PS Property Scam

July 27, 2014

An Taoiseach, Enda Kenny, has told us there is no property bubble. Over the past year property prices in Dublin have risen by 20-25% . A professional couple with 3 times the main salary plus salary of the other salary won’t hack it. They are being outbid by cash buyers.

Of these how many are local and how many represent vulture fund capital of domestic or foreign based interests, no one knows.

Reasonable property valuations of around the €200,000 mark have disappeared with prices skyrocketing far beyond the ceiling that can be afforded by most young people aiming to start a family.

Let’s think about this problem and approach it from a new angle. Without getting into the nitty-gritty of why we are not building the 15000 housing units annually, why the government is slow to act, why planning permission for these units is in the hands of developers cocooned by their problems with the banks, NAMA and the courts, might there be other reasons for the debacle?

Property tax is resented in Ireland and regarded as a bondholders and banker tax to fund repayment of odious debt. http://www.irishtimes.com/news/politics/resentment-over-property-tax-is-palpable-1.1793551

However it has been mooted by tripling the amount of property tax, in excess of €2bn could be raised that would allow taxation to be reduced. Alarmists have pointed out, this would be akin to giving with one hand and taking it away with the other and have derided and scorned the proposal.

However, there is method in this madness. Consider the following scenario: with QE providing plenty of collateral for banks to purchase/invest in property in Ireland with money from abroad, let’s say this money rushes to Ireland to purchase vast portfolios of land/commercial property from NAMA and property in the domestic private market?

Add to this, the savings of those unaffected by the recent property bubble wishing to cash in on rising rents to avoid low-interest rates. Add in lack of supply, and voila, we have our housing bubble?

Who gains? The banks gain. In oncoming stress tests due this fall, Irish banks will be scrutinised on their capital balances, how secure their lending is. Banks will point to rising property values as security against their lending return on domestic loans. Falling property values would lead to more falling into negative equity to tarnish the loan book of Irish banks.

Rising property charges will mean government can reduce taxes if these taxes can be offset and levied against property owners instead.

Cash rich buyers and external vulture funds can swoop in and control the market. Unable to compete, domestic buyers, young people hoping to start a family, will be priced out of the market and forced to rent.

'I don't get it...after all the budget cuts to streamline the work force, why aren't we moving faster.' Rental prices increase with domestic property charges handed on by a new slave class forced to pay whatever rent is decided by a new rentier class. Divisions between rich and poor increase.

Is there an alliance between government, the banks, vulture fund capital, a new rentier class of local and foreign capital with a Greek chorus of ECB, bondholders, to scam young people betrayed in the recent housing bubble collapse?

There is no commitment to bring down housing prices to reasonable levels. Instead there is a denial this problem even exists.

So, first you sign up all Irish taxpayers to pay for odious debt. In order to keep property prices high and safeguard the capital base of banks and continue to make returns on bondholders odious debt, you flood the market with vulture fund money: for example, purchase anything on NAMA’s books. You need to force young people out of the property market and into the rentier controlled sector.

Once you have young people there, you can make them pay any rent you like. Government can force any amount of property charges it wants. Landlords simply raise the rents and the new class of young Irish rent slaves will pay whatever is asked of them. Troika is happy, their odious lending has been securitised.

Those with a fertile imagination can imagine Mr Magoo with his puppet strings controlling Mr Kenny and all his rent slaves in a world without private property,  everything in Mr Magoo’s ownership.

Mr Magoo may turn out to be much more unkindly than George Orwell’s Big Brother!

End.

 

 

 

http://www.theguardian.com/commentisfree/2014/jul/17/brics-development-bank-africa-world-bank-tyranny

http://www.belfasttelegraph.co.uk/news/local-national/northern-ireland/garth-brooks-taoiseach-enda-kenny-rules-out-emergency-legislation-to-allow-croke-park-concerts-to-go-ahead-30419227.html

I’m not a fan of Garth Brooks and bought no tickets for his concerts in Dublin. But I do respect the 400,000 disappointed fans who purchased tickets for his concerts in Dublin. They’ve suddenly received notice the shows are cancelled.

Poor licensing regulation in this area led to a lot of mistakes being made by various bodies involved in the organisation of the concerts. I will not go into the detail of evaluating or enunciating the opposing rights and perceived infringements. They all point to greater clarity and clearer rules for all concerned for future venues.

An Taoiseach, Enda Kenny, has stated intervention by him to save the expected loss of castleintheairrevenue of €50m to the city with cancellation of the concerts would expose him to, “certainly be accused of coming the heavy on an issue like this”.

Failure to act means he is coming the heavy on 400,000 people who’ve purchased tickets.

A smarter option would have been to acknowledge that a mess has been made; facilitate legislation that enables the concerts to go ahead on a one time basis;  compensate the local residents in a big way for their inconvenience; guarantee this was only a once-off subject to clearer licensing rules in this area.

This would gain kudos for An Taoiseach who has squandered this opportunity once again to show leadership that is worthwhile and not less than worthless.

This is but more evidence of Kenny’s blindfold mess of eg property charges that discriminate against city dwellers, water charges that discriminate against everyone, privatisation of refuse collection that has ended in the Greyhound mess, expulsion of key party members on their conscientious objection to certain aspects of party policy, medical cards debacle, water debacle, energy grid mess.

But most of all dunce failure to deliver on a debt deal for Ireland that is not less than derisory. But you will often hear him in self-congratulatory mood as he deliberates on the crumbs the ECB has bought him with.

Happily the result of the European elections showed a rejection of the Irish public of FF/FG policies in spite of massive propaganda to persuade them otherwise of the Kenny agenda. Blind indifference to Kenny’s agenda informs  most of the electorate who experience another world of falling standards of education and public health, increasing taxes, emigration and few jobs.

In a vacuous way the Kenny agenda is to ignore  the debt ridden nature of Irish state’s private and public liabilities, to pretend these are sustainable, that a trickle of new jobs can be nurtured into a river of growth. To celebrate when there is no cause for celebration. To bestow confidence with a smile wherever caution signals action required more than a smile.

Kenny’s is a light weight, shallow, head in the sand agenda, that hopes against hope that a rising tide will lift all boats: Even when there is no tide.

Ireland requires a growth rate of 8% to be sustainable under its present conditions of odious debt. But growth rates above 2% would be cause for celebration. Inflation has turned into deflation and growth will be sponged up to pay for increasing incapacity to repay debt.

Austerity is the name of the game led by Germany. This is aimed to suck the marrow from the bone of peripheral countries such as Ireland. Austerity requires puppet governments to be bailiffs and Kenny’s certainly serves the mark.

http://www.irishexaminer.com/archives/2012/0609/opinion/enda-kenny-is-failing-in-role-as-taoiseach-196756.html

“Enda’s strategy in Europe has been to align with Germany, which is bizarre as economically we are faced with different circumstances entirely to Germany. Enda has failed to make any case for Ireland and has instead bought into Germany’s own misconception of the Irish people and the Irish economy.”

A little over 2 years ago the writer of that letter wrote ” Last night I attended the launch of the FF Futures Group in Dublin and it stuck out a mile who the real Taoiseach is. We need to get a Cork man back in the driving seat, it seems.

Would that we could elect Micheál Martin to the job. He would do us all proud.”

On the contrary, both Martin and Kenny are joined at the hip when it comes to Europe. Both need to be replaced by leaders of more depth and insight who will not disappoint in leading this country through difficult times ahead.

But even Micheal Martin has the wit and insight to this week suggest enabling legislation to allow the Garth Brooks concerts proceed. Clearly FF/FG are worse than FF.

It’s a curious case of deja vu that the ‘come the heavy’ argument from Kenny has been heard before. It was used to defend the rights of bondholders over the rights of the people of Ireland, its taxpayers and public services, who were levied with the liabilities of bankers and bondholders and the €67.5 bn odious debt levied on the people of Ireland by the troika.

These arguments should be examined in another forum, the Banking Inquiry promised by Kenny. It too is currently embroiled in a mess.

Kenny  cannot learn from mistakes made in the past. Ireland joined up to a flawed EMU with its flawed euro currency that did not suit our needs and was poorly if not recklessly administered in favour of Germany.

While EMU peripheral countries sold the fool’s gold of debt by Germany are witnessing the painful legacy and extraction of their liabilities,  Germany continues to grow with enviable growth rates of 4% +. Germany’s bondholders safely secured against the liabilities of Irish taxpayers.

The original European Union was an aircraft carrier with all members having a say in its running. That ship was sunk 6 years ago. In its place is a poorly defended and organised convoy led by a German battleship towing with fraying tow ropes the economies of peripheral zone members.

So far, Kenny’s reign is mindful of a tale told by an idiot, full of sound and fury, signifying nothing.

Tomorrow Enda Kenny reshuffles his pack. Its difficult not to be indifferent and to regard this as nothing more than the swapping of seats of another orchestra on another titanic.

End

http://www.enotes.com/shakespeare-quotes/tomorrow-tomorrow-tomorrow

Macbeth:
To-morrow, and to-morrow, and to-morrow,
Creeps in this petty pace from day to day,
To the last syllable of recorded time;
And all our yesterdays have lighted fools
The way to dusty death. Out, out, brief candle!
Life’s but a walking shadow, a poor player,
That struts and frets his hour upon the stage,
And then is heard no more. It is a tale
Told by an idiot, full of sound and fury,
Signifying nothing.

 

 

 

 

 

jean-claude juncker“Mr Juncker is seen as an ‘arch federalist’ by the Government because of his record of wanting more power for Brussels over national Parliaments” Jean-Claude Juncker is no Santa Clause.

“Mr Cameron added: ‘There are times when it’s very important that you stick to your principles … even if the odds are heavily stacked against you rather than go along with something that you believe is profoundly wrong.’

He said the recent European elections had shown that there was ‘huge disquiet about the way the European Union works’. “

Cameron is campaigning for reform of Europe and the election of Juncker will be viewed as a step back for reform and a step forward for the status quo of austerity for taxpayers and no austerity for lenders.

…”

Support for the EU is wafer thin in the UK and the Tories have pledged an IN/OUT referendum in 2017 if the Tories remain in power.(1)

At the heart of this dispute in Europe is fears over growing centralisation. However, it is ironic that growing centralisation does not include the centralisation of bailout debt of peripheral debtor nations such as Ireland.

Meanwhile former Luxembourg Prime Minister Jean-Claude Juncker will become next president of the European Commission following  European Council vote 26:2 on June 27 with UK and Hungary voting against.

The question is will David Cameron now lead a eurosceptic campaign for Britain to leave the EU. Will he regard his reform agenda as dead?

The vote comes in the wake of the routing of pro European parties in the recent European elections May 26/27.

http://www.economist.com/blogs/charlemagne/2014/05/european-elections-0

European parliament elections saw the rise of  the neo-Nazi Golden Dawn party in Greece now set to enter the European Parliament. On the far-left, meanwhile, the anti-troika Syriza party leads the ballot. Its clear people voted on the basis not of extreme ideological far left or far right on a racist agenda, but simply on for or against the Europe project.

Many of those who do not hold the extreme views of extreme left or right voted for such parties on the basis no mainstream  parties articulated their anti EU views.

In France Marine Le Pen, trumped  both the centre-right UMP party and the Socialist Party of François Hollande. The National Front won about a third of the seats allocated to France. “One half of the Franco-German motor of EU integration thus appears to have gone into reverse, with unforeseeable consequences for the whole European project.” However mainstream parties still control up to 2/3 of seats in the EP.

“In Britain, always more sceptical of the European project, Mr Farage’s UKIP seems to have beaten the traditional parties, with the opposition Labour party coming second and the Conservative party of the prime minister, David Cameron, coming third. “I don’t want Britain to leave the EU. I want Europe to leave the EU,” declared Mr Farage.”

Cameron for the Tories at home has let some of the air out of the tyres of the eurosceptic wing of the Tory party and the rise of Farage UKIP.

It will be interesting to observe if Cameron transmogrifies from a position out to ‘reform Europe’ to outright eurosceptic supporting UK unilateral withdrawal.

In Ireland there was no support for the Cameron anti Federalist position in spite of Enda Kenny’s continuing failure to negotiate a debt write-down. Kenny,  a golden boy of the troika is ‘glowing testimony’ to the policies of the soldiers of austerity, he hopes to obtain a commissionership or two for Ireland out of his support for Juncker.

Kenny lost opportunity to play the debt card and make his support for Juncker contingent on a reworking of Ireland’s odious debt profile with Irish people saddled with approx €40bn out of the troika’s €67bn losses that ought to have been shared by external banks. Clearly FG and Labour policy is to be poodle for Europe and the banking financial industry.

Meanwhile John Bruton chairman of IFSC, a former Taoiseach and Fine Gael hack, has espoused the view election to presidency of the European Commission should be by vote of the people directly not merely by members of the European parliament.

Ironically, Juncker’s EPP in its electoral manifesto for 2009

http://en.wikipedia.org/wiki/European_People’s_Party

also called for ” direct election for the President of the European Commission “. EPP also supports, ” Increasing transparency and surveillance on financial markets. “

Kenny’s other political initiative, the banking inquiry, would appear to be dissolving before our eyes before it even gets to take place.

Cabinet confidentiality may prevent certain records surfacing if they exist. Restrictions surrounding the inquiry limiting it to a showcase trial around the guarantee already limit investigation of the poor management of Ireland’s bailout deal led by representatives of the central bank/dept for Finance and political representatives.

The curious case of Brian Lenihan’s repeated visits to the Dail with the bill for the banks leaping from €3bn to €30bn + is major cause for investigation as to who misled who with the bill passed to Irish taxpayers, a story that demands to be told.

