Ireland sold 1.5 billion euros of bonds in an auction yesterday, with demand rising for a 2014 note.

“There was also some speculation that EU central banks may have bought some short dated Irish government bonds late in the day,” Glas said.

“

+1

When it happens and you are giving the others the “I told you so”, I will back you up. You said it in August 2010.

I see Prof. Honohan was in China giving a speech that touched on this the other day. I gave a speech (well, a presentation or two) in Beijing not so long ago. They were very polite and appeared to be listening but you could tell they weren’t really taking it in. I wonder what will happen there when the economic miracle peters out? I doubt they will be as placid as the Irish.

I expect we’ll have to agree to disagree. I’l leave you with just one thought. Yes the (private sector) bankers have brought the country to its knees, but policy and regulation encouraged and allowed them to behave recklessly. However, even within the current regulatory arrangements, private sector owners of the current semi-states would not have been able to inflict the damage on consumers and the economy that successive governments have wrought in the last decade.

It becomes TOGIT if there’s no engagement. Issuing jeremiads from the sidelines (along the lines of Pte Fraser in Dad’s Army “we’re doomed, all doomed”) usually isn’t very helpful.

The starting point has to be a recognition that the current arrangements linking government, regulators and semi-states in the various sectors are damaging the interests of citizens and the economy. No point moving any further if this isn’t recognised. Next step is reform of these arrangements and restructuring of the semi-states so that, at the very least, they no longer damage the interests of citizens and the economy.

Only then does any consideration of financing and ownership become relevant. However, in general these two steps are linked because much of the damage to the interests of citizens has been caused by inefficient financing of the semi-states’ activities and investments. Successive governments, even when funds were available, failed to provide any direct financing of semi-state investment. Instead they relied on the regulatory function setting high prices to extract extra cash for financing from consumers and users of the semi-states’ services. Regulators, particularly the energy regulator which has extracted up to €5 billion from consumers that should have been financed by new equity and borrowings, are running out of road. And the Government doesn’t have the dosh to invest.

If you’ve gotten this far, I think you can see where it’s leading….

Nono, I’m using the more recent Lisbon consolidated numbering. (Remember Lisbon? ) The power to specify definitions appears under Article 125 of consolidated-Lisbon. Apparently the definitions which held at least as recently as 12 March this year were in Council Regulation (EC) No 3603/93 of 13 December 1993. Of course this replaces a mystery (”other type of credit facility”) with a mystery (”any financing of the public sector’s obligations vis-à-vis third parties”).

Marx was wrong - this is not a fight between labour and capital , this is a fight between Labour/capital and the people who control the supply of money.

Ahhh Gnome Chomsky , the lefties favourite lefty. The Lisa Simpson of lefties. Pardon me if I do not waste my time.

“The collapse of western civilisation is looking more and more certain.”

As Noam Chomsky has shown in his book ‘Hegemony or Survival’ - the masters of the universe are not interested in the sustainabilty, they are interested in more power and wealth.

Economists and other intellectuals have become the “high priests of ideology” - rationalising and defending policies which are ruinous.

Worth a read of this chomsky article:

http://www.chomsky.info/articles/199606–.htm

The collapse of western civilisation is looking more and more certain.
If something is broken you fix it - if the cardinals in Brussels and elsewhere get there way we will be lucky to live in medieval squalor.

We are better then this.

I suppose we can all develop the scenarios that will generate whatever sweet dreams or nightmares we desire. You seem unpersuadable.

Getting back to the initial theme of this thread, I fear that behaviour by some bankers - ranging from the reckless to the borderline (allegedly) criminal - though perfectly rational given the incentives and lack of external constraint, may encourage an increased affection for public sector and semi-state companies that their performance doesn’t warrant. Although the government-regulator-semi-state triangle in the energy sector may not be as damaging as the government-regulator-banker-developer quadrangle in the banking sector, it is damaging nonetheless.

It may be more difficult to ensure efficiently run semi-states than you think.

