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Posts tagged ‘Morning Ireland’

Central Statistics Office (CSO) has released its inflation figures

 

By Namawinelake

This morning Ireland’s Central Statistics Office (CSO) has released its inflation figures for July 2011. The headline Consumer Price Index (CPI) was flat month-on-month but up 2.7% year-on-year (same as the annual figure last month, in July 2010 the CPI also remained flat). The biggest driver of inflation in the past 12 months continues to be the CSO category of housing-related costs, and within that, the most significant component is mortgage interest* which has risen a staggering 25.2% in the past 12 months and indeed a significant 2.3% in the past month alone as ECB and domestic bank-driven interest rate rises take effect. Mortgage interest comprises nearly 7% of the CPI so the effect is significant.

full article here at source:http://namawinelake.wordpress.com/2011/08/11/irish-residential-rents-continue-to-stabilise-with-0-5-drop-year-on-year-mortgage-interest-costs-up-a-staggering-25-2-year-on-year/

Ireland is heading for bankruptcy!

OPINION: Ireland is heading for bankruptcy, which would be catastrophic for a country that trades on its reputation as a safe place to do business,

By MORGAN KELLY

WITH THE Irish Government on track to owe a quarter of a trillion euro by 2014, a prolonged and chaotic national bankruptcy is becoming inevitable. By the time the dust settles, Ireland’s last remaining asset, its reputation as a safe place from which to conduct business, will have been destroyed.

Ireland is facing economic ruin.

While most people would trace our ruin to to the bank guarantee of September 2008, the real error was in sticking with the guarantee long after it had become clear that the bank losses were insupportable. Brian Lenihan’s original decision to guarantee most of the bonds of Irish banks was a mistake, but a mistake so obvious and so ridiculous that it could easily have been reversed. The ideal time to have reversed the bank guarantee was a few months later when Patrick Honohan was appointed governor of the Central Bank and assumed de facto control of Irish economic policy.

As a respected academic expert on banking crises, Honohan commanded the international authority to have announced that the guarantee had been made in haste and with poor information, and would be replaced by a restructuring where bonds in the banks would be swapped for shares.

Instead, Honohan seemed unperturbed by the possible scale of bank losses, repeatedly insisting that they were “manageable”. Like most Irish economists of his generation, he appeared to believe that Ireland was still the export-driven powerhouse of the 1990s, rather than the credit-fuelled Ponzi scheme it had become since 2000; and the banking crisis no worse than the, largely manufactured, government budget crisis of the late 1980s.

Rising dismay at Honohan’s judgment crystallised into outright scepticism after an extraordinary interview with Bloomberg business news on May 28th last year. Having overseen the Central Bank’s “quite aggressive” stress tests of the Irish banks, he assured them that he would have “the two big banks, fixed by the end of the year. I think it’s quite good news The banks are floating away from dependence on the State and will be free standing”.

Honohan’s miscalculation of the bank losses has turned out to be the costliest mistake ever made by an Irish person. Armed with Honohan’s assurances that the bank losses were manageable, the Irish government confidently rode into the Little Bighorn and repaid the bank bondholders, even those who had not been guaranteed under the original scheme. This suicidal policy culminated in the repayment of most of the outstanding bonds last September.

Disaster followed within weeks. Nobody would lend to Irish banks, so that the maturing bonds were repaid largely by emergency borrowing from the European Central Bank: by November the Irish banks already owed more than €60 billion. Despite aggressive cuts in government spending, the certainty that bank losses would far exceed Honohan’s estimates led financial markets to stop lending to Ireland.

On November 16th, European finance ministers urged Lenihan to accept a bailout to stop the panic spreading to Spain and Portugal, but he refused, arguing that the Irish government was funded until the following summer. Although attacked by the Irish media for this seemingly delusional behaviour, Lenihan, for once, was doing precisely the right thing. Behind Lenihan’s refusal lay the thinly veiled threat that, unless given suitably generous terms, Ireland could hold happily its breath for long enough that Spain and Portugal, who needed to borrow every month, would drown.

At this stage, with Lenihan looking set to exploit his strong negotiating position to seek a bailout of the banks only, Honohan intervened. As well as being Ireland’s chief economic adviser, he also plays for the opposing team as a member of the council of the European Central Bank, whose decisions he is bound to carry out. In Frankfurt for the monthly meeting of the ECB on November 18th, Honohan announced on RTÉ Radio 1’s Morning Ireland that Ireland would need a bailout of “tens of billions”.

Rarely has a finance minister been so deftly sliced off at the ankles by his central bank governor. And so the Honohan Doctrine that bank losses could and should be repaid by Irish taxpayers ran its predictable course with the financial collapse and international bailout of the Irish State.

Ireland’s Last Stand began less shambolically than you might expect. The IMF, which believes that lenders should pay for their stupidity before it has to reach into its pocket, presented the Irish with a plan to haircut €30 billion of unguaranteed bonds by two-thirds on average. Lenihan was overjoyed, according to a source who was there, telling the IMF team: “You are Ireland’s salvation.”

The deal was torpedoed from an unexpected direction. At a conference call with the G7 finance ministers, the haircut was vetoed by US treasury secretary Timothy Geithner who, as his payment of $13 billion from government-owned AIG to Goldman Sachs showed, believes that bankers take priority over taxpayers. The only one to speak up for the Irish was UK chancellor George Osborne, but Geithner, as always, got his way. An instructive, if painful, lesson in the extent of US soft power, and in who our friends really are.

