We are only fiscally delinquent when we attach our banks to the people, so we should cut them loose
The 13.00 train from Waterford to Dublin pulls out bang on time in glorious sunshine and sneaks its way up the River Suir before turning right and heading inland, towards Kilkenny. Yesterday, the Sunny South East certainly lived up to its reputation as the low winter threw long shadows on the fertile fields either side of the track.
It was that very combination of river, sun and productive fields, which made Waterford the first city in Ireland.
The Danes — the Ostmen — founded the city in 914. The Danes, driven demented by the type of Arctic weather we are experiencing, set out from Scandinavia to find more fertile lands and more clement temperatures. They found us.
Initially, they sent raiding parties, but soon decided to settle and Waterford provided a perfect site on a huge river — close to the sea — which could be easily defended.
Interestingly, one of the reasons they settled in this part of the country might be the sunnier climate. In the days before industrial agriculture, the single biggest factor affecting wealth was agricultural productivity and, the biggest factor affecting productivity was the quality of the soil and sun.
Because the South East had more sun and longer days than the rest of the country, the yields per acre were marginally higher than anywhere else. But marginally higher yields meant an agricultural surplus and an agricultural surplus meant trade and that’s what the Danes did. So it was not by accident that the Vikings chose this part of the country.
As the train speeds north towards Thomastown, past huge medieval abbeys and castles, you can see how sustained agricultural wealth, broad trading rivers and proximity to the sea, made this part of the country more commercial and richer than anywhere else for centuries. That is why the abbeys and castles are here in such abundance; these people were rich.
Today, that is not the case. Waterford city has seen unemployment rise from 5,200 in 2008 to 11,500 now.
As I left Waterford following a performance of ‘Outsiders’ in the wonderful Garter Lane Theatre, it wasn’t the Vikings who crossed my mind, but the memory of John Redmond.
Redmond — the last boss of the Irish Parliamentary Party — was the Nationalist MP for Waterford. He was the last of the great nationalist leaders of a great parliamentary party, which stretched back to O’Connell. He and his party were destroyed by Sinn Fein in 1918. They were on the wrong side of history. In one election, 100 years of Irish political continuity was turned on its head and the idea of a negotiated, peaceful settlement with Britain — the working assumption of the Irish Parliamentary Party — was rejected emphatically.
Today’s vote in the Dail on the EU/IMF so-called “bailout” might turn out to be a similarly pivotal moment. The Establishment is pitted against the people, leaving a huge vacuum, which will be filled.
The people clearly do not want this EU deal. We know that you can’t solve a problem of too much debt with even more debt. You solve a debt problem with less debt.
We also realise that no other country has ever tried this policy combination of four years’ austerity with no debt restructuring. The reason is because it is not possible.
We are embarking on “econocide” or the deliberate killing of the economy. It is rarely practised for obvious reasons, but our Establishment seems intent on doing it. We must stop them.
These are the people who brought you the housing boom. These are the people who told you there would be a “soft landing”. These are the people who told you the banks were “well-capitalised”. These are the people who told you the bank bailout was “manageable”.
You would be forgiven for not believing a word that comes out of their mouths.
Next year, the economy will contract further under the pressure of the State taking out so much money. This might be tolerable if we restructured our bank debts and got them off the national balance sheet and achieved an interest holiday, while the economy reeled with the tax hikes and spending cuts.
Without this type of deal, the end result of the Government’s policy will be a bigger debt crisis in two years’ time. But in the meantime, more bank creditors will have been paid and the process of soldering the banks to the State will be complete.
The only argument the Government can come up with is the craven colonial riposte, no doubt heard in 1918, “sure how else will we get the money?”
We will get it from the market after we have passed a bank resolution law, which severs the banks from the State and forces the senior bondholders of the banks and the ECB, which now hold Irish NAMA bonds, into a debt-for-equity swap.
This is how banks are wound up in every proper country. This is what the Americans did in the early 1990s. Problem solved. It ain’t pretty and there will be plenty of shouting and roaring, but that’s the way it goes. That’s capitalism.
If we take the banks off the national balance sheet, the debt/GNP ratio of Ireland falls below that of Belgium, which raised money yesterday at 1.8pc. The world knows that Ireland’s growth potential, if we do the right thing, far outstrips that of Belgium.
Our debt/GDP ratio without the banks would be 75pc. The corresponding figures for other European countries are: Belgium 96pc, Greece 126pc, Italy 116pc, Portugal 76pc, France 78pc and Germany 73pc. We are only fiscally delinquent when we attach our banks to the people, so we should cut them loose.
