The Greek Crisis and European Political Contagion Post author By Philip Lane Post date May 15, 2012 The third article in the FT series is here. Categories In Uncategorized 117 Comments on The Greek Crisis and European Political Contagion ← Aghion on Hollande → Oireachtas Report on TSCG 117 replies on “The Greek Crisis and European Political Contagion” A very perceptive article. As Germany prepares to steamroll Greece out of the Europe, European history is casting a long shadow on the steamroller. We’re all facing a lost decade… http://www.bloomberg.com/news/2012-05-15/yields-show-u-s-is-facing-lost-decade-krugman-says.html Interesting article. If the Greeks stay in the euro and secure better conditions for a 3rd time. It would bring our meek approach to ‘negotiation’ sharply in to light. Several representaives of investment corps and a couple from the banks today said that a Greek exit would cost Germany 80 billion plus, and France 60 billion plus. I’m not sure if this is via their private banks or not, and if it assumes the govt.s intervening on the losses. Either way, Merkel/Hollande are both retracting from yesterday’s general position on the exit; ‘Greece must stay and be assisted…’, etc. Personally, I’d like to see the whole project voided, but even supporters must be really wringing their hands over Kenny’s bend-over-and-take-one-for-the-euro bargaining tactics, seeing the leverage Greece can still use. Though they might just be hanging on to them as ballast until they feel they can get away with adopting a more punitive stance. Then again as I’m sure Morgan Kelly would point out our deficit doesn’t lend itself to well to such brinkmanship. @ All As a counterpoint to this article, an item from the same paper based on real data and sound analysis. It shows the poor performance of the UK economy relative to the Euro Area. http://www.ft.com/intl/cms/s/0/0dd43b94-9eb8-11e1-9cc8-00144feabdc0.html#axzz1uXdTsPel Prime Time just pondered the round-two prospects of ‘the far-right Syriza party, which came second in the last election…’ Cormac Lucey, on the same show, believes that exit from the eurozone will be beneficial for Greece. In the event of ‘contagion’, and if the currency deteriorates, is there a credible scenario that can be projected that would show the point when Irish membership of it is is less preferable than a new national currency (less of a gap between devalued currencies, etc) ? Syriza is “far left”, bordering at plain crazy, I would say “Raising tensions still further, Germany warned Greek voters that the wrong result in next month’s election will force their country out of the single currency. ” http://www.telegraph.co.uk/news/worldnews/europe/greece/9268507/Greece-on-brink-of-collapse.html No comment. @ Mark Cormac probably just lost the Irish banks a few million. @ Mark “Cormac Lucey, on the same show, believes that exit from the eurozone will be beneficial for Greece” I’d like to see the numbers. A certain portion of Greece’s debt is now subject to English law- if it leaves the EZ won’t the debt just follow it ? Seafoid, In theory yes but such a contract would be difficult to enforce. What would Germany do, sieze Athens? The periphery would almost certainly grow post default but also post a double digit Currency depreciation plus of course the inevitable fiscal cotraction. In short living standards go down deeply before rising. If the Greeks vote the “wrong way ” they are out of the euro as of course are we. No point in staying. Bring it on. What was the point of switching the contracts to English law, tull? Court actions against Greece for years ,the same as Argentina, just to make sure it would never leave. Argentina is still cut off from the bond markets. Greece will probably have no choice but the last bailout was booby trapped. tullmcadoo, why should Germany do anything about Greece defaulting ? Those countries, like Argentina, punish themselves. As as our american friends have demonstrated again and again, occupying other countries is not a profitable business : – ) If you wanna buy some islands, go to http://www.vladi-private-islands.de gosh this might be interpreted as a commercial I think you are correct now they beat up 78 year old dutch guy: http://www.welt.de/politik/ausland/article106315000/Griechen-brechen-Hollaender-die-Nase.html I see their tourism sector booming after that Once out of the euro, the drachma will depreciate by ? [I saw 50 drachma to 1 euro somewhere…FT I think]. Ok, plenty of export upside. However, GDP /economic performance will also rebase far lower, say 50% for example (who knows really, although there are some precedents). Assuming the economy rebounds after 2-3 years and averages 6-8% growth thereafter, clearly it will still take them years (almost a decade) to get back to where they are economically (even now). The narrow focus of the likes of Schauble on [forcing] Greek’s exit also forgets /ignores the likely negative contagion impact on Portugal, Spain, Italy, etc….and Ireland too. The idea that Greece is an exception /isolated entity is a farce….highly dangerous. This threatening of Greece will come back to haunt Germany…..and Europe. JF “If the Greeks stay in the euro and secure better conditions for a 3rd time. It would bring our meek approach to ‘negotiation’ sharply in to light.” I think an overall point being missed is that, where a debtor is objectively insolvent (Greece, others….and this is factual, where debtor-blame has become financially /economically irrelevant), there needs to be an orderly default /restructuring (write-down) of debt….That’s what happens in most commercial [civilised] default situations, under any modern capitalistic model. Schauble & co’s attitude (throw Greece and any other defaulter under the bus) is from the dark ages and is not a model that should be endorsed by anyone. It (at very least) lacks moral authority….It is simply the ‘law of the jungle’ [bully]. “Killing” one’s neighbour for money. If that succeeds as the Euro model going forward, then I agree the Euro should be dismantled. Every death, suicide, etc. in Greece and elsewhere is on the system’s head….particularly those who are “I’m ok Jack”….Schauble & co’s current approach is simply not ok. History will show that, clearly. @ Genauer “Syriza is “far left”, bordering at plain crazy, I would say”. You appear to be on the other end of the spectrum, equally “plain crazy”, I would say. It is absolutely wrong for a 78 year old Dutch guy to be harmed. The level of human-harm being directly and indirectly imposed on the debtor nations is also wrong. It is not a question of “an eye for an eye”. Wrong is wrong. No justification. If you look at real figures rather then GDP metrics which paints the untouchables that reside in the monetary stratosphere rather then the domestic taxables I don’t really see much difference between the Greek and Irish economy to be honest and by some measures the Greek economy was better then the Irish economy at least in 2010. Dublin airport had a 10.1 % drop in passengers back then (the worst in Europe) Athens dropped by 5.2% Ireland experienced a 12.1 % drop in passenger numbers while Greece experienced a small drop by comparsion, a 2.3% decrease. There was a slight increase of 1.7% of passengers into Dublin in 2011 and Athens experienced a drop of 6.3% in 2011 – its all swings and roundabouts with merely different time variables Lets look at more recent no bullshit oil consumption. omrpublic.iea.org/demand/gr_tp_ov.pdf omrpublic.iea.org/demand/ir_tp_ov.pdf You don’t get those sort of declines from efficiency gains with Dublin Bus drivers being more careful with the fuel economy thingy. These are collapse figures. ….and by not accepting normal creditor /debtor insolvency resolution , supporters of the status quo are participating in and are being directly responsible for (with Germany and the other creditors) the dangerous escalation of the present Euro situation (and that includes Official Ireland….). It will come back to haunt Germany and Europe as I say…..and Ireland….The lack of moral courage (and sense) is palpable! @ Dork Phenomenal charts. Point very well made /demonstrated. Thanks. @ Paul W http://www.ekathimerini.com/4dcgi/_w_articles_wsite3_1_03/05/2012_440466 http://www.ekathimerini.com/4dcgi/_w_articles_wsite3_3_14/05/2012_442091 Being yes men of Europe has got Ireland nowhere [Ireland’s] economic policy seems to be saying Yes to everything that Chancellor Angela Merkel demands. Not a good idea. Indeed, it is so supine to EU demands you could jokingly ask if the Irish Government has been taken hostage by the troika and is now suffering from Stockholm Syndrome. Being the good little yes men of Europe has got Ireland nowhere. Greece played hardball and got 50 per cent of its debt written off. The Irish Government, on the other hand, did what the ECB demanded, nationalised private bank debt and increased the debt-to-GDP ratio by 40 per cent, a huge €70 billion.’ http://www.irishtimes.com/newspaper/opinion/2012/0516/1224316194527.html iIn the spirit of cosmopolitanism in political discouse – What’s the difference between €170 billion and €100 billion? €70 billion in odious private financial system debt that has been unconscionably loaded onto the shoulders of the Irish Citizenry. Vote NO. @The Dork Checking the Vaults Germans Fret about Their Foreign Gold Reserves Germany has gold reserves of just under 3,400 tons, the second-largest reserves in the world after the United States. Much of that is in the safekeeping of central banks outside Germany, especially in the US Federal Reserve in New York. One would think that with such a valuable stash, worth around €133 billion ($170 billion), the German government would want to keep a close eye on its whereabouts. But now a bizarre dispute has broken out between different German institutions over how closely the reserves should be checked. http://www.spiegel.de/international/germany/debate-breaks-out-in-germany-over-foreign-gold-reserves-a-833289.html No correlation intended 😆 @Paul W Whats really crazy about the euro experiment is that neither shovel ready projects or hi tech projects will solve its crisis. When I hear about the construction lobby gearing up to manufacture more concrete waste I want to cry. Capital projects are essentially useless as they don’t get used in this crazy monetary envoirment !! Consider this. The Madrid / Barcelona air route has increased its passengers according to Eurostat by 4.8% !! This after they built a friggen high speed line of optimal distance with Zaragoza in between ! If the Spanish had the peseta they would not be able to afford the Kerosene for those 3 Million internal inter city air passengers. The Euro is some sort of money export device to the Sheiks – a alien would think it was a Arabian conspiracy. The Euro has in fact created a global energy crisis via it monetary polices & creation of the BRICs. / OPEC oil users. Saudi Arabia for example as experienced a 3% YoY oil demand increase to 2.6 MBD as many people in Europe cannot afford a bus ticket while others can afford to jump on a plane for a domestic flight. Its a completely insane unworkable monetary system that has created GLOBAL chaos. The entire array of input / output equations are defective withen its web of debt. It seems to work systems to the limit via false economy labour arbitrage mechanisms until you get a collapse of systems such as the 42 % decline of domestic air traffic in Y2010 that we got.(it was not all about those new motorways) @ genauer So what are you saying… Extremism is becoming /now the norm (and acceptable). The extremism being witnessed on the left (traditionally the “have nots”) is matched by that on the right (nowadays the privileged, protected, “I’m alright Jack”…”bullies”…including the unions in Ireland). The middle ground is being lost. Those who support the status quo (including most of the Esteemed Economists who blog on this site….) are now mainstream supporters of the right (or rather far-right….whether they like that or not). Incredible to see Labour in Ireland going in this direction (I have never been a supporter /voter). My point remains: those who deny normal creditor /debtor insolvency resolution and are supporting the status quo are part of the Euro ‘machine’ that is killing people in Europe today; who are supporting the escalation of social divergence and radicalism; who are denying the normal workings of capitalism; all it appears (despite all the micro-argument) because “I’m alright Jack”. It seems the Euros purpose is the suck domestic demand out of the economy until you get a seismic collapse of society. It keeps its victim alive simply by telling the population they are working more effiecently as they are increasing output for lower wages….. But where does this excess output end up ? Credit waste me thinks. EJECT EJECT EJECT. @ Paul W all I did, was correcting Marks impression that Syriza would be “far right” and adding that they are known in Greece for being “extremist and intolerant” This is enough for you to insult me and making all kinds of assumptions about what I or my nation wants to do. You are very fast at calling people, who do not agree with you, “far right” @ Paul W “Greece once out of the euro…plenty of export upside” Greece has very little to export (other than tourism and shipping), it is a generally internal economy. This is why some people question just how much positive impact the devaluation will have given the increased energy costs it will create. The debt overhang would be the primary reason to exit the Euro, but this can’t just be brushed off either, sovereigns can still be taken to court to chase their debts. @Paul W re “My point remains: those who deny normal creditor /debtor insolvency resolution and are supporting the status quo are part of the Euro ‘machine’ that is killing people in Europe today; who are supporting the escalation of social divergence and radicalism; who are denying the normal workings of capitalism; all it appears (despite all the micro-argument) because “I’m alright Jack”. +1 @Seafoid/Tull “In theory yes but such a contract would be difficult to enforce. What would Germany do, sieze Athens?” Hardly, but they were well in control of Athens the year Schauble was born. Maybe the creditors could start demanding human collateral when everything else is gone. Below is the link to Amartya Sen’s keynote speech at the Berlin’s INET’s Paradigm Lost conference. Well worth listening to; http://ineteconomics.org/conference/berlin/amartya-sen-keynote-address-inets-paradigm-lost The Irish view; @ John Corc im not sure how voting No in the fiscal compact will help the cause for getting rid of upward only rent reviews? Perhaps you are hoping we need a second bailout and via this the Troika demand the ripping up of many domestic contracts to make the economy competitive again, like they have done in Greece? Note, this also meant that everyone’s employment contract was ripped up and people were forced to negotiate a new one with their employer, thereby being forced to accept a new minimum wage around 30% less than the previous one (which was already tiny). The min wage for over-25s is now €530. A month, ie €25 quid a day. @David O’Donnell “One would think that with such a valuable stash, worth around €133 billion ($170 billion), the German government would want to keep a close eye on its whereabouts” This is not the first time over the years I have heard doubts expressed about whether gold reserves held overseas – particularly in USA and London – are actually there and whether the holder(s) knows that it isn’t but there is a big pretence going on that all is tickety boo otherwise confidence in the world banking system would totally collapse. But if that were the case, who is then physically holding it? The aliens that are supposedly actually running the world? Elvis? The Rosthchilds (though they could be the same aliens according to some US conspiracy websites)? Anyway, back to more mundane on-thread matters: CAN ANYONE TELL ME…. what would actually happen to the Euros held in personal bank accounts by your average Mr and Mrs Spiriadolous in the event of Greece suddenly leaving the Euro? I presume there would be