Accountability and Sustainability

Frank Convery has an interesting piece under this title on the Comhar Blog

67 replies on “Accountability and Sustainability”

“Lying worthless bastards”

I think that about sums it up for me!

I recently saw, at first hand, a perfect example of why we have the political system we have (and perhaps deserve).

It was a constituency candidate vote and most candidates had packed their local branches with members of their extended family, as was very noticeable when the names were read out to come and get their ballot papers. So, the only people these candidates seem to be accountable to are their family!

It was pretty obvious from the speeches made by each candidate before the vote that they barely had a brain cell between them and were just going to be cannon fodder for the whip system. As each one pointed out though, they had ‘done their time’ and now it was ‘their turn’.

You somehow don’t come away from these things thinking that one of these people could actually command the equivalent of a TD’s salary (and generous expenses) in the real world. We really do overpay for what we get.

I came away sad and disappointed – fancy being so daft as to think if I got actively involved that I could make a difference. It would take a revolution to change things here and I just don’t see the vast majority stirring off their sofas, putting the remote control down and actually bothering.

This is a well written and balancd piece with lots of interesting points.Not least when he has a gentle dig at the failure of the economics profession. More generally, he suggests that there were multiple failures, something that those currently brandishing pitchforks would do well to understand: we were all culpabable in some shape or form. Some more than others, certainly, but nobody gets out of this without some blame. Lenders, borrowers, politicians, lawyers, accountants, academics and the media are all in the mix.

The search for accountability is right and proper. But it has descended into a witch-hunt. Which is deflecting from the task of putting things right. Our fits of righteous indignation may make us feel better but there will be unintended consequences; not least will be the simple fact that we are ignoring that there is much yet to be done.

The next act in this drama will be a polticial one.

Folks, if you vote with your pitchforks you will achieve two things in 2011. First, the EU/IMF loans will not be forthcoming and the teachers, nurses etc will simply stop getting paid. Second, the ECB will stop lending to the banks and the ATM’s will go dark.

Those who do not understand budget constraints – or simple arithmetic – can deny these simple truths. Financially literate militants (the ultimate oxymoron?) may argue that taxes can be raised to fill the gaps. Good luck with that.

Don’t underestimate the possibility that all of this may yet have an apocalyptic outcome if the election goes pear-shaped.

Frank refers to “esteemed international authorities and rating agencies.”

The ratings agencies were as conflicted as many at home who were swept along in a gale of self-interest, hubris, the national sport of scrounging from the public treasury and greed, in a country run by the generation that had entered national politics in 1977, at the start of another reckless period of misgovernance.

In 2000, the IMF warned about ensuring banks adhered to prudent lending guidelines, the risk of a substantial fall in aggregate demand from a serious US recession, suspending income tax cuts, housing bust experiences from elsewhere etc.

The economists were wasting their time and the bank economists were always ready to hit the airwaves to sell their snake oil, with the certainty that interviewers with investments in slam-dunk property projects themselves, were not going to ask probing questions.

I provide an illustration on the letters page of the Irish Times today of the abuse dished out by a trade unionist to the OECD in 2001 when it dared question the ‘miracle.’

” Support politicians who are willing to read, to understand complexity, and the trade-offs involved, and to communicate choices and decisions effectively.”

The electorate by and large, not only don’t understand the complexities, but are not interested in trying to. What they want is a simple message that doesn’t take too much effort to understand and can be latched onto. Job done.

Such an electorate is in no position to “Support politicians who are willing to read, to understand complexity, and the trade-offs involved” because they cannot work out who they are. That’s why you get Bertie and that guy in America who kept repeating the word “change”.

You end up back with “he who shouts the loudest …” etc…

I think this is starting to apply to the new vogue of popular economic commentary. You often find that those who get things least wrong over time also tend to be sufficiently aware of the complexities that they rarely make the most noise.

Noisy, over-simplistic economist for President anyone?

