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Posts tagged ‘David Mc Williams Blog posting’

Waking up to reality

By David Mc Williams

This brilliant quote from economist JK Galbraith just about sums up why individuals and organisations tend to stick to plan A when the evidence suggests that Plan A isn’t working. No one likes to be proved wrong but, ultimately, the worst thing we can do when our world view turns out to be flawed is stick to it. Yet this is precisely what many of us do.

Given this general observation, it was fascinating to see the IMF conclude last week, with its influential world economic outlook, that it might have got its basic economics wrong. If not quite apologising for leading half of Europe up the economic garden path, the IMF has at least admitted that what we have been arguing for years in this column is right. For the first time, the IMF conceded that austerity doesn’t work and, not only does it not work, but it is counter-productive.

The implications of this concession for the continuation of the ‘austerity at all costs’ policy are enormous – and may prove to be the first chinks in the armour of the troika. Christine Lagarde’s IMF noted in its global outlook that the world economy has slowed down more rapidly than it had expected, and its experts asked themselves why had they got it so wrong yet again. Given that the main pillars of Irish economic forecasting – the Department of Finance……………………..

full article at source: http://www.davidmcwilliams.ie/2012/10/15/waking-up-to-reality

David McWilliams has posted a new article, ‘ECB is merely phoning it in’

By David McWilliams

Walking around Dublin these days, it appears that everyone is on the phone.

It is impossible to stand in a queue or in a public space and not be amazed by the amount of gadgetry and texting and chatting that is going on.

This communication business continues to grow in all sorts of unanticipated ways as more and more people all over the world get connected.

For example, did you know that every minute of every day, 35hours of content are uploaded to YouTube?

It is important for those of us who watch the economy to be aware of what is going on in mobile phone companies.

Reading the economic tea leaves is a crucial part of the economics profession, and most economists have a favourite set of figures.

Mine is mobile phone company results.

Details in a mobile phone company’s accounts tell us more about what is going on in an economy than other more commonly used leading indicators. Looking at the right figures to predict the next moves in the economy is crucial because after all what use are economists if they can’t tell you what is likely to happen in the future?

You’d be pretty dismissive of a doctor who couldn’t diagnose you in advance, but could tell you on your deathbed that you had a fatal disease.

see full article at source here : http://www.davidmcwilliams.ie/2011/06/28/ecb-is-merely-phoning-it-in

‘ECB a slave to passing fads’ By David Mc Williams

By David Mc Williams

The other day, I watched a Few teenage kids knocking around my neck of the woods.

One lad in particular caught my attention.

He walked like a young fella with haemorrhoids, legs far apart as if in total discomfort. I watched him as he hung around with his mates, trousers sagging down so far that every time he walked, he had to spread his legs apart just to keep his jeans up.

Fashion can be a strange thing.

Have you too noticed the fashion over the past few years for young lads’ jeans to be slung lower and lower? It is called ‘‘sagging’’.

The genesis of this particular trend is quite interesting.

Sagging stems from American hip hop culture and originated in the prison system.

Belts are banned in US prisons for obvious reasons and as a result prisoners’ trousers sag. During the early 1990s,black gangster rappers, trying to ape the ‘tough guy’ prison look, first started mimicking this US prison look. It soon became de rigueur for the hip hop movement.

A decade or so later, like all fashion, it morphed out of the original ghetto and found its way into the mainstream.

Today, quite bizarrely, you have extremely white, southside Dublin schoolboys who couldn’t locate Mountjoy without Google Earth, hanging with their homies, trousers somewhere between their rear ends and their knees, a ping US penitentiary chic.

You may view the full article and add your own comments at

David Mc Williams using the Default word!

I am writing this on the New York subway hurtling downtown from the Upper East Side towards Wall Street.

The old Jewish lady, all coiffed and nailed, is putting on her lipstick intently, oblivious to the rest of the crowded train.

Two students chat away about the film, The Jersey Shore, while the rest of the carriage go about their mid-morning business.

Two Latin American tourists, all gold and diamonds, in telltale Brazilian bourgeois mink coats, stand for what seems like an eternity, scanning the subway map – easy pickings for a run-of the mill mugger.

Yet they are totally safe. I remember when I first came to this city in the late 1980s, the subway was regarded by many as no-go zone.

