May 16, 2013

Wanted: smart new bank that gives us the credit we're due

Posted in Banks · 110 comments ·

A friend of mine, a small business owner, is typical of many thousands of cash-strapped entrepreneurs in Ireland at the moment.

He has a small business and the demand for his product is strong. The market is resilient and in any other country he’d be fine and probably employing a few more people.

He is in the reasonably enviable position of having customers, but as he has no credit, he finds it almost impossible to trade his way out of the current difficulties. Many business people have neither customers nor credit, this man has customers but no credit and because he has no credit he can’t buy his stock and without the stock he has nothing to sell. He is turning away good custom – custom that has been with him for three years – because he doesn’t have anything to sell to them.

Up until last year, the importer of the products (from the UK) normally extended credit to its Irish retailers. The retailers then could stock up, wait for the punters to come in and, once the products were sold, the supplier was paid.

Given the extreme openness of this economy and our reliance on many products made in the UK, this type of arrangement would be entirely normal.

But all this stops in a credit crunch. Normally, the supplier can offer credit terms to his retail clients because his bank is giving him decent terms, so everything flows from the top.

However, let’s go back to the bottom, to the retailer who has a shop on the street of your town. He pays staff and rent and is the end point of the domestic economy.

His story is the story of the credit crunch in middle Ireland. It is the tale behind the Central Bank’s credit figures, which tend to be announced every month on the news. My friend is debt-free. He has always traded tightly and yet now he is on the verge of going under.

A credit crunch spreads like a virus through small businesses, from small supplier to small supplier, as everyone chases outstanding bills. As the chase intensifies, credit terms get shorter and shorter and in the absence of a large provider of credit, such as at least one healthy bank, the system dries up.

It is worth fleshing out what happens when credit begins to dry up.

It begins with the banks not extending liquidity and working capital to decent businesses, because the banks themselves blew their balance sheets by excessive lending. They are deleveraging and are paying back money to their creditors. The banks have to get their loans to deposits ratio down to 100pc, this means taking in more money and lending out less.

Banks rarely stop lending because they want to. After all, this is what a bank does, it makes money from lending to people. In a credit crunch, the banks are compelled to reverse a decade of reckless lending.

The credit crunch spreads like a virus in a creche because everyone – even businesses that manage to keep their credit lines open – can get nobbled by a supplier that is in trouble.

This supplier may look for an extension and, in a short while, the balance sheet of a strong trader can begin to look messy. Where there used to be cash, there are now creditors. Where there used to be money, there are now IOUs.

The bank sees these and gets windy. Working-capital limits are then cut. This will be particularly the case where small businesses are involved because the bank will be cost-cutting and slashing headcount. Maintaining relationships with small businesses is costly and banks in cutback mode will keep the large accounts serviced and just ignore the smaller ones, particularly if they are troublesome.

This brings to mind Mark Twain’s famous quip that: “A banker is a fellow who lends you his umbrella when the sun is shining, but wants it back the minute it begins to rain.”

FOR many small businesses, one of the main reasons why they have seen their balance sheets weaken is that, at the height of the boom, many were advised by pension sharks, bankers and the like to convert their cash on the balance sheet into deposits for leveraged land speculation. The flipside of leverage in a boom is deleveraging in a crash.

As the nation tries to pay down debt and sell the assets on the balance sheet, the price of assets will fall further. And because the price of assets, such as houses and property, is falling much more than interest rates are falling, the negative impact of the debt on the balance sheet is amplified enormously.

Rising property prices in the boom implied that the real cost of borrowing was negative – because if prices were rising at 15pc per year and the interest rate was 5pc, the real interest rate was minus 10pc.

Now think about when the price of property is falling and the rate of interest is stable – the real rate is massively positive, crippling the borrower. This process is far from over.

Up until now, the banks have been hoping that property prices will rise again, this is why we have not seen so much property being sold. However, all this is changing.

In my local town, five properties have come up for sale in the past two weeks. There will be more. This is a sign that we may be going into the final phases of the property cycle. The banks have given up on the market and are going to sell at whatever price they can get.

My friend with the cash-flow problem still faces his dilemma because the banks will not lend for cash-flow purposes when they are in deleveraging mode.

So where is the opportunity? There is an enormous opportunity for a new bank to come into Ireland that can extend working capital to decent businesses. It would seem to be obvious for the State to make a few new banking licences available and then actively go out and solicit business. New capital will dramatically increase the potential of this country.

Credit is a virtuous cycle. You give one guy a few more months and some cash and he gives the next supplier a break, then the retailer can get stock and have enough time to sell and the process of commerce kick-starts again.

It is win-win for everyone. Surely that’s not beyond us?

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    At last the penny seems to be dropping that our banks are an impediment to our economy. Bring in new banks and we will see new credit and mortgage rates that drop when the European Central Bank rate drops. People will move to these new banks and the existing ones will collapse gracefully like they should have been allowed to do 6 years ago.

  2. hughsheehy

    This isn’t a new problem. It was – in many ways – a deliberate goal of government policy.

    I wrote about it in 2009. Of course it went beyond NAMA, but NAMA was relevant too.

    • joe hack

      Yes most people get this and so do other including DmW I guessing someones energies are diverted? If you open a bank I be your first customer.Oh will you be doing overdrafts?

