April 13, 2015

What Roosevelt did won’t work here, but...

Posted in Sunday Business Post · 57 comments ·

Perhaps the best description of the journey from solvency to bankruptcy comes from Hemingway in his novel The Sun Also Rises. Two characters have just met and are talking intently, each trying to figure out what the other is doing in rural Spain in the 1920s. One of them asks the other, ‘How did you go bankrupt?’ The other responds, ‘Two ways. Gradually, and then suddenly.’

When we look at how countries, firms and individuals go bankrupt, we see that Hemingway got this right. Initially, it is a gradual process, and the parties tend to be in denial. When dealing with a new reality – a difficulty in meeting a mortgage payment, or a drop in the value of your home – most of us tend to expect that things will return to normal. It takes a while to get our heads around a permanent fall in prices or incomes.

Over time, though, it becomes apparent that there is a monumental shift occurring under our feet. At the point when bankruptcy can no longer be avoided, things move rapidly. The run-up to bankruptcy is a panic situation: the creditor tries to get his hands on as much as possible and the debtor tries to preserve something for himself.

Up to now, the Irish banks that have been bailed out using state capital have been exercising a moratorium on mortgage foreclosures: this was the price exacted in return for the state’s financial infusion. But it can’t go on forever and if AIB is to be sold, and some of the state’s capital recouped, something has to change.

AIB will only be sold if investors are certain that the bad loans have been sorted out and that there are no nasty surprises hidden in the balance sheet. Who would invest in a bank knowing that the new capital invested would merely be filling the hole?

However, the cost of mortgage default or write-downs is eviction, because if banks write down the loans, they will want to sell the underlying assets – the houses – to recoup some cash.

Despite the recovery in the economy, the debt burden hasn’t gone away. While some people are buying new cars at a rate not seen since 2006, many more are still mired in mortgage debts – and this is when interest rates have never been lower. What happens when rates rise?

According to figures the Minister for Finance cited in the Dáil in late 2011, household debt in Ireland is at a breathtaking 140 per cent of GNP. Any upward movement in interest rates will have a devastating impact on people’s ability to repay mortgage debt.

Together with interest rates – a major factor in the trajectory of debt dynamics – defaults and evictions is the attitude of the banks. As long as they don’t insist on getting their money back immediately, there is a chance that a mass mortgage-default episode can be avoided for an extended period. This has come to be known as the “delay-and-pray” strategy. But this is coming to an end.

In order to linger in this state, the bank will need a shareholder who doesn’t care about the value of their investment. This may be possible under government ownership. However, this is not a plausible long-term prospect. Banks must return to profitability at some stage, a necessity that may prove incompatible with the current moratorium on foreclosure.

We have now reached that point, as the state wants to sell the banks. The status quo – in which people can’t afford to pay their mortgages, and the banks can’t afford to write them down – is now not sustainable. The trajectory of bankruptcy – gradually, then suddenly – comes into play.

But is there an alternative to the cycle of default, debt write-down and eviction?

At the height of the Great Depression, US president Roosevelt, recognising that the economy was being held back by debt and understanding that mass eviction was not tenable, stated it was his objective to “relieve the small home owner of the burden of excessive interest and principal payments incurred during the period of higher values and higher earning power”. He embarked on a programme of debt relief, setting up the Home Owners’ Loan Corporation (HOLC) to buy mortgages from banks in exchange for bonds. The government then restructured the mortgages, writing off significant amounts of principal. In all, one million mortgages were restructured.

Starting in 1933, the HOLC bought up mortgages and then waited. Over time, as US conditions improved, and the mortgages started to perform profitably, it sold them back to the banks. Thus, a million Americans, who might otherwise have been kicked out of their homes, got back on track and paid off their loans.

Could we do something similar here? Could we write down and not evict?

Yes we could, but where would the money come from? There can be no more taxpayers’ money going to the banks. So how? What if we used the age-old debt-for-equity mechanism?

Given that house prices rose rapidly during the bubble years, the write-downs might be administered on a sliding scale, with those who bought at the peak getting the biggest break. Let’s imagine an average loan write-down of one third. Picture a mortgage with €300,000 outstanding. The mortgage holder applies for relief, and is accepted. Her mortgage is written-down to €200,000, with repayments restructured accordingly.

