A Rescued Comment

Too good to miss . . .

Re Box 6, By Gavin Kostick

[Scene: A spacious drawing room in Frankfurt. A patient is strapped to a table. M Drachet in attendance, plus admirers]

M Drachet: Our diagnosis for this fellow is an excess of partying, too much of the punch-bowl, a surfeit of humours, grass corpulence and a palpable debt overhang. Our remedy? Leeches!

[Enter Mr deKrugman, a plain talking Yankee]

Mr deKrugman: Hold your hand, sir! The patient is week. Leeches will only distress his condition further.

M Drachet: Oh that annoying fellow. Even your fellow Americans agree that leeches are the cure.

Mr deKrugman: Not any more they don’t. They’ve changed their minds.

M Drachet: Really? Never mind – bring on the leeches.

Mr deKrugman: Rather than leeches, this fellow needs an infusion of fresh blood to recover.

M Drachet: Are you volunteering?

Mr deKrugman: You, sir, can create all the blood you wish and you know it.

M Drachet: Balderdash.

[A fop whispers in M Drachet’s ear]

M Drachet: Well that’s news. But you forget, our medical charter expressly forbids it. And you miss the nicer point, if we were to do so, this fellow would learn nothing from his foolishness and return to his profligate ways.

Mr deKrugman: Are you trying to cure the fellow, or teach him a lesson?

M Drachet: A soupcon of A and a morsel of B. Now, the leeches.

[The leeches are applied, and the patient becomes noticeably paler]

Mr deKrugman: Told you.

M Drachet: You really are the most arrogant fellow.

Mr deKrugman: Says the man with the leeches.

M Drachet: But this is part of the cure! You see he is being purged, in in being purged he will ultimately return stronger.

Mr deKrugman: Or dead like that poor Greek fellow.

M Drachet: And anyway, you quite misunderstand. It is not the leeches that make him pale, but, er, that, that and la bas!

Mr deKrugman: You’re pointing at a bunch of random things.

M Drachet: Not at all, I’m pointing at fetid air! Contagion I tell you. Stop looking at the leeches.

Mr deKrugman. Look, are the leeches to teach a painful lesson or to help the patient get better?

M Drachet: Can they be both?

Mr deKrugman: No.

M Drachet: To be honest monsieur, we do it because we’ve always done it.
But our meticulous research shows that if the patients have, er, died in the past – it wasn’t the leeches fault! It was, um, something else!

Mr deKrugman: I strongly recommend an infusion of fresh blood.

M Drachet: But if we tried something new and it proved better, why our reputation for competence would be in tatters – you laugh sir?

Mr deKrugman: No sir, I weep. I weep.

[They continue to bicker as the bloated leeches suck happily at the patient]

107 replies on “A Rescued Comment”

John Corcoran Says:

June 1st, 2012 at 5:05 pm
Firstly I would like to thank BBC radio which allowed myself and Paul Krugman to simultaneously address the people of the UK and Nothern Ireland and advocate a No vote. Unfortunately if the joint broadcast had been a day earlier I feel it might have been a swing factor.

We have thrown all our gambling chips away and betrayed our fellow european neighbours who are struggling with austerity. Raymond Crotty must have turned in his grave when the result was announced. We betrayed Raymond as well. In a country that elected the corrupt Charles Haughey and continues to vote Michael Lowry to top the poll it is of no great surprise. The most sophisticated electorate in the world–what a joke. The logic was simple if you vote No you get two votes –if you vote yes only one. Two is greater than one. Simple maths.

The train has left the station for Ireland and we have our bank debt forever tied to our throats. The oligarchs and their fellow travellors who frightened our people into buying vastly overpriced houses etc used the exact same tactics to frighten the voters into voting for a disastrous deal for Ireland. The soft landing professors and the other useful idiots did the rest. A sad day for Ireland. We betrayed ourselves and our fellow europeans.

The No people –fought the good fight–finished the course–kept the faith.

Brian Woods II Says:

There was a weird David Lynch film called “Boxing Helena”.

It seems fiscal multipliers are always in a box. Are the European Commission and the ECB using the plot of that film as their strategy?

“Boxing Fiscal Multipliers”?

Inquiring minds want to know.


I see a report today saying that Italian debt has now passed 2 trillion. The debts just keep getting bigger. Everywhere.


And another saying that Spanish property prices are falling through the foundations now, not just the floor.

Boom boom

It’s all going to rat5hit.

Will Drachet’s lawyers will be seeking an injunction asking for this thread to be pulped, on the basis it misrepresents the leech application process?

His perspective might be that the scene setting should have the patient merely imprisoned (with access to 24hr TV and state of the art gym etc). Leeches are passed under the cell door each morning and only the patient is allowed to apply them and he always puts them in the wrong place?

This wins the internet.

Also, for grumpy: Boxing Helena was actually by Lynch’s daughter, Jennifer.

The patient is an alcoholic – a cure for that is needed, leeches will do – fresh blood sends the alcoholic back out to kill himself over the longer term.

What about the previous Act

Sir Bond Baron: Mr Trichet I have a problem in the Barony of Ireland that I do believe is under your control. The problem is I gave a ton of coins to the Anglo Robbers bank who gave it Sir Quinn to buy shares in the same bank and hence artificially boost the apparent value of the bank to hoodwink investors. It now appears that this plan has backfired and the Anglo Robbers bank is a worthless dead duck and there is no chance I will ever get my coins back Boo Hoo!

Mr Trichet: I don’t have full control! the peasants might revolt and that pesky Count IMF wants me to give you a haircut [starts waving a scissors]. Anyhow dosn’t all that sound a bit illegal!

Sir Bond Baron: The sheriff without doubt is a bit of a moron and also sick to boot so maybe we could scare the living daylights out of him by telling him he won’t have enough shekels to pay the guards at end of the month.

Mr. Trichet: Sorry it is not as simple that Sir bond they have enough shekels, they have a pension reserve fund that could them till next year!

Sir Bond: My god they could be self-sufficient by then, they could use their fund to grow small business, put it into education and attract more inward investment from the Chinese of all people – You must stop this terrible act or all the bondies will suffer terrible consequences and the burghers from Dussledorf will not see any money when they put their cards in the hole of the wall – You must stop this immediately –

Mr Trichet: – I will go forth immediately to this isle and “strong arm” their louthish leader to
A. Give the pension pension reserve fund to other bank bondies and pay up the large deposits plus interest to there depositors who will immediately withdraw their funds to create a larger hole that the government can fill with any remains of their pension fund.
B. Start improvishing the country by closing down hospitals, reducing doles and cutting back on education.
C. Get their central bank to give the Anglo Robber bank all the gold it wants, on the promise of future taxes from the now improvrished people so the bank can pay you in full everything he owes you plus interest.

Sir Bond: You can do that!, my god they you are a magician! what is in it for the lout that can do such to his county and what about the other crowd outside the palace who say they will not give us a “red cent” if the populace change their esteemed leader.

Sir Trichet: The lout will get riches beyond his wildest dreams and as for the other crowd have no fear I have been told that they “all say those type of things during elections”

‘grass corpulence’? Will someone for God’s sake correct that typo! Obviously it should be ‘gross corpulence’. And to think NY Times readers are looking at that also.

Unfortunately the metaphor of mixing medicine and theatre does not work. What physician would prescribe anything but strict diet and exercise to a grossly overweight patient? Would a physician recommend continuing to let him feed at the trough? I’d move to strike off such a doctor. Such a patient needs to get back to a healthy weight (i.e. living standards in Ireland c. 1994) when he can afford to live within his means and not feast on sumptuous dining in the finest restaurants run up on a credit card bill for which he hopes Frau Markel, the Swabian housewife, will pay back.

Was it Scott Fitzgerald who said there’s no Second Act in American lives? We Irish are going to find there is no Second Act in this drama either – we’re going straight to Act Three where the leeches have either done their job and/or the patient has died. There is no dramatic scenario in which we can continue our current living-beyond-our-means lifestyle hoping for a deus ex machina in Act Two!

Mr Kostick, that was a small but perfectly formed work of subversive genius, Dr McHale, you might have a career as an editor if you tire of economics. Well done.

I remember one half of deKrugman remarking in a blog post that the debate on the usefulness of reactionary austerity economics could not be won by reason because for Drachet, Osbäuble and their US counterparts the policies are articles of faith – an end rather than a means.

