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Archive for December, 2010

US Jobs clams (the real news)

Bertie Ahern still cleaning up !

Former taoiseach and Fianna Fáil leader Bertie Ahern has announced he will not run for Dáil Éireann at the next general election.

In a speech to his party cumann in the Dublin Central constituency last night, Mr Ahern, who was 59 last September, said he had made it clear as far back as 2002 that it was always his plan to step down as a TD before he was 60.

The announcement brings an end to a Dáil career that began in 1977 and saw him serve as taoiseach from 1997 to 2008, winning three general elections in succession.

Asked by reporters if he intended to run for the Presidency, he replied: “I don’t know. I honestly haven’t decided that.” Asked if he was ruling out running, he said: “No, not tonight, everyone would love to be in the Áras. Only one person will end up there.”

Asked if he had any regrets, he said: “If I had seen the banking crisis coming. Nobody advised me, no economist, all those people now writing books saying ‘I told you so’ – none of them.”

On Anglo Irish Bank, he said: “I can honestly say that not once did anyone or any delegation that came in to see me ever say, ‘Watch out for Anglo’ . . . I wish they had have.”

Local party members had no knowledge of his intentions as they assembled at their headquarters in St Luke’s, Drumcondra, for what was expected to be a social occasion.

The meeting was held in private but a script for Mr Ahern’s speech was released. “With an election due in the spring and my next birthday in September being my 60th, I want to confirm tonight that I will not be a candidate at the next general election.”

Referring to the “great economic storm” currently under way in Ireland, he warned against excessive pessimism. “Some gains have been lost, but in truth many remain. I dearly wish there was no crisis. I realise that it would have been better if some things had been done differently, but I will not denigrate the good that has been done,” he added.

Taoiseach Brian Cowen said last night that Mr Ahern’s decision “truly marks the end of an era”.

“He is without question the consummate politician of our generation in this country. He is a person of rare ability and extraordinary talent.”

Describing the office of Taoiseach as “the highest and the ultimate civic responsibility”, Mr Ahern said it had been his “great honour” to be entrusted with it for over a decade.

“I am proud of what I have achieved in politics and I am prouder still to have had the privilege to have worked with and for so many fine, patriotic and extraordinary people.

“It is not given to anyone in life who tries and tries again not to sometimes fail. Years of apparently great success then, are apparently tainted by great failures now, but the truth is more complex and in time it will be viewed more dispassionately. The raw emotion of real shock means it is too soon to take stock.”

He said he was proud of the role that he and former British prime minister Tony Blair played in leading the negotiations on the Belfast Agreement “to a successful and a successfully lasting conclusion”.

“Every single day, I thank God that I have lived to see peace fulfilled.”

Paying tribute to his successor, he said: “I especially want to extend my good wishes to our Taoiseach, Brian Cowen, who is a leader of great ability and decency. He has my enduring respect.”

Mr Ahern served as taoiseach from June 26th, 1997, until May 7th, 2008. His resignation was precipitated by the controversy arising out of revelations about his private finances at the Mahon tribunal, which is expected to report early next year.

He was elected the sixth leader of Fianna Fáil in 1994, following the break-up of the Fianna Fáil-Labour coalition headed by Albert Reynolds and Dick Spring.

Mr Ahern will receive an estimated €135,000 as a combined ministerial and TD’s pension. Had he delayed his retirement until after the end of February 2012, his pension would have been significantly less.

Comment:

This man should be on trial for fraud, corruption, and tax evasion, and the total destruction of ordinary people’s lives he and his mafia cronies are still pulling at the leavers of power as his stooges are still running the country!

If we the people of Ireland had any courage we would Storm the Bastille and put the guillotine into use, there are enough other  lackeys that should lose their heads along with him  for the crimes they have helped to commit on the ordinary taxpayers of this country

The sorry fact is that this man and many more will ride off into the sunset with bags of loot under their arms that will keep them living the good life at the expense of the downtrodden taxpayers they have helped to fleece.

If there is any justice this man’s various pensions should be taken from him,and he should be forced to live on the dole for the rest of his life and roam the streets as a homeless man .

Max Keiser last report for 2010

Commoditys heading higher?

Battle Over Chinese Yuan Fuels “Commodity Super Cycle”
Submitted by Gary Dorsch on Wed, 29 Dec 2010

In 2009, China spent $89-billion for imports of crude oil, $50-billion on iron ore, and $30-billion on copper. However, even before the final tally for 2010’s import bill is calculated, Beijing understands that the era of cheap commodities is over, and that if continues to target economic growth of 9% or more, it’ll have to pay a heavy price. Beijing has been backed into a corner, by the US Treasury, and its powerful allies at Japan’s ministry of finance, and must soon decide how to navigate its economy in the year ahead. The threat of hyper-inflation looms on the horizon.

As the final days of 2010 are drawn to a close, the landscape of the commodity and financial markets has been turned upside down from just two-years ago. The price of copper has soared to record heights at $9,400 /ton in London, more than 3-½ times higher than its lowest point hit two years ago. Crude oil has rebounded to $92 /barrel, up from a crash bottom low of $33 /barrel, and cotton has skyrocketed 95% this year to $1.44 /pound in New York, up from 60-cents two-years ago. Overall, the Continuous Commodity Index (CCI) has recouped all of its losses from the post Lehman Brothers’ meltdown, and is climbing to new all-time highs.

Fueling the advance of the resurgent “Commodity Super Cycle,” is booming demand from emerging countries. China and India in particular, are now engaged in the construction of new airports, railways and new cities, activities that demand a lot of steel, and its key ingredients – coking coal, iron-ore, and nickel. China is set to continue to tap international markets for farm commodities in 2011, to replenish reserves that got dangerously run down this year. China’s stocks of corn, sugar and cotton are thought to be below one month’s supply.

