November 8, 2012

Growth focus is mending US while austerity stalls Europe

Posted in Irish Independent · 187 comments ·

WHOEVER has won the US election, he will be reasonably assured that he will preside over an economy that is on the mend. Last weekend I spoke to someone who knows Obama well and is a big Democratic fundraiser in California. His assessment is that Obama knows that the economy is moving in the right direction but he also knows that the next president will gain credit and this is one of the factors driving him as he would be appalled if Romney took the economic plaudits.

Whether this is a fair assessment of the president’s state of mind, it is significant that the US economy, after a few years on the ropes, is recovering. One way to look at the last four years of economic policy in the US is that a battered, bruised and very sick economy has been nursed back to health by a central bank and a government that is putting growth first and is worrying about austerity later.

To achieve this, the central bank has kept interest rates as close to zero as possible in order to ease the severe deleveraging that has gripped the US since the property/credit bubble burst in 2008/9. In tandem, where low interest rates have not worked because the people have too much debt and the banks too much bad debt, the Federal Reserve has engaged in what is called “quantitative easing”, buying up collateral from the banks and giving the banks money in return.

This has allowed banks to clean up their broken balance sheets. This process is not over and this is the reason why American interest rates are likely to remain at historically low levels for a long, long time. In addition, the US government has run a massive trillion-dollar budget deficit pump priming the economy.

Despite these efforts, the recovery in the US has been considerably weaker than previous recoveries from recession. According to a recent study by the US Council for Foreign Relations comparing this recovery with previous ones, the Council concludes that:

“The current recovery remains an outlier among postwar recoveries along several dimensions, particularly those that relate to housing. The Federal Housing Finance Agency’s house price index declined in the first quarter of the year, after rising for two consecutive quarters. Consumers remain reluctant to take on new debt and the stock of debt is lower than it was when the recovery officially began”.

This reflects the vicious deleveraging which has had to go on as people try to pay back debts and companies do likewise. Of course, because in the US mortgages are non-recourse, people can walk away from their houses without being shackled with the debt personally. This is in direct contrast to the Irish situation where one mistake in buying a house at the top of a boom will condemn you to a life of debt servitude. In the US, this is not the case as the loan goes with the property not the person.

In fact it is the housing market and the evidence that it is stabilising in recent months, despite an earlier setback, which gives most cause for optimism. Looking at the way the economy works, it is almost impossible to have a sustained recovery if there is on-going negative equity and too much debt around the neck of the average person. In the US, the debt problem is sorted by non-recourse mortgages and the fact that people move about a lot. And, as the housing market stabilises, the negative equity legacy for those still in the same properties will ease.

The central role of housing in the economy was again reiterated by William Dudley, president of the New York Fed bank, who acknowledged some improvement in housing of late, but said, last week, that “credit availability remains “impaired” and argued that, overall, the pace of the broader US economic recovery has been disappointing.

He went on to say that the housing market is “a key impediment” to economic growth in US. But as we look forward, the key drivers of the housing market, income growth, employment and demographics are moving in the right direction.

However, this process of emerging from too much leverage, swinging to too much deleveraging and back to normal recovery has to be facilitated by economic policy. This is the responsible thing to do. Deleveraging is a long, slow difficult process as we know here and as the private sector pulls in its horns, unless the government keeps demand buoyant by spending, it’s hard to see how the economy can recover.

Contrast this American approach with what is going on in Europe. As noted, the Americans are putting growth first and worrying about austerity later. The fact that interest rates and long-term interest rates are at their lowest level for decades suggests that the financial market is broadly supportive of this stance.

If, for example, the dollar was about to collapse under the weight of printed money or the US bond market was going to fall off the much discussed “fiscal cliff’, bond yields would be much, much higher.

The bond yield or the long-term interest rate is only the short-term interest rate plus a risk premium for adverse future events. Obviously the general consensus in the US is that the government and the central bank are broadly doing the right thing in nursing the economy gently back to health.

In contrast, the EU, faced with broadly similar problems of too much inherited debt and consumers who are not spending, is opting for a policy of austerity first and growth later. This is forcing the EU economy into an entirely unnecessary recession. Policy is exacerbating the slowdown and in so doing practically guaranteeing the expansion of long-term unemployment.

When seen against the pragmatic discretion deployed by US policy makers, Europe’s rigid, ideologically-driven approach encapsulated in the “fiscal compact”, must seem like an economic suicide pact. Europe has 25 million unemployed and short-term interest rates in the core are negative. If that doesn’t scream at you the need for a fiscal expansion in the eurozone, I don’t know what does! Today, as the new president in Washington contemplates the future, he can at least be reasonably satisfied that the economy will be moving slowly in the right direction for the first time in five years. Is there any European leader that can similarly look forward towards what Churchill described as the “broad sunlit uplands”? Well who’s fault is that?

David McWilliams’ new book ‘The Good Room‘ is out now from all bookshops.

  1. Adam Byrne


    • GF

      I am not an economist, but have worked in Banking/Insurance for 20 years so have some idea of how it all works, but not the deeper knowledge I read from contributors on this wonderful site.

      So although I write the below in a tone that “I know everything”, I truly know I don’t and for the contributors on this site who know I have the below wrong could you let me know why (in a way that I will understand).

      Non-Recourse Mortgages would never have allowed house prices to get so high if there was a law stating that ALL principle private residences must be Non-Recourse Mortgages.

      My reasoning here is that the banks, knowing they are taking the bulk of the risk, would not lend so much (i.e. €420,000.00 on a two bedroomed apartment that is only 525 square feet with a management fee of €2,400 per annum). They would be the entity that would incur the loss then this residence drops in value.

      They would also consider more closely the multiples of salaries (i.e. twelve times the joint salaries including bonuses and overtime). The banks would remove overtime/bonuses. The banks would reduce salary multiples. Thus the purchasers would have a smaller chunk of money to purchase the property and therefore the bidding wars would never have gone so high.

      I know people were buying “investment” properties and were getting hand outs from families but in principle this was only a small part of the house buying public (especially regarding the hand outs from families).

      My thought is that if a law was passed that all mortgages on principle private residents had to be non-recourse this problem would never happen again because the banks would lend more cautiously and thus house prices would not rise so extremely. I know there will always be bubbles but I think this law would ensure the next bubble was considerably smaller. And because a large proportion of the mortgages would be non-recourse people could hand back the keys and start again.

      Should we not be protecting future generations now by passing this into law? Or have too many powerful people got too much invested in property to allow this to happen (as I think it would drive down prices further if it was passed now, which in itself is worrying as it means banks are still over lending).

      What is a sustainable multiply of salary for a mortgage? When I worked in Irish Permanent Building Society back in 1993 it was 2.5 times the first plus once the second. Seems like a loan for a car these days. What is international best practice multiples and do the contributors on this site feel non-recourse mortgages would ensure banks would lend more prudently in the future? Or have I missed some basic economic principles?

      • astainexile

        You are so right but unfortunately with so many people struggling to hold onto their homes in negative equity but at least still having somewhere to live, this law would not be as favourably received as it ought. However, it is important to highlight this travesty of justice whereby people who cannot continue to pay their mortgages not only lose their homes but continue to retain the debt. This is not as widely realised a fact as some might think, as I have heard of many people who thought that by handing back the keys they were also handing back a property that would allow the mortgage lender to recoup the debt by selling on -NOT SO!!!

        • Adam Byrne

          Hand back the keys and tell them to stick their mortgage up their ass. If enough people do that, what are the banks going to do? Put tens of thousands of people in prison? I don’t think so.

          I’m sorry if anyone has to leave their home, but if you do, then give them the keys and tell them you are not paying a penny more on it. Then use your income on renting somewhere more frugal.

      • Adam Byrne

        Sound about right to me GF.

  2. Grey Fox

    The point that sticks out like a sore thumb is the difference between recourse and non recourse mortgages, this is the main issue in my opinion, this is not to say that if Irish mortgagors had the option to walk away from indentured servitude that they would, owning your home is a pre-programmed requirement in the Irish, we also have the major issue of Financial wrongdoing / recklessness which should not go unpunished so, maybe we in Ireland need a hybrid solution somewhere between Recourse and Non Recourse solutions whereby the Banks share some of the pain, in other words a re-evaluation of mortgages to reflect the true value of the properties they represent, this coupled with adjustments to loan terms would go a long way to making distressed mortgage loans good for the banks and keeping families in their homes. This, in my opinion is a fair solution although deep in my heart I really want to see the Banks totally penalised for their hijack of the Irish people and our economy but, the political will is not there for that and I doubt that will change with the yellow pack political parties we have in Ireland.

    • Grey Fox

      With reference to the end of my last comment, I will add, I shall continue to work to change the status quo with regard to yellow pack parties and to that end I would encourage readers to visit and read the post relating to Direct Democracy Ireland, the newest party in Ireland which will launch in Buswells Hotel next week, I believe it is a viable alternative if it receives the crital mass required, in the face of the current situation there is no reason why the Irish people would not look at any available alternative.
      It’s time to wake up!

    • Adam Byrne

      Nope, not a hope of justice for bankers (apart from a token prosecution or two). The politicians are in bed with them – best bum chums.

      The best we (or should I say ‘they’ – I have never had a loan in my life) can hope for is some sort of debt for equity swap as suggested by David and others.

  3. Born in the USA

    Actually, in the United States, residential mortgage loans are FULL recourse in 40 of the 50 States.

    And, for what it is worth, and I can explain fully if you would like, the Fed’s actions are very dangerous, emptying its bullets and making it unlikely they will be able to begin a cycle of leveraged growth again should a recession occur.

    The US made a big mistake; they should have brought back the Home Owner’s Loan Corporation instead of jamming people into high LTV low rate mortgages which will result in negative real returns and potentially massively negative nominal returns.

  4. Adam Byrne

    Max Keiser would be in complete disagreement with you David regarding the US currency and bond market. He repeatedly states that both will crash. As it is, one of you will have to be badly mistaken and which one should be revealed within the next year / 18 months or so.

  5. dwalsh

    I am obviously living on a different planet than David.

    In my world the American economy is not recovering.
    The American economy is dead in the water. It cannot recover.
    [using that word 'recover' in the sense of returning to the infinite monetary growth model of recent decades]

    How can it recover?

    How can aggregate demand, required for a real recovery, return to a nation that has off-shored its industrial base and exhausted domestic credit to bankruptcy?

    Also…the intention behind austerity cannot be recovery.
    That must be case; any thinking person can see austerity cannot produce recovery…in the sense of return to the infinite monetary growth model.

    What it can produce is massive national and global re-structuring.
    That is the real intent of our lords and masters.
    That is what it really says on the tin….for those not mesmerised by the opiate of mainstream media.

    • astainexile

      Concur! For more years than I can remember I have said that the combination of mechanization and cheap labour would mean a loss of quality and skills and a flooding of the market place with mountains of goods we do not really need. The recent decline in production in the world’s factory – China – will not concern them too much because they are winning the global economic war by investing in underdeveloped countries and thereby gaining effective control over these new markets for their products. In my opinion much cheaper and smarter than the American method of situating their bases all over world.

      • Adam Byrne

        Moral of the story: don’t buy crap, e. g. queue all night for the ‘latest’ iPhone (or what is, in reality, a re-issue with minor upgrades to boost Apple’s already overflowing (and greedy) coffers – a marketing ploy (brainwashing) which the proles lap up).

        As it happens I need a smart phone for one of my sidelines, but I always insist to whoever I am contracted with at any given time that they buy it. I am certainly not queuing or paying for it. It’s the little things that make a difference.

        • Adam Byrne

          The €500 that they have to spend on buying me a smart phone is €500 less of corporate profits – look at it like that.

          Mind you, with that particular client I boosted their sales by a grand a day, with said phone, so I guess it’s their customers who are paying for it really: is this a win-win-win situation?

          • Don’t buy crap. I can dig that Adam.

