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Posts tagged ‘EU’

What Brian Lenihan and Cowen doesn’t want you to know?

Cropped picture of Vincent Browne from Flickr

Image via Wikipedia

Anybody who didn’t see tonight with Vincent Browne should take the time and look at the show now

Want to know how much? Want to know the real figure? Want to know what Brian Lenihan doesn’t want you to Know?

Anybody who didn’t see tonight with Vincent Browne should take the time and look at the show now

link http://www.tv3.ie/shows.php?request=tonightwithvincentbrowne&tv3_preview=&video=29656

The crisis comes to pass

Posted: By Gavin Sheridan

of  www.thestory.ie 

We have warned time and time again that Ireland was facing a massive fiscal crisis, both on here and on Twitter. We took a look back through the archives to see what we might have called right over the last number of months:
September 11, 2009: ‘A floor in the market’
We questioned just how much nonsense Finance Minister Brian Lenihan spoke in September 2009, where he argued that Ireland had neared the floor in the housing market. Of course, NAMA set its floor in November 2009, and prices have fallen ever since – leading to yet more losses for the taxpayer. We quoted him:
“If a flood of property is dumped on the market, it will be utterly unsustainable. That is one of the reasons we must establish NAMA and try to establish a floor in the market. We are very near it on the basis of the figures and data we have about the yield from property. The yield is at an all time high relative to the assets, which is a clear objective economic indicator that we are approaching the trough. We must banish our devils, the suggestion that we have further to go. That is part of the problem and the reason for the illiquidity in the housing market.”
There is no doubt that everything said there was a fiction, and it was patently obvious at the time.
December 24, 2009: Morgan Kelly on how we got here
Morgan Kelly published a paper at Christmas 2009, in which he outlined the looming bank crisis and the coming massive mortgage crisis. It was universally ignored. We highlighted it at the time:
I can’t really add much to Mr Kelly’s excellent analysis. What it says to me is that the next 12 to 18 months are going to be among the most difficult, if not the most difficult, time this country has faced. I encourage everyone to read the entire document.
I will emphasise his conclusion:
Despite having pushed the Irish state close to, and quite possibly beyond, the limits ofits fiscal capacity with the NAMA scheme, the Irish banks remain as zombies whose only priority is to reduce their debt, and who face complete destruction from mortgage losses. The issue therefore is not whether the Irish bank bailout will restore the Irish banks sothat they can function as independent commercial entities: it cannot. Rather it is whether the Irish government’s commitments to bank bond holders when added to its existing spend-ing commitments, will overwhelm the fiscal capacity of the Irish state, forcing outside entities such as the IMF and EU to intervene and impose a resolution on the Irish banking system.
February 4, 2010: The Coming Crisis?
It might be news to some people, but the purchasing of Irish bonds by Irish banks was highlighted a long time ago. We highlighted along with many others that Irish banks were buying Irish sovereign bonds and using them as collateral at the ECB. We also emphasised that Ireland was in as worse, if not a worse state than Greece – just that the markets had yet to pay attention to Ireland:
If you thought all of the problems had been sorted, then think again. There are really big problems coming down the road, and very few people seem to be talking about them. So let’s look a little closer at the potential fiscal problems Ireland, and our banks, face.
Everyone is talking about Greece right now, but to me Ireland is no different. It is probably worse. So with these deadlines looming, what is happening? Over the past number of weeks you might have noticed various headlines to do with NAMA delays. Why is this important? Could it be that unless the banks can transfer these junk ‘assets’ from their books, they could face funding difficulties on non-ECB markets?
I could well be wrong, or even cynical, but my feeling is that banks are desperate to get this stuff off their books, in order to be better able to fund themselves after the ECB shuts the discount window. If they don’t get them off their books, and onto the backs of the taxpayer, the banks could simply end up going to the wall, or simply being nationalised.
If you’ve read Morgan Kelly’s excellent analysis of the Irish credit bubble you will be aware of the Irish banking system’s over reliance on international money markets for funding. When the financial crisis hit in September 2008, these money markets froze and Irish banks struggled to get day to day funding. This is what ultimately led to the bank guarantee, and to the opening of what’s called the ECB discount window.
Banks all over Europe were struggling with funding, so the ECB essentially enacted emergency measures to help fund the banks. Irish banks were one of the biggest beneficiaries of the discount (the interest rate charged by the ECB is sometimes called the discount or repo rate). Ireland’s banks have effectively been kept on life support by the ECB since 2008, as McWilliams also noted last year. Essentially Irish banks were buying NTMA-issued sovereign bonds with short-term lending, presenting that as collateral to the ECB and then borrowing cheaply from the ECB. Summed up here – 25% of our deficit in most of 2009 was indirectly funded by the ECB.
When you combine the shutting of the discount window, with the delays in NAMA transfers and ultimately our own State borrowing (indeed we have already borrowed €6.5bn so far this year – 33% of our bond issuance for this year was done in January) and with the likely writedowns of not 30% but 50% on the loanbooks, we are facing a serious crisis. And of course the other factor is the ECB raising interest rates at a time we need them to stay low.
My questions is this: how are we going to pay for all of this?
February 22, 2010: Delay and Pray
This actually sums up how the Irish banks, especially Anglo, have been dealing with our property developers. Rolling over interest, not writing down the loans, not crystalising the losses, doing repayment deals with developers – to drag it out – extending and pretending.
Here it is in a nutshell: NAMA is one massive “Delay and Pray”.
Given that our banks are insolvent, that they are facing massive liquidity issues with the imminent closure of the ECB discount window, they cannot keep the pretence of extending and pretending up forever – and NAMA is, or was supposed to be, the answer to their prayers. You could also argue that Bank of Ireland recently changing its fiscal year was part of this tactic.
The Government would take the crappy loans from the banks (rather a lot), and through some financial voodoo, the losses would still not be crystalised, and rather ingeniously – the debt would not appear as sovereign debt for Ireland, or as debt for the banks, but would instead be dumped into this NAMA bad bank.
And NAMA has one sole purpose – keep the pretence going that someday, somehow, the value of the underlying assets will return to peak prices. Delay and pray. Do not write down the loans. Do not accept the reality of the losses. Do not pass go.
Not only is it unlikely that this will happen, it is almost impossible. Morgan Kelly wrote in December that it could take 50 years for the underlying assets to return to 2006 prices. Last week, in the High Court, we saw development lands being written down by 60% to 98% (in terms of valuation, not borrowing). These figures are the reality of the lands that NAMA is taking charge of. And we are overpaying already. How long do you think it will take rezoned agricultural land bought for €13m at peak, revalued at €600,000 in 2010, to return to €13m? The answer is: it won’t. So much land was rezoned that there is no necessity for rezoning for a further 70 years in many counties. Add to that the 300,000 vacant properties. Add to that little demand. Add to that zombie banks unable or unwilling to lend.
This is the reality of NAMA. Delay and pray.
It logically follows that where the banks lent money with no obvious collateral to back the loan, and where the supposed value of derivative is now zero, the bank sustains a massive capital loss.
However the banks are simply delaying and praying until NAMA takes over the loans, and then NAMA continues the praying.
We are in for one hell of a fiscal mess.
If you hear spin that no one saw this coming, don’t listen. There were plenty of commentators and plenty of warning signs. Unfortunately many people chose not to listen.


I too have been warning about this now for the last 20 months and it is  with great sadness that I now see come to pass, my worst fears although I believed we would have been past the worst by now the establishment of the greatest fraud in Irish history (NAMA) has in fact help postpone the worst effects of the now oncoming second phase of this financial disaster yet to be faced by Irish people.

The Current economic terrorists in the Department of Finance have successfully placed private debts of a Golden Circle on to the hard pressed shoulders of the Irish people and they have helped these same gangsters whisk away their ill-gotten gains all across the world .They have also compensated some of them by promising to pay them a salary of up to 200,000:00 Euros a year .This is sheer madness!

Why is nobody doing anything about this crazy stuff? Anywhere else in the world these gangsters would be in jail!

We the Irish people have seen out rights enshrined in the Constitution trampled all over because of political expediency, we have been lied to and robbed by people whose job was to protect the and uphold the constitutional rights of all the citizens of Ireland. Instead they have blatantly placed the financial welfare of a select few above the welfare of the nation and are in the truest sense traitors

They have betrayed the trust of people of Ireland and must be removed from office

A general election is desperately needed now and only candidates that promise to bring these traitors to justice should be voted into office.

Sadly the established political parties are remaining quite on this particular point and there are no calls coming from them to prosecute their colleagues in the Dail

Last night on Front line Pat Rabbet hinted that he would consider going into power with the Green Party

These are the same gutless gangsters that have sold out on every one of their own core values just to stay in power with the current government. Let this be a reminder why we need to have a complete change in the political system unfortunately none of the established political parties want to bring about this change, as it would be akin to asking Turkeys to vote for Christmas they are part of the dysfunctional political system we are saddled with and cant wait to get their hands on the lucrative perks and pensions heading there way by default  .

Ireland defaulting???

Ireland defaulting???

