Banking Inquiry Report

Has been published, volumes 1 and 2 are available here.

By Stephen Kinsella

Senior Lecturer in Economics at the University of Limerick.

69 replies on “Banking Inquiry Report”


Joe Higgins and Sinn Féin finance spokesperson Pearse Doherty were the only two of the 11-strong team of bank inquiry TDs and senators who refused to back the final document.

Joe said “the reckless behaviour that inflated the bubble and caused the crash should have been criminalised” and that senior politicians, bankers, bondholders and developers in charge at the time “should have been facing jail instead of golden pensions”.

In a 146-page broad-side at the capitalist economic system and its impact on Ireland’s social fibre, Mr Higgins said the “bubble government” of then taoisigh Bertie Ahern and Brian Cowen, alongisde then tánaiste Mary Harney, finance minister Charlie McCreevy and others of serving “the interests of bankers and developers, not those of ordinary people”.

He was equally critical of then opposition leader and current Taoiseach Enda Kenny, accusing him of being a “silent non-opposition” to the “cut throat competition and reckless lending” that took place during the period.

The big black marker censorship lines in the Volume 3 core documents make for a nice touch. Adds to Inquiries’ air of mystery (bewilderment).

fyi The Other Dissenter

Sinn Féin Finance spokesperson Pearse Doherty has said there are fundamental failures in the final report of the banking inquiry.

Deputy Doherty said;

“We are conscious that people are still suffering as a direct result of the causes of the bank crisis and the policy responses. People wanted those at the helm to be held accountable for their actions. We attempted to do that at the public hearing.

“The final report, however, rationalises the key player’s position and presents their position as the defining narrative of the crisis. This is a major failing of the banking inquiry.

“While the banking report touches upon of the relationship between bankers, developers and politicians, what it fails to do is examine those relationships. That was the whole purpose of the ‘nexus phase’ – to critically analyse those links. This is another fundamental failure of the report.

“It fails to consider in any real way the operation of NAMA, whether it was appropriate or not, the liquidation of IBRC and the issue of burden-sharing outside of the ECB’s response.
[…] “Will some of the lessons be learnt? Looking at this government the answer is no. The Fianna Fáil government reduced sustainable taxes and put their hopes on property-related income.

“This is exactly what Fine Gael is doing with its plan to abolish €22bn of our sustainable tax base.

“There’s no doubt that this will not be the final chapter in this story. People will continue to dig into this. The fact that 98 percent of the material we received will not be published is not acceptable.

Brendan O’Connor did a satire advance publication of the report a couple of weeks ago in the Sindo. The satire suggested that there would be a largely insipid report except when it came to the ECB when they would be unanimous is demonizing that institution. How prescient he was.

It concludes that the ECB threatened to withdraw liquidity unless there was a bail out. Well of course we knew that and what is wriong with that? Irish banks had gone way beyond the type of liquidity support which they were entitled to get from the ECB and that was because they were insolvent. The ECB were absolutely entitled and right to insist on the bailout.

If Ireland had had decent oil and gas reserves, the tardiness of this would have allowed it to be read while observing the sequel in real time.

The headline was rolled on BBG today and I doubt many overseas readers even bothered to read all the way through the banner.

Re: The Question which the Inquiry Raises

I think that the important thing, which has happened in commercial property in Ireland in recent times (commercial real estate enterprise was really what was at the root of the Irish financial crisis), is the transition away from a bank funded commercial property sector, to a private equity fund model. And what was more revealing, to me personally, than anything else published in this inquiry report, . . . was that after everything that has happened, and after billions of lines of analysis written by our learned economics professionals, . . . that when summoned to appear in front of an Oireachtas committee recently, . . . the private equity funds, who now sit squarely, in the heart of the commercial property industry in Ireland, . . . said, that they could not find a space in their diary.

Roll back, a decade. Substitute bank, for private equity fund, and one has a repetition of the same stuff, all over again. As they say, roll on the next inquiry, into the next crash and subsequent financial crisis. By that stage, no doubt, most of us will simply be waving our walking sticks and movement assistance devices in the air, . . . and few will think to even ask our generation, about ‘back the nineties’ (insert an ould fella’s giving out voice) BOH.

Page 6 of the Regling and Watson report ” This was a plain vanilla property bubble, compounded by exceptional concentrations of lending for purposes relating to property, and notably commercial property”. Reckless Irish banks secured their commercial property lending against extraordinary Irish commercial property leases i.e. upward-only rent reviews tied to very long leases. No other country in the world tolerated these feudal leases. The reason Ireland had these extraordinary leases was because the sovereign signed them.

