The Government’s new economic strategy was unveiled yesterday. It is supposed to outline new thinking for the next decade. Yet it seems very much like everything else that we have ever seen before.
It is long on things we “must” do, making it read like an early new year’s resolution list. It is not so hot on the things we are actually “going” to do. It’s full of good intentions like promising to go to the gym, eat less chips and cut down on pints, without committing to actually getting up on the treadmill at 8 this morning.
The document, written in nice, big-spaced green writing, with lots of bare white unfilled pages, reads like more of the same. This unsatisfactory feeling was backed up by the quotes from the Taoiseach, saying this was “no time” for change.
It is the perfect time for change because change is a constant. It is the one certainty in life. In a globalised world, countries that embrace change succeed because globalisation forces the pace and scope of change. The world isn’t waiting; it is revolving.
In our own work lives, those who embrace change tend to have successful careers and meaningful, if somewhat stressful, lives. But an element of stress is important and probably essential. Life isn’t easy. It isn’t meant to be without worry and stress, but these concerns are made tolerable by flexibility and adaptability.
The idea of transforming the economy by doing nothing new doesn’t wash. But we could transform the place.
If we consider the four big government objectives, there is ample room for simple initiatives that could help the Government achieve its aims quickly.
The first aim in the document is never to go back to the boom/bust economics of the 2000s characterised by far too much credit to the property sector; the second is debt sustainability; the third is to reduce taxes to encourage people to work and to employ; and the fourth is to create conditions for the maximum employment possible.
How might you go about doing these?
Lets start with speculative cycles. The best way to stop boom/bust and speculative urges is to limit credit being funnelled into property. Without credit, there can be no bubbles and without excessive leverage, there can be no speculation.
Tomorrow the Central Bank could move to stop this booms/bust cycle so that we never, ever have a property pyramid again. It could do this by limiting the value of the collateral against which the banks can lend.
When you look at all property markets, they are driven not by supply and demand, but by excessive lending against collateral. As soon as prices rise, the ‘equity’ in the houses rises and banks feel that they have permission to lend more and more cash because they have the buffer of equity.
But this only ensures that yesterday’s rising prices leads to tomorrow’s increased lending.
A suggestion to stop this price/lending spiral was tabled by Israeli economist Amos Rubin. Imagine that regulators instructed lenders that the combined maximum loan amount should not exceed 70pc of the moving-average value of a property, offered as collateral, over the preceding 20 years.
This would wipe out any future house-price nonsense at a stroke, and the socially insecure would need to find another asset through which to display their endemic inadequacies.
By preventing money going into property, we liberate that money to go into other investments, which have the potential to create jobs and opportunities for Irish talent, particularly young talent.
The second government aim is to stabilise our debts. The best way to do this is reduce them. The main debt dragging the economy down is not government debt but personal debt associated with too much housing-related mortgage debt.
Irish mortgage debt could be wiped out overnight by using the same tool used to pay off the bondholders of Anglo.
Anglo had no money so the Irish central bank used “magic” to invent money for the shell Anglo in order to pay back its creditors. The central bank did this by accepting an IOU from Anglo and depositing real money in Anglo’s account in return. Anglo used it to pay the bondholders.
This was the famous promissory note. It was a promise to pay. The Government underwrote it. But instead of paying it late March, the Government negotiated with the ECB that we’d pay it back in 2038.
Why not do something similar for mortgage holders?
Fund the cost of mortgage debt relief — via a debt for equity swap — where the banks take ownership of 50pc of the house with a massive promissory note. This promissory note could be paid back when the houses are sold. The banks can recoup the money sometime in the future.
This would take the boot of debt repayment off the necks of hundreds of thousands of citizens and would kickstart domestic demand overnight.
If it’s good enough for Anglo, surely its good enough for you? As domestic demand starts up again, we could address the third problem of reducing tax on our citizens by demanding that the multinational pay the 12pc they claim they pay but don’t.
The multinational are corporate welfare tourists, coming here so that they can get the best tax deal in the world.
They don’t pay 12pc. In reality, they pay 2.5pc.
According to the US Bureau of Economic Analysis, US multinationals in Ireland reported net income of €95.6bn.
On this “taxes other than income and payroll taxes” payable in Ireland in 2010 amounted to €2.4bn, giving an effective rate of tax of 2.5pc — far below headline rate of 12.5pc.
If these companies were to pay tax at the very low — by international standards — of 12.5pc, the exchequer would net €10bn in corporation tax per year.
You could give a lot of tax cuts to the ordinary citizen with this money adding to domestic demand and investment just at a time when the debt deal reduces personal mortgage-related debt.
