September 6, 2012

Let's forgive debt before the unforgivable happens

Posted in Debt · 238 comments ·
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The new chief economist of the Central Bank stated the obvious last week when he said that there would have to be debt forgiveness on many mortgages that simply can’t be paid. Someone who signed a contract in good faith during boom conditions, when income and the price of the house was rising, simply cannot honour that contract if his income has shrunk and the price of the asset has collapsed. Many tens of thousands of Irish people simply do not have the money to pay the mortgage now and certainly won’t have it when the next round of tax increases are signalled at the Budget.

From the point of view of the banks, the more they kick the can down the road and pretend that the mortgage problem will go away, the more they turn into zombie banks. Unless they can crystallise losses on loans they have out against houses which have fallen in value and clients whose incomes have collapsed, the banks themselves will not be able to raise the capital needed to function like normal banks. This is because unless investors know that the losses in the banks are finally over, they will not invest any new capital. If they did that, new capital would only go to repay old losses and validate old mistakes.

This means that unless they admit and write down their losses on their mortgage books, the banks will have to be self-financing. In order to do that, they will have to get their loan- to-deposit ratios down to 100pc. At the moment, the ratio is 140pc for the main banks. This means that for every €140 of loans out they have only deposits of €100. They have to get this down and can only do this by taking in more deposits or by giving out fewer loans.

This implies that banks will be taking money out of the economy, not putting it into the economy, for the next few years. It also means that the velocity of money, the amount of times notes and coins change hands in the economy, will fall and this means that monetary policy as we understand it is ineffective in boosting demand. Such a situation calls for unorthodox measures and those unorthodox measures involve the Central Bank instructing the banks to begin to write down mortgages as soon as possible.

This doesn’t just make sense economically but it makes sense morally. It is immoral to keep thousands of our fellow citizens in what is in effect a debtor prison. The debtor needs a break. If they get no breaks and are out of work or find their income falling, there is no way they can pay even a portion of the debt. Thus they remain in limbo and are precluded from playing any normal part in the economy. It’s not hard to see how this leads to a vicious downward spiral, where people are trapped in their homes, unable to get on with a normal life.

Yes they made a mistake, but who doesn’t?

The most perplexing thing about all this is that according to the banks’ own stress tests last year, the worst-case position is that mortgage defaults would cost the bank €16.3bn. This capital has been injected into the banks by the government’s re-capitalisation. For an excellent account on the details of this google Karl Whelan’s (University College Dublin) comments at Central Bank of Ireland conference ‘The Irish Mortgage Market in Context’, October 13, 2011.

So they have the cash buffer to absorb a significant amount of writedowns, so why don’t they do it and why haven’t they been doing it over the past few months? By writing down bad loans the banks would be signalling to the world that they are getting on with the real process of sorting out their balance sheets. At the same time, they would be forgiving people their debts, giving them a chance and some hope for the future.

This is where the issue gets political, both with a little and a big P. The fear on the part of the banks must be that the €16.3bn won’t be enough and that the overall cost of mortgage writedowns will be higher. If it is higher, the banks will want more money from the State — which it hasn’t got. A cynical interpretation of why the bank bosses don’t want this is that they are all — most of them financial mercenaries — brought in on short-term contracts to stabilise the banks and on course for bonuses if they just keep everything afloat.

If they began the process of debt forgiveness and this leads the bank to look for more money from the State, they, the bosses, would have failed. No one who is making a nice career for themselves, in the business of going from bank to bank after crises, wants to be the guy who failed. The key for them is to pass on the really nasty bit to the next guy. Therefore, they will adopt a “delay and pray” approach and hope that some miracle full tide will raise all the boats.

The other possible reason for the lack of action is that maybe the mandarins in the Department of Finance prefer not to face up to the scale of the mortgage default crisis as it would scare off our eurozone neighbours just as we negotiate a bank debt deal. There may be a notion within the halls of power that as the spotlight is off us now, we should do nothing which might draw attention to ourselves, particularly as we might have a deal in sight. This is a cute hoor tactic because we know that we will have to go back to the well if there isn’t enough in the €16.3bn to cover the mortgage default bill.

This seems to be a big risk to take because if mortgage defaults occur they will go viral and yet again we will be reacting to a crisis rather than controlling it. The man from the Central Bank is right, and he has the power to force the banks to begin doing deals right now in order to prevent a default crisis. The only way to do this is to press on with debt forgiveness in certain cases.

With mortgage writedown and debt forgiveness will come a certain amount of repossessions because there are cases where people have no ability to pay and the bank can’t just give them the house. This is where politics with a big P comes in, because there is no political party that will preside over repossessions given our history. The parties would be much happier for the banks to gradually become zombies than entertain the sudden political flashpoint of banks chucking people out on the street.

Taken together, this means that the prospect of organised debt forgiveness will be delayed and the risk of chaotic mass default be brought forward.


    • McClaffert

      Could the Banks reluctance to forgive debt have anything to do with the 1,250,000,000.00 Euros per week they have been repaying to the ECB for the last 75 weeks? (about 94,000,000,000.00 Euros)

  1. MICKEYG

    As long as the defaulter does not keep the underlying asset then I am OK with this.
    1. Let the bank write off the debt and take possession of the house. If this causes property prices to drop then fine (will be good for #2 belwo) and will mean Irish prices reflect actual economics.

    2. The mortgage defaulter can then enter the property market (like everyone else) and buy a house they can afford, or rent, or go on social housing.

    With this idea;
    A – the bank is penalized for bad lending
    B – there is a consequence to defaulting and people will now in future that if you cannot service a debt you lose your asset
    C – those who are clearly struggling get a chance to start again (they can consider the mortgage payments to debate as rent). Not a bad deal.
    D those who have serviced, and continue to service their debts, are not being taken for a ride.

    Not sure how best to treat those who cannot service the debt on investment properties. If they get relief does that mean that anyone who invested in shares will get relief too?

    • Hi MickeyG

      Yes this is the idea, something nuanced that doesn’t reward the profligate lender or borrower.

      Best

      David

      • John Realist

        We need to get real. The Bank has to share some of the blame and in turn share some of the burden. The private banking arms of this state were very good at selling property related investment products to their customers but now that these investments have gone pear shaped they don’t want to know. Why cant they take the same approach when the shoe is on the other foot.
        The Bank sold me a product that was to return an average of 8% per annum for five years in a property related scheme. From the same bank I took a mortgage on a property that they in turn valued at the asking price which has now declined by 60%. So both investments are a disaster but I still have to ensure they get their return on the mortgage while they have washed their hands completely of the product they sold me. Makes you wonder!!

        • MICKEYG

          Not sure if you read what I wrote. The bank does get stung and do not get to wash their hands. They get a property that is worth less than what is outstanding on the mortgage.

    • Howya

      Am with you in principle. But there are 170,000 households in trouble. The sheer volume would overwhelm everybody concerned.
      If a homeowner could afford the mortgage on the written down value then would it not be better to leave them in their home?
      Under your suggestion would a home owner have to declare bankruptcy?

      And the big philosophical question – are we as a society prepared to help the majority of homeowners knowing that a few cute hoors will screw the system or will we condemn thousands of families to years of stress because we can’t see the bigger picture?

    • positron

      How about a retrospective affordable housing style setup?

      For instance: If X finds themselves in say 100k negative equity with property currently valued at say 200k, may be the bank (or the Government?) pay/forgive the 100k, but in turn take half ownership of the property. Person X and family can remain at the property, and X should have the choice to buy back the Government/Banks share of the property in future, or when the property is sold the bank/Government gets 50% of the proceedings – or something to that effect. (I am not explaining this too well…)

    • kathy22

      Can you just be clear how can me being homeless help you in any way. You feel better because someone else has lost their home? Thats pretty low I must say.

      The banks sold the mortgages to bond holders they have been paid, they were given bailouts that they did not pass on to the customers.

      Save your moral outrage for the banks and not ordinary people trying to survive against the odds

      • redriversix

        +1 Kathy

      • nev

        Huge difference between “homeless” and “not owning a house”. Do you want those who struggle to pay the rent to pay for those who struggle to keep their investment?

        • Deflated

          Big difference between people who have a mortgage, are struggeling to pay it, are doing their best all the while stuck in an agreement that is very one sided and if defaulted on leaves a bank with the asset that they have been paid on, with profit recorded and taken, wherby they(the bank) could reposess, rent it out (to cover any costs), sit on it till prices recover (if ever) and sell it on for profit with no value given to the person who has stressed and sacrificed to get them as far as they could.

          Get a life!

      • breltub

        I fail to see where anyone said they would be happy to make anyone homeless? This seems a strange comment. An emotional straw man argument that serves no purpose to finding a solution to a problem.

    • The real point here is that the property market, as it stands, is a dead duck and will remain so for the foreseable future. A lot of people, powerful influential people, retain a flicker of hope and that is what makes the situation all the more hopeless and lamentable.

      In relation to Point 2: Do you really think that anyone who gains debt forgiveness for past mortgages is going to make the same mistake again? Most likely they will choose the second or third option – renting or social housing.

      Regardless of what people may like to say about the ‘madness’ of the property boom, for people living through those times it made sound economic sense and contained a large element of social responsibility – patriotism you could even say. The idea was that by investing in property, you weren’t just ensuring a roof over your head (one of the three basic necessities – food, clothing, shelter), you were also building a nest egg for the future. The latter aspect has been revealed to have been a fraud. If there is going to be a recovery in the property market, it won’t be fuelled by the same ambitions that existed before; it will be for far more mundane reasons – nobody wants to be homeless. And the truth is, in the Ireland of today, there is no excuse for anyone to be homeless. Property decays quite rapidly if it is left unattended to. We may well reach a situation where we end up paying people to occupy certain properties (they will give it a nice fancy name like ‘social housing’).

      It’s all a bit like Facebook share – people thought it was worth billions, turns out it was only worth millions. It is never going to be worth billions but millions is still a lot of money – except for those who were deceived and invested billions.

      Ireland as a country was ‘taken in’ in believing that you could base economic development upon the production of a single commodity – housing. The same way that a previous generation thought that the ould spud would never let them down.

      Best thing we can do for the forseeable future is to re-orient ourselves, re-focus our direction. Encourage people to invest in skills and education – they might well be inclined to do so if they are freed from mortgage slavery. With time people will start to get rich again and look around for areas to invest their wealth – possibly even in property but hopefully with a bit more sense than the last time around.

  2. Stephen

    Lets be honest – the other side to every loan is a persons savings and deposit or business cash reserves.

    To forgive debt on a wholesale basis is to transfer wealth from one portion of the community to another.

    It can only happen if corrective action is taken in the way finance is managed and regulated.

    Our problems are of European origin, the solution is there. We need to socialise the debt across the Euro-zone, raise a tax on GDP and issue long dated bonds (war bonds) to stabilise the damaged economies. In order to partake they need to adopt new fiscal rules (which we have).

    For debtors to partake they need to hand over everything and live on the minimum debt for a time 2- years or so (Sweden), then they should be clear of the debt and will be more the wiser.

    We all know flash Paddy’s that over extended in the boom and flaunt their obligations now are even proud of how much they owe NAMA. I do not want to pay their debts until I know they have put everything on the table.

    Pension funds in the UK are being flushed with cash in the hope they can be protected from a future bankruptcy action. The media are asleep.

    S

    • bonbon

      Socializing the casino debt accross the Eurzone is exactly what the Red Judges of Karlsruhe are on standby for. Have you any idea what that means? Draghi, Hollande, Barroso all want to dump this toxic waste on German taxpayers, and traitors that they are, are getting cold feet.

      We render instead the entire derivative debt and that includes securitized mortgage packages, null and void. Real legitimate debt, from 40 years of no physical economic growth must be made up and financed over 25 year. That means Hamiltonian banking, well understood by each nation-state in its own particular way.

  3. nev

    Sounds great. But then I’m thinking about myself and many other people who saw the ridiculousness of the situation long before 2008. People who never considered taking that mortgage that was only 50K on top of what we could safely afford. People who kept humbly paying the rent every month – to the guy who was obviously doing a stupid thing by buying his third home, in his dreams of becoming a rentier and a rich man at our expense (in good faith, huh?).

    And now we should forgive this guy. We should leave him the houses he grabbed – and keep renting from him, paying for his, now reduced, mortgage. Or else he will stop buying our services and we’ll all be out of work.

    Great, just great.

    • p15574

      I agree. What about the rest of us who don’t need debt forgiveness because we weren’t crazy? We will have to pay for the forgiveness, as we own the banks that will take the hit. I also agree about the multiple homes – the people who became ‘property magnates’, buying multiple houses ‘off the plans’, pricing first time buyers out of the market.

      I can understand that many people are trapped with no job and in massive negative equity – certainly, they need SOMETHING. I also agree that the country is in limbo until something concrete is done. Perhaps it should only be done for someone’s PPR?

      And what about the Strategic Defaulters? The people in gainful employ who have stopped paying their mortgage, salting away the cash, waiting for debt forgiveness (ie for me to pay for their negative equity)?

    • gizzy

      Are you Victor from One Foot in the Grave

    • Mark Walsh

      Nev,

      I agree with you 100%. Profligate “Paddy Trumps” with their double digit rental properties should not be included in any debt forgiveness package, ever, period.

      Their desire to ape their american uncle, Donald Trump, with unadulterated avarice has detonated in their faces. So be it.

      On the other hand, principle private residences with lead laden underwater mortgagees should be thrown a lifeline (debt-forgiveness).

      This was their only chance of getting their own roof over their own heads. They were badgered, belittled and bullied onto the “property ladder”. Though ladders have always had two directions, the southern option was neither mentioned nor cautioned by the powers that be.

      The powers that be (legislators, mandarins and banks) now have a moral and economic duty to those that heeded their home-ownership propaganda and to the nation state.

      Debt Forgiveness?