On a per capita basis, mainland China and India’s consumption of oil and metals is still only a fraction of those of the more developed countries like the US, Japan and South Korea, suggesting that the potential growth of this emerging commodity demand would be enormous in the years ahead. And if an economic recovery in the G-7 nations takes hold in 2011, it’s possible that severe shortages of key raw materials could materialize, sending commodity indexes higher yet.

china-imports

During the past year, the emotions of equity traders swung between the exhilarating impact of the Federal Reserve’s electronic printing press, and the fear of a possible “double-dip” recession, emanating from the Greek debt crisis, or a sharp slowdown in China’s economy, due to a tighter money policy. But while the Greek debt crisis triggered the May 6th, “Flash” Crash on Wall Street, sparking a 1,000-point intra-day plunge in the Dow Jones Industrials, investors in commodities stayed bullish, and handily beat stocks and bonds by a huge margin in 2010.

While global stocks are still about $11-trillion short of the record $62.6-trillion of market capitalization reached in October 2007, silver has soared 75% higher from a year ago, to its highest level in 30-years. Coffee is up 73%, corn up 48%, wheat up 45%, orange juice up 31%, and soybeans up 30-percent. The cost of unleaded gasoline in New York is up 55-cents a gallon since late August. Yet the upward explosion in commodity prices this year isn’t even on the Fed’s radar screen, since it routinely excludes food and energy from its definition of inflation.

Even as the commodity markets continue climb to new record heights, the Fed aims to pour more fuel into the tank of the “Commodity Super Cycle,” by injecting an extra $450-billion of high octane liquidity into the US-money markets in the first half of 2011. Traders are already betting on QE-3, with a median estimate of $340-billion of additional liquidity. The Bank of Japan, is also injecting an extra $60-billion into the Tokyo money markets, under the guise of its QE-3 scheme, including the purchases of ETF’s linked the Nikkei-225 index, and REIT’s for a new twist, that’ll whet the appetite of Japanese speculators in the world markets.

china-tightens-monetary-policy

Since July, European banks have been expanding their commodities trading desks in Asia as the region’s rapid growth prospects and regulatory changes in Europe and the US pull investors east. While establishing footholds in emerging giants such as China and India, banks are also focused on stuffing their portfolios with grains, precious metals, iron ore, coal, rubber, and crude oil. The Agricultural Bank of China built round-the-clock commodity trading teams in New York and London this year, to further Beijing’s ambition to be a major force on commodity markets.

Soaring commodity prices are celebrated by the Fed, since it removes the threat of a deflationary spiral plaguing the US-economy. However, in China and India, home to one third of the world’s population, the specter of soaring commodity prices is viewed with grief stricken horror. In rural areas where huge throngs of citizens live on wages of less than $2 /day, more than half the household budget is spent on staple commodities, such as corn, rice, palm oil, soybeans, and petrol. Beijing admits that the consumer price index in China is +5.1% higher than a year ago, it’s highest in 28-months, and worries that a 10% inflation rate lies ahead.

On Sept 16th, US Treasury chief Timothy Geithner advised Beijing to allow a “significant and sustained rise in the yuan’s value” against the US-dollar, as an expedient tool to dampen the inflation pressures from soaring commodity prices. “The pace of the yuan’s appreciation has been too slow and the extent of appreciation too limited. We are examining the important question of what mix of tools, those available to the United States and multilateral approaches, might help encourage the Chinese authorities to move more quickly,” Geithner warned.

Three months earlier, on June 19th, the People’s Bank of China (PBoC) said it would allow a more flexible exchange rate for its currency, after it was frozen for two-years against the dollar at 6.82-yuan. Yet the pace of the yuan’s appreciation was very slow, gaining only 1% over three-months. New York Senator Charles Schumer commented “Until there is more specific information about how quickly China will let its currency appreciate and by how much, we can have no good feeling that the Chinese will start playing by the rules,” he warned. Michigan’s Senator Sander Levin added, “We’ll see if China’s action in this immediate period really reflects a very significant change in policy. We follow the yuan every day,” Levin warned.

feds-qe2-scheme

Yet China’s decision to bow to American pressure to un-hinge the dollar /yuan peg, was one of the key sparks, that ignited the latest upward thrust of the “Commodity Super Cycle,” and is now boomeranging on Beijing. But the big blow was dealt by Fed chief Ben “Bubbles” Bernanke, acting at the directive of the US Treasury, on August 28th, when he told the world’s top central bankers, gathered at Jackson Hole, Wyoming, that a second tsunami of QE, would soon be unleashed upon the globe.

In its simplest form, “quantitative easing,” (QE) is nothing more than massive money printing, designed to dilute the value of US-dollars floating in circulation. And since most globally traded commodities are priced in dollars, when the value of the dollar goes down, the prices of commodities and precious metals usually climb higher. China’s trade minister Chen Deming lamented, “Uncontrolled printing of dollars and rising international prices for commodities are causing an imported inflationary shock for China and are a key factor behind increasing uncertainty.”

The US money supply, as measured by MZM, has mushroomed by nearly $500-billion since late April, and is fueling the explosive surge of the “Commodity Super Cycle,” to record heights. Beijing has responded to the surge in commodity prices, by hiking bank reserve requirements to a record 19%, – draining out 2-trillion yuan of liquidity from the Shanghai money markets since October. The PBoC has also guided the Chinese 7-year Treasury-bond yield 1% higher to 3.80% today, to discourage speculation in commodities. But with inflation running ahead at +5.1% or higher, Chinese bond yields are still mired deep in negative territory.

With the Indian central bank reluctant to push its 6.25% repo rate much higher, Beijing has few allies in its battle against soaring commodity markets. Central banks in Brazil and Chile, which could hike their lending rates a half-point higher next year. However, in order for Beijing to get the upper hand over bullish commodity traders, it must allow Chinese Treasury bond yields to climb above the inflation rate, and into positive territory. That’s something Beijing isn’t ready to gamble on.

