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Archive for the ‘David Mc Williams’ Category

We’re being sold out for cheap economic flattery

David Mc Williams latest posting says it all

By David Mc Williams

When you walk up one of Ireland’s deserted main streets, it is difficult to reconcile the talk of Ireland doing well and being the model for other European countries to follow with the reality of living here. The reality here is that retail sales have collapsed and are not recovering. Anyone dependent on the domestic economy is just about surviving. No credit is being made available to anyone and unemployment is devastatingly high, while emigration continues apace.

That is what is going on in the “Real Ireland”.

Contrast this with the “Invented Ireland”. In the Invented Ireland, we are, supposedly, showing the rest of Europe the way out. We are the poster boys for austerity and the one indicator that the supporters of Invented Ireland obsess about is the bond yield on Irish government debt, which has fallen from 14pc to 8pc in recent months. This is significant but as we are not active in the market because we have been locked out of it, there is not that much value in this figure. However, in the world of Invented Ireland, the economy has “turned the corner”, where the skies are blue and Ireland is the star pupil of the EU. This is despite having the second highest level of unemployment in Europe — but in Invented Ireland unemployment doesn’t matter as long as the figure for GDP is increasing.

full article at source: http://www.davidmcwilliams.ie/2011/10/27/were-being-sold-out-for-cheap-economic-flattery

When will the penny drop?

By David mc Williams

The economies of the eurozone desperately need to start growing again, but the very currency that binds them is also acting as a straitjacket to growth
Do you want to know what bank recapitalisation looks like? I am sitting opposite it right now. It looks like two well-heeled French bank executives, in matching rimless Armani glasses, scanning spreadsheets nervously in the foyer of the swanky Bonnington Hotel in Dubai.

They are here looking for money. They have been sent here from Paris to get cash from the Arabs. This is the human face of the mad grab for cash that is going on all over the Gulf as Europe’s bankers turn to one of the few places in the world with enough money to bail them out. Obviously, the French will hope to have bagged the swag by midweek so that their clubbable chairman can clear his throat and announce solemnly on RTL that the bank is ‘‘well capitalised’’

full article at source: http://www.davidmcwilliams.ie/2011/10/17/when-will-the-penny-drop

Comment:

 

 

 

 

 

I don’t have to go to the foyer of the swanky Bonnington Hotel in Dubai. Unlike David here I simply cannot afford to go to the local pub, for God sakes. David’s description of the
current crises is also nothing new as I too have been calling for a reality check on the euro .Three years ago I said we in Ireland needed to reintroduce the Irish Punt because of the disastrous decision our then incompetent finance minster made with regards the bailing out of the corrupt banks.

The decision to foist the private banking gambling debts on to the taxpayers of this country could only result in us having to carry enormous austerity measures that are now crippling the economy was a dead certainty. Having gone down that road we needed to balance the effect of these austerity measures by devaluing our currency in order to attract foreign investors .Because we are part of the euro we cannot devalue and whilst our economy is contracting the imposed austerity measures are choking off the lifeblood of the economy .Three and a half years later we are no further ahead in fact we are  worse off .Our national pension reserves have disappeared down a black hole in the toxic banks .We have double the debts of Greece and its only a matter of time when this fact will cause the inevitable DEFAULT of Ireland.

Welcome to the economic stagnation, 21st-century style

David Mc.Williams has a new post I think is a very interesting article.

The other night, in Cork, I was chatting to a woman from Mayfield. Let’s call her May. She works in a clothes shop on Patrick Street, Cork’s main shopping street. Last Sunday, she worked all day on this prime retail thoroughfare, and guess how much she took in the till during the whole day? Well, a shop like this should be – andwas in the recent past – taking about €1,800-€2,000 on Sundays, around €6,000 on Saturdays and anywhere between €1,200 and €1,500 on weekdays. Last Sunday,May took in €60 for the entire day!

Although this example might be a tad extreme, the reality for retailers all over Ireland is one of collapsing demand. Strolling down Patrick Street last Friday morning, it was clear that everyone was struggling.Every shop I counted, from the top of Washington Street to the English market, had either ‘for sale’or ‘massive discounts’ signs on the window.This is what happens when the economy slumps.

read full article at source: http://www.davidmcwilliams.ie/2011/10/03/welcome-to-the-economic-stagnation-21st-century-style?utm_source=WebsiteSubscribers&utm_campaign=4f509ad54c-Weekly_Roundup_10_August_2011&utm_medium=email

Till French debt do us part

By David Mc Williams

Over the past few weeks, one of the most perplexing positions taken by many of Ireland’s so-called ‘sensible’ commentators is that the euro is not workable in its present form, but that breaking from it would be inconceivable.