The negotiations went downhill from there. On one side was the European Central Bank, unabashedly representing Ireland’s creditors and insisting on full repayment of bank bonds. On the other was the IMF, arguing that Irish taxpayers would be doing well to balance their government’s books, let alone repay the losses of private banks. And the Irish? On the side of the ECB, naturally.

In the circumstances, the ECB walked away with everything it wanted. The IMF were scathing of the Irish performance, with one staffer describing the eagerness of some Irish negotiators to side with the ECB as displaying strong elements of Stockholm Syndrome.

The bailout represents almost as much of a scandal for the IMF as it does for Ireland. The IMF found itself outmanoeuvred by ECB negotiators, their low opinion of whom they are not at pains to conceal. More importantly, the IMF was forced by the obduracy of Geithner and the spinelessness, or worse, of the Irish to lend their imprimatur, and €30 billion of their capital, to a deal that its negotiators privately admit will end in Irish bankruptcy. Lending to an insolvent state, which has no hope of reducing its debt enough to borrow in markets again, breaches the most fundamental rule of the IMF, and a heated debate continues there over the legality of the Irish deal.

Six months on, and with Irish government debt rated one notch above junk and the run on Irish banks starting to spread to household deposits, it might appear that the Irish bailout of last November has already ended in abject failure. On the contrary, as far as its ECB architects are concerned, the bailout has turned out to be an unqualified success.

The one thing you need to understand about the Irish bailout is that it had nothing to do with repairing Ireland’s finances enough to allow the Irish Government to start borrowing again in the bond markets at reasonable rates: what people ordinarily think of a bailout as doing.

The finances of the Irish Government are like a bucket with a large hole in the form of the banking system. While any half-serious rescue would have focused on plugging this hole, the agreed bailout ostentatiously ignored the banks, except for reiterating the ECB-Honohan view that their losses would be borne by Irish taxpayers. Try to imagine the Bank of England’s insisting that Northern Rock be rescued by Newcastle City Council and you have some idea of how seriously the ECB expects the Irish bailout to work.

Instead, the sole purpose of the Irish bailout was to frighten the Spanish into line with a vivid demonstration that EU rescues are not for the faint-hearted. And the ECB plan, so far anyway, has worked. Given a choice between being strung up like Ireland – an object of international ridicule, paying exorbitant rates on bailout funds, its government ministers answerable to a Hungarian university lecturer – or mending their ways, the Spanish have understandably chosen the latter.

But why was it necessary, or at least expedient, for the EU to force an economic collapse on Ireland to frighten Spain? The answer goes back to a fundamental, and potentially fatal, flaw in the design of the euro zone: the lack of any means of dealing with large, insolvent banks.

Back when the euro was being planned in the mid-1990s, it never occurred to anyone that cautious, stodgy banks like AIB and Bank of Ireland, run by faintly dim former rugby players, could ever borrow tens of billions overseas, and lose it all on dodgy property loans. Had the collapse been limited to Irish banks, some sort of rescue deal might have been cobbled together; but a suspicion lingers that many Spanish banks – which inflated a property bubble almost as exuberant as Ireland’s, but in the world’s ninth largest economy – are hiding losses as large as those that sank their Irish counterparts.

Uniquely in the world, the European Central Bank has no central government standing behind it that can levy taxes. To rescue a banking system as large as Spain’s would require a massive commitment of resources by European countries to a European Monetary Fund: something so politically complex and financially costly that it will only be considered in extremis, to avert the collapse of the euro zone. It is easiest for now for the ECB to keep its fingers crossed that Spain pulls through by itself, encouraged by the example made of the Irish.

Irish insolvency is now less a matter of economics than of arithmetic. If everything goes according to plan, as it always does, Ireland’s government debt will top €190 billion by 2014, with another €45 billion in Nama and €35 billion in bank recapitalisation, for a total of €270 billion, plus whatever losses the Irish Central Bank has made on its emergency lending. Subtracting off the likely value of the banks and Nama assets, Namawinelake (by far the best source on the Irish economy) reckons our final debt will be about €220 billion, and I think it will be closer to €250 billion, but these differences are immaterial: either way we are talking of a Government debt that is more than €120,000 per worker, or 60 per cent larger than GNP.

Economists have a rule of thumb that once its national debt exceeds its national income, a small economy is in danger of default (large economies, like Japan, can go considerably higher). Ireland is so far into the red zone that marginal changes in the bailout terms can make no difference: we are going to be in the Hudson.

The ECB applauded and lent Ireland the money to ensure that the banks that lent to Anglo and Nationwide be repaid, and now finds itself in the situation where, as a consequence, the banks that lent to the Irish Government are at risk of losing most of what they lent. In other words, the Irish banking crisis has become part of the larger European sovereign debt crisis.

Given the political paralysis in the EU, and a European Central Bank that sees its main task as placating the editors of German tabloids, the most likely outcome of the European debt crisis is that, after two years or so to allow French and German banks to build up loss reserves, the insolvent economies will be forced into some sort of bankruptcy.

Make no mistake: while government defaults are almost the normal state of affairs in places like Greece and Argentina, for a country like Ireland that trades on its reputation as a safe place to do business, a bankruptcy would be catastrophic. Sovereign bankruptcies drag on for years as creditors hold out for better terms, or sell to so-called vulture funds that engage in endless litigation overseas to have national assets such as aircraft impounded in the hope that they can make a sufficient nuisance of themselves to be bought off.