This leaves a hole of €100,000 on the balance sheet of the bank. This hole could be filled by giving the bank an equity stake in the house. When the house is sold, a percentage of the proceeds – perhaps matching that of the write-down – would go to the bank. This is a debt-for-equity swap: the bank takes equity and the borrower gets debt relief.

The equity stake would not wholly solve the bank’s new balance-sheet problem, however, because a large proportion of the homes covered by the relief scheme would be in negative equity. The banks would need an infusion of capital from somewhere else in order to keep their balance sheets intact.

Where could this new capital come from? We would have to convince the ECB to accept housing equity as collateral for a massive Irish banking bridging loan.

At the beginning of the debt crisis, when the ECB was behaving like the central bank of a solvent continent, this move would have been impossible. But now with the ECB embarking on QE, anything is possible.

Debt for equity is the only way you can have (1) write-downs without (2) evictions and (3) still sell AIB. If these are the state’s objectives, debt for equity is what it has to do. It is time to get back to the European negotiating table because Hemingway’s iron law of bankruptcy simply can’t be avoided any other way.

  1. michaelcoughlan

    Hi David,

    A very important and timely article. There is something that hasn’t been considered however.

    “Debt for equity is the only way you can have (1) write-downs without (2) evictions and (3) still sell AIB……………..

    Where could this new capital come from? We would have to convince the ECB to accept housing equity as collateral for a massive Irish banking bridging loan”

    Lets assume the banks take equity stakes in people’s houses who are under water. Then the ecb gives still another loan to Irish banks.

    What then? The bond bubble and the equity markets bubbles still haven’t popped and they will. Interest rates will then sky rocket and it’s back to square one mortgage payments bouncing.

    Too much debt is the problem.

    This is what you do. Strengthen legislation to allow honest people who are victims of banking incompetence to allow them to stay in their homes when the default happens. Let the whole thing collapse. Hand bondholders and shareholders their arses.

    When the dust settles and AFTER interest rates have normalised set up a new state controlled and owned entity to asses the person’s capacity to pay. If they are on social payments let the state take ownership of the house and rent it back to the person on a rent to own scheme.

    If other people are in jobs with lower incomes allow them to pay a mortgage which reflects their new lower capacity to pay and remain owners of their houses. Much fairer.

    Will my suggestion happen? No. Big bird will protect the banks at the peoples expense and at all costs.

    What you are articulating is that having had all our money transferred to corrupt bankers in the form of higher taxes, destroyed economies, and min wage zero hour contract jobs is now to transfer a large portion of probably the only asset left for most Irish people; the family home.

    No chance.

    Charlton Heston’s quote to the NRA in the USA comes to mind;

    “They will prize my rifle from my cold dead hands first”


  2. 16then

    As someone who is currently bankrupt, I can confirm that is exactly how it happened. We sold off everything to make payments, we realised that we shouldn’t / couldn’t do it any longer.

    With the Government able to borrow at the lowest interest rates possible, now is the time for them to do something on Mortgages. They already have Nama, who’s mandate could be extended, but rather than Equity on houses they should apply either an inheritance tax or capital gains on any property which receives a write-down.

    • With our €64 billion bailout, it could be argued that this amount indirectly covered the banks taking a hit of €42 billion by transferring loans to NAMA. I would like to think the balance of €22 billion has more gone towards helping people like you to move on with their lives, rather than going towards non Nama developers and bond holders. Nothing worse to see a rogue developer having debt of millions written off only to have huge profits a few years later, while a mortgage holder is made bankrupt simply for being at the house buying age in the boom years.

  3. When interest rates start to rise, and they will in 2016, this model may not hold water.

    • michaelcoughlan

      yes. well spotted. I also mentioned the same above.

    • Colin

      Stephen and Michael, what makes you both so sure there will be interest rate rises in the future? Is it a hunch or is there some reasoning behind it?

      • michaelcoughlan

        For a whole pile of reasons colin.

