When I was in school, the class was fairly split between swots and messers. But the messers broke into two groups. The first were the hard-core messers — these were the lads who the teachers told us “would come to no good”. If they were caught smoking in the jacks and you had just managed to evade capture, these were the lads who would never rat on you.
On the other hand, the second type of messers were the most dangerous — they were the blokes who wanted to curry favour with the teacher and would squeal on you at the first hint of trouble. They wanted to be treated as swots but weren’t quite good enough, so when they stepped over the line and were snared, they always sided with the teacher and capitulated at the most modest disciplinary threats.
The Irish establishment reminds me of these guys who want to be with the ‘goody goodies’ at the top of the class but don’t have the wherewithal. Worse still, these were the lads who capitulated at the smallest threat from the top, so they are the easiest to control because they don’t have the natural self-confidence and ability of the clever lads, nor do they have the natural self-confidence and defiance of the real messers.
Europe is split between the swots — the countries that owe nothing to anyone — and the messers, the countries who owe their shirts to everyone. Most of the swots are well behaved, looking down their noses in private at the messers, while saying nothing incriminatory in public, preferring to condemn in a conspiracy of supercilious silence. Except of course for Finland, which broke ranks this weekend.
When faced with the distinct division between debtor nations and creditor nations, the cleverest thing for the debtors — the messers — to do is form a coalition of delinquency to strengthen their hand in future negotiations. This is, after all, what the creditors are doing.
If it was in doubt before, it is clear now that the endgame for Europe will involve a massive structured default, so we should decide what side we are on.
Today is the first anniversary of the Greek bailout. Greek two- year interest rates are more than 20pc. Greek government bonds are 11pc above those of Germany. Remember last year’s bailout was supposed to solve Europe’s debt crisis.
Back then, even though Ireland was a financial delinquent, we tried to behave like one of the swots. Our Finance Minister puffed his chest out and told anyone who might listen that “we are not Greece”. But no one believed him. What they saw was a snitch, trying to belittle a nation whose total debt — public and private — is much less than ours. The minister then earmarked â‚¬2bn he didn’t have to help these poor Greeks. This cavalier exercise in fiscal delusion combined with belittling our partners who found themselves in trouble did us no favours. We were trying to suck up to the good guys when everyone knew we were no better than the Greeks. Ultimately, the Greek finance minister got his own back during the week the IMF came in here, when he looked at our banking mess and claimed loudly that “Greece is no Ireland”.
Having been so quick to condemn the Greeks and sneer at the Portuguese, we found that we had few enough friends when we needed them last November. Instead of seeking a debtors’ alliance, having the self-confidence to admit that we were weak, and the defiance to point out that it was a mutual creditor and debtor problem, we sought to curry favour.
We displayed the age-old Irish weakness of preferring to be loved rather than feared, to be pliant rather than defiant, to be malleable rather than awkward.
Well, this game has not worked. In the past two days the rating agencies — after billion- euro bailouts and capitalisations — still downgraded our banks to junk status. We know that Greece is on the verge of default. We also know that in capitalism the key concept in a bankruptcy is the idea of co-responsibility, where the creditors and the debtors are equally responsible.
According to the Bank of International Settlements, the debtors of European periphery owe the creditors â‚¬1.1 trillion, or â‚¬1,100bn. So it is clear this money will not be paid and will have to be restructured.
There are two ways for creditor nations to deal with this. The first is to realise that the game is up and do a deal before the likes of the Greeks default and drag us with them after the IMF money runs out. This would seem silly. The longer they wait, the more likely the anti-euro result of Finland’s election will be repeated in the other creditor countries. The Finns voted that they had enough of paying for Germany’s banks and close to 20pc voted for a party that is against any more money going to the periphery and, by extension, to the German creditors.
Finland’s conversion to fiscal and monetary prudence is at odds with the Finland I first visited in the winter of 1994, when the Finnish municipalities were raising money from foreigners. Finland in 1993, having told the world it would not devalue, devalued overnight by more than 40pc. They consequently “burned all the foreign bondholders” who had originally invested their “hard currency” in Finland on the basis that the Finnish currency — the Markka — would be held stable. And who was in the Finnish cabinet when Finland burned all the foreign investors and put the future of the Finnish citizen before the foreign financier? Why Olli Rehn, of course. The same Olli who says to do such a thing would be dreadful.
When I was there, I was representing the people who were about to commit new money to Finland. And do you know what happened after Finland burned its bondholders via a shock devaluation? Was it cast out of the markets and turned into a pariah?