Worse still, a bankruptcy can do nothing to repair Ireland’s finances. Given the other commitments of the Irish State (to the banks, Nama, EU, ECB and IMF), for a bankruptcy to return government debt to a sustainable level, the holders of regular government bonds will have to be more or less wiped out. Unfortunately, most Irish government bonds are held by Irish banks and insurance companies.

In other words, we have embarked on a futile game of passing the parcel of insolvency: first from the banks to the Irish State, and next from the State back to the banks and insurance companies. The eventual outcome will likely see Ireland as some sort of EU protectorate, Europe’s answer to Puerto Rico.

Suppose that we did not want to follow our current path towards an ECB-directed bankruptcy and spiralling national ruin, is there anything we could do? While Prof Honohan sportingly threw away our best cards last September, there still is a way out that, while not painless, is considerably less painful than what Europe has in mind for us.

National survival requires that Ireland walk away from the bailout. This in turn requires the Government to do two things: disengage from the banks, and bring its budget into balance immediately.

First the banks. While the ECB does not want to rescue the Irish banks, it cannot let them collapse either and start a wave of panic that sweeps across Europe. So, every time one of you expresses your approval of the Irish banks by moving your savings to a foreign-owned bank, the Irish bank goes and replaces your money with emergency borrowing from the ECB or the Irish Central Bank. Their current borrowings are €160 billion.

The original bailout plan was that the loan portfolios of Irish banks would be sold off to repay these borrowings. However, foreign banks know that many of these loans, mortgages especially, will eventually default, and were not interested. As a result, the ECB finds itself with the Irish banks wedged uncomfortably far up its fundament, and no way of dislodging them.

This allows Ireland to walk away from the banking system by returning the Nama assets to the banks, and withdrawing its promissory notes in the banks. The ECB can then learn the basic economic truth that if you lend €160 billion to insolvent banks backed by an insolvent state, you are no longer a creditor: you are the owner. At some stage the ECB can take out an eraser and, where “Emergency Loan” is written in the accounts of Irish banks, write “Capital” instead. When it chooses to do so is its problem, not ours.

At a stroke, the Irish Government can halve its debt to a survivable €110 billion. The ECB can do nothing to the Irish banks in retaliation without triggering a catastrophic panic in Spain and across the rest of Europe. The only way Europe can respond is by cutting off funding to the Irish Government.

So the second strand of national survival is to bring the Government budget immediately into balance. The reason for governments to run deficits in recessions is to smooth out temporary dips in economic activity. However, our current slump is not temporary: Ireland bet everything that house prices would rise forever, and lost. To borrow so that senior civil servants like me can continue to enjoy salaries twice as much as our European counterparts makes no sense, macroeconomic or otherwise.

Cutting Government borrowing to zero immediately is not painless but it is the only way of disentangling ourselves from the loan sharks who are intent on making an example of us. In contrast, the new Government’s current policy of lying on the ground with a begging bowl and hoping that someone takes pity on us does not make for a particularly strong negotiating position. By bringing our budget immediately into balance, we focus attention on the fact that Ireland’s problems stem almost entirely from the activities of six privately owned banks, while freeing ourselves to walk away from these poisonous institutions. Just as importantly, it sends a signal to the rest of the world that Ireland – which 20 years ago showed how a small country could drag itself out of poverty through the energy and hard work of its inhabitants, but has since fallen among thieves and their political fixers – is back and means business.

Of course, we all know that this will never happen. Irish politicians are too used to being rewarded by Brussels to start fighting against it, even if it is a matter of national survival. It is easier to be led along blindfold until the noose is slipped around our necks and we are kicked through the trapdoor into bankruptcy.

The destruction wrought by the bankruptcy will not just be economic but political. Just as the Lenihan bailout destroyed Fianna Fáil, so the Noonan bankruptcy will destroy Fine Gael and Labour, leaving them as reviled and mistrusted as their predecessors. And that will leave Ireland in the interesting situation where the economic crisis has chewed up and spat out all of the State’s constitutional parties. The last election was reassuringly dull and predictable but the next, after the trauma and chaos of the bankruptcy, will be anything but.

source: http://www.irishtimes.com/newspaper/opinion/2011/0507/1224296372123.html?via=rel

Comment:

I thought I would resurrect this article .It still holds true to-day

This is the real Ireland and the codgers in the Government are stupid enough to ignore this excellent piece of work. Morgan Kelly is the voice of sanity crying in the wilderness ,those of you who want to hear the truth listen to him !

Morgan Kelly: Right or Wrong???

Morgan Kelly‘s article in the Irish Times on Saturday last, was responsible for stirring up a hornets’ nest in Irish politics and in the zest pit that is the Irish financial world. Here is a summary of the main points he made of which I wholeheartedly agree with. Coming from an ordinary private citizen’s perspective I cannot understand how we the downtrodden taxpayers can still tolerate morons in Government and their stooges running the various financial institutions that have so miserable failed us and our nation state. Some of the people now uttering their pearls of wisdom to us were in fact cheerleaders of the disastrous policies and still enjoy lottery salaries whilst the rest of us struggle to put bread on the table .Until there pampered leaches start to feel the pain the ordinary citizens feel will they understand that the time for waffling is over and we must tackle the high prices for the basic needs like high ESB prices ,Petrol prices , and the various taxes that they now seem to be advocating to pay back debts we the people have nothing to do with ! We must default on this debt to do otherwise is just prolonging the inevitable, you don’t need to have a PHD to suss this one out ! 