        Normality has to come back to the markets or the craziness of record highs in stock markets (inflation/hyperinflation an austrian perspective), and deflation in the real economy (a Keynesian perspective) will get more perverse.

        best regards,


      • “As I have written several times before, the Fed cannot ever raise interest rates again, this would destroy derivatives, the economy, the Fed’s own balance sheet and create a situation where tax revenues would not be enough to pay the interest on federal debt. Raising rates is not an option. Unfortunately, it is the same situation in both Europe and Japan, they have no options left either”


        Interest rates cannot rise as a matter of Cb policy. BUT when the market overwhelms the fixes by the Cb/governments then anything goes. Timing is unknown but unlikely to go past 2016 IMO. This applies to all CB’s not just the FED.

        • Felix Quigley

          I am not sure what you mean by derivatives. I can find no good explanations either. Yet I am told they caused the last crisis.

          We Exchange goods by means of currency. This is mainly paper and coin nand credit cards are evolved from that.

          But these do not represent real value. They are only valuable because people trust them as a means of Exchange.

          The idea was that if you bring your dollar in the Fed will Exchange it for so much gold. Nixon ended that right?

          So the paper dollar was a derivative (it derived from the gold supposed to be there to back it up)

          But that is gone. Nixon ended that but the trust carried on for a bit longer.

          Now Bush and Obama have been piling up the trillions like nobodys business.

          I think you are referring to that above but I am not sure where it fits in.

          Thanks for your comments Tony.

          • Hi Felix

            The top “comments” were extracted from the link that shows the essay by Bill Holter.

            Derivatives refer here, I think, to financial instruments derived from currency. Any currency swaps and bonds of various stripes. Sovereign, corporate and municipal. all will be pennies on the dollar and the holders assets diminished.

            Essentially anything at low interest suddenly exposed to higher interest rates will see a substantial loss. Plus the servicing of any of these debts at higher interest rates will be impossible as all will be unable to pay thus going broke. The bond of a bankrupted entity is worth nothing or little and the market will demand punitive double digit interest rates to be even bothered to be interested.

            Junk bonds there will be in abundance.

            In this case where would you prefer to be invested. Stocks, bonds, real money?

        • cooldude

          Here is a good article on derivatives. Basically they are just bets made between banks on whether the value of something will rise or fall. Interest rates is a very popular one and they can use these bets to manipulate rates lower than would be normal. That applies to all markets and all are manipulated. Wall Street is now just a casino exchanging these bets through their algorithms. What can possibly go wrong. By the way if/when the bets do go wrong the depositors money will be lost to make good the debts so this is not just some academic subject. As to its scale global GDP comes in at around $64 trillion yet this “market/casino” has a value of over $900 trillion. This is how the next financial crisis will occur and with it will be a global theft of depositor’s money. Banks are not a safe place to keep your savings as they all gamble at this casino.


  4. Le Methode

    I have read many articles about proposed solutions to the home borrower debt crisis and to be honest none will work . All proposals are skewed with conflicting interests and opportunities for failure .

    I am an advocate of the philosophies as applied by the French and I know they would steer away from any of these proposals including the above . They would spend days and weeks philosophising to seek a solution before even contemplating the pragmatic logical solution. Unfortunately we in Ireland do not know what this means and I don’t think we will listen either . Thus the lack of experience and the appearance of many other unqualified opportunist heads who just want to be seen only aggravates this fiscal diarrhea .

    Normally what is determined as part of the initial feasibility is to know where does the apple fall as in Newtons Law of Gravity . And this is only the start .I have never known any Irish Economist who can accurately explain this in minute detail . Thomas Pitteky would do an excellent analysis of this .

    Using a parallel and not related topics Napolean after war saw his defeated soldiers demobilised and unable to make a decent living so he created the concept of Viager and saved them financially and this business continues today to assist old aged French people today .Generally no banks are involved .

    My own hunch is that the solution will need the elimination of the Irish Banks before any realistic solution is found .

    • michaelcoughlan

      “My own hunch is that the solution will need the elimination of the Irish Banks before any realistic solution is found”

      yes certainly.

    • Colin

      Just make sure that golden handshakes for the staff are eliminated before you implement the plan.

  5. Antaine

    In this wee country of ours deals like this only happen for the privileged few. Shudder to think it would ever happen for the great unwashed.

    • Colin

      Who is left to pay for the great unwashed’s bailout? The tenant class and the young?

    • Deco

      Unfortunately, you are correct. The veneer of respectability in the professions, and the mainstream politicians hides some extremely corrupt, compromising and dubious behaviour.

      “Good room” scenario.