Reason is wasted on this sorry crowd of millenarian debt cultists and neoliberal fanatics. Satire and public derision the other hand has seldom been better spent on better targets: ‘if we tried something new and it proved better, why our reputation for competence would be in tatters’.

@bunbury, enters from stage right, wearing blinkers.

Unfortunately the metaphor of mixing medicine and theatre does not work. What physician would prescribe anything but strict diet and exercise to a grossly overweight patient? Would a physician recommend continuing to let him feed at the trough? I’d move to strike off such a doctor.

Your gifts of comprehension are second only to your facility with English.

I would note however you seem to be commenting on another production – that one about the Eurozone financial sector “A Nation is of No Importance”?

The really funny thing is how so many Irish people accept that Mario has any money power…….
This is therefore political power.
Therefore we live under a shadow of this darkness.

Not very funny if you ask me…

Its not so much reactionary austerity economics but brutal logical transfer of wealth economics…
People have accepted that this guy Mario has control over the Irish hinterland.
He can thus move former Irish resources on his global chessboard to any slave plantation that takes his fancy
Our finance minister is in the habit of giving letters of comfort to the banking system which were by defination treacherous.

Not very funny..

George Carlin expressed it best.
In a painfully brutal manner.


I see Alan is now picking Judges……………

This is the end of the Irish nation.

@ All

With all due respect, this stuff is pretty lame. Why go looking for drama abroad when there is more than enough at home? Some suggested titles;
“In the service of the frontline”. “A funny thing happened to me on the way to Croke Park”. “Section 23”. “The Ghost Estate”.

@ Shay Begorrah

As any horse racing trainer will tell you, blinkers are used to get a racehorse to concentrate on the race at hand and not be distracted by things going on around during the race. They are often found to turn under-performing horses into winners. I warn you: I can trade metaphors all night.

As Dork will tell you (if you take the time to wade through the verbiage) with the Euro there is no longer a Nation State.

I’ll leave you with some relevant quotations from the great Oscar:

“To be popular one must be a mediocrity”.

“It is so easy to convert others. It is so difficult to convert oneself”.


With all due respect, this stuff is pretty lame.

The opportunity was there to turn a local lack of validation into a global Internet phenomenon and you took it. Brave.

@Kevin Donoghue

In fairness to DOCM, if you had been pointing out since early 2011 that the leeches of austerity were doing the job…

To be even more scrupulously fair to DOCM his position represents the consensus position in the institutions of the EU and that of the government of its largest state, and though the position may be wrong at least it has been consistently so. That kind of consistency inevitably begets confidence.

To pick an example of that consistency from an earlier thread the German Imperial Minister of Finance Schauble has been peddling the same basically racist fantasies about the cause of the crisis since day one as he does today.

His latest emission in the Wall Street Advertiser and Bankers Bugle is heady mix of fantasy, neoliberal cant and German flag waving and here is an article fifteen months ago in the Financial Times which is at odds with historical fact.

Why austerity is only cure for the eurozone

Whatever role the markets may have played in catalysing the sovereign debt crisis in the eurozone, it is an undisputable fact that excessive state spending has led to unsustainable levels of debt and deficits that now threaten our economic welfare.

Whatever role, eh?

So remember folks, the global financial crisis was only responsible for speeding up a preexisting problem (remember how many billions Ireland had already spent on the banks in the years 2000-2007. It is a nice round number). Now I do not remember a steady year on year deterioration in the finances of either Ireland or Spain before the GFC but my memories are coloured by not being a dangerous right wing lunatic.

It is a remarkable testament to how utterly devoid of introspection or larger purpose the current flavour of European Union is that after four long years of failed responses to its component of the global financial crisis there is no one at a senior level willing to publicly entertain the thought that perhaps the ideology guiding policy formation or even just the policy response needs reevaluation.

In fact with Rehn’s recent “Stay the course.” piece in the FT it seems like the northern European neoliberals are doubling down again, again.

Plan B better be ready for when Merkel is reelected – the German right’s blueprint for the European Union is not one with a space for Ireland in it.

‘September 1913’ — William Butler Yeats
What need you, being come to sense,
But fumble in a greasy till
And add the halfpence to the pence
And prayer to shivering prayer, until
You have dried the marrow from the bone?
For men were born to pray and save:
Romantic Ireland’s dead and gone,
It’s with O’Leary in the grave.

Where would an Irish drama begin?

Possibly in May 1922 when Arthur Griffith, the head of the nascent Irish Free State, attended the burial of Richard Croker, former head of New York’s Tammany Hall political machine, at the Glencairn estate in South Dublin (Glencairn House is now the official residence of the British Ambassador to Ireland.).

Croker, a native of Cork, had returned with loot from New York to become a country squire, living in England and Ireland. His horse Orby won the Epsom Derby in 1907 but the King of England refused him an invitation to the traditional post event royal dinner.

Edward Saxe-Coburg-Gotha’s family had stolen its way to respectability in the more distant past!

A decade later, Eamon de Valera, a native of New York, having survived a disastrous civil war he had triggered, launched a newspaper for his political party with $250,000 subscribed by Irish Americans, but they were given worthless shares in a Delaware corporation, while De Valera’s family used the American money to take control of the Irish company that owned the newspaper.

De Valera’s Fianna Fáil began its long act on winning power in 1932 and introduced a version of American machine politics.

Daniel Boorstin, the US historian, wrote on Irish control of the big American cities, that it was: “machine politics that produced the political boss and the professional politician whose business was politics. Their test was the ability to keep their business profitable for themselves and their clients and while the Irish were quickly and spectacularly successful in politics they did not prove masters of the arts of good government. For the emigrant, in flight from poverty and oppression, American politics had become an end in itself, a business to support him and his fellow clansmen.”

In 1980 after a period of disastrous economic mismanagement, Charles Haughey, leader of Fianna Fáil, said in a national address that the country was ‘living beyond its means.”

Like Croker, Haughey too aspired to be a country squire and within weeks of becoming taoiseach, was personally bailed-out by Allied Irish Banks, and while the economy stagnated in the following decade, he lived on the charity of wealthy businessmen.

This time, Allied Irish Banks ws bailed out by the taxpayer.

What is the dénouement of this play?

Like Japan? A return to the party that twice wrecked the economy in a generation — after the current fumbling government retires in exhaustion?

On a wet Friday morning whilst wrestling the children out of the door I was mentally distracted by Box 6 from the ECB report, which as David O’D pointed out, wasn’t being properly discussed.

I mentally composed a couple of wrangling sorts of nit-picky posts, then gave up, saw it as a little drama and put that in, in the 15 minutes before heading out.

Paul Krugman may well be a ‘serial lurker’, but he is isn’t the only one as I received a little email from Jonathan Portes, whom I’ve never been in contact with before, saying nice comment and that he’d forwarded it on to Paul Krugman and I passed that on to John McHale.

Next thing you know it’s in the New York Times blog and I’m mentally rewriting it after the fact.

On the substantive issue, here’s Jonthan Portes himself with Dawn Holland in Vox:

‘Self-defeating austerity?’


Good to see the responses above are splendidly true to form and thanks, where appropriate, for the kind words.

Well done. Excellent stuff.
The patient(s) will be eternally grateful through your intervention, if they survive.

@ Gavin Kostick

To make it to the pages of the NYT – a fact which had gone unremarked by me – is quite an accomplishment and my congratulations for that.

I cannot, in all honesty, change my view of the substance as I subscribe rather to the views of another recent contributor to the US press (WSJ); Herr Schaeuble. The problem with his analysis, however, is that he proposes a solution that can work for a country such as Germany but cannot conceivably work for all countries simultaneously. The countries running systemic current account surpluses must also make an effort.

I believe that Germany will (and Schaeuble has already done so by the manner in which he circumvented his Chancellor with a fait accompli in relation to banking supervision).

As to Greece, contributors may be interested in more up-to-date news than that from 2011.


There are a number of interesting recent developments, notably the manner in which Merkel put a (measly) figure on the emergency fund that the Eurozone may eventually put together. There is also an understanding among leaders that a long-term budget for the period 2014-2020 can be agreed in early February. With any luck, the ministers in charge of the money may have agreed the deal before their leaders can make another mess of it.

If one door remains shut, who knows, maybe another one will open! Developments in relation to Portugal, which is much more comparable to Ireland than Greece, seem to me to be likely of more relevance to Ireland’s situation.

