A farmer told me he had just taken €53,000 out of the local bank and put it under his bed
YESTERDAY was the feast of the Immaculate Conception. In many other Catholic countries, particularly in Belgium and southern Holland, this is also the week that Santa comes and leaves presents in children’s shoes. For many, both the Immaculate Conception and Santa Claus are simply not believable. For me as a child, December 8 was a day off school and that’s all that counted.
What would Christmas be without Santa, or Catholicism without the Immaculate Conception? You can’t have one without the other. Even if you don’t believe, sometimes it is easier to pretend.
The Budget was akin to the Government playing a big game of ‘let’s pretend’. Let’s pretend that the banks are solvent. Let’s pretend that the problem in Ireland is ‘social’ welfare rather than ‘corporate’ welfare (because this is what bailing out the banks amounts to) — welfare fraud by corporations. Let’s pretend that the Budget can make the economy grow. Let’s pretend that some other country has tried austerity without mass debt restructuring and succeeded. None of the above are true.
The problem with ‘let’s pretend’ games is that, when we are young, they allow a child’s imagination to flourish, with reality and fantasy crossing over, but when we become adults, we know it’s only a game. We also know, for example, that the reason no country has ever tried what we are doing — austerity budgets without debt restructuring — is that it doesn’t work. So why go through the charade?
The people know the Budget will not get us out of the hole, and they are voting with their pockets by taking money out of the banking system. The official response to this was, first, to deny it is happening and then to say it is all right because as quickly as our deposits leave, the ECB injects new cash into the banks and the net position stays the same. But this is a recipe for a banking collapse, as it implies that a banking system without deposits is a banking system; it is not.
For example, the other night, following a performance of ‘Outsiders’ at the lovely Backstage Theatre in Longford, a local farmer approached me tentatively. He mumbled for a bit, complained about the weather and abruptly told me that he had just taken €53,000 out of the local bank and put it under his bed (and being a farmer he had a shotgun by the bed). He didn’t solicit any advice as to whether this was a good or a bad thing to do; he just stated baldly his own personal conclusion about the banks, the economy and the financial affairs of the nation in general.
Either we fix the banks or this farmer’s approach will become commonplace and the establishment’s course of action that increasingly looks like national economic suicide or ‘patricide’ will continue.
The only part of the banking system that is currently working is clearing. Most deposits are still in the banks, cheques still clear, the ATMs still work. But that is it. The original guarantee prevented a run back then, but the problem has changed utterly since September 2008. It is now failing. The reason it is failing is that it was the right solution to the wrong problem.
The banks are insolvent. It is interesting that the conversation is now about comparing levels of insolvency. Bank of Ireland is quite insolvent, AIB is more insolvent and Anglo is completely bankrupt. The thing about solvency is that either you are or you are not. You can pay the bills or you can’t. None of our banks can pay their bills.
So, what is the solution? Let’s look at the numbers. In September 2010, when the guarantee expired, the banks had €55bn of bonds that they needed to roll over. The market, knowing that the banks were insolvent, said ‘no thanks’, so the ECB and Irish Central Bank stepped up to the plate and provided the liquidity the banks needed in order to open for business the following day.
To that €55bn we can add the €35bn the ECB had already provided in liquidity, giving us €90bn.
Then we can add the €34bn of special liquidity provided by the Irish Central Bank and we get €124bn. To resolve this mess, we have to look to the biggest holders of Irish bank debt: the ECB and the Irish Central Bank as well as the bondholders.
It should be very easy to convince Mr Trichet that allowing Ireland to go bust — as we surely will with the albatross of bank debt hanging around our neck — would be against the very raison d’etre of the ECB.
What is the biggest cause of runaway inflation in every country from Weimar Germany to Zimbabwe? A currency that people think is weak, and therefore don’t trust. The one thing that will weaken the euro is a sovereign default within its borders. It would turn into an existential crisis for the currency. There is no one willing to trust a currency whose continued existence is in doubt. Result? The euro plunges on the international market.
To stop this happening, the ECB has to sort out the Irish banking system in a way that does not lead to the people of Ireland being saddled with debts we cannot afford.
It should be fairly easy if there is a will to do it.
All deposits in Irish banks are held electronically. Ring fence these and move them to another institution. (This is not as odd as it sounds, it is exactly the plan Patrick Honohan outlined for the depositors in Anglo when he said that institution would be wound up by the end of January.) If a suitable institution does not exist, then we should create one.