a ‘bank holiday’ announced then Mr and Mrs Spiriadolous would wake up on the Monday morning to find their €1,000 was now worth 50,000 Drachmas and all Greeks would be told to take their Euros to the bank to swap them for new Drachmas (yeah, like that’s going to happen)…. …..but what happens to the digital Euros that were held in their bank account? Do they just ‘disappear’ or is the Greek government effectively swapping them for new Drachmas and they get to keep all the Euros? I presume in this instance, all Greek banks accounts would be hit (e.g. businesses whether Greek or foreign, institutions, charities, foreign governments?) or would some be immune (e.g. local bank account of a foreign consul)? I have asked around but seem to be getting different answers from different people. There must be some laws/rules/precedents somewhere? No free lunch for Greece or Ireland then unless perhaps you are a bank like IBRC where a free lunch costs ¢30 bn paid for by taxpayers. No? Lets give a free lunch to all banks and banking institutions? Ooops, we already did that? In fact, this is not fair to other banks across the EU, lets guarantee ESM lunches for them all, paid for by taxpayers? No messing around now with ‘so-called’ democratic governments and messy ELA/PN’s and taxpayers and governments ‘cribbin and whinin’ on and on about ‘fairness’, lets give free LTRO free lunches directly to all banks. I listened to discussion with German Green PArty spokesperson this morning. Germany is doing very well, at the moment. Capital is flowing very well from all the loan taps and pipes. Taxes are up. The Greens are thinking of closer political union for Europe and something like the Federal Deposit Insurance Corporation for Europe. Keep the faith now, don’t be thinking the euro is a bit like bust Ireland only that it has Ireland, Spain, Greece, Portugal and possibly Italy sized busts to insure. You are allowed to dream, arn’t you? For the moment, but I’m sure a tax/charge is being considered on dreams 🙂 The German Greens can dream of a European version of the USA with a European styled FDIC. Imperialist dreams are fine, arn’t they? Well, not if you lived in the wayback 1933 where if you wanted to be rich, you grabbed everything by being part of the Reich 🙂 Meanwhile Germany continues to suck the marrow from the bone of Ireland preaching its moral philosophy that there is no such thing as a free lunch? Taxpayers paying the free lunches enjoyed by Irish banks No different 🙂 You couldn’t make it up. http://searchfinancialsecurity.techtarget.com/definition/Federal-Deposit-Insurance-Corporation-FDIC @The Dork of Cork “EJECT EJECT EJECT” Some people are running onto the pitch…. they think it’s all over (Wembley 1966). Sounds like you are waiting for the: “It is now!” It’ll be interesting to see how things pan out. The Greek people are going to be (are) subject to a barrage of PR to tell them to vote ‘the right way’ this time. Between now and the voting, anything could happen I guess. There are certainly a lot of headless chickens out there today. I know. I was just talking to one. I’m concerned this crisis is going to cut into my Heineken cup final trip 🙁 Here’s some political contagion for you! Who is this guy? http://www.irishtimes.com/newspaper/opinion/2012/0516/1224316194527.html @BEB: “Greece has very little to export (other than tourism and shipping), it is a generally internal economy.” You got something against tourism and shipping? ISTM they generate revenue just as well as beef or whatever. Of course Greece is a “generally internal economy” if you somehow convince yourself that the external sector doesn’t count, but you could apply that kind of reasoning anywhere. On the up side – at least i’ll be able to afford a holiday – if they don’t burn the place down in the meantime I think ill hit the mainland Just checking… Whitsunday holidays in Greece are the first weekend in June. Make sure your money’s out by then lads and lasses! @BEB Below is the link to the great debate; RTÉ.ie Radio 1: Morning Ireland Media Player http://www.rte.ie @ PR Guy Re “I have heard doubts expressed about whether gold reserves held overseas – particularly in USA and London – are actually there..” True, much controversy about this part of it being Gordon Brown liquidated English stocks and they’re gone. Its a highly volatile market but gold is not fiat. Countries such as Argentina have recently being demanding repatriation of gold stocks held abroad. Some speculate banks may be driving down the price of gold as they sell into the market with gold looking for precious liquidity to shore up bank recapitalisation and loan losses under new stress test requirements. The commodities markets are infected by market speculators. Some commodities are small enough they can be bought up in their entirety with a future contract that allows the purchaser to conduct the sale without a penny up front. If the market is cornered in this way, the price is bound to rise; the market is then flooded with a big sale and the difference pocketed, simple scam. Loose regulation in recent years could lead to famine in certain parts of the world where future speculation has infected food prices. Future speculation means no commodity has to change hands. When the date for transfer of the commodity occurs, the buyer can make a future purchase contract and again pocket the difference. The financial services industry built on such scams needs to be brought under control. The paper markets of financial speculation have had a free lunch under Greenspan and the expansion of paper based derivatives. These markets need to be investigated, taxed and tightly regulated under rules of full accountability and transparency in Open Trading environments where all transactions can be scrutinised. Some financial paper instruments should be banned totally eg OTC derivatives. Hedging is one thing, to protect the buyer against market fluctuations, open speculation and manipulation of market pricing, is another. Off topic, welcome to Ireland fellow “No’ campaigners. Look forward to reading your pamphlet exposing the Vichy sell out of Ireland by our lame duck negotiators representing the banks, not the people 🙂 BEB Finally the link to the great debate; http://www.rte.ie/news/morningireland/player.html?20120514%2C3285548%2C3285548%2Cflash%2C257 @PR A few years ago I thought the only mechanism to give the Euro a solid money base was freegold at 10,000 + or something. Now I am much more sceptical of the gold merchants , besides the population at large would need to hold much of the stuff so that you could get a rational transmission. Whats killed the Euro is a lack of a large money base , so you need a very highly leveraged credit system to give “growth” that is then very vulnerable to shocks. I mean even I am sceptical of the Spanish high speed rail thingy , the sheer scale of the programme was something…. http://www.youtube.com/watch?v=p-UyspAwDPs But it seems to have been developed to inject “growth” into the system rather then serve real actual human stuff , a bit like our Motorway programme. The Spanish don’t do elegance like the French – its in your face like. But the Spanish now don’t have much tokens and the Northern Europeans are in their caves so… Ireland and Iberia have been torn down and stripped for a idea about money that may have failed. I mean who wants to go on holiday to a contruction site ? , or worse construction sites that are abandoned !! The Euro & EMU has been a sort of monetary tornado. CounterPoint: Greek crisis The euro exit is a bluff 15 May 2012 La Stampa Turin The voters’ verdict is already in across several countries and regions: the cure based strictly on austerity within the eurozone has failed. What needs to be done now is to take that reality on board and to start negotiations that promise to be trying and that may lead to awkward compromises. Greece, though, must be ready for anything. And it must distinguish between the reality and the threats and blackmail that are flying about at the moment. http://www.presseurop.eu/en/content/article/1989641-euro-exit-bluff …. and