But where does that conundrum leave us? It means we are in a currency union which is tearing itself apart from the inside, yet is apparently unfixable. But this is plain silly. If the thing is broken, fix it; if it is unfixable, break it up and start afresh. The problem is that no one wants to pay the price of fixing the euro. No one except the ‘serial integrationists’ in the elites of Europe wants closer political or fiscal integration. Integration’s popular rejectionwas evidenced by the past three failed referendums here, in Holland and in France. So Europe is stuck.

full article at source: http://www.davidmcwilliams.ie/2011/09/26/till-french-debt-do-us-part?utm_source=Website+Subscribers&utm_campaign=2978de89df-Weekly_Roundup_10_August_2011&utm_medium=email

 


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Germany profited in boom so must deal with the bust!

By David Mc Williams

It is now down to Germany. Does it want to save the euro or not? If it does, it will have to underwrite the Irish along with the Italians, Spaniards and a few others besides, not to mention the Greeks.

If it doesn’t want to save the euro, it will have to deal with a rapidly rising new deutschemark, which will soar in value against every currency — not just in Europe but against every currency in the world. In fact, the blueprint for Germany is Switzerland, and last week the Swiss National Bank responded to the rising Swiss franc by capping its rapid appreciation because it is hurting Swiss industry. A post-euro Germany with the new deutschemark would be like the Swiss Franc on steroids. It would be like a massive Switzerland in the heart of Europe with a hugely overvalued currency.

full article at source: http://www.davidmcwilliams.ie/2011/09/14/germany-profited-in-boom-so-must-deal-with-the-bust?utm_source=WebsiteSubscribers&utm_campaign=02a50fdec3-Weekly_Roundup_10_August_2011&utm_medium=email

 

Comment:

Germany :Should I stay or should I go???

ESRI has been getting its forecasts wrong for years

This article is the latest instalment from David mc Williams
I would be inclined to agree with him on what he says about the ESRI and their
latest announcements on the economic outlook .Frankly I couldn’t be bothered to even give them the time of the day. With a history like theirs I wonder why they get such attention from the Media !

By David McWilliams

In Irish economic circles, you tend to take much more stick from having been right than having been wrong. Those economists who got it wrong in the boom and believed the hype about the soft landing, such as the ESRI, still manage to grab front-page headlines. In contrast, those who called it right are put under constant scrutiny and are still being dismissed by the establishment as cranks, celebrities or, at best, lucky opportunists.

The “insiders” rally round each other even when they are wrong and the “outsiders” are denigrated. In the economics world, for what it’s worth, the outsiders’ crime — the crime of being right — is particularly dangerous precisely because it exposes the limitations of the insiders. This type of insider/outsider prototype is commonplace in Ireland.

Yesterday, we saw more of this type of behaviour where the establishment insiders carry on with their forecasts despite their appalling records:

Full article at source: http://www.davidmcwilliams.ie/2011/09/07/esri-has-been-getting-its-forecasts-wrong-for-years?utm_source=WebsiteSubscribers&utm_campaign=3431032834-Weekly_Roundup_10_August_2011&utm_medium=email

Euro Crisis or Death by A Thousand Day Trades

 

We in Europe are certainly living in interesting times.

   PDF Document  here   Euro Crisis Or Death By A Thousand Cuts[1]

Labour unrest, collapsing employment, bankrupt public coffers, riots and sovereign debt default.

This all might seem unexpected however in 1995 a former European Union economist Bernard Connolly foretold it all in his classic book “The Rotten Heart of Europe.” Connolly was hounded out of his elite job for telling the truth about the lies and obfuscation about the ERM (Exchange Rate Mechanism), the forerunner of the Euro. He knew that his instincts and training as a professional economist were telling him that the Euro would be a disaster for Nation States yet he was not allowed to articulate his genuine concerns.“As we shall see, in France the long arm of the authoritarian state has pressurized dissident economists and bankers, deployed financial information programmes on international TV channels, threatened securities houses with loss of business if they questioned the official economic line, and shamelessly used state-owned and even private-sector banks, in complete contradiction with their shareholder’s interests and Community law, to support official policy. ……….

