Iceland’s main interest rate was lowered on Friday to 6.25 per cent, while its ten-year debt is also trading around this level. Ireland’s cost of long-term, borrowing rose on Friday to 6.5 per cent.
So Irish interest rates are now higher than Icelandic interest rates.
Icelandic interest rates are now lower than Irish rates: just take that in for a second.
The country that defaulted on debts, shut down its delinquent banks, burned the bondholders, allowed its currency to fall and did everything ‘wrong’, according to the Irish establishment now, is regarded by the financial markets as a safer bet than Ireland.
Think about it. Iceland is a country where the residents refused to allow international bankers bleed the country dry and put the policy of making the people stump up for the banks to a referendum.
Obviously, the people rejected the idea of paying foreign banks what the banks demanded.
More sensibly, they said Iceland would restructure the debts so that Iceland can survive.
Last week, the Icelandic Supreme Court ruled that Icelanders who took out foreign currency mortgages and loans did not have to pay them back because the loans were illegal.
If you were to believe the propaganda from the Irish government, such a move should have caused interest rates to spike upwards – as investors panicked.
But the opposite happened.
Investors looked at Iceland, which has seen its unemployment peak at just above 7 per cent and growth has returned, and concluded that it was going the right way.
The reason for the markets’ reaction is that financial markets are forward looking.
You win some, you lose some, but the key is to stay in the game.
The more it looks like Iceland is on the right track to growth, the more the markets will forget what happened and will look to a profitable future in Iceland. But you can only be profitable if the country is growing; what really scares investors is a country with a death wish.
So, two years after the crisis, Iceland’s interest rates – the key barometer of market confidence – are falling. In contrast, two years after our crisis, Irish interest rates are rising.
Our international reputation is in doubt. Last Friday, our Minister for Finance suggested that this might be because economic commentators had been too negative.
RAF pilots in the war had an expression:’ ‘You only take the flak when you are over the target.” It is hard not to conclude that, the closer a commentator is to the truth, the more flak he takes from the establishment which has told so many stories and sold so much spin that it doesn’t know what the truth is any more.
The truth is that – as this column has been arguing for over a year and half now- our banking policy is verging on the financially suicidal.
We in Ireland were told that, if we knuckled under and slashed our budget deficit and kept our banks afloat by giving the innocent the bill for the guilty, we would be rewarded by the financial markets with lower interest rates.
This was never right. It was always wrong because that is not how the world works.
The markets want growth and anything that strangles growth scares them.
Those of us who argued that the government’s policy would fail were ridiculed.
Yet again, official Ireland has been proved to be wrong, criminally wrong. But these spats really don’t matter; what matters is how we are going to get out of this.
The recovery here in Ireland is in our own hands. It will be local and it will happen when local people decide they have had enough and it is time to start the fight back.
Last year, I travelled to Iceland to see how they were dealing with the crisis and I was amazed at the feeling of local solidarity.
In little bars and cafes in remote areas, they constantly said tome that they would get out of this on their own, by promoting their own local industries and produce and selling it to other Icelanders.
In a tiny village outside Reykjavik, a few local shopkeepers said they would figure out how to get people into their village to boost business.
Undoubtedly, the government’s defiant stance towards the foreign banks instilled a sense of national solidarity, and it was impressive to see.
In the last week, I have seen the same spirit in Ireland in two very different communities.
Last Saturday night, I was in a bar called Murrays in Graiguenamanagh, listening to a brilliant ceili band, the Darty Ceili Band from Sligo.
I was at the Graiguenamanagh Town of Books fair, which is an annual event with the aim of turning Graig’ into Ireland’s book town, not unlike Hay-on-Wye. This is the dream of a local businessman and he is drawing on all the town’s resources to make this happen.
The next day, as I strolled on the most beautiful walk up the canal on the river Barrow from Graig to St Mullins, it seemed so obvious: our recovery will be local.
This was reinforced on Friday night in Clifden, where the arts festival was in full swing. I found myself listening to a combination of Breton and Armenian music out on the western seaboard, and the place was full of locals and tourists.
The point is that the Clifden Arts Week and the Graiguenamanagh book fair are just examples of what is going on all over the country, despite – rather than because of – the government.
These are local initiatives, which wouldn’t happen without the indomitable human spirit to do something for ourselves.
The organisers of both events put in huge amounts of work behind the scenes to make sure that, for a few days, extra people come and visit the town and spend a few extra euro in the shops and bars.
These few extra euro all add up and, if the initiatives are successful, more and more people come back.
