Leogate and Green Jersey Economics

Isn’t the Irish Times chief cheerleader on all points of orthodoxy re government policies in any and every area of business and economics? Why the surprise?

@ Alchemist

No surprise perhaps other than seeing “doing the same thing over and over again and expecting different results” pass for sensible advice.

It’s pretty funny that “Minister in truth-telling shock” is deemed worse for the bond market than the capital structure flipping discussed below.

The way to regain credibility is to pursue policies that are credible.

It reminds me of the 1992 witch hunt against anyone who said we might have to devalue. Then the Irish Times wrote an editorial which started by saying something along the lines that the defence of the pound was like the defence of the national territory……..

You might criticise Varadkar for the timing of his comments — with Greece in the firing line — but you couldn’t argue against the substance of what he said. And there doesn’t seem much point in us pretending in the months ahead that all is well, when clearly the markets think it isn’t.

you forgot to include Patrick Honahan in with the Irish Times.

The Live Register jumped 2,600 in May (seasonally adjusted), the retail sales volume index accelerated in its pace of decline in April (first estimates), and the NCB manufacturing PMI dropped to 51.8 in May from 56 in April… yet stating that “the plan” is nonsense is an offense against the State.

I’d love to read JtO’s thoughts on this.

@ David Burke

“you forgot to include Patrick Honahan in with the Irish Times.”

Actually, I thought PH’s comments, as I heard them, seemed sympathetic to Leo’s plight.

The fact that what Leo Varadkar said is so widely accepted means that there wasn’t such a great need to say it.

It is up to politicians to choose how best to communicate and how best to achieve goals. That is their job. The Irish Times should not be telling them how to do it. The point about the comment affecting the markets appears to be a canard.

My problem with Varadkar’s comments are

(i) they were not consistent with the MoF’s & Taoiseach’s position, leading to a perception of an incoherent and confused Government, and

(ii) the fact that they come from a cabinet Minister could be used by the IMF as a stick to beat us with and/or trigger a legal difficulty for the IMF’s participation in the loans.

It may be that there is an FG master strategy at work with LV keeping the public up to speed on the one hand and the the MoF and Taoiseach giving the official position. (I am not sure which one represents Eda Kenny’s Big G or who is making good on his promise that Paddy will be told what Paddy wants to know.)

It may also be the case that there is a strategy of letting other Governments know where we really see this going.

However, the truth is probably more prosaic. Most observers will likely surmise that the Government is not unified on economic policy and Leo has a big mouth. At least Leo can’t be accused of not being straight up on those points.

@Zhou

America gets ‘deep throat’ and we get ‘big mouth’. It’s just not a level playing field.

“the “everything’s going to be fine” approach runs the risk of being exposed as just as false as the corner-turning rhetoric of the previous government”……yeah, we need more of Morgan Kelly’s dire warnings to redress the balance

Same as it ever was. If you want to shut down any dissent you just accuse folks with different opinions of putting jobs at risk.

Well here is one corner we obviously haven’t turned…

@Jagdip Singh
The Examiner piece started with:
“IRISH bond yields rose for the first time in more than a week yesterday”

So I thought I’d look: http://www.bloomberg.com/apps/quote?ticker=GIGB10YR:IND

10 year yields have been rising since 18 May and peaked on 27 May at well over 11%. Mr. Varadkar made his comments on 29 May and since then yields have fallen both days at close and are currently down for today (so far!).

2 year yields likewise peaked on friday and came down on monday and yesterday. Nowhere do I see them flatlining.

Perhaps Bloomberg is not a reputable source? Or perhaps the Examiner needs to, eh, examine its conscience.

General consensus for the last five years has been that the less Mr. Varadkar says, the more impressive his is.

@zhou_enlai

Cobblers re the last comment.

As the old saying goes – “If you don’t have something constructive to say, say nothing”

I’ve generally found Leo Varadkars comments to be constructive. This time is no different. Saying nothing in times like we’re in is tantamount to living a lie.

As far a I can determine Mr. Varadkar is no liar.

It must be a great relief to the Irish government that the Irish Times has shown itself to be the one institution in the world that is less sophisticated and more ignorant about economic policy than they.

@karl

well said

this overly optomistic delusional thinking for three years and counting has turned a very bad situation into a disaster for this country the financial bond market investers know full well that with no to slow growth it will not be possible for this country to go back to the markets late next year

so lets shoot the messenger/Leo and stay positive keep the mantra everything is going according to plan as were on a wing and a prayer only one problem we have only one plan and if that trails off course we dont have a plan B but the bright sparks in goverment can worry about that when it happens

its time to get real me thinks

We seem to have driven up the same old cul-de-sac here. The government, officially, has to keep to the line that the EU/IMF package is working and will work, while, one can only hope, furiously seeking to apply whatever traction it has in the corridors of power in Washington, Frankfurt, Brussels, Paris and Berlin to secure a better deal. It has a pretty heavy programme of work to complete the actions specified in the EU/IMF – all of which (and more) should generate signifciant economic benefits – and it needs to maintain popular support (or, at least, sooth popular discontent).

It needs to maintain popular support for the useful aspects of the package, lest popular support evaporate on the basis that it’s all ‘saothar in asice’, but it does no harm if the odd bugle sounds from within the fortress that highlights the inadequacy of the package in the context of the core EZ and ECB unwillingness to address the liquidity support for Irish banks and the support the Irish Exchequer has provided, and continues to provide, the EZ banking system in a constructive manner.

Politically, the core EZ situation has deteriorated. DSK’s defenestration hasn’t really helped Pres. Sarkozy. He remains, politically, a dead man walking. The politically dead walking is even more pronounced in Chancellor Merkel’s case. The about-turn on nuclear is evidence of blind panic. The probability of any statesperson-like initiatives on the Euro or EZ is rapidly diminishing to zero. This is the real problem – and there’s very little Ireland can do about, except get back to a primary fiscal surplus as quickly as possible.

I find it striking that many of the commentators take seriously what comes out of the former executive circles –
Message to the functionaries – neither you nor goverment have any other function but to hold hands if you accept the dominion of the financial churches
Paul Hunts stoic belief that we must get back to fiscal surplus is even more hilarious – this is not a artificial debt crisis of the 80s where the various churches preached fiscal austerity to drive up the profits of their credit masters.
The Churches seem to be in real trouble this time as they have destroyed their golden goose – why nobody on this forum is not calling for driving a stake through the heart of these vampires is beyond me.

@ John McManus

A good column indeed from Cantillon (indeed the Cantillon column often has excellent stuff — an interesting question as to why an anonymous column is better than the ones with names on it!)

And there’s no intention here to tar all IT journalists with the one brush. But the editorials are, as far as I can see, an official stance of the newspaper far more than the more realistic opinions of the mysterious Cantillon.

I see that even the credit ratings agencies are disagreeing with the absurd Varadakar. This is what the Standard & Poor chief economist, one Frank Gill, said last night (link below). Surprise, surprise, JTO is the first and, so far, only one on the thread to quote him. Normally, anything that the credit ratings agencies say is treated like Divine Revalation on here.

http://www.rte.ie/news/2011/0601/euro-business.html

S&P chief upbeat on markets return.

Updated: 14:09, Wednesday, 1 June 2011

An event has heard that Ireland has a good chance of financing itself on international capital markets next year.

Ireland has a good chance of financing itself on international capital markets next year without additional help from the International Monetary Fund and the European Union, credit rating agency Standard & Poor’s said last night.

S&P senior director Frank Gill was speaking in London at an event organised by the London Irish Business Society.

He said S&P thought ‘there is definitely a good probability’ that Ireland can fund itself in commercial markets next year.

Mr Gill also said that Ireland’s current €85 billion IMF/EU programme would be enough to meet all of the country’s borrowing needs since ‘there won’t be any unexpected fiscal costs’.

He also said that Ireland should be able to withstand a possible debt default by Greece, as the market had ‘the capacity to differentiate’ between both countries.

JTO again:

Let’s not beat about the bush. If the Standard & Poor chief economist’s scenario comes true, it will be a financial disaster for many people in Ireland, not least on this site, although certainly not for JTO.

Mega-Mega-billions, on a scale that we can barely comprehend, have been moved out of Ireland since 2007, mainly by people who have consumed an overdose of Morgan Kelly, the main symptoms of which are blind panic and impaired judgement. I am sure that those responsible for this capital flight are heavily represented on this site.

I have no objection to people investing their money where they like and I certainly would be against any measures to prevent them from so doing.

However, the facts are that, as of right now, this is a terrible investment and they have made a big mistake. Investment in government bonds of most EU countries is currently showing a negative return, with inflation considerably higher than the interest rate the investment is receiving. This is particularily true of investment in UK government bonds, which is not only showing a heavily negative return, as inflation there is almost 5 per cent, but is additionally sitting on top of a 20 per cent currency depreciation since 2007, a depreciation which is very likely to continue in coming years, given how much higher inflation is in the UK than in Ireland. Those who invested their cash in UK government bonds in 2007 are currently seeing their investment worth about 15 per cent less in euro terms than when they invested that cash.

In contrast, as I have posted repeatedly here, having moved my savings in the opposite direction in 2007, and being just about the only person on this site to come out and admit to having been investing in Irish government bonds in recent years, my savings are currently gowing at a truly phenomenal rate. All thanks to the favourable combination of a very high interest rate and very low inflation rate in Ireland. That is on top of the currency appreciation referred to above which, naturally, has worked in the opposite direction for me.