  6. Or we could just accept that foreclosure has to be a normal part of the system we have chosen

    • eoinoc

      Amazing how the truth is constantly avoided by so many different parties.

      The narrative needs to change from one of ‘do we repossess ?’ to ‘How do we repossess ?’
      Concentrate people’s minds and you will resolve this issue.

      Repossession is the only option.

      If you can’t afford to live where you are, then it’s time to move.

      Le Merde started hitting the fan in 2008 and here we are, 7 years later, still twiddling our thumbs wondering if we can somehow escape this without any pain.

      We can’t.

      Repossessions need to happen quickly and cleanly.

      Start with 2+ years in arrears.

      Simply repossess them all.

      Then move on to 1+ years.

      Finally bring in a law that states if you are 1+year in arrears the property is automatically repossessed.

      Enough with this craziness.

      We can’t have a genuine recovery without sorting out the mess from the previous boom.

      It’s time for those in arrears to swallow the bitter pill and move on.
      For all our sakes.

    • Colin

      At last. Someone speaks the truth. Of course repossessions can happen. It works in every other country. We implore American multinational firms to come to Ireland to create jobs, and these employees take on American work ethics and values, and we know the country would be screwed without these multinational operations based here so why can’t we adopt American repossession policies and jingle mail policies?

    • I checked the statistics last summer and if we had the same repossession rate as in the UK, then it would have been 3.5 times higher than our rate at the time. But since only 2% of UK mortgages are/were in arrears, the market there would easily adsorb the repossessed homes-unlike here where the mortgage book is still decreasing reflecting the weak new mortgage demand compared to the baby boomers retiring and paying off debt. Since AIB account for 28% of the nation’s total mortgage value and BOI around 19% then obviously these will be the banks dominating the court repossession cases.

  7. CorkPlasticPaddy

    That’s all well and good for you to suggest such a solution to this problem, but what will happen to the people who’s properties are repossessed? All you will do is create an even bigger problem. I have no sympathy whatsoever for the people who bought to rent. They are the one’s who should have their properties repossessed not the ordinary mortgage holder!

  8. Adelaide

    My recollection may be hazy but I recall a figure that one third of all Irish residential property is owned, one third mortgaged and one third rented. David already said in a previous article that the only solution is mass social housing, leaving it to the private market has and will continue to fail.
    The saving grace of being a small island is that the mass homelessness of evicted renters and mortgagers alongside empty properties will be too visible, the Irish through sheer uncomfortable dint of physical proximity to each other will be forced to solve the worsening housing crisis, then again, the Irish have so little regard for each other that they avoid beneficial solutions in preference to spiteful punishments. We shall see which way this crisis unfolds.

    • Hi Adelaide,
      Yes it’s around 758,000 principal dwelling mortgages, 140,000 buy to let mortgages last December and roughly around 550,000 rental homes incl social housing (based on estimates using census 2011 and with PRTB data from census time as well as recent data to predict number of unregistered rental properties). If there are 1.75 million occupied homes, it does look like around a third are rented, 25% of owner occupied are mortgage free and nearly half of all occupied homes mortgage free but closer to 40% if we exclude social housing. These figures obviously don’t include the 10% of all homes which are vacant. I agree we, as a nation, have little regard for each other if there’s a huge social housing crisis as well as a lot of vacant homes- very little of which are in ghost estates.

  9. things Roosevelt did in 1933 was to make it illegal for american citizens to own gold. all gold had to be turned in and people were paid at $22 dollars per ounce.
    Once the gold was delivered the price of gold was reset at $35 per ounce or a near 60% increase on the reset.

    That is how a state when bankrupt will set about robbing its citizens. AA sort of bail in if you like.

    Today all G20 countries resolved to bail in the deposit holders in the case of bank failures. a ruptured banking system leads to a ruptured state. All citizens pay for inflation and government bail outs.

    some are suggesting here that some should be bailed out (the mortgagors)
    while others will be bailed in (the mortgagees saved ).

    Everyone is trying to save all others from greed corruption and foolishness.
    Socialism gone mad, really, when one looks at it from afar.

  10. Deco

    Concerning money and US politics, there was a very important announcement yesterday…..


