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Posts tagged ‘David McWilliams'’

Russian roulette in an unstable world

I am here at Abu Dhabi Airport. My flight was supposed to depart at 2.15am. It’s now 9am and we’ve been told the flight may take off at 11am. So you can imagine the state of the place and the state of me! There’s no point in getting angry at staff, who are trying their best to deal with a mega systems failure. There has been a collapse of the Etihad infrastructure: poor visibility due to fog, lights on the runways have gone out, crews are not able to make their connection and now there is a massive backlog of planes queuing up on the runways with no one to fly them.

Obviously, now that the backlog is into many, many hours, lots of the crew who could work are prevented from doing so as they would be over the acceptable working hours per week or month. Here in the business lounge after 12 hours, it’s like a refugee camp for people with lots of air miles, and the levels of middle-aged male indignation is rising ever higher. The Filipino stewards are doing their best, but they have about as much idea about what is going on as the rest of us. However, their Etihad uniforms makes them legitimate targets for customer ire.

This collapse this morning got me thinking about systems’ failures in general.

Running an airline and an airport that prides itself on being a transit hub is an extremely tricky business and – as everything is profoundly interconnected – when something small goes wrong, like fog in the early morning, everything can collapse. You’d hope that this would not be the case, indeed you convince yourself that this can’t be the case, but it is.

Systems can be very fragile and the difference between smooth organisation and total chaos is, in reality, very small. The possibility of contagion – in this case with flights, connections and crews – is everywhere. Like the ecosystem of a rain forest, each small change can have an amplified effect on activity somewhere further down the food chain.

Deeply unstable set-up

These changes, which on their own don’t seem to add up to much, can profoundly affect the health of some creature or plant. Similarly, the airline network with its web of connecting flights, each one depending on each other, is a deeply unstable set-up.

Financial markets are similarly integrated ecosystems and the question is whether they are becoming more – or less – stable……………………………

full article at source: http://www.davidmcwilliams.ie/2014/03/10/russian-roulette-in-an-unstable-world?utm_source=Website+Subscribers&utm_campaign=e3ce0a49c4-22112012&utm_medium=email&utm_term=0_861a00f27d-e3ce0a49c4-266228133

David Mc Williams on Pat Kenny

Here is an excellent commentary  by David Mc Williams on the current financial crises in europe .I find myself in agreement with most of his analyzes .His assertion that the answer to deflation is inflation and his knowledge of current German ideoligy is spot on as I am living here among them I can confirm that is what I am hearing from many Germans I talk to here in Lubeck

My own belief is we need a Financial Marshall plan for Europe

see :http://en.wikipedia.org/wiki/Marshall_Plan

also :

.

Pod cast here

Original audio source (pod-v-12061220m25spkmcwilliams-pid0-1225368_audio.mp3)

something has to change (By David McWilliams)

By David McWilliams

Did you know 47 million Americans live under the poverty line and that figure has risen every year for the past four years? There are more Americans in poverty than at any other time during the past 52 years.

What about the fact there are the same amount of jobs in total in the US economy today as there were in 2000, and yet the population is 38 million larger? These are significant figures because the US economy is not creating jobs and, without jobs, these figures get worse. If they get worse, something will give.

Maybe the rise in US poverty is the reason why extremely rich Americans like Warren Buffett are imploring US President Barack Obama to tax the rich more. Maybe Mr Buffet reckons it is better to give away a bit of wealth now, than all of it in a massive political change later. We see the same thing in France, where the very rich are arguing to be taxed more.

full article at source: http://www.davidmcwilliams.ie/2011/09/21/world-is-on-the-edge-and-something-has-to-change?utm_source=WebsiteSubscribers&utm_campaign=275fecfcfb-Weekly_Roundup_10_August_2011&utm_medium=email

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

David McWilliams ‘Too much regulation will stifle our banking sector’

David McWilliams has posted a new article, ‘Too much regulation will stifle our
banking sector’.

Yesterday the IMF published its fifth review of Iceland’s economy since the crisis began. The IMF declared Iceland’s economic progress “impressive” and disbursed a loan tranche of $225m (€136m).