These changes to the way we do business would not only be fair and just, but would create the demand to lift many hundreds of thousands of people off the dole queues. And imagine, this could be done without any house price inflation.
We could have a people boom not a property boom! Now wouldn’t that be the productive result we are all looking for?
This is what real transformative change looks like.
DAVID MCWILLIAMS LAUNCHED A NEW DAILY GLOBAL FINANCE AND ECONOMIC NEWSLETTER YESTERDAY, WWW.GLOBALMACRO360.COM.
THIS IS ACCOMPANIED BY A NEW PUNK ECONOMICS ANIMATION, AVAILABLE HERE.
An excellent article, David. Complex topics explained with simple language. Skill! You spoke about some of this at the final show of Kilkenomics. Accepting your Techno-Cornucipianism within a BAU economic scenario ‘going forward’as a given:this all looks fine as proposals, but I can’t see Fianna-Geal hegemonic hyrbid Establishment adopting a sensible strategy now. They’ve avoided it since they trashed the foundational vision of an independent Ireland. But let’s hope they at least read and digest your analysis. Like the new site http://globalmacro360.com/ “David Mc Williams’ daily thoughts on a big world from a small city.” but it took a while… Read more »
Such change requires a whole new type of politics in ireland as none of the existing parties are capable of taking the initiative required to do new things. Change is the antithesis of irish politics. While its good to see possible solutions posited like this in a clear and approachable manner, the main point it outlines is the gulf between our current political clique and the real people and thinkers of Ireland.
What can you expect from bull shitters only just more bullshit!!!
David, your articles are easy to understand for the ignorant like me. You are exposed to data, you talk and listen to others of similar caliber, with similar interests and passion as yourself. In all your articles there is logic, common sense, intelligence and pragmatism – leaving all religious and political matters aside. There seems to be an absolute truth in this article.
However, with all this logic and common sense, our leaders don’t see that – in fact they see the opposite. So is there another opposite logic and common sense that our leaders are tapping from?
The Luddites on here are not going to like exhortations to change.
Just getting on a flight to Chicago, have a good Christmas lads.
These are brilliant ideas David that would work but will never get implemented with by the shower of incompetent that ‘run’ this country. Not in a million years. We need to get rid of them immediately.
I loved this article – a clear understandable blueprint for the economy.
Happy Christmas all.
Btw David this link isn’t working
http://WWW.GLOBALMACO360.COM.
Best.
Reality Check
Interesting article and suggestions although I doubt Enda and Michael will pay any heed. I had a gander at your new daily http://globalmacro360.com/ and have some alternative predictions for 2014. Bank holiday to be enacted in the US in the first half of 2014. Bail ins to be instigated across the board with a large portion of the $10 trillion on deposit being either confiscated or turned into bank shares. $Dollar to resume trading ar a 20-30% devaluation to all major currencies including the Euro. Civil unrest to break out across the US which will be followed by martial law.… Read more »
I think this article is flawed in it’s premise because it recognizes government policy as what leads this country. I believe this to be wrong. To give you my perspective: 1.Your vote no longer counts as the government is owned by it’s debts to the bank guarantees. 2.The banks are therefore in control of all government fiscal policy. 3.This give the citizen the most democratic power ever, because your bank account is now how you vote. To bring the government/banks to immediate attention is a simple 3 step process. Once at attention then a system can be rebuilt to suit… Read more »
Hi David,
When I read this post the though crossed my mind are you becoming as mad as bonbon.
Know why? Mrs Edna the tuirseach, still pays himself a salary bigger than Barack embarrassment in a country still in negative cashflow to the tune of 10bn and you take him serious? The article is well thought out etc but useless as a thorium powered time machine.
Read breltub above for real hard-hitting policy options.
Regards,
Michael.