Here are two small examples of the locals using culture to liberate the economy.
This is what we are good at in Ireland: locals coming together to create an atmosphere, normally using literature, music and the arts, in order to help ourselves to help ourselves.
This is the communal energy which exists in all small towns and villages, all over the country. It is there. It is ready to be harnessed organically and this is the sort of local spending which creates local jobs.
All we are asking of our government is not to make any more elementary mistakes.
Don’t lumber us with debts we can’t pay.
We don’t need a huge banking system.
We don’t need to be world-beaters. We can explain to Germany and France that we are weak and want to start small again.
This is how economic recoveries happen.
They don’t start on the bond trading floors of London.
They start inside the minds of all of us.
The recovery will be more GAA than IDA, less bond market, more farmer’s market.
All we are asking the government to do is to not make the problem they caused in the past ten years any worse.
This is what the Icelandic government did. Is it too much to ask?
Excellent article!
Completely agree that the recovery will be local… it will start with local coffee shops, holistic therapists, etc
We support these in Ireland with nubie.com
Yeah I hope Peter Sutherland read this article in the Sunday Business Post!
Where is everyone, only four blogs late Monday Evening. I don’t bother to read David’s articles on a Sunday, rather wait till Monday online for the added work of Deco, John Allen, furrylungs and the likes. great Article, Dermot Galvin drilling home the same message on the Late Late show Friday night. Perhaps the Gordan Gekko’s of this world will be investing more in local markets and it’s people.
Your 2 examples don’t exactly fill me with optimism and confidence for our immediate future, will our uncompetitive tourism industry rescue the inner cities and long term unemployed, patients on hospital trolleys. In fact a Khmer style return to year zero seems more plausible and attractive
Could we please have some more concrete suggestions for extracting ourselves from this cess pit of our own divising.
I for one am emmigrating to my great shame
It’s hard to see how a government that believes that the only people who can create jobs are FDI allied organisations, can come to a place in it’s mind where a recovery is locally based. This government hasn’t a clue, everything is soundbytes and politically embedded statements, “green jobs” this and “knowledge economy” that. If bullshit sentences and stupid and meaningless politically encoded catchphrases were tradable on the bond market we could sort out all our financial woes by lunchtime tomorrow. The dogs on the street know that a recovery must be local, fair play to David for shouting “rubbish”,… Read more »
The problem with The Irish people is that they lack confidence in themselves and in their own country. As somebody pointed out , they will give greater heed to something that is said from a foreigner about Ireland than what an Irish person would say. The Irish rely too much on the idea that somebody should come and give us jobs instead of the notion that we can it for ourselves i.e. the huge support that is given to multinationals. Irish people are very slow to stand up and fight for something. I heard a comment once by a foreigner… Read more »
This coming winter, try a piece of Irish engineering for a change if your oil boiler is one the way out…Grant Engineering in Co Offaly. Regarded as one of the best in UK and Ireland. Look at Newbay, The Now Factory and indeed Iona. These are marvellous examples of Software Engineering in the telecoms/mobile phone business. Take Moffett Wind Turbines. More Irish engineering. These will not fall down in Irish conditions (some of the nastiest conditions in the world). Any more? I believe all are Irish owned and run. But I think we need to start singing their praises…even bloody… Read more »
If bondholders get burned Thursday next, there’ll be a seachange in Irish politics. If not, there’ll still be seachange, but a more painful one for everyone.
Either way, we need lots of corrections before people can dance at the crossroads again.
Self enablement/liberation/determination/enterprise of local communities, structured around support for quality of life/opportunity for local family life; who would not want that?
Ah finally somebody has found an economic recovery. Except it is in a country that did the completely obvious. Authority is a curse in Ireland. Nearly always filled by spoofers, ditherers and pretenders. Everytime a productive enterprise starts in this country, the local authorities, quangoes, and government bodies are rubbing their hands with glee over the opportunity to have some poor unfortunates slaving in order to provide rates and stealth taxes to the state. The state, incompetently managed, wasteful with resources, biased in favour of cronies, and staffed with nepotists, is a hindrance. David is correct – anything that happens… Read more »
subscribe.
David,
Your point about being ridiculed reminds me of a quote:
“All truth passes through three stages. First, it is ridiculed. Second, it is violently opposed. Third, it is accepted as being self-evident.” – Schopenhauer
I’m afraid to say, we may be just starting the second stage.
