A lovely graph

This is a terrific graph courtesy of Paul Krugman, that speaks a thousand words.

57 replies on “A lovely graph”

“We have yet to see any of the crisis countries reach a point where falling relative wages are generating a clear export-led recovery, or in which austerity is actually paying off in falling debt burdens.”

Krugman may be right – as far as I know – with regard to the second point but he can hardly be correct with regard to the first, at least in the case of Spain (and Ireland).


Spin and garbage. Krugman is precisely right about Spain. Exports are strong, but even the article that our PR flak quotes is clear about it being too early to claim a broader recovery. When we see the unemployment rate falling below 20% and heading lower, we can talk about a clear recovery.

In the case of Ireland, even the evidence that things may be moving in the right direction is ambiguous.

Everyone ascribes the fall in peripheral bond yields over the past 18 months to the ‘Draghi effect’ as debt ratios have generally risen, with deficit ratios in a number of countries also deviating from the projected downward path. Yet OMT is a conditional assurance at best and even if triggered cannot deal with solvency issues so its ‘success’ is a puzzle. Is the ban on naked selling of CDS more significant than generally believed or have more investors decided that the market has simply underestimated the political will to maintain the single currency despite its many economic flaws?

@ BeeCeeTee

I do not normally respond to ad hominem comments but will make an exception in this case. I never make such comments. I would be grateful if you would do me the same favour.

Let me spice my comments up with a quote:

“Of all the many ways of organising banking, the worst is the one we have today.”

“Change is, I believe, inevitable. The question is only whether we can think our way through to a better outcome before the next generation is damaged by a future and bigger crisis. This crisis has already left a legacy of debt to the next generation. We must not leave them the legacy of a fragile banking system too.”
Mervyn King, Former Governor of the Bank of England.

For me, the graph alludes to how unsustainable the contemporary system is.

Attempting to resolve a debt crisis under such a debt-based monetary system is impossible. All we can do is delay the debt crisis to some future date and call the interim recovery but ultimately we’re going to have to sanction some source of debt-free money to resolve the issue.

The whole system has to expand to remain stable. Not only do household and business debts have to rise along with the money supply, but it’s helpful if public debts rise too.

Like Mervyn King, I believe change is inevitable. We will most likely entertain the notion that the crisis is resolvable without changing how money is created for another few years. But eventually we have to revisit this money multiplier model of banking, realise that the banking system function profoundly at odds with how we think it does and reform it.

At the very least we could have the central bank credit the Government’s account by an estimate of the seigniorage lost due to the digitisation of money. They would debit a ‘token’ asset like Money outstanding perhaps.

However even this system would require lots of policing of banks’ activities.

Better again to declare all current account deposits as legal tender, record them as liabilities of the central bank and have banks intermediate people’s savings.

A bankrupt bank would have all its current account deposits moved to the bank’s of its customers choosing. Hence there’d be no need for a bail out, a bail-in, deposit insurance and there could never be a bank run. With no industry unfairly protected from failure we could see if true capitalism actually works.

Krugman’s chart shows how debt / GDP ratios changed while bond prices fell. But this static picture misses a key component – the debt dynamics. A question might be, does the market believe that austerity policies have ultimately slowed the progress to the right of those little orange dots (even if it made them move a little faster initially), and has austerity ensured that those little dots will not continue sliding to the right but will stop and start moving left again?

I’m not attempting to minimise the Draghi effect, merely suggesting there is more to the austerity / debt dynamic.

@Dan McLaughlin

“or have more investors decided that the market has simply underestimated the political will to maintain the single currency despite its many economic flaws”

Even if you are correct in suggesting the above, and there may be some truth in it in the sense that speculators have been warned, it is still the case that unless the fundamental imbalances in trade, capital flows and intrastate unemployment rates are reversed, those imbalances will in the long run overwhelm any political aspirations to ‘saving the euro’.

The imbalances too will dissipate the number of people who would be willing to take pain to save the euro (27% in Irl, and mostly in the upper eschelon brigades, surprise, surprise. Ir Ind a few days ago. Don’t have ref).

I would like to see more detail on the shape of the lines between the blue dots and the orange dots. I would be fascinated to see what shape Krugman estimates for those lines over the next 5 years or so.