This is a finely judged mix of stricture, self-deprecation and smug self-righteousness that could usefully inform any aspiring politician. The serious failings in the fiscal, bank supervision and financial regulation areas provide a useful whipping boy for those who might wish to deflect attention from inadequacies in the areas where they exercise authority or influence.

And it is all far too easy. As a small open economy, located between the US and Britain, it would have proved impossible to avoid being swept up in the bonfire of financial regulation and supervision of real and shadow banks which the forces of financial capitalism (cheered on and assisted by ‘useful idiots’ in academia) compelled a weak and misguided US administration to ignite in the late ’90s. And the apparent ‘free lunch’ provided by hard-working German savers via EMU would have proved irresistible. And so it has proved to be. Yes more effective gvernance might have reduced the severity of the outcome, but it’s difficult to see how it could have been avoided.

And how confident is Prof. Convery that, in his primary areas of interest – energy and the environment – his strictures are not equally valid? The few of us who use research and analysis to question the conventional wisdom are either dismissed or subject to pillory and derision.


Full disclosure, as a Blairte-leaning Brit I have never pretended to understand Irish politics despite being here for over 20 years.

It is all very well to indulge in Fintanesque flights of ideological fancy that imagine a reordering of the political landscape. But we can only play what’s in front of us. And that consists of policy manifestos, such as they exist.

A vote for Fine Gael is a vote for a chance – no more than that – that we emerge from this is reasonable shape. A vote for anybody else (I assume here that votes for the soldiers of destiny are ruled out by assumption) is a vote for much bigger public sector cutbacks (because we won’t be able to borrow to pay salaries) and a vote for the banks to stop dispensing cash (because the ECB will be noticeable by its absence).

Re AIB and Anglo divvying up bonus payments before being taken over, knowing full well the bonuses would come from the taxpayer and be, effectively awarded for malpractice.

Is there a case of fraud to answer for the senior parties involved?

The nation has been ‘legally injured’ to the tune of 40m plus whatever it was Anglos staff were offered for the 2008 ‘annus mirabilis’.
The manner and matter of the bonus award ‘feels’ fraudulent to me, but IANAL. Any legal eagles understand the background?

(from the webs)
Fraud: A false representation of a matter of fact—whether by words or by conduct, by false or misleading allegations, or by concealment of what should have been disclosed—that deceives and is intended to deceive another so that the individual will act upon it to her or his legal injury.
Malpractice: In law, malpractice is a type of negligence in, which the professional under a duty to act, fails to follow generally accepted professional standards, and that breach of duty is the proximate cause of injury to a plaintiff who suffers harm. It is committed by a professional or her/his subordinates or agents on behalf of a client or patient that causes damages to the client or patient.

This is a bit off-topic but is kind of linked.

Is this what is going to happen:
1: The State draws down the 85bn in say 15 months (because of exceptional bank losses) ->
2: After all the current fund is drawn down we will be refused further EU bailout ->
3: That leaves us with two options: a) default or b) continue to pay off debts;
3:a (default) means that we would be now defaulting on the EU fund which in turn cannot default on bondholders before 2013.
3:b (continue to pay off debts) will ultimately be a debt collection exercise before our eventual default

So ultimately the way this could play out is that EU will be on the hook for our debts if we are forced to draw down on the 85 bn before 2013. This I think is the ultimate end-game here and we are merely collateral damage (but significantly damaged none-the-less) Is this a plausible scenario?

@ Joseph,

You must have gone to either a Lab or FF convention. I am guessing Labour. FG conventions are much bigger affairs these day. They go on too long and not everybody is related. Branch stacking is “de rigeur” in every polity. Go to Australia if you want to observe such fun.

Maybe you went to a SF convention where everybody is called Frank Murphy. That might be for a whole other reason.


The drawback with voting FG is that Labour comes in a red wrapped buy 1 get one free package. That is also the drawback with the Soldiers. If you vote Labour you get a policy lite agenda and possibly a bearded one as Tainaiste. In fact then you get a governing elite of people who “were never members of a subversive movement”. That would be the more interesting option though.