Another initiative which deserves a mountain of praise is the local initiaive in Co.Clare, where locals formed a co-operative and built a wind farm. This is a substantial acheivement in Ireland, where the tariff system is biased oppressively against competition by local scale initiatives to the ESB.
I enjoyed reading this article .Here is my opinion: Icelandic Laws – their laws are based on the natural order of things , thus all good things come from the bottom up .This means People Power .This is known in Icelandic as ‘folkthing’.Their laws are are based on the old Irish Laws known as The Brehon Laws that we once had and were extraordinary and evolved very well in the times then and would have done so to our modern time had it not been taken from us by the English Common Laws.Common Law is in fact a very uncommon… Read more »
Have to say I’m surprised by the news of Iceland. Not arguing with it, just surprised. I’d heard reports the economy they were growing, and I put it down to, well when you hit bottom the only way is up… Would be very interesting to see what life is like for the average Icelander these days. Hope its going well for them. With us, we’ve yet to hit anything close to bottom, its going to be a long drawn out affair. But great article. The government and economy is not being run in our interests, so it is up to… Read more »
In essance DMcW is saying burn the bondholders in Anglo….this is not going to happen. FF are adamant that this will not happen because it will damage us further. In any case the bonds are worth 14 billion and are guaranteed by the government. I can’t help but feel DMcW is getting increasingly desperate in trying to find solutions to our debt and deficit problem. There is no easy way out of debt you just have to bare it and pay it back. The deficit is where we are bleeding and this has to be stopped, the Germans will make… Read more »
It is too much to ask David. We have the most incompetent Government in the history of this Universe. To ask for anything other than a kneejerk reaction and bluster is way too much. They paid 34 million for advice about the banks and then did the opposite of what the consultants suggested?
I am glad to hear Iceland’s situation is improving. I remember being impressed by their Prime Minister when he appeared on Prime Time last year, explaining, in perfect English, why his country would not be held accountable for the wanton negligance of Internation Finance. However, I think it is wildly optimistic to believe Ireland posesses the moral back-bone to emulate Iceland’s approach. Firstly, I see Irish society as being very fractured socially in terms of class, urban/rural, age and attitudes. In fact I see Irish social solidarity as being dangerously weak and getting weaker all the time : consider here… Read more »
Nationalise all hydrocarbon reserves
Sell the army
State dissolution of all religous cults and forfeiture of thier funds and property.
Lottery to cull a third of all civil servants with no compensation.
Ditch our dependance on Europe and U.S in favour of dependancy on China
Eat the rich
MOVE TO ANOTHER COUNTRY QUICK
http://www.youtube.com/watch?v=gRZvERI5nf8 “Its so nice to know we’re not the only country with drunken morons” Begorrah, I guessed he was a nightclub stand up comedian myself. I didn’t quite get that St Patrick’s Day Obama joke: http://bit.ly/9fEEif last Paddy’s day “Greeting once used by President Regan to guests gathered in the White house, On St Patricks Day you should spend time with saints and with scholars, so I’ve got 2 more stops to make…… Since finding out KOwing did a standup recently, now I get it! Hopefully Irish Conan O Brien back soon, I’d nearly forgive Leno and invite him over… Read more »
Interesting reflection on the concerted, continued, and measured efforts of big business to create our number 1 social problem.
http://www.sbpost.ie/post/pages/p/wholestory.aspx-qqqt=TOM+MCGURK-qqqs=commentandanalysis-qqqsectionid=3-qqqc=5.3.0.0-qqqn=1-qqqx=1.asp
worse that getting something for nothing, is celebrating nothing as if it were something. This is pure drivel, and the commercial establishment is 100% behind it. Essential to the fact that we blew the binge, was the fact that a lot of the money was pissed up literally against a wall, in a stupendous and pointless euphoria, ‘proud to be Irish’ and all that rubbish.
Excellent US Cartoons covering the recession.
The one I think that might be available for translation to Ireland is # 2.
Just write ESRI on the window, and have Cowen pop his fat boozy head out, with a pint glass in one hand telling the people in Galway that the recession is over….
Excellent US Cartoons covering the recession.
The one I think that might be available for translation to Ireland is # 2.
Just write ESRI on the window, and have Cowen pop his fat boozy head out, with a pint glass in one hand telling the people in Galway that the recession is over….
http://economicrot.blogspot.com/2010/09/weekend-funnies-25-sept-2010.html
Great Article David.
However, I think its time you realised that there’s no point staying here and trying to change things. The gombeens rule the roost. They won’t let you succeed. The curse of St. Munchin has gone national.
