Last Thursday night, Bill Clinton spoke in UCD. It was a brilliant speech, classic Clinton, full of empathy, humour, self deprecation and hope; above all, it was laden with Clintonesque hope.
Others spoke of optimism and the need to look to the future.
The theme was that we are too pessimistic at the moment and are potentially hampered by our own negativity.
In fact, so much of the chat focused on the need to be optimistic that, by the end of the night, it began to feel like a self-help group for men in tuxedos.
Clinton’s keynote speech was followed by an address by Seamus Heaney.
Heaney made an equally compelling speech and the real friendship between the former US president and Nobel laureate was evident in the natural warmth between them.
However, Heaney said one thing that resonated with me.
He quoted Czech poet and former president Vaclav Havel on the distinction between hope and optimism.
Havel, a man who had plenty of time to think about these things following years of internal exile in Czechoslovakia – made the following distinction: ‘‘Hope is definitely not the same thing as optimism. Hope is not the conviction that something will turn out well, but hope is the certainty that something makes sense, regardless of how it turns out.”
This is a crucial distinction.
As the evening was an Irish-American celebration, there was a lot of talk about Irish-America and how it helped with the peace process.
Time and again, speakers mentioned the bravery of Clinton in giving the visa to Gerry Adams to enter the US in January 1994 as a milestone of political vision over bureaucratic tunnel vision.
This was the triumph of hope over optimism. Clinton didn’t give Adams a visa because he was an optimist but because it made sense irrespective of the outcome.
At the time, Clinton went against all the advice and all the received wisdom of the vested interests of the day.
Everyone, except Republicans and a few IrishAmerican politicians, claimed that the Adams visa would be a horrendous mistake.
The official line was that it would lend credibility to a terrorist and would ‘reward’ bad behaviour and thus embolden others to continue – rather than stop – fighting.
The establishment was wrong, very wrong.
The reason they were wrong is that they couldn’t see that the world had changed.
They were stuck in their thinking.
Today, the establishment is wrong again on Anglo Irish Bank.
The financial markets would reward us for burning the creditors of Anglo, like the world rewarded Clinton for giving Adams a visa.
But the Irish establishment can’t see this probably because so many of them – bankers, brokers, top mandarins and professional law and accounting firms – have their snouts in the trough.
I couldn’t help thinking, as I listened to Clinton, whether our government and the few thousand professionals who will gain from bailing out the banks and Nama know the difference between optimism and hope.
The Cowen/Lenihan government – which has been wrong about everything on the economy – is putting its faith in blind optimism.
The line is that if we pay all the money now, we will be rewarded as good boys; if we buy AIB now, we will make money in the future; this is our ‘line in the sand’ moment; it’s onwards and upwards from here.
And sure by the time we go back to the bond market, the world will have changed, and everyone will have forgotten the mess that Ireland has become and finance us at a lower interest rate.
This is blind and pathetic optimism, because it is based on the same three-card trick, the same bluff and gamble that got us here in the first place. In short, they have learnt nothing at all.
In contrast to optimism, hope is doing that thing which makes sense because, once something makes sense, people look to the future with confidence.
The future can’t be secured by yet another gamble. Consequently, if a bank is bust, let it go bust – don’t bluff.
The taxpayer didn’t cause this and has no business paying for any of it.
The argument given by the establishment, who were in attendance in UCD last Thursday night, is that to allow capitalism to take its course is wrong.
So we have now arrived at the perverse situation in Ireland where we must reward failure because to penalise failure would undermine the credibility of the state. This convoluted logic is the triumph of self-help optimism over rationality.
Look where the ‘we are turning the corner’ self help optimism of this government has got us.
We are now a state with no control over our policy.
This is what the EU Commissioner Olli Rehn stated last Friday: ‘‘Ireland will not continue as a low tax country. But rather it will become a normal tax country in the European context.”
What does this mean for our corporate tax structure? Has the government given away our corporate tax rate to save Anglo?