            Don’t shell out money on software development either. It’s all been done before and all you need to do is fit the pieces together like a jigsaw puzzle. Of course you may need to bring someone like me on board when the technical road gets rocky :-)

            It’s been a money racket for too long and now you can target any platform on the planet using free tools and a free operating system. Hows that for a freebie and a healthy business with zero start up costs. That is my route and I am taking it because I am very good at it and did my homework

            These M$ ‘Certified Partners’ need to pull their thumb out. I can write apps on my Linux box without the investment in the M$ tool chain

            Smart is what it is called. It is the losers who queue outside Apple and M$ stores at midnight who finance their billion dollar advertising budget. Crap products that cripple you for profit and finance these middlemen who are bullshitters

            Glad to know you are seeing results from your marketing skills. I am genuinely pleased for you and hope you flourish

            I am back into software development with a passion because I finally admitted that is where my talents lay. It is for intellectual stimulation only at this time but who knows where it will lead. To Lisbon I hope

            It’s all open source now and nothing can stopping it. Microsoft are seriously losing their way and Apple are getting their nipples chewed by Samsung in the mobile market

            But with billion dollar marketing budgets I suppose it would be possible for coprporations to convince the world that the moon is made of blue cheese

    • breltub

      I’ve gone through the comments, and there are all kinds of responses.
      So many different opinions.

      The only solution I can see is to force all of these opinions to converge on what I deem to be the best course of action for these individuals to take in the name of the common good, which I of course decide!

      That will bring us all around to the same way of thinking, and then no mater what, everything is improvement and progress when everyone thinks and works in the same manner.

      Yours sincerely,
      Ben, JC and Mario

  6. cooldude

    I really wonder where your great confidence in this supposed recovery in the US is coming from. The US has debt of $16 trillion and if you added in the unfunded social obligations such as medicare and pensions the figure is over $100 trillion. They are adding to this with an annual deficit that is approaching $2 trillion and are buying up around 70% of their own debt because the yield is way too low for a country that is basically insolvent and nobody else wants their bonds. This is direct monetization of debt and is generally seen in banana republics when they are on their way to a currency crisis which is usually followed by a bout of hyperinflation. It was the Greenspan policy of low interest rates which created the housing bubble which has caused havoc with their economy yet this policy which caused the problem is somehow going to fix it. I’m afraid not David and you are going to have to look a bit deeper at the real underlying causes of the fiscal mess that is the USA. You can start with the Federal Reserve Bank whose dual mandate when it was set up 99 years was to protect the dollar and to avoid high unemployment. The dollar has lost over 97% of it’s purchasing power in this period and if they added all the people who are longterm unemployed the rate would be over 20%. In other words they have failed and they should be disbanded. The only solution is to let the insolvent banks fail and start afresh with a new monetary system which is not as easily debased as this present system of unbacked paper. It is this system of centrally controlled banking that has failed and that will become very evident soon.

    • Adam Byrne

      cooldude, how do they buy up the 70% of their own debt? Can you explain briefly the steps involved in that? Thanks.

      • cooldude

        Very good question Adam. The Federal Reserve simply buys the government debt issued by the Treasury. Before 2008 this practice was rare but since then it increased to a figure of 61% for 2011. At that rate of increase my 70% figure is probably conservative as once this type of rot sets in in an economy it always grows rapidly as other countries shun the dodgy bonds. Here is a quote from Lawrence Goodman, a former Treasury official and current president for the Centre for Financial Stability “The Fed is in effect subsidizing US government spending and borrowing via expansions of it’s balance sheet and massive purchases of Treasury bonds. This keeps Treasury interest rates abnormally low, camouflaging the true size of the budget deficit.” So they in effect get a double whammy of monetizing their own debt and keeping interest rates artificially low. The only problem is that other regimes that have tried this policy such as Zimbabwe recently, Argentina in the 1990′s and the Weimar in the 1930′s all got a few unpleasant side effects from this policy of fiscal lunacy. But it will be different this time according to David’s mate Paul Krugman and there is nothing to worry about???? Somehow I’m not so sure. Here is the article with all the gory details

        • Tony Brogan


          Also the money used by the /Fed to buy the Gov. Treas. is printed out of thin air and added to the budget funds to spend and so is inflationary.

          • cooldude

            They don’t even go to the bother of printing them Tony they simply digitally create these new units of currency at zero cost. Saves money on ink and paper. The fact that these new units automatically lower the value of the existing units doesn’t seem to bother them. This is a slippery slope and has always ended badly in the past. Maybe things are different this time????

          • Adam Byrne

            Yeah, we all partied cooldude but we can now see the green shoots of recovery and there’ll be a soft landing.

            Comical Lenny.

        • Adam Byrne

          Thanks for the explanation cooldude, much appreciated.

  7. molly

    The USA has this Hugh mountain of dept and it is parking this Hugh mountain to one side and it seams like what they do next is one Hugh gamble ,surly the dept mountain is going to expand.
    Will this not make things much worse further down the road.
    The Irish government would surly follow this,if allowed by Europe or maybe if they can burrow money on the open markets.
    Ireland is trying to be something it’s not and why? Vested intrest ,the golden circle of the vested intrest will stop at nothing to protect what’s there’s past ,present ,future.

  8. Mr McWilliams, on your vision of the eurozone (never say ‘Europe’) I agree, but ‘American economy moving slowly in the right direction’? Are you kidding me?

  9. bonbon

    NY Gov. Cuomo now thinks it is time to look at storm surge barriers, but Mayor Bloomberg refuses to “stop the waves”. European firms such as Holland’s Arcadis, and its UK subsidiary Halcrow presented plans in 2009 for the CH2M plan, refused then. Halcrow worked on a similar barrier in St. Petersburg, Russia, completed in 2010.

    We have 2 transatlantic examples of the self-destructive suicidal criminal negligence of the physical economy over decades. Sandy was a man-made disaster same as New Orleans! Here is the other :

    It’s Economic Reconstruction, Stupid!

    Nov. 7, 2012 (EIRNS) — German industry orders fell hard in September over August by 3.3%. For exports to the Eurozone, the figure was even 9.6%! Germany exports a total of 40% of its goods to the Eurozone. Especially hard hit is the auto industry, followed by the chemical and steel industries. Today, the government economic experts council was to present their economic outlook report.
    Thus, it is absolutely clear, that our policy of economic development, especially for Southern Europe and the Mediterranean, has to be on the table now, along with a final {coup de grace} for the insane euro-dictatorship.

    Our policy includes a Marshal Plan for the Med area, including the Mezzogiorno and Messina Straits, refused by Monti, but just this week China sent a memorandum with an offer to do it (conditions not known at this time).

  10. D15 Taxi Driver

    I really wish Mr David McWilliams assessment of US growth (07.11.2012) was well founded. Alas I fear otherwise. He, together with Economic and Political Establishments everywhere are determined to adhere to the belief that this present crisis is fundamentally due to Fiscal and Bank failure. This is a flawed analysis. It is certainly true there are enormous Financial and Debt difficulties and that Bank Abuses and Miss-Management contributed greatly to the crisis; but these are symptoms rather than the root cause of the calamitous situation of today.

    The Economic and Political Lobby appear to believe Economic Activity is centred round money; they concentrate on monetary matters of Debt and Bailouts and Bank Restructuring and Austerity while they ignore what has happened to the very core of all Economic Activity. Production is the prime mover of all Economics and Production has been utterly transformed in recent decades. The historic struggle to provide enough to satisfy Human needs has been resoundingly won. The insatiable appetite of the Consumer Society can consistantly be filled to excess. Modern problems relate more to not being able to consume all that can be produced rather than not being able to produce all that is needed.

    This turnaround has enormous implications for Economic Philosophy; the old Economic Rulebook has no solutions for dealing with such an unprecedented situation of surplus. To compound the difficulties, work, which was historically the prerequisite to production, has been greatly diminished. Unemployment must increase where work is diminished unless there is a total rethink of the work/jobs relationship. Growth which was the panacea to cure all Economic ills is greatly impaired by the fact that most Developed Economies have already grown to near saturation point; there just is not much more need be done to satisfy their infrastructural needs or supply their requirements.

    Efforts to emerge from this so called “Recession” either by Spending (US) or Austerity (EC) are futile as neither process addresses the core problem. This is not a time of “Recession”; it is the dawn of an unprecedented period in Human History when all needs can be supplied in abundance and people do not have to work so hard anymore. The extraordinary advance of Technological Ability while being embraced and enjoyed by all, is denied, ignored and unmentioned in the Economic Debate. We are just not prepared to embrace what is really a very good and optimistic situation.

    Mr Obama is right when he proclaims “the best is yet to come”. It most certainly is as we enter very best time the Human Race has ever experienced. But only if Establishments realise that their great problem is accepting and adapting to phenomenal Technological Success where everything but work is in plenteous supply. Present remedial policies are similar to medieval medical practice of treating skin rash with multiple rubs, poultices and processes while totally unaware of the instigating virus fermenting within. And present Economic remedial action has every bit as little hope of success.

    Like Reply
    14 hours ago 7 Likes

    Excellent post. I totally agree that the fundamentals of production and demand are not given enough attention, and are often glossed over. I hadn’t really noticed this trend until I read your post. Maybe people are afraid of what they might find when they examine these issues more closely.

    I think the risk of production overtaking demand is very real, especially in certain sectors, but also maybe as an overall trend. Most people in modern countries live very comfortably, and are maybe not as motivated to work hard or trade as much as they would have had in the past. Products that were once luxuries 20 years ago are now cheap and considered necessities, e.g. a car phone was once a status symbol!

    I would predict that the demand for new high-tech products (especially medical tech) will remain strong, while more basic or traditional skills may suffer further devaluation.

    This may cause some political unrest. I agree that the overall standards of living are increasing dramatically, and will probably continue to do so, but the incomes of people with highly valued skills will be seen to pull away from the rest, and this could cause some bitterness. 20 years ago nobody cared that they couldn’t afford a mobile phone, because most other people couldn’t either. Now people feel impoverished if they can’t buy smartphones for their kids.

    Like you, I think the massive increase in production of extremely high value product and services (medicine, technology, etc) is a very good thing, and we should be optimistic for the future.

    Like Reply
    10 hours ago in reply to penury 2 Likes

    David David David. There is some fine Central Bankers logic. The USA is borrowing over 3.5 billion a day just to pay for ‘day to day’ running costs of its liberal nation. By borrowing what I actually mean is monetising pre-existing debt and borrowing some more. It has to do this now because the prudent savers of china no longer want to be involved in the largest ponzi scheme since John Law issued shares in the Mississippi Company. This inflation of the money supply that we have had since the dot com crash is distorting the open market, making people on low wages poorer and destroying peoples pension funds. The Dollar is the world reserve currency since 1971 but now that is only a name. Some of the largest trade deals in the world are now being done in gold as the emerging power houses of global trade seek to abandon the dollar and use a more stable form of money.
    Ever since Nixon installed the new fiat dollar, American industry has been wiped out and by the time George W came to power the only export the USA had left was Dollar bills. Countries were very happy to play along with this charade as it meant they could lend to american consumers and they would then provide them with jobs by purchasing their products but this is all about to end. The era of borrow and buy is going to be replaced with save and invest. The only thing holding it back at the minute is the ECB and the FED who are keeping rates too low in the hopes that cheap credit will make the hungry consumer eat more.
    Jobless numbers in the USA have dropped below 8% for the first time in four years last month but this too is false. It only counts people who are seeking employment and many have given up on the american dream and will much like Ireland have a mass exodus of it indebted youth to far away lands in search of a better life.
    Obama has bailed out Detroit at a cost of half a million dollars per job saved. He has installed the NDAA which means that he can now arrest detain and even kill people without a court ruling. It all sounds a little to much like Hitlers Germany or Mussolinis Italy for my liking.
    You carry on with your dreams of economic growth in the states if you wish. I however draw on my knowledge of history.