Now if this sounds weird to you, it should do. This is the Iceland that defaulted on all its bank bondholders and this is the Iceland that the IMF warned would be cut off unless it paid all its foreign bondholders. Yet just two years later, the IMF declares that Iceland’s progress has been “impressive” and lends the country money!

full article at source : http://www.davidmcwilliams.ie/2011/06/08/too-much-regulation-will-stifle-our-banking-sector

comment:

Am I hearing right? Didn’t I hear this warning before wasn’t that what Sean Fitzpatrick said on our TV screens at the height of the housing Boom? I sent it because of light regulation we are in the mess we are in? I saw David Mc Williams’s latest TV appearance and I got quite a shock and the first thing that came to mind was well we have another Berti Ahern in a cupboard effort!

While I find myself agreeing with most things David says about the economy I do not agree with light regulation on the Banks and his new acting career might not be one of his better moves

‘Memo to ECB: print money” : by David Mc Williams

David McWilliams has posted a new article, ‘Memo to ECB: print money ‘

Is the European Central Bank (ECB) Europe’s AIG?

In other words, will the ECB be left holding the can, having lent all this money to the peripheral countries in order to save rich banks in Germany and France, in the same way as insurance giant AIG was destroyed by the sub-prime market?

If you remember back to the Lehman crisis, it was the collapse of AIG that really spooked the world’s financial markets. It had recklessly insured most of the toxic waste of Lehman’s and other banks’ balance sheets – all the sub-prime mortgages and worse.

When they all defaulted, the damage went straight on to AIG’s balance sheet as the insurer of last resort.

The ECB in 2011 is beginning to look Like AIG in 2008. It is certainly also beginning to sound not like an institution that is in control, but an institution that is beginning to panic.

For example, speaking on Thursday, executive board member of the ECB, Lorenzo Bini Smaghi (who, despite sounding like a character from Lord of the Rings is actually an Italian economist) opined that high-debt countries must stick to the terms of their bailouts. If they don’t, they risk having their banks cut off from ECB capital measures. Surely this is not how central banks work?

You may view the full article and add your own comments at
http://www.davidmcwilliams.ie/2011/05/30/memo-to-ecb-print-money-2

comment:

A good article well worth the  read .

‘We’re being played for fools’

David McWilliams has posted a new article, ‘We’re being played for fools’

Where do you think the financial markets assess Irish risk? What countries are
we compared against? Surely we are still regarded as a European developed nation
when it comes to risk?

Think again. After – or more likely because of – our recapitalisations and
bailouts, the world regards us as a bigger default risk than […]

You may view the full article and add your own comments at
http://www.davidmcwilliams.ie/2011/04/25/we%e2%80%99re-being-played-for-fools

Has the Left missed another opportunity to address the questions of equality and social justice in Ireland?

 sent is this afternoon

Author: Pirooz Daneshmandi of Irish Left Review

Published: February 21st, 2011

by Pirooz Daneshmandi

There is no doubt that the current crisis in Ireland, and internationally, has major implications not just for the economy but socially and politically as well. However, in Ireland at least, there are no signs that policy makers have grasped the full extent of the problem yet.

It appears that the main pre-occupation is still how to preserve the status quo, or as much of it as possible, rather than a serious look at the fundamental problems inherent in the system and their consequences for society. This is to be expected from those on the Right.

What is surprising is that some of the more radical alternative solutions on the economy are being proposed by sources considered on the Right. They include the Financial Times, The Wall Street Journal, and the International Monetary Fund.

Similarly, commentators such as David McWilliams, Peter Mathews, Paul Somerville, Jim Power, George Soros, Senator Shane Ross, Dr. Constantin Gurdgiev, Professor Patrick Honohan, Professor Morgan Kelly, Professor Karl Whelan and Professor Brian Lucy could hardly be described as the “raving, loony Left” and yet they have, during the last decade, repeatedly come up with analysis and alternatives that would go far beyond what the Irish Congress of Trade Unions or the Irish Labour Party have offered.