@ Andrew S

You may find this hard to believe but in the old LSE days membership of the exchange required adherence to “my word is my bond” and in a modern context, it is incredible how this used to work, and how really pissed off people got when someone didn’t play ball. If a member said something you could assume it was true. Old fashoined or what!

Then there was big bang, and banks started to own everything. Hence banking culture took over.

The CISI are actually trying to re-introduce the concept of integrity in financial services and – in the unlikely event that anyone at the Irish banks is a Chartered member – I imagine a complaint might get them kicked out. I also imagine the kickee wouldn’t give a stuff.

The problem with legal sanctions is the burden of proof – its OK to be incompetent, in a legal sense that is.

Does it actually matter what side of the house individual deputies are sitting on?
They did nothing to stop the crisis and are doing nothing to fix it.
They are the most highly paid puppets in the history of mankind.
If you are going to have a client government at least make it good looking!

Brendan Walsh

1. Re Honohan’s report.
He goes on to note that “intrusive demands from line staff could be and were set aside after direct representations were made to senior regulators.”
Was this illegal? If not why not? Have there been prosecutions?

2. Frank Convery awards a C+ to the economical group!!
A live and living example of grade inflation.
Economists failed and failed dismally. Not all of them but as a collective group. They were one of the key external professional groups, next to the auditing profession, that should have screamed stop. As a group they didn’t. Fail.

3. That “silence was not neutral” as stated by the author is a chilling reminder of other more disturbing episodes in Ireland. And still no whistle blower legislation or protection.

@ Joseph
Where does it all get us?
Economists across the world failed.
Regulation across the world failed.
Failure is not uniquely Irish at all. Nor, unfortunately is cover up.

My worry is that there is an even greater calamity about 15 months away. We will be literally bankrupt and the normal routes of EU and IMF money will be limited. That is chilling!

We’re spending so much time looking back that we cannot see what’s coming.

Frank Convery is perhaps too gentle with the political class and seems to take the Honohan report to be gospel truth (“should in my view be required reading for anyone serving in the Irish Parliament today“.

Well, perhaps it should — but so should its critics. There’s an interesting posting by Eddie Hobbs which views the report from a different perspective, and which IMO should also be ‘required reading’:

Professor Honohan’s report is wrong. Wrong because it misses the essence of the crisis, by concentrating within the incorrect time line from 2003 forward. The big cock up occurred earlier. The essence of the Irish banking crisis extends back a few years earlier to how the Financial Regulator was established in a devious compromise engineered by The Central Bank in collusion with The Department of Finance to deny Ireland the establishment of a green field financial regulator with a new regulatory culture, new management and a new staff not captive to cosy relationships that spanned decades. This was the recommendation of the Mc Dowell Committee on regulatory reform whose work was undermined by both institutions in favour of a regulatory model that kept real change to a minimum and ensured that the new Financial Regulator would remain a child of Dame Street and Upper Merrion Street and would be led by their own kind of decent chaps who knew how things really worked. …'s_report_misses_point_and_Ivor_the_Engine_scores_own_goal!/

So the lesson is that it’s all a bit more complicated than Frank Convery thinks. Remember his Recommendation No 5:

Support and indulge evidence based analysis that goes against the prevailing wisdom.

Isn’t the ‘prevailing wisdom’ on this site that Honohan ‘said it all’?

@ tull

History, including our own, is full of former rebels turned statesmen. The cracks are painted over in time and new governing groups form. The crisis we are now entering has no parallel in recent history, so expect ongoing political redefinition and realignment. That process is national, regional and global and it could well accelerate.

There are huge law and order risks here, as well as economic ones.
“F*** your politics, I have a horse outside’ is all too common. I’d rather meet a democratic representative of our most chaotic and marginalised people than meet one with a paper cup, or a knife, in his hand.

So would you, and most other reasonable folk, I’ll bet. I see no undemocratic parties in the Dail. We should respect those who can connect to the parts that other beers don’t reach, including those for whom emigration, or suicide, seems the only prospect.

