March 16, 2015

Auf Wiedersehen? Never

Posted in Sunday Business Post · 114 comments ·

Over the past year, the euro is 25 per cent down against the dollar – our main trading partner. This is the currency that was supposed to bring stability to Ireland. Losing a quarter of your value in 12 months is hardly stability, now, is it?

In fact, our 15 years’ experience with the euro have been 15 years of massive economic instability. It has been a chaotic period of seven years of unsustainable boom, followed by a year of meltdown and then seven more years of recession, unemployment, emigration and public service cutbacks.

The only reason the economy is growing strongly now is because England and America – our major trading partners – are growing strongly. When you hear politicians talking about the Irish economy, and saying we are the fastest growing economy in Europe, it is meaningless, because we aren’t a European economy at all. We are an Anglo/American economy, with a European exchange somehow grafted onto us.

In pure economics terms, it is inexplicable that Ireland uses the euro as its currency, because when you stand back and look at things coldly, it is clear that it has been an unmitigated disaster for us. The exchange rate is the most important price in any economy, particularly a trading economy like ours, and yet we gave away control over it without any real national discussion about this momentous move.

The euro was the primary cause for the property boom because Irish interest rates remained far too low when the economy was growing far too fast, facilitating all the borrowing. The Irish exchange rate remained far too low too, which meant cheap foreign goods flooded in, pricing local products out of the market and driving the trade balance towards deficit.

The overvalued exchange rate also meant that it was almost impossible for Irish indigenous exporters to compete. Besides the multinationals, there isn’t an exporting base to speak of – 90 per cent of Irish exports are from the multinational sector.

And in the euro, the banks could borrow as much as they wanted from the rest of the eurozone with no exchange rate risk. The lenders misdiagnosed no exchange rate risk for no risk and the borrowers – the banks – exposed themselves to massive liability risk because all this money flowing into the banks was ‘hot money’. When you finance with ‘hot money’, it’s not a matter of if the money leaves, but when it does.

Finally, the regulators who were asleep at the wheel were, I believe, more likely to be all the more somnambulant because we were in a currency union, with all the talk of the ‘protection’ of the euro.

The euro didn’t protect Ireland: it exposed us. Then in the bust, when interest rates should have fallen and the exchange rate should have fallen immediately, they both actually rose – thus exacerbating the shock. The currency should have collapsed to ease the adjustment; it didn’t. The Central Bank should have engineered inflation to reduce the real cost of massive personal and corporate debts; it didn’t.

The cost of this was a much deeper recession than was necessary, much higher unemployment than was necessary and much higher emigration than was necessary.

Amazingly, after nearly 35 years of trying to tie our currency to that of Germany and France (as we first embarked on this lunacy in 1979), we still do the vast majority of our trade with Britain and the US. The idea was that tying our currency would make our economy operate in the continental cycle – it doesn’t. It never has and never will.

When our people lose their jobs, they don’t go looking for work in Germany or France, they go to England and the English-speaking world – as we have always done. By far and away the majority of our inward investment comes from America. This American dominance has increased in recent years – not because of the euro, but because we speak English, have low taxes and have an American culture, which makes it both attractive for American capital and attractive for European talent to immigrate here.

It has nothing to do with the currency. If it had, why does Britain still get far more not just American but total foreign direct investment than anywhere in Europe?

So why did we join a currency that we have no business being in? It was, and still is, political. Over the years, the political establishment has disliked everything British and has wanted to re-orient the country towards an imaginary link with continental Europe that never existed. We have always been an Atlantic race, we are not continental. With the exception of Finland, Ireland is the only non-continental member of the EU in the euro.

Today, being part of the euro makes little sense. The currency is collapsing today because Europe is in a deflationary mess and Britain and the US are growing. In the future it will probably rebound – and all the while, Irish entrepreneurs have to deal with different prices, making business harder, not easier.

Yet the upper echelons of the Irish public sector and most ‘respectable people’ believe that being in the euro is a good thing, despite the overwhelming economic evidence to the contrary. The euro being a good thing is now conventional wisdom. And when an idea becomes conventional wisdom, it is extremely difficult to change it, because so many so-called ‘serious’ people have lined up behind it.

As the wonderful JK Galbraith noted, when serious people “are faced with the choice between changing their minds and finding the proof that there is no need to do so, they invariably get busy looking for the proof”.

As a result there is no debate, and those who suggest that the emperor has no clothes are dismissed as mavericks or cranks – or, worse still, they are accused, in the ultimate putdown deployed by serious people, of guess what? Not being serious.

But this is deadly serious. Because there is no way Ireland can foster an indigenous, wealth-creating exporting sector when we have no exchange rate certainty.

So who benefits? Clearly those people who are well paid in euro, but could never generate this income and this lifestyle if they had to earn it in the competitive marketplace where they export and compete for their services against the best elsewhere.

Who might these people be? Why, the very senior civil servants who pay themselves excessively in a currency they could never hope to earn.

Is it any surprise that the policy elite love the euro? It makes them rich and, more interestingly, it makes them comfortably rich. They are Ireland’s “rentier” class – a drone elite that gouges rent from the productive class. Meanwhile, the people – Irish entrepreneurs – who have to export to actually earn their keep, can’t do so.

If the Greek crisis caused a break-up, we should be first out the door. But guess what – if the euro did break up, Ireland would be the last to leave, clinging on to Germany begging for respectability.

  1. Bamboo

    Thanks David, still have to chew this one.

  2. michaelcoughlan

    Hi David,

    When I read this in the SBP I felt I just had done a round with Mike Tyson in his prime. Such hard hitting accurate and insightful analysis.

    What’s important for me to remember is what neutron Jack told you that we must define the world as it is and this article is an excellent and outstanding example of that.

    It really helps because we can make decisions based on the economic status quo which is based on the perverse underlying political dynamic that exists (and very expertly shown by this article) rather than the wishful tooth fairy nonsense coming from Professor Hone-a-scam in the CB.


  3. Colm MacDonncha

    Wow. Strong words indeed. Looking at Lucinda and Co and reading the Irish Times property supplement at the weekend I despaired for my boys’ futures. We aren’t European. Never have been. We’re northern Atlantic’s,andwe have to take advantage of our geographical location and cultural uniqueness to find our place in the rapidly emerging new world order. Our political system has enabled dross to take over and scupper any chance of genuine self determination and development in the interest of the minority who are ‘inside’ the system.

  4. This is a very brave and very important commentary and is essential reading for all those scratching their heads at the volatility we are seeing at this time. It is scary to see the Irish media talk up the Euro depreciation as a good thing – literally the largest middle class market in the world – some 400 million people have just seen 25% wiped off their currency in dollar terms in a matter of months.

    Dollars account for 75% of global trade. This is not good, this is not a controlled ascent, there is no on in command of the facts and no single master plan that we can all rely on. We are seeing a global mass currency devaluation which is a direct result of hyper leverage of credit – QE and currency devaluation is an attack on our savings, our pensions and our future.

    The Euro has two fatal flaws – it has no political consensus behind it and it assumes a single interest rate policy for a diverse economic area while ignoring the need for fiscal transfers. German industry got a very cheap currency from which to ship their heavily engineered goods globally. We got their savings at artificial rates. It is time to wake up.

    A Punt Nua that is managed on the basis of our trade book and is tasked with stabilising trade flows would (while having significant downsides) might be infinitely more desirable.

    Stephen Flood

  5. Eireannach

    I can honestly say that I am a member of the ‘Irish entrepreneur class’ David McWilliams likes to line up against the civil service/insiders/etc. I own, which has generated over €300,000 in it’s first 8 months of business. We’re looking at a great summer ahead. We operate out of both Dublin and Belfast.

    I cannot, for the life of me, see what difference it would make if Ireland left the EZ and had a floating currency. One week we’d be up against the EUR, GBP, USD and so on, another week down. So what? Running a company is about having a vision, setting up systems that deliver the vision, reaching your market of people who care about what you are producing, and being productive generally. Producing a website with good content, good social media posts that engage people, graphic design and printing, having clear images of the kind of staff who should work in this business model, etc.

    David McWilliams is basically an Anglophile – he knows the UK is heading for Brexit, and he’s a bit jealous. He just wants Ireland outside this EU/EZ ‘nightmare’, etc. But to anyone who is actually operating a small business, it doesn’t really matter if the currency is GBP, EUR, USD, etc. or if there are import duties and tariffs to pay, or not, how hard all the tax is, blah, blah, blah.