Reform in Europe has been put on the back-burner. Juncker’s backing by Merkel will further consolidate a federalist Europe with growing powers of centralisation and growing control of the European parliament by Germany.

As austerity and lack of growth continues to haunt the EMU, is it now time for Ireland and the UK to consider leaving the EU? Its long past time for Ireland to adopt a strong position in renegotiating its debt profile.

To do so, do we need to leave the euro and join those countries outside the euro such as Switzerland and the UK ?

Currently the following countries do not use the euro.

United Kingdom
Bulgaria
Croatia
Czech Republic
Denmark
Hungary
Lithuania
Poland
Romania
Sweden

Ireland outside the euro could return to its own currency, the punt,  using the euro as a base.

Deflation in Europe is about to make our debt profile worse. Calls in Europe for more investment to stimulate jobs come against the backdrop of a growing austerity that puts more brake on growth.

There is less and less money to go round. Devaluation would help restore our national finances. An open, flexible country with a large dependence on exports, could offset any disadvantages and quickly restore order to Ireland’s finances. Day by day our prospects in Europe diminish.

Whatever there is looted from starving the public services of funding in education and health gets exported back to large banks in Germany, France and US by way of €8bn in interest payments on our ‘bailout’ debt. An alliance with UK under a commonwealth free trade agreement the Switzerland way could yield an excellent alternative to our current debacle.

http://ec.europa.eu/trade/policy/countries-and-regions/countries/switzerland/

“The cornerstone of EU-Swiss relations is the Free Trade Agreement of 1972.

As a consequence of the rejection of the EEAmembership in 1992, Switzerland and the EU agreed on a package of seven sectoral agreements signed in 1999 (known in Switzerland as “Bilaterals I”). These include: free movement of persons, technical trade barriers, public procurement, agriculture and air and land transport. In addition, a scientific research agreement fully associated Switzerland into the EU’s framework research programmes.

A further set of sectoral agreements was signed in 2004 (known as “Bilaterals II”), covering, inter alia, Switzerland’s participation in Schengen and Dublin, and agreements on taxation of savings, processed agricultural products, statistics, combating fraud, participation in the EU Media Programme, the Environment Agency, and Swiss financial contributions to economic and social cohesion in the new EU Member States.

In 2010 an agreement was signed on Swiss participation in EU education, professional training and youth programmes.

In overall, around 100 bilateral agreements currently exist between the EU and Switzerland.”

Ireland could well take a leaf from the Swiss book. With a similar bilateral trade agreement with the UK, there is another way to the austerity path.

With lack of inflation, anchored to the euro, our situation worsens. However, with results from recent local elections it appears most now reject the FG/LB view that we are living in a paradise with 70,000 new jobs with the tide turning.

Many experience such a fool’s paradise differently, especially those on hospital trolleys.

End.

 

1. Read more: http://www.dailymail.co.uk/news/article-2671985/Angry-Cameron-warns-European-leaders-consequences-Cognac-breakfast-Brussels-fixer-Jean-Claude-Juncker-given-EUs-job.html#ixzz361HE77UF

2. http://en.wikipedia.org/wiki/Croatia_and_the_euro

3. http://www.economicshelp.org/blog/1299/economics/advantages-and-disadvantages-of-devaluation/

 

 

Shudder Island

June 15, 2014

Currently Ireland is reeling from revelations regarding the 796 babies buried in Tuam. Lists of names and cause of death of all who died between 1925 and 1960 are published in today’s Sunday Independent. Babies were buried in an unmarked grave. Poor healthcare, neglect or worse caused a mortality rate sometimes between 5 and ten times the normal mortality rate in the wider population. Further investigations and inquiries will reveal more. It’s thought such high mortality rates occurred in similar homes for unmarried mothers across the country during the same period.

Some of these homes appear to have been run along the lines of Japanese prisoner of war work camps and were populated by those regarded as members of Ireland’s lowest caste, unmarried mothers. Religion, politics and foot soldiers in the civil administration provided the lethal conditions under which such abuse flourished.

Archbishop Dermot Martin probed on his reaction to such revelations wondered why there were not people of insight, whistleblowers, within the church who rang alarm bells. I’m sure he equally questions reasons for genocide and ethnic cleansing in Ruanda and Nazi Germany.

Let me partially attempt an answer. Organisations and institutions can go bad for many reasons. Organisations are living organisms with foot soldiers  to follow and defend the status quo. Those who threaten the status quo are summarily executed in a worse case scenario. In a lesser context they are shown the door. Those ambitious for power like Frank Underwood in House of Cards know how to tow the line. They are rewarded for such loyalty card actions and guard the doors.

Unfortunately those with the greatest critical faculties can become victim of a zombie takeover. This can lead to a less than healthy competence emerging among leadership contenders. This may explain the government’s hand maiden of the troika, soldier- of – austerity performance in dealing with our economic collapse.

Perhaps this is also a clue to what is happening to our long-delayed Banking Inquiry. Government has already stopped the PAC committee headed by FF John McGuinness acquiring the job and instead it has given the inquiry to a new committee with a new chairman, Ciaran Lynch, Labour TD.puppets

Through mismanagement the FG/LB led government lost its overall majority on this committee and now has reimposed its own political majority stating it must have power to impose its “terms of reference”. We should shudder.

But the so-called banking inquiry was already holed below the water line. Its flaws go back to a referendum where Irish people decided politicians were not to be trusted. As a result Oireachtas committees are prohibited from holding non-public office holders to account. The difference with this inquiry and previous ones eg Honahan, Regling/Watson , Nyberg is that hearings will take place in public, not in private.

If it goes ahead, some of its hearings could prove to be farcical, with those probed in attendance with their solicitors, stonewalling and pleading the 5th Amendment. Worse still, those “terms of reference” will come from handmaidens of the troika infected with a deep compliance and subservience to bankers.

This government has defended the rights of bondholders over the rights of taxpayers. Sutherland, Bruton, Honahan, and Department of Finance officials have a lot of banking secrets to hide and are likely to use such terms of reference to steer attention away from bankers and towards political adversaries who have little to confess other than compliance, subservience and incompetence.

The fact that Oireachtas committees are already hobbled in the above way should point to the only way forward for a real Banking Inquiry to take place: it should be a proper judicial inquiry led by a high Court judge, a person of competence and good standing with proper powers of compulsion to get answers we need.

Stephen Donnelly TD was correct to spot the political stage-show trial and resign from the committee before this Banking Inquiry could manipulate him towards a darker agenda.

In a previous inquiry I suggested some terms of reference.

Some Suggestions for the Inquiry

1. Follow the money.

This should not be too difficult. Ideally, the ten largest loans handed out by each bank could be trawled through to examine the precise mechanics involved in these developer loans: who dealt with them, how were decisions made, documents in support of the loans obtained and examined. This would quickly reveal a seam of rich information that will quickly unravel the culture of lending in the banking system.

2. Examine the bonus system.

Word has it that the traditional method of classical banking with local managers intimately knowledgeable re financial matters in the local community with lifetimes of experience overseeing lending patterns responsibly, was set aside. Instead such managers were replaced by whiz kids of the bonus culture pressing loans on everyone they could find. Lending standards were lowered, the bottom line was the bonus, prudential lending was the big casualty. As long as property rose in value nobody cared.anglo

3. The role of the central bank and regulator.

Specific interest should target the Central Bank personnel who were witness to Anglo’s meteoric rise to unsustainable levels of growth during the Celtic Tiger.

4. The case against Europe.

Particular interest should focus on ECB(European Central Bank) and ICB(Irish Central Bank) relationships, correspondence and communication by email, phone, video, meetings where regulatory brakes should have been considered and monitored by ECB and ICB. Note this has already been ruled out of order by the probe.

5. The Guarantee.

The inquiry should not conclude its deliberations until full and final discovery is made of the personnel and role of ECB, ICB, Dept of Finance and the political representatives  who played a role in the Guarantee.

I find it difficult to swallow the commonplace assumption the Irish Dept of Finance, Irish Central Bank, Irish politicians and representatives of the Irish financial industry acted alone in opting for the state guarantee.

The Guarantee would have been new territory. In hindsight it was a rash and incompetent idea. It would be therefore easy to assume incompetent rashness on the part of that group from a relatively large background in banking and politics. But, were there other compelling forces at work? Who, where this did the ‘Guarantee’ come from?

The inquiry should examine closely the possibility of other outside influences on the Guarantee. It’s incredible to believe the ECB was not consulted on such a momentous decision.

6. The role of the credit rating agencies?

It’s incredible to believe the high credit rating afforded to Ireland and to its banks at the height of the Celtic tiger as it increasingly became more exposed to dangerous lending practices and icebergs.

7. The role of financial auditors

Anglo Irish Bank auditors, Ernest & Young, their role needs to be scrutinised.

8. The planning authorities and the role of planning legislation that fueled the boom?

There are plenty of issues not covered here, but the above is a sample of what a banking inquiry should deliver answers on so that we can learn for the future. It’s not sufficient that opaque, broad generalisations be used to obscure the truth.

The inquiry needs to yield positive results that discovers hard factual evidence that will form the concrete base of any conclusions it makes.

In the US financial meltdown has been the subject of detailed inquiries:

http://en.wikipedia.org/wiki/Wall_Street_and_the_Financial_Crisis:_Anatomy_of_a_Financial_Collapse

“The Report cites investment banks as a major player in the lead up to the crisis, and uses a case study of two leading participants in the U.S. mortgage market, Goldman Sachsand Deutsche Bank. The case study found that from 2004 to 2008, banks focused their efforts heavily on RMBS and CDO securities, complex and high risk financial products that they could bundle and sell to investors who did not necessarily know the composition of the product. Financial institutions issued $2.5 trillion in RMBS and $1.4 trillion in CDO securities. They created large trading desks that dealt strictly in RMBS and CDO securities. More alarmingly, their trading desks began to take out insurance policies against the RMBS and CDO securities, allowing them to wager on the fall in value of their own asset. They acted in many instances as an intermediary between two opposing parties who wished to bet on either side of the future value of a security. This practice led to a blatant conflict of interest in the securities market, as the banks used “net short” positions, in which they wagered on the fall of a security, to profit off the failure of a security they had sold to their own client.[10].”

The cause of financial meltdown in Ireland was different with focus on  banking and housing bubble meltdown. Will our inquiry into Ireland’s financial meltdown comprehensively answer the questions  explaining the legacy of financial meltdown still with us.

9. Many other areas not covered here require investigation as well.

Can such an inquiry competently deliver the answer as to why young people in Ireland cannot afford housing, cannot afford to begin families, why the financial services industry, the banks, austerity, continue to extract from them through falling social services in health and education, a future that comes through Ireland eating its young; a politics of vampire bailiffs masquerading as democratically legitimate politicians defending the people!”

Meanwhile Enda Kenny, Taoiseach, trendy handmaiden of the troika, a soldier of austerity, a poster boy of austerity and postboy for how jobs can flow from austerity, can count the days before his government breaks.

It’s not often the Irish Central Bank’s sometimes Pollyanna forecasting agrees with the views of this writer,

With another €2bn to be taken out of the budget, unease re Ukraine, disinflation in EMU, global slowdown in growth, further instability in government, there could be a perfect storm in the Autumn:

In its latest macroeconomic financial review, the Irish Central Bank points to concerns regarding our banks as a result of forthcoming ECB stress testing:

http://www.centralbank.ie/publications/Documents/Macro-Financial%20Review%202014.1.pdf

“…outcome of the ECB Comprehensive Assessment (CA), which includes a point-in-time Asset Quality Review (AQR) and forward-looking stress tests, will be important in determining the resilience of the major banks to future shocks, notwithstanding the substantial capital injections of recent years. The results of the AQR and the stress tests are due to be published simultaneously in November 2014 at the time that the Single Supervisory Mechanism (SSM) enters into force.

….The low-yielding tracker mortgage loan book and high share of impaired loans will
also limit domestic banks’ ability to increase margins on existing business

…The outcome of the ECB’s CA may also impact provisioning and,
in turn, the profitability of the domestic banks. The ECB and
relevant national authorities commenced the CA in November
2013. The assessment exercise comprises three distinct
elements: an Asset Quality Review (AQR); a Supervisory Risk
Assessment; and a stress test. This exercise will be completed
before the Single Supervisory Mechanism (SSM) enters into
force on 4 November 2014. In total, the CA will be carried out for
128 banking groups in the Eurozone. Five credit institutions in
Ireland will be subject to this assessment – AIB, Bank of Ireland,
Permanent TSB, Ulster Bank and Merrill Lynch as the ECB will
directly supervise them under the SSM. Subsidiaries of
Eurozone banking groups, such as KBC and ACC, also fall
indirectly within the scope of this CA, as they may have loan or
asset portfolios subject to the AQR.”

Banks have large bonds that are due in 2015 and a downward assessment may affect Irish banks to raise capital on external markets. But no doubt the inward rush of pirate QE vulture funds supporting our virtual zombie economy’s NAMA property sector, will attempt to buffer the financial system. Vulture fund money is the only buyer at the moment, the domestic market priced out for both commercial and residential development.

Government break up, further austerity in our budget, stress tests on our banking system, a perfect storm indeed.

Enda Kenny, trending austerity across Europe, may bail out for a job in Europe as clouds gather. Currently, Alan Dukes, Fine Gael doyen, former chairman of Anglo Irish bank, soldier of austerity and friend of bondholders, is on radio pontificating on our banking inquiry shenanigans. You may shudder! Directing the searchlight away from bankers and Department of Finance officials towards political enemies in Fianna Fail would be up his alley.

