McWilliams on the Fiscal Treaty Post author By Stephen Kinsella Post date May 29, 2012 David McWilliams summarizes his main arguments against the Fiscal Compact in the FT today. Update, and in the interests of balance, thanks to commenter Scorpio, here’s a summary of 44 economists on the Treaty. Categories In Uncategorized 143 Comments on McWilliams on the Fiscal Treaty By Stephen Kinsella Senior Lecturer in Economics at the University of Limerick. View Archive → ← Exporting electricity → John McCartney: “Short and Long-Run Rent Adjustment in the Dublin Office Market” 143 replies on “McWilliams on the Fiscal Treaty” Depressingly correct analysis. Yes will win though as most still compute (incorrectly) that the status quo is the best option. I particularly despair that young people are being scared into maintaining the status quo when they have most to gain from upsetting the applecart. Maybe if they ever get representation in the Dail that might change. Hi Stephen, Have you revealed your voting intentions? Are you advocating a particular side? @actuary I particularly despair that young people are being scared into maintaining the status quo when they have most to gain from upsetting the applecart. The Irish Labour party, who one might expect to offer some resistance to the neoliberal Europe on offer are an old and conservative lot, the youngest of the four senior ministers is 56, their average age is 61. These are people who fear change and with no fight left in them. The Irish Labour Party will of course be left ruined by this, which will greatly amuse their EPP ‘partners’ here and in Europe. Hi Jag, I’ve written a piece for the Seanad on the Fiscal Compact, so I don’t think it’s appropriate to reveal a side, so to speak. I’d just like to give out the information as factually as I can. It has just occurred to me that I’ve posted two ‘no’ type articles recently, but this shouldn’t be taken as evidence I support that position. I’m not advocating a particular side. FC is about tightening the noose of loans around the neck of the Irish economy and making sure the bankers get their money back. This will lead to deeper austerity. Our debt profile will worsen and deepen under the demands of FC. More loans will be required at more punitive rates involving asset grabbing. Its time to leave the euro before the noose is pulled. We won’t be ‘isolationist’ outside the euro, other countries will leave; its highly likely Germany will be among them Other opportunities exist such as closer ‘commonwealth’ links to sterling growing more fruitful and beneficial economic links between UK and Ireland and Ireland and the rest of the world. However, consider the scenario if the Irish economy economy is not meant to be self sustaining, but Debt sustaining. Deep austerity, cuts to public services – school, hospital closures, etc – are made as the weight of debt increases, sustained by declining growth due to the financing of this debt. http://international.ucla.edu/media/files/Przeworski_Vreeland.pdf “Program participation lowers growth rates for as long as countries remain under a program” Argentina was a country that suffered the catastrophe of policies re debt sustainability currently being pursued by our government: “But it gets catastrophically worse for a country that has committed itself — as Argentina did — to a fixed exchange rate. When investors start to believe that the peso is going to fall, they demand ever-higher interest rates. These exorbitant interest rates are crippling to the economy. This is the main reason that Argentina has not been able to recover from its four-year recession. It gets worse, Krugman on Europhoria and Nevada/Ireland comparison http://www.nytimes.com/2011/01/16/magazine/16Europe-t.html?pagewanted=all “What does this have to do with the case for or against the euro? Well, when the single European currency was first proposed, an obvious question was whether it would work as well as the dollar does here in America. And the answer, clearly, was no — for exactly the reasons the Ireland-Nevada comparison illustrates. Europe isn’t fiscally integrated: German taxpayers don’t automatically pick up part of the tab for Greek pensions or Irish bank bailouts. And while Europeans have the legal right to move freely in search of jobs, in practice imperfect cultural integration — above all, the lack of a common language — makes workers less geographically mobile than their American counterparts. And now you see why many American (and some British) economists have always been skeptical about the euro project. U.S.-based economists had long emphasized the importance of certain preconditions for currency union — most famously, Robert Mundell of Columbia stressed the importance of labor mobility, while Peter Kenen, my colleague at Princeton, emphasized the importance of fiscal integration. America, we know, has a currency union that works, and we know why it works: because it coincides with a nation — a nation with a big central government, a common language and a shared culture. Europe has none of these things, which from the beginning made the prospects of a single currency dubious.” Ireland remaining in the euro is simply not sustainable. Deciding to remain in search of further bailouts is a disastrous decision. Are we likely because of ill informed propaganda reducing the issues to trite ad absurdum trivial nonsense re growth, to vote Yes. Yes, we are. Vote No and avoid the sudden realisation in years to come that by voting Yes, you share Benedict Ireland’s legacy of selling out your nation’s constitution and future, to those unconcerned banking interests, who’ll trample on your children’s future in ways your hopes may not realise. @Colm Brazil +1 For ever is a long time to be in a fixed currency union that pretty much everyone agrees is a bad idea @ Stephen Kinsella – if you are just giving out the information why do you not give a link to this: http://www.indecon.ie/publications/policy.html instead of a link the well known views of David McWilliams??? ERROR #1 “At a time when income is falling because of rising unemployment and taxes, this means the debt burden is getting heavier every day relative to income. “ – DMcW Please see Chart 2 from the Central Bank’s Quarterly Financial Accounts. http://www.centralbank.ie/polstats/stats/qfaccounts/Documents/2011q4_ie_qfaccounts.pdf The household debt burden is not getting heavier every day. Rather, high savings have reduced the burden debt. At Q4 2011 household’s debt to disposable income ratio stood at 207.8%, its lowest level since Q2 2007. Pretty simple stuff. Disappointing to see simple factual errors in the Financial Times oped pieces on Ireland I wrote the following response to the equivalent article David wrote on his website; Following our use of digital can provide a good analysis of why this recession is so unique and where we may be headed. Prior to the 1960s a fifth of our money supply existed as cash. The remaining 80% existed as bank-account money. While cash and bank-account money appear to be one and the same, since they are interchangeable, both have remarkably differing properties. Cash is created by the state and is spent into circulation by the Government. Bank-account money is created by the banks and loaned into the economy. Hence every bank-account Euro has a matching debt. Bank-account money is also deleted as loan repayments are processed so even though reducing our debts may seem like a reasonable thing to do, the bank-account money no longer exists after you repay a loan. Since the 1960s our cash money supply has dwindled to just 3% of the total and the 97% existing as bank-account money, or digital money, comes with a corresponding debt. This gradual increase in our use of bank-account money over cash has had many consequences on our economy because a much higher proportion of our money exists in tandem with debt and is only temporary since it’s constantly being deleted through loan repayments. Since the 1960s it takes two incomes to run a household, recessions are much more severe and occur more frequently, we have housing bubbles which we didn’t have before the 1970s, The Government invents new taxes since its ability to create cash is insignificant, business is more and more about the bottom line, every economy attempts to become a net exporter, products become less durable, the country is often accused of losing its culture etc. All of the above is primarily because we use more digital money over cash and because every digital euro has a corresponding debt. This system of money creation is unsustainable and as David has pointed out before ‘When something can’t go on forever it will stop’. To keep this system going we need people to organise more bank loans than year than last. The beginning of the digital money system in the 1970s was a self-fulfilling one because entrepreneurs could no longer earn enough from circulation to start up a business. Hence they got banks to create the money through lending. This made it even harder for the next wave of entrepreneurs who got banks to create even more money through lending. Equally house buyers could not collect enough from circulation to buy a house outright and so they too got banks to create money, and debt, through mortgages. The next wave of house buyers found it even harder to buy a house outright and banks created higher and higher amounts of money, and debt, and mortgages have taken longer and longer to repay. However mortgages have now hit a natural limit. They take two incomes thirty years to repay and cannot increase in duration. For this reason, and the inability of the money supply to dwarf itself periodically like it has done, we appear to be at the end of this system of money creation. This system of money creation isn’t going anywhere. The policy makers are desperately trying to get bank credit, and it’s equal debt, flowing again but for the first time in history Governments, households and businesses appear to have no further borrowing capacity. One solution is to provide debt-free digital money as well as cash to the Government. This is ultimately where we’re headed but it appears we’re a very long way off since the money creation/deletion system seems to be so misunderstood by politicians and, dare I say it, some economists. Thanks for posting this Stephen. Dear Mr Keynes or whatever your actual name is Paying back money out of existing savings not current income as you have noted does not mean that the debt burden relative to income is not getting heavier. If your debt is fixed and your income has contracted and is falling still, we are simply in Irving Fisher territory. Are you denying the impact of deleveraging on this economy? Or maybe you think the liquidity trap is a myth? Pretty simple stuff really. Dissappointing etc All the best and chill out, David @ Stephen Kinsella You’re too young to sit on the fence when you have opted for a