July 30, 2012

Reading the tealeaves

Posted in Sunday Business Post · 177 comments ·
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In terms of reading the economic tea leaves, last week’s cup of data has left behind a perplexing residue, with some good bits, some bad bits and lots of confusing bits, which could go either way. However, it is a crucial week because the evidence suggests that something very odd is happening in Ireland. The Irish bond market is decoupling from the Irish economy. That sounds weird, but let’s dig a bit to explain.

The news from the financial markets – Ireland being able to borrow again – is unambiguously good. There are a few gripes, like the interest rates, but it would be churlish not to see this as a positive – and indicative of a likely bank deal which will see a dramatic easing in the overall debt position of the state.

Obviously, there is a long road still to go, but the markets clearly believe that the bank debt mutualisation deal hinted at in Brussels last month will be delivered.

So far so good, but at the same time, the data from the real economy was awful, and the news from the banking system, as well as local credit conditions, is equally desperate.

In another development which will form the background music to the next few months, ECB president Mario Draghi has signalled that he is going to take the Germans on and has fired the opening salvos in what will prove to be a titanic battle for the hearts, minds and balance sheet of the ECB. He will buy government bonds directly.

So it has been quite a week.

Let’s deal with the decoupling idea. For the markets to come in behind a bond issue of a country still in the IMF’s emergency ward would usually mean that the patient is making a robust recovery. But this is not the case at all. In fact, the evidence presented last week shows that the Irish economy – the real economy, where most of us work – is still getting weaker.

This should cause yields – the interest rates on our bonds – to rise and the markets to say: “Thanks but no thanks, we’ll pass this time.” But the opposite has happened. How can that be?

Lets examine this week’s real economy tea leaves.

For some years, this column has been making the point that we are in a balance sheet recession. Many Irish peoples’ balance sheets are broken because, on the one side, they have assets – houses, land and apartments – which are falling in value but, on the other, they have debts which are fixed.

At a time when income is falling due to rising unemployment and taxes, this means the debt burden is getting heavier every day relative to income.
As a result, people with savings are saving even more. Those with debts are trying to pay them off. The same goes for companies. Ireland’s savings ratio – the amount the household and corporate sectors are saving – has exploded.
Latest data for the first three months of the year – looking only at the household sector – shows that Irish people are saving more and more, or paying back more and more debt, or both. The savings rate has increased markedly, from 11.2 per cent of gross disposable income in the first quarter of 2011 to 14.2 per cent in the first quarter of this year.

This was the highest first quarter savings rate registered since the figures were published. Just to give you an idea of the shift: in 2007, we were borrowing 5 per cent more than our incomes.

This causes an old-fashioned liquidity trap, where monetary policy doesn’t work and where it doesn’t matter how low interest rates go – because people aren’t borrowing and banks aren’t lending. The liquidity trap is made worse by vicious deleveraging, which is destroying asset prices.

Given that, even in an open economy like Ireland, most of us are employed in the domestic sector, your spending is actually my income and my spending is your income. My income is also the root of my savings. But, as Keynes observed in the paradox of thrift, if we all save at the same time, who is spending. If no one replaces our spending, then demand will fall and fall.

Retailers react to falling demand – retail sales in June fell by a huge 5.5 per cent year-on-year in June – by cutting prices to coax us to spend. But the very fall in prices convinces people that prices will fall further and the bargains will come next month, or next year. So the laws of economics are turned on their heads. When prices fall, demand doesn’t go up, it goes down.

This causes unemployment to rise. Last week, CSO figures showed that over 82,000 people under the age of 25 were out of work in April 2011. This means that 39 per cent of people in the 15-24 age group are out of work. This comes on top of data last week on long-term unemployment, which rose to just under 200,000.
People don’t want to borrow because they have too much debt, and banks don’t want to lend because they have too much bad debt. Yet the deleveraging is destroying their capital base, too.

Again, the paradox is that deleveraging my balance sheet might make my position better, but when we all deleverage at the same time, we drive down asset prices further, demanding yet more deleveraging.

In the Irish banking system, we can see the paradox of deleveraging mainly via the fact that the ECB is presiding over the lowest interest rates ever, yet AIB has just increased its mortgage rates. The reason for this is that the banks need to raise margins on any new business for the years ahead to accelerate their own rate of deleveraging. The banks have to raise deposit rates to get more money in, and they have to raise margins across the board to make sure they are making money.

So the data from the real economy are terrible, yet the bond market is open for business. Why is this?

A rational conclusion must be that the financial markets see relations with the ECB as being much more important. If the ECB is going to open its balance sheet and buy bonds, which is the logical conclusion from what Draghi said last week, then it doesn’t matter that the Irish real economy is dormant.

As long as the Irish government sticks to the policy of turning the economy into a large debt servicing agency and the ECB gives it permission to do this by suggesting that Ireland will continue to “qualify” for support if necessary, then the bond market will stay open. But all the while the economy is actually getting weaker and weaker – not stronger and stronger, as you might deduce from a bond auction. Bizarre.

Just to mark your card for a scrap ahead, consider this: when Draghi said he would do “everything necessary to save the euro” last week, he signalled that he would take on the German lobby at the ECB because the only way he can save the euro is by buying Spanish and Italian debt directly. The Germans will, to use the vernacular, go ape. The Bundesbank has already issued a statement saying this is “problematic”.

Let’s come back to that titanic battle next week; we have enough to digest for now.


  1. The Joys of ‘thinking’ is profitable and tax free . Long live madness .

    • Can anyone see that what’s going on has long decoupled from economic principle or understanding but political strategy. Commenting on events in Europe with regard to the established Economic expectancies has long descended into futility. I appreciate David has to write two articles a week but the reality of events in Europe is far more central to the political arena in terms of it’s chief determinants.

  2. michaelcoughlan

    Hi,

    Another excellent article because unlike some previous ones which stated the obvious this one once again gives excellent strategic insight focusing on the cause rather than the symptom.

    Did the thought ever cross your mind about something else which has decoupled? Let me enlighten you. Since the Dail is more focused on turning Ireland into a debt collection agency and serving the agenda of financial imperialism because that’s what they are doing, they have decoupled from representing their voters, ie us.
    In a nutshell we now have a financial tyranny in place with a mandate from all of us in the fiscal treaty to put financial terrorists ahead of the interests of the citizenry of this great Republic.

    You stated in a previous article McWilliams that you could see no other way to increase liquidity in Europe other than for the ECB to buy government bonds. WRONG DAVID. Here is an alternative: http://en.m.wikipedia.org/wiki/WIR_Bank#section_2

    I am getting involved with a new let’s system being set up here to help save myself and friends from financial terrorists and will keep you informed. I hope McWilliams you see the point the Dali Lama is making when he says we need prayer AND actio. The time has come to stop writing and get off our arses and put in place systems which serve us and not financial tyranny.

    • hibernian56

      Is a parallel financial system allowed in this country? Surely the trough feeders in Revenue would have an issue with anything that deprives them of fodder.

      Just look at how the Credit Union system has been dismantled (admittedly again due to reckless lending).

      WIR sounds very interesting, but how would it work in reality? Would I deal with another entity in what I understand to be a balance sheet form of barter? How does one buy materials from an entity outside this system?

    • tonym112

      I was involved insetting up a LETS in Galway which has since lapsed. The hours in running it were too heavy – it wasn’t ‘electronic’ enough. Brixton now have a form of LETS which allows people to pay for goods/service using their mobile phone. You might try and link in with Transition town in your area as the goals are mutual.

  3. joe hack

    About time you finally admitted it, is all in the tea leaves there is no science in economics?

    The past week, tea leaves aside, it does show us that Ireland is been run by the banking systems not democracy.

    we are been held to ransom by a few people in a ratings agency and/or possibly some 28 year old coke head taking a bet on Ireland, maybe the ratings agency and the 28 year old use the tea leaves too.

    What will happen when these agency’s run out triple letters to use, eventually all countries will be at ZZZ which of course may as well be AAA.

    If a martian were to land IT would have to conclude that the planet is been run by a couple of gamblers and that the 7 billion people who reside on it are been terrorized by the gamblers.

    What will it take for us to take control of our own country? I am for the 2nd republic and a new money, who wants to part of it?

    • hibernian56

      Its not just the Ratings Agencies, but also on a human level the state supported Credit Bureaus that keep tabs on citizens too. Everything is rated, from the individual, to the company, to the State. Perhaps its a good thing that we citizens don’t have access to credit as easily as before.

      Do we really need that new shiny thing?

      As far as a states rating goes, I think its simpler when compared to a pig farm;

      How big is the trough?
      How much fodder is being added to the trough?
      How many snouts are stuck in the trough?
      How often do the fattened get sent to the market?
      How much is left over for the runts?

