NTMA Technical Paper: What Drove Irish Government Bond Yields During the Crisis?

Paper by David Purdue and Rossa White here.

105 replies on “NTMA Technical Paper: What Drove Irish Government Bond Yields During the Crisis?”

Was the mid-2011 spike to 15% not the result of political uncertainty at EU level?

During early 2011 there was finally the acceptance that Greece would have to default on some of its debt. The became a necessary condition for further EU/IMF support and was agreed in principle at the July 2011 EU Summit.

The uncertainty seemed to centre around whether PSI would become a requirement of all EU/IMF programmes, i.e. would there be haircuts to privately-held Irish and Portuguese government bonds as these countries were also in programmes. One of the (notional) principles of the EU is that all countries are treated the same. Thus if Greece was required to default on privately-held bonds for EU/IMF support it was possible to surmise that Ireland and Portugal would have to do so as well.

The initial haircut of 20% offered some support to this as it was clearly inadequate to make any inroads into stabilising Greece’s public debt spiral and could have been considered an “average” haircut to applied across all programmes. As it turned out the July 2011 summit decided that Greece “requires an exceptional and unique solution”. By November that had turned into a PSI haircut of around 60%.

For Ireland and Portugal the threat of PSI as part of their official programmes was removed and yields fell back towards those levels suggested by the “fundamentals” included in the analysis shortly after that summit.

The 2011 spike may also have been driven by Credit Default Swaps (CDS) which were used extensively by Hedge funds and other traders wishing to short government bond markets. A ban on naked CDS on European Govt bonds was introduced in 2012 (i.e. one has to own the underlying bonds to buy a CDS) and the CDS market has subsequently collapsed. The only way to short most euro bond markets now is to borrow the bonds which many are reluctant to do as the market can be squeezed.
On the paper in general it is extraordinary that most of the fall in yields over the past two years is due to a dummy variable ,the OMT announcement, and therefore based on a conditional promise which the ECB may not be legally allowed to fulfill.

A number of Irish economists either advocated Irish sovereign default or announced that it was inevitable. In a free country, people may say whatever they please, but the public expression of the mistaken belief that Ireland would choose not to repay sovereign debt probably added billions to Ireland’s interest bill.

For example, Colm McCarthy declared:

“The Irish State is insolvent and headed for sovereign default.”

He then questioned why anyone would lend to Ireland. As it turned out, anyone who bought Irish 5 yr debt at that time has made a 63% gain to date.


“The large spike is most likely explained by a temporary collective movement due to fear and uncertainty (about Government bond default and/or euro exit) which is divorced from the fundamentals.”

a) the existence of, or
b) the presumed existence of
a contingency plan to stamp Euro notes and withdraw from the currency area ‘a fundamental’ or a reality, deduction or speculation which can be regarded as ‘divorced from the fundamentals’?

Had that plan been acted upon, would the 2011 spike have been subsequently characterised as ‘explained by fundamentals’?

@Ossian Smyth

You’re not being fair to CMcC. The next line in the linked piece states “This is not my opinion, it is the opinion of the credit markets to which the Government must return..” Many other commentators made much more dubious and strident declarations about default and exiting the euro etc.

Courtesy the Net, this spot-on analysis of the text that was agreed between Schaeuble and Geithner after their meeting (which took place shortly after Draghi’s “whatever it takes” intervention).


Greece is still in the euro and shows every sign of staying there. On this, and on other issues, Schaeuble’s appreciation of the general situation seems less than comprehensive.

Does somebody of you have

a list of Irish bonds (ISINs ! or equivialent) actually isssued

he considers relevant to address the relevant question, namely how much in bond coupon payments, the Bank of Ireland is actually paying because of the rate spikes?

That would be very beneficial to adress the cost question

Ossian Smyth’s comment does invite us to look back at the strident and / or foolish views expressed on this site and elsewhere about the appropriate policy for Ireland during the dark days of 2011. I don’t think the hurlers in the ditch covered themselves in glory!


did you take a look at what this Eric Bonse is writing , in what magazine?

The guy has a politology diploma. He has no clue of finance, has to fill in every month an article, with his real hobby horse his own home page.
Wanna become a seond Wolfgang Münchau, with his “eurointelligence” nobody is reading anymore?

endless repetition of the same gross nonsense
“Der Streit um Jean-Claude Juncker ist festgefahren. Kanzlerin Merkel hat zu lange mit den Juncker-Gegnern paktiert, als dass sie nun noch heil aus der Sache herauskäme”

the little magazine “cicero” is reaching so few people, and making so much losses that they wanted to be distributed with “Die Welt”, you know this right wing Springer Verlag thing, the plan crashed yesterday

This little Bonse tree can and does say any nonsense, as long as it keeps his pseudo intellectual readership entertained.

DOCM, why do you bring this crap here?

Timmie Geithner is not part of the Obama” team” anymore, because people refused to meet the guy, who tried to steal our gold and special drawing rights, as we learned this summer in the FT “How the Euro was saved”.

Timmie Geithner is the classical arrogant, criminal american bully, who now has a book to sell, and of course can just tell his version, after being ousted.

@Ossian Smyth

If the State itself, NTMA included, believed in early 2011 that Irish govt bonds were a good bet, it had at the time liquid funds and investments of almost 30 billion to spend on them. Now that investment would really have saved billions and billions and billions!!!

The State should have put its money then where its mouth is now.

But perhaps we would have been afeared of asking for permission, from our masters, to invest wisely in ourselves.
EZ bond yields are ultra-low, simply because if they were otherwise, the euro would have been toast long before now. And the euro will still be toasted if yields rise at all in the next few years.

And now to the technical.

1. The paper lacks the fundamental insight that the price of an Irish bond is basically a German bond plus a risk premium plus a little liquidity premium
(Plotting the Irish risk premium after subtracting would probably yield a bump, which could be described by 4 parameters and next to none variables, gut feeling !!)

investment grade is typically a close function of risk perceived by market and vice versa (visit risk manager handbooks)

2. The analyis of one single 10-yr irish curve is done in isolation of other maturities and other countries. Heeeh?

3. the analysis has about 6 additional, somewhat hidden parameters
(“The macroeconomic variables are lagged at either three or six months (i.e. one or two quarters) to better model the information on hand to market participants at the time of yield movements”)

4. The input IMF program application is missing (Ireland 11/28/2010 550 CDS points)

5. looking at CDS spreads, Ireland has a furunkel in Feb 2009 not fitting into this picture (anybody here, who has this data for himself ?)

soo we explain here one function for one country by 6 variables , 8 parameters, and 6 additional, somewhat hidden, half-parameters, while omitting the most important variable

Who is the supervisor of those students?

The markets thought the Euro was in danger of breaking up in 2011 and they couldn’t price it because they can’t do tail risk and default to panic so they sold off the bonds of all the weaker peripherals. It took the ECB so long to get the finger out- it has been consistently behind the curve. Once Draghi came out with his “whatever it takes” lovebombing of the markets the yields came in again


Some of the projections on Piggy debt sustainability are insane


“But the report also warned that lower-than-expected growth projections put Athens on a course to miss its debt targets, which the troika of international lenders – the European Commission, European Central Bank and International Monetary Fund – have insisted must get “substantially below” 110 per cent of economic output in 2022, from a peak of 177 per cent this year.
The report shows Brussels now expects Athens’ debt to fall to 112 per cent of gross domestic product in 2022 due to weaker growth – a consequence of Greece’s deflationary trends and lower revenue from the privatisation of state assets.”

The OECD’s downgrading of US and EZ growth for 2014 is not a good sign.

The trajectory of yields was surely policy dependent. In 2011, debt service costs were going higher, the Germans were threatening to eject Greece inter alia and Gearing up to pastoralise Cyprus. The ECB was run by Pierre Laval. Austerity was in vogue in the EZ and the recovery in the properly run Anglo Saxon economies was stuttering. Fast forward and the ECB is under new management, nobody listens to crazy Jens any more, austerity is a croc, QE is coming and the Anglo Saxons are doing ok.

How the Euro was saved (for now) But if crisis comes back again Italy will be the key.


“With nearly €2tn in sovereign debt – the fourth-largest debt pile in the world – Italian finance ministry officials estimated a three-year bailout programme would cost about €600bn. There was not enough money in the EU or IMF to foot that bill. Italy was simply too big to bail.”

