On November 24, 1942, General Von Paulus of the German 6th Army, bunkered down in Stalingrad, received the order he was dreading. Instead of the retreat that he was planning, the orders from Berlin stated simply that “Fortress Stalingrad” was to be held “whatever the circumstances”. The general knew the game was up. The army was nearly encircled. There was one last chance of a breakout which could save hundreds of thousands of men and machinery that could be used to fight another day.
He knew there would be another day and Germany could ill afford to waste another penny or lose another life or commit another tank to Stalingrad. But the party bosses in Berlin were worried about the systemic impact of a defeat in Stalingrad. Having promised that victory was “just around the corner” and having assured people that they knew what they were doing and that there was “no alternative”, how could they admit defeat now?
The party believed that it was better to risk everything via a mad gamble in Stalingrad than acknowledge reality. The generals on the ground knew that Stalingrad was of no importance. The soldiers were exhausted, hungry and scared. Apart from bearing the name of Stalin, there was nothing strategic or systemic about the city. If it fell, it would have no lasting negative impact on the German army’s capabilities.
But the boss was obsessed by Stalingrad. In his “bubble” world, a defeat in Stalingrad would send out the signal to the rest of the world that Germany was losing the war and could be beaten. “What would the rest of the world think?” he fumed. The Fuhrer’s line of thinking was that the credibility of the German war effort was on the line in Stalingrad. He was convinced that if they cut their losses there, their credibility as a fighting force would be irreparably damaged.
In fact, the opposite was the case. Defeat in Stalingrad with a retreat would have made Germany stronger, not weaker. However, those who had devoted so much political capital in Stalingrad couldn’t do a U-turn now, for political rather than practical reasons. They couldn’t be seen to admit that they were wrong, nor could they accept that the problem of holding Stalingrad at all costs was too big and that the resources of the army were finite.
Not surprisingly, Goering promised the German people that his Luftwaffe would keep the 6th Army fed by air. This was totally delusional as the German air force didn’t have the planes to fly in to Stalingrad and they didn’t have the logistics on the ground to cater for such air traffic under constant Soviet bombardment.
But reality never came into the politicians’ equations, no matter how often the generals in the field told Berlin the game was up. The politicians continued to move around — on their maps in the bunker — armies that had long since been destroyed, aircraft which had long since been shot down and Panzer divisions which had long since been immobilised in the great Steppe battles of 1942.
In short, Germany’s political top brass were totally delusional. Having fed propaganda about imminent victory to the people, they began to believe it themselves. This led to the ridiculous line that if Stalingrad could be held the war could be won. Of course the behaviour at Stalingrad simply confirmed to her enemies that Germany was run by fanatics and this fanatical behaviour would ruin the country.
Now keep this imagery in your head, and think about the Irish financial system. In banking terms, Anglo is our Stalingrad. Let’s consider “Fortress Anglo”.
Our politicians are throwing billions we don’t have at a shell which has no systemic value and will simply suck in more of our money. This money could be spent on classrooms or hospital beds, or it could be used as start-up capital for new companies; but no, it will go to Anglo. Four billion euro of our money has already gone into this financial carcass. That money is gone; we will never see it again. Brian Lenihan and Brian Cowen seem to believe that stuffing good money after bad — and in the process enfeebling the country — is the way forward. This is the behaviour of fanatics, neither of whom has ever worked in financial markets and so they don’t understand the people who they are trying to impress.
The guarantee was a bluff, not a policy. It has worked, now get rid of it.
The market knows we don’t have the money and is therefore penalising us in the bond market with higher interest rates than anyone else in the euro bar Greece. They know that the more money we plough into Anglo, the higher taxes and debts go in the future — both of which will drag the growth rate and undermine the ability to pay the interest on these debts in the future. They can see through the spin and the blather which might go down well at a Fianna Fail/GAA get-together but doesn’t wash anywhere serious.
We don’t need or want “Fortress Anglo”. Apparently Anglo is about to announce a €12bn loss — the biggest in Irish corporate history. Should we keep on drip-feeding cash into this? How can the average, decent Fianna Fail voter stand for this when unemployment is rocketing? Fianna Fail members should ask what Lemass would make of this?