Therefore, the only viable option left for Beijing that could hold down the cost of key raw materials, is to succumb to pressure from the Fed and US-Treasury, and allow the yuan to climb further against the US-dollar. Right now, Hong Kong based currency dealers expect the yuan to gain roughly 6% next year, hitting 6.25 /dollar in late 2011. Yet allowing the yuan to climb higher also carries huge risks, and the strategy could backfire, if traders view it as a reason to jack-up commodity prices, given China’s increased purchasing power. Beijing would also suffer a huge loss on its massive $805-billion portfolio of US T-bonds. With no good choices for the PBoC to use to thwart the “Commodity Super Cycle,” China’s citizens will have to get used to the new normal, – rapidly escalating inflation.

source http://www.financialsense.com/contributors/gary-dorsch/battle-over-chinese-yuan-fuels-commodity-super-cycle

Snow all gone in Wicklow Town

2010 and the NAMA Fraud

A Review of NAMA in 2010
namawinelake | December 30, 2010 at 3:23 pm | Categories: NAMA | URL: http://wp.me/pNlCf-TR

It was Dr Michael Somers, the former head of the NTMA that highlighted a flaw in the Irish character in his speech at the MacGill Summer School in beautiful Donegal in July this year – the flaw being that we tend to focus on process in this country at the expense of objective. It would be unfair to say that NAMA has not achieved its objectives yet. After all this year was mostly going to have been about establishing the agency, recruiting staff, setting procedures and of course valuing and acquiring the target loans from the financial institutions. With loan acquisition, NAMA missed its target (set out in the draft NAMA Business Plan in October 2009) of transferring the first tranche in December 2009 (actually transferred on 10th May, 2010) and to have completed the transfers of €77bn of loans in July 2010 (€71bn of loans have been transferred to date, though only 60% have been subjected to granular due diligence and valuation).  But overall NAMA has transferred a colossal volume of loans, €27bn of which have been agreed by the EU and with the loan acquisition process being described as “reasonable” by the Comptroller. NAMA has paid banks some €30.2bn of bonds (presumably 5% are subordinated bonds which will only be honoured if NAMA makes a profit) which are exchangeable for cash equivalent and can be made available for lending to the wider economy. Although up-to-date numbers are not available, it is likely that NAMA has spent close to €200m on professional fees in 2010 having conducted massive procurement exercises. The agency has an estimated headcount of 100 at the end of the year. The curious legal case involving Paddy McKillen was comprehensively beaten at the High Court and the betting is that the appeal to the Supreme Court will not be successful for Paddy. The NAMA CEO and Chairman have spread NAMA’s message positively from Belfast to Kerry, from Galway to the committee rooms of the Oireachtas (here and here), from the BBC to RTE (though it was the Economist that gave NAMA the greatest leg-up by saying “In the long run Ireland’s response is the better” in August 2010). And all in all, the agency has avoided scandal during its first 12 months of operation. So as processes go, the acquisition phase of NAMA’s existence can be judged a qualified success.
And the acquisition phase is important to NAMA’s success – the oft-repeated rule for the house flipper – “you make your profit when you buy” – is relevant to NAMA also. But it is the next phase, the management and disposal of assets, that will determine NAMA’s overall success and the early indications are not good. Bear in mind that the first tranche had started to transfer in March 2010 and was completely absorbed by the agency on 10th May, 2010 – that’s nearly eight months ago. Information reaching here suggests that not one of the first 10 business plans has been agreed, that is, signed by both the developer and NAMA. So much for NAMA’s claim that developers need submit plans within 30 days of their loans being acquired and that NAMA would determine in less than three months how to proceed with the borrower. And remember that in this phase NAMA controls practically all of the cards, unless the Construction Industry Federation wakes up to its responsibility in providing a united voice for developers. In the next phase, NAMA will be operating alongside the mighty beast that is “the market”. And whilst markets can be irrational, exuberant and dysfunctional they tend to be objective driven in terms of financial bottom lines. And that may well be the story of 2011 – the process-driven agency versus the objective-driven market. But that will be the subject of another entry.
Meanwhile, I give you yet another end-of-year review of NAMA, more comprehensive than most (if not all) and penned by a blog which focusses on the agency.
NAMA month by month
January 2010 – A quiet month for NAMA with the application for EU approval being submitted just before Christmas 2009, the valuation panel being appointed in December 2009 and loans being valued. Irish Times property pundits suggest that residential property would drop by 10% in 2010 with a pick up in prices in the second half. We’ll get to see how accurate they were when the limited Permanent TSB/ESRI house price series for Quarter 4, 2010 is produced at the end of January 2011.
February – Despite the best efforts of FG’s Senator Eugene Regan, the man from Brussels says “yes” to NAMA with the redacted decision published in April. News from the commercial court that a field in Athlone valued previously at €31m was now worth €600,000 – although far more difficult to index Savills claim later in the year that on average, development land has fallen 75-90% from peak.
March – the first tranche begins to transfer by 31st March (just about  with only €0.37bn of loans from EBS and INBS transferred). We learn that NAMA is to acquire €36bn of loans from Anglo, up €8bn from a few months before and indeed that €36bn may well grow now that NAMA is considering acquiring Anglo’s land and development exposures of €0-5m. The publication of the NAMA Long Term Economic Value regulation tells us that NAMA is prevented from using data produced after 10th January, 2010 when assessing LEV – oh dear. Information continues to leak from NAMA to selected media outlets. Hopes for NAMA developer, the John J Fleming group flounder as a judge characterises its examinership plan for survival as “an aspiration based on hope”. We ended the year with news that John Fleming himself was seeking bankruptcy from his current base in Essex in the UK. The third of three major studies into vacant housing concludes we may have 350,000 of vacant homes, more than 150,000 than we should have. The Ghost Estates review published in October 2010 suggests that there are some 30,000 vacant new homes on certain estates.
April – NAMA at the Oireachtas – we’re all very impressed with Brendan McDonough. Information Commissioner Emily O’Reilly is the latest to demand that NAMA be brought under the umbrella of the Freedom of Information legislation – demands thus far rejected by the Minister for Finance. NAMA issues details of the bonds and subordinated debt it is giving to banks in exchange for loans – the interest rate on the subordinated debt is tied to the rate on the 10-year bond rate (9% as of today) – nasty. Spousal transfers come into focus – not for the first time nor the last. The image of bulldozers reversing the construction boom hoves into view as NAMA confirms that some developments will meet their fate with a JCB. News that Grafton Street rents have fallen by 44% in one year, though they are still falling by 20% per annum. Brian Lenihan tells us that we can now buy homes with confidence with prices being realistic.
May – Tranche 1 completed. NAMA Chairman, Frank Daly forced to clarify comments in a speech to the Association of Compliance Officers – he didn’t mean to suggest NAMA would stop pursuing developers once it had recovered the amount NAMA paid for the loan. It costs €500 a year to maintain the NAMA website – really, that much? NAMA given a €250m recoupable working capital buffer advance which it manages to repay in October. Former IMF bigwig, Steven Seeling, joins the NAMA board.  Developer Simon Kelly tells the Independent that there’s no point in NAMA taking back developers’ cars because they’re a drop in the ocean compared with the amounts owing – and judging by the wheels on show in December’s Prime Time Investigates, NAMA agrees with him. NAMA makes some friends in Belfast.
