January 22, 2015

Law of unintended consequences from a Paris taxi journey

Posted in Irish Independent · 148 comments ·
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I am on the RER train from the centre of Paris to Charles de Gaulle Airport after having what could only be described as a very French adventure. Over an hour before, I had arrived at the airport a few hours early to write this article in peace. But as is unfortunately typical for me, I realised I had left my passport in the hotel. So I had to jump back into a cab and get it.

The taxi driver was an immigrant from China. We got chatting and he told me he worked the airports and was hoping to get a fare back, but fares back are hard to come by. Having heard his game plan, I asked him to cut me a deal and I would pay him a small discount for the round trip. Now I don’t know about you, but I have never met a Chinese person who doesn’t do deals. In fact, I have never met a taxi driver anywhere who doesn’t do deals for good fares. But this guy was affronted and with a certain dismissive Gallic shrug, he claimed that he would take me for what was on the meter. So I told him, politely, where to go.

Consider this. I had asked him to do the €110 round trip for €100. He blanked. So rather than get a €100 round trip, this dude got €55 and was left to find a full fare back to the airport from the centre of Paris. He gave up a certain €50 for a possible €55 which would have got him back to the airport, the very place he’d suggested he was based. Now I am on the train, observing the casual comings and goings of cosmopolitan Paris, paying only €10 for the pleasure and my Chinese friend is playing the taxi destination lottery on the streets.

This episode summed up a lot of what my French friends claim is so frustrating about living in this quite wonderful country: the bureaucratic mindset. If Chinese immigrant taxi drivers can be converted from ‘free-wheeling opportunists’ into ‘by-the-book, short-sighted, uncommercial jobsworths’ then the ailing French economy is in serious trouble. The pigheadedness of Parisian taxi drivers and their inability to see the big picture was in evidence recently over their opposition to Uber, the new taxi app that is taking the world by storm. Parisian taxi drivers, on hearing that Uber was about to stage a low-key launch in Paris, embarked on a two-day strike.

Quite apart from annoying their customers and de-barring themselves from their own wages, what do you think happened?

Interest in Uber, a service that nobody in Paris had heard of before the strike, went through the roof. The taxi drivers had given Uber the best marketing boost the company could hope for – and it didn’t cost Uber a penny. Now, Uber is transforming the Parisian taxi landscape and the taxi drivers themselves are in part responsible.

Such an outcome is called the law of unintended consequences: when you do something to achieve one outcome, it ends up causing a totally different one.

This brings me to two Central Bank announcements over the next few days. The first is by the ECB, expected tomorrow, when it unveils a fresh round of QE – money printing. The European economy, including France, has stalled and only by coaxing the banks to lend free money can the ECB hope to get activity going again.

As well as making money available to the banks to lend, the ECB is also making sure that interest rates are zero.

The second announcement is expected from Dame Street, when our Central Bank will unveil its 20pc deposit scheme, which will demand that first-time buyers have 20pc of the price of a house set aside in savings before they can bid. The aim here is to stop house price inflation by reducing the amount of credit that can be extended to any house via increasing the accepted loan-to-value ratio. In the boom, some of the froth that built up in the housing market was undeniably inflated by 100pc mortgages. Let’s take both in turn and see whether there may be some idiosyncrasies present in Ireland which could lead to unintended consequences, undermining both objectives.

By cutting rates, the ECB hopes to get banks to lend. Banks make money by charging more on the money they lend out than the rate they offer on deposits. However, in Ireland, due to the €400bn tracker mortgage market, every time the ECB cuts rates, the banks have to cut rates on trackers – which is money lent out. This means the banks have to recoup the losses on trackers by charging more interest – not less – for loans, even if the rate of interest is falling. So tomorrow, we will arrive in the rather paradoxical situation in Ireland where lower ECB rates might mean higher market rates for Irish borrowers. Now that would be an unintended consequence. What about the central bank’s deposit hike for first time buyers?

Undoubtedly, limiting credit to the market will keep house prices down because it is credit, not demand, that drives prices up. So limiting credit will reduce upward pressure on house prices. This has to be good for all first-time buyers because it is higher prices that afflict first-time buyers. In the medium term, all buyers will benefit. However, in the short term, rich kids will benefit most. This is because prices won’t fall so quickly. First-time buyers with rich parents who will give them the deposits will gain enormously. So too will middle-aged cash buyers.

So here the unintended consequence of the Central Bank’s move to make the housing market cheaper and thereby more fair will have the effect of rewarding people who have rich parents. Hardly the fairest outcome.

As I fly through the city on public transport to the airport, it strikes me that public housing, like public transport, has to be the fairest way to house most of our people and in so doing, provide a proper, long-term solution to Irish housing. Tinkering around with deposit amounts and interest rates can never achieve this.


  1. Heading to France on Wednesday and will keep my eyes open for similar experiences. Forwarded this article to my business partner over there and he recounted a similar story, will paste it in here in a minute. Anecdotal of course.

    • He wrote:

      “Good article. My take on his judgement of the French…all I can say with my limited knowledge [OF ECONOMICS], but more extensive experience with the country and culture, is that the French are arrogant and proud, they refuse to appear desperate and will not compromise on their pride and associated values to make a buck, ‘there are more important things…’..hence why I also think French culture remains a little less diluted (or open to change and adaptive values) than say, for example, the British culture over the past 20 years. There are pro’s and cons of course, and economic re-stimulation and initiatives may be harder to implement as a result of this perceived inability to adapt to economic woes since the 2008 crisis. People speak of ‘la crise’ here like it’s just a particularly long spell of bad weather that one has to ride out. Case in point; there is an old house for sale we can see from one of the bedrooms here, right opposite the casino supermarket. N… and A… wanted to see it, so got the agent to show us around yesterday. Had a chat with the agent, and she said on the property market in Q…, and generally in France, that people would rather let properties fall into ruin than sell at a significantly reduced price. This house was one of the first built in the area, over 100 years old, absolutely incredible carved woodwork finishes on the inside, beautiful detail both inside and out, and yet the kids who are selling their late parents property have let it fall into ruin over the past 10 years, whilst the price gets bumped up every year it doesn’t sell! Reminds me of a Dominican tour guide who once told me about French tourists on the way to the boiling lake. He said French tourists would rather risk life and limb doing a dangerous hike than concede to needing and paying a tour guide, whilst other tourists are simply happy to provide stimulus to the economy by employing a guide. These are my observations. That’s my empirical opinion, not based on a large base of factual knowledge as you know.”

  2. sravrannies

    Hi Adam, my experience of working with the French reflects this although, I would add that the Germans are too far behind. They would balk at the slightly risky decisions us Irish would take – those decision never went wrong of course!

    Peter

  3. johnp001

    Regarding your statement on the unintended consequences of the Central Bank’s macro-prudential rules:
    The Central Bank cannot be influenced by the consequence of possibly increasing social inequality by introducing the macro-prudential rules. The Central Bank’s remit is to protect the banks by preventing them from continuing to issue the masses of irrecoverable loans that they issued in the past.
    It is the government’s role to introduce legislation to provide social equality and it would be completely inappropriate for the Central Bank to be responsible for an equitable society.

    • I understood that it is the governments role to generate as much inequality as possible without causing political instability so as to line the pockets of their financiers for funding their election campaigns, as well as saying thanks for the brown envelopes.

  4. Is it just me or does anyone else think that the euro will be on par with the US dollar? If the euro drops as much as it has done in the past year after QE then that will be the case. My question is would QE have been good for the Eurozone if it was brought in years ago like in us and Britain? On the one hand you could argue there would have been less incentive to make spending reforms and on the other a weaker euro would have encouraged investment and growth which many people argue is much better than austerity to dig Europe out of the hole. Is it bureaucracy that led the ECB to refuse QE for all these years? I think so- it nearly seemed like a cardinal sin in Frankfurt to avoid doing anything to make to Euro look weak.