“We have yet to see any of the crisis countries reach a point where falling relative wages are generating a clear export-led recovery, or in which austerity is actually paying off in falling debt burdens.”

Export-led recovery, is it now? So whom exactly is going to export what to where? EU -> EU? Spuds for Beemers? That would be nice! If D-land exports its stuff to some ex-land, will IR-land benefit? You really do have to wonder.

The ‘pay-off’ for self-inflicted regressions in national economies is a lesser debt burden? Or is it (temporarily) same principle, but less interest?

I would respectfully suggest we aim for no borrowing for day-to-day state expenses – asap. But that might be too much of a problem for politicians who keep making unsustainable electoral promises. Of course, the sheeple might be a tad miffed if their grazing ‘rights’ were cut-back. When is our next parliamentary election then?

“I would respectfully suggest we aim for no borrowing for day-to-day state expenses – asap.”
Structural balance is nearly in sight

“I would respectfully suggest we aim for no borrowing for day-to-day state expenses – asap.”
Structural balance is nearly in sight

Draghi would need to declare UDI in order to be able to ‘really’ do what it takes.

He can print a Trillion for the financial system and SFA for the EZ ..er.. proxy_Sovs.

Krugman’s graph on Ireland would be more revealing if it started 2007 and used GNP instead of the ‘false’ GDP.

Prob with the ECB(undesbanke) is that it is impotent wrt to printing for EZ citizenries. It is, quite simply, NOT a functioning central bank.



Further to Dan’s point above, I would suggest there has been a general drift in investors perceptions towards the view that sovereign bond holders will have their interests protected to whatever extent is possible by the moving of goalposts etc, in order to avoid any actual default.

Part of the rationale has been the serial falling-into-line of various states when push came to shove. The idea is that if they do, more or less, what the Germans ask then necessary finance to roll will be found from some vehicle or another – even if that vehicle is quite possibly imaginary. It’s a market psychology which for the time being is dominating.

This is a reversal of direction from the topsy-turvy regime temporarily ushered in to European bond markets, in late 2008 by the Irish government (or maybe it was Trichet, by remote control), forcing a policy of turning sovereign bond holders into mugs and saps for powerful lobby groups, on a generally unsuspecting investor community.

The apparent farce that was Cyprus in Spring of 2012, assisted in reversing the primacy of bank creditors and, contrary to many predictions, European banking did not collapse as a result.

As long as comments on policy have the appearance of representing the interests of an organisation, those interests and the manner in which they are pursued are relevant to discussion. Especially if the organisation chooses to be anonymous.

@Liam Delaney

I call disingenuous claptrap on that. It is not even wrong. Point one seems laughable (Why is Krugman using real data and not measuring against an imaginary forecast, eh? Tell me that!)

Since when is the debt ratio the proper measure of austerity policy? Austerity, which we used to call fiscal consolidation, means reduction of the deficit, not the debt.

Apart from the historically dubious claim that the weasel words “fiscal consolidation” predated neoliberal un-word austerity (who could object to any policy containing the word “consolidation”? It just sounds so serious.) it is just bizarre to assert that austerity’s success is measured by whether or not the deficit falls – by this definition austerity can only fail if you do not implement enough of it.

I say again “Not even wrong.” and I am sure Ed Dolan knows it.

Although it is only January 2, may I nominate his graph for the most disingenuous of the year?

Nope Ed, but I think you might be in the running.

Krugman’s graph is misleading because the ratio of debt to current GDP is a poor indicator of short-term changes in the stance of fiscal policy. A better measure of austerity is the change over time in the underlying primary budget balance (UPB), that is, the surplus or deficit of the government budget when adjusted for the state of the business cycle, interest rates, and one-off fiscal measures like privatizations.

If you draw a graph with interest rates on the vertical axis and the UPB on the horizontal axis, it shows that “austerity” as defined by a movement of the UPB toward surplus, is associated with a decrease in interest rates. Of course, correlation is not causation. Still, whereas Krugman invites us to interpret his graph as showing that austerity has not helped bring rates down, the alternative UPB version is more readily interpreted as showing just the opposite.

