Patrick Honohan in London Post author By Seamus Coffey Post date May 8, 2012 The Governor of the Central Bank has delivered two speeches today. The Return of the Surprise in Central Banking The Experience of Financial Integration – Ireland, Britain and Europe Categories In Uncategorized 30 Comments on Patrick Honohan in London ← Is Ireland’s Fiscal Adjustment Failing? → A Guest Post By Gavin Barrett 30 replies on “Patrick Honohan in London” Weird stuff , and very wide ranging. Is he looking for a centralised European treasury to give even larger letters of comfort or what ? What is a banking federation without a treasury ? Do they aim to bypass politics entirely by seizing control of fiat ? Whats the point when you have such compliant ministers ? do they fear a Napoleon amongest the political ranks ? Bigger Banks to hyper inflate even more credit and a more distant stern Treasury to Guarantee & impose tax on its citizen serfs…. Wonderful. Money and bank credit needs to be separated somehow — these guys just won’t stop. The just want to keep building bigger & bigger bombs. 19th century free banks with the coin of the realm A Bloody Nightmare. Nothing weird at all. Very cogent, clear and relevant. Both speeches are well worth reading in full… they are short – just a few minutes needed. Should even be accessible to dorks if just concentrate a bit! “These, I submit, are the three key lessons we need to keep in mind. Timing is everything When it comes to such surprises, timing can be everything – better not be late. …So here is my lesson no. 2: surprise announcements can have long-run effects. …Lesson no. 3: central-banking-by-surprise makes candid communication extremely difficult. The crisis has brought back centre stage the role of dramatic announcements with far-reaching effects. It is important to get the timing right: too late and a lot of damage can be done; too soon and the side-effects may be worse than the hoped-for effect (if the source of the problem has been exaggerated or misdiagnosed).” I wonder how that radio interview announcing Ireland was negotiating a ‘bailout’, which the Finance Minister was attempting to avoid agreeing to, rate according to the above criteria? What exactly did that FT article say that hadn’t been said before? @ grumpy That quote is just pure loony tunes. Get PR Guy on the job. This look like his area of expertise. Gave me a bit of a chuckle. Prof H must be reading some sort of a DIY Spin manual, or perhaps was at a ‘comms’ course recently. Some of his other statements are really troublsome. “Thus, it’s not just the implicit political protection that a plausible rogue may seek and secure: any national regulator worth their salt should be able to stand against that. But in periods of collective national myopia such as that which generated the property bubble in Ireland, the chance of getting somebody whose judgement is not affected is greater, the more distant their base.” “Morality is dead! – and thank God for that!” Let somebody, anybody, take virtual responsibility for making my adult decisions. This is psychological displacement on steroids. And this: “They know better now, and so do the governments. Next time around will (to this extent) be different: this particular lesson has been learnt.” Words fail me. If I need a lecture about how to regulate banks I shall ask Prof Bill Black and Dr Michael Hudson. At least they appear to have some moral fibre. @The Dork of Cork “A Bloody Nightmare” +1 @Grumpy “Timing is everything” The guy has clearly been reading too much Miyamoto Musashi http://www.miyamotomusashi.com/gorin.htm “I am a warrior of Harima province, Shinmen Musashi No Kami Fujiwara No Genshin, age sixty years. …. All the five books are chiefly concerned with timing” @Brian Woods Snr I think that quote (“the chance of getting somebody whose judgement is not affected is greater, the more distant their base”) may be linked to Elderfield? I vaguely recall when the Prof. was installed, the talk used to be about “seeing the green shoots of recovery” and telling us “we have turned a corner.” Perhaps it’s time to bring in some fresh thinking? In 1999 David McWilliams told Professor Honohan and all the other Irish Professors, live on the late late show, that there was a massive property bubble in Ireland and when it bursts hundreds of thousands of Irish households will be in negative equity. The rest is history. p.s. does anyone know how I (as an individual investor) can put some money into Burma? “After all, international financial integration is as much a product of technology as of liberalising financial policy and, as such, is with us, whether we like