July 7, 2014

Strike while the iron's hot

Posted in Articles · 100 comments ·

There are good things happening in the Irish economy. Now is the time to protect them. We have heard a lot about the GDP figures and the tax data in the past few days, but these things tell you what has already happened, rather than what is going on right now. My hunch is that the economy is getting stronger faster than many people think.


We are seeing a significant turnaround in the fortunes of Irish exporters, particularly exports to our biggest neighbour and single most influential trading partner, Britain. This is invaluable.

The Brits are booming. There is currently much debate over there about how long this can last, and whether or not it is just yet another property and credit-fuelled upswing, but the fact remains that when Britain does well economically, so do we.

If you look at the chart on this page, which maps changes in firms’ expectations about the future, you see that the confidence of Irish companies and the confidence of British companies moves in tandem. In contrast, the confidence of EU firms lags well behind.

SBP 6th July 2014 - Irish UK EZ Business Sentiment

This shows you that the fortunes of Irish and British companies are intertwined. This is not just because we export so much to Britain, but also because we both export disproportionately to the US. The Americans have just had their best month for job creation in the past six years.

This entwined relationship is likely to continue. Speaking to a number of friends whose companies export services to Britain, they are all telling me that they are having their best run of orders from there in years. There is no real reason to believe that British demand will let up. In fact, the big change on the landscape is the fact that the Bank of England looks set to be the first major central bank to raise rates since the financial crisis began. This will have an effect, but a muted one.

Higher interest rates will drive up sterling even further, which is good news for Irish exporters and, given that Irish domestic demand is still subdued, the ability of Irish importers to pass on imported inflation in higher local prices is likely to be restrained. In short, the influence of Britain for the next few months is likely to be more positive for exporters selling to Britain than negative for Irish people buying British goods in Ireland.

But, looking a bit deeper at the Irish GDP figures, we see that local demand is still on the canvass. The reason for this is clear: Irish real incomes are still falling because income tax is still rising and, while unemployment is falling slowly, it is still twice as high in Ireland as it is in England.

In addition, we are still the country with possibly the highest level of personal debt in the world – the legacy of the housing boom.

At the moment, because the eurozone is in a bad way, the monthly cost of this debt is as low as it will ever be. But this will change. Economies move in cycles. Right now, the eurozone is a mess of deleveraging, deflation and policy madness. However, this won’t last for long. Europe will recover in time, because that is what economies do.

The ebb and flow is the business cycle. Most economists like to describe the economy as a business cycle. I think it is better to describe these cycles as ”human nature and can be explained by how we move from optimism to pessimism and back again. Because we are also part of the herd, we all tend to behave in a similar fashion. This is why the economy moves from optimism to pessimism, sometime inexplicably.

So all economies recover from recessions. Take Britain. Four years ago, it was on its knees. Today, it is up again. And policy lags behind these fundamental changes in human nature, so that now the British will have to raise interest rates to burst the very optimism that the rest of Europe craves.

Eventually, Europe will do the right thing, and gradually the demand for loans will increase as people get more optimistic. At this stage, interest rates will rise again in Europe. What happens to Ireland then?

Unfortunately, we are likely to see a tsunami of mortgage defaults because so many hundreds of thousands of people who are meeting their mortgage repayments now will not be able to when rates rise. Even if there are not so many defaults, the impact of higher mortgage bills on consumer spending will be profound. Remember that people’s monthly mortgage payments have been falling, not rising, since 2006. Imagine what happens when that changes?

So what should we do? We should take the opportunity now, when our economy is doing better than the rest of Europe, thanks to our natural dependence on the Anglo-American world, to strike a debt deal for mortgages in Ireland.

The government used an fictitious IOU called a promissory note to pay the creditors of Anglo. Through a financial sleight of hand, it pushed the payment of this out for another 20 years, if not longer. Why not do something similar for the hundreds of thousands in negative equity?

We could orchestrate a large debt for equity swap between the banks and the people, where the banks take equity in the now-rising house market. The promissory note is used to plug the gap in the banks’ balance sheets, and the Central Bank in Dame Street simply ”credits’ the banks the cash.

In this way, we might use the present good luck to our advantage. The good luck is that our English-speaking world is doing well and the eurozone isn’t. But this will change.

The British and Americans will rise interest rates, and so too, eventually, will the Europeans. When the Europeans do it, our house of debt will come tumbling down – at a time when everyone else is recovering.

Will they care about Ireland then? I doubt it. The European reaction might be one of resignation: ”Haven’t the Irish sorted their house out yet? And we could see our fledgling recovery knocked back again.

There are lots of good things going on now in the economy, lots of new businesses opening. There’s a new generation coming up who knew nothing of the boom and all the attendant nonsense.

We owe it to them to sort out the personal debt legacy once and for all. To lose one generation to recent economic mismanagement is bad enough. To lose two would be unforgivable.

    • conor

      Hi David,
      I would be very interested to see some comments on these comments

      Bundestag committee claims Ireland has no plan for growth
      German MPs emphasise troubling lack of concern over Dublin’s ‘shadow bank’ sector

    • Mike Lucey

      Before accepting that the job situation in the USA is good it might be an idea to see the picture being painted by Paul Craig Roberts, Virtual Economy’s Phantom Job Gains Are Based on Statistical Fraud.