No: the international banks — such as the one I worked for — were back in, just a year later, lending again. I know this for a fact; I was there doing the lending! Not only were we lending to the Finnish government, we were lending to Finnish county councils and municipalities.
So it is hard to take this new-found Finnish probity seriously. The consequence of Finland breaking its international promises was actually inconsequential. Why was this? It was because everyone understood that Finland with a more competitive currency was a better bet. Similarly now, everyone understands that the periphery of Europe with less debt will be a better bet. A balance sheet with less debt is a better balance sheet and less at risk of future default. Simple.
Now that Greece is on the brink and we have been downgraded to junk-bond status, Spain looks next to go and Portugal is settling into an IMF bailout, 1,000 people a week are leaving our country and the rating agencies doubt even the US’s ability to pay its debts — isn’t it time to realise that the world has changed?
So what do we want, chaos or an organised solution? Maybe it’s time the messers realised that the swots’ solution has not worked. It is time to rethink employing the common sense of the back of the class rather than the elegant theories of the teacher’s pet.
Very good article, very apt analogy. But can we restructure/default without leaving the euro? And if we were to devalue overnight, would the insiders have salted the remainder of their hard currency offshore? I like the idea of the euro and I have benefitted from it in many ways; like many others, I feel betrayed by the monetarist zeal of the EU and especially its determination to keep all zombie banks afloat (and not for one second do I wish to minimise the criminal role our own government played in this), but we can’t go like this, taking this monetarist… Read more »
“The American way of life is not up for negotiation” Dick Cheney. “We are going to restore faith in the Irish fiancial system” Brian Lenihan, some time afterwards. We don’t do humility in this country. Humility in Ireland, frees you from unwaringly paying for the gombeens. Therefore humility, as a potential undermining force against gombeenism, is forbidden by means of a fairly effective set of social mores. Our mores with money and finances, go to the very core of the behaviour that wrecked this country. I hope that we start to look at ourselves in the mirror, and start to… Read more »
Thanks for article and info on forked tongue ‘1993 burn bondholders cabinet cheerleader’ olli Rehn.
It appears to me we’ve blended messer with some variant of the Irish dunce and cloned it into the gombeen variation of begging bowl clueless Stockholm syndrome bent on self annihilation of the Irish economy….will we ever have an economy that works again?
Thanks for pointing out the hypocrisy of Olli Rehn and co, what a bunch a miserable arctic alcoholics. Thanks for giving us the truth about your experience of bailing out a country.
I’d say that Boyd-Barrett fella was a genuine messer in school. Was he in your school David? Bet he didn’t rat out anyone either.
An apt analogy David. I found what you said about Olli Rehn surreal. What was good for Finland then, is now not good for Ireland! Our politicians have no testosterone, especially Enda, in my opinion! Plus they are still not listening to us the Irish people! What will it take for them to wake up and see what it is they are doing to Ireland! Maybe they deserve what will come down the line when we go in to a chaotic default?!? Maybe the Irish people will show their anger then?!? Maybe! Or maybe, we’ll go to the slaughter with… Read more »
It should not be forgotten that within the swats there are areas that are net recipients.
Much like the situation with the farmers here, where the transfers designed to keep people in the countryside was shifted to mean only landholders. The transfers were then used outside the State. Think Kerry group and Glanbia to name but two. Where they then used that cash to fund an orgy of debt purchases in the USA. Where the actual outcome was to transfer more out of a region than the original investment in.
David. Maybe the insider banking elites see *debt strangulation* as a fantastic opportunity. The article concludes the less debt of the books surely the better. But, those who own and run the markets and the determine the flow of funds and capital seem to feast on debt sodden sovereign countries. Look at the news today. The exit and entry ports in ireland are been put up for sale, the forestland is been put up for sale. The power stations are been put up for sale. All to raise revenue to pay for debt servicing. Now whatever way one breaks this… Read more »
Again David is on about how capitalism works. That has F**k all to do with this system which is creditism i.e. the expansion of M3 by over 8%pa since the beginning of the euro or over 8% monetary inflation. (this did not lead to 8% CPI inflation but the expansion of the Euro did match Irish house price growth until late 2006 see figure here http://vimtrading.blogspot.com/ ) I think “Burn the Bondholder” will lead to a contraction of this M3? Or do as the Finns did, devalue the Euro. Is this an expansion of base Money to pay the bonds… Read more »
We displayed the age-old Irish weakness of preferring to be loved rather than feared, to be pliant rather than defiant, to be malleable rather than awkward.
That phrase captures the essence of our stupidity, perfectly. Perfectly.
