February 7, 2013

Why we should not pay the promissory note

Posted in Irish Independent · 125 comments ·
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The ECB never does anything without an eye on global trends. In the overall scheme of things, despite being the “European” central bank, things that happen in small European countries matter little in setting the tone. In contrast, what happens in big countries with competing currencies to the Euro, matters a lot.

When it comes to small European countries, the ECB’s tactics are always the same: threats, nasty leaks, warnings of Armageddon, orchestrated press releases, all followed by a well-disguised climb down. Expect the same here.

The reason for this is that the ECB has no conventional weapons but it does have the nuclear option: when a country can’t pay its debts, the ECB can cut off the banking system from ECB financing. This brings the country down which will cause chaos not just for the country but, via contagion, for the whole Euro system. So the ECB is condemned to climb down, the best example is Greece, a four-time defaulter within the Euro, and yet money still comes out of its ATM machines in Athens.

But all the while, the ECB is more worried about what is happening in Japan then either Ireland or Greece.

In its most blunt terms, the independence of the Japanese central bank is over. The government has decided it’s time to generate inflation, time to let the Yen fall and kick-start the economy via debasing the currency. Japan announced this once in a generation policy change two weeks ago.

Having independent inflation hawks running how much money is printed is great in inflationary times, but absolutely stupid in deflationary times. It is yet another case of the generals fighting the last war. Japan’s recession has blown the old orthodoxy apart. When the problem is deflation the solution is inflation. When the problem is falling prices the solution is rising prices.

The people who are at the top of the ECB are driven by the mantra of “stable or low prices good, rising prices bad” but they also know there is a finite time within which to indulge their deflationary fantasies. One of the reasons Japan could suffer two decades of low growth, low incomes, falling prices and higher and higher taxes, is that the population is homogenous. Europe is not. It is a multi-ethnic society with social welfare spending which is likely to fracture into racial conflict as the already huge levels of youth unemployment, much higher in immigrant communities, continue unchecked. As Angela Merkel observed at Davos, Europe has 7% of the world’s population, produces 25% of global GDP whilst financing 50% of global welfare payments. This can’t last without growth.

Europe and the European project can’t survive a decade of deflation. The first thing to go when politicians know they have to reflate the economy is central bank independence. Therefore, with money being printed everywhere and currencies such as the Yen, the dollar and Sterling involved in competitive devaluations, the ECB’s ideology is hardening today to protect itself from political interference tomorrow.

So Ireland is caught in the teeth of an ideological battle for the future of central banking, which is why what happens in Tokyo is much more important than anything Irish politicians say. As far as Europeans are concerned the Irish political class is having a conversation with itself.

However, regardless of the members on the ECB’s board, at the top of the ECB there is the pragmatist Mr. Draghi. He knows that he has no conventional weapons to threaten Ireland. He also knows that nuking the poster boy is hardly a clever way of keeping order in the Euro classroom, so he makes threats via his underlings who pass this on to our civil servants, who brief our politicians, who end up saying silly things in public like, “There will be no cash in the ATMs”.

But there will be cash in the ATMs. Look at Greece. If any country “deserved” to have its flow of cash cut off it surely must be Greece. Having defaulted at every opportunity, having slashed its debt burden through defaults, having given the two fingers to everyone, surely the ECB would eventually cut off funding to the Greek banks. Has it done this? Has it f–k!

Why are Greek ATMs spewing out crisp German-backed ten Euro notes this morning? Because the ECB is stuffing Greek ATMs with cash. There is no way that the ECB can kill its own children — even ones as delinquent as the Greeks.

The Greeks understand the basic rule of monetary economics: the lender of last resort, the central bank, exists to be defaulted on. It prints the money, so it can’t go bust.

The Greeks and the ECB both understand that money is politics and politics is money. Our politicians, unfortunately, are repeating mantras given to them by the ECB’s spokespeople and these politicians in turn feed this to certain journalists, who come out with things like, “we must respect the ECB’s independence” or “these things are very complex”. Get a grip.

The ECB was created by politicians. It will be brought to heel by politicians. That is what democracies do. The last time we had independent central bankers try to threaten social peace in an era of deflation and high unemployment, central bankers lost. That was the Great Depression and the Gold Standard. The lessons are there for anyone with a grasp of history.

This brings us to the promissory note. We know that keeping a dead bank alive with real money makes no sense, but we are told that the consequences of not paying the money will be dire. But what are they, these consequences?

Here I write as a former central banker and I can tell you the consequences are likely to be minimal. We know the ECB won’t push the little red button and detonate the nuclear option. It didn’t do that in Greece. It knows failure in Ireland will bring the Japanese solution closer, so that will be avoided at all costs. ATMs will continue to work. Life will go on and if you believe that the Irish state will be around in one hundred thousand years or one million years, pay back the promissory note in installments of euro 30,000 a year. We would still be paying it. We would have simply adjusted the terms of the IOU. There are all sorts of things we can do because the IOU is one part of the Irish state paying back another one, so who cares? Yes of course it’s monetary financing, but this is what you do in deflationary times, with unemployment at close to 15%, emigration rampant and GNP down almost a quarter in six years. As they’d say on Operation Transformation, “Cop on”!

The ECB is in a bind, not us.

Seamus Mallon famously said of the Belfast Agreement that “Republicans are too clever to admit they’ve lost and Unionists too stupid to see they’ve won”. With regard to the promissory note, the ECB is too clever to admit that it might lose and Irish politicians are too stupid to see that we could win.

David McWilliams’ new book The Good Room is out now.


  1. redriversix

    Subscribe………….YES [waited in the long grass ]

  2. Pat Flannery

    The thing that is most worrying to me is how the Irish Government is manipulated by the KPMG and the other Big Four using an NCB. There never was any possibility of “a deal” with the ECB.

    The Irish allowed 10 men to own their own bank, issue billions in loans to themselves and destroy the country. That is the strongest argument against any national central bank existing.

    The only thing that will prevent this ever happening again is the winding up of the NCBs. Europe needs only one central bank, the European Central Bank.

    • Realist

      “The only thing that will prevent this ever happening again is the winding up of the NCBs. Europe needs only one central bank, the European Central Bank.”

