52 thoughts on “Moody’s go for Baa1”

  1. Quick fly by.

    Moody’s finally catching up with realities on the ground in both Ireland as well as the broader Eurozone. Not unexpected (well the two notches probably was) by those closely following Moody’s comments and Irish fundamentals lately, as well market pricing obviously,, but it’s still gonna make the Perma-Bears’ cornflakes taste very bitter this morning (see Twitter for fresh examples). Anyway, off to enjoy the sunshine…

  2. Bond. Eoin Bond !

    Good to see you back again. I missed you.

    Good point with the rare (as I believe, but do not have long term experience on) upgrade by two notches.

    The only event I know was by S&P for Greece in 2001

  3. I was going to make a comment about how this announcement will cause certain heads to swell, but I see Eoin Bond has apparently returned to posting, which I guess makes that point anyway.

  4. Greetings BEB

    That’s all OK if one ignores the big picture.

    ‘I would contend complacency is the prevailing attitude of market participants – and not central bankers. Unfortunately, central bank monetary inflation and market intervention have been the leading instigators of complacency-inducing asset price Bubbles. Tepper is fearful of “deflation” and for good reason (including $440k/hr) and would prefer that central bank “money” sustains this gilded age of speculative genius.

    I’ll be the first to argue that there is heightened Bubble fragility in the global financial system and economy that will ensure interminable pressure on central bankers to keep the electronic debits and Credits coming. I also view QE3 and all the monetary stimulus as having made global markets, finance and economies only more distorted and vulnerable’

    ‘ I worry that the big negative lurking out there is the reality that the Fed no longer controls “financial conditions.” Especially with the recklessness of QE3, precariously loose finance became the domain of hedge funds leveraging high-yielding instruments and performance-chasing finance flooding into high-yield ETF products. Now, with monetary inflation having levitated price levels all over the place – bonds, stocks, homes, household incomes, spending, corporate earnings and cash flows, global finance, etc. – the system is today extraordinarily susceptible to speculative de-leveraging and the reversal of flows out of the ETF complex. And this week we have confirmation that David Tepper, king of sophisticated market operators, is sensing “Nervous Time.”

    http://www.prudentbear.com/2014/05/nervous-time.html#.U3iNcfldUl0

  5. The sheeple neither know about this, nor could they care less. Baaaaa – Baaaaaa – hey have more urgent needs to worry about …. food, shelter, despair, health …..

    I listened to the Minister for his brudder’s industrial sector waffling on about social housing yesterday .. blah blah

    I listened to Minister for Housing – Jan O’Sullivan – this afternoon attempting to defend the un-defend-able ……

    and I listened to Peter McVerry this morning with Miriam and Eamon, who reminded us what life was like in Derry in the 0s/60s

    On a previous thread, I note NO substantive comment on the suggestion By Michal Taft on how to address social housing crisis ….. so I repeat some of it here:

    […] €7 billion is being spent on paying down debt. It comes from the Government’s considerable cash balances. At the end of 2013, the Government held €18.5 billion in cash. This is made up of money that has already been borrowed and revenue from bank investments (e.g. bonds held in Bank of Ireland, etc.). The Government is taking the €7 billion and paying down Government debt to lower the debt/GDP ratio.

    Read on: http://www.irishleftreview.org/2014/05/12/time-year-homelessness/

    ‘€3.5 billion would build approximately 20,000 social houses. This would house over 20 percent on the waiting list. And this programme could target the nearly 3,000 living in emergency accomodation.

    This would make a significant impact on housing need in Ireland – though it would only be a beginning. More housing could be brought on stream if currently unsuitable social housing were brought back into the system – the average cost of rehabilitating social houses is €17,500.

