January 16, 2012

Irish banks will shrink and shrink

Posted in Debt · 222 comments ·
Share 

The European debt crisis is moving swiftly to the next phase following the downgrade of France and the collapse of the Greek negotiations with its creditors last Friday night.

It is becoming increasingly obvious that there will be no deal in Greece. This is good news because it means the end of the pass-the-parcel-ponzi-scheme, whereby the bill for more and more institutional debt was passed on to more and more innocent people who had nothing to do with the debt in the first place.

Greece will default – as it should. The bondholders will get roasted – as they should – for making bad investments. The laws of capitalism will be allowed to do their thing. Debtors and creditors will pay – as they both should – with both parties sharing the cost.

Whether this leads to Greece being pushed out of the euro remains to be seen. An opportunistic play by a desperate Greek government might be a total default, followed by the reintroduction of a new currency and then the restart button is hit. Initially, it would be an international pariah, but over time it would recover.

You might think it sounds radical, but it is straight from the IMF’s own adjustment handbook. In fact, the favoured IMF remedy to debt crises is partial/agreed default, followed by a rapid devaluation of the currency, which is then fixed at a new, much lower level.

The more aggressive approach is simply an amplified version of what is likely to happen anyway. The present policy calls for an internal devaluation plus some default. Why not an explicit external devaluation with total default, which gets you to the same place but a lot more quickly?

One of the reasons why there will be huge opposition in Europe to the Greeks going down this road is because it means the banks that lent money to Greece would get nothing or very little.

On the other hand, internal devaluation would mean that they would take a haircut and then slowly bleed Greece dry for the rest of the money. But when you think about Greece’s position, this makes no sense. Greece has a current account deficit of ten per cent of GDP. This means it must borrow an amount equal to nearly ten per cent of its GDP to pay for its current level of imports. If yet more money goes abroad to feed interest payments for foreign banks, it will have to borrow yet more just to make its current account balance. This is why getting the biggest default now must look attractive from Athens.

The realisation of this Greek position has led to the downgrading of France because the French banks are more exposed to Greece than any other foreign banks. All this news is simply the latest phase in Europe’s ongoing debt crisis. It is clear that, however it ends, the credit/banking industry will never be the same again.

We are moving from the great age of borrowing to the great age of saving. The great age of borrowing from 1990-2008 saw people, firms and countries borrow and borrow as much as they could to buy goodies today which they could only pay for tomorrow. Now the opposite is the case. We are in the great era of saving and this will mean, among other things, that the established banks in Ireland will shrink and shrink and shrink. They will sell everything and lay off staff.

In terms of job opportunities, the age of deleveraging means that the notion of safe jobs in the banking industry is over. Thinking back to only a few years ago, it was so different. When I got a job as an economist in the European economics section of the Central Bank, my mother rejoiced at the fact that the young lad had finally secured a “good” job in the bank. Second only to a “big” job in the bank, a “good” job in the bank was good because you couldn’t get fired. No one lost a job in the bank. Like the civil service, the bank had “P and P’ – permanent and pensionable – written all over it.

That age is over for good. Ulster Bank’s announcement that it is to cut jobs is only the first. Indeed, what tends to happen in these cases when there are layoffs of such magnitude, which can’t be avoided, is that the banks have been watching each other, waiting for one of them to move on redundancies first. The announcement from one is like a starter gun being fired. It gives ‘permission’ for the others to announce similar layoffs.

Up to now, bank officials have fared rather better than the people they financed in the construction sector. Relative to the building industry, the banking industry has fared reasonably well in the downturn. Layoffs in the building industry were swift and ruthless – while, in the banks, things have been much less dramatic. However, now this will change and what happened in building will happen in banking. The two industries are inextricably linked.

The Ulster Bank layoffs amount to just 0.9 per cent of the total number of people working in bank and finance. In terms of the total number of people working in Ulster Bank, the redundancies amount to close to 10 per cent of the workforce. If that were to be repeated across the industry – even exempting the growing IFSC – the impact would be devastating. We are talking about huge numbers of formerly “good” jobs gone.

The only light at the end of the tunnel would be for new banks to come in. One of the problems with the banks is that they are bust, they are carrying too much debt and they are not in a position to act as the engine for the recovery, lending to companies that are brave enough to invest.

But ultimately this recession will end. All recessions do. One of the ways to accelerate this is for new banking licences for banks with new capital to come in and start again.

Unless the state actively embraces and encourages new players – and there are some out there – the crisis will continue.

What we are seeing in Greece and France this weekend is only another phase in a banking crisis. Greece will default, taking some of the European banking industry with it.

We are witnessing the slow death of a certain form of the banking industry, but the need for banking remains. We are looking at the death of a certain type of banking – the type of banking which destroyed itself in the age of leverage. As night follows day, a new, very different banking industry will emerge. People will always want to save and others will always want to invest. The best hope for those who have lost their jobs is that the state embraces newcomers who could come in and we start again.

A Greek default would accelerate this process of creating a new banking all over Europe. Bring it on.


  1. The noose is getting tighter.

    There is an unbelievable amount of misery out there and now it is being shared more evenly. Next the rich will be asked to chip in to keep the lights on.

  2. Adam Byrne

    subscribe.

  3. CorkPlasticPaddy

    I feel sorry for the ordinary bank officials who will be losing their jobs, but it would be no harm at all if the bank ‘bigwigs’ lost theirs! They’re the ones that have caused most of the problems if not all of them!

    Pauldiv, I agree wholeheartedly with what you had to say about the rich being asked to chip in to keep the lights on.About bloody time they were! Why should the ordinary joe soaps be the only ones.If the rich had paid their fair share from day one then we mightn’t be in the mess that we’re in now!!!

    • DarraghD

      Paddy some of the “ordinary” banking officals, are the same folks who were up to their necks in the property related bonus culture of the Celtic Tiger. The same Branch Managers, Relationship Managers, these people are still a part of our problem in this country. The banking system in this country is still largely infected with fairly junior ranking banking people at branch level who simply do not understand new business lending that is not sitting neatly within the context of a property development.

      As I said above, we need a new bank, new people runnig it, new capital and a new approach, based on competence and the actual capability to lend small amounts to folks with good business ideas with a good idea and the work ethic to push it forward.

  4. DarraghD

    David, how about a small business bank set up along the lines of the Irish Credit Union movement, capitalised by small voluntary contributions by Irish people, which would support small start up businesses?

    If a business receives support by way of seed capital, for a few years, it makes small monthly contributions back into the organisation, allowing it to grow and help new businesses that are applying for assistance.

    The problem with our current banks, in addition to them being bust, is that the very same organisational structure and the very same individuals, (Branch & Assistant Branch Managers, Relationship Managers), are hunkered down inside their banks for the long haul, these are the same saps who wouldn’t process a business loan applications only a few short years ago if it wasn’t property related!

    How about a clean sheet approach, bring a few credible & decent people with actual entrepreneurial experience and proper business banking & lending experience together, set up a voluntary national movement that is all about job creation, but has a small lending facility so that it will actually be able to walk the walk as well as talk the talk, all capitalised by small “investments” by a large number of people, (like the Credit Union, if you save 10 Euro, you own 10 shares in the organisation).

    I despair sometimes when I hear of us always searching for a foreign solution to our woes in this country, (as your article above suggests, lets bring in a foreign bank), it’s like the IDA and the government approach, it often sounds as if we could not get out of bed in the morning in this country without help from the outside, with the importation of entrepreneurship and FDI.

    We have entrepreneurs here in Ireland, we have the flair and the vision, we have the education, we have the work ethic, what we don’t have is the sometimes tiny amount of seed capital that is always needed to get a business up and running, and I say this myself as an entrepreneur who was on the dole until recently enough, who is now running a small business.

    I often wonder why we have never set up a national voluntary movement, something along the lines of the Credit Union movement (but only for small business start-ups), but that also takes in valuable inputs from local business folks, that is basically a three tiered organisation, you have apprentices at the bottom (the lowest tier), who are supported by those at the top tier (those who are local volunteers who manage the orgaisation (not unlike a Credit Union credit committee), and you have the middle tier who are those who are up and running and who are also making small regular contributions into the organisation once they are out of the initial entrepreneurial “risk” zone.

    My idea obviously isn’t complete and would need to be expanded upon, but I do think that something has to be done, because this government doesn’t have a notion what to do about the unemployment crisis that this country is now in, it’s a team of failures who have no idea what it is like to take a punt on themselves in terms of a small business venture.

    • gizzy

      There has being a full proposal for this put to the last and this government at a high level. It does not have dept of finance support and they feel the small business guaranteee scheme through the existing Banks is the way to get credit to the business community. Remember in their minds we have two pillar Banks we need to support forever.

      • DarraghD

        Where would the Dept of Finance have to fund or finance this? It would be self-funding, made up of small shares bought by Irish people up and down the country, just like a small Credit Union. The trick to getting it to work is keeping the County Enterprise Boards, the Dept of Finance, all the lads on 100K plus, with their public sector gobs, completely out of the loop on this.

        I can’t state this enough, the last place you would go near would be the Dept of Finance with something like this! NOthing to do with government, nothing to do with civil servants, nothing to do with useless state agencies and quango’s. An organisation like this would come into existance BECAUSE OF the useless nature of all of these arms of the state.

        • gizzy

          I agree with yoir sentiment but
          Firstly they have to approve it for a banking licence. You could raise enough capital eg 100m would allow you lend 700 m. The problem is the 700k in deposits and funding needed.

          • gizzy

            sorry should read 700 m in deposits and funding

          • DarraghD

            How did the Credit Union get started up if they needed 700 mil in reserve funding?!? This can be done, and I think it should be done, the last thing I’d ever let get in the way of an organisation for jobs is PS beaurocracy. There are legal money lending businesses out there and I’m sure they are not capitalised to the tune of 700 Million Euro! I’m not trying to start an argument with you but I don’t accept that this couldn’t be done up and down the towns of Ireland, asking folks to take 20 quid out of their failed AIB or BOI and buy 20 Euro of shares in this new organisation that supports small start-up businesses…

          • pauline

            That is where the Diaspora come in. I think people are just waiting until the know that their money won’t be put down the same black hole everything else is going into. ie Anglo etc debt.

    • Juanjo R

      Why not stick this up in the ideas section of the site?

      Seems like a sound basic notion, maybe it needs a little more fleshing out. There are grants and seed capital loans available through Enterprise Ireland I think. I’m not sure how extensive they are.

      • JOHNNYD

        Enterprise Ireland only deal with companies with 10 or more employees or 1 million in turnover.
        At least thats what I was told during a 2 minute rejection conversation having applied for aid.

    • JOHNNYD

      We got billions in cheap credit during the boom,where were the entrepreneurs then.
      Spent on bling and tat,our reputation precedes us.
      Whos going to take us seriously now?

    • Hi Darragh,

      I agree with you re foreigners, but my point is that there are – and I know this for a fact – some interesting foreigners exploring the Irish economy to inject cash rather than just sweat cheap assets. They are being hampered by the local big wigs. But these are the guys we should be doing business with. However, I take your point.

      Best
      David

      • Lord Jimbo

        Ireland is a small country, with a few financial institutions who are extending their control over the monopoly they have in the market, power is more centralised than ever because their competitors have exited the stricken Irish market, they just need to strengthen their balance sheets (courtesy of the taxpayer/citizen).

        Irish banks are tightly linked to the political system and key business cirlces (old and some new money), those trying to enter that pond of sharks, well good luck to them, I’d think you’d be better off advising foreign companies, taking in the odd ski on the Italian slopes.

        The Irish elite are Ireland’s worst enemy, they have played the game tight since independence, they have been rocked somewhat by the financial crisis, but they have the country cornered and don’t want the status quo changed leaving in ‘interlopers’, who in their eyes would either take some of their potential gain or show them up for the wasters and out-of-ideas people that they are. They wish to remain the king makers, the merchant princes, but their dreams have long faded leaving the vista of a bankrupt country on the horizon.

    • Realist

      Something similar started recently in the UK for small businesses:
      http://www.fundingcircle.com
      It is peer to peer lending like Zopa for private lending. http://www.zopa.com
      Funding Circle is for small businesses.

      Somebody should start something similar in Ireland :)

  5. breltub

    If this is the end of the age of leverage, do you see the return of hard money, asset backed currencies?

    It also looks like the Euro will disappear in it’s current form in the next few months, with Germany pulling out.