Indeed, the lack of any alternative proposals on the part of the bigger Trade Unions and Political Parties at a time of an unprecedented crisis in capitalism is conspicuous for its absence. The almost complete agreement, with minor differences, on the strategy forward from political parties on the Right and the Left is quite a remarkable accomplishment on the part of the establishment.

Despite ample research pointing to the fact that societies that address social inequality do better on almost every indicator, one would be hard pressed to find any mention of it in the political discourse of all the major parties, Left or Right. Instead, all the attention is focused on ensuring that there are no radical or fundamental changes offered.

The main pre-occupation of all the major political parties appears to be not to offend the wealthy and the powerful by suggesting that they pay their fair share of the cost of this fiasco caused by their rapacious behaviour.

The need to ensure a minimal corporation tax rate is considered sacrosanct, almost worth going to war with “friends” but no such consideration for protecting the poor, the weak and the vulnerable in society, they can be sacrificed with disdain. Of course, this is nothing new to any student of history, but that doesn’t make it any more palatable.

Furthermore, the lack of any proposals to avoid the same predicament in future is also lamentable. We are supposed to be satisfied with the fact that there is a different regulator and Governor of Central Bank, never mind that the policies and the guiding principles remain largely the same as those responsible for this crisis.

Indeed, any mention of the need for a significant change of mindset is ridiculed with scorn by “respected” commentators and “experts” as impractical, childish and generally not worthy of consideration. This is despite many serious problems with regard to equality and fairness and their impact on poverty, housing, healthcare, education, transport and energy over many decades and the need to address them as a matter of urgency.

It is often claimed that the majority of the population do not want radical and significant changes. If this is true, is it not due to the fact that any alternative is condemned to the margins and hardly ever discussed seriously? Is it not because the true costs of the existing situation are usually minimised and framed in a manner that distracts attention away from the root causes? Is it not because of the relentless promotion of a skewed set of values and the subliminal assumptions propping up the status quo?

It appears that far from playing a role in helping to bring about the required changes, the leadership of the Left is often a hindrance to it and any significant change is only possible as a result of popular action.

source: http://www.irishleftreview.org/2011/02/21/left-missed-opportunity-address-questions-equality-social-justice-ireland/?utm_source=feedburner&utm_medium=email&utm_campaign=Feed%3A+irishleftreview%2Ffeed+%28Irish+Left+Review%29

The bailouts: Let confusion be unconstrained…

 Author: WorldbyStorm

of Cedar Lounge Revolution

Published: February 16th, 2011

This weekend I read the Sunday Business Post with some eagerness. Here would be the answers I required, that many require, about the bailouts, both the banking one and the ECB/IMF one – which aren’t quite the same thing as is all too apparent, and what is and isn’t possible.

Let’s start with the analysis.

In a piece that considers whether we can renegotiate the EU/IMF deal and aspects of same the SBP argues that while renegotiation would be ‘difficult’ [interesting that it doesn’t rule it out entirely], it does accept that ‘there is room for manoeuvre’ not least because already ‘A EU wide debt restructuring is under tentative discussion’. And it goes further, it suggests that ‘there is a range of ways in which this could be structured, but our best hopes are mechanisms which in some way lower the level of debt that we (and other peripheral economies) take on’. Their ultimate conclusion being that to the question whether the deal can be renegotiated the answer is ‘yes, in part’.

Similarly they are cautious, but not as much as might be expected, as regards burning the bondholders, where they suggest that ‘it will be tough for any new government to win agreement on this. It could however be a bargaining chip in any talks to seek concession elsewhere’.

And on the issue of an improved interest rate on the EU/IMF deal they argue that ‘there is a chance of some relief here, though now much is not clear’.

But this is where reality, as distinct from what other want us to do, intrudes.

We won’t be done any favours. The only thing which will change Europe’s mind is if they believe that IReland – and other peripheral states – are being lumbered with so much debt that the bailout will not work.

How much is too much debt?

EU commission calculations which show the debt-to-GDP ratio rising to 120 per cent of GDP, suggest that the commission fears that, for us this could be the case.

That’s typically cautious, but the message is unmistakeable. Our real financial situation, predicated by the bailout, is now such that we cannot service the debt.