By the way; another title for your Irish drama might be “The Buckley Report” or, alternatively “The Consultant’s Contract”. Nearly all the necessary dramatis personae are listed. One only has to go into the ranks of the private sector for the others. (Deciding on which side some participants are to be listed may prove to be a bit of a problem).

If it were to take the form of a Greek drama, the chorus, as I have remarked before, might suitably be Hanrahan.


This verse in particular.

“It’s looking crook,” said Daniel Croke;
“Bedad, it’s cruke, me lad,
For never since the banks went broke
Has seasons been so bad.”

A bit stage Irish; but what can one do?

@ Gavin Kostick

I should add that I have not the vaguest idea who is right and who is wrong with regard to the outcome of the current austerity policies being followed in Europe. The argument simply does not seem to me to be related to what is actually going on i.e. what is feasible politically.

Arthur Beesley sums up the current situation in today’s IT.


I doubt if, against this scenario, leaders can afford a bust-up in February and the countries in difficulties, and not just their banks, cannot wait for some cash until after the German elections.

Again the banks rightly understand that the only thing of value remaining is government Fiat………
Their investments have a negative return (they always have over a long enough time period)

The fiat will not be returned…..it will be absorbed as the capital base is declining at a faster and faster rate.


UK energy trends – september

Second quarter 2012 :
Total energy production was 10 per cent lower than in the first quarter of 2011
Oil production fell by 12 per cent when compared with the second quarter of 2011.
Natural gas production was 14 per cent lower than the second quarter of 2011. Gas imports fell
by 6 per cent, with shipped imports of LNG falling by 42 per cent, due to increased imports from
Norwegian fields
Coal production in the second quarter of 2012 was 4½ per cent lower than the second quarter
of 2011. Coal imports were 64 per cent higher reflecting generators’ demand for coal being up
by 60 per cent (decline of nat gas to elec. / rise in domestic rail traffic to carry coal to plants)

Europes crisis is very much a North Sea crisis as the UK externalizes the losses on its neighbours.
The Big bang is so over.

Meanwhile as we are forced to burn coal again (see UK document) Toll and others want to tax carbon……priceless.
Its a resource transfer operation
No new capital is created.
Its a question of who gets to burn it as all the stuff will be burned anyway.

@ Gavin Kostick

Arthur Beesley had a second article which is correct in terms of the detail, as far as I can see, but from which I would draw the opposite conclusion.

It is to be welcomed that the impossible political objective of full EMU has been dropped by Merkel, especially as there is good reason to suspect that it was being used by her simply as a stalling tactic. The result of the idea being raised by Van Rompuy is that there can be little remaining belief that full political integration is either possible or necessary for the survival of the euro. This may also deprive Sweden of the main argument being used for staying aloof from the Banking Union (when the real reason is that its government does not wish to see the activities of its main banks – that dominate in Finland and the Baltic countries – come under scrutiny until it knows exactly what this scrutiny will consist of).


@All Philistines

Get off the blog or get a life!


NO. You are not getting King Philistine of the Month award; nor are you getting Spinner of the month award: that said, you probably deserve both.


Text from Blind Biddy:

Nice one Gavin; brought tears to the eyes of Patricia_the _ Irish_Sovereign_in_Exile

You can’t make this stuff funny

The history of Europe is too dark………


The people “advising” the Irish government both during the inflation and deflation phase of this extraction operation are not stupid.

For example the money supply has been declining since late 2008 and yet they continue to raise taxes on this declining base.

Its a purposeful act of extraction
The purpose is extraction
The goal is destruction.
You can’t sugar coat this.

The UK & other core countries don’t see the debt build up as real as it is not in one sense.
Its simply a record of past fuel burn for a negative return.
But its not a reason to stop dead.

It has got nothing to do with economics.
Its a act of war.

I find the Quislings having a laugh at this just too much to be honest.

@ All


From the official record of the press conference by Hollande.

« Je voudrais revenir à cette notion nouvelle de contrat de compétitivité et de croissance. Vous avez parlé la nuit dernière de démarche volontaire. Ce matin une députée européenne, Sylvie GOULARD qui est proche, vous le savez de monsieur MONTI, affirme que ces contrats sont un peu la porte ouverte à tous les marchandages financiers possibles. Elle parle même de caramel mou en ce qui concerne ces contrats. Est-ce que vous ne considérez pas que cette nouvelle initiative est en train de rendre le processus européen encore plus complexe, encore plus byzantin, encore plus illisible ? »

« Pour une fois que nous pouvons être capables de faire du cousu main et pas de la norme et de la contrainte, saisissons-nous de ces formules ! Qu’est-ce que cela veut dire un contrat de compétitivité et de croissance ? Cela veut dire que, pour un pays qui voudra faire un certain nombre de réformes, en matière d’innovation, de recherche, d’amélioration de sa compétitivité, de formations professionnelles, d’organisation différente du travail, et qui souhaitera avoir un accompagnement de la part de l’Europe, parce que cela correspond à des convergences souhaitables ou à des orientations qui ont été posées il y a bien longtemps d’ailleurs par l’Europe — souvenez-vous du processus de Lisbonne ! –, ce pays pourra donc avoir le soutien de l’Europe.
Je ne vois pas pourquoi j’aurais à m’en effrayer. Ce serait beaucoup plus problématique si on obligeait tous les pays à passer je ne sais quel contrat avec l’Europe, pour leur faire accepter une politique que les pays eux-mêmes ne voudraient pas. Or, le mot contrat écarte cette hypothèse. Dès lors que c’est volontaire, dès lors que c’est accompagné, dès lors que c’est sur des sujets qui sont ceux de la croissance, de l’emploi, de la compétitivité, je pense que c’est une bonne formule. Je pense qu’il y en a assez des procédures automatiques qui ont été maintenant renforcées et qui conduisent des pays à avoir des politiques budgétaires plus que sous surveillance. Ce n’est donc pas du tout ce cadre-là qui est proposé ».

« Monsieur le Président, deux questions. Une précision à propos de ces contrats de compétitivité et de croissance, plus exactement du mécanisme de solidarité associé à ces contrats. Mme MERKEL dit : pas plus de 20 milliards d’euros. Elle dit : 10, 15, 20 milliards au maximum. Pour vous, est-ce assez ou faut-il plus ou beaucoup plus ?
Et puis deuxième point, l’agence FITCH de notation maintient, certes, le triple A de la France, mais également son orientation négative, c’est-à-dire qu’elle se réserve le droit d’ici quelques mois d’abaisser cette note. On estime même que la probabilité que cette note soit abaissée est d’environ 50 %, voire un peu plus de 50 %. Que pensez-vous de cela ? Est-ce que FITCH est plus crédible que MOODY’S et sa consœur SNP ou moins crédible ? »

« Vous me demandez de noter les agences de notation, d’en faire une hiérarchie ? Je mettrai forcément en premier celle qui nous note le mieux ! Chacune a ses règles, ses paramètres, ses critères, souvent d’ailleurs assez convergents. FITCH vient de confirmer la note qui avait été posée il y a déjà plusieurs mois. Elle n’en a changé aucun de ses aspects, y compris l’orientation négative pour le triple A.
Nous entendons ce qui nous est dit, mais nous ne déterminons pas notre politique par rapport à telle ou telle agence. Nous déterminons notre politique par rapport à l’intérêt de la France, par rapport à ce que nous voulons lui donner comme force en matière de compétitivité et lui ôter comme faiblesse en matière de dette et de déficit.
Par ailleurs, je constate que la note de la France, celle que nous pouvons vérifier chaque jour sur les marchés, c’est le taux d’intérêt. Or depuis que je suis à la tête de l’Etat, les taux d’intérêt n’ont cessé de baisser. Je n’en tire pas de satisfaction personnelle, ce n’est pas moi qui fais les marchés. Mais je constate que la France ou en tout cas la dette souveraine de la France est particulièrement appréciée par les marchés, au point d’avoir un taux d’intérêt qui est maintenant en dessous de 2 %, et qui est même négatif sur les échéances courtes.
Mais tout cela est fragile, tout cela est vulnérable. Nous devons donc avoir une crédibilité. La crédibilité, ce n’est pas de faire de l’austérité, la crédibilité c’est d’avoir une ligne, une cohérence, une action dans la durée, et c’est cela que j’ai à expliquer aux Français et aux Européens. Voilà ce que nous voulons faire : nous voulons renforcer l’économie de la France pour lui permettre de saisir toutes les opportunités, aujourd’hui pour sortir de la crise et demain pour avoir une reprise la plus forte possible de la croissance.
Enfin, la seule considération que j’ai à l’esprit, c’est l’emploi. Nous devons créer de l’emploi. A cet égard, des mesures ont été prises et il y aura la négociation — qui n’est pas encore achevée — sur la sécurisation de l’emploi. Nous en attendons dans les prochains jours la conclusion.
Sur ce qu’a dit Mme MERKEL en terme de montant, elle l’a dit au Conseil européen et on en avait parlé. Enfin franchement, si on arrivait déjà à dégager 10, 15, 20 milliards rapidement pour les mécanismes de solidarité, je prends ! 120 milliards pour le pacte de croissance, 15 à 20 milliards pour le mécanisme de solidarité, on verra pour la suite… Pour le fonds de résolution des banques, il va falloir trouver un certain nombre de montants. Tout ce qui peut être mis au service de la solidarité, de l’emploi, de la croissance et de la compétitivité, je prends ! »

The fundamental lesson of the post 1986 Europe ?

