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‘Ireland’s treatment by the leading rating agencies appears conspicuous. It is far outside the empirical pattern that can be derived from historical data’
The rating agencies are a convenient target at times but one criticism I would have is their willingness to respond to short term market moves, as opposed to fundamentals, which was clearly evident in Moody’s last downgrade of Ireland to sub-investment grade. That tendency has arisen as a response to the heavy criticism the agencies took in relation to their sanguine view of sub-prime debt and the charge that they badly lagged the market before and after the financial crash .
You might mention to the authors that the figures appear to be missing from the paper.
I like the narrative approach, but it is hard to assess without those figures.
Instinct says that although the authors have a point they haven’t figured in the bit where bond holders in the euro zone realised that there was no lender of last resort: indeed that what was was assumed to be the LOLR was actively hostile to the idea.
With this approach, it might be worth a look at bond spreads for EZ versus non eurozone countries for similar situations.
There were several factors that contributed to the Irish economic crash and the overreaction of ratings agencies and bond investors came after the main event.
In a time of international crisis, small economies that are dependent on foreign investors to fund most of their debt sales are particularly vulnerable as the potential buyers may have limited knowledge about such economies.
In 2007 when the US subprime crisis and credit crunch signalled that the global financial sector was in trouble, Ireland and Finland, two small economies that had experienced economic crises over the previous two decades, were in sharply different positions in respect of vulnerability to an international shock.
Ireland’s net public debt was 10.5% of GDP compared with Finland’s -72.5%; household debt was at 210% of gross disposable income compared with Finland’s 110%.
Both countries sharply cut public debt in the 1990s with the benefit of rising exports.
For a number of years, Ireland with less than 1% of Europe’s population was getting over a quarter of US greenfield investment; there was a huge increase in labour participation with the number of dependents that every 100 workers had to support cut from 230 to 115.
FDI peaked as a job creator in 2000 and during the 2001-2007 property bubble fuelled by tax cuts, credit growth, low euro interest rates and a large inflow of migrants from Eastern Europe, there was NO net jobs growth in the internationally tradebale sectors.
In 2007, DKM estimated that Irish construction output represented 22.6% of GNP and 19% of GDP, when measured in gross output terms. The construction to GDP ratio was the second highest proportion (after Spain) and ranged from less than 8% in Sweden to over 21% in Spain and with an average ratio of around 12% in Western Europe and less than 11% in the UK.
By mid 2008, almost two-thirds of outstanding domestic Irish private bank credit of €416bn was property-related.
Icelandic and Irish banks had the highest loan-to-deposit ratios in Europe; loan to deposit ratio rose very sharply, from 136% in January 2003 to a peak of more than 193% in October 2008. PermanentTSB peaked at 277%.
One of the factors that increased market jitters was the uncertainty about the extent of bank losses.
In February 2009, exactly 2 years after the subprime crisis broke out in the US, the Irish unit of Pricewaterhouse Coopers (PwC), the biggest of the Big 4 accounting firms, delivered a report on Anglo Irish Bank to the minister of finance.
“These annual impairment charges were €2.3bn and €3.0bn respectively per annum under the two scenarios for the years ended 30 September 2009 and 2010. The two PwC impairment loss scenarios exceeded Anglo’s worst case impairment loss scenario.”
Jones Lang LaSalle valued a sample of 160 properties held as security in relation to the top 20 land & development exposures on Anglo’s books.
Anglo Irish Bank reported a loss of €12.7bn for the 15 months to the end of December 2009 - the largest loss in Irish corporate history - after charging €15bn to cover bad debts.
The main Irish story was that a massive bubble was followed by a massive bust. Ratings agencies and bond investors were among the extras in the cast of villains.
“…the government announced an unconditional guarantee of €440 bn for more or less all liabilities of Ireland’s seven major banks. While considered bold and unavoidable at the time, it is quite possible that Ireland would have taken an entirely different path without this step.”
Oddly, as I recall, typical reaction “at the time” wasn’t:
“I say chaps! About what the Irish have just announced - that’s really bold and unavoidable. The right thing to do. The only thing to do. How spiffing!”
There was, in fact, a plurality of expletives. and there were many, many, incredulous, raised voices, at the time.
It really, REALLY pissed off A LOT of people, many of whom simply ‘lost it’ immediately with Ireland. Most of the rest joined in progressively over the next couple of years.
Now the authors have a problem reconcilling the behavoiur of both the bond market and the ratings agencies in the months following.
People in ratings agencies talk to people in the market, they read the same stuff. Trust was ebbing in a big way. That isn’t in the model.
By Autumn 2010 it had become apparent to almost all market participants that, not only had The Irish government failed to understood what it was doing when it guaranteed all those banking liabilities, but that it had not the faintest idea of, nor did it want to know, what those liabilities were.
“Just get the feck out of Dodge” is tricky to model quantitatively.
The Irish banks were not only exposed to the local property market, they enabled Irish investors to become the second biggest investors in commercial property in Europe after the Germans.
About 80% of Anglo Irish Bank’s €68bn loan book was secured against Irish and British property. Bank of Ireland’s loan book in 2008 at €135bn, had 71% or €95bn secured against property. AIB’s loan book was at €150bn, and 60% was secured against property.
Irish investment of €13.9bn was put into European property deals in 2007. In contrast, the Irish business sector did not even get a total of €200m in venture capital investment.
1) Whether or not the bond markets responded at the time, Ireland was in deep trouble. The correction following the construction boom and several years of sharply falling export competitiveness would have produced high unemployment and a large mismatch between Government revenues and expenditures no matter what the markets did.
2) The bank guarantee was as clear a statement as we could have made that the interests of holders of sovereign debt were not our over-riding prioriity. Holders of sovereign debt would have been deranged not to respond to this clear indication of where they ranked in the priorities not just of the Irish Government, but also the largest opposition party.
3) It was rational to think that Ireland might possibly default for at least two major reasons. First, that it required difficult-to-agree interventions by the ECB that were certainly contrary to the spirit of relevant EU treaties to prevent default, and it was far from clear that this would happen. Second, that it arguably did make sense from an Irish perspective to default, whatever our past record and whatever the positions of Irish politicians at the time.
