October 15, 2012

Waking up to reality

Posted in Sunday Business Post · 207 comments ·

“When faced with the choice between changing one’s mind and proving that there is no need to do so, almost everyone gets busy on the proof.”

This brilliant quote from economist JK Galbraith just about sums up why individuals and organisations tend to stick to plan A when the evidence suggests that Plan A isn’t working. No one likes to be proved wrong but, ultimately, the worst thing we can do when our world view turns out to be flawed is stick to it. Yet this is precisely what many of us do.

Given this general observation, it was fascinating to see the IMF conclude last week, with its influential world economic outlook, that it might have got its basic economics wrong. If not quite apologising for leading half of Europe up the economic garden path, the IMF has at least admitted that what we have been arguing for years in this column is right. For the first time, the IMF conceded that austerity doesn’t work and, not only does it not work, but it is counter-productive.

The implications of this concession for the continuation of the ‘austerity at all costs’ policy are enormous – and may prove to be the first chinks in the armour of the troika.
Christine Lagarde’s IMF noted in its global outlook that the world economy has slowed down more rapidly than it had expected, and its experts asked themselves why had they got it so wrong yet again. Given that the main pillars of Irish economic forecasting – the Department of Finance, the Central Bank and the government’s own fiscal advisory thingy – all subscribe to the IMF’s original view of how the economy works, this volte face by the IMF is not merely academic.

So the IMF asked itself what was going wrong with its economic models which, yet again, got the projections so wrong. Remember, this is the organisation, along with the ones mentioned above, that didn’t foresee the greatest crash in recent economic history.
The nub of the issue is what economists call the size of the fiscal multiplier. This concept relates to how much a cut in government spending or increase in taxes affects the rest of the economy. If it doesn’t have much impact, this would be a small multiplier and mean that a country could cut government spending and not be affected so much because the private sector would take up the slack.

This is what the IMF believed up to now. But last Wednesday, it admitted that it may have been wrong. It admitted that the private sector, reeling with too much debt and no access to new funding, might not be taking up the slack at all.

It’s worth looking at what the IMF itself had to say about issues in the report because it reveals the evolution of thinking at the institution that, more than most, affects Irish economic policy. Here’s the direct quote:

“With many economies in fiscal consolidation mode, a debate has been raging about the size of fiscal multipliers. The smaller the multipliers, the less costly the fiscal consolidation. At the same time, activity has disappointed in a number of economies undertaking fiscal consolidation. So a natural question is whether the negative short-term effects of fiscal cutbacks have been larger than expected because fiscal multipliers were underestimated.”

After pages of charts and numbers, and probing into what exactly happens in an economy like Ireland’s, when the government slashes spending, the IMF concludes: “These results suggest that actual fiscal multipliers were larger than forecasters assumed. But what did forecasters assume about fiscal multipliers? Answering this question is complicated by the fact that not all forecasters make these assumptions explicit. Nevertheless, a number of policy documents, including IMF staff reports, suggest that fiscal multipliers used in the forecasting process are about 0.5. In line with these assumptions, earlier analysis by the IMF staff suggests that, on average, fiscal multipliers were near 0.5 in advanced economies during the three decades leading up to 2009.

“If the multipliers underlying the growth forecasts were about 0.5, as this informal evidence suggests, our results indicate that multipliers have actually been in the 0.9 to 1.7 range since the Great Recession.”
Wow! Just take this in for a moment.

This means that the IMF now admits that the impact of cutting government expenditure on economic growth, demand and unemployment is twice as much as it had thought – or maybe more.

The reason for this as the column has been arguing all along, that Ireland and Europe are experiencing an old-fashioned liquidity trap made worse by vicious deleveraging, which is destroying asset prices. Imposing more austerity simply doesn’t work.
The main reason for this is what Keynes described as the paradox of thrift. Most of us are employed buying and selling to each other. Therefore, your spending is my income and my spending is your income. My income is also the root of my savings. But if we all save at the same time, who is spending? And if no one replaces our spending, then demand will keep falling.

Retailers react to falling demand by cutting prices to coax us to spend. But the very fall in prices convinces people that prices will fall further, and the bargain will come next month or next year. So the laws of economics are turned on their heads. When prices fall, demand doesn’t go up; it goes down.

Balance sheets are broken because, on one side, we have assets – houses, bonds, land and apartments – which are falling in value but, on the other, we have debts, which are fixed.

At a time when income is falling due to rising unemployment and taxes, this means the debt burden is getting heavier every day relative to income.

As a result, people with savings are saving yet more. Those with debts are trying to pay them down.

People don’t want to borrow because they have too much debt, and banks don’t want to lend because they have too much bad debt. Yet the deleveraging is destroying their capital base, too. Again, the paradox is that deleveraging my balance sheet might make my position better, but when we all deleverage at the same time, we drive down asset prices further, demanding yet more deleveraging. If everyone is saving, who is spending? The rise in government spending is the logical reaction to, not the cause of, the liquidity trap.

As demand falls, real wages don’t fall because those with jobs protect themselves and the adjustment comes via unemployment. Irish unemployment has more than trebled in four years.

So, austerity becomes self-defeating – and can’t work.
The IMF now admits this and, interestingly, the implication of this realisation is that the fiscal compact we enthusiastically signed up to will destroy Europe’s economy.
This change at the IMF is significant. A few weeks ago, this column suggested that the only way out of Europe’s growth mess would be a huge fiscal expansion. The IMF now seems to agree.

  1. KD

    It is well understood that economic models are very similar to weather prediction models: they MAY give a reasonable result in the short term, but are unreliable in the long term – this is proved. What get’s me is that the economists, who should know better, seem to deliberately forget this.
    And, as clearly elucidated by DMW in this article, the other key part to any mathematical model (and let’s be clear: this is what we are talking about here) are the assumptions made at the outset. When modelling complex nonlinear systems, there are usually some key factors, usually “estimated”, but having large effects on the outcomes. In engineering dynamic modelling these factors are often referred as “fudge factors” – and it is very easy, and frankly, tempting, to choose these values to be favourable. Clearly this is what happens with economic policy makers. This would be academically amusing if my future didn’t depend on it.

    • AlanPower

      Quiet right.

    • bonbon

      Very good that you brought up Climate. Remember the huge fraud known as Climat Change perpetrated by Uni East Anglia CRU? Well the emails were all over the internet indicting the whole bunch. But what was much more damning was the email attachments – the actual computer software used to generate the “prediction” with comments by students on how they changed stuff to get the desired results!

      Economics today perpetrates very similar hoaxes, for example game-theory. If one substituted horses for humans the theory would be the same! This is why so much distrust exists. Galbraith’s publication I post below is a good attempt to break with this. Much better is LaRouche-Riemann economics. There creativity is the central issue, avoided by all others. And after all economics is created – it does not grow on trees.

      • dwalsh

        Muddying the waters!

        Climate change is real…but…it is only an aspect of the full-spectrum destruction being wrought on the planet by human activity. The real issue is the poisoning of the biosphere; the poisoning of the soils and rivers and oceans and atmosphere.

        So-called ‘global warming’ and climate change is merely an aspect of the full-spectrum planetary catastrophe we face.

        But in one aspect you are right, this bogey of ‘global warming’ is being used by multiple special interests groups for their own agendas. And most especially by the elites to muddy the waters and keep public attention divided and distracted; while they decide and implement the measures they choose to deal with the crisis; measures which will be designed to preserve and extend their hegemony.

  2. This is likely to play out same as the whole Saddam and the WMDs episode. Millions knew that all that was BS!
    No! We’re going to fiscal war regardless of any facts!
    That dye has been cast!

  3. Dorothy Jones

    Re: “When faced with the choice between changing one’s mind and proving that there is no need to do so, almost everyone gets busy on the proof.” from above:

    Quote from Karl Whelan in Forbes:

    “The WSJ story supplies a really depressing explanation for why the Eurogroup of finance ministers disagreed with Mario Draghi’s assessment that bail-in tools needed to be used when resolving the Spanish banks.

    a chief reason ministers decided not to make more privileged bondholders take losses was the Irish precedent, two people said. Dublin has had to pump more than €60 billion, equivalent to around 40% of its annual gross domestic product, into several struggling lenders, forcing it to request a €67.5 billion bailout from other European countries and the International Monetary Fund in 2010.

    Forcing senior creditors to take losses in Spain would have raised more questions in Ireland about why taxpayers were forced by the EU to take on the huge burden of repaying high-ranked bondholders.

    Yep, you read that correctly. Because Irish taxpayers were forced to pay off all the losses of bondholders in private banks, Spanish taxpayers need to do the same, so that Irish people don’t complain about being treated unfairly. Because we made a mistake before, we need to make it again to avoid admitting we were wrong.

    Unfortunately, this type of unwillingness to admit to past mistakes is a regular feature of the EU policy making.”

    Link to article:

    • Joe R

      “Dublin has had to pump more than €60 billion,…”

      Ireland was a sovereign nation and had a choice. ‘Has had’ is incorrect, it never had to.

      Nor did Iceland, and they didn’t.

      • bonbon

        Iceland’s parliament actually did vote to bail out Britain’s banks. The President overrode them and put it to a Referendum which had a huge success. That’s actually what happened. Britain then put Iceland on the Terrorist List!

        What is the decadence of parliaments and Congress, that repeatedly do this? Why is it that only empire benefits? Sovereignty is a principle, as Argentina’s President Cristina Fernandez de Kirchner, not an accounting matter.

        • Joe R

          I thought they were on the terrorist list for prosecuting bankers?

          Positively barbarian behaviour!

          • bonbon

            For not bailing out British pensions, it was on the List. If Britain cannot bail out its own quicksand, the Inter-alpha Group, let them admit it publicly! Iceland called the bluff.
            The system cannot ever be saved. It is Britain’s system. Let them keep it!

  4. Grey Fox

    Dogs in the street know this is not working, but when the crooks are pulling the strings and the public trustee’s don’t have the balls to stand up to them we have no chance. IMF is a smart organisation, they are rowing back because they know they have pushed societies to the brink and it is evident that we will all go over the edge with this current plan, once we go over the edge there is no way back.
    I have been shouting for a long time what my father told me, “you cannot repay debt by borrowing more money”, in our case, it is printing more money, LTRO’s and QE, its all bullshit and facilitating a massive, criminal transfer of wealth, but, Irish people have this affliction whereby they are in denial until the problem lands at their front door, I think its called ” I’m alright Jack”! this condition is no more evident than within the Political class. Its never too late to wake up!

  5. Adam Byrne


  6. bonbon

    This might appear as Keynesian logic. I am not convinced anyone here endorses Keynes (nor Hayek). But trying to triangulated between these will fail. JK Galbraith was an FDR collaborator, where Keynes was rejected.

    Unless a huge amount of synthetic debt is declared null and void, and I mean synthetic derivatives, the only result of massive money printing will be hyperinflation. The Triple Curve shows (without fancy “multipliers”) graphically whats happening :

    We have now Bernanke and Draghi in full “helicopter mode”. This tsunami of cash will reach Irish shores just as London shoves its operations to Dublin. Are they out to destroy Ireland completely? To make quite another example in case anyone gets Icelandic ideas?

    The awning chasm between this monetary tsunami, and the physical economy, should remind one of that horrible silence as the sea retreated in Indonesia not long ago.

    Here is a report on JK Galbraith in 2010 :
    James Galbraith Echoes “LaRouche Plan”
    “”The first step toward health is realism. We must first stop pretending that bad assets can be made good, that bad loans will someday be repaid, and that bad people can run good banks. Debt crises are resolved when debts are written down and gotten rid of, when the institutions that peddled bad debts are restructured and reformed, and when the people who ran the great scams have been removed.”

