Donal O’Mahony Disagrees with Morgan Kelly

“YES, WE are all bond market vigilantes now. The gyrations of Irish government bond yields are fast becoming a national obsession, with talking heads dominating all media outlets in a manner that leaves the dogs in the street straining to get a decent bark in.”

Beats all the nonsense that stockbrokers and bankers were spouting as they cheered on the destruction of a nation.

“Courtesy of Nama and the stepped-up prudential requirements of a new and vigorous financial regulator, Ireland will soon find itself with two of the most strongly capitalised banks in Europe (AIB and Bank of Ireland). This realisation is already playing out in Irish bank funding markets, where credit spreads are now tightening appreciably against European peers. For example, subordinated debt spreads for Bank of Ireland have tightened by as much as 120 basis points over the past five weeks.”

http://www.irishtimes.com/newspaper/opinion/2010/0413/1224268226001.html

And where are the subordinated debt spreads for Bank of Ireland now?

Again more nonsense

The banks liabilties exceed their assets – they cannot now create debt credit as their customers have reached and exceeded debt capacity.

The goverment cannot get debt from the financial markets so when the banks customers become unemployed they cannot hope to even pay modest debts.
Workers who took out unrealistic debts are now stretched to pay these private debts as the goverment raised tax / reduced expenditure to pay debts incurred to bail out the banks
The solution is easy – create debt free or nearly debt free money to create a new equilibrium.
If not you soon reach catastrophic implosion as the debt gets compounded to infinity against a static money supply.
Its that simple – why all this pointless conversation for 2 years or more.

what a joke – and indeed how much does it cost to write bullshit such as this – I repeat what a joke – do the banks think all the Irish people are retarded……… actually on second thoughts
Message to the banks – you made the mistake of awakening the sheep by trying to butcher it in the presence of others – you should know that dispensing debt is a subtle art and best done in small groups, as if the whole herd gets wind of the farmers true nature it may be a bit difficult to sheer, let alone butcher the livestock.

I am going have a go at the section of Mr. O’Mahony’s article dealing with bank defaults: the paragraphs from Unfortunately, current circumstances are far from normal. to Those who advocate bond defaults, but then seek alternative explanations for rising bond yields, betray breathtaking ignorance of bond market dynamics. (I won’t annoy the IT or readers here by quoting it all.) I’m sorry to say that it is risible.

First I’ll deal with this bit.

LIABILITY MANAGEMENT exercises on subordinated debt have been a feature of the bank recapitalisation story (at home and abroad) over the past 18 months, but all being conducted without the compulsion of investor participation, such that issuers (the Irish included) might still be seen to be honouring their liabilities in full

To an idle, unfinanced yahoo like myself, the Dunfermline immediately springs to mind here. As best I understand it, the Dunfermline Building Society was put into resolution under the UK’s Banking Act 2009, and the subordinated debt was given a swingeing haircut. As far as I can tell, the whole process was compulsory as far as the subs were concerned, and they certainly don’t seem to have been offered any alternative to taking their losses. And in fact EU approval for the resolution required this kind of “burden-sharing”. Ah, but wait. The Dunfermline went into on 30 March 2009: twenty months ago. Sorted! Similarly, the Danish banking resolution system, approved by the Commission in these terms

The Commission found the scheme to be in line with its Guidance Communications on state aid to overcome the financial crisis (see IP/08/1495). In particular, the aid is limited to the minimum necessary to ensure an orderly winding-up. Moreover, burden-sharing is ensured by excluding shareholders and subordinated debt holders of the failed bank from any benefit from the aid. Finally, strong limitations on the activities and the lifespan of the bridge bank will minimise distortions of competition that may arise from the state measure.

at the end of last September, doesn’t matter because (as far as I can tell) no institutions have been resolved under it yet. (Credit: Jagdip Singh.) Truly, this is the sort of careful attention to detail we expect from professional financiers.

At last, Morgan Kelly exposed for the fraud that he is.

Time the Government stepped in with the nuclear option, simply sack him.

I love the last bit, the kicker…
“a need for more enlightened self-interest in the ways in which we disburse the investments of the pension fund and insurance industries, the National Pensions Reserve Fund, and indeed the domestic banks themselves.”
Or
“global bond stategegist suggests we abandon global diversification, put all eggs into irish basket”
Hmm……

@Brian Lucey

On the grounds that taxpayers are paying lots of money towards this wrecker’s salary and are deriving, not zero, but massively negative benefit in return. Taxpayers pay him 100k a year, or whatever, and the service he offers them in return is trying to convince the rest of the world that the economy is heading for such a crash that they have no hope of getting their money back and should charge sky-high interest rates. Any cost/benefit analysis would quickly come to the conclusion that taxpayers are not getting value for their money from Kelly’s continued employment at their expense. However, the government are probably too weak to take my advice, although there will be a window of opportunity for doing it when the GDP figures are published next month and confirm that Kelly’s predictions are totally wrong. The main difference between you and him is that you have the honesty to admit that you want to see the economy crash, which is why I don’t advocate the same treatment for you.

Please, JtO, you need to retreat a tad. Do you seriously think that bond investors make their decisions based solely on the views of an Irish don who has adopted a contrarian stance – and, while not being bang on the money on all occasions, has been remarkably prescient on some key issues?

And as for those of us whom you perceive as being intent on “doing Ireland down”, I think you will find that, recognising the patient need surgery urgently, many of us advocated that course – rather than the prolongation of suffering that the application of the alternative homeopathic remedies have caused.

We have a lot of reassurance, admonition and exhortation from our domestic elite since the bubble burst. Outside the semi-detached MNC sector, however, the economic fabric has continued to unravel. Hard to believe that is all down to Morgan and the blogs.

I suppose if there had been more willingness to divulge the facts a little earlier, we’d be more inclined now to believe our official sources. Hopefully the discourse will become a little more reality oriented in the New Year.

@Brian Lucey

Never heard of Stakhanovite. Who does he play for? Neither have I read a lot of Soviet history, although I did watch Dr Zhivago once. I expect that reading a lot of Soviet history was de rigeur when you were a student, at a time when so many cherished the hope that Ireland would soon become part of it. Perhaps they still do.

@Brian Lucey, Paul Hunt

Why don’t you address what Donal O’Mahoney is saying about Kelly? Why bother about a mere spectator like me? O’Mahoney is the one who is slugging it out with Kelly and just landed him flat on the canvas. I’m merely cheering him on.

@Karl W,

Admonition noted, but I believe that JtO articulates a mindset and world view that is more prevalent – and influential – in Ireland than you might care to acknowledge. I’m old-fashioned enough to believe that engagement and discourse, if pursued assiduously, may lead to enlightenment.

15-0 to “donal is less credible than a plan from Baldrick” on the IT so far….

@ Eoin Bond

The bond spread is indeed narrowing. At first I suspected ECB buying but the FT has pointed out that a G20 statement this morning seems to suggest that France and Germany are back-tracking on forcing bondholder losses. Looks like they blinked.

@Mr. Bond,

Immediate panic over? ECB buying Irish sovs? A market pause while a deal is being worked out in the background? Any thoughts?

@ Paul Hunt

no ECB in sight yet (oddly, they usually wait til around 11am CET before they do anything, assume they like long morning espresso and croissants). No much buying, but sellers have disappeared and a few bits of real money trying to pick some up.

Donal O’Mahoney’s article was a far more entertaining, and uplifting, read than Professor Kelly’s but you’d want to be pretty dumb to believe that either of them are entirely correct in their analysis. Weighing up one set of arguments against the other, I’m more inclined towards O’Mahoney’s perspective than Kelly’s, but that’s why the IT juxtaposes strong opinions in this way, to appeal to a readership who like to make their own minds up rather than just being passive receivers. As an ordinary lay person, I’ve been more impressed by John McHale’s contribution to this debate, both on this blog and in his radio interview, than either of the IT columns.

@ KC: “The solution is easy – create debt free or nearly debt free money to create a new equilibrium.”

Spot on. Thanks.

@JtO: John we encorage and tolerate free speech – up to a point. You are now at that boundary. Moderate your comments about individuals or I shall make a formal request to the administrators to moderate all your future comments (if they can do that). You are being termed a Troll: No John you are an ignorant bully -pure and simple. Take you ignorant and unhelpful comments elsewhere.

Brian P

@Brian Woods

WE encorage and tolerate free speech.

I shall make a formal request to the administrators to moderate all your future comment

JTO again:

I think by ‘moderate’, you mean ‘censor’.

And what is all this: “WE encorage and tolerate free speech”?

especially ‘WE’.

You are not listed as one of the site administrators. You are just a mere poster like me. Don’t give yourself a status you do not possess. So far, the site administrators, to their credit, have given no reason to believe they will start censoring posts as you request. Looks like Morgan Kelly’s fans are in trauma at seeing their man being carried out of the ring.

*IRISH 10-YEAR BONDS EXTEND GAINS; YIELD FALLS 40 BPS TO 8.72%

@ Brian Lucey

shouldn’t you be updating us with this on your Twitter page? Don’t want people thinking you only have bad news on your mind when updating bond yields…

Thank you, Mr. Bond. Haven’t seen the text of the EU statement, but it seems a statement of the bleeding obvious – no private sector money used in any EFSF intervention. The spread coming in could be due to the Veterans’ Day ‘weekend’ in the US, or the supply of stock for borrowing to short could be dwindling, or, now that the spread has been pushed out so far, shorting profits are shrinking – or the ability to secure them becoming much more risky.

Don’t think this is over yet by a long chalk. Damage is being done all around to other players (here and in the other peripherals) who need access to the international capital market – and a slight tightening of the spread is going to have little impact if credit lines are closed. For example, the CER is proposing to increase its fictional cost of capital for the ESB Networks (extracting another €200 million from consumers) by 20% to cover expected higher borrowing costs by the ESB.