we know a good bit obout bluffing around here on the Fiscal Corset … plague of locusts spotted over Castlebar …. @The Greeks In solidarity. That said, your upper_echelon tax gougers do need to be taken on; the present adjustment is unconscionably regressive. @ Kevin D Greece’s export sector as a % of its economy is the lowest of the EZ, at around 20%. That was kinda my point. Of any country exiting the EZ, it will benefit the least from a devaluation on that score. @The Dork of Cork “or worse construction sites that are abandoned” A good ananlogy for both Spain and Ireland. p.s. I do wish people would stop saying today is a good day for releasing bad news. That is so yesterday. @cb Couldn’t agree with you more about the scam that is gold. It is mind boggling that an educated and advanced society not only see the value in investing in pretty worthless commodity, notwithstanding genuine (but niche) demand at Indianweddings, but actually regard it as a flight to safety! Gold came very close to dying after it actually went down from a low base around the tech bubble crash in 2000….but the sector did a hell of a job reinventing that craps table since then! @ PR Guy, tks for that link. Believe me that guy is not messing 🙂 I’ve made a similar point MORTEN MESSERSCHMIDT “I would argue that Irish fiscal sovereignty regarding the corporate tax issue will be put under severe pressure if the fiscal union treaty is passed. The European Parliament voted overwhelming for a compulsory common consolidated corporate tax base (CCCTB) across the EU. The Thyssen report, passed last month by 452 votes to 172, proposes an EU corporate tax base, setting out rules for where and how much corporations pay the tax they owe. Germany and France (which dominate the EU) in February already announced that they will soon have a harmonised common consolidated corporate tax base. So this issue is very much on the EU agenda. New French president François Hollande is also in favour of the common corporate tax base, and as a good socialist, he even wants to raise the corporate tax rate in France.” It appears bailouts are having a two pronged approach. On the one hand, as in Hungary http://www.immonet.at/hungary-bailout.htm bailouts combine growth dampening budget deficit reductions and full bailout of the financial sector; on the other, FTT and Corporation Tax increases. As MESSERSCHMIDT points out, we’ve failed to get a debt writedown of 50% given to Greece, we’re likely to be walking into a tax tap put onto the Irish financial services sector in the form of raised CT; FTT is on the way. Our Y boys are back from Europe with a few vague notional promise of some future investment projects. They should just hand over the keys and be done with it! @ VB here’s the thing though – what should you invest in as a true safe haven anymore if not gold? @ Colm Brazel Morten Messerschmidt has a history of neo-nazi and islamophobic tendencies, including a spell behind bars for a racially motivated offence. Probably best if you dont look to him for inspiration, and im surprised at the Irish Times for publishing him. What next, Golden Dawn in the Indo? @ V Barrett For all its failings in historical terms its a far better store of value than most stuff especially fiat money. If obstacles to do with inflexibility could be overcome, it could return to being a reserve currency. Gold reserves are held in significant quantities by many nations as a means of defending their currency. It brought a lot of stability before floating exchange rates and deregulation in the 1970’s. It could form a basis to return the world to fixed exchange rates to avoid even bigger speculative scams involving fiat money burning out of control. Keynes in 1942 proposed a supra national currency, the Bancor backed by barter and expressed in weight of gold, the Chinese are interested and discussion has revived on this: http://en.wikipedia.org/wiki/Bancor @V Barreet As long as the ECB holds Gold on their balance sheet and revalue it each quarter it does have importance. However If The Euro disappears, Gold will crash and Bunds will not be a safe haven , all value will flow to the $ in my Dorkish opinion. In the end there can only be one……. reserve asset. What actually makes a reserve asset is how useless it is (if it had a utility it would not be a very good reserve asset) but this however makes it useful in other areas – in Particular its ability to soak up the flow from malinvested debt stocks. The desperate attempts for “growth” have nothing got to do with the well being of people , the bankers merely want to keep their leverage profits wether they be $ or gold bugs. Whatever happens money of some sort needs to be put back into peoples pockets. Giving then credit to increase demand and subsequently trying to make rational investments in the physical world is impossible and worse then pointless as it is clearly a massive waste of scarce resourses. Katie Taylor qualifies for London Olympics http://www.irishtimes.com/sports/other/2012/0516/1224316203570.html I’m a massive fan. Her semifinal final round in the last world championships the best and most intelligent piece of amateur boxing I’ve witnessed. Naturally, Katie is a distant relative of Blind Biddy, and with Patricia the Irish_Sovereign_in_Exile, one of her most devoted fans. @The Greeks Methinks you might also be due a few bob on the ‘Olympics’ copyright. I’m sure Cicero took care of the particulars – should be worth a half a trillion at least … and had you defaulted within the EZ a few years ago this could all have been sorted by now … just a thought! @ Bond Tks for the tip re Messerschmidt. I despise ‘neo-nazi and islamophobic tendencies’. However, civilised debate involves playing the ball, not the man. I gave consideration to the points raised in the IT article, without knowing anything about him. Those points he raises, irrespective of his unhappily disturbed background, stand on their own, especially those three paragraphs I quote above. @BeB The only safe haven is ‘intellect’. Irish chicken being brought somewhere to roost for some reason 🙂 http://bit.ly/LagYHp The Bloomberg Ireland Economic Summit In a black hole near you somewhere in Dublin!!! Anyone got a link to an agenda and speakers? Who is setting the agenda? In whose interests? http://www.irishtimes.com/newspaper/breaking/2012/0516/breaking11.html @PR Guy, this question: “CAN ANYONE TELL ME…. what would actually happen to the Euros held in personal bank accounts by your average Mr and Mrs Spiriadolous in the event of Greece suddenly leaving the Euro? ” If deposits are NOT converted in Greece then it might be argued that deposits will not be forcibly converted to other currencies in any eurozone country. That event should comfort people in other program/problem countries and hopefully stop bankruns there. If deposits ARE converted then people will know that their savings CAN be converted against their will and as a result people might think twice about keeping money on deposit in banks in problem countries and this could (would?) create bankruns. Anyone up for a cost/benefit analysis of creating a precedent of forced conversion of deposits? My guess is that everything that can be done to avoid forced currency conversion of deposits is being done. Kicking off the Summit will be a special address by the Taoiseach (Prime Minister) of Ireland Enda Kenny followed by an update on the Irish economy by Finance Minister Michael Noonan. Other speakers will include: — Alan Ahearne, Member of the Commission (Board), Central Bank of Ireland — Lucinda Creighton, T.D., Minister of State for European Affairs, Republic of Ireland — Alan Dukes, Chairman, Irish Bank Resolution Corporation Limited (IBRC) — Kathleen Gaffney, Vice President and Portfolio Manager, Fixed income Group, Loomis Sayles & Company LP — Colm McCarthy, Lecturer, University College Dublin — David McWilliams, Economist, Journalist, Broadcaster, Author — Michael Noonan, Minister of Finance, Department of Finance, Ireland — John Studzinski, Senior Managing Director and Global Head of Blackstone Advisory Partners LP, The