    Like Reply
    1 day ago 13 Likes

    Absolutely correct Owen. The normally fairly grounded Mr McWilliams has gone right off the rails on this one. The US economy is irredeemably bust, and adding $6 trillion to the national debt over the past 4 years has achieved nothing other than to mask this fact. Changing the way GDP, Inflation and Unemployment are calculated has also painted a pretty picture, but has not, of course, changed the underlying reality.

    As to this ‘Deleveraging’ nonsense, I am amazed that so many people include Mr McWilliams repeat this old canard ad nauseum without checking the (easily available) figures produced by, among others, the New York Fed. These show that while there HAS been a net reduction in mortgage debt since 2007 of $800bn, there has also been $1.2trn of mortgage writeoffs over this period. In other words, far from paying down debt willingly, the only reason net debt appears to have gone down is because of foreclosures and debt writeoffs. Outside of that, consumer debt has actually risen by $400bn. Americans are too broke to pay down debt – they are simply defaulting on it.

    I think the Republicans dodged a bullet by losing the election this week. Obama and the Democrats are sailing into a sea of pain the likes of which the world hasn’t seen since the 1930′s and this time they won’t be able to blame the mess they inherited from the other guy. Not that a Republican government would have been in any better position – the events now unfolding are too big and powerful for anyone to control or fix.

    What happens once people in Europe, the US and indeed China realise that, despite all the promises, their politicians are powerless in the face of a generational balance sheet recession to which there is no fix? The Greeks in Syntagma square last night might be showing us the future.

    Like Reply
    12 hours ago in reply to owen_neary 4 Likes

    ‘QE’ is not a cure for a sick economy. The evidence from Britain is that ‘QE’ has created an inflationary recession, with consumers retrenching from discretionary spending as they struggle to pay ever rising food and energy prices. The only beneficiaries from this ‘QE’ policy have been the property investors who caused the economic crisis in the first place; their value of their investments has not been corrected as it should have done in a balanced economy.

    Like Reply
    1 day ago 12 Likes F

    On the topic of growth the Germans and British are now gunning for our corporate tax rate. I have always said that making a low corporate tax rate the cornerstone of Irish economic policy is huge Irish mistake. These firms are going to be reigned in by both Europe and America and the impact on the Irish economy and elusive growth is going to be gut wrenching.

    Like Reply
    1 day ago 10 Likes

    • Shush

      I too was surprised at your article David. I was about to craft out a response but Owen Neary and Au Trader beat me to it with their articulate analyses. I attended a couple of sessions of Kilconomics in 2010. It was there I came across Peter Schiff for the first time. I recommend his simple common sense view of economics (he does a totally unscripted 2 hour radio show daily). As he commented recently when a Keynesian economist was telling him about the beneficial affects of Hurricane Sandy….. “When people studying economics have the last ounce of common sense squeezed out of them, then they get their degree”!

    • Tony Brogan

      Ditto all the above.

  11. bonbon

    Here is what is really going on right now in the US and EU.

    Austerity and Hyperinflation

    Nov. 7, 2012 (LPAC) — While preparations for war on Syria abruptly accelerated with Obama’s re-election, so did Nero’s preparations for a confrontation with the lame duck Congress over drastic austerity.
    The Washington Post Wednesday morning reported Democratic Congressional sources to the effect that Obama would confront the House leadership on a take-it or-leave-it policy of entitlement, defense, and domestic cuts combined with selective tax increases. The party sources said Obama was ready to veto anything else that came from Congress intended to avoid “automatic” sequester and across-the-board tax hikes (the so-called “fiscal cliff”). He will threaten to let these destructive sequester cuts and taxes go through and deal with the next Congress.
    Obama, as he told the Des Moines Register in what he thought was an off-the-record interview in late October, wants the “go big”, $4 trillion austerity deal he couldn’t ram through in Summer 2011, modelled on the Simpson-Bowles “Catfood” Commission. He is now letting it leak that he will go to a full budget and debt crisis if necessary to get it. Other sources speaking to Senate Democrats say they are prepared for this and think the Republicans will capitulate to a quick deal on these lines. Obama’s policy will be that this is the {only} deal, and otherwise, over the “fiscal cliff.”
    In fact, both the Supercommittee’s ill-favored “fiscal cliff” and the Catfood Commission-type “go big” deal mean cuts in defense and domestic programs, and more taxes. The difference is that Obama’s go-big deal involves Medicare and Medicaid (if not Social Security) cuts as well.
    The labor movement, having just mobilized a lot of money and manpower to support NerObama’s re election, is now preparing to mobilize a rear-guard fight against his austerity policy.
    The sharp drop in stock markets on Wednesday appeared to be reacting to the possibility of a December debt crisis over Obama’s austerity plans. But another factor was the sad new reports on the European Union economies. The European Commission today gave up its claims of growth for the 17-nation Eurozone and 27 nation EU in 2013, which it had been “forecasting” at 1.0% and 1.4% respectively. Both will stay in recession, and unemployment continue to spread until atleast mid-2014, under the EC’s new report. ECB chief hyperinflator Mario Draghi spread alarm by stating the view that the German economy is being dragged under by the Eurozone’s collapse tendency.

  12. StephenKenny

    Assuming that this is correct, I hope that this recovery is an improvement on the last one, that turned out to be a property bubble, or even than the previous one to that, which turned out to be a stock market bubble (Enron, WorldCom, dot com, ) , or even the one before that (financial deregulation – Insider trading, junk bonds, etc).

  13. D15 Taxi Driver,
    The concept that production has overtaken demand is an extremely interesting one. IMHO it is not given the serious consideration it deserves.
    Many prattle on about consumer demand so much and yes when I see people queueing overnight for the latest I-gadget it does make me wince in disbelief. However these are merely discretionary demands and not needs at all.
    - The things we mostly need in Western economies are, at the moment, in plentiful supply (That’s not to say we should take them for granted!)

    It’s now just become a matter of scale -

    Public or Private
    Beer or Bollinger
    Lada or Lambourghini
    Canoe or Yacht
    House or Mansion
    Low D or HD-3D Plasma
    2g or Smart
    Cinemaplex or Opera
    BallyB or Bali

    I am lucky because in material terms I can secure what I need.
    And in the really important stuff – I’m spoiled rotten.

  14. michaelcoughlan


    I must be on a different planet to you David. This article is like the captain of the Titanic saying if we go faster we will get to America before the boat sinks!

    The article is pure nonsense. The reason the US gets away with printing more money and not having to deal with the negative consequences is because the buck is the worlds reserve currency backed by the US military.

    America on the mend my arse!

  15. george

    The USA and the European Governments are socializing debt, when we all know that the only way forward for the benefit of the Society, would be to force the Banks, to fix the problem they have created. If you rob a bank and you are caught, you end up in jail. But if the Banks rob entire Nations as it is the case, it’s wrong that the ordinary citizens are expected to pay.
    Banks have the real power, and politics doesn’t make the slightest difference. Most of the politicians, apart from posturing, are afraid to fight them, and unwilling to change the status quo.
    It’s fine to have freedom of expression and protest, and to talk about Parliamentary Democracy; but in reality given the current circumstances, we are in a dictatorship, where few powerful groups, decide the future of most of the people. Our tax exiles (11.000 of them) laugh at the concept of justice, and democracy has less real value, than the US dollar or the euro. Iceland seems to be the exemption to the rule, but very conveniently is being ignored.

    It’s time for the people of Ireland an the rest of Europe, to show solidarity with the people of Spain, who at their protest marches are being brutally beaten by their Police Force, under the instruction of the Spanish Government. That is what the Financial Elites are ready to do against the rest of us, so our only hope is to have a synchronized protest plan, among all the people of the European Union, with a set of demands. It seems absurd to think that the economy can be fixed exploiting the population of entire nations, to benefit the frinancial culprits of this crisis. It’s fair that if they’ve created the problem, they should bear the cost of fixing it.
    Ordinary people like us, independent political activists, journalists, and others, should think that: THE BEST HOPE IS THAT THE PEOPLE OF EUROPE WILL UNITE WITH ONLY ONE VOICE AND DEMAND JUSTICE!

    • dwalsh

      Absolutely right George.

    • Adam Byrne

      You are right of course george, but there have been more ‘sets of demands’ produced on this site in the last four years than I have had hot dinners in the same period. That’s not to mention other like-minded forums, blogs and sites in Ireland, the UK, Europe, the USA and beyond.

      You can sing till the cows come home george and draw up lists of injustices as long as your arm. But like you said, start organizing, or protesting or whatever, and pretty soon you’ll be getting a baton over your head.

      So what to do? My philosophy in life (or part of it) is to steer well clear of politics. All I can do is live a minimalist life and try to set an example for others, as well as keep talking and trying to influence people in that manner. First thing to tell people is that they don’t need all that rubbish that they waste their money on and there’s more to life than vacuous pastimes. At least books are free (libraries) and there’s more learning in them to fill a billion lifetimes.

      One day there might be a widespread awakening. I wouldn’t go near politics with a barge pole – it’s EVIL. You’ll end up getting corrupting going that route. Live by your own rules and try to do unto others and you would like done unto you. It’s hard at times because we all have to look after number one – but what other option is there?


      • Adam Byrne

        getting ‘corrupted’ I mean.

      • george

        Adam yours is a very valid point of view, and very interesting philosophy of life!
        My thinking behind the idea of an “EU CITISEN FRONT”, is apolitical in the conventional sense of the concept. But I see the protests in Greece and in Spain, where I was shocked at the brutality of the Police repression, and I think the only hope is that European Citizens will organise peaceful protest marches, in every important city of the Union, the same date at the same time; demanding the Governments and the EU authorities that the Banks and other Financial Institutions, bear the cost of the problem they have created.
        And if that doesn’t bring any positive results, to be followed by a General Strike in every Country of the EU, at the same date.
        At the moment they can push ordinary citizens into a corner, because we are not united throughout the whole of the EU; and regional protest marches are easily dealt, and portrayed in the media as isolated events. What will be the result if it becomes a massive protest throughout the whole of the EU, where pensioners, workers, unemployed people, students, self employed people, nurses, teachers, and others, will march in groups, ( in an Olympic Parade’s Style), and every group showing the same banner: “MAKE THE BANKS PAY FOR THE MESS THEY’VE CREATRED”?

        • Adam Byrne

          Fair enough george, lets see if it happens but I will be brutally honest and say that I won’t be the first on the street but probably not the last either.

  16. rebean

    I have just had an interesting thought on some of the comments above . Politicans and bankers seem to be the main cause of our ills. How much money do they really need ??? I was thinking if we could sit down with all these people and actually ask them How much money do you actually want to go away and allow somebody else to try and fix the mess we are in. It would be cheaper in the long run to actually remove the gobsh*tes from the equation. Real sustainable growth will be found in increased food production,wind energy to power cars,properly insulated well built houses,quality healthcare that is reasonably priced etc etc.

  17. 50 million are without medical insurance and the official umenployment rate is not under 8 percent as official figures spew. The country is 16 Tn in debt and probably double that

    Matt Cooper is in New York licking ass and McWilliams is doing the same here. This is Alice in Wonderland fascist propaganda and only an idiot could read it without laughing. Especially when most of article paraphrases their heroes. Boy you Irish really need to cop on. You are being doped and not just with fluoride

    The yanks are committed to increasing defence expenditure as they have done over the past four years and as DMcW said last month ‘the Iran business will be sorted out in the new year’

    These people give me a chill. They are determimed to prove that wars and suffering are worth it just to prove a point of ideology. They are sick very puppies and have to be stopped

    It is your duty to stop and question these false heroes. Especially when the blood starts flowing in a poor country far away from your green pleasant island. But then again it might be financially beneficial to conventiently turn a blind eye if that blood flow will guarantee your pensions

    • whatamess

      “Matt Cooper is in New York licking ass and McWilliams is doing the same here. This is Alice in Wonderland fascist propaganda and only an idiot could read it without laughing.”

      +1 !

  18. ME


    Is it April 1st? You don’t honestly believe that the US economy is recovering, surely. Have they got to you? Do you think the Dow or S&P 500 is going up? Look at them in terms of Gold or Industrial Metals or Commodities or Agricultural, Crude Oil, they have been crashing since the year 2000. It only looks like increasing in terms of dollars because of inflation due to money printing.