    Once that happens, the Irish government will not be able to hold on to the Croke Park agreement and all the other items it pays for on credit. There will probably be a harsh readjusting phase.

    Will it be worth sticking around for? History tells us we will just screw it all up again anyway electing fools and giving them too much power. Our version of state is corrupt, so will never succeed.

    Very seriously considering South America and a fresh start, if I am to live in a banana republic it might as well be warm, sunny and far away!

    • DarraghD

      It’s an awful pity that we can’t just get on with it, this killing the economy with a million bad news headlines is just insufferable. If the Euro isn’t working, then DEAL WITH IT, give us back our national currency, devalue and let us get on with it!

      It’s like watching a Fawlty Towers episode at this stage, only nobody is laughing.

      • Deco

        Fawlty Towers is not funny, when you are the mug that gets stuck with the bill…..

      • Realist

        If the banking system is not different than the rest of Europe it is not going to help.
        Just think of Iceland and how they ended up with their own currency following the similar banking credit expansion.

        • breltub

          So we are all in agreement…we’re screwed no matter what!

          • Realist

            I would be more than happy to see Irish exit EU and learn from the mistakes reforming the banking system preventing booms so busts never occur.
            So 100% reserve banking with gold standard or similar and no central bank.

  6. SLICKMICK

    Having listened to the podcast, can anyone explain how Dan Mac has kept his job ? City are the best team in England,Madrid/Barca the best in europe, Messi, not Ronaldo the best player in the world.Dan earns (lol) 190 k a yr.Sack the useless branch and lending managers on 100k.They only got the job via nepotism.

    • gizzy

      See Ernst & Young getting 423 eursos an hour for one partner to run one branch of the Credit Union. Who agreed this? It is beyond madness.

      • molly66

        You see I thought things would improve with kenny and gilmore but the greed just keeps growing.

        • gizzy

          It will grow more because the big firms are struggling to get private sector income so must now increase from the State and State owned Banks. In civil service land if you get advise from one of the big four your arse is covered.

      • abutler

        The same Ernst & Young that done such a fine job of the Anglo Irish books!

  7. gizzy

    Banking wise the solution here is to have one cetralised payments, clearing and transmission system which licenced Banks pay to use. They need to lodge enough with the Central bank to cover their customer demands. Then the Banks revert to being deposit takers and lenders with other approved activities. We are a small country and a cetralised payments system for this country is only the same as a mid sized Bank internationally.

  8. CitizenWhy

    If the banks want to bleed Greece dry, why then Sarkozy will decree it so. But LaGarde? Ah, she may walk out and the Sarkozy act be dragged off stage.

    • Lord Jimbo

      Sarkozy has three months, in some respects he is already yesterday’s man, just a question of whether Hollande will snatch defeat from the jaws of victory, looks a little out of his depth.

  9. Lyndon Jones

    Banks are now paying deposit rates of 4% on one year fixed ….short term but lending out long/medium term at 5% , how can they make money ? Add in a level of bad debt and they must be losing money.
    I guess they are borrowing from the ECB at 2% and this is keeping them afloat.
    I cant see new banks coming here and setting up new branches which would cost alot adding to overheads. The only way a new bank can set up is to be an internet bank like Rabodirect but even they are losing customers due to loss making investment products.
    Every business in Ireland has downsized why not the banks , for instance the former INBS still has all its staff but is doing no business , what are the staff doing ?
    Very few people are taking out loans for cars or mortgages so there is little new business.
    Personally I am paying off the mortgage and will be finished in 5 years until then I wont be borrowing anything from any bank. We wont be out of recession for the next 5 years , its going to be austerity , cutbacks and more taxes .

  10. piombo

    Good thesis about shrinkage of banks which can well be extended to banks outside Ireland.
    There are of course another two further dimensions to the sovereign debt default problem, namely:
    (1) Net contagion
    As an example, when the original lender (let’s say a French bank) nets off their exposure of say Greek Gov debt against the Credit Default Swap cover they purchased from say a large US bank/hedge/mutual fund who is the net loser? Logic would tell me the latter. But as these instruments are not publically traded, it is difficult to understand where exactly the knife is going to drop.
    This is the real issue behind PSI involvement in that the holders of the CDS cover know they can get a better deal by simply holding out and going back to the CDS-issuer to collect although the perfidious Greek parliament is trying to legislate a coereced PSI involvement.

    (2) Current account deficits
    Until the Irish State spends less than it takes in, there will be no appetite for new entrants into the Irish Banking market. The reason is quite simple, Ireland’s public-sector creditworthiness will be shot to bits until the legacy CDS-holders, ECB and IMF have had their opportunity to pick over the carcass. This will mean a perennial risk of nationalisation of any bank entrant until the smoke has cleared.

    • Juanjo R

      I think both your points are well off the mark. Heres why;

      1) If Americans are involved the bankruptcy laws there back up the holders of CDS’s and repos – since 2005 they are exempt from “automatic stays”. Lehmans and Bear Sterns went this way – they were burnt by their derivatives partners in the blink of an eye who stripped them of any remainassets before anybody else got there ( bondholders ) etc. Trade in repo’s and CDS were up 20 percent this year BTW, the banks sense ANOTHER big party here.

      2) Entry to the market is dependant on making back the money committed in the initial outlay. Foreign banks ( Rabobank as ACC and RBOS as Ulster Bank ) only piled into Ireland because of the property boom and lent aggressively in order to get a piece of the action, occasionally to even bigger turkeys than the others had lent to ( Jurys and Arnotts sites come to mind ). Plus nethier have been nationalised as they are registered abroad. They both have been most active in the courtroom trying to get some money back.

  11. Johno

    I work for a bank. Yes a dirty little secret of mine! With out going into the name or where I work , I can tell you the only department that is growing is our collection department. We are always looking for staff. The positions are very rarely advertised anywhere and we normally get an email once a month or once every 6 weeks asking if we have any friends or family who would be looking for a job to apply. And on a very much office gossip the higher you are up the ladder the more chance of your friend or family member has in getting a job!

    I know a good few members of staff who now work in collections and they all comment on how many mortgages are in trouble. What I found most disturbing of all was they are told the bank have no responsibility as to how much someone owes. That the person who is in trouble on their loan its all their fault. Now I’m not going to pretend I have all the answers but I feel from reading here ( I read a lot more than I comment ) I have a fairly good grasp of whats going on. But one day I got into a bit of a debate at lunch with a few of them from collections and I said I disagreed with the notion the bank is not in some way part responsible for the debts the some people took. As a responsible lender I felt we should of made more of an effort to make sure the person borrowing the money could afford it. But it genuinely sounded like they were brain washed with the answers they were coming back with. And the majority of it sounded like scripting that we would have to read to customers about x y or z.

    The attitude’s in the bank , from where I sit , is that they ( staff at my level at least ) have no idea whats going on and it comes from emails from the board saying how well things are going! It really is an odd depressing place to work.

    • DarraghD

      It sounds like a cult you are working in.

      • Deco

        A credit cult.

      • Johno

        You wouldnt be too far off it Darragh!

        • Hi Johno,

          Fancy a pint to chat more about this because what you say had been hinted to me by many of my own friends working in some of the banks?

          Best,

          David

          • tonym112

            My brother and his wife got their 1st mortgage 4 years ago. Despite each working full time, they are unable to pay for the increased mortgage repayments as well as looking after two young children. They made a deal with the bank to pay 40% less. Now the bank is reneging on the deal and threatening to put them out of their home. They plan to leave the country and never return, cos they will never pay that debt -and there’s no point in paying for a home with 200k negative equity.

            Anyways my brother had worked for a collections company at one stage in his IT career and was calm enough about it all when he was being told this. The bank man, feeling less defensive, revealed they were reneging on all the deals. Asked why, he said that the government weren’t doing anything about the problems with mortgages and it would take people kicked out onto the streets for the government to act, that was the reason for the policy change.

            I’m not sure what they expect the government to do, but i’m pissed off that ordinary working people are being forced to emigrate with their family because of a financial crisis they didn’t create.

          • Johno

            Would love to meet for a pint. You have my email address so drop me a line if you want to.

          • Colin

            tonym112,

            Your brother and his wife are big eejits fro buying 4 years ago. Very poor judgement. Did he not listen to McWilliams? Or buy ‘The Pope’s Children’?

            Ireland is not the best place in the world to live. It takes time for many of us to stop believing the brainwashing propaganda. The country is set up for old people, free this, that and the other, and protests about paying any kind of tax, and ringing into whineline looking for sympathy, making up stories that can’t be proved about only being able to heat 1 room in the house. It’s all rubbish! It’s all beal bocht. And these are the people who spent their lives avoiding tax.

            Memo to OAPs; It’s your turn to pay!

          • tonym112

            No Colin – they’re not eejits, they only wanted their own home for the family and like most people they weren’t economically aware of what was going to happen. When you’re having your first child you’re thinking of other things than the dynamics of national and international economics.

            If you read your own message – you’re the one that is moaning and whineing about others moaning and whineing. Don’t reply I’m not interested your stupidity.

          • Colin

            At tony, you’re typical of the herd, deny the debate, shut the discussion down. You are institutionalised.

            Memo to your brother and the likes of him; You can raise a child in rented accomodation. Believe it or not, the child won’t be traumatised.

            I moan against cronyism and elitism. I argue for meritocracy and fairness. People like you won’t shut me up. You come here to David’s site and for what?

    • piombo

      Hi Johno,
      I don’t know which bank you work for or your role, but a bank’s responsabilities are to protect shareholders equity, pay creditors, pay and respect employees, deliver customer services and ensure compliance. In fact, where banks have not carried out their responsabilities they have been severely and rightly punished.
      The new banks theorised by David’s article would definitely want to ensure their capital, creditors and customers were being safely managed.
      Permit me to make the observation that you seem to be caricaturing your bank into the likeness and image of what the disaffected lament.
      Furthermore, the bank senior management is without doubt fully aware of the situation, that is the reason they are beefing up Collections.
      Banking is a money lending business and as such only credibility and integrity are the only allowable traits. Finally, I would venture that most of your colleagues know full well what is going on but are just hanging on for the fateful day.

      • Johno

        Hi Piombo
        I do agree with what your saying about the banks role , a bank is there to make money. Im under no illusions about that. But if any credit institution lends money to anyone for whatever reason its the banks duty to manage the risk of lending it for the shareholders and the persons getting the loan. Banks , from what Im told by my Dad , used to go out and value a house when someone was applying for a mortgage. This is not done anymore. Banks failed in their duty of risk management in my opinion. One bank openly encouraged customers to come in and lie to them about what they were borrowing money for!

      • bonbon

        The Glass-Steagall walls erected between commercial, insurance, investment institutions were necessary in 1933 and even more urgent now. A bank under this regime will function as you imply. Otherwise hell.

        Try mentioning Glass-Steagall around any Irish bank HQ today and take cover quickly!

      • Lord Jimbo

        Pimobo,

        Risk analysis? SWOT analysis? Due diligence? Moral Hazard? Illegitmate debt? Business ethics? Corporate Social Responsibility? Let the lender and borrower beware? Changed economic and financial circumstances? Mediation? Coming to a reasonable financial arrangement that works for all parties? Code of practice?

        Any of those tickle your fancy when it comes to bank practices?

    • Peter Atkinson

      Johno, its been a well known fact in this wonderful country of ours for years its not what you know its who you know.One particular ex FF Councilor I knew fron the 70s got everyone he knew in the area a job in either the Civil or Public Service.Most of these individuals were probably unemployable at the time for one reason or another but in those days a nod was as good as a wink.One particular person who was shown this kind favour is just about to avail of a bumper payout and pension in February.

      Make no mistake Johno, unemployment in this country is the preserve of the “outsiders”. the unwashed so to speak.The cronyism will never dissapate as long as we keep electing those old civil war farts.

    • Willie C

      Interesting related news from down under…

      class action being taken against the banks for irresponsible home loans… one worth watching…

      Maurice Blackburn principal, major projects, Ben Slade said there was a legal basis for challenging the lending practices of Australian banks that had ”unlawfully” and ”wantonly” put consumers in home loans they were unlikely to be able to repay.

      ”There are thousands of families out there who are over-committed in circumstances where the institution knew or ought to have known at the date of making the loan that they would not be able to maintain the repayments over the life of that loan,” he said.