public role. Whatever the choices made over the next decade, life will be difficult or desperate for many people. The ancien regime has failed because of a failure to tell bitter truths to an electorate always ready to be bought. The alternative that will be on offer is likely to be some cocktail of policies that have been discredited wherever they have been implemented — sometimes at a huge human cost. Economists generally feared challenging conventional wisdom during the bubble. It would surely be against the public interest if that was to be repeated. Testimony to the Seanad or whatever is not a reason to avoid taking a position on a crucial issue of our times. It is possible to disagree with some of David McWilliams’ current prescriptions, but he did sail against the strong winds of hysteria and delusion which has destroyed the lives of of tens of thousands of our people — some complicit, others innocent victims for the second time in a generation. @David McWilliams Excellent article, even to a non-economist like me. You were also spot on on your prediction of the banks turning into debt collecting agencies. That is what they have done. Deleveraging is a far greater evil than austerity, yet is getting little attention. @david Nonsense. Perhaps you could tell us which debt to disposable income ratio you had in mind in the quotes in your article? i.e. the one that “Since Ireland adopted the euro, its ratio of household debt to income has risen from 93 per cent to 220 per cent”. The central bank series has fallen back to 207% The readers of this column can see the one reported by Central Bank (here), Chart 2. and make up their own minds, i.e. its fallen sharply. http://www.centralbank.ie/polstats/stats/qfaccounts/Documents/2011q4_ie_qfaccounts.pdf You make no distinction in your article between existing savings (asset) and savings from current income. Rather “Ireland’s savings ratio has exploded to 17 per cent of income; it was minus 5 per cent in 2007. “. That’s current income is it not. In any case you just tell us what official CSO/Central Bank series show’s the debt burden is getting heavier relative to income and we can all see if there has, or has not been a factual error. In any case as you note yourself the savings rate (i.e. savings as a proportion of disposable income) is extremely high. This is because people are paying down debt. That is, savings our of current income. Why don’t you admit the error, and stop attempting to muddy the waters. The readers of this column can read the central bank report for themselves here. Chart 2 @John Maynard Keynes “The household debt burden is not getting heavier every day. Rather, high savings have reduced the burden debt.” Its misguided assumptions like these that have us in the trouble we are in. Some have used their savings to reduce their debt burden. But look deeper into these figures and what do you see? Higher taxes, reduced salaries, unemployment, more household charges, increasing negative equity… is the burden that is being referred to. Those factors are not making the debt burden go away, they are making it worse. Rather than relying on the wrongly adduced evidence, your Chart 2 example of people desperately trying to reduce their debt burden by using their savings in this way, preventing them spending their savings in the real economy, consider a more reliable index of the increasing debt burden felt by most people, taking more and more people under water on a daily basis: Check out Moody’s om mortgage arrears. The banks will require another circa ¢5 bn to plug this hole. According to Moody’s the mortgage arrears debt burden is growing by the day. “Mortgages where repayments had not been made for 90 days or more also grew from 3.25 per cent last year to 5.74 per cent of the mortgage pool tracked by the agency. Moody’s tracks a €40 billion pool of residential mortgages that Irish lenders have used to back bonds used to raise funds.” http://bit.ly/KO0sdw @scorpio Just so the readers of this site are clear: the Indecon economists poll is a poll of economists who are all State employees and those that are not State employees are being paid by the State in some form for conducting the survey in the fist instance i.e. the non State economists are Indecon economists. I’m not for one moment discrediting the views and opinions of those in the survey but surely it would make more sense to spread the breadth of opinion a little wider than those who enjoy the backstop of the State to support their livelihoods. Don’t you think? @John Maynard Keynes Perhaps you’d like to advise those who’ve lost their jobs and are in negative equity to pay off their mortgage arrears from their savings? If they do this, which they can’t do because they’ve no savings or little left, tell them the overall debt burden is easing because some are paying off their debt with their savings? They should be comforted with your Chart 2. Those in mortgage arrears, the unemployed, the fall in GNP, closures in the retail sector, higher taxes, service charges, Moody’s figures on mortgage default, show them your Chart 2. The myopia of this, you couldn’t make it up! Its nearsightedness nonsense. Your eye is too close to the Chart to see it properly. You need a good pair of debt glasses. Put them on and move back from the Chart and look at some other charts relating to the items I’ve got above. It’ll help you see Chart 2 better 🙂 @Colm Brazil The ratio of household debt to household disposable income has fallen sharply in recent years, in part savings have been high. David McWilliams asserts that “At a time when income is falling because of rising unemployment and taxes, this means the debt burden is getting heavier every day relative to income. “ – DMcW The official central bank series is based on household income. Clearly, the falls in household income have not been sufficient (the key point) to offset the increase in the household savings ratio. Rather this ratio has fallen, in stark contrast to what David has asserted. See chart 2 attached http://www.centralbank.ie/polstats/stats/qfaccounts/Documents/2011q4_ie_qfaccounts.pdf That the household debt burden has fallen is not an assumption, its a fact. For now I think I’ll stick with the official series produced by the central bank. If you David or anyone else has a series for the debt burden which shows it rising I’ll be happy to look at it. I suspect you’ll struggle as it doesn’t exist. You seem to suggest we should look at arrears. Arrears do not measure the debt burden – they measure the ability of those in debt to service it. Indeed, it is possible we could have a far higher arrears rate, for a much lower level of debt? I like to base my economic discussions on the facts, yourself and David plainly do not “At a time when income is falling because of rising unemployment and taxes, this means the debt burden is getting heavier every day relative to income. “ – DMcW Please see Chart 2 from the Central Bank’s Quarterly Financial Accounts. http://www.centralbank.ie/polstats/stats/qfaccounts/Documents/2011q4_ie_qfaccounts.pdf The household debt burden is not getting heavier every day. Wow. Just wow. This is like JTO and the census figures. Putting the data blinkers on to keep the truth out of view. Who gives a flip about the household debt if people don’t have enough money to pay the taxes needed to keep the country going? In any case you just tell us what official CSO/Central Bank series show’s the debt burden is getting heavier relative to income and we can all see if there has, or has not been a factual error. The Debt/GDP ratio you pudding! In any case as you note yourself the savings rate (i.e. savings as a proportion of disposable income) is extremely high. This is because people are paying down debt. That is, savings our of current income. You equate paying off debt to saving? Are you from Merrion Street too? Why don’t you admit the error, and stop attempting to muddy the waters. Confirmed for Trolling. That’s government debt GDP ratio, not household debt which is the topic of the discussion. Today’s topic is the Fiscal Treaty. You’re the one that keeps bringing up the Central Bank quarterly report on household debt( Protip: CBI reports habitually sugar coat the country’s current state) Can I recommend the ladybird book of economics You might as well. I can’t see where else you’re coming upon all of these notions. Right to recap So as I’m sure we’re all aware David McWilliams has made a factual error in his financial times article today. He says ““At a time when income is falling because of rising unemployment and taxes, this means the debt burden is getting heavier every day relative to income. “ Please see Chart 2 from the Central Bank’s Quarterly Financial Accounts. http://www.centralbank.ie/polstats/stats/qfaccounts/Documents/2011q4_ie_qfaccounts.pdf This shows the household debt to disposable income ratio has fallen to 207%, from a peak around 220%, indicating a massive factual error in today’s FT. Until someone can point me towards some data from the CSO/Central Bank or elsewhere substantiating Mr McWilliams point I think we can dismiss it as nonsense. @Scorpio, hadn’t seen that, thanks, it’s now in the main body of the thread. @michael, I’m not sitting on the fence, I just don’t feel the need to wade into an already crowded space, there are much better economists than myself making excellent points, I’m not sure what I’d add. @All, could we address the substance of David’s arguments, regardless of whether you are for or against them? @OMF “income is falling because of rising unemployment and taxes”. David is talking about household debt. not government debt. Perhaps you might like to ask him yourself. As I’m sure you’re aware higher taxes tend to push up on government income, (and down on household income). This is a bit of a giveaway that David is talking about household debt, not government debt. @Stephen David has written an article for the Financial Times which as you know is an extremely influential publication with investors. If he has made a factual error in his article on the Irish economy, he is fair game. I think my posts above make clear where the error is. To say the household debt burden is rising, when it is not, is a large error. @Yields or Bust – “Indecon economists poll is a poll of economists who are all State employees” – that is where most economists are employed, and I doubt their jobs are immediately depending on their stance on the treaty i.e. they can be free to express their views. Most outside the broad public sector will push views that will make them personally better off either through headlines or by creating uncertainty that will gain them more clients i.e. they will not be unbiased. Why is it that when DMcW or ‘he who cannot be named’ (MK) get mentioned on this blog, people start handbagging each other? And God forbid I should ever mention Brian Lucey. Uh-oh. I’ve done it