I have never claimed to be a financial genius. But, let’s face it, against such lousy opposition, one doesn’t need to be a financial genius to outsmart them. Investing in Irish government bonds, which have a nominal interest rate of 10 per cent, and where inflation is 1.5 per cent, rather than following the mob and investing in UK government bonds, which have a nominal in interest of 2 per cent, and where inflation is almost 5 per cent, is a no-brainer.

As things stand, therefore, my investment is showing a huge return, while those who have moved their cash out of Ireland in recent years, particularily to the UK, are seeing a negative return. Their only hope of seeing their investment come good, and seeing JTO’s investment turn sour, is if Ireland defaults and/or devalues. Hence the constant clamour for it, both here and in the media. I have repeatedly said that there is no economic reason why these should happen and have been sneered at. Now, the chief economist of Standard & Poor, no less, is saying that they are unlikely to happen either. They can sneer at him if they like, but it is not going to change the fact that, as of now, their investment in foreign government bonds, particularily UK government bonds, is currently showing a negative real return, when, like JTO, they could have had an annual 8 per cent or so positive real return by investing in Irish government bonds.

It should be the absolute priority of the government to ensure that the Standard & Poor chief economist’s scenario turns out to be the case. No one is disputing the right of people to invest their own cash where they like. But, it should be the absolute priority of the government to ensure that those, who have been moving mega-billions out of Ireland in recent years, suffer, as a result, both heavy financial losses and psychological torment, when it dawns on them sometime around 2012/13 that there isn’t going to be a default/devaluation in Ireland and that the miserable, indeed negative, return on their investment in foreign government bonds would have been so much better if only they had taken JTO’s advice.

Regarding the absurd Varadaker, fair play to Kenny and Noonan. They responded well. But, they should have sacked Varadaker to add to the credibility of their refutations of his statement. In the absence of that, they should tell Varadaker to stick to making sure that the trains run on time and to ensuring that the great improvements in the road network and road deaths rate, that he inherited from his FF predecessors, are maintained. Even if he was an intelligent man, as Minister of Transport, he has no business sounding off on financial matters.

The Irish Times is adopting Garret Fitzgerald’s former line of “Not scaring the horses”, the horse of course having long since bolted.

It seems to me that the country is collectively not capable of talking about, let alone dealing with, its financial crisis in an adult fashion. Frank and honest discussion of our public finances from just about anyone in the public sector or commentariat is as likely to be had as a frank and honest discussion of their private sex lives. The country is operating a “Valley of the Squinting Windows” policy in relation to its finances. This isn’t helping anyone!

Effectively, this is all a form of denial. Collectively, the country is refusing to face up to the dire problems it now faces, choosing to procrastinate, ignore, and playdown rather than make any decisions at all. Ministers, etc are coming out with seemingly wild, random and contradictory statements on strategy because there is no strategy. There is no plan. No-one is in charge. Few even acknowledge a problem exists, and fewer are willing to deal with it.

I note that this is a historical Irish trait. Indeed, during the Famine, some parts of the country(principally in Dublin, which is still most affected by this attitude) were seemingly “aware” that a famine was even occurring. In fact the nonchalance of the Irish ruling classes about the famine and its effects disgusted the general British public, who regarded the Irish Landlords and administrators as both feckless and inhumane. Nationalists would subsequently blame Britain for all of Ireland’s woes; a mistaken assumption as this crises has clearly shown us.

The country needs to grow up. It needs to talk about its problems and deal with them maturely, instead of perennially turning away from them and hoping they will go away. This time the country is really caught, and ignoring the problem is simply not going to work. We are in hoc for €200 billion+ and what the country needs now is clear leadership with clear direction.

I expect however, that we will simply get yet more talk of escapism.

Doesn’t the IT tend to run 2 sets of analysis ? John McManus seems to do stuff for people who want to know what is going on and you have Pat McArdle and Cantillon and the regular MK outings etc. Then there are the editorials for people with notions that everything is grand. It is like the difference between Six One and Prime Time. The IT caters to a broad church.

It seems to me that a certain amount of media output is designed to stop a bank run. Everything is trína chéile at the moment. The elite are all over the place and it is reflected in the incoherence of elements of the media.
There would be a super PhD on “the editorial policy of the Sindo, July 2007- December 2010”

IT editorials are a world unto themselves. They get so much mileage pontificating about the dead peace process in the Middle East.

@ JtO

Holyhead? Are you taking the long route back from Wembley? Disappointing result on Saturday… 🙁

@ wow

“Lenihan with some articles going so far as to say he could quote latin he learned in the 70s. ”

Aha. So that’s where he picked up the whole pari passu thing!

😉

DIPLOMATS TOLD TO TALK UP RECOVERY
Tanaiste Eamon Gilmore has ordered Irish diplomats across the globe to get the message out that Ireland has drawn a line under its banking crisis.

In a rally-the-troops speech to overseas ambassadors, the Foreign Affairs minister outlined key points to be driven home to international press, business and political figures.

These include that Ireland was meeting its European Union/International Monetary Fund rescue package targets, was returning to economic growth, had dropped prices and rents and was holding onto its low corporation tax rate.

Mr Gilmore also told the foreign service to underline Ireland’s reputation for innovation, scientific research and the arts.

He described their mission as “a major diplomatic initiative to restore, in the words of Robert Emmet, Ireland’s place among the nations of the earth”. from yahoo news

No mention of growth down, unemployment up, mounting debt. Sounds like FF spin

Sorry, off topic, but surely the headline of the day.

In the FT:

“EU warns US to speed up bank reform.”

@JTO

Just curious how an investment in a 10 Year Irish Govt bond bought over the past year and held until today can be showing anything other than a capital loss:

You said “..Investing in Irish government bonds, which have a nominal interest rate of 10 per cent, and where inflation is 1.5 per cent, rather than following the mob and investing in UK government bonds, which have a nominal in interest of 2 per cent, and where inflation is almost 5 per cent, is a no-brainer.

As things stand, therefore, my investment is showing a huge return..”

Hmmm?

Perhaps you may have noticed but in the interim the 10 year yield has moved out not in so the underlying price has fallen not risen. You may need to check you’re portfolio statement again.

Agree with you in relation to bank deposits however – can’t for the life of me see anything other than 100% of these being repaid and picking up an additional 300 to 350 bps versus an equivalent Barclays/BNP deposit over the past year looks good business to me aswell.

@Gary O’Callaghan,

Only ‘of the day’? I reckon some time will pass before that one is beaten. The one I’m waiting for is “Merkel says Germany will pay off 50% of ECB’s liquidity support to Irish banks.” I suspect I’ll be waiting.

Plus ça change, plus c’est la même chose

Sept 2010 – Comical Lenny:
http://www.thepropertypin.com/viewtopic.php?p=422869#p422869

May 2011 – Comical Mickey:
http://www.thepropertypin.com/viewtopic.php?p=509008#p509008

And yet, it’s still not funny…

@Seafoid
Wow – what can one say ? – the sheer size of claims on Ireland is mind blowing given our tiny size.
However the Euro structure has nothing got to do with a Gold standard – it has freegold on its balance sheet.
If Peripheral credit deposits ran to Gold tommorow it will explode the size of the Euro balance sheet and thus its volume of cash.

@ Seafóid

To echo the DOC, what can one say? Maybe one response would be to read the attached report of the Bundesbank and especially pages 18 and 19 (on a topic ventilated on this blog some weeks ago).

http://www.bundesbank.de/download/volkswirtschaft/mba/2011/201104mba_en_german_balance.pdf

To take the initial post, the following sentence invalidated it in its totality as far as I am concerned.

QUOTE And the IT’s reaction to this loss of credibility is to condemn a minister who makes a statement everyone knows to be true and to encourage the government to repeat a mantra about “no second deal” that will, in time, be just as discredited as the previous government’s approach. UNQUOTE.

To quote “everyone knows” in a supposedly serious contribution!

The essence of the debate has always been about growth. The bond markets do not believe we can grow out of this. The confidence fairies believe otherwise. Disaster always lay with either a domestically generated slowdown (the failure of the confidence fairy’s magic dust to do its thing) or a global slowdown. Just in case our focus on our own parish has diverted attention, there appears to be a looming issue with global growth. Could be a normal mid -cycle pause, could be the start of something nastier. $100 oil usually prompts a global recession. I hope that someone somewhere has something approaching a contingency plan about what to do in the face of renewed cyclical risks.

@ simpleton

I was talking to an Indian colleague yesterday in Switzerland. He said he can’t see how Western Europe in general can grow given all the stuff we already have. And all the debt behind it.

http://www.guardian.co.uk/commentisfree/2011/may/31/triple-crunch-economic-torpor

“Economists at Tullet Prebon have calculated that six sectors – housing, finance, health, education, construction, and public administration and defence – account for 58% of the UK economy. All relied heavily on private or public borrowing over the past decade, with finance expanding by 123%, construction by 27%, health by 35% and real estate by 26%. The real output of the other 42% of the economy is 5% lower than a decade ago.”

@Edward v 2.0 , Yields or bust

I don’t concern myself with the nitty-gritty of exactly which bits of paper the Ulster Bank invests my savings in. I pay them to do that, as do most people. Similarily, I don’t cut my own hair or fill my own teeth.

Bottom line is: my savings, which were mostly all transferred from north of the border to south of the border in mid 2007 (with modest amounts added monthly since) are showing a large increase since then, partly because of the appreciation of the euro v sterling and partly because of the high interest rates south of the border. Had I left them in the Ulster Bank in mid 2007, they would by now have shown little increase at all, as they’d have missed out on the appreciation of the euro v sterling and gained abysmally small interest rate appreciation.