@ Carolus

The prevailing wisdom on this site is more along the lines of “Prof Honohan is usually right”.

Michael, the benchmarking part of your piece was put to DB on rte radio today.

1. How come DB blames everything on banking supervision and the interviewer – every interviewer – fails to point out the obvious about his own position wrt that?

2. David says your comments don’t count because you are not “of standing” unlike the ESRI who, David says, think that benchmarking was the best thing since sliced bread. Plus they are down the docks whereas you are somewhere foreign and therefore worse than just irrelevant.

It seems that until some Irished based “people of standing” are prepared to publicly make those sort of points then Frank Convery’s enlightened voters are going to continue to be treated like mushrooms.

So if you are a person of standing reading this, don’t forget, keep schtum.


Even the most optimistic card carrying blueshirt would rule out the OM. Not going to happen.

Re Mr Cardiff. Promoting someone for failure to perform is not a uniquely PS phenom.


I think the mesage that SF or Lab = the ATM’s will run dry might be a powerful one? Might persuade a few floating voters?

“I think the mesage that SF or Lab = the ATM’s will run dry might be a powerful one? Might persuade a few floating voters?”

They’re going to run dry anyway – aren’t they? Once we’re through the 85bn what then?


Steady on. You’ll frighten the horses. This EU-wide game will come to a head before that. The EU’s Grand Panjandrums (both political and institutional) are trying to buy some time by shoring up the peripherals in the hope that they’ll hold the line and allow them to postpone tackling the underlying problem of the EZ’s dodgy banks. Unfortunately for them the old tried and tested suspects, Belgium and Italy (the former without a goverment and the latter about to lose one), are coming to the fore.

However, I think you can be reasonably confident that the groundwork is being done behind the scenes. It’s a question of how quickly it will be ready – and how soon it will need to be applied in anger.

@Eureka, simpleton

Lab surely represent too many public sector workers to be in a position to turn down the credit line no matter how expensive. Can you imagine Joan Burton telling the nation that the interest rate offered was too high, and because one day default would likely happen anyway, we are going to self-finance straight away instead?

Do you think there is any collateral left? Do you see a public primed and ready for patriotic economic hostilities?

The point is that the lender of the 85bn may not be so willing to give it, even if Lab agree to the interest rate, given that they seem uninclined to agree to all of the other conditions. Labour’s manifesto, such as it is, seems to violate most, if not all, of the loans terms and conditions.

The pity about Labour is that I think they have enough gumption to shout stop at moments when the disastrous consensus is prevailing. I think Burton has been asking very useful questions and personally I’d love to see Ruairi Quinn back in office. He was an excellent Minister for Finance.

But they have to get past “Croke Park is an industrial relations issue so we can’t comment on that” and “tax the rich”. I think the voters see through it and Gilmore’s sound bites will only carry them so far.

OM perhaps out of the question, but I think they will do better than 32%.

As for DB saying Michael Hennigan is not of standing!!!! Pay no attention MH. Your constant use of empirical evidence over lazy abuse ensures you are of excellent standing around here 🙂 Did the ESRI praise benchmarking on the basis that the productivity element would be introduced at some point?

simpleton: I think the mesage that SF or Lab = the ATM’s will run dry might be a powerful one? Might persuade a few floating voters?

Well, in fairness you did acknowledge that you don’t understand Irish politics. That message would be powerful, certainly, but not in the way you seem to think. What it says to me is that we have placed enormous power in the hands of foreigners. With a message like that you would have had a good chance of persuading the late Conor Cruise O’Brien to vote for Sinn Fein.

A more reasoned approach will serve you better. The real threats we face are not nearly so dramatic. The French Foreign Legion is not going to seize the printing works in Sandyford no matter who wins the election.

The corporate nation doesn’t do responsibility, unless it concerns sexual impropriety. So Eliot Spitzer resigned after he was caught with a prostitute . Nobody in the Bush government did following the collapse of Lehman.