now. ‘Chill out’ is appropriate advice. Quite possibly one can agree with everything David McWilliams writes, (saw him live once at Blanchardstown – excellent communicator) and yet the question of where the cash will l come from for the next bailout still hangs in the air. The government has been producing so much wind, got air and guff about ‘the recovery’ that it near convinced itself that a second second visit to poorhouse would be unnecessary. Bringing it up in conversation in certain quarters was as welcome as the shingles. It is equally possible that many of those who voted for the government parties are angry that various pledges of bank debt and reforms were cast aside. If not outright anger they are at least ambivalent, and not cooperating with the government on the ESM vote is seen as getting one over. Those on the Left advocating No have their noses stuck in Lenin’s What Is To Be Don and see the current circumstances as providing the wedge for the overthrow, the revolution, our cronies and not yours etc. Odd isn’t it, in a family therapy kind of way, how many on the Left are reliant on the state for money, employment and sustenance. I am a strong europhile but the level of debate on Ireland seems to entirely skirt the whole thrust of the European project. Whether it is due to ignorance, indifference or even hostility to European thought, I am not qualified to answer. However, Ireland has been brought to ruin by ‘its own gentry’ and their habits, and it is time to wake up the that otherwise the cycle continues. Different actors, same narrative. @scorpio Precisley what I said above – what you actually mean to say is the vast majority of State employed economists recommend a Yes vote. The fact that ‘most economists are employed by the State’ does not mean that their opinions are any more valid than those in private employ. The point I’m making is that the chort for the Indecon analysis is far too narrow and as a result the overall findings in the survey are questionable. Right to recap So as I’m sure we’re all aware David McWilliams has made a factual error in his financial times article today. You’re coming on waaay too strong. You need to work on your Trolling. Try to develop a more subtle approach. Instead of desperately asserting your position as concluded, a more simple approach involving placing doubt on its opposite is often more effective. For example you could have said: “There are questions around DmWs assertion of X” or that “CBI reports suggest a different explanation for X”. Such subtle propagation of FUD(Fear, Uncertainty, Doubt), carried out slowly over time, can be extremely successful. Indeed, after five year of such application, the decision makers of an entire continent have been permanently paralysed, and are now unable to take any actions at all, let alone the right ones. Meanwhile, top banks and bondholders clean up at public and sovereign expense. You should set your standards a little higher. @Yields or Bust – if the majority are employed by the state then this is hardly biased. At least their job does not depend on their view and is therefore a lot more reliable than those peddling a particular line for their own benefit. Good stuff alchemist. The main points as far as I can see are that there is a 13bn deficit to fund and the bank losses have been dealt with. Perhaps later bank leakage will be dealt with differently but the ship has sailed on the existing stuff. And that hurts. But it is no justification for the cutting off of the money for the deficit. @JMK “To say the household debt burden is rising, when it is not, is a large error.” This is not deductive reasoning, its faulty inductive reasoning. You cannot infer because some people can pay back debt out of their savings, the overall debt burden on people faced with higher taxes, etc etc is reducing. This kind of reasoning only brings the economics profession into disrepute. Its unsound, misguided, unobjective and a misuse of empirical data and most of all its unscientific. You need to get back to mathematically verifiable data based arguments based on the laws of deduction, not induction. This is a nobrainer, Moody’s know this, the Irish Central Bank know this, the Govt by flagging the need for a second bailout know this, but JMK stands behind the argument “household debt burden” is decreasing because some people have used their savings to pay this off; while the vast majority of us feel the pinch of higher taxes, household charges etc and the numbers falling into mortgage arrears now represent 10% of all mortgages. Their household debt burden is reduced so much they can’t pay their mortgage. Ah well, along with “Vast Majority of Economists Recommend a Yes” Propaganda machine is full steam ahead…. I saw a dead cat on the pavement the other day, not a good omen! “Nothing will come of nothing” Vote No 🙂 This is slightly off topic but I think J M Keynes point deserves further exploration. The Central Bank figures for household debt in 2011 are obviously interesting if correct but chart two is not as hopeful as you might think, note that the baseline percentage of disposable income starts at 110% so the fall is even more modest than it looks. So the good news that David McWilliams is arguably ignoring is that the average ratio of disposable income to household debt for Irish households dropped from ~222% to ~208% over the last 3 years, a drop of 6%. I do not have the figures to hand but I seem to remember that average incomes have dropped by a greater percentage in that time period. This a good news story for very small values of good, if at all. Further imagine you took these figures and charted them separately for the unemployed, those in negative equity and the insiders who are still doing quite well (where would various blog posters place themselves I wonder?). Might it be the case that the drop in liabilities relative to disposable income has been high for the well off (thanks to deflation) and lower, or negative, for those out of work or working in jobs more dependent to domestic demand than exports? I would be interested to know. One last thing, the Saint Vincent de Paul society has reported a doubling of calls looking for assistance in the last two years so I suspect that David McWilliams view of the household debt situation is how it looks from the street rather than a few floors up on Dame Street. @ scorpio I’d have to agree with YoB that it is clearly a biased sample set – not only are the economists principally paid by the state, but by targeting those in academia, they have also selected a certain personaility type (those who would prefer to research and teach rather than ply their wares in the finance industry). I’d imagine that if it were a poll of people with phds/masters in economics, which included research analysts at investment banks and hedge fund managers/traders, you would come up witha very different proportion in favour of the treaty. Does anybody know how much of the decline in the CB’s average household indebtedness is due to debt write-offs by NAMA or the banks/developers skipping off to the UK for a quiclie bankrupcy? @Edward v2.0 – most bank economists are civil srvants too – I have not heard any against the Pact except those who will gain from people moving money out of the Euro zone (interesting to note that the outfit aparently owned by the patriotic Declan Ganley appears to have opened an office in Switzerland to this effect). As the FT is paywalled here’s a link to the same article – but on David McWilliams site: http://www.davidmcwilliams.ie/2012/05/29/its-not-a-fiscal-union-its-a-fiscal-straightjacket Some in the country are overindebted; others are not. Over 40% of owner occupiers in Ireland have no mortgage compared with 12% in Sweden and 9% in the Netherlands. So the farmers are already on European welfare for four decades, is it realistic to ask Finland to provide a dig-out for the rest when the earnings of the sheltered sectors in Ireland are much higher. Shame on us to even expect it. In Finland in 2009 according to the OECD, a Finnish GP’s pay was 1.8 times the average wage and 3.5 times in Ireland; a salaried medical specialist earned 2.6 times the average wage in Finland and 4.5 times in Ireland. An Irish TD’s pay is 28% higher than that of a Swedish counterpart and onwards the litany could go. David provides good material for the victimhood audience but the reality check (also cheque) is that the cargo-cultists will not get gifts without strings. Not everyone is as foolish or as stupid as some of the Irish were. Another public episode of the Croke Park ‘Dance of the Seven Veils,’ is due soon. Minister Brain Hayes ‘reassuringly’ said last January: It is now time for local management to show a level of ambition about opportunities for change under the Agreement. There are sectors where both the challenges and the opportunities are very great. Management agendas that were hard won in Croke Park now need to be pursued by sectoral management even where that means that they have to go into a difficult negotiating space. (George Orwell where are you?) Implementation needs to be approached with greater urgency in all sectors. And beyond all this farce, we will have people in the same public offices, doing the same work for different levels of pay and benefits. Forty years to reform unfunded public pensions and it’s of course let them eat cake elsewhere. I agree with the issue of personal debt ballooning – but it’s this combined with the zombification of the banking system that is creating the perfect storm. We’ve got Japanese-style zombie banks and Icelandic-style debt levels… We’re going Japlandic! We can’t save the people because this would mean letting the banks go. We can’t let the banks go because it would mean the bondholders go hungry – ergo we can’t let the bondholders go hungry. Welcome to 21st Century Debt Slavery. @What goes up – the bondholders have been fed a long time ago so they are totally irrelevant at this stage (to be fair they were very relevant some time ago and I would have burned them). Anyone spot a Response Rate on the Indecon 44? N=? @scorpio a little detail on that ‘vast majority’ would be helpful? @Alan Gray ? @ WGU JCT and his strong vigilance. Up there with freeing up lending and contractionary expansion. Peter Boone and Simon Johnston Der Euro ist fertig The End Of The Euro: A Survivor’s Guide http://baselinescenario.com/2012/05/28/the-end-of-the-euro-a-survivors-guide/?utm_source=feedburner&utm_medium=email&utm_campaign=Feed%3A+BaselineScenario+%28The+Baseline+Scenario%29 VOTE NO FOR A CHANGE IN DIRECTION AND DO YOUR BIT TO SAVE EUROPE FROM BEING DESTROYED BY NEO-KON IDEOLOGY DOD Too late, Primary Surplus looms. No money for you arts luvvies there Dave. @scorpio if you are just giving out the information why do you not give a link to this: Because they are appealing to an authority they do not have? One of the eye openers for me when visiting the Irish Economy was just how unreconstructed the Irish economics community was after the start of the collapse of the housing bubble and the bondholder bailout. It seemed that after the staggering market failure of the global financial crisis most economists held exactly the same positions as before. The world had changed but they remained they same people with same enthusiasms and hobby horses. So David McWilliams gets a pass because he was publicly, vocally right about the seeds of our current crisis in the property bubble and the insanity of extending the bailout while I would need to check the history of the economists in the Indecon journal before accepting their vision of the world was a realistic one. Simply put anyone in the economics profession in Ireland who failed to flag either the housing bubble, the dangers of EMU or the malign influence of the financial sector is on probation. They have to prove themselves useful again. In 1999, live on the Late Late show , David McWilliams told all the professors and lecturers in economics in all the Irish universities and all the Irish politicians that there was a massive property bubble in Ireland and when it bursts hundreds of thousands of Irish households will be in negative equity. They were subsequently told that the Irish commercial property market is an organised cartel. Guess what their response was?. Guess which way they want you to vote? —Vote No. FYI Banking crisis Can Spain make a solo comeback? 