September 9, 2013

A heavy price for banking failure

Posted in Banks · 137 comments ·
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Watching the bank bosses during the week reminds us all that the Irish banking crisis is still with us. The banking crisis started in 2000, not 2008 as is often stated, and is still crippling us. The Irish banking crisis began when the banks began to blow their own balance sheets on wild property lending. Every time they lent money for some developer or other to build a new shopping centre or a new development, they were destroying wealth, not creating it. But in the effervescence of the boom, this process of gradual bankruptcy was recognised by only a few people.

The destruction of wealth and the banking crisis began tentatively, but ultimately turned into frenzy as the banking herd copied each other. While much attention focuses rightly on the behaviour of Anglo Irish Bank, it did not act alone. If you want to get a handle on just how reckless the lending was, AIB and Bank of Ireland doubled their total loan books in three years. Bank of Ireland took more than a century to build a loan book of €63 billion and then, in three years from 2003 to 2006, it doubled it.

By 2008, it was all over. The damage had been done.

Back in 2003, when it was neither popular nor profitable, this column argued that, without dramatic remedial action, the coming property crash would impoverish us all and pointed out that the banks and bank lending, not supply and demand or a rising population or all the other nonsense spewed out, were the epicentre of the problem.

Fast-forward nearly a decade to this week and we listened to the bank bosses being evasive, indignant and, in some cases, haranguing politicians, despite the fact that none of the banks would be open if it weren’t for taxpayers’ money.

And it looks like they have once again shown that damning combination of arrogance and incompetence because, reading between the lines, it’s obvious they need more cash. Once again, they have underestimated the extent of their losses and, once again, they will expect someone else to cough up the cash.

Looking back over a ten-year history, the behaviour of the banks in Ireland has been nothing short of extraordinary.

In the period of 2000-2008, they behaved like pyromaniacs in a forest, playing with fire and laughing at anyone who warned of the dangers of a contagious inferno. Once the market peaked and reversed, the banking system’s implosion would be a financial forest fire that would engulf all around it – deposits, good businesses and people’s livelihoods would all be incinerated.

Once the fire caught hold and spread, the government – who should have been on top of this via the regulator and the central bank – had a choice, either to put it out using everything it could or to let the fire burn (let the banks go) and see what happened.

Anyone witnessing the evisceration today of Cypriot deposits, or the total collapse of economies in the 1930s, or during the Asian crisis, as a result of just letting banks go bust in an uncontrolled fashion, knows the authorities have to act to prevent a contagious bank run. There are many who argue we should have let them all go under, or that we could have isolated the bad banks and let others go. But they were all bad; every single Irish bank was bankrupt in 2008.

Those who started the fire continued to lie about the extent of the damage, and the firefighters – the regulators and central bankers – who were supposed to be in control sided with the pyromaniacs until it was far too late.

We know that the banks lied to the government about the extent of their losses in the panic of 2008 and only began to ‘fess up after they had Nama in place by 2009.

The bank guarantee and Nama were the consequences, not the causes, of the Irish banking crisis because, without a banking crisis caused by reckless bank lending, it’s clear no action would have been necessary.

The guarantee ought to have been in place only for two years at the most in order to prevent the bank run that was well under way. However, it was extended, apparently because, having lied about their true losses, the banks couldn’t keep going without an extended State insurance policy. As the losses mounted, the insurance policy itself bankrupted the insurer even though, by the time the troika walked in (November 2010), the original terms of the insurance policy had expired.

Once the IMF was here, the banks incompetently calculated how much fresh money they would need in the worst-case scenario. They emphasised that only in the worst-case scenario – if the economy continued to contract, and if defaults continued at a certain rate – would they need more capital. You may remember the line “the best capitalised banks in Europe” which was doing the rounds in 2011.

It transpires that not only were they not the best capitalised banks in Europe, but that they mightn’t have enough capital to deal with today’s mounting mortgage arrears. We can see that the ten years’ sorry history of the banks and the Irish state has been one of mendacity, incompetence, deceit and entitlement. Now, I realise that banker-baiting has become a type of national pastime, but I write as someone who was pointing this out when many of today’s most aggressive banker-baiters were actually cheerleading. What interests me is not vengeance or political point-scoring. What interests me is how has all this affected the Irish economy and our ability to compete in the world.

Last week, we received evidence of the deleterious impact the banking crisis is having on the Irish economy. Each year, the World Economic Forum publishes its global competitiveness index. Ireland was ranked 28th in the world. On most metrics, Ireland does well enough. For example, in primary education, where we have been making cuts in both general expenditure and in the conditions of younger teachers, Ireland ranks eighth in the world, just above the Netherlands. In contrast, when you examine banking, where no expense has been spared to keep the banks afloat, you see that under the indicator of “the soundness of the bank” out of 144 countries, Ireland ranks 141st out of 144.

This is the legacy of all that corporate high-fiving in the boom and it affects all parts of the economy because, when you look at the problems Irish businesses face as they try to grow, by far the biggest problem is access to financing.

No proper funding is a function of dysfunctional banks that are still broken, haven’t enough capital, and continue to operate as if they are part of the solution when they are still very much the problem – and the roots of this problem go back well over a decade.

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  1. I thought it was current episodes of Coronation Street I was reading and finding the culprit who set fire to Rovers Return. Its deep stuff this article proclaims .

  2. Lexicon

    Ivan Yates has introduced a chapter in his new book with the heading :

    Arrogant Ignorant Bastards ( A I B )

    It would be interesting what he might say were it to have been :

    B O I

    or

    K B C

    or

    P T S B

    etc

  3. cianireland

    The banks didn’t simply decide to bet the house on housing all by themselves; unwittingly we contributed to putting them up to it…

    It is worth noting that modern economies have very little group representation (in the absence of mass unionisation) and that one of the few places where we are in fact mass represented is via our collective pension contributions.

    Pension contributions mass in the hands of a few key managers who in turn have a massive impact on corporate decision making and absolutely on the banking sector in the early naughties.

    With Anglo shooting the lights out shareholders were screaming at the rest of the banks to follow suit. Specifically the LARGE shareholders, people running OUR MONEY, would have been leaning heavily on the banks to make hay.

    This is in no way me suggesting that we, as a collective, share responsibility or blame. This is me highlighting that inadvertently and in virtually all corporate decisions, our collective ownership of stakes in these businesses affects how they behave.

    This includes influencing short-termist policies, cost cutting, union busting etc…

    Not only are the turkeys voting for Christmas, they largely don’t realise someone is voting for them!

  4. David says the beginning of ‘ to blow ‘ period is the year 2000 . I disagree emphatically on that year .

    It was 1998 when the National Crime Forum under the aegis of the Dept of Justice issued a report under the chairmanship of FF and Minister O’Doherty .

    This report ignored invited professional oral and written contributions made at various appointed official centres around the country relating to Irish Banks and their deceitful practices .

    This report was the ‘Green Card ‘ to allow the ‘ Green Jerseys ‘ exploit the public with a mindset of a ‘ Green Deception ‘ that eventually caused the deleterious impact al the nation now lost and gone.

  5. CorkRob

    What’s needed now is a clear path to finance for the struggling SMEs looking to grow their businesses. Lets get real – the main banks are not interested in lending to SMEs, only in liquidating housing stock and maintaining the Status Quo of their historical salaries and bonuses by padding their balance sheets.
    While letting them go bust would surely have a calamitous effect on thousands of depositors, it always strikes me as odd how the depositors would lose their savings but the debtors (Mortgage holders and those with loans) would have their debts cycled on to a new Master for further hounding.
    Could the government not now establish a new “Clean Bank” , with no historical issues and capitalise it, rather than pour €billions more wasted money into these terminally sick banks? Surely this would be the best way to ensure growth in successful indigenous industries by committing finance through this new bank?

    The old banks seem to be “giving the bird” to the regulator again in terms of minimum lending and their arrogance has to be terminated.

