On May 1, 2003, President George Bush stood on the bridge of the USS Abraham Lincoln. Behind him a massive banner was unfurled, which read “Mission Accomplished”. The president declared success in Iraq and assured the American people that the victory was his, Saddam was defeated and there would henceforth be no more combat operations.
The vast majority of American and Iraqi casualties occurred after this date. In fact, the Iraqi insurgency kicked off after the American mission was declared accomplished.
When I hear our government spin doctors declare that “exiting the bailout” signals a “mission accomplished” moment, I am reminded of Dubya.
The economy here is turning slowly, not as a result of government policy but in spite of it.
The combination of a credit crunch, an overvalued exchange rate, higher and higher explicit taxes, stealth taxes of all sorts and a massive fiscal contraction is a recipe to poison even the healthiest economy, let alone one burdened by negative equity, broken balance sheets, which is actually one-fifth smaller than it was in 2008, and has 400,000 fewer people living in it.
That all these potentially fatal attributes couldn’t kill local business stone dead is testament to the achievement of thousands of small Irish businesses who have managed to stay open in the past few years.
The recovery, which in recent months finally began to make some dent in unemployment, is still fragile and could be derailed easily. So it must be protected.
Part of protecting the economy is being honest about it, being truthful with the people as to why things are happening and being alert to any unexploded financial landmines.
So concerned was the IMF about the unexploded landmine deep inside the banks that in its latest Fiscal Outlook, buried deep in the report, is a suggestion that a “capital levy” might be levied on wealth in the event that debt levels are not being brought down quick enough.
This is what happened in Cyprus where deposits over €100,000 were impounded to “bail in” the banks.
On page 49 of the report, the IMF makes this suggestion explicitly. These reports are never published without the people at the top agreeing to everything.
If we are to be honest, Ireland is exiting the bailout with gross debt as a percent of income, actually higher than it was when we went into the bailout. If Ireland were a company, it would have gone through a restructuring, yet it has more debt at the end of the restructuring than the beginning while still being cash-flow negative.
You would also imagine that leaving the bailout would also correspond with the country not having to borrow yet more every year. But this is not the case.
But why are the financial markets so keen to finance us if things haven’t improved significantly?
The answer to this question brings us a bit nearer the truth.
The Government has been very keen to spin “exiting the bailout” as a sign that Ireland is uniquely virtuous and is very different to the other countries that were similarly in the bosom of the troika.
The EU also wants to spin this line because, as leading indicators all over the eurozone turn down and deflation haunts Spain, Greece and Italy, the EU needs a victory. Olli Rehn and his mates in the ECB desperately need to argue that the way out of the crisis is to lumber the debts of others on to the shoulders on innocent taxpayers, while reducing rapidly government spending and increasing taxes.
But the interesting thing is that Ireland is not the best performing asset in Europe in the past 18 months. The best performing asset has been the IOUs of Greece. Greece is a country where GDP shrank 3pc in the past three months and where deflation is gripping the economy. Yet yields on Greek government IOUs have come down from 30pc to around 8pc. The same has happened everywhere. Italian, Spanish, Portuguese and Irish bond yields have all come down in unison.
But if the Greeks are performing better than us, surely there is something else going on that is driving the risk premium in Ireland down than just Irish-specific news?
There is.
The key is Mr Draghi, the ECB boss. He has said he will “do whatever it takes to save the euro”. This means he will use the central bank’s balance sheet to buy the debt of governments in difficulty if needs be. Two years ago, he unveiled a scheme to force banks to buy government IOUs. This caused yields on peripheral government bonds to move downwards. Mr Draghi’s scheme worked as follows. The banks went to the ECB with bad collateral. They gave this to the ECB and the ECB gave the banks cash in return. The banks were compelled to use this cash to buy government bonds when they were yielding 5pc, 6pc and 7pc. This obviously meant that the banks could get a “free” interest rates “pick-up” by buying the bonds at these high rates. The ECB, in effect, underwrote the risk. This caused bond markets all over peripheral Europe to rally and it also made the profits of the banks much healthier.
The reason people are prepared to lend to us and lend to the Greeks is that they know that Mr Draghi will buy all the IOUs if he has to. So the first thing to appreciate is that Mr Draghi is the main reason Ireland is exiting the bailout.
The second issue outstanding is the fact that the Irish banks are still more or less bust, and what happens if they need more money? Where will it come from?
A capital levy perhaps? Now that’s something to think about before we declare Mission Accomplished.