As Irish students slumming it, the subway was the only way of getting around and there was, initially at least, a sense of adventure as you descended down into the bowels of Manhattan and breathed in that distinct subway stench, jumped the turnstiles and allowed the warm air which was pushed through the tunnels like some gigantic subterranean piston to wash over you.

For many of us then in our late teens, the subway was New York and, most importantly, it was far away from home. We were free.

However, our American employers and relations didn’t see it that way. They lectured us on the dangers of the trains and told us never to go near the subway.

This was the New York of former mayor Ed Koch, a city of violence, muggings and casual crime where the fear of the unknown appeared to terrify most people.

The place was full of rumours, and the subway became the ghoulish scene of CSI style crimes perpetrated on the innocent.

Respectable people didn’t get the subway.

Fast-forward to 2011 and all that has changed. The train is now full of those who, in the late 1980s,would have been classic victims; these same passengers have the confident swagger of the blithely unconcerned.

New York changed because the people who run the place decided to change it.

They decided they had enough. By committing huge resources, lots of thought and common sense, the New York subway became safe.

If the New York subway can change, Ireland can change.

Had you suggested two decades ago that old ladies would confidently ride the subway you would have been laughed at – but it happened.

It happened because people thought differently and decided to change. It didn’t happen by following the crowd.

The subway is an anomaly in this city, with its tooth-and-claw capitalist signature. In a country that heralds free enterprise, it is interesting that the mode of transport of choice, whisking bond traders down to Wall Street, is a heavily-subsidised public company.

The subway was cleaned up, not by some swashbuckling free-marketer, but by diligent public officials. It proves that ideology is not the only catalyst to change.

Change comes because people want it.

As I watched these bond-traders on Wall Street, in identikit Brooks Bros suits and penny loafers, queuing for lunchtime sushi, high-fiving the wonders of the private sector, I am sure they didn’t consider that the subway that got them to work is a state company.

Their minds are focused on Portugal, the euro and the next move by Ireland.

On Wall Street, the talk of Ireland is all about when we default.

No one here believes a word that comes out of the European Commission, the ECB or the organs of the Irish state.

The traders I chatted to see the numbers, they see the huge debts that are there to be paid by the people, and all agree that the way to go is to default on the bank debt and start again, protecting the sovereign in the process.

Now only the very silly would take their view on most things in life seriously; they are, in the main, one-dimensional, not particularly talented or educated lads, but they do constitute the market and the market has spoken.

They mention Ireland in the same breath as Argentina before Argentina defaulted in chaos in 2001.

The traders who were on the street at the time say that the signals are precisely the same.

Argentina went through 25 months of recession, unemployment rose and then eventually ordinary people took their savings out of their banks. Once that happened, the game was up. These Wall Street guys see Ireland as repeating precisely the same mistakes.

The interesting thing is all of them believe that, if Ireland stops paying the ‘‘odious’’ bank debts, the economy will recover extremely quickly. They also indicated that they would consider buying Irish government paper if we got rid of our bank debt. But with the bank debt, there is no way.

At the moment, Taoiseach Enda Kenny is trying to change the interest rate we face but while, a reduction of interest will help, it will only stop Ireland defaulting if we do not add any more to that debt.

Unfortunately, it now seems that the Irish banks are going to need an awful lot more cash.

Let’s imagine for a minute that the government is crazy enough to commit another €50 billion (which is not an unlikely figure) to the banks, which would increase our government debt to €195 billion.

Then add the deficits that we will need to fund for the next five years. That’s about another €45 billion.

This gives leaves our national debt at €240 billion.

Even if we manage to finance all of that at 4 per cent (which is the lowest possible figure under current arrangements), it would cost nearly €10 billion a year in interest payments alone.

That is equal to 80 per cent of the government’s income tax take in 2010. It is unsustainable. There is no way around it.

Paying interest on debt is a draw on an economy – it means money that could be invested in an economy is leaving the country. If we are paying €10 billion in interest every year and our GDP is in the region of €150 billion, we need to expand the economy by more than €10 billion each year, just to stand still.

It works like this: GDP on January 1 is €150 billion. During the year, extra economic activity in the economy adds €10 billion value to the economy, giving a GDP at end of year of €160 billion. But the economy has to pay €10 billion in interest. So we have to take that €10 billion from the €160 billion to get end-of year GDP.

That leaves the GDP at the same level as it was at the start of the year: €150 billion.

The economy will have to run to stand still. Something has to give.

