Is it just me or do you also think there is something strange about the IMF writing reports criticising itself and trying to pass it off as objective commentary? Last week we saw the IMF, one leg of the troika’s rickety three-legged stool, saying that the Irish economy was not performing well under the policy that it, the IMF, was implementing. It stated that the level of unemployment was staggering. What is actually staggering is that they should be staggered – because this high level of unemployment is the result of IMF policy here.
The IMF’s indignation is a bit like the HSE issuing a report criticising the health service and stating it is staggered by queues at A&E.
This absurdist approach (in the sense that it amounts to nothing) to responsibility is made more, dare I say, absurdist by some sections of the media. For example, I was listening to RTE’s Morning Ireland programme where, quite seriously, the interviewers were taking this “report” at face value, asking other experts whether they “agreed with the IMF” rather than asking the obvious question, which is “does the “IMF agree with the IMF”?
It is Mr Beckett, Mr Camus and Ms Lagarde all wrapped into one.
Just so we make no mistake: the IMF is making policy in Ireland. The consequences – higher unemployment, lower growth and a shrinking domestic economy – are the direct result of these IMF policies. If the IMF is worried about the consequences of its own policy then shouldn’t it change it?
Part of me thinks that the IMF has realised that the entire thrust of its economic intervention in Ireland and Europe is unravelling and it is trying to mendaciously lay the groundwork for a tactical intellectual retreat. When it finally abandons its austerity folly it will point to these flimsy reports to claim: “look we were sceptical all along”. If you are shocked by my cynicism just remember that the iron rule of a bureaucracy or an organisation is to perpetuate itself and its power.
Therefore, the key thing for an organisation is to extend its prestige. Somewhere in this orgy of self-preservation the truth gets lost and the story changes to suit the new times.
So, with the IMF, last year’s conventional wisdom “austerity works” becomes, on the back of evidence that maybe this is not true, “austerity doesn’t always work”. This shifting position is a prelude for “austerity only works in certain conditions” and then we will have the complete volte-face. Yesterday’s conventional wisdom and hard-held positions become tomorrow’s folly.
With regard to conventional wisdom, we would be wise to remember the great American economist Galbraith who pointed out that conventional wisdom is rarely defeated by some brilliant countervailing idea which convinces people to change their views, but by the march of events.
In the IMF’s case, the events are the facts, which could have been pointed out by a Leaving Cert economics student: austerity doesn’t work when the banks are broken, interest rates are already low and the debt overhang is enormous.
For years this column has been arguing that we face what is termed a balance sheet recession where debts are so big that the balance sheets of the middle classes are ruined. On one side of the balance sheet there are assets, which have collapsed in value. Yet on the other side are liabilities or debts which are rising, thus the net worth of the middle classes has evaporated.
This means people save what they have. This bears down on the spending and therefore retail sales fall. Up until now the IMF and its pantomime sister the European Commission dismissed these balance sheet recession notions, preferring instead to peddle the notion that the recession was a function of too much government spending. In fact the opposite is the case – the explosion of government spending is the consequence, not the cause of the recession.
Check out the Pauline conversion of the IMF. This is what it is saying now, in a shameless arse-covering exercise. “Household debt remains high, curtailing consumption, and financial distress affects many households. The halving of house prices from their peak has driven a 38 per cent fall in household net worth, the largest fall in the EU.
“Households have responded by increasing their savings rate to about 12 per cent of gross disposable income, from pre-crisis levels below 8 per cent, with about three-quarters of saving used for debt reduction during 2010-12.”
So what do you think happens when savings rise by 4 per cent of GDP? Well clearly consumption falls by the same 4 per cent. And what happens when consumption falls 4 per cent? Well obviously income falls because when you think about it, your spending is my income and vice versa. If you stop spending, I am not earning and if I am not earning, I am not spending and you are not earning, so your income falls. And as income falls, debt burdens rise relative to income even if debts stay the same in absolute terms.
So here’s what the IMF is saying now. Surprise, surprise.
“Debt burdens of many households are much higher, and mortgage arrears over 90 days continue to mount, reaching 15.8 per cent of the total value of mortgages on principal dwellings and 26.9 per cent of buy-to-let mortgages by the end of 2012.”
