Ultra posse nemo obligatur, anyone?

Paul Mason has a blog post and interview here, worth reading and watching. I am going to stick my neck out and assert that Manolis Glezos does in fact speak with a certain moral authority. But it is the German deputy finance minister’s constant insistence on obeying the law that prompts this post, along with its title. For German government use of the principle in the economic domain, see here (p. 188).

240 replies on “Ultra posse nemo obligatur, anyone?”

Banks open “ad infinitem” as per Varoufakis?

The timing put to the Greeks was clearly no accident. They must know it. My guess is that the texts exchanged during the weekend have given rise to an understanding and that the delay in submitting the list of measures is simply another exercise in bravado by a government of both political and financial amateurs.

From their European opponents’ point of view, the political imperative is obvious; the Greek electorate needs the time to grasp the perilous point to which Syriza has brought them. They have a few more weeks to do so. If their banks can stay open that long!


Your sneering contempt is fooling no one. These guys have put the fear into you or your employer or both. That tells me they must be doing something right.

See Michael Taft’s recent analysis, which is right on the money.

Re: New age diplomatic methods

What one has to remember, is that the only value that Greece now has, to northern Europe, is to keep it barely alive, so that it serves as the cautionary tale, to electorates and governments in places such as Ireland, in case they get too confident, and ask for too many questions about why they had to bail out so many creditors, . . . and it might lead back, to creditor institutions, in a lot of northern European states.

All that the northern states in Europe appear to be doing now, is selling their ‘protection’, to whomever is willing to pay, and to have ‘exhibit A’, as some busted southern European former democratic state, to reinforce that bargain, is the only purpose that Greece as a nation, serves for the northern Europeans, any longer. Here in Ireland, members of the past government between 2007 and 2011, when the crisis in banking and finance, in Cyprus occurred, they said look at what happened in Cyprus.

Our politicians voices, somewhere, stopped being the voices of the Irish people, and instead became the voice of a new kind of European economic diplomacy. What needs to cease all over Europe, very soon I expect, is that individual member states, need to stop referred to austerity, or financial crises in worst affected parts of Europe, . . . and using that as propaganda, as the poster child images, the health warnings, . . . which need to be heeded by everyone.

Whenever a political figure, here in Ireland now, do wish to ‘win’ some political argument of their own here in Ireland, what they tend to reach for first, is an opportunity, to serve out some rough justice, to some poor southern European member state. It is like when the parent spanks one bad kid, and then wags a finger at all the rest.

What it is really, is it is a new 21st century form of diplomacy, which ‘straddles’ itself upon the 24 hour news cycle. It is a combination of something very old, and very new. On the one had, there is a ‘medieval’ aspect to it, like the heads on spikes and stuff, that used to appear around fortified city states. And on the other, because the ‘head on spike’ image, is broadcast-able, across such vast distances now, . . . there is a modern, twist to all of it.

Back in the so-called thirteen days, and the Cuban missile crisis, which averted a full scale nuclear conflict (where leaders on both sides, of that diplomatic near melt-down lost effective control of their military chain of command), it was argued that what prevented the conflict occurring, was a brand new, international diplomatic language. It involved a lot of communication, signalling and so forth, with ‘language’, becoming a part of that event too, . . . what is a blockade, using battle ships in the Atlantic ocean, and so on.

At one point, a man called McNamara proclaimed, there will be no more firing of anything. The signals were beginning to get scrambled, in this attempt to ‘communicate’, across oceans and continents, between do very different political and administration systems. And yeah, I’m sure there was even some game theory involved, somewhere.

But what we’re attempting to engage in nowadays, in 2015, in Europe are sort of economic battleships, with what are called ‘the markets’, providing the Atlantic ocean, upon which numerous middle aged, or very old European state heads of finance, want to practice this new aged diplomatic language upon.

The communication system works, whereby the politicians who is present in the European member state, ‘reads’, what is going on, in the oceans of European economic war diplomacy, depending upon who is getting blockaded, or who is getting beaten up, . . . and our local member state minister then, speaks on local radio or television then, . . . to the local population of the member state, and tells us, how we should interpret, or not interpret this latest round of ‘missile’ firing, or threat to fire missiles, or press buttons and so forth.

So we all then, get scared in our respective member states, and run underneath our beds, and scare blankly out from our darkness, and pray, that what happened to whomever, won’t happen to us. So we’re effective, and by a long, round-about fashion, back to the head upon a spike, signalling again, that goes way, way back in European history. Way back.

But it’s just all been amp-ed up to the present day, and social media-ified, for our benefits, so that the experience feels, modern. But in large measure, it is the work of bureaucrats who like to govern, in large measure, by scaring the people, into a submission. And that’s a danger game too, as a lot of monarchs, in a local of medieval city states, discovered back in their times. Or course, the elephant in the room, still after six years, is this believe in the idea, that if some obnoxious bank, somewhere in France, or somewhere in Germany, would go to the wall, because of something Greece did, or didn’t do, . . . that it would trigger the Lehmans effect, and the end of the world would happen.

Maybe, what we do need to do in Europe, is to find out what these dodgy banks or institutions are, are force them to topple over, and have systems there, in place, for when they do. Instead of engaging in all this absolute nonsense. BOH.

I saw that interview. Well done, Paul Mason.

Although one got the impression that the deputy Finance Minister was not entirely comfortable with the policy he was espousing.

According to AEP (Guardian blog, the Greek proposals were given to Declan Costello (EC Commission ) at midday. The blog also has what can only be described as a plea from Legarde to ease up on Greece ( at approx 5.00 pm).
The Greek cabinet meets in the morning. The Eurozone ‘phone call’ tomorrow pm.
After the Greek cabinet meeting they can either stand up and sing
‘Hymn to Liberty’ or stand up and sing ‘Deutschland Uber Alles’.

I hope Manolis Glezos does swing the argument. It will be a real irony if he does. That it finally took a 92 year old veteran of WW2 to make a stand against aggression in 2015.

According to the twitter machine via the Guardian live feed it is the bravado of the establishment according to Yanis Varoufakis.

“3h ago, 19:09 – PS….. Greek finance minister Yanis Varoufakis has just told CNN that Athens can’t be blamed for the delay:

— Siegfried Muresan (@SMuresan)
February 23, 2015
#Varoufakis tells live on #CNN that GR delivered reform letter today & it was Eurozone finance ministers who asked delay. #Greece #Eurogroup”


@Kevin O’Rourke

Mad Oul Jozie down_the_road is impressed. As a neu fan of Brehon Law, the principle of ‘eric’ related to compensation for injustice [as in her case to the ECJ re ECB bullying] she is now looking for a copy of Justinian’s Digesto as she seeks further legal arms from Roman Law.

She has also been in touch with Fratzscher in Berlin – a German Pragmatist Political Economist a million miles from the antics of Sinn.

Moral: Greece cannot pay unsustainable debt.


Yes – you poor dear – democracy can be such a bitch! A threat to ur ideal elitist ordoliberal dictatorship? Your ‘political imperative’ suggests that democracy is to be simply ignored; the cultish doctrine is all.

Your guess is essentially worthless; ordoliberals do not DO empirics.


From P. 188
‘US experience suggests that major institutional reforms tend to follow major political and economic crises, such as the Civil War, the Panic of 1907, and the Great Depression. […]

In 1978, Chancellor Helmut Schmidt, seeking to reassure a Bundesbank nervous that the proposed “European Monetary System” would not pose excessive demands on Germany, quoted a Latin legal phrase, “Clausula rebus sic stantibus. . . . Ultra posse nemo obligatur.” This roughly translates as “ a fundamental change of circumstances could make a treaty inapplicable . . . . no one [country] is obligated to do more than they can do.”

A number of countries across Europe may eventually ask themselves if fundamental circumstances have changed in a way that renders their previous commitment to the eurozone inapplicable.’ O’Rourke & Taylor, 2013, p. 188


I don’t deny the accuracy of the graphs on p.175. The isolation of the 2008-12 period, and any conclusions drawn from it, is running the risk of being specious, however. It tells us where various economies were when the Gates of Hell opened; it tells us nothing as to how they arrived there.

None of which, btw, should be implied as agreeing with any aspect of the official, or Bild, weltanschauung. The establishment German view of the Eurozone is, at best, strange. H-W Sinn is more typical than most would wish.

“They have a few more weeks to do so. If their banks can stay open that long!”

That’s really hilarious, DOCM. Imagine you’re a bond quant and you are trading EZ bonds . What data will you use for your strategy so you don’t blow your money up in the case the EZ market has another politically induced meltdown ? Maybe some German Mr Bean videos ?

@ Ernie

Sneering contempt is what it is, exactly.
I read elsewhere recently that “‘regimes often are at their most ruthless on the eve of their collapse.”

Did you ever watch the Sophie Scholl film ?


Freisler was the judge. He was killed by an American bomb in 1945

I would suggest to those advancing what Varoufakis said on the reason for the delay as a definitive statement of what happened consider the fact that what was at issue was not a grocery shopping list but a document designed to start the major task of the recovery of trust between the two sides and which, had it not proved acceptable, would have given rise to major problems this morning. The idea that there have not been intense contacts over the weekend, and dispute over the content, is IMHO not credible. Jockeying for advantage right up until the last minute was to be expected.

Of course, others are free to have a different view.


The two sides did not IMHO strike a deal on Friday. They agreed a process to allow an acceptable arrangement to be struck. Insofar as there has been movement, practically all the substantive movement has been by the Greek side, a fact that is to be welcomed as it is in the interest of the Greek people.

I must admit the term “comprador bourgeoisie” is new to me; what we are wont to call shoneens. It’s sad how so many Irish europhiles have degenerated into something similar.

“Syriza programme, post-deal, looks far more like traditional social democracy than a radical left package.” That’s Duncan Weldon’s summary on Twitter and, if it turns out to be right, then kudos to the Greeks. That’s the makings of a good start for Syriza.

Suzanne Lynch has an excellent piece in this morning’s IT.


YF does nothing to improve his chances of being accepted into the club of his colleagues as an “interlocuteur valable”. They do not deal in “constructive ambiguity”.

The action now moves to the Bundestag.

Simon Nix on of the WSJ also had an item which is supported by the facts. Those of an opposing view might helpfully add a few to their arguments rather than indulge in questioning the bona fides of those that do not agree with them.


On exceeding ‘the obligator’

‘[T]he figures show [that Greece has] in fact achieved more than any other country under all the cherished troika headings, despite losing more GDP than Germany after the First World War.

Greece had the fastest fiscal consolidation at 4.4% of GDP compared to Ireland’s 1.3%; was the most responsive to growth recommendations in the OECD, with Ireland third; and had lowered labour costs to restore competitiveness more than the EU average and Ireland.

Its government revenue as a a percentage of GDP was higher than Ireland’s in 2012, according to the IMF, while it was now easier to fire workers in Greece than in Germany— though still easiest in Ireland.

There are accusations that €226.7bn has been wasted by the Athens government but the figures show that just 11% of it has gone to cover the costs of running the state and covering the primary deficit — which it has now eliminated.

The single biggest slice, €81.3bn, has been used to pay maturing debt, 19% or €48.2bn has been used to recapitalise Greek banks, while 16% or €40.6bn, has been spent on interest repayments.

But the required engine of growth — exports and present in Ireland’s case —was not part of the Greek economy. And Greece allowed the troika to undermine this area by agreeing to push up taxes on energy for instance. The IMF, in a recent report, acknowledged that mistakes were made and that cutting wages was one of them.’


Neat finesse by the German/French to filter their dodgy bank loans to Greece via the Eurosystem and onto the lumpen EZ citizenry with a ZERO cut. German Banking System still, imho, dodgy – and the Derivatives Death Star over Frankfurt hasn’t gone away you know! And Angela had to over-rule her finance minister – losing both poor dears some ‘credibility’!

From a quick look at the Varoufakis letter it seems to me that:
• the list of individual commitments looks very like what ought to have been in pre-existing agreements with the Troika. If not, then the previous agreements must have been very vague. We need an item-by item checklist.
• There will be a need make some estimates very quickly of the actual money amounts implied by various individual commitments in the letter. Otherwise it night be regarded as all smoke and mirrors.
• If they actually succeed in getting large sums from tackling tobacco and fuel fraud and smuggling, maybe our Revenue and Garda could hire in some Greek consultancy services. (Which just says how sceptical I am on this one).


Nothing from the Daily Mail today? Or Brendan Keenan – Morgan Kelly’s opposition just before our banks collapsed?

There were strategic errors made by Tspiras and Varoufakis at the outset. They naively assumed that pulling the plug on extend and pretend would work and that the rest of Europe actually cares about the suffering of the Greeks. It is a defeat and there is no way to put lipstick on this pig. They are also on a very short leash and this drama will go on and on. If I were in their place I would do the following in order:
1. Reform the tax system, going after the Swiss money and the oligarchs. If they can get even half of the 76 billion said to be outstanding tax they have a buffer at the next food fight.
2. Learn how to work the system. Find out who their friends are in the EU and how far they would go. Also develop administrative competence and gain the confidence and support of their civil servants.

3. Strongly encourage Greeks to stop buying German products. The common market means they cannot really impose a tax on BMWs but they can suggest to the Greek people to not buy these products. And anti-German sentiment is pretty high right now in Greece. Sign no more deals for French and German military hardware and use the money saved to alleviate the humanitarian crisis. Hit them where it hurts.

4. Prepare for a Greek exit from the Euro. They need to have a plan in place if they are to make credible .

Sorry WordPress seems to be acting up and giving me errors. There is something in my post it doesn’t like.

They need to have a plan in place if they are to make credible threats. . Remember they’ve only been in power for four weeks and much of that time has been spent negotiating. His mistake was to assume this wasn’t a game and game theory does not apply. But it does and if the Germans are playing like that he has no option but to come ready for the game at some point in the future. Maybe 4 months, maybe a year down the line. Also it would help the Greek case if the next standoff occurs when the markets are a bit less complacent and suffering another round of their periodic disturbances.
PS: The name calling by some blog commenters of those who oppose their stance is rather juvenile.

“Strongly encourage Greeks to stop buying German products.”

That would be the dumbest thing ever. Not even Syriaz would be that stupid.

Here’s why:


But, in the unlikely event of the Greeks following this crazy advice, Bord Failte should have a plan to attract as many as possible of the 2 million plus Germans who will be looking for an alternative destination for their holidays.

Re: Game theory aspect

The important thing, is not to over complicated, game theory. The chances are, that one’s grand mother exercises a lot of the theory, every time they decided to go and shop in one store, versus another. In fact, the older generations learned stuff like naturally. They had to, to survive.

They naturally exercised many of these muscles – academics forgot how, and had to invent a fancy name for it – before they could allow themselves, to embrace it again.

As we moved into the modern academic age however, and we ended up with ‘systems’, or ways of doing stuff, that worked off of a theory that was close to the mechanical universe, or the way that the human body functions, as in the idea of medicine, our most clever people discovered that their techniques omitted important facets, such as an ability to gamble.

