January 28, 2013

The money behind the spike

Posted in Sunday Business Post · 244 comments ·
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The other day, there was an arresting interview online from Davos. It featured a guy called Ray Dalio. This man manages a startling $140 billion and speculates in the markets. He started with $5 million, so evidently he is good at what he does.

While much of the coverage here was on Enda Kenny and what he was saying about how much the rest of the world loves us, the interview with Dalio was, for me, the standout one of the week – notwithstanding, of course, David Cameron’s move earlier that week(- more on that later).

Dalio said something quite straightforward about the state of the world financial system. When asked what he was going to do with his investments this year, he responded that, with so much cash about, he expected much of this money to leave cash deposits and buy “stuff”. He wasn’t so specific on what stuff exactly, but he said he felt that it made sense for people to use their cash, which is now not generating any return, to buy other stuff.

Is this the moment when the stock market and property markets and, frankly, markets for everything that isn’t cash, explode?

Dalio’s view of the world is straightforward. As the central banks of the world keep pumping more and more money into the economy to ensure that the recovery takes hold, the value of cash is plummeting. He is therefore not taking his cash off deposit, because he sees some great investments out there. Rather, he is taking his cash out of his deposit account because he is getting no return on it.
So the price of all assets is rising because a wall of money is pushing them up, not because the prospects of the economy have improved dramatically.

This explains quite a lot. Take for example the Irish bond market. It is rallying at a time when the ability of the economy to generate the growth necessary to validate that rally is not there. This means that the rally in assets is rented, not earned.

The rally is rented, not earned.

Let that sink in.

By this I mean the spike in Irish bond prices is a new bubble based on a huge amount on money looking for a home and finding its way into the Irish bond market. High-yield assets are rallying as investors like Dalio go in search of yield from ‘stuff’.

This implies that the rally in Europe and the sense that the worse of the European bond/debt/credit problem is over – as is being muttered in Brussels – is ludicrous. The bond herd is now buying up peripheral European bonds driven by the free money from the European Central Bank (ECB) rather than any change in the ability of the countries such as Italy, Spain and Ireland actually to service that debt.
We are in a classic six-stage cycle of how a bubble forms, driven yet again by cheap credit. These six stages were outlined by the brilliant US economist Hyman Minsky.

In the first phase, what happens is called displacement. This is when there is a change in policy which materially affects the economy.

This change in Europe occurred over the past 18 months when ECB boss Mario Draghi replaced Jean Claude Trichet and started printing money. He hasn’t stopped since. This is the same policy followed by the Fed. And, in recent days, the Japanese have gone one further and said they will print as much as is necessary to push up the rate of inflation.

The second phase of a Minsky cycle is the gearing phase. This is when the price of assets lurches upwards driven by the change in policy. Once this happens, the banks get involved and financiers like Dalio get on the bandwagon, buying stuff with borrowed money. This causes the boom in assets.

In the next phase, the boom phase, the herd gets involved and buys risky assets, driving the price ever upwards and, as the price goes up, more and more investors get into the asset.

The fourth phase is the euphoria phase when the investors are so ecstatic with the perceived returns on their assets that they forget there was ever a crisis in the first place. Even if they are now buying assets expensively, the very expense can be made legitimate by all sorts of new theories. The fact remains that countries in peripheral Europe haven’t a prayer of paying back money, even as yields fall to almost Germanic levels.

Then we get the fifth phase, which is the distress phase. Here we see canny investors getting out and taking their profits. The herd is still high-fiving each other while the smart ones sell and escape with their swag.

The final sixth phase is the panic phase when the herd realises that the countries in peripheral Europe could actually never pay their debts in the first place because the lifestyle they achieved with the borrowed money was a rented lifestyle, not an earned lifestyle. The herd panics and runs for the door. The house of cards comes tumbling down.

Then we move into what is called the Minsky moment where good assets have to be sold to pay for the losses in a portfolio caused by the fall in the value of bad assets. Because there was leverage, we go into another deleveraging cycle in Europe at higher levels of debt.

Obviously the only coherent way out of this is a default because, when debt can’t be paid, it won’t be.
However, the core of the central bank policy in Europe right now is to avoid this at all costs. Once you take capitalism out of the equation when non-repayment punishes stupid investment, you are in for a long-term cycle of repetitive booms and busts.

As the great British economist John Stuart Mill observed: “Credit busts don’t destroy wealth, they merely reflect the extent to which wealth has already been destroyed by stupid decisions made in the boom.”
When we hear moneymen saying indiscriminately that they are going to buy ‘stuff’, it is a small signal of a Minsky moment likely in the future.

This brings us nicely to David Cameron. Will he get what he wants from Europe? My hunch is that the EU will be convulsed by the ramifications of recurring bond crises in the years ahead. Crises are always met in Europe by more, not less, integration. Against that background, the EU is not likely to open up the prospect of an à la carte EU. Therefore, Cameron might not get what he says he wants.

In such a case, the in/out British referendum is carried by the “out” side. Middle Scotland is then in a conundrum and will move to a more separatist mode, even if the referendum on independence is defeated next year.

The real battle of Britain starts then as Scotland and Wales worry about being welded to English nationalism with no EU escape hatch.

What happens to us? Well, Ireland is like the jockey riding two horses, the British economic horse (our biggest trading/demographic/cultural partner) and the European horse (our political master). As long as the two horses are running in tandem, the jockey can manage.

However, when the two horses dart off in different directions, the jockey’s position becomes terribly uncomfortable.

David McWilliams’ new book The Good Room is out now


  1. woodsey

    David,

    Another one of your ‘watershed’ analyses! Well spotted! And the ‘stuff’ is the peripheral sovereigns’ bonds?

  2. Adelaide

    “As the central banks of the world keep pumping more and more money into the economy.”

    Good article but it leaves me with a question.

    Can someone briefly clarify the money trail of the above statement, my understanding is that the Central Bank money is lent to Commercial banks who lend it to a clique of big boy operators in the financial market who go on a spending spree and cause boom/hyper inflation?

    Is the article implying that commerical banks lend/pump the money into the speculator hands of the Ray Dalio’s of this world or do most of the Ray Dalio’s work for commercial bank?

    My question really is who is spending this Central Bank wall of money and how did they get their hands on it in the first place.

    Clarification be much appreciated.

    • Hi Adelaide, It’s Complicated!

      There are three types of money in the economy.

      1. Cash is created by the central banks and the profits from the sale of new cash goes to the Department of Finance. Cash forms only 3% of money in the euro zone.

      2. Reserve-Account-Money is the type of money that banks used to buy ‘stuff’ off each other. It’s created by the central banks and is held electronically at the central bank and is not in general circulation.

      3. Bank-Account-Money, the numbers in our bank account, form 97% of the money in circulation. It’s not created by the central bank but by the commercial banks, normally in the process of advancing loans.
      Banks can also create this type of money to buy ‘stuff’.

      When David says central banks are pumping more and more money into the economy he means they are creating lots of Reserve-Account-Money. From there the banks are well capitalised and they can create Bank-Account-Money up to a certain multiple of the balance of their Reserve Account.

      They can create bank-account-money by typing it into a borrower’s account. Or, if no-one is willing or able to borrow, they can create money by purchasing something and typing new money into the seller’s account.

      If you’re completely new to this you can read our 37 page guide to the euro zone’s monetary system at;
      http://sensiblemoney.ie/data/documents/How-Banks-Create-and-Destroy-Money.pdf

      Or if you’re already familiar with accountancy you can see our 20-page guide at:
      http://sensiblemoney.ie/data/documents/Modern-Banking-Procedures-Updating-the-Money-Multiplier.pdf

      • Realist

        ” It’s not created by the central bank but by the commercial banks, normally in the process of advancing loans.”

        It is allowed by central banking fractional-reserve banking that is the culprit of this crisis or almost all crisises in the 20th and 21th century.
        Banks are just using the system to gain a lot by expanding the credit well above what people saved, meaning expanding (distributing) money into the industry sectors of their choice causing destruction of wealth.

        • Hi Tony,

          Just on point B you say that if you deposit 1 euro into a bank they can lend out 9.

          However, banks don’t take in deposits, keep some aside and lend out the rest. Rather, they create the money they lend by typing a higher bank balance for the borrower and it has nothing to do with how much has been deposited with them. Thus almost every euro created this way has a corresponding debt.

          In section 4.7 of ‘How Banks Create and Destroy Money’ [http://sensiblemoney.ie/data/documents/How-Banks-Create-and-Destroy-Money.pdf] we explain why banks need depositors and savers if you’re wondering.

          It’s also very important to understand that most money is temporary also and when a loan is repaid to a bank the money is ‘deleted’.

          • Tony Brogan

            Bank takes a deposit of already issued currency . Your wages for instance. 1000 cash in 9000 moore can be loaned out. yes of course as the monet loaned out is repaid the iou is extinguished and the money disappears.

            Effectively this is what happens. how they do it is by creation of 9000 extra by a leger entry and the money created out of thin air. Tha 9000 can be deposited elswhere and used to expand the credit by another 81000. thus the money supply expands to feed the boom and inreverve contracts to create the bust.

          • Realist

            Read the chapter 4 of this book where it is all explained clearly:

            http://www.mises.org/books/desoto.pdf

            It explains clearly some things people are not aware, that banks are playing on the cards that some of the borrowed money will come back into the bank.
            For example to say in Ireland there are 3-4 major banks of similar capacity, that means for example 25% of borrowed money will be returned back and more loans will be loaned based on it.

            At the end as proven both in practice and mathematically in theory in the book banks expand credit away more as Tony said multiple times of what is in reserve or saved.
            Not to question the legality of the lending somebody’s current accounts and that both sides think they have money to bid up prices of some good!!!!

            This book is an eye opener for everybody and it is free.

      • Tony Brogan

        Cenral banks create money from thin air.
        A. Issue money to government to spend directly as government does not have enough in taxes. This is called a loan from the central bank and is secured by a bond issued by the government aka the people. That is a promise to repay the ‘debt’at a future date. This bond bears interest which is also paid to the central bank.

        The amount of the bond/loan is added to the national debt

        The government spends the money and so it goes into circulation and also increases the money supply.