Is this the price for the European Stability Fund? Is this the price for optimism over action?
Optimism has led to us pulling out of the bond market till next year.
This will provoke an enormous crisis, because the government’s gamble now is that we can go to the market desperately looking for cash at a time when the credit crunch and the massive fiscal contraction will mean the economy is contracting next year, not expanding.
Optimism also has led the government to slip in this nugget about Nama last Thursday: ‘‘The government has decided, having consulted with the Nama Board and the European Commission, that where the total exposure of a debtor is below a €20 million threshold in AIB and Bank of Ireland, that debtor’s loans will not now be transferred to Nama.
The threshold had previously been set at €5 million.
‘‘They account for just €6.6 billion of the aggregate €80 billion volume of Nama eligible loans. Loans of this size can be efficiently managed by the banks themselves through their network of local representation and relationships.”
So €6.6 billion of dodgy debt which was supposed to go into Nama will now be left on the balance sheets of the banks, which kind of defeats the purpose of Nama in the first place.
Think about it: Nama exists to remove the bad loans from the banks’ books, but by not doing that, it is acting in direct contravention of its raison d’etre. AIB and Bank of Ireland have already transferred €9.7 billion to Nama and have €25.3 billion outstanding.
This number now drops to €18.7 billion, with AIB and Bank of Ireland having to write down the balance themselves. Which, of course they will not be willing to do, or at least will only be willing to do if they have money available to cover the losses.
Which will lead to the zombification of the banks – which was what Nama was designed to prevent.
But this can all be swept under the carpet by blind optimism, because if you tell yourself that the future will be better without doing anything to make that better future more likely, you can convince yourself of anything.
My money says we will be in the European Stabilisation Fund by St Patrick’s Day and that Mr Commissioner will be running the show. This is where this touchy-feely optimism will get us.
Had the government had the Clintonesque courage revealed by granting the Adams visa to do the right thing – not the respectable thing – we could be back in the market, sovereign and confident.
But no, we will be in contrast, a concubine country, dancing to the commission’s tune.
That’s where optimism gets you.
The banks will be zombies and the economy will continue to contract. There is a difference between hope and optimism, but when – as this government has – you have spoofed yourself and the people for years, you don’t have Vaclav Havel’s clarity, and you can’t distinguish between hope and optimism. But, of course, you couldn’t have that clarity because that type of clarity is the product of integrity, not mendacity.
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David: Your Insight and grasp of our problems and your eloquent analysis and portrayal of them have reached new heights with this column. It is utterly brilliant.
Clinton and Heaney have that effect on people. They give us hope that following a rational course will provide a safe pathway through the mists that cloak the future.
Keep aiming at the positive as I believe that your best efforts still lie ahead of you.
Indeed, David. We need to openly examine where we have come from, no matter how unpalatable that may be, to take the correct actions that inevitably serve to create our future.
That requires a certain state of mind that does not seem to be the state of mind promoted by the status quo!
David says it better than I could. I agree with everything he says. Paddy’s Day for the European Rescue Fund sounds about right! Its like your donkey was losing badly partly because it was carrying too much weight, so you trimmed down the weight it was carrying to the bare essentials. It wasn’t winning, but its performance was no worse. To improve its performance in the race against default, you decide to hobble it. A €4bn austerity package in the coming budget will do this. Same again in further budgets will reinforce this. The cost of the banks bailout plus… Read more »
Well, I think it is fair to say that many countries are now adopting ‘non-transparency’ as a part of their economic policy framework. And this fits perfect with the aversion to clarity that see coming from Kildare Street. In fact, only Joe McNamara seems to be able to think clearly, and he got ridiculed as acting out of confused thinking. David is correct. The ‘leadership’ needs to get it’s thinking straight, and start to think with clarity. In fact, the only bit of clarity that came all week came from Joan ‘we are in this recession because we have no… Read more »
David , ‘ Snouts in the trough ‘ I like it . I also liked your run in with Hanafin on the radio last week .
