Anglo Irish was badly run so it is saved.

Makes no sense particularly when liquidation was going to cost €20 billion and that is what saving it looks like costing.

Then they get printing, convert banking balances immediately and gradually bring the new currency into circulation. Once progressed, they float the new Neudeuschtemark thereby cutting Greece and Ireland and Spain adrift. We wil have to sort our own mess out.

Take one banking mess. Add new rules and taxes to taste. Stir. Repeat. Who’s the real Aunt Sally? Or take a fresh look at the role of euro played in our financial crises.

The Irish always are loyal and strong and even when they have been badly damaged by economic warfare, they stick to the wisest policy even at the cost of short term loss.

The Irish are fantasists who relish the idea of being rich without having to postpone consumption.

Which of these three statements is the most true? Does it matter that we do not study and eliminate our weaknesses?

Gotcha. All wrapped up now anyhow. I felt Ed’s comment, to imagine things, was worth dealing with. BOH.

The whole premise of your original post was that the drachma (and the punt) are dead and therefore impossible or next to impossible to resurrect. I think repeated instances of history and some of the posts on here have shown that it would be possible with exchange controls, sequencing etc. and I think you concede that although difficult it would be possible – “Before we linked to sterling, or anything else, we would have to launch a new currency, from scratch, and persuade people to hold it.”

The real question then is not so much would it have been better to have remained outside the euro but would it now make sense (rather than being impossible) to secede from the currency. I don’t think it would make sense now but that is the question that should be asked.

As_an_aside,_what_is_with_the_under_scores,_David_O’_Donnell?

And aside eile, BOH, could you just post a link to your blog so I can avoid repetitive strain injury to my finger from all the scrolling past your long posts?

If I may impose this on all of you finally. If I was to come up with a crash course syllabus, as I mentioned above, to serve Irish universities to engage in some cross disciplinary thinking about innovation culture, (how to kick start innovation and growth, and get Ireland out of its mess) it would look something like my blog entry below. All the best. BOH.

http://designcomment.blogspot.com/2010/03/school-for-innovators.html

What - ‘Colm McCarthy on the right…’ - I’m shocked, truly shocked! Spose he can be ‘on’ the right in general, and ‘in’ the right in this particular instance. But as you put it - ‘That’s his business’ - Quite! I can always deal ‘with’ , discourse with, the ‘right’ as distinct from being ‘dealt to’ by the ‘right’ - unless he’s a Sharah Phelanite? No - couldn’t be - he engages at times. I’m off all ideologies anyway … for ever … they are dangerous. I’m into ruthless pragmatism at the mo ………

On the future - and the present - how do we get rid of this lot before 5 o’clock tomorrow … er … today. Less than 17 hours - and a few seconds to meltdown. And do you know what - they almost certainly won’t even properly screw us - they will only 75% screw us, three quarter screw us …… leave us barely hanging … and then they will come back for more, the last quarter. Gotta mobilize ……. they won’t GO - ergo, they must be PUSHED. Only question is HOW?

Ed said: We’re don’t have much choice, but to imagine things, at this point and when we’ve got something real to sell, then we’ll have to set about creating a market. There’s no point chasing after big established markets, they’re already well covered. Our future is in niche and novel sectors that are too small to be of interest the big boys, but ideal for small and flexible companies.

What Ed is saying makes perfect sense to me. However, the language of business school may not be something too many economists will warm to. It is crucial however for Ireland’s sake that economics and business are brought together somehow with innovation at university level. I don’t mean innovation as it university research leading to spun off entreprise startups. In my opinion if we try to do that in Ireland we will waste a lot of good money after bad. The best innovation by far we can do in universities in Ireland, is as follows (I do hope CMcC and others can take this on board). We should offer students from all faculties at university level, a business school lite version. Namely an intensive certificate course, that could be completed within months, maybe a group finishing every quarter or something like that. It would consist of maybe one day a week, built in simple modules to give the students from all faculties an idea for what innovation is about. Even students who work a lot in design, say the architecture faculty at UCD could benefit enormously from a brief certification course like I described. If nothing else, it would introduce a whole generation of multi-faculty graduates to the basic tenets in business and innovation. What Ed spoke about in his comment, I quoted above is straight out of Clayton Christensen’s theory on disruptive companies. I have encountered computer science and technology graduates in my life, and also enjoy that sort of company. What always strikes me about the computer science folk from the US, is they frequently have a firm knowledge of such business theories, to match up with their basic technical knowledge. I suggest that some evening at UCD, you invite me to come along and sit down on a panel in front of the senior students in one of the societies, or perhaps a joint society event, and I will be welcome to field even the dumbest questions, from the most far out characters there are today at UCD. I can do no more than offer my services. The moderator here has my e-mail address. But what I am suggesting would be far, far more beneficial for Ireland than millions spent on other innovation initiatives for Irish universities. I would be willing to offer my services to help with a draft syllabus also, if anyone cares to bother.