    We’ve spent 5 years talking about this now and still the government inaction goes on and on and more of our precious cash is wasted on a bunch of financial hooligans who seem to believe that they are above reproach and untouchable.
    Unfortunately leadership seems sadly missing in government, with the focus solely on hitting unrealistic Troika and (lets be honest) Bundesbank austerity targets.

    The case for the reintroduction of the Punt must now also be getting stronger and stronger – the ability to devalue the currency would offer immense opportunity to the country – sure, the price of imports would rocket, noticeably oil, but that could be the catalyst that’s been missing to seriously start developing an indigenous Alternative Energy industry, which could employ tens of thousands and reduce our dependency on fossil fuel imports.

    It’s nigh on time for the talking and doffing of the hats to the “Banking Gods” to cease and for positive and affirmative action to be taken by government.

    • Paul Divers

      People have been talking about the banks for 5 years and the only thing that has changed is that the bankers appear more arrogant and the politicians more tame.

      Even talking about them is a waste of energy and although some seem to think this was a brilliant article by our host I view it as a re-spin of what we all already know and merely takes us back to David’s apparent obsession with needing to be proved right after taking on the establishment a decade ago. It sounds like a swipe at the bankers and stuck in the past.

      It’s time to move on and start thinking about how we can change this terrible system. We are changing, slowly and individually, but the problem is that we have no collective vision and are surrounded by individuality, mediocrity, corruption, laziness and most importantly, stupidity!

      I’d rather focus on the economics and politics of :

      “start developing an indigenous Alternative Energy industry, which could employ tens of thousands”

      Good point. It’s already started but no-one is talking about it. See the last article for some good links on fracking in Ireland. We could start by fracking the arse out of Dublin Bay :-)

      Seriously, this country can either roll over and let the big boys come and take all our resources while we undergoe decades of austerity and limp goverment or we can stake a claim in the spoils.

      The type of figures we are talking about could provide this country with the best of everything – education, health, housing etc. If Libya could do it then we could

    • Deco

      If a clean bank established itself, outside of state interference, the government would feel obliged to pin it down, and prevent it from damaging the oligopolistic set up with the existing “pillar banks”.

  6. Hi David

    I have concurred with your comments since the noughties when you warned about the housing boom and its subsequent fall. I was in a weird way lucky to be in England during the early 90s and observed the devastation of the property crash there and I saw the same signs in Ireland occurring. I knew the crash was coming as did you (maybe not the extent of it). It is why I did not buy a house, I could have got a loan if I cooked the books a bit, did what the banks did but I knew fundamentally I could not afford a house and if any little thing went wrong I was screwed. So I rented, I still rent.

    There is a great quote from Anthony de Mello when he says ‘It is easier to protect your feet with slippers than to carpet the whole of the earth.’ This quote came to mind as I was reading your article. Yes the banks have behaved deplorably in collusion with our past and previous government coupled with a lack of proper regulation (I believe this is improving) but in each of your articles you place the ordinary man and woman as a victim of the bankers and the government and I have a huge problem with that part of your argument.

    The banks could not have distributed loans like sweeties without the assistance of those who sought loans they could not afford. Ordinary people believed they were on the never, never and the good times would last forever and that is dangerous thinking, nothing stays the same forever. Banks and those that borrowed were in partnership in this so the responsibility lies with both parties. I concur that the banks have got away with so much but by making ordinary people victims means they are unable to look at their own part on this. They will just point the finger at the banks, at the government and remaining stuck in victimhood which does not help or empower anybody. If everyone decided not to avail of loans they cannot afford or feel the need to own a property at any price then the banks cannot dole out loans like sweeties.

    My response is not in relation to bank guarantee scheme, truth is we have and continue to be shafted in that respect and I have no solutions to offer on that score.

    • CorkRob

      Miec,

      Tens of thousands of young couples bought during the boom, only because the Banks and the Estate Agents were hyping the growth in property prices to be a spiralling phenomena and they didn’t want to get left behind.

      They did not buy trophy houses – many could only afford poorly built and cramped apartments, which they now find are worth only a fraction of the mortgage amount they still have around their neck.

      They did not have the benefit of foresight and the UK experience that both you and David did and should in no way be blamed for the corporate greed of the banks, estate agents and fund managers who drove this bubble.

      • Many I know were simply putting a roof over their heads. The rental market was not expansive, and there are still issues that disallow a comparison with other countries where renting is more established. Security of tenure being the most obvious.

      • Bowley

        Would have to disagree slightly; I was burnt in the 90′s UK crash, & upon returning home to Ireland was treated as a pariah by my family, who believed I must have done something terribly wrong to have my house repossessed; the effects of escalating interest rates were quite incomprehensible to them. The general consensus was, “Sure, that wouldn’t happen here, you’d just go to the Social Welfare Office & they’d HAVE to help you out”.
        There were so many Irish over in the UK during the 90′s who later streamed back here in the boom years that I find it hard to believe only a minority had any knowledge of the crash, whether first-hand or not.

        Now several of my younger siblings are in mortgage difficulties themselves, having over-stretched dramatically with the costs of their weddings, jeeps, etc all added to the longest possible mortgage terms. They’d heard first-hand of my experience, yet still chose to blindly forge ahead.

        Seems cautionary tales are just not wanted in a gold rush.

        The time for some basic essential everyday financial studies to be taught in schools is long overdue, on a very practical, ‘shock-tactic’ basis. Get ‘em young…

        • Grey Fox

          That’s what we paid massive salaries to regulators and public stewards for, but they were asleep at the wheel or more likely handed over control of the wheel to finance deal drunk bankers.

    • Original-Ed

      Responsible government would have controlled credit – allowing 100% mortgages was criminal. Nobody has the right to do wrong and that also applies to governments.

    • joe sod

      i agree with this comment also. I do not agree with the narrative that the banks were solely to blame for the bust. The reason for the bust was the atrocious regulation and management at all levels in the irish system from financial regulation to planning. The whole system in ireland failed, even if the banks were reckless a proper planning system would have stopped the ghost estates from being built. This type of thing would never have happened in Britain. The IFSC was the home to some of the dodgiest hedge funds in europe attracted by the zero regulation. The only way to restore some sort of credibility to the regulator was to put a foreignor into the job. Thankfully another foreignor will take over from him after the attempt to put another insider from the department of finance was foiled.

    • Paul Divers

      You can get a hungry dog to do almost anything when you bang the dinner gong and being hard of hearing and I never heard the call. Don’t think I missed much

    • conor

      Hi Miec,
      Re your statement “The banks could not have distributed loans like sweeties without the assistance of those who sought loans they could not afford”
      The banks had the ability to say no to those who sought the loans as they were holding the money and giving it out at in credible multiples of in some cases two salaries.
      One of the reasons I believe the banks gave out the funds like there was no to-morrow was, that they had already lent hundreds of millions to builders and developers and if the houses that these developers had built were not sold the proverbial would hit the fan, so they doled out the money to the buyers of these homes to keep the roundabout going.
      Conor

      P.S If you needed any proof of this, why did B of I sell its office block on Baggott Street when giving out money to everyone else to buy.

    • jeeaaan

      The only regulation working is against the credit unions.

  7. Original-Ed

    David, you should have this piece etched onto brass plates and nailed to the doors of all the culpable state institutions and bank HQs.

    I love the effervescence bit – it sums up the whole period when the light weights in charge were surfing the bubbles.

    What ever happened to Dr Dan ?

  8. Pat Flannery

    You are probably right that it all started around 2000 in Ireland because it had already started a few short years earlier in the United States.

    I had been a U.S. Realtor (estate agent) and Mortgage Broker throughout the ‘80s and the ‘90s. The National Association of Realtors enforced very strict standards of professional practice. That policy had served us well down through the years in that lawyers were hardly involved in real estate. Unlike in Ireland your local Realtor did your house transaction from end to end without a lawyer. That required great trust by the people. We had that trust.

    Then came “securitization”. The Wall Street money floodgates opened up and struck us like a tsunami. But it immediately ran into a problem.