“The physics of markets and economics can be strange. Trends continue in motion long after they should have halted. It can take years for ineffable logic to work itself out in market prices. External shocks take time before they are reflected in inevitable damage to the overall economy.”
“By adopting OMT earlier, the ECB could have prevented the panic that drove the spreads that justified the austerity. It did not do so. Tens of millions of people are suffering unnecessary hardship. It is tragic.”
The ECB could, but didnt, have done a lot more than it did at almost every stage. I have been a critic of it, and will remain so. In an effort to be more Bundeshawkish than the bundeshawks it has run perilously close to the edge time and again. Every single country has suffered. It has, quite simply, failed in its duty.
“We in the Eurosystem have as our primary objective the maintenance of price stability for the common good. Acting also as a leading financial authority, we aim to safeguard financial stability and promote European financial integration.”
Lets see. Borderline deflation is conducive to the common good is it? The chaps in the ECB know about stagflation having lived through it. That is whats being flirted with. Is it financial stability to have prolonged existential questioning of the currency? Hardly. Has the antics of the ECB in assuaging the historico-cultural fears of the Germans helped promote further financial integration, where we have non-convertible euros and a balkanization of finance.
Its zero for three, and its cheerleaders should at minimum admit that. Can it do better? Of course. Will it? Maybe. Will it matter? No
Fail, fail and fail again.
Well, for Sundayish musing what reforms could make the European Central Bank into something useful?
Top of the head:
* Dual mandate
* Fair gender representation
* Minuted meetings
* Some way of preventing ECB insisting on fiscal action in return for doing its job
* ECB off the Troika
* Some way of allowing internal debate with learning possibilities rather than closed prior assumption of collective wisdom
* Flexible inflation targeting
“Central Europe”: ring a little bell? Maybe those Middle-Europeans are being true to their cultural embedding? Goes back quite a ways.
So, if their current behaviour seems at odds with a pan-european idea - (save us peripherals - from ourselves!) , maybe its our lack of understanding of what a Mittle-Europa mindset actually means, is the ‘problem’. Would not be the first time us Western Europeans made this mistake.
If I were a ME-pean, I’d have little patience with us western islanders. The ME-peans owe us nothing. But we took their euro, so we had better ‘follow their drum’.
Well, for Sundayish musing what reforms could make the European Central Bank into something useful?
A devastating meteor strike on Frankfurt might make the ECB part of a useful lesson on the monitoring of asteroids.
I am with Brian Woods Snr on this one, the ECB is already fulfilling the role it was created for and that role is substantially as the neoliberal thought police. Asking the ECB for a dual mandate is liking asking if the Ku Klux Klan could admit non-whites (Democratic politics and economic policy making were never meant to live together boy! Burn Cyprus!). The intellectual diversity in economic thinking that people are looking for here is one of the things the ECB is bound to oppose.
Ireland is a bit like the protesters in the Ukraine here, we have an idealised vision of what the EU represents (western values, whatever they are) when since at least the early nineteen nineties its been about the formal legal privileging of market imperatives over democratic ones (which are exercised nationally and nationalism is _so_ _so_ bad) as well as some worthwhile environmental window dressing.
For me the gold standard on thinking about the political role of the ECB is this long but brilliant one from US economics blogger JW Mason in 2012, he makes a convincing case for the ECB as the European institution that represents the political interests of European financial capitalists and industrialists.
So EMU is an ordoliberal creation and it is not just missing crucial economic policy elements, it is intended to prevent them from being used and gradually make the realization of what used to be thought of as left policies as politically unthinkable (as they are in Germany, thanks substantially to the ECB’s model, the Bundesbank, and its political power).
Ireland needs to be realistic about this - we are smaller than many second tier European capitals and have no hope whatsoever of opposing the direction that Europe is traveling in (however much better we could have managed the banking crisis and approach the debt crisis). It is also too late to make alliances with other countries. Germany has been adept at playing the peripherals off against one another (we have been the odious, simpering, good boy in the class) and France seems too paralyzed to fight the German bloc.
What we can do is set about readying to stop travel in the same direction and making sure that political and commercial interest groups in Ireland with EU sympathies are kept further from government. Think Denmark or Sweden here and think very carefully about how we can be ready to escape EMU.
Noonan might be playing the fool in his public pronouncements (”We can’t afford to go mad.” execept “we” was the private sector) but perhaps he realizes that Ireland may have to have the budgetary space to escape the Eurozone (with a touch of default) at some point in the next decade.
A little less à la carte solidarity would be in order.
The average number of open infringement proceedings in respect of breaking rules or not implementing them, against EU member countries this year is 30 with Italy in the lead at 68. There were 641 open cases on May 2013, being prepared for the Court of Justice - - what a waste of resources
Beggar-my-neighbour facilitation of massive tax avoidance is at last being tackled following pressure from individual countries.
The development of the internal market gave rise to discussions on having a common currency in the 1980s and it was two French socialists, President Mitterrand and Jacques Delors, president of the European Commission, who were in the political vanguard of the project. Absent the dramatic collapse of Communism, the German government would have struggled to win support for it.
What is fact in data or in agreements is not easily settled.
Marc Coleman in the Sunday Independent writes today:
in June 2012 the EU summit gave Ireland an implicit but clear promise to use the ESM to help recapitalise our banks retrospectively. Until that promise is honoured, all bets are off as far as Troika diktats are concerned.
There is no reference to legacy debt in the post-summit statement and if any leader did actually make such a promise, it’s curious that nobody has been named.
On facts, the Charlemagne columnist of The Economist made a blog post on Saturday that was subsequently deleted. It was titled ‘Ireland’s dead cat bounce’ (the term comes from a Cantonese saying) and had an error on budget deficit data. However, it does illustrate that the official position is meeting with some scepticism.
I think we see things in the center of Europe a lot more with a 2000 year perspective, and that means that we have a lot more patience.
That also includes making small, temporary compromises, as long as it does not screw up necessary, long term rules.
What surprised us a little bit was the amount of aggression against treaties, which we strongly believe to have to be that way.
And when we strongly believe, that in the long run we are not large and strong enough to go it alone, how can countries like Greece, Ireland, Italy believe that?