      The runts in every case are vital to the future of the feeding system. What happens when you have a small trough with too many feeders, limited fodder and a growing number of runts? It is inevitable that most of these runts will never fatten up and will be forced to look elsewhere for fodder.

      If you don’t go to the market often enough with your fattened produce, you can’t buy fodder. If you allow the biggest feeders to gorge until they have more fat than meat they are beyond the market and too heavy to move away from the trough.

      I find it all too east to draw a close comparison between the Irish State and a very badly run Pig Farm. Small trough, no fodder, huge number of heavy and useless gorgers and a growing number of hungry runts.

      I agree with the 2nd Republic on the proviso that ANYONE who had ANY involvement with government the 1st Republic (politicians, councillors, mid and senior level council workers, state legal reps, mid and senior level department employees etc.) are barred rom holing any form of public paying position.

      Micheal Collins commented on the forming of the “Republic” that he feared we were only changing jerseys, he was entirely correct.

      Let these useless gorgers join the private sector and learn what it means to earn their living.

      • Deco

        That analogy is sticking in my mind.

        For some reason it seems to explain a lot of the benaviour and the deceit that we have seen in recent years.

    • bonbon

      It will take this :
      As Crisis Looms a Pattern of Editorial Support for Glass-Steagall Emerges

      (LPAC, 28 July 2012) A major turn-around is emerging from some of the previously staunch opponents of Glass-Steagall bank separation. These shifts are no accident: People are getting the point that without Glass-Steagall there is no alternative to hyperinflation. What first took hold in London, when a group of senior bankers used the revelations of the LIBOR scandal to thrust Glass-Steagall into public debate, is now sweeping through the media inthe US in the wake of Sanford Weill’s “epic conversion.”

      Here is a run down of recent editorials for Glass-Steagall:

      Financial Times on Sandy Weill’s Damascus Road Conversion
      Los Angeles Times: We Need Glass-Steagall, Not Volcker Rule
      Crisis Also Converts The New York Times: Editorial for Glass-Steagall
      American Banker Magazine Says Weill’s Call Rivets Washington, LaRouche’s Glass-Steagall No Longer “Marginal”
      Finance Watch Publishes List of Bankers for Bank Separation
      Spitzer: Weill Finally Got It Right, Even If He Is To Blame


      With a breakup of the banks (and Euro), as Britain intends, republics will then have the huge challenge of deciding on the future, free of shackles. So get some economic science, not tea-leaves, in your agenda.

      You know where to look for it – I have posted it repeatedly. Everyone wants a future especially the youth in Spain for example.

      • bonbon

        If the Collins quote is exact, changing jerseys means staying in the past. I would like to hear more on Collin’s strategy. I have the distinct impression his death kept Ireland back in the past. All the symptoms are there – changing FF for FG, practical pragmatic utterances, and no hope for young people.

        • joe hack

          There is no one answer like that of Hollywood movie might message.

          My point above refers to a lack of community a community that is becoming less involved in it own decisions as the bursar is now in control of the committeemen and the community that elected them

          So changing the committeemen has little affect as they have little by little, steadily given power to the bursar a privatising merchant who launders drug moneys who now in full control of the mess it created this leaves only one solution for the community.

      • Tony Brogan

        In as much as the media is controlled, bought and paid for by the monied elites there is no Pree Press.

        This raving about Glass-Steagall is a set up, a white wash, a pretence at a solution.

        They, the elites will give us glass Steagall and proclaim the problem is fixed.

        In reality it is the same old same old and we will all have been duped once again.

        The central problem is central to the solution or a beginning of a solution. It is the central bank.
        All countries with a central bank lose control of monetary policy and lose sovereignty to the bankers.

        Remember the quote “I care not who makes the nations laws if I CONTROL THE MONEY SUPPLY.”

        Well they still will control the money supply. The central banks will continue to inflate the supply causing the dislocations and misappropriations in the ecomomy . We will all be even worse off financially and into the bargain will have taken even more regulation and controls.

        THe start is to get rid of the central banking system. (Be careful, as You will likely die for trying; thats how important it is to the money powers.)Reclaim sovereignty over the courrency and the nations money supply.
        Set up a sound money system and do not listen to the nay sayers who say that this time is different and gold and silver is not money.

        go and get some for your self as it is the only thing to be done by an individual to protect themselves from the ravages of central bank induced inflation and a failing economy.

        dump your debts and save. Never mind the collective concerns, save yourself first and then you can help others.

        All else is distractive from the main issue.
        Beware the bond market it is the largest bubble yet. When it goes pop, ruination will occur. Pension funds will be insolvent, governments will be totally , totally bankrupted, major corporations relying on finance will be broke.

        Don’t be a part of it and do not be shamed into thinking that somehow saving is a sin. when you are ready you will spend and that is the time to do so. For too long we have spent first and paid later. Now we are really paying for the spendthrift ways over and over.

  4. joe hack

    “The ‘ART’ of tea”

    • bonbon

      Zen and the art of Tea-Making.

      The grits in my coffee tell me something else, and a simple reading of European press while taking coffee tell the story.

      • joe hack

        I don’t Know but I think Mr. McWilliams was using Tea leaves as a metaphor for don’t know what the f is going on but here my best guess based on the confused messages out there.

  5. piombo

    A few points on the article:
    1) Apart from the public service, retail and the professions such as legal, accountancy, journalism, I would suggest that most other people in Ireland actually work for companies whose markets are non-domestic and therefore what happens to domestic demand will not impinge their tax-paying nor saving/deleveraging abilitities. Rather, the more deflation the better as prices will continue to fall as they should as Ireland is still way too expensive;
    2) I agree that Mario Draghi will take on the Bundesbank to save the Euro as he has the political support of all the major Euro countries including the Germany.
    The Germans are playing duopoly here. Their economy is slowing fast and risks recession right in an election year. The Bundesbank continues to demonstrate “independence” by chastising Mario Draghi. No German senior politician even supported the Buba comments as they know the game will be to allow Draghi to reflate the southern european government bond markets thereby arresting an imploding Euro and allowing the ESM to gain it’s banking license. Let’s remember that the ESM facility will have “troka-like” conditions attached so the two birds (fiscal consolidation and lender of last resort) will be at last achieved sooner rather than later.
    I feel Ireland will get a break in all of this as Draghi cannot avoid affording Ireland the same conditions he will give to both Italy and Spain.

  6. michaelcoughlan

    Hi,

    Can we steer clear of the public/private diversion. NEITHER are the enemy. The WIR bank in Switzerland operate as a let’s system. http://en.m.wikipedia.org/wiki/Local_exchange_trading_system

    As far as I know it was up to 2005 organised as a not for profit co-operative. Since it is a book keeping transaction no currency/legal tdnder changes hands therefore as it stands it does not come up on the state/revenue radar or contravene any law.

    • joe hack

      “Can we steer clear of the public/private diversion. NEITHER are the enemy.”

      Yep! some people and fools easily fall for the divide an conquer strategy they don’t even have a clue that they are been used.

    • hibernian56

      I agree. The “Public” sub categories needs to be properly defined. Perhaps a distinction between “Public Sector” and “Closed Sector”.

      Public Sector are initial pay level positions recruited “openly” via public channels. Gardai, nurses, ambulance drivers, teachers, road sweepers etc.

      Closed Sector are inwardly recruited, rewarded and promoted based on the internal rules of the various quangos, a closed sector; County Managers, Senior Executive whatever’s, Semi States etc.

      By “Closed Sector” you include the government Mandarins, special advisers, “Senior Executive” whatever’s, State Board appointee’s, Semi-State appointee’s, politically appointed legal reps, city & county council “management”, councillors and politicians.

      By “Closed Sector” you include that person you have dealt with in some state agency thats an obvious bluffer, under skilled and incompetent to fill the role he/she is being over paid to not do efficiently. A person promoted to safety.

      Lets not tar everyone with the avaricious personal promotion tendencies of a privileged few.

      • Deco

        We have a massive cultural problem in the Irish public sector. It has deteriorated considerably since the 1970s.

        Performance is abysmal, and unacceptable.

        And since the housing bubble ended, it has become impossible to finance, except by continually borrowing more and more money.

        • Pedro Nunez

          It’s a sad fact about our culture that a poet can earn much more money writing or talking about his art than he can by practicing it.
          W. H. Auden

          Culture is the process by which a person becomes all that they were created capable of being. (not in ‘Gombeen nation’)
          Thomas Carlyle

  7. “But, as Keynes observed in the paradox of thrift, if we all save at the same time, who is spending. If no one replaces our spending, then demand will fall and fall.”

    Savings and Investments are essentially just two sides of the same coin. It is supposed to be the function of financial institutions to keep the money circulation going. The money that other people have no use for at present, they divert to the people who have use for it at present. Clearly that is not happening at the moment so financial institutions, like everything else, are not functioning. What we have therefore is not a system of Saving but a system of Hoarding, which is quite different.