If we did that, it is easy to say where the money would come from: it would come from the same markets that have always financed us. In fact, Irish treasury bonds — shorn of the banks and the obligation to pay off the bank creditors — would be the buy of the season. Money would flood into the coffers and we could then deal with our cyclical budget deficit without torpedoing the economy.
We could then outline a plan which would get the deficit down over time. This will impress the markets because it will ensure deficit reduction without econocide.
To reverse econocide, we need to turn the tables on the ECB and let the world know that the ECB is culpable. In fact, in this entire sorry European debt mess, arguably the man most culpable is Mr Trichet who presided over not a new currency but an inter-country, inter-bank debt pyramid, where out of control German and French lenders lent to out of control Irish, Spanish, Greek and Portuguese borrowers. According to the figures of the BIS (Bank of International Settlements), the banks of the peripheral countries owe the banks of Germany and France over €973bn.
That figure explains why the IMF is here. It is not here to bail us out; it is here to bail them out. The bailout is a bailout for the banks of Germany and France and the Irish taxpayer foots the bill. It is that simple. And where will the EU and IMF money come from? It will be borrowed from the very investment banks that will be bailed out. So they will get interest payments from us, in order that we pay for their mistakes.
Therefore, politicians who are queuing up to vote for this sell-out and stitch-up would be wise to wise to remember the fate of John Redmond in Waterford.
Look, we have a non-representative democracy where a small cabinet can issue a party whip to pass any dail vote. Debates are a waste of time. Our problems are not economic. They are political. These rational articles for all their merit are useless. Anyway, are our economic problems really that big? We lost 30% of our economy overnight with the crash of the construction economy and we are still standing and stable and showing signs of growth. The problem we are facing is a political system that does not follow modern social needs. In a way, I am relieved we… Read more »
Anybody out there got some serious tips on how to stop this?
Georg’s suggestion of Citizens Petition to EU – 1,000,000 signatories from seven countries?
I’m a member of http://www.avaaz.org I wonder if they could help us?
subscribe.
It is a question of what happens in a default. It is inevitable bearing in mind we won’t even be able to pay the interest. Anybody know what happens then? Why can’t we get all our top economists into a room and agree on this(they already do)publicly. The economists of Europe should unite and voice their expertise.
It’s the inconsistency of it all that is so galling. If it were out-and-out predatory capitalism, you could at least respect its internal integrity but this bastardised version where all the profits are privatised and all the risk socialised is like getting mugged by Donald Trump.
Once again I have to agree whole-heartedly with David. What is the hang up with a default by the Irish banks? Ireland – the sovereign – has previously defaulted. Devaluations of the Punt in the past were DEFAULTS and funny enough we never had problems getting overseas investors to re-invest once we had taken the right steps that put the Country to rights. The ‘markets’ don’t take defaults personally. The ‘markets’ are not one homogeneous mass and some (and Ireland is so small it won’t take too many) investors will be happy to invest in Irish bonds once they are… Read more »
Redmond and his party was destroyed in 1916 on the Somme and in the Ypres salient later.
Firstly it was not the fault of German and French banks for lending our banks “too much money” it was our banks fault for borrowing too much to begin with. As for separating the banks from the state its TOO LATE. The ECB have been giving us charity as have the IMF and the EU why are they cast in a bad shadow??? Its a bit like advocating that mice chase cats. DMcW has no sense of responsibility if you borrow to much and live beyond your means it YOUR fault. Defaulting is not the answer , we should treat… Read more »
Finally David you have called a spade a spade. That Ireland is in fact bailing out the French and German banks. Ireland is being scape-goated by our so called EU community. What I don’t truly understand is why our current politicians don’t see this and indeed why so many Irish folk don’t either. The ECB, the IMF and the EU have told us the BIGGEST lie ever, for their gain. And somehow, there is also a gain in this for the people we have voted into public office, who claim to represent us! Irish politicians are no more than DICTATORS!… Read more »
RADICAL?…. David pointed to John Redmont, and while reading his article it triggered some thoughts on the Radicalization effects we can observe in our societies today. Radicalization is a process. It describes the shift of a person or a group towards an extremist position often sanctioning the use of violence to enforce their agenda, but not always. Both terms, ‘extremist position’ as well as ‘violence’ are relative and depend on the context they are used in as well as the observers or commentators positioning. When certain conditions come together at the same time they provide fertile grounds for the radicalization… Read more »
Once again, David, is talking complete sense! Our so called ‘political elite’ are just ‘taking us for a ride’. Well, I can tell you one thing when they all start to come around canvassing for our vote one thing’s for certain and that’s that the FFers are going to get an earful and so will the FGers if they don’t start talking sense. I’ve always voted for Labour in general elections, but this time I’m seriously thinking about voting for SF, because they’re the ones that seem to be the only ones talking with any sense. The bank debt should… Read more »
More madness from Lenny today will top his speech of March 30 last http://bit.ly/9JEAsv “Already, we have reaped the benefits of this growing confidence. Since last April’s Supplementary Budget and the announcement of the decision to establish NAMA, borrowing costs have fallen and our bond spreads have halved. This trend was reinforced by last December’s Budget which outlined the next stage of our plans to return to a sustainable fiscal position. That is why we must retain our fiscal discipline.” I believe he was saying it was impossible, a better deal could not have been negotiated. WrongAgain Lenny has totally… Read more »
How did they say it ? hat were they thinking ? Imagine if back then when the Danes first arrived what did they say about the place as they entered from the seas towards Co. Waterford .They said ‘ Helvick ‘ and it means ‘Sunny Bay’.They knew from that moment after feeling good in Helvick that something better was further up river.Eventually that was Kilkenny and Waterford. Have we on this forum found our own Helvick that we can feel happy about to go anywhere?Or are we just like the Peerog Boat people from Somalia who are prevented from making… Read more »
We are all Terminal immigrants with different times of arrivals on our ~PPS numbers.