We will have some troubles ahead,
short term: AQR, Greece, Ukraine.
mid term energy: what is the UK deciding, how will they fix their 8% deficit?
long term: demographics, the rise of China
Germany has a broad majority government, many experienced hands at the important positions. We will weather, whatever comes.
On the issue that caused the major difference, according to press reports, between Asmussen and Schaeuble, that of the appropriate legal base for the SRM, the latter has conceded the point that it must be that defended by Asmussen and the legal services of all three institutions, Commission, Council and ECB i.e. Article 114 TFEU under which decisions are taken by qualified majority. However, the Resolution Fund, it seems, if the Reuters report is correct, is to be set up by way of intergovernmental agreement where the core creditor countries will have an effective veto.
The honours with regard to which institution decides on the closure of a bank, Commission or Council, also seem to be equally divided but the Commission will clearly still have a central role in line with EU jurisprudence.
“The engineer, like the insurance agent, is hampered by the fact that his skill depends on the earth behaving in the future as it has in the past. As Petroski writes,
Since it is future failure that is at issue, the only sure way to test our hypotheses about its nature and magnitude is to look backward at failures that have occurred historically. Indeed, we predict that the probability of occurrence for a certain event, such as a hundred-year storm, is such and such a percentage, because all other things being equal, that has been the actual experience contained in the historical meteorological record.
That record, however, is now shattered. In the course of Petroski’s lifetime, and all of ours, we’ve left behind the Holocene, the ten-thousand-year period of benign climatic stability that marked the rise of human civilization. We’ve raised the global temperature about a degree so far, but a better way of thinking about it is: we’ve amped up the amount of energy trapped in our narrow envelope of atmosphere, and hence every process that feeds off that energy is now accelerating. For instance, this piece of simple physics: warm air holds more water vapor than cold. Already we’ve increased moisture in the atmosphere by about 4 percent on average, thus increasing the danger both of drought, because heat is evaporating more surface water, and of flood, because evaporated water must eventually come down as rain. And those loaded dice are doing great damage. The federal government spent more money last year repairing the damage from extreme weather than it did on education.”
“It is now crucial to complete this agenda at the European and national level. In this agenda there is no place for retreating into nationalism and protectionism. We know better than this and should stay focused on the key reform priorities: completing the banking union, implementing growth-friendly fiscal consolidation, and structural reforms in labour and product markets. I have little doubt that all these reforms are beneficial and trust-enhancing, even though some of them may be opposed by vested interests or entail adjustment costs in the short term.”
As far as I can detect, Draghi for all his ability, is now suffering from Stockholm Syndrome.
The ECB were the very first to retreat into nationalism. Trichet in his interview with McConnell (Ir Ind) did not mention giving liquidity to Irish banks, he was giving liquidity to ‘Ireland’. In his mind Irish bank losses had already been nationalised.
“JCT: “That I will not say. What I will say, is that the same message for all. The message coming from the Governing Council at the ECB, was a collegial approach. And a fact is that Ireland was supported more than any other country by far. This question misses an important point. The Governing Council of the ECB had been, was and continued to be much more forthcoming, in terms of supply of liquidity, with Ireland than with any other country in the Euro system. My understanding is that the Government of the Ireland at the time assessed rightly the systemic consequences of the decision it has to take.”
And no amount of soft celebration and speeches by our own ‘Dear Leader’ tonight, or by Draghi will reverse the process commenced by Trichet.
Draghi, with Asmussen in tow, nationalised and ringfenced Cypriot bank losses in 2013, even to the point of taking the assets of a good Cypriot bank and merging it with a glugger Cypriot bank.
His Cypriot performance will have done no harm to Asmussen’s career prospects, as today’s announcement bears out.
Tough on the Cypriots, but that’s careerism and the ECB for you.
Pat Leahy in todays SBP, reassures me, just a little, in commenting (albeit in brackets) that we have a plan in place for next time. I hope he is right.
From Draghi’s speech
“Our common responsibility for the euro area strengthens the case for reform. ”
Given the destruction wrought on peripheral Europe in the past five years, our ‘common responsibility’ to get rid of one of the major instruments of destruction, the Euro.
If the Economist and Prof Lucey & Gurdiev are bearish on the prospects for Ireland., then I am on the bull tack. This publication and these individuals are like stopped clocks, correct twice a day. I suspect Mr Foreigner is right, there is a strong cyclical upturn in Ireland driven by a rebound in confidence, reinforced by Anglo Saxon export markets. Of course, if the only newspaper you read is the Grauniad then you will not agree.
the youtube is not available here. What does it say?
But I did take a pretty close look at the flood data this summer. Historical data, searching back 500 years, valley cross sections, solving differential equations, while riding my bike, without driving into the one single pothole in 10 km of our excellent bike lanes, and breaking some bones, …. progress for me : -)
About 500 pictures taken, lots of excel sheets, cost, risk, what our good Czech neighbors are doing and can do with their dams. The whole nine yards, it’s my bread and butter business, I am just moonlighting in economics.
And I am in support for the building permits for new waterfront real estate (disclosure: I have zero interest in it), and I would buy then there, if the price is OK.
Practically everytime some non-physicists comes me with “simple physics” , I am getting the creeps.
That 72% will have a long number of years to reflect on their opinion as they pay back private debts imposed on the Irish State by the ECB, in particular.
My second point is that I do not accept the bona fides of the ECB or the EC in implementing policy in an even handed manner across the EZ.
In short, to me the EZ is now a foreign power, with policies designed to protect and enhance the interests of mobile banking and capital at the direct expense of citizens of this country and a great deal of citizens of other countries. The fact that Irish elites continue to benefit enormously with bonanza pay and pensions, may make the euro a cause celebre to them, but as a private sector worker it confers no benefits, other that an overvalued currency when selling products.
The very idea that Rehn/Barroso felt they should be in Ireland to celebrate the ‘end’ of the bailout shows the sheer arrogance of these people. These were the two, who with Trichet, imposed moral hazard interest rates of about 6% on a so called partner country.
The euro has failed Europe economically, with Germany being the exception, and as I am not German nor do I live in Germany, from my point of view, the sooner the euro disappears from Europe the better.
In other words, I am neither in the euro elite army nor supported by the euro elite army, therefore I will not support the euro or the euro elite army, particularly following the destruction visited by it.