        B. central bank /creates/prints money and issues as capital resrves to commercial bank(s). Commercial banks operate under fractional reserve system. That is they have to have some money in reserve in case you come along and want some from your account. The standard reserve was about 10% but has been a lot less say 3%.
        so with a 1 euro deposit the bank can lend out 9 euro. The nine euro they create out of thin air and loan to whoever they deem qualified. some one they expect able to pay the preinciple back plus the charged interest.

        At this point all the money is created out of thin air except the small amount od coin issued which actually has substance.

        It means that all the money in existence is etherial and does not exist except as a bookeepin entry and represented by bank notes and promissory notes and bonds and othe iou”S All is brought in to existence as a debt.

        Then there is the interest. There is no money issued to cover the interest. So if all people tried to pay off the principle loans at the same time it would use all the available money and there is none left to pay the interest.

        So the banks print this means that the money returns as interest payment is taken from the money in circulation. ans sooner or later the only money left is the interest that is owed. Inother word it is impossible to pay off the debts incurred plus the interest and so to extend the system more money must be loaned into circulation as ever increasing amounts. Then because this extra is mostly being used to pay off interest and other debt there is not enough to operate the economy and the money in circulation shrinks and the economy is depressed. so governments borrow larger and larger amounts of money with greater and greater negative affect on the economy. It is the famed debt trap. The liquidity trap. The more that is printed the woorse off we all are.
        It is the ultimate ponzi scheme.Run by the bankers who collect the interest on non existant monetto enrich themselves and make economic slaves out of all.

    • Adelaide

      THANKS so much for the (below or above?) replies but what I’d REALLY like to know is WHO is spending the new money that is causing the global price inflation?

      Paul Ferguson says “Or, if no-one is willing or able to borrow, they (the commercial banks) can create money by purchasing something and typing new money into the seller’s account.” This is my own understanding.

      I’ve a fair understanding of how money is created/destroyed, but my blank spot is how does it always seem to end up in the hands of big speculators/investors? IS IT VIA BORROWING OR DO THEY IN FACT WORK FOR THE BANKS?

      • Realist

        The first beneficiaries of new money are first users of the same: governments and bankers, than it comes all their associates, e.g. government agencies and “private companies” doing businesses with government and for banks property and car businesses, investment companies, insurances, …

        Once the prices of products are bid up so high, the later users that are buying inflated priced products will suffer the most.

        Distribution of money + inflation just hammering some industry sectors and some people while transfering wealth to some privileged. At the end once that privileged businessed died out we suddenly realize wealth is destroyed and resources consumed on unwanted products and services.

        Investment banks are privileged as they can get cheap money from the borrowers (mea and you) either directly to play with or through their retail banks paying us 2% on savings, leverage that borrowed money 10 or 50 times, push/bid prices up making trying to outsmart each other on the market.

        It is all wasteful as resources (labour, land and capital) are spent into the businesses that mostly destroy wealth.

        Said that does not mean like some posters here that investment baning is stupid, derivatives should be banned, banks closed and nationilized, …

        All has their own purpose and should be there, but in some different quantity.
        Such quantity only can be defined by people’s (ultimate consumers) wishes.

        • Adelaide

          Thanks. So in summary. Correct me if I’m off.

          After the money creation mechanism, THEN commercial banks channel a percentage of this new money into their subsidiaries, subsidiaries which speculate on the open market, plus the banks lend large sums of it favourably to large private financial institutions who also speculate on the open market.

          The governments also play similar roles to commercial banks in handling the new money.

          All in all global asset prices increase due to the super-charged spluge of new money.

          • Tony Brogan

            Sorry if this is overkill.
            Inflation is the key to the spread of the wealth gap. That is those who have more and those who have less.
            It has been stated as you know that the wealth gap (spread) is the widest since the 30′s depression.

            We have similar conditions now to then.

            As explained, the banking system leads to the issuance of almost unlimited credit(loans or debt) which goes into circulation (normally but not lately as banks are not issuing loans) and expands the money supply.
            That is it INFLATES the money supply. This is the definition of inflation not the popular use to describe the apparent rise in prices.

            Realist is correct in his description of distribution of the extra money. The new money is issued by the banks or spent by the government.

            The first recipients get this new money before it affects the economy. So those closest to the source benefit by spending at par. These are the crown corporations and the businesses contracted to government for services and goods. Plus the large commmercial banks and their favoured customers
            and any individual taking out a loan immediately.

            All the above receive the new cash before the rest held by savers etc is diluted in value.

            As the money moves into the economy it fully dilutes the value of existing savings and now buys less than it used to. This gives the appearance of rising prices.

            Net result. Those who get the money first prosper by using it at par value. The genreral Jack and Jane getting no increase find their money buys less and are impoverished.

            Rich get richer and the poor get poorer.

            But a lot of Jack and Janes tried to get aboard the system. They too borrowed and then bought assets immediately which appeared to go up in value as the currency was debased (inflated) but no new value was created and the wealth effect was a mirage as the accumulated debt plus interest stiffled the economy.

            The menace is inflation. There is no such thing as good inflation. Inflation always benefits the wealthy at the expense of the less well off . It is a transfer of wealth from the poorest to the bankers themselves.

            The only solution is to
            close the central banking system
            Ban fractional reserve banking

            and close down any expansion of the money supply.

            Nay sayers will exclaim this will lead to austerity and poverty. This is not true. That has already happened but is disguised.

            A monetary system that is not subject to inflation is the only way to avoid major credit fueled booms and the inevitable bust. The bigger such a boom the bigger will be the bust. The bust can not be avoided.

            What can be avoided is the repetition of the same conditions to have yet credit based another boom. The best way is a monetary system that does not allow expansion of the money supply and thus inflation. It is the prosaic, practical values of gold and silver that do this, not the glitter.That is why for Millenia a gold ans silver based money system is preferred by most of the people most of the time.

            All other systems fail. Average length of life span of an unbacked fiat currency is 40 years. We are now counting from 1971, the closing of the gold window by Nixon. The collapse of our currencies is nigh.

          • cooldude

            In this interview Ben Bernanke explains to Oprah exactly how he creates money. It would be funny except it’s all true.
            http://www.zerohedge.com/news/2013-01-28/bernanke-oprah-ive-been-doping-years

          • Realist

            Yes, exactly.
            Banks will use any mechanism allowable in that country, EU or any other unions to lend a lot of money.
            What way is the better than doing it from thin air, e.g. electronically, without even people saving it first for the exactly that amount.
            Imagine if you are given the possibility to get money cheaply from ECB, to say 2%, or from savings of people for 2.5% (as currently in Ireland) and then lend 5-10 times more for 4% (mortgage) or 13% (personal).
            The return is not just the difference between lending and savings rate, but away more due to leveraging, is not it ?

            The stock market as other markets are flushed with expanded, inflated, money printed from thin air so they are growing more than they should.
            See what is happening with the stock market while the economy is supposedly not in the best state, how come and from where is all that money.

            Of course banks are taking “tremendeous” risk as they need to get money back except when states are helping them with tax payers money and inflation.
            E.g. the state issues bonds, the same banks buy those bonds and put them in ECB as collateral.
            Even worse, ECB buys bonds straight from the states, directly creating money from thin air and expanding the money.

            Not to mention the legal point of the fact that current account (deposit) money should not be touched by banks. It should be sacred money as you actually own it. By lending it out they are saying that 2 parties have the same money available at that moment in time, as you can pull such money anytime.
            We do not want bank runs, do not we :)

  3. Grey Fox

    David,
    Is the confidence (trick) boost by the Moneymen statement ” we are going to buy stuff” the final push to inflate the bubble to the max?
    When in your honest opinion do you envisage the sixth phase occurring?
    I ask because the level of calm in Europe is very unsettling indeed.

  4. markodxb

    Hi David, so if we have a pot of spare cash dwindling in the bank and wish to invest can you give advice on an asset(s) that doesn’t require us to be savy investors that know when to get out? is there anywhere safe? only seeking opinions and not commitments obviously, and understand its not

  5. Pat Flannery

    Maybe some of these “investors” in stuff might look more to Africa, India, South America, Mexico etc. where there are still reserves of raw materials and cheap labor. This might siphon off the worst of the pending asset bubble here in the pampered West.

    For example I am noticing a renewed interest in Tijuana, Mexico by Southern California investors. “TJ” seems to be sponging up some of the local San Diego and Los Angeles property boom cash that historically would have recycled into American ballparks, convention centers and other muni-bond boondoggles.

    Wouldn’t it be nice if this “wall of cash” now flooding the developed nations was diverted into capital programs in underdeveloped nations the human species might do something right – by accident.

    • StephenKenny

      I understand the implicit moral stance, but what makes you imply that underdeveloped nations are any better at not losing money than developed ones?

    • ps200306

      All that the flow of hot money into a developing economy does is create an asset bubble there too. That’s what happened with the Asian Tiger — once the hot money leaves, asset prices collapse, leaving the domestic economy ruined. In fact, that’s what happened with the Celtic Tiger too.

  6. markodxb

    sorry….. and understand its not easy to make such recommendations.