    In the US, real unemployment from shadowstats U6 is 22.5% and rising. Real Inflation is 10%. All the money printing will cause much higher inflation. if not hyperinflation, coming soon.

    The banks have not cleaned up their balance sheets! They are all insolvent, bust, toast. Bernanke is helping them now, by buying the crap on behalf of the US tax payer – who will no doubt have to pay for this bailing out, yet again. The banks can still show all the derivatives they bought at the value they were, when they bought them. If they were forced to “mark to market”, like they’re supposed to, that would show they are all bust. Which is why the all Govts cant allow this, so they let them continue the LIE. There’s about $1,500 Trillion derivatives kicking around. The banks and Gov’ts are off in fairy-land.

    The US bond market doesn’t fall of the cliff, because Bernanke is pretty much buying them all. What do you think would happen if the FED stopped buying? – It would be game over (and fast)!

    I don’t know who said it, but if printing money is a solution – then why isn’t Zimbabwe the wealthiest Country on the planet? (100 Trillion Dollar bills).

    Doesn’t sound like a recovery to me. Those green shoots from 4 – 5 years ago are a bit dry and withered now!

    From your “Punk Economics” series – you were on fire, brilliant. That’s why I cant believe you just released this article. Did they got to you? Or is this a test?

    Sorry mate – you’ve fallen out of your tree.

    • Tony Brogan

      Davids opinion piece is drawn from the opinion of a few wealthy contributors presenting at Kilkenomics.
      They stated a similar opinion.
      These contributors were all sponsors of Davids career or worked with him in a past life and thus weild great influence.
      David’s central bank upbringing has its consequences too.

      • When a man accepts money from hidden sponsors he becomes their prisoner. When he is bought he knows he has sold his soul at night but dons a jolly looking face from the jar by the door in the mornings. Provided that he has a soul at all

        Transparent, predictable and fake

        • whatamess

          it doesn’t really matter about “hidden” sponsors or well promoted sponsors does it… DMW is a business man and as such understands that it’s a case of their conditions and his concessions and finding a middle ground where everybody can win …that’s ‘real world’ business …nothing to do with him becoming their “prisoner”–that’s just waaaaay too strong for me…I haven’t DMW on some pedestal from which i’m waiting for him to fall… DMW hasnt all the answers…not a chance !

          “Provided that he has a soul at all” –simply uncalled for and i’m generally a big fan of Pauldiv contributions…i give you the benefit of the doubt and say that this article REALLY irritated you as it’s SO out of touch with reality and PRO U.S.A!It’s a stinker of an article no question,but these vicious personal attacks … gimme a break man !

      • ME

        Tony, Maybe time for David to lose his chains and become a free man?

  19. In the main Davids blogs allow we non-economists to blather away postulating all sorts of ideas. And in the main those postulations are neither here nor there.
    This particular piece nails the mans flag to the mast. Without pretty competent economic knowledge it is not possible, IMHO, to comment.
    It is a very clear call which I hope is right for the good of mankind and in which I hope that Europe gets away from dogmatic, self serving Furrylugs economics.
    No more Hairy Ears.
    Europe is presiding over the destruction of a whole generation.
    Old people in charge making decisions who remember the worst War ever, precipitating another one, worse again.

    • cooldude

      Of course it is possible not just to comment but to pick holes in any flaws. This attitude that keynesian economists and bankers know best is the one that has got us into this mess. The idea that the situation in the US is better than Europe is flawed and will be clearly exposed in the coming years. To find a solution to a problem the first thing you need is a clear idea of the real causes of the problem. That is where this blog has to go if it is to be relevant.

      • bonbon

        But as DMcW says we (all) disagree on the cause. Neither the Keynsian, nor Austrian schools (peas on a pod) have the slightest inkling what economics is all about, both being committed monetarists (of fiat or metal varieties). Even MK pursues the legal/decadence CSI approach, but there is no scientific principle (except justice of course) of economics discussed.

        Of course these two siamese (Keynes and Austrian of the London School of Economics) twins are not the only totally and utterly lost, most of the population is too, and politicians express this exquisitely.

        Look at Mayor Bloomberg of NY – we should not build storm surge barriers to stop waves!” That is the mindset, along with GoldmanSachs praising the economic value Sandy delivered. Most cannot even see what’s wron g there.

        • cooldude

          The usual bullshit from Mr Bonbon. This problem was clearly identified by Von Mises (famous Austrian economist) over half a century ago. Increased liquidity which comes from money printing and not savings ALWAYS leads to asset bubbles and distortions in the market. When this is compounded to the nth degree by repeated attempts to increase liquidity as present you have a situation where the only way you can stop the inevitable bust is by massive injections of new money. It’s a bit like drug addiction and it ends the same way. The economy either voluntarily withdraws from the easy money or it goes through a currency crisis, usually in a bout of hyperinflation, which forces the economy back to a less elastic and usually a commodity money supply. So Bonbon as usual you are wrong in confusing Keynesian economics, which is based on a very elastic and constantly expanding money supply with Austrian economics which is based on a commodity based money supply, which by it’s very nature is difficult to debase. In fact the two schools are like chalk and cheese but somehow through both your ignorance and your pseudo intellectual bullshit you keep getting confused between the two. Chalk and cheese and don’t come back with one of your pseudo intellectual references to the “British Empire” Either debate the causes of our problems or stop pretending you are some kind of intellectual wizard who doesn’t have to bother with the nitty gritty of proper debate.

          • Adam Byrne

            How do you ‘voluntarily withdraw’ from the easy money if you are already up shit creek without a paddle?

          • Tony Brogan

            Hello Adam
            Stop spending and pay off the debt

            Stop spending and make a deal with the creditors for an orderly payment of debt, usually cents on nthe dollar, pennies on the pound.

            Stop spending and declare voluntary bankruptcy and drive a deal with the creditors

            Give up spend all you can in a last blow off and be declared bankrupt and a ward of the estate.

            Oh yes get bailed out by a relative, win the lotto, inherit a bundle.

          • Adam Byrne

            I don’t mean individuals Tony but I take your point. I barely spend myself. Kilkenomics is my largest yearly expenditure.

          • bonbon

            Debate is not possible is one loses it all the time. If you were so sure of Von Mises and Hayek there would be no need to resort to table thumping.

            The is disagreement, and evidence why. There is deception, most people no see that and trust nothing.

            Hayek’s deception is indeed very cunning (nudge, wink), but in the end puerile. I have great fun pointing this out. Distance from Hayek, Mises is highly recommended.

            Make my day!

  20. redriversix

    Good morning

    I could not disagree more with David this morning about this Article and I am curious as to how you came to the conclusion that the U.S is recovering..?

    I know hopeless addicts who have a better chance of Recovery than the U.S.

    I respect you David and was very sorry I had to miss Kilkenomics…..But America RECOVERING ?!!!

    C,mon !!

    I will post more later

    Have a great day

    Barry [RR6]

    • molly

      The country is awash in wealth and cash. It’s just that it’s not in your hands. It has been transferred, in the greatest heist in history, from the workers and consumers to the banks and the portfolios of the uber-rich. Is this USA or IRELAND ?

  21. Vortex Thought

    This is a hole .

    Dante’s Inferno gave some heat .

    Is that all the choices we have left ?

  22. NeilW

    “Obviously the general consensus in the US is that the government and the central bank are broadly doing the right thing in nursing the economy gently back to health.”

    Not obviously at all. The underlying assumption there is that ‘markets’ set the interest rates.

    They don’t in a floating exchange rate non-convertible system.

    So you can draw no conclusion other than the Fed wants interest rates to be low. And therefore they will be low.

    • Tony Brogan

      “So you can draw no conclusion other than the Fed wants interest rates to be low. And therefore they will be low.”

      Chris Powell from GATA coined the phrase, “there are no free markets anymore”

      In order to obtain low interest rates the central bank must flood the world with more currency.
      At some point people will no longer want this devalued currency and its value will plummet.

      Hello hyperinflation and depression simultaneously.
      There is no recovery coming , only destructive depression and martial law.

      • bonbon

        There never existed for one moment any “free market” anywhere – it is a fantasy of Adam Smith. Attempting to impose one by force (as both Keynes and Hayek recommended) led to the mess.

        To have a monopoly on the future (as you claim), is quaint. Right now highly unpredictable things are going on. Make no linear extrapolations.

        • Tony Brogan

          Incorrect, free markets are all over the place on a day to day basis. It is those of a national im oert which are adjusted and controled by the state and so no longer work.
          The basic problem is the uncuppling of the world economies from any restriction on the production of money. The advent of the central banking system and their domination of the politicians has resulted in a flood of currency that has distorted every market and created the debt based credit expansions followed by the inevitable bust, credit contraction and depression. Long foretold by those paragons of virtue the Austrian school of economics and nobody else.

          As a statist yourself you have no understanding of how a market works or why it should be, preferable to your 5 year plan. all 5 year plans have failed to achieve their aims.

          • bonbon

            The Austrian School, a “bedrock” for some posters here, is simply that, a rock. There is no evidence of any economics there whatsoever. Of course they do not have the monopoly on incompetence, or more correctly deliberate deception. And Hayek praised to high heaven (or low Hell in his case) Bernard Mandeville’s ultimate deception. I can quote that exact statement anytime.

            Basing predictions on the bedrock of deception is bound to lead to very embarrassing denouement.

            We face deception from almost every EU decision, statement etc. To counter that with a very cunning deception is de-rigor Empire.

        • whatamess

          “Make no linear extrapolations”

          i like it ;)

  23. DC

    David is obviously still caught in the nether world of Kilkenomics (he is defintely having a laugh with this one!)

    Explain this

    and have a listen to this

    The US is on course for another recession in 2103,

    HFT activity has skewed the stock market out of all recoginiton (p/e ratio, risk , profits etc – meaningless). The Dow Jones and S&P are at historic highs and are heading for historic Falls.

    Channel stuffing is rife across all manufacturing sections.

    Housing recovery – where ????

    Student loans – the next bubble to pop.

    pensions funds that cannot meet their present commitments, let alone future ones.

    Obamacare – that will add scores of trillions of liabilities to the Govt debt load. (with the addition of higher taxes- yeah thats a real growth promoter)

    Define Growth – does it mean the repatriation of jobs to the US whereby people will work just to live on a minimum wage?

    Lets have a look at gdp versus debt for the US

    Or the Fiscal cliff, or Ben Bernanke money printing machine.

    The simple fact id that the US and EU are two sides of the one coin – living beyond their means, with too much obligations and not enough revenue.

  24. MIKOD

    Morning, This is my first post. I have been reading David’s articles for a number of years now without ever feeling the need to comment until now.

    David, do you honestly believe that America is recovering?

    China is buying oil from Russia and has put in place a new trade agreements with a number of other major players such as Japan. For the first time in their history they are buying oil and other goods using gold and not the American dollor. Where will all these surplas dollors end up? I reckon the will flood back into America over the next 3 to 12 months. This together with QE(to infinity – 40bill a month for “as long as it takes”)3 will ensure that the country is awash with dollars, thus significantly devaluing the currency, causing inflation and a prolonged period of depression. I fear that paper money is dying in America right before our eyes. Silver and gold to continue to rise but at an even quicker rate in the not too distant future.

    Just a thought but needed to get it out there.

  25. Jaysus,

    Hold your horses there lads!

    All the article is saying is that the US economy was being nursed back to health after nearly been destroyed by Bush/Greenspan/Wall Street. The palliative is low interest rates and expansionary fiscal policy. And I don’t think rates are being kept low by the Fed as much as they reflect the “the liquidity trap” which is driving down the price of money. Savers mightn’t like it, but there it is and the fall in the US current account deficit suggest that the US is financing more of its own largesse than used to be the case.