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Because in the Greek Bail-Out: 77% went into the Financial Sector : An anatomy lesson of where the money went in Greece http://www.attac.at/news/detailansicht/datum/2013/06/17/greek-bail-out-77-went-into-the-financial-sector.html
David, Thank you for covering the topic of Bail-in’s. We (GoldCore) recently released a comprehensive report ‘From Bail-Outs to Bail-Ins: Risks and Ramifications’ describing what exactly Bail-ins are, where they are coming from, why and how the will likely manifest. Since it’s release the guide has been picked up right across the globe and has generated a lot of debate and comment. I believe that this move from bail-outs to bail-ins represents a massive shift in banking policy, has had little if any scrutiny and has been driven by unelected bureaucrats which have circumvented the democratic process. The fact is… Read more »
Sound article. So, depositors may have something to worry about and by the way, we need to be aware that there are non-income earners who are in retirement age and have negligible to zero deposits who are the vast majority of this aged group – these people (the majority in this age group) really do not care. Perhaps the biggest impact of a bail-in is the detrimental effect it could have if working capital (cash part of savings by a business) is ceased is instead of being allowed to be used for day to day business operations. Indeed, it makes… Read more »
Ireland the state, is not looking after the interests of its people, it marches to the tune of the pied piper of globalising and is excellent at keeping in step. What makes it even worse; we have the weakest government that we have ever had in office which has lasted as long as this one. This government has not been raised by mammy to protest, to say NO and still make friends. This is in part, is a reflection of the people themselves the modern nurture of compliance, weak leadership from all including that of mammy and daddy. Just Say… Read more »
Spot on David, all hail Mario “Flash Gordon” Draghi, saviour of the universe, (were do I get some of ‘dem der guaranteed money, bond yokie’s)
IOUs = UOIs:
‘U’- the people of Ireland ‘goody two shoes’ ‘O’- owe ‘I’- the so called ‘elite’ who are laughing all the way to ‘U’ your bank – ha ha ha
Thank ‘U’ very much
Regards,
I
ha ha ha “IDIOTS”
Nice sensible article from David, now everyones got The Christmas raving office party stuff out the way on the last thread. So, where are we? Where have we been since this began? Bertie & Biffo: “we are where we are!”. Anger is an energy? “Anger is not a policy” says the ghost of Linehan [RIP]. Then, everyone got really pissed, had a few marches, elected Fine Gael – who promptly abandoned the whole grown-ups running the Sovereign country stuff & handed it over to the ‘experts’. Just like they were still handing in homework to Christian Brothers, hoping buggery wasn’t… Read more »
No turkey for Christmas, just grilled pigeon. Middle class meltdown under Troika Austerity, relief in sight? Or headlights?
http://www.irishcentral.com/news/The-New-York-Times-questions-Irelands-highly-praised-economic-recovery-235552941.html
[…] spite of, and not because of, the blundering ineptitude of this government and the one before it. Bailout Exit. If goody goody Ireland is the model student, how come bad boy Greece is the star perfo… On paper the country is as bad and worse off than its ever been. Sign in or Register […]
New York Times (front page of business) on Irish recovery :
Hardships Linger for a Mending Ireland
http://mobile.nytimes.com/2013/12/12/business/international/as-bailout-chapter-closes-hardships-linger-for-irish.html?hpw=&rref=business
What Recovery?
Today’s Headline
“Irish industrial output fell 11.6% in October”
includes
“On an annual basis, industrial output here has fallen 7.5% since October 2012.”
http://www.rte.ie/news/business/2013/1212/492397-industrial-output-euro/
When is Enda giving his State of Nation address??? I glimpsed a headline somewhere “Enda National Broadcast Speech on Exit” or thereabouts.