@Ossian Smyth

some context for that McCarthy quote

7 January 2011 │ 84 pages
Global Economics View
The Debt of Nations by Citibank

Gives a flavor of the mood at the start of 2011

“There are no absolutely safe sovereigns — ‘rates analysis’ has to be done
simultaneously with ‘credit analysis’ for all sovereigns, including the G3.
 There are likely to be several sovereign debt restructurings in the euro area
(EA) in the next few years. Liquidity support should not stop this; only
permanent bail-outs would.
 The sovereign debt crises of the euro area periphery interact with banking
sector weaknesses throughout the EU. Both need to be addressed for a lasting
 Ireland’s financial support package will buy time, but does not address the
fundamental insolvency issues of the consolidated sovereign and banking
system. The Irish case also highlights the need for an EU-wide bank special
resolution regime (SRR).”


De Grauwe showed an OMT dependence of 200bp on the 2 yr yld and half that on the 10 yr. As the paper concentrates on the 10 yr yld it erroneously cites DG as corroboration of its findings.

“Sat, May 7, 2011, 01:00

OPINION:Ireland is heading for bankruptcy, which would be catastrophic for a country that trades on its reputation as a safe place to do business, writes MORGAN KELLY
WITH THE Irish Government on track to owe a quarter of a trillion euro by 2014, a prolonged and chaotic national bankruptcy is becoming inevitable. By the time the dust settles, Ireland’s last remaining asset, its reputation as a safe place from which to conduct business, will have been destroyed.
Ireland is facing economic ruin.”

I doubt that this type of article helped lower Irish bond yields.

@ OS

You don’t get it, with all due respect. The EZ did not have the plumbing for a crisis of this magnitude. Read that Bini Smaghi presentation. And the markets couldn’t price the risk so they dumped it.

It was the unknown consequences of Greece leaving followed by the next weakest that finally brought the headcases around.
Nothing to do with Colm McCarthy. He was just pointing out the bleeding obvious.


“Wednesday, September 14, 2011
A Greek Exit from the Euro Area: A Disaster for Greece, a Crisis for the World
by Willem Buiter CitiGroup Global Economics View”

I wonder what the point of the NTMA article was . I suppose they don’t want to draw attention to the sloppiness of the management of the EZ.

trying to answer our Greenie Ossian’s question

is anybody here aware of other Irish bonds in the relevant time window
5/1/10 5/1/12 11/28/2010
start stop IMF


ISIN vol (billion) coupon issue date maturity date
IE00B4V6D496 2 4.50% 2/1/2012 2/18/2015
IE00B60Z6194 9 5.0% 1/21/2010 10/18/2020
IE00B8DLLB38 6 5.50% 8/2/2012 10/18/2017

XS0862044798 1 10% 7/29/2011 7/30/2016


Commentators such as CMcC or MK or whoever (there was a lot of people trying to make their name on the bust) did not cause the spike in Irish government bond yields (they may have added a small bit of cream on top). Buiter probably had a more meaningful impact given his market-guru status. But the one certainty is that they sure as hell didn’t have a clue what was going on in the markets or what the true position of debt sustainability dynamics were either.

The Eurozone found itself in the midst of a political and economic crisis, and without the institutional framework to stabilise itself amidst that backdrop, the lack of a LOLR now the most obvious. Much of this has been rectified, but there is still much more work to do. At the moment, Draghi is doing most of the heavy lifting through verbal intervention, but next year he may need to back it up with actual financial intervention.

The ESRI’s Hermes model uses a simple equation to predict the risk premium on Irish bonds (defined as the 10-year yield spread over bunds); the premium is a function of the EBR and the debt ratio. It uses annual data, however, but captures the spike in the premium in 2011 and subsequent fall.
Trying to model shorter term movements in markets is a fruitless exercise. I suspect, given herd instincts, the importance of market positioning and a wide variation in the degree of market liquidity.

The possibility that there was a deliberate attempt to destabilise Ireland and destroy its reputation after the onset of the global recession needs to be investigated by the Gardaí. They need to examine emails and bank accounts. Look back at what was being said and written in the Irish, UK and world media in 2009, 2010 and 2011, some of which made its way on to this site. Its absolutely full of wild hysterical deranged rants along the lines of ‘Ireland is doomed’, ‘Ireland is bust’, ‘Ireland is finished’, ‘Ireland will leave Euro and devalue 50 per cent’, ‘Get your money out of Ireland now’, ‘Ireland should rejoin UK’, ‘Ireland is a failed state’, ‘Ireland is a banana republic without bananas’, ‘It will be 30 years before growth returns to Ireland’, ‘Ireland’s economy is destroyed for a generation’ etc, etc. Thousand upon thousand of articles along those lines. In case anyone thinks I exaggerate, I just googled and found articles with all these heading from that period.

No one can accuse JTO of succumbing to the hysterical drivel that was being spouted then. My conscience is clear. My posts on this site from that time show clearly what I thought of it. I am hopeful that tomorrow’s GDP figures will be the final vindication of my stand back then and the final nail in the coffin of Ireland’s doom pornography industry, which back then threatened to sweep all before it.

Now that the dust is settling and the Celtic Tiger is returning, the interesting question is ‘who was behind all the orchestrated hysteria and doom-mongering at the time’? As with any ‘whodunnit’, the first step in finding the answer to that is to ask ‘who benefitted from it’?

I’d say the UK Government/MI5/City of London axis benefitted in a number of ways. The finger of suspicion points at them.

First, despite having high inflation, a huge budget deficit and a high balance-of-payments deficit, all negative factors for interest rates, the UK government was able to borrow incredibly cheaply at the height of the hysteria in 2009-2011, mainly because billions were flowing from countries like Ireland into London. Given what we now know about the way LIBOR and FOREX markets were rigged, does anyone think that bad-mouthing Ireland as a way of getting people to transfer their money from Ireland to London, in the process helping the UK Government to borrow incredibly cheaply, was beyond them?

Second, there is the political question. This being an economics blog, people tend to ignore the political. But, in the real world its more important than the economic. The UK Government hasn’t managed to hold on to Scotland, Wales and Ireland (all of it up to 1922, part of still) for centuries by being slow about these things. Look at the dirty, underhand, but seemingly effective, tricks the UK Government has played in Scotland’s referendum campaign. Even back in 2009, the UK Government could see the referendum in Scotland coming into view. Does anyone think that even back then they didn’t have scores of ‘think tanks’ working on it? Given that the referendum would be about Scotland following a path Ireland had already gone down, does anyone seriously think that even back then it would not have been a priority of the UK Government, for ensuring a ‘no’ vote, to portray Ireland as an economic disaster area.

Then there is the currency question. The reason the UK is so anti-Euro isn’t just economic. Its political. Quite simply, if the Euro is a success and perceived as a success, its the end of the United Kingdom. Following the referendum in Scotland, its clear the majority want to vote ‘yes’. ‘Britishness’ is dead for them. What’s stopping many of them is London-inspired fear that, if they choose independence’, they’ll have no viable currency option. London says it won’t let them use the £, and London-inspired propaganda has it that the Euro is a disaster. If the Euro was a success and perceived as a success, Scotland would have a readily-available currency option after independence. As Ireland is the closest Euro country to Scotland, and with numerous other close links, the perception of Ireland being a success within the Euro would have been catastrophic for the UK Government’s campaign to hold to Scotland. There was no way the UK Government was going to allow that to be the perception. I think eventually it will be found that it was from this fact that most of the hysterical ranting doom-mongering about Ireland in recent years has emanated from. A bit ironic that the GDP figures for Ireland, that will confirm the return of the Celtic Tiger and be the final nail in the coffin of the ‘doom-mongering about Ireland’ industry, will be published on the same day as Scotland votes. Possibly too late.

April 4th 2011.

From Brendan Walsh
Is the tide about to turn?



“Interesting. Last week I was working out what Irish Govt bonds would do to a small pension in the next 6 years. They would almost double it. And even with a 25% default day one, they would do as well as investing in 3% German bonds over the same period.
It was all rough calculation on an excel spreadsheet but it gave me food for thought.”

The markets are for the herd. There is little logic.
At least Templeton (or whoever he is) was able to use a simple calculator.

On advocates of consequential moves without apparent downsides, the State bank guarantee should have been a lesson.

Venezuela with its 61% inflation rate is close to default and Prof Ricardo Hausmann of Harvard is being investigated for spreading “false” rumours. He’s a former Venezuelan minister.

