Germany, Greece and the Marshall Plan

Albert Ritschl has written a very informative response to the NYT op-ed by Hans-Werner Sinn in this Free Exchange post.  (See also Karl’s post here.)

A while back (in pre-crisis days), Tim Guinnane wrote a nice paper on the 1953 London Debt Agreement – available here.

175 replies on “Germany, Greece and the Marshall Plan”

I posted this link to a relevant article by Philip Stephens on another thread.

@ All

To situate the ECB discussions in their proper context, this article by Philip Stephens makes a quite outstanding contribution.

Hollande is, indeed, standing in the shadow of de Gaulle. The euro, for the management of which the ECB is responsible, is the sword of Damocles which will either make or break Europe.

Many of the points made in the Satayjit Das contribution have been adverted to repeatedly by some commentators on this blog.

The point that is most striking in these contributions, however, is the omission of any reference to decisive facts (leaving aside Professor Sinn’s contribution which is on a par with his other contributions). One would imagine that Europe was not recovering from a devastating bout of mutual destruction, and that the Cold War never existed, in relation to the debate on the Marshall Plan. And that all the economies in Europe were of an equal size when the reality is that the divergence between the German and the French economies is the core of the problem.

As Philip Stephens points out “To decouple from Germany and put France at the head of Europe’s Club Med would be to tear up half a century of French European policy”. It seems that now is not the best moment in history for France to have a president who has never previously exercised government executive authority.


Transcript of a Conference Call on Ireland

MR. BEAUMONT: On the first point, it’s certainly the case that Ireland’s ability to regain market access depends very much on broader financial conditions in the Euro Area, especially in 2013, and so that remains a risk.

In terms of the point about political support and the promissory notes, in fact, everything we write is directed to our Board, so we’re helping our Executive Board understand the domestic situation in Ireland.

These promissory notes used to recapitalize failed banks entail repayments of 3.1 billion euros annually, which is quite similar to the amount of fiscal consolidation that is done annually. These notes are very difficult politically to keep servicing in the current manner, and that’s what we saw at the end of March where instead of making the repayment in cash, the repayment was made in the form of a long-term government security.

MR. BEAUMONT: Yes, this is specifically in relation to a potential shortfall in growth in 2012. Currently we have no signs that, but if it were to happen, we would support accommodating a revenue shortfall rather than trying to offset it within the current year.

I see Albrecht Ritschl is a member of the advisory board to the German ministry of economics. So the German government has at least one very good adviser, if this piece is anything to go by. But there’s no indication that Merkel is going to get a clue anytime soon.

Great response. Really well reasoned and comprehensive smack down of a somewhat ridiculous argument.

Arguing about the direct cost of wars as a retorque I feel I bit more uncomfortable with. As wars start for many reasons.


Cheers for the link. Basically they’re saying:
1)There’ll be no mini budget this year
2)Europe is holding up any talk of PN discounts.
3)We’ll need to dump tracker mortgages in to IBRC
4)Ireland needs a deal on PN if it’s to have a hope of returning to the markets to borrow.


I have not read the article by Philip Stephens but the sentence you quote must be challanged:

“”As Philip Stephens points out “To decouple from Germany and put France at the head of Europe’s Club Med would be to tear up half a century of French European policy”. ”
The reference to “Europe’s Club Med” is a bit rich.

The fact is that, what is now almost if not a majority of countries that joined a particular club, the EZ /ECB/Euro are distinctly unhappy with the way the club is being run by the principal members. Those disaffected members have not been able to influence club policy in any appreciable way and have had to watch from the sidelines as the principal members do very well.
So it is not putting France in charge of “”Europe’s Club Med” that is the issue. The real issue is can the principal members of the club accommodate its more ‘mediocre’ members as Merkel would call them.
In the absence of the mediocre attaining the superlative or the superlative accepting that she will have to live with lesser mortals, then this particular club ist kaput.

Yes Mercantile states are most vulnerable in a depression , especially higher quality mercantile product exporters ( I don’t think we count as we are not a NATIONAL mercantile state)
As long as Germany remains in the Euro it can borrow off our accounts driving down the cost of its capital , laying waste to its now wider hinterland and exporting its surplus to people with the money to buy the stuff – Asia , North America.

But its a policey that is net negative to wealth over the long term as it is driving up the cost of worldwide inputs.(oil)

This madness cannot go on as the global supply chain is just too long and tenuous……. but they will try.

PS if Greece was Getting the money it would be buying the product…. it ain’t buying.
Greece new private car regs

Y2008 Jan – May :131,993
Y2012 Jan – May : 26,902 (prov)

German domestic new car regs is also showing tentative signs of slowdown this May (although of course its only 1 month of data)

– 4.8% this May when compared with May 2011…
Could be a blip as it is stable since the beginning of the year Jan – May 2012 : at +.03%

Prof Ritschl gave an interview to Der Spiegel last year.

A period of competent government in Greece could open up a lot of possibilities. Its FDI record is abysmal compared with its neighbours despite having superior partly EU-financed infrastructure.

The Greek government “has an extraordinary portfolio of assets” and the balance sheet of the government’s Real Estate Development Company amounts to €280bn, according to the IMF.

SPIEGEL ONLINE: The Germany of today is considered the embodiment of stability. How many times has Germany become insolvent in the past?

Ritschl: That depends on how you do the math. During the past century alone, though, at least three times. After the first default during the 1930s, the US gave Germany a “haircut” in 1953, reducing its debt problem to practically nothing. Germany has been in a very good position ever since, even as other Europeans were forced to endure the burdens of World War II and the consequences of the German occupation. Germany even had a period of non-payment in 1990.

SPIEGEL ONLINE: Really? A default?

Ritschl: Yes, then-Chancellor Helmut Kohl refused at the time to implement changes to the London Agreement on German External Debts of 1953. Under the terms of the agreement, in the event of a reunification, the issue of German reparations payments from World War II would be newly regulated. The only demand made was that a small remaining sum be paid, but we’re talking about minimal sums here. With the exception of compensation paid out to forced laborers, Germany did not pay any reparations after 1990 — and neither did it pay off the loans and occupation costs it pressed out of the countries it had occupied during World War II. Not to the Greeks, either.


France has run out of road and is struggling with twin deficits. It has run a trade deficit every year since 2002 and a financial deficit every year since 1975.

Hollande’s problem is that he has no additional reserves to spend domestically; even during a boom, the country had a trade deficit and EIB spending across Europe will not have a significant impact.

It doesn’t help Europe that US consumers in recent times have had income rises less than inflation while middle class incomes have been stagnant for decades. In China, the health care obligation of companies was removed in the 1990s, health care costs are high while the insurance market is not well developed. Meanwhile, the rising middle class have a problem shared elsewhere: mortgages, running two cars and with the one child policy, an obligation to support two sets of parents.

France does gain from the luxury goods market which it was recently reported is now equivalent to the national output of Spain or Australia.

@ Joseph Ryan

I presume that you have not read the article because of the FT paywall. The article was, however, syndicated and this link may work.

France has many features of a Mediterranean country but that is not its immediate difficulty. It has elected a president, and seems about to elect a majority in parliament, which seems to think thay the good times can simply continue to roll. Hollande has reduced (!) the minimal increase in retirement age (admittedly only for those that have clocked in 40 years), promised increases (!) in the minimum wage (a good third higher than the rate in Germany; where such exists only in various sectors) and proposes to introduce legislation preventing (!) companies from either moving or downsizing. At the same time, he wishes to have Germany agree to the introduction of eurobonds (!).

Germany may carry a major responsibility in the crisis – and Merkel is simply the best of a bad lot of a generation of European leaders – but cannot be held responsible for the behaviour of politicians in other countries.

Either Hollande reverses engines and recognises the weakness of his position – which can only be compounded by appearing to be involved in an effort to isolate Merkel (since denied by his PM) – or there is real trouble ahead

My view is that he will.

@Albert Ritschl

Danke for the precise and informative tutorial.

Love that line: “The German position is that these debts have ceased to exist.”

OK, as a German, Sinn was a fool to raise the subject of the Marshall Plan, but Karl Whelan is a complete idiot to remind him of the “massive financial and human cost incurred by earlier generations of Americans” for the sake of the “freedom and prosperity that modern Europeans enjoy”, and to pompously call for an apology from Sinn. Besides his insensitivity in using WWII to attack a German, Karl Whelan forgets that he is from a country that shamefully persecuted its own men who contributed to that freedom and prosperity ( ) and offered its condolences to the Germans on the demise of Hitler ( ).

What I would be more interested to know is when Whelan is going to offer an apology for repeatedly criticising misrepresentations of Sinn’s views, and for misleading people by denying Germany’s massive exposure to real wealth loss arising from its TARGET2 credit. Whelan may have taken his ball from this blog and run home to his own website where he does not allow comments, but as the TARGET2 issue has been considered by an increasing number of more eminent commentators (Krugman etc), it is becoming clear that Whelan is wrong.

A Joycean note for Greeks on Bloomsday

Saturday, June 16, 2012

Austerity Kills: How the EuroCrisis is Being Used to Break the Social Contract

One aspect of the Eurocrisis that has not gotten the attention it deserves is the way it is destroying not just jobs, but the very underpinnings of society. People who took actions that were prudent at the time are increasingly at the mercy of forces beyond their control. And this isn’t a tsunami-type disaster but a man-made one whose severity is worsened by the callous attitudes of the European elites.

I sent the following email to Sinn the day his piece appeared in the New York Times:
“Dear Mr Sinn
I found your piece thought-provoking. But can you explain one thing for me. In your fourth paragraph you speak of the “constituting principles of a market economy”, and state that “it is the creditors‚ responsibility to choose their debtors. If debtors cannot repay, creditors should bear the losses.”