Game theory, in short depends upon ones ability to choose the game, to begin with, not to mind, what happens after that. If you are able to choose the game, you are also able to choose in advance, what some of the likely outcomes might be. After that, you can even go off and read a book, or go to sleep. Get some one to wake you up, when you’re all done.

I.e. It’s the idea, that instead of our being constantly there, to manage and maintain something (as in the idea of a system operative, that it is more hands off, and less direct. Like I mentioned, the older generations operated in their lives and society, in such a way, that it incorporated all of this. And as we moved into an age, that was more to do with science, and systems, we had to discover a way, to re-integrate some features back in.

The best example, by a long shot, of game theory, that you will discover in modern Irish economic history for example, is the one where the debate, about the Irish banking crisis, . . . was framed as a certain kind of game, in advance, . . . participants, without even knowing it, were instructed in the rules of the particular game, as conceived, . . . and guess what, half the intelligent population on the island of Ireland, ended up getting sucked in to, that game that was pre-laid out for them.

The game was: were Irish banking institutions, insolvent, or were they il-liquid, when the ‘crisis’ occurred.

By defining the whole game, in that respect, most of the brightest, of the economics profession in Ireland, all got sucked into playing a game, that essentially guaranteed, they could never even get close to discovering any decent insights.

The thing with game theory, which is important, is probably best described, using a term like counter-game theory. That is, realizing that you are wandering around inside of the restricted maze, that has been provided for you, which effectively restricts your effective intelligence (as opposed to potential intelligence), below a much lower ceiling than in should have.

The post-banking crash, public debate here in Ireland, is a classic example of just that.

Another example, which is provided to us, by an economics history, named Kevin O’ Rourke, . . . is as follows. In relation to the ‘gold standard’, Kevin reminds us in one of his talks, that back at the turn of the 19th and 20th centuries, . . . most really bright, sophisticated, intelligent economists, would have viewed, the ‘gold standard’, as the best standard to work with, to manage global trade etc. Kevin goes into a little more detail, in how some of the better things about the gold standard, got thrown out, when they finally decided (each country, at different times), to abandon the gold standard, during the 1930’s period.

In fact, Ireland was one of the earliest to do so, as it turned out.

But what professor O’ Rourke reminds us, is that John Maynard Keynes was one of the only ones at the time, to reject the notion that a gold standard was the future. But as he explains, Keynes was able to see a few more angles, than the average bear, at that time.

In regards, to this European debt crisis at the moment, the game theory, aspect to it, isn’t activated by staying in, or leaving the euro, European monetary union.

The game theory is activated, when a small nation such as Greece, begins to do what politicians in places such as Great Britain are doing, at the moment. That is, members of the British house of parliament are inviting folk, from different currency areas entirely, in to their living room, and telling them, we’d like to do business, with you.

You’re essentially returned back to the grand mother and the grocery bag again. But the trick is, to see an overview. Know when one has defined the game, or where the game, has been defined for you.

Game theory, is such an excellent complement to economics study, because without it, economists, constantly find themselves upside down, at the bottom of all the same kinds of bear traps. Always. It’s almost freaky. BOH.

@ John Sheehan

There is no shortage of information, especially in relation to the IMF.


@ All

For the record, attacking the policies of Syriza cannot legitimately be presented as bashing the Greek people. In fact, it can be argued that it is a defence of their interests. Also for the record, presenting the problems that Greece faces in terms of the standard narrative between left and right does not stand up to even cursory examination. The alliance that makes up the new Greek government is, in itself, a demonstration of this.

Greece may get the visitors, but even the money the tourists bring in is being siphoned. Guess by whom.

The Fraport deal, will now go through, as one of the privatisations that must not be reversed. [IMHO, that deal was a deal-breaker in the negotiations.]
A forty year lease to manage the airports!!!
The creditors want the money back, but they also want to to keep extracting money from the most viable industry Greece has.

As for Dijjsselbloem’s ‘trust’, he was so willing to start the process of building trust, that he wants to take back control of the ‘bank’ contingency fund. Now there is trust building for you.
I hope the Greeks did not concede that.

What strikes me about the Syriza letter is that it’s a very ambitious programme for a 4 month period.

@ Garo

“Sign no more deals for French and German military hardware and use the money saved to alleviate the humanitarian crisis”

Unfortunately it appears there is little money save in this area as Greek spending on military equipment fell substantially during the Troika period.
The defence budget is down 46% from 2010, and equipment spending is down 67 percent.


The size of the Greek army also appears to have contracted from 124,000 to 70-90,000 today. That’s now about 6-8 soldiers per 1000 population, compared to 1.6 soldiers per 1000 population in Ireland.

@ JR

They did indeed “concede” it. The funds had been sitting idle for a while and Syriza’s pre-election manifesto proposed using them for public spending. Germany requested that they be taken back as no longer needed for their intended purpose. Persumably if Syriza had spent the funds, the amount would have been added to Greece’s public debt. Of course if Greece defaults on the whole lot in the end anyway, that wouldn’t matter (to the Greeks!)

They can force Greece to comply but it just means the crisis will be back in a different form in another while.
Without growth the EZ is finished.
Greece is just the most extreme example.

France and Italy are supposed to reform while in depression. Savage intergenerational struggles over access to resources are de rigueur

“There is a generational split in Italian society where workers over 50 have significant salaries and benefits but those under 25 find it hard to get any job. Italy’s unemployment rate stands at 12.6 per cent, with 43.3 per cent of those under 25 without a job. The divide is reflected in union support. Italy’s union members tend to be older workers while unions are losing support among the young.”

Italy is just a few years behind Greece on the curve.
The UK isn’t much different either. Young people are being hammered while Government pension spending is protected.

And the holy bond market is oblivious to deflation. Thinking a limited QE programme will generate growth. The whole thing is incoherent.

@ DOCM: “For the record, attacking the policies of Syriza cannot legitimately be presented as bashing the Greek people. In fact, it can be argued that it is a defence of their interests”

Mr Orwell would be proud of you! Been reading Edward Bernays have we?

“Also for the record, presenting the problems that Greece faces in terms of the standard narrative between left and right does not stand up to even cursory examination.”

Well, at least you got this bit correct.

Oh, you mean – “The alliance that makes up the current Irish government is, in itself, a demonstration of this.” Well, well.

Meanwhile in the real world, Irish emplyment rises by 30k y/y with 21k jobs added in H2 v 6k added in H1.
Of course, this is all fake and we are doomed anyway. The real rate of UNN is over 20% not 10% or so we are told, Austerity has failed in Ireland …to destroy the economy.

Meanwhile Tull over in Shangri La Ms Yellen has admitted that wage growth is not strong enough to justify interest rate increases.
So those equity prices look very ambitious
And 1% bond yields- how much risk is priced in at that level?

@ Tull

stop drinking the kool aid. Its the rampant emigration that is causing that spike in employment figures. And Jobbridge. And temporary minimum wage water meter installation jobs from the Oligarch Dinny.

Democracy’s last stand

“Let us not dictate,
yet in strong terms state,
you must reduce our rent”
Nien! scowled Schuable
“there’ll be no wobble,
you’ll recompense to the cent”

It was thus began
the heroic last stand
of democracy from its cradle
Brought its joker face
and its Rock Star grace,
it would shed its “David” label

It had games to play
and there were cards to lay
and kindred allies to exhume,
They had Right on their side
and the Left too astride,
‘y’ the Spanish one would assume

There was the Portuguese
and could possibly tease,
the Italians from their gloom
But if all else fails
then surely the Gaels,
would herald resilience from their doom

“So do your worst!
well not quite your worst,
your form we fear and respect
But did not debt relief
deliver you lot from grief?
So make time on the past to reflect

Cause if you stay hell bent
On one seven five per cent
We’ll take the euro to its knees
With masstricht in the gravel
The troika will unravel
So ask nicely now ‘pretty please’”

“Hmm, I think I’ll call your bluff
Because we have had enough”
Decried Schauble with a frown
“You see solidarity’s long dead,
been chopped from Masstrichts head
und There’s a new sheriff in town

And as for your friends
They can’t make amends
For fear is a powerful thing
Because within our loop
we’ve the eurogroup
Oh the fear elections can spring!

But I’ll tell you what
I’ll give you a cut
At drafting text with less of a sting
Get your finance celebs
To appease the plebs
In saying words ain’t what they seem

Then get back in your place
And show the good grace
To leave ‘My Struggle’ a relic forgot
Righteous indignation
Can’t trump or chasten
This self righteous juggernaut

@ Ernie Ball

Poor Michael Taft. I remember on this blog commenting that it was ironic that Michael and I were both wishing for a shinner victory in Greece. Michael wanted it because he envisaged a domino of shinner victories culminating in the original of the species here in Ireland becoming the “first progressive government in the history of the State”. I wanted it because it would make clear to Daft followers that shinners hold a busted flush.

I hasten to admit that I am not always right.

@ Ernie Ball

Poor Michael Taft. I remember on this blog commenting that it was ironic that Michael and I were both wishing for a shinner victory in Greece. Michael wanted it because he envisaged a domino of shinner victories culminating in the original of the species here in Ireland becoming the “first progressive government in the history of the State”. I wanted it because it would make clear to Daft followers that shinners hold a busted flush.

I hasten to admit that I am not always right.

Economy is too strong for current to be re-elected. Country will vote for a Irish version of Syrizia – coalition of Shinners & Lord Ross. That will not end well.


Again, just for the record, I admit to a decided antipathy for extremes; of the left or the right. The only thing they seem to have in common is intolerance of the views of others. Coalitions between centre-left and centre-right parties, on the other hand, are far from unusual e.g. apart from Ireland, the current German governing coalition. This point, to my mind, is so obvious as hardly to require explanation.

The jobs news is very much to be welcomed, and it seems to be spread across most occupations.
It could, of course be about 20,000 at least better, if the government tackled the Dublin housing shortage, using more robust methods than throwing sugar, smiles, and money at failed developers, bearded but unbowed. And of course if they took the gloves off with land hoarders, including NAMA.
But there is now a very obvious regional imbalance, that could be but will not be corrected any time soon. Jobs, even building jobs, in Dublin are of little use to an unemployed building worker in Longford. Even Norman Tebbitt might consider that too much of a bike ride.

The real reason for jobs growth here is our links to the British and US markets. If we were dependent on mainland Europe, the outlook would be very different.

[The other jobs bottleneck is of course FG and Labour TDS in North Dublin, who seem determined to throw away over 300m and the potential that a BA link would bring. Surely it would be better in the long run to bribe each of the recalcitrant TDS with a million or so each, but of course they would not be tempted.
I hope Aer Lingus workers never come back looking for any more than statutory redundancy in a few years time, if the inevitable happens.]


Very well put together and very close to the bone.

What will the leftists do to attack the QNHS employment figures this time?

Last time they claimed the figures were unreliable due to ‘sampling error’.

The unemployment rate has now been falling at a steady 0.15% per month for 2.5 years. So, on a strict arithmetic basis, its on target to hit 5% by December 2017. However, I’d expect the rate of fall to accelerate somewhat as the oil price fall and tax cuts work their way through the economy, so I am sticking to my forecast of last month that the unemployment rate will hit 5% by September 2017.

What is interesting is the number of ‘doom’ economists/commentators who simply failed to mention the QNHS figures in their tweets. Quelle surprise!

So, the Irish Times today has an interview with Yanis.


Alas, I shall not be able to read it. Apparently, you now have to pay to read the IT online. I’d sooner give my money to ISIS than the IT.


So! Privatisation is unwelcome in Greece but to be applauded in Ireland?

I have no problem with privatising that which has no strategic interest or which has potential contingent liability to the state.

Ports and airports (and beaches) are strategic, not airlines.
Also strategic are Coillte (for timber and recreation) ; Bord Gais, electricity, telecoms and other networks.
Commercial banks are also strategic because they are unable to manage the simple process of taking a nations savings and recycling it to national investors, without gouging out exorbitant cuts for themselves and gambling the savings on every mad cap adventure they or their friends can think of.

PS Air Lingus is already private and it is a pity that those Labour and FG TDs did not concern themselves a little more with what the strategic national interest in many of the decisions made over the past three years, particularly those in relation to protecting favoured interest groups.

PPS. I am against extremes myself, but the question of who are now the extremists and who are now the centrists is very much a debatable point.

Correction, the above should have read:

“I have no problem with privatising that which has no strategic interest or which has NO potential contingent liability to the state.”

@ PQ

Thanks for the link to a very informed, and evidently expert, commentator. He certainly makes clear why there can be no rush for the exit as far as the euro is concerned. Varoufakis has just said on Bloomberg that Greece will make every effort to stay in. He has a strange way of going about it.


His view of what constitutes democracy is not shared by the chairman of the Eurogroup.


To describe what Dijsselbloem had to say as a bit of a rant, as Le Figaro does in its headdline, is not quite accurate. He was defending what 18 other finance ministers find to be the correct view. If democracy means that a minority party that gets into government must implement an election platform that was clearly un-implementable – except with the money of others – then Greece is, indeed, headed in the wrong direction. Schaeuble has already made clear that either all the commitments entered into are kept or not a cent will be forthcoming. The Eurogroup does not do “constructive ambiguity”.

@ Tull

It’s a democracy. Nobody said the people would always obey the markets. The Fed hasn’t always been worshipped in the States either.
Maybe some decent pay rises would change the mood and help economics at the same time.

@ seafóid

Fantastic data from the ONS today you’ll be pleased to hear. Wages rising at a clip, low inflation, full employment, strong business investment, deficit nose-diving… Gideon has certainly engineered an economic miracle. Latest polling data suggests the UK electorate will give the Tories the second term they deserve.


“He was defending what 18 other finance ministers find to be the correct view”

So you are totally satisfied in the purity of their sentiment and that party political considerations has played no role in at least some of those finance ministers arrival at the ‘correct view’. It is very difficult to believe that if the Irish labour party stands for anything like it purports to that it could ever have held this to be the ‘correct view’. Only the willing suspension of disbelief could lead you to the conclusion that the ‘correct view’ has been informed entirely independent local politics. In the case of Ireland I would say it was the predominant consideration, closely followed by colonial appeasement mentality….and I do not use the term ‘colonial’ lightly. For centuries we were unwilling victims of colonialism – today you need only remove the ‘unwilling’ adjective.

Great news Johnny.
Will the benefits trickle down to UKIP voters ? If they don’t there’ll be a hung parliament.


“Yet the second phase of fiscal consolidation will take place against a very different economic background from 2010-12.
Then, budget consolidation was part of an integrated plan with the Bank of England to change the mix of fiscal and monetary policy. The Treasury accepted that fiscal tightening in isolation would reduce the growth of aggregate demand, but believed that quantitative easing by the bank, and a weaker exchange rate, would restore growth and rebalance the economy.

Whether this strategy proved successful is still a matter of dispute. Those who, like myself, supported the new policy mix, must concede that the economic recovery was initially very subdued, only gaining momentum when there was a pause in fiscal tightening.
The bank presumably thinks that monetary conditions are already expansionary, and that the private sector is now growing robustly enough to allow both fiscal and monetary policy to be tightened together. But that is doubtful.

