Posted: Mon Nov 08, 2010 2:16 pm Post subject: Audio: The Irish & Europe in Revolt
"As ordinary Irish people start to realise that this thing is not only
happening, it is happening to them, we can see anxiety giving way
to the first upwellings of an inchoate rage and despair that will
transform Irish politics along the lines of the Tea Party in America."
Scroll slider to 12mins 40 seconds to see David McWilliams
preview the Kilkenomics festival and assert that crippling debt
repayments are a bailout for the Elite and French and German banks.
The populist Tea Party revolt is not confined to the USA.
Ireland is on the verge of an election which will unseat
vested interests and may spawn a revolution in economics.
The Irish have seen the same litany of corruption as Americans.
The same kind of banker cartels; same type of bailouts; same
underwater mortgages problem; same abandonment of Main St;
same grossly-overpaid public servants; and the same incompetent,
crooked political class.
They've just about had enough.
And the situation is worsening.
Against that backdrop, comes a brilliant inspiration for a 'Tea Party'
event combining boring economics with some side-splitting comedy.
The four day festival features a score of independent Irish and
international economics experts coming together to question the
NWO banks/central bank paradigm and explore solutions to our
global problems which favor people before NWO cartel banks.
The headline speakers include Peter Schiff and Bill Black,
well known critics of neo-liberal economics and the Fed in the USA.
This event is the opening salvo in a people's battle.
The next three months are going to see sparks fly.
Kilkenomics is an Economics festival which will run in
Kilkenny City, Ireland on November 11th - 14th 2010.
Twenty-four events, five venues, views from four continents,
thousands of questions, hundreds of answers, one weekend.
If you’re like us you’re finding all economics complicated and frightening in equal measure right now. What if we were to put some world class economic thinkers together with some of the best comic analytical minds available and see if they can’t make all this easier to understand in a way that is entertaining, informative and funny?
Money is serious. Comedy is funny.
This could be seriously funny. And seriously useful too.
Maybe there’s a way of looking at all this, a way which acknowledges how absurd where we are now is and looks for a way out with insight, humour and originality rather than depressing analysis of how we’re all going to hell in a hand basket. Our comedians, Colin Murphy, Karl Spain, Fred MacAulay, Des Bishop, Neil Delamere and Barry Murphy have all shown an ability to deal with the dark side of life without depressing their audience. Our economists are world class, all offering a unique take on what just happened, what will happen and what needs to happen next. Maybe if we put them together we’ll come away with a unique perspective and understanding of where we are, how we got here and were we need to go next. And we might actually enjoy ourselves getting there.
Find out how one of America’s most successful investors – Peter Schiff – got everything right, from sub-prime to banks, from the dollar to gold and made a fortune in the process. Meet Bill Black, whose mastery of banking fraud and white collar crime has defined a generation; or listen to the astonishing clarity and razor-sharp insights of best-selling author, John Lanchester. Discover why brilliant economist Ha-Joon Chang believes that the washing machine has changed our lives more than the Internet and why globalisation isn’t making the world richer.
Ireland will try to win support this week from the European Union to avoid a Greek-style bailout as investors balk at buying the country’s bonds.
EU Economic and Monetary Affairs Commissioner Olli Rehn arrives in Dublin today for a two-day visit after the government laid out a plan last week to cut spending and raise taxes by as much as 6 billion euros ($8.4 billion) in 2011.
While Ireland has the funds to avert the need for an immediate rescue, its cash may run out in the middle of next year unless it can raise money from the bond market in 2011..... Link
If you thought the bank bailout was bad,
wait until the mortgage defaults hit home
The Irish Times - Monday, November 8, 2010
THE BIG PICTURE: Ireland is effectively insolvent – the next crisis will be mass home mortgage default, writes MORGAN KELLY
WHEN I wrote in The Irish Times last May showing how the bank guarantee would lead to national insolvency, I did not expect the financial collapse to be anywhere near as swift or as deep as has now occurred. During September, the Irish Republic quietly ceased to exist as an autonomous fiscal entity, and became a ward of the European Central Bank.
It is a testament to the cool and resolute handling of the crisis over the last six months by the Government and Central Bank that markets now put Irish sovereign debt in the same risk group as Ukraine and Pakistan, two notches above the junk level of Argentina, Greece and Venezuela.