– The bank guarantee of September 2008 was a mistake, but a much bigger one was failing to reverse it when it became clear that the bank losses were insupportable.

Patrick Honohan gave “an extraordinary interview” to Bloomberg on 28 May last year, giving assurances that “the two big banks, fixed by the end of the year. I think it’s quite good news the banks are floating away from dependence on the State and will be free standing”. Riiiiight…

– Honohan’s miscalculation of the bank losses is the costliest mistake ever made by an Irish person.

– With Ireland’s reserve fund enough to keep us funded until this summer, Brian Lenihan was in a strong negotiating position when he initially refused to countenance an EU/IMF bail-out last November – but that position was blown out of the water by Honohan’s admission on Morning Ireland on 18 November that Ireland would need a bailout of “tens of billions”.

– The IMF proposed reductions of €20bn on unguaranteed bonds totalling €30bn and Lenihan apparently told the IMF team: “You are Ireland’s salvation.”

– However, the pesky Yanks vetoed such reductions – US treasury secretary Timothy Geithner, the man who sanctioned €13bn of payments from State-owned AIG to Goldman Sachs, “believes that bankers take priority over taxpayers”.

– The EU/ECB were also insistent on all debts being repaid in full. The IMF wanted major haircuts. The Irish negotiating team sided with the EU/ECB – prompting one IMF staffer to describe the Irish as “displaying strong elements of Stockholm Syndrome”.

– The bailout was on a par with the Bank of England insisting that Northern Rock be rescued by Newcastle City Council.

– “The sole purpose of the Irish bailout was to frighten the Spanish into line with a vivid demonstration that EU rescues are not for the faint-hearted … The ECB is keeping its fingers crossed that Spain pulls through by itself, encouraged by the example made of the Irish.”

– “Irish insolvency is now less a matter of economics than of arithmetic … The predictions for Ireland’s debt by 2014 range from €220bn to €250bn, but either way we are talking of a Government debt that is more than €120,000 per worker.” (To which we add: So, like, around 27 years of total income tax from someone earning the annual industrial average…)

– Ireland’s two main banks were “run by faintly dim former rugby players” – so nobody thought they could run up enough debts to bring down a continent.

– The European Central Bank sees its main task as placating the editors of German tabloids.

– Ireland, and Europe’s other small crisis countries, will eventually be forced into some sort of bankruptcy – which would be a disaster for us. Creditors could sell debt to so-called ‘vulture funds’, which could have “national assets such as aircraft impounded in the hope that they can make a sufficient nuisance of themselves to be bought off”.
 

Compiled by LAURA SLATTERY and SUZANNE LYNCH

A compelling case for default and swift balancing of the national budget or a lethal injection for our economy and citizens? Twelve economists discuss 

SEÁN BARRETT 

Senior lecturer in economics Trinity College Dublin 

IRELAND’S CHANGE from a full employment economy and solvency to 14 per cent unemployment and a bailout invites a contrarian response so well led by Morgan Kelly. Widespread institutional failure caused the twin crises in banking and the public finances. These then spread their contagion over the entire economy.

Regulatory capture and institutional malaise have dominated our responses to date. We need the provocative advice of Morgan Kelly to walk away from the bank crisis and tackle the public finances quickly rather than over several years.

With so many of the institutions and personnel who caused the twin crises largely exempt from its consequences, and likely to remain exempt, we need Kelly to remind them and us how much they have harmed this country.

Under “measures to prevent a recurrence” Kelly merits the tag of “required reading”.

ALAN McQUAID 

Chief economist Bloxham Stockbrokers 

THE UNDERLYING theme of the Morgan Kelly article, apart from criticising individuals, is not saying anything new. What Joe Durkan and the ESRI are talking about is similar, in a way, to Kelly – they’re both talking about speeding up the budget correction. Enda Kenny has dismissed the idea and I’d be with Kenny on this. The economy is too fragile.

The [Kelly/Durkan] argument is that it’s the ECB’s problem: a lot of the money was lent to us by European banks that should have known better. I wouldn’t disagree with that. I think the ECB has to do a lot more before this crisis is over.

These are unprecedented times and my gut feeling is that I don’t think anybody did anything deliberately to mess the State up, I think it was all in good faith. It does look like it was the wrong thing to do. Patrick Honohan is obviously in a difficult position given he is on the ECB. I’m not sure anyone could have done any better.

RAY KINSELLA 

Economist UCD Michael Smurfit Graduate School of Business 

IRELAND SHOULD withdraw from the euro zone and inform the next finance council of its decision. This will require pegging either to the UK’s sterling, our largest trading partner, or to the “Deutsche” euro. Either way it will involve devaluation.

The transmission of the effects across the economy will involve negative, as well as positive, consequences. What can be said with near certainty is that it is the least worst option.

Domestic economic indicators and financial market data point to a terminal lack of credibility in the terms, scope and time-frame set out in the bailout. There is simply no way back from prevailing Irish bond yields and associated CBF spreads.

The recent euro zone policies have flown in the face of the markets’ dispassionate analysis of the adjustment policies imposed on the Irish economy. The EU’s €750 billion “shock and awe” initiative cobbled together in May 2010 singularly failed to firewall the periphery from contagion.

Recent proposals for a stabilisation mechanism by 2013(!) defy belief.

PAUL SWEENEY 

Chief economist Irish Congress of Trade Unions 

MORGAN KELLY’S article hit a real chord. He said it as it is. But his solutions would lead to chaos and impoverishment. He is correct about the immense stupidity of the bank guarantee and of the government continuing to repay these socialised private debts.