    This makes sense of David’s point that the Irish Government and the ECB are each contriving to turn the economy of the country into a large debt servicing agency. In the final analysis however, this strategy will only work if it succeeds in reviving the Irish economy. At the moment it is only succeeding in sinking it further.

    • Deco

      +1.

      Lot of useful comments there.

    • Tony Brogan

      “At the moment it is only succeeding in sinking it further.”

      The mother of all booms will be followed by the mother of all busts.

      Then we get on with life. Trying to use the same policies to revive the economy that created the bust will only prolong the agony.

      • I would say that that has already happened and there’s not coming back from it either. I wouldn’t wait for the mother of all busts to fizzle out. Just get on with the rest of your life.

  8. BlahBlah

    The Celtic tiger economy was based on false assumptions and a confidence trick. David these are your own words the only way for asset prices in Ireland to go down.

    If that is emotionally not bearable for the property punters in Ireland let’s introduce a domestic parallel currency for this type of stuff. Let’s introduce the punta nua for domestic payments and transactions and keep the euro for exports and imports. The punta nua / euro exchange rate will be a floating exchange rate.

    • Eireannach

      BlahBlah,

      My father, a hig-ranking retired civil servant for his sins, bought a 4-bed house at t he Allsop auction in the Shelbourne hotel in a development called ‘Marella’, a semi-ghost estate behind the Diamond Coast hotel in Enniscrone, Co. Sligo. Rabobank is clearing the remaining unsold properties at auction, reserve price €45,000 usually. He paid €84,000 as I recall. We’re currently fitting it out, finishing off some plumbing and so on – total coast €100,000.

      This ghost estate in Enniscrone is a hive of building activity. Rabobank’s auction proves that a well-built 4-bed holiday home in Enniscrone costs about €80,000, before works. I feel this is a natural price for such a property, not cheap exactly but affordable on Irish wages.

      The fact that these houses were €500,000 at one time seems like a weird dream. My friends all agree – when you look at these houses, you think €80-100,000.

      In other words, the Irish property market, at least in Enniscrone, is now ‘normal’ again.

      • BlahBlah

        I would agree Eireannach, obviously the picture is still a bit different in Dublin.

        But we don’t need the Euro to buy and sell property in Ireland. It actually was the Euro that has helped to turn the Irish housing market into a mad casino. The punta nua could now act perfectly as an insulation to future speculative bubbles in the domestic economy.

        • Eireannach

          Kilkenny has its own currency, although I don’t think its used much outside of the Kilkenomics festival weekend. Local currencies are the way forward, especially in rural Ireland, to keep trade local.

          We’re going to stay in the EZ unless Germany et al force us out, which would be quite a big deal, I don’t think they will unless the PIIGS really refuse to reform. So we’d better get used to the euro in Ireland, and develop regulatory mechanisms that stabilize prices in future. Funnily, we’ll be more German after this crisis, more interested in ‘stability’ and the lack of inflation than getting punch-drunk on the dizzy feeling of surging asset inflation. We won’t think that’s a ‘good thing’ in the future, the extent of this crash will put us in the German anti-inflationary mindset for decades to come.

          • BlahBlah

            I don’t know keeping the Euro in Ireland would mean further internal devaluation and wage depression by possibly 30% in particular in the public sector.
            And for what? The Euro will have to fail sooner or later in its current form if the asymmetric shocks can’t be absorbed, which they probably shouldn’t in case of this eurozone in the first place.

          • bonbon

            I’m afraid a little coverage of the German press, reported here in the previous theme, is essential. Otherwise a huge strategic blunder is right now underway by FG (the other FF jersey).

      • Deco

        Eireannach.

        I am happy for the people who are buying for less than 100K. I think that they will form a far healthier community, than a community where everybody is in negative equity.

        • Eireannach

          You know Deco, my mother goes down regularly to plant fuscias and the like. Some of the neighbours have planted tastefully on rockeries and so on. All estates look a bit spartan initiallly, but this one in Enniscrone will become leafy as the years pass by. I agree, when people buy at €80-100,000, the mood on the street is one of guarded optimism. Neighbours chat about the activity in the town at the moment. The sound of children playing is everywhere.

          Maybe this is what turning the corner feels like, or will feel like when this ghastly house of debt-cards finally falls.

          Irish are naturally somewhat optimistic and hopeful, especially when children are involved. Enniscrone has a great vibe this year, 2012. A forward-looking vibe. My friends who came down for a weekend to help with building agreed that the atmosphere in the pubs was glowing, open and genuinely friendly.

          Isn’t life strange? Life springs up in the most curious places, like flowers after the rain.

          • joe hack

            Don’t tell any one he is a civil servant with spear money to buy a Holiday home.

            There are some civil servants who only taken home around 430 euro a week and some would rather them to sit at home on the dole staring out the windows of their bedsits.

          • Adam Byrne

            Sounds very positive. I hope it works out for the best for all involved.

        • Adam Byrne

          Exactly.

      • gizzy

        Eireannach

        That is below cost selling. The planning costs and contributions alone on that unit would be circa 15k. Then add legal fees etc maybe 5 k more. Then pay esb and gas for connections , throw in auctioneer cost That leaves about 6ok for the site and the build cost. There is no one going to be building any time soon.

  9. molly

    We all know that this government can’t balance the books and to some extent witch suits them they are beening black mailed and if they where to Stand up and do the right thing witch they wont.
    For the government to do the right thing they would have to look at there own pay and expenses and that’s a no no greed of self and all that.
    Now who’s going to pay for all this the low payed who have had enough and throw in the middle class,so add these to groups together and between them they should have the stopping power,to force the the government to make a u turn.
    Why should we pay for the greed of others including the government from private jet to guilt edge pensions.
    The sums don’t add up and never will add up so the answer is cut from the top,if this government thinks they can return to the markets and get us into further depth to pay for the greed of the over payed and the over prescribed pensions they need to think again.

  10. Adam Byrne

    Southern Illinois.

  11. Deco

    [
    However, it is a crucial week because the evidence suggests that something very odd is happening in Ireland. The Irish bond market is decoupling from the Irish economy. That sounds weird, but let’s dig a bit to explain.
    ]

    It is possible that the Irish banks, under instructions from the Irish government, under instructions from Brussels are buying Irish gilts.

    I strongly suspect that this is what is going on….

    As if the Irish banking system does not have enough exposure already. This is loaded with assumptions, and one of them is that the ECB will ot go into a big print, even though it is increasingly obvious that the ECB is going to have to go into a big print run.

    With respect to the broader economy, the behaviour of the state in crowding out economic activity, via levies and taxes, is increasing unemployment.

    And increasing unemployment has the result that those in employment save more. Especially those in marginal sectors like retail, light manufacturing and construction. If people in those sectors get overtime they will save every cent of it, because they know the overall picture of employment, and their great diminished hopes of any additional earnings.

    My conclusions – stay away from Irish bank shares, because they are still doing some very risky messing around. It is probably less speculative to bet on oil companies getting oil from the Irish coastal wasters to Whitegate, and covering their considerable costs – not that I recommend that either though.

    The overall debt level in the Irish economy is still of considerable proportions. And there is very little honesty in either our public policy, or mainstream commentary concerning this.

    • Deco

      I base my deductions concerning the Irish banks buying Irish state debt, on the fact that this has already been occurring in other PIGIS.

      Also under Basel II rules, state debt is categorized as the strongest of assets, essentially allowing the banks to beef up their standing as banks and their official credit worthiness.

      But, if the ECB prints money, then the real interest rates on those bonds will jump, and the bonds will have paper losses, until their are sold.

      Proving that the whole thing is based on flawed assumptions.

      The strategy that Nouriel Roubini calls “kicking the can down the road” is what is going on here.

      • Tony Brogan

        your assuptions of state interference in the purchase of bonds has a high probability of being correct.
        As I understand, and subject to correction, the ECB cannot bailout individual countries or their banks.

        The proceedure was for the Fed RES to print dollars, loan to US banks of choice, which banks loan to european banks via currency swaps who buy the bonds.

        Thus the Fed steps in where the ECU cannot and US banks are protected from the default of EURO banks and the US taxpayer is on the hook.

        Back door monetization. But what are friends for if you can not rely on them.

        In the meantime the Daily Reckoning thinks France is toast and the EURO doomed so I think Ireland needs a plan B and/or C

        http://www.dailyreckoning.com.au/turning-into-piigs-why-frances-economic-debt-crisis-could-doom-the-eu/2012/07/25/

      • bonbon

        Transferring private banking debt of an unrivaled cassino to a state, which is what is being done fools no-one. That’s kicking the can onto workers backs.
        Mr. Draghi is breaking the law :

        EU Investigates ECB’s Draghi Following Complaint

        Corporate Europe Observatory (CEO), which tracks EU-focused lobbying, accused Draghi in June of lacking independence because of his membership in an international forum of public and private sector financial leaders, the Group of Thirty (G30).

