97 Clio before the registration was due, but my wife (the optimist) thought it would be wise to keep it until the NCT, the idea being that if it was too costly to pass the NCT, I could sell it then. Too, perhaps by then she’d have another job. I registered for 6 months, and found a better deal on my insurance. At this point, our big issues are heat, electricity and food.

      Social welfare has calculated that 600/week of my income is my wife’s, thus the E2.85/wk from jobseekers’ allowance. We still can’t figure out how that was calculated. Whatever. It doesn’t matter. Even if they were providing us with the 38 euro a week that she received last time, we would be dipping into our savings in order to cover our monthly cost of living expenses.

      We can do more. I have argued that I should dispense with the 40 euro monthly cost of my mobile phone and internet contract. Or we should do away with a land line. One or the other. We could also spend less on groceries. I would make the argument that we should rid ourselves of the TV (and that rip-off TV licence–RTE gives away more in a year on the Late, Late Show than I make in a decade), but I think my wife would kill me for even suggesting it.

      So we spend more to live than we take in. We are slowly but surely depleting our modest savings (less than 20 grand). We argue about whether my wife should roll over or draw down on her pension (about the same again). I’m against it; she’s for drawing down.

      The upshot is that if the government were to leave us alone (i.e. stop the continual erosion of my take home pay through increases in car registration tax, increases on taxes on home heating fuel and petrol, failure to better regulate the health insurers, impositions of property taxes and water charges–on ad infinitum), we’d probably just about make it through a few more years of this. We might actually come out the other side without a penny to our name, but with our home. But this government has given me every reason to believe that I and my wife, people on the margins–neither one of us have ever earned the average industrial wage in this country–are expendable. We are fearful that we may not come out of this with anything–a job, a place to live, any sense that, as citizens, we are valued.

      The austerity measures imposed by this government, along with the new taxes recently proposed and legislated, takes away large chunks of our hope for our future here. Whatever about me, imagine contributing to the coffers for 35 years only to be told by the government that you’re expendable. (After 10 years of work, I actually became eligible for many of the benefits that my tax contributions had been working toward just as the government suspended them. I have always been paying full whack for dentist visits for example.) I feel worst for my wife. She feels absolutely insignificant and absolutely betrayed. It is a horror to witness.

      But the government doesn’t have to witness this. They are fixated on their targets, and they have demonstrated clearly their preferred method of attaining to them, go after all the “dossers”: the social welfare cheats and long-term unemployed. (At the same time as they rob the coffers themselves, the government wants to shame the victims of their policies!)

      The government should be MADE to witness the consequences of their methods for reaching those targets! What can we expect from a government who has so little insight into the recipients of social welfare that they didn’t want to ‘deny the severely disabled their “opportunity” to work like everyone else’? Even if the less severely disabled and the not at all disabled such as my wife wanted to work, we would be hard pressed to name the “opportunities” that are denied them. For my wife, opportunities are: working for nothing. Employers would love to have workers come in and work for nothing. No. Less than nothing, because there is no compensation for the expense of transporting one’s self to work for nothing.

      A mark of the incompetence of this government is their inability not only to instil hope, but to at least stem the devastating erosion of hope. Perhaps politicians should be made to adhere to the Hippocratic oath to at least do no harm. But as we’ve seen elsewhere, ethics and politics are like oil and water. So who will make politicians behave ethically? Who will make them see the humanity of their constituents?(rhetorical questions)

      • Adam Byrne

        All I can say is, very honest and moving story that deserves wider exposure. Thanks so much.

      • Colin

        Lawr,

        You’re clearly feeling the pinch, but you should try on an 80% reduction in salary for size and see how that fits you.

        Can I ask you why you needed to take two degrees? And did you research what your salary was likely to be in your chosen career before you took out the loans? Don’t mean to be nit-picking but taxi drivers earn more than what you earn and they don’t need 2 degrees to do what they do.

      • Deco

        The peice is very sad. But not depressing.

        This is what people are realising.

        The taxes you pay can be made to disappear in a myriad of rule changes, when the social provisions you paid for are taken away from you. PRSI, Pay Related Social Insurance. To provide for social insurance. Well, PRSI is a FRAUD. Because PRSI is dependent on the promise of the clowns running the state. If they were any good to us, G Sucks would ensure that they would be discredited and removed. And you would know it because the media would undermine them.

        You contract with the state over PRSI is a complete fraud. I know it is a fraud. I hope that everybody wakes up to this. Because the point of PRSI is to drive up consumer confidence.

        How is austerity being implemented on the bondholders ????? Er, it isn’t.

        It is now becoming clear that Marxism for the Millionaires is sociatally destructive. Iceland had the right idea. Sure, life is tough in Iceland. But the fraud element has been fixed. In the EU the fraud continues. It continues in Greece, where people are starving, while millionaires who dodge taxes, and stick the money into Greek state bonds, bailouts. It continues in Ireland. It will continue in Latvia, and Portugal. And Hungary. It is coming to Spain, and to Italy. And then France. And Belgium, the US, Japan, the UK.

        The whole social security system is a ponzi scheme.

        I am reminded of Wills commenting on Ponzi schemes, and also by Richard Doutewaite on “the growth illusion”.

        In Ireland we had Dithering Bertie, and the Grote Illusion.

        • Harper66

          @ Deco and Lawr,
          I found myself at a lunch this week with a group of people heavily involved on a local level with one of the main political parties.
          The level of disconnect and arrogance amongst the group was staggering.
          They spoke of “what was best for Ireland…” when really they were speaking of what would be best for them. To give them their credit I believe they genuinely saw no difference between the both. It was as outlined in deco’s post, they were either in politically appointed positions or were private enterprises surviving off state contracts. They spoke of dole bludgers without realising they themselves were the opposite side of the same coin.
          This “austerity” is purely academic to them because they are outside it and the cool disconnected way they spoke of it angered me. It was to them a matter of addition and subtraction and not a matter of finding food or heat as it now for so many.
          However the inescapable truth is that there is no more money to fuel their hubris. There is nothing left to pay further taxes with.

    • Deco

      Harper,

      That was very good piece that you wrote. And it tells a lot of truth.

      I remember the other year, when the Irish Times published an article saying that Ireland was one of the richest countries in the world – as a result of some study, based on the value of the housing stock and the ISEQ. I think the statistics were provided by the ESRI. (yeah, I know, that outfit of jokers).