29 May 2012El País Madrid Assurances from the head of government cannot amount to much: victim of a severe banking crisis, Madrid will soon be forced to seek help in the EU. Like Ireland, it will then be placed on a drip-feed – and under guardianship. [……..] What would happen if the Spanish government were finally forced to dip into the rescue fund? Harvard professor Kenneth Rogoff answers: “If the eurozone and the ECB fail to take unequivocal and speedy steps, there’ll be bank runs throughout the periphery and devastating capital flight. To avoid this, banks must be provided with liquidity. “The eurozone should move several rungs up the ladder of fiscal union with Eurobonds. We will see exceptional measures, which until very recently were unthinkable – but that has happened every time Europe has been on the verge of an accident.” http://www.presseurop.eu/en/content/article/2077841-can-spain-make-solo-comeback Vote NO for a change in direction – Rapidly. To all those voting NO. Please explain how a member state voting against joining the ESM gets further bailout money? I am all ears (or at least eyes). @ Scorpio State employed or state dependent economists, in theory, can say Y or N but why do I think that they know what side their bread is buttered on and what % how of that butter has to be borrowed? Minister Rabbitte, was on ‘This Week in Politics’ with Sean O’Rourke who pointed out that two Nobel prize winning economists believed that Europe was totally on the wrong track. Stiglitz has described the FC as an economic “suicide pact”. What was Pat’s response? Pat got a bit huffy, but quickly fired off his response. Well, they might have Stiglitz and Krugman but “most economists who earn their living in this state (from the state) support the “Y” vote. Well, they would say that Pat would they not? I mean it is very hard to persuade economists that this could be a disaster when their salaries depend on them not understanding that it could and will be a disaster. Not that I would ever question their integrity, models or assumptions. Is it not a bit strange that when the government desperately wanted something to be believable the last people they hired were economists from this state to do the analysis. They brought in “independent” experts from abroad and payed them millions. Of course we did use home grow “independent” economists such as Dr. Alan Ahearne to advise Brian Lehihan and independent economist Dr. Peter Bacon to advise on NAMA and that ahhem! worked out just fine. 44 economists ? Jesus. Why not ask just 1 accurate forecaster…… Steve – 18 March 2010. “Deflation stands at the shoulder of the entire Eurozone. Some might think this would allow for a stronger euro: What is the point? What products will Europe exchange for what it wishes to own? There must be some commerce taking place from Europe to the rest of the world or the trap is sprung, not a liquidity trap but an export trap. This would keep them away from the crude oil that they require to function. This more than the debt compound spiral is what awaits the European Union. The alternative to commerce is for the ECB to create more euros for the purpose of foreign currency exchange – to sell money rather than goods – but doing so now or later is pointless. Why not do so in 2008 when it would have mattered most and cost the least to bail out Greece and clear the speculators and bank interests from the debt market at the same time? The euro becomes ironic: too hard within Europe itself but always second fiddle to the dollar for the Middle Eastern energy producers will always prefer the dollar as it represents ‘security’.” http://www.economic-undertow.com/2010/03/18/the-end-of-the-euro and the earlier(Feb 2010) http://www.economic-undertow.com/2010/…/euro-head-fake-deju-vu-193... “The problem with doing nothing in Greece is that banks have lent Greece a lot of euros. If Greece fails, the banks are in distress. The Greek government is in distress because it – like most other governments – borrowed funds on its own account to bolster its banks. Now that Greece and other sovereigns are suffering, the pain will be fed right back to the banks. The banks wouldn’t have problems if more people would borrow. People won’t borrow because they don’t have jobs. They don’t have jobs because the banks won’t lend – people without jobs won’t borrow because they are embarrassed. Or, because the banks have cut them cold! Governments borrow in place of the jobless citizenry but doing so in currency other than one’s own is dangerous. If a country borrows in its own currency, there is no danger, but unless citizens take the lead of the government and borrow themselves, there is no effect either. In crises such as ours, it’s not the governments’ solvency that matters so much as it is the citizens’. The Eurozone is living the general insolvency of Greek citizens. Along with that hapless country are the citizens of half of the countries in Europe. ” Dork – I dislike this Greece morality tale – the Greek economy is not unlike the Irish domestic economy , with both countries far from the centre and in a isolated Geographical position. Therefore oil price shocks effect these countries in a more dramatic fashion , such as airport movements etc. The multinational sphere operates at a higher indeed stratospheric Altitude , less affected by such movements. For example on a net basis the agricultural industry is the same as it ever was because of higher input costs. We have wasted 5 years when at least some of the policey decisions were obvious. @The Alchemist We have not ratified the ESM in the Dail .. er .. yet. BTW, the ESM does not yet exist. We live in turbulent times. EZ does not need an ESM – it needs a properly functioning ECB. Smell the breeze in Europe … I’m not in favour of further ‘bail-out’ money for the financial system – where do you think most of the last one went? @Minister Coveney ‘Throughout the referendum campaign, the Government has claimed that rejection of the austerity treaty will close off future access to emergency funding from the European Stability Mechanism. This is simply not true. The rules of the ESM are clear. Funding will be provided to any country where such funding is deemed indispensable to safeguard the financial stability of the euro zone as a whole. If the Government requires emergency funding in 2014, and I believe it will, this funding will be provided by the ESM. Failure to do so would jeopardise the entire euro zone economy. On Thursday you have an important decision to make. Do you vote for more austerity and more power being transferred to the European Union? Or do you vote for a change of direction. All across Europe people are abandoning the failed policy of austerity. The tide is turning. The debate has moved on. The austerity treaty is clearly past its sell-by date.’ http://www.irishtimes.com/newspaper/opinion/2012/0529/1224316859125.html On this one I’m with Pearse Doherty and the IMF spokespersons. Looking to 2012, the budget targets further fiscal consolidation totaling 2¾ percent of GDP and that lowers the deficit to 8.6 percent of GDP. This target is still achievable even with the reduction in the growth outlook for 2012 because the starting point for 2011 was a little stronger than was allowed for in the budget projections, inflation is expected to be a little higher owing to the weaker euro, and the budget projections included some prudent buffers. In the area of fiscal policy, the report discusses policy reactions in the event of a further reduction in growth for 2012. In the current circumstances, where the Irish authorities have already in Budget 2012 adopted about ½ percent of GDP in measures additional to that originally planned, the IMF would support the accommodation of revenue shortfalls associated with weaker growth. The reason is that additional fiscal consolidation in 2012 would unduly threaten the still-fragile economic recovery, which is needed for debt sustainability and regaining access to market funding. Transcript of a Conference Call on the Fifth Review under Extended Fund Facility Arrangement for Ireland with Craig Beaumont, Mission Chief for Ireland, European Department, and Olga Stankova, Senior Press Officer, External Relations Department Washington, D.C. March 2, 2012 At the same time, Ireland’s overall fiscal deficit remains large and it’s important to preserve the credibility of the medium-term fiscal consolidation plan to reach a deficit of 3 percent by 2015. If a reduction in growth in 2012 was part of a more lasting revision in the medium-term economic outlook, it would be appropriate to reevaluate the consolidation plan for 2013 through 2015 to allow the burden of the shock to be spread over time. http://www.imf.org/external/np/tr/2012/tr030212.htm No comment for pragmatists, as opposed to fearmongers, necessary. “To all those voting NO. Please explain how a member state voting against joining the ESM gets further bailout money?” I’m not yet certain that I’m voting No, but if the poll was today I’d have done so already. I’m open to sensible arguments for a Yes vote. (“Have ye seen Mad Max, have ye?” doesn’t quite cut it.) I sincerely hope the answer to your question is that a state voting against joining the ESM is denied further bailout money. What you call bailout money I call external debt and back in the days when I was an economics student the Irish economics profession was venomously