FF will not do a deal with the bondholders because there is something dark at the heart of the banks . At the very least I would say that the bond market would refuse to lend to FF in the future , they would demand a change of government . It would be the end of FF . And FF see no difference between the party and the country .
Eloquent stuff David, I read your book “Follow THe money” and really enjoyed it. You have a personal relationship with Mr. Lenihan. Is there no way you can influence his decision making? Is there any way to turn this around? It is shocking to think of how badly this is being handled. What I fail to grasp is how they can safe guard the banks while ripping off the common man. Is there any chance of the government helping out Billy Bob who owes 10k on credit cards, 15k on car loans and is three months in arrears and about… Read more »
G20 and the IMF I think we live in a new Reality where the IMF represents the ‘global government’. Beyond the slightest shadow of a doubt, Irish political decision of the past two years reflect what the IMF wants us to do. While the G20 is acting like a government, it is the IMF that is the true power behind the curtains. The way DSK looks at it, world peace through economic stability. The first attempt to have a truly global representation were the United Nations, but they were constantly undermined and weakened by US interests. After the Asian crisis… Read more »
I agree we are on the road to the European Stabilisation Fund, but would argue it may even be sooner than St Patricks day. As long as FF stay in power, we are powerless to influence the current course of action, and we will have to sit through an austere budget in Dec which will further throttle our struggling economy. If we cannot grow the the economy, and get people back to work, the 3 billion + cuts will be to no avail. I am disapointed that the FG stratregy to try to force the issue in the Dail was… Read more »
Barrister Lenihan.
Our problem at the moment is that we have a good barrister bluffing in the wrong chamber. Full marks for oratory excellence but it looks like we’ll be going down guilty as charged. Should have got an economist stupid.
But no, we will be in contrast, a concubine country, dancing to the commission’s tune.
++1 David. I keep saying this since long, Sarkozy/DSK/Merkel/Trichet whistle, Lenihan dances!
Fucking debt junkies….sigh
Personally I am unable to feel optimistic about a situation until I have stared the problem in the face and made a plan for the future that takes account of the risks ahead. Once I have done everything I can to protect myself against problems ahead, then I can be hopeful and even optimistic, however bad the situation might be.
If I cling to optimism for fear of looking at my problems too closely, my words of optimism do not carry conviction and I wake in the night plagued by nameless fears.
Have we any collective memory? Easy for Clinton to talk in generalisations and to invoke the good old rhetoric, or berate us for being overly negative (the good old American positivty industrial, maybe he should quote from ‘The Secret’ and the ‘Law of Attraction’ that we brought it on ourselves but like Darby O’Gill if we think hard enough and positively enough we can once again go to Never Never Land. What about his role in all this? His economic policies, the further financialisation of the US (global) economy (revoking the Glass—Steagall Act for instance), pushing neoliberalism, low interest rates… Read more »
If I were a German citizen I would be outraged at the prospect of bailing us out any further, and I certainly would not invest in the Irish state as it is run by lunatics.
EMMIGRATE
I think we are seeing the final stages of delusion before the Reality Day appears with the IMF/European Rescue Fund knocking on the door: http://bit.ly/9fxYST Interesting discussion on the IMF here: “No, the real concern of the fund’s senior staff, and the biggest obstacle to recovery, is almost invariably the politics of countries in crisis. Typically, these countries are in a desperate economic situation for one simple reason–the powerful elites within them overreached in good times and took too many risks. Emerging-market governments and their private-sector allies commonly form a tight-knit–and, most of the time, genteel–oligarchy, running the country rather… Read more »
http://www.youtube.com/watch?v=Ujcs8g-MghM&feature=player_embedded
Spoofer Hanafin’s turn to shout everyone down.