Of course I agree with this statement. But what I need to understand is why you do not seem prepared to apply the same principle to (for example) German banks which lent recklessly to over-extended Irish banks. These German banks chose their debtors. The debtors could not repay (and their shareholders were correctly wiped out). But the German creditors are not bearing their losses.

Are you aware of any ethical argument to support the idea that these German (and other) banks should now have their losses recouped by ordinary Irish taxpayers?

With best wishes”

I am still waiting for Prof. Sinn’s response….

The ECB just blinked .. or maybe it just winked .. or was it a mere twitch?

Text from Blind Biddy: Hey Gov’nor! What’s up?

early exit polls must be out ….. in Greece and in Egypt ….

THE BIG PICTURE – THE WAR WITH THE DODGY FINANCIAL SYSTEM (Greece and the EZ crisis are but symptoms …


But what is evident with the series of financial crises over the last 15 years, which used to occur mainly in developing countries but which are now consuming the developed economies, is that the markets that have the real power are financial markets. And these are stateless.
Worse, they have taken over the role of the state to set the rules of money in a deeply pernicious fashion. Indeed, we can go further. Global financial markets have become destroyers of states, not a new kind of state. That the traders rely, as citizens, on some sort of state structure to live, is merely an irrelevance, an inconvenient aside.
As I have argued before, it is impossible to deregulate financial markets because money is rules about value and obligation. So what happened instead when financial markets were “deregulated” is that the governments’ role as the setter of rules was handed over to traders, who made up their own rules: more than $700 trillion of derivatives, intense high frequency trading and so on. It results in a weird contradiction: governments trying to save their systems from the new rules being created by the traders, yet the traders relying on the state’s rules about finance to overlay their games of meta money. Meta money traders have to have conventional share trades between buyers and sellers to apply algorithms to manipulate the markets at high speed.

Well worth a good scan ….

@ All

It seems that the Elysee has decided already that the tone of conflict with Germany needs to be lowered.

The elements of a possible agreement would seem to lie in the following;

“L’objectif français pour le Conseil européen de la fin juin a sensiblement évolué. L’urgence, c’est la stabilité financière de la zone euro. «Le but est de donner des éléments à court terme pour déstresser la zone», explique-t-on à l’Élysée. Les instruments existent et pourraient être mis en place «dès cet été». Côté français, on plaide pour plus de souplesse dans le Mécanisme européen de stabilité, ou un système d’obligation à court terme, à travers par exemple le «fonds de rédemption». Une idée allemande, n’oublie-t-on pas de souligner…”

Another example of the strange malinvestment on this continent……while the European commission shovels money into the Lyon – Turin grand tunnel project simple investments are not considered……

The Roscoff to Morlaix rail route ..connecting onto Paris.
Its been stripped of investment / run down for decades when once it went direct to Paris.
Only 3 slow railcar connections a day (2 in winter)

In the words of this Utuber….
“a SNCF XGC Train arriving and departing Roscoff on 24 09 11
I visited France for an extended day trip and missed the local bus service from Roscoff. I ended up waiting for quite some time in a very sparse station for this little XGC diesel variant train, which was quite enjoyable! It was very clean, surprisingly quite for a diesel, punctual and the ticket collector was very polite – highly recommended”

You would think Enda boy would do something useful and whisper this into the French Presidents ear.
It could become the next Big Tram Train project after the Nantes to Chateaubriant thingy is completed at the end of this year.

But this all follows a pattern……
The new Larne Cairnryan route / debacle is the best example of this…. taking out the town of Stranaer and the rail lines sunk capital on both sides of the sea in one dramatic malinvestment decision.
Now the Northern Ireland executive must spend 100 million + on a road link when road traffic is declining!!!

See Fig 4.3 (traffic especially commercial has sunk and then flatlined post 2007)
Also the final stage of the Larne rail route has become unprofitable because of the missing rail connection on the other side… will have a reduced service……..

You really can’t make this stuff up but it does illustrate how the corporatization of the commons to maximise profits of single companies extracts general wealth over time.

Germany is not alone in this sphere ,its weakness is cars , ours is the built envoirment – it has destroyed the western fabric.

Germany, France, Spain, Greece, even America gets a mention above.

The reaction to the Tol et al publication or “unpublication” showed that there is very little appetite in Ireland for honest self-scrutiny.

When it came to benefitting from the Marshall Plan Irish official cack-handedness played its hand.

More energy needs to be devoted to the use of the next bailout or ‘Marshall Plan’ and whether anything useful will be done in the meantime to address unemployment in the Irish economy.

For goodness sake all this gaping at the ins and outs of antics between , Merkel, etc. is a futile distraction.

“Love that line: “The German position is that these debts have ceased to exist.”


@The Alchemist

We are in denial so we cannot admit ( even to ourselves) that a second bailout will be needed. Even the IMF have recognized this in saying we need relief on the bank debt.
I agree with you that we should be focusing on our own situation whilst Hollande and Merkel play their power games. Alas, our glorious leaders have adapted the three monkies strategy …as someone else pointed out recently.

@The Alchemist

Yes – response to misery of a million is very poor …. p1ss poor.

Did you note the IMF comment on cross-departmental policy?

@Ministers Burton, Bruton, Quinn & Reilly + The Revenue

Any comment? Or are you all just ‘cross’ with each other?

We should offer an accelerated version of the Troika targets, perhaps to running a budget surplus as early as next year, this should be offered in negotiations on writing off liabilities associated with promisory notes, bank related national debt or whatever effectively lowers our national debt to below 100% from the year in which we achieve the surplus. Further write offs could be negotiated for given time points should we remain in surplus for example. This model would provide the short sharp shock needed to stop the rot in the Irish economy and offer an enticing model to German minded interests in a type of trade off, which could see Ireland return to markets in 2014 and provide an example of a program that works


Rich – you must be rich……
We are already transferring a huge amount of real resourses (blood) to the cores cold dead heart.
Short Sharp Shock !! – have you been living in a tree or what ?
I live in a hole and even I know whats going on (to a small degree)

Please forget about the debt thingy for a second – thats a metaphysical concept used to control both nations and individuals.

The question always boils down to – who is burning the Diesel.

Stalingrad was more then a political battle.

You take the Caucasus area – you take the oil.
Autobahns and Imperial overstretch go hand in hand….. just go ask Eisenhower when you release this mortal coil.

Currency union / UK , Norway, Switzerland etc matrix – oil demand.(OECD Europe)
OECD Europe Y2006 : 15.7 MBD
OECD Europe Y2012? : 14.1MBD ~ (March 12 month moving average)

Your actions would merely transfer more real resourses to the core at our expense (very bad zero sum game economics)
Daniel Gross has recently stated the Autobahns are getting full which means they are not burning diesel with much efficiency.
Do you want to give them more precious Diesel ?… to do what exactly ?

@ All

At the risk of introducing a further “futile distraction”, herewith an interesting Voxeu article on the state of play with regard to the use of the existing legal possibilities (including the ESM which will have been ratified by Germany on the eve of the next really, really, really decisive meeting of the European Council while it will not have been ratified by France or a series of other countries important to the process).

If the Le Figaro report of the Elysee briefing is correct, this is the menu from which immediate measures will have to be chosen.

The footdragging by the European Parliament, representative of national positions no longer in tune with the times, will also have to be corrected.

@ The Alchemist


The narrative of being all victims of international elites – – claimed by the local elites and the voters who supported them — is a little threadbare at this stage.

When Donogh O’Malley, minister for education, proposed the plan for free secondary education, my mother asked: “Who will do the dirty jobs when everyone is educated?”

I also recall that term ‘educated’ when it was used in a forward to a once infamous book, which I have commented on elsewhere and reproduced below.

Last week, Jimmy Deenihan, minister of the arts, launched Yeats Day and said: “Ireland has long been recognised internationally for the important role that Irish creators have played nationally and internationally for many generations.”

We now of course trade on the international recognition when contemporary local recognition was in short supply.

In the year before Taoiseach Éamon de Valera spoke in a radio broadcast on St. Patrick’s Day 1943 about “the laughter of happy maidens, whose firesides would be forums for the wisdom of serene old age,” the fireside tales of Tadhg Ó Buachalla, a tailor, and his wife Ansty, about life in the area of the beautiful Gougane Barra in the Cork Gaeltacht, were immortalised by Eric Cross in the book ‘The Tailor and Ansty.’

The book was banned and Frank O’Connor wrote in an introduction in a later edition: “But we were all too innocent to anticipate the effect the book would have on Mr. De Valera’s well-educated government. It was banned for ‘being in its general tendency indecent.’ I didn’t mind them saying that about my own work. After all, you don’t take up a dangerous trade like literature in Ireland without developing the hide of a rhinoceros and renting a house in a strategic spot with direct access to the sea. What alarmed me was that the Tailor and Ansty lived in a mountain townland where people still believed in fairies.

The man [who defended the book] was a Protestant landlord, Sir John Keane, who tabled a motion in the Senate condemning the Censorship Board. Everyone interested in either censorship or in Irish public life would do well to get hold of the four day debate in the Senate Proceedings of 1943. Reading it is like a long slow swim through a sewage bed.”

@ All (and Gregory Connor)

I have just noticed that “cocos” get a mention in the Voxeu article.

“it is also envisaged that banks may be required to issue a sufficient proportion of their capital in the form of convertible debentures, which would be converted into equity by discretionary decision of the resolution authority”.

I am still mulling over what this sentence from the Le Figaro report might mean.