      ”The only impact of making that loan would be to deprive them of their deposit and extract repayments to a point where they could no longer pay. The bank then moves in on its security – being the forced sale of the home – leaving these families high and dry and much worse off than they were when they got the loan in the first place.”

      http://theage.domain.com.au/real-estate-news/banks-face-home-loan-suit-20120116-1q2dg.html

  12. Deco

    Intellectually, the people running the Irish banks are not up to the job.

    The solution is either to replace them with young blood, or else new banks.

    The solution dictated by the Troika is the exact opposite.

    If Fingers messes up INBS, then it should be liquidated, and that massive pension pot he had for himself, divided up to give a few pennys in the pound to the creditors. And the taxpayer should be kept completely out of the equation.

    But this is not happening. We have Marxism for Multimillionaires, and “Too big to Fail”. In fact we seem to have “Too well connected to Nail” as well.

    David – this article is excellent.

    It is worth more than an entire month of Pravda Evening News.

    Keep up the good work. The ordinary people will thank you some day.

    • Lord Jimbo

      Don’t think it is a question of young or old blood, often in Ireland the young blood is merely the offspring of those currently in place.

      It is about getting your banks run by proper people and at this stage, that looks to be external people who run a business not a ponzi scheme with a political slush fund.

      There will be no new banks, the current banks will definitely block that one.

  13. Realist

    David,
    “Unless the state actively embraces and encourages new players — and there are some out there — the crisis will continue.”
    “The best hope for those who have lost their jobs is that the state embraces newcomers who could come in and we start again.”

    The last thing we want is to government to encourage anything. Their encouragament cost us a lot, meager 100-200 billions or so.

  14. DMCW4PRESIDENT

    Maybe Richard Branson would like to take a punt on Ireland? I like the language he is talking in on their manifesto but this country is so corrupted by greed, he would probably be blocked from entering our kleptocracy.

    http://uk.virginmoney.com/virgin/northern-rock/40-years-of-better.jsp

  15. wills

    David,

    The ‘age of leverage’.

    Fractional Reserve Banking for ye without regulators doing their job.

    And computer thrown in.

    And greedy bastards closed off from reality.

    A willingness to carry out fraud.

    A culture of plausible deniability.

    Resulting in an open season financial instrument ponzi criminal enterprise terminating in a crash and the wreckage left for the productive economy to sort out and re-set and then go again!!

    Cos the problem here is the white collar gangsters are at the same banking
    switch.

    So I reckon the culture of gaming the system and rigging the game and leveraging the productive economy demands action now.

    Or this sh!t will happen again, soon.

  16. bonbon

    The banks are dead, Long Live the Banks!

    Yes we need commercial banks. Glass-Steagall does this cleanly and much less painfully. Even Volcker admits this.

    We must hive off the “leverage” derivative arms to survive, and allow a healthy recapitalization based on a credit system of national commitment to progress.

    This is not Hayek “spontaneous” action, nor distributionist regression, but a knowable, debatable public discussion-able, urgent action.

    • Realist

      So, you will decide what I want or to say the central government or central bank will do that for all of us ?
      It is the system that operates at the moment and does not work in economy.
      Hayek was correct saying that central body cannot own all economic information to drive the economy.

      Hayek’s Nobel prize speech “Pretence of Knowledge” nicely sum it up:
      http://www.nobelprize.org/nobel_prizes/economics/laureates/1974/hayek-lecture.html

    • bonbon

      “Unless the state actively embraces and encourages new players — and there are some out there — the crisis will continue.”

      As the Austrian School of Hayek et al (and Open Republic) along with the distributionists are rabidly anti-state, we cannot expect a recovery from these corners.
      The nation-state must generate credit, and not allow private money printing which is basically whats going on with the FED and the ECB (back-door). Hamiltonian national banking must take center stage again after being crushed 100+ years ago giving us the horrors of the bust monetary machine.

      • Realist

        You are wrong when saying that FED and ECB are independant, and that the government is nothing to do with them and fractional banking system.
        They are politically controlled (FED directly while ECB indirectly). ECB is buying bonds directly now to calm markets, really laughable of independt entity.

        What you want is more government here that is not going to help at all.
        Tell me 3 main reasons why would national bank succeed where current banking failed ?
        Is that Hamilton this guy you are talking about, the central banker guy ?
        http://en.wikipedia.org/wiki/First_Bank_of_the_United_States

        • Nono

          Realist, are you sure it’s the government who controls the FED and not the way round? After all, the FED is a private entity and the government has no power over it. Mayer Amschel Rotschild stated it very clearly: “Give me control of a nation’s money supply, and I care not who makes its laws”

          • Realist

            It is our of interest of both, but the government is the only one who can end the FED without blood.
            So, you tell me who is more powerful.
            They are both self interested, as government is sponsored by banking.
            Governments are getting money through taxing, selling bonds and inflation, out of which last two are supported by banks.
            Banks are enriching themselves due to the government giving them laws to expand credit through the fractional banking system.
            The government created FED in 1913 and gave them power to start their work.

            http://mises.org/daily/4171

    • Deco

      The problem with a political solution is that by definition, it is based on power.

      As we have seen in recent years, power itself has become a joke. The politicians consult us once every five years. They take phone calls from IBEC, on a 24 by 7 basis.

      Just look at the Lisbon debacle.

      Maybe Hayek’s approach is best in that it removes money from those with the biggest incentive to abuse and wreck the poltical process, for selfish purposes.

      As Shakespeare commented “It is the weak who are cruelest”.

      • Realist

        Well said Deco.

      • bonbon

        Politicians have become seperated from people, but not at all from economists most of which are Austrian School. Look at Monti – applying Hayek, un-elected in a coup.
        Making the ECB independent as an article of a treaty nobody wanted until blackmailed is enshrining Hayek in law (even the German Grundgesetz).
        None of this should be in any way surprising, Pinochet was the Chicago Boys tool to enforce the Austrian School.

        • Realist

          You are really off the topic bonbon.

          Please read the wikipedia or any resource about Hayek and other austrians please :)
          http://en.wikipedia.org/wiki/Friedrich_Hayek

          Austrians and Chicago schools are two different schools.
          Austrian school is against central banks so not sure where you are getting your ideas.
          Austrians are for minimalistic government or no government.
          They are for no taxes, but rather to people spend money on things they want.

          • bonbon

            Both are Mont Pelerin. The key is to go for the axioms – and Julian Simon does this in the Hayek obituary.
            Axiomatically Mandeville. Imagine “modern” economics based on a 1700′s treatise, the Fable of the Bees!

            It is ludicrous !

          • Realist

            Austrian economy main treatises are created in 20th century. Many of good things were adopted into mainstream economics. Some related to banking, central banking and free-market capitalism were not. This is where I am coming from, that we wasted a lot of resources laste century and beginning of this one with having monopolistic central banks and banking and reckless governments and their reckless spending.

        • Deco

          Point of information. The Chicago School are ardent monetarist. They followed Friedman and not Hayek.

          The main Austrian proponent in the US in recent decades have been Mises and Rothbard. Hayek represented the Vienna school in Britain. He was a correspondent of Keynes, though they held different views.

          • bonbon

            Hayek and Friedman both Mont Pelerin key figures, so splitting hairs is not relevant.

          • Realist

            “Hayek and Friedman both Mont Pelerin key figures, so splitting hairs is not relevant.”
            They were both free-market economists but from the different schools.
            If they were part of some society does not mean they thought about everything the same way.
            Friedman in the later years actually adopted a lot of things from Austrians.

            Anyway, if me and you are Irish citizens does it mean we think the same ?
            Or we are in the same chess club or drinking in the same pub ?

          • Deco

            Hayek and Keynes worked together in the same universities in Britain.

            Does that make them the same ?

            Honestly, Bonbon, you are being lazy.

            ASSUME – trying to make an ASS out U and ME.

          • bonbon

            So the Chicago Boys overlap with Hayek (who was also at Chicago Uni). Apparently independent schools not different at all.
            Apparently opposing views with the same objective.
            Go for the axiomatic roots, names found along the way have ardent followers.

            Mandeville is key to this – do we want that economics, warmed up, or modern agro-industrial nation-states committed to progress with a supporting health banking sector?

          • bonbon

            Its lazy not to go after relentlessly the key axioms, and one finds pretty quickly a Mandeville current. A non-lazy look at this individual’s work, fighting off nausea, takes courage.

          • Realist

            Bonbon
            You put Hayek name in this forum first so not sure why you are continuing to do so.
            I only mentioned that I was influenced by austrian economists of which I mainly read Mises, Rothbard and some other.
            Unsure how Mandeville influenced austrian economy to be honest.
            A lot of stuff was happening 100 years ago and people were making the mistakes when young.
            For example I believed that governments are working for good of all people and not their self interest.
            Does this mean I should not be allowed to speak now because of my wrong belief in the past :) ?

          • Realist

            Deco,
            Thanks for the support, as without you I will again go away from this forum.
            Bonbon is just finding relationships one by one without 1 link or 1 book to mention supporting what is he saying.

      • bonbon

        Hayek applied, removed control over money from nation states and gave it to private central banks, and cartels, which must now be rescued by coup. Exactly.

        There is another word for that.

        Hayek wrote Road to Serfdom while teaching at the London School of Economics and a formal member of the British Fabian Society. Yet again we have the Fabians then as now promoting anti nation-state policies.

        The Mont Pelern society overlaps with the Pan European movement which gave us the “federalist” EU disaster now unravelling.
        Hayek founded this to spread the Serfdom ideas, and Friedman as well as a long list of famous figures all members.

        • Realist

          All wrong of course.

          Hayek – 1899-1992
          FED – 1913 (Hayek 14 years of age)
          Bank of England – 1694

          Main critics of central banking and fractional reserve banking: http://en.wikipedia.org/wiki/Central_bank#Criticism

          Being professor at LTE does not imply all bad things happened there, e.g. Keynes, …
          http://en.wikipedia.org/wiki/London_School_of_Economics

          If you continue throwing more names I am going to be sick. Your arguments are too easy to dispute with just simple wikipedia. Give us some meat please :)

          • bonbon

            Have a look at Julian Simon’s neat reference, likely not in the wiki.

            The LTE of the Fabian Society is a central pivot in all this. But Mandeville’s “economics” is so obviously embarrassing most will not look it up.

            It seems to be LTE’s core curriculum!

          • Realist

            Mandeville lived in 18 century.
            What is he to do with anything.
            Tell me what main austrian treateses or thoughts mentioning Mandeville.
            Even google is giving up on you really.

          • Realist

            Julian Simon, give me the link/resource/book you are talking about.
            Have no clue how to find anything you are saying.

          • bonbon

            Simon’s obituary. I have the text, but if you need a link I’ll try to find it. I posted the title here more than once.

          • bonbon

            Here is the full Hayek obituary referencing Mandeville
            as the key source.
            http://www.independent.org/newsroom/article.asp?ID=311

            For Mandeville, I’ll look up a link for the 1705, The Grumbling Hive–republished in 1714 as The Fable of the Bees, or Private Vice, Public Virtue.

            Simon points to this economics.

          • Realist

            So, the whole refute of austrian economy is based on obituary article about Hayek ?
            And I could not find anything wrong in the article.

    • bonbon

      Talk about “power” – the 5 TBTF banks have concentrated among them over $10 quadrillion nominal debt. That is 5 private companies. Of course on paper they are bigger than the entire EU. And people look at gov’ts? Very strange, but pure Hayek.
      In other words following blindly Hayek waiting for “spontaneous” recovery has created this mess. And more Hayek medicine? This is like trying to fix communism with even more communism in the DDR/USSR.

      I begin to see why the “elites” just cannot break loose and fix this mess. Hayek said you cannot, it must spontaneously happen!

      What control!

      • Realist

        It is the government that brought laws as they were bribed by bankers.
        Both governments and bankers are abusing it, where the government is borrowing a lot of money through bond issuance while bankers are lending more than they have earning a lot of profit.
        They need to revert their decisions so banking starts being legal again and not fraud.

        The governments legalized fractional reserve banking system. They put central banks in place. They took off gold standard.
        Free market does not mean you can do anything you want. It is based on property rights where my saved money cannot be borrowed to anybody. Fractional reserve banking was for 1000′s of years punishable by death.
        If you borrow somebody’s deposit (saving, current account) you were risking your life before 19th century. Nowdays banks and governments do not care how much money they print or abuse as it will be paid by tax payers of course, and to be worse our children as a lot of wealth is destroyed.