Crumbling support in polls for government incumbents shows the Irish electorate is far more sophisticated than our political masters who’ve betrayed trust.

Having been shafted by the ECB, a €67bn sinkhole loan billed to us from the troika, to bail out the euro not Ireland,  a badly designed and unworkable ECB  that sent freefall confetti  lending of euros into Ireland’s banks, setting off a false property lending boom bubble, its long past the time we ditched Europe and set up a new alliance with countries such as UK, Norway, Sweden in a new sterling zone. Other moves are worthy of consideration also.

As well as confronting our past, we need to be prepared to ditch it and not prolong its legacy of austerity and misery.

Until next time!

The Scott Expedition!

May 25, 2014

Part 11 (from prev blog)

The US government’s own data shows a net worth of minus $16.9 trillion, over 100% of GDP in the red.  And even in their most optimistic projections, the government tells us that growth in debt will outpace growth in tax revenue. US has not freed itself from the debt catch 22. 

The US has struggled with the impact of the crash of 2008 with reforms that have stopped short of the Glass Steagall response to the crash of 1929 in its principal reform compelling the separation of investment banking from commercial banking built around the protection and securitisation of depositor funds. Mario Draghi’s imminent stress testing of European banks is reminiscent of Timothy Geithner’s stress testing of US banks that arguably restored confidence in banks.

The more debt is paid down through austerity, the more the economy takes a loss. The critical point of 90% debt to GDP has been passed by US and many members of the EMU: http://www.economist.com/news/finance-and-economics/21576362-seminal-analysis-relationship-between-debt-and-growth-comes-under “This Time is Different”. In their paper Ms Reinhart and Mr Rogoff sorted the figures into four categories of indebtedness and took average growth rates for each.

They found that public debt has little effect on growth rates until debt reaches 90% of GDP. Growth rates then drop sharply. Over the entire two-century sample (from 1790 to 2009), average growth sinks from more than 3% a year to just 1.7% once debt rises above the critical level. In a shorter post-war sample the decline is more dramatic; average growth drops from around 3% to -0.1% after the 90%-of-GDP threshold is attained.” Ireland’s debt to GDP is 123% and we’re struggling with correspondingly low growth levels of >1% struggling under projected growth levels of 2-3% that are never realised.

But hey, the troika are there to bail us out further, so markets believe. We have a coalition government  of  bailiffs willing to superimpose on taxpayers austerity measures to pay the crippling interest repayments circa €8bn/pa looting Irish public services while the wealthy are protected from having to pay a fair share of such bills. Economic stagnation is buffered by propaganda efforts to persuade the public that a small increase in employment levels recovering from 15% to 12% means such austerity methods are succeeding. Not unrelated to the success of austerity, If you can have a look at this John Stewart/Tim Geithner interview of recent days. Its elsewhere on YouTube and other places in spite of efforts to prevent it viewable for Irish audiences: http://www.youtube.com/watch?v=9R7OL2ZyZKQ  Geithner is the man who faced down our Minister Noonan telling Noonan he had to pay up on senior bondholder debt.

Geithner played the same ruse in the US insisting derivatives of AIG worth €60bn be paid back at 100% on the dollar. So-called recovery in the US has meant the return of profits to the banks without the trickle down benefits of a growing economy. Instead wealth has been concentrated and consolidated for the TBTF banks with the wealthy 1% given even more power.

The printing of money invested in stocks and shares has led to inflation of wealth for the rich and contraction of economic freedom and asset participation by the poor. This is an economic recovery sparked by fools gold that will not end well. Dodd Frank and Volcker have not defused the financial weapons of mass destruction that have built up in the shadow banking deregulated toxic world of global financialisation since the early 1970’s. Instead Geithner has revived the monster that gave us 2008.

“Most first time homebuyers can’t afford a home in the US. They are overburdened with college student loan debt, and the ‘sins’ of the fathers who delivered them over 200 years of servitude. There is no way those people will fill the mortgage gap and create a true and sustainable housing market without, once again, interest rate fixing and more fraud to prop up a goofy system.”

Similarly in Ireland property through financialisation of the property market still remains a speculative bubble that the present government refuse to lance. Property prices are simply too high to be affordable except by cash rich speculators. It is conceivable that a future beckons with speculators overcoming the property sector where family home buyers will be squeezed out of the market entirely.

This has already happened in some states of the US where hedge funds rich on QE and Geithner handouts, have bought left right and center squeezing out local homebuyers. Homebuyers are now forced to rent and with a cornered market those rents can be set at any price. This is a consequence of the financialisation of the economy destructively consuming the real economy. http://online.wsj.com/news/articles/SB10001424052702303661404579177873015074830   ireland-government-debt-to-gdp While radical financial moves have been made led by Paulson/Geithner(see below) to counteract the effects of Wall Street 2008 that led to imminent financial meltdown , in Europe it is believed losses incurred by the crisis in 2008, have been largely concealed by regulators ‘successfully’ hiding the losses of large banks in many EMU jurisdictions.

Stress tests across banks in the EMU some Friday next October will see phone calls made to each of the chief executives of every bank in Europe to reveal the findings of those tests. No one knows the full details of the formulae being used to calculate any shortfalls in these banks. Any bank found to be short will have until the following Monday to procure the money. Speculation on this blog surround the recent arrival circa last December of hedge fund miracle buyins to large tracts of the NAMA portfolio.

Is the Irish bank book currently being sterilised by such investments being groomed for the imminent stress test appraisal involving property and commercial/private loan exposure to marked down losses? Prof Morgan Kelly recently drew attention to the large exposure of Irish SME’s to outstanding levels of loan obligations that have yet to be written down. Are we currently being recreated into a new financial entity spawned by global financialisation rather than real economics? Have Irish banks marked down losses and how will they fare in oncoming stress tests?

Is a world of appearances dumping and triumphing over the real world?

According to Iain Dey writing in Sunday Times, 25/05/14, Business 8, European banks including Irish banks face the following scenario in regard to Mario Draghi’s ECB bank stress tests: “”..big banks have already started to brace themselves for the fallout. deutsche Bank launched an €8bn share issue last week to bolster its bank sheet, partly due to fears the probe will expose the fault lines in the German financial system.

Italy’s banks have raised cash, and France’s BNP Paribas may follow soon” “”The market thinks about 30% of Europe’s banks should fail the stress test,” said a senior director at a large European bank. “If only 5% are told they have to raise more capital, the test will look soft and it will be dismissed as a political fudge. – which means the whole exercise has been pointless. “But if 40% fail that’s a lot of money to find.”

Global shadow banking excesses deregulated have covered up real economic realities hedged beneath a false economy built upon illusion and farcical casino gambling bubbles in stocks and shares and paper derivatives not worth the paper they are written on.

The Geithner solution to global crisis built upon creating more paper and more illusion with soft pedal reform, is a recipe for global recession and a worsening of the global economy. More economic activity could have been generated if TARP assets were handed out to ordinary american taxpayers in tax benefits and social welfare entitlements with Hooveresque dam building programmes  designed to improve US infra structure, roads, schools; rather than handouts to gambling bankers playing derivatives and the stock market pretending they are building the real economy instead of a global toxic paper dump of appearances as the world eats its young.

In Ireland Fine Gael pride themselves and publicise at every opportunity their willingness to take the tough decisions to save the Irish economy. These decisions have meant denial of medical cards to the long-term disabled and the imposition of odious debt upon Irish taxpayers. The tough decisions have not been to stand up to Timothy Geithner to refuse to pay senior bondholder gamblers; they have caved in to the dictats of the troika; they have failed to renegotiate our debt to involve burden sharing and debt write down.

http://en.wikipedia.org/wiki/Troubled_Asset_Relief_Program The Public Bank solution Some radical alternative solutions to our banking crisis have emerged in Ireland and US involving the proposed setting up of a more sanitised form of banking, namely, Public Banks. In the US there has been debate around the question of the constitutionality of Public Banks vs Private Banks. So-called “public banks” as we know them today are not Public Banks in the strict sense of the term. If they were, they would be issuing ‘greenbacks’.

Instead they trade in dollars backed by the Fed just as private banks do. Public banks are a hybrid version of public savings banks or chartered banks.They lend out deposits under regulations that claim to favour depositors rather than lenders or bank shareholders. You could regard them as private banks who claim they operate more in favour of the public interest. ‘Public’ Landesbanken German banks operating in the framework of Sparkassan German public savings banks, have gotten into deep trouble through derivative speculation (reform of shadow banking and unregulated derivative gambling is more urgent than ever) proving public banks tend to move from a hybrid model to a private commercial one before they crash.

Its likely though Angela Merkel has moved to protect Public banks in Germany by ensuring they will not be subject of stress tests (an ominous omission in regard to the fairness of stress testing), Landesbanken strategic lenders of the Sparkassan public bank model, have lost badly through derivative speculation during the Wall St meltdown.

The public bank model offers more than it can deliver and it may be unfit for purpose in a world increasingly dominated by global financialisation and looting due to Shadow banking practices. Public banks rely on the dollar and may represent  more prudential forms of lending practice but they operate in a world whose rules favour private banking.

The pro banker republicans in fact were the ones who opposed the 1913 Fed Reserve Act. The act provided for a committee that would run the 12 regional reserve banks owned by commercial banks and the committee would be appointed by the President. ‘Bankers would run the twelve Banks, but those Banks would be supervised and by the Federal Reserve Board whose members included the Secretary of the Treasury, the Comptroller of the Currency, and other officials appointed by the President to represent public interests.’

Examination of the constitutionality of the Fed Reserve Act 1913 needs to be seen in light of the reforms of Glass Steagall Act in the 30’s and removal of regulatory controls in the 70’s and Dodd Frank Reforms and Consumer Protection Act that already may be proving too little and too late to save the dollar.

The world of shadow banking and global financialisation reveal contamination that threatens to overwhelm and destroy capitalism and democracy with growing signs of extreme right, nationalistic backlash both political and economic. What is required to reform the global economic system are deeper changes than those provided by Dodd Frank with its Volcker Rule amendment:  http://en.wikipedia.org/wiki/Dodd%E2%80%93Frank_Wall_Street_Reform_and_Consumer_Protection_Act

“Comprehensive regulation of financial markets, including increased transparency of derivatives (bringing them onto exchanges);” has yet to be fully implemented. Separation of commercial banking from investment banking as in the Glass Steagall Act is matter of urgent reform. Preventing this are TBTF entities such as Goldman Sach’s whose ruthless manipulation of financial markets allows them to manipulate the commercial aspects of banking activity with permeable Chinese walls giving them permanent access to business information they use to exploit investment opportunities( see last blog re Libor rigging)

There are quite a few ideas out there masquerading as solutions to the global financial crisis that are in effect worthless. You’ll find them paraded as success stories, look for wide grinning faces of arrogant disdain among politicians who promoter austerity. Austerity for the people and not austerity for bankers!

Lose money at the financial casino tables of Wall Street. Solution, give them more money to play with and replenish losses of the compulsively addicted. In Europe the solution is to introduce austerity and give the bill for the losses to taxpayers and the public sector. Reward the bad and punish the good. Steal from the poor to pay for the odious losses of the wealthy under threat of financial Armageddon.

The growing divide being rich and poor gives more power to the rich to prey upon and loot the fallen assets of those who’ve lost out in the crash. Thus hedge funds rich on QE from Wall Street bailout like to launder the proceeds by scooping up the proceeds of great deals provided by NAMA who’ve done the work in sterilising property portfolios and packaging them into nice economic ribbons and bunting ready to be picked clean by loose hedge fund money.

This is a world where virtual money has now become the new real.

Flushing The Toilet

In Europe things are not going that well. Interesting times are with us. France and Italy and Spain going under with deteriorating growth rates indicating recession.

In Ireland we face the problem of no affordable for the young. Solution 100% mortgages.

In the US Federal debt has been rising, and will soon exceed 90% of GDP. That should ring the alarm bells. According to Reinhart and Rogoff, author of the 2011 book, This Time Is Different: Eight Centuries of Financial Folly. Reinhard and Rogoff are of the opinion that when government debt exceeds 90% of GDP, the economy will contract at a 0.01 annual rate. This is now known as “The 90 Percent Rule.” The concept is that giant debt levels will crowd out economic activity and hamper growth. Incidentally, debt levels in Europe are close to the 90% threshold. http://kingworldnews.com/kingworldnews/KWN_DailyWeb/Entries/2014/5/13_R._Russell_-_I_Saw_Bread_Lines,_Babe_Ruth_&_The_Graf_Zeppelin.html

What’s wrong with this picture?

Maurice+McCabe001 http://www.independent.ie/irish-news/elections/kenny-shakes-hands-with-whistleblower-garda-mccabe-30287155.html

Answer A: Unfortunately Garda McCabe has been relegated to directing traffic while an Taoiseach Kenny is delegated to run a country. (reader, you need to be Irish to get the context) http://en.wikipedia.org/wiki/Scott_Medal

Answer B: Garda McCabe deserves a Scot Medal; An Taoiseach leads  ‘Irish economic recovery’ Scott expedition heading for disaster.

Answer C: Garda McCabe’s actions have led to imminent reform of the Department of Justice.

Enda Kenny’s government presides over the destruction of the state through austerity. (Each  of above correct) Sometimes in spite of all the propaganda re ‘tide is turning’, ‘growth returning’, hard decisions courageously made by this government, a small number of new jobs for those young people left behind who have not emigrated yet, massaging of employment statistics, the truth will out.