Moody’s reported in 2010 that the 20 sovereign defaults since 1997 were Mongolia, Venezuela, Russia, Ukraine, Pakistan, Ecuador (twice), Turkey, Ivory Coast, Argentina, Moldova, Paraguay, Uruguay, Domenica, Cameroon, Grenada, Dominican Republic, Belize, Seychelles and Jamaica.

@ Seamus Coffey


Wonder are you surprised or shocked that 44 countries could agree on key aspects of corporate tax reform? 😯

Maybe it may merit a thread as it will impact several Irish economic indicators?

Francis Ireland maintained a rigid 1 to 1 link to sterling from 1928 to 1979 when it opted for a separate identity in the EMS. Sweden and Denmark track the euro very closely since inception. Nonetheless your Scottish pound deposits will only be worth pound sterling so long as the independent entity says so.

You would have to laugh at the No side promising the earth regarding the NHS when back in London they are flogging it off piecemeal to the private sector.

” Much of this has been rectified, but there is still much more work to do.”

What exactly has been rectified and what would you say is outstanding ? The EZ is fine as long as the herd doesn’t panic again for 2 or 3 years but if it does I wouldn’t be confident of the defenders of the Zone holding their nerve.

It looks as though there is no allowance for risk in the pricing of Irish bonds. Lots of one way bets.
Similar problems with ETFs. All grand as long as nobody shouts “fire!”


In almost all cases actions speak louder than words except of course when the ECB speaks and most credible Central Banks for that matter.

The model produced in the paper by the NTMA clearly indicates that Draghi’s ‘whatever it takes’ announcement had the desired effect of aiding a Euro wide sov bond yield collapse, as was hoped at the time.

By implication the same but opposite effect could have been easily managed by Westminster at the time of our IMF and UK et al /EU bailout.

If your thesis is to be credible about Scottish ‘No’ vote think tanks wanting to lay bare the disaster that was/is the Republic of Ireland then surely the time to let that particular cat out of the bag was when we were in deep shit at the end of 2010.

But no. What did London do? They acted.

London lent the Irish Sov from recollection c€7bn ?? I could be wrong on the number but what was to stop London at that time suggesting that the RoI was a basket case and even ‘we its closest neighbour couldn’t see the merit in lending to it’ – but of course this didn’t happen..

The London establishment had a open goal opportunity to let us sink by making statements to the market at the time but acted in completely the opposite direction and ergo your thesis regarding NO Voting think tanks rubbishing the YES side arguments over the past number seems to me wide of the mark.

That OMT brought down yields is not in dispute. We don’t need pretentious linear regression models to tell us that. However the conclusion that 11% ylds were “fundamentally” correct in 2011 but the extra 3% was irrational is most unconvincing.

AFAIR, Cyprus was in a monetary union and had a seat at the ECB and look at what happened.


You are a bit naïve. You should have lived in N. Ireland during the Troubles. Of course, the UK Government was never going to do anything publicly hostile. That’s not how it works. Their minions in the media do it. There were countless articles at the time ‘laying bare the disaster that was/is the Republic of Ireland’, as you put it (which, of course, tomorrow’s GDP figures will confirm was all cr*p). You have to be very naïve to believe the UK Government didn’t have a part in it (given the advantages, both economic and political, they derived from it – as outlined in my earlier post). Look at Scotland again. It is now known that the UK Government orchestrated statements by banks and other companies last week (just after first poll to put ‘yes’ ahead) that they would pull out of Scotland if they voted ‘yes’. Blackmail, pure and simple. As for the 7 billion loan, it was peanuts compared with the private capital flowing from Ireland to London at the time.

@ Ossian Smyth

The panic mongering of so many in that time frame did not actually cost Ireland anything, because the last longer term bond Ireland issued was January 2010 with 5%

Or do I hear some comments from Bond Eoin Bond ? : – )

@ James Ryan

Your own calculation, you referred to, seems to be based on the assumption, that there would be some recovery value, of actually about 40 % or so, for IE00B60Z6194. That is in deed the default asumption going into first order CDS calculation, but the ISDA determined value for Greece was 21.5%

@ Brian Woods II
I do in fact dispute, that OMT brought this down. From our perspective, the “within our mandate”, the Bundesverfassungsgericht ruling ESM legal, if, and ONLY if , every measure is voted on in the Bundestag, and the volume limitation

guaranteed the viability of the whole structure.

There is now a functioning lender of last resort (LOLR), but it only comes with enforcable strings attached to it, as it must be.

The repeated Italian aggressions, to push their debt onto the rest did succeed only one time in August 2011. The second attempt led to the ouster of Berlusconi.

John the Optimist

In hindsight, I think now they did not only want to destabilise Ireland, but some really gambled for the breakup of the Euro.


the lunatic attempt of the by far richest country in Europe, Cyprus, to steal from their neighbors, was rebuffed by 21/1/1. We had that discussion in length at this time in this blog.

In summary, crime did not succeed, and will not succeed

All necessary institutions are now in place and working.

And the ultra low interest rates and spreads now reflect the certainty.

The remaining risk premiums reflect my feeling of the risk that some folks try something stupid and criminal (I translate GR0114028534 into a probability of about 30% over 5 years)

Italy will surely make another attempt to push their debt onto the rest.


You are 100 per cent correct in saying UK was for break-up of Euro. My point is that it isn’t just for economic reasons, but political reasons. Quite simply, successful euro = end of United Kingdom. The currency argument is the only one they have in Scotland, although it looks like being quite effective as Scotland gets most of its info from London media.


Do you not think that a lender of last resort after independence would be necessary for a small country with a large banking sector?

Have people learned nothing from the credit crunch – or was that all fake and orchestrated by MI6 anyway, just to set the backdrop for the Scottish referendum?

Do you think the banks based in Scotland are pretending that they are not convinced that the lack of access to a LOLR is a sound business environment for them?

Irish economists should never again “put on the green jersey” and write whatever propaganda helps to lower bond yields, or to raise bank share prices, or keep people buying overpriced properties, or whatever political goals can be boosted by propaganda efforts. Economists should look at the evidence dispassionately and be honest in their opinions. So the whole tenor of this discussion is flawed and corrupting of good economic policy analysis. Honest economic analysis is not measured in how many basis points it lowers contemporary bond yields.


You could say the same about any small nation. Should Denmark become part of Germany so as to lessen its exposure to banks? Should Finland become part of Russia. UK Gov/MI5/City of London didn’t deliberately set out to cause global crash. But, once it happened they made maximum use of it for their own financial and political ends. Was it Tim Geithner who said ‘never waste a good crisis’? Spreading the word that Ireland was about to sink without trace (the prevailing view in the UK/Dublin 4 media and on this site at the time) certainly encouraged residents of Ireland to transfer their money to UK and buy UK bonds at incredibly low interest rates. Plus, an ideal opportunity for them to convince Scots that Ireland had made a big mistake leaving the Union and that the Scots shouldn’t do similar. Tragically, it looks like it will work and that Scotland is about to be conned again, although I hope I’m wrong. Thank God Ireland had Patrick Pearse, James Connolly, Michael Collins and Eamonn DeValera, whose methods proved more effective.


You seem to be suggesting you wouldn’t trust the Irish people to vote for independence from the UK.

Perhaps if the Scots don’t do so it will be because they don’t find the UK or the English as repellent as you do, or details like currency as trivial. It is possible, if they do vote that way, that they might just be right.

Honest economic analysis should be judged on whether or not it was correct. By that std , you wd not buy snake oil.
I seem to remember what might be called a pack of lies produced by BUBA about wealth in the EZ.

@ BWII et al

OMT works and continues to work. The question must surely be why!

Dan McLauglin raises the point in the following terms above.

“On the paper in general it is extraordinary that most of the fall in yields over the past two years is due to a dummy variable, the OMT announcement, and therefore based on a conditional promise which the ECB may not be legally allowed to fulfill.”

It must be the fact that the markets do not believe the promise to be conditional. In other words, the political, economic and commercial realities of the situation dictate that it be fulfilled, whatever view individual politicians – and notably Schaeuble – adopt. The exchanges and sequence of events in July 2012 demonstrated this to be the case.

Meanwhile, the world moves on and with it the ECB.


@Gregory Connor.