        “We received a complaint and sent a letter to the ECB,” said Gundi Gadesmann, spokeswoman for EU ombudsman Nikiforos Diamandouros.

        “Now we are waiting for a reply.”

        Read the full article at CNBC.
        ——–
        Draghi’s bond-purchasing policy is against European law

        Juergen Stark, former chief economist of the ECB who quit his post in protest against the bond-purchasing strategy past November, said in a radio interview with Germany’s state-run Deutschlandfunk that Draghi’s plans are case for someone to take the ECB to court.

        “We are already in an extreme over-stretching of European law, to put it mildly,” he said, but Draghi’s plans are “in my view, a clear violation of European law, because it implies unlimited and indirect financing of states by the European Central Bank.”

    • Pedro Nunez

      Anyone listened to Reith Lectures 2012 by Niall Ferguson, just listening to his ‘Ascent of money’, have we been here before circa 1914?

      déjà vu,Jamais vu, ou Presque vu?:

      He argues that overly complex financial regulation is to blame for the 2007 financial crisis – not deregulation, as many others claim. The solution to getting the banks to behave, he says, is not more regulation but scaled back, simplified regulation and, importantly, full enforcement of the law.

      Semantic satiation?

      http://www.bbc.co.uk/podcasts/series/reith

      • bonbon

        I think Ferguson has no choice now that his owners have decided for Glass-Steagall, 33 pages instead of 700-page Dodd-Frank overly complex and unworkable diversions.

        I’ll bet he is twisting and turning trying to deal with Sandy Weill of Citi’s clear and loud call for bank breakup, a Damascus road conversion. Add to that FT’s editorial! Not in the tea-leaves, what?

        So come on Ferguson, get with the program, FDR’s successful national intervention that saved the economy. Drop the old British Empire, it is finished.

  12. Deco

    David – that was an excellent article. Top notch.

  13. Tea Leaves From AIB , Bank Center

    Missile ONE

    Thousands of letters have been received this week already from AIB informing depositors of new constrained notices of withdrawals of their monies and subject to the discretion of the bank .
    More confusion prevails as these missives are conveyed to these deposit hoders many of which are old age pensioners .

    Demand facilities being withdrawn and in some cases ‘ Breach of Notice Costs ‘ introduced.

    • cooldude

      This points to the beginning of capital controls over savings. This will only get much worse. It is vital to switch a large part of your savings out of the insolvent and corrupt banking system into assets which act as a store of value during an era of rampant currency debasement. The best type of assets to do this are gold and silver held outside of the banking system. Look out for your family’s financial future first and then look at the bigger picture. It will take a lot more than Glass Steagall to save the insolvent banking system which has now bankrupt all the sovereigns. Here is an article which looks at the real reasons behind the absolute mess the modern banking system has turned into
      http://www.thedailybell.com/4133/Modern-Banks-and-Banking-Are-Terrible

      • bonbon

        Sandy Weill of Citi, I think knows what he is talking about. He ought to, he comes from Citi the very center. And the financial press takes his 180 degree turn about the more seriously.

        We are going to Glass-Steagall.

        The synthetic debt of “investment” banking will be handled appropriately with this law back in place. Attempts to bundle legitimate debt with the swamp are what Glass-Steagall will make very obvious.

        • cooldude

          Sandy Weill is the reason Glass Steagall was abandoned in the first place. In 1998 as chairman of Travellers Group he organized a $76 billion merger with Citigroup which completely contravened the existing regulation of G S. No problem to Sandy he got Gerald Ford and Robert Rubin on the new board and successfully lobbied Congress to get rid of G S. This guy is a crook and a scumbag of the highest order and you think he has all of a sudden repented on his ways and wants to undo the harm. Well firstly it’s too late with this $700 trillion derivative time bomb ticking away in the background and secondly scumbags like him don’t change their ways. This is all a sideshow to pretend that the system can be fixed with a bit of tinkering and some new/old regulations. It can’t the system is rotten to it’s corrupt core and when it implodes will have to be replaced with a monetary system which respects the rights of the individual over the rights of the totally corrupt banking system.

        • bonbon

          We know all that and more. The point is that following Britain’s London Financial Times on the 4th of July 2012, spreading waves for Glass-Steagall are becoming a tsunami. Sand Weill has saved his soul.

          There is no guarantee of course, the enemy of this solution will try thermonuclear war if not stopped.

  14. Missile 2 3 4 5 etc to arrive from your Irish Banks soon.

  15. molly

    I came back from a week in lanzrote while there I was talking to a German girl who worked in a doctors surgery ,
    She was telling me what she thought about the prolims in the euro zone ,she said that the Germans work work work and they save save save and most Germans don’t want to bail out the euro zone and why should they she said the problems in the euro zone are not of German making.

    • Dorothy Jones

      It’s interesting here at the moment Molly. The combination of low interest rates and fear about the future of the Euro means that anyone with money saved/inherited [and that's most people] are looking to put money into property where they think they will get a decent return. There are all the signs of a potential bubble at some stage down the line. Apartments are being bought off plans with projected completion dates in excess of 4 years or so. There are some hugely ambitious projects resembling the type of Ballsbridge projects in ca. 2006, Schoeneberger Areal for example. EVERYBODY is talking about property. It’s very strange, it reminds of the type of carry on in Ieland back in the day. I suppose the sign will be when the banks start to offload their own properties, like in 2006 in Ireland when at the same time they were still flinging money at customers. Some of my old colleagues are now describing themselves as property asset managers and making very tidy sums from the situation. There was a small bubble in Berlin after the wall came down but this is on a much bigger scale. Maybe I’m wrong, but this all feels very familiar…..sign of old age:)

      • Adam Byrne

        Oh dear. What about ‘it can never happen again’. If the Germans are now imitating the idiocy of the Celtic Tiger Irish then there really is no hope for the human race. Very enlightening Dorothy.

        • Dorothy Jones

          Dear Adam and molly: I suppose it’s all relative. Just had a meeting with someone from Argentina who lost all of their wealth because of the crash back then. So, it puts ‘our’ dilemma really in perspective. He just started over, and worked here from the bottom up…met the woman of his dreams [from Colombia] at a language school here and now happily married. So…sometimes there is good also arising out of what appears to be a tragedy.

      • molly

        It always comes back to who’s going to pay,I for one will have to be forced to pay ,but I feel I have a choice in this and I keep comming back to the same picture in my head of self survival.
        We as people are being hammered at every turn and it’s heading down the road of giving up the car ,not traveling ,get rid of sky tv ,mobile phone in a word lliving of the land.
        It’s like a big part of me wants to opt out of this rat race ,look at who’s running things in this country and look at who was running things,I feel as life goes on things stand a good chance of never changing and I want no hand act or part in that sad twisted freek show .
        No matter who’s running the show they will always do and say anything to hold on to the power mantle at any cost and it has always been the wrong people who suffer and there’s no accountability .
        So the wrong people run things and the wrong people suffer,who in there right mind wants to be party to this .

        • Was glad to read this post

          When I said ‘go west and become a dosser as it will make you happy’ I was only half joking

          Opting out is easy and more people are coming around to your way of thinking

      • Deco

        There IS a property bubble in Germany.

        The result of ECB interest rate policy, and it is being fed by worried savers moving money out of the PIGIS into Germany.

        Same applies to Scandinavia.

        It will burst. Proof that the ECB is making a mess of matters once again.

        David – an article about a property boom and crash in German and Scandinavia would be interesting, for international readers.

        You might even get Der Spiegel asking for permission to reproduce it – which would be worth a fair few bob for you !!!!

  16. molly

    F. For L. Lie
    I. I. A. About
    N. Never. B. Being
    E. Ever. O. Of
    G. Give. U. Use
    A. Anything. R Remember
    E. Except.
    L. Lies

  17. joe hack

    If Quinn was a candidate in the next general election in Cavan I bet he would top the poll

    The moon is full the kettle on for a brew but I cant figure out how t read tea bags

    Speculate to accumulate more speculation

    • Pedro Nunez

      Ya ‘Zorba the Greek’, starring his namesake, how apt;

      http://www.youtube.com/watch?v=jady5iBCOCs

      • joe hack

        One of my favorite movies a lesson in living life I remember when I lived near Spiddle for 10 years or so a friend I met that I had taken on to work with me wanted to take me out on the town so we did, but after running of open venues we ended up in the function room of the Connemara Coast Hotel as the sun was rising.

        There was just the two of us with our private bar man, the function room had about 100 ten place tables as I talking to him about Zorbo I then jumped from table to table to explain Antony Quinn s dancing impressions of zorbo the Greek, my friend joined me and the bar man followed at least until the breakfast staff told it was time to leave.

        Pedro thank for the memory recall,

        Sean Quinn is NO Zorbo, Zorbo Loved life, not counting.