“Côté français, on plaide pour plus de souplesse dans le Mécanisme européen de stabilité, ou un système d’obligation à court terme, à travers par exemple le «fonds de rédemption.”

I have a lot of sympathy for rebeleconomist, as much as I love Karl Whelan that post is both ridiculous and offensive – These World War 2 references really need to end.

Someone as intelligent as Karl Whelan can’t possibly believe, as the post implies, that the United States entered World War 2 for solely, or even primarily, altruistic reasons

@ rf

Whatever else, the wisdom of the saying “what ever you do, don’t mention the war” comes to mind.

Why not mention the war?

Germany with the full fanatical support of most of its population did lay waste to the whole European continent (and north Africa) they did kill millions of people in an industrialised fashion on a scale never seen before or since.

If the Germans can not face up and accept and learn from their history then who is to say all of that will not repeat?

The Greeks are not saints (neither the Irish) but neither are the Germans for that matter, the last time the Germans got all smug and superior about themselves bad things happened, burying head in sand and forgetting the past is a bad move.

Mr Sinn rewriting history to suit his arguments is irrelevant?
The events leading up to and being the cause of rise of Nazis are irrelevant?

German politicians painting the Greeks (and all the rest of us “peripherals”) as lazy, incompetent, unable to rule themselves etc etc is irrelevant? where have we heard arguments like that last and how did that endup?

I didnt say that – I said comparing German intentions and capabilities in 1939 and the present day is pointless. As is sinking to the level of some of the more obnoxious anti ‘periphery’ commentators

History, and historically embedded societal, institutional, power, and class structures always matter; always.

rf: “…as much as I love Karl Whelan….”

I’m reminded of that wonderful moment when Ben Briscoe, in a speech marking his belated defection from the Haughey camp, announced with great feeling: “I love Charlie Haughey…”

As Briscoe paused for breath, Haughey responded softly: “I love you too Ben.”

That was the one time in my life that I thought there was something likeable about the old rogue.

@ RebelEconomist

“What I would be more interested to know is when Whelan is going to offer an apology for repeatedly criticising misrepresentations of Sinn’s views, and for misleading people by denying Germany’s massive exposure to real wealth loss arising from its TARGET2 credit.”

I noticed that, their exposure will be almost a trillion by the end of the year. I also preferred Laura Noonan’s realism to Karl’s hypothesis on the PN’s though in fairness I think he did apologise to her.

That’s one of the disadvantages of running your own blog, especially when you don’t allow for interaction from those you expect to read it. A lot of our intelligentsia prefer to operate in a vacuum, they feel it is enough to be challenged by a few students.

From my coporate dealings with Germans there is an intolerance of operational differences that betrays a deeper impatience with their internal standards. Americans are frequently mocked and the Irish are always asking for ‘more’. They may well be correct in their judgement of other cultures and practices, its the way they manage these in a team environment which makes aloof and arrogant. I do not believe the Germans would tolerate our indifference to internal control and management failures – a trait I would admire. As the German consortium that purchased the Nuclear plant from Mr Burns put it ‘We Germans are not all light and happiness you know’

Loved Laura Noonan’s ‘realism’ with Steve Keen on the Vincent Browne show …

does anyone have the link? unlike DOCM I’m mulled out today .. it is another classic .. think DanO B was in ‘realist’ mood as well … but methinks Keen thought him a bit of a mule on the night… afaik Lucinda & Laura get on well … nuff said on that one for the day.

Anyone interested on the state of play on regulating €750 Trillion in Dodgy Derivatives? Sleep well … [I’m off to the troika of Harrington, McDowell and the nonCeltic Tiger …]

Ciaran to Rebel Economist: “Any chance of a link to these eminent commentators [who support Sinn on TARGET2]?”

Eminence is in the eye of the beholder I guess. For my part I’d prefer to see something in the nature of a coherent argument. Sinn hasn’t come up with one.

@Robert Browne

‘our intelligentia’ – what a wonderful idea! Where can we get one?

Glad to know you are not one of the 70% of the unemployed on the rich salary of €188 a week.


Your rhythmic chant around transport infrastructure, diesel and EIB investment is from a parallel universe, these issues rank up there with global warming and overpopulation they are not issues for our time. The electric car will reduce emissions and enable cheap mass individual transit with lower carbon footprint and less transfer of wealth to the middle east

This flow of capital to the core is another drum beat that permeates this site – the Germans/French loaned the money and are desperate to get it back to protect their own banks, i remember the rubish spouted about Ireland giving loans or contributing to loans for some one or the other and listening to how well we would do on the margin of interest we would earn! This is typical if not entirely fair. We borrowed the money to inflate our egos and embody the Irish fantasy of being a modern economy deserving a first world standard of living well the votes are in and the reality is different the best we can do is reboot and reformat the economic model for another crack, the staus quo is a mirage in a credit desert and reincarnation is our tomorrow

Just because the oil is below ground does not guarantee it will be lifted…it will require more capital which will eat into discretionary demand.

Conservation will also eat into discretionary demand as the most effective conservation outside of starvation is wise investment ,this conservation will also reduce the price which may make it uneconomic to extract.

Just Suppose the French decide to reinvest in the Roscoff branch line….(there is no evidence of this as far as I know) – rails must lifted and replaced , new ballast put down ,electrical cables , signalling perhaps , rolling stock ,a new stations in Plouénan (nearby) pop :2,472 (abandoned 1981) & Taule : pop :2,895 (abandoned 1981)é

Which means less consumption…. less houses , less cars ,less holidays.
But these capital intensive things must be done as the oil is not available to waste.
(But they have two of those all in one rail lifting ,concrete sleeper deposit machines so they will around to it eventually I should think)

Besides thats, its BP stuff – you would want to be mad to believe those boys future forecasts.

But the most immediate problem Europe is facing is its lack of soverginity.

Think of Japan – all of its reactors went offline , yet it could buy LNG & oil no problem because it was sovergin.
Europe is not – its the new Saudi Arabia for the Planet , Spain collapses and the $ price falls…….
Think about that – the world is falling in love with Europe for the first time.

When Germany decided to not reinvest in Nuclear it externalised the higher cost of Nat gas & coal on our backs as we share a currency……its borrowing off our account.

This is bad very bad – much worse then my darkest fears.
If we could take German car production resourses and somehow give them a French mindseton things we might get out of this hole but theres one problem with that – they are Germans with a mercantile fetish.


Does my employment situation lessen my opinion or is it the content that you warrants your dismissive remarks?


Merely a humanistic statement.

Might have something to do with your ‘a budget surplus as early as next year’ and my recent perusal of the IMF updates on earlier thread. But as I noted above I’m mulled out today … but if you could shed any illumination on how 70% of the unemployed could do a ‘budget surplus’ on €188 a week it would be greatly appreciated.

You will get no argument from me when you say the Irish are fools …..& traitors

But we were but a conduit for the cores mercantile & interest earning ambitions.
We however owe money to the core…..which is a advantage, – I however don’t want to see the continent tear itself apart but if the Germans want our money to sell real energy intensive goods to Asians they can go F$£k themselves.

PS Electric cars are absurdly capital expensive , lithium for example is very very very expensive – the French loan you the battery for a reason.

Private Cars also have this habit of being unproductive – they sit in driveways and outside workplaces all day doing nothing.
Its a Luxury we cannot now afford – infact we never could.

Taken from namawinelake and it is surely the quote of the week:

“Quote of the Week

“Dear Greeks, create clear political conditions. Vote courageously for reforms instead of angrily against the necessary, painful structural changes. Your country will only be able to keep the euro with parties that accept the conditions of the international creditors. Resist the demagoguery of Alexis Tsipras and his (radical-left party) SYRIZA.” Front page of German edition of The Financial Times on Friday. ”

“parties that accept the conditions of the international creditors”

And that in a nutshell is the crisis to date. The creditors, regardless of country or ethnicity have controlled the agenda and institutions dealing with this crisis.
In cases where democratic governments don’t comply willingly, they have solutions for that too.
It is a creditors hegemony that needs to be broken because it is breaking the debtors and the entire economic system.


I dont understand your stance to be direct, I gather your position is the current unemployment assistance level is sacrisanct? Unemployment assistance among the range of social transfers in Ireland are expensive in the shadow of a €16 bn deficit and 121% debt to GDP – can we afford them? State sector Wages and welfare must fall by an amount approximate to the budget deficit (similar to what might happen in the event of a new punt vs euro), perhaps more I believe in a budget surplus to regain international confidence. Employment taxes would worsen the Richard Tol % (ie those better off on welfare). What else is there to do?

Spose you could re-form the PeeDees! Or take Laura and Lucinda to tea. Nite.


“The French objective for the European Council in late June has changed significantly. The urgency is the financial stability of the euro area. “The goal is to give some short term to de-stress zone,” says one as president. Instruments exist that could be set up “this summer”. French side, it calls for more flexibility in the European Stability Mechanism, or a system of short-term obligation, for example through the “redemption fund”. A German idea, remember it does not emphasize …”

No muffs in this one.

Any linguists care to improve?

The night before Greece begins the process that will end with it being kicked out of the Euro,” the night before Larry was stretched” is the only song that seems appropriate

@ Michael Hennigan

“I also recall that term ‘educated’ ”

Here it is from George Hook ”

The law student from Queens passes to the medical student from UCC who then transfers to the commerce student from UCD

(but it was a fabulous try)

Starts at 1.26

It always brings me back to Morgan Kelly’s point about the banks being run by slightly dim former rugby players.

@ grumpy

Noblesse oblige!