    These are all known as ‘constraining factors’. You just work within and design around the constraining factors.

    To remain in, or leave, the EU or EZ is not that important to a small business owner – these are questions for the chattering classes – David McWilliams and the scribbling journalists who’ll write endless reams of blather as the Brexit referendum approaches.

    Meanwhile, those of us who run small businesses will persevere as we always have, within whatever constraining conditions exist, to build business systems that work.

    • MrADC

      “David McWilliams is basically an Anglophile…”

      - and that comment of yours, with all of its implied negative connotations basically confirms all that DMcW has said in the above article.


      • Eireannach

        So you reckon we should leave the EZ, and possibly even the EU too, do you MrADC? Talk us through how that’d work for Ireland.

        • Noelster

          300K in your first 8 months, you are to be congratulated. Being in business myself, I respect anyone who can make a go of it like that. Well done. Brilliant idea too!

    • Good for you Eireannach

      This “scribbling journalist” runs a small business which turns over multiples of yours but has been around for a a while – so lets hope you get there. I write because Iove writing. I am happy to be a scribbler when the working day is finished.

      Now as for being an Anglophone – I am a realist and am really ethnically agnostic.

      In my own experience, my biggest clients – and I share this with the vast majority of Irish small busineses – are either Irish, British and American. That’s just the way it is.

      The currency of the country is an important issue and there is enormous amounts of economic litreature about using an appropriate currency and the costs of not doing your homework on this issue – I advise you to have a read of it before blathering online on a issue you clearly haven’t a rashers about!



    • Deco

      Best of luck with your business. Particularly with respect to cash flow, quality management, and operations management.

      It might be a good idea to offer a tour pickup beside one of the Dublin Airport hotels. Or even an indication that you are open to this, if requested.

      Perhaps one of the hotels beside Dublin Airport, might offer your tour, to their guests, if required.

      • Eireannach

        Deco, for three years I’ve been listening to how these ones, or those ones, may or may not start up in competition against us, from Dublin. FWIW, we now have 33,000 Facebook likes, It’s getting dreadfully late in the day for others to start. Plus there is the issue of finding good lunch venues on our circuit, as our Dublin and Belfast Winterfell tours are sitting pretty on the best lunchtime spots. But good luck to any of our competitors – I’d shake their hand, and buy them a pint. They have more mojo than me if they start now. I started when it was an open goal, so to speak.

    • paddythepig

      Makes perfect sense. David resembles the old major in fawlty towers wandering around the hotel with a rifle looking for Germans to shoot.

  6. There is surely a consolation prize in all this though, that we should see a larger influx of tourism from the UK and the US, given the fx rate movements that have got us to the situation we are now in.

    We don’t all work in tourism needless to say, but the country in general making more money from it should be a logical consequence of what is being described here as all-bad.

    • Eireannach

      Hi JC1981.

      It is true that tourism will benefit, to some extent, from a weak EUR. But as DMcW likes to say, ‘stand back and take a look at the big picture’.

      The EUR is currently down against the GBP and USD. In Ireland, some win, some lose because of this. What is ridiculous – I just have to say this – is the lemming-like contagion of emotions that starts a self-centred panic to protect one’s wealth because “25% of savings have been wiped out” or whatever. In the next few months, it’ll be the GBP tanking due to talk of a Brexit. Then the USD will be in trouble for some reason or another.

      People who talk about protecting their wealth by switching from one currency to another are probably just retirees who are too old to generate an income by building a business that works. Those who build businesses don’t concern themselves with the sheep-like contagion of emotions as this or that currency rises or falls this month or that. They are playing a longer, deeper game of building systems that work.

      Currency panic is the absolute and utter embodiment of the lazy ‘get rich quick’ culture of the English-speaking world which, I will remind you all, is so lacking in anything resembling a long-term vision that it is home to the most heavily-indebted people in the world – US, Ireland, UK, Australia. Also the culture that wants to make the most money-for-nothing through lazy tricks like buying property so they can put the kettle on and lazily watch it rise in value (they hope).

      The EU and EZ may be a mess, but the UK and US are a post-imperial shambles too. Here we are, stuck in the middle with these two.

      • MrADC

        “The EU and EZ may be a mess, but the UK and US are a post-imperial shambles too. Here we are, stuck in the middle with these two.”

        …and you run a Game of Thrones based business – the irony runs strong with this one!


      • Legally_blonde

        Considering the writer’s strong connections to Google and Woodford Investment Management, it’s not surprising he’s emphasising the Anglo-US connections.

        What he seems to have avoided is the increased attractiveness of a cheaper, well-educated, English-speaking workforce attuned to the culture of American tech firms. There could be some new corporate arrivals in Ireland soon, if they can get some certainty on corporation tax. And not the Lone Star hedge fund kind.

        Living abroad, I have seen a 20% pay increase due to currency exchange over the past year, but I know it won’t last.

        Your Game of Thrones business is a classic “Why didn’t I think of that?”

    • Dilly

      That short term thinkers see profits from this drop but long term bigger picture when Europe recovers we will be in trouble because we are not in Europe. Some people just can’t get their heads around that.

  7. polomora

    Very good, thoughtful article. However, some corrections/clarifications are in order.

    1. When he writes that “The Irish exchange rate remained far too low too, which meant cheap foreign goods flooded in’, I presume that David meant that the EUR/USD exchanged rate remained too high, ie the currency was overvalued.

    2. Strangely, for a former economist, he has misread or misunderstood the available data . The most recent export trade data show that for Ireland’s top 10 export markets, exports to the EU accounts for a greater share than exports to the US and UK combined (36.7% vs 33%).
    1 USA United States 19%
    2 GBR United Kingdom 14%
    3 BLX Belgium-Luxembourg 13%
    4 DEU Germany 8.0%
    5 FRA France 6.3%
    6 CHE Switzerland 5.1%
    7 NLD Netherlands 4.3%
    8 JPN Japan 3.1%
    9 ITA Italy 2.6%
    10 ESP Spain 2.5%

    3. To the replier who writes “…some 400 million people have just seen 25% wiped off their currency in dollar terms in a matter of months”, I don’t think that these people who use the Euro as the medium of exchange are too worried that the EUR/USD exchange rate has collapsed. Intra EU trade and tourism dwarfs that between the EU and the USA and UK combined. Does it matter that the Euro has risen against the Japanese Yen during the same period?

  8. DarraghD

    As a small business owner trading in our domestic economy, nothing reinforces the powerful reality of this article, than when you are struggling to pay yourself 20K a year in your own small business, while writing a cheque to the local authority for 8K a year, to pay for those insiders in our local authorities and elsewhere, who are alluded to in this article, who consider 50K to be some sort of a starting salary, in relation to their own employment.

    David couldn’t have said it better, the world that these people live in, our precious “insider class”, the world of 50K salaries being considered poor pay, the world of automatic increments, the world where you can’t be touched regardless of performance, this is a different universe than the world I work in, where that has to be actually earned through being the difference between what I buy and what I sell. If you thought about the sheer injustice of all of this, you would actually go mad I reckon.

    • Deco


      Darragh, here is a word you will enjoy in an ironic sense.

      Symbiosis. When the parasite can no longer grow it’s greed beyond the ability of the host to carry it.

      It describes where the institutional state sits currently. Same in Italy, and Spain.

      I know a family in business. Many extended family members. Between 20 and 30 of them. And between the lot of them they put together one Million euro for a business plan. They had been saving since the 1980s. They went to the local authority.

      The local authority demanded 80 grand as a development levy. And they were encouraged to resubmit the plans via an architect who was aligned to a prominent politician (nudge, wink). The type of politician who is an expert in being “concerned”, “in touch”, “totally aware” and 100% pc on the national media.

      They pulled the investment. I think they parked it in Norway, eventually. [ good move incidentally]. Local authority parasites got zero. Crooks aligned to superficial politician, zero.

      • DB4545

        In the early 90′s while living in London I spoke to a Japanese investor who pulled out of a tech investment and located to Wales instead for similar reasons. The IDA team did their work and landed him. He was approached by a prominent politician who could “facilitate” and “co-ordinate” with all the relevant State bodies to “smooth out” any difficulties. All for a fee of course. “Too much for the sleeve” as the Japanese call brown envelope culture. He walked of course. Sickening.