@ francis: Thanks for your 6.28 pm. I was just pushing some musings around in my head. Like, if one was raised on a diet of potatoes what would one do when one found dumplings in the stew? - instead of the expected potatoes!
The centre has little need of the periphery - except as a source of staple foods. What were they thinking about? Its in their eastern hinterlands that their problems lie. Not in the draughty western isles nor twitchy Mediterranean lands.
Private debts imposed on the Irish State by the ECB in particular! The way I remember it is our Taoiseach and Ministers were down on their knees begging like the beggars on the pedestrian bridge to the Listowel Racecourse on race days.
You can call it incompetence, ignorance or political opportunism but nobody held their noses closed as they pushed wads of Euros down their throats.
The facts are unpalatable and difficult to digest and result from a lack of knowhow and backbone. The model as we all know is that of the Taoiseach as head waiter and the TDs’ as waiters, all eager to please. We get what we vote for unfortunately as FG follows FF. I would not be at all surprised if FF becomes the dominant party in the coalition after the next election.
We have demonstrated repeatedly that we cannot protect us from ourselves. After entry to the EEC we had to toe the line from Brussels and we prospered mightily up until we committed hari kari with low interest rates. Then we borrowed from any source that would lend to us piling debt higher quarter after quarter. All the while complaining that we were not being lent enough by the ECB and IMF.
The first symptom of recovery is recognising that there is a problem and we look at it in the mirror most mornings.
“The successful conclusion of the Irish programme is a strong signal that our common response to the crisis is delivering results,” Olli Rehn, the EU’s economic chief, said after eurozone finance ministers signed off on Ireland’s final aid payment this month”
I thought I was not easily shocked but this raises my ire by orders of magnitude. Usually I tend to neutralise articles in British publications by playing the bias card. For some reason this one hits me as being richly deserved.
One again we see the word hangover in an Economist article on Ireland. Could we wake up and close the bar in the Dail.
One third of Irish youth emigrating a huge drain of human capital.
Even with optimistic assumptions Ireland has a decade of anaemic growth to look forward to.
The last paragraph is the most damning of all.
“What is therefore clear, for the all optimism and brave faces Ireland’s political and economic elites have put on, the Celtic Tiger is now dead. Ireland’s banking crisis saw to that during the financial crisis, and its consequences are still crushing it today. The Irish government could introduce structural reforms to boost the country’s growth, but its politicians have more often sought to block, rather than support, such measures. With very little in terms of political will to force through such reforms on the horizon, it will be many years until Irish eyes smile once again.”
This article should be posted on every billboard in all post secondary institutions of education in Ireland.
This is must reading, follow the Michael Hennigan 4:26pm link.
Firstly, do not be depressed about the 72% of the Irish population who currently favour staying in the Euro, this largely reflects how misinformed the Irish people have been by their government, foreign powers and the print media about the European component of the global financial crisis.
Once people become informed, take on this blog for an example (a blog whose contributing posters are firmly on the right), the number of people who unconditionally support the Euro and the ECB dwindles to one bey voluble poster, and that person may not be here purely in a personal capacity…..
Having established that people would choose differently if they knew better we need to work out how to shift those percentages, and to that we need to think why people believe what they do.
Here are a few possible explanations.
(1) The conflict between the interests of the political and technocratic class in Ireland and the general citizenry. A promotion to Europe is a big prize for a politician or civil servant in a small country like Ireland and the incentive not to step out of line with European establishment consensus is strong. When we were told that “we all partied” that was a direct relaying of the acceptable political analysis for a politician in Europe to take to the Irish people.
(2) The ownership and political allegiances of the press in Ireland has led to the economic and political analysis being extremely one sided (Irish Times: neoliberal, Irish Independent: conservative, Irish Daily Mail: proudly fascist). A left wing analysis of the European component of the global financial crisis is not available to most of the Irish public. TINA.
(3) People’s understandable fear of change, particularly change that would anger our larger European neighbors.
(4) The replication in Ireland of the new political strategy of the right in Europe, to forge an alliance between capital and the middle classes against the undeserving poor (This could not have happened without EMU the various “packs” of fiscal rules). While in America the right still relies on false consciousness for much of its support the European right has much more cleverly restricted the economic and monetary policies available to government so that the interests of the middle classes and the underclass are now opposed - they are trying to forge a new right wing majority using international agreements and not politics. Brilliant work, if utterly immoral.
Each of these points can be addressed:
(1) Reintroduce fear of the people into the lives of Irish politicians and senior civil servants so as to make them less compliant.
(2) Aggressively counteracting neoliberal/orodliberal narratives in the press and in daily life.
(3) Reminding people that there was life before the Euro and it was better.
(4) Distancing ourselves from the EU to a degree by electing politicians with a less imperialist bent.
There is an international recovery underway but growth is going to remain bumpy for some time in quite a lot of economies.
BofA forecasts US GDP rising by 2.6% in 2014 compared with an average 3.4% in 1960-2007.
As for Ireland, Ibec says services exports will be the main driver of export growth - and who am I to question the wisdom of those Ibec folk? Wouldn’t everyone love to be able order manna from the heavens via some digital strokes?
“Services exports, on the other hand, continue to perform exceptionally well with the volume of outbound trade jumping 40% over a three-year period. While the services data can be somewhat volatile, the sector, which already accounts for over 50% of exports, will continue to be the main driver of export growth over the coming years.”
Hi John if you’re reading. I know you have difficulty getting RTE, so I thought I’d just run through Enda Kenny’s address to the nation last night.
It really was the most remarkable achievement.
It began with a reconstruction of the final scene of ‘Braveheart’, with Kenny in the Gibson role. howling, ‘You can take away my life - but you cannae take away my freeee -dooooohm’, but instead of then (somewhat disappointingly in the original) dying an undercover Michael Noonan (the Brendan Gleeson role), threw him his trusty claymore of cutting, with which he hacked himself free and then simply clove asunder three villainous oppressors, who were handily marked with coats of arms plus added identifiers, Rehn, Draghi, LaGarde - though he seemed a little regretful and chopping the head of the latter.
Then, in a superb overhead shot of Ireland, he proceeded to pull mighty chains from the country including one that pulled down the Pope in Rome. Ireland then blossomed again as a modern-day Tir Na Nog.