Hardly any Irish economists “put on the green jersey” in 2009/10/11 and wrote propaganda to lower bond yields. Give me examples. Most worked in the opposite direction. They put on some other jersey (we can speculate about its colour) and wrote hysterical doom propaganda that had the effect of raising bond yields in Ireland. Their hysterical predictions of the time are now being proved totally wrong (as tomorrow’s GDP figures will confirm). The point of my earlier posts is that we really need to know why. There could be an innocent explanation. They might just be as thick as a plank and actually believed what they were saying. Or it could be more sinister.

Here is Morgan Kelly, 6 May 2012 – Irish Times.

“Ireland is heading for a catastrophic bankruptcy.”

“A prolonged and chaotic national bankruptcy is inevitable.”

“By the time the dust settles, Ireland’s reputation as a safe place from which to conduct business, will have been destroyed.”

“Ireland is facing economic ruin.”

“The Irish bailout of last November has already ended in abject failure.”

“The destruction wrought by the bankruptcy will not just be economic but political.”

“Ireland will become Europe’s Puerto Rico.”

“Ireland is going to be in the Hudson.”

How exactly is this ‘putting on the green jersey’?

Do you disapprove of economists talking-down the Irish economy (far too mild a term for this rant) as much as you disapprove of them talking it up?

If ever there was an incitement to people to get their money out of Ireland, this was it. What do you think might have been the effect of this rant on bond prices in Ireland and the UK? Which country is the most likely location that people reading this rant and moving their money out of Ireland would have moved it to? What impact do you think such a rant would have had on the Scottish independence debate?

I was in Scotland the past two weeks (helping the ‘yes’ campaign) and I saw lots of leaflets from the ‘no’ camp containing quotes from Morgan Kelly and other economists who said similar things about Ireland at the time. The message being peddled even last week was ‘Ireland is bust, ruined, destroyed – stay in the UK if you want Scotland to avoid the same fate’, and they were using quotes similar to those above to ‘prove’ their argument Tomorrow’s GDP figures will destroy this argument once and for all, but possibly too late to save Scotland.


You are quite correct. Very perceptive of you. I wouldn’t trust the Irish people to vote for independence if the Easter Rising hadn’t occurred, Ireland had stayed in the UK, and a referendum was taking place in Ireland now. They’d be subject to blackmail and intimidation to vote ‘no’. The UK government would be lining up the multi-nationals in Ireland and getting them to say they’d pull out if Ireland if they voted ‘yes’. And they’d be bribing every economist in the country to predict ruin if they voted ‘yes’ (and let’s face it, going by what they said in 2009/10/11, lots of them would be happy to do it without being bribed). However, the matter is academic thanks to the men of 1916. I don’t find the English repellent at all.


I’m not saying Irish economists should put on the green jersey. I’m just saying that perhaps they shouldn’t all assume they’re suddenly bond market experts and can with high accuracy predict the future when things are actually very uncertain. The doomongers got it wrong, this is simply fact.

@ Francis

Loss of bond market access did cost ireland in fact – this is the reason we are currently trying to renegotiate the reasonably expensive IMF loans we were forced to take out.

1. I wrote last night a pretty massive critique of the technical aspects of this paper.

Brian Woods II was just showing that the claim of corroboration with this De Grauwe was wrong too.

Dan McLaughlin was just mentioning the ESRI model, which is of course based on starting with the Bunds,
and which took me quite a few clicks to find out what the hell EBR is to mean.
Exchequer Borrowing Requirement (EBR), only to be found explained in some obscure 2005 Duddy paper, A really classical of AKüFi (Abkürzungsfimmel) as we say in Germany – )

I wonder, is there anybody in this whole blog, who here can pass judgment on the technical issues of this paper?


2. Tullmcadoo

Your statement “I seem to remember what might be called a pack of lies produced by BUBA about wealth in the EZ.”

Is, as usual, materially false.

In stark contrast, the honest assessment “The Eurosystem Household Finance and Consumption Survey”

was organized and paid for by the ECB and respective National Central banks (“LIST OF HFCN PARTICIPANTS)

and it shows:
1st Column : Median Net Wealth (€1,000)
2nd Column Mean Net Wealth (€1,000)
Germany (2010) 51.4 195.2
Cyprus (2010) 266.9 670.9

I presume that everyone commenting on this thread is at least familiar with this subject to the point of having read this:


It was not possible to work out what the ‘correct’ yield on Irish gilts should be by putting some numbers from ‘fundamentals’ into your spreadsheet when more important variables, like Spain or Greece perhaps leaving the Euro were required, repeat, required, to be considered by both risk and asset managers. The fact that neither did leave, does not alter that fact, because it could not be known with certainty at the time.

In that context the two decimal point probabilities of default that used to be authoritatively trotted out by enthusiastic commentators were always comical though…


Bosnia doesn’t have an economy geared to banking and finance like Scotland does.

Francis “I wrote last night a pretty massive critique of the technical aspects of this paper.”
Which is available where…? Link?

Eoin Bond. Gregory C is correct. Bond salesmen or whatever may be economists but economists shouldnt be bond salesmen or whatever. Whatever because they might be analysts.

Tullmacadoo (fan of JB Keane?) Surely the thing is not post fact “correct” but honest analysis on the facts present at the time of analysis? We are all experts after the fact.


“OMT works and continues to work. The question must surely be why!”


Good dog!
However I wouldn’t lean on that reed.

3 problems with markets- herding, emotion and short termism- there’ll be more crises before things get back to normal , assuming they can

Maybe implying dishonesty is OTT. Most were crap on the way up and down. A few were right on the bust but forgot to turn. Very few actually got the trade right.
Lots are still in denial and will have to wait for the next recession. You would get better forecasters in PP of a Saturday.

@ unfeasibly

It was not possible to work out what the ‘correct’ yield on Irish gilts should be ..because the risk was political (given the “no breakdown” service in the EZ at the time) and depended on decisions made in crisis meetings. The notion that all risk can be modelled out of danger was shown up as flawed. Excel can do a lot but not that.

” In real life, unlike in many of our models, crises are not an instant but a time period. This time dimension creates ample opportunity for all sort of strategic decisions within a crisis. Distressed agents have to decide when and if to let go of their assets, knowing that a miscalculation on the right timing can be very costly. Speculators and strategic players have to decide when to reinforce a downward spiral, and when to stabilize it. Governments have to decide how long to wait before intervening, fully aware that delaying can be counterproductive, but that the political tempo may require that a full-blown crisis becomes observable for bickering to be put aside.”

Hmm… I thought a “pretty massive critique” would be more than a few bullet points on a blog. Silly me. Good to see that aul german charm is still there tho.


“The possibility that there was a deliberate attempt to destabilise Ireland and destroy its reputation after the onset of the global recession needs to be investigated by the Gardaí. They need to examine emails and bank accounts. ….”

But there was definitely a very successful attempt to destabilise Ireland in the period 2000-2007, but not much Garda interest in that. A number of people sounded warning but most were sent to Coventry and it seems are being made to stay there.

Many of the people responsible for managing the country during that periods are drawing huge pensions and literally laughing at the country full of idiots that allowed them to get away with the dosh.

As far your grande M15 plot in the Ireland crisis-mop-up period, do remember that some of us ordinary folk have been able to get paid work in the UK at many times in our lifetime when mother Ireland’s breast had been suckled dry to benefit of the pampered ones.

Your detailed analysis of Ireland carefully omits the hundreds of thousands consigned to the emigrant boats and planes over the years, an abysmal failure of the State to look after its own.
No amount of statistical diarrhoea can undo the wrongs that Ireland has visited on its less well off since independence.

re: Scottish Referendum:

As for the Scottish referendum, if Scotland vote to separate at this time, they are making a mistake of historical proportions.
The EU has been conscripted to serve a German and banking led hegemony, and is visibly creaking. In such circumstances Scotland needs the safety in numbers that the UK provides in order to protect its interests. Even a fool could see that the EU/ECB were quite content to ‘wring the necks’ of minnow nations like Ireland, Greece, Cyprus.

Even worse, the EU with ECB in tow, is now being subsumed politically by NATO, to the point of almost going to war to protect the Ukraine, somehow now ‘part of the EU’, the Russian speaking part at that.

This from the same people that two years ago, were on the point sending Greece and Cyprus (and Ireland) back to the stone age for daring not pay private bank creditors.