The New York subway story tells us that, when the powers-that-be eventually decide to ‘get real’ with something, it can be fixed. But this needs complete political support and the change in policy needs to be dramatic.

A structured default now is the game-changer we need. The view from Wall Street this afternoon is that this is the answer.

Don’t bet against it.

source: www.davidmcWilliams.ie


As I already stated ,from what I make out of the latest news coming out of Europe, Enda was told where to go and I am now thinking that the German and French are now thinking of pushing Ireland out of the euro currency ! We have become isolated  and irrelevant and the debt crises is moving on to that of saving the Euro and Ireland in now regarded as a liability that must be cast off into the sterling area perhaps! Either way we now are in debt to the ECB to the tune of 150,000,000,000: Billion  and the Central bank of Ireland has supported the banks to the tune of 50,000,000,000:00, this cannot go on.

Forget about the 85,000,000,000:00 billion bailout Default is the only option now so get real Enda!

The constant spoof about our corporation tax is just distracting from the real crises; we are looking at debts of approximately of 280-300 billion now and waffling about a one or two percentage saving is just pissing in the wind. We , as a country are in no position to service the interest on such enormous debts let alone pay back the capital. We must offer a equity swap to the ECB and the Bond Holders on the Bank Debts and failing that we must then default on this odious debt” As a Nation we were not responsible for private debts of corrupt banks

‘Still time to save many billions’

David McWilliams has posted a new article, ‘Still time to save many billions’

The only question that matters in this election is whether we should continue
paying out money to people who invested in our banks and got their bet wrong.

The more money we pay these bank ‘investors’ – who have no right to be paid,
because the banks they invested in are insolvent – the less we […]

You may view the full article and add your own comments at

David Mc Williams “economics festival”

Forgive the ‘legacy debts’ and save the economy

Let’s say you own a company. It’s a retail company which you set up in 1999. It traded well in the boom, but to grow quickly, you took on debts commensurate with your turnover. Every time that you wanted to increase turnover, you had to rent a new outlet and invest.

This took money – and, while you tried to reinvest cashflow, you needed to go to the banks because the costs of your premises and rents were so huge.

Your turnover hit €2 million in early 2006.You expanded by opening two new outlets to capitalise on the demand and you incurred more debt – but it was manageable because turnover was rising. You employed more and more people.

Trade was good, but your costs were high and margins were still tight.

You convinced yourself that, over time, you would get the systems right and the cost to income ratio would move in your favour.

After all, you were still learning, putting in the hours, but you were building something and you believed in the future. By early 2008, you had six outlets, a turnover of €3 million and debts proportionate to that figure.

You could service your debts out of your cashflow. Then, crash! People stopped buying your wares.

Today, your turnover has halved. You own a company, which has a turnover of €1.5 million, but debts appropriate to a company with turnover of €3 million. What do you do?

Do you borrow more to try to tide you over, so that you incur more debt to pay for already too much debt? Do you close down and sell everything to pay off the debt? Do you slim down and keep two of your six shops, which may trade through the recession? But even if two shops are trading at full tilt, they won’t generate the cash to pay the debts which were incurred for an operation of six shops and a turnover of €3 million.

You go to the bank and explain that there is no cash, and ask the bank to consider some negotiation on the debt.

The bank refuses and claims that it will now go after your other assets.

But you don’t have any. What about your family house? Didn’t you put that up as collateral? Well, yes, but it too has fallen by 50 per cent in value since the peak.

You leave the bank, despondent. Remember you still have three outlets that are trading well, employing people, generating Vat and income tax and corporation tax revenue for the state. You are also taking a modest wage out of it.

The suppliers with whom you have done business are also depending on you, as are their suppliers, and on and on down the chain.

If you close now, the ramifications will be felt far more widely than just your firm. What are your options?

Either you can enter debt renegotiations with the banks and your other creditors where they will get something – not everything, but you all stay afloat – or receivership, where you fold and your creditors get far less in the subsequent fire sale.

The banks refuse to budge, and you don’t want to admit to some of your suppliers that you can’t pay your bill because of the shame of not being able to meet your obligations.

So you try to trade for a bit more, but the figures don’t add up.

Reluctantly, you go into receivership. The receiver tells the creditors to line up in an orderly queue to see what can be salvaged from the business. The banks and the other creditors get much less than they would if you had all done a deal on ‘debt forgiveness’.