I posted a side-by-side analysis of the two graphs on my blog today. Liam Delaney already gives the link above, but here it is again in case you missed it: http://www.economonitor.com/dolanecon/2014/01/02/austerity-and-the-euro-in-two-graphs-a-reply-to-paul-krugman/


Nice try but as Mickey Hickey’s grandmother in Gnieveguillia would have said “dhera when there is no growth won’t the debt ratio deteriorate for sure?”
Austerity isn’t going to make it with the public because it fails the Ronseal test.

@Ed Dolan

Krugman’s graph is misleading because the ratio of debt to current GDP is a poor indicator of short-term changes in the stance of fiscal policy.

You keep using the word “misleading”. I do not think that word means what you think it means.

Again I say that if your principle measure of the success of austerity is whether it cuts the deficit (and the PSP excludes debt repayments, which seems, cough, “misleading” to me) you can never really call austerity a failure – it just has not been done been with enough intensity.

The remarkable thing about the Euro is that its a project that has unified the political, banking and administrative classes against the lower orders. It has been, under German leadership, the most successful effort in political and social engineering in modern history. Mundell must be ecstatic.

Economically it has been a wash out obviously but its now essential to the well being of the governing classes and the political dominance of capital in the Eurozone.

I tried to understand both Krugie and Dolan: no joy. Gobbldygook.

Assumptions structure one’s thinking – and may obstruct the seeing of the ‘obvious’, but not the seeing of a nonexistent phenomenon.

Entrenched theories are very difficult to replace. Defenders of whatever is considered the Status Quo will go to considerable lengths to embellish and embroider the theory. Ordinary folk may be more impressed by impressive mumbo-jumbo – that is unintelligible (to them), rather than simple observations and explanations, that they might comprehend.

What appears to be a cause-and-effect process, might not be so. Sure, we have an alleged cause, and we have an alleged effect: but no confounding, un-observed variables? Hmmmm.

Austerity (fiscal consolidation) has clearly resulted in worse debt /GDP ratios, via lower growth, high unemployment and contraction. By definition, inherent default or refinancing risk has deteriorated, but that has been mitigated via ECB & Troika liquidity support, and ECB interest rate support (keeping them low). However, the extent of interest rate suppression in face of the rapidly rising debt levels is still surprising……or at least, market investor acceptance of this situation. I cannot see any correlation, so cannot agree with Krugman here. However, what Ed appears to be saying is that, as current and structural deficits reduce, that has resulted in investor confidence and the lower interest rates. However, I cannot agree with that either given the inherent rise in credit risk and reduction in standalone sovereign debt service capacities, notwithstanding that I accept what Grumpy says that investors have priced in govt and supranational (practical and political) support to do whatever is necessary to sustain the euro.

What I do agree with PK’s stance is that policy to date has not worked, despite interest rates being kept so low. Low interest rates by themselves are simply not working….can’t work in isolation from demand in particular.

What these graphs do make me wonder though is whether we are again simply seeing a very large mis-pricing of credit risk, just as we had pre-crisis, but this time being more directly driven by central banks? Accepting that, it seems to me that debt creditors are increasingly being driven to the equity risk end of the spectrum. In credit terms, ultimately the creditors are forced to write-off debt and /or convert to equity….

One of the conversations here in New York is around the fact that current policy is forcing people to “play”‘ even if they don’t want to, due to lack of belief in the reality of the financial & economic foundation(s) right now…..play or get fired. Not so different from PE-crisis: play, make profits /bonuses, or get fired.

I therefore see nothing more than the progression of the debt service cycle. At some stage, restructure(s) will be necessary to protect the existence of the euro…..but I accept that could be a long way off still. Misery, unemployment, etc to continue in the meantime……for no particularly good reason.

However, a debt cycle driven by creditor perogatives (supported by political will) will also mean far more wealth stripping than seen thus far before credit /debt resolution will be possible. Individual country’s debt levels do have a limit…….at some point, the markets will revisit again and require more” collateral”…..as we have seen with Cyprus (and Ireland), in excess deposits and funded private pension funds will be raided and further pilfored…..this has already begun of course.

So, as BW Snr says above, the economic theory provided here looks incoherent to a banker, PE, etc.

Talking about low interest rates, the world in fact seems more dependent on low short term funding than even pre-crisis…..certainly in Euroope (in the US there have at least been huge recent reforms to mitigate the structural risks inherent in short /long interest rate funding strategies). As Draghi himself says, the ECB has no control over longer term interest rates……God forbid that market lenders will eventually demand higher interest rates on refinancing.