      Principle Private Residence Mortgagees? Yes

      Paddy Trumps? No

        • cooldude

          Fully agree Mark. Don’t forget our whoring media who pushed this property bubble at every chance. I never read one article in the mainstream explaining how asset bubbles work and how negative equity becomes a lifelong noose around people’s necks. We were sold a pup and it is time to face up to these facts.

          • Mark Walsh

            Cooldude,

            Thank you. As for the media? What media? There was a time when a journalist was that, a journalist. Investigative, probing, asking hard questions, not satisfied with lame answers. Think Watergate.

            Now we have pretty faces on TV, gossip columnists…. kowtowers all.

            Don’t get me started about RTE…paid by the State…no one ‘working’ on that gravy train has the balls to tell the truth.

            Irish State owned TV. Don’t we slam other nations for their State owned TV?(N Korea, Iran et al)

            We’re just as bad, fluffy news with happy endings.

      • nev

        Mark,

        I’m probably a bit more radical in my views. Not that I’m happy to see hard working people’s dreams collapsing, but I see two completely different problems here.

        I stand for the right to have food and a decent place to live – for every person in the country (or in the world, for that matter). On the other hand, no one is entitled to own a house, especially that particularly nice house. Trusting friends, government or that guy on a TV show who said prices will only go up is not a sufficient reason why someone should now own that house and not me.

        Here’s my formula:
        Kicking people out of houses? No
        Subsidising home owners at my expense? Hell no

        • Mark Walsh

          Nev,

          Your formula is very valid in a black and white world.

          Unfortunately we live in a grey world. Different strokes for different folks etc.

          I vehemently object to the ‘strokers’ being stroked by the powers that be and everyone else will carry the can.

          Fact is the property casino aligned with the creed ‘greed is good’(stoked by the white collar brigade) permeated Irish and other societies worldwide.

          History demonstrates that humans react in such a manner. There are individual exceptions to the rule (Ghandi and others), but nevertheless we do greed.

          If you were prudential in your outlook and made correct choices I can fully understand your desire not to pick up the tab for distressed mortgagees that went over-the-top. Their bad.

          That said, those non-prudential people’s positions are bringing the whole ship down. This includes, you, me and the rest of the nation.

          Which is the lesser of two evils?

          Ethically damned if we do, financially damned if we don’t.

          There is no elixir to the mortgagee plight.

          There was, however, one for the nation in 2008 but our pithless politicians rhetorically asked “Do you want us to end up like Iceland?!?!?”

          Hell yes!

          And for two good reasons:

          1. Let the odious bank debt die with the deceased banks

          and

          2. Imprison the profligate Prime Minister.

          Electoral Turkeys and Christmas adage ringing in the background…

      • Qr96UThjJT7j

        Well Mark, by focusing on “principle private residences”, you’d be also punishing people like me, who had to emigrate and who are renting out that PPR, while renting myself in another country, while working to service that mortgage back home (which the rent doesn’t come near covering by the way).

        • Mark Walsh

          Qr,

          You may have misunderstood me.

          I believe your PPR should have debt-forgiveness, whether you’re here or were forced to emigrate (compliments of our political-economic idiotic choices).

          The only folks that DO NOT deserve debt-forgiveness are those that viewed property as a lottery win for every house they purchased over and above their PPR.

          I also believe you should have been given/granted your debt-forgiveness in lump-sum and only redeemable by way of wiping out your mortgage.

          Win for you, win for your lender. Reset button pressed. Simple.

          Instead, behind closed doors, the lender was bailed out, guaranteed by the government and these monies are being recouped via income taxes and levies.

          This not being egregious enough, the government then allows the banks to go after the very people who are currently repaying the banks losses in addition to fully repaying their underwater mortgages.

          The only double whammy winners are the banks.

          I hope you realise I’m on your side.

          Mark.

          • Qr96UThjJT7j

            Thank you Mark for your reply. The reason I assumed people like me would be excluded from such a scheme, is that my home is rented. I would certainly welcome any assistance, and this lump sum idea certainly seems excellent (I think I first heard this idea from Steve Keen, would that be right?)

            Best wishes, your contributions to this conversation are invaluable in keeping the signal to noise ratio tolerable.

            Qr

          • Mark Walsh

            Qr,

            Thank you.

            Yes you’re spot-on, Steve Keen is the man.

            Mark.

      • trumptower

        Avarice ?? or simply a way to provide security for the family in the long term. There is no moral argument here. It’s all about common sense. Nothing wrong with someone trying to provide a steady pension for themselves. I have double digit properties all fully rented. I find that the banks are already doing deals with investors who are in trouble. I’ve been given help by one bank I deal with without asking for it and without needing it with nothing sought in return by them. The banks haven’t a clue. I hear one bank is still working its way down to investors with loans of €5m or less.

        I hope people now understand what sharks the financial services and banking industry are and what a fool the average TD is. Money and honesty make poor companions. Educate yourself and trust none of them.

        Debt forgivness is inevitable for investors. If you owe €5m and have assets worth say 30% of that and can’t make the repayments then it will be written off. It has to be.

  4. Clare Leonard

    No need to forgive any debt, let the government who took over 40% of the sale price of all homes in the form of vat, builders contributions, stamp duty, etc. etc. in the last few years GIVE A TAX REBATE, after
    all, they were the major contributitor to the increase in price of property during the boom.
    When hyperinflation kicks in and rent prices go through the roof, you may reconsider your position re. renting.
    It may be a wonderful and welcome opportunity for the Germans to let the Irish take the blame for the potential dismantling of the ESM.
    I believe no decision will be made on the 12th. of September by the German constitutional court.
    They will await the outcome of the Thomas Pringle case, which comes before the ECJ on the 23rd October.
    In his action Mr Pringle has questioned the compatibility of the ESM treaty with existing EU treaty provisions.He has questioned the lawfulness of a related amendment to the EU treaties. The Irish Supreme court referred these Q to the ECJ last July.

    Is the ESM treaty compatible with the EU treaties?

    Is the related decision by heads of government to amend the EU Treaties legally valid?

    Can the ESM come into operation before the EU treaty amendment comes into force on the Ist january 2013.?

    Irelands payment to the ESM is 11 billion,
    this payment will be our initial petty cash contribution.
    The Irish people are bankrupt as a result of the ECB privatising bank profits and socialising bank losses.
    This madness cannot continue, bailing out banks will lead to civil unrest.
    I hope the Germans put a stop to the ESM. The banks need to take their losses on the chin. What a pity
    the Irish will be blamed.
    Thomas Pringle is a brave man, we need more like him.

    • Dorothy Jones

      http://namawinelake.wordpress.com/2012/06/25/injunction-set-to-prevent-ireland-ratifying-esm-treaty/

      Here’s some background to the Thomas Pringle case
      from NAMA wine lake including links to Thomas Pringle’s own website.

    • molly

      This government like the last government are no use to use the real people .
      I agree about what was the governments take in tax ect and when the budget comes out in December I believe there will be mass protests.
      Look at petrol diesels ,heating ,how do this government expect people to survive in this deer kip of a banana republic.

    • bonbon

      The Thomas Pringle ESM/EU Case Has Been Prioritised By The EU Court Of Justice
      From an article posted on the Thomas Pringle website

      “There is a principle within the EU that if an issue is before the ECJ that could affect everyone else then implementation [of the ESM] should be held off until it is resolved,” Mr Pringle told the Financial Times. “If the ECJ agrees with me then the ESM is not compatible with EU treaties and cannot come into force.” — Financial Times 13.08.12

  5. michaelcoughlan

    This really is a superb article. The most important message it demonstrates is not what it says about what’s happening (which can’t be faulted) but what it says about the person who wrote it. Now that your vision is crystal clear David what economic advice can you offer to the people who live here in light of your outstanding grasp of the zeitgeist (realpolitick). Mass defaults are already occurring. In my view our pillar banks will be declaring losses for years to come. Dermot Desmond suggested a number of years ago that a buyer will have to be found for both of them. Those of us who have been following this blog for a while will have our own life boats made ready by now. Whatever about mass defaults in mortgages mass defaults in pensions is a certainty with the pensioner nit having time on their side to recover.

    The next article you write is probably going to be the most important in my view. I hope that you can see now that the establishment has abandoned the ordinary people to their faith as your article points out that you offer advice how we the ordinary people can survive in this most beautiful country in light of the self destructive policies being adopted by the government.

    Heavy is the crown David. The fact that people like you and others such as the risk manager in the AIB who was fired for doing his job properly are not taken seriously by the people in the administration is your greatest badge of honour!

    Irish people survived the famine when the government that time capitalised on the potato crop failure and ‘helped’ the people to emigrate so unworkable plots could be amalgamated into larger holdins to produce beef and wheat for Enhlish markets.

    We will survive this too so long as we have the same fortitude. It is also important that our insightful honourable citzrens who have the skills to make a difference though few in number to continue to have the courage to call it like they see it!

    • bonbon

      In 1846, Eire had no nation to act with, it was defeated in 1798. Now we do, an it was created by Arthur Griffith, whose writings in 1905 are full of economics, the political-economics of national banking. The government of 1846, the British Empire committed calculated genocide, and will do it again, in fact are doing it world wide. It’s a bad habit.

      Imperial economics brought Eire to its knees, and Arthur Griffith discovered and published exactly on this point. It takes courage to see yet again an empire’s deeds and face up to it.

      Adam Smith’s “invisible hand”, the insane wild-eyed swindle of “spontaneous unknowable forces” bringing economic growth led to this. We will be told it is “too complex” in the modern world catastrophe to break up the fine elites banks, no nation would have the knowledge to do that. We will be told to run for cover clutching a piece of gold and wait for it to blow over. We will be told a lot to prevent Glass-Steagall.

      Resist!

  6. gizzy

    I am stunned by some people in this country who blindly accept debt or investment forgiveness for professional investors and bond purchasers to the tune of 12 bn this year alone but have a morale dilema with their neighbour catching a break.

    In most cases these are ordinary people who did what the governemnt and experts at the time advised and that their bank signed off on and that the bank investors then invested in. But pay back the bond holders, rescue the banks but whatever you do if you bail out the little guy take his home from him.

    Unreal morally and economically.

    If you think its a morale hazard try the economic logic of rehousing 130,000 families so far with bad credit records.

    • Deflated

      Gizzy I could not agree with you more. I am amazed at these people. Pooling up stories of guys with 3 houses etc as if that accounts for everyone. What an absolute crazy outlook.

      Most people who have mortgages in trouble are families, young professionals etc who are doing their best. They saw prices soar and were seeing, every day talk and evidence that it was getting more and more expensive. They and I do not believe anyone could have seen the devistation of this world wide recession happening.

      People here would rather see the 10s of thousands suffer to stop a very small amount of cute hoors get out of massive debt – they are so narrow minded they cant see the wood from the trees.

      The actual benefits to the economy would be greater if debt forgiveness was implemented as there would be a turn of direction for people and families to concentrate on valued and productive lines of life – able to afford better education, food etc.

      Money is not real. (full stop) life is and growing children and food is.

      People will take this as lesson learned and I believe comunity growth will be quicker and better as a result of the forgiveness. THIS IS WHAT OUR COUNTRY NEEDS NOW.

      This would also give us a feeling of progress and the ability to grow as they way we find ourselves now is stagnant.

      This is not taking into accound the now quiet of the LIBOR scandal and its possible ramifications on all loans (included is Euribor) and the hopeful possibility of Ireland getting out of the Euro and reclaiming its own resources. Sure we have better roads etc from Eu funding but we have always had the means to grow on our own as with Gas, oil wave etc rosources that can creat a real growing independent economy. We need to get away from our influance form Europe and stand on our own feet as opposed to selling of things for a goddamn song.

      Join together and get on track. Help those who find themselves in trouble and do not judge as you have no idea what they are going through or have gone through. Business men have hug themselves, leaving cert students kill themselves etc – it is all a result of this damn ridiculous backward thinking society.

      • gizzy

        Agree deflated i do not know is it the coldness, smugness or ignorance of a certain element in Ireland inc those in power that stuns me more.

      • bonbon

        It is an insane Dionysian anti-intellectual fashion that took over. It is what von Hayek pinned down in his Austrian School lectures, which he fully promoted, an incredible swindle. President Higgins campaigned on this theme, ideas in economics and culture. People really lost their minds, some irrevocably. Back in 2000 I knew what was going on in finance, the Euro, and the unbelievable reaction when this was put on the table, totally irrational, was a surprise. People lost their minds in a wild-eyed belief that spontaneous, but unknowable, processes of economics trumped creative reason, a kind of shrugging jerking mindless “freedom”. Nietzschean, pure and simple.
        But that’s always how it works. Hayek’s Bernard Mandeville refined this (plagiarized actually from Ortes), and Hayek identified it as primarily a psychological weapon, the ultimate. Aimed right at the mind itself. Exactly Nietzsche. But promoted by schools, Universities, Economis Magazine, Wall Street, Friedman, Hayek.
        Just look at the Economist Magazine’s Schumpeter Column. Look up that name, trace the economics straight to Nietzsche, promoted by London.

        But mind always wins. From the darkest corners of those circles, come (totally unexpected for those still in the Nietzche grip) calls for a creative reasoned intervention into the banking system.

      • padser

        I agree, can’t penalise a generation of people for blind mistakes of, over profiteering banker’s. But the notion of pulling away from Europe, even the hardened of anti Euro, nationalist know that’s becoming a myth. Each Treaty signed off on, leads to more integration of member states.

        • bonbon

          A thousand year Reich. Can’t be stopped. Europe has had that before. As DMcW points out this is leading to the unforgivable.