  9. Deco

    The entire Euro mess is the result of the Trichet spell at the helm of the ECB. Draghi is not causing today’s problems.

    Draghi is causing the problems of the 2020s, now. And given that Draghi is doing what Trichet did, on a larger scale, and for longer – we are in effect being informed now that the 2020s will be mess.

    This depression was brought to you by men in suits with MBAs.

  10. polomora

    In the absence of inflation, the Euros in your bank account are worth the same as 12 months ago, when the EUR/USD exchange was 25% higher. Of course, your USA vacation will be 25% more expensive, but that’s a lifestyle choice.

  11. Deco

    an American culture, which makes it both attractive for American capital and attractive for European talent to immigrate here.

    David this is removed from reality.

    Modern American culture can be very shallow, and representative of decades of dumbing down, consumerism as life, and obsessiveness.

    Ireland has descended down this road, since 1998. In that time, the gap between rich and poor has exploded. Politics became even more corrupt than it was in the 1990s. There was an explosion in consumerism for the sake of psychological comforting, and a consequential explosion of debt.

    Obesity, Narcissism, superficiality, and other elements that emerged in the Reagan era (greed is good), showed up in Ireland. And particularly in Dublin. Combine that with money, and pride, and one-up-man-ship, and you get a nasty cocktail. The official response, amongst the media, was to be “cool with that” at first, and then to “celebrity our new found wealth”. [ which happened to really be money borrowed from the Germans ].

    There is a right left culture war in Irish society. Just look at the voters who voted for Ahern in 1998, 2002, and 2007, and endorsed EU referenda because authority told the people what to do.

    We have transformed our culture into something deeply dysfunctional, even to a degree that most Americans feel positively repulsed.

    You only have to look at the substance abuse level, which rocketed, and has not gone away.

    If things stay on track (in the manner in which the pundits on RTE talking gloriously), Ireland will be an unbearable hellhole in 2015. Run for the benefit of a corrupt, self-centred right, and an arrogant, dishonest left.

    I know “talent” which has already left because of the combination of high marginal PAYE, and state services that are rubbish. Because they live in to live in a safe neighbourhood costs a fortune.

    The commitment-return ratio of the tax system between the people and the state, is driving people out. Ireland attracts graduates who want to make a name for themselves. They are gone by the time they get enough money to pay for their preferred existence back home.

    It may cause absolute consternation in the “pride” department in D’Olier Street, with their mission of defining Irishness in a manner that pleases the breweries, the real estate agents, and big business – but the dream is a mirage.

    It is an extension of American culture – it now exists as a means for flogging over-rated products to death. Everything from an English Black ale to the Temple Bar to Hollywood escapism.

    Harney, a stooge for American mncs, wanted us closer to Boston than Berlin. [ she obviously never read an Atlas in her life]. Well, she got her way. Ireland is no longer a societal concept. We know that it is being frayed when we see the latest political stunt act (headed up be an financial advisor/salesman), talk about a vision that is a load of corporate buzzwords.

    Dublin is heading towards American levels of Cocaine addiction, and hard drugs usage. The same applies to debt. And psychology.

    Nobody is here because of American culture. I fear for where modern American culture is leading America – it is leading it into the Abyss].

    • Deco

      European talent does not seek American culture. They come here because their own home cities are not creating the employment opportunities, that they want. This is a massive problem in Latin Europe. It is because there is nothing going on at home.

      That is why people come here. Because the state systems in Latin Europe are stifling business, to the point that business is not hiring.

    • DB4545

      Deco the gentleman who I think you may be referring to just needs to be asked two simple questions by Vincent Browne.
      1. What is/was his business relationship with Tony Taylor?
      2. What are his current views on investment in the Cape Verde Islands?
      I think you may see that political stunt implode real soon.

      • Deco


        Correct. And there are other “projects” that are not in the public eye, which are unsavoury.

        VB is the only one who will ask the hard questions. The state propaganda quango is useless, and has it’s own tax code, to maintain it’s lies.

        • DB4545


          Some things never change. And yet some things do. Hopefully whistleblower legislation might encourage someone to step forward and bring the “projects” into the public domain BEFORE taxpayers and investors are screwed. VB has certainly done this State some service and at some personal cost. The “talent” at Pravda haven’t got a backbone or an original thought between them.

          • Deco

            The latest big idea from Pravda – hire an amateur whose credibility peaked 20 years ago ( when he was talking to puppets), in an effort to get a younger listenership.

            Pay him far more than he is worth – an obscene amount of money. And stick him on television as well.

            Hobbs was a Pravda “star” so it is unlikely that Pravda will spill the beans.

            And believe me, there are beans :)

  12. DarraghD

    The ECB has one job and really one job only, to keep inflation at or close to 2%. For 6 years straight it has failed to accomplish that singular expectation that exists upon it. Any Managing Director or CEO who stood over 6 years of their business shrinking year on year when it was meant to be growing, would not just be out of a job but would be pretty much untouchable within their industry as a leader of a business.

    The whole problem with this mess that the EU is in is that those at the top setting policy do not understand business on a macro economic level. In that absence of that kind of fundamental understanding of what creates jobs and trade, you have as we can now see, a blind and cult like obsession with a doctrine of EU integration for no other reason than the sake of it, for itself. No assessment is allowed and no discussion is tolerated, that arrives at an opinion that our continuing membership of a common currency union, is not a healthy a thing.

    If you started a political party in this country today along the lines of the UKIP, where you advocated a discussion on reintroducing the Irish punt, you would be told to be quiet, that you will harm our international reputation, that you will scare off FDI, that you should be quiet, that you will rattle the multinationals, that you are basically talking out of your arse and don’t know what you are talking about. We we all know, those who will dispense this advice to you are typically not trading in the domestic economy, they are either public sector insiders who have their pay, terms and conditions absolutely protected, or else they are working for a large multinational who puts the fear of Christ into them that if we leave the Euro then their job is no longer safe.

    One of the greatest tragedies I think is that our fear of the EU and the US multinational community in this country is so great, that we don’t even allow a discussion on the reintroduction of our own currency, it is not unlike all discussion that takes place in relation to our 12.5% Corporation Tax rate, the national political position is and always has been, “we are not even going there”, “it isn’t up for discussion”.

    That is how tight a hold big business interests now have on this country, where a starting conversation is not even tolerated, you are written off as a clown and an uninformed idiot if you even think we would be better off with our own currency than to stay within the Euro,as I said above, “shut up, you’ll rattle the multinationals”.

    • Deco


      WE are even afraid to have an open discussion about what is in our interests. In case it would upset other people.

      This is highly absurd.

      Do the Greeks have this “complex” ?

      Or the Danes ?

  13. Deco

    Honohan is an underling in a power hierarchy. He is not a servant of the Irish public, because his job is to obey those above.

    The entertainment of his depiction in the Irish media, as some sort of authorative figure is amusing. He is not.

    Now, maybe, that is a good thing. Maybe he is not fit for the task.

    But, the rest of the ECB don’t seem to be much better.

    The Euro has been completely mismanaged. It is simply too large to run. Even the US Dollar and the Chinese Yuan might be too big for effective management. The geniuses in charge of the Euro are struggling to cope with the task.

    Now, if this was affecting the supply of cabbages, or some other aspect that EU institutional power micromanages in detail, it would be a source of ridicule.

    But this affects the entire monetary system. And aside from this we have banks advocating the economic approach that suits them best – monetarism in the mode of Milton Friedman. The natural Keynesians, are also now monetarists in that they want more leverage in the financial markets.

  14. Deco

    Is it any surprise that the policy elite love the euro? It makes them rich and, more interestingly, it makes them comfortably rich. They are Ireland’s “rentier” class – a drone elite that gouges rent from the productive class. Meanwhile, the people – Irish entrepreneurs – who have to export to actually earn their keep, can’t do so.

    100% correct. Those in the state system have cheap borrowing so that the current “living beyond it’s means” borrowing can exist.

    DE-NL-AT-FI will keep down interest rates, and the gombeen elements in the PIGIS will get to preserve their expansive institutional state that keeps them in their aspirations.

    We need to reform the institutional state. And many EU mandated commitments are simply going to be dropped. The institutional state has grown excessive beyond the welfare state. The welfare state promised social services. The institutional state is not about social services, but about power. Power to bail out well connected bankers, or sell an asset at discount to a well connected crooks.