Becoming “Competitive” destroys your wealth base.

Countries should slowly withdraw from global trade and look inwards.

Only through this can a country increase redundancy from Manchester type economic shocks………

Micheal Hudsons


The banks want us to chase our tails


Competitive means the extraction of labour value – nothing more.
It destroys net wealth.

Its a net negative game as it destroys the capital base of a country.

Further Globalization as too many externalties now.

National credit and real borders


@ All

The German radio service, Deutsche Welle, is very impressive in its coverage of European affairs. (It is a pity that the same cannot be said of the national broadcaster!).


As Arthur Beesley has perceptively pointed out, the key sentences in the European Council conclusions are the following;

“The Commission will submit in the course of 2013 a proposal for a single resolution mechanism for Member States participating in the SSM, to be examined by the co-legislators as a matter of priority with the intention of adopting it during the current parliamentary cycle. It should safeguard financial stability and ensure an effective framework for resolving financial
institutions while protecting taxpayers in the context of banking crises. The single resolution mechanism should be based on contributions by the financial sector itself and include appropriate and effective backstop arrangements. This backstop should be fiscally neutral over the medium term, by ensuring that public assistance is recouped by means of ex post
levies on the financial industry.”

Merkel is stealing the clothes of the SPD (and the Greens, who recently endorsed the SPD proposals on the Banking Union in a joint press conference).

@ All

Paradoxically, Deutsche Bank, the main target of the SPD, has the best coverage in English of what it proposes.


Unless Merkel pulls off something which she has yet failed to do i.e. gain an absolute majority (from a German public evidently holding a scepticism which finds expression only in the secrecy of the voting booth), the new government in Berlin will be a choice between a number of not very attractive options from an Irish perspective; Greens/SPD, SPD/CDU/CSU (repeat of grand coalition) or (unlikley), maintenance of existing CDU/CSU/FDP coalition.

Given the attitude of the Greens, the least attractive would be the first option cf. the comments of one of their two leading lights, Trittin.


Simple as that. You do understand the leech creditor mechanism. However, globalisation will not be stopped (or mitigated) easily. Ireland continues to try to live in the cracks….and hopes that someone wealthy will buy it lunch and beers….

Herbert Hoover came up with the term ‘depression’ because it was more soothing than panic or bust. The term ‘austerity’ wasn’t promoted by a marketing type.

The reviewer in the Times of Gene Kerrigan’s new book, ‘The Big Lie: Who Profits from Ireland’s Austerity?,’ says : “It doesn’t purport to explain where we are going next, or how to get there, but it gives a lucid account of why we are where we are.”

Whether right or wrong, Gene Kerrigan writing on the Irish crisis has more credibility than for example Shane Ross.

There is the European dimension but also the local one where the people without countervailing vested interest power are unfairly targeted.

So after a 20-year credit binge, credible alternatives to some form of fiscal adjustment in Europe, are seldom aired.

The Fed has been the most active central bank among developed countries but last month, the broad measure of US unemployment was 14.4%, down from 15% in Nov 2011. Nevada, like Ireland had a big housing bust, and its rate is 21%.

Banks have done well from the low central bank lending rates.

Mario Draghi, ECB president, does deserve credit for stabilising the euro.

Europe’s 3 biggest economies, Germany, France and the UK, are projected to have gross debt to GDP ratios of 81.5%, 92.1% and 93.3% in 2013.

What level of stimulus would be required to return the continent to 2007 growth?

Michael Hasenstab of Franklin Templeton is quoted as saying: “Ireland is now the second fastest if not the fastest growing economy in Europe, along with Germany. The PMI numbers in Ireland are in fact better than in Germany.”

The first part of the quote isn’t true; the second part is but if he really understood the Irish economy, he wouldn’t be quoting PMI data.

Estonia is projected to grow by 2.1% this year and 3.1% in 2013 — this is another small economy where headline data is misleading.

Some 20% of Estonia’s 2012 budget comprises EU transfers, which will start running out in 2015. As regards exports, a small number of firms are part of European supply chains while re-exports are also significant (goods imported via Estonia by Russian firms, from third countries).

@ Dork

North American energy independence; cheap natural gas in the US coupled with decades of stagnant wages, will put heat on big industrial energy users in Europe in coming years.

are you setting your self up as a more knowledgeable authority on the Irish economy than Franklin Templeton? And Estonia too?

@ joe Lawlor Says:

are you setting your self up as a more knowledgeable authority on the Irish economy than Franklin Templeton? And Estonia too?

This question reeks of the peasant mentality that I sometimes encountered in West Cork.

I am not setting myself up as an authority on anything. It’s easier for you to pose a question than challenge facts.

Franklin Templeton may or my not make money on the €8.5 billion holding in Irish bonds irrespective of what it knows about the Irish economy beyond the headline data.

FDI data looks good in 2011 if the US Chamber of Commerce in Ireland is the source — rising cash balances held in the overseas accounts of US banks to avoid US tax, are an FDI inflow to Ireland! The chamber put US ‘inflows’ at $30bn. The UN’s UNCTAD, which uses data prepared by the Financial Times’ fDi Intelligence, which put global inflows to Ireland at $13bn. Ireland got a 5th ranking for attractiveness because of the existing large stock of FDI. However, in a survey of multinational companies, Ireland doesn’t appear in the top 20 favourite destinations for 2012-2014.

The facts on the ground are that jobs in the FDI and indigenous sectors are below what they were 12 years ago! Claims about competitiveness being mainly responsible for a rise in exports are baloney!

Most foreign commentary on Ireland take misleading headline data at face value and in 2000, Antoin Murphy of Trinity College in a paper took Prof Paul Krugman to task for buying the yarn of an Irish productivity miracle.

It’s worse today given that tax avoidance strategies have become much more aggressive.

To get a more credible total export value in 2011, I would chop off 40% from the total of €165bn. That would result in exports from indigenous firms, live animals, tourism and transport amounting to 20% of the total — which is far from impressive.

As for deferring to my assumed ‘betters,’ two years ago this month, on RTÉ Radio One’s News at One programme, David Begg, trade union leader, and 15 years a Central Bank board member through boom and bust, read an approving comment on social partnership from a paper published by the Economic and Social Research Institute (ESRI) think-tank. He conveniently ignored other ESRI research.

When Seán O’Rourke, asked about a point I had made, the union boss said the “people down the docks” (the ESRI headquarters is on Dublin’s Sir John Rogerson’s Quay), were “independent” and “have a status” compared with me.

A far cry from Jim Larkin: “The great appear great because we are on our knees.”

Actually Michael, my recollection of that boom-time central bank guy’s comment on the radio about you was that he wasn’t interested in anything people like you say because you are not “a person of standing”.

People like you can always be excluded like that, because people like him act as gatekeepers to the pedestals – and you don’t appear to be “a safe pair of hands” or generally the right sort, from the estasblishment’s point of view.

Know your place lad!

@Joe Lawlor

Don’t be so naive to believe that Mr Hasenstab has any more clue about the state of the Irish economy than he does about the man in the moon. I worked in such organisations and believe you me the analysis is no more sophisticated than the official data they base their positions on i.e. piss poor.