September marked Ireland’s point of no return in the banking crisis. During that month, €55 billion of bank bonds (held mainly by UK, German, and French banks) matured and were repaid, mostly by borrowing from the European Central Bank.
Until September, Ireland had the legal option of terminating the bank guarantee on the grounds that three of the guaranteed banks had withheld material information about their solvency, in direct breach of the 1971 Central Bank Act. The way would then have been open to pass legislation along the lines of the UK’s Bank Resolution Regime, to turn the roughly €75 billion of outstanding bank debt into shares in those banks, and so end the banking crisis at a stroke.
With the €55 billion repaid, the possibility of resolving the bank crisis by sharing costs with the bondholders is now water under the bridge. Instead of the unpleasant showdown with the European Central Bank that a bank resolution would have entailed, everyone is a winner. Or everyone who matters, at least.
The German and French banks whose solvency is the overriding concern of the ECB get their money back. Senior Irish policymakers get to roll over and have their tummies tickled by their European overlords and be told what good sports they have been. And best of all, apart from some token departures of executives too old and rich to care less, the senior management of the banks that caused this crisis continue to enjoy their richly earned rewards. The only difficulty is that the Government’s open-ended commitment to cover the bank losses far exceeds the fiscal capacity of the Irish State.......
This €70 billion bill for the banks dwarfs the €15 billion in spending cuts now agonised over, and reduces the necessary cuts in Government spending to an exercise in futility. What is the point of rearranging the spending deckchairs, when the iceberg of bank losses is going to sink us anyway?
What is driving our bond yields to record levels is not the Government deficit, but the bank bailout. Without the banks, our national debt could be stabilised in four years at a level not much worse than where France, with its triple A rating in the bond markets, is now.
As a taxpayer, what does a bailout bill of €70 billion mean? It means that every cent of income tax that you pay for the next two to three years will go to repay Anglo’s losses, every cent for the following two years will go on AIB, and every cent for the next year and a half on the others. In other words, the Irish State is insolvent: its liabilities far exceed any realistic means of repaying them.
For a country or company, insolvency is the equivalent of death for a person, and is usually swiftly followed by the legal process of bankruptcy, the equivalent of a funeral.
Two things have delayed Ireland’s funeral. First, in anticipation of being booted out of bond markets, the Government built up a large pile of cash a few months ago, so that it can keep going until the New Year before it runs out of money. Although insolvent, Ireland is still liquid, for now.
Secondly, not wanting another Greek-style mess, the ECB has intervened to fund the Irish banks. Not only have Irish banks had to repay their maturing bonds, but they have been haemorrhaging funds in the inter-bank market, and the ECB has quietly stepped in with emergency funding to keep them going until it can make up its mind what to do.
Since September, a permanent team of ECB “observers” has taken up residence in the Department of Finance. Although of many nationalities, they are known there, dismayingly but inevitably, as “The Germans”. So, thanks to the discreet intervention of the ECB, the first stage of the crisis has closed with a whimper rather than a bang......
The next act of the crisis will rehearse the same themes of bad loans and foreign debt, only this time as tragedy rather than farce. This time the bad loans will be mortgages, and the foreign creditor who cannot be repaid is the ECB. In consequence, the second act promises to be a good deal more traumatic than the first.
Where the first round of the banking crisis centred on a few dozen large developers, [b]the next round will involve hundreds of thousands of families with mortgages. Between negotiated repayment reductions and defaults, at least 100,000 mortgages (one in eight) are already under water, and things have barely started.
Banks have been relying on two dams to block the torrent of defaults – house prices and social stigma – but both have started to crumble alarmingly.
People are going to extraordinary lengths – not paying other bills and borrowing heavily from their parents – to meet mortgage repayments, both out of fear of losing their homes and to avoid the stigma of admitting that they are broke. In a society like ours, where a person’s moral worth is judged – by themselves as much as by others – by the car they drive and the house they own, the idea of admitting that you cannot afford your mortgage is unspeakably shameful.
