‘You want it to be one way.”
‘‘Man, stop.”
“[But] it’s the other way.”
The above dialogue occurs in season four of The Wire – the HBO crime series based in Baltimore, Maryland. Marlo Stanfield, a notoriously vicious drug dealer, walks into what Americans call a convenience store.
Straight in front of the security guard, he pays for his cigarettes but steals a lollipop.
The security guard confronts him as if to say, what the hell are you doing right in front of my nose?
The security guard explains to him that he knows who Stanfield is and how dangerous he is but even so, Marlo can’t just steal stuff – it’s against all the rules, that’s not the way the world works.
Stanfield just looks him in the eye and repeats three times,’ ‘You want it to be one way’’.
By this he means that life is based on facts, not on wishful thinking.
The reality is that life is not like that.
Wishful thinking is not how the world works, irrespective of what the guard might want.
This exchange – and, in particular, the difference between the reality of the world for a mean-assed drug dealer and the reality of the world for a security guard working on a Sunday morning to support a family – reminds me of the difference between the harsh financial reality of the markets – which are losing faith in Ireland – and the wishful thinking of Ireland’s politicians and senior civil servants who are telling the world that everything is under control.
Everything is not under control; in fact everything is spinning out of control.
The Financial Times carried an editorial last Friday which echoes what this column has been saying for the past year: the time has come for a forced debt-equity swap in the Irish banks.
The more the government keeps writing cheques for the banks, the worse our credit rating will get and the higher the price for the economy in terms of austerity.
It is good to see that the Financial Times has finally woken up to what is going on here.
The main reason is that the government and its advisers are so chronically insecure that a word, even an utterance of support, from the Financial Times and they are screaming all over the airwaves that the rest of the world thinks they are doing a great job.
This overblown reverence for what the FT thinks touches an insecurity which runs deep in the Irish psyche. It’s a case of ‘‘what will the neighbours think?”.
The corollary is also true, which is that, if the FT doesn’t like what the Irish government is doing, the Irish government sits up and listens.
This attitude – possibly a post-colonial hang-up – governs much of what goes for thinking in the upper echelons of the Irish civil service.
It reminds me of my granny’s ‘‘good room’’.
My granny had a good room, which was so good I wasn’t good enough to go into it.
In fact, the only people who were good enough to go into the good room were people my granny was trying to impress.
But the funny thing was we pretended that we used the china in the good room everyday when such guests knew full well that the good room was opened only for special occasions.
But the insecurity that bred the good room was precisely the type of insecurity which is much more concerned with what the neighbours think than being concerned about the real facts.
This is why it is so important that the FT has come out and said ‘‘enough’’, because one editorial from the Financial Times will have more impact on our top civil servants (who run the place) than 10, 000 or possibly even 100,000 people on the streets.
The other reason the FT piece is so important is that it addresses Marlo Stanfield’s point, which is the difference between what is and what is hoped to be.
The Irish state has been living in a make believe world for the past two years, writing cheques with money it doesn’t have to save banks and bank credit it doesn’t need.
The behaviour has been most bizarre.
For example, Brian Cowen talks about coming up with billions of euro as if the money is just stashed under the mattress or in a tin above the telly, which he’ll just go and get after his tea.
The cavalier attitude has been almost farcical.
More farcical still has been the willingness of foreigners to go along with this charade and swallow this spin.
At last, the penny has dropped.
Finally, the world is beginning to realise that we don’t have any money and if we did, the smartest thing to do would not be to give that cash to banks’ creditors.
This realisation is the reason we are being downgraded by the ratings agencies and this is why the bond market will close on us.
This is why the ECB is buying our debt, because no one else will, and yet all the while, the Irish top brass claim nothing is wrong.
They haven’t twigged Marlo Stanfield’s point either.
The world is not how they’d like it to be – it is as it is.
And this means that there is no more cheap money for Ireland as long as it is using that money to bail out creditors.
Even the Financial Times now gets it and is calling for a forced debt for equity swap, where creditors take a hit.
The best course of action now is to let the guarantee lapse, force the creditors into the room and tell them this is the way it is going to be.
The bondholders become equity holders.
They now own the banks which they once lent to.
The banks are recapitalised using bondholders’ funds and the banks’ balance sheets are rebuilt via debt dilution, not via raising new capital to pay old debt.
The taxpayers have paid enough.