Launcelot GobboNay, indeed, if you had your eyes, you might fail of 
the knowing me: it is a wise father that knows his 
own child. Well, old man, I will tell you news of 
your son: give me your blessing: truth will come 
to light; murder cannot be hid long; a man’s son 
may, but at the length truth will out.”(The Merchant of Venice)

Lets look at some home truths: Signs of a new property bubble in Dublin already covered in this blog. how is government responding: http://www.merrionstreet.ie/wp-content/uploads/2014/05/Construction-Strategy-14-May-20141.pdf A highlight of the document is the insane suggestion that State guarantees be provided to boost loan to deposit ratios of borrowers from 80% to 95% on new mortgages.

The bank extends 80% based on the property and the ability of the borrower to repay and the state jumps in with a further 15% leaving the borrower to get a 5% maybe from elsewhere, a credit union perhaps; end result 100% mortgages, a prime cause of the recent property bubble meltdown….

The 2020 property document above was obviously written by bankers for bankers. We have a government of bankers for the bankers.

The solution to the property crisis in Dublin is regulated management of the sector. There is adequate levels of serviced land available in industrial areas of Dublin that would welcome a docklands type regeneration. Planning laws require overhaul to release this land into state ownership.

Opportunity and enterprise stimulus with investment using the floatation of a state investment bond to finance an immediate large-scale building programme for the Dublin region could begin immediately.  Pension Fund investment could be used.

The most important regenerative aspect of such a project would be to fix prices to three times the average industrial wage. Many other creative responses are available.

However its in the interest of vampire banks to keep property prices high to keep toxic assets primed.

The most problematic aspect of the housing crisis in Dublin is the problem of affordability.

The stated objective of reducing prices, introducing affordability, regulating costs of land, materials, building costs, and matching these to what people can afford, needs to be the bottom line for recovery to take place.

Instead the empty government strategy is to try to stimulate demand for cash rich investors, to make large profits for ballyheabanks, both selling large loans and profiting from them at the expense of Irish taxpayers,  indicative of  disastrous failure of this government.

Tough Decisions

Often touted in unison by both Fine Gael and Labour is how they saved the Irish economy from financial Armageddon and in order to do so they had to take the tough and courageous decisions.

Unfortunately the decisions referred to did not amount to showing some backbone and standing up for Irish taxpayers against the dreadnought troika demands for odious reparation of our debts.

It’s quite incredible to believe that an Irish government was so subservient to the EMU that it undertook a bailout of €67 bn forced on it by the troika to payback losses made by private Irish banks to banks in Germany and France and elsewhere.

In the US questions are raised re how ethical it is to have used TARP money generated out of thin air to bailout banks and not home owners. In Ireland, the so-called ‘tough decision’ by government parties has been taken to have Irish taxpayers  landed with the bill. Compliance and obedience mix with incompetence in defending the best interest of Irish taxpayers is the new norm.

It’s incredible to believe lack of regulation on the part of the ECB being partly responsible for the debacle, was not stimulus of a collective response to bail out Irish taxpayers by freeing them from this debt that was not theirs.

Instead this debt was saddled on Irish taxpayers. Irish taxpayers not only suffered the personal loss of falling property prices and the meltdown of the Irish economy, but Irish taxpayers were forced to pay the losses incurred by foreign banks and bondholders. Fine Gael and Labour claimed a small reworking of our promissory notes into legalised commercial debt and not the tearing up of the promissory notes, as a success. Reworking of debt into longer term obligations has been touted as ‘success’ by negotiators who failed the test of acquiring debt write down of even a portion of our debt.

Looking at this more closely its clear the majority of Irish politicians are not responsible for this state of affairs. In fact most Irish politicians would not be informed enough on economic matters in general even less so on macro economic policy. Responsibility for these matters is taken out of their hands and resides in a small group who dictate policy:

http://www.taoiseach.gov.ie/eng/Taoiseach_and_Government/Cabinet_Committees/Economic_Management_Council_for_attachment_.html

Taoiseach (Chair)
Tánaiste & Minister for Foreign Affairs & Trade
Minister for Finance
Minister for Public Expenditure & Reform
– See more at: http://www.taoiseach.gov.ie/eng/Taoiseach_and_Government/Cabinet_Committees/Economic_Management_Council_for_attachment_.html#sthash.qnzXCdYu.dpuf

The evidence points to policy being formulated by the banks and handed to the above to execute? How else to explain the ludicrous mistakes of mismanagement that has led to bondholder payouts, compliance to odious and extortionate rates of interest without share burdening of troika bailout, the current 15% insurance deal for first time buyers and ongoing austerity burdens crippling taxpayers.

Philippe Legrain used to be head of the team of strategic policy advisers to the president of the European Commission, José Manuel Barroso. In his new book, European Spring, Philippe Legrain writes: “had Irish banks defaulted on all their debt at the end of September 2010, German banks would have lost €42.5 billion, British ones €27.5 billion and French ones €12.3 billion.”

Legrain describes how Jean Claude Trichet blackmailed the Irish government by threatening to cut off liquidity to the Irish banking system which would mean forcing it out of the euro. Unfortunately, second-rate Irish politicians charmed and entranced by Europe did not have what it takes and they fell in with European demands.

Following the dictats of bankers has led to massive emigrations and massive unemployment and an unconscionable debt burden that is increasingly more unmanageable.

So-called reforms of the health service currently amount to a programme to replace nurses with ‘care assistants’. Our schools are 50% filled with part-time posts with embargos on appointment of fulltime teachers with many schools filled with teachers unqualified to teach subjects they are required to teach on a daily basis.

‘Reform’ ‘hard decision’ regulation through external examination to Junior Certificate level in our schools is being abandoned under the false flag of ‘reform’. Property charges and water charges with falling salaries and rising taxes are bleeding the country dry.

A proposal to solve water supply problems in a country awash with water amounts to the setting up of an expensive and wasteful quango without one leak being fixed. Hopes rest on the quango being sold to a hedge fund who will privatise Irish water and extort further water levies from taxpayers who already pay taxes for their water.

The energy sector is a mess with proposals for pylons and energy reform under hold with the refusal of Pat Rabbitte to publish a white paper. Endless inquiries and committees of investigation in energy, Justice a mess.

Tough decisions amount to attacking the old, disabled and the crippled. They do not mount to tough decisions to face up to those responsible for odious debt foisted on Irish taxpayers.

In a white is black propaganda world even the word ‘tough’ has lost its original meaning.

End

http://www.theguardian.com/money/2014/may/22/tim-geithner-book-financial-crisis-banks-bailout

 

Part 1

Senator Finance Committee chairman Ron Wyden, a Democrat, said he wants to make it harder for U.S. companies to move their headquarters abroad to lower their taxes for inversion deals that take place on or after May 8, 2014.”

“A recent bid from drug-maker Pfizer Inc to acquire AstraZeneca Plc, renewed attention on corporate inversions. The potential deal would allow U.S.-based Pfizer to re-domicile in Britain to take advantage of a significantly lower corporate tax rate there.Crash_Zeppelin_LZ18_(LII)

In April, days after the potential Pfizer deal was made public, the Obama administration said it was seeking ways to curb inversions.”

Its becoming more difficult to provide welcoming tax haven arms to lure MNC’s and others to our shores with financial services provided by the IFSC. Greater regulation of the tax avoidance shenanigans of corporates is on the cards.

http://www.reuters.com/article/2014/05/09/us-usa-tax-inversion-idUSBREA4801M20140509

Financial Transaction Tax

Concerns about jobs at the IFSC and concern MNC’s may wish to relocate to other jurisdictions are behind Ireland’s opposition to FTT. It’s also likely the question of FTT has not been sufficiently grasped by the Department of Finance. Much as Department of Justice ignored alarms from whistleblowers through reliance on advice from Callaghan, Department of Finance relies on advice from stakeholders in the banks both political and otherwise.

In its opposition to FTT Department of Finance is in need of some serious overhaul. It will be a matter of some unsurprise (my word) if deficiencies in the Department of Finance are found by the oncoming banking inquiry to be of such gravitas to have led us to such debacles such as the ill-fated ‘Guarantee’. We shall see.

On Europe’s side FTT is seen as a way to dismantle Ireland’s status as a tax haven, a financial weapon of mass destruction, a tax haven luring companies to Ireland with low tax rates and low corporation tax. It’s not so much the MNC’s that are of concern here but the vast array of shelf companies many no more than a post box that avail of IFSC services. Regulation of financial trading abuses could spell the end of financial services reliant on global freedom from regulation.

In Ireland’s case this could see the departure of IFSC clients to London to avail of freedom from regulation.

It’s ironic our membership of the euro prevents us from going the way of sterling. London’s capacity to reject this tax and place London’s financial services on a better competitive edge  to Dublin behoves the question whether we should have joined the sterling area rather than the eurozone.

Such exodus could stir  opportunity to reject odious debt, leave eurozone, rejoin sterling as our difficulties deepen under our weight of indebtedness as we escape the toxic brand of the euro.

We need a worldwide financial transaction tax.

Rigging of the Global Financial system

http://www.forbes.com/sites/greatspeculations/2014/03/18/fdic-sues-16-global-banks-for-roles-in-manipulating-libor/

The FDIC filed the lawsuit on behalf of 38 banks which went bankrupt at the peak of the downturn in 2008, as a considerable part of the losses for these banks were incurred on interest-rate derivative products sold to them by the bigger banks. As the bigger banks were in a position to influence the benchmark rates in a manner suitable to them when the crisis hit, the losses on these products were exaggerated for the failed banks, including Washington Mutual and IndyMac. The lawsuit names U.S.-based banks Bank of AmericaJPMorgan Chase and Citigroup, as well as other globally diversified banking groups as well as the British Bankers’ Association which oversaw the LIBOR fixing process at the time.”

Can real markets survive the  financialisation of the ‘real economy’  masquerading as the new real? The global financial system has many more balls to keep in the air and risk of slippage is increasing rather than falling. Quantitative Easing, subprime lending, rigging of the derivative market, skyrocketing stocks and shares as the real global market undergoes austerity, now has another market manipulation device in rigging of the price of gold:

Throw into the mix accusations of the fixing of global currency rates

http://dealbook.nytimes.com/2014/05/05/banks-sued-on-claims-of-fixing-price-of-gold/?_php=true&_type=blogs&_r=0

One is reminded of the plot of Clash of The Titans(Simpsons)250px-Dump

 Mayor Quimby denounces him for spending the Sanitation Department’s yearly budget of $4.6 million in only a month. To solve the budget crisis and pay the workers for their services, Homer gets cities all over the United States to pay him to mash their excess garbage into the abandoned mine shaft on the outskirts of Springfield. The rest of the family warn Homer that this will be endangering the town, but he claims there is nothing to worry about. Eventually, despite the budget crisis having ended and the workers receiving their salaries as promised, the garbage builds up underground and begins to erupt, pouring trash all over the town. At a town hall meeting, Homer gets fired from his post and replaced with Ray Patterson, but Patterson declines reinstatement to the position, expressing his amusement at them “wallowing in the mess [they] made.” With no one else to fill for Sanitation Commissioner to clean up the trash, Quimby then takes extreme measures by moving the entire town five miles down the road from its current site, but Lisa points out that even though they are transplanting Springfield, they will just start littering again when they finish moving.”

http://en.wikipedia.org/wiki/Trash_of_the_Titans

Those Searching for Plan B

With a failed Department of Justice, proposals to seriously undermine education by doing away with the Junior Cert, proposals to fill GP waiting rooms with free health care for the under 6 yrs paid for by austerity for the majority, selling off resources such as water heading for an Enron Californian Energy nightmare; hapless failure to deal with odious debt foisted on us by the troika, will gravity bring about the inevitable? Ruinous plans of the previous administration have not only been compounded, but have been exponentially made worse by the present administration.They have no plans other than making hay (jobs) while the sun disappears behind the clouds of austerity.

http://en.wikipedia.org/wiki/Tobin_tax300px-European_Union_financial_transaction_tax.svg

Direct supervision and stress testing of banks in Germany has been watered down with the news it will be limited to banks with more than €30bn and the Sparkassan are happy.

http://online.wsj.com/news/articles/SB10001424052702303661404579177873015074830

Stress testing of banks in 2014 with growing austerity, low inflation could be a watershed. Its becoming more difficult to keep the financial Zeppelin balloon in the air. Not all is bad, fears of the consequences of financial Armageddon have seen the hawks depart from confrontation over Ukraine and efforts to find a solution have found renewed impetus.

The problem with the global financial system is a systemic one.

Tobin proposed:

The tax on foreign exchange transactions was devised to cushion exchange rate fluctuations. The idea is very simple: at each exchange of a currency into another a small tax would be levied – let’s say, 0.5% of the volume of the transaction. This dissuades speculators as many investors invest their money in foreign exchange on a very short-term basis. If this money is suddenly withdrawn, countries have to drastically increase interest rates for their currency to still be attractive. But high interest is often disastrous for a national economy, as the nineties’ crises in Mexico, Southeast Asia and Russia have proven. My tax would return some margin of manoeuvre to issuing banks in small countries and would be a measure of opposition to the dictate of the financial markets.[3][4][5][6][7]

http://businessetc.thejournal.ie/10-eu-states-to-bring-in-financial-transaction-tax-legislation-646984-Oct2012/

Given 10 EU member states already have a form of a financial transaction tax in place, the proposal would effectively introduce new minimum tax rates and harmonise different existing taxes on financial transactions in the EU. According to the European Commission this would also “help to reduce competitive distortions in the single market, discourage risky trading activities and complement regulatory measures aimed at avoiding future crises”.