June – Minister for Finance, Brian Lenihan tells the Oireachtas that despite the decline in values of Irish property since November, 2009 (the NAMA valuation date), the fact that NAMA’s portfolio includes other national markets means the effect of property value changes since November 2009 on NAMA’s loans has been “broadly neutral”. NAMA’s importance to the hotel sector is becoming apparent and indeed it seems that NAMA will have control over some 90 hotels in the State when it is finished with acquiring loans. Paddy McKillen’s Maybourne assets (Claridge’s, the Connaught and the Berkeley hotels in London) come into focus with reports that he is seeking to refinance the group and avoid NAMA – still no update as of today with debt repayment due by the end of December 2010. The IMF urges NAMA to begin disposals sooner rather than later – that was during a routine visit, what’s the IMF position now that they control the bailout? The Sunday Tribune claims NAMA CEO, Brendan McDonagh is on €500,000 a year. The RICS describes NAMA as a “thunderous cloud that overhangs the property market”
July – NAMA publishes its Business Plan – is that it? Dr Michael Somers, former head of the NTMA, attacks NAMA at the MacGill Summer School – NAMA is “bizarre” says Michael. The Mail on Sunday publishes story about NAMA’s Head of Portfolio Management, John Mulcahy, allegedly accepting hospitality on the yacht of the former owner of the Glass Bottle site, Paul Coulson. Paddy Kelly sticks the boot into John at the MacGill Summer School when he reveals that John valued Burlington Plaza at €350m in 2007. Deputy Frank Fahey entertains us all with his grasp of how NAMA bonds operate. NAMA publishes Quarter 1 accounts – loss of €7m. NAMA publishes Codes of Practice. Willie O’Dea suffering fierce stress worried that he might break NAMA’s anti-lobbying rules.
August – EU approves Tranche 1. Tranche 2 complete. Northern Irish Finance and Personnel Minister, Sammy Wilson, gives NAMA a thumbs-up. Top 10 developer, Cosgrave, gets planning permission for 1,500 dwellings in Dun Laoghaire. Suggestion that Dr Peter Bacon has been appointed as an adviser to NAMA, having been one of its conceptual architects. Start of the saga involving Top 20 developer, Paddy Kelly’s BMW 745i, repossessed by ACC, then returned with an apology only to be taken again in December. Sean Dunne, the Bane of Belle Haven, secures planning permission on land bought for €197m an acre in Ballsbridge.
September – NAMA at Cantillon and Galway. NAMA launches €5bn funding  programme which now seems to have been abandoned. Big Bang announcement for the future of Irish banking sees NAMA abandon €5-20m exposures at AIB and BoI (later reversed by the IMF) and NAMA provide estimates of final discounts (67% for Anglo, 60% for AIB yet only 42% for BoI). The massive scope of NAMA’s operations in Northern Ireland is laid out. Both the Credit Review Office and the Irish Small and Medium Sized Enterprises Association report better credit availability. NAMA abandons Tranche 3. More details on the investors in the NAMA Special Purpose Vehicle as we find out that counter staff at AIB have put part of their pensions on the line. Rumours about NAMA’s first British sale with Derek Quinlan’s Mayfair carpark (understood to have stalled but is likely to be sold in 2011). Irish bond rates skyrocket which pushes up the price NAMA pays for loans. Liam Carroll’s Anglo HQ finally secures planning permission.
October – NAMA gets into hot water over developer salaries and seems to clarify that it doesn’t pay more than €200,000 per annum. NAMA’s under-resourcing is criticised by McDonalds chief. NAMA pays just €38m for the €288m loans in respect of the Glass Bottle site. NAMA obtains judgment against Paddy Shovlin and the Fitzpatrick brothers. Ratings agency Fitch say that NAMA may break even because of the deep discounts it is applying to loans. The court case of the year gets underway as Paddy McKillen seeks to have NAMA’s treatment of his loans reviewed. Paddy loses his case comprehensively though he has appealed to the Supreme Court and a decision is expected in January 2011.
November – NAMA at the Committee of Public Accounts. CIF commission report that is nasty to NAMA and NAMA responds in kind.  EU approves Tranche 2. IMF bailout extends NAMA scope to include €0-20m exposures at AIB and BoI. NAMA lawyers up with the appointment of insolvency practitioners. Bernard McNamara’s property empire starts to implode with NAMA appointing receivers to Michael McNamara construction and Radora. Comptroller and Auditor General’s haphazardly produced report on NAMA judges the agency “reasonable” in its loan acquisition phase. Liquidator appointed to the Pierse group. NAMA’s Q2, 2010 accounts produced which show a year to date loss of €1m but should have shown a loss of €600m. NAMA repays €250m advance from the government. NAMA’s most valuable asset, the Battersea Power Station site, gets planning permission.
December – NAMA announces that it has acquired €71.2bn of loans at par value and paid €30.2bn in consideration. The NAMA CEO’s comments about the banks at the Committee of Public Accounts promise to develop legs in the New Year amidst apparent claims by the Committee that it was misled. Blackstone gives us a taste of the sort of characters NAMA will need engage with in 2011 and beyond. The Whelan Group is liquidated but we need wait until early January 2011 to find out what will happen to McInerney.
Performance against objectives (NAMA doesn’t have formal objectives so what follows is subjective)
(1) Facilitating lending – difficult to say because there are a number of factors that affect lending and the needs of the wider economy (demand for lending) is arguably more important than banks’ ability to lend (supply). The Credit Review Office and the Irish Small and Medium Enterprises Association (ISME) both support the proposition that lending conditions for businesses are improving. That said, the economy has suffered a severe contraction, is likely to have stagnated in 2010 and with a prospect of marginal growth in 2011 (0.9-1.75% growth in GDP according to the EU/IMF/government) so demand for credit is subdued. And the outlook might make NAMA irrelevant – if Irish banks have to deleverage by cutting lending by €90bn in the next three years and if deposits continue to flee to perceived safer havens, then NAMA may be of only marginal significance to the factors affecting lending.
(2) Making a profit for taxpayers – too early to say. But NAMA is likely to have made a loss of €1bn+ in the first year which is concealed by NAMA not revaluing its loans (valued by reference to November 2009 and uplifted by an average of 10% for “long term economic value”). The hope must be that conditions improve over NAMA’s lifetime and that NAMA judiciously manages its vast portfolio so that a profit can be returned to the taxpayer. I would have said that it is too early to have an informed opinion on NAMA’s profitability prospects but I would be cautious. As indicated by the NWL index at the top of this page, the markets in which NAMA operates need increase in value by a weighted average of 10% (from 912 to 1000) for NAMA to break even at a gross profit level.
(3) Creating certainty about banks balance sheets – again NAMA has done its job reasonably well with valuing some 60% of the €71bn of loans it has acquired at a granular level and with some 40% of the valuations of the €71bn being approved by the EU. The difficulty is that, even after NAMA has completed its acquisitions (non land and development), banks will still have some €70bn of commercial property loans on their books and another €70bn of non-property commercial lending plus €120bn of personal lending including mortgages. And don’t mention off balancesheet exposures like derivatives. So no, there is not certainty in the banks’ balance sheets but that is not NAMA’s fault. I have some faith in the IMF-mandated exercise to examine non-NAMA loans and off balancesheet exposures in the first quarter of 2011.
(4) Stabilising property/construction sector – a flaw in the NAMA concept and one not apparently considered by Dr Peter Bacon, one of NAMA’s conceptual architects, was that the property market may not be at the bottom or indeed close to it. Property prices in Ireland have continued to decline this year (gradually according to the very limited Permanent TSB/ERI house prices series, more so according to the commercial indices). Looking forward, it is hard to see any recovery in house prices in the short term and despite the brave assertions of the commercial sector, rents are plummeting (20% per annum) and that presages capital values continuing to fall (already 60% off peak values). Yes other markets where NAMA has 33% of its assets show a mixed picture, increases in the UK, Far East and US, falls in Europe, Middle East and some exotic locales like Cape Verde. But in Ireland the picture has been almost universally negative. NAMA has arguably interfered with the natural trajectory of prices and stalled firesales but it has not halted the underlying decline in prices as the country responds to what is a depression.