      Does this mean that countries with just one central bank prospered before or prospering now ?

      Central banks should not be,
      end of story for me,
      let us be.

      • Pat Flannery

        It means that if Ireland did not have its own Central Bank the developers who owned Anglo-Irish Bank would not have been able to pay themselves billions and send the bill to the Irish tax payer.

        The ECB behaved responsibly in trying to restrain the runaway Irish Central Bank within the limiting terms of the EU Treaty. McWilliams mistakenly believes it was the ECB that saddled the Irish taxpayer with debt.

        The Irish did it to themselves and will do it again if allowed. The EU will either demand the end of NCBs or let them destroy their own countries.

        An ECB “deal” was never on the cards. The Irish Government lied.

        • Realist

          I totally agree with you that Irish are responsible for Irish destiny.
          I am a strong believer in personal responsibility and like subjectivism.

          What I do not agree is that ECB is blameless.
          FED is in the same basket together with other NCB’s around the world.

          Why ECB is buying bonds in direct transaction, so called European QE ?
          Why ECB is still allowing Greek, Irish and other bonds to be collaterilized with them ?

          ECB and NCB’s with their fractional-reserve banking scheme is responsible for this.
          It does not mater is it 1 or N central banks.

          • Pat Flannery

            I agree with you that the ECB is anything but blameless. As to whether we should have fractional-reserve banking and a central bank to control it, I see no workably alternative short of barter using gold and silver as a medium, dictatorship or monarchy. Either way the only alternative to barter is fiat money. The problem is not the chosen money system it is governments that want to spend more than they take in.

          • Realist

            “The problem is not the chosen money system it is governments that want to spend more than they take in”

            Exactly the problem. Monopoly on money.
            Mises said in 1912:
            “The sound-money principle has two aspects. It is affirmative in approving the market’s choice of a commonly used medium of exchange. It is negative in obstructing the government’s propensity to meddle with the currency system.”

            Why not returning to free-market money, e.g. freely chosen commodity-based money regime such as, for instance, the gold standard ?
            Sound money ?

            Having abandoned the sound-money principle, governments central banks are in the very process of forcing down the interest rate over long period of time, by way of strongly expanding credit and money supply. This, in turn, leads to asset price inflation, misallocation of scarce resources, inducing cyclical swings, (“boom and bust”).

          • Tony Brogan

            Hi Realist
            Please do not confuse the cental banks with fractional reserve banking.
            The central bank produces money from thin air.
            BUT it is the commercial banks which practice fractional reserve banking.
            It matters not whether we have a national central bank or a european central bank or both.
            The majority of the money creation comes from the commercial banks using the fractional reserve practice.

          • Realist

            Tony,

            We both know that banks are doing credit expansion but under central banks regulations.

            This is why central banks are the culprit as they are regulating fractional-reserve banking.
            They control how much each bank can loan, what collaterals are, what interest rates are.
            At the moment central bank is pushing banks in Ireland to borrow more, to give more mortgages, even giving them quotas. They might even charge them if they do not obey and borrow more. Nasty business.

            http://en.wikipedia.org/wiki/Fractional_reserve_banking#Regulation

            Central banks are backing up banks and saving them.
            Without the central banks many banks will dissapear.

            I am against both central banking and fractional-reserve banking.

          • Tony Brogan

            Agree to all

    • bonbon

      I’m afraid you have not been at this blog long enough to remember the issue of the credit bubble of the Eurozone. The is no independent national central bank in Ireland since at least the Euro rollout, and before that. A credit bubble hit the entire transatlantic region at the same time, and even Australia. The US has no national bank since the FED was installed.

      So back to national banking, but never nationalizing the zombies – the must be outside the (British variant electric fence). Simply put Glass-Steagall.

      The ECB is totally bankrupt, has bought up all the toxic paper which is worthless – it is a “bad bank”. At least the dirt then is in one place. So too is the FED. It is so bad Bubbles Ben is bailing out Draghi – credit swaps.

      The “central banking mantra” of some schools are desperate to prevent the re-emergence of National Banking credit system as Hamilton demonstrated with the First US National Bank. This is the central issue – at least no no one can obfuscate.

      • Tony Brogan

        You confuse a National Bank with a central bank. Your Hamiltonian bank was not a national bank in the strict term but a central bank acting not in the interest of the people but in the interest of the bankers themselves.
        That is why it issued money as debt and charged interest to the people.
        That is why Jackson called it a den of Vipers and wiped them out. Hamilton was a Rothschild agent and married into the family. He was a bankers banker.

        Your continual promotion of Hamilton’s bank shows either an apalling ignorance or willful deceit.

    • cubabm

      Its all a load of horse shite…………..or is that cow shite…….quick someone get a DNA test kit…!!!!

  3. Beaver

    My, my, Davids hormones are so high hes using four letter words in his articles. Economic armegeddon must be nigh. I suspect you wrote this before they announced IBRC was being liquidated. Is this because it was being sued by hedge funds who had their junior bonds burned and they looked like winning?

    • MrCooper

      It was confirmed last night that in the dail that any legal proceddings that IBRC are involved in will transfer across to NAMA.

      So those cases are still ongoing.

      The sad thing is that now all the work that David Hall had done may be lost .Now Shane Ross and Stephen Donnelly may not be able to take a case on the promissory notes being ilegal, as we will be issuing bonds instead.

  4. SPQH

    There are different versions of the formulation “Republicans are too clever to admit they’ve lost and Unionists too stupid to see they’ve won” but none of them were made by Seamas Mallon. His very different and much more subtle description is that it was ‘Sunningdale for slow learners’

  5. MON WOBBLE

    Yesterday was the 7th Day before the Peak of the forthcoming Moon WOBBLE …….and we know what happened …that faithful Yesterday !

    BAD BANK WAS LIQUIDATED

    Emergency Sitting in DAIL

    TOTAL PANIC

    MAYHEM

    All is not over …..watch the week ahead to 14th/15th

  6. Dorothy Jones

    http://namawinelake.wordpress.com/2013/02/06/nama-to-merge-with-ibrc-as-scramble-for-promissory-note-solution-intensifies/
    Comment on merger IBRC [Anglo] and NAMA and link to text of Bill, and impact on promissory notes following last night’s Dail midnight session

    • Realist

      This is how economy grows, from IBRC debt, why not :)

      Bonds issued to cover this up, bought by banks and put into ECB as collateral to drive up economy and David’s GNP numbers.
      God bless politicans and central bankers.
      They are so smart and we are so stupid.