    The impact on employment would be considerable. 35,000 direct jobs would be created – that is, jobs on site. ‘

    I must therefore concur with Taft: IT IS THIS GOVERNMENT’S “POLICY” TO DO SWEET FECK ALL ON THE SOCIAL HOUSING/HOMELESSNES crisis AND TO SIMPLY PAY DOWN DEBT AND ADHERE TO ABSTRACT ORDOLIBERAL METRICS AND TO HELL WITH THE LOWER-ECHELONS

    @Minister Jan O’Sullivan

    You have a reputation as a decent, hardworking, and caring politician. In the spirit of the stonemason James Kemmy – you have been provided with pepples for the housing crisis …. a gross insult, from this Gov and the Minister for Finance in your own constituency:

    Take the honourable action to highlight this disgrace – RESIGN. There is another party which would welcome you – and a possible path back to government in the future.

  6. @David O’Donnell
    “The international meltdown as a result of the Wall Street Crash of 1929 created turmoil everywhere, and Fianna Fáil’s protectionist economic policies in the 1930s did not succeed in achieving the self-sufficiency that was promised in the agricultural and industrial sectors due to reliance on imports for industrial raw materials and the dependence on Britain to export its agricultural produce. An active housing programme resulted in 80,000 houses (rural and urban) being built between 1932 and 1942, but disease and poverty remained rife.”
    http://www.independent.ie/opinion/analysis/independence-its-not-just-the-economy-stupid-30279746.html

    Just to show what a newly independent State was capable of in the ‘hungry 30s’. Post the 1929 crash, that generation had the sense not to rely on the markets for salvation. I wonder were the bond yields more important than housing back then.

  7. The only reason rating agencies became newsworthy was that as they followed the market down the ratings actions forced selling under a lot of mandates.

    They are now following the market up, but journalists have forgotten to stop paying any attention.

    If the market generally followed ratings agencies rather than the other way round, what would that say about the point of all the analysis that goes on outside ratings agencies?

    fyi

    http://www.ft.com/cms/s/0/2222512e-dea0-11e3-b46b-00144feabdc0.html

  8. Off the thread, I know, but I cannot resist calling attention to a piece in the Irish Times that proclaims:

    “Fortunes of Ireland’s wealthiest 250 equals third of GDP!

    I fear our economics educational system is not doing its job of teaching fold about the difference between stocks and flows.

  9. “The German government abandoned the Depfa sale plans after months considering bids from potential buyers. The decision to wind down the lender creates the risk of Germany imposing losses on holders of the securities and extending a ban on coupons, according to Barclays Plc analysts Christy Hajiloizou and Yulia di Mambro. ”

    So the markets are now pricing in a German bank default on bonds. How inspiring.

    Will we hear from Axel Weber and Jeurgen Stark, then ECB board members, and Jens (Trichet, ” I called Jens) Weidmann, to explain why the Irish State was obligated to bail-out bondholders, and why it is now seemingly acceptable from Germany to walk away from its bank creditors.

    One wonders how other German bank bond yields are reacting to this news.

  10. When Barrack Hussein Obama supported the Italian Monti surprise attack of demands to force the rest of Europe to “automatically buying their bonds” when no sane person would buy them,

    why doesn’t he put per Executive Order into the US Constitution the right of permanently rising asset prices of all kinds?

    To be guaranteed by appropriate purchases of the Fed. That would make things just so much easier.

  11. http://www.ft.com/cms/s/0/ee4f28e2-df24-11e3-86a4-00144feabdc0.html

    “David Tepper, founder of Appaloosa Management and manager of $20bn, generated the event’s biggest headlines with a warning that Europe sits on the verge of deflation. He said the European Central Bank had come up at dinner and Mr Bernanke had expressed concern that it appeared to be content with 1 per cent inflation. “The trouble with targeting 1 per cent is we don’t know if we are measuring this right,” Mr Tepper quoted him as saying.”

    Measuring is really difficult at the moment , innit.
    Things look like they are back to normal but they aren’t.

  12. Joseph Ryan,

    how often did we have this now here in this blog in the last 5 years?

    There is no Alex Weber or any other (ex-) German official needed to tell you:

    The Republic of Ireland signed into law in October 2008 a national guarantee for all bank debt. That makes you liable now, at the cost of a state default called.

    2 weeks later Merkel and Steinbrück went to great pains to declare, German savings are safe, without saying anything you could sue over for a nickel, or god forbidden signing anything. And that means, that we can now play hardball with the holders of those Depfa bonds.