Re: The Question which the Inquiry Should have Raised

Essentially, what we had in Ireland, was some variant of Greenspan-economics. That is to say, one cannot avoid an economic bubble. The best that one can do, is ‘clean up the mess’, after all of the dust has settled. It was commonly accepted wisdom at the time in the 90’s and 00’s, that this was just the best that we could do, or should try to do.

The question, which the inquiry might needed to ask, was if ‘cleaning up the mess after’, is a cost effective strategy, or not? Hint: The Irish specific running of this experiment, throws up a conclusion, which should be beyond dispute. It’s unforgivable that private equity funds, refused to appear at the Irish parliament’s buildings recently – and is not a great sign, for the future. These are, the kinds of lessons that we ought really to have learned by now. Intrusive financial regulation needs to be, just that. Apart from putting financial institutions in the spotlight, it puts those in our regulator’s office in the spotlight, at the same time, . . and is not intended to be comfortable for any side. BOH.

AIB has a leverage ratio of 5.4% as the world economy heads into deflation.Juicing up returns via leverage only works with 2% inflation. With deflation leverage is toxic.

Interesting how the local poltroons get a pass while the ECB as a foreign entity is targeted.

It is true that €9bn in possible bond burning is not small change but neither is support for Irish banks of up to €140bn or 25% of all Euro Area emergency funding for a small economy member is not inconsequential either.

Black swan events are rare and it usually pays to go with the flow:

Irish Banking Inquiry 2016: Delayed wisdom, glacial change

@ John Corcoran

You have put your finger on the main reason why the Celtic Tiger engine blew up. It was not domestic, as widely believed, but commercial property, supposedly in the hands of professional drivers, that was the main reason; not the estates created by small-scale builders across the country (that could get involved if, as one professional said to me, “they could hold a spirit level”).

And unique and antiquated lease law was the real villain of the piece, maintained in place because of (i) the influence of those benefiting from it and (ii) fear that any dramatic immediate change would (a) cause total market disruption and (b) be subject to successful legal challenge.

The governing laws were decided by politicians acting, supposedly, in the public interest as they viewed it. The evidence that their view is not unacceptable to a wide swathe of the electorate is indisputable. One can take the example of the legislation adopted, supposedly, to ensure “that this never happens again” (assuredly the tiredest cliche in the political and media vocabulary) and the view of the European Commission in its most recent report.

“Establishing an effective spending control mechanism is crucial for prudent and counter-cyclical fiscal policy making. With the introduction of a medium-term expenditure framework (MTEF) in 2012, expenditure ceilings were expected to operate as anchors of prudent fiscal policy making over the medium term. However, while specifying procedures and conditions for revisions, existing legislation and relevant circulars, leave ample room for changing the ceilings in a pro-cyclical manner as testified by recent experience.”

Are we being asked to believe that this situation is the work of public servants?

Were the legislation and relevant circulars drafted in order to have their supposed impact, it would greatly limited the capacity of politicians to decide by way of political whim where expenditure was directed. That is why it gets approved by them in the Dáil.

It is up to the electorate to change this situation. My near certainty is that they will change some of the actors, but not the play.


I don’t have direct access to the Pete Lunn ESRI piece …

Surprising – 8 years on – that we still do not have a critical analysis of How and Why the ESRI [supposedly a reasonably cogent bunch] slipped up big time here … insufficient in the extreme to simply cite IMF and OECD reviews …. a small nation must be intellectually smarter …. and we clearly were NOT

In behavioural terms – How, for example, did [does] flawed market ideology influence the thinking, models, and analysis of the ESRI during John Fitzgerald’s tenure at the top?

Have any ‘changes in mind-set’ occurred since?

Have any thought changes in the wider academic community occurred since?

One suspects … sadly … not!

100 years after 1916 the actions of the Irish Political Power Elite in recent years have been embarrassingly sheepishily supine and servile to the Corporate.Financial System in the extreme …..

One wonders if revolution in thought is still possible …?

The Lumpen Irish Citizenry has been roightly scr€wed for 100 Billion …. FACT.

@ Michael

The reason why the ECB held the line on the bonds was
1 it was easy
2 the Eurozone does not have the architecture required to run itself during a financial crisis

specifically it is missing

• A Banking union with a single supervisor
• a single resolution authority
• a common safety net involving
o Deposit insurance
o fiscal backstops
o burden sharing and
o a credible Lender of Last Resort

None of these have been put in place since either.


Why did Nyberg miss the elephant in the room:

Commercial property lease lengths in Finland 3 years
Commercial property lease lengths in Ireland 35 years

Arthur Beezley on the topic.