Highly leveraged people, organizations and countries remain highly vulnerable if they believe that the current status quo can or will continue indefinitely…..

Hemingway comes to mind again…..the build up to bankruptcy is slow, but bankruptcy itself is very quick.

Krugman didn’t make his central claim from that graph that austerity hasn’t lowered interest rates. His claim is a “dramatic flattening of the relationship” between debt levels and interest rates since 2011. And it’s plain to see. Greece is out there with debt levels that never would have passed a sustainability test pre-2008, and Ireland, Italy and Portugal are in borderline territory. Yet interest rates haven’t spiked. In addition, it’s not even clear how to interpret a UPB-interest rate correlation, since debt default incentives increase as the UPB improves. Krugman’s point: what’s different now than 2011? OMT is a plausible explanation. Not complete, as Dan notes. But certainly can carry more weight than successful effects of austerity.

AEP’s piece is relevant.


One thing – post the World Wars, it was the US that wrote off much debt for European countries. No such leadership from Germany as yet of course, and the fundamental thinking and culture of Germany is very different in any event.

The point though is that there is no correlation between interest and debt levels. The “fundamentals” have been hijacked and are artificial. Still, people, etc must trade……and are desperately still dependent on continuing official /state support. Withdraw it (as is now beginning), will also have many “unintended consequences”. There is much over leveraged crap that has been “saved” over the last few years……but that was always a temporary solution, right?

Another excellent article from the Telegraph, relevant here.


Much the same could be written about Ireland? Normalization will likely bankrupt many, but bankrupt is bankrupt as JG often says…..Better to start anew if you can….if you can’t, then the State should help.

Normalization will happen elsewhere first of course……Ireland will never lead on such things. However, note the change in discussion in the US, UK and elsewhere. It will come, as will higher interest rates, etc.

Apropos of nothing, I wonder if any of the anonymous contributors here would be up for making a declaration that they are not lobbyists?

Something like “I am writing in a purely personal capacity and I am not paid for advocacy of similar views.”

Lets try it:

I am writing in a purely personal capacity and I do not professionally advocate similar views or represent a political party.

I am writing in a purely personal capacity and I am not paid for advocacy of any particular view.

No problem, Shay.

The Draghi July 2012 commitment to do whatever it takes to defend the euro was significant in stabilising the situation and it came following the ECB’s Long-Term Refinancing Operation of over €1tn in 3-year liquidity in Dec 2011-Feb 2012, that Spanish and Italian banks partly used to buy local sovereign debt. The agreement on a second-bailout for Greece in February 2012 with a 53.5% private haircut, possibly allayed short-term concerns about its possible exit from the EMU while big international funds could afford to buy some risky high yield assets when yields generally were very low.

As for exports, none of the peripheral countries is a big commodity producer. So miracles cannot be expected in the short term.

With the exception of Ireland, their record in attracting foreign investment is poor and where big firms dominate every key global sector, it’s not easy to develop new markets. These countries have few big firms and besides, in contrast with Eastern Europe, the Mediterranean countries were particularly hit by competition from China.

Current accounts have improved, mainly because of falling imports.

Italy’s exports have recovered to slightly above the 2007 level and there is evidence of improvements in Spain and Portugal, in particular serving markets of former colonies.

Italy and Spain have multi-decade problems that in the past devaluation didn’t solve. Italy stagnated in the decade before the crash.

It was significant this week that the head of the CBI, Britain’s top business lobbying group, called for pay rises. It would be a miracle if his counterpart at the US Chamber of Commerce did the same, given the imbalance between capital and labour and the fact that the richest third of US households account for 89% of all equities – the S&P 500 rose 30% in 2013.

Stimulus does not just have to come from governments.

Gail Collins the NYT columnist, wrote last March when the House voted for farm subsidies while cutting funding of food stamps:

During an Agriculture Committee meeting on the bill, Representative Juan Vargas of California quoted Jesus’ lesson that “whatever you did for one of the least of these brothers and sisters of mine, you did for me.”

That raised Representative Fincher’s hackles. “Man, I really got bent out of shape,” he told that Memphis audience, proudly reporting that he countered with Thessalonians: “The one who is unwilling to work shall not eat.”