  5. StephenKenny

    “Undoubtedly, limiting credit to the market will keep house prices down because it is credit, not demand, that drives prices up.”

    Having this observation aired in a national media is astonishing. If it gets out, it will quite literally break the US, and shatter the UK, economies.

    • stevedublin

      How would it break the US and UK?
      There is reasonable credit available in both countries

      • StephenKenny

        Because in both countries the story, raised to the status of cult, is that prices only reflect demand, so are accurate, at whatever level they reach. House prices are also the basis of consumer spending, based on the optimism of increasing house prices, ‘profit’ from property speculation (rising house prices), and on actual increased borrowing, based on increased house prices.

        Introduce the idea that prices reflect credit, rather than demand, and the fact that the US has had an increase in outstanding credit of about 100% of GDP over the last 15 years, and the UK of almost 200% of GDP, then the future of house price increases looks a lot less certain than if they reflect demand.

        Outstanding credit cannot just rise forever, whereas ‘demand’, can.

  6. stevedublin

    If public housing is the answer, where do I get my free house?
    Do I have to be poor to qualify for a free house?

  7. douglaskastle

    Society has always rewarded people with rich parents, it is a simple fact. However you are missing the game completely, this serves the banks more.

    Women entering into the work force properly in the 80s had one unintended outcome (in my mind). When a couple with 2 salaries started competing against a couple with only one person working, and thus only one salary, the couple with only one salary got blown away. It became the de facto case that 2 salaries incomes were required to even be able to afford a house. There are outliers to this example obviously, but I think it is fair to say the norm. However I have seen too many friends HAVE to go back to work after having a baby, so that they can pay the mortgage (French translation: death pledge, BTW).

    Now that market is tied up as much as possible. Growth for the banks is fairly level and boring. Ergo the rise of tapping into the equity their parents have locked away in their houses. Watch out for the norm, a couple with 2 salaries, getting blown away competing against a couple with 2 salaries and what their parents can kick in too. These are parents, who in the main wouldn’t be considered rich, but just have a house they may have been lucky to have paid off. I saw the start of this in Australia while I was living there and house prices have gone through the roof (relative to wages). Have the houses become more valuable? From a brick and mortar perspective no, from a lack of supply and a newly cashed up source yes.

    This serves no-one except the banks and must be regulated somehow to stop it becoming the norm. We end up become wage slaves from the day we start earning until the day we die, and now they want to kick it over into the next generation if possible too. If it were any other asset you would just walk away from a crap deal. However we have such a blind spot when it comes to property and also it can only go up, right?

    • StephenKenny

      An alternative is for the state to get involved in directly supporting property prices. The UK has a couple of schemes to do this. One is a state guarantee for loans to cover the deposit, and the other is effectively state subsidy on the property price.

      Talking to one of the national UK developers recently, they said that with average property prices now breaking the ten times average incomes, pretty much everything they were selling relied on these schemes.
      Interestingly, they thought that the second hand market was, in may ways, in worse shape, with entry level second hand properties at 5-8 times average adult incomes, and about 12 times incomes of potential first time buyers.

      • douglaskastle

        Cynically, from a tax take perspective, it is also in the best interest of this government if the prices of houses go up. I think the surplus on the expected tax take last year was partly as a result of increased houses prices. Also more people at work, and the increase in the number of house sales. Let the next government worry about the bubble.

        • Deco

          Those in politics, simply want power in the short term. And they will trade anything for that power. Therefore we see short term policies.

          If there is a media environment of restricted information flow (like occurs spectacularly in the Irish media) then you get an accentuated version of this short term thinking. And we see this in the media coverage of the economy. It always carried a bias to achieve certain ends – the manufacturing of consent.

          The financial reality has changed since 2008. But the underlying policy demands from certain vested interests are still just as absurd. And all that is restraining them is lack of finance.

          In other words, at an ideas level, the public discourse in the media is just as nonsensical, and as dishonest as before.

  8. Deco

    Public housing policy in Ireland is a mess.

    Incidentally, there is a new social segregation program consisting of shifting the working class out of Dublin, into the midlands in some cases to villages where they are desperate to get out of in a desperate rush – and they can’t. Of course there are usually local gombeen developers in these villages who have made a pile of money, and corrupt councillors who issued planning permission without any serious market demand.

    The housing density in Dublin is not urban, and in some cases not even suburban. If Dublin wants to be a city, then Dublin needs to be planned like a city.

    That means if needs to move up vertically. And it needs public transport, at an economic scale that fits with a higher urban density, and that provides increased economic performance.

    The problem is – there are gombeens who would lose out. And there would be more housing supply. And Ireland’s politicians have no intention of allowing more housing supply. And Ireland’s professional classes have absolutely no intention of having more housing supply.

    Public policy is beholden to vested interest, and the public interest suffers.

  9. Deco

    I was in the Black Forest region of Germany a few years ago. And I stopped in a town where there was a well, that pumped up mineral water, for free.

    And in that place, there were tourists filling up with free mineral water. Mostly, “les Francais”. And a few Germans. Very dignified and very patient. And extremely polite. But I got the sense that there is a serious net income crisis in France.

  10. SMOKEY

    Before I bash the “Frogs”, I must say that the HEROICS of the police who rescued the people in the market and iced those sub human scum in the warehouse in the last couple of weeks were awesome. I was feeling proud of a police force I have no connection with whatsoever, pure adrenalin junkies with military skills, HEROS everyone of them.
    I don’t know much about French people except they like to drink and fornicate, as this has been my experience with a couple of girls I have known so other than that, I cant comment. Oh, and I love foie gras and French wine. But I do know that the Chinese are the most driven deal making hard working willing and able people on earth. Although they had the reputation for being the worst drivers in the world in San Francisco, they lose that title to the drivers on this little island. The Irish are the worst drivers I have ever seen anywhere and the Irish are not too fond of work either, and the state of the current crop of college 20 somethings work ethic is pathetic. So they will never save 10 percent much less 20 for anything, ever. Losers most of them. And on a final note, public housing is the perfect place for these types. They can all compete for who takes the most crap Ryanair holidays to bed bug infested 2 star resorts and who has the latest overpriced phone. That is the future of this country unfortunately. And if you couple that with a health minister who should have made headlines with a “radical emergency plan” to get people off trolleys, instead, he decided to come out of the closet. Now THAT is a minister who is control of his brief. Two days of news on this. Am I the only one who thinks he should resign?

    • Colin

      I blame the irish mammies and daddies. No deposits should be given to children to help them buy a house. This is money the Irish mammies and daddies should keep for themselves for a rainy day. I only had two hopes of getting a deposit given to me; no hope and bob hope. I would not feel happy or comfortable to take it should it even be offered to me, so I would say no.

      But the reality is that this gifting is widespread, and they are free to do it as much as they wish, but when it all goes pear shaped, these people run to the papers with tears in their eyes moaning about the big bad bank taking their house away from them for not paying the agreed repayments, ah godhilpiss……

    • I always feel you’re holding back a bit SMOKEY. Let loose man, get it off your chest!

      • SMOKEY

        You are too right Adam, I could get a heart attack keeping it all inside and not saying what I REALLY feel! Thanks for the laugh. Have a safe journey and drink some of that delicious wine for me while you are in France.

