I fully agree that allegations of corruption should be thoroughly investigated and, following due process, if proved true, appropriate sanctions should be imposed. But tracking down every allegation over the last 10 years could take another 10 years - and we don’t have that luxury. The power hose of popular revulsion expressed in a general election that would clean out the political stables and elect a government genuinely committed to radical reform is the best we can hope for. And a key reform would establish a ferocious statutory anti-corruption agency.

Leaving was my solution. You might expect an apology from those who undoubtedly knew, but you won’t get one. The system is designed to share out OPM. Other people’s money. When you enquire into why it happened and no one bar a few, told us it was going to happen, there are many blank looks. I noticed this before “it” happened and so did others. You will only find correct predictions and explanations on free media. Not the MSM. Just because it is free doesn’t mean it is twisted by an agenda. Just because you pay for it does not mean you get the truth. A very twisted society. Tortuous. Wrong. Corrupt.

We’ll talk ourselves into despair. What you describe is, unfortunately - and tragically for so many, highly likely, but I sense a growing recognition of the need for the power hose and radical reform after that. One has to live in hope.

OTOH, any sort of inquiry, even a cheap option llike the PAC, is very unlikely to identify any of the reasons in such a way that they could be fixed. How likely is it that McCreevy, Bertie, Cowan, Lenihan will admit to any error, any failing. Even less likely that past and present public servants will make any admissions, assuming they bothered to turn up.

The only way out would be to fight an election on the basis of proposals to change our ’system’ As Finfacts implies, in a multiseat PR system is that likely to happen??

Bye, Barry

“It is not much, but knowing that you know nothing is the beginning of wisdom.”

Your points, as always, are valid, but it is probably unfair to berate economists. They, like everyone else, must operate within the existing framework of democratic governance and of the institutions established and policies enacted by this framework. This represents the consent of the people, freely given, to be governed in a particular way, but this is where the problem lies.

FDR pursued Keynesian policies from his inauguration in ‘33 (in the face of opposition from the conventional wisdom which eventually compelled the adoption of a premature fiscal tightening) prior to the publication of Keynes’s “General Theory”. Keynes’s influence came later. Economists have no political power or influence unless those elected to govern choose to consult them or to take heed of what they are saying.

The political reality - and, therefore, the economic reality - is continued governance by those who played a major role in creating this mess (and who are determined not to acknowledge their responsibility) followed by a choice (which the current Government is determined to postpone offering to Irish voters for as long as possible) between a continuation of current governance or an alternative comprised of parties whose policies on substantive economic and financial matters (insofar as they may be observed) diverge widely. This is not an inviting prospect in the context of the major reforms that are required to clean up this mess and to resotre some measure of economic prosperity.

Therefore, perhaps, you are correct. “Nothing will change.” I’m struggling to keep a vague hope alive that some political rationality will emerge.

Nothing will change. OPM and TPTB get richer and the taxpayer picks up the tab.
There are no economists who admit that there is corruption in Ireland. They would never be employed by TPTB again. That was why there were no warnings!

I’m sure many share your anger and sadness. Although the Irish banking and financial crisis has features that differentiate it from that in other developed economies - and I think these have been pretty well documented - you seem to have hit on one that, perhaps, has not received much attention in your contention that “the Regulators Office was set up to Fail”.

The US and Britain, whose banks were most involved in, and affected by, the credit crunch, used to have reasonably effective systems of financial regulation until they were progressively dismantled in the late ’90s. In Ireland there was never any serious commitment to effective financial regulation - or regulation in other economic areas. All modern developed economies had high profile regulatory and competition bodies - the OECD and the EU were particularly keen on them - so it was seen as necessary to develop and establish a raft of these bodies and to have all the trappings, but it was all a facade as there was never any political or policy intention to have them operate as most regulators operate (or try to operate) in other jurisdictions.

Regulatory responsibility was often diffuse and under-empowered (e.g., financial) or subverted to pursue policy objectives (e.g., energy). Regulation was never going to be allowed to get in the way of businesss and profits. All businesses will seek to evade, limit or undermine regulation, but its necessity is grudgingly conceded and, frequently, poachers will become zealous game-keepers. But this is not the Irish way. As one wag observed of the CEO of an Irish business: “He could not see a rule or a regulation without trying to figure out a way of bending or breaking it”.

Most other countries are seeking to repair and reinforce their systems of financial regulation - with varying degrees of enthusiasm in the face of concerted bank opposition - and there is much for economists to get their teeth into, but we need a power hose in Ireland.