FT took the view that the Euro and Irealnd will not be allowed to fail and in that scenario who was likely to be the biggest winner from such a stance relative to the other sovereigns – simple as. Their model throws up Ireland. Action:Buy.

We will receive more surplus coal from the Americas as they burn more cheap gas.

That will be about it

Moneypoint will be seen as the last decent investment in Ireland before the credit hyperinflation began.

Burning high value Nat gas for electricity is a crime.

Bits from the above very important paper……

“The share of generation from coal increased from 22.5
per cent in 2011 Q2 to 36.1 per cent in 2012 Q2, its
highest second quarter level in the last fourteen years.
Gas’s share of generation decreased from 43.7 per cent
in 2011 Q2 to 29.8 per cent in 2012 Q2, its lowest
second quarter share in the last fourteen years.”

“Imports of coal in the second quarter of 2012 were
64.3 per cent higher than in the second quarter of
2011 at 11.9 million tonnes. However this level is still
below historical trends seen prior to the end of 2008″

All but 3.5 per cent of UK steam coal imports came
from just three countries: Russia (46.1 per cent), the
USA (26.5 per cent) and Colombia (23.8 per cent).
Russian and Colombian steam coal imports increased
by 65.3 per cent (+1.9 million tonnes) and 36.2 per
cent (+0.7 million tonnes), respectively, from quarter 2
Steam coal imports originating from the USA were
more than four times the volumes reported in quarter
2 2011 (0.7 million tonnes)”

Total demand for coal in the second quarter of 2012,
at 14.2 million tonnes, was 45.5 per cent higher than
in the second quarter of 2011. Consumption by
electricity generators was up by 60.4 per cent to 11.9
million tonnes, reflecting the switch from gas to coal
for electricity generation .
Electricity generators accounted for 83.5 per cent of
total coal use in the second quarter of 2012;
compared with 75.8 per cent a year earlier.

You are witnessing a structural change in the UK energy sector.
The post 1990 dash for gas is over.

Privatization was merely a equity extraction.

Meanwhile the banking sector will preserve the life they have grown accustomed to via a life or carbon tax…………..

You really could not make this shit up.

Required bed time reading for Alan Shatter………..

“How it got this bad in Detroit has become a point of national discussion. Violent crime settled into the city’s bones decades ago, but recently, as the numbers of police officers have plummeted and police response times have remained distressingly high, citizens have taken to dealing with things themselves.
In this city of about 700,000 people, the number of cops has steadily fallen, from about 5,000 a decade ago to fewer than 3,000 today. Detroit homicides — the second-highest per capita in the country last year, according to the FBI — rose by 10 percent in 2011 to 344 people.

Average police response time for priority calls in the city, according to the latest data available, is 24 minutes. In comparable cities across the country, it is well under 10 minutes.

“Energy products can be obtained but only if someone’s grandmother is gunned down inside her house by a gang of dope-crazed teenaged hoodlums. The reason for the hoodlums has been the success of industries in pauperizing the city: either the consumers must become richer or costs of fuel-plus-credit must decline. Since the trend — as seen in the model city — is for consumers to become impoverished the outcome is for costs to be unmet and the production/credit side to be de-funded …

When customers cannot afford fuel it remains in the ground. Right now, Detroit — that model for America’s future in today’s present — cannot afford cops. It cannot afford firefighters, it cannot afford basic services. It has been bankrupted by the short-term success of its own consumption tycoons … hard to see how it can pay for high cost petroleum!”

Europe has turned our island into a wetter & milder Detroit.
Its not the Riordans now
Its love /hate

What have we become ?
Why did we allow them to do this to us ?

Returning to Box 6: A critcal insider ECB review

Well, the assumption of -0.5 is not supported by Hibernian emperics or the IMF -could be up to three times (or even more) – oh dear gotta shift focus or we are in danger of being deemed incompetent. It’s the long term that matters not the short term and our sophisticated SIMULATION suggests we are right [forget real empirics] to continue with austerity and ordo liberalism. Of course we are wrong but to admit such would deem us incompetent and it is far better to be deemed competent with the wrong policy than to change to a sensible policy and have our record to date deemed incompetent. Our SIMULACRUM IS THE NEW REALITY EVEN IF IT DESTROYS EUROPE, ITS CITIZENRY, AND THE EUROPEAN PROJECT. How we miss Dear Lorenzo.

@The Guv’nor

@ MH

Well put! However, I would add one qualification to the effect that the misrepresentation of the data may, nevertheless, have a major benefit if the markets are guided by it. The trick nationally must lie in recognising the ephemeral nature of the phenomenon. With any luck, the politicians involved are aware of this!

As Martina Devlin remarked in a recent column, what is happening in the HSE – and Ireland generally, it must be said – is beyond parody, the starting point of this thread. What is heartening is that the general public are beginning to get a grasp how the elements of the economy fit together. Despite all the ducking and diving, the fact that certain sectors are getting an easy ride through the crisis can no longer be hidden. The party mainly responsible for this situation is suffering the consequences. (No, it is not Fine Gael!).

Returning to the HSE, I would heartily recommend a reading of the article by Donal de Buitléir in today’s SBP under the title “What we do not know about state spending” and the sub-title “Eurostat figures show, among other things, that Ireland’s health system is the third most expensive in the world”.

Those getting an easy ride, shock horror, include some of the beneficiaries of the 40% of the budget spent on social welfare!

Brendan Keenan has some useful things to say in the Sindo on what is described in the official documentation, it seems, as VLWI (very low work intensity).


@ Yields

“Don’t be so naive to believe that Mr Hasenstab has any more clue about the state of the Irish economy than he does about the man in the moon.”

The moon as an investment opportunity! I think you’re right there. Lots of space: golf is easy. OK there are no carbon fuels, but loads of solar power. Possible minerals. If we send a baby, er two babies, up there the demographics are great. The construction possibilities just make me cry. Loads of advertising potential as readers of 2000AD will remember. A bloke already there to offer sanguine advice. Get PR Guy! Get a portfolio together! Buy now. And the dark side offers really profound cultural opportunities.

Actually the science philosopher David Deutsch thinks that this is the way we’re going to go.


‘Those getting an easy ride, shock horror, include some of the beneficiaries of the 40% of the budget spent on social welfare!’

Could you be more specific! Who?

Or are you merely expressing your pseudo_mcarthyite_patrician sado-masochistic tendencies on the serfs?

Anybody who knows anything about Irish society during the euro years is aware that the “decent working class” could not compete with foreign workers much of whom came from a middle class background.

The Tycoons who ran this country into the ground made monster profits from this wage deflation

Now that the Externalities are in your face the same old faces pretend to be surprised !!!!
Give me a break.
Give us all a break from these knowing & nodding faces which have gotten us into this mess.


These people cannot be employed within the Euro as the machines have replaced them.
That is the role of machines is it not ?
Replace labour…….

The only people that are now employed & employable within high wage areas of the neo – liberal economy are people that have skills that can game the system and transfer the declining capital base into their hands.


The Dan O Briens & Brendan Keenans of this world never really ask themselves a simple question…..

Do their jobs have productive value………

This policy debate of “Useless Eaters” does not orbit around production because most jobs in Ireland don’t produce much anyway….

Its a rentiers debate
Its not grounded in any physical reality.

Given the spacial reality of hyperinflated house & road junk that is our daily physical reality people burn less resources when they are unemployed.

I mean – imagine how much BTUs Dan o Brien burns !!!
All for a very obvious net negative return.
How many jet trips does he take in a year ?
And for what ?

The evidence is in………..its as clear as mud.
The UK is producing just enough virtual greenbacks to keep the system ticking over.
The control : Northern Ireland proves the point.

The FIRE workers in Northern Ireland are at least burning less resources going to work now.


“Overall NI Railways will be providing close to 5,000 weekly train services. There will be an increase of almost 14% in services which will allow more growth in passenger numbers on top of the clear growth experienced in recent years.

“The new timetable brings great news for people travelling by train particularly for those travelling on the Coleraine line who will see their weekday services increase by 50%.”

The evidence is in………..its as clear as mud.
The UK is producing just enough virtual greenbacks to keep the system ticking over.
The control : Northern Ireland proves the point.

The FIRE workers in Northern Ireland are at least burning less resources going to work now.


“Overall NI Railways will be providing close to 5,000 weekly train services. There will be an increase of almost 14% in services which will allow more growth in passenger numbers on top of the clear growth experienced in recent years.