Back in 2010, the private sector was so risk averse that it was running an enormous financial surplus. It had responded to the crisis by increasing savings and reducing investment to an unprecedented extent. As confidence was restored, its surplus was run down by 10 per cent of GDP from 2010 to 2014. This boosted consumption and investment, creating conditions in which fiscal policy could be tightened without holding back an economic recovery.But, from here, it would be rare for the private sector to shift substantially into financial deficit by increasing its expenditure further relative to income. Growth in private activity will therefore need to come from a rise in income, especially wages, not from falling savings ratios. That will be a more difficult process, especially if fiscal policy is being tightened at the same time. The second phase of the fiscal correction may therefore be even harder to attain than the first. A simultaneous contraction in both fiscal and monetary policy looks problematic: something will surely have to give.”

“Full employment” presumably includes 700K on zero hours contracts.


And how will pay rises work now that inflation is below 0.5%?

Watch out for the precariat.

A question for you, Johnny

With Bank of England base rates at 400 year lows why does the UK Government pay the private sector rates in excess of 7% for Private Finance Initiative funding ?

Could I ask a favour. Would those of you who need to use the terms ‘Left’ or ‘Right’ substitute the terms Port and Starboard – and see how quite un-informative and confounding the former two terms actually are: things political have changed quite some in the last three decades.

Our political economic situation is now a Twitter pi**ing match between those pols who are proposing lower levels of taxation, versus those who are proposing the opposite. The irony is that the former also propose increased expenditures in social transfers, health care and education and a few other worthy boondoggles, whereas the latter propose the exact same – but more carefully ‘targeted’. So-called privatizations are political boondoggles! The insiders maintain their status: the taxpayers pay up! Privatiziations mostly convert into a nett increase in taxes – but simultaneously, and at the same time, the advocates of privatization propose a parallel reduction in taxes! Don’t believe me?

Then please listen (or read) attentively to the various spokesmodels for the opposing groups as they peddle their political propaganda. Its a tad amusing – were it not so unplesant for the taxpayers – and their dependents. And the other irony is that these two groups are the opposite sides of the same political coin and represent the awful choices we have to vote for at election time. At some point the electors will plump for the extremists – but that will not work out any better than choosing one of the so-called centrist groups.

Example: If the Irish healthcare system’s costs continue their annualized log-arithmetic increase – at what point does the system seize up? That is, it is consuming as much as is raised in tax revenues? The latter appear to be increasing at a low, arithmetic pace, so the trend lines between the two are … …?

There appears to be a severe logic deficit somewhere above. Anyone?

Good news on earnings-HE up 1.7% y/y, WE up 2.3%. Interesting to see Private sector up 3% reflecting improving economy while education in down 2% y/y.
Interesting observsation-public sector premium is still over 40%.

Pay also starting to rise in Ireland; weekly earnings up an annual 2.3% in q4 last year, which given CPI inflation of zero means strong increase in real earnings. Pay increased in 9 of the 13 sectors in CSO survey.


Every time you come up with a problem, Osborne solves it. If you look at it in a certain light, you are his boss, which must be very gratifying.


A publication from the European Trade Union Institute (ETUI).

This book is a follow-up to the ETUI 2012 volume ‘The triumph of failed ideas’. The focus of the book is the weight attributed to the different economic and social development paths in ten individual EU countries, and their interaction with the austerity regime established at EU level which in fact is deepening the crisis rather than paving ways out of it.

The main message of the book is that a gradual recovery is possible only if there is a change of course in individual countries that then triggers reactions in the policies of other countries and perturbations at the EU level.


Download free; h/t Social Europe J.

That fantastic UK data again


“The UK’s economy expanded by 0.5 per cent, quarter on quarter, in the final three months of 2014, the Office for National Statistics has confirmed.
Business investment fell by an estimated £0.6 billion (1.4%) since Q3 2014. It increased by 2.1% compared with the same quarter a year ago.”

Deflation will presumably bring down pay increases in the future.

so weekly earnings up 2.3% plus and employment up 1.5% = wage bill up 3.8%. Moreover we have a fiscal stimulus and an easing in monetary conditions. The Celtic Phoenix is taking win.

M1 and M3 in the EZ are also picking up. How long before the deflationists are forced to go stand in the corner with the doom porn merchants.

All debt is really a future tax on your income. Sometimes this can be of benefit if “you” are company trying to expand our a young couple trying to buy a home (In a non-bubble managed market). However with housing bubbles and frozen companies all linkage with “good debt” is almost lost.

This all started with Thatcher and Reagan and liberalising of markets we now in a major historical phase that could easily lead to a new great depression as both the debt, asset and money markets are failing. We live in interesting times

Take debt interest rates have gone down to zero (and negative) and they cannot be increased. One fifth of government bonds are now negative. When Thatcher started giving massive tax reductions to the uber-rich she set in stone a new cycle of perpetual government debt and running down of public services – We can see the result in the U.K. with crumbling infra-structure, NHS reductions and increasing inequality gradually destroying the welfare state and destroying even the British Labour party itself. The government debt was a great way for the uber-rich to parasite itself on the rest of society, by buying goverment bonds they could extract income tax of the working society and give it to themselves calling it interest. For this gift they need the remaining structures of civil society, the police and legal systems to enforce their debt liens and ensure that they can enjoy their days on the super-yacht off Cannes while the rest of us have to scrape by watching the petrol while our governments send in the bailiffs to insure that in Irelands case last year nearly 40% of our taxes are interest payments, money taken from us so we can’t upgrade our educational establishments or pay for our health is shipped off.

The problem for the elites was that neoliberal bastions the U.S and the U.K. also got addicted to debt. Even Apple issued bonds to buy back shares because it didn’t want to spend cash because of tax reasons. Debt is growing and growing. The Governments responded by reducing interest rates to zero and below and debt kept growing and growing. Including private debt we go 200%, 300%+ (in the case of Japan) of GDP. Greece is just part of this trend. The result is any central bank (other than Russia!) increased interest rates the Sovereigns, half the businesses and 60% of families would go bankrupt. All central banks can now do is quantitative easing

What about the money markets. To create money you need something that is small, comes in easy denominational units, has limited supply and is hard to copy. It is also useful that a government to make it illegal to counterfeit. In the last while you have the US appreciating by about 15% against all major currencies, does that reflect a real market or a massive increase in US productivuty- No of course not, it reflects supply and demand and the fact that the Chinese, Saudi and Russian likes hoarding trillions of this stuff in their central banks and also the fact that most multinational profitability has now reached monopoly like levels reflecting the fact that they are defacto monopolies. What are doing with their cash piles – not investing as they have succeeded in cutting labor power so much (another Thatcher dream) that the labour force has falling real wages and demand – no they are keeping “it” on computers in the tax havens creating more demand for the digital currency which is the US dollar.

As for asset prices – Look at the S&P and the London property market.

All these are symptoms that we are going back to a feudal type economy were the governments are run for the elites or their proxies the multinationals.

Greece just caught in the middle and the hope is they may save democracy after having invented it 3,000 years ago

Apples share by back case is very strange, sitting a huge cash pile they decide to go into debt to buy their own shares. Why not use your cash pile!, for tax reasons because if they repatriate it they would owe some US taxes. First of all the logic of buying your own shares what if you take it to its ultimate where they spend all their cash buying their own shares hence boosting the value of their last remaining share and then they borrow enough to buy that share for say $600 billion who owns them then? The bondholders. Hence all this is doing is transferring ownership from shareholder to bondholders, reality to future earnings. Creating an entire bureaucracy of financial advisers, bond paper work, legal debt paperwork doing absolutely nothing and eating up in the process Apples cash pile, investment and everything else in the process. Even the guy or institution with the last share for $600 billion will probably bank it in a cash haven where it will sit as a number of digits on a computer doing absolutely nothing other than paying golf club membership fees and buying the odd luxury jet and upping the value of the USD. This is killing productivity and nothing else.


The Alternative in Greece
Posted on February 26, 2015 by Yves Smith

‘As regards the debt, the text mentions that “the Greek authorities reiterate their unequivocal commitment to honour their financial obligations to all their creditors fully and timely.” In other words forget any discussion of “haircuts,” “debt reduction,” let alone “writing off of the greater part of the debt,” as is Syriza’s programmatic commitment.

Any future “debt relief” is possible only on the basis of what was proposed in the November 2012 Eurogroup decision, that is to say a reduction in interest rates and a rescheduling, which as is well-known makes little difference to the burden of servicing debt, affecting only payment of interest that is already very low.

But this is not all, because for repayment of debt the Greek side is now fully accepting the same framework of Eurogroup decisions of November 2012, at the time of the three-party government of Antonis Samaras. It included the following commitments: 4.5% primary surpluses from 2016, accelerated privatizations, and the establishment of a special account for servicing the debt — to which the Greek public sector was to transfer all the income from the privatizations, the primary surpluses, and 30% of any excess surpluses.

It was for this reason too that Friday’s text mentioned not only surpluses but also “financing proceeds.” In any case, the heart of the memorandum heist, namely the accomplishment of outrageous primary surpluses and the selling-off of public property for the exclusive purpose of lining lenders’ pockets, remains intact. The sole hint of relaxation of pressure is a vague assurance that “the institutions will, for the 2015 primary surplus target, take the economic circumstances in 2015 into account.”

But it was not enough that the Europeans should reject all the Greek demands. They had, in every way, to bind the Syriza government hand and foot in order to demonstrate in practice that whatever the electoral result and the political profile of the government that might emerge, no reversal of austerity is feasible within the existing European framework. As European Commission President Jean-Claude Juncker stated, “there can be no democratic choice against the European treaties.”



P.S. on the QT: Blind Biddy is in contact with HRH … hmmm discussing cricket of course!!! Patricia the Irish_sovereign_in_exile (R.I.P) got on well with HRH … treatment of Greek Democracy simply ain’t cricket! The Unthinkable is often feasible and plausible … These Islands …


“Falling inflation and deflation make fixed returns look more appealing on an inflation adjusted basis, even if yields are below zero and David Tan, head of global rates at JPMorgan Asset Management, says negative yielding bonds can also look attractive when compared with returns on cash.“For a lot of banks, owning a five-year government bond at minus 8 basis points [the yield on Germany’s Bund sale this week] is preferable to placing the money on deposit with the ECB at minus 20 basis points.”

Is the ECB going to play the pied piper of Hamelin to the bond market by slowly bringing the ECB rate down to minus 10% and strangling the bonds that follow ?

From your link

“Neoclassical economics considers a union a monopoly on the supply of labor, and thus a kind of market inefficiency.”

and a comment from the FT

1. http://www.ft.com/cms/s/0/f0ab2ea0-86e1-11e4-982e-00144feabdc0.html

MarkGB Jan 1, 2015
@Bob, Freelancer
“Is it possible that the theory which is used to justify QE is flawed?”

Good post and a good question. My answer to your question is ‘Yes it is’. It is often overlooked that a return to ‘normality’ and therefore a sign of success is, to paraphrase Dr Bernanke, when the Fed returns bonds to the market and restores its balance sheet to pre-crisis levels. Personally I think water flowing uphill is more likely, as is a return of QE in 2015 more likely than a reduction in rates.

We’ve had six years of QE and ZIRP because debt is unsustainable at anything like ‘normal’ rates. De-leveraging is what the market needs, and will eventually get. Essentially the central banks are trying to solve insolvency with liquidity, and addressing structural issues with cyclical cures. It won’t work.”


Glad you liked Edward Hugh’s piece. As they say in Ulster, he is no dozer. For me these are the takeaway points.

‘Now lets turn to Europe, and Greece: the country with the second highest gross sovereign debt level globally (175% of GDP). Now the change in government in Greece has bought to the headlines the fact that this sort of debt level is not sustainable, unless someone else makes your debt effectively interest free. The Greek finance minister wanted to declare the country bankrupt, and accept the debt could not be paid.

But the Euro Area partners rejected this, and preferred to maintain the fiction of sustainability. More money for nothing and your debt for free is the solution that has been found to maintain that fiction. The significance of the recent Greek deal is that things are essentially going to remain that way’

‘Billed widely in the press as a “great” victory for Germany, and a major humiliation for Syriza the outcome is in fact neither. The main victors (if such a name be relevant) have been – oh irony of ironies – the Troika (henceforth known as “the institutions”). In fact we are talking about the ECB (Mario Draghi), the IMF (Christine Lagarde) and the EU Commission (Jean Claude Juncker).

There is basic agreement between the leaders of these three institutions that Greece was subjected to excessive austerity at the time of its first programme (the IMF have even made self-criticism over this), and that at a time of extended low inflation/deflation and worries about the settling in of deflation expectations further austerity is inappropriate’

‘So some sort of coherent policy is now being implemented in Europe in response to the regions long standing low growth issues. It’s not clear that the measures being taken will serve to remedy the issues they were brought into being to address, but they will have long term consequences and they will make the currency union participants act more like one coherent whole, and in that sense they are to be welcomed.

It may be that there is no real “solution” to the long term deflation issue, in which case other measures will eventually have to be found. But neither is having one weak country after another sliced off and savaged in the bond markets any more satisfactory as an outcome.

What we could be seeing is the birth of a transfer union with the specificity that there will be no actual inter-country transfers. If things are happening in this peculiar way then that will be because this is the EU, and this is how things are done here’

End quotes

Draghi and his elves really are magicians. They are working in the world of social expectations to make debts disappear up his sleeve. Credit also means belief. Knock knock.

It’s all in there in Modern Monetary Theory and also in the classic works of sociologist Pierre Bourdieu. The knee bone connected to the thigh bone…. 🙂


@D O’D

Map on Union membership shows that capital and corporations have totally won in America. The resulting fall in middle class and working class incomes has reduced demand, corporations are banking rather than investing their hugely growing profit piles as the share of wages reduces in the corporate profit and loss. They are not investing as demand is reducing. Henry Ford once said I will not sell my cars if I don’t pay my workers enough to buy one.The modern day Henry Ford is shifting production to China to reduce costs and banking his inflated dollar profits in a tax haven.

On the 18 finance ministers vs. 1 thing—how come group think was bad pre-crash in the central bank, regulator’s office, department of finance etc., but is now good in the Eurogroup?

This is my favourite sentence of all time. So much to ponder.

“For this gift they need the remaining structures of civil society, the police and legal systems to enforce their debt liens and ensure that they can enjoy their days on the super-yacht off Cannes while the rest of us have to scrape by watching the petrol while our governments send in the bailiffs to insure that in Irelands case last year nearly 40% of our taxes are interest payments, money taken from us so we can’t upgrade our educational establishments or pay for our health is shipped off.”

That sentence should be shown to a school children as an example of how not to write. It is too long, badly written, hyperbolic and factually incorrect.

The QNHS employment figures make nonsense of some claims made by the doom pornists in recent years.