        What you want is to go to North Korea case where we will be government owned as they will tell us what to eat, borrow or do. This is called Hamilton’s curse represented by bonbon.

        • bonbon

          Care to comment on the link to Hayek? How about Mandeville? This is all 18th century British imperial monetarism, fact.

          Of course this ideology has a hold on the elites.

          By the way PRK is communist, of Marx also a London project, funnily enough.

          • Realist

            You never answer on my questions, but it does not mater I will on yours.

            What you wrote is just too complicated to me.
            I am not historian so throwing name after name after a lot of history is not going to help anybody on this forum.

            How about talking just words and logic behind our ideas, regardless are they austrian, keynesian or hamiltonian ?

          • bonbon

            I answered showing what Hayek theory is all about – Mandeville’s Fable of the Bees. This core ideology is not so dazzling as detailed financial numbers, but equally stunning in its sheer idiocy. I am flabbergasted that such feudal regressive nonsense is propounded, although hidden.

            To push Hayek et al, is to push Mandeville even if “modernized”. To proclaim as Gingrich does that a great leap has occured with Hayek is hilarious!

          • coldblow

            Realist: “I am not a historian so throwing name after name after a lot of history is not going to help anybody on this forum.”

            I disagree. Simple (or simplistic) concepts and proposals have to be put in their historical context if they are to be assessed. That includes fractional reserve banking, central banking and Hayek.

            I had a tract by Larouche PAC (whoever they are) printed off near my desk for a few weeks and recently got round to reading it. It’s bizarre stuff in my view and a I noted that quite a bit of it had been used earlier by bonbon. On the other hand he has some interesting points to make – I think: if he explained himself a bit more clearly I’d be able to confirm that. On the other hand, however, these pleas for ‘proper’ capitalism to be just allowed to a free hand strike me as naive.

          • Realist

            coldblow, bonbon

            Then put the proposal and arguments up first.
            I am fine if you add names whoe said it with it.
            But putting names without arguments is not worthwhile.
            Also linking names just because they appear at some stage to be austrian school of economy is absurd.

          • bonbon

            To attempt to abstract ideas from real people is absurd. Individuals are responsible and accountable.

            Mandeville’s economics normally would be of minor historic interest, but when I find it popping up all over the place today I am forced to wonder what is going on.
            The “moral” thrust of The Fable of the Bees, according to Mandeville, is that “There must be pride, luxury, and deceit for a people to flourish.”

            We have deceit, luxury for the few, we had Tiger pride, but did the people flourish?

            Something is awry with Hayek’s Mandevillian concepts.

          • Realist

            Bonbon,
            Austrian’s are nothing to do with Mandeville.
            Get over it in your historical head.
            We are talking fractional reserve banking and central banking here.
            If we start going back to the origin of life it will do no good here.

          • bonbon

            The Austrian School of Hayek et al is identified by Simon as Mandevillian. I think that is pretty clear. From this follows the elaborated theory in all its glory. It rests on the fable of the bees, which I concede is today very odd indeed, but there is no wiggle room, this is the Austrian School.

          • Realist

            bonbon – just continue trolling.

    • bonbon

      Any Hayek discussion must deal with this :

      http://www.davidmcwilliams.ie/2012/01/11/tremors-from-australias-crash-will-reach-our-shores#comment-110537

      Basically Mandeville. This is mainstream economics, and exactly why were are is a mess, and why most deeply suspect something is completely wrong.

      Julian Simon, who countered Hayek, unfortunately does an “Atlas Shrug” at a critical point, almost like Greenspan’s Ayn Rand. Between Shrugging off, waiting for a Spontaneous Godot, the entire elite is frozen, including politicians into icy indifference (as FDR noted).

      • Realist

        You have no clue what austrian economics is as you probably never read any book on it.
        Just throwing names without any argument means nothing to me and other readers.
        Put the exact claim down and we will be able to discuss it.

        • bonbon

          Comment on Julan Simon’s penetrating analysis of Hayek.

          A lot of fancy theories can be based of very odd axiomatics indeed. It would be academic if the effects were not a horror show.

          • Realist

            So, what book, article you are referring to here ?
            I just do not understand what are you talking about.

            From googling Simon and hayek I am just finding the admiration between these two professors.

            Put the link so I can comment on the logic you are implying here.
            As said earlier it will be easier if you put logic in front of me.

          • bonbon

            Economist Julian Simon’s April 13, 1992, obituary of Friedrich Hayek, who had died on March 23 of that year, appearing under the title, “The Path of Hayek, Scientist of Freedom, Has Come to an End.”

            There Simon clearly identifies Hayek’s inspiration and central concept – Mandeville, which I elaborate in that link.

            I am surprised to find Hayek-ians who are not aware of Mandeville’s core teachings.

          • Realist

            And your whole critic of austrian economy is based on this article from Simons about Hayek:
            http://www.independent.org/newsroom/article.asp?id=311

            I am not seeing anything bad said in there to be honest as both admired each other.

          • bonbon

            Putting aside the mutual admiration love-fest, look at the title of the 1705/1714 economic theory source.

            What is this – public good can only appear “spontaneously” from private vice? What kind of economics is that? Unfortunately the EU is awaiting good from the vice of banking cartels as if Hayek, from the grave, told it too. His Mont Pelerin society members are the driver of pan-europe, and Keynes’s Bancor the original Euro inspiration, just in case someone says Keynes is of another colour entirely.

          • Realist

            Bonbon,
            you are the funniest guy ever, probably hired to water down interesting discussion.

          • bonbon

            Still unwilling to read Mandeville then? Can’t blame you, it is daft.
            I and others have just pulled the carpet from under the Austrian house. Fireworks!

          • Realist

            You are just funny and will regard your comment funny in the future.
            You have no clue what austrian economy is, sorry bonbon.

        • bonbon

          The entire discussion on Hayek started when I mentioned national credit systems as the solution. The mere mention of national credit (ala Hamilton) is anathema to the Austrian School including Hayek, Mises, and the entire Mont Pelerin membership.
          So we have a clear case of 2 opposing views.
          I simply point out the feudal (Mandeville) origin of the Austrian (and Fabian) monetarism, is first responsible for the current hell, and second that there is medicine put into practice in the US First National Bank. This is the origin of the national action called Glass-Steagall put into practice by FDR.
          All of this is well documented.

          I think readers here have a right to an axiomatic dialectic since Hamiltonian methods are not taught at the LSE, or at any Uni right now. Considering the mess and the failure to resolve it, this should be an obvious omisssion.

          • Realist

            You are taking things too simplistic.
            You are thinking people did not learn and correct theories and are living in stone age.
            You did not read 1 book from Austrian economy and you are considering yourself an expert on it.
            You googled 1 article and think you are smart.
            You digged Hamilton’s idea of national bank, like we are not all sick of socialistic ideas and central banks already.

            Get over these stupid ideas from Hamilton.
            You anyway told you do not know what started the crisis earlier, so how are you suppose to solve it with Hamilton ?

  17. molly66

    Why o why are we paying the Anglo bonds ,who the he’ll is advising kenny and co to pay up on behalf of the Irish people,this is just crazy insane ,kenny wants to keep our good name while Rome burns all around him,
    The domestic econmony has been taken of life support because it’s dead,
    How can they keep cutting a cut to me is a rise in diesel ,toll ,car tax when diesel and petrol goes up it makes every thing go up the wrong people are being made to suffer here and enough is enough since the start of 2012 things have got worse in a down word cycle.

    • Deco

      For the same reason that we get EU treaty re-runs.

      Because we are instructed on what to do.

      We are part of an Imperial construct.

      • bonbon

        Imperial is spot on. And economics are the weapon of choice not armies. The control exercised by the Hayek,Schumpeter,Mises, invisibl hand is beyond belief. It goes a long way to explain the otherwise inexplicable inaction of elected and non-elected hopefuls.

        • Realist

          Hayek and Mises wanted to give more control to people.
          When you go and choose which bread to buy you are choosing which bakery to survive and which one to go under.
          They want the same for banks. But no, governments needed to bail them out.
          They wanted to reform banking to be 100% reserve banking, no central banks, so what society first save to invest and spend, and not to spend recklessly what is not yet saved, so our children does not need to pay for it in the next 100 years.

          Governments and states are those with the power to do whatever they want based on central thinking, nothing to do with me or you.

          • bonbon

            Now the banks are doing whatever they want – so far – with states and people.

            The Banks are on notice, we the people are going to Glass-Steagall them and soon.

        • Realist

          So, who instantiated laws for banks to be such reckless ?
          Was it not the governments around the world.
          How come fractional banking came to the world, later on with central banks, and later on without gold support ?
          Who is bailing banks when they fail ?
          You see, central banks and governments are all over the place. It is now very hard anybody to believe central bankers and governments are nothing to do.

          What you are saying is this: if I give my kid a gun and he starts shooting around I am not guilty ?

          Or even better: I will give banks with central bank backing all powers to print money and distribute it first to my political friends (governments) and next my good bankers, and later to my friends builders and so on.

          • bonbon

            We had Glass-Steagall until 1999 repealed by Larry Summers et al. That loaded the gun with live ammo known as derivatives. Plutonium ammo! It is not difficult to see why WallStreet/London so badly needed that law out of the way – Mandeville’s economics just could not work! The private vice of derivative trading just could not produce public good! Well what has it produced?

            According to economists and politicians, spontaneous good must appear at any moment from the vice of hedge-funds totally out of control. They are blue in the face waiting. But to take explicit action – not allowed because spontaneous recovery must be unknowable, therefore it cannot be policy!

            Result total paralysis, icy indifference, and paying off mobsters.

          • Realist

            Your hole program is this one. Once people read it they will lough at you :)
            You are a socialist joke.

            http://www.larouchepub.com/eiw/public/2009/2009_1-9/2009_1-9/2009-9/pdf/80_3609.pdf

    • bonbon

      They are waiting for an economic Godot because the austrian school beloved economist said it must be spontaneous, therefore unknowable.

      This is worse than the beal-bocht. Godot.

      • Realist

        Austrian school thinks that we are all smart and that we know how to buy bread, butter and meat ourselves.

        Bonbon thinks we need a government to tell us how to do that and for it pay them a lot of money in taxes so bonbon has extra bonus and good pension.
        In reverse we will get a few 100 billions bill to pay in the next 100 years of life due to the government giving all power through the law to central banks and their controlled banks to do whatever they want.

        • Deco

          Realist,

          If you lived under the reing of dithering Bertie, the IBEC tanaiste, and the ICTU Phat Cats, you too would know how intelligent government is at allocating resources.

          Just look at the Binge Syringe in O’Connell Street.

          We have two Pillar Banks as well.

          Out goes one Pillar, and in comes three even more oppressive Pillars in it’s place…..

        • bonbon

          The Austrian school wishes to erase the nation-state which leaves the “free-market”, in reality cartels, plus 5 or 6 concentrated investment houses with $14 quadrillion nominal debt which the “people” must pay.

          This is just Fabian theory warmed over.

          • Deco

            Cartels by definition is an unfree market, and is reliant on compelling free people.

            Effectively, what you get when the PDs are the “tail wagging the dog” in government….

          • Realist

            Free-market will work as there is nobody to corrupt.
            Not like this socio-capitalism, where the corrupted state can bail and print money.
            Cartels never worked in reality as always the best company in cartel leave such. Why would any company that is better than the other be in a cartel supporting the weak ?
            Just think of Greece at the moment and how nobody really want to help them.
            Think of EU as one real big cartel :)
            I tis mission impossible in real world with 1000 of companies that can compet.

          • bonbon

            the 5 or 6 TBTF banks are a cartel, which only the repeal of Glass-Steagall enabled. That was an act of a nation-state to set hard boundaries, like the Bretton-Woods later.
            Private self-regulation of pirates is a joke.

            The PD’s had a distributist G.K. Chesterton ideology from the Fabian Society. Hayek was also a formal member of the same. Phillip Blond of the Fabian Demos think tank gave us Blair’s New Labour AND Cameron’s Progressive Conservatism, both rewarmed distributist.

            It is amazing how it all boils down.

          • Deco

            The EU as a cartel. That is actually a fascinating concept.

            The EU actually functions as a cartel concerning power.

            The history of Europe since the fall of the Roman Empire has been about one episode following another in an attempt to cartelize power.

            And each time it ends in a disaster, eventually.