    But, Galbraith warns, “there will not be another bank-sponsored private credit boom.” Instead, he argues, “we need to create new, policy-focused financial institutions like the Reconstruction Finance Corporation to take over the role that the banks and capital markets have abandoned,” and he also calls for “a national infrastructure bank, an energy-and-environment bank, a new Home Owners Loan Corporation, and a Gulf Coast Reconstruction Authority modeled on the Tennessee Valley Authority.” And echoing LaRouche’s HBPA, he calls for “refinancing of mortgages or conversion to rentals with right-to-rent provisions so that people can stay in their homes at reasonable rates.”

    That is Galbraith (and it runs in the family). We need an RFC with major projects.

    • AlanPower

      The Fed balance sheet is DOWN $50 billion year over year. This confirms that the Fed has in fact been engaging in mostly verbal intervention over the last year rather than actual monetary intervention.

    • daveyboy

      Please stop with the larouche nonsense. It makes it very hard for anyone to take you seriously because Lyndon LaRouche is a TOTAL MENTALIST.


      • bonbon

        ”The first step toward health is realism. We must first stop pretending that bad assets can be made good, that bad loans will someday be repaid, and that bad people can run good banks. Debt crises are resolved when debts are written down and gotten rid of, when the institutions that peddled bad debts are restructured and reformed, and when the people who ran the great scams have been removed.”

        Face it, take it seriously. This is what needs to be done sooner than later. Galbraith is corect. Larouche is perfectly right, razor sharp in analysis and pulls no punches. Read the economics at the source, never mind some one’s opinion – that’s after all the Tiger way, being heard to say what Tiger’s tend to say. Brave Tiger indeed.


        • Realist

          LaRouche, together with Galbraith are history.
          Gailbraith was historician and never really appreciated with economic schools of any kind, even wrong one.

          Stop bombing us with LaRouche please :)

    • Tony Brogan

      So when are we going to finally acknowledge that it is the central banking system that primes the pump for the fractional reserve policies of the commercial banks. nothing else will remove this problem of debt production other than the abolishment of the central banks and the outlawing of the fractional reserve system of banking.

      The central banks and the fractional reserve system are DESIGNED to ENSLAVE every single person on earth by stealing your productivity for the banks pleasure.

      Talking about the inability to see a solution other than the one fixed in ones head it is evident that the majority of the bloggers herein are so afflicted including our host, David.

      As Greyfox so correctly SHOUTED we can not fix A DEBT PROBLEM WITH MORE DEBT.

      So why do we let the causes of the debt continue to operate? No economists other than the Austrian School seem prepared to face the reality of the proper course of action. Few seem to agree that this is the proper course of action but deliver smoke screens of partial actions that act as red herrings and allow the robbery to continue.

      And of course a part of the correct action, that I agree with, is to revoke the private debt assumed by the public purse. All odious debt can legally be reneged on.

      • bonbon

        In the real world, outside the von Mises club, and the Mont Pelerin Society, political-economics has moved on from middle-ages feudalism.

        Only sovereign national political-economics can and will work, something Britain’s economic zoo prefers never to mention. The IMF, created during WWII Reconstruction, has its roots in national political-economics, corrupted since Truman, is perhaps realizing where it comes from. DMcW is hinting at that, I think.
        There is no guarantee of course that it will function now as intended.

        I like these quotes :
        “The study of money, above all other fields in economics, is one in which complexity is used to disguise truth or to evade truth, not to reveal it. The process by which banks create money is so simple the mind is repelled. With something so important, a deeper mystery seems only decent.” JK Galbraith: ‘Money: Whence it came, where it went’ (1975).

        “Under capitalism, man exploits man. Under communism, it’s just the opposite.” (Attributed)

        “The modern conservative is engaged in one of man’s oldest exercises in moral philosophy; that is, the search for a superior moral justification for selfishness.” “Stop the Madness,” Interview with Rupert Cornwell, Toronto Globe and Mail (6 July 2002).

        “There’s no question that this is a time when corporations have taken over the basic process of governing.” Galbraith in a PBS television interview on The Newshour shortly before his death.

        The reference to the purpose of “complexity” above is very revealing – to disguise rather than reveal truth. Because of this and his collaboration with FDR, the usual cliches do not apply.

    • Tony Brogan

      “the only result of massive money printing will be hyperinflation.” Quote from bon bon.
      Welcome to the Austrian School bon bon.

  7. wills


    The notion that the IMF in anyway got it wrong on austerity like they are telling us all is simply insulting and disgusting.

    This is a PR stunt on behalf of the IMF.

    IMF work as a partner with The Fed and BoE etc and all sing from the same 1694 central banking system hymn book of tricks, piracy and plunder.

  8. StephenKenny

    and there was I thinking that it would be necessary to go out and improve the economy, when all we need to do is borrow a few hundred billion and the economy will recover to the state it was in in 2006.

    The reason that 99% of professional economists didn’t see anything wrong with the economy in 2007 was simply that they believed, and still do, that economies can avoid any recessions if demand is sustained by government borrowing. They assumed that this would be done, in the way that the ‘Greenspan Put’ had got rid of any threatening downturns over the previous 20 years.

    We can borrow our way out of any economic troubles, until we can’t. Until then, it will be QE to infinity.

  9. tony_murphy

    The IMF didn’t see the crash coming.. really?!

    It planned it! along with it’s globalist banking demons cabal

    SDR’s one world electronic currency = total control. ORDER OUT OF CHAOS. It’s how they work. Don’t be fooled. NO escape if they get their way.

    Watch Arron Russo http://www.youtube.com/watch?v=O6ayb02bwp0 start just over 1 hour in – first hour is mainly concerned about income tax in america

  10. “When faced with the choice between changing one’s mind and proving that there is no need to do so, almost everyone gets busy on the proof.”

    I wonder was Galbraith married at the time or was he reflecting on the time his wife first proposed to him and he decided to extend his batchelor hood before taking the deep plunge .

    Marriage and Fiscal issuance go hand in hand all the way to the Alter ( Bank)

  11. tubdoc

    All economic models are horseshit. According to chaos theory you can never have the correct starting points and therefore all simulations are prone to different results.

    Check out “The Secret Life of Chaos”.

    • bonbon

      The secret irony is that most economic models are based on exactly the same axioms as “chaos theory”. It is true that all including that spruced-up version do produce quite a lot of manure.

      Better to start with physical-economic principles, not some mathematical language. Galbraith does have a go at that : “A Biophysical Approach to Production Theory”


      there is much more to economics, but that is a move by the “establishment” in the right direction.

  12. molly

    It’s all one big con and the only thing that’s going to Change things is mass revolt anything else is window dressing .
    When you do the maths and see and hear with open minds about what’s gone on and what’s going on and what’s comming the majority of people and the ones going to behit past present and future,need to rebell or face the fact that so many are going to pay for so few.

  13. cooldude

    The only real way out of “Europe’s growth mess” is to sort out the debt problem. This can only be done by some sort of restructuring involving some sort of debt forgiveness and/or defaults. If “huge fiscal expansion” actually worked then Zimbabwe and Argentina would be two huge success stories. I’m afraid we have reached the endgame for this Keynesian experiment in growing our way out of debt saturation. New ideas are needed in eliminating all this debt and they will have to go beyond this flawed “growth” model which is over. A choice in the currency we can use would be a start.

  14. grougho

    got to side with the radicals on this one,

    the imf have been at this for years, and to assume that they were surprised by this outcome seems honestly way beyond belief. we need to stop trusting all financial establishments.

    yup all.

    this is theft.
    its not an accident.

    • Tony Brogan

      Deliberate policy by the IMF
      They are not so dumb.
      We are though to be taken in by their soft shoe sallies.

      • bonbon

        Imputing a downright supernatural intelligence to actually quite stupid IMF people, is well, very silly. Stupidity reigns almost all the time everywhere, but not all the time.

        It is much more scary to actually realize that stupidity alone could blow the planet up. Stupidly shuffling towards war.

        So tolerate no stupidity no matter how popular. What do you think put Obama or FG into power after Bush and FF were totally discredited? Money and popular stupidity.

        • Tony Brogan

          Under estimating an adversary can be deadly.

          Some very clever and capable people pull the strings.
          The stupid are manipulated

          • bonbon

            Lagarde clever? Strauss-Kahn thought he was until New York’s Finest taught him a lesson!

            No, cleverness in a feral (the adversary) way is not to be mistaken for intelligence. Intelligence shows up on the Financial Times on July 4 2012, when that institution called for Glass-Steagall. There intelligence broke through. Sandy Weill, the ultimate insider of Citigroup, showed intelligence calling for reinstatement of GS which he personally “shattered”.

            Intelligence can break out at any time! That is the great fear of the oligarchs. That is their end.

          • Tony Brogan

            To think I refer to Lagarde as pulling the strings is to tell me you do not understand anything of which you speak.
            bon bon , I am afraid you are one of the manipulated, uncomprehending the true nature of the controls exerted.
            Calling Sandy Weill an insider is like calling a shrimp a whale.

          • bonbon

            Smoke and mirrors, in place of any real knowledge, can appear smart. That is the Venetian Way, the way of Mandeville, expounded by von Hayek. Feral cleverness of the likes of DSK is not to be confused with intelligence (a rare gift today).
            Galbraith is intelligent enough to see how “complexity” is used to hide truth so simple it repels the mind. von Hayek wrote that complexity meant economics is unknowable – that repels my mind, and opens the door to the entire circus seen today.

            There is the true nature of Venetian string pulling, or rather as NY’s finest say, nose pulling. It’s in the mind.

          • Tony Brogan

            Bon bon you are the champ of smoke and mirrors and by your own reckoning that makes you the biggest chump in town.

            You talk total wacko garbage, “full of sound and fury, signifying nothing” of any import.

  15. allblackmagic

    You are not alone. The New Zealand Treasury continues to have difficulty letting go of failed neoclassical economic models and has similar difficulties getting its forecasts within cooee of reality. Perhaps there’s too much clever maths and not enough humility within the ranks of economists worldwide?

  16. Scruffy

    I seem to recall the IMF repeatedly warning that the Irish Housing market was overvalued.

  17. bonbon

    Euro Will Explode with a Big Bang

    Oct. 15 (EIRNS)–Ludwig Poullain (92), the eminence grise of German banking, longtime former CEO of West LB, wrote in an op-ed for the {Cicero} monthly magazine, that he is firmly convinced that the euro system does not have the slightest chance of survival. “All rescue packages so far have proved useless, and they will continue to be so. The money paid is gone, the euro rescue one big fiasco,” he wrote.
    “Even before there is a rescue action for Italy, we will experience a giant blow, something like a currency-policy big bang which will let the euro house of cards implode. But to the great surprise of everybody, a closer look at the shambles will show that the values and substances deposited in the safe are preserved, and that a sound new (system) can be created from that.”

    • Tony Brogan

      “But to the great surprise of everybody, a closer look at the shambles will show that the values and substances deposited in the safe are preserved, and that a sound new (system) can be created from that.”

      No surprise to the Austrians who have predicted such occurences forever.

      Would the deposits in the safe be gold by chance. Germany, France and Italy all report larger holdings.(If the US has not stolen and sold it)

      For an individual to be protected from currency devaluation by creep or crisis there is only one place to be. solid tangable assets. Land, gold and silver.

      • bonbon

        Many in Germany share the Austrian obsession with “substances”. And of course to them the entire rescue package is a fiasco. All very well and good.

        Where the conflict begins is the next step, as I continue to endeavor to explain. Monetarists, and that included “Austrian”s, simply cannot understand the physical-economy. German “Austrians” simply fail to see that the Marshall Plan could never have occurred with “savings”. Herman Abs of the Kredit Anstalt für Wiederaufbau, KfW, Credit Reconstruction Corp, did understand. These are the institutions Galbraith refers to above, that private banking has abandoned.