It’s a useful device that would put a spanner in the works in many of the financial algorithms in software used by the TBTF banks to raid financial markets.

http://en.wikipedia.org/wiki/European_Union_financial_transaction_tax

Overhaul of world financial markets is long overdue. Very little progress has been achieved though many support change:

“The Obama administration leans to the first view, saying the crisis showed the vulnerability of the financial system to activities beyond the scope of regulation. Part of its remedy is to standardize most derivatives, instead of relying on the arrangements many companies favor, which users negotiate privately with banks. The administration would force trading of those standardized derivatives more into the open, in some cases onto exchanges, with settlement handled by clearinghouses.

The administration isn’t alone. The Group of 20 major economies last year supported trading standardized derivatives on exchanges by the end of 2012.”

This is 2014 More of this in Part 11  ……..(next time)

End

http://online.wsj.com/news/articles/SB10001424052748703685404575307034252253118

Banking Inquiry

May 4, 2014

 

Have you observed everywhere you go the preponderance of self aggrandising large posters at circa €10 a pop presumably pandering to and inflating the egos of all the political hopeful faces smiling collectively down upon us?image_1

On a local walkabout I recognised none of the faces. I mentally noted our post box was empty of leaflets setting out the political aspirations, beliefs and promises of candidates. I was interested in their position on water charges, property taxes, banks and bondholders, education, health, austerity and taxation in general. The media hasn’t bothered to question or elicit their views in any form of comprehensive way.

I guess they are leaving it up to me to call and connect with them to grill them on some issues. I wont be doing so. Democracy is hanging on by a thread it appears. Appearance is threatening to replace the real; real matters less and less, only appearance matters, your picture on a poster. I suppose its sufficient to gather from the banner under which the candidate seeks election, their political hue.

One way democracy can be felt and have its integrity restored is by much sought banking inquiry into our financial collapse. The demand for answers by the third estate has been grudgingly capitulated to by the current political class. Cynics may suggest it’s a political ruse and diversion to take attention away from ongoing austerity and the further €2 bn in cuts due in our next budget.

We’ve had an inquiry led by Peter Nyberg and a review by Central Bank governor Patrick Honahan both telling us what we already knew, that loose regulation and poor governance in a context of global financial meltdown led to banking collapse, but we needed substantially more than abstract conjecture based on withheld information, so we’ve a new inquiry.

Mr Lynch, who chairs the Finance Committee, will lead the nine member inquiry. There will be two members from each of Fine Gael, Labour; one from each of Fianna Fail, Sinn Fein and the independents.

In a rather ludicrous twist to the selection process those who have expressed most knowledge and interest in the issues under examination, will be excluded as ‘their bias’ will be grounds for compromising themselves during debates. Instead membership of the inquiry team will be biased in favour of those who because of disinterest, lack of informed knowledge, or some other politically inspired reason, will not compromise themselves in debates.

Ignorance and indifference may be the modus operandi of the investigating team. Lets hope this will not be so.image

In scoping out territory for specialised investigation of the intriguing subject matter in this banking inquiry, one hopes each elected member sitting on the committee will set up their own backroom investigative, research team to research and scope leads for investigation and to draw up a comprehensive list of questions to be put to those appearing before the inquiry.

The inquiry will make conclusive recommendations arising from its investigations on how mistakes made in the past, can be avoided in the future. Without speculating on the results of the inquiry, its hard not to point a finger at poor governance structures in the Irish Central Bank, The Department of Finance and the role of political interference in the banks.

The relationship between financial circles in banking and political cartels in Ireland is worthy of close examination. Sutherland, Bruton, Dukes, Spring are names that conjure up an image of this close relationship. The banking and financial world has been a lucrative head hunting ground for certain politicians whose political nous has been much coveted by the banks and turned to good use to lobby politicians from within, by those who have strong political connections.

One recommendation for this inquiry would be to strongly consider legislation requiring all politicians to undergo a period of amnesty of 5 years following their years in office, before they can be seconded to a position in the financial services industry.

This would prevent the abuse of political power by lobbyists in the financial services industry.

Some Suggestions for the Inquiry

1. Follow the money.

This should not be too difficult. Ideally, the ten largest loans handed out by each bank could be trawled through to examine the precise mechanics involved in these developer loans: who dealt with them, how were decisions made, documents in support of the loans obtained and examined. This would quickly reveal a seam of rich information that will quickly unravel the culture of lending in the banking system.

2. Examine the bonus system.

Word has it that the traditional method of classical banking with local managers intimately knowledgeable re financial matters in the local community with lifetimes of experience overseeing lending patterns responsibly, was set aside. Instead such managers were replaced by whiz kids of the bonus culture pressing loans on everyone they could find. Lending standards were lowered, the bottom line was the bonus, prudential lending was the big casualty. As long as property rose in value nobody cared.anglo

3. The role of the central bank and regulator.

Specific interest should target the Central Bank personnel who were witness to Anglo’s meteoric rise to unsustainable levels of growth during the Celtic Tiger.

4. The case against Europe.

Particular interest should focus on ECB(European Central Bank) and ICB(Irish Central Bank) relationships, correspondence and communication by email, phone, video, meetings where regulatory brakes should have been considered and monitored by ECB and ICB.

5. The Guarantee.

The inquiry should not conclude its deliberations until full and final discovery is made of the personnel and role of ECB, ICB, Dept of Finance and the political representatives  who played a role in the Guarantee.

I find it difficult to swallow the commonplace assumption the Irish Dept of Finance, Irish Central Bank, Irish politicians and representatives of the Irish financial industry acted alone in opting for the state guarantee. The Guarantee would have been new territory. In hindsight it was a rash and incompetent idea. It would be therefore easy to assume incompetent rashness on the part of that group from a relatively large background in banking and politics. But, were there other compelling forces at work?

The inquiry should examine closely the possibility of other outside influences on the Guarantee. It’s incredible to believe the ECB was not consulted on such a momentous decision.

6. The role of the credit rating agencies?

It’s incredible to believe the high credit rating afforded to Ireland and to its banks at the height of the Celtic tiger as it increasingly became more exposed to dangerous lending practices and icebergs.

7. The role of financial auditors

Anglo Irish Bank auditors, Ernest & Young, their role needs to be scrutinised.

8. The planning authorities and the role of planning legislation that fueled the boom?

There are plenty of issues not covered here, but the above is a sample of what a banking inquiry should deliver answers on so that we can learn for the future. It’s not sufficient that opaque, broad generalisations be used to obscure the truth.

The inquiry needs to yield positive results that discovers hard factual evidence that will form the concrete base of any conclusions it makes.

In the US financial meltdown has been the subject of detailed inquiries:

http://en.wikipedia.org/wiki/Wall_Street_and_the_Financial_Crisis:_Anatomy_of_a_Financial_Collapse

“The Report cites investment banks as a major player in the lead up to the crisis, and uses a case study of two leading participants in the U.S. mortgage market, Goldman Sachsand Deutsche Bank. The case study found that from 2004 to 2008, banks focused their efforts heavily on RMBS and CDO securities, complex and high risk financial products that they could bundle and sell to investors who did not necessarily know the composition of the product. Financial institutions issued $2.5 trillion in RMBS and $1.4 trillion in CDO securities. They created large trading desks that dealt strictly in RMBS and CDO securities. More alarmingly, their trading desks began to take out insurance policies against the RMBS and CDO securities, allowing them to wager on the fall in value of their own asset. They acted in many instances as an intermediary between two opposing parties who wished to bet on either side of the future value of a security. This practice led to a blatant conflict of interest in the securities market, as the banks used “net short” positions, in which they wagered on the fall of a security, to profit off the failure of a security they had sold to their own client.[10].”

The cause of financial meltdown in Ireland was different with focus on  banking and housing bubble meltdown. Will our inquiry into Ireland’s financial meltdown comprehensively answer the questions  explaining the legacy of financial meltdown still with us.

Can such an inquiry competently deliver the answer as to why young people in Ireland cannot afford housing, cannot afford to begin families, why the financial services industry, the banks, austerity, continue to extract from them through falling social services in health and education, a future that comes through Ireland eating its young; a politics of vampire bailiffs masquerading as democratically legitimate politicians defending the people!

Other politicians have no need to masquerade, they openly serve the financial services industry. The control of democracy and freedom is now vested in the financial services industry.

So perhaps the election posters you see about you are less meaningful than first they appear.

End

 

 

 

Global Financialisation and QE in USA and UK

http://www.positivemoney.org/how-money-works/advanced/how-quantitative-easing-works/

“…money created through QE was used to buy government bonds from the financial markets (pension funds and insurance companies). The newly created money therefore went directly into the financial markets, boosting bond and stock markets nearly to their highest level in history. The Bank of England itself estimates that QE boosted bond and share prices by around 20% (Source). In theory, this should make people feel wealthier so that they spend more. However, 40% of the stock market is owned by the wealthiest 5% of the population, so while most families saw no benefit from Quantitative Easing, the richest 5% of households would have each been up to £128,000 better off (according to Strategic Quantitative Easing, p28, by the New Economics Foundation).

Very little of the money created through QE boosted the real (non-financial) economy. The Bank of England estimates that the £375 billion of QE led to 1.5-2% growth in GDP. In other words, through QE it takes £375 billion of new money just to create £23-28bn billion of extra spending in the real economy. It’s incredibly ineffective, because it relies on boosting the wealth of the already-wealthy and hoping that they increase their spending. In other words, it relies on a ‘trickle down’ theory of wealth.

http://en.wikipedia.org/wiki/Quantitative_easing

In the USA we’ve had QE1, QE2 and QE3 with $1.7 trillion alone spent on QE1

http://www.opendemocracy.net/openeconomy/ross-heard/qe-timeline-of-quatitative-easing-in-us

Note above the effect of QE to boost the bond and stock markets. “40% of the stock market is owned by the wealthiest 5% of the population”. Actually the real figures could be closer to 60% of the stock market is owned by 1% of the population.

How did this come about?

Well the global financial system came close to collapsing in 2008. Apart from Lehman’s most of the leading players were bailed out by QE.

Some took the view this was a good thing as the global financial system due to deregulation was infected with a corrupt takeover managed by a global banking system grown “too big to fail”.

Without regulation of the global banking system, global banks decided to use the opportunity to ‘regulate’ themselves:

Rigging of Libor Rates

http://www.acfcs.org/in-landmark-lawsuit-fdic-tries-to-make-institutions-that-rigged-libor-rate-pay-for-failed-bank-losses/

“The “London Interbank Offered Rate,” or Libor, was intended to be a daily snapshot of the interest rates at which banks would lend money to each other. The rate is tied to an estimated $300 trillion in securities and financial products worldwide.

Banks fixed the rate to reap profits, hide their own weaknesses, FDIC says

It was set each day by a poll of the world’s 16 largest banks, administered by the British Banker’s Association. Rate-setters at each institution were supposed to provide a neutral, independent assessment based only on market forces. Instead, the FDIC alleges the 16 financial giants who set the engaged in “fraudulent and collusive conduct” to fix the Libor to their own advantage for a period of about four years between 2007 to 2011.”

Note above “The rate is tied to an estimated $300 trillion in securities and financial products worldwide.”

Some may raise  eyebrow at the figure of “$300 trillion in securities and financial products”. Some may argue these financial products are a good thing providing stability and reliability to world financial markets.

A farmer might want finance to invest in his farm based on collateral around his crop of next year that’s just been planted. So he gets investment using collateral derived on the projected sale price of the crop the following year. The investment derives from projected calculations. The investment firm is happy, the farmer gets his money.

Everybody profits unless the crops are always ruined by bad weather or schenanigans.

That “$300 trillion in securities and financial products” is a scary figure involving casino bets across the world’s financial system requiring payouts in certain circumstances that must be avoided at all costs otherwise the global financial system is in danger of collapse.

Right now the casino world of shadow banking has become a global casino industry involving 100’s of thousands of employees earning fat fees betting on paper products. Individuals and companies such as those that reside in the Irish IFSC (Irish Financial Services Center) operating Ireland as a global tax haven, just as their colleagues work the monopoly game in London and Wall St.

Global financialisation of the derivatives market has become the dominant player of the global economy and it threatens to extinguish real markets and real economies with a false economy similar to that operated under the demised USSR. This is capitalism threatened by the socialisation of the financial sector.

Global financialisation is decoupling from the real world of the real economy of science/medicine/health/education/manufacturing/enterprise/new products/food production or new invention contributing a fair deal for all who occupy earth.

Democracy itself is being overwhelmed. New global economy based on financialisation of paper products aided by high frequency trading algorithms is now pulling all levers ruining democracy and the economies of formerly free nations hoovering up all to the 1%.

How the financial market is rigged by the large banks and institutional investors.

Plenty other youtube videos on the same topic you should be familiar with. The algorithms are rigged. See here:

https://www.youtube.com/watch?v=NYWrtvSCziQ

Part 11

How deregulation came about and the global financial casino was born.

‘A Short History of Financial
Deregulation in the United States’

Matthew Sherman

You might like to study how the scary dependency of world financial markets came about to that figure of $300 – $350 trillion shadow banking derivative trading, start here:

http://www.cepr.net/documents/publications/dereg-timeline-2009-07.pdf

The deregulation beast that led to 2008 financial meltdown has been revived with QE and is busy further looting and pillaging the global economy.

Instead of proposed revival of the world economy, next meltdown could end in worse than what was experienced in 2008. The omens are not good.

Let’s look at the antics of the world of global financialisation in regard to Ireland’s economy

Unfortunately rich people dont tend to spend their money in the real economy, they tend to invest in stocks and shares. Especially when they see stocks and share values rising and it does not mattter if QE is the artificial cause of this.