Rather than criticise DO’M, why not focus on the actual points he is making. Firstly, that bond yields have gone parabolic, the classic herd rushing for the door despite a virtual certainty that these bonds will be repaid. Investors are either being forced to sell because of yields further adding to the problem or are running scared due to a lack of understanding of the real story on the ground.
Secondly, that Ireland has self-help options that are either not available or have already been used by other affected countries. Private pension and insurance funds across Europe typically invest c.35% minimum in their own sovereign debt ( Germany it’s over 50%, Spain 70% source BIS). in Ireland these funds hold less than 5% of NTMA bonds ( source CBI ). Even getting to the European norm over the next 5 yrs would create over 25 bio of new demand and crucially a permanent buyer and proper liquidity for the market the lack of which is the primary reason for the crazy moves in recent weeks. The NPRF is a unique Irish saving pool and it makes zero sense to pay for funding at a rate higher than the pool is earning. So another 15 bio of demand. And finally the Irish banks uniquely in Europe hold very little Irish debt ( source recent CEBS stress tests ), moving their liquid asset pool composition to the European norm would create another pot of demand of c.20 bio. All in all, it’s untapped demand of 60 bio which is roughly the total funding requirement for the state including redemptions for the next 5 yrs, or to put it another way, in theory Ireland moving to EU norms re asset allocation of domestic savings would allow the state stay out of debt markets until 2015!!!!
Thirdly, there is no direct evidence yet of mortgage defaults getting anywhere near the levels suggested by MK. Note that BOI this morning have reconfirmed their loan loss guidance, unchanged in 18 mths now !!. And Irish banks uniquely in Europe record mortgages in arrears even if the loan has been rescheduled until the original unpaid monthly debit has been settled. I would urge you to read that point again, it flys in the face of the MK argument. If you don’t believe it, ring the banks Comsat dept and ask them, Irish banks are probably OVERSTATING arrears relative to EU peers.

The real economy has started to pick up, search ‘YouTube ‘ for ireland by numbers’, the data is getting materially better, Ireland has had a horrific period of adjustment and the process of going from A to B has been a nightmare but we’re nearly there and all the doomsayers fail to appreciate how dynamic an economy it is. There will be further pain as we reassign capital from unproductive public and private sectors, years of pain for the reckless who borrowed at the peak but the cataclysmic collapse forecasts are ludicrous and Donal and others will be proved right.

@ Paul Hunt/Celtic

c’mon guys, you only gotta ask nicely… 😀 The important bit is the last paragraph. Interesting that the UK signed off on it.

SEOUL, Nov 12 (Reuters) – Following is a statement issued by the finance ministers of France, Germany, Italy, Spain and Britain at the Group of 20 meeting in South Korea on Friday.
The statement was issued after a financial crisis in Ireland was discussed at the G20 meeting.

“At its meeting on the 29 Oct 2010 the European Council discussed the future arrangements for ensuring economic and financial stability in the European Union.
“Whatever the debate within the euro area about the future permanent crisis resolution mechanism and the potential private sector involvement in that mechanism we are clear that this does not apply to any outstanding debt and any programme under current instruments.
“Any new mechanism would only come into effect after mid-2013 with no impact whatsoever on the current arrangements.
“The EFSF is already established and it’s activation does not require private sector involvement. We note that the role of the private sector in the future mechanism could include a range of different possibilities such as a voluntary commitment of institutional investors to maintain exposures, a commitment of private lenders to roll over existing debts or the inclusion of collective action clauses on future bond emissions of euro area member states.”

Lucey’s obviously on a tea-break, so i’ll step in. I know he places big importance on getting the information out there, bad or, eh, good, right?

*IRISH BONDS EXTEND GAINS; SPREAD NARROWS 44 BPS TO 602 BPS

CDS spreads have also tightened significantly this morning. Lets have a good news Friday!

The Irish Bankers Fed wallah on the Six one news last night said that there is some committee working on the issue of people in mortgage difficulties and that there is a huge difference between negative equity and actually being unable to pay anything on one’s mortgage. So how bad is the mortgage situation likely to get ?

I imagine that Ireland is not going to go down the road of senseless mortgage foreclosure as per the US because it would be culturally unacceptable and a hark back to the worst days of the Raj. It seems to me as though the banks are actually doing some thoughtful work in this area.

BTW the Yank approach is ripping the hearts out of poorer neighbourhoods and also has the effect of savaging the accumulated wealth of the lower middle classes, a consequence that will have significant resonance in the future.

I know that there are people on this site who are expecting an apocalypse (do any of you regularly follow Mayo football?) but is it really likely in the mortgage market ? Most of the people who bought during the boom are solid middle class FF voting come-from-a- respectable-family types . If traders in Lahndan are betting on them handing in their keys I think it says more about what traders in Lahndan know about Suvin Island than it does about what is actually likely to happen.

I agree with Brian Lucey that the problem needs to be assessed and analysed but might it not be the case that the actions of the banks and the cultural context will mean that this is one self inflicted disaster that doesn’t materialise ?

There is supposed to be a statement coming out later today that deals with Ireland specifically.

@Eamonn,

You missread me. Of the two, I find Donal O’Mahoney’s arguments more persuasive than Professor Kelly’s and there may indeed be an emotional factor in that – I’m the optimistic type and I loathe negativity for the sake of it of which there’s all too much around and most of which is self-indulgent opportunistic garbage. Excessive negativity is as misleading in its conclusions as overoptimism, and just as damaging in the long run. However, in his intervention in this debate John McHale spoke only to the facts, which is why I take his argument seriously. As for hope, well, we all know what hope did: he stuck a feather in the ground and hoped it would grow a hen.

Brian Woods II

Why did it take that Kelly article to get Donal O’Mahony out? It is good to see more visibility from people like him. I do get the feeling that people who are in a position to do something are copping on to the seriousness of the situation.

I thought the interview between Paxman and Lenihan on Newsnight earlier in the week was excruciating. I have no time for FF but there was something about the English Paxman telling the Paddy that he was incompetent that really stuck in my craw.

BTW, Zeitgeist is a German noun so it takes a capital letter.

@ Brian Woods

I think that JTO makes an interesting point regarding the ability of academic economists to impact negatively on public perceptions when given a high profile voice in a main news outlet – hard for the paymaster to take it but given the concept of academic freedom held suspect hard to do much about it.

Indeed the more negative the commentary, given the sensitivity of the markets currently to bad news, the more likely the news moves things in the wrong way thus fullfilling the doomsday scenario originally painted. On the downward cycle does this inherently create an incentive to write articles such as that written by M Kelly. Davy employees are quite clear in indicating what their day job involves.

Maybe someone could answer a question i have wondered about for a while – do you get paid for writing the oppinion pieces in the IT?

Bailout this weekend (80bn, 3-4yrs), involving EU AND UK, rumour but strong one (and i know but wont say who’s putting it out – ‘good’ bank you generally wont hear trying to spook the markets). Yields coming a lot lower, CDS in by 70bps….

Bond. Eoin Bond

“Bailout this weekend (80bn, 3-4yrs), involving EU AND UK”

UK banks getting a bit nervous?

RBS?

Actually MK is wrong here – we don’t need no stinking badges.

We can create credit with the states resources – we still have Euros ,lets multiply it.

Medley Report:

Intensive EU discussions are underway that will lead to a financial-rescue plan worth more than €80 billion for Ireland and as soon as next week. There will be no “private-sector participation.”

The final decision is likely to be taken Tuesday (November 16) at the meeting of the Eurogroup, the committee of the Eurozone’s 16 finance ministers and representatives from the European Commission and the European Central Bank, but a political agreement to act has already been struck at the G20 summit in Seoul.

Officials will be negotiating over the weekend over the exact shape of the package but it is clear it will be similar to the Greek deal in that it will be sufficient to remove Ireland from the market for up to three years, and it will be combined with an IMF and EU adjustment program. Where it will differ is in the efficiency of raising the funding. Both IMF and European Financial Stability Facility cash will be available without a repeat of the political maneuverings over Greek aid, although the Irish won’t need financing until they restart their funding program in the new year. Once the EFSF has the political go-ahead, it can start funding.

Eurozone governments are also seeking a substantial British contribution to the program, probably via the €60-billion European Financial Stabilization Mechanism, which is guaranteed by the EU’s 27 members and not just those that use the euro.

In a bid to stall contagion, the ECB is likely to step up its bond-purchase program — as it did in the first days after the May 8-9 crisis meeting. Officials differ over whether or how soon the Portuguese government will have to seek external assistance.

Joseph Ryan

Needs to be €80bn at zero over 100 years.

Oh to hell with it.

Just lets the ECB print €80bn.

Simples.

“UNCONFIRMED: Rumours Medley have published a report suggesting that there will be an EUR 80B bailout of Ireland next week.”

http://twitter.com/humenm

@Greg.
Conclusion. So finally its in the open. Fianna Fail has bust the country.

http://www.independent.ie/business/irish/davy-claims-watchdog-erred-in-bond-decision-1285876.html

enough said

I wouldnt trust Davy’s with any of their crap, since they are always wrong

Enda F

“I posted Medley’s comments above.”

Apologies. Missed that.

Joseph

“Conclusion. So finally its in the open. Fianna Fail has bust the country.”

If the rumour is true. Yes.

Of course we should not accept any package that does not include throwing Anglo and INBS to the wolves.

Consolidating this fraudulent debt on the sovereign would be treason.

The logic of saying that seniors would suffer post 2013 but not before escapes me.

ED

Maybe he didn’t get the memo.

🙂

@all

From the alleged Medley Report: “… a political agreement to act …”

What a lovely phrase – KoMopSumNida Seoul …. The Solidarity Bond it is.

Euro senior_citizen bonds universally win out over particular cost of Irish bank bail_out: ergo, negotiation with the ECB (and EC) on amelioration of particularly obscene cost to Irish serfs as EZ learns new lessons and moves to some form of EU citizen protection from financial infections.

There is exaggeration at times on both sides.

On the official side, Brian Lenihan appears to be the only senior public
official who speaks on issues without resorting to spin.

Yesterday, Minister Batt O’Keeffe issued a statement claiming that the implementation of the EU services directive could result in a rise in exports by €16bn pa. Apart from the fact that most of the foreign-owned firms responsible for 97.5% of service exports have already companies in individual EU markets, Ireland only implemented the directive after a public warning of legal action by the EC.

Official job creation targets now include an estimate for indirect jobs and no estimate of job losses and so on.

We encouraged gullible overseas observers during the bubble and lapped up the reports on the ‘miracle’ but this week when an idiot on Bloomberg TV said Ireland would run out of cash in 60 days, the NTMA said it was ‘mischievous nonsense.’

Two days later, the Taoiseach said if the Budget wasn’t passed, we would run out of money by next June – – but don’t we all hear half a story at times?

Claims are made about exports but despite a 50% rise in current price terms since 2000, jobs are back to the 1998 level.

As regards the rise in bond yields, it wasn’t articles in the Irish Times that were the catalyst but the 2-year slow motion response to the banking crisis, in particular the failure to address the cost of the Anglo bailout with urgency and the slow-motion in 2009 in getting detail from the banks on security and documentation on key loans.

The official line of the Government in the summer of 2009 and from Davy’s was that the LTV would be 75%.

According to the WSJ this week, Brendan McDonagh was shocked in early 2010 on the state of the loans’ securities.

This then resulted in a big announcement in March on Bank recapitalisations and a move up in yields.