    • Deflated

      These people badly need their heads checked.
      They cannot see the wood from the trees.
      They support hiding assets, illegal loans etc. What idiots they are showing themselves to be.

    • molly

      Sean Quinn would top the poll and his son would as well,and mr Quinn got greedy but he also go shafted big time and I don’t agree with tge way he was shafted,look at all the developers in Nama where they shafted,look st all the wrong doing by the last government did they get shafted no they road of into the sun shine with big pay offs and sky high pensions.
      I believe if Quinn was left to run his company’s he would have payed back what was fair look at the last government a lot of them with there big pay offs will they produce any jobs and one in the states living in the lap of luxury payed for by us gobshites he does even spend money in this country.

  18. joe hack

    David,
    What brand of tea do you read don’t tell it that its former Fine Gael TD and Minister for Foreign Affairs Peter Barry tea that you read if so you might be getting the wrong message.

    Try Rooibos for the discerning tea-leaf reader

  19. bonbon

    Not appearing in the tea leaves, but continuing calls for bank separation abound.

    Spiegel Editor In Chief Calls For Banking Separation

    In yet another case of the {Wendehals} ["About-Face"] phenomenon, this week’s print edition of Spiegel, one of the biggest news-magazines in Europe, carries an editorial by editor-in-chief Georg Mascolo titled “Separate the Banks.”

    He reports on Sanford Weill’s conversion and says that Glass-Steagall should never have been repealed. So far, he claims, there is not yet enough support for its revival, even if a “smart” German DAX CEO like Nikolaus von Bomhard (Munich Re) also wants to eliminate “the system’s construction error.”

    To those who object (including in the economics section of Spiegel), he says Deutsche Bank will have to find itself another business model, but the pros clearly are more than the cons. The famous argument that Lehman Borthers was purely an investment bank and would have had to be saved regardless of Glass-Steagall, is true — but only in the present system. If you had a strict separation of banks, it is highly probable that Lehman Brothers’ collapse would not have affected the whole financial system. Mascolo calls for a swift implementation of Glass-Steagall and says IT COULD BE QUICK AND IT MUST BE QUICK. [emphasis added]

    “The Glass-Steagall Act became possible because a U.S. Senate commission had exposed the stupid, risky and sometimes criminal behavior of banks before the Great Depression. The outrage over it cleared the way for the law. Sometimes history does repeat itself. Glass-Steagall served the world well for decades; it would have been better to have never repealed the law. Now it is time to correct this mistake.”

    Spiegel also has a feature on the LIBOR cartel, including the investigations of Deutsche Bank.

  20. bonbon

    ‘The Newsroom’ Explains the Glass-Steagall Act
    “You could be Gordon Gekko [tycoon from movie "Wall Street"]or George Bailey [community banker from "It's a Wonderful Life"] but you couldn’t be both.”

    Glass-Steagall revolution begins with HBO broadcast.

    http://videos.nymag.com/video/The-Newsroom-Explains-the-Glass;search:section-news#c=VQ23TM0DJL9CTHRS&t='The Newsroom’ Explains the Glass-Steagall Act

  21. gizzy

    Some of the blogs here show how much of a mess we are in that we do not know whether something is good news or bad news. We have a mini celebration that a civilservant can buy a house for 84,000.

    If we look at that including vat probably 25k – 30 k of that price is going to the state through vat and local authority charges. These monies are of course now being soley used now to pay public service and wages.

    The professionals will get their paws on another 5 k because a Bank is paying.

    The Bank who are trying to exit the Irish market so are of no strategic value to the country will then take the rest to reduce their Irish liabitity.

    So we have a bank which is of no use to Ireland dumping property on the market so some one who has cash can pick up a bargain so the state can get 30% of the sale price to pay safe workers while the whole construction industry (which normally employs young men who are suffering huge unemployment levels, social problems and topping the table in suicides) lies dormant.) Oh and the young people cannot buy that property because they cannot get a mortgage.

    Yipee

    • joe hack

      Is this not obvious gizzy here the rub those who have a need for a HOME may not be able to afford it now, yet some want to knock some of these HOMEs DOWN.

      Of course there are those that will gain by these low prices and my even boast they got a bargain.

      If employment returns those house prices will rise and the newly employed will bear the brunt of house price inflation.

      And there will still be homeless people

      The banking system is running the country.

      It is called capitalizing

      What is the duty of our government under the constitution

      • gizzy

        joe

        Met some bankers this morninh. they haven’t a clue what to do.

        This is another problem, the traditional solutions to clear debt were repayment, refinance or realisation os security.

        With the debtor in trouble repayment is out, with no banks refinance is out, with falling asset values realisation of security may reduce debt but have the knock on effect of driving asset prices down further dragging more loans into the bad category.

        What to do ?

        • joe hack

          LIVE LIFE go for a walk a swim and enjoy what you have there is no more to life that living and given.

          Learn to control understand your fears and its sources, money can and is used a tool create fear.

          I am not saying we do not consider the future but do not fear what has not yet happened.

          You are not in control of the world, change the things you can change and try to affect the things you hope will change.

          The world is not about to end just because someone writes about the doom and gloom of economies this is serious and has real effects but it mostly brought on by people who still believe in alchemy, stock market and banker types and there followers.

          look at the people following Quinn there is no logic to it, why did this man need a billion how much will it take to alleviate him of his fear how many people could be saved from starvation with this alchemy money.

          I am not a hippy type far from it but I do believe the world will come out of this in the long term much better then it was when in the boom and before.

          This is not because I am an silly optimist but because I see the enormous benefits of world wide communications the USSR is no longer a country of two headed monsters as some tried to lead us to believe nor are other country’s they are just people like us.

          we are seeing the lies that where played out in IRAQ and are still going on there and in other places but there are those that still will not try to educate themselves about the world around them.

          My only source of fear is others irrational fear and those that are in a position to use it for their gain/fear.

          Education and communication is KEY

          Explain to me why anyone needs more than one home

          • Dorothy Jones

            ‘Live Life’ +++++1 :)

          • bonbon

            Greece is being forced to shut universities by the junta, Troika. For them education is a cost to be cut. Hospitals are being gutted, so do not get ill – that’s too expensive, to be cut.

            That is coming to a town near you if they are not stopped. This is not an irrational fear, but a certainty. FG is committed to being the sidekick of this gang and they would dearly like everyone not to reason why…

    • Harper66

      Gizzy,
      excellent post.it is hard to know whether to laugh or cry.

    • Dilly

      http://pjmedia.com/victordavishanson/california-the-road-warrior-is-here/?singlepage=true

      I read this article recently and this paragraph stood out …

      “Terrible governance was also a culprit, in the sense that the state worked like a lottery: those lucky enough by hook or by crook to get a state job thereby landed a bonanza of high wages, good benefits, no accountability, and rich pensions that eventually almost broke the larger and less well-compensated general society. When I see hordes of Highway Patrolmen writing tickets in a way they did not before 2008, I assume that these are revenue-based, not safety-based, protocols – a little added fiscal insurance that pensions and benefits will not be cut.”

      • bonbon

        “Governance” is Blair’s code word for the likes of Goldman Sachs technocrats Draghi, Monti, Papademos.

        I prefer government committed to the General Welfare, not a board of directors in London.

  22. I agree with David in that to a certain extent people save more during a recession and it can feel like there’s less money is circulation as a result.

    However a far bigger contributer to there being less money during a recession is that once a debt is settled with a bank the money no longer exists.

    When processing a loan repayment banks lower the debtor’s current account and lower the debtor’s debt to them. In doing so they lose both a liability and an asset. Their balance sheets contracts and the money just doesn’t exist anymore.

    One way to control the recession getting any worse would be to declare all bank deposits as legal tender. It would then be illegal for banks to delete money and instead they’d have to credit any loan repayments to the Central Bank who would decide whether to delete the money or not.

    • bonbon

      Under Glass-Steagall we are going to delete trillions of nominal book value – the derivative casino.

      Great joy will prevail at the (digital) shredding ceremony.

      Commercial banking of course will then thrive on boring deposits and credit for companies under a Hamiltonian Credit System.

  23. While economists, probably the most superfluous choice of studies one can sign up to, are center stage for the fools to hang to their lips, these leader who appear to be in charge, they have to follow scripts written by others.

    Period
    .

    • joe hack

      WoW! I would love to debate that but I would need a sub-editor.

      I think if you read several different so called “news” sources you will find that those who write and articulate opinion base there opinion on the opinions of others.

      There is only minutiae of facts for any of there opinions and the sources of there information is never cited so it seems we are to believe the opinionated by verdure of the fact that they have an opinion and have an ability to articulate it and of course a medium.

      The problem then is when an opinion is treated as fact which often is the case.

      Here is a biggy for example “Saddam Hussein has WMD and can Deploy them in 44 minutes” so how many opinionated writers and TV punditry repeated the this lie without any facts how many of the public believed it as fact?