That will change. The perception growing among borrowers is that while they played by the rules, the banks certainly did not, cynically persuading them into mortgages that they had no hope of affording. Facing a choice between obligations to the banks and to their families – mortgage or food – growing numbers are choosing the latter.
In the last year, America has seen a rising number of “strategic defaults”. People choose to stop repaying their mortgages, realising they can live rent-free in their house for several years before eviction, and then rent a better house for less than the interest on their current mortgage. The prospect of being sued by banks is not credible – the State of Florida allows banks full recourse to the assets of delinquent borrowers just like here, but it has the highest default rate in the US – because there is no point pursuing someone who has no assets.
If one family defaults on its mortgage, they are pariahs: if 200,000 default they are a powerful political constituency. There is no shame in admitting that you too were mauled by the Celtic Tiger after being conned into taking out an unaffordable mortgage, when everyone around you is admitting the same.
The gathering mortgage crisis puts Ireland on the cusp of a social conflict on the scale of the Land War, but with one crucial difference. Whereas the Land War faced tenant farmers against a relative handful of mostly foreign landlords, the looming Mortgage War will pit recent house buyers against the majority of families who feel they worked hard and made sacrifices to pay off their mortgages, or else decided not to buy during the bubble, and who think those with mortgages should be made to pay them off. Any relief to struggling mortgage-holders will come not out of bank profits – there is no longer any such thing – but from the pockets of other taxpayers.
The other crumbling dam against mass mortgage default is house prices. House prices are driven by the size of mortgages that banks give out. That is why, even though Irish banks face long-run funding costs of at least 8 per cent (if they could find anyone to lend to them), they are still giving out mortgages at 5 per cent, to maintain an artificial floor on house prices. Without this trickle of new mortgages, prices would collapse and mass defaults ensue.
However, once Irish banks pass under direct ECB control next year, they will be forced to stop lending in order to shrink their balance sheets back to a level that can be funded from customer deposits. With no new mortgage lending, the housing market will be driven by cash transactions, and prices will collapse accordingly.
While the current priority of Irish banks is to conceal their mortgage losses, which requires them to go easy on borrowers, their new priority will be to get the ECB’s money back by whatever means necessary. The resulting wave of foreclosures will cause prices to collapse further.
Along with mass mortgage defaults, sorting out our bill with the ECB will define the second stage of the banking crisis. For now it is easier for the ECB to drip feed funding to the Irish State and banks rather than admit publicly that we are bankrupt, and trigger a crisis that could engulf other euro-zone states. Our economy is tiny, and it is easiest, for now, to kick the can up the road and see how things work out.
By next year Ireland will have run out of cash, and the terms of a formal bailout will have to be agreed. Our bill will be totted up and presented to us, along with terms for repayment. On these terms hangs our future as a nation. We can only hope that, in return for being such good sports about the whole bondholder business and repaying European banks whose idea of a sound investment was lending billions to Gleeson, Fitzpatrick and Fingleton, the Government can negotiate a low rate of interest.
With a sufficiently low interest rate on what we owe to Europe, a combination of economic growth and inflation will eventually erode away the debt, just as it did in the 1980s: we get to survive.
How low is sufficiently low? Economists have a simple rule to calculate this. If the interest rate on a country’s debt is lower than the sum of its growth rate and inflation rate, the ratio of debt to national income will shrink through time. After a massive credit bubble and with a shaky international economy, our growth prospects for the next decade are poor, and prices are likely to be static or falling. An interest rate beyond 2 per cent is likely to sink us.
This means that if we are forced to repay the ECB at the 5 per cent interest rate imposed on Greece, our debt will rise faster than our means of servicing it, and we will inevitably face a State bankruptcy that will destroy what few shreds of our international reputation still remain.
Why would the ECB impose such a punitive interest rate on us? The answer is that we are too small to matter: the ECB’s real concerns lie with Spain and Italy. Making an example of Ireland is an easy way to show that bailouts are not a soft option, and so frighten them into keeping their deficits under control.
Given the risk of national bankruptcy it entailed, what led the Government into this abject and unconditional surrender to the bank bondholders? I have been told that the Government’s reasoning runs as follows: “Europe will bail us out, just like they bailed out the Greeks. And does anyone expect the Greeks to repay?”