      Anyway, I sat there scratching my head about this. I thought it was absolute nonsense. And David was saying that the Irish boom was a credit boom. He used the analogy of the sudden rain fall in the middle of the Aussie outback, and the flourishing of life, before ut went back to being parched three weeks later.

      You are correct. You get encouraged, etc.. to do all these great things. And when you do you find out it is so that a collection of gombeens can charge supernormal economic rents for everything from TV licences, to M50 tolls, to grocery prices, to local authority rates, to PRSI.

      And then along comes Big Phil, and tells you that the house that you got scelped over will be used to provide the local party activists with their wages, in the local authority. [ever notice how many of the party political canvassers who knock on your door are state employees ? Yeah that right....vote for Johnny...he got me a job on the council, and me brother-in-law too, and me cousin, etc ]

      2012 – the year something unexpected happens over the property tax.

      I expect moaning and dram from the leafy suburbs. I expect confrontation in some working class areas.

      And I expect a boycott to start somewhere in Connacht or Munster with locals all banding together and simply refuse to co-operate.

      • juniorjb

        “It is so that a collection of gombeens can charge supernormal economic rents for everything from TV licences, to M50 tolls, to grocery prices, to local authority rates, to PRSI.”… and let us not forget to mention that other supernormal rent, the housing market, that buy-to-let stuffed market jiggery that has been the biggest form of social welfare for the middle classes since the year dot. It’s not precisely a state body, but it certainly looks like the use of political influence to seek rents – and guess how many of the well-upholstered backsides in the Dail owe some of that stuffing to extensive property portfolios? Sadly, far too many relatively ordinary citizens were pleased to dip their glib snouts into the same trough at the first opportunity.

  21. bonbon

    Professor Wilhelm Hankel, one of the German “wise men” who opposed the euro from the outset and challenged the constitutionality of the Maastricht Treaty, has declared that the euro is now dead and that it is time to return to sovereign currencies. In a recent speech at an event sponsored by the financial provider HeWa in Saarbruecken, Hankel declared, “We must return from the currency union to an exchange rate union,” because only by returning to national currencies can nations “devalue their currency if they run into trouble.” He argued that in an exchange-rate union, these measures can be taken in a coordinated fashion. He argued that the bailouts are only postponing the inevitable destruction of the euro and should be abandoned as a dead-end. He noted that both the ECB and the EFSF are already in need of insolvency procedures: “With a core capital of only 10 billion euros, it [the ECB] has 210 billion euros in external loans in its books. That cannot work.” The EFSF is even worse, he argued, because it has 28 billion euros of capital against 440 billion in external loans. For this reason alone, nobody is going to buy EFSF bonds on the commercial markets.

  22. bonbon

    Why this is a Transatlantic financial collapse, not just the Euro.

    Former Fed Official Says Bernanke’s “Swap” Bailout of Europe Is Illegal

    Gerald O’Driscoll, former Vice President of the Dallas Fed and now at the Cato Institute, had an op-ed in the WSJ today, titled: “Federal Reserve’s Covert Bailout of Europe,” saying that the Fed’s unlimited “currency swaps” are simply covert loans, intended to circumvent the law. O’Driscoll asks why the Fed did not just lend to the European banks and the ECB, but answers his own question by asserting that both the ECB and the Fed “need a fig leaf” to cover up illegal acts.
    The Fed, he says, was exposed for its earlier massive bailout of Europe (by the successful Bloomberg suit demanding exposure of the recipients of the 2008-9 bailout which I posted elsewhere in this blog). Bernanke thus offered swaps, which are not booked as loans, and do not show up on the Fed’s books. As to the ECB, O’Driscoll says that “some European governments” consider an ECB bailout of banks to be illegal. But, he adds, since U.S. banks and money market funds are “curtailing their lending to European banks,” the Euro banks and governments have nowhere else to turn — so they use the subterfuge of the swaps. (Of course, the ECB ignored such restrictions in the recent half-billion-euro bailout, probably with Fed money.)
    In 2008, the Fed officially had about $600 billion in swaps, which were paid down to almost zero by this past summer, but have now leaped to nearly $100 billion, mostly in December. These official figures are certainly a fraction of the real total.
    O’Driscoll writes: “The Fed has no authority for a bailout of Europe.” He reports that Sen. Lindsey Graham, following a meeting with Bernanke on Dec. 14 with angry Senate Republicans, said Bernanke had said that the Fed did not have the “intention or the authority” to bail out Europe.

    • Malcolm McClure

      I have been following the £-$-€ exchange market closely over the past month and there are clear signs of massive manipulation by some entity with VERY deep pockets. Should we worry? Like hell we should.

  23. Norman Speight

    I’m afraid that your correspondent Philip is wrong. Software engineers are not the same cost everywhere. We had thousands of them here in the UK earning £120,000+ and a whole binful of jobs available – I’m talking about three to three-and-a-half years ago. Now you can’t get a software job for love or money. Why?
    Easy, they have all gone to India where the cost is so much less FOR DOING THE SAME JOB. I’m in that business also, have been for forty years.
    Another thing, surely no sane person in Ireland really believes that if the cost of labour comes down enough, then the employment problem will be solved – no-one can be that dim – surely! How do you compete with China where the Army controls the prisons and loans out labout at costs barely above starvation – cos they do!
    Ain’t going to work lowering Irish labour costs no matter which advocate (notice all these advocates are employed) pushes for it. The answer is that the Euro is terminally ill, further than that, it is a with a cancer which is highly contagious. So what, for comparison purposes about the UK. Well, if no one wants to buy the Euro ‘cos it’s the riskiest game in town, and the Dollar is certainly where it is because the Chinese – who hold lots of them – don’t want to encourage losses by flogging them off, so that is also on the cliff edge, which currency should be bought? Look at your exchange rates to find the answer, I think the £ is the only game in town. By the way, be clear, I’m not advocating this out of UK loyalty, nor out of the UK being an economic ‘success’ ‘cos that ain’t true either. Our governemnt civil servants have awarded £40 Billions of contracts to businesses who charge £248 for changing a light bulb! Really, read our papers if you don’t believe me. It’s just that in this game of fakery, not all currencies go down, many go down, but some (like Brazil currently) do go up. In Europe, at the present time, that is the UK£.
    What is the solution for Ireland? I most certainly do not know, for the very good reason that as soon as a solution is proposed, those in charge say it can’t be done for all sorts of reasons. The problem being that all governments want to keep the game going with them benefitting. Perhaps letting the banks go broke might really be the right thing after all.