As I sit writing this I am getting news over the wires that the Irish government have asked the EU for emergency funds Ireland was in talks to receive emergency funding from the European Union, but Dow Jones Newswires reported the Irish Finance Ministry as stating it had not applied for EU emergency funding ,but sources within the department insist that talks are ongoing .Just on Bloomberg,  Ireland is being urged by European policy makers to take emergency aid to contain a debt crisis rattling their markets, according to a person briefed on the discussions.

video link http://uk.reuters.com/news/video?videoId=164092013&newsChannel=GCA-WeekendTopStoriesUK

In a conference call of European Central Bank officials Ireland was pressed to seek outside help within days, the person said on condition of anonymity. Separately, a European Union official said a request for assistance was likely even as Irish Finance Minister Brian Lenihan told RTE Radio that such a call “makes no sense” as the government is fully funded to mid-2011.Events are now been played out and lenihan is now been ignored and sidelined.

This means Ireland will be joining Greece with the begging bowl  and we are in effect defaulting .Lenihan and Cowen have lost all credibility  and the country should now have a general election in order to establish some sort of thrust from the markets

The current government is now dead in the water as nobody can believe a word they say.

Remember the Bank Stress Tests ?

European Bank Stress Tests: The objective of the extended stress test exercise was to assess the overall resilience of the EU banking sector and the banks’ ability to absorb further possible shocks on credit and market risks, including sovereign risks, and to assess the current dependence on public support measures. The scope of the stress testing exercise was extended to include not only the major EU cross-border banking groups but also key domestic credit institutions in Europe. The results of the stress test were to be disclosed on a bank-by-bank basis, on 23 July 2010 remember?
Then we had the results of the stress testing carried out on AIB and Bank of Ireland and coordinated by the Committee of European Banking Supervisors .the results we were told demonstrated that AIB and Bank of Ireland meet the stress requirements and did not require additional capital beyond the requirement set in March 2010 by the Central Bank and Financial Regulator following completion of the 30 March 2010 Prudential Capital Assessment Review[1].
According to the head of Financial Regulation at the Central Bank, Matthew Elderfield “The stress test results published  for Ireland’s two largest banks as part of a Europe-wide exercise follow the Central Bank and Financial Regulator’s own stress testing process earlier this year under our Prudential Capital Assessment Review (PCAR) framework. The stresses were set at a severe stress level and it is therefore consistent with our earlier exercise that the Irish banks have achieved the target level of capital in the EU process. In our application of the EU stress test we have, as a prudent measure, decided to apply a number of the more demanding PCAR parameters – the Irish banks also meet the target level of capital against this standard, but with less headroom.”
So fast forward to1st October 2010 64days later AIB remember the Irish Bank that passed the stress test has to be nationalized .So either this stress test was a complete farce or the Central Bank in Ireland and the department of Finance were telling lies to the Europeans or they both were trying to con the Markets ,or the boys here are so out of touch with what is actually happening on the ground within the banks here and have completely lost the plot ,things are so bad they are just limping from crises to crises
One lie after another a billion here and another billion there what does it matter the banking system is a basket case!
We the public are going to have to wake up and kick these incompetent at best and at worst financial terrorists out of office and off our collective backs.
Mark my words Bank of Ireland is bankrupt and will come calling to the taxpayers of this country again within 6 months!  
We need a general election in order to give a new fresh team a mandate to guide us through this financial disaster!  
with the nationalizeation of AIB the lies of Lenihan have once again been exposed ,
the question now is how manny more lies will we put up with from him?

Due Diligence abandond at NAMA ?

Anglo-Irish Bank will be paid more than €6 billion for the last set of loans it transfers to the National Asset Management Agency (Nama) before the agency has a chance to assess their true value.

The decision will allow Anglo to use newly issued Nama bonds as collateral for fresh borrowing from the ECB, in an effort to ease its increasingly stretched liquidity position.

The agency will pay for the loans upfront, despite its previous insistence that due diligence be carried out on all loans before a transfer takes place.

Nama will seek to recoup the difference if its due diligence subsequently discovers that it has overpaid for some or all of the loans.

The Department of Finance revealed last week that Nama had brought forward the timetable for all five participating institutions – Anglo, AIB, Bank of Ireland, EBS and Irish Nationwide – and planned to conclude the transfer of their remaining Nama-bound loans in one final tranche.

Prior to last week, it had been expected that the institutions would transfer their remaining loans over three, or perhaps four, more tranches.

It has emerged that Nama will apply special conditions to Anglo’s transfer, however.

Finance minister Brian Lenihan said Anglo would complete its loan transfers to Nama by the end of October – significantly earlier than the previous deadline of December.

Lenihan said ‘‘bonds will issue to Anglo in return on the basis of Nama’s current estimate of their value’’.

‘‘The loans will then be subject to due diligence and valued by Nama on a loan-by-loan basis. If any adjustment to their value is necessary, it will be made subsequently.”

The government has informed the European Commission of the change to Nama’s operation, but will need to bring in new legislative regulations to allow payments to be made to Anglo in advance of the formal valuation of the loans in question.

‘‘This expedited transfer will maintain the principle of a loan-by-loan valuation of all Nama transfers and is consistent with the EU state aid approval for the scheme,” Lenihan said.

source http://namawinelake.wordpress.com/author/namawinelake/
Here we have Lenihan again rewriting the rules on accountancy and due diligence
This of course is sheer madness and I just don’t know why this is allowed to continue ,it is as if Lenihan has something to hide or protect.
 Has he done some other deal with outside interests?
No where else in the world would this kind of account gimmickry be allowed in fact people have lost their business for less and have been found guilty in attempting  fraud  
‘‘The loans will then be subject to due diligence and valued by Nama on a loan-by-loan basis. If any adjustment to their value is necessary, it will be made subsequently.”

 what good will that do? Anglo will just say we haven’t got any money and the taxpayers will have to stamp up all loses and Lenihan couldn’t care less it’s not coming out of his pocket
This is Fraud and a total betrayal of the taxpayer’s interests and lenihan knows it!
where is this money going to go ?
who’s pockets are getting filled ,
who are the beneficiaries of all this money?
where did the first 22.500,000,000,:00 billion go who got it and why ???????
How many TD’s have loans out from Anglo-Irish Bank ?
Has  Lenihan or Cowen or any member of the families loans from Any of the Bailed out banks ?
are they solvent? 
Why is the Minster of Finance ready to cripple our country to bail out private bankers and gamblers
if this was the US this bank would be closed down 19 months ago and the directors would be in Jail along with the financial regulator and perhaps Cowen too !


Brian Lenihan’s statement this morning.

New NAMA adjustments

1. Loans of less than €20m not being transferred now .

2. NAMA debtors to drop from 1500 to 850

3. NAMA to abandon tranches, replaced with one remaining tranche per Participating Institution (PI – AIB, Anglo, BoI, EBS, INBS) Irish Nationwide Building Society

4. Anglo tranche to be transferred by end of October 2010

5. Loan-by-loan due diligence to continue

6. EU consulted and advised – (But it got EU  approval ?)

7. Loss of sub-€20m loans to reduce NAMA portfolio from €80bn at par value to €73.4bn

8. A 67% haircut expected on remaining Anglo tranche of €19bn (remaining Anglo tranche of €19bn plus T1+2 = €35bn and Anglo was supposed to be selling loans and sub €20m loans are now excluded – is €19bn right?)

9. Large increases in estimates of haircuts remaining tranches – Anglo 67%, AIB 60%, BoI 42%, EBS 60%, INBS – not shown (why?)

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

Latvia’s Cruel Neoliberal Experiment

by Prof Michael Hudson
Latvia is being devastated by two global wars. On the geopolitical front is the Cold War’s coup de grâce. Neoliberals have managed to de-industrialize Russia and the rest of the former Soviet Union, persuading parliaments to dismantle government support for economic renewal. The “Washington Consensus” has backed a policy of giving away public enterprises and land to a newly minted oligarchy of insiders, and helped them sell shares to Western investors. The ensuing economic wreckage has helped avert future military rivalry to U.S. hegemony.

Western investors are waging their own social war of finance and property against labor. Initiated by the Chicago Boys in Chile in 1973, sponsored in Britain by Margaret Thatcher’s Conservatives after 1979 and by Ronald Reagan’s Republicans in the United States after 1980, this class war was capped by “Rubinomics” under Bill Clinton and the Democrats after 1992. Rejecting the classical distinction between earned income (wages and profits) and unearned income (economic rent, financial charges and land-price gains or other asset-price gains), this global war seeks to rationalize privatization of the land and key resources of the former Soviet Union and China as well as those in Third World debtor countries. Its aim is to roll back a century of Progressive Era regulatory reforms and taxation of rentier wealth. So over and above being on the losing side in this victory over Communism, Latvia has been swept up in this war of oligarchy against democracy.

Western Europe has viewed the post-Soviet economies as markets for its surplus exports (especially those subsidized by the Common Agricultural Policy) and bank credit. The last thing the West wants is to help potential competitors develop in the way that it has developed itself – by protectionist tariffs, public subsidy of industry and agriculture, infrastructure spending, social-democratic regulation, and progressive taxation. The strategy is for global conglomerates to buy up property (with tax-deductible credit), while European banks extend loans to fuel debt bubbles. This policy has left the Baltics and other post-Soviet countries economically dependent beyond their ability to pay down the debts they have run up so rapidly over the past decade.