“IMF calls for greater efforts on mortgage arrears, joblessness” – Irish Times. This presupposes there ‘is an’ ‘efforts’ we don’t even have one singular effort never mind a group of efforts. “’doing nothing’, Enda” is effortlessly hard work~ Effort connotes hard work but it is subjective: If we make one big effort out all the little efforts, we will still end up with an effort even if the effort is made up of “greater efforts” we still end up with an effort. Enda awards himself a gold star for a subjective effort/s is he not been a bit coined to… Read more »
Good stuff David. I think you are definitely going in the right direction with those suggestions. I hope that kind of thinking can inform policy in the years ahead. The mismanagement of monetary and fiscal policy and practice caused the crisis; but as you know the source of the policy lies in the global banking system and transnational corporate sector. The policies were coming from the highest level in the global system. They ensured that even the regulations which were in place in our country and others were ignored. My point is that we are suffering from a global malaise… Read more »
I agree that imposing a limited loan-to-value ratio on lenders is the best curb on credit. The nice thing about it is that, as you point out, it is available as a tool to the central bank right now. This idea is not just another pie-in-the-sky aspiration either, although I believe Amos Rubin, whom you quote, proposed an 85% maximum LTV based on a moving-average value over the preceding four to six years not twenty as you wrote. Rubin’s very practical idea can be based on any one of numerous independent home price indices e.g. Case-Shiller, which I personally like.… Read more »
Still DMcW baulks at splitting up the banking system, even though he plainly wrote just before about “unexploded landmines” and immanent bail-in’s. DMcW desperately knows the importance of credit, and cannot reconcile it with an inevitable next bubble. Moral Sentiments, as dictated by hero Adam Smith just will not cut it – remember the language of the filthy Tapes. It is as if those gangsters were actually mocking the grip Adam Smith has on the necks of bankers politicians and depositors. And to top it all, there is a lurking belief in “magic”, that fiddling with tax would produce flowering… Read more »
A Chairde, A1. The writing is simple and unpretentious in the slightest. The article is inspiring because it sounds like a plan and reminds us that it is time to think of New Year resolutions. ‘The Christmas’ means time off, which is nice, but it’s about children. New Year is the big one for adults because it is profound and becomes more profound with age and as a fellow Braveheart you will understand it’s significance I would like to wish you the best of luck in 2014 with your new idea and hope you continue to show us what one… Read more »
“If we consider the four big government objectives, there is ample room for simple initiatives that could help the Government achieve its aims quickly. The first aim in the document is never to go back to the boom/bust economics of the 2000s characterized by far too much credit to the property sector; the second is debt sustainability; the third is to reduce taxes to encourage people to work and to employ; and the fourth is to create conditions for the maximum employment possible.” It is evident that the current political arrangements dictate policy must be from Brussels. The monetary union… Read more »
The creation of the Irish Financial Services Centre and the globalised financial casino industry it respresents in Ireland is a Trojan Horse. It destroyed our economy and our sovereignty. I am convinced this was planned – not accidental.
The neoliberal notion of the free unrestrained market is a delusion. A system made to measure for sociopaths and criminals. We cannot build a rational or humane world on the basis of unrestrained greed.
“I am convinced this was planned – not accidental.” Much if not all the economic mayhem is planned. You as a rational person, and concerned, have observed and come to a conclusion. Very little is accidental. nobody can be stupid enough to make those mistakes. World wide it is so. Planned mayhem. Out of chaos people seek order. thus are their freedoms systematically curtailed. The government big enough to give you all you want is equally big enough to take it all away. GATA has been accumulating information on the precious metal and financial market and have evidence to support… Read more »
You skate around the issues David like a kid on a frozen pond. Stay close to the bank or you might fall in. you just make me angry as you never address the fundamental issue of money formation as a debt bearing, interest demanding loan. Either you agree or disagree. What is it? Otherwise I conclude it is a waste of time pursuing this blog. I learn from here that few have the guts to tell it like it is. Kilkenomics is a waste of time except for the socializing. It is a foregone conclusion there is more of the… Read more »
lie , lies and more lies
http://www.zerohedge.com/news/2013-12-19/cftc-announces-it-undercounting-size-swaps-market-much-55-trillion
http://www.ft.com/intl/cms/s/0/f356b78a-67d1-11e3-8ada-00144feabdc0.html#axzz2nzhMdxyG
In his press conference Bernanke reiterated the FOMC Communique’s false narrative that persistently low inflation could harm the economy. We cannot believe that Fed academics still believe in the economic alchemy that holds that economic growth is related to inflation. Fed academics, like Soviet apparatchiks, have purged the economic history of the Seventies, Eighties and late Nineties in order to maintain the promiscuous credit policies that keep big banks and big government functioning.
Please note that the initial response to Fed tapering drove the S&P 500 below and important technical level (or two) and someone immediately appeared to rescue stocks by driving SPHs higher. We have warned incessantly that this scheme has occurred repeatedly since the financial crisis of 2008.
The Fed and the Government have unleashed an unprecedented amount of manipulative control over the markets – all of them, not just the precious metals market.
