Bad arguments

We’ve gotten used to disingenuous arguments by István Székely regarding the EC/ECB stance on burning bondholders, but (given that the original interest rates they insisted on were a disgrace) this one really takes the biscuit:

Separately, the top European Commission official on the Irish bailout said critics of the decision not to impose losses on senior bank bondholders should recognise the benefit from the interest cut on Ireland’s rescue loans.

István Székely said the cut would yield €12 billion while moves to “burn” Anglo Irish Bank bondholders might have realised €3 billion.

Also, €3 billion?

Karl is right: it is too late to do anything meaningful about this, and the game has moved on. But that doesn’t mean that we should let these guys rewrite history.

25 thoughts on “Bad arguments”

  1. Stephen Collins lacks intellectual originality, and his ploy is always to support the establishment line. However his false dichotomy that it’s either Eat-Mamma-Merkel’s-Sausage or Leave-Eurozone plumbs new depths.

  2. I get the feeling that the details of the Anglo deal are not widely known amongst people who watch the RTE six one news and that next March’s E3.1 bn payment is going to come as a surprise.

  3. Interesting that only the latest bond repayments are considered. One-eyed, but interesting none the same.

  4. The Irish Times should be asked to set the matter straight. The above statement from István Székely is clearly utterly misleading and incorrect.

    The ‘paper of record’ should not have allowed this comment to stand in an article as if it were the unvarnished truth.

  5. Well – there is only one thing to do with bad arguments: challenge them. Could do with a good bit more of it around Europe.

  6. Thank you Kevin.

    It disgusts me to the bone to read such blatant manipulative and false statements, however, it does not astonish me. not a sausage.

    @DoD

    I can see a problem with that approach, because they cluster bomb the public sphere with such disingenuous arguments, they keep you busy challenging them, while there is no time left for the real debate, it is methodical .

  7. I note there is a hint of “bad argument” about the fact that having failed to even attempt to resolve insolvent private banks thereby having private unsecured senior bonds not pay out in full, the popular move is for the government to look for approval to fail to find and pay down the money it “temporarily” created out of thin air in the form of promissory notes.

    So having not bothered to facilitate a private default, it is now to seek permission for a sovereign default or restructuring of Irish sovereign debt so that the pro notes become longer term Irish printing, or maybe even permanent Irish printing.

    Obviously it will not occur to the Germans that the other Pigs might notice this trick.

    Expediency rules OK.

  8. @Georg R Baumann

    It is a well known legal strategy on hammering the serfs – bombarding the lifeworld and the public sphere with cluster bombs of matrixsquidesque propaganda – and yes perhaps to attempt to challenge all of these would be to fall for the ploy, rather than directing resources (of all hues) at regaining some control over the agenda; ….

    Seven_of_9 now back in intergalactic communication with Blind Biddy. Apparently 7_of_Nine gave the ‘presant and near future of the Earthlings’ as a 5% assignment to her high infants group on PXFGTRJ.galaxy, and they came to the conclusion that the era of earthlings would end in 36 months time with a final selves-destructive battle between the Four Hedge Funds still standing after they had consumed all the people and resources of the planet. Hence Blind Biddy’s move to get involved with her own hedge fund so they she can join in the battle on the side of serfs, even if for no other reason than brute satisfaction. Party Time!

    Enjoyed the drumbeat – gave me an idea; more later.

  9. @DOD

    Seven_of_9 now back in intergalactic communication with Blind Biddy….

    I am not used to such deep subtleties of the english language ….I am afraid I am lost in translation….

  10. @Joseph

    “The ‘paper of record’ should not have allowed this comment to stand in an article as if it were the unvarnished truth.”

    Unavoidable given standards in today’s X-factor/social media drivel that passes for journalism – lift the copy, edit a few words and persuade yourself that you’ve just ‘written’ an article – and if you don’t do sixteen of those a day as per the current productivity agreement… “you’re fired” and will be replaced by an intern who has a degree but zero knowledge or experience.

  11. @PR guy@Joseph

    “Unavoidable given standards in today’s X-factor/social media drivel that passes for journalism – lift the copy, edit a few words and persuade yourself that you’ve just ‘written’ an article – and if you don’t do sixteen of those a day as per the current productivity agreement… “you’re fired” and will be replaced by an intern who has a degree but zero knowledge or experience.”

    +1

    To which I might add that all of this makes it increasingly harder and longer for the reader to find the truth behind current affairs.

  12. There are also good arguments going on:
    http://blogs.telegraph.co.uk/finance/ambroseevans-pritchard/100013558/you-are-all-wrong-printing-money-can-halt-europes-crisis/
    “This is a monetary crisis, caused by a jejune central bank that aborted a fragile recovery by raising rates earlier this year, allowed the money supply to collapse at vertiginous rates in southern Europe, and caused a completely unnecessary recession — and a deep one judging by the collapse in the PMI new manufacturing orders in November.

    Needless to say, drastic fiscal austerity is making matters a lot worse. You cannot push two-thirds of the eurozone into synchronized fiscal and monetary contraction without consequences.”