I don’t expect Europe will disintegrate on account of this; on the contrary it will come out of it strengthened; perhaps in ways we might not welcome. The fall will require debt restructuring and that will give the senior power brokers, stake holders and creditors enormous power over our future; a future I am sure they have already planned out. Here’s one I made earlier! Clearly the purpose of the crisis is to bankrupt the Western nations as a prelude to restructuring. The ball to be watching in all this is not the mountains of debt erupting out of the… Read more »
David; Dear David
What happens in 2012
Schooling has a lot to answer for, the principle architects of our current economic disaster including the cheer leading economists, academics and journalists were mostly if not all, privately educated in elite schools, and also attended Dublin based universities, corporate centres of education that benefitted from the largesse of the banking and finance fraternity throughout the boom and who now go in desperate search of Chinese and US money. A quick scan of the main private colleges in Ireland on Wikipedia reveal some very interesting attendees, quite an overlap. Awfully tight game which was played out with appalling consequences on… Read more »
Check out what NZ Government are proposing to deal with future asset / property bubbles…
Far-sighted and progressive…..
Any chance of our lads looking up from the hole we’re in and contemplating something like this?
It always interests me to see David talk about devaluation with such ambivalence. Essentially, Olli Rehn stole 40% of his citizens and investors savings, taking the easy way out. He could have chosen the path of true reform instead, but politicians as we all know prefer the easy way out. The fact that this get out of jail, liposuction false option is not readily available to the Irish is a really good thing. I wonder why did Finnish municipalities need to borrow anything anyway? Couldn’t they pay their own way? Why should this be held up as an example of… Read more »
Just a Thought
Could the Irish have believed that because of the lack of visibility of Public Investments in Irish Infrastructure that owning more than one property gave them a better sense of security for themselves and their family!
On the contrary in continental that is never a problem .Thus Europeans only buy a country cottage for the summer and not seen primary as an investment.
When the Fine Gael chief whip complained about those scruffy Independent TDs for not following the Dail dress code, he sounded like someone telling off a pupil for not wearing his school uniform. It’s too much of a coincidence that we heard this complaint just before the EC/ECB//IMF troika arrived in Dublin to hand out the exam results to the government. It follows the same pattern of trying to impress those in authority by looking down on others, as David describes. Brian Lenihan tried that too but it wasn’t just Greece that he was looking down on. According to Michael… Read more »
I like David’s ‘school cliques analogy’ but Ireland’s espousal of the Euro was more like a marriage of convenience, entered into with great pomp and ceremony and followed by celebratory feasts that continued for several years. Now the breadwinners are experiencing a seven-year itch and wondering what they saw in us in the first place. Then they remember their pledge to honour and cherish, for richer and for poorer, until death do us part. But instead of presenting them with healthy and prosperous offspring, we have spawned a mountain of debt. Divorce will be messy, repudiating all the ties that… Read more »
Malcolm, if I had to use your analogy then the groom wants a divorce because she can’t pay him back the 100DM he lent her to get elocution lessons and make herself presentable seeing as she has spent it all down the pub and at the hairdresser’s. He’s the breadwinner and a strict Lutheran and he doesn’t want a missus who won’t do whatever the **** he says. Besides, she’s useless at housekeeping and doesn’t even understand the concept of recycling.
David I see you have returned to your lads at the back of the class theme, albeit more nuanced this time. My sympathies lie with those caught between the authoritarian power structure in the person of the teacher at the front of the class and the even stricter hierarchy (and dress code) of the extended family of baboons at the back. Perhaps consideration should be given to arming all pupils? My experience was of England. I spent yesterdau moving house and the old lad with the van (who faced into the mountain of junk with admirable resilience and stoicism) told… Read more »
So now we are going to pay good money for bad toxic loans and then sell good assets – owned by the state – at a deep discount. How will this make us more solvent?
Hi David, just watching VB on media imvolvement in the property boom. No mention of you yet. Anyway, thats history now. What you are saying about good money going after bad is true. But why should we be surprised?
Here’s something else. Competition for renaming Anglo Irish Bank. Any ideas?
Bank of Ireland
Now that this bank is insolvent and nationalised why should it be allowed to carry an Irish Sovereign Name when it is prudent that our Central Bank should be renamed too and aptly to Bank of Ireland just like in all other EU jurisdictions ie Bank of England , Banque du France , Deutsch Bank etc .