      Most people would try to support such a move

      Why someone with know how has not yet opened a bank surprises me

      • Tony

        It’s not so easy to “open a bank”. Metro Bank opened in the UK in 2010. This is the first new bank to open in the UK in a century and a half.
        I think about 50 million quid capital is needed to open a new bank there. So it’s not about know how, its more about money.

        • joe hack

          The bank of Dave a savings and loan bank did not cost 50m even at 50m why has it taken 150 years???? i can’t see it costing 50m maybe for certain types bank business certain bonds are needed???

          • Tony

            The Bank of Dave isn’t a bank in the true sense. The TV programme that was made about it at the time outlined that. It’s more of a credit union in fairness. Fishwick is subject to rules and regs under his licence that prevent him from operating a “proper” bank (whatever that is). In fact, if I remember correctly, the cost of, and capital required for, opening a bank was highlighted in that very TV show.

        • joe hack

          Yep I get that about Dave’s bank. why 50m why not 1m or 100m the money must be related to something within Metro Bank structure? Gizzy below mention 25m euro not pounds?

          Why someone with know how has not yet opened a bank surprises me?

        • petrapig

          Let the credit unions have sort codes, sorted.

  3. BlueLines59

    It can be done it just takes effort and willpower. The struggle is about the regulations that are in place. These impede newcomers.

    After the recession began in the UK late 2008 to early 2009, David found that many of his customers, through no fault of their own, were struggling to obtain loans from their High Street Banks. These were loyal customers that he had done business with for many years, and whom he had complete faith in.

    Burnley Savings and Loans Ltd officially opened its doors in September 2011. The company was created and is managed by David Fishwick, a local entrepreneur, business man, and the largest supplier of Minibuses in the U.K.

  4. SETANTA1966

    There’s a way around bypassing the Bank’s to acquire lending…..” Crowd Funding ”

    I for one hope this work’s here in Ireland as the Banks are sucking the life outta every entrepreneurial brain we have…
    Little or no Credit or Lending = little or no Cash Flow = Little or no Business = THE INEVITABLE. ..CLOSING DOWN. .

  5. Reality Check

    Paraphrasing Mises: “When you have credit lending in excess of people’s voluntary savings – An artificial boom followed by a bust follows”.

    Added to the mix are the Local authority apparatchiks’ demanding stasi-style hiked up “rates” – to fund their excesses and waste.
    You couldn’t make it up.

    • bonbon

      Mises recipe is being followed to the letter with the “bail-in”, the daylight theft of savings to “save the banks”. Meanwhile they also follow Keynes for inter-bank credit.

      Between Mises and Keynes the credid crunch kiles.

      So basically you have no way to respond to DMcW’s theme.

  6. joe hack

    The Bank of Dave! – Which they tried to close but their where no laws that they could find which legally allowed them to close it.

    I need a new printer so while walking past a local shop I said to the person next to me I must check the printers out the person next to me replied “you’re not that well of now to be supporting the local business”! – Circling to the bottom!


  7. joe hack



  8. redriversix

    Morning David

    Have you heard about “Positive Depositor Preference” ? is the new catchphrase agreed in dublin castle at a meeting of EU Finance Ministers when they agreed to steal money from depositors who have more than 100K in the Bank.No gurantee accounts under this amount are safe…….

    On the same day we were in Court in front of the Master regarding some cases when a Barrister representing A.I.B addressed the Master asking him to adjourn a LOT of A.I.B cases till October..this is very unusual..!

    We need to go back again and find out why Mathew Elderfield is leaving…is their a problem with the paperwork he filed/accepted for A.I.B in relation to their assets,securities & guarantees with the Central Bank..? why would he leave a 100K bonus behind when most people think he did a good job..?

    Their are very strong rumors that A.I.B has already been stress-tested and failed..badly

    I believe their is a major problem with A.I.B that needs to be investigated further..

    May need your help investigating this if you can..?

    Peoples/Companies Bank Accounts ARE going to be “cyprused”.., here and across the E.U

    This may be a long hot Summer and not in a good way..



    • joe hack

      I read estimates that irish banks will need another 30 billion?

      • redriversix

        Yeah Joe saw that too..from the I.M.F..I have also noticed as David alluded to in his article that there is a huge increase in properties for sale across South County Dublin..considering that we are entering a traditionally quiet season for estate agents this would appear unusual activity and further back up Davids idea that Banks are “selling”..?

        I was in David’s Parish yesterday as I do some volunteer work there and I counted 9 for sale signs…I don’t think I have ever seen that many in this particular parish at the same time before..

        • stevedublin

          “onsidering that we are entering a traditionally quiet season for estate agents” – summer is the busy season for estate agents, winter is quiet for selling houses

    • woodsey

      Mathew Elderfield, Peter Oakes, Jonathan Sugarman, the Quinn debacle, the efforts to avoid bank stress-testing until next year or the 12th of never and now this possible AIB thingy? Is that a strong whiff of poo I smell coming from the Central Bank, the Dept of Finance and its minister? A ‘Smart New Bank’, David? Have a little ‘nose’ around the ones we already have?!