    The local Realtors understood value. For generations they were the appraisers, or “valuers” as they are known in Ireland. The process was pretty automatic. It was all based on “comps” i.e. prior closed sales of comparable properties in the immediate area. It was a law of nature. You had to justify your appraisal by using “comps” as your base line and adding or subtracting for small quantifiable differences e.g. a pool, a larger lot or a view.

    Realtors, through their local co-op or “Board of Realtors” kept very careful “comp” records. Access to these records was an exclusive privilege of your real estate license. The local people understood the importance of these records and knew they could not be circumvented. Nobody could pull property values out of the air. Your property was worth no more and no less than the last comparable sale in your neighborhood. All you needed to know was what that last sale price was and your local Realtor had it.

    Then along came Wall Street in the form of “Prudential Real Estate & Mortgage Co” who started buying up all the small mom-and-pop Realtors all over the country. The difference between us old-time Realtor and Mortgage Brokers and these new Wall Street slicks with their briefcases full of hype was that they purportedly were lending their own money.

    Lending your own money is not a licensed activity therefore they didn’t even have to be licensed. Many of these new “senior mortgage specialists” were selling vacuum cleaners door-to-door the month before.

    All the constraints of the old profession was gone. We were doomed.
    Gone were the “comps”. A property was now worth whatever a “Prudential” or a “Countrywide” “senior mortgage specialist” said it was. Our frantic protests that lending “securitized” money was not lending one’s own money went unheeded. Incidentally the money lent by Irish banks wasn’t their own money either. That too went unheeded, even by our own David McWilliams, to this day.

    But everybody was having a great time. Those who didn’t sell their old home and “move up” refinanced. With the “cash out” they paid off the family car, took a vacation in Vegas, bought a boat or camper etc. etc.. Business was booming everywhere. Everybody was buying something.

    The deadly Wall Street “securitization” bug quickly spread around the world like a pandemic. It reached Ireland right around 2000 as you say David. I spent three months here in that year, renting a holiday home and watching in amazement. I think I even remember seeing you on television saying it was all a giant bubble. I remember being pleased that somebody understood but I also remember doubting that you or that somebody understood what was causing the bubble. In fact I don’t think you understand the evils of “securitization” to this day.

    To me being in Ireland in 2000 was like watching natives seeing a light bulb for the first time. Sadly I knew that light bulb to be lethal. It had already destroyed my profession in California. I was trying to get away, to recuperate and here it was, following me.

    By 2008 the Wall Street “securitization” bug had not only destroyed the real estate and mortgage broker profession I loved, it had destroyed America and the world economy.

    In any market there has to be a meaningful method of asset valuation. When that gets thrown out the window look out below. Scrapping the “comp” system made the wildest “securitizations” possible. That’s what really happened. I know, I was one of its first casualties.

    • Paul Divers

      What you are describing is the effect of light touch regulation.

      • Pat Flannery

        What I think I was describing is the assault of Wall Street on main street. There was no regulatory body involved in the Wall Street takeover of mom-and-pop real estate shops. The old mom-and-pops didn’t need regulation. Their neighbors were their regulators.

        Now that the old world has given way to corporate super-sized world in all areas of the economy it has brought a whole new set of governing challenges that are not yet fully understood let alone implemented.

        Our universities and think tanks are way behind the curve in first understanding and then crafting the tools that are now needed in this new highly centralized economy that were never needed before.

        • Paul Divers

          Ireland is not perfect but neither is Norway or other perceived ‘enlightened’ societies. Even with their huge sovereign wealth fund they are split 50/50 on joining the Euro and are nervous and indecisive about being left behind.

          Like us they also have dilapidated schools yet pay generous welfare and wages that are the envy of all EU states. It’s paradoxical but it is better to have a warm home and food and suffer the inconvenience of a cold classroom. A trade off

          The right is calling for more risk taking whereas the left want to adhere to prudence and self discipline. Scotland and Ireland will face the same arguments if ever they gain autonomy over their energy potential

          It sounds like the Norwegians are bored and want a little risk taking in their lives but they could look to Ireland to see where that gets you

          In Ireland we have seen the full effects of deregulation and laisse fair economics and we are in a position to learn from the mistakes but some people can’t even see that we need fundamental change. Conservatives don’t like change and being a conservative country explains why change occurs in Ireland at the same rate as treacle flowing down a drainpipe

          It is easier to carve a mark on running water than to change the worldview of the types of people Kevin Myers talks about in the earlier link I posted. One paragraph which explained a lot and filled in huge gaps in my scholarly pursuits in understanding the Irish psyche

          It sometimes feels like are being assaulted but I don’t accept that we are victims. The population was asleep at the wheel and surrendered their power to the bankers and politicians

          It’s time to move on and concentrate on our potential.

          • Paul Divers

            As Bonbon suggested DMW is happy to keep peddling the victim mentality. All I can say is that if you feel like a victim then stop thinking, acting and being one. Today. Dump the chains

            Let it all flow out the window if that’s what it takes to free yourselves

            If he kids start calling you a loser then tell them to lead the way

  9. Allow the banking system to collapse and risk destroying the economy.
    Rescue the banking system and risk destroying the economy.

    The only question worth investigating is who is responsible for going with the latter decision rather than the former.

    Was this epochal decision made by legitimate representatives of the Sovereign Irish State of The First Irish Republic?

    Or not?

    A very powerful article, David. Hope to visit Kilkenny and finally try to meet you, if I can get through the throngs of admirers that stalk your every move. I hope you’ll sign an autograph so I can impress everyone at what a good ‘plastic paddy’ I am, here in Birmingham. I’ve got Roy Keane’s!

    regards
    your #1 fan!

    [LOL, etc]

  10. 5Fingers

    Banks generally were allowed to get too big. Worse, they where allowed to integrate cross nationally and worst of all they were allowed to mix risk based on bogus and nonsense economic forecasts. Governments are also too big and too centralised making them trivially lobbied by super big banks using economic forecasts to justify claims. By the way I believe many economists have blood on their hands and should be shamed for lending credence to nonsense. DMW was brave.

    Only way forward for Ireland.

    1 disband senate and fail and have provincial government. Own currency if they wish.
    2 one central tax collection in Dublin equal dispersal or by proportion. Dump quangos. This is sort of on the Nordic lines. It is not that radical

    3 let the banks go.

    In 5 years we

  11. Deco

    That article constitutes “required reading” for all PAYE taxpayers in this country.

    The second massive issue, is the scale of Ireland’s mounting Ponzi debts – in large part due to an overextended insitutional state, but mostly due to a massively mismanaged banking system that is a millstone around the people’s necks.

    The banks are bankrupting the entire economy. Some “bailout”.

    • Indebting the population is the inevitable result of using the current central banking system. It is controlled and run by a dozen big players for their private benefit.
      Will nobody address this issue. All else is empty rhetoric until that is solved.
      Central banks create the loans to government and the reserves to commercial banking. No limit, no restriction and every penny issued as a debt. What is to like about that?

  12. pauloriain

    A lot of people had lots of money in the banks, whether they were bond holders, pensioners, or depositors. Certainly a good proportion of that money in those banks could have been earned off the high standard of living which existed in Ireland due to the boom in the property market. Of course some of the money would have been earned having had nothing to do with property.
    Nevertheless, the crash comes and yes it is desirable to protect people’s wealth, but can someone please explain, why the ordinary Joe Soap, who has no savings, is not a bondholder, has no pension, doesn’t own their own house or have any loans has to pay to protect those who’s money has been lost.

    Something that is lost, is lost. There’s no point running around trying to find it if it’s lost and why make someone who has nothing to do with the lost item pay to replace it is ridiculous.

    David can you please explain why say, in the case of Cyprus it was bad to have a bail in. Let me put this in the terms it should be seen. People were given a choice between losing all of their money, if there was no bail in, or only losing a proportion of their money with a bail in. Bail in’s should have happened everywhere to a larger extent.