To translate this into economics speak, for the benefit of those here at the Irish Economy blog, have a listen to the podcast of Paul Romer (Stanford university) talking about growth, linked at Stephen Kinsella’s website. The classic black box created by economics to view the world, is the one where labour and capital are put together in the same place, and out of it comes productivity. What Paul Romer suggests, is that everything which can be described as output is only stuff that existed already. All that happened was it got re-arranged in some different way. But classic economic theory never looked very hard at what happens inside that black box. This is a very nice intersection point I think, between business school language and economic theory, which I am sure people here will appreciate that. It is a definition that can be used to look at green energy generation. In the past, we transported vast amounts of fuel to the power station. In the future, we are trying to move the power station to the fuel (with some amount of difficulty it appears, involving new technical challenges and so on). BOH.

http://www.stephenkinsella.net/2010/03/25/fantastic-podcast-on-trade/

@David O’Donnell
Colm McCarthy is I would believe on the right. That’s his business. We are spending a lot more than we are taking in. That means spending cuts in the short-term, whatever your political views. It also means tax increases in the short-term, so I suppose that makes it a politically neutral process. I think we should go with perhaps FG’s proposals for an off-books stimulus, combining it with TASC’s suggestions. It would be a mini new deal, just to change the national conversation to something more hopeful, if nothing else (and combined with a change of government). But that’s another issue. As are the tax breaks, pork spending and protected sectors we need to tackle if we are to recover quickly and create an equitable, stable society.

‘Before we linked to sterling, or anything else, we would have to launch a new currency, from scratch, and persuade people to hold it’

Wikipedia says
‘A new pound was introduced in 1928, although monetary union with sterling was maintained. This new Irish pound was initially known as the Saorstát pound (”Free State pound”) and was pegged to the pound sterling’

I guess people were ‘persauaded’ by capital controls etc. That’s not considered cricket these days, but the Chinese seem to make their own rules.
Euro exit would be gruesome, but internal devaluation seems equally grim. Choice of hanging or beheading I suppose.

“It’s easy to conjure up the potential for trade from the comfort of an armchair.
We saw recently how the Innovation Taskforce ignored the market/demand side.”

We’re don’t have much choice, but to imagine things, at this point and when we’ve got something real to sell, then we’ll have to set about creating a market. There’s no point chasing after big established markets, they’re already well covered. Our future is in niche and novel sectors that are too small to be of interest the big boys, but ideal for small and flexible companies.

“The whole country wasn’t full of eejits!”
If not, then, who voted in the present government?

WE ARE EUROPEAN. WE SUPPORT THE EURO. WE SUPPORT ALL EURO_ZONE MEMBERS IN SOLIDARITY. WE PLAN TO EXPORT MORE TO OUR EURO_ZONE PARTNERS IN EUROPE & IMPORT MORE. WE SUPPORT A STRONG EUROPE. WE OPPOSE LITTLE NATIONAL_LANDERS & ZENOPHOBIC FRINGES THROUGHOUT EUROPE, INCLUDING IRELAND, WHERE_EVER WE FIND THEM.

WE ARE EURO_IRISH, AND PROUD TO BE EURO. OVER AND OUT!

The punt was pegged to sterling until 1979 when we joined the ERM.

The broader point is Ireland is too small to have a free floating currency.

@Michael Hennigan - Finfacts
“The UK was our biggest trading partner in 1973 when 55% of total exports went there.
“The inconvenient truth is that the Eurozone has been for some time!”

We’d still be in the EU Michael, just we’d be pegged to a weaker currency. Even our MNCs exporting into the Eurozone (if it continued) would benefit from a weaker currency relative to the Euro. Sterling fits the bill

We don’t have a punt, we abolished it. Entirely. Gone, finished, kaput. Ireland no more has a currency than does Massachussets.

Before we linked to sterling, or anything else, we would have to launch a new currency, from scratch, and persuade people to hold it.

“The whole country wasn’t full of eejits!”

Still isn’t Michael. Keep those pikes in the attics in pristine condition!

agreed, a bit oversimplified though, there would be a fair time constraint and by the time it comes around (because Ireland is sooooo fast and efficient) one might hope the economy will have picked up…

although would we have to peg ourselves to the sterling? why not just use the Punt instead?

The UK was our biggest trading partner in 1973 when 55% of total exports went there.

The inconvenient truth is that the Eurozone has been for some time!

@ All

Some people foolishly ignore that beyond economists and people known through the media, there was a significant constituency that had never drank the FF/PD Bubble Kool Aid.