  9. lff12

    Actually, David, KBC are about to start building a retail business in Ireland – I suspect for that very reason. There is a huge gap in the market, and a good deal of “good” custom out there who have been roundly rogered by the Irish banks, and willing to move. I for one ended my relationships with the Irish banks in 2004 and will never, ever bank with them again – at whatever cost which at the moment really means I largely have to live credit-free.

    • gizzy

      Retail I would think will not be SME but home loans and related products which was a business they did in Ireland before.

  10. redriversix

    K.B.C were bailed out in Belgium..had losses last year of 922 Million euro.

    I can say I have meet some representatives from K.B.C in relation to restructuring debt with their customers and their attitude is a lot more positive than Irish Banks..saying that , still have not heard back from their credit committees in relation to individual cases so being professional is all I can rate them positively for today.

  11. redriversix

    To clarify..

    When you meet Irish Banks and their representatives their attitude towards customers is somewhere between rude and downright hostile.

  12. TrackerMan

    Imagine if all Irish savers pulled deposits from AIB and Bank of Ireland (similar to what the corporate deposit market did in 2008), we would have two run down agencies with essentially no funding and still very large losses to realise, not a very stable place for ones cash! it’s very simple – If banks here had confidence in their loan books and their capital position, they would be lending and they are not (net new lending is negative – in order to shrink their funding requirements with ECB / Central Bank). Net result is that Irish domestic banks have to match deposit rates offered by Nationwide UK / Danske Bank etc in order to protect their deposit books. If you look at the writedowns on Danske / Bank of Scotland loan portfolios, the Irish banks have not provisioned to the same level on their loan portfolios (ex NAMA transfers) , which imply further additional significant writedowns in order to have a “clean” balance sheet. However this cleansing would be made much easier if a vehicle was found to warehouse tracker mortgages – a significant portion of their loans books, thus reducing their cost of funding, improving their net interest margin and providing fresh cash to enable lending to the real economy here. If / when the ECB provides an efficient warehouse / funding vehicle for these trackers, Irish banks would have a sounder financial footing. However they have no incentive to realise losses elsewhere on their loan portfolios, until this issue is resolved as it would dampen investor confidence in their ability capital ratios and thus necessitate fresh equity capital injections – something that neither the private sector nor government has much appetite for at present – hence the debate on “bail-ins” at present, deserves a little closer attention than it is currently receiving.

  13. michaelcoughlan


    “smart new bank that gives us the credit we’re due”

    Why didn’t they do this back at the start?

    I’ll never know but crowd funding is what I suggest is the correct methods from now on. The dummies books people even have s book on crowd funding. It’s vital particularly if you look at the bill still video the wizard of oz
    Thar business’es break the usurus trap they keep falling into.

  14. breltub

    Welcome to the Keynesian nightmare of your own creation. You want credit you can’t get it, but don’t worry. Your Government has borrowed it in your name.
    I don’t see why you are concerned for your friends business. The government will stimulate his business through investing in growth.

    All he has to do is pay his taxes and be happy that the credit is flowing into the system.
    He can make his money investing in stocks and bonds.

    It’s the smart economy, stupid!

  15. breltub

    The lesson from this article is that trap of monoploy.
    In what other industry are you forced to go and deal with a giant ass hole who is crap at his job!

    There is a massive need to disintermediate the banks. Not reform them, because they won’t. Not restructure them, because that propagates the monopoly.

    Make those losers compete. Remove their monopoly!

    Your friends needs credit. You have a brain. You were an investor.
    Why are you not promoting the idea of peer to peer lending?
    Competing currencies, like your Kilkenny marble. Or the Wir in Switzerland.

    Enough of this balance sheet, deleveraging waffle. It is the mind set of those stuck in the past!

    In my opinion it is now morally unacceptable to keep your money in a bank. You are providing capital for those using it to destroy society.

    I support my friend’s projects and ideas I want to support through p2p start up sites like kickstart or pling.

    Ireland needs a good peer to peer lending facility so capital can match up with ideas.

    You have a face people tend to trust in that regard David, and probably the expertise to really add to a project like that.

    Bring back some capitalism to society and end this corrupt mess we have now!

    • bonbon

      What you see is Adam Smith’s “capitalism” in action. Banks competed for profits, and did in fact loot the economy to the bone. But only after 2000 was it really easy, in the free unregulated market of financial instruments that just happen to have a bail-in guarantee.

      With this guarantee the freedom, oh the freedom of the markets!

      The Guarantee for the Free, in the U.S. of E.

      Bring back FDR’s intervention.

  16. molly

    Just wondering if there was a deposit run on the banks how long it would be before the government stepped in and closed the banks for a week and then start to steel the deposits held with in.

  17. joe hack

    No more smelly fivers thanks to the new crisp fiver but how long will it be before they become smelly?

    • breltub

      The new notes do not smell. In fact to call them smelly fivers is now a crime.
      They are to be known as “fair fivers” and represent the newer, fairer, more open society we aspire to.
      The fairness doctrine!

    • bonbon

      Have you seen the move to remove small Euro coins from circulation. Step 1 maybe?

      • michaelcoughlan

        Never have I been more convinced by this post to swap my euro coins for silver ones. 250 1cent coins will buy you 1no 1oz Austrian philharmonic silver coin readily saleable or transferable into any other currency or means of exchange in use anywhere in the world.