    • bonbon

      I know this argument well. I saw a presentation (NDA so not too much detail), where the actual cost to a large firm of moving jobs to India were shown on a PPT. What should at first glance appear cheaper was nearly 4 times! more expensive. All costs were shown.

      That was a shocker for me!

    • Philip

      The better Irish builders will survive and are superb. No question. Sad fact is that they are few and they continue to earn a decent living as do the many Polish who work with them. The chancers have been forced out. This is going on in every skillset across the board in all countries. In Ireland we also see Polish/ Indian/ Irish/ UK software engineers work alongside and continue to do well if they are good. We need to loose the regional labels on price differentiation. Mobility tends to make local pricing arrangements irrelevant and you simply will not retain good people.

      • Philip

        Gad I hate this website layout. So difficult to edit and navigate. Above was a response to Juniorjb.

        In response to Norman, – no…I can confidently bet that most of those guys were not software engineers – good engineers still command those salaries and more. There is a problem with role definition where anyone who looks at the back of a computer is called a software engineer or IT expert. Similar nonsense with many other desciplines. In London and elsewhere during the boom there was a massive shortage of everything. Those salaries were crazy. In fact, I still find it interesting to still see UK people making good money in Ireland. Good people for the real work – not just process stuff which you can give to anyone off the street with a few weeks training…as in Bangalore or Sao Paulo. The reason I am banging on about this is to highlight a polarisation between the really skilled elite and those who think they are good for nothing at the end of their degree cycle. I am sorry to say that those who rushed to be auctioneers/ marketeers in financial products and other forms of so-called “skilled” activity are in deep doo doo. That said, these latter are an important aspect of most of our society who are real people with brains and a need for real dignity and work. The skillset elite divide was brought on by excessive credit which in turn caused mass long term poor decision making.

        Regarding the rest of your comment, you are spot on. There is a dilemma in Ireland and elsewhere where the battle between plain dignity and financial avarice is becoming obvious and is being wilfully ignored by our leaders. No wonder we have no idea what to do. We are powerless becasue those who lead us seem equally powerless. Irish have to learn to protest.

  24. bonbon

    GS conducting a Collective Rain Dance under the printing-press shower!

    The three news items of the day are: 1) Bank overnight deposits at the ECB rose again, to EU452 billion (from EU412 the previous day); 2) The ECB balance sheet has surged to EU2.73 trillion, half of which is backed by “bus-ticket” collateral; 3) An invisible hand has helped the Italian government to sell a EU9 billion three-month bond at half the rate (3.2 %) of one month ago. Miracles of the printing press!
    However, after the sale, Italian spreads on German bonds went up again, at 500. Tomorrow the ECB is expected to repeat the gimmick for a mid-term sale of Italian bonds.
    The fact is that Prime Minister “Mario the Executioner” Monti is destroying the physical economy of Italy, thereby bringing the country to bankruptcy. As Monti is now studying a new tax on residential real estate, Italians are starting to realize that even Monti’s human sacrifices are not placating the markets.
    Even Monti’s colleagues are increasingly turning against him. An open letter published by economist Gustavo Piga has already been signed by “dozens of economists and university instructors,” {Il Giornale} reports.
    Liberal “reformer,” Deputy Giuliano Cazzola wrote today that Monti’s package has “been turned into law amid the indifference of the international financial community.”
    “The Monti government has announced new measures, while a sort of collective ‘rain dance’ is being performed in the country to invoke growth,” Cazzola writes.
    Parliament has put pressure on Monti to move to protect both Italian sovereign debt and national retail banks. Both chambers of the Italian Parliament have voted up a resolution demanding from the government a European action to reverse recent European Banking Authority (EBA) rules. In particular, the Italian Parliament rejects the idea that sovereign bonds held by national banks should be accounted at market value, and that retail banks should be punished by increasing their reserve ratio to 9%. The resolution was unanimously passed on Dec. 20. Whereas such an action has scant probability of success, the Parliament move has a political significance.

    In a radio interview today, EU-puppet Prime Minister Monti stretched all conceivable credibility, stating that the global crisis was unexpected: “The crisis came like a sort of unexpected tsunami on the global and national realities, and on the European stage.”

  25. SLICKMICK

    http://www.examiner.ie had a piece yesterday about no pay cuts for bank staff.A charmed life for some.Flexible wages ? EBS workers still expect a bonus!

  26. Original-Ed

    What’s the point of comparing Iceland with Ireland. They have free energy and an abundance of fish for export, but not much else.
    We have very little indigenous output to export other than food and that has a high energy dependency if added value is to be extracted – not much there from a devaluation.
    The Tech area is essentially controlled by multinationals and their transfer pricing policy puts them outside any major benefit from a devaluation. Their wage bill is only a small proportion of product value and is basically a form of “hush money” in a scheme of tax minimisation.

    • bonbon

      Compare what Iceland’s brave President did when he overrode the similarly rotten Parliament and allowed the people to burn the banksters.

      Its not really about fish and geysers.

    • Hi Original Ed,

      The point is not to compare us to either Iceland or Latvia in terms of the real economy – although I do remember the mainstream arguing that we could not copy Iceland because it was too small to go on its own and then when the Icelandics did what they did, the mainstream argued that we couldn’t copy Iceland because it was small enough to go on its own! The point here is to examine how real wages behave.

      Best.
      David

  27. Harve

    Season’s Greetings All!

    Just home for the christmas and reading the biography of Michael Collins, I wonder what he would have done in the situation Ireland now finds itself…? I can’t imagine him going like a good little school-boy to Brussels, taking the “internal devaluation” medicine and awaiting the “praise” from Angela, Jose et al. for being “good Europeans”. Don’t get me wrong, I’m not advocating violence, not at all, but as someone who is now an emigrant, I do think that we need imaginative and charismatic leadership from somewhere, to stand-up to these Eurocrats and give the Irish people some hope. There’s no real future in attempting to pay-off a mountain of debt whilst we cut everything else, left, right and centre, inluding most importantly areas that contribute to our future innovative capacity (education; infrastructure etc.). At this stage, I agree that our best option is to leave the Euro. Countries have left currency unions before and whilst this may create a year of uncertainty things will recover more quickly with this option. We may be painted by Eurocrats as being bad Europeans. I would argue the opposite, we would be making a major contribution towards Europe having to a long look at itself in the mirror and begin the reforms that have been lacking since the 1990s. A scaled-down Euro might be appropriate for countries like Germany, Netherlands, Austria etc. whose economies are closely aligned but not countries like Ireland whose major trading partners (US and UK) are not in the Euro. Flexibility is Ireland’s greatest strength, but not the “flexibility” that drives down wages and drains hope from out people. We need decisive action in 2012 to get this mess sorted and truly put Ireland back on the path to growth.