And then on to the editorial. It argues that:

There is no point pretending that we can act unilaterally here. The ECB, is… providing some €100 bn in funding to our banking system, and the EU/IMF cash is needed to keep the country going.

But, for there is a but.

The new government can, however, legitimately say; yes, we abide by the commitment in the plan to provide cash from the NPRF to recapitalise the banking sector, but we want this plan to be implemented in tandem with a restructuring of the sector.

And more crucially…

We also need to find a way to draw a line under the state’s exposure because, if this does not happen, the level of debt being taken on by the taxpayer will be unsustainable.

But others in the paper argue it is already unsustainable [indeed doesn’t the analysis above that mentions the Commissions calculations seem to indicate that as well?]. Indeed further on the editorial itself tilts towards this position when it says:

The central issue is whether changes can be made to lighten the debt burden we will face in future.

And then it says that:

The taxpayer should not have to shoulder all the losses – particularly from Anglo and Irish Nationwide – while senior debt-holders get off scot-free.

If the EU insists that these bondholders must be repaid in full, then it must help in doing so, or provide significant relief elsewhere in the programme terms.

And it gets better…

While we are entering the realms of semantics here, this in itself is not a renegotiation of the deal.

This isn’t just semantics. This is vital to the continuation of this state and the nature of the society that emerges. And yet paradoxically it is semantics. The SBP gravely says that:

We are in no position to repudiate the deal – but neither can we pretend that Ireland can continue to absorb endless losses emerging from its banking system.

What it itself argues for, the implicit burning of some aspect of the senior debt-holders, a ‘significant relief’ in the programme terms, a ‘lightened debt burden’, a drawing of a line ‘under the states exposure’ is in every respect something that demands, if not a repudiation, a renegotiation of the deal.

And this implicitly contradictory stance is at the heart of much of the discourse prevalent at the moment on this matter.

Contradictory not in the way that that sentence above posits repudiation against absorption of loss, but rather that it runs up to repudiation without quite getting there.

And contradictory too because from reading everything else in the SBP it is clear that Ireland cannot absorb the current level of loss.

David McWilliams notes as much when he counterposes Aland Dukes ‘blithely plucking a figure of €100bn which he says is needed to keep the banking system afloat…. we should not pay another cent to this banking system. We simply do not have the money’.

And he notes further that:

Who thinks it is clever that Ireland should spend €100bn buying a load of toxic bank rubbish when we only earn €31.7 bn (ie Ireland’s total tax take from all sources in 2010).

Tom McGurk makes much the same point…

Given that we still do not know where the debt ceiling is, the notion that somehow a workforce of one and half million people can clear all our debts within the foreseeable future is becoming increasingly absurd.

And he says a bit more:

The long term implications of years of austerity and enforced emigration threatens to devastate the country, because, in real terms what the bailout is offering amounts to no more than a slow bleeding to death – and every possibility that, further down the line we may end up having to default anyway.

And McWilliams goes further again:

Of course we are going to burn the bondholders. Of course, we are going to wind up the banks. Of course the ECB will have to take a big loss on the Irish assets it has taken on its books.

And the SBP editorial itself also veers close to this line when it notes that ‘It would now be wise for the new government not to be rushed into spending another whack of taxpayers’ money… before we put more money in, we need to know the destination at which we want to arrive’.

It’s that distance between those two elements that the SBP tries to argue is a situation we are about to face into, rather than one we are already in, which the orthodoxy has sought to position itself as a sort of last gasp stand.

And as McWilliams notes there’s a characteristic of the orthodoxy, and has been through this crisis. A sort of exaggerated politeness, or deference to power. As he says, ‘the Irish establishment has got to stop looking for the proof that spending €100bn on toxic banks is the right thing to do’. We’ve seen that mindset again and again, where despite the nature of the crisis, the lack of a clear ‘debt ceiling’ as McGurk puts it, at any point, the orthodoxy has time and again been utterly convinced of the correctness of its own decisions and unbelievably ignorant in its dismissal of any alternatives whether positioned within or outside the orthodoxy.

And at each point more weight has been burdened upon the shoulders of the citizens of the Republic.