    • Deco

      The institutional state is squeezing the welfare state. We have seen this repeatedly in the last five years.

      The employment tax system contract is now morally devoid of any meaning. Ask anybody who got laid off, and who waited 18 months for welfare. Or retirees. It is devoid of meaning, because the working people are providing for those that don’t work – those that lobby successfully.

      The Welfare state is now a fraudulent promise. There is no money. The money has been squandered on the institutional state.

      In order to save the welfare state, we need to shrink the institutional state.

      For many people in the institutional state, or many interests aligned to the institutional state, this is a massive threat.

      Therefore, any threat is met by a ferocious fight back. As witnessed in both the Nice and Lisbon referendum re-runs. It was vicious. And it had zero to do with the content of the treaties. The “vote yes for jobs” mantra was a massive joke, in the context of the role of Brussels in undermining employment levels. This was a lie. But it worked. And now it can be forgotten about.

  15. mishco

    “Nobody is here because of American culture.” Totally agree, Deco. What we have now is more a pale imitation of American “business culture”, without the can-do optimism and open-mindedness towards starting and running a business. And in no way do we (in David’s words) “have an American culture”, although we are bombarded by it in the media. We have Christy Moore, John B Keane, and the list of great musicians, poets, playwrights, sporting champions,etc goes on and on. That is an Irish culture, and one that will always attract people to our shores, whatever the exchange rate. (And surely, David, poor old Finland hasn’t fallen off the Continent, or has Putin engineered that as well?)

  16. DB4545

    David I can’t believe you’re resorting to the Eamonn Dunphy style of journalism to generate debate. The article seems like a 1950′s throwback from the little englander school of thought i.e. “fog in the english channel continent cut off”. Ryanair has grown on the back of European trade.The fact is that excluding the UK & Ireland there’s a market of 425 million Europeans to trade with in addition to the rest of the world. The Euro for all it’s faults (and it has many) makes it easy and attractive for business and trade. It’s certainly made costs transparent compared to the sterling and punt era. This place was Bulgaria in the early 1980′s. Let’s work with our strengths of informality and just getting the job done. If there’s one European import we don’t need it’s the bureaucratic monster at work in some European Countries. Develop Dublin airport as a major European hub for business trade and tourism and watch this Country grow.

    • DB

      No one’s doubting there’s a big market out there, we just don’t have much to do with it and havn’t really had so we have a political elite wrapped up in Europe when for most of us, its at best a sideshow.!



      • DB4545

        David the fact that we’re having a discussion in English underscores the importance of English and the English speaking world to us. But we are also a useful launching pad into Europe for other global players too and we attract other Europeans with the language skills we need to connect to Europe. If the Euro is 25% down against the dollar that has to make our exports more competitive which can only help us in the short term. We’re a lot cheaper to do business in than the City of London and London generally. Londoners are being priced out of their own city by a wave of hot money buying up the monopoly board and causing a ripple effect throughout the South East.
        We don’t need a big slice of the global pie a few crumbs from that table will keep us well fed. If we had a sensible all Ireland project and focus our development along the M1 corridor from Dublin to Belfast I think we could be a Singapore style hub plugged into the US,the UK and the rest of Europe. What we don’t need is to squander scarce resources on call centres in gweedore or two mile borris to service the needs of a ministerial seat. Shannon got a shot at the title and is going nowhere fast and I don’t see bantry bay turning into Rotterdam any day soon. The East is the natural commercial corridor let’s just allow the rest of the Country return to being a farm and get on with it.

      • DB4545

        David the fact that we’re having a discussion in English underscores the importance of English and the English speaking world to us. But we are also a useful launching pad into Europe for other global players too and we attract other Europeans with the language skills we need to connect to Europe. If the Euro is 25% down against the dollar that has to make our exports more competitive which can only help us in the short term. We’re a lot cheaper to do business in than the City of London and London generally. Londoners are being priced out of their own city by a wave of hot money buying up the monopoly board and causing a ripple effect throughout the South East.
        We don’t need a big slice of the global pie a few crumbs from that table will keep us well fed. If we had a sensible all Ireland project and focus our development along the M1 corridor from Dublin to Belfast I think we could be a Singapore style hub plugged into the US,the UK and the rest of Europe. What we don’t need is to squander scarce resources on call centres in gweedore or two mile borris to service the needs of a ministerial seat. Shannon got a shot at the title and is going nowhere fast and I don’t see bantry bay turning into Rotterdam any day soon. The East is the natural commercial corridor let’s just allow the rest of the Country return to being a farm and get on with it.

      • Deco

        The entire interaction between the Irish body politic/institutional state and Brussels is rather well understood, as the interaction that occurred with the village doctor visited David’s Grandmother in Cork.

        It is not one bit business-like. It is actually quite amateurish.

        Watch the “welcome” Mme Lagarde gets when she is in town. The IMF are facilitators for the wealthy to get their money back after loaning it to the poor.

  17. Pat Flannery

    So, David would like the Irish to get screwed more, just like the Americans:

    • Deco


      Current US Labour market policy, and taxes on labour is designed to create “discouraged workers”, drive out employment, and drive down wages. This is a massive societal cost.

  18. coldblow

    Excellent article.

    “Because there is no way Ireland can foster an indigenous, wealth-creating exporting sector when we have no exchange rate certainty.”

    Is this still a possibility? Was it ever one?

    “We gave away control over [our exchange rate] without any real national discussion”

    Er, ditto?

    I was watching some Icelandic news this morning and they had a big demonstration in the capital with a reported 7k turning up. I couldn’t really work out what they were saying so I looked it up and apparently they were protesting *against* their govt’s decision to withdraw its candidacy for joining the EU. (Their economy has recovered in recent years, it seems.) Apparently they feel that the govt. should consult the people about this.

    This is odd. The people were ordinary looking (whatever ordinary looking is in Icelandic terms) and a few of them were interviewed. They only had (as far I as can tell) platitudes to say but seemed nice and fresh and decent in a modern EU-embracing kind of way. A big EU flag was blowing in the wind alongside an Icelandic one. I got a very strong impression that the state broadcaster is on their side (pro-European debt-extraction agency) and wants to show them in the best possible light.

  19. dod6

    Here’s Yanis Varoufakis with some creative, realistic ideas on restarting consumption & investment in Europe based on an understanding of Macroeconomics sadly lacking in Ecofin and the Commission.

    How the EU elite respond to such ideas will be a litmus test for the future of the EZ. If Varoufakis continues to be dismissed, not least by an Irish finance minister who ought to be a leading change advocate, we can only look forward to more extend & pretend, rising nationalist bigotry, more mythology masquerading as economics, more technocratic group-think… but not indefinitely.

    Varoufakis is the canary in the coal mine.

  20. westbrit

    Oh blimey. Mr McWilliams is of course correct. Young Ireland circa 1916-21 needs to grow up and recognise we are part of the Anglosphere and stop wailing over minority sports such as 800 years of English rule etc, etc.

    The majority of my neighbours in Connaught (yes note the spelling) want commercial success for Ireland and a decent career at home – not overseas in the Commonwealth and the USA – for their children.

    What is the point of designating our Irish economic and foreign policy if it is just “anything but England” for that has brought us the economic war and nothing but ruin since 1921.

    I recall an article Mr McWilliams wrote some time back pointing out that Ireland was wealthier in 1913 or 1914 in relation to the UK and Europe than it is now.

    Irony will be that for 2016 we face the prospect of choosing yet again between Germany and England – as in “our gallant allies” versus the Somme – when the Eurozone and with it the EU blows up.

    Oh and, yes, the UK will exit the EU and we will likely see a UKIP, DUP, Tory coalition or supply vote arrangement by May 2015…. what will we have here then?

  21. paddythepig

    We need a single world currency, not a basket of micro, mini and maxi currencies. Then people will concentrate on the the things that truly create wealth, and abandon the false god of Money manipulation.

  22. SMOKEY

    All of the above said, was not the main point of the article the following?
    The most current recession has left one hell of a lot of folks in hardship, suffering, stuck in shitty accommodation, divorced, broke, sad because children have immigrated, and generally cynical, because of a lack of political will by the self protected class of insiders? Something like that. Happy Saint Patrick’s day to all on this blog, Im wetting the shamrock as we shpeek.