Our birth certificates just tell us when there was no more room and we decided to just pop out > We only decided the time not the place .Afterall we could not get back in.
The Dail is just a glorified talk shop where they endeavour to justify their existence. They are sterile of any creative original thought but very adept at softening the blow on their own pockets. The bail out is a joke. It should be called a rip out or in tune with David’s latest article the rape and pillage of a nation. A tribute extracted by force. You can bring a horse to the water but you cannot make him drink. This epitomizes the Irish Government. George Soros pointed out the crash was a result of excessive use of credit and… Read more »
David. X = ‘We are embarking on “econocide” or the deliberate killing of the economy. It is rarely practised for obvious reasons, but our Establishment seems intent on doing it. We must stop them.’ Y = ‘That figure explains why the IMF is here. It is not here to bail us out; it is here to bail them out. The bailout is a bailout for the banks of Germany and France and the Irish taxpayer foots the bill. It is that simple. And where will the EU and IMF money come from? It will be borrowed from the very investment… Read more »
Is there even any bank debt left that we can properly default on? I’d love to see a proper breakdown of what exactly a bank debt default would achieve. As far as I can see the last two years has been about converting all the worthless debt from the banks into real taxpayer backed sovereign debt, transferring ownership of that from speculators to other sovereigns, and making it so that it’s us that the banks owe the money to. We’d be defaulting on ourselves for a bunch of it. I’ve no doubt we could save some money still, but would… Read more »
McWilliams talks common sense. Voltaire said “common sense is not that common”. He also said “It’s dangerous to be right when the established view is wrong”. The guy that said we are all to blame and therefore we all should pay is completely muddled in his thinking. The reality is a few hundred developers and a few banks are to blame and also the foreigners who gave them the money. In a capitalist free market system these entities should fall on their swords. That’s how the system cleanses its self out. It’s pretty simple. Also the foreign bond holders would… Read more »
Hi David, “We will get it from the market after we have passed a bank resolution law, which severs the banks from the State and forces the senior bondholders of the banks and the ECB, which now hold Irish NAMA bonds, into a debt-for-equity swap.” “If we did that, it is easy to say where the money would come from: it would come from the same markets that have always financed us. In fact, Irish treasury bonds – shorn of the banks and the obligation to pay off the bank creditors – would be the buy of the season. Money… Read more »
To misquote Winston Churchill:
“Never in the hisory of economic governance has so much been owed by so many to so few”.
FF led Ireland down this path.
Does anyone else share my disquiet at the role in all of this, or more accurately the apparent avoidance of any role at all, for the so called President of Ireland. This might seem a bit trivial in the circumstances, and it is certainly not central to current events, but I do think the office should have some relevance. Many contributors here have questioned the constitutionality of much of this government’s recent (ie post sept 2008) financial legislation. Regardless of the technical rights and wrongs about this, the reality is that a hugely unpopular government, with technical but not legitimate… Read more »
For a political expression of the need for change look to;
IDP-Irish Democratic Party. irishdemocrats.com
ILP-Irish Liberal Party. irishliberalparty.org
David, Thanks for a nice talk today in Newbridge. I have stolen wholesale some of your ideas below. All, I’ve had just about enough of this nonsense. Our democracy may be weak but within the next ten weeks we will have the only tool in the toolbox available to us to effect change: the vote. I suggest we use it. The 14% who will vote for the status quo are unlikely to be rescued from their folly, I am more concerned that the remaining 86% make a good choice. Below is the text of a letter I intend to send… Read more »
Zero Hedge latest article about the Euro and where things are heading.
http://www.zerohedge.com/article/nic-lenoir-why-euro-about-cash-and-burn-and-why-his-concern-new-normal-not-slow-growth-civil
Humpty Dumpty had a BIG FALL!!!