hostile to it. Funny how that changed. Nice use of anger David. The argument has cleanly fallen into no -we are being shafted yes- we need to comply or else. A divided nation arguing over a fractured union. Again. Can you imagine what some of the landlocked EU countries or US states would give to be a small independent nation with identity, an island. But what does Ireland do….. PS.rumour has it the fiscal treaty was worded by the trio Onall Forze, Archur Bach and Telmi Whozier-Dadi. @The Alchemist “To all those voting NO. Please explain how a member state voting against joining the ESM gets further bailout money? I am all ears (or at least eyes).” As it happens I will not be voting due to being out of the country. But my summary is as follows: A YES means we keep doing as we are doing, with a very large number of snouts still very deep in the trough, doing very well. We still have pension tax breaks, pay increments, millionaires getting children’s allowances and different millionaires with free health care and a PS pension system that a millionaire would not be able to buy. All while we have terrible misery and tragedy and unemployment. But we will stick to the rhetoric, ‘We are all in this together’ and it seems those doing very well may believe that make-believe. A NO vote on the other hand will, to any logical person, entail a immediate balancing of the budget. There is no other alternative (TINA), unless one goes for the begging bowl and flat cap. Given the mood music internationally such a stance will get a sterner reaction than the Irish have generally reserved for their own fellow citizens, the travellers. However I suspect that in the event of a NO vote, Ireland regrettably will opt for the begging bowl option. A choice that will result not only in defeat but humiliation to boot. Initially I was on the yes side, the reason being that Ireland will have to get it finances in order. To my mind the sooner the better. Then the ESM became known to me and although this treaty is not about the ESM, I find the ESM to be very scary indeed. Nobody has answered where Ireland will get the ~11 billion in capital to be allocated it seems purely on the advice of an unaccountable board that may be headed by Schauble! On balance I would no at this point. Ireland needs a reality check. It is not ready for one, but will it ever be. Maybe better a reality check now and a forcing of responsibility on a country that has long ducked responsibility. It is a hard call. In the final analysis it has less to do with what is in the treaty than whether Ireland is capable of self determination. A yes vote will not answer that question. A NO vote is more likely to demand an answer to that question sooner. If Ireland does vote no I wouldn’t expect any sympathy from thar lear These numbers are from 2008 but Ireland is still well off compared to Poland, Czechistan, the Mezzogiorno, Portugal, Wales http://epp.eurostat.ec.europa.eu/statistics_explained/index.php?title=File:Gross_domestic_product_(GDP)_per_inhabitant,_in_purchasing_power_standard_(PPS),_by_NUTS_2.PNG&filetimestamp=20111020141821 @seafóid LORD CAVERSHAM Oh, damn sympathy. There is a great deal too much of that sort of thing going on nowadays. LORD GORING I quite agree with you, father. If there was less sympathy in the world there would be less trouble in the world. Wilde could face competition these days. Krugman is in rare form at the LSE: “The US does have a big structural problem: one of its two political parties is deeply insane.” @ All “Nine out of ten dentists recommend Sensodyne!” What does that prove? That the product is good? What is clear is that there are too many economists paid from the public purse and that they cannot agree on the time of day, not to mind a basis for analysis. This suggests that (i) the discipline is so fragmented that it it no longer makes any sense or (ii) a breakthrough synthesis of some kind is required. Personally, I think that it is a combination of the two. For the moment, however, they are the gurus of the age and have to be suffered. P.S. DMW might reply to the point raised by JMK instead of offering advice on the need to chill out. “The US does have a big structural problem: one of its two political parties is deeply insane” How about this for a ringing endorsement of Romney and his former life at Bain capital ? Sure to go down well in the Rust Belt. “Steven Davis, a University of Chicago expert on private equity buyouts and their impact on job creation, calls the whole line of attack “pretty worrisome”. “It’s not that private equity guys are angels who are always doing good, but they are an important part of a market economy,” he says. “I’m concerned these attacks will translate into policies that retard the creative destruction process http://www.ft.com/cms/s/0/4f410a0e-a673-11e1-9453-00144feabdc0.html#ixzz1wHtWqnqS JR, we will get the 11bn from the ESM to give to the ESM. Will we make a profit though…not sure. Seriously do not be surprised if theat is the outcome. One thing for sure, it won’t be coming out of revenue and we will not be borrowing it on the open market. No peripheral EZ sovereign will be borrowing from private markets in euros in its own name for a long term in the remainder of my working life (20 years), if ever again. @ All An interesting thought is that the quality of economists is a function of the quality of the economy in which they are operating, especially in relation to the reliability of the statistics that give an indication of how an economy is performing. As MH has demonstrated, the measures that are used in relation to the Irish economy, despite the best efforts of the CSO, are dubious. GIGO in other words. Another measure in economies that perform well is that reward is related to performance. The system of relativities taken as sacrosanct in the Irish public sector is an indication of a major weakness that simply has to be corrected. “we will get the 11bn from the ESM to give to the ESM..” For GR/IE/ESP ESM is a leveraged insurance fund discussed here Our initial contribution is €1.27 billion, we’ll only be liable for the rest if there is a default on the whole fund, the fund is ¢500bn plus another approx ¢200 bn rolled over and into it from EFSF. Real money contributed amounts to approx ¢80 bn, 27% contribution from Germany, the rest is leveraged. Spain will require a huge chunk of it. We’ll have to borrow the €1.27 along with ¢5bn for our banks from it 🙂 Don’t ask where the money is coming to make repayments, our current repayments are sinking us 🙁 http://en.wikipedia.org/wiki/European_Stability_Mechanism Not quite sure the form of financial paper and how that will be used to leverage the fund up from ¢80b to ¢500b ? @ Stephen Kinsella Good call! Does anyone think it’s ominous that the chief of the Bank of Spain seems to have got the heave ho in the middle of their crisis? @Tullmcadoo. “One thing for sure, it won’t be coming out of revenue and we will not be borrowing it on the open market. No peripheral EZ sovereign will be borrowing from private market in euros in its own name for a long term in the remainder of my working life (20 years), if ever again.” We may not agree on lots of things, but I certainly agree with you on that. IMHO the same applies to most of the peripheral banks. I find it very odd that we still have to listen to the mantra of sovereigns and particularly banks ‘getting back to the markets’ not only from the Irish government but from the ECB / Troika . In the case of banks it simply will not happen. They do not appear to have acknowledged the depth of the failure of mobile capital in terms of the financing of banks or sovereigns and the devastation caused by the unfettered mobility of the capital. The status quo ante is not coming back. In fact it is not desirable that it does. A better system of mutuality between financier and financed will need to be developed. One would have thought that the ECB and other central bankers would be proposing ideas. Or is that too much to expect from people entrusted with responsibility. @ Ceteris Paribus As omens go, it is not that important. Bankers are expendable. FYI the latest from AEP http://www.telegraph.co.uk/finance/financialcrisis/9298180/Europes-debtors-must-pawn-their-gold-for-Eurobond-Redemption.html @JR Re unfettered capital The NZZ, a Swiss newspaper, reported on Sunday that the Swiss Central Bank is looking at setting up an emergency task force that would be deployed when the Central Bank is overwhelmed by the wall of money that might leave the EZ in the event of a Greek exit. One of the options would be capital controls, according to a spokesman. @DOCM Thanks. I had read it. Do we have any gold to hock? I think there is a chalice that is allegedly priceless and we could hock the book of Kells. @Seafoid I saw they were going to introduce negative interest rates. They did that before. At .58% on their 10 yr bonds it looks like a sure fire way to lose money and it is the same with german bunds. Pimco warned today of a bubble in the market. @Seafoid: Capital Controls: Count me in: A 20% tax on all liquid funds deposited outside of depositors country of tax residence. 75% of such tax to be refunded to original country. 25% (the carrot) to tax authorities of recipient country. That would straighten a few Dickie Bows and Handlebars. This is 3 years old but not much has changed in the meantime Where’s all the money going to ? I ain’t seen none of it It’s going to keep these bullshit banks afloat And they are still paying out bonuses on Wall Street …And you talk sh*t about it and they say oh we gotta retain the talent What are you talking about talent you stupid ****** That’s the same ****** talent that ****** the whole thing up And for all the money that we done paid to these goddamn banks we could have recapitalised a brand new banking system http://www.youtube.com/watch?v=zOZnRUZKf48 From 2:45 @ All Don Quixote makes his entrance. http://www.lefigaro.fr/conjoncture/2012/05/29/20002-20120529ARTFIG00689-l-espagne-prete-a-s-endetter-pour-ses-banques.php The comment about the negative impact recourse to the EFSF has is worth noting. There are many words that could be used about the present referendum campaign bu dignified is not one of them. Cf. from another thread. http://ftalphaville.ft.com/blog/2012/05/29/1019961/ireland-loves-a-good-referendum/ FT on how much subsidy the UK taxpayer provides to its banks http://ftalphaville.ft.com/blog/2012/05/28/1018781/how-much-an-implicit-banking-subsidy I wonder how the numbers would look for the EZ. @ All FYI http://www.ft.com/intl/cms/s/0/7730ca10-a9b4-11e1-9772-00144feabdc0.html#axzz1w5jikQcH What would Colm McCarthy make of this? Is Spain big enough to force a change in the rules of the game? …with skewed questions favouring the Y position and no pull outs favouring the No position. It doesn’t address the question of whether we should stay in the Euro. Ignoring