    Don’t you learn this in Irish schools that signing treaties, laws, and contracts, does have consequences?

  13. @ Francis

    Indeed we do. Of course I can’t imagine a history chapter on one of the worst decisions ever taken by the Irish state will be written with out reference to unelected ECB bureaucrats that bullied Ireland in to extending the absurdity. Not to mention the regulators (national and international), irresponsible lenders/borrowers both institutional and individual (national and international), architects/promoters of the eurozone (national and international), the electorates that voted for it (national and international), the unquestioning media and the inept response then and now of all those that had/have the power to do more, particularly Germany, to mitigate the disastrous social fallout.

  14. John Foody,

    do you have any evidence for your wild claim:

    “unelected ECB bureaucrats that bullied Ireland” for the October 2008 law?

  15. This year we have the 100th anniversary of WWI, and people like me spent over many decades considerable time thinking about how did we get into this?

    a) Nibelungentreue, a blank check, that time to Austria.
    b) the itch for a fight, by many people in many countries
    c) and after 1918, Dolchstosslegenden and the hatred of Jews, not to forget, with all the consequences.

    We have made and signed very clear treaties, NATO, the Euro with its no bailout clause, which exactly prevented such blank checks, for extremely good reasons.

    And not so nice people very recently repeatedly try to overturn this, trying to get blank checks for other Euro members debt, with the repeated assistance of the alien (to the Euro) US Obama.

    US Obama, UK Hague, NATO Rasmussen were repeatedly trying to trigger promises to Ukraine far beyond NATO obligations, turning strictly defensive obligations into aggressor behavior.

    After trying that in 2007 to Georgia, Ukraine as well. I hope we will get some mood indication in the Ukraine coming weekend as well, how much support the US sponsored parties in the West Ukraine really have.

    No blank checks, not even for Wolferl Schäuble at the ESM, or a small group, but full parliamentary control over war and finances.

    So speaketh the Bundesverfassungsgericht.

  16. Of general interest!

    http://www.econstor.eu/bitstream/10419/91709/1/776567063.pdf

    Muddling through is the name of the game, what makes it possible being the commitment of countries to democracy and the rule of law. There are worrying signs that these virtues are not as well anchored in an enlarged EU as was presumed by those agreeing to enlargement, notably in the case of Hungary.

    The debate with regard to the Ukraine is instructive. “Spheres of influence” have no place in a Europe instructed by the principles set out in the EU treaties, most recently in the Lisbon Treaty, still less the “annexation” of an area of one country by another.

  17. @Francis

    The first treaty that Irish primary school children were acquainted with, in my youth, was a broken treaty, the Treaty of Limerick.
    Later were learned about other treaties, ‘in far off countries about which we knew little’, until we learned of the more recent treaty of Versailles, another broken treaty.

    As for how often ‘did we have we this now’, as far as I am aware this is the first occasion that I have seen where German banks bonds are now being priced for a percentage default. I could be wrong of course, but for me this is a first.

    As for my belief that past German members of the ECB board, with the backing of Weidmann despite his recent backsliding attempts to place himself on the other side, sided unequivocally with large bank creditors in Oct/Nov 2010 and in March/April 2011 primarily for nationalist reasons, well, that is my belief right or wrong.

    Ireland made horrendous errors, but stuffing residual bank debts down our own throats, of our own volition, in 2010 and 2011 was not one of them. That stuffing was done by a German controlled ECB. An ECB that rushed to protest it was helping Ireland while stuffing those debts down our throats and charging 6% for the privilege.

    The majority of treaties, historically, have been signed in extremis, usually conferring the greater benefits on the more powerful signatories. There is nothing sacrosanct about them, and when the balance of advantage changed, most treaties were either ripped up or forgotten about.

    As an Irish person at this point, given the Irish experience of the last six years, I feel myself under no obligation whatsoever to be bound by any treaty or document emanating from Europe, regardless of what Irish government has signed it.