The fallacy of this reasoning is obvious. Despite a decade of Anglo-Fáil rule, with its mantra that there are no such things as duties, only entitlements, few Irish institutions have collapsed to the third-world levels of their Greek counterparts, least of all our tax system.
And unlike the Greeks, we lacked the tact and common sense to keep our grubby dealing to ourselves. Europeans had to endure a decade of Irish politicians strutting around and telling them how they needed to emulate our crony capitalism if they wanted to be as rich as we are. As far as other Europeans are concerned, the Irish Government is aiming to add injury to insult by getting their taxpayers to help the “Richest Nation in Europe” continue to enjoy its lavish lifestyle.
My stating the simple fact that the Government has driven Ireland over the brink of insolvency should not be taken as a tacit endorsement of the Opposition. The stark lesson of the last 30 years is that, while Fianna Fáil’s record of economic management has been decidedly mixed, that of the various Fine Gael coalitions has been uniformly dismal.
As ordinary people start to realise that this thing is not only happening, it is happening to them, we can see anxiety giving way to the first upwellings of an inchoate rage and despair that will transform Irish politics along the lines of the Tea Party in America. Within five years, both Civil War parties are likely to have been brushed aside by a hard right, anti-Europe, anti-Traveller party that, inconceivable as it now seems, will leave us nostalgic for the, usually, harmless buffoonery of Biffo, Inda, and their chums.
You have read enough articles by economists by now to know that it is customary at this stage for me to propose, in 30 words or fewer, a simple policy that will solve all our problems. Unfortunately, this is where I have to hold up my hands and confess that I have no solutions, simple or otherwise.
Ireland faced a painful choice between imposing a resolution on banks that were too big to save or becoming insolvent, and, for whatever reason, chose the latter. Sovereign nations get to make policy choices, and we are no longer a sovereign nation in any meaningful sense of that term.
From here on, for better or worse, we can only rely on the kindness of strangers.
Morgan Kelly is Professor of Economics at University College Dublin
Martin Wolf of the Financial Times says he is `probably the world's most effective critic of globalisation'.
Chang takes on the free-marketers' dogmas and proposes ideas like - there is no such thing as a free market; the washing machine has changed the world more than the internet has; we do not live in a post-industrial age; globalisation isn't making the world richer; governments can pick winners; some rules are good for business; US (and British) CEOs are overpaid; more education does not make a country richer; and equality of opportunity, on its own, is unfair.
He notes that the USA does not have the world's highest living standard. Norway, Luxemburg, Switzerland, Denmark, Iceland, Ireland, Sweden and the USA, in that order, had the highest incomes per head. On income per hours worked, the USA comes eighth, after Luxemburg, Norway, France, Ireland, Belgium, Austria and the Netherlands. Japan, Switzerland, Singapore, Finland and Sweden have the highest industrial output per person.
Free-market politicians, economists and media have pushed policies of de-regulation and pursuit of short-term profits, causing less growth, more inequality, more job insecurity and more frequent crises. Britain's growth rate in income per person per year was 2.4 per cent in the 1960s-70s and 1.7 per cent 1990-2009. Rich countries grew by 3 per cent in the 1960s-70s and 1.4 per cent 1980-2009. Developing countries grew by 3 per cent in the 1960s-70s and 2.6 per cent 1980-2009. Latin America grew by 3.1 per cent in the 1960s-70s and 1.1 per cent 1980-2009, and Sub-Saharan Africa by 1.6 per cent in the 1960s-70s and 0.2 per cent 1990-2009. The world economy grew by 3.2 per cent in the 1960s-70s and 1.4 per cent 1990-2009.
So, across the world, countries did far better before Thatcher and Reagan's `free-market revolution'. Making the rich richer made the rest of us poorer, cutting economies' growth rates, and investment as a share of national output, in all the G7 countries.
Chang shows how free trade is not the way to grow and points out that the USA was the world's most protectionist country during its phase of ascendancy, from the 1830s to the 1940s, and that Britain was one of world's the most protectionist countries during its rise, from the 1720s to the 1850s.
He shows how immigration controls keep First World wages up; they determine wages more than any other factor. Weakening those controls, as the EU demands, lowers wages.