  18. molly

    The pork pie government we are turning a corner ,we are being fed a large bucket of vomit.
    Look you can give money to small company’s but if joe soap has not money to spend whats the point.
    I know loads of people out there that can’t get payed for goods and services,some have been spun a merry dance lie after lie.
    Some have gone back to jobs they have done and tried to remove goods and being told by police to leave,so to options walk away or go down the legal route.
    You might get a judgement but still not get payed .

  19. molly

    The government and the Troika have killed the domestic economy ,making new jobs is not going to improve the domestic economy unless you improve the take home pay of the large amount of people who owe to much money.
    The spenders have been the people who have being hit the most.

    • breltub


      You invest in more crowd pleasing stunts. The Lions tour can’t come fast enough. From speaking to an insider I know that the hardest hit are those who bought into the Garryowen Boom!

      Got the house, got the car, got the jersey. Even learned what a forward pass is!

      What is really needed, according to the dept. of finance official figures, is 3 more Heineken cups, an extra X-Factor and 2 Cheltenhams per annum!
      What the government wouldn’t give for another Sonia o’Sullivan!

      • Adam Byrne

        The Lions Tour indeed, what a pile of shite.

        • breltub

          It is even better when politicians start using sporting references. “Pull on the green jersey”
          I love that one!
          “We are all in this together”

          Team Ireland has replaced

          You’d miss the .inc been thrown around like the good old days!

  20. Beaver

    Sure if your mate has sure thing demand David, why not lend him some money in return for a cut of the profits? Cut out the middle men.

  21. gizzy

    Have the plan for new Bank done for last fours years. 25 million initial capital for set up costs and initial staffing. Further capital dependent on lending targets. Set up as State Bank ala ICC to allow it grow. Then use to entice foreign Bank in to buy modern low cost Business Bank with no legacy loan book. Even presented this at the Dail Finance Sub committee two years ago.But powers that be felt credit guarantee scheme was better. Told them credit guarantee schemes only worked as an add on to a functioning Banking system not as replacement for one. Now only 3 million issued under the scheme. We were right on everything we predicted in our presentation and are still right. Outside Bank will not greenfield this but may buy incubated Bank in 4 to 5 years.

    • joe hack

      You always make common sense even if I don’t politically agree with ya some times.

      Is there a minimum money requirement to set up bank ? or is just paper work? or do just put the word bank on an address? I have a euro I could spare?

      • gizzy

        You need to be approved by Central Bank for licence that is your plan your promoters, your proof of capital your proof of funding your management strength etc we had all that but could not get off the starting line. But it is still right.

    • bonbon

      How would your idea fare with a full Glass-Steagall of the other banks in place? I am curious. It might work. I am sure if one looked at the US in 1934-5 for similar ventures one would find something interesting.

  22. bonbon

    Any bank can function, after splitting off the zombie “investment” arms, and preventing ANY insurance on such activity ever again.

    Hamiltonian Credit charters commercial banks to invest in the physical economy – risk assessed knowing no insurance from the same institution.

    One pledges the general improvement of the nation-state over generations as collateral. When looked at this way has any other collateral any value at all?

  23. bonbon

    What seems vague is the “product” needing credit, whatever it is.

    One needs to look at a credit system not from individual activity, but from a 25-year intent to jump the economic platform. That will generate, products likely not considered in the old platform box-in.

  24. redriversix

    EU cancels Bank stress tests till 2014….?

    A.I.B will not allow public to see their liquidity status as it is commercially sensitive and not in the public interest…News Today From The Central Bank…Nuala O somebody or other..! Irish second name…

  25. george

    I don’t think such a Bank exists or that possibility will materialise.
    I don’t think there is not even good will among multimillionaires entrepreneurs and celebrities that could help, but prefer to put their spear billions in hedge funds, and other speculative investment, rather than do something of the kind.
    Western civilization is not only economically bankrupt, but morally as well, despite all the rhetoric about God, Freedom and Democracy. Our social and economic model is obsolete.
    We are living under corporative and banking fascism.
    We are heading for the mother of all crashes!
    May be nature will teach us few lessons we forgot long long ago.
    Count your blessings or your good luck.

    • george

      Sorry I meant corporate no corporative.
      I think there is not even good will…

    • michaelcoughlan

      Hi George,

      Very precient and superb post. Very very insightful.

      • george

        Hi Michael
        Look who is leading us!
        If you leave aside many types of rhetoric.
        Corporations see us in terms of consumers.
        Governments in terms tax payers.
        With that mind set we have no chance, and our limited imagination can only think in terms of economic growth.
        Basically we keep going in circles, and the gap between our technological and our social development keeps widening.
        Bad news for the humanity!

    • michaelcoughlan

      “maybe nature will teach us a few lessons”

      Looks like she is already. The corporate psychopaths who control the works financial system are almost all male and their children are almost all male according to John Perkins in his superlative book confessions of an economic hitman.

      Remember all human beings are is ecological shit as our species is only 4m years old. Shark species are 400m years old. Put another way if all insects died in the morning within 50 years all life would have died out. If all human beings on the world died out in 50 years time all life would have FLOURISHED.

