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A Tribute to Mr. Raymond Crotty

A Tribute to Mr. Raymond Crotty
Economics Lecturer
Trinity College Dublin, Ireland.

Ludwig Von Mises
“Everyone carries a part of society on his shoulders. No one
is relieved of his share of responsibility by others and no one
can find a safe way for herself if society is sweeping towards
destruction. Therefore everyone, in his own self interest, must
thrust themselves vigorously into the intellectual battle.”

An Irishman whose life was a real example of the moral
imperative exemplified in the above quote was Raymond
Crotty. Through his actions and writings he tried to do the
right thing. He tried to make a difference.

“Our Enemy the State“, so said Raymond, in 1988 in his
book “A Radical’s Response”. In this treatise Mr. Crotty,
former farmer and economics lecturer at Trinity College, tried
to explain how Ireland was being exploited by its domestic
political groupings. Through his efforts the constitution was
correctly used to try to protect the Irish people from what he
saw as abuse of privilege by an immoral political class. This
class, he believed, was using the resources of the Irish people
for their own selfish benefit. In order to take his high court
action to protect the constitution and safe-guard the right

to a free ballot on fundamental legal changes he pledged, as
security, the title of his own family home. In fact he and his
wife faced possible bankruptcy in the event of failure on the
legal front. What would Mr. Crotty be advising us now about
possible solutions to the predicament Ireland now faces? I will
use some quotes below to try to give you some inkling of a
possible answer to that conundrum.

“Sixty years on (1986), the Irish economy is back again to
a position similar to that of 1922, immediately after the
break with Britain…….Joining the EEC seemed, in 1972, the
answer to 50 years of failed self-government. Fifteen years
of membership of a Community comprising all the former
colonial powers has done nothing to alleviate, but much to
aggravate the problems of Ireland……This happened also with
the earlier Union with Britain, which brought untold hardship
on the Irish masses, while, as intended, securing the position
of the elites who engineered the Union. The new EEC Union
likewise has resulted in wholesale loss of jobs, a quadrupling
of unemployment and an increasing extreme dependence on
subsidies from, and credit through, the EEC.”

Thus we can see that all though much has changed since 1986,
unfortunately most remains the same in 2010.

Ireland is now lurching toward financial ruin because
of insolvent banks, fully state guaranteed international
bondholders, high inflation due to a bloated and inefficient
bureaucracy that produces no goods, reckless public sector

borrowing, an unquantified off-balance-sheet derivative
time-bomb, collapsing cash and credit circulation, insolvent
businesses and an incompetent government executive. We
are being lied to with regard to the true nature and extent
of Ireland’s financial afflictions. Many would say that it is
the international financial crisis that caused the problem
however, I believe, it is the failure of our political class to
ethically regulate itself and effectively manage that is the
true source of the current mayhem. This class is working
closely with a golden circle to bail itself out yet will now leave
a “bill of costs” which will cripple the Irish public finances for
decades. This class has sold out the country to a European
Banking elite that forces itself into every aspect of out lives
to the detriment of real freedom. The ongoing erosion of our
liberty is clothed in a veneer of “greater good” but the effect
is social atrophy.

As Crotty predicted, the state is no longer the friend but
the enemy of the average Irish citizen. This situation was
always the case in mainland Europe and throughout the
British Empire. Constitutions were thus developed by
revolutionaries, such as DeValera, to tame the power of the
state. This lesson of history has been forgotten by the “new”
Irish and they have now sold their children’s birthright to
elites but the Irish people are not to blame because they
have been hoodwinked by a privileged social grouping that
protects its dynastic power while ignoring the horrific social
implications of their drastic austerity measures. In other
words they have the income and the assets whilst we and our

children will be left to carry the debt.

Ray Crotty knew in 1986 that borrowing would end in disaster
for Ireland, and we currently who are socially conscious, are
now experiencing a human tragedy unfolding daily as it did
so in 1985. It was not called the “lost decade” for nothing.
However, in 2010 it is much worse because in addition to
unbridled public borrowing there is private debt of nearly half
a trillion Euros. Thus this time the burden is doubly crippling
particularly when you factor in an Irish cost of living which is
now nearly 50% higher than that in mainland Europe. This fact
can be readily verified during any short holiday trip to Spain or
Portugal or Germany.