First, they support the view that economic growth has been every bit as high as the CSO figures for GDP and GNP indicate. The doom pornists have been peddling the notion that the GDP/GNP figures are all artificially inflated because of contract manufacturing. The employment figures show this is nonsense, as follows:

total employment Q4 2012: 1849.9 – Q4 2014: 1938.9

increase of 4.9% between Q4 2012 and Q4 2014

however, all the increase was in full-time jobs:

total full-time employment Q4 2012: 1398.7 – Q4 2014: 1492.6
total part-time employment Q4 2012: 450.2 – Q4 2014: 446.3

if we count each part-time job as 1/2 of a full-time job, we get the following for the number of full-time equivalent jobs

total full-time equivalent employment Q4 2012: 1623.8 – Q4 2014: 1715.8

increase of 5.7% between Q4 2012 and Q4 2014

Historically, productivity growth in Ireland has averaged 2-3% annually – let’s assume (just because I’m in a generous mood) that between 2012 and 2014 it was lower and in the range 1-2% – that would leave economic growth between Q4 2012 and Q4 2014 in the range 7.8-9.8%.

GDP figures for Q4 2014 are not out yet – but, between Q3 2012 and Q3 2014, the CSO put GDP growth (reduced by the pharma cliff) at 5.4% and GNP growth at 7.6%. For the theory that the CSO have been exaggerating GDP and GNP growth in the past couple of years, labour productivity in Ireland would have to have either fallen or to have been well below its historic norm, something for which there is no evidence whatever.

Second, the doom pornists have been claiming the CSO employment figures have been inaccurate (they claim all CSO figures they don’t like are inaccurate) because a disproportionate share of the increase in employment was in agriculture. They deduce from this that the CSO must have made sampling errors.

But, the latest CSO figures show that of the 90k increase in employment between Q4 2012 and Q4 2014, only 15.9k was in agriculture and 74.1k in non-agriculture.
In the most recent year between Q4 2013 and Q4 2014, employment in agriculture fell sharply. The most likely explanation is that thousands of people in rural Ireland work both in agriculture and in construction. When the construction industry is in the doldrums, a greater proportion of their working hours will be on the farm, so they will describe themselves as ‘working in agriculture’. When the construction industry takes off again, a greater proportion of their working hours will be on the building site, so they will describe themselves as ‘working in construction’. Figures for total employment are not affected. The Department of Finance figures for income tax receipts totally support the CSO employment figures.

Based on all this, I’ll stick my neck out and make the following prediction:

Over the next few years the GDP/GNP growth figures between 2012 and 2014 AND the employment growth figures between 2012 and 2014 will BOTH be revised UP.

No wonder the doom pornists don’t comment on the economic data any more.


With the highest number of children in jobless households, Ireland risks creating a vicious cycle of poverty and social exclusion, reports Ann Cahill, Europe Correspondent.

‘Ireland has had one of the highest percentages of young people not in employment, education, or training, and now an increasing number seem to have lost hope and are not looking.

“A worrying trend in the Irish youth labour market is the increase in involuntary part-time work, which stands at 41.4% of those aged 15-24 years compared to an EU average of 37.5%,” says the report. “It points to increasing labour market segmentation for young people.”

The report finds there are also class mismatches, with unemployment among third-level graduates at 7% but 21% for those who left school early.

“As a percentage of wages, childcare costs are higher than in any other EU country,” the report notes.

[…] Ireland also has the highest number of children living in jobless households, which increases the risk of creating a vicious cycle, that has risen from 26% in 2007 to 34% in 2013.


The correlation between Hibernia and the neo-kon arz-hole of east Texas continues to strengthen …

@Johnny Foreigner

“Latest polling data suggests the UK electorate will give the Tories the second term they deserve.”

I agree with you that that would be a sensible and desirable outcome and, as you suggest, it may happen.

However, the electoral boundaries in the UK are rigged in favour of Labour. As a result, the Conservatives will need to be miles ahead of Labour to form the next government. That could happen, but will require a bit of a collapse in the Labour vote compared with what the polls now show.

The electoral boundaries are supposed to be redrawn every few years to take account of the drift to the suburbs, but Labour failed to do this when in power between 1997 and 2010 and the Lib Dems vetoed it when in power between 2010 and 2015. Shades of Derry 1922-1969. As a result, if the Conservatives and Labour get the same number of votes, Labour will get far more seats. Something similar is true with regard to UKIP and the Lib Dems. UKIP are around 15% in polls and Lib Dems on 7%, but the Lib Dems will probably get more seats.

It is perfectly possible that the UK will vote decisively for the right (Conservatives + UKIP on 48% , Labour + Lib Dems on 42%) but end up with a coalition of Labour and Lib Dems. That, of course, is perfectly democratic. If it was the other way round, it would be called fascism.

I myself will be voting DUP for the first time as the nationalist parties in N. Ireland are currently various shades of ultra-left liberal marxist. Although, in the unlikely event of FF or the SNP running candidates in N. Ireland, I’d vote for them.

Here’s a great example of Irish state incompetence. Related to Limerick as well


“Demolition of one of Dublin’s largest and most dilapidated flat complexes has started ahead of a €12.5 million Dublin City Council social housing regeneration scheme.
St Teresa’s Gardens, next to the Coombe maternity hospital in the south inner city, was to be demolished and rebuilt as part of a Public Private Partnership (PPP), but the plans were scrapped more than five years ago, following the collapse of the property market”

A smaller scale version of Pruitt Igoe in St Louis but the same roots in the system and its attitude to the losers


When investors and people (their is a difference, I suspect!) wake up to negative yields, what course of action will they take?
Will the alternative to holding bonds and cash be to keep bidding up land, real estate, gold, commodities and so called blue chip equities?
Or maybe, finally, some people will start investing in the real , small business, economy again?
There is also the fact that a huge % of investments must be rather passive and will take a long time to react to negative yields.


Article on the IMF and Greece, including criticisms from developing countries regarding the Fund’s performance and opposition to what is seen as preferential treatment to a (relatively rich) European country.

A few years ago I heard Lagarde speak at a conference. She followed one of the defeated candidates for the IMF post , one favoured by the developing member countries, and it was striking how defensive she was. It was clear that many IMF members feel the Fund is controlled by developed economies and has not adjusted to the changing balance of the world economy. Lending Fund money to rich European countries is not what the developing world considers fair or a sensible use of Fund resources.


That is a massive developing theme. Greece was bankrupt and the IMF got involved in a bailout of banks and insurers.

I presume the IMF was overruled in the Troika.

The Republican party didn’t like it and they were right. Europe had enough money to bail out Greece. The German insistence on following dead rules is a big part of the problem.

There is more here. The comments are also interesting.


@ JtO

The upcoming UK election is fascinating with about 6 options at the forefront of the betting markets.

The boundary issue is not the main problem in a FPP system. Even if the constituencies were all of equal size huge anomalies can arise. The name of the game is to win narrowly where you win and lose massively where you lose.

UKIP are hugely hard done by under FPP. That is because they will always find it hard to beat the Tory candidate – so they may do very well proportionately but always tend to finish second. That’s why the betting markets say they will get less than 2% of the seats with 15% of the vote.


The logic of investing at negative yields escapes me.
Maybe we need a big dose of inflation to wash all the dumb and pointless money out of the system.

IMHO, SNP are to the left of the Shinners and Syrizia. Anti business and more welfare spending to beat the band. If the Scots were an independent nation, the SNP would have to bring in austerity budgets due to the collapse in the oil price. If I was in UK, I would be voting to keep LAbour out.

@ tull

Labour are hamstrung by all the light touch stuff Balls did at the Treasury that blew up in 2008. RBS has just been downsized again.

I can’t see the Tories getting a majority either. Osborne promised to get the deficit down to zero and he didn’t. Even halving it was hard- he had to shunt off a load of spending onto the PFI credit card. Which is very expensive long term.

@ Seafoid

“The logic of investing at negative yields escapes me.”

What is the purpose of fixed income investment? Securing an income on a pot of cash, that is at or above the depreciating purchasing power of the original investment, with little or no risk. At least moderate inflation is or has been the norm now for the last few hundred years of modern economic or finance, if not longer, ie the original pot of cash depreciates in value unless it is able to earn some sort of counterbalancing income.

However, in a deflationary world, which is, rightly or wrongly, now a genuine issue to contend with given global DM deleveraging, the long term impact of the global financial crisis, and strong deflationary pressures from both increasing Asian productivity as well as the massive prior investment in technology, real estate and medical advances, a pot of cash may have an INCREASING purchasing power, ie just leaving it there means you can buy more with it in the future. Additionally, many of the people willing to accept this negative yield are also simply reserve managers of developing nations trying to ensure the ‘value’ of the massive export reserves they have built up over the last decade and a half. They know their fragile economies could easily collapse again under a domestic investment bubble, so do not wish to use it domestically. So they export this capital to overinvested DM economies, pushing down the price of this capital, and resulting in deflation.

@Dan McL, seafoid

Fully agree. There was no need for IMF involvement in EZ; a political decision to provide cover to Angela & Wolfgang while they ruulled …

Even more so in Ukraine – where IMF are ‘bending’ their ruules ….

Michael Hudson: Has the IMF Annexed Ukraine?
Posted on February 15, 2015 by Yves Smith

Yves here. Ukraine is going into an IMF program in even worse condition that Greece with its various loans from the Troika in 2010, and we can see how well borrowing more when you were already overindebted worked out for Greece. In addition, this interview with Michael Hudson makes clear that the loan to Ukraine is wildly out of line with IMF rules, making it painfully obvious that this “rescue” is all about propping up the government so it can continue to wage war rather than economic development.

http://www.nakedcapitalism.com/2015/02/michael-hudson-imf-annexed-ukraine.html h/t Paddy Zhukov in Kharkov

from above:

PERIES: So, Michael, in a recent interview published in The National Interest magazine, you said that most media covers Russia as if it is the greatest threat to Ukraine. History suggests the IMF may be far moredangerous. What did you mean by that?

HUDSON: First of all, the terms on which the IMF make loans require more austerity and a withdrawal of all the public subsidies. The Ukrainian population already is economically devastated. The conditions that the IMF’s program is laying down for making loans to Ukraine is that it must repay the debts. But it doesn’t have the ability to pay. So there’s only one way to do it, and that’s the way that the IMF has told Greece and other countries to do: It has to begin selling off whatever the nation has left of its public domain; or, to have your leading oligarchs take on partnerships with American or European investors, so that they can buy out into the monopolies in the Ukraine and indulge in rent-extraction.

This is the IMF’s one-two punch. Punch number one is: here’s the loan – to pay your bondholders, so that you now owe us, the IMF, to whom you can’t write down debts. The terms of this loan is to believe our Guiding Fiction: that you can pay foreign debt by running a domestic budgetary surplus, by cutting back public spending and causing an even deeper depression.

This idea that foreign debts can be paid by squeezing out domestic tax revenues was controverted by Keynes in the 1920s in his discussion of German reparations. (I devote a chapter to reviewing the controversy in my Trade, Development and Foreign Debt.) There is no excuse for making this error – except that the error is deliberate, and is intended to lead to failure, so that the IMF can then say that to everyone’s surprise and nobody’s blame, their “stabilization program” destabilized rather than stabilized the economy.

The penalty for following this junk economics must be paid by the victim, not by the victimizer. This is part of the IMF’s “blame the victim” strategy.

The IMF then throws its Number Two punch. It says, “Oh, you can’t pay us? I’m sorry that our projections were so wrong. But you’ve got to find some way to pay – by forfeiting whatever assets your economy may still have in domestic hands.

The IMF has been wrong on Ukraine year after year, almost as much as it’s been wrong on Ireland and on Greece. Its prescriptions are the same as those that devastated Third World economies from the 1970s onward.

So now the problem becomes one of just what Ukraine is going to have to sell off to pay the foreign debts – run up increasingly for waging the war that’s devastated its economy.

One asset that foreign investors want is Ukrainian farmland. Monsanto has been buying into Ukraine – or rather, leasing its land, because Ukraine has a law against alienating its farmland and agricultural land to foreigners. And a matter of fact, its law is very much the same as what the Financial Times reports Australia is wanting to do to block Chinese and American purchase of farmland.[1]

The IMF also insists that debtor countries dismantle public regulations againstforeign investment, as well as consumer protection and environmental protection regulations. This means that what is in store for Ukraine is a neoliberal policy that’s guaranteed to actually make the situation even worse.

In that sense, finance is war. Finance is the new kind of warfare, using finance and forced sell-offs in a new kind of battlefield. This will not help Ukraine. It promises to lead to yet another crisis down the road very, very quickly.’

BTW, Putin did not start this; Nuland and her corporates and Ukie Oligarchs are set to plunder …..

And the EU stood ‘idly by’ ….

@ Tull
I don’t think the SNP are that lefty. They will do whatever the big banks in Scotland say. They won’t nationalise anything.

The Guardian had this to say at the time of the referendum


“The reality for modern nation states is that they all face a global economic order in which corporate power is in the ascendant, threatening the livelihoods of the poor and averagely well-off with no respect for borders, and against which most elected politicians can only deploy limited authority. This is what modern politics is fundamentally about.”

Labour in the UK and in Ireland are similarly constrained .

The poor Daily Telegraph seems to have gone through the wringer as well.

Finally, think Irish Famine and Neu NeoKon Ukraine …..



‘One can easily see the antecedents to modern Austerians in Marx’s summary of Lord Dufferin’s position [on Ireland]:

Lord Dufferin is one of those land magnates. That rent-rolls and profits can ever be “excessive,” or that their plethora is in any way connected with plethora of the people’s misery is, of course, an idea as “disreputable” as “unsound.” He keeps to facts. The fact is that, as the Irish population diminishes, the Irish rent-rolls swell; that depopulation benefits the landlords, therefore also benefits the soil, and, therefore, the people, that mere accessory of the soil. He declares, therefore, that Ireland is still over-populated, and the stream of emigration still flows too lazily. To be perfectly happy, Ireland must get rid of at least one-third of a million of labouring men. Let no man imagine that this lord, poetic into the bargain, is a physician of the school of Sangrado, who as often as he did not find his patient better, ordered phlebotomy and again phlebotomy, until the patient lost his sickness at the same time as his blood.

Lest one thinks that Marx is fighting a strawman, you can read Lord Dufferin in the original.

Continuing the analogy to modern events, it is especially striking to see the analogy of bloodletting that has become commonplace among critics of austerity (see this post from Michael Hudson for example). Despite Marx’s radical reputation, mainstream economists such as Kevin O’Rourke have stated something similar:

Extensive farming favored landowners but led to diminished employment opportunities. The permanent nature of the blight necessitated a switch away from old farming styles. The possibility that the Famine also provided farms with the opportunity for such a switch cannot be discounted, for of course if extensive farming was their most profitable option, one must ask why they did not switch sooner. From the perspectives of landlords and farmers, the Famine cleared large tracts of land of the smallholdings which made large-scale grazing difficult. Viewed in this light, the Famine served as a sort of speeded-up enclosure movement.