Blackstone Group — Michael Torpey, Head of Shareholding Management Unit — Banking Division Department of Finance, Ireland Read more: http://www.irishcentral.com/news/Bloomberg-hosts-first-Irish-Economic-Summit—to-explore-turbulent-times-of-Irelands-economy-and-the-future-151508245.html#ixzz1v1mGBHCD Hmmmm balance? balance? hmmmmmm I sense another Lucinda deconstruction of the banalities coming on – should be more interesting than Noonan’s ‘leap in the dark’ but considering that we are already in a black hole not of our making for €70-€100 billion and leap seems to be in the dark for the non-represented lumpen citizen-serfs at the bloomber summit [link available from above …. and who is this McWilliams guy? @Bond Eoin Bond “what should you invest in as a true safe haven anymore if not gold?” I honestly wish I had an answer to that question. But I don’t. Perhaps there aren’t any? Maybe vegetable seeds and a hunting bow are the ultimate assets to hold? “im surprised at the Irish Times for publishing him. What next, Golden Dawn in the Indo?” Can’t say I agree with people like those either but Voltaire springs to mind (“Monsieur l’abbé, je déteste ce que vous écrivez, mais je donnerai ma vie pour que vous puissiez continuer à écrire” – at least I think that was Voltaire). The right to free speech and all that guff. @BEB CB I don’t think having nothing else to invest in is a good enough reason to invest in gold (don’t laugh but land/property is a far more prudent longterm investment) – gold is no less a fiat construct at this stage than paper printed with images of dead patriots. Periods of stability during golds reign are no different that than periods of stability one can point to under fiat regime….they are purely incidental and based on trust that a pound relative to all the other pounds in the economy is buying just about what it should. In 1999/2000 gold was trading at 200 dollars an oz – its currently around 1600 USD – there is nothing to say it will not again hit 200 – is that the kind of stability we are after. In any event it only performs from a stability perspective as a second layer of illusion – the money washing around in the economy and its value must reflect the underlying value of the economy – if it does not so, the illusion of gold doesn’t make the system anymore stable. @BEB “Morten Messerschmidt has a history of neo-nazi and islamophobic tendencies, including a spell behind bars for a racially motivated offence. Probably best if you dont look to him for inspiration, and im surprised at the Irish Times for publishing him.” I wasn’t aware of this background but i’ll take your word for it….but could it be possible that this is precisely why the IT published him?….we will see if Mr Messerschmidt is discredited along the longs you have outlined above in the coming days whereever this issue is raised….will he ultimately be branded another voice of the loonie left/right advocating a No vote AFTER enought people have read his views? An example of the sort of PR barrage the Greek public are getting at the moment (to try to make sure they vote ‘the right way’ at the next election) – on a local radio station this morning: “…but if we do that [reject the single currency] we will go back decades. All our achievements will be wiped out and it will happen in such a violent way I don’t know if we will be able to continue functioning as a modern democracy” And that’s from an outgoing Finance Minister (Filippos Sachinidis). Responsible approach or what? @PR GUY! Jesper Here is a analysis of what might happen.. http://www.bloomberg.com/news/2012-05-15/europe-must-face-ugly-reality-of-greek-exit-from-euro.html Ugly! Lets try to divorce Fiat (it merely goverment legal tender that is issued and taxed) from bank credit shall we. Fiat itself can be both usurious or it may not (Commercial banks sov money holdings or interest free Talley sticks…greenbacks etc.) Bank credit a different beast entirely. Then there is the concept of a reserve currency which is a internationalist tool used by the banks as a reserve asset. From 1922 onwards the $ gradually replaced Gold as a reserve asset. PS – our food imports priced in Euros are down slightly (Jan – March 2011 /12) from the same period last year. Y2011 :1,308 Y2012 : 1,261 Is this another indicator of a decreased population or is things worse then that ? Oil imports up slightly (Jan -March) It just keeps creeping up on us. Y2011 : 1,360 Y2012 : 1,438 When energy imports are higher then food imports in Ireland it always is a sign of impending collapse in my opinion…… but when oil imports alone are consistently higher then food imports….. All discretionary demand is being squeezed from the system me thinks. @ PR Guy “The right to free speech and all that guff.” Where did i suggest censorship? If he wants to print something himself, than more power to him, but the IT is a privately owned media outlet that can choose who it wants to publish in its pages. It has decided it wants Messerschmidt’s opinion in them today. It has not disclosed that he has a controversial past. If one knew that his socio-political persuasions were of far right nationalism and no further integration within the EU, as well as some interesting opinions on immigrants and Islam, one might think his economic opinions and urging of the Treaty’s rejection were at least somewhat based on or related to that political mindset. Hey – Finally, an Irish Engineer …. http://www.bloomberglink.com/gatherings_participants_bio.php?gathering=134&Id=3914 Hope he got on with all those teachers …. Mickey Noonan calls for referendum in Greece…. http://www.irishtimes.com/newspaper/breaking/2012/0516/breaking11.html @BEB I don’t know…..the IT also publishes articles by former national school teachers on issues ranging from international finance to our impending doom if we leave the Euro – i suspect the reason these wholly unqualified people get this platform is because these people have been democratically elected – like Messerschmidt. Irish trade figures for those with an interest (sorry if it’s off topic but couldn’t find anywhere else suitable to put them): http://www.irishtimes.com/newspaper/breaking/2012/0516/breaking20.html Who’s importing all those ‘transport goods’ Dork? Ryanair? well, via this infamous danske messerschmidt thing in the IT , I read o’tooles http://www.irishtimes.com/newspaper/opinion/2012/0515/1224316128720.html?via=mr as well Maybe this helps with understanding some things: since this “Germany and France violated Maastricht treaty” (first) comes up again and again, please take a look at the German view of this http://www.nakedcapitalism.com/2012/05/bill-black-new-york-times-reporters-embrace-the-berlin-consensus-and-ignore-krugman-and-economics.html#comment-712398 @PR Guy, Maybe Water Cannons to clean the streets (of people saying No to water rates)! @Ceteriparibus, The way I see the question about forced currency conversion after the increasingly likely Greek default: Greek banks would lose money on any Greek government bonds they own. How much do they still have after the latest swap? Would the losses wipe out equity and sub-bonds (if they’ve sold any sub-bonds)? Senior bondholders and the parri passu with depositors…. Greece can (?) afford a deposit insurance payout but not paying out on senior bank bonds? I’ve not yet seen an analysis of how Greek banks are funded and how much loss absorbing capital it has. I’ve not yet seen an estimate of how much a deposit insurance payout would cost in Greece. x number of depositors to get y amount protected equals total cost of? How much assets do the banks have? The author of the Bloomberg article has conflated (rightly or wrongly) a Greek government default with a supposedly unavoidable conversion of deposits. Is it unavoidable? Will the Greek government pass a law that steal the wealth of the people serving in the police and the military (among others) and then they’ll expect to get protection from rioters? @Bond Eoin Bond “It has not disclosed that he has a controversial past….. If one knew that his socio-political persuasions were of far right nationalism and