Would any of the financial wizards on here like to tell us:

(a) How much would X,000 sterling moved from a Belfast bank to a Dublin bank in mid 2007 now be worth in sterling terms?

(b) How much would X,000 euro moved from a Dublin bank to a London bank in mid 2007 now be worth in euro terms?

Is anyone seriously suggesting that, as of now, (a) is not giving a far far better return than (b)? The fact is that most of these financial wizards, while sneering at the few of us who did (a), have themselves done (b) to a factor of N, and require a default/devaluation outcome in order to make their (b) better than our (a). If that doesn’t happen, they are sunk. Hence the passion with which they scream for it and the vehemence with which they denounce anyone (the latest being Frank Gill of S&P) who say it isn’t likely.

@Joseph

I would love to get hold of a pint of whatever it is that people like you and Frank Gill are drinking…

JTO again

So, the chief economist of S&P comes out with a detailed rebuttal of your point of view, and your response is about what he might be drinking. Your witty comment would no doubt get a laugh at an undergraduate debating society, but this site ought to be for adults.

@Joseph

I for one don’t intend to be around when it does.

JTO again:

You’ve been posting here for 2 years that you were leaving. How come you are still around? What’s holding you back?

@Joseph

You really do need to go out there and talk to ordinary people to see what’s really happening.

JTO again:

I am surrounded by ordinary people daily. In fact, I am posting this from an internet cafe near O’Connell Steet, which contains some very ordinary people. No sign here of any of the revolutionary fervour you keep dreaming is about to erupt. But, I’ll ask around just in case.

@Eoin

Are you taking the long route back from Wembley?

JTO again:

Fortunately, I was not able to get tickets for the Wembley debacle. Simply en route from a very successful business trip to Turkey.

@Joseph, Paddy the American

Re the live register figures. You asked for my analysis. These simply confirm that the live register has been flattening out for the past year. The seasonal adjustments are totally unreliable and skewed towards the summer months. We had this debate last summer. I refer you to the various threads then. The ‘seasonally-adjusted’ live register rose by 11,700 between April 2010 and August 2010. Minister O’Cuiv claimed that the rise was ‘seasonal’ (even after the ‘seasonal adjustment’) and would be largely reversed in the autumn and winter, and it was. A similar thing happened to some extent in 2009, in that, even after ‘seasonal adjustment’ the autumn figures were much better than the summer figures. This strongly suggests that the ‘seasonal adjustments’ are faulty and skewed towards the summer months.

In the absence of reliable seasonal adjustment, the best overall picture of the trend can be obtained by looking at the y-o-y change (ie between each month and the corresponding month the year before), as this will eliminate any seasonal distortion. The y-o-y changes each month since the start of 2010 are:

Jan 2010 +110,700
Feb 2010 +84,500
Mar 2010 +65,900
Apr 2010 +50,800
May 2010 +38,500
Jun 2010 +37,300
Jul 2010 +34,400
Aug 2010 +30,200
Sep 2010 +22,600
Oct 2010 +17,100
Nov 2010 +11,500
Dec 2010 +13,500
Jan 2011 +5,700
Feb 2011 +7,300
Mar 2011 +6,000
Apr 2011 +6,900
May 2011 +3,000

So, this month’s figures show the smallest y-o-y rise since the recession began. A rise of just 3,000 between May 2010 and May 2011 indicates the number on the live register has been essentially flat over the course of that year. As long as the y-o-y rise keeps coming down, it is clear that the number is flattening out. If the figures follow the trend of the past two years, with a skewness in the seasonal adjustment towards the summer months, then it is likely that there will be further ‘seasonally-adjusted’ rises in June, July and August, followed by ‘seasonally-adjusted’ falls from September on. None of these ‘rises’ or ‘falls’ will mean much unless confirmed by the figures for the y-o-y change. If this continues to come down, as it has done since January 2010, then this means that the number on the live register is flattening out. If it goes negative, which it is now quite close to doing, then this means that the number on the live register is falling. If it starts to increase again, then this means that the number on the live register is accelerating again. So far there is no sign of it increasing again, but, which ever way it goes, because of the clear inadequacies in the monthly seasonal adjustments, the trend in the y-o-y change is the best indicator. On this basis, the number on the live register is clearly flattening out, with the y-o-y increase coming down almost every month since early 2010, when it was over 100,000, and now in May hitting a new post-recession low of just 3,000.

That is not to say that the figures are good. Clearly, they can not be considered good until they start showing a sustained fall. They are simply flat, neither rising nor falling much over the course of the year, with apparent falls in some months and apparent rises in other months being largely illusory and cancelling each other out.

Look – the dogs on the street know that Irish people cannot afford to bail out German banks – end of!!!
All this economics clap-trap is just confusing the issue.
The Germans blame the Spanish when they get EColi, they blame the Italians when they get too many refugees and they blame the Irish when their banks go belly up.
What I’m saying is not politically correct but it needs to get out there.
Let Europe revert to the looser European Common Market.
We have a Europe of economic ghettos now!!

@JTO

Though it pains me to say it I have to agree with you re returns on Irish returns, specifically Irish bonds.

I did a little spreadsheet calculation about a month ago which showed that even with a 25% day one ‘haircut’, my meagre pension fund would return more in Irish bonds over five years that Germans bonds over the same period. [with no haircut on the German bonds!]

I enquired about this from the managers but was told that no Irish pension fund mangers have funds that invest in Irish bonds.

It surprised me to say the least.

@JtO
“(a) How much would X,000 sterling moved from a Belfast bank to a Dublin bank in mid 2007 now be worth in sterling terms?

(b) How much would X,000 euro moved from a Dublin bank to a London bank in mid 2007 now be worth in euro terms?”

Did you invest in Irish government bonds or place you money on deposit in EUR with an Irish bank?

Is it just a currency gain on the fall in the value of £? Does this out weight the loss on the value of the bonds over that period?

@Joseph Ryan. Meant to say company trading with too much debt

@jim power

on your original post, aren’t many recoveries ‘creditless’ e.g. UK from 1992 onwards, i.e. lending is always lags growth in a post recession period?

how can the household, personal debt problem be getting worse. The central bank stats show that household financial liabilities have fallen as they have paid back debt?

There are examples of credit less recoveries alright. Recent IMF paper. But in Ireland’s current plight I find it hard to see domestic demand coming back in absence of credit resumption. Ireland is not yet in a post recession period. My experience is that with wages still under pressure for many, with interest rates rising, with CPI necessities rising strongly and with the fiscal squeeze still to come a lot of personal sector borrowers are moving ever closer to the precipice.

See the Martin Wolf article linked from Krugman’s blog:

http://krugman.blogs.nytimes.com/2011/06/01/the-euro-living-dangerously/?smid=tw-NytimesKrugman&seid=auto

Spoiler: Doom-jukies will love this one with more Morgn Kelly style aggregating of central bank debt. Great graphics.

@ DE

You asked

“Did you invest in Irish government bonds or place you money on deposit in EUR with an Irish bank?”

Good question. JTO says

“being just about the only person on this site to come out and admit to having been investing in Irish government bonds in recent years, my savings are currently gowing at a truly phenomenal rate.”

Seems to me you saying that he can’t possibly have bought Irish government bonds. Is that correct?

1. Transparency is generally good but caution is required when there are international ramifications.

Since 2003, how many times has Trichet had to subsequently clarify a public statement to calm the fx markets, compared with his predecessor?

2. There is evidently a lot more interest in default and getting the foreigners to pick up the tab than there is for fixing the broken systems at home and adjusting public and private sector professional cartel costs, which grew on the back of illusory prosperity.

3. Karl Whelan is correct in highlighting “lying about the scale of our problems and ultimately denying things that everyone knew were true.”

We are back to another summer wobble in the international recovery and on Wednesday the FT reported that the rebound in UK consumer spending in 2015, 7 years above the 2008 recession peak, will be the lowest in 180 years!

A report last week said average wages for UK workers on low-to-moderate incomes are likely to be no higher by 2015 than they were in 2001.

We are better at dreaming than handling inconvenient truths.

We talk about boosting trade with the BRIC countries as if even most of the units of multinationals in Ireland responsible for it, have even a say in the destination of their output, never mind the delusion that an Irish State agency could have an impact.

Employment in the tradeabale goods and services sectors (both FDI and indigenous) is at 1998 levels when the workforce was 25% smaller.

New FDI projects tend to be small as we already have most of the US big MNCs interested in serving the European market but not to worry, headline FDI figures still look good and UNCTAD classifies expansions of existing facilities as ‘greenfield’ investments.

Meanwhile with about 20 big plants in the pharma/medical devices area responsible for 60% of merchandise exports and 33% of total exports, shipments expanded by 38% in 2004-2010 with direct employment almost static in the low 40,000s.

Voilà! Unit labour costs dip while German costs rise as 1.5m workers were in the Kurzarbeit short-time working scheme at its peak.

In the period 2001-2007, there was a net increase of 5,000 jobs in the internationally traded goods and services sectors; why would we do better in this decade?

We can always dream: this week a newspaper reported that Ireland’s “bid to become a global software hub received a massive boost with news that Cork Institute of Technology (CIT) is to offer the world’s first degree in cloud computing.”

It was as if someone in Skibbereen had discovered a new planet.

4. Almost four years after the onset of the global credit crunch, there have been no significant reforms and the status quo remains intact for the big beneficiaries of the boom.

In the conservative society both the traditional trade unions and their richer counterparts in the professions oppose change.

What a system! Public contractors can become multimillionaires investigating corruption but when a clerical error in the Department of the Taoiseach, results in an overpayment of €1m, the lawyers keep the money.