His most dangerous solution is to “bring the budget into balance immediately”.

This would mean that the deflationary path currently being pursued by government – where one quarter of domestic demand was wiped out in just three years – would look positively benign. It would eviscerate the economy and wipe out too many businesses and citizens. Besides, few governments run balanced budgets.

This idea smacks of that most dangerous tendency in academic economics – to deliver prescriptions with little thought as to their impact on people. Fine in theory, appalling in practice. Interestingly, in its latest report, it is a weakness to which the ESRI has also succumbed as it does a volte face on previous recommendations and demands huge and immediate cuts.

Kelly is right on “disengaging from the banks” but it has to be done with EU agreement. Call it a “managed default”.

TOM O’CONNOR 

Lecturer in economics and public policy Cork Institute of Technology 

I BELIEVE Morgan Kelly is correct in his assertion that Patrick Honohan was badly mistaken in going public on November 18th last, stating the Ireland would need a bailout. He is also totally correct that the bailout cannot be repaid and will have to be abandoned. Bondholder haircuts were rejected by the ECB also and the Irish negotiating team essentially rolled over for the ECB team subsequently.

The selfish motivations of the US and ECB, who were not concerned at all with the economic interest of Ireland, should alert policymakers immediately that the deal was never well intentioned and should never have been agreed.

Kelly’s solutions are not the ones I would favour, however. His assertion that we eliminate an €18 billion Government deficit immediately is neither possible nor socially acceptable.

I do think that his way of dealing with the banks and the ECB is somewhat ingenious: the Government leaves the bailout and leaves the banks by default to be supported by the ECB, who ultimately will have to swap their debt for share capital. The ECB picks up the €160 billion tab. However, this could create huge uncertainty and frighten international investors.

BRIAN LUCEY 

Associate professor in finance Trinity College Dublin 

PATRICK HONOHAN couldn’t change the guarantee – that’s a political decision. I’d be amazed if he didn’t argue strenuously for some change. In his previous existence, he had argued that we should be cautious with guarantees. Clearly, he lost the argument.

I don’t think Honohan could have said anything much more than what he said – he is constrained by his position. It’s important to remember that he is not the representative for Ireland on the ECB, he’s the representative from Ireland.

I do think the Government could do well to accelerate balancing the budget. But I would lean more towards the ESRI than Kelly .

I think it’s absolutely clear we have got to make our move very quickly. I don’t know why we are waiting. I’d be astonished if the governments of Greece, Portugal and Ireland weren’t working together in their common interest.

It’s very easy for politicians to be dismissive of articles by academics, but they should prove or dismiss those analyses on their own logic. What we really need to do is dig into the views of the Department of Finance.

FERGAL O’BRIEN 

Chief economist Ibec 

WE WOULD agree with some of what Morgan Kelly says and disagree with some of it. Overall there is considerable merit in doing a relatively fast fiscal balance. The quicker we do it, the stronger position we will be in in terms of our debt management options.

But it is not an exact science and, obviously, it cannot be done in a year.

Doing it in a single year would be far too brutal; there would be far too much damage to the economy and it would be far too much of a social challenge.

I think there’s no question but for Ireland to remain an attractive location for investment, we must work within the loan arrangements that are in place. If we isolate ourselves, we will be undermined. Europe hasn’t yet fully acknowledged the interconnectedness of sovereign and banking debt.

As it does so over the next few years, it will work in our favour.

There is a big difference between being a player with full information and being an observer and having partial information. There are certain people who have much more information than the rest of us.

STEPHEN KINSELLA 

Lecturer in economics University of Limerick 

MORGAN KELLY is a true social scientist. He takes data, looks at the economic and political realities in the economy, and makes a judgement which he communicates clearly. He has been spot on in his analysis to date, and while I was initially sceptical of his views, I’m now converted to the notion that Ireland has nothing but drastic options left to it.

I’ve tried to cost Kelly’s latest plan myself, and it isn’t pretty. Kelly’s views should be engaged with by policymakers, not because they are always right, but because they represent a challenge to the status quo that we need in a policy space filled with sycophants.

MOORE McDOWELL 

Senior lecturer University College Dublin 

MORGAN KELLY is definitely not a master of understatement and let’s just say his colourful way of expressing himself doesn’t do him any favours. Nonetheless I agree with about 80 per cent of what he says. He rightly says the decision to introduce the guarantee in 2008 was the wrong decision. But it’s very unfair to accuse Patrick Honohan of making the “costliest mistake ever made by an Irish person”. Messrs Cowen and Lenihan did that.

What Kelly is saying is that, while we have failed to burn the bondholders – the horse has bolted, as it were – we should now burn the ECB. The key problem in Kelly’s argument is the conclusion he reaches. Putting the entire budget deficit right this year would involve a 30 per cent cut in Government spending, which equates to 10-12 per cent of GDP. The effect that would have on aggregate demand and employment would be colossal.

Kelly’s figure of €250 billion in national debt is very much in the top-range estimates. Even the most pessimistic commentators say €230 billion. However, the question of whether the national debt is sustainable is the key issue.

TONY FOLEY 

Senior lecturer in economics Dublin City University 

I DO not agree that we are heading for economic ruin, although one could argue that large decline in GNP, 15 per cent unemployment and the likelihood that it will be 2017 or so before 2007 levels of economic activity will be resumed is already economic ruin.