      After the outing of this lie people appeared to continued to believe other unproved facts from the same sources was this a way of justifying there misjudgments,or was it maybe they just wanted to see one million Iraqis die (revenge)?

      From above it would not be hard to conclude that the people that died in the twin towers merited the murdering of 1 million Iraqis? but if we where to compare the above to the tens thousands of deaths sponsors by HSBC in Mexico it would seem they are not but rather their deaths are worth Bank Bonus and it seems that some people in Cavan and such are out supporting this type of business practice.

      We are been told by the opinionated that the civil and public employees are a curse on our economy but I have not seen any analytic facts or any information on this by the folk who opinionated this, so it seems I am to believe because they say so, and also to believe some who may have a political or other private get rich motive?

      It was a wonderful sight to see the London Olympics boast to the world about there NHS (I wonder did Obama Pay for that)or was this two figures to the Cameron?

      Of course this opinionated “fact” is poring out of every orifice of every medium with no citations and it then appears to be fact, so as Captain Jean-Luc Picard might to an the Editor “make it so”

      Yes who are these councilors are why are our elected so sycophantic to there every word?

      The truth is out there somewhere somewhere but you said the truth mattered?

      • Georg is just tired brother. Tired and can’t be arsed. If he chose to let rip he would blow you away. You really don’t know the minefield awaiting you if you joust with him. Be aware. Be scared lol.

        • joe hack

          No joust here, not today anyways, I like what he says and stop been a sycophant to George there is enough of that here, McWiliams must be bored with the his sycophantic fan base?

          • Definition of a sycophant

            a self-seeking, servile flatterer; fawning parasite.

            Lol. Anyone who knows me will tell you I am the exact opposite joe.

      • bonbon

        Notably missing in your brief overview of the press, is Blair being responsible for both the WMD lies and the NHS destruction with his NICE – National Institute for Clinical Excellence , know parochially as the National Institute for Citizen Elimination.

        Gone is the truthiness (Steven Colbert’s howlingly funny youtube clip). Truth is pungent, if you do not pull your punches.

        Missing also is Blair’s direct intervention with Juncker to force Berlin to “save the Euro”. The stink of truthiness is wherever he goes, lecturing on religion and globalization (no joke, that’s his angle).

        • joe hack

          yep there is lot missing I am pointing to the “fact” that an opinion based alone on an opinion often comes to be regarded as “fact” and in turn begets more opinion which may come regraded as “fact” none of which is based on truth or happenings.

          Syria might be another case in point, to look at;

          If for example a group in Ireland lets say the pensioners when out and protested and things got out of hand…

          would you expect to see the pensioners appear very soon with RPGs and other assorted weaponry remember Syria has a autocratic government so how come the protesters over a year ago got their hands on this type of weaponry?

          we all knew someone was supplying weapons but It now appears that they are being supplied by two other autocratic states Saudi Arabia and Oatar and these autocratic states are been supported by the good old USA with McCain in the background, his private war on whatever, Hypocritical ideology, he could care less about the resultant outcome, a playground.

          The end result of this interference will not serve the the Syrian peoples they are been used as ponds and I don’t believe for a moment that the outside interventionist could care less about the fate of the Syrian peoples.

          The jingoism is at a height in the BBC they show blood fires, smoke, sounds of bangs, Booms, and idiotic reporters running around while guns are blazing but yet no one knows who the protesters are.

          It just get rid of Assad and it don’t seem to mater what tools are used, or at what cost.

          The truth is out there somewhere but who cares don’t let the truth get in the way of a good story…

          It is like they are watching to many Hollywood movies there a god guy and a bad guy, kill the bad and all will well.

          The people of Syrian and not important it’s not about helping them these people are not philanthropically.

          • joe hack

            the interventionist are not philanthropic

          • Colin

            The truth will show that many of the rebels in Syria are foreigners. It is not a real civil war. I know the native Christians in Syria are suffering more from the rebels, they look to Assad for protection, but you will never hear this truth from the BBC, RTE or any other media outlet. So why isn’t the BBC telling us that our co-religionists are been murdered by muslims and asked to pay protection ‘jizya’ to the rebels, who come from outside of Syria? Because its jam packed full of liberal lefty types. Dennis Thatcher was right, the Bolshevik Broadcasting Corporation.

            This is not new, in Bosnia and elsewhere where conflicts involved muslims, you found Saudis, Turks, Algerians and others fighting for the Bosnian Muslims against the Serbs and Croats. They want to spread Islam and fight and die for it. There is a global agenda here. As Bin Laden said, “When people see a strong horse and a weak horse, by nature they will like the strong horse,” he famously opined.

          • bonbon

            Missing in that “truth” is the role of Saudi Prince Bandar, involved in 9/11, now Intelligence service chief. Saudi is funding the chaos. Aim? Obvious – too drag the US into yet another war. Bandar, on the Board the British Aerospace Engineering BAE firm which organized the Al Yamamah oil for weapons baster under Thatcher where $180 billion “disappeared” into a slush fund for terrorism over 35 years. “Rebels”, “Taliban” – quaint.

        • bonbon

          To understand “Syria” and why now, who benefits, who has the capability, and why there is a deep fear, I strongly recommend this video. If you have slow internet like I do, download the ipod file and play it with some Windows player. Takes about 35mins on a bit less than 1 megabit internet. (If I get my hands on the local provider sparks will fly).

          http://laroucheirishbrigade.wordpress.com/2012/07/31/syria/

        • Blair is one of the most despicable individuals on the planet. I am not much of a swearer but I hope that bastard dies roaring

  24. Tony Brogan

    Pithy explanation of the financial crisis. Mature audiences only.

    http://www.youtube.com/watch?v=GXcLVDhS8fM&feature=player_embedded

  25. Good article. Real good

    So basically no one has a clue. This is why economics will never be regarded as science

    People with money are surruonded by cosmic darkness and looking for the faintest light. Like some of your posters who are trying to convince us that ‘everyone’ is talking about property. Erm no they are not and ‘most’ people don’t have savings

    Some of your posters have never lived in the real world my friend and they are unintelligent and far from becoming well rounded individuals. Some of of them can’t even spell. Others are normal people with big hearts, tack sharp minds and powerful writing skills

    My Grannie used to read the tea leaves. On the morning of the 57 league cup final she told faither Celtic would score seven and he replied ‘aye right’. Guess what. They did. The old fox was from Sligo and she wasn’t real. She ‘knew’ things and she never mentioned money in her puff

    Just like I know things. I know that life is meant for living and not for worrying about money. It’s all very sad actually to see people limit their intellect and potential through the blind pursuit of money, power and prestige

    Head west and be a dosser young man. Twill make you happy

    as I lay me down to sleep
    I hear this little beep beep beep
    out the window I spy in the sky
    little Sputnik up on high
    telling all the huns in heaven
    rangers one and celtic seven

    • bonbon

      Well just because some want to read tea-leaves waiting for the Titanic battle looming now, as DMcW says, take it as n intermezzo.

      As any Marine will tell you, eat when you can, sleep when you can, because you never know when the next chance will be. I suppose the SAS add, take tea when you can…

    • bonbon

      Just because DMcW has granted a tea-break, does not mean economics is magic. Many do know what to do, especially in Britain. So take the time to read the FT, Spiegel… editorials I posted to see what is happening outside the tea-house.

      Marbh le tae agus marbh gan é.

  26. Why would David say ‘Reading The Tea Leaves ‘ when we do not have any. Tea Bags are the norm today .Tea was put into a bag so we could never read any tea leaves again.

    Leaves of Tea must feel free to think to communicate and not be incaccerated like battery chickens as Irish Citizens feel today in our incumbent society .

    The Joy of Tea is now a memory so is the code it creates that enables the drinker to communicate in a parallel life denied to the ordinary senses.The Joy has been replaced by a void of secrecy that numbs the mind and darkens the senses to be no more and can only awaken again when the next astro phase returns namely The Age of Capricorn ( Earth) in 2000 years time.

    As AIB condemns the Deposits in their banks to a period of suffering, the tea bag does likewise, thus ends the art of reading tea leaves ,and deposit withdrawls are stopped on demand .

    For now man can only drink his tea and touch his soul and maybe if he still sober re-elect a new government .

    • Colin

      Loose tea is still available in supermarkets. To brew it takes time and effort, and even some care and love. It is superior. However, the tea bag is like instant coffee, quick, and inferior, but most people prefer those options these days, more’s the pity. And the best place for a good tea or coffee is at home, where you control the process.

      For coffee, i strongly recommend Lavazza’s a modo mio. You won’t ever want another coffee in a coffee shop after this.

      • mishco

        I recommend green tea – in fact I grow it in the garden in Korea. Many people say it improves cognitive function and reduces brain cell decay.
        Compulsory 4 cups a day in the Dail?