Leo Varadkar focusing on the bailout gives heart to those who want to keep their bubble gains and at this six month stage in the EU-IMF programme, what short-term purpose is served by his speculation apart from comfort for those in denial?

@ Grumpy/Karl

its a mtm vs cashflow issue. On a mtm basis, JtO’s portfolio has performed poorly vs bunds, on a cashflow basis its massively outperformed. Assuming Ireland doesn’t default, his Irish bond portfolio will massively outperform bunds. Even if it does eventually default, the Irish portfolio could still outperform if the coupons earned offset the eventual haircut.

A 10yr Bund bought today (compounding, taxation and discounting ignored) will yield around 31.75% in accumulated coupons over the life of it, and then a 2.35% loss on redemption (i’m reffing the 3.25% 07/21 @ 102.35).

The 5% 10/20 Irish bond @ 68.0, in contrast, will yield 73.53% in accumulated coupons (lets assume if matured at the exact same date as the Bund), and a 32% profit on redemption.

So if Ireland only ever defaults on redemption, and by a rather chunky 50%, but keeps the coupons intact until then (and most people feel the nominal rather than the debt servicing is the issue), then your net return would be 55.5% vs a 30% Bund return. Lots of uncertainties in between of course, but makes one think, does it not?

@ All

In any country that understands the meaning of economic sovereignty, statements with regard to the state of the economy relative to the view taken by international markets are usually left to the Minister for Finance. Curiously, the other obvious exception, apart from Ireland that is, is Germany where Merkel, in an undisguised battle for pole position with her minister for finance with regard to public opinion, has made an art of pulling the carpet from under him at sensitive points. The most recent example is the speech she has just made in Singapore.

http://tinyurl.com/6xhho95

To say that the Chancellor needs new refrain would be an understatement.

The sheet music may possibly be found in the new treaty establishing the ESM, the text of which is freely available on the web. Herewith version courtesy UKIP. N.B. The square brackets.

http://www.ukipmeps.org/uploads/file/european-stability-fund.pdf

The idea of holding Germany’s management of her economy up as a model for the rest of Europe, especially against the background of the current cucumber wars, is ridiculous. Such is the collapse in the standing of Merkel, however, especially following her u-turn on nuclear energy, and her endorsement of Germany going her own way on a whole range of issues recently, that the respected correspondent of Le Monde in Berlin has recently penned a very critical article on the subject.

http://tinyurl.com/6dpro96

As to international comparisons in general, caution, it sems to me, is required, the mote in Ireland’s own eye being so enormous. It is also worth recalling that the official position of Sweden remains that of wishing to join the euro. The people refused to concur in a referendum in 2003 (56.1% against). The decisive development in the Swedish economy was the response, under Persson of the Social Democrats, to a housing and banking bubble, an unsustainable rise in public expenditure and a fall in competitiveness. A radical situation required radical solutions. Ireland is in a radical situation and can apply the radical solutions now or see them applied later.

@MH

Leo Varadkar focusing on the bailout gives heart to those who want to keep their bubble gains and at this six month stage in the EU-IMF programme, what short-term purpose is served by his speculation apart from comfort for those in denial?

You are absolutely right on that point.

What is needed is a declaration of an economic state of emergency with emergency powers to do the following.

1. A full on assault on the gravy train for all PS earners over €50,000.
2. A full on assault on the rip off of the PS by professional contractors.
3. A complete elimination of PS pensions where recipient is in receipt of another PS pension in excess of €30,000.
4. Power to force repatriation of foreign deposits . eg 25% tax if not deposited prior to July 31st.
5. Power to force repatriation of pension funds into govt bonds.
6. New deal jobs programmes concentrating on among others, forestry (to employ building workers and provide long term energy, broadband, primary schools, and the finishing ghost estates to make suitable for tourist projects.
7. And last but not least, burn the bondholders. But not before putting our own house in order first.

We are watching a slow motion destruction of the country with no credible or decisive actions being taken. They are not being taken because too many in positions of power and influence have their snouts still buried in the trough. A trough that is now being reluctantly filled by foreigners.
It is a shameful scene.

@JtO
Wasn’t looking for an explanation of seasonal adjustments or the methodology involved, just wondering how you’d throw a positive spin on the continued — and accelerated — deterioration in consumer spending AND continued weakness in the labor market AND a faltering recovery in manufacturing all in the same period (and reported within the same week).

At least you admit that the situation as regards the Live Register is not good news. I can’t quibble with you there.

Off topic
rre CSO Job Data

There was an increase of 5,911 (+25.4%) in ‘Other Registrants’ on the Live Register in the year to May 2011 bringing the total to 29,207. This increase was entirely recorded among persons aged 25 and over (+5,950 or +26.0%). See table 1a and 1c.

Which category make up this group. Could it include early retirees from the PS who are being advised to sign on in order to get the protection of the widow/wodower’s pension until age 65.

And indeed to get other benefits such as JB provided they fill the necessary criteria.?

@Yields or Bust

Just to clarify, I am not an accountant, a financial or investment analyst, or whatever. I do not know the precise details of where my money in the bank goes. Does anyone (apart from said accountants and financial and investment analysts)? I do not personally buy bonds, shares or whatever. I wouldn’t even have a clue how to. It is all Greek to me. I merely put my hard-earned money in the Ulster Bank, Belfast, give a general directive as to where I want it invested (in this case, back in 2007, when I could see that sterling was going to plummet, my directive was to move it south of the border), and pop along every six months to see my financial advisior at the Ulster Bank, Belfast, where, after a cup of tea, a few jokes about Iris Robinson, and a heated debate about Tyrone’s All-Ireland prospects, the meeting ends with a quick look at the bottom line of my finances. As of last time I was there (in April), my bottom line was looking extremely healthy. Can people who moved their money out of Ireland in 2007, particularily to the UK, say the same? My savings are increasing quite rapidly in real terms. I assume that this has something (at least partly), to do with current high interest rates on Irish bonds, although I can’t be certain. I leave all the details to the bank.

I’m not convinced that slagging off of Germany is the way forward nor am I convinced that trying to find reasons to call leaders of other countries populist is very productive either.

Look for signs of populism in your own leaders and then maybe necessary reforms can happen.

As for the Swedish banking crisis:
http://www.nytimes.com/2008/09/23/business/worldbusiness/23krona.html
Göran Persson came to power after the crisis had been mostly resolved.

Sweden may or may not join the euro. Some countries used some tricks to meet the criteria to join, Sweden can use tricks to fail to meet the criteria. If joining the euro causes Sweden to increase the payments to the EU (optimal currency area arguments of countries not wishing to reform) then the opposition to joining the euro will be even stronger.

@ JTO

“My savings are increasing quite rapidly in real terms. I assume that this has something (at least partly), to do with current high interest rates on Irish bonds, although I can’t be certain. I leave all the details to the bank.”

Therein lies the error – your savings are increasing despite the current high interest rates on Irish bonds, not because of them. If Ulster Bank had indeed invested your money in those high-yielding Irish bonds your conversation with the financial advisor might be much less cordial as you would be sitting on losses rather than gains. Your man in Ulster Bank must have the money on short-term deposits/investments in the Free State, which I’ll admit has been an excellent investment relative to leaving the money in the UK. My issue with your earlier and prior comments on this is in the implication that investment in longer-term Irish government bonds has been anything other than a disaster for investors.

As I’ve remarked before, youse are all missng the point of JTO’s satire. His deposits, although denominated in euros, are with Ulster Bank Belfast. Hence, unless I am much mistaken, they are guaranteed by Her Majesty’s Government.

For a while I thought JTO might be dsquared (Daniel Davies). But dsquared would have got tired of this joke long ago.

@ All

I have gone back to ‘Clarity needed when figuring out Government debt’, and added an extra comment as I asked an outside eye whose opinions I value to have a look and their reply has come through today.

@Eoin Bond etc
If these bonds are such good value then why dont we see massive piling into them, from overseas/eurozone investors, driving price up and consequently the interest rate down? I mean, they can do the math also, no?
It strikes me that the answer is: they dont believe that its too good to be true or that its a fill your boots moment.
Thoughts?

@ All

Maybe Martin Wolf has the explanation!

QUOTE If this is a true currency union, a deposit in any eurozone bank must be the equivalent of a deposit in any other bank. But what happens if the banks in a given country are on the verge of collapse? The answer is that this presumption of equal value no longer holds. A euro in a Greek bank is today no longer the same as a euro in a German bank. In this situation, there is not only the risk of a run on a bank but also the risk of a run on a national banking system. This is, of course, what the federal government has prevented in the US. UNQUOTE.

This is an amazing statement from a reputable economist. Maybe he has had his mind addled by Professor Sinn. If the bank in which you have your euros collapses, they are worthless to you because you cannot get them back but they are as valuable as any other in the hands of whoever happens to hold them at the moment, probably the owner of a site sold at an impossibly inflated price funded by a loan from the bank in question. And to think that Sinn actually gets an audience! Time to refer to Michael Moore.

http://www.irisheconomy.ie/index.php/2011/05/04/lending-between-national-central-banks/

These professors see the lever but have a hold of the wrong end.

There is a solution to the problems of the periphery – which are small relative to the EU as a whole – and it is threefold (i) for the richer Member States to get out their chequebooks if they do not wish to see the EU collapse (ii) ensure that this spending is not tied to useless production of their heavy goods – such as submarines in the case of Greece – which the peripheral countries do not need but is devoted to balanced development across Europe (the objective is in the treaties and called “economic and social cohesion”) (iii) create a true internal market by freeing up their economies and ceasing – especially in the case of Germany – deliberate administrative measures which favour exports over domestic consumption.