  18. The rating agencies have to appear relevant but they have the same modelling difficulties as the others. You have to dance while the music is playing and then try to figure out when the music is going to stop and the panic start. Very difficult. For Ireland you have low yields but 120% + debt and not enough growth to get the numbers down – how does one model those conflicting dynamics ?

  19. I think it is worth to continue the discussion tomorrow, because it will hopefully contribute to a better understanding to what the fundamental problems of Europe are.

    Especially in connection with Depfa / Ireland, we have some griveances of our own about.

    I will look up some things back from 2007, which will take some time, to provide it in fair ways.

    For tonight I just want to leave a link of German support for a further “arch enemy”

    http://www.thw.de/SharedDocs/Meldungen/DE/Pressemitteilungen/international/2014/05/pressemitteilung_003_pumpen_laufen_serbien.html

    pumping capacity of 1400 m^3 / h is about 1/3 of a 200 year flood in my Dresden, and tomorrow we seem to provide another volume of this size, within 2 days.

    This is no gimmikry, no strutting around at some Gala Diner, but real help to keep 50% of the power supply of Serbia running in their difficult times.

  20. @francis

    I made no such claim re 2008, you’ll have to re read my post. So far it is only clear that the German backed, unelected bureaucrats bullied us in to extending the error, i.e. to continue paying off the private debts. The creditors of which just so happened to be German/French banks.

  21. @ francis and John Foody,

    Did you both read Colm McCarthy’s recent article in the Sunday Independent?

    “Europe needs to learn from its bad choices and transform itself into a true monetary union”

    http://www.independent.ie/opinion/columnists/colm-mccarthy/smothered-by-our-own-blanket-guarantee-30263226.html

    A snippet:
    “….Misdiagnosis leads to quack cures and the initial European response, which persisted from the onset of the crisis into 2012, was that the eurozone’s problems derived from excessive budget deficits run by the countries experiencing the greatest liquidity strains. This line was peddled most vociferously by the European Central Bank whose line was followed slavishly by the EU Commission. With the solitary exception of Greece, the eurozone crisis was a banking bubble, not an orgy of fiscal excess…. From a long list, Legrain picks the botched bailout of Greece in May 2010 as the original sin of the euro debacle. European politicians led by German chancellor Angela Merkel insisted that Greece, which was heavily indebted to French and German banks, was solvent and worthy of official credit when just about nobody else shared that view. In due course, Greece defaulted on unsustainable private bondholder debts to the tune of €100bn, the largest sovereign default in history. The French and German banks emerged largely unscathed, protected from the losses their carelessness had earned….”

  22. I look at this, and it is just the endless repitition of the same.
    We start with something like a credit rating and then complaining about Germany begins.

    Blaming Germany for all the ills in the world, coming with the Versailles treaty and forgetting the London debt Agreement from 1953.

    The no bail out clause is in the treaty for very good reason. Because many european countries have a long and very recent history of not balancing their budgets and then trying to sovle this with the printing press, incompatible with low and stable inflation.

    Many people, not just a blog commenter like Joseph Ryan here, but certain academics in Ireland and Greece were also pretty certain, that they do not feel bound by treaties and law.

    From my perspective the consequences of a state default would have been way more disastrous for Ireland than paying the debt down at extremely good conditions.

    As we have just learned, repeated serious attempts have been made, with the help of aliens to topple te treaties and push other peoples debt on other countries.

    France endlessly tries to topple the independence of the ECB, nobody wants to sign up to binding financial rules, try to forget that before any OMT their would be an legally binding ESM program.

    These things will not change. It is much more convenient in countries like Italy and Greece to blame Germany than to realize that their present situation is the consequence of their own election of politicians.

    “Angela Merkel insisted …” Could we have a quote for that?

    Erm, I nearly forgot, that in

    http://www.irisheconomy.ie/index.php/2014/04/30/philippe-legrain-investors-are-ignoring-eurozone-risks/#comment-509621 (and subsequent)

    I have shown a long number of false claims legrain has made, and politely asked for reference.