Did you know that Havel invited Fraznk Zappa to Prague in 1990 and appointed him as ‘ Special Ambassador to the West on Trade , Culture and Tourism ? Sounds kind of funny but Frank was serious about developing trade etc . However the US Secretary of State , James Baker rerouted a trip through Europe to visit Havel with a simple message . ‘Havel could either do business with the US or he could do business with Frank Zappa ‘ I am starting to see parallels between Zappa and David . Neither are afraid to speak their minds and… Read more »
“Hope is the certainty that something makes sense” – the search for meaning, for understanding the reasons, regardless of how events turn out, is the introvert’s raison d’etre. Crotty’s motto (from Virgil or someone): Felix qui potuit est rerum cognoscere causam. The extravert on the other hand isn’t too concerned about the whys, but just wants the job done with the right end result. Who’s right? Well, both presumably. It’s perhaps funny to see David quoting Havel who seems pretty sure to be an introvert. Excuse the psychobabble but that’s just the way the world is made. So, following Bill… Read more »
Alan 42, treason is exactly what has happened. National security should always take precedence over politics or personal gain. We have have given up our financial independence and, in my opinion, that constitutes a breach in our national security. It may be too late but we need a hero. Haughey/Ahearn/Cowen were modern day Dermot MacMurrough’s.
An Interesting Article David, A question as regards to the announcement that the loans transferred to NAMA by Lenihan must be over a certain threshold . Is it possible that that was under a direct order from the Eurocrats and that there would be no more money lent by the ECB to the Irish Banks unless this policy was instituted. One must remember as well that to admit you were wrong takes courage and to do it in public takes even more courage and to admit that that you dont have a bulls notion about what you are doing well… Read more »
Our Acute Case of Fiscal Madness
Future historians will marvel at the austerity madness that gripped policy elites in the spring of 2010.
http://www.truth-out.org/our-acute-case-fiscal-madness63692
@ Deco further to a point you made above, I like this quote: “none are so blind as those who refuse to see”.
Drug money saved banks in global crisis, claims UN advisor.
Drugs and crime chief says $352bn in criminal proceeds was effectively laundered by financial institutions
http://www.guardian.co.uk/global/2009/dec/13/drug-money-banks-saved-un-cfief-claims
If you want to get familiar with how the system really works, how corporates and government officials from the top to the bottom truly function then Johann Hari’s article is a must, courageous writing, which speaks truth to power.
Suffocating the poor: a modern parable
They democratically elected a president to stand up to the rich and multinational corporations – so our governments have him kidnapped
http://www.independent.co.uk/opinion/commentators/johann-hari/johann-hari-suffocating-the-poor-a-modern-parable-2081411.html
Bono Partner McKillen’s Suit May Hold Key for Anglo Irish Loans
http://www.bloomberg.com/news/2010-10-04/bono-partner-mckillen-s-lawsuit-may-hold-key-to-14-billion-in-u-s-loans.html
Lisbon for Jobs!!!……..for the boys
The low Irish corporate tax rate will not survive, at least not without major adjustments. To see why, consider this story from “Le Monde” last week. Employees at Oracle France, who like all employees of large French companies are entitled to participate in a compulsory profit-sharing scheme, were mystified by the fact that although Oracle France was doing a lot of high-end business it was not declaring any profits. On investigation, it turned out that the profits had been “relocated” to an Oracle company in Ireland essentially through intra-group contracts of doubtful substance. The French labour court held that Oracle… Read more »
Someone once said to me that Ireland is where the money is kept but unfortunately not where it is spent, it makes more sense in light of that comment
Eireanneach, would you like the response in French, German or Croatian? Or maybe, at a stab, rusty Irish or Russian.
I’ll just say (and i don’t want to sound like a pompous ass) that my masters in economics was taught through the medium of French and English in Belgium. I love learning languages, particularly Slavic ones. And German is the langauge I love most.
But you are right I am an Atlantist but not for linguistic reasons.
All the best, David
There’s a real sense of panic in the air and unless we’re all put on steroids to double our output – the St Patrick’s Day IMF intervention will become a famous date in our history.