The world has changed and the strategy of hoping for something to turn up is not working and will not work.
We have no money and the world isn’t prepared to lend to us in order that we bail out reckless lenders.
Let’s move on. Let’s hope that the FT’s editorial and the downgrade will nudge us a bit closer to sanity.
David, you forgot to mention that Marlo has the security guard bumped off later in the show…
The question I have is, what about all the tax payers who invested in these banks. Pensions, savings, funds have all been put in there by hard working tax payers too. Defaulting isn’t free, we’ll still pay for that too. You give the impression that it’s a victimless action.
I’d like to know who it will impact, and how it will impact them.
Promises, Promises!
“Change We Need”
http://www.youtube.com/watch?v=eAaQNACwaLw&feature=fvw
Great article again, few points here as well
General Humbert and the Irish E(e)conomy!
http://bit.ly/boVfT9
The Wire..great series:)
David – excellent article. Let’s face it, the establishment is concerned with keeping up the veneer. There is something seriously imbalanced with the Irish economy, and seriously unsustainable about our consumption patterns in this country. And this has been the case over the past forty years, bar an odd period of deflation, followed by currenncy devaluation and a resulting inward investment. And all along we were fooling ourselves. But nobody is allowed say anything about it. (‘cribbin an moanin’ an sittin’ on de fence is a loast opportunitty’). We even have clowns like Dermot Ahern telling us that the consumption… Read more »
Wealth can neither be destroyed or created, it is only transferred through deception and false crisis. This fact is enough to take back our country. The people of Ireland are being robbed through deception and lies.
Like the rest of the world, Iceland was robbed , Greece was robbed , america has been robbed, Spain,Portugal… the list goes on and on. When are the masses going to realise that this is one big scam to destrou culture, sovereignty and ultimately lead to a on world central bank controlled by very few people. The evidence for this is overwhelming and should be given to every Man , Woman and child in this country. No Bullets anymore , just financial ones.
Hi, What no one has explained is why so many apes are “promoted” in the banks and the civil service and so much talent is in exile. My two cents worth it’s a result of the promotion of loyal incompetence ahead of diligent professionalism. In other words you are promoted to protect the incompetence which destroys everything rather than for you skill or ability which would be a threat to the status quo. I am 38 years of age and have witnessed this in the construction industry, banks, sport etc and can understand why talent is viewed so contemptuously when… Read more »
At least the delusion is now coming to an end – the imf/ecb will more than likely come to our rescue in in the first quarter of 2011 and that we’ll give us real clarity about our situation for the first time since the bubble burst. The present uncertainty can’t go on and it looks like our politicians are now reconciled to the inevitable – they look more relaxed day by day as they accept that the problem is way too big for any internal solution.
David, you are always way ahead of these idiots.
And now Dan Boyle’s GREENIES are jumping on your bandwagon.
We just can’t afford this any more. An orderly default is inevitable. They’re probably just waiting for the banks to roll over the €30 billion this September to begin discussing this with the ECB and EC. I read this weekend that we are staring down the barrel of a €200 billion deficit that will consume one-third of all taxes, duties and excise collected in a year just to service. We aren’t going to make enough by deflating the economy further through yet more harsh budgets. Debt-for-equity needed for Anglo at the very least if we are to keep our head… Read more »
If the Irish voting public had any sense, they’d be asking where all these tens of billions are coming for to prop up zombie banks, which weren’t there for say health care? Calling a halt to throwing money at the banks surely cannot be worse than continuing as is.