source http://namawinelake.wordpress.com/author/namawinelake/

comment:

There is no getting away from it NAMA is by  far the worst fraud committed on the Irish people and the perpetrators will have to face the people just like Nicolae Ceausescu had to do when his time was up .No matter how out of touch politicians are with the people at some point the people show who really is master!

Meltdown 2

‘We still have the financial means to save ourselves’

David McWilliams

has posted a new article, ‘We still have the financial means to
save ourselves’

If we separated the banking system’s debt from the rest of the State, we could
borrow easily on international markets

Yesterday, I got into a Dublin taxi and started nattering away about the usual,
the weather, the football and, of course, the state of the kip.

“How was the Christmas?”

“Not bad, considering, less boot work, but. Last […]

You may view the full article and add your own comments at
http://www.davidmcwilliams.ie/2010/12/29/we-still-have-the-financial-means-to-save-ourselves

Comment:

There is nothing more that can be added here as most ordinary people already know of this stuff

What we don’t know is why approxatemely 20% of the population still support is this corrupt Fianna Fail /green government!

Could it be that people still can’t see any difference between the established political parties and their solutions for the economy?

There is nothing coming from the so called opposition that would inspire me to vote for the as their policies are just more of the same i.e. looking after number one and cronies

None of the political conmen waiting to get their hands on power are going to really change anything for the ordinary Joe Soap. They are just inching to spend spend spend more taxpayers money on their pet projects and accumulate their entitlements of huge pensions and perks. They have a vested interest it keeping the corrupt political system intact that puts incompetent people in ministerial jobs and as for accountability ,forget it!

Ireland has a bright future but only if we the people start demanding from the people we entrust to run the country are suitable qualified and are held accountable for everything they do on our behalf !

What Is Wealth?

Sent to me today

 Wealth: it is a social/spiritual thing stupid.

According to the monetary theory of E.C. Riegel the true backing for all wealth is active labour operating in real time.

To Buckminster Fuller wealth is controlled time to freely act comprehensively in tune with synergetic Universe.

