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.
subscribe.
David, this is to be expected in a one party state where the sheeple have no alternative political party and where the PARTY owns the media, even last Friday we read in the Irish Times about Rob, Bob and Deidre entering the newly vitalised Irish property market with 800k, 600k and 500k to spend, what nonsense. The famine of leadership is so severe that all they can think of is property, landlords are increasing rent to business to cover their losses and ruining good business, a time of Famine has returned, rack-renting and emigration.
“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 above extract from your article is the most important point you have made in a long and everyone in this country needs to get to grips with….. especially the media. There should be no more so called balanced interviews, giving cretins the opportunity to put forward numb nuts type arguments. Is it a… Read more »
We are screwed!! Many people through history warned countries about giving the power to a private bank to issue it’s currency. We are no longer a sovereign country period. Sad time for our beloved country. “Permit me to issue and control the money of a nation, and I care not who makes its laws. Mayer Amschel Rothschild ” “The European Central Bank has the exclusive right to authorise the issuance of euro banknotes. Member states can issue euro coins but the amount must be authorised by the ECB beforehand (upon the introduction of the euro, the ECB also had exclusive… Read more »
Re David’s previous article ” If the government is prepared to risk AIB for Anglo, the lunatics are clearly on the loose and running the asylum.” http://www.rte.ie/news/morningireland/ I caught a little bit of Rachel English interview with either Daniel Gros from the Centre for European Policy Studies or Global Strategist Donal O’Mahony …. I think it was Donal O Mahony made the point coverage abroad eg NYT ‘Can a bank bring down a country’, he said this was also echoing what Irish journalists had been saying about Ireland’s approach to Anglo. Donal made reference to booboos by Cowen adding to… Read more »
This trilogy of films about the Economic Horror Show make sense now more than ever because the baying for blood is about to kick in:
Wallets Full of Blood: Houses on the Moon http://www.vimeo.com/3269259
Wallets Full of Blood: Zombie Banker Blues http://www.vimeo.com/4292136
Wallets Full of Blood: Roscommon Death Trip: http://www.vimeo.com/13167154
Duck Science of Economics ( a la Irlandaise )
sponsored by Feen & Fall a government mafia agency
Foie Gras all the gizzards until they come to bursting point inside then blow the stuffin out of them.
Beware of the Irish bearing Property and the Greeks bearing bonds! http://www.vanityfair.com/business/features/2010/10/greeks-bearing-bonds-201010 The guy on Prime Time last night was right, Ireland’s credibility is shot to pieces (having the same government has not helped), and the markets know the financial losses are a bottomless pit which will probably bring the State to a halt. The link below illustrates what should have happened to Fianna Fail, they should have been booted into the pit along with Fingers, Seanie F. & the Anglo debacle, but their TDs and Senators are up to their necks in property and the banks, I wonder how… Read more »
I watched O Cuiv on Primetime and he seems to know what he is talking about . I would buy Irish bonds , whats the problem ?
David , you can write all the articles you like but the truth is that these people are ok at organising a new set of traffic lights and what not. But when it comes to matters of business and economics they are in way over their head and do not have a clue .
All you have to do to see how big the iceberg really is is under the surface is take a look at page 16 of the BIS Quarterly Review http://www.bis.org/publ/qtrpdf/r_qt1009b.pdf.
Irelands total forign exposure is €800 billion which is €200,000 per capita compared to the other PIGS who are only around €25,000 per capita.
We are 8 (eight) times more exposed than Greece, Portugal or Spain. Very scary stuff.
Is there any chance he(Lenihan) is so clever that he is just borrowing what he can while he can knowing full well a default is inevitable now. Its a shot in the dark given his performance so far!