Folks, the problem is the Euro. I don’t just mean the EU meddling and pressure to not allow a bank to default. The problem is the interest rates and exchange rate and not being able to print our own currency. Firstly on interest rates; the low Euro rates fed already inflated prices. The prices were already high because in the 90s Ireland had a real boom. But by the 2000s Ireland really needed to be hiking interest rates to control inflation. Instead of this (due to the Euro) we got very low rates. This fed the bubble and caused the… Read more »
There is no hope or optimism that is why thousands are leaving the country, all we will be left with is a rump of people working for the multinationals and of course public servants. It is too late to cry over spilt milk Lenihan has set us on a course and it cant be changed at this stage. DMcW will do well for the foreseeable future, economics will be the nuber one subject over the coming years. The 4 year plan will be interesting in that it will bring home to everyone the scale of the financial problem and it… Read more »
David. > ‘‘Hope is definitely not the same thing as optimism. Hope is not the conviction that something will turn out well, but hope is the certainty that something makes sense, regardless of how it turns out.” – Havel This quote is the follow up to *defining reality*. Define reality and hope comes next. > ‘The reason they were wrong is that they couldn’t see that the world had changed.’ – DMcW Could it be that the insiders see that change is afoot and they are trying to play catch up on it to regain the high ground over it.… Read more »
Folks, Lenihan when asked about deposit flight risk “Ireland is an island” so there is no flight risk (at 32:00)
http://bit.ly/9ee7dB
(via LRK)
We all know Bill Clinton has his own personal Blarney Stone. I didn’t hear the speech but from all I’ve heard it’s clear what his message was — PAY UP! Bill’s one of the good cops of the international system; strolling in right on time to tell us what a fine lot we are and how we can do anything we put our minds to — such as paying the debts of our delinquent rulers. David is right about the establishment; they have gotten it wrong for decades — wrong for us that is not for themselves – and they… Read more »
Land of Hope and Glory A lot of people here agree that there is no altenative to default and I myself have no reason to disbelieve them such is the quality of insight this fine economics blog offers to laymen who know as much about economics as they do about the end of the universe or the loch ness monster I believe that as a nation Ireland allowed itself to be collectively conned and that people are maybe now ready to accept that they made a serious error of judgement. If you have always been a person of sound judgement… Read more »
“There are two ways to conquer and enslave a nation. One is by the sword. The other is by debt.”
– John Adams
Ireland is just a small part of the pie. Globally what is occurring is the bankrupting of the nations of the world by the Doges of international finance — just as they did to overthrow the Ancien Regime – with the intent of installing a new global banking and monetary system as the superstructure for a new world order. The times they are a changing folks; this is not a local issue.
I cringe when I listen to our politicians. Latest from one of our leaders: “We need a strategic plan”. (Tánaiste, Calamity Coughlan on 6.01 news today; FFspeak for creating another ‘consultative committee’, I presume.) George Osborne, UK Chancellor of the Exchequer, is so articulate and lucid in explaining his proposals and why he considers them necessary – likewise for Cameron as PM. They explain problems and immediately state solutions, in clear concise English – impressive stuff even if you disagree. What is so wrong with our politicos? Perhaps they simply cannot cope with our second official language as well as… Read more »
Wolfgang Munchau in the FT endorses DMcW’s appraisal of the situation:
http://www.ft.com/cms/s/0/0aa07d78-cf1d-11df-9be2-00144feab49a.html
“So what should Ireland do? Recognising the scale of the problem was a good decision. The fundamental problem with the Irish government’s approach was the decision to dump almost the entire adjustment burden on to the taxpayer, rather than to accept or negotiate a partial default.”
“Brian Lenihan, the Irish finance minister, might wish to ponder whether his monumentally unfair taxpayer bail-out is what will ultimately “bring down Ireland”.
This group of people and institutions coined it during the economic bubble and they continue to do so two years after that bubble burst.
A lot of them were key players in the boom years. They were the movers and shakers who were embedded in the banks or getting lucrative state contracts.