Despite the attempt of the members of the enquiry to fix the major responsibility for the crash other than where it rightfully belongs (i.e. with the politicians and the electorate that put them into office), they have, paradoxically, thrown up the one figure that debunks their underlying arguments.

The sum of €9 billion is not a minor amount; but not that significant in the wider scheme of things.

To bring the correct analysis to its logical conclusion, another question needs to be answered i.e. does the value of the concessionary financing ultimately granted by the other countries of the EA in the context of the Irish bailout add up to a sum of matching proportions?

The latest quotations.

The inherent contradictions of, on the one hand, trying to maintain that “we were not told” or, alternatively, “we were made do things that we did not want to do”, coupled most recently with “we are being told but it is nobody’s business but our own” and, ending up, with “maybe we should do it anyway”, must by now be obvious, even to the most blinkered of observers.

There has been no meaningful financial reform since Lehman. Leverage is as high as ever. The EU has no structures in place for the next crash. Derivatives suffer from a huge collateral problem. Most of the money in the US flows to the top 1%.

“It is up to the electorate to change this situation. My near certainty is that they will change some of the actors, but not the play.”

So, the spectators on ‘Hill 16’ can alter the Rules-of-Play? Not likely. The Coach, in consultation with the Selectors can change the composition of the team – and kit them out in a different strip. That’s it.

Once invested our so-called democratic government (and the ECB) is simply a partisan, largely unaccountable dictatorship. Our electorate, “votes with its heart, not its head.” And.

When our parliamentary politicians and the financial vested interests hold the voter by his (financial) testicles, his mind and his heart follow.

No meaningful re-structuring of our so-called banking system (its simply licensed usury) is possible absent prior meaningful restructurings of our parliament and its procedures and privileges. Likely to happen. Nope!

text from Blind Biddy in Geneva with The One-Eyed Shia Sheik and Paddy Zhukov:

The Big Picture on Hibernia – a realist piece of background critical thought to be included in Vol. I BBIU on Capital’s Takeover of Ould Democracy Around Here , 2016

A Must read as it relates to global power context recently; are we global? Or simply taken over? h/t

Post 09 both finance and the PS needed to be reformed. Neither were. Next crash will be worse. Macro pru is a fig leaf.

It seems that all energy has been dissipated and all passion spent. During the crisis posts on the minutiae of Government or EU proposals often attracted more than 300 comments. Now, in the aftermath, and following the totally inadequate parliamentary reckoning, it is a struggle to hit 30.

There may have been some shaking out of the most avaricious rent-seekers, natural wastage always takes its toll and the allocation of political patronage has had a major re-direction, but the majority of rent-seekers remain ensconced – and there are always new additions to their number. And the evidence is all around.

To a considerable extent the status quo ex ante has been restored. The principal difference, as we head in to a general election, is that there is no viable ‘government-in waiting’ to provided voters with the option of choosing an alternative government should enough of them decided to throw the current bums out. The previous two and a half (or the one and a bit v. one and a bigger bit) party system, in most instances, gave voters at a general election the options of retaining the outgoing government or of kicking them out of office safe in the knowledge that the alternative government-in-waiting would deliver reasonably sensible governance. That is the essential feature of democratic governance. A potentially credible government in waiting must be offered to voters.

This isn’t the case now and it may take a further visit to the polling booths for voters to effect the necessary realignment of the disparate political factions and plethora of ‘independents’. However, this realignment may prove beyond their ability to achieve in one effort given the spread of non-mainstream factions and independents being offered to them that range from the dangerous through the ideologically deluded, the pious and the anally retentive to the well-intentioned but ineffectual. In the meantime the rent-seekers, fully supported by the mainstream parties, will continue to gorge themselves at the expense of the vast majority of citizens.

Joe Higgins TD is retiring to make way for Ruth Coppinger. He wrote his own banking report , high on insight compared to the shoddy official version. I wonder what John McHale thinks of the state of the banking sector. Oligopoly in the mortgage market means consumers are fleeced on rates. AIB should be decommissioned and replaced with an outfit whose DNA is competence.

The Banking Inquiry was a surprisingly worthwhile exercise. Its report is a very long way from being a final balanced description and judgement on the disaster, but it is good in parts, and very good in some parts. Much more important than the report, the inquiry process itself brought a huge amount of information, perspectives and analysis into the public domain that should provide the material for more considered political and policy analysis of the catastrophe in the future.

It also demonstrated that much of what was previously written on the subject by apologists for the FF-FG-Green bank guarantee axis was garbage. Now that it is too late to see the bad guys, the undeserving beneficiaries and the misguided policy-makers get their just desserts, it is at least good that the information lock-down that protected them through the worst of the crisis has been significantly relaxed.

the elites are living on fumes. Neoliberalism can’t even generate growth now. The debt escalator is broken. It is time to start thinking of new memes. IT editorials are going to need them.