      • bonbon

        You should look up Prince Philip’s much more elegant formulation to reduce world population. Or Lord Bertrand Russell more direct formulation. Or why not Dr. Schellnhuber’s, OBE : 1 billion.

        Russell :

        “But bad times, you may say, are exceptional, and can be dealt with by exceptional methods. This has been more or less true during the honeymoon period of industrialism, but it will not remain true unless the increase of population can be enormously diminished. At present the population of the world is increasing at about 58,000 per diem. War, so far, has had no very great effect on this increase, which continued through each of the world wars…. War … has hitherto been disappointing in this respect … but perhaps bacteriological war may prove more effective. If a Black Death could spread throughout the world once in every generation, survivors could procreate freely without making the world too full…. The state of affairs might be somewhat unpleasant, but what of it? Really high-minded people are indifferent to happiness, especially other people’s.”

        You keep company with genocidalists it appears. You should know this by now.

        You appear so high-minded, Squire. A proper little leprechaun of a Mephistopheles. Or should I say Troll.

        • michaelcoughlan


          Fair play to you bonbon you always take the bait. I though I’d hook you on the 250c for 1 Austrian philharmonic 1oz coin but I got you this time. Let me explain why you sound so ridiculous. My post is meant to be sarcastic.

          Sociopaths don’t understand sarcasm,
          irony, shame, guilt, decorum, or anything other than their own warped view of the world which lead you to state that I am keeping company with Prince Philp. A clear demonstration of
          How off the wall your dogma really and truly is. We have a saying in the countryside: a shut mouth catches no wasps. Despite other people on the board calling for you to be restrained
          You completely ignore their request and continue with your ranting and raving.

          Who do you think reading this post will be taken seriously at the end? It ain’t you buddy.

          • michaelcoughlan

            As for Lord Bertrand Russell I am sure that your intelligent and articulate portrayal of Lord Russell’s views are accurate without even knowing anything about the guy. The trouble for you is that he is an even bigger nutcase than you are and you are so daft you actually take his views seriously.

            Poor you.

          • bonbon

            Wiggling about “sarcasm” – that’s a good one.

            Your post was what it is, a rageball outburst. Punks (British invention) tried the same trick, telling everyone the S*X Pistols “Belsen was a Gas” is “sarcasm”.

            It is NOT sarcasm, it is REHABILITATION.

            We’re onto that nasty trick. Sarcastic fascism is STILL fascism.

  26. imithe

    Hi David. Ask your friend to have a look at
    It’s an online crowd-funding inititiative designed to assist small enterprises secure loans that the banks won’t provide.

    It seems to be working well for profitable companies whose main hurdle is securing a loan to grow.

  27. molly

    Banks can’t hide there balance sheets long term,it’s like sh-it it rises to the top.
    For every new job there’s An old job lost , front line news is not the full story how many jobs are lost and hide in the bottom of the news pile.

    • Deco

      The ESRI are a waste of taxpayers money.

      Sell the ESRI. And pump the money into the mental health system, and into programs to tackle substance addiction – especially alcohol addiction.

      Of course, Roisin Shortall did not last long after making it public that she wanted the volume of alcohol consumed in this country reduced, for the sake of the health system.

      As David says, the ESRI are always late at observing the obvious, and always early at forecasting the incorrect.

      The comments about the link, indicate that people are waking up to the fact that the ESRI are useless.

  28. [...] new banking licences should be looked at as some sort of new thinking on the matter of spending: Wanted: smart new bank that gives us the credit we’re due | David McWilliams So where is the opportunity? There is an enormous opportunity for a new bank to come into Ireland [...]

  29. Morning

    Regarding the ESRI, I must admit I share the scepticism of the man from above. This week alone they produced research on the generational divide which we’ve been banging on about here for years. This is not research its just a lazy, after-the-event form of workfare for people with worthless PHds.



    • breltub

      Can I just get the glass-steagall in here first. Perhaps a new “subscribe” in joke can get going!

    • michaelcoughlan

      “worthless PHDs” ponzi scheme in 3rd level qualifications. No end to the corruption. Some misfortune probably paid a fortune to get it.

    • bonbon

      When the worthless PhD’s fiddle with Glass-Steagall you get Vicker “ring-fencing”, Liikanen-light, Dodd-Frank, and host of other doctorate dissertations.

      Try mentioning Glass-Steagall to the Professor, and lose any kind of stipend.

      One can get financial support spinning banking tails !

    • Reality Check

      Spot on Deco & David.

  30. Deco

    The “new” government are now behaving like the old one.

    Political strokes.
    Expensive junkets.
    Obedient to Brussels, and pleasing to the “unsecured” bondholders.
    Jobs for the party supporters, relatives, pals.

    And now we have the Minister for Justice knowing minutae about an opposition TD, when it was not recorded by the gardai’s incident recording system. And using it to put the said opposition TD in his place.

    This is like the days when CJH was running the country.

    And, unlike in Britain, nobody ever gets sacked/forced to resign.

    • molly

      It’s very hard for TDs to get the sack ,if they do something wrong they can refuse to leave and await there faith at the next election.
      The job is trailer made for spongers.
      Once a person is elected they can milk the expences,give jobs to there friends and supporters ,trips to different parts of the world staying in 5 star hotels,invent things to spend tax payers money on,the list is a long one.
      I think I am only scratching the surface .