          Let’s see. Napoleon, invinciple emperor of Europe, fell on his stomach near Moscow (Borodino declared by Putin as the first great patriotic war this month). Then Hitler arrives in Paris to the mausoleum of his Vorgänger (predecessor) as he said himself. Next we have Churchill proposing the United States of Europe, pushed by Sir Oswald Mosley. Then came Robert Mundell’s Euro, who in July said its working exactly as planned – creating a crisis for a united states of Europe.
          Look at Greece for a modern version of what happened at Moscow.
          Athens is Borodino. Where will be the Waterloo to wipe away the mess? Maybe we should make Elba, the last and final resting place of the Euro, and let Draghi, Monti preside over the displays as visitors queue up?

  7. StephenKenny

    There is an alternative to debt forgiveness, and the moral hazard that goes with it: Give every household a good lump sum, making it a legal requirement that existing debts are repaid before the money hits the bank.

    A reset for all.

    • Mark Walsh

      At the time of our then government’s rush to re-capitalise the distressed pillar banks, the bailout monies should have been released to the mortgagees of PPR’s and could only applied to their respective 1st mortgage.

      In doing so we would have had the win for the borrower and a win for the lender. Banks recover monies lent, all householders 1st mortgage repaid.

      Instead, banks were recapitalised behind closed doors, repayment of same saddled on every citizen and the banks then go hunting down the same people that are repaying the bank’s horrendous screw-up in addition to the mortgages they cannot repay.

      So, banks got the win-win and the people are repaying double that which was loaned into the system….

      You couldn’t make this stuff up in a Hollywood script…

      • StephenKenny

        A lot of things could have been done in the past.

        Unless there is very significant regulation brought in to effectively outlaw speculation, any debt forgiveness will merely lead to a speculative spree unseen since I don’t know when. The government, having backstopped the irresponsible banks, will have announced that they’re prepared to backstop irresponsible borrowing wherever it is found.

        The fact that it wasn’t necessarily irresponsible at the time is the reason for laws to be introduced that make profiting from asset appreciation, effectively, illegal.

        This clearly isn’t going to happen, so a debt jubilee will, just as it has with the banks, result in one final borrowing explosion, removing every last penny of pensions and savings, and much of future tax revenues.

        This is a desperate, emergency measure, with no consideration given to the future.

        • bonbon

          I suspect you know what that legislation is. Sandy Weill , the bankers icon, the Shatterer of Glass-Steagall, knows his own system well enough to draft the legislation! Short and sweet, not like the 1000′s of paged loopholes current since 2000.

          t is known exactly what to do, and it is Political Economy with a big “P”.

          DMcW realizes its’s political economics now.

  8. gizzy

    Nev and Mark Depositors were already bailed out when the bad banks they put their money into were bailed out with a huge non sustainable guarantee.

    By your v flawed logic. Put money in AIB or Anglo high interest account to get the best rate in 2006. Full bailout no loss.

    Put money into family home or a second property no bailout, no help.

    It is the bailing out of depositors which was then linked to the bailing out of investors which has the country on the hook, not the forgiveness of debt.

    So if you were of an age or demographic profile to have put savings in Irish banks do not be so smug or judgemental with those who were in a different cycle of life and had that very brazen dream of owning a home in their own country or invested in small business.

    When you lose empathy for your fellow man you have lost everything.

    • Mark Walsh

      Gizzy,

      You may not have read my reply to Nev’s formula.

      Also, I did not opine with regard to deposits in banks.

      Now that you bring the matter up, every depositor owns their deposit, period.

      I’m certain you would want your money back/out/guaranteed by the very state that licensed said bank to take in deposits.

      (very good documentary on-line “The Bank of Dave” C4OnDemand)

      I too would expect nothing less.

      I have a huge problem paying for the fractional reserve lending practices of every bank that gets caught holding their self-made time-bomb.

      Overall, I think we’re on the same page.

      Mark.

    • nev

      Gizzy,

      I’ll go more fundamental in my response

      Very valid point. Only it’s the bondholders who must be wiped out first, which did not happen, and which really was the root of the moral hazard here. And you are getting me wrong: I do have empathy, only it’s equal empathy to distressed home owners and those who were pushed out of the market by their trying to grab more than their fair share.

      You see, strictly following the law turns to be the easiest way out of complex ethical problems. You start bending the rules for one group of people, and you end up with all the others crying at your door.

      Re depositors, there is always a sort of guarantee for current account depositors (I never trusted AIB or Anglo, so it’s easy for me to agree, but still). But what usually happens (and might still happen) is equally cruel and equally good for all:
      http://www.youtube.com/watch?v=Py3OOCRLYew
      Cruel but fair.

      • gizzy

        Nev depositors were one group of people, many people did not have and do not have funds to deposit. It is in fact then a safeguard for those with surplus funds who wish to hold that surplus in cash. You must remember that other asset types especially property were put forward at the time as also low risk. Indeed the surplsses of some were created by the transactions in the property markets of others

        I accept for economic reason you may need to guarantee deposits but there is no moral reason.

        I also believe now for economic reasons you now need debt forgiveness and just because it sits on the other side of a balance sheet from cash deposits it cannot be knocked down for a moral reason.

        I believe that the profile of those in power and their friends makes a deposit guarantees a no brainer for them but they cannot countenace a debt forgivenees programme for a younger generation.

        • nev

          Gizzy,

          It is a very complex mix of conflicting interests, indeed. The younger generation is on the hook at the moment, no question about that, but the property overhang virtually guarantees that the situation will turn around at some point: the older generation whose pension savings will have been erased won’t be able to extract rents on the not-so-scarce-anymore properties, either. (Bulldozing it now looks like a smart move)

          As to the financial debt, I’m not sure “those in power” still benefit from it, while they also might have some non-performing real estate. So their interests may be more aligned than we imagine. I’m curious who’s holding most of that debt now, Irish elites or German pensioners?

          • gizzy

            Good question Nev. Most land accquisitions were made from Irish People at sky high prices during the boom. Either the already wealthy or through bonanza rezoning ie the farmers were the sellers. They not the developers were the big no risk winners that no one talks about. They received in most cases the largest proportion of a land deal, then the government, then the developer in that order. Among the biggest winners the farmers took huge wind fall from rezonings for development and roads and now receive 80% of all income from grants.

            And then the government who took a huge amount of money and spent it on a benchmarking exercise that was a fraud against the private sector.

            The big winner in the propery boom were land sellers who became big depositors and got a cover all guarantee and no one says a word.

          • coldblow

            Gizzy

            So you would like to see PS wages realigned with the private sector? Indebted houseowners should be forgiven but the contracted pay and conditions of others should be coldly disregarded? Ten years ago it was difficult to recruit junior civil servants (for example) in Dublin as the cost of living there, particularly accommodation, was too high. There was a Prime Time about it but I don’t recall anyone kicking up a fuss at the time. As a bank employee I doubt you had that problem.

  9. Clare Leonard

    Mario Draghi’s comments when asked a question on debt relief deal for Ireland.

    “IRELAND IS AN EXCELLENT EXAMPLE OF COMPLIANCE”

    You never change things by fighting the existing reality, we build a new model that makes the existing model obsolete. Ireland’s political landscape WILL be
    redesigned, do not loose faith.

  10. Deflated

    The main point I believe we are missing and have always missed is where do we want to go to – if that is not understood and acted on then we go around and around in circles.

    What is the end game for Irish society? Nobody knows…. We as a nation have no goal, sure it is said equil rights for all and all that favourtist rubbish, but what are we aiming for?

    Can we have an active plan to achieve ie tp out natural resources so that we can sell it and make good enough money out of it so that we can charge 5% tax on everyones income only….. Where are we going with all this. nowhere because there is no forward thinking outside of this firefighting.

  11. Clare Leonard

    Deflated,
    I know people are suffering.
    We the people for the people in Ireland can and will bring about change.
    Another few weeks all will be clear.
    We can do it.

  12. Munion

    A Story of Boys Meets Girl

    In 2006 Boy buys 2 bed apartment for €375k. Rents out other bedroom to a friend and has a great time.

    In 2008 Girl buys 2 bed townhouse for €345.

    In 2010 Boys Meets Girl. Cupid hits the two of them dead on.

    In 2011 Boys moves in with Girl. Rents out 2 bed apartment now worth €120k, rent covers half the mortgage. Their housing costs exceed €4k per month. Over 80% of their net monthly income.

    In 2012 Boy marries Girl. It’s a low-key affair.

    In 2013 Baby arrives. 2 bed townhouse now feels quite small. 2 bed apartment rented an average of 10 months a year, slips into arrears. Boy’s parents terrified Boy will go bankrupt and they’ll be chased by bank for their personal guarantee on 2 bed apartment.

    Boy would happily hand bank back the keys of 2 bed apartment and live with Girl and Baby in the 2 bed townhouse.

    Boy considering taking bank managers advice and getting a vascectomy. Would be no space for Baby #2 in the 2 bed townhouse.

  13. p15574

    I think we all might agree that the common person deserved a bailout before bondholders. The phrase ‘burn the bondholders’ is unfortunately not heard from politicians since the election, and it’s also too late for the many billions that have already been paid over to the bondholders.

    We often hear how these bonds are traded at fluctuating prices, eg 50c on the euro. What I have often wondered is, instead of just paying the bondholders, why don’t we actually buy the bonds first, and then just pay ourselves? Surely that’d be much cheaper? Even better if the government states beforehand it’s going to burn them, thus driving the price down before stepping in to buy the bonds back…or is that ‘insider dealing’?

  14. molly

    What I can’t get my head around this talk of debt forgiveness ,let’s say the banks right of a lot of debt.
    Where do the banks get the money from to pay for this,is this not just going to be another tax forced on the Irish people like the insurence levey that is been forced over the Quinn groupe.
    How can the banks pay when they are running at huge losses.
    If the government pay for this through the banks is this not another version of Anglo only on a much bigger scale,this would be a super duper black star much bigger than a black hole.

    • Johno

      Im not sure but think David covered this in the article.

      The most perplexing thing about all this is that according to the banks’ own stress tests last year, the worst-case position is that mortgage defaults would cost the bank €16.3bn. This capital has been injected into the banks by the government’s re-capitalisation. For an excellent account on the details of this google Karl Whelan’s (University College Dublin) comments at Central Bank of Ireland conference ‘The Irish Mortgage Market in Context’, October 13, 2011.

      By the sound of it they already have it.

      • molly

        Well what ever they have it won’t come any way near what’s needed,remember the black hole Anglo the figure started to rise and rise.

  15. Tony Brogan

    Goodday all

  16. bonbon

    Belgian Prime Minister announces his commitment to a full banking separation and gets public support by leading economist

    PARIS, Sept. 6, 2012 (Nouvelle Solidarité) — With the Belgian state (once again) pressured to bail-out the Belgo-French giant bank Dexia, leading political forces in Belgium have put again the Glass-Steagall solution on the table.

    Last weekend, Socialist Belgian Prime Minister Elio di Rupo, visibly aware of the latest outcry for such a solution by some quarters in the UK and the US, as communicated to them by the LaRouche movement Agora Erasmus, has been quite explicit. In the leading Belgian daily La Libre Belgique, when asked on Sept. 1, what kind of banking reform he was considering, answered:

    “One of the big problems is the size of banks. In the UK, the banks represent 600% of GDP, in Denmark 500% of GDP, in the Netherlands, France and Belgium, they represent between 360 and 400%. As soon as the banks have a problem, the impact on the nations is gigantic. We have to exit the financial systems own logic of privatizing profits and socializing losses. The financial assets circulating in the financial world aren’t any longer, in a sufficient way, dedicated to the real economy. That isn’t normal. There exists a demand, in Belgium as in other countries -for example in the United States — to break up the banks: on the one side the deposit banks, on the other the investment banks. Ideas are being worked out, in Belgium at the national bank and on the European level.”
    Full report:

    http://laroucheirishbrigade.wordpress.com/2012/09/06/belgian-prime-minister-announces-his-commitment-to-a-full-banking-separation-and-gets-public-support-by-leading-economist/

  17. bonbon

    Letting banks do their own stress tests is hilarious. Northern Wreck passed with flying colors.

    So the “perplexing question” need another explanation. We need to go over ALL their books under a Glass-Steagall long bank holiday. The derivative books will be rendered void. Then we can talk about banking, but only then.

  18. fly on the wall

    hello all.
    long long long long time reader here!

    sorry for my spelling/grammer as im dyslexic.
    i have a question for Tony B.
    hi tony i will be honest i had you down as a bit of a nutjob with your whole buy metel now line! BUT i am now converted to your outlook after some simple research over the last few months!

    i agree we are now faceing a giant sunami of shit that is about to wash over us all! i have no debts of any kind but i know now that is not goin to save me. what i need to know is a good palce to buy silver? i found a place here in dublin(blackrock) but are they ok to but from? and are the prices ok?

  19. padser

    All this talk about holding Banker’s to blame is not ‘all’ nonsense, but they did not ‘force’ you to buy the property!

  20. Julia

    Excellent article as always David.
    Here is Myles na gCopaleen with a supreme theatrical gesture which may come in useful sometime in the near future -

    http://www.irishtimes.com/newspaper/opinion/2012/0906/1224323649997.html

    • bonbon

      Looks like FG have thrown in the towel, dumped the future, pulled the plug on the past, and taken LP with them, to nowhere. Maybe that is their rule-book?

  21. Agreed, David.

    I hope we in Australia can learn the lessons from the (once again) hard-done-by Irish people and NOT bail out the banks. In fact, we have two leaders in their respective fields here who, in combination, might provide the world with a quick-exit strategy from all the financial turpitude.

    1) Steve Keen’s idea of a debt jubilee which would see a government grant of say $30,000 to individuals (not directly to the banks), to be used by people to pay down their debt. Those not in debt would also receive the grant to help keep the wheels of the economy in motion.

    2) Former Treasury head Ken Henry’s inquiry into “Australia’s Future Tax System” which recommends the abolition of more than 100 taxes (together with all their deadweight on the economy). Australia’s tax base to be reduced to only four taxes: income tax, a federal land tax to be rebated back to the states, the Goods and Services Tax (also given to the states) and tax on miners’s “super profits” (rents).