      • Realist

        Just forgot bonds are collateral for credit expansion, so we all get more mortgages and loans to prop up spending.
        How smart idea, it just did not work last time.
        Ah, sorry, last time it was gold, or GS, or independence, or free market, or Japan, …

  7. While I do believe that the sovereign bond bubble will burst, Karl’s analysis is one of the most reasonable I had come across to date:

    http://www.forbes.com/sites/karlwhelan/2012/11/21/why-ireland-would-benefit-replacing-the-promissory-notes-with-a-long-term-bond/

    In a nutshell: Perhaps more important is the greatly reduced net financing needs over the next decade – €6 billion instead of €33 billion.

  8. Drum Stig

    PLEASE CAN ANYONE NAME THE ADVISORS WHO ADVISED THE DAIL TO VOTE FOR THIS MOTION? Who exactly are the people “giving the advice” (telling the TDs what to do)?
    These muppets (the ones who are clueless) and puppets (the ones who are devious) haven’t a fkn clue what all this is about!! So who is “guiding” them?????

    • hibernian56

      They are the same gougers who worked for the traitors otherwise known as Cowen and Lenihan, it is a fact that the majority of the dept of Finance employees are unqualified, few have even the most basic accountancy qualifications.

      This latest motion is the ultimate money laundering. They are now passing a law whereby they will remove any possibility of defaulting on these private ponzai loans.

      Our country is being run by schoolteachers who are being advised by overpaid incompetents.

      Sickening.

    • celtic-michael

      David McWilliams advised Brian Lenihan before he gave the guarantee for the banks. If you want to know what David was saying at the time, just look it up on his website. You might get a surprise.

      • Realist

        Exactly that.
        They listen to the “prominent” economists in Ireland and elsewhere, aka Krugman.
        They all know wrong post-keynesian or monetarist theories and this is where David’s knowledge is too.

        • Realist

          And this is where we should try to break this vicious cycle.
          Only if we change how intelligencia in economy thinks, you might change stupidity of politicians too.
          This was the Hayek’s idea but does not seem as working yet.
          Maybe this crisis we are in might bring some progress once there realize they know nothing and they stopped nothing.

        • bonbon

          Actually you are wrong there according to Wiki
          Here is praise for Milton Friedman from 2006 :
          Friedman the Free Thinker

          It seems DMcW is a follower of the Chicago School of Milton Friedman.

          We know the Chicago School of Irving Fisher is actually of Austrian School pedigree, with of course “talking points”. So why the caustic judgement?

      • Celtic-Michael

        I never advised Lenihan to do anything. I bear nor responsibility for what any of those people did. I was never their advisor, have never been in the Department of Finance, never been asked to advise on anything. I told Lenihan that without his own currency or own capital controls a bank run -which had already staryed – would be difficult to stop. A temporary guarantee not anything permanent might work and once the thing has settled down, gradually life the guarantee and pick off the creditors one by one in a managed bank resolution process. This is all well documented in period on this site.

        They did the opposite and frankly, had they listened to anythign I had said over the previous five years we wouldn’t have had a banking collapse.

        Best

        David

        • Realist

          David,

          ” had they listened to anythign I had said over the previous five years we wouldn’t have had a banking collapse”

          The crisis started 5 years ago ?
          Can you clearly said now how would you stop it ?

          All I know from your articles is that you want to print more money, loan more money and have more government projects.

          • Realist

            The Irish banking crisis started in 1999. To quote Mill “the crisis itself doesn’t destroy wealth, it merely reveals how much wealth has already been destroyed by poor investments”. The destruction of Ireland’s national wealth began when the banks started overlending and every foundation of a shopping centre and the like over the boom didn’t create wealth but destroyed it.

            It is stopped by capitalism which is a debt default and a restart.

            Best

          • Realist

            Thanks David,

            Well said.
            I wish you can clearly say these things more often.

            The next step is to recognize who caused such cheap money to flow into these poor investments ?

            That is of course Central Bank(s) with fractional-reserve system through credit expansion.
            You need to say it clearly to everybody in your article, except if you believe their innocence.

          • bonbon

            Correct, DMcW, and 1999 is the year Clinton’s Administration repealed Glass-Steagall unleashing a tsunami of “credit”, bubbles all across the Transatlantic, from dot.com’s to housing, to “green” energy. Such financial “activity leaves a crater in the physical economy, highly destructive like an acid that eats the mind itself of those swept up in the surge. Hard to argue with minds so deranged.

          • Tony Brogan

            Bon bon
            The real credit bubble started in 1971 when Nixon cancelled the remants of the gold system. At that point all currencies were backed by nothing and so started the race to the bottom of unlimited money production. Competitive devaluations to infinity. Nothing to do with Glass Steagall

          • bonbon

            Nixon did do tremendous damage, but the effect is highly non-linear with real phase shifts, like water to steam (analogy). So 1999 is a real turning point with awful effects.

        • celtic-michael

          David,

          I never said that you said anything to Brian Lenihan. I referred to what you were saying at the time, and this does not mean what you were saying to Brian Lenihan. It refers to what you were writing at the time, and anybody can go to your website and read it. I am very careful about what I say David, as I do not want to again have a High Court judge deny me a jury for Defamation in the High Court, as has already happened,

          Can you provide an easier way to get to your old articles that you wrote?

          You had a meeting with Brian Lenihan before the bank guarantee, did you not? If Lenihan did not ask you for advice, what was the meeting for?

          Lenihan did give a tempory guarantee!!!! — You told him a tempory guarantee might work!!!! And now you have the audicity to tell everybody to listen to you and that others got it wrong!!!!!

          I have evidence that the government is helping people to missappropriate money from Irish bank accounts, and the national newspapers, RTE, and top so-called journalists do not want to know or investigate. The establishment in Ireland makes me sick.

          • He didn’t give anything temporary; he kept extending and pretending. He came to my house once, unlike all the people who are still drawing salaries from the State and looting the place who were feted daily in the Department while those of us who actually predicted this mess were first vilified by the political class and then by the broad establishment which has, for the past five years, been trying to discredit me.