    Now I am aware of the Shiff arguements and its not just Peter but many others and they are very valid. You forget that it was me who invited Peter over to Kilkenomics a few years so that his views could be heard in Ireland, so I am an admirer. That said, I think the bond market is telling me something else, but as you know and that is why the site is so vibrant, I don’t and nor does anyone have the monpoly on the truth!



    • Tony Brogan

      David there are no free markets anymore. Those who think there is a market discoery price action taking place will be sadly deluded into making faulty investment and business decision resulting in a significant misallocation of capital. this is an enfficient and even wasteful economy that will cause failures and bankruptcies.

      The bond market is totally controlled by the Fed who monetize the government debt by buying all the unpurchased bonds. This buying is done by surrogatedto give the appearence of normality.
      in the open market the actual inflation rate of 8-9% would be reflected in the bond rates whose interest rates shouls be closer to that 8% figure.

      Markets always overpower rigging in the longer run and so we have the mother of a bond bubble to yet burst to the detriment of millions. Think of your pal at Pimco with 1.3 trillion dollars trapped in bonds.

      If you want corroberation of this contact Chris Powell of He will point you in the direction for the legitimate information. To not follow this is to be derilict in your duty as a widly followed commentator who this time I am afraid is grieviously wrong in your opinion on the US economy.

      If you find that my information is not correct I hope you will inform me and I will duly appologise. If on the other hand you discover it is correct you will go down as the guy who warned about the impending bond collapse.

      Best Regards

    • paddythepig

      Don’t forget Clinton. His contribution to the problem was even greater than bush.

      • Colin


        How is it that President Blowjob doesn’t get any flack? How does President Wet Cigar is free from blame?

        Because he’s a lefty liberal.

        • bonbon

          That POV displays considerable laziness. Laziness is no excuse for not knowing what is going on.
          T bring you up to date here is a nice starting point :

          At that website much can be found not only about President Clinton mistakenly supporting Obbama, but Hilary doing extremely dangerous things right this very moment.

          As I quote Einstein above, never stop searching.

          • Colin

            In 1994, the Clinton administration pushed through some fundamental changes to the Community Reinvestment Act of 1977. The goal of these changes was to make sure that banks were “serving low and moderate income geographies” and making sure that these banks “economically empowered persons of low and moderate income”. Regulators were then given more power to punish banks that did not comply with the new rules These changes led directly, I believe, to the explosion of subprime mortgages and contributed heavily to our current financial debacle.

            The changes did two basic things. First, the government changed the measure by which the regulators decided whether a bank was in compliance with the act or not. Prior to 1994, the ratings were determined in large part by what efforts banks were taking to reach into these neighborhoods — what advertising they were doing, how many bank branches they opened, what sort of outreach they made into offering loans and mortgages. The new rules made the rating dependent on outcome-based numbers — how many mortgages were signed, how much money was loaned, and so on. Those numbers were broken down on racial lines, as well as by neighborhood, and by financial status. In other words, for a bank to get a good rating under the CRA it had to actually start writing mortgages to low-income lenders instead of simply offering mortgages and advertising its services. This was not merely a matter of paperwork. As the Comtroller said in 1994, non compliance would bring out “the full panoply of all our enforcement armorarium”. In other words, the government had a couple brand-new hammers and they intended to use them if banks didn’t make low-income loans.

            The second thing that happened is that the Clinton administration made it easier for groups to make complaints against banks for perceived under-performance. That put an immense amount of pressure on banks to cut deals with largely left-wing political groups who them turned that money toward more advocacy and dodgy loans. As a rather prescient article in the City Paper put it:

            Crucially, the new CRA regulations also instructed bank examiners to take into account how well banks responded to complaints. The old CRA evaluation process had allowed advocacy groups a chance to express their views on individual banks, and publicly available data on the lending patterns of individual banks allowed activist groups to target institutions considered vulnerable to protest. But for advocacy groups that were in the complaint business, the Clinton administration regulations offered a formal invitation. The National Community Reinvestment Coalition–a foundation-funded umbrella group for community activist groups that profit from the CRA–issued a clarion call to its members in a leaflet entitled “The New CRA Regulations: How Community Groups Can Get Involved.” “Timely comments,” the NCRC observed with a certain understatement, “can have a strong influence on a bank’s CRA rating.”

            The Clinton administration’s get-tough regulatory regime mattered so crucially because bank deregulation had set off a wave of mega-mergers, including the acquisition of the Bank of America by NationsBank, BankBoston by Fleet Financial, and Bankers Trust by Deutsche Bank. Regulatory approval of such mergers depended, in part, on positive CRA ratings. “To avoid the possibility of a denied or delayed application,” advises the NCRC in its deadpan tone, “lending institutions have an incentive to make formal agreements with community organizations.” By intervening–even just threatening to intervene–in the CRA review process, left-wing nonprofit groups have been able to gain control over eye-popping pools of bank capital, which they in turn parcel out to individual low-income mortgage seekers. A radical group called ACORN Housing has a $760 million commitment from the Bank of New York; the Boston-based Neighborhood Assistance Corporation of America has a $3-billion agreement with the Bank of America; a coalition of groups headed by New Jersey Citizen Action has a five-year, $13-billion agreement with First Union Corporation. Similar deals operate in almost every major U.S. city. Observes Tom Callahan, executive director of the Massachusetts Affordable Housing Alliance, which has $220 million in bank mortgage money to parcel out, “CRA is the backbone of everything we do.”

            It’s not a real mystery to see what happened next. Lending institutions, under the gun to give out loans, started extending loans to people who would not have qualified for them otherwise. Those loans, called subprime because they are made to people who are not prime credit risks, carried higher interest rates (because the lender needs to make sure that it makes money out of a loan that is far more likely to go into default) and other costly attachments that mitigated the risk to the lender and the people whose money the lender was using for these loans (i.e. folks like you and me). The more pressure that was put on banks from these advocacy groups and government regulators, the more subprime mortgages they issued to keep their CRA score high enough to remain in compliance.

            Now, the Clinton administration is not solely responsible for our current financial woes, but it did contribute greatly to the explosion of subprime mortgages, which helped drive us to where we are now. If we’re going to eventually untangle this mess, the CRA and Clinton’s 1994 regulation expansion is a good place to start.

        • bonbon

          And by the way President Clinton presided over the repeal of Glass-Steagall (under impeachment threat at the time). Later he and even Sir Alan Greenspan admitted it was a mistake. But the damage was done in 2000.

          Without Clinton’s support Obama would never have been re-elected.

        • Colin

          Sounds like you are agreeing with me there bonbon.

          Tip: A bit of linear reasoning is very easy to understand rather than ciruclatory ramblings.

          But Bush is the big baddie and its all his fault eh? or so they meeja would like us to think.

          Or go ask President Bill ‘Sub-prime mortgages’ about how the mess all started on his watch.

    • dwalsh

      It seems to me you are thinking like a central banker; implying that fixing the banks balance sheets will resolve the crisis; but real economic recovery requires demand….and there is declining demand capacity in the American system.

      Globalisation is the culprit. It is promoted as good for America and American citizens, but really globalisation only benefits corporations.
      America’s corporations are no longer ‘American’; they are transnational. They are owned and controlled by a transnational global elite who are not nationalists or patriotic in any sense; in spite of being nominally born in some particular nation.
      Globalisation is a transnational corporate transformation of the world.
      Anyway that’s a complex issue for another time.

      My point is: money does not make an economy; economic activity makes an economy.

      Money is a utility. The financialisation of the global economy is an abberation that will be long and deeply studied in more rational and hopefully humane future times.

  26. Tony Brogan

    Together with the vote on Childrens rights which are more likely an attack on the traditional family structure come this comment on EU policy also aimed at the traditional family structure.

  27. Seanie

    Bush will be lucky to last the next four years in office.

  28. A couple of questions: somebody mentioned The Fed buying US treasury bills. Is this not like the Japanese Postal Savings Bank buying Japanese debt for the last twenty years? And with a yield that is still only, what, 2%? 3? And without a military or oil denominated in Yen to back it all up? And what’s wrong with QE? It sucks if you are saving cash or are about to retire, but its also a great way to eliminate debt. I’ve seen that idea proposed here in the proxy form of Ireland leaving the Eurozone, and I don’t believe the objections then were as robust as today’s comments.

    I guess there are plenty of people who would dearly love to see some precipitous crash of the Euro or the US or whatever, but 1: it would actually suck rather badly and 2: it will not happen or be allowed to happen as a result.

    • cooldude

      Hi Liam, some interesting points. Firstly the Japs had a high savings rate which allowed them to purchase their own debt with savings that were already in existence. What the Fed are doing is creating new units of currency to purchase bonds issued by a different arm of the same government. This is classic monetization of debt as practiced during the Weimar era and historically ends badly. QE is basically the Fed buying dodgy securities, usually mortgage backed garbage, off the banks at 100 cents on the dollar even though everyone knows they are not even worth half that on the open market. This is basically bailing out the banks and has nothing to do with getting the economy or anything else moving. Why not simply give every household money and let them either spend it or pay down debt? Because the Fed doesn’t give a shit about ordinary people or the economy and their only real function is to protect the banks from insolvency due to the stupidity of their actions. The board of the Fed is made up of representatives of all the major banks and the only thing they care about is looking after the interests of the banks.
      I personally have no desire to see either the Euro or Dollar crash because as you say it will suck big time. All I am doing is pointing out that ALL the decisions that are being made on both sides of the Atlantic are for the benefit of the major banks and the detriment of everyone else. The banking elites have taken over and it is important to acknowledge this fact.

      • Adam Byrne

        I agree on both counts. Of course it is the banks with their insatiable greed and yes, it would be an absolute human nightmare if there were a crash to occur on either side of the Atlantic – the people at the bottom of the pyramid would suffer the most. So what do to? How to rid society of the scourge of evil bankers and return banking to what it should be? It should be a utility to grease the wheels of productive and sustainable industry. I don’t see a way to do it, that’s why I’m trying to do the right thing on a personal level, limitations notwithstanding, and hope that other people will do and some sort of cultural change will eventually alter the way our society is structured in a positive manner.

        • Tony Brogan

          Here is an answer for you Adam. Not necessarily “the” solution but worth considering.

          Best Tony

        • cooldude

          You are correct Adam to start on a personal level. I know from your previous posts that you’re not a fan of precious metals but you have to find some way to protect your hard earned from the stupidity of these gobshites. Every new unit of currency they create lowers the level of the units we all own. This is basic maths despite what the clueless economists prattle on about. On a personal level you have to protect yourself and your family from this constant debasement of our paper currency. This is worldwide and Japan have just launched QE9 less than a month after QE8. That is the way this messy game works and we have tp protect ourselves from this insanity. In my view precious metals are a simple way of doing his at a low cost especially silver. Land is also an option but it is expensive and not my cup of tea. Each to their own.

          • Adam Byrne

            Fair enough cooldude, I might buy a bit of gold when I am flush but no more than I can carry around. Otherwise it will weigh me down. I’m not trusting anyone to guard a physical stock of it and those certificates of ownership that people buy to tell them how much they own in a far away vault are not worth the paper they are written on.

            I have a lovely piece of land on a Caribbean island that I worked my ass off to buy at a decent price and I have many loyal friends there who take care of it for me. They can share its bountiful crops should that ever be required. I’ll also bring my daughter there, quick as a flash, if I need too.

            Lastly, I have my two hands and I’ll fight like a dog to keep myself alive (as I have before), for my daughter equally so, and anyone else I can fit in after that.

            I don’t thinks its going to come to that guys, but you lot seem to think it is, otherwise why would you all be hoarding your stocks of real / virtual (worthless) gold so I’m just addressing your scenario.

            By the way, in what proportion do you keep your real little pieces of gold vis-a-vis those useless, worthless, will-not-be-redeemed-certificates-if-the-shit-hits-the-fan certificates?

