Honohan Prime Time Interview

Transcript and video link at Broadsheet – here.

27 replies on “Honohan Prime Time Interview”

What we thought was the most sophisticated banking/financial system in the world,designed by nobel prize winners and managed by some of the highest paid people in the world,is spectacularly crisis prone,unbelievably overleveraged,contagious because of the financial system’s interconnectiveness,and major problems with risk analysis and governance.
The old dogma of central banks that if we stabilize prices,the economy would be stable–has been totally shattered and disproved. When will the financial system return to normality–Japan’s banking industry/financial system has not returned to normal after 20 years. There is no coherent or agreed alternative.
Large current account deficits/global imbalances are very destabilising. Keynes’s worries about these have been proved correct. Debtors countries will not be paying back their debts. The federeal reserve printing presses will reduce America’s indebitness others will openly default.
Current growth trends are very poor and it is likely we will have much more difficulty managing our economic affairs in the future.
There has been a failure of global macro-economic policy management,in regulation,reserve accumulation,current account balances etc. Global banking problems are difficult to manage. Lehmans bankruptcy is still not resolved. There is no solution as to how to cope with the bankruptcy of a large financial firm operating in many jurdistictions
The eurozone is in deep trouble. There may be political unrest and the periphery will not be able to repay it’s debts, they will default and it will be very painful.

I took two points from the interview where The Gov’nor was free to comment – on the political he is necessarily restrained [abeit having the liathroidi to go unilateral a few years ago when Yes Ministers were going viral]

1. The banks need to tidy up pronto on the mortgage issue and recognise the debts on their balance sheets
2. The Irish banks will need more capital – and well before 2019.

Two other relevant points:

(a) I agree with Karl Whelan that ‘retrospective funding’ of the bleed1n pillars from the ESM is (deutsche politically) a dead herring – [as dead as the Sovereign; and

(b) I agee with Kevin O’Rourke that the Irish Gov needs to ‘work out’ and portray a ‘credible threat of default’.

Minor point:

Irish proxy_sov debt at 140% GNP is UNSUSTAINABLE. Time to get real REAL.

There’s much to pilfer and asset strip yet…….watch the escalating attack on private pensions and deposits over Euro 100k (in due course)……sure Ireland has “turned the corner”!

Buy a farm.

@Paul W

Don’t need a farm! I get two acres of cabbage & spuds from leasing prime development land cheaply from NAMA and a half acre of turf goes a long way … the candle and jam making enterprises are going well and the sow is thriving; slow broadband in the rural sticks is poor but functional and I keep Blind Biddy’s lovely Xmas present of the neu slim line bazooka in the corner for vermin (inc. elements of homo sapiens) purposes [some of doze financial human animals are real dangerous critters].

Getting ahead of the game with a comfortable 50s existance …. before we hit the 1930s again!


Of course, nobody had a) sussed out from as early as 29th June 2012.

As for b) if you recall, back when it actually mattered, threats had to tiptoe round CP.

Revelatory stuff!

Sounds idyllic but, personally, eating spuds, cabbage and bacon all the time takes me back to the limited Ireland of my (and my father’s and grandfather’s) youth(s). You need to save for a bicycle!…..and expect a limited sex life if all you can offer her is “slow broadband”.


Estimates of up to a Trillion in dodgy within the EU banking system – the ‘few bob to the paddy_banks retrospectivley’ was never a runner – contagion you know. The Big Bust is nigh … RealPolitik time …

Course if the ECB can print a Trillion for the Fin system (which it has) why not print 2 Trillion to tidy up …… The CAPITAL RICH will fight it …… I see no other reasonable way out from a citizen serf perspective.

Ambrose E_P: ECB ready to print, Germany ready to scream

The doves are seizing control of the European Central Bank. They are already laying the ground work for a blitz of Anglo-Saxon QE, whatever the Germans, Dutch, Austrians, and Finns (?) have to say about such wicked Latin conduct.

Welcome to the next fascinating phase of the EMU opera buffa, opera tragica.

The ECB’s Peter Praet – the board member in charge of setting economic policy debates – has given an astonishing interview to Brian Blackstone at The Wall Street Journal, opening the floodgates for bond purchases.


Link to WSJ inc. We’ll see [h/t naked capitalism

@Paul W

Me life is ‘richer’ [in a real sense] than that; ‘Wherof I cannot speak – therof I must keep silent (or Blind Biddy might bazooka me! apologies to Wittgenstein)!

re: AEP

“The doves are seizing control of the European Central Bank.”

Puberty, clearly, is a very late and protracted process in the Central Bank dove family.

Too little, too late, I suspect.

The latest EZ growth dip, as AEP points out, has changed the equation.
The ECB, with it series of growth forecasts, issued with all the solemnity of Solomon, might as well have been issued by John Bowe; or at least pulled from the same place.

AEP is right about societies having to move protect themselves. The Euro has become a potent weapon of destruction against deficit countries.

Meanwhile the EU commission is flaying on all fronts:

Maybe they should ask Bruno Ganz to do their Economics press briefings.

@David O’D
An accurate description of life in Kerry. One small detail is different, the bazooka is usually behind the bedroom door not in the corner. You also need a 4 camera video surveillance system with a recorder. The latter is usually installed after someone has buggered off with a load of your turf in broad daylight. The brazen bastards is how they were described.

Italy has a debt hangover and a very low birth rate. Caldwell wrote about it in the FT a while ago. Bit like Japan.