That Scotland would attempt to get into bed with a modern day European ‘Bonny Prince Schaeuble’ beggars belief.

Joseph Ryan,

What the extremely rich, criminal Cyprus wanted to do a year ago, is to renege on their ELA debt towards the poorer people of Europe. Not on any private stupid investors .

The criminal onslaught was rebuffed by 21/1/1.

john the obscure
If you believe there was a conspiracy then you should of course make a complaint to An Garda. Make a note of the pulse number and come back to us here. If you don’t…smoke, bottles of.

@Joseph Ryan

Please check your facts. The vast bulk of emigration that devastated the Celtic countries, destroyed their cultures and economies, and depopulated them, took place while part of the United Kingdom. Loyal apologists for the United Kingdom, like yourself, try to peddle the idea that emigration is a feature only of post-1922 Republic of Ireland and gloss over the far greater emigration that took place in pre-1922 Republic of Ireland, and in Northern Ireland and Scotland and to the present day.

There was net emigration of 9.5 million from Ireland and Scotland combined between 1841 and 2013 while part of the United Kingdom. That is, net emigration of 5.5 million from current Republic of Ireland between 1841 and 1922, 1.5 million from Northern Ireland between 1841 and 2013, and 2.5 million from Scotland between 1841 and 2013. That is why the English-speaking world is full of Irish societies, Scottish societies, Ulster-Scots societies, Burns clubs, AOH and Orange Order branches. No other parts of Europe have ever experienced emigration on the scale that Ireland and Scotland have while part of the United Kingdom.

Mass emigration and depopulation have been the hallmarks of Ireland and Scotland as parts of the United Kingdom. The only Celtic country to reverse this trend and to experience net immigration and high population growth over a prolonged period of time was Republic of Ireland post-1961. Between 1961 and 2013 the Republic of Ireland had net immigration of 200k and its population rose by 63 per cent. Between 1961 and 2013 Scotland had net emigration of 300k and its population rode by 2.8 per cent. Between 1961 and 2013 the population aged 20-39 of the Republic of Ireland rose by 113.5 per cent, that of Scotland by 2.7 per cent. As an occupied country, the population of the Republic of Ireland fell by 54.5 per cent between 1841 and 1922. As a free country, the population of the Republic of Ireland rose by 54.4 per cent between 1922 and 2013. As part of United Kingdom, the population of Scotland has barely risen for a century, while the Republic of Ireland’s has soared.. The population of Tyrone was 300k in 1841. Today, 172 years of continuous UK occupation later, its 160k. Ditto for Fermanagh, Derry and Armagh. The population of Republic of Ireland was 40 per cent that of England in 1841. In 1922 it was 8 per cent that of England. Some Union! The population of Scotland was 20 per cent that of England in 1841. Today its 10 per cent. Some Union. England’s share of UK population was 55 per cent in 1841. Today its 85 per cent. Some Union. Add on the destruction of the Gaelic, Gallic and Welsh languages under the Union. So, don’t come peddling the idea that the Celtic countries have benefitted from being part of the United Kingdom. The concept of the United Kingdom as a state and the concept of ‘Britishness’ as a nationality are frauds, devised for the economic and cultural domination, subjugation and exploitation of Ireland, Scotland and Wales by England. Please God tomorrow will be the beginning of the end of this abomination. This is not anti-English in any way. I look forward to England prospering alongside free Ireland, Scotland and Wales, but not ruling them.


‘England’s share of UK population was 55 per cent in 1841. Today its 85 per cent.”

Economic logic. You wouldn’t have been able to stop London growing.
You might as well moan about Paris taking all those Auvergne café owners, like it would make any difference.
But climate logic is going to be very different and that English population is going to have a lot of problems given the density.

@Sam Maguire

You aren’t grasping it. So, I’ll put it as simply and as logically as possible for you.

These are the facts:

(1) In 2009-2011, many economists, Morgan Kelly in particular, but others as well, made repeated wild hysterical doom-laden predictions about the future of the Irish economy. I quoted some from Morgan Kelly in my earlier post but, if you google, you can find hundreds of similar quotes from that time from him and others.

(2) Co-incident to this, there was a mass outflow of capital from Ireland to other countries, principally the UK.

(3) As a result of this capital outflow, bond interests rates in Ireland went through the roof, reaching 15pc at one point At the same time, because of the capital inflow from Ireland and other countries seeking a ‘safe haven’, and despite a very similar budget deficit, but a much worse balance-of-payments, the UK was able to borrow for next to nothing.

(4) Roll on to September 2014. The Morgan Kelly ‘doom scenario’ has totally and utterly collapsed. High growth has returned. Manufacturing output is soaring. The budget deficit is melting away faster than an ice cube in a hot bath. Unemployment is plummeting. Ireland can borrow for less than the UK. Tomorrow’s GDP figures will be the final nail in the coffin of Morgan Kelly’s and other doom economists’ reputations. After 11am tomorrow, they’re finished.

Do you disagree with any of these facts?

Now for the explanation of them – there exist two possibilities.

(a) Morgan Kelly and the others genuinely believed their own predictions and have got it all wrong simply because they are as thick as planks.

(b) Something more sinister.

I am happy to believe (a) if it makes you happier.


I have no idea of the population of Auvergne since 1841. Maybe some one here knows. But I’ll wager its not remotely similar to Tyrone, whose population in 2013 is half what it was in 1841. Ditto for the other occupied counties of Fermanagh, Derry and Armagh.


A bunch of economics teachers in Dublin were not the main, or anything like the main reason for capital flight, however much you don’t like them. Anyone running a mandate which was intolerant of default risk could park funds in UK gilts because everyone knew they had their own central bank which would print any money not otherwise available for coupon or principal repayments. That shored up the banks similarly. There would be no default and you had to be an idiot to buy a CDS on UK gilts.

The default risk was therefore exchangeable into currency depreciation risk – which fund trustees don’t freak out about as much. Because many bond and currency guys thought printing was a good idea in the circumstances anyway, even the depreciation risk was limited.

Ireland by contrast, was borrowing in what was effectively a foreign currency it couldn’t print and its ability to meet its liabilities was dependent on the whims of foreign bureaucrats and politicians.


Rural depopulation happened in Tyrone and in the Auvergne, as it happens.
Large swathes of rural France were emptied of most of their people as the economy began to require workers in the cities.
The notion that Throne is sui generis is nuts, with all due respect .


“Between 1846 and 1906 the urban population of France increased from 8,751,000 to 16,500,000. Meanwhile the rural population declined from 26,650,000 to 22,715,000”

Rural population in France is now 24% of total.


BTW that line of argument of yours comes across as Neo Dev.

@Joseph Ryan, Seafoid.

I just googled.

1841 population of Tyrone: 313,011 – 1841 population of Dublin 372,273

2011 population of Tyrone: 160,000 – 2011 population of Dublin 1,273,069

So, in 1841 Tyrone and Dublin had almost equal populations.

But, in 2011 Tyrone’s population was 1 / 8 th of Dublin’s.

When Tyrone won the All Ireland in 2003, it was watched by Tyrone-born people and people of Tyrone descent in bars in every city in the English-speaking world. The above figures show why.

Please tell me in what way Tyrone has benefitted from being under continuous United Kingdom rule for all that time? Show me another county in Europe (other than Irish counties under UK rule) that experienced depopulation on that scale .

Something similar happened in many parts of Scotland during the same period, but not as bad. Preserving the system that made that possible is what Alistair Quisling (or Lord Alistair Quisling as he soon will be) is fighting for tomorrow.


Scientists have discovered a super-massive black hole in the centre of M60-UCD1 – and despite being a small galaxy, the mass at its heart is equivalent to 21 million suns.

This new revelation suggests that huge black holes may be more common than we previously thought.

For those who don’t know, a black hole is a region in space where matter is so densely squeezed that not even light can escape its gravitational pull – for this reason it’s completely invisible to human eyes and needs space telescopes with special tools to be sought out.

“We don’t know of any other way you could make a black hole so big in an object this small,” said lead scientist Dr Anil Seth.



The rural population may have gone down and the urban population may have gone up, but that doesn’t mean the population of the region Auvergne will have gone down, since it will have contained both urban and rural areas. I will google and try to find out the population of Auvergne since 1841. I will post it here if I find it, although probably not tonight. I will be amazed if it hasn’t shown a large increase.