Ireland’s experience in the 19th century has implications not only for today, but specifically for modern Ireland. Ireland never really recovered from the great famine. It had net emigration for the rest of the 19th century and most of the 20th century. According to Martin Ruhs of University of Oxford: “In 1996, Ireland reached its migration ‘turning point,’ making it the last EU Member State to become a country of net immigration”. With the onset of the Euro crisis, unemployment in Ireland reached well above 10% and stayed there. ‘

Goin on the razz with Seven_of_9 – Oh Happy Days!

Varoufakis strikes again!


And back in the real world.


Tsirpas has also come out saying that a debt cut is back on the table! It seems that the Greeks will actually have to run out of money before this two-faced political stance can be brought to an end. Either that or there is a split in Syriza and Tsirpas looks for support from To Potami and the remnants of Pasok (whose erstwhile voters can be fairly safely assumed to have moved en bloc to the more moderate side of Syriza).

Retail sales up 8.8% in volume y-o-y in January.

ISEQ almost at 6,000.

No wonder some leading doomists now prefer to tweet about parts of the male anatomy than about the economy.


I wouldn’t be voting SNP (in those unlikely circumstances) for a left-wing government in UK, but to hasten the end of the UK. As I wouldn’t be living in it, what sort of government an independent Scotland has is entirely up to them.


Let them eat GDP growth.

Is there any reason to believe the figures for Ireland would be any different? Oh, I forgot: there won’t be any such figures for Ireland because all the Irish economists are busy calculating how much more a janitor working in the public sector earns than one in the private sector.

This article by Paul Gillespie deals with the argument as it is generally couched.


The problem is that it misses the point. What is at issue is not a dispute between economic policies – such are never likely to disappear – but the capacity of a government to make an agreement and stick to it. Agreeing one version in Brussels, or, at least, giving the impression of having done so, and selling the opposite version for reasons of political expediency at home, is not tenable in the long run.

There is a third possibility i.e. the legislative actions listed may not be that costly and Athens is following the “Irish formula” while trying to hide the fact that it is doing so. This is only feasible if the rhetoric is toned down. Of which there is no sign.


Yes, the Greeks are two-faced. Nothing like the Germans who refuse to countenance a bondholder bail-in for Ireland and then insist on similar for Cyprus, because the first one would’ve cost Germans money and the second one would’ve cost Germans money. See? Perfectly consistent (and this is the ultimate founding plank for European unity in the 21st century): nothing should ever cost Germans money, especially not their own mistakes.


If I could put seafood’s question somewhat more naively. If there is a borrower of last resort who is prepared to issue paper money earning 0% why would I not put my cash under the mattress rather than on deposit earning negative yields?

Two significant comments from Schaeuble, for once.
““I’d like to ask parliament, each lawmaker, not to reject the request by the finance ministry, which wasn’t easy for me either, because this would do great harm to our people and our future,” Schaeuble said.”

“We, and especially Germany, will have a good future in the 21st century only if European integration remains successful and if we stand united in Europe.”

Quintin Peel guestimated that the Drachma would depreciate by 40%-50% on radio last week (Today FM I think. Stephen Kinsella and Paul Murphy TD were also interviewed in the same program slot.)

The extent of DMark appreciation post euro collapse, must be finally beginning to dawn on some of the hawks in Berlin.

@ Ernie

Too much debt
Too much income going to the rich
Short term data irrelevant
It’ll end in tears

The Greeks owe us a few bob as well and seem disinclined to live within their means. I don’t see why Irish taxpayers should pony up every year so the Greeks can dodge their taxes and retire on OPM @ 50-55.

Hunting yield is fine but below zero ? Surely QE is pointless now.
Where does this leave:

-Basel 3 with its risk weightings of zero for rich country sovs
-The capital asset pricing model which assumes that risk taking deserves a reward
-Bonds if oil takes off towards 150 again


Greeks disinclined to live within their means? I guess you missed the part about them running a primary surplus.

But I’m sure they’ll be open to getting lessons from Irish rentiers.

One wonders if the ECB should remit the 1.9bn coupon to Greece or continue ELA to insolvent Greeks banks. Better to dump the Greeks now before they do more damage.

Varoufakis is opening the debate on what to do about the scheduled repayments later this year. His comments are provocative, but his previous comments about the bailout extension deal were also provocative and the Greeks nevertheless accepted a compromise. So it looks like he and Tsipras adopt maximalist positions in public mainly as a negotiating stance. The key question is whether they can/will actually implement compromises after agreeing to them.

It’s not surprising that he brings up the repayments now since re-financing them is the only thing that can bring any relief to the Greeks this year (apart from economic growth, which Syriza has probably destroyed).

The surplus has evaporated due to industrial scale tax dodging and Syrizia fiscal incontinence.
I guess we are finding out why Kleptocracy is a Greek rooted word.


“Securing an income on a pot of cash, that is at or above the depreciating purchasing power of the original investment, with little or no risk

How plausible is little or no risk under deflation ?

“At least moderate inflation is or has been the norm now for the last few hundred years of modern economics or finance, if not longer”

Except during periods of deflation. And what happened to debt during these periods of deflation ?

“ie the original pot of cash depreciates in value unless it is able to earn some sort of counterbalancing income.”

Moderate inflation keeps debt from strangling the wider economy. It’s why all modern macro economies have an inflation target of 2%. None of them can reach it now either. why ? Too much debt.

“However, in a deflationary world, which is, rightly or wrongly, now a genuine issue to contend with given global DM deleveraging,”

Very little deleveraging going on anywhere

” the long term impact of the global financial crisis, and strong deflationary pressures from both increasing Asian productivity as well as the massive prior investment in technology, real estate and medical advances,”

Very little investment anywhere . It’s all share buybacks .
Tech winners make monopoly profits. Eg apple’s 60% margins. Virtually no tax paid either…

” a pot of cash may have an INCREASING purchasing power, ie just leaving it there means you can buy more with it in the future. ”

This logic means CBs can’t achieve anything with negative rates.

“Additionally, many of the people willing to accept this negative yield are also simply reserve managers of developing nations trying to ensure the ‘value’ of the massive export reserves they have built up over the last decade and a half. ”

I would like to see the stats. My impression is that a lot of debt is OECD. How much did the CBs pump into QE in UK, US, Jap? 9 trillion dollars. How much is in sovs now ?

“They know their fragile economies could easily collapse again under a domestic investment bubble, so do not wish to use it domestically. So they export this capital to overinvested DM economies, pushing down the price of this capital, and resulting in deflation.”

Debt has been driving down the cost of capital.

Start in 1982, the year Bill Gross did

Blaming the EMs misses the elephant in the spreadsheet

If Varoufakis knows what he is doing, the evidence has yet to emerge.


The author of the above knows his Greece. What he does not comment on is the likely impact of a continued slow run on the Greek banks which will accompany the likely excruciating process under which the country will “complete its programme”. Only this seems capable of jolting the Greek electorate out of the fools’ paradise that Syriza has succeeded in conjuring up.

Incidentally, if one was asked to assess the German media reaction in one word, it would be; incredulity!

This item (by a nostalgic for the return of the gold standard!) illustrates another aspect of the general problem i.e. the facility which the euro gives to national politicians to blame unpopular decisions on “Brussels”, Germany or whatever. The consent of the governed, essential in any democracy, is seen as being undermined.


It is not clear that this thesis holds fully true. As the case of Cyprus illustrated, there is a half-way house which returns the debate indisputably to home territory even if outsiders can still be blamed; capital controls!

It may give Cypriot politicians some satisfaction to agree to allow Russian warships to use the country’s ports. But the basic political calculation remains unchanged i.e. if a country wishes to avail of the undoubted benefits which a hard currency brings, either it takes the steps to make its economy function around it or, failing this, it prevents its citizens from taking their money elsewhere.

@ skeptic01: This is just plain wrong: “(apart from economic growth, which Syriza has probably destroyed).”

Economic growth – such as it is, is a much misunderstood process. If the Greek economy falters in its “steady advance” – it is not alone!

Tull: This is completely unnecessary – it adds nothing. “Better to dump the Greeks now before they do more damage.”

The ‘damage’ you may be alluding to has already occurred and is ongoing. Dumping any state will not change the facts nor alter the trajectory nor lessen the human misery.

@ DOCM: What in God’s Holy name are you on about? Greece is not the cause: its the effect. Is this so difficult to grasp? At least the PM and his FiMi have demonstrated they have ‘moxie’ – which is more than you can allege about our lot of homogenized pap.

Or maybe … better to dump the Greeks now because:
– they would be far better off with a floating exchange rate
– they would be better off without unfriendly powers dictating their economic policies
– the rest of us would be better off if our governments had to account to their electorates for the Greek bailout funds, other debts to official lenders and Target 2 liabilities going up in smoke
– the rest of us, and especially the Italians, would be better off if a path out of the euro was well mapped
– The global community would be better off if the European powers had to account to other IMF members for hijacking IMF funds for their own benefit

I no longer pay any attention to any post with the ‘DOCM’ heading….life is far too short…..

All of the above is true. Cut a losing position & move on. Face the fact that Greece is an unreformable kleptocracy and move on.
I would also advocate the confiscation of all Greek assets overseas and the imposition of sanctions.

@ BeeCeeTee

There is an awful lot of money bet on outcomes that are pie in the sky. One of them is Eurozone inviolability , another is a US returning to economic normality

“One of the assumptions of credit investors is that when rates rise, it will be because economic growth is strong and therefore they do not have to worry about being repaid since the companies whose debt they hold will be able to grow and generate the cash flow needed to service that debt. But this may be too optimistic.”

Dumping Greece now is not advisable. There is too much uncertainty and the return of volatility at a time of deflation could tear the Euro apart.


– This is just plain wrong: “(apart from economic growth, which Syriza has probably destroyed).”

Well, the Greek economy was expected to grow a litte this year before Syriza came to power. The uncertainty since their advent has likely knocked business investment on the head, and may have also damaged household spending although the latter effect might be offset by the lower rate of tax collection (20% below pre-election expectations according to reports).

If Syriza succeed in getting more relief from the EZ then the effect on the economy could be very positive.
If they fail, and remain in the EZ repaying all debts as they fall due, then the Greek economy will end up significantly behind where it could have been.

That’s the gamble they have chosen to make. And it probably is a dominant factor in Greece’s fortunes for this year.


My instincts (I’m not claiming they have great rationality) are the same.

What about the argument that Tsipras will put a referendum to the Greeks on Grexit, but only when he’s managed to present a narrative that Germany put a gun to their heads to force them out..


This quotation from the link I posted above may help you understand what “I am on about”.

“The problem is that Greece needs operational, transformative changes in the short term, and a revamping of its productive base, starved of investment as it is, in the medium term. The Greek problem isn’t, as Krugman insists, a classic problem of macroeconomic policy. It’s primarily a problem of an economy rendered uncompetitive from state inefficiency and political turmoil.”

I agree with this view.

I would suggest that those that do not are looking at the problem from the wrong end of the telescope and that events in the coming months will bear this view out. Greece is not the tail that is about to wag the European dog.


‘There is no choice to be made between sound money and sound economic policies. People (including politicians) living under a gold standard adhered to fiscal discipline whether they liked it or not ‘

Jordan can see the mote in the Greek eye while disregarding the beam in the eye of the broader system. He needs to stnd back a couple of metres. He also needs ot read Barry Eichengreen’s ‘Golden Fetters’ and see how growing labour power undermined the Gold Standard.

‘Market-based Credit and discretionary monetary policy mix dangerously. Over this long cycle, market-based finance (as opposed to traditional bank lending) has come to dominate system Credit – along with market and economic performance. Policymakers have responded to resulting serial booms and busts with ever more obtrusive activism – including interest rate, liquidity, communication and monetization policies. Policy measures have reached previously unimaginable extremes – pro-speculation, pro-leverage, pro-Credit cycle and pro-maladjustment. It’s not that “the transmission of monetary policy to the real economy is more variable and uncertain.” The critical issue is instead that market-based Credit is inherently highly unstable. That the Fed and global central bankers have responded to this instability with progressively more experimental intervention and manipulation only ensures a momentous calamity. A rules-based policy approach incorporating disincentives for leveraged speculation and financial excess would over time work to restrain speculative cycles and resulting Credit booms and busts ‘


Here’s what DOCM calls “Schauble toning it down”: “We made a clear agreement in the Eurogroup. Mr [Alexis] Tsipras made a promise. If Greece doesn’t stick to that, there will be no further aid.”

I suppose compared to full-on annexation, that does count as toning it down.

@ paul quigley, etc

Speaking of Barry Eichengreen.


The European: Where do you see Greece in the near future? Inside the Eurozone or outside? Trying to repay its debts, or as the beneficiary of a (partial) debt cut?

Eichengreen: Greece has made clear its strong preference to remain in the Eurozone. Unfortunately, Germany has not stated with quite the same force and lack of ambiguity that it prefers having Greece stay inside. Both Greece and its creditors will have to compromise for this outcome to be sustained. So both sides will have to agree on the priority. In the short run, Greece needs a continuation of its program with the Troika (if under another name) and agreement that it can run a somewhat smaller primary budget surplus. Debt reduction will become an issue when interest payments on the official debt are scheduled to resume some years in the future. It doesn’t have to be addressed now.


DOCM + Tull: Greece (with or without this government) is a classical example of the nature and logic of capitalism – gone badly wrong. But so are most western-style economies. The US economy is (to use nautical terms) ruddeless and becalmed. Just please try to persevere with not hurling any more stones in Greece’s direction or dissing their elected government. It adds absolutely nothing to any meaningful analysis of the genesis and progress of our current global economic problem and what are the likely outomes – uniformly unpleasant.

This is a simplistic and inadequate description:-

“It’s primarily a problem of an economy rendered uncompetitive from state inefficiency and political turmoil.”

It neither ‘state inefficiency’ nor and ‘uncompetitive’ that is the root cause of the political and economic mess in Greece – its the internal inconsistencies of the capitalism economic paradigm of “steady annual advance”. This has slowly inflected from log-arithmetic to arithmetic.

The irony is, and its rarely mentioned in polite economic circles, that the strongest global economy (the US) dropped down to arithmetic mode around 2000 and despite successive administrations throwing every known legal, financial and monetary (and a few unconstitutional) efforts at their economic woes for the last decade and a half – they have failed to re-establish a log-arithmetic rate-of-growth. So what’s the economic prognosis for Greece? Europe? Us? I’d say its poor.

The ‘state inefficiency’ mantra is so often peddled that its hardly even questioned anymore. There is little reliable empirical evidence for it. And as for the ‘uncompetitive’ hogwash – its such a meaningless term, that again, most folk let it slip by without comment.

I opine that both of you should have a greater concern about the Trans Pacific Partnership and what that will do to your beloved ‘efficient’ and ‘competitive’ economies. We’ll all end up like Greece. Happy now?

Sound money is meaningless given the amount of debt in the system. It is all fiat money, all value depending on credibility.