            It will fail because it is a cartel.

        • Falls

          i totally agree. bonbon is rolling out name after name and i really cannot understand what he is saying. he seems to think we are living under the reign of austrian economics. the truth is we have lived under keynes economic theory. what austrian economists have warned has now come to pass. the belief that government who got us into this can get us out is insane. people wont spend because they do not know what government is doing or going to do. they stall. invention stalls, job creation stall. every tax or charge the government assign further drives people to that belief. its classic proof that trying to control something as large as an economy with billions of players all making decisions that are best for themselves is impossible. they wont spend simply because they are unsure what is coming.

          i am amazed that citizens dont laugh that when the government says it is suprised, that when they tax and tax…we spend less which or course means we should tax more. only in government can that twisted logic make sense.

          whats even more amazing to me is that some citizens still expect the solution to come from government…wow just wow. the addiction to government money runs deep in ireland.

          • bonbon

            I roll out some embarrassing facts about Hayek et al indeed. They need to be dealt with honestly. If a Hayekian does not understand Mandeville one gets into all sorts of quandaries. When Mandeville’s stuff as shown by Julian Simon is fully appreciated, one can see we in fact do have a Hayek-Mandeville system now.
            How could that have happened is the question.

            The oddest bit is then Mont Pelerin, Hayek’s society, full of Pan Europeans which gave us the current EU.

            To then promote Hayek, as if they did not really succeed is something only a Honnecker could.

            The keep it simple principle leads to Hayek’s Fabian Society, the fountain for the other Distributist stuff here.

            Nothing is like going for axioms, what?

          • Realist

            Falls,
            Thanks for the nice comment.

            Bonbon, I am not Hayekian, I read Mises, Rothbard and other austrians. That of course does not mean you can tell anything about such person as Hayek, who was the only austrian to get Nobel prize and said that such prize should not exist for economy as social science.
            But anyway it struck me your absurd accusations that I could not resist to respond.

            Do you really know what are austrian aconomy is about at all ?
            What book did you read please ?

  18. piombo

    @ Molly66,
    We are paying for the Anglo bonds because they are paying for our Civil Service. Who is screwing who???

    • molly66

      Yes and the government are part of this I got heating oil 500 liters last Friday 470 euros and the driver told me in the last 6weeks 25 of the houses he delivered to have had there oil stolen crime is crime and crime pays weather it’s government being over payed or the civil servants the big pensions the lump sums it’s crazy ,this is a gravy train for the boys and they have there hooters in the troff ,why would anybody in there right mind want to be honest now bring back the barter system and off with his head.

      • piombo

        Molly66,
        Speaking with former colleagues and friends in a London-based Private Equity firm where I worked for 7 years, I have formed the following opinion of what is most likely to happen. Here it is:
        The Irish State is playing a very astute game, probably one of the best in town. They are waiting for Greece and Italy to implode as follows:
        (a) Greece this week will default as there is unlikely to be agreement on the voluntary PSI;
        (b) Italy defaults in third week of February as they have a massive debt redemption becoming due which will fail;
        (c) The ECB will attempt to save Italy at which point, the Germans announce their intention to revert to the D-mark – end of February;
        (d) The Euro will plummet along with all the Euro denominated soveriegn – end of February;
        (e) D-mark will appreciate to 1.50 to the Euro which will fall to parity with the US$. Germany will maintain a dual currency-one for exports(Euro) and one for imports and domestic (D-mark) – March/April;
        (f) Others will follow into D-Mark, but not Ireland;
        (g) All those who wish will remain in the Euro along with their respective gov debt including Greece who will be crucified in the overnight interbank market.
        (h) The tranches above 60% will be “repoed” by the ECB at 100% of nominal value into 15-20 year bonds, an effective 50% haircut through a doubling of their maturities.
        (h) Euro-area inflation allowed to go to 5% for a few years to stimulate speed of money circulation and hence consumption.

        The risks to the above are:
        (1) The Irish/Portuguese/Italians throw a hissy fit and demand a “Greek-style” PSI – unlikely but you never know;
        (2) The contagion in the US banks due to the crystallisation of CDS payout obligations is so strong as to freeze the interbank market forcing the Federal Reserve into a TARP 2 program plus capital control retaliation against the Euro area.

        Where does the above leave you?
        (1) Spike in fuel costs;
        (2) All chinese and US$-based imports go through the roof;
        (3) De facto capital controls;
        (4) High direct and indirect taxes for the next three years without respite.

        • aodhanc

          Piombo, what will be effect of this for ordinary retail depositers who have their savings in Euro bank accounts?

          • piombo

            Hi Aodhanc,
            None really as long as the Government maintains it’s bank guarantee. You will find some 1980′s type inconvienence (three days notice) when trying to purchase non-Euro such as the US$ or GBP.
            If you are really worried just invest in some 12 month US Treasury bills which you can hold in an online & onshore investment account. The interest isn’t much but it will be held in a non-Euro currency and will be safe.

        • Juanjo R

          Tell me do your friends do predictions on lotto numbers too?

          And will you be back on next week when the first part of this hasn’t happened? Or in March when Italy is still afloat?

          The ECB won’t get to repo much. Any asset worth owning will be long,long gone before the ECB turn up.

          Germany is locked in the the same mutually assured toxic debt explosion as are France and Italy and everyone else…to suggest they can just change currency make a clean get away and just like that is nonsense.

          How can the ECB even continue to exist without the backing of Germany and other rich core nations like France & Netherlands.

          Theres nothing astute about Kenny, Gilmore and Noonan. Good luck is all Ireland can hope for.

        • coldblow

          Piombo

          Interesting analysis. I’ve been wondering for a good while now whether something like this was going to be the end game. I say ‘something like’ as I don’t claim to be able to follow your argument in its entirety.

          Wouldn’t there also be:

          (5) Domestically held savings devalued – ?

          As regular readers might remember, I have long held the simplistic idea that devaluation will only happen once the people who matter get their money out safetly. Then they will not only acquiesce in devaluation but will actively promote it. There might not even be any sound economic reasons for them to do this, but it just seems the kind of thing they’d want to do. Cynical? Moi?

          • piombo

            @ Juanjo R,
            As reported in today’s Lex column, Greek default is
            almost certain. A full 24 hours after I wrote it here.
            No lotto numbers there.
            Once Greece happens, I repeat events (b) through (h) will occur more or less in the order and in the form as set out. There may be a slight variance of a number of weeks, but that does not chance the substance of my assertions.

            I do not have access to the Lex column writers but I do, as part of my company’s work, have to be in constant contact with brokerages in London and every now and again my ex colleagues.
            I value their considerations as they are at the core of the market. I am not schooled in Economics but rather in Finance, so may be I possess a blind spot.

            As to your comment about repo’s, I would ask you to to consider the 3 year €500 bn swap the ECB performed before Christmas as evidence of what they can do when necessary. BTW, this alone will generate circa €90 bn profits given the 500bps contango spread built in over the next three years to the banks who avail of this swap

            Re the ability of the € to survive without Germany and The Netherlands or other “rich” nations, I offer it is entirely plausible for the Euro to survive and thrive as long as it’s members maintain stable purchasing power parity among themselves as expressed through near-uniform interbank interest rates.

            Finally, whilst no supporter of the Mr Kenny et al, it is widely held among the traders that the Irish hand is the best played so far in assuring the markets that they will pay back every cent of debt. They have never added the phase “as currently structured….”
            Finance people don’t mind having to lengthen the redemption period, it just means more fees and higher interest rates. Hence the reason the market-makers get that warm fuzzy feeling when they see Messrs Kenny and Noonan strutting their stuff. Just wait until next week in Davos and you’ll see the reception they’ll get.

          • piombo

            @Coldblow,
            Yes, there will be devaluation in all assets dominated in euro’s versus the US dollar and maybe the GBP. But then again, ask yourself how much of your current and future consumption (except for petrol) will be settled in currencies other than the one of the country in which you live.

        • Juanjo R

          @Piombo

          I really wish i could respond fully but I’m on the move and I don’t have much internet access to spare.

          You missed my point totally on Repos. Go look at MF Globals colapse. They are the last desperate bet of the fractional banking system to keep the show on the road. They exist to f*** over the innocent even further.

          As for Greece I never said it won’t default – I simply asked why this week ( which is nearly over ). It and us and Portugal have been kept alive for political reasons not numerical reasons for a long time now so I’m wondering why this week is different – politically.

          And if Italy goes France has problems – 500 billions worth to be exact, 20 percent of French GDP more or less. Maybe you should factor that in you your prediction ( it is not an analysis ).

          Tell me you your vaunted friends in Londons banking heirarchy talk up Iceland’s example with its currently 7 percent unemployment and its ex-politicians/bankers on trial? Or do they talk up only countries that f***s its own population over at the behest of the banking fraternity? Iceland is probably looking like a good bet to be able to return to the bond markets when it runs out of bailout money soon enough. Us 15 percent unemployement 25 youth umemployment and pariah status if we dipped into international markets in a real way unsupported by the ECB.

  19. Dorothy Jones

    Looks like 26 March 2012 is seen as possible D-Day for Greece:

    WSJ
    ‘Greece has a €14.4 billion bond maturing on March 20 that it can’t afford to pay in full, but the steps to be taken between now and then are many, technical, difficult and large.’

    It should be clear that if Greece doesn’t manage to complete the restructuring by March 20, it will go into a hard default. While the market has largely priced in this eventuality, the fulfillment of the scenario is ultimately unpredictable.’

    Spiegel
    ‘Yes, in the medium term Greece must leave. And the country’s debts will ultimately have to be written off at 100 percent, not at 50 or 70. In addition, we will have to pay even more money as long as Greece is in the euro zone, because it is not capable of making ends meet on its own. All in all, this is a €500-billion ($635-billion) problem.’

    Guardian Business Blog
    ‘Nick Dearden of Jubilee Debt Campaign claimed financial speculators were “gambling with the lives of Greece’s people”.

    Dearden said:

    The sight of vultures swirling above Athens proves that vulture activity is neither marginal nor helpful to the functioning of the global economy. We need to crack down on this activity if the lives of millions of people are not to be decided by a handful of super-rich speculators.

    So how are hedge funds supposed to be doing this? Jubilee cites three scenarios:

    - If most creditors accept a write-down the funds which hold out will not need to accept any reduction in the value of the debt, and they can be paid in full
    - If European politicians become desperate for a deal then bailout funds might be given anyway, allowing Greece to continue paying vulture funds off, essentially with European taxpayer money.
    - If all else fails, Greece could be forced into a default by 20 March, in which case the funds get paid out on their credit default swaps, which act like a sort of gamble that a country will default.’

    So….it’s difficult to see how this default might be averted; what for IE and how long thereafter?

    • @Dorothy

      The Moon Wobble peaks on the 28 th Feb and the rumbles begin on the 21st Feb to 3rd March. So The Euro Greek Wedding Planner will go burst before your date of prediction suggests .The Speed of Arrival is at a Terminal near You . The Future to the Past .

  20. aodhanc

    Despite some restructuring of the Irish banks over the last few years, there is definitely too much middle management waste. People who literally have nothing to do all day, and are still getting overpaid for it.

    There needs a be a serious clear-out.

  21. Malcolm McClure

    The big problem is that the PIIGy banks need to raise about $200 billion rollover debt before the end of March.
    Somebody in Dept Finance needs to paraphrase Maggie Thatcher and tell them “You roll-over if you want to, but Irish people are not Wheeler Dealers.”

  22. gizzy

    Sean Quinn bankrupt. Meanwhile all the barristers, law firm partners, hospital consultants, accountancy partners walk away from their carefully constructed non recourse loans for the property syndicates they were in without a whisper and after availing of great tax breaks. And we are probably talking billions in loans.

    The same Bank Risk committees signed off on these non recourse facilities that now want ordinary people chased down for the full liability because as Michael Noonan would say it would be a moral hazard not to.
    Who sets the moral compass for you Michael.

    The other thing about thse loans is that some Banks were widely thought to use them to disguise breaches in their sector limits. Yes we had such controls in the noughties where a Bank could only have 20% of their loan exposure to any given sector such as property. But if a Barrister was a memnber of a property syndicate to develope apartments couldn’t you classify that as legal sector even though there was no recourse to the legal income..

    Anglo in 2003 I think were showing 19% of their loan book was to property and the regulators accepted that when the dogs in the street new different.