@Jesper,

Keynes believed that as much, if not more, constraint should be exercised on those who ran persistent external trade surpluses as on those who persisted in running deficits. But he failed to get his way. It shouldn’t be an insult to remind policy-makers of the contentions of the Master – particularly when one of his ignored contentions is highly relevant.

@Paul Hunt,

Keynes was right on many things and interpreting what he says can be interesting.

Germany is good at certain things. As the PIIGS are not so good at these things we should therefore hobble Germany to even things out?

Or is it at all possible that the PIIGS should improve?

Suppose we choose to hobble Germany. That would either strengthen EU versus the rest of the world or weaken the EU relative the rest of the world. I happen to believe that bringing down German economic performance to the PIIGS level would weaken the EU.

Alternatively, the PIIGS improve thus weakening the relative strength of Germany in the EU.

I can see why the PIIGS would prefer to hobble Germany as that would enable them to continue in their ways for some time (until they possibly got even worse again…). I don’t see it as a credible solution.

What do the PIIGS bring to the EU? Burning money can be done without their assistance so help me out here?

@Jesper

“does insulting a creditor make it more or less likely that credit terms will improve.”

IMHO valid question but I also wonder if inconveniencing a debtor increases or decreases the chances of ever being paid in full or maintaining a cordial relationship? (Good point about populism by the way)

@all

Considering the topic of this thread :

I look forward to hearing more from Mr Varadkar avout his plans and expectations for the portfolio he is specifically responsible for and which was the beneficiary of a major initiative in recent weeks.

@JTO

I dont agree with everything you write (and possibly never will) but this has been changing lately. Well done on the live register analysis.

@Michael Hennigan

“…at 1998 levels when the workforce was 25% smaller”.

Considering that a number of commentators are predicting mass exodus and economic armageddon it should not be long before our workforce is reduced by more than 25%. In fact reading some of the posts over the last 2 years I am surprised we are not there yet. Perhaps it will happen in the next few weeks.

Thanks for the comparison with Sweden. I wonder if NAMA can spare a few apartments in Dublin? Come to think of it I would not be surprised if NAMA could also spare a few apartments in Brussels as well.

Today’s funny headline comes from JCT in the FT

“There is no crisis of the euro”

http://www.ft.com/intl/cms/s/0/e0bd4e7a-8d15-11e0-815d-00144feab49a.html#axzz1Np0CTswP

In the end of the day we can blog here all we like. There is no way in hell Ireland can pay for the mistakes of German banks.
There is no way in hell Ireland should stick to any kind of European solution for anything. The only thing the Europeans do that doesn’t end up inflicting major pain is the Eurovision (and that’s debatable) everything else done by Europe is rubbish (total and utter rubbish)
Look at how they handled the Balkans – oh yeah go get independence guys…oh please don’t kill each other….oh let’s send in 100 Dutch guys to twiddle their thumbs as Bosnians get slaughtered..oh that didn’t work…what’s that the sound of the Americans coming to sort out our problems….(for only the 3rd time in less than 100 years!). Look how the EColi stuff is handled – German knee jerk reaction – blame a PIIG. Look how Tunisia and Arabia is handled (no intervention – let it foment until the radical muslims fill the power vacuum) – only place they care about is Libya cos of oil for BP and possibly ELF.
The European project overstretched itself with the Euro. It is a disaster and they cannot fix it.
Let’s not hang around to become another European mess!

If the Big Issue is the Fiscal Deficit well amazing it does not appear to bother the FG Ministers. On tuesday Hogan announces a new Quango – Irish Water – and yesterday O’Reilly announces another one the – SDU. This from a Party that was going to shoot Quangos. Colm Mc Carthy in his recent Report outlined just how far apart the average remuneration packages of the Semi State Quangos are from the rest of us but that does not bother this Government. This Government is another clueless disaster and I expect the cables from the Ambassador in the US Embassy winging their way to Washington are the same as the ones that were sent when the two Brians were in power. IMF please put the boot in to save us from utter disaster with these Politicians. For my sins I voted for this shower (not Labour) around two months ago. Can I take my vote back ???

@Paul Hunt,

this happened due to cost-cutting in Sweden & reading some comments that the periphery should stand up (in essence for their privileged classes) against the core did cause some anger:
http://www.thelocal.se/33172/20110413/

I’d rather see money spent in Sweden on preventing this like that from happening instead of seeing it leaving Sweden to go to some overpaid politicians in the periphery.

As far as I can tell, the periphery sees its role in the EU as spending the proceeds of the hard work done by the core. Not quite the best selling argument to make the core want to keep the periphery. Are there any others?

@Bond Eoin Bond

Well – something is positive. 15 year bonds sound great at the mo …..

Spose EIRCOM still looking for a State Guarantee (-; Or might it default?

Summer time – an da livin is EZ_ee …..

@seafóid

Best laugh I’ve had all day; all week even. Dulce et decorum est pro ECB errare!

@Eureka

You say

“..There is no way in hell Ireland should stick to any kind of European solution for anything. The only thing the Europeans do that doesn’t end up inflicting major pain is the Eurovision (and that’s debatable) everything else done by Europe is rubbish (total and utter rubbish)..”

You’re probably right to be annoyed in fact seriously annooyed at the manner in which the ECB et al have gone about the crisis but as VB asked his Sinn Fein guest on his programme last night – what do you do when the ECB says NO? i.e there is no debt restructuring, no deal renegotiating, there is no other game in town accept our way i.e. take the medicine or piss off.

When the teachers, the guards, the unemployed , the nurses etc etc have their respective hands out next month and the month after looking for the monthly cheque what do the Govt do?

Telling the ECB etc to stick their plan where the sun don’t shine aint a rock solid solution.

So as VB continues to ask and I do here – what do you do when the ECB says NO?

More construction less destruction please !

@Jesper,

We could go around in circles on this. Part of the problem, but only part, is that hard-working savers in the core EZ didn’t pay enough attention to how their hard-won savings were being invested – and their elected politicians did not pay enough attention to ensuring bank supervision and financial regulation was fit for purpose. We have all sinned, but the penance is not proportionate.

@Paul H

How has the efficient and competitively priced worker in the EZ core “sinned”? What is going to motivate him to feel contrite?

Irish voters could be said to have been unwiiling to bother to watch Primetime and could look around them to see the absurdities going on.

How are German voters to be convinced they are equally culpable?

@Livonian,

call it what you want. The net-contributors to the EU is now asking themselves how long they’ll ‘temporarily’ fund the net-recipients. The answer seems to be whichever comes first of:

-end of time
or
-the net recipients are no longer part of the EU

@Paul Hunt,

failed investors should pay & some will pay. Countries that can’t/won’t pay their way will default, the investors still holding on to bonds of those nations will lose out & hopefully that will humble the overmighty finance industry. Hopefully that will also lead to better investment decisions. The suckers will be the citizens in the countries that default, they’ll be the ones suffering the most.

@all,

a market implies payment for goods and services. Defaulting means not paying. Not paying means no market. So tell me, as the periphery seems disinclined to pay and therefore does not provide a market, what does it have to offer the rest of the EU?

@ Jesper

“a market implies payment for goods and services.”

Yes, but payment can come in many forms, as we noted above. The EU needs to ask itself what is better for it in the longer term – a vibrant, economically buoyant, and converging peripheral economy, or a debt-laden, stagnant and deeply unhappy divergent periphery? This isn’t as simplistic or, dare i say it, populist as “the periphery seems disinclined to pay” or “the periphery wants to spend the hard-earned money of the core”. Whats required are actual solutions, rather than just moralistic-barking. These solutions may involve restructuring or reprofiling of debt, they may involve overhauling how much of the economy works, and they may involve either subsidies or grants being offered. They may ultimately involve a default (though you seem confused on this – failed investors will pay vs railing against the thought of default with an LBS-style argument?). What seems more and more certain, however, is that charging a hefty (c.100%) premium on official funding support is not going to work as a solution.

Jesper, a few questions.

What do you see the EU as? Is it a just a large market to which everyone has access if they play by the same rules or is there some grander purpose? If it is just meant as a mechanism to allow capital to flow wherever the greatest profit can be found do you think any of the smaller and less industrialized countries would have joined?

It is also quite bizarre that you think that vast state bailouts are going to humble the overmighty finance industry? Has not the purpose of all the bailouts so far been to protect the finance industry?

The primary purpose of all the loans, privatizations and austerity in the peripheral countries has been to protect international capital from its own poor decisions, Merkel’s differences with Trichet boil down principally to her having a more restrictive view of which investors should be protected.

We feckless peripherals have been taught an important lesson about the power of capital and how meaningless the phrase “European partners” has become in an era of inexplicable Christian democrat political hegemony and deluded enthusiasm for market solutions to a market instigated catastrophe.

@ Colm McCarthy

Ireland is unable militarily to defend itself, bereft of fossil fuels, dependent on a rules-based international trading framework, and a dependent-member of a shared-sovereignty economic and political union. And somehow our meagre diplomatic network is a luxury?

Most of our Embassies are now one man and a dog operations, and yet we still expect to be able to exert some influence on those who will decide our fate. Would the peace process have happened without the cadre of diplomats we had developed? And how might we fare in the EU if we decide to play an even more marginal role than heretofore?

@JtO – “You’ve been posting here for 2 years that you were leaving. How come you are still around? What’s holding you back?”

The wife mainly (not wanting to leave her family). But given that we’ve just agreed in the past 24 hours that she’s welcome to stay in Ireland while I go elsewhere it is no longer such a problem. However, finding the work is. It’s a case of there being sod all here and not much elsewhere at the moment.