“The new timetable brings great news for people travelling by train particularly for those travelling on the Coleraine line who will see their weekday services increase by 50%.”

@ MH

Damien Kiberd in the Sunday Times is also essential reading this weekend. The new property tax may have interesting side effects and bring to an end the pernicious impact of the slogan much touted by a political party now deservedly in bad odour on “removing people from the tax net”. Paying taxes is a duty, not a trap for the unwary.

I quote;

“The de facto unification of the tax and welfare systems in this country would represent a massive step forward not just in coping with the current fiscal crisis but in the medium term as well. Any country which spends more than €20 bn a year on social welfare at a time when its tax take is just €36bn is clearly dysfunctional. If that country has a situation in which 22% of hosueholds are described as “jobless”, the degree of dysfunction clearly increases.”

Prodded forward by the Troika, a totally inadequate coterie of politicians may blindly be leading the country in the right direction.

The LDP wins in a landslide in Japan, the Dark Knight returns in Italy and the PRI is back in Mexico.
There is still a market for populist politics especially when leavened with a touch of Xenophobia.
The putative alternative govt of SF & FF in promising more spending, taxing the rich and fingers to the foreigners is striking the right pose.


Prodded forward by the Troika, a totally inadequate coterie of politicians may blindly be leading the country in the right direction.

Why indeed the figures between the start of our Troika program and now tell a story of steady progress towards eliminating the evils of employment. Numbers employed in Ireland are now down 131,000 (7%) on the 2009 figures (post crash, pre Troika goodness).

Obviously with the continuing success we have had in cutting jobs we need to make equally strong efforts to cut the social welfare benefits that those freed from the burden of paid work suffer – Ireland needs sustainable, affordable unemployment. Money is such a complication anyway and the Troika will make sure it goes where it belongs – to keep the Eurozone financial sector safe from its own gross incompetence and staggering greed.

It is never clear whether the enthusiasts for the failing neoliberal cure are simply being disingenuous to further their class interests (eg: the financial sector, its larger feudal network and their guardians at the ECB) or whether it is US style conservative epistemic closure where contrary evidence just can not be admitted. The ECB’s continuing PR offensive against the dastardly Keynesian bias of fiscal multipliers is as good an example as you could ask for of either failing and possibly both.

Which brings us to an artistic truth nicely highlighted by Mr Kostick’s little tragedy. The cast of the European component of the global financial crisis (Osbäuble, Drachet, Rehnoso) play essentially indistinguishable characters. Draghi, though not a fool like Bini-Smaghi or Trichet, shares with his predecessors the same analysis of the situation and desired end state.

Now compare these two Financial Times pieces from two of the horsemen of the Austpocalypse over the last three years.

Wolfgang Schauble, September 5, 2011: Why austerity is only cure for the eurozone

Olli Rehn, December 10, 2012: Europe must stay the austerity course

These are two articles separated by fifteen months of failing economic indicators by two major EU figures and yet they are essentially identical. Schauble was wrong to start with and Rehn has been persuaded that stability of continuing a failed policy is less likely to damage “confidence” than a shocking change of direction to a policy set that might work.

This plot of this show makes no sense and it must not go on.

“Paying taxes is a duty, not a trap for the unwary.”


The revenue is the waffen SS of the Irish state………

Tax to pay interest on the commons is a duty ?………

Give us all a break please

You are a obvious plant for the Cromwellian forces that has infested this place since since well Cromwell

You cannot tax a declining money supply for 4 years and expect a rational physical economy.

I am all for a produce and tax fiat system but not a private system of money control as we have now.

Taxing declining activity achieves what exactly ?

A transfer of wealth………………..
That destroys society

A kings fiat need not be interest bearing.

This rejection of the physical reality of a economy …. i.e inputs and out puts is very strange.

A dutchman who brought real value to this society.


I have talked to dutch people who needed to escape the trap that was Europe of the 70s and 80s……

Most of those people decided to leave these shores in the 90s as the money power became ever stronger on these shores.

As people became consumers rather then citizens…….

Ireland and it inc disciples
There is really nothing worse
These people have no inner life.
They have been consumed by consumerism

The nation state after 300 years destroyed the last refuge of tribalism in the Blaskets…

Now the same characters want to destroy their creation for the even darker construct
The market state.
A entropy engine which farms people at a even higher intensity.

They wish to destroy all sentient life
They are a expression of pure evil.

All real value has been taken from this society

They wish to suck the very marrow from our bones.

Dark dark Hanoverian forces are at work.

They wish to destroy us.

@ Shay

“Why indeed the figures between the start of our Troika program and now tell a story of steady progress towards eliminating the evils of employment. Numbers employed in Ireland are now down 131,000 (7%) on the 2009 figures (post crash, pre Troika goodness).”

Slightly selective dating there by you.

Labour force:
Q4 2010 (ie when Troika arrived) = 1.794mn
Q3 2012 (ie now) = 1.773mn

Fairly stable basically, having previously haemorraged jobs at a rate of around 20k+ per quarter

Thinking of working in your local Aldi store are we ?

The hard inelastic Euro currency had driven down wages destroying the Irish main street & market town shops.

The bottom feeders have moved into the wreckage.
Their business model depends on long supply lines and cheap local labour.

@ Tull

That is a real danger! Merkel has embarked on a slow bicycle race until after the federal elections and one wonders how many countries will make it across the finishing line still upright (and whether they will include Germany in terms of avoiding a recession).

Her views on the issue now under discussion are clear;


The new property tax will have the most interesting consequences, as Damien Kiberd points out, in terms of addressing the welfare trap the existence of which is so glaring that only the wilfully blind can refuse to accept its existence.


@ Tull

Continuing the theme, John McManus, coincidentally, has an interesting comment this morning.


While he is right, in my opinion, with regard to the view taken by outsiders as to the economic future of the country, and also almost certainly right with regard to the CPA maintaining “industrial” peace, he does not deal with the point that I am trying to make which is the need for fundamental reform. For example, I would argue strongly against reductions in public service numbers and I am not in favour of worsening the working conditions for public servants but for an elimination of the unjustified differentials between employment in the public and private sectors (indeed, abolishing the distinction nearly altogether as has been done in most successful economies). Neither do I support across the board cuts in social welfare but in reform of it with a view to targeting those most in need and creating the most efficient outcomes. The present government is making a near total hash of both issues.

I would also differ with his analysis on what is driving people crazy and who the people are. While his focus is naturally on the views of businessmen, the rage that is brewing is in the ranks of private sector workers that are becoming increasingly aware of the distortions being created by the steps the government is taking.

I have used the analogy of a rising tide raising all boats. This is what has occurred in previous self-inflicted economic cock-ups in Ireland, with many boats undeservedly lightened by emigration and others undeservedly maintained in their original and equally undeserved bloated condition. Outside investors do not much care. We should!

But to come back to my original point, that it is the Troika doing the prodding that may be moving things in the right direction, the USC, and now the property tax, should allow an assessment of total family incomes, irrespective of source and get us to a point where all know what each is contributing – or not contributing – to society. By way of example, in the Scandinavian countries, there is a public register of the tax status of all individuals. Here, such an approach would still be anathema.

@ Mr Bond

A quetion if you have time.

I see Greece has bought back its own debt at a discount.

Can any country do that? I assume, because it is not being discussed, that this is not on the table for Ireland. Why not?


Slightly selective dating there by you.

Not intentionally so. I picked the figures for the last full year without the bailout (when, without the security of Troika guidance we were not on the path of fiscal rectitude) and the year in which Ireland was bounced into one.

If there are honest to god econometricians reading who have a different perspective on the employment figures and the effect of the Troika program I am here to learn.

In fact I would be interested in seeing any socially significant metrics of well being that have improved under the caring and beneficial boot of the ECB/EC/IMF Troika anywhere.


Troika arrives because consensus Market view is economy is FUBARed. So after they arrive you would expect a duff economic performance. Everyone else headed for the hills.


Any country can buy back it’s own bonds if it can raise funds elsewhere and more cheaply to do so. ECB SMP etc does this and profits can be directed to he relevant issuer if politically agreed – eg Greece.

Irish bonds are generally not trading significantly below par so unlike Greece, there would be little obvious profit. The ECB has made it clear they are not goin to allow OMPs to facilitate countries shifting their debt profile towards cheap short dated stuff as they don’t want to be regarded as Muppets and think the bond market’s pricing of longer dated bonds provides a useful pressure on governments.