In early Sept 2009, I had written on this blog that an LTV of 75% was not credible:

Wall Street Journal says Ireland’s fate tied to doomed banks:

http://www.finfacts.ie/irishfinancenews/article_1020984.shtml

What happened to last night’s rumour about overnight funds ?

@greg
“Of course we should not accept any package that does not include throwing Anglo and INBS to the wolves.”

Beggars can’t be choosers unfortunately.

@All
Forgive me if I’m being too indulgent, but I’d like to guage people’s opinions on what would be the implications of our having to accept SDRM/EFSF funding? What would it mean for taxes (personal and business), public sector pay and employment levels, welfare rates etc?
And getting back to Greg’s comment, what would happen if we refused to accept the terms associated with the funding?

I am delighted that JtO has illustrated his “optimism” with a certain amount of bile. He is clearly a partisan.

I have said it before, but it is just fascinating that tripe begets tripe and enticed JtO in this way.

This is what passes for “thinking” in some circles and explains many things about the mess Ireland currently is in.

Veronica.

Sorry, the two articles are clearly of far different levels of accuracy and erudition! I am sure John McHale winced being in such company!

A couple of things:

First, this site seems as good as any to request that someone attempts to adequately analyse the affect of media commentary here on perceptions abroad. It seems to me that certain people are trying to have it every way – scoffing at the notion that media commentary here could influence perceptions abroad, yet seemingly determined to influence the debate here nonetheless.

Second, it is now apparent that any opinion expressed here (or in the wider media), which does not conform to the general conclusions the most frequent contributors to this site have drawn, is subjected to a lot of ridicule and very little analysis. The irony that those contributors (and their supporting commenters) instantly accuse others of playing man-not-ball seems to be entirely lost on them.

Third, this thread has proved beyond doubt, if proof were needed, that a number of dismal scientists here need to recalibrate themselves to focus more on the science and less on being dismal.

Im an avid reader of this site but Im increasingly alarmed by the inability of certain posters to even entertain a single doubt about the veracity of predictions emanating from their hero Morgan Kelly.

There seems to be some sort of cult forming that seeks to jump down the throat of any dissenters.

There are a few on here that remind me of ‘Squealer’ to Morgan Kellys ‘Napoleon’

Marian

“And getting back to Greg’s comment, what would happen if we refused to accept the terms associated with the funding?”

The Euro would unravel within a week.

Ireland would be locked out of IMF funding.

A guarantee of €400bn was stupidity itself.

The ECB needs to grow up.

The debts of Anglo & INBS cannot be repaid.

To attempt to do so is National suicide.

Better off going it alone if that is what is required.

@seafoid

Overnight liquidity thing probably dissipated because now less chance of haircut problem accessing efsf. So state backup less potentially impaired.

Ash? Anyone?

Ronan Furlong

“The logic of saying that seniors would suffer post 2013 but not before escapes me.”

Does it escape you?

Particularly with regard to €50bn of insolvent bank debt.

Statement by MoF:
http://www.finance.gov.ie/viewdoc.asp?DocID=6576
leaves everything to play for.

To Michael Hennigan’s chronology, it is worth adding the disastrous handling of the increase in the headline amount of aid for Anglo announced in August, which only came out when the European Commission approved a bigger amount than people had been expecting. But this came in early August, when Brian Cowen was less than half way through his holliers, and Brian Lenihan was, I believe, in Schull. No one was around to explain what was going on, that set the bond market off, and it’s never recovered.

Paul Hunt

“The clarity provided by the EU Finance Ministers of the G20 is most welcome. The Statement makes it clear that any potential private sector involvement in that mechanism does not apply to any outstanding debt and any programme under current instruments. Any new mechanism would only come into effect after mid-2013. So this would have no impact whatsoever on the current arrangements.”

The “current arrangement” being that Ireland gets stuffed for €50bn of insolvent bank debt.

“Any new mechanism would only come into effect after mid-2013.”

Just before Greece exits the Stabilisation Fund with debt to GDP of 150%.

How convenient.

@Greg,

Deals will be done, as the ECB is also on the hook for the massive liquidity support it is providing for the Irish banking system – but not in the current frenzy. Ireland must be taken into protective custody to prevent it harming itself any further – and others in the immediate vicinity. I think that has now been accepted and, in Claud Cockburn’s memorable words, “confirmed by official denial”.

We need to see the additional fiscal outgoings for bank losses over the next 10 years as a tax on the greed and incompetence of the bubble era – unfortunate, but bearable. It is regrettable, but is of less import than the need to reduce the fiscal deficit and to begin repairing the economy. For this we also need external assistance as the current political factions are displaying their usual – and understandable – prediliction for placing their lust for political power above the public interest.

@Greg

The Minister, in his response to G20, is basically stating that he intends to continue with his reversal of the logic of republicanism – and continue to screw the lifeworld of the Irish Citizenry in socializing the debts of the banks and elements of the upper-echelons of Irish society.

Angela’s timing might be off, but her logic remains sound. Frankfurt to act.

Three intersecting bubbles:property, banking and public sector. Banks lent to property, they spent it, pushing property prices up, yielding taxes that the public sctor spent on wages and headcount. Property prices went down. 120,000 construction related workers laid off out of total rise in unemployment of 200, 000 (speaks to the rest of the economy being better than commonly supposed). Banks went bust when property stopped repaying loand. Public sector went bust when taxes stopped flowing.

Public sector is being fixed and will be even more fixed by the IMF.

Here is a proposal to fix the banks (NAMA an abject failure in that regard): take the one ‘good’ bank, for example, that is supposed not to need any more capital but is dogged by fears that this is just wrong and, therefore, can’t fund. Note that it makes circa 900 million pre-provision profits. Normalise this at a conservative 1bn. Aplly a conservative multiple of 7. Extreme stress test reveals, say, potential further losses of 3bn. Give said bank to BNP (or whoever) for 4bn ( 7 minus 3). Insure (Irish government with a backstop to IMF?) any further write-offs above 3bn. Aplly same logic to the other, ‘less good’ bank. Do either or or both. Banking system fixed overnight.

Still leaves the 120000 construction workers as long-term unemployed but, to the extent that it can be, this is job done. Sorted.

This talk of cult is misdirected.

Anyone remember the cult of consensus approach to budget, the cult of 4 billion cuts recently surpassed, the cult of 3%, the cult of there is no alternative and the cult of go and commit suicide as suggersted by Bertie-on the horses- Aherne, the cult of the soft landing and so on and so on.

Come on guys if you are going to talk about cults then at least list all the cults rather than targetting one man whose opinion you dont like.

Interesting article from Mohamed El Erian
Austerity alone won’t cut it

http://www.ft.com/cms/s/0/11ad1ab8-ee49-11df-8b90-00144feab49a.html#axzz154eBDszd

“So far, Europe’s response has consisted of two elements: peripheral countries (and particularly Greece and Ireland) embarking on ambitious austerity programmes; and, simultaneously, these countries receiving external funding through access to the ECB’s balance sheet and, in the case of Greece, loans from the European Union and the International Monetary Fund. But the lesson of numerous crises in emerging economies show that this approach simply kicks the can down the road. It does not deal with the basic problems: the overhang of debt (an acute problem for Greece and Ireland in particular) and poor competitiveness. “

@MPLT.
@JTO

re:
Ireland has had a horrific period of adjustment and the process of going from A to B has been a nightmare but we’re nearly there and all the doomsayers fail to appreciate how dynamic an economy it is. There will be further pain as we reassign capital from unproductive public and private sectors, years of pain for the reckless who borrowed at the peak but the cataclysmic collapse forecasts are ludicrous and Donal and others will be proved right.

Some of us may be nearly there. Others definitely not there.
There are some positive indicators as indicated by JTO but they are a drop in the ocean when set against the scale of unmeployment, business distress and the State and bank finances.
The position will be resolved eventually but not without long term solutions.
1. Long term ringfenced mortgage to cope with bank losses. Make sure it is high enought.
2. Burden sharing on a realistic scale. This means severe cuts in higher levels (above €40,000) pay with pari passu reductions in pensions.
3. Increase tax levels to Scandinavian levels.

To ALL.
The continued and personalised sniping on the site does not reflect well on the persons involved.
I would be more interested in hearing proposed solutions. Specific solution to cut backs for instance and proposed tax changes or tax rises.

@JtO & MPLT

Following JtO’s plug I read MPLT’s posting. Absolutely agree with JtO’s assessment.

Just after listening to Pat Kenny’s Kilkenomics program. Stomach churning mob rule. Disappointed that people like Olivia O’Leary entered the mob spirit getting cheap applause for spouting populist banalities.

I will give a flavour of proceedings. Towards the end someone asked why can’t people like David McWilliams and Brian Lucey form a political party and use their brains to sort us all out. DMcW came up to the plate. He was prepared to give whatever was needed for the benefit of our country (loud mob applause). He admitted though “I wouldn’t be very good at such things like fixing the local drains but when it comes to the big picture I know what needs to be done”. I nearly got sick.

@Greg,

I agree. It makes the task of securing any measure of popular acceptance for the severe fiscal adjustment required almost impossible. Postponing interest payments on the infamous promissory notes for 2 years won’t fool anyone as they’re just being rolled on. Sadly, some EU/IMF enforcement will be required.

BWII

Shame to see such a picturesque place as the Marble City clogged up with all these thought leaders. The home of hurling deserves better.

I read Lucey et al yesterday and the thought sruck me-why not sell both the Anglo and AIB deposit books for their collective worth, say 100bn on Lucey’s Anglo valuation. Then we could pay off everybody’s mortgage debt or the sovereign debt or whatever.

Am I missing something?

@ceteris.
BOI are certainly paying 13% to me on the small few euros on deposit with the. One per cent.

MPLT

“Private pension and insurance funds across Europe typically invest c.35% minimum in their own sovereign debt ( Germany it’s over 50%, Spain 70% source BIS). in Ireland these funds hold less than 5% of NTMA bonds ( source CBI ). Even getting to the European norm over the next 5 yrs would create over 25 bio of new demand and crucially a permanent buyer and proper liquidity for the market the lack of which is the primary reason for the crazy moves in recent weeks.”

Are you suggesting a compulsory allocation of pension fund assets to Irish Sovereign debt?

“The NPRF is a unique Irish saving pool and it makes zero sense to pay for funding at a rate higher than the pool is earning. So another 15 bio of demand.”

I could be wrong but I thought the NPRF was restricted in the amount of Irish government debt it could acquire.

Has this changed or are you suggesting a fundamental rewrite of the NPRF Investment Strategy?