        • Tony Brogan

          The cause of the fiasco is excess money printing. They are the monetary specialists Exactly what the Austrians warn about.
          you wish to provide more credit in a like fashion with the probable results to be much the same.
          you can not kick start, restart, or plain start a solid economy with printed paper fiat from any source but especially from government.

          Too much stimulas got us where we are.

          Let the debt get paid of or defaulted. Let people regroup. Let then get started from a sound basis. A solid building must have good foundations. There are no short cuts so forget about your grand schemes to get rich quick all over again and leave the people be.
          Just give them the opportunity to choose whatever tools they wish to use.
          Ask yourself why the most sucessful money devised by mankind should be banned from use as it is by the european governance. not allowed to use gold and silver coin. Sez who!! If it is so poor what are they afraid off.

          (You will wipe that medieval smirk off your face when the fiat is devalued by another 50% and a 50% again after that. gold will be 4000 Euros and 5000 dollars.)

          These things are done deliberately by evil plotters and manipulators.

          • bonbon

            The point is “the next step”, as I said repeatedly. Any attempt to block reconstruction with a monetary argument, is part of the problem, not the solution. Reconstruction Finance Corps, chartered national banking will be necessary, with the derivative debt written off, and huge programs will be in motion all over the place. This is where the “Austrian” mettle will be tested, not at the CSI corruption dock. This I have identified as the center of conflict.

            Monetarism did create the alleged crisis, and monetarism will not be allowed to block reconstruction.

            Governments committed to the Common Good, which does not spontaneously effuse from the sweat of extorted and exploited labor, but must be the public intent, will act differently. The Mandeville swindle that public good will spring forth “spontaneously in unknowable” ways is the most incredible curse ever on labor. It is the last gasp of feudal gold and land title-holders against the modern agro-industrial harmony of interests. To have Hayek publicly laud Mandeville s incredibly revealing – it is proof of feudalist outlook.

          • Realist

            “Governments committed to the Common Good”
            You must be living on drugs last couple of years then.
            Politicians are no good to society.
            I see no one party in Ireland with the proper economic plan so why bother with them.

          • bonbon

            That is exactly why people here are very angry – betrayal of the Common Good. Exactly why Enda is doing what he does. Humanity is mostly the future, even most will not admit it. Never mind the wallet, taking away the future is the gravest crime against humanity, and crime it is. This blog is not intended, I think, to the CSI of economics, a police theme. Economics is in reality all about the future. The single reason why for the moment no swift CSI dragnet has occured, is the indecision, cultivated by the alleged crisis “management”, about the future.

            Look out when it clicks – anyone who gets in the way will be in trouble.

            Every “school” must have something to say when challenged. If it appears population reduction, crushing economic collapse and no reconstruction is the message, well then, by God, look out. Do not mess with the human species!

  18. bonbon

    Galbraith from 2009 on Obama’s Supercommittee : The USA and Europe are run by a tutor-cracy and faux-politics to exploit the alleged debt crisis to dispose once and for all of the welfare-state.

    Democratic economist James Galbraith, in an interview with the Italian daily Il Messaggero published Aug. 9. Asked whether the super-committee will give the right suggestions, Galbraith says:

    “For God’s sake! It will be a Junta, a body without legitimacy. It would be better to leave decisions to Members of Congress; true, they quarrel even in a dirty way, but eventually they must always be accountable to their constituencies. This committee created out of nothing, without political controls, worries me a lot.”

    Galbraith exposes the fact that both the U.S. and Europe are run by “a technocracy, or better, a tutor-cracy, a situation in which the U.S.A. is under the tutelage of a bunch of financial bureaucrats, and Europe is in the hands of an illegitimate central bank. The bureaucrats are the members of rating agencies, Standard & Poor’s, for instance, who want to model the political life of this country after their views, and maybe exploit this alleged debt crisis in order to dispose once and for all with the welfare state. In Europe, you have a central bank which is accountable to no one; with us, at least, the Fed must be accountable to Congress for its actions.”

    In an article published by Deutsche Welle on Aug. 8, Galbraith made a similar point: “The debt deal will make things clear. The President is not a progressive–he is not what Americans still call a liberal. He is a willful player in an epic drama of faux-politics, an operative for the money power, whose job is to neutralize the left with fear and distraction and then to pivot rightward and deliver a conservative result.”

    Here is an interesting publication, Jing Chen and James K. Galbraith, working paper at the University of Texas, January 2009, “A Biophysical Approach to Production Theory”


    • Tony Brogan

      The present President is a social worker projected into performing policies proscribed by profligate ponzi perfectionists.(Central bankers)

      To call him a closet conservative creates incredulity.

      • bonbon

        Obama is a money-power (a phrase that FDR liked) operative, to deliver a conservative result. Galbraith is right on this. Faux-politics.

        • Tony Brogan

          No the result delivered has nothing conservative about it.
          The results to date, and desired to be so, are about the embellishment and expansion of government and collective powers and the reduction of personal freedoms.
          Incidentally, much the same results that would occur from your centrist government policies and paper money scams.
          National and collective socialism is the aim and the current achievement.

  19. Beaver

    ´´a huge fiscal expansion´´ will screw the savers/pensioners and reward those who took on unsustainable debt´´. Survival of the weakest.

    ´´those with jobs protect themselves´´ Known in Ireland as the Croke Park agreement. Solution – half their wages and use the savings to build infrastructure which gets the builders off the dole. Same amount of money sloshing around in the economy and a lot more hope.

    • bonbon

      And hope the Euro survives? It cannot.

      To build infrastructure, no private bank credit boom will work as Galbraith says above. National Public Credit along Hamiltonian Banking lines will work, as Galbraith implies referring to the Reconstruction Finance Corp. of FDR. The USA needs urgently the Third National Bank after putting the FED in a sealed basement for audit purposes only.

      Large programs are needed not small-minded beggar the neighbor “at the greasy till”.

      • Beaver

        State funding is the cheapest way to build infrastructure so its the only way.

        Half the public service wage bill is a big program.

        Begger my neighbour is epitomised by ´´me job, you dole´´.

        • bonbon

          Examples of big programs : the TVA, 3-Gorges Dam, NAWAPA XXI, Transaqua, Eurasian Landbridge, Shannon Deep Harbor.

          Once one starts thinking, well away from the greasy till, the world indeed is big. Big problems, and vast programs on the table for years blocked by those till keepers.

      • Tony Brogan

        No system of credit finace will work in the longterm.
        Capital investment must be produced from savings to ensure long term success.

        No 5 or 10 year state plan has ever provided long term productivity or wealth generation.

        • bonbon

          There Galbraith and I differ with the British system. FDR did too.

          National banking with sovereign credit for improvements, the very basis for existence, will no come from savings. Doing that improvement will produce savings. Protecting them while clearly improvement is going on is easy.

          Two completely different world views here. One looks to the future, the other to the past. Simple choice.

          • Realist

            The problem with National Bank is the same as for today’s state run economy.

            How they are going to know where to put money, usually coerced through taxes, or expanded with fractional reserve ?
            Is it going to be a trillion dollar man mission to Mars, solar panels for everybody or whatever silly project they can think of ?

            And at the end National Bank is anyway fractional reserve based on credit expansion, like now, and state monomopy on fiat money, that can be printed and inflated, meaning who is first on money will benefit.

          • bonbon

            What has value is not money, and bonds must reflect this. The expanding physical economy, relative potential population density, as society expresses what it is to be human, has future value. This is a complete break with the old lsnd-and-gold title-holder concept of feudalism. This time though Glass-Steagall will block a regressive lurch back to that. Modern harmony of interests in agro-industrial expansion, and sure that includes near space infrastructure and the He3 fuel at the lunar poles. Mars makes a great early warning system for large object impacts. We are never going back to horses again. We are heading for 25 billion+ and we know what we need to do. first green those deserts, enable efficient transport of goods and raw-materials, and bring modern agriculture to huge fallow areas. That is an economic platform, to reach the next after that.

            Monetary arguments that attempt to block this are part of the old problem we are dealing with

          • Realist

            Glass-Steagall is not going to solve main economic problems:
            1. Sovereign debt problem where the state spending too much
            2. Banking credit expansion with central-fractional-banking
            3. The link between the state and (central & other monopoly) banks

            I think all economic schools agree that money is just the mean to exchange goods and labour between parties.
            And this is why it should not be monopolized by state through the central banking.
            That way the state is directly destroying the wealth by consuming it directly or through stupid projects.
            The money printing and credit expansion is shifting wealth to the parties of their interest at first and then destroying it later on.

        • bonbon

          The tutor-cracy that Galbraith alludes to is running the USA and the EU, not a state. The ECB has no state, is a private club accountable to no elected process. Same for the FED. This private totor-cracy “of the free people” is there for all to see, all the people.

          • Realist

            They are far of being private my friend.
            ECB is buying government bonds directly in the last few years, showing us how independent they are.
            ECB is leveraged 1:200 and if it goes belly it will need government help. What a vicious circle it is, is not it :)

            The other problem is that politicians rely on these Central banker intellectuals to sort out the economic crisis.
            This is why politicians are useless, except if they get rid of central bank and fractional reserve.
            But why would they cut the only easily controllable source of their spenditure. The other source is a tax income that people do not like too much to be increased.
            The government will not get rid of this source of income as people, in general, know more about (taxes) and usually have no clue about money printing, inflation, fractional credit expansion.
            I am unsure what is worse, taxing or the other monetary ways, but it looks the second way is going to burry into the ground everything sooner or later.

          • Tony Brogan

            Yes all central banks are private entities operating for the benefit of the bankers and not the state.
            They operate under government statute for existence and bribe politicians to remain in existence.
            That is why they need to be closed down don’t you agree?

      • Tony Brogan

        The industrial revolution in britain was funded by private investors and planned by private companies. There were many failures but huge wealth generated as well.

        No national debt based banking required.

        The White Pass Railway was built by an Irish Canadian in a mear 18 months. All private funding.

        Get the government OFF OUR BACKS!!

    • Philip

      I have a major problem with fiscal expansion. Who manages it? To be fair, if well managed, everyone wins. But right now, I have such a complete lack of trust in public bodies doing anything right due to nepotism, cronyism etc.

      Expansion must be encouraged from the grass roots did I hear someone say? Ah yes…private companies will save the day if we loosen the fiscal taps. Again, this is far far too haphazard and really the human tendency is to hedge and invest only if someone else does. Not good for big stuff.

      The problem as I see it is neither approach is up to much.

      • Tony Brogan

        You are correct to fear monetary expansion by the state. It is inflationary. Period. Proven hundreds of times.

        There are plenty of private visionaries who will take a chance and use private funds to do so. If wrong they are broke. If correct they are rich. The recent passed years are full of such events.

        Our problems stem from profligate bankers who blackmailed the public to absorb private debt.
        Plus the bankers produce the debt based currency. Shut the down, close, the central bank, outlaw fractional reserve banking, introduce sound money into circulation.

        • bonbon

          Which state in recent times? All credit since 1971 was private fondi at work. The ECB has no “state”, the IMF is not a state, and the FED as Galbraith points out is totally out of any accountability to a state.

          So no one here has experience of state banking, the last vestige was the RFC, and some examples under Bretton Woods, such as the Marshall Plan.
          To quote Galbraith :
          “But, Galbraith warns, “there will not be another bank-sponsored private credit boom.” Instead, he argues, “we need to create new, policy-focused financial institutions like the Reconstruction Finance Corporation to take over the role that the banks and capital markets have abandoned,” and he also calls for “a national infrastructure bank, an energy-and-environment bank, a new Home Owners Loan Corporation, and a Gulf Coast Reconstruction Authority modeled on the Tennessee Valley Authority.”

          Great stuff. I’m very glad Galbraith’s name was brough up.