It is time to shut Anglo down. The deposits should be transferred to either AIB or BoI. A “vulture” fund should be asked to come in to take the property debts and see what they can get for them. There are plenty of ways they could finance this. This avenue is always explored in distressed debt situations — we are no different. One of the biggest creditors of Anglo is the Central Bank, which has very quietly lent Anglo over €10bn under something called the “master loan repurchase agreement”. (It doesn’t want you to know about this by the way.)
The agreement is a hangover from when we had our own currency and is the ultimate “cash-for-trash” vehicle. Our Central Bank, out of its own coffers, loaned Anglo money and in return taken toxic collateral which the ECB wouldn’t touch. This is what has kept Anglo open. Therefore, we’d negotiate with our own Central Bank; it would take the loss and have to report less profit over the coming years. No big deal.
Anglo is our financial Stalingrad. We should close it down tomorrow, deal with the creditors and get the hell out. Ireland can’t afford to spend another cent on it.
The financial markets would shrug and move on if we did so. What most people fail to understand is that financial markets are forward-looking. Tomorrow’s prospects, not yesterday’s mistakes, are what drive investors. Markets are not in the business of punishing countries. There is no money in punishment. They want Ireland to grow, so that they can make money. Could someone please explain this to the fanatics who run this place and their lackies in the media who pedal their propaganda?
AIB -v- AIB
Another Imbecile Bastard
Why does the Opposition not demand to see the Business Plan for Anglo – showing when we will get our investment back? And before people fall on the floor and roll around laughing, it is very well for us to characterise Anglo as a basket case and any further bailout as good money after bad but like David’s Stalingrad image, it’s simplistic and without detail we can’t test what the government is saying against reality. For Christ’s sake, could prominent and influential economists and commentators like David research the detail, get statements from Ministers and confront them with the reality.… Read more »
[…] 3, 2010 by namawinelake David McWilliams, the prominent arch-critic of NAMA, has criticised the government’s continuin… and reveals that in addition to the €4bn given to Anglo from the National Debt “One of the […]
http://www.youtube.com/watch?v=9yjvCpHciYQ
David must have been watching this video.
David, Another concise article but unfortunately this critical analysis of our plight as a nation is not reaching the masses. A poster recently highlighted this fact with reference to ABC1 exposure only via Sunday Business Post and Independant. Even the numbers once contained by the ABC1 categories have evaporated with the collapse of the middle class. Look at circulation figures and advertising revenues for confirmation of this. All other demographics are bypassed. The message needs to remain simple but accurate and with everyday language and situations at its core. (“Stalingrad” is fine but it does not hit everyone where it… Read more »
David – Anglo Irish Bank is a massive disaster area (and I fervently hope that criminal prosecutions ensue) which contaminated the entire banking system. I dont know the consequences of letting it fold – and I think it is weak to blame this on the politicians. They are politicians not bankers – that is de facto. Therefore it comes down to the advice they are receiving. What is that advice? It is obviously contrary to what you think – but who is right? This does seem to be you v them. The Stalingrad analogy – interesting but somewhat twisted. Even… Read more »
The return of ‘Stalingrad’: Excellent! Triggers following rant: But who is the mad Fuhrer in the bunker? Is it Cowen? Or is he merely UbergruppenFuhrer? If so, to whom does he report? It’s depressing to read ‘our’ and ‘we’ to describe Ireland as a unified polity. It isn’t. Never was. There’s always been a freak clique in charge, running the show for their own ends, their own rewards, using the foundational errors of the State to generate misplaced loyalty amonst the serf classes. JM Keynes ‘ no nation ever repaid their debts’: But they carry on paying the interest charges… Read more »
Can someone please explain the current relationship between Sean Quinn and Anglo. Is SQ playing the role of Stalin in this allegory?