In a well judged serious of montage shots, Kenny, stripped to a simple loin cloth, showed off his nuggety wiriness in tangling with a series of foreign leaders in a variety of what seemed to be ancient Celtic ninjutsu styles. The sequence of tangling with Angela Merkel may be the only part that was considered in poor taste, but perhaps it was misplaced gallantry after the comments by Silvia Burlesconi, and this section referred, I think, to deep shared Northern fertility rituals.
After that, Kenny swept his shamanic cloak around the departed and wept and howled: ‘This is a low key exit.’
Having hurled the priesthood from the nation he re-instated paganism with Honohan being appointed chief wizard at the altar of the Irish Central Bank. This did, unfortunately, involve human sacrifice, but he thanked very much the Irish people who had volunteered stoically for the necessary, and it was hard to tell if they were bemused by this development as they had hood over their faces.
Finally, with tears falling, he moaned in triumph, ‘This is for Mayo, lads’, announced a statue of himself with his foot on a triple headed monster and then renamed Connemara the Kenny Counties before thrice circling the island on a triple victory lap before being vigorously toweled down by an appreciative Eamon Gilmore.
It all went down very well and his lack of unseemly triumphalism was much appreciated by all.
The olde Left/Right political dimension is now almost dead. It has been replaced by the cleavage of those who inhabit the centre of the Financialized economy and those who inhabit its periphery. This is much more suited to social embedding of the contemporary Irish rural and urban peasant. Who now brandish a Credit card in one hand and a designer begging-bowl in the other - whilst driving about in a Merc (not literally a Mercedes Benz - but you get the idea).
The loudest and least bashful of these mendacious peasant beggars are (not a complete list - just a flavour), IBEC, CIF, IFA, ….., and fill in the remaining blanks yourself. These beggars all have the same refrain: (they must have attended the same PR Academy. “Please Minister, may we have less taxes and some more transfers from the taxpayer.” Yes! Less and more! Its delusional stuff.
And we wonder why the plain vanilla Irish sheeple are behaving in a similar fashion.
So, how do you have less taxes, but transfer out more. You borrow, and borrow and borrow - until you have to sell both your cow and its pasteur. That’s funny, that is! And when (or if) that grass starts to regrow. Well, the new Rentier (some distant finance house) may hire you (at min wage, you understand) to … … Hold on! Come to thing about it, they may not need you at all. Robotics and technology have may rendered you redundant. I believe someone is working on a aerial robot to herd sheep(le)!
@DOCM: That Charlemange piece. I’ve tried, without success, to locate it. Thanks.
Make no mistake. Us Irish are NOT Europeans. Never have been. Sure we exported our culture some time back. But that was it.
It all went down very well and his lack of unseemly triumphalism was much appreciated by all.
After all the current government has bravely sacrificed in Ireland (the jobs, the exported youth, sovereignty, self respect) I think they deserve their moment in the sun. I myself respect them most for their difficult decision to side with their European political peers against the Irish people (who went mad after all).
Well done Enda and Eamon, the job you did on Ireland will never be forgotten.
Hi Gavin,was traveling missed it unfortunately,RTE is a little better than TV3 but not even close to NPR in so many ways.
I did start the above paper but,but….stopped after the introduction.
“In an extraordinary turn of events the euro area’s fastest-growing and second-richest country, in terms of per capita incomes, became the first to petition the European Union for a bailout on 21 November 2010.”
“On 23 April 2010, the Greek government requested an initial loan of €45 billion from the EU and International Monetary Fund (IMF), to cover its financial needs for the remaining part of 2010.” http://en.wikipedia.org/wiki/Eurozone_crisis
Hi John. It is good news indeed that the Republicans are in full auto-destruct mode but it took a while. How did George W Bush manage to get elected a second time when he systematically undermined the economic position of the large portion of his constituency that was the white underclass in the US?
False consciousness is one way of looking at it, its a Marxist idea that boils down to groups of people acting against their own interests because they have been indoctrinated with a narrative about their position in society that is false. There is more to it than that and its not crazy commie stuff, you could come to the same conclusions by looking at the psychological needs of people to identify with the better off.
Think of low income people in the US south who vote for the US Republicans because of they believe they share more economic interests with Jeff Bezos than with people on welfare who were formerly working in retail recently made unemployed by Amazon selling the same goods (but without sales tax).
Hi Shay,the left are struggling too,obamacare is an unmitigated disaster.
As an emigrant with a few kids,I simply read the rule book and do my best within it to make a few bob.Tend to be agnostic politically but as you are well aware major fan of Eugene Fama I know,I know,it may be my sense of dislocation over here.
This excellent site is worth following…
“The organizing economic concern of the American left is–or is becoming–income inequality… Zucotti Park… Bill DeBlasio… President Obama…. Income inequality is easy to worry about. It offend…. Those who aren’t unnerved by the datum that the income share of the top one percent has shot from about 10 percent in 1980 to more than 20 percent today can worry instead about inequality’s attendant consequence: declining social mobility…. But is inequality really the country’s most pressing problem?…”
I have to say I disagree with you Shay vis a vis Europe. I think people support it because they believe the EU has generally been a possitive force for this country.
And b/c no one offers what the alternative is (1) for us to be outside the EU (2) what our realistic options would have been for dealing with the crisis outside the EU (assuming it would have happened outside the EMU)
Obamacare ended up as something very similar to what the Republicans would have done pre Tea Party. It’s a long way from what the US needs.
It is too little to stop health insurance pillage doing serious long term damage to the US economy.
And it’s far too complex.
The Republicans hate it.
It’s very Obama, really.
And I don’t want the Government getting its hands on my Medicare either.
We can certainly grow enough potatoes here for my beloved potato dumplings, with pork and gravy . : - )
150 – 40 years ago, the coal and iron areas were the rich in Germany / Europe, and agrarian Bavaria was the poor house, now it is different. With the emphasis on renewable, the wind rich Irish coast and the sun rich south might very well be the preferable places in 40 years down the road.
Plenty of retirees, English, german, Swedish, prefer Spain and Greece already now, to bleach their bones.
Core vs periphery , to go by a cynical and Darwinist approach of who falls off the boat this turn, maybe good for some short term incentives, but not for building a community on long term grown trust.