  23. SMOKEY

    AND!!!!!!! I now know how to use the word “sumnambulant” in a sentence. No wonder I couldn’t get a job in a bank before.

  24. michaelcoughlan

    @ tonybrogan

    The irish finance minister is buying guess what Tony?

    Gold and agricultural etf’s:

    • “The gold ETF is not a safe haven asset rather it is a derivative that tracks the price of gold and in which one does not have legal title to or own the underlying asset.” Gold Core.

      I would add that GLD has little gold as it is not subject to audit and employs sub custodians, sub sub, and sub sub sub custodians none of whom are subject to audit.

      Do not follow Noonan there as he could lose his investment of at beast get a cash settlement. Buy the real thing and have in hand at home and tell no one. Get an equal amount of weight of silver. Maple Leaf coins are world renowned for fineness and weight.

      What do you say about Mr. Noonan there David?

      • Also the prospectus allows that the fund could choose to own no gold but merely substitutes or cash. That is it will likely invest in other dirivitives of gold but not the real thing.

        It is managed by HSBC who is also the worlds largest short of gold in the world. Recently they were reportedly closing their London vaults, which asks the question if they have any gold anywhere at all.

        • Mike Lucey


          Check out B’rad Meltzer’s Decoded: Fort Knox’ on the History Channel if you have not seen it yet.

          Of course the investigating team did not get into Fort Knox to eye ball the yellow stuff. An interesting comment came from a waitress in the local town who’s mother was a USA army guard to Fort Knox. The waitress said that her mother told her there was nothing left but dust! Could it be a case of the ‘Downstairs’ from the Fort Knox’s ‘Upstairs – Downstairs’ telling it like it is?

  25. Mike Lucey


    That was an interesting read about Mr N. Maybe he is trying to tell us something?

    I’ve just watched an excellent talk by Patrick Byrne, CEO of Overstock and am now more convinced that ‘Blockchain Trading’ will in time come into play as an honest and democratic form of currency / money.

    “Patrick Byrne, CEO of Overstock and CryptoCurrency advocate gives the annual F.A Hayek Memorial Lecture (58 mins) – “The Essence of the Cryptorevolution: Crypto allows for peer-to-peer yet trust-less exchange of value, which disrupts social and political institutions doing that now.”?

  26. Not sure where this improving economy in the US is coming from except the adjusted figures and statistics reported by mainstream media. Lies and mis-truths.

    “It is more fair to say that the US economy looks stronger than its competitors. But it is weak enough all the same: labour participation is the lowest in modern history, housing is flat on its back, consumer spending is down despite the huge falls in gas prices and now the exchange rate is massively overvalued making exports uncompetitive.”

    There is only one world currency that is not issued as a debt and not able to be infinitely inflated. Hint, it is not the euro, punt nua nor the pound nor US dollar.

    Ireland needs its own currency, issued from Treasury , debt free. It is the only way to redeem sovereignty. Otherwise kiss the Irish free state goodbye.


    Situation Deteriorating In The United States

    “I am also fascinated by the deteriorating U.S. economic numbers since the beginning of the year. At the beginning of the year it was consensus that the economy was going to grow at 3.5 percent in the first quarter. Now the Atlanta Fed has come out and suggested it may be a negative number.

    When you look at manufacturing reports, housing starts, retail sales — none of them are very good. In fact, they are way under what people assumed they would be. This is being exacerbated right now by the sharp rise in the dollar, which I think is a negative force for the U.S. economy.”–John Embry

    • “And you certainly don’t want to look too closely at the largest province where I live, Ontario. Ontario is truly in desperate condition. I love my country but I hate the current state of our finances. This is just part and parcel of the whole problem in the Western world, where over-indebtedness is going to crush the system.” John Embry

  28. Colin

    Subscribe – it’s hard to disagree with anything David writes here.

    Happy St. Patrick’s Day everyone. Please remember, St. Patrick was a Brit, albeit a pre Anglo-Saxon Brit.

    However one advantage regarding the euro is that nowadays when we go on holiday to the Eurozone, we do not get with nasty foreign exchange fees or poor exchange value and vice versa with the Eurozone tourists visiting here, so that’s a positive. But indigenous exporters have failed to increase market share in any great measure in the Eurozone since it was created, and this is the lifeblood of the Irish economy which must take precedence over tourism.

  29. coldblow

    David argues that we are in the Euro because of our elite’s dislike of Britain. Is this really true? I always got the impression that the opposite was the case, that the Queen was welcome to visit, that the Loyalists in the North got an easy ride and I imagined that if they met their British counterparts in the bar or on the golf course that they had in common a dislike for their own red-necks.

    I could be wrong and so I would be interested in learning his reasons for saying this.

    It reminds me of a recent comment here that RTE are biased against Sinn Féin. As I noted at the time, Eoghan Harris in the Sindo thinks the exact opposite is the case.

    One further reason why our elite likes Euro and the EU, at a guess: it takes away further responsibility for governing the country as they have the excuse that they no longer have the power to do things. This would surely suite those who don’t want to rock the boat or are just lazy. (I have made this point in the past here.)

    • Deco

      The reason our elite likes being “at the heart of Europe” is because they view it as some sort of school vacation for grown ups every time they get to take parte in conferences.

      Conferences which usually involve the grown ups negotiating in their interests, and our fools smiling from ear to ear at that warm feeling of being involved in something too important or complex for any of to comprehend.

      The one thing our elite can do well, is facilitate other people getting their agenda – as we are seen to have no agenda.

      Because…most of the time, our muppets don’t even know that is in our country’s interest, and are therefore completely incapable of having agenda.

      And of course, the others all “love us” for this.

      No wonder we keep getting shafted. FF and FG are more useless than the Home Ruler party were 100 years ago when they were imploring kids to die needlessly in mud for a few inches on General Haig’s map.

  30. JM23

    Great article.

    I couldn’t agree more that the euro, since its inception, has been the millstone around the neck of the Irish economy that, unwittingly, has served thus far to pull us under the waves. We will continue to drown until such time as we withdraw.

    I am pro European and pro the common market. I believe the EU to be a force for good, and I believe Ireland is best served by being at the heart of EU decision making. However, all to often, when one advocates that the current interest rate setting morass…that of the ECB trying to fulfil the impossible task of setting an appropriate interest rate for Germany, an economic powerhouse, and Ireland, who’s population is dwarfed by an abundance of European cities…(that the ECB could ever set an appropriate interest rate for those two countries at the same time…is nothing short of preposterous.)…all to often one is labelled anti European. On the contrary, I believe that Ireland’s necessary withdrawal from the euro to be a pro European act. Right or wrong, the euro is viewed as “being Europe”. I do not wish to see the situation evolve whereby disenchantment with the euro translates into anti European sentiment. At least no more than it has done so already.

    As you mentioned in your article, this impossible appropriate rate setting environment the ECB finds itself in, resulted in exacerbating the boom, and needlessly prolonging the recession through our inability to devalue our own currency.

    But to quote one of our many failed would be patriots; We are where we are.

    So where does that leave us?

    Throughout the boom I luckily never felt drawn to the property roulette wheel. I can’t claim a huge degree of prescience for this happenstance. But rather I viewed efforts by our elected leaders, along with much of the media, in their attempts to scare people into buying property (the “buy now before it’s too late” brigade)…with a healthy degree of suspicion.

    And so I saved during the boom. Just because it seemed like the prudent thing to do…neither spending excessively, nor living like a monk. And eventually the recession started. Luckily I held onto my job and just continued as before; I saved alot and spent some. Property fell to reasonably affordable levels, but I still decided not to get involved. Because I don’t believe that incurring debt in a currency that is widely recognised by multiple Nobel award winning economists, as being a currency doomed to failure, at least for a country such as ours, is the prudent thing to do.

    There is a reason I’m typing all this and it’s this; I have savings. I don’t have debt. And still, in this situation, I believe that there should be widespread writedowns on *everyone’s* mortgage, as well as commercial property, and that all those, myself included, who acted relatively prudently during the boom should accept that this be done for the good of the Republic.

    Furthermore, I believe that we should leave the euro immediately. And all those with savings, myself included, should suffer a 25-40% hit on the value of our savings relative to the world reserve currency, the dollar.