The debts of the banking system can also be moved to the new institution, but the ECB would have to allow the money it is providing as liquidity to become capital in the bank. It would own, along with the other bondholders, 100pc of the shares in the new bank. As the property market here finally starts to clear, the bank could be sold to the private sector, fully capitalised and in good health.
Ireland is a systemic risk to the euro. We can deal with our own sovereign debt. We cannot deal with the debts of private institutions that went on a lending splurge to the private Irish banks for quick profits, nor should we.
If the ECB does not allow us to forego the bank debt, then it will reap what it is sowing. We will cause a crisis for the eurozone, and the demise of the very institution that has the power to save both itself and us.
The austerity Budget, without a deal on the banks, will lead to patricide. Corporate welfare, not social welfare, will sink this country. Will that be Fianna Fail’s legacy?
Irish Wanking Bankers!
http://www.youtube.com/user/thepointmelmerby
One Irishman’s opinion on the demise of the Celtic Tiger.
Would it not be simpler to just come to an agreement. Give our banks to the ECB/bondholders in exchange for a clearance of debt. Float them, this might attract fresh investment and increase the overall value of the banks.
David said (rightly!): Ireland is a systemic risk to the euro.
Thanks to Kevin O’Rourke for pointing it out, here the activities of the EU government (commission) and Deutsche Bank in context.
http://www.irisheconomy.ie/index.php/2010/12/10/eichengreen-and-the-european-commission-on-haircuts/
http://www.independent.ie/business/european/bondholders-safe-even-if-opposition-win-election-2454031.html
http://www.uti.is
An excellent Icelandic view of what went wrong in Ireland.
Hope the talentless middle management , most of whom obtained their cushy positions via nepotism, enjoy their bonuses.Where are the IRA when you need them?
Irish Times: Fianna Fáil agrees to hold Dáil vote on EU-IMF deal http://www.irishtimes.com/newspaper/breaking/2010/1209/breaking38.html This is an opportunity! How can we organise to inundate every TD with emails & phone calls? How can we explain that the country is insolvent due to the bank guarantee? How can we explain that the growth estimates in the 4 year plan are wildly optimistic? How can we explain that we are a democracy and we demand our elected officials act in the interest of THE PEOPLE, NOT private banks, NOT european central banks. I demand we default. We will not be held responsible for… Read more »
“We cannot solve our problems with the same thinking we used when we created them” Albert Einstein…
Love the way Lenihan says we are ALL in this together! If he was in front of me making that statement I would have a hard time restraining myself, honest to God. Love the way Cowan says we ALL have to take the pain. What fucking arrogant pricks! It is actually bizarre that they would have the total audicity, or is it stupidity, to make statements like that. They still have their fat salaries, pensions and perks, (oh shame Lenihan arrives in a Ford not a Merc). What a Clown! As if knocking 1euro/hr off the minimum wage will create… Read more »
I like this idea. David has suggested variations of this idea for quite a while now. It seems the only reasonable way to go forward. But the government had steadfastly refused to think about moving the depositors to a “good deposit bank” up until the ANIB wind down was suggested. I think the idea of moving AIB and BoI depositors there also is just too much honesty for the government to cope with. I’ve been wondering for a while if the ECB are simply nervous about the idea of winding down an active Irish bank (not ANIB) as they’re concerned… Read more »
http://bit.ly/cOwXz6 Great patricide metaphor FF committing patricide destroying Ireland and its economy. I wonder if the metaphor can be leveraged to see us as Oedipus tricked into marrying ECB/IMF, mother, while killing the euro, daddy. Disagree with DmcW on ‘pretend issue’. I don’t believe there is any pretence. Pretence involves cognitive awareness of reality. The only reality that NTMA and Clown Government have awareness of is the subservient, stooge dependency upon misled belief the economic policy they are following is correct. I believe the hysterical urgings of Clown to have confidence in our recovery is truly believed by him. Its… Read more »
I heard FFs policy legacy to the next government and the country in general described as a ‘scorched earth policy’…it is tragic and true. Their actions have hamstrung not just the next government but the next generations of Irish people…unless. Unless some extraordinary leadership emerges that is not in thrall to the Doges of international finance and Eurocracy. Remember many of the out-going FF politicians will have no political future in Ireland — we must hope; although Cowen’s recent well received bawling populist speeches, and the 7000 first preferences in Donegal are alarming. Their only hope is comfy jobs in… Read more »