@ PQ

I agree! I did describe the author as a nostalgic for the gold standard to which he ascribes rather magical properties in terms of the conduct of economic policy not borne out by the historical evidence. But the general point that he raises seems to me to be correct i.e. that under the present institutional arrangements for the euro there is little real leverage that can be exercised on countries not playing the game (as defined in the agreed rules). Until now, that is! The experience of the Cypriots suggests that the choice is not between toeing the line and exiting the euro but being forced to compensate for failing to do so by the imposition of capital controls; the decisive factors being (i) failing banks (ii) continuing negative market reaction and (iii), especially in the case of the Greeks, falling tax receipts leading to a rapidly worsening budgetary situation,

Schaeuble is clearly attempting to calm the waters. an exercise in which IMHO Tsirpas and Varoufakis would be well advised to participate. Of course, they may have other plans! Or none at all!


Just saw this in the FT


“The ECB is set to announce the terms of its expanded QE plan next Thursday. This QE plan is very different from the previous one launched by the Fed. Among the main reasons, the eurozone is not running a substantial deficit and this means bond supply is limited. ”

There was enough money in the EZ to bail out Greece (and Ireland) and stick it to bondholders without bringing the IMF into the farce.

Latest poll in Greece:
“A Metron Analysis poll published on Saturday showed popularity ratings for the prime minister’s radical left Syriza party at an all-time high: from the almost 36% it won in snap polls on 25 January, support for Syriza has jumped to 47.6%, a record for a movement that only three years ago was on margins of Greek politics.”

With poll ratings like that, a collapse in government revenues, and totally unrealistic ‘official’ debt maturities (that the official lenders knew were unrealistic from the outset), then Tsipras may be left with no option but to go for a referendum on Grexit if the re-negotiations are not looking realistic.

The fall is Greece tax revenue is probably more down to a fall in Russian tourism business, and general economic collapse than it is to people refusing to pay taxes. Two years ago, on a trip to Greece, I was told that Russian is the new foreign language to learn, as the Russian tourist market had increased hugely in importance. Clearly the Russian market has now collapsed, consequent to EU sanctions re Ukraine.
One wonders why Greece should have to pay a disproportionate price for r EU/US chaotic foreign policy failures in the Ukraine.

Greece GDP falls since 2009 are as follows:
2009 -4.4%
2010 -5.4%
2011 -8.9%
2012 -6.6%
2013 -3.9%
2014 Not yet available.
Greece revenues have collapsed? Well based on the above numbers, of course they have collapsed, and they will take years to stabilise, and even more years to recover.

“I would also advocate the confiscation of all Greek assets overseas and the imposition of sanctions.”

Strong stuff, especially coming from Ireland, with its second hand aircraft.


A volatile Greek minister for defense and 60 fighter jets might make that an unwise option for the local sheriff.
Wouldn’t it have been better, and cheaper, to let capitalism take its course in 2010.
Must Europe we go to war to recover the money the bondholders lost.

@ JR

Apparently tax receipts in Greece have always declined during election periods, because the outgoing government confines tax collectors to quarters in an attempt to boost their chances. Michael Lewis’ (hyperbolic) 2010 article on Greece documented the effect based on interviews with tax collectors. http://www.vanityfair.com/news/2010/10/greeks-bearing-bonds-201010
The current slow-down may be no different and could simply reflect that this aspect of misgovernance has not been fixed since 2010. On the other hand Syriza has promised more lenient terms for people in “difficulty” with tax, which could make the effect persistent. We just have to wait and see.

@ DOCM Dijsselbloem is making a significant climb-down. The original idea was that Greece does not get the 7.2Bn until April, when compliance with all agreed conditions is verified. Now they can get earlier payments by making a partial effort to implement some stuff earlier. The discrepancy between the language used (“Greece warned to start reforms early”) and what is actually happening is obviously designed to fool northern European voters. The tone of the rhetoric on both sides is aggressive, but in reality both sides are making concessions.

The organisers of this site and the site’s posters need to be reminded that the title of this blog is ‘The Irish Economy’ and not ‘The Greek Economy’.

In this vein:

Just out this morning: Ireland’s manufacturing growth at 15-year high in February:


ISEQ just a smidgeon short of 6,000 – it was at 1,800 in 2010 – any Irish stock market investor who has not made a large profit between 2010 and 2015 is seriously useless.

Bank of Ireland 920 million euros profit in 2014.

Ulster Bank 750 million euro profit in 2014 – meantime its parent company, RBS, made a 4 billion euros loss in 2014 – and to think that these morons wanted to sell Ulster Bank a few months ago.

Any one who thinks that the Celtic Tiger has not returned is an idiot. All statistics (output, employment, tax receipts, surveys) confirm it.

Interest rates are on the floor and if the Tories win they will run a referendum on EU membership. It’s not a Tiger. It looks more like Frosties.


Good of you to point out that the Greek Min for Defence is a neo fascist & a buddy of some of the unsavoury characters around Putin. Greece under Syrizia seem headed down the same road trod by Milosevic in times past. A mix of uber nationalism, crossed with a sense of victimhood all wrapped up with kleptocracy.

@ skeptic01

I would say that both sides are beginning to box a bit more cleverly.


Getting the magic wand back from a collection of sorcerers’ apprentices is a job of some delicacy and it is far from obvious that Dijsselbloem has the necessary touch. It all hinges on the speed with which the Greek electorate wakes up to the fact that their new government has reversed the trajectory of their economy in comparison with others, including of those countries that have successfully exited programmes.

One element will certainly be a degree of revisionism in the view that Greece is symptomatic of a wider European economic malaise when the evidence is mounting by the day that it is not.


One solution might be to have two different sites. One for the Keynesians who can discuss what is happening in theory. The other for the rest of us to discuss what is happening in reality.

For example, there are good labour numbers out for the EU this morning with a larger than expected drop in unemployment. The first site could discuss how, in theory, this is not happening. The second could discuss how, in reality, this is happening.

@ JtO: “Any one who thinks that the Celtic Tiger has not returned is an idiot.”

Count me in there John! Let’s assume (cert par, as they say) that the 2007 GDP was 100 and decreased by 3% annualized, compounding for 6 years to bottom out at 83 (round figures) – approx a -17% decrease.

The GDP ‘drop’ from 2007-2014 seems to have been approx -3.8%, whereas the 2009-2014 difference is -17%. These values are calculated from some quite dodgy stats but Michael H would be able to provide more reliable data.

This means that for the CT to ‘return’ to 2009 levels of GDP our annualized, compounding increase in GDP would have to be +3.3% or +3.4% for 5/6 years in a row, or alternatively, approx +20% in one year. That latter value is a tad optimistic, but a 3% uptick is possibly possible. So, what was the actual 2014 increase then? If its >4%, then you might be on to something.

However, we are in the advent of a parliamentary election so just lets hang in there until 2019/2020 and see what eventuates. Aggregate energy costs will surely rise – but no one is sure how, or when. Someone pencilled in 2024 for crude to top $200 bbl – based on 2013 production and usage predictions. Maybe? Hope not.

@ JtO

Ah the old bank profits wheeze again. Remember the fantastic profits which Anglo clocked up. While their business model was heading straight of a cliff.

But it’s all different now……………..central bankers operating a free money wheeze …guaranteed bank profits…..it will go until it can’t.

As for the terrific manufacturing PMI, Michael is on it.


The EA data is surprising to the upside of late- credit less negative, money supply accelerating, GDP slightly better than expected in q4, unemployment rate lower, HICP in Feb less negative than forecast, PMI’s rising. The last few years have seen some better numbers in the early months only to give way to disappointment but it would prove interesting if QE turned out to be unnecessary, although no doubt the ECB would claim that expectations of asset purchases was responsible for the upturn in economic activity.

@joseph ryan

A Metron Analysis poll published on Saturday showed popularity ratings for the prime minister’s radical left Syriza party at an all-time high: from the almost 36% it won in snap polls on 25 January, support for Syriza has jumped to 47.6%, a record for a movement that only three years ago was on margins of Greek politics.”

That might be because the GreekMedia sold the extension deal as a massive climb down by the Germans. We looked them in the eye and they blinked!!!

Eventually the Greek people will realise that’s not quite what happened….

@ Dan

This weekend’s FT had an article that spoke about QE in the EZ “to combat deflation and jump start growth”

UK inflation was 0.5% in December. Japan is even worse. US inflation is lower now than pre QE.

Is there any evidence from anywhere that QE generates inflation , other than asset bubbles ?


There you go with that positively biased fact based analysis again.that is not the done thing on this blog now. We need more left leaning hellenic hagiographic doom porn.

@Sarah: Have the Irish people realized that the bank guarantee was an unmitigated disaster? Beam, mote etc.

As Bank of Ireland has been mentioned, let be positive:

The most relevant figure from an operating point of view was the improvement in interest margins from 1.84% in 2013 to 2.11% in 2014. [p 32]
[God only know where the impairment figures are pulled from these days. ]


Year Pre-Impairment Profit Impairment

2012 224m 1769m Result: a whopping loss
2013 1070m 1665m Result: a whopping loss
2014 1301M 472m Result: a good profit.
( p30)

The improvement in the interest margin is key and doing well at 2.11%. Fundamentally, if a bank does not have an interest margin > 2%, then trouble looms. The ‘impairment’ guestimates, would do John Bowe proud.

However: Of the 89 billion in assets, the bank has just over 14 billion in tracker mortgages and according to the bank :
“Net interest margin from ECB tracker mortgages is broadly neutral” (p36).

In plain man’s language, 14 billion of assets (tracker mortgages) out of a total of 89 billion, make no money at all for BOI, even before administration costs. At an interest opportunity cost (subsidy) of 2.11 %, that’s about 300 million per year of a subsidy to BOI tracker borrowers. Extrapolate that for say 16 years remaining in the mortgages and that gives a lifetime subsidy remaining to BOI trackers holders of 5 billion. Lets say AIB have the same and PTSB have about 2, we are looking at a grand total of a 12 billion euro subsidy to tracker mortgages holders over the lifetime of existing mortgages.

Its a great little country that can afford it.

The bank has a further 15.2 billion of property assets, with a default rate of 46.5%.
The upshot of all this is that of the total 89 billion in assets, 14 billion trackers make no money, and 15 billion property assets are 46.5% defaulted. (p 38)
In such circumstances the bank has done extremely well to achieve and interest margin of 2.11%, but this can only have been done at the expense of gouging non-tracker mortgages and other borrowers, as well as paying little or no interest on deposits, and jacking up fees.

The bank is doing well, however. But the fact that the country (ultimately) will have to subsidise trackers, some of whom are very well off indeed, is a bit too much to bear.

Lets be positive, and yes things are improving, but lets never again take bank headline numbers for anything other than the PR exercise that they are.

@Johnny Foreigner

Good idea. There could be 2 sites – one with with real statistics, the other with statistics that posters get to select in accordance with their desired outcomes.

@John Sheehan

From yesterday’s PMIs, Ireland is booming, most European countries are growing, but socialist France is going down the plughole. The French economy is performing almost as badly as the French rugby team. I wonder if the latter is related to the former (seriously)? Have they even won a match since Hollande took over?

The bad news continues: new car sales up 28% so far this year.


More bad news expected for the doom porn industry later today. Exchequer returns due out at 4.30pm. Then, another big fall in the live register tomorrow. When will the torment end?

Ireland’s economy is the fastest-growing in Europe, Ireland’s rugby team is leading the Six Nations, unemployment is plummeting, retail sales and car sales are soaring, and Spring is around the corner. But, Fintan O’Toole remains as dejected as ever.


One day they’ll make a movie out of Fintan O’Toole’s columns and it will be the greatest ‘weepie’ in the history of cinema.


I am also a sceptic on QE . The ECB do not do policy mistakes ( anyone ever hear them mention the two rate increases in 2011?) and QE is perfect in that any recovery can be attributed to it even though the theory behind it is non-existent and the evidence very mixed (e.g. US bond yields ended higher after every episode ). I particularly like the ECB’s argument against replacing QE with a direct injection of cash to the public- that would be fiscal policy, which the bank does not get involved in, even though they have just agreed to buy up to 33% of EA governments’ debt.

JohntheOptimist ++ Don’t forget Paddy Harrington’ s emergence from his own “Depression”. Ireland now has 4 qualified for Augusta Masters. !N


“most European countries are growing”

Which ones are growing and how does GDP compare to 2007 ?

What do those “indicators” (golf wins, rugby wins, new car sales) tell us about the socioeconomic status of those proclaiming that everything is hunky-dorey? And hunky-dorey for whom? Why, those for whom golf and rugby are important and who are able to afford new cars.

The indicators themselves are indicative of a certain detachment from the economic concerns of most people.

@ Ernie

The following is a rugby issue but it’s also about shoddy risk management, the abuse of power , the failure of regulation, vested interests , rent seeking and shunting things under the carpet in the hope everything will be grand. So it’s very germane to the EZ as well.


“It’s really a question of knowledge. When does the knowledge crystallise within the governing sport and the global governing body about the dangers of concussion and did they not do something about it during that period.”
Legal action, Fenelon believes, will occur when current or recently retired professional players are out of the game for a sustained period of time.
“Well, in the professional game those under contract are not going to do it really as they would be biting the hand that feeds them,” he said. “Perhaps when players hit their early 40s and their memory isn’t the best or there is something badly wrong, the neurosurgeon then looks at his medical record and sees rugby and a history of concussion.
“Then it’s a matter of looking back to, say, 2003 and what was the best practice around concussion then and what were the authorities doing about it? If they were doing nothing, yet they knew about it, well, then you have to say a plucky lawyer will take that case up. Definitely.
“The data retention of the governing bodies becomes very important . . . This information is never going to be given up voluntarily. I suspect they will put up a big fight against an application for discovery of documents. That’s where I think the real confrontation is going to begin legally.”

@ Ernie: ” ….who are able to afford new cars.”

I believe the question is … … ? No Deposit; ? Zero Finance; and ? Trade in. Look at all those lovely exorting banners decorating the exteriors of car salesrooms.

“Will that be cash or charge, madam?”

? Hire purchase; ? leases. How many are actually paying cash? Hmmmm.

Increasing consumer (personal) debt is hardly an indicator of a boom – or is it? Depends on one’s indicator status, I suppose.


Things are improving for real people Ern, maybe not those who teach obsurce and outdated political theory to a sceptical audience, who only want to get past the paper & study a proper subject next year.

Parental discretion advised for the doomsters – and keep the smelling salts handy.


“The reduction on the exchequer deficit is driven by increased tax receipts, reduced net voted expenditure and earlier full repayment of loans from the exchequer to the social insurance fund,” said the Department of Finance.
The department said the State collected €6.74 billion in taxes in January and February, an increase of €925 million or 15.9 per cent on the same period in 2014 . The overall return was €345 million or 5.4 per cent ahead of the target set out in the October budget. The figures, released this afternoon, show that the Revenue collected €2.89 billion in income tax in the first two months of the year, €183 million or 6.8 per cent more than one year previously. The return in February was €91 million or 7.1 per cent ahead of target.
The improvement in income tax returns follows separate data last week which indicated that the rate of unemployment is on course to drop below 10 per cent this year.”

re improving economy

The 2015 Irish Budget was predicated on 5.5% nominal growth in GDP but Finance projected a 3.1% rise in tax receipts, largely due to a big fall in receipts from the pension levy. In the event the end-2014 tax outturn was stronger than expected, requiring only a 2.5% rise in tax receipts this year to hit the Budget target.
The data just released shows receipts up 15.9% year over year to end-Feb, and €345mn or 5.4% above profile. Early days but the tax forecast may be far too conservative.