Can you write an article about where the best places to emmigrate are? I’d love to read something which keeps the flicker of hope alive. Anyone who thinks Official/Insider Ireland will change its ways are deluded.
Still laughing at the cartoon with Obama sitting around the table with his surviving economic advisors (Homer Simpson, Fidel Castro and Mickey Mouse)……brilliant!
There’s another difference between us and Iceland….
In Iceland, they are going to put a few bankers and members of the former government on trial.
http://www.tinyurl.ie/1ed
Check this post on my sisters blog to see the amount of produce she got at a farmers market in Cork City for E45 Euros I always thought those places were prohibitively expensive
http://foodfloraandfelines.blogspot.com/2010/09/farmers-market.html
Some interesting snippets appeared on television last week regarding Iceland and the Euro. The Icelandic Prime Minister was talking about Iceland’s potential when the Arctic starts producing oil and gas. They are already training people for off shore related work such as search and rescue and Iceland is geographically positioned in a area which will make it an ideal base for the service and repair of aircraft, shipping vessels, electronic navigation equipment and so on. In Iceland people have hope In Berlin last week there was a meeting of economists from around the globe and one of the Germans was… Read more »
Is voting labour equivalent to supporting the Unions? I always voted labour because I thought it was a vote for the lower classes
Firstly have we been overlooking the obvious.We have acres of land crying out for development.Yes development.Development of our primary industry agrculture.Pardon me if I have this wrong.We buy the seeds.We need machinery and labour to sow and reap the crops.We sell the crops on fresh.We can also set up factories to prepare them ie washing, chopping bagging etc.Factories needed for this activity.More jobs.The list goes on and on for the value added chain.I am sick to the back teeth listening to the hi tech sector.Cloud computing is the latest buzz.Cloud cuckoo computing more like it.A couple of slick mick geeks… Read more »
Everywhere I read about the Banks, it is always the same story. HRE, Hypo Real Estate 2008, Chancellor Angela Merkel comments on bonus payments ‘We will make sure this will never happen again!’ – Wrong! – 2009, HRE reports 2,2 bln losses, and additional taxpayers bails out money is shoveled into the Bank. Hearings in the german Parliament bring no results. Merkel’s government ring fences the Bank with legal eagles, no relevant information gets into the public realm. By now a total of 140 bln was pumped into this Zombie Bank. A few weeks after the latest bailout, Bank management… Read more »
“The recovery will be more GAA than IDA, less bond market, more farmer’s market.” Christ Almighty, but what a comment. From a man that could wipe the floor with the lot of them and their talk of recovery. Pure simplicity. Start at the bottom and work up, starting with the half million poor hoors who lost their jobs through no fault of their own. Nail these lying, grubbing soft talking charlatans of politicians to their own self serving mast and drive on. They’re abjectly disconnected from their people and all the Buinniocht and spin won’t disguise it now. They’ve lost… Read more »
I don’t see Seanie Boy paying back his debts, so there is a way besides paying back. Borrow $1m it is your problem, borrow $1bn and it is the bank’s problem. The amount Anglo borrowed from the bondholders is their problem, not the Irish taxpayers.
As usually a brillant article with very good points. However after watching “Frontline”. I conclude that the Final Wave of debt and Corruption is ready to wash over us. The IMF wolf is at the door and Fianna fail (The Rob the Public Party) fall among themselves like something out of Zombie movie. Brian “Our Plan is Working” Lenihan still acts like a gobshite and takes advice from his ‘friendly’ bankers. Labour and their offering of a political pairing to bale out the tramps in Fianna Fail, coupled with their display on Pat Kennys show really showed themselves up. Labour… Read more »
http://www.independent.ie/national-news/political-turmoil-labour-and-fg-at-war-as-tanaiste-jets-out-2355209.html I think it is now clear that Gilmore wants to be Taoiseach, but he wants FF to stay in power. Maybe he should just transfer across. I am begining to think this is just a pantomine. Gilmore does the point scoring routine, when he sees an opportunity, but is covering up a fair bit alos for his own cronies. Calamity is responsible for FAS. Shane Ross has a book out called “The Wasters”, and FAS occupy centrestage. Calamity was due questioning on Thursday, so her jaunt to Boston was a perfect means to avoid the questioning. The problem with… Read more »
Deco,
Is there any good guys left?
Where is our Moses, Obama, Gandhi
our modern day Saint Paddy to banish to snakes away?
What is her or his name?
Maybe its an individual reader of this blog?