Italy has no chance of getting over debt hangover. Neither do most of the other countries.

Italy’s debt /GDP went from 125.6% to 133.3% of GDP from Q2 2012 to Q2 2013.

Based on zero growth, and a borrowing rate of 4%, it will climb to 138.6% in another year. [Italy’s growth was -.1% for Q3 2013.]

One ‘solution’ might be for all states to simply declare that their bonds no longer pay what it says on the tin. They pay a rate equivalent to prior years growth plus 1% up to max of 2%, no more.
Let the chips then fall where they will.

Even astronomical levels of growth, which will not happen, would have difficulty in arresting the current debt dynamics throughout the EZ.


The above stats from Eurostat, with swathes of Debt/GDP rising in almost all cases, combined with zero or negative growth, make proponents of Two Packs and Six pack solutions appear more akin to cartoon characters, than to people who live in the real world.
Yet the cartoon characters expect to be taken seriously.

@ Joseph Ryan

Italy currently has a net public debt ratio of 106% and household debt at about 55% of GDP.

Comparable data for Ireland is net 138% (GNP) and 167% household.

Italy’s current debt servicing cost is half the early 1990s level and it runs a primary surplus.

It has a growth crisis that could not be solved by devaluation alone — realistically it has to lead the effort to implement reforms — even if it defaults, there is no getting away from that.

Ireland also has a growth crisis but in the land of fairytales, there is no audience for that argument – – yet.

Richard Bruton is heading to India on another trade mission. Current trade is a decimal point. It’s a very difficult market to break into.

Manna drops from the heavens are getting scarce in Europe.


According to your figures, Italy must be holding a massive cash reserve to get from a current debt/GDP of 133% to the net figure of 106% that you give above.

Either way the debt dynamics are impossible. While not a mathematician, I have sufficient maths to deduce that when the Debt/GDP ratio exceeds 100%, the rate of growth in GDP has to be in excess of the interest rate in order for the ratio to reduce.
That infers growth of ~ 4% in order to beat peripheral interest rates of ~4%. We cab both agree that such growth rates are not in the realm of reality in the immediate future.

I agree that reforms are necessary both in Ireland and Italy, but I have a lot of doubts that we will get them or that even if we did, the reforms will work.
Germany, on the other hand can borrow for ~0%to 2%, so that the growth bar is that much lower in her case.

Intuitively, the case being made on the next thread, that negative interest rates are more appropriate at present makes sense to me.
Another alternative would appear to be severe capital / wealth taxes, so as to shift the returns from capital back to labour.
It seems to me that all of the developed economies want to place the returns to capital on a higher priority than full employment of their citizens, or the standards of living of their citizens.
Negative interest rates would help shift this priority, which is not and should not be a self evident priority.

My attitude to the powers that be, both in Ireland and particularly in the EZ has hardened considerably over the past few years. The next generation is scraping from the dole, to half jobs, to zero hours jobs, to internships and back to dole again. All the while to pay for bonanza payoffs for insiders, or to bankroll the financial system, its executives and employees; and most crucially of all to make returns to past wealth in the form of interest rates.
Rewarding the idle rich, with rents, interest or dividend, was never good economics and is socially poisonous, but rewarding them seems to take a priority over all else in current economic dogma.

Between the DoF officials like Moran in the Crow’s nest and the governor I think the Titanic will be saved. This is “manageable”?

“Well, what am I…I’m always worried, I’m always scanning the horizon for risks, so I don’t think I would like to renumerate them in order to accelerate their arrival. There are a number of risks that one can see out on the horizon. And a number of things which we’re monitoring very closely. So, you take your choice now, I’m sure you have a list of your own that you would like me to comment on.”

@ Joseph Ryan

The IMF says Italy’s gross debt will be 130.8% of GDP in 2014.

The positive side of the balance sheet include pensions funds, cash balances and the value of stakes in private companies.

@ All

The Central Bank’s role in the debt crisis has been relatively timid in recent years.

Some issues have been beyond its control but it could have embarrassed the people in charge of the sclerotic system to legislate for a change in a 2009 property law that put action on overdue buy-to-let mortgages that eventually took 2 years to rectify.

Ms Justice Elizabeth Dunne made a ruling in June 2011 that there was a flaw in the law that impacted buy-to-let mortgages.

Two years and a month later, Alan Shatter, justice minister, said in the Oireachtas:

“I want to emphasise at the outset that the Bill does not grant any additional powers to financial institutions.  It merely restores the position which was thought to apply when the Land and Conveyancing Law Reform Act 2009 was enacted, i.e. that the relevant provisions of the law in force prior to the commencement of that Act on 1 December 2009 would continue to apply to mortgages created prior to that date.

What crisis? No need for panic!

It’s basically the same story with bank debt.

Shannon front row remain on standby should Herr Geithner ever drop by …. a mere €20 billion or so to discuss against the head!

@Mickey Hickey

from your link: Didn’t they do well out of the crisis!

Just saw the part where the Gov indicated that he would not like to see depositors take any sort of a hit in the event of a bank getting into trouble in Ireland.

Does that mean the depositors in Cyprus are entitled to their money back?

I think the Cypriot depositors could draw a phrase from one Mr. Bailey to one Mr. Gogarthy – “Will we f*!@”.

I thought this was the EU – with emphasis on the U bit. Apparently some union members are more equal than others.

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