Re: Colm in the Indo

Colm writes on 31st Jan 2016.

All of the official reports have interesting things to say about the banking system in the round and its spectacular collapse, but there has been nothing exploring the failures on a bank-by-bank basis.

I think that Colm has been consistent in this one point, for the very many years that I have been reading his columns, blogs and listening to his commentary and input into the debate in general.

To put, what Colm has written above, in another language, . . . what we seem to notice in the modern time (I’m not certain if this was always the case, or if it’s a more recent trend, now that everyone relies more on academic upbringing and less on un-common sense), . . . is the trend towards observation and reporting of the outcome.

It’s a symptom really of the (over-) media age, that we inhabit today.

I listened to Ridley Scott movie director discuss his industry recently. Ridley asked, how many movies are made each year, in north America alone? Someone ventured an educated guess – there are probably about a thousand odd movies – produced each year in north America. Ridley’s response to this suggestion was, that is probably about five hundred movies too many. One simply runs out of stories to tell, characters that one can create and dramas that one can depict. One simply runs out of creativity, a lot faster than one looses an ability to push through more production of movie product.

It’s the same, with reporting and the medium.

We have it coming from all angles, at us.

It’s the modern world that we live in.

But, always, as large as the volume of material produced, and amounts of reporting that is carried out, the level of creativity and analysis, within that reporting and material is never approaches near an acceptable standard.

All we have got is: the house came tumbling down, and all of the rubble is scattered around our feet, all around the floor.

We’ve now got umpteen examples of that narrative, describing the aftermath, the fall out, the consequences. And the strangest thing about all of that, is that in the modern age that we inhabit, the media age, that would appear to be, all that there is, and no more.

There was one contribution, within the evidence however, from Irish Times veteran journalist (this is the second real estate crash in Ireland and United Kingdom, which Frank McDonald has reported upon, in a single life time. Frank was a reporter back in the aftermath days of the 1974 real estate bubble collapse in both Britain and Ireland (and very little is known, or recorded about that event either).

Frank I can recall, did offer a suggestion to the banking inquiry committee members, that what we witnessed in Ireland, was equivalent to that which happened in north America. What we had in Ireland, was sub-prime lending. But instead of spreading the sub-prime lending, thinly across a whole population of otherwise, un-credit worthy borrowers. In Ireland, owing to it’s smaller population and physical size, one could never hide such lending activity, in the aggregate across an entire continent. What we did in Ireland, was sub-prime lending nonetheless, and it was concentrated rather, to achieve it’s equivalent goals as they achieved in north America, amongst a select few who engaged in real estate speculation.

But none of it is new.

An HBO documentary series, made recently about the second American president and friend of George Washington, John Adams (1735 – 1826), had himself a son, who blew his fortune on real estate ‘opportunities’, post the American revolution of the later 18th century. All that one can say, is that this particular wheel has been spinning on its axis now, for a very long time. BOH.

@ PH

The silence is ominous, or promising, depending on one’s point of view.

Arthur Beezley deserves a medal for this contribution to a promising interpretation.

The various interventions detectable in the media over the past days would best be categorised as dirty work at the crossroads.

The election outcome, as has already been demonstrated across Europe, (Greece, Portugal, Spain) is wide open. Opinion is free but budgetary facts are obstinate. The capacity to ignore this over the life-time of the next Dáil is limited, if not non-existent.


There will always be a certain percentage of voters who believe that there is no shortage of money available from increasing taxation on other voters (or from reducing the largesse allocated to other voters) to fund an increase in the largesse to which they believe they are entitled as a right. However, for a majority of voters (which would include many who had experienced the outcome of Martin O’Donoghue persuading Jack Lynch and George Colley of his economic lunacy in 1977 – with a second bout of education being provided to the slow-learners with the 2008 triple bust) I suspect there is much more scepticism about this “fiscal space” and the claims of the various factions.

What, of course, is totally ignored – and which is much much larger than even the most fanciful estimates of this “fiscal space” is the amount in total of economic rent that is captured, of the resources that are wasted to ensure the capture of these rents and of the accompanying dead-weight losses and inefficiencies. And there even less consideration of how any available “fiscal space” is suqeezed to ensure some compensation of the masses for the detrimental impacts of the rapacious rent-seeking by a minority – even if it a very large minority.

What used to help to keep the show on the road – most of time – is that the rent-seekers are spread across the political spectrum and the traditional 2 and a half party system ensured they were either represented or protected irrespective of the complexion of the government in power.