  7. deulofeu

    The recent announcement by the Bundesbank, that it is to seek the repatriation of Germany’s reserves of physical gold, currently held in New York and Paris, is a highly significant development in the on-going crisis in the financial system. As recently as three months ago, the German Central Bank was trenchantly opposed to such a suggestion and adamant that it was, in fact, of intrinsic importance to Germany that it continued to store physical gold reserves in New York and London that would be immediately available as collateral against dollar or Sterling denominated liquidity.
    The Bundesbank’s volte-face on this issue is an indication that the previously solid relationship of trust that existed between Central Banks worldwide, an intrinsic element of ah concerted campaign to avert catastrophe in the financial system, is beginning to fracture.
    The distrust that is manifestly obvious in the decision of the Bundesbank to demand repatriation of Germany’s physical gold reserves provides concrete evidence that concerns are growing with regard to the reckless and irresponsible abuse of re-hypothecation in the financial markets.
    The fact that banks, and other broker dealers, could re-use collateral pledged by their clients as collateral to finance subsequent borrowings of their own and that there are no limits in the UK on the amount of a client’s assets that can be re-hypothecated has created a truly alarming situation for the global financial system.
    In 2007 it was estimated that re-hypothecation accounted for over half the activity in the shadow banking system. When one considers that dependence on re-hypothecation has increased in the intervening period and that a small amount of hard assets are backing the infinite layers of debt that support our global financial system, it is easy to understand the alarm that has gripped the German Bundesbank. It is this that has prompted it to seek to repatriate its share of the relatively miniscule amount of ‘hard’ collateral that is currently supporting the truly astronomical and, ultimately, unsustainable debt levels worldwide.
    If the Bundesbank’s decision to request a repatriation of gold from New York can be interpreted as an indication that distrust is growing between Central Banks worldwide, then the recent joint announcement by the Government and the Central bank of Japan that they had jointly adopted a 2% inflation target to compliment a $116 billion fiscal stimulus plan to boost growth is a further worrying development.
    The recently elected Prime Minister, Shinzo Abe, had called on the Bank of Japan to unleash unlimited monetary easing and to accept a higher inflation target in an attempt to revive the world’s third biggest economy. With debt to GDP currently at 240% in Japan, a staggering 100bps higher than Greece, and the country suffering from a balance of trade deficit for the first time in over thirty years, the Prime Minister decided that somewhat desperate times required equally desperate measures.
    A decrease in Japan’s exports to China, – a result of the increased tensions between the two countries over the disputed islands of Senkaku/Diaoyu, – has further increased pressure on the Prime Minister to act. His decision, however, to compromise the independence of the Bank of Japan, by directly involving them in stated government policy of increasing inflation and attempting to devalue the yen has been far from universally welcomed. Germany’s Minister for Finance, Wolfgang Schauble, was quick to criticise what he saw as ‘Japan’s false understanding of monetary policy’ and claimed that it would ‘pump excessive liquidity into global monetary markets’. A senior colleague of Schauble in the CDU, Michael Meister, added to these concerns when he stated that Japan’s attempts to invigorate exports by pushing the yen lower against competitors was ‘very worrying’.
    What is implicit in the comments of both Scheuble and Meister is the fear that the policies being pursued by Japan will inevitably lead to a currency war that could have catastrophic consequences for the global economy. However, to attempt to portray Japan as the primary instigators of a global currency war and to ignore the fact that the US Fed, the ECB and the Bank of England have long since accepted that ‘money printing’ is the only weapon left in their armoury to stave off global depression is an abject lesson in delusion.
    The debate regarding currency devaluation does, however, provide a valuable insight into how the global financial crisis may evolve in the not so distant future. Though there are many who would have us believe that the crisis in the Eurozone, generally regarded as having been the greatest threat to global stability, has been effectively resolved there are others who fear that only a symptom of the malaise has been treated and not the disease.
    When Mario Draghi acted to address the threat that was hanging over the euro’s continued existence, by promising that the ECB would do ‘whatever it took’ to protect countries that were coming under increasing pressure to fund themselves on the bond markets, he inadvertently caused further distress to his long -suffering patient by destabilising one of the relatively few healthily performing sectors of the European economy.
    Throughout the crisis for the Eurozone, a crisis that has seen relatively all sectors of the economy degenerate alarmingly, the one bright spot for many countries was the advantage they could take from a weak euro to increase exports. Many countries, including Italy, Spain, Ireland and, in particular, Germany, highlighted the continued success of the export sector as a beacon of hope to citizens who were suffering the harsh realities of the crisis.
    With European leaders, joining Draghi in loudly proclaiming success in saving the Eurozone, they, ironically, ensured a strengthening of the euro at a time when trading competitors were aggressively devaluing their currencies. As a result, in this particular ‘race to the bottom’ the, and indeed the Eurozone, is currently the biggest loser. Though Spain and Italy can undoubtedly fund themselves at rates far lower than their previously unsustainable levels, the fundamentals of their respective economies are rapidly dis-improving.
    On the evidence of economic data recently released in Spain, relating to retail sales, house prices, manufacturing, impaired loans and unemployment, the country is currently witnessing depression-level activity. Retail sales fell by 7.8% in November, a record. Spanish banks’ bad loan’s ratio increased to 11.38%, another record. Fourth quarter GDP recently announced by the Central Bank revealed a 1.7% year on year decline, following on a 0.6% decline in the third quarter, the worst year on year decline since the third quarter in 2009 when the world was still reeling from the collapse of Lehmans. The latest unemployment figures are possibly the starkest illustration of the true economic reality on the Iberian Peninsula with 26%, or a truly staggering 6 million people, without work. When it was subsequently announced in November that Spain witnessed a 0.6% decrease in exports for the month compared to a 7.6% increase in 2011 further disturbing writing was on the wall.
    Spanish exports had previously continued to post relatively good result, based primarily on exports to non-European countries that rose on the back of a weak euro. This was, however, before Mario Draghi moved to address Spain’s difficulties in accessing finance on the bond markets, and by saving the euro strengthened its value. With the euro/dollar currently at 133 and rising it can be expected that Spanish exports will continue to tumble and plunge the country ever deeper into depression.
    It can also be expected that as this occurs the clamour for the country to exit the euro and return to a devalued peseta will grow ever louder and the focus of global financial concerns will once again return to the Eurozone. It is inconceivable to imagine that this eventuality has not been considered at the highest levels in Germany. The fact that German exports are now also showing worrying signs of weakening could well herald a further reappraisal of the Bundesbank’s support for the euro project, a support which many observers believe has been minimalist, at best, of late. It may also serve well to explain their recently declared interest in the repatriation of the country’s reserves of precious metals from the United States – as they seek to ensure that any prospective new fiat currency Germany adopts will be verifiably backed by its own hard asset, Gold.

    • Clarence Beeks

      Maybe that’s Germany’s game in the end… eject the PIIGS from the Euro by forcing them to make the decision themselves by inflating the euro so the pips squeak! very interesting times ahead!

    • Tony Brogan

      Good analysis but what is your solution for Ireland
      Ray Dalio knows the score. My bet is he moves cash into gold and silver and stays liquid but protected from inflation and then when gold and silver reach their true value will buy other assets. He handles private investor money and makes his living being successful

  8. SLICKMICK

    A jockey’s neck is as hard as his “”"”"” ? If the Brits pull out, they may close their labour market to Paddy . That is when our problems will multiply even further. The punt is worth 110 pence versus sterling, expect lots of indigenous manufacturers to get crushed over the coming months. Colm Mc Carthy was right about the stupidity of us joining the euro.
    Michael Torpey does a nice line in self preservation, he oversaw the disastrous lending @ First Active, jumped ship with a 7 sum pay-off in 2008, moved to Treasury roles @ ILP, NTMA, Dept of Finance, now he is @ BOI. Incredible !!!

  9. SMOKEY

    What stage of the six stages are we in? 3rd or 4th?

  10. Realist

    The heart of Minsky’s framework is that capitalism is inherently unstable and has self-destructive tendencies.
    Contrary to Minsky, the existence of the central bank is what makes modern capitalism unstable. It is this factor alone that is responsible for the current financial instability.
    Minsky had no clue actually why these stages.

    And Ray Dalio plays with other people’s money and looks like following just simple streategy explained below.
    He realized how inflation distort things and used it smartly in his strategy:
    http://www.zerohedge.com/news/2013-01-23/return-cash-beta-alpha-inside-look-worlds-biggest-and-most-successful-beta-hedge-fun

  11. Lord Jimbo

    Europe is a key trading partner, historically a source of investment (structural funds), something of a lender of last resort when the country is led off the fiscal cliff by a grubby elite, so it has as much as importance as our trading relationship with the UK, a country which seems to have found itself wedged between the issues of Scottish independence and European integration, interesting couple of years ahead which Ireland can benefit from if it plays its cards right, sadly no sign of that on the horizon.

    I doubt any country has as many things going for it as this little island and yet the place finds itself in so much trouble, remarkable the damage a few people can do. While a certain daily newspaper goes with slight rises in property prices as a signal that the game is back on, if only they would read one of their own columnists.

    The failure to put in place industries which manufacture goods or deliver professional services and instead focus on recreating a Frankenstein property bubble part II should ensure Ireland doesn’t move far from its current position. In the meantime, the society is showing signs of pressure, in my area, gangs of track suited kids roam the streets with nothing to do, aggressive and barely literate, older people fear long waiting hours in A&E, businesses feel the pressure with others closing, it is a kind of silent, indifferent decline.

    Such things cause concern especially when there is a growing social, political and economic vacuum.

    • Adam Byrne

      Yeah, loads going for this country, massive potential and opportunities galore.

      But run by a bunch of hopeless clowns and charlatans, voted in by a larger shower of ignoramuses.

      • Tony Brogan

        Needs new party Adam with a new focus. Dump the old baggage and buy a new suit.

        • Adam Byrne

          I like Sinn Fein’s policies (most of them) and some of their candidates are good – Pearse Doherty and Eoin O’Broin in particular but I decided not to join them for two reasons:

          1. I am not prepared to canvass or campaign to the general public as I have an utter disdain for them – most of them are idiots in the classic sense of the word. Any new political party is going to have the same problem. [EXTERNAL ISSUE]

          2. I have no time nor interest in going on memorial marches, which is what Sinn Fein do a lot of the time. That’s all total bollox. I don’t care what happened in 1969 or 1982 – couldn’t give a f**k. All I care about is the present and the future. Looking back is a waster of time. You may read about it but I’m not going on dopey marches – I told them this in no uncertain words.

          Pity, they have some good ideas and candidates (as mentioned).

          Politics in general is a dirty, unsavoury business. I’m staying clear of it and looking after number one, friends and family. Anything else is a bonus.

          • Adam Byrne

            Point 2. was [INTERNAL ISSUE].

          • joe hack

            I like Sinn Fein’s policies (most of them) and some of their candidates are good — Pearse Doherty and Eoin O’Broin in particular but I decided not to join them for two reasons:

            I agree…

            But your point 1 is why we are where we are…

            I will skip point 2 for now and go to your closing which is the similar to point 1…. and add it not easy to lead it is easy to sit on the side lines and asked someone to do the hard work..

            smiles

          • Adam Byrne

            I lead in my own way joe hack.

            The public are a bunch of hopeless fools.

            They get what they deserve.

          • joe hack

            Well teach them it only takes a few to change things, we know this… start with a manifesto, complaining is not a solution / fix

          • Adam Byrne

            I teach plenty and change a few too. I’m not complaining, just saying I wouldn’t go near politics with a barge pole.

          • joe hack

            yes even your thoughts here have an influence

          • Adam Byrne

            I wouldn’t have thought so.

          • Tony Brogan

            Funny thing is I liked a lot of their policies too.