            Can’t you see what is happening?

            D

          • celtic-michael

            David,

            “He didn’t give anything temporary; he kept extending and pretending.” If it wasn’t temporary, why was he extending it? Can you extend something that did not exist or something that is permanant? And, what was he pretending? I think you can only extend something that is temporary.

            I publicly made my allegations against Brian Lenihan “He didn’t regulate the solicitors, and does anybody now believe he will regulate the banks?” October 10, 2008. Being denied a jury for my other allegations the same day, and the proceedings stated that I was making comments against Lenihan, but Lenihan did not join the proceedings. Maybe Lenihan could see the case going to the Supreme Court, and did not want to become embroiled.

            Why do you not give an easier link to your previous articles?

            Mickey Mouse predicted this crisis. Personally, I predicted it in 1987, and I am sure there are people who predicted it in 1979. In October 2007, I also said that the IMF would be in Ireland by the end of June 2010. 4 months out. So, don’t talk about predictions and that you were the only one. Complete b….

            Looting the place? Care to be more precise about who is looting the place? The High Court is putting liens on people’s property and failing to say why!!! Want to see the evidence? Come and watch the evidence being presened in the High Court, if you dare!!

            I am not afraid to make public allegations with details. However, as I am currently being denied a jury for defamation in the High Court, I will bide my time. I must be careful what I say, in case my property is stolen by officers of the courts while the media and so-called journalists turn a blind eye, something they have already done.

            You say the establishment has been trying to discredit you. You write for the Irish Independent, and the Sunday Business Post, newspapers which are failing to investigate matters of public interest, while they print your articles. Lucky you.

            I can see what is happening. The establishment and you want more money printed and it appears you want that money to be just given to the banks.

            Michael

  9. Adam Byrne

    Personally I love the idea of paying back €30,000 a year over one million years.

    My conscience would be clear foisting that on future generations.

    • Realist

      As I have 3 kids I should be able to spend 3 times more than I earn.
      As they might live longer too, they will have enough time to help their poor dad.
      I am sure we can win over these youngsters and get into the law that banks should give us more money if you have more kids!!!!!
      If we have direct democracy we could put this smart idea to voting and I am sure majority will agree.

      Central bank anyway wants to expand credit to drive progress, so I see no reason to not help them.
      I have never been to Hawaii so why not hire Ryanair fleet and we all fly there and spend our hard earned euros.

  10. gizzy

    Why the haste to liquidate IBRC if there is no deal yet. Is that being one for other reasons under the guise of having to do it for the ECB or is it connected o the Quinns legal action against the IBRC and what that would have opened up. Hard to have successful legal actions against liquidated companies. Then the former auditors of Irish Nationwide get the gig instead of being in court. Then there is the questions of will the assets being transferred by the liquidator to NAMA attract the same discounts as previous transfers and how transparent is this.

  11. Tony Brogan

    “The Greeks understand the basic rule of monetary economics: the lender of last resort, the central bank, exists to be defaulted on. It prints the money, so it can’t go bust.”

    But why does the central bank print up that money as…

    A DEBT to the country covered by a bond and added to the National debt. AND…

    Charge interest on that debt which has to be repaid with REAL MONEY and the sweat and toil of the people??

    To make the country and the people bust. That’s what.
    The central Banks work for the banks and the banks work for thenselves

    DAVID why do you advocate the printing of more and more money under those conditions. Nobody can afford any more debt. Every dollar printed in the US is now NEGATIVE for the US economy.

    Sounds stupid and crazy to me.

    The lessons of the past depression were that money printing did not help and it was not until the WW11 was over that there was a recovery. 20 years of money printing in Japan did not work.
    Doubling and tripling the national debt with QE to infinity in the US is failing and getting worse.
    THe ECB has been printing to infinity with no results. UK is going under printing like crazy.

    Everyone is nuts. If you think more printing of borrowed money will help you’r nuts.

    Why bring the cenral bank to heal. If I had a renegade dog like that I would not try to retrain it . I’d shoot it.

    time to get rid of the cental bank
    time to be rid of the Euro, You have not made a case for it yet David.
    Put money creation in the hand of treasury and issue money debt free and interest free. Then follow the rest of the world and monetise silver coin for honest money. Just wait to see what the Chinese will do when they are good and ready. In the meantime they short the paper market and drive the price of bullion down which they then buy at cheap prices with both hands and load up.

    Revoke the odious debt David.
    Righteous indignation will go nowhere. Tell the ECB to go to hell and use your own money is the answer.

    Your suggestion to print , print is the road to perpetual economic servitude.

    • Drum Stig

      excellent points Tony

    • Realist

      Nice post as usual Tony.

      “DAVID why do you advocate the printing of more and more money under those conditions.”

      He said he is a retired central banker, so it looks he learned economics from the wrong teachers.
      He never said anything bad about central bankers that I can remember of.
      He tried to say bad things about central bankers above, but mingled it with his non-understanding of economy saying the cause was “independence” and “GOLD”

      “The last time we had independent central bankers try to threaten social peace in an era of deflation and high unemployment, central bankers lost. That was the Great Depression and the Gold Standard. The lessons are there for anyone with a grasp of history.”

    • ouldbegrudger

      Completely agree, @Tony. There doesn’t seem to be a good thread going in the “Punt Nua” gambit. Think of the political face-saving that could be had if we could find a way to stay in the Euro.I was in the Fatherland last weekend and had a light-hearted row with bunch 30-something engineers in a Dusseldorf bier house. We came to the conclusion the Germany should be kicked out of the euro then the rest of us can devalue. Now if only we could get them out of the ECB….

  12. Hahahahaha

    5.15: Announcement on possible Anglo liquidation imminent

    5.16 Markets nervous

    5.25 Noonan makes ceremonial visit to David McWilliams’s kitchen. Dalkey, Co Dublin.

  13. Ah well at least we don’t have roadblocks from all those pesky protestors outside the Dail.

  14. wills

    …other way around …, politicians dance to the banking system tune.

    A fact now proven.

    • Realist

      They are in the same tune, both sides profiting.
      It will not be one side without the other.
      Worst possible cartel.