        • teenytiny

          Carry on Smokey !

          and as you’re a Donegal man shurely,this one’s for you

          The Fairy Reel

          https://www.youtube.com/watch?v=sRVz2TJElVU

          [ and not too much vino - it kills brain cells don't cha' know ]

          • SMOKEY

            Knew a girl we called “the sausage queen” from Donegal, but other than that I have never been there. That said, that’s some fine fiddlin! Thanks for the link. Brain cells are few and far between these days so I don’t worry about it too much anymore, fill that glass please.

        • teenytiny

          Oh dear,not a Donegal man Smokey ? I stand corrected and not for the fist time here.Mixed messages on this blog are not uncommon afterall.

          C’est la vie

  11. McGoo

    David, a few follow-up questions based on the article:

    1. “As well as making money available to the banks to lend, the ECB is also making sure that interest rates are zero.”. Surely if the currency is being debased by QE, the bond markets should force interest rates UP?

    2. “only by coaxing the banks to lend free money can the ECB hope to get activity going again.”. How will the ECB stop the banks just using the free money to buy government bonds, thus getting an risk-free return? Similarly, how will the ECB stop all the new money being used to push up asset prices (property, stock market) instead of going into the real economy?

    3.”rich kids will benefit most. This is because prices won’t fall so quickly.”. Huh? How are they going to benefit by using their parents money to buy a house when house prices are falling? Surely they’ll wait for prices to stop falling, the same as people who don’t have rich parents?

    4.”Now that would be an unintended consequence.”. Unintended, yes, but surely will help to cool the overheating housing market? Perhaps a good unintended consequence?

    5. “it is credit, not demand, that drives prices up”. Why are you the only irish financial commentator brave enough to put this obvious truth into writing? Well done.

  12. Swanie

    Last year we spent time looking for a house in Germany. Just before Christmas we purchased a lovely detached home located between Dusseldorf and Cologne.
    Mortgage rate for first 10 years is 1.6% fixed(lump sum payments allowed, but we cannot clear the mortgage within this 10 years). Final ten years is 2.3% fixed (we can pay this off as soon as we want to). The person we were dealing with in the bank (Sparkasse) couldn’t have been more helpful.
    The house is located close to (i.e. less than 10 minutes drive) 9 creches – the most expensive of which is €120 per month. We’re also located less than 10 minutes away from the train station and all major amenities.
    It’s only when one looks at other countries that one can see how messed up everything here seems to be (excepting Paris :) ).

  13. Intended Consequence to an Un Intended Consequence

    There is an unintended consequence occurring in the interpretation of ‘arrogance’ . A shrug of shoulders is a normal cultural reaction often witnessed in Paris except that the Parisians are more determined in expressing it .Its a serious passion practiced daily and has many forms ‘ I was busy and looking important until you came along ‘ ‘and turning my back walking away from you ‘ . It is a ‘cirque’ and a performance and to understand it just smile and try to be smarter .

    It is better to laugh to disarm the person and say…’.oo la la ‘ and lift your arms. Wave your arms as if you were baptising them . Afterwards try reasoning …or whatever it takes. The arrogance is only severe in Paris no where else. They are looking for attention ….to be paid. So they do a song and dance about it . Learn to accept it and move on .

    My Parisian cousins are typical Parisians …mean mother f**kers …who don’t spend a dime….and when they take you out for coffee ….you always pay .Also never buy a second hand car from a Frenchman …..it has been well driven ‘to the ground’ .

    I can only comment to say that ‘why did David use a taxi from the center of Paris to the airport ?’ . It never makes sense when it is served so well by public transport …both ways.

    I agree that the French culture to Anglo Economics is bizzare and they look at it from the bottom of a barrel .Their perception is liken to a social inclusion that satisfies national tastes and France, and their practice is a process of the best of communism and socialism where they must have ten documents when in fact only one is needed. Duplicity is common.

    Finally rich kids will not benefit most with restricted credit .Everyone benefits with lower prices.

    When you are next peeing in a public toilet in Ireland if the facilities are the best it was made in France marked Deceaux written on the outside otherwise you have a smelly local quick fix that cost too much and always faulty and your legs get wet .

    • Colin

      ‘I can only comment to say that ‘why did David use a taxi from the center of Paris to the airport ?’ . It never makes sense when it is served so well by public transport …both ways’

      I agree John. I can’t for the life of me understand it, unless David prefers to use the time in the taxi to sus out the opinions of the taxi driving fraternity. He would look like a real eejit if he started talking about the local economy to the person sitting opposite him on the train I suppose.

      • Cost Benefit Analysis

        Why did David not swap his already read local newspaper with a taxi driver sitting in a cafe near the exit ( as many do before their next fare ) and offer him an expresso . Sus the victim in his lair and prey on his downtime . It costs nothing and more time to give more info to give enough news for the next article . This would have been the Quai d’Orsay Experience …only priceless .

  14. A shabby, dysfunctional, money-grubbing cesspool, where fleecing the tourists is the economic mainstay, was what I observed of Paris when I was last there in 2011. And now the cheese-eating surrender monkeys are trying to tell us that it’s the capital of the world! That is why, je ne suis pas Charlie.

    • Colin

      That’s why you should find a hotel outside Paris and get the train in and out each day. We stayed in an aparthotel in Cergy, North West of Paris for less than €100 per night, got a continental buffet breakfast included in the price, and really enjoyed our time there. Our train ticket was a 3 day pass and included use of the metro in Central Paris. This afforded us the opportunity to splash a bit more cash on eating out and drinks and tours than if we had been staying in Central Paris, making the holiday very comfortable. The views from the Sacre Coeur are free.

      • Or you could just stay at home and flush your money down the toilet. You’ll be just as happy and fulfilled.

        Did I forget to mention that the last time I was there, it was when they were bombing the hell out of Libya? That was the main news item. Rampaging and looting on a world scale is what they’ve reduced themselves to and now they are about to start again.

        • StephenKenny

          Although I love Paris, it seems to be unavoidable to accept that the French have joined the US, UK, and Spain as the main perpetrators of global war crimes.

        • Colin

          Yes Oscar, if you don’t like Paris, don’t go there. That’s pretty good advice and can be applied to other locations too.

          And flush money down the toilet if it floats your boat, but I’d rather spend it on something more enjoyable like a nice meal and keep the pleasant feeling in my memory bank, ready to be recalled at any particular time.

          • Enjoy it while you can Colin, if that’s what floats your boat, but don’t expect it to last.

          • StephenKenny

            It’s interesting, I expect a nuclear strike during the next three years, but on a major UK town/city.

            It seems to me that France is too integrated in Europe – too many countries would react. With the UK, not so.

          • Who is going to launch that Stephen?

          • StephenKenny

            The Russians, during a sort of ‘regime change’ style operation – launched the US & UK – that escalates into a sort of civil-war conflict.
            The strike will be interesting. It won’t stop US from continuing their efforts, and may start limited conflict. We shall see how effective the US nuclear missile shield actually is.

            I know it sounds rather extreme, but wars are like that: August 1914 – hubris ran amok.

          • StephenKenny

            … launched BY the US & UK…

          • SMOKEY

            @StephenKenny,
            Lithium, Thorazine, Serintol, Loxitane and Phenotil are all available with your medical card Stephen, Don’t let your prescriptions run out before coming onto this blog anymore, it is both unsavoury and distasteful. And in your, case washing them down with a bottle of JD is not recommended.

          • StephenKenny

            Well, well, well. So now we know.