From time immemorial, wealth has borne an obligation to support overall social welfare. But over the past few decades the vested interests have refined their strategy for reversing this principle. Led by financial lobbyists, they have sponsored a campaign to shift the tax burden off real estate and monopolies onto labor, privatize the public domain and break free of public regulation to extract rents and fees without constraint. The result is a change in the direction in which Western civilization has been moving for centuries.

The International Monetary Fund (IMF) and European Union (EU) are key players in this about-face. They demand that governments impose austerity plans, scaling back employment and public spending on such basic necessities as schools and hospitals, and selling off public assets and enterprises to pay creditors. This extractive effort has polarized economies. Creditors have backed politicians pledged to rewrite the tax laws, deregulate government oversight, and to bail out banks (even foreign banks) with public funds when loans go bad, as they must do as the debt overhead shrinks economies.

Latvia and its Baltic neighbors are victims of this counter-revolution. Since dissolution of the Soviet Union in 1991 they have been used as a laboratory to break from liberal European tradition. For starters, a radical tax policy (a heavy flat tax on labor, almost none on property) has replaced the tradition of progressive taxation. A philosophy of privatization with no recapture of the rental value created by public investment and general prosperity has replaced the tradition of a mixed economy, while financial policy encourages borrowing in foreign currency despite local income being in domestic currency.

Finally, there is no “public option” in the form of basic infrastructure, banking or other natural or legal monopolies. Nor is there public regulation to keep prices in line with actual costs of production. Instead, neoliberals have disabled Latvia’s government and turned the economy over to foreign owners, creditors and suppliers. This policy drains the economic surplus, while foreign economies also receive Latvia’s labor and flight capital unable to find employment at home.

As a result of this policy, the nations that dominated Latvia in past centuries by military power are now doing so financially, as illustrated by its recent capitulation to European Union and IMF loan conditions. This war against the post-Soviet economies imposes economic austerity similar to the dictates the IMF has imposed on Third World countries for the past half-century. The result is debt peonage and neofeudal privileges creating dependent “tollbooth economies.”

No countries outside of the post-Soviet sphere have tried such an experiment. It aims at testing how far an economy can be depressed before its population dies off or emigrates. What is so remarkable is that this is being done in the name of free markets, and even in the name of Adam Smith. Yet Smith and other classical economists defined free markets as ones free of land rent, monopoly rent and financial overhead. They developed classical value and price theory as a tool to endorse taxing this unearned income, which they deemed to be unnecessary charges in excess of cost-value, headed by land rent.

Economic rent is the proverbial free lunch: income without a corresponding cost of production. Instead of taxing away this “empty” pricing without cost value, the flat tax is levied on labor, and the value-added tax to the sale of consumer goods. These taxes raise the cost of living and doing business, making Latvia’s labor and industry uncompetitive. Rather than taxing the land’s site rent to minimize the cost of living and doing business by holding down property prices, and rather than limiting the prices that monopolies can charge, “neoliberal” policy has forced the economy into deepening trade and debt dependency on foreign countries to finance the chronic structural trade deficit that this policy has caused.

Latvian faces the problem of how to earn the foreign exchange to pay the foreign-currency debts it has taken on, and how to pay for the imports on which its open economy, high flat tax on employment and dismantling of government support have left it dependent.

What has financed Latvia’s trade deficit and rising foreign debt service has been mortgage credit borrowed in foreign currency. Some 87 percent of real estate mortgages are reported to be in euros and other foreign currencies, mainly from Swedish banks and their affiliates. These lenders have not asked how this debt can be repaid. The price of this irresponsibility no doubt will be to suffer defaults that threaten to wipe out their own capital.

Latvia’s neoliberal planners also have been remiss. Their policy of financing a trade deficit by borrowing against property already in place (rather than to invest in new means of production to increase exports or displace imports) could last only as long as property prices kept on rising and sufficient rental income remained unpledged to pay debt service. Mortgage borrowers turned over this currency to the central bank, which used it to cover domestic spending on imports. But this situation could last only as long as the real estate bubble was expanding. But since the financial and real estate bubble burst, foreign bank lending has dried up. The currency is now being supported by borrowing from foreign official agencies – on destructive terms that direct Latvia to shrink its economy even more! This shrinkage makes Latvia even more dependent on foreigners for its imports, and indeed for employment.

So how is the economy to recover? Neoliberals have no answer. The culmination of what they call “free market” doctrine (a travesty of what “free markets” meant to Adam Smith) is to centralize planning in the hands of creditors: the European Union, IMF and Scandinavian bank lobbyists on behalf whose creditor interests the prime minister and central bank heads have represented as against those of indebted Latvians. This is the function of neoliberal policy, after all: to shift planning out of the hands of elected officials (economic democracy) into those of the financial sector (oligarchy), mediated by international financial agencies (dollar hegemony).

This cruel experiment must end. Latvia must escape the economic and demographic death spiral into which its politicians have steered it. By indebting Latvia to foreign creditors beyond its ability to pay – and crippling its competitiveness with a regressive flat tax – neoliberal “reform” (more accurately, a reaction against the 20th century’s Progressive Era reforms) is causing emigration and social collapse. It is time for Latvia to rejoin the course along which Western civilization has been traveling for the past eight centuries and reject the road to debt peonage and neoserfdom.

Latvia’s radical flat-tax experiment

Every Western economy has financed in public education, transportation and other infrastructure investment first and foremost by a property tax, followed by a progressive income tax that initially fell on the highest wealth brackets. In the United States the original 1913 income tax required only the wealthiest 1 percent of the population to file tax returns. Capital gains were taxed at the same rate as wages and profits, on the logic that the effect of a capital gain is the same as earning income: both served to increase net worth.

Fighting back, the rentier classes have spent nearly a century trying to reverse progressive taxation. The fiscal shift onto labor has been promoted by financial investors and property owners seeking to avoid their traditional fiscal obligations. Capital gains in the United States (mainly price increases for land sites) are now taxed at only half the rate levied on earned income. Many countries do not collect such taxes at all, or enable them to be easily avoided. Labor pays a regressive concealed tax in the form of paycheck withholding for Social Security and medical insurance, whose costs are removed from the general budget where they would fall on the higher tax brackets. (Higher-earning managers are exempted from these taxes.)

At the state and local level, property taxes have been gradually but steadily replaced by income and sales taxes falling on labor and consumers. This has caused a tax squeeze that has forced cutbacks in public services, reversing the funding of local prosperity. Counter-intuitive as it may seem, high tax rates and protective tariffs tend to go hand in hand with high growth rates – as long as the tax revenue is invested in infrastructure and other economic support. In recent American and British economic history, periods of relatively high income tax rates have also been those with the highest-growth rates and least finally polarized imbalance.

The reason is easy to understand. Whatever rental revenue the tax collector relinquishes is available to be pledged to banks as debt service on loans to buy property. Homeowners thus end up paying the bankers the income that they used to pay in taxes. But the government for its part still have has to raise tax revenue, which is levied on wage income and consumption. Housing prices rise in proportion to the tax burden being shifted off property onto employees.

Until the 1990s no economy ever had sought so radical a counter-reform as to abolish the property tax. It would seem at first glance that no democracy would vote for an anti-labor tax as extreme as that with which Latvia and other post-Soviet economies have saddled themselves. In the United States in 2000 a billionaire right-wing Republican candidate, Steve Forbes, was laughed out of the presidential primaries for proposing a flat tax. In Western Europe such a tax would run against democratic tradition. But it is no laughing matter in the Baltics. This seemingly anti-democratic situation has been maintained by misrepresenting the tax as efficient rather than destructive of the domestic market.

So the first Latvian experiment was how to persuade the country to adopt this tax policy and keep it in place, while leaving real estate and wealth virtually untaxed. In the face of the rising tide of indebtedness and emigration, the second stage of this experiment was to see how far this policy could shrink the economy without voters demanding a change. No one can know the answer until voters actually push back by electing a party or coalition with a less corrosive policy.

The American Economy of High Wages doctrine vs. Latvia’s low-wage policy

Latvia’s high tax on labor is averse to the rise labor productivity that requires rising living standards, educational levels and health as a precondition. The nation’s anti-labor policy is antithetical to that of every economy that has achieved world-class industrial status. The U.S. economy, for example, built itself up not by grinding down its wages to compete with Britain and other industrial nations, but by just the opposite strategy. The American System of Political Economy, wrote E. Peshine Smith in 1852, rests “upon the belief, that in order to make labor cheap, the laborer must be well-fed, well-clothed, well-lodged, well instructed, not only in the details of his handicraft, but in all general knowledge that can in any way be made subsidiary to it. All these cost money to the employer and repay it with interest.”[1]

This became U.S. development policy after the Civil War (1861-65) freed the nation from Southern anti-industrial trade policy. Undertaking a study of international wage and productivity comparisons in 1884, the U.S. Deptartment of Labor concluded: “It is not by reducing wages that America is making her conquests, “but by her superior organization, greater efficiency of labor consequent upon the higher standard of living ruling in the country. … High-priced labor countries are everywhere beating ‘pauper-labor’ countries.”[2]

Latvia has achieved the worst of both worlds. It has raised the price of its labor by levying a higher flat tax on employment than is found in any other country (over 50% from the combination of social tax, employer tax an wage tax), while leaving employees with too little disposable income to raise their productivity to Western European standards. Cutbacks in public spending on education and public health shift the economic burden further onto labor, leaving an economy in which only the very rich are able to survive. This is why so much of Latvia’s working-age population has emigrated or plans to leave. Without reversing this austerity policy toward its labor force and improving workplace conditions, Latvia will suffer further capital flight and emigration, and its trade deficit will deepen.