It seems to me that we need to start to try and build a plan for “afterwards”. The inevitable has come about because it had to. The pretence that hoped we’d recover in time to maintain the current status quo is at an end. Now what? SO we may have an election, we may start to see property fire sales and proper mark to market valuations. And we may see people for the first time being able to afford a house (let’s stop calling it a home!) without it compromising other choices needed to make a home in a community.… Read more »
There was an article in yesterdays Business Post – and when I seen I thought about the implications of the article. Basically, Dan Boil exists as the man to ensure that there is a perception than the GP have a superior conscience to FF. So when a bunch of FF backbenchers start to get concerned about something this is a danger to the public perception of the GP. http://www.sbpost.ie/newsfeatures/banking-on-trouble-51324.html That was yesterdays news. And now the question arises ‘How is Dan Boil to respond so as to ensure that this does not damage the perception of the GP as being… Read more »
What is The Reality ? We all agree what should be done .If it is done, what is the reality? And how does it ‘Hit’ you? Can you do something ‘Now’ to reduce the impact on yourself and your family? Do we really know ‘what is the reality’ ? Our Grannies sitting rooms were great places and held traditions from another time of old .Yes there was a veneer .Our Grannies were not malicious .They saw a purpose in what they did and it was productive .We never questioned their motive and certainly Grandpa would not even dare to think… Read more »
Let’s face the establishment in Ireland is a bunch of clueless spoofers. http://www.independent.ie/business/irish/honohans-wife-takes-euro400k-hit-as-crh-slides-2316032.html If these people read Phoenix Magazine they would know better. This is what happens when we take seriously pronouncements from the IT, RTE, and FIRE economy insiders in Ireland. The list of people who are your betters here is fairly long actually. http://www.independent.ie/business/irish/honohans-wife-takes-euro400k-hit-as-crh-slides-2316032.html Phoenix Magazine also warned about Anglo being a disaster. The whole incident of the GP playing optics over the Anglo saga is hilarious. David McW, Brian Lucey, Morgan Kelly, Contantin Gurdgiev etc… have been proven correct less than one month after the nonsense of… Read more »
David, Glad your a fan of The Wire. I repeat a comment I have made many many times before: Ireland suffers from a National Inferiority Complex that infects all aspects of society, not just Government. Glad you also explicitly referred to that here. At the risk of repeating myself ad-nauseum, John Adams put it best 240 years ago, when his advice was sought on the creation of a constitution for Massachusetts. What was required in his view was “..a government of laws not of men”, referring to the need to move beyond systems based on the divine privilege of a… Read more »
All,
Constantin Gurgdiev has drafted a manifesto which is open for comment here:
http://trueeconomics.blogspot.com/2010/08/economics-27810-manifesto-i.html
Add your thoughts.
Something is up & running.
Give it momentum.
@BriMcS
https://twitter.com/BriMcS
Why it has taken the rest of the world so long to realise that a bunch of morons run the place, is amazing in itself. You would think serious economists would have seen through the charade 2 yrs ago when the country was collapsing and the government went on summer holidays for months. People without an economic degree between them were talking about increased rates, downgrading and possible default. It doesn’t take a genius to see that there is no leadership and we are basically screwed. When they came back from holidays they sat around scratching their heads with no… Read more »
It is my considered opinion that we can make our own reality, but because we are all such individuals, governments and elites don’t need to worry because they know we will never agree on a strategy to oppose them. I do not agree that it is ‘the way it is’ and there’s nothing we can do. WE need to oppose family dynasties in politics. I’m glad to see Olwyn Enright is not running in the next general election. There’s also two other family dynasties, Flanigan and Cowan in Laois Offaly. Just look at the 3 senior members of FF: Cowan,… Read more »
huffnpuffpolly : I agree and your prose says it better than others.Maybe we should call on all the Grannies in the country to go into the sitting room and talk this matter through and deliver a proclamation.
Smelly Poops near U
http://www.weissratings.com/weakest-banks-and-thrifts-in-us.php
Life has improved enormously since I stopped listening to RTE/PRAVDA and Irish politicians. I use a variety of info. sources and I have a feeling for what is coming down the line, touched on in David’s article. We ain’t seen nothing yet. Those who are overextended/financially exposed do not normally factor in the ‘unknown element’, the issue that comes out of the dark like a 9-11. Best to keep life as honest and simple as you can. The bailout and government cheque writing postponed the inevitable, a lot will depend on Lenihan, if he goes then I expect the flood… Read more »
Calling it as it is………method behind the ‘madness’. Elites will emerge stronger and richer from this so called ‘recesssion’, in fact it is a giant economic readjustment, which seeds more power back to those who control the world economy. Keeping people on the edge of survival, it is not about people in the Central Bank, or Dept. of Finance being stupid, it is about implementing policy, the instructions come from elsewhere and we follow through like the compliant, dependent State we are. “The fact remains, however, that the kleptocratic rulers in the US, EU, and other debt-burdened countries know exactly… Read more »
A very interesting presentation from Professor David Harvey, thought provoking.
http://www.youtube.com/watch?v=qOP2V_np2c0&feature=player_embedded#!