    Happy New Year!

    • bonbon

      Collins without Griffith would not have survived the meeting with Lloyd George. We have Griffith’s ideas and tradition fully alive today.

      We have now co-thinkers all over Europe, much better than in 1921. We just have to be alert! I will post as much as I can on this here.

      I strongly suspect the small-minded murdered Collins just because he thought big, like Griffith.

  28. Adam Byrne

    “We need decisive action in 2012 to get this mess sorted”.

    We certainly do Harve, and PIGS might fly too.

    Happy New Year to you too and enjoy your flight out of here.

    Adam.

  29. straboe1

    At the beginning of this crisis I suggest we have an virtual devaluation of the economy. It meant the social partners negotiating the costs, wages and cost of services down. See http://moylisha.hubpages.com/hub/Virtual-Devaluation
    The proposal was ignored. The capitalist media an the powers brokers would not want this to happen as the lower orders would have some power, and this could not be allowed to happen. Some form of devaluation has, and is necessary for us to survive, David is correct in his analysis.

  30. straboe1

    Does anybody see it as being beyond comprehension that an interest rate over 7% is too much for Italy, yet Ireland is charged 8.2% on the 30 billion Euro loan from the ECB, and our politicians tell us that we have friends in Europe. Where are they?

    • redriversix

      +1 straboe1…………

      your post is exactly why what politicians are selling is a compete load of nonsense.

      Italy owes far more to German Banks than we do and is far worse off.The powers that be are simply stalling for time..

      IT is beyond all….Comprehension.

      Best

      RR6

      • This shows a weakness in the English Language when we are unable to experience the moments we live in and therefore shut ourselves off from the reality and at that stage we as a nation stop living in the real world and chose a life under subterfuge .

      • bonbon

        What appears incomprehensible, is in reality fully accessible to reason. The key is derivatives, the missing link. It is very difficult to bring this into the open, but it is driving all kinds of apparent madness. I post what I can but I know it needs further discussion.
        The core derivative “engine” is the Inter-Alpha Group since 1973. It always turns up whenever one goes through these numbers, but always downplayed to insignificance.

    • bonbon

      Professor Wilhelm Hankel among others are our real friends (see post above).
      Not FG’s friends, but who cares.

  31. Colin

    “So those getting paid too much in Ireland still get paid too much, yet the people who feel the real cost of the “internal devaluation” are those who lose their jobs because rather than cut wages, employers cut staff.”

    The law needs to be changed to force employers to lower wages of all staff, before they can even think about letting one single person go. Overtime should not be permitted in a company thinking of letting people go. Putting 5 people on a 4-day week is much better for the company and society than getting rid of 1 person. The sooner the ‘business’ community realise this, the better things will be here. This is all bloody well simple and obvious, its amazing that it is not implemented. I’m afraid the Irish concept of Management has failed us once again.

  32. straboe1

    I never liked the World Bank. but it appears that if we were to break with the Euro, we might end up in a better off if we dropped the ECB and went with the World Bank as it appears more sympathetic to our critical situation. Our friends in Europe, especially Germany and France are totally concerned with their own position of power rather than with our survival. It appears that the W.B. would permit us burn some of the bondholders, they know that the Irish taxpayers should not be held accountable for gamboling the losses of speculators.

    • redriversix

      I do not believe we need permission to do something that is going to happen anyway…we simply do not have the money,nor will we, to pay back these debts.

      They need to be cancelled immediately.

      ECB / EU /TROIKA would get quite a shock if Ireland said “not one more penny shall be paid”

      I could almost guarantee they would de here in a heartbeat to see “what could they do for us”

      Once the rest of Europe see’s that we did not turn on to a pillar of salt..the rest of the bankrupt Countries would follow suit…….

      Their is ALWAYS another way out and usually it is under our nose.

      Fear is not a fact,its a feeling.

      Best

      RR6

    • bonbon

      See the post above – China surpasses the WB and has much better terms. Also the WB unlike China, forces “appropriate technology” – which could mean for these clowns asking us to burn dried cow-paddies for heat with cute little portable burners for a mobile population. Sustainability you know!

      Better join with Portugal on this matter, as well as burning the bond-holders.

  33. Nice chart, can’t see the cartoon you are referring to but I am sure it is cute

    This is all academic and very bland stuff. Granted it carries an artificial renegade edge compared to the offerings from ‘journalists’ employed by comics like the Irish Independent. I find it amusing that people actually come on here are plead with you to stand for election. As if it make one shred of a difference!

    There is never an inflammatory word and like the chlorinated water and Irish politicians it tends to keep people in a constant psychological state of Fear, Uncertainty and Doubt (FUD)

    We still see the same well heeled faces on tv each night wasting breath on a crisis which is moving into it’s fourth year and still everyone is apathetic and /or clueless

    Everyone, and especially those with families, should read the article linked to by Gege above. Here it is again:

    Child Victims of Greek Crisis

    This is what is coming down the tracks!

    Reading this article should awaken the anger in anyone who has a social conscience.

    • Adam Byrne

      I read it Pauldiv and it’s a bad situation but no one in their right mind should be having 10 kids, not now, not 10,000 years ago, nor 10,000 years in the future.

      Hasn’t he ever heard of condoms?

      I’m glad his family is getting help though and there are surely a lot of people with only 1/2/3 kids in trouble as well.

    • redriversix

      Thanks for the link , Pauldiv……..very sad article.

      It could very well happen in Ireland and perhaps their may be signs of it already,but as you point out……nobody really cares because they think it could never happen to them.

      Their usually has to be some kind of Disaster before people come out and say “why was this not prevented”?