Latvia’s radical privatization policy

Western Europe’s and North America’s investment in public infrastructure has provided their economies with a head start. Failure to invest – or to do so on a privatized basis – results in higher costs. Neoliberal privatization thus put the post-Soviet economies at a cost disadvantage. The Washington Consensus has had the effect of “pulling up the ladder,” preventing Central Europe and other post-Soviet regions from catching up to become serious competitors with the West.

Latvia’s leaders have told voters that public enterprise is antithetical to private enterprise. But what they are criticizing is Soviet bureaucratic planning. They miss the more successful American and Western European social democratic tradition of public enterprise, and indeed leave out the long sweep of the history of civilization itself. It is now recognized that every commercial and entrepreneurial practice known today, ranging from the development of money and coinage, standardized quality, weights and measures, pricing and the charging of interest to profit-sharing commercial contracts and partnership arrangements, were developed in the temples and palaces of Sumer, Babylonia and their Near Eastern neighbors as early as the Bronze Age, 3200-1200 BC. The private sector adopted these techniques, starting with members of the palace bureaucracy acting on their own account. Privatization of credit and other basic infrastructure – and governorship of provinces under the Romans – created social imbalance as creditor oligarchies gained power and disabled royal checks and balances.[3]

Near Eastern rulers proclaimed Clean Slates to annul the overgrowth of debts that polarized society between creditors and debtors. These royal debt cancellations contained three basic dimensions: a wipeout of personal and consumer debts (but not commercial business debts); liberation of individuals pledged as bondservants to creditors; and a return of land and crop rights to the debtors, to free the land from creditor claims on its usufruct.[4]

Every successful economy in history has been a mixed public/private symbiosis. America’s first professor of economics at the nation’s first business school – Simon Patten at the University of Pennsylvania’s Wharton School of Business – explained that public infrastructure and enterprise is a “fourth” factor of production. It differs from labor, capital and land in that its aim is not to obtain income. Labor earns wages, capital earns profits and land receives rent, but the aim of public enterprise is to minimize the economy’s cost structure – the price of living and doing business. Public enterprise operates on a break-even level to provide essential services at cost (in the case of the post office), at subsidized rates (health care, research and development patents, and phone and broadcasting systems) or even freely (roads, public education, police and fire departments). Likewise, a classical tax system is levied on the land’s site rent so as to avoid avoiding taxes that raise the price of labor and capital, while preventing this rent from being capitalized into bank mortgages that raise the price of housing and commercial real estate.

Privatization raises the price of doing business, by charging fees to cover the payout of profits and dividends, interest and other financial fees, soaring management salaries and bonuses, and stock options. The aim of privatizers is to make gains by rent extraction, turning the economy into a conglomeration of tollbooths charging access fees. Outsiders borrow money from banks to buy the privatized infrastructure and raise access fees all the more – gaining support from the financial lobby by becoming one of the largest markets, inasmuch as public infrastructure is the largest capital investment in most economies and hence the largest bank market.

Appropriators of natural monopolies and other public enterprises translate their economic gains into political influence to free themselves from taxes and disable price regulation and anti-monopoly laws. Their idea of a “free market” is to shift the tax burden onto labor, off themselves and their special privileges – and off the interest charges paid to banks for the purchase of such privileges. The aim is to leave the maximum amount of revenue “free” to be paid to high finance.

History’s greatest fortunes have been carved out of the public domain, often by military conquest and more peacefully by political insider dealing. What distinguishes recent privatization is the role played by the financial sector, acting internationally. Revenue from privatized property rights is capitalized into financial securities and bank loans, on a scale large enough to drive a global stock market boom highlighted by post-Soviet stock markets and real estate. The tragedy of our time is that this financing and debt leveraging has been managed in a predatory and extractive way – by loading existing assets down with debt and financial claims without creating new means of production, export earnings or other means to pay.

From the 1950s through the 1970s the World Bank headed financial consortia lending to Third World governments to build roads and ports, power plants and other infrastructure – mainly the “external” costs of foreign-owned raw materials production. The financial sector and its clients got rich on extending credit for these projects. Then, in the 1980s, they made yet bigger fortunes selling off this public capital. From Britain to Latin America, public infrastructure and government enterprises were the largest asset category apart from real estate. Global bankers and financial institutions made money twice, first by funding this investment and then transferring it into public hands on credit, mainly by leveraged buyouts and the subsequent flurry of mergers and acquisitions.

For many decades privatization was imposed mainly on debt-strapped Third World economies forced to relinquish their policy-making power to the IMF and World Bank. But the Baltics had no debt at all when they emerged from the Soviet Union. All the post-Soviet economies were debt free – and had no property claims. Yet instead of becoming the most competitive economies in the world, they succumbed voluntarily to Western European bankers loading their economies down with debt, and to investment advisors telling them to create and give away property rights to insiders. The latter then were advised as to how to sell large chunks to Western money managers, turning the subject post-Soviet economies into the world’s leading stock market vehicles. Instead of advising these economies to build themselves up the way that North America and Western Europe had done, by public investment in infrastructure to minimize the cost of living and doing business, the Washington Consensus dictated the creation and sell-off of rent extraction privileges.

This was by applied with almost religious fervor – or more accurately, a superstitious enthusiasm best characterized as neoliberal cultism. Russia’s central bank even paid 100% interest for U.S. dollar loans to needlessly back its own domestic currency issue – only to have this borrowing siphoned off and dissipated subsidizing capital flight to the West, in a flood estimated at $25 billion annually for over a decade! The myth that domestic currency had to be backed by foreign exchange – as under the old gold standard – was bought as if it were a religious teaching from on high, not a ploy to stymie and stifle Russian development.

Latvia’s experiment in free-trade dependency

All the leading industrial and financial economies, from Britain in the 17th century to the United States after 1860 (when its Civil War freed the country from Southern anti-industrial trade policy), Germany and France, Japan and modern China have built up their industry and agriculture – and hence their foreign trade, which in turn has made them financial powerhouses – by means of protective tariffs, subsidies and public infrastructure.

Agricultural protectionism has been particularly successful in the United States (based on the Agricultural Adjustment Acts of 1933 and 1938, supported by import quotas and systemic opposition to Third World food independence) and the EU’s Common Agricultural Policy (CAP). Price supports for crops have enabled farmers to invest in capital and increase farm productivity as sustained as that in manufacturing. This protectionist policy has made crop exports the mainstay of the U.S. trade balance, while European protectionism likewise has produced rising farm surpluses.

Rolling back tariffs and other taxes makes countries less competitive by slowing capital investment, blocking their rise in living standards and productivity. Their lead in protectionist policy has enabled the most developed nations to benefit from capital flight and emigration from countries that have failed to achieve a mixed economy. The resulting fiscal deficits have forced governments into debt, increasingly to foreigners. Their loss of autonomy has enabled the industrial, agricultural and creditor bloc to operate via the IMF and EU and demand austerity that makes indebted “free market” economies even less competitive, locking them into an economic and even demographic death spiral of debt and poverty.

This is the prospect facing Latvia today. It has bought into an anti-government faith that specializing in banking and transport services – while becoming more industrially, agriculturally and financially dependent on foreign suppliers – is the way to make it richer most rapidly. The reality is that by increasing dependency on (and payments to) foreign bankers and international financial institutions, this policy leaves less opportunity for most Latvians to make a living.

Policy conclusion

Fifty years ago Stalin dispersed some 50,000 members of Latvia’s propertied middle class by force, seizing their property and arresting many, exiling some to Siberia and driving others to emigrate to save their lives. Latvians understandably recoil from this destructive behavior and go to the opposite extreme, only to discover that this produces a similar effect. Latvia and the other Baltic nations have been caught in the backwash of the Cold War. “Market forces” have replaced military force, but the effect is equally harsh: to dismantle post-Soviet industry and drive labor – especially skilled labor – and capital out of these countries.

The U.S. logic was that any industrial capability was potentially military in character. It followed that manufacturing and high technology should be dismantled throughout the former Soviet Union. Russia’s economy was rolled back to make it more of a Third World country – what the Americans long called “a hewer of wood and drawer of water” in Biblical language. In Russia’s case this meant living off oil and gas, along with nickel, aluminum, platinum and other metals. But the Baltic States do not enjoy this fallback position.