            Just to note, I ran a number of businesses through e-gold, GoldMoney, e-bullion, and others I can’t even remember so I’m very familiar with them. Very useful for internet transactions in a good economy but no one ever actually gets the real gold in any major quantity and certainly won’t in any perilous situation – they are just another leveraged form of paper money / fractional reserve banking. Do you seriously believe that every account that GoldMoney (for example) operates is backed by a discrete amount of gold?

          • Tony Brogan

            Yes Adam, one can take delivery of bullion from goldmoney. It just needs arranging . Not perfect but Allocated, audited and trustworthy, not 100% safe as in your own hands but next best.

      • paddythepig

        In 2008, the government on the advice of the fed gave a tax rebate averaging 600 dollars per American household, as a stimulus to the economy.

        • cooldude

          Although I don’t have an account with Goldmoney I do believe they are a company of integrity and I also believe James Turk, the owner, to be 100% honest and has genuinely tried to show how gold and silver can be used as money through the modern systems of debit cards etc. The accounts in Goldmoney are fully allocated to each individual owner so nobody else can have a claim on someone else’s holding. James has over 30 years experience in banking finance and became so disgusted with the carry on in the industry that he devised and set up his company which allows people to use precious metals both as a store of value, which is their most important function, and also a medium of exchange between two willing parties. I have 100% confidence in both him personally and the procedures his company uses. Check out their website and if you see any flaws point them out to me because it all seems good to me

          I do agree with you on certificates which claim ownership of unallocated metal. Stay clear of anything like this because you will just become an unsecured client of metals and have no legal rights. The key thing is an allocated account which is only yours. Having your account segregated gives even more protection. We are talking about protection so there is no point in taking any risks with paper certificates or unallocated accounts. I like gold but I prefer silver as there is much less silver on the planet and the ratio to gold is currently 53-1 which is way higher than the historic ratio os 15-1. This 15-1 ratio corresponds to its availability in the earth and will probably be resumed sometime in the future. Thats my plan anyway and at least it has nothing to do with insolvent corrupt banks.

          • Adam Byrne

            All due respect to you and Mr. Turk cooldude but ‘allocated’ or ‘unallocated’ are just words and may not have any basis in reality.

            Unless you have the gold / silver in your hand, weighing you down, then there’s no way of proving anything, no matter now many websites you forensically examine.

            Moreover, at some point you might want to check the actual veracity and purity of the precious metal you are holding and not many people have the means, technical expertise or equipment to do that.

            Call me paranoid but a large element of monetary / metallic transaction is trust and who can you really trust these days, or for that matter, in any days, except yourself and your own two hands? That’s why it’s land, food and fighting for me any day over paper and metal.

    • Tony Brogan

      And what’s wrong with QE? It sucks if you are saving cash or are about to retire, but its also a great way to eliminate debt.

      QE is currency developed from nothing by the central bank. It is then issued to government of chartered banks and thus more debt based currency enters the economy. There is always interest charged on QE and guess who pays in the long run. you and I.
      Remember there isno suchthing as a free lunch unless you own the bank.

      check out Bank of North Dakota for a people owned bank that benefits the commumity.

      • Tony Brogan

        of chartered

        Should read

        or chartered

      • bonbon

        Many agree that QE is insane, has been insane, and will be insane. It is an attempt to divert from national banking and public credit as Hamiltonian showed.

        Glass-Steagell will render the international investment apparatus null and void. We are then back to Hamilton. Chartered banks will service the massive Reconstruction to take place by a community of sovereign nations.

        • Tony Brogan

          Your Hamiltonian bank is another central bank spewing credit that will result in its own issuance of QE. That is what a credit note is. It is a fiat currency issued as a debt to the central bank.So no change there

          Glass steagall does not stop fractional reserve banking or the colateralization of mortgage and debt instruments so not much help there. A red herring for a solution.

          Your massive reconstruction will be financed by a vast expansion in the public debt outstanding and so no change there.

          We can be enslaved by the system we have or by your system. Better the devil we know at present than the one we don’t.

          • bonbon

            It is time to continue searching, take Einstein’s advice. Hayek arrived at a full stop and failed to develop further. In fact Hayek’s entire school is about stopping all progress, and reconstruction.

            Look at the Triple Curve again – that physical economic collapse (not measured in any monetary terms) must be dealt with and discussed – the silence on this at Kilkenomics (for example) is the indicator of the problem.

            Keep searching – do not stop with metal. In fact gold makes a good ships anchor, or millstone.

          • Tony Brogan

            Bon bon
            Before you go dissing everyone else why won’t you actually explain Hamitonian banking.Why won’t you explain that it is just another central bank. Why not explain that it is a credit based issue of currency from a privately owned bank that adds piles of debt on to the public purse.
            Why won’t you explain that Glass Steagall may separate commercial banking from “investment banking” but does nothing to stop the exponential growth of money via the central bank and the commercial banks fractional reserve system.
            Why won’t you explain that none of your plans address the root cause of the debt trap and the liquidity trap,which is the debt based money system foisted upon us by the central banking system you are so fond of.
            you have never answered a question yet so pardon me if I do not hold my breath.

          • bonbon

            These things are well explained, but for someone who has come to a full breaking screeching halt on the road of learning, no amount of new information will get that auto (or bike going) again.

            I think the problem is vehicles made of gold are simply too heavy to accelerate.

            So let’s discuss what the Triple Curve says about money, economists, economy and what is says we must urgently do now 1) Glass-Steagall, 2) Hamiltonian national banking, 3) massive reconstruction – all inseparable.

          • Tony Brogan

            Well explained by who, not you.
            Avoidance again, have you no shame?

            diss the opposing view but offer no explanation for your own. Typical avoidance.

      • cooldude

        Adam I fully respect your opinion and good luck with it. My view would be that all advanced civilizations on this planet have used a medium of exchange that everyone can trust and that won’t lose it’s value quickly. This was the problem with the Roman denarius, which was the original world reserve currency , but through the constant debasement of a load of degenerate emperors, it eventually became worthless just like the constantly abused currencies of today. I know you find all of this hard to believe listening to all the gobshites in the lamestream media but this is the truth and all you have to do is have a look at monetary history. The keynesian hate this because it clearly shows that when a stable currency system is allowed to flourish in an open economy unemployment and government dependency become things of the past. Look each to their own but I would never try to subject you to a Mao Tse Tung 5 year plan under the leaderrship of Dr Bonbon. Each to their own and long live diversity.

        • Adam Byrne

          I wasn’t disputing any of that cooldude.

          I was merely saying that you’ll get ripped off by people selling ‘gold’ (allocated, unallocated, ‘certified’ or otherwise) just as quick as you will by others who print paper money.

          Think of it logically – why, in fact HOW could their human nature be any different?!

        • bonbon

          The deception of the Ausrian school is to set up the straw dog of “statism” using the now very dated tactic of Soviet or Maoist idiom. That rather worn approach betrays the real target : every trace of the nation state based on the general welfare is to be eradicated. In this that School is exactly, precisely, the same as the current policies well on the way to destroying the nation state. From von Hayek’s special sandbox, the Mont Pelerin Society came the tactic of the EU – Pan Europe. No surprise to me at least.

          The first nation state was the USA after rejecting the British Empire formed in 1763 at the Treaty of Paris. It took a very short time to realize that the bankers ran the world. By 1776 war was on. Since then the Empire which lost it, has conducted an unrelenting series of wars. von Hayek’s School is of precisely this current as he admitted himself in the 1883 interview which I can post again.

          The Austrian School have a strong echo also of Confederate slogans slamming the Union, even more dated than the Soviet slogans.

          What really drives the Austrian School wild-eyed and frothing, is national banking which Hamilton exactly identified as the ultimate response to the Empire. The straw dog of “central bankers” is merely to assault national banking.

          To bring this to graphic clarity (steady the nerves there!) is the Typical Collapse Function. To reconstruct the transatlantic economies requires massive intervention now, and national financing. Any attempt to throttle this with golden chains or straw dog arguments is criminal in effect.

          • Tony Brogan

            Bunch of bullshit lies and misrepresentations. The only person with froth on the lips is you and its not from a guiness brew.

          • bonbon

            Dismiss that at your own peril. Everything there about von Hayek is documented. Hayek represents himself.

            So back to national banking, no straw dogs, and realize the Soviet is long gone (except now for the Brussells EU Soviet issuing diktats – but it is not a state).

            Reconstruction, never addressed by gold, is the key issue of economics. And after all economics is what this blog is about.

  29. Adam Byrne

    You’d wonder who all this trillions of debt is ultimately owed to?

    Better to just cancel all debts worldwide and start again.

  30. george

    AMAIA EGANA was a fifty three years old woman from Barakaldo, Spain, who TODAY KILLED HERSELF, jumping from the balcony of her fourth floor apartment, after opening the entrance door of her home, to Court Officials with an EVICTION ORDER because she was behind in the repayment of her home-mortgage. Two weeks ago a 54 years old man from Granada, hung himself from a tree, after suffering the same humiliation. In Spain alone 500 HUNDRED FAMILIES DAYLY are thrown out from their homes, to satisfy THE GREED OF CORRUPT BANKS, BONDHOLDERS, AND FINANCIAL ELITES. Since 2008, 350.000 FAMILIES HAS LOST THEIR HOMES, while USELESS AND COWARD POLITICIANS IN POWER DO NOTHING to stop the evictions, and the pumping of billions of euro of ORDINARY CITISENS INTO THE COFERS OF UNSCRUPULOUS BANKS. How many people is suffering a similar faith, in the rest of Countries of the EU?
    Yesterday in this Blog I said that: “Ordinary people like us, independent political activists, journalists, and others, should think that: THE BEST HOPE IS THAT THE PEOPLE OF EUROPE WILL UNITE WITH ONLY ONE VOICE AND DEMAND JUSTICE”. And start to think about ways to have a SYNCHRONIZED PROPEST PLAN in all the cities of the EU, demanding that the BANKS THAT CREATED THIS PROBLEM FIX IT, without making the people pay for it .
    IS SOMEBODY OUT THERE (social organizations- trade unions- political activists etc.etc.) to kick the ball into play. Wouldn’t be fantastic that for once, Contemporary Irish Society will show its revolutionary side, and do something that will benefit most of the People of the EU. Doesn’t the memory of people like Amaia Egana and thousands of other nameless victims, who are suffering at the hand of the BULLY BANKS and CORRUPT AND COWARD POLITICIANS (who want to divide and rule), deserve it!
    In case somebody wants to get in touch with her, Margen Izquierda is the spokewoman of “Stop Desahucios”, an Organization that look after the needs of evicted people.

    • Adam Byrne

      Tragic story george, and I don’t want to belittle the story you have just told or keep harping on about the same thing but unfortunately when people organize in groups and the organizations start to expand, no matter how good the intentions – empire builders get involved, and the politics and personal vitriol starts off. It’s always the same, I’ve seen it dozens of times. We are just not evolved enough as a species right now to ‘do’ politics, or ethics correctly. Therefore, without meaning to piss on your potential parade – I will stand alone and will NEVER get involved in any form of politics. That’s just my opinion. Good luck to you george. Go prove me wrong.

      • You are suggesting we look after number 1 and turn a blind eye to what is happening. You sound like you have no faith. I’d rather die standing together than accept this shit alone on my knees

        The history of the world is dominated by struggles that turned into the stuff of legend. People are not designed to turn a blind eye and look away. Those who do are not alive

        The International Brigades fought Franco and the effect influenced the outcome of WW2

        Ireland and the Spanish Civil War

        In Cuban schools children still begin the morning with the wow ‘We Will Be Like Che’

        • Adam Byrne

          I don’t turn a blind eye to anything around me Pauldiv, I quite possibly might be one of the most prickly people you would ever meet in person, if you ever do. I almost always say what’s on my mind and call a spade a spade, although I am fair minded too and let others speak their piece.

          All I’m saying is I am not getting involved with a load of twats in politics to try to get another, even larger load of twats to ‘vote’ for me. Vote for my ass. Nothing personal Paul.

          • Adam Byrne

            PS. Are you planning on going nationwide with the ‘struggle’ yourself anytime soon? Serious question.