          • Tony Brogan

            All credit provided by the central banks has been approved by the state and even asked for or demanded for it.Profligate politicians of a socialist bent from any party of whatever name expending the largesse to taxpayers in return for votes.
            Commercial banks allowed to exercise fractional reserve banking as authorized by the state.

            The ECB as you are well aware services the European state as well as the member counties national central banks as clients. See above.

            There is plenty of experience of state banking, the results are to be seen in the chaos and decay of economies worldwide. The use of your hamiltonian banking scheme is more of the same with no limit to how much fiat is to be created. Highly inflationary currency produced out of the magicians hat ( Mandeville money) and unless you can explain how it is not and how I am misinformed I will stick to my opinion.

            As for your other schemes, I stick to my opinion that there are only one or two substances worthy of the name money, and one of them is not funny money and the other is not monopoly money.

            You have yet to describe in any detail or at all how “Hamiltonian Banking” actually works.

          • bonbon

            The Fed has been separated from Congressional overview since 1914. As Galbraith says, since then the game has been private bank credit. The only state that actually practiced national credit, is lo and behold Britain. They preach free-trade, privatizations, (and practice some to look poster-boyish), but as Alan Griffith said they financed the British Empire with state methods. Hamilton knew this, and called the bluff, in a much more modern banking system and Credit Clause of the Constitution.
            The way Bernanke and Draghi operate right now is the “the crisis creates the approval”, a form of terrorism againstall elected oversight. This is the Carl Schmitt crown jurist method – the crisis makes the law. To call that state credit would make Goebbels blush!

          • Realist

            So, how come government bonds are accepted, or even directly bought by Central Banks all around the world ?

            Why would be of interest to something “private” to do such stupid thing.
            ECB is still buying Greek and other countries bonds!!!!!

            All monopolies are possible because of state. All. Rememeber that.

            Are you also saying that the state cannot get rid of central bank or whatever they want ?

          • bonbon

            Monopolies can be broken up, and that is exactly what will happen to the Too Big to Fail behemoths. They are making it easy, as there are only a few now. I post below a very nice report on that now. Glass-Steagall is to break off certain non useful sectors from the productive economy. Private clubs, the Money-Power as FDR like to call them in his “Let me tell you about banking” radio chats, will never do this.

            Hamiltonian banking for all the people, of the people and by the people, is a nice way to put it. chartered banks will need good bankers, so plenty of work there. A lot more work for reconstruction, and planning even bigger programs…

          • bonbon

            And as for bonds, Hamilton turned the huge war debt problem into an asset with bonds, that’s why we have the model of the Credit Clause. Building NAWAPA XXI for example now, is a stated intention of the nation for the future. Benefits such as huge increases in power production, agriculture, service and transport networks not to mention a direct modification of weather for the better, are of real value. Putting millions to work in advanced industry has value. Bonds based on the legitimate debt on the physical-economic curve of the Triple, being reversed and increasing have value. No private fondi could ever possibly even contemplate such measures. Canada Mexico and the USA for starters are partners in such a program. Even wider look at the landbridge to cover Eurasia, and the America’s. We have the new Arctic route to Siberia.

          • bonbon

            Today bondholders are private banks that speculated on them. They take a loss, after all, private firms go under. The bonds were based on bubbles such as the housing or dot-coms etc, created by private firms.
            Let them settle it among themselves.

          • Realist

            The total stock market at the moment is the same size as government bonds/security market (around $50-60 trillions each). Other bonds, including property related are another $100 or so trillions.
            While one side, private, creates wealth the other usually destroys it, or shift it from productive parts to non-productive.

            I need to clarify that I do not consider the banking sector fully private (in Ireland is obviously not now) as they always rely on central banks help and government bailouts to save them.
            Politicians are saving them as they have their own interest in issuing bonds, to stay in power and on big money pots. Those bonds “private” banks buy, then put it as collateral in central banks so they can do further credit expansion.

            I am just really mad that “The government” or “State” who created the mess in the first place (by spending more irationally and creating/allowing the central fractional banking) is always there to sort out things.
            But even worse they want to sort it out the same way they created it, by expanding even more money into public sector and public projects as the only way to create so called “aggregate demand”.
            Bullshit economy pushed again by central banks and IMF in the last week or so throughout Irish media.
            Central banks pushing banks to borrow more to prop up properties. IMF saying it is wrong and the money printing should continue, like it was not always the case with IMF.

            I bet the 2013 budget will be the same size as previous year budget, and to me means no changes. Media is pushign such outcome, people do not want any social benefit cuts, public sector does not want too much messing, and the Irish tiger will continue the same way, until sudden death of all this dodgy socio-capitalism.

  20. bonbon

    Some are so locked up in the dead-end Keynes v. Hayek zoo, that the world simply passes them by. Now see what vulture funds are all about today :

    Argentina: “We will Not Cede Sovereignty to the Vulture Funds”

    Oct. 15 (LPAC)–So stated Argentina’s Foreign Ministry in an Oct. 12 statement, responding to the offensive by the City of London’s predatory vulture funds which seized the naval frigate Libertad on Oct. 2 as it docked in a port in Ghana, a country notorious for its subservience to the British Empire.
    The frigate remains embargoed in Ghana at the behest of the NML, Ltd. vulture fund, a subsidiary of the notorious Elliott Associates, seeking the full face-value payment on defaulted Argentine bonds on which it speculated during Argentina’s 2001-02 financial crisis. NML’s owner, billionaire speculator Paul Singer, is the primary financier of the U.S.-based vulture fund lobby group, American Task Force Argentina (ATFA).
    For two centuries, the Foreign Ministry states, “Argentine history has been characterized by permanent tension between the full exercise of our sovereignty, and the objective of domination by global powers [using] political as well as economic and military means.” The illegal embargo of Libertad “is another chapter in that history.”
    Along the same lines, On Oct. 12, Argentine Finance Minister Hernan Lorenzino submitted an official statement to the IMF’s Financial and Monetary Committee in Tokyo, denouncing the fact that Argentina faces “extraordinary and often ridiculous demands” by vulture funds, which seek “privileged treatment” within the international financial community through their bogus legal cases. He pointed out that the same financial vultures who’ve preyed on Argentina have also victimized Greece.
    The seizure of the Libertad is an example of “aberrant financial speculation,” by a group of usurious financial predators, the Foreign Ministry statement charges. In the past, international courts in Germany, France and even New York state have ruled that vulture funds’ attempts to seize Argentine military assets were illegal, because such assets are inextricably linked to the nation’s sovereignty. “For the government of Cristina Fernandez de Kirchner,” it concludes, this “is not an accounting matter but one of sovereignty. We shall exhaust all legal means in the courts of Ghana and internationally in defense of our sovereignty, against the vulture funds or anyone else who seeks to impose a global system by which nations are subjugated by speculative capital.”

    • Beating the same old drum there, you can always be relied upon to trot out the same anti-Brit propaganda. Perhaps the Galbraith quote can be applied to you just as appropriately?

      • bonbon

        Imagine that, private firms, pure vultures, seizing sovereign military assets. Nothing new about that – the British Empire was always a Company. Once the World Company. Now the only global empire. We witness an act of piracy, sorry, by privateers, is the jolly old Company tradition of Drake and the rest of them.

        There have always been willing Boston and Wall Street stringers for Empire. Obama today is a prime example.

        Time to put Empire behind us. It is simply outdated and bankrupt, never to be revived.

        • NML Capital is a subsidiary of US hedge fund Elliot Capital Management, one of Argentina’s former creditors.

        • Joe R

          La Fragata Liberdad…it’s a sailing ship, it is miltary in name only no guns, – ceremonial, goodwill and training missions only as per the asgard 2, but a good deal bigger…

          • bonbon

            The Gork Fock, the German training sailing tall ship is also not really a threat to anyone. Imagine if a private fund tried to seize that?

            Vulture funds, carrion eaters, circle above the collapsing economy. Who’s next on their menu?

  21. mediator

    Dear David

    This article is tosh – not because the analysis is off but because of the basic premise that the IMF are honest economic brokers is absolute rubbish.

    Again David you fail to see that its not that the IMF are stupid – this stuff is proceeding according to their plan.

    About a year ago you were predicting the demise of the Euro and if I remember correctly I and others stated that the Euro was planned as a means to an end – the end being an undemocratic united states of europe and that it wouldn’t fail as it was a lynchpin of the elites strategy.

    Well the Euro ain’t going nowhere and one by one sovereign nations are falling into line and impoverishing their own citizens.

    All this is dancing to the tune of the IMF et al and still you seem to think that the IMF mean well and have no agenda other that what is stated on their websites and press releases.

    You need to start with what the various players are doing ask yourself cui bono, their words are meaningless.

    • bonbon

      Actually Mundell, the “father” of the Euro, himself did say recently that about “the means to an end”. Yet we all know where the U.S.E came from – Churchill, echoed within months by Sir Oswald Mosley. So the Euro and the U.S.E are British projects from the get-go. Lagarde is “kept”.

      Yet that is in itself nothing new. In fact since 1763 that is what all history is about. The USA is practically demolished with Obama usurping the Constitution. We simply see a continuation of British foreign policy, with some window-dressing.

      Cui bono?, Why now the intense moves?, and who could have the logistics? – 3 questions to be asked. Galbraith above mentions the tutor-cracy running the USA and Europe. Fine.
      It boils down to economics – imperial doomed economics, or sovereign pursuit of anti-imperial methods. Why is it that imperial economics always must lead to impoverishment and population reduction, culling? What deeply held belief drives this insane oligarchy?

      That’s 2 more questions that must be dealt with. We had culling in Ireland in 1847, just to remind everyone.

    • cooldude

      Have to agree with you Mediator. John Perkins has explained clearly how the IMF works and what it’s agenda are. Have a look at his website.
      The “huge fiscal stimulus” that is proposed will not bring any growth. This is confirmed by the former head of the Zimbabwe central bank who tried this exact same remedy to his country’s debt problems just a few short years ago. Here is his own account of how it went and the similarities to QE3 and ECB bond purchases

      • bonbon

        Perkins’ Confessions of an Economic Hitman, shows what he did for years – an attack on sovereign national economies for the benefit of an international oligarch.

        He actually served empire and knows it.

        The point is sovereignty and the political-economics that implies. Alexander Hamilton explained this very well, and the USA under Lincoln, FDR, JFK, and a few others revived it. The USA needs that Third National Bank now (the Fed being sent to the deepest cellar for audit), and Reconstruction for today, the NAWAPA XXI Water and Power Alliance. Financing that with Hamiltonian methods is straightforward, well tested. Eurasia needs the Landbridge, and Ireland’s Shannon Deep Harbor can link into this. All these mean sovereign nations commited to cooperate for development, actually strengthening sovereignty.

    • grougho

      well put mediator, tried to articulate something similar, but much more eloquently put,
      and something our host needs to address

  22. bonbon

    No sign of a chink in the Troika Golem armor here. Is it running on autopilot?