      • cooldude

        Realist i think Wills has it right. The banking elite is running the show. The shareholders of all the central banks are the commercial banks. The idea that central banks make decisions for the good of an economy is blatantly wrong. The only criteria they care about is the welfare of the banks who are their shareholders. Look at how the banks were bailed out when their stupid reckless gambles went wrong. The politicians do what they are told to do. They are either coerced or bribed to do what they are told. Rajoy in Spain has sort of admitted he took bribes. I would expect Cowen was bribed also. This is all a deliberate scheme to introduce neofeudalism and turn us all into debt serfs through asset bubbles and the constant debasement of paper currency which David seems to like so much. The great depression was brought about by the excessive liquidity policy of the FED during the 1920′s. If Hoover had allowed the markets to clear out the bad debts and the insolvent companies it would have ended quite quickly. Instead he started this road of low interest rates and stimulus which we are still on. The only way back from this is through competition in the money supply and let people decide what they want to use as a medium of exchange and more importantly a store of value.

        • Realist

          I understand it clearly of course.
          I think we are all on the same page.

          What I think we disagree is that you believe (central) bankers know how they are destroying wealth and they are doing it purposefully.
          From talks to many of my friends I still think they believe in what they “wrongly” learned in school and at work.
          They all still strongly believe in these economic fallacies they are doing.
          Economists still believe this is the way as they do not know any other way. David still included.
          Politicians too.
          They do not want to cut each other as it means cutting their own money cow.
          Even without a lot of bribery they will do the same.

        • Realist

          If banking loby is so strong why most of Irish banks are nationilized, e.g. owned by the government ?

          • cooldude

            This is it. The losses were socialized but these guys still get their massive salaries, bonuses and share options they can exercise if they can somehow manufacture another bubble with even more money. I know exactly what you mean about education and the endless promotion of the deeply flawed Keynesian theory. Keynes stated quite clearly that the easiest way to destroy an economy and a society was to debase the money with constant inflation. This is now global policy and is indeed destroying all economies and forcing citizens into debt slavery by luring them into asset bubbles one after another and stopping them from saving money through negative real interest rates.

            I will dig out an article I have somewhere which shows that the planet is controlled by 147 corporations whose shareholders are these big banks. They are not stupid and know they are destroying the currency system. They obviously have some back up plan for the inevitable demise of the US dollar and are probably loading up on gold personally whilst they denigrate it in the press and treat it as just another commodity similar to pork bellies. We are all going to find out fairly soon that gold and silver are monetary metals and are ideal stores of value as the paper currencies are debased even further.

            I like your comments Realist but I am convinced all of this is deliberate and is going very much according to plan. We have just taken on our bank debt under long term government bonds. Another victory for the bankers as they send another country into permanent debt servitude.

          • Realist

            Bastiat: “That Which is Seen, and That Which is Not Seen”

            I agree with you as we are looking into the problem from 2 different perspective.
            We are both correct so let me explain my view.

            While you are talking about employees and not owners (capitalists) we did express ourselves differently.
            You are talking about employees who does not need to think about long term future of something they do not own, but about fullfilling their long-term careers and encashing their wallets.

            Capitalists, owners, on the contrary do not want to burn resources easily and want their capital to grow and their businesses to prosper.
            They do not want banks to be nationilized, meaning their wealth becoming 0.
            Look how shareholders of Irish banks went bust while CEO’s come and go.

            The same applies to politicians and their 4 years term to take as much benefits as possible from the public goods, as they are regarded as nobody’s or everybody’s.

            It is deliberate of course, I do not deny it.
            But I am only arguing that they still preach and believe in what they are doing, that they are doing good for the society, expanding economy, and they believe should be enumerated for it.
            Some of them have doubts, but human mind is there to block them admitting it even in private.

            Politicians fight for themselves, bankers for themselves. And they are in the same circle as they both benefit from this scheme. Nobody wants to cut this vicious circle except when the full crisis hits and there is no escape for both of them.

            Corporatism is only possible due to the given government grants and privileges.
            This is why the government needs to move from giving such privilege to any company, needs to restrain in controlling everything, and allow more free-market capitalism.

            “Another victory for the bankers as they send another country into permanent debt servitude.”

            As you can see there are always winners and loosers:
            1. temporary, lucky employees, in good time, are winners
            2. temporary, lucky owners who somehow sold owership are winners
            3. Long term capitalists, owners of the banks are loosers

            This is why I am seeing this as a win for socialism and loss for capitalism, as the economic drivers, capitalists were burned down.
            Of course as you said together with tax payers who always get burned regardless.

          • Realist

            Due to my methodological subjectivism I believe we should all be burned as we are.

            We voted for this democratical system where politicians have their say, is not it ?

            Politicians created central banking and banking privileges, all other industry privileges, ….

            We are all to blame.

            I am curious how to correct all of this the most appropriate way :)

  15. hibernian56

    Winding up the bank, but not winding up the debt. Will Dukes get a severance package? what about the other board members? Who will be the liquidator?

    SCAM SCAM SCAM SCAM

  16. whatamess

    Peter Browne from IIFC on Pat Kenny Radio show today Thursday- “no way should BOI bond at 10%yield have been sold” …whatamess !

    17minute long audio

    http://www.rte.ie/radio1/radioplayer/rteradioweb.html#!rii=9%3A20137455%3A133%3A10%2D01%2D2013%3A

  17. SLICKMICK

    BANK DEBT IS NOW NATIONAL DEBT. I THOUGHT WE WANTED TO AVOID THIS ! WHAT HAPPENED TO THE JUNE DEAL ?

  18. colindrums

    Relevant quotes from David himself:

    “But remember who got us into this mess in the first place. If the blueprint for recovery is being drafted by them, which it is, let’s be careful…”

    “To be led up the garden path once is a tragic mistake. To allow ourselves to be taken there again would be unforgiveable.”

    • celtic-michael

      Lenihan done what David McWilliams suggested. Only need to read above where McWilliams replies to me. Then read the quote from Colindrums, attributed to McWillams. And lots of Irish listen to McWillams. Ha ha ha!

  19. Adam Byrne

    All the news channels are saying that this arrangement is ‘subject to ECB approval’.