      • DB4545

        David in a Country notorious for moaning I like an upbeat article as much as the next person. The proposal you’re suggesting seems like you want to hop into bed with the scammers who took the Country under. The banks are recapitalised at the expense of the ordinary Citizens again and they have free rein to create another housing bubble again. The usual suspects will go for the fast buck bricks and mortar scams which a mountain of cash will generate
        instead of long term industries and new technologies. Bring back the troika and let’s have some sound Germanic long term discipline. What that means is housing, food and services provided at realistic prices to make the Country attractive and competitive globally. It delivers for the ordinary Citizen. Having just stocked up at the local Lidl and Kaiser in Berlin at approximately .75% of Irish prices we still have some work to do even when factoring in transport costs. In essence David as the British commented on us “We may believe in fairies but we deal in pigs”. And this little pixie head ain’t buying it.

        • CallerNJ

          No. I think he means the bank would obtain part of the equity in the residential properties. Those mortgage holders would lose some of the debt and bring down the cost of financing the mortgage (details to consider). Of course the bank looks good now as it has less of a loan book and equity investment it can use as collateral. It’s win~win, or is it?
          The crux would be in the details of such a deal. Can people lose their house or contorl of the property under certain circumstances? Possibly if this is not drawn up correctly. But where I live no one really owns their property the Gov has the ultimate say on it, it’s all leased from them and it’s not a problem.
          The idea is worth looking into, but it’s the details where it’s really going to count.

    • 33square

      “Minister for Finance Michael Noonan overruled departmental officials at the end of April to introduce a tax break worth €26 million to inactive farmers.

      Mr Noonan made his decision after he had been lobbied by Minister for Agriculture Simon Coveney.”

      Mr Coveney can do no wrong since the chats at Bilderberg. He sorted getting our beef back on sale in the U.S. too. Let’s see what other miracles this lad will pull out of the hat now he’s got all the right friends in all the right places

  1. Dorothy Jones

    Nice upbeat article of a Monday. But I have lost all hope of politicians in this Country ever doing anything as pragmatic and good for the people as suggested. And to add insult to injury of a risible performance during the Crisis, Enda Kenny panders to Merkel and some of the German Business Community last week after the store opening in Berlin.

  2. StephenKenny

    and i’ve got this really great bridge that would look just dandy in your garden…..

  3. dorn

    This is merely anecdotal I know but: “Remember that people’s monthly mortgage payments have been falling, not rising, since 2006.” Perhaps yours is, but I got a mortgage in 2010 and all its done since is risen (twice i think).

    Presumably you are refering to the magical tracker mortgage of boom time myth, and with the same sort of glee that mainstream news regularly informs us of “great news for mortgage holders – the interest rate has gone down again!!!”. Yet more than half of irish mortgage holders are on variable rate mortgages, and get shafted every time a senior banker decides he wants a new yacht.

    Perhaps there will be the same end result either way.

    • noady

      Suspect David is referring to actual “payments” on mortgage relative to actual payments that were being made in 2006

  4. Pat Flannery

    You are actually suggesting that Ireland institutionalize “sleight of hand” as a national financial tool? Far from condemning the dishonesty of the Irish Government’s “fictitious IOU called a promissory note to pay the creditors of Anglo”, you are actually suggesting that the Irish Government pull the same dirty trick again “to plug the gap in the banks’ balance sheets”? This time it would be called an “equity swap between the banks and the people”?

    From having been the island of saints and scholars Ireland is becoming the island of scammers and swindlers. Good suggestion David, it fits right in – the latest scam proposal by our leading economist.

  5. TrackerMan

    OK, we have a clear problem here – exposure to futures rises in market / ECB interest rates. Given that 65% to 70% of banks mortgage book is tracker mortgage based, clearly consumers are exposed to rising rates. My question is can anybody recommend an appropriate hedging product, which would be open to the general public, which would enable them to profit / get compensated from rising ECB interest rates and which would be closely alligned to the maturity / cash flow profile of their existing monthly mortgage payments?

    • try getting a fixed term mortgage for as long a period as possible. It could pay you well in a future interest raising climate.Pay a little extra now to save later.
      Here in Canada, a 5 year term with a fixed rate can be had for less than 3% pa. Compounded semi annually not in advance.

    • CallerNJ

      Not really apart from what Tony Brogan already suggested. I mean you could hedge with a number of instruments like interest rate swaps and so on. Unfortunately these are not readily available to the general public. To enter such a contract you’d be required to put down the full collateral amounts anyways. Consider that there’s no perfect hedge and if hedged it’s going to incur all sorts of fees on the side, which one should incorporate into the calculation. You could always short the housing market if you think it was to collapse on a rising interest rate but if you ask John Paulson he’d be 1st to tell you that this is in fact a very hard thing to do.

  6. [...] a new article on his web site, McWilliams is talking up the Irish economy: Strike while the iron’s hot | David McWilliams My hunch is that the economy is getting stronger faster than many people think. McWilliams [...]

  7. michaelcoughlan

    Hi David,

    Why are so many of my posts deemed to have to be moderated?

  8. Equity Swap

    I do not advocate this procedure because the helpless borrower is aiding the banks and enslaving himself to penury slavery .

    Instead the Irish Banks should embrace the positive benefits by writing off larger provisions for bad debts and topping the maximum residential loans to the current market of the house.

    Collective amnesia from the banks is a good national remedy and will enhance the confidence of the national productivity of the country .

    What is good for the gander is good for the goose.

  9. Colin

    …..and I thought the prudent who did not buy during the credit fuelled binge would soon be able to buy their own house at a fair price once capitalism was allowed to do what it does, with all those house re-possessions on the market at a fair price. Instead, what David proposes, is not capitalism, but socialism for the rich. What’s wrong with forcing people to trade down and live within their means? What’s wrong with good quality cheap property – something you advocated a few weeks ago if I remember correctly? Are you cosying up to the gombeen industy now, with their ‘professional’ fees in the €0000s to skelp, I mean help someone become a homeowner?

