Thursday, 28 July 2011

Sometime during the day while I was dealing with the fallout to my liver of over-enthusiastic prescribing of anti-depressents and statins (so the Zeitgeist) Brian Hayes TD made an ass of himself.

You can see his full comments elsewhere but Junior Minister at Finance said that Ireland had NO choices but to trundle on paying “or go back under Britain's skirts” (no I didn't know countries were wearing them long this season or that we had ever resided there either). In a statement as pointlessly silly as it was inaccurate Mr Hayes claimed our debt would double if we left the Euro, we had few natural resources and the programme for government “ had never
mattered less”. In a final bit of puffery he likened those questioning the Euro as inspired by North Korea's Juche or go it alone policy.

I'm going to leave his remarks on the programme for government stand: after all if he wants to publicly declare lying on that scale who am I to dissuade him? With a bunched liver I don't have the energy either to earwig him for being stupid enough to announce such levels of mendacity.

We elect governments to make choices and making choices involves finding them. If you are too stupid to see the choices or too narrow minded to want to do so, get out and stay out of government. Plain old fashioned 1960s geography book economics that our choices are limited because we have no natural resources is frightening when it comes from someone in power. Guff like that is just about bearable from opposition deputies not in a position to do harm.

Ireland owes somewhere between €150 billion and €220 billion depending who you talk to, what their agenda is (watch for the ones who say “no agendas here”, worst liars of all) and how they calculate.

Not to any agreed standard of accuracy clearly.

I would like if the sums added up just one way, it is a primitive uneducated holdover I share with many: probably comes from having to get sums right in school, a traumatic experience in early life that more economists and politicians should endure.

Leaving aside my disquiet that there can be €70 billions of difference we are still faced with a colossal and still rising debt mountain (valley surely?). The debt at whatever figure breaks down roughly 2/3 Sovereign Debt and 1/3 Bank Debt treated as Sovereign Debt because our Government in their generosity with our future incomes took it on.

Right now the people who voluntarily lend money to governments, the markets, believe that we have NO HOPE AT ALL of making the repayments on this burgeoning hole.

That is why no one except other governments will give us a red cent and people who assess these things for a living have down graded our debt/bonds to junk. ( Not rubbish, junk, the super risky-you-might-not-get-all-your-money-back-stuff)-

For a variety of reasons, mostly to do with the fact that they could not win a domestic election in 25 years and had gotten themselves into Europe's BIGGEST party FG have had a kind of religious approach to Europe that is not present in any other party in the state. Wrap-the-gold-stars-round me boys leaves them ill equipped to deal with reality if the comments attributed to Junior Minister Brian Hayes tonight are, in fact true.

I'd like to give him the benefit of doubting that anyone could be so asinine without copious quantities of mind altering substances or that he is being wildly misquoted. I am not optimistic on either.

Mr Hayes jumped not just on a bad idea but on shockingly flawed thinking also and then preceded to kick it to death.

Going back into Sterling, as I am translating his skirts comment, is not just NOT the only game in town it is one that nobody how took the smallest notice of currency would advocate. I suspect that Mr Hayes knows this but is trying to stick up as unpalatable an Aunt Sally as he can construct from his limited resources. His real fear is that more and more people a re now questioning the Euro, and thus ( Oh Heresy Heresy they all hear and say) the transcendent holiness of the European project.

We started on the wrong side of a fiat currency (paper the government INSISTS is worth something), the Euro, and are going to stay there. Euro interest rates ( and insane FF policies) stoked our capital bubble: now mired in debt we will be scourged by a politicised ECB minding Germany.

The Euro, despite the feeble best efforts of EU's politicians and technocrats may fail anyway. We should have, (by we I mean the Department of Finance to which Mr Hayes is attached) a Plan B. Indeed the should even have a Plan Z. Mr Hayes's outburst does not make me confident that such plans exist or even that the people with power know that they SHOULD exist.

That the Euro under threat is fearsomely obvious: the currency would look a lot worse except for, as the elderly mourner in Monaseed expressed something similar, “He waddn't as bad as hees brudder. Bernanke, in an exercise that has reduced American wealth by more than anything else in history, has printed dollars under that wonderful but rather odd belief that one may print wealth and Sterling is dropping against both € and $ as investors assess the dodgy health of Britain's banks and poor growth prospects for its stalling economy.It is the greatest tribute to Peter Mandelson that no one noticed during the election that Brown had wrecked Britains economy for a decade at least.

There is no reason why we should NOT consider quitting a Euro that is now an impoverishment. A floated currency would work fine once government realizes that your own currency means you can't do the kind of fiscal drunkenness so beloved of all politicians. There are innumerable choices open to us on the currency side(from privately issued gold backed notes to a floated fiat, currency is money, that is all.): That Mr Hayes other does not know this or does not care to know this makes him a poor choice of Junior House Doctor at the hospital of Finance.