    No?

    • Tony Brogan

      Hi Bryan

      Point 1. To pay each citizen $30,000 and not to the banks sounds like a bright idea, BUT…. where does the money come from. Same place as the money for the bank bailout?? Therefore printed out of nothing by the central bank, loaned to the government and added to the national debt at interest accruing..
      Same problem.. One can not bailout a debtor by borrowing more money. The debts must be paid or defaulted. The lender or the borrower pays.
      In addition that 30,000 will be immediately deposited in an account at a bank where it will remain and held as a bank reserve. It will not recuculate as the banks are broke and need the reserves to stay technically solvent.
      Result one time blip of activity and back to square one.
      Fundemental of economics. Adding to the money supply does not increase the wealth. The value of all goods and services remain at rhe same as they were.
      Adding the money creates further distortions in the economy leading to further malinvestment.
      Adding money to the economy creates inflation which robs those who are prudent. It lowers interest rates artificially and deprives savers of income, notably pension funds.

      Point 2. Reducing the footprint of government is always a good idea. Less interference and economic decisions made for political purposes. If the lowered taxes result in a reduced government.. good. If not then the government will run a deficit and borrow from the central bank with the same results as point 1.

      Please correct me if I am wrong here.

      cheers
      Tony

      • StephenKenny

        It is the central bank’s job to do such things as manage the money supply. There is no problem at all in printing $30k each. If a country with their own currency did it, the currency would simply drop to compensate so imports would leap in price, and in terms of internally produced goods and services, the prices would rise to compensate: more money —> same amount of goods and services.

        The prudent would not get disproportionately robbed, as they would receive their proportion of the currency increase. The goal is to make everyone poorer – which will happen oneway or another – but to do it in a way that is equitable. Those with no debts will get a nice $30k deposit.

        This approach is pretty much the only way to to avoid the very real moral hazard of debt write downs, or of the bailout loans.

        • Tony Brogan

          So essentially it is a wayto devalue the domestic currency to make thenation more competative.
          Unfortuneately this is availavable to all sovereign nations with the result that we have a series of competative devaluations resulting in general inflation against all real goods.
          This is measured with remarkable clarity by the gold yard stick. Yet another reason to invest in real assets and and have gold and silver in hand to protect against the inflation(devaluation of the buying power of the currency).

      • StephenKenny

        If you don’t already do so, Steve Keen is well worth following: http://www.debtdeflation.com/blogs/

  22. Tony Brogan

    Here is a list of countries stting the central bank requirements for reserves in percent of cash available and held by chartered banks.

    The euro zone is listed at 1%
    This means as I understand the ratio (if anyone knows better, please set me strait.) that a bank caN TAKE A DEPOSIT AND LOAN OUT 99 TIMES THAT AMOUNT.
    If this is the case then a default rate of merely 2% will bankrupt a bank. A default rate closer to 20% will make it impossible for the bank to recapitalize without absorbing a huge sum of money.
    so if the bank holds on to a delinquent loan and has it on the books at par it is less in trouble, theoretically than if the loan were valued at market.

    so if the debts are forgiven or not, the banks are in a tremendous hole which cannot be escaped from. This is the result of fractional reserve banking.
    i saw a report that Irish banks will be asked to recapitalize to the 8% level. An impossible task if you ask me. with the amonunt of debt outatanding and in default the banks will have trouble being solvent at 1% ratio never mind 8%
    Leverage on the way up appears to make fortunes and on the way down the wealth evaporates. Welcome to the real world.

    Other countries have required reserve ratios (or RRRs) that are statutorily enforced (sourced from Lecture 8, Slide 4: Central Banking and the Money Supply, by Dr. Pinar Yesin, University of Zurich, based on 2003 survey of CBC participants at the Study Center Gerzensee[6]):

    Country

    Required reserve (in %)

    Note

    Australia

    None

    Statutory Reserve Deposits abolished in 1988,
    replaced with 1% Non-callable Deposits[7]

    Canada

    None.

    New Zealand

    None

    1999 [2]

    Sweden

    None

    Eurozone

    1.00

    Effective January 18, 2012.[8] Down from 2% since Jan 1999.

    Czech Republic

    2.00

    Since October 7, 2009

    Hungary

    2.00

    Since November 2008

    South Africa

    2.50

    Switzerland

    2.50

    Latvia

    3.00

    Just after the Parex Bank bailout (24.12.2008), Latvian Central Bank
    decreased the RRR from 7% (?) down to 3%[9]

    Poland

    3.50

    as of 31 dec 2010 [10]

    Russia

    4.00

    Effective April 1, 2011, up from 2.5% in January 2011.[11]

    Chile

    4.50

    India

    4.75

    March 2012, as per RBI.[12]

    Bangladesh

    6.00

    Raised from 5.50. Effective from 15 December 2010

    Lithuania

    6.00

    Pakistan

    5.00

    Since November 1, 2008

    Taiwan

    7.00

    [13]

    Turkey

    8.00

    Since February 1, 2011

    Jordan

    8.00

    Zambia

    8.00

    Burundi

    8.50

    Ghana

    9.00

    Israel

    9.00

    the Required Reserve Ratio is called Minimum Capital Ratio[14]

    Mexico

    10.50

    Sri Lanka

    8.00

    With effect from 29 April 2011. 8% of total rupee deposit liabilities.

    Bulgaria

    10.00

    Banks shall maintain minimum required reserves to the amount of 10% of the deposit base
    (effective from December 1, 2008) with two exceptions (effective from January 1, 2009):
    1. on funds attracted by banks from abroad: 5%;
    2. on funds attracted from state and local government budgets: 0%.[15]

    Croatia

    14.00

    Down from 17%, effective from 2009-01-14[16]

    Costa Rica

    15.00

    Malawi

    15.00

    Nepal

    5.00

    From the monetary policy announcement for FY 2011/12 CRR reduced from 5.5% to 5%

    Hong Kong

    18.00

    Brazil

    20.00

    Up from 15%, effective from 2010-12-06 – Ratio is for requirement on term deposits.[17]
    RRR for foreign currency positions increased to 43.00 on 2010 July 15 [3]

    China

    20.50

    Ratio is for major Chinese Banks on 2012-02-24;[18] down from a 21.5% high in June 2011.
    Small and medium-size banks have a lower rate of 18.50%.

    Tajikistan

    20.00

    Suriname

    25.00

    Down from 27%, effective from 2007-01-01[19]

    Lebanon

    30.00

    • Hi Tony,
      interesting reading. I know from my own gut feeling that fractional reserve banking is immoral but can you explain to me how a bank who say create money out of thin air can ever go bankrupt?

      I mean they created the money out of thin air…does it really matter if they get it back or not?

      Please explain.

      Many thanks,

      Josey :)

      • StephenKenny

        Fractional reserve banking isn’t, legally, so free and easy.

        Banks can only lend money – create it out of nowhere – up to a multiple, typically ten times, of their ‘tier one’ capital. This is, basically the total of their deposits and shareholder capital. So for every $ you deposit, the bank can lend $10, and for every $ in new shares you buy in the bank, they can lend $10.

        There are actually many tiers of capital, and many other ways that a bank can strengthen their capital base.

        To understand how a bank should work, watch the TV Series Dad’s Army and consider what Captain Mainwairing would have said to an underling who suggested conning their customers by adding dodgy small print., To see how they actually work, read Prof William Black’s book, ‘The Best Way to Rob a Bank is to Own One’.
        .

        • Tony Brogan

          Hi Josey/Stephen

          StephenKennysays:

          September 7, 2012 at 6:22 pm

          Fractional reserve banking isn’t, legally, so free and easy.

          Banks can only lend money — create it out of nowhere — up to a multiple, typically ten times, of their ‘tier one’ capital. This is, basically the total of their deposits and shareholder capital. So for every $ you deposit, the bank can lend $10, and for every $ in new shares you buy in the bank, they can lend $10.

          True Stephen, and then..
          EU says the reserves can be 100:1 so ten times the money loaned at 10:1 ratio and then…
          Securitize the loans. Take the mortgage loans or any other loans and bundle them up in a package and sell to a hedge fund or other investor looking for income returns. “Great investment fully secured by prime real estate”
          The cash returns to bank to be loaned out all over again but they get back the full loaned amount and add to reserves and now the cycle is turned Exponentially again…and again… until dirivitive is piled on to dirivitive like there is no tomorrow.

          Then it seems that the bank may have guaranteed the returns on the securities and so now it only requires a fraction of the loans to non perform and the bank is broke so many times over that it matters not how much extra the central bank supplies in bailouts, be it trillions there is not enough to recapitalize the banks. This amount being ADDED TO THE NATIONAL DEBT has everyone broke. That is what appears to have happened to Bear Sterns.
          A failure of the bank will bring down the whole financial system.
          That it is why it is QE to infinity and why the system is loaded now with QUADRILLIONS OF UNREGULATED UNSECURED DERIVITIVES THAT HAVE BEEN NAMED INSTRUMENTS OF FINANCIAL DESTRUCTION.

          All this talk of debt jubilees and relief is just pissing into the wind. This is why Glass Steagall is a red herring, a straw man, wishful thinking. It is why it is promoted by the PTB to make it look as if the politicians can do something. Salve to the people. “They” will not let it collapse, “We” will be ok. The government will bail us out. Wrong!! Moral hazard has you in its grip.

          It is why any sane country is buying gold as fast as it can before the whole economy collapses and implodes on itself.
          It is why any sane person has some land and a little of the only money worth anything at the end of the financial armageddon.
          There is a little time left to act as the players will not bring the house down if it can be stalled to a further date. nobody knows yet when it will collapse. ,, today, tomorrow or next year, but it is getting closer and closer.

          So you can’t eat gold or silver but when did you see anyone munching of a bank note. Mind you some of the food people eat today they may as well eat the note as there is likely more nutrition there than in the food they swapped it for.

          And if the authorities try to steal it from you well it will be already too late, you will be living in an authoritarian society and your freedom gone.

          Money is private property not goverment property. It has been usurped.
          Gold and silver are the monies of freed men not slaves. People have the right to use whatever they wish as money , not be forced to accept pieces of paper backed by a bankrupted state, diminshing in value daily.
          They can not steal from us all if we all have some so act like a free person and get some anyway you can get it before it is unavailable at any price. Sell the couch and get a silver coin. Don’t go out for dinner and buy a silver coin. Quit the coffee purchase daily and every month buy a silver coin. Buy silver with money you were going to spend anyway. Get your priorities right. Keep the money in hand where you know where it is and tell no one. You will need it in due course.
          Get silver at any price you can, it is going to be multiples of current pricing as fast as the fiat currency fails and failing it is now, and fail it will in the near future.

          Well I must get my panniers loaded and ready to ship aboard the plane with my bike. I leave on Tuesday for my cycle adventure. Flying out on 9/11.

          Take care, eat well, execise well, buy silver at any price it is available to you. Charity begins at home.
          Act like a freeman not a serf. Get involved with a group. Become an activist. Refuse to be cowed. Fortune favours the bold. “The only thing required for evil to succeed is for good men to do nothing”
          ‘What the mind can conceive and believe, it can achieve”– Napoleon Hill, Think and grow Rich, circa 1922 (?)

  23. bonbon

    Eurozone’s largest bank, Santander: Preparing for Break-Up of the Euro

    Sept. 6, 2012 (LPAC)–In its biannual risk report filed before the UK Financial Services Authority on Sept. 5, the UK affiliate of the largest bank in the Eurozone, Spain’s Banco Santander, reported that it has hedged 44 billion euros against the risk of a Eurozone country pulling out and adopting its own currency, steps “which could be complemented by exchange and/or capital controls, and additional bank holidays to effect the exit.”

    Another scenario considered is that, “in case of a total dissolution of the Euro zone, the euro would cease to be a valid currency, and all the member States would return to their currencies on the basis of a probable EU Treaty which would formalize the dissolution.”

    Such filings on preparations for the coming euro zone break-up were required by the FSA from all top UK banks.
    So much for the adamant assurrances of German Chancellor Angela Merkel and Spanish President Mariano Rajoy when they emerged, all friendly from their short, working meeting on Thursday in Madrid, that they are committed to “the defense of the euro,” and “to dissipate any doubt surrounding the common currency.”

  24. bonbon

    Bank Separation Was Hot Issue at Frankfurt Bankers’ Conference

    Sept. 6, 2012 (EIRNS)–At yesterday’s Handelsblatt Banking Day in Frankfurt, attended by several hundred bankers, views on several top issues currently disputed among the bankers clashed; for example, on the ostensible need for a EU banking union. One of the big bones of contention, however, was the bank-separation issue: whereas the German Social Democrats’ Peer Steinbrueck, a former finance minister, endorsed a bank-separation system (details not reported), numerous leading bankers reportedly opposed it: Francis Oudéa, of Société Générale, and Commerzbank’s CEO Martin Blessing, as well as Bank of America’s Germany manager, Christian Meissner, and Klaus Friederichs of JP Morgan.

    Unfortunately, in a breach of usual practices, the press was excluded from the apparently most interesting parts of the event, and bankers were alone by themselves, so that probably, the biggest disputes on the Glass-Steagall issue at the event are not made known to the broader public.

  25. bonbon

    Draghi Opens the Floodgates, Announces Unlimited Bond Purchases

    Sept. 6, 2012 (EIRNS)–With one member voting against (most likely, Bundesbank President Jens Weidmann), the council of the ECB this noon voted in favor of ECB President Mario Draghi’s proposal to purchase sovereign bonds of troubled Eurozone states without limit. The plan, run under the title, “Outright Monetary Transactions” (OMT) [or, Outright Madness -- or Murder -- Transactions--ed.], will be dependent on the conditions set by the EFSF/ESM, as Draghi said in response to a question at his Frankfurt press conference, today — conditions which will be determined by the Sept. 12 ruling of the German constitutional court, naturally. Draghi made efforts to appear confident that the court would rule in favor of his views. Eurogroup President Jean-Claude Juncker and EU Commissioner for Finances Ollie Rehn attended the ECB council meeting.
    What are called “conditions” in reality are brutal austerity policies dictated to debtor governments by the EFSF and ESM as the precondition of the ECB spending a single euro for the OMT program. The collateral for the ECB “unlimited” bond purchases to the benefit of the private banks would be unlimited austerity for the population. Draghi’s plan implies a big step forward, in the establishment of financial dictatorship over the Eurozone.