“L’objectif français pour le Conseil européen de la fin juin a sensiblement évolué. L’urgence, c’est la stabilité financière de la zone euro. «Le but est de donner des éléments à court terme pour déstresser la zone», explique-t-on à l’Élysée. Les instruments existent et pourraient être mis en place «dès cet été». Côté français, on plaide pour plus de souplesse dans le Mécanisme européen de stabilité, ou un système d’obligation à court terme, à travers par exemple le «fonds de rédemption». Une idée allemande, n’oublie-t-on pas de souligner…”

The French objective for the European Council at the end of June has evolved considerably. The urgency is the financial stability of the euro zone. “The objective is to find the elements in the short term to destress the zone”, the people at the Elysée explain. The instruments exist already and can be put in place “from this Summer”. The French side argues for more flexibility in the ESM, or a system of short-term bonds, via, for example, the “redemption fund”. A German idea, there is no failure to remark…

There was a contribution which I seem to recall on the possible issue of bonds with a maturity of less than one year – which I can no longer find – but the link to the redemption fund idea is beyond me. Maybe the journalist misunderstood!

You simply don’t know what we can afford as there is no we… in us….. this is not a collection of European sovergin states competing for capital – there was simply a artifical tooth extraction operation which directed capital to the core.
We were a conduit during the credit hyperinflation phase and now a conduit again during the money deflation phase.
I would recommend you watch the latest Keiser report where Max interviews Yanis V. – they describe the latest money deflation phase as a sort of Ponzi austerity where the austerity actively promotes the acceleration of debt…… this “austerity” is not trying to save real resourses, it is trying to save a stock of debt by destroying Physical capital on a huge scale.

Germany would find it impossible to bid for such a large share of BTUs if it were a national economy again and we are likely to get a larger share as our resourses are going chronically underutilized at even these collectively low European energy ration levels.

Below is a comment on the above Financial Times article;

1. William Thayer Sr | June 15 1:26am | Permalink
I recommend everyone take a look at the link offered by John Corcoran below.

The true value of a real estate property is the present value of its income stream. For example, if you own an apartment building and the rents fall in half, then the value of the building falls in half (assuming the same discount rate etc.).

What happened in Spain is similar to what happened in the US (as far as price increases). In the US, property values went from 100 in 2000 to 200 by 2008. In Spain it was worse. The values were 100 in 2000 and 300 by 2008. The US property values have dropped to 140 by 2012 but in Spain they are at something like 270. They need to drop to somewhere in the 140 range like the US. This means prices will drop by half. This hasn’t happened yet which means the worst is yet to come.

Let me get back to the income stream. With 25% of the people unemployed and therefore contributing nothing to the GDP, what does this say about Spain’s present value? It is, unfortunately, overvalued. This means its bonds are going to be a tough sell.

I really feel sorry for the Spanish people because they are so nice.

The solution for Spain is more job creation. Spain is weak in advanced technologies and marketing which are the key to new jobs. What should it do? It should do what China did. It should use Special Economic Zones. China has the kind of growth that Spain needs. Of course, it will be pointed out that China has the wage advantage since they only pay their people about $4/hour. Here is what I think Spain should do. Use its unemployed people. Have Spain continue to pay their unemployment (say $10/hour for example). However, charge the companies coming into the Special Economic Zones the same wage as China….just $4/hour. Then a US or European company would have as much incentive to put their shoe plant in Spain as in China. There would be fewer unemployed people in Spain and these unemployed/Special Economic Zone people would be making $14/hour which would improve their lot. It would also improve Spanish Exports vs. Imports.

In the last decade, the Eurozone has lost about half of its manufacturing to China. Why not get some of it back rather than just paying the unemployed to sit around?

Happy BLoomsday

BLoomsday to Bustday

In the book “The Fitzpatrick Tapes“by Tom Lyons and Brian Carey,page
184 chapter 2 reads as follows;

“Fitzpatrick says he had no role into the decision by the government to
guarantee the bank. “No.No. Absolutely zilch. I had no idea
whatsoever. None.“ He had recently spent an entire day with the
Taoiseach;he had influential friends in Chairlie McCreevy,Peter
Sutherland and Fintan Drury;but instead of trying to influence the
course of events he had had dinner in the house of his old school friend
Jackie O`Driscoll in Bray and gone to bed at 11 p.m. A contact
within the central bank rang him at 5.30 a.m. to tell him what had
happened, and that it would be reported on the news at 7. “

Jackie O`Driscoll is the grandson of Eileen Joyce, sister of James Joyce.

Response from a Norwegian to your link;
The break up of single currency suits me well. It won’t work without a federation and and federation is not an option.

You see up here we have high taxes, we chose so because we think free quality eductaion from kindergarten to university is a good use of resources and feeds innovation which feeds growth, we also think that if there is not free quality healthcare available for everyone it will pay us even more as we need workforce that is fit – this is not a left policy – it is a national strategy from left to right.

Why in earth would we give money to Ireland for instance that has much lower corporate taxes than we do so it could maintain its low corporate tax. None of this makes sense unless you have a Federation with one rules for all. And in that we can only lose.

Additionally I’d point out that we did already have SGP. With Europe and its decisions it is a bit like with trafic regulations. Everyone agrees there should be trafic regulations in place. It is just that the driving culture is very different in different cultures and also how you go after those who break the rules is different. It is not gonna change just by introducing new trafic rules. Again.

The dream of United Europe is idiotic. It is not gonna happen ever. It is as stupid as the dream of CCCP. We are nations to the core. Just look at the bitching and milking between nations now. It is more apparent now than ever but it has been going on since the start of EU.

@Ciaran, a Krugman blog post that is sufficiently recent for me to recall in which he mentions that Germany might ultimately be “on the hook” for the TARGET2 balances arising from capital flight from the eurozone periphery is this:

The key error that I think Karl Whelan makes is to assume that the potential loss of Germany’s TARGET2 credit does not matter because the Bundesbank could create money to cover the loss without burdening the German taxpayer. I explain why I think his view is incorrect in a comment on his VoxEU post 7921 here:

Hopefully Kevin Donoghue will find my argument there to be coherent.

Hopefully Kevin Donoghue will find my argument there to be coherent.

Sadly, no. I read that stuff when you first linked to it here. You need to understand that mere assertion is not argument. The Vox comment you link to is no better. You tell us that ECB liabilities, such as currency and reserves, are “literally real liabilities” which means that you don’t know what “real” means in this context, or maybe you don’t know what “literally” means.


Sorry that was a bit cryptic. By “that stuff” I meant the lengthy post on your blog.

As for the Krugman remark, it was obviously an off-the-cuff comment; there’s no reason to suppose he cares much about TARGET2. Worrying about central bank balance sheets would not be in keeping with his (eminently sensible) way of looking at the world.

No, Kevin. Think before writing. The ECB’s liabilities are “real” in the sense that the ECB promises to hold their value in real terms (albeit with slight depreciation consistent with the “below but close to 2%” inflation target). If you want to be pedantic, it is reasonable to use “literally” because the inflation guarantee is clearly stated in words, but I was probably trying to avoid writing something like “really real”! Now, go back and read my comment again, and tell me what is factually incorrect about it.

No, Rebel, it isn’t reasonable to use the word literally for statements which are not literally true.

Further on you say “a choice can be made not to maintain the solvency of the central bank, that would be tantamount to a lack of commitment to the inflation target.” No, it isn’t “tantamount” to that.

But anyway, what on earth makes you think it’s up to me to show that this claim is factually incorrect? You’re the one seeking to establish an equivalence between central bank insolvency and inflation. It’s for you to show your work.

Im miles out of my depth here but it has to be said it seems a little tenuous to say “krugman supports my position” based on one tiny blog post.

Would it be inflationary? How would that work?

When a private deposit is moved from private periphery bank to a German private bank, the claim could, if the system had been designed differently have remained a claim against the periphery central bank. If that had been the design then a Euro collapse and default would have left the private German bank with a Euro liability to its new depositor but its asset would have been a defaulted on claim against periphery CB.

Instead, the design is such that the new depositor has a claim against the private German bank, which has a claim against the German Central Bank – which has a (Target 2) claim (now defaulted on) against the periphery central bank.

Instead of private banks and likely private depositors being defaulted on, the German central bank is defaulted on.

However it might have come across, I imagine Karl would have agreed, prior to his exile to the international space station, that the (smallish) annual interest due on that defaulted Target 2 claim was a clear loss to the Germans. You can argue he might have over-egged the argument that the default on the actual capital amount didn’t matter at all – perhaps in an attempt to counter some of the opposing OTT arguments – it very likely does not cause any inflationary consequences through printing the defaulted amount and the vagaries of fiat currency valuation (ie FX) would be unlikely (though not guaranteed) to automatically result in any depreciation or loss of purchasing power via dilution to holders of the new German currency.

Personally I think the impression that the default would just not matter is a stretching the anti-Sinn line a bit far.

I also think that the question of debt forgiveness for Germany and the context in which that occurred (including the W word) are entirely proper subjects for discussion.

History matters … Colm McCarthy on Greece in the Sindo

It is too easy today to blame Greece for the manifest failings of its political system. Europe has failed Greece too, in the inadequate policing of the misgovernment of recent decades, in the admission of Greece to a misconceived common currency to which it was patently unfitted, and in the inept bailouts when the chickens came home to roost. One should fear for Greece this morning. This is not just about economics.

And worth taking a look at the ‘great’ choices that Egyptian Citizenry has been presented with …

@ David O’Donnell,

Colm makes interesting points regarding the history and Germany has a higher moral obligation to Greece than Ireland. It after all provided us with 40 years of foreign aid without strings and just expected us to be prudent!

The problem is in how can blame be apportioned and we Irish know well that passing all the blame for our woes to the Germans, at a minimum puts them on the long finger.