The classic definition of wealth is based on value and this value is defined and quantified by ability to exchange. However If you are not interested in “classic” economics, you do not care if the values you seek are exchangeable. Thus a mother’s love is highly valuable, but is not exchangeable and therefore is not in the GDP numbers. Yet try living in a society without such love. To a philosopher the supreme value might be the wisdom of truth. But again such truth may have no economic value if folks do not want it in exchange. But try administering a civilization for millennia without such wisdom and you realize how important it is.

This is the crux of the issue with regard to wealth. By wealth most folk mean stuff that will be exchanged but in actual fact some of the most valuable things in life are “free” i.e. health, freedom, air, sun-light, love, environment, ethical values and the rule of Law.

To incorporate “uneconomic” wealth into our zeitgeist as to what “real” wealth is, western society must start changing its economic consciousness. If the “western tradition” does not modify its manner of money “wealth” accounting the world will continue to be trapped in cycles of recession and depression and war. I believe in the importance of assisting in this task.

Why do we need to redefine our concept of money? Money through overt conditioning has become the only acceptable medium of exchange. Old systems of exchange through barter have fallen by the wayside. Unfortunately today we have boundless resources of wealth due to technology and know-how yet this wealth is not being distributed and used due to “shortages” of “purchasing power” which means: money. It is obvious to anyone who is aware that these shortages are “man-made” for monopoly corporate gain and are the source of great inequality and pain.

What is a possible solution to this conundrum?

The only peaceful solution I see is the promotion of self awareness and personal action and initiative. Folks must realise the media conditioning in operation in society, programming them to consume and compete. Folks must wake up to the fact that quality of life does not emanate from junk consumption. It is paramount that people start to learn then understand then communicate the truth about monopoly economics. Association with like minded networks of people will sustain, nurture and nourish “non-monopolistic” wealth values. These associations succeed because they accentuate the theory Y ideals of human nature and eliminate the theory X aspects, as propounded by Douglas McGregor. Theory Y assumes people are good and loving and initiative based. Theory X assumes people are bad and lazy and unreliable. My experience of life has shown me that the environment in which people operate in is crucial. Values and leadership are of prime importance. If the environment is trusting and loving and nurturing people will grow in like mindedness if not they stagnate and become self-centred, negative and pessimistic.

Thus my answer is to lead rather than to follow. This is what “holistic” or “synergetic” living means. It is a life based on an expanded consciousness of “wealth”. Such a philosophy of life integrates rather than disintegrates. It is about elevating not levelling. It expands rather than contracts. It is about quality rather than quantity. In other words if you allow old fashioned ideas about wealth and money condition your mind you will “think” you are “poor” and do nothing. However if you expand your conscious and give “value” to such things as health, happiness, purpose, meaning etc. you will see that this new “balance sheet” accounts you as being very wealthy indeed. This wealth will give you confidence to act and folks the real world is ALL ABOUT ACTION. However, believe it or not, the most important form of action is CONSCIOUSNESS RAISING. This is why religions place such important emphasis on prayer because prayer is spiritual mentality made consciousness.

Wealth and Riegel Monetary Theory: issue your own credit if you can provide value eventually.

 

In a life spanning over 70 years, one of the greatest students of money, and it’s meaning, was the American E.C. Riegel. In his book “Flight from Inflation”, he identified money as the mathematics of value and argued, that for a democracy to thrive, the money power must be free. He spent his life pointing out that this money power is YOU AND ME. He was amazed that very few knew this life-changing secret.

The freedom of exchange is the foundation of all freedoms, according to Riegel, and the freedom of exchange unencumbered is the truest democratic freedom of mankind. He felt the best way to vote was to vote every day with your actions.

In a free community money is issued by a buyer. Such a money issuer must, in exchange for the goods and services he buys from the market, place other goods or services into the market place. Thus money as a money instrument is evidence of a purchase that is issued by a purchaser to a seller. Therefore, MONEY IS ACTUALLY BACKED BY THE VALUE SURRENDERED BY THE SELLER AND POTENTIALLY BACKED BY THE VALUE IN THE POSSESSION OF THE NEXT SELLER.

Thus, in essence: money is issued by a purchaser, but it must be issued by a purchaser who can, and is, prepared to issue value; it is a tradesman’s agreement to carry on split barter among themselves. From this analysis we can deduce that commercial banks do not “lend” money. They, in fact,

permit the “borrower” to issue money {which everybody should have the personal unencumbered right to do if a free democracy}. Once given “permission”, the borrower now has the “legal” authorization to write cheques to the extent of the loan and tenders them in trade. ONLY UPON THEIR ACCEPTANCE by a seller, who in fact provides value, does new money come into existence.

From this reality of the natural law of money issue, it must be understood, that governments cannot qualify as issuers because they are not in the real situation of personal enterprisers who can provide value.

Thus, in essence, money is a social phenomenon based on mutual respect, co-operation and interest. When this natural contract is broken, through abuse of power, the result is usually inflation. Simply put, inflation is the over issue of money without the required provision of value. Such a situation can be entertained in the short term but in the long term this fraud destroys the social system.

Wealth and the need for Civitas: thinking and acting for the greater good.

Giambattista Vico in his classic book “New Science” pointed out that the greatest achievement of mankind was the growth of civil society out of the terror of barbaric nature. In his view God had created man, but man and man alone had constructed civilization. Thus, for Vico, the greatest investigation man could undertake was to truly understand how this miracle of order and achievement was made manifest through the passage of time.

In the course of his study Giambattista came to comprehend the importance of moral order in the development of societies. This Civitas, or sense of the greater good, formed the bedrock of the social contract that built Alexandria, Sparta, Greece and Rome.

Unfortunately it is all too obvious that this old natural civic sense is dying in modern society and unless we educate our youth about the fragility of society I fear civil order will continue to breakdown. The end result could be an ongoing civil war within “developed” nations that will eventually lead to a new Dark Age of city-states and self-preservation.