Oh Lord what revelations! You seriously mean Mr IMF, that when incomes fall there will be debt problems? Wow! How many PhDs did you need to figure that out? Now who do you think will be most affected by the lack of domestic spending? Will it be the multinationals which we welcome but which employ relatively few people to whom the government constantly genuflects or the small businesses that employ the vast majority of us?
Of course it will be the small business sector, which accounts for about half of gross value added and 72 per cent of employment. So the IMF is now beginning to see what its policies are doing. The implication of the slump in growth is that the banks are now in danger of needing another bailout.
Now, if they need another bailout, where will the capital come from? This is where Cyprus comes in. What if the capital needs to be raised from depositors? Are we safe then?
The starting point from the EU is that the Cypriot deal was the “template”. Then the EU backtracked and stated it was a special case. I am not too sure which statement to believe.
However, given the way the IMF has changed its stance, a U-turn from the EU on deposits can’t be out of the question.
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Nearly 40% labour force on unemployment, one parent(not working),disability payment. This is what emerges from the Government’s 2011 Report on Social Welfare numbers. See report http://www.welfare.ie/en/downloads/statsa2011.pdf The number of recipients is here as follows: Total Widow(er) ,One-Parent families recipient (under age 66 yrs) 216508 total illness disability recipient 243,416 total jobseekers recipient 379,973 total supplementary welfare recipient 34,597 total number welfare recipients 874,494 This does not include the unemployed people’s dependants- e.g. unemployed spouses. http://www.welfare.ie/en/downloads/statsa2011.pdf See page 30 of this report for the table where I got these figures This is scandalous. In the Irish labour force it is nearly… Read more »
Two further points: I am having trouble accessing http://www.welfare.ie now. Is there a problem with the site?
I omitted all those on Labour Activation schemes e.g. Jobbridge, CE Schemes, Fas courses.
Everyone who has money in the banks right now, needs to be worried about the Cypriot solution. Unless the amount you have in the bank is earning more than the potentially 30% you’d lose by such a solution, or the penalties for getting your cash out of the bank amount to more than 30%, then it simply makes sense to get your cash out now, before they take 30% of it without your say so. Would this cause a run on the banks? Well, yeah, if everyone did it. But let’s face it, the Irish people are dumb and gullible,… Read more »
The sooner we get out from the Troika deal and go back directly to the IMF for bailout 2, the better. There is a better chance of getting a debt write down from the IMF than from the EU.
Dog Bites Tail …or can he ? Our Irish Minister cannot bite his tail and the sooner someone tells him that the sooner he will realise he must get out of that spin he has been playing under the baton of Legarde Troika & Co . The bureaucracy perpetuating its power over us is ‘ENARCHY’ ie the aluminae of Ecole National Admisistrif of which Legard and all her henchmen carry out their pornagraphic economics on the Irish . How often have they watched our Minister pee down his pants into his socks .You will never be told for within the… Read more »
Hi david,
Excellent article. “there is no so blind as those who will not see” would appear to be a perfect fit for the IMF.
Regards,
Conor
David, I have read your articles for years and this is my first comment. How could the combined brains of Europe and the IMF really get this so wrong and try and get out of a recession by creating more recession.?The emigrants from Ireland are not just 20- I am not alone in leaving close to retirement and I will not be the last Why do people speak of “low interest rates” – yes low for mortgages as tracked to ECB but my Overdraft rate to PTSB is 14.4% and higher if I go over my limit. My personal loan… Read more »
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Great to see your return to form David. Worth posting the link to this all over Facebook, Twitter, LinkedIn and Google+
I am so cross with the Troika/Irish Government/Banking sector et al, they are so corrupt that ordinary decent Irish people cannot see that they are screwing us right, left and center! I have no doubt they will come after our savings. See this……… http://www.goldcore.com/goldcore_blog/global-deposit-confiscation-called-influential-ceo-italys-largest-bank And I quote……….. “The CEO of Unicredit Federico Ghizzoni said yesterday that it is “acceptable to confiscate savings to save banks.” He said that the savings which are not guaranteed by any protection or insurance could be used in the future to contribute to the rescue of banks who fail and that uninsured deposits could be… Read more »
You’re so right. The IMF’s main reason for existence is to bring countries round to the type of economy recommended by Milton Friedman, Maggie Thatcher etc. whereby they should privatise everything, sack as many civil servants as possible, reduce the salaries of the remainder and in the process have the multinational vultures pick over the bones for any profit to be made. Maggie said “there is no such thing as society” so why would the IMF worry about unemployment except to shed crocodile tears.