Broadly speaking we turned a blind eye when the same gang, raped Africa, Southern and Central America and the rest of the developing world. We were a net beneficiary of these pillages and sucked up the media defence of it. We are currently in collusion with the war crimes being committed in the Middle East again sucking up and rehashing the Clinton and Co. defence of these crimes. It’s now our turn to get banged. It could all be so different if we were a nation with some backbone and elected people with vision rather than cronies that are just… Read more »
I’d wondered why the budget seemed to target the less well off much more than the well paid. At first I put it down to just ordinary vested interest greed. Then I worried that it was some Fianna Fail electoral shinanegans and they were going easy on the demographic they thought most likely to vote. But now I think there is a much more sinister method to the madness, and it is coming from the ECB. Apart from the bits put in to placate enough backbenchers to get the thing through the Dail (old age pension etc), they have skrewed… Read more »
Absofuckinglutely agree 100% with NO HOPE,as I said before,like father like son.Let the people not forget! On a different note,I see Fintan O’Toole wants more women in politics,surely the two Marys,Harney and Coughlan, were among the greatest disasters in recent memory? Does anyone remember years ago a Japanese company were going to build a metro system for Dublin at no capital cost to Ireland,then they would lease it back to the government over 25 yrs?Guess who shot that one down….Her Hatefulness Mary O Rourke! Saw Mary Hanafin interviewed on France 24 about the Irish situation,what a condescending cunt,full of typical… Read more »
As above I’m off work at moment and on crutches. Yesterday I watched the debate in the UK Parliament re Student Fees. Full house, intelligent argument and in the end a close result with the coalition winning. No one knew what the result would be as both Conservative and Liberals voted against their own government. No Problem it’s called intelligent debate and it is what healthy democracy is based upon. There were displays of honour, respect and intellect! Next Wednesday FF/Greens will win by approx two votes another type of “debate” The “Irish” type where it doesn’t matter what’s argued!… Read more »
DMcW is becoming increasingly more desperate, first he advocates default ( Sinn Fein ) then he advocates a good bank idea ( Fine Gael ). Surely this is akin to rearranging the chairs on the Titanic. They tried to do this with Anglo ( good bank – bad bank ) but were still left with the debts no matter what way you do it. As for the Euro it is still performing well in my opinion despite peripheral difficulties. Bond prices accross the world are increasing in the last few days and I for one ( being a bond holder… Read more »
Jesus Christ . You still have the Euro zone by the balls . Do a deal that is favourable to Ireland . Treat Ireland as a business and strike the best deal that you can . The window is closing . The markets and the world are still scared of a new GFC caused by Europes debt .
About 18 months ago TCD’s Philip Lane linked to this article by a former IMF Chief Economist on irisheconomy.ie
http://www.theatlantic.com/magazine/archive/2009/05/the-quiet-coup/7364/
subscribe.
I have a suggestion and a song. I like many of you look forward to reading this forum its like buying a lotto ticket you think PS200306 will have all the right numbers answers listed like magic. I read Gurdgiev, Lucey. Kinsella, Kelly and all the international comments I am addicted as I have little else to do.I not only do the Soverign Banking gig I also do peak oil just to keep the pain level up.Try digest the following on top the debt service contract http://aspoireland.org/2010/12/01/peak-energy-climate-change-and-the-collapse-of-global-civilization-the-current-peak-oil-crisis Ok here is the suggestion Steady State Economy with world first debt free… Read more »
Please indulge my poetic efforts; All criticism welcome! The Village Green by Pól Ó Muirceartaigh The neon lights blanked out the night upon the village green. A voice rang out “Good night, God bless” in foreign tongue it seemed My head not long laid down to rest I soon began to dream Next thing I know I’m peering out upon the village green. I peered down on familiar ground which somehow dimmer seemed A gathered crowd about a bus as tears began to stream. The brightest of my boyhood friends suitcases in their hands Bade sad farewell to grieving clan… Read more »
So…… do I act as David ‘appears’ to suggest and take the lousy few bob I borrowed for my son’s education out of BOI? Where should I lodge it. Is the post office still ‘good’?