    What happens if the ECB doesn’t approve the deal (later today I believe), seeing as the legislation has already passed?

    Or is this just waffle?

    • Realist

      I doubt they do anything without previous consultations.
      They are too puppetized to do anything on their own at this stage.

      • Adam Byrne

        Yes, I agree.

        But in theory, what would happen?

        • Realist

          ECB just agreed the deal, who will not say it was not all orcestrated :)

          In theory they will just sit again, as politician with politican and agree new terms.

          • cooldude

            Reuters has confirmed the deal. They would do as they were bought by Rothschild’s bank in the 1850′s and only publish stuff which is beneficial to the banking elite.

  20. 5Fingers

    Was the reason for the emergency meeting to do with a leaked message (from Frankfurt apparently) that the IBRC was going to be liquidated anyway and this would trigger an automatic bond selloff at 8AM precisely today leaving the Government no option but to find emergency funding elsewhere to cover assets (or should I say debts) at horrible rates of interest? Default on these debts will be avoided at all costs my fellow fodder-menchen.

    Political survival is the name of the game and the financiers know it all too well. Right now, FG/LAB would be wiped out at the polls and they know it. A liquidation and transfer to NAMA would have made a “good” optical recovery from the inevitable ECB put-down. It’s got a bit messy now. Am very interested in outcome of Adam’s above observation.

    Our politicians are cowards to red braces smart asses and bullies to its most vulnerable citizens. We are like the sociological equivalent of battered wives – who “love” their spouses but too ashamed/scared to come out and tell it how it really is. I mean, explain how can we have a big march 30K plus on horsemeat contaminated burgers (they should have charge extra in my mind!) and less than a few hundred will turn up if funding for disabled is turned down.

    What galls me is not so much the fact we have to pay of this nonsense – so often processes and business are just a fact of life and you execute as you can, but the shambolic disorganized manner of these lazy minded and over paid idiots who cannot get the basics right and it runs right through our political fabric and shows no sign of relenting or mutating into anything worthwhile. Their clumsiness continues to wreck the place far more than any financier or Central Bank would. I wish people would remember this. This is not about the fault of externals…this is an Irish Problem 100%

  21. zhameed

    Great Article .Sometimes you imagine what else is going to happen worse then already this government has done it seems that the ECB have fully taken over Ireland this time

  22. transitionman

    ECB live now “We took note of this” 13.50
    FFS ECB has the keys of the country they are the puppeteers.
    The had the biggest Muppet Show last night.
    David Mc Williams I call on you in the to throw your hat politically in with the middle sane road of Shane Ross, Stephen Donnelly.
    “The ECB was created by politicians. It will be brought to heel by politicians. That is what democracies do. The last time we had independent central bankers try to threaten social peace in an era of deflation and high unemployment, central bankers lost.”
    114 TDs voted for the Central Bankers Where are the Irish politicians to bring them to heel`?
    You are going to be branded as a inconvenient populist again regardless. Sam Smyth has been silenced.

    The conversation on the outcome of default as you have outlined above is essential. It is jump into the unknown or get strangled to death.
    Having watched the death of gombeen Irish politics live last night our country is poised to loose much more than sovereignty.
    The economy is not growing, no economy is,in my opinion we will not have growth. The multiple debt, energy and climate storm is clearly now on the horizon and nothing is going to stop it. How we as a community of citizens of this country face this storm is being written. Are we like the locked passengers on the lower decks of the Titanic Debt Slaves or do we jump into the icy seas of Depart Devalue Default ?

  23. joxer

    This ‘deal’ to me as a lay man is a complete joke.
    Yesterday we owed 28 billion in promissory notes,today we owe the original 28 plus 34 billion more in interest.my figures may not be completely accurate but they are in ballpark.
    This goverment makes me sick,they are completely useless,then in again in a democracy you are supposed to get the goverment you deserve,maybe this is all this sick rotten state deserves.
    this ‘state’ is rotten to the core,no wonder every young person can’t wait to get the hell out of this banana republic.
    Pearse and Connolly must be turning in their graves.

    • molly

      Yes we’ll said this new bond is to be reviewed yearly and can be traded on the bond markets and if traded the intrest rates could rise,this is a bad deal for this country.
      Banana republic is right.

  24. molly

    The can has been kicked down the hill but when the time comes to retrieve the can ,the can will be the size of a joint scrap yard.
    Notice what kenny said in his speach we Will start paying 3 percent ,after we start paying 3 percent how much will the percentage rise by.
    Is the devil hidden in the detail .
    The way the whole deal has been done smells fowel . The truth is if you have the majority in the government you can do what you like ,when you like to who you like.

  25. molly

    The more I think about this new bond deal the more depressing it is ,what we are left with is living in a country that the majority of people who are working will be in a position where there will be no pay rises ,while the cost of living will rise.where people on social well fair will receive no cost of living rise so .
    A high percent of Irish people live from week to week imagine what surviving will be like in a few years after after we have a few years of cost if living rising with no pay increases.

  26. Deco

    The “Deal” is more of a gimick than anything else.

    Benefits for the government parties.
    i) No more discussion of the Anglo Bondholders.
    ii) No more discussion of 3 billion euro tranches, while they tell the gardai to try policing without a transport fuel budget.
    iii) They all get to posture, pretending that their friends in Europe have given them something.
    iv) they get to talk up the country’s prospects
    v) they can keep borrowing for an Irish state system that is chronically infected with nepotism, jobs for the boys, and dishonesty.

    Benefits for the ECB
    i) They get to scare Spain, Greece, Portugal, and Italy into thinking that they will not tolerate defaults.
    ii) They can pretend that they are still not going to accept any bank defaults.
    iii) They get to drop soft hints that they will print euros to the financial markets, but the message is soft enough to not be discussed in the upcoming German elections.

    Benefits for bank bondholders
    i) they get everything they want.
    ii) no austerity for the bondholders – only austerity for taxpayers and social services
    iii) they have not been apprehended concening their power in EU decision making
    iv) the Irish media has still not told the people who these bondholders are – they will know engineer having the entire issue swept under the carpet and forgotten.

    • molly

      I think Spain and Italy will default or they will get offered a great deal not to but it will amount to the same thing default .