These truly are “Demon Days” and the Irish government is totally possessed beyond ANY redemption. By ignoring the voice of the people their actions will bring disastrous long term hardship for every Irish citizen. As MACKER has been saying for some time it is now imperative to “SEPARATE BANK FROM STATE DEBT OR ELSE FACE ECONOCIDE”. Ireland and the government is rapidly running out of precious TIME to turn back the clock before the day in 2011 that will change our lives – overnight…
http://www.stansberryresearch.com/pro/1011PSIENDVD/PPSILC43/PR
Interesting one……….. Tánaiste promised funds that did not exist TÃNAISTE MARY Coughlan made a commitment to give the nationwide Your Country, Your Call (YCYC) competition Government funding of €300,000 even though her then department did not have the funding in its budget. The Department of Finance officials, with whom we were in regular contact in preparing the estimates, were unaware of the arrangement to support YCYC and, given the timing, it was not possible to have an additional €300,000 included in the department’s published estimate for 2010.” Mr O’Keeffe told Labour TD Ciarán Lynch in a response to a parliamentary… Read more »
Commenting on the need for emergency measures, Prime Minister Geir Haarde said on 6 October, “There [was] a very real danger … that the Icelandic economy, in the worst case, could be sucked with the banks into the whirlpool and the result could have been national bankruptcy.”[2] He also stated that the actions taken by the government had ensured that the Icelandic state would not actually go bankrupt.[3] At the end of the second quarter 2008, Iceland’s external debt was 9.553 trillion Icelandic krónur (€50 billion), more than 80% of which was held by the banking sector.[4] This value compares… Read more »
Getting worked up about what the Irish government or Irish politicians might or should do is irrelevant. The debt problems of the Eurozone peripheral countries, however caused, have created a problem for the Eurozone as a whole and that problem can only be dealt with at Eurozone (indeed EU) level. The issues to be examined at European level have been the subject of some interesting comment in the last few days in both the Financial Times and the Wall Street Journal. Ireland’s absolute lack of real influence in the outcome of those discussions is nicely summed up by Arthur Beesley… Read more »
David talks about the wealth of the sunny south-east and that ties in with my own understanding, as follows. Because of its milder climate Britain would be on the edge of the W. European birthplace of “agricultural capitalism” where harsh winters and a cooler climate in general than the Med. and warmer regions to the south (where you needed no capital but some seed and a patch of land to scatter it on, a bit like the spuds in Ireland in a later time) encouraged the accumulation of capital in the form of oxen, saved hay etc in isolated clearings… Read more »
The ECB – owned by the European Central Banks, inturn owned by Private European banks, in turn owed money by the Irish banks. German, French majority. The IMF – U.S. Majority, owned by its biggest funders, mainly U.S., Japan, German, U.K., French, Italian governments. These government are heavily influenced by their respective private banks and wealthy individuals. In turn owed money by the Irish banks. The EU Commission – stongly influenced by German, French, Italian, Spanish and U.K. interests. These government are heavily influenced by their respective private banks. In turn owed money by the Irish banks. The corner stone… Read more »
I understand the main confusion of the general Irish public seems to be that the ‘rescue fund’ is dependent on the senior creditors being repaid.
They are being purposly misled.
Iceland refused to refund the creditors. The senior bondholders got back 7cents on the euro (Austailian Central bank) and it was still availed of the rescue fund.
Gaurds, Teachers, Nurses, Welfare recipients you would still get your rescue fund. You are being misled again by our government.
Bankruptcy and reorganization procedures for cross-border banks in the EU: Towards an integrated approach to the reform of the EU safety net:
http://www2.lse.ac.uk/fmg/documents/events/conferences/2009/regulatoryResponse/1161_Nieto.pdf
Some news re Enda in Brussels on Morning Ireland, report of €25 bn of senior bond ‘unguaranteed’ that might return upwards of €12.5 bn to taxpayers, if FG get their way.
Don’t quite know the difference between ‘guaranteed’ and ‘unguaranteed’ as I presume the ‘guarantee’ was to include all debt, eg senior bondholders, previous and subsequent to the guarantee.