Just consider two aspects of Irish health costs and the continuing gravy train for pharmacists, GPS and others…

The Competition Authority says that the cost of visiting a GP has risen rapidly in recent years, significantly outpacing the general rate of inflation in the economy. There are indications that a substantial number of private patients are delaying GP visits due to cost factors and are “shopping around” for cheaper consultation fees. The State paid an average of €65 for every GP visit made by a public patient in 2008…A GMS contract is very valuable to a GP practice; very few GP practices operate without one. The current GMS system favours existing GP practices and protects them from competition from newly qualified GPs.

The impact of the GMS on private patients is often overlooked. It is assumed that “the market” will take care of them. This ignores the fact that the market for private patients is itself significantly affected by the operation of the GMS. The GMS system impacts directly on the commercial behaviour of almost every GP practice in the State, affecting decisions on where GPs locate, the number of GP practices established, the nature of such practices and the profitability of individual practices. This in turn affects the provision of services for private patients and indirectly influences the price GPs charge private patients.

The ESRI said last Jan that pharmacy costs have continued to rise as a percentage of public health expenditure and the State bill came to €1.9bn in 2010. Last February, a Dail committee heard that spending on drugs was growing by 9% a year, compared to 2-3% in the UK.

It’s necessary to enact a drugs reference pricing Bill that will allow patients and pharmacists to replace branded drugs, prescribed by a GP, with cheaper generic ones. 

During the 2000s Ireland experienced one of the highest annual growth rates in pharmaceutical expenditure of any OECD country. In 2009 Ireland spent more on pharmaceuticals per capita than any other OECD country (with the exception of the US, Canada and Greece).


We call ourselves Celts but apparently the Keltoi (in Greek) never made it to Ireland.

The modern Macedonians are Slavs and are quite an irritation for their Greek neighbour.

A giant statue resembling Alexander the Great has in recent years been erected in the heart of Skopje, Macedonia’s capital.

“This is our way of saying [up yours] to them,” Antonio Milososki, the state’s former foreign minister, told the Guardian in an interview in October 2010.

“Alexander the Great, in fact, had no passport or birth certificate,” he said, sitting in the foyer of a government building brimming with relics dating back to the warrior king. “This project is about asserting Macedonia’s identity at a time when it is under threat because of the name issue. We all live in a geographic area where we share a common past but our attitude towards history is inclusive. The Greeks’ is exclusive.”

@Philip Lane.

Thank you for posting the Albrecht Ritschl article. [Now that I have read it !].
It was very informative, particularly in relation to the ‘Young’ plan and its modern day austerity equivalent. It makes one wonder whether the teaching of modern European history has been consciously avoided in Germany.

Excellent article by Colm McCarthy but as the Albrecht Ritschl article shows history is being deliberately ignored or forgotten.

Indeed one wonders how the teaching of modern European history was approached in the former USSR controlled East Germany where Angela Merkel was brought up.

“I also think that the question of debt forgiveness for Germany and the context in which that occurred (including the W word) are entirely proper subjects for discussion.”

I would agree with you on this. The parallels with the 1920s/1930s are so striking that it would be intellectually dishonest to ignore the 1933- 1948 period, that period being the direct consequence of the failed and pernicious policies implemented during the 1920s/1930s.

Indeed talk of firewalls is a form of irresponsibility and cop out. The first objective should be to put out the fire if possible. No serious effort has been made in this regard, the most obvious solution of debt writedown being firstly ruled out on every occasion. A bit like firemen ruling out the use of water to control a fire.

@ciaran, actually Krugman accepted the Sinn argument, as passed on by Martin Wolf, from the start:

The big names do not so much investigate the TARGET2 debate and explicitly give an opinion; what you see is that they include the TARGET2 balances in the potential losses in the event of Grexit or euro break up, like this:

For those who are interested in keeping up with the most recent writing about TARGET2, this website is useful:

That website alerted me to the latest post on TARGET2 from Felix Salmon, who has been one of the holdouts:
Note how he now admits that it is arguable that TARGET2 “saddles the Bundesbank with potentially unlimited liabilities”.

@grumpy, perhaps you are right that Karl Whelan would agree that the small loss of interest on the Bundesbank’s TARGET2 credit would represent a clear loss to the Germans, but it would help if he would say so, since that is vital to the debate. I would be wary of being reassured by the low interest rate – ie the ECB refi rate – paid by the TARGET2 balance at present. The TARGET2 credit is a floating rate perpetuity and the refi rate may not always be so low. Assuming that the refi rate is an appropriate risk-free discount rate, the NPV of the TARGET2 balance is equal to its face value – ie about 25% of German GDP. And rising daily, perhaps increasingly rapidly if Grexit occurs and raises the prospect of Spexit!

@ciaran too, something I do agree with Karl Whelan about is that the loss of Germany’s TARGET2 credit is not inherently inflationary. It is a real loss to the German state, but taxes including seigniorage are fungible, so there is no particular reason why that loss should be covered by money creation.

I’m not sure the linked articles say what you think they say
From Felix salmon:
” I don’t think that arguments about hypothetical wealth
figures are particularly
compelling, and the
amount of money that the
Bundesbank earns each
year is so small — less than a billion euros, last
year, which is less than
one tenth of one percent
of German GDP — that if
the Bundesbank stops
remitting profits to the German fisc, no one will
really notice.

The real thing to worry
about Target2 in
Germany, then, is not that
the euro will fall apart and
the Bundesbank will have
to write off lots of paper assets. Rather, it’s the
fear that someone will
challenge the whole
system in Germany’s
Constitutional Court, that
it will be found unconstitutional, and that
the entire financial sector
of Europe might fall apart
as a result.”

I cant access the Martin wolf article but all’s I see krugman saying is that the bundesbank is worried about the imbalances ( hardly news) and that there will be catastrophe if they pull the plug on it.

Gavyn Davies says Credit Suisse estimates that, if all EFSF/ESM (bailout funds) commitments are fully utilised, Germany could amass potential liabilities to the peripheral economies amounting to €671bn, or 25 per cent of German GDP. “This shows that Germany is becoming too heavily exposed to a euro break-up to allow it to happen.”

The stimate includes €179bn in Target II balances.

How to win friends……

“Both comments received a negative reaction in Greece but a letter by Germany’s Bild newspaper to Greek voters went down even worse. The tabloid warned Greeks: “Tomorrow you have elections but you do not have any choices.”

“If you don’t want our billions, you are free to elect any left- or right-wing clowns that you want,” the newspaper said in its open letter. “For more than two years, thought, your ATMs are only issuing euros because we put them there.

“If the parties that want to end austerity and reforms win the elections, they will be breaching all agreements and we will stop paying.”

No comment.

@Kevin OD,

I am not sure exactly what you think is not true, but I assume that you accept that the ECB inflation target means that it effectively promises to fix the real value of its liabilities (ie money).

How can a central bank keep this promise? If the real value of its money is falling at an unacceptable rate (ie it looks like the CB’s inflation target will be breached), the cb can buy some of its money back to raise its value. In order to do so, the cb must have assets to sell. To be able to keep its promise come hell or high water, the cb must ultimately have assets at least as valuable as its liabilities – ie the cb must be solvent. If the cb does not have assets in excess of its liabilities, then there must be a question about its ability to keep its promise in all circumstances. That is why failure to maintain the solvency of the cb is tantamount to a lack of commitment to the inflation target. It is not that there is an “equivalance” between cb solvency and inflation; it is just that the central bank is not in a position to keep its promise in all circumstances. There is a danger of inflation; that’s all.

It should now be clear why Karl Whelan is silly to write “If German officials were concerned about the need for the Bundesbank’s balance sheet to show assets greater than liabilities, then they could agree for the Bundesbank to write itself a cheque equal to the value of the TARGET2 credit and to top it up each year with interest. There would be no need to also top up its liabilities, so the Bundesbank’s technical solvency will have been restored without raising any taxes on German citizens.” Since the cheque to itself would be the Bundesbank’s liability as well as its asset, such an operation would do nothing to fill the hole in the Bundesbank bank balance sheet caused by a loss of its TARGET2 credit. Either the Bundesbank would have to proceed with negative net worth or the German taxpayer would have to write the cheque.

@ciaran, regarding the small amount of money that Germany’s TARGET2 credit presently pays, see my comment at 10.06 am today (perhaps our comments crossed if you are as slow at writing as I am!)

I read a lot of Greeks are converting electronic money to physical money and storing in safe deposit boxes in banks.
How would you go about doing that here and how safe would your money be?
Is this the future for us too?

BTW nice to see WW2 making it to the mainstream – I used to get blasted for bringing it up.
Real problem is that NAZIism prospered because of:
1 Groupthink
2 Shortsightedness and
3 A superiority complex.
Unfortunately all three elements characterise the current German approach too.
This isn’t about blame really. It’s about national and European reform.


If the real value of its money is falling at an unacceptable rate (ie it looks like the CB’s inflation target will be breached), the cb can buy some of its money back to raise its value. In order to do so, the cb must have assets to sell. To be able to keep its promise come hell or high water, the cb must ultimately have assets at least as valuable as its liabilities – ie the cb must be solvent.

The third sentence does not follow from the previous two. A central bank can pay a sky-high rate on deposits and charge an even higher rate to borrowers. The quality of its assets has nothing to do with this. If a commercial bank is forced to turn to the central bank as LOLR, it makes no difference whether the central bank holds more gold than Fort Knox or just a small tin of sardines.