      Hi Adam,Some people like to have big families…maybe they were thinking that “next year will be better”

      But, I agree,how anyone could have 10 children is beyond me,but those that do…I wish them well

      Best

      RR6

  34. bonbon

    Italian Debt Sale Underscores Death of Euro

    The sale of Italian long-term bonds today at 6.98% today, was only a hair under the psychological threshold of 7%. The European Commission has cancelled all 2-jan-2012 celebrations.
    Deutsche Bank chief economist Thomas Mayer, in an interview with the Sunday edition of FAZ, said that the situation in Italy will determine the fate of the euro during the coming few months: “At the beginning of next year Italy will fall into a deep recession. If the country manages getting out of the recession before the elections in May 2013 — which I expect –then Italy may be a role model for all southern states. Otherwise, the eurozone will break apart.”
    Linear projections made by Intesa SanPaolo forecast a drop of Italian GDP to minus one percent next year. In 2012, Italy must roll over EU440 billion in debt, and the EU deals demand a reduction of deficit to zero in 2013. Furthermore, the EU demands that Italy cut 5% of its debt every year, in order to bring it down to 60%. The absurdity of such a proposition has been underscored even by economists.

    Mayer said that even the withdrawal of at least one country from the euro zone is expected now. For example, a withdrawal of Greece from the common currency is no longer considered a taboo. There is a high risk, he added, that after the parliamentary 2012 elections, a new government may take power in Athens that is either unwilling or unable to carry on the drastic austerity program. The Greeks would then be forced to quit the euro, and print their own money — the drachma, or something else,” Mayer said.

  35. bonbon

    Something Is Rotten, at Germany’s Supreme Court

    Over the past couple of years carious legal cases brought against Berlin and the EU on Lisbon etc, were all rejected (except on in Sep). Fiscal Union is the latest. I am sure Irish legal “experts” are watching this closely.

    An interview which Udo di Fabio, an outgoing member of the nine judges at the Second Senate at the Federal Constitutional Court of Germany, granted to the weekly {Der Spiegel}, reveals once again that something is foul at that court: he claims that the “fiscal union” with all its substantial transfers to Brussels was basically okay.
    “Since no politician really intends to transfer their power of disposition over the substance of the national budget at an EU level, there is no insurmountable obstacle,” he said. “If Brussels only more closely supervises whether the member-states are adhering to the agreements that they have concluded, then this does not constitute an infringement on their identity. Anyone who voluntarily agrees to something has to accept that they will be checked to ensure that this contractual obligation is fulfilled.”

    The {Spiegel} interviewer asks again, to get the point clear: “If the European Commission imposed strict regulations on individual countries aimed at debt reduction — and Germany could one day also be on the receiving end of such measures — this would put very narrow limits on the Parliament’s right to determine the budget.”

    Di Fabio, however, answers: “Each case would have to be examined individually. In principle, if a parliament has passed an act committing itself to the Maastricht stability criteria, it has to accept that violations will not go unsanctioned.” Which shows once again that the court, with its present members, is no real line of defense for the German Constitution against the EU Empire.

  36. Deco

    Well, this will be the first “revision” that you can expect from Espana. I expect more.

    http://www.marketwatch.com/story/spain-warns-of-higher-budget-deficit-for-2011-2011-12-30

    Spain had a housing bubble that was as imbalanced as Ireland’s. Admitterly, the private debt bubble was never as bad as Ireland – as far as I know there were no Spaniards shopping for “bargains” in Manhattan or Chicago, in the clothes stores. Neither were young Spaniards “taking a year out” to go boozing.

    But the Spanish banks have proven reticent with regard to their property asset valuation and “mark to market” accounting measurement. And the collapsing employment market from young people is killing the urban real estate market. The “Costa” market is a different economics model, and is more influenced by credit markets in Northern Europe.

    Spain is in a really tight spot. The waste of the previous decade is weighing down on the entire economy. The employment market has seized up. The local governments are rotten with inefficiency and cronyism. And the EU probably expects the bondholders to give back every cent.

    Interestingly enough, Spain is the only large country in the Eurozone to have already stayed within the parameters of the deal agreed by Merkozy, Van Rompuy and Barrosso four weeks back. Which is about the only bit of credit that can be given to the Spanish politicians, over the past decade.

    Spain is proof that keeping the criteria for Eurozone membership, and even keeping the criteria for the Merkozy deal – will ot prevent you getting into an extremely serious crisis.

    How could the idiots in Brussels possibly have failed to notice this ?

    Well, they will probably hear a lot more about it in coming months.

  37. wills

    I reckon *internal devaluation* is austerity explained in its real terms.

    So when media spin austerity as a new inevitable econ reality sh1t sandwich put together and served up at the insider international banking system counter we the taxpayers must eat we can name check *internal devaluation*.

    One thing jumps out for me regarding this *austerity* hocus pocus.

    Article above maps contours through its spin.

    The austerity piggy banks raid is simply a corollary to running a ponzi scam.

    The austerity is merely a rouse to divert attention away from the debt-ponzi scam.

    The austerity writes an artificial narrative delivered too the masses.

    Using the idea of cuts, and more taxes it creates the impression that the sacrifice been hoisted on people will fix things. So the engineered crisis is used to propagate a nonsense which perpetuates the people remaining confused and befuddled in terms of exogenous money printing free money and funneling it into the insiders coffers.

  38. StephenKenny

    There are several problems here, that are being mixed up.

    The one that interests me isn’t the debt – it’s too big so a default of some sort is certain – it’s the annual, structural, deficit, and I’m not just referring to the Government deficit, there are the also the corporate and the consumer deficits.

    The main problem we have is that everyone has been living beyond their means; countries, people, companies. Even in cases where it seems like they haven’t – Germany, for example – they’ve been benefitting from those who have, so have, in effect, imported this unwarranted excess in borrowing along with the benefits.

    So what is going to happen, whether we like it or not, whether we call it ‘austerity’ or not, is that everyone, nearly, is going to get poorer, and the buying power of their incomes is going to fall. It’s not a big deal, and it certainly isn’t complicated.

    The question is, therefore, what is the best way to accomplish this. The most popular approach, certainly with politicians, is to borrow and spend. In time, this will create price inflation, and gravity, in effect, will take over. The other approach is to attempt to cut expenditure, to some extent.
    Contrary to popular opinion, both are “austerity”, as both will lead to an austere period, during which almost everyone will be living in “austerity”.

    The interesting thing is that both approaches can, in principle, work. Again, they’re not very difficult concepts;
    1. Creating wealth is done by borrowing money, investing it in a good idea, creating a better mousetrap, an iPad, or a nuclear fusion reactor, and so on. So clearly, borrowing and spending can work.
    2. Cutting expenditure can work if the bottom xx% of expenditure, sorted by uselessness, is removed.