Western self-interest was predatory in promoting the economic regime that led to today’s financial disaster. The West has subdued the post-Soviet population and appropriated the economic surplus from the property it had built up, along almost identical lines that had occurred in Latin America in the 16th and 17th centuries, and Africa in the 19th century, replete with client chieftains, tax “freedom” for the predators and debt peonage for the local labor force.

Latvia’s radical neoliberal experiment is testing the degree to which this kind of destruction of labor, public enterprise and government policy can be wielded by non-military means. The question is, how long will Latvia succumb to the Stockholm syndrome, identifying with the parties that have captured its economy and self-imposed anti-labor, anti-industrial and anti-agricultural policies democratically. The effect is to reduce the population to a state of debt peonage to foreigners, and indeed to Latvia’s old feudal master, Sweden.

What keeps Latvians in this subservient position is the travesty they have been taught regarding the tax policy, wage and labor policy and trade policy that has guided the most successful nations. Europe and America have told Latvia, “Do what we say, not what we do.”

Latvia could have become a low-cost producer by transferring housing and office sites freely to their occupants and users at the time of independence or soon thereafter. It could have provided public infrastructure at cost. Its manufacturing and other enterprise was free of debt, and could have used productive credit to expand operations. The post-Soviet economies had no debt at all when they obtained their political independence from Russia in 1991 –no property claims for rent or interest. Yet over the past decade they have become the world’s most debt-ridden countries. Having borrowed against real estate, public enterprises, natural monopolies and mineral deposits, they now have to beg from the IMF and EU for loans to stabilize their teetering exchange rates.

This borrowing is mainly to serve foreign bankers, not Latvians, just as Latvia’s tax system is designed to serve these bankers. The effect of Latvia’s bank borrowing has been to enable – indeed, oblige – buyers to bid up prices for housing and other assets. Latvia’s perverse tax system, insider property dealings, failure to tax economic rent, and relinquishing credit creation to foreign institutions have made it a high-cost economy. Its real estate bubble, applauded for turning it into a “Baltic Tiger,” was achieved by taking on foreign-currency debt for loans to bid up the prices that homebuyers and businesses have to pay for the space they need to live in and conduct business. The World Bank endorsed the Baltic Miracle as insiders and other appropriators got rich by selling off the assets inherited from Soviet times.

The flat tax, dismantling of state support for industrial and agricultural employment, withdrawal of public subsidies for production that every European Union nation enjoys under the Common Agricultural Policy (CAP) and centuries of industrial protectionism, the dismantling of public budgets to serve a new rentier class such as the Physiocrats, Adam Smith and other classical liberals sought to free industrial capitalism from – all this was designed to dismantle Russian industry and thereby end its potential Cold War threat to NATO.

Lacking a raw-materials base to support them even at Latin American standards, Latvia needs to end the neoliberal experiment and adopt the policies that made Western Europe and America rich. Fortunately, this can be done with the stroke of a pen. Just as the neoliberal dismemberment of Latvia was bloodless, so the recovery of markets does not require a revolution. It can be done by rewriting the nation’s tax law and financial law along more progressive lines.

To make this start, Latvia needs to free itself from the anti-industrial, anti-labor tax system that neoliberal managers have imposed, and from the foreign-currency debt burden with which foreign banks have loaded the country down. The problem is that income that is not taxed will end up being pledged for debt – and paid out as interest charges. Contrary to what bank lobbyists and neoliberal propagandists argue, land taxes reduce the price of real estate. It is taxes on labor and capital that add to the cost of living and doing business.

The post-classical road to neofeudalism and debt peonage

Designed to serve the creditor nations, inter-governmental loans tend to be injurious to the countries. These sacrifice policy-making autonomy to the International Monetary Fund and, in Latvia’s case, to the European Union bureaucracy. The EU and IMF view debtor countries as vehicles to extend credit to their own banks and exporters. Over the past two years they have “helped” the post-Soviet countries maintain their exchange rates by sacrificing their domestic economies in order to sustain the payment of mortgages to European banks that otherwise would have to take heavy losses on their loans to real estate debtors unable to pay the higher domestic-currency carrying charge that would result from their local revenue falling against the euro.

The EU has made it clear that its credit is not to finance domestic investment or spending, but just the opposite. It requires debtor governments to impose austerity and even run budget surpluses to squeeze out foreign exchange by limiting the population’s ability to afford imports and presumably “free” output for export. (This never works.) This policy of economic shrinkage is just the opposite of Keynesian counter-cyclical spending such as Mr. Obama’s Stimulus Plan to help pull the United States out of its own downturn. Austerity plans are only for export to economic dependencies – and make them even more dependent on the financial core.[5]

Latvia’s GDP fell by 18 percent in 2009, and is forecast to shrink altogether by nearly 30 percent from the crisis’ onset in autumn 2008 until the end. More people already are out of work (the yearend 2009 unemployment rate is reported to be 16.8 percent), so default rates are rising. Housing and other real estate prices have plunged by about 50 to 70 percent in most markets, and new construction has all but stopped.

In the public sector where shrinkage is most drastic, Latvia had over 150 hospitals and clinics when the Soviet period ended in 1991. It now has only around 40, and the IMF and World Bank demand that it close down half of them. Many needed services were closed, including trauma centers and ambulance services. Public health standards have worsened and life spans shortened by several years for men, as has been the case in Russia. There has been an exodus of doctors and health specialists, especially to the richer neighboring Scandinavian countries – part of a serious emigration of highly skilled and unskilled workers alike. According to a recent poll, about a quarter of the male population aged between 20 and 35 years old plans to emigrate during the next five years. And as for the training of new professionals, formerly free universities are now charging tuition, so money rather than talent now obtains higher education. This is the result of financialization as Latvia shrinks its economy to pay foreign creditors.

One motive for emigration is to avoid a lifetime of debt peonage. Homeowners find themselves frozen into their homes almost as serfs as property prices plunge below the amount of their mortgage debt. They cannot move out, because they would have to pay banks the balance due on their negative equity. They, not the banks, must absorb the loss on the bad loan. Unable to find a buyer at a price that covers their mortgage, debtors remain personally liable to save the Swedish bankers from taking a loss, by making up the difference out of their own future earnings. And the situation is getting worse as rents fall in the shrinking economy. There is no way to find renters to cover the mortgage debt. Many debtors are deciding that it is easier to leave the country. This is what many parents are urging their children to do today.

So the economy seems to be in a death spiral – not only economic death but a demographic crisis as well. Matters threaten to worsen if Latvia’s trade deficit forces the currency to be devalued. Carrying charges on the 87 percent of Latvian mortgages denominated in foreign currency would soar. But the only way to stave off devaluation is to keep on borrowing from the EU and IMF. And their financial dictate calls for rolling back wages and living standards, taxing labor all the more and slashing public spending and investment even further! Instead of coming up with a plan to extricate the economy from this debt peonage, Latvia’s neoliberal government can only repeat its faith in “restoring equilibrium” by tightening the fiscal and financial screws.

An economic program to renew Latvian development

Banks must share responsibility for keeping loans within the debtor’s ability to pay. This basic rule has been violated throughout the world in recent years. This has been largely a result of the banks’ greed in making loans more than limited to 70 percent of the property’s value, as was long the rule in the United States. In view of the fact that Latvia’s currency is under pressure to be devalued – with 87 percent of mortgage debts being denominated in foreign currency – banks should only able to take the house itself when they foreclose. This is the collateral that was supposed to back the loan, and it is what makes mortgage loans different from personal loans. Personal liability should not be permitted for mortgage debtors. There is no better way to prevent banks from making irresponsible loans, and then trying to make the debtor’s pay.

Second, all loans and obligations should be re-denominated in domestic currency. This is similar to what U.S. President Franklin Roosevelt did in the in 1932 when he overruled the gold clause in most loan contracts. (The clause stated that if the price of gold changed, the debt had to paid in gold equivalence.) This was intended to prevent creditors from obtaining a windfall gain and indeed, a gain beyond the ability of debtors to pay and hence at the expense of economic recovery. The economy comes first, not the bankers. This is especially important in today’s world, where there is no longer a constraint on the banking system’s ability to monetize credit.

A third plank of the program to renew Latvia is designed to cope with the problem of abandoned housing, squatters and crime that has plagued foreclosures in the United States. Upon insolvency or foreclosure of residential and commercial property, the foreclosing bank must put it up for auction within one month, to be sold at a market price. The current occupant (either the indebted owner or renter) will have the right to match the bid. Our plan is for the government to set up a bank to lend the occupant funds to buy the property, converting its current rental value into mortgage debt service. At current prices, the new mortgage may be about 30 percent of the existing debt – and it will be denominated in domestic currency. The oligarchs seem happy with this, because loans on the large public utilities and other assets they have taken over and borrowed against also will be redenominated in domestic currency.

In October 2009, Latvia’s Prime Minister endorsed the first plank of this program, saying that there should be no more personal liability for mortgage debt. The Swedish finance minister became furious and said that this would break all tradition. The Harmony Centre (“Concord”) Party replied that the tradition to which Sweden seemed to be referring was feudalism, and reminded Sweden that Latvia threw off the Swedish yoke back in the 17th century – and threw out the German land barons in 1905.