    • jerkface

      Completely agree with Colin. This is a perfect example of encouraging moral hazard. I am shocked McWilliams is advocating this after years of good articles this one turned my stomach. I have been waiting for years to buy a price at a fair price while people are defaulting on their mortgages and restricting supply. As far as I’m concerned if you can’t afford the repayments get out.

    • DB4545

      If you want to compare the “professional fee” scam at work in this Country with the UK just go on the UK propertypal website. It will tell you the solicitors fee and rateable value of the property. Try doing that in Ireland by making a few calls and ask what the fee will be. You’ll find it much easier to nail jelly to a ceiling.

  10. michaelcoughlan

    Hi David,

    Look at this:


    The chinese are using FOOD to finance deals in the financial market in the case in the link soyabeans. As a result the soyabeans are SKYROCKETING in value (Hyperinflation) and the newly created loot is driving the cost of 1 bed apts in London over 1m (Hyperinflation).

    • michaelcoughlan

      Tony Brogan please read this Post.

      Palladium has been going parabolic for time now and I am making nice gains thanks very much on a long position. I couldn’t understand it why it was rising so steadily I thought it must have had some military application but now I know its being used as a basis for rehypothecation in China. So why not gold?

      The only answer I can think of is that because the Chinese are so smart they know if they increase the requirement for the physical the price will rocket as the comex can’t deliver so the demand for the physical is over spilling into palladium and now even food commodities. Our host however is taking about Britain booming when whats happening is that the whole world is sleep walking into hyperinflation.

      Deflation my arse! Big bird in Europe is getting her inflation all right now David as are all the classically trained economists. God help anyone hoping to feed a family!

  11. Sorry for the double post??????

  12. Seems the solution to our problems is to manipulate and distort the interest rates again and so affect the markets. Thought that was what got us into trouble in the first place. Something abut artificially lowering the interest rates creating a credit fueled Irish tiger.

    Some people never learn!! As accounted above by various posters the touted recovery is a mirage.

  13. “It’s The End Of The Monetary System As We Know It (TEOTMSAWKI), and although it will be a difficult time for so many, I generally feel fine. I think it’s part of an overall evolution mankind is experiencing.”


    Yep the US is in recovery mode alright. 80% of the economy relies on the government!!!!

  14. Deco

    Britain is not booming – Britain is borrowing. In fact Britain is making itself more broke than ever. Britain is uber competitive in certain service sectors. But the debts are NOT being reduced. The housing crisis is getting worse. And Britain is investing everything in labour intensive economic sectors – which results in a miserable quality of life. Britain is the inverse of South Korea. One is looking imperially impressive, the other is simply getting very rich. Actually, to be honest, South Korea is probably doing both now.

    The ECB interest rates are low, as a result not of market conditions, but as a result of strict regulation of the currency markets across the OECD.

    And Ireland’s economic problems are not due to a lack of credit – but to a lack of profit in the system. The state and oligopolistic players, who made a fortune in the boom era, have strengthened their grip on the market economy, and have mismanaged the social economy. The working population are being sucked dry. The solution to everything is more taxes, and levies. A new broadcasting charge for the wealthy clique in Donnybrook. Bailouts for bank bondholders. Taxes to support politically appointed cronies in the local authorities. And now (more) price hikes in health insurance.

    The Irish economy’s problem is asphyxiation, of the profit making system. There is very little margin in business, in vast swathes of Ireland. Of course there is plenty of fat in the institutional state. But the rest of the economy is getting thinner and thinner.

    The same system as existed in the boom era – except a rampant excess of credit (courtesy of the ECB) covered it up, and the Irish media sold the credit binge as an economic boom. It wasn’t. Productivity barely nudged outside of the mnc sector. In fact it probably went into reverse in the services sector, after the benchmarking farce, as inflation destroyed real incomes.

    The entire intellectual analysis of the crisis, that we get from official Ireland, is irrelevant. It is carefully manufactured bull5h1t. Kenny, and Co have no clue what they are doing. The Irish Times only knows how to praise the official policy dictats coming from Brussels, with everybody remarking how well the Emperors new suit appears.

    We have managed to go 20% into a crisis, and not see any difference except in the voting pattern in the districts that are being squeezed to death by the centralized control of power and resources in Ireland.

  15. Fat Tony

    Reading this article makes me feel sick.

    • Adelaide

      Fat Tony, lay off the Bad Deflation, I know you love it as much as Good Deflation, but it’s going to make you sick, quit it or it will quit you.

    • michaelcoughlan

      “They cited the increase in jobs (288,000). But anyone who takes the time to examine those jobs would say that statistic is preposterous — 523,000 full-time jobs were lost and part-time jobs surged by 840,000″

      Must have allowed the mullingar motor mouth bollocks to run amok over there.

      “My daughter has a part-time job and she would love a full-time job but she can’t get one. Employers don’t want to give full-time jobs because they can pay next to nothing for part-time jobs and the employees don’t get benefits. So the idea that a job is a job is absolutely bogus”

      Similar type employment on offer from the mullingar motormouth in fuckair.

  16. Germany does not Pontificate Mysteries

    The German Bunsdestag Finance Committee Report has finally delivered the Truth about how Kenny & Co run this western isle and have included facts from off record meetings given by the inept civil servants from NAMA and Central Bank and their personal opinions, that the Germans considered significant enough that it had to be reported back to Berlin.

    This report is not mysterious it embraces what they heard from both sides of the mouth of the Irish civil servants .

    Why did the Minister for Finance not include this in his submissions directly from his department to those delegates ?

  17. Colin

    Looks like Krugman was visiting the site……. he agrees with David.