The whole country wasn’t full of eejits!

Give my regards to Auntie Sally - always thought she looked amazingly irrationally exhuberant - believe she is back in vogue in certain quarters?

I thought it was obvious what would happen if we left the Euro: we just peg ourselves to sterling. Exactly where this country was from independence until we went into the ERM.

- how it would pan out in macro-policy terms:

A lot better than the Euro. The UK is our biggest trading partner so that removes the exchange rate risk for the majority of our exports. We would be pegged to a steady, solid currency and we would be approx at a 30% discount form where we are today.

Come on Colm, this isn’t difficult to figure out.

I thought it was obvious what would happen if we left the Euro: we just peg ourselves to sterling. Exactly where this country was from independence until we went into the ERM.

- how it would pan out in macro-policy terms:

A lot better than the Euro. The UK is our biggest trading partner so that removes the exchange rate risk for the majority of our exports. We would be pegged to a steady, solid currency and we would be approx at a 30% discount form where we are today.

Come on Colm, this isn’t difficult to figure out.

To ere is human, to forgive is divine. People who are given the wrong information by a distorted market will make poor decisions. Capital inflows into Ireland should have affected the price of our currency, the euro remained relatively cheap. The government and the banks where given free money and so they spent it. No amount of regulation can stand in the way of ‘irrational exuberance’.

Non_issue - Germany is going nowhere - it has its own clique of nationalist, right wing little germanders - as we do.

@John Muldoon

Colm McCarthy, unlike Ned O’Keeffe’s piigs, still has his b***s - unlike many of not most supine academics , few around here excepted. If he says he opposed it I believe him. On the Euro now - I 100% agree - again a non-issue - we are going nowhere. On other matters I may [& DO (-;] totally disagree with Colm McCarthy - this is substantive discourse - and an extremely weak Irish public sphere needs more of it.

It is, of course, a lot better for those in secure employment to be paid in a hard currency that allows them to purchase foreign goods and services at a reasonable price and there are a lot of people (in employment) with a lot to lose.

Surely though someone, somewhere, should be looking into how leaving the euro could work in practice. I take Colm’s point about the severe practical difficulty and cost and that it may well outweight the benefit…

Four professors write in today’s FT,

“The Greek action is painfully reminiscent of Germany’s ill-fated moves to slash spending in the 1930s slump, which taught the world that cutting budgets to appease creditors in a downturn generates mass unemployment and radicalises society.”

http://www.ft.com/cms/s/0/6a618b7a-3847-11df-8420-00144feabdc0.html

I wonder what they would think of cutting spending to appease bank creditors!

The said 4 professors in today’s FT that are looking for Germany to reinstate the D-mark are:

Wilhelm Hankel is emeritus professor of economics at the University of Frankfurt/Main; Wilhelm Nölling is professor of economics at the University of Hamburg; Karl Albrecht Schachtschneider is emeritus professor of law at the University of Erlangen-Nuernberg; Joachim Starbatty is ememeritus professor of economics at the University of Tuebingen.

The other interesting point is how people will vote in a referendum if Germany pushes for a treaty change to allow withdrawal. Should people vote for said change in the knowledge it will allow Germany to leave or PIIGS to be pushed out. If the euro federalists were to vote no, what would happen then. The scaremongering works in the other direction too!

You don’t have to John, it’s a matter of public record. There is a Google thingy on your computer somewhere.

Some other commenters seem to think that the only reservations I ever expressed about macro policy over the last decade are the ones they can remember. Lazy, and bad manners.

The remaining countries view it as a UN administered territory within Serbia.

Both views ignore the reality -it is being run by the NATO countries, until they can dream up some way to get out of there. Independence was supposed to be a silver bullet allowing NATO to exit, but it made things even more complex. Now they’re trying to hand over to the new EU Mission, but even this is not working very well yet.

But to be honest, whichever interpretation you prefer, it is still a territory outside the Eurozone which uses the Euro as official legal tender.

On the wider point, I would have argued years ago for staying out of the Euro to remain closer to the British pound. But after a decade of selling ourselves to multinational FDI as the Anglo-Saxon country inside the Eurozone, it’s far too late to start having cold feet about it. We’re in it, so we have to make it work for us now.

Get a life! Responsibility for the local mess is in our own hands: fiscal policy, tax policy, p1ss_poor regulation, abysmal corporate governance, bankers gone bonkers, developers over extended, lack of political pragmatic intervention, idiotic neo_con ideology, - the root causes of this crisis are particular and local - low interest rates were not the problem; how we managed to adjust to such interest rates is an Irish matter. We don’t need external scapegoats - our Political/Governance sytems failed us abysmally: and they are still in situ.