  31. molly

    The whole system is this country must collapse .
    Money in and far more money out as time is turning full circle it stands to reason the money has to run out.
    The good times that are still rolling for a large segment of the people who are working and who have retired,the said mention people where and are on top pay , top lump sums,top pensions.
    This country is acting like a country that’s 100 times it’s size.
    It stands to reason the whole system that stinks to high heaven will simply run out of cash .
    When this happens there will simply be no way to borrow the vast funds to keep the party going.

  32. molly

    A good number of articles on this blog past and present in one way or another come down to money.
    The say money makes the world go round or our country go round.
    Would you agree that in the not to distance future,Ireland is going to start to run out of money.
    It is fact that Ireland needs to borrow a lot to keep the lights on.
    When do you think the lights will go out.
    Even in boom time could we afford the wages ,pensions,lump sums,hand shakes and
    The index link pensions.

  33. Adelaide

    ‘Public Self-Issued Credit And Public Self-Governance’ Solution.

    ‘Valun’ (‘value of unit’) money, as proposed by E.C.Riegel in the 1930′s/40′s
    (please, Bonbon don’t reply with an ‘ad hominem’ reply)
    is the only logical and humane MONETARTY SYSTEM that offers a profound, positive solution. I ultimately believe that society will adopt these structures and also his views on self-public POLITICAL SYSTEM, (with or without E.C.Riegel his ideas are ultimately the most logical ‘bleedingly obvious’ when you delve through all the alternatives ), because once aired they are impossible to ignore. Unfortunately for him he advanced his ideas long before technology existed to manifest his ideas.

    His ideology of ‘self-issued credit’ has a long history which he generously acknowledges and formulates and his proposal of ‘self-governance’ is (an alternative extension of his monetary policy)impossible to ignore. Once you read his papers from then 1930′s and 40′s, the guy is so far ahead of his time, to this day, that once you propose his ideas in ‘every day’ language to any contemporary they immediately ‘get it’.

    Any conversation regarding money and politics is deficient without regard to the long history of self-public monetary and political independence ideology formulated by E. C. Riegel.

    • Adelaide

      FYI. E.C. Riegel was an Irish-American.

    • bonbon

      It is a bit odd that some are so afraid of a simple reply. We went through this before here and here

      To summarize, ex-Tigers MUST do their homework, be not afraid to offend the very perpetrators of this continued disaster. If someone has either been hired, or mistakenly convinced, so what? We thought RTE was the fawning sycophant.

      Have look at this, E.C. Riegel’s attack on FDR, Franklin D. Roosevelt’s New Deal and successful defeat of fascism.

      Quarantine The aggressor in the White House / [by E.C. Riegel].

      This is a vicious ad-hominem attack on the successful policies that are urgently needed now, Glass-Steagall, New Deal. A vicious attack on the successful defeat of fascism. Now we have Riegel apeasing, Keynes and Hayek praaising, and Friedman promoting fascism – all monetarists.

      Go ahead and cherry-pick “arguments” from this, that’s your problem. Monetarism leads to this ugly truth.

    • bonbon

      If Riegel did not mention the Hamiltonian Credit Clause of the US Constitution, considering his reputed self-education, it not omission, rather policy. We Irish cannot be expected to read of this, written while the New Deal was being rolled out (many of had relatives there then).

      To clear up this issue we have that book by Riegel showing exactly the monetarist point of view, exactly the point of view of FG right now, appeasing, opposing any actual solution.

      Monetarism is a thin gruel served at the U.S.E. camps feeding time, before visitors arrive.

      • Adelaide

        I believe ‘cherry-picking’ is your expertise.

        How you can lump E. C. Riegel with Keynes, Hayek, Friedman and ‘monetarists’ in general is beyond me. It is the one unique characteristic of Riegel is that he is an ‘anti-monterist’!

        Plus, I’m familiar with the paper you allude to

        Quarantine The aggressor in the White House / [by E.C. Riegel].

        and it is an anti-war (pre WW11) paper urging pacifism. (it’s a pity our contemporaries can not write so eloquently)
        And yet you say, in an attempt to rubbish him,
        “Have look at this, E.C. Riegel’s attack on FDR, Franklin D. Roosevelt’s New Deal and successful defeat of fascism.”
        You’re not only chronologically incorrect but completely deceitful.

        You should do your homework! as you are often apt to say.

        And what RTE and FG has to do with the ideology of Riegel, well, you’d have to spin an intricate web of 6-degrees to make the connections. Please, like other contributors have already said, please, make a contribution that makes logical sense and not a meanigless rant.

        • Reality Check

          Bonbon’s drivel, the incoherence of it all; I’m convinced Bonbon comes on here with a “flight of ideas”.
          He’s on a high if you know what I mean….

        • michaelcoughlan

          Well done Adelaide re bobnbon. You could also point out to him that the biggest contribution to defeating fascism was 27m dead Russians.

          • Bamboo

            RE: ESRI Above also.

            Although I agree that the ESRI outcomes and predictions are somewhat dubious – I do think that data analysis is based on what you want to see based on certain data modelling techniques you choose.