    ‘Some have offered lame excuses; some, following in the footsteps of climate-change deniers, have gone down the conspiracy-theory rabbit hole, claiming that we really do have soaring inflation, but the government is lying about the numbers (and by the way, we’re not talking about random bloggers or something; we’re talking about famous Harvard professors).’


    So your loaf of bread, pint of milk, half dozen eggs, pound of sausages, box of cornflakes, pound of butter, bag of spuds, block of cheese and packet of ham are going up in price, but don’t worry folks…..the inflation is all in your head, its not real…… apparently

    Over to you Mr Brogan (or any other random blogger or something) …..

    • michaelcoughlan

      Price of many of the items like chocolate, beans, diswasher tablets, washing powder are remaining the same but you are getting LESS (shrinkflation).

      Bastards in charge know this. Article is very partisan and excellent colin for posting it.



    • cooldude

      Krugman is just an arrogant self important twat who simply refuses to look at the FACTS in relation to the rapidly increasing inflation in food prices across the globe. This was debated on this blog a few weeks ago and it seems fairly clear that there is 30% plus rate of inflation in food across the globe so far in 2014. Food prices are deliberately omitted from the CPI calculations since the Reagan era because they are too difficult to manipulate and are rising constantly and this is accelerating. Monetary inflation will always lead to price inflation but it can take a while when there is so much speculation happening. This will become totally clear as we get through 2014.

      Another stupid swipe he had in the article is about “climate change deniers”. What a load of cobblers. Everyone with half a brain knows that the climate has been changing on this planet for millions of years and we don’t need arrogant ass holes like Krugman to point this out. Where there is serious debate is about the causes of climate change and whether the data being used is being manipulated and whether the earth is actually warming at present or in a slight cooling phase for the last eighteen years. From the available non manipulated facts it does seem that the earth is cooling slightly at the moment but this doesn’t fit very well into the Al Gore computer models which showed a hockey stick increase towards the early part of this century. Rather than just admit that this is indeed the fact they have changed the meme from global warming to climate change and ignore or manipulate all facts which don’t match their flawed models. Here is a good article in the mainstream media which explores this manipulation and all the hype by idiots like Krugman


  18. Fat Tony

    Universal Health insurance “tax” final straw. JR needs to be shot.
    Aparrantely it is easily possible to melt lead wheel balancing weights down to make bullets. Automatic machine guns like the STEN MKIII are also fairly easy to make at home. Time for a revolution…whoes with me?

  19. Pat Flannery

    David’s argument for “debt for equity swaps” is predicated on his belief that the Irish Government will succeed in convincing the EU that the creation of money to bail out IBRC (formerly Anglo) was to pay off the bank’s creditors therefore not monetary financing. In other words that monetary financing is OK when used to make good capitalists’ losses.

    With the accession of Joan Burton as Leader of the Labor Party will she embrace the Fine Gael/Fianna Fail argument that the best way to thrive in the EU is to be a good friend to capitalists? Or will she argue that the EU as a whole is changing and is now ready to be a good friend to the people? In other words is she a real socialist or just another Chartered Accountant?

    • paddythepig

      70% of Anglo’s creditors were depositors.

      • Pat Flannery

        Hardly any of Anglo’s creditors were ordinary depositors. At the end probably none; they had all fled. Throughout its existence Anglo got practically all of its funds from (1) interbank borrowing (which dried up causing the Government bailout) and (2) from selling securitized mortgage bundles.

        These securitized mortgage bundles had repurchase agreements which made them in effect loans from creditors.

        These securitized mortgage bundles were practically all that was left of Anglo at the end. Its assets were whatever these bundles were worth on the open market while its liabilities were the creditors who held the repurchase agreements on the securitized mortgage bundles.

        The Irish Government decided to honor these “repurchase” liabilities in full. Presumably they thought that the bond markets would think highly of them if they did. In any case the result was that every penny of the Anglo bailout went to the securitized mortgage bondholders. Thus Ireland saved the capitalists’ markets and is now looking for its lump of sugar.

        • Not forgetting that the Irish government is in fact the irish taxpayer who is now austerity taxed to try to pay that bill acquired.
          Remember, the national debt doubled!!

          Plus there was no debt relief for the mortgagors who are now trapped in Negative equity housing. (I am not saying they should be bailed out but then neither should the banks.)

          Years ago as a practicing Realtor I was asked the question “when is it a good time to buy a house? a subsequent question was, What happens if my house goes down in value, Is it worth buying?

          First answer. buy when you are ready and can see your way affording it for at least 5 years. In other words , do not try to time the market but buy when it suits your social needs. (There are many other reasons to own your own place other than investment calculations.)

          That is make your own decisions and only when you can afford to do so.

          Answer two. The price of property can go up or down depending on demand and supply factors which are influenced by many things other than mortgage interest rates although that as an effect. (I have seen mortgage interest rates rise several points and all the while property prices went up and up.)

          Most mortgages are written for a 25 year ammortization (or used to be). That is, the house would be paid off in 25 years resulting in the benefit of no rent payments or mortgage payment.

          Calculations show that over this time frame rental payment for housing and costs of owning a house are roughly equal. So, whether renting of buying one forks out a lot of hard earned income over that time.

          during this time rent payments will initially be cheaper but rise with inflation quite steadily. Mortgage payments tend to be relatively steady as the interest rate is already a function of the inflation rate(Or used to be).

          If the housing market did not increase at all and the 100 price paid was still 100, 25 years later, the homeowner made a good return on the 10% down payment. The 10% equity down payment has become 100 equity for a ten fold increase over 25 years. I think as I remember this equals about a 12% compounded increase in value on the down payment.