  15. Could it be that the Chineese taxi driver works for a large taxi company where by everything he does is tracked by GPS big brother etc. He if tries to cut a deal with a customer then his superiors will think he is on the fiddle and will fire him without even consulting him about the fare. Chances are he works for an agency at a bad rate who pimp him out to a taxi company, the taxi company would just e-mail the agency that they didn’t want the guy back in the future. (This is how users of pimp labour agencies exploit and abuse workers in Ireland, it’s probably much like the prostitution ‘industry’, (use abuse and fire and replace). He may not have the language to explain this to customers.
    His situation might be like trying to cut deal with a foreign bus driver, the are not allowed to do it and will unlikely get into discussing the reasons with you. Just a theory.

    • michaelcoughlan

      Very accurate. McWilliams never stated how he got from the hotel to the train station either.

      Michael.

    • low6figures

      Could it be that not all Chinese people are natural deal-makers, and that the taxi driver David encountered moved to France specifically to get away from that way of behaving? If so, any conclusions about the smothering effects of the French culture/economy would be based on a selection bias, (not to mention an n of 1).

  16. Colin

    Unintended consequence of socialism for the rich and savvy.

    I know a couple in their 70s, who live a middle class lifestyle. A few years ago the wife inherited some money from an aunt, approx €250,000. This woman has 5 grown up children, including one daughter who is a single mother of two teenagers.

    So, you would think this is straightforward enough and that she would help out her daughter with buying a house (like the other mammies do). But no, this woman is clever. She bought a property, and installed her daughter there as a tenant. Her daughter lost her job previously by a few months, and therefore is entitled to dole and rent supplement. So, your taxes now fund the rent supplement paid to the single mother, who hands this money over as rent to her own mother who keeps ownership of the property. And this socialism for the savvy continues to this day.

    Notice that if the property was simply given to the daughter, the Dept. of Social Welfare would be saving about €800 a month. Instead, this money finds its way into the bank account of a well off retires lady in her 70s.

    As I keep telling ya, it’s a great little country!

    • Deco

      I don’t blame the aunt.

      I blame the idiots at the top of the state system, who believe that house price valuations need to be driven up to create the illusion of wealth.

      With the inbuilt assumption that the illusion of wealth is a societal goal.

    • E. Kavanagh

      Quick question, are you the same Colin who commented above, “I blame the irish mammies and daddies. No deposits should be given to children to help them buy a house.”

  17. In an economy build on conflict between slaves who deprived of time, sleep and money then it is much easier to blame the slaves for problems than to blame the system which is designed to maintain slavery so as to give a free live to a small few.

  18. michaelcoughlan

    Hi,

    “limiting credit to the market will keep house prices down because it is credit, not demand, that drives prices up”

    A child wouldn’t make such a statement. A willing purchaser with moola in his pocket drives up prices. Rich kids with daddy’s money are driving up prices in Dublin and they couldn’t giver a fiddlers about mortgages (credit) because they don’t need them. Plenty of 1st time house buyers with mortgages in their pockets increase demand and drive up prices.

    Demand David drives price.

    “By cutting rates, the ECB hopes to get banks to lend” Rally? If they wanted banks to lend they would stipulate that they do IN FACT lend.

    http://www.breakingnews.ie/ireland/central-bank-reports-drop-in-bank-lending-to-households-656358.html

    “it strikes me that public housing, like public transport, has to be the fairest way to house most of our people”

    Like you think the government should develop it’s own pads down in Dalkey and foxrock and basically extinguish what’s left of an almost non existent free-market altogether? Do you really think handing over such a vital part of our economic system to the same cu&ts who landed us in all of this will bring different results?

    Adelaide told you McWilliams that the policies being implemented are designed to stop the worlds derivatives positions from unwinding. NOT to boost the economy or help the people.

  19. michaelcoughlan

    Hi all,

    Bring back the bonbons thats what I say. I write with a tear in my eye. Not dragging his ass any more Draghi has just announced on the 9 o’clock news 1 Trillion QE for Europe. Thats 2000 euro for every citizen in Europe!

    He justified his act by taking a swipe at his critics saying he reduced the interest rates 5 or 6 times and there wasn’t a hint of inflation so now he feels justified launching the big bazooka.

    In other words even though the evidence shows that the more he cut rates the more the spectre of deflation raised its head (like Max Keiser said printing money causes deflation in the current parallel universe we live in). He now feels that he will get a different result detonating his financial atom bomb.

    Albert Einstein said that the sign of madness is doing the same thing over and over again and expecting a different result. It really is something the Bonbons could identify with and its clear now that bonbon type personalities call the shots in the ECB.

    I have never been more convinced that its Germany and not Greece will leave the Euro citing legal reasons where Draghi has exceeded his powers. Watch what Germany does now David with its magnificent tanks. Will it stop selling the older models and start upgrading them to modern standards?

    I wish the Bonbons were still posting here. I also really miss RR6.

    Michael.

  20. Pat Flannery

    If Syriza gets into a new Greek government on Sunday will austerity be really over in Greece as the Syriza leader Alexis Tsipras is telling Greek voters? Will a Greek government be able to use QE to end crippling austerity in Greece? If not, QE will be exposed as the fraud it is.

    This will spark other Syrizas in other countries. It may finally expose the real aim of QE which is not to fight bogus “deflation” but to halt the growth of workers’ real income – by devaluing the currency.

    • Deco

      The threat of Syrizas in other countries will cause Brussels, and the Merkel government to be deliberately mean and nasty with the new Greek government.

      You can be certain that the banks in Frankfurt are panicking and Merkel will stand up for their interests.

      Watch as Brussels and Frankfurt start to punish Syriza for daring to contemplate the obvious – the Greek national debt is completely unsustainable.

      The entire EU bailout program, and the “Greece on track” (in shackles) plan was nonsense.

      Brussels will be alarmed because Brussels is driven towards the urge for more centralization of power in Europe. (with the inbuilt assumption that Brussels knows best, despite the repeated blunders from Brussels).

      Brussels will not want any country to have a political leadership that does not obey Brussels.

      How will the media cover this ? Presumably by stating that the Greeks have made a mistake, and the Greeks must keep voting until they pick the “correct option” (according to Brussels and Merkel).

      Ever wonder why the EU is in so many quagmires ? And most of them are “made in Brussels” or “made in Frankfurt” or “made by Merkel” ?

      • Exactly Deco, Christine Lagarde the evil bitch even said on Primetime the other night that she won’t be negotiating with Syriza if they get elected.

        Yes, you heard it right folks – she won’t be negotiating with an elected government from a member state – presumably because she doesn’t like the cut of their jib.

        So much for democracy in the EU.

        Miriam O’Callaghan just let that one slide. Also, she asked the evil bitch about debt relief for Ireland – Lagarde just completely ingnored the question and launched into the usual meaningless and patronizing waffle.

        Miriam let that one slide again in her awe – her interviewing skills are about as penetrative as a comatose eunuch.

        • Pat Flannery

          Adam, “her interviewing skills are about as penetrative as a comatose eunuch”. I love it.

          So, Christine Lagarde said that she won’t negotiate Syriza. In other words she sees her job as preventing any write-downs of any bond debt.

          She and Draghi would rather debase the currency than see Goldman Sachs suffer a write-down of its worthless sovereign debt. Nice people we have in charge. Makes me tend to agree with Tony that central banks are the real problem.

          • michaelcoughlan

            “Makes me tend to agree with Tony that central banks are the real problem”

            I am amazed it took you so long to figure it out. Lagarde praising the irish people for making the sacrifice was like a paedophile praising a 6 year old for not crying out while he screws the 6 year old in the ass.

            She added further insult to injury when she went on to say the result was that poluba’s economy will grow 5% as a result when the real reason this is happening has been pointed out previously by mcwilliams and last night on tv by mccarthy.

            Ireland does most of its trade with the UK and the US and as the euro gets weaker and their buble fiat currencies expand upwards in value it makes our exports cheaper.