it or not. Exchange rate regimes, financial flows and provision of 2 financial services are its chief vehicles. Mostly we can like it, but it can and has run amok, so needs well designed and policed regulation.” Solution, according to Honahan, is to centralise European Banking in some form of a regulatory banking system. Under ECB we’ve had LTRO with a huge percentile of the money used not to get credit moving in the economy, but instead get spent on rubbish sovereign bonds and the rest used as chips in the global banking casino. We know a large amount of it was spent on buying US T bonds with banks trying to protect themselves by speculating outside the euro. At least in the present system, the electorate have some control of their banking systems and can put pressure to bear to have banks serve the commercial needs of business rather than speculate in financial services and investment banking. In the US there is pressure mounting to break up large banks. I presume a banking union would lead to further consolidation if the funding of European banks was controlled by the ECB/EFSF. Germany the biggest funder of EFSF may not be too happy at having to bail out Irish pillars. Smaller independent public banks serving the needs of shops on Grafton Street punished by upward only rent review decision making by toxic banks, are needed. A banking union at european level would push banking further beyond the law operating under the undemocratic, dictats and edicts of regulations similar to those underpinning the ESM. It would be a further setback for democracy and another step on the road for european socialism for the banks. Its a surprise to have Honahan advocate a system for the euro similar to the failed rouble system. Its good Honahan is writing about surprises. One surprise for him could be the breakup of the euro. The solution is not to ‘try better’ the mistakes of the past, but to try solutions that might succeed. We thought we already had a banking ‘Union’ in the ECB, apparently not. Lets try strengthening the ECB and regulation in order to police loose lending practices in the global casino floating loose exchange controls, deregulated financial products and rogue financial engineering? Err No. After the mess made by the euro operators and designers, I would look elsewhere and not reward them with opportunity to create a bigger mess. Lets instead abandon the euro and pursue stability in having our debt restructured using many precedents for this. Lets consider instead a banking union with UK and sterling that would grow commerce between NI, ROI and UK as we pursue new regulatory reforms that could be the focus for a new Bretton Woods that will be able to provide for the coming needs of a post euro collapse and provide real regulation for a global banking system that has been allowed to run amok under deregulation and a floating currency regime that is jigged 🙂 Honahan himself might consider surprising us with his resignation due to the unconscionable and odious bailout deal that has failed Ireland. @PR Guy Yep, send it to me, cash only for tax reasons, and I’ll see you right. Now, now PR: Musashi? Timing right; but that guy was wielding a pair of swords (or a least a stout bamboo) and he meant ‘business’. Like Machiavelli, Musashi has been hijacked by Gurus, Buddhas, and other low-life consultant types (your honorable self excepted) for commercial gain. Truth is a funny thing. It cannot be refuted. Lies on the other hand … … spawned a whole industry. Fresh Thinking. Now that would not be the name for a new fangled brand of snake-serum juice? Naw! @hoganmahew Will you knock of the VAT if it’s cash only? The Irish have an undue deference for Professors I think. Don’t get me wrong I respect them but their specialty is teaching and research. It does not mean that they have better judgement or more valuable insights than others. In fact they can often be real world naive. The govt keep wheeling them out to add gravitas to stupidity. It’s a pity. @Brian Woods Snr Been reading him most of my adult life. Had to buy a second copy as the first one fell apart. I’m sure he could teach economists a thing or two. And you’re right, he did once use a bamboo stick in one of his fights. He thought the other guy was such a tosser he just smacked him once in the head instead of killing him with the normal sword(s). I used to fence in my younger days – I was deadly after reading Musashi. Anyway… back to the thread…. my observation is that people don’t generally like surprises in a work/economic/financial sense (other than maybe winning the lotto or something). @ John Corc McWilliams also recommended we