          If the housing market dropped 50% then the 10% down payment equity increased 5 fold in 25 years which as I remember is something around 8% per annum return.

          With this calculation it shows that no matter what the housing market does it is always advantageous to buy rather than rent when the long term view is taken.

          The result is I have no problem saying to a mortgagor who has negative equity, ” suck it up and keep paying, as you will be ahead in the long run”.

          Those who can’t pay the mortgage will be set back and should try to negotiate with the bank for a settlement. It is of advantage to both to do so.

          One major problem with all this is the interference of government in the due process that distort the market place to such a degree that nobody can make a market based decision on what to do as the market place is totally distorted by lies, deceit and interference and so bares little semblance to reality.

        • paddythepig

          You are completely wrong. Karl whelan has published a paper on this topic. I suggest you read it.

          • Pat Flannery

            I had already read all Karl Whelan’s papers on the subject including his most recent one for the Labor Party. Nothing I wrote above is inconsistent with any of Karl’s writings. Read them again.

          • paddythepig

            The spoofing index has just gone through the roof.

  20. WTF is Ireland Inc up to? Is there a long term goal of breaking the Anglosphere trade cycle links/synergy and syncing with Europa/Euro or not? What’s the point of trading in the Euro if your main business momentum is Britain and the US. When will German and French be made compulsory for school kids in Ireland? Etc. And why do the UK/Rep of Ireland sync their visa reqs for Chinese tourists if Ireland’s part of Schengen? Or is it? Can’t remember. Eejity Ryanair asking for passport not driving licence yet expect Brits intoxicated with Mrs Brown’s Boys to put up with mad travel docs nonsense. Fuggedaboudit. Outrageous prices to take the wife/kids on the boat this summer from Rosslare, cheaper to fly/hire car. Shame for anyone with a larger family, though I guess they’ll use a transit van to take them all, like my Dad did.

    It’s a surreal situation. In London yesterday for the Tour de France, I parked at Westside Mall & wandered around. Incredible. Nail parlous, perfumes, bling clothes and masses of people buying the crap/tat. And I joined a line dancing class for lulz. It’s manic in the Metropolis and lots of Irish accents, either tourists or residents but all splashing the cash in Mayfair after the finish. Mind you, the Irish obsession with Londres is well known even if it’s quietly ignored by the D4 wannabe Norman elites who spend as much time in Knightsbridge as Ballsbridge as it would #GiveTheGameAway Like having an abortion, Loving London More Than Dublin is another guilty secret for many Green Jersey K-Club casualties, now bailed out by Culchie taxes and living it large with “yonder Saxon Foe” *rolleyes*

    “For those choosing to venture abroad, London was the most searched, followed by Albufeira in Portugal and Puerto del Carmen in Spain.”


    I suppose the truth is that Ireland Inc/IFSC is now a Franco-German hedge to the City of London if Frankfurt and Paris can successfully wage war against The City Of London with Tobin Tax type stuff. Erm, good luck with that one lads!

    When interest rates double and quadruple, expect The Mother Of All Crises on both these Isles of Wonder/Plunder, expect them to be torn asunder with recrimination and accusation as the crazy folk in Westside and Dundrum are presented with the real bill for their bling-tastic Party Like It’s 2005. 7/7/2005 London was bombed. Yesterday 7/7/2014 it erupted into orgasmic joy as the exile entrepreneurial French went full on bonkers with love for Le Tour Yorkshire and the mad cockernee coppers singing WW1 songs and all the rest of the mayhem I witnessed. One of the best days of my life in one of the best cities in the world. Londinium used to be part of Mercia before the Norman Conquest of 1066. It shall be again once HS2 is approved. Or it becomes an independent state once the Scots make up their minds about their Mel Gibson Grievance Mongering. As for Ireland Inc? Well, if someone doesn’t sort out The Garth Brooks Situation, the place could go up in flames any day soon. Enda! Declare marshall law, commandeer some racecourse or whatever it takes, or the Culchies will march on D4 and torch it to the ground in anger.

    You couldn’t make it up.

    • DB4545

      You couldn’t make it up. I’d prefer to have my fingernails pulled out than listen to country music but how does a Country lose 50 million worth of business overnight? Absolute stupidity and indifference when some hard headed leadership is required. Hotels, bars restaurants, taxis and all the other services in the tourist sector screwed up because of no planning not bad planning. What does that matter when you don’t live in the real world and no matter what f**k up you make if you’re an insider your cronies will fix you up and the taxpayer can pick up the tab.

    • DB4545

      It’s interesting to see what really worries politicians when 50 million is lost to The Dublin economy. Pat Rabitte is worried about the lost of revenue to RTE with licence evasion. Given that the State broadcaster is a key tool used to influence the voting public I note his concern. Why should taxpayers should fund the lifestyles of the D4 media mafia when there’s no full disclosure of how their tax money is used? Is there anyone electable who will serve the Interests of Citizens of this State?

  21. Mortgage debt overhang from the housing bust has meant lack of middle-class spending power and consumer demand, preventing the economy from growing. The problem might be fixed by a new approach from the Fed. But if the Fed won’t act, counties will, as seen in the latest developments on eminent domain and litigation over Mortgage Electronic Registration Systems (MERS).

    Former Assistant Treasury Secretary Paul Craig Roberts wrote on June 25 that real U.S. GDP growth for the first quarter of 2014 was a negative 2.9%, off by 5.5% from the positive 2.6% predicted by economists. If the second quarter also shows a decline, the U.S. will officially be in recession.

    That means not only fiscal policy (government deficit spending) but monetary policy (unprecedented quantitative easing) will have failed. The Federal Reserve is out of bullets.

    Or is it? Perhaps it is just aiming at the wrong target.