  23. With Greek debt being expected to have a 50-75% haircut, it’s going to be interesting when it does default as some think there is a legal case to sue the Euro issuers…this could drag on a lot longer than we think.

  24. Philip

    So, Greece crumbles, Unicredit in Italy crumbles (article last week) as does Italy itself, CDS gets paid off to what effect? May as well come clean and say “no can pay”. We’ve already discussed last week about Australia’s emminent demise in light of falling demand for ore from China (copper prices are falling? ) certainly I know the cost of cabling dropping recentlty.

    Was chatting to a friend about the prospect of leaving a few bob in a German bank and was warned that the youd’d never get it back for a while when the Euro tripped over becasue the German banks would do an emergency lock in of all cash during the turmoil which could last a long long time.

    We have a public service which we cannot afford. The receipts are simply not there and really the idea of taking wealth that is not there to be taken is unworkable. For a start, it’d be gone overnight. Welcome to the interconnected world. So we are gone there.

    What comes across is that any solution we derive from all of this will need to be worked out with others outside our national borders. Working alone will not hack it unless we are prepared to be like the North Korea of Europe and unlike David, I do not share it as a simple matter of recessions coming and going. I do not remember any historical reference that looks at the entire western and western like trade hemisphere going down the tubes.

    There is money out there…but it is now clear that not any of it is answerable to a sovereign or to an electorate and it aint coming back except under the owner’s terms and conditions. Thei reality is that the nation state is gone and was gone for the last 20-30 years if not longer.

    The only light I see is that of global networks which form the new consumer and interest groups of the future – suppliers/ consumers (all playing the 2 roles) with a common purpose – getting along versus facing mutually assured destruction and developing a set of agreements/codes of conduct.

    Nations/ Cities are but management and efficient communication units of a bygone era. When you started buying on EBAY, it showed you have as much interest in the so called nation state as the so called new world order that a lot of panicked loo lahs like to believe in.

    You are a fraction of a second from everyone else. Get used to it and reach out. The islands are gone and learn to develop that diplomatic tongue in your heads.

    • bonbon

      So you imply Hayek’s agenda, to rid the world of nation states, has been achieved. Wonderful new world indeed we have now.

      Governance, ala Monti is the future?

      There is another name for this, obvious to anyone.

  25. Deco

    Next week, we will have Seanie Bond Day.

    A pan EU celebration of our wealth, where we decide to give some of it away to a worthy cause. Re-electing Sarko. (If you ask me it does not matter how much money the French FIRE sector throws at Sarko, he is finished.).

  26. grougho

    Well done to #OccupyDameStreet on 100 days of occupation – you’re doing great work.

    We (Contact.ie) have just launched “Don’t Pay the UNSECURED Anglo Bondholders – Part2: Not Our Debt” at http://www.contact.ie/debt

    Other groups around the country, most notably the coalition of groups under the banner of “Debt Justice”, will also launch similar campaigns this week. Why this week? Well, because at the end of it UNSECURED and UNGUARANTEED Anglo bondholders are “due” to get paid €1.25bn of your money.

    Our aim is to get 4,000 people to email every TD and Senator about this outrage, which will mean about 1,000,000 emails arriving through government servers with a very clear message – THIS IS NOT OUR DEBT.

    Please add your name to the campaign here:
    http://www.contact.ie/debt

    Please also post it on your Facebook page and tweet it (using the hashtag #NotOurDebt).

    Thanks a lot,
    Contact.ie
    Related Link: http://www.contact.ie/debt

  27. grougho

    just lifted from contact.ie and reposted for all who wish to sign – please follow the link – its a good idea.

  28. pauline

    A good bank is where the Diaspora would come in.. we all have mostly decent jobs and a bit of cash that we could deposit to get Ireland up and running again.. unfortunately the unsustainable debt of banks means that people are cautious in bringing their money in to Ireland. A Good Bank loaning to ordinary business and people is exactly what we need.

  29. pauline

    We’re not screwed.. we’re in the same situation as always.. where the people like in this forum who are sensible are being ruled by the people who are more interested in who’s funeral they should be attending and feathering their own nest rather than Ireland.. we need 1. To get people together.. ie a forum/organisation where small new businesses can access high quality marketing/business knowledge. So the makers (functional) and business (financial and sales) people can help each other. 2. Get funding.. Good bank/Investment fund. Diaspora. 3. Marketing.. hey we have people in every country of the globe…

  30. molly66

    In two thousand and six I bought a cottage in Meath I bought it for two hundred thousand, I spent one hundred thousand on it after one year I sold it for four hundred thousand.
    I spent the profit on holidays I enjoyed the money ,the point is the bank where throwing money at me if I wanted it, the bank manager use to ring me up and say do you need to change your truck,do you want a loan,would you not buy another house and so on .
    Where are these people now,it would be very easy for me to be up to my neck in a sea of depth thanks to B O I am I glad I did not take them up on the offers,I feel sorry for the people who did but you see the banks can’t have there cake and eat it.
    If a bank was a dog and it bit it’s feeder you would but the dog down well we feed the banks,

  31. redriversix

    Morning All

    I have come to the conclusion that Senior Civil Servants run this Country,not the Elected Governments.

    Governments come and go , but Senior civil servants are for life, they are the ones with ALL the information.They inform Newly elected Governments what they can and can’t do after they come in to office.

    Senior Civil servants seem to be the ones cultivating long term relationships with their EU partners.These are the People , the EU know are in for the long haul and who do not change when a Government does,therefore it is far better to groom the civil service because they are always there and if they do “leave”their is ample opportunity for them to progress further in Brussels.

    I believe Government is now corrupted beyond redemption as the policy’s they follow are clearly insane,yet they insist it is correct.

    They are going to pay a Anglo Bond of 1.25 Billion euro next week yet they slash and burn or health and education system.

    There is now clear evidence of control of our National Broadcaster.Any prior rating agency cuts to Countries or Banks was usually followed by RTE by debate and extensive reporting,biased or not….yesterdays coverage or lack of was a clear indication I have seen of a order NOT to mention to much about Countries recent downgrades by S&P.

    There was VERY little reporting or debate about it yesterday.

    But the Governments are playing on the APATHY OF THE PEOPLE and they are very comfortable in the fact that most people could care less until it is too late.

    What is going on is the greatest crime of our time,and we, as a NATION are doing nothing…. apart from a few exceptions,but a lot more action has to happen before you will see Citizens back on the list of priorities.

    But I believe,there will be very little action because Apathy and FEAR are Rampant……….

    Treat every EURO as a prisoner

    Best

    RR6

    See Kevin Cardiff for further details………….

    • March On To Ballyhea Protest – where Real People Matter ………….outside Church at 10 am Charleville , Co. Cork…..next SUNDAY

    • molly66

      The train that is thundering down the tracks is about to crash and then the sleeping Irish might wake up.

    • bonbon

      FYI U.S. CALLS OFF LARGEST-EVER JOINT MILITARY EXERCISE WITH ISRAEL

      After much hype about the magnitude and importance of the upcoming U.S.-Israeli joint “deployment” known as Austere Challenge 2012, the Israeli media announced today that the exercises have been called off by the White House — and may be cancelled altogether. No official statement has been put out by the White House, and the Defense Department has not replied to a questions from EIR. The Israeli media says that the official reason being given by the U.S. for the delay is “budgetary.”

      Could be deception, but the heat over Iranian scientists being killed is very likely.

      • Tull McAdoo

        @ bonbon, just as a matter of interest what has your post just there now, got to do with what redriversix, john allen and molly66 were writing about.

        redriversix was writing about senior civil servants, john allen suggested joining the protest that is ongoing down in cork……

        Then you add stuff about the US/ israel and iranians being assinated which is as far from the original points being made by redriversix as the man in the bloody moon.

        Now whats your game mate? Are you some sort of lurker thats come on here to disrupt or are you just some of disrespectful scatterbrain who likes interrupting with whatever bit of nonsense that happens to enter your head?

        • @Tull

          Welcome back .We all thought you were on the beach over Christmas .Whats up ~~?

          • Tull McAdoo

            I had a couple of weeks off over the Christmas John, spent some of it helping some friends clean up after that awfull event in Christchurch.

            Im back on the forum here to see what’s to be done about Irelands mess.

            Jesus, John we have Irish families arriving here now in Perth. My wife who is also Australian summarised it well the other day when we were flying back from New Zealand, when she said they were ” on the economic run”.

            Maybe I owe bonbon an apology for my angry outburst above but as I see it people in ireland really need to focus on the problems at hand and not allow themselves to be distracted by other events.

            To my mind talking about Glass-Steagall, Obama and all that is just as distracting as Bertie and his line about the Lehman Brothers.

            I spoke to a lady last week down in O’Reilly’s pub in West leederville, who up to Christmas worked for the HSE and was now living in Perth with her husband and children, looking to get back on their feet.

            She told me that that the HSE was packed to the wrafters with FF cronies who new nothing or cared nothing for the health of the people of Ireland. After they hacked off a large chunk of the budget to satisfy their own self-interest, whatever remained would go towards front line services.

            I just cannot make the connection between that story and Glass-Steagall and the Economics of the 1930′s.

            I’ll leave you John with a piece sometimes called “Lament for Limerick” but in this case might be a Lament for ireland…..

            http://www.youtube.com/watch?v=9LLB4LRQ3Jk&feature=related

        • bonbon

          Just in case someone thinks apathy, fear is the only problem, we have a complete breakdown going on and as many here have noted a real war danger.

          Obama will go for it and this is extremely relevant. We face not just problems with civil servants, deficits all cosy comfortable themes.

          We were within an inch of war over christmass, thank god delayed.

          Since we are in a transatlantic crisis Eire can in no way claim isolation.

        • bonbon

          I agree everyone is disgusted with FF/FG/LP but instead of naming that nausea cronyism think again. It is the instinctive human reaction when people entrusted with the public good refuse to actually take action for that good. This is anti-human.
          An essential part of this is to split the banks, set up commercial banking, and progress. Glass-Steagall is the name of this action for the public good.
          One can point the finger at all kinds of relatively minor issues, vice, moralizing, hoping for some “spontaneous” good (Hayek et al), but this is the real issue – public good as a knowable policy.

        • @ Tull

          Its great to read your aoulde sod opinions as seen from the western cape in OZ and your on-site experience of the allied irish forces landing nearby …it sometimes seems to far away for us to decipher properly what is really close for you .

          Keep us updated with real facts where it matters .

  32. bonbon

    Downgrading the Bailout Fund: It’s All Over

    Tim Geithner’s and Barack Obama’s loudly demanded “big bazooka” bailout fund for Europe is a buried relic after S&P today downgraded the bailout fund itself, the European Financial Stability Facility (EFSF). That bailout fund, which Geithner wildly promised could be “leveraged” to EU2 trillion, now {may} have a capacity to raise EU300 billion or so, and that goal is fading fast. Since bank bailouts in Ireland and Portugal have already used part of the EFSF, the real “bazooka” is a EU100-200 billion pistol.
    The downgrades of nine European countries on Jan. 13 essentially busted the British-favored EFSF, because France and Austria lost their AAA ratings which were backing it, leaving it with just four guarantor nations — Germany, Finland, the Netherlands, and Luxembourg. When Fitch and/or Moody’s follows S&P in downgrading the EFSF, it will also have to pay higher interest rates for what little it can raise.
    The irony pointed out by Bloomberg and other financial wires today, is that the EFSF, even when it had a remaining bailout capacity of EU300 billion, was already far too small to make a dent in the ongoing debt crash — so its downgrade and shrinkage are really hardly worth discussing now. The euro debt system is finished.

  33. bonbon

    Just to give a reality check on what a financial crash means imagine 50,000 electricity disconnections in 1 week.