Iceland’s reduction of its unemployment stats to 7.5% with ours at 14.5% it posits FC as a way to growth. Its a study in propaganda and does not address the individual clauses of the ESM, its conditionality; everything is reduced to the view ESM will be a source of funding. It doesn’t even get this right as we can merely apply for funding with no guarantee we will get it, or what terms. It doesn’t address the question of debt writedown. It doesn’t address or pose the question of deferral of FC until Hollande produces his protocols though one answer re No is produced here. But The tactical nature of voting No is not the subject of any bar charting. It has a simplistic reduction of arguments in the referendum campaign to issues that ignore the legal matters involved. A Nobel prizewinner is consulted for the following quote: “Some economists argue that smaller countries are better off with fixed exchange rates against some larger trading partners, I don’t feel I know enough about this issue to comment.” Oops, if he doesn’t know much about it, he doesn’t want to be in your survey; he’s told you he doesn’t know enough about it. Tip, ask Krugman, he knows all about it; he knows how they don’t suit small countries. Actually scrap the above comment, its inaccurate – I have read zee Germans are avoiding Greece for Turkey……which finance somehow finds more accommodating….. for the moment. omrpublic.iea.org/demand/tu_dl_ov.pdf These are quite devastating capital flows both during the inflation malinvestment phase and the deflation malinvestment phase. omrpublic.iea.org/demand/gr_dl_ov.pdf Despite their natural animosity or indeed because of it these countries on many levels are similar….. The nasty Greeks meme does not explain its collapse The problem is quite simple on one level … formerly proud countries do not now produce domestic money and are exposed to the market and its credit junk economics. Ireland was always a sad little country as it was never sovergin … always whoring for foregin investment to fill its sovergin power vacuum. Watching Enda is painful….. the man is pathetic. Colm Brazel; witth regard to: ‘…the question of whether we should stay in the Euro… Iceland’s reduction of its unemployment stats to 7.5% with ours at 14.5% it posits FC as a way to growth…’ Some time ago an Icelandic Minister, interviewed on RTE, was asked whether they feared repurcussions from the EU – that could negatively impact their joining it – as a result of the course they had chosen . The man calmly smiled at the interviewer, and said that Iceland had been watching how the EU was treating certain member states (the inference from what preceded meant it was certain that it was primarily ourselves he was referring to) and that matters such as this would determine whether or not the country wanted to join at all. [44/N] x 100% = ? Shurely someone must know this known unknown? Nnnnnn @all An Taoiseach didn’t show – for the VB show … again! The Trappist Debate has also been cancelled – just in case. Breaking Newz Unconfirmed rumours, from a usually very unreliable source, that An Taoiseach is voting NO. Hence the silence …. shurely the most devious, the most cunning, the most silent of them all. Speechless in awe – absolute awe. What Certainty! What can be more certain than sayin nathan – nathan at all at all. De mus me readin Beckett in Ballyhaunis and Balinrobe …. Suggest Spain is now making Greece and an Irish wafflefest of a referendum campaign look like curiosities. @docm The ECB appear to have said ‘no’ to setting a precedent of the ECB printing the cash to recap Spain’s banks – the plan, as reported, seemed to be for repos with the ECB (though don’t be amazed if that is misreporting and it was to be Spanish central bank). If that is correct, Spain may try to get permission for their own CB to print in a similar way to the promissory note arrangement Ireland used. Note the similarity between the Spanish plan and the Irish plan (and the ECB’s response) to replace the pro notes, or repayments, with Irish gilts and get the ECB to repo them. That would have turned Irish printing into ECB printing. @ grumpy Hence my question? I would be surprised if the answer was anything other than a no, especially because of the total incompetence demonstrated hitherto by Rajoy and his new government. Meanwhile, in another part of the forest, the Commission is getting ready to table its bank resolution proposal, appropriately enough on 6 June. http://www.irishtimes.com/newspaper/finance/2012/0530/1224316912339.html One must assume that the proposal is based on Article 114 of the TFEU which allows for adoption under QMV and co-decision with the EP. However, politically speaking, any deal will require unanimity among the major players with London and Berlin having the biggest problems. @ David O’Donnell Saw your post earlier deeply critical of the role and performance of academics from the economic profession in Ireland. I didn’t contribute a view to that because of other more irons in the fire re the No campaign I was occupied with. Relatedly I’ve been turning my mind to the question of propaganda and have written about it on my occasional blog http://colmbrazel.wordpress.com I don’t have the resources of time etc to go more deeply into the subject, it’s an area worthy of deep investigation in Ireland. I didn’t touch upon the SF challenge to the Referendum Commission, for example; plus there’s a lot more I could’ve written about the subject. Irisheconomy.ie has been an interesting journey and study for me since I became involved approx one year ago. I wished to deepen my understanding of economics from an Irish perspective. Since then I’ve read and contributed to perhaps 95% + of the opeds and avidly read posts and links. My goal has always been to understand the causes and the nature of the Irish financial meltdown. I realised quite quickly there is a preponderence of right wing pro government leaning economists on Irish economy.ie. I like to read views that are challenging and thought provoking even if they are occasionally one sided. The site also had a good number of critical posters who did not belong to the status quo who were quite prepared to let their views be known. This led to many quite entertaining and heated exchanges exasperating both points of view but also achieving occasionally a sense of balance. It was interesting to read the views of Karl Whelan, until he decided to vacate the site unctuously protesting re views critical of his position. One economist, Brian Lucey, emailed me critical of a post I’d made re KW position on a particular point; he commented he wouldn’t be surprised if KW walked off the pitch, he didn’t post here anymore as he felt dealing with criticism was too much a hassle. Its become apparent to me other economists don’t post opeds here because they wish to avoid public criticism. Yet there are very pro Y economists who are regular contributors to irisheconomy.ie who are to be congratulated for giving opportunity to debate. I would particularly like to thank Philip Lane and John McHale and Stephen Kinsella for their contributions; though I’ve clashed with each on the subject of censorship occasionally annoyed at the removal of a post of mine as I take care to ensure critical comments are impersonal and made at the theoretical level on matters of content alone. Occasionally my posts were censored, but it was a rare occasion. As I said, there is a lack of balance on the site. We’ve had a parade of economists stating their reasons for voting Y. Its been left to posters to mount a rearguard defense of the No position. This current op-ed unusually featured DMcWilliams known critic of the status quo ably writing on the FT many arguments that feature in the No campaign. What happens next explains the censorial nature of irisheconomy.ie and why I’ve had a Richard Toll epiphany moment leading to my decision to move on and away from this site for inspiration on intellectual matters related to the study of economics in Ireland 🙂 Good to see you guys posting, you NO who you are. Take a bow if you’ve been NO from the outset spurred on by the humiliating way we’ve been treated by Brussels and represented by ‘ political leaders ‘ who’ve sold out this country to banking interests. Scorpio Says: May 29th, 2012 at 2:11 pm Asked for balance that a link be given to http://www.indecon.ie/publications/policy.html international perspectives We then had a discussion above on his post, fair enough, eg “@Yields or Bust – if the majority are employed by the state then this is hardly biased. At least their job does not depend on their view and is therefore a lot more reliable than those peddling a particular line for their own benefit.” Robert Brown countered with, “@ Scorpio Note, I began by saying, I’ve had problems on this blog before re posts being pulled and censorship rearing its ugly head. Stephen Kinsella then responds to Scorpio by providing a link in his op-ed to a survey indicating the majority of economists agree with the Y campaign. Kinsella uses the phrase, “in the interests of balance’. Nah, Stephen, this is just a new level in raising the censorship bar on Irisheconomy.ie. That update could have been given an oped on its own, it was included, not for balance; but to detract attention and discussion away from DMcWilliams and his views and to bring focus back to the Y campaign. That in itself would not lead me to leave this site. It took a post of mine written last night to deconstruct the survey of Irish economists as skewed in the questions it asked, skewed in the 99% highlighting in pull out boxes of statements favouring the No campaign, skewed in the lack of questions put re the timing and content of the Referendum, skewed in its lack of probity re constitutional implications of the Referendum: in general, a piece of low quality propaganda favouring the Y side. The post was pulled twice but I got a rewrite in 9:50 🙂 Robert Brown wrote above: “State employed or state dependent economists, in theory, can say Y or N but why do I think that they know what side their bread is buttered on and what % how of that butter has to be borrowed? Minister Rabbitte, was on ‘This Week in Politics’ with Sean O’Rourke who pointed out that two Nobel prize winning economists believed that Europe was totally on the wrong track. Stiglitz has described the FC as an economic “suicide pact”. What was Pat’s response? Pat got a bit huffy, but quickly fired off his response. Well, they might have Stiglitz and Krugman but “most economists who earn their living in this state (from the state) support the “Y” vote. ” Its been an interesting and meaningful learning experience for me on irisheconomy.ie. Its time for me to graduate and leave. Some will be delighted; if you’re happy in your nappy, clap your hands 🙂 Others, not. You NO who you are. Shay Begorrah wrote: “One of the eye openers for me when visiting the Irish