The loyalty to the United Kingdom on this site, even when confronted with the facts regarding its depopulation of Ireland post 1841, is very revealing. Reminiscent of the outpourings of Orange politicians at Stormont circa 1950. But, even they wouldn’t be so uncritical these days. The spirit of Conor Cruise O’Brien lives on.


You are dismissing them as a bunch of teachers. They were being quoted all over the world. Interviews with them were being shown all over the world. They were media celebrities. But, hey, I don’t want to speak too ill of the dead, which, in reputation terms, is what they will be just over 11 hours.


The population of Connaught was 552907 in 1926. In 2011 it was 542547.
Independence did not help Connaught much, or the Irish language.

I would like to see an independent Scotland, but is that the choice they have?

For me, in the current EU/EZ environment, their choice is a joint London/Edinburg way or Frankfurt’s way.
Unless of course, they intend to go it alone, like Iceland. If so more luck to them. The first thing they need to do would would be to re-nationalise the land of Scotland currently owned by about 2500 people and send these landed gentry homeward to tae think again.
I doubt they up for that kind of real independence.

John the obvious
Coincidence is neither correlation nor causation surely?
As I say, either you believe there’s a conspiracy in which cast your civic duty is to report it or you are a blowhole.
If it makes you happier I believe b…:)

@Joseph Ryan

Congratulations on opting for an independent Scotland. What policies they pursue after independence is for them to decide. I wouldn’t disagree with you about the landed gentry, but its their choice.

But, your comment about Connaught is absurd.

This is population of Connaught in various years.

1841: 1,418,859

1926: 552,907

2011: 542, 547

So, a decline of 866k in 85 years from 1841 to 1926 under UK occupation. A decline of 10k in 85 years from 1926 to 2011. I’d say that was a hell of an improvement. If Connaught had stayed in the UK, they wouldn’t have enough people to raise a rugby team now.

Obviously, when you have a social catastrophe on the scale of the population falling from 1,418,859 to 552,907 in 85 years, it will take time to turn it around. So, the population continued to fall, but at a greatly reduced rate, until 1961. It hit 419,465 in 1961. Then, the turnaround came and it increased to 542,547 in 201. The increase of 30 per cent in Connaught’s population between 1961 and 2011, much higher than UK or average EU population growth in the same period, would have been considered laughable if it had been forecast pre-independence.

@Sam Maguire, @UnfeasiblyCharming

Any one who thinks that having half-a-dozen of the most prominent economists screaming from the rooftops that the economy is about to go bust, that its finished, thats its ‘in the Hudson’, and having these broadcast and reported all over the world, that this doesn’t affect investors’ perceptions of where to put their money is extremely naive. However, today is their Waterloo, so I don’t wish to be too harsh.

So John the Onanistic, why not then make a complaint?
Also, you keep saying MK and others. Which others?
I call you a man with a personal animus against economists. Probably one stood you up for a date once…


Why do you not start your time series from 1169. in my view 1841 is an inflated base to start from.
I would also contend that the roller coaster ride of the Irish economy this century owes little to the witterings of economists (celeb or otherwise) It is all down to the conduct of policy at both the Irish and EZ level. If you want to blame someone-start with Bertie, move on to Biffo and haul in a Pomeranian House Frau, a Franco Hungarian midget and a cast of wooden headed German and Vichyist Central bankers.


“If you want to blame someone….”

But, it isn’t a matter of blame for economic failure. Because there hasn’t been economic failure. Ireland’s economic growth since independence has been phenomenal, almost certainly the highest in western Europe (although there isn’t much data for pre-1960s). Its certainly the highest in western Europe since then. Ireland’s GDP per capita went from 55pc of UK in 1922 to 130pc in 2014. What’s to blame in that? My criticism is not of the governments (whether FF or FG) but of economists with agendas who tried to destroy the country’s reputation and who have now been proved hopelessly totally uselessly wrong.

“1841 is an inflated base to start from”

No, it isn’t. Population growth 1801-1841 was broadly in line with rest of UK. The population collapse that came after was unique to Ireland. You are simply reflecting the John Bruton line that Ireland was a land of milk and honey while ruled by the UK, that the Easter Rising was a huge mistake, that Ireland should have stayed in the UK and been happy with any crumbs the UK offered (if it had, its population today would be under 2 million). Tragic if Scotland succumbs to UK blackmail and intimidation and votes ‘no’ today, but one positive spin-off would be that the men of 1916 would be totally vindicated and John Bruton (Ireland’s Sir Anthony Quisling) a laughing-stock.


1841 Tyrone: 313,011 –
Dublin 372,273
Bombay 50,000

Now Tyrone 160 K
Dublin 1.273 m
Bombay 15 m

You can say anything you want with stats!

What sort of GDP per head did Tyrone have in 1841? Spuds and what else ?
Peasant farming didn’t appeal to many people after petrol came along and they started to have choices.

What was the population of Tyrone in 1741? Why is 1841 so critical?

So now we have fully Godwinized this thread. John the Obsessive needs to take a breath and stop gibbering about whatever it is he is gibbbering about. Mods, please close the thread or spamcan posts (including any of mine) that are not germane to the original issue?


You obviously know nothing (literally nothing) about the history of rural Ireland, in particular of the northern counties.Typical of the Left In Ireland. No wonder they can’t get any votes outside Dublin 4. If you did, you would know that the depopulation of counties like Tyrone over the past century and a half of UK rule was due to land confiscation, starvation, evictions, rent racketeering by British landlords, burning-outs, discrimination, gerrymandering, military occupation, and the occasional massacre thrown in for good measure. That you find this all so funny tells us all we need to know about the Dublin 4 Left in Ireland.

@Sam Maguire

The hysterical, apocalyptic and heavily-publicised-worldwide claims by prominent economists about the imminent destruction and inevitable bankruptcy of the Irish economy are highly relevant to the thread topic which is: ‘What Drove Irish Bond Yields During the Crisis’. Not saying this was the only factor. But, you have to a fool to believe it wasn’t one of the factors.


Spoof away, baby

You have to look at the big picture. The 2 big islands in the neighbourhood can’t have 7 mega cities. Tyrone lost influence. I can show you similar stuff from Switzerland. Why did Lausanne grow at the expense of Moudon or Avenches ?

London became the local hub for the Irish islands and everything followed.


Personally, I think Tyrone will do better over the next century than London.


The reason for choosing 1841 is that Irish census, with detailed county-by-county information, start in 1841. Check CSO website.

Now that we see that the crisis was largely overblown it is right that the focus should move from the popular whipping boys of Bertie and Biffo to those publicity seeking econ celebs who nearly talked us into economic oblivion. And their genius colleagues in the US ratings agencies shouldn’t escape unscathed.


Typical British nationalism from you. The spiritual heir of Conor Cruise O’Brien.

Please God Scotland will put the boot in it today.

Show me similar stuff from Switzerland where 90 per cent of counties had population falls of over 50pc between 1841 and 1922. Go on, I dare you. Name one other country in Europe where the population fell between 1841 and 1922, let alone fell by 55 per cent. That you defend the indefensible in regard to UK depopulation of Ireland helps explain why the Dublin 4 Left are reviled in rural Ireland.


The Brits were worse in Finland, you know. North Karelia’s population was decimated by them over the 20th century. Northern Norway has similar issues.
Your focus on Norn Irn hides a very partitionist mentality.


I was not aligning my self with JB. I am very proud of the contribution of my relatives in the fight for Irish freedom. They fought (and died in 1 case) on the Irish side BTW. I have their medals to prove it.
I am simply pointing out that if you want to assess the record of English occupation, you have to go back to the starting point which is 1169. That is the point at which my ancestors arrived (from Wales). Cormac O Grada and Morgan Kelly will help you.
No self respecting historian or statistician would be satisfied with your methodology.


Congratulations on your family’s part in struggle for free Ireland. You should be proud.

Am busy with work just now, so haven’t time to further discuss population figures until later.

I made a bad mistake. In heat of moment, and probably affected by just having been looking at Irish Independent website, I erroneously called him Sir Anthony Quisling. His proper name is, of course, Sir Alistair Quisling. My apologies to him and you. (the ‘Sir’ won’t be long coming).


Figures just out.

Real GDP in Q2 was UP by 7.7 per cent y-o-y.

Real GNP in Q2 was UP by 9.0 per cent y-o-y.

Sensational figures.

Celtic Tiger is back (as predicted here by JTO in July).