WE HAVE CREATED A PRIVATE SECTOR THAT RELIES ON THE GOVT TO TOP UP THE POCKET MONEY WAGES THAT EMPLOYERS PAY THEIR STAFF. AT THIS RATE ALMOST EVERYBODY WILL BE CLAIMING 1 WELFARE PAYMENT OR ANOTHER. I WAS IN LONDON LAST WEEK AND THE PLACE IS BUZZING. THE NUMBER OF IRISH ACCENTS IS INCREDIBLE . CAN’T WAIT TO SEE THE END OF THE IRISH LABOUR PARTY. LOL.THE OLD JOKE ABOUT JESUS BEING IRISH WAS SPOT ON, 33 , SINGLE AND LIVING WITH YOUR PARENTS !
Good article David. Deposits are now definitely in play and are now viewed as a source of funds to keep the banks afloat. In Cyprus the situation for depositors is actually worse than has been reported. For those with over 100,000 they have lost roughly 20%, had another roughly 20% converted into bank stock which is now of very low value if you can sell it, and have the remaining roughly 60% paying low interest but not able to be withdrawn and no idea when it will be. For those with under 100,000 the max that can be withdrawn is… Read more »
Good article David.
I think it is likely that this IMF report and the media presentation is setting the stage for the Cyprus model to be applied here.
Very soon there will be articles from elite shills about a possible ‘bail-in’ being absolutely necessary.
Eventually there will be an announcement that regretably they have to confiscate some part of our deposits and savings in our banks.
That is where this is going. The Cyprus model will be applied here.
This,I believe is the I.M.F / World Bank plan all along……look at the failure rate of the I.M.F & World Bank in “projects” they have been involved in before…it is staggering. Third World Countries. I.M.F offers “loan” of money. Money used to “improve infrastructure and utilize natural resources. International Contractors brought in to “win contracts” Governments use I.M.F “loan” to pay contractors Country gets deeper in debt while “contractors” take a percentage of Resources,Oil,Gas,Water,power,Forestry & mining. Easy Money keeps flowing to Government,top 1% get rich while the rest of the country becomes poorer. Eventually so much debt ,Country cannot pay…I.M.F… Read more »
Hi, A number of different thoughts crossed my mind when I read this article in the SBP so let me start with the first which is; I am staggered that you are staggered that they are staggered! It’s almost like David McWilliams doesn’t trust or believe David McWilliams. For so long you have been consistently accurate and now that the whole thing is panning out more or less as foretold by you, you are staggered? Last year you used the words “I am 100% certain” that this whole ECB/EMF/Troika nonsense will be a failure and now that it is unravelling… Read more »
Hi, I think I got this from a previous so it may belong to another poster if so thanks. It really is a very good piece of work. The banker’s guide to owning it all; 1. Become majority lender in an economy of people with assets you want. 2. Encourage indebtedness by loaning generously while securing on assets of interest. 3. Loosen lending standards until the assets you seek to capture are attached. (this makes the economy debt dependent) 4. Once debts are significant for the bulk of the population, sharply tighten lending standards. <– Economic shock – Onset of… Read more »
On another point…
Your bank accounts will have a further levy placed on it…which is , of course… theft.
Government will continue attempts to marginalise & criminalise the unemployed,poor & sick and portray us as a drain on society which in turn will create further social divide.
Banks will need a further bailout..probably around 20 billion..Ireland is still in recession , unemployment still growing…
No sign of Recovery not now & not while present policies are in place.
So..look after yourself and don’t wait for someone to help you..be prepared and know where you stand.