@David McWilliams When I read this, my first thought was that you were the person who (first) advocated that Ireland should issues a blanket guarantee for the banks in 2008. On checking, I found that I was partially right but completely wrong! eg. Sunday Business Post 19 October 2008 In his last two columns, David McWilliams called for the introduction of a 100 per cent deposit guarantee. Now he explains what must happen next. “By inserting a clause which ties the fortunes of our biggest banks to those far more susceptible to financial ruin, the government has erred – with… Read more »
David, You don’t seriously expect them to make an adult decision do you? Take responsibility? Anyone who thinks this government would take responsibility for anything must be smoking something from Jamaica. We have the most galactically incompetent government in the history of this universe. What is it going to take to get them out, so we can get our economy and taxpayers to stop bleeding? Let me tell you. Only when we have the imminent debt crisis fully exposed (in a few months) will the people take to the streets en masse, to get them out. By then it will… Read more »
A fitting reflection perhaps…
http://www.youtube.com/watch?v=iHsx1cvACkY
[…] you, but to protect rogue creditors who have no right to expect that they will be paid. source http://www.davidmcwilliams.ie/2010/09/08/we-dont-have-an-economic-policy-its-all-just-a-big-bluffIreland has effectively nationalised its financial system for two years: it will guarantee deposits […]
Just the other day, Brian Lenihan said that pouring money into Anglo wasn’t so much to save the bank as to save our reputation. That ship has long since sailed. For €40 billion I can live with the tag of harlot or Jezebel! I don’t recall signing anything to assume the risk for the bank’s careless lending practices yet I’m(we’re) stuck with the bill. Every man, woman and child in the country will owe somewhere in the region of €10,000 just for Anglo and yet hardly any of us even heard of it before we were handed the bill, but… Read more »
RIde the horse until it collapses under your weight! 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 thought has crossed my mind at the… Read more »
I don’t like sending this but …. the truth is never wrong or right it just is. Figures are for End Quarter 1 2010 Total Exposure (Private, Government, commercial). Remember NAMA is “private”. Values in US Dollars. Billions Population Per-person debt Greece 297 11M 27,000 Portugal 322 10M 32,000 Spain 1102 46M 23,000 IRELAND 843 4M 210,000 !!!!! Also note: 1. Ireland has no tourism industry, killed by overpricing and exploitation of foreign labour. 2. Ireland has no fishing, it was given to the EU in order to get EU grants, industry value given away 500-600Billion, grants received 32Billion. 3.… Read more »
David, Why don’t you, Constantin Gurdgiev, Eddie Hobbs and Professor Morgan Kelly get together, and present a comprehensive plan to this insanely incompetent government. We are heading for total collapse at this rate. All that remains at this rate, is for us all to leave, if something radical is not done NOW! Better yet, form a new political party and get these idiots out. The next lot won`t have a clue either because they have had decades of mindless plodding and cannot come up with radical proposals. We need a completely new party with new thinking to change the entire… Read more »
Many people knew from the word “Go”, that attempting to save our idiot bankers was an exercise in futility given the excesses of the bubble-nation. The laws of the capitalism that we were so proud of during the boom years dictated that we should have let the weak die out in order that the herd would remain strong. With the money we’ve already spent we could have set up a brand new National Bank and transferred deposits from the idiot institutions to it. Simple. When word got out about Seanie et al’s personal loans we knew that the rot went… Read more »
David is correct there is no economic strategy. There is a CYA strategy. There is a reassure everybody that everything is fine strategy. There is a keep IBEC and ICTU happy strategy. There is a prop up the property market strategy. There is a get your party activists onto the state payroll, via quangoes strategy. But there is no coherent, intelligent economic strategy. If there was, then the labour market would be getting fixed. But the labour market is completely off bounds. Deflation would be allowed to occur so as to enable Ireland to reprice itself competitively. (as happened in… Read more »
The minimum wage will have to be dropped to a level equal to that of NI. The commercial rates being charged by the local authorities will have to be halved, because it is destroying the service sector employment. The GP and ILP are pushing behind the scenes for the introduction for property taxes across the board. FG are resolutley opposed. FF are divided. But it is being discussed behind closed doors. In fact it was being discussed even before the crisis began. The GP wanted it in the program for government in 2007, and FF told the GP that FF… Read more »
Mr Lenihan added that the Government was “satisfied” it could identify what the final cost of covering losses at Anglo Irish Bank would be.
Two years Folks…. two bloody years they were not able to get a full audit report on the books of Anglo.
WHY?…. ON PURPOSE!
What happens if the players at the poker table does a runner ?
Having read the article one quotation from the Great Socialist Dithering One comes to mind, with respect to the nonsense coming from the DoF, NAMA, and the Kildare Street circus….