  27. Deco

    Here is an examply of why the ECB has no clue what they are doing, and why this crisis is not “half way there” as some people in the EU Commission are claiming.

    http://www.zerohedge.com/news/2013-02-01/dutch-sns-bank-fails-real-estate-losses-first-too-big-fail-nationalization-five-year?page=2

    Just wondering…..but if NL has a housing bust, or FI….how will the ECB manage this ? Interesting the FF Finance spokesman was talking about this in his criticism of the deal. (How come FF find somebody who sees housing busts coming, long after we have had a housing bust here ? ).

  28. Deco

    The greatest PR stunt of all is decreasing the national debt, by moving the Anglo bit of it into NAMA.

    NAMA is the National Debt Part II.

  29. joe hack

    They hope that by the time payments are due on this Note that the county will have enough growth to Outweigh the burden of this Note but most of them will be dead by then…!!!!!

    David,

    All money is based on a promise to pay therefore promissory note is money

  30. joe hack

    David, you are very late to the game with the above (to busy with the MAMIL Tigers n stuff eh!) but finally you have clearly recognized the importance of politics when it comes economics-money/IOUs/Promissory Notes/La-Los-The EURO…

  31. joe hack

    According to the unreliable Wikipedia….”"”"”An IOU (abbreviated from the phrase “I owe you”)[1][2] is usually an informal document acknowledging debt. An IOU differs from a promissory note in that an IOU is not a negotiable instrument and does not specify repayment terms such as the time of repayment. IOUs usually specify the debtor, the amount owed, and sometimes the creditor. IOUs may be signed or carry distinguishing marks or designs to ensure authenticity. In some cases, IOUs may be redeemable for a specific product or service rather than a quantity of currency.”"”"

    According to investopedia on the “Definition of ‘IOU’
    “”"”"An informal document that acknowledges a debt owed. IOU is an abbreviation, in phonetic terms, of “I owe you.” The debt owed does not necessarily involve a monetary value but can also involve other products. With IOUs being informal, those issuing the IOU are given free reign when writing and issuing an IOU. Things like time, date, interest, and payment type are not mandatory but may be implied.”"”"

    Read more: http://www.investopedia.com/terms/i/iou.asp#ixzz2KEyYF3gp

  32. SMOKEY

    SUBSCRIBE!! Ha ha that feels go… wait , eh,, DOH!!

  33. molly

    The ECB had a hand if our so called bad depths and played a major part in bank looking after bond holders ,the Irish government have just played right into there hands by letting them of the hook and setting in motion a set up that will cost us even more money that we did not owe in the first place.
    .

    • molly

      Micheal noonan is not to far of his retirement and I don’t think he will be to worried about where the next few euros will come from,it would remind you of the last shower of FF TDs who knew the game was up and jumped ship and look how well we rewarded them .
      Great country for some,terrible country for others so who’s fooling who.

  34. Tony Brogan

    Beware the TROJAN HORSE.

    The expression, “Beware of Greeks bearing gifts” has nothing to do with modern day Greeks but everything to do with delivery ofthe Trojan horse to the citizens of Troy. Once the horse was inside the walls out came the invaders and destroyed the city.

    Today the Trojan horse is the Central Banking System delivered to the doors of the state. Politicians and the country bring in the horse and out come the bankers who have overcome the state and destoyed it.

    We are familiar with the computer infection by a Trojan horse. Once in the computer out come all the virus that take over the computer and destroy its functioning.

    The same happens in the economy. Who delivered the Trojan horse and planned the operation. These are the international financiers (IFS). The Rothschilds and the Rockerfellers et al.Benanke and crowd are the puppets, the choir masters executing the master plan on behalf of the IFS.

    The master plan is to destoy the economies of the individual countries. They do this by controlling the money supply and the monetary system. Constant debasement of the money leads to an inflationary environment which causes people to spend that causes the booms that inturn become a bust. People borrow to maintain a lifestyle. They become a comsumer society.
    Gone is the incentive to save and invest.

    Lack of proper investment causes lack of productivity. Low interest rates and easy money cause malinvestment and a waste of capital. Society declines. People are unemployed. More money is printed. Same results until society looks for a saviour.The IFS provide a saviour.

    Part 11
    A common enemy is conjured into existence. People are distracted from the economy by the manufactured enemy (the war on terrorism)) and centralised government proposed as beneficial to all.
    False flag events are planed and executed to scare the people.
    Central government will protect us from the bogy man terrorists and marshall the economy in the common good. We the citizens are rounded up, our freedoms curtailed and our economy in tatters. Debt is piled upon debt upon the people while the IFS scoop the wealth pried from our hands.

    Part 111

    All the well meaning people are miseducated by the institutions founded by the IFS. They come from the colleges and universities with false premises. Told what to think and not how to think. Propagating the same policies that are already driving us to penury and bondage.

    It is not their fault that they misrepresent the people and foster the IFS agenda. They went to the wrong schools. When someone spends that amount of time 12-15 years being educated and then works for 10 years in service to a central bank, it is unreasonable to expect they will not support a central banking system. Only a free thinker will see the errors and change a mindset.

    There are smart people who can clean up an infested computer and return it to a proper function. They root out the virus and destroy. They put in place a system to protact from a Trojan gaining entry. They are aware of the malware and infestations attacking the computer and protect against it. The computer owner has to be aducated to the problems in order to defend against them.

    The people have to be educated as to what is attacking them. They have to be able to set the defence system and to operate their society in the knowledge that there are those whose intent is to destroy them.

    Those with this education are in the minority yet but growing in strength and numbers. They are banding together in groups and planning the the destruction of the Trojan horse (central banking system) and aiming to defeat the builders of that horse (the IFS).They are present on this blog and becoming more vocal and insistent.

    As others on this blog attest also:
    The central banking system must be destoyed (the trojan Horse)
    The fractional reserve system banned, and legal tender laws repealed (kill the viruses).
    A sound money system implemented and silver coin reintroduced as part of a free money system that is asset based and not debt based (boost the immune system with the right food and proper habits).

    Only then will the economy recover. Only then will virtuous behaviour be rewarded. Again it will pay to be thrifty and save. Hard work will be rewarded. Then will it pay to invest capital for improvement of industry and innovation. Then will the standard of living increase for the majority and not just for the favoured few.