LENIHAN NEVER INTERVENES ON BEHALF OF PUBLIC INTEREST The chairman of the Public Accounts Committee has said it is publishing a letter it received from the chief executive of the National Asset Management Agency refusing to give it the pay scales of people on the agency’s staff. I suspect if you study the records, you would find that LENIHAN has intervened only to award gratuitously higher (TAXPAYER) SUMS for NAMA-executive remuneration. On the basis of his justifications, every professional would start at a PREMIUM because starting-out in a new position is the most challenging phase, with greatest workload. Check example… Read more »
Hi David, The property market has already started to clear. http://www.businessandfinance.ie/cat_news_detail.jsp?itemID=3250. and as you know as rents rise so will property prices. The minister has two choices ONCE WE SOLVE THE PROBLEM IN THE NATIONAL CURRENT ACCOUNT. Option one; He knows we can tell the senior bondholders to fu*k off when our current account spending matches revenue. How do we know this? YOU told us so. Isn’t speculative capital always forward looking as you have told us ad nauseaum? The bond markets will keep lending to us at that stage as we will be living within our means and also… Read more »
Excellent, the absence of Irish civil society mechanisms and channels is evident for all.
But can we rise above the gombeenism
“Let’s pretend”. I think the entire ediface of contemporary, be there or be square, sophisticated, up to your neck in debt, “I’mLovinit”, great4alaff, Irish culture is a case of let’s pretend. Let’s pretend we can vote alcoholics into power and that “it will be grand”. Let’s pretend it was all the bankers fault. Let’s pretend that Mr. and Mrs. Gilmore’s site deal in County Galway with the Department of Education (the organization that employ her in a management capacity) is all totally above board (as reported by the Old Schitzo on D’Oliers Street). Let’s pretend that the legal profession have… Read more »
The new Cosmopolitan… JUST THE RIGHT AMOUNT OF WRONG!- Today, Friday 10 December 2010: RTE six-one news, the entire show was dominated by ‘effin’ Eddie and exhausting their time on Gerry Ryan’s coroner report and the inevitable sports news. Geeze, will you give the man a brake? If you take advantage of this ground shaking news that Ryan was a morphinist to deliberately distract from the real important issues, I suggest you pay his family another months of his salary for having the privilege to report on the fact that he was a multi drug addict that went too early… Read more »
Taking money out of the banking system is driven by fear.
The deposits are backed by the ECB. Therefore deposits in Irish banks are safe. They are very safe.
But there is one thing that is no longer safe. Houses are no longer as “safe as houses” as an investment.
Let’s pretend that property is a sound investment.
Tubridy interviewing Flash Gordon this evening discovered that he actually has emotional intelligence. Big beaming smiles all round. Gordon explained his party’s defeat at the polls by saying that they hadn’t explained their policies well enough. Tubridy said that looking forward a year he could picture Cowen sitting there saying the same thing.
At least Gordon kept the UK out of the Euro. What well-merited decision will Cowen be able to point to?
If you have an interest in the psychology of how our planet got to the mess it is now in, spend some time on this.
http://www.edge.org/3rd_culture/kahneman_taleb_DLD09/kahneman_taleb_DLD09_index.html
Dumbest comment I ever heard.A woman in Tipp said that she would vote for Mattie Mc Grath, because like herself, “he came from a family of 10 kids”.You could’t make it up !
I’m sat here, wondering how we actually went so badly wrong in this country. Admittedly, I’m doing it bloody slowly, as I’m on rather a lot of prescription sweeties that tend to slow the though process to even less than my usual glacial pace. I remember at school being taught about politics, how PR and other electoral systems worked, the social responsibility of voting, filling in census forms, how society and various political systems ‘works’ and all that. Some of it even sunk in. And that was a lot of years back, mind you. Just out of curiosity, do we… Read more »
Is Europe’s Bailout A Giant Shell Game? : Planet Money : NPR
http://www.npr.org/blogs/money/2010/12/03/131789085/the-friday-podcast-is-europe-s-bailout-a-giant-shell-game
Headlines I’d love to see; IRELAND TO U-TURN ON DEFAULT! – “It never made sense?” Admits Official SITE OF CHILDRENS HOSPITAL CHANGED! – “It never made sense?” Admits Official SENATE ABOLISHED! – “It never made sense?” Admits Official FF/FG TO MERGE! – “It never made sense?” Admits Official NUMBER OF TD’S HALVED! – “It never made sense?” Admits Official TD’S TO STAY OVERNIGHT IN STATE OWNED HOTEL! – “It never made sense?” Admits Official TD’S TO GET FREE TRAVEL CARDS! – “It never made sense?” Admits Official TD’S TO GET MIMIMUM WAGE! – “It never made sense?” Admits Official PAT… Read more »
It’s amazing to be living in times that demonstrate why the French revolution started. I’m at a complete loss to understand,let alone comment about, the crass ignorance if not abject arrogance of those we have deemed to be suitably and sufficiently able to run our affairs. What in Gods name is taught in our leading Universities or elsewhere that this class codology has risen to the top of the stew? Incomprehensible tripe masquerading as policy rules the land. Scarcely believable econo-prop sits as a last bastion of the Mise an Gombeen Brigade. I narrowly dodged the incident involving HRH Prince… Read more »
I listened to the budget speech and when I reflected back on what it contained, I could not shake the notion that given all that had happened ,here was a Finance Minister implementing all the policies advocated by none other than Seanie Fitz. Now there’s f…… ironey for ya… you could’nt make it up as our host is usually heard to say.