By the way, a conclusion that may be drawn from this discussion of central bank balance sheets and TARGET2 is that Tsipras is correct – it does not necessarily follow that Greece must leave the eurozone if it refuses to accept the bailout conditions. As far as I can see, so long as Greek banks can keep delivering enough eligible collateral to cover outgoing payments, which the government can probably ensure if it really wishes Greece to remain in the euro, Greece can remain a fully-functioning member of the euro, whether or not the government follows the programme, stops receiving further bailout money or even defaults on its debts. The other eurozone countries can cut Greece off, but that would require a positive decision by them.

@michael h

One could argue that Turkey, after centuries of mismanagement and pilfering, has a moral obligation to the Balkans in general, not to mention The Levant, North Africa, etc.

Germany’s recent military brutality does grant it a unique role, but there is no evidence in German politics or civil society at present that the past will be repeated.

Greece has issued a deal of oil exploration licenses recently, especially around Cyprus. A Greek friend tells me that Turkey’s response has been a number of military flights which she claims accidentally violated Greek airspace. I have no independent verification of this but I have no reason to doubt her.

Often overlooked in the debate is the reality that Greece for its size is very heavily armed and a conflict with a neighbour is probably the last thing Europe needs but it could happen by accident in a situation of political drift, more or less.

So, here we are staring into the ….. insert overused economics-related phrase here ….. as Greece votes to …. insert etc.

I see that journilism is living up to its usual standards this Sunday.

The only story I haven’t seen is that Greece will be kicked out of Euro 2012 if they don’t vote the right way. I’m not sure which they wouldn’t get more upset about – the Euro or the soccer.

@ The Alchemist
Ahem….that’s the Independent you linked to. Dinny just sore about media ownership rules and all that.
It does a good job dealing with fake boobs though….


Paying a higher rate to depositors (ie paying interest on the reserves component of base money) might encourage them to keep holding the central bank’s liabilities, but it would of course accelerate the deterioration of the central bank’s balance sheet. Charging a higher rate to borrowers is effectively the same as selling assets – as its debt assets mature, the central bank restricts the purchase of new ones to lower their price and raise the interest rate. Note that you could have made the same argument about a commercial bank. What is special about a central bank? (Not to mention that either of these operations would reduce the profitability of the bank, reinforcing the argument that the hole in its balance sheet caused by the loss of a major asset represents a loss to the bank shareholder – in the case of a central bank, the state).


Your figures regarding pharmaceuticals in ireland in terms of cost per capita are incorrect as they include non drug costs including vitamin supplements that are flung about on the GMS. Irish drug prices are set at wholesale level based on a ‘reference basket’ of 9 countries the average which must be taken

The mark up by pharmacists remains obscene as much as 50% for putting the pills in a bag. Of course the issue of generics is completely misunderstood, at present generics cost the state approx 5% less than brands, the generics companies offer unto 80% discounts to pharmacists so all the savings go to pharmacists not the state, this explains their enthusiasm for substitution.

If drug wholesale prices are slashed parallel exports will clean out all new medicines and companies will not be able or motivated to maintain local supply. Be careful what you wish for

As for GP costs I entirely agree with you

The electronic stuff is useless. Too easy to sequester. But the Greeks are mistaken if they are storing Greek euro notes. German, Dutch or Austrian notes are preferable as, even if it doesn’t break up, the least we can expect is a two tier Euro.
@ The Alchemist
Dr Constantin has a few ideas…
“These steps should include a plan to put in place strict capital controls, a system of cashless crediting of internal transactions within the economy for the period of disrupted payments systems, a plan and the systems required to remonetise the Irish economy, and a plan for restructuring domestic and external debts in the case of euro collapse.”
As for our guys getting prepared ………

Even Marian Finucane had yer woman with the fake boobs on yesterday. HSJ.
Perhaps there is a correlation between fake boobs and impending financial Armeggedon. Definitely a phd in economics for originality. Or?

@Rebel: “What is special about a central bank?”

It can’t run out of money. Let’s not go chasing hares. Have you retreated from your claim about the link between central bank solvency and inflation?

@Kev, “It can’t run out of money”. I am glad you said that!

Yes, a central bank cannot run out of money technically, but it might have to stop creating money, or even withdraw some it has already created, to live up to its inflation promise. And that is the link between central bank solvency and inflation – not a hard link, but a question of increased risk. Risk that the Germans in particular are averse to. Basically, as long as the central bank targets inflation, it cannot be the slush fund bucket that Karl Whelan seems to have in mind.

Anyway, I shall be out for a few hours, so if I do not respond, do not think I have given up on you, Kevin. I will pick up our debate later, if you wish.

Willem Buiter hit the nail on the head with his statement
“European leaders are only capable of acting at the point of a gun.”

Looks like Greece will cock and point and only then will there be action.

Willem Buiter hit the nail on the head with his statement
“European leaders are only capable of acting at the point of a gun.”

Looks like Greece will cock and point and only then will there be action.

@ Ceteris
You could be right.
Is it people looking for a safe haven?? Are they recession proof assets?? They’re also probably fairly resistant to further inflation….


Okay so there is no hard link between central bank solvency and inflation. What makes you think there’s any link at all? The US ran high rates of inflation during the 1970s despite the fact that the Fed had abundant AAA assets. The harsh Volcker response which brought inflation back down did not depend in any way on the Fed’s possession of those assets. High interest rates were enough. Lenders don’t need fancy assets to screw the bejaysus out of borrowers.

Over in the Yves Smith site Naked Capitalism there is a good piece looking the strange market state of today.
“Finance and the Mafia State”

They mention Phil Bobbits books – in particular the
The Shield of Achilles….. with looks at the rise of the nation state during the cabinet war period and the subsequent post WW II rise of the market state.
He looks at the world from a neo – con perspective but it is a must read in my opinion as it opened up my limited world view to the strange thread of history that has lead us to this moment in time.

In my view the supranational capital markets have developed in such a fashion recently because the resourses that a typical city uses does not come from its local hinterland…. the old system of one city / state trading with another’s city state hinterland and resourse base has been disappearing since the rise of supranational financial capitals using the vast & fluid energy locked up withen oil.
Indeed the world has still not fully come to terms with navies switch from coal to oil.

@ Rebel Economist

Your post at 12.42pm yesterday possibly ranks as one of the stupidest that this blog has yet received, which puts you at the top of quite an impressive list.

1. “Besides his insensitivity in using WWII to attack a German”

Sinn brought up the Marshall Plan, which was the direct consequence of WWII. How would you prefer KW reference it, something like “….which resulted from a complex political skirmish that took place in the 1940s”??? Sinn tried to moralise on the Marshall Plan, which is indeed ironic given that Germany both caused it’s requirement as well as became the primary beneficiary of it. KW smacked him upside the head on the stupidity of raising the Marshall Plan and Sinns complaints against the US government’s urging for German action on the current EZ problems.

2. “Karl Whelan forgets that he is from a country that shamefully persecuted its own men who contributed to that freedom and prosperity”

Most countries shot deserters during national emergencies, we took away their pension benefits. While a stupid decision at the time, I think we’re happy where we stand in the overall morality of such decisions relative to other countries. Almost every country did something “wrong” during WWII, so if this issue, and a politically naive, though thoroughly correct per the diplomatic protocol of a neutral country at the time, act of sending condolences on Adolf’s expiration, are the worst acts we performed, then I’ll sleep contently tonight. Many thousands of Irish men and women put their lives on the line to help in the fight against the German Nazi tyranny. We had a weak, immature and conflicted government at the time, but we have always had a strong and brave people. I’ll not have you wagging your finger at my “countries decision” 70 years ago – we chose to fight for freedom, even if our government at times remained on the fence. You genuinely don’t want to get into an argument on this.

3. “Karl Whelan forgets that he is from a country that shamefully persecuted its own men who contributed to that freedom and prosperity”

Karl was becoming subject to many personal attacks on here as a result of his economic views. People claiming he was trying to curry favour with the Irish government etc. Basically the blog was, and is, becoming prone to slightly nutty and potentially libellous commenters. Can anyone blame him for wanting to take personal control of what and where he writes? Given that you blog anonymously, you may not fully appreciate this issue, and so you rather too easily throw around comments like “he’s a complete idiot”. To be honest, why should anyone have to “respond” to such comments just so you can feel good about yourself???

@ Eureka

I’m generally loath to bring up WWII on here, but when someone starts moralising about Ireland’s positioning in that tragedy, at the same time as complaining about the “insensitivity” of mentioning it to a German, well I will then make an exception…

@ rich

Your figures regarding pharmaceuticals in ireland in terms of cost per capita are incorrect…

The facts…

The OECD said in 2011 that the total pharmaceutical bill across European Union countries in 2008 is estimated to have reached more than €180bn, accounting for around 18% of total health spending on average (unweighted) across EU countries. Over the past ten years, average spending per capita on pharmaceuticals has risen by almost 50% in real terms . However, considerable variation in pharmaceutical spending can be observed, reflecting differences in volume, structure of consumption and pharmaceutical pricing policies.

Greece and Ireland spent the most per capita on pharmaceutical products, with spending of €584 and €563 respectively, compared with an EU average of €376.

Ireland’s drugs bill is what it pays wholesalers and pharmacists in respect of prescribed drugs, and items such as paracetamol and supplements.

Public payments rose from €332m in 1997 and the cost of drugs schemes doubled from 2002 to over €1.6bn in 2008. Fees and other income earned by pharmacists doubled accordingly.

In 2008, it cost the taxpayer an exorbitant €640m to get €1bn of drugs from factory gate to patients in the community in 2008.

Published Health Service Executive (HSE) figures showed that 26 pharmacies received payments of over €1m in 2006. The biggest recipient, Abbey Healthcare in Blackrock, Co Dublin, received over €4m, which was almost twice as much as the next biggest.