    - See more at: http://www.occupy.com/article/ahead-looming-foreclosure-crisis-local-governments-are-stepping#sthash.EHaglCMn.dpuf

  22. Posted at Midas du Metropole

    From the not-so-tame inflation files comes this update regarding trucking, which is approaching crisis proportions. This is an excerpt from a lumber industry guy’s take on the matter:

    “We have been receiving many calls from Transportation Managers who are under stress to explain to their sales group and management why truck pricing has jumped so quickly and dramatically. Secondly, even if you can pay a higher price, why is it that you still may have to wait a lot longer than usual to get the freight picked up? I understand the stress, and can add that I have not seen such a sudden and deep shift in my 30-year transportation career.

    I am guessing that those outside of transportation are still learning to understand the effects of the government’s strict regulations on the hours a driver can legally be on duty. Since truckers are getting less miles, they are going to charge more for each mile they run. Since it is taking them longer to pickup and deliver, they are hauling fewer loads. The regulations have, as expected, added much cost and time to truck transportation. When adding the effect of regulations to fewer trucks and more freight, the combined effect to truck availability is staggering.”

    Fewer trucks, fewer drivers, higher fuel and insurance costs + new government regs = compounded misery for the consumer. That bacon and egg breakfast with juice and coffee is about to get way more expensive than it already is, assuming it even makes it to your plate. Breakfast is already up 23% y/y in spite of the best laid plans of mice and Feds. Maybe this is why gold got whacked this morning at 10:00 AM. Dumping 9,601 Comex contracts in just 6 minutes (which oddly enough comes up to almost exactly 30 tons) has a way of beating gold into submission, or, to be more succinct, sub-$1320.

    A thousand reasons for gold to rise, ONE reason why it doesn’t. At least those are some pretty good odds for an uprising.
    James Mc

  23. posted Midas du Metropole

    hi bill,
    the july 7 COT report was simply incomprehensible!
    the commercials are now net short 16 million ounces
    of gold.
    they are net short 252 million ounces of silver. what
    does that mean? only about 800 million ounces of
    silver are mined worldwide every year. only about
    100 million of these are actually physically traded.
    the rest are use in jewelry, photography, and
    this means the Big Banks control 2.5 X the
    silver traded worldwide yearly. if people can’t
    see this is flagrant manipulation nothing,
    could convince them.
    yes, i’m sitting on my 30 silver contracts.

  24. In her book Nomi gets into the historic relationship between the Presidency and Wall Street. Without delving into the entire conversation, she believes GATA is correct about taking on all the money and power in the world … in that, contrary to what the Fed and others in power say, Gold is THAT BIG A DEAL … and has been for a very long time. One of her major points is that they HATE gold because it acts as a “restraint” to what they want to do in the political/financial world, among other areas. In that sense GATA is correct in all that money and power wants to constantly defuse the barometer/thermometer of US financial market health … that being the gold price.

    Of course, gold is just one aspect of the many issues she deals with. But, what a delight to have such a scholarly, Wall Street type acknowledge how right GATA has been all these years.

    For those Café members interested in purchasing the book, go here:

    All the Presidents’ Bankers Available Now!

    Here is a 49 second, pictorial trailer of the book:


  25. Dave from Denver…

    The Deteriorating Economic Outlook
    July 8, 2014

    I wrote an article with Dr. Paul Craig Roberts and John Williams (Shadowstats.com) which details why the negative 2.9% GDP contraction for Q1 as measured by the Government was likely a gross misrepresentation of the real GDP decline which occurred. We also explain why this will likely lead to a further measure decline in GDP for Q2, despite Wall Street’s interminable optimism in calling for a 3% rise in GDP. Finally, we explain the implications for real wealth being generated by the economy in relation to the inexorable rise in Government debt:

    Years of understatement of inflation has resulted in years of overstatement of GDP growth. Thinking about the many years of misstatement, we realized that the typical computation in nominal terms of the ratio of debt to GDP is seriously misleading.

    You can read the article here: The Deteriorating Economic Outlook

    With the economy starting to contract, corporate profits and cash flow will continue to dry up. This will place the highly overvalued corporate bond at risk for a devastating sell-off. Corporate bond spreads are the tightest they’ve been to Treasuries since 2007. Anyone remember what notable credit market event followed 2007?

    You need to dump your bond fund investments now. As in, call you investment advisor or retirement fund administrator and get out. ASAP. Don’t put the money into money market funds because they blow up too – see 2008 for reference (they all have derivatives in them). Move as much money as you can into precious metals and junior mining stocks: Junior Mining Stock Research Reports.

    While every chart and technical analyst under the sun has been screaming that the metals and miners are going to sell-off here, they just keep bouncing back and going higher – climbing that wall of worry.


  26. Bill H:
    There is precious little time left.

    We have already gotten many pieces to the ending of the petrodollar puzzle. We know about Russia and China (and the remaining BRICS) making deals in all directions that will not use the dollar. We have seen the U.S. allies Britain, France and South Korea all doing trade deals with the East that will not use dollars. We know that Saudi Arabia, (the lynchpin of the “petrodollar”) has had high level talks with both Russia and China over the last 180 days. Unless you are an ostrich and just want to “hope” that these talks were merely about the weather and how Aunt Millie and Uncle Joe are doing then you know that “energy” and trade in general was discussed. Obviously, Saudi Arabia accepting rubles, yuan, euros (and God forbid gold of all things) was a part of the discussions. Of course there probably were a few “what if’s?” discussed. The Saudis would have wanted to know “what if” the U.S. were to freeze their assets? What if the U.S. shut them out of the SWIFT system? What if the U.S. decided some sort of military retaliation? In order for Saudi Arabia to cross the U.S. they would need some, if not many “assurances” to these and probably other questions. My question is “did they get all of the answers that they needed?” …or are there more?