The economic profession in Europe organized literally hundreds of conferences, seminars and colloquia to which only conformist speakers were invited; and the Commission’s “research” programmes financed large numbers of economic studies to provide the right results from known believers.”Connolly goes to state the essence of his book:

“My central thesis is that the ERM and the EMU (European Monetary Union, the mechanism with ultimately brought the Euro into technical existence) are not only inefficient but also undemocratic: a danger not only to our wealth but to our freedom and ultimately, our peace.”

As the current crisis unfolds we are just beginning to see the flaws in the Euro system that Connolly foresaw. Under the regime yes we have stable exchange rates between the Euro countries but there is no harmony between the disparate economies that make up Euroland. For example when it comes t0 borrowing “sovereign debt” each country is on its own. This last week Greece had to pay 18% on two year money whereas Germany had to pay only 3% approx. Where Greece has gone Spain, Portugal and Ireland are soon to follow. The technical makeup of the Euro is being brought into the glare of the light of day and business functionaries do not like the weaknesses they see. The idea that the Euro has a “central” bank has thus been exposed as a myth. If the Euro actually had a real central bank the sovereign nations of the European Super State would be able to borrow under its aegis, they cannot.

This means the Euro is not a “currency” as such but in actual fact is an exchange rate mechanism only.

Thus it is a political entity not an economic one. The fact that Germany “cannot assist” Greece in these crises while the Euro burns indicates again that politics and power rules the day not bread and butter and families and jobs. The behavior of Germany is actually frightening in light of the fact that it is the major beneficiary of this artificial exchange mechanism. The Euro is allowing cheap German goods flood.

Europe and explains why it has 200-300 billion Euros of trade surpluses with its economic partners.In a survey last week over 80% of Greeks want to exit the Euro but this voice is not being reported in much the same fashion that Connolly’s concerns were silenced by elite bankers and politicos. However, in 1995 the world was less connected when the Euro mechanism was being set up. Today we have hedge funds connected through Cray computers ready to “play” the markets. As soon as traders realize the Euro is a one way bet they will opt destroy the exchange mechanism because of its exposed failings.

The Emperor has been seen to have no cloths. As sure as night follows day they are going to reap their reward, the same way George Soros reaped his one billion paycheck on the 16th. September 1992 (“Black Friday”) when the bank of England lost 3.4 billion Sterling in one single day defending a flawed exchange link to Euroland. It is my suspicion that Germany sees this as a very real scenario and does not desire to waste its hard won foreign reserves on a “Norman Lamont” (The “Black Friday” chancellor of the British exchequer) type endgame.

All of this would be fascinating if it were purely an academic issue, unfortunately it is not. In Ireland, for example, the country is going through a horrendous economic downturn, one which is being exacerbated by this “currency” crisis. The problem is we now know the Euro is not a real currency and confidence is shot. The end result is lost jobs, non-existent credit, frozen business cash flows, unemployment and emigration. In other words the issues are very, very real. And I am sure it is the same in Greece, Portugal, Spain and Italy.

I do hope that the powers that be put their heads together to solve this developing disaster. Bernard Connolly wrote about it 35 years ago so they have had a lot of time to prepare. Let’s hope wisdom prevails and that the lessons Argentina learnt nearly a decade ago can be used. In that crisis, when she had to break the link to the Dollar (a la our Euro) she allowed devaluation but inspiringly its leaders also insisted the devaluation of all Dollar loans. In doing so the elite realized that they had only two options.

Social catastrophe or neutered bankers. They took on the bankers and substantially diminished the debt. Thus they saved their nation.

Accordingly, the so called “PIIGS” countries; Portugal, Italy, Ireland, Greece and Spain, should form a league based on national economic restructure. This league should form a common secretariat with the purpose of negotiating an exit from the Euro and allowing their currencies to “float” once more. This will immediately allow their economies to become competitive again without widespread deflation. Most importantly all Euro loans must be devalued to a new negotiated exchange conversion, as per the Argentinean model. This action will be greatly resisted by Euro bankers. This is why no one European nation could go this route alone. But together in league they have a chance.

I hope Irish leaders realize the difficulty we are in and have the intelligence and wisdom to formulate the type of solution mentioned. If such leadership was shown by Ireland perhaps the other heads in Portugal, Italy, Greece and Spain would have the courage to join with their fellow European brothers and sisters and save their nations from certain financial destruction. Yes we truly are living in interesting times.

source  thanks to chris at  www.wealthbuilder.ie

Reference: “The Rotten Heart of Europe”

Bernard Connolly

Faber & Faber, London, 1995.

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