Note government propaganda extolling a turnaround in Ireland’s economic affairs is false unless you consider sitting in the back seat and allowing the driver to take you where they will, of benefit to you. Instead of chasing ambulances, you will find many politicians chasing job announcements, if they can be found.

Hedge Funds and their global reach and power are increasing their grip on the global economy. What are they up to in the case of Ireland?

Awash from funds from QE they’ve been on a spending spree in Ireland. They’ve bought left, right and center from NAMA and purchased large amounts of commercial and private property creating the artificial illusion of the return of a mini boom in Ireland’s property sector.

These hedge funds have been active in many states in the USA cornering the property market and making it impossible for local property buyers to compete with their prices. Its believed they hope to make a profit by turning the population of these states into lucrative rent  controlled serfs.

Without access to the FOI(Freedom of Information) facts on the identity of cash buyers in the property sector in Ireland, it’s impossible to know how much investment of this kind is taking place. But certain large commercial property deals give evidence and proof of such activity.

Some effort has been made to argue returning emigrants have pushed up property prices in depressed areas, but the evidence to support this, is not there unless you consider one offs.

http://www.investopedia.com/terms/h/hedgefund.asp

An aggressively managed portfolio of investments that uses advanced investment strategies such as leveraged, long, short and derivative positions in both domestic and international markets with the goal of generating high returns (either in an absolute sense or over a specified market benchmark).”

Lets say Hedge Funds are simply grouped portfolios of stocks and shares, orca whales in a sea of derivatives. Do they benefit from QE as well? Yes, they do.

Banks like companies trade in the real economy as well and for the most part they are private companies that for large investment purposes banks for Hedge funds represent opportunities.

Here’s the deal, its a modern version of Monopoly. For the creative out there its time to build a modern version of the game of Monopoly based on the rules of the stock exchange, QE, the FED…

Consider this scenario. A large reservoir of cash has been poured into the banks and resides on their balance sheets.

Its too dodgy to lend that cash into the real economy as people are stricken with negative equity, austerity with no champagne. And there’s more of this to come.

The champagne from the Fed gets poured from above onto glasses piled high in a pyramid and Hedge funds are among the first recipients to have  glasses filled.

The question for Hedge funds is what to do with their money? Well, simple really, they look around and see QE being soaked up by banks and financial institutions inflating  value  by between 20%-40%, so its time to get on the bandwagon and invest in rising share prices to benefit even more, from the upswing.

Lets follow the money and look at how Ireland is faring under new dominion of global financialisation…

You might think Ireland with its debt/gdp profile is a basket case even if you don’t take into account the amount of leveraged debt circa €120 trillion owed by its economy public and private. However, in this new post democratic financialised global economy, the old rules of trade based on manufactured goods has been replaced by the exchange of financial paper daffodils(my neologism).

So why does David Tepper(see below) look at Ireland’s banks as investment opportunities? Its no brainer maths really. With QE the value of eg BOI shares are undervalued by 20% as long as they don’t fail or the Irish economy does not go under. QE and troika bailout has been poured into BOI underpinning a resolve not to let it fail. The troika have extended Ireland a loan facility of €67.5 bn, so banks are safe for the moment.

Note all QE injections are applied across share prices, bond prices, stocks irrespective for the most part of the underlying real value of those stocks and shares underpinned by the real economy.

It matters little the underlying economy in Ireland is weak, the retail sector is dying, austerity is drying up the remainder of debt free assets in Ireland

http://www.financedublin.com/debtclock.php

It matters little our debt to GNP approaches 125% and we owe approx €180 trillion or that our local economy is dying under the crippling weight of debt; or that NAMA and government keep property prices highly inflated beyond the reach of local consumers.

These facts simply do not matter anymore in this new era of global financialisation. A decoupling has taken place between the real economy and the new globalised economy based on financialisation.

A Short History of Financial

Deregulation in the United States

Matthew Sherman

http://www.cepr.net/documents/publications/dereg-timeline-2009-07.pdf

The above is worth a look examines how deregulation led to financial meltdown in 2008.

QE and global financialisation has consumed the Irish economy and swallowed it live and whole.

Hedge funds have swept in as vultures and consumed large stakeholdings in the property sector and in the Irish banks looting a stricken economy with stakeholder funds provided to them by QE and the world of shadow banking.

Enter David Tepper….. “You look at the world and you make an investment…So, that’s what it is:

How can this guy sweep in and grab a one third stake in an Irish ‘pillar bank’ in a couple of months that Irish people have bailed out paying for it with the looting of their public service?

https://www.youtube.com/watch?v=ax5SK9ckC_Q

http://namawinelake.wordpress.com/2013/01/24/hedge-fund-manager-blows-whistle-on-bank-of-irelands-subordinated-bonds/

Welcome to the global casino

By investing in an Irish bank the future of the bank will be secured? All members of the casino have had their chips inflated in value by between 20-40% to help them play at the tables. Stocks and shares rising due to QE investors and hedge funds on the domino train look for a good punt from their rigged vantage point.

champagne

http://www.irishtimes.com/business/markets/wilbur-ross-to-sell-part-of-bank-of-ireland-stake-1.1712038

An unregulated financial sector beginning in 1970 instead of being detoxified and disarmed of their financial weapons of mass destruction aided by the false principle of banks too big to fail, has been allowed by QE to blossom like a Frankenstein on the world’s stage.

This country has been looted and pillaged by the nefarious dealings of a corrupt global financial system aided by corrupt and incompetent governments feathering their own nests. We are now owned by global hedge funds and rents are rising…

http://beginnersinvest.about.com/od/stocksoptionswarrants/a/what-is-a-derivative.htm

We enter interesting times and the game is rigged by those who pull the levers and strings.

Governments need to impose austerity not on their populations but on those who rig the game.

End

1. http://video.about.com/beginnersinvest/Beginners-Guide-to-Derivatives.htm

 

Lord Haw Haw

April 21, 2014

LordHeeHawReal GDP is the one indicator that says the most about the health of the economy and the advance release will almost always move markets. It is by far the most followed, discussed and digested indicator out there – useful for economists, analysts, investors and policy makers. The general consensus is that 2.5-3.5% per year growth in real GDP is the range of best overall benefit; enough to provide for corporate profit and jobs growth yet moderate enough to not incite undue inflationary concerns. If the economy is just coming out of recession, it is OK for the GDP figure to jump into the 6-8% range briefly, but investors will look for the long-term rate to stay near the 3% level. The general definition of an economic recession is two consecutive quarters of negative GDP growth. “

http://www.investopedia.com/university/releases/gdp.asp

Oops according to http://www.tradingeconomics.com/ireland/gdp

GDP annual growth rate for Ireland  was -0.70% with overall growth rate -2.30%. Previous blog elaborates on the decline in pharmaceuticals due to patent cliff.

Declines in GDP per last blog due to austerity, global recession, ending of patents for MNC’s, no worries, according to ESRI, lets simply  hide the facts and ignore GDP and measure another less reliable economic indicator instead, GNP (Gross National Product). GNP can be primed by excessive lending into the construction sector, for example recent Celtic Tiger experience.

Lord Haw Haw propagandists from the ESRI make the following assertion

http://www.irishtimes.com/business/economy/employment-growth-to-create-50-000-new-jobs-in-economy-say-esri-1.1757991

” The ESRI forecast gross domestic product (GDP), the more standard measure of output, would grow by 2.6 per cent this year, and by 3.5 per cent next year.

It warned, however, that the GDP numbers were being distorted by the so-called “patent cliff” in the pharmaceutical sector, and therefore gave an unreliable picture of activity in the economy.”

It’s the other way round, the ESRI have twisted globally accepted standard indexes such as GDP, denigrate them because they do not paint the pretty picture they require, and massage their figures for economic outlook.

Judging by the declining figures due to patent cliff issues there is no reason for the overly optimistic propaganda figures of 2.6 per cent this year, and by 3.5 per cent next year given above.

http://www.irishexaminer.com/business/gdp-growth-figures-misleading-265035.html

According to John Walsh of the Cork Examiner,

“…… the patent cliff in the pharmaceutical sector where generic drugs are increasingly replacing patented products in overall output. Low value generic drugs are causing a big drop off in profits in the sector, which has knock on effects for GDP figures.

“….. the amount of sales revenue and profits in the IT sector being moved abroad, even though tech firms have significantly increased employment levels over the past few years.

Again, the GDP figures are skewed by lower profits booked in Ireland, but the domestic economy and the GNP figures have benefited hugely from the increase in real activity.

ESRI chief economist, John Fitzgerald, said using GDP figures for real growth in the Irish economy is now misleading!

However, the European Commission uses GDP, which will present problems when calculating the economy’s structural deficit, which is a key part of the fiscal stability treaty, he noted.

Mr Fitzgerald said the Irish economic recovery was being underpinned by a surge in investment.

The ESRI is forecasting an increase in investment of 9.6% this year and 10.4% next year.

Exports are expected to grow by 3.7% in 2014 and 4% in 2015. The current account as a percentage of GNP is forecast at 9.3% this year and 9.9% next year.”

Ironically, the Cork Examiner sadly has just announced the culling of 50 jobs. It isn’t feeling the economic turnaround.

John Fitzgerald is becoming the Irish austerity version of Lord Haw Haw.

Fitzgerald refers to “sales revenue and profits in the IT sector being moved abroad..” Hard to know what he means there as he does not explain. Perhaps he means the profits of U2 being sent offshore. Accepted practice of profit flows from MNC’s in other jurisdictions channeled into Ireland rather than at point of sale in other jurisdictions is controversially the means by which a large part of our GDP gets inflated?Korean_Ferry_Sewol_Capsized,_2014

On the radio recently when pressed on whether it advisable the brakes on salary scales being removed as a result of the feel-good projections might be a good idea, Fitzgerald offered it a good idea that maybe this should begin with salary scales in the Central Bank.

Perhaps he has an eye on a job there. ICB is part responsible for the poor to disastrous negotiations on our promissory notes and troika deal.

Into this vibrant turnaround water charges or approx €240 annually have just been announced to add to the woes of hapless consumers.

This will  pay for the installation of meters and a bureaucratic quango white elephant packed with huge salaries without one burst pipe being fixed. When the white elephant is up and running amok, it will try to leverage an investment bond from international markets to pay for the development of infrastructure.

We’ve had this mess before with the privatisation disaster of Eircom http://en.wikipedia.org/wiki/Eircom#Privatisation

“The Eircom flotation is considered to have been an example of a stock market bubble— after the initial hype of the flotation died down, the stock price fell rapidly. Many of the 500,000 small investors were angered by the significant financial loss they incurred, blaming the government for not sufficiently warning them of the risks inherent in stock-market investment.

Since privatisation, Eircom penetration of landlines has fallen from 82% to 69%. During this period, there has been a large increase in mobile phone ownership and a significant rise in line rental to the highest in Europe.”

ITs a distinct probability Irish Water will follow the same vector and be a disaster for Irish consumers. Raising the necessary stock mark bonds required for investment in Irish water will lead Irish Jack and Jills perilously exposed to exploitation and the vagaries of the global financial system with no prisoners taken. Another example of government incompetence.

Ironically a recent White Paper, on Universal Health Insurance had no costing proposals though the definition of White Paper implies that unlike as in a Green Paper that outlines proposals and asks for debate, a White Paper is meant to detail specific plans with costings. Ah well, government painting green white is par for the course.

Backtrack for a moment and recall water was high on the agenda for the troika negotiations.

Often as quid pro quo for bailout of underdeveloped nations who fall into a state of financial collapse, bailout terms involve lucrative contracts for international investors. Suffice it to say consumers will be on the hook for either privatisation of the water supply when like Eircom, Irish Water will be sold into the private sector and on the receiving end for higher charges and low investment looting by international investors. The present course adopted by this government is worse than selling off our harbours.

download

Instead the Irish Pension Fund assets should be spent on actually repairing pipes and fixing the leaks.

Meanwhile possible sanctions war in East Europe has faded into the background with fears of an energy crisis in Europe if Russia increases its charges for gas.

Part 11

The banks have not been fixed and the property sector is in the midst of a growing mortgage crisis ignored by the banks.

In spite of the distinctly wild optimism of Fitzgerald of the ESRI, our banks continue to teeter on the brink of an unresolved mortgage crisis. Property prices are still far too high with banks not lending. Their loan books are still infected with losses from the property sector that have yet to be marked down with losses masquerading as assets. A run on Irish banks remains a distinct possibility and may have already begun.

According to Shane Ross, Business, 2, 20 April Sunday Independent:

“In 2011 Wilbur Ross….and his associates bought a 35% stake in BOI at 10 cent a share. Wilbur is a vulture investor. Last month he sold a third of his shareholdings for 33 cent each. Ross has extracted his entire original investment from the Bank of Ireland and now holds his remaining stock for nothing. He has a free ride. Wilbur’s intentions with the remaining holding are critical. Rumours on the market are that he has promised not to sell before June 25. Wilbur does not hang around earning goodwill. He is not in Ireland on a mission of mercy….

….ask Wilbur specifically what his intentions are for his remaining massive holding? If he refuses to promise to hold on for several years, fasten your safety belts….”

In the background looms Mario Draghi:

http://www.rte.ie/news/business/2014/0324/604236-draghi-irish-banks/

“The ECB remains in close contact with the Central Bank of Ireland with regard to the situation of the Irish banking sector.”

Mr McGrath said the letter was far more “sober” than the assessment of the banks by the Government.

He added the ECB was “distancing” itself from tests of the banks by the Central Bank last year.