This is economic equivalent of Brazil 1, Germany 7.

Ireland fastest-growing economy in developed world.

Well done, baldy Noonan.

Ireland growing at over twice UK rate (similar to 1964-2013 average).

Scotland can have same if it chooses.

Messrs Kelly, McCarthy et all made fools of.

No one will ever believe a thing they say again.

In the latter’s case, how ironic if his own demise occurred on the same day as the demise of his beloved United Kingdom (although less hopeful about that).

Any one who supports SAOR ALBA and is on twitter, please tweet figures.


I don’t want to continue the JtO bashing here but I note your reply to my post was not directed to me but to Seafoid hence my delay in coming back to you.

In any event you didn’t answer my point – which was – why given the golden opportunity of laying the boot into the RoI at the time of arguably our greatest recent economic need at the end of 2010 did London not simply tell Brian Cowen et al to piss off and get the cash elsewhere?

If there was every a chance of gaining a massive say in Irish affairs all over again then 2010 was the year in which the British could have acted. But they didn’t do that. London basically gave us a dig out. They didn’t have to. They could as you suggested above have allowed the English media go to town on us by creating a atmosphere of endless economic doom at the time. Again they didn’t do this. In my view they acted reasonably and were a willing lender at a time when we were in a bad economic place.

I support almost entirely your other arguments made over the years on the site about how well economically we compare as a country relative to our nearest neighbour. Indeed I too believe a Yes vote will be a massive boost for the long term growth and development of Scotland but I am utterly unconvinced of your thesis that London has had an agenda to rubbish Irish independence in advance of todays vote at every given opportunity.

The facts particularly surrounding our bailout simply do not support that argument.

As one of the co-authors I thought I’d follow up on some comments:


Thanks for detailed comments. Always good to get feedback.

1. You are obviously correct that the German bond can have explanatory power but the issue is one of characterisation. We could characterise the IE yield Ireland’s nominal 10year yield = Germany’s 10-year + credit risk premium + liquidity premium. In turn, Germany’s nominal 10-year yield = the sum of the expected overnight ECB rates for the next 10 years + a term premium. But it would then beg the question “what is driving these variables in the end?”. We skip characterising IE yields as DE + extras and seek to answer the second, more fundamental question about the credit and liquidity risk premia. That we explain the majority of the movements in the 10 yield without disaggregating the DE yield suggests we have a decent characterisation of the IE variable.

2. The analysis is constrained to just IE 10 year mainly for brevity and clarity. The piece is intended to be technical but also open to those without a financial/ economic background. On excluding other countries, the title of the piece clearly states its intention – we are not looking at other countries, just Ireland. De Grauwe et al covered other euro area countries in their paper, but our analysis could be extended. But banking variables will not be as important in other cases.

3. The reasoning behind lagging certain variables is sound. To not use lags would be to say market participants are able to incorporate information not yet on hand. This is not realistic – the data is released at a lag and market participants cannot use information they do not have.

4. It’s a fair point that a dummy variable for the introduction of the IMF programme is not included. In a preliminary model, we used a bailout dummy variable but it added little to the model. It would be fair to say that it is hard to distinguish between the IMF Programme and the realisation that another large re-capitalisation of the “Covered” banks was inevitable. The Programme simply forced that to happen as soon as possible. This effect would be captured by the ELA variable, which did not improve until well into the programme.

5. There is a pop in yields (spreads) in 2009 explained by the model . As for omitting CDS spreads, we decided to exclude a CDS variable because the Irish CDS market is very illiquid compared with the cash market so it may be unreliable for such an analysis. If we did include CDS though, it would again shift the question to “well what moved CDS spreads then?” and we would be using the same set of variables to explain CDS spreads. It is probably best then to attack the question we want to answer directly with the data we have to hand.


Sorry if I directed reply to wrong person.

There are numerous claims in Scotland that MI5 has been using dirty tricks to sabotage independence movement (see link below). Obviously, there is no absolute proof of these. If anyone had absolute proof, they’d not be long for this world. Whether you believe them depends more on your background. If you come from leafy suburbs of Dublin, they are probably difficult to believe. If you come from Northern Ireland, they are very difficult not to believe. Never said Cameron or Osborne took a decision to ‘black propaganda’ Ireland. These things don’t work like that. It works at a level below official government level. Numerous examples over years of MI5/right-wing-British-establishment-empire loyalist-Daily-Telegraph-type-nuts using lies, black propaganda, subterfuge, underhand methods and worse to achieve objectives. Look at Kincora, McGurk’s Bar bombing, Monaghan bombing in 1970s. Not saying officially sanctioned by Cameron or Osborne at all. This element of UK society is a law onto itself. Even been claimed in past to have plotted against their own government. Given the passion that they feel for keeping United Kingdom intact, and given their past record, it is not in the least difficult for me to believe they were involved in ‘black propaganda’ against Ireland at height of crisis, when the idea of Scottish secession was starting to loom large. “Ireland’s difficulty is England’s opportunity”, as someone once said in reverse. The English media (and Dublin 4 media) did indeed go to town at the time ‘creating an atmosphere of endless economic doom’ about Ireland. Google the media from back then. I never said (at least I don’t think so) that UK wanted to gain a massive say in Irish affairs again or to see Ireland collapse. They’ve long given up on that. But, what they did want was to discredit the idea of gaining independence from Ireland among the Scottish electorate by portraying Ireland as having already collapsed, and there were any number of economists and commentators at the time saying just that.


@ David Purdue,

you write a lot about what you just do, but with little justification by data.

You take just one time series out of many available, apply a model in stark deviation to what everybody else is doing,

and then go on to explain this one series with many, many input variables, expressed parameters, and hidden parameters, your unspecified time lags, reasonable or not.

We both know that the simple approximations of who (with what fraction of the underlying at stake) reacts with what time delays and strength are not just some simple linear function, and especially heavily dependent on factors you ignore.

In the past I tried to explain this “how much data vs how much vaiables to explain it” to people with some real world experience of “Design of experiment” Experiments, Results , and interpretation. Many people just see many of this as a distraction from their own specific thing, and get hung up, so we dont do this anymore.

A good fit has zero intellectual value, given the overkill of input values.

One offer I could make, is, since the input data seem to be hard to get, but not really confidential, that you put them somewhere, where I can take them, mash them up a little bit and sent it to your email.

And then you decide what you do with it.


Bit of irrational exuberance in that last post. The big picture remains fragile unless bond yields have reverted to pre lehman normal since lunchtime. I wouldn’t bury Kelly yet. The next stage of the crisis could get very dirty. The problem with the highest growth in christendom is that it means nobody else is doing well and that is not good for medium term prospects.

The new party Alternative for Germany to the right of the CDU and very much anti EZ is becoming a threat to the CDU. This means Angela Merkel must cater to the AFD in order to stop erosion of CDU members the AFD.

Here is the viewpoint from the wrong side of the tracks.


First one on the PDF list beginning with Bilderberg.