There is a case of cognitive dissonance when it comes to structural financial and fiscal reform. Most people are not aware that a workable alternative exists, one that was viewed for a century as being the free market alternative – a market free of unearned income and “empty” pricing. Students no longer are taught that economic thinkers have spent the last seven centuries discussing better modes of taxation, banking and pricing, based on the ability to distinguish between economically necessary costs and income, and unnecessary costs.

The classical reformers sought to complete what they viewed as the economic program of industrial capitalism: to throw off the remaining legacy of feudalism, above all the landlord aristocracy that used to be called the idle rich, and also predatory bankers – a cosmopolitan interest typically working with absentee owners, monopolists and other rent-extracting parties. Landowners, privatizers and monopolists are now backed by their international bankers, joining forces to become a new aggressive power as financial speculators. Their activities are not necessary for the industrial economy to operate, but are a rentier overhead that slows it down.

The most important plank of our program concerns the tax system. Like most other post-Soviet economies that have been neoliberalized, Latvia has a dysfunctional flat tax on employment – a total tax burden (labor, employer, and social tax) of over 50%. This is the major factor pricing Latvian labor out of global markets. We urge that the tax be shifted off labor and its employers onto where the classical economists urged it to be placed: on the land and natural resources, presently taxed at less than 1% of their value.

This would “reform the reformers.” We expect that the EU and its commercial bankers will fight against this tax shift, fearing that it might spread to other countries. That ultimately is the economic and financial war in which Latvia is caught up as prime victim. Fiscal reform must be a key element in financial reform, because the two prongs of reform are symbiotic. Taxing the land will save its rental value from being capitalized into bank loans. Our aim is to limit bank credit to the financing of creating new means of production, not merely to bolster the price of unproductive, extractive privileges and property claims.

Our recommendations are those of centuries of classical liberal economics, from the French Physiocrats through Adam Smith, John Stuart Mill to America’s Progressive Era reformers. In rejecting their classical economic and fiscal logic, Latvia’s neoliberal planners are much like fundamentalist believers in Genesis were offended when Thomas Huxley defended the theory of evolution. “Respectable churchgoers were appalled. ‘Let us hope it is not true,’ cried one horrified lady upon hearing that humans were descended from apes, ‘but if it is, let us pray that it will not become generally known.’”[6]

This is the attitude taken today by Latvia’s neoliberal taliban. They would like to hope that the ideas of the men they cite as their intellectual patron saints – Adam Smith, et al. – did not really say what they did. But facts are facts. The dysfunctional tax system, financial system and dismantling of public enterprise and a public banking option run counter to the idea of free markets held for centuries by the classical liberals. Their idea of a free market was a market free of unearned income, free of land rent and predatory financial charges. Latvia’s neoliberal rulers have been busy loading down the economy with these charges during their entire time of office. The result has been an economic and demographic death spiral for Latvia.

Latvia’s financial and economic problems are not natural, nor are they inevitable. Latvia can still become a highly competitive industrial and agricultural producer with a high standard of living. All it needs to do is end the radical neoliberal experiment – an experiment which, after all, was designed to destroy Russian Soviet military power, sweeping up Latvia’s unfortunate economy in the backwash.


[1] E. Peshine Smith, “The Law of Progress in the Relations of Capital and Labor,” Hunt’s Merchants’ Magazine, XXVI (1852), p. 42.
[2] U.S. Labor Secretary Jacob Schoenhof, Wages and Trade in Manufacturing Industries in America and in Europe (New York, 1884), p. 19. I discuss both the above authors in America’s Protectionist Takeoff, 1815-1914: The Neglected American School of Political Economy (ISLET, 2010).

[3] Michael Hudson, “Entrepreneurs: From the Near Eastern Takeoff to the Roman Collapse,” in David S. Landes, Joel Mokyr, and William J. Baumol, eds., The Invention of Enterprise: Entrepreneurship from Ancient Mesopotamia to Modern Times (Princeton: Princeton University Press, 2010):8-39.

[4] Readers of the Bible will recognize this as the essence of the Jubilee Year of Leviticus 25, which Jewish religion took out of the hands of rulers and placed at the center of their religion as a covenant under Mosaic law. And when Jesus gave his first sermon in the synagogue, Luke 4 describes him as unrolling the scroll of Isaiah and saying that he had come to proclaim “the Year of our Lord,” that is, the Jubilee Year, deror. This Hebrew word that the prophets and Leviticus used was cognate to Babylonian andurarum. I describe the details in “Reconstructing the Origins of Interest-Bearing Debt and the Logic of Clean Slates,” in Debt and Economic Renewal in the Ancient Near East (ed. Michael Hudson and Marc Van De Mieroop, CDL Press, Bethesda, 2002):7-58.

[5] I provide a history of theorizing along these lines – and of alternatives – in Trade, Development and Foreign Debt (1992; new ed. ISLET 2009).

[6] Cited in Brian Fagan, Cro-Magnon: How the Ice Age Gave Birth to the First Modern Humans (2010, Bloomsbury Press), p. 44.

Michael Hudson is a frequent contributor to Global Research. Global Research Articles by Michael Hudson

David McWilliams on the ESRI

David McWilliams has posted a new article, ‘Why the ESRI has got it wrong’

Should governments cut spending rapidly this year and next if the economy is
still on its knees?
This debate is raging, not just in Ireland, but around the world. Broadly
speaking, the EU and the European Central Bank (ECB) want to cut back government
spending quickly, while the Americans are more cautious, wishing to make sure

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

The €22bn question should be the 78 billion ++ Question?(Just Anglo)


AFTER the revelations of a horrendous capital hole of €9.3bn for 2010, and potentially a further €10bn over the next number of years, defending a future for Anglo Irish Bank has become a very difficult task for the Irish Government.

However, there are two key reasons why the Government is continuing to support the bank as a going concern:

  • Macro impact: the bank’s current and potential role in supporting liquidity to the Irish economy, particularly the Irish small/medium business sector. Also, by winding down Anglo Irish Bank, the impact of a ‘fire sale’ of the Anglo loan book on the existing Irish banking market would be highly detrimental to the sector.

lRetrieval of capital: the potential that the State can retrieve some of the invested capital used to support the bank in the years to come through a trade sale.

The contraction of liquidity in Irish lending has been drastic, particular among the foreign-owned banks operating in Ireland.

Strong relationship

Anglo is an incumbent and has strong relationships across many sectors in the economy, outside of its property exposure. In a well-defined focus, it has a role to play as lending provider in the small- to-medium sized enterprise sector where it holds a 20pc market share.

Discontinuing Anglo Irish Bank and winding it down as a franchise virtually eliminates any chance of a retrieval of value from the capital committed by the State.

There is no certainty that winding up the bank will prove any less costly than providing support as a going concern.

Whether the bill for winding up Anglo Irish Bank is €20bn, €30bn or potentially €60bn as the Finance Minister indicates, it would have a destabilising impact on the sector.

The fall of a bank with a €72bn lending book — €35bn after the National Asset Management Agency — with the loss of deposits and the potential house-of-cards effect on the remaining sector, are all justifiable reasons for the continued support of Anglo.

Closing down the loan book of the bank simply forces a massive liquidation event on all non-property borrowers in the Irish economy.

As a going concern, Anglo may be able to create some value for its franchise in the coming years.

The most significant threat to the future of Anglo Irish Bank comes in three forms:

  • The complete loss of credibility as a counter-party.
  • A decision from the EU that the state influence at the bank is distorting competition in Irish banking.
  • Its shocking capital hole.

The need for a strong independent management, strong capital levels and a cohesive strategy can mitigate the counter-party risk issue over time.

However, Anglo will need to demonstrate its ability to survive in the funding markets independently from government.

Plans to create a “good bank/bad bank” are believed to be advancing to EU level. The single key question for the EU concerning Anglo Irish Bank is whether the state ownership of the bank will distort the competitive landscape in the Irish banking industry. This question must be resolved before a “good bank” can compete in the Irish market.

Finally, the state bill for supporting Anglo has already breached the most negative assumptions flagged during the imposition of the bank guarantee scheme.

Defending Anglo should not be a political decision or an emotional one, but an economic one. If the bill for winding the bank down is greater than that for investing in its support, then the State must act to minimise the final long-term cost to Ireland — however unpopular the decision appears.

– Kevin McConnell

Irish Independent



I have for many years invested in the stock market (a Day trader ) at the beginning used to invest in companies like IBM and INTEL and small companies like PGNX and Trinity Bio Tec etc.

I would start by putting in a small amount of money and then If the trade went against me I would put in more and then more and at some time I would start thinking well it must go up sometime and then double down and hen I would find myself looking for reasons to put even more funds into a bad trade

Reading the above article I recognize the very reasons I would use, It would cost more if I left the trade so I must stick with it and sometime in the futures it will go up again.

It’s a good company a big company has huge assets and so on

As a trader now for the last 14 years I have to say that the reasons the Minister has put forward and the Minster bought and paid for media seem to be supporting are just laughably.

I have learned to become a discerning investor, and have learned painful facts of life about the financial world.