I agree the Central Bank got its assessment of the scale of the bank bailout wrong and we only seemed to face reality when the EU-IMF required the involvement of the independent Blackrock assessment. Maybe if we had known much earlier the final scale, we would have had a stronger basis for an alternative approach.

In 2013, we will still be unacceptable to financial markets and there will have to be “Bailout Two” or a continuation of paying interest without repaying capital, with whatever additional money is needed to pay market bonds that are due. You could call this a default but it would be an agreed restructuring with the EU and IMF.

I do not agree we can walk away from the banks and presume the ECB will continue to operate them for our benefit as the new owners. It would be nice if the ECB did so.

JOHN McHALE 

Professor of economics NUI Galway – Speaking on RTÉ’s Morning Ireland , May 9th: 

CERTAINLY, EARLY in the crisis Morgan Kelly was very much ahead of everybody else in seeing it coming and I think his early analysis was incredibly valuable.

But I think in his recent articles, and particularly this one, he is really going off in the wrong direction.

I think he has been quite unfair to Patrick Honohan. Honohan wasn’t the one that gave the original blanket guarantee, but he inherited it.

Morgan puts a lot of emphasis on protecting Ireland’s reputation and says we shouldn’t default to protect that reputation, but reneging on the guarantee, which is what he calls on Patrick [Honohan] to have done, would have been reneging on a sovereign obligation and it would have done incredible reputational damage, and it would have really created a hornet’s nest of legal issues, so I think it’s just completely wrong to put the problems that have resulted from the guarantee on Patrick’s shoulders.

The proposals that Morgan Kelly is putting forward, which are essentially to wash our hands of the banking system and also to cut our borrowing to zero immediately, would actually have devastating effects for the economy.

It would essentially destroy the banking system, and would not only require cuts of about a third in public spending but it would put us into another very deep recession.

JOE DURKAN 

Economist Economic and Social Research Institute – Speaking on RTÉ’s Morning Ireland , May 11th: 

IF WE went bust, then banks in Europe would go bust. That means we are interdependent, and if that interdependence exists, then the right thing to do is to take an interdependent approach to it, which really means doing it at euro level.

Like everything else, you need to do it quickly, because the truth of the matter is while the debt is sustainable in a purely technical sense, it is by no means optimal.

If they don’t help us, then it impacts on others and there’s a possibility that we could just fail.

If you look at what’s happening in the other countries, it is stop-gap measures you have all the time, and I don’t think we need stop-gap measures, I think we need something new and innovative.

I don’t agree with debt figure of €250 billion. The most I can see is five to six years’ time is €195 billion, maybe €200 billion.

The second thing is, he had a point about when the debt goes over 100 per cent, you’re in trouble. In fact, that’s not strictly true.

Technically, we know that it’s possible. The real issue is whether you can get a primary budget surplus, which is your budget surplus excluding your interest payments, above a certain level. It’s a purely technical relationship, that the real interest rate minus the real growth rate times your debt-GDP ratio has to be less than your primary budget deficit.

WHAT THEY SAID: KELLY’S ARTICLE, HONOHAN’S RESPONSE 

Quotes from Morgan Kelly’s original article published in The Irish Times last Saturday: 

“With the Irish Government on track to owe a quarter of a trillion euro by 2014, a prolonged and chaotic national bankruptcy is becoming inevitable . . . While most people would trace our ruin to to the bank guarantee of September 2008, the real error was in sticking with the guarantee long after it had become clear that the bank losses were insupportable . . .

“The ideal time to have reversed the bank guarantee was a few months later when Patrick Honohan was appointed governor of the Central Bank and assumed de facto control of Irish economic policy . . . Honohan’s miscalculation of the bank losses has turned out to be the costliest mistake ever made by an Irish person . . .

“National survival requires that Ireland walk away from the bailout. This in turn requires the Government to do two things: disengage from the banks, and bring its budget into balance immediately.”

Excerpts from Central Bank governor Patrick Honohan’s response to the article on RTÉ radio last Sunday: 

“I took a lot of legal advice on this. There was no way of the Government walking away from that very formal guarantee, endorsed by the Oireachtas. The Government would have been treated as a bankrupt right away . . . The fact that we did not have precise numbers did not affect the honouring of the guarantee . . . All it would have done would have been to bring forward and accelerate the EU-IMF programme probably to May or June of last year . . .

“Everything was done by me and by colleagues on behalf of Ireland . . . It was not a final solution. I would regard it as a holding operation, something to offer a window of time in which to get what could be sorted out within our own competence in Ireland . . . It’s not the end of the story. Negotiations, discussions will continue with Europe for a long time to come as we know there are already discussions about the interest rate and so forth.”

source:http://irelandjailbreak.wordpress.com/

In the year 2009 Morgan Kelly wrote this report on the

“The Irish Credit Bubble” link here The Irish Credit Bubble

Related articles:

WITH THE Irish Government on track to owe a quarter of a trillion euro by 2014, a prolonged and chaotic national bankruptcy is becoming inevitable. By the time the dust settles, Ireland’s last remaining asset, its reputation as a safe place from which to conduct business, will have been destroyed.read full article here http://www.marketoracle.co.uk/Article28018.html

article by By Christopher M. Quigley
B.Sc., M.M.I.I. Grad., M.A.

Bare-Faced Lies comming from the Goverement!

The cover of Irish electronic Passports as of ...

