Paul Volcker on Ireland

Towards the end of a recent essay in The New York Review of Books (‘The Time We Have Is Growing Short’) Paul Volcker has some interesting remarks to make about the Irish economic situation.

6 replies on “Paul Volcker on Ireland”

Volcker acknowledges the degree to which the real economy has been ‘financialised’, but he doesn’t really name the Greenspan put. Nice of him to be nice about us, but this bit makes one wonder how many of our banks are zombies.

‘ Essentially, an official agency following established procedural safeguards (in the US presumably the FDIC) could seize control of the failing institution, deal with its immediate obligations to maintain continuity in the market, but then promptly arrange for an orderly liquidation: stockholders and management would be gone, and creditors placed at risk, as in a normal bankruptcy. Ideally the path toward liquidation (including the sale of parts of the company) would be eased by setting out a “living will”—dissolution priorities prepared by large nonbank institutions and reviewed by their supervisors. Put simply, the concept is to prepare for a dignified burial—not intensive care with hopes for recovery’

The moral hazard has been removed form virtually anything the state has got its hands on. This is one of the reasons we have so much profligate waste by government workers but worse the state is now now grabbing half of the worst and most profligate institutions in the private sector. Well, they were private before the state decided they were “to big to fail”. Nothing should be to big to fail, and if it it then it is simply too big. Now the tax payer is in the hotel business, concert business and shopping centre business where they compete with …. well, taxpayers! Go figure as they say in the U.S.

I presume that Mr. Volker was not talking to any of the people in Irish banks who still consider their 500,000 Euro salaries sacrosanct even puny despite having wrecked the country and wiping out shareholders. Neither, did he talk to our public sector unions who are able to predict the world economy forward to 2014 even though the interest rate on Irish bonds today were 5.6% a full 3% over German bonds. Neither did he discuss our unfunded Ponzi pension scheme of 112bn and how the state was going to fund it.

His visit was brief, if he had stayed around longer he might have acquainted himself more with the Irish habit of talking tough while presuming somebody else was going to take the hit. We are a very realistic people provided the realism is swallowed by someone else. That is why we get the tough rules for “everyone” followed by a raft of exemptions and exceptions for the people who preach the tough medicine for everybody save themselves. A certain figure of 642 special ones comes to mind.

“But now Ireland has been caught up in its own speculative excesses and financial deficits, culminating in a sharp economic decline. There is a lot of grumbling, about banks in particular. But I came away with another impression. The people I spoke to had an understanding that the boom had gotten out of hand. There seems to me a determination to do something about the situation, reflected not just in the words of the political leaders but in support for action among the public. And there is a sense of what is at stake, that the gains they made in recent years have been placed in jeopardy. The urgent need to get back on a sustainable budgetary and economic track is well understood.”

I have the same impression. People from all walks of life in Ireland are ready and able to buckle down, work hard and do with less. At the same time as some people are going into a funk of self-loathing and despair the rest of the country is fighting the good fight. There has been a huge collective effort by the people of Ireland which is starting to benefit us. The unity of purpose at all levels is heartening.

@ zhou_enlai

“People from all walks of life in Ireland are ready and able to buckle down”. Is that official government policy? I am rather intrigued as to what your definition of “all walks of life”. I suspect my friends working for NAMA until 10 pm every night have little say in whether or not to pull on the green jersey or not. Similarly, I have noticed that those sweating in various government departments especially finance and enterprise, who swan into the Shelbourne most evenings are also doing their patriotic duty even though they did insist on exempting themselves from those budget cuts which they prescribed for everyone else. Then of course we have these 435,000 unemployed people champing at the bit to get work and and our leaving certificate students waiting to do their fathers and mothers proud. At least many of these can hide out for a few years.

There are many people working in the private sector whom I have spoken to and meet every day who are convinced that putting on a debt harness only means your master will hit you harder and more often.

The will to change the economy must be born from the perception that public sector apartheid will be tackled and that if you work in the private sector you and your children may actually be allowed to work in the higher echelons of the civil service. If only even as a reward for paying down the mistakes of government bodies like the DoF, CB and FR that left the banks run riot. As Bertie said, “I don’t know why youse lot don’t go and commit suicide?” problem is that many have now taken him up on his offer. NAMA has divided this nation more than the government of Ireland Act 1920.

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