I think his point is that assuming an unwarranted degree of certainty from a projection, and hence changing current behaviour to reflect that, in the face of large and unforseeable events, is not a good idea. Projections can be quite a good thing in a Black Swan world, especially if they are mostly conservative and partially extreme. It’s a bit self serving, but I’ve a pre-canned rant about it all here: http://tinyurl.com/nyokla.

A key contention is that stock markets are “imperfectly efficient” and fluctuate around their fair value. Smithers basic argument is that central banks should watch out for signs of “irrational exuberance” and nip it in the bud by increasing interest rates and/or raising capital ratios. Since central banks put a lot of effort into identifying the “output gap” when setting interest rates the argument is that identifying a sustained gap between actual and fair market value should not prove excessivley onerous. Perhaps this is an area where economists could be profitably and usefully deployed.

http://comicalwatch.blogspot.com/

http://www.youtube.com/watch?v=t3V22QHWP7E

It is worthy of note that despite the reckless mismangement, nobody saw fit to resign on a point of principle from teh ranks of the senior civil service or the Central Bank.

Within the official circle was the State broadcaster RTÉ - - the political leaders’ preferred route to the public. The ineffective format of the Dáil, coupled with 2-minute door step interviews and a compliant RTÉ management coasting on an advertising bonanza, meant that there was never a risk of having to give what could be termed a forensic interview - -unless it was a self-serving response to a tribunal leak.

As regards economists, the academic economists may have had a disdain for the some of the prominent financial service economists, who were essentially well-paid PR men for the moneychangers, but these people provided the “intellectual” support for the boomsters.

In 2004 Bank of Ireland’s Dan McLaughlin had declared a “Golden Age of Construction,” at a construction industry dinner and then in 2007, said “there are a number of economic viewpoints about the Irish economy which are often voiced but have little in the way of support from the facts. One often hears that growth is unbalanced but a glance at the data from 2001 to 2006 shows average GDP growth of 5.3%, with all components growing in a 4.5% - 5.5% range.”

A year before, the myopic economists at NCB had produced their 20/20 Vision report, and again underpinned the fantasies of the politicians.

In June 2006, I wrote the following:

1. Foreign companies were responsible for 87% of Irish exports in 2005. 

2. Dell and Intel are Ireland’s biggest exporters.
 
2. Irish investors ploughed €30 billion into local and overseas commercial property in the past 5 years.

3. Investment of €133m has been made in 75 Enterprise Ireland supported companies since 2001. 

4. One in five Irish private sector workers are dependent on construction and more than 100,000 will become unemployed within 10 years.

4. No Irish-owned company has floated on the Nasdaq Stock Exchange since 1999.
 
5. Most workers in Irish-owned companies have no occupational pension. 

6. The Irish Government awarded special pay increases to all current and retired public sector workers, including politicians, in return for a benchmarking performance system. Targets introduced are basically unmeasurable and aspirational.

7. William Prasifka, the chairman of the Competition Authority, recently said that “in too many areas, Ireland has not willingly embraced competition.”
 
8. New Irish housing units are among the most expensive and the lowest quality in the Developed World
 
9. Since the end of 2003, output per worker in Ireland has been almost static.
 
10. Most foreign companies will have relocated from Ireland by 2025.
 
11. In 1970, Ireland’s national debt was as healthy as it is now: just ten years later it was one of the worst in the world

The central bank published a list of more than 200 customers, including companies and state governments.

Nigerian police have arrested four of the banks’ chief executives after all five were sacked last week.

The bosses are being questioned over the bad loans taken on by their banks which totalled $7.6bn.

Can the Nigerian teach us.

Well, I guess we have learned that our financial regulatory environment has even less transparency and accountability than that in Nigeria.

Should give pause for thought that Paddy Neary was retired instead of fired.

What interests me is that many economists raised questions about what was happening, but they weren’t listened to.

Of course, it was easy to write off some of them as cranks because they were. Googling “economists who warned about the crisis” produces a useful list.

But there a significant number of economists who issued warnings from within the academy but were ignored. Wynne Godley is an interesting case in point - he was an “establishment” UK economist who began warning in the 1990s about the huge emerging imbalances in the world and particularly the US economy. The impression I have is that he was shunned in Britain and has ended up teaching in Bard College in the US. By the way, Bard developed a great website with a huge amount of [sceptical] analysis reflecting Godley’s approach , most of which has been widely and studiously ignored. He has a website: http://www.wynnegodley.com.

I’m afraid this is a psychological rather than an economic problem.