Once the downgrade happened, a process kicked in where companies have to remove money from Ireland based on rules from their Treasury/Finance depts… This is why the whole Green v Fianna Fail war started to erupt. Holiday season is over now. Back to work on 1st September. All hell will probably break loose
David. I would argue that the insiders do have access to money and are milking it like its never been milked before. The insiders use the banking crisis, which was self inflicted, to issue bonds to swap for endless amount of cash over there at the ECB. If they can do it, why wouldn’t they….!!!!!!!!!!!!!! Look at all that lolly they can get with the bonds. They creamed the property market and now its the turn of the bonds to be creamed and the ECB is there as the cow to provide the milk. These guy’s are hip to the… Read more »
This is the most deeply philosophical piece to emerge from David’s pen, because it touches on the nature of reality. ‘Life is based on facts, not on wishful thinking.’ Nevertheless, David, speaking as a respected scientist, it is worth remembering that Man does not live by bread alone. The responses above seem to me to be nudging the debate in a very dangerous direction. If we are not careful we could quite easily talk ourselves into a decline, eventually provoking the end of civilized behavior in Ireland. Let’s try, against all the odds, to maintain a positive outlook here. David… Read more »
I might have posted this previously but it’s probably woth anothe look, given Davids call for reality.
http://www.huffingtonpost.com/rj-eskow/unfree-markets-the-last-g_b_555986.html
A – True story. In a certain South American country a massive banana producer went into financial difficulty. This was due to bad management. The owners family was very influential in the country and so they didn’t care about how they managed the company. Sure enough the goverment used a large proportion of money from their ’emergency relief’ fund, (funds set aside for disater relief from floods volcanos etc.) to bail out the banana company. They came out on the National News and said ‘ We have to bail them out becuase we need those jobs and we need entrepreneurs… Read more »
By the way I read an ancient asian proverb the other day, It says that if anyone trys to make an excessive profit from food, clothing or housing then diaster will ensue for them and others. Why are people allowed to make massive profits from housing? We are not the United States and housing is a human right. Legislation please.
Wishfull Thinking : http://www.mountainart.co.uk The feeling now is a real loss deeper than ever before .It’s the feeling of the repeat of the Loss of Atlantis ( now Inish Mor ) where only Plato is the only person recorded as knowing of such a great place in another time before him.It is when all life is divided , one half given back to nature and the remaining half is designed by both man and nature.It is a time of when we again morph once more into Lepracauns -(they are invisible and have a life system that holds a time warp… Read more »
Folks, there’s no need to become deeply philosophical. Like Dawkins I’d worry about any objective and scientific suspension of disbelief, based on non empirical evidence, that’s used to clamp the brain to deny scientific critique and evidence, in favour of any kind of blind adherence to any dogma. I would hold the view for the purposes of debate on economic matters its helpful to stick to the evidence. Difficult I know, because its largely hidden away from us in this socialist bankocracy of ours. Our politicians get paid one third more than their MP equivalents in the UK and do… Read more »
What David is proposing that the bondholders accept a debt for equity swap is not going to happen. It would be nice to think that this is a quick and easy solution. But the banks are nearer the end of recapitalisation not the begining. AIB needs another 7 billion and Anglo needs another 10 billion as suggested on TV3 last night. Bond holders are pension companies by and large and forcing them to accept equity would be morally wrong. All the bail outs have been transferred to sovereign debt which will become our biggest problem in a few short months.… Read more »
Lets not forget the developers who many think have funds salted away hidden from bankruptcy exposure. Many believe they are lying in the tall grass awaiting Nama to offload the commercial property. Then they’ll swoop buying up their own stuff at half to nothing discount bonanzas! Whose watching that goalmouth?
” HOME ” IS WHERE THE HEART IS?
http://www.youtube.com/watch?v=jqxENMKaeCU
” CHANGE WE NEED “
Good article here, but are we invisible,..’lone’ crusader Matthews plus another howler on Pravda RTE this am, ‘Everybody’ shocked at losses posted by Anglo…’Nobody’ anticipated losses as high as this.. Well shiver me timbers but a large majority of the Irish people have been against the approach taken by FF and Pravda RTE with the banks. ‘Everybody’ apart from FF regards the approach taken as the most expensive option…. Its therefore deja vu to have this view confirmed by news of Anglo losses with more impending through the NAMA white elephant.. Unfortunately, though the article compares the UK and US… Read more »