But Mr. Crotty did not leave it there, he used his considerable
economic intellect to propound a way forward, an analysis
which we know all too well was never followed. His solution
could be applied even now, if only we found the will and the
determination. In 1986 His formula for economic and moral
salvation ran as follows:

“It is not difficult to identify the nature of the change
that is necessary to transform Irish undevelopment into
development. It involves essentially eliminating banking
privilege. In Ireland producers are charged too little for land
and capital and too much for labour. ……All taxes should
be removed from labour (PAYE & PRSI) and the things that
labour buys (VAT). Tax revenue from land and from the
financial system (Banks, Insurance Companies and Building

Societies) should be maximized. In addition, in order to save
revenue and to preclude further borrowing by corrupt and
corrupting politicians, the public (and banking debt should be
renegotiated or) repudiated …..The proposed fiscal changes
would transform Ireland’s undeveloping economy into a
developing one. The state is the enemy of the nation and
has been the cause of its undevelopment this point the Irish
people must comprehend. But even as the nation has been
undeveloped by the state’s actions, the people have looked
more and more to the state to remedy the situation.”

In 2010 The Irish people somehow must start rejecting the
local/international banking system now robbing the national
coffers. Raymond Crotty cries out from the past. He was not
listened to then and we are paying the consequences. This
moral Irishman correctly analysed Ireland economic problems
and history has shown this analysis to be correct. It is not
too late for Ireland to start again but we need this time to
take the right road and choose true national development
not financial bondage. In other words borrowing in not
the answer, productive commercial enterprise is. And the
benefits of this enterprise must flow, as a moral right, to
the average hard working lower and middle class citizen not
financial elites regardless of whether they are of the home-
grown or international variety. This time let us finally listen
and take the right road of hard work, honour and duty not
a phantom dream of lottery wins, quick rich schemes and
reckless speculation. Yes we are in a difficult situation but let
us take the hard choices that lead to real change not cosmetic

As Oscar Wilde, once famously quipped:

“Yes we are all in the gutter but let us chose to look up to the

Anglo is splitting in two

Anglo Irish Bank will be split into an asset recovery bank and a funding bank, the Department of Finance said today.

The recovery bank, or so-called bad bank, will be eventually be sold or its assets will be run down over a period of time.

The funding bank will be separated from Anglo’s loan assets and will be owned directly by the Minister for Finance. It will not engage in any lending but will continue to accept and manage deposits.

This is a variation of the proposals from Anglo’s board. It wanted to split the bank into an asset management unit, which would have looked after the bank’s “lower quality” assets that remained after transfers to Nama were complete, and a good bank, which would manage the performing loans, retain the bank’s deposit funding and engaged in new lending.
source http://www.irishtimes.com/newspaper/breaking/2010/0908/breaking10.html


This is a prime example of accounting gimmickry
The tragedy goes on at Anglo Irish Bank the bright sparks at the department of Finance have decided to allow Anglo to metamorphose into a good bank and a bad bank
This is yet another example of a totally out of touch Minster that is just not living on the same planet as the rest of the Irish people
Having pumped billions down this toxic toilet he is now going to double the cost of running the same basket case
We the people are still waiting to be told exactly where did the 25 billion go that he has already pumped into Anglo go? That the minster says is “Gone”!
The money isn’t just gone, Disappeared, somebody got this money so where did it go who is this somebody.
Splitting this Toxic toilet will not make the problem of Anglo go away
The “Brand” Anglo is toxic and it should be shut down now .

“A picture is worth a thousand words”

Europe’s biggest can of worms is overflowing again.
Fears that Europe’s banks are vulnerable to losses on risky government bond investments are sending shivers through the European bond markets, especially Ireland and Greece. Investors are dumping risky bonds tied to weaker European economies and crowding into the safe havens of German and British government bonds.
Ireland, which is grappling with an increasingly expensive bail-out of troubled lender Anglo Irish Bank, is the single worst performer Tuesday.
The premium that Ireland has to pay over Germany to borrow from investors in the bond market has hit its highest level since the euro was created in 1999 (Specifically, 3.75 percentage points compared with 3.47 percentage points on Monday.) Prices of Irish bonds have fallen, sending the yield on the benchmark 10-year Irish bond above 6%. (Bond prices and yields move inversely.)
Greece isn’t faring much better. The yield on its 10-year note is nearly 12%, while its own “risk premium” over Germany has also blown higher. Portugal’s spreads are also weaker. Credit-default swaps for Spain, Portugal, Ireland and Greece have all jumped in price, suggesting investors are more worried about these countries defaulting on their debts

Source http://blogs.wsj.com/marketbeat/2010/09/07/europes-bond-market-tanks-again/

Struggling with the euro zone’s biggest budget deficit relative to its gross domestic product at more than 14% last year, Irish authorities are also grappling with the ballooning cost of bailing out the banks, especially state-owned Anglo Irish—a bill that has already hit €33 billion ($42.55 billion), or roughly 20% of Ireland’s GDP.