DMcW has finally smelt the coffee or rather the sewer of the mudflaps planning to save their rotting swamp called a banking system. To prepare the landlubbers for this mudbath both Germany’s Focus and DLR (national radio) let it all hang out yesterday – “explaining the grab cascade”, and warning of plain seizure. It is not just Ireland but the entire EU, and the USA, that is about to be robbed and given the Detroit treatment. The rancid sophistry of “saving the taxpayer by slashing the creditor” – depositors are now called creditors! And never forget Enda presided over the… Read more »
You do us a service by highlighting the media machine losing it’s mind and having convulsions over made up hope. It’s designed to make Ireland look good in the eyes of investors looking for cheap labour but the place is as rotten as ever and more corrupt than we imagined after reading about the CRC. Ireland.inc is open for business and we are all up for sale. Hip hip. Let us whore ourselves out to the next highest bidder. If we are good we might even get a living wage. Any switched on person living in the real Ireland whether… Read more »
“That all these potentially fatal attributes couldn’t kill local business stone dead is testament to the achievement of thousands of small Irish businesses who have managed to stay open in the past few years.” http://www.rte.ie/news/business/economy/pmi/ looks like things are still ramping. Have a look are similar stats around the world…same upwards trend. I cannot explain it. No one is predicting it. But I can attest in business I am in – Hi Tech/ Telecoms/ IT, it is all upside – no hype. Oil and general energy demand is climbing. Dublin and other population centers are ramping. Not so for rural… Read more »
Have I deja-vu or something? Posted already here. A quick check : Goldcore Limited is regulated by the Central Bank of Ireland. Please note however the provision of precious metal product or service does not require licensing, authorisation, or registration with the Irish Central Bank and, as a result, it is not covered by the Irish Central Bank’s requirements designed to protect consumers or by a statutory compensation scheme. GoldCore Limited trading as GoldCore is registered in the Companies Registration Office under Company number 377252. Registered for VAT under number 6397252A. © 2013 Further : https://news.goldcore.com/commentary/when-roosevelt-ditched-gold-standard which links to :… Read more »
Excellent article. An equally sobering view in the FT – “Irish pace of reform blamed on cronyism It has survived occupation, wars and famine during its near 500-year existence under the motto Nolumus Mutari, “We shall not be changed”. Now, the Honorable Society of King’s Inns, which controls barristers’ entry into the Irish legal system, has seen off the EU and International Monetary Fund. The delayed legal reform is but one example, according to critics, of how the structural and political changes promised by the Fine Gael-Labour coalition that has guided Ireland through the crisis have not been delivered. Vested… Read more »
Stephen came in here and made a reasonable and short post about his take on economics and his business and certain people were up in arms. He didn’t overdo it with his sales pitch and it was obvious (if you read it) that it wasn’t just a copy and paste job – plus he responded to any comments made with courteousness. So what if he has a business interest? There are plenty who do – what’s wrong with sharing your link once in a while as long as you aren’t spamming people? In case you hadn’t noticed folks, this is… Read more »
While I was reading Davids article on my HP Laptop ,I was thinking about this possible over exposure of Brands on this site..as I light a Silk Cut Blue,I contemplate this predicament whilst enjoying a refreshing cup of Lyons Tea with some avonmore milk..I am sure Gold is a good buy,maybe silver or bitcoin ? but how about lockheed Martin ? excellent products,growing demand.captive consumer base…? I was reflecting on the State of our Economy [ presuming we have one ] whilst returning home in my Volvo and while refueling with Texaco fuels which is a excellent fairtrade product I… Read more »
Jack Nicholson.
“Why can’t we all just get along?” That age old chestnut!
Alas it’s not in our nature.
http://www.youtube.com/watch?v=MPMmC0UAnj0
Why destroy when you can create?
“The second issue outstanding is the fact that the Irish banks are still more or less bust, and what happens if they need more money?” A very pertinent question. They will need more money. But from where? It sure as shekels won’t be from the ESM fund. Why the headlong rush for collective banking oversight. It certainly doesn’t extend to collective responsibility for recalcitrant bank failings. They like to make big noises… but back it up with hot air. The great victory claimed by Enda and Treacle Gilmore on recapitalisation compensation for ‘legacy’ bank debt turns out to be absolute… Read more »
Did Ireland’s bailout treat the sick patient without curing it of cronyism, vested interests and no accountability?
FT piece today 131213 Irish pace of reform blamed on cronyism http://www.ft.com/intl/cms/s/731b5d6a-628f-11e3-bba5-00144feabdc0,Authorised=false.html?_i_location=http%3A%2F%2Fwww.ft.com%2Fcms%2Fs%2F0%2F731b5d6a-628f-11e3-bba5-00144feabdc0.html%3Fsiteedition%3Dintl&siteedition=intl&_i_referer=http%3A%2F%2Ft.co%2FfSjo4vdpq9#axzz2nLbUgMrH
Crystal clear Ryu. Bail ins are coming this way and anyone who takes any personal action to protect themselves is labelled “elite”. What a load of cobblers.
[…] If goody goody Ireland is the model student, how come bad boy Greece is the star performer? from David McWilliams: […]
The money confiscated in the Cypriot Bail-in was mostly that of Russian gangsters and foreign savers based in the Middle East.Very few Cypriots (like the Irish) had large amounts of money saved in banks. The Irish that do have money in banks are getting it out as fast as they can and buying investment properties in Dublin and Galway.The Irish love of property hasn’t gone away and bricks ‘n’ mortar are still regarded as prize assets. They are certainly returning on the investment with rental incomes currently at their highest in decades.As David has said before,follow the money!