By now, you must be wondering why I keep bringing up this guy. Fincher is a farmer who has, over the years, received $3.5m in federal agricultural subsidies, much of it for — yes! — cotton.

Europe isn’t the US and there is no significant support for a federal state. Some have argued for a something like the postwar Marshall Plan but who can force Italy to do what it doesn’t wish to do?

De Long/ Eichengreen say that the Marshall Plan, which transferred $13bn in aid from the United States to Western Europe in the years from 1948 to 1951, was not big enough to stimulate growth but…the Marshall Plan significantly sped Western European growth by altering the environment in which economic policy was made – – in effect it helped in the creation of market economies.

After the massive disaster, it was likely also easier to get things done compared with contemporary vested interest controlled systems.

Pravda, the left of centre Slovakian daily wrote yesterday on Latvia becoming the 18th member of the EMU, that Slovakia’s joining the Eurozone five years ago was the start of a success story:

“Slovakia completed its ‘Europeanisation’ when it joined the Eurozone. Some of the steps leading up to the euro could have been more elegant and less painful. But the euro offered good prospects to foreign investors and improved Slovakian companies’ access to the markets.

Certainly, the euro also has its downside. On the political level it involves a loss of sovereignty. But in exchange, membership offers a strong system of collective defence. Although the Eurozone has repeatedly been written off, now Latvia has joined it too. Further proof that the euro not only has economic significance, but geopolitical clout as well.”

I’m one awfully pi**ed off taxpayer and I am writing in a purely personal capacity and I am not paid for advocacy of any particular view – apart from using my own resources to air my own!

And another thing, I have taken considerable time and effort to acquaint myself with some aspects of economic matters that are causing significant hardships to millions of folk. There is a name for such stuff: Totalitarian behaviour. And some critters come on here to defend it! Or direct our attentions to other defenders. Nice. Or is it that some folk have the luxury (blinkered vision) of being able to hold on to the ‘cushy’ end of the stick only – and not the sharp, ‘sh*tty end’?

And another thing. This is 2014 – so, unless you have been asleep for the last four decades, hence failed to observe and comprehend in a meaningful, intellectual manner, that all modern economies have, to a greater or lesser extent, been financialized, so that all commentary about anything pre-1970 (being somehow helpful in providing salvations) is almost useless. Sure, its interesting from an historical perspective. But that’s it. You do really have to move on – and very fast.

And here’s another thing. Economic ‘growth’. Do economists actually understand the various natures and levels of consequences of this – given our demographics and the limited finite physical resources available? It appears not. And that lack of comprehension is not part of our current problem?

Sure, we do need money (credit) as an essential nutrient (for economic growth). But we do need some other essential nutrients as well. And we most assuredly do need some way to to compost and detoxify our waste stuff – especially debt! Yes: debt IS a waste product. Think on this.

@ MH

What must also not be overlooked is the fact that the US also played a significant role in the setting up of the European Coal and Steel Community, which provided the template for the EEC and ultimately the EU as it stands at present. The key to the organic growth of the institutions was the introduction of a supranational – i.e. federal – element culminating, one might say, in the creation of the euro. I agree, however, that there is little enthusiasm, if any, among electorates for deeper political integration.

As far as I can see, Krugman has very little understanding of the political and institutional dynamics of the EU i.e. he fails to distinguish between the relative weights and political circumstances of the players.

The odd man out remain France with regard to making the necessary changes domestically to encourage growth.


The FDP may have been a pushover for Merkel but the SDP is made of sterner stuff as the willingness of its ministers to speak their minds has already made clear, especially in relation to the basic underpinnings of the level of integration achieved to date e.g. in relation to free movement.


The big question is whether Hollande can up his game and the related one of whether the arrival of a sister party in government in Germany will prove to be the key enabling him to do so.


You forgot this part:”I am writing in a purely personal capacity and I do not professionally advocate similar views or represent a political party.”
I am writing in a purely personal capacity and I do not professionally advocate similar views or represent a political party.

Interesting paper from Basu and Stiglitz

‘Joint liability in international lending: A proposal for amending the Treaty of Lisbon’

“In a recent paper, we attempt to provide an analytical foundation for an amendment of Article 125 of the Treaty of Lisbon (Basu and Stiglitz 2013). What we are arguing for is the Treaty to be amended to permit joint liability in international lending. The paper does not go into institutional details of how this may be done, but constructs a game-theoretical model to motivate such a legal-institutional change.”