    Recent exchange rate events has largely seen to the latter. Though this is still no reason to keep the euro. (Ideally I wanted Ireland out of the euro in 2008). As long as we keep the euro, meaningful widespread debt writedown will never be achieved. I believe all those with euro denominated debt in this country were put in that position through a combination of factors, (the government and media cheerleading, the regulator turning a blind eye, the property tycoons, the banks! I can’t even begin to describe the pain it causes me to think about how the Irishmen in those banks didn’t have the needs of the Nation as their guiding hand…the ill conceived monetary union. I’m sure I’m forgetting more)…and that our fellow citizens are in effect living a prison sentence in their homes, and raising families in de facto poverty…and most importantly, I believe we are neither acting like true citizens of a Republic, nor a collegiate people of the European ideal, so long as we allow this situation to continue.

    So I just wanted to say, because I’m no doubt rambling, it’s very heartening that from time to time I find articles like yours, that seek to address the heart of our problems. You must feel like you’re screaming into a void. And that things move so slowly. But keep going. Patriotism isn’t restricted to those of 100 years ago. It’s possible to be a true patriot and a true European and advocate for the removal of this euro millstone. Because what our country has become, this whole euro experiment, and every political party currently in the Dail who “represent” us…if that’s not hell, I don’t know what is.

    • Mike Lucey


      Well put! As you say, one size can never fit all and never will be so. I trust you have put some of your eggs into ‘real money’ as a safeguard, 20% is the recommendation of the experts.

      I also feel that should there be a nationwide debt forgiveness in the future that the ‘savers’ should in some way be compensated, even long term compensation would be good. Better to owe in to ‘our own’ than the enemy.


    • paddythepig

      Would this be the debt that paid public service salaries, and paid for the Irish welfare state? We’re you as opposed to this debt when it was being borrowed to pay for the above?

  31. coldblow

    JM23: “I believe the EU to be a force for good, and I believe Ireland is best served by being at the heart of EU decision making.”

    I don’t believe it is a force for good. Raymond Crotty opposed Irish participation as all its members at the time (except for Luxemburg, I think) were former imperial powers whereas Ireland was the only former capitalist-colonized country in Europe. In an interview about Ireland in February last year Michael Hudson described the present set-up as anti-labour and argued that the EU are waging class warfare.

    Hudson wonders at the lack of opposition to current policies in debtor nations where these are clearly damaging to their own interests. In the interview he talked about a “herd instinct” and a “Stockholm syndrome”. I think these terms are vague and don’t really explain anything. I actually have a theory about it which does explain it, or at least in a rather more coherent way, through extrovert behaviour, and it is from this perspective that I wonder why people say they are in favour of ‘Europe’.

    I read somewhere that the cost of the Irish bank bailout amounts to several thousand euros while that for our European partners is in the modest hundreds at most.

    I don’t believe the common argument that the EU has prevented another continental war. At best it has attempted to neutralize Germany by channelling her economic power through formal institutions, which necessarily require consultation with her partners, rather than, er, going it alone, as she did twice during the last century. France gets to keep a nuclear arsenal and other trappings of power, but nobody is fooled. The US’s special relationship is with Germany, not Britain.

    Indeed, as we have seen over the last year or so in the Ukraine, the EU has actively incited revolution and war (albeit at the behest of the Americans). Note Catherine Ashton’s prominence at the Maidan demonstration.

    When I first came to Ireland (28 years ago) it was weird to hear so many young people (and not just on the radio, but in face to face conversation) say how they felt more European than Irish. This was the era of Eurospar, Euro-launderettes and Euro-everything. When the banks crashed seven years ago any European ‘solidarity’ which Irish European idealists may have hoped for was in short supply. Ask the Greeks.

    They don’t even share the same sense of humour. Remember how they reacted to Dustin the Turkey at the Eurovision?

    By the way, in reply to an earlier post, I don’t think Britain wants to leave the EU. The Conservative Party are committed believers, like all the main parties, and the promise of (another) EU referendum is worthless as they know that such a referendum will never be held.

    • Deco

      The origin of the word “Yankee” – Jan Kees – John the Cheese eater. It is a term for the Dutch speaker/German speaker in the Northern part of the original 13 colonies. Connecticut, NY were both settled by the Dutch. Pennsylvania, and Ohio by Germans. That was before the Midwest became New Westfalen in the 1840s.

      Magna Carta, and the English language are borrowed from England. But relentless optimism, the primacy of ambition, sensibility as the intellectual strength, rigorous time keeping, and the can-do attitude are all Dutch or NW German traits.

      Television is dumbing down a great culture, and turning it into the cultural equivalent of BurgerKing or Taco Bell. In the real world there are consequences.

  32. mcsean2163

    Noonan’s critique of Varoufakis is total cringe.

    • I respectfully suggest that all who desire an Ireland of economic freedom within or without the European Union read the above link. If it is not understood please read twice more. Then inquire with questions as to how this will work in practice.

      This can be done at no fiscal or financial costs to the country but resulting in savings and a prosperous economy using a currency protected from the evils of inflation.

      • Adelaide

        Your constant espousal of ‘commodity money’ ignores the historical fact that alongside ‘FIAT’ money they are both consistent failures, as explained in Bill Still’s excellent documentary The Secret of Oz.

        • michaelcoughlan

          Yes Adelaide.

          However Still himself has a flaw in his argument. Tony met him in bray in Ireland and challenged him and Still apparently didn’t like having to examine his own hypothesis.

          The flaw in Still’s argument is that when he says currency needs to be issued interest free in the public interest by the government (who controls the quantity) you are handing the printing presses to politicians who will print their way to oblivion.

          McWilliams issued guidance on this matter which initial caused my mouth to drop open because it went against my own intuition but I tried my best to eat humble pie and figure out the point he was making.

          Mcwilliams said he was against sound money as a concept (If I quote you incorrectly let me know David) because he viewed it as a constricting force on the expansion of the economy.

          Riegel’s ideas are note worthy but self issued currency is too week not being backed intrinsic value. So my two pence worth is that you need a currency which circulates in a manner which gets around the constricting aspects of sound money alluded to by McWilliams such as bitcoin or a note with a recoverable gold element in it or most likely both as in a note with a blockhchain and a tiny gold element (in case of economic collapse some value will be retained) which is ultimately backed by the wealth creating capacity of the economy capable of being self issued (Riegel style).

          The self issue capacity decentralises the issue of the currency to the citizen but the gold and blockchain element retain control of the value of the currency with the blockchain element allowing for fungibility and a capacity to increase the supply of currency to get around the problem talked about by mcwilliams of the sound money becoming too strong causing a brake on economic expansion.

          These ideas only a work in progress.


    • michaelcoughlan


      There is a flaw in Salin’s view. From the link:

      “The monetary value which is assigned to the coin shall be slightly higher than the value of the silver contained in the coin. This condition is necessary, to keep the coin in circulation and prevent its being melted down for a higher value in silver, than its value as Greek money”

      The government can’t decree the “value of the drachma”. The market does that. If the drachma falls in value against the coins they coins will be taken out of circulation.

      The solution is to issue drachma into circulation and for the national mint to store the silver coins backing the currency promising the bearer the right to retrieve the coins on demand.

      So if I receive a note promising me one pound of silver on demand at the mint in return for the note I am holding then the note functions as silver but gets around the fungibility and constricting issues highlighted by mcwilliams.

      Imagine tony if you grow 5kg of potatoes and you say to a guy I want a silver backed drachma which he obtains from the mint by selling euros to the mint you slowly replace the interest bearing currency with silver backed paper.

      If the bearers claim their coins in a case where the value of the coins drop the mint goes into the market and buys new coins to redeem the notes being returned holding onto the coins already in storage which were used to back the currency at the start.

      If the coins have risen in value above the fiat at the time of their issue then the mint retrieves the coins from its vault and redeems the notes.

      This protects the mint from an arbitrage exposure.

      The beauty of this is that it also incorporates the self issued currency idea of riegel in other words if you can trade a service or good for silver you can bypass the banksters fiat racket altogether by issuing your own a payment of silver from the mint in lieu of goods or services provided.

      The way it happens is the purchaser issues the mint with an receipt of transaction to a seller which is used to claim from the mint in silver and equal amount of currency but the purchaser has transferred his goods or services to the seller PRIOR to writing to the mint.

      The creator of the goods and services has EARNED the right to increase the supply of barter notes. If he cant find a seller to take his goods or services then they are not up to scratch.

      It is his latter approach I am going to take when setting up my new business. I am going to price my goods in silver etf covered call backed barter notes. The covered call aspect generates a revenue to cover admin costs.