    • The Age of Capricorn. I am planning on staying around for that.
      Should be awesome

  27. joe hack

    Could someone define “The Elites” as it is used here on this blog?

    • Do some homework and stop sounding like a simpleton. There’s no excuse for asking such idiotic questions on this blog. Catch up fast!

      No one has the energy to answer these basic questions

      People here have been talking about the elites for years and you should read the archives to get a handle on things and the mood of this gaff

      Otherwise what is the bloody point in playing blind?

      • joe hack

        Ah so there is no definition is it a generic term like the size of half a hole or a full hole?

        but so, do people on here mean “the elite” are people in a position above themselves, if so what position are the people on here, it could mean I am an elite or that they are elitist, are you an elite Mr. Paul?

        Would you check my speling for me thanks

        Had look at you site I Like

        • bonbon

          To get a whiff of what “elite” means, look at the FT editorial on July-4 (US Independance Day). A 180 degree turn about on banking decided on a small group who neglected to give you any warning. The shock in the financial world (Sandy Weill’s conversion) shows what elite means.

          Do not expect them to beg permission from public opinion, of the press-titutes.

        • I crossed the line there joe. Apologies friend. I have my faults brother

          The term ‘elite’ has been doing the rounds for years now and new terms such as ‘financial terrorism’ are in commom use in the alternative media and by some of posters on here

          Such terms are never used in the language of the mainstream media because they are in denial and still living in 1950s Ireland

          They would prefer us to believe that life is a level playing field and that financial terrorism does not exist

          There are elites everywhere from the GAA club in Ballynowhere right up to and including the parliaments and the instituions that hold power in all countries

          They are only elite by virtue of birth and being in the right places and saying the right things. It is all a gas. In fact they are a very stupid lot and their intelligence is questionable

          Like the idiots who think that growth is the answer to all our ills they can’t see past the end of their noses. There are only so many dwindling resources yet these people still think that the planet is there to be raped and abused to make a quick buck

          They are the real simpletons joe. Not you or I

        • Joe. I am just a working class man and proud of it.
          I will check your spelling if you ask me to. I laughed at you calling me Mr Paul. Plain old Paul is enough. There is no airs and graces here

          Ps. It’s more lively with you on here. Keep posting and keep making us think and smile

          Good luck you sycophant!

    • Tony Brogan

      Elite as in operating beyond the law or out of control of government but affecting everything that the ordinary citizen does.
      E.G. the central bankers and their handlers opperating with impunity.

      Read this extensive essay for the full flavour.
      http://www.edwardjayepstein.com/archived/moneyclub.htm

      • Good link. This is an example of elitism but still many people refuse to admit that this is how the world really works. Including most Irish journalists. Why?

        Because they know their place

  28. Deco

    Update from Spain.

    http://globaleconomicanalysis.blogspot.ie/2012/07/100000-workers-in-spain-will-not-be.html

    This is getting like Eastern Europe after the end of Marxism, with a bankrupt government, and state employees waiting for montsh of backpay.

  29. Deco

    On the margins, some canaries in some coal mines. Soone they will sing loudly.

    1) The US Treasury market – currently being proppoed up by Oil money from the Arabian Gulf, and invested via London.

    http://www.marketwatch.com/story/doug-kass-favorite-short-for-the-next-decade-2012-07-31?dist=tcountdown

    It is faciltating lower US interest rates, a stronger dollar, cheaper raw materials for the US, and the entire range of currently installed US stimulus projects.

    2) Facebook is decling further. Now this is a big problem for Ireland, because we are seeing a dot com 2.0 bubble with respect to social media It investment. And lets be honest here – the business model is a complete joke. Some companies in this sector wil NEVER have any meangful revenue compared to their current market valuations.

    This, and 19 Billion Euro borrowed to prop up the expansive Irish state system, are what is propping up the Dublin real estate market.

    3) London’s Olympics. Empty seats (maybe a lack of people who can pay). Massive expenditure on a once off item. How many cities have held the Olympics, to find that they were unable for a long time afterwards to be able to pay the bill ? And apart from that the ConDem coalition have not done anything to fix the mess created by New Labour and Phony Tony. They will continue to kick the can down the road, and then lose the next general election to New New (Old) Labour, who seem to have even less of a clue on what to do. Then there is the issue of Peak North Sea Oil.

    4) the ECB’s current interest rate policy is causing a property mania in the Western German real estate markets, and in Finland. Likewise real estate is getting frothy in Norway, Sweden, Denmark, and possibly The Netherlands.

    [ David – if you do an article on this, Der Speigel or some other German media publication might be interested, and you might get good money for it – with the option of possibly getting additional deals down the line).

    The first three issues are inevitable, and will cause us problems here. I don’t know how number 4 will play out.

    • Deco

      And number 5. Australia is about to go down and under.

      5) Easy credit in Australia, and economic policies that seek to deliberately overheat the economy (by the Aussie Labour Party – a soul mate for British Labour and FF here) are blowing Australia too far, too fast.

      http://globaleconomicanalysis.blogspot.ie/2012/07/shades-of-2006-thats-what-australia.html

      This will result in a lot of Irish people showing up at the local dole office again. And bear in mind that in Australia, there are marginal employees who only have work visas because of labour shortages, and who are always one hangover day away from their employer saying enough is enough.

      We are most like to see the biggest wasters of the Irish contingent show up at home first.

      • They are far removed from the Irish navvies who built Britain and contributed so much to that country

        The feckless youth of today would not know what to do if it ever came back the ‘backs to the wall’ mentality

        Some of them are not worth a light

    • Dilly

      I heard that there is a new Facebook Phone being produced. That gave me a good giggle. Its such a joke. I know people who bought shares too.

  30. Pedro Nunez

    +1
    firedamp risk, is explosive at methane concentrations between 4% and 16%, with most violence at around 10%, and caused much loss of life in coal mines,
    What’s the explosive ECB interest rate policy?

  31. bonbon

    DMcW well knows it, that extreme moves and flailing of the bankers to save their hyperinflated rumps are underway.

    A devastating attack on Draghi came yesterday from Thorsten Polleit, chief economist of the Degussa gold-trading firm, in an editorial in the {Frankfurter Allgemeine Zeitung}, in which he wrote that the ECB’s monetary expansion policy is out of control, enhanced by the Target 2 program and extra money-printing. And now, the ECB under Draghi wants to buy up ever more sovereign bonds, which is nothing less than a “monetizing of state debt, which happened very often in history.” This will lead to a “lira-zation of the euro.”
    But even worse: Social and political costs of the money-devaluation policy by the ECB are high, Polleit says. “But even a policy of inflation cannot prevent the nearing recession-depression…. Not even the hyperinflation in the Weimar Republic could prevent the collapse of the German economy.” He concludes by saying, that this policy is a policy “of worst evil.” “The euro and efforts to save it will become a nightmare, if the activities of the ECB are not stopped.”

  32. As this article arrives at Dusk soon it must not be forgotten of he importance of being ernest in politics .Displaying a sense of infusion and taste and a command of flavour The Prime Minister of UK in early 1830′s favoured the principles of the Magna Carta returning the rules of law to the mass of people thus making the reform of the feudal system and of what was left of it more durable without having to endure the heavy costs that the French Revolution had to endure . This Prime Minister was a Whig and his name was EARL GREY .

    Lets drink to that .

    • bonbon

      Well Britain still does not have a Constitution, no citizens, only subjects.

      I’m afraid the story of the “Magna Carta” is not complete.

      Britain organised the Terror, to stop a repeat of the debacle for the Empire at Yorktown led by Frenchman Lafayette.

      Today on July 04 London’s FT published a call for FDR’s Glass-Steagall, quite a change indeed.

      Great tea-time reading, what?

      • ……….’favouring principles’ and ‘reform” ….its no wonder why the taste of Earl Grey at any time of day displays that inclusive hold to the thoughts of what should be done .

        Its Time to play with Tea and find an Irish Flavour that makes a difference where it matters .

        PS
        I am not suggesting FG Barrys Tea .

        • Pedro Nunez

          +1, prefer Assam or Lapsang Souchong meself,
          but maybe we can develop ‘an Irish Flavour’ that has a similar smoky taste, not too difficult with the present ‘bonfire of the vanaties’ and whiff of cordite lurking about the place!

          Is mise le meas,
          Gobnait O’Gombeen IV (Junior)

    • Let’s put the kettle on and ave a nice cup o tea. Earl Grey will do very nicely

      I’ll try to tune into the grannie. Sometimes she comes visiting in the night. I’ll tell her the lads need answers

  33. Time Machine

    There is a difference between coffee and tea after the water has been added .With coffee it becomes instant and with tea it beholds the art of infusion and with time to determine the satisfactory taste to the consumer .So tea can have various taste for the consumer depending of the level of infusion they chose .Maybe our economy will now return from Coffee Houses to Tea Houses .