no further integration within the EU, as well as some interesting opinions on immigrants and Islam, one might think his economic opinions and urging of the Treaty’s rejection were at least somewhat based on or related to that political mindset” You make him sound like yer average UK Conservative MP. As I said, I don’t agree with this guy’s views either. So you would agree then that if the IT should be ‘obliged’ to disclose the political views, personal history and agenda of this guy – to help readers draw their own conclusions – then they should do it for all op-ed writers, regardless of where they sit on the political spectrum, and not just single out people that you don’t think the IT should be inviting to contribute? I’m not quite sure where you would find a journalist or editor who could write balanced, accurate and objective pen-pictures of their contributors but hey ho. Perhaps you could give us some guidance here… what for example would you write as the balanced, objective, accurate pen-picture for, say, oh I don’t know, maybe an IT contributor like Brian M. Lucey? @paulr Good one! @ PR/VB sometimes when there’s an op-ed, its easy to have an idea they may have a potential bias (public sector union rep saying how good a job public sector workers are doing, IBEC arguing for lower taxes, opposition saying the government doing a bad job), but with this guy i’d guess 99% of people didn’t know his at least Euro-sceptic background, never mind his other extremist viewpoints. i think if he’s a professional politician, then you should probably say what his basic policies are, even if they want to be nice in their description. If he’s an academic, i think they should note any conflicts of interest (ie if they give paid investment consulting/advice etc) there could potentialy be. If he’s a bank, something standard about potentially dealing in the underlying govt bond etc would make sense. If we had a debate about football discipline, and Joey Barton was on one side of the debate, noting his disciplinary record would be a useful addition to the debate. @PR I don’t know to be honest , all that G.P.A. like stuff is a outcome of paying people below their productivity. Those activities (+ derivatives of course) must reach higher and higher into the stratosphere to get a return. Its a way of stretching out diminishing capital I guess , it works until it breaks – Gold speculation follows this ….. when they break Gold or $ (?) will rise as the fluff created over these past 3 decades must go somewhere. The import data tells you much more about the rump Irish domestic economy in my opinion , with shoe leather down as kids get driven to school even in these austerity times. As I said before all the input / output price signals are completly skewed in this economy , indeed its not a economy , it is merely a conduit of capital. PS – the slight rise in road vehicle imports could be explained by the switch to Diesel rather then petrol cars. @PRGuy, Eoin Surely on this occasion, the appropriate thing to do is request an op-ed for balance from Mr Spitfire? Damnit, Mr. Bond. You’re being far too reasonable and sensible. It’s going to upset a lot of people here. @BEB: “Greece’s export sector as a % of its economy is the lowest of the EZ, at around 20%. That was kinda my point. Of any country exiting the EZ, it will benefit the least from a devaluation on that score.” There’s a humongous amount of argument needed to get from the proposition: [A] exports are 20% of GDP to: [B] devaluation won’t help much. Maybe there’s a model in which [A] implies [B], but I’d hate to have to defend it at an economics seminar. @genaeur My problem is not whether or not Germany violated the Maastricth treaty first in terms of some trivial fiscal “improprietary”….my problem is with all of Europe, lead by Germany violating the Maastrictht treay NOW through the imposition of private creditor bail outs on shoulders of irish taxpayers – the Maastricht treaty is enshrined on a principle of solidarity – this is explicit and implicit throughout the entire treaty – but Ireland have been told, “you alone” must bear the crux of the pain of saving private debt speculators from across the EU. @Eoin Bond Re Greek exports and potential benefits from ccy depreciation, you have not done your homework according to Prof. Krugman. http://krugman.blogs.nytimes.com/2012/05/15/more-on-greek-and-argentine-exports/ Re the Messerschmidt piece: It is hard to argue with his central point – that this treaty is a starting point on the road to fiscal and political union which will undoubtedly lead to a loss of sovereignty and, most likely, a loss of full independence in the setting of our corporate tax rates. It is lamentable that this point had to be raised in the national media by a far-right extremist. However, that doesn’t change the validity of quite a cogent piece. In the long run it is unlikely that we will be allowed to have our cake and eat it. That is, to remain within the Euro, benefit from cheap financing and a wide export market while also achieving some form of prom note restructuring and being allowed to keep our CT rate. In my opinion, if push comes to shove it would be better to prioritise the restructuring of the cost of the bank bailout and our CT rate. Either way, the government should be planning for potentially adverse scenarios, whereas they clearly have their heads in the sand. @ All If Greece does leave the euro, how do you think Official Ireland will react – politically and economic policywise? @ Paul W I think if they leave the euro the rhetoric and reaction will be pretty predictable….”sorry to seem them go – serves as a warning to the Irish why we must stay in etc…” – they will do nothing in terms of economic policy that is not dictated to them. what i would be interested in is if Greece leave and start to show significant signs of economic recovery 12-18 months down the road, how will they deal with that calamity! btw, i’m not suggesting Greece will boom if they leave euro – there is a far more serious underlying economic malaise in Greece than in Ireland but if they were to turn things around quickly it will highlight even more the insanity of our addiction to a monetary union that has not advanced this economy or society one iota. This is interesting http://www.independent.ie/national-news/welcome-to-clones-co-monaghan-where-you-can-pay-in-old-punts-in-bid-to-beat-recession-3110325.html because it gives a mechanism on how dual currency could run post any melt down @ Bazza I didnt quite categorically say “they wont benefit from a devaluation because they dont export”, i said they wont benefit from a devaluation in terms of what they export, which is what everyone seems to claim is the main reason for devaluing in the first place (“lots of export upside” was what i was initially responding to). The CEPS research actually suggested that it was the expensive nature of imports that was the big positive development in Argentina, as they substituted for their own produced goods. And that makes sense. So when Greece figures out how to turn olive oil (which it is actually a net importer of i recently discovered) into power, or else figures out cold fusion, then it’ll be grand im sure. By the way, Argentina produces its own oil. @ eureka thanks for the post…v interesting – power to the plebs! What these exports might be will, by definition, be unpredictable. But the strong incentives that will be created by a super-competitive exchange rate are undeniable. It’s easy to detect that Arvind Subramanian like most economists, hasn’t had much exposure to developing export markets. He doesn’t even mention import content. All that can be said, is that Greece like Ireland has has had a governing class of scroungers grabbing what they can from the corrupt system. It would be lucky to have a real leader of the people not a partisan dishing out patronage. @ Paul W My point remains: those who deny normal creditor /debtor insolvency resolution and are supporting the status quo are part of the Euro ‘machine’ that is killing people in Europe today; who are supporting the