The recent increased interest in Irish, Spanish and Italian bonds reflects the “lust for yield” referred to below, coupled with the ECB’s OMT backstop program for short-dated securities.

“Our house view is best encapsulated by the phrase ‘I’m so bearish, I’m bullish,’ ” Michael Hartnett, Merrill/BofA’s chief investment strategist, wrote in his Thundering Word note last week according to The Wall Street Journal. The reason, he said, is that the world’s central banks are flooding the globe with liquidity, growth remains weak, and…well, the world’s central banks are flooding the globe with liquidity.

“Fourteen economies, with a combined equity and bond market cap of $65 trillion, now have zero interest rates.” This driving capital to high-yield markets, emerging markets, and yes, stock markets. “Even in frontier markets such as Nigeria, a recent Lagos municipal bond issuance raised $2 billion with a 14.5% coupon.”

This should result in strong gains for stocks in 2013, with markets across the US, Europe and Asia seeing returns of 10-16%. The firm recommends investors get overweight in equities and corporate bonds, and has an S&P 500 year-end target of 1600, but thinks the returns will be bunched up into the second half.

At some point though, he warns, this “lust for yield” will have consequences.

Last week French 2 year bonds were at a yield of just 0.03% compared with 2.045% on two-year Italian bonds.

PIMCO, which runs the world’s biggest bond fund, has indicated a preference for Spanish and Italian bonds and the ECB is ready to buy short-dated bonds. The Italian government is forecasting €410bn of debt sales in 2013.

John McManus refers to the borrowing situation rather than the outlook for the economy. On that luck may help but unlike the early 1990s, the main trading partners are now banjaxed as well

The issue of reform is important as in the medium term, high unemployment is likely to remain a drag on the economy for many years.

In the US, a return to the average growth of 3.2% in the 1960-2007 period anytime soon is not expected. The US is becoming more competitive because of almost stagnant median wage levels over the past 3 decades and cheap natural gas. However there has been a fall in business creation since the early 1980s and the average monthly rate for the best year of job creation in the 2000s fell to 208,000 from 321,000 in the 1990s.

Almost all net job creation in the US is by firms up to 5 years old – – even though 50% of startups are dead by their 5th birthday..

As for Europe, not much is expected.

As for the BRICs, nice Mr Xi has likely forgotten that cuddly calf in Clare already. They are very difficult markets to develop from scratch.

The FDI area will hum along but there will not be manna from heaven jobs in big numbers. The big ares of growth for MNC are in emerging markets.

After 3 more taskforces, the penny will drop that the expectation that the comercialisation of university research could have become a jobs engine, was daft. Some of the gullible will shake their heads and wonder why other people were so naive. Others will claim to have known it all along.


“Fourteen economies, with a combined equity and bond market cap of $65 trillion, now have zero interest rates.” This should result in strong gains for stocks in 2013, with markets across the US, Europe and Asia seeing returns of 10-16%. ”

..until punters realise corporate profits can’t grow much in the absence of economic growth ..

…and weaning markets off CB cash will be difficult too.

@ MH

My focus is rather narrower. Reform is, in my view, required immediately rather than in the medium term. However, I have no confidence that it can be brought about by the present government. The links that I have provided above, on the other hand, suggest that certain almost mechanical reform effects are being created by policy steps forced upon the present and the previous governments by the Troika.

Brendan Keenan drew attention to this in his commentary cf. relevant extract from MOU.

“Structural reforms

Health sector

38. The authorities will conduct a study to compare the cost of drugs, prescription practices and the usage of generics in Ireland with comparable EU jurisdictions.

Efficient social support expenditure

39. The authorities will complete by end January a review of the labour market activation policies in place to enable the unemployed to return to active employment against the targets set out in the ‘Pathways to Work’ plan, with a view to increasing the impact of the interventions made and services provided in this key area through; implementing key service elements such as profile-based activation in all offices; extending onestop
shops to more offices, bringing forward necessary steps to outsource training and activation, and broadening coverage of policy initiatives to long-term unemployed.”

Were it not contained in what is in effect a binding international loan document, this type of language would be just the usual waffle to be found in a wide variety of documents on the website of the Department of Social Protection. This is no longer the case.

Meanwhile, the generality of the commentariat is busy up every tree in the wood.

P.S. The legislation on the Local Property Tax is the real eye-opener e.g. in respect of the universality of the measure cf. from the Q & A I linked to above;

“In the case of housing provided by local authorities and social housing
organisations, the local authority or housing organisation will be liable for

As to the action of FF, the party that signed up to the idea, in now opposing it, what can one say?

There is not enough money tokens to employ Guards in Cork city or part time post office people for Christmas.

And you talk about pathways to work ?

What drugs are you taking ?

On this nasty weather day I noticed the chaotic nature of the school run again – this did not happen during the 80s recession.

We have a monetary crisis in the eurozone which has / is causing this global energy crisis.

A child of 10 could see it.

The resource allocation in this non national economy is catastrophic.

Its a result of both the Euro and neo liberal capital & subsequent labour flows which is driving down real labour value to absurd levels.

The non productive guys with the capital claims on the remaining rump economy must therefore drive others into abject poverty as they operate within a zero sum monetary system.

@ Gavin

“I see Greece has bought back its own debt at a discount.

Can any country do that? I assume, because it is not being discussed, that this is not on the table for Ireland. Why not?”

Buying back debt only makes sense if either (a) it is trading at a discount to par (ie buying it back create an accounting ‘gain’ to help get debt/GDP down) or if you can replace it with cheaper (re)financing, ie effectively zero % Troika loans which Greece is getting.

Now, is it possible i hinted that we should be trying to do something along these lines over the last year, but no one was quite sharp enough to pick up on (and thats me being polite)? Oh, wait, what the…


But in short, buying back debt only makes sense if you are in such a distressed situation that your debt trades at very low price levels. All of Ireland currently trades above par, and by a large amount in most cases (the 2017s are @ 109 at the moment), given the view international markets currently have of us (ie a very good one).

@ seafóid

The labour share in national income has been falling in several countries.

In the mid-1970s a majority of global investment was funded by household saving, in recent years global investment is funded primarily from corporate saving.

Cash balances have been rising among corporates and at the end of 2011, European non-financial public companies had about €750bn in cash holdings.


The Irish including possibly many journalists, are generally bored with process/system issues; public project management has been pathetic; the buck stops nowhere system continues; a taoiseach can get away with not giving even one in-depth media interview in a year.

TDs draw attention to welfare cuts but not their own welfare: Colm Keavney TD had expenses of €50,540 in Mar-Dec 2011; Richard Boyd Barrett and his constituency colleague Mary Mitchell O’Connor drew over €30,000. Boyd Barrett also got a tax-free ‘leaders allowance’ of €31,000.

The replacement for FÁS should have foreign staff running it.

I was told last Oct in Cork by an unemployed person who was sent on a FÁS course that one module was on Toyota’s ‘just-in-time’ supply system

A study by the ESRI published last year showed that Irish return-to-work schemes for the unemployed, including FÁS programmes, were generally useless.

Overall, the authors said that those who were assisted by the State while unemployed were less likely to return to work than the average welfare recipient. The researchers say that welfare recipients may have learned “as a consequence of the process, that they were unlikely to face monitoring or sanctions as a result of failure to search actively for, or obtain, employment, leading to some decline in job search intensity.”

The buck stops nowhere but when there are foreigners to direct outrage towards, that is of course a different kettle of fish!

@ MH

What you write tends to confirm my point. Until we get to a situation where all adults have to file a return of ALL income (including transfer payments), this wasteful rigmarole will continue. FAS was, of course, the absolute epitome of this.

To put it bluntly; they (the Troika) are on to us!

Why any thinking person should object to this and continue to be led by the twaddle emanating from the current crop of Irish politicians – with a few exceptions – is beyond me.

Incidentally, in the broader context, I posted what Hollande had to say on the record above as I found it hard to believe that he said it i.e. that France would take whatever it could get in the way of support from the EU to promote employment (which may well be true but it is not something that one could imagine de Gaulle saying).


