Categories Banking Crisis Fiscal Policy Gerlach Speech at ZinsFORUM, Frankfurt Post author By Karl Whelan Post date December 9, 2011 9 Comments on Gerlach Speech at ZinsFORUM, Frankfurt Here‘s an interesting speech titled “Ireland’s Road Out of the Crisis” by Central Bank Deputy Governor, Stefan Gerlach. Related ← Fiscal Rules: Stocks, Flows and All That → The euro and the EU 9 replies on “Gerlach Speech at ZinsFORUM, Frankfurt” I don’t believe this meme that everything started to go wrong post 2000. Our leverage took off post 87 , went stratospheric post Maastricht and went to Trans lunar injection post euro introduction. The problem with the pre 1987 world was that our banks were lending money on the wrong endeavours. Imagine if Bank of Ireland was fully functional today ? The EIB could come in , set up , half finance a infrastructure project with BoI taking up the slack. But we had very very conservative banks even when operational – I agree its good to have conservative leverage but even back in 87 it was all dead concrete dreams that depended on outside multinationals for core revenue / wealth production , outside tourists , outside structual funds. Our banks are not interested in creating domestic core wealth – they are just add ons that finance consumption , ah sure Europe will do this project for us and Europe will provide this structual fiscal fund for us…………… Ah sure whats the problem ? Houston we have a cultural problem. This is a cautious speech but a few points: 1. Mr Gerlach fails to mention the 8% devaluation in the early 1990s as a factor in the economic success of the mid to late 1990s. 2. There is no mention at all of the social strains caused by austerity but perhaps central bankers don’t do social very well. 3. The concluding thoughts are refreshingly honest coming from the ICB: One could be somewhat more confident about the outlook if the external backdrop was more favourable. What Ireland is trying to achieve is difficult. Policy implementation has been strong and important progress has been made, but much will depend on how the international situation evolves, and the outlook there continues to be increasingly uncertain. Ireland is doing well in terms of its own adjustment programme, we will find out in time is that enough. But they do not fill one with confidence that the outcome will be favourable. @ Dork The good Stefan Gerlach has part of the story, which is probably true as far as it goes. You are right to point to the bigger picture. We are only the extras. http://www.newyorkfed.org/research/staff_reports/sr458.pdf There has always been a problem in this little ex-colony. Our domestic banks were never willing to fund native enterprise, unless it was of the alcohol/tobacco monopoly variety. They preferred to tie capital up in property or leave in on deposit in the City of London. As for all those external injections you mention, the patient is still looking a bit pale. @ paul quigley Dear God paul, a swift glance shows that’s one hell of a paper. You wouldn’t care to put a bit of context on it, would you? Also – what would you like to see the Irish bank system funding? @Paul Wow – thats some spicy soup they are force feeding us with . I would like to find this warehouse thingy where they store these strange ingredients and BURN IT TO THE GROUND. Why can’t they say this paper is null & void ? oh I forgot sorry about that sir , 3 bags full sir. en.wikipedia.org/wiki/Three_Bags_Full. Dork :This extreme privatised money is mad laugh is it not Mr Peel ? Mr Peel : Yes it was predictable , they just redirected their business away from the legislation and when they made enough money they bought the legislators and changed the law. Dork : Great Fun. Mr Peel : Ha I am dead and so therefore have no skin in this game so therefore I find it Funny but why do you ? Dork : I am sick. Mr Peel : Yes ……….. but who is this bloke ? http://www.youtube.com/watch?v=FQAPGhLNV1M Dork : I don’t know – he just keeps saying that he is from Barcelona. Arriba Dork Huerta de Soto has that Latin style. Lots of feints and dribbles, but he always knows where the goal is. @ Gavin There is nothing for it but to take Steve Keen’s advice. A few cups of strong coffee will get you through that paper in an hour or two. It’s the best short summary of the shadow banking system I have seen, because it shows exactly how the dud assets were engineered into respectable fare for the buy side. Pure Faustian Alchemy. The Gnomes have been at it again. Can someone kindly print us out a few copies of those wall charts as Christmas presents ? @ Gavin ‘Also – what would you like to see the Irish bank system funding?’ How about a bit of guerilla theatre for starters ? 🙂 @ paul quigley Am 20 pages in and it’s not as daunting read as I thought – but Christmas shopping beckons. Here’s a little bit of uplifting Northside guerilla joy from my friends at theperformancecorporation. Synthesis: In, albeit time_warped 2002, control here, for the mo; forces outside our control worrysome. See you in 1999. Comments are closed.