  23. @ All

    This recent blog post by Seamus Coffey might help bring some focus to the debate.

    http://www.corkeconomics.com/?p=1443

    Our EU official creditors would argue that the element of concessionary financing in the bailout is as much as can be expected of them although Merkel has conceded that Ireland’s situation is “special”, as indeed it is; home of the biggest bank bust of all time in terms of its cost to the taxpayer.

    As Seamus points out, the taxpayer’s loss was someone else’s gain, notably the depositors – mainly Irish – of Anglo and Irish Nationwide. There were Irish winners and losers, a fact that those seeking a foreign scapegoat seem incapable of facing up to. Flaying the bondholders might have helped, but would not have plugged the gap.

    Politicians elsewhere in Europe are keenly aware of the problems created for their taxpayers by their own banking busts (and not a single country has escaped unscathed). Hope springs eternal but the prospects for retrospective re-imbursement – by someone – of the losses incurred by Irish taxpayers seem poor.

    The other aspect is that the nature of the debate about the euro has changed i.e. it is here to stay but on what basis?

    Cf. the detailed exposition by Professor A. Winkler linked to above.

  24. @ All

    I make the point about democracy and the rule of law to underline the fact that it is respect for these principles that has held, and is holding, the EU – and especially the EZ – together.

    By all means, let’s sue the ECB! The UK has done so. But rather than barrack-room legal debate about the rights and wrongs of our case, would it not be better to concentrate first on the reasons why the Irish government – the presumed plaintiff on behalf of the taxpayer – has not done so?

  25. Sending from a train:

    Seafoid,

    For US companies there are enough historical statistical data and long enough a stable legal and macro environment, that they could do the linear regression to the Altman-Z score.

    For countries there is neither enough statistics nor are the circumstances stable. Especially for Euro countries that is a nearly completely political question.

    If you look at the OCED Annex 27 – 33, you will find, that the financial balances are payable. If something drastic would happen for a country, that would be reflected in the ESM program, and the calculated payments from the EU budget.

    What you have to weigh is therefore only the craziness of the politicians of certain countries, their willingness for brinkmanship vs the determination of the rest to not give in, and therefore create a huge moral hazard for others. From my perspective the Cyprus case has given the clear answer, that everybody in the EuroArea understands this now, and that trying to rock the boat only hurts those who do it.

    And the dropping rate spreads over the last year reflect this. I followed the whole drama up and down, and I don’t recall that my opinion was far away from market consensus.

    DOCM

    I dont see for anybody any advantage to leave the Euro, and I see a good chance that in a few years countries like Denmark and Poland will join as well. They basically have to run pegs anyways, and within they have a seat at the table.

  26. @DOCM

    Hope springs eternal but the prospects for retrospective re-imbursement – by someone – of the losses incurred by Irish taxpayers seem poor.

    Yet another utterly contemptible effort to pin the failures of the financial sector and EMU on the “grasping” Irish public.

    The thing to always keep in mind is that this is really about how the private sector losses from the European component of the global financial crisis are allocated in the EU.

    The ECB has the back of financial capitalism, the EC is determined to protect the creditor countries (sic, actually it is investor countries). Ireland’s situation and its huge debts are because of its powerlessness, not the Irish peoples avarice, shorted sightedness or incompetence.

    Now lets unwrap your little gem of a sentence.

    The first thing is that the word “incurred” seems to suggest that Ireland’s 65 billion and counting bailout of the financial sector was a case of a fully informed and deliberate investment by the Irish people which went wrong. This is a lie.

    The costs were initially an attempt to prevent a huge market failure getting out of control. Once the scale of the disaster was clear Ireland was forced to make good on these private sector losses by intimidation from the ECB and investor countries. These costs were forced, not incurred and there is nothing natural or necessary about them.

    The second thing is that this cost is born not just by taxpayers but by every child who will be born in this country for thirty years. Thanks substantially to the enthusiasm of people like you for maintaining a dysfunctional and corrupt status quo these children will grown up in an Ireland which is deprived of resources by the EU.