@ Brian Woods Snr

You say you’ve spent a lot of time studying economic matters and you appear to be irritated by a contrary viewpoint.

On economic growth, countries like Ireland have gained from globalization and can in turn be impacted by it. There is no guarantee that the current standard of living can be maintained.

Thomas Hobbes wrote in 1651: “No arts; no letters; no society; and which is worst of all, continual fear, and danger of violent death: and the life of man, solitary, poor, nasty, brutish and short,” and that’s what life was like until the early 20th century and then there were two cataclysmic wars in that century.

As for the issue of resources and the ingenuity of us humans, it was the capacity for social learning, Prof Mark Pagel argues, that set our ancestors apart from every other species and hominem lineage, that sent them around the globe, into every climate and condition, whereas, by contrast during the Ice Age in Europe, “the Neanderthals sat in Gibraltar going extinct while gazing across the straits to the warmer climes of Africa clearly visible only eight to ten miles away, but they were unable to make boats to carry them there.”

I wouldn’t say what a standard of life people should live as I’m not exactly conventional
myself. However, there is no elegance in poverty and I have seen a child taking care of younger children in the Philippines, in a traditional house on stilts while his mother was at work.

Some people who speculate about debt restructuring can easily forget that it can impact a pension for a person who is light years away from a gnome of Zurich.


I agree that the US role was very important and last November on the 50th anniversary of the Kennedy assassination, the OECD paid a warm tribute to the president for his role in supporting the development of the organisation from the Organisation for European Economic Cooperation that was established in 1948 to administer the Marshall Plan.

In an illustration of Kennedy’s interest, the OECD published a photograph of a meeting with the first OECD director general, the Oval Office.

The implied 10-year yield on Irish government bonds is put below 3.40% here (for the moment at any rate):


In actual NTMA business around €600 million of private equity funds in the NPRF will be sold to shift the focus towards ‘domestic assets’:

Lexington to Buy $1B Portfolio From Irish Pension

The NPRF is just after receiving €2 billion from the sale of the BOI preference shares but that will be transferred to the Exchequer sometime this year.

@ john,

Just a couple of clicks away from that link is:


“I can confirm to the Deputy that I have given instructions that the proceeds arising from the Bank of Ireland preference shares transaction should remain with the National Pensions Reserve Fund for the time being. Further consideration will be given as to how best to utilise the proceeds having regard to the NTMA’s debt management plan and the future profile of our cash balances.”

@ MH

In fact, the decisive decision taken by the US was to side with the supranational approach epitomised by the ECSC rather than exclusively with the intergovernmental one epitomised by the OECD. (This is why the latter has largely stood still while the ECSC has grown to an EU of 28 states that have achieved a wide level of integration, despite the attempts of de Gaulle to derail it with his “empty chair” strategy).

One irony of the present situation is the extent to which the UK, which was an ardent supporter of a strictly intergovernmental approach, and initially refused to join in, is returning to its pre-EU entry position.

On the issue of further political integration, I should have made clear that there is no need for treaty change to allow this to happen cf. this FT report on the “runners” for the post of President of the Commission, the supranational body charged with identifying and defending the “general interest” of the EU (Article 17.1 TEU).


We seem even to have a reluctant runner in the race!

@Brian Woods Snr

You have distinct advantages in coming to the sphere of ‘political economy’ somewhat late [thus avoiding socialization to Grimm ideological fables] and in receiving a scientific [in its original sense] training early in life. In the human sphere [which includes political economy] hermeneutics trumps explanatics most of the time and demands some understanding of Power and Profit. Social Justice is [as Michael Hennigan points out] a result of social learning processes, and it is practically impossible at this stage of human development to model such processes in purely mathematical [the apex of the intellectually challenged neopositivists] terms. You are probably correct in noting the obsession with ‘growth’ and the paltry attention devoted to sustainability.

@Michael Hennigan

Homo “Sapiens” is ~ 1.5% – 2.00% Neanderthal. I have a pretty good hunch, albeit no empirical DNA evidence, of who the high neanderthal beings might be – and suspect a few of them on this blog.

Anyone know who came up with the poorly conceived term “Sapiens” for our lot? Seven_of_9 finds the term absolutely hilarious wrt Hibernians.