    Again why are people with no money, assets or anything to do with this crisis bailing out people who have money and are wealthy. This is the fundamental question around which any bail in should be framed. Rightly the EU has mandated that bail in’s will occur in the future.

    As an example of who’s going to pay, todays generations have put repayment of the promisory note out 34 years to tomorrow’s generation, many of whom not even born, will be paying debts then to protect today’s wealthy.

    Understanding that people with money in investments were getting paid a risk premium, with the return on investment. Secondly, deposit guarantees existed up €100,000 (but it would be arguable whether that should have been allowed also) so no one was going to be totally wiped out. Thirdly many people, shareholders did lose everything, so why let those wealthy people get wiped out and not other wealthy people. Again, why impoverish the poor to prop up the wealthy???

    • Pat Flannery

      What David and economists need to explain is that bundling mortgages and selling them as securities, known as securitization, is not a licensed banking activity. It is what it says it is, securities dealing activity. You don’t need a banking license for that. The fact that banks do it does not make it banking activity requiring a license from a Central Bank.

      Losses incurred from unlicensed activity by a bank are not guaranteed by any government agency nor regulated by any central bank. If the AIB decided that selling fish in Moore Street was a profitable enterprise would selling fish become licensed banking activity and subject to government guarantee?

      Banks often engage in non-banking activity such as IT services(perhaps they have not yet realized the potential of Moore Street). With all due respect to bonbon it was not the repeal of Glass-Steagall that unleashed the banking Furies, it was the extension of “banking activity” cover to everything a bank does.

  13. Pat Flannery

    David you wrote here: “The guarantee ought to have been in place only for two years at the most in order to prevent the bank run that was well under way.”

    This reminds us that you did in fact advise Lenihen to give a bank guarantee, albeit for a limited period. This shows that you did not understand bundled securitization, the wellspring of the banks’ lending. What was happening in 2008 was not a bank run.

    Still calling it such shows that you still don’t understand what happened. You still think the problem is the Euro. If economists like you do not understand the problem, what chance do we have?

    • Pat

      If I could’ve figured out a way to stop the bank run in AIB by trying to rate capital on deposit different (traditional bank run affecting depisitors) from capital which was being sold via a Bloomberg trade (securities market run) , I’d have thought differently, but I still can’t see how – absent a proper bank resolution law – you could have done that.

      But maybe the legions of well paid advisors who were paid to regulate and monitor the economy might have had the answer to that. And where are they now?

      Best

      David

      • Pat Flannery

        David: Did they not appear separately on the banks’ balance sheets? Did you ask to see how assets and liabilities relating to securities trading was treated differently on the balance sheet from ordinary deposit business, as it surely was? Did anybody ask? That was the key question. It is still the key question.

        It is not too late to ask to see those 2008 balance sheets. After all you are a stakeholder – your reputation is involved. And the answer might provide some direction out of this mess. The “well advisors and regulators” got away with it and are still getting away with it because nobody asked the right question.

        • Pat

          It doesn’t matter where they are on the balance sheet if all the lenders to the bank are pulling their money out, the bank will go bust and in an integrated system the entire financial system will impode. You forget there was no independent central bank, no access to other funding, no cpaital controls and an asset/liability maturity that implied bankruptcy in the absense of new lenders.

          As for my reputation, I suspect had they listenieng to anything I had written for the previous eight yaesr we wouldn’d have been in the mess. I bear no responsibility for anything any of these people did. They were in power I wasn’t even ever invited into the Department of Finance to explain what I had been writing on the topic.

          Within months I realised they they had no intention of keeping the policy temporary and wrote that we should rescind it immediately and put in place a corporate resolution structure.

          Best

          D

          • bonbon

            DMcW, it is now crystal clear, banking separation followed by massive credit AFTER the toxic stuff was either written off or deepfreezed, deep-sixed.

            That is Hamiltonian Credit in action. Harmony to anyone’s ears when they first hear the music. So what if Lenihan would maybe have not understood (who knows?). Never mind if Sweden did not do it. Never mind if the banshee shrieking from the bowels of the IFSC reached fever pitch.

            The sound of the shattering of Glass-Steagall seems to have brought Sandy Weil to a sober clear-headedness. If him why not you?

          • Radharc Áilinn – Very Clear

          • michaelcoughlan

            Hi,

            It’s obvious to me from this post and bonbons (despite my best efforts) that you both suffer from the same sickness which is blind ignorance. Both of you are in the same tiny room faced into a corner repeating to yourself over and over again; in your case if only they would liststen to me, in his case if only we could reinstate glass

            You had an article some time back where you said you worked for neutron jack and you quoted him saying that we must define reality as it is not as we would like it to be and have you or bonbon managed that? No. It’s pure drivel both of you are writing. When you asses the world system it is right now you will conceive responses that work in the environment you are in and not your idealistic vision which exists only inside your own head.

            Poor you and poor bonbon.

          • bonbon

            The real drivel, or rather insane religious belief is the “gold” mantra. The madness of this Hell Fire Club stuff seems to be still doing the rounds.

            “Sound money” from unhinged unsound minds.

    • Joe R

      Securitization diehards Pat Flannery and Grey Fox take note…

      Quote below from Karl Whelan´s paper “Ireland’s Economic Crisis The Good, the Bad and the Ugly´´, p.11.

      http://www.karlwhelan.com/Papers/Whelan-IrelandPaper-June2013.pdf

      “Another risk factor was the significant change in the funding model employed by the Irish banks during the later years of the boom. Prior to 2003, these banks had operated in a very traditional manner, with loans being roughly equal to deposits. After 2003, the rapid expansion of property lending was largely financed with bonds issued to international investors. From less than €15 billion in 2003, international bond borrowings of the six main Irish banks rose to almost €100 billion (well over half of GDP) by 2007. This source of funding proved to be less stable than deposit funding once the property market crashed.´´

      Please note the keyword there. It is BONDS.

      Pat Flannery – there are lots of factors listed there for why there was very real pressure and change occurring in the housing market in the late nineties onwards. These changes were in plain sight everybody could feel those changes around them. Please stop with this securitization as root cause obsession. It just detracts from what actually happened, and prevents real analysis.

      • Pat Flannery

        Joe R: Karl Whelan and I are saying exactly the same thing. Securitization and Bonds are exactly the same thing.

        I wonder how many other people do not understand that securitization is the process that created the bonds that are killing us.

        I wonder if DMcW understands it. I doubt it. If he did his loyal readers such as yourself would by now understand that the “bonds issued to international investors” as Karl describes them, were secured by bundles of mortgages in a process known as securitization.

        Whelan has a much better grasp of it. He identifies mortgage-backed securities (bonds issued to international investors) as a completely new source of funding for bank lending that was totally different from traditional deposit funding.

        This was exactly my point to McWilliams. Yet he continues to insist that these mortgage-backed securities/bonds cannot be separated out on the banks’ balance sheets. He seems to believe that these international investors just came in and deposited money in Irish banks. No wonder you are confused.

        • bonbon

          You sound just as confused. you know very well that Glass-Steagall’s repeal made all that possible, yet you never mention it. That mental block put’s you in DMcW’s camp. Let ye haggle all ye want about the best way to avoid the issue.
          As I posted here in March 2013,
          Something very interesting happened over at Political World. Karl Whelan has posted
          A Marshall Plan for Europe – A proposal from German Confederation of Trade Unions
          This is a sign of a break with existing policies, and addresses the physical economy. There is still a monetarist overtone (no mention of Glass-Steagall as far as I can see so far), but good work.

          So Karl Whelan has something to say.

          • Paul Divers

            Whoever you work for Mr Bonbon you certainly influence minds and I suspect your heart is in the right place. You are certainly changing minds around here and that is just what this country needs for hell or high water

            I wonder what Tam would make of it?

      • Joe R

        No, they are not the same and Whelan is not saying what you said. Whelan says many things outside of the financing aspect which you keep obsessing about.

        No where in the 33 pages of his paper is the word securitization mentioned. Securities backed debt is mentioned twice but not in connection to what you are on about.