Just a few poinst regarding the large number of Irish directors of off-shore companies. It must be realized that Dublin’s IFSC (International Financial Services Centre) is one of the largest “Tax Havens” in the world. Most of the “directors” mentioned are actually “straw men”. I.E. part of the professional service offered through the IFSC. The following is an excerpt from the CIA Worldbook on the Irish economy: Debt – external: $2.352 trillion (30 September 2011) country comparison to the world: 9 $2.283 trillion (31 December 2010) Yes believe it or not 2.353 Trillion Dollars are “managed” there. To further explain… Read more »
A fine piece of spleen venting. Feeling better now David?
ECB apparently planning to lower interest rate next month despite the fact that it doesnt make the banks lend. Here it will further weaken the banks because half their mortgages are trackers on which they are making a loss. Let the IMF figure that one out. The banks or the borrowers? – Draghis choice…
[…] light of that, this piece by David McWilliams on the IMF coming out against its own policies is […]
Huge unemployment and increased poverty are the results of IMF policy everywhere. Impoverishing people to benefit a few elite families and banks is what the IMF exists for. Sometimes it encourages environmental degradation for a wee portion of its debts to be paid. The debt never ends.
Read “Confessions of An Economic Hitman” by John Perkins if you really want to know what the IMF and the World Bank do. It’s available on the web as downloadable pdf.
Who are all these guys with over 100K in the bank? Indeed, who are all these guys with much more than perhaps savings to allow buying winter fuel, school books etc. etc. They can rifle my bank account all they like and are entitled to keep what they find. The people who are all hot and bothered about depositors savings must be extraordinary wealthy – top 5% of the people in this country in fact. If a deposit is a fund – a multi billion/ trillion one what’s wrong with skimming a few bob off that? Are we all to… Read more »
We live under Neo-Liberalism. Western democracies were founded tom protect the ownership classes (merchants, plantation owners). That’s what liberal means, the protection of the ownership classes, that is, the owners of large assets. Under nNo-Liberalism the highest moral obligation is to maximize shareholder value, that is, reward investors, the most cherished of the ownership class. Aside from criminal justice, our legal system exists to protect and advance the sacred rights of large property holders: the big owners of the means of production, the big owners of land, the big owners of physical resources such as energy, the big banks, and… Read more »
None of it is surprising. I’m not sure its a conspiracy ( I may be naive) but just the centuries old mix of greed, stupidity and moral bankruptcy. Barry your info is fascinating.
(Note any journalist going to investigate how many politicians got loans from Irish Nationwide that will disappear with liquidation. I heard a prominent Fine Gael TD had a ten year interest only loan from them.)
David, It’s great when after arguing a point someone influential writes about it so well done that you now have the IMF supporting what your column has argued for a long time. With this in mind I hope one day you may acknowledge that there’s less money during a recession because money is canceled out of existence through loan repayments. Under ‘normal’ circumstances banks may create money through loan to replace that which they delete through repayments. However during today’s recession loan repayments are greater than new loans and that’s why there’s less money in circulation today. I take you… Read more »
Talking about the IMF as if they have made a mistake in policy that they now wish to correct implies the controlers of the IMF are not very bright. It is blatantly obvious to the great unwashed that the IMF enforces policies of destruction. They have been doing this since inception. IT IS A DELIBERATE POLICY, AND THESE PEOPLE ARE NOT STUPID, THEY KNOW WHAT THEY DO. It is time to recognise that anything to do with the modern (last 300 years or more, since the formation of the Bank of England) banking system enacts deliberate policy to impoverish the… Read more »
——————————————————————————– No Paper Is Safe From A Bail-In: FSB Jeff Nielson Ever since our governments perpetrated the Cyprus Steal roughly three weeks ago (the first of their “bail-ins”), I have been exploring the ramifications of this crime. My apologies to readers for any redundancy since then; however it has been necessary to cover this subject in a methodical manner in order to precisely and conclusively illustrate that: The Cyprus Steal was a premeditated act, plotted (at least) 18 months in advance; which included warning the Big Money to move their wealth out of harm’s way Many/most other Western regimes already… Read more »
Above can be seen here at this link
http://www.bullionbullscanada.com/intl-commentary/26112-no-paper-is-safe-from-a-bail-in-fsb
DMcW holds out some hope for the IMF changing its spots. Yes, it may, but the predator still remains. It is trying to pave the way for a new SMALLER financial system, dumping the totally un-bailable junk, BUT squeezing credit for the few, only. This would result in genocide beyond most comprehension. We need Glass-Steagall in its original sovereign form, not in reverse like the bail-in is, nor in murderous intent as the financial elite are now paving the way for. That is why Hamiltonian sovereign credit systems are inseparable from GS. A glance at the Triple Curve should show… Read more »
http://kingworldnews.com/kingworldnews/KWN_DailyWeb/Entries/2013/4/8_Embry_-_This_Is_Heading_Toward_A_Catastrophic_Ending.html
“Portugal considering paying workers and pensioners in treasury bills – WSJ
The WSJ, citing sources, reported that the Portuguese government is considering a plan to pay public workers and pensioners one month of their salary in treasury bills rather than cash.”