That the NPRF should be “directed” to buy government debt?

http://www.irishstatutebook.ie/2000/en/act/pub/0033/sec0018.html#partiii-sec18

Paul

“I agree. It makes the task of securing any measure of popular acceptance for the severe fiscal adjustment required almost impossible. Postponing interest payments on the infamous promissory notes for 2 years won’t fool anyone as they’re just being rolled on. Sadly, some EU/IMF enforcement will be required.”

“Postponing interest payments on the infamous promissory notes for 2 years won’t fool anyone as they’re just being rolled on.” Enronesque in its brass neck.

“Sadly, some EU/IMF enforcement will be required”

I’m not against intervention. I think the budget deficit is ours and ours alone.

And I don’t have to be an optimist to know that we can make the adjustment.

I merely suggest that we should take a hard line on Anglo and INBS as part of negotiations.

@Brian Woods II

Hi Brian,
What’s your beef with David McWilliams? Is it his style or his substance? I’ve just been re-reading ‘The Pope’s Children’ (2005) and his denunciation of the credit junkies looks pretty spot on to me:

[O]ur most productive generation — those between 20 and 40 — are moving rapidly into levels of debt that would concern outsiders looking in. But us, we don’t care, because we believe our own propaganda that this time it’s different. So borrowing continues apace. We borrowed 25 percent more in 2005 than we did in 2004. And we are spending this cash on flashy items. In the past four years, the market share of BMWs and Mercs has doubled, from 3.6 percent to 6.2 percent. We are Europe’s bling nation. Per head, there now are more Mercs sold here than in Germany. The two big banks — our principal moneylenders — are, as a result of our splurge, the most profitable in Europe, making around € 350 ($442) profit per customer. […] The full-on nation is burning the candle at both ends.

That was five years ago. It all looks pretty obvious in retrospect but DMC was one of the few who saw the writing on the wall before the house went on fire. Give him his due.

ceteris paribus

“I smell a rat”.

Too right. They’re coming for your private pension fund.

“more enlightened self-interest”

Whose self-interest?

I accept it is easy to snipe from the sidelines and take the populist view and David McWilliams can be hard to listen to but why is the idea of so called intellectuals forming a new party sniped at?

Is the current system with the likes of Willie O’Dea, JHR and Donnie Cassidy working?

The current system of getting elected revolves around gombeenism or patronage. What % of TDS are elected on the family name ( Andrews etc).

A new party with some household names at the helm could gain traction. Who these would be is another story.

I agree with those that are grounds for optimism. We are near rock bottom if not already there. We would rise quicker with the right political decision makers.

@Greg
you are right, it would require a legislative change for the NPRF to buy Irish debt. similarly, it would require legislation to require both private pension insurance or bank funds to do the same and it is more than a bit ‘south american’ if enacted
my point though is that we are seriously out of line with other eu countries in terms of asset allocation of domestic savings and that has massively compounded our problem as there has been no natural buyer of Irish debt when bad news came out. free fall every time
we are in wartime now and that demands extreme solutions
domestic savings in theory should be used to finance long term infrastructure and investment, yet our savings are funding offshore companies and govts. they have stopped reciprocating and we need to bring our savings home
there are plenty of precedents, the Dutch forced private pension funds to buy domestic debt about 3 yrs ago to ‘plug the deficit’ and now 90% of funds are in Dutch or German bonds ( Irish equiv would be 63 bio)
last year the fsa in the the uk forced domestic banks to hold only uk govt gilts as liquidity buffers, overnight creating demand of over 200 bio for uk govt debt, all in the name of prudent liquidity
spains pension funds are obliged to buy Spanish bank or govt debt to ensure prudent liquidity since the start of 2009
we need to wise up and start being clever and as every country retreats to base, use what resources we have to stop getting beaten up by overseas bullies. and that’s what they are, all western banking systems gorged on credit, anyone who doesn’t realise that germanys banks, French banks, Spanish banks are in the same boat as our own is naive. it was a global cock up and we are paying the price for taking the hits to the banking system up front and crazily not ensuring a liquid domestic bid for our own funding requirements as the world works thru this crisis.
the uk us and japan all ‘printed cash’ to fund the system, the ecb will ultimately have to do the same but in a different way by funding ALL the banking systems at artificially low rates to recapitalize them.
we’re just the first link in the chain in my opinion

“The corollary is that Ireland is moving increasingly towards “self-help” status, whereby the ongoing borrowing requirements of the public sector can, in principle, be absorbed by the accumulated surpluses of the private sector.”

Am I reading that correctly?

A not so thinly veiled threat to confiscate private surpluses for public use?

Time to get your “private surplus” beyond the reach of the state then?

@Grumpy
Thanks. I could not find the article again. Eoin Bond says it is the secondry market. But what has happened the liquidity issue – can they get overnight money at reasonable rates.

@Greg
I seem to remember a financial services unit being bought out at a huge price- so you got to keep churning the commissions to pay the interest.

@Greg,

I agree. That day of reckoning will come, but it won’t be forced (exclusively) by an irish government. In the meantime I can’t wait for the spin that will accompany the announcement of the bail-out. “The IMF is only here to help. We’re still in charge. We’ve taken the best (international) advice in the past; we just need a lot more now.”

MPLT

Sorry MPLT I need to take this slowly (not being an economist).

“it would require legislation to require both private pension insurance or bank funds to do the same and it is more than a bit ’south american’ if enacted”

Are we now taking advice from Argentina?

http://online.wsj.com/article/SB122460155879054331.html

So the asset allocation of private pension funds would be determined by an act of the Oireachtas?

“it would require legislation”

Might it not also require a change to the Article 43 of Constitution, Private Property?

You are suggesting that the state should be allowed to take my private property (private surplus) and determine where it will be invested?

So if my pension fund is currently 100% allocated to equities the state can instruct the fund manager to take 50% of that and “invest” in Irish government debt?

@ Greg. the state already has very strict rules regarding your ‘private’ pension fund, how much you or your spouse own if you passed on, how it is managed, the deficit allowed etc
I’m not saying it’s right, I’m saying it brings us into line with everyone else and like it or not, that’s who we are competing with and we need to be properly equipped going to battle in a global market

@mplt

You could diversify lots of funds as soon as you were convinced entry into the Euro was going ahead. Depended on what the the fund was and the trustees.

@Eoin,

Don’t think there is a chance of a bailout before the budget. I think you will see strong statements of support come out of the G20 later today and from various EU leaders next week. They will try and remove the possibility of debt restructuring off the table and see where that takes us.

Medium term, I still don’t see any other option than outside help.

@Eoin,

Many thanks for the up-date. What are the odds the market players won’t be back for more on Monday? Postponing the details of the 4-year plan until after the Donegal by-election doesn’t look very clever. Plenty of scope for “events” in the interim.

Letter to shareholders from Dr Michael Walsh, Chairman, Irish Nationwide, 10 March 2008:

“The financial results for 2007 were outstanding. The pre-tax profits of your Society were €391 million – an increase of 64% over 2006. The total reserves of your Society, which are the members’ funds, are now €1,510 million. The level of loans to customers increased by 18% during the year to €12.3 billion. This increase in the loan book is a true reflection of how competitive your Society is. The table below highlights the outstanding job done by the management and the staff of your Soceity over the past decade.…

The Board wishes to acknowledge the enormous contribution of Mr Fingleton to the Society’s success over many years and his importance to the Society….”

I quote this merely to recall that ‘facts’, divorced from context or dynamic, are fairly meaningless. In my view, the dynamics (or the ‘fundamentals’, to quote our much-maligned leaders) of the economy are much improved of late (cf, JTO), but are not sufficient to outweigh the continued justified (and disinterested) concern of the markets regarding i) the sovereign’s ability to repay existing and future debt, and ii) the extent of further unrecognised bank write-downs.

DOM writes “The corollary is that Ireland is moving increasingly towards “self-help” status, whereby the ongoing borrowing requirements of the public sector can, in principle, be absorbed by the accumulated surpluses of the private sector. Of course, practice can differ from principle in this regard; hence the need for more enlightened self-interest in the ways in which we disburse the investments of the pension fund and insurance industries, the National Pensions Reserve Fund, and indeed the domestic banks themselves.”

This is the Hugo Chavez school of economics. The notion that private pension fund managers should be ‘persuaded’ to buy Irish gov’t bonds in ever larger quantities is very questionable – especially from an investment professional firm such as Davy.

There’s a lot of criticism of Morgan K. around the fact that the ‘didn’t offer a solution’. But let’s face it – even if he had – what difference would make. The trouble in Ireland is that the folks who run the country have no concept that anyone else should run it. So they they say ‘we’ they mean themselves and not you. Lenihan on Newsnight the other night was beast from an island where he has no natural predators. He wandered into Paxman’s gunsights and, purely for sport, Paxman fired off a shot or two – but BBC jouralism / current affairs has no interest in the truth about how Ireland is governed. This was just entertainment. The bullets bounced off Lenihan and by the end Paxman was plainly bored. You could see Paxo thinking ‘A rather charming Irish rogue’…..I wonder what’s playing at Covent Garden this week-end.’

Hmmm, as soon as i say that this hits…

RTRS-EURO ZONE SOURCES SAY IRELAND IN TALKS TO RECEIVE
EMERGENCY FUNDING FROM EUROPEAN UNION

@Bond. Eoin Bond

Time could be now then! States and Markets – sometimes States.

The statements made at G20 summits have to be taken for the complete undulterated PR balderdash that they are. The rubber hits the road with Frau Merkel and Madam La Garde who will have to face voters who are disgusted with the idea that governments, bankers and speculators who made enormous amounts of money by gaming the system will walk off with their booty while the taxpayers are left in the dust with the losses. All the economic science and carefully crafted economic models cannot overcome the cold hard fact that even the gullible Irish voters are waking up and are not smelling coffee but are smelling the putrid stench that corruption, fraud, cronyism, nepotism, parochialism and plain common stupidity and ignorance has brought to pass. The gov’t in power since 1997 is partly to blame for the problem and is now an impediment to the solution. So said Joseph Stiglitz the well respected Nobel Laureate a few days ago. An early election is badly needed. Clean out the stables now.

@hogan,

The IMF’s hand has been stayed in Greece – much to its chagrin. I agree with you. I doubt they will be kept on that leash in an Irish bailout. And they’ll have lots to keep them occupied in the dysfunctional non-traded sectors.

In my patch, I very much rate the IMF folk who deal with energy sector policy and regulation. Can’t wait for them to give the Irish sector the once-over.

*IRISH FIN MIN SAID THERE IS NO APPLICATION FOR AID

getting stupid now D/E…

Of course there is no application for aid. The formal application is made only when the package is fully agreed and ready to go.