The market is unforgiving and has no loyalty. There are two worlds for the market one is the makeup spin world that the ordinary retail investor belongs (Mostly you and me)

Then there is the real world, after you strip away the spin (like stripping an onion) the smart money world .this world is made up of the institutional investors, the big guys, the smart money.

These are the guys that manipulate the media and reports, publish up-grades to a stock

e .g .Such and such received an increased price target from a broker to –day .You see there are so many vested interests manipulating the news that it is practically impossible in truth to give good advice on any stock .It all boils down to the thrust wordiness of the company’s Management, their past performance and the strength of their balance sheet (technical and fundamental analyzes) and Business model. Now to any investor looking at the Anglo proposal and the available information

It would be red flagged .this is what’s known as a basket case! Doing a technical and fundamental analyzes on the available information it’s a lost cause and no more money should be put into this dead loss! There is no upside, this will gobble up any amount of funds you have and will become a dumping for other lost causes as well (losses for other Banks)

No amount of money will retrieve the thrust that has been lost in the business model this bank had!

The damage that has being caused by this Bank is worse than ENRON, Lehman Brothers! Or World com and must be closed down now!

The Brand ANGLO is dead and anything or anyone to do with is toxic.

As an investor my advice is get out and cut your losses now! You would have a better chance to revive any one of the above companies, and the yanks with their infinite amount of capital chose to closes down their Turkeys (lost causes).in the states this would be shut down To-day Period!

The management would be in Handcuffs and some would be in Jail now.

There is the real possibility of huge class actions been taken against Anglo Irish Bank, the Irish Government and against the senior management!

Keeping this Bank on life support is just plain madness, but a bad investor will always find a reason to stay in a bad trade no matter what.

Stop this slaughter now!


Denmark’s hidden shame!.

The sea is stained in red and in the mean while it’s not because of the climate effects of nature.

It’s because of the cruelty that the human beings (civilised human) kill hundreds of the famous and intelligent Calderon dolphins.

This happens every year in Feroe Iland in Denmark . In this slaughter the main participants are young teens.


A celebration, to show that they are adults and mature!

In this big celebration, nothing is missing for the fun. Everyone is participating in one way or the other, killing or looking at the cruelty “supporting like a spectator”

Is it necessary to mention that the dolphin calderon, like all the other species of dolphins, it’s near extinction and they get near men to play and interact. In a way of PURE friendship

They don’t die instantly; they are cut 1, 2 or 3 times with thick hooks. And at that time the dolphins produce a grim cry like that of a new born child.

But he suffers and there’s no compassion while this magnificent creature slowly dies in its own blood

Stop this slaughter now!

We will send this mail until this email arrives in any association defending the animals, we won’t only read. That would make us accomplices, viewers.

Take care of the world, it is your home!

Assine contra essa crueldade:

Sign Against this cruelty:

1.- Ana kARINA Rivas (m) Mexico DF

2.- Carlos Enrique Bulle-Goyri. DF

3.- Alejandra Nabarro ( Mexico Cuernavaca )

4.- Esteban criz mejia. Mexico DF


6.-González Alvarez Victor Rodrigo

7.-Ines Garcia Perez (México)

8.-Stella Morales (México)

9.-lgarcia (México)

10.-Leticia Cuéllar (México)

11.-Salma Urbina Aguilar (Quintana Roo, México)

12.-DIANA LUCELLY POOT PUC (quintana roo, mexico )

13.-Josue Acero Gonzalez ( Quintana Roo , Mexico )

14.-Micaela Medina ( Argentina )

15.-sofia bidondo( Argentina )

16.- Ma. Marta Soruco ( Argentina )

17.- Cyntia Mariela Roitman ( Argentina )

18.-Aldana Martínez ( Argentina )

19.- Adriana Salomon ( Argentina )

20.-fernando valussi( argentina )


22.- Leyes Alberto Fabian ( Argentina ).-

23.- Augusto Patricio Mateos ( Argentina – Chaco )

24.- Maria Alejandra Bury ( Argentina – Chaco )

25.- Claudio Alexis Agnesio ( Argentina – Chaco )

26.- Cesar Abel Falcon(Argentina-Chaco)





31- NATHIA JUDKEVICH ( Argentina )

32-MARINA JUDKEVICH ( Argentina )


34- Bogado Espinoza, Lorena Abi ( Argentina )

35- Ortiz, Natalia Muriel ( Argentina )

36- Marcelo Rodrigues de Rezende (Sorocaba-Brasil)

37- Thais Chenchi Santana (Sorocaba-Brasil)

38- Lilian Yoshie Kato ( Sorocaba – Brasil)

39 – DIOGO CRISTO ( Sorocaba – Pindorama – Gaya )

40 – DANILO GOMES ( Sorocaba – Cidade de Mentiras)

41- Tiago Holtz Guerreiro (Sorocaba- Brasil)

42 – Laura Nunes Garcia Vieira ( Sorocaba – Brasil)

43 – Anderson Schmitt Junkes (Jandira – Brasil)

44 – Eronides Santos Filho (Jandira – Brasil)

45 – Suzana Lopes Ribeiro ( Jandira – Brasil )

46 – Paulo Henrique Ferreira (Cotia/SP Brasil)

47 – André Luiz da Fonseca Roberto ( Carapicuiba/ Brasil )

48 – Jean Paulo Camargo Costa (CARAPICUIBA/ BRASIL)

49 – Rodrigo de Jesus Ferreira (Jandira – Brasil)

50- Bárbara Tabain Seslija de Sá (Jandira – SP – Brasil)

51 – Ana paula Morina Ferreira (Barueri – SP – Brasil)

52-Bárbara Louise (São Paulo-SP-Brasil)

53-Diego Lima (Carapicuíba-SP-Brasil)

54 – Wanda leila de Oliveira marra ( Osasco – SP –Brasil )

55 – Joilva Duarte (Osasco-Brasil)

56 – Patricia M. Dias ( São Paulo – Brasil)

57- Eduardo M. Dias ( São Paulo – Brasil)

58 – Wagner R. Franco (São Paulo – Brasil)

59- Ruth Cristina Serafim (São Paulo – Brasil)

60- Thiago Silva (São Paulo – Brasil)

61 – Cristiano S. de Moraes (Rio de Janeiro – Brasil)

62 – Kelly Lopes Dias (São Paulo – Brasil)

63 – Fábio Ferreira / São Paulo – Brasil

64- Fábio Araujo / São paulo – Brasil

65- Marcia Stevaux/ São Paulo – Brasil

66 – Débora Gisele Ferraz – Brasil

67- Andrea Alexandre de Carvalho

68 – Adilson dos Santos Pinto (Cruzeiro SP)

69 – Francisco ReZende (Lorena-SP)

70- Mislane Souza Prates( São Paulo-Brasil)

71 – Janderson Dutra (Rio de Janeiro-RJ – Brasil)



74- Maria L Lima – (Rolândia – Brasil)

75 – Marilise G.Z. Solle (Rolândia-Brasil)

76- Luis Fernando Silva de Almeida (Rolândia Pr- Brasil)

77- Adriana Amaral de Souza (Rolândia Pr – Brasil)

78 – Carlos Alberto Ferreira do Amaral (Rolãndia PR – Brasil)

79 – Lilian Carla de Souza Gonzalez ( Londrina – Pr. – Brasil)

80 – Ailton Valdivino da Silva – (Uberlândia – MG – Brasil)

81 – Heliza Piosiadlo (Uberlândia – MG – Brasil

82 – Patrícia Cordeiro ( Joaçaba-SC-Brasil)

83 – Danielle Argenton (Herval D’ Oeste – SC – Brasil)

84 – Valdirene Soares ( Joaçaba – SC – BRASIL )

85 – Luiz Sérgio Belló – Joaçaba SC Brasil

86- Eduardo Wieser -SC- Brasil

87- Julio Pancera ( Navegantes , SC – Brasil)

88- Fredi Goede ( Pomerode , SC Brasil)

89 – Mario L.Fanton

90 – Valério Littig ( Curitiba – Brasil )

100-cassia cavalheiro

101 – Paulo Terumitsu Ishii [ Curitiba – Paraná – Brasil]

102- Caroline Niro ( Curitiba – Paraná – Brasil

103-Alexandre Batista(Londres-Inlaterra)