Well here comes the debt free Treasury option for money. Where have you heard that as a potential solution??
Side step the central Bank fiat currency and the associated usurious debt.
I’ll bet it will not happen. There will be not too subtle threats offered for consequences if tried by the Portugese government.
“Margaret Thatcher’s dead. This lady’s not returning”
http://www.irishtimes.com/news/world/uk/thatcher-not-mourned-by-all-as-some-britons-party-1.1353176
Left’s sickening ‘celebration’ breaks out just minutes after Baroness Thatcher’s death
http://www.dailymail.co.uk/news/article-2305760/Margaret-Thatcher-dead-George-Galloway-leads-chorus-celebration-left.html
Soon it will be the US deposits being stolen!! Economy Will Implode-Jim Willie 8 April 2013 By Greg Hunter’s USAWatchdog.com Dr. Jim Willie of GoldenJackass.com says powerful forces around the globe are working to do away with trading in U.S. dollars because of massive money printing by the Fed. Dr. Willie says, “The world makes a reaction, and what they have done is create, slowly but surely, a U.S. dollar alternative for trade.” Dr. Willie’s sources say precious metals will be used to back a new currency and predicts, “The gold price will be $7,500 to $8,000, and silver will… Read more »
Soon it will be the US deposits being stolen!! Economy Will Implode-Jim Willie 8 April 2013 By Greg Hunter’s USAWatchdog.com Dr. Jim Willie of GoldenJackass.com says powerful forces around the globe are working to do away with trading in U.S. dollars because of massive money printing by the Fed. Dr. Willie says, “The world makes a reaction, and what they have done is create, slowly but surely, a U.S. dollar alternative for trade.” Dr. Willie’s sources say precious metals will be used to back a new currency and predicts, “The gold price will be $7,500 to $8,000, and silver will… Read more »
Interesting reading see link, especially page 8 = (19) http://www.fdic.gov/about/srac/2012/gsifi.pdf I believe the western world is now ready for the total collapse of the shadow banking system, which will in turn bring down the main street banks. Canada is ready for a bail-in, New Zealand, Spain, UK- USA etc. etc. http://news.goldseek.com/GoldenJackass/1364601600.php http://foolscrow.wordpress.com/2013/04/01/leaked-news-from-government-insider-ireland-to-opt-out-of-imfworld-bank-and-join-new-brics-bank/ When one considers that the Irish Central Bank is just a branch office of the ECB, it is very unlikely that they have anything to do with the Irish decision RE. BRIC’s. Do you remember the government brought out special tax relief for those doing business with the… Read more »
A fine article with barely concealed rage and frustration. You are back on track after a small hiccup Rage and frustration is common today because the world has clearly gone insane and trying to feel normal in a sick society is unhealthy. It can kill us if we take ourself and our places in this world too seriously Even great men have their frustrations and it pleases me to know this. It’s just that their worries are different to mine Mortgages, savings, health plans, investments etc are a major source of stress. Especially if you lie awake at night and… Read more »
A song for Thatcher by Elvis Costello
“Tramp the dirt down”
http://www.youtube.com/watch?v=K-BZIWSI5UQ
http://www.paulcraigroberts.org/2013/04/04/the-assault-on-gold-paul-craig-roberts/
http://campaign.r20.constantcontact.com/render?llr=n7vdaxbab&v=001nB5QX27vwTgvp3Trgrsisdl4eTL6kp3giN5TpjN87eWzITwfHwFpbSXeEr4tcbuMhvObdUl2Zxnx71WxBSmmXC2M9YrrvUa7OAGCNeb5Zem40okM9mr12HD_FZN2PQ-r
Maskes a good synopsis as a financial blog read if one is so inclined.