I agree that there seems to be an obsession with ANIB in the government. David can expect a massive backlash from FF front benchers, from the likes of Mary O’Rourke and Michael Martin. Personally, I reckon that it would be more accurate to draw the analogy of Napoloeon Bonaparte’s campaign on the Iberian Pennisula. (The British called this the Pennisular War). Bonaparte wanted to undermine the British war economy by banning British ships from the Continent and enforce a ‘continental blocade’. The Portuguese refused resolutely. And the Spanish seemed to be ignoring the dictats from Paris. End result Bonaparte sent… Read more »
The article captures the stupidity of bureaucracy as much as anything. I’ve worked in a big company that failed. For a few years Ive noticed the parallels between that experience and listening to the analysis from experts in Ireland In both cases, the management were in denial, completely out of touch, writing off catastrophic events with excuses and trying to ignore that the world had changed fundamentally. As always it was only external events that forced the issue, which then became common knowledge (Sure everyone knew…. ) But even this would be somehow spun into another fantasy by those on… Read more »
Hi David, Not too bad an analogy about Stalingrad but I wouldnt have used it – after all Germany collapsed and no-one here wants that vista. > a shell which has no systemic value AnIB is a big mess which we as a state is propping up – its insanity rather than fanatical. The next tranche of “re-cap” is 6 billion, what a load of tosh! Untangling the Anglo mess is not easy, but the pain should NOT be borne by the taxpayer, any 4 year old knows that! Its not that it has zero systemic value, it has a… Read more »
David, You have of course not taken into consideration; the current gangsters running the country are “possible” in the pay of the international bond holders! There is no other possible explanation, the other night I was looking at pat Kenny’s Front line and a perfect FF Gobsh** was on the panes trying to pedal the whole NAMA bul*** On the same panel there was Brian Lucey of TCD who I thought was not all that forceful in getting across as I suspect he was more at home in the debating halls at TCD We got from the FF apparatchik (Government… Read more »
[…] see full article at http://www.davidmcwilliams.ie/2010/03/03/money-sucking-anglo-is-our-financial-stalingrad […]
David, spot on, we are in the midst of an economic war zone, ammo is low, support lines drying up, Fuehrerhauptquartier is loosing the marbles, soldiers (businesses) are slaughtered like sheep, or freeze to death (no credit), we are on our own. The Stalingrad analogy is striking and brings personal flashbacks of my late uncle who lost a leg and a foot there. SUGGESTION: I wish you and Constantin, Brian etc etc would join forces, and produce as frequently as your articles you tube videos, weekly discussion panels on developments, as well as individual comments and analysis. Without going into… Read more »
test
hi,
seems blog is having glitch. currently only 13 of 25 comments showing on my screen, presume page 2 not showing. recent comment i posted that’s invisible to me is visible elsewhere? cheers, colm
You know things are getting bad when the ‘Stalingrad’ analogy comes out of the drawer. It is an interesting parallel, we are seeing similar patterns of behaviour – no doubt. Deco’s discussion of the Iberian campaign during the Napoleonic era is equally appropriate, especially with the long drawn out nature of it and the comparison with our financial mess. Stalingrad was however of strategic importance. As pointed out by one contributor, it was an important point to capture as it would have been a thorn in the side of Germans when they advanced on the Caucuses. But the other historical… Read more »
Allied Irish FEAR –
we are Kerry Blues in the local and national abatoir ready to listen to our fate as it burns and disapears in front of our eyes .The flames stretch before us as it almost reaches our hearts to distroy all we are .
When those soldiers were in the trenches they were all in FEAR waiting their fates too only to be Decimated and become a Nobody and Forgotten. Soon this Time will be upon us as the 2B’s conspire with the Ugly Banks to take Our Time away .
This is REAL FEAR .
Excellent article once again David,
It seems to me that Cowen et al. believe that the obsession with saving face applies throughout the investment community as well and therefore one needs to do everything possible to save face (even if this means looking more and more ridiculous in the long-term). When will they (politicans, most of the public sector etc.) get it into their heads that when you make a mistake, admit it, learn from it and move on!!!
Apologies for changing topic.
I’ve heard of an financial broker loosing businesses as the banks don’t want any middle men anymore. The next day I heard a similar case of a an independent insurance broker. Both are looking for employment now. As both are self-employed and not entitled to Jobseekers Benefit or Allowance, Today’s news: 20 people added to Live Register in February is somewhat misleading of the true scale of the problem. I assume there are hundreds of similar cases like the above all over the country that is never mentioned not mentioned in this article.