          • BirdCourter

            Adam hi, I was having this very conversation with someone recently re how ironically one can be much more effectual outside of politics than in politics (David being an obvious example not just because of his writings but also his direct innovations like Kilkenomics, and Dun laoghaire Book fest etc and I am sure even though I don’t know any of you that other participants to this great forum do several other positive contributions in and beyond their day jobs etc.

            We expect too much from our political figures for several reasons but primarily because the system is, not at its core, designed to think in the macro-public long-term; (Dan O’Brien) has been writing good stuff on this for a while now. Now of course the best way to change the system is to join, but it’s not easy and it’s no coincidence some of our best and brightest stay out of politics; though personally I really applaud those few that do!!

            Fortunately and not to be too downbeat, the best thing about Ireland is its people and we have to keep innovating in our own small ways. Shamrocks of Success, as you know, being my own latest proposal (www.facebook.com/shamrocksofsuccess). I haven’t a penny in my arse pocket but I do have another 2 projects in the offing one involving US partners and another (a radical financial idea) I hope to have a sit down with David on sometime soon after I formulate the idea more soundly. Shamrocks of Success is offering the government a creative solution and one that will create jobs and lift the mood of the country positively. All I can do is put the idea out there but ultimately I’m not politically or media connected and fear (though to be fair I have to wait and see as talks with DCC have been cooperative to date); it could get usurped by some 1916 commemorative event that could end up costing the citizenry a lot. But anyway we’ll keep persevering.

  12. joe hack

    Déjà vu

    We need to have a neck like jockeys bollocks and default then we can invite the Brits to dine with us on the horse’s meat.

    If not, it may be soon be time to get skinny latte paper cups and go begging.

    It is often said that people in the past did know what they where doing and that we have learned so much since then.

    So it would seem we are enlighten in 2000-2013 and we know what we doing? But what will people in the future say?

    The money cyclists need to be run down

    For our own Irish self interest our government needs to Default.

    we are to deep in debt and we cannot sustain it without real help or a default and that help will not be forth coming we need jump now before we make worse.

    With the so called continued printing of money the people of Ireland will not be able to put food on their tables the government duty is to act as servants of its masters,the people.

    • joe hack

      Correction; It is often said that people in the past did “NOT” know what they where doing and that we have learned so much since then.

    • Tony Brogan

      So encourage a party with referendum , initiative, and recall as part of its policy. Go Assist DDI and provide the alterative that will make the government the servant of the people father than the master.
      Revitalise the constitution.
      Take care Joe.

  13. joe hack

    Creation; did “NOT” know

  14. joe hack

    Fools and money are easily parted; the Irish are the fools;

    The help is not going to come it is too expensive “A Moral Hazard” the puppy dog look from the government will just receive a head rub from others, they will say why should we bail you after all you are the 20th richest nation in the world, there are people starving elsewhere.

    But maybe if Enda does another cutesy dodgy roll;
    Man up Enda! No one asked you to pay the debts of your banks, Enda this is gambling table and no one at is your friend “It’s not personal, Sonny, it’s strictly business.”

    • Deco

      The Irish have been pumped with nonsense by vested interests to encourage them to throw money in the pursuit of happiness, whilst the vested interests ensure that they will not find any happiness.

      The people are not free enough to find happiness.

      • joe hack

        I meant the Irish nation acquiesce to the governmental actions and still do.

        “Vested interests” are also individual Irish people too, ‘generally’ I don’t assume that the Irish public any less greedy that the so called ‘vested interest’ that is why i would advocate rules to protect ourselves from ourselves.

        The Irish people were free to invest in property (some set out to buy more the a home) there was no gun to their head they were free to make those decisions as too were the “vested interest”

        Defining the “vested interests” might be a long topic for debate it could argued that the size of your wallet determines it, but that might just mean you were you were lucky and broke “vested interests” at any one time in a cycle.

  15. cooldude

    Interesting article and comments. As Deco has been pointing out on this blog for some time the bond bubble IS already starting to release air. This can be seen in the supposedly “safe” 10 year Treasury bonds in the US. There is a negative real return on these bonds and they are priced as if they are risk free. They aren’t and this will lead to an exodus from these supposed safe havens. Over 80 countries now have negative real interest rates so money in the bank is also a losing proposition. A rise in inflation is now a certainty and it is going to be a lot more than expected. We are now heading into an inflationary depression which will eventually lead to a currency crisis and a new medium of exchange. This is quite normal as unbacked paper currencies have an average life span of 38 years and this one is showing all the signs of it’s imminent demise. It will take a couple of years but we are heading for a new Bretton Woods type agreement and a new world currency system. This is why the Chinese and the Russians are adding to their gold as fast as they can get it. They know what is coming next is the end of the US dollar reserve currency system. The only protection that can protect on an individual level is hard assets such as land, gold, silver, platinum,food, oil and maybe some equities. Here is a very good report on all these issues and we can take some protection on an individual level from what lies ahead. Do not expect your government or central bank to protect you. Just listening to Enda at the moment should be enough to convince you of that.
    http://www.lemetropolecafe.com/img2012/Misc/Thunder_Road_-_December.pdf

    • Grey Fox

      Looks like the Irish Army lads will come in handy at some point, minding “dem thar hill’s in Wickla” that are filled with the yellow metal, supposedly!

    • Tony Brogan

      AAAPLUS Cooldude

    • Deco

      The bond market is in the clueless zone.

      Will Japan really pay back all that money ?

      What about Greece ? Will Spain really be able to make it’s banks solvent without running up Irish state debt scale debt levels ? Will Portugal and Cyprus balance their books and grow out of their problems ? Will France arrest it’s chronic never-ending decline in competitiveness since the mid 1970s ? Will Italy fix it’s labour market ? Will heavily indebted US states grow themselves at a rate that exceeds their growth in borrowing in both percentage and nominal terms ?

      There are massive assumptions about the bond market, and they simply do not fit unless there is “stimulus” and “a competitive readjustment” at the same time. The “stimulus” itself will only mess up the bond market because it usually means money printing.

      David is right. Defaults are now a mathematical certainty all over the place.

      • molly

        Band aid plaster to patch a hole the size of the moon comes to mind.
        Who’s going to feel the heat and take the hit big time .
        Looking at the whole story unfolding its just impossible to stop and impossible to resolve,who’s going to be caught in the cross fire,governments and nations.

  16. molly

    Well David the circle goes round and round.
    Remember the dragons den how many of the dragons had no real money just proped up by a scam system and the apprentice show mister big, the list goes on.
    When you sit back and think about it, how near to collapse are we???

  17. redriversix

    Germany is now among Iran, Venezuela & Libya to have formally requested the return of their physical Gold.

    The Netherlands has now also requested their Gold back.
    No deal on Irish Bank debt.

    French Invasion of Mali

    U.N to soon authorize military intervention in the Congo.
    U.s Special forces arrived in Congo this month along with 3 U.A.Vs [ drones] to “assist” in fighting rebel terrorism.Check out Natural resources of the Congo.

    U.K Economy now in triple dip rescission.

    As stated before Bond bubble explosion due.
    We are being dragged into a global War.

    Thanks for the article David,great stuff.

  18. redriversix

    Oh I forgot to mention..

    Ireland due for another Bank Bailout & recapitalization..probably end of year or early next year…..but its coming.!

  19. Harper66

    http://namawinelake.wordpress.com/2013/01/28/weve-largely-stopped-borrowing-to-pay-for-services-and-welfare-now-were-borrowing-to-repay-interest-on-debt/

    “…. we have now moved to a financial position where the deficit is primarily caused by interest on our massive debt burden”

  20. redriversix

    further contractions in our economy shall cause further downward adjustment of revenues requiring more borrowing to run the State.This years budget is in October.

    Property continues to fall in value .Banks continue to withhold lending facilities from Business.
    Austerity failing but continuing.

    Mortgage arrears growing as well as the threat of repossession. Unemployment growing etc etc etc

    The E.U will now listen to Ireland and assist with “debt restructuring” because we hold the Presidency of the E.U for six months …………..!

  21. george

    DICING WITH DEBT

    An Icelandic journalist was talking last week in the Pat Kenny Show, about Partial Debt Forgiveness in Iceland, Banks, and Bankruptcy Laws.

    After the collapse of the Icelandic economy, the Icelandic Government, decided that in order to solve the huge economic mess they were in, three things were essential.

    - The first one, was for the BANKS to take some of the losses.
    - The second one, was a PARTIAL DEBT FORGIVNESS FOR PROPERTTY LOANS, by which people would have to pay 110% of their property loan at actual market value, and not at the original value of the loan. So if a house was bought at 400.000 kronas, and now has a market value of only 200.000 kronas, people have to repay the loan for 220.000 kronas only.
    - The third one, was to change the BANKRUPCY LAWS, by which after two years, individuals are free of it.

    But as most of our political class maintains here: “IRELAND IS A VERY SPECIAL CASE”, AND WHAT ICELAND HAS GOT, IRELAND CANNOT, and all the other nonsense the established politicians like to repeat like parrots: “ that we are part of a bigger European Family, and the euro, and the people should pay for the Banks debts, because there aren’t any other options to us. So why did we change Government then?

    Ireland wasn’t a “special place” for DOCTOR Savita Hallapanavar, the woman that was found to be miscarrying in one of our best University Hospitals. It rather was the Country, that paradoxically proclaims to the World that is Pro Life, where she found her death, after according to her husband, pleading for days for a termination of her pregnancy.
    Nor it is for the thousands of families, who at the moment are being crucified by the greed of Banks, with the indifference and inaction of most of our Politicians, that are presiding over a Country with one of the highest national debts per head of population in the World, enjoying themselves among the highest salaries and conditions in the world, paid by the rest of us. And that now want to convince us, that ones we get more time to repay the nationalised Banks debts, it will be a great achievement for the Country, and it means, we are going to be able to repay it with no problem at all!
    .
    Our REAL PATRIOTS are in Ballyhea and Charleville, putting up day after day with horrendous weather conditions, and terrible personal situations, getting not a single penny from the State. Families that through their courage, example, and their generosity, are doing much more for Irish future generations, than anybody else; leaving most of our so called “leaders”, looking as mere charlatans with a huge salary.

    In the estate this Country is, no politician or civil servant should take more than 150.000 euro in pay. If people at the top do it, stop repaying the Banks debts, and implement the same policies as Iceland, then they could go to renegotiate the Croke Park Agreement, setting the example from the top, and making the Irish economy more competitive. But who can seriously believe them, when they are doing as little as possible, in order to keep their privileged status,as it is, when thousands of decent hard working families are losing their jobs, homes and hopes?