    I don’t know the answer to this but I do know that if both Britain and France (with South Korea as a cherry on top) have decided to do business with our “enemies” and do this business without using dollars for settlement …then something really big is afoot. It also tells me that now the Saudis can do business deals WITHOUT using dollars and all they’ll need to do is point a finger. You see, prior to any of these 3 other deals being done, Saudi Arabia could not “defect” and go it alone. Now, all they need to do is say that “they are modeling their deal” after the Brits, French or South Koreans.

    I must confess that after hearing about France and the South Korean deals on Friday, I thought that gold (and silver) would be up sharply and the dollar down sharply this Monday morning, they were not. I usually try to look 2, 3, or more steps into the future as the markets used to do but that thinking is so passé. Gold is and has been “locked down” for 2 years now. We can argue that it is or is not manipulated but in my opinion that would be a waste of precious time. We can argue the supply and demand points or the fact that the metals now trade at or below the cost of production. We can argue about the dangers of systemic leverage, a bloated money supply, monetization, the fractional reserve nature of nearly everything or the mathematical bankrupt nature of the U.S. Treasury or …we could talk about the “fraud” that is pervasive everywhere. Again, in my opinion it is a waste of time.

    You see, even if just one of these points is true (they all are, each and every one of them) then you should prepare for the worst because something is really wrong. Actually, all you need to do is look at the “market reactions” to any of these topics to know that something is wrong. Should interest rates on U.S. Treasuries be close to all time lows when we already know that the money supply has been pumped up and the fiscal sustainability of the nation is in ruin? Dilution on the one hand and nothing but risk on the other. It doesn’t make sense does it?

    No, it does not make sense and will not until it does. The derivatives that have been used to paint the pretty pictures will snap like rubber bands, prices will “adjust” without ever trading between “here and there”. What I am telling you is that we are very close to waking up one day to a world that is unrecognizable. Stocks might look like they split, bonds, currencies, gold and commodities will all look like the decimal points or comma’s are in the wrong places.

    Why am I sounding so urgent with this piece? Because as I see it there is just the one last piece of news from Saudi Arabia to come out. No amount of dollar printing or derivatives creation will be able to hold back the financial tsunami once the Saudis defect officially and publicly. As I wrote in my last piece, no matter what spin you hear after a Saudi announcement, do not believe it! If you hear anything out of Saudi Arabia that does not sound “kissy smoochy” to the U.S., you absolutely MUST prepare for what will come. You should have already been making preparations and only need to “top off” or finish final preparations. If you have not done anything yet then PLEASE, get off of your duff and move as fast as you can NOW! I believe that from the day that Saudi Arabia announces that they will accept currencies other than dollars for oil, it will only be 2 weeks or less that some other country comes out and says they will NO LONGER accept dollars for oil. This will create a “run” on dollars. A “run” as in trying to spend as many as possible as fast as possible before they lose much or all value. This will also be seen at your local Wal Mart with maybe a few days delay. Make no mistake whatsoever, we have sat back and watched as the Chinese and other foreigners have “run” the gold market. The next market to be “run” will be dollars (and thus Treasuries). This will work it’s way all the way down to daily items and will be seen as a “crack up boom”. The first 24-48 hours will probably be explained as consumers finally starting to spend, after that everyone will know exactly what is happening.

    Whether it is Saudi Arabia or not, you can mark my words. A currency crisis and run on the dollar of epic proportions is only “one event” or one announcement away from happening at which point “you” will be out of time! Regards, Bill Holter, Miles Franklin Associate writer

    • DB4545

      Forgive my ignorance of these matters but my understanding is that China holds a lot of US dollars through bonds and US debt generally. China thinks in centuries and the US appears to think in sound bites. If China and others are going to implode the US dollar I’m sure they must have put a hedging mechanism in place to mitigate their risk. Is gold the hedge and if not what is?

      • as I understand it.
        China has invested in vast infrastructure in advance of needs.
        They have invested heavily in commodities, land, mining and agriculture and agreed terms in US dollars (the dollars are already committed elsewhere.
        They have accumulated waaaay more gold than reported.
        Some estimates reckon as much as 10,000 tonnes.

        They are hedged already but still feathering their nest as long as they can. They will not pull the trigger til they are ready to, but they are already ready!!

        • The investments are in Africa, Asia and the big food producing areas

          • DB4545

            They’ve effectively locked in Africa and Australia as a farm and a quarry to service their economy. I suppose when you don’t have to win hearts and minds through any kind of democratic process it creates it’s own efficiency and speed, Singapore on steroids. China has done all this with very few shots being fired while the US and others are grandstanding about relatively trivial bullshit. When a Mr. S Hussain threatened to move out of dollars the US didn’t take too long to soften his cough. What will prevent similar events in Saudi given that the Saudi elite couldn’t rule without the US security umbrella?

        • DB4545

          Oil and gold and silver are in a decline when viewed over two year window. Security of supply (fracking, the new pipeline from Kurdistan through Turkey etc. ) seems to have mitigated the usual alarm bell of oil. This can all seem distant and academic but the fact remains Ireland is linked to and benefits from the US security umbrella. The US seems to produce or maybe just allows the best and worst of the human condition to have free rein. I admire the MIT, Silicon Valley and Stanford end of the spectrum. I’m not so sure about seventy year olds dressed in chicken suits in Orlando because they or the State don’t have sensible provisions for a dignified old age. But I hope that those who are doing the thinking for US inc. have got their act together because however much wishful thinking we may do this doesn’t look like turning into another American century. We’re about to start living in interesting times.