Over 1 million people watched Ireland beat England on Sunday (in Ireland, that is). If the current trend of new cars sales is repeated in the coming years, 500,000 families will have bought a new car within a space of 5 years. Hardly a tiny minority.

“obsurce and outdated political theory”

I would be more worried around “obsurce” (is that a Saxon word?) and outdated economic theory, Tull, to be honest


500,000 distinct families? I call BS. More like the same 100,000 buying a new car every year. If it’s not the same 50,000 buying two new cars per year.

@Dan McLaughlin

The numbers look very positive, at the outset, but there are a few caveats.

The actual income tax collected Feb YTD, is up 6.58% according to the published figures, but the income tax collected for February 2015 is 1,383,000 exactly the same as Feb 2014. [exactly the same !]

[Working off the alternate presentation for last year, I make the Income tax Feb ytd up by 10.2 % on last year. I can only conclude that there has been some last changes / adjs to last years figures]

This means that as far as income tax is concerned, the big impact (increase) was in the January returns. i.e the Dec 2014 payroll, indicating hefty bonus payments / seasonal employment in Dec 2014, perhaps.

The corporation tax figure is up hugely, but this may not indicate a a sustained increase, as it must be remembered that many domestic corporations are carrying forward huge tax losses. The Corp tax may have more to do multinational tax payments, whose linkage to the ‘real’ economy can be somewhat tenuous.

On the expenditure side, social welfare is down hugely ytd. Almost €240 million down on 2014, a bit more than one have suspected even with job reductions?
Nearly all other depts have increased expenditure. This is surprising in that there has been no wage ’round’ as of yet, and still the dept expenditure (most of them) are well up on 2014.

Very good results, but the income tax figures may not be as positive as they appear at first glance. [In addition if I am correct, the DOF might like to indicate their policy in relation to changing the allocation of prior year published figures to the various months].


The new cars figures would be absolutely marvellous, if only we made a few parts in Ireland. Even if we only made the car mats, it would be something.

If an MNC pays CT to the revenue, surely it is linked to the economy.

Fair cop.

I recommend a diet of thin gruel with bitter tears for the doom pornsters.
I see the Tories are pulling ahead in the UK. That will lead to rending of garments and wailing and gnashing of teeth in your typical sociology dept.

With 1.4m households with one car or more, sales of 120,000+ would be needed just to replace the fleet assuming a 12 year life and no used imports.

I don’t know if any stats are “real” with all the debt sloshing around the system . Modelling can’t get it.

Here’s one possible reason the fall in the price of oil was so violent . The actual fall in demand was relatively slight.


I wonder if oil inflation isn’t a risk a few years ahead with all that might mean for interest rates…..

And John Plender with an interesting thought


“It is conceivable that investors, nursing losses on bond portfolios whose value has been savaged by rising interest rates, will lose their appetite for the paper of over-indebted governments. If the central banks are then forced to finance government deficits directly, the switch from deflation to inflation could happen very fast.”

Japan’s deficit is insane . Even the UK can only get by with fiscal easing.


can you make up your mind whether you are either a deflation doom porn star or now an inflation doom porn star….please

you are bearish because yields fall & are now swinging to a position of bearish due to a rise.

Perhaps you are a stopped clock or a broken record.

A highly informative blog post by Frances Coppola.


Unfortunately, while she demolishes her opponent’s argument, the result does not get us very far; Greece still has a major problem, aggravated by the arrival of Syriza in power.


The disappearance of private sector bank deposits is the most remarkable feature. The idea that the taxpayers of other countries can be expected to volunteer to pony up to remedy this situation is politically unrealistic, both at the domestic and European level.

And the good news just keeps on rolling! A drop of 4300 in the live register in one month is staggering. I look forward to a sustained, serious analysis of these and other recent figures by our leading economists *crickets chirp*.

“The standardised unemployment rate (SUR) in February 2015 was 10.1%, down from the revised figure of 10.3% in January 2015. The seasonally adjusted unemployment rate from the most recent Quarterly National Household Survey (QNHS) was 10.4% in the fourth quarter of 2014. See table 3. On a seasonally adjusted basis the Live Register total recorded a monthly decrease of 4,300 (-1.2%) in February 2015, reducing the seasonally adjusted total to 355,600. See table 2(a). In unadjusted terms there were 355,124 people signing on the Live Register in February 2015. This represents an annual decrease of 42,945 (-10.8%).”

@ Tull

Deflation followed by inflation when the bond market joins the dots.
The problem is too much debt.
That’s what props up a lot of the asset prices you rave about.
I bet US yields won’t go up this year either.

Traders have to trade and feel chirpy- that’s why warning signs are always missed.

Sorry about the broken record- have you tried MP3s ?

More horrific Irish data, unemployment down to 10.1% and the fall in the live register accelerating, February marking the third biggest seasonably adjusted monthly fall since Sept 2011. Live register now falling at a 60% faster pace in the last nine months (avg -1.05% m/m) vs. the nine months previously (avg -0.68% m/m). Terrible news altogether. I blame Jobbridge.

Here’s the problem, Tull

” The central banks of the US, UK and Japan all adopted easier policies and were rewarded with an upturn. Given weak wage growth and a lack of fiscal support, such stimulus ought to continue. ”

The FT misses the point.
Weak wage growth is the problem with debt worship. It’s a debt trap. The Phillips curve is broken too. Low unemployment is not generating adequate wage inflation.

Japanese wages are not rising to the required extent . Neither are US wages.
Equity prices assume they will.
They won’t.

Probably the most interesting economics article of the last 3 months was the IT editorial on EZ QE.


” The European Central Bank is failing in its mandate to keep the rate of inflation in the euro zone close to 2 per cent. Therefore it needs to act and looks likely to do so on Thursday, announcing a programme of quantitative easing (QE) to try to boost inflation”

Pure regurgitated hopey changey economics waffle. There is no evidence whatsoever that QE can bring overindebted economies back to target ranges of inflation.

Here’s a good laugh from the Fed


“Mr Fischer said the Fed’s decision to swell its balance sheet to $4.5tn and hold rates low for six years carried financial stability risks, but he defended its actions. The research suggests the effects “are only now manifesting themselves in full, reflecting the inherent lags in the monetary transmission mechanism”, he told a conference in New York. ”

If you think I’m wrong throw up a few arguments. But not PMIs or what the market thinks about interest rates. The market has no idea what is going on in the bowels of the system.

It is not interested as long as EPS scams are generating cashflows and bonuses are going out .


Isn’t it a pity that the Greeks didn’t elect a party led by some Goldman-Sachs alumnus?

If Spain is right and the Eurogroup is contemplating another loan to Greece, this time €50bn, I wonder how long the solidarity of some Irish political parties with Greece will last if the Irish exchequer has to stump up €0.85bn?


“Parental discretion advised for the doomsters – and keep the smelling salts handy.”

I really find these kind of comments amusing and reflective of something akin to Stockholm syndrome. I don’t need smelling salts to remind me how much my taxes direct and indirect are going up every year, including the last 12 months. Bloody right receipts should be up. What’s the parade about? A paltry €183m in the first two months of the year! if they can keep that rate going it will cover the interest we have to pay on debt for 2015 in just over 8 years time! Maybe I do need the smelling salts alright!

“The standardised unemployment rate (SUR) in February 2015 was 10.1%, down from the revised figure of 10.3% in January 2015″

Good to see it coming down but it was 4% in 2007 and it went up at warp speed within a year

so it’s taking a long time to clear.
42,000 a year would need another almost 5 years to get back to 4%.

What sort of jobs are being created ?

How long did disgraced doom porn economist Morgan Kelly say the reverberations would last ? I think he said 10 years, didn’t he ?

@ Seafoid

“42,000 a year would need another almost 5 years to get back to 4%.”

I think there is a slight possibility we shouldn’t be using boom-bubble metrics to measure current performance. That’s at least my idea of some common sense, rather than just complaining about every bit of data you can find.

Finland is a good economy for us to try and follow, yes? Their early 1990s bubble-low in unemployment? 2.1%. The high in the crash? 18.3%. The lowest they have ever seen since then? 6%. We are unlikely to ever have an unemployment rate as low as 4% ever again. And nor should we want to achieve this, as its suggestive of some bubble forming somewhere in the economy.

What sort of jobs are being created?

1. Private sector jobs.
2. Jobs where you aren’t on the dole any more and you pay tax.
3. Jobs that cover a wide range of sectors and aren’t all concentrated within a clear and unsustainable bubble (e.g. housing).

From the perspective of repairing the State’s finances, those are three excellent qualities. Think of how many non-jobs in the public sector, or bubble jobs in housing were ‘created’ over the period 2000-2007. This recovery is in many ways far more healthy than the supposed boom we had in the period preceding the crash.

It is now clear that predictions for Ireland of GDP/GNP growth in the range 3-4% in 2015 are massive underestimates. The growth is the result of good management, which hopefully is permanent, and good luck (a series of one-off factors). What we are seeing in 2015 is a ‘Perfect Storm’ (or its opposite, whatever name that has) for growth. It is difficult to predict a precise figure, but I wouldn’t be the least surprised to see real GDP/GNP growth in the range 8-10% in 2015 (on top of growth in the range 5-6% in 2014). The factors causing the growth are:

(1) A massive improvement in Ireland’s competitiveness as a result of having the lowest inflation in the EU between 2007 and 2015.

(2) On top of this, an unprecedented fall in the euro v dollar and sterling. Combined with having continued lower-than-UK inflation, Ireland is experiencing an approximately 15% improvement in competitiveness v the UK in 2015.

(3) A 50% fall in the oil price.

(4) A flood of FDI into Ireland in 2012-2015, now building up production.

(5) A tourist boom, which would be strong anyway, but which is being accelerated further by (1) and (2).

(6) The end of milk quotas.

(7) The pickup in growth in the Eurozone.

(8) The collapse in Ireland’s government borrowing costs, which is facilitating the replacement of high-interest debt by low-interest debt, which in turn is reducing debt interest repayments by the Exchequer.

(9) The natural upswing in the construction industry cycle.

(10) The unleashing of pent-up demand throughout the economy (as evidenced by the surge in consumer confidence and the sharp rise in car sales).

(11) A reversal of the historic pattern of cross-border shopping. The massive rise in the value of sterling v the euro, combined with UK inflation being higher than Ireland’s, has pushed the comparative price level north of the border way above that south of the border.

(12) The huge balance-of-payments surplus Ireland has amassed in recent years, which means the economy can sustain a very sharp rise in consumer spending and business investment without going into external deficit.

The only disappointing feature of the Irish economy in 2015 is that new house building has not risen as much as it should have. Ireland should by now be building 35k houses annually. House building is rising (see (9)), but is nowhere near the level required. If it wasn’t for this, I’d say GDP/GNP growth in 2015 would hit 10%.

Of course, some of the one-off factors (fall in euro v sterling, fall in oil price) will probably be reversed one day and that will affect growth when it happens. But, it doesn’t seem to be on the horizon at the moment. And, yes, there will be a recession one day, just as Ireland will lose at rugby one day. But, it is impossible to predict just when. The last period of growth lasted 21 years and the one before that lasted 24 years.

Those who are peddling the idea that the current situation is similar to that in 2007 and that, consequently, another crash is likely are deluded. The main characteristic of the economy in 2007 was that, after 21 years of high growth, some imbalances had developed in the Irish economy. Among them:

(1) Ireland had lost competitiveness – the comparative price level was the second highest in the EU.

(2) Ireland had a massive balance-of-payments deficit – which meant there was a need to rein back on consumer spending and business investment to reduce the deficit.

(3) Ireland was at the top of the construction cycle – almost 90k houses were being built annually and the only way this could go was down.

The present period of growth has only been going for 2/3 years, far too soon for similar imbalances to develop. I am quite sure that if growth continues for a long period (similar to 1958-1982 and 1986-2007), then such imbalances will indeed develop. It is a natural part of the economic cycle. But, the economy is nowhere near that stage at present.

Comparisons of the housing market in 2015 with that in 2007 are particularly absurd. Apart from the fact that house prices in 2015 are 30-40 per cent lower than in 2007, even if there was another house price crash (unlikely, but not impossible), this would have little effect on the real economy. The main effect on GDP/GNP of the post-2007 crash in house prices was not the house price crash per se, but the fact that it brought new house building almost to a halt. Between 2007 and 2017, new house building fell from 90k annually to 8k annually. In 2014, only 11k house were built. Even if there was another house price crash (unlikely, but not impossible), and even if this crash eliminated new house building completely, the effect on GDP/GNP would be about one-eighth that of the 2007-2013 crash. A much more likely scenario is that new house building will rise over the next few years.

None of this means that growth is certain. There are always risks. And it is presumptuous to assume that growth is inevitable. Pride comes before a fall. What the Lord Giveth, the Lord Taketh Away. Etc. The main worries at present are a war in eastern Europe, a war in the Middle East, or a 9/11-type terrorist attach in the U. States or Europe. Please God these won’t happen, but the possibility is always present.


‘Between 2007 and 2017’ should be ‘Between 2007 and 2013’.


“(7) The pickup in growth in the Eurozone.”

should be:

“(7) The pickup in growth in the Eurozone, combined with continued high growth in the U. States and U. Kingdom.”

@ Johnny F: The situation is that our economy has – for the time being at least, stopped falling. There are some quite nasty issues still lurking in the undergrowth (pun intended).

A list of indebted developed economies put Ireland at #2, behind Japan.* Debt – if it has to be repaid, is negative future income, hence is also a negative on G*P. I do not believe the macro models include this negative variable (I am open to correction on this point).

And what have our great leaders decided is a sensible proposal to keep economic activity in positive mode? Why to emit more debt (as QE)!

The raw employment numbers are a mish-mash of somewhat dodgy aggregate estimates – which probably conceal as much as enlighten. A forensic autopsy is needed there.

The overall stats on private residential mortgages are dreadful. An unhealthy private mortgage market is not indicative of a positive economic advance. If, or when, the delinquent loans are cleared out then one God-awful political mess will be disclosed.

Healthcare costs appear to be – for the moment, beyond control. Increases have to be kept <3% p/a. Think this is possible? I do not.

Only a small number of determined folk will take the time and effort to dissect out the CSO data – provided the raw data is available. Meaningless means are no way to conduct meaningful analyses or draw conclusions.

Cost of money is essentially zero. Energy costs have decreased by 25%-35%. So where is the economic bounce from there factors of production? And the Baltic Dry Index?

* zerohedge 23rd Jan.