  34. joe hack

    Tea prices have been failing for the last year or more But look at what has happened since David’s above piece was published…

    {{{“July 30 (Bloomberg) — Peet’s Coffee & Tea Inc. has investors wagering rival bidders will attempt to top a $1 billion takeover offer that’s already the most expensive U.S. beverage deal.”}}}}

    I am thinking opening a franchise called soothsayer tea, the first outlet will be on wall street.

  35. michaelcoughlan

    More on the wir bank in Switzerland.

    Important to get familiar with its modus operandi. Instead of talking through our asses about muppets in the Dail, banks, markets etc let us focus on something we CAN control which is the establishment of something similar in Ireland. It’s going to be vital because the floppy haired one who must be obeyed said in an article some time ago that he was certain that the euro zone would break up. When we get pushed out it is only we ourselves who will save ourselves not some asshole politician or bailout pusher!

    Enjoy.

    http://www.youtube.com/watch?v=VMy8zmWSrFA&feature=youtube_gdata_player

  36. Deco

    I have been told that in the US, because of rising costs of meat, and squeezed budgets that pet ownership is getting the squeeze….the latest trend is not to get a pet unless it is necessary…or to have a vegetable garden instead.

    49 Million on foodstamps and increasing.

    I wonder will it reach the point where people in Europe buying sports fan wear or sports event tickets ? (major forms of discretionary expenditure).

    • bonbon

      Give the banksters a fair trial! A fair sentence, and fairly and squarely split up their banks. A square deal.

      Sure beats pleading!

  37. TEA PARTY

    Before this page dissapears lets pay homage to our host David and raise all our cups to celebrate his birthday season

    Happy Bithday David

  38. TEA PARTY

    Before this page dissapears lets pay homage to our host David and raise all our cups to celebrate his birthday season

    Happy Birthday David

  39. This article was a great tea party it was a pity that Molly did not stay along .

  40. joe hack

    {{{“Draghi faces leadership test over pledge to rescue”}}}

    eurohttp://www.irishtimes.com/newspaper/breaking/2012/0802/breaking11.html

    his longest day

  41. Dorothy Jones

    Em…. for heaven’s sake…this is mayhem. ok so all of the people here are asking what they should do with thhe €500 or 15€m…whatever. Now I keep sayineg the money they thimk they have is …..long gone…udo spent that money [unbeknowst to himself] in 2006.
    Now: Am I wrong?

    David

    You know where that money went. I do also.

    • Dorothy Jones

      Apologies for the the typos
      But why does Germany think it has money?
      And leverage?
      Germany is the weakest link.
      Mad financing structures here.
      GERMANY IS BROKE
      That is why the hedge fonds are making a fortune now aginst the idiots who think Deuttchsland Inc is a good bet.
      Don’t believe me? Short Deutschland und kassiere gut ab. Shorting Deutschland….look at the returns post 2006
      Why is Germany broke?
      Look at the funding structure: public and private monies.
      Anyone?
      I’ll post the links here for any fellow-anaroks.

      • Dorothy Jones

        GERMANY IS BROKE
        massive overruns on public/private projects
        there IS NO MONEY IN GERMAN BANKS
        Anyone challenge that?
        The big skeleton is when ‘das Volk’ realise it?
        David, you know that already
        ? Fortsetzung folgt?

        • joe hack

          Yea sure, it’s always the same when it’s a Germans round at the end of the night out they suddenly decide to go Dutch.

          Common Dorothy its your round.

          Well if all are broke, then all is level again and the books are balanced…

      • bonbon

        Kein panik! A state cannot go broke, it can default. And ypu fail to mention Draghi’s “Wunderwaffen” against the coming speculative onslaught. Merkel is indeed in the Bunker with Hollande and great Führer Draghi.

        A saner wind is blowing – the July 04 call for Glass Steagall from London’s Financial Times.

        So less hysterics and tea leaves, please.

  42. It seems that Fritz is the bad guy again and this is a sentiment often expressed in these esteemed boards but I don’t buy it. Now that the Italians and Spaniards are showing their teeth Fritz does not look so invincible. In fact to me looks like he is there for the taking and he knows it. He is wetting himself because that others have the power to keep him in check

    In this age we are seeing thousands of Spanish miners marching to Madrid just like the Jarrow marchers of the thirties and their defiance reminds us that ordinary people always have and always will need to fight for what is fair and proper. If any nation could identity with this then you would imagine it would be Ireland but for too long the Irish people played along with the hoax and were complicit in their own perishing

    But sure we left all that protesting nonsense behind us years ago when we became all grown up like seven year olds who had been given far too much Holy Communion money in the traditionally and well loved grubby brown envelope

    It is like we are indoctrinating kids into the love of money at an early age. No wonder they become spoiled whingers when the crying wind comes calling. They are overweight and not cut out for the real world with all it’s practical, intellectual and emotionional challenges. In my day we ran around all day like whippets on speed playing proper football without a care in the world and ate vegetables we grew in our garden. If you got a pound for your communion you were doing well and knew it

    And then I think of the namesake Robin Williams doing a sketch. Oh David save save me pleaaaase! You have to laugh and see it for how sad it all is. I’d love to slap people like that

    Bizarre right enough. I suppose the definition of bizarre would be ‘bereftness of common sense’. Just like the world we now live in and the world you half heartedly describe. We don’t have to buy it and can get by happily with few material posessions and just enough enough money to treat ourselves to a steak once a week. Anything else is wasteful and greedy

    Head west young man and be a dosser. Twill make you happy

    Have courage to do the things that mean something to you personally and never be dead from the neck down trying to fit into this insanity. A man needs spark in is his soul and lead in his pecker. Any rambling man will tell you this

    Money is worthless in every sense and all the answers are all inside Irish Bros

    I had ten year start in opting out. Life is not perfect but it’s pretty close. I know how to be happy. Food in the fridge and a few sound friends can get you far

    If you doubt me then just read Tam O’Shanter. Twill keep your soul straight

    If you are still angry and full of despair then I can tell you stories about men I knew who chased Rommel all across North Africa and gave him a right good doing. We might have to give him another one by the looks of things. All depends on that sexpot Frau Merkel

    • bonbon

      You mean running for tha fop Monti (Mountbatten), the incompetent aristocrat who delayed the war 1 year. You should hear both US and Rommel’s comments on that idiot.
      Have a look at van der Heydte’s Modern Irregular Warfare.

      Angela decides nothing. These decisions are made in London. Those that do this kind of thing have had a huge flash of insight – Glass-Steagall. Can you imagine calling for that on July-04?

      Well it happened.

      Delighted to hear of Tam – if he’d only listened to the dame!

      • “These decisions are made in London”

        Spot on. Someone is wide awake thank Cod

        It is amusing to imagine Angela being a sexpot with a huge male following. Like all the winkers who drooled at the sight and sound of Maggie

        Oor Rab was an honest man but could not resist the temptation of John Barleycorn and comely maidens. He had plenty of lead in his pencil like a man should and quite right too

        Oh Tam where is your likes again?

      • It’s the Jim Baxter mentality

        Why try to score more goals when you don’t have to.
        Why not just keep it on the ground and take the piss.

        How typically Scottish.

    • molly

      Greece is a big country but how is it that Spain and Italy are in the driving seat ok Greece got one hell if a right down but are screwed .
      Spain and Italy will get depth forgiveness and will get a much better deal ,so Ireland can’t stand proud only scraps from the big boys table.

      • joe hack

        Hi d do d Molly,

        Ireland GDP about 0.2 trillion not much less than Greece their population is about 2.2 times ours 10.5 millions Greece per person based GDP is 2 times less moneyed YOU/ME

        Italy GDP approx 1.9 trillion Spain GDP approx 1 trillion that’s a total of 2.9 trillion Spain needs 0.3 trillion NOW that over 1.5 times our GDP

        Note the numbers are from memory and some were remembered from quite a while back but it should still answer your quizzzzz

  43. Tony Brogan

    James Turk points out that the the Fed is becoming irrelevent. Trillions of stimulus and we are still in the “great recession”
    ditto the ECU and stimulus packages.

    http://kingworldnews.com/kingworldnews/KWN_DailyWeb/Entries/2012/8/1_Turk_-_Gold_To_Explode_Higher_As_US_Debt_To_Be_Downgraded.html

  44. Tony Brogan

    News for The Tortoise and the Hare Jeff Nielson

    ETF Daily News (blog)

    The Tortoise and the Hare

    TheStreet.com‎ – 9 hours ago

    By Jeff Nielson 08/02/12 – 01:39 PM EDT. Add Comment … We had a Great Race between a quietly confident Tortoise and an arrogant, condescending Hare.

    Why Precious Metals Are The Most Under-Owned Asset Class On The Planet

    ETF Daily News (blog)‎ – 6 hours ago

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