    • Adelaide

      Hillary Clinton genuinely scares me.
      God Save America from Hillary Clinton. Hopefully her track record of lies, corruption, ineptitude and being Wall Street’s whore will derail her campaign, a truly unhinged soulless individual with her unsettling ‘other worldly’ gaze.

      Go Rand Paul!

      • Felix Quigley

        You are right. Ben Shapiro is a clever man and he has Hillary sussed. Just google him. The latest about emails is very serious issue. the whole tendency in America, and Obama has been the very worst, is to move away from the dual control of the historical American Revolution and to destroy “Parliament” that is Congress.

  11. Deco

    David, the Irish government is too broke to be intervening in the market.

    The Irish government could reform the institutional state, close down the useless quangos, sell the unproductive, uncompetitive parts of the semi-state sector (Fas/Solas, RTE, the ESRI), and go on an economy drive on the rest (perhaps realgning universities like DCU, UL, WIT, DIT, NUIM, and NUIG to make them wholly STEM based).

    In other words, do not expect a solution from the institutional state. Instead merely expect more politics, favours, tricks, lies, and pretence.

    And prepare for the next crash. Because it will come before the end of the year. If Milliband (woefully inexperienced in my opinion) becomes UK PM, it will come within one month.

    • Miliband is a disaster waiting to happen Deco (not that I’m a massive fan of Cameron either).

      As I said earlier on Twitter:

      “Anyone who would vote for Ed Miliband would want to have their head examined”

      “A whole bunch of sycophants applauding Miliband. The day I need a ‘leader’ like him (or any leader) will be day I lobotomize myself”

      • Deco


        Milliband as PM, is exactly as you describe it. Milliband depending on the SNP might be an even bigger disaster. The SNP sound a lot like FF under Ahern – promising loads of stuff, without no disclosures about who will pay (or when they will pay for it).

        Cameron (often mediocre at handling critical issues like the UK economy) is less deluded than Milliband.

        If Milliband wins, then Ireland will get into trouble within six months.

  12. Deco

    People’s attitude to the concept of the common good, and shard public direction has completely changed since the 1930s.

    Blame it on the 1960s, the Spoiled Brat Revolution, consumerism, the Reagan/Thatcher/PD era, the failure of bureaucratic socialism – or perhaps all those elements.

    But don’t expect buy-in when you have Johnny Ronan getting sweetheart deals from the state for the Cowen Can in cebtral Dublin, while water is taxed three times and is still of dodgy quality.

    • Deco

      don’t expect the people to be impressed, when the state propaganda quango assembles a bunch of quango bosses together for an after dinner type discussion along the lines of “we are all in this together” (that is why my quango pays me 150k per annum to do SFA and tell everybody that I care).

      The institutional state is rotten. It has become a parasite on productive decent people. And the people are fed up with it.

    • michaelcoughlan

      Hi Deco,

      From the Indo;

      “Ronan’s victory is not final though. One need only look back to this time last year, when another US investor – Blackstone – bought loans tied to developer Michael O’Flynn from Nama at a steep discount.

      At the time that deal was portrayed as a victory for Mr O’Flynn. Three months later Blackstone moved to take control of the business and remove Mr O’Flynn and his team. That row ended up in court and was only resolved this year.

      Mr Ronan is out of Nama and “back in business”, but he still doesn’t have a lot of room to manoeuvre. It’s not quite party time all over again just yet”

      Egotistical son of a bitch is about to get asset stripped a second time. When the bond and equity markets pop sooner rather than later interest rate rises will crush him.

      Ronan like Bernard Mcnamara never built a thing. In Mcnamara’s case it was the tradesmen and management and in roanas case it was the builders he employed.

      Standard of professionalism in the fourth estate is deplorable.


  13. DarraghD

    What is going to make this interesting in a kind of scary way, are two things: (1) a general election within the next year approximately. Mass evictions are politically toxic for any party, particularly two incumbent parties, one claiming to especially represent the working person in society, and then other other factor that makes this scary is: (2) the unique separation of powers here that we have under the constitution. Court petitions and consequent judgements, unlike a report issued or an action taken by some quango or semi state or whatever, that can be shelved, silenced, or as we saw with Minister Hogan, can be promoted into a higher orbit of use leanness where he can do less harm on the domestic political scene, not even the government can influence the judicial process that is being asked now by Irish banks to kick families out of their homes & onto the streets, that will result in scenes reminiscent of a Trevelyan era eviction.