    The economy will be built on the rock of savings and not on the sand and swamp of debt based credit expansion as currently proposed by such as our own David McWilliams.

  35. Tony Brogan

    Gentlemen, I have had men watching you for a long time and I am convinced you used bank funds to speculate in the breadstuffs of the country. When you won, you divided the profits amongst you, and when you lost, you charged it to the bank. You tell me that if I take the deposits from the bank and annul its charter, I shall ruin ten thousand families. That may be true, gentlemen, but that is your sin! Should I let you go on, you will ruin fifty thousand families, and that would be my sin! You are a den of vipers and thieves. I intend to rout you out, and by the Eternal God, I will rout you out.

    - Andrew Jackson, U.S. President

    • bonbon

      The destroyer of the National Bank, and the Recall activist. His laws got Arnie Schwarzenegger, the Chicago Boys of Milton Friedman’s favorite. And look what Arnie did to California. Never forget the decision to put Arnie on the slate for Gov. was made in Jake Rothschild’s manor, reported in The Scotsman.

      And in fact the present mess of the Dems and GOP stems from Jackson. And look what they just did.
      This is what andrew Jackson deserves :
      The Condemnation of Andrew Jackson for Treason
      Everyone is invited to look at what this character did to banking, development, and the Constitution.

  36. redriversix

    It was never our debt ,it was private banking debt.

    Seems resistance is futile.

    I don’t care if it only cost 40K A YEAR.THIS IS A ODIOUS DEBT.

    • Tony Brogan

      RR6–well put.
      It is all a scam and delusional.
      When is a debt not a debt? when it belongs to another!!
      Revoke all Odious debt!
      Pay off the rest with your own debt free currency issued by treasury.

  37. Tony Brogan

    http://www.caseyresearch.com/cdd/water-next-great-technological-frontier

    Wars of the 21st Century may be fought over water-Casey Research

  38. Billneer

    I’ve got a spare 34 billion, since you guys deserve a break after the famine, troubles etc. I am going to pay the Debt off. All i ask is you don’t go out and party too hard and don’t get into debt again. Oh actually i got one condition pensions… no one gets a pension more than €80 000 a year.

    • gizzy

      Ah no its you billionaires who need a break, buying all those shite bonds that bombed out unsecured. Just let the mad whores who may have bought a house and a car take it all off your hands for being such reckless muppets.

    • Tony Brogan

      Which central bank did you borrow it from?

  39. cooldude

    One interesting point about this article is David’s admiration for the inflationary policies of new Japanese Prime Minister Shinzo Abe. This guy has launched an all out Krugmanesque style attack on deflation. He has doubled the “inflation target” from 1% to 2% and has vowed to use all means at his disposal to achieve this. Well he seems to have been quite successful in that after only three months the Yen has fallen by 18% against the other major currencies and the Nikkie has risen in value by 28%. The only slight problem is that he has already exceeded his inflation target in items like petrol and consumer goods which are also rising rapidly and which are of much more importance to ordinary Japanese people than the stock market. A rising stock market does not mean a healthy economy as we have seen with the 1000% increases in the stock markets of Weimar Germany, Argentina in the 1990′s and more recently in Zimbabwe. In Zimbabwe even though the stock market was up over a 1000% you still couldn’t buy a dozen eggs with the proceeds of a decent portfolio. The strange thing is that these policies were tried in Japan in the 1930′s and surprise surprise after some initial success they led to a nasty bout of extreme inflation in 1936 and the assassination of the politician who came up with this brilliant Keynesian plan Korekio Takahashi.

    This current policy will end the exact same way in a bout of extreme and maybe even hyper inflation. The thing is Japan is already on QE 10 and has over 18 years of negative interest rates so they have been fairly active with all this stimulus carry on for a while. What they didn’t do however is to shut down their zombie banks who got into huge difficulties after too much foolish lending into a massive property bubble. It seems we never learn and are doomed to repeat the mistakes of history. This time Japan will be closely followed by all of the western world as a result of this ridiculous policy of competitive currency debasement unless it is stopped.

  40. joe hack

    MATT GOSS – BROS – I OWE YOU NOTHING ( 1987 )

    http://www.youtube.com/watch?v=DAFDmWrvzZ8

  41. joe hack

    Bond = (Link, Tie, Connection, Attachment, Friendship, Acquaintance, Relationship) Bondage (Burden, Oppression, Repression) Bonding = Kenny+Noonan+ Rabbit + Euro Banks +ECB Etc.

  42. Tony Brogan

    “The top elites, funded by central banking, utilize government power to reshape the world”

    “Lost in this analysis is what kind of government the US has become and who REALLY runs it. The US government is evidently and obviously being run by a tiny, unaccountable clique of impossibly wealthy individuals who inhabit various independent jurisdictions such as the City of London, Washington DC, the Vatican and eventually, Israel.”

    “But the elites also use dominant social themes — scarcity promotions — to frighten middle classes into giving up wealth and power to the aggregate facilities (UN, World Bank, IMF, etc.) that provide the engine for increased centralization”

    http://www.thedailybell.com/28665/CNN-Bad-Government-is-YOUR-Fault-Not-Ours

  43. irishminx

    “We SHOULD not pay the promissory note” David, we do or we don’t! There is no “Should” in life! As life is to bloody short for “Shoulds”!!

    Le meas.

    • joe hack

      Minx, we should don’t not pay, or would it, or could it be should do not pay.

      don’t pay / do not pay, we can do and don’t and we then should get the same result

  44. Tony Brogan

    Remember the English White Slave Trade to the West Indies and the Americas. A people enslaved in the past but now free are giving away that Freedom to economic serfdom binding themselves to the European Central Bank.
    One more reason to revoke the odious debt and obtain a new currency for a free and prosperous people.

    http://www.globalresearch.ca/the-irish-slave-trade-the-forgotten-white-slaves/31076

  45. Tony Brogan

    What is good enough for the state of Virginia is good for the state of Ireland

    http://21stcenturywire.com/?s=SILVER

    “If this program makes it through, it could open the door to other states following suit, and might open a path to economic liberation from federal domination over the sovereign states. An interesting development to say the least…”

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