  26. bonbon

    Considering Draghi’s OMT latest idea, and the implicit unlimited austerity for people, a debt jubilee from a bankers dictatorship seems unlikely.

  27. bonbon

    Calls for Debt Audit Point to Illegitimacy of the Debt
    March 9, 2011
    The very legitimacy and legality of the speculative debt bubble that London and Wall Street have created, are being called into question by a growing chorus of voices internationally. Among some of them, but not all, the idea of a LaRouche-style Glass-Steagall reorganization of the international financial system is very much present–without which such an audit could not function.

    On March 3, the Jubilee Debt Campaign–which was originally set up with significant Vatican input in the lead-up to 2000–issued an international call for Greece’s debt to be audited to determine what parts are illegitimate and should therefore not be paid. The call referred to the precedent set by “an audit in Ecuador in 2008 [which] encouraged President Correa to default on some of Ecuador’s most unjust debt, leading to a write-down by borrowers.” The latest Jubilee call was signed by 200 international economists, activists, parliamentarians, and others, including two former Ecuadorian cabinet ministers (Pedro Paez and A. Acosta), the UN’s Jean Ziegler, Denis Halliday, American economist M. Weisbrot, and some others in far left field, and/or outer space, such as Noam Chomsky.

    Nationalist forces in Ireland are also picking up on the Jubilee call, and urging that the same be done in Ireland. Economist David McWilliams said the audit should be done in tandem with “a referendum on paying bankers and bondholders”–a policy most associated with Gerry Adams’ Sinn Fein–and that “we could set the example for all of Europe.” Fintan O’Toole and other Irish economists and trade unionists have also signed the call, according to Eurobserver.com, which also notes that “Any substantial repudiation of this debt would punch massive holes in the balance sheets of the banks in the core of the Eurozone that performed much of the lending.

    http://cecaust.com.au/main.asp?sub=articles&id=2011_03_09_audit.html
    ——–
    Glass-Steagall is the best way to do this, splitting off the speculative sector, cancelling its synthetic debts.
    If Australia’s Keen really does support the Jubilee, it would be interesting to know his views on bank separation.

    • StephenKenny

      After reimplementing Glass-Steagall, why shouldn’t a broker/dealer, such as Goldmans Sachs, who are not part of a commercial or retail bank, massively increase their shareholder base to provide catpital, and then leverage 100 to 1 to bet on next year’s wheat crop? or oil? or massively short Italian bonds, effectively destroying Italy’s ability to borrow on the open markets?

      None of these things would be outlawed by Glass-Steagall.

      • bonbon

        Outlawed are bailouts for such entities. And no access to deposits, whatsoever. Not only seperation of mmg teames, but physically seperated offices. This is the way it worked. After 2000, well we know what began then.

        As for leveraging, the classic example is LTCM in 1998. That got a bailout over a “crow-eating” weekend as the entire system was already in danger of an unwind. So Derivatives were already in full swing, actually since 1974 (after Nixon broke Bretton-Woods). If GS bet on this years crop, it would be bankrupt – it is a disaster. But they really are betting on Obama bailouts, not “crops”. We take all that away, suddenly.

        • StephenKenny

          Are you suggesting that Goldman’s couldn’t be systemically dangerous?
          Before the late 1990s, broker dealers weren’t allowed to be limited liability. The only capital was investor, and the partners were personally liable for all losses.

          A ‘real disaster’ today would wipe out some shareholders – pension funds most likely – whereas a ‘real disaster’ pre-1999 would have bankrupted the Goldmans partners.

          Also, no one who wasn’t within the industry concerned, was allowed to take a position any of the commodities markets. Goldman’s and the rest could not get any access to the commodities markets at all. These regulations are still in place, but for reasons that are very unclear, they, and several others, have been given letters – by the CFTC – which allow them into these markets.

          Glass-Steagall is certainly important, but there are a lot of other things that would need to be done, and most importantly, there would have to be people who were prepared to enforce any laws that were passed. No point having Glass-Steagall if it isn’t enforced.

          • bonbon

            Glass-Steagall will shake the tree. What falls will be amazing. But first shake that tree.

            Are we not tired of being labelled “low hanging fruit”? Have you heard that term?

            Well some really rotten securitized fruitcakes will be shook down. And you are right this must be enforced.

            That is the measure of any presidential candidate. I posted in last blog, answers to all those questions by the “what if” contingent. I’ll dig up the link…

    • I’m sure Steve Keen said he wants investment banks treated differently because of the troubles they’ve created, bonbon.

      • bonbon

        It would be very interesting to track down statements he must have made recently. Glass-Steagall is an intervention that a republic can do. The Crown still holds sway in Australia, with a nasty history of dismissing governments who fail to amuse. Still London’s Financial Times started a call on July4 this year. That should be encouragement enough!

  28. Clare Leonard

    Do not forget one of the conditions Draghi set== Spain must first ask for a bailout. Spain, I hope has
    learned from Irelands mistake and will not request a bailout.
    Spain has enough Gold in hand, they can issue a gold backed bond themselves and capital will flood into Spain. Check the small print on the bailout of Greece,
    their gold is gone. Check the small print of the Irish bailout, where is our 6 ton of gold, which was
    in the bank of England is it still there????? I cannot get an answer.
    In the small print the troika always
    take any gold they can get their dirty hands on. This is and always was the end game. Wake up everyone before it is too late.
    Paper currency is going to nil value. The ECB are well aware of that. They will destroy each and everyone of us is we allow it.
    The people of Ireland need to
    work with the people of Spain and Italy,
    They are picking us off one by one.
    We need to stand together.

    • bonbon

      Even the Bundesbank gold seems to have vanished.

      The Troika kills, entire nations. There is absolutely no way to negotiate with them.

      Lets break up their banking system as FDR did in 1933. We need a functioning bank sector, but free of derivatives which will be banned, punishable.

    • breltub

      Clare, what are you saying?
      That the value of a legally decreed piece of paper printed under licence of the ECB by delarue can lose value?
      I don’t get it. That is ridiculous. The piece of paper says €20 on it. So it must be €20. You know gold is only good for rappers, dental fillings and maybe some 6th year electrolysis experiments!

      Think about the damage Ben Bernanke would do if he started dropping gold out of a helicopter!

      Going back to gold is nothing but a barbarous idea and will cause nothing but cranial damage once hyper inflation kicks in and Ben has to start dropping it! Think of the children!!

  29. coldblow

    As Michael Hudson has always argued property prices will always rise according to how much banks will lend against it. So in that sense it is not the buyers’ fault. Here is his latest.

    http://michael-hudson.com/2012/08/wall-streets-war-against-the-cities/

    Unless, as Stephen argues, you make profiting from asset appreciation illegal there isn’t much it seems that people can do to prevent bubbles occurring but opt out. Or boycott – but what would Ireland know about that kind of thing?

    The moral argument against debt forgiveness in my view depends mainly on your psychological outlook. Someone mentioned above the parable of the Prodigal Son, which my old scripture teacher called one of the most challenging for people to accept.

    For what it’s worth, here is my take on the psychological divide.

    Intraverts: What’s mine is mine (and so what’s his is his)
    Extraverts: What’s yours is ours (and what’s mine is mine – I worked hard for it – I hope no-one notices)

    • Colin

      Prodigal son did not re-inherit on his return, which many people wrongly assume he did. The wise father made sure that the other son got the farm. Prodigal son got a warm welcome as he ate a lot of humble pie, swallowed his PRIDE, and came home to where he belonged. Maybe he got a job polishing his brother’s boots when the fatted calf was well and truly finished.

      Also, can I pose questions to those who bought property?

      If you got a mortgage, how many multiples of your salary were you prepared to borrow against? If you got a mortgage multiple of 8, were you prepared to go to 9, 10, 11, 12 ,13? Where was the cut off multiple? For me, the multiple is 3.5, so I’ll be waiting a long long time before I think about buying.

      What kind of a multiple are you? Are you a 5? or a 7? or a 9? If so, why do you choose this multiple?

  30. Eoin Meehan

    David, what about abolishing full-recourse mortgages as part of the mortgage re-org? As far as I know only Ireland and the UK still have these.

  31. Lord Jimbo

    4 years since this crisis kicked off and we are talking about the obvious, wouldn’t be surprised if the talking goes on for another 4 years.

    • bonbon

      London’s Financial Times only began discussing the obvious on the 4th of July 2012 with the editorial call for Glass-Steagall. Sandy Weill of Citigroup began openly talking about restoring that law, he being the self-described Shatterer of Glass-Steagall (as an office framed certificate proves) in August 2012.

      Since then from all corners, some most unexpected, repeated and heated discussion of this key intervention.

      Some dismiss that as “just talk” – those who clutch the dying system.

  32. Pat Flannery

    Unfortunately Mr. McWillaims does not seem to understand mortgage finance. He writes about existing Irish mortgages as if they are part of the Irish fractional reserve banking system. They are not. They were all financed through securitization. His entire article is therefore in error.

    The fact is that the banks were merely the originators of these mortgages. They were not the investors. Only the investors can forgive the debt. The investors hold that debt in the form of securitized instruments known as bond.

    The only way to reduce mortage debt therefore is by burning the bondholders. The banks have no say in the matter. They never did. They were just brokers for bond securitization from the start.

    I sometimes wonder if by writing spurious articles such as this McWilliams is not deliberately perpetuating the myth that banks can write down mortgage debt or take less than book value in a short sale. It is either that or he just does not understand mortage finance.

    • Tony

      Pat, banks have already written down mortgage debt and taken the hit in short sales. Dont you remember that nurse who “spilt the beans” a few months ago? I have other anecdotal evidence of this. Your argument doesn’t stand up at all.

    • bonbon

      Very good point, on securitizaton. When the Home Owners and Bank Protection Act, HBPA, was proposed by LaRouche in the US in 2008, it was clear the banks as commercial agents in an industrial society were to be protected as well as home owners. Of course the entities holding those derivative (not asset backed, but ass-backed toilet paper) bundles, re-sold over and over, were going to take a hit. That is what Glass-Steagall is all about. The bailouts are a doomed attempt to save the value of that toilet paper (to put it diplomatically).
      Even Sand Weill of Citigroup and London’s FT, all call now for a clean separation that was finally abolished in 2000, with massive lobbying from himself and Citigroup after it was the first really big re-combination of a commercial bank and Travellers. The stink rising from agencies sitting on this toxic paper is too much for even the banks now.
      It got so bad that it was proven in court that no one could clearly identify who held the securitized packages, paperwork was missing. Foreclosures should have been halted.

      So any Jubilee must clear out that toxic sludge, hiding in the shadows, except for the odor. Debt cancellation will be much easier then.

      But never forget, real economic collapse, with no growth for 35 years will become suddenly visible as the sludge is cleared. That means huge reconstruction, as after an economic war (which it is). That means a type of banking known as Hamiltonian, the antithesis of London’s piracy. I certainly believe bankers want to do real banking when the sludge is cleared.

    • Sorry Pat

      Very few Irish mortgages were securitized which is why we had to re- capitalise the banks…duh!

      Best

      David

        • Juanjo R

          UCD bred passive aggressive idiot.

          Read the link below. IT IS REFERENCED. Do you know what that is?

          Professional Practice lecturer my arse.

          • Dorothy Jones

            Wow!

          • Dorothy Jones

            For someone who lives across the globe and posts that they have bigger fish to fry….get over it man…move on…more to life than that

          • Juanjo R

            2 hours to come up with a come back – sharp!

            Obessing about a post of mine from 6 months ago thats mature!

            The big fish has been fried, some others are being fried thank you for asking. Some fish remain to be fried but thats out of my control, but hey thats life!

            And what has my living across the globe got to do with anything? I have less right than the you to have an opinion? You are a lover of all things German are you not and you work in Germany, post in German here, and even live in the germanic style gigantic blot on the sea-side called Malahide marina village? Superiority complex? Where could you have got that from?

            You had an opportunity here to respond to Pat’s ACCURATE AND INTELLIGENTLY PUT ARGUMENT and you chose to behave like a LITTLE GIRL playing schoolyard suck-up to McWilliams the percieved powerbroker here.

            You were caught being infantil…get over it!

      • bonbon

        “We” had to recapitalize? Who do you mean exactly?

      • Juanjo R

        Losses on Irish Mortgage-Backed Securities To Rise – Fitch http://online.wsj.com/article/BT-CO-20120801-713952.html

        If there were so few secuirties out there why are Fitch making statements about this? And why does it crop up in the Wall Street Journal

        The following REFERENCED blog post ( as opposed to your meanderings ) puts the figure between Permanent TSB, BOI, EBS and some minor lenders at €32 billion. Does not include AIB and RBOS/Ulster Bank or ACC/Rabobank.

        http://dublinopinion.com/2012/04/02/irish-mortgage-backed-securities-initial-notes/

        • Pat Flannery

          Juanjo:

          Thanks for that link. Perhaps McWilliams should have a chat with Conor McCabe, who seems to be better informed on the matter of “just how much of the Irish mortgage book has been securitised”.

          Regards,

          Pat

        • bonbon

          Very interesting. Why are RBOS etc not included? They are the Inter-Alpha group, the “never mentioned” “totally informal” banking club that turns up in every single crisis firstly as a deafening silence. Every time. The referee of that post needs to explain.