    Athens Indignants Return to Syntagma, Civil Disobedience and Strikes Continue

    As Greece teeters on the edge of default, the Greek mass strike is reawakening. For the first time in months, an estimated 2,000 Indignant protesters returned to Syntama Square Sunday night, to resume the anti-austerity protests. Following the massive police attack on demonstrators last July, the demos had tapered off and ceased by the end of the summer.
    Labor unions have announced new strikes, with the Athens Labor Center (EKA) closing down the Athens metro (red and blue lines) in a 24-hour strike on Jan. 17. The electricity workers union GENOP announced that it will refuse to deliver disconnection orders to homes that have not paid their bills, because the government has added on the new property tax. In Crete, GENOP workers demonstrated at the offices where the electricity bills are processed. The union has revealed that 50,000 disconnection orders are expected to go out this week, and renewed a call to its members not to cut off power to pensioners or to low-income families. Some 1.5 million bills remain unpaid, while another 250,000 are past due.
    The latest opinion poll shows that the ruling Pasok party is slated to do even worse than Ireland’s Fianna Fail party, polling no more than 14.5%. If elections were held, Pasok would get no more than 40 seats, compared to its current total of 160, out of the 300 seats in Parliament, according to the polls. The conservative New Democracy (ND) polled 30.5% which would give them 130 seats. The left-wing parties have significant increases with the Democratic Left having 13.5%; the Communist Party (KKE), 12.5%; the Radical Left Coalition (Syriza), 12%. All these parties won far less in the last elections. The right-wing Popular Orthodox Rally (Laos) had 5.5% and the EcoGreens, 4%. Moreover, 9 out of 10 respondents said they feel socially insecure, while 62% do not trust the unelected Prime Minister Lucas Papademos and his government. The opinion poll was published yesterday in {Kathimerini} and conducted by Public Issue.

  34. Colin

    Great article David. Bring on the layoffs for bank staff. Why should they have had 5 more years of work than people who were let go in the construction industry in 2007? And give them only the minimum statutary redundancy. Bring in Lyndon Jones as a lifestyle adjustment consultant to advise them of the benefits of austerity. And boy do they need to take the austerity medicine, as they have been far too insulated for far too long.

    This article is good news, it brings hope to those who have suffered the most and lost the most.

    • Deco

      Banks are the ultimate example of private sector profits retained, private sector losses socialized.

      Clowns who lied to ordinary people in the binge era, and accumulated bonuses, from creating this mess, are now living like public servants.

      People are not angry enough. It is a disgrace. I blame the Irish media for conditioning people to feel anger, despondency, but to never rationalize what is actually going wrong.

      The people are being emotionalized into a state of paralysis so that they will not rationalize how they have been conned – by – “our advertising sponsors”.

      • bonbon

        Not the press as such, but economic think tanks with deep pockets using press organs. The “paralysis” is waiting for the Godot of “spontaneous order”, a classic Hayek doctrine.

        The notion that our nation-state be cmmitted to progress with healthy banking is banned – and rejected by even marchers, or Occupy, by a 30 year brainwashing into apparent powerless – this is the conservative revolution in effect.

        Railing against this, while clinging onto the very source is pure theater.

        • Lord Jimbo

          “Get on the ladder before it is too late”, that was a big favourite of commercial economists, real estate people and journalists wokring in the main$tream media, many of whom having been throwing their arms up at the state of the country for the past 3.5 years and yet can’t see their own hand in it. As one Greek philospher said, speak the truth and prepare for your death.

          As the joke goes about the Irish Times, a property paper with a news supplement.

          • bonbon

            I like that – main$tream media.
            But the reason they cannot see what they have done is Ferguson’s Invisible Hand which governs the so-called free-market of cartels.

    • paddythepig

      I agree Colin.

      The only thing David didn’t mention was the over-employment and over-payment by the State of it’s employees.

      The state needs to deleverage too. That has been obvious from day one.

      • StephenKenny

        And who will organise and administer that particular civil service operation?

        • paddythepig

          Public service .. not just civil service.

          Judging by current and previous actions – nobody will do it, certainly not the politicians – unless the money for this is taken off them.

  35. coldblow

    David

    OT, but (re a recent article of yours) there’s an amusing quote in last Sunday’s Observer from Boris Johnson (if the source is trustworthy, of course).

    http://www.guardian.co.uk/commentisfree/2012/jan/15/nick-cohen-astor-cameron-taxes

  36. uchrisn

    Of course the banks should have been allowed to fail with the creditors losing.
    When in South America there was a very similar case of a failed company – a banana plantation. Failed due to its poor and reckless management. The banana plantation was bailed out with money set aside for diaster relief.
    The reason it was bailed out was to protect insiders in the country, it was as clear as daylight.
    If the bana plantation had been allowed to fail then all the jobs would be lost – that was the offical line. Not true. The bananas were still there in the morning so someone else could have come in bought up the banana plantation, managed it properly, hired the people and made it a success.
    The reason the Irish failed banks have been bailed out is to protect Irish insiders. The people have been told a miriad of lies for years for why they need to be bailed out and each has been proved worng with time.

  37. [...] This very interesting short essay was posted over at the Irish website davidmcwilliams.ie yesterday.  It’s worth skimming…and I thank reader Declan Barrat for sharing it with us.  The link is here. [...]

  38. molly66

    The way things are heading we will be living on some sort of food aid the the army truck will come with food and we will have to fight for our rice if we don’t die from winter cold we will die from starvation maybe then the government might heed our warnings.

  39. [...] article at source:http://www.davidmcwilliams.ie/2012/01/16/irish-banks-will-shrink-and-shrink Advertisement GA_googleAddAttr("AdOpt", "1"); GA_googleAddAttr("Origin", "other"); [...]

  40. bonbon

    We had Glass-Steagall until repealed by Larry Summers et al. That loaded the gun with live ammo known as derivatives. Plutonium ammo! It is not difficult to see why WallStreet/London so badly needed that law out of the way – Mandeville’s economics just could not work! The private vice of derivative trading just could not produce public good! Well what has it produced?

    According to economists and politicians, spontaneous good must appear at any moment from the vice of hedge-funds totally out of control. They are blue in the face waiting. But to take explicit action – not allowed because spontaneous recovery must be unknowable, therefore it cannot be policy!

    Result total paralysis, icy indifference, and paying off mobsters.

    • bonbon

      @Realist : No idea how that got double posted.

      • Realist

        No worries.
        In essence I can conclude our discussion this way:

        bonbon – national bank aka Hamilton, fractional
        realist – 100% reserve banking without central bank
        bonbon – credit expansion
        realist – no credit expansion, only saved money in time deposits can be lent out
        bonbon – central governance, no competition, public order
        realist – liberty, competition, no subsidies, no bailing out

        • bonbon

          bonbon – absolutely no bailouts
          bonbon – hamiltonian national banking
          bonbon – credit system, not monetary or gold standard
          bonbon – common good meaning progress and funding
          bonbon – no liberty for banking cartels with exotic competitive instruments

          • Realist

            From wikipedia about Hamilton’s national bank idea:

            Fractional – credit expansion – cause of booms

            “the Bank of the United States might technically possess $500,000 in “real” money that it could, and would, use as security to make loans up to its capitalized limit of $10 million.”

            New government bank or central bank function????

            “the primary function of the Bank would be commercial and private interests. The business it would be involved in on behalf of the federal government–a depository for collected taxes, making short term loans to the government to cover real or potential temporary income gaps, serving as a holding site for both incoming and outgoing monies–was considered highly important but still secondary in nature”

            How will other banks compete with national bank from the government (of course independant) ?

          • bonbon

            Hamilton was primarily concerned with the US War of Independance Debt and how to turn it into bonds. We could look at the legitimate debt ( dumping the derivative gambling debt ) as a kind of economic war debt, and use Hamilton’s method. This will be the biggest discussion in the recovery.

  41. Stiofan

    Dear David, I realise that you feel ultimately this recession will end. You believe that all recessions do. Any yet, this is not a recession. A great many people see this as a watershed event. I believe that things will not return to ‘normal’ after this ‘recession’. I feel that fundamental change is at work. Shall we stop calling this a recession?

    • Stiofan I agree, this is not a recession!

      Now the 80′s – that was a recession! And the 30′s – that too was a recession even a depression! But you’re right this is no less than a top down stranglehold on what could easily be a viable economies!

      Yes we’re spending more than we take in and sure we have to reduce deficit.
      (Which of course was mainly brought about by opportunistic political bribery of the electorate – Ahern and Cowen managed to more than double the price of running the country when inflation ran at a record low)
      But clearly at this rate killing the patient is unavoidable and such a meltdown will lead to all sorts of extreme and dangerous scenarios.
      How can the people we elected specifically to alter our course continue to ignore the precipice? Unless of course the precipice is now our intended destination?
      I saw a lot of flak flying over Sean Quinn recently and rightly or wrongly Anglo have had their revenge and made sure that Quinn doesn’t start another enterprise?
      Now I know that it’s illegal to trade when you’re insolvent and Quinn must step down. But who’s even more insolvent than Quinn?
      Well our pillar banks for a start and don’t mention Anglo.
      No this is not a classic capitalist recession where the insolvent go belly up – This is a selective recession where the most insolvent are actually calling the shots.

      This is the unbearable castor oil and when we’re sick of it and on our knees we’ll be offerred a least worst option which we will then appear to freely choose and vote for!
      It’s a Lisbon 3 plus!
      It’s a takeover!
      It’s a coup!
      And the one thing that this certainly is not…Is Progress!
      I think Stiofan that the hand of history is upon us and if the right people don’t wake up soon the very fabric of our society may be damaged way beyond repair.
      In 1933 a certain little man with a little moustache was actually elected to lead his country. As his party machine propagandised, pontificated, bullied and spun, people began to accept/believe some very strange logic.
      The madness grew slowly and insidiously – Why?

      ……Because people began to accept strange logic – even though instinctively they knew it was wrong!

      Peculiar too is how the 80′s recession didn’t attract the same suspicion as “this one”.

      But then again – that was just a recession!

      • Cheers with chalices Paul

      • bonbon

        The 1930′s depression was stopped by FDR who later defeated the mustache. And the key component was Glass-Steagall. This time we need a global Glass-Steagall immediately to control finance. Then we need massive high-tech projects to progress. These 2 components will get us out of this.
        Thirdly we need Hamiltonian Banking to support these projects.
        It is not hopeless. And many have woken up.

        • Realist

          Last thing we need is another government bank.
          Taxes are coerced from us by government.
          Do we want to have our saved money coerced too by pure government bank (like NAMA, BOI and AIB are not already government banks) ?

    • bonbon

      I agree this is not a recession, rather a breakdown, never before seen, except during the Bardi bank collapse just before the Plague. I posted the physical breakdown effect just this week on Greece above. This is not some kind of “business cycle”.
      Secondly it is transatlantic to begin, which will ruin China if allowed to occur.

      So we have a global economic breakdown crisis.

      That is why I go after the Austrian school, Friedman, Keynes etc because these offer no solution nor explanation whatsoever. I.e. standard textbook economics utterly fails to even begin to understand this. In fact this very theory has produced this mess.

      The nearest analogy is the first attempts at supersonic flight, where vehicles shattered because of a refusal to deal with the real flow. Parts of the aircraft experienced supersonic flow, while others subsonic setting up for shock wave destruction.

      Just going faster with QE 1,2,3, ECB hyperinflation guarantees breakup.

      Come to think it this is like the Euro breakup.

      • Realist

        Do not put austrian economics into the same basket with others. They were fighting against Keynesians and Monetarists from the beggining.
        They were marginalized for the century while they predicted every crisis properly.
        This is why Austrian economy is getting so much attention recently as Keynesians and Monetarists failed.

      • bonbon

        I have been reading that Hayek obituary by Simon in detail again. It is a very concise summary of Austrian School economics, which the wiki says is “not mainstream” strangely enough. Simon knew Hayek well.

        It is very striking that the so-called limit of knowledge as an argument against enacting policy, is almost exactly Kant’s critique of pure reason.
        I would recommend all have a critical read, but to follow up references, especially Mandeville.

        Missing here is the Mont Pelerin society set up to promote these objectives whose membership crosses seeming boundaries showing a basic agreement in principle – the nation state and national banking must be eradicated.

        • Realist

          It is 1 article not telling anything negative :)
          You are pathetic and lazy basing argument on one positive article about Hayek, and dimissing the whole Austrian economy school of thought.

          I spent months and months reading treateses with more than 1000 pages from Mises and Rothbard called: Human Action and Man, Economy, and State, to not mention other many books.
          And now your are telling us all that austrian school of thought is stupid because of 1 article that is actually positive, but your head somehow rearranged it negatively.

        • bonbon

          I too spent ages trying to go through the confusing threads, which is why I find Simon’s single page summary extremely refreshing. Otherwise one gets lost in a maze. Its even more labyrinthine until one sees the basic agreement among Mont Pelerin groups. It simplifies things.
          I have read Kant, Mandeville, and am stunned to see these as core Austrian School pillars.
          If I was lazy believe me I would not see these links.