    Both seem pretty simple, and both have their supporters. The difficulty is that both are very hard to do properly, and it is clearly perfectly possible to do both so badly that they will actually do more harm than good. Investing in wealth generating industries is incredibly hard, just as is selecting who gets a pay cut so as not to reduce wealth generation.

    This leads us to a final problem. Economists (which includes the financial services sector).
    Which of these two economic reorganisation models each country should choose, what are the variables and their values, are questions that economists – given the $billions we spend on them every year – should be able to answer.

    The difficulty is that, as we have seen over the past 10 +years, the world’s leading economists can do little more than the economics version of forecast tomorrow’s date. They utterly, completely, and comprehensively, have no use. Whatsoever.

    The problem that this gives us, is that there is no way on earth that either approach will actually work properly, so we have to accept that whatever we do will be done improperly. So which one is least worst, when done really badly.

    If we borrow and spend, and create price inflation, then the people who will obviously benefit are those with no savings, no employment-based income, and no fixed incomes i.e. the speculators are the people who primarily benefit during a period of price inflation, and everyone else loses.
    So that leaves cutting. Inappropriately and badly. Almost however badly it’s done, it couldn’t have a worse outcome than an economy with the speculators left as the only game in town. Of course, that was “Almost however badly …”, and we are dealing with politicians and the paraphernalia of the state.

    If we leave it to gravity, we get the speculators; if we don’t, we get direction by political activists who are the footballing equivalent of the pissed, red faced, yelling, fans, trying to play midfield for Brazil. Hard to win. By why should it be otherwise?

    • wills

      I reckon the ‘living beyond means’ is in of itself a good point, but, in the context of the present and the future a digression from the central issue which is the wealth is been arrogated through a monetary system by insiders.

  39. Shamrock Trade Mark in Germany

    I wrote on this matter on this site before and in The Irish Times in the 80s .Here are more revelations :

    http://www.irishtimes.com/newspaper/frontpage/2011/1231/1224309679626.html

    Coras Trachtala responded in writing then in the IT their denial of the events as submitted in my letter then and published in ~IT.

  40. bonbon

    This should give Noonan/Kenny something to think about. Imagine holding a referendum after the Euro collapses. Now that is “buying time”!

    Leading Economic Advisor to Merkel Admits Euro May Go

    In an interview with the DT published today, a top economic advisor to German Chancellor Angela Merkel conceded that the euro system may collapse. Beatrice Weder di Mauro, a member of the German Council of Economic Experts, while admitting that the collapse of the euro would be “bad for everyone involved,” said it “cannot be completely excluded. The policy has been trying for almost two years to contain the crisis and draw firewalls. However, these walls are not rich yet.”
    She acknowledged that the German economy is projected to grow at an anemic 0.4 percent in 2012, but could go negative, causing a significant jump in unemployment and further instability. She was sharply critical of the collective failure of the European political leadership to deal with the crisis.
    The fact that a top Merkel aide has come out so publicly acknowledging that the euro could collapse is significant, given that Merkel has been so strong in insisting that the EMU must be defended at all costs.

  41. bonbon

    This is very similar to the report from a Freiburg bankers meeting a couple of years ago (posted elsewhere here).

    French Economists Call for a “Coordinated Dismantling of the Euro.”

    In an appeal published on Dec. 23 in {Le Monde}, a group of prominent senior economists from across the French political spectrum called of the “coordinated dismantling of the euro.”
    The text suggests imposing a “bank holiday” like FDR’s in 1933 and cites the repeal of his Glass Steagall Act as one of the main causes for the financial disintegration. However, the thinking remains inside the economic monetary school and doesn’t say a word about physical economy, great projects, or the technologies and science of the future.
    After analyzing the vast differences between the various national economies of the Eurozone, the call states that “under these conditions, the insistence of the governments to push forced march into the dead-end of the euro, can only lead to a general aggravation of the economic situation in Europe…. That is why, in order to avoid this disaster, the signers of this text propose a European coordination be committed to the necessary takedown of the euro. This can be done by the following six modalities.
    “1) National currencies will be recreated in each of the countries of the zone by exchanging every existing euro for a unit of this new currency. For paper currency, we need a short transition period during which the old euro notes — uttered by each national bank and bearing a distinctive mark depending on the country (a ‘U’ mark for France) — will be stamped over, until enough new notes will have been printed for the exchange. For metal coins, the exchange can be done very quickly since they carry already one national face.
    “2) On the date the euro is taken down, the exchange rates of the new national currencies, with respect to one another, will be defined by a common accord, in order to re-establish normal conditions of trade. That is the only means to viably resolve the principal problem, which is net foreign debts. One must account for the price rises in each country since the creation of the euro and of the situation of its foreign trade. Necessary devaluations or revaluations will be defined according to a European unit of account, whose international value, outside the Eurozone, will be calculated by a weighted average of exchange rates of national currencies, as for the former ecu [pre-euro "European currency unit"].
    “3) Inside each country, at the time of the takedown, prices for goods and services, as well as the value of assets and bank accounts, will remain unchanged. The disappearance of the euro will convert the public debt of each state into its corresponding national currency, whoever the creditors are, and except those who hold trade debt. By contrast, the foreign debts of private agents, including their foreign trade debt, will be converted into European units of account. Although this solution favors stronger countries to the detriment of the weaker countries, it is the sole realistic means to assure the continuity of previously concluded contracts.
    “4) In order to avoid having to establish exchange controls, all the governments will declare bank holidays for a limited period. They will temporarily close the banks to determine which are viable and which must seek help from the central bank. Their stock market quotations will be suspended during this period. The solution will lie on the basis of a universal principle to decide that the guarantee will be supported by the central banks, which will abandon their independence and return to their status from before the 1970s. The state will protect depositors, by taking over, if required, part of the banking system.
    “5) The nominal exchange rate of national currencies will remain fixed during this same period, according to parities decided by common agreement. Then they will be the objected of a planned float on the market, with a 10% margin of fluctuation. A new European monetary system could then be studied in order to stabilize real exchange rates.
    “6) This operation will be made easier, if, preliminary to the takedown of the euro, its exchange rate were strongly depreciated against other currencies. The end of a costly euro will undoubtedly neither be agreed upon by all of our partners nor by the ECB, but France could contribute to it by repealing the 1973 Giscard law. This law, which forbids financing public debt by the central bank, was otherwise first consolidated by the Maastricht Treaty, and then a second time by the Lisbon Treaty.
    “In the future, we think it’s not possible to avoid facing the problems that were masked by the euro crisis, in particular the explosion of private monetary creation and the global drift of banking systems, as a result of the repeal of the Glass Steagall Act.
    [Signed]: “Gabriel Colletis, Alain Cotta, Jean-Pierre Gérard, Jean-Luc Gréau, Roland Hureaux, Gérard Lafay, Philippe Murer, Laurent Pinsolle, Claude Rochet, Jacques Sapir, Philippe Villin, Jean-Claude Werrebrouck, economists.”

    http://www.lemonde.fr/idees/article/2011/12/23/pour-un-demontage-concerte-de-l-euro_1622307_3232.html

  42. tony_murphy

    Ron Paul has the right ideas on what Money should be and what Governmemt should be.