The people who drove AIB into the mire are still in charge, minus one. Nobody at the DoF has been sacked. No lessons learned, just fingers crossed about reversions to the mean.

@Kevin D
I agree, we have devolved power to foreigners. There is clearly an active debate about whether or not you think that is a good thing. The pragmatist might answer: it depends on the alternative. I have read works by the Cruiser and I would guess that he would choose the Brussels based foreigner rather than the ones that exist in a different dimension altogether.

Perhaps you are right: the ATM’s would not run dry, or at least would do so only for a few weeks until the punt nua is made ready. Again, why would you vote for that, given everything else that would come with it? Iceland’s default would look quite orderly by comparison.


The Normal Distribution? With reference to The Houses of the Oireachtas? Why am I having difficulty with such a conceptualization? C’mon – help me out here – ! can’t even visualize a criterion …..

simpleton: Iceland’s default would look quite orderly by comparison.

Once again you seem to be using a line of argument which works against your case: “One of the remarkable things about the crisis of the past three years is that it has ended up strengthening the political hand of hard-money, austerity-imposing orthodoxy — yet the reality is that heterodoxy has worked much better in practice.”

There’s no point in saying we mustn’t do drastic things. We did a very drastic thing when we guaranteed the banks, as our EU partners were quick to point out. We may have to do something equally drastic to repair the damage. At a minimum I think we should impose a ceiling on the State’s liability for the banks, such that confidence in its own solvency can be restored. That stops short of simply reneging on the wretched guarantee but it could, I think, put us on a sustainable path. Anyone who thinks that’s too radical is unlikely to win my vote.


Get the DB quote and print off a few T shirts with it on it.
A badge of pride when they cant get the ball off you and have to tackle the man….

@Kevin D
You fall into the same trap as all of the others who assume false choices. You cannot say ‘cap the liabilities of the State’ and then put a full stop. It is a touch disingenuous.
Your proposal is for a default.
Do that, and the 85bn becomes 0. Public servants don’t get paid, unless it is in punt nua, likewise for the ATM’s.
Please, let’s stop talking about choices we don’t have, let’s think through, to a conclusion, the implications of the choices that we do have.

re: My worry is that there is an even greater calamity about 15 months away. We will be literally bankrupt and the normal routes of EU and IMF money will be limited. That is chilling!

What was and is required is an organized retreat- Not the inxeplicable insertia followed by the shambolic races of Castlebar that we have seen to date.

If Armageddon is 15 months down the road then you make sure that the country’s economic defences are set up to deal with that eventuality. And you construct defensive/fall back positions until you finally make a stand from a position of relative strength.
During the EU/IMF negotiations we were paradoxically in a position of relative strength. We should have made a stand at that point.

@ Kevin Donoghue

At a minimum I think we should impose a ceiling on the State’s liability for the banks, such that confidence in its own solvency can be restored.

Sounds great. Now let somebody work out the nitty-gritty and write the history of the future so that we can check their predictions out post factum.

Just how is this suggestion supposed to be implemented in practice? Basically it means burning, or at least singeing, the bond holders. But as we all know the bailout would not have been endorsed if the Government had not maintained their ‘wretched’ guarantee.

It is hardly conceivable that a debtor can ‘restore confidence’ in his solvency by reneging on one basket of loans with the argument that he will thus be in a better position not to renege on another basket.

Simpleton is right : “let’s stop talking about choices we don’t have ..

re: Do you think there is any collateral left?

If you mean financial capital, the answer is yes. In the banks.

If the liabilities of the bondholders are set to zero, then there is a hell of a lot of collateral in the now State owned bank. Certainly enough to back a currency with.

@ grumpy

David Begg’s radio interview today is typical of the people who have a grip of the Irish public megaphone.

So he quotes from a paper on social partnership from somebody “down in the docks” (ESRI) who has more status and is more acquainted with the bufoonery in Dublin than someone based abroad – – unless it is in tune with his own version of events.