The Greek bond buyback has been very adversely commented upon in Germany and seen by one commentator as confirming the criticism of Rogoff of the likely outcome in such circumstances i.e. the price would go up and the only beneficiaries would be the vulture funds that bought at depressed prices. The price was pushed up from 10% to 38% of nominal value. (Ht. Eurointelligence).

@Bond Eoin Bond
Re: debt buyback.

As I understand it we are doing just the opposite. We issued relatively expensive debt and are sitting on some 20b cash in hand which is deposited with the CB at next to nothing interest.

Namawinelake did a good article on this a little while back.

I suppose it’s wise to have a cushion…

@ Fiat

“Namawinelake did a good article on this a little while back.”

The NWL article seems to suggest running down cash balances considerably, and only looking to fund very close to when we actually need it. That would be a fairly high risk strategy for a country that (at that point, if we hadn’t issued anything) would have been out of the markets for around three years. You can argue just as aggressively that showing, for want of a better term, “proof of life”, ie the ability to fund yourself, you make the cost of future funding cheaper, even if the first stab at it seems relatively expensive. Remember, of a total debt of around 190bn, we issued a fresh batch of around 4bn, so its hardly like we impacted significantly on the total “interest burden” payable by Ireland in % terms. Certainly bond yields have performed in a way that fits with the argument that it was a strong signal to send to the markets that Ireland was back in the market (and ESB, Bord Gais, BOI and AIB have followed alongside), though obviously the referendum and the announcement of OMT happened at the same time, and of course had a large impact as well.


sometimes you have to pay people to play your game. The game in this case was to find a way to create debt/GDP savings for Greece out to 2020, and the method used was the debt buyback. No debt buyback = more loans or haircuts to official loans. The cost was the premium to the previous market price.


At the start of 2012 most Irish gilts were trading in the 80s. Per Eoin there is nothing much left below par except the 2020 bond that is at such a small discount it wouldn’t be, if you tried to buy it in.

The key thing is replacing outstanding borrowings with cheaper funding. If that funding is available in theory, and the view is that the creditors are not against advancing it (big if) then the market should assume the debt will be replaced and prices rise in anticipation – effectively attempting to front-run the buy-back.

@Eoin, isn’t there a difference of perspectives here? – the cheaper financing of 500m for 4 months or so is obviously real money, but very modest in the context of Ireland’s GNP etc?

Are you thinking of debt management tactics like this, or do you think there is a potential move on a more significant scale viz debt sustainability. I don’t think it follows from OMT, is there something significant we are missing?

Returning to Box 6(eternally recurring): A critcal insider ECB review

Well, the assumption of -0.5 is not supported by Hibernian emperics or the IMF -could be up to three times (or even more) – oh dear gotta shift focus or we are in danger of being deemed incompetent. It’s the long term that matters not the short term and our sophisticated SIMULATION suggests we are right [forget real empirics] to continue with austerity and ordo liberalism. Of course we are wrong but to admit such would deem us incompetent and it is far better to be deemed competent with the wrong policy than to change to a sensible policy and have our record to date deemed incompetent. Our SIMULACRUM IS THE NEW REALITY EVEN IF IT DESTROYS EUROPE, ITS CITIZENRY, AND THE EUROPEAN PROJECT. How we miss Dear Lorenzo.

@The Guv’nor

re: Marc Coleman

“Having forked out €80bn to bail out Hypo Real Estate – which went bust because it was ultimately regulated by our Regulator – German voters are unlikely to vote for any party that promises anything to Ireland.”

Hypo went because Hypo management in Ireland and more importantly Hypo management in Germany bust it through sheer recklessness, not because of the Irish regulator or because of any other other regulator. Our regulator may have been a pick-your-word, but nobody in his office made a decision to buy as much as a button that ended up on the balance sheet of Hypo or any other bank for that matter.

I find it extraordinary that supposedly intelligent people will come a conclusion such as Marc Coleman has come to on this matter.
Perhaps his biblical compass is astray.

@ Joseph Ryan

This the bit I that I found interesting.

“Last Friday, Merkel said that there could be a “stick and carrot” approach to risk-sharing for troubled countries of the eurozone, adding that: “We are talking about support linked to improvements in competitiveness”. On the same day, in an interview with the Financial Times, ECB President Mario Draghi had this to say: “The countries that have been successful in adjusting and in reforming have mitigated the short-term contractionary effects of fiscal policies” to which his interviewer responded: “Are you thinking about Italy?” and to which Mr Draghi responded: “No, I’m thinking about Ireland.” Without debating the finer points of how far Ireland has or hasn’t reformed, the point is that Merkel has held out the prospect of helping countries that are seen as reformers and Draghi has made clear that the ECB regards Ireland as one of them. And that is good news.”

The Road to Shared Liability
Hidden Risks Plague Euro-Zone Bank Oversight Plan
By Michael Sauga

Angela Merkel received recognition from the highest possible level — herself.

German Chancellor Angela Merkel was full of praise for the euro-zone bank oversight plan passed last week at the EU summit in Brussels. But the deal is not nearly as watertight as she claimed. It lacks a legal foundation and could lead to a conflict of interest at the highest levels of the European Central Bank.


The markets operate within ranges as they move sideways overall. CB funding pushes up equity prices until results time when numbers come out of line with valuations. This risk.on tranche has lasted longer than the others and corporates have never been so flush but they can’t earn their equity discount rates leaving their money on the sidelines. They don’t believe enough in things to invest. There is not enough growth to justify a CB pullback. The US is some time away from escape velocity. The crisis continues. Risk off will be a big shock when it returns. Austerity is bad for the corporates too.


I have no problem with reform, provided it starts from the top and reforms down. I even think it is necessary. I will believe it is happening in Ireland when I see refresher fees and retainers fees abolished and a rate per hour struck for our esteemed legal and other professions that is tied to a single digit multiple of the minimum wage.

Whatever about the politics of being seen as reformers, the negative effect on the C+G+I simply will not go away.
You have been an advocate of looking beyond these shores to inform ourselves of less myopic views. If I may pose a question on differing world views.

Why does ‘Europe’ regard itself to have a ‘debt’ problem. Japan, for instance has a ~200% Debt/GDP and still manages to sell Toyotas.
1. Why has Europe backed itself into a psychological debt trap, believing that any Debt/GDP ratio of more that ~60% GDP is anathema?
2. Is the Debt/GDP ratio the real economic problem or is it the enforced reduction of the Debt /GDP ratio that is the problem.

These may sound like silly questions, but the well being of millions of people are being affected by Europe’s choice to ignore the question and insist that the answer proposed is not only the correct one but the only one possible.

@ Joseph Ryan

I have to confess that the only aspect of the crisis impacting the euro that interests me is trying to assess what is going to happen next. That is, in itself, a sufficiently big topic. Press reports of Draghi’s hearing before the EMU committe of the EP this afternoon have him saying that the EA is in better shape than other economic areas in terms of the underlying statistics. What has been missing, and which explains the paradox when comparisons are made with Japan, is the confidence that the euro is here to stay. This seems to now exist, if somewhat shakily.

It seems that Ireland will continue as poster boy as far as growth is concerned but I think that Marc Coleman is right when he says there will be no get out of jail card not so much because it does not correspond to Merkel’s electoral calendar but for the simple reason that it would make no sense from the point of view of those capable of providing it. Any aid will have to go hand in hand with “improvements in competitiveness” i.e. continued transformative reform.

This is the sour medicine that an inadequate Irish governing class – not just politicians – is doing its level best to avoid.


I do not think we will need anything quite so drastic. But the disgraceful discriminatory treatment between existing and new employees in the public sector simply cannot continue. Not to mention paying increments to existing staff while offering new staff such as nurses meagerly paid short-term contracts. There is no hiding the fact that the undertakings in the CPA agreement equate to a refusal to share the burden of adjustment equally among all staff to the detriment of the services that they are collectively supposed to provide.

@ Grumpy

Haven’t we kinda already bought back 20bn or so at decent discounts via our ownership of the bulk of the banking system? But don’t tell the usual government critics who’ll just claim this means our banks don’t have a diversified enough asset base….


Yes, but that’s the sov / bank entanglement we should all be familiar with by now though.

Eoin it’s peripheral banks taking a punt on their sobs bonds and when the bonds go up it does one thing and when they go down the headline writers wake up. There may be people who don’t realise the Irish banks are basically state owned, suppose it might be stealth so far as they are concerned…

This is a long standing symbiotic thing, “together we, er, ?”

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