I’d like to know the finer distinctions, if legally under the guarantee, such distinctions can be challenged, or not?
Bonds Bonding Bridges Buildings Better Baker Poker Pie
The Euro may be a basket of currencies but it could become underwritten by a single eu bond if Germany agrees but that will not be the same as the US dollar .It would be interesting to know the merits of each afterwards were it to come to pass.
Something has to give otherwise it breaks .
The 3% nonsense
Here:
http://www.cesifo-group.de/cesifo/newsletter/Chart_10_2.htm
Eoin Fahey http://blog.kbinvestors.com/node/71 Eoin certainly must be a contender for Lenny’s Chief Economics Advisor, or perhaps a spokesperson for Pravda RTE, or maybe a job lecturing in Galway with Alan Ahearne…. “The above is a fairly simple analysis of course. If interest rates were to rise sharply, for example (which could happen if the rest of Europe were to grow strongly) the Irish deficit could rise to even higher levels than the 10% I assume here (though this seems very unlikely). But it serves to point out that while Ireland faces a truly scary set of economic circumstances, one of… Read more »
http://www.universitytimes.ie/story.php?id=519
excellent article outlining some of the huge payments recieved by some of Irelands most consummate insiders and quango members.
The Mad Hatter told Alice that “words mean what you want them to mean.” He would have been at home in the European Union, where “no” means “yes” and political propaganda is passed off as information. If Ireland votes No to the Lisbon Treaty, the EU will continue and Ireland will be part of it, but if they vote Yes the Irish will find they have even less leverage in Europe than today:
http://online.wsj.com/article/SB10001424052970204488304574435471966748620.html?mod=europe_opinion
David
Congratulations on the TV3 Media Award, Story of the Year, for your reporting on the economy and related matters.
The question arose again on Vincent Browne on whether you ‘would run’. Don’t worry too much about the drains – go for it!
Something interesting seems to be happening in the US:
http://thefourteenthbanker.wordpress.com/2010/12/17/sell-your-soul-to-the-devil-this-christmas/
The consequences of this are so enormous, I’m actually speechless.
Fair dues to the petitioners et al who’ve lobbied for this. No lobbying from Pravda RTE. Seems they’ve been blindsided, pressure entirely internet based. But its only limited to the new draconian banking powers not bailout! Can’t get any detail so far as coverage is mostly about gutters and weather:)
http://www.rte.ie/news/2010/1217/banks-business.html
[…] for Ireland At last, our economy gets shot in the arm Ireland?s rating cut five levels by Moody?s SEPARATE BANK FROM STATE DEBT OR ELSE FACE ECONOCIDE Mortgage arrears and the banks Net tightens on Anglo suspects with DPP files. Anglo moves […]
Website claiming to have a list of the Anglo Irish Bond Holders? Open the following and scroll down to see the list.
http://dailybail.com/home/rothschild-bank-and-goldman-sachs-are-both-on-the-list-of-bo.html
Well, it seems as the banking fraternity in Ireland never learn. We had Madam Bowler deciding she will opt for an orderly step-down. (Did she jump or was she pushed ??). We have AIB again in the soup. And now BoI are found to be paying well connected boyos in secret without anybody officially finding out until it is too late. http://www.independent.ie/national-news/probe-into-euro500000-secret-bank-bonus-2465716.html These people are still to comfortable, too unaccountable, and too crony-driven. One wonders why anybody still trades in shares of these companies. It is like as if they are speculating that the gamblers running these firms might accidentally… Read more »
David – you are correct concerning John Redmond’s role with attempting to serve the Old Empire, with the current Irish political class trying to be of service to the new enpire. At the end of the day these empires are serving their own interests. And soveriegnty is an ability to do the same. I am watching the rise of Sinn Fein, and coming to the conclusion that recent commentary by Nigel Farage, MEP are correct. Ireland is a comparitively wealthy country compared to Hungary, Lavia, or Greece – yet even here we have a movement that wants to play the… Read more »
The issue of Belgium’s national debt will become topical when Belgium eventually goes for divorce. When Czechoslovakia split, the Czechs opted to pay the bills. It was amicable. And many Slovaks still wanted to stay, even though they were getting a free lunch out it.
However in Belgium neither side can make any such commitment. They simply cannot agree on the bill, or indeed anything concerning state money. It is a disaster.
http://www.youtube.com/watch?v=thSTpGnWEAs&feature=related
“Bailout” explained
http://www.youtube.com/watch?v=vMdbS1VU5do&list=PL96E1966791702C3C&index=11&playnext=2
Extreme Civil Unrest
What do you think dwalsh?
“The Money Masters” A documentary worth watching…