Economy was just how unreconstructed the Irish economics community was after the start of the collapse of the housing bubble and the bondholder bailout. It seemed that after the staggering market failure of the global financial crisis most economists held exactly the same positions as before. The world had changed but they remained they same people with same enthusiasms and hobby horses.” +1 Well done to the NO side on this site. I’ve happily shared their views on many topics. Don’t underestimate how smart and capable you guys actually are and how closely you follow the road leading to “real” knowledge of the subject you are passionately interested in, I’m on the same road; keep up the good work. Thanks for all the interesting and informative posts. As you can guess, I’ve come to have a very low opinion of standards in high places both on a political level and now regarding the profession of economics in academia in Ireland. Get yourselves a copy of the survey above and take it out in 12 months 🙁 Don’t know if the moratorium on the Treaty will close this site down after 12am today, I’m around here until that time. Tomorrow I move on. I don’t like posts being pulled and censored. oops, few typos above: The piece, “Note, I began by saying, I’ve had problems on this blog before re posts being pulled and censorship rearing its ugly head.” -> Should be brackets, (I’ve had problems on this blog before re posts being pulled and censorship rearing its ugly head). ““@ Scorpio” should be after first smilie and before Robert Browne. Of course, “skewed in the 99% highlighting in pull out boxes of statements favouring the No campaign” was meant to be, “skewed in the 99% highlighting in pull out boxes of statements favouring the Yes campaign” sorry about the rush.. “Contrary to media reports published today, the European Central Bank (ECB) has not been consulted and has not expressed a position on plans by the Spanish authorities to recapitalise a major Spanish bank. The ECB stands ready to give advice on the development of such plans.” Of course that doesn’t alter the fact that the ECB can strangle the banks at will. @ Colm B Jesus dude, you don’t half have a high opinion f yourself and a low opinion of others. Maybe Karl felt that your accusation that he was voting Yes in order to curry about with the government was over the line? @ Bond, “accusation that he was voting Yes in order to curry about with the government was over the line?” Nope, a little more subtle than that, similar to other views eg Robert Browne critical of the self interest of academics above, what I did factually state was that it would do him no harm. I’m not the only one to criticise any view he might have; nor do I live in a dreamworld where I remove myself from discussion and debate because someone has a different view to my own. I’m sure his reasons for vacating his role on Irisheconomy.ie have a little more depth than that 🙂 But, dude, its been fun crossing swords with you. You bring a knowledge on market matters to this site that is very valuable; occasionally I’ve seen terrific posts from yourself among the dross 🙂 What’s the story re Bloxham, Nessa Childers wants answers: http://www.labour.ie/press/listing/13383061485386178.html I see Paul Krugman has called for a No vote……on Radio 4 Our press don’t seem to be interested. @CB If you want a view on what happened at Bloxhams don’t bother reading the IT http://www.irishtimes.com/newspaper/opinion/2012/0530/1224316915502.html What was the Central Bank doing for the last two years? If they can’t spot trouble in a tiny outfit god only knows what is going on down the docks. Great Krugman has called for a No vote, what a terrific economist 🙂 From Nessa Childers MEP “The lobbying is facilitated by the ‘IFSC Clearing House Group’ which is co-ordinated directly by the Department of the Taoiseach and involves many other departments. This Group has sub-groups focusing on the hedge fund, insurance, banking and treasury sectors with monthly meetings of each in government buildings. The IFSC Clearing House Group along with Dukes, John Bruton with Enda their PR spokesperson: banking sector 1, (taxpayers+democracy) 0 @ Ceterisparibus In the world of Irish Orwellian black/white propaganda one of the propaganda rules that is most favoured is the one where Questions are morphed into Answers: Questions re Bloxham, IBRC or other scandals re IFSC remain as Questions, but go little further. Don’t expect to see anybody leaving Bloxham or Central Bank in handcuffs followed by a court appearance tomorrow or a public trial. “Since 2010 the financial regulator has found that four of the country’s leading brokerages have failed to report transactions in the prescribed manner, and have been heavily fined for their failure.” There’ll be a fine and a coverup. Not mentioned by IT but mentioned by Nessa is the role of financial auditors, how come they didn’t pick up the fraudulent accounting. So next time you have a question, that’s your answer, get it (well, maybe a little fine per question)? 😉 Where’s the blue collar crime CAB investigation into IBRC at ? The question is the answer! No answers only questions that become answers. Simples 🙂 “god only knows what is going on down the docks…” Kathleen Barrington has taken a peak in the past http://kathleenbarrington.blogspot.com/2011_04_01_archive.html @ceteris Since the K-Crusader might not get too much maistream coverage on that in Ireland: http://news.bbc.co.uk/today/hi/listen_again/default.stm about 6.30 in On Bloxhams, just contrast with limited liability banking plcs the comparatively tiny exposure, and the fact that no public bailout was ‘required’. If you assume that either mistakes or fraud will occur because regulation and auditors will not spot or anticipate everything, would you rather have lots of small partnerships around the place or a couple of Anglos? Which business model should be encouraged? @ DO’D “where do you think most of the last one went?” Spending on health, education and social support would have taken the largest part. Where is a source of funding for the second bail out which does not have stringent conditions on annual deficit and national debt? N voters are highly principled and completely unafraid to ask others to suffer for their convictions. @Grumpy You cannot compare apples with oranges! “If the Irish, who have been such good foot soldiers, if the Irish say “no”, that will send a helpful message” to Germany that austerity is damaging the euro-region economy, [Krugman] told BBC Radio. (Yes, but even good foot-soldiers bearing helpful messages do get shot sometimes.) Tanaiste Eamon Gilmore has said there won’t be a second vote on the EU fiscal treaty. He told RTE Radio a “no” vote would make a second bailout more likely. Priceless. http://www.businesspost.ie/#!story/Home/News/Debt+Watch%3A+Italy%27s+bond+auction+misses+target/id/19410615-5218-4fc5-cc85-858cb9780875 That link again: http://www.businesspost.ie/#!story/Home/News/Debt+Watch @ Ceterisparibus Krugman said “I have though about this carefully” “Vote No”. The Journal cover the story. http://www.thejournal.ie/paul-krugman-says-irish-voters-should-vote-no-468368-May2012/ Keugman must have bought into the Pearse Doherty analysis that we would be bailed out come what may. The former engineers assistant has been sent away with a flea in his ear and the Shinner bank a/c is depleted. Zimmer do an excellent range of recon implants for the younger patient. I suppose that leave Mary Lou as next dear leader of our Nationalist Socialists. @Tull Don’t know about that flea in the ear bit…. “He said there was obviously room for legitimate legal and political debate on the question. The Referendum Commission statement was its “best analysis” of the issue and there was absolutely no doubt that it was considered, thoughtful, measured and an absolutely legitimate argument. He said he was not in a position to pronounce that the statement was clearly wrong or likely to affect the referendum result. A final resolution on the matter could only be determined by reference by the European Court of Justice and a dialogue between the Supreme Court and the Court of Justice.” He said he was not in a position to…… In other words one High Court Judge……. Costs issue was adjourned. @ Kevin Donoghue “Of course that doesn’t alter the fact that the ECB can strangle the banks at will.” AFAIK no EZ bank has been liquidated. “Contrary to media reports published today, the European Central Bank (ECB) has not been consulted and has not expressed a position on plans by the Spanish authorities to recapitalise a major Spanish bank.” How does it happen that it makes sense for the ECB to give the banks hundreds of billions via LTRO but that direct recaps are the responsibility of individual countries? @ Tullmcadoo All that happened was a closing of ranks and a kick to touch. The main objective here was to put this to bed without causing major embarrassment to the government, or collateral damage to the “Y” side, of course, there is the sensitivities of his former colleague to also consider. Instead of giving his erudite judgement today, we were told that this was not possible and would be delivered…..? “after the referendum”. No need to give these pesky and bothersome “No” types a lift going into the final furlong. The commission itself came up with some obfuscatory form of words which they issued via Twitter a sort of “muddy the waters” apology. They then maintained, that what they said, via Twitter was substantially the same as what they they originally said. Funny the way our Referendum Commission can say more using Twitter and be more definite about their considered, thoughtful, measured and legitimate arguments than a high court judge can be in open court. @Seafoid “How does it happen that it makes sense for the ECB to give the banks hundreds of billions via LTRO but that direct recaps are the responsibility of individual countries?” The ECB said today that direct financing of banks was contrary to their statutes. They have been fairly consistent on this. @ceteris Yes I can, having witnessed the ‘reward’ portion of the orange culture being inserted into the apples, without the ‘risk’ part. Contrast the Bloxham partners with the chairmen, CEOs, CFOs etc of the banks. The apples used to be apples. They aren’t any longer. @seafoid The ECB didn’t give any money to the banks. They took assets, at significant discounts, as security as part of the LTRO. When Irelanf gave promissory notes to its banks, it only took ownership of something basically worthless in exchange. Cheers CP and Grumpy. It was T.H. Huxley who said that there is nothing sadder than a beautiful hypothesis destroyed by an ugly fact. @ Seafoid The ECB has given term liquidity which will be repaid in 3yrs time. They are asking that governments provide permanent equity capital which has a maturity of infinity. It’s an important distinction which