Good to see Adamabyss, John Allen are both getting better, if not better. A seventeen yr old of mind caught a bad flu about eight weeks ago, high fever for a few days, but lasted a week. After it, I got a cough and avoider of doctors, let it go on, and on. So the week before last, I capitulated to the wife and brood, went to the doctor, a little concerned it might be cancer, asthma, or bronchial pneumonia, though otherwise I was fine:) It wasn’t any of the above, but was indeed a treatable bronchial condition, that should… Read more »
Re DmcW, “So now we are going to pay good money for bad toxic loans and then sell good assets — owned by the state — at a deep discount. How will this make us more solvent?”
Our partners in Europe apart from the bold Finns along with the ECB/IMF are right this minute working hard to find a solution to this.
We have to keep negotiating with them until they come up with an answer they’ll provide us with in due course>>>Lol
The real cost of maintaining the level of inequality in Ireland is really becomming apparent as each day passes.
Doherty’s 3 million is just the latest in a long line of payments that certain people believe and feel that they are entitled to.
The problem now of course is that your average citizen has been so weighed down with debt that this inequality is no longer affordable.
People are just going to have to wean themselves off of this sense of entitlement. Pretty much as Deco has been caslling it for years.
It has to be a misplaced sense of entitlement, for how else can you explain how the likes of Doherty, Fingers and so on, feel justified in paying themselves such vast amounts of money.
These people have bankrupted the companies that they worked for. How can failure of this magnitude be rewarded in this way?
As a matter of fact, I think that these people should have to pay a heafty fine for the devastation and destruction of wealth that they have caused.
Good Morning. it seems we seem to think we have a some sort of monopoly on certain personality traits. Having worked abroad and had Irish and non Irish bosses and colleagues they shared the same traits as us even if sometimes they were just less fun to be around. They like us promoted people above their level of ability because they were comfortable with them or they knew would not be a threat. As a small nation this comfort effect may be more damaging because the circles are smaller. I worked in banking for a number of years and still… Read more »
Reuters have a thoughtful article today headed “Eurozone may need to rethink anti-crisis strategy” http://uk.reuters.com/article/2011/04/22/uk-eurozone-strategy-idUKTRE73K5GR20110422 It ends: ‘In Germany there is an expression “Augen zu und durch,” which loosely translated means: “Close your eyes, continue down your path and hope for the best.” At some point soon, this approach may no longer be an option.’ Shakespeare, as usual, said it better than anyone: ‘Do not, as some ungracious pastors do, Show me the steep and thorny way to heaven, Whiles, like a puff’d and reckless libertine, Himself the primrose path of dalliance treads And recks not his own rede.’ Micawbers… Read more »
I am sitting here in Terminal 2 in Frankfurt Airport; my flight to Singapore will kick off at 23.50, that’s 22.50 Irish Time. I am travelling alone tonight, so I have time to reflect on a point I made this morning about consequences of ones actions. Things are starting to quieten down here as our flight QF006 is the last scheduled flight out of here tonight. The staff here at the airport are on a “wind down”, chatting, laughing, having coffee. Everything has gone well for them today, no mishaps, no crashes, and no major dramas. I even feel relaxed.… Read more »
A huge number of Americans now believe that capitalist and Christian values are at odds, and that inequality is too extreme in the USA. What does Ireland think? Happy Easter!
Give the Germans and French credit. They learned from the collapse of the Soviet Union. Privatize state assets, make big money, expand the elite, then consolidate wealth into the hands of the top elite. And the best part is that Germany and France can privatize the state assets of other countries. Ooh La La!
Just watch your piss tax and decaux subsidised by the Irish Revenue Tax.
Newspaper Headline :
‘Woman denies biting off testicles’.
Next to this headline was :
‘Ireland was forced by ECB to take bailout, says Lenihan’.
Are they both the same story?
With reference to the role elite private education played in our current debacle, often religious run institutions where a sense of superiority, certainly a sense of being apart or removed from the rest of society is present, it will be interesting to see if old Six-One news covers this story in any depth. Such elitism can only damage a society, especially a country that claims to be a Republic that treats all chidren equally. We know this to be nothing but myth making nonsense, hence the mockery every year with faux commemorations for those who fell fighting for Ireland’s freedom.… Read more »
What do you think of this?
I find it insulting to say the least!
Lenihan pushed legislation through with force, allowing two of the most questionable characters in the country, Healy Rae and Lowry to become the deciding vote on the finance bill, even bribing them with positioons for the family, as we know by now and other stuff.
He had a choice, to tell Rehn to shove it.
Pretending he had no choice is adding insult to injury.
Folks…. take a step back from the rotten theater of finance and politics…. enjoy!
The 4 step plan to leave the Euro. There’s quite a bit of sense there.