    Throw in on top of that, a labour leader in the UK who is extremely low on achievement and obviously so, yet on ambition, I can’t think of anything more dangerous, and yet if we manage to dodge him, we get a man who will give the EU an “in or out” referendum on membership of the EU?!?!?

    Seriously, if you haven’t decided to become a “prepper” after taking an honest sober look at our local political landscape right now, then I think there is something wrong with how you might be seeing things!

  14. StephenKenny

    The problem with these sorts of solutions are the commercial practices they teach the banks, financial sector, public sector, and politicians.

    It teaches them that there’s no real downside to the sort of behaviour that we’ve seen in the past 15 years. They can go away and do it all over again, front loading the profits, and the (future) taxpayer will catch the losses.

    It also trains the overall system that property speculation is far more profitable, and a great deal safer, than any sort of productive investment.

  15. DB4545

    David where have you been for the last eight years? Hemingway’s iron law of bankruptcy has been avoided and evaded by every scammer involved in this mess. There’s nobody in jail except for a few unconnected nobodies.The bankers, the developers, the politicians, the fixers dumped it all into lap of taxpayers and sailed off into the sunset with fat pensions and/or one year bankruptcies in the UK/emigrated to the US or beyond. Now the developers want to unfold their stalls and open for business with assets hidden undeclared and intact. The politicians are making noises that we “must forgive and forget” and move on and let them go about their business of f**king the taxpayers all over again. If some Irish banks are unfit for business let them go to the wall and let clean players in. The end.

  16. Grzegorz Kolodziej

    David reminds us of President Roosevelt’s Home Owner’s Loan Corporation which allowed his government to buy mortgages from banks in exchange for bonds and says that the government waited until the US conditions improved and when the mortgages started to perform profitably, it sold them back to the banks. He then calls our attention to the problem of financing such plan of writing down some mortgages and not evicting. His idea is to use debt for equity swaps, but this triggers another problem he points out: the banks would still need capital from elsewhere and we would have to convince the ECB to accept housing equity as collateral within the framework of QE programs.

    I can identify two problems with Dave’s idea and I would like to propose some solution to the second problem.

    First problem with that is that if we look at how all of this worked in the US we will notice that the US economy needed 17 years and World War II to get out of the recession. The unemployment rate before the Great Depression was about 3% and by 1939 it was still 19%. Hardly a success. Personal Consumption was still about 10% lower in 1940 than it was in the Great Depression year of 1930. The Great Depression has only really ended when the Federal Budget was cut from $95bn in 1945 to $35bn in 1947. The Keynesian economists were horrified but the economy took off, and this is without considering that most of President Roosevelt’s solutions required delegating much of legislative power to the executive power which in turn required first emulating some corporate solutions of a fascist state (whereby all business in a corporate state is in obedience of mission to the paternal wisdom of government) and secondly breaking the law, which Roosevelt commented on by writing to the Chairman of the House Committee that ‘little thing like the Constitution ought not stand in the way of a good intention for the public welfare’. By the way, when we talk about the New Deal I am not quite sure how happy the Irish would be some means which President Roosevelt thought would justify his goals such as confiscating part of people’s savings.

    In Poland the government implemented a New Deal program of public works and price regulations on an ever larger scale than in the US – by confiscating 2/3 of people’s savings on 28 October 1950 at the cost of around 400,000 people imprisoned in years 1944-1956 and 100,000 killed between 1944-1956. Both President Roosevelt and Vice-President Wallace were enchanted by the Soviet Union. Are you sure David we should put President Roosevelt on a pedestal, a man who having been acquainted with details of the atrocities being committed by the Nazis shared Anthony Eden’s fear that Hitler might actually accept an offer from the Allies to move Jews out of areas under German control (we can read all of that in the Memorandum of Conversation by Mr. Harry L. Hopkins, Special Assistant to President Roosevelt regarding a meeting with Anthony Eden March 27, 1943)?