guarantee all the banking debts. How’s that worked out for us? BEB He got the 95 mark question right. We’re now dealing with the wreckage for ignoring him in 1999. @Ciaran Oh Ciaran you are not another guy who believes in the power of wizards ? Although the man gained full Temporal power on the morning of that RTE interview and thus became the De Facto Taoiseach. The man is somehow unimpressed with CBs loading up with goverment paper…… again another man who believes the token of the realm should pay interest as if it was a God given right of the priests and not a convenient monetary invention. I would like to see how the CBs little sisters credit investments fare if Fiat treasury paper flooded the gaff. The banking waste would be exposed to full view by all – their turkeys would become Dodos as the banking leverage was drained from the system. Is nobody shocked that these guys have become political ? Ask yourself why is that ? Because they are seizing control of the printing press itself – a exchequers function. (Although they always had control in Ireland it seems) Somebody somewhere better dig up Henry 1rst and stick him on the throne or something. http://www.youtube.com/watch?v=p9uIcs2ck6Q The smell must surely be gone by now. @ John Corc he got the 95 mark question right? How many marks was the guarantee question worth, 60bn or so? Further, McWilliams called the housing bubble 8 years before it burst. Im no sure that makes him in any meaningful way “accurate” or useful. What do they say about economists, they’ve predicted 5 of the last 2 recessions? Bingo on the second copy! My first was a beautifully illustrated edition – some visitor nicked it! He did kill that opponent – who was only 16! Musashi was not someone you took lightly: fatal mistake. Now as for that fencing bit: Scaramouch ring a ding? 🙂 @Eoin Are you not being a bit unfair to DMCW there? I thought his plan was to announce a guarantee and either a) stick to the time limit and use the delay to actually do something about resolution, or b) more likely given the dynamism of the MOF, announce it was all a joke at some future date. Either way, JC it was a spectacularly duff idea. Deposits maybe, NEW bond issues maybe, but guaranteeing everything and then planning to tell the markets you didn’t mean it, er no. In 1999, there was going to be a much bigger bubble because of euro entry. @ Grumpy i actually am being a touch unfair on him, but the simple point is this – DMcW says an awful lot of stuff, and loves to highlight and repeat the stuff he got right (or rather highlight it and repeat it until it goes wrong, ala the guarantee), whilst forgetting the stuff he got wrong. He called the housing bubble, but calling it in 1999 is a completely useless achievment. John has nevertheless posted that line around 20 times on this site in eulogy to it. I don’t like the Gov’s analysis of letting Lehmans fail. Not that his analysis of subsequent events is flawed, but he doesn’t explore what may have happened if Lehmans had been saved. It may be the case that alternative actions may have produced slightly better results (or possibly worse outcomes). The underlying problem was that a huge number of existing loans were unlikely to be repaid and at some point this had to correct. Pointing to one event (albeit the one that actually occurred) and its negative effects creates an impression that a different action (saving Lehmans) would have produced a panacea. What I’d argue is that you’d need to do a bit of “what-if” scenarios. E.g. US subprime or Irish commercial/residential debts would go bad at some point and somebody was going to get stuck with these losses. It may be the case that saving Lehmans may have reduced ‘peak’ panic but not have stopped the credit crunch. @ Ahura http://www.caseyresearch.com/articles/emperor-naked-david-stockman @Ahura Mazda “but he doesn’t explore what may have happened if Lehmans had been saved” But the problem is that if they had saved Lehmans, you’d have had half the financial institutions in the west sticking their hands out wanting money… …oh, wait. @Brian Woods Snr Is that Scaramouche as in young lawyer in French revolution or as in Italian farce? Thunder bolts and lightning very very frightening me. It would be interesting to hear the Prof’s views on raw power and decision making when there are no choices. @ PR Guy: Young lawyer masquerading as clown! I know some clowns masquerading as lawyers !! @PR Guy I’ll guarantee 10% return for three years… 😀 CARTOON OF THE DAY – THE GROWTH PACT Euro Stretching 11 May 2012 Trouw Amsterdam http://www.presseurop.eu/en/content/cartoon/1968481-stretching Comments are closed.