      • Tony Brogan

        This observation leaves me scratching my head. you seem to imply that if the mortgages were securitized the banks would not need to be recapitalized.
        Can you please elaborate?
        Thanks.

        • bonbon

          No, it means that recapitalization can only possible work if those securities are rendered null and void. That is the derivative overhang, the Inter-Alpha waiting in the shadows. That is the shadow banking system (plus drug laundering).

          Thst is what Glass-Steagall is exactly about. No commercial banking can function without this and that is why bailouts vanish.

          • Pat Flannery

            bonbon:

            First you must separate licensed banking activity from unlicensed banking activity.

            Originating loans under (licensed) fractional reserve banking rules requires a prescribed ratio of bank capital to loan portfolio (“loan book” in Irish parlance). Originating loans under rules set by investors in mortgage-backed securities does NOT require a (fractional reserve) banking license. If banks originate such loans they usually do so for an origination fee and to retain lucrative servicing rights.

            Once an originating bank sells such a loan, usually in a bundle with others, it no longer needs (regulated) bank capital to back it up.

            Irish banks BOUGHT BACK bad loans from securitized investors which then required bank recapitalization. That is what caused the Irish “banking” crisis. It really wasn’t a banking crisis at all.

            Even if the Irish banks were contractually obliged to do so, it was between them and their mortgage-backed securities investors. Such business was not licensed activity. It was like running a caf̩ in their office building Рan entirely separate business.

            All that needed to happen, from a regulatory or government point of view and to protect the public, was to separate licensed banking activity from unlicensed banking activity.

            Mr McWilliams says: “Very few Irish mortgages were securitized which is why we had to re- capitalise the banks…duh!” He is wrong about that.

            It was the REPURCHASE of massive amounts of securitized mortgages that caused the Irish banking crisis. These repurchases were designed to convert unlicensed banking activity into licensed banking activity. It would have been illegal for the Government to bail out the banks from their unlicensed banking activity. The taxpayer recapitalization (bailout) of Irish banks needs to be examined in this light. And media commentators need to stop justifying it.

          • StephenKenny

            It’s a pretty strange way to argue it. Sure, a lot of mis-rated securities were bought after all the various bailouts were announced – it was one of the many under-the-counter methods used to recapitalize the banks.

            But even so, with a maximum of 25% of Irish mortgages securitized in the first place, there was a considerable risk. The flexibility given to the definition of regulated capital meant that a lot more was lent than might have been expected.

            Dwarfing all of that there is the absolutely key question of the quality of the loans given, the quality of the decisions to grant loans. Hundreds of millions were being granted on the back of business plans that would have made a cat laugh.

            To suggest that is was merely neccessary to separate licensed from unlicensed activities, is to brush over the fact that the question of the definition of licensed banking activities is, in many ways, the core of much of the problem.

            Look into the ongoing lawyer-fest of Lehmann Brothers, and one thing you’ll find is an endless procession of so-called off-balance sheet, so-called arms-length, investment vehicles, pretty much involving every bank holding company in the US, UK, and elsewhere. Many arguments revolve around their status and where the liability sits.

            If a government wants to bail out a bank, it can bail out a bank. It may have to allow some things to do it – the US Treasury overnight reclassifying Goldman Sachs as a Bank Holding Company to give them access to the unlimited 0.5% lending, and then rewriting the requirements for such lending – The US Government bailing out an insurance company, AIG, so they could pay off -bailout – Goldmans.

            There’s no problem at all.

            Prior to the deregulation of the 80s, and especially the 90s, it may have been cut and dried, but today? Goldmans created securities that they knew would blow up, sold them to their clients, insured them to a value greater than the insurance company concerned, and made a killing from the taxpayer.

          • bonbon

            @Pat Flannery
            Glass-Steagall, repealed in 2000 opened the door to exactly what you say. The equivalent in Ireland, Germany and elsewhere was also disabled. In Germany it was a packet of 80 regulatory laws and most of the lobbying to repeal was by green politicians. It is certain that HypoRe in Dublin used the legal vacuum.

            Glass-Steagall separated commercial (licensed) banking from investment and insurance, very clear rules. It was in effect from 1933 to 2000, although from 1990 under massive attack from Sir Alan Greenspan and Larry Summers. President Higgins first elect radio chat (RTE!) clearly said the repeal of Glass-Steagall is key. Still you have explained the exact process very clearly.

          • bonbon

            @StephenKenny – that is a very strange way to avoid saying Glass-Steagall, with vague handwaving. The AIG case is a cut-and-dried example of what the repeal allowed. The entire “Holding” company issue is covered here:
            http://en.wikipedia.org/wiki/Glass%E2%80%93Steagall_Act_of_1933

            To write “there’s no problem at all” is completely daft.

            Now the entire securitization swindle is out in the open. Glass-Steagall is firmly on the table.

          • Pat Flannery

            bonon:

            You are right that the 1999 repeal of the 1933 Glass-Steagall Act opened up the floodgates of mortgage securitization and heralded a new era of unlicensed, unregulated “banking” in the United States. Like the potato blight of 1845 it did not take long to reach Irish shores.

            The July 2010 Dodd-Frank Act, although near fatally flawed by brutal Wall Street lobbying, may go some way towards reversing the disastrous repeal of Glass-Steagall.

            I just wanted to correct Mr McWilliams’ erroneous belief that “Very few Irish mortgages were securitized which is why we had to re-capitalise the banks…duh!”

            He might want to go easy on the “duh!” – especially when he is wrong.

      • Pat Flannery

        David:

        Then it appears you do understand mortgage-backed securities (bonds), you are just misinformed.

        Regards,

        Pat

  33. bridestream

    David, Is Pat Flannery’s point about ‘mortgage finance’ correct? Is he right and you wrong?
    I am not qualified to give an opinion.
    I don’t know if Pat F is qualified either but David you surely are qualified. Aren’t you?

    • Pat Flannery

      I don’t know whether or not 36 years as a mortgage broker in California qualifies me to talk about mortgages originated in Ireland by Irish banks. However I do know that Irish banks adopted the same method of bundling and selling mortgage-backed securities that we developed in America, particularly in California.

      Mr McWilliams seems to think that most Irish mortgages are what we in America call “portfolio” loans i.e. loans originated and held by banks as assets for their own balance sheets. Such loans are not intended for sale to outside investors.

      I very much doubt that many Irish mortgages were originated or funded in that way. Banks will quickly run out of lending capacity making those types of loans if they are to stay within the constraints of fractional reserve banking.

      Once the black art of creating mortgage-backed securities or mortgage bonds, hit Irish shores the Irish banks were off to the races. The plague of securitization did more damage to Ireland than anything since the potato blight.

      I don’t know if Mr McWilliams understands securitization. It would appear not. If he did he would not be writing about Irish banks forgiving debt. Only the bond holders can forgive debt and they don’t seem to be a very forgiving lot.

  34. joe hack

    der rag gy…

  35. Tony Brogan

    “what would the martians think if they saw what we are doing”

    http://www.youtube.com/embed/XRCIzZHpFtY?rel=0

    • bonbon

      In fact we are Martians now. We have eyes and ears, Curiosity, right now there, and the first greeting from Mars was sent to NASA last week.

      No evidence of gold there yet, but water is more valuable.

      • Tony Brogan

        Oh there will be gold on Mars alright but the Greenies will stop a mine to protect the pristine wilderness from despoilation!

        • Adam Byrne

          Just like the Canadians won’t share any of ‘their’ water with thirsty people because it’s on their ‘sovereign soil’ Tony – the soil that was decreed their’s a thousand generations ago.

          Oh wait a minute, wasn’t there someone else living there before that? Well they are dead now and didn’t have Canadian passports, so they don’t count.

          Nothing personal Tony, you’re a good man, just trying to illustrate the farcical nature of sovereignty, nationality and the the restrictive devices (actually insulting and discriminatory pieces of worthless paper) called passports. Burn every last passport on earth.

          • Tony Brogan

            Nobody said they would not share. They are part of the longest undefended border in the world.
            There is a lot of water in the Great lakes the border runs through but a cooperative agreement has left the water untouched.Niagara Falls is on the border as is the St Lawrence River.

            The Columbia river source is in Canada and flows south from the same source (The Columbis ice fields in the Canadian Rocky’s)as several Canadian rivers

            Sharing is one concept. The other is to make a plan and implement it over the objections of the locals.
            Your reference to the natives being there first!! Two wrongs do not make a right.

            By the way, how do you feel about the EU fishermen coming and putting the irish fleet out of business. I was in Killybegs last year. The boats go out for 2 weeks. I heard the tail of Spanish fishers coming in and loading fish from the boat directly to trucks that haul the catch to europe. The fish do not touch Irish soil and provide no economic benefit at all. The rape of Irish resourses.
            Do not want that to happen to Canadian water.Or Canadian anything for that matter.

            As bob bon pointed out there are “native” indians in the Fraser river catchment in central BC who have Gaelic words in their language. Gee, maybe Ireland has a claim on Canadian water.Thanks Goidal Glas.

            The Fraser river is one of the largest natural river systems left. no dams. Salmon swim 500 miles upstream to spawn. It is now being recognised what the ecology of the 1000′s of miles of river sytems owe to the calmon recycled in the upper reaches. minerals and substances from the ocean returned to the soil for a cycle of renewal.

            We do not know thee ffect on the arctic ocean of the removal of millions of gallons of fresh water. I can imagagine that it would raise the salinity and make itharder for the arctic to freeze which in turn will remove more ice from the arctic. Good or bad, you be the judge. We do not know the effect it would have.

            As a citizen of the world you should be embracing the only universal money (currency) there is. The future is golden, even the premium medals to be won anywhere are “gold” medals. We strive for the “gold ” standard in all things. It is embedded in the consciousness of all people. Time to return to what works. A currency with no boundaries to be used by citizens of the world.

            Have a great day Adam, citizen of the world. I’ll raise a pint with you in October!!??

          • bonbon

            Destruction of all nations is the explicit target of the banking crisis. Destruction of the one discovery that can put that empire to rest with the sediments forever.

            You sound like a Kamikaze pilot faces with certain defeat.

            Healthy people do not do that. Canada has every right to be a republic and cooperate withe nearby republics such as the USA and Mexico for the shared common good. Arctic runoff right now the greenies claim as their property. Somehow moving it south instead, disturbs the gods of the earth. Gaia anyone? Even the author of that volume became an outspoken nuclear advocate.

            The Empire has no concept of the common good of diverse peoples, languages, cultures, rather homogeneous rape.

          • Tony Brogan

            Destruction of all nations is the explicit target of the banking crisis.

            I agree with you here bob bon

            What is happening. I believe that the boom and bust are deliberate policy to break the backs of the western industrial democracies. There are other policies at play too that are not a part of this blog.

            The cry for help from the the peoples will result in centralized governance and less and less personal freedom. It is happening in front of your eyes. It is happening to your person as you live and breathe. It has been evident most of my lifetime. I have been called a nutbar for decades but less often lately! I take it as a badge of honour!!

            The sovereign nation state is the vehicle for individual cooperation. The smaller the state the more democratic it can be. Ireland is the perfect size. Cooperative sovereign states through treaties will result in endevours beneficial to all parties.

          • Adam Byrne

            I don’t believe in borders either Tony – totally false constructs, just like passports.

            No way would I advocate doing any sort of large scale project without thorough consultation with each and every stakeholder over a period of years if not decades, so we are on the same page there for sure.

            But people are going hungry and thirsty all over the world and if we need to divert water from one place to another (as we have done for thousands of years) then so be it.

            As for the fish, I’m all for fair and equal distribution under rule of law but at the of the day if it’s a choice between fish dying and kids eating, I’m choosing the kids every time, as I’m sure you would.

            I don’t care if a fisherman is Irish or Spanish; doesn’t concern me in the slightest as long as everyone has equal rights, taking geography, ecology and economy etc. into consideration.

            One day soon we’ll get off this planet and opportunities will become infinite, food will be synthesized etc., no need to over fish or drive other species to extinction.

            If the Luddites had had their way, we’d still be in the dark ages. Big problems need big ideas for big solutions.

            October for a drink sounds great Tony, count me in, finances permitting (I’m a student!)! You should time it to come over at the end of the month / beginning of November for Kilkenomics – you’d really enjoy that. Year 3 and counting.

          • Tony Brogan

            Hi Adam
            I am retired living on my illgotten gains and seeing if I have enough for the rest of my life. so we will toast each other with a glass of water that still being the cheapest drink around!
            I will make sure I am in ireland for Kilkenomics but I am sure I will be aggravated by speaker after speaker with no solution except what we know does not work!!
            Am I too harsh?

          • Adam Byrne

            I don’t think you’d get aggravated Tony. I’ve been to the first two Kilkenomics and they have been very stimulating and postive in outlook. No one is expecting miracle solutions as they are impossible. We know who the ‘baddies’ are though and we’ve got to keep calling them for who they are.

          • bonbon

            The old oligarchical trick to use or create a crisis so people might call for very their own beheading as happened in the Terror in Paris, I do not think will work. Sure they may be again grooming a Robespierre, who trained in London while translating Newton’s Optics. After that we had Mazzini’s Young this and that, all directed out of London. Today we have Londonistan. But they have miscalculated. Any war now would involve thermonuclear weapons, over in 60 mins. That means the end of them too. That is the meaning of Einstein’s E=mc**2. It is the end of an oligarchical “tradition” of millennia.
            Unfortunately von Hayek et al. also miscalculated with this. The extrapolation they make fails to take this into account. Mankind has stepwise mastered fire (a non material thing only the mind could know) to the point that ancient “trend lines” mean nothing now. This has huge implications for economics and its subsidiary finance.