The business is closed, the jobs and tax receipts are lost, and all because the ‘legacy debts’ of the boom strangled a good but much slimmed-down business in the bust.

This is a typical example of what is happening all over Ireland now. More significantly, it is also the reason why the state cannot convince any investor that the country is solvent.

The people who use silly expressions such as ‘Ireland Inc’ do not seem to realise that Ireland Inc is only the aggregation of us, the Irish people. If our businesses are going under because of the legacy debts of the boom, our country will also default because of the aggregation of the legacy debts.

Debt forgiveness is essential if the country is to recover. This can be called default, renegotiation or repudiation. Call it what you like but, without wholesale reduction of the legacy debts of the last ten years, the Irish economy will become mired by the politics of retribution and recrimination.

True capitalism is based on the idea of the second chance. All of us who have ever tried something, ever taken a risk, have all failed at some stage.

In my own case, I have written books that sold over a hundred thousand copies; I have also written books that sold poorly. I have presented TV and radio programmes that were successes, and I have been fired from TV and radio stations.

I have invested in companies which have returned multiples of the original investment, but I have also had to write off entire investments because companies went belly-up.

This week in Kilkenny, with another investor/partner, I have put my own money into Ireland’s first economics festival www.kilkenomics.com. If it works, we will succeed; if it fails, we lose.

That’s the nature of capitalism and enterprise.

Failure is part of the equation and there is no shame in failing – the shame is in not trying.

The ability to recover after a defeat, to dust yourself down and to get back up, is based on being ‘allowed’ to do so. If we allow a person to get back up, the only issue then is personal character and whether they want to have a go again.

I talked recently to a receiver who told me that, in his 30 years in business, he has never been appointed to a receivership twice with the same individual.

He told me that, when people make a mistake, such as borrowing too much in the first venture, they learn and don’t make the same mistake again.

He said that most entrepreneurs get back up.

But they are cleverer for the experience of failure.

We all know that failure and success are first cousins.

Therefore, the idea that we can run a healthy, capitalist country without debt forgiveness is ludicrous.

Debt forgiveness is the beginning of the recovery. It will have to start at the firm level and the individual level.

Ultimately, the state will have to renegotiate all its debts.

We will not have a successful fiscal adjustment unless it is accompanied by a national debt amnesty.

This is the way the world works.

The question is not if, but when.

The nature of default is what is important. If we are seen to have tried to pay, but failed valiantly and honestly, then we will get a second chance.

New money and new creditors will emerge; they always do.

The world is full of money. The reason it’s not coming here is that the markets expect a default or some sort of nasty financial event.

Why not bring it on, face the reality, and move on?

That’s what a capitalist economy, an entrepreneurial society is all about. Isn’t that what we are supposed to be?

Comment :

 I think this is a good idea and a welcome chance to hear the views of so many different people .I think it will also bring new ideas into the broader public arena and a chance to meet other like minded concerned citizens

Pity about the cost could be expensive though!

I am thinking of heading down to this “economics festival” s0 if there is anybody from the Wicklow area that wants to go, maybe I can pick you up and we can pool the car .

I was thinking of going on Friday so get in touch ASAP


here is the itinerary :source http://kilkenomics.com/

I have place for 3 persons

NAMA = ‘‘class rescue scheme for the professional classes’’


 from David Mc Williams latest posting on his blog.

My friend, who has never been a radical, dismissed Nama as a ‘‘class rescue scheme for the professional classes’’.

As he headed off, I asked myself, ‘‘How far is he from taking to the streets?” There are now hundreds of thousands of people like him.

Unemployment, as measured by the live register, has risen from 4 per cent to nearly 14 per cent in the past few years. It can be described clinically as a ten percentage point rise.

Others looking for context might use the line, ‘‘it was worse in the 1980s’’.

As a percentage, the number was higher in the 1980s,but the real story is that the actual number of people on the live register now is at the highest it has ever been.

Each of the approximately 450,000 people on the register has a different story of the misery, but we mostly chose not to listen.

source http://www.davidmcwilliams.ie/2010/10/26/how-long-before-the-people-crack


Too true,

As I have personally called on almost 2500 homes in the last 9 weeks I do notice that most people just want to keep the door closed and shut out all the bad news and they certainly do not want to be reminded about it. Then you get very few who say you’re doing a great job while they make up an excuse why they can’t do something themselves, and who can blame them the cards are stacked against decent people who want to make that change possible

The battle goes on !

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