In his book “The Evolution of Civilizations” Prof. Carroll Quigley summed up the problem succinctly:

“The third age of conflict of our society began to display the ordinary marks of such a stage about 1890. At that time, in the principal industrial countries, it became clear that the rate of expansion had reversed itself….

All the characteristics of an age of irrationality began to appear on all sides. Increased gambling, increased smoking, the growing use of alcohol and narcotics, a growing obsession with sex and perversions of sex, an increased mania for speed, for nervous tension, and for noise; above all, perhaps, a growing tendency to regard violence as a solution for all problems, be they domestic, social, economic, ideological or international. In fact, violence as a symbol of our growing irrationality has had an increasing role in activity for its own sake, when no possible justification could be made that the activity was seeking to solve a problem.

All the characteristics of any age of conflict are too obvious to require further comment. They arose because the organizational patterns of our culture CEASED TO FUNCTION AS INSTRUMENTS……..Religious organizations no longer linked men to God but adopted diverse mundane purposes. Our intellectual theories no longer explained anything or made us at home in the Universe. Our social patterns no longer satisfied our gregarious needs, even when we fled from the lonely anonymity of the city to the rat-race uniformity of sub-urbanism. Our political organizations increased the burden of their demands on our time, energy and wealth but provided with growing ineffectiveness the justice, public order, education, protection, or incidental amenities we had come to expect from them. And on the military level costs rose at an astronomical rate without being able to catch up with our increased danger.”

Thus, the culture of the west needs to reconnect with its roots. Philosophy, learning, investigation, discipline, self-sacrifice, future orientation all these attributes need to be focused upon and nurtured for our youth. Sport, lotteries, quiz games, celebrity, reality shows, crime, are all very well but if they become the essential core of modern mentality then it bodes a society tending towards narrow self interest and terminal decline. We need to start believing in meaning again and the place to start is to believe in yourself and the power of a human life.

 

Social wealth and the growing open-source movement: giving so that you may receive.

The essence of the myth of the Western tradition is the ideal of an independent life lived in liberty and dignity through family and community. This liberty and independence promotes enterprise and action. Such a myth engendered the human initiative which gave birth to such epoch-changing developments as paper money, financial credit, steam power, the combustion engine, steel hull shipping, electricity, wireless communication, television, air flight, nuclear power, the micro chip and the Internet.

The Western tradition is hopeful, future oriented, ordered and based on action, reflection and compromise. In the event of “either /or” the West will opt for both, if possible. Its successful evolution is based on an ever evolving dialectic, never totally true, but always moving toward a more comprehensive understanding of truth. In this manner the natural outlook of the West is not just material or spiritual. It is a synthesis of both: – the body and the soul matter equally.

One of the great mysteries of Western civilization, currently centred in Washington, and which now dominates the World, is the fact that the West has re-invented itself three times. This rebirth came about through the process of circumvention and reform of old inefficient institutions and mind-sets. This process of rebirth resulted in new dynamic engines of growth being designed, developed and applied. The dates the three phases of Western expansion as follows:

            1.          970 – 1270

            2.        1420 – 1650

            3          1730 – 1929

In each case the instruments of expansion were respectively:

            1.        Feudalism

            2.        Commercial Capitalism

            3.        The Industrial Revolution

If the West is to transcend our age of conflict and enter a new age of expansion the only way forward is through human initiative, enterprise and action. The open-source movement, which is an effort to circumvent a failed economic model based on “price”, is just such an epoch changing initiative. But this creativity will only blossom in an environment of true liberty and dignified freedom. Repression, on the other hand, would stifle any such initiative and would spell the end of Western society. Hopes could be dashed. Civil conflict could ensue. The current post-socialist model called “pluralism” does not appear to have at its disposal a new instrument of expansion. Its guiding philosophy seems to be one of atrophy. The modus operandi of contemporary political power evidences a group of “vested interests” holding on to money rather than motivating and organizing the creation of new wealth.

Reformation and change can come about through outright reform or circumvention and this latter method I believe is beginning to operate and should be fostered by enlightened leadership. This is a solution in which everybody can play a part.

In essence, co-operative action is circumventing frustration. Eventually this movement, if fostered, will give the current atrophied structure much needed time and options. And options are crucial. Circumvention will work, but it must be understood by power groups that it is essential and thus should not be destroyed. Such insight is what is imperative from our political masters today. This circumvention must redevelop energy systems, monetary theory, financial practice, political structure, media distribution, excellence in education, etc. At the end of the day, however, the goal has to be the conceptualization, development and application of a new instrument of wealth creation and distribution. Open-source initiatives have the potential to do this particularly with the continued growth of broadband systems.  

The open-source movement has shown how difficult, complex problems can be solved in community, outside the control of official economic “price” doctrine. The rules are being rewritten and can be interpreted by those who understand what is happening. The explosion of the Internet is but one example of this developing paradigm in successful operation. Through liberty positive change could come about and this may lead the West toward a fourth period of expansion resulting in a new phase of development for the world.

Conclusion:

Wealth is a social possession not a purely private one. Learn. Understand. Communicate.

Your consciousness, beliefs, actions and functioning social networks create true wealth. Monopolistic accounting rules conditions you to think yourself into actual poverty.

Money is a medium of exchange. It is not “valuable” unless it is believed in (i. e. possessing “credere”). Monopolistic banking manipulates the medium of exchange and grants those in control unacceptable benefits through inside knowledge of timing of planned expansions and contractions of this medium.

A sound and stable society needs a stable “steady  state” money supply. Achieving this state of balance should be a prime objective of government. This goal can be brought about through full reserve banking. Thus fractal reserve banking should be abolished.