This is a very old debate. Charles MacKay in his “Extraordinary Popular Delusions and the Madness of Crowds” published in 1841 is still worth reading - in fact, I suspect that it wouldn’t take a lot of changes to re-issue it as an analysis of what’s happening now.

Unfortunately, if MacKay is right, there’s probably not a lot that can be done.

Lessons are learnt by one set of policy-makers, but then “a new paradigm” comes along and everything is forgotten. The US went through the Depression, reformed its banking and regulatory systems to deal with the problems the crisis revealed, only to undo most of those reforms in the 1970s and allow a move into what could be a re-run of the 1930s.

As MacKay realised in the 1840s, a widely held belief that certain assets will increase in value [he had tulips in mind, but of course substitute property in Ireland's case] can produce that increase in value. In the early stages, money can be made because you can sell the tulips to other people - so to that extent, its rational for some people at some point to buy and sell tulips. The madness starts, of course, when large numbers of people believe that the price will continue to rise forever.

MacKay saw that the madness is supported by rationality. This mixture of sanity and insanity gripping large numbers of people is compelling and probably impossible for individuals to resist, especially when the lure is wealth [or a place to live]

“The defendants’ fraudulent misrepresentations saddled investors with unknown risks they did not bargain for,” said Benton Campbell, the US Attorney for the Eastern District of New York.

Butler and Tzolov deceived a number of corporate clients including drugmaker Roche, semi-conductor business ST Microelectronics, and Canadian fertiliser firm Potash Corporation.

“It was a bait-and-switch scheme,” said Assistant US Attorney John Nowak.

“They deceived clients who had trusted them.”

Sounds familiar?

Steve Keen is a national treasure. But there are others, in the USA, who are of an Austrian bent. They saw it coming and as inherent in a banking system where there are inadequate controls on those who govern. A recreation of the Law situation in France. Thomas Jefferson said many things of banks. All true.

The point is that bankers can actually end up owning most of a host society simply by providing capital to front companies that encourage trade in assets upon which loans are extended. It is then a kiting game. Pass the parcel. Those who withdraw their capital early save it. The rest end up exposed as Marx said, in swindles. TPTB saw this coming for years. Years. That is one reason for the carbon is a pollutant angle. The increase in credit in the USA is obvious from the graphs and starts in the 70s. Instead of stopping the dot com swindles they joined in and hen, obviously they failed, extended the creation of credit by lending to those who could not afford it, secured on housing. This article by the wsj shows why no one warned: the msm were in on it!
http://economistsview.typepad.com/economistsview/2009/08/odd-wsj-story-on-vermont.html
Spitzer warned people and was ruined! The US federal government were telling stats to loosen the restrictions on lending ….

If you relied on the msm, you were misinformed. Too many people were making money out of selling rubish and ruining everyone. Only those who took a measured view were able to see what Joseph Kennedy saw: too many who were ignorant and would be ruined, were involved. The Wall St institutions were run to ruin investors. Stockbrokers et al only make money if there are sales and they never encouraged people to sell as they would not make money out of that. There has been a stream of government incentives to inverst in the stockmarket. OPM by the bucketload. The system was entirely corrupted and very few could credit that. Sorry for the pun. For a dark side reading of what was going on, read Bob Chapman and Marc Faber. http://www.theinternationalforecaster.com

The problem now is not to tell the stupid that they were lied to. It is to stop the waste of what precious capital remains in Ireland.

Regulation is not needed for the next decade. There will be no lending as the economy continues to deflate. Sad news but you all bin took! Stop wasting capital! Stop listening to the msm!

Vote with money by paying off debt or walking from mortgages. Vote against incumbents. Vote by moving to a less corrupt and expensive country. I can recommend Australia!

It is inherent in our banking system as eventually, it becomes too large to support itself, like any other Ponzi scheme!

Fraud involves creating trust in the victim and then betraying that trust.

How much fraud has been committed by the senior executives in the Irish banking system during the exposive stage of the recent credit boom? Why should these banks get a red cent from the Irish citizens (many of whom are in serious financial debt) when there has been very little evidence of criminal investigation, much less prosecution.

The American experience is a useful guide on the banking culture at the very top in recent times. The recent presentation “The Great American Bank Robbery” by William K. Black , , the former litigation director of the Federal Home Loan Bank Board who investigated the Savings and Loan disaster of the 1980s at UCLA, California is sobering. You can it view at http://hammer.ucla.edu/watchlisten/watchlisten/show_id/128429/show_type/audio?browse=none&category=0&search=