“ure a waffler…ure a waffler….yahve been wafflen for years…so yah have..”.
They need to start reforming the state institutions, making them efficient, light and far more intelligent than they have been to date. And much of the state system needs to be wound down (800 quangoes, and countless departments). State sponsorship and involvement in a lot of the non-state sector needs to be curtailed also – including the NAMA nonsense.
Ireland Inc is a coop based on cronyism run by stupid politicians exponentially dumber civil servants enabled by self centred personal interest public sector unions facilitated by intellectually barren bankers. They will never accept the truth as they will have to admit that they know nothing about running a country or managing finance and handling international finance. What you have is a coop of parasites living off those who have to work for a living. They are totally dishonest and occuppy positions beyond their ability. The Freefall programme on RTE was very interesting. It epitomizes what the state thinks of… Read more »
Another fallout from the ‘freefall’ after the ‘free-for-all’!
Wonder will the link between it and the policies of Bertie Ahern ever be raised by the current presenter of the Late, Late Show and offerer of refuge to Tony Blair.
http://www.irishtimes.com/newspaper/breaking/2010/0908/breaking26.html
The gravity of incompetent decisions in the past two years alone, that this fearful and captured government – Hat Tip to Brian Lucey – has taken, appears not be be understood by the Irish Public at all.
This is literally the only explanation I can come up with to understand this eerie silence in Ireland in the past two years.
The Irish concept of lifestyle has become completely unsustainable. And with pride, the people will react and demand that it continue. They will get angry with the clowns in charge and put another collection of opportunist clowns in their place. The problem at it’s intellectual source is one of pragmatism or pride. And since CJH Irish people have turned to pride, even those that hated CJH became like him in ways. Pragmatic analysis never mattered, instead there was a “bull-market” in arrogance. We still have a failing labour market. For a lot of people that is problem number 1. Australia… Read more »
The Professional Bodies that ‘the alleged’ are members of can only have been seen to have turned a blind eye to the Reality and are morally culpable to the distruction of the Sovereign State .Their ethics do not include in their prospectusrs a Social Conscience for the well being of our lost nation.
So we default? Then what. Let’s stop going over the reasons of why and so forth (mind you I am very taken by the idea of the banks using temporary slush funds arising out of MNC profit churns and the whole thing being caught on the bounce!)
Have we enough funds to keep the public service payroll going until the end of the year?
What happens when we run out of cash? This looks inevitable.
Mr Brain C mentioned about the Freefall programme on Mon night. I agree it was a very interesting programme but there is a point I think you sould consider as Puschkin the Black and White Cat earler mentioned that the media is owned and governed by the same elite club that also own the banks and run the country. Did you notice that lenehan was given a lot of time on the programme , more than any of the rest of them to give his own “unbiased” opionion? Did it ever occur to you that this could be also a… Read more »
First off let me offer my sympathies to the good people of Ireland who are going to suffer because of these fools.I nearly moved to Ireland and in retrospect not doing so was a good thing. a couple of questions froma foreigner: What is “the Irish concept of lifestyle”? Why dont the people stage petitions and demonstrations? Why dont the media ask the powers to be the hard questions? When I was in Ireland the idea I got from the avg man in the pub was that everything is hunky dory…Why is that? Is there credible opposition to the current… Read more »
B Ahern made an appearance on the John Murray show on RTE radio this morning.Easily batted a half-hearted attempt by Murray to interview himAhern’s proudest legacy is the road network!.Is O CUIV MORE INEPT THAN HIS USELESS GRANFATHER?.
All,
The blame & spleen-venting is OK but doesn’t change a thing.
True Economics: Economics 27/8/10: Manifesto I (?) http://goo.gl/b/Gnn3 is something worth contributing to & supporting.
Remember the opposition in government won’t do it for you.