Olli Rehn Admits New EU Law Will Steal Depositor’s Money.
Another wobbly leg of the stool wants to steal.
Instead of Glass-Steagall, the Dodd-Frank and Volcker Rule, leaves the central financial crisis problem, derivatives, basically untouched. With all the Euro drama, some have forgotten, papered over, buried, downplayed, gold-plated, and drowned out, what this is all about. FORGET DUDD-FRANK IF YOU WANT TO CONTROL DERIVATIVES April 8, 2013 (LPAC) — The April 5 Wall Street Journal reports the that the Commodity Futures Trading Commission (CFTC), headed by Gary Gensler, has stopped writing and proposing “swaps” regulations for the Dodd-Frank Act, due to its “internal divisions” in the Commission. CFTC, which at first led other regulators in announcing Dodd Frank… Read more »
Debt , debt , debt . Who is the next domino to fall etc etc ? The Euro clearly does not work work . Ireland likes to think that it is important but really it is just the ruling elite in Ireland who wish to maintain the status quo who are afraid of the unknown . The ECB considers a small indebted nation on the fringes of Europe while the Irish think that they are master dealmakers at the centre of Europe . Speak to anybody in government and they will tell you that we are economic wonders because we… Read more »
More good news from Iceland. More growth – 3 successive years now. Debt issues nearly sorted. There must be red faces all over the place.
Can PhD degrees be revoked? Priests can be defrocked. Electrician Delighted…what can you do with Economists? Demon-itized perhaps?
http://deartoxicsystem.wordpress.com/2013/04/09/it-is-time-to-let-those-people-go-once-again/
Elderfield Knows Better ‘Only leave the field when you can get praised and allow memory testify to that with your legacy’ .He is a wise man and lucky him he can leave The State too in a blink of an eye to return to his world unblemished and unnoticed .His timing is good and for a personal good reason . A Mouse smells when the Cat is arriving and is gone when it does .His visible chattels are modest because that is his plan that is all he wants us to see. The Time of Dantes Inferno is arriving and… Read more »
Lets hand out a few awards then….. The Cypriot Bankster were top class. A sampling of the accolades that the global finance community bestowed on the Bank of Cyprus during its six-year trek into insolvency. Starting with the bank’s 2008 award for best bank from Global Finance Magazine, the trail of tributes continued in 2009 and 2010, when the bank received quality recognitions from The Banker magazine and JP Morgan Chase. Even as late as 2012, with the bank’s shares down 98% from their all-time high, the Bank of Cyprus still received a 2012 private banking award from the internationally… Read more »
An excellent article, David. I agree that the IMF are now trying to dissociate themselves from their own policy. This was all predicted (here) years ago.
My Thanks to Jim Sinclair’s MineSet. SIGNATORIES to the document which proposes that creditors of financial organizations, the depositors, carry responsibility to “bail in” bankrupt organizations. Members of the Cross-border Bank Resolution Group Swiss Financial Market Supervisory Authority Federal Deposit Insurance Corporation Banco Central de la República Argentina National Bank of Belgium Commission bancaire, financière et des assurances, Belgium Banco Central do Brasil Office of the Superintendent of Financial Institutions, Canada Commission Bancaire, France Deutsche Bundesbank Bundesanstalt für Finanzdienstleistungsaufsicht, Germany Banca d’Italia Bank of Japan Financial Services Agency, Japan Commission de Surveillance du Secteur Financier, Luxembourg De Nederlandsche Bank Banco… Read more »