Image via Wikipedia

http://www.bloomberg.com/video/64569080/

It is a demonstration of lack of creditability in our own politicians when we have to resort to scouring the internet to get to the truth about our countries financial position.

We are being openly lied to, yes bare-faced lies, Lenihan and Cowen are living in a fantasy world of their own and the bunker mentality is obvious to see by all !It is akin to the last days of Hitler in the bunker in Berlin  Cowen and lenihan will not hear of talk of surrender to the Europeans

They have betrayed our people and have brought us down the road of destruction and they should be brought up on charges of economic terrorism

Lenihan and Cowen are in denial and we the people are paying the price for having absolute incompetent people in Government .This government has destroyed the good name of Ireland and they are no better than the mafia.

The country has been driven into the ground and the lies coming from Cowen and lenihan are an Insult to the people of Ireland. The Bailout is coming and no amount of spin is going to change that fact

Whatever Cowen and lenihan eventually call it ,we will be depending on the kindness of strangers and as far as I am concerned the government are a bunch of traitors !

On Newstalk radio program this morning Lenihan conceded that the IMF were on their way and will be here in Ireland tomorrow along with the EU and god knows who else to “see the books” meanwhile In a blow to Ireland, LCH Clearnet Ltd. raised the margin requirement for Irish bond trading to 30 percent of net positions, making it more expensive to buy Irish securities.

This Minster is totally incompetent and should be removed along with the rest of the political vultures infesting the Dail

Irish Bonds are now junk along with the Bank shares and Irish bonds slipped for a second day yesterday , pushing the 10-year yield up 5 basis points to 8.51 percent. The extra yield over German bunds rose 6 basis points to 567 basis points. The Dublin consultations with the ECB, European Commission and IMF tomorrow will “see if the state is able to cover the needs of the banking sector,” Belgian Finance Minister Didier Reynders told reporters today. “If that’s not the case, there will probably have to be a European intervention.”All of this is political waffle and in the end it all means that we are going to have to be bailed out !

listen to Morning Ireland  http://www.rte.ie/news/player.html

They have sold us out !

Still can’t face up to the reality,Cowen & Lenihan’s Bunker Mentality

Listening back on this recording  http://thepressnet.com/2010/09/14/8864/

I noticed again the attempt by Cowen to label the moderator a “defeatist” It occurred to me that Cowen and lenihan are increasingly using words one would have heard in the last days of the Bunker in Berlin May 1945 So we are now labelled “Defeatist” those of us that want to call a spade a spade, reality is reality and no bully boy tactics by Cowen or lenihan will change the fact the economy is on its knees and this is a result of the mismanagement of Cowen and Lenihan Here is a extract of an article I picked up yesterday in the Irish Times by Fintan O Tool, here he has spotted the language Brian Lenihan is using and again only listening again to my recording of the radio interview with Cowen does it become more apparent these two guys have totally lost the plot and must be removed as a matter of urgency for the country’s sake!

Unable to admit putting his country in this hideous mess, Brian Lenihan has turned further and further away from reality, writes FINTAN O’TOOLE WHEN SOMEONE says a thing once, it may be a slip of the tongue. When they repeat it, it is an indication of the way their mind is working. Thus it is with a phrase that Brian Lenihan used twice last Thursday, when he was explaining why “the cheapest bank bailout in the world” has turned into a €50 billion nightmare. The glimpse it gives of what is going on at the back of his mind is truly terrifying. Early in the day, on Morning Ireland , Lenihan remarked of his plan to pump another €3.7 billion into Allied Irish Banks (bringing the total so far to €7.2 billion) that it would help restore AIB to “its former greatness”. The phrase was so breathtakingly brainless that I assumed it was just one of those cliches that sometimes invades the mind when it is on rhetorical auto-pilot. But, no. Later, on Prime Time , Lenihan announced that the entire banking system would be restored to “the greatness it once had”. Oh dear God – he really means “greatness”. Do we really have to ask what constituted the “former greatness” of AIB? Was it the collusion with a massive tax fraud on the State in the 1980s and 1990s? Was it the overcharging of customers to the tune of €66 million? Read more at source http://www.irishtimes.com/newspaper/opinion/2010/1005/1224280400401.html

Irish Banking =Cronyism of overlapping Boards

The Irish Times – Tuesday, October 5, 2010 Lenihan’s paradise lost vision belies tragic truth Unable to admit putting his country in this hideous mess, Brian Lenihan has turned further and further away from reality, writes FINTAN O’TOOLE WHEN SOMEONE says a thing once, it may be a slip of the tongue. When they repeat it, it is an indication of the way their mind is working. Thus it is with a phrase that Brian Lenihan used twice last Thursday, when he was explaining why “the cheapest bank bailout in the world” has turned into a €50 billion nightmare. The glimpse it gives of what is going on at the back of his mind is truly terrifying. Early in the day, on Morning Ireland , Lenihan remarked of his plan to pump another €3.7 billion into Allied Irish Banks (bringing the total so far to €7.2 billion) that it would help restore AIB to “its former greatness”. The phrase was so breathtakingly brainless that I assumed it was just one of those cliches that sometimes invades the mind when it is on rhetorical auto-pilot. But, no. Later, on Prime Time , Lenihan announced that the entire banking system would be restored to “the greatness it once had”. Oh dear God – he really means “greatness”. Do we really have to ask what constituted the “former greatness” of AIB? Was it the collusion with a massive tax fraud on the State in the 1980s and 1990s? Was it the overcharging of customers to the tune of €66 million? Was it the sacking of the bank’s first three internal auditors – Tony Spollen, Ian Howley and Eugene McErlean – for the crime of uncovering shady practices? Was it the demented competition with Anglo Irish Bank to see who could shovel out money to ever more speculative developments in an ever more reckless manner? Read full article here http://www.irishtimes.com/newspaper/opinion/2010/1005/1224280400401.html?via=mr
Comment :
I think this man’s medication must have been mixed up and someone has passed him something from the local head shops There is nothing more I can say about this man’s actions regarding the Banks he is living in cloud cuckoo land. either he is not getting the truth from the banks or he is just plain lying!