David. Yes, our ‘controlling interests’ / insiders / jailors who run Irelands economic system are they in a power base meltdown and ANIB is their DEATHSTAR. ANIB goes and their control over the economics of Ireland goes too. And they loose special place of ‘overlordship’ and blend back into ‘ordinariness’ and the peculiar blend of mundaneness and banalities of every day life. Interestingly this showdown between the forces of common sense and the forces of bubble think over the levers of credit provision. These ‘overlord’ lunatics must be scrambling about scratching their heads how it is their power melted away,… Read more »
(If this post gets through, thx Malcolm for solving earlier glitch, appears long urls can cause problems with posts, see below) Always enjoyed the series Battlefield especially viewing it with my son, whose also a fan! Good book there also by Beevor, worth reading. As far as I recall there was also another dimension historians, their views always taken with a pinch of salt:), mention. This was that the gold star general Paulus should not have followed the orders given him by Hitler which led to the annihilation of his much loved troops. He did this though he refused to… Read more »
Stalin type tactics is apropriate to describe the going ons, or stronger words, gangster behaviour. Last week in the Dail, when Anglo Irish Subject matter was raised, there was reference to assassination lists! wow – no one is safe! Anglo Irish should be the subject of a public inquiry- as the loans go well past 60 Billion & it is who and what & where people have benefited with all that money a flush! UK, US ,Ireland, Eastern Europe ! & no heads have rolled for serious mis- management for starters! Money buys all, this is the motto for the… Read more »
David, while I like the comparison with Stalingrad, I believe a better one would be to liken Fianna Fail’s efforts in Government to that of Stailn’s “Scorched Earth” policy of 1941. It’s quiet clear to them that they are going to be decimated in the next election, their only hope is to leave such an unholy mess behind them that it will be extremely hard for the next government to sort out. The next government will probably have to make even more severe cuts or the IMF will roll in, therefore ensuring their own unpopularity and a reversal in Fianna… Read more »
I think the opening comments from this very good study of the dangers of hubris (well displayed by Bertie and others during the boom – remember the kebab comment)………says it all
Enron – ‘The Smartest Guys in the Room’
http://www.youtube.com/watch?v=o5clNtt7PgM&feature=fvsr
(think David this could be another useful analogy for an article someday)
PIIGS TRADE SHARPLY INCREASES While we are continue to be overwhelmed by the unfolding drama and governmental incompetence on irish soil, here is a reminder why we need fresh blood and fresh thinking. Greenspan once said, that the mathematicians that construct the economic market models have no answer to the recession, it was never part of their equations. According to FT and a letter to investors of Brevon Howard, the largest european hedge fund, holding assets of 27 billion dollars, they said that the short trade in european bonds is crowded. and extended. NO taxpayers money should be given to… Read more »
David says: “The market knows we don’t have the money and is therefore penalising us in the bond market with higher interest rates than anyone else in the euro bar Greece.” On the European scale of ‘direness’ (or should that be ‘direity’?) statistics tell us that Direland is now in second place after Greece. (Although italy, Belgium and Portugal don’t look too healthy either.) See http://donegal.posterous.com/ Note that Direland’s 2011 public debt is 96% of GDP compared with the Maastricht limit of 60%. Also a deficit to GDP ratio of 14.7% compared with a limit of 3% and a bond… Read more »
Does anyone know the source for the suggestion that NAMA has a threshold of €5m for determining eligibility of assets. It’s not apparent from the Bill and I can only see an informal reference in the Business Plan (page 8 bottom “Land and development loans with a value less than €5m with AIB, Anglo and Bank of Ireland and their associated commercial loans will not transfer to NAMA. No such limit applies to EBS and INBS”)
I must confess for the first six months I actually believed what AIB were saying. But then the AIB were forced to make admissions about the state of their loan book. In this context, and the fact that AIB are good at damage limitation, and at convincing those who prefer to understate the scale of the crisis, I find it hard personally to believe AIB any more. Does anybody out there beleive this ? http://www.independent.ie/business/irish/new-aib-chief-says-group-being-circled-by-investors-2086303.html There were rumours circulated last year that CIBC of Canada wanted to takeover AIB. The D4 media passed it to us like as if it… Read more »
Dr Morse – If die Baden Volke en dem Hoch Huse zuch Bank of Ireland was du opfen diesen doors I would prove a crime there any day .They prefer to hide and tells us that their Generals are living with the gods .In reality these General in the B of I are delusional and their fanactical behaviour is ruining the country.