            In other words as McWilliams has said previously and paradoxically the worse things get for europe the better for us.

            Lagarde is just a cunt of the kind mentioned by John Lennon in working class hero.

            “There is room at the top they are telling you still but to get there you must learn to smile while you kill”

            Better still to laugh like a fucking hyena like acme door gunner:

            https://www.youtube.com/watch?v=S06nIz4scvI

          • Pat Flannery

            Actually Michael I was thinking of the Eurozone National Central Banks (NCBs), other than the Bundesbank under Jens Weidmann whom I admire.

            I am not opposed to Central Banks per se (as Tony seems to be). I am opposed to central banks being instruments of national fiscal policy. That is the tragedy of QE. It enables national governments to finance bad policies, even war, as the Fed does in the US. I am sorry that the NCBs, all but the Bundesbank , caved in to political pressure.

            However, I see no alternative to central banks. Gold cannot be a modern currency. Even the Chinese recognize that Global trade cannot be conducted in gold, or in any gold-backed currency.

            The German Bundesbank is Europe’s best banking model but Draghi has destroyed a key financial alliance by alienatingn Weidmann. Draghi and Lagarde are political animals, not keepers of the currency. Think of the wars Ronald Reagan would have unleashed if Paul Volcker was the same?

            QE is a huge mistake and may destroy the Euro, or at least a strong Euro led by Germany. But by sending Germany back to the Deutschmark QE may have the unintended consequence of strengthening Germany, not weakening it, which remains the Anglo-American long term objective. They see this as a continuation of WW II, only fought with financial weapons.

            I don’t know if Germany can go it alone. We’ll see. There is even a different opinion about that between Weidmann and Merkel. Personally I side with Weidmann.

          • Hi Pat
            i knew nothing about central banks until 10-12 years ago when I started to read about them. where they originated, how they are structured, and how they operate.
            Some claim to be nationalized, that is owned by the government, and thus harmless and in control.
            The fact is that the officials are nominated, that is unelected and not answerable to the people. Many times the central bank shares are owned by private interests.

            It is how they operate that concerns me.
            They have been made the custodian of the nations wealth (if there is any left at this point) and have a monopoly on the issuance of state currency.
            Originally currencies were based upon an underlying asset. That asset was commonly gold.
            There is a reason gold was used as it is unique in its properties and the substance to best act as a store of wealth, and yet be readily potable, microscopically divisible, completely fungible, and stable (immutable)as it does not rot, decay, melt, vaporize, dissolve or burn. It is not readily replaceable as new supply involves a large investment and considerable work, but if it is brought in to circulation it is “worked” into existence.

            There is a reason that western central governments hang on to their gold id that the intuitively know these properties made gold the money of last resort.

            Central banks are not required to audit, or disclose activity re the gold holdings. This secrecy is to their advantage not the people. Why is it that it is the closest guarded secret? Why can we not know how much is retained and whether the central bank has moved it or not. Have the leased it // to whom and why?? We are not allowed to know.

            Why is it that all new currency issued by central banks is issued as a loan? If it is the national currency and based upon nation assets and wealth, why is it loaned to us and we are charged interest. Why is this amount added to the national debt and the associated interest payable charged to the people.

            It is no coincidence that income tax originated at the same time as the formation of the Federal reserve. Tat means that all currency except coin is a debt. It means that all the QE or whatever it is next named is added debt. Why if debt is the national and corporate and individual problem do we use the issuance of exponentially increasing currency to try solve the problem. It is the height of insanity to solve a debt problem by adding additonal debt

          • This exponentially expanding debt is the solution of the central banks.

            I am not the only person who understands this. The central banks assuredly understand this. They are not stupid. That leads to the conclusion that this is deliberate policy. If so, who benefits? Why would they do this?

            The banks are not under the control of the people as most would not do this to them selves. The policy only benefits those who seek absolute power.
            If they can enslave the populations by using aberrant monetary policy they will. By funding government military they can enforce by aggression a similar policy. By funding think tanks they can formulate the policies
            and educate the leaders into following policy that suits the monied interests.

            Thus the elite money controls the politicians, buys their elections, sets up discussion to change the direction to where they want. The central banks have unlimited access to cash to fund anything they wish.

            If a country banned central banking and issued currency from treasury directly they accomplish a complete separation from the banking industry. government could issue currency without it being loaned into existence. Thus there is no national debt. There is no accompanying interest to pay.
            Therefore the government budget would be in balance or a surplus rather than a deficit.

            This would enable the income taxes to be reduced or eliminated. all people would have more money in hand to spend . the economy could breathe again.

            Having treasury control the money supply does allow government to print what ever it needs at any time. So government can be just as profligate as at present. (Currently government can spend whatever it wants as the central bank will provide on request, as a debt and at interest, of course).
            The increase in the money supply is by definition, inflation.

            It is well known by some economists that there is no requirement to increase the money supply in order to have a growing efficient economy. Ideally the money supply should remain static. No inflation being the result.

            As the economy becomes more efficient by use of efficencies and innovations the people become more wealthy and we have a gentle deflation. The price of goods and services drop and our money goes a little further.

            The trick is to have money issued by treasury but at the same time restrict its increase to zero.

            In order to do this the currency must be connected to a solid asset and this is likely best handled by setting it to gold as was done for the last hundreds of years if not thousands.

            In addition the legal tender laws must be repealed so that any currency of the peoples choice may be used. This would put the national currencies into competition with each other and private currencies. That would enable people to use the best currency they deem fit for their purpose.

            One knows that this policy is anathema to central banks. Those who try to activate such a policy are assassinated. These people are the politicians acting alone on behalf of their people. Lincoln, Kennedy Kennedy, Garfield, Saddam, Gaddafi, etc
            It is paramount that the people be educated about the function and intent of the central banking system.

            My view is that the central bankers and their minions are the basic cause of all our problems.

        • I gave up watching prime time years ago, it’s pro government because it’s pro big business with heaps of double standards.
          If an honest person gets a look in and starts to show that the emperor has no cloths by telling the truth, then she shuts them down by talking over them.
          When the many thieves in suits come on they are giving a free run to spout lies out of them for as long as they want.

    • StephenKenny

      The EU, and US, are trying to deal with an insoluble problem, at least it’s insoluble in the form that they’re talking about it. i.e. trying to sustain EU & US lifestyles for 650m people that are based on 25 years of massive debt accumulation.
      Every government during that period has, to some extent to another, found ways to borrow money from the future. Unfortunately, this future is starting to be today.

      Economies are globally integrated to a degree that’s never been seen before. This removes from the toolbox most of the previously deployed economic tools:
      - letting your currency fall during a recession used to enable a rise in exports to other countries – well, that’s all well and good when countries are not all trying to do it at the same time. In that circumstance, no one can use this tool to any real effect, as some other country will drop their currency.
      - Cutting interest rates doesn’t work to improve business, because business can already borrow cheap money from one of the global financial markets. The best it can do is to encourage consumers to increase their level of debt – the time comes when consumer debt levels get so high that it’s effect tails off.
      - Using temporary borrowing to ‘bridge’ between business cycles doesn’t work for the same reasons – i.e. we aren’t in a downswing from which we have to grow, we are just in a bubble which will have to pop.

      These people are in a real fix. They know they should try and deflate this vast global bubble – someone’s going to have to – but don’t want the catastrophic PR of it happening on their watch. The answer is simple, one more kick down the road.

      Prof Krugman has repeatedly said that debt levels aren’t as high as at previous times, so are OK, and that’s true. But these ‘other times’ were all during, and soon after, major wars.