That system has now broken down, but the rent seekers have little to fear at the moment. The outgoing government has pampered them lovingly and they retain sufficient support in FF, SF and the main elements of the ideologically deluded left.

RTE is plasteted with election chatter. FG and Lab say they can “build on the recovery”. US growth has just been revised downwards. The UK is on the verge of deflation. The ECB can only manage 0.4% inflation.

Trying to figure out me fiscal stance within an unknown fiscal space under the constraints of a nonsensical fiscal corset ….

Little wonder that Fine Gael, Fianna Fail and Labour, financial system branch managers, are fiscally confused …

Time for a change … competence in addition a plus!

@Financial System, ECB, EC, IMF

Unfinished business!

@Brian O’Hanlon

Corporate Governance and Irish Bank Boards = Oxymoronic …

Oh for the good ol’ days of ODC … ordinary decent capitalism ….

@ JF

This might be one.

I invariably refer to this BOE paper when trying to get my head around at least some of the issues.

It is reassuring, on the one hand, to note that the practitioners and the commentators, both general and academic, in the banking arena also appear to have some considerable difficulty in understanding what is going on and, on the other hand, very, very worrying.

The link to the Banking Inquiry is direct. The conclusions drawn by it ignore the wider context within which the banking crisis arose, largely for reasons of domestic political consumption.

Next stop; introduction of negative rates by the ECB?

Paul Hunt has said most of it already.

Essentially the status quo ante has won out. The crisis has been wasted. The banking enquiry won’t result in any changes, even within the world of banking. Foreign banks were chased away (e.g. and will be slow to return leaving us with the few domestic banks and the shadow lending world of NAMA and the PE/Vulture funds.

Meantime the political parties are all back to the same games in the election. The standing orders of the Dail are the same. The public service reformations have been skimpy at best. And we have a party funding mechanism that protects the status quo to an obnoxious degree. (if you don’t believe me, look at the address of the Labour Party HQ. Some of the most expensive office space in the country, quite likely). New political entrants are fighting against that kind of money. No wonder there’s no change..and the failure or incompleteness of the banking enquiry is – at this stage – largely beside the point.

The HSE costs 14bn a year and it is completely dysfunctional. How many people are sucking off that teat?

The election campaign up to this point has surpassed all expectations in terms of what can only be described as sheer silliness. “Lost in Fiscal Space” might be an appropriate title for any subsequent documentary.

From the point of view of this blog, the question is whether economic commentary has been caught up entirely in the general failure to address everything except the real central issue; how do we fund and expend public expenditure in general, the question of whether the economy will be able to provide more, or less, funding in the future being a residual issue, and, in any case, largely un-quantifiable.

It would seem that the answer is no.

The question then turns to whether the outcome of the election will force the necessary focus on both politicians and electorate. The answer would appear to be, possibly, yes for three central reasons (i) EU financial rules (ii) international uncertainty and (iii) the likelihood of a large number of independents from whom a minority government will have to seek support and, in the process, force debate in relation to the 95% of the – recurring – expenditure iceberg,much of it wasteful and the result of rent-seeking rather than entitlement, below the water.

The external environment has deteriorated markedly for whoever forms the next Irish government and the global banking sector is now taking a pounding, including behemoths like Deutsche bank. Japanese 10-year yields are now negative, as are German yields out to 8 years.
The market appears to have decided that monetary policy has reached its limits and that negative interest rates do more harm than good. Where to from here?

O’Faolain’s statement that “The new Ireland is still learning the old lessons the hard way, like a brilliant but arrogant boy whose very brilliance acts as a dam against experience, so that he learns everything quickly –except experience


‘From the point of view of this blog, the question is whether economic commentary has been caught up entirely in the general failure to address everything except the real central issue; how do we fund and expend public expenditure in general, the question of whether the economy will be able to provide more, or less, funding in the future being a residual issue, and, in any case, largely un-quantifiable.’

With respect, it is hard to shift you off your Hobby Horse. Fiscal rectitude is one issue, and only one, important though it is.

Human life is a broad current, as @ BWSnr knows well, and there are other equally ‘central’, and pressing, issues. For example, decent employment doesn’t grow on trees and it often doesn’t get ‘delivered’ by the ‘free market’.

Your otherwise worthy EC is failing its citizens in terms of employment. The younger EC ‘middle class’ is relatively poorer every year, The promise of security was not delivered, so why should they believe in the ‘system’.