escalation of social divergence and radicalism; who are denying the normal workings of capitalism; all it appears (despite all the micro-argument) because “I’m alright Jack”. That all sounds grand but the killing began at home and all this outrage is rather recent. So what prompted your epiphany? On the propaganda scale we’re beginning to hit high notes when the merits of one argument over another are reduced to political affiliation or whether the person proposes the argument is a Jew, neo liberal, Arab, Irish, right or left or walks on four feet instead of two. Rational debate ‘ought’ to be able to separate out features of an argument to examine/analyse merit on the basis of deductive and empirical logic. Not always easy but essential if the world is not to succumb to unreasoned bias, prejudice, racism etc. ITs ironic the Far Right Le Pen movement, for example, are against the FC when the FC itself institutionalises socialism for the banks that runs counter to the tenets of neo liberal thought. ITs ironic that support for the FC comes from a right wing extremist agenda that is anti democratic and anti liberal. But plenty contradictions exist in the current campaign. Speaking of propaganda “description by Richard Alan Nelson: “Propaganda is neutrally defined as a systematic form of purposeful persuasion that attempts to influence the emotions, attitudes, opinions, and actions of specified target audiences for ideological, political or commercial purposes through the controlled transmission of one-sided messages (which may or may not be factual) via mass and direct media channels. A propaganda organization employs propagandists who engage in propagandism—the applied creation and distribution of such forms of persuasion.””http://en.wikipedia.org/wiki/Propaganda We’re swimming in propaganda from the Government and RTE at the moment. Adverts describing the FC as strengthening the need for fiscal discipline that don’t tell the listener their constitution is being weakened by being made subject to unelected bankers above the law in Brussels, should be banned. The FC is not subject to line by line, clause by clause analysis is reduced to that of a further tap that can be switched on for more bailouts and further relaxation of the terms of current bailouts… But I’m all for declaring interests. For your enjoyment, here’s Nigel Farage and Laffin define the essence of Irish nationality, make your own mind up 🙂 Thanks, Nigel, for providing a tiny bit of balance against the Y gobbledegook nonsense that has torpedoed Ireland’s economy with the wonderful bailout, so successful indeed, we want another one and are prepared to hand over the keys to the constitution, to join the queue for it 🙂 http://www.youtube.com/watch?v=Ml-Gy5emF_Y http://www.france24.com/en/20120418-far-right-candidate-rallies-faithful-against-eu-immigration-stupid-marine-le-pen-france @Paul W “If Greece does leave the euro, how do you think Official Ireland will react – politically and economic policywise?” By sticking their heads in the sand? Or sticking their heads somewhere at any rate (though some wags might say there heads are already stuck there). Paul Mason over at the BBC tells me that over €2bn has left Greek bank accounts since the election there but he wouldn’t want to call whether it will tail off or pick up now there’s a new election date. If there really is still €127bn on deposit in Greek banks it doesn’t sound like that big a run. I asked my French colleague to see what could be dug up on how the Holkel talks really went last night but nothing so far. I have to go and take a ‘leap in the dark’ for a couple of hours. All this kerfuffle is causing far too much work. The problem is a lot of the Y camp cannot distinguish between the EMU and the EU. The euro has failed the EU, simple. I’m in favour of the EU but not of the mess the euro has made, or the EMU has made. That video above was 2009 on the Second Lisbon treaty debate, I wonder what Professor Laffin’s views are now? @MH ‘All that can be said, is that Greece like Ireland has has had a governing class of scroungers grabbing what they can from the corrupt system. It would be lucky to have a real leader of the people not a partisan dishing out patronage.’ +1 SF speak ? 😉 @ PR Guy 165bn in the Greek banks fyg, as at end March “Devaluation” in a free floating currency pair world is much more of a complicated thingy then in the past Bretton Woods system. What is the drachma devaluing against ? It would simply be putting fiat money in the hands of the people rather then credit money and seeing how productive they could be. You can’t be very productive if you don’t have any money in your pocket despite what the slave masters keep telling us. This is the meme that unfortunetly the euro system has propagated , paying workers less then their productivity and stating this is somehow more effiecent. Is it ? , not a holistic level me thinks. Where does the surplus end up ? Credit Junk mostly. PS the 20% export number, is this tourism also ? @Eureka They need to print & accept a new script , when that stuff (punts) goes back to the CB it gets destroyed. The script in that depression era Austrian town (I can’t think of the name) was not accepted in the Post office or train station (think of the state) but was accepted withen the town which kept the money supply positive & commerce engaged. Script however is not really fiat as it not accepted for payment of taxes , but maybe for eggs , bread , second hand household stuff and the like. @Jesper Bloomberg were reporting the Greek banks holding 49 b of bonds…that was a few days ago. It looks like they are toast with the ECB pulling out… “ECB cutting back on liquidity for Greek banks, report says The European Central Bank is increasingly refusing requests for liquidity from Greek banks, making them dependent on support from the Greek central bank, Dutch financial daily Het Financieele Dagblad reports Wednesday, citing «sources in Brussels», according to Dow Jones Newswires. At the end of January, Greek banks had received 73 billion euros in liquidity support from the ECB, but this amount has dropped by more than 50% now, according to the newspaper. The ECB is cutting back support because Greece has been holding off on recapitalizing its banking system, despite receiving EUR25 billion in funds for that purpose, the paper says.” You wouldbe a brave soul to hold your money in Greece. @Ceterisparibus “The European Central Bank is increasingly refusing requests for liquidity from Greek banks” I’m not entirely sure what’s going on. No time to investigate. See below. “The European Financial Stability Facility (EFSF) is expected to approve an E18 billion recapitalization disbursement for Greek banks within the next four days, and the banks should get the money within a week, a senior Eurozone official told MNI Wednesda. Earlier today MNI reported that the European Central Bank was growing nervous about delays in the recapitalization program for Greece and was threatening to suspend its lending to Greek banks as a means of expediting the decision. “This has been a point of concern for the last month, and it was debated during Monday’s Eurogroup meeting, where ECB President Mario Draghi and EFSF head Klaus Regling were present,” the official said. “Up until then, the EFSF had sided with the Greek Financial Stability Fund, which was delaying the recapitalization process because it disagreed with certain points of the assessment of Greek banks’ eligibility for the funds,” he explained.” @ BEB You’re right about gold but I think it might be a short term thing. Ok here come a few dumb questions: How do I top up my phone with gold? How do I withdraw gold from an ATM? How do I use gold in a credit card transaction? We expect money to do a lot more now than it did in times past. I don’t think gold fits the bill in the long run @eureka you will hear plenty of those pining for a currency backed by Gold….but you are getting to the heart of the real issue – what is the gold backed by? people for some reason feel comfort in the extra layer of illusion. I think Greece will exit the euro. To all the naysayers, let me try to answer the main points: 1. “Greece will still owe a huge debt in euros”: To those who remember Econ 101, ‘sunk’ costs are not costs, it’s dead money and should not factor into future decisions. 