Regards,
@BriMcS
watching programme on Mon on RTE. Big point that is missed or washed over was jean Claude trichet gave orders to the minister to protect the banks at all costs on the previous sat., and he did. So the story that the government is running the show is just pure bull. they are doing what the ecb and the eu want them to do and this will be the outcomehttp://irishsovereignty.wordpress.com/2010/07/14/turning-the-corner/
Anybody think this Anglo split is a load of waffle? A pathetic attempt by the government to look like it has a clear plan when it still has it’s thumb up it’s ass? Doesn’t this bank have offices that deal with loans owed to it anyway, and offices that deal with it’s deposits anyway? What have these Anglo workers been doing since it was nationalised anyway? Will the new toxic loans half of the bank be like nama? Will the new ‘funding bank’ give out free toasters or calendars at Christmas? What a load of cock! A PR stunt if… Read more »
Afternoon all, thanks for all the comments. The RTE programme the other night was a whitewash and I don’t believe advanced our understanding of what actually happened and more importantly, who was to blame. If we don’t pin down that, we won’t know what to learn. On this site I think we are fairly sure of what happened and what to do to get out of it. If I hear Lehmans again I will cry. Had I known that it was going to be such a white wash, I wouldn’t have appeared briefly on it. Maybe next week’s will be… Read more »
The goal is clear since long, all senior bondholders will be paid, the public will be squeezed to the last drop of blood.
The Heist continues!
Best
Georg
What part of capitalism don’t they get? Everyone knows that if you’re efficent you thrive, and if you’re not, you go to the wall! It’s not that difficult to understand, is it? It’s that way in Nature, in the Universe, and it’s that way in business; and all the wishful thinking, and bluff, and B.S. in the world won’t change that. And because of that, the inevitable will happen anyway……….no matter how long you postpone the reality. Ireland doesn’t have a Government. It has a small group of overpaid and pampered TD’s, whose main focus is, and always has been,… Read more »
I watched the first ten minutes of Freefall and then switched it off. It was pure rubbish.
A bit off topic but….
http://www.youtube.com/watch?v=pifibs_q7ec
We as Irish must release ourselves from the mindset of the Famine and move on.
Actually today was New Moon Day and fitting to start writing down intentions and desires.I am beginning to believe FF must employ an astrologer.This is no accident.
@Paul Divers I agree we should enjoy the sights and sounds of Autumn and take regular walks and exercise as an antidote. Regarding David’s or other contributors to RTE’s Freefall ‘freefall’ on good documentary making ‘storm in a teacup’ I imagine particants do so in good faith, don’t have editorial control of the final product, blame the makers. OT has Lenihan lost it? Heard him on Morning Ireland blowing about the extension of the ‘State Guarantee’ aka ‘taxpayers guarantee’. Would someone tell him the more Nero fiddles while Rome burns, the less meaningful the guarantee. Also he was praising our… Read more »
As I suggested yesterday, part of the quid pro quo for the EC bailout seems to be Corporation Tax equalization
http://www.rte.ie/news/2010/0909/eu_tax.html
I thought Ireland’s 12.5% rate had been set in stone in the Lisbon treaty?
How many months will it take for the MNCs to relocate to Sweden or somewhere else with a measure of sense?
We have more bloody awful spin from the Irish Independent today, and it comes as no surprise to me at any rate that Fionnan Sheahan tags on his name to this headline grabbing rubbish which is a clearly structured to deceive the reader. It is only on careful re-reading of the piece in combination with information from other sources that the true picture of what is happening in Anglo Irish Bank emerges. It is clear to me at any rate that the headline that state’s that “ Anglo told it will never lend another penny” is a barefaced lie. The… Read more »
The reason the government is selling the country, this and the next generation down the toilet is simple. It is personally financially beneficial to the people making the decision to do so. It is economics at its most basic. They get to stay in power and situ for longer on very lucrative salaries and expenses. Ditto for the senior civil servants, administrators, professional advising firms, the top bankers etc. Every month extra that you can stay in power makes many of them €10,000 or more richer. Treason was often bought for a lot less than that. The Irish Officer corps… Read more »
“That’s how crises end – when someone makes an adult decision and takes responsibility.”
PERIOD.
As a non-economist reading David’s articles, I cant help feeling that there has to be another side to the story, and I would love to hear it so as to make a balanced and informed decision.
However I never see any feedback in the media to his or Fintan O’Tooles articles. Why not? Why do the people of Ireland accept this? Why don’t the opposition take up the case? I just don’t understand what’s going on…
What I do know is that I live abroad and am applying for another EU passport as insurance for the future…