      Any one can come in and trade their skills or labour if I need it and I will issue them with an item (barter note) which will have REAL transferable value. It is a faith based self issued currency real world adaption of Riegel’s vision.

      I am still looking for flaws so if you find any point them out.


      • michaelcoughlan

        “The way it happens is the purchaser issues the mint with an receipt of transaction to a seller which is used to claim from the mint in silver and equal amount of currency but the purchaser has transferred his goods or services to the seller PRIOR to writing to the mint”

        should also include:

        the seller also writes to the mint to transfers an equal amount of coins from his own account to the mint’s account to allow the transaction to clear when the purchaser’s invoice has to be redeemed by the mint.

  33. This commentary is about money. More, correctly currency.

    Money has, in order to be effective, certain characteristics. These are principles determined over time, centuries in fact, if not millennia.

    Here are the five qualities that are deemed by mankind to be desirable for money to perform. it must be:

    Able to hold Intrinsic value.

    Over the last 2500 years only gold has held up as having all six characteristics.

    Durable; means long lasting and in fact gold does not rot, blemish, decay, evaporate. burn, dissolve or in any other way diminish over time. Think of the coins and bullion recovered in a brand new state after being buried, flooded or lost for ever over any time period. It might be said to be immutable in the ordinary course of events.

    Portable. A large amount of wealth may be moved or transported using a small amount. Thus it has been the salvation of various nomads as they moved from one place to another, be they nomads or refugees.

    Divisible. Gold is easily divided into fractions of any original amount and thus is suitable for any transaction.

    Fungible. Any divided amount of gold of certain weight and fineness is identical to any other like amount of gold. As such it is acceptable in any part of the world where gold is accepted as payment which is most of the world.

    Intrinsic Value. This is the best guarantee that your money will not become worthless as will paper money backed by nothing.

    Rare. Not easily replicated or duplicated. Thus the money supply is stable and not rapidly expanding

    The above is money, and silver is a close second being used for day to day transaction while gold is reserved or held as wealth and used only to settle major transactions where silver is too cumbersome.

    Currencies are those things derived from money. As such currencies are the first derivative. Thus a currency divorced from money quickly becomes worthless.
    Currencies were devised as a means to represent money and thus have value only because they represent money itself. “I promise to pay the bearer on demand” “One pound Sterling” Unfortunately today currencies have abandoned any backing by real money.

    Being unbacked by real money allows the perception of value to change on a whim.
    The latest has been the use of the word “Patient” by the spokesperson of the federal Reserve. Now speculation is rampant on the value of the US dollar as the commentators try to guess which direction the value of the US currency will go.

    We have now the individual currencies being given a speculative value one against another. Originally all currencies were valued against gold. Then as that was abandoned, governments desired more currency than there was gold to back it. What was abandoned was any measurement of the value of the currency. In 1944 only the US dollar was backed by gold and so the currencies became measured by US dollars, which was in turn backed by gold.

    All nations were now using the US dollar as a gold standard proxy.

    In 1972 the US abandoned this link and the US dollar was no longer linked to gold and the bearer of a US dollar note could no longer exchange for a like amount of silver or gold. At that point all the nations’ currencies became anchorless. No currency was backed by anything. All currencies were values against themselves.

    This is a form of illusion. How does one measure anything without a measuring stick with a proper acceptable scale of measurement.

    This has left all nations the ability to produce as much currency as they saw fit. Any graph pulled on currency expansion will show the surge in money expansion since 1971.
    Another graph will show the surge in inflation at the same time.

    Should we be surprised as the true definition of inflation is the expansion of the money supply. all nations now expand the money supply at faster and faster rates of expansion. Why?

    It is called competitive advantage. As a nation produces more currency to circulate, two things happen. The existing money supply is reduced in value and interest rates become lower. Thus as a central bank says it will lower an interest rate it is tacitly saying it is increasing the money supply. Interest rates and money supply are linked.

    A nation gets a temporary advantage over its trading neighbours by reducing the currency value relative to other currencies. We are told this is good for us as it enables us to sell our products to other nations thereby keeping employment.

    Of course it is never mentioned that it is effectively putting the nations goods on sale price and receiving less foreign currency for them. Also what is never mentioned is that all imported products from other nations becomes more expensive. As an active trading nation both buys and sells from abroad it means that the inputs of raw materials obtained from others becomes more expensive and thus the competitive advantage initially gained is soon lost.

    In addition, other nations do exactly the same thing and so we have competitive currency devaluations. These devaluations happen with greater and greater frequency. Thus is born volatility. currencies start to jump up and down against each other until it becomes impossible for a manufacturer to estimate costs of production correctly. Sometimes there will be extra profits and at other times unexpected losses. This requires the use of more derivatives to hedge the bet on the direction a currency may go. There is a loser for every winner on these hedged bets. It is a zero sum game. Nothing is produced by this activity. If the loser cannot pay because of insolvency (a bank perhaps) then the winner is not paid and is thus also a loser.

    Basically the system evolves to what we have today. Multiple currencies backed by nothing tangible competing against each other to drive each other into the ground. Insanity. It all starts with the use of bad money. It starts with the abandonment of the principles of sound money.

    To secure a sound economy it is essential that we revert to a sound money system.
    That is why Hugo Salinas Price is suggesting his proposal to monetize silver.
    He recognizes that an abrupt switch at this point may be too disruptive.
    He also recognizes that all precious metal coins have be stamped with a monetary value that is far less then the actual value of the coin. It is for example why a canadian silver maple leaf does not circulate as money. It is denominated as $5 but it trades and is bought for its silver content at over $22 CAD. Unless the coin is denominated at above $22 by a substantial amount it will not circulate as money but will be saved as a hedge against inflation. 12 years ago the same coin could be bought for less than the denominated $5 and so it has serves well over this period as an inflation hedge.

    It becomes readily apparent that any coin of value with a stamped monetary value
    less than the market value will not circulate as money. Bad money drives out good money. People save the good money but exchange the bad money as soon as they can for items of use or intrinsic value.

    Therefore it seems that the only way to have a good money coin circulate as money it to have it worth more as money than it is for savings.

    Therefore the coin should be named to be identified and have the explicit fineness and quality and the weight stamped on the coin. Readily identified but of floating value. Just the same as a Canadian maple Leaf silver one ounce coin is minus the $5 denominated value.

    HSP suggests this and also that the government agency involved sets a value by dictat that is set and published in the media just as exchange rates, and interest rates are. It is suggest by HSP that the monetary value assigned to the coin be at least 20% higher than the world price of the contents of the coin.

    This will allow the mint to purchase the metal at world prices, refine and mint the coins, distribute them according to demand and retain a modest profit to the mint. This profit to the mint allows the mint to stay in business and to meet demand for the coins no matter the world price of the metal.

    This also allows any government to buy with currency any amount of metal and convert that currency to coinage acceptable to the people.

    It should be established that this coin will be a newly denominated coin, not one currently in existence and given a unique name.

    Periodically the price of the metal will rise and so a calculation takes place that also rises the dictat monetary value of the coin. Thus the coin stays in circulation regardless of how high the value of the precious metal goes.
    In the event that the price of precious metals falls then the dictat monetary value does NOT fall or change just as a value of a coin with and imprinted value on it does not change.

    Thus people are assured of two things. The money will not decline in value and will increase in value if there is inflation. Thus the purchasing power of the money is retained. This will provide confidence in its continued use. such a money can run in parallel to the nations currency as initially the money will be used to save. Gradually it will move into circulation as a currency superior to the paper fiat notes which will be at a suitable point be discontinued.

    That is the plan (if I have not missed something) proposed by HSP and is brilliant in its simplicity. It is disliked, opposed , by central bankers as it removes their power over the economy and the politicians.

    Lets go for it. Monetary reform is imperative.

    Alternatively we wait for the crash of the fiat currency system and the economic mayhem to follow. The current volatility of the currencies is the first sign of the imminent collapse. The second sign is the depreciation of most currencies already against that measuring stick of gold.