    Read his books

    And check out this campaign supporting song, make a difference, buy it, share it

    http://www.youtube.com/watch?v=Lvhu9lUz-hE

    • bonbon

      Ron Paul’s economics are highly questionable, as are most of the other candidates’. He is getting support because he openly opposes the war-drive, and Obama’s dictatorship.

      Under Obama, American Citizens Have Fewer Rights than Did Nazi War Criminals, says Ron Paul

      GOP presidential candidate Rep. Ron Paul on Thursday accused President Barack Obama of giving suspected terrorists — including U.S. citizens — fewer legal protections than Nazi war criminals were given.
      “What did we do with the Nazis — war criminals — after World War II? They got trials. Yeah, and they got what was deserving: they got hung,” Paul told an audience of more than 700 voters during a campaign speech in Council Bluffs, Iowa. “This year has not been good for the cause of personal liberty, because about a year ago the President announced there are so many bad people around that he has to really go after them to protect us. There are some dangerous people out there. There’s a lot of ‘em. Most of them get a trial, but he changed the rules. He says now it is proper for the President to decide to assassinate an American citizen without a trial, without charges, because he thinks they’re that dangerous.”
      In his campaign speeches in Iowa, Rep. Paul also continues to attack out-of-control spending on military adventures abroad, questioning whether we should have U.S. military forces in 130 countries and 900 military bases, and saying that, instead, this money could be spent on domestic needs, including caring for soldiers returning from Iraq and Afghanistan. He debunks the notion that the U.S. should be the policeman of the world, says that we shouldn’t go around the world looking for trouble, and is warning against plans to spread wars to Syria and Iran.
      Although Paul is under hysterical attack for his military and foreign policies from the neo-cons and virtually the entire Republican establishment, he appears to have more support from military personnel than any other GOP candidate. Today’s New York Times reports that its analysis found that both active-duty and retired service members “overwhelmingly lean to Mr. Paul,” and that Rep. Paul’s itemized contributions from both active-duty and retired military personnel are almost double that of all other Republican candidates combined.

      • tony_murphy

        George Soros paid for trolls, there are a few obvious ones on this site.

        Ron Paul is the world’s last chance.

        He is all about Liberty, private property rights, real money

        He wants ending debt enslavement to globalist bankers, forced vaccinations, mass medication via water and food etc.. basically he is 100% against tyranny, and to suggest his policies are questionable is completely ridiculous

        • bonbon

          If you want to bring Soros into this, I’ll certainly oblige, but that is a subject in itself.

          Seriously, the economics must be looked at real hard, considering the mess we are in. Paul is getting votes being against tyranny. The economics litmus test is Glass-Steagall, a FDR (Dem after all) stoke of genius. It was GOP’ers who brought the new Glass-Steagall bills to the table. I have somewhere a speech from Paul on this – I’ll find it.

  43. redriversix

    Obama will probably get reelected bit will be a lame duck president as he won’t control either the senate or congress.

    The Military do lean towards Ron Paul but that will fizzle out nearer election time.

    Their is a U.S Carrier group just outside the straits of Hormuz while Iran carries out War games there today.

    Happy New Year to you all.

    Treat every euro as a prisoner

    Regards
    RR6

    • tony_murphy

      he doesn’t have to control the senate or congress

      congress and senate are bought and paid for, just like he is, by the globalist banksters and the military industrial complex.

      they take their orders from the new world order corporation

      • bonbon

        Obama’s Supercommittee overrides the constitutional role of Congress. Obama overrides that with Signing statements, started by Bush Jr. Ron Paul goes after all this.
        Obama is the best president Soros could buy.

  44. CitizenWhy

    Here are some other reasons to consider fleeing the Euro. Things are VERY VERY bad in the EuroZone. Governments are going to be forced to give even more to Europe’s zombie big banks.

    Happy new Year all!

    SOURCE: link is at the end.

    The European big banks are in even deeper doodoo than their U.S. counterparts. Gordon T. Long, in a report called Collateral Contagion, lifts a hitherto little known part of the veil:

    There are approximately $55 trillion of banking assets in the EU. This compares to only $13 trillion in the US. Bank assets in the EU are 4 times as large as in the US.

    In the US, debt held by the bank is smaller because retail deposits are a primary source of funds. EU banks use wholesale lending and, as a consequence, the debt held by banks is close to 80% versus less than 20% by US banks.

    Wholesale bank lending in the EU approximates $30 trillion versus only $3 trillion in the US, a 10 X differential.

    Wholesale lending is fundamentally borrowing from money market funds and other very short term, unsecured instruments. The banks borrow short and lend long. It all works until short term money gets scarce or expensive.

    Both have occurred in the EU and this recently placed Dexia into bankruptcy, forcing it to be taken over by the Belgian and French governments. The unsecured bond market fundamentally closed in the EU in Q3 2011, as fears mounted that an EU solution was not forthcoming.

    Assuming $30 trillion of loans is spread over three years, EU banks have a requirement for $800 billion a month of rollover financing for wholesale lending outstanding.

    Ilargi: If those numbers don’t render you speechless, please read them again. $800 billion a month of rollover financing, every single month for three years.

    The ECB recently passed out €489 in three-year loans at 1%. Nobody was impressed for more than a few hours. Gordon T. Long’s report reveals at least a part of the reason why. Moreover, the ECB is now accepting the proverbial toilet paper as collateral for the loans, but guess what, banks are running out of toilet paper! David Enrich and Sara Schaefer Muñoz touch on the same topic for the Wall Street Journal:

    Europe’s Banks Face Pressure on Collateral

    Even after the European Central Bank doled out nearly half a trillion euros of loans to cash-strapped banks last week, fears about potential financial problems are still stalking the sector. One big reason: concerns about collateral.