Actually, what’s also fascinating is how broad the dissent on much of this. Take Colm McCarthy in this weekends Sunday Independent who notes that:

There is a practical objection to a Europe-wide bank resolution: it would finally address the burden-sharing issue which French and German politicians wish to avoid. The ECB, whose policy throughout the crisis to date has been driven by no-bank-must-fail mantra and the protection of bondholders, needs a thorough redesign if another crisis is to be avoided. The Franco-German plan is also silent on this crucial issue.
Aside from employees of the European Central Bank, prominent economists have been virtually unanimous these last few months in dissenting from the non-policy being pursued. Bloomberg quoted another well-respected practitioner of the dismal science during the week in the following terms: “Senior bondholders of European banks should take a haircut on their investments instead of struggling banks being supported by taxpayer bailouts,” Citigroup’s chief economist, Willem Buiter, said.
“As soon as the end of this year, all the European zombie banks could be restored to health or put out of business by making senior bondholders pay instead of the taxpayer,” Mr Buiter said, adding that state support for failing financial institutions should be removed as soon as possible.

Actually he says something else of interest, but dealing with that is for another day:

The result of the banking crash has been a descent into unsustainable budget deficit in many countries. Those which had big government debts to begin with (Greece), or which allowed a greater banking bust to emerge (Ireland), have ended up in the most trouble. But the problem is general and in Germany, for example, the budget rules of the Eurozone were broken earlier than in countries like Ireland and there is widespread nervousness about the true condition of large parts of the German banking system.

And perhaps more predictably Brian Lucey writing in the Irish Times this week also argues for a ‘debt write-down’. Indeed he seems to argue that we have a stronger hand in demanding such.

He notes that:

The ECB has in excess of €100 billion extended to domestic banks. The Irish Central Bank has extended more than €50 billion. The only reason money flows from ATMs is that it is being provided by the ECB.

The decision by the ECB – and although this has never been explicitly articulated it has never been denied – appears to have been a quid pro quo. In return for the Irish authorities not imposing losses on senior bondholders, the ECB would continue to fund Irish banks.

And continues…

Above and beyond all this lies the fact that at its heart the euro is a political, rather than an economic, experiment. Any solution must therefore also lie in politics. It is generally agreed that the terms and conditions of the bailout, in particular that part of it emanating from our European partners, are such as to make it incredibly difficult for the State to avoid significant and unnecessary cuts.
We must therefore negotiate a political solution to the banking crisis, and this must involve the writing down not just of the interest rate we pay on the bailout, but the actual amount of money we are borrowing.

And:

We have political power and we should use it. Even if the Government is forced to consider a unilateral decision; and I would favour that if we begin movement towards that using the powers of the Minister for Finance, the ECB will not cut off emergency liquidity. To do so would expose it as a neocolonial power.
I do not believe that it is such. Irish banks borrowed foolishly from European institutions. European institutions lent bullishly to Irish banks. The solution to date has been for the Irish taxpayer take on all of the adjustment. Time to call a halt.

But what then of Europe itself? What of them?

The line there seems to be ‘Yes, but not yet’.

“It is essential to respect the plan, respect the memorandum and especially for 2011 the decisions are very much framed by the memorandum but concerning the outer years there is more room of manoeuvre.”

Mr Rehn did not elaborate, but made clear his support for the principle of a lower interest charge on rescue loans. “If there will be any changes to the pricing policy, which I personally support and the commission supports, it will take place for the overall European reasons not specifically because of electoral statements in Ireland.”

The pricing of the loans was under review in the light of concern about “the real issue of debt sustainability and its relation to growth dynamics”, he added.

But here too we see evasion. Rehn must be able to read the same stats as anyone else, must therefore be able to see that the levels sustainability [and note I’m putting aside considerations as to whether the state should take on these debts as distinct from the reality that so far we have] are such that the capacity of the Irish state to continue under the original terms of the bailout are simply unfeasible. And his comments at the same time about the bondholders don’t negate this at all. If the bondholders aren’t to be burned then the EU/IMF deal would have to be amended in some other way in order for it to be feasible for the Irish state to service the debt.