fits in with their interpretation of senior bond holders not representing “risk capital” and thus should not be in the firing line for losses on resolution of a failed bank (though the “new” regime, whenever it arrives, will change this interpretation). http://ftalphaville.ft.com/blog/2012/05/30/1022361/spains-long-climb-to-the-liquidity-hospita http://online.wsj.com/article/SB10001424052702303807404577434602798916414.html U.S. officials are pressing Europe on several fronts, including a broader role for the Continent’s €700 billion ($878 billion) rescue fund, according to people familiar with the matter. Allowing the fund to directly recapitalize European banks—instead of forcing troubled nations to borrow from the fund for that purpose, potentially putting them under even more market pressure—could calm fears of cascading bank runs in Spain and other nations even before Greece’s June 17 election. @Inde_KON What is N? IF you presented this as a first year undergrad report – it would be returned with an NG and a suggestion to brush up on 1st year statistics101. It has as much social scientific validity as the three arbitrary constraints within the fiscal corset. Have ye no sense of social scientific shame? Course this has not stopped Minister Coveney from claiming on Newz at 1 today, based on your dodgy presentation of data, that 90% of Irish economists wear Y-fronts (and probably corsets!) – the Y-front meedja has also reported it … tut tut …. @Stephen FYI – Fence sitting wearing Y-Fronts and an Angeline Corset can be hazardous to one’s health! Course it would look great on U-TUBE (-; @eoin “The ECB has given term liquidity which will be repaid in 3yrs time” You want a bet!? LTRO –> VLTRO quite likely. The key difference, it seems to me, is that the assets remain with the ECB, and they are far from worthless. If the ECB did not have the insight to disbelieve the fantasy that unsecured senior bank credit was nothing more than high up in the credit structure, and bought in to the ‘Great Moderation’ craze, then they really should award themselves a minus Brownie points all round. @seafoid It seems entirely logical for the US position to be ‘never mind the details or the rights and wrongs – just stuff money into the banks’. Spain [h/t naked capitalism Although the Spanish bourse was off overnight it seems other markets are bouncing about on the perception that if things get any worse there will need to be some more action from central banks. The ECB, however, continues to throw cold water on that idea: It is up to national governments, not the European Central Bank, to rescue any banks that get into trouble, ECB policymaker Ewald Nowotny said on Tuesday, adding that the central bank was not discussing restarting its bond purchases or priming to cut rates. Fellow central banker Andres Lipstok reinforced the message, saying European central banks are being pushed into functions that are alien to them and that the ESM bailout fund would be a more suitable vehicle for tackling the bloc’s debt crisis. Asked by reporters about problems in the Spanish banking sector, Nowotny, who is Austria’s central bank governor, said the problems were ‘unfortunate’. “We have to be aware that rescuing banks is the responsibility of national governments,” he said. “The role of the ECB is in the field of liquidity and not solvency.” Which leads to the question, what happens when the nation in question is also having solvency issues? http://www.nakedcapitalism.com/2012/05/all-eyes-turn-to-spain.html @ECB_undesbanke Shudda gone to SpekSavers! ‘Irish voters to give Merkel rare boost’ Bloomberg JHC! Italy bond auction misses target? EU Commission wakes .. er .. up! Angela sleeps on dreaming of her loyal Hibernian serfs addicted to deutsche austerity. Perhaps looking at the Household Debt alone is only one part of the story. Household debt may be reducing, from 220% to 207% as per JM Keynes post above. However if one’s salary is reducing at a greater rate than ones debt reduction, then proportionally the persons debt relative to their income is actually increasing, even though their debt may be less than that 4 years ago. For example. In 2005 I had a debt of 200K, salary income of 50K. My debt was 4 times my salary income. In 2012, my debt is 6% less i.e. 188k, but my salary has reduced to 40K. My debt is now 4.7 times my income. As tax increases continue and other income sources dry up, my debt even though it has reduced from 4 years ago is approaching the stage where I am unable to service it. @Grumpy Jeez grumpy your morphing into a dork. A bit too intellectual….back to boring bond yields. @ceteris That would be dorphing, surely. CARTOON OF THE DAY Ireland The fiscal compact road 30 May 2012 The Irish Times Dublin http://www.presseurop.eu/en/content/cartoon/2086141-fiscal-compact-road @ Grumpy Touché The story of the day is Madam Lagarde pays no tax on her 450,000 salary and 83000 expenses. And she had the temerity to berate the Greeks for failing to pay their taxes. 10 yr Bunds at 1.26% and Swiss at .53%…time to panic? “No, but…” to the fiscal compact 30 May 2012 The Irish Times Dublin In the midst of an economic crisis still in constant flux, it would be pointless for the Irish to vote Yes on the May 31st referendum on the fiscal compact, which for the moment is but a collections of penalties for misbehaving signatories. Come back later, argues Fintan O’Toole. http://www.presseurop.eu/en/content/article/2075611-no-fiscal-compact @ceterisparibus … time to panic? Too late .. http://www.presseurop.eu/en/content/cartoon/2035321-beware-wave Der Euro http://www.presseurop.eu/en/content/cartoon/2071241-safety-cord Banks may require an extra €3-€4 billion, says Elderfield http://www.irishtimes.com/newspaper/breaking/2012/0530/breaking40.html Lovely day … DOD “16.19 Ireland heads to the polls tomorrow (see 14.31) to decide on the EU’s fiskalpakt. Conservative MEP Daniel Hannan argues “that it’s hard to see what else the eurozone leaders have to do to encourage Ireland to vote ‘No’ to the FU Treaty”:” telegraph How is this for hubris…. “This is about stability, bringing confidence to the euro,” the premier said as he campaigned at Dublin railway station. Kenny said a “yes” vote on the German-backed pact would show Europe that Ireland could lead by example.” Just as the euro is going through the floor….good man Inda …….timing is everything. Spanish Civil Guard officers in full riot gear secure the area in front of a burning barricade blocking the A-66 highway in the northern Spanish village of Campomanes, during a coal miners protest against government spending cuts in the mining sector. Photograph: Eloy Alonso/Reuters IT front page now. Wonder are they wearing teflon Y-Fronts? @ CP Bloxham- another stunner for Irish auditing Lagarde must have been snitched on by an underling. Mais quelle arrogance. FYI Der Spiegel High-Stakes Referendum Ireland’s Test Vote on Merkel’s Fiscal Pact By Carsten Volkery in London Though past referendums on European Union issues in Ireland have proven to be problematic, this time things are expected to go off without a hitch. When the Irish vote on the EU “fiscal compact” treaty on Thursday, their clear approval is expected. Polls predict that some 60 percent of the voters will tick the Yes box on the controversial treaty, which commits all ratifying members to fiscal responsibility. But as certain as a majority vote may appear, German Chancellor Angela Merkel will nevertheless be anxiously focused on the activity in Dublin on Thursday. In the past, the Irish have repeatedly proven to be both unpredictable and resistant to being told what to do. Should they reject Merkel’s fiscal pact, it would be a further setback for the German chancellor following the election of Socialist François Hollande in France. http://www.spiegel.de/international/europe/irish-engage-in-intense-debate-over-euro-zone-fiscal-pact-referendum-a-836006.html NO .. er .. comment. “Irish Auditing” – sounds like a good idea – has anyone ever tried it out? @DoD And they are still paying out bonuses to auditors …And you talk sh*t about it and they say oh we gotta retain the talent What are you talking about talent you stupid ****** That’s the same ****** talent that ****** the whole thing up DOD, I shall be casting my ballot tomorrow to ensure a primary surplus in 2014 and possibly an exit from the EZ. I think 20% reduction in the state payroll and a ceiling on all SW payments to each claiming household would be a start., ‘Fellow central banker Andres Lipstok reinforced the message, saying European central banks are being pushed into functions that are alien to them and that the ESM bailout fund would be a more suitable vehicle for tackling the bloc’s debt crisis.’ – They’ve been rather willing to engage in actions outside their remit – witness our former ECB deputy pre-empt Lenihan with that phone call. And they had the brass neck to criticise Hungary over CB impartiality ! Anyone prepared to call a few constituencies? I presume Donegal NE and SW will be No Mayo ? Dublin leafy- will they be yes ? Cork North West probably no Maybe it will be along the lines of the divorce referendum http://www.adnet.ie/divorce.html A bit of sham by indecon. Talk about loading the dice. Seafoid, Watch the Leinster commuter belt. These are volatile and full of battlers. If as a group they vote No then it will be a lot closer. I anticipate the north side of Dublin will go No and south side yes. The highest Y could be Dublin S- home constituency of Winston Churchtown. The West will be interesting to see if there is a Ganley surge. I think it is 50-50. Glad that I do not have a sub to the FT to read more back to the future stuff . Have a read of Articles written by the same author on the 28 September 2008 and the 1 October 2008 on the Bank Guarantee. If you live in LaLa Land you may believe anything in print……… @ Seafold + 1 I see you got up early to vote! @TRP the 28 of Sept 2008 was not the major crime…the extension in 2010 would fill that slot exacerbated by a decsion to pay unsecured bondholders not envisaged by even the 2008 guarantee Government are in a bit of a cold sweat tonight! All the arrogance and swagger is disappearing pretty fast. http://www.irishexaminer.com/ireland/yes-side-fearing-defeat-after-low-turnout-195910.html @R Browne Dont believe everything you read in the papers including “de paper” as you will often find ordinary people have a lot more cop on than the media take them for. @ V Barrett Do you want me to give embarrasing quotes from those articles of the 28 September 2008 and 1 October 2008. – “State Guarantees can avert depression” and ” Lenihan’s masterstroke……” I dont expect any “economist” to be advising Governments to be giving Guarantees to creditors of commercial entities. However, once give by a Sovereign they cannot be taken away which is why I dont agree with them in the first place. Comments are closed.