            Sometimes the ESRI is in a sombre negative mood; sometimes they are happy and feel it is time for the nation to see some better news instead of all this gloom and doom. So what better things to do then output some good news stuff.
            I wonder: Are we developing dangerous level of bad news edictions?
            Are we – posters of this forum – falling into a worrying mode of scepticism, cynicism, indulging on bad news, and all other negativities?

            And for sometime now, in this forum we are seeing strong development of the bullying culture coming up.

          • bonbon

            In the U.S.E we are seeing fascism on the rise, fascist economics, youth dumped with no future, wage squashing.

            And you are worried about etiquette?

          • bonbon

            Russia and the US allied, but the economics that gave the US any chance at all after 1929 was FDR’s New Deal, RFC, and Glass-Steagall breaking the power of Wall Street which financed Hitler.

            This is why one finds WallSreet/London luminaries praising Hitler and attacking FDR. London’s Hayek was clever, giving Hitler’s economics a smile and nudge-nudge wink-wink.

            Drop monetarism, it is a thin gruel.

          • bonbon

            And, Squire, you posted above here a nasty tirade against the human species, straight from Al gore’s and Prince Philip’s genocidal policies. Why is the true color of Greenies Brown?

          • michaelcoughlan

            “nasty tirade against the human species”

            The 20th century was the most destructive in human history. Some one has to point out the obvious if we are to effect Change. You rightly point out we are slipping into war. It isn’t the flora and fauna causing the trouble for us.

        • bonbon

          Riegel opposed the urgent intervention into WWII that FDR knew well was important, who knew Wall Street had financed Hitler and the Business Plot – you should too.

          RTE expects fawning sycophants, and your attempt to pose Riegel expects exactly the same. I think you have misjudged the mood!

          We are not about to be fed any drivel now. So hard questions : what mentality drove Riegel to oppose the New Deal (well known)? Why did FDR’s intervention rouse the ire? It is monetarism.

          what mentality drove Keynes to publish in Hitler’s Germany, Friedman to praise Nazi economics, Hayek to rework it, and now Riegel to oppose any creative intervention? A mental disease called monetaris.

  34. joe hack

    U.S. authorities seize accounts of major Bitcoin operator.

    and Loads-a Bill’s – Mr. Gates is now the richest man in the world poor Carlos Slim how will he manage

    I wonder id Bill is interested in up a dumb bank in Dublin

    Avoid wall street and your country will grow

  35. Robbie

    David, It seems to me that all your proposing is to add more banks to an already decrepit system. It’s the dept based monetary system as a whole that is the problem. We need to revolutionise our entire monetary system and not just do a few small tweaks and adjustments to a system that is already deeply flawed. Banks are private businesses and like all businesses their #1 priority is to maximize their own profits. Isn’t there a massive conflict of interest in allowing banks to be the creators of money and then getting to decide which part of the economy that money will be lent into. During the bubble years over 80% of all new money was lent into property because banks felt this was the safest bet for them. The real economy was kept afloat by the property bubble, but as soon as that bubble burst everything else went with it. We don’t have to have money created as debt. There are more stable alternative monetary systems being proposed. Here are just some of the proposals from and BANKS WILL NO LONGER BE ABLE TO CREATE MONEY. (2)MONEY CREATION TO BE GIVEN TO AN ACCOUNTABLE AND TRANSPARENT BODY.(3)MONEY IS ONLY TO BE CREATED WHEN INFLATION IS LOW AND STABLE.(4)NEWLY CREATED MONEY TO ENTER THE ECONOMY FREE OF ANY CORRESPONDING DEBT.(5)NEWLY CREATED MONEY TO ENTER THROUGH THE REAL ECONOMY INSTEAD OF FINANCIAL MARKETS.(6)BANKS TO GIVE INDIVIDUALS CONTROL OVER HOW THEIR MONEY IS INVESTED. In my opinion banks should be reduced to small local community businesses for people to do their daily financial business with. Just as all communities have a Pharmacy, Newsagent, Butcher, Off-License etc, that’s all banks should be.

    • joe hack

      Debt money it’s a criminal

    • bonbon

      We have numerous posting from Ferguson on this topic. It misses the point entirely.

      Have a look at the Triple Curve, Typical Collapse Function

      Now DMcW has referred to the “Great Divergence” a couple of blogs ago, he has noticed, belatedly, an aspect of the Triple Curve.

      But the point is – look at the plunging physical economy. To reverse that catastrophe, (after giving the bank system the Great Split), means massive credit for productive jobs with reconstruction in all areas from power to health care.

      Monetarists miss this entirely, miss life itself. And monetarists created the disaster, cannot conceive of anything than more of the disaster.

    • Glad to see some analysis of the debt-based system Robbie. Banks extending credit (creating money) sounds like a good thing when you describe it from the point of view of individuals within the system as David has done.

      David, thinking about the system as a whole for a moment. Since money comes from bank loans and every unit of credit the banks create is matched by an even higher debt, is this not the root cause of the debt crisis?

      Conversely, how can you possibly resolve the debt crisis by getting banks to create even more credit, again with an even higher debt.

      Why should an entrepreneur/business have to go into debt in order for there to be a medium of exchange in the economy?