To Paul Div, In answer to your alphabetical list of blogger of the year. I will have to disagree with your suggestions and also decline to accept my place in the list. You are way off rr six should be number one not only for his wit- see above- but for his apparent selflessness. I read every one of his comments but and in the years here I have only commented once if have at all. Mostly because I agreed with most of what he has said. See above – The next in line should be What a mess and… Read more »
Does anyone know of a way to exclusive stop a spell checker from putting capital letters on the words gold, god and christian – is there a spell checker for no religious people ¿ those don’t believe in false golds ¿
No that bug infestation seems to have been quelled with a good dose of gold bug DDT supplied by Monsanto: Lets get back to the topic: “THE REASON PEOPLE ARE PREPARED TO LEND TO US AND LEND TO THE GREEKS IS THAT THEY KNOW THAT MR DRAGHI WILL BUY ALL THE IOUs IF HE HAS TO. SO THE FIRST THING TO APPRECIATE IS THAT MR DRAGHI IS THE MAIN REASON IRELAND IS EXITING THE BAILOUT. THE SECOND ISSUE OUTSTANDING IS THE FACT THAT THE IRISH BANKS ARE STILL MORE OR LESS BUST, AND WHAT HAPPENS IF THEY NEED MORE MONEY?… Read more »
There ya go even a web site called “The Doom Collective” above posts DMW apocalyptic topic “This site talks about all things Doom”.. “Doom On”
Oh Deary Me http://www.youtube.com/watch?v=0L7SOPDOvvI Peter Schiff on ‘Bitcoin vs Gold’ getting into an awful tangle of logical fallacies attempting to explain ‘Intrinsic Value’. This talking-head presentation is 12 minutes of pure buffoonery and historical inaccuracies. Save yourself the pleasure of giggling at his nonsense, in summary his point is, “Bitcoin is rubbish because Bitcoin is exactly like Gold except for one thing called Intrinsic Value. Now, I have no words to explain or logical idea what ‘Intrinsic Value’ is so I’ll bluster for a good ten minutes on unrelated topics. And with that, Buy Gold, Avoid Bitcoin, because I’m sounding… Read more »
http://www.caseyresearch.com/cdd/the-mandela-myth
alternate opinion re Mandela
According to SJI over the duration the poorest 20% of society have had one fifth of their Income disappear.
Maybe someone should run that one by the ‘Bailout’ exit cheerleaders!
I was unable to watch RTE news, it was too painful.
Michael D just happened to be having a mini fete/bash for the Priory Hall residents. Terribly nice of him, thoughtful and that. . . oh it just happened to coincide with the other celebrations today.
What exactly were they celebrating, a successful hoodwinking is docha.
“duration of the crisis”
Why do you think the US government will never ever have a problem funded its expenditures and deficit? “Because the electricity to the computers will never be cut off” James A Galbraith Nov 14, 2013
The geeks have to earn their Euros the US does not have to earn dollars it can print its own money the Greek cannot -James A Galbraith Nov 14, 2013
Even the Troika Think Irish Government Wrong to Accept Bank Bailout and Austerity! IMF mission chief for Ireland, Ashoka Mody, was a member of the troika team that put together the bailout package for the Irish banks. Now, three years later, he says that his troika partners’ – ECB and EU Commission – imposition of the murderous austerity policy which ensued, was “analytically, practically and institutionally wrong”. “To be hopeful about the future would require a much more ambitious policy direction from Europe beyond austerity”. “This is a crisis in as much as because there are no clear answers and… Read more »
The European Parliament gave its official go-ahead for the bail-in “approach,” in a decision Dec. 11. An EU directive will enter into force on January 1, 2015, and the bail-in system is to take full effect on January 1, 2016. Anticipate then bail-in’s can for sure begin at any time, starting with the EU Summit on Dec.19-20. ECB’s Jörg Asmussen on Handelsblat yesterday : “It must be ensured that the orderly resolution of a bank can be done over a weekend.” “The bail-in has to be done quickly, because otherwise, the depositors might try to pull out their money.” According… Read more »
Money is whatever the majority of people trust and believes it is – bitcoin is a global money its (sove)-‘reign’ will then have to be global it may help to define globalisation. Which inevitable means less control – a dictate by those with access to the algorithms no guarantee you that might be – none – be careful what you wish for!!!