Ask yourself why private companies invest in gas powered stations rather then more diverse and capital intensive power plants.

The reason is simple- they would have to put up a much larger amount of capital for a coal /hydro or nuclear plant.
They can also externalise the risk by claiming the rising price of gas is the cause for the rising price of electricity.
In fact the rising price is due to scarcity due to its inappropriate use in electricity generation when it could be used more effeciently in the fertiliser or home heating / cooking sphere.
Meanwhile the state electricity company is deprived of capital so that the private players can move in.
Collapse is only a matter of time in such a system.
Strategic planning is more then cutting wage costs which are secondary in such a formally capital intensive business and competition is a joke in such a natural monopoly.

Privatization does not lead to better service or decreased prices. In fact it would be easier to secure price decreases with an efficiently run semi-state company.
The short term cash generated would be squandered in (guess where …Anglo!). No thank you to privatization!!

You have a view on fractional banking and fiat currencies and why they don’t work. Most of the rest of us seem to recognise the perils and seek to avoid/minimise them. That’s fair enough, but you’re unlikely to gain many converts.

Your bank/power ultility analogy might have some validity in Britain (or even in parts of the US) where private equity has hollowed out some balance sheets, but it has no relevance in the Irish context where consumers have being paying through the nose for the last decade for huge investment in power generation and networks.

You have an accounting point, but I’m looking at things that would get down the state’s cost of funds and selling (some) semi-state assets gets the debt/GDP ratio down, productive investment of the proceeds might provide some assurance to the markets of future debt service capability and do the trick.

I don’t think wholesale sale as you put it is on the agenda and I expect Colm McCarthy and his colleagues are wrestling with the complexity of the restructuring that will be required before any clear definition of the assets that might be sold will emerge.

And, for example, there are three valuations of the ESB and BGE on the go - the book value (historic cost), the regulatory value (indexed historical cost) and the valuation for ESOT purposes. I have no doubt that splitting them up and selling, at least, the regulated parts would generate bids well in excess of the book value. This would be a good deal all round, as consumers would be off the hook for paying through the nose for Minister Ryan’s green whizzo schemes.

But I can’t see anything sensible like this being implemented - irrespective of what Colm and his colleagues recommend. That’s why I say: bring on the institutional EU and the IMF.

It is not a very efficient argument, but it is, I think an accounting point?

Anyway, I think wholesale sale would be remiss. Coillte, for example, own 7% of the land surface of the country. Would it not raise greater revenue for them to sell piece-meal the smaller land-holdings they have? Perhaps even through ebay! Given the love of land, this could perhaps generate more than a sale of the company in toto.

When you speak of profit I assume you’re not confusing the normal profit required to retain and attact investment and super-normal profit in excess of this. Since most semi-states own specific, long-lived assets, generating this normal profit is a necessary requirement - irrespective of who owns them.

A common argument is that the state’s cost of funds is lower than that of the private sector and users of the semi-states’ services would end up paying more, but (in normal times) the state’s cost of funds is low because taxpayers are ultimately on the hook and the bond markets believe they will continue to pay up. At the moment the state’s marginal cost of funds is in the danger zone and we shouldn’t be squeamish about doing things that will bring it down.

But the argument for privatisation is valid irrespective of the level of the state’s cost of funds. There is no reason why the private sector shouldn’t be involved if it is willing to participate and prepared to respond to the incentives and comply with the constraints imposed. This frees resources that the state may deploy in areas where the private sector is less willing and able.

And I think the banks will be forced to continue shrinking thier balance sheets rather than stuffing them with infrastructure assets that might generate returns less than their current cost of funds.

A Padhraic Garvey from ING Financial Markets is quoted as saying: “Ireland had to pay high rates to attract investors…”

Nobobody told him about the ‘green jersey’ fraternity!

@ Keith Cunneen

You need to update your braindrive on the IMF.

It’s currently run by a former French Socialist finance minister, Dominique Strauss-Kahn, who has provided inspired leadeship during the financial crisis.

It is of course not run as a charity.