    Troika Drives Portugal to the Brink of “Blowing Up”

    Oct. 15 (EIRNS)–Three leading Portuguese political figures have warned in the last week that their country is at the point of blowing up, under the Troika’s austerity policy. The government’s presentation today of its 2013 budget plan, denounced by the Socialist Party as a “fiscal atomic bomb,” and sparking dissent even in the ruling party’s coalition partner, the CDS, already provoked the first clashes between police an protestors in weeks of protests in front of the parliament.
    Gen. Ramiro Eanes, an elder statesmen from the post 1974 Revolution period who served as President from 1976-1985, does not intervene frequently these days, but on Oct. 10, he spoke out loud and clear in an interview with Radio Renascenca, warning that the very unity of the country is at risk, because a considerable part of the population have been denied minimal conditions of dignity.
    If people are not given a window of hope regarding the future; if they are convinced that their children will not live better, either, this is “very grave,” and affects “the unity of the country,” Gen. Eanes warned. And when there is no unity, resignation can very quickly give way to indignation, which is the mother of all follies. “We must prevent this from happening, and if we cannot give everyone a salary, we have to give everyone adequate minimal conditions.” Gen. Enaes suggested a “Council of Wisemen” be created to develop a program for growth, and, when asked, he urged the Catholic Church to speak out more actively, because when some of “God’s children and our brothers are suffering greatly, the Church should make its voice heard.”
    Likewise, Jorge Sampaio, Socialist Party president from 1996-2006, warned that the government may fall, and the country could “blow up” under the austerity policies, a message which former Socialist Party presidential candidate Manuel Alegre has been making in a more forceful manner. Alegre joined various demonstrations in September, and has cited Argentina’s successes as proving alternative policies can work.
    The Passos Coelho government remains unmoved, presenting a budget which, among other horrors, lays off more public employees, increases income taxes by an amount equal to a full {month}’s wage for many workers, and imposes a 4% surcharge tax on all workers’ earnings in 2013. Finance Minister Vitor Gaspar arrogantly announced that the budget is “unalterable,” which provoked the CDS spokesman to remind his fellow governing party that to deny Parliament the right to change the budget is an attack on the democratic system itself. A Left Block (BE) parliamentarian denounced that budget as the “greatest attack on the country” since the 1974 Revolution; a Communist Party parliamentarian warned that it will bring on the greatest mass firings since 1974.

  23. Philip

    A sort of dissappointing article as it fails to challenge the fundamental premise that mere fiscal reflation will do anything useful. Let’s really understand why the IMF are sweating: The original austerity plan is starting to blow the whole banking system and their elite to confetti and the endgame is coming a tad too uncontrollably at them. The next trick is to spawn a new ponzi scheme to quieten the masses before they truly wake up. That’s all that is going on.

    Galbraith’s quote applies to us all including the belief in this article that mere monetary policy alone can fix all ills.

    • bonbon

      Not true, historically too shallow.

      The reason the IMF is “sweating” is that the entire idea of private banking credit (which Galbraith rightly points out above, is finished), does not work.

      They are having excruciating difficulty because the only economic model that will work is sovereign Hamltonian Banking, the very foundation of the USA, embedded in the US Constitution, elaborated by Arthur Griffith, Friedrich List, Matthew Carey, asserted by Argentina, Iceland, China, Russia.

      They are seeing the end of an ancient oligarchical “fondi” system with all its tricks (ponzis, hedges, derivatives). They face an army of sovereign nations and are simply outnumbered; nightmare time for these enemies of mankind – and they do intend to cull numbers if they can get away with it. The more they apply austerity, the greater the resistance and reach for sovereignty will be. They are stuck!

      • Tony Brogan

        TheIMF is aware that austerity does not work. It works for them as they strip the people blind and pocket the assets.

        The us constitution embeds the use of coin as money and only coin and forbids paper.


        It is clear that Hamiltons bank and its sucessor were unconstutional and WERE NOT EMBEDDED in the us constution and after their charters expired they went or were forced out of business.
        These banks acted in the exact same fashion as have banks this century and last expanding credit and withdrawing it again to create depressions and to create a monied elete class and a pauperized lower class of citizen.

        Congress shall have the power:
        To coin Money, regulate the Value thereof, and of foreign Coin, and fix the Standard of Weights and Measures;

        To provide for the Punishment of counterfeiting the Securities and current Coin of the United States

        Bon bon it appears is on the side of the bankers elite and against the interest of the working people with his Hamiltonian banking.

        • bonbon

          Hamilton wrote the Credit Clause of the US Constitution. The First and Second National Banks of the USA are a prelude to the Third. National Public Credit, as Galbraith alludes to, posted here, with institutions such as the Reconstruction Finance Corp. are the model for the world.
          Andrew Jackson, wrecker of national banking is a hero of the now bankrupt WallStreet gang.
          The NAWAPA XXI project is what must be done with public credit. The day of the fondi (Venetian model for the model central bank, BoE) are over.

          • Realist

            Book “Hamilton’s Curse” is good start to realize we are already living in Hamiltonian world Bonbon.


            DiLorenzo reveals how Hamilton, first as a delegate to the Constitutional Convention and later as the nation’s first and most influential treasury secretary, masterfully promoted an agenda of nationalist glory and interventionist economics–—core beliefs that did not die with Hamilton in his fatal duel with Aaron Burr. Carried on through his political heirs, the Hamiltonian legacy:

            - Wrested control into the hands of the federal government by inventing the myth of the Constitution’s “implied powers”
            - Established the imperial presidency (Hamilton himself proposed a permanent president–—in other words, a king)
            - Devised a national banking system that imposes boom-and-bust cycles on the American economy
            - Saddled Americans with a massive national debt and oppressive taxation
            - Inflated the role of the federal courts in order to eviscerate individual liberties and state sovereignty
            - Pushed economic policies that lined the pockets of the wealthy and created a government system built on graft, spoils, and patronage
            - Transformed state governments from Jeffersonian bulwarks of liberty to beggars for federal crumbs

            By debunking the Hamiltonian myths perpetuated in recent admiring biographies, DiLorenzo exposes an uncomfortable truth: The American people are no longer the masters of their government but its servants. Only by restoring a system based on Jeffersonian ideals can Hamilton’s curse be lifted, at last.

          • Tony Brogan

            Is there a book on how to rid us of the bon bon curse

          • bonbon

            Britain feels most deeply threatened by Hamilton’s genius. To this day it makes them shake.

            NAWAPA XXI, the Eurasian Landbridge are Hamiltonian on a scale beyond most people’s radar, but the British Empire fully realizes it is finished. Attempting a WWIII now over this means their end as well. So some are waking to reality – National Banking and Public Credit for the greatest reconstruction ever seen on thsi planet is about to take off.

            Adapting to exactly that reality is what this blog is all about.

  24. StephenKenny

    To me, the question is not so much about debt itself, but about the use to which the borrowed money is put:

    Prof Hyman Minsky described three types of debt, each of which pushes an economy to a crisis: Hedge debt, Speculative debt, and Ponzi debt:

    - The first is ‘good’ debt – a company borrowing to increase the production of something, and paying off the capital and interest from the proceeds of the activity.

    - The second is less good – essentially used to fund turnover which never creates enough to pay off the capital sum, which needs to be endlessly rolled over.

    - The third is debt which can only be serviced by the accumulation of more debt – new debt being used to pay off older debt.

    It seems to me that the last 20-40 years started off as speculative debt, and in the past 15 years has pretty much all been ponzi debt.

    The trouble with 99% of economists seems to be that they view debt as of only one kind debt, and recessions as just downswings from a states of robust and balanced economic activity. I would have thought that the last five years would have shown us that neither, recently, is true.

    • Philip

      10/10 comment. So true that it hits the nuts and bolts of the issue head on.

      The first type of good debt is investment to start and build and innovate. Slow and steady growth – sound margin usually and if they have a decent R&D, should be around for the long term.

      The second type of debt is what I call land grab or market grab debt. These is where volume is king and marketing and big pockets can drive solid small businesses to the wall. Margins are tiny – so much so it drives…

      Debt buildup to build bigger market share at ever higher volumes and tinier margin will full wipeout of small competitors. This is the Red Queen’s race.

      The rest of the game is run for cover..Ponzi, Hedge and speculative – money for nothing which accelerates the 3rd type of debt.

      The rest is recent history

    • bonbon

      Too misleading and not useful at all. There are only two kinds of debt, legitimate and illegitimate.
      Legitimate debt is honored by productive powers of labor. Illegitimate, known as derivate, nominal debt we will simply render null and void.

      For those confused b the alleged debt crisis, the Triple Curve clears the air.
      The upper 2 curves, financial aggregates, monetized derivative paper are simply casino side-bets, not relevant.
      The collapsing physical-economic per-capita, per hectare real debt is what is to plan for. This will take 25 years at least to reconstruct after the ravages of Tiger monetary tsunamis. Of course firstly the derivative waste must be forever buried, never to raise its claims against humanity again.


      The graphic curve shows why people are totally confused, including economists. This confusion leads to radical throwing out the baby with the bathwater, throwing out the very basis for existence, the physical economy, with the monetarists, blocking any reconstruction as “leading to a ponzi again”. We have grown beyond that, and Alexander Hamilton tackled this as Arthur Griffith did. Now we will do it again, on a vast scale.

      • Philip

        Bonbon…Stephen is bang on in describing the mechanism. I think the good and bad aspects are self evident in terms of their legitimacy. Stephen is not in the least confused how this works because I have seen it in action at first hand.

        The triple curve you show is the good debt disappearing south, the monetary buildup as cash cows form and the financial ripoff as land grab starts to take off with the final retreat to financial instruments replacing all as it takes over “real” money. It is sort of like the typical blowout of a small town when Tesco lands.

        The argument you are presenting is like a curates egg. You need to relate it to day to day ordinary activity and stop quoting. No one reads that stuff.

        • bonbon

          Reading takes time. The physical-economy, not measured in any monetaristic metric, is the collapsing curve, the very basis for your existence. Reading too fast, as kids do today, skips over the metaphor. The cultural scourge today after 45 years of British monetarism shows up in the insane wild-eyed attempt to measure the physical economy in monetaristic terms. That’s the whole point of the Triple Curve- it splits open the entire Tiger world view for all to see how utterly incompetent it is and still lingers on.

          The metaphor shows exactly what to do to avoid being culled Tigers, split off the casino from the physical economy and hang it out to dry. Immediately intervene to reconstruct that rubble heap of an economy over at least 25 years. That needs political-economic banking.

          So instead of limp-wristed British hand-waving at the blackboard, describing “trends”, we can see how to act creatively and why, all in one metaphor. No “complex” algebra, as Galbraith says used only to hide, not reveal economic truth.

          Tiger’s need to understand how a scientific principle, universal, actually pervades day-to-day economics. Exactly the opposite of what “descriptive” methods limply explain.

          • Realist

            “Tiger’s need to understand how a scientific principle, universal, actually pervades day-to-day economics.”

            Would you clarify this statement, give us a good book on it please?

            “Exactly the opposite of what “descriptive” methods limply explain.”

            Why would descriptive but precise method be worse off ?
            The real language is away better to describe things than mathematics.
            The current economical issues are that mathematicians and statisticians are driving the economy, aggregates, multipliers and all that nonsense took the place.

          • bonbon

            Descriptive is limp wristed because denies the existence of a knowable scientific principle, which can never be “of the data”. This is known as reductionism, and deductive-inductive truthy stuff from this is by definition false. Trapped in a sad mold, either by training or by terror induced by the crash, one is induced to fall back on sense-perception. Either way science begins when it becomes obvious senses cannot ever show the real world. This is made very intuitive by the Triple Curve – 3 principles subsumed by one and turning fast over time. In fact the time of the events on those curves is from the process itself, which is why prediction (deductive-inductive from sense data) has nothing to do with forecasting. Every economist knows they must be able to forecast and know that somehow every prediction is rubbish. That’s because of deeply embedded training. I hope the Triple Curve clears that up.
            Take money for example – the upper 2 curves show money has no intrinsic value, it is a result of physical-economic processes and policies. The physical economy has value – it is life and death, longevity, population density and all that means. The scientific principle of the productive power of labor, and the relative potential population density of a culture-political-economy drive the curves and the use of money, not the other way around.

            And here is the clincher – the future, a choice, actually drives present action. Try that one with deductive statisticians. Another reason forecasting is totally different to “prediction”. So economics is entirely different to weather.

            In other words just as gravity, a universal principle, itself not sensed, but known and understood as producing effects like orbits, is the same as the uniquely human productive power of labor. We are of the same universe, and science can encompass principles we express. Life expresses principles, not seen in the chemistry, e.g. the rate of change in the biosphere is orders of magnitude faster than geology (how fast the entire atmosphere changed from methane to o2). We are still orders of magnitude beyond that again.