A few of the dockers produced a paper in Dec 2008 which showed Irish public sector pay excluding pensions exceeded comparable private sector pay by 10% for top jobs to up to 30% for other grades. It was published in the Economic and Social Research Institute (ESRI) in its Winter 2008 Quarterly Economic Commentary.

Begg brushed off the issue of benchmarking because there was a cut in salaries of 15%. It didn’t matter that it was an abuse of public funds in the first place.

This cut of 15% included a pensions levy of about 7% and net funding costs for employees still exceeds 20% – – but these are what are called facts which of course people don’t wish to hear.

I agree with Joseph Ryan. There is a lot of foreign money tied up in Ireland, considerably more than €85bn.

If Ireland is going to default anyway based on the current path it is time to change course.

@ Sarah Carey


Begg used the word ‘status’ rather than ‘standing’. An interesting term from a well-paid insider.

What he doesn’t know is that I don’t want what he calls ‘status.’

He surely has a brass neck having sat at Central Bank board meetings since 1995.

“I’m not going to go into the blame game — I still have a few years to live,” Ken Whitaker said last week according to the Irish Independent. He also celebrated his 94th birthday last week.

“But I do think we have to moderate our pride when taking advice. . .”

It’s interesting that he would avoid direct comment and his point about pride was well made.

RTE News at One

Does David Begg have the status of a failed banker?

How was he appointed? Who appointed him? Did he have some weighty finance qualifications?

Quite relevant really when you consider the consequences of the Central Bank’s culture and conduct and then look at the ECB’s forthright reaction to appointments to the Hungarian Central Bank:

Also, this might resonate a bit for a couple of reasons:

………”Let’s recap some of Hungary’s recent fiscal achievements. We think we’ll start with last week’s bizarre ploy to stuff the central bank with party political appointees and increase official inflation targets…

Then we’ll give pride of place to recent government expropriation of private pension fund assets from a semi-funded system into its own, unfunded state pension liabilities for short-term fiscal gain. Not least because this also involved the soft restructuring of government debt…….”

Those dastardly socialist bankers. That wouldn’t happen on David’s watch.

simpleton: Your proposal is for a default.

Actually it’s not. If I say that my workshop will not accept liability for losses in excess of €1m, that statement does not constitute a default. It’s merely a warning that my ability (or willingness) to pay is limited. Of course any decision to limit an existing blanket guarantee can be called a default if and when the banks’ losses grow to exceed the limit imposed. But if no limit is imposed and those losses push the debt to a level we can’t afford, we will eventually default anyway. There’s no escaping Stein’s Law.

Voters are entitled to know what the consequences will be if the banks are in worse shape than they have admitted. We didn’t sign up to become members of a Lloyd’s Syndicate to insure banking risks to an unlimited amount. We are entitled to elect TDs who are clear on that point.

If you want to restrict discussion to “the choices that we do have” then you had better list them. My impression is that you think we really have only two: fall into line with the dictates of Olli Rehn, or become a pariah nation. Since you reject the latter, what’s left to discuss?

@Kevin O’Donoghue
You say that we didn’t sign up to insure banking risks to an unlimited amount.

Isn’t that exactly what our govt did on our behalf?

@Kevin D
I’m simply being pragmatic: it will be a default because Brussels/ECB says so. What you or I call it doesn’t really matter. Your proposal will lead to the absence of 85bn. And you keep ignoring this simple fact.

Maybe there are only two choices. Just don’t get annoyed with me for spelling it out. Times are hard, get over it. We do nobody any favours by pretending otherwise.

@Joseph Ryan
“re: Do you think there is any collateral left?

If you mean financial capital, the answer is yes. In the banks.

If the liabilities of the bondholders are set to zero, then there is a hell of a lot of collateral in the now State owned bank. Certainly enough to back a currency with.”
Eh, no. At least, I don’t think so. I’ll try and figure out and let you know. Aside from the interbank funding stuff, one thing to bear in mind is that a good proportion of the ELG guaranteed paper issued in the last two years was bought by the other banks…

Hugh Sheehy,

Yes, our government gave a crazy undertaking on our behalf. But the next government can say: that was them, this is us. It happens all the time. I really don’t want to see Ireland acting irresponsibly, but I don’t think it’s irresponsible to say that the previous government made a bad decision and we want to undo it; we will pay what we can afford but that may not (and probably will not) make everyone whole.