        • bonbon

          This might seem OT, but I had a discussion recently about Homeopathic medicine. I dug out the founders thesis, as summarized by a scholar. There it is explained that since the cause of disease can never be known and the action of medication neither, we must tackle an unknowable disease with practically non-working medicine. Hence the well known homeopathic stuff. Hahnemann the founder based all on Kant, and Kant is required reading for practitioners.
          http://www.google.com/url?sa=t&rct=j&q=&esrc=s&source=web&cd=2&ved=0CCQQFjAB&url=http%3A%2F%2Fwww.feg.unesp.br%2F~ojs%2Findex.php%2Fijhdr%2Farticle%2FviewFile%2F128%2F127&ei=wOEWT8GjKZH8sgb6k41K&usg=AFQjCNGJgGnyUllnjCNYFDPZX386NmhFxA&sig2=3Z5-cBclpwgW46egljO-eA

          I find this kind of thinking, Kantian, in economics too. For instance the very title of Hayek’s last work, Fatal Conceit, says it all.
          No wonder we get homeopathic economic medicine when we need antibiotics!

          • Realist

            Threads are confusing if you do not understand them, of course.
            This is why you just jump to the article that is actually positive and make it negative in your own head. Article did not say anything negative.

            You said yourself that you do not know what caused this crisis. Austrians clearly state that it is credit expansion with the help of central banks and their low interest rates pumping money in the economy.

            You are just wrong about austrians, but never mind.
            Basic pillar is “human action” and it all starts from there.
            Your governmental, taxation, central bank ideas caused all this mess, and austrians are total opposite of your ideals.

          • bonbon

            The confusion arises when Keynsians argue with Hayekians. This apparent noise resolves itself when one finds they actually agree on different methods to erradicate the nation-state.

            The Mandeville reference as a key Austrian School pillar is in the Simon article. Of course Hayek would call that positive, but the title of that particular 1705/1714 book is unsettling to say the least.

            If one lumps the Mont Pelerin objectives together one finds the reason for the crisis – the free-market and limits to growth ideologies: 40 years of no real physical economic growth hidden until now by derivatives.

          • bonbon

            Leading Austrian School economist, and Mont Pelerin Society Founder, Hayek traced his own philosophical roots to the early eighteenth century Satanist, a founder of the Hell Fire Clubs well known in Ireland, Bernard Mandeville. In a lecture he delivered at the British Academy on March 23, 1966, von Hayek lauded Mandeville as a “master mind,” as the inventor of modern psychology, and as the true intellectual forebearer of David Hume, Adam Smith, Jeremy Bentham, Carl Savigny and Charles Darwin. Von Hayek argued in his Mandeville lecture that Mandeville’s poem, “The Fable of the Bees,” was perhaps the greatest philosophical treatise ever composed. He credited Mandeville with inspiring Adam Smith’s argument for the unbridled free market.

          • Realist

            You must be a politician working in labour party in some causy government job.

            I finally found from where are you coming from and that Hamilton manifesto :)
            http://www.larouchepub.com/eiw/public/2009/2009_1-9/2009_1-9/2009-9/pdf/80_3609.pdf
            So La Rouche is your idol, nice person really, accused of fascism :)

            Anyway socialism, communism and fascism are totalitarian regimes, where the current democracy is going, instead of libertarian free society, with more and more laws and more and more government and their spending.

          • bonbon

            Just to quote Mandeville’s famous poem so beloved of Hayek and many others – The Fable of the Bees, Private Vices, Publick Benefits 1714 :
            ——–
            . . .Thus every Part was full of Vice,
            Yet the whole Mass a Paradise
            Flatter’d in Peace, and fear’d in Wars
            They were th’ Esteem of Foreigners,
            And lavish of the Wealth and Lives
            The Ballance of all other Hives.
            Such were the Blessings of that State;
            Their Crimes conspired to make ’em Great;
            And Vertue, who from Politicks
            Had learn’d a thousand Cunning Tricks,
            Was, by their happy Influence,
            Made friends with Vice: And ever since
            The Worst of all the Multitude
            Did Something for the common Good.
            ———
            Mandeville argued that since man is inherently evil, subject to rage, violence, greed, the best society is the least intrusive. In fact to impose natural law is the seed of destruction.

          • bonbon

            To see Virtue made friends with Vice is to describe FF, FG/LP right now.

            By God, I thought the Hell Fire clubs were a historic curiosity. Now I find their founder admired by economists and exactly what’s happened in Eire in a poem of 1705!

          • bonbon

            This gets even more disturbing – We see Benjamin Franklin’s total opposition to Mandeville’s expressed politick with the Common Good enshrined in the US Preamble, the guiding principle of Hamiltonian Credit banking. And Hayek expresses absolute opposition to this.
            What is then libertarian other than opposition to the very founding principle of the USA? Fascism, Communism are all opposed to this principle.

          • Realist

            You are either government troll or political lunatic.
            I am stopping feeding your lunacy.

    • Morning Stiofan,

      I realise that this one is very different, but it is made much worse by the policies we are following. Large scale debt forgiveness would cut short this recession/depression.

      Even as is, I believe that we will see activity by the beginning of next year in property as yields head north and people look to chepa property as a store of wealth and as a source of income. I know that is an unpopular thing to say, but I believe it to be likely.

      This will give the fools the sense that things are moving in the right direction but will only relect the direction of lazy capital.

      Best,

      David

      • StephenKenny

        Would debt forgiveness really work? Really?

        Surely, as you imply, people will just pile back into property again?

        This new debt generated ‘growth’ will be on top of the downside created by the debt forgiveness that a whole generation of pensioners, somewhere, will have lost half their pensions, and a whole generation of young people will face significantly lower standards of living as they grow up.

        Debt forgiveness is not a free lunch. There’s no such thing (except, perhaps, the petrodollar, and even there it’s questionable).

        • bonbon

          Debt forgiveness has rings of absolution. The creditors right now think they are gods, and have taken out default insurance so they believe they can dictate terms in Greece. I wonder what the insurance entities think.

    • StephenKenny

      There seem to me to be two types of national problem, at the moment, with each effecting the other to some extent.

      Firstly, there are countries like Germany, France, and so on, who have international banks who got involved in the madness part of the financial system, and have massive problems that their tax payers will have to pay for, in one way or another. These countries have essentially sound, balanced, economies who will have a recession of a relatively normal kind.

      Secondly, there are countries like Ireland, Spain, Portugal, UK, most eastern European countries, and the US to a large extent, who’s entire economies are a complete mess, endemically, structurally.
      These countries have a far more difficult situation to get out of, firstly because they have to get their entire populations (OK, almost entire) to realise that you can’t have an economy based on “charging each other ever more for taking in each other’s washing” (Peter Ustinov, I think). And secondly that they have to do things, make things, that other countries want, so they can afford the energy, food, and manufactured goods, that they want.

      This second situation, it seems to me, is very far removed, and very much more difficult to solve, than the first.

      • bonbon

        We have banking problems, being shoved on nations by a cartel intent on surviving no matter what.

        It is a political issue to label this national.

        That is a choice, which will bring down any government that tries it ala FF with the guarantee.

        The cartel will try to force it using various methods that become more desperate with each ratchet down.

        We therefore have 1 problem, the cartel. Can Eire then act in unison with “stronger” nations to bust this demon?

  42. Peter Atkinson

    Folks this is not a recession and don’t let anybody tell you otherwise.We are entering what can only be described as the long dark tunnel of depression.Nobody can find the light switch and there are many exit points and as we know at present the fools on the hill have little or no chance of lighting the way.

    You need to talk to the older generation to have any insight into what is ahead for us all.I had the pleasure of listening to Niall Tobin on Miriam Meets on RTE Radio 1 last Sunday and I strongly recommend that you you listen to it too.There is a man who entertained me and many more throughout the years and to listen to his comments on the future of this country summed up my feelings.

    Change only comes about when you have the stomach for it.We know that the current incumbents have neither the will nor the inclination to rock the status quo so please stop voting for these party political hacks if you really want new beginnings.

    I personally do not care what color or creed my elected representitive hails from nor do I care if he hails from Mayo,Mullingar or Mullinavat.What I do care about is that he has some conception of what is required to rip up the old guard blueprint which has clearly failed the majority, and present us with a credible alternative for survival.Otherwise piss off back to the rock they crawled from under and stop acting like snake oil salesmen.We no longer believe in any more of your bullshit quick fix election promises.

    • bonbon

      There is hope. The new President was elected by a people brutalized and set up to be robbed. The famous tv interview shows how suddenly things can change.

  43. bonbon

    Some news from half-way to Australia which shows the fighting spirit to be heartily recommended in Dublin.
    Malaysia was a Tiger too, and ruined by George Soros a few years before Eire.

    Malaysia Prime Minister Najib Echos Ex-Premier Mahathir, Speaking Against Economic Terrorism

    Malaysia’s Prime Minister Datuk Seri Najib Razak gave a surprising speech before the first “Global Movement of the Moderates” conference in Kuala Lumpur, comparing the “sharp-suited” bankers and economic “hitman” with religious extremists and terrorists.
    Najib has pushed himself forward on the world stage as representing moderate Islam, moderate politics, moderate economics, “moderation” in general, to demonstrate that Islam does not tolerate terrorism, but often seeming like a code phrase for accepting the status quo.
    But Tuesday, in his speech, moderation became a slashing and on-target attack against the out-of control financial elite.
    Excerpts: “Quite simply, we can no longer allow the workings of the markets to be value-free or value neutral. Markets, we all know, are the only route to rising global prosperity and sustained stable growth, but we must do away with the unjust, unfair outcomes they can produce when left unchecked, and with the kinds of reckless economic practices that brought our global financial system to its knees.”
    The Prime Minister cited how “massive overleveraging, mind-boggling credit default swaps, subprime lending like the monstrous creation of some crazy scientists, these new and poorly understood financial practices rampaged out of Wall Street and left the devastated lives of millions in their wake.”
    “But what of the men and women, the bankers and the traders, who went about their work with such abandon and with so little thought for anything beyond their own enrichment?… A line of mug shots of the culprits would look very different to the `rogues gallery’ of extremists we have grown accustomed to in recent years — sharp-suited, desk bound and clean shaven rather
    than dark skinned, bearded and combat-trained,” he said.
    Najib said that “this flies in the face of everything we have been told about extremism but it also raises the important question: what do extremists look like? How can we come to know them? The answer, of course, is that extremists, like extremism itself, take many forms — and we can only know them by their acts.”

    Ex-Premier Mahathir Mohamad expressed the same idea in perhaps somewhat different language when he was fighting to save Malaysia from the likes of George Soros and Al Gore during the Asian financial crisis in 1997.

  44. bonbon

    Does this poem describe Ireland or more exactly the EU and USA today?

    Bernard Mandeville, so beloved of many famous economists — The Fable of the Bees, Private Vices, Publick Benefits 1714 :
    ––—
    . . .Thus every Part was full of Vice,
    Yet the whole Mass a Paradise
    Flatter’d in Peace, and fear’d in Wars
    They were th’ Esteem of Foreigners,
    And lavish of the Wealth and Lives
    The Ballance of all other Hives.
    Such were the Blessings of that State;
    Their Crimes conspired to make ’em Great;
    And Vertue, who from Politicks
    Had learn’d a thousand Cunning Tricks,
    Was, by their happy Influence,
    Made friends with Vice: And ever since
    The Worst of all the Multitude
    Did Something for the common Good.
    –––

    Believe it or not, this is the free-market, libertarian, conservative revolution, central document cited again and again as the inspiration of Adam Smith whom Marx referenced as the essence of capitalism.

    Author Bernard Mandeville was a founder of the Hell Fire Clubs which spoiled the Irish landscape.

    We have a hellish collapse going on right now, expecting common good to arise spontaneously from vice with no intrusive natural law.

    We need capitalism and banking of the common good.

  45. rebean

    Regardless of bank layoffs which seem inevitable I wonder can anyone enlighten me on what exactly the tax payer gained from the bailout of AIB. They got a truck load of money to throw into a hole of debt. There was no conditions to the handout and the fatcats continue to enjoy their massive salaries and join golfclubs at the taxpayers expense. Correct me please if I am wrong or a little harsh I would love to hear that they actually took a pay cut ( the top brass not the lower paid )

You must log in to post a comment.
× Hide comments