FF used the national pension reserve fund to bail out the banks. The taxpayer put in €16billion euro in this fund to fund their pensions. Now FF says new workers in the public sector will be get a different pension scheme to the one currently enjoyed by public sector workers and that we will have to wait until we are 68 for those retiring after 2028 to get the state pension. Why should those ‘working’ in the Pensions Board, Department of Finance, Financial Regulator get their pensions after their performance? While many of the rest of us don’t. Stop proping… Read more »
EUROPA 2020
Leaving the Lisbon strategy behind, the european commission just published their agenda until 2020.
http://ec.europa.eu/eu2020/
The Hitler gone bonkers in the bunker analogy is a bot to simple and lets them off the hook in that it shows them to misguided .
Anglo has been sitting there for 2 years or so doing nothing except sucking in money . Everyone that looks at the books does a backflip and supports government policy . Ie Alan Dukes etc .
There is something rotton at the heart of Anglo .
Came across this article on the Indo and it was only when I was half way through I thought: ‘Hey this guy sounds familiar’ and when I looked for the author sure enough it was our man himself. I knew it was the voice of a rebel and it didn’t sound like the usual offerings from our bought and paid for press hacks. Good work Dmac. The mad general analogy was a good ‘un. I could almost feel the spit from their foaming mouths and see the chasms of insanity behind the whites of their mad staring eye balls. I… Read more »
We are a morally and philosophically bereft people. A Catholic educational system designed to diminish or confuse your sense of social responsibility. Is it any wonder what is happening now in this crisis?.
And bishops are now asking us to cough up for abuse legal fees with straight faces. And the banks want our future to pay for their excesses of the past…you starting to see parallels here?
Who’s yer daddy!!!
Twitter, facebook, website, meetings suggested on forum to get message out on NAMA. Anyone wan’t a web conference accessible through an url, let me know. Would work like a public information service. EG, 10 q’s addressed by the host using powerpoint or other local computer application. Questions preset with a walk through each one by the host. Information would have to be very solid. Sample: title: Examining Anglo What is the bank guarantee? Why was Anglo included? Could it have been left out of BG? Would nationalisation have worked?Cost of? What consequences for taxpayer of letting it go under without… Read more »
James BOND – This article is written from the perecived strategy of a nations forces attacking an enemy in a foreign land to gain hold of new national resources . Now I beg to ask you to see a different viewpoint.How about your own country is attacked by a maverick bondholder who has credentials that include : ex mossad duties; a jew, an Israeli,skilled in finance, a taste of the good life, a linguist in five languages,skilled in the arts of war,a spy, a crook,and fearless . Now include that he arrives ashore bringing with him an Irish prostitute (… Read more »
From our Host:
http://www.facebook.com/permalink.php?story_fbid=334362289116&id=6303603305
Posters. It seems to me the ‘controlling interests’ are crossing into a new phase in the ‘seizing the high ground’ chess game underway, to-day. Why? The blatant in your face reinvention of the state pension announced to day, has all over it , a game play to it. It is designed to extend control over citizenry sense of security the state pension offered the citizenry and play a higher degree of havoc with this security. It adds to the already uncertain future facing a hellva alot of citizens and swings back in the power elites favor more distracted worries preoccupying… Read more »
wills – when I was ‘in flight’ in other lands many years ago all my working teams considered Ireland as the biggest village pump in the world.Silence was golden and you dont tell two Irish people anything otherwise you have a rumour. I learned a lot about my country then through the eyes of foreigners .A total different mindset miles from our own parochial dig outs. I remember when the Saudi royal family arrived in Dublin to give a gift of a dagger to CJ Haughy his accompanying henchmen had machine guns under their kaftans …vestments.No one saw them. I… Read more »
88 Keys in Cuba – The Irish putting their shoulder to the wheel!
Inspirational
http://www.youtube.com/watch?v=fSaeqivLtWA
http://www.youtube.com/watch?v=fSaeqivLtWA
Folks, I think that it is time to post this again; Furrylugs told me he missed it the last time.