Second, as @ seafoid regularly points out, is the pathetic ‘regulation’ of financial markets. Governments must be terrifically ‘prudent and responsible’, while financial speculators and their central banking mates can pocket the windfalls, play ducks and drakes with tax regimes and socialise losses ad lib. We have failed there too, and the day of reckoning for EZ banks and governments is on the way.

‘Bubbles inflate both perceived wealth and future expectations. Meanwhile, in the real economy sphere, myriad Bubble facets work to destroy wealth. Mal-investment, over-investment and associated wealth destruction remain largely concealed so long as financial asset inflation persists. This is true as well for wealth redistribution. The unfolding adjustment process will deflate asset prices so as to converge more closely with deteriorating underlying economic fundamentals.’


Ref your BOE paper on ‘money’

‘Since abandoning the gold standard in 1931, various other ways of keeping the value of money stable have been tried, with differing degrees of success. For example, in the 1980s, policy aimed to keep the rate at which the amount of broad money in the economy was growing stable over time.(5)’

Other people know lots more than me here, but I know this much. Maintaining domestic economic growth is just one task. Managing the currency is another, and so is managing the trade balance. They all have to mesh and often they don’t.

The Old Lady of Threadneedle St is about 400 years old, so the Brits have has plenty of sterling crises down the years. Going off the Gold Standard in the 30s wasn’t done lightly.

Post WW11 there were many years of tight credit control, and this was all thrown to the wind in Thatcher’s Big Bang. The relationship between the BoE and City of London has never been the same since. A Festival of private bank-generated consumer debt.

Here is an entertaining UK commentator, who also happens to be…well… accurate

@ PQ

On the subject of hobby horses, it is all in the eye of the beholder. I have a theory that explains quite a few of them, expressed in terms of the “inverse law of involvement” i.e. the further away and irrelevant the problem, the more intense the debate is about it.

I make no bones about the fact that it is my view that the overwhelming national need is to dissect the accounts of Ireland Inc. and present them in an understandable format to the electorate. This problem is evidently too close to home to generate useful debate. What we have instead is auction politics buying, as the phrase has it, the voter with his/her own money. This folie a deux – between politicians and the electorate – is evident in all democracies but carried to extremes in Ireland because the budgetary “facts” are so much confetti. (There is a certain logic to this delusional relationship. Every voter thinks that it is some other voter will pay the bill. The politicians know this).

What the country really needs, of course, is another 10,000 public servants!


Once upon a time MIT had cred ….

That was when ould capitalism reigned … no more …

Financialization_ism is the order of the day … with a dollop of neo-kon-militarism … and a veryveryvery dodgy elite …

Globally … we’re scr€wed ….

Eurozone is regressing to 1930s and less and less so-called democracy … branch managers anyone ….

Locally … this guy retains achievement ….

Blind Biddy and I support him …


Your “inverse law of involvement” explains a lot.

With regard to your observations on the politicians and the electorate as we face in to ths general election, I believe three things are going on. For the outgoing governing politicians, having squared the various special interest groups, the focus is on tweaking the ‘great redistribution’ required to compensate for the rent-seeking of the special interest groups and to realign the distribution of the largesse and on realigning the fiscal burden of funding this largesse. FF and SF have their own variants of this exercise – which explains this waffle about “fiscal space”. These variations of the fiscal tweaking required set the limit of their ambitions. The views of the other factions and individuals don’t matter very much.

However, for the electorate it appears a majority are resigned to the fact that it will take 3 general elections to sort out the political aftermath of 2008. A majority gave FF and the Glasrai a well deserved electoral kicking in 2011; and a majority now seem resolved to give FG and Labour an electoral kicking on 26 Feb. I suspect they would much prefer to have a more competent, less hubristic government and a credible government-in-waiting. Now they have neither. Most voters were broadly satisfied with the 2 and half party system that prevailed from 1932 to 2011. But before they’ll get to replacing that system a majority seem bent on giving the current shower a good kicking. And it is well deserved.

“I make no bones about the fact that it is my view that the overwhelming national need is to dissect the accounts of Ireland Inc. and present them in an understandable format to the electorate. This problem is evidently too close to home to generate useful debate. What we have instead is auction politics buying, as the phrase has it, the voter with his/her own money. This folie a deux – between politicians and the electorate – is evident in all democracies but carried to extremes in Ireland because the budgetary “facts” are so much confetti. (There is a certain logic to this delusional relationship. Every voter thinks that it is some other voter will pay the bill. The politicians know this).”

DOCM – are you actually sure about the above? Do you actually believe it? It completely contradicts both common and not-so-common sense.

The ‘electorate’ – whomsoever they are, have little interest in our so-called National Accounts. Its one big boring bore. Politicians seeking election will avoid (like the plague) all mention of National Accounts. It attracts neither interest nor votes. Now, flooding – there’s one for ye!