@MPLT
You don’t appear to understand capital, or I don’t understand what you are saying.

Supposing I move my PRSA funds out of bunds and into Irish debt. How diversified is capital in the country then? Er, less, I’d say, concentrated on the performance of the sovereign.

What does it do to external investment balance?
Well, it makes it worse as there is a lower investment in bunds.

Currently external investment balance stands at -157 bn euro. Most of the external investments that are worth anything are pension fund, insurance assets and the like. Each time a coupon is paid on a bund, my pension and the country’s investment position improves (by a teeny-tiny amount). Aggregated, these investments abroad help balance out the interest payments that we pay to others.

Bringing them back home is not going to help, indeed, it is going to increase capital flow out of the country (in the form of existing interest payments with no balancing income) as well as increasing the pressure on the sovereign to perform.

I don’t know about you, but I wouldn’t rate the current administration to perform in a circus, so expecting that they will return my savings to me with interest is a bit rich.

Contrary to what Donal has to say, it’s self-evident that Ireland’s bank problems are much worse than admitted.

While NAMA haircuts have been greater than predicted, it is only necessary to look at the rules of the game as written, and at publicly available information on surrounding circumstances, to see that they must have paid the banks at a level well above any objectively reasonable estimate of the long term economic value of the assets.

Three points are key in relation to NAMA:
– NAMA is obliged to pay for assets at their ostensible market value as of a date in the past, when such few benchmark transactions as were occuring took place at prices significantly higher than they do today.
– Prices in the Irish property market are still underpinned by an enormous degree of intervention by the state to limit supply. Vast volumes of new properties have been parked in NAMA cold storage, and the homes of at least tens of thousands of mortgage defaulters are being kept off the market by the moratorium on repossessions. If the market was allowed to operate, it is self-evident that it would be at price levels far below those which obtain today.
– The main argument originally made in favour of the idea that 10% growth in property value is a reasonable and conservative assumption was based on evidence from past Irish recoveries from property slumps. Unfortunately, most of the key information quoted at the time seems to have failed to discount for very substantial inflation. Based on my calculations, the long term trend in the JLLS capital price property index was flat from around 1970 to the mid-1990s when discounted by the CPI. There were occasional blips above trend, but they did not last. We are now coming out of the mother of all blips. If the argument made by NAMA advocates that the past is a good guide to the future in Irish property stands up, then property prices still have a long way to fall.

In relation to the wider banking sector, it is reasonable to take what will happen to NAMA as a rough guide for what will happen to banks left with broadly similar loans from outside NAMA’s remit.

If you put the most honest of men in a position where he has a moral and professional obligation to manage opinion in the wider world, then it is only rational, and even a mark of respect, to discount what he has to say in the light of his responsibilities.

@ DE

sure it was…sure… 😀

My personal opinion is somewhat as you suggest – that someone non-Irish and non-German is pushing a better deal into the open in the hope they can get everyone to sign on. It might take a while to agree (a month or so), but i would not be surpised if we saw a somewhat amended EFSF coming into existence shortly. In the meantime, Irish focuses on domestic issues, and ECB buying will ramp up for the next few weeks. Today’s events should at the very least solidify Irish risk out to 3 years, ie banks should now be able to issue ELG for that period.

I am in a pub not far from merrion sq and there is a german dude here. I don’t believe in co-incidences! Must tell Joan.

@MPLT
I refer to http://www.cso.ie/releasespublications/documents/economy/current/iip.pdf

We already have a huge deficit of offshore assets. Selling more would leave us in the position of being solely dependent on growth in Ireland to improve this position – we would be left with a rump of external ‘debt’ that would operate in isolation, undiversified from the Irish economy.

My point is that at least with some foreign investments, the economy in aggregate is in a position to benefit from diversity – we get some growth where there is growth.

Should we leave it to the state to decide how best to invest? Their track record on picking bank shares is poor…

At least the British sympathetic. Jeremy Warner writes..

“The Irish government has been betrayed by its European “friends” as surely as was Britain during the fiasco of the ERM in the early 1990s. Unfortunately for Ireland, there is no similarly obvious escape route. It cannot devalue its way back to growth. It is as permanently imprisoned in its eurozone sarcophagus as an Egyptian mummy in the Valley of the Kings.

What makes this fate so galling is that Ireland has done everything that could reasonably be expected to set its fiscal house in order, and, unlike others, it has done so ahead of time and voluntarily. Wages, pensions and public services have been slashed, and taxes raised in a manner that makes the UK’s yet-to-bite fiscal consolidation look like a stroll in the park.

Yet it’s all been in vain.”

@ All

The Professor is back on-line! Hurrah, he has greeted our bond yield improvement with…..eh, a frowny emoticon, ie 🙁

Now, i wonder has JtO being suggesting such a thing happening…

@Bond.Eoin Bond
Looks like the G20 statement is working. 8.13% in .76
Whats you prediction for Monday. Will they (bondtraders) reflect and resume selling or are the ECB and UK lending buying support. I see David Cameron supporting us.

@Dreaded Estates
Interesting bit from MSNBC article ‘If needed, the 60 billion guaranteed by the EU budget is to be tapped first.’ Just enough to keep us going for three years.

How much of bonds both senior and subordinated are still outstanding at the 6 institutions ? Could we not sting the european banking system early next year before we go down ?
We’ve indirectly bailed out German banks from their bad investments in private casinos (Anglo, AIB) and then have to get lectured about the need to burden share by Angela as we get bent over because we didn’t ?
WTF is going on here.
Give her what she wants.
Let the remaining bondholders go.
Time for a little hardball from the Brians, something more than statements pleading for the Germans to please say something nice about us.

@eoin

Now, i wonder has JtO being suggesting such a thing happening

JTO again:

No, I have been too busy giving interviews to the Irish Examiner.

That very nice-looking lady lecturer from UCD posted yesterday that she had identified me as Danny McCoy, the head of IBEC. I am not, of course.

But, this is what he said in an interview with the Irish Examiner today. I suppose that there is a certain ressemblance between what he is saying and what I have posted. Except that, when I post it, I get called a troll. And, with all due respect to him, I said it a few months before he did. It all comes down to which group of economists you believe. Those that work at the coalface, engaged daily in making/selling things, or those that sit behind desks in universities.

IBEC: Strong industrial production figures show recovery on track
Friday, November 12, 2010 – 02:18 PM

Industrial production in Ireland has risen by 7.9% in the month and 10.9% in the year, according to Eurostat figures. IBEC said the data demonstrated that recovery is “firmly taking hold”.

The EU statistics agency figures show that Ireland posted the strongest monthly improvement in industrial production in the EU in September 2010. IBEC Director General Danny McCoy said: “Part of the reason why bond yields have risen so sharply is that markets have been doubting Ireland’s growth prospects. Latest industrial production data clearly show that the recovery is on track.

“Ireland continues to have a resilient, diverse and dynamic enterprise base on which to build future growth. In response to the recession, Irish companies and their employees moved quickly and with a flexibility unmatched in any other country.

“We now have evidence that this is working and business is gaining the necessary momentum to drive growth. We have a lot more to do to restore our economic fortunes, but we are on the right path.”

http://www.irishexaminer.com/breakingnews/business/ibec-strong-industrial-production-figures-show-recovery-on-track-481559.html#ixzz155Y0FBld

Brian Woods II

Ta, you’ve obviously done your homework. Frankly, I don’t know enough about the country (having lived abroad for several decades) to be able to agree or disagree with your judgment. But your reply has been most informative.

Sorry, italics should end after the word ‘truth’.

@seafoid

Not sure I was clear. Suggesting motivation for backing/encouraging deal.

btw …”Or September 2008 when sterling fell and Osborne blamed Darling for “talking down the pound”?”

Actually Osbourne looked very silly at the time since he went around shouting from the rooftops that ther was going to be an imminent gilts strike – even encouraging one, but yields just kept falling monotonically. Looked shrill and naive. Enter Ken Clarke.

He seems to be a subscriber to Morgan Stanley research and can’t bring himself to read the other side.

@JtO
MK predictions have been ok so far. His unemployment prediction was well off but he called things earlier and more accurately than most on the banks.

Only time will tell whether he is correct on us needing outside assistance. Most of the problems he forecasts is on the banking which is an area you don’t comment on much

Come on guys, we all need to wear the green jersey and get through this together

dreaded_estate

banking which is an area you don’t comment on much

JTO again:

Correct. I don’t comment on things that I know little about. I only post in about 10 per cent of threads. I notice some people (not you) post in nearly every thread. It would be better if people only posted in threads that they know something about. That seems to be a rule you follow as well.

Forget the fact that I disagree with Kelly. I am nobody. But, the list of somebodies who are lining up to give totally opposite opinions to Kelly is getting quite long. In the past 24 hours alone: Patrick Honahan, Danny McCoy, Donal O’Mahony. You are correct in saying that only time will tell whether or not Kelly’s apocalyptic forecasts prove accurate. Not just the one about needing outside help, but his forecasts that the economy will completely crash with no recovery at all in the near future. My point is that clearly he has done great damage in making the forecast, and while, if he is proved right, that won’t matter as he will be vindicated, but, if he is proved totally wrong in this, and notwithstanding the damage that would have been needlessly caused in that case, he just carries on in his taxpayer-funded job as if nothing had happened.

@JtO

Carolus Galviensis herewith withdraws all allegations of trollhood leveled against JtO.

If tenure is such a good thing, why not extend it to everybody?

Not being a university professor, I don’t think I’m indulging in special pleading when I claim that an exemption should be made for the world of academe, at least in the case of state-funded universities. Enough of the public sector is politicised as it is — what other state servants can express contrarian views without risking disciplinary action? If universities were privatised tenure would be a matter of freedom of contract, of course. But you have a good point — there are pros and cons.

Whereas, even if all the predictions that Morgan Kelly made this week, to damaging effect, turn out to be totally and hopelessly wrong, he carries on collecting his taxpayer-funded salary regardless.

By virtue of warning the Irish public about the upcoming housing crisis four years ago, Morgan Kelly has deserved his lifetime taxpayer-funded salary several times over. If he dissuaded even a hundred would-be house purchasers from their folly, he has probably saved them at least 100K euro per head. That’s not a bad achievement.

And, yes, Mk could conceivably be wrong about the mega-crash he believes we are heading for. But MK is hardly likely to CAUSE such a crash, unless we attribute supernatural powers to him as a kind of Prince of Darkness.

If he’s wrong, the taxpayer will have lost a relatively small sum (per capita, that is). But if he is right again, every investor who — thanks to his advice — steers clear of Irish govt. bonds will have gained. So will every Irish citizen who buys a one-way ticket to anywhere outside the Republic thanks to their taking MK seriously.