          • bonbon

            What “native” means is really interesting. The British pushed the “autochtonous” model as nations states began to form, nation states committed to the general welfare. Many have found that human beings were never “indigenous”, rather for 100′s of thousands of years over many iceages, sea-faring. One finds evidence of languages in the most unexpected places. The most intense fight over this is of course the America’s, or Australia.
            NAWAPA is a program only sovereign nation states could even conceive of. A top-down careful analysis since 1960 of projected agriculture, power needs, water runoff. No “collection” of private firm could possibly implement this. This is modern political-economics.

            China, whose Yellow River meant the river of tears with at least 15000 deaths per year, built the 3 Gorges based on the US TVA under FDR. The TVA chief, Liliental actually planned that there then with China. Compared to China, the Rocky reservoir region is totally depopulated right now, but this huge project will build new cities and actually increase the population. Greening the Great Desert will increase the population potential. It is a test of the remaining oligarchy. Let them observe what we can do. That was Thomas Paine’s legal defense of the doomed French King : instead of execution exile him to the US so he can see a real republic in action. Instead Britain’s Robespierrs started the killing, to prevent a French republic.
            I follow Thomas Paine on this.

        • bonbon

          There is a scientific problem there. Gold deposits, here on lively Earth, are associated, as are other metal concentrates such as Iron, with the transition from a methane atmosphere to O2. The Archaeobacter sediments cause by the sudden switch to, for them highly toxic O2, concentrated the metals they had accumulated, including gold (which most say has no metabolic role in modern bacteria or plankton). Knowing this, one searches for either ancient ocean coastlines, or ancient meteor crate rims where the concentration is higher. Today thats where the mining compaines search.

          Now we, of the noosphere, know life concentrated minerals over 100′s of millions of years. We are willfully much faster, so it is clear we must concentrate faster. That means a higher energy flux density than sunlight, or as archaeobacter used, chemical energy (witness the deep ocean boiling sulfurous vents today). With fusion we can concentrate any element, even from “waste”. It is a natural step, that life managed in its own way. Gold then becomes less important than Deuterium or Tritium…

          • Tony Brogan

            Go for it bon bon
            you can be the world’s first sucessful alchemist!

            If achieved it would blow my theory out the window as gold would, produced thus, would be highly inflationary and cause yet another bubble which would surely burst.\
            How close is mankind to achieving this wonder?.

          • bonbon

            It is not a wonder. Life did this over millions of years. Yes then Life is to wonder at. In a fusion economy, really the same principle exponentially accelerated, various isotopes will have major value. Just do not try carrying them around in your wallet! And since they have a half-life they must be consumed!

            Fusion has been unnaturally blocked over 40 years, except for perfectly functioning thermonuclear extermination bombs of course. This creates an unnatural “raw material” deficit. There is a natural deficit of He3 which is to be found in great quantities in polar Moon craters (Clementine Satellite survey). That is the fuel of future rocketry.

            Since an economy is the result of the productive powers of labor, not some alchemical emission from inert raw materials, increasing this power of labor is a priority – the machine-tool principle. Increasing the energy flux-density, which life demonstrated over eons, is a knowable, for us, willfully directed principle. That means moving from carbon to H and further. Dr. Schellnhuber, Merkel’s “scientific advisor”, was given the OBE by Her Majesty herself, for proposing total de-carbonization, with no jump to higher densities. A true genocidalist, indeed.

          • Tony Brogan

            “Knowing this, one searches for either ancient ocean coastlines, or ancient meteor crate rims where the concentration is higher. Today thats where the mining compaines search.”

            I am not so sure about your suggestion as to where to find mineralization. Most of the production is geothermal in origin. Occuring as you say on submarine fault lines where lava/magma reaches the surface of the sea bed and coalesces on the sea floor ans then covered in silt to become sedimentary rock with veins of silver/gold etc.
            OR it is volcanic in nature where an eruption sends out branches of magma through the overlying sedimentay rock such as limestone. The further these branches go the more they split up and so without erosion the surface rocks contain narrow small veins while the deeper one goes, the bigger and more defined the veins are. Sometimes one finds these close to the surface because of centuries of erosion.
            Other rocks are eroded and are carried in glacial morain or river silt many miles from their source.
            Placer deposits. Gold and silver are thus spread around in many rock types and situations. Takes a good geoligist to figure this and I am just a layman and that is the extent of my knowledge.

          • bonbon

            There are some nice maps showing ancient crater rims, now much easier to find with orbital imaging, and ancient seas. Those maps are generally not easy to get. Geologic processes, take a much longer timescale, except of course at the supernova epoch of the solar system. During that highly active and incredibly fast phase, uranium and elements above Iron were produced. The heavier elements are concentrated at planetary cores and dispersed on the surface. Life intervened and concentrated sediments. Meteor impacts on these created patterns of higher density, of course not easy to find.
            If one finds concentrations of certain elements on Mars, that would be evidence of a long biospheric activity. Especially Iron. The magnetic field of mars has no simple NS, rather many. Could it be they indicate mineral concentrations? There is evidence of tectonic activity which meant a liquid mantle at some point. The largest known volcano, there, would be fascinating to investigate. Curiosity is in a crater. I am sure they will look for element concentration. It could be that crater was 2 times filled with water, so sedimentation.

    • breltub

      They might wonder does humanity keep math a secret because it can land stuff like that on their planet but most people are unable to understand APR…

      • bonbon

        Obama wants to shut NASA completely. It is fighting for its very existence. Gene Cernan, last Astronaut on the moon said in July, Obama is not an American. He simply does not think or behave like one. Neil Armstrong, normally very private sent an open letter in June blasting the Constellation cancellation.

        Obama’s Queen knows NASA is the gateway to thinking scientifically, considered a huge threat to the dying oligarchy. That monarch, on the Landing, said “the universe is so big and we are so small”. Well that is small-mindedness of the Lilliputians. After murdering JFK who set NASA in motion, we got Vietnam, Derivatives, Bosnia, the Euro, Iraq, Afghanistan, the biggest bailout in history.
        That murder is the turning point.

        • breltub

          No shutting down the Pentagon or the NSA though

          • bonbon

            General Dempsey, who was in Ireland and London this week making sure everyone knows the military are not about to let Obama go after Russia. That’s the Pentagon speaking. Obama won’t dare challenge them openly. He is not popular. Instead, cowardly Nero that he is. he intimidates citizens with reports od “successful” drone killings (ratio 20:1 innocent collateral damage).

            This is what NASA is up against. Curiosity was done in defiance of Nero.

  36. wills

    Is it not obvious at this stage that the banks are not interested in what is fair and just even if the banks are living on the backs of public funds.

    The banks are a mafia run private cartel keeping their eye on the next pOnzi scam.

    Debt write down for any of their customers is way down the list of their concerns.

  37. wills

    IMO the time has arrived to take on the banks in their proven record now of rackeetering and conspiracy.

    First, banks engineered an unlawful property bubble against A45 of constitution.

    Second, banks lied about leverage ratios and set you up david as the fall guy to use to bush whack us all with an never ending banking guarantee.

    Third the banks looted the pension reserves.

    Fourth, the banks bushwhacked govt into setting up a toxic bank called NAMA to bail them out of their sludge while the crony networks behind the banks socked the swag in tax havens.

    Fifth, the banks plugged their sucking hose into taxpayers in the guise of levies.

    Sixth, the banks are now stock piling capital bail out funds and on the sly deleting debts owed and clearing out dead wood.

    Seventh, moral hazard R.I.P

    • Tony Brogan

      Where there’s a will’s there’s a way!
      A1+

    • bonbon

      It is so bad, that stinking sludge in bank basement safes, that baker icons themselves are calling for immediate action. Sandy Weill is the best known.

      We took on the banks before in 1933. Only the nation-state has the legitimate mission for this. No private club will ever do it. That requires politicians from an era of utter decadent liberalism, to become statesmen, not an easy task. Still, the sheer scale of the disaster does make people think in ways they thenselves never thought possible, and discover those who already “were there”.

  38. Clare Leonard

    Brellub,
    When I say the value of fiat currency is going to nil, I refer to the reduction in the purchasing power of the Euro,Dollar etc.etc.
    The value of paper money is based entirely on FAITH. Since there is nothing behind paper money but the obligation of a state to redeem it in more paper or electronic money. Fiat currencys worth is questionable at best. There is a history of states every 27/40 years walking away from the face value of fiat money. It is impossible to walk away from the value of Gold and silver, because sound money is itself a commodity.
    Gold and Silver coins as precious metals with intrinsic value will never impoverish their owners in the same way that paper money has.
    Why are you paying more in the last 6 months for petrol, why are you paying more for food, Gas, ESB.
    Every time the ECB prints more Euros the purchasing
    power of the Euro drops, and prices rise.
    The creation of paper currency does not cause inflation. IT IS INFLATION, and inflation is a tax on the poor. Trade unions should be looking at the quality of money not the quantity.
    It was not the lack of money that caused this problem, it was the flood of money that caused it. Governments have always sought to monopolise the issuance of currency, either directly or through the creation of central banks, but the price we pay is the terrible and ongoing debasement of our money.

    This is the cause of global poverty, on a massive scale.
    The US$ has lost 40% of its purchasing power in the last 4 years alone because they print $ nonstop, Oil is priced in $, Wheat is priced in $, the USA use the printing press to pay for their wars and people starve all over the world as a result, due to the increase in the price of food caused by constant inflation. We also pay every time we fill up at the petrol station and buy bread, whatever chance we have in Ireland of
    coping with the constant price increases, the 3rd. world has no hope.
    This is a very serious moral issue. I ask you, what is the point is spending money
    on overseas aid while at the same time we support a monetary system which is responsible for starvation.
    I do not give a fiddlers about gold or silver, it is just a means to control corrupt banksters and politicians, as they are unable to mass produce Gold and Silver to buy votes and conduct wars.
    We live in a society where if you are very rich you
    get a bailout.
    If you are poor you get a hand out.
    If you are in the Middle you get left out and wiped out.
    That is no way to run a country.
    This very, very serious situation is only starting.
    When a nations bond market collapses, so does its currenty. The USA is purchasing 70% of its own debt because noone wants their bonds, so too the ECB is funding the banks to buy EU bonds because noone wants them. It is hard to miss the connection between the monetary policy that brought the housing market down, which will in turn bring down the bond market. When sufficient money is printed and pumped into bonds they will loose their value just as housing did, then the GAME IS UP for all of us.
    Banks hold our bonds as tier one capital and we guarantee them as part of our soverign debt.
    I will repeat, the bond market will go the same way
    as the housing market. Then your fiat currency is worthless.

    The head of our Central bank can encourages the bond buying spree, he does not look after your interest, just remember, his job is to protect the banks at all cost, NOT THE PEOPLE.
    When the ECB forced us to do the bailout they broke
    international law, under Odious debt. There is a legal case before the Irish courts which the media do not cover. Why????? =Change is coming.
    The powers that be are busy planting the seed in the media that the drought in the USA will cause global starvation, if you buy that story you are not looking at the facts. Ben Bernanke and Mario Draghi should be arrested and tried for crimes against humanity.
    We must have change and we will have change.

    • Tony Brogan

      Bloody brilliant Clare
      you nailed it
      Welcome to the blog!!

    • bonbon

      here has been a major harvest disaster not only in the USA, but right across the Ukraine to Kazakhstan. In 2008, Russia banned wheat exports when that happened.
      Numerous public figures have demanded Obama rescind hits dictatorial biofuel quota because livestock is being culled. He has refused to act, in the green genocidal British tradition.
      Bubbles Ben and Draghi and especially Blair should be tried for crimes. Obama must be impeached for well documented high crimes and misdemeanors.

      Look up Barbara Tuchman’s A Distant Mirror, when the banking (derivative) collapse of the Bardi and Perruzi banks of the 14th century, followed by a harvest collapse, opened the door to the plague. Exactly the same process is now underway on a massive scale.

      • Tony Brogan

        Agreed. Biofuel is not only uneconomic. It damages engines and can be used in limited amounts so there are no economic benefits.
        The amount used is removed from the food supply adding to shortages and rising prices. Hitting the poor peoples as Clare said.

        • bonbon

          And all based on the Global Warming Hoax, rthe lie of the 21st Century. It began with a lie, lying continues, and lies cost astronomical bailouts.

          A culture based on lies?

    • breltub

      Thanks Clare,
      I agree on all points and I too would like to see a money backed by something which preserved the wealth of people and was not debased to support the fuedalisation of society. Like you say, bailed out at the top and hand out at the bottom.

      When Ben Bernanke said he would drop dollars out of a helicopter in order to prevent deflation it seemed ridiculous. But people continue to believe working for a piece of paper printed at the whim of someone so flippant about it’s value is a good idea.

      If he were dropping gold or silver from the helicopter…

      • bonbon

        Well then it would never fly! Bubbles Ben is like Draghi, utterly incompetent. Ben needs to be reined in to the Treasury, given a semester on Hamiltonian Banking and then asked to pronto impliment Glass-Steagall on the 12 Fed banks. After all he knows where the books are. And I do not mean Geithner’s Treasury – he can observe from a rubber walled room in case his fits injure him. Obama given a padded room with a basketball to keep him from doing some kind of Nero thing.

        Urgent requirement of psychiatrists some time soon.

      • bonbon

        And since there are already bats in Balmoral and Buckingham belfries, a couple more large ones perched up there no one would notice, as the imperial system simply vanishes.

      • cooldude

        I agree Clare is spot on with every single one of her points. The mainstream media are making this Draghi bond buying scheme out to be the best thing since sliced bread. Why not simply call it what it is which is simply creating more Euros to buy debt which no one in their right mind would touch. This is monetization of debt and it is always a sign that extreme or even hyper inflation is not too far away. And lets not be fooled by this “sterilized” nonsense. Thats like saying you might be pregnant. They are creating new currency units to purchase bonds because nobody wants them. These new units cannot be mysteriously sterilized and WILL cause and are causing inflation which is robbing people on fixed income such as pensioners. This will all end badly. Currency systems tend to last around 40 years on average and this system of floating unbacked paper promissory notes is on it’s last legs.