        There are many types of bonds, many different types and I don´t know which where used – there were a lot I doubt in anybody knows the full score – but Whelan doesn´t mention securitization, which is a specific aspect of this financing. Just you do.

        I don´t know if you heard when you working in California but Ireland became involved in this thing called monetary union, with the EU in the 1990´s. Note that was not the US of A. Therefore you can take your irrelevant US analogies elsewhere, because they don´t apply.

        The real bank of final recourse in Ireland/EU is called the ECB, basically the old Bundesbank. A very large chunk of the money lend into the Irish system during the boom from Germany. Those German investors/banks lend because THEIR own (ex) central bank the new ECB was on hook for it, at the end of day. Same for Spain, same for Greece, same for Portugal.

        This is the critical fact in relation to money that moved easily inside the EU, from the center to the periphery be it to Ireland, Greece, Portugal or Spain.

        http://www.nytimes.com/interactive/2010/05/02/weekinreview/02marsh.html?_r=0

        Note the big sums of money didn´t come from China or the US or Gulf sovereign funds. It came from European countries, inside the Eu and usually part of the monetary union the biggest two being France and Germany. If this market for securitization was really the be all and end all that you are proclaiming then the debt would have a wider global spread. But we don´t have that. The EU and ECB is key to it all.

        • Pat Flannery

          Joe R: “The EU and ECB is key to it all.” Just further proof of how much you all have been indoctrinated by David into believing that German investors just came in and deposited money in Irish banks then left causing a bank run.

          I know David knows better but I just can’t figure out his motivation other than trying to drive Ireland back into the UK and Sterling.

          • Joe R

            Perhaps I am a troll as well because I disagree with your viewpoint?

            Or just a feeble minded sheep? Is that what you wanted to say? I can be indoctrinated by a blog?

            That was a classic ad hominem attack by you by the way just there. You never dealt with my counter points. You just attempted a `well you would say that anyway wouldn´t you´ argument allied with an attempt at an insult which appears to suggest that you are more intelligent than me.

            Seriously, I hope you enjoy yourself on those fringe paranoid, looney tune blogs out there – ones run by people with no qualification or competence in journalism nor economics who pontificate to accepting sheep, like you, about what is ill in the world. You know ones that promote Steve `the spofter´ Keen, Max Kaiser the performing cool-aid clown, Irving Fishers nasty right-wing idiot follower group known as `Positive Money´ and the renaissance of celebrated policies of General Pinochets´ own `Chicago School Boys´. You remember Pinochet, he was a murdering fascist who embezzled his own state. He had the kind of economic policies that required death squads to implement. And was beloved of the US of A, until he engaged in acts of terrorism on US soil. Irving Fisher thought eugenics was a good idea, and racism was not his only flaw. His capability with economics his profession was famously , too ( quotes 4 & 5 are charted here on the following link).

            http://www.gold-eagle.com/article/1927-1933-chart-pompous-prognosticators

            Seriously, please go and enjoy yourself where intolerance and idiocy reigns.

            Oh and by the way you are, actually, in case you haven´t noticed ( but I think you have sub-consciously judging by the attack you made ) YOU the indoctrinated one in this argument.

          • Pat Flannery

            Joe R: I merely wanted to make the point that international investors did not just come in and make deposits in Irish banks as you have been led to believe. They bought mortgage-backed securities issued by Irish banks. There is a big difference.

            There was no ad hominem attack intended.

  14. Adelaide

    BBC4 “Requiem For Detroit?” broadcast last night.
    A historical documentary about the city’s rise and fall.
    Although presented as a Big Baddies vs Little People format, the piece inadvertently cast everyone in a bad light, by their actions or inactions they were all perpetrators in one way or another, just that those perpetrators with less power are referred to as victims.
    How can you be a perpetrator and a victim at the same time? But you can on a time scale, you destroy the city and then you cry foul. By pointing the finger of blame at Greed, Selfishness, Intolerance and most of all the delegation of their adulthood to mythical higher authorities “the government should../the state should../the corporation should..” being Feebleness, both the Big Baddies and the Little People are truthfully both pointing at the same reflection in the mirror.

  15. redriversix

    Oct 1983.

    Suicide bombing of U.S Barracks in Beirut.242 dead U.S marines. 58 French paratroopers also killed on same day in 2nd suicide attack.This attack was carried out because of U.S support for invasion of Lebanon by Israel and the shelling of a Mountain top by the U.S Sixth fleet in support of Lebanon pro-Israeli Militia/Army in which innocent civilians were Killed..

    U.S & french peacekeepers withdrawn.

    Oct –Dec 1983

    invasion of Grenada

    Dec 1989 31 January 1990
    Invasion Of Panama

    1990/91
    First Gulf War

    1993
    Somalia “Black Hawk down”
    World trade center Bombing….

    1995
    Alfred p murtagh Building Oklahoma…..destroyed

    2000
    USS Cole attacked in Aden port,Yemen

    1995/99
    repeal of Glass steagall act-Larry Summers

    9/11/2001
    attack on World Trade Centre,Pentagon & crash of flight 93
    [ attackers unknown ]

    Alan Greenspan slashes interst rates to historic lows

    President Bush tells America to “spend spend spend”

    Oct 2001
    Invasion of Afghanistan

    enactment of Patriot act & Homeland Security.

    2003
    Invasion of Iraq

    any economic links to all this..?

    Seems America was never that peaceful to begin with..!

  16. redriversix

    I left out Carters failure in the Iranian desert “Operation Eagle claw” i think..to rescue U.S Hostages

    The Iranian Embassy siege in London 1981

    The Falklands War 1982

    Libya’s Bombing of a nightclub in Berlin Frequented by U.S servicemen

    Reagan’s Bombing of Tripoli in retaliation.

    The Lockerbie Bombing

    Reagan’s Iran-Contra debacle in South America.

    The Bosnian/Serb War,Clinton

    The 1 million people massacre in Rwanda [ nobody bothered with that ]

    Peace out..!!

  17. bonbon

    Amazed at the Jig, Reel, and Ceili around the issues here. Only thing missing is music.

    The Jig and Reel may make the discussion look Irish, but anyone with even a glimmer of sunshine can see that a tsunami of loose cash flooded the entire transatlantic after 2000, after the repeal of Glass-Steagall, lending legitimacy to “securities”, etc, with an implicit guarantee now playing out as the Bail-In, official policy of the EU, Swiss, USA, Oz.

    Each can put this to their own favorite choice of music, from flamenco to tap-dance, all together now! The result is a cacophony, unbearably deafening.

    The opening crescendo of this god-forsaken philharmonic, was LTCM in 1998, preceded by rumbling notes of Black Tuesday which gave Sir Alan Greenspan the conductors baton after 1987. Enron was the shrieking of banshees otherwise known as irrational exuberance!

    The result is reeling, stunned onlookers, brought to their knees by the very noise.

    To save the mind from more of this, it is time for a renaissance. The likes of Greenspan, Bernanke, Draghi, and his choir of yobs here, cannot compose an economy which will never spring forth from such noise (or smelly wallets). We need a harmony of interests, not a cacophony!
    The purpose of Glass-Steagall is to ban banksters from the music of economy, for the very sake of the mind.

    Perhaps DMcW could not hear this when Lenihan came a-visiting. Maybe a choice of music perhaps?

    • Deco

      The bankers have bought out democracy. Hostile takeover. Or maybe it was a freindly takevoer.

      Jefferson’s quote comes to mind.

      The banks give people a little bit of sugar – a sugary cola hit. And then they take over people’s minds, with meaningless nonsense.

      Rebates, teaser loans, no-deposit required, etc…

      George Carlin did a sneer of the whole thing, and he cut straight to the point.