    As I put in some other threads, fiscal contraction without monetary expansion is not going to work. It is expecting states to delever at the same time as the private sector and it is putting pressure on rollover debt.

    Rollover debt is the big problem in Italy and Spain given the size of their existing borrowings. It will also be a problem in Germany, the Netherlands and everywhere else if the crisis is allowed to continue. Eurozone debt revulsion will set in. There will be no safe haven.

    Investors in sovereign debt need to have the confidence that there can be no writedown in value on that debt. They have to have the same confidence that the ECB appears to feel that bank bondholders should have. It is not enough to have a safely funded banking system without having a safely funded sovereign.

    It should be the case that states that are undergoing austerity have lower funding costs than those that are not – given that bond markets are supposed to be future looking. That this is not the case is a measure of the mistrust that bond buyers have for the ECB.

  13. @ hogan

    “Investors in sovereign debt need to have the confidence that there can be no writedown in value on that debt. They have to have the same confidence that the ECB appears to feel that bank bondholders should have.”

    I think this is relevant

    http://monthlyreview.org/2011/11/01/the-political-economy-of-the-egyptian-uprising

    “As David Harvey argues, capital cannot solve its crisis tendencies but merely moves them around. In The Enigma of Capital, Harvey emphasizes that it is important “to recognize this perpetual repositioning of one barrier at the expense of another and so to recognize the multiple ways in which crises can form in different historical and geographical situations.””

    The banking crisis was simply shifted to the sovs. Nothing was solved. The crisis continues .

  14. @seafoid
    “The banking crisis was simply shifted to the sovs. Nothing was solved. The crisis continues .”
    Absolutely. The problem is that states are more important than banks…

  15. Yes – the crisis, now that the sovs have been captured by the tentacles, is shifted to the lifeworlds of the x-citizen_serfs: the only question remaining is how does the Lifeworld fight back with its back to the wall. It has to wrest back democracy from the captured sovs, as a prelude to a full frontal assault on the rogue_ferengi_marixsquidesque toxic and odious interests that have infected such lifeworlds. If not, the final demise of the Earthlings will arrive as the Hedge Funds figth it out at the end of earthling time.

  16. Good Arguments:

    http://www.jfki.fu-berlin.de/faculty/economics/team/persons/schularick/CreditBoomsWP_072711.pdf

    Our ancestors lived in an Age of Money, where credit was closely tied to money, and formal analysis could use the latter as a proxy for the former. Today, we live in a different world, an Age of Credit, where financial innovation and regulatory ease broke that link, setting in train an unprecedented expansion in the role of credit in the macroeconomy. Without an historical perspective, these profound changes are difficult to appreciate, and one task of this paper has been to document this evolution and its ramifications.

  17. @Hogan / Seafoid

    re “The banking crisis was simply shifted to the sovs. Nothing was solved. The crisis continues .”
    “Absolutely. The problem is that states are more important than banks…”

    But an ‘independent’ ECB determined otherwise i.e that the banks had to saved regardless of the cost to States. That is still the position except for some neat French deal re the EFSF, which has failed at lift off.

    Off topic somewhat:

    I was also interested in a memo from the ECB, linked to by Karl Whelan below, where the ECB picked up the tab for a number of banks that went bust and was wondering why it can be ok for the ECB to do so in some cases and not in others. Perhaps it was just a coincidence that the countries concerned were Germany, Netherlands and Luxembourg.

    I was not clear if Karl Whelan was questioning in some way the ECB’s room for manoeuvre in deciding which banks to favour and which banks to dismiss in respect of losses.

    This excerpt was posted by Karl Whelan on a previous thread:
    http://www.irisheconomy.ie/index.php/2011/12/02/time-for-a-deal-on-ela/#comment-202939

    “”The ECB doesn’t do open market operations. All lending to banks go through the NCBs.

    In relation to NCB losses, Article 32.4 of the statute
    http://www.ecb.int/ecb/legal/pdf/en_statute_2.pdf

    says

    “The Governing Council may decide that national central banks shall be indemnified against costs incurred in connection with the
    issue of banknotes or in exceptional circumstances for specific losses arising from monetary policy operations undertaken for the
    ESCB”

    When Lehman’s and others defaulted on NCB loans, they decided to invoke 32.4 to share any losses:
    http://www.ecb.int/press/pr/date/2009/html/pr090305_2.en.html

    And the annual reports of all the Eurosystem NCB’s cite 32.4 as meaning sharing of losses.

    But for ELA, there’s no loss sharing.””

  18. If instead of being flushed down the toilet, each Irish citizen was simply written a cheque in Euros, how much better off might we be?

    (c) Duncan Black, from whom this was shamelessly stolen.

  19. Re

    István Székely said the cut would yield €12 billion while moves to “burn” Anglo Irish Bank bondholders might have realised €3 billion.

    He is arguing for interest rate cuts of €12 billion + €3 billion above, isn’t he 🙂

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