Does anybody want of give it a go?
Surely, we sure be able to say to our kids
that true monsters dont really exist!
Your Anatomy : Sometimes we think we have the best looking bodies in the world . Sometimes others think we dont.Does it matter ? Many believe that we will be left with Euro Loans should we leave the Euro Zone.I believe we may not be left with Euro Loans .If I am right I think this seriously does matter. Lets revisit the concept .We are a basket of currencies .The Irish Banks are regulated by the Government and can devalue should they decide.What do they devalue ? Essentially they devalue whatever is within their remit . That means all your… Read more »
“The only thing necessary for the triumph
of evil is for good men to do nothing” …Edmund Burke
“If you don’t know where you’re going
you might wind up someplace else” …Lawrence Berra
“Define reality, face into it
and do something about it.” …Jack Welch
Labour Party gombeen turnaround to allow MAry attend conference of ‘career counsellors’ while the Dail sits.. media and LP think it important she should go on these trade missions. I don’t. Its the unbelievable gombeens at work again. Anyone else think this is a banana republic fetish. Banana republics attendance of the minister lets everyone know who Mr 10% is in no uncertain terms. In our case it gives the message of croneyism, favouriticism, who swings the bat. Fair dues state occasions, but trade fairs! Its part of the whole infection of business in Ireland by the state and visa… Read more »
Bond yield, 6.8%.BOI and AIB share price 50 cents.What a mess.
A lot of talk about Mr.Suds – if I ever met the man I’d say to him “What good is it for a man to gain the whole world, yet forfeit his soul”. Of course men like these have no morale conscience, how could they. A thing that baffles me is why pensions are paid whilst one is still in emoployment and to be paid more than one! Totally agree that to much attention is given to multi – nationals, while yes great to have them remember 50% of the Irish economy is made up of small to medium size… Read more »
Where is THE TRUTH? Government unveils new plan to create 300,000 jobs strengthening exports by 1/3….. Ahem…. sure! Edzard Reuter is a remarkable man, he was CEO of Mercedes Benz from 1987-1995. His father was a popular social democrat, and the family had to flee to Turkey after the Nazis came to power. He is 82 now and gave an interview to DIE ZEIT. He studied mathematics and theoretical physics in Berlin after the war, later switched to law. Asked about what multiples of the average industrial worker he would think to be normal for CEO and other top managers,… Read more »
“It is clear now that the only party guaranteed not to do a deal with Fianna Fail is Fine Gael,”
As much as I hate to say this, I think Fine Gael Fergus O’Dowd is right in this.
I am very, very disappointed in Labour flip to the dark side.
Labour seem to be sucking on Fianna Fail tit now.
Well done Lads,
Make sure you don’t choke on the milk now!
Jaysus, the whole thing seems like something out of WWF westling match.
Actually more like “The Thick of It”
A joke from top to bottom.
I posted this before, but it’s relevant here:
http://michael-hudson.com/2010/04/the-coming-european-debt-wars/
David says in his article that the Icelandic Supreme Court ruled last week that it was legal not to pay back foreign-currency mortgages and loans.
Interesting piece on Bono
http://www.mahala.co.za/culture/bozo/
Question:
Does anyone have a source or an idea how I can research how many members of the legal profession are in government and ‘opposition’ parties?
Thanks
Georg
Right Wing Populists
Since I joined Davids site, I frequently made this a subject of my contributions.
http://www.spiegel.de/international/europe/0,1518,719842,00.html
Deco – 300k is a nice round figure for their avertising campaign INDEED! I must say that’s shocking to hear about your friend’s family business, can you imagine how many more cases of that goes on. All the talk of the smart economy, some of the best and very successful self made men & women I know ranging from lates twenties to pensioners weren’t the most acamedic people but had a raw energy/ talent for business on both a sales and ideas front – again thing that stands in the way of these talents of the country – well it… Read more »
As we approach Black Thursday? 30/09/2010, when the currency markets and bondholders may go crazy at the cost of Anglo, I wonder if demotion of our euro back to ERM status http://bit.ly/d9nmEB is on the cards, or if its time to dust off our old punts. Before the Euro ERM 11, currencies in ERM were allowed to float up to 15% range of the euro. Bumping us back to ERM would allow devaluation. Pegging Anglo bondholders to a punt/euro devaluation would help as well. Apparently in Dublin today there was a huge convoy seen heading for Sandyford, overhead helicopters, large… Read more »
Did I hear 7%? Anyone for 7%… What is the breaking point??