104-udson bergues de almeida

105 – Inês Calazans, Alemanha

106 – Anabela Martins – Portugal

107 – Luisa Sequeira – Silves / PORTUGAL

108 – Alzira Rodrigues – Silves / Portugal

109 – Cremilde Ribeiro – A.. de Pêra / Portugal

110 – Augusto Miguens – Elvas / Portugal

111 – Natália miguens – Elvas / Portugal

112 – Manuela Santos – Carcavelos / Portugal

113 – Carla Santos – Oeiras / Portugal

114 – Maria Carlos Barreto de Carvalho – Carcavelos / Portugal

115 – Eliete Mendes – Lisboa / Portugal

116 – Conceição Oliveira – Lisboa / Portugal

117 – Mariana Domingues – Portugal

118 – Joana Murtinha – Portugal

119 – Filipa Almeida – Portugal

120 – Iolanda Fontes – South Africa

121 – Kalen Viljoen – South Africa

122 – Wendy Golding – South Africa

123 – Inge Strugnell – Botswana

124 – Philippa Lee – Botswana

125 – Ilse Swart

126 – Miche de beer

127 – Celeste Smit

128 – Jeneane Fourie

129. Stefnie de Beer (SA) Human beings ? How can we call ourselves that !

130 Corné van Staden

131 Anna-Marié van Staden

132. Sheralee Scott ( South Africa )

133 Bev Hindmarch ( South Africa )

134. Ian Pardy (SA)

135. Dominic Porter (SA)

136. Carl Bennett (SA) Sick Bastards!!

137 Dieter Rossler South Africa uncivilised idiots

138. Vigie Naidoo, Johannesburg South Africa (how far western man??)

139. Rodney Reddy S.A. — lily-livered, sure they’l never dare try this with some tiger or bull sharks

140. Mira Naidoo, Johannesburg South Africa (shameful specimens called humans)

141. Rocco Steffannelli, Bari Italy (senseless killing)

142. Christian Hoffer, Mank Austria (Neanderthals!)?

143. Sarah Caine (SA)

144. Lorraine Caine (SA)

145. Elaine Caine (Sa)

146. Lorraine Isaac (SA)

147. Ronnie Isaac(SA)

148. Angelique Mason(SA)

149. Alysha Isaac (SA)

150. Mary Joe Emde (SA)

151. Nalisha Gangadien SA)

152. Charlene Gangadien (SA)

153. Cordelia Soobramoney

154. Nicholas Soobramoney

155.. Gabriela Pillay

156. Sarah Pillay

157. Jaeden Chetty

158. Sam Chetty

159. Dean Prinsloo

160. Nicole Pillay

161. Janine Geldenhys

162. Noeleen Pillay

163. Vigie Naidoo, Johannesburg South Africa (Nordic barbarism!! – Climate Change?- go figure?)

164. Colette Boyd

165. Tanya Scheffel

166. Rob Armstrong

167. Megan Adriaanzen – Jhb S.A. This is the most appallingly, disgusting thing I have ever seen!!!

168. Gareth Adriaanzen

169. Aldorette Swanepoel

170. Steve Maree – Durban , South Africa

171. Karen Robjant – and they are supposed to come from a civilised country – very sick people

172 Gerhard Janse van Rensburg – Durban South Africa

173 Keagen Janse van Rensburg – Durban South Africa

174 Trent Janse van Rensburg – Durban South Africa

175 Graham Robjant – Durban South Africa

176 Tamaryn Robjant – Durban South Africa

177 Beryl Robjant – Durban South Africa

178 Joan Austin – Durban South Africa

179 Simone Heijmans-Durban South Africa


















197 Janice Wittrup SA

198 Tempest Hindman (Aus)

199 Gary Hindman (Aus)

200 Eben van der Watt (UK)

201 Jeandre van der Watt (UK)

202 Armand van der Watt (UK)

203 Jetro Smith ( UK )

204 Morne du Preez ( UK )

205 Joey Wasiliew ( USA )

206 Willie Olivier, Cape Town (uncivilized barbarians)

207 Andre’ Groenewald, Durban (SA)

208 Chris Goldmann Carvoeiro, Portugal

209 Gary Fonternel – Australia

210 Simon Lewis – Australia

211 Scott Wetherall – New Zealand

212 Jeremy Cusiel – Perth

213 Victoria Verity – Perth

214 Karen Stockin – New Zealand

215 Monika Merriman- NZ

216..Linda Jennings Sydney , Australia

217. Margaret Burgess , New South Wales , Australia

218 Merrill Duffy Australia

219. Margaret Ward – Australia

220 Sandy Jones, NSW Aust

221 Jacqui Bright N.S.W. AUST.

222 Penelope Chambers, Qld , Australia

223 Kim Grant, Sydney , Australia

224 Pua Soliola, Sydney , Australia

225 R’Chee Saipele, Auckland , New Zealand

226 Kim Watts, Auckland , NZ

227 Jenny Korff

228 John Baker, Auckland , New Zealand

229 Paul Baker Auckland New Zealand

230 Jocelyn Dutton Auckland New Zealand

231 Michael Dutton Auckland New Zealand

232 Susan Mann Auckland New Zealand

232 Brian Mann Auckland New Zealand

233 Philip Harris Auckland

234 Eden Moss, Auckland , New Zealand

235 John Moss Auckland New Zealand

236 Pat Moss Auckland New Zealand

237 Mel Orange, Wellington , New Zealand

238 John HOLLAND , South Australia

239 Pauline Macdonald South Australia

240 Helen M south Australia

241 Deidre Coulthard Sth Australia (gee some humans can be sick-bastards alright…..you wonder what planet they come from??…..WE ARE DOOMED!!)

242. Veronica Coulthard , South Australia (sick alright, poor dolphins)

243. Rachel Salmon , South Australia , Australia (how can anyone be called a human to do such senseless acts to such beautiful creatures!!)

244. David Salmon , South Australia , Australia

245. Deb Frank , South Australia , Australia …….absolutely disgraceful!

246. Kathrine Kosmina , South Australia , Australia …words fail me!!!

247. Leanne Mudge , South Australia , Australia

248. Sandra Martin

249. Linda Raison , South Australia , Australia

250 Peter Dorsett, South Australia

251. Helli Meinecke , South Australia

252. Clair Marslen , South Australia

253. Frank Aarts , Australia

254. Deanna Dorward , Australia

255. Thea Aarts , Australia

256. Margie Aarts , Australia

257 Maree Bath , QUeensland , Australia ..

258 Jennifer Walker , Queensland , Australia

259 Jan Deacon, Queensland , Australia – so very very sad!

260 Judy Dixon , Queensland , Australia – unbelievable

261 Susan Jenkin, currently NT, Australia .

262 Del Aulich, Melbourne , Australia- This is unacceptable- must be stopped!w

263 Judith Shapland Melbourne Aust: Who the hell are these so called human beings I am outrages that this should be happening as a global community we need to ban together to stop it!!!!!!!!

264 Deborah Chubb

265 Ray Robinson, Melbourne , Australia . This will not stop until our tears of outrage mingle with the blood of these beautiful creatures.

266 Christina Higgs Melbourne Australia. Unbelievable and so horrible, this has to stop.

267 Diane Beck, Mansfield Australia

268 Christine Davis Redcar England

269 Maureen Tosh, Redcar, England

270 Sandra O’Shea, Nunthorpe England.

271 Moyra Gibb, Kirkcaldy, Scotland

272 Alan Gibb, Kirkcaldy, Scotland

273 Margaret Smith, Kirkcaldy, Scotland

274 Ian Smith, Kirkcaldy, Scotland

275 Anne Ward,Edinburgh, Scotland

276 G V Ward, Edinburgh, Scotland

277 D Johnstone, Sanquhar, Scotland

288 Janet Brown Edinburgh, Scotland

289 morag mccall ,scotland

290 Laura cowan Aberdeen Scotland

291 Marx Murdoch Aberdeen Scotland

292 vicki keraghan invergordon scotland

293 Mieke Horsburgh, Invergordon, Scotland

294 David Horsburgh, Invergordon Scotland

295 Moira Adam, Blackisle, Scotland.

296 Claire Russell, Daviot, Inverness, Scotland

297 Heather Sutherland-Fraser – Black Isle, Scotland

298 Alison McMillan – Inverness, Scotland

299 Gillian MacAskill, Nairn, Scotland

300 Lesley Moore, Nairn, Scotland

301 Davy Orr, Inverness, Scotland

302 Eleanor James, Johnstone Scotland – Once again males (not men) prove how cruel and idiotic they are. I’m ashamed to be human.

303 Dot Spragg. England

304 Barry Spragg. England

305 Sally Moorey, England

306 Paul Wallace, England

307 Trudi OConnor, England

308 Elaine Grayson, England

309 Elaine Whitehead, England

310 Lynn Chapman, England

311 John Moutrey, England

312 David Webb, England

313 Trevor Clayton, England

314 Paul Bowring, England

315 Paul and Jackie Edwards, Shropshire, England

316 Jeremy and Marie Ransom

317 Chris Barrow

318 Aileen Robertson, Edinburgh, Scotland

319 Nina Porter, Inverness-shire, Scotland

320 Margaret Le May, Nairn, Scotland

321 Iain & Kirstine McKenzie,iEast Linton, Scotland

322 Jim Merry,Dunbar,Scotland

323 Ken Riva, Livingston,Scotland

324 Brenda Riva, Scotland

325 Graham Parker, Scotland

326 Anne Morgan Scotland

327 HJ Kerr

328 T M Birch Wales

329 Charlie Kavanagh Ireland

330 Thomas Clarke Ireland

331  Lauren Clarke   Wicklow Town /Ireland

332 Stephen Clarke   Wicklow Town /Ireland

Anybody who loves the sea cannot ignore this cruelty; this is truly shocking behaviour coming from the country that hosted the world’s largest climate change conference.

 Shame on Denmark!

I call upon the Minster of the environment Mr John Gormely and the Irish Government to immediately call upon the Danish Government to ban this barbaric activity

No sane person could condone this slaughter

Please help stop this madness!

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