If there hadn’t been a shift away from the orthodox line as expressed by Lenihan et al subsequent to the bailout would Rehn now be so equivocal about what happens in the future? If there were not a growing pressure from both left and right about this issue would the orthodoxy still be holding firm that all this was sustainable, as articulated only a week or so ago in the Irish Times in an almost incredibly panglossian article by Rossa White of the NTMA?

But what’s this? Brian Lenihan is shocked… shocked he tells us!

There is ‘considerable shock’ among EU finance ministers at the tone of the debate in Ireland regarding the possibility of a bond default in the Irish banking sector, according to the Minister for Finance, Brian Lenihan.
Speaking at the end of an EU finance ministers meeting in Brussels, Mr Lenihan this was damaging credibility.
‘There’s considerable shock at the whole debate in Ireland about bond default and they see that as something that’s deeply damaging to confidence in the Irish system – that’s the European perspective on this,’ Mr Lenihan said.

And earlier:

Earlier Mr Lenihan said: ‘Olli Rehn has made it clear that the EU arrangements are not open for renegotiation, it’s very important we appreciate that in Ireland.
‘What the EU are (sic) saying is… that we need to be more competitive, we need to downsize our banks, we need to bring our public expenditure under control.
‘They agree with that, we agree with that.’

But note what Lenihan is doing. He’s eliding default and renegotiation and, one must assume deliberately, eliding at least three different positions. I’ve previously noted that there’s the left of SF position which is repudiation, left of the LP [ie the SF position] which is burn the bondholders, the LP and FG positions [not precisely the same but close] of renegotiation with the bondholders expected to do some heavy lifting. There’s also the Shane Ross/David McWilliams positions which are effectively managed default. But Lenihan confuses all three – albeit the logic of all of them involve at the least renegotiation.

And worse he ignores the voices from – arguably – within his own general camp, such as McCarthy, who are also arguing for at the least renegotiation.

There’s a comment on an Irish Economy thread on NTMA article referenced above that goes like this:

Given spoof and bluster worked so badly with the problems we have faced, one wonders why it is persisted with. And then one remembers… it is what institutional Ireland does best.

Sadly, it is indeed.

And is that latter attitude going to prevail? Will there be any change under FG? The experience of the Fianna Fáíl administration where black continued to be white until the very last moment, and even after, doesn’t give much cause for optimism. Because much the same class will be taking up the reins of power from their supposed adversaries in FF.

So what has been learned in this trawl? That renegotiation, far from being an absurd approach is now reaching the level of certainty, not least because underlying all else is one inescapable fact, that we still cannot afford the costs of the bailout. But that there’s more.

As the ranks of those economists, commentators and politicians who demur from the recent prevailing orthodoxy on this matter what will be the response from the EU if, as already we are beginning to hear, there is a actual danger of outright default?

“We should take heed, because we are next.”

Friday  February 18 2011

source:

 David McWilliams

No wonder the Greeks are upset. Yesterday, the IMF and the EU were busy trying to limit the damage following their mission to Greece. One auditor, also the EC representative, Servaas Deroose, encouraged the Greeks to “sell beaches” to pay back the IMF/EU loan.

We should take heed, because we are next.

What would you be prepared to sell to pay back the IMF/EU deal, which is designed to bail out bank gamblers who punted on Anglo? The Aran Islands? Dogs Bay or maybe a big slice of Achill? The Rock of Cashel — that’d make a few quid.

Mr Deroose has revealed something about the thinking behind the IMF/EU loan and the sequence of events in Greece and Ireland as the EU Commission sees it. Bad enough to have a citizen of the most fiscally incontinent country in Europe — Belgium — lecture us on government excess, worse to have him indicate that the fire sale of state assets is the endgame.

So let’s get things straight: the Irish citizen is being asked to take on the debts of the European banks and pay for this by selling our assets for half nothing to the same banks so that we can bail them out. We take on debts without a discount and sell assets without a premium. At the moment these loans that we are being asked to pay are trading at a deep, deep discount because the “assets” they were supposed to back have collapsed in value. Yet we are being asked to pay for these loans at par.