          • Colin

            Adam, he’s too busy getting pissed up at home to go out and get up off his arse and do something, apart from the periodic tirade at David.

          • Fair enough Adam. I like a man who likes plain talking and I enjoy your posts. I understand why you’d not bother. As for me I am too drunk and too much of a waster, as your sidekick Col will tell you, to take up the cause lol

            Seriously, this business over that poor girl who died in the Galway Hospital convinces me that you might be right. This is a backward country and it is frightening to think that the brainwashing went deeper than we imagined. This week we reached a new low

            I don’t take things personally Adam and think you and me get on alright. No worries there

          • Why do ask if I am going to take the struggle to the nation Adam and why are you serious about the question?

        • 10,000 attended a protest in Waterford yesterday.
          It was organised in a single week by two women.
          They are like Che.

    • Deco

      Time for an “occupy” movement with a difference.

      The EU policy in regards to capitalist mistakes, and bailouts for the bankers, and punishment for the little people is showing itself to be morally repugnant.

      Time for the EU to accpet the concept of default.

  31. Adam Byrne

    Panic over lads, we spoke too soon.

    Osborne and King have arrived on their white stallions to save the day.

    “Has Treasury magically cut debt by £35bn”

    I was worried there for a minute.

    What do you think of this sleight of hand, cooldude, Tony, et al?

    • StephenKenny

      It’s an interesting sign that the market signals are no longer operating. Effectively, it’s informing the world that the markets are closed, and that all interest rates – the costs of money over various periods – are simply whatever the politicians say they are.

      It’s a bit like the currency rates in the old eastern block countries – they were simply whatever the politicians said they were.

    • Tony Brogan

      Well bullshit baffles brains,

      All I suspect is it is a squeeze the balloon ploy.
      you know the trick with a balloon. same amout of air but squeeze it this end and the other end expands. change the shape, make animals out of it.No change in the amout of air.
      Strikes me as the same amount of debt but less here to impress ther troops but more over there unnoticed they hope.
      They are still deeper in debt, and the countries soul is sold to the company store(bank)

  32. bonbon

    Merkel Defends Her “Destroika” Policy at European Parliament

    Nov. 8, 2012 (EIRNS) — Yesterday there was a debate with Angela Merkel at the European Parliament. She gave a fully utopian speech, saying that sooner or later the European Treaties should be changed in order to allow the EU institutions to intervene more in national budgets, and trying to appease the Parliament by calling for “more democratic legitimacy” of EU institutions.
    Many MEPs confronted her, even harshly, with the effect of the Troika measures on subject countries. One person called it “Destroika.”
    She responded that she wants countries to make structural adjustments and not social cuts; had they structurally adjusted, they would not be forced to make social cuts. She said there is no alternative to such a course, and a deviation from it would be “a sin.”
    The head of the social democratic faction, Austrian MEP Hannes Swoboda, blasted this in an interview with “Yes, the Sin, this surprised me. Whereas, I had meant, and I stick with that, that Frau Merkel advocates for Greece, Portugal and other countries what she would never dare to advocate at home: namely, the destruction of social protections and of the social state.”
    Another faction leader confronted Merkel with the fact that the Fiscal Pact is illegal because it is outside of European law. Merkel answered that she was aware of this problem and wanted from the beginning to change the treaties, but others wanted concessions for doing that, which she said were unacceptable. But, the EU legal experts told them the extra-EU treaty was legally possible, and they chose that way. She is of the opinion, however, that in the next years the treaties must be changed.

    • bonbon

      Now we have it. It is a sin to deviate from Angel(a)’s course of action. And to make the illegality sin-free, the treaties must be changed!

      I wonder if she used this formulation with Enda? Imagine him telling the sinners?

      Money as a religion is just around the corner.

  33. george

    I was reading from the web page Tony Brogan sent in his last post.
    In his book: “Bankers have seized Europe: Goldman Sachs Has Taken Over”, Dr. Paul Craig Roberts says the following: “We find the banker-controlled European Commission demanding that European labor bail out the private banks by accepting lower pay, fewer social services, and later retirement.
    The European Union, just like everything else, is merely another scheme to concentrate wealth in a few hands at the expense of European citizens, who are destined, like Americans, to be the serfs of the 21st century”. After he suggest Public Banks as a solution.
    Why do we bring children into this kind of world? Even if they do well, they are going to have to go around with the blinkers on, all the time!

    • bonbon

      The kids expect the parents to prepare a better world. Rightly so.

      The solution is Hamitonian banking put in place after the US war of independence and removed various times by what we call now London/Wall Street.

  34. StephenKenny

    It might also be worth pointing out that all this talking about QE (money printing) is extraordinary in itself. A country only prints money if no one will lend it any, either at all, or at a faintly reasonable interest rate.

    With the exception of the periods of the world wars, any major country even hinting at printing money should set off klaxons everywhere and send us running for the proverbial bomb shelters.

    • Tony Brogan

      Yep, the gold and silver bomb shelter

    • bonbon

      The record for QE is the Weimar Hyperinflation of 1923, between wars actually. The effort to pay the Versaille Treaty arbitrary debt left no other option after the economy was destroyed by occupation etc.

      The effort now to pay off 10 QUADRILLION derivative nominal synthetic debt is what is destroying the physical economy (not discussed at Kilkenomics at all) and driving insane monetarists to break all law.

      Glass-Steagall is a return to sanity – the a cold sober assessment of the economic wreckage hits hard. Reconstruction on a massive scale will follow.

      • Tony Brogan

        Basically correct on the first two paragraphs but not with the solution

        The central bank issuance of debt based credit to the government and to the commercial banks who then by using the fractional reserve system exponentially expand the the money supply are the basic cause of the problem

        close the central banks. return monetary policy to treasury . If notes are issued they need to be 100% backed by specie.

        GS does not address these issues.

  35. Tony Brogan

    No US recovery seen here

    Dave from Denver…

    Avoiding The Fiscal Cliff = QE To Infinity
    There is no reason to expect that renewed efforts at federal budget deficit reduction will result in anything more than the usual smoke and mirrors, further increasing, not reducing, long-term U.S. sovereign-solvency risk. In reality, the U.S. economy has not recovered, and no recovery is pending. Consumer liquidity remains severely impaired, and broad business activity continues to falter anew. As a result. the actual federal budget deficit going forward will be much worse than the relatively rosy numbers being used as the basis for government negotiations – John Williams,

    Everyone can draw their own conclusions about how this so-called “fiscal cliff” situation will play out, but the only way it can possibly be “resolved” is by postponing the inevitable. As Williams states: “Accordingly, global market reaction–to a severely deteriorating outlook for U.S. fiscal conditions–increasingly should reflect massive flight from the U.S. dollar and movement into gold and the stronger Western currencies.”

    • ME

      I agree on Gold (and more so on Silver). But, are there any “stronger Western Currencies? I thought they were all in free-fall together? In a “race to the bottom” (or a “race to debase”).

  36. Tony Brogan

    More from dave from Denver

    The truth is that not only will the fiscal cliff scenario be kicked down the road like the proverbial “can” (anyone know if that’s supposed to be a beer can or a soda can? Maybe a can of beans?), but the increasing chasm between expenses and revenues will have to be filled with even more Treasury debt issuance. Tautologically, this means more QE. More QE means even higher prices for gold and silver. The reason more QE will be needed is the same reason the Fed has continued and expanded QE since its inception in 2008: 1) the banks need liquidity or they will collapse; 2) the Treasury needs a new source of cash or interest rates will go to the moon.

  37. Tony Brogan

    Meeting in Malahide
    bloggers get together in the upper room at Duffy’s pub a stroll from the Dart Station
    7.30 tonight Sat
    Meet with Philip, Dorothy Jones and Tony Brogan

  38. Deco

    I have only got time to read the article now.

    I am sceptical about the official statistics. There has been a lot of “change” implemented on the measurement of economic activity since 1982.

    Check John Walter Williams, for statistics measured in the old fashioned (serious and objective) manner.

    Here is an interesting article that I seen this morning. I figured I would add it, as it covers the topic of debt deflation in a very prosperous country, that also happens to have extreme debt levels, and which is expected to bailout out the others.

    Is the debt deflation scenario now about to hit the core ?

    Also we now see that the Germans are worried about the inability of the French state, or the French labour unions to reorganize their economic equation to better fit the reality of what they are actually producing.

    Interestingly, the Germans expect the Dutch to be able to reoganize themselves.

    And then there is the one member of the core that get zero coverage of our EU worshipping media in this country. And that member is Belgium. Belgium is another serious problem that nobody ever reports upon, the same way as when this all started off, the media told us Spain would be fine.

    With all this to be resolved in the next six months, and so much unravelling going on, the Eurozone is going to have an extremely ropey period in the medium term future.

    It will all prove Ireland’s gift to the Anglo Bondholders to be highly absurd and stupid.

    Prepare to have your intelligence insulted repeatedly by the EU leadership in the next 12 months on an unprecedented scale.

    I also expect the Irish media to continue to completely misreport the fiscal cliff issue in the US. There is a serious borrowing problem. The TEA (Taxed enough already) movement started based on concern about the borrowing, and the taxes. In typical form, thanks to the US media it became synomous with just about everything else. But the issue still remains. The debt levels are very serious.

    Well, there is something that the knowitalls in RTE/Pravda have not yet told you.

    • bonbon

      As I post above, it is now a sin to doubt Angel(a)’s course of action which is now called Destroika. (Her very own words – Evangelist daughter).

      Confession and 20 Hail Mary’s plus a nice silent contribution (1 bn a week) at the “charity” basket on the way out.

  39. michaelcoughlan

    Wakey wakey David. Freedom of speech is a great thing isn’t it?

    • michaelcoughlan

      Read the sixth Paragraph.

      • michaelcoughlan

        Here is the sixt paragraph;

        “Kennedy also took steps to get rid of the Federal Reserve, by printing 50 billion dollars in silver certificates, which were interest free. He planed to use this money to pay off the national debt and to free the American people from the control of the Illuminati Banksters. If the U.S Government would print its own money interest free like the Constitution says they should be doing, the national debt would be zero, and all taxes could be eliminated. The average American would have twice as much money to live on. If our government would print their own money interest free, like President Andrew Jackson, President Abraham Lincoln, and President John F. Kennedy, have done in the past, the national debt would no longer be an issue, and taxes would be gone, and the average American could have very little, if any, debt. History shows President Kennedy was assassinated within a few months of issuing silver backed interest free United States Notes”

        • bonbon

          JFK was murdered for one reason only – to kill optimism in the US population. The perpetrators succeeded in that with a long useless war he was determined to stop.

          The long downward slide since then to Obama’s re-election was the intention. Now they have Obama in place at their disposal to carry out the Blair Doctrine.

          Russia knows exactly what this means. I hope you do too.

        • bonbon

          I hope you have heard of Permindex Corp, pinpointed by Garisson and shown in the film JFK? That was the logistics center for the murder. Clay Shaw was the link.
          Today 9/11 was managed by BAE which has Saudi Royal connections. Obama refuses to declassify those 28 pages.
          9/11 – 2, Benghazi, is also looking like Obama’s doing. It will not go away.

    • michaelcoughlan

      In the link is a video of a guy called James Files who was they guy who shot Kennedy from the grassy knoll in Deely Plaza (The fatal exploding head shot).

      If you listen very carefully to his description of the event he says something only a trained rifleman would know. That is he was aiming for the president’s eye but due to the fact that the bullet which hit president Kennedy in the back from the other shooter caused him to slump forward it put his aim out only ever so slightly which means that the bullet entered the president’s right temple and exited out the rear blowing the back of his skull off.

      It’s this piece of skull that Mrs Kennedy is reaching for on the trunk of the limo and she replaces the piece of skull on the president’s head. The reason he was aiming for the presidents eye is because when you shoot a human being in the head to ensure a kill the bullet has a much easier path of resistance through the back of the eye socket into the soft tissue of the brain than if it has to travel through a 1/4 inch of the skull.