    .
    THANK YOU to the People of Ballyhea and Charleville! The ordinary people of Ireland with a bit of sense, should know who are our REAL PATRIOTS!
    .
    DICING WITH DEBT (Don’t miss the excellent documentary!!!)
    http://www.abc.net.au/4corners/stories/2012/03/08/3448633.htm

    • Adam Byrne

      I’m going to head down to Ballyhea myself to join one of the weekly marches in a few weeks. Will have to get a B and B for the Saturday night. Anyone got any recommendations?

      • george

        Adam I’m going to go too, I couldn’t go last weekend as I didn’t have petrol money! Cheers

        • redriversix

          if you & Adam what to come with me some Sunday morning,we can share the costs ,leave early Sunday morning .come back Sunday evening..?

          • redriversix

            drove down on Sat night for meeting,took about 2 hours 30 minutes..Drove back after meeting.

            Very good evening,Declan Ganley,Luke “Ming” Flanagan..Peter Mathews T.D Senator Sean Barrett & Unite Economist Mike Taft…

          • Adam Byrne

            I fancy staying the night down there Barry but lets keep in touch. It’ll be a few weeks yet till I can drum up the cash. Got a few invoices out. 30 days means 90 days in Ireland.

          • george

            redriversix thank you very very much for your kind offer!
            So you were there. I felt so frustrated I couldn’t go, especially when I’ve heard a gentleman arguing so well the case in Claire Byrne`’s radio program, and asking the public to support them. I’ll be there, after I get my pay cheque, at the end of the month.
            Cheers!

      • Tony Brogan

        Well done Adam I cycled to Castlebar in October to join the march there. Take a tent and sleeping bag!!
        give the BnB money to someone in support!!

      • Not doing very well I see.

  22. Deco

    I reckon that this is David’s best article of the New Year. In terms of quality and relevance to the overall economy.

    The central banks are messing about. Europe is awash with cash for spending on assets, but is also in an income crisis. Just look at the PIGIS. There is an income crisis. 20% Spanish unemployment is an income crisis. The markets are out of sync with the real economy. In particular the bond markets in Europe west of the Rhine and south of the alps are indifferent to economic weakness and declining incomes.

    Wales will stick with England because Wales is part of the same economy, and is highly dependent on England. Scotland’s nationalist party are not yet ready to run anything bigger than an mid sized city. Their main selling point is that they sell hope whereas the Scottish Labour party sell dependency and more lethargy, and the Scottish Lib Dems pretence. Since the Scottish Labour Party took over Scotland politically, Scotland has been going down hill intellectually, and economically.

    The British decide what is best for Britain. They are in effect putting it up to Brussels and Frankfurt to get their act together and stop dithering and blundering. Several other North European countries did not get excited, instead evalauting if Cameron had a point. The Dutch seem to be also evaluating. The French unleashed loads of hyperbole and swamped themselves in metaphors.

    But the real movement is the underlying reality. Cameron is delaing with an underlying reality faster than the others. That would indicate to me that the British are have a better grasp of where they stand than the other countries. They are moving faster. It might also be that Britain’s Debt to GDP ratio post Gordon Brown is careering out of control, and the British have realised that they need to get a grip on matters.

    • Tony Brogan

      Solid comments Deco

    • Eireannach

      What you neglect to consider, Deco, is that there could very easily be mass default of Iberia, Ireland, Greece and so on WITHIN political union of Europe. If a banking union is created, the PIIGS could default but institutionally, the EZ core would still hold together, just as the US will hold together as a union even if a federal state defaults.

      Will political union happen before the mass sovereign defaults of the PIIGS? The answer is YES.

      The Brits realise that Mario Draghi has kicked the can far enough down the road to lock the EZ into a United States of Europe, whether the populations of the USE want it or not. So he’s trying to figure out can the UK start a two-tier EU by leading a group of renegotiators who want to keep in the single market, out of the USE core.

      Have the Swedens, Danes, Finns, Dutch, Czechs, Irish (fat chance!) or anyone, in fact, stood forward shoulder to shoulder with Cameron to say they want a new Treaty for a two-tier Europe?

      The answer is NO. Despite your endless anti-EU rhetoric, you will fail to stop the creation of the USE, within which sovereign defaults can happen in a few years but the political union will hold.

      A lot of Europe will be inside this USE. Maybe we’ll fall out of it, or maybe not. Maybe everyone in Europe, all 27 countries, will be in it totally and utterly.

      But for ideological reasons and a bit of emotion on your part – you want to be independent, don’t you Deco? God love you, like Healy Rae’s patheitically weak pub fighting-talk, you’re reduced to DMcW missives and blog-talk.

      The EU may fall apart – OR IT MAY NOT, sovereign defaults and all. Deal with it!

    • As usual you are more derogatory to the Scots than to Cameron and his public school toffs. I put it to you that the Scots would do a far superior job of running an independent nation than the Irish could

      The labour party have not taken over Scotland and this is why you don’t know what you are talking about. Election votes used to be split 50/50 between tory and labour but after Thatcher the tory vote plummeted to zero

      The tories are hated in Scotland and with bloody good reason. Screw Cameron. He is a sociopathic bully boy

      The reason Cameron is making noises re Europe is that he is under political pressure from little englanders in his party to are threatening to jump ship and join Farage and UKIP. It is all hot air and piss

      • “The Conservatives are in real trouble. Unless they can stage a reconciliation with the large numbers of former Tory voters who now intend to support Ukip, they can give up any hope of challenging Labour at the next election.”

        Cameron is under the cosh from extreme right wing elements and former thatcherites who defected to UKIP. Farage is calling the shots and among his despicable views are the theory that children from poor social backgrounds have a genetic deficiency

        http://blogs.telegraph.co.uk/finance/thomaspascoe/100021890/ukip-are-the-true-heirs-to-thatcher/

        Please don’t try to tell us that these people are honourable. They are damaged

  23. Tony Brogan

    Well David, you are finally zeroing in on a part of the problem. The issuance of unlimited fiat money from central banks. This has been yelled at you loud and clear on the blog for months; do you finally listen.

    Still no solution proposed which is to remove the source of that money.
    Close the central banking system and ban fractional reserve banking. Will you address that issue next? Is your central bank education and training getting in the way of clear thinking? Has your education clouded your mind? Can you see through the fog yet David.

    Here is my solution David, presented once to stoney silence here but to acclaim elsewhere. So I will present it every article until you address the issue.

    This applies as an Irish solution but is identical as a solution for any state, city or country.
    —————————————————————————————————————
    January 25, 2013 at 10:43 pm Talk is cheap. Here is a solution. Tear it apart if you can. It will be my standard answer from now on to any debate on improving this or that. We have to solve the fundemental problem nobody addresses. Our money system
    –––––––––––––––––—
    What is not understood, except very few, is that it is the monetary system that has destroyed the economy.
    People are blinded by preconceptions and opinions planted by propagandists’ in the media.

    We are fed lies and half-truths all the time. Side issues are raised to distract us.
    All these topics to debate are red herrings, straw men, wooden horses, to distract. They get us to argue over non entities, to divide us from ourselves.

    I spend 40 years reading such pap and could not figure out why there was not resolution, why I did not understand. Then one day I received a lecture from a stranger, and I looked in to what he told me and then I realized.

    I was being had, set up, deliberately deceived, and made sure to be confused. I was being lead down the garden path. I knew my standard of living was declining; I could see it took one and a half wages to buy a house instead of one. Then it took two wages and now around here two and a half wages.

    Then I struck on the basic problem and read about in my own time. My self-education program cost me 30 hours a week at my earning rate of 100 dollars an hour, times 10 years. You work it out. Yes I am a slow learner. Yes I go over and over things but I know I have it correct. That cannot be said for other educational processes.

    So what is the problem? Why are we where we are? It is so simple that it is hard to grasp.
    We have given over to others our birthright. We have abandoned the essence of trade and prosperity; man’s greatest invention on the road to prosperity, comfort and wealth.
    We have given away the control of our private property. We have given our money. Our money is in the hands of those who desire the wealth that it contains. Money is the great enabler, the medium of exchange. It allows the exchange, efficiently, from those who have and don’t want to those who have not but want.
    Money enables trade instead of barter. Money allows an exchange by mutual agreement for the betterment of both parties. After the exchange both parties are better off.
    Money allows the storage of wealth in a portable form. It is able to be deployed immediately to achieve a desire. It is liquid, immediately available.
    Money is a catalyst to the exchange of goods and services. It is the medium of exchange; it is not consumed in the transaction. It is ready to perform this function over and over again.
    To have the widest application money must be universally acceptable. I travel with my money and want to spend it where I arrive. Money must be trusted wherever it is. One unit of exchange must be the same and equal to other units of exchange.
    Money must be fungible.

    To function effectively money must be divisible, with the sum of the parts equal to the whole. Thus money can act as a medium of exchange in small transactions as well as large ones.
    Money thus exercises great control and effect on the economy. Such power is coveted by the unscrupulous.

    HE WHO CONTROLS THE MONEY CONTROLS THE ECONOMY.
    HE WHO CONTROLS THE ECONOMY CONTROLS THE PEOPLE.
    HE WHO CONTROLS THE PEOPLE CAN ENSLAVE THEM AS SURELY AS IF THEY ARE CHAINED TO AN OAR.

    Over time our money has come under greater control of a cabal. Over time the people have relinquished control of their money. First control was relinquished to the state. Then the state gave control to the cabal. Then the cabal changed the form of the money to such as impoverishes the people to the benefit of the cabal. It enriches the cabal and transfers the peoples’ wealth away from the people.

    People now work harder and longer for less and less. People are indebted when they are born and further indebted when they die. People spend their lives working to service the interest charges on these debts without ever paying off the principal.

    THE SITUATION IS THAT THE CABAL OWNS THE MEANS OF PRODUCTION AND NOT THE PEOPLE. HOW CAN IT BE REGAINED? WE MUST REGAIN THE OWNERSHIP AND CONTROL OF OUR MONEY.

    It can be seen that a freeman owns his own money. A debt slave does not. The money is owned by the master.

    The method of operation by the cabal is to own the central banks which are in charge of the money. This way they control the government by stealth or overt threat.