Sure we have ‘auction politics’ – but so what? Its Politics! Like as in “Local”. And as for this – “…folie a deux …” That is just plain dopey. Ireland is an ‘extreme’? I doubt it. Still, we do have STV-PR, which is almost, but not quite, unique.

Now, I’m not asserting that each Irish voter may be completely disinterested. I suspect that some are genuinely engaged, some semi-attached but the remainder just want to get as far away as possible.*

The only arithmetic our politicians really care about are the number of 1st preferences they get, the pattern of transfers and who will be last to be eliminated. QED.

* see: Preface to “Developing Attitude Toward Learning: or SMATS and SMUTS”. 2nd ed. Robert Mager (1984). p ix; “The Parable of King Amoeba”.

But for all the regulatory changes that policymakers can list, there are concerns that reforms have not gone far enough. Anat Admati of Stanford University wrote in this month’s National Institute Economic Review that the reforms had been “messy and unfocused”. “Instead of simple and cost-effective regulations to counter distorted incentives that harm the economy, regulators have devised extremely complex regulations that may not bring enough benefit to justify the costs but will allow the pretence of action,” she said.

@ PQ

By the way, there is another BOE paper which is of interest as it deals with the process of “money creation in a modern economy” and demonstrates that not only are there popular misunderstandings about the topic, which is hardly surprising, but that these are also prevalent in textbooks and the academic world generally, which is.

An example is the prevalent assumption that a “proper” central bank should be a source of limitless liquidity to banks in times of crisis. The BOE paper (page 3) states that reserves are supplied “in normal times ‘on demand’ .. to commercial banks in exchange for other assets on their balance sheets”.

The exchange element (and possible associated haircuts) is routinely ignored, leading to the conclusion in the case of Greece, for example, that the ECB “closed Greek banks”, and/or imposed capital controls, when it was the Greek government that did so, admittedly after losing a stand-off with the ECB which the previous Irish government at least had the sense not to engage in. Not, of course, a conclusion that the Banking Inquiry arrived at.

Footnote 9 at page 8 is also of interest.

“If the central bank were to lower interest rates significantly below zero, banks would swap their bank reserves into currency, which would pay a higher interest rate (of zero, or slightly less after taking into account the cost of storing currency). Or put another way, the demand for central bank reserves would disappear, so the central bank could no longer influence the economy by changing the price of these reserves”.

In the present topsy turvy banking world, this seems not to be true.

@ PQ

I overlooked the fact that the ECB has already (December) introduced a – small – negative rate. Strange times!

‘Remembrance of Past Economic Narratives’

,,,the soft underbelly of the economy,,,

,,,the small open economy,,,,

,,,the Celtic Tiger,,,

,,,the soft landing,,,

,,,the fiscal space,,,,

What’s next?

The ‘rent seekers’ are very happy, they have exceeded their survival expectations since the collapse of the economy and they will be in an even stronger position after this election because FG and FF will be told by those same rent seekers, by big business, by ECB, by US Chamber of Commerce, by IMF and by EU to get their act together, form a stable neo-liberal government and keep the ‘show on the road’ – in the interests of the citizens – dontcha know….

@ PH

One of the most puzzling aspects of the Irish saga is how a governing and media establishment of such parochialism and mediocrity can, in the past half-century at least, come up with repeated sequences of boom/bust/boom i.e. reflecting the ability to get out of trouble as fast as we get into it. The only really obvious explanation is the role of FDI and the lucky/unlucky coincidences of favourable/unfavourable external circumstances impacting a near totally open economy. Each episode has to be studied in turn.

At the risk of too much repetition of the same point, this time it is really, really different.

The Portuguese are finding out the hard way.

Scratch any Irish media commentator and mention Portugal and the reaction would be; Portugal?


Neolibs have not understood the nature of the labour-capital relation …..

QE went to the wrong side of this relation …. which by now must be pretty close to toppling over ….

Note the ‘tentative’ perhaps here: “…. perhaps going as far as injecting stimulus directly into the veins of the economy.”

Odious debt is simply crippling … a ‘real WMD’ …. we are under the cosh of the matrixsQuid and their ilk, the superpacs who control democracy, the 1% who own the medja and propagandize the serfs …. and ignorance.

Spose the upcoming Fine Gael/Fianna Fail ‘Special Purpose Vehicle’ will continue with the usual nonsense and adopt their servile branch managerial positions ….. such as accepting the kriminal imposition of financial system debt on the Irish Citizenry


GO! Away.