  18. Ryu Hayabusa

    Larry Summers is a poster child for Diet Coke! Loves extolling its virtues…

  19. Nothing can be solved until the current banking system is disbanded / destroyed/ collapsed etc.

    Currently there is no physical restriction on the amount of money that can be produced.
    All money except coin is issued as a loan which means it is an iou , a debt.
    As all money is a debt there is a constant drain on the economy to pay the interest on that debt.
    When a loan is taken out and the money loaned only the amount of the loan is issued into existence but not including the interest to be paid.
    The interest to be paid is introduced into the economy by lending additional money to yet another person. If there are no further loans made then there is not enough money in circulation to pay off the interest.
    In order for the monetary system to not collapse there must be a stream of new money issued on an ever increasing basis.
    That increase requirement is becoming exponential on a representation on a graph.
    For instance the US national debt was 8 Trillion dollars when Obama took office. It is now 15 trillion dollars and rising at 1 trillion annually.
    It took over 230 years to accumulate 8 Trillion and just another 5-6 years to double that again.
    Ditto for most countries.
    The monetary system is about to implode.
    It is a Ponzi scheme that requires an endless stream of suckers to lend to. It is a legalized fraud.

    Debt based money must be eliminated.
    That would eliminate the escalating interest payments on the currency.
    Fractional reserve banking must be eliminated.
    There must be a restriction on the amount of money that can be produced.
    National currencies can be issued debt free, interest free from treasury.
    That means no national debt. No interest on that debt which = economic freedom.
    That means no regional currency unless it is issued on the above principles.(Unlikely to happen)

    That would be a start.

    There are ways to set the currency volumes so that it is limited in issuance. An economy does not need an expanding money supply to be healthy.
    Money is a catalyst (Just as that piece of platinum in the tail pipe of your cars exhaust is) that is not consumed in the process of the transaction. It acts as a medium of exchange and is immediately available for the next transaction.

    • Deco

      Obama is just another showman. Why does anybody take him seriously ? Really ? It is all a load of nonsense.

      It get really funny when you hear Obama tell us he is sceptical of the Russians.

      I mean the Russians, are not continually fibbing and recirculating feel-good BS. They are being very straight to the point.

      • the concentrated thought needs to be on the structure of the world’s monetary system. not Obama or any other shills. The control is with the international bankers not the politicians. sovereignty has been given away.

    • Adelaide

      +1

      I reiterate Max Keiser’s point-of-view that sound mathematics gives money its value, that people’s faith in a monetary model is or ideally should be founded on sound mathematics.
      E.C.Riegel’s zero-sum Valun monetary model is a great example of sound mathematics.

    • Ryu Hayabusa

      Well made points.
      As PT Barnum/David Hannum or whoever it was opined “There’s a sucker born every minute!”

      The quandary for the vested interests is can they spew out the suckers in sufficient quantities to counterbalance the confetti FIAT money isuing!
      The people of this planet are being hoodwinked on an almost global scale.

  20. Deco

    AIB.

    Morally insolvent at the time of the million punt loan to CJH. “It’s a great little country”.

    Intellectually insolvent when they bought the insurance company that nearly finished them in the 1980s.

    Then there was the first Bailout. Media coverage was scarce, and soft. “support our advertising sponsors”. The Irish media was bought up. Don’t challenge gombeenism.

    Did they sack anybody ? No.

    Did they learn anything ? Probably not.

    BoI were morally insolvent when they started donating to political parties. In 2004 they had 30 grand ready for Mrs. McUseless, in case of an election for the Aras – even though she did not have to run.

    And Anglo and IL&P were, if anything worse.

    There is a massive cultural and moral problem in this country with respect to the banking system, and finance. We have a human capital problem. An intellectual problem.

    How have the political establishment responded to this ?

    They have decided to bail them out, subsidize them, ignore the indiscretions, and then lump them into “two pillar banks”. This indicates that our political establishment really is also intellectually, and morally bankrupt.

    And the ECB approves all of this. They are just as bad.

    That gold bug in Canada who keeps posting all of the time suddenly makes an awful lot of sense.

    Incidentally, so does Mr. Glass-Seagal, Bonbon.

    In fact everybody is talking sense except the idiots who are in positions of power/influence/clout who are telling us what we are supposed to do to be responsible.

    Somebody needs to hit Sutherland, Quinn, Glesson, and the other ex-AIB clowns.

    The two pillar banks are at the nexus of Ireland’s decline into the sewer.

  21. cooldude

    This is not just an Irish problem but one that has happened or is happening in all Western countries. What has really failed is our system of central banking who are supposed to control the commercial banks. Banking should be a relatively simple industry where deposits are stored on behalf of the public and that money can be then loaned out but only if the depositor agrees to it. Having central banks to backstop this industry simply encourages the fractional reserve banks to start taking greater and greater risks in the knowledge that the central bank will step in if they get in trouble. What is needed is an open market in the banking industry without any support if these clowns are stupid enough to lend on land that isn’t even zoned. Then let them fail as they should if they engage in reckless behaviour.

    In 2008 we should have let them all go bust after the six month depositor guarantee was up. If people hadn’t got the brains to get their money out during this period then they deserved to lose it. If you leave your money in a blatantly insolvent company you shouldn’t expect to get it back. All the shareholders were wiped out and I didn’t hear any sympathy for them. This is what Iceland did and they went through some tough times but now are recovering.

    To really rub it in the head of lending at BOI during 2003-2006 when they doubled their loan book is now actually their CEO Richie Boucher. Talk about taking the piss. That idiot should have been the first guy fired. Then again if you reward failure this is the type of crap you get.

  22. The evidence of the Irish Banking Deceit began in 2000 but the cause began in 1998 after the failure of The National Crime Forum to include in their report then that banking be included as a location of crime or potential crime .

    In the absence of their stewardship and direction where real crime does matter their abject failure gave a printed licence for all the leaders in banking to play casino money with the nation and knowingly they would get away with it and to employ their skills in deceit by stealth .

    • We must ask ourselves the ‘Why ‘ the Banks did what they did and that reason alone is ‘ because they knew they could get away with it . No Policy of Opinion given by The National Crime Forum.

    • Paul Divers

      ‘Luckily, we aren’t selling our kids into slavery. But burdening them with the debts of a previous generation is fairly close to the modern equivalent. Debt, and particularly personal debt, has been conflated for centuries with sin. In modern German, for example, the same word, Schuld, means both debt and guilt. This association needs to be knocked on the head.’

      Stephen Kinsella

      http://www.independent.ie/opinion/columnists/stephen-kinsella/how-can-we-find-billions-for-banks-but-nothing-for-priory-hall-victims-29565815.html

      • paddythepig

        Not a true aficionado in my book.

        I read an article by him a few years ago, and he said he would take to the streets if his salary was reduced. See the second last paragraph in the article below.

        Turned me off him, considering over-paid public servants are a huge part of our problem.

        http://www.theguardian.com/business/ireland-business-blog-with-lisa-ocarroll/2011/may/10/ireland

        • Paul Divers

          Interesting. Stephen Donnelly appears to be a different kettle of fish.

        • Paul Divers

          In the post he says he is a mid level public sector worker and the article mentions that there are not many public sector workers on large pensions

          The welfare budget is the largest even though welfare has been cut several times. Halving the welfare budget would be political suicide but I suspect that were FG in a majority government they would have no problem doing it

          For my own sins I am doing an IT internship in the public sector where people are bewildered to see people working for their dole. At least I will be somewhere warm during the coming winter days :-)

          • paddythepig

            That depends on his definition of ‘large’ pensions. Everyone knows that the pension liabilities from the public service are enormous, and that even the mid-level pension bill is far too high. The bill for mid-level pensions would also be far higher than top-level pensions, due to the higher number of individuals on mid-level salaries compared to top-level salaries. Regrettably, our children are being asked to pay these pensions, poor things.

            A true aficionado would see what needs to be done, and take his medicine.

            Wouldn’t share your view on Donnelly, I always get the impression he’s playing to the gallery.

            Good luck with the internship, hope something good comes out of it for you. You never know.

          • Paul Divers

            Thanks Paddy. I know it will interest me and get me back in the ring.

          • Dorothy Jones

            Good Luck Paul, Best Dorothy

          • moneydoesnotmatter

            A new adventure Paul.
            Good luck with it.