  27. @ Shay

    I would just add that it’s supposed to be a Union not a beggar my neighbor arrangement. Dumping all of the costs of the bank failures on Ireland was wrong . That approach won’t fly the next time TSHTF on the Continent either.

  28. ‘Legrain characterises in stark language the way the interests of those banks were placed ahead of those of Ireland when the troika took over: “Euro zone policymakers, notably ECB president [Jean–Claude] Trichet outrageously blackmailed the Irish government into making good on its guarantee, by threatening to cut off liquidity to the Irish banking system – in effect, threatening to force it out of the euro . . . This was a flagrant abuse of power by an unelected central banker whose primary duty ought to have been to the citizens of countries that use the euro – not least Irish ones. Bleeding dry Irish taxpayers to repay foreign debts . . . was . . . shockingly unjust.”

    Legrain is quite a mainstream figure – pro-market, pro-EU. He is simply telling an open truth. But no one who purports to speak for the citizens of Ireland dares to use this language of outrageous blackmail, flagrant abuse of power and shocking injustice. They can’t do so because four parties – Fianna Fáil, Fine Gael, Labour and the Greens – capitulated in office to this blackmail and bullying. At no point did any of them find the courage to challenge, on behalf of their fellow citizens, the legality or morality of what was done – and is still being done – to Ireland. When tested, they abased themselves and their country.

    http://www.irishtimes.com/news/politics/ballyhea-protests-on-bank-debt-show-collective-self-respect-1.1801718

    Ballyhea (still) says NO!

  29. A Must Read – from .. er .. Forbes

    Why Everything You’ve Read About Ukraine Is Wrong

    This article is by Vladimir Golstein, a professor of Slavic studies at Brown University. He was born in Moscow and emigrated to the United States in 1979.

    The mainstream American media has taken a nearsighted view of the Ukrainian crisis by following a script laid out by the State Department. Most reports have either ignored the truth or spun it in a way that paints only a partial picture. Here are seven things you should know about Ukraine.

    http://www.forbes.com/sites/forbesleadershipforum/2014/05/19/why-everything-youve-read-about-ukraine-is-wrong/

  30. @ francis

    I would agree with regard to Denmark and Poland. However, the problem is elsewhere i.e. managing the euro into the future requires a synthesis of European expert opinion which is still sadly lacking. Professor Winkler, since the very beginning of the crisis, has been an expert voice with an approach grounded in facts, not emotion. Ditto Seamus Coffey as far as Ireland is concerned.

    The economic academic community in each country seems to be a hostage to whatever is the national prevailing school of thought of the moment. This cannot continue.

    Post the European elections, a broad-based approach to persuade public opinion of the need to accept the implications of sharing a single currency will be a sine qua non. Finding a candidate for President of the Commission who could match the contribution of Jacques Delors, for example, would be a good start.

  31. @ DOCM

    “The economic academic community in each country seems to be a hostage to whatever is the national prevailing school of thought of the moment. ”

    Macro is a real mess, it would appear.

    I liked this quote
    http://www.zerohedge.com/news/2014-04-24/bank-england-chief-economist-be-warns-its-time-rethink-everything

    “The economy in crisis behaved more like slime descending a warehouse wall than Newton’s pendulum, its motion more organic than harmonic.”

    the full presentation is well worth the read

  32. @ DOCM

    Thanks for the link to Seamus Coffey’s article. Unfortunately it is founded on some pretty dubious economics. The fact that globalised or financial markets are ‘increasingly distant from government control’ is not some law of physics. It is simply a reflection of the historical conjuncture in which we live. Powerful plutocratic interests have corrupted political systems, captured regulatory systems, and paid for the necessary economic apologists. The Dork of Cork , who is seen only on distant planets now, has argued persuasively, that the euro was a vehicle for the destruction of European economic capacity.

    http://www.youtube.com/watch?v=4PQrz8F0dBI

    Seamus:
    ‘The banks in Ireland lent massive amounts of money because they wanted to and there really was little that government policy could do about that.’