As it so happens I have dissected the CSO data on health inflation recently. The reality is that health inflation kept chugging between 2007-11 but underwent a remarkable fall in the last 3 years, unprecedented for a developed economy. The trend is remarkable, to the extent that Reilly was able to boast about Ireland having the 3rd lowest health inflation rate in the EU28 back in 2013.

Of course prices for health goods are still high because of the rampant inflation we suffered in the boom years. We need more deflation in this sector at least.

Salaries, Johnny
What sort of salaries?

Great excitement from the likes of yourself over job numbers in the UK and the US but very low salaries if you dig deeper. Distinctly underwhelming. Wage inflation is a huge problem in both the UK and the US.

Can people raise kids on the salaries of these new irish jobs or not?

Numbers of jobs created is as insightful as PMIs.


As it so happens I have dissected the CSO data on health inflation recently. The reality is that health inflation kept chugging between 2007-11 but underwent a remarkable fall in the last 3 years, unprecedented for a developed economy. The trend is remarkable, to the extent that Reilly was able to boast about Ireland having the 3rd lowest health inflation rate in the EU28 back in 2013.

“It [the EC commission] is not putting up the money. The Member States, and notably Germany, are…”

My understanding, in terms of ECB, ESM and Eurogroup country bailouts, is that members contribute according to the capital key, which in theory relate to each country’s GDP, that in a perfect union, would be in proportion to the population of each country.
So each country, by and large even though the union is clearly not perfect, contributes an amount proportionate to its population. Such being the case, to apply the term ‘paymaster’ to Germany, an expression that I have seen repeatedly in various media is somewhat misleading. As a citizen of Ireland, I am operating on the assumption that I am paying pretty much the exact same as a German, French, Italian, or Spanish citizen.
One further point in relation to the ‘paymaster’ term, while in no way not associating the term with you.
Ultimately, strange as it may seem, the paymaster in a trading union is the country that runs a trading deficit. That reality needs to be kept in mind.


Salaries were up 2.3% last year. Given our near zero inflation levels that is a big jump – at that rate our competitiveness in sectors like IT and finance will be eroded fairly quickly.

As JtO points out we’re in the sweet spot right now, a wonderous confluence of factors in our favour. ‘Rejoice!’ as a remarkable woman once said.


That there is a pickup is excellent news, but do not get carried away.

Most tax numbers are positive, but the income tax numbers are not as positive as they are being hailed, nor should they be given that tax cuts are already working their way into the YTD income tax take.
In fact the misreporting spin put on the Feb returns will be highly damaging in the run up to an election.
[Both income tax (YTD) and VAT YTD are largely dependent on the Dec 2014 payroll and consumer spending.]

Already today we have the Tániste talking about tax cuts, and Eoin Roynane looking for abolition of the pension levy and restoration of pay cuts.

Items one (low inflation) and two ( Euro collapse vs Stg) of your list were / are extremely important, but I very much doubt item 8 (pent up domestic demand being unleashed).

The lack of housing, particularly in Dublin, is nothing short of criminal, and it not a victimless crime, but I doubt that house prices in many parts of Dublin are 30%-40% off 2007, and in any case, as a nation, we should measure nothing except insanity from the 2007 housing peak prices.

@ Seafoid

“Numbers of jobs created is as insightful as PMIs.”

We’re reaching a very specialist level of whinging here. Have the common sense to simply accept good data when you see it.


“an unprecedented fall in the euro v dollar and sterling”

But is it just beggar my neighbor currency devaluation ?


See Dan’s post above. If as is likely there is another Greek bail out, we are in for 900m. We will not be able to duck it this time as we are out of the programme. Maybe each Irish household could be assigned a Greek household to look after. I bags the Niarchos family.

@ JF: “Of course prices for health goods are still high because of the rampant inflation we suffered in the boom years. We need more deflation in this sector at least.”

Deflation in the health sector???? Where? How? Good luck with that!

” … at that rate our competitiveness in sectors like IT and finance will be eroded fairly quickly.”

Try being ‘competitive’ with India? The domestic sections of these sectors are ‘shielded’ – they are merely competing with themselves. How much in subsidies and tax incentives are given by Irish taxpayers to both these sectors?

How much in tax revenues are forgone by allowing income relief on interest paid on debt? How many other tax avoidance boondoggles have we?

Recovery, whatever that means, is very, very slow.


In for another ‘Greek’ bailout??

No, not if is a reasonable solution is arrived at.
There are about 70 billion Greek bonds still in ‘private’ hands. How about ‘haircutting’ them first- Full shave!

In any case, as Greece is now supposed to be running a primary surplus, all Greece needs is a long (very long) maturity profile, at ultra low rates.

As the ECB was so very kind to start bailing out the private bondies holding Greek debt back in 2010 (to the tune of ~54 billion), and will be spending a trillion or so buying up every kind of derivative soaked junk in existence(AAA only, of course) , then it does not stretch the imagination to replace all Greek bonds in official hands, including IMF, with 100 years bonds at ECB rate.

PS: I enjoyed that Carinthia mess (upcoming) from Austria. Guess who won’t pay this time? Good old Austria, Debt/GDP of 81% in 2013.
Who holds a chunk of the debt? Deutsche Bank.
Can’t pay or won’t pay?
What a pity both of them can’t lose.
No doubt Ireland will end up with a little piece of Carinthia, via QE.
Shure who could deny Deutsche as a counter party!


Compared to the 2011 base I think we are down something like 2% for the health indices. To have that stability over close to 5 years is unprecedented. It is fairly consistent across all the sub-indices – drug costs, devices, doctors fees…


who holds the Greek bonds still in private hands?. The Greek banks and some poor benighted Greek pension funds so that means an insovlent banking system and less solvent pension system.

@ JF: OK. But those trolly figures and closed-up wards are indicative of what? Overfunding? Underfunding? Management dysfunctions? What?

‘They’ (usual Oliver Twist-like – “Minister, can we have some more!” whingers) want to assault the problem with … … how much moolah? 25 mil? 50 mil? 100 mil? Are these sums ‘one-offs’ or ongoings, the latter with a built-in annual percentage escalator? Hmmmmm.

Oh! And some demented political folk are allowing we shall have tax reductions – any day now. Unbelievable!

Now should we petition the Vatican to sanctify the men (it was hes?) who invented the QE Credit Card?

@ PQ

how about u deal with the jobs ones. They’re the ones I took issue with the complaining about.


The health budget has to grow just to deal with (i) an increased population (ii) an increased population of dependents (young and old) (iii) increased coverage rates that come from both the ageing population and the expansion of free access. There are some obvious structural reforms that we need to push through the vested interests in order to partially solve the trolley problem but we also need to spend more money to resolve it.

Cheers Johnny

2.3% is quite decent. Hopefully the Govt won’t mess it up. It’s a bit early for tax cuts IMO


QE is going ahead by printing money. why couldn’t the next Greek bailout come via the same funding source ? What’s the risk? Inflation LOL


the numbers are good but just saying x jobs were created doesn’t say anything. It’s all about bringing demand back up and if workers aren’t getting decent pay awards demand is going nowhere.


@ seafoid didn’t complain half enough 🙂

The dogs on the street know that job quality of jobs matters just as much job quantity. Of course that reality has to be denied by those who profit from the status quo. Otherwise they couldn’t possibly continue with failed policies.

Most dogs have also sussed that most jobs being created nowadays are pretty miserable by comparison with what was available here 20 years ago. Opportunities in the private sector have not come anywhere near compensating for the loss of secure state employment. Power has shifted away from employees.

Reduced pay, pension rights, more commuting, higher rents, increased taxes and charges all have the effect of shrinking what the Americans call the middle class, ie Joe and Jane Soap. McJobs and Mini jobs may be good for business owners and shareholders but they are bad for most citizens.

Even in the so-called leading economies. Growth comes at a high social cost, and those ‘market flexibility’ chickens will eventually come home to roost.


The prognosis in Ireland is even worse because debt levels are high in public and private sectors. That severely limits the possibilities for fiscal expansion and consumption led recovery.

Just noticed that the comments section of that link is intriguing.

A little peep into the dystopian future, and a rare sighting of the Dork :).

@ JF: “There are some obvious structural reforms that we need to push through the vested interests in order to partially solve the trolley problem …”

Yeah, I know, but which ‘reforms’ will get the nod? Want to try ‘pushing thru’ the nurses? The docs? The pharmacists? The paper-pushers? Good luck!

This new health insurance boondoggle sheduled for April will – wait for it, and put your hands together folks – a triple-tier health system. Huzzah!

Keep the shares – at least the taxpayers will have a modest income for a few years.

What we need is a reprise of the Black Death – a military-grade pneumonic variant. That’ll solve our trolly problem in jig time – 😉

@ PQ

The problem is the markets are not interested in detail. If you are a sheep in a herd you follow the other sheep and you watch the shepherd, not the wolf. This time is always different.

Markets will rise on anything- numbers of jobs, PMIs (WTF do purchasing managers know about macro instability) , currency manipulations, January gut feel, market moves, whatever and it’s all self reinforcing CB driven baseless optimism with heavy doses of BS.


“Mr Fischer said the Fed’s decision to swell its balance sheet to $4.5tn and hold rates low for six years carried financial stability risks, but he defended its actions. The research suggests the effects “are only now manifesting themselves in full, reflecting the inherent lags in the monetary transmission mechanism”, he told a conference in New York. ”

Never mind the debt load, feel the trend.

Crashes happen because players do not look at the big picture. The business imperative is lethal. And how do economists make sense of this? They don’t.

re; AIB

The AIB results are not that strong, and are nowhere as good as BOI.
The outgoing Chief Executive has kitchen-sinked as much profit into 2014 as was humanely possible.

1. Net interest margin still struggling at 1.69% (BOI is at 2.11%), although Frank Daly is doing his damnest to help by paying back NAMA bonds before they are due.
2. Other income (non-interest) at 843m is flattered by almost 430m of one-offs. Most of those will not be there next year, but that will be the problem for the incoming CE to explain.
3. Loans to customers earn an average 3.33%!!. That’s an average that variable rate mortgage holders and people with personal loans, should weep over.
4. A write-back (no less than that) of 188M in loan provisions versus a provision of 1904M in 2013. Where do these numbers come from? John Bowe of Anglo had some places in mind.

If this is the best AIB can do, with ELG now virtually gone, then it has a long way to go.

After all the hoopla and disaster, bank results are just as much a guessing game as ever, and depended to a very large degree on house prices rising.
But the banks and government did an excellent job in getting those house prices up. ‘They would do, wouldn’t they’, they were counting on it.


Here is some sensational stats – not just in mind you.

Marginal income tax rate – 52%
VAT 23%
Property, water, insurance levy – al
Unemployment +10%
Net migration circa -40k p.a. for last 5 years.
Debt to GDP – +115% and we ain’t inflating our way out of that any time soon
Interest on debt this calander €8.5bn
years in the mire – 7.5

To paraphrase the Blackadder, you may recognise sensational stats but I fear you wouldn’t know a relevant stat if it painted itself purple and danced naked on top of a harpsichord, singing “relevant stats are here to stay!”

@ PQ

Here’s a good example of markets/Fed/FT versus reality


check out the “almost there” chart. 8.6 m jobs created in US 09-14 so employment is almost back to full level

2. http://monthlyreview.org/2014/01/01/the-plight-of-the-u-s-working-class/

A trawl through the BLS stats (Sept 2013)

Unemployed 11.3 million
Marginally attached to labor force—did look for work in last year but not in last four weeks because
a) thought none was available 0.4 million
b) of illness, lack of transportation, lack of daycare, etc. 0.8 million
c) working part-time for economic reasons 7.9 million
Total BLS Estimate Un- and Underemployment 20.4 million
Number of people that would be in the labor force if participation rate had not declined from 67.3 to 63.2 percent (minus the 1.2 million not in labor force but counted above as marginally attached). 8.8 million
Total jobs needed for full employment 29.2 million

Maybe 3 million jobs created since- how many joined the workforce ?

Still a long way to go.

A link for those who cannot decide whether they fear deflation or inflation.


It all boils down, in my inexpert but hopefully intuitive opinion, to an analysis made some considerable time ago on the lack of safe assets and a proposed means of remedying it.


One assumes, of course, that the authors know what they are talking about. The political willingness to act is, however, another matter. The markets seem to have forced an alternative solution. The zero bound is not the barrier that economists evidently thought it was. People will pay others to “mind their money”.


You are simply one of these people who are unable to come to terms with the fact that the economy failed to collapse as hoped and has gone back into a renewed period of extremely high growth. All economic statistics confirm this. Things like unemployment, mortgage arrears, debt/GDP, net emigration that are a legacy of the recession are now improving.

The unemployment rate may be 10.1%, but it was 15.1% some 32 months ago. So, even you should be able to work out that its on target to hit 5% by October 2017. Even earlier than that as the rate of decline has accelerated in recent months.

The most recent CSO figures showed net emigration falling to 20k in the year to April 2014, not the 40k you claim. All indications are that it will fall considerablly further in the year to April 2015.

With regard to property taxes and water charges, listening to the screechings of the loopy-left in Ireland, one would think that elsewhere no one paid these taxes. My cousin in Surrey told me a few weeks ago that she paid property (council) tax of £1,800 annually (almost 2,500 euros) and water charges of £500 annually (almost 700 euros). Corresponding charges in the Republic of Ireland are puny in comparison.

I apologise that I am unable to answer all your points tonight with my usual detail and precision, as I have just landed in Thailand and am heavily jet-lagged.

“I apologise that I am unable to answer all your points tonight with my usual detail and precision”

A predilection for self-congratulations is clearly not just the purview of Enda & Co.

Contrary to your implied branding of me being fraternal with the “loopy left” I have no objection in principle to property or water charges. What i have is a probably with people representing an increase in tax receipts as definitive and “sensational” evidence of an economic miracle”. If you tax more, then all else being equal, taxes increase – its not rocket science.

€183m increase in income tax receipts compared with 2 months the previous year is church gate collection ‘sensational’ when compared to returns this economy is required to make to draw its ‘odious’ debt.

If you are going to crow about a 10% unemployment rate then extend your gratitude to the 100+k net migrants that has made this happen since 2010. It would not be unreasonable to assume that at least half the achievement owes its success to the airports of Ireland.

“Things like unemployment, mortgage arrears, debt/GDP, net emigration that are a legacy of the recession are now improving.”

I’ve never denied this – I would question the motive of those that get too excited about pretty modest improvement after what will be, barring a monumental improvement in the next year or two, the lost decade that as some above referred to, morgan kelly anticipated it would be. So we’ll have lost a decade that when its over we will be saddled with a massive (and unjust) debt burden (by order of the Euro-facists), a dysfunctional property market, no political reform to speak of, 10% unemployment, marginal tax rates of 52%, a water infrastructure that is on the brink of disaster (I am assured of this by a friend in Dublin corporation), a health service in serious crisis and an education system that is worse than pre bust.

I don’t have a problem with optimism but please lets leave the hyperbole of success to one side for another few months – we’ll have to listen to enough it come election time.

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