@Brian Woods Snr.

In only took 100 years to find those 1916 ‘gravitational waves’ ….. as Seven_of_9 put it in an intergalactic text to Blind Biddy – “Earthling are very slow learners” – and there is probably no truth in the rumour that DOCM was spotted riding a slow camel around Limerick City yesterday … could be global warming of course …. 1.5 Trillion in student debt in the US! Seven has a point …

Ah, yes. Gravitational Waves. But do they exist in Fiscal Space? Or is Fiscal Space such a titanic Black Hole that it swallows all? I blame it all on “Blakes 7” – really I do. And as for those Dalecks: they’re just a bunch of mono-ocular pussies.

Am reading about the creation of money (courtesy of DOCM). Smoke, mirrors and Houdini come to mind. Not to mention Moral Hazard. Ponzi and Madoff did exactly the same thing. Only they got caught! You can create fiat money no bother. But debt has to be paid from your real, disposable future income. So what happens when that income is swallowed by that pesky Fiscal Space? Do sucky sucking sounds warp through Fiscal Space?

“Us Earthlings is slow learners” ??? Now listen here. Speak for yourself. KO! And have a jorum while your at it!

New economic narratives –

‘The Gravitational Pull of The Fiscal Space’

MOF to electorate – ‘Let us down? The bonds will go up!’

Back to the Banking Inquiry:

Patrick Honohan, Guv’nor Emeritus of the Central Bank, was the witness, and Joe Higgins T.D. was asking the questions.

“I have a general question first for the governor,” he began. “Some people would feel that in terms of a new report and indeed in other reports, in trying to get to this mystery of why there was not an intervention to stop the property bubble from being blown up, there is too much tiptoeing around the tulips and that we can get to a very fundamental reason.”

By this point some of Joe’s colleagues on the committee and the media contingent accustomed to his periodic exposition of capitalism turned off. All knew that what was to follow would undoubtedly contain nothing new. Except in this case, they were all wrong.

On he went: “Is it the case that the property bubble was blown to extremes by this scramble for super profits by banks, developers, and bondholders, that this is what the capitalist financial market is all about, that this ideology is shared by Government, the majority of the legislature in this State and by much of the media and that the regulatory authorities, most of whom came through the system, share that, and that the prevailing spirit is ‘Don’t separate the lion from its prey. That is what they do, let them at it’?”

Everybody awaited Honohan’s expected reply in defence of the system, but the witness surprised the room.

“That is right,” he said. “That is what I read.”

If the room was surprised, then Joe was flummoxed. All his political life he had been attempting to expose the evil of capitalism, often a lone voice against those who would do down the working man and woman, and here was a figure from the busom of the establishment admitting that he, Joe, had been right all along.

“You agree with me,” Joe asked in a voice thick with incredulity.

“In broad terms,” Honohan replied.

And whence did this ‘lite-touch’ regulation originate?

From the report chaired by Michael McDowell S.C. for Ministers Charles McCreevy Fianna Fail and Mary Harney of the Progressive Democrats and Taoiseach B. Ahern in 2002.

@ DoD

one third of americans work on contracts with no pension funding, health insurance or sickness cover. Capital has destroyed Labour. Labour anwers back by refusing to buy more of what the snP 500 is selling. So there is no growth. Neoliberalism has iterated the logic to the death .

It is worse than anything you can imagine. MR have the stats.
“about 15 percent of the population, 46 million people, live below the poverty level, which is around $14,000 for a two-person household and $23,492 for a four-person household.35 Twenty million of those living in poverty (close to half) are relying on an income that is less than 50 percent of the poverty level—$7,000 for a two-person household and $12,000 for a family of four. Over 100 million people (one-third of the U.S. population) are existing below twice the poverty income, close to $47,000 for a family of four.”

Wide wealth differentials predict poorer health outcomes and these are feeding into brutal mortality statistics.

This is senior hurling. Yellen can’t generate growth because of this.

Back to the Banking enquiry (2)

A. S. Blinder – quote –
‘ The poster child is Ireland – in practice Ireland’s rash actions turned a banking crisis into a sovereign debt crisis. Ireland’s annual government budget deficit in 2010 was a shocking 32% of GDP, likely setting a modern day world record.’

Aren’t we great fellas altogether with our world recods and our enquiries and all that and sure we’re now almost back on the pig’s back – ‘air dhroim na mhiuice’ – and the only casualties are the emigrants, the citizens, the homeless, the recipients of social services, the usual wasters – sure we’ll be grand and our new FF/FG admin will be the makin’of us….and the bond buyers will love us!

And sure if we need more ‘enquiries’ – we’ll have them!

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