Bilderbergers, lies and moribund media – Germany needs a Alternative. Via the AfD you think what you like, the fact is one, according to the state elections in Brandenburg and Thuringia is more than obvious that more and more people after looking for an alternative for Germany. (Here for the latest episode of SchrangTV to this Theme: https://www.youtube.com/watch?v=PyV5JwdGXgE) Only the few people are aware that German policy by the bureaucrats in Brussels is made. The chief Jean-Claude Juncker is now, the newly appointed EU Commission. He plans to major restructuring of the European Commission since its Foundation. Away from the bureaucracy, down to the government of Europe. What can we thereof expect? Juncker had already in 1999 outlined in great detail how, in his view, the EU Policy vonstattengeht: “We decide on something, make it into the room and wait a while to see what happened. If there will be no great cry and no uprisings, because most do not comprehend what has been decided, we continue step by step until there is no turning back. ” In other words, we are therefore still hoodwinked, for discomfort of the people and for the benefit of elites, where lies are part of everyday business, such as Juncker even 2011 said: “When the going gets tough you have to lie”. And these elites met again at this year’s Bilderberg meeting in Copenhagen / Denmark. Many know nothing of the mysterious Bilderberg (On the detail in the book: “The lie of the century, the only known insider” written was), although it is they who pull the strings of the political puppets. Most citizens think that really hit the G-8 meeting, world leaders and high Importance. The situation is different at the Bilderberg meeting, where between 100 and 150 Guests, including government, high finance in Western Europe, the USA and Canada and leading industrialists, the royal and princely houses and even the media with the Editors and owners of publishing houses, are represented. Again here, the Permanent resident ex-German Bank Chief Ackermann and Springer-chief Dopfner. G-8 meeting However, compared to the Bilderberg meetings as a backyard Stammtisch- Event. Though the most influential media in the world when Bilderberger- Meetings are present, none of this will reported in the media. At this year’s meeting of the Bilderberg Group, a major theme Putin will have been. He has become a huge threat to the United States because it is their given economic dogma escapes. Furthermore, Putin is planning to establish a alternative world order to the BRICS countries around – a “multi-polar” system, the destroy the dollar as the world reserve currency and the current US-EU-NATO Power axis would significantly dilute. Another topic will have been, the massive crisis of credibility in the Western media are. Is also in Germany the media landscape in its most severe crisis. Always more people turn away. The print media sales break for years one, only that it is not officially reported. As were, for example, the last 10 Years, about one billion fewer newspapers and magazines sold. It is not only Personal degraded in the mainstream media, but all editors make tight. 2012 was, for example, the Frankfurter Rundschau in bankruptcy, the Financial Times Germany is now history.
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If you look in the comment column when “Spiegel online”, recognizes massive headwind the reader. Just as all other Western mainstream media currently issued: The Readers, viewers are running away in droves. They are found in the propaganda reports not again. Lying structure built over decades apart. Especially the example of the Ukraine-Russia-reporting the media lies are currently increasingly apparent. Since it is fully up to date “the Russians” assumes a biological warfare, with Ebola viruses. In “World Online” is the title of an article on August 21, literally: “Russia has made ​​Ebola weapon.” And “Spiegel Online” reported that Ukrainian troops had attacked the Russian convoy crashed the stock exchanges. This disgraceful scaremongering turned shortly afterwards as a hoax out. The propaganda war continues to run at full speed and with a mental Mobilization comparable. As evidence of a Russian tank invasion of the Ukraine grab the media, under them the ARD on an image from 2008 of a military maneuver from the Caucasus back, which will serve as proof of the invasion. Only after massive Protests the image was removed. The image has become another career move behind him and is now also foreign newspapers in a way for lies and warmongering against Russia abused, which is itself the WDR in the shade. The dpa Picture Service has the photo in its database with a unique caption provided: It is August 19, 2008 near the Georgian town of Gori been included. For his 90th birthday, the journalist Peter Scholl-Latour glanced at his life and also to the crisis in Ukraine and stated: We live in an age of Mass dementia, particularly the media. In this day and age, it is particularly important that you this knowledge with friends and Acquaintances shares. Only together we reach the goal. And always remember, “Who swimming against the flow entering the source. ” Best Regards Heiko Schrang

Further comments on the paper:

1. this is the very first non-annual-report paper of the NTMA ever, right? Non peer reviewed, as it seems.

2. references

7, out of which
1 Unpublished,
1 mimeo,
2 non-peer-reviewed CEPS DeGrauwe, to which I assign significantly negative value
1 correctly cited Eaton et al. from 30 years ago
1 Shiller 1981, well, one of the “20 most famous AERs”, but incorrectly cited, with very little relevance to the paper here, or even contradicting in that markets are not following nitty witty details of fundamentals like ELA, Debt /GDP
1 ECB working paper, I will comment later on, to say it mildly

Maybe as a comparison, not just for referencing
Alain Monfort†and Jean-Paul Renne‡ “Decomposing euro-area sovereign spreads: credit and liquidity risks∗”

3. data analysis

I had that actually on my list of one day to do, re-analyzing the various time-series of bonds of various durations, CDS, political announcements etc.

A. Before 2008 all Euro countries were treated as AAA, most of them weren’t, we know now, with the 50 basispoints off until 2005 not explained by your model. Ireland was 3 times AAA in 2002,, Portugal AA-, but all degraded from 2004 on. –that did not just start in 2007

B. how the interest rate spreads / CDS rates of the 3 IMF cases developed in the phase 2009 – 2012, looks to me in hindsight pretty much correlated to how these countries responded to their IF programs. From endless dishonesty and treachery in Greece, over somewhat mixed in Portugal (e.g. 40 hours per week fought over even in 2013/2014), to Ireland fulfilling the IMF plan exactly
From Summer 2011 on, Germany was the only safe haven left, with 10-year rates below 1% in 2012, with even France and Austria having spreads > 50 pb.

What political decisions, treaty signings, public uttering, supreme court decisions on what day then turned one interest rate a little earlier or later, or the whole risk pandemonium, we can endlessly debate, without anybody having any proof, that convinces the other side.

C. After “within our means, whatever it takes”, ESM signings, “strictly conditional” to French and Dutch interest rates were peaking in the week of the all important Bundesverfassungsgericht decision on the 9th of September 2012

All Euro interest rates I am looking on here (Germany France Italy Spain Netherlands Portugal Greece Ireland)

follow a very simple model,

a) country rate = base rate + liquidity premium + greekness times (risk rate – base rate)

b) Germany as the base rate, and Greek as the proxy for the risk rate

c) for the safe countries France and Dutch there is a liquidity premium of 57 and 29 bp.

d) Ireland is 24% “greekness”, Portugal 54%, Spain 32%

e) and for Italy only two parameters unequal 0, a base premium 0f 124 pb and 14% Greek,

and without any further knowledge of debt, ELA, stupid decisions, GARCH procedures, hidden lag parameters, whatever, I describe and predict 8 country rates and get correlations of >0.95 for everybody, and 0.985 for Ireland

Now, what model would you follow, if you have to buy and sell, this one as first order, or the NTMA paper?

4. Summary

The NTMA data explains very little data (just one country time series) with many inputs, often not publicly available, or plain undisclosed, in a semi sufficient way (R^2 = 0.87 not good for so many variables) and with a technical bombast.

The much larger amount of publicly available data (8 countries) can be explained much better (Correlation =0.98) with an extremely simple model, suggesting that the investor crowd goes much more by the general behavior of problem countries and not by unavailable details.

@ francis

And with a concluding explanation which even I, with zero knowledge of the mathematics involved, can understand.

My own non-technical conclusion is that (i) Ireland is but a minnow among the financial fish involved and (ii) there is little likelihood of it being possible to draw much enlightenment from the country’s experience.

Meanwhile, Draghi soldiers on; without much success! Germany’s QE moment seems to be emerging above the horizon.


I spend a little more time with the 3 papers

the NTMA, the ECB, and the unspeakable DeGrauwe.

And without going into technical musings, probably nobody here would understand,

today only the short version:

All assignments of OMT effects are fake

All papers carefully avoid to adress the legal reality:

there was not one cent OMT done

if OMT would be legal at all, it is “strictly conditional” on an existing ESM Program, as by Bundesverfassungsgericht and ECJ Pringle case

The Word ESM is carefully avoided in all 3 papers. Guess why : – )

There is only one big and lasting jump in the rate data,



then rates stayed stable until Germany’s ratification of the ESM on 27 September 2012

after the Bundesverfassungsgericht judged the legality with several conditions,
see Germany in wiki/Treaty_Establishing_the_European_Stability_Mechanism

and only after that, interest rates started to come down systematically

because the law was upheld, and treaties not broken, as it would be very clearly the case with unconditional OMT

Black humour has broken out in Greece as a result of Angela Merkel and Antonis Samaris Greek PM statements.

“We are told to get off our sick bed while still under sedation so as we can semi consciously enter the open money markets naked.”.

” We are forced to exit intensive care and step into the coffin to go directly to the cemetery.”

Ireland’s exit should be interpreted similarly and not as a triumphant early exit for political reasons. The open market is a cruel and capricious master that does not feel obliged to respect short sighted and opportunist decision making.

The 4% budget deficit is all well and good except that in a stagnant EZ wide economy with zero growth and matching inflation there is no safety buffer. Some day all the prayers to St Brigid and St Patrick will be rewarded and by immaculate intervention our gov’t will gain the ability to plan 3 years ahead. We are beyond economics into the realm where only divine intervention will save us.


you seem to quote somebody. Could you tell us who that might be ?

Because the facts are pretty much the opposite



“Athens has insisted it will not need a third loan program but sources in Brussels note this can only be guaranteed if Greece secures the trust of the markets and that in order to do this it must press forward with reforms.”

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