  27. redriversix

    Their is still too much debt..

    Their are no longer full time jobs available,

    Irish Government still has no solution to Bank crisis

    Banks are still too indebted

    Personal debts..i.e credit cards , cars, furniture loans ,this problem has still not been addressed

    This Government now has no agenda or plan other than surviving the next 18 months and protecting their individual careers.

    It is the South of England that is doing well..the North ? not so much……

    We need to learn not to borrow and go back to basics..cash is king


    • michaelcoughlan

      Debt is bad.

      Spot on.

      It is very simple maths. In the uk when ALL the debt is added the shit pile (debt) is over 350% GDP. Since money is borowed into existince the interst charged on the supply of the currency say at even 1% of the shit pile equals 3.5% of GDP.

      In other words the economy has to grow by at least 3.5% JUST to maintain the money supply at a constant level or the economy contracts due to currency being taken out of circulation to pay the interest on the shit pile.

      The ideologues in charge don’t get it that the more you print THE WORSE the problem gets.

      Its like a massive tumor taking the blood from the body the bigger the tumor the less blod available for vital body functions.

  28. http://www.thedailybell.com/news-analysis/35460/Italys-Renzi-a-Charismatic-Technocrat-and-Internationalist/

    The end game is a fully internationalized world. Those who are aware of what’s actually going on should be quite conscious of this sort of manipulation and take effective steps to combat it as best they can, at least on a personal level.

    David on the one hand promotes interventionist policies for governments and on the other acts as an entrepreneurial in his personal business. One can’t have it both ways. So which way is it??

  29. StephenKenny

    This piece made me think back to the 2006/07 period, when David McWilliams was banging the drum about too much debt and over priced properties.
    I read a piece, sometime in 2007, predicting much of what we have seen since then, in terms of state intervention in all financial and related markets.
    It forecast various ups and downs, and said that the final downswing would occur then the Chairman of the US Fed went on television to announce a $1 Tn direct intervention in the US stock markets – US government directly buying shares to hold up the stock market prices.
    Eventually, the market would call his bluff, and then it would have to be £$2Tn, then $5Tn, then $12Tn, and on. Confidence in the system would simply evaporate.

    Today I saw an announcement from the head of the Japanese central bank stating just that . They are starting to buy shares directly in the Japanese StockMarket, to push up prices.

    So, after all we’ve seen over the past 6 years, it seems we’re stating on the final market support mechanism (I can’t think of any other). I never thought I’d see the day.

    It seems that there’s just one shoe left to fall.

    • Started in the US in 1988 with The Presidents Working Group on financial Markets


      It is getting more and more frequent and more overt. Dow Jones is estimated to be 50% traded by central banks and government entities. The real economy is out of the markets.

      Bonds, stocks, economy… all is a fake construct. Waiting for the big black swan to appear.

      • StephenKenny

        The point isn’t that it’s happening, the point is that public announcement is now necessary to give it real effectiveness.
        What else can the authorities do, when the effectiveness of this policy wears thin? They can increase the scale, but eventually there isn’t any more they can do.

        • The point is most do not know about the manipulation.
          The manipulation is ongoing with greater and greater distortions induced in the market.
          People now make decisions based on false premises that result in inefficiencies and errors resulting in lost productivity and a falling standard of living.

          This is your governments at work interfering in the economy to nobodies benefit except the sycophantic banking industry and the elites holding all the strings.

          The final point is that the “authorities” have no business meddling there in the first place.
          They are ruining the economy and lives of hundreds of millions or billions of people world wide.

          And we have notable economists advocating such policies as we sit and type to each other!!!The world is MAD

          • http://www.tfmetalsreport.com/blog/5918/understanding-latest-bank-participation-report

            Here is a report on the desperate manipulation of the precious metals market by all means illegal.

            Otherwise known as price setting and collusion. A criminal offence. Unprosecuted of course as the regulators turn a blind eye

          • StephenKenny

            OK, so there two courses of action:
            The first is to keep beating the drum, as you do;
            The second is to look at the indicators of the next inflection point, and since all the popular indicators are being manipulated, that is difficult.

            One indicator I remember well, from 2006, was a sale and lease back offer that David McWilliams made to a roomful of property and financial services big shots. They were all eulogising on the forthcoming sunny uplands, but were strangely reticent when offered a very tasty 10 year property deal deal – very tasty that is, if you actually believed in the sunny uplands.

  30. Why is there gold for China but none for Germany? – Linda L.

    This is a very good question, I guess the simple answer is “the lesser of two evils”. If there is not enough gold to go around who do you pay? Do you pay your banker or do you pay your friend? If you don’t pay your banker he might foreclose. If you don’t pay your friend you might be able to say to him “just wait a little while, it’s inconvenient right now”. The Germans have fallen into line with the Bundesbank providing some cover by saying “no, we really didn’t want our gold back, we trust the Americans”. I don’t think that this would work very well with the Chinese. I have said all along that on the day the Chinese are told there is no more gold, they will pull the plug and the system will unwind entirely …including and on top of the Chinese. However, the Chinese can stand a paper meltdown and reset better than anyone on the planet. They have built cities (many empty to this point), roads, bridges, factories, etc. oh, and they also have gold. The Germans on the other hand are not quite as modernized and only have possession of 60% of their gold, a paper breakdown will affect them more so in my opinion they are prolonging the game and “hoping” that their gold will magically appear. I doubt it. I do believe however that they have been told “you can’t have your gold back…for now”. It is a sad state of affairs as I see it. – Bill Holter

  31. Economic facts that bear some semblance to reality rather than those invented as propaganda by others.


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