The truth is the Fed is absolutely terrified by gold. When the price starts to move up like it did from 2008 to 2011, it signals to the world that something is wrong. The Fed has spent considerable time and resources since September 2011 working to keep the price of gold as low as possible. More on this soon, as I’m working on an article about this. But the fact stands that what is occurring right now and has been occurring in varying degrees for decades is the extreme manipulation of gold for the purpose of defending the U.S. dollar’s… Read more »
Follow the new Zealand example. Growth is so good it is the strongest performing currency this last ten years.
Ireland should follow the example of New Zealand and build industrial exports based on it agricultural output
http://www.oecd.org/newzealand/41077830.pdf
David Schectman We spend half the year in Aventura, Florida. From Thanksgiving on, the traffic and shopping is unbearable, as the snowbirds descend on Miami Beach and the surrounding areas. One of the biggest attractions is the Aventura Mall, about two miles from where we live. We avoid it like the plague, this time of the year. Parking is impossible and the pre-Christmas crowds are impossible. On Wednesday morning, Susan drove there to pick something up at Nordstroms. The parking lot was half empty. The mall was empty. The employees at Nordstroms couldn’t understand where all the traffic was? Every… Read more »
Andy Hoffman I mean, can you imagine the gall of this ivory tower failure claiming the Fed’s strong suit has been communication; let alone, that it could receive “support of the broader American public?” No entity is more despised globally; and in time, even comatose, reality-show addicted Americans will realize, too, that the Fed is not only the cause of its problems, but in fact, the nation’s mortal enemy. Even a government agency would have difficulty screwing up so royally; but then again, to the private banks that own it, inflation is exactly what they seek. Only financial assets benefit… Read more »
Everyone lies. It’s an engrained corrupt habit. In June, the USFed Chairman Bernanke expected to start pulling back before the end of year, but that appears out of the question. The public statements undercut the USFed’s credibility and even contradict their own inaction. They await more evidence of progress. They see none. They talk of the USEconomy continues to expand at a moderate pace, which is a lie. If it did, they would halt the $85 billion in monthly financial welfare with economic food stamps. They talk of labor markets showing some further improvement, which is a lie. If it… Read more »
http://campaign.r20.constantcontact.com/render?ca=dfb3deaa-433e-4669-b9ba-6a231601c945&c=877a32b0-427b-11e3-ad08-d4ae52a45a09&ch=8905dbc0-427b-11e3-ad3c-d4ae52a45a09
Debt enslaves the majority…. enriches the minority……. this is the goal..more debt for the majority,more taxes,less health care & eventually no state pension…even though your paying for it less rights,less & less sovereignty. Countries are or will be owned by Corporations including Banks.. Democracy is ending just like communism…replaced by socialism for failing Corporations and Capitalism for failing families. your life and the lives of others across the World are now part of a business plan..you better be productive. Wars are planned like Corporate buyouts or hostile takeovers..even as expansion plans. This is the future…hell ! it may even be… Read more »
If Santy did economics plans ….
Hi David, I just watched your excellent video on punk economics re hostages and QE. Id like to respectfully highligh an error in the message. You say that the rich get richer when assets go up as a result of QE because you correctly point out that the inflationary effects are confined to the markets. However rich people AREN’T getting richer in this manner. Let me explain; When an asset rises in price as a result of QE it’s VALUE remains the same. The real reason the rich are getting richer is because wages which remain the same are REDUCED… Read more »
Imagine, most can not see reality.
http://plata.com.mx/mplata/articulos/articlesFilt.asp?fiidarticulo=227
http://campaign.r20.constantcontact.com/render?ca=53a41596-84b1-416c-9a18-cc87d065e35a&c=877a32b0-427b-11e3-ad08-d4ae52a45a09&ch=8905dbc0-427b-11e3-ad3c-d4ae52a45a09
Considerable economic content above for those interested
Anyone else receive an email saying David’s email hacked?
I didn’t open it, as well as the last few as I usually delete them and come straight to this site.
Anyhoo…if there is any veracity to this let me know.
Scotia Macotta bankster tries to frighten producers into forward selling at knockdown prices
http://kingworldnews.com/kingworldnews/KWN_DailyWeb/Entries/2013/12/20_LBMA_Chairman_Tells_Producers_Gold_To_Plunge_%24400_In_2014.html
Because of the latency I discussed, it’s not being noticed but the central banks, bullion banks, and the sovereigns are taking the long side of that (trade). They are taking delivery on an unleveraged basis, and it will show up, but it’s in the hundreds of tons, especially as we moved sub-$1,200 (on gold). That’s why sub-$1,200 is unsustainable, despite what the likes of Goldman Sachs and all of these shill bullion banks are saying.”