            Universal principles must be put at the center of economics, and there are all kinds of efforts. Galbraith in that publication makes a good go at it. Away from descriptive statistics, to action principles.

            When society realizes its uniqueness, it is suddenly clear why NAWAPA XXI is the action to take. Geology took millions of years to move rivers in now wasteful ways. We can move them in 25 years. That comes from simply realizing our intrinsic nature.
            The biosphere’s deserts demand (in a way) intervention of its highest expression, us, to green them. We have a choice. Some like Obama would rather blow up the planet and reduce us to less than 1 billion than let us simply be human, not animals waiting for rain.

            There is the conflict – to be human, in ways including those above. That is what a science-driven economy means, not the monetary and very limp-wristed casino.

            It just shows the power of something that can be known, and taught, and advance but not weighed or bought. That’s the way it’s built.

          • Realist

            Are you saying to employ people in Ireland we should move rivers to flow where people can drink it ?
            Is that what NAWAPA is.

            Or why not build a big pyramid, on one of NAMA’s big land sites? It will employ all unemployed, bring GDP up, so we get the economic growth.
            People will start spending money with a bit of pushing from Hamilton, create a proper “aggregate demand”, so we all get happy.

            Thanks Bonbon. But do you realize that people want what they want, not what you say them to want, what government or Hamilton’s bank say them to want.

            This is the central economical problem. No central body could possibly grasp what we all want. This is why only competition and private companies who fights to understand what people want, produce and try to exchange with people.
            Some die, some not. Stupid government cannot possibly know to build the Pyramid, NAWAP craziness, bridges, infrastructure that nobody needs.

            Why is the problem to leave people to spend money on what they want ?
            Are you saying people are stupid so you should tell them to not drink Coke, or eat in Mc, or not to save but rather spend, support crazy projects ?

          • bonbon

            This is NAWAPA XXI – awe inspiring.


            The original TVA was inspired by our Irish Shannon Scheme which FDR heard of.

            This time around we are inspired :

            Have a read – the maps are wonderful. Ideas move and flow in a way rivers do not. We can move rivers for power, agriculture. We can link into the Eurasian Landbridge and complete that new after more than 150 years delay.

          • Realist

            Does this mean after the property bubble let’s try another agricultural and power production bubble ?
            How do you know it is the way to go ?

            I said it million of times, no central planning body, party or LaRouche Irish brigade can know what to invest money in.
            Only private companies and entrepreneurs, risking their pooled resources and predicting what many people might need can create new products, services or whatever.
            Such companies can also fail and go bust after consumer tasting failed for their products.
            In opposition to that, your government sponsored project usually never fail (initially or on paper at least) as all you need is to break the neck of people by taxing them or inflating your fiat money.
            You, politicans, always find an excuse, it was world wide crisis, ECB, this or that.
            Proper private company just go bust and “RELEASES RESOURCES” to other productive uses.
            This release of resources is the most important thing, as such resources compete and reduce price of labour, land and money for other productive uses.

  25. molly

    David what happens when the bust comes ,who’s going to lose out in terms of the people who funded the thing in the first place.

  26. molly

    Do the government know how bad things are out there if they do and they make things harder for the low to middle class in the December budget,this will prove how devoid they are from the people who elected them.
    Toll charges
    The basic things
    if increased like the above will drive the people over the edge.
    I am tired of hearing about how we have turned a corner and the little signs of growth .
    When you here the large job numbers comming you don’t here about all the small amount of job losses add all these together in a month and they would far exceed any gains.

    • bonbon

      Here is the alternative :


      Without this “they” will drive Ireland, like Portugal reported above” into the sea. Call up the elected and tell them there is an alternative.

      Who ever said this would be easy?

      • molly

        What’s the difference between Ireland and a third world country the only thing I can think of is third world country’s try to better themselves and we are going backwards and if we don’t make a stand we will become a third world country.
        Rich against poor,history is full of this,every third world country has rich v poor,the sad part about this is we are sitting back and allowing it to happen.
        I make a point of asking people what they think about this government and have yet to here anything positive said .

        • bonbon

          So take the plunge and tell people what could and must be done instead of describing the failures. That is really what people are waiting to hear.

          • molly

            The only reason I can think of why people aren’t out on the streets in large numbers is they haven’t suffered enough.
            Like alcoholics who keep drinking they haven’t suffered enough.
            I keep telling people what must be done ,but we need this on a much larger scale,I believe this will happen very soon.

          • Dorothy Jones

            Wouldn’t bother to engage there molly. Last time I got a comment from someone who doesn’t even post under their own name about marching not being enough and querying what was on their signs.

            Made me think of the KEN doll. Posting like that is the equivalent of having a smooth bump instead of a pair of liathroidi in the middle nether region.

            Can’t even be called w*****s because they haven’t got a pair.

          • bonbon

            Go ahead, break the mold. The future is not made by complaining. No need to torture people, or wait for further suffering.

            Think big, who said the Irish should not – the British maybe? Do not listen to any hopeless posters, who have nothing to say about the future.

          • bonbon

            The model for those immersed in finance seems to be Dominique Strauss-Kahn. Now that was finance with b**ls.


            New York’s finest had a different opinion.

        • Grey Fox

          Molly I share your frustration, we should call a spade a spade, we are not a democracy, we are not a republic and we are most certainly not Sovereign!
          So at the next election let us see on the ballot:
          Coca Cola maybe, certainly JP Morgan or Rothchilds!
          We may as well just simply vote for our favourite Bank or Big Corporation because our Public Trustee’s are puppets!

          • molly

            Yes but what about the left and the shinners anything is worth a chance .
            We have had a dose of the FF/ FG/ LAB/ the greens look where they brought us .
            Was doing a job today and got talking to the man I was doing the job for ,he thinks the government is doing a good job,I ask him what he worked at ,retired manger in the civel service.
            If we could put people into groups
            The poor
            The new poor
            The well off
            The rich
            The first two groups are being pulled apart for the sake of the other two groups,the first two groups are say 80 percent of the population+ so 20 percent is calling the shots.
            Who’s the mug.

        • Grey Fox

          Check out Direct Democracy Ireland, well worth a look!

  27. mediator

    Molly they couldn’t care less

  28. Tony Brogan

    My biggest fear about Kilkenomics is that the speakers will be of the kind mentioned as not willing to raise their head for a look around.
    Last year the speakers at MaGill Summer School were the same old same old party line.
    I remarked to a friend that if the country was relying on such to solve the problems there was no hope.
    I will attend what I can in Kilkenny and hope to be illuminated and proven incorrect in my fears. I am hoping to hear DMW suggest that a good start is to close the Central banks, ban fractional reserve currency, and implement a silver coin currency as a choice for the people. Do I expect too much?– Not really or we are doomed to acting on our own as the state will be ruined and the people within it.

    • Tony Brogan

      MacGill Summer School

    • bonbon

      Well, you can use another currency for the show. Marbles. Just imagine if they were metal!

      Do not take the Mont Pelerin Society too seriously, or be a Pilgrim for the British.

      • Tony Brogan

        Well then they would be called ball bearings wouldn’t they.

        Better they paid for silver coin to use as spending currency. The cost in local fiat would be the same and instead of having a valueless piece of paper at the end of the festival they would have a coin valued on the international market of something of value which over time would repel inflation and be worth more than expensed for it. A keepsake worth saving!

        For an economics forum to dispense worthless pieces of paper is another example of not being able to get out of a mind set.

        The use of silver coin would liberate all who use it.
        However I will spend my gifted (included in the purchase price of the festival) currency on things of substance and save my coin.

      • Realist

        I lived once in the country where the paper money was used in toilets, when you get out of toilet paper as it was cheaper. The biggest issue with it was that it was too fine, just printed by the central bank.
        New money with more zeros was printed every few weeks.
        And that was not too long ago.

        I would always like something more durable bonbon.

        • Tony Brogan

          Fortunately for me I have not. Hoever I may not be able to escape the experience the way things are unfolding.

          • Realist

            Agree. We are not going to escape it.
            Even if I do not want my 3 children to go as I did through the monetary fiascos (or even worse, wars), I am uncertain of all of it.

            I hope this craziness bursts sooner rather than later, as I am trying to accumulate the wealth for them and give them brighter future.
            As it is prolonging further every year, more wealth is wasted, while less progress for the mankind is going to happen.

    • Dorothy Jones


      For the two of ye: Glasperenspiel. Now hence to Kilkenny and slug it out on the Sat over a pint in Langtons. :)

      • Tony Brogan

        I tried reading Hesse as a teenager but laboured heavily with little understanding }:-(

      • coldblow

        The psychological categories (from Jung I think) in the wiki article are, in my view, just wrong. There’s only extraversion and intraversion as far as I can see in the world around me. Never read this book but I read a few of others. I liked his Knulp (possibly not a real book) about a gentleman tramp in a Germany of a century or so ago – gives a different view of the country from the usual.

  29. Dorothy Jones


  30. michaelcoughlan


    This is a benign enough article in that it’s a rehash of what’s been said before. What’s important is the fact that events have proved your analysis correct. Buachaill maith David.

    What I am really looking forward to is seeing if the IMF changes it’s cuts at all costs policy now that it knows it’s the wrong thing to do. It will be interesting to see if Mr John Perkins is proved correct in his analysis David won’t it?

    I sincerely hope I am proved wrong but I think they will keep cutting. I sincerely hope Perkins is wrong and that somewhere in the IMF is someone who just like bankers and politicians isn’t a careerist and forces the organisation into a volte face.


    • StephenKenny

      So what would be the hoped for result of this change of policy?
      Are we seriously expecting people at the IMF to proscribe industrial and commercial policy? Which sectors and companies to invest in?

      There is a bit of the ‘shoe shop intensifier ray’ in the world that Perkins describes.
      The last 20 years has shown us that all you have to do to take over a country is to give it a lot of money, or even cheaper, lend it a lot of money.

      Lent or given, it will result in the destruction of the countries productive base, whatever it was, leaving them with nothing but estate agents, money traders, and a sprawling, bloated, public sector.

      Almost every economist I can think of, has warned of this.

      • Tony Brogan


        Good comments but I am not holding my breath for any change from the IMF
        It is all a PR stunt to make us all feel they care!

        There is only one to get out and that is to opt out. The people as awhole3 must be roused or it will be too late.
        This is war for the survival of the sovereighn state and also the sovereign individual. There is no geneva convention in this war. It is total war against a cunning unremitting enemy.

        When we wake to reality then something will happen. At present the people sleep walk in a daze from a vaguely decerned nightmare.

        • bonbon

          Now the Geneva Convention is to be thrown out the door? Seems we have a little Marat, Danton, or Robespierre operating here disguised as a Pilgrim (from Mont Pelerin). The true face of the Austrian School is being revealed as people wake to reality.

          • Tony Brogan

            Stupid comment

          • bonbon

            You will next, I am pretty sure, throw the Treaty of Westphalia out the door.

            But Mr. Blair ans Sir Henry Kissinger beat you that one. Still no surprise – British foreign policy being what it in fact is.

            What is very surprising, that policy being what is is, if the Financial Times of London choosing the US Independence Day to call for Glass-Steagall with great resonance.

          • Realist

            Hey Bonbon,
            Where did you learn to express yourself this easy way?