I’m not at all annoyed with you. I responded to your suggestion regarding how to sell existing policy to the electorate. If you think you can sell it I wish you luck. But be careful where you canvass.

You will probably defeat me on the numbers. Specifically I had in mind the ECB money provided to the banks. In a doomsday scenario this is a powerful card to play.
My concern is that we are using up the last of the cash reserves. After that we are truly at mercy of strangers. Not a good place to be. We don’t appear to have any fall back position or even thought about a fall back position.
Ireland is a beaten economic docket, the consequence of banking millstone of moral hazard around our necks. It may soon be a beaten social docket.
What we need is an organised retreat.
In such a retreat the State (I define that to mean the welfare of the majority of the citizens) must take priority. All other institutions, long term relations, legal niceties take second place.
But I would be interested to hear the mechanics of setting up a currency, how it is done etc. It is not an area that I have any knowledge of. It is also a topic that is rarely discussed on these threads. Is it verboten?
The State needs fall back positions.

@ Joseph
You will get a lot of people telling you that it’s impossible and maybe they’re right!
I don’t know.
Just cannot for the life of me see what we’re going to do when the 85bn runs out (and it will run out very quickly once the banks hoover it up).

@Joseph Ryan
“You will probably defeat me on the numbers. Specifically I had in mind the ECB money provided to the banks. In a doomsday scenario this is a powerful card to play.”
Eh, this is backed by the prime assets of the banks…

The long-term welfare of the majority of the citizens is best served by the state not going bust. If you have ever been to bust states, you will know what I mean. Plenty of opportunities for the wheeler-dealers, you know, the types that made the Tiger great. Not much for an ordinary citizen…

The mechanics of setting up a currency was discussed at some length a while ago. My view and that of some others was that it would be possible for the Germans, for example, to set up a new currency, since it would be stronger than the old one, but that it would be very difficult for us to go from a strong currency (the euro) to a weak one.

The fallback position, as I keep saying, is for the state to move to a dual currency system where all payments in the state are made in a local currency which floats freely, but all external trade is in euro. So the state would pay its wages and any transfer payments, collect taxes etc. in the local currency. Private employers would be free to pay in one or the other, as their income dictated. Private debts would probably, as in Iceland, have to remain in euro.

As you can see, it is a horrible solution. The new scrip currency would instantly deflate by a large amount. Many would take advantage of it with a two-tier society being the result (this would happen even if there was no attempt at gouging). It would be desperately unfair.


Status indeed! Even more interesting.

Well just remember – once they start insulting you personally you know its because they can’t reply to your arguments…..

“It is hardly conceivable that a debtor can ‘restore confidence’ in his solvency by reneging on one basket of loans with the argument that he will thus be in a better position not to renege on another basket.”
That argument has lead us to ruin.

“Your proposal will lead to the absence of 85bn. And you keep ignoring this simple fact.”
It’s a high interest loan, not a gift. How much of it could end up with the banks? It causes a sovereign default with reputational damage. It means 17.5 Bn more of our money incinerated on the banks first. And it’s only 67.5 Bn!

“The IMF will contribute 22.5 billion euros of the loan amount, a proposal expected to be approved by the fund in December.

Another 45 billion euros will come from the European Union and bilateral European lenders, and the final 17.5 billion euros will come from the Irish themselves, via their cash reserves and other liquid assets.”

Taking this loan means sovereign default on government debt. We’ll be Argentina.

Just saw on RTE news how the EU is charging a 3% profit margin for our overdraft.
With friends like this…..

@simpleton et al.

I can see nothing in the MoU agreement that prohibits default (e.g. on the €22bn of unguaranteed senior debt). If you think that there are sections in the agreement that would cause the €85bn to become €0 if some senior bondholders were hit, then it would be useful to point them out.