Q/A from dec 19th q91/92,link above,it’s the next q/a Seamus why so certain it’s getting transferred and this year?
It’s smoke and mirrors accounting gimmicky,what’s the next bill for the luxury of owning PTSB gonna be,who’s paying ?
It should be viewed like TARP in totality,too much noise about “good news” lately.

“Michael Noonan (Minister, Department of Finance; Limerick City, Fine Gael)
I propose to answer Questions Nos. 91 and 92 together.
The Preference Shares, which date back to early 2009, formed part of the €4.7 billion total investment made by the State in Bank of Ireland. The shares were a directed investment held by the National Pension Reserve Fund.
I can confirm to the Deputy that I have given instructions that the proceeds arising from the Bank of Ireland preference shares transaction should remain with the National Pensions Reserve Fund for the time being. Further consideration will be given as to how best to utilise the proceeds having regard to the NTMA’s debt management plan and the future profile of our cash balances.”

Tks Seamus posts crossed,happy new year that was the q/a i was attempting link,it’s rather ambiguous no?

@ john,

The timing might be ambiguous but the purpose is not. The €2 billion will be used by the NTMA in the management of the Exchequer debt/cash balances rather than staying in the NPRF.

@Seamus,or mismanagement so only count the winners huh:)
Regards,I firmly believe and no I don’t have a fecking link as PTSB/DofF/CB consider the taxpayers contingent liability for PTSB to be a dirty little secret.


I am writing in a purely fantastical, grumpy capacity and unprofessionally advocate charitable enlightenment, in particular, of those who display all the insight of a political party.


If either you or BEB are engaging in market shaping it is the subtlest work I have ever seen. Then again perhaps that is what makes ye so dangerous…

I am writing in a purely personal capacity and I do not professionally advocate similar views or represent a political party.

@ MH: I am not in the slightest bit irritated by any sort of contrarian views. Its the apparent failure to comprehend the context that perplexes me.

ALL human economic activity MUST take place within a finite physical system – subject to some immutable laws, etc., etc. However, the problem appears to lie with the pesky humans who hold fast to some modern version of the Immaculate Conception. You know the one – “Growth will set us Free!” Indeed.

@DO’D: Jeeze David, those are such big words – I’ll have to get down the aulde dictionary! Hey up! It says I’m a horse’s ass! – and I thought I was a sheep! Ah well, I’ll graze on!


Having a biochemist around is useful when addressing the neokon neanderthal strain in modern political economy – and on the blog.

“When the nation is misled and in chaos
Ministers mouth empty promises.” Tao Te Ching #18 [~5,000 yrs ago]

Just for reference:

I am writing in a purely personal capacity and I do not professionally advocate similar views or represent a political party.

I can further volunteer that

I have no financial interest in Ireland, neither long nor short, haven’t it nor intent to take it in the near future.

Just my average citizens share in Euro organisation’s loans to Ireland, I expect to be repaid in full and on time.

It actually reminded me of asking John Gallaher a similar question, about 9 months ago, in one of my first posts here.

And his kind answer was one of the reason, I stayed here : – )

@francis,hi francis happy new year,the graphs good too!
My financial/political position has not changed regarding Ireland,was hoping pick up a repo BTL in nicer part Dublin,but that ain’t happening,no supply.Tremendous amount shadow inventory,if the AQR for PTSB was even simply bad,why not release it,BofI was in the mkt. had to.It.has to be horrendous,but how big can it be,AIB is a lot bigger similar loan book.
Going to be in Berlin for Easter,looking forward to it.

@John Gallaher
My estimation of it is that the banks will continue to extend and pretend as long as interest rates remain at historic lows.

The shakeout will occur when Mario succumbs to the twin pressures of rising inflation and German inflation phobia and increases interest rates. The banks at that point will have no place to hide because of the higher cost of carrying 180 plus day overdue payments.

It is similar to the receding tide effect.

By the way there should be a movement to make all the BVM shrines into Mario shrines, he has performed miracles and bought us at least two years of relief.

And as times passes, the time span for rising interest rates shortens (by definition). Forward interest rate curves are expectation based of course……but when sentiment turns, forward (medium and LT) will rise. Even Draghi admits that CBs have no control over longer term interest rates.

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