      • Hey Stephen,
        We’ll say it again
        Every credit induced bubble is followed by and equally big bust.
        The 45 year (really 100 years since the Fed was formed) party since 1971 will leave a huge headache the morning after.

        It is going to be a hell of a final bust and is unavoidable.

        • StephenKenny

          What’s interesting is the degree to which disaster has become the norm, over the past 15 years.

          Consider money printing – so-called QE. At any other period of my life, the announcement by a European or American central bank that they were going to print any new money, and with it, buy their own debt, would have resulted in the financial district emptying, as everyone fled for the hills. Now, it’s applauded!

          It is now announced by central banks that they are regularly intervening directly in various global equity markets. It’s apparently part of creating the ‘wealth effect’. When the market in the US starts to fall, the Japanese central bank starts buying $ billions of shares. When the DAX falls, the Canadians intervene, and so on and so on. This should be causing panic in all the markets, but instead, everyone just accepts it as a ‘good thing’.

          The world is truly in an upside down state.

  21. http://www.plata.com.mx/Mplata/articulos/articlesFilt.asp?fiidarticulo=261

    “Had it not been for Snow, London might have eventually faced an existential threat from cholera. Thanks to Snow, the quacks were defeated, and reason prevailed. Can we hope for reason to prevail in a world run by quacks in Economics, in Central Banking, in Finance Ministries? Snow showed London, “It’s the shit in the water that’s killing us!” When are the world’s quack economists going to accept that it’s central banking and the fiat money shit it issues that is killing our world?”

    The real necessary debate is derailed yet again. Is there one person out there who understands that when it comes to central banking policy there are NO unintended consequences. The CB bank policies are designed to enthrall and impoverish all.

    Without being rid of the cause of the cholera the cholera persisted. Without being rid of the central banking system there is no cure for the pestilent economy that is heading for a deflationary collapse followed by hyperinflation

    • cooldude

      Excellent article Tony. It’s hard to know whether to laugh or cry at the idiots on the radio this morning celebrating the deliberate debasement of their everyday currency in order to bail out the banking system. Ivan Yates actually said that a weaker Euro is good for Ireland. Good for the banks is more like it. All it does is lower our purchasing power and gives the banks more money to speculate with. Seriously the lunatics are in charge and people are happy to go further into debt slavery. If increasing the money supply was a route to economic progress then Zimbabwe should surely be the wealthiest country in the world.

  22. http://www.gata.org/files/PollittMarketLetter-01-2015.pdf

    The consequence of the US trying to control the world though it’s military (funded in turn from unlimited money from the Federal reserve) is that they have to control and curtail Russia. They are surrounding Russia with a ring fenced military network. The latest being the CIA/US induced coup of the Ukraine where an elected government was derailed.

    The unintended consequence of attacking Russia in covert economic policy and overt discreditation of Putin is that the Russian people will come together to resist this attack and indeed fight back.

    • cont..
      Putin has shown a remarkable constraint to date but behind the scenes accumulates resources and formulates alliances that will defeat the US without firing a shot. The question will then be , can the US resist from firing a shot. So far the proxy wars rage on in the eastern Ukraine provinces, in Syria, Iraq and Afghanistan etc.

      By following the current economic policy the US will lose trust of nations and control of the financial system and be reduced to a regional power. May she do so with grace and stir a holocaust of some nature.

      • and stir, should read, and not stir

      • Currencies are in competitive devaluation mode. All trying to get a trade advantage over the other. This is a race to the bottom. The US dollar is seen by many as the currency of last resort, thus the rise in value against most currencies of the world.

        One currency not fooled is gold. The reason for the strength of gold is that more and more are realizing that the next devaluation is that of the US dollar and that all currencies are sinking together.

        The only currency used world wide that has no counterparty risk and that cannot be devaluded by a printing press is gold. Many nations know this and millions of people know this thus the demand for physical gold exceeds the annual mined supply by double.

        Where is the gold coming from. There is only one place it can. It is the western countries central bank supply. Your money is being given away at knockdown prices.

        The world price is being controlled by paper promises to pay. Perhaps as much as 100 times is promised as is actually available.When this paper trade charade collapses gold will jump just like the Swiss franc and then some.

        Gold at some point will double in minutes as the gold trade goes no bid without a willing seller until much much higher prices.

        That is the unintended consequence of today’s monetary policy.

  23. The Swizz have been threatened and cajoled into violating their banking secrecy and selling over have their gold stash, by the US, over the last 10 years. Hard on the heals of a flash jump in the currency they liberated the Swiss announce a trading centre for the Renminbi, in Zurich. They now look east and over their shoulder to the west. They know which way the gold is moving as they have refined most of it in the process.

    “They also will now have another way to transact business, they will be entitled to and even enticed to use the new clearing system that Russia has formed… and not under the watchful eyes of SWIFT! As a speculation on my part, I believe the Swiss fully understand “what” it is that is coming. They can see as well as we can, the collapse is coming. A banking collapse, a derivatives collapse, a trade “war” and collapse, and a currency/credit collapse.” Bill Holter

    http://news.goldseek.com/GoldSeek/1422043320.php

  24. Paris 2015

    My son and I were in Paris from 1st January until the 4th .Chinese from China were everywhere in large queues buying very expensive handbags in Gallerie Lafayette and it did not matter that the national shop Sales were beginning on the 6th January they just wanted to have an expensive bag at any price.

    Just for the (written) record we were the only Irish in the castle forecourt on the rock in Monaco when the world witnessed the revelation of the royal twins by the Prince and Princess of Monaco . We were in the midst of all the local dignitaries all in their fancy dress attire in front of the world press and TV crews .

  25. Pat Flannery

    Hi Tony and Adam,

    As I understand it, today gold is replaced by “the discipline of the markets”. If you devalue your currency the markets reflect it. That means there is no need for an underlying asset such as gold.

    Yes, all new currency issued by central banks is issued as a loan. But the interest on that loan is the property of the national government! When the loan is paid back the currency disappears. It is usually replaced by a new loan but that is a matter of fiscal policy not monetary policy. Therefore exponentially expanding debt is the fault of governments, not of central banks.

    Yes, elite money controls the politicians, but that is not done through central banks, it is done directly between politicians and rich people such as the Koch brothers.

    As for a country abolishing its central bank and issuing currency directly from its treasury, that would, as you say, allow a government to print whatever money it needed at any time. In such a scenario what would restrain a government from the most outrageous spending policies?

    What we need is some means of restraining governments not encouraging their wildest fantasies. INDEPENDENT central banks are the best device we’ve come up with yet. They need to be improved not abolished.

    As for abolishing legal tender laws in favor of a plethora of “people’s choice” currencies, that would defeat the very thing that promotes world trade, staple currencies. Such a babble of currencies would be barely a step above barter.

    I agree “it is paramount that the people be educated about the function and intent of the central banking system”, not so that they may replace it with monetary anarchy, but so that they may better appreciate its role in the modern world. A better understanding may have prevented the ECB going off the rails as it has just done with QE.

    It is my opinion that the Germans, being a Federation of States, understand the proper role of a central bank with regulatory powers better than anybody and should be listen to in this before it is too late.

    • Hi Pat,

      I agree with Tony’s general sentiment regarding central banks and so on. How these issues could be resolved specifically is beyond my knowledge or interest.

      I don’t agree with Tony’s advocacy of gold, etc. – that’s yesterday’s news – he’s pining for a time that is never coming back. Bitcoin (for example) or something else would be more useful.

      Regards,

      Adam.

      • Pat Flannery

        Hi Adam,

        I too agree with his general sentiment about central banks. Like our political institutions they have become too powerful, too arrogant, too responsive to the 1% and not at all interested in the 99%.