Hi all, With dismay I see the blog descend into the same tit for tat sound mooney split banks mantra as always. As a result you all missed a very important point our host made which corroborates what I’ve been saying all along; “The economy here is turning slowly, not as a result of government policy but in spite of it” In other words we don’t need the fail eireann people, banks to be split, gold backed money, thorium powered nuclear reactors to be built to thrive. WE ALL can thrive IN SPITE of the scumbags in the banks etc.… Read more »
printing presses open to feed the banksters,ONLY ??!!
to add insult to that bailout injury,we have bail-ins , again serving to ‘accommodate’ ONLY our slave money masters!
pieces of eight Fabian stuff …PIRATES ,in Armani suits,nothing more
I must admit some funny observations from Miriam Lord in IT
http://www.irishtimes.com/news/politics/miriam-lord-s-week-low-key-conga-to-celebrate-the-end-of-days-1.1627613?page=3
It looks like EndaMoses, of Biblical repute, is leading the Exit, chanting Blessed be the Bondholders, for theirs shall be the promissory Notes.
A taste of reality for “thriving Tigers”, anti-Tigers et al, in spite of it. I am absolutely sure DMcW knows these numbers… Food exports is only sector to record growth so far this year. The country’s trade surplus narrowed sharply in October. The surplus shrank 8pc in October while unadjusted data for the first 10 months of 2013 shows that exports are down by 6.4pc against imports so far this year to date. The trade surplus for the year so far is €31.8bn, down 12.2pc on the same period last year. The latest data showed little reason for cheer, bank… Read more »
Big British insurance vulture facing wipe out. It’s sure to have major repercussions, maybe even the spark for a general collapse? –
CATASTROPHIC losses at RSA’s Irish division may prompt a takeover of the insurance giant or lead the company bonds to be rated as junk. Almost two thirds of RSA’s total reserves have been poured into Ireland in a matter of weeks.
Glass-Steagall seperates insurance as well from deposit banking. Without this in place, insurance can trigger a systemic blow-out.
Righteous Indignation
Achtung Achtung !!
Can we please stay on topic everybody??In fairness !!
I can only speak for myself, but i find it awwwwfullly disconcerting that you all stray from the title of our host’s offering.Allow me to lad by example …huhhhh!
Hold On Greece! Your c**k is on the ‘bloc’ ,but no need to sweat so profusely …ECB has got your back! …or rather locked on to your medulla oblongata,for the kill shot!
http://uk.reuters.com/article/2013/12/14/us-greece-economy-idUKBRE9BD0EB20131214
bonbon it’s time for you to stop your Self Righteous Indignation it can be done I have helped others through this process one step at time, there is friendly face here ready to hold your hand and help through this metamorphosis.
Wow, RSA sure stirred up the “keep it low-key” Exit Party, did’nt it. Sure took the life out of the boozy “recovery”. The doomed system is primed for another “Lehman”, the trigger again will come from off-field. Moving the goal posts has become comical. Have a look Joint Statement from Belgium: Four MPs and Agora Erasmus Call for Glass-Steagall “Breaking Up the Banks: A Responsible Policy” Why? “Let’s go back for a moment and review the sequence of events. In 2008, the losses of AIG, the cause of the fall of Merrill Lynch and Lehman Brothers (resulting at home with… Read more »
Which is better or worse?
Borrowing money to keep Ireland afloat at interest rates we can’t afford and which will have to be paid by those not yet born or using savings that now exist?
Production has falling and employment has risen slightly while wages have falling?
Define Tax?
It must have been fear of an ESB strike that had the insurance company’s on their knees to SAINT ANTHONY – it worked they found the pension fund which was supplied to the bailed out bond holders (the insurance company’s)by the Irish tax payer.
I wonder if Noonan is aware of this intervention
I wonder what will “Jade Rabbit” find on the dark side of the moon???
http://www.huffingtonpost.co.uk/2013/12/14/china-lands-probe-moon_n_4445606.html?icid=title%3D_ukt2
Bloody hell, Asmussen has resigned from ECB, now will work for German Govt http://uk.reuters.com/article/2013/12/15/uk-germany-coalition-asmussen-idUKBRE9BE0EU20131215
Over 300 comments, very impressive.
I didn’t see the clueless muppet Enda Kenny’s ‘speech’ as my little girl was on Skype from the US and the latest episode of My Little Pony was far more important at the time.
What did people think of it? I will watch a rerun and the Vincent Browne special at 10.30pm.