    Our salvation is to reclaim our birthright which is to reclaim our money as personal property.
    The people must regain control of the government. The government, aka the people, then must close the cabal operation called the central bank. The current money system must be halted and stopped. Debt based money must be destroyed and replaced with money that is an asset and a store of wealth.

    The current money system besides being a debt based system is also subject to distortion in value through inflation of the money supply. A money system must retain stability in the amount of money within the economy and not be allowed to expand and contract by the guesses of an individual or committee. No individual can estimate the future economic decisions of his neighbours let alone the millions of people using the money. Any changes induced into the system will distort the economic signals and thus create inefficiencies in the economy.

    Over millennia mankind has experimented with many different currencies and forms of money. There is a general agreement as to the form and characteristics of which money works best and which does not work well.

    The solution for the long-term growth and health of the economy (at a state level) is as follows.
    The people must regain control of the government.
    The central bank must be closed and the fiat debt based money system closed.
    Treasury must replace all current money with treasury notes issued directly to the people one for one. This Treasury money will still be subject to inflation and so inflation protection controls need to be implemented.This requires silver coin be monetized.

    Silver coin is to immediately be monetized. These coins can be any that are trusted to contain a stated weight of silver and state a purity of silver. The coins can be minted by any mint of sterling reputation and already a trusted source of coin. Such as the Royal Canadian Mint and the silver one ounce Maple leaf coin.

    These coins will circulate alongside and parallel to the fiat treasury bills. The legal tender laws are to be repealed. This way there is open competition in the money people can use. If the treasury money becomes inflated people will prefer another currency and would likely save in silver coin.

    Silver will be monetized as follows. A monetary value will be set on the coin that is guaranteed to remain approximately 20% or more above the world spot price for silver. If the spot price increases then the monetary value of the coin will also increase. The monetary value of the silver coin will never be reduced even if the spot price of silver would drop substantially lower.
    This is the calculation to monetized one ounce silver coins.

    Current spot price in the world = E23.80.
    Plus by 20% = E28.56
    Round up to next multiple of 5 = E30.
    The calculation is done as of midnight every Saturday and on Sunday the value is published on the web site and in the press and is good for the following week.

    Should the spot price of silver rise then the monetary value of the silver will rise in increments of 5 euros. Should the spot price fall the monetary value of the coin will not ever be reduced. Thus the coin protects against inflation and retains value.

    Monetizing the Canadian Maple Leaf for example would cause silver to flood into the country as people could “spend it” at prices higher than they paid for it. That would be an initial boost to the economy. Other coins from trusted mints could also be monetized. Removal of the legal tender laws (and VAT taxes on silver) would allow settlement of private debt in any currency agreed between the parties and fiat currency could not be forced on people in settlement of private debt. Government could still insist that taxes be paid in fiat but they could also accept other money in payment too.

    The state could also mint silver coin. A beautiful coin of Irish design. Silver would be bought at spot prices, minted and coin sold into circulation. Any profit in the process accrues to the government as seniorage and would allow accumulation of precious metal that would begin to back the treasury notes issued as currency.Coin will continue to be sold by the irish mint until demand is sated.

    This whole process means abandoning the Euro but not necessarily the European trade union.

    Having established a stable currency and an ‘honest’ money system, the national debt will have been largely expunged and paid off with the new currency. The country would be debt free with no interest payments. The costs of the state budget would be radically lowered and income taxes could be abolished and the income tax regulations eliminated. This would result in spending power returned to the people and the tax breaks returned to the people. The economy would be dramatically changed and people able to concentrate on being prosperous in a real way rather than in the mirage provided by a credit fueled boom and bust.

    But most important of all the people would be freed from the bondage of the debt based fiat money system and their masters. They would be a free people in every sense of the word.

    That would be a wonderful 100 year celebration would it not? Free at last.

  24. Tony Brogan

    Ray Dalio

    Net Worth

    $10 B As of September 2012
    Founder & Co-Chief Investment Officer, Bridgewater Associates
    Age: 63
    Source of Wealth: hedge funds, self-made
    Residence: Greenwich, CT
    Country of Citizenship: United States
    Education: Master of Business Administration, Harvard University; Bachelor of Arts / Science, Long Island University
    Marital Status: Married
    Children: 4

    • joe hack

      Hey Tony Brogan, what does he have for breakfast Golden Nuggets breakfast cereal

      Education: Master of Business Administration; see his an office Clark, if he had done online course he be worth Billions and we would then be told that he was successful………..

    • No doubt he would easily pass the Are You Fit to Have Children Test!

  25. Tony Brogan

    From archives Lemetropolecafe

    Dalio and where to invest

    Just last month, a man named one of the 100 most influential people by Time Magazine, Ray Dalio, is also on the gold band wagon. Dalio is also Not a long time gold bug. I recently wrote a post about what he is advising that said, “Now, a modern day version of JP Morgan is telling the world, ‘Gold is a currency.’ That’s what $120 billion hedge fund manager Ray Dalio said recently about the yellow metal. Dalio, founder of Bridgewater Associates, doesn’t give many interviews. So, I find it very telling that when he does speak, he says, ‘It’s not sensible not to own gold.’ When asked if he owned gold, he quickly replies, “Oh yeah, I do,” and said people should have ‘10%’ in their portfolios.”

    “10%” gold in someone’s portfolio–that’s all? Think again. Tom Cloud is an expert in financial planning and tangible assets. He has more than three decades of experience advising high-net-worth clients and institutional investors. Some of the individual high-net-worth clients have more than $20 million to protect. I talked to him on the phone this week, and he told me most of his clients are going to a 45% allocation of physical precious metals. This move is the polar opposite of debt and leverage. This is a pure insurance and protection of wealth play.

    Think putting “45%” in precious metals is outrageously high? John Paulson, who made billions betting on the housing bust in 2007, has more than 44% in gold assets or gold shares in his fund. (Click here for more on John Paulson’s gold holdings.) By the way, Paulson recently sold all of his JP Morgan stock.
    —————————————-
    This is the smart money movement David, so how about addressing this in your follow up essay.

  26. Tony Brogan

    10/3 Eric Sprott & David Baker – Do Western Central Banks Have Any Gold Left???

    Notwithstanding the recent conversions of PIMCO’s Bill Gross, Bridegwater’s Ray Dalio and Ned Davis Research to gold, we realize that many mainstream institutional investors still continue to struggle with the topic. We also realize that some readers may scoff at any analysis of the gold market that hints at “conspiracy”. We’re not talking about conspiracy here however, we’re talking about stupidity. After all, Western central banks are probably under the impression that the gold they’ve swapped and/or lent out is still legally theirs, which technically it may be. But if what we are proposing turns out to be true, and those reserves are not physically theirs; not physically in their possession… then all bets are off regarding the future of our monetary system. As a general rule of common sense, when one embarks on an unlimited quantitative easing program targeted at the employment rate (see QE3), one had better make sure to have something in the vault as backup in case the ‘unlimited’ part actually ends up really meaning unlimited. We hope that it does not, for the sake of our monetary system, but given our analysis of the physical gold market, we’ll stick with our gold bars and take comfort as they collect more dust in our vaults, untouched.

  27. redriversix

    Currency Wars + Trade Wars = World War..

    Iraq,Afghanistan,Iran,Syria,Yemen,Congo,Mali, Somali,
    Bahrain,Lebanon,Palestine,Nigeria, Pakistan…….Turkey,

    Amerika has 35,000 troops stationed around the World.The Biggest U.S Embassy in the World is under construction in Iraq.
    Amerika has 737 bases around the World

    2013 US Defense Budget $633 Billion Dollars

    • Tony Brogan

      final death throes of a dying empire. Nowt so dangerous as a wounded tiger.

      All on debt based printed money. Guaranted to bankrupt the nation. Very dangerous.

  28. Tony Brogan

    Europe’s (unresolved) experience with its debt crisis provides an insightful window into the future. Austerity measures in Ireland, Portugal, Spain and Greece have caused tremendous pain to their citizens (25% unemployment rates) and wreaked havoc in their economies (double digit retail sales declines).

    http://www.sprott.com/markets-at-a-glance/ignoring-the-obvious/

  29. joe sod

    As regards Britain and the EU, they are having an identity crisis, their influence in europe is diminishing as europe has spread eastwards. Germany is now the biggest economy and has become more influential in europe and the woorld since 1990 whereas Britains influence has diminished. In the forbes list of the worlds most influential people in 2012 Angela Merkel was third whereas David Cameron was at 12, Mario Draghi and Mario Monti also scored higher in influence. Another factor which people there dont like is the open door immigration within the EU

    • TheIrishFonz

      Britain is a major world economy despite the ups and downs and seeming inability to nail emerging markets(the visit by the Chinese some time back revealed much bigger deals for the Germans than for the British which said a lot).

      Britain still has a role to play and I wouldn’t write it off so quickly just because the Germans are shipping out the Mercedes. Britain has natural allies in Europe, historically the Portuguese, the Scandinavians, especially the Danish, Ireland is locked in because of trade, Central and Eastern European countries especially Poland don’t want a dominant Germany, nor Italy, they certainly want Britain in the game as a counterforce. Britain is also a permanent member on the UN Security Council which the Germans are not and a very canny player of the diplomatic game, it also has the Commonwealth which is not insignificant.

      Britain has strong links to the US which the Continentals have never liked, the so called ‘Anglo-Saxon’ axis. Britain is trying to counter the EU project somewhat because Germany is running away with it something which should be supported because one power dominating the EU is a disaster for all while also trying to win support for the Conservatives going into the next election. Ireland has an oppportunity amidst the jockeying for position and is trying to get back in the game but one has a sense that the domestic economy, the ridiculous level of unemployment, consumption decline etc may well catch up with those in Leinster House who seem in cloud cuckoo land.

      • joe sod

        good post, an overly dominant Germany in Europe probably not a good thing. The unification of Germany in 1990 meant that Germany dealt with the new Europe straight away in 1990 which turned out to be a big advantage. The other former western european countries didnt really feel the effect of eastern enlargement until the last 5 years. But it does look like Britain is throwing a hissy fit because its not getting its own way. Its a dangerous game what if it results in other countries choosing to leave and the break up of the EU

  30. bonbon

    Iceland Wins Case Against Inter-Alpha Bank Bailout

    Jan 28 (EIRNS)–The tiny nation of Iceland has scored a victory against the Anglo-Dutch financial oligarchy. Headlines are leading with words like “unexpected” and “surprise” in describing the ruling, by the Luxembourg-based European Free Trade Association (EFTA), affirming Iceland’s decision to defend its sovereignty by not bailing out British and Dutch banksters (“bondholders”) after the 2008 bankruptcy of IceSave bonds.