However, I am worried that you have been recording how long I’ve been posting on this site and what I’ve been saying. Should I be afraid, very afraid? Do you know where I live? Perhaps you are really Alastair Campbell.

To put the record straight, I’ve only been saying I want to leave since I graduated from my MA last November – having been unable to find work in my normal field since then and even been turned down for warehouse and farming work recently in an attempt to find any work to help make ends meet (one employer laughingly mentioned something about my English being too good – implying they only hired non-Irish cheap labour). Sadly, having previously been working on contract all the time I had to be a one man limited company and as a ‘company director’ I have not even been able to claim any benefits since I lost my last contract in 2008 (due to the financial crisis).

However, I know that you are only interested in statistics and data and prefer to ignore real life and context so no doubt you would report my situation as:

Joseph has achieved long overdue weight loss since his recent
austerity programme began, moving from 13st down to 11st

He now gets up at 0530 every day but his inability to sleep due to
worry is actually a benefit as he starts his daily job search earlier
and it enables him to apply for an additional 5.65 jobs per day,
increasing his productivity by 0.004%

Growing vegetables in his two polytunnels to feed his family is
keeping imports of vegetables down by 0.0000004% pa

Being unable to draw any form of benefit has saved the exchequer…

I could go on but I would probably lose the will to live.

One thing that is really driving me away from these shores though is that I’ve worked all over the world and met many people at many different levels, playing many different roles in those countries and I can assure you that I’ve never been anywhere as bad as Ireland: where the political, professional and ‘elite’ classes are so full of wide boys, chancers, spivs, liars and gob5hites. I would tend to classify you amongst the gob5hites JtO but no doubt you will have some data to spin to make out you are not.

@DOCM

Glad to hear that you believe Ireland is going back to the sovereign bond markets soon. The Troika will be Thrilled! So will the Tooth Fairy!

To cite Michael Taft:

‘Thank You, Minister Leo, For Your Two Big Feet
A couple of cheers for Minister Leo, putting both his feet in the mouth of the Government. In a refreshing dose of realism he stated WHAT EVERYONE KNOWS [linked to Irish Times] – we’re not going back to the markets anytime soon.

Unfortunately, this realism landed the Minister in a bit of warmish water. Not because of what he said, but because the Government is in denial. Are we going back to the markets in 2012? No. 2013? Ditto. We’re heading straight into the European Stability Mechanism which will, up to that point, mean that markets will continually price-in a default. That, alone, will keep us out of the markets. We are the verge of becoming a semi-permanent ward of the EU.

The Government may feel that denying the obvious gives it room for manoeuvre. This was the same logic the last Government relied on when denying the IMF was in town; denying it was seeking a bail-out; insisting the plan was working. Look how that turned out.’

I too believe that Ireland, post ESM introduction, will be a ‘ward’ of the ECB/EU – as I have posted here previously.

My regards to your pal Lorenzo.

@Michael Hennigan
What can I say? I hear that the new strain of EColi actually originated in the ham sandwich of an overpaid underworked Irish Public Sector worker. You see the root of all evil after all…..

@BEB
This may be a dumb question but is there any division in the bond market between those who believe that the revenue they obtain from lending money should come from economic growth and those who believe that it should come from increased taxes? What I’m trying to say is – is anybody in that industry getting worried that with an underperforming global economy the chances of making bonafide returns on investments are deminishing to the extent that the whole industry itself could be in real trouble in a year or two? Is it in the bond market’s own interests to free up a bit of economic growth by allowing haircuts?

@ Jesper

i’ll start in reverse order:

1. Irish bankers “adding a couple of percentage points” being crappy banking: What would you call German bankers adding a couple of BASIS POINTS and lending to Irish banks, the brilliance of the harder working core?

2. Ireland doesn’t expect to close the deficit by “taking gifts” from the core. What we probably want is a bit of EU assistance in getting there, via lending at a sustainable rate of interest while we restructure the economy and banking system. We’re trying pretty hard, believe it or not, and we’re hoping to get under the 3% ceiling by 2015, but the ESM may scupper this attempt on account of its now generally accepted idiocy in threatening to bail-in private bondholders in 2013. However, the EU is unable or unwilling to rectify this, as it would, of course, constitute a “moral hazard”, which obviously is not the case in making the brilliant core bankers mentioned above whole.

3. “Ireland does not want to borrow to finance the deficit.
Ireland does not want to close the deficit by increasing taxes nor by cutting spending.”

Confusing. Is the first line a sarcastic one? Is the second one devoid of any knowledge of the Irish budgets of the last 3 years? If you put the word “enough” in there it might make sense, but seeing as you didn’t, it doesn’t.

4. “converging periphery? Surely you jest? Borrowing money, not paying it back and claiming that is development?”

I said thats what the EU should want in the longer term. You seem to disagree that this can ever happen? This leaves one of the following as a conclusion:

– you didn’t read properly what i said
– you don’t think the EU should be about any sort of convergence of economies, as you rule it out happening in the future.

The second suggested conclusion would imply that you perceive an incredibly different EU than what the rest of the EU has been led to believe. What’s the point of the periphery in that situation then, in your opinion? They should be some poor serfs who’ll buy the core goods and services but never attain any relative increase in their standard of living? Is the core granted this eternal higher stature for any particular reason? Are they just genetically or culturally harder working?

shame on you irish times when is someone going to tell us the truth, everybody including Leo seems to know whats going on. The worrying fact is that Leo is the only one in the current administration who knows what is going on. Or may he didn’t hedge like the rest of us.

@Eoin,

thanks.

1. So default. That will allow the core to take over enough equity in the core banks to be in position to fire some incompetents. Might be good if Ireland would replace some more of the bankers in banks that are currently in Irish government control.

2. Generally accepted idiocy? Accepted as idiocy by whom? Bailing in bondholders might happen sooner than 2012 and after 2013 it has to be a clear possibility if euro-bonds are to be avoided. Euro-bonds are a crappy idea that will only benefit countries who prefer not to implement structural reforms -> Reforms wouldn’t happen.

3. You might not have made the argument that a debt problem can’t be solved by adding more debt but it has been a common one. So for the people who made that argument, the deficit can be dealt with in two ways: Borrow to fund it (borrow means pay it back later), or close the deficit by cutting spending and raising taxes.

4. Why do you imply that the periphery can never develop but has to be sustained by subsidies and periods of lending followed by defaults? Sounds like you have some very negative opinions of the people living in the periphery. Are your opinions based on genetics or culture?

ECB and EU actions through out the Euro crisis is looking to me like they are trying to create a Federal Europe through scare tactics with Ireland ,Greece ,Portugal soon to be Spain they can have Belgium ,Italy and France on the run in which they will run in to their arms to ensure the masses look to what ever will give salvation from this crisis that will bring a sense of normality and a structured secure future for ordinary people

just look a Greece at this moment and how they are being bullied in to the fire sale of state assets and the Austerity messures that they are forced to make in oder access the latest tranch of bail out loans which is continuing n to weaken of their independant financial decision making processes in order to keep their masters at the EU they may end up a puppet state of the EU institutions,

looking one year down the line Ireland in maybe one years time

the fight more than likley will be squeezed out of our new goverment after the readjustments in what really needs to happen to bring down the deficit spending of all public sector wages will be cut by 20% to 30% plus a cap on all pensions social welfare cuts of up 25% increase in all aspects of taxes income tax,property tax,water tax,VAT,Capital Gains Tax,and finally when we are at our weakest Corperation tax will be raised in to line with other Euro Zone countries by order of our EU masters as a trade off that we can get a organised restructuring of our state debt unfortunely we will given up our growth prospects and decision making powers

@DOCM

He also quoted Jean Monnet correctly in a manner which was hardly accidental and which contrasts with a bowledirsed version advanced by Merkel in a speech in Bruges some time ago – no doubt intended to echo the speech made some considerable time earlier at the same venue by Margaret Thatcher – which simply revealed that she shared with Thatcher a total lack of knowledge of the history of the European Community and of how it came into existence.

The EU came into existence thanks to the biggest “bailout” of them all – the decisive Anglo-American intervention in WWII that ended Nazi plans for a unified Europe, and the subsequent reconstruction of Western Europe with the Marshall Plan and other initiatives. This provided the political and economic environment from which EU institutions could be formed and prosper. Perhaps EU integrationists didn’t like the history lesson delivered to them by Thatcher 20 years ago. Given that overt or latent hostility to Anglo-American institutions, culture and market economies is a pretty common feature of the “neo-Monnet” views held by LBS and Trichet, it must be uncomfortable for them to have attention focused on this period.

Now institutions that diminish the probability that the Germans will march, or try to march, their armies into Paris every 40 years or so are a great thing. A non-stop drive towards ever greater European political and economic integration, with each step a further dilution of national sovereignty is quite another.

The founders of the Euro knew exactly what they were doing – the solution to the inevitable economic problems met along the way all involve further political integration, so the strategic objective is being achieved. The details don’t really matter that much. Monnet himself said “The fusion of economic functions would compel nations to fuse their sovereignty into that of a single European State”. We can try to slow it down and roll it back, but that is the true strategic battle that Ireland is in right now. Ireland sleepwalked into Monnet’s masterplan, and has now awoken to find the nightmare is real.

@ Bryan G

I would agree that the introduction of the euro was ill thought out and that the motivation of Kohl in promoting its introduction was in a direct line of the thinking of Monnet. The idea that it was a quid pro quo for agreeing to German reunification is just a popular myth. Dan O’Brien’s description of the euro as akin to a lobster pot – easy to get into but impossible to emerge from – is a good one.