Andrew Maquire
http://kingworldnews.com/kingworldnews/KWN_DailyWeb/Entries/2013/12/20_Maguire_-_Shocking_Amount_Of_Physical_Gold_Bought_In_7_Days.html
It’s not fair!! It’s not fair!! Wasn’t my fault Ireland was unfairly treated when dealing with failed banks: The FT noted comments from the IMF’s former mission chief to Ireland, Ajay Chopra, who played a key role in designing Ireland’s bailout. He said Ireland was treated unfairly when it was prevented from burning bond holders, putting all the burden of supporting banks on domestic taxpayers, while senior bond holders got paid out. The article noted that Ireland pumped €64B into its banking sector that eventually led to a bailout with the EU and IMF. S&P reaffirms Ireland’s rating at BBB+/A-2:… Read more »
Mexico opens the lending floodgate to potentially die of debt suffocation and simultaneously be strangled by the interest payments on that debt.
http://plata.com.mx/mplata/articulos/articlesFilt.asp?fiidarticulo=226
Thick as they are, Kenny and Gilmore must surely feel totally humiliated –
http://www.irishtimes.com/business/economy/deal-on-irish-legacy-bank-debt-unlikely-barroso-1.1634215
Barroso – “In fact it was the banking sector in Ireland, that was one of the biggest problems in the world in terms of banking stability, let’s be honest about this.”
So now the entire Euro fiasco in the world is Ireland’s fault. So much for poster boys and girls.
For those who have understandably great difficulty making any sense of the idea of credit, and know something must urgently be done, here is a good starter. The monetarist onslaught from both banksers and goldbugs must be put aside, however rudely it takes. The politicians are gutlessly unable to be rude to that noisy gang, and find it much easier to insult voters with pabulum.
Generalizing the Principle of Government Credit: Non-Mechanical Economic Cycles
Most here, and including DMcW, will never have heard of this, the true history of credit. It is time to make this actual now.
For all citizens who must understand what credit means, and who know that the current monetarist nightmare trumpeted from dark corners is utter tripe, humbug and bunkum, Michael Kirsch has a good video here on Franklin Roosevelt’s Credit Principle Michael Kirsch of LaRouchePAC discusses Franklin Roosevelt’s credit principle, as expressed in his use of the Reconstruction Finance Corporation, which evolved from his broader plan to re-instate a credit system of economy, as was facilitated by the first and second Bank of the United States. Roosevelt’s proposal for 12 credit banks for industry, his various lending programs, and excerpts from his… Read more »
While praising the efforts of the Irish people, Borroso said the euro was “the victim” of irresponsible practices in the Irish financial sector.
http://www.irishtimes.com/news/politics/brussels-unhappy-at-portrayal-of-its-role-in-bailout-1.1635163
Poor Borroso, I can hear the knuckle dusters ringing as he walks. Some think it’s the spurs, no, it’s the arms swinging right to the pavement.
As anyone who in involved in the design and production of complex machines knows, Andrew Jackson’s “simple machinery” of government is bound to bust itself, or for the more technical, diverge under stress.
So dump the scandalous kow-towing to Andrew Jackson in various schools and dark corners, and get with advance government, active promotion of economic progress, be done with simple machinery. Hey we live in a complex world and understand much more than rattling horse carriages.
Fed aims for the market directly. Manipulations go mainstream
http://kingworldnews.com/kingworldnews/KWN_DailyWeb/Entries/2013/12/21_Former_US_Treasury_Official_-_We_No_Longer_Have_Free_Markets.html
http://kingworldnews.com/kingworldnews/KWN_DailyWeb/Entries/2013/12/21_Maguire_-_Behind_The_Scenes_Look_At_The_Fierce_War_In_Gold.html
For anyone interested in the mechanics of pOnzi banking criminal rackets read article above.
Best article yet on the critical core reality powering EVERYTHING else in terms of the nightmarish economic status ante;
http://www.thedailybell.com/exclusive-interviews/34856/Anthony-Wile-Doug-Bell-on-the-Decline-of-the-Green-Revolution-and-the-Future-of-Farming/
The pros and cons of agriculture.
“From 2005 to 2008, the worldwide price of food rose 80 percent — and has kept rising.” Today, along with the cumulative index, the Standard & Poors GSCI provides 219 distinct index “tickers,” so investors can boot up their Bloomberg system and bet on everything from palladium to soybean oil, biofuels to feeder cattle. -”
and you are told the cost of living increases less than 2% pa.
My grocery bill has gone from 350-500 a month; much more in line with the 15% per annum range.
http://ellenbrown.com/2013/12/22/100-years-is-enough-time-to-make-the-fed-a-public-utility/