Some cutbacks have been made in the middlemen bonanzas since but it’s still a gravy train.

The problem for Big Pharma is that huge R&D spending is not producing results.

About the same number of drugs was approved by the US FDA in 2008 as were approved in 1950. At the same time, the cost of funding a breakthrough drug is rising by 13.4% annually.

The return on investment from R&D among the leading 30 drug companies had halved since 1990, and at 10% in 2010 was barely sufficient to cover their cost of capital.


@Bond Eoin Bond
Lets not forget our American cousins who gave their money and their lives to save Europe before and after WW11;

A post on Paul Krugman’s blog, highly relevant and quite short:

What A Real External Bank Bailout Looks Like

Something I’ve been looking at: Texas after the savings and loan crisis of the 1980s.
The cleanup from that crisis cost taxpayers about $125 billion, back when that was real money. As best I can tell, around 60 percent of the losses were in Texas. So that’s around $75 billion in aid — not loans, outright transfer.

Texas GDP was about $300 billion in 1987. So this was equivalent to giving — not lending, not even taking an equity stake — Spain 25 percent of its GDP to bail out its banks.

And in the US it wasn’t even treated as an interstate political issue.


The OECD report you refer to makes reference to the fall in public expenditure on health in 2009 (-3.2%) and that Irish public spending on health stands at 9.5% of GDP, at the OECD average. I acknowledge that GNP comparisons would be more appropriate however costs per capita reflect two elements – price and volume

Again the per capita amounts you mention are not incorrect per se , when you look at our expediture on pharmaceuticals as % of GDP then we fall very much back in line with the OECD average (,/ns/StatisticalPublication&itemId=/content/chapter/health_glance-2011-63-en&containerItemId=/content/serial/19991312&accessItemIds=&mimeType=text/html) just above at 1.7% vs 1.5% average, however they are misrepresentative as the number of prescriptions per patient is 31 in Ireland ( )-54 m items prescribed to approx 1.7m GMS medical card holders vs 16 items per person in the UK(

So in summary there is a greater spend per capita but then there are more items dispensed per person at least vs the UK which has very tight control of drug prices. While I agree the dispensing charge is exhorbitant I do not agree that wholesale prices are the issue, if anything GP’s are throwing medicines around like confetty including items like Berroca and other ‘medicines’. Like BMW’s but unlike houses or pharmacies, medicines are internationally tradable and their price is already anchored to 9 others within the EU. My issue remains with the 70% of the health budget that is untouched salaries and benefits


Steady on there. There is a strong argument that there was something peculiarly vindictive and sulky about the decision not just to take away pension entitlements of those that disobeyed the Irish state and went to fight with first the British and then the British and Americans, but also to ban then from ever being employed by the state – something which employed the power of the state to reduce most to decades of poverty.

The comparison with deserters being shot I think might be a stretch. It was a traditional army enforcement tactic used not only during the war itself, but usually at the point where it had a deterrent effect on others so its effect was pertinent to the battle. The Irish comparative was a cold, calculated, nasty act of revenge.

Then of course there is access to the Atlantic ports…..

I don’t agree with docm. I think ww2 has background resonances that have an at least subliminal effect whether they are openly discussed or not. It might even be advisable to discuss them.

@ Kevin Donoghue

The Texas example is interesting but we not only don’t wish to have corporate tax rate equalisation, we think it’s OK that US MNCs can pay us tax or pay nobody tax, by diverting customer revenues from foreign markets to Ireland.

Google UK is Google’s biggest overseas market and in 2010 generated about £2.15bn ($2.9bn) in revenues – – Google Inc. said the market accounted for 10% of group sales.

2010 accounts for Google UK Ltd., filed at the UK’s Companies House, showed it made a pre-tax loss of £22m on turnover of £240m.

Most of the $2.9bn in UK sales were diverted to Ireland and in 2010 Google Ireland reported revenues of €10.1bn (US$12.9bn).

Michael if it wasn’t Ireland then these companies would move to any number of other offshore locations.

It’s not US or UK that Ireland is competing against but Caymans and Seychelles and about dozen UK island “territories”.

Interestingly enough half of tax havens belong to the Queen… something to ponder about.

@ Grumpy

1. These guys broke the law of the land at a time of national emergency for a nation still attempting to foster it’s own independence and sovereignty. The government actually made a fairly logical, albeit near-sighted and naive, decision at the time, though the subsequent 70 year wait for reversing it is the more unfortunate decision.
2. The relative vindictfulness of financially penalising deserters vs shooting them in the head is not even worthy of debate IMO.

@ grumpy

The only “background resonance” that WWII has, as far as I am concerned, is that the experience should not be repeated.

Unofficial exit polls I hear are starting to sound like the rugby yesterday with ND predicted to beat SYRIZA by a drop goal (3 points) and PASOK getting an average Connaught score of 12 points. Maybe 30-27 in the final tally if it keeps going as per the past few hours. Of course, that could all be bollix and spin being put out by ND and PASOK.

Turnout as at a couple of hours ago c.50% (May 70%’ish) and just under an hour until polls close with late voting surge expected from younger people (apparently, older Greeks always vote early while the youngsters go to the bar first – one presumes to ‘seriously reflect’ ove an ouzo or three). I suppose there’s always the possiblity of an injury time comeback if that’s true.

This time round, they only vote for the party they want and not a specific MP (parties will rank their MP’s – if you got voted in last time but find your party ranks you below whatever this round’s cutoff point is if they get fewer votes then tough). I don’t think anyone is going to be surprised if no one party can find enough support to form some kind of ‘coalition of the willing’. I guess that means Merkel will decide Greece has become ‘ungovernable’ and kick them out of the Euro then?


We are not competing with island tax havens; we do have a low tax rate and a half century expereince of hosting foreign companies.

Companies with a main purpose of using Ireland as a tax haven leave very little value added. The big companies with actual operations in ireland that also engage in tax haven activities, are pushing an open door because the Revenue of courae would treat citizens differently.

I make a distinction between traditional profitshifting and the way servics income is transferred to Ireland.

The danger for Ireland is that while gridlock in Washington DC prevents reform of the corporate tax system but at some point, blatant tax evasion may result in a minimum tax applying to foreign jurisdictions – – that of course would be the longterm and who cares about that until it arrives?

Michael politicians in US are openly bribed (erm lobbied) by the very same large companies, and despite all the promises of “change” and “hope” its business as usual.

And yes as a director its unfair how Revenue treat SMEs compared to Googles of this Island, for example every few months I have to invoice Google and wait months and months for them to pay VAT they “hold onto” only to handover every single cent of this over to Revenue. Would be much faster if Revenue actually send the bill to Google directly cutting out on my paperwork, or Google paid the full amount including VAT.


I’m not familiar with the particulars but it might be that Google Ireland are approved for zero-rating of VAT. Their turnover is certainly likely to consist of at least 75% exports, the particulars are what you supply to them and if they manage their cash efficiently and have asked revenue for zero-rating of VAT:

Am a bit surprised by Googles behaviour, usually big companies pay all or nothing (when they get around to paying).

CNN reporting ND on 30. SYriza on 29.5 and PASOK on 11 with democratic left on 6. Also Golden Dawn holding up with 6.8.

It’s a shambles!

History matters …

Dimitris Dimitriadis
Playwright, novelist and translator
A native and a resident of Thessaloniki, Dimítris Dimitriádis (b. 1944) is a playwright, essayist, poet and also the translator of a large number of authors including Shakespeare, Tennessee Williams, Samuel Beckett, Jean Genet, and Marguerite Duras. He is the author of several novels and close to three dozen plays including I Am Dying like a Country, which has been widely translated and performed in several countries.

So the cause of the crisis is historical rather than political or economic?

Yes, although I don’t deny the economic and political dimensions. But you cannot say it enough: the political system under which we live in Greece, which dates back to the Ottoman occupation (and is thus several centuries old), is completely clientelist. The big landowners of times past have been replaced by the political parties, but they have the same relationship to the people. The state belongs to the party, and the party utilises and exploits state resources to maintain its systems of patronage.


If those returning heroes had actually been shot in the head by the Irish state its independence would have been swiftly brought to an end by the Allies with not a murmer of objection from anywhere. What was done to them was just about the maximum nastiness the state could keep under the international (and particularly the Irish-American) radar and thus get away with. It was utterly shameful.

Sadly you put your finnger on it. From the perspective of a large part of the Irish republican family- ranging from most of SF, a lot of FF and a small few FG- it was a pity that the Germans liost. Whose flag was burnt by who on VE day in Dublin. This inste anti Britishnesd on the part of the establishment contributed to the Ill fated decision to join the Euro.

Breaking Newz


Patricia the Irish_Sovereign_in_Exile has sent her felicitations. Blind Biddy is in Athens; Seven_of_9 remains wisely off the planet at the mo.


The call will no doubt go up from Syriza later on:

“Απαιτώ μια επανακαταμέτρηση”

Who left all that chad laying around?

Very good election result for Greece.
NDP can form coalition with PASOK and use Syriza as a very powerful threat in negotiations.
Watch this space and expect some attempts at softening from Germany.
Now if only Spainand Italy werent lined up…..

My guess is that ND/PASOK might just get enough to get back into power. Only just squeeking it because it mustn’t be made too obvious must it?
What do they need between them? 40’ish% plus the 50 seats for the winning party? Something in that order of magnitude. You don’t need to rig too many boxes to squeek it.

ANd Germany making cooing noises. Must be risk on tomorrow then eh if they get back into power?

The last time the Irish economy was really in the mire, back in the 1980s, we used to joke that election-winners should have the option of making the other side bat first. If Syriza are good bowlers it could be a short innings.