  23. Enclosed Debtors Prison

    We in Ireland have created a Gulag for enforced slavery at home with polarisation of communities scattered .For those who have decided to remain at home will in good time record the misery and pain of broken families and loss of national identity .This deep sense of loss induces a deflated morale that is only designed to worship the Gods of Banks and Plutocrats from Europe .

    This new cult will have their own regulated enforcers and where the meek are destined to an eternity of remorse and sadness .Their tunes will continue to display a veiled deceitful image of life in the form of empty policies that reach all aspects of life we once knew to be. Alas in vain .

    Those that are lucky will become lost in the ocean of mankind .Uneducated and innocent and destined to the bottom of the pit.

    Only a few will be called that are lucky .And that is just a few too little.The rest are dammed.

    • Paul Divers

      +1

      Blessed are the bewildered

    • Paul Divers

      ‘The Irish State and the Irish people were thus in thrall to a militant, ultramontane Catholicism – a thraldom that was both voluntary and mandatory, a prison cell made with the willing labour of the prisoners. ‘

      Kevin Myers

      http://www.independent.ie/opinion/columnists/kevin-myers/our-primitive-catholic-pseudogaelic-state-laid-foundations-for-magdalenes-29093777.html

      • A really depressing article, but no surprise to me.

        I was able to have a few words with Bruce Arnold when in Dublin earlier this year. His analysis is just as devastating:

        http://www.irishgulag.ie/book

        It’s been a long, strange trip for me commenting on this blog, from the early days when I was slightly intimidated by ‘economics’- never having studied it. It was really part of the jigsaw puzzle of who I am, where I came from, and where I’m going (the grave, like everyone. lol!) And it was obvious to me that ‘economics’ was key to understanding my heritage.

        I’d like to thank David and everyone else for putting up with me whilst I developed my thesis, which is now echoed widely. Namely, that The First Irish Republic of 1961 was fatally undermined from the start and crashed from one corrupt iteration to the next, to The Emergency, to Haughey, the Troubles, the banking crisis and next…..?

        I’m going to take a hiatus from reading and commenting here as, in all honesty, it’s just too depressing. The next crisis will be so much worse, and it seems set in stone.

        I grew up in an English city, but the culture around me was full-on Culchie, fugees from Dublin mostly. It was an amazing place to grow up, and I’ve never really left it. But I’ve accepted that the clowns running Ireland today are simply a catastrophic joke, and there’s no point feeling even a residual allegiance to such an overtly boastful corrupt culture. Not that England or British culture is any better.

        I no longer recognise “Ireland” in relation to the values and culture from which I emerged. I wish all well, but for me, it’s time to let go of the very notion of “Irish” or “English” and find a new way of relating to my past, my parents and my youth.

        Once again, thanks to all and good luck in the turbulent years ahead.

        With every good wish
        Yours, in Jubilo!

        “I was born on a boat on the Irish Sea, between Hollyhead and Dun Laoghaire”.

        • Paul Divers

          Thanks friend.

          Excellent link but again stuff we already know.

          ‘Punishment was cruel and excessive’

          Authority was enforced through fear, had no mandate and was silenced with bribery and corruption. Same old.

          We should explore Myers theme further because it points to the core and root cause of Irish mass mental illness. No offence.

        • Paul Divers

          I know what you mean about it being an adult doze when you age looking for reasons to believe because the grave is getting close and we worry if our time was wisely spent

          You look to the past because there is no future and young people think you are uncool because you prefer Mary Wilson to X-Factor. All we have is the past because it was a much better time.

          There is no future. The future is no use to me whatsoever. All my knowledge, experience and humanity comes from a past that is gone. Progress. I am a ghost and happy to be so in this anonymous bs fucked up nasty place

          Living to almost 50 is a bonus and I’d not change thing. I feel lucky in that I have never been under the thumb of some tyrant or boss. I’d never become Bob Cratchet and now I am seeing the benefits of being an outsider who made hard choices influenced by a canny Scottish mother

          I am sad you feel depressed but we all are and it sounds like you were using us to help you with your thesis and it’s touching that you would like to thank us and we wish you well. It would be lovely if you were you give us a mention :-)

          See you soon

        • 5Fingers

          My new narrative of the day is harmful aggregators. The catholic church was such. A global machine centrally controlled leveraging the flock as fodder. DeValera’s Dail creation was just on the same lines, just scaled down. The Irish simply do not understand the benefits of small organisational units except in guerilla warfare.

          As the aggregation builds aggregators self serving purpose becomes more selfish and disconnected from its supporters. We see it happening all around us and its “conveniences” aim to switch off the mind. Throw in a dose of Marshall McLuhan and boom! TV and Internet has been petrol on a blazing fire.

          Catholic Church is now outmoded. Enter can do, I know it all secularism. Same old game, just different vestments and alters. Confessional is in FB…

          • Mostly agree, but FB is not equivalent to auricular confession! It’s more Warhol re-writing Dante on a hand-held device. I’ve always known the entire interweb was a spy machine so have made damn sure that anyone trying to parse my real life from my lyrical-surrealist-art-terrorist rampages online is wasting their time. It amuses me that GCHQ still track me because I was invited to ‘Protest The Pope’. I didn’t because I don’t give energy to face-time-attention-whores like Ratzinger. Plus, he got his comeuppance, as did O’Brien. I’ve done my bit, now it’s time to plan a final ancestor honouring trip to Laois and Kilkenny to say bye to my uncle and bye to the whole collapsed wreck of contemporary Ireland. I hope what emerges after The Celtic Corralito is fit for purpose and leads to renewal with The Second Irish Republic.

            Really enjoy your comments. Take care. And Paul Divers: I’ll definitely name-check DMcW if I decide to finally cross the Rubicon and get back on stage for the first time since Dublin 1970′s first World Irish Dancing Feis. David will be so pleased, once he finishes face-palming.

            It’s my birtday. I’m early 50s. 9/11 was at 2:00pm GMT. Just lit a candle. Time to move on from that and a lot of other stuff.

            Take care folks, and thanks one final time.

  24. Harper66

    http://www.independent.ie/business/personal-finance/property-mortgages/a-solicitor-should-have-a-bigger-house-than-a-paye-worker-even-if-insolvent-29568257.html

    A LEADING financial expert has claimed hospital consultants and solicitors are entitled to live in bigger houses because of their “professional status” – even if they are insolvent.

    http://www.broadsheet.ie/2013/09/10/a-solicitor-should-have-a-house-that-accords-with-his-status-in-society/

    “In practice, the PIP will also have to assess the type of house that might be needed for a professional person such as a solicitor, accountant or a hospital consultant as opposed to a house that’s needed by someone who is in the PAYE sector for example, so that, as a PIP, I would be making a very strong case, for example, that a solicitor should have a bigger house that accords with his professional status in society so that his neighbours and clients can see that, yes, this person is a good solicitor who’s is living in a good house etc. etc.”

  25. bonbon

    DMcW is spreading the “helplessness” angle, I wonder why? No mention of FDR in the 1930′s and how he dealt successfully with the Wall Street problem. No mention of the Reconstruction Finance Corp., Glass-Steagall, the Shannon-inspired TVA. All of this is well understood. Many here play second fiddle too.

    Afraid of playing “second fiddle” Mr DMcW, in the recovery about to begin. Playing first fiddle on a rubble heap? That is really second fiddle to the British imperative to loot us all back to the stone age. Of course each satrapy mired in the rubble heap needs its allotted fiddle. Is this the game?

    • Paul Divers

      Playing second fiddle to no-one here friend. Humble always. Inferior never.

      Contrast the home life of David Copperfield to when he spent time in the small warm loving home of Ham Peggoty and you will understand the true meaning of the words poverty and wealth

  26. McGoo

    My last glimmer of hope for Ireland shrivelled up and died inside me when I read this :

    http://www.independent.ie/business/personal-finance/property-mortgages/a-solicitor-should-have-a-bigger-house-than-a-paye-worker-even-if-insolvent-29568257.html

    Apparently the Personal Insolvency Bill is just a bailout for the “insiders” at the expense of ordinary, solvent, working people, and Ireland is still a banana republic, and shows not the slightest sign of changing, ever. I don’t think I can bear the thought of spending the rest of my life here.