    Anyway, my first point is that we cannot wait for 17 years for the economy to take off and mortgages starting to perform profitably. ECB (and FED) also does not want to wait for 17 years and therefore they embark on the QE program which results in hidden hyperinflation in property market and stock exchange. Maybe David’s solution would work in short term when it comes to relieving debt burden of young couples in Ireland inasmuch in hyper inflated markets the debt for equity swap solves the problem of too much debt, but in the long run liquidity is not a substitution for insolvency. Hemingway characters often start with big plans and ruffle everyone’s feathers on their way but sometimes they end up committing suicide. QE program is a suicide in long term which will end up with sovereign bond market collapse.

    Having said that, we can boil down the outcome of David’s solution to federalization of toxic Irish property bubble and in that I support his cunning plan of paying countries like France and Germany in kind for burdening the Irish taxpayer with bad debts of their banks. Let’s do it!

    As to his idea that the write-downs might be administered on a sliding scale (with those who bought at the peak getting the biggest break) I find it very fair. Pity that David is only jesting for no political party will give preference to outsiders over insiders except for the radical left, in which case Ireland will be bereft of any foreign investment and it will suffer Polish levels of taxation to finance the radical left programs (in Poland if you are earning 350 euro a week gross you will receive perhaps a 100 euro after taxation – half of your wages will be deducted for a Social Insurance Institution which will soon go bankrupt and with that income you will be paying 32% income tax – ever wondered why so many Poles emigrated?; all of this to finance bureaucrats – 3 times more of them than in 1989 and a lot of new ones after Poland’s accession to the EU – and to repay growing foreign debt because unlike Greece, Poland takes its debt repayments seriously and debt repayments account for a much bigger part of Polish budget than Greece’s; it has also, in an unfathomable act of stupidity, voluntarily chipped in to rescue the euro which is rather like Irish taxpayers bailing out Germany; i in 2013 Poland has also paid €200m for the British rebate, but only few people know that Germany have their own EU rebate too – €2.5bn, as does Holland – €1bn).

    Second problem is that, as I pointed out in the Irish Independent a few years ago, by agreeing on everything what Germany and France proposed Ireland deprived itself of any bargaining power with the EU and the EU controlled ECB.

    Is there any solution to this problem? Maybe there is. It is to threaten the ECB/IMF that should they not accept the debt for equity swap Ireland will, along the UK, join the China led Asian Infrastructure Bank and it will get the swap deal there – Prime Minister’s Cameron move which pissed off the US so much that they issued a statement saying that they are ‘wary about a trend of constant accommodation toward China’. By the way, this reorientation of the UK toward China at the cost of the US should make David to rethink his proposed strategy of choosing the UK-USA alliance over the continental Europe alliance because more and more countries are now drifting away from the soon-to-be overthrown dollar hegemony.

    The UK’s U-turn has already resulted in China investing ?14bn in Hinkley Point C nuclear power station which should make the UK a little bit less dependent on President Vladimir Putin’s mood (Ireland is more dependent on energy imports than the UK but that never worried any Irish politician except for those who firmly believe that even though it turned out that Germany cannot afford the wind energy, is féidir linn), ?42.8bn in UK’s High Speed 2 airline, ?800m in Manchester City Airport and ?1bn in the Asian Business Park.

    If Ireland replicated the UK’s change in geopolitical strategy it could in the best case scenario force the ECB – or maybe even the US, using its Irish lobby over there? – to get the debt-for-equity deal at the cost of not joining the Asian Infrastructure Bank for the time being.

    In the worst case scenario Ireland will get the much needed Chinese investment and perhaps the Germans will stop reading Ireland’s budgets in Bundestag before they are red in the Dáil. David often mentions the opportunity presented by the Irish diaspora in the weakening US, but he never mentioned the opportunity presented Chinese diaspora here in this country – some of them Chinese immigrants might actually be very wealthy and well connected people…

    Maybe this can be done without Ireland changing its name to Chireland? It would be a Mark Twain entrepreneurial story rather than Hemingway’s. As far as I remember, no Mark Twain character ever committed suicide…

  17. Deco

    Roosevelt might not have been a success. Did the economic crisis of 1932 really need to run for 10 years. There was a recession in the aftermath of WW1, and the President of the US at the time, President Harding bailed out nobody. The recession corrected itself after 18 months.

    Roosevelt did introduce laws that cut down on the level of “casino-banking” that was occurring in Wall Street. However, other anti-deflationary policies were nuts – especially with respect to the destruction of food.