At the same time, our crucial and profitable state utilities — like the ESB — will be sold at a discount because the buyers will know that the sellers are screwed.

This is what is going on. An organised heist, which will play out in front of our eyes and reward the very investment banks that blew their own and their clients’ money on the promises of David Drumm and the like. Meanwhile, our politicians argue over the rate of interest, begging for crumbs when they should be fighting for us.

Someone has to stop this because the words of the EU Commission in Greece are directed at us too.

Is there anything we can do?

Yes there is. Whatever you might think of some senior European politicians, they are democrats. They are bonded together by the vision of Jean Monet and Schuman — the founders of the EU. Central to this vision was the notion of forgiveness. When I studied at the College of Europe in Bruges, this message was articulated again and again. Europe was a family of nations and once you were in the family, the family treated you as an equal and no matter what your previous behaviour, there was always a chance of redemption.

This allowed Germany to recover after the War and it is the same attitude which is allowing Serbia, a country which orchestrated genocide in Bosnia less than two decades ago, to seek EU membership.

In short, there are many more democrats in European politics than there are central bankers.

There are many more elected politicians with a broad European view informed by history than there are unelected central bankers with a narrow monetary view.

We need to bring this battle to generous European politicians and wrestle the details out of the mean fingers of bureaucrats and central bankers who were never elected and have no mandate.

But how?

You put it to the people. The new government should put to a referendum the question of making any further payments from the citizens to the bank creditors. This would give the new government a clear democratic mandate with which to negotiate. There is no democrat in Europe who would oppose the will of the people and it would get straight to the point where the political economy bulldozes the financial economy. It would also give the Government huge authority on the biggest issue facing us all.

But can it be done?

Yes, article 27 of the Constitution governs the circumstances where a decision which is of “such national importance that the will of the people thereon ought to be ascertained”. Article 27 has never been used for this purpose but there is provision in the Constitution for a referendum on something which is simply so important that the people should be able to vote on it.

So it can be done, but is it now too late?

No, it is not too late for two reasons. The first is that if we do not stop paying out money to the bondholders, we will default on everything — sovereign debt and all — eventually. This would be a disaster for every Irish person. The second reason is that the situation is getting worse.

Behind our back, the Irish banks keep issuing government- backed paper in our name and this is happening on a daily basis, welding us ever tighter to the delinquent banks. This has to stop.

Since the last week of January, Irish banks have issued €18.35bn worth of government guaranteed debt. So the reliance of Irish banks on government guaranteed debt has risen from €16billion in mid-January to about €34billion today.

This debt is being issued to allow the banks to either (a) unwind their positions with the Irish Central Bank‘s Emergency Liquidity Assistance (basically the printing of money by the CBI) or (b) boost their funding position ahead of the bank stress test that is currently being carried out by the Central Bank.

Of course, all of this bank stress-testing is missing the point. The stress test that is now needed is a stress test on the State. Instead of believing the politicians that the State will be able to pay €100bn to the banks and everything will be fine, we should test the numbers and see if that is actually possible.

But, of course, that test will not be carried out. Because a stress test of the Irish State would show the one thing that no politician is willing to admit — that the State is currently insolvent, and the Government guaranteeing another €18billion of debt only serves to make that problem worse.

One way to put a stop to this madness is by holding a referendum. If ever there was an issue of such national significance, this is it. The time for a popular plebiscite has come.

http://www.davidmcwilliams.ie

– David McWilliams

Irish Independent

Comment:

I wholeheartedly agree with this assessment and reaffirm to the people of Wicklow, that I am standing in this election on the basis that the current so called bailout is nothing more than a bailout for reckless lending of German and British banks to equally reckless Irish banks like Anglo Irish Bank The Irish people should not be libel for the gambling debts of these financial institutions. I believe the outgoing Government are guilty of dereliction of their Duty and it is an affront to the Irish people that these same incompetent people should walk away now with lottery pensions.

The Political parties that now hope to gain power are all proposing to continue with this madness and it is now up to the independents to force the new government to see sense. But this will only happen if voters vote enough independents into the Dail in the first place.

I can look myself in the eye and say I did my bit can you ?

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