  36. bonbon

    Why did DMcW choose his theme on the The 80th Anniversary of Glass-Steagall: The American Principle of Progress ?

    May 16 is the 80th anniversary of the law that taught Wall Street a lesson they never forgot. A lesson we need to teach again across the entire transatlantic disaster zone and the U.S.E.

    Then FDR re-chartered the Reconstruction Finance Corp., with Credit Banks for Industry and the New Deal.

    So, DMcW, we have a precedent for credit and industry!

  37. joe hack

    Dollar crisis and the coming collapse of US global hegemony

    By Colin Todhunter

  38. bonbon

    A very revealing story of Microfinance :

    Obama and Geithner: They’re Not Really Americans

    Timothy Geithner’s father, Peter F. Geithner, ran the Ford Foundation Microfinance program in Indonesia that paid for Ann Dunham, President Barack Obama’s mother, to do her PhD thesis promoting primitive slave industries for Indonesian villagers instead of industrialization, and they met in person at least once. Peter Geithner later ran the Ford Foundation’s entire Asia program.

    Are some now promoting primitive industries instead of industrialization in the catastrophe called the “U.S.E” ? It seem this fascist nonsense comes from exactly the same source as the entire banking fiasco – John Perkins’ Economic Hitmen.

  39. Dorothy Jones

    The best commentary on economy that Ireland has ever had : NAMA wine lake, has just posted a farewell note. The blog will remain but is closed for new material.

  40. bonbon

    11-May-2013 EU Prepares Grab for Bank Accounts

    The German KfW, Reconstruction Credit Agency, ran a worst-case TBTF chain reaction failure scenario, just recently. Widely reported in Focus and elsewhere.

    But a coup is now in preparation. The response from the financial oligarchy is the method of Carl Schmitt, “the emergency makes the law”, “legal” apologist for the 1930′s Nazi dictatorship.

  41. Harper66

    Very sad news. NWL provided a wonderful service.

  42. David,

    I know you think this kind of detail isn’t that important and a good economist to you is one which has the people side of things in mind, moreso than the mechanics.

    However I’m trying to point this kind of thing out so that you better understand the present system. The ultimate goal is that you’ll start seeing the ill-consequences of the system and see that the simple process by which money is created and destroyed is the root cause of many of our social problems as well as our financial ones.

    Anyway, the technicality I want to highlight is:
    “They are deleveraging and are paying back money to their creditors. The banks have to get their loans to deposits ratio down to 100pc, this means taking in more money and lending out less.”

    There’s so much wrong here I’m not sure where to start.

    When you say that banks are paying back money to their creditors this gives the impression that banks must first have money before it can lend. As you know (I think) banks create the money they lend. As you also know banks delete the money they receive through loan repayments. What creditor do you think is being paid in the process?

    There is a second type of money, central-bank-money, and banks with excess central-bank-money often lend it to banks who otherwise need it. This is repaid in time but this type of money is not in general circulation and banks can repay their creditors all they like – It doesn’t affect the amount of money in the economy. If all central-bank-money debts were repaid the banking system as a whole would not deleverage at all. Paying back money to creditors does not deleverage the system at all.

    The next thing is the idea that banks have to get their loans to deposits ratio down to some healthy level.

    Again, the model of banking which you still seem to have is the popular notion that banks take in cash from depositors and lend it out to borrowers. How a bank could lend out more than it has under such a system is a mystery and it’s one which you incorrectly explained in ‘The Good Room’ as the difference being made up by funding from foreign banks.

    Of course this model of banking is completely wrong and all I’m really saying is please deal with and write about the banking system we actually have.

    Here’s the tutorial on the loans to deposit ratio:

    When banks process loans they credit the borrower’s account creating a ‘deposit’. The borrower’s debt becomes the banks asset. Since all money is created this way the L:D ratio starts off life at 1:1

    When banks process a loan repayment they lower the customer’s account and lower their debt to them and again the L:D ratio stays at 1:1

    If people transfer money abroad the L:D ratio goes above 1:1.

    If the government bails out the banking system people’s bank balances are lowered in favour for an increase in the banks’ reserve accounts and the L:D ratio raises.

    If the economy takes in money from abroad or if people default then the L:D ratio lowers.

    If the L:D ratio is higher than 100% it means the population owes more than exists and this is surely a bad thing so I can see the merit in advocating a smaller L:D ratio and preferably one below 100%.

    Two things:
    What path do you see to getting the L:D ratio down to 100%? Bear in mind a reduction in debt reduces ‘deposits’ by the same amount.

    Also, ‘Deposits’ are liabilities of the banks and Loans/Debts are assets. A L:D ratio below 100%, if achievable, would leave the banks in a more insolvent position.

    It’s through these kind of technicalities that I’m trying to highlight the impossibility of resolving the debt crisis under such a debt-based system. Hopefully, you start advocating even a partial source of debt-free money as a means of helping the economy.

    • bonbon

      That is a hopeless monetarist argument. Glass-Steagall is mst certainly a non-monetarist intervention, from outside the technicalities.

      A monetarist coup is now in preparation, admitted by various quite openly.

      This is why monetarism is utterly incapable of providing any way forward whatsoever – technicalities after all are what drives the coup junta.

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