Source http://wsj.com

ON THE radio on Monday, Brian Lenihan spoke of “not showing his hand” to the European Commission. He suggested that we in Ireland had to “hold our nerve”. These phrases are not normally used in economic policy — rather, they come straight from the world of poker.
This language is appropriate as it probably best sums up the Government’s policy throughout the banking crisis — it has all been a big bluff.
Yesterday, the financial markets reacted to the gambler’s words by selling Irish bonds, thus driving the yield (at one stage) up from 5.78pc to 6.15pc.
Yields came down to 6.01pc, following rumours that the European Central Bank was buying Irish bonds. We are fast becoming a vassal state of the ECB, the only institution prepared to buy Irish bonds.
The ECB is doing this for one reason — to protect the bondholders of Anglo from the default which has to come. In this little game, we issue expensive IOUs at 6pc that the ECB buys with money it prints for nothing to keep open zombie banks that don’t lend. The ECB is doing this not to protect you, but to protect rogue creditors who have no right to expect that they will be paid.
source http://www.davidmcwilliams.ie/2010/09/08/we-dont-have-an-economic-policy-its-all-just-a-big-bluff

Ireland has effectively nationalised its financial system for two years: it will guarantee deposits and debts for the country’s six biggest banks until 2010. This means it is assuming potential liabilities of around EUR550bn, compared with existing government debt of EUR40bn and overall GDP of EUR160bn. The move has increased pressure on the UK authorities to boost the size of the deposit guarantee.
The move was designed to shore up rapidly dwindling confidence in the banking sector. Irish financial sector shares plummeted early this week amid fears that it is particularly dependent on the frozen interbank market; loan to deposit ratios are 150% in Ireland compared with 130% in the rest of the EU, Sebastian Orsi of Merrion pointed out in the FT. Banks have been “bleeding money” as the Irish property and construction markets have tanked, noted Ambrose Evans-Pritchard in The Daily Telegraph. Ireland has become the first eurozone member to slide into recession now that the property bubble has burst and consumption has slumped.
What next?
By effectively betting its economy, Ireland has “certainly upped the stakes in the confidence game that is banking”, as Alphaville said in the FT. The hope is that the guarantee will improve Irish banks’ access to funds on world markets. But Ireland may be in for a bumpy ride. Note that the banks’ assets are highly concentrated in “fast-fading” UK and Irish property, said Lex in the FT. At Anglo-Irish Bank, the exposure to these two sectors is 80% and at Bank of Ireland and Allied Irish it is 71% and 60% respectively. And if markets keep withholding wholesale funds from “property plays”, then the government “may have to reconsider that guarantee”.
source https://info.moneyweek.com/article.php?p_id=10807

Comment :
“A picture is worth a thousand words”

I have posted the various sources above in support my own opinion that the government are totally on the wrong economic path and what’s even worse they are hell bent on sticking with this disastrous policy all logic seems to have disappeared and we are becoming slaves to the mantra we must spin ourselves out of this mess no matter what
Brian Lenihans language is increasingly that of a gambler (read DavidMcWilliams latest posting on this Link above)
David is one of the country’s finest economists and it would appear this government are choosing to ignore his sound advice just like they did on the eve of the first bank blanket guarantees
This is the time when the government should be getting the best minds in the country to come up with a real solutions to the financial crises that is after all their own making
Whether you agree with me or not, that facts are the well informed lenders (Bond Traders) of the world certainly do so, and what’s more they are getting very nervous at the lack of this governments realistic economic road map
The constant dirp drip feed of ever more disastrous figures emanating from Anglo and NAMA should frighten all of us
The Governments belligerence and a misplaced sense of loyalty to their pals a la Galway tent has to be abandoned pronto, and these gamblers must face the music themselves
The Irish nation cannot afford the commitments made by incompetent government minsters that are overwhelmed by the sheer complexity that is the Derivatives market
It is just plain stupid to expect civil servants who have no training in this field to advice party indoctrinated con men to understand these financial nuclear bombs
There are only a hand full of people in the world that understand these complex financial instruments ,even after 10 years of market participation myself I still don’t know anybody in the field that has successfully traded their way into profit
These financial instruments were created by the largest financial corporations in the world (AIG, JP Morgan, Citi etc and they were designed as far as I can make out to protect themselves as they were the market makers as well as the insurer and we all know that insurance companies are notorious in looking after themselves
the bottom line here is the markets have now copped on to the spin the Irish Government have been spewing out on the world’s airways and they Ireland Ink has a set repayment capability and that is now breached and any further surprises coming from Anglo Irish and Allied or Bank of Ireland is going to push this little country over the Default Bridge
And with the current Captain on the Irish Titanic ignoring the warnings of Icebergs dead ahead what does he do?
Call for more Ice for his pals cocktail,s