    IceSave was an online bank designed by the Inter-Alpha banks to facilitate the financial bubble through “savings” bonds paying 6%, and further connected to the bubble network through branches in the island of Guernsey, a British Crown dependency in the English Channel. At the time of its failure, in October 2008, the combined nominal indebtedness of Iceland’s three largest banks, Kaupthing, Landsbanki (IceSave’s parent) and Glitnir, was more than five times Iceland’s Gross National Product.

    As runs developed against the banks in early October, however, Iceland’s parliament quickly voted through a resolution putting the domestic depositors first in any bailout. When the bank failed on Oct. 7, the Brits quickly realized they were being frozen out, and passed their own resolution — taking effect 10 minutes after passage — seizing Icelandic assets under a post 9/11 anti-terror law, the first use of the 2001 law supposedly designed to contain jihadist terrorists. At some point, both the British and Dutch governments voted to bail out the bankrupt bondholders themselves!

    In 2010, Iceland was forced to shoulder more of the foreign debt, in order to get an agreement with the IMF, but still maintained the authority of the original bankruptcy — taking control of the banks without assuming (all) their debts. During 2011, Iceland’s citizens further supported their national sovereignty by voting up, not one, but two referendums, both affirming the takeovers. It was after those two rebuffs that the banksters undertook the suit through the EFTA which was denied today.

    “It is a considerable satisfaction that Iceland’s [defense] has won the day in the IceSave case; the EFTA Court ruling brings to a close an important stage in a long saga,” the government said in a statement. In a recent interview with British television, Iceland’s President Olafur Ragnar Grimsson denounced Britain’s “eternal shame” for invoking the terrorism laws. “We were there together with al-Qaeda and the Taliban on that list,” he said. “We have not forgotten that in Iceland.”

    This serves as perfect prelude for the Icelanders to be the first nation to pass a Glass Steagall bill, which is now pending before the Economic Affairs and Trade Committee, and is expected to be voted on before national elections in April.

  31. bonbon

    It seems everyone is willing to discuss jockeys running 2 horses (bets on now !), and Cameron’s ploy.

    What really is causing a fuss is none of this, rather :

    ECB Stirred Up by Bank Separation Debate

    Jan. 28 (EIRNS)–The European Central Bank has now also jumped into the widening debate on bank separation. “An impact assessment needs to be carried out as a matter of priority,” the ECB said in an e mailed statement this morning today. “The proposals which the Liikanen Group have made, may have a significantly different impact across the EU, given differences in the structure of the banking sectors,” the statement said. “This could produce different consequences in terms of divergent funding costs as well possible unintended consequences, namely on the real economy of member states.. This needs to be assessed.”

    As under the non-binding (!) suggestions presented by the Liikanen Group, EU banks would be forced to push much of their trading activities into separately capitalized units and set up extra capital buffers, on which however “further clarification” was needed, the ECB added.

    “The addition of a further capital buffer for European banks would need to be duly assessed as it would come on top of several other new requirements including the counter-cyclical capital buffer, the capital conservation buffer, the additional capital charge for systemically important financial institutions and, possibly, the systemic risk buffer,” the ECB said.

  32. bonbon

    Tyrie Calls for Electrifying the Ringfence

    Jan. 28 (EIRNS)–In an oped in today’s Financial Times, Andrew Tyrie, British Conservative MP and chairman of the parliamentary commission on banking standards, calls for “electrifying” the ringfence in the proposal for banking reform that the government of Prime Minister David Cameron is issuing.

    Tyrie writes, “The ringfence must be ‘electrified’ if it is to stand a better chance of success. In other words, if the banks test the ringfence too much they will get a shock. We therefore recommended a reserve power for full separation, an approach approved” by Sir John Vickers who chaired the Independent Banking Commission, aka the Vickers Commission, which calls for ringfencing the activities between investment and commercial banking within any one bank. He further wrote that the regulators also want ringfencing strengthened. It seems it is only the banks that don’t want it, and it is the strength of their lobbying against it that “makes the case eloquently for electrification.”

    Tyrie adds that “All history tells us that banks will be at the ringfence like foxes to a chicken coop unless they are incentivised not to do so…. Electrification is therefore essential to ensure that the banks comply not just with the rules of the ringfence but also with the spirit.”

    • Tony Brogan

      Get rid of the central banking system and fractional reserve banking for a real clean up all else is a mirage.

      • Realist

        Exactly:
        1. Get rid of central banking fractional-reserve system
        2. Spend and invest what you (domestic) or somebody else (foreign) previously saved.
        3. Leave freedom to decide where and how to do 2. above to people and companies.

        This will prevent both distribution of money and destruction of wealth.

    • bonbon

      Actually I find the Electrification idea rather amusing. Imagine the wayward investment banksters stumbling about where before they could empty the till?
      All those horses heading straight for the Electric Fence.
      I think DMcW could do a very good addendum to the Punk videos!

      Anyhow every sovereign state including Ideland, Ireland, and even the UK, has a natural right to its own banking system, split of course. No international crew has a right to shut down any state’s banking system.

  33. bonbon

    A reminder that all is not well with the galloping LIBOR banks as they round the last turn to a banking union… (taking late call bets now…)

    Nine German Banks Investigated in Libor Case

    Jan. 28 (EIRNS)–As reported by the {Sueddeutsche Zeitung} and other news dailies this morning, the German financial market watchdog BaFin is not only investigating Deutsche Bank and Portigon (the bank that replaced the carved-up former N.R.W. state landesbank WestLB), but also seven other institutions: Landesbank Berlin, BayernLB, LBBW, Commerzbank, DZ Bank, Helaba and NordLB have been targets of initial investigations. Two of the latter ones have not provided the required information, so that BaFin will launch a special investigation into these two banks–, whose names were withheld, however.

  34. Alan42

    I have a good friend who is high up in one of the big investment banks . Their take on the ‘ Global Financial Crisis ‘ is and I quote ” It was caused by poor people who could not afford their mortgages ” I actually thought that they were joking . What was shocking but not really surprising was that their was a sense of no lessons having been learned .

    I was talking to a friend who was trying to convince me and my wife that we should buy a house in the California as a ‘ investment ‘ as everything was on the up and could only get better . I replied that all the central banks are just printing money and if everything was so wonderful , then why would they be doing that ? He looked at me like I had just run over his dog .

    • Deco

      I would easily believe both stories.

      Just look at the approach of his soapiness writing in The Irish Times, continually expressing the need for PAYE taxpayers to take responsibility for carrying the banks (as if the banks are not expected to be responsible).

      Therein lies the greatest problem of the West. Intellectual bankruptcy. The predominant opinions on the media, which are given reverence and respect are purely nonsensical.

      Or to put it another way – the policy framework being driven by the power centres, are at the behest of vested interests who are intellectually empty, and morally insolvent. Financial insolvency is an inevitable result of all of this. And the solution is always provided as being to stick it on the sweat and toil component of the economy. The results is one big Ponzi scheme based on the gullibility of the active, naive part of the population.

      This is politics trumping economics. Don’t be surprised to see increasing moves towards greater political control, of the population. What they don’t see is that it is killing the economy. Throwing bank debts into the public finances is going to wreck the bond market.

      Whatever will the soapy one say then ?

    • Tony Brogan

      My experience is that most bankers do not understand money. they do not know what it is or how it works.
      They have no idea of the math od compound interest.
      ignorant administrators.

      • Realist

        They are real professionals, they know the business they are good at, to earn money for the bank.
        All they need to know is that on each euro they lend will earn 13% on personal loan, …..
        The central bank grant for banking license is the biggest possible privilege to have.
        Risk, what risk, central bank will help them together with the states and their tax payers :)

    • Adam Byrne

      Haha classic tales Alan, thanks for the laughs. Well it WOULD be funny if it wasn’t so sad.

    • bonbon

      Be brave and tell them we are going to split up his toys, take investment banking out to dry. Glass-Steagall.

      You will cause catatonic shock – fun eh?

  35. Deco

    When the main page in “Marketwatch” issues a warning, then we know even the mainstream is covering it’s options on the possibility of a crisis.

    http://www.marketwatch.com/story/critical-warning-no-7-banks-crash-economy-again-2013-01-29

    The essential point made by Paul Farrell, is that Wall Street has not learned any lessons. Full marks then to Helicopter Ben for bailing them out, and for ensuring that the chancer element is protected from their own recklessness and bad judgement. It makes a repeat almost inevitable. Just a matter of when will this happen.

    • bonbon

      I find it funny to hear (ex)-Tigers, striving for world stupidity Nobel Prizes, in the face of the sheer madness of Draghi and Bernanke.

      Drop the “me-too dumb” attitude, these two got the cigars. Their stupidity has academic qualifications, serious study, and practice at that. It is astounding to see. It is so easily identified from where it comes, that people expect a much cleverer explanation!

  36. DC

    ” What is viewed as “underinvestment” in stocks is actually a symptom of a rise in the gross indebtedness of the global economy, enabled and encouraged by quantitative easing of central banks, which have been successful in suppressing all apparent costs of that releveraging. ”

    A Must Read!

    http://www.hussmanfunds.com/wmc/wmc130128.htm

  37. DarraghD

    It’s weird, for all this “wall of money”, there is absolutely fúck all of it that I can see, making its way down into the real economy in this country. Isn’t this what money is actually for in the primary sense?!? Isn’t it meant to allow us to trade products and services?!? Isn’t it meant to allow the mechanic, who isn’t a farmer, earn a crust through fixing cars, and pay for his bread and his meat using money, that he has earned via his/her trade? In the same way, isn’t it meant to allow the farmer, who can’t fix cars, to hire the mechanic to fix his car or tractor, using the wage that he generated for himself by selling tillage or livestock?

    But look what has happened here in our country, the money that Joe the mechanic earns, in order to pay for the goods that Paddy the farmer has produced, simply isn’t there, because it’s been extracted out of the economy to pay for mistakes of a private institution that were made back in 2002, 2003, etc, and to pay 1 billion a month to run a country that is still spending 1 billion a month more than it is generating, 4 years into a recession!!!!!!!