Mr McGrath said he was “deeply concerned” that Mr Draghi has raised a question about the “viability of all nationalised banks”.

Amidst this turmoil one can be sure of one thing, that is that Lord Haw Haws from the ESRI fueled by statistics from the IRISH CSO materialising 50000 jobs  in the Irish agricultural sector out of nothing, will stoke the flames of propaganda assuring everyone all is well:

http://edition.cnn.com/2014/04/20/world/asia/south-korea-ship-sinking/

“Sewol: “Our ship is listing and may capsize.”

Jindo VTS: “How are the passengers doing? …”

Sewol: “It’s too listed that they are not able to move.”

A short time later, another exchange takes place:

Jindo VTS: “Are the passengers able to escape?”

Sewol: “The ship listed too much, so it is impossible.”

The transcript may help answer one of the major questions about the capsizing: Why didn’t more passengers escape on lifeboats?”

Perhaps one should ask Captain Kenny, aka Captain Smith of the titanic, aka “Sewol Capt Lee Joon-seok”, why passengers on the Irish titanic are reassured.

Irish assets approach ever more dangerously close to the  ‘extraordinary measures’ of  Mario Draghi involving bail-in for depositors in Irish banks. They face the tightening noose of austerity and the siphoning out of the Irish economy of 100 years of efforts to improve public services for the Irish people.

We abhor the absence of a public bank inquiry investigating the mechanics and procedures of loan approvals in the Irish banking system prior to 2008, the shredding of notes of public service officials sufficient by itself to have the attendees at the ‘guarantee’ meetings removed from office (this has not happened), the coverup, propaganda and consequent disastrous negotiations of the promissory notes and bailout terms.

This leads to the inevitable  conclusion that though the Irish Sewol has not sunk yet, this should not reassure us that it will not shortly be deja vu time, when we realise sinking was inevitable, if only we had seen through the propaganda of Irish Lord Haw Haws who’ve cost us so much in the past and who still in situ create an even bigger mess.

End

 

http://en.wikipedia.org/wiki/William_Joyce

 

George Bernard Shaw once wrote: There is no accomplishment so easy to acquire as politeness and none more profitable.

Queuing for Dublin’s reignited property bubble, economy turning the corner, or bubbles from a drowning corpse?artane Welcome to the Irish Property Market. All Irish ministers were away on junkets for St Patrick’s Day living it up on their high salaries while this  Gazumping was going on: attached photo with prospective house buyers queuing outside a property in North County Dublin in March.

1. Bidders don’t have to authenticate themselves before they place a bid. They just need to turn up and give a name and number. Are these bidding details saved for regulators to verify in some way?

2. No way for a bidder to have confidence that a counter bid is genuine. You have to accept it at face value. For arguments sake a counter bid could be bogus (from seller or agent).

3. Ability of Estate agent to control the supply of a corner of the market in a particular area. No regulations there requiring full disclosure on release of property on their books onto the market.

4. The % fee as incentive should be regulated/replaced with fixed fee.

5. No obligations around Sale Agreed eg no legislation that the sale should be posted on a public database with the law giving contract protection to the purchaser…this allows for gazumping. Buyers should be able to access a public database to show if a property is still for sale.

It would be very interesting to follow the money re cash buyers and see where it comes from. The above list is not exhaustive. Are banks providing this money? Huge downpayment deposits lead the market into the hands of dubious cash buyers.

Here was the bidding for a St Annes house in Raheny circa November 2013: Asking price €325,000 The house eventually went sale agreed at €391,000. When the current bid for this house reached about €360,000 they then put another house in the same estate on the market . That house eventually went sale agreed at > €360,000.

A month or so later the same estate agent then put another house in the same estate on the market and the asking price was €390,000 !!! Controlling the supply of these properties into the market place allowed the estate agent to manipulate the market.

The Irish property market remains broken and government have done little or nothing to help fix it.

The Irish banks are vulnerable to depositor bailin. Deflation has taken hold and the growth rates for the Irish economy with 2% heralded for 2013-2014 insufficient to grow Ireland out of recession.

I’ll try to put this politely as I consider the following: A lynch pin of propaganda on employment statistics are government claims they have ‘created X number of more jobs in the economy’. Members of the opposition or critics of government  say, yes, they should be congratulated for that….but…..!! So, before I go any further, let me clearly state I do not give the government any credit for any upswing in employment statistics. In fact, through their programme for austerity, the reverse is the case.

Any employment improvements have come in spite of their policies. There are of course those who under any government eg Enterprise Ireland or IDA or people in the commercial world, who should take kudos, without government claiming their efforts, as their own achievement. Leo Varadkar, Minister for Transport, Tourism and Sport, is now signalling that Ireland’s railway system will be cutback because apparently he regards investment in road transport, more efficient and productive.

The austerity drive continues unabated.

Government will quickly take credit with Enda Kenny and Richard Bruton making their business to turn up at any announcement of tele support jobs to take advantage of our status as a tax haven. Laughter and feel good smiles de rigueur. Education and Health have seen major cutbacks in employment levels. Our international university ratings are falling because of cutbacks in R&D and staffing and investment.

Six years into our financial meltdown and a report just out http://www.rte.ie/news/2014/0404/606596-housing/ reports that up to 80,000 urban housing units are needed over the next five years to keep up with demand. NAMA has been providing a trickle of Social housing units falling far short of requirements. €30bn of taxpayer money went into NAMA, €67bn of bailout money went into the banks.

Why isn’t the government out providing jobs building these homes? Do you get the feeling the government is not in control of anything?

They are just along for the salary/pension ride mandated to do nothing while others pull strings in the shadowy financial sector ! The trick is to do nothing  other than to milk every photo opportunity where one new job can be created out of nothing!

A Conundrum

Here’s the problem, banks require developers to put up to 30% of their own money into property development projects, but developers don’t have that kind of money other than for small infill developments. One solution proposed by government to deal with this problem is to use money from http://www.nprf.ie/ISIF/IrishStrategicInvestmentFund.htm to provide a three way supply of investment from banks, Strategic Investment Fund, and developers to get large projects eg in Adamstown, Co Dublin, off the ground, to provide homes.

If you acknowledge that use of the SIF would be beneficial in this instance, it does have its difficulties. Not the least of which is the fact of high property prices beyond the capacity of the typical industrial wage. Even those on high incomes cannot afford rising rent, high cost of accommodation; those on lower incomes, single income families, eg unmarried mothers face inability to pay higher rent charges and are in danger of losing their homes.

The high cost of property is due to Ireland’s re-ignition of a property bubble in the larger cities because of low investment and shortages in supply of new building and government failure to govern; including failure to negotiate bondholder debt write-down.

Couple this with the rentier dependence of the banks on return from large property lending on past loans, then we have a conundrum turning into a real crisis with a negative impact on the economy and the lives of young people.

The balance sheets of banks are based on ability to recoup  lending that allowed banks to mark up  balance sheets. Here’s the problem: it’s therefore in the interest of banks to keep property prices high to curb negative equity to improve/maintain their  levels of capitalisation and solvency. But, a big BUT, falling salary levels, higher taxation/charges, mean fewer can afford to take out loans, even to obtain modest housing stock.

Our bailout has been the bailout of compulsive gambler losing at the casino. Banks have funded him and told him to continue playing as before. Property Scam Property prices and high rents go beyond the capacity of ordinary people to afford. So, even if large developments improving the housing stock come on stream, austerity driven salary levels and a middle class pilloried and under attack from all sides for more taxes/charges, mean fewer can afford the high property prices.

If banks write down bad loans based on high property prices in the past, their balance sheets will be severely effected. If they give out mortgages based on high property values, banks know from previous experience such predatory lending will boomerang back at them and lead to unsustainable lending practices. One could argue on a large scale this dilemma has been mirrored by NAMA . With a portfolio in the 10’s of billions, was this portfolio worth nothing with no buyers out there to give it credibility? Will the coming ECB stress tests of 2014 due for later this year see the ECB look at the banks and see large holes in their balance sheets with lending out there that cannot be recouped due to falling property prices; taps turned off vis a vis loans to SME’s and other forms of investment in the economy?

As a result, will NAMA not be able to sell any of its portfolio stock? Worse, will NAMA sell its stock in a firesale and send property prices into a spiral downward? Ministers from Northern Ireland were worried NAMA might just do this creating havoc for Northern Ireland’s economy. Would coming stress tests on the banks pull the rug from under the banks and force them to write down their lending and loan books to ZERO? Furthermore, this could have impact on the broader EMU economy and prevent Ireland from reaching its targets to pay back its €67bn of bailout without being crushed by the burden?

Recent activity in Ireland by US hedge founds with reports that one deal of circa €5bn was concluded in record time of 2 weeks for NAMA and its NI portfolio, plus a proliferation of other similar deals, would appear to give evidence that a strategic decision has been made by US Hedge funds to invest into Ireland buying distressed commercial property assets of NAMA and the banks. This would  provide a backstop to the banks and NAMA hopefully lead Ireland out of its quandary, and hopefully lead other countries eg Spain/Italy to follow Ireland  out of recession, a Surprising backstop of the Irish banks?

Who would have thought US Hedge funds could be persuaded to rescue NAMA?

We have a Tilly, fumbling at the greasy till,  government, silly.

Tilly

James Joyce

He travels after a winter sun,
Urging the cattle along a cold red road,
Calling to them, a voice they know,
He drives his beasts above Cabra.
The voice tells them home is warm.
They moo and make brute music with their hoofs.
He drives them with a flowering branch before him,
Smoke pluming their foreheads.
Boor, bond of the herd,
Tonight stretch full by the fire!
I bleed by the black stream
For my torn bough!

Part 11

The Growing Power of Tilly Hedge Funds 

The Greasy Till

https://www.youtube.com/watch?v=myvyGl6yo64

Thus it is that the financialisation of the global economy sees more and more power vested in the global, shadow economy; less and less power in the real economy. The real economy has not gone away. Jobs and salaries have yet to be created and found to underpin the strategic investment of Hedge funds with tenants/owners able to pay their way in a new rentier system experiment.

Thus it also is that Enda and Richard like to frolic and proclaim their job hunting skills. Squaring austerity, which is the antithesis of economic growth, though strong arguments are made to the contrary, with real development and real economic growth is a real problem. The rich become richer the disposable income of the middle class is falling(cf last blog). Maintaining the high cost of property by Hedge Fund investment while deflating the economy through austerity policies, is a recipe for disaster.

Ireland future 51st state of the union?

Perhaps the Hedge Funds have covered their bets with Ireland now considered ripe for membership as a future 51st state of the union should the euro fail?  http://www.irishcentral.com/news/top-banker-says-ireland-should-break-with-eu-and-join-the-us-105660413-237723801.html

Former Bank of Ireland chief executive Mike Soden, now a leading member of the Irish government’s newly-established Central Bank Commission, has said Ireland should consider leaving the European Union if it renders the country unable to make decisions on its own fiscal policy.”

“In his new book on the financial crisis, ‘Open Dissent,’ the 63-year-old banker say: “Just for a moment, let us question why our hands are tied at this time as a member of the EU. “If we are in search of a solution and Europe finds it difficult to accommodate the needs of the Irish electorate, should we look elsewhere?” He adds: “Our membership of Europe has to have balance in all aspects, particularly in relation to our culture, our sovereignty and the price we pay for economic and financial independence. “Have we unwittingly surrendered these precious aspects of our society as the price of European Union membership?”

While government has done nothing to reshape this economy, the real shakers and movers have been busy. Globalised Financialisation of the Irish Economy Backstop You might also expect government preparedness and action to prevent a property bubble beginning again, that the banks would be forced to lend into the economy, housing units required by population sustainability and growth, would be built. Government would lead the people back to affordable housing to allow young people to set up homes based on reasonable incomes free from predatory lending practices and crushing bubbles.

You would be wrong!

There are no plans to make housing affordable? Whatever about plans that may come in the future to build more homes, the word ‘affordable’ will not be part of the lingua franca. The banks want to net large profits and bonuses on property loans. The government want to net large profit from property taxes. Many government ministers have large property portfolios they do not want to compromise with falling property prices. Somewhere in all of this are the victimised serf taxpayers. The only gotcha in this ludicrous situation is the lack of long term sustainable jobs in a stable and real economy. Without a real economy the long term sustainability of over inflated property prices is compromised  headed for a fall.

Namawinelake here speculates that instead the government’s capital budget is being siphoned away to coverup shortfalls in austerity suffering departments eg Health. http://namawinelake.wordpress.com/2013/01/04/did-government-departments-really-spend-e850m-on-capital-expenditure-in-the-month-of-december-2012/ What that housing agency report does is show up government ineptitude and propaganda. The only budget this government cares about is downpayment of troika debt. No doubt that report will lead to the commissioning of another government five-year plan. Instead of action we have delayed planning that scuttles any attempt to act now.

6 years into financial meltdown we have a plan to have a banking inquiry and with a new property bubble emerging, we will soon be making more property planning bubbles to consign to the shelf as soon as every ounce of propaganda is milked from them.canstock8599636 But we do have a Shatter inquiry. Plans are like bubbles easily popped as they lie dormant on a shelf somewhere waiting for a pin such as a broken promise to burst them.