    Disagree. Ireland did need the euro to attract utterly unprecedented capital inflows, which would otherwise have been halted much sooner. It would have been nice if this was genuine risk capital. The record shows instead that the lending was corruptly secured, through covert and as yet undisclosed linkages between our local elites and the global leveraged speculating community. In effect, our leading political and institutional figures received large considerations in return for gaming the economic security of the state.

    There is such a thing as negligence, and there is culpable negligence. The fact that large sections of the ‘respectable’, trusted and ‘responsible’ classes profited from the debacle is something which less privileged folk should note carefully. A bit of social levelling will not go amiss.

    The reality is that there were no banking decisions in 2008. All we had was the inevitable working out of nod-and-wink ‘arrangements’ and ‘understandings’ which had been reached over the previous decade. This was a silent, insidious, ‘natural’ betrayal of the general interest, because the ‘end of history’ Zeitgeist was all about private gain. Now, logically, we will inherit the bitter ashes of public squalor.

    None of the above will be investigated adequately, because it touches too closely on the incestuous clans who continue to control and ‘own’ our institutions. Time for the Silent Majority to make its presence felt.

  33. That these agencies have any credibility regardless of how they are calling it is what beggars belief. I would have more faith in seanie fitz heading up the fed.

  34. DOCM,

    I will be mostly offline the next few days.

    Just a short repeat after going over the FRB/US model today. I Will not waste any more time on it.

    All english speaking economists are considered proven wrong here around.
    There will not be any “consensus” on anything on any relevant time frame.

    The ONLY relevant thing is treaties and law, and relevant majorities.

    And the anglo american adventure in the Ukraine is turning into extremely brutal fiasco. Just look at the brutal rewrite, as it becomes now common to the FT, of artictles like http://www.ft.com/intl/cms/s/0/73cdf238-dfec-11e3-9534-00144feabdc0.html?siteedition=intl#axzz320r3P79Z

    This is the armageddon for forced public opinion in the west.

  35. @ PQ

    That was also the one point with which I disagreed but did not get around to mentioning it as I was concentrating on the numbers contained in the blog post.

    Unfortunately, we get the politicians we deserve. A fair electoral system alone is not enough to guarantee good governance.

  36. @ paul quigley,

    In what way was the euro necessary “to attract utterly unprecedented capital inflows”. I’m not sure the capital flows were unprecedented, though obviously they were in a limited Irish context.

    The euro was not a necessary condition for the massive credit bubble. There could just as easily have been massive capital inflows with an independent currency. There’s no doubt the euro made it easier as it changed the complexion of exchange rate risk but there is nothing to suggest the banks would not have scaled up their lending as they did absent the common currency.

    Research from the Central Bank shows that the Irish-headquartered banks had availed of about €100bn of foreign funding by the end of 2006. Of this around €30bn was from affliated banks (mainly AIB and BOI operations in the UK), €40 billion was from non-affliated banks (the inter-bank market London) and €30 billion from foreign non-bank sources (mainly collective investment funds who purchased bonds). How can we say that this would not have been possible without the euro? Iceland had an independent currency and there banks attracted massive foreign funding.

    The mere presence of the euro is too easy a scapegoat for the explosion of credit in Ireland. Correlation is not causation. The banks did it because they wanted to. The regulator allowed them because he didn’t want to know. The government facilitated it because they collected a third of it.

  37. @ Seamus

    The banks in Ireland lent massive amounts of money because they wanted to and there really was little that government policy could do about that.’

    Under EZ rules banks are apparently the responsibility of the local government.
    The Government was liable for the mop up costs in the absence of any responsibility on the part of those holding the bonds of the banks so policy should manage to reflect this in time before TSHTF. Who runs the country? Is it the banks or the Government ?

    One of the major problems in modern finance is the absence of any interest in what causes failure and how to avoid it.

  38. @ seafóid,

    Is there something that can be done to stop banks lending money? There is plenty that can be done to help mitigate against the costs if it goes wrong but what can be done to actually stop it? As mentioned:

    A more hands-on regulatory regime would probably have had a greater appreciation of the risks faced by the Irish financial system as the credit bubble expanded. This might have resulted in moves to increase the loss-absorption capacity of the banks before the downturn. The enforcement of loan-to-value and loan-to-income limits may also have helped.