Incidentally, almost EVERY Cassandra who years ago predicted the current debt-deflation crisis (such as Peter Shiff, Mike Shedlock, Steve Keen, Charles Hugh Smith, the Automatic Earth duo, Chris Martenson etc) is convinced that bankruptcy is just ’round the corner’ for all credit-boom infected countries. They got it right the last time when everybody else got it wrong. They have no credibility problem.

@JtO,

Another point: your attitude to Morgan Kelly seems to be of the ‘tails I win, heads you lose’ variety. Whether the predicted apocalypse occurs or not, MK will be found guilty in your book. If the sky falls in, he will have helped damage the universe’s foundations; if it doesn’t, he will have misspent taxpayers’ money with his irresponsible scaremongering.

My own view is that the worst Dr Doom could do is bring judgment day forward by a couple of hours. And would that actually be a bad thing?

@Carolus Galviensis

Carolus Galviensis herewith withdraws all allegations of trollhood leveled against JtO.

JTO again:

I am 61 and not up-to-date with current jargon. I don’t even know what a troll is, or whether being called a troll is a compliment or an insult. Explain it to me. The first person to call me a troll on this site was Richard Tol. Or was it Richard Troll calling me a tol? Anyway, it is confusing at my age when a Tol calls you a troll.

@Carolus Galviensis

But if he is right again, every investor who — thanks to his advice — steers clear of Irish govt. bonds will have gained.

JTO again:

But, if he is wrong again, every investor who passed up the opportunity to buy Irish bonds at 7/8%, and opted instead to buy UK bonds at 1/2% (or whatever they are now), and possibly suffers further exchange rate loss into the bargain (entirely possible given that UK inflation is nearing 4%, v 2% in Eurozone and -1% in Ireland) will have lost. He can’t have it both ways.

While on the subject of academic economists influencing people on their investment decisions, I reiterate my suggestion of a few weeks ago that all academic economists in Ireland declare publicly where they have invested their money. Then, we’d see how their investments are faring and whether or not they are putting their money where their mouth is. Like lots of northern nationalists, virtually all of my money (not that there is a lot of it) is in Irish Government bonds. I’m now getting a whopping interest rate, and a 20% appreciation on top of that over what some of my unionist friends are getting who kept their money in UK Government bonds, convinced by the likes of Kelly that the UK was safer. I doubt if Morgan Kelly has his money invested in Irish Government bonds, so it is great to know that almost certainly my investments are doing better than his.

@Brian, really? Presume you have a paper to back this up!

@JtO

I think the difference could be down to differences in methodologies.

The CSO the use a rental survey of estate agents and others to determine how rents have changed over the period. Not sure if this is performed monthly or quarterly.

The CSO review group from March 10 doesn’t seem to be completely happy with this method and they are investigating alternative data sources for private rents.

http://www.cso.ie/surveysandmethodologies/surveys/prices/documents/reviewgroupreportmarch10.pdf

Recommendation 23 page 25

The IPW index is simply based on the average rent of all 18k properties currently for rent on Daft and is updated weekly.

I think the IPW index may be more forward looking than the CSO survey. We kinda look at rental expectations for properties yet to be rented while the CSO does a survey of a sample of estate agents rentals completed over a given period.

Not for 1 minute suggesting the IPW method is better than the CSO, it is what is and no more.

You can see the IPW indices updated weekly to the right of the site

JohnTheOptimist

Morgan Kelly’s Opinion Piece was published in the Irish Times on Monday 8th November 2010.

The Bloomberg record (mid I think) has the 10yr Irish opening at 7.847 and closing at 7.939.

http://www.bloomberg.com/apps/quote?ticker=GIGB10YR:IND

Click on the “1W”.

A rise in yield of 0.092 on the day. Quick man the lifeboats. 😯

Is that the “Morgan Kelly” effect?

Your Unionist friends may be nursing losses but Morgan Kelly is not responsible.

Mind you your Unionist friends might know something about diversification.

Maybe they’re just not telling you.

“But, if he is wrong again, every investor who passed up the opportunity to buy Irish bonds at 7/8%”

They can buy on Monday at a yield of 8.141%.

But they might want to quick about it. If I’m right the banks, who borrow at (what) 1.5% from the ECB will front-run retail and drive prices up and yields down as it appears the EU will provide €60bn to Ireland under the bailout.

@JtO
“You are correct in saying that only time will tell whether or not Kelly’s apocalyptic forecasts prove accurate. Not just the one about needing outside help, but his forecasts that the economy will completely crash with no recovery at all in the near future. ”

The vast majority of MK’s piece in the Irish Times was potential banking losses sinking the economy. He seemed to mention the economy very little if I recall correctly.

This graph may explain some the difference JtO.

Up To July rents were fairly flat since the since of the year and had even recovered some previous falls. The last 4 months have seen pretty dramatic falls however. At an average of about 2% per month

http://img834.imageshack.us/img834/696/currentrentxps1.png

@jto
“Like lots of northern nationalists, virtually all of my money (not that there is a lot of it) is in Irish Government bonds. I’m now getting a whopping interest rate, and a 20% appreciation on top of that over what some of my unionist friends are getting who kept their money in UK Government bonds, convinced by the likes of Kelly that the UK was safer. I doubt if Morgan Kelly has his money invested in Irish Government bonds, so it is great to know that almost certainly my investments are doing better than his.”

Surely you’re only getting a whopping interest rate as a reflection of the fall in the € capital value. The coupons haven’t gone up. If you have an offsetting fx gain, that would tend to compensate fully or not for the capital loss – depending on when you bought them.

If your friends were convinced by the likes of Kelly thaty the UK was safer, they seem to have been right. Seems the bit you got right was that the Euro was going to strengthen against sterling – something which has nothing to do with Ireland. Now a patriotic cash deposit in Anglo and a switch yesterday into those bonds…….

@Carolus and JTo

Boys, boys, boys.

C’mon now – all this playing the men not the ball is not constructive. (though the troll jokes are funny). Personal attacks do not advance the debate and they are increasingly a feature of public discourse.

Are we the only ones not in Kilkenny?

@Sarah Carey

I have always thought that economics chiefly belongs to the entertainment industry, at least as practiced in the Republic of I. Kilkenomics vindicates my argument by its very name. Certainly it looks as though there’s quite a lot of preening going on there today and if they’re not playing the men there what else are they playing? If they play the men, why can’t I and JtO do so in our humble, low-key way?
BTW where are the ‘personal attacks’ between myself and non-troll JtO?

P.S. Reliable sources in the Grand Duchy tell me that the Eurostat eagles have landed. Watch out for a Greek not bearing gifts, a dark Italian wearing granny glasses, and a green-eyed femme fatale from one of the Baltic states.
This information is TOTALLY confidential.

@Tull

“I fail to see the purpose of Prof Lucey though.”

Prof Lucey serves a very useful purpose. If it was not for his alleged deposit selling moment you would be conned into thinking these profs speak ex cathedra.

Sarah Carey Says:

“Boys, boys, boys.

C’mon now – all this playing the men not the ball is not constructive. (though the troll jokes are funny). Personal attacks do not advance the debate and they are increasingly a feature of public discourse.”

I have dealt with MPLT

You can read the discourse for yourself. MPLT had the decency of discourse.

I have dealt with JohnTheOptimist

He chooses not discourse.

do not advance the debate

How would you advance the debate?

The proposition offered by Donal O’Mahony is this.

“we disburse the investments of the pension fund and insurance industries, the National Pensions Reserve Fund, and indeed the domestic banks themselves”

My response is this.

“This is a manifesto to take control of the entire financial system and allocate domestic capital under fiat.”

Donal O’Mahony suggests that your private property should be seized by the state for the purposes of the state.

If you don’t enjoy the idea private property all you have to do is say so.

Maybe it’s a boy thing.

What’s your opinion?

Are you an optimist?

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

“Boys, boys, boys”

I’d be obliged if you left your sexist predisposition out of the discourse.

@ Greg

That link is excellent. Totally agree with every word of it. The cult of positive thinking has become a new tyranny in our lives. And it does nothing to help anyone face real problems head on.

If our economy is going down the toilet then the best thing we can do is face up to it – face the brutal facts – and work out the best way to deal with it. Not delude ourselves with some fantasy silver lining.

Re the bailout. I think we have a couple of weeks tops. Look for news that gardai leave has been cancelled. Bailout will be announced a day or two after that. Some interesting comments in the Sunday papers. Get up early, buy a couple with a bucket of coffee and go have a good read lads and lasses. Hard to distinguish fact from fiction in the world of journalism at the moment. Too many dogs on the street sniffing around this one.

@Carolus Galviensis – how reliable is your source in Luxembourg? Your trio sounds like the scouts ahead of the cavalry. Seen it before but in takeover situations rather than bailouts. Got any names for these horsemen (and lady) of the apocalypse?

That’s of course assuming there hasn’t been a run on the banks before the gardai leave is cancelled!

I must remember to start going to the cashpoint a bit more often and sticking it under the mattress. Might need it if those cashpoints stop working….

@Joseph

That the Eurostat eagles have landed is as good as certain. If I’m mistaken I’ll post a correction on Monday.

I sorta made up the rest, i.e. like the Bible: true, but not literally true.

PSST .. IT’S ALL HUSH HUSH — don’t tell anybody.

Bloomberg — Ireland was urged by EU to apply for emergency package

http://noir.bloomberg.com/apps/news?pid=20601102&sid=aWCzmtJbSHzo

@David in Dublin

In Scotland prices in Tesco between 50 and 70% of irish prices.

Lidl and Aldi very quite because they have real competition from morrisons etc.

Tesco laughing all the way to their non-irish bank.

@Brian J Goggin

Wot! To the “hostile gang in Dublin”?

Sarah Carey

“Don’t take it so personal. A man would take it on the chin “

I did not. Your response is vacuous other than your repeated sexism.

“My opinion is that we probably will need a bailout – either ESF/IMf or that latest rumour I loved – the Chinese!!! I will shed a tear for Irish sovereignty and then get on with things, since I am not sure who rules will make any difference to my life, other than having less money, and as far as that is concerned, I approach that problem with a blitz like spirit of mixed resignation, stoicism and yes, optimism that the wheel will turn, as it always does, presumably by the time my own boys will be ejected from the nest.”

“My opinion is that we probably will need a bailout”

And the reason your opinion matters in that is what exactly?

Did you work that out all by yourself? Your opinon?

“I am not sure who rules will make any difference to my life”

Have you any idea just how stupid that statement is?

“stoicism and yes, optimism that the wheel will turn”

Stoicism?

Logic? Ethics?