    • bonbon

      This is standard Astran School, anti nation-state British monetarism.

      Ireland did not bug its sovereignty and is founded by an economist, Arthur Griffith, who very clearly exposed the fallacies of British monetarism using both Friedrich List’s and Alexander Hamilton’s political-economics. Neither of these are ever mentioned in the halls of “education” nor the London School of Economics.

      The insane belief of “intrinsic value” in dead inert capital or metal leads to incredibly stupid economics.

      As Hamilton showed, the productive powers of labor has value, and it is a national priority to increase tha with the use of higher forms of energy-flux-density, powertools, materials processing, dense agriculture, better transport of capital goods.

      From “dead capital” as Griffith put it, nothing flows, not economics, nor production.

      von Hayek put it extremely precisely using Bernard Mandeville’s rather infamous tome, from private vice is to flow public virtue. This is to be a “spontaneous” but “unknowable” process because of its “complexity” and the weakness of the human mind – exactly Adam Smith’s slogan.

      This explains why economics gatherings impotently sit there waiting for Godot. “No one knows what could come next” as repeated at the Frankfurt Bank fes held this week. They have all been mesmerized by von Haek and Adam Smith into a catatonic wild-eyed haze. Into this then appears the golden pendulum to complete the trance.

      To fight this, resist the swindle, means dropping belief in simply put “magic”.

  39. michaelcoughlan

    Hi David,

    I’ll bet your article in the sbb on Sunday will include an observation that the unlimited bond buying by the ECB of shite bonds from weaker euro governments won’t work because all it will do is bankrupt Germany.

    I agree with you all ready. There is something other than the hyperinflation of the Weimar republic the rise of hitler etc scaring the shite out of the Germans. If this all gets nasty and Germany realised that nothing has changed in Russia or the Uk since 1945 ie the Brits are a nation of moneylenders and hedgefund managers and all the Russians are good for is hawking raw materials who do you thing will get thd blame for the monster fuck up about to befall the eurozone? Germany and guess what? If any of us had to live through obliteration bombing of our cities like the Germans had I can’t imagine they are going to attempt to takenover anyone anytime soon which only leaves one option; Germany can close its Borders park thousands of its magnificent leopard 2 panzers just inside it’s own Borders pull out of the Euro and tell Eutope to go fuck itself.

    That’s where we are heading.

    I hope God does exist because we will surely need his help befoe this banking nonsense runs it’s course. As for Dan Obrien in todays Irish Times and the ‘sterilsiaton proceedure’ whatever the fuck that is to stop inflation from taking off? Such nonsense!

    • cooldude

      Hi Michael, I hadn’t read your piece when I posted above. Could not agree more on this “sterilization” nonsense. Isn’t that the same Dan O Brien who seven years ago was telling everyone that Irish property prices would keep rising and that it was “different” this time. How these clowns are still allowed to write in our newspapers is beyond me. Gobshites like him should be carted off to Spike island and left there for a long period.

  40. michaelcoughlan

    On biofuel Tony(

    Not true. There is a company in Ireland producing biodiesel from waste products and is the only one as far as I know which is viable.

    Other biofuels such as SVO ( straight vegetable oil) don’t damage engines because no ethanol is used in the manufacturing process. Older diesel engines can easily be converted to run on straight veg oil. As it happens I own a van with such a conversion. Works perfect. More modern diesel engines can be manufactured to accept biodiesel without damage.

    Michael.

    • Tony Brogan

      Good points. Thanks for the correction.

      I was logged in to the use of food stocks. Also to the reports from local garages who said the additives of biofuel to petrol could only be limited.

      I guess diesel engines are a different matter. I have read of someone driving around the world on oil from fish and chip shops!!

      Making fuel from waste product that would otherwise go into the atmosphere as it rots makes sense. In Victoria there is also an effort to extract methane gas from the garbage dumps. I am not sure that is economically sucessful.

      Of course one can ask is the production of vegitable oil replacing the production of other food crops?? or is it being grown where food can not.

      • bonbon

        Biofuel is always grown where food cannot by definition. It always replaces food crops ! The incredible irony is that the carbon input to modern agriculture to acquire biofuel is not accounted for in the so-called co2 bill!

        The true green will then suggest environmentally friendly biofuel production, no fertilizer, tractors, harvesters, rather plantation manual labor! They would even label this a jobs program! Next we’ll hear states-rights for that “charming way of life”.

      • Colin

        Some cabbies in London use waste cooking oil from fish and chip shops. When one passes you by on the street, you immediately feel hungry.

    • bonbon

      Using arable land to burn food potential is a crime against humanity. Farmers I know, rightly proud to have fed the world, are being priced into betraying their mission. As builders betrayed their mission building ghost estates.

      We have now a major crop problem world wide. And the EU subsidizes forest clearing for bio-fuel – see the case of Papua and the Orang Utangs and Palm oil.

      This it the ultimate green-meets-finance (always happy bedfellows) murderous scheme ever invented. The hysterical fit Merkel had over Fukojima, turned off 17 reactors. The result? Helios sun power in Greece for export only in front of starving citizens, Desertec cabled from Morocco, wind turbines with massive cabling problems, the highest power costs for manufacturing in the world. Bioreactor leakages which showed no one knows what organism evolution is going on in them. That slurry is really dangerous, and now identified for controls, which will kill the subsidies anyway. Solyndra, Obamas poster-boy greenie firm went belly up even with White house cheques. It is the next finance boondoggle to blow.

  41. michaelcoughlan

    Hello David,

    I am sure you are familiar with the derogatory term ‘run by accountants’ with it’s implied observation everything goes to shite when accountants wind up in charge. Guess what? Have a look at the following list and guess which profession they are?

    Charlie Haughry,
    Bertie Ahern,
    Patrick Neary former regulator,
    Seamie Fitzpatrick,
    Michael Fingleton,
    Bernard McNamara former builder/developer,

    You gotit David all chartered accountants in Ahern’s case accounts clerk.

    Guess which professional organisations were retained to review audit and sign off on the books of their respective organisations? Right again David, chartered accountants!

    What a joke!

    • bonbon

      ENRON the ranch at the Crooked E, the real first bailout (after LTCM) was only possible because of Arthur Anderson accountants doing the books. When ENRON folded, AA was disbanded and the staff went, guess where, to PWC, that fine upstanding accounting firm doing the books of many.
      The ESM is an accountants dream, the EU run by book handlers.
      Political-economics is not accountancy.

      • StephenKenny

        Enron wasn’t bailed out. The shareholders and bond holders got completely wiped out. Tens of thousands of people, including employees, lost much of their life savings.
        The CEO went to prison for 26 years, the CFO only got away with 5 years, or whatever it was, by doing a deal, and on and on….
        Weirdly, you might say that Enron was the list time that the the regulatory and legal systems actually worked.
        What is interesting is that the accounting model that Enron developed, to enable them to use borrowed money as income, was very clearly the genesis of the CDS.
        In many ways, Enron was a microcosm of the modern economy.

  42. Tony Brogan

    This is why the gold price could go to $100,000 / ounce. US unfunded libilities jump to $222 Trillion

    Two Bloomberg correspondents reported on August 8 that the US Government’s unfunded liabilities rose by $11 trillion last year, “ten times larger than the official deficit”, and are now at an estimated $222 trillion.

    http://www.goldmoney.com/gold-research/alasdair-macleod/the-gold-price-and-the-exponential-growth-of-our-problems.html?utm_source=english-subscribers&utm_medium=email&utm_campaign=w36-2012-newsletter

    • bonbon

      A cup of coffee in Berlin in 1923 cost 1 trillion Marks. There is a nice picture of a 100 Billion Reichsmark note here :
      http://de.wikipedia.org/w/index.php?title=Datei:100-Billionen-Geldschein-2.jpg&filetimestamp=20100329160515

      So if a piece of gold is worth let’s say that note, is it valuable. A couple of months before it was worth only a fraction.

      The Versailles Treaty demanded 30 billion in gold, impossible to pay.

      • Tony Brogan

        The gold did not change in value it was the fiat that blew to worth nothing.
        Whatever it cost in gold to buy the cup of coffee in say 1920 cost the same in gold in 1923.
        gold retains your purchasing power and is inflation proof.
        The paper money is always subject to inflation and the robs of the people of buying power.
        Silver is now E26.26 or US$33.68.

        • bonbon

          British Trades Union Congress Demands, Shake Up the Banks

          Sept. 8 (EIRNS)–Ahead of its upcoming convention, Great Britain’s Trades Union Congress (TUC) released its program for reforming the banking sector which points to the need for separating retail and investment banking and calls for the formation of a state investment bank.

          “Banks caused the crash,” TUC General Secretary Brendan Barber said in a TUC press release. “Their problems are still driving the Eurozone crisis. They are still failing to provide the finance that Britain’s productive sectors need.

          “Yet the government is still tiptoeing round reform. Even the limited Vickers proposals are being watered down, and initiatives designed to kick-start lending or boost growth end up helping banks, rather than the real economy.

          “That is why it is not just unions backing a radical shake-up. Proposals we make also find support among business leaders, consumer groups and even some ministers.”

          The banking reform manifesto calls for building a banking system that will “focus on the building of long-term, real economy value rather than on short-term high-risk/high-reward speculative activity.” Highly critical of the Independent Commission on Banking, chaired by Sir John Vickers, the TUC charges that it does not go far enough and criticizes the fact that the government watered down the Vickers recommendations even further, such as “allowing complex investment banking products to be sold by ‘retail’ banks. Such moves also suggest that the proposed ‘firewall’ between retail and investment banks may not be strong enough, especially as it is likely that banks will be able to find ways to circumvent it with new products and services. It may be the case that only full separation will be able to truly ring-fence retail deposits and the payment system from speculative ‘casino’ banking.”

          The manifesto calls for new independent commission with a broader mandate which “should involve finance experts, trade unionists, mortgage holders, SMEs and other interested parties affected.”

          There is also a call for the “creation of a State Investment Bank” as “a publicly owned credit provider that supports the real economy.” Including extending credit to small and medium enterprises, infrastructure, etc. it is suggested that the Royal Bank of Scotland, which is already 84% own by the government be converted into such a bank. The example of the German Kreditanstalt für Wiederaufbau is given, including a proposal to establish similar banks on a regional basis. Although there is a call for a Green Investment Bank, which could be folded into a state investment bank, such a Green bank should by no means be seen as an alternative.

  43. Tony Brogan

    http://www.youtube.com/watch?v=sxVsosT3GAw

    Russia Today
    Interview with Bill Murphy of GATA

    GATA’s Bill Murphy on the JP Morgan Silver Shortage and the next Bullion Bank Run

  44. tony_murphy

    communism is coming.. say goodbye to private property etc… say hello to huge taxes and the european police in your face like the epa

    the east german communist is leading the way

    the globalists, central banksters, college of europe crew are getting away with murder

    http://wealthcycles.com/blog/2012/09/07/european-federalism-can-it-save-the-euro?utm_source=Social+Media&utm_medium=Twitter+and+Facebook&utm_campaign=Article%3A+European+Federalism+-+Can+it+Save+the+Euro%3F

    • bonbon

      I recommend Rosa Luxemburg on Lenin’s total blindspot for imperialism. He simply did not understand it. Merkel neither. She is Frau Honnecker.

      Blair does! His servant Obama does not.

      Ireland does!

      We have had imperialism for at least 6000 years, Britain is the 4th Roman Empire (not the UK). It is the last of its line.

  45. bridestream

    Clare Leonard – a brilliant piece of writing.

  46. michaelcoughlan

    Hi David,

    I have a wormery at the back of my house. It’s bascially a large barrel containing worms which eat veg scraps. From time to time I have to sieve through piles of shite to collect the quality byproduct vermcast which I use to make a very high quality multipurpose compost.
    Like my wormery I was sieving through loads of shite on the Internet trying to find out what sterilisation of debt means. Apparently the ECB will fund the new round of bond buying through selling to the private Market thereby preventing an increase in the money supply.

    As if the private Market will buy increasingly worthless bonds at acceptable yield levels!

    Thes guys are on 500k plus per year. Guess what well qualified construction professionals like myself who took your advice and were out of the Market before the crash have been on for the last couple of years? A Quantas flight or our arses!

    And even we can see the utter folly of the latest load of shite to come out of Europe which I can’t even turn into multipurpose compost!

  47. fly on the wall

    Tony Brogan can you please tell me where is a trusted place to buy gold/silver in ireland?

    also which do you think is the best investment? is a mixture of both best,im not trying to make money or anything i just trying to keep what little money i have safe.

    • Tony Brogan

      Preservation of capital is thename of the game. gold and silver are generally not investments but at present are suppressed in relative value by actions in the paper market. Heavy shorting by bullion banks and overt/covert sales of physical by central banks.

      Also fiat currencies are artificially high relatively because of manipulation in the other direction. how long will the manipulation go on? A long time but it is a loosing battle as market forces exert themselves.
      Physical bullion is reportedly in short supply and that is what ultimately drives the pricing.

      silver is more undervalued than gold as demonstrated by the price ratio of 52:1. Historically it is closer to 15:1 or 20:1. so it is not unreasonable to suppose we will shortly see a narrowing of the ratio and silver will improve relative to gold. In the last month it has fallen from a recent high of 58:1

      Suggestions by Michael for companies are valid but I make no reccomendation. Only suggestions for you to do your own due diligence.
      Review http://www.gata.org site for a long list of PM dealers around the world including some in Ireland.
      good luck.

    • tony_murphy

      Have bought from http://www.guernseymint.com/ before

      if you are worried about storing it yourself, or don’t want to pay the VAT, then

      http://www.goldmoney.com/

      although it’s always wiser imo to have possession yourself if possible

      Mike Maloney’s goldsilver.com is another option

    • tony_murphy

      Silver has multiple uses, it’s a super conductor and has medical applications etc. Everyone should have silver.

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