It may be a socialising of the debts of the the insider /elite but I can assure ye, it is definitely Thatcherism for the rest.I am just wondering if there is some hawkish gobshites in the DOF and elsewhere who feel that this might be the last chance saloon for one last attempt to implement Thatchers/Regan’s failed ideology. This might seem like a strange comment but dont forget it was the mentors of the present brigade that thought protectionism and an insular self-sufficient route was the way to go. I have to say the level of ignorance and incompetence coming… Read more »
“That was the situation that I found in the Philippines, a vastly rich and wealthy elite, about 200 powerful families owned the land, the food, the factories and all industry. The millions of Filipino people, were mired in poverty, hunger, sickness and were begging for the scraps that fell form the tables of rich who lived in palaces and made billions of money from corruption. They even owned the government. The congress was stacked by the relatives and friends of the rich and government served them and not the poor.” Fr Shay Cullen, Preda 2010. There are situations like this… Read more »
furrylugs : I am reminded of the french Engagement in Algeria where the ‘insiders ‘ the planters were given favours while the indiginous outsiders moslems were ostrascised . We all know what eventually happened afterwards for the failure to listen to the cries of the outsiders ….the French were kicked out with the insiders. Vive the outsiders .
Geeze I am coming home today from the glorious sunshine.
Anybody think it would be better if this IMF money didn’t come through? And we told the bondholders to go and shite! http://www.irishtimes.com/newspaper/frontpage/2010/1211/1224285303441.html
Chicken’s coming home to roost?
http://golemxiv-credo.blogspot.com/
southofdub, a good point in this video is that we(the people) could have the banks and the bondholders by the gonads if we clubbed together. At the moment it is like herding cats, sure people vent their anger but without a collective will we might as well say nothing. We should have a petition and lobby the Dail one way or another before next Thursday.
This video:
http://www.youtube.com/watch?v=HjkIVJYnC7U&feature=player_embedded
http://www.youtube.com/watch?v=lyYVfuedy0g Pearse Doherty First 10 minutes of his post budget speech. I have been watching the massive swell in support for SF over the past few weeks with interest. Equally I have been surprised by some close friends of mine who have recently told me they are going to vote SF in the upcomming election.Prior to this they would not have considered voting SF. One friend of mine pointed to Pearse Dohertys post budget speech as the deciding factor in giving SF his vote (the speech combined with the fact the last three community meetings he attended in his locality… Read more »
The Sovereign Debt Problem – Speech by George Soros October 05, 2010 World Leaders Forum at Columbia University As you know I have written several books which serve to explain the crash of 2008. Two years have elapsed since then — it is time to bring the story up to date. That is what I propose to do today. The theory I shall use is the same as in my previous books, so I shall not repeat it here. The main points to remember are, first, that rational human beings do not base their decisions on reality but on their… Read more »
I’m going to like this guy if he keeps going down this track! He really is growing balls!
http://www.irishtimes.com/newspaper/breaking/2010/1214/breaking26.html
Just imagine what could happen with a little bit of unified coercion from us. The collective will, if organised and directed properly could catapult us through this mess.
It will pass peolpe…eventually!!!!
Only a man harrowing clods
In a slow silent walk
With an old horse that stumbles and nods
Half asleep as they stalk.
Only a thin smoke without flame
From the heaps of couch-grass;
Yet this will go onward the same
Though Dynasties pass.
Yonder a maid and her wight
Come whispering by:
War’s annals will cloud into night
Ere their story die.