As the sun shone over Celtic Tiger Ireland, a lot of them made wads of money. Now that the rest of us are in one hell of a storm, they continue to make hay.
http://www.tribune.ie/news/article/2010/oct/03/the-untouchables/
Straight from today’s copy the FT (us version) “From 1998 and 2008 its (Anglo Irish Bank) loan book swelled from 3Bn to 73Bn. Almost all the new lending went to a small group of developers furnished with an array of tax-breaks by Fianna Fail, as builders, bankers and politicians rubbed shoulders at venues such as the party’s hospitality tent at Galway’s horse races.” Make no mistake, FF brought Ireland to this point. All politicians and all parties are not the same. FF is continuing to make ‘mistakes’. Follow the money. Ireland is not being run for the good of the… Read more »
“We need to openly examine where we have come from, no matter how unpalatable that may be, to take the correct actions that inevitably serve to create our future”
This is a national emergency! No public servant including politicians should earn over 100,000 for the forseeable future….now how much would that save?
If they don’t go along with this then sack them (like Reagan did with air traffic controllers)— there will be many to take their place for that money who will be equally/better qualified
I’ll say it one more time;
Náid ona Náid a Phioc.
Change is inevitable, in whatever shape it comes. That is a tenet of social economics.
I thank you.
zzzzzzzzzzzzzzz
Its good to define this vocabulary as the government are clearly confused, lets continue. Positivity is important and I had a great boss who banned negative words like ‘difficult’ or ‘problem’ from the office. People started to use ‘challening’ or ‘issue’ instead. In this case you can be positive and still explain reality. Being positive can be a vocabulary and bodylanguage issue and does not mean ignoring reality. Optimism: Setting targets high relative to the conditions. Setting targets high is not the same as expecting them to be high. Again this great boss made the plan/budjet/timeline taking into account that… Read more »
Did any of you vote for Olli Ren ?
Were you even given a chance ?
http://www.independent.ie/opinion/letters/our-corporation-tax-rate-must-survive-2364624.html
Court sentences trader to five years (2 suspended) and tells him to pay back €4.9 billion :-)……….
http://www.guardian.co.uk/world/2010/oct/05/french-trader-guilty-societe-generale
A couple of points that I would like to make now with the European union and national debts. 1. With the mobility of workers across Europe many Italians/Poles/Germans are working in Dublin and this trend will increase. They will be paying back the Irish debt too. Young Irish people can easily move to work in the U.K. or another country. They will be avoiding the Irish debt. These trends are set to increase in the future. 2. If Ireland defaults on its debt there is a European rescue package to ‘bail us out’. So Irish debt is really European debt,… Read more »
On the theme of Irelands debt being Europes debt -Nobel Prize winning economist Joseph Stiglitz says that brussels should have prepared a fund to ‘help out’ ailing economies like Ireland (instead of waiting till they go bust). Also he seems to agree as David suggested to a 2 speed Europe, as we should have a ‘weaker’ currency than Germanies.
FO’T has ia comment on Lenihan’s ‘bank’s days of greatness’ in today’s Irish Times http://sqi.sh/3iv AAhhhh! — I well remember those days of Banking Greatness. The heavv mahogany doors beneath pillared porticos swung open at 10:00 am on the dot and closed again at 3:30pm, leaving plenty of time for the denizens to get in 9 holes before dark, even in wintertime. Behind the broad hardwood counters the cashier thumbed through piles of A4 sized white fivers and tenners on which the copperplate hand of the Governor of the bank ‘Promised to pay the bearer on demand the sum enshrined… Read more »
http://www.marketwatch.com/story/moodys-puts-ireland-on-review-for-rating-cut-2010-10-05?dist=beforebell
Socialism for the rich does not work. Default would have been cheaper, and more honest. Wills was correct about ponzi schemes. Now the whole country is a ponzi scheme.
Well there you have. Crack up boom, followed by crack up bust.
“Those banks were orphans to the world” (Lenihan, 2008).
#/./# ‘#;/ #./ #’., #’/ /.,#’; #’;./, #’;/.,