    Roosevelt was lucky in the end. Call it the “survivor” theory. In 1945 there were few industrial powers intact. The United States, Switzerland, and Sweden were at an enormous advantage. Their corporations had few competitors, and carried little or no debt. Their workforces were ready to work overtime, and the machinery was in perfect condition. Their credit systems were intact. Their populations were well nourished, and not infected by distrust or enmity of each other.

    Truman stood down the military economy. And production of the real economy took off. Houses, cars, clothes, appliances, all took off. And America was capitalized and ready to produce.

    What America has done to itself since the LBJ years, by hollowing itself out is disgraceful. And I don’t see anybody talking about it.

  18. “We can chase this rabbit all day, of course. The broader point is that when you let government make decisions that should be market-driven, you will receive inefficiency, waste and sub-optimal results. Worse, some of the waste is intentional. Food stamps (or the politically correct SNAP) is arguably welfare for Cargill and Conagra. Such firms are its greatest beneficiaries and fiercest defenders. One man’s welfare is another man’s profit margin. In various ways, we are all on both sides of the fence. That’s why it is so hard to change the system. One way or another, most of the population are welfare queens. “-

    See more at: http://www.thedailybell.com/news-analysis/36230/Were-All-Welfare-Queens-Now/?uuid=6F800609-5056-9627-3C5071902B060BF2#sthash.wt0eRTmd.dpuf

  19. Roosevelt could not save the US economy until after it had gone to war and recovered in 1945.
    It will be much the same today. The economy cannot be saved by government action.
    This time is different too as the basic economy is in tatters because of the extensive debt many times what it was in 1933 as a percent of the GDP.
    Going to war to save the economy is different too as the US is stretched thin around the globe and the war efforts will add to the debts even more.
    Current reports are showing declining productivity and growing debt

    “Weaker-than-expected headline data in the next week should push consensus expectations meaningfully towards an outright quarter-to-quarter contraction for the April 29th initial estimate of first-quarter 2015 GDP growth. Once all revisions are in place, that first-quarter GDP contraction should be the deepest since the economic collapse from 2007 into 2009, and it would raise serious market concerns for a subsequent, second-quarter GDP downturn (release on July 30th) and formal recognition of a “new” recession. – John Williams, Shadowstats.com, April 10, 2015

  20. Your taxes have nothing to do with the requirement of government needing any money


  21. http://investmentresearchdynamics.com/economic-reports-indicate-economy-entering-crash-mode/

    “Given that the economy appears to be entering “crash mode,” and given that the money supply is now almost 5x higher than it was in 2009, and given that Treasury debt outstanding is now $7 trillion dollars – or 64% – higher now than in 2009, and given that interest rates can only go negative, I would suggest that the Fed is out of tricks and what is coming at us in the system is going to be much WORSE than what occurred in 2008.” Dave from Denver

  22. LKSteve

    Hemingway’s description of bankruptcy is perfect. The company I work for has just placed most of its businesses in Europe into administration. Indeed the ground shifted. And indeed the business was in denial.
    On another note. I live in a Brisbane suburb that was built after World War Two. The houses are what’s known around here as post-war, many of them with roofs that are known in the trade as ‘Frenchies’ , built in kit form in France after the war and shipped out here to make the process of erecting state financed homes quicker. There was a labour shortage here after the war. All the menfolk were buried in various pats of Europe, Turkey etc.
    There is a lot of work going on at night here. All the pipes are being dug up & replaced. You just hear machines, no voices. Brisbane City Council must have strict no-noise-rules for night workers. I took the dogs out this morning as the workers were wrapping up. I recognised the unmistakable brogue of Irish Men talking quietly amongst themselves after their arduous nights work. “See you Monday” one said to the other, he meant Sunday night when the night-workers resume their working week.
    The Irish are rebuilding the infrastructure, just not their own.

  23. survivalist

    The article seems to offer a suggestion that is at the outset presented as unworkable or doomed to failure. It looks like the point of this is to both short-cut the consideration of some of the questions around eviction and at the same time offer the consolation of having at least tried perhaps?
    What is not asked among many possible questions is whether eviction is right or not. If it is right to evict families and allow the fall out to occur on those families, parents and children then there is no need to discuss the matter its simply a function of business.
    If on the other hand it is not right to evict families then what follows from this?

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