Now the EU Commission guy Szekely said last week in a conference call with Deutsche Bank that senior bondholders were protected, so clearly there is a huge inconsistency here. Either there is another secret agreement or he was speaking nonsense. After seeing his performance at the press conference in Government Buildings a couple of weeks ago speaking nonsense is a definite possibility. He contradicted himself a number of times (unlike Chopra who was very precise, if not very expansive).

I hope that this issue will be raised in the Dail tomorrow during the debate on the IMF/EU agreement. A verbal agreement by the two Brians with the EU on not hitting senior bondholders would not have any legal standing for a new government. If there are additional constraints and conditionality in a secret side agreement then these should be published before the Dail debate, otherwise, for example, the approval of the agreement could then be later subject to legal challenges on the basis that its true nature was misrepresented.

It is now official EU Commission and Ecofin policy that bondholders should (at some point) participate in burden sharing e.g. from last week’s Ecofin report

RECALLS the agreement at the global level that the banking industry should contribute towards the costs of a crisis and AGREES with the Commission on the importance of reducing moral hazard effectively, by ensuring i.a. that shareholders and creditors will suffer a fair and appropriate amount of losses in bank resolution, thus receiving a treatment similar to that which they would have received if the bank had been wound up. Over time, mechanisms should be in place to ensure that the financial sector bears the costs of resolution measures not already borne by shareholders and creditors, in a way that equitably reflects its responsibility and with a view to eliminating the need for the use of public funds, whilst preventing further moral hazard;


NOTES that the Commission has emphasised the specific issues related to the debt write down tool, and strongly ENCOURAGES it to develop a framework where that tool effectively contributes to ensuring that resolution is a credible option for all institutions within the regime, including SIFIs, irrespective of their size, complexity and interconnectedness. In so doing, the Commission should consider the importance of a common international framework in this field.

Now of course the aim is that this occurs under controlled circumstances in the future, and may not directly help Ireland with its current outstanding debt. However it is also possible that the omission of any reference to hitting or not hitting senior bondholders in the MoU is deliberate and is to keep the options open for the future. I think what the EU Commission and Ecofin fear most is that each overly indebted country takes its own unilateral approach and does a solo run and to counter this they are trying to put together a system for an ‘orderly’ default in some manner.

@ Oliver Vandt

It’s a high interest loan, not a gift.

Since this loan is unlikely ever to be repaid, it is more like a gift masquerading as a high-interest loan. That at any rate seems to be the German commentariat’s view, FWIW.

“Justice minister Dermot Ahern has appointed a new tribunal team, chaired by barrister Sinead Behan. It will serve up to 2013.
The seven-person panel of legal experts includes barrister Rosemary Healy-Rae, daughter of Kerry South TD Jackie Healy-Rae.”

Hands up everyone who thinks Ireland’s position in those corruption league tables accurately reflects the reality.

@Bryan G
re Now the EU Commission guy Szekely said last week in a conference call with Deutsche Bank that senior bondholders were protected, so clearly there is a huge inconsistency here.

I have seen this remark critiscised on these threads as being a breach of insider trading rules. And so it is.
But the reality is that Deutsche Bank got what it wanted and is briefing acccordingly.
However, the question must be asked, why is Deutsche Bank so anxious to publicly pursue its agenda of protecting senior bondholders knowing that it will impose intolerable strains on many peripheral banks and countries?
Is Deutsche Bank as weather proofed from the current turmoil as most ordinary people believe them to be or are they also vulnerable?
Are there hidden losses in German on German bank balance sheets that have not been outed yet?

@ Joseph Ryan

The Bundesbank has estimated that the total German bank exposure to Ireland is €25bn – – much lower than the Bank for International Settlements data, which is commonly quoted but requires adjustments for offsets.

Deutsche Bank said last June that it had a net sovereign exposure of €3.2bn to Italy, €500m to Greece and €200m to Ireland, and no such holdings in Spain and Portugal.

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