    Some have returned to all time high gold prices (all time low value of the currency)

    • StephenKenny

      Who would this benefit?
      I suggest that if you consider it carefully, a well adjusted and balanced economy would be catastrophic for a number of groups:
      Politicians would no longer be able to return to their multimillion pound ‘consultancy’ roles.
      The entire Financial Services, and associated, sector. They would be forced to be paid a reasonable wage for leading to local businesses.
      The public sector would be devastated. The very significant pay increases, and surge in meaningless ‘executive’ jobs, would all have to go.
      NGOs – the explosion in these taxpayer funded organisations, which do nothing of any real benefit for anyone except themselves, would have to go into reverse.

      This malinvestment is now systemic, in fact the process of extending it is now systemic. Gresham’s Law reached a tipping point years ago, and wealth generating activities are now far less attractive, in the main, than bureaucratic an parasitic activities.
      The degree to which it is more sensible to do something essentially useless than useful, is now so wide as to make the latter not only incredibly risky, but also insufficiently rewarding.

      The crash, or a war, is all we have left.

      • Too true Stephen

        However I will be able to say I tried however ineffectually to do something about it.

        Unlike David suggests, never say, “never”

        Think and Grow Rich by Napoleon Hill suggests

        “what the mind can conceive and believe it can achieve”

        If David will not examine the alternatives in the public media we will have to go to a higher level.

        • StephenKenny

          We’ve fallen, or jumped, off a very tall building.

          As we fall, since we cannot say what time we’ll hit the ground, it is the perceived wisdom that we aren’t falling at all. This huge crowd of people, all falling towards the ground, all saying ‘Only an idiot, or a conspiracy theorist, would say we’re falling’.

          And in this environment, you expect someone, anyone, to stand up in the national media and commit political suicide by saying we’re falling?

          The ground grows nearer, and it is true that we can’t say if it’s one mile, or ten miles away. As if it maters to anyone except short-term financial traders.

          • Well some are keen to take credit for past statement and analysis so I was expecting that another so obvious position would, could, not be ignored.
            future glory awaits.

      • In answer to who benefits.
        Why, the regular citizen.
        This is a return to public policy to benefit the people.
        Perhaps Direct Democracy would be interested?

        • StephenKenny

          And that of course is the most serious symptom of the completely broken – mal-investment driven – system:
          Since wealth creation no longer has a place in the economic system, no one in power is on the side of the wealth creators i.e. on the side of the regular citizen.
          They can simply print/borrow themselves rich – the question therefore arises, “What are all these people for?”

          • we are economic serfs bound to paying ever increasing debt loads.

            It is time we awoke to what is happening and why. Then the people will do something about it.

            Barely a person understands our monetary system
            That includes most economists and MSM commentators and apparently David too.
            Either that or he has struck a Faustian bargain, to avail himself of the crumbs from the emperor’s table.

    • c.eire

      Would it still be wise so to keep buying the physical coins with the monetary denomination stamped on them to keep to hand ?

      • Absolutely.
        With the fall in the value of the EURO this last year you will be able to retain your buying power with any savings held in bullion coin.
        It is the smart thing to do. Keep accumulating.

        Denominated coins will not circulate as money as the real value is way higher than the monetary value. However, good quality bullion coins can be sold anywhere in the world to gain whatever currency you wish to spend.

        One should carry a few with you when traveling just in case of a sudden change or bank problems while you are enroute.

  34. Well worth the read for a sane perspective on Europe and the insistence of US intervention. How the results of the US spreading democracy results in devastation and destruction of country after country all at the profit of the military industrial complex. This is largely paid by the US taxpayer via the funding of ever increasingly vast amounts of debt by the Federal reserve.

    Thus the instability of the world is largely funded by the central banking money system.

    Being rid of the central banking fiat, debt based, ponzi scheme flood of money would deprive the war mongers of their funding.

    Basically, what is evident, those who support a central bank money system also tacitly support the international war machine of the one world government madmen who wish to enslave humanity to the benefit of the select few. ((Way , way less than the so called 1%,))

    It is way past time to revert to a sound money system that is not able to be abused any where so easily. This is a question of the survival of humanity.

  35. He was right

    If the American people ever allow private banks to control the issue of their currency, first by inflation, then by deflation, the banks…will deprive the people of all property until their children wake-up homeless on the continent their fathers conquered…. The issuing power should be taken from the banks and restored to the people, to whom it properly belongs. – Thomas Jefferson in the debate over the Re-charter of the Bank Bill (1809)

  36. [...] View David McWilliam’s article from the Irish “Sunday Business Post”, 15th March 2… [...]

  37. Adelaide

    E.C.Riegel “As long as the People’s misconception on the intrinsic value of money lasts, so too will their suffering.”

    Riegel’s viewpoint which he presented in his Valun Monetary Model was that the only democratic money impervious to debasement or manipulation by third parties was money (The Valun) with two properties

    1. It solely serves as a medium of exchange
    2. It is issued at source by the individual market participants in a zero-sum mathematical framework.

    The reason gold-bugs and ‘commodity money’ advocators cling to the notion their ‘money’ should be backed by something valuably tangible is their refusal to concede the self-evident fact that ‘money’ is a physical representation of a mutual illusion shared, understood and acted upon in good faith by the consensus of its market participants for the purpose of exchanging trade. Money is an illusory but practical tool, the only question being “Who issues it?”.

    • Anybody can create/issue money. The question is how is it issued , by whom, and can it be trusted to be redeemed.

      I borrow something from you and give you an IOU in exchange. I have created currency that if recognised by enough people you could use in exchange of other goods. It depends on the strength of the covenant.

      All currency is the same.

      commodity money has not that problem as it is money in its own right and recognized by people as such. It has no counter party risk and is not a zero sum game. It is not extinguished in use in trade but it acts as a catalyst for trade over and over. To do so it also is a store of wealth and as such has value in its own existence.

      PM’s also are not issued by anyone and so it is impartial. Other currency can be inflated until worthless. The issuer is always tempted to do so.

      The “value” of precious metals as money is set by the market place and not by edict. The daily fix in London of the world gold price, is just that, A FIX, a con job.

      Basically the problem with all issued money is the fact that it is issued by someone who can then corrupt the money by issuing more and more until the currency is destroyed. Without that corruption anything can be money, issued by anyone. Do you trust the issuer of your commonly used currency. More and more are saying they do not.

    • Please explain to me how the Valun is issued. It seems to be based on the individuals ability to produce. How is this decided and by whom.
      What is meant by “a zero sum mathematical framework”??

      Commodity money has as far as I can see has the same attributes as Valuns
      It bears no interest either.
      It acts as a medium of exchange (but is not consumed in the process merely acting as a catalyst ready to be used over and over again.)

      Neither is gold and silver political in the sense that it is controlled by a single entity. It is political only in the sense that it becomes controlled by government by act or decree.

      Whether it be Valuns or commodity money both are agreed that if government had no control over money then they would be unable to wage war or fund the apparatus of state that makes slaves out of their citizens.

      At least we need to repeal the legal tender laws.

  38. Tony, I think you should set up your own gold mining business – in the comfort of your own khazi:

    “Gold in faeces ‘is worth millions and could save the environment’”

  39. “Losing a quarter of your value in 12 months is hardly stability, now, is it??

    It lost a quarter of it’s value as measured by the US dollar. However within the EURO area it lost nothing between all the member states. There nothing changed.

    It lost barely any against the Canadian or Australian dollar either as the Can/Aussi buck suffered a similar fate.

    The devaluation of all currencies can be properly measured when compared against real goods or real money. In Canada for instance our gas (petrol) prices fell initially when oil prices fell but soon went up to not much change as out currency devalued.

    The central banks are terrified of people seeing the real value of fiat which is why there is an unmerciful campaign to discredit gold and silver as the real money they are.

    Similarly most currencies lost against gold as amply demonstrated by the Rouble which dropped to all time lows when compared to gold. The US dollar has lost little to gold and at this point seems prepared to start to lose to gold too.

    Gold is the second best performing currency in the world and about to become the best.

    N.B. silver in the last weeks has out performed gold and may move into first place as a currency to own while pushing gold into second place. All national or block currencies are in a competitive devaluation situation, and are rapidly heading to a zero value, as they compete with each other in a race to the bottom.

  40. Ruairi_OBroin

    booms and busts are engineered by the thieving so-called elites to steal money from the ignorant. This is true on a micro (personal) and macro (state) level. Pile in the cheap credit, force the dumbies into loans they can’t afford leading to bankruptcy, then sweep in to buy up valuable resources for pennies on the euro. We have been taken for fools by the economic hit men who are still laughing at us all the way to the bank!

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