  40. bonbon

    Oettinger Lashes Out Against U.K., France

    Nov. 9 (EIRNS)–Germany’s member of the European Commission Günter Oettinger lashed out against the governments of the United Kingdom and France yesterday, saying in Brussels that he is less concerned about Greece than about the British and the French. Referring to British Prime Minister David Cameron’s firm intent to insist on deep cuts in the European Union budgets, and referring to the tide of anti-EU sentiments in Britain, Oettinger said that the Brits “seemed to have lost their mind” to an extent that one would have to wonder if they still wanted to be part of “Europe.” Oettinger also attacked France for not having enough industry and innovation.
    Attacks on Britain also came from France and Italy, whose European Affairs Ministers agreed yesterday they would insist that the special EU rebates once granted to penny-pinching London during Prime Minister Margaret Thatcher’s reign, be eliminated.

    So much for “harmony” and “consensus” in the EU.

  41. bonbon

    The Tremonti Effect on Glass-Steagall

    Nov. 9, (EIRNS)–Former Italian Economy and Finance Minister Giulio Tremonti’s aggressive campaign for Glass-Steagall has the effect that now, whenever he is on talk-shows, he wins over every opponent.
    Thus, on Wednesday on the popular “Porta a Porta” talk show on Raiuno, Tremonti forced all participants, both pro- and anti-Obama, to acknowledge that Obama has failed in the most crucial reform, that of reintroducing a Glass-Steagall-like banking separation. Tremonti recalled that President Bill Clinton, in 1999, repealed “the glorious Banking Act of Franklin D. Roosevelt, an act that was copied everywhere in the world,” and instead “legitimized derivative contracts. Globalization was oiled by this mechanism.”
    There are only three other alternatives: 1. Buying time, as the ECB [European Central Bank] and the Fed are doing–but this is no solution. Sooner or later, the bill comes due;
    2. Inflation–but the Chinese do not like it. It would destroy savings earned by many of them and destabilize their social order; or
    3. War, as in 1939;
    The unsolved financial problem must be solved. Toxic debt has been shifted here and there. A 12:1 ration between speculative finance and productive finance is unheard of in history, and cannot be sustained. If I were U.S. Treasury Secretary, I would stop printing money, financing only certain things and, of course, make rules for the financial industry. “Obama has failed in making the real rule, Glass Steagall.”

  42. breltub

    Unfortunately David’s most deluded article yet. I read this and immediately thought of the lucky fool. They guy has the one trick and it works, and works, and it keeps working and he makes a name for himself but then one day he losses it all. Bang. The trick was just that, a trick that was lucky that it fitted in with the movement of the times. Readers of Black Swan/Fooled by randomness will be familiar with the idea.

    I think David needs to step back, reanalyse what is happening.

    Can it be he has been fooled by his conditioning?
    Could he be seeing data points and making them reaffirm his biases?

    None of us are perfect.
    Central bankers, central planners and centralist economists included!

  43. Jaysus

    You are not doing very well with this article Davido and all the negative comments provoked you to bless us with thy presence. I’m not surprised boy and think you need to pull your fine finger out. Put your notebook down, stick you head out the window and get some of this nice November air into you and clear the head

    It sounds like you are worrying more about predicting the future than dealing with the present. You are absolutely right to state that the future is guesswork and by suggesting that the US is in recovery tells me you need to ground yourself and fast. Feet on the ground and all that

    Maybe this will make you reconsider your malaise:

    Hurricane Sandy: beware of America’s disaster capitalists
    Naomi Klein

    “Either this crisis will become an opportunity for an evolutionary leap, a holistic readjustment of our relationship with the natural world. Or it will become an opportunity for the biggest disaster capitalism free-for-all in human history, leaving the world even more brutally cleaved between winners and losers”

    Economic models fuelled by consumption are for losers.

    • Dorothy Jones


      David should not worry you. You’re sitting on your arse in Sligo. The world world will pass you by without you even noticing.

      Kindest Regards. Dorothy

      • If you criticise you get a hard time in here from followers but you never get a hard time from the man himself. The only ones taking offence when David gets it in the neck are posters. David can handle it alright and he has proved time and again that he is a man who can take criticism

        It worries me when he turns out half assed articles that will influence people who daren’t question his word. He is not god ffs. Question him always and break his balls too. Who is this article intended for? Certainly not all the posters who said it was rubbish

        It’s our job to question self made prophets. Always.

        We Will Be Like Che

    • Adam Byrne

      Thanks for the Klein article, she is always a good read. I’ll get to it now.

      I would predict that the second outcome suggested by her will be more likely.

      Therefore I am getting on the side of the winners.

      One thing that may differentiate me from my new compatriots is that I am not interested nor stimulated by consumption apart from the bare minimum needed to survive.

      After all the losers are gone I will continue to fight the winners from the inside and on the QT.

      May the best man survive!

    • bonbon

      This link is “climate-change ” drivel. The catastrophe is man made because the storm surge barriers proposed in 2009 by a UK firm in fact were not built. The same barriers work very well in Holland and now in St. Petersburg (built by the same UK firm).

      The financiers love “climate change” and in fact originated the lie of the 21st Century, to cover for their criminal negligence best seen here

      Typical Collapse Function

      • bonbon

        Comparing NY to Venice (which had a surge then too), we have the same behavior of the elites of the Ventian Empire today :
        Sandy was an act of nature; much of the disaster, however, was man-made. And even in recovering from it, the disaster’s victims believed they could see priorities that had as much to do with class, visibility and status as with need. In New York as in Venice, if we want our cities to be safe and suitable for their people, we have to ensure they are built for us, and not for the rapacious elites whose wake is a trail of destruction as distinctive as any storm’s.

      • The article might sound like a book pitch but she found a niche that is interesting, persuasive and credible. If she sells books then I wish her well because she sounds like someone who gives a shit about corporations and their pillaging of OUR resources for THEIR short term profit

        Fracking Hell

    • Tony Brogan

      Naomi Klein’s tirade about global warming is misplaced. It has little to do with hurricane sandy

        • Tony Brogan

          Global warming is basically non existent. the computer modeling of the IPCC scientists in the 1970′s has proven to be a non event. Any global warming is from natuel causes and not man made Polution yes. Climatre change no.
          There are 1000′s of scientists disputing the global warming thesisbut they get little press. no chicken little alarm to publish.

          • It’s all a matter of opinion then isn’t it. There are thousands of scientist to say other wise. The case remains open and thank god it does.

  44. rebean

    I was wondering if you had seen Gerard Celentes blog Re debt . It really has a good blog on Irish debt transfer onto the citizens backed by Europe. I know we have heard it all before but its an interesting presentation on the issues. Worth a look.

  45. bonbon

    1923 was the year German Hyperinflation took off attempting to pay Versailles WWI debt while the economy was at the same time suppressed. The famous 100 billion Reichsmark notes for a cup of coffee :

    be very sure are not forgotten.
    Without bank separation as Haldane of the BoE has repeatedly called for, these efforts are doomed.

    Weimar Hyperinflation, Here We Come

    Nov. 10 (LPAC)–”The Bank of England has just crossed the line into straight government financing,” the {Telegraph}’s Assistant Editor Jeremy Warner wrote today. In an alarmed note reporting on the Bank of England’s decision to transfer $56 billion in interest income from gilts to the Treasury, Warner said: “So now we know why the Bank of England’s Monetary Policy Committee called a halt to more QE this week — it’s because the Chancellor and the Governor of the Bank of England have concocted a backdoor way of doing the same thing.” This is heading, Warner warns, towards “simply creating the money and handing it by the lorry load to the Treasury, a la Weimar. . . This is a slippery slope, and I regret to say that the Bank of England is now very much on it.”
    Joining the British Empire on that Weimar slope is the Obama administration, take 2. The {Telegraph}’s Richard Blackden wrote Nov. 8 that “Obama’s victory also means the world is more likely to have a Federal Reserve chairman — whether Ben Bernanke or his successor — inclined to print money. The Republican challenger Mitt Romney had voiced concerns about the policy.”

  46. bonbon

    Will the New Archbishop of Canterbury support Glass Steagall

    The new Archbishop of Canterbury, who heads the Church of England, might very well support a Glass Steagall type banking reform. The former Lord Bishop of Durham, Justice Welby, who this week was elevated to head the 80 million strong Anglican Church, is a most unique candidate and just might bring fire and brimstone to the City of London.

    In a recent speech to financiers in Zurich Archbishop Welby cited a the “Dog and Frisbee” speech of the Bank of Englands advocate of Glass Steagall, Andrew Haldane. He call for a change of culture and that banks “must be allowed to fail.” Welby also called banks “exponents of Anarchy” and not serving and “useful purpose”.

    • StephenKenny

      The Church of England seems to be of little relevance these days. I’m not sure that anyone would pay much attention to any such speech.

      • bonbon

        You do realize who heads that Church? Of course you could reply that has little relevance too.
        This is the Irish and American blindspot today.

        The Commission on Banking Standards, set up earlier this year in the wake of the Libor crime of the century, hopes that Welby will remain on their commission.

        And if he remains, Stephen Hester, Antonio Horta Osorio and Peter Sands — the bosses of Royal Bank of Scotland, Lloyds and Standard Chartered respectively —could become the first to be grilled by the Archbishop-elect when they appear before the Parliamentary Commission next week.

  47. bonbon

    China Sees Dim Future For U.S. Under Obama

    Nov. 10 (LPAC)–A People’s Daily opinion piece by a Yang Ziyan on Friday asked, “Can Barack Obama help U.S. out of troubles?” and gives the only possible answer — not likely.
    “Since Barack Obama took office, the U.S. economic situation has been deteriorating…. Obama will face the problem of `no money available’ first after winning the re-election. Reducing expenditures is not a good method because it will cause serious economic recession…. The economic problem is never merely related to economy but includes complex political factors…. Considering the amount of debt and opposition from Congress, it is not easy for Obama to get his expected results….
    “In spite of withdrawing troops from Iraq, Obama did not help Iraqi political factions to make a compromise. On the issue of Afghanistan, he cannot find a political solution in line with the interests of the United States, either. In addition, the United States did also not make any significant political progress in dealing with Palestinian-Israeli conflict and U.S. relations with Iran, the D.P.R.K. and Pakistan.
    “Observers believe that Obama did not mention such issues as the European debt crisis, the sovereignty disputes over islands in East Asia and U.S.-D.P.R.K. relations, which indicate that he has not set an ambitious foreign policy yet. The trouble is that any issue will affect the overall situation of the world.

    Therefore, Obama will face not only the `cliff’ but also `landmines’ in the new four-year term.”

  48. Pat Flannery


    You write:

    “Of course, because in the US mortgages are non-recourse, people can walk away from their houses without being shackled with the debt personally. This is in direct contrast to the Irish situation where one mistake in buying a house at the top of a boom will condemn you to a life of debt servitude. In the US, this is not the case as the loan goes with the property not the person.”

    First you put your finger on the exact core of the problem (which I have been trying to point out on your blog since I got here i.e. that mortgages are real estate, not “securities”) and then you ignore it in the interest of your favourite hobby horse, slamming the EU.

    You continue:

    “In contrast, the EU, faced with broadly similar problems of too much inherited debt and consumers who are not spending, is opting for a policy of austerity first and growth later. This is forcing the EU economy into an entirely unnecessary recession. Policy is exacerbating the slowdown and in so doing practically guaranteeing the expansion of long-term unemployment.”

    You failed to draw the correct conclusion even though you predicate the correct facts. You failed to point out that enacting law similar to the U.S. i.e. making mortgages non-recourse, placing at least some of the risk on the lender, is the primary policy correction needed.

    Do that David and there is no need for “austerity”.

    • Harper66

      ” making mortgages non-recourse, placing at least some of the risk on the lender, is the primary policy correction needed.”


  49. Dorothy Jones

    Sean Fitzpatrick character axed from Anglo the Musical after complaints from his lawyers!

    You really couldn’t make it up.

    It looks good though.

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