    However, nothing was going put the banks in a position to deal with the crash the resulted. When it imploded Anglo lost around nine times its shareholder capital. Even in the event that Anglo was required to have twice as much shareholder equity it would still have been wiped out more than four times over.

    The Irish banks created most of the money they lent out. Bank A lent money to Person A who transacted with Person B who put the money in Bank B. At the end of the day Bank A and Bank B could balance off their positions.

    The banks didn’t need foreign funding to increase their lending. They could be self-funding between themselves. The banks needed foreign funding when someone got the money they created and didn’t deposit back in a bank in Ireland but used it abroad – either smart money that left the country, or money lent in Ireland to buy apartments in Bulgaria, 4x4s or a third foreign holiday. It is only because of money leaving Ireland that the banks needed foreign funding. The lending came first.

  39. @Seamus Coffey

    Don’t suppose you have a link to the INFAMOUS report advocating LIGHT TOUCH REGULATION in 2003 Chaired by Mick PD McDOWELL, during one of his POLITICAL hissy-fits, and backing up his oddo-neo-liberal fellow travellers MCCreevy and Harney all three facilitated by the non-ideological me-feiner Bertie Ahern?

  40. Update on the Odessa war crime [h/t nakedcapitalism, blindbiddy intelligence unit

    One official in this conversation, “Noginsky,” is a lobbyist for Ukrainian exports to Russia; the other, “Epshtein,” is Ian Epstein, the Israeli Consul in that region of Ukraine. The Jew who had masterminded the massacre is “Bennie,” the nickname for Ihor Kolomoiskyi, a Ukrainian gas-magnate, who was chosen by the Ukrainian Presidential contender and former Prime Minister Yulia Tymoshenko (another gas-magnate) to be the regional governor in the Odessa area. (Tymoshenko’s ally, the far-right economist Arseniy Yatsenyuk, whom the Obama Administration had selected to run the interim Ukrainian government while Tymoshenko campaigns for the Presidency, did the actual appointing of Kolomoiskyi, on Tymoshenko’s behalf.) Ihor “Benny” Kolomoiskyi also had offered a bounty of $5,000 for each corpse produced from the Trade Unions Building. He was very active behind the scenes in that massacre.

    Here is the key excerpt from an English-language transcript of this tapped phone conversation (which also transcribes yet another, in which Kolomoiskyi warned an enemy, “Tsarov,” that a million-dollar bounty had been placed on his head):

    http://www.washingtonsblog.com/2014/05/mastermind-odessa-massacre-embarrasses-ukraines-jews.html

    Why is the EU supporting these criminals?

  41. @ Seamus

    “When it imploded Anglo lost around nine times its shareholder capital”

    What was the leverage ratio? Bagehot wrote quite some time ago that “banking ought to be simple”. Regulation doesn’t have to be complex. Leverage ratios and LTV maxima and rules on what they can’t do. Glass Steagall was 37 pages long and worked far longer than Basel 2.

    The PD notion that competition would bring stability ignored systemic risk. All the banks were ####ed.

    Banks provide an important service to society but the risks they take if run by morons are not acceptable.

  42. @ Seamus Coffey

    I accept that the matter is not a simple as the euro, but confidence matter in credit systems, so international senior bondholders were a key ingredient here. They ‘understood’ that the ECB was going to provide enough liquidity to ensure their bonds would be paid in full, while a respectable and ‘responsible’ institutional face was put on the crony capitalist conversion of private losses into crippling public debt.

    The Eurosystem allowed them to eliminate credit risk when lending to Irish banks. In other words they had no stake in the outcome of the lending and no reason to have any interest in the local regulatory regime, because they had captured the state.

    If our state had not been corrupted for decades by domestic and foreign private interests, including the domestic banks, none of that would have been possible. Nul points for the ‘leading’ professionals and ‘key’ civil servants, who profited from or ‘didn’t notice’ the scam. Mediocristan.

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