There is a social revolution taking place in America. It is changing the face of economics as we know it. It is currently called the open source movement(OPM).  The most powerful thing anybody possesses is the ability to act. Action begets results. People believe what they see. OPM is changing the word. It is challenging Microsoft (Linux). It is depth charging monopoly journalism (Wikileaks). It is transforming learning (Wikipedia). It is reinventing barter (Facebook Swap Groups). This is only the beginning. Monopolistic wealth is dying. It is dying because it is killing the society that nurtured it in good faith. Social wealth is being reborn. Those societies that nurture this wealth will thrive and transcend. Communistic and monopoly capitalistic systems that fail to transform are doomed to go the way of East Berlin when it tried to stop change through a wall. However walls cannot contain spirit and they will not constrain the inevitable continued development of the western tradition which is now on the cusp of its forth period of expansion.

 

 

Will the IMF bailout help Ireland recover from the debt crisis?

By Arthur-Paul Strigini 
 December
 How will the Irish economy recover from the debt crisis? Will the bailout plan work? And will the Irish economy bounce back quickly? How will the Irish people be affected by this situation? These are some of the questions one can ask after the events of the last few weeks. 

From 1995 to 2007, Ireland saw its economy grow substantially and was known as the “Celtic Tiger”. As Irish people tend to own their houses from a relatively young age, banks easily gave out cheap loans on houses and construction projects without asking many guarantees. House prices were continually rising and eventually in 2008, like in the United States, caused the housing price bubble to burst. In the wake of the ensuing crisis, the Irish government decided to bail out its banks, recapitalizing or nationalizing most in the process. The government guaranteed savings, checking accounts and bonds that they sold to investors on behalf of Irish banks that attracted foreign investment for a while, but as the situation worsened in other countries, this money inflow soon disappeared. At the same time, the government’s injection of money was not sufficient to re-launch the economy, and the country high budget deficit no longer permitted it to cover the banks’ liabilities.

In May 2010, as Greece accepted the International Monetary Fund’s bailout terms, Ireland’s prime minister stated that his country’s economy was not like that of Greece and didn’t need help. As described by Robert M. Dunn in his book “International Economics”, Countries are generally reluctant to ask for the IMF’s help as it imposes drastic measures that render it hard to “manage economic and financial affairs”. Even though the IMF ensures investors to see their money again, its intervention stigmatizes the government; its ability to maintain a stable economy is questioned, and is often seen as a political embarrassment. When budget deficits are maintained for long periods of time, and trade deficit widens, the constant depletion of foreign exchange reserves will bring the economy to a halt, to the point where the government will have to wait until it receives money from its exports to pay its bills.

Today, numerous European countries are owed important quantities of money by Irish banks. For example, as Simon Johnson, a former chief of the IMF and author of “13 banks”, has declared: “German banks are owed $139 billion (4.2 % of German GDP), British banks are owed $131 billion, (~5 % of Great Britain’s GDP), and the French ones are owed $43.5 billion, (~2 % of French GDP). 

It is clearly not in their interest for Irish banks to fail, as it is then more likely that given the present state of its finances, the Irish government would not be in a position to cover their debt. As the situation deteriorated, it was only a matter of months before the more important Euro zone countries would pressure Ireland into seeking their help and that of the IMF. 

At first, Ireland would not give in, but on Sunday November 28th 2010, a €85 billion package was imposed with the obligation for the government, like in Greece, to put in place an austerity plan with constraining fiscal policy to compliment the bailout. It consists of cutting Ireland’s social welfare budget by 15% in an effort to save 4 billion a year and widening the source of tax, to make money from low-income workers who pay no tax and public pensioners. As stated by Paul Mason, the economics editor for BBC’s Newsnight “each Irish family will pay an extra €3000 in tax.” In the process, 25,000 public sector jobs will be terminated, and the nation’s hourly minimum wage will be cut by 1 euro (-13%). Finally, the government spending on healthcare will be cut considerably. All will be done in the hope of stimulating job creation and reducing budget deficit from 32 to 3% of GDP within the next 4 years.

France and Germany also asked Ireland to increase its corporate tax, as did the EU Economic and Monetary Affairs Committee who wish to enforce a standard of 25% for all Euro zone members to level competition. But the Irish government resisted this, as this measure has allowed the country to attract foreign investment and create jobs and as David McKittrick reported in the Belfast Telegraph: It “is to remain unchanged at 12.5 %, Dublin having argued that it was one of the engines of its one-time prosperity and could be so again”.

Since the inception of the Euro currency on the 1st of January 1999, Euro zone advocates had highlighted its advantages, particularly the fact that it had eliminated exchange rates between the 16 countries, thus facilitating trade between them. However, with the debt crisis, we can see that the very ties implemented by the single currency which were bragged about during periods of growth, have facilitated the contagion throughout the Euro zone. As a result of the record high Irish debt combined with the depletion of their foreign exchange reserves, the Euro has depreciated substantially in the last few weeks (close to 8%), even though it only forms two or so percent of the Euro zone’s GDP. 

Investment confidence has vanished and speculators are now turning their attention to Portugal and Spain. In that context, European political leaders are trying to reassure investors, and Dominique Strauss-Kahn, the leader of the IMF, has stated that “the Irish economy will come back on track rather rapidly”.

But the reality is that investors are still skeptical, and in my opinion, rightly so as the margin for manoeuvre of the Irish government is limited. Yes they are introducing an austerity plan, and the IMF bailed them out, but there is little hope for the Irish economy to undergo a growth of 2.75% within the next 4 years as announced. Indeed, the single currency hinders Ireland’s ability to conduct an export-led growth whereby it cannot devalue its currency to increase net exports. For Paul Mason, “it is dependent on a more general recovery across the Euro zone and/or successfully competing for high value inward investment by, for example, speculative finance industries or high tech, high value global operations.”

Besides, there is continuous pressure from other countries to increase their corporate tax. This, if it were to be implemented would have a catastrophic impact on the recovery, as it would tremendously reduce foreign investments. At the end of the day, it seems to me that, no matter what they do, the Irish government cannot control their own destiny and very much depend on what will happen in the Euro zone and particularly in Iberia: only time will tell

source http://www.themetropolitain.ca/articles/view/933

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