How Gangsters are Saving the Eurozone

How Gangsters are Saving the Eurozone
By: Pravda

Stephen Fidler writes:

Gangsters, drug dealers and criminals engaged in money laundering appear to be helping to shore up the financial stability of the eurozone. That is thanks to the demand, European officials said, for high-denomination banknotes, mainly from 200 euros and 500 euros. The European Central Bank issues these bills for a large profit which is welcome at a time when their response to the financial crisis has cast doubt on their financial strength.
The high value notes are “the euro is becoming increasingly the favorite currency in the black economy and to all those who value the anonymity of their transactions and financial investments,” wrote Willem Buiter, chief economist at Citigroup (Citigroup on the list of USA tax havens) in a recent report. The business of issuing euro banknotes, produced at a cost close to zero, is “extremely profitable” for the ECB, Buiter wrote. (And the U.S. has given billions?)
When euro banknotes and coins were brought into circulation in January 2002, the value of the existing 500 euro was 30,800 million euros, according to the ECB.
Today, there are approximately 285,000 million euro banknotes in circulation, yielding an annual growth rate of 32%. By value, 35% of euro banknotes in circulation are the largest denomination, the 500 euro note that few people get to see.
In 1998, Gary Gensler, then a member of the U.S. Treasury showed public concern about the competition to the $100 bill, the highest value in U.S. banknotes, posed by the largest euro and its possible use by criminals. He noted that $1 million in $100 bills weighs 22 pounds, in hypothetical $500 bills, would weigh just 4.4 pounds. (I do not see the problem to print 1,000 tickets, or $ 10,000)
Police have found large euro notes in cereal boxes, wheels and hidden compartments in trucks, said Soren Pedersen, a spokesman for Europol, the European police agency based in The Hague. “It goes without saying that this money is often linked to the illegal drug trade, which explains the similarity of the methods of concealment that are used.”
An ECB spokesman declined to comment on who uses the euro notes.
The ECB and the governments that belong to it are the beneficiaries of the demand for large bills.
The profit a central bank obtains from issuing currency – as well as other privileges of a central bank, such as asking for free or low cost deposits from banks – is known as seigniorage. It normally accumulates in the national treasures after the central banks account for their own costs
Proceeds from the ECB seigniorage emission are becoming increasingly important this year.
The ECB has included in its balance sheet hundreds of billions of euros of unknown quality in response to the global financial crisis.
It holds more than 600,000 billion in collateral for banks to whom it made loans, and over 400,000 billion in securities it holds directly, including government bonds.
In general, the ECB’s balance sheet has grown to nearly 2 trillion euros (million million). It has a capital base of 78,000 billion euros. That is a leverage which makes it look like a “hedge fund on steroids,” said Buiter. It wouldn’t need to lose much with these assets to wipe out its thin cushion of capital.
That’s where seigniorage comes in. Then it becomes important with the benefits obtained from the issuance of currency.
In recent years, the profits of its issuance of new paper currency was 50,000 billion euros. In 2008, the year of the crisis of Lehman Brothers, it was 80,000 billion euros.
Even with conservative assumptions about future growth of currency in circulation – of, say, 4% per annum, which is in line with the ECB’s target inflation rate of 2% plus economic growth rate – Buiter estimates future seigniorage profits for the central bank will be between 2 trillion euros and 6.9 trillion euros.
Thanks to seigniorage, he says, the ECB is “super solvent.” (Just like the Fed, except that this is more supersolvent it is the queen and the U.S. currency can be indebted to the galaxy (in dollars) and issue bills of millions of dollars and pay their bills in a couple of minutes).
An ECB spokesman said that there are no plans to withdraw the higher value notes, national equivalents of which were used in six member states before the launch of the euro. They will be retained when issuing a new series in the coming years.
Replacing them with lower denomination notes would increase production costs and processing, he says.


No real news here this is well known throughout the financial industry just like the “Rumours” about Anglo Irish Bank and its connections with questionable entities involved in similar activities in this state,
Like I said “Rumours”
where there is money there is crime not too far away and not where you would expect it to be either !

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