  31. Tony Brogan

    Mexico wakes to reality

    Recently Mexico announced it had purchased 92 tonnes of gold to add to its reserves.
    An investigative reporter has obtained information that the gold purchased was likely a paper promise or worse that the sale appeared to be real when in fact that same gold has already been sold to several others. Loosely termed fractional reserve banking in gold–otherwise known as criminal fraud if we tried the same thing.
    Worse still most of Mexico’s gold is held in London and likely already hypothecated. Another word to describe gold sold to others, leased out or otherwise disposed of.
    This is how the price of gold is manipulated downward as these goings on do not add to demand for physical gold but also allow gold to be syphoned off by the moneyed elites for their own account.
    Of course this is not just Mexico with a problem. Any country trusting the international banksters has a similar problem.
    Also a lesson for individuals. Make sure you do not own a paper promise to pay but have in hand any precious metals. Only you can be trusted for your own account. Take care.This system is about to blow up along with the fiat currencies.

    Read on here.

    • Realist

      Exactly, go away from state controlled fiat currency and state monopoly on the same. Allow people to use any they wish or like. And for centuries that was gold and silver, well known why.

      It is just crazy to have the idea that the new paper money will make all your problems go away.
      See what ideas are winning in economy today:

      • Tony Brogan

        Excellent von Mises Institute essay.
        Well worth the read, and couldn’t have said it better myself {:-)
        Good post.

      • bonbon

        The swindle that some metal will make all problems go away, as if by magic, is even more insane. Both are monetarist fantasies.

        Sure, fiat monetarists are lurching for metal monetarism, like drunks in a casino. Lurching for an imagined past “glorious epoch” is simply nostalgia for the British Empire. And they should run the economy?

        Interesting how both Lord Maynard Keynes, Mr. Fiat, and von Hayek, Mr. whatever, both spring from the London School, the Fabian Club of Empire. There are others of the same club but Ireland has had direct experience of that Empire for hundreds of years.

        • Realist

          The non-fiat money, not controlled by the state, will just stop fiat currency manipulations we are experiencing, e.g. printing.
          The other needed change is to drop central-fractional-banking and get back to 100% reserve banking.
          People should not spend before they save.
          You cannot go sailing every day, if you do not save a few hours every day of your time. The same is for other resources.
          The last one is to get rid of public services and have the m competitive and private, so they bring more values to consumers/customers.
          At the end the government is not earning money, but rather coercing it and putting it into whatever use they think good (usually not). No way to value their services nor to improve them as no competition.

          We are spending our children’s future at the moment.

        • Tony Brogan

          You are not only insane bon bon. you are evil. You are programmed and operated by LaRouche. You are a drone with no mind of your own; just a piece of a collective.
          Your statements are irrational and not to be taken except as the ramblings of a madman. That is what I will do from hence forward. Debate is impossible with insanity.

          • bonbon

            Now, now, having a hissy fit is not only revealing but really the only argument the Austrian School has. von Hayek praised irrationality to the utmost in his lectures, just in case you have not studied them. The objection, bordering on hysteria, is quite silly.

            It is insane to even entertain the fantasy that fiat or metal can solve anything, that good thing will seep from heaps of paper or gold dust. Incantations might help though – keep trying. Take you’re time. Newton spent a lot of time at alchemy, he was the last of them Babbage said.

            But now I find a couple here! Amusing.

          • Realist

            You said you never read 1 book from Austrians, so how you can state “just in case you have not studied them”.
            Did you and how ?

            Do you realize how many concepts in economy is accepted even with the mainstream economy from Austrian economy?
            Do you realize you are comparing the Austrian school of economy with the Larouche political party.

  32. Deco

    The government, the auctioneering “profession” (sic), RTE and The Irish Times have been talking up the real estate market recently.

    Yet, here are some very serious statistics from Davy


    Data on arrears in Irish buy-to-let (BTL) lending were released for the first time yesterday in a speech by Central Bank regulator Fiona Muldoon. As we expected the 90+ day arrears rate for BTL lending at end-Q2 2012 was 20%, twice the rate for owner-occupiers, at 10.9%. Also, almost two-thirds of BTL loans in arrears have been so for more than 180 days, compared to around 50% for owner-occupiers.

  33. coldblow


    There is a wider problem as the posts here point out, but I agree with your article. Austerity is leading to disaster and that policy (which you criticized from the start) needs to be changed. You have to start from where you are.

  34. Realist


    I really did not enjoy this article at all and let me tell you why.

    From your article somebody might conclude that what is going on in economy is somehow different what is happening in the last 50 or more years.
    Somebody might think Austerity is something really big, while I did not see it that way at all.
    They do not do anything substantial to make me think, like you did above.

    IMF is not changing their mind, it is the same policy they had, pushing credit expansion, talking about aggregate demand, multipliers and other nonsensical constructs.
    You can hear now central bank moaning about banks.

    You used the terms used by the current economists that are vague and make no sense. They are mythical tersm to me without any value.

    Can you really explain to people what these terms mean and why should we pay attention to above article:

    1. Economic growth (do you mean GDP or something else, as GDP will grows by just inflating the money or more public spending).
    2. Liquidity trap (do you mean that saving is wrong or that you should force people to spend more?)
    3. Fiscal multipliers (do you really know what is this, please explain if you can?)
    4. Aggregate demand (“When prices fall, demand doesn’t go up; it goes down” – If this is true that will mean people will never buy anything ? It just have no sense to me)

  35. Tony Brogan

    ‘The IMF now admits this and, interestingly, the implication of this realisation is that the fiscal compact we enthusiastically signed up to will destroy Europe’s economy.
    This change at the IMF is significant. A few weeks ago, this column suggested that the only way out of Europe’s growth mess would be a huge fiscal expansion. The IMF now seems to agree.’

    Fiscal policy as I understand it relates to things governments do to stimulate or slow economic activity but do not include monetary policy.
    Things like taxation, duties, subsidies, & government spending. These things are still largely the preserve of the individual state within Europe so I do not see a fiscal compact except for the ability of labour and capital investment to be more mobile.
    Where there is a compact is in the area of monetary policy and this is where the problems lay and where the current economic downturn is centered.
    Fiscal and monetary policy are not mutually exclusive of each other.
    A government may decide to spend but it has to borrow to do so if taxes are not increased and so a relaxed monetary policy is required to allow the fiscal policy to be executed.

    Most European states have given up their right to monetary policy by adopting the Euro currency. This one size fits all monetary policy creates the cracks and fissures that are breaking the Union apart.

    Not until the nation state takes back its fiscal policy will it regain the sovereignty required to have any effect deemed to be needed on its national economy.

    It is the policy of the European central bank that is destroying the respective national economies and enforcing a fiscal policy on a state via the IMF will not solve any problem.

    The Euro currency must be abandoned by the state and a national currency adopted to allow fiscal policy to work and then the IMF can be told to leave town.
    Concurrently the Central banks should be closed and financial decisions returned to treasury.
    The national currency should revert to sound money principles so that government fiscal policy is restained and governments are not able to borrow excessive amounts to fund pet projects or bribe the electorate, or go to war.

    Austerity in a milder manner should be implemented at the beginning and as such the admonition to live within ones means would subscribe to a balanced national budget and a healthy productive economy.
    If operated in this manner austerity in its current form would be obsolete.

    So again it returns to having a monetary system that restricts the creation of extra money. That in turn eliminates inflation. It deprives governments of the means to have excessive fiscal policy and the funds to conduct wars etc.

    Should all the member countries adopt such principals then nobody would have the means to conduct war. Then the European trade union would be worthy of the Nobel peace prize rather than the ridicule it now desrves.

    • Realist

      Hey Tony.
      I am really pessimist about central-fractional-banking dismissal.
      There is no 1 economist in Ireland proposing such.
      In Europe there are some, but they are overpowered with so many neo-Keynesians and others who just do not think changing anything.

      The only way that to happen is if everything goes bust, but then other zombie politicans and economists, aka bonbon, might arise.

      Pretty dark, is not it :)

      • Tony Brogan

        I agree with you. One first responsibility is to ones self. Then attempt to achieve change. That means being in a position to effect change.
        Without a political position one is left writing letters andinvading blogs.

        At least we know we are not alone as others here have similar points of view.

        In my opinion bon bon is sent to destroy this blog. It is in danger of having rational mind changing discussion.
        he is able to spout so much invective and propoganda that a lot of good posters are retiring from expressing opinion or thoughts that are ridicule and scorned by himself.

        DMW has to sell his story line and will stay in the middle. Many cute observations and there now did I not tell you so before buy nary a sugestion of how to fix the problem other than the socialist response og debt forgiveness which solves nothing but is a popular sop.

        There may be some good speakers at kilkenny but I doubt I will hear an illuminating proposition to resolve the problem.
        i will be surprised if opinion is allowed from the floor. Just a selection of questions carefully responded to with orchestrated answers.

        I hope thing go pop in the US first as I suspect the government will be less able to control the results and we may see a rebirth of sound monetary princples.

        Take Care
        See you in a couple of weeks in Kilkenny?{:-)

        • Realist

          Yes, ourselves first. Personal resonsibility first.
          My next priority is my children, so it will be 4 of us soon.
          I am also converting people around me by just discussing economics and other aspects of life.
          It is very tough task to do but with persisting I can see people changing over years :)
          In the US I had a bit of a hope with Ron Paul, but that went south as usual :) At least a lot of people heard a different opinion.

          I am not coming to Kilkenny, sorry :)

  36. Everybody take a look at this graph it says everything I want to say! Were already worse off than the Greeks : http://thepressnet.com/2012/10/16/were-already-worsr-off-than-the-greeks/

  37. Deco

    Default – because in the end, in reality, There Is No Alternative to default.

    The ECB, and EU commission, and G-Sucks gang in Pennsylvania Avenue are completely against default.

    But in the end, Default is unavoidable.

    And until it comes, the people will suffer in Ireland, Greece, Spain and elsewhere.

    • bonbon

      Default is only a first step. Reconstruction is what they are trying to prevent- that is what they are in terror of. It means their end as we move on. Their type of banking is simply not useful under a global reconstruction. And we have the plans on the table, truly grand in scale.

      Some of these are prepared to prevent reconstruction at any cost, including a massive cull. It really is us or them very soon. Others realize even they would not survive, and accept the inevitable, a world with national banking in a very busy movement. That is the Financial Times July 4 2012 Glass-Steagall breakthrough.

      Inevitability? Avoidability? Be not so quick with prognostications.

    • Grey Fox


    • Realist

      Agree, this nonsense need to stop.
      The problem is what next where we all cannot agree fully :)

  38. Waking up to Reality

    In this article I am reminded of a waking up to an ‘afterlife ‘- an eternity of bliss and family reunions a place of all fluffy clouds , choral music and hot young angels .

    How nice it is to trumpet this transcedent experience – an odyssey – a Judaeo – Christian model.

    Alas! I have a memory so I don’t want to wake up or do many others either. Should we do we will all wake up psychotic , angry , confused , and wanting to ‘go back’ or as David said ‘ busy on the proof’.

    Like Dante , we all need a guide ,a messianic hand and maybe Henri Thiery.

  39. Deco

    There is no austerity being applied to the Anglo Bondholders !!!!

    • bonbon

      “Burn the bondholders” is on the table. It is a democratic choice, a political-economic principle, not a question of mood, nor election showjumping.

  40. Deco

    Dublin Airport Authority, with massive debts thanks to the T2 debacle.

    There is no finer example of what David calls “the good room” with expensive furniture and linen curtains, than T2. It is “the good room” of Ireland.

    Never mind the towns where it is not safe to walk the streets at night. Never mind the suicides of small business operators. Never mind the rampant substance abuse. Ireland can have a nice shiny face, and be highly pretenscious in T2. No wonder Ryanair avoided it (apart from the cost issues there).

    And now the DAA are paying pensions that would embarrass even Brian Cowen to their retirees.

    And this country is broke. The policies that it is pursuing are making it even more broke. All in the name of socialism. Socialism is now just as crooked as capitalism.

  41. bonbon

    Something is afoot : Looks like Sandy Weill is right there is no hope for the banking system without Glass-Steagall.

