ON THE radio on Monday, Brian Lenihan spoke of “not showing his hand” to the European Commission. He suggested that we in Ireland had to “hold our nerve”. These phrases are not normally used in economic policy — rather, they come straight from the world of poker.

This language is appropriate as it probably best sums up the Government’s policy throughout the banking crisis — it has all been a big bluff.

Yesterday, the financial markets reacted to the gambler’s words by selling Irish bonds, thus driving the yield (at one stage) up from 5.78pc to 6.15pc.

Yields came down to 6.01pc, following rumours that the European Central Bank was buying Irish bonds. We are fast becoming a vassal state of the ECB, the only institution prepared to buy Irish bonds.

The ECB is doing this for one reason — to protect the bondholders of Anglo from the default which has to come. In this little game, we issue expensive IOUs at 6pc that the ECB buys with money it prints for nothing to keep open zombie banks that don’t lend. The ECB is doing this not to protect you, but to protect rogue creditors who have no right to expect that they will be paid.

This policy will not only ultimately bankrupt us but will leave us with an economy where small domestic business is hollowed out by the credit crunch, the public sector will be kept on a life-support machine for as long as possible and only the capital-intensive multinationals will thrive. But ultimately for the multinationals, the tax on their workers’ wages will act as a disincentive for them to invest.

When we get real, we will see that Anglo’s debts are likely to be in the region of €36bn — or roughly 50pc of its loan book of €72bn. As the bond market indicated yesterday, we are clearly running out of time, and contrary to the minister’s assurances, no one thinks the €25bn bailout of Anglo is “manageable”. This cavalier attitude to finance is frightening away proper investors. This is exactly how the Greek crisis started and we know how that ended.

The Government is bluffing with our future, and by extending the guarantee yesterday it is simply showing all the signs of panic, rather than firm financial management.

The guarantee, when it was introduced nearly two years ago, was a bluff. It had to be. There was no way Ireland could afford to bail out our banking system — one of the smallest banks in the system has gone properly bust — and despite Mr Lenihan insisting that it will be manageable, it has led to the ‘New York Times’ questioning whether Anglo will bankrupt this country.

Imagine what would happen if one of the two clearing banks went to the wall. There is no way we could afford it and no way that we ever could have afforded it.

The guarantee was a credible bluff two years ago. Now, however, it is far too dangerous and should be dropped unilaterally because to preserve it risks a much greater fiscal crisis. More egregiously, the guarantee is undemocratic. Lumbering the people with the sins of creditors, bankers and developers is unfair and totally unworkable.

This is why the markets are selling Ireland. They have no interest in the bonds of a country whose people have been betrayed by their Government.

AT THE moment, the official position of the Government is that there is no alternative to paying off everyone who ever lent money to Seanie and his gang.

This is complete nonsense and proves the point that this Government actually has no idea what it is talking about. Once you realise that the Government’s experts know nothing, then the picture becomes very clear. By the way, they also knew nothing in the boom, when they predicted that we would have a soft landing.

The proclivity of the Department of Finance to bluff and build up straw-man arguments is not new. Using fear as a policy to lumber the people with the mistakes of Ireland’s institutions is a recurring theme.

At the moment, the canard that is being used by the elite to bully the people is that if we do the right thing and get those who lent to Seanie and the gang to bear the loss, we will lose credibility and there will be a knock-on effect on the creditworthiness of the rest of our society. How could this possibly stand? How could it be credible to make people who didn’t make the loan, pay for the mistakes of people who did? Please explain.

The reason the elite can’t explain is that they have no answer to it. They are bluffing. But why are they spoofing and making such momentous decisions on the hoof?

The most logical explanation is that they cannot handle the truth — that we are close to bankruptcy and can’t afford the bank bailout. But admitting that we have severe problems involves an adult characteristic called responsibility. In Ireland, the little people are responsible, while our tiny elite of leaders are so craven that they will never admit they messed up. So instead, we get spin.

I am reminded of the last financial crisis of 1992-93. Back then, when it was first suggested that the Irish punt be devalued, the elite in government circles argued that if we devalued we would become an international pariah.

The spin from the establishment was that a devaluation would constitute a massive blow to the credibility of the State. Investors would never forgive us and the interest rate in Ireland would spike upwards to reflect the new currency risk. If we devalued, the bond market would close for Ireland and a recession would follow.

When we eventually devalued, having sworn up to the last that we wouldn’t, what happened? Precisely the opposite to what had been predicted by the elite. Money flowed into the country, interest rates fell, inflation fell, bond yields fell and the economy took off.

The markets took the opposite view to the elite. It transpired that the markets didn’t give a fiddlers about credibility, they just wanted the crisis to be over.

Once we devalued, the markets concluded: “Ireland has had its crisis, the air is cleared, now let’s go and make money there.” And this is what happened. The crisis came and went and then the economy rebounded.

We should tell the creditors of Anglo, including the ECB and our own Central Bank, that the game is up and the people won’t pay. The Irish market would rally and the credit crunch would begin to ease.

That’s how crises end — when someone makes an adult decision and takes responsibility.

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