No-one should miss this:
Register of Members’ Interests:
https://spreadsheets.google.com/ccc?key=0AmB2HUQaR5vwdGhfY2hlSDAydTJDOHA4ck5rb0FBbnc&hl=en_GB
Guys,
Almost up to 100 No2NAMA fans on Facebook – please help give it a puch over the top.
http://www.facebook.com/pages/No2NAMA/329929836541
Please ‘Become a Fan” and if you’re a fan already, please go to the page and click ‘Suggest to Friends’.
How’s this for Moral Hazard? From todays Irish Times;- http://www.irishtimes.com/newspaper/finance/2010/0304/1224265557378.html “The SPV would issue two types of shares with Nama holding the majority of voting shares, giving the State control over the entity but leaving private investors with majority ownership of the equity.” The private investors are AIB & BOI among others. So the banks have recklessly loaned out money willy nilly, then loaned out more money on the back of that. This brings down the economy, the banks get a bail-out, the distressed assets are put out of harms way into NAMA but the banks still get to profit… Read more »
Does anyone else think it strange that Mr Lenihan is refusing to run the numbers again after the EU Decision (which we still haven’t seen and won’t for several months apparently) last Friday. Yes the Decision changes the valuation methodology somewhat but more importantly property prices which had dropped 47% last September (and were used then to provide public estimates) have now dropped 55%.
ttp://namawinelake.wordpress.com/2010/03/04/exclusive-nama-is-now-to-pay-banks-e15bn-more-than-the-assets-are-worth/
I was wondering when we’d start seeing this: http://www.irishtimes.com/newspaper/ireland/2010/0304/1224265559360.html?via=mr Some will be unfortunate buyers who found they couldn’t finance a mortgage when their apartments were finished being built. Others will be greedy speculators who planned to flip the properties and thought they could walk away from them losing only their deposits when values fell. If anyone saw Prime Time the other night, it featured a distressed buyer struggling to pay a forty year mortgage on a house bought for 545,000 … the mortgage was due to finish when she was aged 78, even though she claimed she just bought it… Read more »
Is this an admission from Irish Life that Permo is a turkey ? http://www.irishtimes.com/newspaper/finance/2010/0304/1224265558648.html http://www.independent.ie/business/irish/ilp-needs-to-raise-8364600m-before-pursuing-merger-plan-2087981.html My theory on Permo is that it is a bank with a different business model, and therefore a completely different life cycle with regard to the credit crisis. Assumptions that it is safe are a load of nonsense. It was always likely to hit the peak yet in terms of bad loans at a time, staggered onwards by twelve months from the rest of the banking system. Permo’s problem is not that new houses are not selling. It does not care about this. Permo’s problem… Read more »
@Alf,
article covers a fair bit of ground but its only the tip of the iceberg. Re assets overseas:
‘At least 30% of the assets in Nama are denominated in currencies other than the euro. As a result, exchange risk is enormous for Nama, particularly when both the dollar and sterling are weakening and may weaken in the years ahead. Nama itself admits this will create “volatility” in the profit-and-loss account and will be very difficult and expensive to hedge. ‘
Anyone know if NAMA has any plans to hedge its losses against currency variations?
http://en.wikipedia.org/wiki/Hedge_(finance)
Regarding the latest pension ‘reform’ (it sounds more like a fudge really).
What exactly are we paying PRSI for ? (Pay Related Social Insurance). It is definitely not for the health service, because we pay health levies and VHI for that, in addition to PRSI.
Maybe somebody should bring up a case against the state that PRSI is a fraud, and that therefore until we see exactly where the PRSI money is going, that we should not have to pay for it. That should put the spotlight on the thousands upon thousands of managers on the payroll in the HSE.
OBSERVATIONS The standard answer of the establishment when it comes to NAMA questions these days: “We need a functioning banking system.” —- I am sure you all heard that as often as I did, so many times when direct questions on NAMA were put to the politicians, be it on Prime Time, the news, where ever it was, instead of answering the questions, they come back the same phrase, over and over again. From my own observations, who ever I talk with, it is not only Fear, as John Allen described it, that is dominating the public mind, there is… Read more »