    • Paul Divers

      The affairs of the world are ordered in accordance with orthodox opinions. Owen saw that in the world a small class of people were possessed of a great abundance.

      He saw also that a large number lived lives of semi-starvation from the cradle to the grave, while a yet smaller but still very great number actually died of hunger.

      Seeing all this, he thought that it was wrong, that the system, which had produced such results, was rotten and should be altered. And he sought out and eagerly read the writings of those who thought they knew how it might be done.

      It was because he was in the habit of speaking of these subjects that his fellow workmen came to the conclusion that there was probably something wrong with his mind.

      Robert Tressell

    • Paul Divers

      Don’t lose heart friend.

      A good old dose of Scottish common sense would leave guys like the mouthpiece quivering in shame.

    • 5Fingers

      So you mean to tell me you’d have someone represent you that was not from a palatial house? Where is your sense of self respect man!

    • Paul Divers

      It a terrible feeling when a man feels his wee man shrinking up into his belly. It is the most primeval of fears and the root of alpha male insecurity!

    • Paul Divers

      ‘He was responding to a query from Mary Wilson on how family homes would be impacted if a client were to agree to enter an insolvency arrangement’

      I just called Mary and her reply was scathing and vicious. Here is what she had to say:

      http://www.youtube.com/watch?v=Bu9jsUq0eQk

  27. Ryu Hayabusa

    Ireland’s tidiest town… and the award goes to. . . Moynalty, Co. Meath… Yayyyyy,, awarded by Phil “Septic” Hogan. Yayyyy-
    Oh no that doesn’t sound quite right?
    Dollop of irony there gan dabht! :D

  28. 5Fingers

    Some mildly connected truisms and emerging findings

    1 in 3 are getting tired of social networks.

    People are now starting to realise that things get done only when the doers are eye-balling one another. This simple fact was well understood by those used to power.

    The advent of the one stop shop OR the bill aggregator OR any form of packager mechanism where you and companies are invited to leave your brains at home and let others leverage their economies of scale has left people powerless, helpless and incapable of changing without significant cost – not just monetary.

    Aggregation is really about centralising for economies of scale. Everyone loves the idea of lower cost and smooth end to end interworking…but who is policing the centralisers? Why a centralised regulator or government…and who polices those? Why no one. They just make promises of a bigger future. Back to your football match and stop worrying!

    Modern communications with a twist of computational snake oil facilitates aggregation at a global level. The first and easiest are those with minimal capital infrastructure…banks and government. Lobbiests then became global.

    2 examples of one stop shop aggregator mechanics is our Irish Cabinet running all from Dublin…no need for bothersome local councils with power. A second would be the US Government. Republicans and Democrats who are really the same. Why? Their existence is now lobbiest dependent and they on turn are guided by other globalists.

    The power available to convince you that they are right is massive – property us coming back, more growth etc. Economists, sociologists, psychologists you name it have mountains of data to tell you they know more than you. And the joke is none of it…not one shard of it … has its basis in hard science. Snake oil. All BS at a global level.

    How do you fix it? How do you become utility independent when all has been so well laid on? You probably can’t. You can live outside it at considerable discomfort or if very lucky that u be so rich that you do not care( hope u own an island…).

    Personally I think it will fix itself. The end game is highly decentralised strong governance/ representation with a weak middle that does tax collecting. Getting there will be a case of people finally figuring out that social networking is more bother than it is worth. Facebook will then collapse followed by Google and Apple and Microsoft and when that happens the advantages of disaggregation will become apparent. People just need to turn off Sky, the telly, the blogs, stop buying newspapers switch off news and just listen for weather forecast and Radio 4.

    Dream on…

    • ” Getting there will be a case of people finally figuring out that social networking is more bother than it is worth. Facebook will then collapse followed by Google and Apple and Microsoft and when that happens the advantages of disaggregation will become apparent. People just need to turn off Sky, the telly, the blogs, stop buying newspapers switch off news and just listen for weather forecast and Radio 4.”

      That’s exactly what I’m doing today. A birthday present to myself: switch off the entire Nonsense Machine of Bread and Circus troll journos, troll politicians, troll social networking scams. I’m going to stick to books at least 2 years old. If anything important happens, I’ll be able to tell by watching the body language on the streets, exactly like I did in 2001 when Bin Laden went postal. Now, I’m going to break the back of this online crack-cocaine “free shit” craic and get down to some serious research and writing. But I might just have one last blast on Twitter on a theme of #ibelieveher There are so many, many stupid people online, it’s hard to accept I might not be just another one!

  29. Ryu Hayabusa

    It’s beyond laughable at this stage…

    http://www.independent.ie/business/irish/eamon-gilmore-rails-against-irish-austerity-economic-experiment-29567514.html

    ‘Happy’ Gilmore is socking it to the austerity hawks!! Biff! Pow-socky! Blam!

    HELLO!!!! You’ve been up to your oxters with them for nigh on 3 years man!

    He’s defo reminiscent of that character from the Adam Sandler flick ’50 first dates’, an affable chap named “10 second Tom”, only diff is his medium term memory seems to be afflicted aswell!

  30. Paul Divers

    101 degrees was reached but the high temperatures don’t make a he stuff of Mary Wilson.

  31. 5Fingers

    Extreme anything based on beliefs, opinion and fads does exactly the same thing. Why do people fall noise and empty promises of extremism? It comes from an idiotic fear of uncertainty.

  32. Paul Divers

    Can anyone see the green shoots?

    EC chief Barroso: ‘Ireland’s economy is improving’

    http://www.independent.ie/business/irish/ec-chief-barroso-irelands-economy-is-improving-29571445.html

    • 5Fingers

      Of course it is improving! All his Irish buddies who were in hock get to keep their houses no matter what. Can you imagine the embarrassment if otherwise?

      These guys have no skin in the game. They should be blanked out and ignored. It works. My teenagers do to me every day with brilliant efficiency. We can learn from our youngsters.

  33. Adelaide

    The End Is Nigh – Bernanke’s Last Hurrah in the Last Chance Saloon
    http://www.rte.ie/news/business/2013/0911/473510-us-federal-reserve/
    “US Fed’s wind-down of QE expected to begin next week”

  34. MIKOD

    David,

    I have being following this column for years and really enjoy your pieces. I have even read all of your books. This is only my second ever reply to one of your articles.

    It amazes me that you find the need to continually bring up the fact that you were right about this (property crash etc) in 2003. We all know that. Get over it and move on. When you talk about possible solutions the articles are generally a much better read.

    Also, it is very evident that you defend your part in the bank guarantee at every opportunity (I am aware that it was only an advisory roll). Give it a rest and focus on what you excel at – sound economics.

    Sorry for the rant.

    Mike

    • cooldude

      Good points Mike. At this stage we all know that the western system of banking is the worst possible system that could ever be dreamed up and it’s sole purpose is to benefit the few at the top who run the whole debt ponzi. It is time DMcW started applying his ample brain cells to possible solutions. The concept of a National Bank issuing debt free money for the benefit of it’s citizens is a bit strange to some but is extremely feasible and has been proven so. Ellen Brown is a leading proponent of this people friendly form of banking and she will be visiting Ireland in October to explain her ideas. Here is an article which explores the benefits of National Banking for Wales but is equally relevant to the current mess we are in.
      http://webofdebt.wordpress.com/2013/09/11/public-banking-for-wales-ireland-and-scotland-promise-and-possibilities/

      The dates of her lectures are given in the article. I hope to go to the one in Leixlip. We need to look at solutions and they definitely won’t be more of the same boom bust bullshit which created the mess.

  35. [...] A heavy price for banking failure – David McWilliams – Sep 9 – 2013 [...]

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