But trying hard for sticking together does not come “at any price”. If some believe they can steal, break treaties and the law, blackmail, play the racist hate mongering card, there has to be the final alternative to let hard criminals go.
The one central argument remains:
on the Globe we Europeans are a tiny, outnumbered speck, who just had a pretty good run in the last 250 years, getting to more normal size now.
@Vinny it’s certainly a disaster for the White House,quite possibly the democrats too.link to ap pol in WP piece below.
“At the same time, a cresting wave of cancellation notices hit millions who buy their policy directly from an insurer. That undercut one of Obama’s central promises - that you can keep the coverage you have if you like it. The White House never clearly communicated the many caveats to that promise.
Disapproval of Obama’s handling of health care topped 60 percent in the poll.”
@BEB,as Roy Keane famously said..fail to prepare,prepare to fail:)
Decent summary with some great links from this morning,I try to avoid paywalls where possible,hence politico and Washington Post,but WSJ has good piece this morning it’s embedded here,as are some other good articles,included two recent polls,yep a disaster.
The Affordable care Act as an ‘unmitigated disaster’ in the longer run?
‘Disaster’ for the insurance providers?
‘Disaster’ for healthcare spend?
‘Disaster’ for those who hitherto were unable to afford care?
‘Disaster’ for docs/hospitals?
‘Disaster’ for “Tea Party’?
‘Disaster” for Republican Party?
‘Disaster’ for the American middle income earners?
While the Economist and the FT are excellent publication in their own right, it would be naive IMHO to imagine that some regard is not being had to the broader political aspects of the present situation in the EU. As far as Charlemagne’s blog post is concerned, apart from the egregious errors which caused it to be taken down for a period, there are many epithets that one could apply but “balanced” would not be one of them.
The Dutch at least have some skin in the game and the UK has negotiated a formal euro opt-out. Sweden has neither. It has held a referendum, which the government lost, regarding membership of the euro. But said membership remains both a right and an obligation. For the moment, the EU is accepting that Sweden has yet to fulfill some technical conditions which are “preventing” Swedish membership. But other countries are not dupes. Dijsselbloem is entirely justified in his exasperation.
“it’s certainly a disaster for the White House,quite possibly the democrats too.link to ap pol in WP piece below.”
Not really. Obama’s not up for reelection and afaict people dont generally vote on these sorts of complex single issues. A PR problem at the min, perhaps, but thats a serious step down from disaster.
Otherwise it institutionalises a set of reforms to the ‘health care system’ in the US more in line with the Dem elites preferences than Republicans, which *wont* be rolled back (the research would seem to say its very unlikely) and can be built on. So not a disaster from the perspective of people who actually pushed for this type of healthcare reform.
The fact that it was designed and implemented in the context of the US political economy (bones given to the insurance companies etc) isnt here nor there.
“Barack Obama from the start of his presidency has exhibited an almost exclusive taste for the dignified part of government. During the BP oil spill, his remoteness from the plod and toil of problem-solving showed day after day. That was a “teachable moment,” if ever there was one: a public catastrophe that implicated the environment and energy resources close to home for all Americans. The moment escaped this president, as the nuclear disaster in Japan has also escaped him. He never broke a sweat as he could have—literally and figuratively—by descending into the muck on the spoiled Louisiana beaches. Few presidents have ever seemed farther than Obama from being “in the thick of things.” The impression came back as he left Washington with Netanyahu triumphant, and took a plane for Ireland to speak of hope and peace.
Obama’s real trouble has come, however, in his attempts to inhabit the present. He is slower to react than most people, far slower than most politicians. He gave away six months of the health care debate without pressing his initial advantage while the resistance sprang up all around, the Tea Party was created, and congressional enemies gained on him.”
Hopey changey needed to get down and dirty with the GOP and he didn’t until it was too late
It is not denied that us healthcare spend has been a ‘disaster’ for over 60 years- percentage increases have always outstripped gdp growth until the last two years and is now decreasing rapidly- mainly it is believed because of the ‘focus effect’ of a vigorous political brawl and it is projected that the ACA will enhance this decrease while improving the productivity of healthcare delivery….
( ref recent New Yorker piece)
@ John G
Fox News your source?
@DOCM: The Economist piece is not very bright. However, I did like the accompanying visual - [Way Out] - and the two OAPs toddling off with their Opportunity Bag!
That FT piece is shrill. What’s up? Or is just the usual media tripe?
Folk keep wittering on about ‘reforms’: but are a tad sheepish about the actual difficulties that in-place practices have caused. Another Hari Krishna- like mantra is “Privatize, privatize, privatize.” Why? What’s actually not functioning?
Another, truly dopey (if not downright dangerous) idea is liberalization of labour mobility. This is Europe - which has a thin crust of political respectability covering over deep-seated nationalistic, religious and ethnic tensions and hatreds. Its not the United States of Europe!
One really has to wonder about the psychological stability of persons who come out with these seemingly bland, but woefully ill-thoughtout notions. They had better not get the Bear riled up!
@vinny how many links would you like:) “From all appearances, the Obama administration seemed to believe that the mere act of getting the Affordable Care Act through Congress would ensure its survival and popularity. But now it faces the very real possibility that the Republicans, campaigning on the failure of Obamacare and flagging recovery, would win back the Senate in 2014, and be in a position to force the administration to accept changes in the Affordable Care Act that will weaken the program. Obama has already embraced modifications to the act—allowing insurance companies to bypass the exchanges and their regulations—that will hurt it. And if Republicans were to win the White House and Congress in 2016, they could simply repeal the Affordable Care Act.
Draghi is one of the less reactionary senior technocrats that now set the boundaries for monetary, fiscal and soon social policy in the EU. Make no mistake, we are on the cusp of a Europe where national politics will be reduced to choosing local figureheads to implement policies compatible with a broadly neoliberal, capital friendly policy set with the German bloc choosing the acceptable range of parameters.
Read the piece DOCM posted above for a little taste of the future. It is a future with no room for the self determination of smaller nations or any challenge to right wing economic orthodoxy. It brings us back 100 years.