Threatening to double our debt if we got out then in the same breath telling us that we had no option whatsoever but pay is arrant nonsense: neither statement holds a whit of truth. We have choices and what is worse the choice of defaulting ( yes we will use another word, I typing in a hot room and with a shot liver, you supply the vocabulary) is already priced into our bonds: lenders know we can't pay, they expect us NOT to pay. In fact the only person out of the loop on this would appear to be Mr Hayes.

To be reduced to calling critics of the pay-all-love-the-Euro policy North Koreans is not just to lose the argument from first-off but to flag your own defiant ignorance of exactly North Korea does. NK is the last totally centrally managed economy, utterly inimical to markets and freedom. Nothing Mr Hayes or indeed his colleagues have said gives any confidence that they have any better understanding of the role of voluntary exchange, the markets, in the life of the economy.

 It is Mr Hayes, blind to the semaphored and shouted signals from the market that is the propagandizing Central Committee Clown.

Wednesday, 27 July 2011

Viral or a very silly season?


Is it viral?
It seems that no sooner had the Junior Minister at Finance got the choices and facts facing Ireland about debt and the Euro completely wrong that his boss, Michael Noonan TD did the same thing, only worse, with even more bells and whistles.
Not content with the (by comparision) mild warnings of his Junior that we would have to "go back under Britain's skirts" if we did not pay every single cent owed  and that our debt would double INMMEDIATLY if we left the Holy Euro, Mr Noonan really gave us what-for. Russia! Russia! it will be Russia 98. We would rummage for food in the bins, old people would die by the hundreds and folk who had never contemplated knowing poverty would starve. Shades of Goody Proctor and an entire Hades, the over-kill in what is clearly concerted propaganda campaign has now become embarrassing.

It seems grossly unfair to be throwing a second brick-bat at FG in 24 hours ( first was on The Edmund Burke Institute website yesterday http://edmundburkeinstitute.ie/hayesreplyessay.php ) BUT they are the Government and this issue is to big to ignore. Also I have to confess a certain proprietorial interest in the matter: I don't remember a time when I was NOT an FG member and their particular wheel has a dent marked there by my shoulder so Lictores ire pacifice, hic loquitur de amore Romae.

That this is concerted propaganda is clear. As clear is that it is shockingly poor propaganda. What is not so clear is they are doing this.

Ireland is faced by a range, not so much off choices as forced marches. One scenario, listed among the BENIGN is that following a rolling default/restructure by Greece and a slightly sharper time-framed similar exercise by Portugal it would become politically impossible for any Irish (this Irish, we are talking moths here) to continue to pay all the debt, at least one third of which is quasi-sovereign Bank Black Hole.
Our bonds are junk & the markets are pricing default (reach for a word that is easier on your delicate palate if you are inclined) into our bonds because the believe that either we will not or cannot pay pack the debt burden. 
The truth is, however obvious, that nobody knows the future.
What we do know is that the debt crisis is far from over. on Thursday Italy had a 10 year bond sale (€2.7b) but yields points from 4.94% on June 28 to a whopping 5.77% and a few hours later Italian interest rates were at 5.81%.
We can speculate future scenarios but all of them must now take account that Greece is in the process of default. Yes it will be an organised vanilla flavoured one but the outcomes are the same: not all the money, not when it was agreed & next country up please. Portugal would seem to be that country, exactly WHEN the EU leaders will be meeting to agree a Portuguese "restructuring " is open to discussion but pre-Christmas looks like a safe bet.
If Portugal and Greece get write downs in Sovereign Debt why should Ireland continue to pay the all of the quasi-Sovereign Debt that is the Bank Black Hole ( or Lenehan's Poisonous Legacy)?
More to the point HOW can we?
Of course the order of the chaos could be quite different, there is lots of excrement to slap in to lots of air circulating devices but the end question for us is ALWAYS the same. How or why must we repay BBH/LPL?
The answer to that question will not be found in the crack-pot utterances of Mr Noonan and that is a very great pity. Concentrating on propagandising the domestic market is not a good role foe our finance Minister right now (and don't give job to Junior either) but the question must be WHY does he try?
Is it possible that Noonan himself can believe the utter rubbish he was spouting about the similarities between Ireland 2011 and Russia 1998. Noonan is a bright man with a record of believing extraordinary pieces of nonsense  but that is a stretch too far. FG have a religious belief in the sacramental nature of the European project and that certainly does not help but it still leaves me at a loss to know why, in the space of 48 hours, the FG people at finance should feel the need to propagandise so heavily for a position (NO DEFAULT! EVERY CENT! EVERY CENT) that is already lost. 
Is it the Holy Euro?  













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