    Citibank CEO Forced Out; `FDIC Was Ready To Shut This Bank Down’

    Oct. 16, 2012 (LPAC) — Numerous sources report that the resignation of Citigroup’s top management on Tuesday morning was a purge, despite ousted CEO Vikram Pandit’s multiple interviews later in the day, in which he claimed that he chose the right time to leave, etc. Pandit and president John Havens, what was sometimes called the “Morgan Stanley group” running Citigroup, left with immediate effect, with their departures announced by the Board of Directors after the fact.
    The ousting followed a number of developments: Citigroup’s stock value falling to a full 90% below its level of 2007 when Pandit took over; the Federal Reserve ordering the bank in June {not} to pay out a dividend proposed by Pandit, because of its precarious capital (over-leveraged) position; Citigroup having arranged more than $70 billion of collateralized loan obligations in the U.S. this year through September, three times as much as the same period in 2011 and more than any other lender, according to Bloomberg data. The bank has has also been catering to money-market funds, rapidly blowing up its derivatives book, and other activities that crashed in 2007-08.
    In addition, Pandit, a former hedge fund manager, had come under brutal, repeated print and interview attacks by former FDIC Chair Sheila Bair in recent weeks over unnecessary bailouts and cluelessness about retail banking; those attacks also slammed Treasury Secretary Tim Geithner as Pandit’s protector and bailout champion.
    Bank analyst Christopher Whelan of RealAnalytics, who had reported the previous day that the purge was coming, noted that “Sheila Bair, in her new book, reported she was ready to shut this bank down” but was overruled by Geithner and Ben Bernanke’s insistence on multiple bailouts. “Citigroup hasn’t had a banker at the top for a long time.” Whelan characterized the firings as “very disorderly”, and said, “The big banks are going to break up.” Conservatism is carrying the day in the Board, he suggested, meaning more commercial assets in the United States, fewer assets in all the “emerging markets” securities and derivatives markets, where Charles Prince and Vikram Pandit had taken it.
    The newly announced CEO, however, is Michael Corbat, another investment bank veteran (Salomon Brothers). But Corbat since 2010 has been in charge of “Citi Holdings” (i.e., chunks to be sold off and gotten rid of, most recently the Smith Barney brokerage). The shedding of subsidiaries to raise capital is likely to accelerate.

    • Tony Brogan

      Likely suffering from an overloaded naked silver short position that will cost billions. silver goes 36 dollars and watch out

  42. bonbon

    For those Tigers still lingering in a Greenie fantasy land, look at this

    Germans Increasingly Enraged about Rising Energy Prices

    Oct. 16, 2012 (EIRNS)–Outrage among the German population about the rising electricity prices is set to rise, after yesterday’s announcement that the renewables tax on power consumption will increase from EU3.6 cents to EU5.3 cents. This special tax, which is to finance the expansion of so-called renewable energy sources and cover their immense financial losses, caused by the fact that they are highly inefficient, was introduced along with the government’s decree, 15 months ago, to exit from nuclear power completely. The immediate shutdown of eight nuclear power plants in Germany shortly after the media-induced hysteria after the tsunami struck the nuclear complex at Fukushima, has conveniently led to a highly-speculative boom in renewables, with excessive investor expectations that can only be covered by taxpayers’ money — tax rebates for renewables on the one side, extra tax burdens for electricity consumers in private households and smaller industrial firms on the other side.
    The rising rage in the population is addressed by the banner headline in {Bildzeitung}, along with an article on page 2: “Eco-Tax Rises by 47% — Energy Rage.” The story does not offer any remedy for the disaster, which it describes as “an energy change which is too expensive,” but it hints that whereas in Germany, a kilowatt-hour now costs more than EU25 cents, in France with its nuclear power, it only costs a bit less than EU14 cents. In all of Europe, Germany’s energy consumption prices are topped only by Denmark’s EU29 cents per kilowatt-hour. Most of the other EU countries are way below EU20 cents, in the range of EU14-17 cents.

    • bonbon

      So here we have it – the entire “green” agenda comes from exactly the same circles as the banks insatiable bailout appetite.

      This is the new dot.comm and housing bubble rolled into one.

      Any proposed economic recovery will be in the same jeopardy as the bubble boys unless it very clearly separates out this kind of swindle.

      It should not be surprising German bankers are trying to be both the Green wonder boy and Euro poster girl at the same time. The incredible, but true detail is FG, while being the Euro wonder girl, has seen through the Greenie poster boy, at least at the moment.

      Wow, what a political tight-rope act. Riveting!

  43. thejeckel

    The bank of England speak about the end of the world, literally.


    That scares me.

  44. I’ve heard David’s ‘Parodox of Thrift’ explanation for why the recession seems to have deepened but I have a number of issues with it.

    First of all, prices aren’t going down so no-one’s incentivised to wait for a bargain next month.

    Secondly, people saving money instead of spending is not the reason why there’s less money during a recession. The reason there’s less money during a recession is because when a loan is repaid to a bank the money used to do so no longer exists.

    If anyone’s interested in a technical explanation for how this is the case it’s all explained in our publication; How Banks Create and Destroy Money which can be downloaded at;


    • bonbon

      As Galbraith is quoted here many times :

      “The study of money, above all other fields in economics, is one in which complexity is used to disguise truth or to evade truth, not to reveal it. The process by which banks create money is so simple the mind is repelled. With something so important, a deeper mystery seems only decent.” JK Galbraith: ‘Money: Whence it came, where it went’ (1975).

      It is so simple the mind is repelled.

    • StephenKenny

      The problem with the ‘paradox of thrift’, in this day and age, is that there is no opposite ‘paradox’.

      We’ve had 20-40 years of the ‘paradox of spending’ – 20-40 years when spending was too high, being based not on productive activity, but on non-productive borrowing. The paradox being that all that spending was actually bad.

      • Tony Brogan

        Absolutely the same thoughts.
        It is made out that the virtue of thrift is now a sin.
        Profligate spending into debt is now a virtue.

        Black is white and white is black.
        Perpetual peace through perpetual war.
        Welcome to Orwell’s 1984

        • bonbon

          Actually that was Lord Bertrand Russell, the Mephistopheles of the 20th Century. Black and white are any shade of grey that’s decided, and no one will realize how they got the opinion. (Impact of Science on Society).

          Makes Orwell and even HG Wells seem subordinates.

          • Tony Brogan

            I sit corrected

            Here is one for you bon bon

            “Power is in tearing human minds to pieces and putting them together again in new shapes of your own choosing.”
            ― George Orwell, 1984

  45. bonbon

    After Sandy Weill of Citigroup in August and the Financial Times on July 4 2012 called for Glass-Steagall, many are changing their mind.

    “Bring Back the Banking Divide” Says London Investment Analyst

    Oct. 17, 2012 (LPAC)–Another voice from London admitting that dismantling Glass-Steagall was a mistake, comes in a column by Anthony Peters, a strategist for SwissInvest, which is published in Thompson-Reuters’s International Financing Review, commenting on the dumping of Citigroup CEO Vikram Pandit.
    Peter says that Pandit “joins the scrap heap of former investment bankers who made it to the top of a commercial bank,” where it has been shown that the management skill-sets of investment and commercial banking “are not necessarily interchangeable.”
    “Commercial banking is in many respects more like a utility and needs to be managed in such a way. It is as much the attempt to generate investment banking-like returns from commercial banking-like risks, which has led to investment banking-like risks now delivering no more than commercial banking-like returns, which has brought these men down.
    “I admit to having been there and having celebrated when Glass-Steagall crumbled. Count me amongst those who now agree that dismantling the division between lending and underwriting was a mistake, and amongst the proponents of re-establishing the divide.”

    Lega Nord Introduces Senate Bill for Glass-Steagall Type of Banking Separation

    Oct. 17, 2012 (EIRNS)–Sen. Alessandro Vedani, who recently replaced another Lega Nord member of the Senate, introduced a bill signed by 22 Lega members, calling for a strict banking separation regime. Vedani was organized by Movisol member Massimo Lodi Rizzini, who also wrote the introduction to the bill. The text of the bill is identical to the draft earlier introduced by Sen. Oskar Peterlini, with the addition that commercial banks should enjoy a better fiscal treatment than investment banks.
    It is not clear why this group chose to draft their own bill instead of joining Peterlini’s.

  46. bonbon

    Swiss Military Expert: We Are on the Eve of World War III

    Oct. 17, 2012 (EIRNS)–A source who is a retired manager and is part of a circle of military officers in Switzerland, told EIR today that “we are on the eve of World War III.” He said that the traditional saying, that “the war is too important to leave to the generals,” must be reversed today, as the U.S. generals are the only ones who oppose a war. He compared the situation to 1938 in Germany, when Wehrmacht heads Blomberg and Fritsch opposed Hitler’s war plans, and were “watergated” because of that, leaving the way free for the war.
    The source also was negative on recent reports about Swiss Army preparations to face chaotic conditions as a consequence of a euro economic breakdown. He said that Swiss Defense Minister Ueli Maurer is a populist who has reformed and destroyed the capability of the Swiss Army.

      • bonbon

        He is referring to US JCS General Dempsey, who toured London and Dublin in the summer clearly telling the world Israel cannot depend on support if it goes ahead.

        When one destroys the Army, the Generals cannot stop the insane civilians like Obama starting WWIII.

        Prescient. when one knows Switzerland, one realizes what a madhouse the EU is.

        • Tony Brogan

          The military fight the wars. They can refuse.

        • Joe R

          Even more hilarious.

          Imagine Israel starting a war! Well I never. You could add it to 1956, 1965, 1982 and 2006 plus that strike on Irans nuclear power station in the late seventies…that is a lot for a 54 year old state what?

          Or Switzerland. When were the Swiss last in a good fight – 14th century or so? They must be spoiling for one.

          Or maybe Germany and France will get it on. Just like that! Classic rematch eh?

          And WW3? We already had that. The Seven Years war was really the first world war, WW1 was the second, and WW 2 was really the third.

          World war is characterised by fighting on several continents between two sides BTW.

          WW4 is almost impossible because empires don’t exist anymore. Or the huge military forces it would require for that matter to wage war in many places…

          Aside from the idea that organised war just breaks out without any planning…particularly in this day and technological age.

          Great stuff – worthy of a Larouche article I think!

  47. Tony Brogan

    Hey I changed my mind today.
    I took the Dart from Greystones to Connolly this am.
    I had planned for days to attend a jazz session at JJ Smythes. I would then bike back in the night time.

    After having a good late lunch with pleasant company and a Guinness to savor, I looked at the weather and decided to return to Greystones.

    On the bike it took 1.5 hours of cycle time(Does not count the red light stops). Not much more than going by Dart what with the getting to and from the station and having to be be on time etc.

    So there you go. 29 km and save the fare. Sorry about your income David but I have a fetish about saving.

    Look at it this way. The savings paid for my Guinness.
    From the other perspective, because I have had the guiness I could not afford the fare!!

    Choices Choices

  48. dwalsh

    Commodity money is not a civilised option. It is an ancient form of the wealth of oligarchs; not of ordinary humans.

    Commodity money would not resolve the core problem we face today; which is the usurpation of the social and political order and the civil commons by financial oligarchs.

    Today under cover of the financial crisis which they caused (as well as by other means, such as the so-called free-trade treaties) they are moving to complete their theft of the world. They are stealing the world from beneath our very noses; and no one can see it, because their corporate media has everyone hypnotised and indoctrinated to support their right to own everything.

    Instead of seeing how immoral their creed of greed is; we admire them and covet their wealth. We believe without their wealth there would be nothing to trickle down to the rest of us; no crumbs from the table.

    Official economic doctrine in the United States and Europe states clearly that the richer the rich are, the better for all of us.

    What can a rational and humane person say about such a ludicrous economic doctrine; or about the degraded state of a population who accept it.

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