The the fact that this blog almost NEVER links to any left-wing blogs (Michael Taft’s well-researched Notes on the Front foremost among them) suggests that the “full spectrum” of views that they are willing to countenance runs all the way from ordoliberal to neoliberal.
For example, Michael Taft has had two excellent posts in the past week about the fruitfulness (or lack thereof) of spending cuts and whether Ireland is a “high-tax” economy. They skewer several articles of faith among the posters here. You’ll never hear them mentioned, let alone linked to on the main page, which is reserved for reports from “approved” sources.
@ Shay: “we are on the cusp of a Europe where national politics will be reduced to choosing local figureheads to implement policies compatible with a broadly neoliberal, capital friendly policy set with the German bloc choosing the acceptable range of parameters.”
I doubt it. Some European states are kinda fond of their own political setups. Two very destructive European wars have not really ’settled’ folks into some bland, pasteurized and homogenized pablum. The ‘Central Bloc’ had better be careful what they wish for. I expect they will indeed get some of their wishes, but not some critical ones. And the Central Bloc are kind short in both the energy and food departments. You do not bite the hand that feeds you. I hope.
@rf: “what do you see as the alternative ? are you saying leave the eu or just euro ?”
Wrong questions - again! Observe the outcomes that are: there’s you problem. No senior European politicians nor eurocrats appear to have made any progress here. They simply chant, and re-chant some ideological slogans and hope for the best. If that does not work, and it won’t, they then attempt some histrionic, strong-arm stuff - like “The sky will fall!”, or TINA! The basic design and operating parameters are faulty. What has been designed NOT to work, will NOT work!
@ EB: Ernie, I read that Taftie stuff. Its as near dopey as some of the Righty stuff I encounter here. “They” deserve each other. And as I opined recently, that L/R ideological crap is now dead. The contemporary cleavage is along Financialized lines: core v periphery.
Some folk have a lot of catching up to do. But that means trashing their sacred cows, and all. I should not hold out much hope of enlightenment from either set. Be a ‘tramp’. Do some intellectual exploring.
And isn’t there something about ‘pay cheques’ and understanding?
It would be good to see a few mashups of ECB with childrens cartoons
Peppa Pig, with the hapless Draghi Pig trying to make things right while all round falls into chaos
Draghi the Explorer, where he doesnt know where he is or what hes seeing but presses on anyhow
Doc McStuffins where a wooden character tries to put the stuffing back into the broken toys…
Henry hugglemonster, where the aim is to embrace the ugliness and love it
so many many opportunities
Again (??!!) FFS, when did I ask the wrong question before : )
That might all be well and true, BW sr, but I still dont see what the alternative is. (Which isnt TINA - which was saying something more along the lines of ‘this is the end poing of soci-economic development - it’s just not seeing that there’s any realistic better alternative to what we have at the minute, for the forseeable future)
The alternative being outside the Euro in 2008, assuming the crash takes place more or less as it does (does it?) how does the Irish state react?
I’d assume in pretty much the same way as they did. How much space would they have had to come up with any substantially different response?
Simon Nixon of the WSJ cuts to the chase in these comments;
“..two factors helped concentrate the minds of European governments in recent weeks as they thrashed out important details of the euro zone’s proposed banking union.
The first was the European Parliament elections scheduled for May next year. These are expected to result in large gains for euro-skeptic and extremist parties, which could make it much harder to agree on complex legislation involving a substantial pooling of sovereignty.
The second is growing anxiety in the markets and among some policy makers that the euro zone is sliding into deflation. With interest rates already close to zero and no easy way to further loosen monetary policy, a credible banking union is the euro zone’s best chance to reduce financial fragmentation and reduce borrowing costs in the periphery.”
Another article linked by Eurointelligence underlines the rather obvious fact that it is current account imbalances, and the unwillingness of private investors to finance them, within a monetary union, that gave rise to the crisis of confidence in the euro. The unbalanced fix - as documented by numerous economists - insisted upon by Germany now threatens deflation across the Euro Area.
In short, the nature of the problem has changed. The pressure on European leaders to agree a credible package in respect of Banking Union this week is now enormous.
It is something of an irony that it takes the US, through the unlikely conduit of the WSJ, to assess the problems from the necessary distance. But that has been the role of the US for nearly a century in respect of Europe.
@rf thanks point 2 is noteworthy,realistically I doubt it will be repealed but I wouldn’t completely rule it out.An awful lot of political capital wasted over a crap web site,immigration reform anyone…ah now.
” The ACA is a far more redistributive reform than many other social programs. Some Americans will be losers. Moreover, as political scientist Jonathan Oberlander points out, “unlike Medicare and Social Security, Obamacare does not have a well-defined population of beneficiaries, and its benefits are diffuse.” The ACA “treats different groups of Americans in different ways and different times,” making it harder to mobilize public support. The ACA can build a constituency, but it may do so less effectively than the most durable entitlement programs.”
Oh no this is not good…..
“Many in New York’s professional and cultural elite have long supported President Obama’s health care plan. But now, to their surprise, thousands of writers, opera singers, music teachers, photographers, doctors, lawyers and others are learning that their health insurance plans are being canceled and they may have to pay more to get comparable coverage, if they can find it.”
@ EB: Yeah! Can’t disagree with you on that score.
My view, opinion, belief, or whatever, is that folk kinda get attached - in a psychological and sentimental sense, to some -ism or other. Which is fine - as far as it goes. But stuff happens. Things change. So you either ditch some or all of your embedded beliefs, and move along. Or you dig in, re-inforce the ramparts and engage in a war of attrition with the opposition. Reminds me of elderly Tomcats pissing on each other’s corners. Futile.
I do hope, sincerely, that you are not correct about the dis-allowing of contrary opinions, views and beliefs. That’s when you DO have to play both rough and dirty - which is sort of embarrassing, but it HAS to be done. Marks folks’ cards.
“If I am lying down and complaining about the rain - its because I’m being pissed upon.”
@rf: OK. Let’s examine the outcomes of the status quo - and the new, alternate status quo, being proposed. Is what we observe a ‘positive’ (which is very argumentative!) or a ‘negative’ outcome - not in any futile compare and contrast exercise, but in terms of the criteria and outcome objectives which were forecast by the promoters. If the outcomes match the predicted ones, fine - then carry on! If not: pause, and think, like very hard! Its not possible to positively prove anything as ‘right’ - except on Miltonian terms. But the opposite is possible. Its just a deep psychological thingy.