There are none in Ireland.

I see now why you need optimism.

But you misunderstand optimism. As JohnTheOptimist does.

You need it because you live in a world empty of logic and ethic.

The optimism you speak of is nothing other than “Wish Upon A Star”.

Optimism without logic and ethic is mere tyranny.

With me so far Sarah?

“that the wheel will turn”

What nonsense is this? Wheels turning? Pure psychobabble.

“presumably by the time”

Did somebody give you the right to presume?

No they didn’t.

“my own boys will be ejected from the nest”

I hope that when you eject your boys they will have a better grasp of logic, ethic and optimism than you do.

@Frank Galton
MSNBC carried a version earlier.
We are an amazing little country in the Atlantic. We hijack the G20 and oblige the leaders to issue a formal message of support. And we don’t even have an exocet.

Now our Brian is saving the euro -‘Prime Minister Brian Cowen said for the first time that he is working with fellow EU leaders as “there are issues affecting the wider euro area” and that they are trying to “ensure that the bond markets respond positively to the euro.”

For our size we sure can cause havoc.

John

“The cult of positive thinking has become a new tyranny in our lives.”

Have you consider why the tyranny of optimism exists?

Optimistic humans do what they are told.

It really is that simple.

They don’t think. They act. They become actors in some optimistic play.

It is as close to Maoism as you can get without calling it such.

Everybody appears to be free but end up making “free” decisions that make them slaves.

So the Fat Bloke in the Ill Fitting Suit had not asked for a bailout from the EFSF. Neither had the Newly Skinny Bloke with Cancer (Bless Him). Instead we have the leaders of some of the most powerful nations on earth thrusting the EFSF unwanted, unneeded, not FF’s fault, on the nation.

And this is supposed to do what? Guarantee gombeen man that come the election in 2016, that on the anniversary of the event that sparked the foundation of the modern state we will, what, rise up from the chains of our foreign overlords and re-elect the natural party of corruption… eh, I mean government? And their glorious reich will last for another ten years before they stuff the country again?

You have got to be kidding me that these spoofers and blusterers have any voters at all. 18%? Are there really that many mad people in the country?

(Sorry for going all Godwin).

Anyway, back on topic.

If you think that the state is going to go bust and have to be bailed out and so have a more severe austerity program, then yes, you would think that both the unemployment rate will rise and that the mortgage default rate will be higher than average for a property bust (normally a property bust, even with recourse mortgages, would have a default rate of about 5%). Or that the German and/or (probably and) world economies might recover and interest rates might rise. Or they might not and commodity price inflation might feed into eurozone inflation expectations also causing interest rates to rise (remember 2007 anyone?).

If, on the other hand, you don’t think the state will go bust and have to be bailed out and the plan that the current government has put in place is going to work and that Germany is not going to sustain its recovery and that interest rates in the eurozone are not going to rise and that the risk element of peripheral eurozone debt is going to reduce because American QE is going to revive the world economy (except the Germans as noted above), then, of course, you would find it palpably ridiculous that there will be a mortgage crisis with the Irish banks provisioned to the tune of 0.3% while KBC has provisioned 9% of its mortgage book.

Sarah Carey

“I was fortunate to be reared in the 80’s when there was no such thing as disposable income and graduated into a world with little employment and therefore have no sense of entitlement. This above all qualities appears to me to be one of the most useful in days such as this.”

“This above all qualities appears to me to be one of the most useful in days such as this”

What nonsense is this?

“above all qualities”

You have mentioned no quality. You simply state that you exist. Existence is not a “quality”.

“I was fortunate to be reared in the 80’s”

Just how stupid are you?

“I was fortunate to be reared”

Stop talking nonsense. You are a human being.

Wheels, Fortune, Optimism?

What next Fortune Cookies?

“This above all qualities appears to me to be one of the most useful in days such as this”

Mother of Divine Jesus.

The point I am trying to make is that Mr O’Mahony is talking nonsense. Even the best case scenario is going to be bad for us.

@Hogan
Just realised that BL may have given the game away=’that’s why our European partners are anxious to bring it to a resolution,”

@Greg

You lambaste Sarah for saying:

“I was fortunate to be reared in the 80’s when there was no such thing as disposable income and graduated into a world with little employment and therefore have no sense of entitlement. This above all qualities appears to me to be one of the most useful in days such as this.”

Sorry, but Sarah has made a very good point. Not to overdo the Four Yorkshiremen skit but I myself was fortunate to be reared in the 50’s when there was no such thing as disposable income and we lived in a tree trunk and my only toy was a piece of driftwood I picked up on the beach in 1953 and it took a lot more investment to persuade a girl to drop her knickers than it does today and I graduated into a world with little employment and therefore have no sense of entitlement.

Most of us are hardy enough to adjust their expectations to circumstances. Once the Croke Park agreement has been torn asunder on the grounds of force majeure most Irish people will be in much the same boat anyhow and should be able to cut their cloak to fit their cloth. The Irish people aren’t going to starve, after all.

Relax, and ‘chill out’ — as my sons say to me when I get tired and emotional.

@hogan

O.k i get it. For the Irish Times to ask Mr. O’Mahony advice on bond sales is liking going into McDonalds and asking whether buying burgers is essentially a good thing.

On another matter there will be a lot of emphasis in the budget on control and reduction of social welfare. In the bigger picture this is completely irrelevant and will have no effect on the national accounts. Just looking at it from a financial perspective with no moral viewpoint is interesting.

Imagine a world with no debt.

Social welfare in that case is just a transfer payment from the taxpayer to the non-taxpayer and will have no effect, like a form of insurance.

Obviously there are extremes, if the tax rate is too high to pay the social welfare then there is a major disincentive to work reducing GDP. i don’t thing this is the case in Ireland at the moment.

On the other side of the equation you could argue that social welfare payments are more likely to be spent locally on local produce and will have a inherently larger GDP multiplier than the increased taxation would deflate hence boosting GDP.

This may explain why many northern European countries have a stubbornly high GDP per capita in face of a continual assault by right wing economists.

Obviously there are all sorts of other complications were you need to look at the efficiency of the tax collection, debt etc.

In the case of say Japan were debt is largely domestic interest payments of themselves are just another form of transfer from the people who have a good few numbers in a computer in a bank to people who dont and of its nature do not effect the GDP

Carolus Galviensis

“Relax, and ‘chill out’ — as my sons say to me when I get tired and emotional.”

What do your sons say to you when you don’t tell them that their home is being taken away next week?

It’s no joke.

“The Irish people aren’t going to starve, after all.”

Nobody saw it coming the last time.

@Frank

That is the crux of the matter. The whole world is saying it. Merkel is saying it, hans the german taxpayer is saying it now the Wall Street journal. For the love of God could he get the message.

Mr. Lenihan needs to put aside his ego or his job or both and have a “difficult” phone call with some bondholders.

Why cant he let Micheal O’Leary make the call

@ Galton

“The WSJ is not interested in anything other than what it is told to print.”

Are you insane. Do you think there is some editorial board sitting up all night with explicit instructions for what they should publish the next day.

Do you think in the unlikely event that you interviewed for a job on the WSJ to comment on Irish affairs that you would told your job is to take an envelope from a nameless individual to punch into your computer everyday.

No the WSJ concentrates on making money from the readers as it is financial journal. Sometimes it gets it wrong.

The reason it never mentioned INBS and Anglo when they were made whole by our idiot savant was because they had never heard of them.

If you wish to see how my near neighbour Singapore is responding to the challenges, check here:

http://www.finfacts.ie/irishfinancenews/article_1020854.shtml

The impact of the changing model of globalisation is already evident in the US where middle class real incomes have fallen in recent decades and in Japan where about 35% of the workforce are temps, earning less than the Irish minimum wage.

http://noir.bloomberg.com/apps/news?pid=newsarchive&sid=aWpz1UDmPWxI

When this happens across the board, then we have the “crash” of the last bubble. It will affect stock markets too. This GFC has a long way to go yet. All the smart money has flooded into whatever seemed profitable. Derivatives will fail, with “winners” finding themselves losers also! The losers will be wiped out of course. No-one will pay off the winning bets, those with the assets will simply disappear, faster than an Irish solicitor whp pledged properties multiple times to banks!

Way too popular thread!

Some of the banks in Europe will fail, but money can be and will be created by EZ when it is necessary. I do not expect anything like the QE of the USA.

jules Says:
November 13th, 2010 at 12:08 am

Agree!

Greg

Sarah really is cute, eh? As she is unable to deal with matters she makes a rational choice to try to remain on an even keel and to prepare to address those things she can understand? Ignorance can be bliss and for some/many people it is their best response. That is why these matters will still be debated in ten years time. They simply do not understand. They are being sensible though, for someone in their position. You are however, merely showing that things are bad and driving you to distraction. I was at that stage a decade ago, and still have “flashbacks” so believe me, I sympathise with you. If you wish to win others over however, it is good to stick to the facts and what is baked into the system so far? Sarah and the rest will learn more than they want to, but she and others are still good human beings? Even the Brians are trying their incompetent best. The problem we all face is that the system has to radically change back to the days of the Minister for Hardship and it is taking too long to do so. The WSJ say that IMF etc control would be bad. They know otherwise and are lying therefore.

Good thread, by and large.

Was it an Irishman who said “patriotism was the last refuge…..”?

Green Jersy. We are in the EU. Love it or leave it, as we Australians say!

@ Sarah

remember that Tango ad from ten years ago? Well, ‘You know, when you’ve been Gregggged!!’. Don’t take it personally, its a right of passage on here. Pat’s insanity too, they’re a double act.

Most interesting thread.

@ MPLT said a long way further up:

‘The real economy has started to pick up, search ‘YouTube ‘ for ireland by numbers’, the data is getting materially better, Ireland has had a horrific period of adjustment and the process of going from A to B has been a nightmare but we’re nearly there and all the doomsayers fail to appreciate how dynamic an economy it is’.

That remains to be seen.

MPLT also set out some figures showing that there was very significant potential demand for Irish sovereign bonds from NPRF, Irish banks and Irish-based pension and insurance funds, if only those funds were managed in a way which is typical of the Eurozone.

The point was, I think, that much of the weakness of our sovereign bonds was attributable to our own funds unwillingness to invest in them. NPRF rules, aside, it seems remarkable that such a state of affairs has not attracted more critical comment.

In response, @ Paul Hunt says:

‘It is only of historical interest that Irish savers and the managers of Irish savings chose not to invest in Irish securities to the same extent as savers in other much larger economies. Advocating the ‘green jersey’ approach now would signal a return to the autarky that brought the Irish economy to its knees in the 1950s’

Autarchy is probably preferable to anarchy, which is what we will have if we do not resolve this crisis on intelligent lines. The most obvious outcome from austerity is a deep regression to a cross-border/black economy and an explosion in crime. For what it is worth, we are already topping the Euro league in heroin addiction and binge drinking. Our jails already full.