        However I don’t think we should throw the baby out with the bathwater. We need to challenge their authority, which hopefully the Greeks will shortly do. In a strange way the Greeks and the Germans are in the same boat, they are both victims of ECB arrogance.

        Until we come up with a better way of creating and maintaining a stable medium of exchange we should start recognizing the importance of central banks in our lives and start thinking of ways to improve how they operate. Right now they are a holy of holies where only a priestly class may enter. We need a Global Conference like Bretton Woods to define the role of central banks.

          • Pat Flannery

            Wow! I listened to it twice. Love his “triangle of sin”. I hope they make it tomorrow. Greece is fortunate to have such men. They may save Europe from the international oligarchs.

          • He’s extremely intelligent and an excellent speaker. I saw him speak in Dublin a few years ago – Sinn Fein invited him here.

            I always thought David should have had him at Kilkenomics over the past 5 years but that will have to wait for a while if he becomes the new Minister of Finance in Greece.

            His book, ‘The Global Minotaur’ is also well worth reading.

          • Just listened to the Greek tape. I hope.
            It is excellent.

          • Pat Flannery

            I just downloaded Yanis Varoufakis’s “The Global Minotaur”. I am deeply grateful to you and appalled at my ignorance not having known about this man before.

            I hope after tomorrow many more people will be astounded at what they did not know about Greece and about themselves. I wish Sinn Fein had such a man, with all due respect to Pierce Doherty.

          • Funnily enough, as I recall it was Pearse Doherty who instigated the invitation to Yanis when he came to Dublin.

            It was in September 2011.

            He also made an appearance on the Vincent Browne show during his visit which was excellent.

            I’ll post the video if I can find it.

          • Pat Flannery

            Thanks Adam, I would love to see what Browne made of him. And good for Pearce for admiring Yanis. If they succeed in Greece it will be a boost for Sinn Fein in Ireland. This could be like 1848 where what started in Naples spread all over Italy and Europe.

          • Nah, that video is gone. TV3 don’t archive back that far and it’s not on YouTube.

            Pity because he spoke at length, but he has plenty of other videos around the place.

          • Having just gone through the 4 u-tube interview of Yanis Varoufakis I have change my mind.

            Charismatic, engaging and eloquent he is still a solid socialist.

            He does not see debt overall as a problem but advocates something called recycling surpluses between nations. He calls German productivity a form of greed!!

            Count me out as a fan. I will watch with interest tomorrow.

          • Hi Tony,

            With respect, the most important thing is that he wants to change the current system – away from the corruption and greed of banksters and corporatists (and their evil mates in the EU, IMF and World Bank, etc.) that have driven Greece into the abyss.

            I think it’s irrelevant to put a label on him at this juncture – and to paraphrase Pat (above), throwing the baby out with the bathwater is just not going to happen – in other words there will have to a series of steps to bring about a better system – it’s not going to happen all in one go.

            Anything is better than the current direction the EU et al are taking and I think Yanis (not sure about Syriza overall – I am more familiar with Yanis’s work) could be an important part of that process.

          • As David just said on Irish RTE Radio a minute ago:

            “this is not left wing at all, it’s actually right wing” – in referring to the fact that Syriza intend to tell the debtors of Greek to form an orderly queue to get paid cents on the dollar in respect of money that should not have been lent to Greece in the first place by reckless and greedy European banks.

            That’s true capitalism but forget the pre-conceived labels – it’s what is actually happens in Greece now that is important.

          • debtors of ‘Greece’

            This site still a nightmare to navigate.

          • DB4545

            Just listened to that interview Adam. Scary when you have Enda & Co. speaking out against a sovereign democracy and Lagarde saying in advance she won’t negotiate with a member State. The arrogance of it beggars belief. I really don’t know what further proof is required to demonstrate that our political class is bought and paid for. I hope the man is well minded in relation to security issues as I’d put nothing past these people.

          • Hi Adam

            Mr Yanis is not intent on reforming the system as much as reforming the Greek austerity programme.

            He wants to recycle German profits by wiping out Greek debt. In other words , take from the rich and give to the poor.

            His best solution is a removal from the Euro. Stay in the economic union and do a form of Iceland and whip his house into order with a national currency and no central bank.

            Issue funds from treasury debt free and interest free and pay off the old debt with the new currency.

            A Greek QE but without replacing one debt with another.

            Can no one here see the advantage of currency issued by government treasury without being a debt? Can you not see how this currency will wipe out national debt? Can you not see how it will reduce the need for taxes?

            Are we so paralyzed in thinking that we insist on being bound in debt to a central bank.

          • Looks like the change in government is assured

        • Thanks for the thoughtful responses A and P

          It is a difficult subject to navigate but ultimately simple in solution.

          Incidentally, the IMF, World Bank and the BIS need to be removed too. All spawn of the same sire as central banks.

          Perhaps China and Russia will be our salvation as they are already on and alternate system. No country needs the onus and privilege of controlling the worlds reserve currency.

          The only problem with trying to organize a world conference to free up the system will be that the US will drone attack the participants as international terrorists.

    • michaelcoughlan

      Hi Pat,

      You raise a very important point re monetary versus fiscal policy. However i’d like to add something no one talks about not even here on the blog despite my attempts to raise it. When new bonds are issued for the cb’s to buy you correctly point out that the revenue from the coupons is returned to the government. That revenue however is collected from the CITZEN’s so it’s THEIR money and NOT the governments.

      Since the bonds are rolled over this EXTRA revenue has to be recovered through taxation and since salaries will fall in deflationary times as business cut costs to maintain margins the only way gubernments can get this new income stream is through WEALTH taxes like water charges.

      The loans NEVER get paid off because they can barely pay non existent interest rates on existing obligations never mind new debts.

      I suspect that when the FED was created in 1913 someone though it might have been a good idea to keep the opportunity to print money at arms lengths from politicians who would abuse the power for short term political gain but they have circumvented this by issuing bonds instead which has the same effect.

      Nixon (a world class scumbag who had to have his telephone conversions with ike when he was vice president to ike recorded by ike himself so untrustworthy did ike feel he was) made a virtue out of printing money to fund the vietnam war and was responsible for taking America off the gold standard when the brits and french wanted their obligations settled in metal.

      This is part of what’s contributing to deflation and the other part was expertly demonstrated recently by adelaide when adelaide pointed out that the subsequent malinvestment and subsequent collapse of bubble type operations like fracking driven ostensible by free money was the main adverse effect.

      Draghi’s initiatives will ACCELERATE deflation not increase inflation as a result.

      Michael.

      • michaelcoughlan

        For example draghi will spend 1 trillion in the next 18months which is 2000 euro for every citzen in europe at 500m population.

        At 1% the interest bill alone on 1 trillion is 10 BILLION to be taken OUT OF the European economy ON TOP OF all the other interest payments for a total public and private debt pile in excess of 250% European GDP.

        In other words if interest rates are 1% then 2.5% of the total GDP of Europe has to be set aside PA to pay the coupons on the bonds. If the european economy doesn’t expand at a percentage rate in excess of the interest rate charged on the bonds the money recouped in taxation to pay the coupons will on its OWN cause the european economy to contract.

        Big bird and dragging his ass don’t see this.

        Michael.

      • Pat Flannery

        QE, now that the asset markets have inflicted it upon us, presents an opportunity for us. Two facts: (1) interest on Irish QE reverts to the Irish Government and (2) the Government owns AIB.

        It seems to me that the AIB now has access to almost limitless money. Could it not build its balance sheet by buying any outstanding treasury bonds that have a higher cost than QE? Isn’t that what any company or individual would do? Any CEO that would pass up the opportunity to buy back his/her company’s debt at knockdown open market prices should be fired.