It’s probably the best result the Greeks could hope for, given that they want to keep the euro. The EU can’t just put a firewall around an ND-led government, even if it knows how to build one (which I doubt), so negotiations must go on.

@ Grumpy
Hear what you’re saying but think perspective is important in this. Few countries have a glorious track record in any of this. You could say, for example, that the US was just as bad for not intervening until its interests were directly attacked. You know what I mean

@PR Guy / @CP

re:”My guess is that ND/PASOK might just get enough to get back into power. ”

If so there will one last slim chance for ‘Europe’ to get its act together. But on reading the ‘Bild’ spittle referenced by @CP it seems that Germany believes that she has all the answers.
All answers but no solutions.

Strange that the exit poll was inaccurate as regards Syriza. CNN reporting them on 26% and sky reporting them on 27.1%. Yet ND according to CNN at 30.3%… Very close to the exit poll. All that with about 48% counted.
Maybe PR Guy isn’t so far off. Nothing would surprise me as regards Greece.
As Eureka noted…pity about Spain and Italy.
Btw. Euro up at 1.27 to US dollar.

I am disappointed that the lefty loon did not win in Greece. Basically, the more Socialists that are revealed to be fools the better.
On the other hand a lefty win might also expose the utter lunacy of German policy.


Agreed that it was shameful. There was very litle honour around WW2 really, greatest generation mythology notwithstanding.
The Brits sent Ukrainians and other Soviet citizens who had fought with the Germans back to Stalin at bayonet point after the war.
They went to war to save Poland from the Nazis but agreed to let Stalin and the communists have it afterwards.

@Kevin Donoghue at 12.46pm

I would not expect the link between central bank solvency and inflation to mean that a solvent central bank cannot generate inflation – even if the central bank buys good assets in the process, I would expect it to generate inflation if it expands the base money supply enough. Advocates of the backing theory of the value of money might dispute that view, though. I would be surprised if the Fed was not solvent throughout the 1970s and 80s, regardless of the interest rate losses it must have made on its treasury bond purchases as inflation rose, because of its holdings of gold certificates for the gold in Fort Knox.

The Week in Politics; ………… …. …….. …………. …… !

McDowell pars the first.

Blind Biddy has gone on the razz with Vassily Vaitsev in Athens.

Tomorrrow’s crisis menu in emergence …

McDowell finds the second fairway …

Egypt considers its position ….

Mr Sar_kozy settling in as ambassador in residence for life in a Beduoin tent in the Sahel on the borders of Mali and Libya – alone.

Asimov’s Mule, appropriately cloaked, has saved half the turf. Happy days!


In Solidarity.

Il Sole 24 reports tonight that following contact between the ‘Eurogroup’ and the White House, there is an agreement (not formal yet one presumes) to give Greece more time to get its financial affairs in order. Sisyphus Shrugs, perhaps?

Third bailout on its way?

Meanwhile back in Ireland two government ministers can’t even agree on which department should take responsibility for the rent supplement payola…

Oh well, I guess Greece has taken the longer – probably more painful – road to eventual exit. I expect there are a few who are disappointed that the left didn’t win so that there was an excuse to dump them now.

In the meantime, who only knows what a bigger mess the country has become in the past few weeks in between elections. After there’s a big announcement at the G20 that Greece will be given more time to pay back its debts (rah rah rahzmatazz) they will then need to get around to the third bailout soon because it sounds like government revenue has been going off the rails in the past few weeks.

Time to move on. Cloak the problems for a few more weeks then I guess it will be time for someone to discover just how big a hole there really is in Spain (and even then, it will be understated)….. or some other yet to be discovered disaster waiting in the wings.

What’s up next, other than Royal Ascot?

@ All

On the issue of euro bills, what is notable is the fact that the idea has not (yet) been shot out of the water by Berlin.

Bloomberg had an item on the issue some weeks ago, attributing the idea to Olivier Blanchard, IMF chief economist.

The views of Professor Brunnmeier of Princeton may be noted.

“There’s new momentum with the French election and what Hollande is saying,” said Markus Brunnermeier, a professor of economics at Princeton University. That’s bumping up against the same obstacles met by previous efforts. “The French would very much like a joint liability, the Germans don’t,” he said.

He goes on to question whther the idea would work i.e. would a country be kicked out if it did not stick by the rules?

The key issue, however, is surely not this but whether Germany concedes on the fundamental issue of accepting joint and several liability.

Crikey! That rally was even shorter than the one last Monday after the Spailout…… it’a a EUsaster!

After WW11 Irish America controlled the Democratic Party.In 1948 the Democratic Party President Harry Truman organised the Marshall Plan to rescue Germany and mainland europe from economic ruin. Irish America’s control of the Democratic Party reached it’s zenith twelve years later in 1960 when the Irish big city bosses of the Great Eastern and Midwestern cities combined to nominate the grandson of Honey Fitz as the Democratic Party candidate for president.

On the 26th June 1963 President John Fitzgerald Kennedy spoke at the Berlin Wall and commited all America’s resources to the defense of West Berlin. Kennedy arrived at Dublin airport later that day and was greeted by another american born president, President De Valera. JFK spent eight hours in Germany and four days in Ireland. On the day he died the President of the United States,The Speaker of the House of Representatives, the Majority Leader of the United States Senate and the Chairman of the National Committee were all Irish, all Catholic and all Democrats. Irish America rescued Europe after WW11. Perhaps Germany and the rest of europe should be reminded of this important fact.


It’s already moved on…Spain 10 yr.=7.118% now.
That 100b won’t go far. The banks need 545 b. in refinancing….wonder where that will come from? And that is before the under provisioned mortgage write offs.
As for poor old Greece…watched CNN last night visiting soup kitchens. They say that in Athens 200,000+ are using these facilities. Frightening.


You accept that a solvent central bank can generate inflation. Fine. The next step is to see that an insolvent central bank can bring inflation to a halt, simply by raising the cost of borrowing. Clearly you don’t need CB solvency for that. So what’s left of the postulated link?


“It’s already moved on…”

Yes, but I miss the likes of Berlusconi, Sarko and GPap coming out of their late night sessions to tell us everything is OK and any crisis has now been resolved. Perhaps RTE should make one of those “Where are they now?” documentaries?

I see Samaris is talking as though 99% of the Greek people had voted for him and for the austerity measures and general BS about Greek unity and concensus. The other 1% are of course too busy with buying London property or counting the money they currently hold in Bunds and in Swiss bank accounts to bother with elections.

@PR Guy
Re Samaras.

That’s what a Harvard education does. BUllshit on a higher plane.

@PR Guy
Re Samaras.

That’s what a Harvard education does. BUllshit on a higher plane.

Rte reporting this lunchtime that theTroika is considering taking a haircut on Irish debt and extending repayment to 30yrs they are quoting “sources”.

Wow, that would be a game changer.

However, I wouldn’t bet the house on it.


Assuming that the cb does not hike the interest on reserves (which as mentioned earlier would not help its balance sheet), it can run down its assets (reducing loan rollovers if not actively selling assets) to reduce the stock of reserves to raise moneymarket interest rates. Clearly, the cb needs assets to execute this operation.

But look, I said that the link was a question of risk, which I dare say Germany would choose to eliminate by recapitalising the Buba whether you are right or not, and we are getting off the key question here, which is whether the loss of an asset like the Bundesbank’s TARGET2 credit represents a loss to Germany. Even if Germany did decide to leave the Buba insolvent, there is still the loss of an interest paying asset on its balance sheet to contend with.


You told us upthread that a choice not to maintain the solvency of the central bank is “tantamount to a lack of commitment to the inflation target.”

The “key question here” AFAIAC is whether you can back up that claim. It’s not relevant whether hiking interest rates would help the CB’s balance sheet, when by assumption the government has decided to neglect that.


Yes, if you are prepared to run a significant inflation risk by not recapitalising an insolvent central bank, that seems tantamount to a lack of commitment to the inflation target to me.

I have explained why I think that not recapitalising the central bank represents an inflation risk, and hence why the Germans would probably do it. You can explain why you think that not recapitalising a central bank is not an inflation risk if you like, but since the purpose of my original comment was to criticise Karl Whelan for “misleading people by denying Germany’s massive exposure to real wealth loss arising from its TARGET2 credit”, and since that Buba asset is no doubt getting bigger as we write, the question of Germany’s exposure to loss is what I want to settle.

“I have explained why I think that not recapitalising the central bank represents an inflation risk….”

No, you have merely repeated that do you think that. You haven’t given a reason.

You know, Kevin, not enough assets to sell to withdraw base money etc….I am not writing it out again. But as I said, I think the Germans lose whether they recapitalise or not. Now you tell me something.

By the way, when you talk about “interest rate hike”, Kevin, I wonder whether you appreciate the difference between interest on reserves and the interest rate on overnight interbank loans that settle in reserves? If so, I apologise for teaching you to suck eggs, but if not, you might find this old post of mine informative:

When you appreciate that, you can understand the connection between running down cb assets and raising (the latter) interest rate. Most of the time, the contraction of cb assets necessary to raise the interest rate is marginal, but the cb might need to get a bit more brutal if inflation expectations pick up, which is where the risk gets significant.

@RebelEconomist & Kevin Donoghue

Hey, would you two like one of the NAMA 5* Hotel Suites for a weekend in Dublin – gratis – full service bar – WiFi … Close to the Wood Quay Folly and a stone’s throw from PollyShawneen’s Folly and report back to the blog in your own time with a neat 1,000 word ‘working paper’ understandable by financiallly challenged ministers, junior ministers, and all Irish bankers earning in excess of €250,000 p.a.

Thank you.

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