Maybe our banks, pension and insurance funds have managed their investments without regard for the long term health of their own state.
Did we swallow ‘ investment globalism’ in the same way we had previously swallowed ‘ economic nationalism’. My uneducated guess is that our fund managers have made errors which are parallel to those made by our bankers. They were so preoccupied with accounting that forgot their economic responsibilities to the state in which they are domiciled. Externalities matter.

Of course like must be compared with like. Our history is not that of France or Germany. In the old days, we were low tech food producers for the British Empire. We never had a strong business or industrial sector, and we never had a proper welfare state. We had a poorly designed mix of London, Boston and Berlin.

The American dream is not over, but it’s turning a bit scary now even for Americans. Dr Merkel has this crazy idea that capitalism entails risk and that taxpayers shouldn’t always get screwed when things go sour. Perhaps it’s better to wake up. Americans eventually will.

JTO

You should have initiation rights on Irish Economy.
If you were a little ‘nicer’??

@ JtO

Let us hope your “optimistic” prognosis is misplaced, the vista of a United Ireland is absolutely appalling.

BTW any tips on who will win next year’s Derby?

This is why we still have a fighting chance. Opposing ideas smelted in the furnace of debate to give us something solid with which to fight on. I suggest a plan:
1: Start negotiating for the bailout fund now (it will take 6 months to negotiate it properly and always best to start when were not completely despatate for it)
2: Hold them to about 4% of an interest rate over 8 years
3: Use our the threat of default, and destabilization of the Euro as leverage in those negotiations
4: They can tie the bailout into deficit reduction
5: Reverse benchmarking of everything to Euro averages (but this must include mortgage repayments by extending mortgage terms by 30% and taking insurance to cover the potential risk.

BTW – sort of understand JTOs frustration. Hate people vying for the biggest and whitest flags. Good to fight – though no point in attacking people whose abilities need to be nudged to focus on the recovery. Alot of good people feel imrimidated now though in the face of Marquis De Lenihans massive hubris(!!) Would you let him negotiate to buy a car on your behalf?

And that’s how we do it.

Deposit selling moment, deposit selling moment, deposit selling moment…

twitter.com/brianmlucey

Shiny silver coin for whoever spots it first. It should also confirm that the Prof is explicitly against any recovery in our bond yields and ability to avoid a bailout. He should not be allowed public soap boxes like the Irish Times to deliberately talk down the economy.

@JTO
“In the past 24 hours alone: Patrick Honahan, Danny McCoy, Donal O’Mahony.” It would be worth your while looking at the comments section in the IT to see the drubbing that DOM gets. I suspect that he won’t be doing many more articles unless of course the IT likes to stir matters.

Your predictions are very interesting indeed. I guess you assume that a large number of external variables will stay positive like world trade, oil prices, financial stability, currency movements etc. You seem to be using the same logic as people who thought that the property bubble would never end and to focus on internal issues as if Ireland was insulated from the real world events. I’m surprises that you didn’t explicitly mention booming car sales as that appears be one of your key statistics for justifying growth.

That aside, you paint a clear picture. However, I would rather rate your assessment as being close to the “best case” scenario which means that there are other less optimistic alternatives. If some good soul were to describe these, we could then assess (guess) liklihoods of them materialising.

@ Eoin

The Toronto Globe and Mail;

Prof. Lucey is no longer feeling as optimistic. “We need a complete economic restructuring,” he said. His career has tracked Ireland’s economic saga. When he graduated from university in 1985, he, along with all 25 members of his class, emigrated. He returned to Ireland during the boom years.

Thanks to the austerity measures, he has taken a 17 per cent pay cut. His wife, who is a teacher, had her wages slashed by 14 per cent.

Now, he says, Ireland has run out of road “and the can has gotten much heavier.”

@ MH

”no longer feeling as optimistic”?

i can only assume you are referring to his 2006 musings about subprime lending and house prices.

So the prof and his missus, both state employed, probably earn close to $225-250k per annum, with guaranteed state pensions and guaranteed jobs. What a strange little country we live in.

@ jto

seeing as we are in a predictive mood – i predict that if we do have to enter the EFSF it will be on significantly less onerous terfms than currently exist. I also predict that, in line with your view, we will be able to exit it well ahead of the 3 yr deadline. Maybe even after 12 months.

Leaving aside the petty squabbles once again, really I haven’t seen such vindictive childishness since I was at college.

Ms. Merkel says that future bondholders will pay for a bust borrower.
Mr. O’Mahony says let’s invest our pension and insurance reserves in Irish sovereign debt.

Supposing there is a bust sovereign some time after that. Who pays? Well, insurance policy holders and pension savers…

@Brian Flanagan

“In the past 24 hours alone: Patrick Honahan, Danny McCoy, Donal O’Mahony.” It would be worth your while looking at the comments section in the IT to see the drubbing that DOM gets.

JTO again:

The comments section in the Irish Times?

Are you serious?.

The Pope is more likely to be greeted enthusiastically at the next Ballymena Orange Parade than anyone who exudes the slightest disapproval of Morgan Kelly is likely to get in the comments section of the Irish Times. He is their God. They worship him. They kiss the ground he walks on. They strew his path with petals when he walks near. Like when Ayatollah Khomenei died, when Morgan dies, hopefully not for another 50 years, posters to the Irish Times comments section will jump into his grave in the hope of being buried alive alongside him.

@Eoin, Hogan
I don’t get it.
If we have to borrow after 2013 (as we will) to pay or rollover existing debt then those borrowings will be subject to the new regime of haircuts. Who in their right mind is going to replenish unhaircuttable funds with the new version.

@What goes up
This bit is good-
“However, it is the
restorative actions of Irish authorities to stabilise both public finances
and the banking system,lauded by Moody’s Annual Report last week,
that is now turning the tide towards Irish economic redemption. The
international community not only understands and endorses Ireland’s
rehabilitative efforts but, more crucially, it is now prepared to fund it,”

Any chance we could have another thread specifically to cover bailout talk?

What are the facts at the moment?

All I can see is everyone is denying everything – but using some interesting language to do it. Surely a bad sign 😉

I see the BBC are reporting it enthusiastically.

@Joseph
Good idea.
I posted a quote by MoF last night where he said something to the effect that our Euro partners ‘required resolution of the problem’

Could this mean that the big 5 have determined that we are beyond the tipping point and the uncertainty must be removed. We are affecting the Euro stability though this is good for Dr. Merkel

The Republic of Ireland is in preliminary talks with EU officials for financial support, the BBC has learned.

It is now no longer a matter of whether but when the Irish government formally approaches the European Financial Stability Fund (EFSF) for a bailout.

Someone is talking or attempting to force the issue.

It’s beginning to look better. It’s not so much losing our sovereignty as much as handing it over to people who know how to add and stuff

PS If 2013 looks far away, imagine how far away September 2010 looked in September 2008…

@Eoin

You are the expert on all this. While I like to think that I know something about macro-economic statistics, all this is Greek to me.

Ex-FG Taoiseach, John Bruton, says in today’s IT:

“The speculators who are betting that Ireland will not pay its sovereign government debts on time, and who are thereby driving up the spread on Irish bonds, will be proven wrong and will lose money.”

I didn’t realise that they could lose money. Is what John Bruton says true? Or does he know as little about it as I do? Not whether the prediction that they will be proven wrong is true, which is obviously still to be decided either way, but his statement that will they lose money IF (and I know its an important IF) they are proven wrong.

Under what circumstances would they lose money? How soon could they lose it if things didn’t go their way? How much could they lose? Who are the people who could lose? If they do lose it, how would we know? Would it just be one red line in the accounts of some of these companies that never makes the news? Or would it actually be on the news that Mr X or Mr Y has just lost a $billion because his gamble that Ireland wouldn’t pay its debts had lost out? And, finally, if what John Bruton says proves correct, where would be the best place to go to gloat at the losers, make 2-fingered gestures at them, and throw them coins attached to a piece of string when they begged for money to buy their next meal.

Assuming its true, all this is very motivational for me to go out and spend, spend, spend and increase government coffers. Like being Sir Alec Ferguson and being told just before kick-off in the Manchester derby that the owners of Man City have gambled all their money on the result and will go bankrupt if City lose.

@Brian Lucey

Off now to talk on the bailout etc to BBC news 24. Later kiddies. …

JTO again:

Will you be pointing out to the BBC chappie that UK public debt as a percentage of GDP and the forecast UK deficit in 2011 are both almost exactly the same as Ireland’s? As are those in the U. States. I hope that he doesn’t ask you about your post at Christmas last that you wanted to see the Irish economy crash. It would be embarassing watching you wriggle your way out of it.

@ the Prof

so we can confirm now – you want the irish economy to collapse in the short term to meet your political viewpoint?

What political viewpoint?

@ Brian

i dont mean party-political, i mean that you want an entire political change (for longer term good, in fairness) and you want and view an economic collapse as necessary to enact this

@Brian Lucey – “We need massive governance change and that requires a catalyst.”

It usually requires a revolution/bullets/deaths/etc. if history is anything to go by. However, I’m kind of with you on the need for the massive governance change.

I don’t have access to BBC News 24 – would you please post a link to your interview later on? Either on this thread or the new one on Ireland’s number being up (or is that a thread on our dismal performance against Samoa this afternoon?).

@Al
“There was this thing years ago, and I dont want to talk about it…”
Was that you? I was in the other chair. Sorry about it too. I won’t be standing either…

Move up to John McHales…

@Al
My mistake was the goat, I think. Apart from that, there’s nothing you wouldn’t see as high spirits in any regional town…

@ Hogan
Damn D4 media bias…

@Brian Lucey

It’s clear that the “other side” is now trying to construct a Dolchstoß legend to explain our present and future misadventures. It would be unwise to play into their hands on this.

@Sarah Carey

Before we change threads I have a couple of things to say on topic. One is to ask you if you know whether the IT will be publishing a clarification of Mr. O’Mahony’s misleading remark pointed out above.

@anonym

I’m afraid I know nothing about what goes on in the IT. I know there have been remarks here before about an agenda etc that the paper has. Perhaps a newsroom culture exists there, but in the case of most of the columnists such as myself, we work from home. I call into the office extremely rarely ( perhaps 3 or 4 times since I started there?) and I’ve never had any conversations with anyone about editorial direction. Conversations are for correcting/clarifying issues in the column or the odd whine (mine) about comments on the website.