Why would anyone do anything that they KNEW in advance would harm other folk - like Austerity programmes? They would NOT. So, why ARE they doing it? Is it that they are just incompetent? Or what?
There are straightforward technical and legal reasons why individual US states are constitutionally mandated in respect of their internal budgets. The EU and EZ ‘elites’ want the comfort of the US of A - without the necessity of another European civil war - to ’settle’ matters. Its that simple. Delusional stuff. But, we’ve been here before! Some folk just refuse to read history!
“Why would anyone do anything that they KNEW in advance would harm other folk - like Austerity programmes? They would NOT. So, why ARE they doing it? Is it that they are just incompetent? Or what? ”
Well they might for any number of reasons. (1) it isnt politically popular in the core (2) ideological - they think its the best option (3) distributional - interest group (bank) X doesnt want to lose money (4) b/c they’re reacting to unprecedented events and dont have the institutional capacity to do so in any other way.
The Irish government are going to be responding to these same events, even outside the EU, with these same constraints. So the only thing we can do, outside of a new economic paradgim, is make a very superficial cost benefit analysis of both possibilities. And it probably evens out into a nullity.
“An awful lot of political capital wasted over a crap web site,immigration reform anyone…ah now”
Does that mean we get you bak jg if immigration reform fails !! (Im only joking, I actually love you my man ; ) )
Afaicr the US Civil war happened because of a recalcitrant slave state that sought to expand into the west and latin america and create a new slave empire to challenge the northern (!!) . This isnt the reality in Europe, in fairness ; ) No reason the EMU cant be reformed short of an apocalyptic war
what do you see as the alternative ? are you saying leave the eu or just euro
Right question, again! The EU might be rescue-able and its certainly not in our immediate interests to leave.
EMU is another matter. We would certainly have had some kind of a banking crisis in 2008 outside the Euro but it is reasonable to expect that it would have been smaller. Our various passionate, unreasoning love affairs with property are always going to end in tragedy, because love is like that.
However after the crisis we have the tools of devaluation and/or inflation that are not available in EMU and all that stuff that goes with it (import substitution, improved competitiveness, rising energy costs…). Most importantly we would not have been in a monetary union where the dominant country has interests that are directly opposed to ours and an approach to economics in a recession that is, outside Europe, considered batshitinsane (better in the original German). When you consider that the creditor countries used their control over the central bank to then set fiscal policy it makes being out of EMU seem like a much better place to be.
As for there being other options looking at Sweden and Denmark its pretty clear that life outside the Euro is manageable for countries around the same size as us.
So yes, we should be angling to leave the Eurozone. It is a disaster. How we manage it with 60-85 billiion (buts who is counting really) Euro demonimnated debts is another question. We should be trying to sink it.
@ rf: “(2) ideological - they think its the best option”
Spot on! They KNOW it IS the Right thing to do! Even if the empirical evidence says otherwise. So carry on regardless - of the social and economic harm done to millions.
In real-life, science and technology advance precisely because they respond and adapt rapidly to actual outcomes - rather than the ones predicted by theory. Problems with the theory are referred back - to the theory nerds.
Economics seems to proceed in a somewhat different mode. The theory is considered to be valid, it has to be - and it shall provide the predicted outcomes, despite some very dodgy and iffy assumptions. When, inevitably, the actual outcomes are either unexpected or inconvenient or unintended, then it has to be the fault of those dopey folk who are just too stupid to understand the instructions.
“Mark! where his carnage and his conquests cease!
He makes a solitude, and calls it - peace!” [Byron]
The War Between the States was principally over the Sovereignty of States - vis-a-vis the US Constitution: specifically, the 10th Amendment.
“The powers not delegated to the United States by the Constitution, nor prohibited by it to the States, are reserved to the States respectively, or to the people.”
The matter of the extension of slavery (not prohibited by the Constitution) to a newly incorporated territory (or State) was only an issue north of the Mason-Dixon Line: eg: Missouri. The ‘Sessech’ goth their knickers into a right royal twist over what they saw as Federal (Union) interference in their constitutional right - which they took quite seriously! Emancipation only became a political issue after 1862 - and it was Lincoln who first raised it.
Even the water vapor pressure in real air is a much more complicated thing then just p V = n R T.
Discussions which start with “simple physics” practically always end in ideological rants.
And the few cases, where one can make robust “simple physics” statements, like: “If I do not see any carbon rich layers accumulating underneath a rain forest, it can not be a real net absorber of carbon dioxide” is something these people have an extremely hard time to accept, up to threatening violence, if I do not repent : - )
These discussion follow pretty regular patterns, at some point physical knowledge should just get drowned out by moral green self righteousness, and the people begin to act like being the Holy Inquisition, not listening to the arguments anymore, just waiting for some wording, they can get hung up about.
And then we some Krugtrons maintaining that they were “pretty much right about everything”, and wondering why people like me are just laughing.
These discussions are even more unsuitable for a blog like here.
To drive this home a little further:
To look at a relatively much simpler thing: semiconductor physics and manufacturing, lots of seasoned physics professors, and not just laymen, were predicting final “simple” physical limits, we would hit, the spatial resolution of optics (minimum feature size limited to the wavelength 193 nm, we are now at 18), minimum gate thicknesses, etc., just to find that we have up to now always found ways to go some step further, often going on on simple exponential curves over time with remarkable constancy..
The one thing, they did not have on their list of “impossibles”, the maximum frequency, you can operate the circuits with, we did hit a wall 10 years ago.
Finally, with flooding in Dresden / Elbe Valley, you seemed to refer on with your “Dresden is right in the frontline”. We just had a relative lull for 60 years, until 2002, Nature does this, and the people designing and building dam systems know this, quantitatively. I can and did model this for myself, and I did find the evidence, to convince me, that I really understand it.
I am willing to put my money where my mouth is, in a project our local dumb greenies are railing against.
Ok francis educate me. In general, if the averages for air temperature are higher then there will tend to be more water vapour in the air. If we assume typical patterns of temperature distribution rather than some odd, concentrated series of local data to make up the averages, why is this an unreasonable, general assumption?