Mortgage arrears of 12000 have been recently lanced by news of 4 debt writedowns (I kid you not). http://www.irishexaminer.com/ireland/insolvency-service-admits-slow-start-of-four-write-downs-264215.html Government , NAMA and Irish Central Bank can’t believe their luck It would not suit the interests of global hedge funds that the Irish bailout fail putting at risk global share values triggering massive default on large scale bondholders. Add to this opportunity value in the acquisition of potentially lucrative assets yielding fat profit all round. Thus it is the Hedge funds are active in buying off large chunks of the NAMA portfolio( see last blog). http://www.dailynewz.net/news/nama-ni-portfolio-sold-for-%C2%A31bn

Northern Ireland politicians have been terrified NAMA would go into NI with a firesale wreaking havoc on their property market. With a deal on property worth €4.5 bn marked down to €1.3bn rich pickings allow the portfolio to be massaged in value upward heading for another property bubble. Similarly Hedge funds have been looting other tranches of the NAMA portfolio. Government here are delighted claiming the improved employment figures due to MNC’s capitalising on their tax haven status, have been created by them, not the MNC’s.

Do nothing and take the credit for any positive achievements of others due to other factors is a mainstay of the present government. No doubt when any improvement can be claimed in the economy these Hedge Funds will head for the exit. The fact is the Irish government have contributed next to nothing to turnaround. Least of all have they defended the interests of the Irish people. Irish taxpayers will pay the difference between the €4.5 bn marked down to €1.3bn in the above instance.

Just to be clear, in case your house is in negative equity and you paid €450,000 for it, the fact the Hedge funds get a mark down of €4.5 bn marked down to €1.3bn does not mean you will get a mark down and write-down on your mortgage from €450,000 to €130,000. Also don’t be complaining in public about this, note you signed an Non Disclosure Agreement with your bank and the bank can throw you out of your house or take you to court or make life even more difficult for you.  

What can you do?

Anyone facing insolvency or in arrears with their bank with their homes in negative equity should have a word with the Insolvency Service of Ireland in spite of their poor record to date. This is no Iceland where a major mortgage write-down scheme was recently announced, https://www.youtube.com/watch?v=FMgwgEGbBK4 A third of Iceland’s  population of 100,000 people will be helped by a capital injection of circa €1.5bn that will split in two ways, mortgage relief and tax relief. In turn this will boost the local economy.

In Ireland, with 350,000 homes in negative equity and approx €2.5bn in outstanding mortgage arrears, numbers increasing, government has dismally failed to address the situation. Government up their necks with banks lobbyists and financial sector propagandists make sure the banks get what they want. They face the quandary of repossession required by the banks vs bad publicity for government if banks get what they want.

Frozen in this limbo government tend to ignore the situation much preferring to highlight any new arrivals taking advantage of Ireland’s status as a tax haven with friendly taxation policies for the wealthy. Banks want all their odious debt back, they do not want debt write-down, they want to inquisitorially extract their pound of flesh on a case by case basis with FF/FG/LB government acting as their willing bailiffs and Sheriff.

However, there could be an OK corral situation in the coming bank stress tests end 2014. This may force banks to write/mark down their real exposure to debt that will not be repaid. http://www.isi.gov.ie/en/ISI/Pages/Dealing_with_Debt

The commercial and private mortgage property sector in Ireland is bust and the government have done nothing to fix it. The worst excesses of the Celtic Tiger bubble that gave rise to the financial collapse, are being stoked into flame.

Its easy enough to see what needed to be fixed. The economy needed to be returned to a level playing field of debt sustainability where at a minimum two people on average salary levels could afford to purchase a house they would later turn into a home in which they would raise their family. Worst excesses of the bubble such as gazumping, developers primed by predatory lenders to stoke the market, unsustainable rises in property prices, market manipulation, all needed to be fixed by government. The Celtic Tiger led to a situation where ordinary families could no longer afford housing even on two incomes.

The market had become infected by property speculators fed by unsustainable and predatory lending. This has not been fixed, it collapsed in meltdown but with no government fix, its rising again from the ashes. One would expect in the collapse of the property market, housing would be made affordable again, banks would begin to lend secure and affordable loans. Long term sustainable employment would return helping to build homes and create more jobs in the economy.

This has happened in Iceland where debt write-down is practiced. Instead a number of factors have conspired to undermine the interests of Mr and Mrs citizen. A financial services model has intervened to exploit and further undermine the legitimate aspirations of Irish citizens. There are fewer jobs. Part time and contract employment has replaced what used to be full-time sustainable long-term unemployment. The residential and commercial property market is being pillaged and looted by large-scale institutional property investors such as NAMA and US Hedge Funds to corner the supply of property, forcing exorbitant rent/lease demands on individuals and small to medium-sized businesses.

The financial sector has intervened and wiped out the real economy that demands debt write-down. Pent up demand (see falling savings rates previous blog) does not explain the emergence of a new property bubble  in the Irish economy. Such bubbles can be compared to the last breath of a dying economy, or a ‘turning the corner’ of the Irish economy.

Lets look at some recent evidence. Barry O’Halloran of Irish times writes: http://www.irishtimes.com/business/sectors/commercial-property/us-hedge-funds-buy-1-2bn-of-irish-nationwide-mortgages-1.1746326 “US hedge funds Lone Star and Oaktree Capital Management have bought about €1.2 billion worth of mortgages put up for sale by the Irish Bank Resolution Corporation’s (IBRC) special liquidators. Kieran Wallace and Eamon Richardson of KPMG, who are liquidating the State bank that absorbed the businesses of Anglo Irish Bank and Irish Nationwide, confirmed yesterday they had sold part of Project Stone, a number of commercial property loans with a headline value of €9.3 billion, and Project Sand, a group of 13,000 former Irish Nationwide mortgages worth €1.8 billion. Lone Star and Oaktree Capital Management bought 64 per cent by value, roughly €1.2 billion worth, of the mortgages, meaning the borrowers must now repay the cash to the US funds.” News of the sales come before the advent of coming stringent stress tests in 2014 by the ECB. Attention so far has focused on the appointment of “Pepper Asset Servicing” to manage the loans and deal directly with the borrowers. But a number of questions need to be asked:

1. How clean are those mortgages? 2. What percentage of those loans are recoverable? 3. Assuming a large portion of the portfolio is not recoverable, is this purchase a hidden backstop of Irish banks to prevent them going under? 4. What are the implications for debt write-down on behalf of borrowers who cannot repay their loans? 5. While the news may be good for the capitalisation of banks as bad loans are laundered into a monetary value where none may previously have existed, are potential house buyers worse off by the news?

In some US states the activities of such funds buying up all property commercial and private, has led to the situation where property purchase can no longer be afforded. The result has been a situation where ordinary people can no longer afford to purchase a home. They are forced into the rental market. Rising rents mean greater profits for developers and Hedge Funds or companies like Pepper acting on their behalf. Examine the US experience News may not all be bad: http://www.bloomberg.com/news/2014-03-26/hedge-funds-unlikely-saviors-for-new-york-area-homeowners.html

“Judicial states, including New York, New Jersey, Florida and Maryland, require that every foreclosure be approved by a court, slowing the process.”

“For investors, foreclosing or paying a borrower to move out may often be more cost efficient than time-consuming loan workouts, said Diane Thompson, attorney with the National Consumer Law Center based in Boston.” ” Foreclosure Incentive

Seizing a property can be especially valuable to a fund in a market where home prices are rising, Thompson said. Another concern is that institutional investors aren’t subject to the same level of regulatory scrutiny as large banks, making it more difficult to police them, she said. “It’s likely that at least some homeowners will find themselves losing their homes who should have been able to keep them,” she said. “Results will vary. Some will be getting good modifications they wouldn’t have gotten otherwise. For many people expectations will be raised and they’ll likely be disappointed.” American Homeowner Preservation gives homeowners three options, and borrowers often choose as if ordering from a menu, CEO Newbery said. They can pay off the mortgage by coming up with 90 percent of the property’s current value; accept a modified loan with a principal cut; or take between $1,000 and $5,000, depending on the home’s value, to hand over the keys or cooperate with a sale. Making Profit Newbery said his company started in 2008 as a nonprofit organization, and has retained its mission of keeping borrowers in their homes whenever possible. In Ragusa’s case, the firm can make a solid profit even after lowering his payment and the amount he owes, Newbery said. American Homeowner Preservation purchased Ragusa’s mortgage for $134,000 from a fund that had acquired it from Citigroup. (C) Ragusa is now trying to come up with the $10,000 the firm is seeking in exchange for restructuring the loan, a payment that has increased from the original offer. Ragusa, who now works in sales at the cable company for less than half his previous salary, owes $308,000 on his mortgage for the three-bedroom house, plus two years of payments. The balance will be knocked down to $211,500 if he makes the deal with American Homeowner Preservation. “I’m sure the hedge funds are going to do a better job than banks in pushing these through, because they’ve had five years and have not done anything,” Newbery said. “The loans going into private hands and away from banks is a big step forward to resolving families in limbo.’” So here’s the deal. Tarp injects testosterone into the banking system. The economic outlook is dire so funds are not lent into small SME’s.

Government should develop infrastructure through capital projects, are not spending. The economy is stagnating and deflating. The QE money has to go somewhere so it goes into stocks and shares and Hedge Funds. Hedge funds wont invest in manufacturing because  middle class savings levels are dropping to zero. Instead, Hedge funds work the property market creating a false bottom to the commercial and private property market buying out mortgage and property portfolios from the banks.

By cornering the market they can now control the supply of property. It’s in their interest to stimulate and create a bubble. Hedge Funds and NAMA can force foreclosures and send a lot of property onto the market forcing a fall in property prices. This can send property into negative equity and force the sales by commercial/private property that Hedge Funds can buy sweeping up at market’s  lower end. They win on the up and they win on the down.

This is no longer a market economy but a market based on financial chicanery and predatory lending. Controlling the property market Hedge Funds can sell/short the market when it reckons its too high forcing a downward spiral. At its lowest, the Hedge Funds drop in again and buy at bottom prices. They stoke it upward then pull the rug and the cycle goes on making a fortune for them at the expense of citizen taxpayers. If Ireland’s politicians were fueled by Joyce’s brains, they would have declared bankruptcy. Instead, we are where we are, politicians as bailiffs and puppet manipulators of global financialisation and a badly designed European project holed beneath the waterline.

In bankruptcy, you wipe out the shareholders and bondholders and you  get rid of top management because somebody has to be held responsible. None of this was done in Ireland’s case. As a result we have no banking inquiry. The only plan we have to is accept odious debt and turn up in every hair dressing business that declares a new job. In bankruptcy, you need to have a new business plan.

Our business plan sent those in negative equity to the wolves.

Neither has it cleaned up the toxic property sector. What you need to become an estate agent in Ireland?http://www.boards.ie/vbulletin/showthread.php?p=58536059 In Germany a buyer is protected by the service of a notary: http://en.wikipedia.org/wiki/Civil_law_notary “Notaries generally hold undergraduate degrees in civil law and graduate degrees in notarial law. Notarial law involves expertise in a broad spectrum of private law including family law, estate and testamentary law, conveyancing and property law, the law of agency, and contract and company law. Student notaries must complete a long apprenticeship or articled clerkship as a trainee notary and usually spend some years as a junior associate in a notarial firm before working as a partner or opening a private practice. Any such practice is usually tightly regulated, and most countries parcel out areas into notarial districts with a set number of notary positions. This has the effect of making notarial appointments very limited.” Notarial instruments, if prima facie duly executed, are:

  • presumed valid and regular;
  • self-authenticating;
  • probative (i.e., proof of their contents);
  • public;
  • self-executing; and
  • have a data certa, i.e., a fixed, unalterable effective date.”

In Ireland there is not even public debate on the need to  investigate/establish ground rules and enforcement of these to protect the consumer.

Elizabeth Warren: Fixing the Banks, Lifting the Middle Class https://www.youtube.com/watch?v=f519_LGjhCA Active in  a new consumer agency set up under Obama following 2008 Senator Elizabeth Warren stated: “Consumer agency should stay independent” community banks and credit unions are very worried about additional regulatory burdens ” “We are going to fix them with the new consumer financial protection bureau” In Ireland the Irish Central Bank is piling regulations on Irish Credit Unions threatening their solvency and viability. Their democratic and voluntary role is being undermined. Banks are the ones who set the rules when it comes to dealing with those in arrears. Deflation and falling growth rates mean Ireland is still holed below the waterline http://www.oecd-ilibrary.org/economics/country-statistical-profile-ireland_20752288-table-irl Net saving rate in household disposable income %: 1.9 (2005) -0.9 (2006) -2.2 (2007) 3.7 (2008) 9.8 (2009) 7.0 (2010) 5.6 (2011) 2012/13..not given Note drop off. Is there money there Draghi would like to grab for depositor bailin?

  • At European level Draghi & Co have just agreed to bailin for depositors as a means to deal with bank failure; shareholders will be hit and as in Cyprus, depositors will be hit.
  • European stress tests are due to end of this year and many banks are in the firing line including some Landesbanken German banks and AIB, BOI and Permanent TSB. If it happens to us, Germans can wipe their hands and say, too bad, we got hit too.
  • Share prices in  Irish banks have been falling recently and some very large funds have withdrawn their money, both these facts connected.
  • ECB see a lot of savings in Irish banks not being spent in the economy. They can loot that money to fix the banking system.
  • Hedge funds aim to lead Ireland out of meltdown. Doing so may lead other economies eg Spain/Greece/Italy out of their danger zones. Don’t put your bets on this happening soon if ever!

The Irish economy remains in a state of chassis. The euro project has failed in Ireland. Time to reconnect with sterling or the dollar and leave the euro mess behind.

End https://www.youtube.com/watch?v=P8fDLyXXUxM https://www.youtube.com/watch?v=KSwDxx_zt2Q https://www.youtube.com/watch?v=Njp8bKpi-vg https://www.youtube.com/watch?v=jqvKjsIxT_8

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