What I am getting at, however, is the lack of knowledge of the present generation of European leaders of the importance of the institutions of the EU and, indeed, their disdain for them. Nothing could illustrate this better than the position adopted by Sarkozy – and acquiesced in by Merkel – with regard to Ireland’s corporation tax. This is an example of intergovernmental arm-twisting which is totally out of place and an approach which, if continued, will lead to the collapse of the EU. The same holds true of the approach with regard to Greece which is set simply in the Thatcherite context of “we want our money back” and divorced from its political and institutional context. Merkel’s recent speech in Singapore was just more of the same.

Trichet makes a direct reference in his speech to those in the audience – her finance minister included – who have an awareness of the dangers of this approach. In this respect, he could hardly have been clearer.

QUOTE Husserl [speaking in 1935] concluded his lecture in a visionary way: “Europe’s existential crisis can end in only one of two ways: in its demise (…) lapsing into a hatred of the spirit and into barbarism ; or in its rebirth from the spirit of philosophy, through a heroism of reason (…)”.

I think that [eventually] a confederation of sovereign states of a new type, with new institutions to manage the interdependence of today and tomorrow, would be fully in line with such a heroism of reason. UNQUOTE.

As to the philosophical and literary references, this is what drove Thatcher mad but what did she offer as an alternative?

@ Toxic avenger

I agree. Trichet is simply trying to hand the solvency baby back to whom it belongs but a worse set of parents could hardly be imagined.

You guys!! Ireland and her young….What about Europe. Over the past century no continent has systematically slaughtered more of her young than Europe. Wow – we do get into self blame very quickly here.
Being peripheral to Europe it’s easy to turn our sense of powerlesness onto ourselves.
Have a look at this
http://www.independent.ie/national-news/half-of-all-income-tax-now-going-on-loan-interest-payments-2665130.html
is this even remotely sustainable?
The time has come to do this. The truth is that there will be no second bailout because when this one fails we default (maybe we shouldn’t wait until then).
New govt, new mandate and time to tell Europe we don’t need EU anymore!

Recall 3 years ago this month when the airwaves were full of laments about ‘democratic deficits’ and EU elites making decisions without regard to public opinion?

Some have got what they wished for; some years before when the flawed design of the EMU was tested and there were appeals from the European Commission and the ECB for Irish fiscal policy to be tightened, support for the FF/PD government jumped 10 ponts when the EU ‘interferers’ were told where to get off.

Months later, when the OECD said Ireland’s social partnership needed to evolve towards setting general principles and guiding pay determination rather than committing the Government to delivering specific tax cuts, the then incoming ICTU president, Joe O’Toole, criticised “academic bean counters” and said they speak from Paris “with an air of authority that is utterly undeserved,” when different governments and groups were queuing up to find out how we earned our economic success — a sign of the hubris that was common in the bubble years.

President Stipe Mesic of aspiring member Croatia said after the June 2008 rejection of the Lisbon Treaty in a referendum: “Now that they have used the accession and structural funds, when they have developed enormously, I’m a little surprised that the solidarity is at an end.”

The solidaity waned when we thought we had found the philosopher’s stone to transmute a housing bubble to a permanent free lunch.

@ Paul Hunt

All very true. But when I consider how best to respond, I tend to use the example of the nails and cord art assemblages that used to be popular in the sixties. Imagine a map of Europe with a nail for each capital and try tying a cord between them all: the result is a cat’s cradle of inter-governmental wheeling and dealing. Now try it with a spoke and wagon-wheel construction with the institutions of the EU at the centre!

One commentator described years ago the essence of the “democratic deficit” as the inability of national parliaments to control what the ministers in their governments agreed to in Brussels. There is a tension between taking decisions at a European level by a system of qualified majority voting – i.e. a country may be voted down – and parliamentary control which can only be resolved in one way: total and open consultation between parliaments and their governments, not the former trying to replace the latter. We have innumerable examples of the failure to accept the first and an increasing tendency towards the latter, Germany being the prime example but being followed in recent weeks by Finland.

@Eoin,

with that kind of argument, how can you ever buy any debt at any time? There is always risk in all investments.

Giving the periphery cheap money has been tried. It failed. Time to try a different approach.

The EU is helping convergence by facilitating trade. Bad institutions and bad governments are holding some back. Fix the institutions, fix the governance and then growth will happen.

Excesses of the past? Ireland has progressed but is still wasting money and there is more to be done. The pressure the creditors can apply are:
-withholding funds -> incurring a default
-changing the interest rate.

Based on the current progress it seems that the pressure should be maintained.

http://www.dilbert.com/2011-06-03/

@ Jesper

“Giving the periphery cheap money has been tried. It failed. Time to try a different approach.”

So what, giving the periphery expensive money is the solution? Seriously?

No one has argued that there shouldn’t be overhaul of governance and waste. No one is arguing that taxes shouldn’t rise or that spending shouldn’t fall. But there’s limits to how fast that adjustment can occur without destroying the economy (and remember, i’m more in favour of a faster adjustment than most), and increasing the burden on the exchequer certainly wont help with that adjustment. Either will forcing Irish taxpayers to pay all the debts of all the banks, regardless of their insolvent state. Funding both of those via a loan that has a 100% margin in it seems like a plan that is doomed to failure from the start.

But, as noted above, you scoffed at the notion of the periphery converging economically with the core, and you reckon that the periphery serves no purpose in the EU other than to take cheap money and subsidies off the core. It seems fairly clear you had your mind made up well before you got involved in this debate.

As mentioned above, helpful long term solutions sometimes require expending some political capital. The Treaty of Versailles vs the Marshall Plan would be a case in point.

@Mr. Bond,

I agree that ‘expending some politcial capital’ is required, but Pres. Sarkozy and Chancellor Merkel have very little left and their stock is running down rapidly. Various confections of right-wing, populist, nationalisatic, xenophobic factions are either supporting a minority centre-right government from the backbenches (the Netherlands), or poised to do so (Finland), or are likely to do so at the next time of asking (Austria), or are part of government (Denmark), or have deprived an out-going centre-right government of a majority (Sweden). Belgium is still without a government, France remains a law unto itself with support for the NF solid and increasing and Italy, well, is Italy.

Not a lot of political capital there to support the expenditure of treasure on what many voters in these countries perceive as feckless peripherals. This is the key sticking point and Ireland must do all it can to shed the now undeserved ‘feckless’ tag and convince voters in these countries that we deserve some relief.

@ Jesper

This link will save you a lot of work.

http://www.sweden.se/upload/promotion_forum/Brand_Sweden/Bevis/Internationell_ranking_axplock.doc

Re: Peripherals/Core

I wonder if Ireland ever left the EU would Dublin, Cork, Belfast and Galway become “peripheral” economies with Clara becoming part of “the core”?

Enjoy the long weekend!

@ Grumpy

“US non-farms today unambiguously what is known in the market as “crap”.”

Maybe there was too much snow? Wasn’t that the excuse in January ?
An awful lot of the new jobs seem to be in healthcare as well which is not a great sign .

@DOCM,

thanks. The document might need some updating though:

Due to cost-cutting in Sweden there has been a decrease in the number of ambulances sent out in Sweden which has led to several deaths and unneccesary complications for others in need of emergency medical assistance. Luckily the saved money is instead due to be sent to Ireland so that Ireland could continue to pay the highest wages in western europe for their medical consultants. Sweden, the country that gives until it hurts and then some

@ Bryan G

I happened upon the attached contribution in reply to Martin Wolf’s most recent column.

“Scott Peters | June 3 2:00pm

Martin,

I am a scientist and I have casually studied the “science” of economics all of my life only to finally realize it is really quite straight forward. Here it is. Due to being based on fiat currency and the fractional reserve banking system the economy has unlimited money supply. If we open the spigot we can temporarily goose the system, but if we keep the spigot open too long more money than goods will cause inflation. At that point there is nothing to do except tighten the spigot and wait. Buried from public view is that fact that where and at whom you point the spigot at when you open it leads to all kinds of distortions and theft from those that are left “dry”. That’s the whole ball of wax. If you really want to throttle back the highs and the lows (which is indeed highly desirable) you simply go back on a hard money standard, but politicians view this as anathema because it means they can no longer lie and cheat to buy votes. If it weren’t for the fact that this miss handled science can lead to poverty, war and destruction, that would fully sum up the dismal science.

Your government is doing the right thing. If the UK stays the course it will emerge from the malaise before other broke debtor nations. Unfortunately many work day and night to make sure that doesn’t happen. ”

The author is obviously American but we will not hold that against him. He puts the problem in a nutshell. It is not that the ECB is wrong – it is absolutely right in my opinion – but that being right is no help to those left “[high and] dry” in Ireland. But they should be directing their anger at those of their countrymen who are doing very nicley, thank you, and some who have benefited enormously from the direction in which the spigot happened to be aimed.

Nevr mind! We still have Riverdance!

@ Joseph Ryan

I find it difficult to take Professor Sinn seriously. He seems to suffer what appears to be a widespread syndrome in the academic community and which I would summarise as the “eureka” moment. These do not exist in economics.

Of course, I may be missing something. For the moment, however, I am happy with the explanation of the Bundesbank which essentially boils down to saying that, if the system breaks down, the bill will be presented to the central banks (i.e. their governments) collectively. This should guarantee that it will not.

As a Belgian living in Germany, I can tell you the following.

Professor Sinn is clearly pushing for an end to all bailouts and an exit of Greece out of the Euro.