He challenges the conventional wisdom that we must cut spending to cut the deficit. Instead, we need controls capital, on mergers and acquisitions, and on financial products. We need the welfare state, industrial policy, and huge investment in industry, infrastructure, worker training and R&D.
As Chang points out, "Even though financial investments can drive growth for a while, such growth cannot be sustained, as those investments have to be ultimately backed up by viable long-term investments in real sector activities, as so vividly shown by the 2008 financial crisis."
This book is a commonsense, evidence-based approach to economic life, which we should urge all our friends and colleagues to read.
_________________ Minds are like parachutes.
They only function when open.
The Irish banks are playing similar games with house prices as
their counterparts in the USA (via Fan/Fred/HAMP/Fed-MBS/etc.).
This game: prevent houses crashing to their real value!
How? Like this: from the article above....
The other crumbling dam against mass mortgage default is house prices.
House prices are driven by the size of mortgages that banks give out.
That is why, even though Irish banks face long-run funding costs of at least
8 per cent (if they could find anyone to lend to them), they are still giving
out mortgages at 5 per cent, to maintain an artificial floor on house prices.
Without this trickle of new mortgages, prices would collapse and mass
So if they are borrowing at 8% and lending at 5%,
doesn't that mean every mortgage they write is
a loss-making millstone round their necks which
will destroy their balance sheets in the long term?
Yes. But what long term is that?
There is only now. Only short term. Only survival.
The 'free' market is soooooo f&%ked. _________________ Minds are like parachutes.
They only function when open.
Student protests turn violent as Tory headquarters evacuated
A student protest against rising tuition fees has turned violent with demonstrators forcing their way into a building and smashing windows as they approached Parliament.
A group barged into the lobby of Millbank Tower (the HQ of New Labour, remember?), near the headquarters of the Tory party, before being forced out by police and security officers. They then began setting fire to placards outside the entrance.
Windows in the office block were smashed and a number of smoke bombs thrown. Dozens of police surrounding the entrance were pelted with water bottles and jostled by the passing protestors.
Up to 50,000 people, many waving placards, are marching though the streets of London in the biggest show of opposition to the Coalition Government.
Richard Cook and David McWilliams
launch a new currency - The Marble -
Festival on the money as Cats
laugh in face of recession
By Eimear Ni Bhraonain - Wednesday November 10 2010
Forget the Euro -- let's all use Marbles instead! It's going to be the strongest European currency this weekend . . . well, in Kilkenny, the Marble City at any rate.
The 'Marble' money was launched yesterday ahead of the Kilkenomics Festival in the city, which merges the unlikely bedfellows of economics and comedy. So while doom and gloom may be all the rage, now it's time to have a good laugh at it all.
Top comedians such as Des Bishop and Karl Spain, along with economic experts from home and abroad, including the former Argentinian economy minister Martin Lousteau and Irish Independent columnist David McWilliams, will entertain and inform at 24 events in venues all over Kilkenny city.
Mr McWilliams showed off the new money after he joined forces with Kilkenny Cat Laughs festival organiser Richard Cooke to organise the four-day event, which starts tomorrow.
"Money is serious. Comedy is funny. This will be seriously useful. And seriously funny, too," organisers say.
For every €20 exchanged at the festival, €22 Marbles will be handed out for use in venues throughout the city. Festivalgoers can exchange any remaining Marbles for euro at the end of the event.......
Mr McWilliams insists there are alternatives to our budget woes. "It's never too late to renegotiate the bank bailout," he said, adding that ordinary people were paying for the mistakes of wealthy people who "gambled" on banks.
"What's happening now and always happens in a crisis in Ireland is the insiders set the policy and outsiders pay the bill. In the '50s we'd a big crisis and 500,000 people were forced to emigrate -- they're the outsiders -- out of sight, out of mind."
Joined: 04 May 2008 Posts: 826 Location: Outer Heaven
Posted: Wed Nov 10, 2010 1:59 pm Post subject:
I did some reading around after seeing that last name "Schiff"....seems like Peter is related to the "good" ol' Jacob Schiff and I don't think Jacob Schiff needs an explanation or introduction. Thats potentially scary. It also looks like Peter's brother works for George Soros.
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