    In my own industry, (motor industry), people can’t spend what they don’t have, and if they do manage to scrape it together, they’ll get the used parts in a scrapyard and pay some lad off the books to do the labour, the same lad providing the labour is probably on the dole and trying to supplement his income with 100-200 Euro a week cash in hand, with his eye on going abroad before the summer.

    This is exactly what is going on in the motor industry in Ireland that I work in today, day in day out. Legitimate businesses are being priced out of the market, by scrap yards and illegal black market labour. The guy providing the labour off the books doesn’t give a fúck because he will be living in Australia in the highly unlikely event that Revenue even become aware of his activities, let alone actually try to take any action against him.

    I’ve a mate who runs a business in the transport/logistics industry and the very same is going on there, the man in the white van is undercutting legitimate businesses, happy to earn 100-200 Euro a week to supplement his dole.

    The only growth I’m seeing in this country is the growth in the black market, and growth in the number of legitimate businesses in the domestic economy going to the wall, and these are not the words of an armchair contributor immersed in doom & gloom, these are the words of someone trying to grow his business & create a few jobs in this utterly and hopelessly dysfunctional country that we are currently living in.

    • Realist

      When you see the growth in the gray and black markets you know that the real crisis is coming.

      It is usually the human response for all the bad things our beloved government is restricting us to do.
      E.g. to trade freely, to work freely without minimum wage and so much taxation, to save money without the same being stolen and lent without our permission, to travel without paying taxes, to drink, to smoke, to whatever else you name it ….

      The state is the culprit together with its central bank fractional-reserve banking system.

    • bonbon

      Bernanke, Draghi print for he banks, by the banks and of the banks.

      The physical economy simply does not exist in their world, it is roadkill. Look at the graphic gravatar, it shows the process unleashed, and the destructiveness.

      Some, all of the time, but not all, all the time stare mesmerized at the hyperinflation, and do not notice the very floor being pulled out from under. Why the sinking economy if the money goes stratospheric.

      Very important observation.

  38. DC

    Spot on – A dyfunctional country that still expects to extract more revenue from an ever dwindling economic base.

    BTW the black market economy is a global issue.
    A scary future if this article is to be believed.

    http://www.freakonomics.com/2011/11/01/the-black-market-is-the-second-largest-economy-in-the-world/

    But just look at immigration rates (and pps number issuances)into Ireland, a country that is supposedly bankrupt with near record youth unemployment. What Gives ?

    • bonbon

      Not to outdo these reports, but the drug industry is worth around $600 billion per year. That’s banking liquidity for you.

      The banks are addicted, Dope Inc.

    • Realist

      Mainly the black market is the response to the state regimes and their opression to not allow people their own freedom.

      Just think of one typical example.
      Pack of Marlboro tobacco in Europe is from e1.7 in some and e9.5 in Ireland. Not sure did prices move recently as I am not smoker.

      Now think is this normal and how come so many tobacco smugglers trying to reach Irish shores.

      • Adam Byrne

        Cos there are so many plonker smokers in this country (and elsewhere). What TWAT would even spend 7p on a packet of cigarettes?!

        • Realist

          Very true from my and yours point of view.

          Still, the freedom should be there to all who wants to smoke.
          And when I say freedom it includes the freedom of 8-9 euro taxation by the government too.
          As you said, even it is 7p me and you will not touch it. I am teaching my children too assuming they will be smart enough to resist.
          What smokers should not have is the freedom to harm other people’s property, mainly air poluting the areas of non-smokers without prior consent of the same.

          • Adam Byrne

            Smokers don’t give a toss about anyone except themselves, therefore I don’t give a toss about them.

            I have the freedom to wish them all a miserable life and painful death.

  39. DarraghD

    Make no mistake about it and I’m not being alarmist here, but unless we rapidly start standing up in this country and stopping the destruction of our domestic economy by way of the insane FF policies of austerity, we are completely and utterly goosed as a nation.

    The cost of running the state is too high, 1 billion Euro a month more than we are taking in by way of revenue, and this is 4 years into a recession.

    That might sound like a complete contradiction, in that I am disagreeing with austerity but advocating cuts in public sector pay, the point I’m making is that the inordinate expense of running this country is being placed almost exclusively on a private sector that has been bled fúcking dry to pay for an inefficient and still bloated public sector.

    If we cut the cost of running the country, and dealt with the bank debt, that is simply not our problem to deal with as taxpayers, people might have actually some money left to spend in the domestic economy that would sustain jobs.

    • george

      In my opinion we are in free fall, and unless there is a miracle, or we implement radical ideas and changes, nothing will stop us hitting the rocks down below.

      We are the only Country in Europe that has an ace in its hand, because we are the only country, that can drastically reduce the cost of running the State.

      1) We know that Pay, Conditions, and Pensions, to Politicians, and High and Middle Ranking Civil Servants, are too high, and not only distort the market economy, but are a burden to the rest of the population . Given the estate of the Country is in, we cannot afford salaries higher than 150.000 euro. And if this is not implemented, nothing of what follows will change

      2) We know that our social welfare bill is too high, in comparison to other Countries, and the size of the economy; and also it distorts the market economy, and it is a burden to the working people, and has to be reduced as well

      3) We know that the commercial rates and rents, of commercial properties (and houses), also are too high, as a consequence of the above; and don’t have a relation to the real economy, and are bleeding the commercial sector to death.

      4) We know as well, that professional fees especially from doctors, solicitors and others, are also too high, and that it has a negative effect not only in the private sector, but in the public one as well.

      A little example of how distorted our economy is. The other day, a man in the Joe Duffy’s show said, that for what he pays in Ireland per week, for the medicines he takes, he can buy in Spain the same medicines, for up to a three months period.

      I guess there are some politicians in Dáil Éireann ready to do radical changes regarding all of the above, and the nationalised Banks Debts, and Debt forgiveness for home owners, and a fairer taxation system. But the actual Government is not delivering real changes, to the Small and Medium size business sector, and working people, that sustain the economy, of this Country.
      They seem to be robbing Peter to pay Paul, and hoping the Multinationals will save the bacon for them.

      What the People of the Country need at the moment, is a new election. We need new people in charge, with radical ideas and changes, or this will go on from bad to worst, until we’ll end up selling, every bit of State’s assets, we could find. Because the excuse for our lack of patriotism, courage, and vision, is going to be always the same: “how are we going to pay the salaries and the social welfare bill” .

      So eventually we will hit rock bottom. And one day we will realize, that we are living as addicts, that are only worried about how to pay for the next fix. And probably we’ll end, waking up in a cold sweat, totally defeated by our own lack of vision, discipline, and willpower.

      • Adam Byrne

        Good write up george but who are these new people that should be in charge? I don’t see them.

        • george

          Adam thanks! We’ll have to hope that soon, few bright and courageous people, would be able to leave their ego at one side, and are going to get together for the sake of this Country, with solid arguments and policies, with which most of the people of the Country can identified with. And they will be able to work together, even if they come from different political backgrounds. I mention few people in the Dail that for me, are doing an extremely good job. Shane Ross, Stephen Donnelly, Pearse Doherty, Roisin Shortall, Peter Mathews, Richard Boyd Barret, (and few others I’m sure). And then we have people from outside politics, with an excellent record, as our host, who for long time now, is asking for partial debt forgiveness for home owners, and I think even for to remove the Banks debts from our National debt; or people like Michael Taft and others, who given a radical change will feel inspired, to cooperate in some way with a new Government. Then we have Grey Fox and his friends in New Democracy, that are promising us very interesting concepts. We have to support bright and courageous people ready to cooperate, and ready to learn, from one another.

          We cannot sit back and do nothing as heartless elitists with no social conscience, that can speculate with their capital, without producing anything of benefit for the society; or social parasites ready to gamble their last few euro in the betting office, or in a pool game in the Pub, at the risk of leaving their families without food, and after it, demanding help from the State.

          We have to scream, to shout, until we’ll have no air left in our lungs!
          Even if we get nothing, life is in the pursuing, for that reason the People of Charleville and Ballihea deserve to go down in history, with the highest honours, than a lot of politicians and high civil servants, who are not ready to show leadership qualities and cut down their salaries, conditions, and pensions, to the needs of the Country (and I’m not talking here of a token gesture but of a systematic change). Even if legality is in their side, I don’t think natural justice is. As Olivia O’Leary said in other words: “stop hiding behind the Constitution, and if needed change it”. We have to start this Country again from scratch, preserving the best it has, and removing the bad, not only in the political arena but in the social one as well, or instead of celebrating the Irish Gathering, we’ll end up lamenting in Eireann Wake.
          Apart from that WHAT ICELAND HAS GOT, WE HAVE TO FIGHT FOR!

          Don’t miss the President of Iceland talking, (after it you’ll realize why we are where we are, and they succeded at what we failed), and the REST of videos from the Real News.com
          http://www.peoplebeforeprofit.ie/
          Cheers!

          • Adam Byrne

            Ok george. Hope to see you at Ballyhea, at least, in the near future.

            We have our own President here and he doesn’t seem to do much. A few months ago some of my American friends were raving about a speech he made on US TV castigating the banks and demanding change – and I haven’t heard a peep from him since he came back to these shores. What use is he?

    • molly

      This current shower(government ) are useless at looking after the Irish people but they are experts at looking after themselves and there cronies.
      Our big big problem is we don’t have the proper people in public life to run this country fairly,properly and right.
      We need change a complete change a new party and that’s our big big problem .
      The private sector is being slaughtered by the up keep of the public sector.
      The debts of people in public and private sector are the same and its one big mess and god help us because its heading to a state of every man for him self.

  40. wills

    Posters,

    Article reads on bubble economics and its logistics.

    One other fact on bubbles absent from article of course is that bubble are engineered to transfer wealth into the pockets of the insiders.

    • TheIrishFonz

      Important point which as you say is absent from the analysis, wealth transfer is a critical aspect.

      • Realist

        Exactly, distribution of wealth is the culprit:
        Two major ways:
        1. Distribution helped by the government distribution through taxes, welfare, grants, licenses, patent laws, tariffs,
        2. Distribution through inflation (credit expansion and bond printing) where first users of money benefits against last users. Both government and banking are first to benefit.

    • bonbon

      Financial engineering, derivatives, are the tool. But this only works as long as there is no hermetically sealing of investment banking from commercial. 1999 sa the last bastion fall. Since then, well it is clear.

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