@ Bryan G
‘In effect Ireland is on a gold standard, and on one which it cannot easily leave unlike countries on the real gold standard 100 years ago. The spigot could be used in theory but those in charge of it are not going to turn it on’

and @ DOCM

‘ It is not that the ECB is wrong – it is absolutely right in my opinion – but that being right is no help to those left “[high and] dry” in Ireland.

+1

If we agree to treat our employment-lite FDI sector as the enclave that it is, then perhaps the bind for the ‘domestic’ economy is something like this:

‘The assymetry in the gold standard system under which countries in surplus can shift the burden of adjustment to countries in deficit, forcing them to deflate, was the last thing needed in 1928-9’

Golden Fetters: The Gold Standard and the Great Depression (Eichengreen 1995 p 15).

@DOCM

Both the US and EU authorities were formulating their response on the fly, outside the normal rules of operation of their respective institutions. The US response was far more pragmatic and realistic that of the EU, where a much more fundamentalist/purist approach reigned. There was a systems failure in both jurisdictions, but rather than taking a systems approach to fixing the problem, you appear to view the ECB element of the system as immutable and inviolate, and require only other elements of the system to compensate as necessary as a result. This greatly reduces the range and feasibility of policy instruments that can be applied to solving the problem. The losers are taxpayers in general, and taxpayers in the peripheral countries in particular. The winners are those who happened to be the beneficiaries of what turned out to be a broken system, notably creditors, whose investments all turned out to be risk free.

A “heads I win tails you lose” form of market economy is more suited to a Mafia-style protection racket rather than the modern day global economy. The payment a week ago of €200m of Irish taxpayer money on an unsecured unguaranteed Anglo bond is just one small example.

Link should be http://www.econ.berkeley.edu/~eichengr/fetters_gold_paper.pdf

@ Bryan G

Thanks 🙂

@ DOCM

“The ECB is an institution, established by treaty, and governed by EU law which cannot act outside its remit (but which has sailed pretty close to the wind in deciding to buy the distressed bonds of some of the peripheral countries).”

This characterisation is patently false as the ECB has repeatedly broken its own rules since the beginning of the crisis by, for example, continuing to supply liquidity to insolvent banks, accepting lower-quality bonds as collateral as well as buying distressed bonds of the peripheral debt. If the ECB stuck to its knitting I wouldn’t have so much of a problem with it (as it would have forced the Irish banking insolvency issue years ago) but it acts on the whim its leaders, breaking rules when it wants and blaming the rules when it wants to keep to them.

@ Jesper

“Due to cost-cutting in Sweden there has been a decrease in the number of ambulances sent out in Sweden which has led to several deaths and unneccesary complications for others in need of emergency medical assistance. Luckily the saved money is instead due to be sent to Ireland so that Ireland could continue to pay the highest wages in western europe for their medical consultants.”

So your new line is “Overpaid Irish doctors killing hard working Swedes”? Brilliant. We’ve hit a new low point fellas.

@Eoin,

as no money has been handed over from Sweden to Ireland yet that would be an impossibility, with some luck there will be no transfer.

My intent was to compare the Irish austerity with what is happening in Sweden. I’m not impressed with what is claimed to be austerity in Ireland. Maybe the next budget will be about austerity.

Or as mentioned before when it is undeliverable – for what ever reason.

@JTO

Congratulation’s on the investment and potential new career in banking (:

@BEB

AS mentioned previously, country could do with some more concise reporting as earlier to direct questions – well done.

@ Edward v2.0

An opinion strongly held by you does not a fact make. Perhaps you might outline the elements where you think the ECB is acting outside its mandate, quoting the relevant texts, and get back to me!

@DOCM,

I agree with Edward v2.0’s statement:

This characterisation is patently false as the ECB has repeatedly broken its own rules since the beginning of the crisis by, for example, continuing to supply liquidity to insolvent banks, accepting lower-quality bonds as collateral as well as buying distressed bonds of the peripheral debt.

The ECB has clearly taken actions beyond its remit as defined in TFEU Article 127 (i.e. monetary policy; foreign-exchange operations & reserves; payment systems). It is intellectually dishonest to say that policy instruments A and B used outside its remit are OK but policy instruments C and D are not OK because they are outside its remit. The ECB Governing Council ultimately chose which set of policies outside its Treaty-defined remit to pursue.

Also you said:

Taxpayers everywhere will have to continue to pick up the pieces and for a simple reason, it seems to me: no better system – volatile and dangerous as the existing one is – has yet been found. cf.

I have already pointed out in a previous post that federal taxpayers in the USA have not been hit hard as a result of the 2008 financial crash; hence the USA is an existence-proof that given a similar starting point to that in the Eurozone, a different set of policies can produce a far more favourable outcome for taxpayers. The policies adopted in the USA were driven by a different set of principles – notably a greater willingness to see losses imposed up through the capital structure of a bank, a greater willingness to use QE, and a greater unwillingness to impose losses directly on the taxpayer.

I’ll admit that the institutional and legal structure of the EU makes it procedurally more difficult to bend the rules than in the US, but taking the view that the ECB’s actions were the only game in town and that the taxpayer hit suffered in Ireland was inevitable and replicated everywhere are clearly false.

@DOCM

An opinion strongly held by you does not a fact make. Perhaps you might outline the elements where you think the ECB is acting outside its mandate, quoting the relevant texts, and get back to me!

If you are not persuaded by Edward v2.0’s words, perhaps you can be persuaded by those of Jurgen Stark:

However, this does not mean that monetary policy is liable to be subordinated to financial stability concerns. The ECB is well aware of the possibility of monetary policy being ‘contaminated’ by financial stability considerations. Monetary policy – even in crises and, I would say, particularly in crises – is about lending temporarily to solvent institutions. Lending to institutions which have long-lasting, structural funding and equity problems is the responsibility of the fiscal authority.

The limits to what monetary policy could and should credibly do are both conceptual and practical: monetary authorities cannot be expected to solve issues which lie well outside their official remit.

I think we all got over the “Irish banks only have a liquidity problem” line about 2.5 years ago.

@ DOCM
I would have put up the relevant links to ECB charters etc earlier but I’m on my holidays so limited to a phone. Luckily, I remember LBS himself was recently recounting how a Greek default would make their banks insolvent and thus, under ECB rules, would not be able to borrow from it. So I’ll add to Bryan G’s comments with mouthpiece in chief of the ECB – if you google ‘ECB’s Bini Smaghi warns against default repercussions’ there’s a reuters article from May 30th which says ”ECB rules that ban it from lending to insolvent banks would also mean it had to shut Greece’s banks out of its lending operations, Bini Smaghi said”

QED

With all due respects to my opponents in this discussion, you are going around in circles.

To quote Stark:

“Monetary policy – even in crises and, I would say, particularly in crises – is about lending temporarily to solvent institutions. Lending to institutions which have long-lasting, structural funding and equity problems is the responsibility of the fiscal authority”.

That responsibility has been accepted, as far as the ECB is concerned, in the case of Ireland. It has not happened in the case of Greece and Bini Smaghi, also quoted, spells out the consequences.

The relevant primary treaty text is Article 127.5 “The ESCB shall contribute to the smooth conduct of policies PURSUED BY THE COMPETENT AUTHORITIES relating to the prudential supervision of credit institutions and the stability of the financial system”.

This text covers a multitude, the definition of the “stability of the financial system” being open to wide interpretation including the definition of “lending temporarily”. It also makes the division of responsibility clear.

Having regard to the steps taken with regard to the Irish banks – they easily meet capital requirements – their solvency is hardly in question. What is in question is the solvency of the “fiscal authority” and the performance of the new government has done nothing to reassure markets in this respect. And the assumption that EVERYBODY KNOWS that Ireland must have a second bailout may have credence in Ireland in general, and on this blog in particular, but has absolutely none with our creditors.

@ Kevin Donoghue

I have seldom been involved in a discussion where my opponents provide the arguments to support my side of it. At what magical moment did Irish banks move from being insolvent to solvent? I personally did not notice. Nor, for that matter, did the vast bulk of domestic Irish depositors with them.

Our problem lies in Leinster House and the propensity we have as a nation to refuse to face reality by electing representatives who also refuse to face it and, indeed, have made a virtue of the fact in their election campaigns.

@Eoin,

it is not surpising that a low tax high spend country like Ireland is in deficit, however, it is surprising that Ireland with a huge deficit still can afford the luxury of highly paid elected politicians. Waste not, want not. Maybe Ireland is getting value for money, based on current performance I deem that very unlikely.

Sweden is making and will continue to make choices with its money. Ireland is spending money of others so the money it spends will be subject to others opinions 😉
Fix the deficit and then maybe criticism of others leaders and other economies will have some credibility 🙂

You referred to two world wars with millions of dead and untold suffering and connected it to the current economic situation. I think that would be the lowest point so far.

@ Jesper

i didn’t refer to any world wars. I referred to the political solutions that evolved from both. One was a populist and stupid decision, one was a brave and brilliant decision. One laid the groundwork for another world war, one laid the groundwork for 65 years of peace and the eventual EU.

The point is that when a crisis occurs you can either do whats easy or whats difficult (that applies to both creditors and debtors in the current crisis). Paul Hunt thinks that no one is willing, politically, to do the brave thing (and again, he refers to both sides in this), but i tell you what, how about you keep up the cheap jibes about world war dead, the lazy periphery and Swedes dying because of ambulance-cuts-being-used-for-Irish-doctors and we’ll see how far we get….

@ Eureka

many thanks for the kind if naff words! The bond market is truely enourmous. It always has, and probably always will be. Its just that the current crisis had made people realise this. It should be remembered that much of this taxed income eventually comes back to you via a pension income, although that does bring up the whole “who’s got the pensions” argument again…