    The only way European banks can now convince anyone–institutional investors, fellow banks or the ECB–to lend them money is if they pledge high-quality assets as collateral.

    Now some regulators and bankers are becoming nervous that some lenders’ supplies of such assets, which include European government bonds and investment-grade non-government debt, are running low.

    If banks exhaust their stockpiles of assets that are eligible to serve as collateral, they could encounter liquidity problems. That is what happened this past fall to Franco-Belgian lender Dexia SA, which ran out of money and required a government bailout.

    “Over time it is certainly a risk,” said Graham Neilson, chief investment strategist for Cairn Capital Ltd. in London. “If banks don’t have assets good enough to pledge as collateral, they will not be able to tap as much liquidity…and this could be the end-game path for a weaker bank.”

    Ilargi: The market for unsecured bonds issued by banks is dead. And they no longer have any collateral left to issue secured bonds. So what will they do?

    Saw this Guardian headline yesterday: “Liquidity crunch fears stalk markets.” I’d say that should have read “Solvency crunch fears stalk markets.” The ECB has taken care of short term liquidity. But to no avail.

    Collateral equals solvency. The ECB loans equal liquidity. And liquidity means nothing if you’re insolvent. Inevitably, banks will start to fall by the wayside. Even some of the Too-Big-To-Fail ones.

    Read more: http://theautomaticearth.blogspot.com/2011/12/december-29-2011-trends-2012-end-of.html#ixzz1iA3uaTjf

  45. CitizenWhy

    What price will Ireland pay to bail out the big insolvent European banks?

    • redriversix

      Ireland will pay in….

      More job losses
      family breakups
      addiction
      suicide
      stress
      shame
      rise in crime
      destruction of middle class
      breakdown in education
      addict children
      poverty
      no health care
      starving and freezing of the elderly
      Emigration [ to where ?]
      enslavement to low paying jobs [if your lucky]

      Further rise in big government and bureaucracy.

      People’s rights reduced

      Unless of course we have a financial strike and pay 5% of all our personal banking debt including mortgages

      Put the balance of funds ,if you have any, towards securing your family.

      This needs to be done ASAP.I cannot emphasis this strongly enough.

      We are last on the governments list of priorities but the first who are expecting to pay through indirect taxation and property/water/tax.

      enough is enough.this year is going to be a business bloodbath.

      Put yourself first and cancel the subscription to Fear

      Have a happy and peaceful New year and the greatest thing you can find for yourselves is peace of mind and you can still achieve that even with all this turmoil.

      Do the best you can,one day at a time.that is all you can do…….is it not good enough ? don’t worry about it their is always tomorrow !

      Best

      RR6

  46. redriversix

    Morning Gizzy..

    hope you had a busy Christmas and i wish you every success for your family and you in the New year.

    Keep it Simple…….

    Best

    RR6

  47. stiofanc02

    Interested in a good tip? I tried out a great Buffalo Wings recipie last night. Killer wings these!
    The blue cheese dressing was good, but, I needed a better blue, other than that this is THE Buffalo Wings recipie. Let me know if you are interested and I will post it.
    Happy New Year and remember Davids good one that “bills that cant be paid wont be paid”.
    It worked for me. You are better off facing up to a “bad credit” rating than trying to pay it all, that is from me not David. Besides no one will loan you any money now anyway. Oh, and for those who dont know, you can, without damaging your credit too much, hand the keys of your new car back 100% legally if you have paid over 50% of the payments. That is the only requirement. 50%? hand em back and tell them where the car is parked. You can leave it in a public space so you are not worried about the neighbors seeing it towed away. Good luck and hang in there all.
    Killer Wings I tells ya Killer…….

    • redriversix

      The 50 % hand back is a great secret that finance companies hate people knowing about.I was able to help some people in 2011 get out of their finance deals and get good quality cheap Cars for them.

      As regards bad credit ratings or Judgements….I have been on that path for three years now and I have never been Happier.I went broke and lost everything trying to pay banks back and worrying myself sick and then I woke up one morning and said “what the hell I am I doing” !!!

      I did the best I could,it wasn’t good enough,get over it and move on.I went to several court appearances and always found Judges professional and courteous whichever they ruled.

      I don’t drink as I believe you need to be fit to deal with the kind of trauma my Family and I went through.

      I am always seeking work,but all I seem to get offered is poverty trap jobs,but that will change this year as I must be presenting myself or my C.V wrong , but that’s okay.Every day is a school day.

      Today,I have no savings or pension,no healthcare or investments.I sold as much as I had to pay down debt and lost our house too.

      I have a wonderful wife and two great kids and we get by one day at a time and the greatest thing we achieved is peace of mind and knowing that everything passes both good and bad so we are ,and we will be okay.

      This is why I keep going on about a financial strike.I paid the Banks and left my family with nothing.Banks got bailed out,I didn’t,nor did I expect to.

      So pay you and your family first and do it from today,because if I knew then what I know now,I would not have paid them one red cent as Charlton Heston said……

      “they could pry it from my cold dead hands”

      and I would not have a bit of guilt or remorse.

      So Family first

      Financial Strike now

      And if you will excuse me…. “FCUK THE BANKS”

      A very happy New year to you all….PUT YOURSELVES FIRST THIS YEAR.

      Best wishes

      RR6

    • redriversix

      Hi Stiofanc02

      If you hand the vehicle back with 50% paid off you will not damage your credit rating at all.They may try and threaten you with it,but they cannot legally do it.

      Make sure the vehicle is clean and in good order as they will charge or any repairs or maintenance that may be required.

      This is subject to the finance agreement you have,get it checked out with consumer protection agency

      “Bills that can’t be paid…won’t be paid”………..

      outstanding..so simple

      All the best

      RR6

      • molly66

        Do you know anything about bank loans if you owe the bank can you offer to clear the loan get a discount,I have tried to do this with the credit card balance with no luck ,they still want the full amount?

        • stiofanc02

          Actually the credit card companies will do deals, up to 60% off of what you owe but you have to wait until it goes to a collection agency or solictor and you can settle with them. Been there done that as the catch phrase goes but I must warn you you need to have a cast iron stomach and you must be in a postioin of not being able to pay. Unwillingness to pay doesnt go down well and is easily proved, its the inability to pay after events that overtook me and redriversix that gives us our light hearted apporach and a path to a better life! Good luck.

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