        If a profligate son suddenly came into an inheritance should he not first pay off his loan sharks? If Enda does not even consider this course I will take it as positive proof that he and his government are owned and operated by the bond market loan sharks.

        • All irrelevant Pat if QE is the source of the problem.
          All other debates are extraneous and provide no solution. QE is issued as debt. Even if used to pay off existing debt it is still debt. A little breathing space may be as the interest on the new debt is less than the old.

          No currency has been issued into existence to cover the interest. 100 borrowed at 1% still requires 101 to be repaid. where is that money to come from? From someone elses money of course. But that second person is now short 2 and has only 99 to pay their 101 required.

          So we need another borrower to but more currency into existnce just to pay the interest due. That is the Ponzi scheme nature of our fiat currency. It needs another mark to borrow yet more.

          Of course that is the nature of our money system. It is about to collapse on itself as there is no one to absorb the new debt.

          Trillions in QE will be followed by Quadrillions then to infinity. The bust from infinity leaves zero.

          • michaelcoughlan

            “The bust from infinity leaves zero”

            Zero for the citizen. 100% to the person going short like gsucks.

            Beggars belief.

            Michael.

  26. Poke a stick in your own eye Adam, me friend. I pine for nothing/
    __
    Special drawing rights will be the solution and all will be under a single currency, If you think the EURO is a problem now wait till you get special drawing rights issued by the IMF. The INF is a creature of the bankers and non elected. such is the speedy creep of totalitarianism.

    Better to have individual currency priced in gold and all international settlements done on a quarterly bases in gold. Then each currency is individual and the “reserve” currency is gold.

    • Haha Tony, better maybe? Who knows? Personally I doubt it.

      Will it ever happen? No.

      Might as well live in the real world.

    • michaelcoughlan

      Hi Tony,

      Your view that gold is manipulated is more telling than your view of gold as currency. Why use gold as currency if the politicians can manipulate its price? Gold as insurance yes. I don’t believe its the panacea though.

      Just curious Tony.

      Respectfully,

      Michael.

      • It is not the politicians per se.
        Central bankers manipulate the prices. In fact they now manipulate the stock markets too. In fact there is not a market that is not manipulated. (see a number of attached articles in this series).

        Regulators have been paid off or threatened with reprisals. Regulators no longer do their job. They just pretend to. See the fines to JP Morgan for illegal business and outright fraud. Not a person charged or jailed. Law for the common folks not applied to the elites. Too big to fail is now too big to jail.

        The gold and silver markets are manipulated down by illegal bare naked paper shorts. See http://www.gata.org for 14 years of collected evidence.

        The fiat money system itself is a Ponzi scheme as operated. As such total illegal. Yet it exists. It spreads unlimited currency of one kind or another (Yen, US Dollar, Euro ) that inflates all markets until they die of exhaustion. As this is all imaginary money conjured out of nothing there is no capital. As such it is a hollow bubble and when pricked evaporates in minutes to nothing.

        Fiat money is spread across the landscape in this fashion like a cancer on the markets. Like cancer it can create immediate problems or problems that take years to manifest.

        This is not capitalism. Capitalism has been shouldered aside by corporatism, and fascism, even gangsterism.

        When the crooks are removed, and removed they must be the only money that cannot be readily inflated is gold. Thus it is call honest money. They rest is trash. I do not want to deal with trash money when there is an alternative.

        In the meantime to an Individual gold gives insurance against the competitive devaluations of all other currencies that now is occurring at increasing velocity. The devaluation is headed to the manic rocket stage of the graph and after a final blow off will crash land.

        gold will be the insurance and the last man standing. It makes sense to use such a currency as money does it not?

        “All it takes for Evil to triumph is for good men to do nothing” Currently fiat triumphs. What are you doing about it?

    • Just to emphasize that central bankers look after themselves and then the banks then the politicians and care a rat’s arse about the people.

      Get rid of the central banks and then deal with the profligate politician by having a constitutional declaration of repeal of legal tender laws ans make all currency competitive on their own without resorting to artificial interest rates and the meddling that goes along with it.

      It is empirically evident that debt based booms are followed by equally sized busts. Therefore to be rid of the busts one must avoid the booms.
      such credit based booms are the creature of central banking. Therefore get rid of the central banks.

  27. joe sod

    Taxi drivers come in for alot of criticism and in many cases rightfully so. However they do operate in the real world and by and large do not make much money for all the hours they work. They also operate in a free market, David had the choice to either take a taxi or the very good public transport in Paris. In Ireland the taxi industry was deregulated virtually overnight a decade ago. The taxi drivers had very little input in this and no political clout. The money they could make driving taxis were decimated with the increased competition following deregulation. The common retort is well thats capitalism get over it.Contrast this with how the professions and the public sector is treated in Ireland. Last week we had the ridiculous spectacle of teachers striking not over pay or pensions but over changes and modernisation of the examination process. The teachers are always indulged by the politicians. Its the same story with the legal eagles. Ireland has the most expensive legal system in the world. The high cost of insurance in Ireland (the under provisioning by both RSA and FBD insurance)is a direct result of the high cost irish legal system and extraordinary payouts. Both of these areas were the troikas main targets for reform and modernisation, yet both remain unreformed.

  28. michaelcoughlan

    @Deco

    It seems the same idea applies in France the more you fuck the thing up the higher you get promoted;

    “Ms Lagarde is said to have awarded the equivalent of some £270m to Bernard Tapie, a convicted football match fixer and tax dodger who supported her governing UMP party”

    http://www.telegraph.co.uk/finance/financialcrisis/8681645/IMF-chief-Christine-Lagarde-to-be-investigated-over-controversial-financial-deal-with-tycoon.html

    • michaelcoughlan

      Miss lagarde doesn’t seem to understand the irony of her position of refusing to negotiate with syriza if elected and the head case mowing down the people in the magazine office.

      Freedom of speech for parisians but none for Greek citizens?

      And I am not even left wing.

      More and more bizzare everything is getting.

      Michael.

  29. An unintended consequence of central bank chicanery is that even the main stream press are reluctantly seeing the advantage of gold to a degree.

    http://www.ft.com/home/us

  30. https://www.bullionstar.com/blog/ronan-manly/

    Do you wonder if the NY Fed is more and more secretive as the stash of gold gets less and less.
    They do not want the world to know there is but a fraction of what they purport.

    US says they have over 8000 tonnes but refuse to allow an audit. I thought it was the peoples money in the first place. The Fed seem to think it belongs to them!!

  31. EugeneN

    The whole rich kids will benefit is nonsensical. No more than they would otherwise if prices were allowed to rise by 20% and deposits were allowed to be 5% then the rich kids will still be in a better position – their parents will still have the money and give them that 20% increase. The same people will be buying the same houses, but at a higher cost.

    In any case banks should ( and to be fair are as far as I can see) asking for proof of savings. So the 20% deposit isn’t any good if you lived at home and got it as a gift, it’s proof of not being able to save in fact.

  32. E. Kavanagh

    “€110 round trip for €100. … So rather than get a €100 round trip, this dude got €55 and was left to find a full fare back to the airport from the centre of Paris. He gave up a certain €50 for a possible €55.”

    Actually he gave up a certain $45 for a possible $55. And depending upon how the taxis work over there, maybe it would have been hard for him to avoid using the meter; or maybe his margin is pretty small.

    It does point to a good possible app: the customer based Uber. An app in which the customer offers to pay a certain amount for a lift to a certain destination, and the drivers decide whether they want to accept that amount, or even offer a lower amount.

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