Ahern turns up the heat on Cowen (Let the fun begin!)

Ahern turns up the heat on Cowen

TAOISEACH Brian Cowen‘s position looked increasingly precarious last night as a cabinet minister confirmed Fianna Fail TDs were contacting senior party figures to express concerns about his leadership.

A string of ministers came out to publicly back Mr Cowen, but several, while expressing their support, also made it clear that the situation within Fianna Fail was serious and volatile.

As the fallout from the Taoiseach‘s disastrous ‘Morning Ireland‘ interview escalated rather than receded:

  • Justice Minister Dermot Ahern admitted “worried” TDs were in touch with him.
  • Foreign Affairs Minister Micheal Martin repeated his belief that “lessons had to be learned”.
  • Tourism Minister Mary Hanafin said people expected senior ministers to be able to communicate properly.

Despite the fallout over the deeply embarrassing party “think-in” in Galway, ministers doggedly stuck to the line yesterday that the Taoiseach had suffered from a “nasal” problem and not from over-drinking.

Yet bizarrely, at the same time they spoke of how Mr Cowen had had “an off-day” and called the interview “an unfortunate incident”.

The confusing signals came as Mr Cowen again tried to reassure voters and colleagues there would not be any repeat of his late-night session. But in another inadequate interview performance, he struggled to find the words to restore confidence.

Speaking about his 3.30am debacle in Galway, the Taoiseach said he would be “a bit more cautious in terms of that aspect of how I conduct my social life”.

Mr Cowen’s efforts to contain criticism of the interview debacle came as the Green Party indicated it would not tolerate another embarrassing episode.

Fianna Fail backbenchers are still angry at the fallout from their leader’s performance and some have contacted ministers, including Mr Ahern — a development that could be very damaging for Mr Cowen.

But showing the damage caused to the Government by the affair, Environment Minister John Gormley admitted the controversy was a distraction from the Coalition’s work.

Mr Cowen now faces into a crucial 48-hour period as backbench unhappiness leaves his future on a knife-edge.

After days of denials of party rumblings, Mr Ahern’s surprising admission of concerns over this week’s events added to the controversy.

“I have spoken to backbenchers since last Tuesday and, yes, obviously there are people, you know, who are worried about what happened on Tuesday. But equally so, I think there is a clear understanding that our situation as a country is too vital and too serious for us to be diverted by, in effect, a party row at this stage,” he said on the RTE ‘Six One News’.

Ms Hanafin conceded she had questioned why the Taoiseach did the interview when she heard it. “You certainly expect somebody at our level who is giving an interview to be able to communicate properly,” she said in Donegal.

Mr Martin again admitted the affair was damaging. “Clearly we have lessons to learn and we will work on . . . future communications strategies,” he said.

Finance Minister Brian Lenihan also came out in support of Mr Cowen, saying “the matter (was) closed”.

Despite expressing confidence in Mr Cowen’s leadership, Mr Gormley repeatedly refused to say what he would do if the Taoiseach put in another below-par performance.

He claimed such questions were “hypothetical”.

Within Fianna Fail, there was a strong sense Mr Cowen was still under immense pressure. “Everybody is very nervous,” a senior party source said.

But a veteran TD said he did not believe a formal heave was in the offing as nobody had been canvassing support for a motion of no confidence. “They’d need to be on to a middle-ground fellah like me if that was happening,” the TD said.

Mr Cowen said he would not get involved in speculation about a potential leadership heave in Fianna Fail.

He said he had learned not to be found in a similar position again and would need to leave social functions sooner.

“I think such is the atmosphere of politics today and perhaps the way people tell you things and how things can go off on a tangent very quickly, I’d be more cautious about that aspect of how I conduct my social life,” he said.

Tanaiste Mary Coughlan was critical of the scrutiny politicians were under.

“If we as politicians and as human beings are not allowed to live in this country with the freedom that every person else has it’s a very sad day.”

– Fionnan Sheahan, Aine Kerr and Eimear Ni Bhraonain

Irish Independent link http://www.independent.ie/national-news/ahern-turns-up-the-heat-on-cowen-2342896.html

Comment:

This only confirms that this shower will stop at nothing to stay in power even if it means they turn on their own leader to do so!

They are so engrossed with the idea of staying within the walls of Lenster House their own parallel universe, where they are pampered like lords and the riff raff ordinary surfs like us only occasionally get to be invited for a few minutes

The infighting is quite common amongst rats; they will turn on each other for their own survival just like Fianna Fail is now doing!

We the public will now be told that the new leader is the person to lead this country into the next decade and we should all put our shoulders to the collective wheel once again but with renewed vigour, but the leader will stay behind to watch over the gear of course while we the ordinary surfs are expected to do the pushing!

We can expect whoever might emerge, to distance themselves from the mistakes of the past

And blame it on everybody else in the country.

Let the fun begin!

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