2. “Greece does not have an export economy”: Tourism – There will be millions of Germans spending their euros in Greece if they leave the euro. Good luck getting a hotel room next summer. 3. “Greece will collapse into anarchy with extremists in gov’t”: Do you believe the USA will allow that? Or even the EU? Once Greece leaves the euro, the sheltered portion of the economy will be shrink significantly and the economy will boom. Five years of 6%+ growth will solve a lot of problems. For anyone interested, very interesting piece from Capital Economics – under European Economics Focus, entitled “Can the euro survive the sovereign debt crisis?”, dated May 15th. Apologies that I cannot get an access link though the firewall. However, one can sign up for a free trial to see the article (I have it in PDF form….don’t know if I can attach here?). http://www.capitaleconomics.com/european-economics/european-economics-focus/why-and-how-will-the-euro-zone-break-up.html Super charts. Belated and unnecessary clarification (from me) ‘re- ‘all I did, was correcting Marks impression that Syriza would be “far right” ” – I was quoting the scripted report on primetime, which did call them far-right; an unbelievable error, I thought. re Paul: ”@ All If Greece does leave the euro, how do you think Official Ireland will react – politically and economic policywise?” Michael Noonan will take the piss out of them like he did today with his class-clown feta cheese joke. Given the seriousnes of the question for which he gave that as an answer, I think we all need to be seriously worried about his competence. @ V Barrett If somebody were to offer me 100 dollars or a nugget o gold Id take the dollars every time. Why? Because I can break it up into single bills Because its recognised across the world Because it is produced in a controlled way Because it is used to price oil Because it is backed by the wealth and labour of a rich and stable nation I’m just not sure about this drive for gold @ VB, Eureka Some people think that the $ is as bad as the euro….hence the lure of gold. Approx, 2 years ago, I was at a ‘social’ conference in Stamford CT…..a meeting of local US Irish-related /affiliated business people that have met annually for last circa 20 yrs……A guy with a large manufacturing business in CT stood up and said that he had invested everything in gold approx 1 year before (“most of my net worth”), and was 80% ahead on his investment at that time…In the meantime, he has done at least that again. Entrepreneurs…..different kind of animal…..incredible pity that Ireland’s entrepreneurs have been wiped out financially, and in spirit…..cannot be replaced by your “public servant”, “I’m alright Jack” type. @ Mark “Michael Noonan will take the piss out of them like he did today with his class-clown feta cheese joke. Given the seriousnes of the question for which he gave that as an answer, I think we all need to be seriously worried about his competence.” Completely agree, Michael isn’t competent to be in Finance. He’s a traditional populist, like Kenny and (absolutely) Gilmore….Little substance, and struggling (increasingly failing) to stay in touch with Irish public sentiment. John Moran (new Sec Gen Finance) is a good, intelligent, finance experienced guy. However, recent comment for instance from a very senior private equity fund, work-out investor (“restructurer”) in the US said “He’s powerless to do anything amidst all the politics…Ireland is cripled by politics.” Official Ireland has little credibility in the US PE community given their experience with Ireland in the last few years (NAMA especially – note!, but also e.g. Eircom). US MNC in Ireland is a bit different to PE…..They are gooing over the reduced fixed costs. If Ireland loses its 12.5% CT rate, however, it will be game over…Many MNCs will depart, very quickly…..The FC + pending 2nd bailout will end up with that, as per the IT article today (objectively read) and Official Ireland will “fall in” with Germany /France /ECB rather than rebel, in the usual (Kenny, Gilmore, previously FF) manner, despite ‘words’ indicating differently. Even the Major advisory firms there in Dublin are fearful (under the surface) of this inevitability…actually expectant of that demand from Eurozone….in the not-too-distant-future. Official Ireland’s strategy to-date is whittling away any negotiating leverage Ireland may have /may have had…..Best boy in class will end up “bullied” further in the end….and will lose if the current trajectory is pursued ‘mindlessly’. When the noose tightens further, it’ll be interesting to see how the (Irish) “PIGS” squeal. It will be even more interesting to see whether there is really any Irish National Unity……or is it just “I’m alright Jack” by the few who are pulling the strings and benefitting from the recession. Official Ireland may have an economic strategy currently (albeit ‘misguided’ in my view), but there does not appear to be any material, national social policy or unity backing that up (hence the Q-marks over the FC referendum being passed), willingly believed in and supported by the people of Ireland. In that sense, Irish politics has failed the Irish people thus far. @ Paul W I guess only time will tell. How does that guy realise his 80% – by converting the gold back into real money. I dont fully understand this but i think the gold thing is a bubble. Better off buying copper. @ Eureka “How do I withdraw gold from an ATM?” http://www.guardian.co.uk/money/2011/jul/01/au-atm-gold-vending-machine In fairness, gold is not meant for the day to day spending, but more for the store of wealth. Something else would have to be used for smaller purchases of goods and services. @ BrianH the economy will boom in terms of GDP growth. The standard of living will be below 2008 levels for decades to come due to the import inflation. This probably happens regardless of whether Greece remains within the EZ or not, but fans of devaluation always seem to leave the issue of inflation and standards of living off the table for some reason. As for the “do you think the US/EU will allow that”, i think you underplay how low patience is within the EU with Greece. You could easily see the rise of a soft-dictator like in Hungary out of the ashes. @ BEB Thanks for indulging this. That “something else ” would have to be money. And that would have value in itself. Is money’s intrinsic value really a factor of the demand for the goods and services produced by the society that prints it? If so where does gold come into it? If the swedes had no gold, for example, you’d still want Kronar (think that’s theirs)? @PW your gold investor is no guru – he is lucky, plain and simple. Someone is shorting the market as we speak, someone else is going long – one of them will win – the victor will be called an entrepuener/a guru. If he made the same investment in gold 15 years ago he would have been wiped out. Its a whimsy, a fashion, an illusion. It is no less fiat that fiat itself. as Eureka points out – he is ahead in what – worthless cash? @VB Correct, not a guru…an entrepreneur reacting positively to the times (your 15 yr timeframe is too far beyond the story)….At least he is ahead…..Can’t see the schoolteachers running Ireland taking risks and succeeding….. @ Paul W “Can’t see the schoolteachers running Ireland” – you know Enda Kenny is a schoolteacher – right?! Interesting point. The guy is not a guru – he is a gambler. There is a fundamental difference between investing in assets that people actually need as opposed to those that people think other people will need. One is investment, the other is speculation. Believe me – gold is a bubble. It will be a very big bubble but it is still a bubble. It will burst. And we will end up with the currencies of countries where people produce valuable goods and services. Dollar, Yen, Sterling and Deutshcmark. Comments are closed.